10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from _____ to _____

Commission file number 1-10804

XL CAPITAL LTD

(Exact name of registrant as specified in its charter)

CAYMAN ISLANDS
(State or other Jurisdiction of
incorporation or organization) 98-0191089
(I.R.S. Employer
Identification No.)

XL House, One Bermudiana Road, Hamilton, Bermuda HM 11
(address of principal executive offices and zip code)

(441) 292-8515
(Registrant’s telephone number, including area code)

             Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]

             Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [_]

             As of August 11, 2003, there were 137,153,902 outstanding Class A Ordinary Shares, $0.01 par value per share, of the registrant.

XL CAPITAL LTD

INDEX TO FORM 10-Q

	PART I. FINANCIAL INFORMATION	Page No
Item 1.	Financial Statements:
	Consolidated Balance Sheets as at June 30, 2003 and December 31, 2002 (Unaudited)	3
	Consolidated Statements of Income for the Three Months Ended June 30, 2003 and 2002 (Unaudited) and the Six Months Ended June 30, 2003 and 2002 (Unaudited)	5
	Consolidated Statements of Comprehensive Income for the Three Months Ended June 30, 2003 and 2002 (Unaudited) and for the Six Months Ended June 30, 2003 and 2002 (Unaudited)	6
	Consolidated Statements of Shareholders’ Equity for the Six Months Ended June 30, 2003 and 2002 (Unaudited)	7
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 (Unaudited)	8
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	50
Item 4.	Controls and Procedures	54
	PART II. OTHER INFORMATION
Item 4.	Submission of Matters to a Vote of Security Holders	56
Item 6.	Exhibits and Reports on Form 8-K	56
Signatures		58

2

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

XL CAPITAL LTD
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)

	(unaudited) June 30, 2003		December 31, 2002
ASSETS
Investments:
Fixed maturities at fair value (amortized cost: 2003, $16,016,107;        2002, $14,118,527)	$	16,697,815	$	14,482,647
Equity securities, at fair value (cost: 2003, $529,512; 2002, $661,377)		549,810		575,010
Short-term investments, at fair value (amortized cost: 2003, $1,040,023;       2002, $1,001,179)		1,040,934		1,002,076
Total investments available for sale		18,288,559		16,059,733
Investments in affiliates		1,809,643		1,750,005
Other investments		164,562		146,061
Total investments		20,262,764		17,955,799
Cash and cash equivalents		3,007,127		3,557,815
Accrued investment income		266,348		226,862
Deferred acquisition costs		827,837		688,281
Prepaid reinsurance premiums		1,149,308		957,036
Premiums receivable		4,521,393		3,592,713
Reinsurance balances receivable		1,220,822		1,239,970
Unpaid losses and loss expenses recoverable		5,631,248		5,012,655
Goodwill and other intangible assets		1,655,352		1,653,700
Deferred tax asset, net		295,431		320,624
Other assets		329,899		441,914
Total assets	$	39,167,529	$	35,647,369
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Unpaid losses and loss expenses	$	14,748,209	$	13,202,736
Deposit liabilities		3,125,060		2,410,258
Future policy benefit reserves		2,655,427		2,479,738
Unearned premiums		5,199,263		4,028,299
Notes payable and debt		1,890,398		1,877,957
Reinsurance balances payable		1,677,749		1,924,150
Net payable for investments purchased		710,120		1,546,276
Other liabilities		1,539,087		1,551,443
Minority interest		56,896		56,923
Total liabilities	$	31,602,209	$	29,077,780
Commitments and Contingencies

See accompanying Notes to Consolidated Financial Statements
3

XL CAPITAL LTD
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share amounts)

	(unaudited) June 30, 2003			December 31, 2002
Shareholders’ Equity:
Series A preference ordinary shares, 9,200,000 authorized, par value $0.01,       issued and outstanding: 2003, 9,200,000; 2002, 9,200,000	$	92		$	92
Series B preference ordinary shares, 11,500,000 authorized, par value $0.01,       issued and outstanding: 2003, 11,500,000; 2002, 11,500,000		115			115
Class A ordinary shares, 999,990,000 authorized, par value $0.01, issued and       outstanding: 2003, 137,124,895; 2002, 136,063,184		1,371			1,360
Contributed surplus		4,044,651			3,979,979
Accumulated other comprehensive income		684,834			184,814
Deferred compensation		(56,131	)		(31,282	)
Retained earnings		2,890,388			2,434,511
Total shareholders’ equity	$	7,565,320		$	6,569,589
Total liabilities and shareholders’ equity	$	39,167,529		$	35,647,369

See accompanying Notes to Consolidated Financial Statements
4

XL CAPITAL LTD
CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars and shares in thousands, except per share amounts)

	(Unaudited)						(Unaudited)
	Three Months Ended June 30						Six Months Ended June 30,
	2003			2002			2003			2002
Revenues:
Net premiums earned	$	1,575,809		$	1,057,541		$	3,127,440		$	2,122,256
Net investment income		190,551			174,743			382,455			345,870
Net realized gains (losses) on investments		93,687			(110,002	)		89,024			(216,022	)
Net realized and unrealized (losses) gains       on derivative instruments		(12,257	)		(5,134	)		2,236			(14,610	)
Equity in net income of investment       affiliates		34,306			7,931			61,104			40,116
Fee income and other		9,792			20,459			22,069			28,408
Total revenues	$	1,891,888		$	1,145,538		$	3,684,328		$	2,306,018
Expenses:
Net losses and loss expenses incurred	$	937,575		$	822,097		$	1,822,829		$	1,464,395
Claims and policy benefits		83,225			18,816			202,783			66,579
Acquisition costs		298,550			174,260			538,862			359,992
Operating expenses		193,908			180,906			384,427			326,051
Exchange gains		(23,352	)		(23,206	)		(26,054	)		(31,570	)
Interest expense		46,282			40,139			92,422			81,761
Amortization of intangible assets		375			11			750			625
Total expenses	$	1,536,563		$	1,213,023		$	3,016,019		$	2,267,833
Income (loss) before minority interest,    income tax and equity in net (income) loss     of insurance and financial affiliates	$	355,325		$	(67,485	)	$	668,309		$	38,185
Minority interest in net income of       subsidiary		3,166			1,779			5,028			4,034
Income tax		11,009			22,900			31,039			36,854
Equity in net (income) loss of insurance and       financial affiliates		(16,522	)		(416	)		24,565			(448	)
Net income (loss)		357,672			(91,748	)		607,677			(2,255	)
Preference share dividends		(10,013	)		—			(20,161	)		—
Net income available to ordinary    shareholders	$	347,659		$	(91,748	)	$	587,516		$	(2,255	)
Weighted average ordinary shares and    ordinary share equivalents outstanding —    basic		136,791			135,662			136,527			135,431
Weighted average ordinary shares and    ordinary share equivalents outstanding —    diluted		138,634			135,662			138,084			135,431
Earnings per ordinary share and ordinary    share equivalent — basic	$	2.54		$	(0.68	)	$	4.30		$	(0.02	)
Earnings per ordinary share and ordinary    share equivalent — diluted	$	2.51		$	(0.68	)	$	4.25		$	(0.02	)

See accompanying Notes to Consolidated Financial Statements
5

XL CAPITAL LTD
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(U.S. dollars and shares in thousands)

	(Unaudited)					(Unaudited)
	Three Months Ended June 30,					Six Months Ended June 30,
	2003		2002			2003		2002
Net income (loss)	$	357,672	$	(91,748	)	$	607,677	$	(2,255	)
Change in net unrealized appreciation of    investments, net of tax		343,748		68,848			408,974		(35,466	)
Foreign currency translation adjustments, net		95,225		(1,649	)		91,046		55,428
Comprehensive income (loss)	$	796,645	$	(24,549	)	$	1,107,697	$	17,707

See accompanying Notes to Consolidated Financial Statements
6

XL CAPITAL LTD
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(U.S. dollars in thousands)

	(Unaudited) Six Months Ended June 30,
	2003			2002
Series A and B Preference Ordinary Shares:
Balance—beginning of year	$	207		$	—
Issue of shares		—			—
Balance—end of period	$	207		$	—
Class A Ordinary Shares:
Balance—beginning of year	$	1,360		$	1,347
Issue of shares		5			2
Exercise of stock options		6			9
Repurchase of shares		—			—
Balance—end of period	$	1,371		$	1,358
Contributed Surplus:
Balance—beginning of year	$	3,979,979		$	3,378,549
Issue of shares		33,011			18,219
Stock option expense		2,088			—
Exercise of stock options		29,573			43,100
Balance—end of period	$	4,044,651		$	3,439,868
Accumulated Other Comprehensive Income (Loss):
Balance—beginning of year	$	184,814		$	(213,013	)
Net change in unrealized gains on investment portfolio, net of tax		411,433			(34,309	)
Net change in unrealized gains on investment portfolio of affiliates		(2,459	)		(1,157	)
Currency translation adjustments		91,046			55,428
Balance—end of period	$	684,834		$	(193,051	)
Deferred Compensation:
Balance—beginning of year	$	(31,282	)	$	(27,177	)
Issue of restricted shares		(33,078	)		(17,736	)
Amortization		8,229			6,875
Balance—end of period	$	(56,131	)	$	(38,038	)
Retained Earnings:
Balance—beginning of year	$	2,434,511		$	2,297,478
Net income (loss)		607,677			(2,255	)
Dividends on Series A and B preference ordinary shares		(20,161	)		—
Dividends on Class A ordinary shares		(131,398	)		(128,255	)
Repurchase of ordinary shares		(241	)		(1,574	)
Balance—end of period	$	2,890,388		$	2,165,394
Total Shareholders’ Equity	$	7,565,320		$	5,375,531

See accompanying Notes to Consolidated Financial Statements
7

XL CAPITAL LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)

	(Unaudited) Six Months Ended June 30
	2003			2002
Cash flows provided by operating activities:
Net income (loss)	$	607,677		$	(2,255	)
Adjustments to reconcile net income (loss) to net cash provided by (used in)    operating activities:
Net realized (gains) losses on investments		(89,024	)		216,022
Net realized and unrealized (gains) losses on derivative instruments		(2,236	)		14,610
Amortization of premiums (discounts) on fixed maturities		10,325			(13,872	)
Equity in net loss (income) of investment, insurance and financial       affiliates		(36,539	)		(40,564	)
Amortization of deferred compensation		8,229			6,875
Accretion of deposit liabilities		48,654			28,395
Unpaid losses and loss expenses		1,545,473			32,438
Unearned premiums		1,170,964			1,393,714
Premiums receivable		(928,680	)		(1,142,645	)
Unpaid losses and loss expenses recoverable		(618,593	)		(390,789	)
Prepaid reinsurance premiums		(192,272	)		(169,155	)
Reinsurance balances receivable		19,148			(139,317	)
Deferred acquisition costs		(139,556	)		(237,219	)
Reinsurance balances payable		(246,401	)		(286,548	)
Deferred tax asset		25,193			33,111
Other assets		107,563			5,995
Other		235,978			122,058
Total adjustments		918,226			566,891
Net cash provided by operating activities		1,525,903			564,636
Cash flows used in investing activities:
Proceeds from sale of fixed maturities and short-term investments		14,044,006			21,348,349
Proceeds from redemption of fixed maturities and short-term investments		8,918,014			1,601,993
Proceeds from sale of equity securities		772,434			478,070
Purchases of fixed maturities and short-term investments		(25,919,805	)		(23,478,748	)
Purchases of equity securities		(416,356	)		(281,549	)
Investments in affiliates, net of dividends received		(21,861	)		(284,315	)
Acquisition of subsidiaries, net of cash acquired		—			(32,197	)
Other investments		(2,880	)		14,492
Fixed assets and other		—			(1,252	)
Net cash used in investing activities		(2,626,448	)		(635,157	)
Cash flows provided by financing activities:
Proceeds from exercise of stock options		29,579			43,109
Repurchase of shares		(240	)		(1,575	)
Dividends paid		(151,559	)		(128,255	)
Proceeds from notes payable and debt		—			596,814
Repayment of notes payable and debt		—			(350,000	)
Deposit liabilities		672,633			324,877
Net cash provided by financing activities		550,413			484,970
Effects of exchange rate changes on foreign currency cash		(556	)		444
(Decrease) increase in cash and cash equivalents		(550,688	)		414,893
Cash and cash equivalents — beginning of period	$	3,557,815		$	1,863,861
Cash and cash equivalents — end of period	$	3,007,127		$	2,278,754

See accompanying Notes to Consolidated Financial Statements
8

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)

1.   Basis of Preparation and Consolidation

            These unaudited consolidated financial statements include the accounts of the Company and all of its subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position and results of operations as at the end of and for the periods presented. The results of operations for any interim period are not necessarily indicative of the results for a full year. All significant intercompany accounts and transactions have been eliminated. The prepara tion of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates.

            To facilitate period-to-period comparisons, certain reclassifications have been made to prior period consolidated financial statement amounts to conform to current period presentation. There was no effect on net income from these changes in presentation.

            Unless the context otherwise indicates, references herein to the Company include XL Capital Ltd and its consolidated subsidiaries.

2.   Accounting Pronouncements

            In December 2002, the Financial Accounting Statements Board (“FASB”) issued FAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure”. FAS 148 amends FAS 123, “Accounting for Stock-Based Compensation”, by providing alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In addition, FAS 148 amends the disclosure requirements of FAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.

            Effective January 1, 2003, the Company has adopted the fair value recognition provisions of FAS 123, as amended by FAS 148, under the prospective method for options granted subsequent to January 1, 2003. Prior to 2003, the Company accounted for options under the disclosure-only provisions of FAS 123 and no stock-based employee compensation cost was included in net income as all options granted had an exercise price equal to the market value of the Company’s ordinary shares on the date of the grant. Awards under the Company’s stock plans vest over periods ranging from three to four years. If the fair value based method had been applied to all awards since the original effective date of FAS 123, the cost related to employee stock based compensation included in the determination of net income would have been higher. The following table illustrates the net effect on net income and earnings per ordinary share if the fair value method had been applied to all outstanding and unvested awards in each period presented:

	Three months ended June 30,						Six months ended June 30,
	2003			2002			2003			2002
Net income (loss) available to ordinary    shareholders—as reported	$	347,659		$	(91,748	)	$	587,516		$               (2,255	)
Add: Stock based employee compensation expense    included in reported net income, net of related tax		1,288			—			2,088		—
Deduct: Total stock based employee compensation    expense determined under fair value based method    for all awards, net of related tax effects		(14,397	)		(16,052	)		(25,687	)	(26,413	)
Pro forma net income (loss) available to ordinary    shareholders		$ 334,550		$	(107,800	)	$	563,917		$             (28,668	)
Earnings (loss) per ordinary share:
Basic — as reported	$	2.54		$	(0.68	)	$	4.30		$                  (0.02	)
Basic — pro forma	$	2.45		$	(0.79	)	$	4.13		$                  (0.21	)
Diluted — as reported	$	2.51		$	(0.68	)	$	4.25		$                  (0.02	)
Diluted — pro forma	$	2.41		$	(0.79	)	$	4.08		$                  (0.21	)

9

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands)

2.   Accounting Pronouncements (continued)

            In April 2003, FASB issued Statement No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“FAS 149”). FAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under FAS 133. FAS 149 also clarifies the types of financial guarantee contracts that are included in the scope exception of FAS 133 and the characteristics of a derivative that contains financing components. FAS 149 is effective for contracts entered into or modified after June 30, 2003 and should be applied prospectively. The provisions that relate to forward purchases or sales of “when issued” securities or other securities that do not yet exist, should be applied to both existing contracts and new contracts entered into after June 30, 2003. The Company does not expect that its adoption will have a material effect on the Company’s financial condition and results of operations.

            In January 2003, FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). The objective of FIN 46 is to improve financial reporting by companies involved with variable interest entities. This new model for consolidation applies to an entity in which either (1) the powers or rights of the equity holders do not give them sufficient decision making powers or (2) the equity investment at risk is insufficient to finance that entity’s activities without receiving additional subordinated financial support from other parties. FIN 46 requires a variable interest entity to be consolidated into the company that is subject to a majority of the risk of loss from the variable interest entity’s activities or that is entitled to receive a majority of the entity’s residual returns or both. The consolidation requirements of FIN 46 apply immediately to variabl e interest entities created after January 31, 2003. For entities created on or prior to January 31, 2003, the consolidation requirements apply in the first fiscal year or interim period beginning after June 15, 2003. Based on structures and contracts currently in place, the effect of adoption of this standard on the Company’s financial condition would be an increase in both assets and liabilities of approximately $1.7 billion. Management is pursuing alternatives with regard to restructuring these variable interest entities.

            In April 2003, the FASB cleared Derivative Implementation Guidance Issue No. B36, “Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk Exposures Than Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor under Those Instruments”(“Issue B36”). The accounting guidance states that modified coinsurance arrangements, in which funds are withheld by the ceding insurer and a return on those withheld funds is paid based on the ceding company’s return on certain of its investments, contain an embedded derivative feature that will require bifurcation. Companies that have ceded insurance under existing modified coinsurance arrangements may reclassify the related securities from the held-to-maturity and available-for-sale categories into the trading category on the date the guidance is initially applied. This guidance i s effective for the periods beginning after September 15, 2003. The Company is currently evaluating the effects of implementing Issue B36, however, the Company does not expect that its adoption will have a material effect on the Company’s financial condition and results of operations.

            In July 2003, the Accounting Standards Executive Committee issued Statement of Position 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts” (“SOP 03-1”), which provides guidance on accounting and reporting by insurance enterprises for certain non-traditional long duration contracts and for separate accounts. The provisions of this SOP 03-1 are effective for financial statements for fiscal years beginning after December 15, 2003. The Company is currently evaluating the effects of implementing SOP 03-1; however, the Company does not expect that its adoption will have a material effect on the Company’s financial condition and results of operations.

3.   Segment Information

            The Company is organized into three operating segments — insurance, reinsurance and financial products and services — in addition to a corporate segment that includes the general investment and financing operations of the Company.

10

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands)

3.   Segment Information (continued)

General, life and annuity and financial operations are disclosed separately by segment. General operations include property and casualty lines of business.

            The Company evaluates the performance of each segment based on underwriting results for general operations, net income from life and annuity operations and contribution from financial operations. Other items of revenue and expenditure of the Company are not evaluated at the segment level. In addition, the Company does not allocate assets by segment for its general operations. Investment assets related to the Company’s life and annuity and financial operations are held in separately identified portfolios. Net investment income from these assets is included in net income from life and annuity operations and contribution from financial operations, respectively.

            Certain lines of business within general operations written by the Company have loss experience generally characterized as low frequency and high severity. This may result in volatility in both the Company’s results and operational cash flows.

11

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands)

            The following is an analysis of results by segment together with a reconciliation to net income:

Quarter Ended June 30, 2003:

	Insurance			Reinsurance			Financial Products and Services		Total
General Operations:
Net premiums earned	$	870,079		$	599,441		$	—	$	1,469,520
Fee income and other		1,569			6,343			—		7,912
Net losses and loss expenses		551,923			376,832			—		928,755
Acquisition costs		143,829			141,566			—		285,395
Operating expenses (1)		104,697			36,694			—		141,391
Exchange gains		(6,949	)		(13,083	)		—		(20,032	)
Underwriting profit	$	78,148		$	63,775		$	—	$	141,923
Life and Annuity Operations:
Life premiums earned	$	—		$	56,605		$	13,877	$	70,482
Fee income and other		—			—			29		29
Claims and policy benefits		—			73,064			10,161		83,225
Acquisition costs		—			6,916			403		7,319
Operating expenses (1)		—			1,956			1,658		3,614
Exchange gains		—			(3,320	)		—		(3,320	)
Net investment income		—			33,596			6,638		40,234
Interest expense (2)		—			—			2,791		2,791
Net income from life and annuity operations	$	—		$	11,585		$	5,531	$	17,116
Financial Operations:
Net premiums earned							$	35,807	$	35,807
Fee income and other								1,851		1,851
Net losses and loss expenses								8,820		8,820
Acquisition costs								5,836		5,836
Operating expenses (1)								9,019		9,019
Underwriting profit							$	13,983	$	13,983
Investment income — financial guarantee							$	5,229	$	5,229
Net realized and unrealized gains on weather       and energy derivatives								5,223		5,223
Operating expenses — weather and energy (1)								5,239		5,239
Equity in net income of financial       affiliates								16,658		16,658
Minority interest								3,228		3,228
Contribution from financial operations							$	32,626	$	32,626

______________

 See footnotes on following page.

12

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands, except ratios)

3.   Segment Information (continued)

Quarter Ended June 30, 2003 (continued):

	Insurance			Reinsurance			Financial Products and Services	Total
Net investment income — general operations								$	145,088
Net realized and unrealized gains       on investments and derivative       instruments (3)									76,207
Equity in net income of investment and       insurance affiliates									34,170
Interest expense (2)									43,491
Amortization of intangible assets									375
Corporate operating expenses (1)									34,645
Minority interest									(62	)
Income tax									11,009
Net Income								$	357,672
General Operations:
Loss and loss expense ratio (4)		63.4	%		62.9	%			63.2	%
Underwriting expense ratio (4)		28.6	%		29.7	%			29.0	%
Combined ratio (4)		92.0	%		92.6	%			92.2	%

______________

(1)	Operating expenses exclude corporate operating expenses, shown separately.
(2)	Interest expense excludes interest expense related to financial operations shown separately.
(3)	This includes net realized gains on investments of $93.7 million, net realized and unrealized gains on investment derivatives of $3.9 million and net unrealized losses on credit derivatives of $21.4 million.
(4)	Ratios are based on net premiums earned from general operations, excluding fee income and other. The underwriting expense ratio excludes exchange gains and losses.

13

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands, except ratios)

3.   Segment Information (continued)

Quarter Ended June 30, 2002:

	Insurance			Reinsurance			Financial Products and Services			Total
General Operations:
Net premiums earned	$	540,931		$	495,300		$	—		$	1,036,231
Fee income and other		10,886			8,506			—			19,392
Net losses and loss expenses		394,590			427,561			—			822,151
Acquisition costs		67,644			100,295			—			167,939
Operating expenses (1)		111,241			31,021			—			142,262
Exchange gains		(22,181	)		(1,025	)		—			(23,206	)
Underwriting profit (loss)	$	523		$	(54,046	)	$	—		$	(53,523	)
Life and Annuity Operations:
Life premiums earned	$	—		$	10,497		$	—		$	10,497
Fee income and other		—			—			—			—
Claims and policy benefits		—			18,816			—			18,816
Acquisition costs		—			1,276			—			1,276
Operating expenses (1)		—			1,191			—			1,191
Net investment income		—			16,825			—			16,825
Net income from life and annuity       operations	$	—		$	6,039		$	—		$	6,039
Financial Operations:
Net premiums earned							$	10,813		$	10,813
Fee income and other								1,067			1,067
Net losses and loss expenses								(54	)		(54	)
Acquisition costs								5,045			5,045
Operating expenses (1)								7,941			7,941
Underwriting loss							$	(1,052	)	$	(1,052	)
Investment income — financial guarantee							$	6,365		$	6,365
Net realized and unrealized gains on       weather and energy derivatives.								2,993			2,993
Operating expenses — weather and energy (1)								3,947			3,947
Equity in net income of financial affiliates								416			416
Minority interest								1,684			1,684
Contribution from financial operations							$	3,091		$	3,091

______________

 See footnotes on following page.

14

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands, except ratios)

3.   Segment Information (continued)

Quarter Ended June 30, 2002 (continued):

	Insurance			Reinsurance			Financial Products and Services	Total
Net investment income — general operations								$	151,553
Net realized and unrealized (loss) on        investments and derivative       instruments (2)									(118,129	)
Equity in net income of investment and       insurance affiliates									7,931
Interest expense									40,139
Amortization of intangible assets									11
Corporate operating expenses (1)									25,565
Minority interest									95
Income tax									22,900
Net Loss								$	(91,748	)
General Operations:
Loss and loss expense ratio (3)		72.9	%		86.3	%			79.3	%
Underwriting expense ratio (3)		33.1	%		26.5	%			29.9	%
Combined ratio (3)		106.0	%		112.8	%			109.2	%

______________

(1)	Operating expenses exclude corporate operating expenses, which are shown separately.
(2)	This includes net realized losses on investments of $110.0 million, net realized and unrealized gains on investment derivatives of $2.0 million and net unrealized losses on credit derivatives of $10.1 million.
(3)	Ratios are based on net premiums earned from general operations, excluding fee income and other. The underwriting expense ratio excludes exchange gains and losses.

15

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands)

3.   Segment Information (continued)

Six Months Ended June 30, 2003:

	Insurance		Reinsurance			Financial Products and Services		Total
General Operations:
Net premiums earned	$	1,751,306	$	1,150,101		$	—	$	2,901,407
Fee income and other		3,717		17,793			—		21,510
Net losses and loss expenses		1,073,208		727,338			—		1,800,546
Acquisition costs		268,279		246,215			—		514,494
Operating expenses (1)		202,793		71,254			—		274,047
Exchange losses (gains)		768		(23,208	)		—		(22,440	)
Underwriting profit	$	209,975	$	146,295		$	—	$	356,270
Life and Annuity Operations:
Life premiums earned	$	—	$	139,842		$	23,411	$	163,253
Fee income and other		—		—			50		50
Claims and policy benefits		—		183,536			19,247		202,783
Acquisition costs		—		13,869			1,460		15,329
Operating expenses (1)		—		4,221			4,091		8,312
Exchange gains		—		(3,614	)		—		(3,614	)
Net investment income		—		65,144			12,549		77,693
Interest expense (2)		—		—			4,927		4,927
Net income from life and annuity operations	$	—	$	6,974		$	6,285	$	13,259
Financial Operations:
Net premiums earned						$	62,780	$	62,780
Fee income and other							509		509
Net losses and loss expenses							22,283		22,283
Acquisition costs							9,039		9,039
Operating expenses (1)							22,306		22,306
Underwriting profit						$	9,661	$	9,661
Investment income — financial guarantee						$	10,673	$	10,673
Net realized and unrealized gains on       weather and energy derivatives							15,633		15,633
Operating expenses — weather and energy (1)        activities (1)							10,810		10,810
Equity in net income of financial       affiliates							17,176		17,176
Minority interest							5,298		5,298
Contribution from financial operations						$	37,035	$	37,035

______________

 See footnotes on following page.

16

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands)

3.   Segment Information (continued)

Six Months Ended June 30, 2003 (continued):

	Insurance			Reinsurance			Financial Products and Services	Total
Net investment income — general operations								$	294,089
Net realized and unrealized gains       on investments and derivative       instruments (3)									75,627
Equity in net income of investment and       insurance affiliates									19,364
Interest expense (2)									87,495
Amortization of intangible assets									750
Corporate operating expenses (1)									68,953
Minority interest									(270	)
Income tax									31,039
Net Income								$	607,677
General Operations:
Loss and loss expense ratio (4)		61.3	%		63.2	%			62.1	%
Underwriting expense ratio (4)		26.9	%		27.6	%			27.1	%
Combined ratio (4)		88.2	%		90.8	%			89.2	%

______________

(1)	Operating expenses exclude corporate operating expenses, shown separately.
(2)	Interest expense excludes interest expense related to financial operations shown separately.
(3)	This includes net realized gains on investments of $89.0 million, net realized and unrealized gains on investment derivatives of $8.5 million and net unrealized losses on credit derivatives of $21.9 million.
(4)	Ratios are based on net premiums earned from general operations, excluding fee income and other. The underwriting expense ratio excludes exchange gains and losses.

17

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands)

3.   Segment Information (continued)

Six Months Ended June 30, 2002:

	Insurance			Reinsurance			Financial Products and Services			Total
General Operations:
Net premiums earned	$	1,130,732		$	916,467		$	—		$	2,047,199
Fee income and other		17,431			9,405			—			26,836
Net losses and loss expenses		769,176			692,193			—			1,461,369
Acquisition costs		159,609			192,509			—			352,118
Operating expenses (1)		200,214			49,707			—			249,921
Exchange gains		(24,293	)		(7,277	)		—			(31,570	)
Underwriting profit (loss)	$	43,457		$	(1,260	)	$	—		$	42,197
Life and Annuity Operations:
Life premiums earned	$	—		$	49,690		$	—		$	49,690
Fee income and other		—			2			—			2
Claims and policy benefits		—			66,579			—			66,579
Acquisition costs		—			1,871			—			1,871
Operating expenses		—			2,274			—			2,274
Net investment income		—			32,343			—			32,343
Net income from life and annuity operations	$	—		$	11,311		$	—		$	11,311
Financial Operations:
Net premiums earned							$	25,367		$	25,367
Fee income and other								1,570			1,570
Net losses and loss expenses								3,026			3,026
Acquisition costs								6,003			6,003
Operating expenses (1)								19,349			19,349
Underwriting loss							$	(1,441	)	$	(1,441	)
Investment income — financial guarantee							$	12,620		$	12,620
Net realized and unrealized gains on       weather and energy derivatives.								3,912			3,912
Operating expenses — weather and energy (1)								7,079			7,079
Equity in net income of financial affiliates								2,488			2,488
Minority interest								4,135			4,135
Contribution from financial operations							$	6,365		$	6,365

______________

 See footnotes on following page.

18

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands)

3.   Segment Information (continued)

Six Months Ended June 30, 2002 (continued):

	Insurance			Reinsurance			Financial Products and Services	Total
Net investment income — general operations								$	300,907
Net realized and unrealized losses       on investments and derivative       instruments (2)									(234,544	)
Equity in net income of investment and       insurance affiliates									38,076
Interest expense									81,761
Amortization of intangible assets									625
Corporate operating expenses (1)									47,428
Minority interest									(101	)
Income tax									36,854
Net Loss								$	(2,255	)
General Operations:
Loss and loss expense ratio (3)		68.0	%		75.5	%			71.4	%
Underwriting expense ratio (3)		31.8	%		26.5	%			29.4	%
Combined ratio (3)		99.8	%		102.0	%			100.8	%

______________

(1)	Operating expenses exclude corporate operating expenses, shown separately.
(2)	This includes net realized losses on investments of $216.0 million, net realized and unrealized losses on investment derivatives of $9.8 million and net unrealized losses on credit derivatives of $8.8 million.
(3)	Ratios are based on net premiums earned from general operations, excluding fee income and other. The underwriting expense ratio excludes exchange gains and losses.

19

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands)

3.   Segment Information (continued)

            The following tables summarize the Company’s gross premiums written, net premiums written and net premiums earned by line of business:

Quarter Ended June 30, 2003:

	Gross Premiums Written		Net Premiums Written		Net Premiums Earned
General Operations:
Casualty insurance	$	693,358	$	471,452	$	464,193
Casualty reinsurance		243,504		206,553		234,940
Property catastrophe		46,095		49,983		54,503
Other property		406,916		309,048		299,084
Marine, energy, aviation and satellite		281,325		239,775		284,911
Accident and health		23,941		20,025		24,496
Other insurance (1)		82,714		42,639		42,792
Other reinsurance (1)		77,185		64,238		64,601
Total general operations		1,855,038		1,403,713		1,469,520
Financial Operations		106,266		104,466		35,807
Life and Annuity Operations		75,889		63,703		70,482
Total	$	2,037,193	$	1,571,882	$	1,575,809

Quarter Ended June 30, 2002 (2) :

	Gross Premiums Written			Net Premiums Written			Net Premiums Earned
General Operations:
Casualty insurance	$	464,305		$	313,608		$	242,592
Casualty reinsurance		206,110			200,456			198,982
Property catastrophe		64,740			47,018			53,574
Other property		331,755			230,264			229,123
Marine, energy, aviation and satellite		240,402			183,022			144,955
Accident and health (3)		(34,073	)		(34,815	)		53,376
Other insurance (1)		137,344			94,236			91,857
Other reinsurance (1)		31,858			19,908			21,772
Total general operations		1,442,441			1,053,697			1,036,231
Financial Operations		75,848			73,434			10,813
Life and Annuity Operations		19,968			11,529			10,497
Total	$	1,538,257		$	1,138,660		$	1,057,541

______________

 See footnotes on following page.

20

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands)

3.   Segment Information (continued)

            The following tables summarize the Company’s gross premiums written, net premiums written and net premiums earned by line of business:

Six Months Ended June 30, 2003:

	Gross Premiums Written		Net Premiums Written		Net Premiums Earned
General Operations:
Casualty insurance	$	1,468,490	$	1,046,068	$	901,760
Casualty reinsurance		779,228		681,850		454,618
Property catastrophe		242,983		232,740		113,039
Other property		1,030,911		753,254		633,341
Marine, energy, aviation and satellite		758,805		601,449		513,112
Accident and health		73,887		65,981		48,827
Other insurance (1)		197,078		126,018		131,366
Other reinsurance (1)		294,705		244,128		105,345
Total general operations		4,846,087		3,751,488		2,901,407
Financial Operations		151,032		148,462		62,780
Life and Annuity Operations		187,213		161,016		163,253
Total	$	5,184,332	$	4,060,966	$	3,127,440

Six Months Ended June 30, 2002 (2):

	Gross Premiums Written		Net Premiums Written		Net Premiums Earned
General Operations:
Casualty insurance	$	1,071,801	$	781,797	$	534,490
Casualty reinsurance		656,439		576,898		358,827
Property catastrophe		262,486		224,420		113,899
Other property		962,054		642,121		472,032
Marine, energy, aviation and satellite		607,239		410,481		281,938
Accident and health (3)		97,111		74,691		67,194
Other insurance (1)		361,121		316,253		168,913
Other reinsurance (1)		164,065		125,259		49,906
Total general operations		4,182,316		3,151,920		2,047,199
Financial Operations		102,121		97,096		25,367
Life and Annuity Operations		58,496		48,497		49,690
Total	$	4,342,933	$	3,297,513	$	2,122,256

______________

(1)	Other insurance and reinsurance premiums written and earned include political risk, surety, bonding, warranty and other lines.
(2)	Certain reclassifications have been made to prior period consolidated financial statement amounts to conform to current year presentation.
(3)	Accident and health business originally included in the acquisition of Winterthur International was written and earned commencing July 1, 2001. During the three months ended June 30, 2002, the Company sold the remaining unearned premium related to the business, totaling $49.0 million, back to Winterthur Swiss Insurance Company. This was accounted for as return premium.

21

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands)

4.   Notes Payable and Debt and Financing Arrangements

            The Company entered into a new $100.0 million letter of credit facility in January 2003 to provide additional capacity to support the Company’s U.S. non-admitted business and this facility was subsequently increased to $200.0 million in June 2003. $100 million of this capacity was utilized at June 30, 2003, and $200.0 million was utilized at August 8, 2003.

            In February 2003, the Company entered into an aggregate of $300.0 million of commercial paper-based credit facilities (the “Credit Facilities”). These facilities were increased to $500.0 million in June 2003. The proceeds of advances under the facilities were used to fund a trust account to collateralize the reinsurance obligations of the Company under an intercompany quota share reinsurance agreement. The Company could face additional obligations under the Credit Facilities prior to the stated maturity of February 25, 2007, if certain events were to occur, including, but not limited to the Company’s insolvency, withdrawal of assets from the Regulation 114 trust by the ceding company, the downgrade of the Company’s credit ratings below certain specified levels, or the failure of the agent to have a first priority perfected security interest in the collateral posted by the Company. At maturity, the Company will be obligated to make payments in an amount equal to the principal and accrued interest outstanding under the credit facilities. The issued securities and the Company’s repayment obligations are recorded as a net balance on the Company’s balance sheet.

            In June 2003, the Company renewed its principal revolving credit and letter of credit facility. The facility was increased from $2.0 billion to $2.5 billion of which up to $675 million is available as revolving credit and up to $2.3 billion is available in the form of letters of credit, with the combined total not to exceed $2.5 billion.

            In July 2003, the Company entered into a contingent capital transaction with an aggregate value of $500 million. This transaction also includes an insurance trust that provides the Company’s cedants with statutory relief under state insurance regulations in the U.S. Under the terms of this facility, the Company has acquired an irrevocable put option to issue preference ordinary shares into a trust in return for proceeds raised from investors. This put option may be exercised by the Company at any time. In addition, the Company may be required to issue preference ordinary shares to the trust under certain circumstances, including, but not limited to, the non-payment of the put option premium and a ratings downgrade of the Company.

            For information regarding cross-default and certain other provisions in the Company’s debt and convertible securities documents, see Item 7 of the Company’s Form 10-K for the year ended December 31, 2002.

5.    Exposures under Guaranties

            The Company provides and reinsures financial guaranties issued to support public and private borrowing arrangements. Financial guaranties are conditional commitments that guarantee the performance of an obligor to a third party, typically the timely repayment of principal and interest. The Company’s potential liability in the event of non-payment by the issuer of the insured obligation is represented by its proportionate share of the aggregate outstanding principal and interest payable (“insurance in force”) on such insured obligation. In synthetic transactions, the Company guarantees payment obligations of counterparties under credit derivatives. The Company does not record a carrying value for future installment premiums on financial guaranties as they are recognized over the term of the contract.

            The net outstanding exposure as at June 30, 2003 of financial guaranty aggregate insured portfolios was $43.3 billion, which includes credit derivative exposures of $10.1 billion. The carrying value for these credit derivatives was a net liability of $128.0 million at June 30, 2003.

22

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands except share and per share amounts)

6.   Derivative Instruments

            The Company enters into derivative instruments for both risk management and trading purposes. The Company is exposed to potential loss from various market risks and manages its market risks based on guidelines established by management. These derivative instruments are carried at fair value with the resulting gains and losses recognized in income in the period in which they occur.

            The following table summarizes the net realized and unrealized (losses) gains on derivative instruments included in net income for the three and six months ended June 30, 2003 and 2002.

	Three Months Ended June 30, 2003			Three Months Ended June 30, 2002			Six Months Ended June 30, 2003			Six Months Ended June 30, 2002
Credit derivatives	$	(21,363	)	$	(10,124	)	$	(21,930	)	$	(8,768	)
Weather and energy risk management derivatives		5,223			2,993			15,633			3,912
Investment derivatives		3,883			1,997			8,533			(9,754	)
Net realized and unrealized (losses) gains on       derivatives	$	(12,257	)	$	(5,134	)	$	2,236		$	(14,610	)

7.   XL Capital Finance (Europe) plc

            XL Capital Finance (Europe) plc (“XLFE”) is a wholly owned finance subsidiary of the Company. In January 2002, XLFE issued $600 million par value 6.5% Guaranteed Senior Notes due January 2012. These Notes are fully and unconditionally guaranteed by the Company. The Company’s ability to obtain funds from its subsidiaries to satisfy any of its obligations under this guarantee is subject to certain contractual restrictions, applicable laws and statutory requirements of the various countries in which the Company operates including Bermuda, the U.S. and the U.K., among others. Required statutory capital and surplus for the principal operating subsidiaries of the Company was $2.5 billion as of December 31, 2002.

8.   Computation of Earnings Per Ordinary Share and Ordinary Share Equivalent

	Three Months Ended June 30						Six Months Ended June 30
	2003			2002			2003			2002
Basic earnings (loss) per ordinary share:
Net income (loss)	$	357,672		$	(91,748	)	$	607,677		$	(2,255	)
Less: preference share dividends		(10,013	)		—			(20,161	)		—
Net income (loss) available to ordinary shareholders	$	347,659		$	(91,748	)	$	587,516		$	(2,255	)
Weighted average ordinary shares outstanding		136,791			135,662			136,527			135,431
Basic earnings (loss) per ordinary share	$	2.54		$	(0.68	)	$	4.30		$	(0.02	)

23

XL CAPITAL LTD
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(U.S. dollars in thousands except share and per share amounts)

8.   Computation of Earnings Per Ordinary Share and Ordinary Share Equivalent (continued)

	Three Months Ended June 30						Six Months Ended June 30
		2003			2002			2003			2002
Diluted earnings per ordinary share:
Net income (loss)	$	357,672		$	(91,748	)	$	607,677		$	(2,255	)
Less: preference share dividends		(10,013	)		—			(20,161	)		—
Net income (loss) available to ordinary shareholders	$	347,659		$	(91,748	)	$	587,516		$	(2,255	)
Weighted average ordinary shares outstanding—       basic		136,791			135,662			136,527			135,431
Average stock options outstanding (1)		1,843			—			1,557			—
Weighted average ordinary shares outstanding—       diluted		138,634			135,662			138,084			135,431
Diluted earnings (loss) per ordinary share	$	2.51		$	(0.68	)	$	4.25		$	(0.02	)
Dividends per ordinary share	$	0.48		$	0.47		$	0.96		$	0.94

______________

(1) Net of shares repurchased under the treasury stock method.

            Future weighted average number of shares outstanding may be affected by the convertible debt issued by the Company during 2001. Due to the contingent nature of the conversion features of the debt, there was no effect on diluted earnings per share for the three and six months ended June 30, 2003 and June 30, 2002.

9.   Annuity and Life Re (Holdings), Ltd.

            The Company recognized an other than temporary decline in the value of its investment in Annuity & Life Re (Holdings) Ltd., an insurance affiliate, of $40.9 million in the quarter ended March 31, 2003. The investment was written down to its fair value of $2.1 million as at March 31, 2003. There was no decline in the fair value between March 31, 2003 and June 30, 2003.

24

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2003
COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2002
(U.S. dollars in thousands, except per share amounts)

General

            The following is a discussion of the Company’s financial condition and liquidity and results of operations. Certain aspects of the Company’s business have loss experience characterized as low frequency and high severity. This may result in volatility in both the Company’s and an individual segment’s financial condition and results of operations.

            This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements which involve inherent risks and uncertainties. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. These statements are based upon current plans, estimates and projections. Actual results may differ materially from those projected in such forward-looking statements, and therefore undue reliance should not be placed on them. See “Cautionary Note Regarding Forward-Looking Statements” below for a list of factors that could cause actual results to differ materially from those contained in any forward-looking statement.

            This discussion and analysis should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and the audited Consolidated Financial Statements and notes thereto presented under Item 7 and Item 8, respectively, of the Company’s Form 10-K for the year ended December 31, 2002.

Critical Accounting Policies

            See the discussion of the Company’s critical accounting policies in Item 7 of the Company’s Form 10-K for the year ended December 31, 2002.

Results of Operations

            The following table presents a summary of the Company’s net income (loss) available to ordinary shareholders for the three months ended June 30, 2003 and 2002:

(U.S. dollars and shares in thousands, except per share amounts)

	(Unaudited) Three Months Ended June 30
	2003		2002
Net income (loss) available to ordinary shareholders	$	347,659	$	(91,748	)
Earnings (loss) per ordinary share — basic	$	2.54	$	(0.68	)
Earnings (loss) per ordinary share — diluted	$	2.51	$	(0.68	)
Weighted average number of ordinary shares and ordinary share    equivalents — basic		136,791		135,662
Weighted average number of ordinary shares and ordinary share    equivalents — diluted		138,634		135,662

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            Net income available to ordinary shareholders increased significantly in the second quarter of 2003 compared to the second quarter of 2002 primarily due to two factors. First, there was an increase in the underwriting profit from the Company’s general insurance and reinsurance operations from a loss of $53.5 million in the second quarter of 2002 to $141.9 million in the second quarter of 2003. This increase in underwriting profit was mainly the result of additional loss reserves of $200.0 million relating to the September 11 event recorded in the second quarter of 2002 and growth in net premium earned in the second quarter of 2003 from pricing increases in renewal and new business written. This is discussed further in each of the segments below. Second, in the quarter ended June 30, 2003, net realized gains on investments were $93.7 million compared to net realized losses on investments of $110.0 million in the prior year’s quarter. Net realized losses in the quarter ended June 30, 2002 included approximately $92.5 million of realized losses related to certain fixed income securities in the telecommunications sector.

Segments

Insurance Operations

            General insurance business written includes risk management and specialty lines. Risk management products comprise global property and casualty insurance programs for large multinational companies, including umbrella liability, products recall, integrated risk and primary property and liability coverages. Specialty lines products include directors and officers liability insurance, environmental liability insurance, political risk insurance, professional liability insurance, aviation and satellite insurance, employment practices liability insurance, surety, marine and energy insurance, specie, bloodstock and other insurance covers including program business. No life insurance business has been written in this segment. A large part of the Company’s casualty insurance business written has loss experience that is low frequency and high severity. As a result, large losses, though infrequent, can have a signifi cant impact on the Company’s results of operations, financial condition and liquidity. The Company attempts to mitigate this risk by using strict underwriting guidelines and various reinsurance arrangements.

            The following table summarizes the underwriting results for this segment:

(U.S. dollars in thousands)

	(Unaudited) Three Months Ended June 30,
	2003			2002			% Change
Net premiums earned	$	870,079		$	540,931			60.8	%
Fee income and other		1,569			10,886			(85.6	)%
Net losses and loss expenses		551,923			394,590			39.9	%
Acquisition costs		143,829			67,644			112.6	%
Operating expenses		104,697			111,241			(5.9	)%
Exchange gains		(6,949	)		(22,181	)		(68.7	)%
Underwriting profit	$	78,148		$	523			NM

* NM — Not Meaningful

            Net premiums earned increased in the quarter ended June 30, 2003 compared to the quarter ended June 30, 2002 primarily due to growth in net premiums written from significant pricing increases, new business written and increased net retentions. The largest pricing increases in 2003 were in the professional liability, other casualty and aviation lines of business. Casualty insurance net premiums earned increased from $242.6 million in the second quarter of 2002 to $464.2 million in the second quarter of 2003. Aviation and satellite insurance net premiums earned increased from $74.3 million in the second quarter of 2002 to $178.9 million in the second quarter of 2003. Growth in net premiums earned in the second quarter of 2003 from 2002 was partially offset by a reduction in net premiums written and earned related to the non-renewal of certain selected portfolios and the restructuring of certain Lloyd’s portfolios.

            Fee income and other declined in the second quarter of 2003 as compared to the second quarter of 2002 primarily due to consulting and administration services provided by Winterthur International for employee benefit plans of unrelated companies that were discontinued at the end of 2002.

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            The net exchange gains in the quarters ended June 30, 2003 and 2002 were primarily due to a decline in the value of the U.S. dollar against other currencies, primarily U.K. Sterling and euros, in those operations that transact in multiple currencies. In comparison to the second quarter of 2002, the gain was partially reduced by a hedge put in place by the Company in February 2003 to cover part of its exposure to a U.K. Sterling reinsurance recoverable balance.

            The following table presents the ratios for this segment:

	(Unaudited) Three Months Ended June 30
	2003			2002
Loss and loss expense ratio		63.4	%		72.9	%
Underwriting expense ratio		28.6	%		33.1	%
Combined ratio		92.0	%		106.0	%

            The loss and loss expense ratio decreased in the quarter ended June 30, 2003 compared to the quarter ended June 30, 2002 primarily due to the negative impact on the 2002 loss and loss expense ratio related to a $73 million September 11 event reserve strengthening in the quarter ended June 30, 2002. Excluding the effect of the September 11 event reserve strengthening, the loss and loss expense ratio increased from 59.5% to 63.4% primarily due to losses from the U.S. tornadoes in the second quarter of 2003. This increase was partially offset by the benefits of premium rate increases and improved terms and conditions the Company has experienced since the September 11 event.

            The underwriting expense ratio was lower in the quarter ended June 30, 2003 compared to the quarter ended June 30, 2002 due to a lower operational expense ratio which was partially offset by a higher acquisition expense ratio. The reduction in the operational expense ratio (12.0% for the quarter ended June 30, 2003 as compared to 20.6% in the quarter ended June 30, 2002) is due primarily to the growth in net premiums earned in the quarter ended June 30, 2003. Operating expenses generally do not change in direct proportion to changes in net premiums earned. In addition, operating expenses decreased by 5.9% due in part to lower consulting fees at XL Global Risk (formerly Winterthur International) associated with its restructuring. The increase in the acquisition expense ratio (16.6% in the quarter ended June 30, 2003 as compared to 12.5% in the quarter ended June 30, 2002) was primarily due to a change in the mix of business being earned. In addition, last year’s acquisition expense ratio benefited from a decrease of approximately $9.7 million in acquisition expenses related to the purchase accounting treatment of deferred acquisition costs related to the acquired Winterthur International operations.

27

Reinsurance Operations

Reinsurance — General Operations

            General reinsurance business written includes casualty, property, accident and health and other specialty reinsurance on a global basis. The Company’s reinsurance property business generally has loss experience characterized as low frequency and high severity that can have a negative impact on the Company’s results of operations, financial condition and liquidity. The Company endeavors to manage its exposures to catastrophic events by limiting the amount of its exposure in each geographic zone worldwide and requiring that its property catastrophe contracts provide for aggregate limits and varying attachment points.

            The following table summarizes the underwriting results for the general operations of this segment:

(U.S. dollars in thousands)

	(Unaudited) Three Months Ended June 30
	2003			2002			% Change
Net premiums earned	$	599,441		$	495,300			21.0	%
Fee income and other		6,343			8,506			(25.4	)%
Net losses and loss expenses		376,832			427,561			(11.9	)%
Acquisition costs		141,566			100,295			41.1	%
Operating expenses		36,694			31,021			18.3	%
Exchange gains		(13,083	)		(1,025	)		NM
Underwriting profit (loss)	$	63,775		$	(54,046	)		NM

            Net premiums earned in the second quarter of 2003 increased 21.0% compared to the second quarter of 2002 primarily due to growth in business written in 2003 and 2002. Growth in business written is mainly due to pricing increases and new business written. Growth related primarily to the casualty lines and international property lines. Casualty reinsurance net premiums earned increased from $199.0 million in the second quarter of 2002 to $234.9 million in the second quarter of 2003. U.S. property rates were generally unchanged as compared to the second quarter of 2002.

            Fee income and other decreased in the second quarter of 2003, due to a decline in fees earned on a deposit liability contract. Fee income and other is expected to decline in future periods as earning patterns are due to contractual terms and conditions.

            The net exchange gains in the quarters ended June 30, 2003 and 2002 were primarily due to a decline in the value of the U.S. dollar against other currencies, primarily the Euro and the Brazilian Real, in those operations that transact in multiple currencies. The increase in the net exchange gain in the quarter ended June 30, 2003 as compared to the quarter ended June 30, 2002 is due primarily to the relative amount of the exchange rate decline of the U.S. dollar against these currencies.

            The following table presents the ratios for this segment:

	(Unaudited) Three Months Ended June 30
	2003			2002
Loss and loss expense ratio		62.9	%		86.3	%
Underwriting expense ratio		29.7	%		26.5	%
Combined ratio		92.6	%		112.8	%

            There were no significant catastrophic losses affecting the Company in the second quarter of 2003. The decrease in the loss and loss expense ratio in the quarter ended June 30, 2003 compared to the same quarter of 2002 primarily reflects the inclusion of loss reserves of $127 million in the prior year for the September 11 event. Excluding the effect of the additional loss reserves related to the September 11 event, the loss ratio increased from 60.7% to 62.9% primarily as a result of the U.S. tornadoes in the second quarter of 2003.

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            The increase in the underwriting expense ratio in the second quarter of 2003 as compared to the second quarter of 2002 is primarily due to an increase in the acquisition expense ratio to 23.6% as compared to 20.2% in the second quarter of 2002. This increase reflects an increase in profit commissions and a change in business mix, reflecting the growth in certain lines mentioned above.

Reinsurance — Life and Annuity Operations

            Life business written by the reinsurance operations is primarily European life reinsurance. This includes term assurances, group life, critical illness cover, immediate annuities and disability income business. Due to the nature of these contracts, premium volume may vary significantly from period to period.

            Net investment income is included in the calculation of net income from life and annuity operations as it relates to income earned on portfolios of separately identified and managed life investment assets and other allocated assets. The accretion of the related policy benefit reserves is included in claims and policy benefit reserves.

            The following summarizes net income from life and annuity operations:

(U.S. dollars in thousands)

	(Unaudited) Three Months Ended June 30
	2003			2002		% Change
Net premiums earned	$	56,605		$	10,497		NM
Claims and policy benefits		73,064			18,816		NM
Acquisition costs		6,916			1,276		NM
Operating expenses		1,956			1,191		64.2	%
Exchange gains		(3,320	)		—		NM
Net investment income		33,596			16,825		99.7	%
Net income from life and annuity operations	$	11,585		$	6,039		91.8	%

            All of the above items increased in the second quarter of 2003 as compared to 2002 primarily as a result of new annuity business and term life business written and earned in the quarter as the Company continues to expand its life reinsurance operations in Europe.

            Claims and policy benefits include the accretion of policy benefit reserves related to contracts where investment assets are acquired with the assumption of the policy benefit reserves at the inception of the contract. Net investment income earned on these assets is included above in the calculation of net income from life and annuity operations. Claims and policy benefits in the quarter ended June 30, 2003 also included a benefit of approximately $7.0 million for business written by the Company’s subsidiary, Le Mans Ré. Acquisition costs have increased by a similar percentage to the increase in net premiums earned in the second quarter of 2003 as compared to 2002.

Financial Products and Services — Financial Operations

            Financial products and services business written includes insurance, reinsurance and derivative solutions for complex financial risks including financial guaranty insurance and reinsurance, municipal reinvestment contracts and funding agreements, customized or tailored financial solutions and weather and energy risk management products. Each of these transactions is tailored to the specific needs of the insured or user.

            Financial guaranty insurance and reinsurance generally guarantees payments of interest and principal on an issuer’s obligations when due. Obligations guaranteed or enhanced by the Company range in duration and premiums are received either on an installment basis or upfront. Guaranties written in credit derivative form provide coverage for losses upon the occurrence of specified credit events set forth in the swap documentation.

            The Company’s weather and energy risk management products are customized solutions designed to assist corporate customers, primarily energy companies and utilities, to manage their financial exposure to variations in underlying weather conditions and related energy markets. The Company attempts to hedge a significant portion of these risks written within the capital markets.

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            Financial affiliates includes the Company’s 20% ownership in FSA International Ltd, a financial guarantee insurer and 42% of Primus Guaranty Ltd (“Primus”), a provider of single name credit risk protection.

            The following table summarizes the contribution for this segment:

(U.S. dollars in thousands)

	(Unaudited) Three Months Ended June 30
	2003			2002			% Change
Net premiums earned	$	35,807		$	10,813			231.2	%
Fee income and other		1,851			1,067			73.5	%
Net losses and loss expenses		8,820			(54	)		NM
Acquisition costs		5,836			5,045			15.7	%
Operating expenses		9,019			7,941			13.6	%
Underwriting profit (loss)	$	13,983		$	(1,052	)		NM
Net investment income — financial guarantee	$	5,229		$	6,365			(17.9	)%
Net realized and unrealized gains on weather and energy derivatives		5,223			2,993			74.5	%
Operating expenses — weather and energy		5,239			3,947			32.8	%
Equity in net income of financial affiliates		16,658			416			NM
Minority interest		3,228			1,684			91.7	%
Contribution from financial operations	$	32,626		$	3,091			NM
Net realized and unrealized losses on credit default swaps	$	(21,363	)	$	(10,124	)		NM

            Net premiums earned increased in the second quarter of 2003 as compared to the second quarter of 2002 primarily due to growth and new financial guaranty business written and the continuing effect of the underlying long term nature of this business.

            Net losses and loss expenses in the quarter ended June 30, 2003 increased as compared to the second quarter ended June 30, 2002 reflecting the Company’s increased IBNR reserve positions determined in accordance with the Company’s reserving practices which are directly related to the increase in net premiums earned.

            Acquisition costs increased by a lower percentage than the increase in net premium earned in the second quarter of 2003 as compared to 2002 due to a change in the mix of business earned.

            Operating expenses related to both the financial guaranty and weather and energy businesses increased in the second quarter of 2003 as compared to the second quarter of 2002 due to the continued expansion of these operations.

            Net investment income related to financial guaranty business decreased in the second quarter of 2003 as compared to the second quarter of 2002 primarily due to a decline in interest rates.

            Net realized and unrealized gains on weather and energy derivatives increased to $5.2 million in the second quarter of 2003 as compared to $3.0 million in the second quarter of 2002 due to increased weather transactional activity and volatility in natural gas prices in 2003.

            The equity in net income from financial affiliates increased in the second quarter of 2003 as compared to the second quarter of 2002 due to increased earnings at Primus resulting from growth in underlying protection written as well as the significant narrowing of credit spreads during the quarter which resulted in mark to market gains.

            The increase in minority interest in the second quarter of 2003 as compared to the second quarter of 2002 is due to an increase in the profitability of the Company’s subsidiary, XL Financial Assurance Ltd. of which 15% is held by a minority shareholder.

            In prior periods, the Company’s credit derivatives written at primary layers on a partially funded or finite basis were included in the insurance segment. Effective January 1, 2003 the Company now manages all credit default swap transactions in this segment and prior period segment results

30

have been reclassified to conform to this change. The Company recorded net unrealized losses of $21.4 million and losses of $10.1 million in the quarters ended June 30, 2003 and 2002, respectively, related to the fair value adjustment for credit default swaps. These unrealized losses reflect the deterioration of credit quality for certain credit pools. The vast majority of financial guaranty coverage that is written in swap form pertains to tranches of collateralized debt obligations and asset backed securities, particularly the higher rated tranches with 91% covering “A” to “AAA” tranches.

