ex10_1.htm


     

    Exhibit
      10.1

     

    EXECUTION
      COPY

     


    FIRST
      AMENDMENT dated as of October 25, 2007 (this “Amendment”) to each of the
      Three-Year Unsecured Letter of Credit Facility Agreement dated as of
      March 12, 2007 (the “Three-Year Facility Agreement”) and the
      Five-Year Secured Letter of Credit Facility Agreement dated as of March 12,
      2007 (the “Five-Year Facility Agreement”) (each as amended, supplemented
      or otherwise modified from time to time, the “Credit Agreements”), among
      VALIDUS HOLDINGS, LTD. (the “Company”), VALIDUS REINSURANCE, LTD.
      (“Validus Re” and collectively with the Company, the “Account
      Parties”), the LENDERS from time to time party thereto and JPMORGAN CHASE
      BANK, NATIONAL ASSOCIATION, as administrative agent for the Lenders (in such
      capacity, the “Administrative Agent”).

     

    WHEREAS
      the Account Parties, the Administrative Agent and the Required Lenders have
      agreed, on the terms and subject to the conditions set forth herein, to amend
      the Credit Agreements in the manner set forth herein.

     

    NOW,
      THEREFORE, in consideration of the above premises and other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      parties hereto hereby agree as follows:

     

    SECTION
      1.  Defined
      Terms.  Capitalized terms used and not defined herein have the
      meanings given to them in the Credit Agreements (as amended
      hereby).

     

    SECTION
      2.  Amendments
      to the Credit Agreements.  Effective as of the First Amendment
      Effective Date (as defined below), the Credit Agreements are hereby amended
      as
      follows:

     

    (a)  Section
      1.01 of each of the Credit Agreements is amended by inserting the following
      new
      definitions:

     

    ““Funds
      at Lloyd’s” has the meaning attributed to such term in the membership byelaws of
      the Society of Lloyd’s.”

     

    ““Lloyd’s
      LC Facility” means a letter of credit facility, between the Company and/or one
      or more Subsidiaries of the Company and the letter of credit issuer(s) and
      other
      credit providers thereunder providing for the issuance of letters of credit
      primarily for the purpose of enabling Funds at Lloyd’s to be provided thereby on
      behalf of the account parties thereunder and in an aggregate principal amount
      of
      up to $100,000,000 at any time outstanding, on terms substantially consistent
      with the terms set forth in the term sheet attached hereto as Schedule 1.02
      (the
“FAL Facility Term Sheet”) and any modifications, amendments,
      restatements, waivers, extensions, renewals, replacements or refinancings
      thereof provided that any such modifications, amendments, waivers,
      extensions, renewals, replacements or refinancings be on terms which, when
      taken
      together as a whole, are not adverse in any material respect to the interests
      of
      the Lenders, as compared to those contained in the FAL Facility Term
      Sheet.”

     

    
      	 


    

    ““Preferred
      Securities” means any preferred Equity Interests (or capital stock) of any
      Person that has preferential rights with respect to dividends or redemptions
      or
      upon liquidation or dissolution of such Person over shares of common Equity
      Interests (or capital stock) of any other class of such Person.”

     

    (b)  The
      definition of Junior Subordinated Deferrable Debentures contained in Section
      1.01 of each of the Credit Agreements is hereby amended by inserting the
      following at the end of such definition: “, including for the avoidance of doubt
      the Company’s Junior

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Subordinated
      Deferrable Interest Debentures due 2037 issued under the Junior Subordinated
      Indenture dated June 21, 2007 between the Company and Wilmington Trust Company,
      as Trustee, as the same may be amended from time to time.”

     

    (c)  Section
      6.02(e) is hereby amended by adding the following at the end of the
      parenthetical phrase contained therein: “and including in connection with the
      posting of collateral (or the realization thereof) under the Lloyd’s LC
      Facility.”

     

    (d)  Section
      6.03(q) of each of the Credit Agreements is amended by inserting “or securing
      the Lloyd’s LC Facility” at the end thereof.

     

    (e)  Sections
      6.04(a) of the Three-Year Facility Agreement and the Five-Year Facility
      Agreement are each amended by inserting “or the Lloyd’s LC Facility” immediately
      following the reference to “the Five-Year Secured Letter of Credit Facility” and
“the Three-Year Unsecured Letter of Credit Facility”, respectively, appearing
      therein.

