First Amendment and Waiver to Credit Agreement among Quanta Capital Holdings Ltd., Subsidiary Borrowers, Lenders, and JPMorgan Chase Bank, N.A.

  FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this "First Amendment"), dated as of July 6, 2006, among QUANTA CAPITAL HOLDINGS LTD., an exempted company organized under the laws of Bermuda (the "Company"), the Designated Subsidiary Borrowers (as defined in the Credit Agreement referred to below) party to the Credit Agreement referred to below, the undersigned lenders party to the Credit Agreement referred to below, and JPMORGAN CHASE BANK, N.A. (f/k/a JPMorgan Chase Bank), as Administrative Agent (in such capacity, the "Administrative Agent"). Unless otherwise defined herein, all capitalized terms used herein and defined in the Credit Agreement are used herein as therein defined. W I T N E S S E T H : WHEREAS, the Company, the Designated Subsidiary Borrowers, the lenders from time to time party thereto (the "Lenders"), the Administrative Agent, and BNP Paribas, Calyon, New York Branch, Comerica Bank and Deutsche Bank AG New York Branch, as Co-Documentation Agents (in such capacity, the "Co-Documentation Agents") have entered into a Credit Agreement, dated as of July 13, 2004 and amended and restated as of July 11, 2005 (as amended, modified or supplemented to, but not including, the date hereof, the "Credit Agreement"); and WHEREAS, subject to the terms and conditions set forth below, the parties hereto wish to amend, modify and/or waive certain provisions of the Credit Agreement as provided herein; NOW, THEREFORE, it is agreed; I. Permanent Amendments/Agreements 1. As of the First Amendment Effective Date (as defined below), the Total Commitment will be reduced from $250,000,000 to $225,000,000. The reduction of the Total Commitment under this Section 1 shall be applied to reduce the Commitment of each Lender on a pro rata basis in accordance with each such Lender's Applicable Percentage. As a result of the foregoing reduction, the Commitment of each Lender as of the Amendment Effective Date shall be as set forth on Schedule 2.01 attached hereto. 2. Schedule 2.17 to the Credit Agreement is hereby amended by deleting "Quanta Specialty Lines Insurance Company" from said Schedule (thereby removing Quanta Specialty Lines Insurance Company as a Designated Subsidiary Borrower under the Credit Documents). Schedule 2.17, as so modified, is attached hereto. The Company represents and warrants that as of the Amendment Effective Date, no Loans are outstanding to Quanta Specialty Lines Insurance Company, and no Letters of Credit issued for the account of Quanta Specialty Lines Insurance Company are outstanding. 3. Section 6.01(g) of the Credit Agreement is hereby amended by inserting the following new clauses (v) and (vi) at the end of such Section: "(v) Promptly following delivery or receipt thereof, a copy of any material written communication between the Company or any of its Subsidiaries and any  Applicable Insurance Regulatory Authority (including, without limitation, a copy of any direction or other notification received by any Regulated Insurance Company from the Bermuda Monetary Authority pursuant to Section 32 of the Insurance Act, 1978 of Bermuda). (vi) Promptly upon the Company becoming aware thereof, appointment of any inspector or any conservator (as defined in Section 8.05) for any Regulated Insurance Company." II. Temporary Amendments and Waivers 1. The parties hereto acknowledge and agree that as of the First Amendment Effective Date (a) no Loans are outstanding and (b) the aggregate Stated Amount of all outstanding Letters of Credit is approximately $213,500,000.00. The parties hereto hereby further agree that so long as all conditions precedent set forth in Section 5.02 of the Credit Agreement are satisfied at the time of each issuance or increase, new Letters of Credit shall be permitted to be issued and increases to the Stated Amount of existing Letters of Credit shall be permitted, in each case during the period (the "Waiver Period") on and after the First Amendment Effective Date but prior to August 11, 2006; provided that, notwithstanding anything to the contrary contained herein or in any Credit Document, without the prior written consent of the Required Lenders, (i) such new Letters of Credit and increases to the Stated Amount of existing Letters of Credit shall be limited to those scheduled on Annex A to this First Amendment and such other new Letters of Credit and increases to existing Letters of Credit the aggregate amount of which does not exceed $2,372,522.68 (for an aggregate of $7,500,000.00), (ii) except as provided in clause (i) above, no other Letters of Credit may be issued and the Stated Amount of any other existing Letters of Credit may not be increased, (iii) no Loans may be incurred and (iv) at the time of the issuance of any such new Letter of Credit or any such increase to an existing Letter of Credit, the respective Designated Subsidiary Borrower shall deliver to the Collateral Agent for credit to a segregated sub-account of such Designated Subsidiary Borrower's Collateral Account an amount of cash and Eligible Securities having a Borrowing Base value (determined as provided in the definition of "Advance Rate" contained in the Credit Agreement) equal to the Stated Amount of such new Letter of Credit or the increase to the Stated Amount of such existing Letter of Credit. 2. The Lenders hereby waive the provisions of Section 4.10(b) for the Waiver Period, but only to the extent that a Material Adverse Effect has resulted or could reasonably be expected to result from the events described in the letter dated May 31, 2006 delivered by the Company to the Lenders. 3. The Lenders hereby waive the provisions of Sections 3.03(a)(iii) and 7.13 and any Default or Event of Default arising under Section 8.03 of the Credit Agreement, in each case as a result of (but solely as a result of) the failure by the Company to comply with the provisions of Section 7.13 of the Credit Agreement, in each case at all times during the Waiver Period. 4. Notwithstanding anything to the contrary contained in the First Amendment or in the Credit Documents, no Collateral shall be released to any Designated Subsidiary Borrower without the prior written consent of the Required Lenders (or all Lenders to the extent required under the terms of the Credit Documents). -2-  5. The parties hereto agree that all amendments and waivers to the Credit Agreement contained in Article II of this First Amendment shall terminate and be of no further force and effect following the Waiver Period. III. Miscellaneous Provisions 1. The Company hereby agrees to pay to each Lender which executes and delivers to the Administrative Agent a counterpart hereof (including by way of facsimile (or other electronic) transmission) by 5:00 p.m. (New York time) on July 6, 2006, a non-refundable cash fee (the "Amendment Fee") in an amount equal to 0.05% of such Lender's Commitment as same is in effect on the First Amendment Effective Date immediately after giving effect to the First Amendment (i.e., after giving effect to the reduction effected pursuant to Section (I)(1) above). The Amendment Fee shall be due and payable on the First Amendment Effective Date (and only payable so long as the First Amendment Effective Date occurs) and shall be paid by the Company to the Administrative Agent for distribution to the Lenders entitled thereto. 2. In order to induce the Lenders to enter into this First Amendment, each of the Company and each Designated Subsidiary Borrower hereby represents and warrants to the Administrative Agent and each Lender that (i) all of the representations and warranties contained in the Credit Agreement and in the other Credit Documents are true and correct in all material respects on and as of the First Amendment Effective Date (as defined below) after giving effect to this First Amendment (unless such representations and warranties relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date) and (ii) there exists no Default or Event of Default as of the First Amendment Effective Date, after giving effect to this First Amendment. 3. This First Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Credit Document. 4. This First Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Delivery of an executed signature page of this First Amendment by facsimile (or other electronic) transmission shall be effective as delivery of a manually executed counterpart hereof. A complete set of counterparts executed by all the parties hereto shall be lodged with the Company and the Administrative Agent. 5. THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 6. This First Amendment shall become effective on the date (the "First Amendment Effective Date") when (i) the Company, the Designated Subsidiary Borrowers and the Required Lenders shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile (or other electronic) transmission) the same to the Administrative Agent, c/o White & Case LLP, 1155 Avenue of the Americas, New York, NY 10036, Attention: Lisa Alexander (Facsimile No. 212 ###-###-####; -3-   ***@***), (ii) the Company shall have paid the Amendment Fee as provided in Section III(1) above and (iii) the Company shall have paid all outstanding costs and expenses of the Administrative Agent in connection with the Credit Agreement and this First Amendment (including, without limitation, all costs and expenses of counsel to the Administrative Agent in connection therewith and herewith). 