Document:

Exhibit
10.1

 

[
VERIDEX LLC LOGO]

a
Johnson & Johnson company

 

33
Technology Drive

P.O.
Box 4920

Warren,
NJ 07059

 

 

January 27, 2005

 

Ed Erickson,

Chairman and CEO

Immunicon Corporation

3401 Masons Mill Road, Suite 100

Huntingdon Valley, PA 19006-3574

 

Subject: Development, License and Supply
Agreement between Immunicon Corporation and Ortho-Clinical Diagnostics, Inc.
dated August 17, 2000 and modified on November 10, 2003 and further modified on
January 27, 2005.

 

Dear Ed:

 

We propose further modifying the subject
Agreement by replacing the milestone requirements of Section 5.2.13. with an
alternative study based on the analysis of bone marrow according to parameters
and requirements as the steering committee shall agree.  Additionally, while the performance criteria
for the milestone requirements of Section 5.2.10.2 shall remain as currently
set forth in the Agreement, Veridex agrees to pay Two Hundred Fifty Thousand
Dollars ($250,000) of the total Five Hundred Thousand Dollars ($500,000)
payable under such milestone provision upon complete accrual of patients
necessary to conduct the study that will support such FDA submission with the
remaining Two Hundred Fifty Thousand Dollars ($250,000) payable upon receipt of
the draft submission and Steering Committee approval as set forth in section
5.2.10.2(a).  All other terms and
conditions of the Agreement shall remain the same. Please indicate your
acceptance by signing in the appropriate space below.

 

	
  Veridex, LLC

  
	
   

  
	
   

  
	
  By:

  	
   /s/ Mark Myslinski

  
	
   

  	
  Mark Myslinski, General
  Manager

  

 

 

 

	
  ACCEPTED AND AGREED

  
	
   

  
	
  IMMUNICON CORPORATION

  
	
   

  
	
  By:

  	
  /s/ Edward L. Erickson

  
	
   

  	
   

  
	
  Name:

  	
  Edward L. Erickson

  
	
   

  	
   

  
	
  Title:

  	
  Chairman, President &
  CEO

  
	
   

  	
   

  
	
  Date:

  	
  02/01/2005Exhibit 10.1

 

EXECUTION COPY

 

$125,000,000

 

SECOND
AMENDED AND RESTATED CREDIT AGREEMENT

 

AMONG

 

THE
NAVIGATORS GROUP, INC.,

 

as
Borrower,

 

THE
LENDERS NAMED HEREIN,

 

JPMORGAN
CHASE BANK, N.A.

 

as
Administrative Agent,

 

BARCLAYS
BANK PLC, as Syndication Agent,

LASALLE BANK NATIONAL ASSOCIATION

and

COMMERZBANK AKTIENGESELLSCHAFT, New York and Grand Cayman Branches, 

as Documentation Agents, 

CREDIT SUISSE FIRST BOSTON, as Managing Agent 

and

BROWN BROTHERS HARRIMAN & CO., as Co-Agent

 

DATED
AS OF

 

January 31,
2005

 

J.P. MORGAN SECURITIES INC.,

 

as
Sole Bookrunner and

Sole Lead Arranger

 

 

TABLE OF
CONTENTS

 

	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  THE REVOLVING
  CREDITS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Revolving Credit Advances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Ratable Loans

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Types of Revolving Credit
  Advances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
  Commitment Fee; Reductions in
  Aggregate Revolving Credit Commitment.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.5

  	
  Optional Principal Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.6

  	
  Mandatory Prepayments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.7

  	
  Revolving Credit Advances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.8

  	
  Conversion and Continuation
  of Outstanding Revolving Credit Advances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.9

  	
  Changes in Interest Rate,
  etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.10

  	
  Rates Applicable After Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.11

  	
  Method of Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.12

  	
  Noteless Agreement; Evidence of
  Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.13

  	
  Telephonic Notices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.14

  	
  Interest Payment Dates; Interest
  and Fee Basis

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.15

  	
  Notification of Revolving Credit
  Advances, Interest Rates and Prepayments, Commitment Reductions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.16

  	
  Lending Installations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.17

  	
  Non-Receipt of Funds by the Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  THE
  LETTER OF CREDIT FACILITY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Issuance of Letters of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Participating Interests

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Reductions in Letter of Credit
  Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  Reimbursement Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.5

  	
  Procedure for Issuance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.6

  	
  Nature of the Lenders’ Obligations

  	
   

  
					

 

i

 

	
   

  	
  3.7

  	
  Notification of Issuance Requests

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.8

  	
  Cash Collateral for Letters of
  Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.9

  	
  Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.10

  	
  Extension of Revolving Credit
  Termination Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  YIELD
  PROTECTION; TAXES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Yield Protection

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  Changes in Capital Adequacy Regulations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
  Availability of Types of Revolving
  Credit Advances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.4

  	
  Funding Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.5

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.6

  	
  Lender Statements; Survival of
  Indemnity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  CONDITIONS
  PRECEDENT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Initial Revolving Credit
  Loans and Letters of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Each Revolving Credit
  Advance and Letter of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Existence and Standing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Authorization and Validity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  No Conflict; Government Consent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4

  	
  Financial Statements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.5

  	
  Statutory Financial Statements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.6

  	
  Material Adverse Change

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.7

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.8

  	
  Litigation and Contingent
  Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.9

  	
  Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.10

  	
  ERISA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.11

  	
  Defaults

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.12

  	
  Accuracy
  of Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.13

  	
  Regulation
  U

  	
   

  
					

 

ii

 

	
   

  	
  6.14

  	
  Material Agreements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.15

  	
  Compliance With Laws

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.16

  	
  Ownership of Properties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.17

  	
  Plan Assets; Prohibited
  Transactions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.18

  	
  Environmental Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.19

  	
  Investment Company Act

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.20

  	
  Public Utility Holding
  Company Act

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.21

  	
  Solvency

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.22

  	
  Insurance
  Licenses

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.23

  	
  Partnerships

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.24

  	
  Lines
  of Business

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.25

  	
  Reinsurance
  Practices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.26

  	
  Security

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.27

  	
  Disclosure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Financial Reporting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  Use of Proceeds

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.3

  	
  Notice of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.4

  	
  Conduct of Business

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.5

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.6

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.7

  	
  Compliance
  with Laws

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.8

  	
  Maintenance
  of Properties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.9

  	
  Inspection; Maintenance of Books
  and Records

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.10

  	
  Dividends and Stock Repurchases

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.11

  	
  Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.12

  	
  Merger

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.13

  	
  Sale
  of Assets

  	
   

  
					

 

iii

 

	
   

  	
  7.14

  	
  Investments
  and Acquisitions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.15

  	
  Contingent
  Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.16

  	
  Liens

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.17

  	
  Affiliates

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.18

  	
  Amendments
  to Agreements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.19

  	
  Change
  in Fiscal Year

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.20

  	
  Inconsistent
  Agreements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.21

  	
  Reinsurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.22

  	
  Stock
  of Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.23

  	
  Financial
  Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.24

  	
  Additional
  Pledge

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  DEFAULTS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  ACCELERATION,
  WAIVERS, AMENDMENTS AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Acceleration

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  Amendments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.3

  	
  Preservation
  of Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  GENERAL PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Survival of Representations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.2

  	
  Governmental Regulation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3

  	
  Headings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.4

  	
  Entire Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.5

  	
  Numbers
  of Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.6

  	
  Several Obligations; Benefits
  of this Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.7

  	
  Expenses; Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.8

  	
  Accounting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.9

  	
  Severability of Provisions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.10

  	
  Nonliability of Lenders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.11

  	
  Confidentiality

  	
   

  
					

 

iv

 

	
   

  	
  10.12

  	
  Nonreliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.13

  	
  Disclosure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.14

  	
  USA Patriot Act Notification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  THE
  ADMINISTRATIVE AGENT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Appointment; Nature
  of Relationship

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.2

  	
  Powers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.3

  	
  General
  Immunity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.4

  	
  No Responsibility for Revolving Credit
  Loans, Recitals, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.5

  	
  Action on Instructions of Lenders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.6

  	
  Employment
  of Agent and Counsel

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.7

  	
  Reliance on Documents; Counsel

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.8

  	
  Agent’s Reimbursement and
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.9

  	
  Notice of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.10

  	
  Rights as a Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.11

  	
  Lender Credit Decision

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.12

  	
  Successor Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.13

  	
  Agents’ Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.14

  	
  Delegation to Affiliates

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.15

  	
  Syndication Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  SETOFF;
  RATABLE PAYMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Setoff

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.2

  	
  Ratable
  Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  BENEFIT
  OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Successors and Assigns

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.2

  	
  Participations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.3

  	
  Assignments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.4

  	
  Dissemination of
  Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.5

  	
  Tax
  Treatment

  	
   

  
					

 

v

 

	
  ARTICLE XIV

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.2

  	
  Change of Address

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
  COUNTERPARTS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVI

  	
  CHOICE
  OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  CHOICE
  OF LAW

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.2

  	
  CONSENT TO JURISDICTION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.3

  	
  WAIVER OF JURY TRIAL

  	
   

  
					

 

SCHEDULES

 

	
  Pricing Schedule

  	
   

  	
   

  	
   

  
	
  Schedule 1

  	
  -

  	
   

  	
  Commitments

  
	
  Schedule 3.1

  	
  -

  	
   

  	
  Existing Letters of Credit

  
	
  Schedule 6.9

  	
  -

  	
   

  	
  Subsidiaries

  
	
  Schedule 6.22

  	
  -

  	
   

  	
  Licenses – Navigators Insurance Company

  
	
  Schedule 6.22A

  	
  -

  	
   

  	
  Licenses – NIC Insurance Company

  
	
  Schedule 6.23

  	
  -

  	
   

  	
  Partnerships

  
	
  Schedule 6.24

  	
  -

  	
   

  	
  Existing Lines of Business

  
	
  Schedule 7.16

  	
  -

  	
   

  	
  Liens

  
	
  Schedule 7.21

  	
  -

  	
   

  	
  Reinsurance Guidelines

  

 

EXHIBITS

 

	
  Exhibit A

  	
   

  	
  Revolving Credit Note

  
	
  Exhibit B

  	
   

  	
  Compliance Certificate

  
	
  Exhibit C

  	
   

  	
  Assignment Agreement

  
	
  Exhibit D

  	
   

  	
  Reimbursement Agreement Excerpt

  

 

vi

 

SECOND
AMENDED AND RESTATED CREDIT AGREEMENT

 

This Second Amended and
Restated Credit Agreement, dated as of                ,
2005, is among THE NAVIGATORS GROUP, INC., a Delaware corporation, the Lenders,
and JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent,
BARCLAYS BANK PLC, as Syndication Agent, LASALLE BANK NATIONAL ASSOCIATION and
COMMERZBANK AKTIENGESSELLSCHAFT, New York and Grand Cayman Branches, as
Documentation Agents, CREDIT SUISSE FIRST BOSTON, as Managing Agent and BROWN
BROTHERS HARRIMAN & CO., as Co-Agent.

 

R
E  C  I  T  A  L  S:

 

A.                                   The
Borrower, The First National Bank of Chicago, as agent and certain financial
institutions have entered into that certain Credit Agreement, dated as of December 21,
1998 (as heretofore amended, the “Existing Credit Agreement”), pursuant
to which the lenders party thereto agreed to make financial accommodations to
the Borrower under revolving credit and letter of credit facilities.

 

B.                                     The
Borrower has requested that the Existing Credit Agreement be amended and
restated in order to increase the amount of the letter of credit facility and
to make certain other changes to the Existing Credit Agreement.

 

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

 

NOW, THEREFORE, in
consideration of the mutual covenants and undertakings herein contained, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Borrower, the Lenders and the Agent hereby agree
to amend and restate the Existing Credit Agreement as follows:

 

ARTICLE I

 

DEFINITIONS

 

As used in this Agreement:

 

“Acquisition” means any
transaction, or any series of related transactions, consummated on or after the
date of this Agreement, by which the Borrower or any of its Subsidiaries (a)
acquires any on-going business or all or substantially all of the assets of any
firm, corporation or limited liability company, or division thereof, whether
through purchase of assets, merger, amalgamation or otherwise or (b) directly
or indirectly acquires (in one transaction or as the most recent transaction in
a series of transactions) at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election
of directors (other than securities having such power only by reason of the
happening of a contingency) or a

 

 

majority (by percentage or voting power) of the outstanding
ownership  interests of a partnership or
limited liability company.

 

“Affiliate” of any Person
means any other Person directly or indirectly controlling, controlled by or
under common control with such Person.  A
Person shall be deemed to control another Person if the controlling Person owns
10% or more of any class of voting securities (or other ownership interests) of
the controlled Person or possesses, directly or indirectly, the power to direct
or cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.

 

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

 

“Aggregate Revolving
Credit Commitment” means the aggregate of the Revolving Credit Commitments of
all the Lenders, as reduced from time to time pursuant to the terms
hereof.  The Aggregate Revolving Credit
Commitment as of the date hereof is $10,000,000.

 

“Agreement” means this
Second Amended and Restated Credit Agreement, as it may be amended, modified or
restated and in effect from time to time.

 

“Agreement Accounting
Principles” means generally accepted accounting principles as in effect from
time to time, applied in a manner consistent with those used in preparing the
financial statements referred to in Section 6.4; provided, however,
that for purposes of all computations required to be made with respect to
compliance by the Borrower with Section 7.23, such term shall mean
generally accepted accounting principles as in effect on the Closing Date,
applied in a manner consistent with those used in preparing the financial
statements referred to in Section 6.4.

 

“Alternate Base Rate”
means, for any day, a rate of interest per annum equal to the higher of (a) the
Prime Rate in effect for such day, and (b) the Federal Funds Effective Rate on
such day plus 1/2% per annum.

 

“Alternate Base Rate
Advance” means a Revolving Credit Advance which, except as otherwise provided
in Section 2.10, bears interest at the Alternate Base Rate.

 

“Annual Statement” means
the annual statutory financial statement of any Insurance Subsidiary required
to be filed with the insurance commissioner (or similar authority) of its
jurisdiction of incorporation, which statement shall be in the form required by
such Insurance Subsidiary’s jurisdiction of incorporation or, if no specific
form is so required, in the form of financial statements permitted by such
insurance commissioner (or such similar authority) to be used for filing annual
statutory financial statements and shall contain the type of information
permitted by such insurance commissioner (or such similar authority) to be
disclosed therein, together with all exhibits or schedules filed therewith.

 

2

 

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

 

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

 

“Applicable Margin”
means, with respect to Revolving Credit Advances of any Type at any time, the
percentage rate per annum which is applicable at such time with respect to
Revolving Credit Advances of such Type as set forth in the Pricing Schedule.

 

“Approved Reinsurer”
means a reinsurer which satisfies the criteria set forth in the Reinsurance
Guidelines for entering into reinsurance or retrocession agreements with the
Borrower.

 

“Arranger” means J.P.
Morgan Securities Inc. and its successors.

 

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

 

“Asset Disposition” means
any sale, transfer or other disposition of any asset of the Borrower or any
Subsidiary in a single transaction or in a series of related transactions
(other than the sale of Investments (other than stock in Subsidiaries) in the
ordinary course).

 

“Authorized Officer”
means any of the president, chief financial officer or treasurer of the
Borrower, acting singly.

 

“Bankruptcy Code” means
Title 11, United States Code, sections 1 et  seq., as the same may
be amended from time to time, and any successor thereto or replacement therefor
which may be hereafter enacted.

 

“Borrower” means The
Navigators Group, Inc., a Delaware corporation, and its successors and assigns.

 

“Borrower’s S&P
Financial Strength Rating” means, at any time, the rating issued by S&P
with respect to the financial strength of the Borrower.

 

“Borrowing Date” means a
date on which a Revolving Credit Advance is made or a Letter of Credit is
issued hereunder.

 

“Borrowing Notice” is
defined in Section 2.7.

 

“Business Day” means (a)
with respect to any borrowing, payment or rate selection of Eurodollar
Advances, a day (other than a Saturday or Sunday) on which banks generally are
open in Chicago and New York for the conduct of substantially all of their
commercial lending

 

3

 

activities and on which dealings in United States dollars are carried
on in the London interbank market and (b) for all other purposes, a day (other
than a Saturday or Sunday) on which banks generally are open in Chicago and New
York for the conduct of substantially all of their commercial lending
activities.

 

“Capitalized Lease” of a
Person means any lease of Property by such Person as lessee which would be
capitalized on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.

 

“Capitalized Lease
Obligations” of a Person means the amount of the obligations of such Person
under Capitalized Leases which would be shown as a liability on a balance sheet
of such Person prepared in accordance with Agreement Accounting Principles.

 

“Cash Collateral
Investments” means (a) short-term obligations of, or fully guaranteed by, the
United States of America, (b) commercial paper rated A-1 or better by S&P
or P-1 or better by Moody’s, (c) demand deposit accounts maintained in the
ordinary course of business, and (d) certificates of deposit issued by and
time deposits with commercial banks (whether domestic or foreign) having
capital and surplus in excess of $100,000,000; provided in each case
that the same provides for payment of both principal and interest (and not
principal alone or interest alone) and is not subject to any contingency
regarding the payment of principal or interest and has a maturity of not more
than six months.

 

“Cash Collateral Security
Agreement” means a security agreement in form and substance satisfactory to the
Agent executed by the Borrower in favor of the Agent, on behalf of itself and
the Lenders, pursuant to this Agreement, pledging to the Agent a security
interest in all Cash Collateral Investments delivered to the Agent pursuant to
the terms hereof, as the same may be amended, supplemented or otherwise
modified from time to time.

 

“Cash Equivalent
Investments” means (a) short-term obligations of, or fully guaranteed by,
the United States of America, (b) commercial paper rated A-1 or better by
S&P or P-1 or better by Moody’s, (c) demand deposit accounts
maintained in the ordinary course of business, and (d) certificates of
deposit issued by and time deposits with commercial banks (whether domestic or
foreign) having capital and surplus in excess of $500,000,000; provided
in each case that the same provides for payment of both principal and interest
(and not principal alone or interest alone) and is not subject to any
contingency regarding the payment of principal or interest.

 

“Change” is defined in Section 4.2.

 

“Change in Control” means
(a) the acquisition by any Person, or two or more Persons acting in
concert of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934)
of (i) 20% or more of the outstanding shares of voting stock of the Borrower or
(ii), if less, a percentage of such stock, greater than the percentage owned by
members of the Terence Deeks Family, or (b) the members of the Terence
Deeks Family shall cease to own, in the aggregate, free and clear of all Liens
and

 

4

 

other encumbrances, at least 10% of the outstanding shares of voting
stock of the Borrower on a fully diluted basis.

 

“Closing Date” means January 31,
2005.

 

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

 

“Condemnation” is defined
in Section 8.8.

 

“Consolidated” or “consolidated”,
when used in connection with any calculation, means a calculation to be
determined on a consolidated basis for the Borrower and its Consolidated
Subsidiaries in accordance with Agreement Accounting Principles.

 

“Consolidated Net Income”
means, for any period, the net income (or loss) of the Borrower and its
Consolidated Subsidiaries calculated on a consolidated basis for such period,
all as determined in accordance with Agreement Accounting Principles.

 

“Consolidated Net Worth”
means, for any period, the consolidated stockholders’ equity of the Borrower
and its Consolidated Subsidiaries calculated on a consolidated basis for such
period, all as determined in accordance with Agreement Accounting Principles, excluding,
however, for the purposes of Section 7.23.3, the effect of
any unrealized gain or loss reported under Statement of Financial Accounting
Standards No. 115.

 

“Consolidated Person”
means, for the taxable year of reference, each Person which is a member of the
affiliated group of the Borrower if Consolidated returns are or shall be filed
for such affiliated group for federal income tax purposes or any combined or
unitary group of which the Borrower is a member for state income tax purposes.

 

“Consolidated
Subsidiaries” means all Subsidiaries of the Borrower which should be included
in the Borrower’s consolidated financial statements, all as determined in
accordance with Agreement Accounting Principles.

 

“Consolidated Tangible
Net Worth” means the excess of (a) Consolidated Total Tangible Assets over
(b) Consolidated Total Liabilities, excluding, however, for
the purposes of Section 7.23.1, the effect of any unrealized gain
or loss reported under Statement of Financial Accounting Standards
No. 115.

 

“Consolidated Total
Assets” means, at any time, the total assets of the Borrower and its
Consolidated Subsidiaries calculated on a consolidated basis as of such time,
all as determined in accordance with Agreement Accounting Principles.

 

“Consolidated Total
Intangible Assets” means, at any time, the total intangible assets of the
Borrower and its Consolidated Subsidiaries calculated on a consolidated basis
as of such time including, but not limited to, goodwill, patents, trademarks,
tradenames, copyrights and franchises and excluding deferred policy acquisition
costs.

 

5

 

“Consolidated Total
Liabilities” means, at any time, the total liabilities of the Borrower and its
Consolidated Subsidiaries calculated on a consolidated basis as of such time,
all as determined in accordance with Agreement Accounting Principles.

 

“Consolidated Total
Tangible Assets” means, at any time, Consolidated Total Assets minus
Consolidated Total Intangible Assets.

 

“Contingent Obligation”
of a Person means any agreement, undertaking or arrangement by which such
Person assumes, guarantees, endorses, contingently agrees to purchase or
provide funds for the payment of, or otherwise becomes or is contingently
liable upon, the obligation or liability of any other Person, or agrees to
maintain the net worth or working capital or other financial condition of any
other Person, or otherwise assures any creditor of such other Person against
loss, including, without limitation, any comfort letter, operating agreement,
take-or-pay contract or the obligations of any such Person as general partner
of a partnership with respect to the liabilities of the partnership.  The term “Contingent Obligation” shall not
include the obligations of any Insurance Subsidiary arising under any insurance
policy or reinsurance agreement entered into in the ordinary course of
business.

 

“Controlled Group” means
all members of a controlled group of corporations or other business entities
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.

 

“Conversion/Continuation
Notice” is defined in Section 2.8.

 

“Conversion Differential”
is defined in Section 3.1(e).

 

“Default” means an event
described in Article VIII.

 

“Department” is defined
in Section 6.5.

 

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

 

“Environmental Laws”
means any and all federal, state, local and foreign statutes, laws, judicial
decisions, regulations, ordinances, rules, judgments, orders, decrees, plans,
injunctions, permits, concessions, grants, franchises, licenses, agreements and
other governmental restrictions relating to (a) the protection of the
environment, (b) the effect of the environment on human health, (c) emissions,
discharges or releases of pollutants, contaminants, hazardous substances or
wastes into surface water, ground water or land, or (d) the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, hazardous substances or wastes or the
clean-up or other remediation thereof.

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and any rule or regulation issued thereunder.

 

6

 

“Eurodollar Advance”
means a Revolving Credit Advance which, except as otherwise provided in Section 2.11,
bears interest at the applicable Eurodollar Rate.

 

“Eurodollar Base Rate”
means, with respect to a Eurodollar Advance for the relevant Interest Period,
the rate appearing on Page 3750 of the Dow Jones Market Service (or on any
successor or substitute page of such Service, or any successor to or substitute
for such Service, providing rate quotations comparable to those currently
provided on such page of such Service, as determined by the Agent from time to
time for purposes of providing quotations of interest rates applicable to
dollar deposits in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for Dollar deposits with a maturity comparable to such
Interest Period.  In the event that such
rate is not available at such time for any reason, then the “Eurodollar Base
Rate” with respect to such Eurodollar Advance for such Interest Period
shall be the rate at which Dollar deposits of $5,000,000 and for a maturity
comparable to such Interest Period are offered by the principal London office
of the Agent in immediately available funds in the London interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.

 

“Eurodollar Loan” means a
Revolving Credit Loan which bears interest at the applicable Eurodollar Rate.

 

“Eurodollar Rate” means,
with respect to a Eurodollar Advance for the relevant Interest Period, the sum
of (a) the quotient of (i) the Eurodollar Base Rate applicable to such Interest
Period, divided by (ii) one minus the Reserve Requirement (expressed as a
decimal) applicable to such Interest Period, plus (b) the Applicable
Margin.  The Eurodollar Rate shall be
rounded to the next higher multiple of 1/16 of 1% if the rate is not such a
multiple.

 

“Excluded Taxes” means,
in the case of each Lender or applicable Lending Installation and the Agent,
taxes imposed on its overall net income, and franchise taxes imposed on it, by
(a) the jurisdiction under the laws of which such Lender or the Agent is
incorporated or organized or (b) the jurisdiction in which the Agent’s or such
Lender’s principal executive office or such Lender’s applicable Lending
Installation is located.

 

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

 

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

 

“Existing Lines of
Business” is defined in Section 6.24.

 

“Extension Request” is
defined in Section 3.10.

 

“Facility Documents”
means this Agreement, any Revolving Credit Notes issued pursuant to Section 2.12,
the Security Documents, the Reimbursement Agreements and the other documents
and agreements contemplated hereby and executed by the Borrower in favor of the
Agent or any Lender.

 

7

 

“Federal Funds Effective
Rate” means, for any day, an interest rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published for such day (or, if such day is not a Business Day, for the
immediately preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations at approximately 10:00 a.m. (Chicago time) on such day
on such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by the Agent in its sole discretion.

 

“Fee Letter” is defined
in Section 10.4.

 

“Fiscal Quarter” means
one of the four three-month accounting periods comprising a Fiscal Year.

 

“Fiscal Year” means the
twelve-month accounting period commencing on January 1 and ending December 31
of each year.

 

“Governmental Authority”
means any government (foreign or domestic) or any state or other political
subdivision thereof or any governmental body, agency, authority, department or
commission (including without limitation any taxing authority or political
subdivision) or any instrumentality or officer thereof (including without
limitation any court or tribunal and any board of insurance, insurance
department or insurance commissioner) exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
and any corporation, partnership or other entity directly or indirectly owned
or controlled by or subject to the control of any of the foregoing.

 

“Indebtedness” of a
Person means such Person’s (a) obligations for borrowed money,
(b) obligations representing the deferred purchase price of Property or
services (other than accounts payable arising in the ordinary course of such
Person’s business payable on terms customary in the trade), (c) obligations,
whether or not assumed, secured by Liens or payable out of the proceeds or
production from Property now or hereafter owned or acquired by such Person, (d)
obligations which are evidenced by notes, acceptances, or other instruments,
(e) obligations of such Person to purchase securities or other Property arising
out of or in connection with the sale of the same or substantially similar
securities or Property, (f) Capitalized Lease Obligations, (g) Contingent
Obligations, (h) actual and contingent reimbursement obligations in
respect of letters of credit, (i) any other obligation for borrowed money
or other financial accommodation which in accordance with Agreement Accounting
Principles would be shown as a liability on the consolidated balance sheet of
such Person, (j) any liability under any financing lease or so-called “synthetic
lease” transaction entered into by such Person and (k) any obligation arising
with respect to any other transaction which is the functional equivalent of or
takes the place of borrowing but which does not constitute a liability on the
consolidated balance sheet of such Person.