     

    (f)  Section
      6.04(b) of each of the Credit Agreements is amended by inserting “and the
      Lloyd’s LC Facility” at the end thereof.

     

    (g)  Section 6.08
      of each of the Credit Agreements is amended by inserting the following sentence
      at the end thereof:

     

    “Notwithstanding
      the foregoing, the Company may declare and pay cash dividends or distributions
      in respect of (i) any trust preferred security, deferrable interest subordinated
      debt security, mandatory convertible debt or other hybrid security (including
      Hybrid Capital) that, at the time of issuance thereof or at any time prior
      to
      the initial dividend or distribution thereunder, was accorded equity treatment
      by S&P and/or (ii) any Preferred Security, if, at the time of and after
      giving pro forma effect to such dividend or distribution, no Event of Default
      under Sections 7.01, 7.04(a)(i) or 7.05 shall have occurred and be
      continuing.”

     

    (h)  Section
      6.12 of each of the Credit Agreements is amended by inserting the following
      exception at the end thereof:

     

    “and
      (xiv) encumbrances or restrictions existing under the Lloyd’s LC
      Facility.”

     

    (i)  Each
      of
      the Credit Agreements is amended by attaching a new Schedule 1.02 thereto which
      shall read as set forth on Annex A hereto.

     

    SECTION
      3.  Representations
      and Warranties.  Each Account Party hereby represents and warrants
      to the Administrative Agent and the Lenders that as of the First Amendment
      Effective Date and after giving effect hereto:

     

    (a)  this
      Amendment has been duly authorized, executed and delivered by such Account
      Party, and each of this Amendment and the Credit Agreements (each as amended
      hereby) constitute such Account Party’s legal, valid and binding obligation,
      enforceable against it in accordance with its terms.

     

    (b)  no
      Default or Event of Default has occurred and is continuing.

     

    (c)  all
      representations and warranties of such Account Party contained in each of the
      Credit Agreements (each as amended hereby) are true and correct in all material
      respects on and

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    as
      of the
      date hereof (except with respect to representations and warranties expressly
      made only as of an earlier date, which representations were true and correct
      in
      all material respects as of such earlier date).

     

    SECTION
      4.  Effectiveness.  This
      Amendment shall become effective as of the first date (the “First Amendment
      Effective Date”) on which the Administrative Agent shall have received
      counterparts hereof duly executed and delivered by each of the Account Parties
      and the Required Lenders (as defined in each Credit Agreement).

     

    SECTION
      5.  Effect
      of Amendment.  Except as expressly set forth herein, this
      Amendment shall not by implication or otherwise limit, impair, constitute a
      waiver of, or otherwise affect the rights and remedies of the Lenders or the
      Administrative Agent under the Credit Agreements or any other Loan Document,
      and
      shall not alter, modify, amend or in any way affect any of the terms,
      conditions, obligations, covenants or agreements contained in the Credit
      Agreements or any other Loan Document, all of which are ratified and affirmed
      in
      all respects and shall continue in full force and effect.  Nothing
      herein shall be deemed to entitle any Account Party to a consent to, or a
      waiver, amendment, modification or other change of, any of the terms,
      conditions, obligations, covenants or agreements contained in the Credit
      Agreements or any other Loan Document in similar or different
      circumstances.  This Amendment shall apply and be effective only with
      respect to the provisions of the Credit Agreements specifically referred to
      herein.  This Amendment shall constitute a Loan
      Document.  All representations and warranties made by each Account
      Party herein shall be deemed made under the Credit Agreements with the same
      force and effect as if set forth in full therein.  On and after the
      First Amendment Effective Date, any reference to the Credit Agreements contained
      in the Loan Documents shall mean the Credit Agreements as modified
      hereby.

     

    SECTION
      6.  Expenses.  The
      Account Parties agree to reimburse the Administrative Agent for its reasonable
      out-of-pocket expenses in connection with this Amendment, including the
      reasonable fees, charges and disbursements of counsel.

     

    SECTION
      7.  Governing
      Law; Counterparts.  (a)  This Amendment and the rights
      and obligations of the parties hereto shall be governed by, and construed and
      interpreted in accordance with, the laws of the State of
      New York.

     

    (b)           This
      Amendment may be executed by one or more of the parties to this Amendment on
      any
      number of separate counterparts, and all of such counterparts taken together
      shall be deemed to constitute one and the same instrument.  This
      Amendment may be delivered by facsimile or other electronic imaging means of
      the
      relevant executed signature pages hereof.