Financial Products and Services — Life and Annuity Operations

            The Company commenced writing life and annuity business in this segment in the fourth quarter of 2002. The Company commenced writing municipal reinvestment contracts in 2002 and funding agreements in 2003 whereby the Company receives deposits and pays interest at a contractual interest rate. The Company has investment risk related to its ability to generate sufficient investment income to enable the total invested assets to cover the payment of the ultimate liability.

            The following summarizes net income from life operations:

(U.S. dollars in thousands)

	(Unaudited) Three Months Ended June 30
	2003		2002
Net premiums earned	$	13,877	$	—
Fee income and other		29		—
Claims and policy benefits		10,161		—
Acquisition costs		403		—
Operating expenses		1,658		—
Net investment income		6,638		—
Interest expense		2,791		—
Net income from life and annuity operations	$	5,531	$	—

            Net premiums earned related to certain blocks of U.S. based term life mortality reinsurance business written that were novated to the Company from Annuity and Life Reassurance, Ltd. in December 2002.

            Claims and policy benefits and acquisition costs also related primarily to this novated block of business.

            Operating expenses reflect the continued build-out of the overall life and annuity business, including expenses associated with the municipal reinvestment contract business.

            Net investment income in the second quarter of 2003 related to investment assets acquired in connection with the acquisition of future policy benefit reserves and interest earned on the municipal reinvestment contracts written.

            Interest expense relates to the accretion of the deposit liabilities associated with the municipal reinvestment contracts and funding contracts written in this segment. At June 30, 2003, the Company has now cumulatively written $1.0 billion of municipal reinvestment contracts and issued its first funding agreement at the end of June 2003, in the amount of $300.0 million.

Investment Activities

            The following table illustrates the change in net investment income and net realized and unrealized losses on investments and investment derivative instruments for the quarters ended June 30, 2003 and 2002:

(U.S. dollars in thousands)

	(Unaudited) Three Months Ended June 30
	2003		2002			% Change
Net investment income — general operations	$	145,088	$	151,553			(4.3	)%
Equity in net income of investment affiliates (Note 1)		34,306		7,931			NM
Net realized gain (losses) on investments		93,687		(110,002	)		NM
Net realized and unrealized gains on investment derivative       instruments		3,883		1,997			94.4	%

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   Note 1. Equity in net income of investment affiliates for the quarter ended June 30, 2003 includes income on the alternative investment portfolio for the two months ending May 31, 2003 only, as compared to three months in the quarter ended June 30, 2002 in order for the Company to meet the accelerated Securities and Exchange Commission ("SEC") filing deadlines going forward. The fair market values of certain of these alternative investments often takes longer to obtain as compared to other of the Company’s investments and therefore are unavailable at the time of the quarter close. Going forward, income on the alternative investment portfolio will be for a three month period lagged by one month.

          Net investment income related to general operations decreased in the second quarter of 2003 as compared to the second quarter of 2002 due primarily to decline in investment yields on the portfolio which was partially offset by a higher investment base. The growth in the investment base reflects the Company’s strong cash flow from operations. The market yield to maturity on the total fixed income portfolio was 3.7% at June 30, 2003 as compared to 5.4% at June 30, 2002.

            Equity in net income of investment affiliates increased in the second quarter of 2003 compared to the second quarter of 2002 mainly due to strong performance of certain of the Company’s investment funds as compared to lower overall returns on these funds in the second quarter of 2002. In addition, as noted above, income on the alternative investment portfolio for the quarter ended June 30, 2003 was for two months only as compared to three months in the quarter ended June 30, 2002.

            At June 30, 2003 and 2002, approximately 40% of the investment portfolio could not be meaningfully compared to applicable public market indices. This includes the deposit and regulatory holdings that are subject to investment restrictions and the Company’s structured portfolio (i.e., assets supporting deposit liabilities and future policy benefit reserves) where, due to the unique nature of the underlying liabilities, customized benchmarks are used to measure performance. For those portions of the investment portfolio (approximately 60%) that could be meaningfully compared to public market indices, the following is a summary of the investment performance for the second quarters of 2003 and 2002:

	Quarter ended June 30, 2003		Quarter ended June 30, 2002
Asset/Liability Portfolios
U.S. Investment Grade, Moderate Duration		2.6%		3.2%
Lehman Aggregate Bond Index		2.5%		3.7%
Relative Performance		0.1%		(0.5)%
U.S. Investment Grade, Low Duration		0.8%		1.1%
Salomon 1-3 Year Treasury Index		0.7%		2.4%
Relative Performance		0.1%		(1.3)%
Euro Aggregate, Unhedged		2.8%		1.9%
Lehman Euro Aggregate Index		2.5%		1.4%
Relative Performance		0.3%		0.5%
Pan European, Hedged		8.3%		12.1%
Merrill U.K. / Merrill Pan Europe Composite		7.3%		10.8%
Relative Performance		1.0%		1.3%
U.K. Sterling, Unhedged		2.1%		2.1%
Merrill U.K. Sterling Broad Index, 1-10 Years		2.1%		2.4%
Relative Performance		0.0%		(0.3)%

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	Quarter ended June 30, 2003		Quarter ended June 30, 2002
Risk Asset Portfolios — Fixed Income
U.S. Moderate Grade		8.0%		(2.2)%
Investment Grade / High Yield Composite		6.4%		0.5%
Relative Performance		1.6%		(2.7)%
U.S. High Yield		8.4%		(10.1)%
CS First Boston High Yield Index		9.7%		(2.3)%
Relative Performance		(1.3)%		(7.8)%
Risk Asset Portfolios — Equities
U.S. Large Cap Growth Equity		14.1%		(14.5)%
Russell 1000 Growth Index		14.3%		(18.7)%
Relative Performance		(0.2)%		4.2%
U.S. Large Cap Value Equity		16.8%		(6.8)%
Russell 1000 Value Index		17.2%		(8.6)%
Relative Performance		(0.4)%		1.8%
U.S. Small Cap Equity		22.8%		(4.4)%
Russell 2000 Index		23.4%		(8.4)%
Relative Performance		(0.6)%		4.0%
Non-U.S. Equity		16.5%		(1.9)%
MSCI EAFE Index		19.3%		(2.1)%
Relative Performance		(2.8)%		0.2%
Risk Asset Portfolios — Alternative Investments
Alternative Investments — (Note 1)		2.9%		0.7%
Standard and Poor’s 500 Index — (Note 1)		13.9%		(13.4)%
Relative Performance		(11.0)%		14.1%

Note 1. The alternative investment portfolio returns and the Standard and Poor’s 500 Index returns for the quarter ended June 30, 2003 includes returns for the two months ending May 31, 2003 only, as opposed to three months in the quarter ended June 30, 2002 in order for the Company to meet the accelerated SEC filing deadlines going forward. The fair market values of certain of these alternative investments often takes longer to obtain as compared to other of the Company’s investments and therefore are unavailable at the time of the quarter close. Going forward, returns for the alternative investment portfolio and comparative indices will be for a three month period lagged by one month.

            Net realized gains on investments in the second quarter of 2003 included net realized gains of $132.3 million from sales of investments and net realized losses of approximately $38.6 million related to the write-down of certain of the Company’s fixed income and equity investments where the Company determined that there was an other than temporary decline in the value of those investments. Net realized gains from sales of investments were mainly due to declines in investment yields during the quarter ended June 30, 2003.

33

            Net realized losses on investments in the second quarter of 2002 of $110.0 million included net realized gains of approximately $15.0 million from sales of investments and realized losses of approximately $125.0 million relating to the write-down of securities due to an other than temporary decline in the value of those investments. Of this amount, approximately $92.5 million related to the telecommunications sector, including Adelphia Communication Corp. (“Adelphia”) and Worldcom Inc. (“Worldcom”), where the decline in the value of such securities was due to alleged fraud.

             The Company’s process for identifying declines in the fair value of investments that are other than temporary involves consideration of several factors. These factors include : (i) the time period during which there has been a significant decline in value; (ii) an analysis of the liquidity, business prospects and overall financial condition of the issuer; (iii) the significance of the decline; (iv) an analysis of the collateral structure and other credit support, as applicable, of the securities in question; and (v) the Company’s intent and ability to hold the investment for a sufficient period of time for the value to recover. Where the Company’s analysis of the above factors results in the Company’s conclusion that declines in fair values are other than temporary, the cost of the security is written down to fair value and the previously unrealized loss is therefore realized.

Net Unrealized Gains and Losses on Investments

            At June 30, 2003, the Company had net unrealized gains on fixed income securities of $566.3 million and net unrealized gains on equities of $20.3 million. Of these amounts, gross unrealized losses on fixed income securities and equities were $57.2 million and $16.1 million, respectively. The information presented below for the gross unrealized losses on the Company’s investments at June 30, 2003 shows the potential effect upon the Company’s future earnings and financial position should management later conclude that some of the current declines in the fair value of these investments are other than temporary declines.

            At June 30, 2003, approximately 2,000 fixed income securities out of a total of approximately 10,500 securities were in an unrealized loss position. The largest unrealized loss in the fixed income portfolio was $2.6 million. Approximately 740 equity securities out of a total of approximately 1,500 securities were in an unrealized loss position at June 30, 2003 with the largest individual loss being $1.0 million.

            The following is an analysis of how long each of those securities with an unrealized loss at June 30, 2003 had been in a continual unrealized loss position:

(U.S. dollars in thousands)

Type of Securities	Length of time in a continual unrealized loss position		Amount of unrealized loss at June 30, 2003
Fixed Income and    Short-Term		Less than six months	$	41,196
		At least 6 months but less than 12 months		9,846
		At least 12 months but less than 2 years		5,759
		Over 2 years		389
		Total	$	57,190
Equities		Less than six months	$	2,614
		At least 6 months but less than 12 months		5,399
		At least 12 months but less than 2 years		7,486
		Over 2 years		650
		Total	$	16,149

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            At June 30, 2003, the following was the maturity profile of the fixed income securities that were in a gross unrealized loss position:

(U.S. dollars in thousands)

Maturity profile in years of fixed income securities in a continual unrealized loss position	Amount of unrealized loss at June 30, 2003
Less than 1 year remaining	$	88
More than 1 and less than 5 years remaining		5,796
More than 5 and less than 10 years remaining		14,981
More than 10 and less than 20 years remaining		9,334
20 years or more remaining		15,290
Mortgage backed securites		11,701
Total	$	57,190

The Company operates a risk asset portfolio that includes high yield (below investment grade) fixed income securities. These represented approximately 5.6% of the total fixed income portfolio market value at June 30, 2003. The change in fair value of these securities has a higher volatility than investment grade securities. Of the total gross unrealized losses in the Company’s fixed income portfolio at June 30, 2003, $14.5 million related to securities that were below investment grade or not rated. The following is an analysis of how long each of these below investment grade and unrated securities had been in a continual unrealized loss position at the date indicated:

(U.S. dollars in thousands)

Length of time in a continual unrealized loss position	Amount of unrealized loss at June 30, 2003
Less than six months	$	7,141
At least 6 months but less than 12 months		4,127
At least 12 months but less than 2 years		3,036
More than 2 years		229
Total	$	14,533

Investment derivatives

            Net realized and unrealized gains on investment derivatives in the second quarter of each of 2003 and 2002 resulted from the Company’s investment strategy to economically hedge against interest and foreign exchange risk within the investment portfolio. See Item 3, “Quantitative and Qualitative Disclosure About Market Risk”, for a more detailed analysis.

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Other Revenues and Expenses

            The following table sets forth other revenues and expenses for the three months ended June 30, 2003 and 2002:

(U.S. dollars in thousands)

		(Unaudited) Three Months Ended June 30
		2003			2002		% Change
Equity in net income of insurance affiliates	$		(136	)	$	—		NM
Amortization of intangible assets			375			11		NM
Corporate operating expenses			34,645			25,565		35.5	%
Interest expense			43,491			40,139		8.4	%
Income tax expense			11,009			22,900		(51.9	)%

            Corporate operating expenses in the quarter ended June 30, 2003 increased compared to the three months ended June 30, 2002 due to the continued build out of the Company’s global infrastructure in developing its network of shared service organizations to support operations in certain locations and new costs related to the Company’s global branding campaign.

            The increase in interest expense primarily reflected a higher accretion charge on the deposit liabilities due to growth in this business. Accretion on the deposit liabilities for the three months ended June 30, 2003 and 2002 were $21.7 million and $14.4 million, respectively. This increase was due to new deposit liability contracts written since June 30, 2002. Interest expense relating to notes payable and debt declined from $25.8 million to $21.8 million due to the inclusion of amortization of debt issuance expenses in the second quarter of 2002 related to the issue of the Zero Coupon Convertible Debentures (“CARZ”) and the Liquid Yield Option Notes (“LYONS”) in 2001. See “Financial Condition and Liquidity” for further information.

            The decrease in the Company’s income taxes arose principally from a decrease in the profitability of certain of the Company’s U.S. and European operations.

36

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2002
(U.S. Dollars in thousands, Except Per Share Amounts)

Results of Operations

            The following table presents a summary of the Company’s net income (loss) available to ordinary shareholders for the six months ended June 30, 2003 and 2002:

(U.S. dollars in thousands, except per share amounts)

	(Unaudited) Six Months Ended June 30
	2003		2002
Net income (loss) available to ordinary shareholders	$	587,516	$	(2,255	)
Earnings per ordinary share — basic	$	4.30	$	(0.02	)
Earnings per ordinary share — diluted	$	4.25	$	(0.02	)
Weighted average number of ordinary shares and ordinary share equivalents    — basic		136,527		135,431
Weighted average number of ordinary shares and ordinary share equivalents    — diluted		138,084		135,431

            Net income available to ordinary shareholders increased significantly in the first six months of 2003 compared to the first six months of 2002 primarily due to two factors. First, there was an increase in the underwriting profit from the Company’s general insurance and reinsurance operations from $42.2 million in the first six months of 2002 to $356.3 million in the first six months of 2003. This increase in underwriting profit was primarily due to additional loss reserves of $200.0 million recorded in the second quarter of 2002 related to the September 11 event. In addition, the increase in underwriting profit has been due to growth in net premium earned from pricing increases in renewal and new business written. This is discussed further in each of the segments below. Second, in the six months ended June 30, 2003, net realized gains on investments were $89.0 million as compared to net realized losses on investments of $216.0 million in the six months ended June 30, 2002. Net realized investment gains in the first half of 2003 were due primarily to gains on sales of securities where there had been a decline in general market interest rates. Net realized losses on investments in the first half of 2002 included a loss of $92.5 million of certain fixed income and equity telecommunications securities, including WorldCom and Adelphia, and a loss of $80.0 million of certain other fixed income and equity investments where the Company believed that there was an other than temporary decline in the value of those investments.

            Partially offsetting the increase in net income in the first six months of 2003 as compared to the first six months of 2002 was an other than temporary decline of $40.9 million in the value of the Company’s investment in Annuity and Life Re (Holdings), Ltd. an insurance affiliate, in the first quarter of 2003 to its then current market value.

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Segments

Insurance Operations

            The following table summarizes the underwriting results for this segment:

(U.S. dollars in thousands)

	(Unaudited) Six Months Ended June 30,
	2003		2002			% Change
Net premiums earned	$	1,751,306	$	1,130,732			54.9	%
Fee income and other		3,717		17,431			(78.7	)%
Net losses and loss expenses		1,073,208		769,176			39.5	%
Acquisition costs		268,279		159,609			68.1	%
Operating expenses		202,793		200,214			1.3	%
Exchange losses (gains)		768		(24,293	)		NM
Underwriting profit	$	209,975	$	43,457			NM

* NM — Not Meaningful

            Net premiums earned increased in the six months ended June 30, 2003 compared to the six months ended June 30, 2002 primarily due to growth in net premiums written from significant pricing increases, new business written, and increased net retentions. The largest pricing increases in 2003 were in the professional liability, other casualty and aviation lines of business. Casualty insurance net premiums earned increased from $534.5 million in the first half of 2002 to $901.8 million in the first half of 2003. Growth in net premiums earned in the first six months of 2003 compared to the same period in 2002 was partially offset by a reduction in net premiums written related to the non-renewal of certain business written by the Company’s Lloyd’s syndicates.

            Fee income and other declined in the six months ended June 30, 2003 as compared to the six months ended June 30, 2002 primarily due to consulting and administration services provided by Winterthur International for employee benefit plans of unrelated companies that were discontinued at the end of 2002.

            Exchange losses in the six months ended June 30, 2003 related primarily to the decline in value of U.K. sterling against the U.S. dollar in the quarter ended March 31, 2003 where the value of certain monetary net assets denominated in this currency decreased. While the value of the U.K. sterling increased against the U.S. dollar in the quarter ended June 30, 2003, the gain was reduced by a hedge put in place by the Company to cover part of its exposure to a U.K. sterling reinsurance recoverable balance. The exchange gain in the six months ended June 30, 2002 was mainly due to an increase in the value of U.K. sterling against the U.S. dollar.

            The following table presents the ratios for this segment:

	(Unaudited) Six Months Ended June 30
	2003			2002
Loss and loss expense ratio		61.3	%		68.0	%
Underwriting expense ratio		26.9	%		31.8	%
Combined ratio		88.2	%		99.8	%

            The loss and loss expense ratio decreased in the six months ended June 30, 2003 compared to the six months ended June 30, 2002 primarily due to an increase of reserves of $73 million in the second quarter of 2002 for the September 11 event. Excluding the September 11 event increase in loss reserves, the loss and loss expense ratio was 61.6% in the six months ended June 30, 2002 as compared to 61.3% in the six months ended June 30, 2003.

            The underwriting expense ratio was lower in the six months ended June 30, 2003 compared to the six months ended June 30, 2002 due to a lower operational expense ratio which was partially offset by a higher acquisition expense ratio. The reduction in the operational expense ratio (11.6% for the six months ended June 30, 2003 as compared to 17.7% for the six months ended June 30, 2002) is due primarily to the growth in net premiums earned occurring at a greater

38

rate than operating expenses. Operating expenses generally do not change in direct proportion to changes in net premiums earned. The increase in the acquisition expense ratio (15.3% for the six months ended June 30, 2003 as compared to 14.1% for the six months ended June 30, 2002) was primarily due to a change in the mix of business being earned. In addition, last year’s acquisition expense ratio benefited from a decrease of approximately $19.3 million in acquisition expenses related to the purchase accounting treatment of deferred acquisition costs related to the acquired Winterthur International operations.

Reinsurance Operations

Reinsurance — General Operations

            The following table summarizes the underwriting results for the general operations of this segment:

(U.S. dollars in thousands)

	(Unaudited) Six Months Ended June 30
	2003			2002			% Change
Net premiums earned	$	1,150,101		$	916,467			25.5	%
Fee income and other		17,793			9,405			89.2	%
Net losses and loss expenses		727,338			692,193			5.1	%
Acquisition costs		246,215			192,509			27.9	%
Operating expenses		71,254			49,707			43.3	%
Exchange gains		(23,208	)		(7,277	)		NM
Underwriting profit (loss)	$	146,295		$	(1,260	)		NM

            Net premiums earned in the first six months of 2003 increased 25.5% compared to the first six months of 2002 in part, due to strong growth and pricing increases in business written in 2003 and 2002. Pricing increases and improvements in underwriting terms and conditions in 2003 were primarily experienced in the casualty lines and international property lines.

            Fee income and other increased in the six months ended June 30, 2003, due to fees earned on a deposit liability contract in the first quarter of 2003. Fee income and other is expected to decline in future periods as earning patterns are due to contractual terms and conditions.

            The net exchange gains in the six months ended June 30, 2003 and 2002 were primarily due to a decline in the value of the U.S. dollar against other currencies, primarily euros, in those operations that transact in multiple currencies.

            The following table presents the ratios for this segment:

	(Unaudited) Six Months Ended June 30
	2003			2002
Loss and loss expense ratio		63.2	%		75.5	%
Underwriting expense ratio		27.6	%		26.5	%
Combined ratio		90.8	%		102.0	%

            There were no significant catastrophic losses affecting the Company in the six months ended June 30, 2003. The decrease in the loss and loss expense ratio in the six months ended June 30, 2003 compared to the same period of 2002 primarily reflects an increase in reserves of $127 million in the second quarter of 2002 related to the September 11 event. Excluding the additional loss reserves related to the September 11 event, the loss ratio was 61.7% in the six months ended June 30, 2002 as compared to 63.2% in the six months ended June 30, 2003. This increase primarily related to losses arising from the U.S. tornadoes in the quarter ended June 30, 2003.

            The increase in the underwriting expense ratio in the six months ended June 30, 2003, as compared to the same period of 2002 is primarily due to an increase in the operating expense ratio to 6.2% as compared to 5.4% in the same period of 2002. Operating expenses were reduced by the effect of the recognition of a curtailment gain of approximately $8.0 million on a pension plan in the U.S. during the first six months of 2002. Acquisition costs also increased as a percentage of net premiums earned in the first six months of 2003 as compared to 2002 reflecting the profitability of the underlying business and, consequently, an increase in additional profit commissions due on certain contracts.

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Reinsurance — Life and Annuity Operations

            The following summarizes net income from life operations:

(U.S. dollars in thousands)

	(Unaudited) Six Months Ended June 30
	2003		2002		% Change
Net premiums earned	$	139,842	$	49,690		181.4	%
Fee income and other		—		2		NM
Claims and policy benefits		183,536		66,579		175.7	%
Acquisition costs		13,869		1,871		NM
Operating expenses		4,221		2,274		85.6	%
Exchange gains		(3,614)		—		NM
Net investment income		65,144		32,343		101.4	%
Net income from life operations	$	6,974	$	11,311		(38.4)	%

            All of the above items increased in the six months ended June 30, 2003 as compared to 2002 as a result of new business written and earned as the Company continues to expand its life reinsurance operations in Europe. In addition, the Company wrote new annuity business and term life assurance business in the six months ended June 30, 2003.

             Claims and policy benefits also increased in line with the growth in net premiums earned and include the accretion of policy benefit reserves related to contracts where investment assets are acquired with the assumption of the policy benefit reserves at the inception of the contract. Net investment income earned on these assets is included above in the calculation of net income or loss from life operations.

            Acquisition costs have increased by a larger percentage than the increase in net premiums earned in the first six months of 2003 as compared to 2002 due to the change in mix of new business being earned, including the new term assurance business that carries a higher brokerage and commission cost as compared to other life business.

            Operating expenses and net investment income both increased in the first six months of 2003 as compared to the first six months of 2002 due to the expansion of this business.

            Exchange gains in the six months ended June 30, 2003 related primarily to the decline in the value of the dollar against the value of the Euro.

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Financial Products and Services Operations

            The following table summarizes the underwriting results for this segment:

(U.S. dollars in thousands)

	(Unaudited) Six Months Ended June 30
	2003			2002			% Change
Net premiums earned	$	62,780		$	25,367			147.5	%
Fee income and other		509			1,570			(67.6	)%
Net losses and loss expenses		22,283			3,026			NM
Acquisition costs		9,039			6,003			50.6	%
Operating expenses		22,306			19,349			15.3	%
Underwriting profit (loss)	$	9,661		$	(1,441	)		NM
Net investment income – financial guarantee	$	10,673		$	12,620			(15.4	)%
Net realized and unrealized gains on weather and energy derivatives		15,633			3,912			NM
Operating expenses — weather and energy		10,810			7,079			52.7	%
Equity in net income of financial affiliates		17,176			2,488			NM
Minority interest		5,298			4,135			28.1	%
Contribution from financial operations	$	37,035		$	6,365			NM
Net realized and unrealized (losses) on credit derivatives	$	(21,930	)	$	(8,768	)		NM

            Net premiums earned increased in the first six months of 2003 as compared to the first six months of 2002 primarily due to growth and new financial guaranty business written and the continuing effect of the underlying long term nature of this business.

            Net losses and loss expenses in the six months ended June 30, 2003 increased as compared to the first six months of 2002 due to the Company’s reserving practices against an increase in premiums earned and also due to an increase in reported reserves notified to the Company on certain reinsured contracts.

            Acquisition costs increased by a lower percentage than the increase in net premium earned in the first six months of 2003 as compared to 2002 due to a change in the mix of business earned.

            Operating expenses related to both the financial guaranty and weather and energy businesses increased in the first six months of 2003 as compared to the first six months of 2002 due to the continued expansion of these operations.

            Net investment income from financial guaranty operations declined in the six months ended June 30, 2003 as compared to the first six months ended June 2002 primarily due to a decline in general market interest rates.

            The fair value adjustment for weather and energy risk management derivative products in the first six months of 2003 increased as compared to the first six months of 2002 due primarily to gains on natural gas option contracts and increased weather transactional activity.

            Equity in net income of financial affiliates increased in the first six months of 2003 as compared to the first six months of 2002 primarily due to increased earnings in the second quarter of 2003 related to the Company’s investment in Primus.

            The increase in minority interest in the first six months of 2003 as compared to the first six months of 2002 is due to an increase in the profitability of XL Financial Assurance Ltd. of which 15% is held by a minority shareholder.

41

            In prior periods, the Company’s credit derivative transactions written at primary layers on a partially funded or finite basis were included in the insurance segment. Effective January 1, 2003 the Company now manages all credit default swap transactions in this segment and prior period segment results have been amended to conform to this change. The Company recorded net unrealized losses of $21.4 million and losses of $8.8 million in the six months ended June 30, 2003 and 2002, respectively, related to the fair value adjustment for credit default swaps. These unrealized losses primarily arose in the second quarter of 2003 and 2002 from the deterioration of credit quality for certain credit pools. The vast majority of financial guaranty coverage that is written in swap form pertains to tranches of collateralized debt obligations and asset backed securities, particularly the higher rated tranches with 91% co vering “A” to “AAA” tranches.

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Financial Products and Services— Life and Annuity Operations

            The Company commenced writing life business in this segment in the fourth quarter of 2002.

            The following summarizes net income from life operations:

(U.S. dollars in thousands)

	(Unaudited) Six Months Ended June 30
	2003		2002
Net premiums earned	$	23,411	$	—
Fee income and other		50		—
Claims and policy benefits		19,247		—
Acquisition costs		1,460		—
Operating expenses		4,091		—
Net investment income		12,549		—
Interest expense		4,927
Net income from life operations	$	6,285	$	—

            Net premiums earned related to certain blocks of U.S. based term life mortality reinsurance business written that was novated to the Company from Annuity and Life Reassurance, Ltd. in December 2002.

            Claims and policy benefits and acquisition costs also related primarily to this novated block of business.

            Operating expenses reflect the continued build-out of the overall life business, including expenses associated with the municipal reinvestment contract business.

            Net investment income in the first half of 2003 includes income earned on the assets associated with acquisition of future policy benefit reserves and interest earned on the municipal reinvestment contracts written.

            Interest expense relates to the accretion charge for the deposit liabilities associated with the municipal reinvestment contracts written in this segment.

Investment Activities

            The following table illustrates the change in net investment income and net realized and unrealized losses on investments and investment derivative instruments for the periods ended June 30, 2003 and 2002:

(U.S. dollars in thousands)

	(Unaudited) Six Months Ended June 30
	2003		2002			% Change
Net investment income — general operations	$	294,089	$	300,907			(2.3	)%
Equity in net income of investment affiliates (Note 1)		61,104		40,116			52.3	%
Net realized gains (losses) on investments		89,024		(216,022	)		NM
Net realized and unrealized gains (losses) on investment       derivative instruments		8,533		(9,754	)		NM

Note 1. Equity in net income of investment affiliates for the six months ended June 30, 2003 includes income on the alternative investment portfolio for the five months ending May 31, 2003 only, as opposed to six months in the period ended June 30, 2002 in order for the Company to meet the accelerated SEC filing deadlines going forward. The fair market values of certain of these alternative investments often takes longer to obtain as compared to other of the Company’s investments and therefore are unavailable at the time of the quarter close. Going forward, returns will be for a full quarter, lagged by one month.

43

            Net investment income related to general operations decreased moderately in the first six months of 2003 as compared to the first six months of 2002 reflecting the continuing decline in yields partially offset by the growth in the investment base. During 2003 the growth in the total investment base was due primarily to net cash provided by operations. In 2002, the growth of the total investment base included the receipt of funds related to new debt and preferred shares issued by the Company in 2002 and net cash provided by operations and deposit liabilities. The yield on the fixed income portfolio was 3.7% for the six months ended June 30, 2003 as compared to 5.4% for the six months ended June 30, 2002.

            Equity in net income of investment affiliates increased in the first six months of 2003 compared to the first six months of 2002 due mainly to strong performance of certain of the Company’s investment funds as compared to lower overall returns on these funds in the second quarter of 2002. This is in addition to the fact that, as noted above, income for the alternative investment portfolio was for a five month period only in the first half of 2003 as compared to six months in the first half of 2002.

            At June 30, 2003 and 2002, approximately 40% of the investment portfolio could not be meaningfully compared to applicable public market indices. This includes the deposit and regulatory holdings that are subject to investment restrictions and the Company’s structured portfolio (i.e. assets supporting deposit liabilities and future policy benefit reserves) where, due to the unique nature of the underlying liabilities, customized benchmarks are used to measure performance. For those portions of the investment portfolio (approximately 60%) that could be meaningfully compared to public market indices, the following is a summary of the investment performance for the first six months of 2003 and 2002:

	Six Months ended June 30, 2003		Six Months ended June 30, 2002
Asset/Liability Portfolios
U.S. Investment Grade, Moderate Duration		4.3%		3.3%
Lehman Aggregate Bond Index		3.9%		3.8%
Relative Performance		0.4%		(0.5)%
U.S. Investment Grade, Low Duration		2.0%		1.7%
Salomon 1-3 Year Treasury Index		1.3%		2.4%
Relative Performance		0.7%		(0.7)%
Euro Aggregate, Unhedged		4.4%		1.6%
Lehman Euro Aggregate Index		4.5%		(0.1)%
Relative Performance		(0.1)%		1.7%
Pan European, Hedged		12.4%		10.0%
Merrill U.K. / Merrill Pan Europe Composite		11.1%		8.0%
Relative Performance		1.3%		2.0%
U.K. Sterling, Unhedged		4.0%		2.8%
Merrill U.K. Sterling Broad Index, 1-10 Years		4.0%		3.1%
Relative Performance		—		(0.3)%
Risk Asset Portfolios — Fixed Income
U.S. Moderate Grade		13.4%		(3.4)%
Investment Grade / High Yield Composite		10.2%		0.7%
Relative Performance		3.2%		(4.1)%

44

	Six Months ended June 30, 2003		Six Months ended June 30, 2002
U.S. High Yield		13.7%		(11.1)%
CS First Boston High Yield Index		17.3%		0.2%
Relative Performance		(3.6)%		(11.3)%
Risk Asset Portfolios — Equities
U.S. Large Cap Growth Equity		(12.8)%		(17.7)%
Russell 1000 Growth Index		(13.0)%		(20.8)%
Relative Performance		0.2%		(3.1)%
U.S. Large Cap Value Equity		12.4%		(1.9)%
Russell 1000 Value Index		11.4%		(4.9)%
Relative Performance		1.0%		3.0%
U.S. Small Cap Equity		19.2%		1.7%
Russell 2000 Index		17.8%		(4.8)%
Relative Performance		1.4%		6.5%
Non-U.S. Equity		8.2%		0.2%
MSCI EAFE Index		9.5%		(1.6)%
Relative Performance		(1.3)%		1.8%
Risk Asset Portfolios — Alternative Investments
Alternative Investments (Note 1)		4.7%		4.4%
Standard and Poor’s 500 Index (Note 1)		10.4%		(13.2)%
Relative Performance		(5.7)%		17.6%

Note 1. The alternative investment portfolio returns and the Standard and Poor’s 500 Index returns for the six months ended June 30, 2003 includes returns for the five months ended May 31, 2003 only, as opposed to the six months ended June 30, 2002 in order for the Company to meet the accelerated SEC filing deadlines going forward. The fair market values of certain of these alternative investments often takes longer to obtain as compared to other of the Company’s investments and therefore are unavailable at the time of the quarter close. Going forward, returns for the alternative investment portfolio will be lagged by one month.

            Net realized gains on investments in the first six months of 2003 included net realized gains of $202.7 million from sales of investments and net realized losses of approximately $113.7 million related to the write-down of certain of the Company’s fixed income and equity investments where the Company determined that there was an other than temporary decline in the value of those investments. Net gains on sales of investments were realized mainly due to the decline in interest rates during the six months. The other than temporary decline in value in the first six months of 2003 was primarily due to declines in the U.S. and non-U.S. equity markets.

            Net realized losses on investments in the first half of 2002 included a loss of $92.5 million of certain fixed income and equity telecommunications securities, including WorldCom and Adelphia, and a loss of $80.0 million of certain other fixed income and equity investments where the Company believed that there was an other than temporary decline in the value of those investments.

45

            The Company’s process for identifying declines in the fair value of investments that are other than temporary involves consideration of several factors. These factors include: (i) the time period during which there has been a significant decline in value; (ii) an analysis of the liquidity, business prospects and overall financial condition of the issuer; (iii) the significance of the decline; (iv) an analysis of the collateral structure and other credit support, as applicable, of the securities in question; and (v) the Company’s intent and ability to hold the investment for a sufficient period of time for the value to recover. Where the Company’s analysis of the above factors results in the Company’s conclusion that declines in fair values are other than temporary, the cost of the security is written down to fair value and the previously unrealized loss is therefore realized.

            Net realized and unrealized gains on investment derivatives in the six months ended June 30, 2003, of $8.5 million as compared to a loss of $9.7 million in the six months ended June 30, 2002, primarily resulted from the Company’s investment strategy to economically hedge against interest and foreign exchange risk within the investment portfolio. See Item 3, “Quantitative and Qualitative Disclosure About Market Risk”, for a more detailed analysis.

Other Revenues and Expenses

            The following table sets forth other revenues and expenses for the six months ended June 30, 2003 and 2002:

(U.S. dollars in thousands)

	(Unaudited) Six Months Ended June 30
	2003			2002			% Change
Equity in net (loss) income of insurance affiliates	$	(41,741	)	$	(2,040	)		NM
Amortization of intangible assets		750			625			20.0	%
Corporate operating expenses		68,953			47,428			41.0	%
Interest expense		87,495			81,761			7.0	%
Income tax expense		31,039			36,854			(15.8	)%

            The equity in net loss of insurance affiliates for the six months ended June 30, 2003 includes an other than temporary decline of $40.9 million in the value of the Company’s investment in Annuity and Life Re. The investment was written down to its fair value of $2.1 million at March 31, 2003. There has been no decline in the fair value between March 31, 2003 and June 30, 2003.

            Corporate operating expenses in the six months ended June 30, 2003 increased compared to the six months ended June 30, 2002 due to the continued build-out of the Company’s global infrastructure in developing its network of shared service organizations to support operations in certain locations and new costs related to the Company’s global branding campaign.

            The increase in interest expense primarily reflected a higher accretion charge on the deposit liabilities due to growth in this business. Accretion on the deposit liabilities for the six months ended June 30, 2003 and 2002 were $43.7 million and $28.4 million, respectively. This increase was due to new deposit liability contracts written since June 30, 2002. Interest expense relating to notes payable and debt declined from $53.4 million to $43.8 million due to the inclusion of amortization of debt issuance expenses in the first half of 2002 related to the issue of the Zero Coupon Convertible Debentures (“CARZ”) and the Liquid Yield Option Notes (“LYONS”) in 2001. For more information, see “Financial Condition and Liquidity.”

            The decrease in the Company’s income taxes arose principally from a decrease in the profitability of certain of the Company’s U.S. and European operations during the second quarter of 2003.

46

Financial Condition and Liquidity

            As a holding company, the Company’s assets consist primarily of its investments in subsidiaries, and the Company’s future cash flows depend on the availability of dividends or other statutorily permissible payments from its subsidiaries. The ability to pay such dividends is limited by the applicable laws and regulations of the various countries the Company operates in including, among others, Bermuda, the United States, Ireland, Switzerland and the United Kingdom, and those of the Society of Lloyd’s and certain contractual provisions. No assurance can be given that the Company or its subsidiaries will be permitted to pay dividends in the future.

            The Company and its subsidiaries provide no guarantees or other commitments (express or implied) of financial support to the Company’s subsidiaries or affiliates, except for express written financial support provided by XL Insurance (Bermuda) Ltd in connection with the Company’s financial guaranty subsidiaries and where other express written guarantee or other financial support arrangements are in place.

            The Company’s ability to underwrite business is dependent upon the quality of its claims paying and financial strength ratings as evaluated by independent rating agencies. As a result, in the event that the Company is downgraded, its ability to write business would be adversely affected particularly in financial guaranty and long-tailed insurance and reinsurance lines of business. In the normal course of business, the Company evaluates its capital needs to support the volume of business written in order to maintain its claims paying and financial strength ratings. As measured by Standard & Poor’s, the Company currently has a group rating of “AA”, and its financial guaranty subsidiaries are rated “AAA”. As measured by Moody’s, the Company currently has an “Aa2” and “Aaa” financial strength rating for its principal insurance and reinsurance subsidiaries and financial guarantee subsidiaries, respectively. The Company’s financial guaranty subsidiaries also carry “AAA” ratings from Fitch. The Company regularly provides financial information to these agencies to both maintain and enhance existing ratings.

Financial Condition

            At June 30, 2003, total investments available for sale and cash, net of unsettled investment trades, were $20.6 billion compared to $18.1 billion at December 31, 2002. This increase in investment assets related primarily to cash flow generated from operating activities for the six months of $1.5 billion and new deposit liability contracts of $672.6 million. At June 30, 2003 the Company’s total investments available for sale, including fixed maturities, short-term investments and equity securities, managed by outside investment management firms represented approximately 90% of invested assets. At June 30, 2003, approximately 94% of fixed maturity and short-term investments were rated investment grade, with 70% rated “Aa” or “AA” or better by a nationally recognized rating agency. Using the Standard & Poor’s rating scale, the average quality of the fixed income portfolio was “AA”. In addition, the net unrealized gain on investments available for sale increased by $424.3 million in the six months ended June 30, 2003 due mainly to a decline in interest rates during this period.

             For the six months ended June 30, 2003, currency translation adjustment gains were $91.0 million. This is shown as part of accumulated other comprehensive income and primarily related to unrealized gains on foreign currency exchange rate movement at the Company’s subsidiaries, where operations have a functional currency that is not the U.S. dollar.

            The Company establishes reserves to provide for estimated claims, the general expenses of administering the claims adjustment process and for losses incurred but not reported. These reserves are calculated using actuarial and other reserving techniques to project the estimated ultimate net liability for losses and loss expenses. The Company’s reserving practices and the establishment of any particular reserve reflect management’s judgment concerning sound financial practice and does not represent any admission of liability with respect to any claims made against the Company. No assurance can be given that actual claims made and payments related thereto will not be in excess of the amounts reserved.

            Inflation can, among other things, potentially result in larger claims. The Company’s underwriting philosophy is to adjust premiums in response to inflation.

47

            Liquidity and Capital Resources

            Certain business written by the Company has loss experience generally characterized as having low frequency and high severity. This may result in volatility in both the Company’s results and operational cash flows. Operational cash flows during the first six months of 2003 increased to $1.5 billion from $564.6 million during the same period of 2002 primarily due to the receipt of premiums, in line with the significant growth in net premiums written. In the six months ended June 30, 2003 and 2002, the net amount of losses paid by the Company for general, life and financial operations was $1.6 billion and $1.2 million, respectively. The increase in net paid losses in the first six months of 2003 is primarily due to growth in operations. The significant cash flow from operating activities is reflected in the growth of investment assets.

            Unpaid losses and loss expenses recoverable grew by 12% from December 31, 2002 reflecting in part the growth of the underlying business as evidenced by the similar growth in unpaid losses and loss expenses. In addition, there has been significant development in the pre July 1, 2001 (the effective date of the acquisition) claims related to the acquired operations of Winterthur International. Under the terms of the sale and purchase agreement with Winterthur Swiss Insurance Company (the “Seller”), the Seller provides the Company protection against such development. At June 30, 2003, the total recoverable from the Seller related to this adverse loss development was $637.2 million, up from $514.8 million at December 31, 2002. For further information, see the Company's Notes to Consolidated Financial Statements for the year ended December 31, 2002, note 6(c) included in item 8 of Form 10-K.

            In the six months ended June 30, 2003, the Company invested approximately $21.9 million in new investment affiliates.

            In July 2003, the Company acquired new offices at 70 Gracechurch Street, London which will become the Company’s new London headquarters. The acquisition was under a purchase, sale and leaseback transaction. The move to the new premises is expected to be the summer of 2004 and this will consolidate the Company’s eight London businesses.

            As at June 30, 2003, the Company had bank, letter of credit and loan facilities available from a variety of sources including commercial banks totaling $5.4 billion, of which $1.9 billion in debt was outstanding. In addition, $2.3 billion of letters of credit were outstanding, 6% of which were collateralized by the Company’s investment portfolio, principally supporting U.S. non-admitted business and the Company’s Lloyd’s capital requirements.

            The following table presents the Company’s indebtedness under outstanding securities and lenders’ commitments as at June 30, 2003:

(U.S. dollars in thousands)

							Payments Due By Period
Notes Payable And Debt	Commitment		In Use		Year Of Expiry		Less Than 1 Year		1 To 3 Years		4 To 5 Years		After 5 Years
364-day revolver	$	675,000	$	—		2004	$	—	$	—	$	—	$	—
7.15% Senior Notes		99,979		99,979		2005		—		100,000		—		—
6.58% Guaranteed Senior Notes		255,000		255,000		2011		—		—		—		255,000
6.50% Guaranteed Senior Notes (1)		597,281		597,281		2012		—		—		—		600,000
Zero Coupon Convertible    Debentures (“CARZ”) (1)		633,839		633,839		2021		—		—		—		1,010,833
Liquid Yield Option    Notes( (“LYONS”) (1)		304,299		304,299		2021		—		—		—		511,351
Total	$	2,565,398	$	1,890,398			$	—	$	100,000	$	—	$	2,377,184

(1)

“Commitment” and “In Use” data represent June 30, 2003 accreted values. “Payments due by period” represents ultimate redemption values. The convertibles may be “put” or converted by the bondholders at various times prior to the 2021 redemption dates. The next “put” date is September 8, 2003 for the LYONs, as described below, and May 23, 2004 for the CARZ. The Company may also choose to “call” the debt from May and September 2004 onwards for the CARZ and LYONS, respectively.

To the extent that holders of the LYONS tender any LYONS for the purchase by the Company on September 8, 2003, the Company has elected to pay all the purchase price in cash. In the event all of the outstanding LYONS are tendered for repurchase, the aggregate purchase price would be $305.9 million.

48

The total pre-tax interest expense on the borrowings described above was $43.8 million and $53.4 million for the six months ended June 30, 2003 and 2002, respectively.

The following table presents, as at June 30, 2003, the Company’s letter of credit facilities available, in use and when those facilities are due to expire:

							Amount Of Commitment Expiration Per Period
Other Commercial Commitments	Commitment		In Use		Year Of Expiry		Less Than 1 Year		1 To 3 Years		4 To 5 Years		After 5 Years
Letter of Credit Facilities	$	3,307,979	$	2,337,478		2003/4	$	3,307,979	$	—	$	—	$	—

            The Company has several letter of credit facilities provided on a syndicated and bilateral basis from commercial banks. These facilities (as well as the off balance sheet collateral and contingent capital arrangements described below) are principally utilized to support non-admitted insurance and reinsurance operations in the U.S. and with respect to the commercial bank facilities, capital requirements at Lloyd’s. All of the commercial facilities are scheduled for renewal within the coming twelve months. In addition to letters of credit, the Company has established insurance trusts in the U.S. that provide cedants with statutory relief under state insurance regulations in the U.S. It is anticipated that the commercial facilities will be renewed on expiry but such renewals are subject to the availability of credit from banks utilized by the Company. In the event that such credit support is insufficient, the Company could be required to provide alternative security to cedants. This could take the form of additional insurance trusts supported by the Company’s investment portfolio or funds withheld using the Company’s cash resources. The value of letters of credit required is driven by, among other things, loss development of existing reserves, the payment pattern of such reserves, the expansion of business written by the Company and the loss experience of such business.

            The Company entered into a new $100.0 million letter of credit facility in January 2003 to provide additional capacity to support the Company’s U.S. non-admitted business. This facility was subsequently increased to $200.0 million in June 2003. $100.0 million of this capacity was utilized at June 30, 2003 and $200.0 million was utilized at August 8, 2003.

            In February 2003, the Company entered into an aggregate of $300.0 million of commercial paper-based credit facilities (the “Credit Facilities”). These facilities were increased to $500.0 million in June 2003. The proceeds of advances under the facilities were used to fund a trust account to collateralize the reinsurance obligations of the Company under an intercompany quota share reinsurance agreement. The Company could face additional obligations under the Credit Facilities prior to the stated maturity of February 25, 2007, if certain events were to occur, including, but not limited to the Company’s insolvency, withdrawal of assets from the Regulation 114 trust by the ceding company, the downgrade of the Company’s credit ratings below certain specified levels, or the failure of the agent to have a first priority perfected security interest in the collateral posted by the Company. At maturity, the Company will be obligated to make payments in an amount equal to the principal and accrued interest outstanding under the credit facilities. The issued securities and the Company’s repayment obligations are recorded as a net balance on the Company’s balance sheet.

            In June 2003, the Company renewed its principal revolving credit and letter of credit facility. The facility was increased from $2.0 billion to $2.5 billion of which up to $675 million is available as revolving credit and up to $2.3 billion is available in the form of letters of credit, with the combined total not to exceed $2.5 billion.

            In July 2003, the Company entered into a contingent capital transaction with an aggregate value of $500 million. This transaction also provides the Company with an insurance trust that provides the Company with statutory relief under state insurance regulations in the U.S. Under the terms of this facility, the Company has acquired an irrevocable put option to issue preference ordinary shares into a trust in return for proceeds raised from investors. This put option may be exercised by the Company at any time. In addition, the Company may be required to issue preference ordinary shares to the trust under certain circumstances, including, but not limited to, the non-payment of the put option premium and a ratings downgrade of the Company.

            For information regarding cross-default and certain other provisions in the Company’s debt and convertible securities documents, see Item 7 of the Company’s Form 10-K for the year ended December 31, 2002.

            The Company has had several share repurchase programs in the past as part of its capital management strategy. On January 9, 2000, the Board of Directors authorized a program for the repurchase of shares up to $500.0 million. Under this plan, the Company has purchased 6.6 million shares at an aggregate cost of $364.6 million or an average cost of $55.24 per share. The Company has $135.4 million remaining in its share repurchase authorization. During the six months ended June 30, 2003, no shares were repurchased in the open market. The Company has repurchased shares from employees and directors in relation to withholding tax on restricted stock.

            With respect to variable interest entities, the consolidation requirements of FASB Interpretation No. 46 “Consolidation of Variable Interest Entities” (“FIN 46”) apply immediately to variable interest entities created after January 31, 2003. For entities created prior to January 31, 2003, the consolidation requirements apply in the first fiscal year or interim period beginning after June 15, 2003. Based on structures and contracts currently in place, the effect of adoption of this standard on the Company’s financial condition would be an increase in both assets and liabilities of approximately $1.7 billion. Management is pursuing alternatives with regard to restructuring these variable interest entities. For more information regarding variable interest entities and other off-balance sheet arrangements, see Item 7 of the Company’s Form 10-K for the year ended December 31, 2002.

49

Current Outlook

            The Company believes that current strong market for premium rate increases and favorable terms and conditions will continue into 2005 for most lines of property and casualty business that the Company writes. It is anticipated that pricing increases experienced on certain casualty lines will be sustained for the medium term. Shorter-tail lines, such as property, aviation and marine, have experienced some softening in pricing, although still at attractive levels. The Company believes there are still a number of unresolved issues in the market including lack of resolution on asbestos claims, which to the Company are insignificant, but for other companies they are not. These issues are expected to continue to put pressures on premium rates and competition. Investment income is expected to be constrained by lowe r yields but cash flow from operations is expected to continue to be strong for the remainder of 2003.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

            The Company enters into derivatives and other financial instruments for risk management and trading purposes. The Company’s derivative transactions can expose the Company to credit derivative risk, weather and energy risk, investment market risk, and foreign currency exchange rate risk. The Company manages these risks based on guidelines established by senior management. Derivative instruments are carried at fair value with resulting changes in fair value recognized in income in the period in which they occur.

            Value-at-risk (“VaR”) is one of the tools used by management to estimate potential losses in fair values using historical rates, market movements and credit spreads to estimate the volatility and correlation of these factors to calculate the potential loss that could occur over a defined period of time given a certain probability.

            This risk management discussion and the estimated amounts generated from the sensitivity and VaR analyses presented in this document are forward-looking statements of market risk assuming certain adverse market conditions occur. Actual results in the future may differ materially from these estimated results due to, among other things, actual developments in the global financial markets. The results of analysis used by the Company to assess and mitigate risk should not be considered projections of future events of losses. See generally “Cautionary Note Regarding Forward-Looking Statements.”

Credit Derivatives

            The Company has written certain financial guaranty transactions in derivative or swap form. The Company does not actively trade these transactions and generally issues and holds these contracts to maturity. Changes in fair value can result from changes in market credit spreads, supply and demand for similar type instruments, changes in future loss and/or recovery estimates, interest rates and credit rating upgrades or downgrades. The Company therefore is at risk for changes in fair value due to changes in any of the above factors.

Weather and Energy Derivatives

            The Company offers weather and energy risk management products in insurance or derivative form to end-users, and manages the risks in the over-the-counter and exchange traded derivatives markets. In addition to entering into transactions with end-users, the Company also maintains a weather and energy derivatives trading portfolio, partially as a means of hedging a portion of its exposure. The fair values of these transactions are determined using available market data and internal pricing models using consistent statistical methodologies.

            The Company’s aggregate average, low and high seasonal VaR amounts for its weather risk management portfolio, calculated at a 99% confidence level, during the period ended June 30, 2003 were $151.8 million, $131.8 million and $175.6 million, respectively. The corresponding levels for the weather risk management portfolio during the period ended June 30, 2002 were $55.4 million, $25.8 million and $101.6 million, respectively. The Company calculates its aggregate VaR by summing the VaR amounts for each of its seasonal portfolios. The Company’s aggregation methodology yields a conservative aggregate portfolio VaR, given that current weather events and patterns have an immaterial effect on expectations for future seasons and the Company could therefore greatly reduce or eliminate its VaR on future seasons by selling its positions prior to the beginning of a season. At present, the Company’s VaR calc ulation does not exceed $60 million in any one season. Since VaR statistics are estimates based on historical data and market information, VaR should not be viewed as an absolute, predictive gauge of future financial performance or as a way for the Company to predict risk. There can be no assurance that the Company’s actual future losses will not exceed its VaR amounts.

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            For the energy portfolio, VaR is calculated using a one-day holding period. Management has established a daily VaR limit for this portfolio of $3.5 million. The Company’s average, low and high daily VaR amounts calculated at a 99% confidence level, during the period ended June 30, 2003 were $2.4 million, $1.8 and $2.9 million, respectively. The corresponding amounts during the period ended June 30, 2002 were $0.6 million, $0.2 million and $1.1 million, respectively.

            The following table summarizes the movement in the fair value of weather and energy derivative contracts outstanding during the six months ended June 30, 2003:

(U.S. dollars in thousands)

	Six Months Ended June 30, 2003
Fair value of contracts outstanding, beginning of the year	$	(6,024	)
Option premiums received, net of premiums realized (1)		(97,851	)
Reclassification of settled contracts to realized (2)		108,315
Other changes in fair value (3)		(102,528	)
Fair value of contracts outstanding, end of period	$	(98,088	)

______________

(1)   For the six month period ended June 30, 2003, the Company collected $213.3 million of paid premiums and realized $115.5 million of premiums on expired transactions for a net increase in the balance sheet derivative liability of $97.9 million.

(2)   The Company paid $108.3 million to settle derivative positions during the six month period ended June 30, 2003, resulting in a reclassification of this amount from unrealized to realized and a reduction in the balance sheet derivative liability.

(3)   This represents the effects of changes in commodity prices, the time value of options, and other valuation adjustments (of $102.5 million) on the Company’s derivative positions, primarily attributable to the hedges of the positions that realized $115.5 million of premiums.

The change in fair value of contracts outstanding at June 30, 2003 as compared to the beginning of the year is primarily due to the increased volume of weather and energy derivative contracts written during the first six months of 2003.

The following table summarizes the maturity of weather and energy derivative contracts outstanding as of June 30, 2003:

(U.S. dollars in thousands)

Source of Fair Value	Less Than 1 Year			1-3 Years		4-5 Years		Greater Than 5 Years		Total Fair Value
Prices actively quoted	$	(112,884	)	$	45	$	—	$	—	$	(112,839	)
Prices based on models and other    valuation methods		3,145			8,848		2,758		—		14,751
Total fair value of contracts    outstanding	$	(109,739	)	$	8,893	$	2,758	$	—	$	(98,088	)

            In managing its weather and energy risk management business, the Company seeks to identify, assess, monitor and manage its market, credit, operational and legal risks in accordance with defined policies and procedures. The Company’s senior management takes an active role in the risk management process and has developed and implemented policies and procedures that require specific administrative and business functions to assist in the identification, assessment and control of various risks within the operation. Due to the changing nature of the global marketplace, the Company’s risk management policies, procedures and methodologies are constantly evolving and are subject to ongoing review and modification. Market, credit, operational, legal and other risks are inherent in the Company’s weather and energy risk management business and cannot be wholly eliminated despite the Company’s risk manag ement policies, procedures and methodologies.

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Investment Market Risk

            The Company’s investment portfolio consists of exposures to fixed income securities, equities, alternative investments, derivatives, business and other investments, and cash. These securities and investments are denominated in both U.S. dollar and foreign currencies.

            Through the structure of the Company’s investment portfolio, the Company’s earnings are directly affected by changes in the valuations of the securities and investments held in the investment portfolio. These valuation changes reflect changes in interest rates (e.g. changes in the level, slope and curvature of the yield curves, volatility of interest rates, mortgage prepayment speeds and credit spreads), credit quality, equity prices (e.g. changes in prices and volatilities of individual securities, equity baskets and equity indices) and foreign currency exchange rates (e.g. changes in spot prices, forward prices and volatilities of currency rates). Market risk therefore arises due to the uncertainty surrounding the future valuations of these different assets, the factors that impact their values and the impact that this could have on the Company’s earnings.

            The Company seeks to manage the risks of the investment portfolio through a combination of asset class, country, industry and security level diversification and investment manager allocations. Further, individual security and issuer exposures are controlled and monitored at the investment portfolio level, via specific investment constraints outlined in investment guidelines and agreed with the external investment professionals. Additional constraints are agreed with the external investment professionals in order to address exposures to eligible securities, prohibited investments/transactions, credit quality and general concentration limits.

            The Company’s direct use of investment derivatives includes futures, forwards, swaps and option contracts that derive their value from underlying assets, indices, references rates or a combination of these factors. When investment guidelines allow for the use of derivatives, these can generally only be used for the purposes of managing interest rate risk, foreign exchange risk and credit risk, provided that the use of such instruments is incorporated in the overall portfolio duration, spread, convexity and other relevant portfolio metrics. The direct use of derivatives is not permitted to economically leverage the portfolio outside of the stated guidelines. Derivatives may also be used to add value to the investment portfolio where market inefficiencies are perceived to exist, to utilize cash holdings to purchase equity indexed derivatives and to adjust the duration of a portfolio of fixed income securities to match the duration of related deposit liabilities.

Investment Value-At-Risk

            The VaR of the total investment portfolio at June 30, 2003, based on a 95% confidence level with a one month holding period, was approximately $409.2 million. The VaR of all investment related derivatives, excluding investments in affiliates and other investments was approximately $6.7 million. The Company’s investment portfolio VaR as at June 30, 2003 is not necessarily indicative of future VaR levels.

            To complement the VaR analysis which is based on normal market environments, the Company considers the impact on the investment portfolio in several different historical stress periods to analyze the effect of unusual market conditions. The Company establishes certain historical stress test scenarios which are applied to the actual investment portfolio. As these stress tests and estimated gains and losses are based on historical events, they will not necessarily reflect future stress events or gains and losses from such events. The results of the stress test scenarios are reviewed on a regular basis to ensure they reflect current shareholders equity, market conditions and the Company’s total risk profile. Given the investment portfolio allocations as at June 30, 2003, the Company would expect to lose approximately 4.2% of the portfolio if the most damaging event stress tested was repeated, all other things held equal. Given the investment portfolio allocations as at June 30, 2003, the Company would expect to gain approximately 13.3% of the portfolio if the most favorable event stress tested was repeated, all other things held equal. The Company assumes that no action is taken during the stress period to either liquidate or rebalance the portfolio and believes that this fairly reflects the potential decreased liquidity that is often associated with stressed market environments.

Investment Credit Risk

            The Company is exposed to credit risk through its portfolio of debt securities which has historically been a significant exposure in the investment portfolio. As at June 30, 2003, the average credit quality of the Company’s total fixed income portfolio, which includes fixed maturities, short term investments, cash and cash equivalents and net payable for investments purchased, was “AA”.

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            The Company’s total fixed income portfolio credit quality breakdown as at June 30, 2003 is shown in the following table:

Rating	Percentage of Total Fixed Income Exposure(1)
AAA		58.2%
AA		11.4%
A		15.4%
BBB		9.4%
BB and Below		5.6%

______________

(1) Portfolio includes fixed maturities, short term investments, cash and cash equivalents and net payable for investments purchased.