7. From and after the First Amendment Effective Date (but subject to Section II(5) hereof), all references in the Credit Agreement and in the other Credit Documents to the Credit Agreement shall be deemed to be a reference to the Credit Agreement as modified hereby. This First Amendment shall constitute a Credit Document for all purposes under the Credit Agreement and the other Credit Documents. * * * -4-  IN WITNESS WHEREOF, the undersigned have caused this First Amendment to be duly executed and delivered as of the date first above written. QUANTA CAPITAL HOLDINGS LTD. By: /s/ Jonathan J.R Dodd ------------------------------------ Name: Jonathan J.R Dodd Title: Chief Financial Officer QUANTA REINSURANCE LTD. By: /s/ Jonathan J.R Dodd ------------------------------------ Name: Jonathan J.R Dodd Title: Chief Financial Officer QUANTA U.S. HOLDINGS INC. By: /s/ Jonathan J.R Dodd ------------------------------------ Name: Jonathan J.R Dodd Title: Chief Financial Officer QUANTA SPECIALTY LINES INSURANCE COMPANY By: /s/ Jonathan J.R Dodd ------------------------------------ Name: Jonathan J.R Dodd Title: Chief Financial Officer  QUANTA REINSURANCE U.S. LTD. By: /s/ Jonathan J.R Dodd ------------------------------------ Name: Jonathan J.R Dodd Title: Chief Financial Officer QUANTA INDEMNITY COMPANY By: /s/ Jonathan J.R Dodd ------------------------------------ Name: Jonathan J.R Dodd Title: Chief Financial Officer  JPMORGAN CHASE BANK, N.A., Individually and as Administrative Agent By: /s/ Heather Lindstrom ------------------------------------ Name: Heather Lindstrom Title: Vice President  BNP PARIBAS By: /s/ Barry S. Folgenbaum ------------------------------------ Name: Barry S. Folgenbaum Title: Managing Director By: /s/ Laurent Vanderzyppe ------------------------------------ Name: Laurent Vanderzyppe Title: Managing Director  CALYON, NEW YORK BRANCH By: /s/ Charles Kornberger ------------------------------------ Name: Charles Kornberger Title: MD By: /s/ Sebastian Rocco ------------------------------------ Name: Sebastian Rocco Title: Managing Director  COMERICA BANK By: ------------------------------------ Name: Chatphet Saipetch Title: Vice President  BARCLAYS BANK PLC By: ------------------------------------ Name: Arthur J. Olsen Title: Director  ING BANK N.V. - LONDON BRANCH By: /s/ M. Sharman ------------------------------------ Name: M. Sharman Title: Managing Director By: /s/ N. Marchant ------------------------------------ Name: N. Marchant Title: Director  DEUTSCHE BANK AG NEW YORK BRANCH By: ------------------------------------ Name: Title: By: ------------------------------------ Name: Title:  SCHEDULE 2.01 COMMITMENTS ----------- Lender Commitment - ------ ---------- JPMORGAN CHASE BANK, N.A. $36,000,000 BNP PARIBAS $31,500,000 CALYON, NEW YORK BRANCH $31,500,000 COMERICA BANK $31,500,000 DEUTSCHE BANK AG NEW YORK BRANCH $31,500,000 BARCLAYS BANK PLC $31,500,000 ING BANK N.V., LONDON BRANCH $31,500,000 ------------------- Total: $225,000,000  SCHEDULE 2.17 DESIGNATED SUBSIDIARY BORROWERS Quanta Reinsurance Ltd. Quanta U.S. Holdings Inc. Quanta Reinsurance U.S. Ltd. Quanta Indemnity Company  ANNEX A NEW-INCREASED LETTERS OF CREDIT - --------------------------------------------------------------------------------------------------- DESIGNATED NEW OR INCREASED STATED AMOUNT OF L/C OR SUBSIDIARY BORROWER BENEFICIARY L/C? AMOUNT OF INCREASE - --------------------------------------------------------------------------------------------------- Quanta Reinsurance Ltd. North Pointe Casualty New $54,549.94 Insurance Company - --------------------------------------------------------------------------------------------------- Quanta Reinsurance Ltd. Harco National Insurance New $101,881.61 Company - --------------------------------------------------------------------------------------------------- Quanta Reinsurance Ltd. Commonwealth Insurance Increase $4,684,943.60 Company - --------------------------------------------------------------------------------------------------- Quanta Reinsurance Ltd. National Interstate Increase $286,102.17 - --------------------------------------------------------------------------------------------------- Total: $5,127,477.32 - ---------------------------------------------------------------------------------------------------