 

8

 

“Insurance Subsidiary”
means each of Navigators, NIC and any other domestic Subsidiary acquired or
formed after the Closing Date which is engaged in, or is authorized to engage
in, the insurance business.

 

“Interest Period” means,
with respect to a Eurodollar Advance, a period of one, two, three or six months
commencing on a Business Day selected by the Borrower pursuant to this
Agreement.  Such Interest Period shall
end on the day which corresponds numerically to such date one, two, three or
six months thereafter, provided, however, that if there is no
such numerically corresponding day in such next, second, third or sixth
succeeding month, such Interest Period shall end on the last Business Day of
such next, second, third or sixth succeeding month.  If an Interest Period would otherwise end on
a day which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next
succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.

 

“Investment” of a Person
means any loan, advance (other than commission, travel and similar advances to
officers and employees made in the ordinary course of business), extension of
credit (other than accounts receivable arising in the ordinary course of
business on terms customary in the trade) or contribution of capital by such
Person; stocks, bonds, mutual funds, partnership interests, membership
interests, notes, debentures or other securities owned by such Person; any
deposit accounts and certificate of deposit owned by such Person; and
structured notes, derivative financial instruments and other similar
instruments or contracts owned by such Person.

 

“Issuance Request” is
defined in Section 3.5.

 

“Issuer” means JPMorgan
Chase Bank.

 

“JPMorgan Chase Bank”
means JPMorgan Chase Bank, N.A., in its individual capacity, and its successor.

 

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

 

“Lending Installation”
means, with respect to a Lender or the Agent, the office, branch, subsidiary or
affiliate of such Lender or the Agent listed on the signature pages hereof or
on a Schedule or otherwise selected by such Lender or the Agent pursuant
to Section 2.16.

 

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

 

“Letter of Credit
Availability Termination Date” means June 30, 2007 or any later date as
may be specified as the Letter of Credit Availability Termination Date in
accordance with Section 3.10 or any earlier date on which the
Letter of Credit Commitment is reduced to zero or otherwise terminated pursuant
to the terms hereof.

 

9

 

“Letter of Credit Cash
Collateral Account” is defined in Section 9.1.  Such account and the related cash
collateralization shall be subject to documentation satisfactory to the Agent
and the taking of all steps required to give the Agent a perfected security
interest in the Cash Collateral Investments.

 

“Letter of Credit
Commitment” means the aggregate Letter of Credit Participation Amounts of all
of the Lenders, as reduced from time to time pursuant to the terms hereof.  The Letter of Credit Commitment as of the
date hereof is $115,000,000.

 

“Letter of Credit
Obligations” means as at the time of determination thereof, the sum of
(a) the Reimbursement Obligations then outstanding and (b) the aggregate
then undrawn face amount of the then outstanding Letters of Credit.

 

“Letter of Credit
Participation Amount” means, for each Lender, the maximum face amount of
Letters of Credit (which are approved by all Lenders in their sole discretion
in accordance with Section 3.1) in which such Lender participates
not exceeding the amount set forth on Schedule 1 or as set forth in
any Notice of Assignment relating to any assignment that has become effective
pursuant to Section 13.3.2, as such amount may be modified from
time to time pursuant to the terms hereof.

 

“Leverage Ratio” means,
at any time, the ratio of (a) the consolidated Indebtedness of the
Borrower and its Consolidated Subsidiaries (excluding any letter of credit
obligations incurred by the Borrower and its Consolidated Subsidiaries in the
ordinary course of business prior to any drawing under such a letter of credit
but including any letter of credit obligations after any drawing) at such time
to (b) the sum of (i) the consolidated Indebtedness of the Borrower
and its Consolidated Subsidiaries (excluding any letter of credit obligations
incurred by the Borrower and its Consolidated Subsidiaries in the ordinary
course of business) plus (ii) Consolidated Net Worth at such time.

 

“License” means any
license, certificate of authority, permit or other authorization which is
required to be obtained from any Governmental Authority in connection with the
operation, ownership or transaction of insurance business.

 

“Lien” means any security
interest, lien (statutory or other), mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, the interest of a vendor or lessor under any
conditional sale, Capitalized Lease or other title retention agreement).

 

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

 

“Loss Reserves” means,
with respect to any Insurance Subsidiary at any time, the sum of (a) all
losses, including incurred losses of such Insurance Subsidiary at such time
shown on page 3, line 25 of the Annual Statement of such Insurance Subsidiary plus
(b) all loss adjustment

 

10

 

expenses of such Insurance Subsidiary at such time shown on
page 3, line 2 of the Annual Statement of such Insurance Subsidiary,
as determined in accordance with SAP.

 

“Margin Stock” has the
meaning assigned to that term under Regulation U.

 

“Material Adverse Effect”
means a material adverse effect on (a) the business, Property, condition (financial
or otherwise) or results of operations of any of (i) the Borrower or
(ii) the Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform its obligations under the Facility Documents, or (c) the
validity or enforceability of any of the Facility Documents or the rights or
remedies of the Agent or the Lenders thereunder.

 

“MUL” means Millennium
Underwriting Limited, which entity is a corporate name with limited liability
at Lloyd’s of London.

 

“Moody’s” means Moody’s
Investors Service, Inc.

 

“Multiemployer Plan”
means a Plan maintained pursuant to a collective bargaining agreement or any
other arrangement to which the Borrower or any member of the Controlled Group
is a party to which more than one employer is obligated to make contributions.

 

“NAIC” means the National
Association of Insurance Commissioners or any successor thereto, or in lieu
thereof, any other association, agency or other organization performing
advisory, coordination or other like functions among insurance departments, insurance
commissioners and similar Governmental Authorities of the various states of the
United States toward the promotion of uniformity in the practices of such
Governmental Authorities.

 

“Navigators” means
Navigators Insurance Company, a New York corporation.

 

“NCUL” means Navigators
Corporate Underwriters Limited, which entity is a corporate name with limited
liability at Lloyd’s of London.

 

“Net Available Proceeds”
means (a) with respect to any Asset Disposition, the sum of cash or readily
marketable cash equivalents received (including by way of a cash generating
sale or discounting of a note or account receivable) therefrom, whether at the
time of such disposition or subsequent thereto, or (b) with respect to any sale
or issuance of any debt or equity securities of the Borrower or any Subsidiary,
cash or readily marketable cash equivalents received therefrom, whether at the
time of such disposition or subsequent thereto, net, in either case, of all
legal, title and recording tax expenses, commissions and other fees and all
costs and expenses incurred and, in the case of an Asset Disposition, net of
all payments made by the Borrower or any of its Subsidiaries on any
Indebtedness which is secured by such assets pursuant to a permitted Lien upon
or with respect to such assets or which must, by the terms of such Lien, in
order to obtain a necessary consent to such Asset Disposition, or by applicable
law, be repaid out of the proceeds from such Asset Disposition.

 

“NIC” means NIC Insurance
Company, a New York corporation.

 

11

 

“Non-U.S. Lender” is
defined in Section 4.5(d).

 

“Notice of Assignment” is
defined in Section 13.3.2.

 

“Obligations” means all
unpaid principal of and accrued and unpaid interest on the Revolving Credit
Loans, the Letter of Credit Obligations and all other liabilities (if any),
whether actual or contingent, of the Borrower with respect to Letters of
Credit, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations of the Borrower to the Lenders or to any
Lender, the Agent or any indemnified party hereunder arising under any of the
Facility Documents.

 

“Other Taxes” is defined
in Section 4.5(b).

 

“Participants” is defined
in Section 13.2.1.

 

“Payment Date” means the
last day of each March, June, September and December.

 

“PBGC” means the Pension
Benefit Guaranty Corporation or any successor thereto.

 

“Person” means any
natural person, corporation, firm, joint venture, partnership, association,
enterprise, limited liability company, trust or other entity or organization,
or any government or political subdivision or any agency, department or
instrumentality thereof.

 

“Plan” means an employee
pension benefit plan which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code as to which the
Borrower or any member of the Controlled Group may have any liability.

 

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

 

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

 

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

 

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

 

“Property” of a Person
means any and all property, whether real, personal, tangible, intangible, or
mixed, of such Person, or other assets owned, leased or operated by such
Person.

 

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

 

12

 

of the Aggregate Revolving Credit Commitment or the Letter of Credit
Commitment, as applicable.

 

“Purchasers” is defined
in Section 13.3.1.

 

“Regulation D” means
Regulation D of the Board of Governors of the Federal Reserve System as from
time to time in effect and shall include any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.

 

“Regulation T” means
Regulation T of the Board of Governors of the Federal Reserve System as from
time to time in effect and shall include any successor thereto or other
regulation or official interpretation of such Board of Governors relating to
the extension of credit by securities brokers and dealers for the purpose of
purchasing or carrying margin stocks applicable to such Persons.

 

“Regulation U” means
Regulation U of the Board of Governors of the Federal Reserve System as from
time to time in effect and shall include any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
the extension of credit by banks for the purpose of purchasing or carrying
margin stocks applicable to member banks of the Federal Reserve System.

 

“Regulation X” means
Regulation X of the Board of Governors of the Federal Reserve Systems from time
to time in effect and shall include any successor thereto or other regulation
or official interpretation of said Board of Governors relating to the extension
of credit by the specified lenders for the purpose of purchasing or carrying
margin stocks applicable to such Persons.

 

“Reimbursement Agreement”
means a letter of credit application and reimbursement agreement in such form
as the Issuer may from time to time employ in the ordinary course of business.

 

“Reimbursement
Obligations” means, at any time, the aggregate (without duplication) of the
Obligations of the Borrower to the Lenders, the Issuer and/or the Agent in
respect of all unreimbursed payments or disbursements made by the Lenders, the
Issuer and/or the Agent under or in respect of draws made under the Letters of
Credit.

 

“Reinsurance Guidelines”
is defined in Section 7.21(c).

 

“Release” is defined in
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended, 42 U.S.C. 39601 et  seq.

 

“Reportable Event” means
a reportable event as defined in Section 4043 of ERISA and the regulations
issued under such section, with respect to a Plan, excluding, however, such
events as to which the PBGC has by regulation waived the requirement of Section 4043(a)
of ERISA that it be notified within 30 days of the occurrence of such event; provided,
however, that a

 

13

 

failure to meet the minimum funding standard of Section 412 of the
Code and of Section 302 of ERISA shall be a Reportable Event regardless of
the issuance of any such waiver of the notice requirement in accordance with
either Section 4043(a) of ERISA or Section 412(d) of the Code.

 

“Required Lenders” means
Lenders in the aggregate having at least 66-2/3% of the Aggregate Revolving
Credit Commitment plus the Letter of Credit Commitment or, if the Aggregate
Revolving Credit Commitment and the Letter of Credit Commitment have been
terminated, the sum of the aggregate unpaid principal amount of the outstanding
Revolving Credit Loans plus the aggregate amount of the outstanding
Letter of Credit Obligations.

 

“Reserve Requirement”
means, with respect to an Interest Period, the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other reserves)
which is imposed under Regulation D on Eurocurrency liabilities.

 

“Response Date” is
defined in Section 3.10.

 

“Revolving Credit Advance”
means a borrowing hereunder (a) made by the Lenders on the same Borrowing
Date, or (b) converted or continued by the Lenders on the same date of
conversion or continuation, consisting, in either case, of the aggregate amount
of the several Revolving Credit Loans of the same Type and, in the case of
Eurodollar Loans, for the same Interest Period.

 

“Revolving Credit
Commitment” means, for each Lender, the obligation of such Lender to make
Revolving Credit Loans not exceeding the amount set forth on Schedule 1
or as set forth in any Notice of Assignment relating to any assignment that has
become effective pursuant to Section 13.3.2, as such amount may be
modified from time to time pursuant to the terms hereof.

 

“Revolving Credit Loan”
means, with respect to a Lender, any loan made by such Lender pursuant to Article II
(or any conversion or continuation thereof).

 

“Revolving Credit Note”
means any promissory note issued at the request of a Lender pursuant to Section 2.12,
including any amendment, modification, renewal or replacement of such
promissory note.

 

“Revolving Credit
Termination Date” means June 30, 2007 or any later date as may be
specified as the Revolving Credit Termination Date in accordance with Section 3.10
or any earlier date on which the Aggregate Revolving Credit Commitment is
reduced to zero or otherwise terminated pursuant to the terms hereof.

 

“Risk-Based Capital
Guidelines” is defined in Section 4.2.

 

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

 

“SAP” means, with respect
to any Insurance Subsidiary, the statutory accounting practices prescribed or
permitted by the insurance commissioner (or other similar authority) in

 

14

 

the jurisdiction of such Person for the preparation of annual
statements and other financial reports by insurance companies of the same type
as such Person in effect from time to time, applied in a manner consistent with
those used in preparing the Statutory Financial Statements referred to in Section 6.5.

 

“Schedule” refers to a
specific schedule to this Agreement, unless another document is
specifically referenced.

 

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

 

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

 

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

 

“Significant Subsidiary”
means, at any time, a direct domestic Subsidiary of the Borrower the assets of
which are greater than or equal to five percent (5%) of the Consolidated Total
Assets of the Borrower and its Consolidated Subsidiaries.

 

“Single Employer Plan”
means a Plan maintained by the Borrower or any member of the Controlled Group
for employees of the Borrower or any member of the Controlled Group.

 

“Statutory Financial
Statements” is defined in Section 6.5.

 

“Statutory Net Income”
means, with respect to any Insurance Subsidiary for any computation period, the
net income earned by such Insurance Subsidiary during such period, as
determined in accordance with SAP (“Underwriting and Investment Exhibit,
Statement of Income” statement, Page 4, Line 20 of the Annual
Statement).

 

“Statutory Surplus”
means, with respect to any Insurance Subsidiary at any time, the statutory
capital and surplus of such Insurance Subsidiary at such time, as determined in
accordance with SAP (“Liabilities, Surplus and Other Funds” statement, page 3,
line 35 of the Annual Statement).

 

“Subsidiary” of a Person
means (a) any corporation more than 50% of the outstanding securities having
ordinary voting power of which shall at the time be owned or controlled,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, or (b) any partnership,
association, joint venture, limited liability company or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.  Unless otherwise expressly provided, all
references herein to a “Subsidiary” shall mean a Subsidiary of the Borrower.

 

15

 

“Substantial Portion”
means, with respect to the Property of the Borrower and its Consolidated
Subsidiaries, Property which (a) represents more than 10% of the Consolidated
Total Assets of the Borrower and its Consolidated Subsidiaries, as would be
shown in the consolidated financial statements of the Borrower and its
Consolidated Subsidiaries as at the end of the quarter next preceding the date
on which such determination is made, or (b) is responsible for more than 10% of
the consolidated net sales or of the Consolidated Net Income of the Borrower
and its Consolidated Subsidiaries for the 12-month period ending as of the end
of the quarter next preceding the date of determination.

 

“Taxes” means any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and any and all liabilities with respect to the foregoing, but
excluding Excluded Taxes.

 

“Terence Deeks Family”
means, collectively, Terence N. Deeks; his spouse; any natural person who is a
lineal descendant of Terence N. Deeks; the spouse, children, or grandchildren
of any such natural person; any trust of which any of the foregoing is or are
the sole beneficiary or beneficiaries; or the estate, executor, administrator,
or legal guardian of any of the foregoing.

 

“Termination Event”
means, with respect to a Plan which is subject to Title IV of ERISA, (a) a
Reportable Event, (b) the withdrawal of the Borrower or any other member of the
Controlled Group from such Plan during a plan year in which the Borrower or any
other member of the Controlled Group was a “substantial employer” as defined in
Section 4001(a)(2) of ERISA or was deemed such under Section 4068(f)
of ERISA, (c) the termination of such Plan, the filing of a notice of intent to
terminate such Plan or the treatment of an amendment of such Plan as a
termination under Section 4041 of ERISA, (d) the institution by the PBGC
of proceedings to terminate such Plan or (e) any event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or
appointment of a trustee to administer, such Plan.

 

“Transferee” is defined
in Section 13.4.

 

“Type” means, with
respect to any Revolving Credit Advance, its nature as an Alternate Base Rate
Advance or a Eurodollar Advance.

 

“Unfunded Liabilities”
means the amount (if any) by which the present value of all vested and unvested
accrued benefits under all Single Employer Plans exceeds the fair market value
of all such Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plans using PBGC actuarial assumptions
for single employer plan terminations.

 

“Unmatured Default” means
an event which but for the lapse of time or the giving of notice, or both,
would constitute a Default.

 

“Wholly-Owned Subsidiary”
of a Person means (a) any Subsidiary all of the outstanding voting securities
of which shall at the time be owned or controlled, directly or indirectly, by
such

 

16

 

Person or one or more Wholly-Owned Subsidiaries of such Person, or by
such Person and one or more Wholly-Owned Subsidiaries of such Person, or (b)
any partnership, limited liability company, association, joint venture or
similar business organization 100% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled.

 

The foregoing definitions
shall be equally applicable to both the singular and plural forms of the
defined terms.

 

ARTICLE II

 

THE REVOLVING CREDITS

 

2.1         Revolving Credit
Advances.  Subject to
the terms of the Existing Credit Agreement, the lenders party thereto
established in favor of the Borrower, and the Lenders hereby continue, a
revolving credit facility pursuant to which, upon the following terms and
subject to the following conditions:

 

(a)                                  From
and including the date hereof to but excluding the Revolving Credit Termination
Date, each Lender severally (and not jointly) agrees, on the terms and
conditions set forth in this Agreement, to make Revolving Credit Loans to the
Borrower from time to time in amounts not to exceed in the aggregate at any one
time outstanding the amount of its pro-rata share of the Aggregate Revolving
Credit Commitment existing at such time. 
Subject to the terms of this Agreement, the Borrower may borrow, repay
and reborrow Revolving Credit Advances at any time prior to the Revolving
Credit Termination Date.  The Revolving
Credit Commitments shall expire on the Revolving Credit Termination Date.  All Revolving Credit Loans shall be in
Dollars.

 

(b)                                 The
Borrower hereby agrees that, if at any time as a result of reductions in the
Aggregate Revolving Credit Commitment pursuant to Section 2.4(b) or
otherwise, the aggregate balance of the Revolving Credit Loans exceeds the Aggregate
Revolving Credit Commitment, the Borrower shall repay immediately such then
amount of Revolving Credit Loans as may be necessary to eliminate such excess.

 

(c)                                  Any
outstanding Revolving Credit Advances and all other unpaid Obligations  with respect to the Revolving Credit Loans
shall be paid in full by the Borrower on the Revolving Credit Termination Date.

 

(d)                                 Upon
the effectiveness of this Agreement pursuant to Section 5.1, each
Revolving Credit Advance which is then outstanding under the Existing Credit
Agreement shall be deemed a Revolving Credit Advance outstanding under this
Agreement.

 

2.2         Ratable Loans.  Each Revolving Credit Advance hereunder shall
consist of Revolving Credit Loans made from the several Lenders ratably in
proportion to the ratio that

 

17

 

their respective Revolving Credit Commitments
bear to the Aggregate Revolving Credit Commitment.

 

2.3         Types of Revolving
Credit Advances.  The
Revolving Credit Advances may be Alternate Base Rate Advances or Eurodollar
Advances, or a combination thereof, selected by the Borrower in accordance with
Sections 2.7 and 2.8.

 

2.4         Commitment Fee; Reductions in
Aggregate Revolving Credit Commitment.

 

(a)                                  The
Borrower agrees to pay to the Agent for the account of each Lender a commitment
fee on its Revolving Credit Commitment less its Revolving Credit Loans at a per
annum rate equal to the Applicable Commitment Fee Rate from the Closing Date to
and including the Revolving Credit Termination Date, payable on each Payment
Date hereafter and on the Revolving Credit Termination Date.  All such accrued commitment fees shall be
payable on the effective date of any termination of the obligations of the
Lenders to make Revolving Credit Loans hereunder.

 

(b)                                 The
Borrower may permanently reduce the Aggregate Revolving Credit Commitment in
whole, or in part ratably among the Lenders in integral multiples of $5,000,000
upon at least five (5) Business Days’ written notice to the Agent, which notice
shall specify the amount of any such reduction; provided, however, that the
amount of the Aggregate Revolving Credit Commitment may not be reduced below
the aggregate principal amount of the outstanding Revolving Credit Loans.

 

2.5         Optional Principal
Payments.  The Borrower
may from time to time pay, without penalty or premium, all outstanding
Alternate Base Rate Advances, or, in a minimum aggregate amount of $1,000,000
or any integral multiple of $500,000 in excess thereof, any portion of the
outstanding Alternate Base Rate Advances upon two Business Days’ prior notice
to the Agent. The Borrower may from time to time pay, subject to the payment of
any funding indemnification amounts required by Section 4.4 but
without penalty or premium, all outstanding Eurodollar Advances, or, in a
minimum aggregate amount of $1,000,000 or any integral multiple of $1,000,000
in excess thereof, any portion of the outstanding Eurodollar Advances upon
three Business Days’ prior notice to the Agent.

 

2.6         Mandatory Prepayments.  Mandatory prepayments of Revolving Credit
Loans shall be required in the amounts and at the times set forth below:

 

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

 

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

 

18

 

provided that, if the outstanding Revolving
Credit Loans at the time of a mandatory prepayment are less than the mandatory
prepayment, the prepayment shall be limited to the outstanding amount of such
Revolving Loans.

 

2.7         Revolving Credit Advances.  The Borrower shall select the Type of
Revolving Credit Advance and, in the case of each Eurodollar Advance, the
Interest Period applicable thereto from time to time.  The Borrower shall give the Agent irrevocable
notice (a “Borrowing Notice”) not later than 10:00 a.m. (Chicago
time) at least one (1) Business Day before the Borrowing Date of each Alternate
Base Rate Advance and at least three (3) Business Days before the Borrowing
Date for each Eurodollar Advance, specifying:

 

(a)                                  the Borrowing
Date of such Revolving Credit Advance, which shall be a Business Day;

 

(b)                                 the aggregate
amount of such Revolving Credit Advance;

 

(c)                                  the Type
of Revolving Credit Advance selected; and

 

(d)                                 in
the case of each Eurodollar Advance, the Interest Period applicable thereto,
which shall end on or prior to the Revolving Credit Termination Date.

 

Not later than
noon (Chicago time) on each Borrowing Date, each Lender shall make available
its Revolving Credit Loan or Loans in funds immediately available in Chicago to
the Agent at its address specified pursuant to Article XIV.

 

2.8         Conversion and Continuation
of Outstanding Revolving Credit Advances. 
Alternate Base Rate Advances shall continue as Alternate Base Rate
Advances unless and until such Alternate Base Rate Advances are converted into
Eurodollar Advances pursuant to this Section 2.8 or are repaid in
accordance with Section 2.5. 
Each Eurodollar Advance shall continue as a Eurodollar Advance until the
end of the then applicable Interest Period therefor, at which time such
Eurodollar Advance shall be automatically converted into an Alternate Base Rate
Advance unless (x) such Eurodollar Advance is or was repaid in accordance with Section 2.5
or (y) the Borrower shall have given the Agent a Conversion/Continuation Notice
(as defined below) requesting that, at the end of such Interest Period, such
Eurodollar Advance continue as a Eurodollar Advance for the same or another
Interest Period.  The Borrower may elect
from time to time to convert all or any part of an Alternate Base Rate Advance
into a Eurodollar Advance.  The Borrower
shall give the Agent irrevocable notice (a “Conversion/Continuation Notice”)
of each conversion of an Alternate Base Rate Advance into a Eurodollar Advance
or continuation of a Eurodollar Advance not later than 10:00 a.m. (Chicago
time) at least three Business Days prior to the date of the requested
conversion or continuation, specifying:

 

(a)                                  the
requested date, which shall be a Business Day, of such conversion or
continuation,

 

19

 

(b)                                 the
aggregate amount and Type of the Revolving Credit Advance which is to be
converted or continued, and

 

(c)                                  the
amount of such Revolving Credit Advance which is to be converted into or
continued as a Eurodollar Advance and the duration of the Interest Period
applicable thereto.

 

2.9         Changes in Interest
Rate, etc.  Each
Alternate Base Rate Advance shall bear interest on the outstanding principal
amount thereof, for each day from and including the date such Revolving Credit
Advance is made or is automatically converted from a Eurodollar Advance into an
Alternate Base Rate Advance pursuant to Section 2.8, to but
excluding the date it is paid or is converted into a Eurodollar Advance
pursuant to Section 2.8 hereof, at a rate per annum equal to the
Alternate Base Rate for such day. 
Changes in the rate of interest on that portion of any Revolving Credit
Advance maintained as an Alternate Base Rate Advance will take effect
simultaneously with each change in the Alternate Base Rate.  Each Eurodollar Advance shall bear interest
on the outstanding principal amount thereof from and including the first day of
the Interest Period applicable thereto to (but not including) the last day of
such Interest Period at the interest rate determined by the Agent as applicable
to such Eurodollar Advance based upon the Borrower’s selections under Section 2.7
and 2.8 and otherwise in accordance with the terms hereof.  No Interest Period may end after the
Revolving Credit Termination Date.

 

2.10                                                   Rates
Applicable After Default. 
Notwithstanding anything to the contrary contained in Section 2.7
or 2.8, during the continuance of a Default or Unmatured Default the
Required Lenders may, at their option, by notice to the Borrower (which notice
may be revoked at the option of the Required Lenders notwithstanding any
provision of Section 9.2 requiring unanimous consent of the Lenders
to reductions in interest rates), declare that no Revolving Credit Advance may
be made as, converted into or continued as a Eurodollar Advance.  During the continuance of a Default the Required
Lenders may, at their option, by notice to the Borrower (which notice may be
revoked at the option of the Required Lenders notwithstanding any provision of Section 9.2
requiring unanimous consent of the Lenders to reductions in interest rates),
declare that (a) each Eurodollar Advance shall bear interest for the remainder
of the applicable Interest Period at the rate otherwise applicable to such
Interest Period plus 2% per annum and (b) each Alternate Base Rate Advance
shall bear interest at a rate per annum equal to the Alternate Base Rate in
effect from time to time plus 2% per annum, provided that, during the
continuance of a Default under Section 8.6 or 8.7, the
interest rates set forth in clauses (a) and (b) above shall be applicable to
all Revolving Credit Advances without any election or action on the part of the
Agent or any Lender.