            Individual corporate holdings in the portfolio are diversified, exceeding 1,000 separate issuer exposures. As at June 30, 2003, the top 10 corporate exposures represented approximately 6% of the total fixed income portfolio (excluding operating cash balances) and approximately 15% of the corporate holdings. The top 10 corporate holdings listed below utilizes a conservative approach to aggregation as it includes unsecured as well as securitized, credit enhanced and collateralized securities issued by parent companies and their affiliates.

Top 10 Corporate Exposures as at June 30, 2003(1)	Percentage of Total Fixed Income Exposure
Citigroup Inc.		0.92%
General Electric Company		0.83%
JP Morgan Chase & Co.		0.81%
Morgan Stanley		0.63%
Ford Motor Company		0.57%
General Motors Corporation		0.52%
Verizon Communications Inc.		0.47%
Household International, Inc.		0.47%
Bank of America Corporation		0.44%
Goldman Sachs Group, Inc.		0.42%

______________

(1) Corporate exposures include parent and affiliated companies that issue fixed income securities. In some cases a portion of the market value may be invested in bonds that are securitized or have sufficient credit enhancement that provides a long-term credit rating that is higher than the rating of the unsecured debt of the parent company.

Interest Rate and Equity Price Risk

            The Company believes that VaR is an appropriate indicator of the risk of the portfolio, however an immediate 100 basis point adverse shift in global treasury government bond curves would result in a decrease in total return of 5.0% or $818.0 million in the Company’s fixed income portfolio at June 30, 2003. It is unlikely that all global yield curves would shift in the same direction at the same time. In evaluating the impact of price changes in the equity portfolio, a 10% change in equity prices would affect total return by approximately $55.0 million at June 30, 2003.

            At June 30, 2003, bond and stock index futures outstanding were $73.5 million with underlying investments having a market value of $1.0 billion. Gains of $2.1 million were realized on these contracts for the six months ended June 30, 2003. The Company reduces its exposure to these futures through offsetting transactions, including options and forwards.

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Foreign Currency Exchange Risk

            The Company uses foreign exchange contracts to manage its exposure to the effects of fluctuating foreign currencies on the value of its foreign currency fixed maturities and certain of its foreign currency equity investments. These contracts are not designated as specific hedges for financial reporting purposes and therefore, realized and unrealized gains and losses on these contracts are recorded in income in the period in which they occur. These contracts generally have maturities of three months or less. At June 30, 2003 and 2002, forward foreign exchange contracts with notional principal amounts totaling $62.0 million and $7.1 million, respectively were outstanding. The fair value of these contracts as at June 30, 2003 and 2002 was $59.4 million and $12.2 million, respecti vely, with an unrealized gain of $2.6 million in 2003 and an unrealized loss of $5.1 million in 2002. For the six months ended June 30, 2003 and 2002, realized gains of $1.6 million and realized gains of $0.1 million, respectively, and unrealized gains of $3.8 million and unrealized losses of $2.9 million, respectively, were recorded in net realized and unrealized gains and losses on derivative instruments.

            The Company also manages the exchange volatility arising on certain administration costs denominated in foreign currencies. Throughout the year, forward contracts are entered into to acquire foreign currencies at an agreed rate in the future. At June 30, 2003, the Company had forward contracts outstanding for the purchase of $4.7 million of Euros at fixed rates. The unrealized gain on these contracts at June 30, 2003 was $5.5 million.

            In February 2003, the Company entered into a series of forward exchange contracts to cover approximately 60%, or $116.7 million (£70 million), of the Company’s exposure to a U.K. sterling reinsurance recoverable balance at one of its U.K. based insurance operations. The mark to market value of these contracts was an unrealized loss of $5.5 million at June 30, 2003.

ITEM 4. CONTROLS AND PROCEDURES

            The Company has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, as of the end of the period covered by this report, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic SEC filings.

            There have been no changes in the Company’s internal controls over financial reporting identified in connection with the evalutation described above that occurred during the Company’s fiscal period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

            The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides a “safe harbor” for forward-looking statements. Any prospectus, prospectus supplement, the Company’s Annual Report to ordinary shareholders, any proxy statement, any Form 10-K, Form 10-Q, Form 10-Q/A or Form 8-K of the Company or any other written or oral statements made by or on behalf of the Company may include forward-looking statements which reflect the Company’s current views with respect to future events and financial performance. Such statements include forward-looking statements both with respect to the Company in general, and to the insurance, reinsurance and financial products and services sectors in particular (both as to underwriting and investment matters). Statements which include the words “expect”, “intend”, “plan”, “believe”, “project”, “anticipat e”, “will”, and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the PSLRA or otherwise.

            All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements. The Company believes that these factors include, but are not limited to, the following: (i) rate increases and improvements in terms and conditions may not be as large or significant as the Company is currently projecting; (ii) the timely and full recoverability of reinsurance placed by the Company with third parties, or other amounts due to the Company, including, without limitation, amounts due to the Company from the Seller in connection with the Company’s acquisition of Winterthur International; (iii) the projected amount of ceded reinsurance recoverables and the ratings and creditworthiness of reinsurers may change; (iv) the timing of claims payments being faster or the rece ipt of reinsurance recoverables being slower than anticipated by the Company; (v) ineffectiveness or obsolescence of the Company’s business strategy due to changes in current or future market conditions; (vi) increased competition on the basis of pricing, capacity, coverage terms or other factors; (vii) greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than the Company’s underwriting, reserving or investment practices anticipate based on historical experience or industry data; (viii) developments in the world’s financial and capital markets which adversely affect the performance of the Company’s investments and the Company’s access to such markets; (ix) the potential impact on the Company from government-mandated insurance coverage for acts of terrorism; (x) the potential impact of off-balance sheet arrangements on the Company; (xi) developments in bankruptcy proceedings or other developments related to bankru ptcies of companies insofar as they affect property and casualty insurance and reinsurance coverages or claims that the Company may have as a counterparty; (xii) availability of borrowings and letters of credit under the Company’s credit facilities; (xiii) changes in regulation or tax laws applicable to the Company or its subsidiaries, brokers or customers; (xiv) acceptance of the Company’s products and services, including new products and services; (xv) changes in the availability, cost or quality of reinsurance; (xvi) changes in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers; (xvii) loss of key personnel; (xviii) the effects of mergers, acquisitions and divestitures; (xix) changes in rating agency policies or practices; (xx) changes in accounting policies or practices or the application thereof; (xxi) legislative or regulatory developments; (xxii) changes in general economic conditions, including inflation, foreign currency exchange rate s and other factors; (xxiii) the effects of business disruption or economic contraction due to war, terrorism or other hostilities; and (xxiv) the other factors set forth in the Company’s other documents on file with the SEC. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein or elsewhere. The Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

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XL CAPITAL LTD
PART II — OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

            At the Annual General Meeting of Class A Shareholders held on May 9, 2003 at the Executive Offices of the Company, XL House, One Bermudiana Road, Hamilton HM 11, Bermuda, the ordinary shareholders approved the following:

1. The election of four Class II Directors to hold office until 2006:

	Votes in Favor		Votes Withheld
D.R. Comey		116,508,827		4,629,423
B.M. O’Hara		120,302,637		835,613
J.T. Thornton		120,093,920		1,044,330
J.W. Weiser		116,499,833		4,638,417

2. The appointment of Pricewaterhouse Coopers LLP, New York, New York, to act as the independent auditors of
the Company for the fiscal year ending December 31, 2003:

Votes In Favor	Votes Withheld	Abstentions
117,659,418	2,814,802	664,030

3. The approval of the amendment and restatement of the Company’s 1991 Performance Incentive Program:

Votes In Favor	Votes Withheld	Abstentions
110,595,588	9,807,697	734,965

4. The approval of the amendment and restatement of the Company’s Directors Stock & Option Plan that expires in 2003:

Votes In Favor	Votes Withheld	Abstentions
97,996,199	22,400,524	741,527

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   EXHIBITS

10.62   Service Agreement Relative to Sureties, Letters of Guarantees and International Stand-By Letters of Credit between Société Le Mans Re and Credit Lyonnais, dated April 25, 2003.

10.63   First Renewal dated November 27, 2000 to the Reinsurance Stand-by Letter of Credit Agreement between Le Mans Re and BNP Paribas, dated October 7, 1999.

10.64   364-Day Credit Agreement dated June 25, 2003 between XL Capital Ltd, X.L. America, Inc., XL Insurance (Bermuda) Ltd, XL Europe Ltd and XL Re Ltd, as account parties and guarantors, and JPMorgan Chase Bank, as administrative agent.

10.65   Letter of Credit Facility and Reimbursement Agreement dated November 18, 2002, amended and restated as of June 26, 2003 between XL Capital Ltd as account party and XL Capital Ltd, X.L. America, Inc., XL Insurance (Bermuda) Ltd, XL Europe Ltd and XL Re Ltd as guarantors and Citibank International PLC as agent and security trustee.

10.66   Standby Letter of Credit Agreement between National Australia Bank Limited, New York Branch and XL Capital Ltd, X.L. America, Inc., XL Insurance (Bermuda) Ltd, XL Europe Ltd and XL Re Ltd, as Applicants, dated July 25, 2003.

56

31   Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

32   Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

99.1   XL Capital Assurance Inc. unaudited condensed financial statements for the three and six month periods ended June 30, 2003 and 2002.

99.2   XL Financial Assurance Ltd. unaudited condensed financial statements for the three and six month periods ended June 30, 2003 and 2002.

99.3   Declaration of Trust dated May 22, 2003, among Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Initial Purchaser, and The Bank of New York (Delaware), as Trustee.

99.4   Put Option Agreement between XL Capital Ltd and Mangrove Bay Trust, dated July 11, 2003.

99.5   Declaration of Trust dated May 22, 2003, among The Bank of New York (Delaware), as Trustee, GSS Holdings II, Inc., as Tax Matters Partner, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Initial Purchaser.

99.6   Trust Agreement dated July 11, 2003, between XL Reinsurance America Inc., as Beneficiary, XL Re Ltd., as Grantor, and The Bank of New York, as Trustee.

99.7   ISDA Master Agreement, Schedule and Credit Support Annex dated July 11, 2003, between Merrill Lynch International and Mangrove Bay Trust.

99.8   ISDA Master Agreement and Schedule dated July 11, 2003, between XL Capital Ltd and Mangrove Bay Trust.

99.9   Assignment Agreement dated July 11, 2003, among XL Re Ltd, Mangrove Bay Trust and The Bank of New York.

99.10   Asset Put Option Agreement, dated July 11, 2003, between Merrill Lynch International and XL Reinsurance America Inc.

99.11   Excerpts from the Authorizing Resolutions of the Special Finance Committee of XL Capital Ltd, dated July 3, 2003.

(b)   REPORTS ON FORM-8-K

   None

57

SIGNATURES

            Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	XL CAPITAL LTD
	(Registrant)
Dated: August 14, 2003	/S/ BRIAN M. O’HARA
	Brian M. O’Hara
	President and Chief Executive Officer
Dated: August 14, 2003	/S/ JERRY DE ST. PAER
	Jerry de St. Paer
	Executive Vice President and Chief Financial Officer

58

EX-10.62

SERVICE AGREEMENT

between

Société LE MANS RE

and

CREDIT LYONNAIS

Agreement relative to sureties, LGs and international stand-by L/Cs

AGREEMENT RELATIVE to SURETIES, LETTERS of
GUARANTEES and INTERNATIONAL STAND-BY L/Cs

Between

LE MANS Re
A corporation with capital of € 204,642,240
whose Registered Office is situate in LE MANS (72000) (FRANCE) Immeuble Novaxis, 33 A
49 bd Alexandre Oyor
registered with the Registrar of Business Companies in Le Mans under n° 412341943
herein represented by Mr Jacques LEMAIRE
in his capacity as Manager – Administration and Finance, fully empowered to enter into the
undertakings provided for herein,
Hereinafter called the “Company ” of the first part,

and

CREDIT LYONNAIS, a corporation with capital of € 1,808,394,053
whose Registered Office is in LYON (69002) France at 18 rue de la République and with
its Head Office in PARIS (75002) France at 19 Boulevard des Italiens,
registered with the Registrar of Business Companies in Lyon under n° 954 509 741
herein represented by Mr Bruno WALLAERT
in his capacity as Manager of the Banks and Institutionals branch,

hereinafter called the “Bank” of the second part,

Le Mans Ré/Crédit Lyonnais Service Agreement April 2003 2

PURPOSE

LE MANS Re and CREDIT LYONNAIS, wishing to maximize the quality of their relations in the area of sureties and international guarantees, want to enter into several reciprocal obligations.

These obligations shall relate particularly to the terms and conditions of performance of operations relative to sureties, L/Gs and international stand-by L/Cs.

The following Bank units are concerned by this Agreement:

                [ ] the Banks and Institutionals Branch which shall attend to the commercial relation with the Company and which shall interface between the Company and the Commercial Support Unit (UAC).

                [ ] the Commercial Support Unit (U.A.C.) Contracts section in charge of the administration of sureties, L/Gs and international stand-by L/Cs and of the issuance of letters of respectability (France/foreign countries) which shall interface between the Company and the International Guarantees Dept.

                [ ] the International Guarantees Dept in charge of the technical aspects and of the actual issuance and delivery of sureties, L/Gs and international stand-by L/Cs.

Le Mans Ré/Crédit Lyonnais Service Agreement April 2003 3

CONTENTS

Premises – Definitions	3
1 – Issuance and delivery of guarantees	3
2 – Call and enforcement of guarantees	4
3 – Client’s repayment undertaking	5
4 – Discharge of liability	5
4-1 – General principles	6
4-2 – Documents	6
4-3 – Partial or total release of liability	6
5 – Charges and fees	7
6 – Guarantors’ information	7
7 – Representations and Warranties by Company	7
8 – Term of the Agreement	8
9 – Governing law – Competent jurisdiction	9
Appendix 1: request from the Company to issue guarantees	10
Appendix 2: schedule of fees and charges	11

Le Mans Ré/Crédit Lyonnais Service Agreement April 2003 4

PREMISES – DEFINITIONS

In this document, we consider at all times that requests for the issuance and delivery of guarantees are within authorized limits. The lines must have been authorized before the process of arranging the guarantee begins. This Agreement shall continue to govern guarantees issued before the expiry of authorized lines.

The parties agree that, as used herein, “undertaking” means any and all personal sureties which can be the object of obligations undertaken by the Bank at the Company’s request, such as sureties and independent guarantees however called: on demand letters of guarantee, independent guarantees, stand-by L/C, etc ... The contents of the document more than the name shall determine the exact legal characters of the undertaking, depending either on its accessory character in the case of sureties or its independent character relative to the principle contract for independent guarantees.

1 – Issuance and delivery of undertakings

The Company agrees to send by telefax to both the International Guarantees Dept and the UAC the form in Appendix 1 (or 1a) specifying the particular characteristics of the undertaking to be issued and delivered and making express reference hereto together with all documents necessary to meet the request. This telefax shall represent a formal request to issue the undertaking. There shall be no confirmation via an original issuance letter.

In the event the wording is imposed by either the beneficiary or the Company, such request shall be sent together with the wording of the document to be issued, as well as all documents and explanations necessary to examine the document to be issued.

This form shall be signed by the duly empowered officer or officers of the Company (the powers shall have been previously sent by the Company to the Bank) and shall be binding upon the Company.

The Bank agrees to examine the Company’s request with all due care and within the shortest time frame, i.e. within 48 hours of receipt providing all the information necessary for the issuance of the required document is in its possession.

The Bank shall nevertheless be under no obligation to issue and deliver every requested undertaking. It shall however notify the Client within the same time period if it is not agreeable to issue and deliver the undertaking.

Le Mans Ré/Crédit Lyonnais Service Agreement April 2003 5

2 – Call and enforcement of Undertakings

                [ ] the Company agrees to indemnify the Bank and hold it harmless for and against all the risks and damages which could result from the claims of the beneficiary of a surety, of a letter of guarantee or a stand-by L/C (or the correspondent bank) against the Bank.

                [ ] for those undertakings which, according to their provisions, have the legal character of independent obligations, totally irrespective of how they are called (letters of guarantee, stand-by L/Cs, etc…) in accordance with their terms and international banking practice, the Bank may be led to make good on undertaken obligations without delay at the request of either the beneficiary or its foreign correspondent, while the latter does not have to justify any claim against the Company and the Bank cannot urge any objections that the Company could raise against the beneficiary.

As a consequence thereof:

- if the Bank is called to pay it shall under no circumstances, as regards those undertakings which have the legal character of independent obligations as above specified, have to take into account any objections that the Company could raise to oppose the enforcement of these obligations and it shall not have to obtain the Company’s agreement to comply. The Bank shall not either have to take into account any exception that the Company can ask it to urge under the principal contract.

3 – Client’s repayment undertaking

Upon the Bank's notice to the Company that a partial or total payment is called by the beneficiary of the undertaking, the Company shall repay the claimed amount to the Bank forthwith without having the possibility, as regards those undertakings which have the legal character of independent obligations as referred to above, to challenge the merits of the payment or urge any exceptions based on the principal contract.

The same rule shall apply to the Company, for sureties governed by article 2001 and following of the French Code of Civil law when the Company has not notified the Bank of its reasons to challenge the payment to the beneficiary within eight days from the date of the enforcement notice sent by the Bank.

The Company expressly and irrevocably gives the Bank – this being a joint interest mandate – full instructions to charge its current account opened in the Bank’s books or any account it would decide to open in its books with the amounts the latter would have

Le Mans Ré/Crédit Lyonnais Service Agreement April 2003 6

disbursed under obligations of any kind and nature undertaken under issuance and delivery requests hereunder

The Company also authorizes the Bank to debit its account:

- with commissions and fees due to the Bank as agreed in article 5 hereof,

- if appropriate, as and when they are claimed to the Bank by its correspondent in accordance with its general terms and conditions, costs, duties, taxes and levies whatsoever and commissions and fees, if any, borne or charged by the latter.

- either from the date of issuance and delivery of the undertaking until the date on which the letter of guarantee is returned or on which the beneficiary or the correspondent shall have expressly released the Bank’s liability.
- or from the date of issue of the undertaking until its expiry date.

To enable the Bank to make the authorized debits as abovementioned and to charge the charges and fees as agreed in article 5 in respect of which the Company gives its debit authorization herein, the Company agrees to leave sufficient funds in its account.

4 – Release of Liability

4-1 General principles

The release of liability shall result from the provisions of the document itself and/or from the specific terms set by the correspondent or from the laws and regulations of the country of the beneficiary

The termination of the undertaking, meant as the specification in the document that the guarantee cannot be called after a certain date or a certain event even in connection with debts that arose prior to such date or event can be put forward by the Bank when there is no doubt whatsoever and subject to any provision to the contrary of applicable laws and regulations. Subject to the same reservations, the Company can put forward facts triggering the termination of the undertaking in accordance with its terms. The Bank shall consider that it is finally released from liability vis a vis the beneficiary only when the triggering facts are undisputably established by the Company allowing for the rules of any nature relative to the issuance of the relevant documentary evidence. The Bank shall under no circumstances be bound to assume the existence of such facts and events based on other facts or prima facie evidence nor to cause any construction or appreciation to prevail over any other

Le Mans Ré/Crédit Lyonnais Service Agreement April 2003 7

Liability is automatically released following events and/or on the faith of documents only when this has been expressly specified in the original undertaking. Otherwise the International Guarntees Dept has to obtain the beneficiary’s approval.

The practical terms of articles 4.2 and 4.3 below shall apply subject to the foregoing.

4-2 Documents

The Company agrees to provide the required documents as specified in the text of the guarantee for total or partial releases of liability when the latter are expressly authorized in the text of the undertaking.

As long as any of these documents has not been received by the Bank, the Bank shall continue to be bound by its obligations and fees continue to accrue.

4-3 Partial or total release of liability

The Bank hereby agrees to process partial or total releases of liability within a maximum of five days from their date of receipt by the International Guarantees Department.

In the event an expiry date is specified and if the original instrument is not returned or if the Guarantor’s liability is not released by the beneficiary, the Guarantor’s liability shall be fully and automatically released thirty working days from the expiry date, save as otherwise provided by the laws or regulations applicable to it.

If the Guarantor’s liability is automatically released or if tendered documents are in conformity with the wording of the undertaking, the Bank agrees to issue an execution notice specifying the reduction or the total release within one week of the Computer data capture.

If the documents are not in conformity, the Bank agrees to notify the Company over the telephone, with a written confirmation, if appropriate, of any observed discrepancies.

If the Bank has to obtain the Beneficiary’s approval, the Bank agrees to send to the client copies of the requests and tracers sent to local banks.

5 – Charges and fees

The charges and fees payable to the Bank are specified in Appendix 2. The fees are determined effective from the date of issue of the undertaking. They are paid quarterly upfront for any other quarter or part thereof.

Le Mans Ré/Crédit Lyonnais Service Agreement April 2003 8

The fees and charges, if any, of the correspondent bank that has issued the undertaking shall be charged in addition.

6 – Guarantor’s Information

The Bank agrees to send to the Company in January each year, the statutory statement showing all obligations undertaken for its account and outstanding as of 31st December the previous year

The outstanding balance under SBLCs amounts to USD 31,595,000 as of 16th April 2003 for an authorized amount of USD 50,000,000 valid until December 2003.

7 – Representations by the Company

The Company shall make its own affair of the consequences, if any, of payments made by the Bank hereunder

The Company hereby indemnifies and holds the Bank harmless for an against any and all risks which may arise from the issuance and delivery of requested undertakings.

8 – Term of the Agreement

This Agreement is entered into for an unspecified period of time. It can be terminated at any time by either party subject to sending to the other a three month prior notice of termination.

On the date of termination, all outstanding guarantees shall remain valid and the Company shall remain bound unto the Bank for all these obligations under issued undertakings.

Le Mans Ré/Crédit Lyonnais Service Agreement April 2003 9

9 – Governing law – Competent jurisdiction

This agreement shall be governed by, and construed according to, French law. The parties hereby submit to the exclusive competence of the Courts within the jurisdiction of the Paris Court of Appeal.

Signed in [ Paris ]. This [ 25 ] day of [ April ] 2003
In three original counterparts

LE MANS RE	CREDIT LYONNAIS
	/s/ JOSIANE BOURDIN
	Josiane BOURDIN
	Responsable
	Crédits Documentaires
	Garanties Internationales

Le Mans Ré/Crédit Lyonnais Service Agreement April 2003 10

EX-10.63

Translation for information purposes only

LE MANS RE

JL/cg

BNP PARIBAS

41, Bd du Maréchal Foch

49100 ANGERS

For the attention of M Frédéric Tollu

Le Mans, 27 November 2000

Dear Sirs

Following our recent interview and our telephone conversation today, we confirm our agreement relating the renewal of the reinsurance stand-by letters of credit on the following terms:

• 0.30% (instead of 0.25%) per year on the unitary amount of each letter of credit with a minimum of US$350 per year, the other terms remaining unchanged.
  
• In the case of the creation of security collateral made up of OECD securities it remains 0.25% but with a minimum of US$350 per year.
  

We are therefore at your disposal to deal with this agreement according to the normal methods as well as to deposit the collateral according to whatever methods you would like to specify to us, the cover ratio being 105% and applying to the sovereign securities issued by the states of the OECD.

Yours faithfully

     Jacques Lemaire
Administrative and Finance Director

Copies for information:	M de la Guierce (MMA)
	M Loison (MMA)
	M Le Bozec (MMA)

Translation for information purposes only

GENERAL CONDITIONS FOR THE ISSUE OF LETTERS OF CREDIT

Between the undersigned

PARIBAS, a limited company with a board of directors and a board of trustees with a share capital of FRF 16,407,476,000, the registered office of which is at 3 rue d’Antin, 75002 Paris and which is registered at the Trade and Companies Registry with the number PARIS B 662 047 885, represented by M. Patrick RAKOTOARISOA and M. Antoine MARTINEZ. Hereafter called “PARIBAS”.

LE MANS RE, a limited company with a share capital of FRF 404,884,479, a business governed by the insurance code with a registered office at 19/21 rue Chanzy 72000 LE MANS.

Trade and Companies Register number: LE MANS 3 412 041 943, represented by M. Jean-Luc BOURGAULT and M. Clément JOURDAIN. Hereafter called “the Instructing Party”.

Firstly, on the basis that:

- The Instructing Party is to seek, for its reinsurance operations, that stand-by letters of credit be issued (hereafter “Letters of Credit”) in order to guarantee that its obligations under the above-mentioned operations are carried out.

- It has been agreed, as between the undersigned, that a simplified procedure for delivering the Letters of Credit is to be implemented. These general conditions are to describe how this is to be operate.

It is understood as follows:

Article 1: Issue of the Letters of Credit

Every request for a Letter of Credit to be issued must be sent either by telex, by fax or by registered letter with acknowledgment of receipt, or by remote transmission (if a licensing agreement for the use of the Lynx-LC package is concluded between PARIBAS and the Instructing Party) by the Instructing Party to PARIBAS ref 467, 3 rue d’Antin, 75002 Paris at least ten days before the date the relevant Letter of Credit is to be issued. This period of ten days will start to run when PARIBAS

- 2 -

receives the above-mentioned telex, fax, registered letter with acknowledgment of receipt or remote transmission.

Every request for a Letter of Credit to be issued must refer to these General Conditions for the Issue of Letters of Credit and include, as a minimum, reference to the following:

- Name of the Instructing Party

- Maximum amount of the Letter of Credit

- Date the Letter of Credit comes into force

- Expiry date of the Letter of Credit

- Name of the beneficiary of the Letter of Credit

- Wording of the Letter of Credit

The issue as well as the wording of each Letter of Credit must be expressly accepted by PARIBAS.

Each Letter of Credit will be issued for a maximum period of one year and will be renewed by PARIBAS for a period of one year from the date of expiry unless (i) notice that it will not be renewed is given by PARIBAS by registered letter with acknowledgment of receipt or by telex at least 30 days before the expiry date of the Letter of Credit in question, or (ii) a request for non-renewal is sent by the Instructing Party to PARIBAS by registered letter with acknowledgment of receipt or by telex at least 60 days before the date of expiry of the Letter of Credit in question.

Article 2: Remuneration

The Instructing Party will make a payment to PARIBAS calculated on the basis of the maximum amount of the Letters of Credit issued and the period during which the afore-mentioned Letters of Credit are valid, in the following manner:

0.25% per year of the unit amount of each Letter of Credit with a minimum of US$280 per year.

This payment will be debited from the Instructing Party’s account n° 7234 V held by PARIBAS, provided that the account is sufficiently in credit at the time each of the relevant Letters of Credit are issued.

This payment will be debited from the Instructing Party’s account n° 7234 V held by PARIBAS at the end of each quarter, provided that the account is sufficiently in credit. For each Letter of Credit which is issued after the start of a quarter or where the term ends before the end of a quarter, this payment will be calculated for the whole of the quarter in question.

Article 3: New circumstances

If the costs involved in issuing the Letters of Credits are to be borne by PARIBAS as a result of new legislation or regulations, or a new directive or recommendation from a proper authority, or a modification to any law, regulation or directive (such as, for example, in relation to reserves or

- 3 -

obligatory deposits, capital and permanent resource margins, liquid or other assets, or any tax, right, duty or other taxation other than a tax on the total income of companies), PARIBAS will inform the Instructing Party and as a result propose that the payments be increased.

In the event where, within sixty days of the Instructing Party receiving notice that one of the circumstances set out in the preceding paragraph has occurred, the Instructing Party and PARIBAS do not come to an agreement on the new terms to be applied to the payments, the Instructing Party will undertake to indemnify PARIBAS against the costs resulting from the above-mentioned circumstances on production of the relevant proof that such amounts have been incurred.

Article 4: Reimbursement

It is expressly understood that PARIBAS is not obliged to consider the reasons for the use of of a Letter of Credit by its beneficiary, nor to judge the validity of these reasons.

The Instructing Party is obliged to reimburse at first request all principal sums, interest and costs that PARIBAS may have to pay in respect of the Letters of Credit issued to its order under this agreement and the Instructing Party already authorises PARIBAS to debit its account n° 7234 V held by PARIBAS with all amounts for which it is indebted to PARIBAS, as a result of the above, provided that the account is sufficiently in credit. The Instructing Party waives its right in advance to contest the validity of such payments made as a result of PARIBAS carrying out its obligations in relation to the Letters of Credit.

All payments of principal, interest, commission and/or related payments in favour of PARIBAS must be made net of all taxes and duties of any kind, present or future, which are payable on such sums irrespective of the means of recovery used. The Instructing Party in particular therefore will reimburse PARIBAS for all taxes, rights or duties, present or future, relating to these payments, with the exception of corporate tax.

The Instructing Party undertakes to make sufficient provision in its account n° 7234 V which has been opened in dollars with PARIBAS to reimburse the amounts due to PARIBAS in relation to the Letters of Credit. If this provision is not sufficient at the time the account is debited by PARIBAS in accordance with the provisions set out in this agreement, the Instructing Party will pay on the amounts due interest calculated at a rate equal to the monthly average of the average day to day US dollar rates applied to transactions carried out by PARIBAS on the inter-bank market, increased by a margin of 200 basis points, until the total amount is reimbursed.

Interest due from the Instructing Party will be payable monthly by debiting account n° 7234 V.

- 4 -

Article 5: Warranties

The Instructing Party warrants and these warranties are deemed to be repeated every time a request for a Letter of Credit to be issued is made:

- that the action in question is not contrary to any of the provisions in its articles of association;

- that it is a French law company with full legal capacity to possess and to exercise its rights, and that the signatories to this agreement are validly authorised to sign it and to bind the company;

- that all the finance documents which have been produced to PARIBAS are accurate, have been prepared according to generally applicable accounting principles and present an accurate reflection of the results for each financial year;

- that since the closing date of the last financial year, nothing has occurred which could prevent the obligations as set out in this document from being carried out;

- that the Instructing Party has not granted any real or personal surety to guarantee an accomodation granted to it or a third party:

       which is likely to prevent it from meeting its obligations as set out in these documents or which could affect the make up or the value of its assets,

       which, when granted, is likely to create an accomodation or a priority in relation to the rights of PARIBAS,

- that its obligations under this credit agreement will be ranked equally with those entered into in relation to other banking establishments;

- that it has obtained all authorisations which will be ultimately required for both the reinsurance contracts and the Letters of Credit relating to these contracts.

Article 6: Covenants

For as long as the Letters of Credit remain in force, the Instructing Party covenants:

- to send to PARIBAS all documents which PARIBAS may deem useful in relation to itself and, if applicable, its subsidiaries, particulary its consolidated accounts certified to be compliant at the end of each financial year (balance sheet, income statement, etc);

- not to implement a significant change in its financial standing, its structure or its activities which may significantly affect its ability to meet its obligations under the current agreement;

- to keep PARIBAS promptly informed of any significant transformation affecting its structure, its nature or its capacity (particularly change of name, merger, demerger or conversion into a different type of company, change of registered office etc).

- 5 -

Article 7: Applicable law and jurisdiction

These general conditions are governed by French law. The courts of Paris have jurisdiction to deal with any litigation in relation to their validity, interpretation and/or the implementation of these general conditions.

The Letters of Credit are governed by the Standard Rules and Practices of the International Chamber of Commerce (Publication n° 500, 1993) and by French law. Only the courts of Paris have jurisdiction to deal with any litigation in relation to the validity, interpretation and/or the implementation of the Letters of Credit.

Signed: Paris, 7 October 1999 in two originals

The Instructing Party LE MANS RE

Represented by

Jean-Luc BOURGAULT	Clément JOURDAIN
PARIBAS
Represented by
Antoine MARTINEZ	Patrick RAKOTOARISOA

- 6 -

EX-10.64

EXECUTION COPY

364-DAY CREDIT AGREEMENT

dated as of

June 25, 2003

between

XL CAPITAL LTD, X.L. AMERICA, INC., XL INSURANCE (BERMUDA) LTD,
XL EUROPE LTD and XL RE LTD,
as Account Parties and Guarantors,

The LENDERS Party Hereto

and

JPMORGAN CHASE BANK,
as Administrative Agent

_____________

$2,500,000,000
_____________

     J.P. MORGAN SECURITIES INC.,
as Sole Advisor, Sole Lead Arranger and Sole Bookrunner,

BANK ONE, NA,
CITIBANK, N.A.,
DEUTSCHE BANK SECURITIES INC.
and
WACHOVIA BANK, N.A.,
as Co-Syndication Agents

and

MELLON BANK, N.A.,
as Documentation Agent

TABLE OF CONTENTS

		Page
ARTICLE I		1
DEFINITIONS		1
SECTION 1.01.	Defined Terms	1
SECTION 1.02.	Terms Generally	14
SECTION 1.03.	Accounting Terms; GAAP and SAP	15
ARTICLE II		15
THE CREDITS		15
SECTION 2.01.	Syndicated Letters of Credit.	15
SECTION 2.02.	Issuance and Administration	17
SECTION 2.03.	Reimbursement of LC Disbursements, Etc	17
SECTION 2.04.	Non-Syndicated Letters of Credit.	20
SECTION 2.05.	Participated Letters of Credit.	25
SECTION 2.06.	Alternative Currency Letters of Credit.	29
SECTION 2.07.	RC Sublimit; Revolving Credit Commitments.	31
SECTION 2.08.	Loans and Borrowings.	31
SECTION 2.09.	Requests for Borrowings	32
SECTION 2.10.	Funding of Borrowings.	33
SECTION 2.11.	Interest Elections	33
SECTION 2.12.	Termination and Reduction of the Commitments	35
SECTION 2.13.	Repayment of Loans; Term-Out Option; Evidence of Debt	35
SECTION 2.14.	Prepayment of Loans.	37
SECTION 2.15.	Fees.	37
SECTION 2.16.	Interest	39
SECTION 2.17.	Alternate Rate of Interest	40
SECTION 2.18.	Increased Costs.	40
SECTION 2.19.	Break Funding Payments	41
SECTION 2.20.	Taxes.	42
SECTION 2.21.	Payments Generally; Pro Rata Treatment; Sharing of Set-offs.	43
SECTION 2.22.	Mitigation Obligations; Replacement of Lenders	45
ARTICLE III		46
GUARANTEE		46
SECTION 3.01.	The Guarantee	46
SECTION 3.02.	Obligations Unconditional	47
SECTION 3.03.	Reinstatement	47
SECTION 3.04.	Subrogation	48
SECTION 3.05.	Remedies	48
SECTION 3.06.	Continuing Guarantee	48
SECTION 3.07.	Rights of Contribution	48
SECTION 3.08.	General Limitation on Guarantee Obligations	49
ARTICLE IV		49
	i

REPRESENTATIONS AND WARRANTIES		49
SECTION 4.01.	Organization; Powers	49
SECTION 4.02.	Authorization; Enforceability	49
SECTION 4.03.	Governmental Approvals; No Conflicts	50
SECTION 4.04.	Financial Condition; No Material Adverse Change	50
SECTION 4.05.	Properties.	50
SECTION 4.06.	Litigation and Environmental Matters.	51
SECTION 4.07.	Compliance with Laws and Agreements	51
SECTION 4.08.	Investment and Holding Company Status	51
SECTION 4.09.	Taxes	51
SECTION 4.10.	ERISA	51
SECTION 4.11.	Disclosure	52
SECTION 4.12.	Use of Credit	52
SECTION 4.13.	Subsidiaries	52
SECTION 4.14.	Withholding Taxes	53
SECTION 4.15.	Stamp Taxes	53
SECTION 4.16.	Legal Form	53
ARTICLE V		53
CONDITIONS		53
SECTION 5.01.	Effective Date	53
SECTION 5.02.	Each Credit Event	54
ARTICLE VI		55
AFFIRMATIVE COVENANTS		55
SECTION 6.01.	Financial Statements and Other Information	55
SECTION 6.02.	Notices of Material Events	57
SECTION 6.03.	Preservation of Existence and Franchises	57
SECTION 6.04.	Insurance	58
SECTION 6.05.	Maintenance of Properties	58
SECTION 6.06.	Payment of Taxes and Other Potential Charges and Priority Claims;
	Payment of Other Current Liabilities	58
SECTION 6.07.	Financial Accounting Practices	59
SECTION 6.08.	Compliance with Applicable Laws	59
SECTION 6.09.	Use of Letters of Credit and Proceeds	59
SECTION 6.10.	Continuation of and Change in Businesses	59
SECTION 6.11.	Visitation	59
ARTICLE VII		60
NEGATIVE COVENANTS		60
SECTION 7.01.	Mergers	60
SECTION 7.02.	Dispositions	60
SECTION 7.03.	Liens	60
SECTION 7.04.	Transactions with Affiliates	62
SECTION 7.05.	Ratio of Total Funded Debt to Total Capitalization	62
SECTION 7.06.	Consolidated Net Worth	62
SECTION 7.07.	Indebtedness	62
	ii

SECTION 7.08.	Claims Paying Ratings	63
SECTION 7.09.	Private Act	63
ARTICLE VIII		63
EVENTS OF DEFAULT		63
ARTICLE IX		66
THE ADMINISTRATIVE AGENT		66
ARTICLE X		68
MISCELLANEOUS		68
SECTION 10.01.	Notices	68
SECTION 10.02.	Waivers; Amendments	69
SECTION 10.03.	Expenses; Indemnity; Damage Waiver	70
SECTION 10.04.	Successors and Assigns	71
SECTION 10.05.	Survival	75
SECTION 10.06.	Counterparts; Integration; Effectiveness	75
SECTION 10.07.	Severability	76
SECTION 10.08.	Right of Setoff	76
SECTION 10.09.	Governing Law; Jurisdiction; Etc.	76
SECTION 10.10.	WAIVER OF JURY TRIAL	77
SECTION 10.11.	Headings	78
SECTION 10.12.	Treatment of Certain Information; Confidentiality	78
SECTION 10.13.	Judgment Currency	79
SCHEDULE I	-  Commitments
SCHEDULE II	-  Indebtedness and Liens
SCHEDULE III	-  Litigation
SCHEDULE IV	-  Environmental Matters
SCHEDULE V	-  Subsidiaries
EXHIBIT A	-  Form of Assignment and Assumption
EXHIBIT B-1	-  Form of Opinion of Paul S. Giordano, Esq., Counsel to XL Capital
EXHIBIT B-2	-  Form of Opinion of Charles R. Barr, Esq., Counsel to XL America
EXHIBIT B-3	-  Form of Opinion of Special U.S. Counsel to the Obligors
EXHIBIT B-4	-  Form of Opinion of Special Bermuda Counsel to XL Insurance and XL Re
EXHIBIT B-5	-  Form of Opinion of Special Cayman Islands Counsel to XL Capital
EXHIBIT B-6	-  Form of Opinion of Special Irish Counsel to XL Europe
EXHIBIT C	-  Form of Opinion of Special New York Counsel to JPMCB

iii

     364-Day Credit Agreement dated as of June 25, 2003, between XL CAPITAL LTD, a company incorporated under the laws of the Cayman Islands, British West Indies ("XL Capital"), X.L. AMERICA, INC., a Delaware corporation ("XL America"), XL INSURANCE (BERMUDA) LTD, a Bermuda limited liability company ("XL Insurance"), XL EUROPE LTD, a company incorporated under the laws of Ireland ("XL Europe") and XL RE LTD, a Bermuda limited liability company ("XL Re" and, together with XL Capital, XL America, XL Insurance and XL Europe, each an "Account Party" and each a "Guarantor" and collectively, the "AccountParties" and the "Guarantors"; the Account Parties and the Guarantors being collectively referred to as the "Obligors"), the LENDERS party hereto, and JPMORGAN CHASE BANK, as Administrative Agent.

     The Account Parties have requested that the Lenders issue letters of credit for their account and make loans to them in an aggregate face or principal amount not exceeding $2,500,000,000 at any one time outstanding, and the Lenders are prepared to issue such letters of credit and make such loans upon the terms and conditions hereof. Accordingly, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

     SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

     "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

     "Account Parties" means each of XL Capital, XL America, XL Insurance, XL Europe and XL Re.

     "Account Party Jurisdiction" means (a) Bermuda, (b) the Cayman Islands, (c) the Republic of Ireland and (d) any other country (i) where any Account Party is licensed or qualified to do business or (ii) from or through which payments hereunder are made by any Account Party.

     "Additional Margin" means (a) for each day that the aggregate outstanding principal amount of the Loans shall be greater than 50% of the aggregate outstanding Revolving Credit Commitments then in effect, a rate per annum equal to 0.10% or (b) from and after the Term-Out Option has been exercised and is in effect, at a rate per annum equal to 0.10%.

     "Adjusted LIBO Rate" means, for the Interest Period for any Eurodollar Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%)

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equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate for such Interest Period.

     "Administrative Agent" means JPMCB, in its capacity as administrative agent for the Lenders hereunder.

     "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent.

     "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly, Controls or is Controlled by or is under common Control with the Person specified.

     "Alternate Base Rate" means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day, and (b) the Federal Funds Effective Rate for such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, as the case may be.

     "Alternative Currency" means any currency other than Dollars (a) that is freely transferable and convertible into Dollars in the London foreign exchange market and (b) for which no central bank or other governmental authorization in the country of issue of such currency is required to permit use of such currency by any Lender for issuing, renewing, extending or amending letter of credits or funding or making drawings thereunder and/or to permit any Account Party to pay the reimbursement obligations and interest thereon, each as contemplated hereunder, unless such authorization has been obtained and is in full force and effect.

     "Alternative Currency LC Exposure" means, at any time, the sum of (a) the Dollar Equivalent of the aggregate undrawn amount of all outstanding Alternative Currency Letters of Credit at such time plus (b) the Dollar Equivalent of the aggregate amount of all LC Disbursements under Alternative Currency Letters of Credit that have not been reimbursed by or on behalf of the Account Parties at such time. The Alternative Currency LC Exposure of any Lender shall at any time be such Lender's share of the total Alternative Currency LC Exposure at such time.

     "Alternative Currency Letter of Credit" means a letter of credit issued by a Lender in an Alternative Currency pursuant to Section 2.06.

     "Alternative Currency Letter of Credit Report" has the meaning set forth in Section 2.06(b).

     "Applicable Margin" means (a) for the period from and including the date hereof to but not including the Commitment Termination Date, 0.365% per annum and (b) in the event that the Term-Out Option has been exercised and is in effect, for the period from and including the Commitment Termination Date to but not including the date of payment in full of the Loans, 0.615% per annum.

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     "Applicable Percentage" means, with respect to any Lender, the percentage of the Commitments of all the Lenders represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.

     "Approved Fund" means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

     "Assignment and Assumption" means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.

     "Availability Period" means the period from and including the Effective Date to and including the Commitment Termination Date.

     "Board" means the Board of Governors of the Federal Reserve System of the United States of America.

     "Borrowing" means (a) all ABR Loans made, converted or continued on the same date or (b) all Eurodollar Loans that have the same Interest Period.

     "Borrowing Request" means a request by an Account Party for a Borrowing in accordance with Section 2.09.

     "Business Day" means any day (a) that is not a Saturday, Sunday or other day on which commercial banks in New York City, London, the Cayman Islands, British West Indies, Bermuda or Ireland are authorized or required by law to remain closed and (b) if such day relates to a borrowing of, a payment or prepayment of principal of or interest on, a continuation or conversion of or into, or the Interest Period for, a Eurodollar Loan, or to a notice by an Account Party with respect to any such borrowing, payment, prepayment, continuation, conversion, or Interest Period, that is also a day on which dealings in Dollar deposits are carried out in the London interbank market.

     "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

     "Change in Control" means the occurrence of any of the following events or conditions: (a) any Person or group of Persons (as used in Sections 13 and 14 of the Securities Exchange Act of 1934, and the rules and regulations thereunder) shall have become the beneficial owner (as defined in rules promulgated by the SEC) of more than 40% of the voting

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securities of XL Capital; (b) the sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of XL Capital; or (c) a majority of the members of XL Capital's board of directors are persons who are then serving on the board of directors without having been elected by the board of directors or having been nominated for election by its shareholders.

     "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.18(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

     "Code" means the Internal Revenue Code of 1986, as amended from time to time.

     "Commitment" means, with respect to any Lender, the Letter of Credit Commitment or the Revolving Credit Commitment of such Lender, as applicable. The initial aggregate amount of the Lenders' Commitments is $2,500,000,000.

     "Commitment Termination Date" means June 23, 2004.

     "Confirming Lender" means, with respect to any Lender, any other bank that has agreed, by delivery of an agreement in form and substance satisfactory to the Administrative Agent that such other bank will itself honor the obligations of such Lender in respect of a draft complying with the terms of a Syndicated Letter of Credit or a Non-Syndicated Letter of Credit, as the case may be, as if, and to the extent, such other bank were the "Issuing Lender" named in such Syndicated Letter of Credit or Non-Syndicated Letter of Credit, as the case may be.

     "Consolidated Net Worth" means, at any time, the consolidated stockholders' equity of XL Capital and its Subsidiaries.

     "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto.

     "Credit Documents" means, collectively, this Agreement and the Letter of Credit Documents.

     "Credit Exposure" means (a) with respect to any Lender under the Letter of Credit Tranche at any time, the sum of the outstanding principal amount of such Lender's Loans and its LC Exposure thereunder at such time and (b) with respect to any Lender under the Revolving Credit Tranche at any time, the outstanding principal amount of such Lender's Loans thereunder at such time.

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     "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

     "Dollar Equivalent" means, as used in each Alternative Currency Letter of Credit Report and in respect of any Alternative Currency Letter of Credit, the amount of Dollars obtained by converting the Alternative Currency LC Exposure with respect to such Alternative Currency Letter of Credit, as specified in such Alternative Currency Letter of Credit Report, into Dollars at the spot rate for the purchase of Dollars with such currency as quoted by the Administrative Agent at approximately 11:00 a.m. (London time) on the second Business Day before the date of such Alternative Currency Letter of Credit Report (unless another rate or time is agreed to by XL Capital and the Administrative Agent).

     "Dollars" or "$" refers to lawful money of the United States of America.

     "Effective Date" means the date on which the conditions specified in Section 5.01 are satisfied (or waived in accordance with Section 10.02).

     "Environmental Laws" means any Law, whether now existing or subsequently enacted or amended, relating to (a) pollution or protection of the environment, including natural resources, (b) exposure of Persons, including but not limited to employees, to Hazardous Materials, (c) protection of the public health or welfare from the effects of products, by-products, wastes, emissions, discharges or releases of Hazardous Materials or (d) regulation of the manufacture, use or introduction into commerce of Hazardous Materials, including their manufacture, formulation, packaging, labeling, distribution, transportation, handling, storage or disposal.

     "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of an Account Party or any Subsidiary resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract or agreement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

     "Equity Rights" means, with respect to any Person, any subscriptions, options, warrants, commitments, preemptive rights or agreements of any kind (including any shareholders' or voting trust agreements) for the issuance, sale, registration or voting of, or securities convertible into, any additional shares of capital stock of any class, or partnership or other ownership interests of any type in, such Person.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.

     "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with any Account Party, is treated as a single employer under Section 414(b) or (c) of

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the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

     "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Account Party or any of such Account Party's ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Account Party or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by any Account Party or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by any Account Party or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Account Party or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

     "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

     "Event of Default" has the meaning assigned to such term in Article VIII.

     "Excess Funding Guarantor" has the meaning assigned to such term in Section 3.07.

     "Excess Payment" has the meaning assigned to such term in Section 3.07.

     "Excluded Taxes" means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of any Account Party hereunder, (a) Taxes imposed on (or measured by) its net income, net profits or overall gross receipts by the United States of America, or by any jurisdiction under the laws of which such recipient is organized or in which such recipient has an office or conducts business (other than a business that is deemed to arise solely by reason of both (I) the transactions contemplated by this Agreement and (II) an Account Party being organized, maintaining an office or conducting business in such jurisdiction), (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction in which such recipient is organized, has an office or conducts business (other than a business that is deemed to arise solely by reason of both (I) the transactions contemplated by this Agreement and (II) an Account Party being organized, maintaining an office or conducting business in such jurisdiction) or (c) any Tax that is not imposed solely as a result of a Change in Law formally announced after the date hereof, and (d) any Tax that is attributable to a recipient's failure or inability to comply with Section 2.20(e).

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     "Existing Credit Agreement" means the 364-Day Credit Agreement dated as of June 27, 2002 between the Obligors, the lenders party thereto, and JPMCB, as administrative agent for such lenders.

     "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

     "Financial Officer" means, with respect to any Obligor, a principal financial officer of such Obligor.

     "GAAP" means generally accepted accounting principles in the United States of America.

     "GIC" means a guaranteed investment contract or funding agreement or other similar agreement issued by an Account Party or any of its Subsidiaries that guarantees to a counterparty a rate of return on the invested capital over the life of such contract or agreement.

     "Governmental Authority" means the government of the United States of America, or of any other nation (including the European Union), or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

     "Granting Lender" has the meaning assigned to such term in Section 10.04.

     "Guarantee" means, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any property constituting security therefor for the purpose of assuring the holder of such Indebtedness, (ii) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including keepwell agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (iii) to lease or purchase property, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guarantee hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount of the Indebtedness in respect of which such Guarantee is made. The terms "Guarantee" and "Guaranteed" used as a verb shall have a correlative meaning.

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     "Guaranteed Obligations" has the meaning assigned to such term in Section 3.01.

     "Guarantors" means each of XL Capital, XL America, XL Insurance, XL Europe and XL Re.

     "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

     "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.

     "Indebtedness" means, for any Person, without duplication (it being understood, for the avoidance of doubt, that insurance payment liabilities, as such, and liabilities arising in the ordinary course of such Person's business as an insurance or reinsurance company (including GICs and Stable Value Instruments) or corporate member of The Council of Lloyd's or as a provider of financial or investment services or contracts (including GICs and Stable Value Instruments) (in each case other than in connection with the provision of financing to such Person or any of such Person's Affiliates) shall not be deemed to constitute Indebtedness): (i) all indebtedness or liability for or on account of money borrowed by, or for or on account of deposits with or advances to (but not including accrued pension costs, deferred income taxes or accounts payable of) such Person; (ii) all obligations (including contingent liabilities) of such Person evidenced by bonds, debentures, notes, banker's acceptances or similar instruments; (iii) all indebtedness or liability for or on account of property or services purchased or acquired by such Person; (iv) any amount secured by a Lien on property owned by such Person (whether or not assumed) and Capital Lease Obligations of such Person (without regard to any limitation of the rights and remedies of the holder of such Lien or the lessor under such capital lease to repossession or sale of such property); (v) the maximum available amount of all standby letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed); and (vi) all Guarantees of such Person.

     "Indemnified Taxes" means Taxes (including Other Taxes) imposed on the Administrative Agent or any Lender on or with respect to any payment hereunder or the execution, delivery or enforcement of this Agreement other than Excluded Taxes.

     "Insurance Subsidiary" means any Subsidiary which is subject to the regulation of, and is required to file statutory financial statements with, any governmental body, agency or official in any State or territory of the United States or the District of Columbia which regulates insurance companies or the doing of an insurance business therein.

     "Interest Election Request" means a request by an Account Party to convert or continue a Borrowing in accordance with Section 2.11.

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     "Interest Payment Date" means (a) with respect to any ABR Loan, each Quarterly Date and (b) with respect to any Eurodollar Loan, the last day of each Interest Period therefor and, in the case of any Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at three-month intervals after the first day of such Interest Period.

     "Interest Period" means, for any Eurodollar Loan or Borrowing, the period commencing on the date of such Loan or Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as specified in the applicable Borrowing Request or Interest Election Request; provided that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Loan initially shall be the date on which such Loan is made and thereafter shall be the effective date of the most recent conversion or continuation of such Loan, and the date of a Borrowing comprising Loans that have been converted or continued shall be the effective date of the most recent conversion or continuation of such Loans.

     "Issuing Lender" means (a) with respect to any Participated Letter of Credit, JPMCB, in its capacity as the issuer of such Participated Letter of Credit hereunder, and its successors in such capacity as provided in Section 2.05(j), (b) with respect to any Syndicated Letter of Credit, each Lender, in its capacity as the issuer of such Syndicated Letter of Credit and (c) with respect to any Non-Syndicated Letter of Credit, the Lender named therein as the issuer thereof.

     "JPMCB" means JPMorgan Chase Bank.

     "Law" means any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority.

     "LC Disbursement" means (a) with respect to any Participated Letter of Credit or Non-Syndicated Letter of Credit, a payment made by the Issuing Lender pursuant thereto and (b) with respect to any Syndicated Letter of Credit or Alternative Currency Letter of Credit, a payment made by a Lender pursuant thereto.

     "LC Exposure" means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements under Letters of Credit that have not yet been reimbursed by or on behalf of the Account Parties at such time. The LC Exposure of any Lender at any time shall be the sum of (i) its Applicable Percentage of the total LC Exposure (excluding any Alternative Currency LC Exposure) plus (ii) the Alternative Currency LC Exposure (if any) of such Lender at such time.

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     "Lenders" means the Persons listed on Schedule I and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. For the purposes of Sections 2.01, 2.02, 2.03, 2.04, 2.05 and 2.06, any reference to the term "Lender" or "Lenders" shall mean a Lender or the Lenders under the Letter of Credit Tranche.

     "Letter of Credit Documents" means, with respect to any Letter of Credit, collectively, any application therefor and any other agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for the rights and obligations of the parties concerned or at risk with respect to such Letter of Credit.

     "Letter of Credit Commitment" means, with respect to any Lender, the commitment of such Lender, if any, (a) to issue Syndicated Letters of Credit and Non-Syndicated Letters of Credit and acquire participations in Participated Letters of Credit and/or (b) to make Loans under Section 2.07(a), in each case expressed as an amount representing the maximum aggregate amount of such Lender's Credit Exposure hereunder, as such commitment may be (i) reduced from time to time pursuant to Section 2.12 and (ii) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Letter of Credit Commitment (including the RC Sublimit) is set forth on Schedule I or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Letter of Credit Commitment, as applicable. The initial aggregate amount of the Lenders' Letter of Credit Commitments is $2,325,000,000.

     "Letter of Credit Tranche" means the tranche hereunder relating to the Letter of Credit Commitments, the Letters of Credit issued and the Loans made thereunder and the Lenders having Letter of Credit Commitments or Credit Exposure in respect of such Letters of Credit and Loans.

     "Letters of Credit" means each of the Syndicated Letters of Credit, the Non-Syndicated Letters of Credit, the Participated Letters of Credit and the Alternative Currency Letters of Credit.

     "LIBO Rate" means, for the Interest Period for any Eurodollar Borrowing, the rate appearing on Page 3750 of the Telerate 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 Administrative 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 the offering of 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 LIBO Rate 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 Administrative 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.

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     "Lien" means, with respect to any asset, any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security.

     "Loans" means the loans made by the Lenders under any Tranche to the Account Parties pursuant to Section 2.07.

     "Margin Stock" means "margin stock" within the meaning of Regulations T, U and X of the Board.

     "Material Adverse Effect" means a material adverse effect on: (a) the assets, business, financial condition or operations of an Account Party and its Subsidiaries taken as a whole; or (b) the ability of an Account Party to perform any of its payment or other material obligations under this Agreement.

     "Maturity Date" means the Commitment Termination Date, as such date may be extended pursuant to the Term-Out Option.

     "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

     "NAIC" means the National Association of Insurance Commissioners.

     "NAIC Approved Lender" means (a) any Lender that is a bank listed on the most current Bank List of banks approved by the NAIC (the "NAIC Lender List") or (b) any Lender as to which its Confirming Lender is a bank listed on the NAIC Lender List.

     "Non-Syndicated Letters of Credit" means letters of credit issued under Section 2.04.

     "Non-U.S. Benefit Plan" means any plan, fund (including any superannuation fund) or other similar program established or maintained outside the United States by any Account Party or any of their Subsidiaries, with respect to which such Account Party or such Subsidiary has an obligation to contribute, for the benefit of employees of such Account Party or such Subsidiary, which plan, fund or other similar program provides, or results in, the type of benefits described in Section 3(1) or 3(2) of ERISA, and which plan is not subject to ERISA or the Code.

     "Obligors" means each of the Account Parties and each of the Guarantors.

     "Other Taxes" means any and all present or future stamp or documentary taxes or any other similar excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of this Agreement, but excluding property or similar taxes other than any such taxes imposed in such circumstances solely as a result of the Account Party being organized in, maintaining an office in, conducting business in or maintaining property located in the taxing jurisdiction in question.

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     "Participant" has the meaning assigned to such term in Section 10.04.

     "Participated Letters of Credit" means letters of credit issued under Section 2.05.

     "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

     "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

     "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which any Account Party or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

     "Prime Rate" means the rate of interest per annum publicly announced from time to time by JPMCB 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.

     "Private Act" means separate legislation enacted in Bermuda with the intention that such legislation apply specifically to an Account Party, in whole or in part.

     "Pro Rata Share" has the meaning assigned to such term in Section 3.07.

     "Quarterly Date" means the last Business Day of March, June, September and December in each year, the first of which shall be the first such day after the date hereof.

     "RC Sublimit" has the meaning assigned to such term in Section 2.07(a). The initial RC Sublimit is $500,000,000.