     

    SECTION
      8.  Headings.  The
      headings of this Amendment are for purposes of reference only and shall not
      limit or otherwise affect the meaning hereof.

     

    [Signature
      Pages Follow]


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
 

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

     

    
      	
              VALIDUS
                HOLDINGS, LTD.

               

            
	
              by

            
	 	
               /s/
                Joseph E. (Jeff) Consolino

            
	 	
              Name:  Joseph
                E. (Jeff)
                Consolino

            
	 	
              Title:    EVP
                & CFO

            


    

    


    


    
      	
              VALIDUS
                REINSURANCE, LTD.

               

            
	
              by

            
	 	
               /s/
                Joseph E. (Jeff) Consolino

            
	 	
              Name:  Joseph
                E. (Jeff) Consolino

            
	 	
              Title:    EVP
                & CFO

            


    

    


    


    
      	
              JPMORGAN
                CHASE BANK, NATIONAL ASSOCIATION,

              AS
                LC ISSUER, ADMINISTRATIVE AGENT AND A LENDER,

            
	
              by

            
	 	
               /s/
                Erin O’ Rourke

            
	 	
              Name:  Erin
                O’ Rourke

            
	 	
              Title:  Executive
                Director

            


    

    


    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


     

    
      	
              DEUTSCHE
                BANK AG NEW YORK BRANCH,

            
	
               

               

               

              By:  /s/
                John McGill

              Name:  John
                McGill

              Title:  Director

            
	
               

               

               

              By:  /s/
                Michael Campites

              Name:  Michael
                Campites

              Title:  Vice
                President

            


    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


    
      	
              THE
                BANK OF NEW YORK,

            
	 
	 
	
              By:   s/
                Michael Pensari

            
	
              Name:  Michael
                Pensari

            
	
              Title:  Vice
                President

            


    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


     

    
      	
              CALYON,

               

               

               

            
	
              By:
                /s/ Sebastian Rocco

              Name:  Sebastian
                Rocco

              Title:  Managing
                Director

            
	
               

               

               

              By:
                /s/ Charles Kornberger

              Name:  Charles
                Kornberger

              Title:  Managing
                Director

            


    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


     

    
      	
              ING
                BANK N.V., LONDON BRANCH,

               

               

               

            
	
              By:
                /s/ N.J. Marchant

              Name:  N.J.
                Marchant

              Title:  Director

            
	
               

               

               

              By:
                /s/ M. Sharman

              Name:  M.
                Sharman

              Title:  Managing
                Director

            


    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


     

    
      	
              WACHOVIA
                BANK, NATIONAL ASSOCIATION,

               

               

               

            
	
              By:
                /s/ Karen Hanke

              Name:  Karen
                Hanke

              Title:  Director

            


    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


     

    
      	
              ABN
                AMRO BANK N.V.,

            
	
               

               

               

              By:
                /s/ Andrew C. Salerno

              Name:  Andrew
                C. Salerno

              Title:  Director

            
	
               

               

               

              By:
                /s/ Michael DeMarco

              Name:  Michael
                DeMarco

              Title:  Vice
                President

            


    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


     

    
      	
              COMERICA
                BANK,

               

               

               

            
	
              By:
                /s/ Chatphet Saipetch

              Name:  Chatphet
                Saipetch

              Title:  Vice
                President

            


    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


     

    
      	
              UBS
                AG, STAMFORD BRANCH,

               

               

               

            
	
              By:
                /s/ Richard L. Tavrow

              Name:  Richard
                L. Tavrow

              Title:  Director
                Banking Products Services, US

               

               

               

            
	
              UBS
                AG, STAMFORD BRANCH,

               

               

               

            
	
              By:
                /s/ Irja R. Otsa

              Name:  Irja
                R. Otsa

              Title:  Associate
                Director Banking Products Services,

              US

            


    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


     

    
      	
              HSBC
                BANK USA, NATIONAL ASSOCIATION,

               

               

               

            
	
              By:
                /s/ Jimmy Tse

              Name:  Jimmy
                Tse

              Title:  Vice
                President

            


    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    ANNEX
      A

    


     

    SCHEDULE
      1.02

    


     

    FAL
      FACILITY TERM SHEET

     

    [Attached]

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SUMMARY
      OF INDICATIVE TERMS FOR A

     

    LETTER
      OF CREDIT ISSUANCE FACILITY FOR

     

    TALBOT
      HOLDINGS LTD

     

    The
      following terms and conditions constitute an indicative term sheet
      only.  The formalization of any facility to be provided by ING and
      Lloyds TSB is subject to credit approval and finalization of satisfactory
      documentation.