 

2.11                                                   Method
of Payment.  All
payments of the Obligations hereunder shall be made, without setoff, deduction,
or counterclaim, in immediately available funds to the Agent at the Agent’s
address specified pursuant to Article XIV, or at any other Lending
Installation of the Agent specified in writing by the Agent to the Borrower, by
noon (Chicago time) on the date when due and shall be applied ratably by the
Agent among the Lenders.  Each payment
delivered to the Agent for the account of any Lender shall be delivered

 

20

 

promptly by the Agent to such Lender in the same type
of funds that the Agent received at its address specified pursuant to Article XIV
or at any Lending Installation specified in a notice received by the Agent from
such Lender.  The Agent is hereby
authorized to charge the account of the Borrower maintained with JPMorgan Chase
Bank for each payment of principal, interest and fees as it becomes due
hereunder.

 

2.12                                                   Noteless
Agreement; Evidence of Indebtedness.  (a) 
Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Revolving Credit Loan made by such Lender from time to
time, including the amounts of principal and interest payable and paid to such
Lender from time to time hereunder.

 

(b)                                 The
Agent shall also maintain accounts in which it will record (i) the amount of
each Revolving Credit Loan made hereunder, the Type thereof and the Interest
Period with respect thereto, (ii) the amount of any principal or interest due
and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Agent hereunder from
the Borrower and each Lender’s share thereof.

 

(c)                                  The
entries maintained in the accounts maintained pursuant to paragraphs (a) and
(b) above shall be prima  facie evidence of the existence and
amounts of the Obligations therein recorded; provided, however,
that the failure of the Agent or any Lender to maintain such accounts or any
error therein shall not in any manner affect the obligation of the Borrower to
repay the Obligations in accordance with their terms.

 

(d)                                 Any
Lender may request that its Revolving Credit Loans be evidenced by a promissory
note in the form of Exhibit A (a “Revolving Credit Note”).  In such event, the Borrower shall prepare,
execute and deliver to such Lender a Revolving Credit Note payable to the order
of such Lender.  Thereafter, the
Revolving Credit Loans evidenced by such Revolving Credit Note and interest
thereon shall at all times (including after any assignment pursuant to Section 13.3)
be represented by one or more Revolving Credit Notes payable to the order of
the payee named therein or any assignee pursuant to Section 13.3,
except to the extent that any such Lender or assignee subsequently returns any
such Revolving Credit Note for cancellation and requests that such Revolving
Credit Loans once again be evidenced as described in paragraphs (a) and (b)
above.

 

2.13                                                   Telephonic
Notices.  The Borrower
hereby authorizes the Lenders and the Agent to extend, convert or continue
Revolving Credit Advances, effect selections of Types of Revolving Credit
Advances and to transfer funds based on telephonic notices made by any person
or persons the Agent or any Lender in good faith believes to be acting on
behalf of the Borrower, it being understood that the foregoing authorization is
specifically intended to allow Borrowing Notices and Conversion/Continuation
Notices to be given telephonically.  The
Borrower agrees to deliver promptly to the Agent a written confirmation, if
such confirmation is requested by the Agent or any Lender, of each telephonic
notice signed by an Authorized Officer. 
If the written confirmation differs in any material respect from the

 

21

 

action taken by the Agent and the Lenders, the records
of the Agent and the Lenders shall govern absent manifest error.

 

2.14                                                   Interest
Payment Dates; Interest and Fee Basis.  Interest accrued on each Alternate Base Rate
Advance shall be payable on each Payment Date, commencing with the first such
date to occur after the Closing Date and at maturity.  Interest accrued on each Eurodollar Advance
shall be payable on the last day of its applicable Interest Period, on any date
on which the Eurodollar Advance is prepaid, whether by acceleration or
otherwise, and at maturity.  Interest
accrued on each Eurodollar Advance having an Interest Period longer than three
months shall also be payable on the last day of each three-month interval
during such Interest Period.  Interest on
Eurodollar Advances and fees shall be calculated for actual days elapsed on the
basis of a 360-day year, and interest on Alternate Base Rate Advances shall be
calculated for actual days elapsed on the basis of a 365 or 366 day year, as
applicable.  Interest shall be payable
for the day a Revolving Credit Advance is made but not for the day of any
payment on the amount paid if payment is received prior to noon (Chicago time)
at the place of payment.  If any payment
of principal of or interest on a Revolving Credit Advance shall become due on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and, in the case of a principal payment, such extension
of time shall be included in computing interest in connection with such
payment.

 

2.15                                                   Notification
of Revolving Credit Advances, Interest Rates and Prepayments,
Commitment Reductions.  Promptly
after receipt thereof, the Agent will notify each Lender of the contents of
each Aggregate Revolving Credit Commitment reduction notice, Borrowing Notice,
Conversion/Continuation Notice and repayment notice received by it
hereunder.  The Agent will notify each
Lender of the interest rate applicable to each Eurodollar Advance promptly upon
determination of such interest rate and will give each Lender prompt notice of
each change in the Alternate Base Rate.

 

2.16                                                   Lending
Installations.  Each
Lender may book its Revolving Credit Loans at any Lending Installation selected
by such Lender and may change its Lending Installation from time to time.  All terms of this Agreement shall apply to
any such Lending Installation and the Revolving Credit Loans and any Revolving
Credit Notes issued hereunder shall be deemed held by each Lender for the
benefit of such Lending Installation. 
Each Lender may, by written notice to the Agent and the Borrower in
accordance with Article XIV, designate replacement or additional
Lending Installations through which Revolving Credit Loans will be made by it
and for whose account Revolving Credit Loan payments are to be made.

 

2.17                                                   Non-Receipt
of Funds by the Agent. 
Unless the Borrower or a Lender, as the case may be, notifies the Agent
prior to the date on which it is scheduled to make payment to the Agent of (a)
in the case of a Lender, the proceeds of a Revolving Credit Loan or (b) in the
case of the Borrower, a payment of principal, interest or fees to the Agent for
the account of the Lenders, that it does not intend to make such payment, the
Agent may assume that such payment has been made.  The Agent may, but shall not be obligated to,
make the amount of such payment available to the intended recipient in reliance
upon such assumption.  If such Lender or
the Borrower, as the case may be, has not in fact made such payment to the

 

22

 

Agent, the recipient of such payment shall, on demand
by the Agent, repay to the Agent the amount so made available together with
interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Agent until the date the Agent
recovers such amount at a rate per annum equal to (i) in the case of payment by
a Lender, the Federal Funds Effective Rate for such day for the first three
days and, thereafter, the interest rate applicable to the relevant Revolving
Credit Loan or (ii) in the case of payment by the Borrower, the interest
rate applicable to the relevant Revolving Credit Loan.

 

ARTICLE III

 

THE LETTER OF CREDIT FACILITY

 

3.1         Issuance of Letters of Credit.  (a) 
From and after the date hereof to but excluding the Letter of Credit
Availability Termination Date, the Issuer agrees, upon the terms and conditions
set forth in this Agreement, to issue at the request and for the account of the
Borrower, one or more Letters of Credit for the account of the Borrower (x) to
support the obligations of Wholly-Owned Subsidiaries of the Borrower with
respect to specific syndicates at the Society of Lloyd’s (the Letters of Credit
issued under this clause (x) being called the “Lloyd’s Letters of Credit”) and
(y) to support other obligations, provided that the aggregate face amount of
all outstanding Letters of Credit Obligations with respect to this clause (y)
does not at any time exceed the lesser of (A) the Letter of Credit Commitment
and (B) $5,000,000; provided, however, that the Issuer shall not be under any
obligation to issue, and shall not issue, any Letter of Credit if: (i) any
order, judgment or decree of any governmental authority or other regulatory
body with jurisdiction over the Issuer shall purport by its terms to enjoin or
restrain such Issuer from issuing such Letter of Credit, or any law or
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) from any governmental authority or other regulatory
body with jurisdiction over the Issuer shall prohibit, or request that the
Issuer refrain from, the issuance of Letters of Credit in particular or shall
impose upon the Issuer with respect to any Letter of Credit any restriction or
reserve or capital requirement (for which the Issuer is not otherwise
compensated) or any unreimbursed loss, cost or expense which was not
applicable, in effect and known to the Issuer as of the date of this Agreement
and which the Issuer in good faith deems material to it; (ii) one or more of
the conditions to such issuance contained in Section 5.2 is not
then satisfied; or (iii) after giving effect to such issuance, the aggregate
outstanding amount of the Letter of Credit Obligations would exceed the Letter
of Credit Commitment.  Letters of Credit
shall be denominated, at the Borrower’s option, in either Dollars or Pounds.

 

(b)                                 In
no event shall:  (i) the aggregate amount
of the Letter of Credit Obligations at any time exceed the Letter of Credit
Commitment; or (ii) the expiration date of any Letter of Credit (other than the
Letters of Credit identified on Schedule 3.1 hereto) or the date for
payment of any draft presented thereunder and accepted by the Issuer, be later
than (x) the date one year after the effective date of such Letter of Credit or
(y) in the case of the Lloyd’s Letters of Credit, four years after notice of
expiry from the Issuer to the Borrower and the beneficiary of the Letter of
Credit; provided, that each

 

23

 

Letter of Credit issued with an automatic “evergreen” provision
providing for renewal absent advance notice by the Borrower or the Issuer shall
be automatically renewed unless at least 30 days prior to each anniversary of
the issuance of such Letter of Credit the beneficiary thereof receives notice
from the Issuer that such Letter of Credit shall not be renewed.  The Issuer shall be under no obligation to
permit the renewal or extension of any Letter of Credit at any time (A) when a
Default or Unmatured Default has occurred and is continuing or (B) after the
Letter of Credit Availability Termination Date. 
The Issuer may (and, upon the request of the Required Lenders, shall)
give notice of termination of any Lloyd’s Letters of Credit with an expiry date
based upon notice at any time (A) when a Default has occurred and is continuing
or (B) after the Letter of Credit Availability Termination Date.

 

(c)                                  The
Borrower agrees that, if at any time as a result of reductions in the Letter of
Credit Commitment pursuant to Section 3.3 or otherwise the
aggregate balance of the Letter of Credit Obligations exceeds the Letter of
Credit Commitment, the Borrower shall cash collateralize the Letter of Credit
Obligations by depositing into the Letter of Credit Cash Collateral Account
cash or Cash Collateral Investments in such amount as may be necessary to
eliminate such excess.

 

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

 

(e)                                  For
purposes of determining usage and availability under this Section 3.1,
when a Letter of Credit is issued in Pounds, such Pounds will be converted to
Dollars upon issuance, upon the proposed issuance of any other Letter of Credit
and at the end of each calendar quarter, and at any time thereafter as
requested by the Agent or any Lender (including the Issuer) and such
determination shall be made by the Agent in its sole determination based upon
the spot exchange rate between Dollars and Pounds as quoted by the Agent’s
foreign exchange desk as of such date of determination.  Notwithstanding any other provisions of this
Agreement, if at any time, after giving effect to the conversion of Pounds into
Dollars as set forth above, the aggregate face amount of all outstanding
Letters of Credit is greater than the Letter of Credit Commitment (“Conversion
Differential”), then the Borrower shall cash collateralize such Conversion
Differential by depositing into the Letter of Credit Cash Collateral Account
cash or Cash Collateral Investments in an amount equal to such difference.

 

(f)                                    At
the request of the Borrower, Letters of Credit may be issued with any
Wholly-Owned Subsidiary of the Borrower as an applicant, so long as the
Borrower is also an applicant under the applicable Reimbursement
Agreement.  The fact that such Subsidiary
is an applicant shall not affect the obligations of the Borrower with respect
to such Letters of Credit hereunder or under any Facility  Document in any way.  Any Reimbursement Agreement for a Letter of
Credit with respect to which such Subsidiary is

 

24

 

an applicant shall include language substantially similar to that set
forth in Exhibit D or otherwise acceptable to the Agent.

 

3.2         Participating Interests.  Immediately upon the issuance by the Issuer
of a Letter of Credit in accordance with Section 3.5 (and with
respect to the Letters of Credit identified on Schedule 3.1 hereto,
upon satisfaction of the conditions set forth in Article V hereof),
each Lender shall be deemed to have irrevocably and unconditionally purchased
and received from the Issuer, without recourse, representation or warranty, an
undivided participation interest equal to its pro-rata share of the Letter of
Credit Commitment of the face amount of such Letter of Credit and each draw
paid by the Issuer thereunder.  Each
Lender’s obligation to pay its proportionate share of all draws under the
Letters of Credit, absent gross negligence or willful misconduct by the Issuer
in honoring any such draw, shall be absolute, unconditional and irrevocable and
in each case shall be made without counterclaim or set-off by such Lender.

 

3.3         Reductions in Letter of
Credit Commitment.  The Borrower may
permanently reduce the Letter of Credit Commitment in whole, or in part ratably
among the Lenders in integral multiples of $2,500,000, upon at least
five (5) Business Days’ written notice to the Agent, which notice shall
specify the amount of such reduction; provided, however, that the
amount of the Letter of Credit Commitment may not be reduced below the
aggregate amount of the outstanding Letter of Credit Obligations.

 

3.4         Reimbursement Obligations.  (a) 
The Borrower agrees to pay to the Issuer of a Letter of Credit (i) on
each date that any amount is drawn under each Letter of Credit (or, if any draw
is paid by the Issuer after 3:00 p.m. (Chicago time) on such date, on the next
succeeding Business Day) a sum (and interest on such sum as provided in clause
(ii) below) equal to the amount so drawn plus all other charges and expenses
with respect thereto specified in Section 3.9 or in the applicable
Reimbursement Agreement and (ii) interest on any and all amounts remaining
unpaid under this Section 3.4 until payment in full at the rate per
annum, computed for actual days elapsed based on a 365 or 366 day year, as
applicable, equal to (A) the Alternate Base Rate for such day for the
first two days following the due date of any Reimbursement Obligations,
and (B) the Alternate Base Rate for such day plus 2% per annum.  The Borrower agrees to pay to the Issuer the
amount of all Reimbursement Obligations owing in respect of any Letter of
Credit immediately when due, under all circumstances, including, without
limitation, any of the following circumstances: 
(w) any lack of validity or enforceability of this Agreement or any of the
other Facility Documents; (x) the existence of any claim, set-off, defense or
other right which the Borrower may have at any time against a beneficiary named
in a Letter of Credit, any transferee of any Letter of Credit (or any Person
for whom any such transferee may be acting), any Lender or any other Person,
whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including any
underlying transaction between the Borrower and the beneficiary named in any
Letter of Credit); (y) the validity, sufficiency or genuineness of any
document which the Issuer has determined in good faith complies on its face
with the terms of the applicable Letter of Credit, even if such document should
later prove to have been forged, fraudulent, invalid or insufficient in any
respect or

 

25

 

any statement therein shall have been untrue or inaccurate in any
respect; or (z) the surrender or impairment of any security for the performance
or observance of any of the terms hereof.

 

(b)                                 Notwithstanding
any provisions to the contrary in any Reimbursement Agreement, the Borrower
agrees to reimburse the Issuer for amounts which the Issuer pays under such
Letter of Credit no later than the time specified in this Agreement.  If the Borrower does not pay any such
Reimbursement Obligations when due at any time prior the Revolving Credit
Termination Date, such Reimbursement Obligations, if in Pounds, shall be deemed
to have been converted into the equivalent amount of Dollars on the date due
based upon the spot rate of exchange between Dollars and Pounds as determined
by the Agent on the Reuters WRLD Page as of the time of determination on such
date.  In the event that such rate does
not appear on any Reuters WRLD Page, the exchange rate shall be determined by
reference to such other publicly available service for displaying exchange
rates as may be agreed upon by the Agent and the Borrower, or, in the absence
of such an agreement, such exchange rate shall instead be the arithmetic
average of the spot rates of exchange of the Agent in London at or about such
time between Dollars and Pounds for delivery two Business Days later; provided
that if at the time of any such determination, for any reason, no such spot
rate is being quoted, the Agent may use any reasonable method it deems
appropriate to determine such rate, and such determination shall be presumed
correct absent manifest error.

 

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

 

(d)                                 At
any time after the Issuer has made a payment on account of any Letter of Credit
and has received from any other Lender such Lender’s pro-rata share of such
payment, such Issuer shall, forthwith upon its receipt of any reimbursement (in
whole or in part) by the Borrower for such payment, or of any other amount from
the Borrower or any other Person in respect of such payment (including, without
limitation, any payment of interest or penalty fees and any payment under any
collateral account agreement of the

 

26

 

Borrower or any Facility Document but excluding any transfer of funds
from any other Lender pursuant to Section 3.4(b)), transfer to such
other Lender such other Lender’s ratable share of such reimbursement or other
amount; provided, that interest shall accrue for the benefit of such
Lender from the time such Issuer has made a payment on account of any Letter of
Credit; provided, further, that in the event that the receipt by
the Issuer of such reimbursement or other amount is found to have been a
transfer in fraud of creditors or a preferential payment under the United
States Bankruptcy Code or is otherwise required to be returned, such Lender
shall promptly return to the Issuer any portion thereof previously transferred
by the Issuer to such Lender, but without interest to the extent that interest
is not payable by the Issuer in connection therewith.

 

(e)                                  All
payments in respect of Reimbursement Obligations shall be in Dollars at the
Issuer’s selling rate for cable transfers to the place of payment of the Letter
of Credit current on the date of payment or of the Issuer’s settlement of its
obligation, as the Issuer may require or, at the Issuer’s election, in the
currency in which the Issuer was required to pay such Letter of Credit.  If, for any cause, on the date of payment or
settlement, as the case may be, there is no selling rate or other rate of exchange
generally current in Chicago for effecting such transfers, the Borrower will
pay the Issuer on demand an amount in Dollars equivalent to the Issuer’s actual
cost of settlement on its obligation however or whenever the Issuer shall make
such settlement, with interest at the Alternate Base Rate from the date of
settlement to the date of payment.

 

3.5         Procedure for Issuance.  Prior to the issuance of each new Letter of
Credit, and as a condition of such issuance, the Borrower shall deliver to the
Issuer (with a copy to the Agent) a Reimbursement Agreement signed by the
Borrower, together with such other documents or items as may be required
pursuant to the terms thereof, and the proposed form and content of such Letter
of Credit shall be reasonably satisfactory to the Issuer.  Each Letter of Credit shall be issued no
earlier than two (2) Business Days after delivery of the foregoing documents,
which delivery may be by the Borrower to the Issuer by telecopy, telex or other
electronic means followed by delivery of executed originals within five (5)
days thereafter.  The documents so
delivered shall be in compliance with the requirements set forth in Section 3.1(b),
and shall specify therein (a) the stated amount of the Letter of Credit
requested, (b) the effective date of issuance of such requested Letter of
Credit, which shall be a Business Day, (c) the date on which such requested
Letter of Credit is to expire, which shall be no later than four years from the
date of issuance of such Letter of Credit or in the case of a Lloyd’s Letter of
Credit, four years from notice of expiry from the Issuer to the Borrower and
the beneficiary of such Letter of Credit, (d) whether the Letter of Credit is
to be denominated in Dollars or Pounds, and (e) the aggregate amount of Letter
of Credit Obligations which are outstanding and which will be outstanding after
giving effect to the requested Letter of Credit issuance.  The delivery of the foregoing documents and
information shall constitute an “Issuance Request” for purposes of this
Agreement.  Subject to the terms and
conditions of Section 3.1 and provided that the applicable
conditions set forth in Section 5.2 hereof have been satisfied, the
Issuer shall, on the requested date, issue a Letter of Credit on behalf of the
Borrower in accordance with the Issuer’s usual and customary business
practices.  In addition, any amendment of
an existing Letter of Credit

 

27

 

shall be deemed to be an issuance of a new Letter of Credit and shall
be subject to the requirements set forth above. 
The Issuer shall give the Agent prompt written notice of the issuance of
any Letter of Credit.

 

3.6         Nature of the Lenders’
Obligations.  (a)  As between the Borrower and the Lenders, the
Borrower assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit by, the respective beneficiaries of the Letters of Credit; provided,
however, that the Borrower may have a claim against the Issuer, and the
Issuer may be liable to the Borrower, to the extent, but only to the extent, of
any direct (as opposed to consequential or exemplary) damages suffered by the
Borrower which the Borrower proves were caused by the Issuer’s willful
misconduct or gross negligence in determining whether documents presented under
a Letter of  Credit comply with the terms
of such Letter of Credit.  In furtherance
and not in limitation of the foregoing, the Lenders shall not be responsible
for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the application for
an issuance of a Letter of Credit, even if it should in fact prove to be in any
or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii)
the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) the failure of the beneficiary of
a Letter of Credit to comply fully with conditions required to be satisfied by
any Person other than the Issuer in order to draw upon such Letter of Credit;
(iv) errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise; (v) errors in the
interpretation of technical terms; (vi) the misapplication by the beneficiary
of a Letter of Credit of the proceeds of any drawing under such Letter of
Credit; or (vii) any consequences arising from causes beyond control of the
Issuer.

 

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

 

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

 

3.8         Cash Collateral for Letters
of Credit.  If no Cash Collateral
Security Agreement has been previously entered into, then on the Letter of
Credit Availability Termination Date the Borrower shall enter into the Cash
Collateral Security Agreement and, in any event, on and after such date the
Borrower shall pledge and deliver to the Agent, for the benefit of the Lenders,
cash or Cash Collateral Investments in sufficient amounts to maintain in the
Letter of Credit Cash Collateral Account an amount at least equal to the
following percentage of the Letter of Credit Obligations outstanding from time
to time during the following periods:

 

28

 

	
  Period

  	
   

  	
  Percentage of Letter of Credit

  Obligations Collateralized

  	
   

  
	
  Letter of
  Credit Availability Termination Date to but not including first anniversary
  of Letter of Credit Availability Termination Date

  	
   

  	
  20

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  First
  anniversary of Letter of Credit Availability Termination Date to but not
  including second anniversary of Letter of Credit Availability Termination
  Date

  	
   

  	
  40

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Second
  anniversary of Letter of Credit Availability Termination Date to but not
  including third anniversary of Letter of Credit Availability Termination Date

  	
   

  	
  60

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Third
  anniversary of Letter of Credit Availability Termination Date to but not
  including fourth anniversary of Letter of Credit Availability Termination
  Date

  	
   

  	
  80

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Fourth
  anniversary of Letter of Credit Availability Termination Date and at all
  times thereafter

  	
   

  	
  100

  	
  %

  

 

The Letter of Credit Cash
Collateral Account shall be maintained by JPMorgan Chase Bank in the name of
the Agent for the ratable benefit of the Lenders and the Agent pursuant to the
terms of Article IX; provided, however, that if no
Default has occurred and is continuing, the Borrower may direct the investment
of funds therein in Cash Collateral Investments.  The earnings thereon shall be for the account
of the Borrower.

 

3.9         Fees.

 

(a)                                  Commitment
Fee.  The Borrower agrees to pay to
the Agent for the account of each Lender with respect to its Letter of Credit
Participation Amount a commitment fee at a rate per annum equal to the
Applicable Commitment Fee Rate on the daily unused portion of such Lender’s
Letter of Credit Participation Amount from the Closing Date to and including
the Letter of Credit Availability Termination Date, payable on each Payment
Date hereafter and on the Letter of Credit Availability Termination Date.

 

(b)                                 Letter
of Credit Fronting Fee.  The Borrower
hereby agrees to pay to the Agent, for the account of the Issuer, a letter of
credit fronting fee with respect to each Letter of Credit from and including
the date of issuance thereof (or, with respect to the Letters of Credit
identified on Schedule 3.1, the date on which such Letters of Credit are
deemed issued under this Agreement pursuant to Section 3.1(d))
until the date such Letter of Credit is fully drawn, canceled or expired, in an
amount equal to the rate provided in the Fee Letter of the aggregate initial
face amount of such Letter of Credit, calculated with respect to actual days
elapsed on the basis of a 360-day year and payable quarterly

 

29

 

in arrears on each Payment Date in each year and upon the expiration,
cancellation or utilization in full of such Letter of Credit.  In addition to the foregoing, the Borrower
agrees to pay the Issuer any other fees customarily charged by it in respect of
the issuance, amendment, cancellation, negotiation or transfer of each Letter
of Credit and each drawing made thereunder. 
The letter of credit fronting fee is in addition to (and not included
in) the letter of credit participation fee provided for in paragraph (c) below.

 

(c)                                  Letter
of Credit Participation Fee.  The
Borrower agrees to pay to the Agent for the pro-rata account of the Lenders
(including the Issuer) a letter of credit participation fee with respect to
each Letter of Credit from and including the date of issuance thereof until the
date such Letter of Credit is fully drawn, canceled or expired, in an amount
equal to the Applicable Letter of Credit Participation Fee Rate on the
aggregate amount from time to time available to be drawn on such Letter of
Credit, calculated with respect to actual days elapsed on the basis of a
360-day year and payable quarterly in arrears on each Payment Date in each year
and upon the expiration, cancellation or utilization in full of such Letter of
Credit.  During the continuance of a
Default, the Required Lenders may, at their option, by notice to the Borrower,
declare that the Applicable Letter of Credit Participation Fee Rate shall be
increased by 2% per annum; provided, that during the continuance of a
Default under Section 8.6 or 8.7, the Applicable Letter of
Credit Participation Fee Rate shall be increased by 2% without any election or
action on the part of the Agent or any Lender.

 

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

 

30

 

Credit Termination Date.  Otherwise the Letter of Credit Availability
Termination Date or Revolving Credit Termination Date shall be unchanged.

 

ARTICLE IV

 

YIELD PROTECTION; TAXES

 

4.1         Yield Protection.  If, on or after the Closing Date, the
adoption of any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or any
change in the interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency:

 

(a)                                  subjects
any Lender or any applicable Lending Installation to any Taxes, or changes the
basis of taxation of payments (other than with respect to Excluded Taxes) to
any Lender in respect of its Eurodollar Loans or its interest in the Letters of
Credit, or

 

(b)                                 imposes
or increases or deems applicable any reserve, assessment, insurance charge,
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender or any applicable Lending
Installation (other than reserves and assessments taken into account in
determining the interest rate applicable to Eurodollar Advances), or

 

(c)                                  imposes
any other condition the result of which is to increase the cost to any Lender
or any applicable Lending Installation of making, funding or maintaining its
Eurodollar Loans or issuing Letters of Credit or reduces any amount receivable
by any Lender or any applicable Lending Installation in connection with its Eurodollar
Loans or any Letter of Credit, or requires any Lender or any applicable Lending
Installation to make any payment calculated by reference to the amount of
Eurodollar Loans held, Letters of Credit issued or participated in or interest
received by it, by an amount deemed material by such Lender,

 

and the result of any of
the foregoing is to increase the cost to such Lender or applicable Lending
Installation of making or maintaining its Eurodollar Loans, the Letter of
Credit Commitment or Revolving Credit Commitment or its interest in the Letters
of Credit or to reduce the return received by such Lender or applicable Lending
Installation in connection with such Eurodollar Loans, the Letter of Credit
Commitment or Revolving Credit Commitment or interest in Letters of Credit,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender such additional amount or amounts as will compensate such Lender for
such increased cost or reduction in amount received.