     "Register" has the meaning assigned to such term in Section 10.04.

     "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates.

     "Required Lenders" means, at any time, Lenders having Commitments representing more than 50% of the aggregate Commitments of all the Lenders at such time; provided that, if the Commitments have expired or been terminated, "Required Lenders" means Lenders having more than 50% of the aggregate Credit Exposure of the Lenders at such time. The "Required Lenders" of a particular Tranche means Lenders having Commitments under such Tranche representing more than 50% of the aggregate Commitments of all the Lenders under such Tranche at such time; provided that, if the Commitments under such Tranche have expired or been terminated, "Required Lenders" means Lenders under such Tranche having more than 50% of the aggregate Credit Exposure of the Lenders under such Tranche at such time.

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     "Revolving Credit Commitment" means, with respect to any Lender, the commitment of such Lender, if any, to make Loans under Section 2.07(b), as such commitment may be (a) reduced from time to time pursuant to Section 2.12 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of a Lender's Revolving Credit Commitment, if any, is set forth on Schedule I or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Revolving Credit Commitment, as applicable. The initial aggregate amount of the Lenders' aggregate Revolving Credit Commitments is $175,000,000.

     "Revolving Credit Tranche" means the tranche hereunder relating to the Revolving Credit Commitments, the Loans made thereunder and the Lenders having Revolving Credit Commitments or Credit Exposure in respect of such Loans.

     "SAP" means, as to each Account Party and each Subsidiary that offers insurance products, the statutory accounting practices prescribed or permitted by the relevant Governmental Authority for such Account Party's or such Subsidiary's domicile for the preparation of its financial statements and other reports by insurance corporations of the same type as such Account Party or such Subsidiary in effect on the date such statements or reports are to be prepared, except if otherwise notified by XL Capital as provided in Section 1.03.

     "SEC" means the Securities and Exchange Commission or any successor entity.

     "Specified Account Party" has the meaning assigned to such term in Section 2.05.

     "SPV" has the meaning assigned to such term in Section 10.04.

     "Stable Value Instrument" means any insurance, derivative or similar financial contract or instrument designed to mitigate the volatility of returns during a given period on a specified portfolio of securities held by one party (the "customer") through the commitment of the other party (the "SVI provider") to provide the customer with a credited rate of return on the portfolio, typically determined through an interest-crediting mechanism (and in exchange for which the SVI provider typically receives a fee).

     "Statutory Reserve Rate" means, for any day (or for the Interest Period for any Eurodollar Borrowing), a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject on such day (or, with respect to an Interest Period, the denominator of which is the number one minus the arithmetic mean of such aggregates for the days in such Interest Period) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

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     "Subsidiary" means, with respect to any Person (the "parent"), at any date, any corporation (or similar entity) of which a majority of the shares of outstanding capital stock normally entitled to vote for the election of directors (regardless of any contingency which does or may suspend or dilute the voting rights of such capital stock) is at such time owned directly or indirectly by the parent or one or more subsidiaries of the parent. Unless otherwise specified, "Subsidiary" means a Subsidiary of an Account Party.

     "Syndicated Letters of Credit" means letters of credit issued under Section 2.01.

     "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

     "Term-Out Option" has the meaning assigned to such term in Section 2.13(b).

     "Total Funded Debt" means, at any time, all Indebtedness of XL Capital and its Subsidiaries which would at such time be classified in whole or in part as a liability on the consolidated balance sheet of XL Capital in accordance with GAAP.

     "Tranche" means the Letter of Credit Tranche or the Revolving Credit Tranche, as applicable.

     "Transactions" means the execution, delivery and performance by the Obligors of this Agreement and the other Credit Documents to which any Account Party is intended to be a party, the issuance of Letters of Credit, the borrowing of Loans and the use of the proceeds thereof.

     "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans constituting such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

     "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

     SECTION 1.02. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and

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Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

     SECTION 1.03. Accounting Terms; GAAP and SAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP or SAP, as the context requires, each as in effect from time to time; provided that, if XL Capital notifies the Administrative Agent that the Account Parties request an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or SAP, as the case may be, or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Account Parties that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or SAP, as the case may be, or in the application thereof, then such provision shall be interpreted on the basis of GAAP or SAP, as the case may be, as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

ARTICLE II

THE CREDITS

     SECTION 2.01. Syndicated Letters of Credit.

     (a) General. Subject to the terms and conditions set forth herein, at the request of any Account Party the Lenders agree at any time and from time to time during the Availability Period to issue Syndicated Letters of Credit for the account of such Account Party in an aggregate amount that will not result in the Credit Exposure exceeding the Commitments (it being understood that Syndicated Letters of Credit may be issued, or be outstanding, for the account of more than one of the Account Parties at any time). Each Syndicated Letter of Credit shall be in such form as is consistent with the requirements of the applicable regulatory authorities in Illinois, California, Wisconsin or New York, as reasonably determined by the Administrative Agent or as otherwise agreed to by the Administrative Agent and XL Capital; provided that, without the prior consent of each Lender, no Syndicated Letter of Credit may be issued that would vary the several and not joint nature of the obligations of the Lenders thereunder as provided in the next succeeding sentence. Each Syndicated Letter of Credit shall be issued by all of the Lenders thereunder, acting through the Administrative Agent, at the time of issuance as a single multi-bank letter of credit, but the obligation of each Lender thereunder shall be several and not joint, based upon its Applicable Percentage of the aggregate undrawn amount of such Syndicated Letter of Credit.

     (b) Notice of Issuance, Amendment, Renewal or Extension. To request the issuance of a Syndicated Letter of Credit (or the amendment, renewal or extension of an outstanding Syndicated Letter of Credit), an Account Party shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Administrative Agent) to the Administrative Agent (reasonably in advance of the requested date

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of issuance, amendment, renewal or extension) a notice requesting the issuance of a Syndicated Letter of Credit, or identifying the Syndicated Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension, as the case may be (which shall be a Business Day), the date on which such Syndicated Letter of Credit is to expire (which shall comply with paragraph (d) of this Section), the amount of such Syndicated Letter of Credit, the name and address of the beneficiary thereof and the terms and conditions of (and such other information as shall be necessary to prepare, amend, renew or extend, as the case may be) such Syndicated Letter of Credit. If any Syndicated Letter of Credit shall provide for the automatic extension of the expiry date thereof unless the Administrative Agent gives notice that such expiry date shall not be extended, then the Administrative Agent will give such notice if requested to do so by the Required Lenders of the Letter of Credit Tranche in a notice given to the Administrative Agent not more than 60 days, but not less than 45 days, prior to the current expiry date of such Syndicated Letter of Credit. If requested by the Administrative Agent, such Account Party also shall submit a letter of credit application on JPMCB's standard form in connection with any request for a Syndicated Letter of Credit. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by any Account Party to, or entered into by any Account Party with, the Administrative Agent relating to any Syndicated Letter of Credit, the terms and conditions of this Agreement shall control.

     (c) Limitations on Amounts. A Syndicated Letter of Credit shall be issued, amended, renewed or extended only if (and upon such issuance, amendment, renewal or extension of each Syndicated Letter of Credit the Account Parties shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, (i) the aggregate Credit Exposure of the Lenders under the Letter of Credit Tranche shall not exceed the aggregate amount of the Letter of Credit Commitments and (ii) the Credit Exposure (excluding any Alternative Currency LC Exposure) of each Lender under the Letter of Credit Tranche shall not exceed the Letter of Credit Commitment of such Lender.

     (d) Expiry Date. Each Syndicated Letter of Credit shall expire at or prior to the close of business on the date one year after the date of the issuance of such Syndicated Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension).

     (e) Obligation of Lenders. The obligation of any Lender under any Syndicated Letter of Credit shall be several and not joint and shall at any time be in an amount equal to such Lender's Applicable Percentage of the aggregate undrawn amount of such Syndicated Letter of Credit, and each Syndicated Letter of Credit shall expressly so provide.

     (f) Continuation of Existing Syndicated Letters of Credit. Subject to the terms and conditions hereof, each Syndicated Letter of Credit under (and as defined in) the Existing Credit Agreement which is outstanding on the Effective Date shall automatically be continued hereunder on the Effective Date by all of the Lenders, and the obligation of each such Lender shall be several and not joint, based upon its Applicable Percentage and the aggregate undrawn amount of such Letter of Credit (as so defined), which shall be deemed a Syndicated Letter of Credit under this Agreement as of such date. The Administrative Agent shall, on the Effective Date or promptly thereafter, notify each beneficiary of each such Letter of Credit as to the

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Lenders party thereto, and their respective Applicable Percentages, as of the Effective Date.

     SECTION 2.02. Issuance and Administration. Each Syndicated Letter of Credit shall be executed and delivered by the Administrative Agent in the name and on behalf of, and as attorney-in-fact for, each Lender party to such Syndicated Letter of Credit, and the Administrative Agent shall act under each Syndicated Letter of Credit, and each Syndicated Letter of Credit shall expressly provide that the Administrative Agent shall act, as the agent of each Lender to (a) receive drafts, other demands for payment and other documents presented by the beneficiary under such Syndicated Letter of Credit, (b) determine whether such drafts, demands and documents are in compliance with the terms and conditions of such Syndicated Letter of Credit and (c) notify such Lender and the Account Parties that a valid drawing has been made and the date that the related LC Disbursement is to be made; provided that the Administrative Agent shall have no obligation or liability for any LC Disbursement under such Syndicated Letter of Credit, and each Syndicated Letter of Credit shall expressly so provide. Each Lender hereby irrevocably appoints and designates the Administrative Agent as its attorney-in-fact, acting through any duly authorized officer of JPMCB, to execute and deliver in the name and on behalf of such Lender each Syndicated Letter of Credit to be issued by such Lender hereunder. Promptly upon the request of the Administrative Agent, each Lender will furnish to the Administrative Agent such powers of attorney or other evidence as any beneficiary of any Syndicated Letter of Credit may reasonably request in order to demonstrate that the Administrative Agent has the power to act as attorney-in-fact for such Lender to execute and deliver such Syndicated Letter of Credit. Notwithstanding anything in this Agreement to the contrary, the Administrative Agent has no responsibility hereunder with respect to the issuance, renewal, extension, amendment or other administration of any Alternative Currency Letter of Credit, except as expressly set forth in Section 2.06.

     SECTION 2.03. Reimbursement of LC Disbursements, Etc.

     (a) Reimbursement. If any Lender shall make any LC Disbursement in respect of any Syndicated Letter of Credit or Alternative Currency Letter of Credit, regardless of the identity of the Account Party of such Syndicated Letter of Credit or Alternative Currency Letter of Credit, as the case may be, the Account Parties jointly and severally agree that they shall reimburse such Lender in respect of such LC Disbursement under (x) a Syndicated Letter of Credit by paying to the Administrative Agent an amount equal to such LC Disbursement not later than noon, New York City time, on (i) the Business Day that the Account Parties receive notice of such LC Disbursement, if such notice is received prior to 10:00 a.m., New York City time, or (ii) the Business Day immediately following the day that the Account Parties receive such notice, if such notice is not received prior to such time and (y) an Alternative Currency Letter of Credit, by paying such Lender on the date, in the currency and amount thereof, together with interest thereon (if any), and in the manner (including the place of payment) as such Lender and such Account Party shall have separately agreed pursuant to Section 2.06.

     (b) Reimbursement Obligations Absolute. The Account Parties' joint and several obligations to reimburse LC Disbursements as provided in paragraph (a) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Syndicated Letter of Credit or any term or provision

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therein, (ii) any draft or other document presented under a Syndicated Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment under a Syndicated Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Syndicated Letter of Credit (provided that the Account Parties shall not be obligated to reimburse such LC Disbursements unless payment is made against presentation of a draft or other document that at least substantially complies with the terms of such Syndicated Letter of Credit), (iv) at any time or from time to time, without notice to any Account Party, the time for any performance of or compliance with any of such reimbursement obligations of any other Account Party shall be waived, extended or renewed, (v) any of such reimbursement obligations of any other Account Party shall be amended or otherwise modified in any respect, or any guarantee of any of such reimbursement obligations shall be released, substituted or exchanged in whole or in part or otherwise dealt with, (vi) the occurrence of any Default, (vii) the existence of any proceedings of the type described in clause (g) or (h) of Article VIII with respect to any other Account Party or any guarantor of any of such reimbursement obligations, (viii) any lack of validity or enforceability of any of such reimbursement obligations against any other Account Party or any guarantor of any of such reimbursement obligations, or (ix) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the obligations of any Account Party hereunder.

     Neither the Administrative Agent, nor any Lender nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Syndicated Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Syndicated Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond their control; provided that the foregoing shall not be construed to excuse the Administrative Agent or a Lender from liability to any Account Party to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Account Parties to the extent permitted by applicable law) suffered by any Account Party that are caused by the gross negligence or willful misconduct of the Administrative Agent or a Lender. The parties hereto expressly agree that:

      (i) the Administrative Agent may accept documents that appear on their face to be in substantial compliance with the terms of a Syndicated Letter of Credit without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Syndicated Letter of Credit;

     (ii) the Administrative Agent shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Syndicated Letter of Credit; and

     (iii) this sentence shall establish the standard of care to be exercised by the

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Administrative Agent when determining whether drafts and other documents presented under a Syndicated Letter of Credit comply with the terms thereof (and the parties hereto hereby waive, to the extent permitted by applicable law, any standard of care inconsistent with the foregoing).

     (c) Disbursement Procedures. The Administrative Agent shall, within a reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under any Syndicated Letter of Credit. The Administrative Agent shall promptly after such examination (i) notify each of the Lenders and the Account Parties by telephone (confirmed by telecopy) of such demand for payment and (ii) deliver to each Lender a copy of each document purporting to represent a demand for payment under such Syndicated Letter of Credit. With respect to any drawing properly made under a Syndicated Letter of Credit, each Lender will make an LC Disbursement in respect of such Syndicated Letter of Credit in accordance with its liability under such Syndicated Letter of Credit and this Agreement, such LC Disbursement to be made to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make any such LC Disbursement available to the beneficiary of such Syndicated Letter of Credit by promptly crediting the amounts so received, in like funds, to the account identified by such beneficiary in connection with such demand for payment. Promptly following any LC Disbursement by any Lender in respect of any Syndicated Letter of Credit, the Administrative Agent will notify the Account Parties of such LC Disbursement; provided that any failure to give or delay in giving such notice shall not relieve the Account Parties of their obligation to reimburse the Lenders with respect to any such LC Disbursement.

     (d) Interim Interest. If any LC Disbursement with respect to a Syndicated Letter of Credit is made, then, unless the Account Parties shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Account Parties reimburse such LC Disbursement, at the rate per annum equal to (i) 1% plus the Alternate Base Rate to but excluding the date three Business Days after such LC Disbursement is made and (ii) from and including the date three Business Days after such LC Disbursement is made, 3% plus the Alternate Base Rate.

     (e) Right of Contribution. The Account Parties hereby agree, as between themselves, that if any Account Party shall pay any reimbursement obligation in respect of any LC Disbursement with respect to a Syndicated Letter of Credit issued to support the obligations of another Account Party (the "Specified Account Party"), the Specified Account Party shall, on demand (but subject to the next sentence), pay to such first Account Party an amount equal to the amount of such reimbursement. The payment obligation of a Specified Account Party to another Account Party under this paragraph (e) shall be subordinate and subject in right of payment to the prior payment in full of the obligations of the Specified Account Party under this Agreement and each other Credit Document, and such other Account Party shall not exercise any right or remedy with respect to such reimbursement until payment and satisfaction in full of all of such obligations of the Specified Account Party.

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     SECTION 2.04. Non-Syndicated Letters of Credit.

     (a) General. Subject to the terms and conditions set forth herein, at the request of any Account Party the Lenders agree at any time and from time to time during the Availability Period to issue Non-Syndicated Letters of Credit for the account of such Account Party in an aggregate amount that will not result in the Credit Exposure exceeding the Commitments (it being understood that Non-Syndicated Letters of Credit may be issued, or be outstanding, for the account of more than one of the Account Parties at any time). Each Non-Syndicated Letter of Credit shall be in such form as is consistent with the requirements of the applicable regulatory authorities in the jurisdiction of issue as reasonably determined by the Administrative Agent or as otherwise agreed to by the Administrative Agent and XL Capital. Each Non-Syndicated Letter of Credit shall be issued by the respective Issuing Lender thereof, through the Administrative Agent as provided in Section 2.04(c), in the amount of such Issuing Lender's Applicable Percentage of the aggregate amount of Non-Syndicated Letters of Credit being requested by such Account Party at such time, and (notwithstanding anything herein or in any other Letter of Credit Document to the contrary) such Non-Syndicated Letter of Credit shall be the sole responsibility of such Issuing Lender (and of no other Person, including any other Lender or the Administrative Agent). Notwithstanding anything to the contrary in this Agreement, no Non-Syndicated Letter of Credit may be requested hereunder for any jurisdiction unless XL Capital provides evidence reasonably satisfactory to the Administrative Agent that Syndicated Letters of Credit do not comply with the insurance laws of such jurisdiction.

     (b) Notice of Issuance, Amendment, Renewal or Extension. To request the issuance of Non-Syndicated Letters of Credit (or the amendment, renewal or extension of outstanding Non-Syndicated Letters of Credit), an Account Party shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Administrative Agent) to the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of Non-Syndicated Letters of Credit, or identifying the Non-Syndicated Letters of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension, as the case may be (which shall be a Business Day), the date on which such Non-Syndicated Letters of Credit are to expire (which shall comply with paragraph (e) of this Section), the aggregate amount of all Non-Syndicated Letters of Credit to be issued in connection with such request, the name and address of the beneficiary thereof and the terms and conditions of (and such other information as shall be necessary to prepare, amend, renew or extend, as the case may be) such Non-Syndicated Letters of Credit. If Non-Syndicated Letters of Credit issued in connection with the same request shall provide for the automatic extension of the expiry date thereof unless the Issuing Lender thereof or the Administrative Agent gives notice that such expiry date shall not be extended, then the Administrative Agent (acting on behalf of the relevant Issuing Lenders) will give such notice for all such Non-Syndicated Letters of Credit if requested to do so by the Required Lenders of the Letter of Credit Tranche in a notice given to the Administrative Agent not more than 60 days, but not less than 45 days, prior to the current expiry date of such Non-Syndicated Letter of Credit. If requested by the Administrative Agent, such Account Party also shall submit a letter of credit application on JPMCB's standard form in connection with any request for a Non-Syndicated Letter of Credit. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by any Account Party to, or entered into by any

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Account Party with, the Administrative Agent (acting on behalf of the relevant Issuing Lenders) relating to any Non-Syndicated Letter of Credit, the terms and conditions of this Agreement shall control.

     (c) Issuance and Administration. Each Non-Syndicated Letter of Credit shall be executed and delivered by the Administrative Agent (which term, for purposes of this Section 2.04 and any other provisions of this Agreement, including Article IX and Section 10.03, relating to Non-Syndicated Letters of Credit, shall be deemed to refer to, unless the context otherwise requires, JPMCB acting in its capacity as the Administrative Agent or in its individual capacity, in either case as attorney-in-fact for the respective Issuing Lender), acting through any duly authorized officer of JPMCB, in the name and on behalf of, and as attorney-in-fact for, the Issuing Lender party to such Non-Syndicated Letter of Credit. With respect to each Non-Syndicated Letter of Credit, the Administrative Agent shall act in the name and on behalf of, and as attorney-in-fact for, the Lender issuing such Non-Syndicated Letter of Credit and in that capacity shall, and each Lender hereby irrevocably appoints and designates the Administrative Agent, acting through any duly authorized officer of JPMCB, to so act in the name and on behalf of, and as attorney-in-fact for, each Lender with respect to each Non-Syndicated Letter of Credit to be issued by such Lender hereunder and, without limiting any other provision of this Agreement, to, (i) execute and deliver in the name and on behalf of such Lender each Non-Syndicated Letter of Credit to be issued by such Lender hereunder, (ii) receive drafts, other demands for payment and/or other documents presented by the beneficiary thereunder, (iii) determine whether such drafts, demands and/or documents are in compliance with the terms and conditions thereof, (iv) notify the beneficiary of any such Non-Syndicated Letter of Credit of the expiration or non-renewal thereof in accordance with the terms thereof, (v) advise such beneficiary of any change in the office for presentation of drafts under any such Non-Syndicated Letter of Credit, (vi) enter into with the Account Parties any such letter of credit application or similar agreement with respect to any such Non-Syndicated Letter of Credit as the Administrative Agent shall require, (vii) remit to the beneficiary of any such Non-Syndicated Letter of Credit any payment made by such Lender and received by the Administrative Agent in connection with a drawing thereunder, (viii) perform any and all other acts which in the sole opinion of the Administrative Agent may be necessary or incidental to the performance of the powers herein granted with respect to such Non-Syndicated Letter of Credit, (ix) notify such Lender and the Account Parties that a valid drawing has been made and the date that the related LC Disbursement is to be made; provided that the Administrative Agent shall have no obligation or liability for any LC Disbursement under such Non-Syndicated Letter of Credit and (x) delegate to any agent of JPMCB and such agent's Related Parties, or any of them, the performance of any of such powers. Each Lender hereby ratifies and confirms (and undertakes to ratify and confirm from time to time upon the request of the Administrative Agent) whatsoever the Administrative Agent (or any Related Party thereof) shall do or purport to do by virtue of the power herein granted. Promptly upon the request of the Administrative Agent, each Lender will furnish to the Administrative Agent such powers of attorney or other evidence as any beneficiary of any Non-Syndicated Letter of Credit may reasonably request in order to demonstrate that the Administrative Agent has the power to act as attorney-in-fact for such Lender with respect to such Non-Syndicated Letter of Credit (together with such evidence of the due authorization, execution, delivery and validity of such power of attorney as the Administrative Agent may reasonably request). Without limiting any provision of Article IX, the Administrative Agent may perform any and all of its duties and exercise any and all of its

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rights and powers under this Section 2.04 through its Related Parties.

     (d) Limitations on Amounts. Non-Syndicated Letters of Credit shall be issued, amended, renewed or extended only if (and upon such issuance, amendment, renewal or extension of each Non-Syndicated Letter of Credit the Account Parties shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, (i) the aggregate Credit Exposure of the Lenders under the Letter of Credit Tranche shall not exceed the aggregate amount of the Letter of Credit Commitments and (ii) the Credit Exposure (excluding any Alternative Currency LC Exposure) of each Lender under the Letter of Credit Tranche shall not exceed the Letter of Credit Commitment of such Lender.

     (e) Expiry Date. Each Non-Syndicated Letter of Credit shall expire at or prior to the close of business on the date one year after the date of the issuance of such Non-Syndicated Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension).

     (f) Participations. By the issuance of a Non-Syndicated Letter of Credit (or an amendment to a Non-Syndicated Letter of Credit increasing the amount thereof) by the respective Issuing Lender, and without any further action on the part of such Issuing Lender or the Lenders, such Issuing Lender hereby grants to each Lender (other than the Issuing Lender itself), and each such Lender hereby acquires from such Issuing Lender, a participation in such Non-Syndicated Letter of Credit equal to such Lender's Applicable Percentage of the aggregate amount available to be drawn under such Non-Syndicated Letter of Credit. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Non-Syndicated Letter of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Non-Syndicated Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for account of the respective Issuing Lender, such Lender's Applicable Percentage of each LC Disbursement made by an Issuing Lender in respect of any Non-Syndicated Letter of Credit promptly upon the request of the Administrative Agent at any time from the time such LC Disbursement is made until such LC Disbursement is reimbursed by the Account Parties or at any time after any reimbursement payment is required to be refunded to the Account Parties for any reason. Such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Promptly following receipt by the Administrative Agent of any payment from the Account Parties pursuant to the next following paragraph, the Administrative Agent shall distribute such payment to the respective Issuing Lender or, to the extent that the Lenders have made payments pursuant to this paragraph to reimburse such Issuing Lender, then to such Lenders and such Issuing Lender as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse an Issuing Lender for any LC Disbursement shall not relieve the Account Parties of their obligation to reimburse such LC Disbursement.

     (g) Reimbursement. If any Issuing Lender shall make any LC Disbursement in respect of any Non-Syndicated Letter of Credit, regardless of the identity of the Account Party of such Non-Syndicated Letter of Credit, the Account Parties jointly and severally agree that they shall reimburse such Issuing Lender in respect of such LC Disbursement by paying to the

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Administrative Agent an amount equal to such LC Disbursement not later than noon, New York City time, on (i) the Business Day that the Account Parties receive notice of such LC Disbursement, if such notice is received prior to 10:00 a.m., New York City time, or (ii) the Business Day immediately following the day that the Account Parties receive such notice, if such notice is not received prior to such time.

     If the Account Parties fail to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Account Parties in respect thereof and such Lender's Applicable Percentage thereof.

     (h) Obligations Absolute. The Account Parties' joint and several obligations to reimburse LC Disbursements in respect of any Non-Syndicated Letter of Credit as provided in paragraph (g) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Non-Syndicated Letter of Credit, or any term or provision therein, (ii) any draft or other document presented under a Non-Syndicated Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Lender under a Non-Syndicated Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Non-Syndicated Letter of Credit (provided that the Account Parties shall not be obligated to reimburse such LC Disbursements unless payment is made against presentation of a draft or other document that at least substantially complies with the terms of such Non-Syndicated Letter of Credit), (iv) at any time or from time to time, without notice to any Account Party, the time for any performance of or compliance with any of such reimbursement obligations of any other Account Party being waived, extended or renewed, (v) any of such reimbursement obligations of any other Account Party being amended or otherwise modified in any respect, or any guarantee of any of such reimbursement obligations being released, substituted or exchanged in whole or in part or otherwise dealt with, (vi) the occurrence of any Default, (vii) the existence of any proceedings of the type described in clause (g) or (h) of Article VIII with respect to any other Account Party or any guarantor of any of such reimbursement obligations, (viii) any lack of validity or enforceability of any of such reimbursement obligations against any other Account Party or any guarantor of any of such reimbursement obligations, or (ix) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the obligations of any Account Party hereunder.

     Neither the Administrative Agent, the Lenders nor any Issuing Lender, nor any of their respective Related Parties, shall have any liability or responsibility by reason of or in connection with the payment or failure to make any payment under a Non-Syndicated Letter of Credit (irrespective of any of the circumstances referred to in the preceding sentence) as a result of determining whether drafts or other documents presented under a Non-Syndicated Letter of Credit comply with the terms thereof, or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Non-Syndicated Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of an Issuing Lender; provided that the foregoing shall not be construed to

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excuse the Administrative Agent or a Lender from liability to the Account Parties to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Account Parties to the extent permitted by applicable law) suffered by the Account Parties that are caused by the gross negligence or willful misconduct of the Administrative Agent or a Lender when determining whether drafts and other documents presented under a Non-Syndicated Letter of Credit comply with the terms thereof. The parties hereto expressly agree that:

     (i) the Administrative Agent may accept documents that appear on their face to be in substantial compliance with the terms of a Non-Syndicated Letter of Credit without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Non-Syndicated Letter of Credit;

     (ii) the Administrative Agent shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Non-Syndicated Letter of Credit; and

     (iii) this sentence shall establish the standard of care to be exercised by the Administrative Agent when determining whether drafts and other documents presented under a Non-Syndicated Letter of Credit comply with the terms thereof (and the parties hereto hereby waive, to the extent permitted by applicable law, any standard of care inconsistent with the foregoing).

     (i) Disbursement Procedures. The Administrative Agent shall, within a reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under any Non-Syndicated Letter of Credit. The Administrative Agent shall promptly after such examination (i) notify each of the Lenders and the Account Parties by telephone (confirmed by telecopy) of such demand for payment and (ii) deliver to each Lender (including the Issuing Lender) a copy of each document purporting to represent a demand for payment under such Non-Syndicated Letter of Credit. With respect to any drawing properly made under a Non-Syndicated Letter of Credit, the Issuing Lender thereof will make an LC Disbursement in respect of such Non-Syndicated Letter of Credit in accordance with its liability under such Non-Syndicated Letter of Credit and this Agreement, such LC Disbursement to be made to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make any such LC Disbursement available to the beneficiary of such Non-Syndicated Letter of Credit by promptly crediting the amounts so received, in like funds, to the account identified by such beneficiary in connection with such demand for payment. Promptly following any LC Disbursement by any Issuing Lender in respect of any Non-Syndicated Letter of Credit, the Administrative Agent will notify the Account Parties of such LC Disbursement; provided that any failure to give or delay in giving such notice shall not relieve the Account Parties of their obligation to reimburse such Issuing Lender with respect to any such LC Disbursement.

     (j) Interim Interest. If any LC Disbursement with respect to a Non-Syndicated Letter of Credit is made, then, unless the Account Parties shall reimburse such LC Disbursement

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in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Account Parties reimburse such LC Disbursement, at the rate per annum equal to (i) 1% plus the Alternate Base Rate to but excluding the date three Business Days after such LC Disbursement is made and (ii) from and including the date three Business Days after such LC Disbursement is made, 3% plus the Alternate Base Rate.

     (k) Right of Contribution. The Account Parties hereby agree, as between themselves, that if any Account Party shall pay any reimbursement obligation in respect of any LC Disbursement with respect to a Non-Syndicated Letter of Credit issued to support the obligations of another Account Party (the "Specified Account Party"), the Specified Account Party shall, on demand (but subject to the next sentence), pay to such first Account Party an amount equal to the amount of such reimbursement. The payment obligation of a Specified Account Party to another Account Party under this paragraph (k) shall be subordinate and subject in right of payment to the prior payment in full of the obligations of the Specified Account Party under this Agreement and each other Credit Document, and such other Account Party shall not exercise any right or remedy with respect to such reimbursement until payment and satisfaction in full of all of such obligations of the Specified Account Party.

     (l) Continuation of Existing Non-Syndicated Letters of Credit. Subject to the terms and conditions hereof, each Non-Syndicated Letter of Credit under (and as defined in) the Existing Credit Agreement which is outstanding on the Effective Date shall, effective as of the Effective Date, be amended to reflect the Lenders under the Letter of Credit Tranche as of the Effective Date and, with respect to each such respective Letter of Credit, a face amount based each such Lender's Applicable Percentage of the Letter of Credit Commitments as in effect on the Effective Date, and such Letters of Credit, as so amended, shall be continued hereunder as a Non-Syndicated Letter of Credit issued by such Lender.

     SECTION 2.05. Participated Letters of Credit.

     (a) General. Subject to the terms and conditions set forth herein, any Account Party may request the Issuing Lender to issue, at any time and from time to time during the Availability Period, Participated Letters of Credit for its own account. Each Participated Letter of Credit shall be in such form as is consistent with the requirements of the applicable regulatory authorities in Illinois, California, Wisconsin or New York as reasonably determined by the Administrative Agent or as otherwise agreed to by the Administrative Agent and XL Capital. Participated Letters of Credit issued hereunder shall constitute utilization of the Commitments.

     (b) Notice of Issuance, Amendment, Renewal or Extension. To request the issuance of a Participated Letter of Credit (or the amendment, renewal or extension of an outstanding Participated Letter of Credit), an Account Party shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Lender) to the Issuing Lender and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Participated Letter of Credit, or identifying the Participated Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Participated Letter of Credit

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is to expire (which shall comply with paragraph (d) of this Section), the amount of such Participated Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Participated Letter of Credit. If requested by the Issuing Lender, such Account Party also shall submit a letter of credit application on the Issuing Lender's standard form in connection with any request for a Participated Letter of Credit. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by such Account Party to, or entered into by any Account Party with, the Issuing Lender relating to any Participated Letter of Credit, the terms and conditions of this Agreement shall control.

     (c) Limitations on Amounts. A Participated Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Participated Letter of Credit each Account Party shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure of the Issuing Lender with respect to Participated Letters of Credit (determined for these purposes without giving effect to the participations therein of the Lenders pursuant to paragraph (e) of this Section) shall not exceed $50,000,000 and (ii) the aggregate Credit Exposure of the Lenders under the Letter of Credit Tranche shall not exceed the aggregate amount of the Letter of Credit Commitments.

     (d) Expiry Date. Each Participated Letter of Credit shall expire at or prior to the close of business on the date one year after the date of the issuance of such Participated Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension).

     (e) Participations. By the issuance of a Participated Letter of Credit (or an amendment to a Participated Letter of Credit increasing the amount thereof) by the Issuing Lender, and without any further action on the part of the Issuing Lender or the Lenders, the Issuing Lender hereby grants to each Lender, and each Lender hereby acquires from the Issuing Lender, a participation in such Participated Letter of Credit equal to such Lender's Applicable Percentage of the aggregate amount available to be drawn under such Participated Letter of Credit. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Participated Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Participated Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for account of the Issuing Lender, such Lender's Applicable Percentage of each LC Disbursement made by the Issuing Lender in respect of any Participated Letter of Credit promptly upon the request of the Issuing Lender at any time from the time such LC Disbursement is made until such LC Disbursement is reimbursed by the Account Parties or at any time after any reimbursement payment is required to be refunded to the Account Parties for any reason. Such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Promptly following receipt by the Administrative Agent of any payment from the Account Parties pursuant to the next following paragraph, the Administrative Agent shall distribute such payment to the Issuing Lender or, to the extent that the Lenders have made

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payments pursuant to this paragraph to reimburse the Issuing Lender, then to such Lenders and the Issuing Lender as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing Lender for any LC Disbursement shall not relieve the Account Parties of their obligation to reimburse such LC Disbursement.

     (f) Reimbursement. If any Lender shall make any LC Disbursement in respect of any Participated Letter of Credit, regardless of the identity of the Account Party of such Participated Letter of Credit, the Account Parties jointly and severally agree that they shall reimburse such Lender in respect of such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than noon, New York City time, on (i) the Business Day that the Account Parties receive notice of such LC Disbursement, if such notice is received prior to 10:00 a.m., New York City time, or (ii) the Business Day immediately following the day that the Account Parties receive such notice, if such notice is not received prior to such time.

     If the Account Parties fail to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Account Parties in respect thereof and such Lender's Applicable Percentage thereof.

     (g) Obligations Absolute. The Account Parties' joint and several obligations to reimburse LC Disbursements in respect of any Participated Letter of Credit as provided in paragraph (f) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Participated Letter of Credit, or any term or provision therein, (ii) any draft or other document presented under a Participated Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Lender under a Participated Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Participated Letter of Credit (provided that the Account Parties shall not be obligated to reimburse such LC Disbursements unless payment is made against presentation of a draft or other document that at least substantially complies with the terms of such Participated Letter of Credit), (iv) at any time or from time to time, without notice to any Account Party, the time for any performance of or compliance with any of such reimbursement obligations of any other Account Party shall be waived, extended or renewed, (v) any of such reimbursement obligations of any other Account Party shall be amended or otherwise modified in any respect, or any guarantee of any of such reimbursement obligations shall be released, substituted or exchanged in whole or in part or otherwise dealt with, (vi) the occurrence of any Default, (vii) the existence of any proceedings of the type described in clause (g) or (h) of Article VIII with respect to any other Account Party or any guarantor of any of such reimbursement obligations, (viii) any lack of validity or enforceability of any of such reimbursement obligations against any other Account Party or any guarantor of any of such reimbursement obligations, or (ix) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of the obligations of any Account Party hereunder.

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     Neither the Administrative Agent, the Lenders nor the Issuing Lender, nor any of their respective Related Parties, shall have any liability or responsibility by reason of or in connection with the payment or failure to make any payment under a Participated Letter of Credit (irrespective of any of the circumstances referred to in the preceding sentence) as a result of determining whether drafts or other documents presented under a Participated Letter of Credit comply with the terms thereof, or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Participated Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Lender; provided that the foregoing shall not be construed to excuse the Issuing Lender from liability to the Account Parties to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Account Parties to the extent permitted by applicable law) suffered by the Account Parties that are caused by the Issuing Lender's gross negligence or willful misconduct when determining whether drafts and other documents presented under a Participated Letter of Credit comply with the terms thereof. The parties hereto expressly agree that:

     (i) the Issuing Lender may accept documents that appear on their face to be in substantial compliance with the terms of a Participated Letter of Credit without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Participated Letter of Credit;

     (ii) the Issuing Lender shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Participated Letter of Credit; and

     (iii) this sentence shall establish the standard of care to be exercised by the Issuing Lender when determining whether drafts and other documents presented under a Participated Letter of Credit comply with the terms thereof (and the parties hereto hereby waive, to the extent permitted by applicable law, any standard of care inconsistent with the foregoing).

     (h) Disbursement Procedures. The Issuing Lender shall, within a reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under a Participated Letter of Credit. The Issuing Lender shall promptly after such examination notify the Administrative Agent and XL Capital by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Lender has made or will make a LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Account Parties of their obligation to reimburse the Issuing Lender and the Lenders with respect to any such LC Disbursement.

     (i) Interim Interest. If any LC Disbursement is made with respect to a Participated Letter of Credit, then, unless the Account Parties shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Account Parties reimburse such LC Disbursement, at the rate per

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annum equal to (i) 1% plus the Alternate Base Rate to but excluding the date three Business Days after such LC Disbursement is made and (ii) from and including the date three Business Days after such LC Disbursement is made, 3% plus the Alternate Base Rate. Interest accrued pursuant to this paragraph shall be for account of the Issuing Lender, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (f) of this Section to reimburse the Issuing Lender shall be for account of such Lender to the extent of such payment.

     (j) Replacement of the Issuing Lender. The Issuing Lender may be replaced at any time by written agreement between XL Capital, the Administrative Agent, the replaced Issuing Lender and the successor Issuing Lender. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Lender. At the time any such replacement shall become effective, the Account Parties shall pay all unpaid fees accrued for account of the replaced Issuing Lender pursuant to Section 2.15(d). From and after the effective date of any such replacement, (i) the successor Issuing Lender shall have all the rights and obligations of the replaced Issuing Lender under this Agreement with respect to Participated Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Lender" shall be deemed to refer to such successor or to any previous Issuing Lender, or to such successor and all previous Issuing Lenders, as the context shall require. After the replacement of an Issuing Lender hereunder, the replaced Issuing Lender shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Lender under this Agreement with respect to Participated Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Participated Letters of Credit.

     (k) Right of Contribution. The Account Parties hereby agree, as between themselves, that if any Account Party shall pay any reimbursement obligation in respect of any LC Disbursement with respect to a Participated Letter of Credit issued to support the obligations of another Account Party (the "Specified Account Party"), the Specified Account Party shall, on demand (but subject to the next sentence), pay to such first Account Party an amount equal to the amount of such reimbursement. The payment obligation of a Specified Account Party to another Account Party under this paragraph (k) shall be subordinate and subject in right of payment to the prior payment in full of the obligations of the Specified Account Party under this Agreement and each other Credit Document, and such other Account Party shall not exercise any right or remedy with respect to such reimbursement until payment and satisfaction in full of all of such obligations of the Specified Account Party.

     (l) Continuation of Existing Participated Letters of Credit. Subject to the terms and conditions hereof, each Participated Letter of Credit under (and as defined in) the Existing Credit Agreement which is outstanding on the Effective Date shall automatically be continued hereunder on the Effective Date by the Issuing Lender, and as of the Effective Date the Lenders shall acquire a participation therein as if such Letter of Credit were issued hereunder, and each such Letter of Credit shall be deemed a Participated Letter of Credit under this Agreement as of such date.

     SECTION 2.06. Alternative Currency Letters of Credit.

     (a) Requests for Offers. From time to time during the Availability Period, an Account Party may request any or all of the Lenders to make offers to issue an Alternative

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Currency Letter of Credit for account of such Account Party. Each Lender may, but shall have no obligation to, make such offers on terms and conditions that are satisfactory to such Lender, and such Account Party may, but shall have no obligation to, accept any such offers. An Alternative Currency Letter of Credit shall be issued, amended, renewed or extended only if (and upon such issuance, amendment, renewal or extension of each Alternative Currency Letter of Credit the Account Parties shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, the aggregate Credit Exposure of the Lenders shall not exceed the aggregate amount of the Commitments. Each such Alternative Currency Letter of Credit shall be issued, and subsequently, renewed, extended, amended and confirmed, on such terms as XL Capital, the applicable Account Party and such Lender shall agree, including expiry, drawing conditions, reimbursement, interest, fees and provision of cover; provided that the expiry of any Alternative Currency Letter of Credit shall not be later than the one-year anniversary from the date of issuance thereof (or, in the case of any renewal or extension thereof, one-year after such renewal or extension).

     (b) Reports to Administrative Agent. The Account Parties shall deliver to the Administrative Agent and each of the Lenders a report in respect of each Alternative Currency Letter of Credit (an "Alternative Currency Letter of Credit Report") on and as of the date (i) on which such Alternative Currency Letter of Credit is issued, (ii) of the issuance, renewal, extension or amendment of a Syndicated Letter of Credit or a Non-Syndicated Letter of Credit, if any Alternative Currency Letter of Credit is then outstanding and (iii) on which the Commitments are to be reduced pursuant to Section 2.12, specifying for each such Alternative Currency Letter of Credit (after giving effect to issuance thereof, as applicable):

     (A) the date on which such Alternative Currency Letter of Credit was or is being issued;

     (B) the Alternative Currency of such Alternative Currency Letter of Credit;

     (C) the aggregate undrawn amount of such Alternative Currency Letter of Credit (in such Alternative Currency);

     (D) the aggregate unpaid amount of LC Disbursements under such Alternative Currency Letter of Credit (in such Alternative Currency);

     (E) the Alternative Currency LC Exposure (in Dollars) in respect of such Alternative Currency Letter of Credit; and

     (F) the aggregate amount of Alternative Currency LC Exposures (in Dollars).

     Each Alternative Currency Letter of Credit Report shall be delivered to the Administrative Agent and each of the Lenders by 10:00 a.m. (New York City time) on the date on which it is required to be delivered.

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     SECTION 2.07. RC Sublimit; Revolving Credit Commitments.

     (a) RC Sublimit. Subject to the terms and conditions set forth herein, each Lender under the Letter of Credit Tranche agrees to make Loans to an Account Party from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lender's outstanding Loans exceeding such Lender's Applicable Percentage of an amount (the "RC Sublimit") equal to the lesser of (x) initially, $500,000,000 and (y) such lower amount to which the initial RC Sublimit shall have been reduced pursuant to Section 2.12, (ii) such Lender's Credit Exposures (excluding any Alternative Currency LC Exposure) under the Letter of Credit Tranche exceeding such Lender's Letter of Credit Commitment, (iii) the total outstanding Loans under the Letter of Credit Tranche exceeding the RC Sublimit or (iv) the aggregate Credit Exposures of all Lenders under the Letter of Credit Tranche exceeding the aggregate Letter of Credit Commitments of all Lenders (it being understood that Loans may be made, or be outstanding, under the Letter of Credit Tranche to more than one of the Account Parties at any time). Within the foregoing limits and subject to the terms and conditions set forth herein, the Account Parties may borrow, prepay and reborrow Loans under the Letter of Credit Tranche.

     (b) Revolving Credit Commitments. Subject to the terms and conditions set forth herein, each Lender under the Revolving Credit Tranche agrees to make Loans to an Account Party from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lender's outstanding Loans under such Tranche exceeding such Lender's Revolving Credit Commitment or (ii) the total outstanding Loans under the Revolving Credit Tranche exceeding the total Revolving Credit Commitments (it being understood that Loans may be made, or be outstanding, under the Revolving Credit Tranche to more than one of the Account Parties at any time). Within the foregoing limits and subject to the terms and conditions set forth herein, the Account Parties may borrow, prepay and reborrow Loans under the Revolving Credit Tranche.

     SECTION 2.08. Loans and Borrowings.

     (a) Obligations of Lenders. Each Loan under a Tranche shall be made as part of a Borrowing consisting of Loans of the same Type made by the Lenders of such Tranche ratably in accordance with their respective Commitments under such Tranche. The failure of any Lender under any Tranche to make any Loan required to be made by it shall not relieve any other Lender under such Tranche of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. Loans made under the Letter of Credit Tranche shall constitute utilization of both the RC Sublimit and the Letter of Credit Commitments.

     (b) Type of Loans. Subject to Section 2.16, each Borrowing shall be constituted entirely of ABR Loans or of Eurodollar Loans as any Account Party may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Account Parties to repay such Loan in accordance with the terms of this Agreement.

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     (c) Minimum Amounts; Limitation on Number of Borrowings. Each Eurodollar Borrowing shall be in an aggregate amount of $10,000,000 or a larger multiple of $1,000,000. Each ABR Borrowing shall be in an aggregate amount equal to $10,000,000 or a larger multiple of $1,000,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Credit Commitments or that is requested to finance the reimbursement of an LC Disbursement as contemplated by Section 2.03(a). Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of ten Eurodollar Borrowings outstanding.

     (d) Limitations on Interest Periods. Notwithstanding any other provision of this Agreement, no Account Party shall be entitled to request (or to elect to convert to or continue as a Eurodollar Borrowing) any Borrowing if the Interest Period requested therefor would end after the Maturity Date.

     SECTION 2.09. Requests for Borrowings.

     (a) Notice by the Account Parties. To request a Borrowing, XL Capital shall notify the Administrative Agent of such request by telephone (i) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (ii) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the date of the proposed Borrowing; provided that any such notice of an ABR Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.03(a) may be given not later than 11:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by XL Capital.

     (b) Content of Borrowing Requests. Each telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.08:

     (i) the relevant Account Party;

     (ii) the aggregate amount of the requested Borrowing;

     (iii) the date of such Borrowing, which shall be a Business Day;

     (iv) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

     (v) in the case of a Eurodollar Borrowing, the Interest Period therefor, which shall be a period contemplated by the definition of the term "Interest Period" and permitted under Section 2.08(d);

     (vi) the location and number of such Account Party's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.10; and

     (vii) whether such Borrowing is to be made under the Letter of Credit Tranche or the Revolving Credit Tranche.

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     (c) Notice by the Administrative Agent to the Lenders. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender under the relevant Tranche of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing.

     (d) Failure to Elect. If no election as to the Type of a Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the requested Borrowing shall be made instead as an ABR Borrowing.

     SECTION 2.10. Funding of Borrowings.

     (a) Funding by Lenders. Each Lender under any Tranche shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time (or 1:00 p.m., New York City time with respect to ABR Loans requested by XL Capital no later than 11:00 a.m. on the same day), to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the relevant Account Party by promptly crediting the amounts so received, in like funds, to an account of such Account Party maintained with the Administrative Agent in New York City and designated by such Account Party in the applicable Borrowing Request.

     (b) Presumption by the Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing (or in the case of any ABR Borrowing, on or prior to the proposed date of such Borrowing) that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the relevant Account Party a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the relevant Account Party severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to such Account Party to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case of such Account Party, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing.

     SECTION 2.11. Interest Elections.

     (a) Elections by the Account Parties. The Loans constituting each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have the Interest Period specified in such Borrowing Request. Thereafter, the relevant Account Party may elect to convert such Borrowing to a Borrowing of a different Type or to continue such Borrowing as a Borrowing of the same Type and, in the case of a Eurodollar Borrowing, may elect the Interest Period therefor, all as provided in this Section. The relevant Account Party may elect different options with respect to different portions of the

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affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans constituting such Borrowing, and the Loans constituting each such portion shall be considered a separate Borrowing.

     (b) Notice of Elections. To make an election pursuant to this Section, XL Capital shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.09 if XL Capital were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by XL Capital.

     (c) Content of Interest Election Requests. Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.08:

     (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) of this paragraph shall be specified for each resulting Borrowing);

     (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

     (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

     (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period therefor after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period" and permitted under Section 2.08(d).

     (d) Notice by the Administrative Agent to the Lenders. Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing.

     (e) Failure to Elect; Events of Default. If XL Capital fails to deliver a timely and complete Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period therefor, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies XL Capital, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period therefor.

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     SECTION 2.12. Termination and Reduction of the Commitments.

     (a) Scheduled Termination. Unless previously terminated, the Commitments shall terminate at the close of business on the Commitment Termination Date.

     (b) Voluntary Termination or Reduction. The Account Parties may at any time terminate, or from time to time reduce, the Commitments under any Tranche (including the RC Sublimit); provided that (i) each reduction of the Commitments under any Tranche or of the RC Sublimit under the Letter of Credit Tranche shall be in an amount that is $25,000,000 or a larger multiple of $5,000,000 and (ii) the Account Parties shall not terminate or reduce the Commitments under any Tranche or the RC Sublimit under the Letter of Credit Tranche if the Credit Exposure under such Tranche would exceed such Commitments or (in the case of the Letter of Credit Tranche) the outstanding Loans thereunder would exceed the RC Sublimit.

     (c) Notice of Voluntary Termination or Reduction. XL Capital shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by XL Capital pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by XL Capital may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by XL Capital (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.

     (d) Effect of Termination or Reduction. Any termination or reduction of the Commitments or the RC Sublimit shall be permanent. Each reduction of the Commitments under any Tranche or the RC Sublimit under the Letter of Credit Tranche shall be made ratably among the Lenders under such Tranche in accordance with their respective Commitments thereunder.

     SECTION 2.13. Repayment of Loans; Term-Out Option; Evidence of Debt.

     (a) Repayment. Each Account Party hereby unconditionally promises to pay to the Administrative Agent for account of the relevant Lenders, (i) in the event that the Term-Out Option has not been exercised, the outstanding principal amount of the Loans made to such Account Party on the Commitment Termination Date and (ii) in the event that the Term-Out Option has been exercised and is in effect, on the Maturity Date, the then unpaid principal amount of the Loans made to such Account Party outstanding at the close of business on the Commitment Termination Date.

     (b) Term-Out Option. The Account Parties may, by notice given by XL Capital to the Administrative Agent (which shall promptly notify the Lenders) not less than 15 days prior to the Commitment Termination Date, extend the Maturity Date for all Loans outstanding at the close of business New York City time on the Commitment Termination Date to the first anniversary of the Commitment Termination Date (the "Term-Out Option"); provided that such extension shall not be effective with respect to any Lender unless:

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     (i) no Default shall have occurred and be continuing on each of the date of the notice requesting such extension and on the Commitment Termination Date; and

     (ii) each of the representations and warranties made by the Account Parties in Article IV shall be true and complete on and as of each of the date of the notice requesting such extension and the Commitment Termination Date with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).

     Notwithstanding the foregoing, the Commitments of the Lenders to make Loans shall terminate on the Commitment Termination Date.

     (c) Manner of Payment. Prior to any repayment or prepayment of any Borrowings hereunder, XL Capital shall select the Borrowing or Borrowings to be paid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 11:00 a.m., New York City time, three Business Days before the scheduled date of such repayment; provided that each repayment of Borrowings shall be applied to repay any outstanding ABR Borrowings before any other Borrowings. If XL Capital fails to make a timely selection of the Borrowing or Borrowings to be repaid or prepaid, such payment shall be applied, first, to pay any outstanding ABR Borrowings and, second, to other Borrowings in the order of the remaining duration of their respective Interest Periods (the Borrowing with the shortest remaining Interest Period to be repaid first). Each payment of a Borrowing shall be applied ratably to the Loans included in such Borrowing.

     (d) Maintenance of Records by Lenders. Each Lender shall maintain in accordance with its usual practice records evidencing the indebtedness of each Account Party to such Lender resulting from each Loan made by such Lender to such Account Party, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

     (e) Maintenance of Records by the Administrative Agent. The Administrative Agent shall maintain records in which it shall record (i) the amount of each Loan made to each Account Party hereunder, the Type thereof and each Interest Period therefor, (ii) the amount of any principal or interest due and payable or to become due and payable from such Account Party to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for account of the Lenders and each Lender's share thereof.

     (f) Effect of Entries. The entries made in the records maintained pursuant to paragraph (d) or (e) of this Section shall be primafacie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such records or any error therein shall not in any manner affect the obligation of the Account Parties to repay the Loans in accordance with the terms of this Agreement.

     (g) Promissory Notes. Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, each Account Party shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all

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times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

     SECTION 2.14. Prepayment of Loans.

     (a) Right to Prepay Borrowings. The Account Parties shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section.

     (b) Notices, Etc. XL Capital shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.12, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.12. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders under the relevant Tranche of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of a Borrowing of the same Type as provided in Section 2.08. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.16 and shall be made in the manner specified in Section 2.13(c).

     SECTION 2.15. Fees.

     (a) Facility Fee. XL Capital agrees to pay to the Administrative Agent for account of each Lender a facility fee, which shall accrue at a rate per annum equal to 0.06%, (i) prior to the termination of such Lender's Commitment, on the daily amount of such Commitment (whether used or unused) during the period from and including the Effective Date to, but excluding, the earlier of the date such Commitment terminates and the Commitment Termination Date and (ii) if such Lender continues to have any Credit Exposure after its Commitment terminates, then such facility fee shall continue to accrue on the daily amount of such Lender's Credit Exposure from and including the date on which such Lender's Commitment terminates to but excluding the date on which such Lender ceases to have any Credit Exposure. Accrued facility fees shall be payable on each Quarterly Date and on (i) in the event the Term-Out Option has not been exercised, the earlier of the date the Commitments terminate and the Commitment Termination Date or (ii) in the event the Term-Out Option has been exercised and is in effect, on the Maturity Date; provided that any facility fees accruing after such earlier date or the Maturity Date, as the case may be, shall be payable on demand. All facility fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

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     (b) Syndicated Letter of Credit Fees. XL Capital agrees to pay to the Administrative Agent for account of each Lender under the Letter of Credit Tranche a letter of credit fee which shall accrue at a rate per annum equal to 0.365% on the average daily aggregate undrawn amount of all outstanding Syndicated Letters of Credit during the period from and including the Effective Date to but excluding the later of the date on which such Lender's Letter of Credit Commitment terminates and the date on which such Lender ceases to have any LC Exposure. Syndicated Letter of Credit fees accrued through and including each Quarterly Date shall be payable on the third Business Day following such Quarterly Date, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Letter of Credit Commitments terminate and any such fees accruing after the date on which the Letter of Credit Commitments terminate shall be payable on demand. Letter of credit fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

     (c) Non-Syndicated Letter of Credit Fees. XL Capital agrees to pay to the Administrative Agent for account of each Lender under the Letter of Credit Tranche a letter of credit fee which shall accrue at a rate per annum equal to 0.365% on the average daily aggregate undrawn amount of all outstanding Non-Syndicated Letters of Credit during the period from and including the Effective Date to but excluding the later of the date on which such Lender's Letter of Credit Commitment terminates and the date on which such Lender ceases to have any LC Exposure, as well as the Administrative Agent's standard administrative fees with respect to the issuance, amendment, renewal or extension of any Non-Syndicated Letter of Credit or processing of drawings thereunder. Non-Syndicated Letter of Credit fees accrued through and including each Quarterly Date shall be payable on the third Business Day following such Quarterly Date, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Letter of Credit Commitments terminate and any such fees accruing after the date on which the Letter of Credit Commitments terminate shall be payable on demand. Letter of credit fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

     (d) Participated Letter of Credit Fees. XL Capital agrees to pay (i) to the Administrative Agent for account of each Lender under the Letter of Credit Tranche a participation fee with respect to its participations in Participated Letters of Credit, which shall accrue at a rate of 0.365% per annum on the average daily amount of such Lender's LC Exposure in respect of Participated Letters of Credit (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender's Letter of Credit Commitment terminates and the date on which such Lender ceases to have any such LC Exposure, and (ii) to the Issuing Lender a fronting fee, which shall accrue at a rate of 0.125% per annum on the average daily amount of the LC Exposure in respect of Participated Letters of Credit (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Letter of Credit Commitments and the date on which there ceases to be any such LC Exposure, as well as the Issuing Lender's standard administrative fees with respect to the issuance, amendment, renewal or extension of any Participated Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including each Quarterly Date shall be

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payable on the third Business Day following such Quarterly Date, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Letter of Credit Commitments terminate and any such fees accruing after the date on which the Letter of Credit Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Lender pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

     (e) Administrative Agent Fees. XL Capital agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between XL Capital and the Administrative Agent.

     (f) Payment of Fees. All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of the facility fees and the letter of credit fees referred to in paragraphs (a) through (d) of this Section, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances.

     SECTION 2.16. Interest.

     (a) ABR Loans. The Loans constituting each ABR Borrowing shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Additional Margin, if any.

     (b) Eurodollar Loans. The Loans constituting each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period for such Borrowing plus the Applicable Margin plus the Additional Margin, if any.

     (c) Default Interest. Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable (other that in respect of any LC Disbursement under Sections 2.03(d), 2.04(j), and 2.05(i)) by the Account Parties hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided above or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section.

     (d) Payment of Interest. Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and upon (i) in the event the Term-Out Option has not been exercised, the date the Commitments terminate or (ii) in the event the Term-Out Option has been exercised, the Maturity Date; provided that (x) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (y) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan prior to the later of the Commitment Termination Date and the Maturity Date), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (z) in the event of any conversion of any Eurodollar Borrowing prior to the end of the Interest Period therefor, accrued interest on such Borrowing shall be payable on the effective date of such conversion.

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     (e) Computation. All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

     SECTION 2.17. Alternate Rate of Interest. If prior to the commencement of the Interest Period for any Eurodollar Borrowing:

     (a) the Administrative Agent determines in good faith (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or

     (b) the Administrative Agent is advised by the Required Lenders (acting in good faith) that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their respective Loans included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to XL Capital and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies XL Capital and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or the continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and such Borrowing (unless prepaid) shall be continued as, or converted to, an ABR Borrowing and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

     SECTION 2.18. Increased Costs.