     

    
      	
              Obligor/Applicant:

            	
              Talbot
                Holdings Ltd (“THL”)

            
	 	 
	
              Guarantor:

            	
              Validus
                Holdings, Ltd (“VHL”)

            
	 	 
	
              Facility
                Description:

            	
              Letter
                of Credit Issuance Facility (the “Facility”).

            
	 	 
	
              Joint
                Lead Arrangers and Bookrunners:

            	
              ING
                Bank N.V., London Branch (“ING”) and Lloyds TSB Bank PLC (“Lloyds
                TSB”)

            
	 	 
	
              Letter
                of Credit Issuer:

            	
              The
                Facility Agent on behalf of the Banks.

            
	 	 
	
              Facility
                Agent:

            	
              Lloyds
                TSB

            
	 	 
	
              Structuring
                Agent:

            	
              ING

            
	 	 
	
              Facility
                Amount:

            	
              US$100,000,000
                (the “Facility Limit”) provided either by ING and Lloyds TSB, or by a
                small club of banks, arranged by ING and Lloyds TSB (“the
                Banks”)

            
	 	 
	
              Beneficiary:

            	
              The
                Society & Council of Lloyd’s.

            
	 	 
	
              Availability
                Period:

            	
              The
                Facility will be available for the issuance of Funds at Lloyd’s (“FAL”)
                Letters of Credit (in Sterling or US Dollars and, in each case, in
                a form
                acceptable to Lloyd’s) up to and including 31st
                December
                2008.

            
	 	 
	
              Purpose:

            	
              Issuance
                of FAL Letters of Credit in the prescribed format to support underwriting
                capacity provided to Talbot 2002 Underwriting Ltd (“Talbot 2002”) through
                Syndicate 1183 at Lloyd’s of London for the 2008, 2009 and prior
                underwriting years of account.

            
	 	 
	 	
              It
                being acknowledged that for so long as the Funds at Lloyd’s Letters of
                Credit are deposited at Lloyd’s they shall be deemed to support all of
                Talbot 2002’s underwriting years of account that have yet to
                close.

            
	 	 
	
              Collateral:

            	
              Subject
                to the “Additional Collateralization” section below, at the option of THL,
                any FAL Letters of Credit issued under the Facility can be designated
                as:

            
	 	 
	 	
              (i) 
                 being secured (the “Secured Letters of Credit”)
                or

            
	 	 
	 	
              (ii) 
                unsecured (the “Unsecured Letters of
                Credit”).

            


    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


    
      	 	
              In
                the case of Secured Letters of Credit, security will comprise a first
                priority, perfected, security interest granted by the Obligor, by
                Validus
                Reinsurance, Ltd. and/or the Guarantor in favour of the Banks over
                one or
                more cash and securities portfolios with eligibility standards and
                advance
                rates substantially as set forth in Schedule 1 attached
                hereto.  All collateral will be valued by reference to the
                latest available market price.

            
	 	 
	 	
              Subject
                to the “Additional Collateralisation” section below, THL may reclassify
                any one or more FAL Letters of Credit as secured or unsecured at
                the end
                of each calendar month.  Each such reclassification to take
                effect with effect from the 1st
                of the
                following month.

            
	 	 
	
              Custodian:

            	
              To
                be advised, but likely to be the same as for the existing Validus
                Reinsurance, Ltd syndicated secured facilities.

            
	 	 
	
              Agency
                Fee:

            	
              £15,000,
                payable to the Facility Agent annually in advance.

            
	 	 
	
              Structuring
                Fee:

            	
              £25,000,
                payable to the Structuring Agent on closing of the
                Facility.

            
	 	 
	
              Arrangement
                Fee:

            	
              An
                Arrangement Fee equivalent to 0.15% of the Facility Amount will be
                payable
                to ING and Lloyds TSB on closing of the Facility.

            
	 	 
	
              Commitment
                Fee:

            	
              A
                Commitment Fee will be payable, quarterly in arrears, at the rate
                of 0.10%
                per annum on the undrawn portion of the Facility during the Availability
                Period.