 

4.2         Changes
in Capital Adequacy Regulations.  If a Lender determines the amount of capital
required or expected to be maintained by such Lender, any Lending Installation
of

 

31

 

such Lender or any corporation controlling such Lender is increased as
a result of a Change, then, within 15 days of demand by such Lender, the
Borrower shall pay such Lender the amount necessary to compensate for any
shortfall in the rate of return on the portion of such increased capital which
such Lender determines is attributable to this Agreement, its Revolving Credit
Loans, its Revolving Credit Commitment to make Revolving Credit Loans or its
commitment to participate in Letters of Credit hereunder (after taking into
account such Lender’s policies as to capital adequacy).  “Change” means (a) any change after
the Closing Date in the Risk-Based Capital Guidelines or (b) any adoption of or
change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having the
force of law) after the Closing Date which affects the amount of capital
required or expected to be maintained by any Lender or any Lending Installation
or any corporation controlling any Lender. 
“Risk-Based Capital Guidelines” means (i) the risk-based capital
guidelines in effect in the United States on the Closing Date, including
transition rules, and (ii) the corresponding capital regulations promulgated by
regulatory authorities outside the United States implementing the July 1988
report of the Basle Committee on Banking Regulation and Supervisory Practices
Entitled “International Convergence of Capital Measurements and Capital
Standards,” including transition rules, and any amendments to such regulations
adopted prior to the Closing Date.

 

4.3         Availability of Types of
Revolving Credit Advances.  If any
Lender determines that maintenance of its Eurodollar Loans at a suitable
Lending Installation would violate any applicable law, rule, regulation, or
directive, whether or not having the force of law, or if the Required Lenders
determine that (i) deposits of a type and maturity appropriate to match fund
Eurodollar Advances are not available or (ii) the interest rate applicable to
Eurodollar Advances does not accurately reflect the cost of making or
maintaining Eurodollar Advances, then the Agent shall suspend the availability
of Eurodollar Advances and require any affected Eurodollar Advances to be
repaid or converted to Alternate Base Rate Advances, subject to the payment of any
funding indemnification amounts required by Section 4.4.

 

4.4         Funding
Indemnification.  If
any payment of a Eurodollar Advance occurs on a date which is not the last day
of the applicable Interest Period, whether because of acceleration, prepayment
or otherwise, or a Eurodollar Advance is not made on the date specified by the
Borrower for any reason other than default by the Lenders, the Borrower will
indemnify each Lender for any loss or cost incurred by it resulting therefrom,
including, without limitation, any loss or cost in liquidating or employing
deposits acquired to fund or maintain such Eurodollar Advance.

 

4.5                                 Taxes.  (a) 
All payments by the Borrower to or for the account of any Lender or the
Agent hereunder or under any Revolving Credit Note shall be made free and clear
of and without deduction for any and all Taxes. 
If the Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder to any Lender or the Agent, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 4.5) such Lender or the Agent (as the case may be)
receives an amount equal to the sum it would have received had no such deductions
been made, (ii) the Borrower shall make such deductions, (iii) the
Borrower

 

32

 

shall pay the full amount deducted to the relevant authority in
accordance with applicable law and (iv) the Borrower shall furnish to the Agent
the original copy of a receipt evidencing payment thereof within thirty (30)
days after such payment is made.

 

(b)                                 In
addition, the Borrower hereby agrees to pay any present or future stamp or
documentary taxes and any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under any Revolving
Credit Note or from the execution or delivery of, or otherwise with respect to,
this Agreement or any Revolving Credit Note (“Other Taxes”).

 

(c)                                  The
Borrower hereby agrees to indemnify the Agent and each Lender for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed on amounts payable under this Section 4.5) paid
by the Agent or such Lender and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto.  Payments due under this indemnification shall
be made within thirty (30) days of the date the Agent or such Lender makes
demand therefor pursuant to Section 4.6.

 

(d)                                 Each
Lender that is not incorporated under the laws of the United States of America
or a state thereof (each a “Non-U.S. Lender”) agrees that it will, not
less than ten (10) Business Days after the date of this Agreement, (i) deliver
to each of the Borrower and the Agent such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower, certifying that such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United States federal
income taxes.  Each Non-U.S. Lender
further undertakes to deliver to each of the Borrower and the Agent (x)
renewals or additional copies of such form (or any successor form) on or before
the date that such form expires or becomes obsolete, and (y) after the
occurrence of any event requiring a change in the most recent forms so
delivered by it, such additional forms or amendments thereto as may be
reasonably requested by the Borrower or the Agent.  All forms or amendments described in the
preceding sentence shall certify that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes, unless an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form or amendment with respect to it and such Lender
advises the Borrower and the Agent that it is not capable of receiving payments
without any deduction or withholding of United States federal income tax.

 

(e)                                  For
any period during which a Non-U.S. Lender has failed to provide the Borrower
with an appropriate form pursuant to paragraph (d) above (unless such failure
is due to a change in treaty, law or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
occurring subsequent to the date on which a form originally was required to be
provided), such Non-U.S. Lender shall not be entitled to indemnification under
this Section 4.5 with respect to Taxes imposed by the

 

33

 

United States; provided that, should a Non-U.S. Lender which is
otherwise exempt from or subject to a reduced rate of withholding tax become
subject to Taxes because of its failure to deliver a form required under
paragraph (d) above, the Borrower shall take such steps as such Non-U.S. Lender
shall reasonably request to assist such Non-U.S. Lender to recover such Taxes.

 

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

 

(g)                                 If
the U.S. Internal Revenue Service or any other governmental authority of the
United States or any other country or any political subdivision thereof asserts
a claim that the Agent did not properly withhold tax from amounts paid to or
for the account of any Lender (because the appropriate form was not delivered
or properly completed, because such Lender failed to notify the Agent of a
change in circumstances which rendered its exemption from withholding
ineffective, or for any other reason), such Lender shall indemnify the Agent
fully for all amounts paid, directly or indirectly, by the Agent as tax,
withholding therefor, or otherwise, including penalties and interest, and
including taxes imposed by any jurisdiction on amounts payable to the Agent
under this subsection, together with all costs and expenses related thereto
(including attorneys fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent). 
The obligations of the Lenders under this Section 4.5(g)
shall survive the payment of the Obligations and termination of this Agreement.

 

4.6         Lender Statements; Survival
of Indemnity.  To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Eurodollar Loans to reduce any liability of
the Borrower to such Lender under Sections 4.1, 4.2 and 4.5
or to avoid the unavailability of Eurodollar Advances under Section 4.3,
so long as such designation is not, in the judgment of such Lender,
disadvantageous to such Lender.  Each
Lender shall deliver a written statement of such Lender to the Borrower (with a
copy to the Agent) as to the amount due, if any, under Section 4.1,
4.2, 4.4 or 4.5. 
Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be final,
conclusive and binding on the Borrower in the absence of manifest error.  Determination of amounts payable under such
Sections in connection with a Eurodollar Loan shall be calculated as though
each Lender funded its Eurodollar Loan through the purchase of a deposit of the
type and maturity corresponding to the deposit used as a reference in determining
the Eurodollar Rate applicable to such Revolving Credit Loan, whether in fact
that is the case or not.  Unless
otherwise provided herein, the amount specified in the written statement of any
Lender shall be payable on demand after receipt by the Borrower of such written
statement.  The obligations of the
Borrower under Sections 4.1, 4.2, 4.4 and 4.5
shall survive payment of the Obligations and termination of this Agreement.

 

34

 

ARTICLE V

 

CONDITIONS PRECEDENT

 

5.1         Initial Revolving
Credit Loans and Letters of Credit.  The amendments to the Existing Credit
Agreement embodied in this Agreement shall not be effective (in which case the
Existing Credit Agreement shall remain in full force and effect) and the Lenders
shall have no obligation to make Revolving Credit Advances hereunder and the
Issuer shall have no obligation to issue any Letter of Credit hereunder unless
and until all loans under the Existing Credit Agreement have been paid in full
and the Borrower has furnished the following to the Agent with sufficient
copies for the Lenders and the other conditions set forth below have been
satisfied:

 

(a)                                  Charter
Documents; Good Standing Certificates. 
Copies of the articles or certificate of incorporation of the Borrower,
together with all amendments, and a certificate of good standing, each
certified by the appropriate governmental officer in its jurisdiction of
incorporation.

 

(b)                                 By-Laws
and Resolutions.  Copies, certified
by the Secretary or Assistant Secretary of the Borrower, of its by-laws and of
its Board of Directors’ resolutions and of resolutions or actions of any other
body authorizing the execution of the Facility Documents to which the Borrower
is a party.

 

(c)                                  Secretary’s
Certificate.  An incumbency
certificate, executed by the Secretary or Assistant Secretary of the Borrower,
which shall identify by name and title and bear the signature of the officers
of the Borrower authorized to sign the Facility Documents, upon which
certificate the Agent and the Lenders shall be entitled to rely until informed
of any change in writing by the Borrower.

 

(d)                                 Officer’s
Certificate.  A certificate, signed
by an Authorized Officer of the Borrower, stating that:  (i) on the Closing Date no Default or
Unmatured Default has occurred and is continuing; and (ii) each of the
representations and warranties set forth in Article VI of this
Agreement is true and correct on and as of the Closing Date.

 

(e)                                  Legal
Opinions.  A written opinion of
Elliot Orol, internal counsel to the Borrower and its Subsidiaries, addressed
to the Agent and the Lenders in form and substance acceptable to the Agent and
its counsel.

 

(f)                                    Revolving
Credit Notes. Any Revolving Credit Notes requested by a Lender pursuant to Section 2.12
payable to the order of each such requesting Lender.

 

(g)                                 Facility
Documents.  Executed originals of
this Agreement and each of the Facility Documents, which shall be in full force
and effect, together with all schedules, exhibits, certificates, stock
certificates (including stock certificates representing all of the

 

35

 

outstanding stock of each Significant Subsidiary), related stock
powers, instruments, opinions and documents required to be delivered pursuant
hereto and thereto.

 

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

 

5.2         Each Revolving Credit Advance
and Letter of Credit.  The Lenders
shall not be required to make any Revolving Credit Advance (other than a
Revolving Credit Advance that, after giving effect thereto and to the
application of the proceeds thereof, does not increase the aggregate amount of
outstanding Revolving Credit Advances), and the Issuer shall not be obligated
to issue any Letter of Credit, unless on the applicable Borrowing Date:

 

(a)                                  There
exists no Default or Unmatured Default and none would result from such
Revolving Credit Advance or issuance of such Letter of Credit;

 

(b)                                 The
representations and warranties contained in Article VI are true and
correct as of such Borrowing Date except to the extent any such representation
or warranty is stated to relate solely to an earlier date, in which case such
representation or warranty shall have been true and correct on and as of such
earlier date.

 

(c)                                  A
Borrowing Notice or Issuance Request, as applicable, shall have been properly
submitted; and

 

(d)                                 All
legal matters incident to the making of such Revolving Credit Advance or
issuance of such Letter of Credit shall be satisfactory to the Lenders and
their counsel.

 

Each Borrowing Notice
with respect to each such Revolving Credit Advance and each Issuance Request
with respect to each such Letter of Credit shall constitute a representation
and warranty by the Borrower that the conditions contained in Section 5.2
(a) and (b) have been satisfied. 
Any Lender may require a duly completed compliance certificate in
substantially the form of Exhibit B hereto as a condition to making
a Revolving Credit Advance or issuing a Letter of Credit.

 

ARTICLE VI

 

REPRESENTATIONS AND WARRANTIES

 

The Borrower represents and warrants to the
Lenders that:

 

6.1         Existence and Standing.  Each of the Borrower and its Subsidiaries is
a corporation, duly and properly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization
and has all requisite authority to conduct its business in each jurisdiction in
which its business is conducted.

 

36

 

6.2         Authorization and Validity.  The Borrower has the corporate power and
authority and legal right to execute and deliver the Facility Documents and to
perform its obligations thereunder.  The
execution and delivery by the Borrower of the Facility Documents and the
performance of its obligations thereunder have been duly authorized by proper
corporate proceedings, and the Facility Documents to which the Borrower is a
party constitute legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally.

 

6.3         No Conflict; Government
Consent.  Neither the execution and
delivery by the Borrower of the Facility Documents, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate (a) any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Borrower or any of its Subsidiaries or (b) the
Borrower’s or any Subsidiary’s articles or certificate of incorporation,
partnership agreement, certificate of partnership, articles or certificate of
organization, by-laws, or operating or other management agreement, as the case
may be, or (c) the provisions of any indenture, instrument or agreement to
which the Borrower or any of its Subsidiaries is a party or is subject, or by
which it, or its Property, is bound, or conflict with or constitute a default
thereunder, or result in, or require, the creation or imposition of any Lien
in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms
of any such indenture, instrument or agreement. 
No order, consent, adjudication, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption by, or
other action in respect of any governmental or public body or authority, or any
subdivision thereof, which has not been obtained by the Borrower or any of its
Subsidiaries, is required to be obtained by the Borrower or any of its
Subsidiaries in connection with the execution and delivery of the Facility
Documents, the extensions of credit under this Agreement, the payment and
performance by the Borrower of the Obligations or the legality, validity,
binding effect or enforceability of any of the Facility Documents, except that
approval of the New York Insurance Department, the California Insurance
Department and/or one or more other state insurance departments would be
required in order for the Lenders to acquire control of Navigators and
NIC.  Neither the Borrower nor any
Subsidiary is in default under or in violation of any foreign, federal, state
or local law, rule, regulation, order, writ, judgment, injunction, decree or award
binding upon or applicable to the Borrower or such Subsidiary, in each case the
consequences of which default or violation could reasonably be expected to have
a Material Adverse Effect.

 

6.4         Financial Statements.  (a) 
The consolidated balance sheets of the Borrower and the Consolidated
Subsidiaries as of December 31, 2003 the related consolidated statements
of income, consolidated statements of stockholders’ equity, and consolidated
statements of cash flows of the Borrower and such Consolidated Subsidiaries for
the Fiscal Year then ended, and the accompanying footnotes, together, with the
opinion thereon, dated March 9, 2004 of KPMG Peat Marwick, independent
certified public accountants, copies of which have been furnished to the
Lenders, fairly present the financial condition of the Borrower and the
Consolidated Subsidiaries as at such dates and the results of the operations of
the Borrower

 

37

 

and Consolidated Subsidiaries for the periods covered by such
statements, all in accordance with Agreement Accounting Principles consistently
applied.

 

(b)                                 The
consolidated balance sheets of the Borrower and the Consolidated Subsidiaries
as of September 30, 2004 and the related consolidated statements of
income, consolidated statements of stockholders’ equity, and consolidated
statements of cash flows of the Borrower and such Consolidated Subsidiaries for
the Fiscal Quarter then ended, copies of which have been furnished to the
Lenders, fairly present the financial condition of the Borrower and the
Consolidated Subsidiaries as at such dates and the results of the operations of
the Borrower and the Consolidated Subsidiaries for the periods covered by such
statements, all in accordance with Agreement Accounting Principles consistently
applied (subject to changes resulting from normal year-end audit adjustments).

 

(c)                                  There
are no liabilities of the Borrower or any of the Consolidated Subsidiaries,
fixed or contingent, which are material but are not reflected in the most
recent financial statements referred to above or in the notes thereto, other
than liabilities arising in the ordinary course of business since September 30,
2004.

 

6.5         Statutory Financial
Statements.  (a)  The Annual Statement of each of the Insurance
Subsidiaries (including, without limitation, the provisions made therein for
investments and the valuation thereof, reserves, policy and contract claims and
statutory liabilities) as filed with the appropriate Governmental Authority of
its state of domicile (the “Department”) and delivered to each Lender
prior to the execution and delivery of this Agreement, as of and for the 2003
Fiscal Year, and as of and for the Fiscal Quarter ended September 30, 2004
(collectively, the “Statutory Financial Statements”), have been prepared
in accordance with SAP applied on a consistent basis (except as noted
therein).  Each such Statutory Financial
Statement was in compliance with applicable law when filed.

 

(b)                                 No
dividends or other distributions have been declared, paid or made upon any shares
of capital stock of the Borrower, nor have any shares of capital stock of the
Borrower been redeemed, retired, purchased or otherwise acquired by the
Borrower since September 30, 2004, except to the extent permitted under
the terms of this Agreement.

 

6.6         Material Adverse Change.  Since December 31, 2003 there has been
no change in the business, Property, condition (financial or otherwise) or
results of operations of the Borrower and its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect.

 

6.7         Taxes.
 The Borrower and its Subsidiaries
have filed all United States federal tax returns and all other tax returns
which are required to be filed and have paid all taxes due pursuant to said
returns or pursuant to any assessment received by the Borrower or any of its
Subsidiaries, except such taxes, if any, as are being contested in good faith
and as to which adequate reserves have been provided in accordance with
Agreement Accounting Principles and as to which no Lien exists.  No tax liens have been filed and no claims
are being asserted

 

38

 

with respect to any such taxes. 
The charges, accruals and reserves on the books of the Borrower and its
Subsidiaries in respect of any taxes or other governmental charges are
adequate.

 

6.8         Litigation and Contingent
Obligations.  There is no litigation,
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of their officers, threatened against or affecting the
Borrower or any of its Subsidiaries which could reasonably be expected to have
a Material Adverse Effect or which seeks to prevent, enjoin or delay the making
of any Revolving Credit Loans or the issuance of any Letters of Credit.  Other than any liability incident to any
litigation, arbitration or proceeding which could not reasonably be expected to
have a Material Adverse Effect, the Borrower has no material contingent
obligations not provided for or disclosed in the financial statements referred
to in Section 6.4.

 

6.9         Subsidiaries.  Schedule 6.9 contains an accurate
list of all Subsidiaries of the Borrower as of the date of this Agreement,
setting forth their respective jurisdictions of organization and the percentage
of their respective capital stock or other ownership interests owned by the
Borrower or other Subsidiaries and indicating which Subsidiaries are
Significant Subsidiaries.  All of the
issued and outstanding shares of capital stock or other ownership interests of
such Subsidiaries have been (to the extent such concepts are relevant with
respect to such ownership interests) duly authorized and issued and are fully
paid and non-assessable.

 

6.10                                                   ERISA.  The Unfunded Liabilities of all Single
Employer Plans is $0 except that funding of any money purchase pension plan may
be delayed each Fiscal Year until the end of the First Fiscal Quarter
thereof.  Neither the Borrower nor any
other member of the Controlled Group has incurred, or is reasonably expected to
incur, any withdrawal liability to any Multiemployer Plan.  Each Plan complies in all material respects
with all applicable requirements of law and regulations, no Reportable Event
has occurred with respect to any Plan, neither the Borrower nor any other
member of the Controlled Group has withdrawn from any Plan or initiated steps
to do so, and no steps have been taken to reorganize or terminate any Plan.

 

6.11                                                   Defaults.  No Default or Unmatured Default has occurred
and is continuing.

 

6.12                                                   Accuracy
of Information.  No information,
exhibit or report furnished by the Borrower or any of its Subsidiaries to the
Agent or to any Lender in connection with the negotiation of, or compliance
with, the Facility Documents contained any material misstatement of fact or
omitted to state a material fact or any fact necessary to make the statements
contained therein not misleading.

 

6.13                                                   Regulation
U.  Margin stock (as defined in
Regulation U) constitutes less than 25% of the value of those assets of the
Borrower and its Subsidiaries which are subject to any limitation on sale,
pledge, or other restriction hereunder. 
Neither the making of any

 

39

 

Revolving Credit Advance nor issuance of any Letters of Credit
hereunder nor the use of the proceeds thereof, will violate or be inconsistent
with the provisions of Regulation T, Regulation U or Regulation X.

 

6.14                                                   Material
Agreements.  Neither the
Borrower nor any Subsidiary is a party to any agreement or instrument or
subject to any charter or other corporate restriction which could reasonably be
expected to have a Material Adverse Effect. 
Neither the Borrower nor any Subsidiary is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in (a) any agreement to which it is a party which default could
reasonably be expected to have a Material Adverse Effect or (b) any agreement
or instrument evidencing or governing Indebtedness.

 

6.15                                                   Compliance
With Laws.  The
Borrower and its Subsidiaries have complied with all applicable statutes,
rules, regulations, orders and restrictions of any domestic or foreign
government or any instrumentality or agency thereof having jurisdiction over
the conduct of their respective businesses or the ownership of their respective
Property, except where the failure to comply could not reasonably be expected
to have a Material Adverse Effect.

 

6.16                                                   Ownership
of Properties.  The
Borrower and each of its Subsidiaries has good title, free of all Liens other
than those permitted by Section 7.16, to all of the Property and
assets reflected in the Borrower’s most recent consolidated financial
statements provided to the Agent as owned by the Borrower and its Subsidiaries.

 

6.17                                                   Plan
Assets; Prohibited Transactions.  The Borrower is not an entity deemed to hold “plan
assets” within the meaning of 29 C.F.R. § 2510.3-101 of an employee
benefit plan (as defined in Section 3(3) of ERISA) which is subject to
Title I of ERISA or any plan (within the meaning of Section 4975 of the
Code), and neither the execution of this Agreement nor the making of Revolving
Credit Loans nor the issuance of Letters of Credit hereunder gives rise to a
prohibited transaction within the meaning of Section 406 of ERISA or Section 4975
of the Code.

 

6.18                                                   Environmental
Matters.  In the
ordinary course of its business, the officers of the Borrower consider the
effect of Environmental Laws on the business of the Borrower and its
Subsidiaries, in the course of which they identify and evaluate potential risks
and liabilities accruing to the Borrower due to Environmental Laws.  On the basis of this consideration, the
Borrower has concluded that Environmental Laws cannot reasonably be expected to
have a Material Adverse Effect.  Neither
the Borrower nor any Subsidiary has received any notice to the effect that its
operations are not in material compliance with any of the requirements of
applicable Environmental Laws or are the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment,
which non-compliance or remedial action could reasonably be expected to have a
Material Adverse Effect.

 

40

 

6.19                                                   Investment
Company Act.  Neither
the Borrower nor any Subsidiary is an “investment company” or a company “controlled”
by an “investment company”, within the meaning of the Investment Company Act of
1940, as amended.

 

6.20                                                   Public
Utility Holding Company Act. 
Neither the Borrower nor any Subsidiary is a “holding company” or a “subsidiary
company” of a “holding company”, or an “affiliate” of a “holding company” or of
a “subsidiary company” of a “holding company”, within the meaning of the Public
Utility Holding Company Act of 1935, as amended.

 

6.21                                                   Solvency.  Immediately after the consummation of the
transactions to occur on the date hereof and immediately following each
extension of credit, if any, made hereunder on the date hereof and after giving
effect to the application of the proceeds of such extensions of credit,
(a) the fair value of the assets of the Borrower and its Subsidiaries on a
consolidated basis, at a fair valuation, will exceed the debts and liabilities,
subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on
a consolidated basis; (b) the present fair saleable value of the Property of
the Borrower and its Subsidiaries on a consolidated basis will be greater than
the amount that will be required to pay the probable liability of the Borrower
and its Subsidiaries on a consolidated basis on their debts and other
liabilities, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured; (c) the Borrower and its Subsidiaries
on a consolidated basis will be able to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (d) the Borrower and its Subsidiaries on a
consolidated basis will not have unreasonably small capital with which to
conduct the businesses in which they are engaged as such businesses are now
conducted and are proposed to be conducted after the date hereof.

 

6.22                                                   Insurance
Licenses.  Schedule 6.22
hereto lists all of the jurisdictions in which any Insurance Subsidiary holds a
License and is authorized to transact insurance business as of the date of this
Agreement.  No such License, the loss of which
could reasonably be expected to have a Material Adverse Effect, is the subject
of a proceeding for suspension, limitation or revocation.  To the Borrower’s knowledge, there is not a
sustainable basis for such suspension, limitation or revocation, and no such
suspension, limitation or revocation has been threatened by any Governmental
Authority.  Schedule 6.22
also indicates the line or lines of insurance in which each such Insurance
Subsidiary is engaged and the state or states in which such Insurance
Subsidiary is licensed to engage in any line of insurance, in each case as of
the date of this Agreement.  The
Insurance Subsidiaries do not transact any business, directly or indirectly,
requiring any license, permit, governmental approval, consent or other
authorization other than those listed on Schedule 6.22.

 

6.23                                                   Partnerships.  Except as disclosed in Schedule 6.23,
neither the Borrower nor any of its Subsidiaries is a partner of any
partnership.

 

6.24                                                   Lines
of Business.  Schedule 6.24
sets forth a complete statement of each line of business conducted as of the
date hereof by the Borrower and each of its Subsidiaries (the “Existing
Lines of Business”).

 

41

 

6.25                                                   Reinsurance
Practices.  The business of each
Insurance Subsidiary is being conducted in all material respects in accordance
with the Reinsurance Guidelines.

 

6.26                                                   Security.  The Pledge Agreement is effective to create
and give the Agent, for the benefit of the Lenders, as security for the
repayment of the obligations secured thereby, a legal, valid, perfected and
enforceable first priority Lien upon and security interest in the capital stock
pledged thereby.

 

6.27                                                   Disclosure.  None of the (a) information, exhibits or
reports furnished or to be furnished by the Borrower or any Subsidiary to the
Agent or to any Lender in connection with the negotiation of the Facility
Documents, or (b) representations or warranties of the Borrower or any
Subsidiary contained in this Agreement, the other Facility Documents or any
other document, certificate or written statement furnished to the Agent or the
Lenders by or on behalf of the Borrower or any Subsidiary for use in connection
with the transactions contemplated by this Agreement or the Facility Documents
contained, contains or will contain any untrue statement of a material fact or
omitted, omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances in which the same were made. 
There is no fact known to the Borrower (other than matters of a general
economic nature) that has had or could reasonably be expected to have a
Material Adverse Effect and that has not been disclosed herein or in such other
documents, certificates and statements furnished to the Lenders for use in
connection with the transactions contemplated by this Agreement.