     (a) Increased Costs Generally. If any Change in Law shall:

     (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or

     (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement, any Letter of Credit (or any participation therein) or any Eurodollar Loan made by such Lender;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Letter of Credit (or of maintaining any participation therein) or Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Account Parties jointly and severally agree that they will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

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     (b) Capital Requirements. If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Letters of Credit issued or participated in, or the Loans made, by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Account Parties will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered.

     (c) Certificates from Lenders. A certificate of a Lender setting forth such Lender's good faith determination of the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to XL Capital and shall be conclusive absent manifest error. The Account Parties shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof by XL Capital.

     (d) Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Account Parties shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 90 days prior to the date that such Lender notifies XL Capital of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; providedfurther that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 90 day period referred to above shall be extended to include the period of retroactive effect thereof.

     SECTION 2.19. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period therefor (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of an Interest Period therefor, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable under Section 2.14(b) and is revoked in accordance herewith), or (d) the assignment as a result of a request by XL Capital pursuant to Section 2.22(b) of any Eurodollar Loan other than on the last day of an Interest Period therefor, then, in any such event, the Account Parties shall compensate each Lender for the loss attributable to such event. The loss to any Lender attributable to any such event shall be deemed to be an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for Dollar deposits from other banks in the eurodollar market at the commencement

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of such period. A certificate of any Lender setting forth such Lender's good faith determination of any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to XL Capital and shall be conclusive absent manifest error. The Account Parties shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof by XL Capital.

     SECTION 2.20. Taxes.

     (a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Account Parties hereunder shall be made free and clear of and without deduction for any Indemnified Taxes; provided that if any Account Party shall be required to deduct any Indemnified Taxes from such payments, then (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) the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Account Party shall make such deductions and (iii) such Account Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

     (b) Payment of Other Taxes by the Account Parties. In addition, each Account Party shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

     (c) Indemnification by the Account Parties. The Account Parties shall indemnify the Administrative Agent and each Lender, within 10 days after written demand to XL Capital therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to XL Capital by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive as between such Lender or the Administrative Agent, as the case may be, and the Account Parties absent manifest error.

     (d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by any Account Party to a Governmental Authority, XL Capital on behalf of such Account Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

     (e) Exemptions. Each Lender and the Administrative Agent shall, at the written request of XL Capital, provide to any Account Party such form, certification or similar documentation, if any (each duly completed, accurate and signed) as is currently required by any Account Party Jurisdiction or any other jurisdiction, or comply with such other requirements, if any, as is currently applicable in such Account Party Jurisdiction or any other jurisdiction, in

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order to obtain an exemption from, or reduced rate of, deduction, payment or withholding of Indemnified Taxes or Other Taxes to which such Lender or the Administrative Agent is entitled pursuant to an applicable tax treaty or the law of such Account Party Jurisdiction or any other jurisdiction; provided that XL Capital shall have furnished to such Lender or the Administrative Agent in a reasonably timely manner copies of such documentation and notice of such requirements together with applicable instructions. The Account Parties shall not be required to indemnify any Lender or the Administrative Agent under Section 2.20(a) or (c) for any Indemnified Taxes or Other Taxes to the extent such Indemnified Taxes or Other Taxes would not be imposed but for the failure by such Lender or the Administrative Agent, as the case may be, to comply with the provisions of the preceding sentence. Upon the reasonable request of XL Capital in writing, each Lender and the Administrative Agent will provide to XL Capital such form, certification or similar documentation (each duly completed, accurate and signed) as may in the future be required by any Account Party Jurisdiction or any other jurisdiction, or comply with such other requirements, if any, as may be applicable in such Account Party Jurisdiction or any other jurisdiction in order to obtain an exemption from, or reduced rate of, deduction, payment or withholding of Indemnified Taxes or Other Taxes to which such Lender or the Administrative Agent is entitled pursuant to an applicable tax treaty or the law of the relevant jurisdiction.

     (f) If the Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by an Account Party or with respect to which an Account Party has paid additional amounts pursuant to this Section 2.20, it shall pay over such refund to such Account Party (but only to the extent of indemnity payments made, or additional amounts paid, by such Account Party under this Section 2.20 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that such Account Party, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to such Account Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This Section shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to any Account Party or any other Person.

     (g) Any Lender that is not a Lender as of the Effective Date shall not be entitled to any greater payment under this Section 2.20 than such Lender’s assignor would have been entitled to absent such assignment (determined taking into account the provisions of this Section) except to the extent that the entitlement to a greater payment resulted solely from a Change in Law formally announced after the date on which such Lender became a Lender hereunder.

     SECTION 2.21. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

     (a) Payments by the Account Parties. The Account Parties shall make each payment required to be made by them hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, interest or fees, or under Section 2.18, 2.19 or 2.20, or otherwise) or under any other Credit Document (except to the extent otherwise provided therein)

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prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set-off or counterclaim; provided that any payments in respect of Alternative Currency Letters of Credit shall be made in the manner (including the time and place of payment) as shall have been separately agreed between the relevant Account Party and Lender pursuant to Section 2.06. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 270 Park Avenue, New York, New York, except payments pursuant to Sections 2.18, 2.19, 2.20 and 10.03, which shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars.

     (b) Application of Insufficient Payments. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, to pay principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

     (c) Pro Rata Treatment. Except to the extent otherwise provided herein: (i) with respect to any Tranche, each reimbursement of LC Disbursements (other than in respect of Alternative Currency Letters of Credit) shall be made to the Lenders, each Borrowing shall be made from the Lenders, each payment of fees under Section 2.15 shall be made for account of the relevant Lenders, and each termination or reduction of the amount of the Commitments under Section 2.12 shall be applied to the respective Commitments of the Lenders, in each case pro rata according to the amounts of their respective Commitments under such Tranche; (ii) each Borrowing under any Tranche shall be allocated pro rata among the Lenders under such Tranche according to the amounts of their respective Commitments (in the case of the making of Loans) or their respective Loans that are to be included in such Borrowing (in the case of conversions and continuations of Loans) under such Tranche; (iii) each payment or prepayment of principal of Loans under any Tranche by the Account Parties shall be made for account of the Lenders under such Tranche pro rata in accordance with the respective unpaid principal amounts of the Loans held by them thereunder; and (iv) each payment of interest on Loans under any Tranche by an Account Party shall be made for account of the Lenders under such Tranche pro rata in accordance with the amounts of interest on such Loans then due and payable to the respective Lenders thereunder.

     (d) Sharing of Payments by Lenders. With respect to any Tranche, if any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or LC Disbursements (other than with respect to Alternative Currency Letters of Credit) resulting in such Lender receiving payment of a

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greater proportion of the aggregate amount of its Loans and/or LC Disbursements (other than with respect to Alternative Currency Letters of Credit) under such Tranche and accrued interest thereon then due than the proportion received by any other Lender under such Tranche, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and/or LC Disbursements (other than with respect to Alternative Currency Letters of Credit) of other Lenders under such Tranche to the extent necessary so that the benefit of all such payments shall be shared by the Lenders under such Tranche ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and/or LC Disbursements (other than with respect to Alternative Currency Letters of Credit) under such Tranche; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by any Account Party pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or LC Disbursements to any assignee or participant, other than to any Account Party or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Account Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Account Party rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Account Party in the amount of such participation.

     (e) Presumptions of Payment. Unless the Administrative Agent shall have received notice from an Account Party prior to the date on which any payment is due to the Administrative Agent for account of the relevant Lenders hereunder that such Account Party will not make such payment, the Administrative Agent may assume that such Account Party has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the relevant Lenders the amount due. In such event, if the relevant Account Party has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the Federal Funds Effective Rate.

     (f) Certain Deductions by the Administrative Agent. If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.21(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid.

     SECTION 2.22. Mitigation Obligations; Replacement of Lenders.

     (a) Designation of a Different Lending Office. If any Lender requests compensation under Section 2.18, or if any Account Party is required to pay any additional amount to any Lender or any Governmental Authority for account of any Lender pursuant to Section 2.20, then such Lender shall use reasonable efforts to designate a different lending office

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for funding or booking its Loans and/or Letters of Credit hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.18 or 2.20, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Each Account Party hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

     (b) Replacement of Lenders. If any Lender requests compensation under Section 2.18, or if any Account Party is required to pay any additional amount to any Lender or any Governmental Authority for account of any Lender pursuant to Section 2.20, or if any Lender defaults in its obligation to fund Loans or to make LC Disbursements hereunder, or if (in the case of the Letter of Credit Tranche only) any Lender ceases to be an NAIC Approved Lender, then XL Capital may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement to an assignee selected by XL Capital that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) XL Capital shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and/or LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the relevant Account Party (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.18 or payments required to be made pursuant to Section 2.20, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the relevant Account Party to require such assignment and delegation cease to apply.

ARTICLE III

GUARANTEE

     SECTION 3.01. The Guarantee. Each Guarantor hereby jointly and severally guarantees to each Lender and the Administrative Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Loans and LC Disbursements (and interest thereon) made by the Lenders to each of the Account Parties (other than such Guarantor in its capacity as an Account Party hereunder) and all other amounts from time to time owing to the Lenders or the Administrative Agent by such Account Parties under this Agreement, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "Guaranteed Obligations"). Each Guarantor hereby further jointly and severally agrees that if any Account Party (other than such Guarantor in its capacity as an Account Party hereunder) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of

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the Guaranteed Obligations, such Guarantor will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.

     SECTION 3.02. Obligations Unconditional. The obligations of the Guarantors under Section 3.01 are absolute and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Account Parties under this Agreement or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Article that the obligations of the Guarantors hereunder shall be absolute and unconditional, joint and several, under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder, which shall remain absolute and unconditional as described above:

     (i) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;

     (ii) any of the acts mentioned in any of the provisions of this Agreement or any other agreement or instrument referred to herein shall be done or omitted; or

     (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or any other agreement or instrument referred to herein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with.

The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against any Account Party under this Agreement or any other agreement or instrument referred to herein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations.

     SECTION 3.03. Reinstatement. The obligations of the Guarantors under this Article shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Account Party in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and the Guarantors jointly and severally agree that they will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including reasonable fees of counsel) incurred by the

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Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.

     SECTION 3.04. Subrogation. The Guarantors hereby jointly and severally agree that until the payment and satisfaction in full of all Guaranteed Obligations and the expiration and termination of the Commitments they shall not exercise any right or remedy arising by reason of any performance by them of their guarantee in Section 3.01, whether by subrogation or otherwise, against any Account Party or any other guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations.

     SECTION 3.05. Remedies. The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders, the obligations of the Account Parties under this Agreement may be declared to be forthwith due and payable as provided in Article VIII (and shall be deemed to have become automatically due and payable in the circumstances provided in Article VIII) for purposes of Section 3.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against any Account Party and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by any Account Party) shall forthwith become due and payable by the Guarantors for purposes of Section 3.01.

     SECTION 3.06. Continuing Guarantee. The guarantee in this Article is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising.

     SECTION 3.07. Rights of Contribution. The Guarantors (other than XL Capital) hereby agree, as between themselves, that if any such Guarantor shall become an Excess Funding Guarantor (as defined below) by reason of the payment by such Guarantor of any Guaranteed Obligations, each other Guarantor (other than XL Capital) shall, on demand of such Excess Funding Guarantor (but subject to the next sentence), pay to such Excess Funding Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below and determined, for this purpose, without reference to the properties, debts and liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of such Guaranteed Obligations. The payment obligation of a Guarantor to any Excess Funding Guarantor under this Section shall be subordinate and subject in right of payment to the prior payment in full of the obligations of such Guarantor under the other provisions of this Article III and such Excess Funding Guarantor shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such obligations.

     For purposes of this Section, (i) "Excess Funding Guarantor" means, in respect of any Guaranteed Obligations, a Guarantor that has paid an amount in excess of its Pro Rata Share of such Guaranteed Obligations, (ii) "Excess Payment" means, in respect of any Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations and (iii) "Pro Rata Share" means, for any Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the aggregate present fair saleable value

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of all properties of such Guarantor (excluding any shares of stock of any other Guarantor) exceeds the amount of all the debts and liabilities of such Guarantor (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder and any obligations of any other Guarantor that have been Guaranteed by such Guarantor) to (y) the amount by which the aggregate fair saleable value of all properties of all of the Guarantors (other than XL Capital) exceeds the amount of all the debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of the Guarantors under this Article III) of all of the Guarantors (other than XL Capital), determined (A) with respect to any Guarantor that is a party hereto on the date hereof, as of the date hereof, and (B) with respect to any other Guarantor, as of the date such Guarantor becomes a Guarantor hereunder.

     SECTION 3.08. General Limitation on Guarantee Obligations. In any action or proceeding involving any corporate law, or any bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 3.01 would otherwise, taking into account the provisions of Section 3.07, be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 3.01, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Lender, the Administrative Agent or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     Each Account Party represents and warrants to the Lenders that:

     SECTION 4.01. Organization; Powers. Such Account Party and each of its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

     SECTION 4.02. Authorization; Enforceability. The Transactions are within such Account Parties' corporate powers and have been duly authorized by all necessary corporate and, if required, by all necessary shareholder action. This Agreement has been duly executed and delivered by such Account Party and constitutes a legal, valid and binding obligation of such Account Party, enforceable against such Account Party in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium, examination or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

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     SECTION 4.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of (including any exchange control approval), registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect and (ii) in the case of XL Europe, a notification required pursuant to S.I. 399 of 1999 European Communities (Supervision of Insurance Undertakings in an Insurance Group) Regulations 1999, to be filed with the Minister for Trade, Enterprise and Employment within one year of the date hereof, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of such Account Party or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any material indenture, agreement or other instrument binding upon such Account Party or any of its Subsidiaries or assets, or give rise to a right thereunder to require any payment to be made by any such Person, and (d) will not result in the creation or imposition of any Lien on any asset of such Account Party or any of its Subsidiaries.

     SECTION 4.04. Financial Condition; No Material Adverse Change.

     (a) Financial Condition. Such Account Party has heretofore furnished to the Lenders the consolidated balance sheet and statements of income, stockholders' equity and cash flows of such Account Party and its consolidated Subsidiaries (A) as of and for the fiscal year ended December 31, 2002, reported on by PricewaterhouseCoopers LLP, independent public accountants (as provided in XL Capital's Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2002), and (B) as of and for the fiscal quarter ended March 31, 2003, as provided in XL Capital's Report on Form 10-Q filed with the SEC for the fiscal quarter ended March 31, 2003. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of such Account Party and its respective consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP or (in the case of XL Europe, XL Insurance or XL Re) SAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (B) of the first sentence of this paragraph.

     (b) No Material Adverse Change. Since December 31, 2002, there has been no material adverse change in the assets, business, financial condition or operations of such Account Party and its Subsidiaries, taken as a whole.

     SECTION 4.05. Properties.

     (a) Property Generally. Such Account Party and each of its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, subject only to Liens permitted by Section 7.03 and except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes.

     (b) Intellectual Property. Such Account Party and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by such Account Party and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that,

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individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

     SECTION 4.06. Litigation and Environmental Matters.

     (a) Actions, Suits and Proceedings. Except as disclosed in Schedule III or as routinely encountered in claims activity, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority now pending against or, to the knowledge of such Account Party, threatened against or affecting such Account Party or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Agreement or the Transactions.

     (b) Environmental Matters. Except as disclosed in Schedule IV and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither such Account Party nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required for its business under any Environmental Law, (ii) has incurred any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

     SECTION 4.07. Compliance with Laws and Agreements. Such Account Party and each of its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.

     SECTION 4.08. Investment and Holding Company Status. Such Account Party is not (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.

     SECTION 4.09. Taxes. Such Account Party and each of its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Person has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

     SECTION 4.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair

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market value of the assets of such Plan by an amount that could reasonably be expected to result in a Material Adverse Effect.

     Except as could not reasonably be expected to result in a Material Adverse Effect, (i) all contributions required to be made by any Account Party or any of their Subsidiaries with respect to a Non-U.S. Benefit Plan have been timely made, (ii) each Non-U.S. Benefit Plan has been maintained in compliance with its terms and with the requirements of any and all applicable laws and has been maintained, where required, in good standing with the applicable Governmental Authority and (iii) neither any Account Party nor any of their Subsidiaries has incurred any obligation in connection with the termination or withdrawal from any Non-U.S. Benefit Plan.

     SECTION 4.11. Disclosure. The reports, financial statements, certificates or other information furnished by such Account Party to the Lenders in connection with the negotiation of this Agreement or delivered hereunder (taken as a whole) do not contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, such Account Party represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

     SECTION 4.12. Use of Credit. Neither such Account Party nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no Letter of Credit will be used in connection with buying or carrying any Margin Stock. No part of the proceeds of any Loan hereunder will be used to buy or carry any Margin Stock (except for repurchases of the capital stock of XL Capital and purchases of Margin Stock in accordance with XL Capital's Statement of Investment Policy Objectives and Guidelines as in effect on the date hereof or as it may be changed from time to time by a resolution duly adopted by the board of directors of XL Capital (or any committee thereof)). The purchase of any Margin Stock with the proceeds of any Loan will not be in violation of Regulation U or X of the Board and, after applying the proceeds of such Loan, not more than 25% of the value of the assets of XL Capital and its Subsidiaries taken as a whole consists or will consist of Margin Stock.

     SECTION 4.13. Subsidiaries. Set forth in Schedule V is a complete and correct list of all of the Subsidiaries of XL Capital as of March 31, 2003, together with, for each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary and (iii) the percentage of ownership of such Subsidiary represented by such ownership interests. Except as disclosed in Schedule V, (x) each of XL Capital and its Subsidiaries owns, free and clear of Liens, and has the unencumbered right to vote, all outstanding ownership interests in each Person shown to be held by it in Schedule V, (y) all of the issued and outstanding capital stock of each such Person organized as a corporation is validly issued, fully paid and nonassessable and (z) except as disclosed in filings of XL Capital with the SEC prior to the date hereof, there are no outstanding Equity Rights with respect to any Account Party.

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     SECTION 4.14. Withholding Taxes. Based upon information with respect to each Lender provided by each Lender to the Administrative Agent, as of the date hereof, the payment of the LC Disbursements and interest thereon, principal of and interest on the Loans, the fees under Section 2.15 and all other amounts payable hereunder will not be subject, by withholding or deduction, to any Indemnified Taxes imposed by any Account Party Jurisdiction.

     SECTION 4.15. Stamp Taxes. To ensure the legality, validity, enforceability or admissibility in evidence of this Agreement or any promissory notes evidencing Loans made (or to be made), it is not necessary, as of the date hereof, that this Agreement or such promissory notes or any other document be filed or recorded with any Governmental Authority in any Account Party Jurisdiction, or that any stamp or similar tax be paid on or in respect of this Agreement in any Account Party Jurisdiction, or such promissory notes or any other document other than such filings and recordations that have already been made and such stamp or similar taxes that have been paid.

     SECTION 4.16. Legal Form. Each of this Agreement and any promissory notes evidencing Loans made (or to be made) is in proper legal form under the laws of any Account Party Jurisdiction for the admissibility thereof in the courts of such Account Party Jurisdiction.

ARTICLE V

CONDITIONS

     SECTION 5.01. Effective Date. The obligations of the Lenders (or the Issuing Lender), as the case may be, to issue or continue Letters of Credit and to make Loans hereunder are subject to the receipt by the Administrative Agent of each of the following documents, each of which shall be satisfactory to the Administrative Agent (and to the extent specified below, to each Lender) in form and substance (or such condition shall have been waived in accordance with Section 10.02):

     (a) Executed Counterparts. From each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page to this Agreement) that such party has signed a counterpart of this Agreement.

     (b) Opinions of Counsel to the Obligors. Opinions, each dated the Effective Date, of (i) Paul S. Giordano, Esq., counsel to XL Capital, substantially in the form of Exhibit B-1, (ii) Charles R. Barr, Esq., counsel to XL America, substantially in the form of Exhibit B-2, (iii) Cahill Gordon & Reindel, special U.S. counsel for the Obligors, substantially in the form of Exhibit B-3, (iv) Conyers, Dill & Pearman, special Bermuda counsel to XL Insurance and XL Re, substantially in the form of Exhibit B-4, (v) Hunter & Hunter, special Cayman Islands counsel to XL Capital, substantially in the form of Exhibit B-5 and (vi) A&L Goodbody, special Irish counsel to XL Europe, substantially in the form of Exhibit B-6.

     (c) Opinion of Special New York Counsel to JPMCB. An opinion, dated the Effective Date, of Milbank, Tweed, Hadley & McCloy LLP, special New York counsel

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to JPMCB, substantially in the form of Exhibit C (and JPMCB hereby instructs such counsel to deliver such opinion to the Lenders).

     (d) Corporate Documents. Such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing, if applicable, of the Obligors, the authorization of the Transactions and any other legal matters relating to the Obligors, this Agreement or the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel.

     (e) Officer's Certificate. A certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of XL Capital, confirming compliance with the conditions set forth in the lettered clauses of the first sentence of Section 5.02.

     (f) Existing Credit Agreement. Evidence that (i) the Account Parties shall have paid in full all principal of and interest accrued on the loans and reimbursement obligations under the Existing Credit Agreement and all fees and expenses owing by the Account Parties thereunder, (ii) all other amounts (if any) payable by the Account Parties under or in respect of the Existing Credit Agreement have been paid in full, (iii) the Commitments (as defined in the Existing Credit Agreement) have terminated and (iv) all Non-Syndicated Letters of Credit (as defined in the Existing Credit Agreement) in favor of any beneficiary issued and outstanding thereunder shall have been either amended in the manner contemplated by Section 2.04(l) or replaced with one or more Non-Syndicated Letters of Credit in favor of such beneficiary hereunder on the Effective Date (or arrangements satisfactory to the Administrative Agent for such amendment or replacement, as applicable, promptly following the Effective Date shall have been made).

     (g) Other Documents. Such other documents as the Administrative Agent or any Lender or special New York counsel to JPMCB may reasonably request.

     The obligation of any Lender to make its initial extension of credit hereunder is also subject to the payment by XL Capital of such fees as XL Capital shall have agreed to pay to any Lender or the Administrative Agent in connection herewith, including the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy LLP, special New York counsel to JPMCB, in connection with the negotiation, preparation, execution and delivery of this Agreement and the other Credit Documents and the extensions of credit hereunder (to the extent that reasonably detailed statements for such fees and expenses have been delivered to XL Capital).

     The Administrative Agent shall notify the Account Parties and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders (or the Issuing Lender), as the case may be, to issue or continue, Letters of Credit or to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.02) on or prior to 3:00 p.m., New York City time, on June 25, 2003 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time).

     SECTION 5.02. Each Credit Event. The obligation of each Lender to issue, amend, renew or extend any Letter of Credit or to make any Loan is additionally subject to the

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satisfaction of the following conditions:

     (a) the representations and warranties of the Obligors set forth in this Agreement shall be true and correct on and as of the date of issuance, amendment, renewal or extension of such Letter of Credit or the date of such Loan, as applicable (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date);

     (b) at the time of and immediately after giving effect to the issuance, amendment, renewal or extension of such Letter of Credit or such Loan, as applicable, no Default shall have occurred and be continuing; and

     (c) in the case of any Alternative Currency Letter of Credit, receipt by the Administrative Agent of a request for offers as required by Section 2.06(a).

Each issuance, amendment, renewal or extension of a Letter of Credit and each Borrowing shall be deemed to constitute a representation and warranty by the Obligors on the date thereof as to the matters specified in clauses (a) and (b) of the preceding sentence.

ARTICLE VI

AFFIRMATIVE COVENANTS

     Until the Commitments have expired or been terminated, the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Account Parties covenant and agree with the Lenders that:

     SECTION 6.01. Financial Statements and Other Information. Each Account Party will furnish to the Administrative Agent and each Lender:

     (a) within 135 days after the end of each fiscal year of each Account Party except for XL America (but in the case of XL Capital, within 100 days after the end of each fiscal year of XL Capital), the audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of such Account Party and its consolidated Subsidiaries as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year (if such figures were already produced for such corresponding period or periods) (it being understood that delivery to the Lenders of XL Capital's Report on Form 10-K filed with the SEC shall satisfy the financial statement delivery requirements of this paragraph (a) to deliver the annual financial statements of XL Capital so long as the financial information required to be contained in such Report is substantially the same as the financial information required under this paragraph (a)), all reported on by independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of such Account Party and its consolidated

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Subsidiaries on a consolidated basis in accordance with GAAP or (in the case of XL Europe, XL Insurance and XL Re) SAP, as the case may be, consistently applied;

     (b) by June 15 of each year, (i) an unaudited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of XL America and its consolidated Subsidiaries as of the end of and for the immediately preceding fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year (if such figures were already produced for such corresponding period or periods), all certified by a Financial Officer of XL America as presenting fairly in all material respects the financial condition and results of operations of XL America and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes, and (ii) audited statutory financial statements for each Insurance Subsidiary of XL America reported on by independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such audited consolidated financial statements present fairly in all material respects the financial condition and results of operations of such Insurance Subsidiaries in accordance with SAP, consistently applied;

     (c) within 60 days after the end of each of the first three fiscal quarters of each fiscal year of such Account Party, the consolidated balance sheet and related statements of operations, stockholders' equity and cash flows of such Account Party and its consolidated Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for (or, in the case of the balance sheet, as of the end of) the corresponding period or periods of the previous fiscal year (if such figures were already produced for such corresponding period or periods), all certified by a Financial Officer of such Account Party as presenting fairly in all material respects the financial condition and results of operations of such Account Party and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP or (in the case of XL Europe, XL Insurance and XL Re) SAP, as the case may be, consistently applied, subject to normal year-end audit adjustments and the absence of footnotes (it being understood that delivery to the Lenders of XL Capital's Report on Form 10-Q filed with the SEC shall satisfy the financial statement delivery requirements of this paragraph (c) to deliver the quarterly financial statements of XL Capital so long as the financial information required to be contained in such Report is substantially the same as the financial information required under this paragraph (c));

     (d) concurrently with any delivery of financial statements under clause (a), (b) or (c) of this Section, a certificate signed on behalf of each Account Party by a Financial Officer (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Sections 7.03, 7.05, 7.06 and 7.07 and (iii) stating whether any change in GAAP or (in the case of XL Europe, XL Insurance, XL Re and any Insurance Subsidiary of XL America) SAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 4.04 and, if any such change has occurred,

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specifying the effect of such change on the financial statements accompanying such certificate;

     (e) concurrently with any delivery of financial statements under clauses (a) and (b)(ii) of this Section, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines);

     (f) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by such Account Party or any of its respective Subsidiaries with the SEC, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any U.S. or other securities exchange, or distributed by such Account Party to its shareholders generally, as the case may be;

     (g) concurrently with any delivery of financial statements under clause (a), (b) or (c) of this Section, a certificate of a Financial Officer of XL Capital, setting forth on a consolidated basis for XL Capital and its consolidated Subsidiaries as of the end of the fiscal year or quarter to which such certificate relates (i) the aggregate book value of assets which are subject to Liens permitted under Section 7.03(g) and the aggregate book value of liabilities which are subject to Liens permitted under Section 7.03(g)(it being understood that the reports required by paragraphs (a), (b) and (c) of this Section shall satisfy the requirement of this clause (i) of this paragraph (g) if such reports set forth separately, in accordance with GAAP, line items corresponding to such aggregate book values) and (ii) a calculation showing the portion of each of such aggregate amounts which portion is attributable to transactions among wholly-owned Subsidiaries of XL Capital; and

     (h) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of XL Capital or any of its Subsidiaries, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request.

     SECTION 6.02. Notices of Material Events. Each Account Party will furnish to the Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default; and

(b) any event or condition constituting, or which could reasonably be expected to have a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the relevant Account Party setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken by such Account Party with respect thereto.

     SECTION 6.03. Preservation of Existence and Franchises. Each Account Party

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will, and will cause each of its Subsidiaries to, maintain its corporate existence and its material rights and franchises in full force and effect in its jurisdiction of incorporation; provided that the foregoing shall not prohibit any merger or consolidation permitted under Section 7.01. Each Account Party will, and will cause each of its Subsidiaries to, qualify and remain qualified as a foreign corporation in each jurisdiction in which failure to receive or retain such qualification would have a Material Adverse Effect.

     SECTION 6.04. Insurance. Each Account Party will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers, insurance with respect to its properties in such amounts as is customary in the case of corporations engaged in the same or similar businesses having similar properties similarly situated.

     SECTION 6.05. Maintenance of Properties. Each Account Party will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition the properties now or hereafter owned, leased or otherwise possessed by and used or useful in its business and will make or cause to be made all needful and proper repairs, renewals, replacements and improvements thereto so that the business carried on in connection therewith may be properly conducted at all times except if the failure to do so would not have a Material Adverse Effect, provided, however, that the foregoing shall not impose on such Account Party or any Subsidiary of such Account Party any obligation in respect of any property leased by such Account Party or such Subsidiary in addition to such Account Party's obligations under the applicable document creating such Account Party's or such Subsidiary's lease or tenancy.

     SECTION 6.06. Payment of Taxes and Other Potential Charges and PriorityClaims; Payment of Other Current Liabilities. Each Account Party will, and will cause each of its Subsidiaries to, pay or discharge:

     (a) on or prior to the date on which penalties attach thereto, all taxes, assessments and other governmental charges or levies imposed upon it or any of its properties or income;

     (b) on or prior to the date when due, all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon any such property; and

     (c) on or prior to the date when due, all other lawful claims which, if unpaid, might result in the creation of a Lien upon any such property (other than Liens not forbidden by Section 7.03) or which, if unpaid, might give rise to a claim entitled to priority over general creditors of such Account Party in any proceeding under the Bermuda Companies Law or Bermuda Insurance Law, or any insolvency proceeding, liquidation, receivership, rehabilitation, dissolution or winding-up involving such Account Party or such Subsidiary;

provided that, unless and until foreclosure, distraint, levy, sale or similar proceedings shall have been commenced, such Account Party need not pay or discharge any such tax, assessment, charge, levy or claim so long as the validity thereof is contested in good faith and by appropriate

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proceedings diligently conducted and so long as such reserves or other appropriate provisions as may be required by GAAP or SAP, as the case may be, shall have been made therefor and so long as such failure to pay or discharge does not have a Material Adverse Effect.

     SECTION 6.07. Financial Accounting Practices. Such Account Party will, and will cause each of its consolidated Subsidiaries to, make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflect its transactions and dispositions of its assets and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements required under Section 6.01 in conformity with GAAP and SAP, as applicable, and to maintain accountability for assets.

     SECTION 6.08. Compliance with Applicable Laws. Each Account Party will, and will cause each of its Subsidiaries to, comply with all applicable Laws (including but not limited to the Bermuda Companies Law and Bermuda Insurance Laws) in all respects; provided that such Account Party or any Subsidiary of such Account Party will not be deemed to be in violation of this Section as a result of any failure to comply with any such Law which would not (i) result in fines, penalties, injunctive relief or other civil or criminal liabilities which, in the aggregate, would have a Material Adverse Effect or (ii) otherwise impair the ability of such Account Party to perform its obligations under this Agreement.

     SECTION 6.09. Use of Letters of Credit and Proceeds. No part of the proceeds of any Loan and no Letter of Credit will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. Each Account Party will use the Letters of Credit issued for its account hereunder in the ordinary course of business of, and will use the proceeds of all Loans made to it for the general corporate purposes of, such Account Party and its Affiliates. For the avoidance of doubt, the parties agree that any Account Party may apply for a Letter of Credit hereunder to support the obligations of any Affiliate of XL Capital, it being understood that such Account Party shall nonetheless remain the account party and as such be liable with respect to such Letter of Credit.

     SECTION 6.10. Continuation of and Change in Businesses. Each Account Party and its Subsidiaries will continue to engage in substantially the same business or businesses it engaged in (or proposes to engage in) on the date of this Agreement and businesses related or incidental thereto.

     SECTION 6.11. Visitation. Each Account Party will permit such Persons as any Lender may reasonably designate to visit and inspect any of the properties of such Account Party, to discuss its affairs with its financial management, and provide such other information relating to the business and financial condition of such Account Party at such times as such Lender may reasonably request. Each Account Party hereby authorizes its financial management to discuss with any Lender the affairs of such Account Party.

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ARTICLE VII

NEGATIVE COVENANTS

     Until the Commitments have expired or terminated, the principal of and interest on each Loan and all fees payable hereunder have been paid in full, all Letters of Credit have expired or terminated and all LC Disbursements have been reimbursed, each of the Account Parties covenants and agrees with the Lenders that:

     SECTION 7.01. Mergers. No Account Party will merge with or into or consolidate with any other Person, except that if no Default shall occur and be continuing or shall exist at the time of such merger or consolidation or immediately thereafter and after giving effect thereto any Account Party may merge or consolidate with any other corporation, including a Subsidiary, if such Account Party shall be the surviving corporation.

     SECTION 7.02. Dispositions. No Account Party will, nor will it permit any of its Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily (any of the foregoing being referred to in this Section as a "Disposition" and any series of related Dispositions constituting but a single Disposition), any of its properties or assets, tangible or intangible (including but not limited to sale, assignment, discount or other disposition of accounts, contract rights, chattel paper or general intangibles with or without recourse), except:

     (a) Dispositions in the ordinary course of business involving current assets or other invested assets classified on such Account Party's or its respective Subsidiaries' balance sheet as available for sale or as a trading account;

     (b) sales, conveyances, assignments or other transfers or dispositions in immediate exchange for cash or tangible assets, provided that any such sales, conveyances or transfers shall not individually, or in the aggregate for the Account Parties and their respective Subsidiaries, exceed $500,000,000 in any calendar year; or

     (c) Dispositions of equipment or other property which is obsolete or no longer used or useful in the conduct of the business of such Account Party or its Subsidiaries.

     SECTION 7.03. Liens. No Account Party will, nor will it permit any of its Subsidiaries to, create, incur, assume or permit to exist any Lien on any property or assets, tangible or intangible, now owned or hereafter acquired by it, except:

     (a) Liens existing on the date hereof (and extension, renewal and replacement Liens upon the same property, provided that the amount secured by each Lien constituting such an extension, renewal or replacement Lien shall not exceed the amount secured by the Lien theretofore existing) and listed on Part B of Schedule II;

     (b) Liens arising from taxes, assessments, charges, levies or claims described in Section 6.06 that are not yet due or that remain payable without penalty or to the extent permitted to remain unpaid under the provision of Section 6.06;

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     (c) Liens on property securing all or part of the purchase price thereof to such Account Party and Liens (whether or not assumed) existing on property at the time of purchase thereof by such Account Party (and extension, renewal and replacement Liens upon the same property); provided (i) each such Lien is confined solely to the property so purchased, improvements thereto and proceeds thereof, and (ii) the aggregate amount of the obligations secured by all such Liens on any particular property at any time purchased by such Account Party, as applicable, shall not exceed 100% of the lesser of the fair market value of such property at such time or the actual purchase price of such property;

     (d) zoning restrictions, easements, minor restrictions on the use of real property, minor irregularities in title thereto and other minor Liens that do not in the aggregate materially detract from the value of a property or asset to, or materially impair its use in the business of, such Account Party or any such Subsidiary;

     (e) Liens securing Indebtedness permitted by Section 7.07(b) covering assets whose market value is not materially greater than the amount of the Indebtedness secured thereby plus a commercially reasonable margin;

     (f) Liens on cash and securities of an Account Party or its Subsidiaries incurred as part of the management of (i) its investment portfolio in accordance with XL Capital's Statement of Investment Policy Objectives and Guidelines as in effect on the date hereof or as it may be changed from time to time by a resolution duly adopted by the board of directors of XL Capital (or any committee thereof) and (ii) its activities (a) in the weather and energy business conducted on an organized exchange or (b) in connection with its posting of collateral under a credit support annex under an International Swaps and derivatives, Inc. (ISDA) Master Agreement; in each case under clause (a) and (b) hereof not to exceed an aggregate amount of $100,000,000 at any time outstanding;

     (g) Liens on (i) assets received, and on actual or imputed investment income on such assets received, relating and identified to specific insurance payment liabilities or to liabilities arising in the ordinary course of any Account Parties' or any of their Subsidiary's business as an insurance or reinsurance company (including GICs and Stable Value Instruments) or corporate member of The Council of Lloyd's or as a provider of financial or investment services or contracts, or the proceeds thereof, in each case held in a segregated trust or other account and securing such liabilities or (ii) any other assets subject to any trust or other account arising out of or as a result of contractual, regulatory or any other requirements; provided that in no case shall any such Lien secure Indebtedness and any Lien which secures Indebtedness shall not be permitted under this clause (g);

     (h) statutory and common law Liens of materialmen, mechanics, carriers, warehousemen and landlords and other similar Liens arising in the ordinary course of business; and

     (i) Liens existing on property of a Person immediately prior to its being consolidated with or merged into any Account Party or any of their Subsidiaries or its becoming a Subsidiary, and Liens existing on any property acquired by any Account

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Party or any of their Subsidiaries at the time such property is so acquired (whether or not the Indebtedness secured thereby shall have been assumed) (and extension, renewal and replacement Liens upon the same property, provided that the amount secured by each Lien constituting such an extension, renewal or replacement Lien shall not exceed the amount secured by the Lien theretofore existing), provided that (i) no such Lien shall have been created or assumed in contemplation of such consolidation or merger or such Person's becoming a Subsidiary or such acquisition of property and (ii) each such Lien shall extend solely to the item or items of property so acquired and, if required by terms of the instrument originally creating such Lien, other property which is an improvement to or is acquired for specific use in connection with such acquired property.

     SECTION 7.04. Transactions with Affiliates. No Account Party will, nor will it permit any of its Subsidiaries to, enter into or carry out any transaction with (including purchase or lease property or services to, loan or advance to or enter into, suffer to remain in existence or amend any contract, agreement or arrangement with) any Affiliate of such Account Party, or directly or indirectly agree to do any of the foregoing, except (i) transactions involving guarantees or co-obligors with respect to any Indebtedness described in Part A of Schedule II, (ii) transactions among the Account Parties and their wholly-owned Subsidiaries and (iii) transactions with Affiliates in good faith in the ordinary course of such Account Party's business consistent with past practice and on terms no less favorable to such Account Party or any Subsidiary than those that could have been obtained in a comparable transaction on an arm's length basis from an unrelated Person.

     SECTION 7.05. Ratio of Total Funded Debt to Total Capitalization. XL Capital will not permit its ratio of (a) Total Funded Debt to (b) the sum of Total Funded Debt plus Consolidated Net Worth to be greater than 0.35:1.00 at any time.

     SECTION 7.06. Consolidated Net Worth. XL Capital will not permit its Consolidated Net Worth to be less than $5,000,000,000 at any time.

     SECTION 7.07. Indebtedness. No Account Party will, nor will it permit any of its Subsidiaries to, at any time create, incur, assume or permit to exist any Indebtedness, or agree, become or remain liable (contingent or otherwise) to do any of the foregoing, except:

     (a) Indebtedness created hereunder;

     (b) secured Indebtedness (including secured reimbursement obligations with respect to letters of credit) of any Account Party or any Subsidiary in an aggregate principal amount (for all Account Parties and their respective Subsidiaries) not exceeding $750,000,000 at any time outstanding;

     (c) other unsecured Indebtedness, so long as upon the incurrence thereof no Default would occur or exist;

     (d) Indebtedness consisting of accounts or claims payable and accrued and deferred compensation (including options) incurred in the ordinary course of business by any Account Party or any Subsidiary;

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     (e) Indebtedness incurred in transactions described in Section 7.03(f); and

     (f) Indebtedness existing on the date hereof and described in Part A of Schedule II and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof.

     SECTION 7.08. Claims Paying Ratings. XL Capital will maintain at all times a claims-paying rating of at least "A" from A.M. Best & Co. (or its successor) and XL Insurance and XL Re will maintain at all times a rating of at least "A" from Standard & Poor's Rating Services (or its successor).

     SECTION 7.09. Private Act. No Account Party will become subject to a Private Act other than the X.L. Insurance Company, Ltd. Act, 1989.

ARTICLE VIII

EVENTS OF DEFAULT

If any of the following events ("Events of Default") shall occur:

     (a) any Account Party shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

     (b) any Account Party shall fail to pay any interest on any Loan or LC Disbursement or any fee payable under this Agreement or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of 3 or more days;

     (c) any representation or warranty made or deemed made by any Account Party in or in connection with this Agreement or any amendment or modification hereof, or in any certificate or financial statement furnished pursuant to the provisions hereof, shall prove to have been false or misleading in any material respect as of the time made (or deemed made) or furnished;

     (d) any Account Party shall fail to observe or perform any covenant, condition or agreement contained in Article VII;

     (e) any Obligor shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article) and such failure shall continue unremedied for a period of 20 or more days after notice thereof from the Administrative Agent (given at the request of any Lender) to such Obligor;

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     (f) any Account Party or any of its Subsidiaries shall default (i) in any payment of principal of or interest on any other obligation for borrowed money in principal amount of $50,000,000 or more, or any payment of any principal amount of $50,000,000 or more under Hedging Agreements, in each case beyond any period of grace provided with respect thereto, or (ii) in the performance of any other agreement, term or condition contained in any such agreement (other than Hedging Agreements) under which any such obligation in principal amount of $50,000,000 or more is created, if the effect of such default is to cause or permit the holder or holders of such obligation (or trustee on behalf of such holder or holders) to cause such obligation to become due prior to its stated maturity or to terminate its commitment under such agreement, provided that this clause (f) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;

     (g) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging any Account Party a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of such Account Party under the Bermuda Companies Law or the Cayman Islands Companies Law (2003 Revision) or any other similar applicable Law, and such decree or order shall have continued undischarged or unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of an examiner, receiver or liquidator or trustee or assignee in bankruptcy or insolvency of such Account Party or a substantial part of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days;

     (h) any Account Party shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Bermuda Companies Law or the Cayman Islands Companies Law (2003 Revision) or any other similar applicable Law, or shall consent to the filing of any such petition, or shall consent to the appointment of an examiner, receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or a substantial part of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or corporate or other action shall be taken by such Account Party in furtherance of any of the aforesaid purposes;

     (i) one or more judgments for the payment of money in an aggregate amount in excess of $100,000,000 shall be rendered against any Account Party or any of its Subsidiaries or any combination thereof and the same shall not have been vacated, discharged, stayed (whether by appeal or otherwise) or bonded pending appeal within 45 days from the entry thereof;

     (j) an ERISA Event (or similar event with respect to any Non-U.S. Benefit Plan) shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events and such similar events that have occurred, could reasonably be expected to result in liability of the Account Parties and their Subsidiaries in an aggregate amount exceeding $100,000,000;

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     (k) a Change in Control shall occur;

     (l) XL Capital shall cease to own, beneficially and of record, directly or indirectly all of the outstanding voting shares of capital stock of XL Insurance, XL Re, XL America or XL Europe; or

     (m) the guarantee contained in Article III shall terminate or cease, in whole or material part, to be a legally valid and binding obligation of each Guarantor or any Guarantor or any Person acting for or on behalf of any of such parties shall contest such validity or binding nature of such guarantee itself or the Transactions, or any other Person shall assert any of the foregoing;

then, and in every such event (other than an event with respect to any Account Party described in clause (g) or (h) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Account Parties, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Account Parties accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Account Parties; and in case of any event with respect to any Account Party described in clause (g) or (h) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Account Parties accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Account Parties.

If an Event of Default shall occur and be continuing and XL Capital receives notice from the Administrative Agent or the Required Lenders demanding the deposit of cash collateral for the aggregate LC Exposure of all the Lenders pursuant to this paragraph, the Account Parties shall immediately deposit into an account established and maintained on the books and records of the Administrative Agent, which account may be a "securities account" (within the meaning of Section 8-501 of the Uniform Commercial Code as in effect in the State of New York (the "Uniform Commercial Code")), in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to the total LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to any Account Party described in clause (g) or (h) of this Article. Such deposit shall be held by the Administrative Agent as collateral for the LC Exposure under this Agreement, and for this purpose each of the Account Parties hereby grant a security interest to the Administrative Agent for the benefit of the Lenders in such collateral account and in any financial assets (as defined in the Uniform Commercial Code) or other property held therein.

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     In addition to the provisions of this Article, each Account Party agrees that upon the occurrence and during the continuance of any Event of Default any Lender which has issued any Alternative Currency Letter of Credit may, by notice to XL Capital and the Administrative Agent: (a) declare that all fees and other obligations of the Account Parties accrued in respect of Alternative Currency Letters of Credit issued by such Lender shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Account Party and (b) demand the deposit (without duplication of any amounts deposited with the Administrative Agent under the preceding paragraph) of cash collateral from the Account Parties in immediately available funds in the currency of such Alternative Currency Letter of Credit or, at the option of such Lender, in Dollars in an amount equal to the then aggregate undrawn face amount of all such Alternative Currency Letters of Credit and in such manner as previously agreed to by the Account Parties and such Lender; provided that, in the case of any of the Events of Default specified in clause (g) or (h) of this Article, without any notice to any Account Party or any other act by the Administrative Agent or the Lenders, all fees and other obligations of the Account Parties accrued in respect of all Alternative Currency Letters of Credit shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Account Party. If the Administrative Agent receives any notice from a Lender pursuant to the previous sentence, then it will promptly give notice thereof to the other Lenders.

ARTICLE IX

THE ADMINISTRATIVE AGENT

     Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto.

     The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such Person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with any Account Party or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

     The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Required Lenders, and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Account Party or any of their Subsidiaries

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that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by an Account Party or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article V or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

     The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for any Account Party), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

     The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

     The Administrative Agent may resign at any time by notifying the Lenders and the Account Parties. Upon any such resignation, the Required Lenders shall have the right, in consultation with XL Capital, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent's resignation shall nonetheless become effective and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and (2) the Required Lenders shall perform the duties of the Administrative Agent (and all payments and communications provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly) until such time as the Required Lenders appoint a successor agent as provided for above in this paragraph. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring (or retired) Administrative

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Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder (if not already discharged therefrom as provided above in this paragraph). The fees payable by XL Capital to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between XL Capital and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent.

     Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder.

     Notwithstanding anything herein to the contrary, the Sole Advisor, Sole Lead Arranger and Sole Bookrunner, the Co-Syndication Agents and the Documentation Agent named on the cover page of this Agreement shall not have any duties or liabilities under this Agreement, except in their capacity, if any, as Lenders.

ARTICLE X

MISCELLANEOUS

     SECTION 10.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

     (a) if to any Account Party, to XL Capital at XL House, One Bermudiana Road, Hamilton HM 11 Bermuda, Attention of Roddy Gray (Telecopy No. (441) 296-6399); with a copy to Paul Giordano, Esq. at the same address and telecopy number (441) 295-4867);

     (b) if to the Administrative Agent, to JPMorgan Chase Bank, 1111 Fannin Street, 10^th Floor, Houston, Texas 77002-8069, Attention of Loan and Agency Services Group (Telecopy No. (713) 750-2782; Telephone No. (713) 750-2102), with a copy to JPMorgan Chase Bank, 270 Park Avenue, 4^th Floor, New York, New York 10017, Attention of Helen Newcomb (Telecopy No. (212) 270-1511; Telephone No. (212) 270-6260); and

     (c) if to a Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

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Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto (or, in the case of any such change by a Lender, by notice to the Account Parties and the Administrative Agent). All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

     Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or any Account Party may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. Without limiting the foregoing, the Account Parties may furnish to the Administrative Agent and the Lenders the financial statements required to be furnished by it pursuant to Section 6.01(a), 6.01(b) or 6.01(c) by electronic communications pursuant to procedures approved by the Administrative Agent.

     SECTION 10.02. Waivers; Amendments.

     (a) No Deemed Waivers; Remedies Cumulative. No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Account Parties therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time.

     (b) Amendments. Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Obligors and the Required Lenders or by the Obligors and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall:

     (i) increase the Commitment of any Lender without the written consent of such Lender,

     (ii) reduce the principal amount of any Loan or the amount of any reimbursement obligation of an Account Party in respect of any LC Disbursement or reduce the rate of interest thereon, or reduce any fees or other amounts payable hereunder, without the written consent of each Lender directly affected thereby,

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     (iii) postpone the scheduled date of payment of the principal amount of any Loan or for reimbursement of any LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment or any Letter of Credit (other than an extension thereof pursuant to an "evergreen" provision"), without the written consent of each Lender directly affected thereby,

     (iv) change Section 2.21(c) or 2.21(d) without the consent of each Lender directly affected thereby,

     (v) release any of the Guarantors from any of their guarantee obligations under Article III without the written consent of each Lender, and

     (vi) change any of the provisions of this Section or the percentage in the definition of the term "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender;

and providedfurther that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent.

     Anything in this Agreement to the contrary notwithstanding, no waiver or modification of any provision of this Agreement that has the effect (either immediately or at some later time) of enabling any Account Party to satisfy a condition precedent to the making of a Loan under the Revolving Credit Tranche shall be effective against the Lenders under such Tranche for purposes of the Commitments of such Tranche unless the Required Lenders of such Tranche shall have concurred with such waiver or modification, and no waiver or modification of any provision of this Agreement that could reasonably be expected to adversely affect the Lenders of any Tranche in a manner that does not affect both Tranches equally shall be effective against the Lenders of such Tranche unless the Required Lenders of such Tranche shall have concurred with such waiver or modification.

SECTION 10.03. Expenses; Indemnity; Damage Waiver.

     (a) Costs and Expenses. The Account Parties shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees, charges and disbursements of one legal counsel for the Administrative Agent and one legal counsel for the Lenders, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection

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with the Loans made or Letters of Credit issued hereunder, including in connection with any workout, restructuring or negotiations in respect thereof.

     (b) Indemnification by the Account Parties. The Account Parties shall indemnify the Administrative Agent and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee (but not including Excluded Taxes), incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of the proceeds thereof or any Letter of Credit or the use thereof (including any refusal by any Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Account Party or any of its Subsidiaries, or any Environmental Liability related in any way to any Account Party or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses result from or arise out of the gross negligence or willful misconduct of such Indemnitee.

     (c) Reimbursement by Lenders. To the extent that the Account Parties fail to pay any amount required to be paid by them to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such.

     (d) Waiver of Consequential Damages, Etc. To the extent permitted by applicable law, no Account Party shall assert, and each Account Party hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

     (e) Payments. All amounts due under this Section shall be payable promptly after written demand therefor.

     SECTION 10.04. Successors and Assigns.

     (a) Assignments Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) no Account Party may assign or otherwise transfer any of its

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rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by an Account Party without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

     (b) Assignments by Lenders. (i) Subject to the conditions set forth in paragraph (b)(ii) of this Section, any Lender may assign all or a portion of its rights and obligations with respect to any Tranche under this Agreement (including all or a portion of its Commitment and the Loans and (in the case of the Letter of Credit Tranche) LC Disbursements at the time owing to it under such Tranche) to (I) in the case of the Letter of Credit Tranche, one or more NAIC Approved Lenders and (II) in the case of the Revolving Credit Tranche, any Person, in each case with the prior written consent (such consent not to be unreasonably withheld) of:

     (A) the Account Parties, provided that no consent of any Account Party shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default under clause (a), (b), (g) or (h) of Article VIII has occurred and is continuing, any other assignee; and

     (B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment to an assignee that is a Lender immediately prior to giving effect to such assignment.

     (ii) Assignments shall be subject to the following additional conditions:

      (A) except in the case of an assignment to a Lender, an Approved Fund or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment under any Tranche, the amount of the Commitment of the assigning Lender under such Tranche subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Account Parties and the Administrative Agent otherwise consent, provided that no such consent of the Account Parties shall be required if an Event of Default under clause (a), (b), (g) or (h) of Article VIII has occurred and is continuing;

     (B) each partial assignment with respect to any Tranche shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations with respect to such Tranche under this Agreement;

     (C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and

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(D) the assignee, if it shall not be a Lender, shall deliver an Administrative Questionnaire to the Administrative Agent (with a copy to XL Capital).

     (iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(v) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.18, 2.19, 2.20 and 10.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 10.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

     (iv) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose vehicle (an "SPV") of such Granting Lender, identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Account Parties, the option to provide to the Account Parties all or any part of any Loan or LC Disbursement that such Granting Lender would otherwise be obligated to make to the Account Parties pursuant to Section 2.01, provided that (i) nothing herein shall constitute a commitment by any SPV to make any Loan or LC Disbursement, (ii) if an SPV elects not to exercise such option or otherwise fails to provide all or any part of such Loan or LC Disbursement, the Granting Lender shall be obligated to make such Loan or LC Disbursement pursuant to the terms hereof and (iii) the Account Parties may bring any proceeding against either or both the Granting Lender or the SPV in order to enforce any rights of the Account Parties hereunder. The making of a Loan or LC Disbursement by an SPV hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan or LC Disbursement were made by the Granting Lender. Each party hereto hereby agrees that no SPV shall be liable for any payment under this Agreement for which a Lender would otherwise be liable, for so long as, and to the extent, the related Granting Lender makes such payment. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States or any State thereof arising out of any claim against such SPV under this Agreement. In addition, notwithstanding anything to the contrary contained in this Section, any SPV may with notice to, but without the prior written consent of, the Account Parties or the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loan or Letter of Credit to its Granting Lender or to any financial institutions (consented to by the Account Parties and the Administrative Agent) providing liquidity and/or credit support (if any) with respect to commercial paper issued by such SPV to fund such Loans and to issue such Letters of Credit and such SPV may disclose, on a

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confidential basis, confidential information with respect to any Account Party and its Subsidiaries to any rating agency, commercial paper dealer or provider of a surety, guarantee or credit liquidity enhancement to such SPV. Notwithstanding anything to the contrary in this Agreement, no SPV shall be entitled to any greater rights under Section 2.18 or Section 2.20 than its Granting Lender would have been entitled to absent the use of such SPV. This paragraph may not be amended without the consent of any SPV at the time holding Loans or LC Disbursements under this Agreement.

     (v) The Administrative Agent, acting for this purpose as an agent of the Account Parties, shall maintain at one of its offices in New York City a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, the Commitment and Revolving Credit Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Account Parties, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by any Account Party and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

    (vi) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b)(ii)(C) of this Section and any written consent to such assignment required by paragraph (b)(i) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

     (c) Participations. (i) Any Lender may, without the consent of the Account Parties or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement and the other Credit Documents (including all or a portion of its Commitment, Revolving Credit Commitment, the Loans and LC Disbursements owing to it); provided that (A) any such participation sold to a Participant which is not a Lender, an Approved Fund or a Federal Reserve Bank shall be made only with the consent (which in each case shall not be unreasonably withheld) of XL Capital and the Administrative Agent, unless a Default has occurred and is continuing, in which case the consent of XL Capital shall not be required, (B) such Lender's obligations under this Agreement and the other Credit Documents shall remain unchanged, (C) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (D) the Account Parties, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Credit Documents. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Credit Documents and to approve any amendment, modification or waiver of any provision of this Agreement or the other

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Credit Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that affects such Participant. Subject to paragraph (c)(ii) of this Section, the Account Parties agree that each Participant shall be entitled to the benefits of Sections 2.18, 2.19 and 2.20 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.21(d) as though it were a Lender.

     (ii) A Participant shall not be entitled to receive any greater payment under Section 2.18, 2.19 or 2.20 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant or the Lender interest assigned, unless (A) the sale of the participation to such Participant is made with the Account Parties' prior written consent and (B) in the case of Section 2.18 or 2.20, the entitlement to greater payment results solely from a Change in Law formally announced after such Participant became a Participant.

     (d) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any such pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

     (e) No Assignments to any Account Party or Affiliates. Anything in this Section to the contrary notwithstanding, no Lender may assign or participate any interest in any Loan or LC Exposure held by it hereunder to any Account Party or any of its Affiliates or Subsidiaries without the prior consent of each Lender.

     SECTION 10.05. Survival. All covenants, agreements, representations and warranties made by the Account Parties herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and the issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of, or any accrued interest on, any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.18, 2.19, 2.20 and 10.03 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof.

     SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement may

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be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract between and among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 5.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page to this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

     SECTION 10.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

     SECTION 10.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of any Account Party against any of and all the obligations of such Account Party now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

     SECTION 10.09. Governing Law; Jurisdiction; Etc.

     (a) Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of New York.

     (b) Submission to Jurisdiction. Each Obligor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the

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Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Obligor or its properties in the courts of any jurisdiction.

     (c) Waiver of Venue. Each Obligor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

     (d) Service of Process. By the execution and delivery of this Agreement, XL Capital Ltd, XL Insurance (Bermuda) Ltd, XL Europe Ltd and XL Re Ltd acknowledge that they have by a separate written instrument, designated and appointed CT Corporation System, 1633 Broadway, New York, New York 10019 (or any successor entity thereto), as its authorized agent upon which process may be served in any suit or proceeding arising out of or relating to this Agreement that may be instituted in any federal or state court in the State of New York. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

     (e) Waiver of Immunities. To the extent that any Account Party has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution or execution, on the ground of sovereignty or otherwise) with respect to itself or its property, it hereby irrevocably waives, to the fullest extent permitted by applicable law, such immunity in respect of its obligations under this Agreement.

     SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

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     SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

     SECTION 10.12. Treatment of Certain Information; Confidentiality.

     (a) Treatment of Certain Information. Each of the Account Parties acknowledge that from time to time financial advisory, investment banking and other services may be offered or provided to any Account Party or one or more of their Subsidiaries (in connection with this Agreement or otherwise) by any Lender or by one or more subsidiaries or affiliates of such Lender and each of the Account Parties hereby authorizes each Lender to share any information delivered to such Lender by such Account Party and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such subsidiary or affiliate, it being understood that (i) any such information shall be used only for the purpose of advising the Account Parties or preparing presentation materials for the benefit of the Account Parties and (ii) any such subsidiary or affiliate receiving such information shall be bound by the provisions of paragraph (b) of this Section as if it were a Lender hereunder. Such authorization shall survive the repayment of the Loans, the expiration or termination of the Letters of Credit, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof.

     (b) Confidentiality. Each of the Administrative Agent, the Lenders and each SPV agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority having jurisdiction over the Administrative Agent or any Lender, (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (vi) subject to an agreement in writing containing provisions substantially the same as those of this paragraph and for the benefit of the Account Parties, to (a) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (b) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to any Account Party and its obligations, (vii) with the consent of the Account Parties or (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this paragraph or (B) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than an Account Party. For the purposes of this paragraph, "Information" means all information received from an Account Party relating to an Account Party or its business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by such Account Party; provided that, in the case of information received from an Account Party after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of

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such Information as such Person would accord to its own confidential information. Notwithstanding the foregoing, each of the Administrative Agent and the Lenders agree that they will not trade the securities of any of the Account Parties based upon non-public Information that is received by them. Notwithstanding anything herein to the contrary, the Administrative Agent, the Lenders, each SPV and the Account Parties (and each of their respective employees, representatives or other agents) may disclose to any and all persons, without limitation, of any kind, the U.S. tax treatment and U.S. tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to such person relating to such tax treatment or tax structure, other than any information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws, and except that, with respect to any document or similar item that in either case contains information concerning the U.S. tax treatment or U.S. tax structure of such transactions as well as other information, this paragraph shall only apply to such portions of the document or similar item that relate to such tax treatment or tax structure.

     SECTION 10.13. Judgment Currency. This is an international loan transaction in which the specification of Dollars and payment in New York City is of the essence, and the obligations of each Account Party under this Agreement to make payment to (or for account of) a Lender in Dollars shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any other currency or in another place except to the extent that such tender or recovery results in the effective receipt by such Lender in New York City of the full amount of Dollars payable to such Lender under this Agreement. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency (in this Section called the "judgment currency"), the rate of exchange that shall be applied shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase such Dollars at the principal office of the Administrative Agent in New York City with the judgment currency on the Business Day next preceding the day on which such judgment is rendered. The obligation of each Account Party in respect of any such sum due from it to the Administrative Agent or any Lender hereunder (in this Section called an "Entitled Person") shall, notwithstanding the rate of exchange actually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by such Entitled Person of any sum adjudged to be due hereunder in the judgment currency such Entitled Person may in accordance with normal banking procedures purchase and transfer Dollars to New York City with the amount of the judgment currency so adjudged to be due; and each Account Party hereby, as a separate obligation and notwithstanding any such judgment, agrees to indemnify such Entitled Person against, and to pay such Entitled Person on demand, in Dollars, the amount (if any) by which the sum originally due to such Entitled Person in Dollars hereunder exceeds the amount of the Dollars so purchased and transferred.

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

X.L. AMERICA, INC.,
as an Account Party and a Guarantor

By_/s/ Martha G. Bannerman       
Name: Martha G. Bannerman
Title: Executive Vice President

XL INSURANCE (BERMUDA) LTD,
as an Account Party and a Guarantor

By_/s/ Christopher V. Greetham   
Name: Christopher V. Greetham
Title: Executive Vice President & Chief Investment Officer

XL EUROPE LTD,
as an Account Party and a Guarantor

By_/s/ Fiona Muldoon                  
Name: Fiona Muldoon
Title: Chief Financial Officer & Company Secretary

XL RE LTD,
as an Account Party and a Guarantor

By_/s/ John W. Hume                   
Name: John W. Hume
Title: Executive Vice President & Chief Financial Officer

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     IN WITNESS WHEREOF, XL Capital has caused this Agreement to be duly executed as a Deed by an authorized officer as of the day and year first above written.

EXECUTED AS A DEED by XL CAPITAL LTD,
as an Account Party and a Guarantor

__/s/ Georgette Barit                      
witness

By_/s/ Jerry de St. Paer                 
Name: Jerry de St. Paer
Title: Executive Vice President & Chief Financial Officer

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LENDERS

JPMORGAN CHASE BANK,
     individually and as Administrative Agent

By: _/s/ Helen L. Newcome             
Name: Helen L. Newcome
Title: Vice President

CITIBANK, N.A.

By: _/s/ Michael A. Taylor               
Name: Michael A. Taylor
Title: Vice President

BANK ONE, NA

By: _/s/ Chris Bono ____________
Name: Chris Bono
Title: Associate Director

By: _________________________
Name:
Title:

DEUTSCHE BANK AG NEW YORK BRANCH

By: _/s/ Clinton M. Johnson ______
Name: Clinton M. Johnson
Title: Managing Director

By: _/s/ John S. McGill __________
Name: John S. McGill
Title: Director

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WACHOVIA BANK, N.A.

By: _/s/ Greg Wilcox   __________
Name: Greg Wilcox
Title: Vice President

MELLON BANK, N.A.

By: _/s/ Carrie Burnham_________
Name: Carrie Burnham
Title: Assistant Vice President

BARCLAYS BANK PLC

By: _/s/ Paul Johnson___________
Name: Paul Johnson
Title: Relationship Director

CREDIT LYONNAIS NEW YORK BRANCH

By: _/s/ Sebastian Rocco________
Name: Sebastian Rocco
Title: Senior Vice President

HSBC BANK USA

By: _/s/ Anthony C. Valencourt___
Name: Anthony C. Valencourt
Title: Senior Vice President

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LLOYDS TSB BANK PLC

By: _/s/ Michael J. Gilligan________
Name: Michael J. Gilligan
Title: Director, Financial Institutions, USA

By: _/s/ Matthew S.R. Truck______
Name: Matthew S.R. Truck
Title: Vice President, Financial Institutions, USA

MERRILL LYNCH BANK USA

By: _/s/ Louis Alder_____________
Name: Louis Alder
Title: Vice President

MORGAN STANLEY BANK

By: _/s/ Jaap L. Tonckens________
Name: Jaap L. Tonckens
Title: Vice President

FLEET NATIONAL BANK

By: _/s/ Carla Balesaw__________
Name: Carla Balesaw
Title: Director

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ABN AMRO BANK N.V.

By: _/s/ Neil R. Stein____________
Name: Neil R. Stein
Title: Group Vice President

By: _/s/ Michael DeMarco________
Name: Michael DeMarco
Title: Assistant Vice President

THE BANK OF NEW YORK

By: _/s/ Gary Overton___________
Name: Gary Overton
Title: Vice President

THE BANK OF NOVA SCOTIA

By: _/s/ J.W. Campbell__________
Name: J.W. Campbell
Title: Managing Director

NATIONAL WESTMINSTER BANK PLC

By: _/s/ John Mallett____________
Name: John Mallett
Title: Senior Corporate Manager

 

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THE BANK OF BERMUDA LIMITED

By: _/s/ Renee Brunson__________
Name: Renee Brunson
Title: Senior Relationship Manager

THE BANK OF TOKYO-MITSUBISHI, LTD.

By: _/s/ Jesse A. Reid, Jr.________
Name: Jesse A. Reid, Jr.
Title: Authorized Signatory

COMERICA BANK

By: _/s/ Martin G. Ellis__________
Name: Martin G. Ellis
Title: Vice President

GOLDMAN SACHS CREDIT PARTNERS LP

By: _/s/ Robert Wagner_________
Name: Robert Wagner
Title: Authorized Signatory

ING BANK N.V., LONDON BRANCH

By: _/s/ M. Sharman___________              
Name: M. Sharman                                      
Title: Managing Director                               

By: _/s/ P. Ganpin_____________
Name: P. Ganpin
Title: Director

KEY BANK NATIONAL ASSOCIATION

By: _/s/ Mary K. Young________
Name: Mary K. Young
Title: Vice President

 

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UBS AG, CAYMAN ISLANDS BRANCH

By: _/s/ Wilfred V. Saint________
Name: Wilfred V. Saint
Title: Associate Director

By: _/s/ Thomas R. Salzano______
Name: Thomas R. Salzano
Title: Director

 

364-Day Credit Agreement

EX-10.65

18 November 2002

XL CAPITAL LTD
as Account Party

THE GUARANTORS
(as defined herein)

THE LENDERS PARTY HERETO
(as defined herein)

CITIBANK INTERNATIONAL PLC
as Agent and Security Trustee

SALOMON BROTHERS INTERNATIONAL LIMITED
as Arranger

LETTER OF CREDIT FACILITY AND
REIMBURSEMENT AGREEMENT
AMENDED AND RESTATED AS
OF 26 JUNE 2003

CONTENTS

Clause		Page
1.	Definitions	1
2.	The Facility	14
3.	Utilisation of the Facility	15
4.	Termination of Letters of Credit	17
5.	Payment of Demands	20
6.	The Account Party’s Liabilities in Relation to Letters of Credit	21
7.	Default Interest	22
8.	Termination and Reduction of the Commitments	22
9.	Fees	25
10.	Taxes	26
11.	Tax Receipts	27
12.	Increased Costs	28
13.	Illegality	28
14.	Mitigation Obligations; Replacement of Lenders	29
15.	Payments Generally; Pro Rata Treatment; Sharing of Set-offs	29
16.	Guarantee and Indemnity	32
17.	Representations and Warranties	35
18.	Affirmative Covenants	39
19.	Negative covenants	43
20.	Events of default	47
21.	The Agent, the Arranger and the Lenders	49
22.	Notices	56
23.	Waivers and Amendments	57
24.	Costs and Expenses	58
25.	Indemnities	59
26.	Alteration to the parties	60
27.	Set off	65
28.	Miscellaneous provisions	65
29.	Governing Law and Jurisdiction	66
30.	Treatment of Certain Information; Confidentiality	67
31.	Third Party Rights	69

LETTER OF CREDIT FACILITY AND REIMBURSEMENT AGREEMENT dated 18 November 2002 (amended and restated as of 26 June 2003)

BETWEEN:

XL CAPITAL LTD, a company incorporated under the laws of the Cayman Islands(the Account Party);

The GUARANTORS as defined below;

The LENDERS as defined below;

CITIBANK INTERNATIONAL PLC, as agent and trustee for the Lenders (and when acting in such capacities the Agent and Security Trustee respectively); and

SALOMON BROTHERS INTERNATIONAL LIMITED (the Arranger).

1. DEFINITIONS

Defined Terms

1.1 As used in this Agreement, the following terms have the meanings specified below:

Affiliate means, with respect to a specified Person, another Person that directly, or indirectly, Controls or is Controlled by or is under common Control with the Person specified;

Applicable Percentage means, with respect to any Lender, the percentage of the Total Commitments represented by such Lender’s Commitment. If the Total Commitments or Commitment of a Lender have terminated or expired, the Applicable Percentage shall be determined based upon the Total Commitments or Commitment of such Lender (as the case may be) most recently in effect, giving effect to any permitted assignments or transfers;

Applicant means each of XL Europe, Mid Ocean, Stonebridge Underwriting, NAC Reinsurance, Dornoch, County Down, Brockbank and XL Re and any other Affiliate of the Account Party as may be agreed by the Agent and the Account Party from time to time;

Approved Credit Institution means a credit institution within the meaning of the First Council Directive on the co-ordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions (No 77/780/EEC) which has been approved by Lloyd’s for the purpose of providing guarantees and issuing or confirming letters of credit comprising a member’s Funds at Lloyd’s;

Authorised Signatory means, in relation to an Obligor, any person who is duly authorised (in such manner as may be reasonably acceptable to the Agent) and in respect of whom the Agent has received a certificate signed by a director or another Authorised Signatory of such Obligor setting out the name and signature of such person and confirming such person’s authority to act;

Available Commitment means in relation to a Lender at any time and save as otherwise provided herein its Commitment less the amount of its participation in the LC Exposures at such time PROVIDED THATsuch amount shall not be less than zero;

Available Facility means, at any time, the aggregate of the Available Commitments adjusted, in the case of a proposed utilisation pursuant to a Utilisation Request, so as to take into account:

(a)	any reduction in the Commitment of a Lender pursuant to the terms hereof; and
(b)	any Letter of Credit which pursuant to any other Utilisation Request is to be issued;

on or before the proposed Utilisation Date relating to such utilisation;

Availability Period means the period from (and including) the Closing Date to (and including) the Commitment Termination Date;

Bilateral Letter of Credit has the meaning given to it in Clause 4.5(b);

BIS Qualifying Assets means fixed income securities issued or guaranteed by US Government Agencies or by the Central Governments of any OECD country having a financial strength rating of at least “A+” from Standard & Poor’s Rating Services (or its successor);

Board means the Board of Governors of the Federal Reserve System of the United States of America;

Brockbank means XL London Market Ltd, a company incorporated under the laws of England and Wales;

Business Day means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City, London or Bermuda are authorised or required by Law to remain closed;

Capital Lease Obligations of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalised amount thereof determined in accordance with GAAP;

Central Government means, without limitation, government departments, ministries and central banks;

Change in Control means the occurrence of any of the following events or conditions:

(a)	any Person or group of Persons (as used in Sections 13 and 14 of the Securities Exchange Act of 1934 of the United States of America, and the rules and regulations thereunder) shall have become the beneficial owner (as defined in the rules promulgated by the SEC) of more than 40% of the voting securities of the Account Party;
(b)	the sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Account Party; or
(c)	a majority of the members of the Account Party’s board of directors are persons who are then serving on the board of directors without having been elected by the board of directors or having been nominated for election by its shareholders;

Change in Law means (a) the adoption of any Law, rule or regulation after the date of this Agreement, (b) any change in any Law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Clause 12.1 and 13, by any lending office of such Lender or by such Lender’s holding company, if any) with any request, guideline or directive (whether or not having the force of Law) of any Governmental Authority made or issued after the date of this Agreement;

Charge Agreement means the charge agreement, in substantially the form set out in Schedule 9 that may be required to be entered into by the Account Party as chargor pursuant to the terms hereof and pursuant to which the Account Party will grant cash cover in favour of the Security Trustee;

Closing Date means the date on which the conditions set out in Schedule 5 (Conditions Precedent) have, in the reasonable opinion of the Agent, been satisfied;

Code means the Internal Revenue Code of 1986 of the United States of America, as amended from time to time;

Commencement Date means, in respect of a Letter of Credit, the date upon which a Letter of Credit shall become effective, being any date from (and including) the Closing Date to (but excluding) 1 August 2003;

Commitment means, with respect to each Lender, the commitment of such Lender to participate in the issue of Letters of Credit hereunder. The initial amount of each Lender’s Commitment is set forth on Schedule 1, or in the Transfer Certificate pursuant to which such Lender shall have assumed its Commitment, as applicable, but in each case as such Commitment may be:

(a)	reduced from time to time pursuant to Clause 8 (Termination and Reduction of the Commitments) or Clause 4.5 (b) (Replacement Letters of Credit); and
(b)	reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Clause 26.3 (Transfers by Lenders);

Commitment Letter means the letter so titled from the Arranger to the Account Party dated 24 September 2002;

Commitment Termination Date means the later of (i) 31 July 2003 and (ii) the earlier of (a) the laterof 26 November 2002 and the date which Lloyd’s may specify as the Funds Date for 2002; and (b) 1 January 2003;

Consolidated Net Worth means, at any time, the consolidated shareholders’ equity of the Account Party and its Subsidiaries;

Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. Controlling and Controlled have meanings correlative thereto;

County Down means County Down Limited, a company incorporated under the laws of England and Wales;

Default means any event or condition which constitutes an Event of Default or a Potential Event of Default;

Default Period means the period from and including the date on which the Agent makes payment of a Demand Amount to but excluding the date on which the Account Party makes a corresponding reimbursement under Clause 6.1(a) and (b) (The Account Party’s Indemnity to Lenders);

Demand Amount means a principal amount to be paid by the Account Party pursuant to Clause 6.1(a) and (b) (The Account Party’s Indemnity to Lenders);

Dollars or $ refers to the lawful money of the United States of America from time to time;

Dornoch means Dornoch Limited, a company incorporated under the laws of England and Wales;

Environmental Laws means any Law, whether now existing or subsequently enacted or amended, relating to (a) pollution or protection of the environment, including natural resources, (b) exposure of Persons, including but not limited to employees, to Hazardous Materials, (c) protection of the public health or welfare from the effects of products, by-products, wastes, emissions, discharges or releases of Hazardous Materials or (d) regulation of the manufacture, use or introduction into commerce of Hazardous Materials, including their manufacture, formulation, packaging, labelling, distribution, transportation, handling, storage or disposal;

Environmental Liability means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of an Obligor or any Subsidiary resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract or agreement pursuant to which liability is assumed or imposed with respect to any of the foregoing;

Equity Rights means, with respect to any Person, any subscriptions, options, warrants, commitments, pre-emptive rights or agreements of any kind (including any shareholders’ or voting trust agreements) for the issuance, sale, registration or voting of, or securities convertible into, any additional shares of capital stock of any class, or partnership or other ownership interests of any type in, such Person;

ERISA means the Employee Retirement Income Security Act of 1974 of the United States of America, as amended from time to time;

ERISA Affiliate means any trade or business (whether or not incorporated) that, together with the Account Party, is treated as a single employer under Clause 414(b) or (c) of the Code, or, solely for purposes of Clause 302 of ERISA and Clause 412 of the Code, is treated as a single employer under Clause 414 of the Code;

ERISA Event means (a) any reportable event, as defined in Clause 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an accumulated funding deficiency (as defined in Clause 412 of the Code or Clause 302 of ERISA), whether or not waived; (c) the filing pursuant to Clause 412(d) of the Code or Clause 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Obligor or any of such Obligor’s ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by an Obligor or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by any Obligor or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by any Obligor or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Obligor or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganisation, within the meaning of Title IV of ERISA;

Event of Default has the meaning assigned to such term in Clause 20;

Facility means the letter of credit facility granted to the Account Party pursuant to this Agreement;

Facility Office means the office or offices notified by a Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days’ written notice) as the office or offices through which it will perform its obligations under this Agreement;

Fee Letters means the letters from the Arranger to the Account Party dated 24 September 2002 and 19 June 2003, relating to the payment of certain fees;

Finance Documents means this Agreement, the Charge Agreement, the Commitment Letter, the Fee Letters, any Letter of Credit and any other document or documents as may be agreed by the Agent and the Account Party;

Final Expiration Date means the date on which a Letter of Credit terminates in accordance with its terms;

Finance Parties means the Lenders, the Agent, the Arranger and the Security Trustee;

Financial Officer means, with respect to any Obligor, a principal financial officer of such Obligor;

Funds at Lloyd’s has the meaning given to it in paragraph 4 of the Membership Bylaw (No. 17 of 1993);

Funds at Lloyd’s Requirements means, in respect of any member, the amount required to be maintained by that member as Funds at Lloyd’s;

Funds Date means the date notified by Lloyd’s each year as being the latest date in that year by which Funds at Lloyd’s can be placed with Lloyd’s in order to satisfy Funds at Lloyd’s Requirements in respect of the immediately succeeding calendar year being, in respect of the 2002 calendar year, 22 November 2002 or such other date as may be advised by Lloyd’s;

GAAP means generally accepted accounting principles in the United States of America;

GIC means a guaranteed investment contract or funding agreement or other similar agreement issued by an Obligor or any of its Subsidiaries that guarantees to a counterparty a rate of return on the invested capital over the life of such contract or agreement.

Governmental Authority means the government of the United Kingdom, or of any other nation, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government;

Guarantee means, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any property constituting security therefor for the purpose of assuring the holder of such Indebtedness, (ii) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including without limitation keepwell agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (iii) to lease or purchase property, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guarantee hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount of the Indebtedness in respect of which such Guarantee is made. The terms Guarantee and Guaranteed used as a verb shall have a correlative meaning;

Guarantors means each of the Account Party, XL America, XL Insurance, XL Europe and XL Re;

Hazardous Materials means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law;

Hedging Agreement means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement;

Indebtedness means, for any Person, without duplication (it being understood, for the avoidance of doubt, that insurance payment liabilities, as such, and liabilities arising in the ordinary course

of such Person’s business as an insurance or reinsurance company (including GICs and Stable Value Instruments) or corporate member of Lloyd’s or as a provider of financial or investment services or contracts (including GICs and Stable Value Instruments) (in each case other than in connection with the provision of financing to such Person or any of such Person’s Affiliates) shall not be deemed to constitute Indebtedness): (i) all indebtedness or liability for or on account of money borrowed by, or for or on account of deposits with or advances to (but not including accrued pension costs, deferred income taxes or accounts payable of) such Person; (ii) all obligations (including contingent liabilities) of such Person evidenced by bonds, debentures, notes, banker’s acceptances or similar instruments; (iii) all indebtedness or liability for or on account of property or services purchased or acquired by such Person; (iv) any amount secured by a Lien on property owned by such Person (whether or not assumed) and Capital Lease Obligations of such Person (without regard to any limitation of the rights and remedies of the holder of such Lien or the lessor under such capital lease to repossession or sale of such property); (v) the maximum available amount of all standby letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed); and (vi) all Guarantees of such Person.

Insurance Subsidiary means any Subsidiary which is subject to the regulation of, and is required to file statutory financial statements with, any governmental body, agency or official in any State or territory of the United States or the District of Columbia which regulates insurance companies or the doing of an insurance business therein.

Issuing Lender means any Lender in its capacity as an issuer of one or more Letters of Credit hereunder;

Law means any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority;

LC Disbursement means a payment made by a Lender pursuant to a Letter of Credit;

LC Exposure means the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all Demand Amounts. The LC Exposure of any Lender at any time shall be the sum of its participation in the outstanding Letters of Credit at such time and the Demand Amounts owed to it at such time;

LC Proportion means, in relation to the Lender in respect of any Letter of Credit and save as otherwise provided herein, the proportion (expressed as a percentage) of such Lender’s Available Commitment to the Available Facility immediately prior to the issue of such Letter of Credit;

Lender Affiliate means with respect to any Lender, (a) an Affiliate of such Lender or (b) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender;

Lenders means any of the Persons listed in Schedule 1 (Commitments) or any other Person that shall have become a party hereto pursuant to Clause 26.3 (Transfers by Lenders), and which has not ceased to be a party hereto in accordance with the terms hereof;

Letters of Credit means Letters of Credit issued pursuant to the terms of this Agreement;

Letter of Credit Fees means the fees payable by the Account Party pursuant to Clause 9.2 (Letter of Credit Fees) (as adjusted from time to time in accordance with the provisions of Clause 9.3) (Adjustment of Letter of Credit Fee);

Lien means, with respect to any asset, any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security;

LIBOR means, in relation to any unpaid sum:

(a)

the display rate per annum of the offered quotation for overnight deposits in the currency of the relevant unpaid sum which appears on Telerate Page 3750 or Telerate Page 3740 (as appropriate) at or about 11.00 a.m. on any relevant day; or

(b)

if the display rate cannot be determined under paragraph (a) above, the rate determined by the Agent to be the arithmetic mean (rounded, if necessary, to the nearest five decimal places with the midpoint rounded upwards) of the rates notified to the Agent by each of the Reference Banks quoting (provided that at least two Reference Banks are quoting) as the rate at which such Reference Bank is offering overnight deposits in the required currency in an amount comparable to that amount to prime banks in the London Interbank Market at or about 11.00 a.m. on any relevant day; and

for the purposes of this definition:

Telerate Page 3750 means the display designated as Page 3750, and Telerate Page 3740 means the display designated as Page 3740, in each case on the Telerate Service (or such other pages as may replace Page 3750 or Page 3740 on that service or such other service as may be nominated by the British Bankers’ Association (including the Reuters Screen) as the information vendor for the purposes of displaying British Bankers’ Association Interest Settlement Rates for deposits in the currency concerned);

Lloyd’s means the society incorporated by Lloyd’s Act 1871 by the name of Lloyd’s;

Majority Lenders means, at any time, Lenders having Commitments representing more than 50% of the sum of the total Commitments at such time; PROVIDED THAT, if the Commitments have expired or been terminated, Majority Lenders means Lenders having more than 50% of the aggregate LC Exposure of the Lenders;

Mandatory Costs means, in relation to any unpaid sum for any period, a rate per annum calculated in accordance with Schedule 4;

Margin Stock means margin stock within the meaning of Regulations T, U and X of the Board;

Material Adverse Effect means a material adverse effect on: (a) the assets, business, financial condition or operations of an Obligor and its Subsidiaries taken as a whole; or (b) the ability of an Obligor to perform any of its payment or other material obligations under this Agreement;

Mid Ocean means Mid Ocean Limited, a company incorporated under the laws of the Cayman Islands;

Multiemployer Plan means a multiemployer plan as defined in Clause 4001(a)(3) of ERISA;

NAC Reinsurance means NAC Reinsurance International Ltd, a company incorporated under the laws of England and Wales;

Non-U.S. Benefit Plan means any plan, fund (including any superannuation fund) or other similar program established or maintained outside the United States by any Obligor or any of its Subsidiaries, with respect to which such Obligor or the Subsidiary has an obligation to contribute, for the benefit of employees of such Obligor or such Subsidiary, which plan, fund or other similar program provides, or results in, the type of benefits described in Clause 3(1) or 3(2) of ERISA, and which plan is not subject to ERISA or the Code;

Obligor Jurisdiction means (a) Bermuda, (b) the Cayman Islands, (c) the Republic of Ireland, and (d) any other country (i) where any Obligor is licensed or qualified to do business or (ii) from or through which payments hereunder are made by any Obligor;

Obligors means each of the Account Party and the Guarantors;

OECD Country means any member of the Organisation for Economic Co-operation and Development;

Original Agreement means the letter of credit and reimbursement agreement dated 20 November 2001 (as amended by an Amendment Agreement dated 21 March 2002) between, inter alios, the Account Party, the Agent and the lenders thereto;

Original Letters of Credit means the letters of credit issued under the Original Agreement;

Original Parties means the parties to the Original Agreement;

Other Taxes means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement;

Participating Member State means any member state of the European Communities that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Union relating to European Monetary Union;

PBGC means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions;

Person means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity;

Plan means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Clause 412 of the Code or Clause 302 of ERISA, and in respect of which any Obligor or any ERISA Affiliate is (or, if such plan were terminated, would under Clause 4069 of ERISA be deemed to be) an employer as defined in Clause 3(5) of ERISA;

Potential Event of Default means an event or condition which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default;

Private Act means separate legislation enacted in Bermuda with the intention that such legislation apply specifically to an Obligor, in whole or in part;

Quarterly Dates means the last Business Day of March, June, September and December in each year, the first of which shall be the first such day after the date hereof;

Reference Banks means, subject to Clause 26.6 (Reference Banks), the principal London offices of Citibank, N.A., ING Bank N.V., London Branch, Lloyds TSB Bank plc and Barclays Bank plc;

Register has the meaning given to it in Clause 26.11 (Maintenance of Register by Agent);

Related Parties means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates;

Representations means each of the representations and warranties set out in Clause 17 (Representations and Warranties);

SAP means, as to each Obligor and each Subsidiary that offers insurance products, the statutory accounting practices prescribed or permitted by the relevant Governmental Authority for such Obligor’s or such Subsidiary’s domicile for the preparation of its financial statements and other reports by insurance corporations of the same type as such Obligor or such Subsidiary in effect on the date such statements or reports are to be prepared, except if otherwise notified by the Account Party as provided in Clause 1.3;

SEC means the Securities and Exchange Commission of the United States of America or any successor entity;

Stable Value Instrument means any insurance, derivative or similar financial contract or instrument designed to mitigate the volatility of returns during a given period on a specified portfolio of securities held by one party (the Customer) through the commitment of the other party (the SVI Provider) to provide the Customer with a credited rate of return on the portfolio, typically determined through an interest-crediting mechanism; in exchange, the SVI provider typically receives a fee;

Sterling or £ refers to the lawful currency of the United Kingdom from time to time;

Stonebridge Underwriting means Stonebridge Underwriting Limited, a company incorporated under the laws of England and Wales;

Subsidiary means, with respect to any Person (the parent), at any date, any corporation (or similar entity) of which a majority of the shares of outstanding capital stock normally entitled to vote for the election of directors (regardless of any contingency which does or may suspend or dilute the voting rights of such capital stock) is at such time owned directly or indirectly by the

parent or one or more subsidiaries of the parent. Unless otherwise specified, Subsidiary means a Subsidiary of an Obligor;

Substitute Lender has the meaning give to it in Clause 4.4(a);

Taxes means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. Taxation and Tax shall be construed accordingly;

Total Commitments means, at any time, the aggregate of the Lenders’ Commitments (being on the date hereof £335,637,756);

Total Funded Debt means, at any time, all Indebtedness of the Account Party and its Subsidiaries which would at such time be classified in whole or in part as a liability on the consolidated balance sheet of the Account Party in accordance with GAAP;

Total LC Exposures means, at any time, the aggregate of the Lenders’ LC Exposures;

Transactions means the execution, delivery and performance by the Obligors of this Agreement and the other Finance Documents to which any Obligor is intended to be a party and the issuance of Letters of Credit hereunder;

Transfer Certificate means a certificate in the form of Schedule 8 (Form of Transfer Certificate) delivered pursuant to Clause 26.4 (Transfer Procedure);

Transferee means a Person to which a Lender seeks to transfer by novation all or part of such Lender’s rights, benefits and obligations under the Finance Documents;

US Government Agencies means US government agencies whose debt obligations are fully and explicitly guaranteed as to the timely repayment of principal and interest by the full faith and credit of the US federal government;

Utilisation Date means the date on which a Letter of Credit is to be issued;

Utilisation Request means a notice substantially in the form set out in Schedule 6 (Form of Utilisation Request);

Withdrawal Liability means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA;

XL America means X.L. America, Inc., a company incorporated under the laws of Delaware, USA;

XL Europe means XL Europe Limited, a company incorporated under the laws of Ireland;

XL Insurance means XL Insurance (Bermuda) Ltd, a company organised under the laws of Bermuda;

XL Re means XL Re Ltd, a company organised under the laws of Bermuda.

Interpretation

1.2 Any reference in this Agreement to:

(a)	the Agent, Security Trustee, Arranger, Lender or any other Person shall be construed so as to include its and any subsequent successors and permitted transferees in accordance with their respective interests;
(b)	continuing, in the context of an Event of Default shall be construed as a reference to an Event of Default which has not been remedied or waived in accordance with the terms hereof and in relation to a Potential Event of Default, one which has not been remedied within the relevant grace period or waived in accordance with the terms hereof;
(c)	a holding company of a company or corporation shall be construed as a reference to any company or corporation of which the first-mentioned company or corporation is a subsidiary;
(d)	the equivalent on any date in one currency (the first currency) of an amount denominated in another currency (the second currency) is a reference to the amount of the first currency which could be purchased with the amount of the second currency at the spot rate quoted by the Agent at or about 11.00 a.m. on such date for the purchase of the first currency with the second currency;
(e)	a member shall be construed (as the context may require) as a reference to an underwriting member of Lloyd’s;
(f)	a month is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next succeeding calendar month save that, where any such period would otherwise end on a day which is not a Business Day, it shall end on the next succeeding Business Day, unless that day falls in the calendar month succeeding that in which it would otherwise have ended, in which case it shall end on the immediately preceding Business Day, PROVIDED THAT, if a period starts on the last Business Day in a calendar month or if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last Business Day in that later month (and references to months shall be construed accordingly);
(g)	a Lender’s participation, in relation to a Letter of Credit, shall be construed as a reference to the rights and obligations of such Lender in relation to such Letter of Credit as are expressly set out in this Agreement;
(h)	a successor shall be construed so as to include an assignee or successor in title of such party and any person who under the laws of its jurisdiction of incorporation or domicile has assumed the rights and obligations of such party under this Agreement or to which, under such laws, such rights and obligations have been transferred;
(i)	an asset or property shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights;

(j)	VAT shall be construed as a reference to value added tax including any similar tax which may be imposed in place thereof from time to time;
(k)	the winding-up, dissolution or administration of a company or corporation shall be construed so as to include any equivalent or analogous proceedings under the Law of the jurisdiction in which such company or corporation is incorporated or any jurisdiction in which such company or corporation carries on business including the seeking of liquidation, winding-up, reorganisation, dissolution, administration, arrangement, adjustment, protection or relief of debtors; and
(l)	unless the contrary intention appears:
	(i)	a Letter of Credit is cancelled, repaid or prepaid by:
		(A)	providing the Issuing Lender(s) with cash cover (as defined below); or
		(B)	reducing (in accordance with the terms of this Agreement and the Letter of Credit) the amount that may be demanded under the Letter of Credit (or by that amount automatically reducing in accordance with the terms of the Letter of Credit); or
		(C)	cancelling the Letter of Credit by (x) providing written confirmation (in form and substance satisfactory to the Agent or the Issuing Lender) from Lloyd’s that the Issuing Lender(s) has no further liability under the Letter of Credit (including by way of a notice specifying that Lloyd’s does not accept or unconditionally rejects a Letter of Credit (unless the Agent or the Issuing Lender as the case may be, acting reasonably, considers that Lloyd’s remains entitled to make a claim under such Letter of Credit)), and (y) if Lloyd’s agrees, by procuring the return of the original to the Agent;
	(ii)	cash cover is provided, pursuant to the terms of the Charge Agreement, in respect of a Lender’s participation in a Letter of Credit at any time by paying an amount in Sterling equal to the outstanding amount of that participation at that time to such account or accounts as the Agent may specify and creating effective security over such amount in favour of the Security Trustee on behalf of the Finance Parties in form and substance satisfactory to the Security Trustee (together with legal opinions, evidence of corporate authorisation, and similar documentation reasonably required by the Security Trustee), in the name of the Account Party from which the only withdrawals which may be made are withdrawals made with the prior written consent of the Security Trustee in accordance with the terms of the Charge Agreement; and
	(iii)	a reference to principal amount in respect of a Letter of Credit means the maximum amount which is expressed to be capable of being demanded under a Letter of Credit ignoring the aggregate amount of any cash cover held in relation to that Letter of Credit.

Accounting Terms; GAAP and SAP

1.3 Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP or SAP, as the context requires, each as in effect from time to time; provided that, if the Account Party notifies the Agent that the Obligors request an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or SAP, as the case may be, or in the application thereof on the operation of such provision (or if the Agent notifies the Obligors that the Majority Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or SAP, as the case may be, or in the application thereof, then such provision shall be interpreted on the basis of GAAP or SAP, as the case may be, as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

Agreements and Statutes

1.4 Any reference in this Agreement to:

(a)	this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented;
(b)	a statute or treaty shall be construed as a reference to such statute or treaty as the same may have been, or may from time to time be, amended or, in the case of a statute, re-enacted; and
(c)	a bylaw shall be construed as a reference to a bylaw made under Lloyd’s Acts 1871 to 1982 as the same may have been, or may from time to time be, amended or replaced.

Headings

1.5 Clause and Schedule headings are for ease of reference only.

Time

1.6 Any reference in this Agreement to a time of day shall, unless a contrary indication appears, be a reference to London time.

2. THE FACILITY

Grant of the Facility

2.1 The Lenders, upon the terms and subject to other conditions hereof, grant to the Account Party a letter of credit facility in an aggregate amount of £335,637,756.

Purpose and Application

2.2(a) The Facility is intended to support Funds at Lloyd’s for the underwriting business of the Applicants, and, accordingly, the Account Party shall apply all Letters of Credit issued hereunder in or towards satisfaction of such purpose.

(b)
   Without prejudice to the Account Party’s obligations under Clause 2.2(a) and the remaining provisions of this Agreement, none of the Finance Parties shall be bound to enquire as to, nor shall any of them be responsible for, the purpose of, or application of the proceeds of any Letter of Credit issued hereunder.

Conditions Precedent

2.3 Save as the Lenders may otherwise agree, the Account Party may not deliver any Utilisation Request unless the Agent has confirmed to the Account Party and the Lenders that it has waived and/or received all of the documents and other evidence listed in Schedule 5 (Conditions Precedent) and that each is, in form and substance, reasonably satisfactory to the Agent.

Several Obligations

2.4 The obligations of each Lender are several and the failure by a Lender to perform its obligations hereunder and/or under any Letter of Credit issued hereunder shall not affect the obligations of either Obligor towards any other party hereto nor shall any other party be liable for the failure by such Lender to perform its obligations hereunder and/or under such Letter of Credit.

Several Rights

2.5 The rights of each Finance Party are several and any debt arising hereunder at any time from an Obligor to any Finance Party shall be a separate and independent debt. Each such party shall be entitled to protect and enforce its individual rights arising out of this Agreement independently of any other party (so that it shall not be necessary for any party hereto to be joined as an additional party in any proceedings for this purpose).

Change of Currency

2.6(a) If, after the date of this Agreement, more than one currency or currency unit denomination are at the same time recognised by the central bank of any country as the lawful currency of that country, then:

(i)	any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent; and
(ii)	any translation from one currency or currency unit to another shall be at the official rate of exchange or conversion rate recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Agent acting reasonably.

(b)
   If a change in any currency of a country occurs, this Agreement will be amended in the manner determined by the Agent (acting reasonably) so as to reflect the change in currency and to place the parties in the same position, so far as possible, that they would have been in if no change in currency had occurred.

Cancellation of Original Agreement

2.7(a) From the date of this Agreement the Account Party shall not deliver any Utilisation Request (as defined in the Original Agreement) under the Original Agreement.

(b)	The Original Parties hereby agree that the Original Agreement shall be automatically terminated and the Total Commitments thereunder cancelled upon cancellation of all the Original Letters of Credit in accordance with the terms of the Original Agreement.
3.	UTILISATION OF THE FACILITY

Utilisation Conditions for the Facility

3.1 Save as otherwise provided herein, a Letter of Credit will be issued at the request of the Account Party on behalf of an Applicant if:

(a)	no later than 10.00 a.m. two Business Days before the proposed Utilisation Date, the Agent has received a duly completed Utilisation Request from the Account Party;
(b)	the proposed Utilisation Date is a Business Day falling within the Availability Period;
(c)	the proposed amount of such Letter of Credit is less than or equal to the Available Facility;
(d)	the Letter of Credit is substantially in the form set out in Schedule 7 (Form of Letter of Credit) or in such other form requested by the Account Party which is approved by Lloyd’s and the Lenders (such approval by the Lenders not to be unreasonably withheld or delayed and shall not be required unless the other form requested differs materially from the form set out in Schedule 7);
(e)	the beneficiary of such Letter of Credit is Lloyd’s; and
(f)	on and as of the proposed Utilisation Date (a) no Default has occurred and is continuing and (b) the Representations are true in all material respects.

Request for Letters of Credit

3.2 The Account Party may request the issue by the Lenders hereunder of a total of up to thirty Letters of Credit in respect of the Applicants. A single Utilisation Request may be issued in respect of more than one Letter of Credit.

Completion of Letters of Credit

3.3 The Agent is authorised to arrange for the issue of any Letter of Credit pursuant to Clause 3.1 (Utilisation Conditions for the Facility) by:

(a)	completing the Commencement Date of such Letter of Credit;
(b)	completing the schedule to such Letter of Credit with the percentage participation of each Lender as allocated pursuant to the terms hereof; and
(c)	executing such Letter of Credit on behalf of each Lender and following such execution delivering such Letter of Credit to Lloyd’s on the Utilisation Date.

Final Expiration Date

3.4 Each Letter of Credit shall expire on its Final Expiration Date.

Each Lender’s Participation in Letters of Credit

3.5(a) Save as otherwise provided herein, each Lender will participate in each Letter of Credit issued pursuant to this Clause 3 in the proportion borne by its Available Commitment to the Available Facility immediately prior to the issue of such Letter of Credit.

(b)
   No Lender shall participate in or issue any Letter of Credit to the extent that its LC Exposure would exceed its Commitment following the issue of that Letter of Credit.

Notification to Lenders

3.6 On or before each Utilisation Date the Agent shall notify each Lender of the Letter of Credit that is to be issued by the Agent on behalf of the Lenders, the name of the Applicant in respect of whom the Letter of Credit is being issued and the aggregate principal amount of the relevant Letter of Credit allocated to such Lender pursuant to this Agreement.

Cancellation of Available Commitments

3.7 On the expiry of the Availability Period, the Available Facility and each Lender’s Available Commitment shall be reduced to zero and accordingly the remaining Commitments of each Lender shall be equal to their respective LC Exposure under any issued Letters of Credit.

4. TERMINATION OF LETTERS OF CREDIT

Continuation until Termination

4.1(a) Each Lender acknowledges that, subject to the terms of this Agreement, each issued Letter of Credit shall continue in force unless Lloyd’s receives a notice pursuant to Clause 3 of the Letter of Credit, giving Lloyd’s not less than four years’ notice in writing terminating such Letter of Credit on the fourth anniversary of its Commencement Date or any subsequent date as specified in such notice (a Termination Notice). No Finance Party is entitled to give a Termination Notice to Lloyd’s pursuant to Clause 3 of the Letter of Credit except as permitted by this Clause 4.

(b)
   In any year (other than the year 2003), the Account Party may, by notice to the Agent given no later than 1 July of that year, terminate a Letter of Credit, such termination becoming effective on the fourth anniversary of 30 September of that year. The Agent shall promptly give notice to the Lenders and to Lloyd’s of that termination. Following

the giving of such notice by the Account Party that Letter of Credit will expire on the fourth anniversary of 30 September of that year.

Lenders’ Rights to Terminate a Letter of Credit

4.2 In any year (other than the year 2003), each Lender may in its absolute discretion elect to terminate its participation in a Letter of Credit, such termination becoming effective on the fourth anniversary of 30 September of that year. Each Lender undertakes to notify the Agent in writing as soon as reasonably practicable after it has determined that it will so terminate its participation and in any event by no later than close of business on 15 July of that year. The Agent shall give notice thereof to the Account Party within two Business Days of notification from such Lender. Unless notice is given to the Agent as aforesaid each Lender will be deemed automatically to have agreed to continue its participation in each Letter of Credit.

Continuation of a Letter of Credit

4.3(a) If none of the Lenders have given notice pursuant to Clause 4.2 (Lender’s Rights) by 15 July of any year the Agent shall promptly notify the Account Party and the Lenders thereof and subject to the provisions of Clause 4.6 (Continuation Conditions Precedent), the Letter of Credit shall continue in force in accordance with the terms thereof.

(b)
   If in any year a Lender gives notice in accordance with the provisions of Clause 4.2 (Lender’s Rights) that it intends to terminate its participation in any Letter of Credit in accordance with that clause, the Agent shall notify the Account Party accordingly within two Business Days thereafter, (and shall notify Lloyd’s no earlier than three Business Days before 1 September and no later than 1 September of that year) and the succeeding provisions of this Clause 4 shall apply. For the avoidance of doubt, the Agent shall notify Lloyd’s in accordance with (i) the notice given to the Agent by the Lender in accordance with the provisions of Clause 4.2 (Lender’s Rights), and (ii) Clause 3 of the Letter of Credit.

Substitute Lender

4.4(a) If in any year any Lender (a Declining Lender) gives notice in accordance with the provisions of Clause 4.2 (Lenders’ Rights) that it intends to terminate its participation in a Letter of Credit in accordance with that clause, then the Account Party may designate by the date which falls no later than the close of business on the earlier of the date which falls four weeks prior to the Funds Date of that year and the date which falls four weeks prior to 1 September of that year an Approved Credit Institution (which may be an existing Lender or Lenders) (the Substitute Lender) which is willing to assume all of the rights and obligations of the Declining Lender in respect of its participation in the relevant Letter of Credit (the Old Letter of Credit).

(b)	If the Account Party has found a Substitute Lender it shall promptly notify the Agent and the Declining Lender thereof and shall use its best efforts to procure the release by Lloyd’s of the Old Letter of Credit from the Funds at Lloyd’s of the relevant Applicant.
(c)	The Declining Lender shall as soon as reasonably practicable and in any event no later than the earlier of two weeks prior to the Funds Date of such year and two weeks prior to

1 September of such year transfer its rights and obligations hereunder to the Substitute Lender in accordance with the provisions of Clause 26.3 (Transfers by Lenders) provided that such transfer shall not be effective until the Funds Date of such year.

(d)
   The Substitute Lender shall pay to the Declining Lender all amounts then due and owing (and all fees accrued to but excluding the date of such transfer) to the Declining Lender in respect of its participation in the Old Letter of Credit.

Replacement Letters of Credit

4.5(a) If a Substitute Lender has become party hereto pursuant to Clause 4.4 (Substitute Lender), then subject to the provisions of Clause 4.6 (Continuation Conditions Precedent) the Lenders who are deemed to have agreed to the continuation of the Old Letter of Credit (the Extending Lenders) shall, together with the Substitute Lender, participate in, and issue by the Funds Date of such year, a new Letter of Credit (the New Letter of Credit) which shall (i) replace the Old Letter of Credit and (ii) be in an amount equal to the Old Letter of Credit.

(b)
   If a Substitute Lender has not been found by the time specified in Clause 4.4(a) then: (i) the Account Party shall use its best efforts to procure the release by Lloyd’s of the Old Letter of Credit from the Funds at Lloyd’s of the relevant Applicant, (ii) subject to the provisions of Clause 4.6 (Continuation Conditions Precedent), the Extending Lenders shall participate in, and issue by the Funds Date of such year, a new Letter of Credit (the Reduced Letter of Credit) which shall (x) replace their participation in the Old Letter of Credit and (y) be in an amount equal to the Old Letter of Credit less the amount of the Declining Lender’s participation and (iii) the Declining Lender shall participate in a separate Letter of Credit (a Bilateral Letter of Credit) which shall (x) replace its participation in the Old Letter of Credit, (y) be in an amount equal to the Declining Lender’s participation in the Old Letter of Credit and (z) have a Final Expiration Date which is the fourth anniversary of 30 September of the year in which that Lender first gave its notice of termination pursuant to Clause 4.2 (Lenders’ Rights).

Continuation Conditions Precedent

4.6(a) On or prior to close of business on 1 September of any year, the Account Party shall promptly notify the Agent if (as of 1 September of that year):

	(i)	an Event of Default or Potential Event of Default occurs which is continuing;
	(ii)	any of the Representations cease to be correct in all material respects, or become misleading in any material respect; or
	(iii)	any Letter of Credit ceases solely to be used to support the relevant Applicant’s underwriting business at Lloyd’s which has been provided in accordance with the requirements of Lloyd’s applicable to it.
(b)	Subject to due notification to Lloyd’s in accordance with Clause 3 of the relevant Letter of Credit, in any year the Lenders shall be entitled to terminate their participations in all or any Letters of Credit with effect from the fourth anniversary of 30 September of that

year if any of the events specified in Clause 4.6(a) above occurs and is continuing as at 1 September of that year, and any Finance Party shall be entitled to give a notice to Lloyd’s to that effect. Such Finance Party shall promptly give notice thereof to the Agent and the Agent shall provide a copy thereof to the Account Party within two Business Days of such notification from that Finance Party.

Cancellation of Bilateral Letters of Credit

4.7 At any time after the issue of a Bilateral Letter of Credit by a Declining Lender the Account Party may give the Agent and the Declining Lender not less than fourteen days’ prior written notice of its intention to procure that the liability of the Declining Lender under such Letter of Credit is reduced to zero (whereupon it shall do so).

Revised Letters of Credit

4.8 In the event that the Funds at Lloyd’s Requirements of an Applicant changes at or around the time of any given Funds Date in terms of amount and/or the identity of the Applicant, subject to the approval of Lloyd’s and subject to each Lender’s LC Exposures under the Letters of Credit issued hereunder not being increased, the Lenders shall co-operate with the Account Party to ensure to the extent reasonably possible that the Letters of Credit provide for the revised Funds at Lloyd’s Requirements of the Applicants.

Increase to Facility

4.9 If at any time a Bilateral Letter of Credit is outstanding, the Account Party shall have the right to increase the size of the Facility by up to the principal amount of the Bilateral Letter of Credit(s) outstanding by introducing a new lender (which may be an existing Lender) and on terms that one or more outstanding Bilateral Letters of Credit having an aggregate principal amount at least equal to the increase are cancelled at the time the increase takes effect. Each Lender agrees to execute any documentation giving effect to this increase and new lender provided that no such documentation may increase the Commitment of any Lender without the express consent of that Lender at the time such documentation is executed.

5. PAYMENT OF DEMANDS

Disbursement Procedures

5.1(a) The Agent shall, within a reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under any Letter of Credit. The Agent shall promptly after such examination (and in any event by 12 noon on the Business Day immediately following receipt of such demand) (i) notify each of the Lenders and the Account Party by facsimile of such demand for payment and (ii) deliver to each Lender and the Account Party a copy of each document purporting to represent a demand for payment under such Letter of Credit.

(b)
   With respect to any drawing properly made under a Letter of Credit, each Lender will make an LC Disbursement in respect of such Letter of Credit in accordance with its liability under such Letter of Credit and this Agreement, such LC Disbursement to be made to the account of the Agent most recently designated by it for such purpose by

notice to the Lenders within two Business Days of receipt of a demand for payment under such Letter of Credit by the Agent;

(c)	The Agent will and undertakes to each Lender that it will:
	(i)	make any such LC Disbursement available to Lloyd’s as the beneficiary of such Letter of Credit by promptly crediting the amounts so received from the Lenders, in like funds, to the account identified by Lloyd’s in connection with such demand for payment on the date following two Business Days after the receipt by the Agent of such demand; and
	(ii)	notify each Lender on the third Business Day after the receipt by the Agent of such demand for payment that it has credited such amounts to the account identified by Lloyd’s.
(d)	Promptly following any LC Disbursement by any Lender in respect of any Letter of Credit, the Agent will notify the Account Party of such LC Disbursement provided that any failure to give or delay in giving such notice shall not relieve the Account Party of their obligation to reimburse the Lenders with respect to any such LC Disbursement.

Right to make Payments under Letters of Credit

5.2 Each Lender shall be entitled to make any payment in accordance with the terms of the relevant Letter of Credit without any reference to or further authority from the Account Party or any other investigation or enquiry.

Liability of Lenders

5.3 Neither the Agent, nor any Lender nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond their control; provided that the foregoing shall not be construed to excuse the Agent or a Lender from liability to any Obligor to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Obligors to the extent permitted by applicable Law) suffered by any Obligor that are caused by the gross negligence or wilful misconduct of the Agent or a Lender. The parties hereto expressly agree that:

(a)
   the Agent may accept documents that appear on their face to be in substantial compliance with the terms of a Letter of Credit without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit;

(b)	the Agent shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit; and
(c)	this Clause shall establish the standard of care to be exercised by the Agent when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof (and the parties hereto hereby waive, to the extent permitted by applicable Law, any standard of care inconsistent with the foregoing).
6.	THE ACCOUNT PARTY’S LIABILITIES IN RELATION TO LETTERS OF CREDIT

The Account Party’s Indemnity to Lenders

6.1 The Account Party shall irrevocably and unconditionally as a primary obligation indemnify (on demand by the Agent (and any Lender may require the Agent to make such demand)) each Lender against:

(a)	any LC Disbursement paid or payable by such Lender in accordance with the terms of any Letter of Credit requested by the Account Party; and
(b)	all liabilities, reasonable costs (including, without limitation, any costs incurred in funding any amount which falls due from such Lender in connection with such Letter of Credit), claims, losses and reasonable expenses which such Lender may at any time properly incur or sustain in connection with any Letter of Credit.

Preservation of Rights

6.2 Neither the obligations of the Account Party set out in this Clause 6 nor the rights, powers and remedies conferred on any Lender by this Agreement or by Law shall be discharged, impaired or otherwise affected by:

(a)	the winding-up, dissolution, administration or re-organisation of any Lender or any other person or any change in its status, function, control or ownership;
(b)	any of the obligations of any Lender or any other person hereunder or under any Letter of Credit or under any other security taken in respect of the Account Party’s obligations hereunder or otherwise in connection with any Letter of Credit being or becoming illegal, invalid, unenforceable or ineffective in any respect;
(c)	time or other indulgence being granted or agreed to be granted to any Lender or any other person in respect of its obligations hereunder or under or in connection with any Letter of Credit or under any such other security;
(d)	any amendment to, or any variation, waiver or release of, any obligation of any Lender or any other person under any Letter of Credit or this Agreement;
(e)	any other act, event or omission which, but for this Clause 6 might operate to discharge, impair or otherwise affect any of the obligations of the Account Party set out in this

Clause 6 or any of the rights, powers or remedies conferred upon any Lender by this Agreement or by Law.

The obligations of the Account Party set out in this Clause 6 shall be in addition to and independent of every other security which any Lender may at any time hold in respect of the Account Party’s obligations hereunder.

Settlement Conditional

6.3 Any settlement or discharge between the Account Party and a Lender shall be conditional upon no security or payment to such Lender by the Account Party or any other person on behalf of the Account Party, being avoided or reduced by virtue of any Laws relating to bankruptcy, insolvency, liquidation or similar Laws of general application and, if any such security or payment is so avoided or reduced, such Lender shall be entitled to recover the value or amount of such security or payment from the Account Party subsequently as if such settlement or discharge had not occurred.

7. DEFAULT INTEREST

A Demand Amount shall bear interest during each Default Period in respect thereof, and any other amount unpaid hereunder shall bear interest for so long as it remains outstanding at rate of the sum of (i) two per cent. per annum (ii) the Mandatory Costs in respect thereof at such time, and (iii) LIBOR on each day whilst such amount remains outstanding. Such interest shall be payable by the Account Party on the date on which it reimburses the Lenders under clause 6.1(a) and (b) (The Account Party’s Indemnity to Lenders).

8. TERMINATION AND REDUCTION OF THE COMMITMENTS

Scheduled Termination

8.1 Unless previously terminated, the unutilised Commitments shall terminate at the close of business on the Commitment Termination Date.

Voluntary Cancellation or Reduction

8.2 The Account Party may at any time cancel, or from time to time reduce, the Total Commitments; provided that (a) each reduction of the Total Commitments shall be in an amount of £15,000,000 or a larger multiple of £5,000,000 and (b) the Account Party shall not cancel or reduce the Commitments if the Total LC Exposures would exceed the Total Commitments.

Notice of Voluntary Cancellation or Reduction

8.3 The Account Party shall notify the Agent of any election to cancel or reduce the Total Commitments under Clause 8.2 at least three Business Days prior to the effective date of such cancellation or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Account Party pursuant to this Clause shall be irrevocable; provided that a notice of cancellation of the Commitments delivered by the Account Party may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice

may be revoked by the Account Party (by notice to the Agent on or prior to the specified effective date) if such condition is not satisfied.

No Other Repayments or Cancellation

8.4 The Account Party shall not repay or cancel all or any part of the LC Exposures except at the times and in the manner expressly provided for in this Agreement.

Effect of Cancellation or Reduction

8.5 Any cancellation or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made rateably among the Lenders in accordance with their respective Commitments.

9. FEES

Participation Fee

9.1 The Account Party shall pay to the Agent for the account of the Lenders the participation fees specified in the Fee Letters.

Letter of Credit Fee

9.2(a) The Account Party shall pay to the Agent for account of each Lender pro rata according to their respective LC Exposures hereunder a letter of credit fee computed at the rate of 0.60 per cent. per annum (as such rate may be adjusted from time to time in accordance with the provisions of Clause 9.3) on the principal amount of each issued Letter of Credit payable from the Utilisation Date until the Final Expiration Date (as extended) of that Letter of Credit or any earlier cancellation, repayment or prepayment of the Letter of Credit in accordance with Clause 8 (Termination and Reduction of the Commitments) of this Agreement;

(b)	The Letter of Credit Fees shall be payable quarterly in arrears on each Quarterly Date and on the date on which the Lenders cease to have any LC Exposure. Letter of Credit Fees accrued through and including each Quarterly Date shall be payable on the fifth Business Day following such Quarterly Date, commencing on the first such date to occur after the Commencement Date; and
(c)	The Agent shall notify the Account Party in writing at least ten Business Days prior to each Quarterly Date of (i) the letter of credit fee payable in respect of each Letter of Credit issued and (ii) the aggregate letter of credit fee payable in respect of all Letters of Credit issued.

Adjustment of Letter of Credit Fee

9.3 Notwithstanding Clause 9.2(a) above, when the credit rating (as defined below) corresponds to a rating set out in Column 1 or Column 2 below of the fee chart (the Fee Chart), the Letter of Credit Fee payable in accordance with Clause 9.2 shall be the amount set out in the corresponding row in Column 3 of the Fee Chart; provided however, that when the credit rating is

less than A, then the Letter of Credit Fee shall be 0.80 per cent. per annum until the provisions of Clause 19.8 (a) or (b) (Ratings Downgrade) have been complied with (in which case, the Letter of Credit Fee shall be 0.30 per cent. per annum as set forth in Column 3 of the Fee Chart). Once the conditions of Clause 19.8 (i) and (ii) are satisfied, then the Letter of Credit Fee shall once again be payable in accordance with the Fee Chart.