            
	 	 
	
              Letter
                of Credit Commissions:

            	
              Issuance
                commissions will be payable quarterly in arrears, and will be calculated
                on the daily amount of the outstanding Letters of Credit as
                follows:-

            
	 	 
	 	
              a)   
                The commission rate payable on the Secured Letters of Credit will
                be 0.25%
                per annum.

            
	 	 
	 	
              b)  
                 The commission rate payable on the Unsecured Letters of Credit will
                be based on the Financial Strength Rating of Validus Reinsurance,
                Ltd by
                AM Best as at the date upon which commission is payable in accordance
                with
                the following table:-

            
	 	 	 
	 	
              AM
                Best

              Financial
                Strength Rating

              A++

              A+

              A

              A-

              B++

              Below
                B++

            	
               

              Commission
                Rate

              0.40%
                pa

              0.50%
                pa

              0.55%
                pa

              0.65%
                pa

              0.80%
                pa

              1.00%
                pa

            
	 	 
	
              Expenses:

            	
              The
                Obligor/Applicant will pay (or the Guarantor will cause the
                Obligor/Applicant to pay) all reasonable out-of pocket expenses incurred
                by ING and Lloyds TSB in the preparation, negotiation and execution
                of the
                Facility including, but not limited to, legal
                fees.

            


    

    


    
      
        
          
          

        

        
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              Reimbursement:

            	
              Any
                drawings under the Letters of Credit issued under this Facility will
                trigger an immediate reimbursement obligation on the Obligor/Applicant
                (to
                be satisfied within a time period to be agreed).

            
	 	 
	 	
              As
                long as Letters of Credit are outstanding under the Facility, the
                Banks
                will not be obliged to utilise any collateral in settlement of drawings
                by
                the Beneficiary prior to demanding reimbursement from the
                Obligor/Applicant or Guarantor.

            
	 	 
	
              Letter
                of Credit Borrowing Rate:

            	
              In
                the event that any drawing on the Letters of Credit is not immediately
                reimbursed by the Obligor/Applicant, the reimbursement obligation
                will
                bear interest from the date of drawing until the date of payment
                at 3%
                over the relevant overnight London Interbank Offered
                Rate.

            
	 	 
	
              Additional
                Collateralisation:

            	
              1)       
                If an Event of Default occurs (as detailed below) and such event
                is not
                cured within an agreed grace period, the Obligor/Applicant will be
                obliged
                to immediately lodge additional collateral with the Custodian such
                that
                all outstanding Unsecured Letters of Credit become 100%
                secured.

            
	 	 
	 	
              2)         If
                Talbot 2002’s trust funds at Lloyd’s (including any letters of credit
                included in its Funds at Lloyd’s other than any Unsecured Letters of
                Credit issued pursuant to the Facility) is less than the aggregate
                of:

            
	 	 
	 	
              (a)  any
                net unfunded solvency deficit on all open years of account for Talbot
                2002
                (as reported in the solvency statements prepared by Lloyd’s);
                and

            
	 	 
	 	
              (b)  Talbot
                2002’s FAL requirements as determined by the Individual Capital Assessment
                (“ICA”) agreed by Lloyd’s (less an amount equal to the face-value of the
                Unsecured Letters of Credit issued pursuant to the
                Facility),

            
	 	 
	 	
              then
                the Unsecured Letters of Credit must be collateralised to an amount
                equal
                to such difference.  The figures used to test this Additional
                Collateralisation shall be as reported in the Release Test calculations
                provided by Lloyd’s on or around 30 April and 31 July in each
                year.

            
	 	 
	 	
              3)       
                If Notice of Termination of a Unsecured Letter of Credit is given
                to the
                Beneficiary by the Banks, thus crystallising the final expiry date
                of such
                Unsecured Letter of Credit as being four years from the date of such
                notice being given, (the “Tail Period”) then, by no later than the 5th
                business day after the 31st December of the last Year of Account
                agreed to
                have been supported by the relevant Unsecured Letter of Credit, THL
                shall
                (at its discretion) either:

            
	 	 
	 	
              (a)  procure
                that the relevant Unsecured Letter of Credit is released by Lloyd’s, in
                which case the parties shall make appropriate arrangements for a
                replacement letter of credit to be issued in favour of an appropriate
                trustee pending the termination date of the relevant Unsecured Letter
                of
                Credit; or

            
	 	 
	 	
              (b)  provide
                additional collateral to the Custodian, thereby causing the relevant
                Unsecured Letter of Credit to be 100% secured.