 

ARTICLE VII

 

COVENANTS

 

During the term of this
Agreement, unless the Lenders shall otherwise consent in writing:

 

7.1         Financial Reporting.  The Borrower will maintain, for itself and
each Subsidiary, a system of accounting established and administered in
accordance with generally accepted accounting principles, consistently applied,
and will furnish to the Lenders:

 

(a)                                  As
soon as practicable and in any event within one hundred (100) days after the
close of each of its Fiscal Years, an unqualified audit report certified by
independent certified public accountants acceptable to the Required Lenders,
prepared in accordance with Agreement Accounting Principles on a consolidated
and consolidating basis and setting forth in comparative form figures for the
preceding Fiscal Year for itself and its Consolidated Subsidiaries and on a
stand alone basis for the Borrower, including balance sheets as of the end of
such period and related statements of income, stockholders’ equity and cash
flows accompanied by any management letter prepared by said accountants.

 

(b)                                 As
soon as practicable and in any event within fifty (50) days after the close of
the first three Fiscal Quarters of each of its Fiscal Years, for itself and its

 

42

 

Subsidiaries, consolidated and consolidating unaudited balance sheets
as at the close of each such period and consolidated and consolidating
statement of income, stockholders’ equity and cash flows for the period from
the beginning of such Fiscal Year to the end of such quarter setting forth in
each case in comparative form figures for the corresponding period in the prior
Fiscal Year, all prepared in accordance with Agreement Accounting Principles
and in reasonable detail, and all certified by its chief financial officer.

 

(c)                                  As
soon as available and in any event (i) within seventy (70) days after the close
of each Fiscal Year of each Insurance Subsidiary, the Annual Statement of such
Insurance Subsidiary for such Fiscal Year as filed with the insurance
commissioner (or similar authority) in such Insurance Subsidiary’s state of
domicile, together with (ii) within seventy (70) days after the close of each
Fiscal Year of each Insurance Subsidiary, the opinion thereof of the chief
financial officer of the Borrower stating that such Annual Statement presents
the financial condition and results of operations of such Insurance Subsidiary
in accordance with SAP, (iii) on or prior to each June 1 after the close
of each Fiscal Year of each Insurance Subsidiary, the opinion of a firm of
certified public accountants reasonably satisfactory to the Required Lenders,
who shall have examined such Annual Statement and whose opinion shall not be
qualified as to the scope of audit or as to the status of such Insurance
Subsidiary as a going concern, and (iv) within one hundred twenty (120) days
after the close of each Fiscal Year of each Insurance Subsidiary, a written
review of and opinion of an accounting or actuarial firm or internal actuary,
as delivered to the Department, reasonably satisfactory to the Required Lenders
on the methodology and assumptions used to calculate the Loss Reserves of such
Insurance Subsidiary at the end of such Fiscal Year (as shown on the Annual
Statement of such Insurance Subsidiary prepared in accordance with SAP).

 

(d)                                 As
soon as available and in any event on or prior to each May 1 after the close of
each Fiscal Year of the Insurance Subsidiaries, the Consolidated Annual
Statement of the Insurance Subsidiaries for such Fiscal Year, prepared in
accordance with SAP and filed with the New York Insurance Department.

 

(e)                                  As
soon as available and in any event within fifty (50) days after the close of
each of the first three Fiscal Quarters in each Fiscal Year of each Insurance
Subsidiary, quarterly financial statements of such Insurance Subsidiary
(prepared in accordance with SAP) for such Fiscal Quarter and as filed with the
insurance commissioner (or similar authority) in such Insurance Subsidiary’s
state of domicile, together with the opinion thereon of the chief financial
officer of the Borrower stating that such financial statements present the
financial condition and results of operations of such Insurance Subsidiary in
accordance with SAP.

 

(f)                                    As
soon as available, but in any event within 120 days after the beginning of each
Fiscal Year, a copy of the plan and forecast of the Borrower and its
Subsidiaries for such Fiscal Year in the form customarily prepared by the
Borrower.

 

43

 

(g)                                 Together
with the financial statements required by clauses (a) and (b)
above, a compliance certificate in substantially the form of Exhibit B
hereto signed by its chief financial officer showing the calculations necessary
to determine compliance with this Agreement and stating that no Default or
Unmatured Default exists, or if any Default or Unmatured Default exists,
stating the nature and status thereof.

 

(h)                                 As
soon as possible and in any event within 10 days after the Borrower knows that
any Termination Event has occurred with respect to any Plan, a statement,
signed by the chief financial officer of the Borrower, describing said
Termination Event and the action which the Borrower proposes to take with
respect thereto.

 

(i)                                     As
soon as possible and in any event within 10 days after receipt by the Borrower,
a copy of (i) any notice or claim to the effect that the Borrower or any of its
Subsidiaries is or may be liable to any Person as a result of the release by
the Borrower, any of its Subsidiaries, or any other Person of any toxic or
hazardous waste or substance into the environment, and (ii) any notice alleging
any violation of any federal, state or local environmental, health or safety
law or regulation by the Borrower or any of its Subsidiaries.

 

(j)                                     As
soon as possible and in any event within 10 days after the Borrower learns
thereof, notice of the assertion or commencement of any claims, action, suit or
proceeding against or affecting the Borrower or any Subsidiary which may
reasonably be expected to have a Material Adverse Effect.

 

(k)                                  Promptly
upon the furnishing thereof to the shareholders of the Borrower, copies of all
financial statements, reports and proxy statements so furnished.

 

(l)                                     Promptly
upon the filing thereof, copies of all registration statements and annual,
quarterly, monthly or other regular reports which the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission.

 

(m)                               Promptly
and in any event within ten (10) days after learning thereof, notification of
(i) any tax assessment, demand, notice of proposed deficiency or notice of
deficiency received by the Borrower or any Consolidated Person or (ii) the
filing of any tax Lien or commencement of any judicial proceeding by or against
any such Consolidated Person, if any such assessment, demand, notice, Lien or
judicial proceeding relates to tax liabilities in excess of $1,000,000.

 

(n)                                 Promptly,
and in any event within five days after (i) learning thereof, notification
of any changes after the date hereof in the Borrower’s S&P Financial
Strength Rating or in the rating given by A.M. Best & Co. in respect of any
Insurance Subsidiary and (ii) receipt thereof, copies of any ratings
analysis by A.M. Best & Co. relating to any Insurance Subsidiary.

 

44

 

(o)                                 Copies
of any actuarial certificates prepared with respect to any Insurance
Subsidiary, promptly after the receipt thereof, and not later than 90 days
after each Fiscal Year, an actuarial opinion with respect to each Insurance
Subsidiary in form and substance reasonably satisfactory to the Agent and the
Required Lenders from an accounting or actuarial firm or internal actuary, as
delivered to the Department, reasonably satisfactory to the Agent and the
Required Lenders.

 

(p)                                 Promptly
upon the filing thereof, copies of all filings and annual, quarterly, monthly
or other regular reports which the Borrower or any of its Subsidiaries files
with the NAIC or any insurance commission or department or analogous
Governmental Authority (including, without limitation, any filing made by the
Borrower or any Subsidiary pursuant to any insurance holding company act or
related rules or regulations), but excluding routine or non-material filings
with the NAIC, any insurance commissioner or department or analogous
Governmental Authority.

 

(q)                                 In
addition to the requirements of clause (c)(iv) above, as promptly as reasonably
practicable following the request of the Required Lenders, a report prepared by
an accounting or actuarial firm or internal actuary, as delivered to the
Department, reviewing the adequacy of Loss Reserves of each Insurance
Subsidiary, which firm shall be provided access to or copies of all reserve
analyses and valuations relating to the insurance business of each Insurance
Subsidiary in the possession of or available to the Borrower or its
Subsidiaries; provided, that, in the event that the written review
required to be provided to the Lenders in respect of any Fiscal Year pursuant
to clause (c)(iv) above is provided by an independent actuarial consulting firm
reasonably satisfactory to the Agent, or a written review of an independent
actuarial consulting firm reasonably satisfactory to the Agent satisfying the
requirements set forth in clause (c)(iv) is otherwise delivered to the Lenders
at any time other than pursuant to such clause, then the Required Lenders may
not request a report pursuant to this paragraph (q) until one year after the
delivery date of such report unless, at the time of such request, a Default is
in existence.

 

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

 

7.2         Use
of Proceeds.  The
proceeds of the Revolving Credit Loans shall be used for general corporate
purposes including acquisitions.

 

7.3         Notice
of Default.  The
Borrower will give prompt notice in writing to the Lenders of the occurrence of
(a) any Default or Unmatured Default, (b) of any other event or development,
financial or otherwise which could reasonably be expected to have a Material
Adverse Effect, (c) the receipt of any notice from any Governmental Authority
of the expiration without renewal, revocation or suspension of, or the institution
of any proceedings to revoke or suspend, any License now or hereafter held by
any Insurance Subsidiary which is required to conduct insurance business in
compliance with all applicable laws and regulations and the expiration,
revocation or suspension of which could reasonably be

 

45

 

expected to have a Material Adverse Effect, (d) the receipt of any
notice from any Governmental Authority of the institution of any disciplinary
proceedings against or in respect of any Insurance Subsidiary, or the issuance
of any order, the taking of any action or any request for an extraordinary
audit for cause by any Governmental Authority which, if adversely determined,
could reasonably be expected to have a Material Adverse Effect, (e) any
material judicial or administrative order limiting or controlling the business
of any Subsidiary (and not the industry in which such Subsidiary is engaged
generally) which has been issued or adopted, or (f) the commencement of any litigation
which could reasonably be expected to result in a Material Adverse Effect.

 

7.4         Conduct
of Business.  The  Borrower will, and will cause each Subsidiary
to, (a) carry on and conduct its business only in the Existing Lines of
Business or in other lines of the insurance business or in activities
reasonably incidental to the insurance business, (b) do all things necessary to
remain duly incorporated or organized, validly existing and (to the extent such
concept applies to such entity) in good standing in its jurisdiction of
incorporation and its jurisdiction of incorporation or organization, as the
case may be, and maintain all requisite authority to conduct its business in
each other jurisdiction in which such qualification is required, and (c) do all
things necessary to renew, extend and continue in effect all Licenses which may
at any time and from time to time be necessary for any Insurance Subsidiary to
operate its business in compliance with all applicable laws and regulations.  No Insurance Subsidiary shall change its
state of domicile or incorporation without the prior written consent of the
Required Lenders.

 

7.5         Taxes.  The Borrower will, and will cause each
Subsidiary to, timely file complete and correct United States federal and
applicable foreign, state and local tax returns required by applicable law and
pay when due all taxes, assessments and governmental charges and levies upon it
or its income, profits or Property, except those which are being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves have been set aside in accordance with Agreement Accounting Principles
and SAP, as applicable.

 

7.6         Insurance.  The Borrower will, and will cause each
Subsidiary to, maintain with financially sound and reputable insurance
companies insurance on all their Property in such amounts and covering such
risks as is consistent with sound business practice, and the Borrower will
furnish to the Agent and any Lender upon request full information as to the
insurance carried.

 

7.7         Compliance
with Laws.  The Borrower will, and
will cause each Subsidiary to, comply with all laws, rules, regulations,
orders, writs, judgments, injunctions, decrees or awards to which it may be
subject, including, without limitation, all Environmental Laws, the
noncompliance with which could reasonably be expected to have a Material
Adverse Effect.

 

7.8         Maintenance
of Properties.  The Borrower will,
and will cause each Subsidiary to, do all things necessary to maintain,
preserve, protect and keep its Property in good repair, working order and
condition, and make all necessary and proper repairs, renewals and

 

46

 

replacements so that its business carried on in connection therewith
may be properly conducted at all times.

 

7.9         Inspection; Maintenance of
Books and Records.  The Borrower
will, and will cause each Subsidiary to, permit the Agent and the Lenders, by
their respective representatives and agents, to inspect any of the Property,
books and financial records of the Borrower and each Subsidiary, to examine and
make copies of the books of accounts and other financial records of the
Borrower and each Subsidiary, and to discuss the affairs, finances and accounts
of the Borrower and each Subsidiary with, and to be advised as to the same by,
their respective officers at such reasonable times and intervals, during normal
business hours and upon reasonable prior notice to the Borrower, as the Agent
or any Lender may designate.  The
Borrower will keep or cause to be kept, and cause each Subsidiary to keep or
cause to be kept, appropriate records and books of account in which complete
entries are to be made reflecting its and their business and financial
transactions, such entries to be made in accordance with Agreement Accounting
Principles and SAP, as applicable, consistently applied.

 

7.10                           Dividends
and Stock Repurchases. 
The Borrower will not, nor will it permit any Subsidiary to, declare or
pay any dividends or make any distributions on its capital stock (other than
dividends payable in its own capital stock) or redeem, repurchase or otherwise
acquire or retire any of its capital stock or any options or other rights in
respect thereof at any time outstanding, except that (a) any Subsidiary
may declare and pay dividends or make distributions to the Borrower or to a
Wholly-Owned Subsidiary of the Borrower and (b) the Borrower may
repurchase capital stock in an aggregate amount not to exceed $5,000,000 in any
Fiscal Year ending prior to the Revolving Credit Termination Date and Letter of
Credit Availability Termination Date and may pay dividends in an aggregate
amount not to exceed $2,500,000 in any Fiscal Year ending prior to the
Revolving Credit Termination Date and Letter of Credit Availability Termination
Date; provided, however, that the Borrower may not repurchase any
capital stock or pay any dividends unless after giving effect thereto Borrower
would be in pro forma compliance with the terms of this Agreement.

 

7.11                                                   Indebtedness.  The Borrower will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:

 

(a)                                  the
Revolving Credit Loans and other Obligations; and

 

(b)                                 guaranties
permitted under Section 7.15;

 

7.12                                                   Merger.  The Borrower will not, nor will it permit any
Subsidiary to, merge or consolidate with or into any other Person, except that
a Subsidiary may merge into the Borrower or any Wholly-Owned Subsidiary.

 

7.13                                                   Sale
of Assets.  The
Borrower will not, nor will it permit any Subsidiary to, lease, sell, transfer
or otherwise dispose of its Property, to any other Person except for:

 

47

 

(a)                                  sales
of inventory in the ordinary course of business; and

 

(b)                                 leases,
sales, transfers or other dispositions of its Property that, together with all
other Property of the Borrower and its Subsidiaries previously leased, sold or
disposed of (other than inventory or Investments (other than Investments in
Subsidiaries) sold in the ordinary course of business) as permitted by this Section 7.13
since the Closing Date, do not constitute a Substantial Portion of the Property
of the Borrower and its Subsidiaries.

 

7.14                                                   Investments
and Acquisitions.  The Borrower will
not, nor will it permit any Subsidiary to, make or suffer to exist any
Investment (including, without limitation, loans and advances to, and other
Investments in, Subsidiaries), or commitments therefor, or to create any
Subsidiary or to become or remain a partner in any partnership or joint
venture, or to make any Acquisitions, except:

 

(a)                                  Cash
Equivalent Investments;

 

(b)                                 Investments
in debt securities rated A- or better by S&P, A-3 or better by Moody’s or
NAIC-1 or better by the NAIC;

 

(c)                                  existing
Investments in Subsidiaries and other Investments in existence on the Closing
Date;

 

(d)                                 Investments
in debt securities not satisfying any of the standards set forth in
clause (b) above but rated BBB- or better by S&P, Baa-3 or better by
Moody’s or NAIC-2 or better by the NAIC; provided, that if any such
Investment ceases to meet such ratings requirements, then such Investment shall
be permitted hereby for a period of 180 days after the date on which such
ratings requirement is no longer satisfied; provided, further,
that all such Investments under this clause (d) do not exceed, in the aggregate
at any one time outstanding, 10% of the combined Investments of the Borrower
and its Subsidiaries;

 

(e)                                  Investments
by the Borrower (not including Investments in Subsidiaries) in equity
securities in an aggregate amount not to exceed 10% of the Consolidated Net
Worth of the Borrower and its Consolidated Subsidiaries; provided, that
no single Investment in equity securities shall be in an amount in excess of 5%
of the Consolidated Net Worth of the Borrower and its Consolidated Subsidiaries;

 

(f)                                    other
Investments after the Closing Date in an aggregate amount not to exceed
$10,000,000;

 

(g)                                 Acquisitions
in an aggregate amount not to exceed $10,000,000 in any Fiscal Year; and

 

(h)                                 Investments
by Navigators in Wholly-Owned Subsidiaries of Navigators (including new
Wholly-Owned Subsidiaries of Navigators).

 

48

 

7.15                                                   Contingent
Obligations.  The Borrower will not,
nor will it permit any Subsidiary to, make or suffer to exist any Contingent
Obligation (including, without limitation, any Contingent Obligation with
respect to the obligations of a Subsidiary), except (a) by endorsement of
instruments for deposit or collection in the ordinary course of business, (b)
Contingent Obligations in respect of Letters of Credit; provided, however,
that the Borrower may guarantee (i) the obligations of any Person that is
its or its Subsidiary’s employee so long as the aggregate amount of all such
guaranteed obligations, taken together with the aggregate amount of any and all
loans to such Persons by the Borrower in accordance with Section 7.14
outstanding at any time do not in the aggregate exceed $250,000, (ii) the
obligations of any Subsidiary over the initial contracted lease term under
leases of Property entered into in the ordinary course of business in an
aggregate amount not to exceed $10,000,000, and (iii) the obligations of any
Subsidiary under office space leases in existence on January 1, 2005 and
replacements thereof that are on substantially similar terms and conditions as
the lease being replaced.

 

7.16                                                   Liens.  The Borrower will not, nor will it permit any
Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the
Property of the Borrower or any of its Subsidiaries, except:

 

(a)                                  Liens
for taxes, assessments or governmental charges or levies on its Property if the
same shall not at the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate proceedings
and for which adequate reserves in accordance with Agreement Accounting
Principles shall have been set aside on its books;

 

(b)                                 Liens
imposed by law, such as carriers’, warehousemen’s and mechanics’ Liens and
other similar Liens arising in the ordinary course of business which secure the
payment of obligations not more than 60 days past due or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on its books;

 

(c)                                  Liens
arising out of pledges or deposits under worker’s compensation laws,
unemployment insurance, old age pensions, or other social security or
retirement benefits, or similar legislation;

 

(d)                                 Utility
easements, building restrictions and such other encumbrances or charges against
real property as are of a nature generally existing with respect to properties
of a similar character and which do not in any material way affect the
marketability of the same or interfere with the use thereof in the business of
the Borrower or its Subsidiaries;

 

(e)                                  Liens
existing on the Closing Date and described in Schedule 7.16 hereto;

 

(f)                                    Liens
in favor of the Agent, for the benefit of the Lenders, granted pursuant to the
Pledge Agreement or pursuant to the Cash Collateral Security Agreement;

 

49

 

(g)                                 Deposits
of cash or securities with or on behalf of state insurance departments
reflected in the Insurance Subsidiaries’ Statutory Financial Statements; and

 

(h)                                 Deposits
of cash or securities by the Borrower with Lloyd’s of London.

 

7.17                                                   Affiliates.  The Borrower will not, and will not permit
any Subsidiary to, enter into any transaction (including, without limitation,
the purchase or sale of any Property or service) with, or make any payment or
transfer to, any Affiliate except in the ordinary course of business and
pursuant to the reasonable requirements of the Borrower’s or such Subsidiary’s
business and upon fair and reasonable terms no less favorable to the Borrower
or such Subsidiary than the Borrower or such Subsidiary would obtain in a
comparable arms-length transaction.

 

7.18                                                   Amendments
to Agreements.  The Borrower will
not, and will not permit any Subsidiary to, amend, waive, modify or terminate
its certificate or articles of incorporation or by-laws.

 

7.19                                                   Change
in Fiscal Year.  The Borrower shall
not, nor shall it permit any Subsidiary to, change its Fiscal Year to end on
any date other than December 31 of each year.

 

7.20                                                   Inconsistent
Agreements.  The Borrower shall not,
nor shall it permit any Subsidiary to, enter into any indenture, agreement,
instrument or other arrangement which, (a) directly or indirectly prohibits or
restrains, or has the effect of prohibiting or restraining, or imposes
materially adverse conditions upon, the incurrence of the Obligations, the granting
of Liens to secure the Obligations, the amending of the Facility Documents, the
amending of the Facility Documents or the ability of any Subsidiary to (i) pay
dividends or make other distributions on its capital stock, (ii) make
loans or advances to the Borrower or (iii) repay loans or advances from the
Borrower or (b) contains any provision which would be violated or breached by
the making of Revolving Credit Advances, by the issuance of Letters of Credit
or by the performance by the Borrower or any Subsidiary of any of its
Obligations under any Facility Document.

 

7.21                                                   Reinsurance.  (a) 
The Borrower shall cause each Insurance Subsidiary to maintain
reinsurance protection with respect to each type of risk it writes which
reinsurance protection, in the event of a loss, limits the net loss of such
Insurance Subsidiary to 2.5% or less of the Statutory Surplus of such Insurance
Subsidiary.

 

(b)                                 The
Borrower shall not cause or permit an Insurance Subsidiary to enter into or
maintain, as a cedent, reinsurance agreements or retrocession agreements with
any Person other than an Approved Reinsurer.

 

(c)                                  The
Borrower shall not cause or permit an Insurance Subsidiary to enter into or
maintain, as a cedent, reinsurance agreements or retrocesssion agreements with
any Person which do not comply with the guidelines for reinsurance by Insurance

 

50

 

Subsidiaries set forth on Schedule 7.21 hereto, as amended
with the consent of the Lenders (the “Reinsurance Guidelines”).

 

7.22                                                   Stock
of Subsidiaries.  The
Borrower shall not sell or otherwise dispose of (including the granting of any
security interest in) any shares of capital stock of any Subsidiary other than
pursuant to the Pledge Agreement, or permit any Subsidiary to issue additional
shares of its capital stock, except the minimum number of directors’ qualifying
shares required by applicable law.

 

7.23                                                   Financial
Covenants.

 

7.23.1                  Minimum
Consolidated Tangible Net Worth.  The Borrower will at all times maintain
Consolidated Tangible Net Worth of not less than the sum of (a) $230,000,000,
plus (b) 75% of the cumulative positive Consolidated Net Income, if any, earned
from October 1, 2004 to the date of calculation, plus (c) 75% of the Net
Available Proceeds of any equity issuance in excess of $1,000,000 (including
any capital contribution to surplus of the Borrower in respect of which no
additional shares are issued) by the Borrower, if any, made on or after October 1,
2004.

 

7.23.2                  Minimum
Statutory Surplus.  The
Borrower will cause the Significant Insurance Subsidiaries to maintain an
aggregate Statutory Surplus of not less than (i) $175,000,000 on December 31,
2004, and (ii) at all times thereafter, the sum of (a) $175,000,000, plus (b)
50% of the cumulative positive aggregate Statutory Net Income, if any, earned
by the Significant Insurance Subsidiaries from January 1, 2005 to the date
of calculation, plus (c) 75% of the Net Available Proceeds of any equity
issuance (including any capital contribution to surplus of any Significant
Insurance Subsidiary in respect of which no additional shares are issued) by
any Significant Insurance Subsidiary made on or after October 1, 2004.

 

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

 

7.23.4                  Minimum
Risk-Based Capital. 
The Borrower will cause each Significant Insurance Subsidiary to
maintain a ratio of (a) Total Adjusted Capital (as defined in the Risk-Based
Capital Act or in the rules and procedures prescribed from time to time by the
NAIC with respect thereto) to (b) the Company Action Level RBC (as defined in
the Risk-Based Capital Act or in the rules and procedures prescribed from time
to time by the NAIC with respect thereto) of at least 150%.

 

7.24                                                   Additional
Pledge.  Effective upon any Person
becoming a Significant Subsidiary, the parent thereof shall pledge the stock or
other equity interests thereof to the Agent for the benefit of the Lenders
pursuant to documentation reasonably acceptable to the Agent.

 

51

 

ARTICLE VIII

 

DEFAULTS

 

The occurrence of any one
or more of the following events shall constitute a Default:

 

8.1         Any
representation or warranty made or deemed made by or on behalf of the Borrower
or any of its Subsidiaries to the Lenders or the Agent under or in connection
with this Agreement, any other Facility Document, any Revolving Credit Loan,
any Letter of Credit or any certificate or information delivered in connection
with this Agreement or any other Facility Document shall be false in any
material respect on the date as of which made or deemed made.

 

8.2         Nonpayment
of (a) any principal of any Revolving Credit Loan or any Reimbursement
Obligation when due, or (b) any interest upon any Revolving Credit Loan or any
commitment or other fee or obligations under any of the Facility Documents
within five days after the same becomes due.

 

8.3         The
breach by the Borrower of any of the terms or provisions of Sections 3.8,
7.2, or Sections 7.10 through 7.23.

 

8.4         The
breach by the Borrower (other than a breach which constitutes a Default under Section 8.1,
8.2 or 8.3) of any of the terms or provisions of this Agreement
which is not remedied within thirty (30) days after written notice from the
Agent or any Lender.

 

8.5         Failure
of the Borrower or any of its Subsidiaries to pay any Indebtedness aggregating
in excess of $500,000 when due; or the default by the Borrower or any of its
Subsidiaries in the performance of any term, provision or condition contained
in any agreement under which any such Indebtedness was created or is governed,
or the occurrence of any other event or existence of any other condition, the
effect of any of which is to cause, or to permit the holder or holders of such
Indebtedness to cause, such Indebtedness to become due prior to its stated
maturity; or any such Indebtedness of the Borrower or any of its Subsidiaries
shall be declared to be due and payable or required to be prepaid (other than
by a regularly scheduled payment) prior to the stated maturity thereof.

 

8.6         The
Borrower or any of its Subsidiaries shall (a) have an order for relief entered
with respect to it under the Federal bankruptcy laws as now or hereafter in
effect, (b) make an assignment for the benefit of creditors, (c) apply for,
seek, consent to, or acquiesce in, the appointment of a receiver, custodian,
trustee, examiner, liquidator or similar official for it or any Substantial
Portion of its Property, (d) institute any proceeding seeking an order for
relief under the Federal bankruptcy laws as now or hereafter in effect or
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, (e)
take any

 

52

 

corporate action to authorize or effect any of the foregoing actions
set forth in this Section 8.6, (f) fail to contest in good faith
any appointment or proceeding described in Section 8.7 or (g)
become unable to pay, not pay, or admit in writing its inability to pay, its
debts generally as they become due.