Any change to the Letter of Credit Fee described above shall take effect on the day on which the credit rating change is publicly announced by the applicable rating agency; or, in the event either of the conditions set forth in Clause 19.8 (i) or (ii) are not satisfied, the day on which the provisions of Clause 19.8 (a) or (b) (Ratings Downgrade) have been complied with.

Fee Chart

A.M. Best & Co. Financial-Strength Rating Column 1	Standard & Poor’s Rating Services Financial-Strength Rating Column 2		Letter of Credit Fee Column 3
A++		Greater than or equal to	0.55 per cent. per annum
		AA+
A+		AA	0.60 per cent. per annum
A		AA-	0.65 per cent. per annum
A-		A+	0.725 per cent. per annum
B++		A	0.80 per cent. per annum
B+ and below		A – and below	0.30 per cent. per annum

In this Clause 9.3, credit rating means the lower of:

(a)	the financial-strength rating of the Account Party from A.M. Best & Co. (or its successor); and
(b)	the lower of the financial-strength rating from Standard & Poor’s Rating Services (or its successor) of XL Insurance and XL Re.

Agent Fees

9.4 The Account Party agrees to pay to the Agent, for its own account, the agency fees payable in the amounts and at the times specified in the Fee Letters.

Payment of Fees

9.5 All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Agent for distribution, in the case of the Letter of Credit Fees referred to in Clause 9.2, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances absent manifest error in the calculation or payment of fees due and payable.

Basis of Calculation

9.6 The fees payable pursuant to Clauses 9.1 and 9.2 shall be calculated on the basis of actual days elapsed and a 365 day year.

10. TAXES

Tax Gross-up

10.1 All payments to be made by an Obligor to any Finance Party hereunder, whether in respect of principal, interest, fees or any other item, shall be made free and clear of and without deduction for or on account of tax unless such Obligor is required to make such a payment subject to the deduction or withholding of tax, in which case the sum payable by such Obligor (in respect of which such deduction or withholding is required to be made) shall be increased to the extent necessary to ensure that such Finance Party receives a sum net of any deduction or withholding equal to the sum which it would have received had no such deduction or withholding been made or required to be made.

Tax Indemnity

10.2 Without prejudice to Clause 10.1 (Tax Gross-up), if any Finance Party is required to make any payment of or on account of tax on or in relation to any sum received or receivable hereunder (including any sum deemed for purposes of tax to be received or receivable by such Finance Party whether or not actually received or receivable) or if any liability in respect of any such payment is asserted, imposed, levied or assessed against any Finance Party, the Account Party shall, upon demand of the Agent, promptly indemnify the Finance Party which suffers a loss or liability as a result against such payment or liability, together with any interest, penalties, costs and expenses payable or incurred in connection therewith, PROVIDED THAT this Clause 10.2 shall not apply to:

(a)	any tax imposed on and calculated by reference to the net income actually received or receivable by such Finance Party by the jurisdiction in which such Finance Party is incorporated; or
(b)	any tax imposed on and calculated by reference to the net income of the Facility Office of such Finance Party actually received or receivable by such Finance Party by the jurisdiction in which its Facility Office is located.

Claims by Lenders

10.3 A Lender intending to make a claim pursuant to Clause 10.2 (Tax Indemnity) shall promptly notify the Agent of the event giving rise to the claim, whereupon the Agent shall promptly notify the Account Party thereof.

11. TAX RECEIPTS

Notification of Requirement to Deduct Tax

11.1 If, at any time, an Obligor is required by Law to make any deduction or withholding from any sum payable by it hereunder (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated), such Obligor shall promptly, upon becoming aware of the same, notify the Agent.

Evidence of Payment of Tax

11.2 If an Obligor makes any payment hereunder in respect of which it is required to make any deduction or withholding, it shall pay the full amount required to be deducted or withheld to the relevant taxation or other authority within the time allowed for such payment under applicable Law and shall deliver to the Agent for each Lender, within thirty days after it has made such payment to the applicable authority, an original receipt (or a certified copy thereof) issued by such authority evidencing the payment to such authority of all amounts so required to be deducted or withheld in respect of that Lender’s share of such payment.

Tax Credit Payment

11.3 If an additional payment is made under Clause 10 (Taxes) by an Obligor for the benefit of any Finance Party and such Finance Party, in its sole discretion, determines that it has obtained (and has derived full use and benefit from) a credit against, a relief or remission for, or repayment of, any tax, then, if and to the extent that such Finance Party, in its sole opinion, determines that:

(a)	such credit, relief, remission or repayment is in respect of or calculated with reference to the additional payment made pursuant to Clause 10 (Taxes); and
(b)	its tax affairs for its tax year in respect of which such credit, relief, remission or repayment was obtained have been finally settled,

such Finance Party shall, to the extent that it can do so without prejudice to the retention of the amount of such credit, relief, remission or repayment, pay to such Obligor such amount as such Finance Party shall, in its sole opinion, determine to be the amount which will leave such Finance Party (after such payment) in no worse after-tax position than it would have been in had the additional payment in question not been required to be made by such Obligor.

Tax Credit Clawback

11.4 If any Finance Party makes any payment to an Obligor pursuant to Clause 11.3 (Tax Credit Payment) and such Finance Party subsequently determines, in its sole opinion, that the credit, relief, remission or repayment in respect of which such payment was made was not

available or has been withdrawn or that it was unable to use such credit, relief, remission or repayment in full, the Obligor shall reimburse such Finance Party such amount as such Finance Party determines, in its sole opinion, is necessary to place it in the same after-tax position as it would have been in if such credit, relief, remission or repayment had been obtained and fully used and retained by such Finance Party.

Tax and Other Affairs

11.5 No provision of this Agreement shall interfere with the right of any Finance Party to arrange its tax or any other affairs in whatever manner it thinks fit, oblige any Finance Party to claim any credit, relief, remission or repayment in respect of any payment under Clause 10.1 (Tax Gross-up) in priority to any other credit, relief, remission or repayment available to it nor oblige any Finance Party to disclose any information relating to its tax or other affairs or any computations in respect thereof.

12. INCREASED COSTS

Increased Costs

12.1 Subject to Clause 12.2 (Exceptions), if after the date of this Agreement, the result of:

(a)	the introduction of or any change in the official or judicial interpretation or application of any Law (having the force of law or if not having the force of law, generally complied with by a Lender in relation to any relevant jurisdiction); and/or
(b)	compliance (without adopting materially less prudent policies or standards than those previously adopted by it) by any Lender or by the holding company of any Lender with any of the matters mentioned in paragraph (a) above,

including in each case, without limitation, those Laws relating to Taxation, any change in currency, any reserve, special deposit, cash ratio, liquidity or capital adequacy requirement or any other form of banking or monetary controls, is that:

(i)	a Lender or its holding company incurs an additional cost as a result of that Finance Party having entered into, or performing, maintaining or funding its obligations under this Agreement; or
(ii)	a Lender or its holding company incurs an additional cost in making, funding or maintaining any Letters of Credit made or to be made by it under this Agreement; or
(iii)	any amount payable to a Lender or the effective return to a Lender under this Agreement or the effective return to a Lender or its holding company on its capital is reduced as a result of any change in the amount or nature of the capital resources required to be allocated in respect of a Lender’s participation under this Agreement; or

(iv)
   a Lender makes any payment or foregoes any interest or other return on or calculated by reference to any amount received or receivable by it from the Account Party or the Agent under this Agreement;

then and in each such case:

(A)	the Lender shall notify the Account Party through the Agent of the relevant event promptly upon becoming aware of the event giving details of any costs or amount likely to be demanded under paragraph (B);
(B)	promptly following any demand from time to time by that Lender through the Agent, the Account Party shall pay to the Agent for the account of that Finance Party (or, as the case may be, its holding company) such amount as shall compensate such Finance Party or its holding company for the additional cost, reduction, payment or foregone interest or other return.

Exceptions

12.2 Clause 12.1 shall not apply to or in respect of:

(a)	any circumstances referred to in Clause 10.2 (Tax Indemnity);
(b)	any circumstances for which a relevant Lender has been compensated for under Clause 11.3 (Tax Credit Payment).
13.	ILLEGALITY
13.	If, after the date of this Agreement, any Change in Law or in the official or judicial interpretation or application thereof shall make it unlawful or contrary to an official directive in any jurisdiction for any Lender to make available or fund or maintain or to give effect to its obligations as contemplated by this Agreement or the Letters of Credit (or, by reason only of a Change of Law, the Lender ceases to be an Approved Credit Institution), the Lender shall promptly on becoming aware of the same give notice thereof to the Account Party through the Agent, whereupon:
(a)	where such change makes it unlawful or contrary to an official directive to maintain or give effect to its obligations under this Agreement, if the Agent on behalf of such Lender so requires, the Account Party shall by no later than the last day of any applicable grace period specified by the applicable Law ensure that the liabilities of such Lender under or in respect of each Letter of Credit are cancelled within the meaning of Clause 1.2(l)(i)(A) (or use its best efforts to ensure that such liabilities are cancelled within the meaning of Clause 1.2(l)(i)(C)), the Commitment of that Lender shall forthwith be cancelled and the Account Party shall prepay forthwith fees, costs and expenses due to that Lender hereunder;
(b)	where such change only makes it unlawful or contrary to an official directive to participate in further Letters of Credit under this Agreement, then upon receipt by the Agent of that notice, the Available Commitment of that Lender shall be reduced to zero, and upon the expiry of each Letter of Credit in which it is participating at such time, its

resulting Available Commitment shall also be cancelled, provided that if the Lender subsequently transfers or assigns its rights and obligations under this Agreement to a new lender pursuant to Clause 26.5 (Rights to substitute a single Bank), the Account Party may by notice to the Agent increase the Commitment of such new lender by the amount of the Available Commitment that was previously cancelled.

14. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.

Designation of a Different Lending Office

14.1 If any Lender requests compensation under Clause 12 (Increased Costs), or if the Account Party is required to pay any additional amount to any Lender or any Governmental Authority for account of any Lender pursuant to Clause 10 (Taxes), then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Letters of Credit hereunder or to transfer its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (a) would eliminate or reduce amounts payable pursuant to Clause 12 (Increased Costs) or 10 (Taxes), as the case may be, in the future and (b) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Account Party hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

Replacement of Lenders

14.2 If any Lender requests compensation under Clause 12 (Increased Costs), or if any Account Party is required to pay any additional amount to any Lender or any Governmental Authority for account of any Lender pursuant to Clause 10(Taxes),or if any Lender defaults in its obligation to make LC Disbursements hereunder, or if any Lender ceases to be an Approved Credit Institution, then the Account Party may, at its sole expense and effort, upon notice to such Lender and the Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Clause 26.5 (Right to substitute single Lender)), all its interests, rights and obligations under this Agreement to an Approved Credit Institution that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that:

(a)	the Account Party shall have received the prior written consent of the Agent, which consent shall not unreasonably be withheld;
(b)	such Lender shall have received payment of an amount equal to the outstanding amount of its LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the relevant Account Party (in the case of all other amounts); and
(c)	in the case of any such assignment resulting from a claim for compensation under Clause 12 (Increased Costs) or payments required to be made pursuant to Clause 10 (Taxes), such assignment will result in a reduction in such compensation or payments.

A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the relevant Account Party to require such assignment and delegation cease to apply.

15. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SET-OFFS.

Payments by the Account Party

15.1(a) The Account Party shall make each payment required to be made by them hereunder or under any other Finance Document (except to the extent otherwise provided therein) in Sterling on the date when due, in immediately available cleared funds, without set-off or counterclaim (and in the case of payments required pursuant to Clause 6, by 11.00 a.m. on the due date). Any amounts received after such time on any date may, in the discretion of the Agent, be deemed to have been received on the next succeeding Business Day for the purposes of calculating interest thereon. All such payments shall be made to the Agent at the account most recently notified by it, except payments pursuant to Clauses 12 (Increased Costs), 10 (Taxes), 24 (Costs and Expenses) and 25 (Indemnities), which shall be made directly to the Persons entitled thereto. The Agent shall distribute any such payments received by it for account of any other Person to the appropriate recipient promptly following receipt thereof.

(b)   If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.

Currency

15.2 All amounts payable under this Agreement in respect of any Letter of Credit shall be payable in Sterling.

Application of Insufficient Payments

15.3 If at any time insufficient funds are received by and available to the Agent to pay fully all Demand Amounts, interest, fees and expenses then due hereunder, such funds shall be applied:

(a)	first, in or towards payment pro rata of any unpaid fees, costs, expenses, indemnity payments and other amounts due to the Agent and the Security Trustee under the Finance Documents;
(b)	secondly, in or towards payment pro rata of any unpaid costs and expenses of the Lenders under the Finance Documents;
(c)	thirdly, in or towards payment pro rata of any outstanding fees (other than Letter of Credit Fees) payable to the Lenders under the Finance Documents;
(d)	fourthly, in or towards payment pro rata of all accrued Letter of Credit Fees due to Issuing Lenders but unsatisfied under this Agreement;

(e)	fifthly, in or towards payment pro rata of any interest on Demand Amounts;
(f)	sixthly, in or towards payment pro rata of Demand Amounts;
(g)	seventhly, in or towards payment pro rata of any principal (other than a Demand Amount) due but unsatisfied under this Agreement (including, for the avoidance of doubt, any cash cover to be provided under a Letter of Credit); and
(h)	eighthly, in or towards payment pro rata of any other sum due but unsatisfied under this Agreement.

Pro Rata Treatment

15.4 Except to the extent otherwise provided herein:

(a)	each reimbursement of LC Disbursements shall be made to the Lenders, each payment of fees under Clause 9 (Fees) shall be made for account of the Lenders, and each termination or reduction of the Commitments under Clause 8 (Termination and Reduction of the Commitments) shall be applied to the respective Commitments of the Lenders, pro rata according to their respective Commitments; and
(b)	each payment of interest shall be made for account of the Lenders pro rata in accordance with the amounts of interest then due and payable to the respective Lenders.

Sharing of Payments by Lenders

15.5 If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any LC Exposures resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its LC Exposures and accrued interest thereon then due than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the LC Exposures of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders rateably in accordance with the aggregate amount of LC Exposures; provided that:

(a)

if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

(b)

the provisions of this Clause shall not be construed to apply to any payment made by any Obligor pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in LC Disbursements to any assignee or participant, other than to the Account Party or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply).

Each Obligor consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Account Party rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Account Party in the amount

of such participation and the Obligors authorise the Lenders to exchange Transfer Certificates and any other documentation to give effect to those purchases of participations.

Presumptions of Payment

15.6 Unless the Agent shall have received notice from any party prior to the date on which any payment is due to the Agent hereunder that the payor will not make such payment, the Agent may assume that the payor has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the relevant payee the amount due. In such event, if the payor has not in fact made such payment, then each of the payees severally agrees to repay to the Agent forthwith on demand the amount so distributed to that payee with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Agent, at the Agent’s cost of funds from such sources as the Agent may reasonably select.

Certain Deductions by the Agent

15.7 If any Lender shall fail to make any payment required to be made by it pursuant to Clause 15.5 (Sharing of Payments by Lenders), then the Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Agent for account of such Lender to satisfy such Lender’s obligations under such Clauses until all such unsatisfied obligations are fully paid.

16. GUARANTEE AND INDEMNITY

Guarantee and Indemnity

16.1 The Guarantors, jointly and severally, irrevocably and unconditionally:

(a)

guarantee to each Finance Party the due and punctual payment from time to time on demand any and every sum or sums of money which the Account Party is at any time liable to pay to any Finance Party under or pursuant to the Finance Documents and which has become due and payable but has not been paid at the time such demand is made (the Guaranteed Obligations); and

(b)

agree as a primary obligation to indemnify each Finance Party from time to time on demand from and against any loss incurred by any Finance Party as a result of any of the obligations of the Account Party under or pursuant to the Finance Documents being or becoming void, voidable, unenforceable or ineffective as against the Account Party for any reason whatsoever, whether or not known to any Finance Party or any other person, the amount of such loss being the amount which the person or persons suffering it would otherwise have been entitled to recover from the Account Party.

Additional Security

16.2 The obligations of each Guarantor herein contained shall be in addition to and independent of every other security which any Finance Party may at any time hold in respect of any of the Account Party’s obligations under the Finance Documents.

Continuing Obligations

16.3 The obligations of each Guarantor herein contained shall constitute and be continuing obligations notwithstanding any settlement of account or other matter or thing whatsoever and shall not be considered satisfied by any intermediate payment or satisfaction of all or any of the obligations of the Account Party under the Finance Documents and shall continue in full force and effect until final payment in full of all amounts owing by the Account Party under this Agreement and total satisfaction of all the Account Party’s actual and contingent obligations under the Finance Documents.

Obligations not Discharged

16.4 Neither the obligations of the Guarantors herein contained nor the rights, powers and remedies conferred in respect of the Guarantors upon any Finance Party by the Finance Documents or by Law shall be discharged, impaired or otherwise affected by:

(a)	the winding-up, dissolution, administration or re-organisation of the Account Party or any other person or any change in its status, function, control or ownership;
(b)	any of the obligations of the Account Party or any other person under the Finance Documents or under any other security taken in respect of any of its obligations under the Finance Documents being or becoming illegal, invalid, unenforceable or ineffective in any respect;
(c)	time or other indulgence being granted or agreed to be granted to any Obligor in respect of its obligations under the Finance Documents or under any such other security;
(d)	any amendment to, or any variation, waiver or release of, any obligation of any Obligor under the Finance Documents or under any such other security;
(e)	any failure to take, or fully to take, any security contemplated hereby or otherwise agreed to be taken in respect of the Obligors’ obligations under the Finance Documents;
(f)	any failure to realise or fully to realise the value of, or any release, discharge, exchange or substitution of, any security taken in respect of the Obligors’ obligations under the Finance Documents; or
(g)	any other act, event or omission which, but for this Clause 16.4, might operate to discharge, impair or otherwise affect any of the obligations of any Guarantor herein contained or any of the rights, powers or remedies conferred upon any of the Finance Parties by the Finance Documents or by Law.

Settlement Conditional

16.5 Any settlement or discharge between any Obligor and any of the Finance Parties shall be conditional upon no security or payment to any Finance Party by the Account Party or any other person on behalf of the Account Party being avoided or reduced by virtue of any Laws relating to bankruptcy, insolvency, liquidation or similar Laws of general application and, if any such security or payment is so avoided or reduced, each Finance Party shall be entitled to recover the

value or amount of such security or payment from the Account Party subsequently as if such settlement or discharge had not occurred.

Exercise of Rights

16.6 No Finance Party shall be obliged before exercising any of the rights, powers or remedies conferred upon them in respect of any Guarantor by the Finance Documents or by Law to:

(a)	make any demand of the Account Party or any other Obligor;
(b)	take any action or obtain judgment in any court against the Account Party or any other Obligor;
(c)	make or file any claim or proof in a winding-up or dissolution of the Account Party or any other Obligor; or
(d)	enforce or seek to enforce any other security taken in respect of any of the obligations of the Account Party or any other Obligor under the Finance Documents.

Deferral of Guarantor’s Rights

16.7 Each Guarantor agrees that, so long as any amounts are or may be owed by the Account Party under the Finance Documents or the Account Party is under any actual or contingent obligations under the Finance Documents, it shall not exercise any rights which it may at any time have by reason of performance by it of its obligations under the Finance Documents:

(a)	to be indemnified by the Account Party; and/or
(b)	to claim any contribution from any other Guarantor of the Account Party’s obligations under the Finance Documents; and/or
(c)	to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any other security taken pursuant to, or in connection with, this Agreement by all or any of the Finance Documents.

Rights of Contribution

16.8 The Guarantors (other than the Account Party) hereby agree, as between themselves, that if any such Guarantor shall become an Excess Funding Guarantor (as defined below) by reason of the payment by such Guarantor of any Guaranteed Obligations, each other Guarantor (other than the Account Party) shall, on demand of such Excess Funding Guarantor (but subject to the next sentence), pay to such Excess Funding Guarantor an amount equal to such Guarantor’s Pro Rata Share (as defined below and determined, for this purpose, without reference to the properties, debts and liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of such Guaranteed Obligations. The payment obligation of a Guarantor to any Excess Funding Guarantor under this Clause shall be subordinate and subject in right of payment to the prior payment in full of the obligations of such Guarantor under the other provisions of this

Clause 16 and such Excess Funding Guarantor shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such obligations.

For purposes of this Clause, (i) Excess Funding Guarantor means, in respect of any Guaranteed Obligations, a Guarantor that has paid an amount in excess of its Pro Rata Share of such Guaranteed Obligations, (ii) Excess Payment means, in respect of any Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations and (iii) Pro Rata Share means, for any Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the aggregate present fair saleable value of all properties of such Guarantor (excluding any shares of stock of any other Guarantor) exceeds the amount of all the debts and liabilities of such Guarantor (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder and any obligations of any other Guarantor that have been Guaranteed by such Guarantor) to (y) the amount by which the aggregate fair saleable value of all properties of all of the Guarantors (other than the Account Party) exceeds the amount of all the debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of the Guarantors under this Clause 16) of all of the Guarantors (other than the Account Party), determined (A) with respect to any Guarantor that is a party hereto on the date hereof, as of the date hereof, and (B) with respect to any other Guarantor, as of the date such Guarantor becomes a Guarantor hereunder.

General Limitation on Guarantee Obligations

16.9 In any action or proceeding involving any state corporate Law, or any state or Federal bankruptcy, insolvency, reorganisation or other Law in any other jurisdiction affecting the rights of creditors generally, if the obligations of any Guarantor under Clause 16.1 (Guarantee and Indemnity) would otherwise, taking into account the provisions of Clause 16.8, be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Clause 16.1 (Guarantee and Indemnity), then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Lender, the Agent or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.

17. REPRESENTATIONS AND WARRANTIES

17.1 Each Obligor represents and warrants to the Lenders on the date of this Agreement, the Closing Date and 1 September of each year unless all of the Letters of Credit will terminate on or before the fourth anniversary of 30 September of that year (with reference to the facts and circumstances subsisting on each such date) as follows.

Organisation; Powers

17.2 It and each of its Subsidiaries is duly organised, validly existing and in good standing under the Laws of the jurisdiction of its organisation, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

Authorisation; Enforceability

17.3 The Transactions are within such Obligor’s corporate powers and have been duly authorised by all necessary corporate and, if required, by all necessary shareholder action. Each Finance Document to which such Obligor is party has been duly executed and delivered by such Obligor and constitutes a legal, valid and binding obligation of such Obligor, enforceable against such Obligor in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganisation, moratorium or similar Laws of general applicability affecting the enforcement of creditors’ rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

Governmental Approvals; No Conflicts

17.4 The Transactions (a) do not require any consent or approval of (including any exchange control approval), registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable Law or regulation or the charter, by-laws or other organisational documents of such Obligor or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any material indenture, agreement or other instrument binding upon such Obligor or any of its Subsidiaries or assets, or give rise to a right thereunder to require any payment to be made by any such Person, and (d) will not result in the creation or imposition of any Lien on any asset of such Obligor or any of its Subsidiaries.

Financial Condition; No Material Adverse Change

17.5(a) Financial Condition.

The Account Party has heretofore furnished to the Lenders the consolidated balance sheet and statements of income, stockholders’ equity and cash flows of the Account Party and its consolidated Subsidiaries (A) as of and for the fiscal years ended December 31, 2000 and December 31, 2001, reported on by PricewaterhouseCoopers LLP, independent public accountants (as provided in the Account Party’s Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2001), and (B) as of and for the fiscal quarter ended September 30, 2002, as provided in the Account Party’s Report on Form 10-Q filed with the SEC for the fiscal quarter ended September 30, 2002. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Account Party and its respective consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP or (in the case of XL Europe, XL Insurance or XL Re) SAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (B) of the first sentence of this paragraph.

(b)
   No Material Adverse Change. Since December 31, 2001, there has been no material adverse change in the assets, business, financial condition or operations of such Obligor and its Subsidiaries, taken as a whole.

Properties

17.6(a) Property Generally. Such Obligor and each of its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, subject only to Liens permitted by Clause 19.3 (Liens) and except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilise such properties for their intended purposes.

(b)
   Intellectual Property. Such Obligor and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by such Obligor and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

Litigation and Environmental Matters

17.7(a) Actions, Suits and Proceedings. Except as disclosed in Schedule 2 Part C or as routinely encountered in claims activity, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority now pending against or, to the knowledge of such Obligor, threatened against or affecting such Obligor or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve the Finance Documents or the Transactions.

(b)
   Environmental Matters. Except as disclosed in Schedule 2 Part D and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither such Obligor nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required for its business under any Environmental Law, (ii) has incurred any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

Compliance with Laws and Agreements

17.8 Such Obligor and each of its Subsidiaries is in compliance with all Laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.

Investment and Holding Company Status

17.9 Such Obligor is not (a) an investment company as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a holding company as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.

Taxes

17.10 Such Obligor and each of its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Person has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

ERISA

17.11 No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan by an amount that could reasonably be expected to result in a Material Adverse Effect.

Except as could not reasonably be expected to result in a Material Adverse Effect, (i) all contributions required to be made by any Obligor or any of their Subsidiaries with respect to a Non-U.S. Benefit Plan have been timely made, (ii) each Non-U.S. Benefit Plan has been maintained in compliance with its terms and with the requirements of any and all applicable Laws and has been maintained, where required, in good standing with the applicable Governmental Authority and (iii) neither any Obligor nor any of their Subsidiaries has incurred any obligation in connection with the termination or withdrawal from any Non-U.S. Benefit Plan.

Disclosure

17.12 The reports, financial statements, certificates or other information furnished by such Obligor to the Lenders in connection with the negotiation of this Agreement or any other Finance Document or delivered hereunder (taken as a whole) do not contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, such Obligor represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

Use of Credit

17.13 Neither such Obligor nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no Letter of Credit will be used in connection with buying or carrying any Margin Stock.

Subsidiaries

17.14 Set forth in Schedule 3 is a complete and correct list of all of the Subsidiaries of the Account Party as of 31 March 2003, together with, for each such Subsidiary, (i) the jurisdiction of organisation of such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary

and (iii) the percentage of ownership of such Subsidiary represented by such ownership interests. Except as disclosed in Schedule 3, (x) each of the Account Party and its Subsidiaries owns, free and clear of Liens, and has the unencumbered right to vote, all outstanding ownership interests in each Person shown to be held by it in Schedule 3, (y) all of the issued and outstanding capital stock of each such Person organised as a corporation is validly issued, fully paid and nonassessable and (z) except as disclosed in filings of the Account Party with the SEC prior to the date hereof, there are no outstanding Equity Rights with respect to any Obligor.

Withholding Taxes

17.15 Based upon information with respect to each Lender provided by each Lender to the Agent, as of the date hereof, the payment of the LC Disbursements and interest thereon, the fees under Clause 9 (Fees) and all other amounts payable hereunder will not be subject, by withholding or deduction, to any Taxes imposed by any Obligor Jurisdiction.

Stamp Taxes

17.16 To ensure the legality, validity, enforceability or admissibility in evidence of the Finance Documents, it is not necessary that the Finance Documents or any other document be filed or recorded with any Governmental Authority or that any stamp or similar tax be paid on or in respect of any of the Finance Documents, or any other document other than such filings and recordations that have already been made and such stamp or similar taxes that have already been paid.

Legal Form

17.17 The Finance Documents are in proper legal form under the Laws of any Obligor Jurisdiction for the admissibility thereof in the courts of such Obligor Jurisdiction.

Claims Pari Passu

17.18 Under the Laws of its jurisdiction of incorporation in force at the date hereof, the claims of the Finance Parties against it under this Agreement or any other Finance Document will rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors save (i) those whose claims are preferred solely by any bankruptcy, insolvency, liquidation or other similar Laws of general application; and (ii) with respect to XL Re only, those claims required to be preferred by and under the Bermuda Insurance Act 1978.

18. AFFIRMATIVE COVENANTS

Until the Commitments have expired or been terminated and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Obligors covenant and agree with the Lenders that:

Financial Statements and Other Information

18.1 Each Obligor will furnish to the Agent and each Lender:

(a)	within 135 days after the end of each fiscal year of such Obligor except for XL America (but in the case of the Account Party, within 100 days after the end of each fiscal year of the Account Party), the audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows of such Obligor and its consolidated Subsidiaries as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year (if such figures were already produced for such corresponding period or periods) (it being understood that delivery to the Lenders of the Account Party’s Report on Form 10-K filed with the SEC shall satisfy the financial statement delivery requirements of this paragraph (a) to deliver the annual financial statements of the Account Party so long as the financial information required to be contained in such Report is substantially the same as the financial information required under this paragraph (a)), all reported on by independent public accountants of recognised national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of such Obligor and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP or (in the case of XL Europe, XL Insurance and XL Re) SAP, as the case may be, consistently applied;
(b)	by June 15 of each year, (i) an unaudited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows of XL America and its consolidated Subsidiaries as of the end of and for the immediately preceding fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year (if such figures were already produced for such corresponding period or periods), all certified by a Financial Officer of XL America as presenting fairly in all material respects the financial condition and results of operations of XL America and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes, and (ii) audited statutory financial statements for each Insurance Subsidiary of XL America reported on by independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such audited consolidated financial statements present fairly in all material respects the financial condition and results of operations of such Insurance Subsidiaries in accordance with SAP, consistently applied;
(c)	within 60 days after the end of each of the first three fiscal quarters of each fiscal year of such Obligor, the consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows of such Obligor and its consolidated Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for (or, in the case of the balance sheet, as of the end of) the corresponding period or periods of the previous fiscal year (if such figures were already produced for such corresponding period or periods), all certified by a Financial Officer of such Obligor as presenting fairly in all material respects the financial condition and results of operations of such Obligor and its

	consolidated Subsidiaries on a consolidated basis in accordance with GAAP or (in the case of XL Europe, XL Insurance and XL Re) SAP, as the case may be, consistently applied, subject to normal year-end audit adjustments and the absence of footnotes (it being understood that delivery to the Lenders of the Account Party’s Report on Form 10-Q filed with the SEC shall satisfy the financial statement delivery requirements of this paragraph (c) to deliver the quarterly financial statements of the Account Party so long as the financial information required to be contained in such Report is substantially the same as the financial information required under this paragraph (c));
(d)	concurrently with any delivery of financial statements under Clause 18.1 (a), (b) or (c), a certificate signed on behalf of each Obligor by a Financial Officer (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Clauses 19.3 (Liens), 19.5 (Ratio of Total Funded Debt to Total Capitalisation), 19.6 (Consolidated Net Worth) and 19.7 (Indebtedness) and (iii) stating whether any change in GAAP or (in the case of XL Europe, XL Insurance, XL Re and any Insurance Subsidiary of XL America) SAP or in the application thereof has occurred since the date of the audited financial statements referred to in Clause 17.5 (a) and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;
(e)	concurrently with any delivery of financial statements under Clause 18.1 (a), a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines);
(f)	promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by such Obligor or any of its respective Subsidiaries with the SEC, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any U.S. or other securities exchange, or distributed by such Obligor to its shareholders generally, as the case may be;
(g)	concurrently with any delivery of financial statements under Clause 18.1 (a), (b) or (c) a certificate of a Financial Officer of the Account Party, setting forth on a consolidated basis for the Account Party and its consolidated Subsidiaries as of the end of the fiscal year or quarter to which such certificate relates (i) the aggregate book value of assets which are subject to Liens permitted under Clause 19.3(g) (Liens) and the aggregate book value of liabilities which are subject to Liens permitted under Clause 19.3(g) (it being understood that the reports required by paragraphs (a), (b) and (c) of this Clause shall satisfy the requirement of this clause (i) of this Clause 18.1(g) if such reports set forth separately, in accordance with GAAP, line items corresponding to such aggregate book values) and (ii) a calculation showing the portion of each of such aggregate amounts which portion is attributable to transactions among wholly-owned Subsidiaries of the Account Party; and
(h)	promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Account Party or any of its Subsidiaries, or

            compliance with the terms of this Agreement, as the Agent or any Lender may reasonably request.

Notices of Material Events

18.2 Each Obligor will furnish to the Agent and each Lender prompt written notice of the following:

(a)	the occurrence of any Default; and
(b)	any event or condition constituting, or which could reasonably be expected to have a Material Adverse Effect.

Each notice delivered under this Clause shall be accompanied by a statement of a Financial Officer or other executive officer of the relevant Obligor setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken by such Obligor with respect thereto.

Preservation of Existence and Franchises

18.3 Each Obligor will, and will cause each of its Subsidiaries to, maintain its corporate existence and its material rights and franchises in full force and effect in its jurisdiction of incorporation except where the failure to maintain such corporate existence and material rights and franchises would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect; provided that the foregoing shall not prohibit any merger or consolidation permitted under Clause 19.1 (Mergers) or 19.2 (Dispositions). Each Obligor will, and will cause each of its Subsidiaries to, qualify and remain qualified as a foreign corporation in each jurisdiction in which failure to receive or retain such qualification would have a Material Adverse Effect.

Insurance

18.4 Each Obligor will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers, insurance with respect to its properties in such amounts as is customary in the case of corporations engaged in the same or similar businesses having similar properties similarly situated.

Maintenance of Properties

18.5 Each Obligor will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition the properties now or hereafter owned, leased or otherwise possessed by and used or useful in its business and will make or cause to be made all needful and proper repairs, renewals, replacements and improvements thereto so that the business carried on in connection therewith may be properly conducted at all times except if the failure to do so would not have a Material Adverse Effect, provided, however, that the foregoing shall not impose on such Obligor or any Subsidiary of such Obligor any obligation in respect of any property leased by such Obligor or such Subsidiary in addition to such Obligor’s obligations under the applicable document creating such Obligor’s or such Subsidiary’s lease or tenancy.

Payment of Taxes and Other Potential Charges and Priority Claims Payment of Other Current Liabilities

18.6 Each Obligor will, and will cause each of its Subsidiaries to, pay or discharge:

(a)	on or prior to the date on which penalties attach thereto, all taxes, assessments and other governmental charges or levies imposed upon it or any of its properties or income;
(b)	on or prior to the date when due, all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon any such property; and
(c)	on or prior to the date when due, all other lawful claims which, if unpaid, might result in the creation of a Lien upon any such property (other than Liens not forbidden by Clause 19.3 (Liens)) or which, if unpaid, might give rise to a claim entitled to priority over general creditors of such Obligor in any proceeding under the Bermuda Companies Law or Bermuda Insurance Law, or any insolvency proceeding, liquidation, receivership, rehabilitation, dissolution or winding-up involving such Obligor or such Subsidiary;

providedthat, unless and until foreclosure, distraint, levy, sale or similar proceedings shall have been commenced, such Obligor need not pay or discharge any such tax, assessment, charge, levy or claim so long as the validity thereof is contested in good faith and by appropriate proceedings diligently conducted and so long as such reserves or other appropriate provisions as may be required by GAAP or SAP, as the case may be, shall have been made therefor and so long as such failure to pay or discharge does not have a Material Adverse Effect.

Financial Accounting Practices

18.7 Such Obligor will, and will cause each of its consolidated Subsidiaries to, make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflect its transactions and dispositions of its assets and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements required under Clause 18.1 (Financial Statements and Other Information) in conformity with GAAP and SAP, as applicable, and to maintain accountability for assets.

Compliance with Applicable Laws

18.8 Each Obligor will, and will cause each of its Subsidiaries to, comply with all applicable Laws (including but not limited to the Bermuda Companies Law and Bermuda Insurance Laws) in all respects; providedthat such Obligor or any Subsidiary of such Obligor will not be deemed to be in violation of this Clause as a result of any failure to comply with any such Law which would not (i) result in fines, penalties, injunctive relief or other civil or criminal liabilities which, in the aggregate, would have a Material Adverse Effect or (ii) otherwise impair the ability of such Obligor to perform its obligations under this Agreement.

Use of Letters of Credit

18.9 No Letter of Credit will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X.

Continuation of and Change in Businesses

18.10 Each Obligor and its Subsidiaries will continue to engage in substantially the same business or businesses it engaged in (or proposes to engage in) on the date of this Agreement and businesses related or incidental thereto.

Visitation

18.11 Each Obligor will permit such Persons as any Lender may reasonably designate to visit and inspect any of the properties of such Obligor, to discuss its affairs with its financial management, and provide such other information relating to the business and financial condition of such Obligor at such times as such Lender may reasonably request. Each Obligor hereby authorises its financial management to discuss with any Lender the affairs of such Obligor.

19. NEGATIVE COVENANTS

Until the Total Commitments have expired or terminated and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements have been reimbursed, each of the Obligors covenants and agrees with the Lenders that:

Mergers

19.1 No Obligor will merge with or into or consolidate with any other Person, except that if no Default shall occur and be continuing or shall exist at the time of such merger or consolidation or immediately thereafter and after giving effect thereto any Obligor may merge or consolidate with any other corporation, including a Subsidiary, if such Obligor shall be the surviving corporation.

Dispositions

19.2 No Obligor will, nor will it permit any of its Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily (any of the foregoing being referred to in this Clause as a Disposition and any series of related Dispositions constituting but a single Disposition), any of its properties or assets, tangible or intangible (including but not limited to sale, assignment, discount or other disposition of accounts, contract rights, chattel paper or general intangibles with or without recourse), except:

(a)	Dispositions in the ordinary course of business involving current assets or other assets classified on such Obligor’s balance sheet as available for sale;
(b)	sales, conveyances, assignments or other transfers or dispositions in immediate exchange for cash or tangible assets, provided that any such sales, conveyances or transfers shall not individually, or in the aggregate for the Obligor and their respective Subsidiaries, exceed $500,000,000 in any calendar year;

(c)	Dispositions of equipment or other property which is obsolete or no longer used or useful in the conduct of the business of such Obligor or its Subsidiaries;
(d)	Dispositions between or among the Obligors and their wholly owned Subsidiaries; or
(e)	Dispositions with Affiliates in accordance with Clause 19.4(c) (Transactions with Affiliates).

Liens

19.3 No Obligor will, nor will it permit any of its Subsidiaries to, create, incur, assume or permit to exist any Lien on any property or assets, tangible or intangible, now owned or hereafter acquired by it, except:

(a)	Liens existing on the date hereof (and extension, renewal and replacement Liens upon the same property, provided that the amount secured by each Lien constituting such an extension, renewal or replacement Lien shall not exceed the amount secured by the Lien theretofore existing) and listed on Part B of Schedule 2;
(b)	Liens arising from taxes, assessments, charges, levies or claims described in Clause 18.6 (Payment of Taxes and other potential charges and priority claims, payments of other current liabilities) that are not yet due or that remain payable without penalty or to the extent permitted to remain unpaid under the provision of Clause 18.6;
(c)	Liens on property securing all or part of the purchase price thereof to such Obligor and Liens (whether or not assumed) existing on property at the time of purchase thereof by such Obligor (and extension, renewal and replacement Liens upon the same property); provided (i) each such Lien is confined solely to the property so purchased, improvements thereto and proceeds thereof, and (ii) the aggregate amount of the obligations secured by all such Liens on any particular property at any time purchased by such Obligor, as applicable, shall not exceed 100% of the lesser of the fair market value of such property at such time or the actual purchase price of such property;
(d)	zoning restrictions, easements, minor restrictions on the use of real property, minor irregularities in title thereto and other minor Liens that do not in the aggregate materially detract from the value of a property or asset to, or materially impair its use in the business of, such Obligor or any such Subsidiary;
(e)	Liens securing Indebtedness permitted by Clause 19.7(b) (Indebtedness) covering assets whose market value is not materially greater than the amount of the Indebtedness secured thereby plus a commercially reasonable margin;
(f)	Liens on cash and securities of an Obligor or its Subsidiaries incurred as part of the management of (i) its investment portfolio in accordance with the Account Party’s Statement of Investment Policy Objectives and Guidelines as in effect on the date hereof or as it may be changed from time to time by a resolution duly adopted by the board of directors of the Account Party (or any committee thereof) and (ii) its activities (x) in the weather and energy business conducted on an organised exchange or (y) in connection with its posting of collateral under a credit support annex under an International Swaps

	and Derivatives Inc. (“ISDA”) Master Agreement; in each case under clause (x) and (y) hereof not to exceed an aggregate amount of $100,000,000 at any time outstanding.
(g)	Liens on (i) assets received, and on actual or imputed investment income on such assets received, relating and identified to specific insurance payment liabilities or to liabilities arising in the ordinary course of any Obligor’s or any of their Subsidiary’s business as an insurance or reinsurance company (including GICs and Stable Value Instruments) or corporate member of Lloyd’s or as a provider of financial or investment services or contracts, or the proceeds thereof, in each case held in a segregated trust or other account and securing such liabilities or (ii) any other assets subject to any trust or other account arising out of or as a result of contractual, regulatory or any other requirements; provided that in no case shall any such Lien secure Indebtedness and any Lien which secures Indebtedness shall not be permitted under this Clause 19.3(g);
(h)	statutory and common law Liens of materialmen, mechanics, carriers, warehousemen and landlords and other similar Liens arising in the ordinary course of business; and
(i)	Liens existing on property of a Person immediately prior to its being consolidated with or merged into any Obligor or any of their Subsidiaries or its becoming a Subsidiary, and Liens existing on any property acquired by any Obligor or any of their Subsidiaries at the time such property is so acquired (whether or not the Indebtedness secured thereby shall have been assumed) (and extension, renewal and replacement Liens upon the same property, provided that the amount secured by each Lien constituting such an extension, renewal or replacement Lien shall not exceed the amount secured by the Lien theretofore existing), provided that (i) no such Lien shall have been created or assumed in contemplation of such consolidation or merger or such Person’s becoming a Subsidiary or such acquisition of property and (ii) each such Lien shall extend solely to the item or items of property so acquired and, if required by terms of the instrument originally creating such Lien, other property which is an improvement to or is acquired for specific use in connection with such acquired property.

Transactions with Affiliates

19.4 No Obligor will, nor will it permit any of its Subsidiaries to, enter into or carry out any transaction with (including, without limitation, purchase or lease property or services to, loan or advance to or enter into, suffer to remain in existence or amend any contract, agreement or arrangement with) any Affiliate of such Obligor, or directly or indirectly agree to do any of the foregoing, except:

(a)	transactions involving guarantees or co-obligors with respect to any Indebtedness described in Part A of Schedule 2;
(b)	transactions between any Obligor and its wholly-owned Subsidiaries; and
(c)	transactions with Affiliates in good faith in the ordinary course of such Obligor’s business consistent with past practice and on terms no less favourable to such Obligor or any Subsidiary than those that could have been obtained in a comparable transaction on an arm’s length basis from an unrelated Person except if any such transaction would not have a Material Adverse Effect.

Ratio of Total Funded Debt to Total Capitalisation

19.5 The Account Party will not permit its ratio of (a) Total Funded Debt to (b) the sum of Total Funded Debt plus Consolidated Net Worth to be greater than 0.35:1.00 at any time.

Consolidated Net Worth

19.6 The Account Party will not permit its Consolidated Net Worth to be less than the sum of (a) $4,400,000,000 plus (b) 25% of net income (if positive) for each fiscal quarter of the Account Party commencing with the fiscal quarter ending September 30, 2003.

Indebtedness

19.7 No Obligor will, nor will it permit any of its Subsidiaries to, at any time create, incur, assume or permit to exist any Indebtedness, or agree, become or remain liable (contingent or otherwise) to do any of the foregoing, except:

(a)	Indebtedness created hereunder and under any other Finance Document;
(b)	secured Indebtedness (including secured reimbursement obligations with respect to letters of credit) of any Obligor or any Subsidiary in an aggregate principal amount (for all Obligors and their respective Subsidiaries) not exceeding $750,000,000 at any time outstanding;
(c)	other unsecured Indebtedness, so long as upon the incurrence thereof no Default would occur or exist;
(d)	Indebtedness consisting of accounts or claims payable and accrued and deferred compensation (including options) incurred in the ordinary course of business by any Obligor or any Subsidiary;
(e)	Indebtedness incurred in transactions described in Clause 19.3(f); and
(f)	Indebtedness existing on the date hereof and described in Part A of Schedule 2 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof.

Ratings Downgrade

19.8 If at any time one of the following conditions is not satisfied:

(a)	the Account Party has a financial-strength rating of at least “A” from A.M. Best & Co. (or its successor); and
(b)	each of XL Insurance and XL Re has a financial-strength rating of at least “A” from Standard & Poor’s Rating Services (or its successor);

then the Agent may (and if so instructed by the Majority Lenders shall) require the Account Party within 5 Business Days of the failure to satisfy either condition, either:

(i)

to provide cash cover in an amount equal to the aggregate LC Exposures for the time being; or

(ii)

to deposit BIS Qualifying Assets with a custodian acceptable to the Agent, and enter into custodian and other relevant documentation, together with documentation required by the Security Trustee to give the Security Trustee (for the benefit of itself and the other Finance Parties) an effective and perfected security interest in respect of those BIS Qualifying Assets, in an aggregate amount equal to 105% of the aggregate LC Exposures for the time being.

Notwithstanding any of the foregoing provisions of this Clause 19.8, if at any time subsequent to compliance by the Account Party with (i) or (ii) above, both of the conditions in (a) and (b) above are satisfied, the Security Trustee will instruct a bank holding any cash cover or otherwise take all necessary actions to release and return any cash cover or BIS Qualifying Assets to the Account Party and the Letter of Credit Fee shall be determined by reference to Clause 9.3.

Private Act

19.9 No Obligor will become subject to a Private Act other than the X.L. Insurance Company, Ltd. Act, 1989.

20. EVENTS OF DEFAULT

20.1 If any of the following events (Events of Default) shall occur:

(a)	Failure to Pay:
	(i)	any Obligor shall fail to pay any Demand Amount when and as the same shall become due and payable; or
	(ii)	any Obligor shall fail to pay any interest or any fee payable under this Agreement or any other Finance Document or any other amount (other than an amount referred to in Clause 20.1(a)(i)) payable under this Agreement or any other Finance Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of 3 or more days;
(b)	Misrepresentation: any representation or warranty made or deemed made by any Obligor in or in connection with this Agreement or any other Finance Document or any amendment or modification hereof, or in any certificate or financial statement furnished pursuant to the provisions hereof, shall prove to have been false or misleading in any material respect as of the time made (or deemed made) or furnished;
(c)	Breach of Obligations:
	(i)	any Obligor shall fail to observe or perform any covenant, condition or agreement contained in Clause 19 (Negative Covenants); or
	(ii)	any Obligor shall fail to observe or perform any covenant, condition or agreement contained in this Agreement or any other Finance Document (other

	than those specified in Clause 20.1(a) or (c)(i)) and such failure shall continue unremedied for a period of 20 or more days after notice thereof from the Agent (given at the request of any Lender) to such Obligor;
(d)	Cross Default: any Obligor or any of its Subsidiaries shall default (i) in any payment of principal of or interest on any other obligation for borrowed money in principal amount of $50,000,000 or more, or any payment of any principal amount of $50,000,000 or more under Hedging Agreements, in each case beyond any period of grace provided with respect thereto, or (ii) in the performance of any other agreement, term or condition contained in any such agreement (other than Hedging Agreements) under which any such obligation in principal amount of $50,000,000 or more is created, if the effect of such default is to cause or permit the holder or holders of such obligation (or trustee on behalf of such holder or holders) to cause such obligation to become due prior to its stated maturity or to terminate its commitment under such agreement, provided that this Clause 20.1(d) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;
(e)	Winding-up: a decree or order by a court having jurisdiction in the premises shall have been entered adjudging any Obligor a bankrupt or insolvent, or approving as properly filed a petition seeking reorganisation of such Obligor under the Bermuda Companies Law or the Cayman Islands Companies Law (2002 Revision) or any other similar applicable Law, and such decree or order shall have continued undischarged or unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of such Obligor or a substantial part of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have continued undischarged and unstayed for a period of 60 days;
(f)	Insolvency and Rescheduling: any Obligor shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganisation under the Bermuda Companies Law or the Cayman Islands Companies Law (2002 Revision) or any other similar applicable Law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or a substantial part of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or corporate or other action shall be taken by such Obligor in furtherance of any of the aforesaid purposes;
(g)	Material unsatisfied judgment or order: one or more judgments for the payment of money in an aggregate amount in excess of $100,000,000 shall be rendered against any Obligor or any of its Subsidiaries or any combination thereof and the same shall not have been vacated, discharged, stayed (whether by appeal or otherwise) or bonded pending appeal within 45 days from the entry thereof;
(h)	ERISA Event: an ERISA Event (or similar event with respect to any Non-U.S. Benefit Plan) shall have occurred that, in the opinion of the Majority Lenders, when taken together with all other ERISA Events and such similar events that have occurred, could

	reasonably be expected to result in liability of the Obligors and their Subsidiaries in an aggregate amount exceeding $100,000,000;
(i)	Change of Control: a Change in Control shall occur;
(j)	Change in Ownership: the Account Party shall cease to own, beneficially and of record, directly or indirectly all of the outstanding voting shares of capital stock of XL Insurance, XL Re, XL America or XL Europe (except, in the case of any company organised under the laws of Bermuda, for a nominal number of shares owned by nominee shareholders required by the Bermuda Companies Law); or
(k)	Illegality: at any time it is or becomes unlawful for any Obligor to perform or comply with any or all of its obligations hereunder or any court or arbitrator or any governmental body, agency or official which has jurisdiction in the matter shall decide, rule or order that any provision of the Finance Documents is invalid or unenforceable in any material respect, or any Obligor shall so assert in writing;
(l)	Default under Guarantee: the guarantee contained in Clause 16 (Guarantee and Indemnity) shall terminate or cease, in whole or material part, to be a legally valid and binding obligation of each Guarantor or any Guarantor or any Person acting for or on behalf of any of such parties shall contest such validity or binding nature of such guarantee itself or the Transactions, or any other Person shall assert any of the foregoing;

then, and in every such event (other than an event with respect to any Obligor described in Clause 20.1(e) or 20.1(f)), and at any time thereafter during the continuance of such event, the Agent may, and at the request of the Majority Lenders shall, by notice to the Account Party, take any of the following actions, at the same or different times:

(i)	terminate the Total Commitments, and thereupon the Total Commitments shall terminate immediately;
(ii)	require the Account Party forthwith to provide cash cover in respect of any LC Exposure pursuant to a Letter of Credit; and
(iii)	declare all fees and other obligations of the Account Party accrued hereunder to be due and payable in whole (or in part, in which case any fees and other obligations not so declared to be due and payable may thereafter be declared to be due and payable) and thereupon such fees and other obligations, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Account Party;

and in case of any event with respect to any Obligor described in Clause 20.1(e) or 20.1(f):

(x)	the Commitments shall automatically terminate; and
(y)	the Account Party shall automatically be required to provide cash cover in respect of any LC Exposure pursuant to a Letter of Credit; and

(z)	all fees and other obligations of the Account Party accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Account Party.
21.	THE AGENT, THE ARRANGER AND THE LENDERS

Appointment of the Agent

21.1 The Arranger and each of the Lenders hereby appoints the Agent to act as its agent in connection herewith and authorises the Agent to exercise such rights, powers, authorities and discretions as are specifically delegated to the Agent by the terms hereof together with all such rights, powers, authorities and discretions as are reasonably incidental thereto.

Agent’s Discretions

21.2 The Agent may:

(a)	assume, unless it has, in its capacity as agent for the Lenders, received notice to the contrary from any other party hereto, that (a) any representation made or deemed to be made by an Obligor in connection with the Finance Documents is true, (b) no Event of Default or Potential Event of Default has occurred, (c) no Obligor is in breach of or default under its obligations under the Finance Documents and (d) any right, power, authority or discretion vested therein upon the Majority Lenders, the Lenders or any other person or group of persons has not been exercised;
(b)	assume that the Facility Office of each Lender is that notified to it by such Lender in writing prior to the date hereof (or, in the case of a Transferee, at the end of the Transfer Certificate to which it is a party as Transferee) until it has received from such Lender a notice designating some other office of such Lender to replace its Facility Office and act upon any such notice until the same is superseded by a further such notice;
(c)	engage and pay for the advice or services of any lawyers, accountants, surveyors or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained;
(d)	rely as to any matters of fact which might reasonably be expected to be within the knowledge of an Obligor upon a certificate signed by or on behalf of such Obligor;
(e)	rely upon any communication or document believed by it to be genuine;
(f)	refrain from exercising any right, power or discretion vested in it as agent hereunder unless and until instructed by the Majority Lenders as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised;
(g)	refrain from acting in accordance with any instructions of the Majority Lenders to begin any legal action or proceeding arising out of or in connection with the Finance Documents until it shall have received such security as it may require (whether by way of payment in advance or otherwise) for all costs, claims, losses, expenses (including legal

	fees) and liabilities together with any VAT thereon which it will or may expend or incur in complying with such instructions; and
(h)	assume (unless it has specific notice to the contrary) that any notice or request made by the Account Party is made on behalf of the Obligors.

Agent’s Obligations

21.3 The Agent shall:

(a)	promptly inform each Lender of the contents of any notice or document received by it in its capacity as Agent from an Obligor under the Finance Documents and shall promptly deliver to each Lender a copy of each Letter of Credit delivered to Lloyd’s pursuant to Clause 3.3 (Completion of Letters of Credit);
(b)	promptly notify each Lender of the occurrence of any Event of Default or any default by an Obligor in the due performance of or compliance with its obligations under the Finance Documents of which the Agent has notice from any other party hereto;
(c)	save as otherwise provided herein, act as agent under the Finance Documents in accordance with any instructions given to it by an Majority Lenders, which instructions shall be binding on the Arranger and the Lenders; and
(d)	if so instructed by the Majority Lenders, refrain from exercising any right, power or discretion vested in it as agent under the Finance Documents.

The Agent’s duties under the Finance Documents are solely mechanical and administrative in nature.

Excluded Obligations

21.4 Notwithstanding anything to the contrary expressed or implied herein, neither the Agent nor the Arranger shall:

(a)	be bound to enquire as to (i) whether or not any representation made or deemed to be made by an Obligor in connection with the Finance Documents is true, (ii) the occurrence of any Default, (iii) the performance by an Obligor of its obligations under the Finance Documents or (iv) any breach of or default by an Obligor of or under its obligations under the Finance Documents;
(b)	be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account;
(c)	be bound to disclose to any other person any information relating to any Obligor or any Related Party if (i) such person, on providing such information, expressly stated to the Agent or, as the case may be, the Arranger, that such information was confidential or (ii) such disclosure would or might in its opinion constitute a breach of any Law or be otherwise actionable at the suit of any person;
(d)	be under any obligations other than those for which express provision is made herein; or

(e) be or be deemed to be a fiduciary for any other party hereto.

Indemnification

21.5 Each Lender shall, pro rata according to its respective Commitment, from time to time on demand by the Agent, indemnify the Agent against any and all costs, claims, losses, expenses (including legal fees) and liabilities together with any value added tax thereon (or equivalent) which the Agent may incur, otherwise than by reason of its own gross negligence or wilful misconduct, in acting in its capacity as agent hereunder.

Exclusion of Liabilities

21.6 Except in the case of gross negligence or wilful default, neither the Agent nor the Arranger accepts any responsibility:

(a)	for the adequacy, accuracy and/or completeness of any information supplied by the Agent or the Arranger, by an Obligor or by any other person in connection with the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, pursuant to or in connection with the Finance Documents;
(b)	for the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, pursuant to or in connection with the Finance Documents; or
(c)	for the exercise of, or the failure to exercise, any judgement, discretion or power given to any of them by or in connection with the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, pursuant to or in connection with the Finance Documents.

Accordingly, neither the Agent nor the Arranger shall be under any liability (whether in negligence or otherwise) in respect of such matters, save in the case of gross negligence or wilful misconduct.

No Actions

21.7 Each of the Lenders agree that it will not assert or seek to assert against any director, officer or employee of the Agent or the Arranger any claim it might have against any of them in respect of the matters referred to in Clause 21.6 (Exclusion of Liabilities).

Business with the Group

21.8 The Agent and the Arranger may accept deposits from, lend money to and generally engage in any kind of banking or other business with any of the Obligors or their Subsidiaries.

Resignation

21.9 The Agent may resign its appointment hereunder at any time without assigning any reason therefor by giving not less than thirty days’ prior notice to that effect to each of the other parties hereto, PROVIDED THAT no such resignation shall be effective until a successor for the Agent is appointed in accordance with the succeeding provisions of this Clause 21.

Successor Agent

21.10 If the Agent gives notice of its resignation pursuant to Clause 21.9 (Resignation) then any reputable and experienced Lender or other financial institution may be appointed as a successor to the Agent by the Majority Lenders (with the approval of the Account Party, not to be unreasonably withheld or delayed,) during the period of such notice (with the co-operation of the Agent) but, if no such successor is so appointed, the Agent may appoint such a successor itself.

Rights and Obligations

21.11 If a successor to the Agent is appointed under the provisions of Clause 21.10 (Successor Agent), then (a) the retiring Agent shall be discharged from any further obligation hereunder but shall remain entitled to the benefit of the provisions of this Clause 21 and (b) its successor and each of the other parties hereto shall have the same rights and obligations amongst themselves as they would have had if such successor had been a party hereto.