            
	 	
              Save
                following an Event of Default which is continuing after the applicable
                grace period (and for so long as such Event of Default is continuing),
                the
                Banks may not serve any Notice of Termination on the Beneficiary
                before
                1st January 2009.

            


    

    


    
      
        
          
          

        

        
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              4)        
                If the Financial Strength Rating of Validus Reinsurance, Ltd by AM
                Best
                falls below “B++”, the Obligor/Applicant will be obliged to immediately
                lodge additional collateral with the custodian such that any Unsecured
                Letters of Credit become 100% secured.

            
	 	 
	
              Representations

            	
              Including
                that the Applicant’s payment obligations rank at least pari passu with the
                claims of the other unsecured and unsubordinated creditors of the
                Applicant.

            
	 	 
	
              Covenants:

            	
              To
                be consistent with those contained in VHL’s five-year secured letter of
                credit facility with JPMorgan Chase Bank and the lenders identified
                therein dated 12 March 2007 (as amended, the “JPM Facility Agreement”),
                which includes:-

            
	 	
              ·     
                Minimum
                consolidated net worth of the Guarantor (as defined and at the levels
                set
                forth in the JPM Facility Agreement).

            
	 	
              ·     
                Maximum
                leverage ratio (as defined and at the levels set forth in JPM Facility
                Agreement).

            
	 	
              ·      Limitation
                on certain restrictions on subsidiaries (including a covenant not
                to
                permit any of the subsidiaries to create or otherwise cause or suffer
                to
                exist or   become effective any encumbrance or restriction on
                the ability of any such subsidiary to pay dividends or make any other
                distributions on its capital stock), as per the terms of Section
                6.12 of
                the JPM Facility Agreement.

            
	 	
              ·     
                Cash
                FAL of US$215m to be available to be drawn down in priority to the
                Letter(s) of Credit in Talbot 2002 Underwriting Capital Ltd save
                to the
                extent eroded by applicable losses.

            
	 	
              ·     
                Provision
                of annual and interim financial statements of the Guarantor to the
                extent
                required under the JPM Facility Agreement and Quarterly Monitoring
                Returns
                for Syndicate, together with other such information as the Banks
                may
                reasonably require from time to time.

            
	 	
              ·     
                Provision
                of monthly borrowing base certificates in respect of the collateral,
                if
                applicable, which will be valued by reference to the latest available
                market price.

            
	 	 
	
              Conditions
                Precedent

              to
                Closing:

            	
              Including
                but without limitation:-

              ·      
                Certified
                copies of constitutive documents, board resolutions and supporting
                legal
                opinion(s) in respect of the Applicant and Guarantor.

            
	 	
              ·     
                Confirmation
                that FAL of US$215m (comprising cash and invested assets) has been
                lodged
                with Lloyd’s and confirmation from Lloyd’s that they will take into
                account Talbot 2002’s request that such FAL be drawn down in advance of
                any FAL Letter of Credit drawings to meet Syndicate
                calls1

            


    

    

      

    

     

      1    
        Any decision by Lloyd’s as to drawdown involves an exercise of
        Lloyd’s discretion as trustee, in light of circumstances prevailing at the time,
        and thus Lloyd’s cannot/will not enter into a binding
        undertaking.


    


    
      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

    

    


    


    
      	 	
              ·  Provision
                of the Collateral, if applicable

            
	 	
              ·  Execution
                of the security documents relating to the Collateral, if
                applicable

            
	 	
              ·  A
                legal opinion(s) confirming the validity and enforceability of the
                security documents relating to the Collateral, if applicable.

               

            
	
              Events
                of Default:

            	
              Including
                but without limitation:-

              ·  Failure
                of the Obligor/Applicant to comply with its collateralisation obligations
                referred to above to a material extent

            
	 	
              ·  Non-payment
                of principal, interest, fees or commissions

            
	 	
              ·  Bankruptcy
                and/or other insolvency events

            
	 	
              ·  Material
                inaccuracy of representations and warranties when given

            
	 	
              ·  Change
                of ownership of the Applicant (on terms identical to the Change of
                Control
                provision contained in the JPM Facility Agreement)

            
	 	
              ·  Cross
                default

            
	 	
              ·  Non-compliance
                with covenants

               

            
	 	
              Notice
                provisions, grace periods and thresholds to be agreed.