 

8.7         Without
the application, approval or consent of the Borrower or any of its
Subsidiaries, a receiver, trustee, examiner, liquidator or similar official
shall be appointed for the Borrower or any of its Subsidiaries or any Substantial
Portion of its Property, or a proceeding described in Section 8.6(d)
shall be instituted against the Borrower or any of its Subsidiaries and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of thirty consecutive days.

 

8.8         Any
court, government or governmental agency shall condemn, seize or otherwise
appropriate, or take custody or control of (each a “Condemnation”), all
or any portion of the Property of the Borrower and its Subsidiaries which, when
taken together with all other Property of the Borrower and its Subsidiaries so
condemned, seized, appropriated, or taken custody or control of, during the
twelve-month period ending with the month in which any such Condemnation
occurs, constitutes a Substantial Portion.

 

8.9         The
Borrower or any of its Subsidiaries shall fail within thirty days to pay, bond
or otherwise discharge on or more (a) judgments or orders for the payment
of money in excess of $500,000 (or the equivalent thereof in currencies other
than U.S. Dollars) in the aggregate, or (b) nonmonetary judgments or
orders which, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect, which judgment(s), in any such case, is/are not
stayed on appeal or otherwise being appropriately contested in good faith.

 

8.10                                                   Any
Reportable Event shall occur in connection with any Plan.

 

8.11                                                   The
Borrower or any other member of the Controlled Group shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred withdrawal
liability to such Multiemployer Plan in an amount which, when aggregated with
all other amounts required to be paid to Multiemployer Plans by the Borrower or
any other member of the Controlled Group as withdrawal liability (determined as
of the date of such notification), exceeds $500,000.

 

8.12                                                   The
Borrower or any other member of the Controlled Group shall have been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of ERISA,
if as a result of such reorganization or termination the aggregate annual
contributions of the Borrower and the other members of the Controlled Group
(taken as a whole) to all Multiemployer Plans which are then in reorganization
or being terminated have been or will be increased over the amounts contributed
to such Multiemployer Plans for the respective plan years of each such
Multiemployer Plan immediately preceding the plan year in which the
reorganization or termination occurs by an amount exceeding $500,000.

 

53

 

8.13                                                   The
Borrower or any of its Subsidiaries shall (a) be the subject to any
proceeding or investigation pertaining to the release by the Borrower, any of
its Subsidiaries or any other Person of any toxic or hazardous waste or
substance into the environment, or (b) violate any Environmental Law,
which, in the case of an event described in clause (a) or (b), could reasonably
be expected to have a Material Adverse Effect.

 

8.14                                                   Any
Change in Control shall occur.

 

8.15                                                   The
occurrence of any “default”, as defined in any Facility Document (other than
this Agreement or the Revolving Credit Notes) or the breach of any of the terms
or provisions of any Facility Document (other than this Agreement or the
Revolving Credit Notes), which default or breach continues beyond any period of
grace therein provided.

 

8.16                                                   The
Pledge Agreement shall for any reason fail to create a valid and perfected
first priority security interest in any collateral purported to be covered
thereby, except as permitted by the terms thereof, or the Pledge Agreement
shall fail to remain in full force or effect or any action shall be taken to
discontinue or to assert the invalidity or unenforceability of the Pledge
Agreement, or the Borrower shall fail to comply with any of the terms or
provisions of the Pledge Agreement.

 

8.17                                                   Navigators,
NIC or any other Significant Insurance Subsidiary shall cease to be rated “A-”
or better by A.M. Best & Co. or shall cease to have an S&P Financial
Strength Rating (as defined in the Pricing Schedule) of “BBB-” or better.

 

8.18                                                   There
shall occur a change in the business, Property, condition (financial or
otherwise) or results of operations of the Borrower and its Subsidiaries which
has a Material Adverse Effect.

 

8.19                                                   The
Borrower or any of its Subsidiaries incurs or becomes subject to action or
threatened action of any Governmental Authority, including, without limitation,
a fine, penalty, cease and desist order or revocation, suspension or limitation
of a License, the effect of which could reasonably be expected to have a
Material Adverse Effect.

 

8.20                                                   Any
Security Document shall for any reason fail to create a valid and perfected,
first priority security interest in any collateral purported to be covered
thereby, except as permitted by the terms of such Security Document, or any
Security Document, once executed, shall fail to remain in full force or effect
or any action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Security Document.

 

ARTICLE IX

 

ACCELERATION, WAIVERS, AMENDMENTS AND
REMEDIES

 

9.1         Acceleration.  If any Default described in Section 8.6
or 8.7 occurs with respect to the Borrower, the obligations of the
Lenders to make Revolving Credit Loans and issue Letters of Credit hereunder
shall automatically terminate and the Obligations shall

 

54

 

immediately become due and payable without any election or action on
the part of the Agent or any Lender.  If
any other Default occurs, the Required Lenders (or the Agent with the consent
of the Required Lenders) may terminate or suspend the obligations of the
Lenders to make Revolving Credit Loans and/or issue Letters of Credit hereunder,
or declare the Obligations to be due and payable, or both, whereupon the
Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Borrower hereby
expressly waives.  In addition to the
foregoing, following the occurrence and during the continuance of a Default, so
long as any Letter of Credit has not been fully drawn and has not been canceled
or expired by its terms, upon demand by the Agent (which demand shall be made
upon the request of the Required Lenders), the Borrower shall deposit in an
account (the “Letter of Credit Cash Collateral Account”) maintained with
JPMorgan Chase Bank in the name of the Agent, for the ratable benefit of the
Lenders and the Agent, cash or Cash Collateral Investments in an amount
necessary to make the balance in such account equal to the aggregate undrawn
face amount of all outstanding Letters of Credit and all fees and other amounts
due or which may become due with respect thereto.  Following the occurrence and during the
continuance of a Default, the Borrower shall have no control over funds
deposited in the Letter of Credit Cash Collateral Account pursuant to this
Section, which funds shall be invested by the Agent from time to time in its
discretion in certificates of deposit of JPMorgan Chase Bank having a maturity
not exceeding thirty (30) days.  Such
funds shall be promptly applied by the Agent to reimburse the Issuer for drafts
drawn from time to time under the Letters of Credit.  Such funds, if any, remaining in the Letter
of Credit Cash Collateral Account following the payment of all Obligations in
full or the earlier termination of all Defaults shall, unless the Agent is
otherwise directed by a court of competent jurisdiction, be promptly paid over
to the Borrower.

 

If, within thirty (30)
days after acceleration of the maturity of the Obligations or termination of
the obligations of the Lenders to make Revolving Credit Loans and/or issue
Letters of Credit hereunder as a result of any Default (other than any Default
as described in Section 8.6 or 8.7 with respect to the
Borrower) and before any judgment or decree for the payment of the Obligations
due shall have been obtained or entered, the Required Lenders (in their sole
discretion) shall so direct, the Agent shall, by notice to the Borrower,
rescind and annul such acceleration and/or termination.

 

9.2         Amendments.  Subject to the provisions of this Article IX,
the Required Lenders (or the Agent with the consent of the Required Lenders)
and the Borrower may enter into agreements supplemental hereto for the purpose
of adding or modifying any provisions to the Facility Documents or changing in
any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental
agreement shall, without the consent of each Lender:

 

(a)                                  Extend
the final maturity of any Revolving Credit Loan or forgive all or any portion
of the principal amount thereof, or reduce the rate or extend the time of payment
of interest or fees (including without limitation letter of credit fees)
hereunder;

 

55

 

(b)                                 Reduce
the percentage specified in the definition of Required Lenders;

 

(c)                                  Reduce
the amount of or extend the date for the mandatory payments and commitment and
facility reductions required under Section 2.1(b) or 2.6, or
increase the amount of the Revolving Credit Commitment or Letter of Credit
Participation Amount of any Lender hereunder;

 

(d)                                 Extend
the Revolving Credit Termination Date or the Letter of Credit Availability
Termination Date; permit any Letter of Credit to have an expiry date beyond
four years after notice, in the case of Lloyd’s Letters of Credit, or one year
after its effective date in the case of other Letters of Credit; except as
permitted in Section 3.5, permit the amendment or extension of any
Letter of Credit; or, except as otherwise set forth in Section 3.1(b),
permit the renewal of any Letter of Credit;

 

(e)                                  Release
any guarantor of any Obligations or, except as provided in the Pledge
Agreement, release all or substantially all of the collateral for the
Obligations;

 

(f)                                    Permit
any assignment by the Borrower of its Obligations or its rights hereunder; or

 

(g)                                 Permit
any amendment of the Reinsurance Guidelines;

 

provided,
further, that no such supplemental agreement shall, without the consent
of each Lender, amend this Section 9.2.  No amendment of any provision of this
Agreement relating to the Agent shall be effective without the written consent
of the Agent.  The Agent may waive
payment of the fee required under Section 13.3.2 without obtaining
the consent of any other party to this Agreement.

 

9.3         Preservation
of Rights.  No delay or omission of
the Lenders or the Agent to exercise any right under the Facility Documents
shall impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Revolving Credit Loan or the issuance
of a Letter of Credit notwithstanding the existence of a Default or the
inability of the Borrower to satisfy the conditions precedent to such Revolving
Credit Loan or Letter of Credit shall not constitute any waiver or
acquiescence.  Any single or partial
exercise of any such right shall not preclude other or further exercise thereof
or the exercise of any other right, and no waiver, amendment or other variation
of the terms, conditions or provisions of the Facility Documents whatsoever
shall be valid unless in writing signed by the Lenders required pursuant to Section 9.2,
and then only to the extent in such writing specifically set forth.  All remedies contained in the Facility
Documents or by law afforded shall be cumulative and all shall be available to
the Agent and the Lenders until the Obligations have been paid in full.

 

56

 

ARTICLE X

 

GENERAL PROVISIONS

 

10.1                                                   Survival
of Representations. 
All representations and warranties of the Borrower contained in this
Agreement or in any Facility Document shall survive the making of the Revolving
Credit Loans and the issuance of the Letters of Credit herein contemplated.

 

10.2                                                   Governmental
Regulation.  Anything
contained in this Agreement to the contrary notwithstanding, no Lender shall be
obligated to extend credit to the Borrower in violation of any limitation or
prohibition provided by any applicable statute or regulation.

 

10.3                                                   Headings.  Section headings in the Facility
Documents are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of the Facility Documents.

 

10.4                                                   Entire
Agreement.  The
Facility Documents embody the entire agreement and understanding among the
Borrower, the Agent, and the Lenders and supersede all prior agreements and
understandings among the Borrower, the Agent, and the Lenders relating to the
subject matter thereof other than the fee letter dated January 12, 2005 in
favor of JPMorgan Chase Bank and JPMorgan Securities Inc. (the “Fee Letter”).

 

10.5                                                   Numbers
of Documents.  All statements,
notices, closing documents, and requests hereunder shall be furnished to the
Agent with sufficient counterparts so that the Agent may furnish one to each of
the Lenders.

 

10.6                                                   Several
Obligations; Benefits of this Agreement.  The respective obligations of the Lenders
hereunder are several and not joint and no Lender shall be the partner or agent
of any other (except to the extent to which the Agent is authorized to act as
such).  The failure of any Lender to
perform any of its obligations hereunder shall not relieve any other Lender
from any of its obligations hereunder. 
This Agreement shall not be construed so as to confer any right or
benefit upon any Person other than the parties to this Agreement and their
respective successors and assigns, provided, however, that the
parties hereto expressly agree that the Arranger shall enjoy the benefits of
the provisions of Sections 10.7, 10.11 and 11.11 to the
extent specifically set forth therein and shall have the right to enforce such
provisions on its own behalf and in its own name to the same extent as if it
were a party to this Agreement.

 

10.7                                                   Expenses;
Indemnification. 
(a)  The Borrower shall reimburse
the Agent and the Arranger for any costs, internal charges and out-of-pocket
expenses (including reasonable attorneys’ fees and time charges of attorneys
for the Agent) paid or incurred by the Agent or the Arranger in connection with
the preparation, negotiation, execution, delivery, syndication, review,
amendment, modification, and administration of the Facility Documents.  The Borrower also agrees to reimburse the
Agent, the Arranger and the Lenders for any costs, internal charges and out-of-pocket
expenses (including reasonable attorneys’ 

 

57

 

fees and time charges of attorneys for the Agent, the
Arranger and the Lenders), paid or incurred by the Agent, the Arranger or any
Lender in connection with the investigation, collection and enforcement of the
Facility Documents.

 

(b)                                 The
Borrower hereby further agrees to indemnify the Agent, the Arranger and each
Lender, its directors, officers, partners and employees against all losses,
claims, damages, penalties, judgments, liabilities and expenses (including,
without limitation, all expenses of litigation or preparation therefor whether or
not the Agent, the Arranger or any Lender is a party thereto) which any of them
may pay or incur arising out of or relating to this Agreement, the other
Facility Documents, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of any Revolving
Credit Loan hereunder except to the extent that they have resulted from the
gross negligence or willful misconduct of the party seeking
indemnification.  The obligations of the
Borrower under this Section 10.7 shall survive the termination of
this Agreement.

 

10.8                                                   Accounting.  Except as provided to the contrary herein,
all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles.  In the event the pages,
columns, lines or sections of the Annual Statement referenced herein are
changed or renumbered, all such references shall be deemed references to such
page, column, line or section as so renumbered or changed.

 

10.9                                                   Severability
of Provisions.  Any provision in any
Facility Document that is held to be inoperative, unenforceable, or invalid in
any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable,
or invalid without affecting the remaining provisions in that jurisdiction or
the operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Facility Documents are
declared to be severable.

 

10.10                                             Nonliability
of Lenders.  The relationship between
the Borrower on the one hand and the Lenders and the Agent on the other hand
shall be solely that of borrower and lender. 
Neither the Agent, the Arranger nor any Lender shall have any fiduciary
responsibilities to the Borrower. 
Neither the Agent, the Arranger nor any Lender undertakes any
responsibility to the Borrower to review or inform the Borrower of any matter
in connection with any phase of the Borrower’s business or operations.  The Borrower agrees that neither the Agent,
the Arranger nor any Lender shall have liability to the Borrower (whether
sounding in tort, contract or otherwise) for losses suffered by the Borrower in
connection with, arising out of, or in any way related to, the transactions
contemplated and the relationship established by the Facility Documents, or any
act, omission or event occurring in connection therewith, unless it is
determined in a final non-appealable judgment by a court of competent
jurisdiction that such losses resulted from the gross negligence or willful
misconduct of the party from which recovery is sought.  Neither the Agent, the Arranger nor any
Lender shall have any liability with respect to, and the Borrower hereby
waives, releases and agrees not to sue for, any special, indirect or
consequential damages

 

58

 

suffered by the Borrower in connection with, arising
out of, or in any way related to the Facility Documents or the transactions
contemplated thereby.

 

10.11                                             Confidentiality.  Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement
in confidence, except for disclosure (a) to its Affiliates and to other
Lenders and their respective Affiliates, (b) to legal counsel, accountants, and
other professional advisors to such Lender or to a Transferee, (c) to
regulatory officials, (d) to any Person as requested pursuant to or as required
by law, regulation, or legal process, (e) to any Person in connection with any
legal proceeding to which such Lender is a party, (f) to such Lender’s direct
or indirect contractual counterparties in swap agreements or to legal counsel,
accountants and other professional advisors to such counterparties and (g)
permitted by Section 13.4; provided, that any recipient of such
disclosure shall be advised by such Lender 
of the confidentiality requirements herein set forth.

 

10.12                                             Nonreliance.  Each Lender hereby represents that it is not
relying on or looking to any margin stock (as defined in Regulation U of the Board
of Governors of the Federal Reserve System) for the repayment of the Revolving
Credit Loans provided for herein.

 

10.13                                             Disclosure.  The Borrower and each Lender hereby (a)
acknowledge and agree that JPMorgan Chase Bank and/or its Affiliates from time to
time may hold other investments in, make other loans to or have other
relationships with the Borrower, and (b) waive any liability of JPMorgan Chase
Bank or such Affiliate to the Borrower or any Lender, respectively, arising out
of or resulting from such investments, loans or relationships other than
liabilities arising out of the gross negligence or willful misconduct of
JPMorgan Chase Bank or its Affiliates.

 

10.14                                             USA
Patriot Act Notification. 
Each Lender hereby notifies the Borrower that pursuant to the
requirements of the USA Act (Title III of Pub. L. 107-56 (signed into law on October 26,
2001) (the “Act”), it is required to obtain, verify and record information that
identifies the Borrower, which information includes the name and address of the
Borrower and other information that will allow such Lender to identify the
Borrower in accordance with the Act.  The
Borrower agrees to cooperate with each Lender and provide true, accurate and
complete information to such Lender in response to any such request.

 

ARTICLE XI

 

THE ADMINISTRATIVE AGENT

 

11.1                                                   Appointment;
Nature of Relationship. 
JPMorgan Chase Bank is hereby appointed by each of the Lenders as
Administrative Agent (herein referred to as the “Agent”) hereunder and
under each other Facility Document, and each of the Lenders irrevocably
authorizes the Agent to act as the Administrative Agent of such Lender with the
rights and duties expressly set forth herein and in the other Facility
Documents.  The Agent agrees to

 

59

 

act as such Administrative Agent upon the express
conditions contained in this Article XI.  Notwithstanding the use of the defined term “Agent,”
it is expressly understood and agreed that the Agent shall not have any
fiduciary responsibilities to any Lender by reason of this Agreement or any
other Facility Document and that the Agent is merely acting as the
Administrative Agent of the Lenders with only those duties as are expressly set
forth in this Agreement and the other Facility Documents.  In its capacity as the Lenders’
Administrative Agent, the Agent (a) does not hereby assume any fiduciary
duties to any of the Lenders, (b) is a “representative” of the Lenders
within the meaning of Section 9-105 of the Uniform Commercial Code and (c)
is acting as an independent contractor, the rights and duties of which are
limited to those expressly set forth in this Agreement and the other Facility
Documents.  Each of the Lenders hereby
agrees to assert no claim against the Agent on any agency theory or any other
theory of liability for breach of fiduciary duty, all of which claims each
Lender hereby waives.

 

11.2                                                   Powers.  The Agent shall have and may exercise such
powers under the Facility Documents as are specifically delegated to the Agent
by the terms of each thereof, together with such powers as are reasonably
incidental thereto.  The Agent shall have
no implied duties to the Lenders, or any obligation to the Lenders to take any
action thereunder except any action specifically provided by the Facility
Documents to be taken by the Agent.

 

11.3                                                   General
Immunity.  Neither the Agent nor any
of its directors, officers, agents or employees shall be liable to the
Borrower, the Lenders or any Lender for any action taken or omitted to be taken
by it or them hereunder or under any other Facility Document or in connection
herewith or therewith except to the extent such action or inaction is
determined in a final non-appealable judgment by a court of competent
jurisdiction to have arisen from the gross negligence or willful misconduct of
such Person.

 

11.4                                                   No
Responsibility for Revolving Credit Loans, Recitals, etc.  Neither the Agent nor any of its directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into, or verify:  (a)
any statement, warranty or representation made in connection with any Facility
Document or any borrowing hereunder; (b) the performance or observance of any
of the covenants or agreements of any obligor under any Facility Document,
including, without limitation, any agreement by an obligor to furnish
information directly to each Lender; (c) the satisfaction of any condition
specified in Article V, except receipt of items required to be
delivered solely to the Agent; (d) the existence or possible existence of any
Default or Unmatured Default; (e) the validity, enforceability,
effectiveness, sufficiency or genuineness of any Facility Document or any other
instrument or writing furnished in connection therewith; (f) the value,
sufficiency, creation, perfection or priority of any Lien in any collateral
security; or (g) the financial condition of the Borrower or any guarantor of
any of the Obligations or of any of the Borrower’s or any such guarantor’s
respective Subsidiaries.  The Agent shall
have no duty to disclose to the Lenders information that is not required to be
furnished by the Borrower to the Agent at such time, but is voluntarily
furnished by the Borrower to the Agent (either in its capacity as Agent or in
its individual capacity).

 

60

 

11.5                                                   Action
on Instructions of Lenders. 
The Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder and under any other Facility Document in
accordance with written instructions signed by the Required Lenders, and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders.  The
Lenders hereby acknowledge that the Agent shall be under no duty to take any
discretionary action permitted to be taken by it pursuant to the provisions of
this Agreement or any other Facility Document unless it shall be requested in
writing to do so by the Required Lenders. 
The Agent shall be fully justified in failing or refusing to take any action
hereunder and under any other Facility Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.

 

11.6                                                   Employment
of Agent and Counsel.  The Agent may
execute any of its duties as Agent hereunder and under any other Facility
Document by or through employees, agents, and attorneys-in-fact and shall not
be answerable to the Lenders, except as to money or securities received by it
or its authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.  The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the
Lenders and all matters pertaining to the Agent’s duties hereunder and under
any other Facility Document.

 

11.7                                                   Reliance
on Documents; Counsel. 
The Agent shall be entitled to rely upon any Revolving Credit Note,
notice, consent, certificate, affidavit, letter, telegram, statement, paper or
document believed by it to be genuine and correct and to have been signed or
sent by the proper person or persons, and, in respect to legal matters, upon
the opinion of counsel selected by the Agent, which counsel may be employees of
the Agent.

 

11.8                                                   Agent’s
Reimbursement and Indemnification.  The Lenders agree to reimburse and indemnify
the Agent ratably in proportion to their respective Revolving Credit
Commitments and Letter of Credit Participation Amount (or, if the Aggregate
Revolving Credit Commitments and Letter of Credit Commitments have been
terminated, in proportion to their Revolving Credit Commitments and Letter of
Credit Participation Amount immediately prior to such termination) (a) for any
amounts not reimbursed by the Borrower for which the Agent is entitled to
reimbursement by the Borrower under the Facility Documents, (b) for any other
expenses incurred by the Agent on behalf of the Lenders, in connection with the
preparation, execution, delivery, administration and enforcement of the
Facility Documents (including, without limitation, for any expenses incurred by
the Agent in connection with any dispute between the Agent and any Lender or
between two or more of the Lenders) and (c) for any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of the Facility Documents or any other document delivered in connection
therewith or the transactions contemplated thereby (including, without
limitation, for any such amounts incurred by or asserted against the Agent in
connection with any dispute between the Agent and any Lender or between two or
more of the Lenders), or the

 

61

 

enforcement of any of the terms of the Facility
Documents or of any such other documents; provided that (i) no Lender shall be
liable for any of the foregoing to the extent any of the foregoing is found in
a final non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Agent and (ii)
any indemnification required pursuant to Section 4.5(g) shall,
notwithstanding the provisions of this Section 11.8, be paid by the
relevant Lender in accordance with the provisions thereof.  The obligations of the Lenders under this Section 11.8
shall survive payment of the Obligations and termination of this Agreement.

 

11.9                                                   Notice
of Default.  The Agent
shall not be deemed to have knowledge or notice of the occurrence of any
Default or Unmatured Default hereunder unless the Agent has received written
notice from a Lender or the Borrower referring to this Agreement describing
such Default or Unmatured Default and stating that such notice is a “notice of
default”.  In the event that the Agent
receives such a notice, the Agent shall give prompt notice thereof to the
Lenders.

 

11.10                                             Rights
as a Lender.  In the
event the Agent is a Lender, the Agent shall have the same rights and powers
hereunder and under any other Facility Document with respect to its Revolving
Credit Commitment, its Revolving Credit Loans, Letter of Credit Participation
Amount, and any Letters of Credit in which it has an interest as any Lender and
may exercise the same as though it were not the Agent, and the term “Lender” or
“Lenders” shall, at any time when the Agent is a Lender, unless the context
otherwise indicates, include the Agent in its individual capacity.  The Agent and its Affiliates may accept
deposits from, lend money to, and generally engage in any kind of trust, debt,
equity or other transaction, in addition to those contemplated by this
Agreement or any other Facility Document, with the Borrower or any of its
Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby
from engaging with any other Person.  The
Agent, in its individual capacity, is not obligated to remain a Lender.

 

11.11                                             Lender
Credit Decision.  Each
Lender acknowledges that it has, independently and without reliance upon the
Agent, the Arranger or any other Lender and based on the financial statements
prepared by the Borrower and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Agreement and the other Facility Documents.  Each Lender also acknowledges that it will,
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Facility Documents.

 

11.12                                             Successor
Agent.  The Agent may
resign at any time by giving written notice thereof to the Lenders and the
Borrower, such resignation to be effective upon the appointment of a successor
Agent or, if no successor Agent has been appointed, forty-five days after the
retiring Agent gives notice of its intention to resign.  The Agent may be removed at any time with or
without cause by written notice received by the Agent from the Required
Lenders, such removal to be effective on the date specified by the Required

 

62

 

Lenders.  Upon any such
resignation or removal, the Required Lenders shall have the right to appoint,
on behalf of the Borrower and the Lenders, a successor Agent.  If no successor Agent shall have been so
appointed by the Required Lenders within thirty days after the resigning Agent’s
giving notice of its intention to resign, then the resigning Agent may appoint,
on behalf of the Borrower and the Lenders, a successor Agent.  Notwithstanding the previous sentence, the
Agent may at any time without the consent of the Borrower or any Lender,
appoint any of its Affiliates which is a commercial bank as a successor Agent
hereunder.  If the Agent has resigned or
been removed and no successor Agent has been appointed, the Lenders may perform
all the duties of the Agent hereunder and the Borrower shall make all payments
in respect of the Obligations to the applicable Lender and for all other
purposes shall deal directly with the Lenders. 
No successor Agent shall be deemed to be appointed hereunder until such
successor Agent has accepted the appointment. 
Any such successor Agent shall be a commercial bank having capital and
retained earnings of at least $100,000,000. 
Upon the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the resigning or removed
Agent.  Upon the effectiveness of the
resignation or removal of the Agent, the resigning or removed Agent shall be
discharged from its duties and obligations hereunder and under the Facility
Documents.  After the effectiveness of
the resignation or removal of an Agent, the provisions of this Article XI
shall continue in effect for the benefit of such Agent in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent
hereunder and under the other Facility Documents.  In the event that there is a successor to the
Agent by merger, or the Agent assigns its duties and obligations to an
Affiliate pursuant to this Section 11.12, then the term “Prime Rate”
as used in this Agreement shall mean the prime rate, base rate or other
analogous rate of the new Agent.

 

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

 

11.14                                             Delegation
to Affiliates.  The
Borrower and the Lenders agree that the Agent may delegate any of its duties
under this Agreement to any of its Affiliates. 
Any such Affiliate (and such Affiliate’s directors, officers, agents and
employees) which performs duties in connection with this Agreement shall be
entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles X
and XI.

 

11.15                     Syndication
Agent.  The Syndication
Agent, Senior Managing Agent, Managing Agent, Documentation Agent and Co-Agent
shall have no right, power, obligation, liability, responsibility or duty under
this Agreement other than those applicable to all Lenders as such.  Without limiting the foregoing, the
Syndication Agent, Senior Managing Agent, Managing Agent, Documentation Agent
and Co-Agent shall not have or be deemed to have a fiduciary relationship with
any Lender.  Each Lender hereby makes the
same acknowledgements with respect to the Syndication Agent, Senior Managing
Agent, Managing Agent and Co-Agent as it makes to the Agent in Section 11.10.

 

63

 

ARTICLE XII

 

SETOFF; RATABLE PAYMENTS

 

12.1                                                   Setoff.  In
addition to, and without limitation of, any rights of the Lenders under
applicable law, if the Borrower becomes insolvent, however evidenced, or any
Default occurs, any and all deposits (including all account balances, whether
provisional or final and whether or not collected or available) and any other
Indebtedness at any time held or owing by any Lender to or for the credit or
account of the Borrower may be offset and applied toward the payment of the
Obligations owing to such Lender, whether or not the Obligations, or any part
hereof, shall then be due.

 

12.2                                                   Ratable Payments.  If any Lender, whether by setoff or
otherwise, has payment made to it upon its Revolving Credit Loans or
Reimbursement Obligations (other than payments received pursuant to Section 4.1,
4.2, 4.4 or 4.5) in a greater proportion than that
received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Revolving Credit Loans or participation interests in
Letters of Credit, as the case may be, held by the other Lenders so that after
such purchase each Lender will hold its ratable proportion of such Revolving
Credit Loans or participation interests in Letters of Credit.  If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such
action necessary such that all Lenders share in the benefits of such collateral
ratably in proportion to their Revolving Credit Loans and Letter of Credit
Participation Amounts.  In case any such
payment is disturbed by legal process, or otherwise, appropriate further
adjustments shall be made.

 

ARTICLE XIII

 

BENEFIT OF AGREEMENT;
ASSIGNMENTS; PARTICIPATIONS

 

13.1                                                   Successors and Assigns.  The terms and provisions of the Facility
Documents shall be binding upon and inure to the benefit of the Borrower and
the Lenders and their respective successors and assigns, except that (a) the
Borrower shall not have the right to assign its rights or obligations under the
Facility Documents and (b) any assignment by any Lender must be made in
compliance with Section 13.3. 
Notwithstanding clause (b) of the foregoing sentence, any Lender may at
any time, without the consent of the Borrower or the Agent, assign all or any
portion of its rights under this Agreement and any Revolving Credit Note to a
Federal Reserve Bank; provided, however, that no such assignment
to a Federal Reserve Bank shall release the transferor Lender from its
obligations hereunder.  The Agent may
treat the Person which made any Revolving Credit Loan, participated in any
Letter of Credit or holds any Revolving Credit Note as the owner thereof for
all purposes hereof unless and until such Person complies with Section 13.3
in the case of an assignment thereof or, in the case of any other transfer, a
written notice of the transfer is filed with the Agent.  Any assignee or transferee of the rights to
any Revolving Credit Loan, Letter of 

 

64

 

Credit or
Revolving Credit Note agrees by acceptance of such transfer or assignment to be
bound by all the terms and provisions of the Facility Documents.  Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the owner of the rights to any Revolving Credit Loan (whether or not
a Revolving Credit Note has been issued in evidence thereof) or any Letter of
Credit, shall be conclusive and binding on any subsequent holder, transferee or
assignee of the rights to such Revolving Credit Loan or Letter of Credit, as
the case may be.

 

13.2                                                   Participations.

 

13.2.1                  Permitted Participants; Effect. 
Any Lender may, in the ordinary course of its business and in accordance
with applicable law, at any time sell to one or more banks or other entities (“Participants”)
participating interests in any Revolving Credit Loan owing to such Lender, any
Revolving Credit Note held by such Lender, any Revolving Credit Commitment of
such Lender, any Letter of Credit Participation Amount of such Lender, any
interest of such Lender in any Letters of Credit or any other interest of such
Lender under the Facility Documents.  In
the event of any such sale by a Lender of participating interests to a
Participant, such Lender’s obligations under the Facility Documents shall
remain unchanged, such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, such Lender shall remain the
owner of its Revolving Credit Loans and its interest in any Letters of Credit
and the holder of any Revolving Credit Note issued to it in evidence thereof
for all purposes under the Facility Documents, all amounts payable by the
Borrower under this Agreement shall be determined as if such Lender had not
sold such participating interests, and the Borrower and the Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under the Facility Documents.

 

13.2.2                  Voting Rights.  Each Lender
shall retain the sole right to approve, without the consent of any Participant,
any amendment, modification or waiver of any provision of the Facility
Documents, except to the extent such amendment, modification or waiver would
require the unanimous consent of the Lenders as described in Section 9.2.

 

13.2.3                  Benefit of Setoff.  The Borrower
agrees that each Participant shall be deemed to have the right of setoff
provided in Section 12.1 in respect of its participating interest
in amounts owing under the Facility Documents to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under the Facility Documents, provided that each Lender shall retain the
right of setoff provided in Section 12.1 with respect to the amount
of participating interests sold to each Participant.  The Lenders agree to share with each
Participant, and each Participant, by exercising the right of setoff provided
in Section 12.1, agrees to share with each Lender, any amount
received pursuant to

 

65

 

the exercise of its right of setoff, such amounts to be shared in
accordance with Section 12.2 as if each Participant were a Lender.

 

13.3                                                   Assignments.

 

13.3.1                  Permitted Assignments.  Any Lender
may, in the ordinary course of its business and in accordance with applicable
law, at any time assign to one or more banks or other entities (“Purchasers”)
all or any part of its rights and obligations under the Facility
Documents.  Such assignment shall be
substantially in the form of Exhibit C or in such other form as may
be agreed to by the parties thereto.  The
consent of the Borrower and the Agent shall be required prior to an assignment
becoming effective with respect to a Purchaser which is not a Lender or an
Affiliate thereof; provided, however, that if a Default has
occurred and is continuing, the consent of the Borrower shall not be required.  Such consent shall not be unreasonably
withheld or delayed.  Each such
assignment shall (unless it is to a Lender or an Affiliate thereof or the Agent
otherwise consents) be in an amount not less than the lesser of
(a) $5,000,000 or (b) the remaining amount of the assigning Lender’s
Revolving Credit Commitment and/or Letter of Credit Participation Amount
(calculated as at the date of such assignment).

 

13.3.2                  Effect; Effective Date.  Upon (a)
delivery to the Agent and the Borrower of a notice of assignment, substantially
in the form attached as Exhibit I to Exhibit C (a “Notice
of Assignment”), together with any consents required by Section 13.3.1,
and (b) payment of a $3,500 fee to the Agent by the assigning Lender or
the Purchaser for processing such assignment, such assignment shall become
effective on the effective date specified in such Notice of Assignment.  The Notice of Assignment shall contain a
representation by the Purchaser to the effect that none of the consideration
used to make the purchase of the Revolving Credit Commitment, Revolving Credit
Loans and participation interests in the Letters of Credit under the applicable
assignment agreement are “plan assets” as defined under ERISA and that the
rights and interests of the Purchaser in and under the Facility Documents will
not be “plan assets” under ERISA.  On and
after the effective date of such assignment, such Purchaser shall for all
purposes be a Lender party to this Agreement and any other Facility Document
executed by or on behalf of the Lenders and shall have all the rights and
obligations of a Lender under the Facility Documents, to the same extent as if
it were an original party hereto, and no further consent or action by the
Borrower, the Lenders or the Agent shall be required to release the transferor
Lender with respect to the percentage of the Aggregate Revolving Credit
Commitment, the Letter of Credit Commitment, Revolving Credit Loans and the
participation interests in Letters of Credit assigned to such Purchaser.  Upon the consummation of any assignment to a
Purchaser pursuant to this Section 13.3.2, the transferor Lender,
the Agent and the Borrower shall, if the transferor Lender or the Purchaser
desires that its Revolving Credit Loans be evidenced by Revolving Credit Notes,
make appropriate arrangements so that new Revolving Credit Notes or, as
appropriate,

 

66

 

replacement Revolving Credit Notes are issued to such transferor Lender
and new Revolving Credit Notes or, as appropriate, replacement Revolving Credit
Notes, are issued to such Purchaser, in each case in principal amounts
reflecting their respective Revolving Credit Commitments, as adjusted pursuant
to such assignment.

 

13.4                                                   Dissemination of Information.  The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Facility Documents by operation of law (each a “Transferee”)
and any prospective Transferee any and all information in such Lender’s possession
concerning the creditworthiness of the Borrower and its Subsidiaries; provided
that each Transferee and prospective Transferee agrees to be bound by Section 10.11
of this Agreement.

 

13.5                                                   Tax Treatment. 
If any interest in any Facility Document is transferred to any
Transferee which is organized under the laws of any jurisdiction other than the
United States or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply
with the provisions of Section 4.5(d).

 

ARTICLE XIV

 

NOTICES

 

14.1                                                   Notices. 
Except as otherwise permitted by Section 2.12 with respect
to borrowing notices, all notices, requests and other communications to any
party hereunder shall be in writing (including electronic transmission,
facsimile transmission or similar writing) and shall be given to such party:
(a) in the case of the Borrower or the Agent, at its address or facsimile
number set forth on the signature pages hereof, (b) in the case of any Lender,
at its address or facsimile number set forth below its signature hereto or (c)
in the case of any party, at such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the Agent and the
Borrower in accordance with the provisions of this Section 14.1.  Each such notice, request or other
communication shall be effective (i) if given by facsimile transmission, when
transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, or (iii) if given by any other means, when delivered
(or, in the case of electronic transmission, received) at the address specified
in this Section; provided that notices to the Agent under Articles II
and III shall not be effective until received.

 

14.2                                                   Change of Address.  The Borrower, the Agent and any Lender may
each change the address for service of notice upon it by a notice in writing to
the other parties hereto.

 

67

 

ARTICLE XV

 

COUNTERPARTS

 

This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart.  This Agreement shall be effective when it has
been executed by the Borrower, the Agent and the Lenders and each party has
notified the Agent by facsimile transmission or telephone that it has taken
such action.

 

ARTICLE XVI

 

CHOICE OF LAW; CONSENT TO
JURISDICTION; WAIVER OF JURY TRIAL

 

16.1                                                   CHOICE OF LAW. 
THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS
CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET  SEQ.,
BUT OTHERWISE WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE
OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

 

16.2                                                   CONSENT TO JURISDICTION.  THE BORROWER HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO ANY FACILITY DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION.  ANY JUDICIAL
PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF
THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY FACILITY DOCUMENT SHALL
BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.

 

16.3                                                   WAIVER OF JURY TRIAL.  THE BORROWER, THE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED 

 

68

 

TO, OR CONNECTED
WITH ANY FACILITY DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

 

[signature pages
follow]

 

69

 

IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.

 

	
   

  	
  THE
  NAVIGATORS GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  Reckson
  Executive Park

  
	
   

  	
   

  	
  6
  International Drive

  
	
   

  	
   

  	
  Rye
  Brook, New York 10573

  
	
   

  	
   

  	
   

  
	
   

  	
  Attn:

  	
  Bradley
  Wiley

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone:
  (914) 933-6025

  
	
   

  	
  Fax:
  (914) 933-6033

  
						

 

S-1

 

	
   

  	
  JPMORGAN CHASE BANK,
  N.A.,

  Individually and as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Print Name:

  
	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  1 Bank One Plaza

  
	
   

  	
   

  	
  Chicago, Illinois 60670

  
	
   

  	
   

  	
   

  
	
   

  	
  Attn:

  	
  Hector Varona

  
	
   

  	
   

  
	
   

  	
  Telephone: (312)
  732-7614

  
	
   

  	
  Fax: (312) 732-3055

  
					

 

S-2

 

	
   

  	
  BARCLAYS
  BANK plc, individually and as

  Syndication Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Print
  Name:

  
	
   

  	
  Title:

  

 

S-3

 

	
   

  	
  LASALLE
  BANK NATIONAL

  ASSOCIATION, individually and as

  Documentation Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Print
  Name:

  
	
   

  	
  Title:

  

 

S-4

 

	
   

  	
  COMMERZBANK AKTIEGESELLSCHAFT,

  New York and Grand Cayman Branches,

  individually and as Documentation Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Print
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Print
  Name:

  
	
   

  	
  Title:

  

 

S-5

 

	
   

  	
  CREDIT
  SUISSE FIRST BOSTON, acting

  through its Cayman Islands Branch,

  individually and as Managing Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Print
  Name:

  
	
   

  	
  Title:

  

 

S-6

 

	
   

  	
  BROWN
  BROTHERS HARRIMAN &

  CO., individually and as Co-Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Print
  Name:

  
	
   

  	
  Title:

  

 

S-7

 

PRICING SCHEDULE

 

	
  Applicable
  Margin

  	
   

  	
  Level I Status

  	
   

  	
  Level II Status

  	
   

  	
  Level III Status

  	
   

  	
  Level IV Status

  	
   

  
	
  Eurodollar
  Rate

  	
   

  	
  0.875

  	
  %

  	
  1.00

  	
  %

  	
  1.125

  	
  %

  	
  1.25

  	
  %

  

 

	
  Applicable
  Fee

  Rate

  	
   

  	
  Level I Status

  	
   

  	
  Level II Status

  	
   

  	
  Level III

  Status

  	
   

  	
  Level IV Status

  	
   

  
	
  Commitment
  Fee

  	
   

  	
  0.10

  	
  %

  	
  0.125

  	
  %

  	
  0.15

  	
  %

  	
  0.25

  	
  %

  
	
  Letter
  of Credit Participation Fee

  	
   

  	
  0.875

  	
  %

  	
  1.00

  	
  %

  	
  1.125

  	
  %

  	
  1.25

  	
  %

  

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

SCHEDULE 1

 

COMMITMENTS

 

	
  Lender

  	
   

  	
  Revolving Credit

  Commitment

  	
   

  	
  Letter of Credit

  Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  JPMorgan Chase
  Bank

  	
   

  	
  $

  	
  1,920,000

  	
   

  	
  $

  	
  22,080,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Barclays Bank
  PLC

  	
   

  	
  $

  	
  1,920,000

  	
   

  	
  $

  	
  22,080,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LaSalle Bank
  National Association

  	
   

  	
  $

  	
  1,920,000

  	
   

  	
  $

  	
  22,080,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Commerzbank
  Aktiengesellschaft, New York and Grand Cayman Branches

  	
   

  	
  $

  	
  1,920,000

  	
   

  	
  $

  	
  22,080,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Suisse
  First Boston

  	
   

  	
  $

  	
  1,520,000

  	
   

  	
  $

  	
  17,480,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Brown Brothers
  Harriman & Co. 

  	
   

  	
  $

  	
  800,000 

  	
    

  	
  $

  	
  9,200,000 

  	
    

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  $

  	
  10,000,000.00

  	
   

  	
  $

  	
  115,000,000.00

  	
   

  

 

 

SCHEDULE
3.1

 

EXISTING LETTERS OF CREDIT

 

	
  L/C Number

  	
   

  	
  Amount

  	
   

  	
  Applicant

  	
   

  	
  Beneficiary

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ST4027/97

  	
   

  	
  £

  	
  1,500,000

  	
   

  	
  Navigators
  Corporate Underwriters Ltd.

  	
   

  	
  Society
  of Lloyd’s

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ST4028/96

  	
   

  	
  £

  	
  13,250,000

  	
   

  	
  Navigators Corporate Underwriters Ltd.

  	
   

  	
  Society of Lloyd’s

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ST4033/98

  	
   

  	
  £

  	
  5,689,000

  	
   

  	
  Navigators
  Corporate Underwriters Ltd.

  	
   

  	
  The
  Council of Lloyd’s

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ST
  4034/98

  	
   

  	
  £

  	
  12,624,000

  	
   

  	
  Millennium
  Underwriting Ltd.

  	
   

  	
  The
  Council of Lloyd’s

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ST4029/03/343952

  	
   

  	
  £

  	
  5,250,000

  	
   

  	
  Millennium
  Underwriting Ltd.

  	
   

  	
  The
  Society and Council of Lloyd’s

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ST4030/03/343953

  	
   

  	
  £

  	
  5,200,000

  	
   

  	
  Navigators
  Corporate Underwriters Ltd.

  	
   

  	
  The
  Society and Council of Lloyd’s

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  321745

  	
   

  	
  $

  	
  133,645

  	
   

  	
  The
  Navigators Group, Inc.

  	
   

  	
  One
  Penn Plaza, LLC

  

 

 

Schedule 6.9

 

The Navigators Group, Inc.

SUBSIDIARIES

 

	
  Subsidiary

  	
   

  	
  State of

  Incorporation

  	
   

  	
  % ownership by the Borrower or

  a Subsidiary as otherwise indicated

  
	
  Navigators Insurance Company(1)

  	
   

  	
  New York

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NIC Insurance Company

  	
   

  	
  New York

  	
   

  	
  100% Navigators Insurance Co.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Navigators Management Company, Inc.

  	
   

  	
  New York

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Navigators Insurance Services of Texas, Inc.

  	
   

  	
  Texas

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Navigators Special Risk, Inc.

  	
   

  	
  Texas

  	
   

  	
  100% Navigators Insurance Services of Texas

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Navigators California Insurance Services, Inc.

  	
   

  	
  California

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Navigators Insurance Services of Washington, Inc.

  	
   

  	
  Washington

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Navigators Corporate Underwriters Ltd.

  	
   

  	
  U.K.

  	
   

  	
  100% Navigators Holdings (UK) Ltd.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Navigators Management (UK) Ltd.

  	
   

  	
  U.K.

  	
   

  	
  100% Navigators Holdings (UK) Ltd.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Navigators Holdings (UK) Ltd.

  	
   

  	
  U.K.

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Navigators Underwriting Agency Ltd.

  	
   

  	
  U.K.

  	
   

  	
  100% Navigators Holdings (UK) Ltd.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Millennium Underwriting Ltd.

  	
   

  	
  U.K.

  	
   

  	
  100% Navigators Underwriting Agency Ltd.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Navigators Underwriting Ltd.

  	
   

  	
  U.K.

  	
   

  	
  100% Navigators Underwritng Agency Ltd.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Navigators NV

  	
   

  	
  Belgium

  	
   

  	
  100% Navigators Underwriting Agency Ltd.

  

 

(1) Significant Subsidiary

 

 

Schedule 6.22

 

	
  

  	
   

  
	
   

  
	
   

  
	
  NAVIGATORS INSURANCE COMPANY

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

 

THE FOLLOWING IS THE
CURRENT STATUS OF OUR STATE LICENSES AS OF Jan 1, 2005:

 

	
  LICENSED(1)

  	
   

  	
  APPROVED

  REINSURER

  	
   

  	
  SURPLUS

  LINES

  ELIGIBLE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Alabama

  	
   

  	
  Mexico

  	
   

  	
  U.S. Virgin Islands

  
	
  Alaska

  	
   

  	
  Venezuela

  	
   

  	
   

  
	
  Arizona

  	
   

  	
   

  	
   

  	
   

  
	
  Arkansas

  	
   

  	
   

  	
   

  	
   

  
	
  California

  	
   

  	
   

  	
   

  	
   

  
	
  Colorado

  	
   

  	
   

  	
   

  	
   

  
	
  Connecticut

  	
   

  	
   

  	
   

  	
   

  
	
  Delaware

  	
   

  	
   

  	
   

  	
   

  
	
  District of Columbia

  	
   

  	
   

  	
   

  	
   

  
	
  Florida

  	
   

  	
   

  	
   

  	
   

  
	
  Georgia

  	
   

  	
   

  	
   

  	
   

  
	
  Hawaii

  	
   

  	
   

  	
   

  	
   

  
	
  Idaho

  	
   

  	
   

  	
   

  	
   

  
	
  Indiana

  	
   

  	
   

  	
   

  	
   

  
	
  Illinois

  	
   

  	
   

  	
   

  	
   

  
	
  Iowa

  	
   

  	
   

  	
   

  	
   

  
	
  Kansas

  	
   

  	
   

  	
   

  	
   

  
	
  Kentucky

  	
   

  	
   

  	
   

  	
   

  
	
  Louisiana

  	
   

  	
   

  	
   

  	
   

  
	
  Maine

  	
   

  	
   

  	
   

  	
   

  
	
  Maryland

  	
   

  	
   

  	
   

  	
   

  
	
  Massachusetts

  	
   

  	
   

  	
   

  	
   

  
	
  Michigan

  	
   

  	
   

  	
   

  	
   

  
	
  Minnesota

  	
   

  	
   

  	
   

  	
   

  
	
  Mississippi

  	
   

  	
   

  	
   

  	
   

  
	
  Missouri

  	
   

  	
   

  	
   

  	
   

  
	
  Montana

  	
   

  	
   

  	
   

  	
   

  
	
  Nebraska

  	
   

  	
   

  	
   

  	
   

  
	
  Nevada

  	
   

  	
   

  	
   

  	
   

  
	
  New Hampshire

  	
   

  	
   

  	
   

  	
   

  
	
  New Jersey

  	
   

  	
   

  	
   

  	
   

  
	
  New Mexico

  	
   

  	
   

  	
   

  	
   

  
	
  New York

  	
   

  	
   

  	
   

  	
   

  
	
  North Carolina

  	
   

  	
   

  	
   

  	
   

  
	
  North Dakota

  	
   

  	
   

  	
   

  	
   

  
	
  Ohio

  	
   

  	
   

  	
   

  	
   

  
	
  Oklahoma

  	
   

  	
   

  	
   

  	
   

  
	
  Oregon

  	
   

  	
   

  	
   

  	
   

  
	
  Pennsylvania

  	
   

  	
   

  	
   

  	
   

  
	
  Puerto Rico

  	
   

  	
   

  	
   

  	
   

  
	
  Rhode Island

  	
   

  	
   

  	
   

  	
   

  
	
  South Carolina

  	
   

  	
   

  	
   

  	
   

  
	
  South Dakota

  	
   

  	
   

  	
   

  	
   

  
	
  Tennessee

  	
   

  	
   

  	
   

  	
   

  
	
  Texas

  	
   

  	
   

  	
   

  	
   

  
	
  Utah

  	
   

  	
   

  	
   

  	
   

  
	
  Vermont

  	
   

  	
   

  	
   

  	
   

  
	
  Virginia

  	
   

  	
   

  	
   

  	
   

  
	
  Washington

  	
   

  	
   

  	
   

  	
   

  
	
  West Virginia

  	
   

  	
   

  	
   

  	
   

  
	
  Wisconsin

  	
   

  	
   

  	
   

  	
   

  
	
  Wyoming

  	
   

  	
   

  	
   

  	
   

  
	
  U.S. Treasury Dept.

  	
   

  	
   

  	
   

  	
   

  

 

(1) Licensed for all
major lines indicated on Schedule 6.24

 

One Penn
Plaza  New York, NY  10119

Tel. (212)
244-2333   Fax (212) 244-4077

 

 

Schedule 6.22A

 

	
  

  	
   

  
	
   

  
	
   

  
	
  NIC INSURANCE COMPANY

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

 

THE FOLLOWING IS THE CURRENT STATUS OF OUR STATE LICENSES AS OF JANUARY
21, 2005:

 

	
  SURPLUS LINES ELIGIBLE

  	
   

  	
  LICENSED(1)

  	
   

  	
  APPLICATION PENDING TO

  BE SURPLUS LINES ELIGIBLE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ALASKA

  	
   

  	
  NEW YORK

  	
   

  	
  ARKANSAS

  
	
  ARIZONA

  	
   

  	
   

  	
   

  	
  MINNESOTA

  
	
  CALIFORNIA

  	
   

  	
   

  	
   

  	
  MISSISSIPPI

  
	
  COLORADO

  	
   

  	
   

  	
   

  	
  NEW MEXICO

  
	
  CONNECTICUT

  	
   

  	
   

  	
   

  	
  OKLAHOMA

  
	
  DELAWARE

  	
   

  	
   

  	
   

  	
  VERMONT

  
	
  FLORIDA

  	
   

  	
   

  	
   

  	
   

  
	
  IDAHO

  	
   

  	
   

  	
   

  	
   

  
	
  INDIANA

  	
   

  	
   

  	
   

  	
   

  
	
  IOWA

  	
   

  	
   

  	
   

  	
   

  
	
  KANSAS

  	
   

  	
   

  	
   

  	
   

  
	
  KENTUCKY

  	
   

  	
   

  	
   

  	
   

  
	
  LOUISIANA

  	
   

  	
   

  	
   

  	
   

  
	
  MAINE

  	
   

  	
   

  	
   

  	
   

  
	
  MARYLAND

  	
   

  	
   

  	
   

  	
   

  
	
  MASSACHUSETTS

  	
   

  	
   

  	
   

  	
   

  
	
  MICHIGAN

  	
   

  	
   

  	
   

  	
   

  
	
  MISSOURI

  	
   

  	
   

  	
   

  	
   

  
	
  MONTANA

  	
   

  	
   

  	
   

  	
   

  
	
  NEVADA

  	
   

  	
   

  	
   

  	
   

  
	
  NEW HAMPSHIRE

  	
   

  	
   

  	
   

  	
   

  
	
  NEW JERSEY

  	
   

  	
   

  	
   

  	
   

  
	
  NORTH CAROLINA

  	
   

  	
   

  	
   

  	
   

  
	
  NORTH DAKOTA

  	
   

  	
   

  	
   

  	
   

  
	
  OHIO

  	
   

  	
   

  	
   

  	
   

  
	
  OREGON

  	
   

  	
   

  	
   

  	
   

  
	
  PENNSYLVANIA

  	
   

  	
   

  	
   

  	
   

  
	
  RHODE ISLAND

  	
   

  	
   

  	
   

  	
   

  
	
  SOUTH CAROLINA

  	
   

  	
   

  	
   

  	
   

  
	
  TENNESSEE

  	
   

  	
   

  	
   

  	
   

  
	
  TEXAS

  	
   

  	
   

  	
   

  	
   

  
	
  UTAH

  	
   

  	
   

  	
   

  	
   

  
	
  VIRGINIA

  	
   

  	
   

  	
   

  	
   

  
	
  WISCONSIN

  	
   

  	
   

  	
   

  	
   

  

 

(1) Licensed for all major lines indicated on Schedule 6.24

 

THE FOLLLOWING JURISDICTIONS DO NOT REVIEW
ELIGIBILITY OF SURPLUS LINES INSURERS. 
THE BURDEN OF DETERMINING ELIGIBILITY AND ASSURING THAT A COMPANY
SATISIFIES THE FINANCIAL CONDITIONS RESTS SOLELY UPON THE LICENSED SURPLUS
LINES BROKER:

 

	
  ALABAMA

  
	
  DISTRICT OF COLUMBIA

  
	
  GEORGIA

  
	
  HAWAII

  
	
  ILLINOIS

  
	
  NEBRASKA

  
	
  SOUTH DAKOTA

  
	
  WASHINGTON

  
	
  WEST VIRGINIA

  
	
  WYOMING

  

 

Reckson Executive
Park, 6 International Drive, Suite 100

Rye Brook, New
York 10573

Tel. (914)
934-8999 Fax (914) 934-2355

 

 

Schedule 6.23

 

THE NAVIGATORS GROUP, INC.