            
	 	 
	
              Governing
                Law:

            	
              English
                Law

            


    

    


    


    
      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      1

     

    INDICATIVE
      TERM SHEET

     

    FOR

     

    TALBOT
      HOLDINGS LTD

     

    ELIGIBLE
      COLLATERAL AND APPLICABLE ADVANCE RATES

     

    
      	
              Collateral
                Description

            	
              Advance
                Rate

            
	 	
              Matching
                Currency

            	
              Non-Matching
                Currency

            
	
              Cash:

               

              U.S.
                Dollars or Sterling, including time deposits, certificates of deposit
                and
                money market deposits held at Bank of New York, as custodian, or
                that are
                subject to a first priority security interest of the Facility Agent
                or
                Security Trustee.

            	
              100%.

            	
              95%.

            
	
              U.S.
                Government Securities:

               

              Securities
                issued or directly and fully guaranteed or insured by the United
                States or
                any agency or instrumentality thereof (provided that the full faith
                and
                credit of the United States is pledged in support thereof), including
                assets issued by the Federal National Mortgage Association, the Federal
                Home Loan Mortgage Corporation, Federal Home Loan Bank or the Government
                National Mortgage Association.

            	
              With
                maturities of (x) two years or less from the date of acquisition,
                95%, (y) three to ten years from the date of acquisition, 90% and
                (z) more than 10 years from the date of acquisition,
                85%.

            	
              With
                maturities of (x) two years or less from the date of acquisition,
                90%, (y) three to ten years from the date of acquisition, 85% and
                (z) more than 10 years from the date of acquisition,
                80%.

            
	
              Investment
                Grade Municipal Bonds:

               

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

            	
              85%.

            	
              80%.

            
	
              Investment
                Grade Non-Convertible U.S. Corporate Bonds Level I:

               

              Non-convertible
                corporate bonds issued by any entity organized in the United States
                which
                are “publicly traded” on a nationally recognized exchange, eligible to be
                settled by DTC and rated at least (i) AA- by S&P and
                (ii) Aa3 by Moody’s.

            	
              With
                maturities of (x) two years or less from the date of acquisition, 90%
                and (y) three to ten years from the date of acquisition,
                85%.

            	
              With
                maturities of (x) two years or less from the date of acquisition, 85%
                and (y) three to ten years from the date of acquisition,
                80%.

            
	
              Investment
                Grade Non-Convertible U.S. Corporate Bonds Level II:

               

              Non-convertible
                corporate bonds issued by any entity organized in the United States
                which
                are “publicly traded” on a nationally recognized exchange, eligible to be
                settled by DTC and rated at least (i) A- by S&P and (ii) A3
                by Moody’s, but no higher than (x) A+ from S&P and (y) A1
                from Moody’s.

            	
              With
                maturities of (x) two years or less from the date of acquisition, 85%
                and (y) three to ten years from the date of acquisition,
                80%.

            	
              With
                maturities of (x) two years or less from the date of acquisition, 80%
                and (y) three to ten years from the date of acquisition,
                75%.

            


    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    


    
      	
              Commercial
                Paper:

               

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

            	
              90%.

            	
              85%.

            
	
              UK
                Government Securities:

               

              Securities
                issued by the United Kingdom government.

            	
              With
                maturities of (x) two years or less from the date of acquisition,
                95%, (y) three to ten years from the date of acquisition, 90% and
                (z) more than 10 years from the date of acquisition,
                85%.

            	
              With
                maturities of (x) two years or less from the date of acquisition,
                90%, (y) three to ten years from the date of acquisition, 85% and
                (z) more than 10 years from the date of acquisition,
                80%.

            
	
              OECD
                Sovereign Debt:

               

              Debt
                issued or guaranteed by OECD countries, rated at least (i) AA- by
                S&P and (ii) Aa3 by Moody’s.

            	
              With
                maturities of (x) two years or less from the date of acquisition,
                95%, (y) three to ten years from the date of acquisition, 90% and
                (z) more than 10 years from the date of acquisition,
                85%.

            	
              With
                maturities of (x) two years or less from the date of acquisition,
                90%, (y) three to ten years from the date of acquisition, 85% and
                (z) more than 10 years from the date of acquisition,
                80%.

            
	
              Other
                Securities:

               

              All
                other investments, obligations or securities.

            	
              0.0%.

            	
              0.0%.