 

 

Partnerships:            None

 

 

Schedule 6.24

 

LINES OF BUSINESS

 

 

The Borrower and its
Subsidiaries are active in the following lines of business:

 

Commercial Multi Peril

Ocean Marine

Inland Marine

Other Liability

Commercial Auto Liability

Auto Physical Damage

Aircraft

Surety

Reinsurance

 

 

Schedule 7.16

 

THE NAVIGATORS GROUP, INC.

 

Liens:            None

 

 

Schedule 7.21

 

Navigators Insurance Company

 

 

Reinsurance Guidelines

 

•                  Minimum A. M.
Best rating of “A” and

 

•                  Policyholders’
surplus of US $250 million

 

•                  or, if not rated
by A. M. Best, an equivalent rating from a major rating agency along with the
following:

 

•                  Shareholder’s
funds must be in excess of US $250 million and

 

•                  Must pass a
minimum of 5 ISI tests

 

For purposes of this Credit Agreement, the following applies, net of
any collateral from the reinsurers:

 

1.               Reinsurers
constituting the lesser of $5,000,000 or 25% of the credit risk on any
reinsurance program can be outside of the above guidelines.

 

2.               Any resinurer,
falling within the Reinsurance Guidelines, rated A or below cannot exceed an
aggregate exposure across all programs of 66 2/3% of the Consolidated Surplus
of the Insurance Subsidiaries.

 

EXHIBIT A

 

REVOLVING CREDIT NOTE

 

 

	
  $                        

  	
   

  	
  , 2005

  

 

The Navigators
Group, Inc., a Delaware corporation (the “Borrower”), promises to pay to
the order of                                                           
(the “Lender”) the lesser of the principal sum of                                               
Dollars ($                            )
or the aggregate unpaid principal amount of all Revolving Credit Loans made by
the Lender to the Borrower pursuant to Article II of the Agreement (as
hereinafter defined), in immediately available funds at the main office of
JPMorgan Chase Bank, N.A. in Chicago, Illinois, as Administrative Agent,
together with interest on the unpaid principal amount hereof at the rates and
on the dates set forth in the Agreement. 
The Borrower shall pay the principal of and accrued and unpaid interest
on the Revolving Credit Loans in full on the Revolving Credit Termination Date
and shall make such mandatory payments as are required to be made under the
terms of Article II of the Agreement.

 

The Lender
shall, and is hereby authorized to, record on the schedule attached hereto, or
to otherwise record in accordance with its usual practice, the date and amount
of each Revolving Credit Loan and the date and amount of each principal payment
hereunder.

 

This Revolving
Credit Note is one of the Revolving Credit Notes issued pursuant to, and is
entitled to the benefits of, the Second Amended and Restated Credit Agreement,
dated as of                       ,
2005 (which, as it may be amended or modified and in effect from time to time,
is herein called the “Agreement”), among the Borrower, the lenders party
thereto, including the Lender, as Administrative Agent, to which Agreement
reference is hereby made for a statement of the terms and conditions governing
this Revolving Credit Note, including the terms and conditions under which this
Revolving Credit Note may be prepaid or its maturity date accelerated.  This Revolving Credit Note is secured
pursuant to the Security Documents, as more specifically described in the
Agreement, and reference is made thereto for a statement of the terms and
provisions thereof.  Capitalized terms
used herein and not otherwise defined herein are used with the meanings
attributed to them in the Agreement.

 

This Note
shall be governed by, and construed in accordance with, the internal laws (and
not the law of conflicts) of the State of Illinois.

 

	
   

  	
  THE NAVIGATORS GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Print Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

A-1

 

SCHEDULE
OF LOANS AND PAYMENTS OF PRINCIPAL

TO

REVOLVING CREDIT NOTE OF THE NAVIGATORS GROUP, INC.

DATED                             ,
2005

 

 

	
  Date

  	
   

  	
  Principal

  Amount of

  Loan

  	
   

  	
  Maturity

  of Interest

  Period

  	
   

  	
  Principal

  Amount

  Paid

  	
   

  	
  Unpaid

  Balance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

A-2

 

EXHIBIT B

 

COMPLIANCE CERTIFICATE

 

To:                              The Lenders parties to
the

Credit Agreement Described Below

 

This
Compliance Certificate is furnished pursuant to that certain Credit Agreement,
dated as of                     ,
2005 (as amended, modified, renewed or extended from time to time, the “Agreement”),
among The Navigators Group, Inc. (the “Borrower”), the lenders party
thereto, and JPMorgan Chase Bank, N.A. 
Unless otherwise defined herein, capitalized terms used in this
Compliance Certificate have the meanings ascribed thereto in the Agreement.

 

THE
UNDERSIGNED HEREBY CERTIFIES THAT:

 

1.                                       I
am the duly elected                       
of the Borrower;

 

2.                                       I
have reviewed the terms of the Agreement and I have made, or have caused to be
made under my supervision, a detailed review of the transactions and conditions
of the Borrower and its Subsidiaries during the accounting period covered by
the attached financial statements;

 

3.                                       The
examinations described in paragraph 2 did not disclose, and I have no knowledge
of, the existence of any condition or event which constitutes a Default or
Unmatured Default during or at the time of the accounting period covered by the
attached financial statements or as of the date of this Certificate, except as
set forth below; and

 

4.                                       Schedule
I attached hereto sets forth financial data and computations evidencing the
Borrower’s compliance with certain covenants of the Agreement, all of which
data and computations are true, complete and correct.

 

Described
below are the exceptions, if any, to paragraph 3 by listing, in detail, the
nature of the condition or event, the period during which it has existed and
the action which the Borrower has taken, is taking, or proposes to take with
respect to each such condition or event:

 

 

B-1

 

 

The foregoing
certifications, together with the computations set forth in Schedule  I
hereto and the financial statements delivered with this Certificate in support
hereof, are made and delivered this        day of
            ,         .

 

 

B-2

 

SCHEDULE I TO COMPLIANCE CERTIFICATE

 

Compliance as of                   ,
         with

Provisions of Sections 7.14 and 7.23 of

the Agreement

 

	
  Section 7.14
  – Investments and Acquisitions

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Clause (d)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Required:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)

  	
  Combined
  Investments of the Borrower and its Subsidiaries on the date of
  determination:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
  10% of
  (a)(i):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Actual:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Investments
  in debt securities not rated A- or better by S&P, A-3 or better by
  Moody’s or NAIC-1 or better by the NAIC but rated BBB- or better by S&P,
  Baa-3 or better by Moody’s or NAIC-2 or better by the NAIC on the date of
  determination (or downgraded from such ratings within the last 180 days):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Clause (e)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Aggregate
  Investments in equity securities:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)

  	
  Required:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (A)

  	
  Consolidated
  Net Worth of the Borrower and its Subsidiaries on the date of determination:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (B)

  	
  10% of
  (a)(i)(A):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
  Actual:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Aggregate Investments
  by the Borrower in equity securities on the date of determination:

  	
   

  	
  $

  	
   

  	
   

  

 

B-3

 

	
   

  	
  (b)

  	
  Individual
  Investments:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)

  	
  Required:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (A)

  	
  Consolidated
  Net Worth of the Borrower and its Subsidiaries on the date of determination:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (B)

  	
  5% of
  (b)(i)(A):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
  Actual:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Largest
  single equity securities investment by the Borrower and its Subsidiaries on
  the date of determination:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Clause (f)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Required:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Aggregate
  amount of other Investments permitted under Section 7.14(f):

  	
   

  	
  $

  	
  10,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Actual:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Other
  Investments on date of determination:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Clause (g)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Required:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Aggregate
  amount of Acquisitions permitted during any Fiscal Year:

  	
   

  	
  $

  	
  10,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Actual:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Amount of
  Acquisitions from beginning of Fiscal Year through date of determination:

  	
   

  	
  $

  	
   

  	
   

  

 

B-4

 

	
  Section
  7.23.1 – Minimum Consolidated Tangible Net Worth

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Period:

  	
  Fiscal
  Quarter ended
                            ,            

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Required:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Cumulative
  Positive Consolidated Net Income earned from October 1, 2004 to the date of
  determination:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  75% of (a):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Net
  Available Proceeds of any equity issuance after the closing date (including
  any capital contribution to surplus of the Borrower in respect of which no
  additional shares are issued):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  75% of (c):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  $230,000,000
  plus (b) plus (d):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Actual:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Consolidated
  Tangible Net Worth (excluding the effect of unrealized gain or loss under
  SFAS 115):

  	
   

  	
  $

  	
   

  	
   

  

 

B-5

 

	
  Section
  7.23.2 – Minimum Statutory Surplus

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Period:

  	
  Fiscal
  Quarter ended
                            ,                

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Required:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Cumulative
  Positive aggregate Statutory Net Income earned by Significant Insurance
  Subsidiaries from January 1, 2005 to the date of determination:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  50% of (a):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Net
  Available Proceeds of any equity issuance by any Significant Insurance
  Subsidiary after the closing date (including any capital contribution to
  surplus of the Significant Insurance Subsidiaries in respect of which no
  additional shares are issued):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  75% of (c):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (e)

  	
  $175,000,000
  plus (b) plus (d):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Actual:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Aggregate
  Statutory Surplus of the Significant Insurance Subsidiaries:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section
  7.23.3 – Leverage Ratio

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Required:

  	
   

  	
  0.20:1.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Actual:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Consolidated
  Indebtedness of the Borrower and its Consolidated Subsidiaries (excluding
  letter of credit obligations incurred in the ordinary course of business) on
  date of determination:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Consolidated
  Net Worth on date of determination:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  (a) plus
  (b):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (d)

  	
  Ratio of (a)
  to (c):

  	
   

  	
  :1.0

  	
   

  

 

B-6

 

	
  Section 7.23.4
  – Minimum Risk-Based Capital

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Required:

  	
   

  	
  150

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Actual:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (a)

  	
  Total
  Adjusted Capital on date of determination:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  Company
  Action Level RBC on date of determination:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (c)

  	
  Ratio of (a)
  to (b) (expressed as a percentage):

  	
   

  	
   

  	
  %

  

 

B-7

 

EXHIBIT C

 

ASSIGNMENT
AGREEMENT

 

This
Assignment Agreement (this “Assignment Agreement”) between                     
(the “Assignor”) and                           
(the “Assignee”) is dated as of                                 .  The parties hereto agree as follows:

 

1.                                       PRELIMINARY
STATEMENT.  The Assignor is a party
to a Credit Agreement (which, as it may be amended, modified, renewed or
extended from time to time is herein called the “Credit Agreement”)
described in Item 1 of Schedule 1 attached hereto (“Schedule 1”).  Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement.

 

2.                                       ASSIGNMENT
AND ASSUMPTION.  The Assignor hereby
sells and assigns to the Assignee, and the Assignee hereby purchases and assumes
from the Assignor, an interest in and to the Assignor’s rights and obligations
under the Credit Agreement such that after giving effect to such assignment the
Assignee shall have purchased pursuant to this Assignment Agreement the
percentage interest specified in Item 3 of Schedule 1 of all outstanding
rights and obligations under the Credit Agreement relating to the loans listed
in Item 3 of Schedule 1 and the other Facility Documents.  The total of the Revolving Credit Commitment
and the Letter of Credit Participation Amount purchased by the Assignee
hereunder is set forth in Item 4 of Schedule 1.

 

3.                                       EFFECTIVE
DATE.  The effective date of this
Assignment Agreement (the “Effective Date”) shall be the later of the
date specified in Item 5 of Schedule 1 or two Business Days (or such
shorter period agreed to by the Agent) after a Notice of Assignment
substantially in the form of Exhibit I attached hereto has been
delivered to the Agent.  Such Notice of
Assignment must include any consents required to be delivered to the Agent by
Section 13.3.1 of the Credit Agreement. 
In no event will the Effective Date occur if the payments required to be
made by the Assignee to the Assignor on the Effective Date under Sections 4 and
5 hereof are not made on the proposed Effective Date or if any other condition
precedent agreed to by the Assignor and the Assignee has not been
satisfied.  The Assignor will notify the
Assignee of the proposed Effective Date not later than the Business Day prior
to the proposed Effective Date.  As of
the Effective Date, (i) the Assignee shall have the rights and obligations of a
Lender under the Facility Documents with respect to the rights and obligations
assigned to the Assignee hereunder and (ii) the Assignor shall relinquish its
rights and be released from its corresponding obligations under the Facility
Documents with respect to the rights and obligations assigned to the Assignee
hereunder.

 

4.                                       PAYMENT
OBLIGATIONS.  On and after the
Effective Date, the Assignee shall be entitled to receive from the Agent all
payments of principal, interest and fees with respect to the interest assigned
hereby.  The Assignee shall advance funds
directly to the Agent with respect to all Revolving Credit Loans and reimbursement
payments made on or after the Effective Date with respect to the interest
assigned hereby.  In the event that
either party hereto receives any payment to which the other party hereto is
entitled under this Assignment Agreement, then the party receiving such amount
shall promptly remit it to the other party hereto.

 

C-1

 

5.                                       FEES
PAYABLE BY THE ASSIGNEE.  The
Assignee agrees to pay the $3,500 processing fee required to be paid to the
Agent in connection with this Assignment Agreement.

 

6.                                       REPRESENTATIONS
OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR’S LIABILITY.  The Assignor represents and warrants that it
is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim created
by the Assignor.  It is understood and
agreed that the assignment and assumption hereunder are made without recourse
to the Assignor and that the Assignor makes no other representation or warranty
of any kind to the Assignee.  Neither the
Assignor nor any of its officers, directors, employees, agents or attorneys
shall be responsible for (i) the due execution, legality, validity,
enforceability, genuineness, sufficiency or collectability of any Facility
Document, including without limitation, documents granting the Assignor and the
other Lenders a security interest in assets of the Borrower or any guarantor, (ii)
any representation, warranty or statement made in any Facility Document or in
connection with any of the Facility Documents, (iii) the financial condition or
creditworthiness of the Borrower or any guarantor, (iv) the performance of or
compliance with any of the terms or provisions of any of the Facility
Documents, (v) inspecting any of the Property, books or records of the
Borrower, (vi) the validity, enforceability, perfection, priority, condition,
value or sufficiency of any collateral securing or purporting to secure the
Revolving Credit Loans or the Reimbursement Obligations or (vii) any mistake,
error of judgment, or action taken or omitted to be taken in connection with
the Revolving Credit Loans, the Letters of Credit or the Facility Documents.

 

7.                                       REPRESENTATIONS
OF THE ASSIGNEE.  The Assignee (i)
confirms that it has received a copy of the Credit Agreement, together with
copies of the financial statements requested by the Assignee and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment Agreement, (ii) agrees that
it will, independently and with reliance upon the Agent, the Assignor or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Facility Documents, (iii) appoints and authorizes
the Agent to take such action as agent on its behalf and to exercise such
powers under the Facility Documents as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto, (iv)
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Facility Documents are required to be
performed by it as a Lender, (v) agrees that its payment instructions and
notice instructions are as set forth in the attachment to Schedule 1, (vi)
confirms that none of the funds, monies, assets or other consideration being
used to make the purchase and assumption hereunder are “plan assets” as defined
under ERISA and that its rights, benefits and interests in and under the
Facility Documents will not be “plan assets” under ERISA, [and (vii) attaches
the forms prescribed by the Internal Revenue Service of the United States
certifying that the Assignee is entitled to receive payments under the Facility
Documents without deduction or withholding of any United States federal income
taxes].

 

8.                                       INDEMNITY.  The Assignee agrees to indemnify and hold the
Assignor harmless against any and all losses, costs and expenses (including,
without limitation, reasonable attorneys’ fees) and liabilities incurred by the
Assignor in connection with or arising in any manner from the Assignee’s
non-performance of the obligations assumed under this Assignment Agreement.

 

C-2

 

9.                                       SUBSEQUENT
ASSIGNMENTS.  After the Effective
Date, the Assignee shall have the right pursuant to Section 13.3.1 of the
Credit Agreement to assign the rights which are assigned to the Assignee
hereunder to any entity or person, provided that (i) any such subsequent
assignment does not violate any of the terms and conditions of the Facility
Documents or any law, rule, regulation, order, writ, judgment, injunction or
decree and that any consent required under the terms of the Facility Documents
has been obtained and (ii) unless the prior written consent of the Assignor is
obtained, the Assignee is not hereby released from its obligations to the
Assignor hereunder, if any remain unsatisfied, including, without limitation,
its obligations under Sections 4, 5 and 8 hereof.

 

10.                                 REDUCTIONS
OF AGGREGATE COMMITMENT.  If any
reduction in the Aggregate Revolving Credit Commitment or the Letter of Credit
Commitment occurs between the date of this Assignment Agreement and the
Effective Date, the percentage interest specified in Item 3 of Schedule 1
shall remain the same, but the dollar amount purchased shall be recalculated based
on the reduced Aggregate Revolving Credit Commitment or Letter of Credit
Commitment, as the case may be.

 

11.                                 ENTIRE
AGREEMENT.  This Assignment Agreement
and the attached Notice of Assignment embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings between the parties hereto relating to the subject matter
hereof.

 

12.                                 GOVERNING
LAW.  This Assignment Agreement shall
be governed by the internal law, and not the law of conflicts, of the State of
Illinois.

 

13.                                 NOTICES.  Notices shall be given under this Assignment
Agreement in the manner set forth in the Credit Agreement.  For the purpose hereof, the addresses of the
parties hereto (until notice of a change is delivered) shall be the address set
forth in the attachment to Schedule 1.

 

[signature page follows]

 

C-3

 

IN WITNESS
WHEREOF, the parties hereto have executed this Assignment Agreement by their
duly authorized officers as of the date first above written.

 

	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					

 

	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					

 

C-4

 

SCHEDULE 1

 

TO ASSIGNMENT AGREEMENT

 

	
  1.

  	
   

  	
  Description
  and Date of Credit Agreement:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  That certain
  Second Amended and Restated Credit Agreement, dated as of                   ,
  2005, among the Navigators Group, Inc., the financial institutions named
  therein, and JPMorgan Chase Bank, N.A., as Administrative Agent.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Date of
  Assignment Agreement:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Amounts (As of
  Date of Item 2 above):

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Revolving Credit

  Facility

  	
   

  	
  Letter of Credit

  Facility

  	
   

  
	
   

  	
   

  	
  (a)

  	
  Aggregate
  Revolving Credit Commitment (total Revolving Credit Loans)* and Letter of
  Credit Commitment (total outstanding Letter of Credit Obligations)** under
  Credit Agreement

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)

  	
  Assignee’s
  Percentage of each Facility purchased under the Assignment Agreement (taken
  to five decimal places);

  	
   

  	
   

  	
  %

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)

  	
  Amount of
  Assigned Share in each Facility purchased under the Assignment Agreement:

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Total of
  Assignee’s Revolving Credit Commitment (Revolving Credit Loan amount)* and
  Letter of Credit Participation Amount (outstanding Letter of Credit
  Obligations)** purchased hereunder:

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Proposed
  Effective Date:

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

C-5

 

	
  Accepted and Agreed:

  	
   

  
	
   

  	
   

  
	
  [NAME OF ASSIGNOR]

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
								

 

*                                         If
the Aggregate Revolving Credit Commitment has been terminated, insert
outstanding Revolving Credit Loans in place of Aggregate Revolving Credit
Commitment or Revolving Credit Commitment, as the case may be.

 

**                                  If
the Letter of Credit Commitment has been terminated, insert total outstanding
Letter of Credit Obligations in place of Letter of Credit Commitment or Letter
of Credit Participation Amount, as the case may be.

 

C-6

 

ATTACHMENT TO SCHEDULE 1 to ASSIGNMENT
AGREEMENT

 

ADMINISTRATIVE INFORMATION SHEET

 

Attach Assignor’s Administrative Information
Sheet, which must

include notice addresses for the Assignor and the Assignee

(Sample form shown below)

 

ASSIGNOR INFORMATION

 

Contact:

 

	
  Name:

  	
  Telephone
  No.:

  
	
  Fax No.:

  	
   

  

 

Payment
Information:

 

	
  Name &
  ABA # of Destination Bank:

  
	
   

  
	
  Account Name
  & Number for Wire Transfer:

  
	
   

  
	
  Other
  Instructions:

  
	
   

  
	
  Address
  for Notices for Assignee:

  
	
   

  
	
   

  

 

ASSIGNEE
INFORMATION

 

Credit
Contact:

 

	
  Name:

  	
  Telephone
  No.:

  
	
  Fax No.:

  	
   

  

 

C-7

 

Key
Operations Contacts:

 

	
  Booking
  Installation:

  	
  Booking
  Installation:

  
	
  Name:

  	
  Name:

  
	
  Telephone
  No.:

  	
  Telephone
  No.:

  
	
  Fax No.:

  	
  Fax No.:

  

 

Payment
Information:

 

	
  Name &
  ABA # of Destination Bank:

  
	
   

  
	
  Account Name
  & Number for Wire Transfer:

  
	
   

  
	
  Other
  Instructions:

  
	
   

  
	
  Address
  for Notices for Assignor:

  
	
   

  
	
   

  

 

C-8

 

EXHIBIT I

 

TO ASSIGNMENT
AGREEMENT

 

NOTICE

OF ASSIGNMENT

 

                        ,          

 

	
  To:

  	
  The Navigators
  Group, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMorgan
  Chase Bank, N.A., as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
  From:

  	
  [NAME OF
  ASSIGNOR] (the “Assignor”)

  
	
   

  	
   

  
	
   

  	
  [NAME OF
  ASSIGNEE] (the “Assignee”)

  

 

1.                                       We
refer to that certain Credit Agreement (the “Credit Agreement”)
described in Item 1 of Schedule 1 attached hereto (“Schedule 1”).  Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement.

 

2.                                       This
Notice of Assignment (the “Notice of Assignment”) is given and delivered
to [the Borrower and] the Agent pursuant to Section 13.3.2 of the Credit
Agreement.

 

3.                                       The
Assignor and the Assignee have entered into an Assignment Agreement, dated as
of                       ,
           (the “Assignment
Agreement”), pursuant to which, among other things, the Assignor has sold,
assigned, delegated and transferred to the Assignee, and the Assignee has
purchased, accepted and assumed from the Assignor the percentage interest
specified in Item 3 of Schedule 1 of all outstandings, rights and
obligations under the Credit Agreement relating to the facilities listed in
Item 3 of Schedule 1.  The
Effective Date of the Assignment Agreement shall be the later of the date
specified in Item 5 of Schedule 1 or two Business Days (or such shorter
period as agreed to by the Agent) after this Notice of Assignment and any
consents and fees required by Sections 13.3.1 and 13.3.2 of the Credit
Agreement have been delivered to the Agent; provided that the Effective
Date shall not occur if any condition precedent agreed to by the Assignor and
the Assignee has not been satisfied.

 

4.                                       The
Assignor and the Assignee hereby give to the Borrower and the Agent notice of
the assignment and delegation referred to herein.  The Assignor will confer with the Agent before
the date specified in Item 5 of Schedule 1 to determine if the
Assignment Agreement will become effective on such date pursuant to Section
3 hereof, and will confer with the Agent to determine the Effective Date
pursuant to Section 3 hereof if it occurs thereafter.  The Assignor shall notify the Agent if the
Assignment Agreement does not become effective on any proposed Effective Date
as a result of the failure to satisfy the conditions precedent agreed to by the
Assignor and the Assignee.  At the request
of the Agent, the Assignor will give the Agent written confirmation of the
satisfaction of the conditions precedent.

 

5.                                       The
Assignor or the Assignee shall pay to the Agent on or before the Effective Date
the processing fee of $3,500 required by Section 13.3.2 of the Credit
Agreement.

 

C-9

 

6.                                       If
Revolving Credit Notes are outstanding on the Effective Date, the Assignor and
the Assignee request and direct that the Agent prepare and cause the Borrower
to execute and deliver new Revolving Credit Notes or, as appropriate,
replacement notes, to the Assignor and the Assignee.  The Assignor and, if applicable, the Assignee
each agree to deliver to the Agent for forwarding to the Borrower the original
Revolving Credit Note received by it from the Borrower upon its receipt of a
new Revolving Credit Note in the appropriate amount.

 

7.                                       The
Assignee advises the Agent that notice and payment instructions are set forth
in the attachment to Schedule 1.

 

8.                                       The
Assignee hereby represents and warrants that none of the funds, monies, assets
or other consideration being used to make the purchase pursuant to the
Assignment Agreement are “plan assets” as defined under ERISA and that its
rights, benefits, and interests in and under the Facility Documents will not be
“plan assets” under ERISA.

 

9.                                       The
Assignee authorizes the Agent to act as its agent under the Facility Documents
in accordance with the terms thereof. 
The Assignee acknowledges that the Agent has no duty to supply
information with respect to the Borrower or the Facility Documents to the
Assignee until the Assignee becomes a party to the Credit Agreement.

 

	
  [NAME OF ASSIGNOR]

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
								

 

C-10

 

	
  ACKNOWLEDGED AND CONSENTED TO

  BY JPMORGAN CHASE BANK, N.A., as

  Administrative Agent

  	
  ACKNOWLEDGED AND CONSENTED TO

  BY THE NAVIGATORS GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
								

 

[Attach
photocopy of Schedule 1 to Assignment Agreement]

 

C-11

 

EXHIBIT D

 

REIMBURSEMENT
AGREEMENT EXCERPT

 

This Letter of credit is issued under, and is subject to the terms and
conditions of, that certain Second Amended and Restated Credit Agreement dated
as of           , 2005, as
amended, among The Navigators Group, Inc., a Delaware corporation, certain
financial institutions and JPMorgan Chase Bank, N.A., as administrative
agent.  In the event of a conflict
between the terms and conditions of this letter of credit application and those
of the Credit Agreement, the terms and conditions of the Credit Agreement shall
govern.

 

D-1

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