Own Responsibility

21.12 It is understood and agreed by each Lender that at all times it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigation into all risks arising under or in connection with this Agreement including, but not limited to:

(a)	the financial condition, creditworthiness, condition, affairs, status and nature of each member of the Group;
(b)	the legality, validity, effectiveness, adequacy and enforceability of the Finance Documents and any other agreement, arrangement or document entered into, made or executed in anticipation of, pursuant to or in connection with the Finance Documents;
(c)	whether such Lender has recourse, and the nature and extent of that recourse, against an Obligor or any other person or any of its assets under or in connection with the Finance Documents, the Transactions or any other agreement, arrangement or document entered into, made or executed in anticipation of, pursuant to or in connection with the Finance Documents; and
(d)	the adequacy, accuracy and/or completeness of any information provided by the Agent or the Arranger, an Obligor or by any other person in connection with the Finance Documents, the Transactions or any other agreement, arrangement or document entered into, made or executed in anticipation of, pursuant to or in connection with the Finance Documents.

Accordingly, each Lender acknowledges to the Agent and the Arranger that it has not relied on and will not hereafter rely on the Agent and the Arranger or either of them in respect of any of these matters.

Agency Division Separate

21.13 In acting as agent hereunder for the Lenders, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its

divisions or departments and, notwithstanding the foregoing provisions of this Clause 21, any information received by some other division or department of the Agent may be treated as confidential and shall not be regarded as having been given to the Agent’s agency division.

Declaration of Agent as Security Trustee

21.14 The Agent hereby declares that it shall hold:

(a)	all rights, titles and interests that may hereafter be mortgaged, charged, assigned or otherwise secured in favour of the Agent by or pursuant to the Finance Documents;
(b)	the benefit of all representations, covenants, guarantees, indemnities and other contractual provisions given in favour of the Agent (other than any such benefits given to the Agent solely for its own benefit) by or pursuant to the Finance Documents (other than this Agreement); and
(c)	all proceeds of the security referred to in paragraph (a) above and of the enforcement of the benefits referred to in paragraph (b) above,

on trust for itself and the other Finance Parties from time to time.

Such declaration shall remain valid notwithstanding that the Agent may on the date hereof or at any other time be the sole Finance Party; for the avoidance of doubt, however, such declaration shall, in such case, be deemed repeated on each date on which the Agent ceases to be the sole Finance Party.

Each of the parties hereto agrees that the obligations, rights and benefits vested or to be vested in the Agent as trustee as aforesaid by the Finance Documents or any document entered into pursuant thereto shall (as well before as after enforcement) be performed and (as the case may be) exercised by the Agent in accordance with the provisions of this Clause 21.

Powers and Discretions

21.15 The Agent shall have all the powers and discretions conferred upon trustees by the Trustee Act 1925 (to the extent not inconsistent herewith) and by way of supplement it is expressly declared as follows:

(a)

the Agent shall be at liberty to place any of the Finance Documents and any other instruments, documents or deeds delivered to it pursuant thereto or in connection therewith for the time being in its possession in any safe deposit, safe or receptacle selected by the Agent or with any Lender, any company whose business includes undertaking the safe custody of documents or any firm of lawyers of good repute;

(b)

the Agent may, whenever it thinks fit, delegate by power of attorney or otherwise to any person or persons or fluctuating body of persons all or any of the rights, trusts, powers, authorities and discretions vested in it by any of the Finance Documents and such delegation may be made upon such terms and subject to such conditions (including the power to sub-delegate) and subject to such regulations as the Agent may think fit and the Agent shall not be bound to supervise, or be in any way responsible for any loss incurred

	by reason of any misconduct or default on the part of, any such delegate (or sub-delegate);
(c)	notwithstanding anything else herein contained, the Agent may refrain from doing anything which would or might in its opinion be contrary to any Law of any jurisdiction or any directive or regulation of any agency of any state or which would or might otherwise render it liable to any person and may do anything which is, in its opinion, necessary to comply with any such Law, directive or regulation;
(d)	save in the case of gross negligence or wilful misconduct, the Agent and every attorney, agent, delegate, sub-delegate and any other person appointed by any of them under any of the Finance Documents may indemnify itself or himself out of the security held by the Agent against all liabilities, costs, fees, charges, losses and expenses incurred by any of them in relation to or arising out of the taking or holding of any of the security constituted by, or any of the benefits provided by, any of the Finance Documents, in the exercise or purported exercise of the rights, trusts, powers and discretions vested in any of them or in respect of any other matter or thing done or omitted to be done in any way relating to any of the Finance Documents or pursuant to any Law or regulation; and
(e)	without prejudice to the provisions of any of the Finance Documents, the Agent shall not be under any obligation to insure any property or to require any other person to maintain any such insurance and shall not be responsible for any loss which may be suffered by any person as a result of the lack of or inadequacy or insufficiency of any such insurance.

Liability

21.16 The Agent shall not be liable for any failure:

(a)	to require the deposit with it of any deed or document certifying, representing or constituting the title of the Account Party to any of the property mortgaged, charged, assigned or otherwise encumbered by or pursuant to any of the Finance Documents;
(b)	to obtain any licence, consent or other authority for the execution, delivery, validity, legality, adequacy, performance, enforceability or admissibility in evidence of any of the Finance Documents;
(c)	to register or notify any deed or document mentioned at paragraph (a) above in accordance with the provisions of any of the documents of title of the Account Party;
(d)	to effect or procure registration of or otherwise protect any of the security created by any of the Finance Documents by registering the same under any applicable registration Laws in any territory or otherwise by registering any notice, caution or other entry prescribed by or pursuant to the provisions of relevant Laws;
(e)	to take or to require the Account Party to take any steps to render the security created or purported to be created by or pursuant to any of the Finance Documents effective or to secure the creation of any ancillary charge under the Laws of any jurisdiction; or
(f)	to require any further assurances in relation to any of the Finance Documents.

Title to Security etc.

21.17 The Agent may accept without enquiry, requisition or objection such right and title as the Account Party may have to the property belonging (or purportedly belonging) to it (or any part thereof) which is the subject matter of any of the Finance Documents and shall not be bound or concerned to investigate or make any enquiry into the right or title of the Account Party to such property (or any part thereof) or, without prejudice to the foregoing, to require the Account Party to remedy any defect in the Account Party’s right or title as aforesaid.

New Security Trustee

21.18 The Agent may at any time appoint any person (whether or not a trust corporation) to act either as a separate trustee or as a co-trustee jointly with the Agent:

(a)	if the Agent considers such appointment to be in the interests of the Lenders; or
(b)	for the purposes of conforming to any legal requirements, restrictions or conditions which the Agent deems relevant for the purposes of the Finance Documents and the Agent shall give prior notice to the Account Party and the Lenders of any such appointment.

Any person so appointed shall (subject to the provisions of the Finance Documents) have such powers, authorities and discretions and such duties and obligations as shall be conferred or imposed or such person by the instrument of appointment and shall have the same benefits under this Clause 21 as the Agent.

The Agent shall have power in like manner to remove any person so appointed.

Such reasonable remuneration as the Agent may pay to any person so appointed, and any costs, charges and expenses incurred by such person in performing its functions pursuant to such appointment, shall for the purposes hereof be treated as costs, charges and expenses incurred by the Agent under the Finance Documents.

Perpetuity Period

21.19 The perpetuity period under the rule against perpetuities if applicable to the trusts constituted in this Clause 21 and the other Finance Documents shall be the period of eighty years from the date of this Agreement and, subject thereto, if the Agent determines that all of the obligations of the Account Party under any of the Finance Documents have been fully and unconditionally discharged, such trusts shall be wound up.

Lender Representations

21.20 Each Lender represents to the Agent on the date of issue of each Letter of Credit that:

(a)	the execution and delivery of each Letter of Credit by the Agent on the Lender’s behalf has been duly authorised by all necessary action on the part of the Lender; and
(b)	the obligations of the Lender under each Letter of Credit constitute its legal, valid and binding obligations.

Letters of Credit

21.21 Each Lender shall, (a) pro rata according to its respective Commitment, indemnify the Agent against any and all liabilities, costs and expenses which the Agent may incur otherwise than by reason of its own gross negligence or wilful misconduct (in its capacity as Agent) as a result of the execution and delivery of any Letter of Credit and any documents executed and delivered by the Agent in connection therewith; and (b) inform the Agent promptly if at any time the collateral securing the repayment of any amounts payable under any Letter of Credit comprises directly or indirectly a security interest over a principal private residence.

22. NOTICES

Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, as follows:

(a)	if to any Obligor, to:
	XL Capital Ltd
	XL House
	One Bermudiana Road
	Hamilton HM 11
	Bermuda,
	Fax:	1 441 295 4867
	Attention:	Paul Giordano
(b)	if to the Agent:
	2nd Floor
	4 Harbour Exchange Square
	London E14 9GE
	Fax:	44 207 500 4482/4484
	Attention:	Loans Agency
(c)	if to a Lender, to it at its address (or facsimile number) on the signature pages of this Agreement, or such other address as it shall notify to the Agents and the Account Party.

Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto (or, in the case of any such change by a Lender, by notice to the Account Party and the Agent). All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

23. WAIVERS AND AMENDMENTS

No Deemed Waivers

23.1 No failure or delay by any Finance Party in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No waiver of any provision of this Agreement or consent to any departure by an Obligor therefrom shall in any event be effective unless the same shall be permitted by Clause 23.3 (Amendments), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Agent or any Lender may have had notice or knowledge of such Default at the time.

Remedies Cumulative

23.2 The rights and remedies of the Finance Parties hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have.

Amendments

23.3 Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Obligors and the Majority Lenders or by the Obligors and the Agent with the consent of the Majority Lenders; PROVIDED that no such agreement shall:

(a)	increase the Commitment of any Lender without the written consent of such Lender,
(b)	reduce the amount of any reimbursement obligation of the Account Party in respect of any LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby,
(c)	postpone the scheduled date for reimbursement of any LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment or any Letter of Credit (other than an extension thereof pursuant to Clause 4), without the written consent of each Lender affected thereby,
(d)	change Clause 15.4 (Pro Rata Treatment) or 15.5 (Sharing of Payments By Lenders) without the consent of each Lender affected thereby,
(e)	release any of the Guarantors from any of their guarantee obligations under Clause 16 (Guarantee and Indemnity) without the written consent of each Lender,
(f)	release any security granted by the Account Party pursuant to Clause 19.8 (Ratings Downgrade) or 20.1 (Events of Default) without the written consent of each Lender, and

(g)
   change any of the provisions of this Clause or the percentage in the definition of the term Majority Lenders or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender;

and PROVIDED FURTHER that no such agreement shall amend, modify or otherwise affect the rights or duties of the Agent hereunder without the prior written consent of the Agent.

24. COSTS AND EXPENSES

24.1 The Account Party shall pay:

(a)

all reasonable out-of-pocket expenses and charges incurred by the Agent and/or the Arranger (together with VAT or any similar tax thereon and including the reasonable fees, charges and disbursements of counsel for the Agent) in connection with the syndication of the credit facilities provided for herein, the negotiation, preparation, execution and administration of the Finance Documents (subject to the terms of the Commitment Letter) or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated);

(b)

all reasonable out-of-pocket expenses incurred by the Agent, the Security Trustee or any Lender, (together with VAT or any similar tax thereon and including the reasonable fees, charges and disbursements of one legal counsel for the Agent and one legal counsel for the Lenders), in connection with the preservation and/or enforcement or protection of its rights in connection with the Finance Documents, including its rights under this Clause, or in connection with Letters of Credit issued hereunder, including in connection with any workout, restructuring or negotiations in respect thereof.

Stamp Duty

24.2 The Account Party shall pay all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any other document referred to herein.

25. INDEMNITIES

Currency Indemnity

25.1(a) If:

(b)
   any amount payable by the Account Party under or in connection with this Agreement is received by any Finance Party in a currency (the Payment Currency) other than that agreed in this Agreement (the Agreed Currency) whether as a result of any judgement or order or the enforcement thereof, the liquidation of the payer or otherwise; and

(ii)
   the amount produced by converting the Payment Currency so received into the Agreed Currency is less than the relevant amount of the Agreed Currency.

then the Account Party shall, as an independent obligation, indemnify such Finance Party for the deficiency and any loss sustained as a result. Such conversion shall be made at such prevailing rate of exchange, on such date and in such market as is determined by such Finance Party (acting reasonably) as being most appropriate for the conversion. The Account Party shall in addition pay the costs of the conversion.

(b)
   The Account Party waives any right it may have in any jurisdiction to pay any amount under this Agreement in a currency other than that in which it is expressed to be payable in this Agreement.

Other Indemnities

25.2 The Obligors shall indemnify the Agent and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an Indemnitee) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of:

(a)	the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby;
(b)	any Letter of Credit or the use of any thereof (including any refusal by any Lender to honour a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit);
(c)	any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses result from or arise out of the gross negligence or wilful misconduct of such Indemnitee.

Reimbursement by Lenders

25.3 To the extent that the Obligors fail to pay any amount required to be paid by them to the Agent under Clauses 25 (Costs and Expenses) or 25.1 (Currency Indemnity) and 25.2 (Other Indemnities), each Lender severally agrees to pay to the Agent such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; PROVIDED that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Agent in its capacity as such.

26. ALTERATION TO THE PARTIES

Successors

26.1 The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby.

Assignments and Transfers by the Account Party

26.2 The Account Party shall not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Account Party without such consent shall be null and void).

Transfers by Lenders.

26.3(a) Any Lender (the Transferor) may at any time transfer to another Approved Credit Institution (the Transferee) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment) and under any Letter of Credit to which it is a party; PROVIDEDTHAT:

(i)	except in the case of an transfer to a Lender or a Lender Affiliate, each of the Account Party and the Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed);
(ii)	except in the case of an transfer to a Lender or a Lender Affiliate or a transfer of the entire remaining amount of the Transferor’s Commitment, the amount of the Commitment of the Transferor subject to each such transfer (determined as of the date of the Transfer Certificate) shall not be less than £3,000,000 unless each of the Account Party and the Agent otherwise consent;
(iii)	a transfer of obligations shall only be effective if the Transferee has confirmed to the Agent and the Account Party prior to the transfer taking effect that it undertakes to be bound by the terms of this Agreement as Lender in form and substance reasonably satisfactory to the Agent and the Account Party; and on any such transfer being made the Transferor shall be relieved of its obligations to the extent they are transferred to the Transferee;
(iv)	the Transferee, if it shall not be a Lender, shall deliver relevant contact, notice and account details to the Agent (with a copy to the Account Party);

PROVIDED FURTHER that any consent of the Account Party otherwise required under this paragraph shall not be required if an Event of Default under Clause 20.1(a), (e) or (f) has occurred and is continuing. Upon transfer pursuant to Clause 26.4, from and after the last to occur of (i) the effective date specified in each Transfer Certificate; and (ii) the cancellation of a Letter of Credit and the issue of a new Letter of Credit with the Transferee identified as an Issuing Lender, the Transferee thereunder shall be a party hereto and, to the extent of the lesser of the interest assigned by such Transfer Certificate and the Transferee’s participation as an Issuing lender of a re-issued Letter of Credit (the Transferred Interest), have the rights and obligations of a Lender under this Agreement,

and the Transferor thereunder shall, to the extent of the Transferred Interest, be released from its obligations under this Agreement (and, in the case of Transfer Certificate covering all of the Transferor’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Clauses 12 (Increased Costs), 10(Taxes) 24 (Costs and Expenses) and 25 (Indemnities)). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Clause 26.7 (Participations).

Notwithstanding anything to the contrary contained herein, any Lender (a Granting Lender) may grant to a special purpose vehicle (an SPV) of such Granting Lender, identified as such in writing from time to time by the Granting Lender to the Agent and the Account Party, the option to provide to the Account Party all or any part of any LC Disbursement that such Granting Lender would otherwise be obligated to make to the Account Party pursuant to Clause 2.1, PROVIDED that (i) nothing herein shall constitute a commitment by any SPV to make any LC Disbursement, (ii) if an SPV elects not to exercise such option or otherwise fails to provide all or any part of such LC Disbursement, the Granting Lender shall be obligated to make such LC Disbursement pursuant to the terms hereof and (iii) the Account Party may bring any proceeding against either or both the Granting Lender or the SPV in order to enforce any rights of the Account Party hereunder; and (iv) the SPV shall agree to the terms of Clause 30.2 (Confidentiality). The making of an LC Disbursement by an SPV hereunder shall utilise the Commitment of the Granting Lender to the same extent, and as if, such LC Disbursement were made by the Granting Lender. Each party hereto hereby agrees that no SPV shall be liable for any payment under this Agreement for which a Lender would otherwise be liable, for so long as, and to the extent, the related Granting Lender makes such payment. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganisation, arrangement, insolvency or liquidation proceedings or similar proceedings under the Laws of the United States or any State thereof arising out of any claim against such SPV under this Agreement. In addition, notwithstanding anything to the contrary contained in this Clause, any SPV may with notice to, but without the prior written consent of, the Account Party or the Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Letter of Credit to its Granting Lender or to any financial institutions (consented to by the Account Party and the Agent) providing liquidity and/or credit support (if any) with respect to commercial paper issued by such SPV to issue such Letters of Credit and such SPV may disclose, on a confidential basis, confidential information with respect to any Account Party and its Subsidiaries to any rating agency, commercial paper dealer or provider of a surety, guarantee or credit liquidity enhancement to such SPV. This paragraph may not be amended without the consent of any SPV at the time holding LC Disbursements under this Agreement.

(b)
   On each occasion a Transferor assigns, transfers or novates any of its rights and/or obligations under this Agreement, the Transferee (unless it is already a Lender or a Lender Affiliate immediately prior to the transfer) shall ensure that the Agent has notice

	of the same and shall, on the date the assignment, transfer and/or novation takes effect, pay to the Agent for its own account a fee of £1,000.
(c)	Neither a Transferor nor any other Finance Party is responsible to a Transferee for:
	(i)	the execution, genuineness, validity, enforceability or sufficiency of any Finance Documents or any other document;
	(ii)	the collectability of amounts payable under any Finance Documents or the financial condition of or the performance of its obligations under the Finance Documents by any Obligor; or
	(iii)	the accuracy of any statements or information (whether written or oral) made in or in connection with or supplied in connection with any Finance Documents.
(d)	Each Transferee confirms to the Transferor and the other Finance Parties that it:
	(i)	has made its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Transferor or any other Finance Party in connection with any Finance Documents; and
	(ii)	will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities for so long as there are any Commitments or LC Exposures under this Agreement.
(e)	Nothing in any Finance Document obliges a Transferor to:
	(i)	accept a re-transfer from an Transferee of any of the rights and/or obligations assigned, transferred or novated under this clause; or
	(ii)	support any losses incurred by the Transferee by reason of the non-performance by any Obligor of its obligations under any Finance Document or otherwise.

26.4 Transfer Procedure:

(a)	A novation is effected if:
	(i)	the Transferor and the Transferee deliver to the Agent a duly completed Transfer Certificate executed by the Transferor and the Transferee; and
	(ii)	the Agent executes it.
(b)	Each Party (other than the Transferor and the Transferee) irrevocably authorises the Agent to execute any duly completed Transfer Certificate on its behalf.
(c)	To the extent that they are expressed to be the subject of the novation in the Transfer Certificate:

(i)	the Transferor and the other Parties (the existing Parties) will be released from their obligations to each other under the Finance Documents (the discharged obligations);
(ii)	the Transferee and the existing Parties will assume obligations towards each other under the Finance Documents which differ from the discharged obligations only insofar as they are owed to or assumed by the Transferee instead of the Transferor;
(iii)	the rights of the Transferor against the existing Parties under the Finance Documents and vice versa (the discharged rights) will be cancelled; and
(iv)	the Transferee and the existing Parties will acquire rights against each other under the Finance Documents which differ from the discharged rights only insofar as they are exercisable by or against the Transferee instead of the Transferor,

all on the date specified in the proviso to Clause 26.3(a).

Right to substitute single Lender

26.5 If:

(a)	any sum payable to any Finance Party by the Account Party is required to be increased under Clause 10 (Taxes); or
(b)	any Lender claims indemnification from the Account Party under Clause 12.1 (Increased Costs); or
(c)	a Lender’s Available Commitment has been reduced to zero pursuant to Clause 13(b) (Illegality),

the Account Party may give the Agent notice of its intention to arrange the substitution of that Lender with a new bank or financial institution.

On receipt of a notice from the Account Party referred to above, the Lender shall use its best endeavours to promptly assign or transfer all of its rights and obligations under this Agreement to an Approved Credit Institution nominated by the Account Party. Such transfer will be effected in accordance with Clause 26.4 (Transfer Procedure) and the consideration for such transfer shall be an amount equal to the sum of all amounts accrued and owing by the Account Party to the transferring Lender as calculated on the date of transfer.

Reference Banks

26.6 If a Reference Bank ceases to be one of the Lenders, the Agent shall (in consultation with the Account Party) appoint another Lender or an affiliate of a Lender to replace that Reference Bank.

Participations

26.7 Any Lender may sell participations to one or more Lenders or other entities (a Participant) in all or a portion of such Lender’s rights and obligations under this Agreement and the other Credit Documents (including all or a portion of its Commitment); PROVIDED that:

(a)	any such participation sold to a Participant which is not a Lender or a Lender Affiliate shall be made only with the consent (which in each case shall not be unreasonably withheld) of the Account Party and the Agent, unless an Event of Default under Clause 20.1(a), (e) or (f) has occurred and is continuing, in which case the consent of the Account Party shall not be required;
(b)	such Lender’s obligations under this Agreement and the other Finance Documents shall remain unchanged;
(c)	such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations;
(d)	the Account Party, the Agent, the Security Trustee and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Finance Documents; and
(e)	the Participant shall agree to the terms of Clause 30.2 (Confidentiality).

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Finance Documents and to approve any amendment, modification or waiver of any provision of this Agreement or the other Finance Documents; PROVIDED that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Clause 23.3 (Amendments) that affects such Participant. Subject to Clause 26.8 (No Increased Costs), the Obligors agree that each Participant shall be entitled to the benefits of Clauses 12 (Increased Costs)and 10 (Taxes) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Clause 26.3 (Transfers by Lenders).

No Increased Costs

26.8 No Participant or Transferee shall be entitled to receive any greater payment under Clause 12 (Increased Costs) and 10 (Taxes) than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant or the Lender interest transferred.

Certain Pledges

26.9 Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, and this Clause shall not apply to any such pledge or assignment of a security interest; PROVIDED that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto.

No Transfers to any Account Party or Affiliates

26.10 Anything in this Clause to the contrary notwithstanding, no Lender may assign or participate any interest in any LC Exposure held by it hereunder to any Obligor or any of its Affiliates or Subsidiaries without the prior consent of each Lender.

Maintenance of Register by the Agent

26.11 The Agent, acting for this purpose as an agent of the Account Party, shall maintain at one of its offices in Londona copy of each Transfer Certificate delivered to it and a register of the names and addresses of the Lenders, and the Commitment of, and principal amount of the LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the Register). The entries in the Register shall be conclusive, and the Account Party, the Agent, the Security Trustee and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by any Account Party and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

27. SET OFF

Right of Set-off

If an Event of Default shall have occurred and be continuing, each Finance Party is hereby authorised at any time and from time to time, to the fullest extent permitted by Law, to set off and apply any and all deposits in any currency (general or special, time or demand, provisional or final) at any time held and other indebtedness in any currency at any time owing by such Finance Party to or for the credit or the account of any Obligor against any of and all the obligations of such Obligor now or hereafter existing under this Agreement held by such Finance Party, irrespective of whether or not such Finance Party shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Finance Party under this Clause are in addition to other rights and remedies (including other rights of set-off) which such Finance Party may have. The relevant Finance Party may effect any appropriate currency exchanges to implement such set-off.

28. MISCELLANEOUS PROVISIONS

Certificates

28.1 Any determination or notification by the Agent or any other Finance Party concerning any rate or amount under the Finance Documents shall, in the absence of manifest error, be conclusive evidence as to that matter.

Survival

28.2 All covenants, agreements, representations and warranties made by the Account Party herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the issuance of any Letters of Credit,

regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Clauses 12 (Increased Costs), 10 (Taxes), 24 (Costs and Expenses), 25 (Indemnities) and 21 (Agent) shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

Counterparts

28.3 This Agreement may be executed in counterparts (and by different parties hereto on separate counterparts), each of which shall constitute an original, but all of which when taken together shall constitute one and the same instrument.

Entire Agreement

28.4 This Agreement and the other Finance Documents constitute the entire contract between the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.

Severability

28.5 Any provision of this Agreement or any other Finance Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof. The invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. To the extent permitted by applicable Law, each Obligor hereby waives any provision of Law which renders any provision of the Finance Documents prohibited or unenforceable in any respect.

29. GOVERNING LAW AND JURISDICTION

Governing Law

29.1 This Agreement shall be construed in accordance with and governed by English law.

Jurisdiction

29.2(a) All the parties agree that the courts of England are, subject to Clause 29.2(b) and (c) below, to have jurisdiction to settle any disputes which may arise in connection with the creation, validity, effect, interpretation or performance of, or the legal relationships established by, this Agreement (including, without limitation, claims for set-off or counterclaim) or otherwise arising in connection with this Agreement and for such purposes irrevocably submit to the jurisdiction of the English courts;

(b)	notwithstanding the agreement in (a) above, each of the Finance Parties shall retain the right to bring proceedings in any other court which has jurisdiction whether by virtue of the Convention on Jurisdiction and the Enforcement of Judgments signed on 27 September 1968 (as from time to time amended and extended) or by virtue of the Convention on Jurisdiction and the Enforcement of Judgments signed on 16 September 1988 (from time to time amended and extended) or otherwise;
(c)	with respect to the courts agreed in paragraphs (a) and (b) above, each of the Parties irrevocably waives any objections on the ground of venue or forum non conveniens or any similar ground;
(d)	each of the Parties irrevocably agrees that a judgment or order of any court referred to in this clause in connection with this Agreement is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction; and
(e)	each of the Parties irrevocably consents to service of process by mail or in any other manner permitted by the relevant Law.

Agent for Service of Process

29.3 Each Obligor shall at all times maintain an agent for service of process and any other documents in proceedings in England or any other proceedings in connection with this Agreement. Such agent shall be XL Brockbank Limited of Fitzwilliam House, 10 St. Mary Axe, London EC3A 8NL and any writ, judgment or other notice of legal process shall be sufficiently served on the relevant Obligor if delivered to such agent marked for the attention of the Finance Director at its address for the time being. Each Obligor undertakes not to revoke the authority of the above agent without promptly appointing a successor and notifying the Agent thereof.

Waiver of Immunities

29.4 To the extent that any Obligor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution or execution, on the ground of sovereignty or otherwise) with respect to itself or its property, it hereby irrevocably waives, to the fullest extent permitted by applicable Law, such immunity in respect of its obligations under the Finance Documents.

30. TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY

Treatment of Certain Information

30.1 Each of the Obligors acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to any Obligor or one or more of their Subsidiaries (in connection with this Agreement or otherwise) by any Lender or by one or more subsidiaries or affiliates of such Lender and each of the Obligors hereby authorises each Lender to share any information delivered to such Lender by such Obligor and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such subsidiary or affiliate, it being understood that (a) any such information shall be used only for the purpose of advising the Obligor or preparing presentation materials for the benefit of

the Obligor and (b) any such subsidiary or affiliate receiving such information shall be bound by Clause 30.2 (Confidentiality) as if it were a Lender hereunder. Such authorisation shall survive the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

Confidentiality

30.2 Each of the Finance Parties agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed:

(a)	to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential);
(b)	to the extent requested by any regulatory authority having jurisdiction over the Agent or any Lender;
(c)	to the extent required by applicable Laws or regulations or by any subpoena or similar legal process;
(d)	to any other party to this Agreement;
(e)	in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder;
(f)	subject to an agreement in writing containing provisions substantially the same as those of this paragraph and for the benefit of the Obligor, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to any Obligor and its obligations;
(g)	with the consent of the Obligor; or
(h)	to the extent such Information (i) becomes publicly available other than as a result of a breach of this Clause 30.2 or (ii) becomes available to the Agent or any Lender on a non-confidential basis from a source other than an Obligor.

For the purposes of this Clause, Information means all information received from an Obligor relating to an Obligor or its business, other than any such information that is available to the Finance Parties on a non-confidential basis prior to disclosure by such Obligor; PROVIDED that, in the case of information received from an Obligor after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Clause shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Notwithstanding the foregoing, each of the Finance Parties agree that they will not trade the securities of any of the Obligors based upon non-public Information that is received by them.

30.3 Notwithstanding anything in this Agreement to the contrary, the Agent, the Lenders and the Account Party (and each of their respective employees, representatives or other agents) may disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to such person relating to such tax treatment or tax structure, other than any information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws, and except that, with respect to any document or similar item that in either case contains information concerning the U.S. tax treatment or U.S. tax structure of such transactions as well as other information, this paragraph shall only apply to such portions of the document or similar item that relate to such tax treatment or tax structure.

31. THIRD PARTY RIGHTS

A person who is not a party to this Agreement shall have no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.

IN WITNESS whereof the parties hereto have caused this Agreement to be duly executed on the date first written above.

DULY DELIVERED AS A DEED by the Chargor on the date inserted above.

EXECUTED as a DEED	)
for and on behalf of	)
XL CAPITAL LTD	)
In the presence of:	)
SIGNED	)
for and on behalf of	)
CITIBANK INTERNATIONAL PLC	)

IN WITNESS WHEREOF, XL CAPITAL LTD has caused this Agreement to be duly executed as a Deed by an authorised officer on the day and year first above written.

Account Party
EXECUTED as a DEED
for and on behalf of XL CAPITAL LTD
By:	Michael Siese and Christopher V. Greetham
In the presence of:	Candida Madeiros
Guarantors
EXECUTED as a DEED
for and on behalf of XL CAPITAL LTD
By:	Michael Siese and Christopher V. Greetham
In the presence of:	Candida Madeiros
SIGNED for and on behalf of X.L. AMERICA, INC.
By:	Richard H Miller
Title:	Senior Vice President, CFO & Treasurer
SIGNED for and on behalf of XL INSURANCE (BERMUDA) LTD
By:	Christopher Coelho
Title:	Senior Vice President & Chief Financial Officer
SIGNED for and on behalf of XL EUROPE LIMITED
By:	Fiona Muldoon
Title:	Chief Financial Officer & Company Secretary
SIGNED for and on behalf of XL RE LTD
By:	John Hume
Title:	Executive Vice President and Chief Executive Officer

Agent

SIGNED for and on behalf of CITIBANK INTERNATIONAL PLC

By: Paul Gibbs (Vice President)

Address:	Citigroup Centre
	33 Canada Square
	Canary Wharf
	London E14 5LB
Fax:	020 7500 4482/4484
Tel:	020 7500 4712
Attention:	Loans Agency
Arranger
SIGNED for and on behalf of SALOMON BROTHERS INTERNATIONAL LIMITED
By:	Pareejat Singhal (Director)
Address:	Citigroup Centre
	33 Canada Square
	Canary Wharf
	London E14 5LB
Fax:	020 7986 8275
Tel:	020 7986 7569
Attention:	Pareejat Singhal

Security Trustee

SIGNED for and on behalf of CITIBANK INTERNATIONAL PLC

By:	Paul Gibbs (Vice President)
Address:	Citigroup Centre
	33 Canada Square
	Canary Wharf
	London E14 5LB

Fax:	020 7500 4482/4484
Tel:	020 7500 4712
Attention:	Loans Agency
Lenders
SIGNED for and on behalf of CITIBANK, N.A.
By:	Pareejat Singhal (Director)
Address:	Citigroup Centre
	33 Canada Square
	Canary Wharf
	London E14 5LB
Fax:	020 7500 5806
Tel:	020 7508 1826
Attention:	Loans Processing Unit
SIGNED for and on behalf of BARCLAYS BANK PLC
By:	Paul Johnson (Relationship Director)
Address:	1st Floor
	54 Lombard Street
	London EC3V 9EX
Fax:	020 7699 2407
Tel:	020 7699 3121
Attention:	Paul Johnson
SIGNED for and on behalf of ING BANK, N.V, LONDON BRANCH
By:	N. J. Marchant (Director) and T. R. Bates
Address:	60 London Wall
	London
	EC2M 5TQ
Fax:	020 7767 7507
Tel:	020 7767 5902
Attention:	Nick Marchant

SIGNED for and on behalf of CREDIT LYONNAIS NEW YORK BRANCH

By:	Peter Rasmussen (First Vice President)
Address:	1301 Avenue of the Americas NY 10019 USA
Fax:	001 212 261 3438
Tel:	001 212 261 7409
Attention:	Helen Hsu
SIGNED for and on behalf of LLOYDS TSB BANK PLC
By:	Sharon Balchin, Manager
Address:	St George’s House
	6-8 Eastcheap
	Monument, London
	EC3M 1AE
Fax:	020 7661 4981
Tel:	020 7661 4953
Attention:	James Boulden

EX-10.66

STANDBY LETTER OF CREDIT AGREEMENT

In consideration of National Australia Bank Limited, New York Branch (the “Bank”) issuing its irrevocable standby letter of credit (the “Credit”) substantially in the form of Exhibit A hereto in favor of the Beneficiary identified therein (as defined in the Credit, the “Beneficiary”), XL Capital Ltd, a company incorporated under the laws of the Cayman Islands, X.L. America, Inc., a Delaware corporation, XL Insurance (Bermuda) Ltd, a Bermuda limited liability company, XL Europe Ltd, a company incorporated under the laws of Ireland, and XL Re Ltd, a Bermuda limited liability company, jointly and severally (collectively the “Applicants”), hereby agree with the Bank as follows:

1.   The Applicants unconditionally agree to pay to the Bank, on demand in immediately available funds (in United States Dollars), on each date on which a disbursement is made by the Bank pursuant to the Credit, an amount equal to such disbursement. If payment is not made on the date of disbursement, such amount shall bear interest (based on a 360-day year and actual days elapsed) from the date of disbursement until paid in full, but excluding the date paid, at a rate per annum equal to the rate of interest from time to time announced by the Bank as its prime rate plus 2%.

2.   The Applicants agree to pay to the Bank, (a) on the date hereof, an upfront fee in the amount of US$ 50,000.00 and (b) quarterly in arrears and on the date on which the Credit expires, letter of credit fees (based on a 360-day year and actual days elapsed) in an amount equal to 0.425% per annum of the amount available to be drawn under the Credit from time to time.

3.   The obligations of the Applicants hereunder are joint and several, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with terms of this Agreement, irrespective of any of the following circumstances: (a) any lack of validity or enforceability of the Credit or any document or instrument relating thereto; (b) the existence of any claim, setoff, defense or other rights which any of the Applicants may have at any time against the Bank, the Beneficiary or any other person or entity, whether in connection with this Agreement or any unrelated transaction; (c) any document presented under the Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (d) payment by the Bank under the Credit against presentation of a draft or certificate which does not strictly comply with the terms of the Credit, provided s uch payment shall have been made by the Bank in good faith and without gross negligence and payment is made against presentation of a draft or other document that at least substantially complies with the terms of the letter of credit; (e) any agreement by the Bank and the Beneficiary extending or shortening the Bank’s time after presentation to examine documents or to honor or give notice of discrepancies; or (f) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, provided that the same shall not constitute gross negligence or bad faith on the part of the Bank. Without limiting any other provision of this Agreement, the Bank: (i) may rely upon any oral, telephonic, facsimile, electronic, written or other communication believed by it in good faith to have been authorized by any Applicant, the Beneficiary or anyone acting for any of them; (ii) shall not be responsible for errors, omissions, interruptions or delays in transmission or delivery of any message, advice or document in connection with the Credit, whether transmitted by courier, mail, telecommunication or otherwise, or for errors in interpretation of technical terms or in translation; (iii) shall not be responsible for the identity or authority of any signer or the form, accuracy, genuineness or legal effect of any draft, certificate or other document presented under the Credit; and (iv) may accept as a draft any written or electronic demand or other request for payment under the Credit, even if such demand or other request is not in the form of a negotiable draft.

4.   If after the date hereof, the adoption of or any change in any law or regulation or in the interpretation thereof by, or compliance by the Bank with any guideline or request from any central bank or other authority charged with the administration thereof (whether or not having the force of law) shall impose, modify or deem applicable any (a) reserve, special deposit or similar requirement against letters of credit issued by the Bank or (b) any capital adequacy or similar requirement (including without limitation a requirement which affects the manner in which the Bank allocates capital to letters of credit), and the result thereof shall be to increase the cost to

the Bank of issuing or maintaining the Credit (which increase in cost shall be calculated in accordance with the Bank’s reasonable averaging and attribution methods) or to reduce the rate of return on the Bank’s capital as a consequence of its obligations under the Credit to a level below that which the Bank could have achieved but for such circumstances, then the Applicants shall pay to the Bank within 10 days of demand such additional amount or amounts as shall compensate the Bank for such increase in cost or reduction in rate of return. A certificate of the Bank as to such additional amount or amounts shall be conclusive, absent manifest error.

5.   Any and all payments made by any Applicant hereunder shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, excluding taxes on or based on the overall net income of the Bank (all such non-excluded taxes, levies, imposts, deductions, charges and withholdings being hereinafter referred to as “Taxes”). If an Applicant shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the Bank, (a) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Paragraph) the Bank receives an amount equal to the sum it would have received had no such deductions been required and (b) such Applicant shall pay the full amount deducted to the relevant taxing authority in accordance with applicable law and shall provide the B ank with the original or a certified copy of the receipt evidencing such payment.

6.   Should any of the following events (each an “Event of Default”) occur, the Applicants shall pay to the Bank, on demand, for application to drawings under the Credit the entire amount thereof which has not been drawn: (a) the Applicants fail to make payment when due of any amount payable under this Agreement and such failure continues unremedied for at least 3 days, (b) any representation made in any financial statement or in any certificate or other writing delivered to the Bank by or on behalf of any Applicant in connection with this Agreement or the Credit is in any material respect false or misleading when made, (c) an event of default under, and as defined in, the 364-Day Credit Agreement dated as of June 25, 2003 among the Applicants, as account parties and guarantors, various lenders parties thereto and JPMorgan Chase Bank, as administrative agent (the “Credit Agreement”) occurs and is continuing; or (d) the Applicants o r any of them fail to observe or perform any covenant, condition or agreement in the Credit Agreement or in any amendment thereof, supplement thereto or replacement therefor and, in the case of covenants, conditions and agreements other than negative covenants, such failure continues unremedied for at least 20 days after notice thereof from the Bank. Any amount so paid which has not been drawn at the expiration of the Credit shall be repaid to the Applicants, without interest, upon the payment in full of all other amounts owing hereunder.

7.   Promptly after the occurrence of an Event of Default or an event which with the giving of notice or the passage of time, or both, would constitute an Event of Default, the Applicants shall notify the Bank of such event, together with a statement setting forth the actions being taken by the Applicants to remedy the same.

8.   The Applicants agree to reimburse all reasonable attorney’s fees paid or incurred by the Bank in the enforcement of its rights and remedies hereunder.

9.   The Applicants agree at all times to protect, indemnify and save harmless the Bank from and against any and all losses, claims, demands, liabilities, damages, costs, charges, counsel fees and other expenses which the Bank may at any time incur by reason of the issuance and performance of the Credit except to the extent resulting from the Bank’s gross negligence or willful misconduct.

10.   Each Applicant hereby consents to the non-exclusive jurisdiction of any court of record in the City of New York or of the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement or the Credit, and service of process by the Bank in any such suit, action, proceeding or judgment may be made by mailing a copy thereof to such Applicant at its address set forth in Paragraph 14 below. The Applicant also waives any claim that New York County or the Southern District of New York is an inconvenient forum.

11.   THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH NEW YORK LAW.

12.   No failure on the part of the Bank to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Bank of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Each and every right,

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remedy and power hereby granted to the Bank or allowed it by law or other agreement shall be cumulative and not exclusive the one of any other and may be exercised by the Bank from time to time.

13.   The Bank shall provide the Applicants with not less than 60 days prior written notice of its intent not to renew the term of the Credit.

14.   All demands for payment, notices or other communications hereunder shall be given in writing (including communications by facsimile transmission) and shall be addressed:

   If to the Bank, at 200 Park Avenue, New York, New York 10166, attention: Letter of Credit Department, Fax No. (212) 983-1969; and

   If to the Applicants, c/o XL Capital Ltd, at XL House, One Bermudiana Road, Hamilton, HM 11 Bermuda, attention: Mr. Roddy Gray, Fax No. (441) 296-6399;

or to such other address as such party may designate by notice to the other parties.

15.   This Agreement shall be binding upon the Applicants and their successors, assigns, and legal representatives, and shall inure to the benefit of, and be enforceable by, the Bank, its successors and assigns. Neither the Bank nor the Applicants may assign any of its rights or obligations under this Agreement without the prior written consent of the other. Such consent not to be unreasonably withheld.

16.   EACH APPLICANT AND THE BANK IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL IN ANY ACTION OR PROCEEDING BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE CREDIT OR ANY DEALINGS WITH ONE ANOTHER RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.

IN WITNESS WHEREOF, the Bank and the Applicants have entered into this Agreement as of the 25th day of July, 2003.

NATIONAL AUSTRALIA BANK LIMITED (ABN 12 004 044 937), New York Branch
By:	/s/ Dennis Cogan
	Name:    Dennis Cogan
	Title:    Senior Vice President

XL CAPITAL LTD
By:	/s/ Roddy Gray
	Name: Roddy Gray
	Title: Vice President & Deputy Treasurer

X.L. AMERICA, INC.
By:	/s/ Charles F. Barr
	Name:    Charles F. Barr
	Title:    Vice President

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XL INSURANCE (BERMUDA) LTD
By:	/s/ Christopher A. Coelho
	Name: Christopher A. Coelho
	Title: Senior Vice President & Chief Financial and Operating Officer

XL EUROPE LTD
By:	/s/ Fiona Muldoon
	Name: Fiona Muldoon
	Title: Chief Financial Officer & Company Secretary

XL RE LTD
By:	/s/ James O’Shaughnessy
	Name: James O’Shaughnessy
	Title: Senior Vice President & Chief Financial Officer

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EX-31

CERTIFICATION
OF CHIEF EXECUTIVE OFFICER

XL CAPITAL LTD

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(Chapter 63, Title 18 U.S.C.§§.1350(A) and (B))

            I, Brian M. O’Hara, certify that:

            1.   I have reviewed this report on Form 10-Q of XL Capital Ltd;

            2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

            3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

            4.   The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

            a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

            b)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

            c)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

            5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

            a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

            b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 14, 2003
	/s/	Brian M. O’Hara
		Brian M. O’Hara
		President and Chief Executive Officer

CERTIFICATION
OF CHIEF FINANCIAL OFFICER

XL CAPITAL LTD

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(Chapter 63, Title 18 U.S.C.§§.1350(A) and (B))

            I, Jerry de St. Paer, certify that:

            1.   I have reviewed this report on Form 10-Q of XL Capital Ltd;

            2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

            3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

            4.   The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

            a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

            b)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

            (c)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

            5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

            a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

            b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 14, 2003	/s/	Jerry de St. Paer
		Jerry de St. Paer
		Executive Vice President and Chief Financial Officer

EX-32

CERTIFICATION
ACCOMPANYING FORM 10-Q REPORT

of

XL CAPITAL LTD

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Chapter 63, Title 18 U.S.C.§§.1350(A) and (B))

            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chapter 63, Title 18 U.S.C. §§.1350(a) and (b)), each of the undersigned hereby certifies that the Quarterly Report on Form 10-Q for the period ended June 30, 2003 of XL Capital Ltd (the “Company”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 14, 2003	/s/	Brian M. O’Hara
		Brian M. O’Hara
		President and Chief Executive Officer
		XL Capital Ltd
Dated: August 14, 2003	/s/	Jerry de St. Paer
		Jerry de St. Paer
		Executive Vice President and Chief Financial Officer
		XL Capital Ltd

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to XL Capital Ltd and will be retained by XL Capital Ltd and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

XL CAPITAL ASSURANCE INC.
AND SUBSIDIARY

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

AS OF JUNE 30, 2003 AND DECEMBER 31, 2002 AND FOR THE PERIODS
ENDED JUNE 30, 2003 AND 2002

XL Capital Assurance Inc. and Subsidiary
Condensed Consolidated Balance Sheets
(UNAUDITED)
(U.S. Dollars in thousands except number of shares and per share amounts)

	June 30,			December 31,
	2003			2002
Assets
Investments:
Fixed maturities available for sale, at fair value
(amortized cost: 2003 - $131,929; 2002 - $110,927)	$	137,763		$	115,301
Short-term investments, at fair value, which
approximates cost		5,079			20,153
Total investments		142,842			135,454
Cash and cash equivalents		77,470			44,714
Premiums receivable		3,043			2,713
Accrued investment income		1,578			1,375
Reinsurance balances recoverable on unpaid losses		19,386			9,594
Prepaid reinsurance premiums		221,477			151,950
Deferred Federal income tax benefit		5,727			5,003
Intangible assets - acquired licenses		11,529			11,529
Other assets		9,429			7,564
Total assets	$	492,481		$	369,896
Liabilities and Shareholder's Equity
Liabilities:
Deferred premium revenue	$	239,979		$	163,129
Unpaid losses and loss adjustment expenses		19,704			10,380
Deferred ceding commissions, net		21,227			11,654
Reinsurance premiums payable		40,149			19,441
Accounts payable and accrued expenses		20,220			12,541
Intercompany payable to affiliates		10,195			10,289
Total liabilities		351,474			227,434
Shareholder's Equity:
Common stock (par value $7,500 at June 30, 2003
and December 31, 2002, 2,000 shares authorized, issued and
outstanding at June 30, 2003 and December 31, 2002)		15,000			15,000
Additional paid-in capital		139,154			139,154
Accumulated other comprehensive income (Net of deferred
Federal income tax liability of: 2003 - $2,005; 2002 - $1,562)		3,829			2,812
Accumulated deficit		(16,976	)		(14,504	)
Total shareholder's equity		141,007			142,462
Total liabilities and shareholder's equity	$	492,481		$	369,896

            See notes to condensed consolidated financial statements.

XL Capital Assurance Inc. and Subsidiary
Condensed Consolidated Statements of Operations and Comprehensive Income
(UNAUDITED)
(U.S. Dollars in thousands)

	Three months ended						Six months ended
	June 30,						June 30,
	2003			2002			2003			2002
Revenues
Gross premiums written	$	77,886		$	73,526		$	111,126		$	88,054
Ceded premiums written		(70,316	)		(67,256	)		(101,150	)		(79,951	)
Net premiums written		7,570			6,270			9,976			8,103
Change in deferred premium revenue		(6,041	)		(5,717	)		(7,323	)		(6,978	)
Net premiums earned (Net of ceded earned premium for the		1,529			553			2,653			1,125
six months of $31,623 in 2003 and $11,346 in 2002)
Net investment income		1,480			1,317			2,854			2,916
Net realized gains on investments		258			439			196			574
Net realized and unrealized gains (losses) on credit derivatives		711			(2	)		971			184
Total revenues		3,978			2,307			6,674			4,799
Expenses
Net losses and loss adjustment expenses (net of ceded losses		529			139			888			282
and loss adjustment expenses for the six months of
$9,872 in 2003 and $2,235 in 2002)
Net operating expenses		3,075			4,071			9,422			10,177
Total expenses		3,604			4,210			10,310			10,459
Income (Loss) before Federal income tax expense (benefit)		374			(1,903	)		(3,636	)		(5,660	)
Deferred Federal income tax expense (benefit)		446			(750	)		(1,164	)		(1,987	)
Net loss		(72	)		(1,153	)		(2,472	)		(3,673	)
Other comprehensive income, net of tax		1,077			1,060			1,017			504
Comprehensive income (loss)	$	1,005		$	(93	)	$	(1,455	)	$	(3,169	)

            See notes to condensed consolidated financial statements.

XL Capital Assurance Inc. and Subsidiary
Condensed Consolidated Statements of Changes in Shareholder’s Equity
(UNAUDITED)
(U.S. Dollars in thousands)

	Six months ended			Year ended
	June 30,			December 31,
	2003			2002
Common Shares
Number of shares, beginning of year		2,000			2,000
Number of shares, end of period		2,000			2,000
Common Stock
Balance - beginning of year	$	15,000		$	15,000
Balance - end of period		15,000			15,000
Additional Paid-In Capital
Balance - beginning of year		139,154			119,154
Capital contribution		—-			20,000
Balance - end of period		139,154			139,154
Accumulated Other Comprehensive Income
Balance - beginning of year		2,812			1,054
Net change in unrealized appreciation of investments, net of
deferred Federal tax expense of $443 in 2003 and $970 in 2002		1,017			1,758
Balance - end of period		3,829			2,812
Accumulated deficit
Balance - beginning of year		(14,504	)		(9,255	)
Net loss		(2,472	)		(5,249	)
Balance - end of period		(16,976	)		(14,504	)
Total shareholder's equity	$	141,007		$	142,462

    See notes to condensed consolidated financial statements.

XL Capital Assurance Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
(UNAUDITED)
(U.S. Dollars in thousands)

	Six months ended			Six months ended
	June, 30			June, 30
	2003			2002
Cash provided by operating activities:
Net loss	$	(2,472	)	$	(3,673	)
Adjustments to reconcile net loss to net cash provided by
operating activities
Net realized gains on sale of investments		(196	)		(574	)
Net realized and unrealized gains on credit derivatives		(431	)		(6	)
Amortization of premium on bonds		479			245
(Decrease) increase in unpaid losses and loss adjustment expenses, net		(468	)		341
Increase in deferred premium revenue		7,323			6,978
Deferred ceding commissions, net		9,573			8,029
Increase in reinsurance premiums payable		20,708			32,919
Increase in premiums receivable		(330	)		(751	)
Increase in accrued investment income		(203	)		(649	)
Deferred Federal income tax liability		(1,164	)		(1,987	)
Increase in accounts payable and accrued expenses		6,147			1,254
Decrease in intercompany payable to affiliates		(94	)		(5,481	)
Other		95			444
Total adjustments		41,439			40,762
Net cash provided by operating activities		38,967			37,089
Cash flows from investing activities:
Proceeds from sale of fixed maturities and short term investments		38,284			20,196
Proceeds from maturity of fixed maturities and short term investments		26,129			110,297
Purchase of fixed maturities and short term investments		(70,624	)		(142,551	)
Payable for securities purchased		—			(11,417	)
Net cash used in investing activities		(6,211	)		(23,475	)
Cash flows from financing activities:
Capital contribution		—			20,000
Net cash provided by financing activities		—			20,000
Increase in cash and cash equivalents		32,756			33,614
Cash and cash equivalents - beginning of year		44,714			39,204
Cash and cash equivalents - end of period	$	77,470		$	72,818

            See notes to condensed consolidated financial statements.

XL Capital Assurance Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
(UNAUDITED)

1. Organization and Ownership

XL Capital Assurance Inc. and subsidiary (the “Company”) is a wholly owned subsidiary of XL Reinsurance America Inc. (“XL RE AM”), formerly known as NAC Reinsurance Corporation, which is an indirect wholly owned subsidiary of X.L. America, Inc. (“XLA”). XLA is an indirect wholly owned subsidiary of XL Insurance (Bermuda) Ltd. (“XL Insurance”). XL Insurance is an indirect wholly owned subsidiary of XL Capital Ltd. (“XL Capital”), a holding company incorporated in the Cayman Islands. XLA is XL Capital’s U.S. holding company.

The Company is an insurance company domiciled in the State of New York. The Company is engaged in the business of providing credit enhancement by writing financial guaranty insurance policies on asset-backed structured finance, essential infrastructure project finance, future flow, public finance transactions, and credit default swap obligations. The Company issued its first insurance contract in December 2000.

The Company was formed on September 13, 1999 and became licensed as a financial guaranty insurer in New York upon its merger with an affiliate, X.L. Risk Solutions, Inc. on September 30, 1999.

On February 22, 2001 XL RE AM acquired all the outstanding shares of The London Assurance of America, Inc. (“LAA”). LAA was incorporated in New York on July 25, 1991. Prior to its purchase by XL RE AM, LAA was a New York-domiciled property and casualty insurance company that was licensed in 44 states and the District of Columbia. The business previously underwritten through LAA, together with all the liabilities of LAA, was reinsured effective July 1, 2000 to an affiliate of LAA under a reinsurance, assignment and assumption agreement. XL RE AM caused the Company to merge with and into LAA on the day of the acquisition (with LAA as the surviving entity) and for LAA to simultaneously change its name to XL Capital Assurance Inc.

On May 15, 2002, the Company capitalized XL Capital Assurance (U.K.) Limited, (“XLCA-UK”), an insurance company organized under the laws of England. XLCA-UK is a direct wholly owned subsidiary of the Company.

2. Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiary and are unaudited. The results include the consolidation of XLCA-UK, accounted for as a subsidiary with effect from April 24, 2002. In the opinion of management, all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the financial position, results of operations and cash flows at June 30, 2003 and for all periods presented, have been made and all significant intercompany accounts and transactions have been eliminated.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These statements should be read in conjunction with the Company’s December 31, 2002 consolidated financial statements and notes thereto. The accompanying condensed consolidated balance sheet as of December 31, 2002 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the periods ended June 30, 2003 and 2002 are not necessarily indicative of the operating results for the full year. Certain prior period balances have been reclassified to conform with current period’s presentation.

XL Capital Assurance Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
(UNAUDITED)

2. Basis of Presentation and Consolidation (continued)

The preparation of condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Any such adjustments are reflected in income in the period in which the adjustments are made. The financial statement estimates subject to most uncertainty are estimates for loss reserves and calculation of the fair value of credit default swap instruments.

3. Credit Default Swaps

Credit default swaps are recorded at fair value which is determined using a model developed by the Company and is dependent upon a number of factors including changes in interest rates, credit spreads, changes in credit quality, expected recovery rates and other market factors. The change resulting from movements in these factors is unrealized as the credit default swaps are not traded to realize this value and is included in net realized and unrealized gains and losses on credit derivatives. Other elements of the change in fair value are based upon pricing established at the inception of the contract. Credit default swaps are considered by the Company to be, in substance, financial guaranty contracts as the Company has the intent to hold them to maturity.

The credit default swap portfolio is structured pools of corporate obligations that were awarded investment grade ratings at the deals’ inception. At June 30, 2003, approximately 83% of the portfolio was rated AAA with the remaining 17% allocated to other investment grade ratings. The weighted average term of the contracts in force was approximately 4.75 years, and the credit default swaps represented approximately 15% of the Company’s credit enhancement par exposure at June 30, 2003. The portfolios are currently performing as expected.

The net fair value adjustment for the six-month periods ended June 30, 2003 and 2002 was an unrealized gain of $431,113 and an unrealized loss of $5,657, respectively. The components of the Company’s net credit default swap asset and liability at June 30, 2003 and December 31, 2002 were as follows:

	At June 30, 2003		At December 31, 2002
Asset
Gross Credit Derivative Gains	$	3,294,881	$	27,498
Reinsurance		2,929,103		21,098
Net Asset	$	365,778	$	6,400
Liability
Gross Credit Derivative Losses	$	6,069,007	$	7,447,219
Reinsurance		5,442,214		6,748,691
Net Liability	$	626,793	$	698,528

4. Recent Accounting Pronouncements

In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure”

XL Capital Assurance Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
(UNAUDITED)

4. Recent Accounting Pronouncements (continued)

(“SFAS No. 148”). SFAS No. 148 amends FASB Statement No. 123, “Accounting for Stock-Based Compensation,” (SFAS No. 123”) to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the prior disclosure guidance and requires prominent disclosures about the method of accounting for stock-based employee compensation and the effect of the method used on the reported results. The Company’s ultimate parent, XL Capital Ltd, recorded option expense for options granted on behalf of its subsidiaries subsequent to January 1, 2003, in accordance with SFAS No. 123, as amended by SFAS No. 148. The effect of the adoption of SFAS No. 148 was insignificant.

In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities” (“VIEs”). FIN 46 establishes a consolidation policy for those entities where a voting interest consolidation policy is considered appropriate. The key determining factors of whether FIN 46 is applied is the amount, nature, and characteristics of the entity’s equity investment at risk. Additionally, FIN 46 requires that the Company disclose the nature, purpose, size and activities of the variable interest entities and the maximum exposure to loss. The consolidation requirements of this standard apply to all variable interest entities created after January 31, 2003. For VIEs in which an enterprise holds a variable interest that it acquired prior to February 1, 2003, the Interpretation is effective in the first fiscal year or interim period beginning after June 15, 2003.

In underwriting financial guaranty insurance, the Company believes the risk of loss to be remote based upon the Company’s requirement that guaranteed obligations be investment grade prior to the provision of credit enhancement. Typically, in the case of asset-backed securities and other structured obligations, such investment grade ratings are based upon subordination, cash reserves, and other structural protections. Consequently, the Company has determined that it does not have a significant variable interest in such variable interest entities. Accordingly, these variable interest entities have not been consolidated and the disclosure requirements of FIN 46 do not apply.

In April 2003, FASB issued Statement No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS No. 149”). SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133. SFAS No. 149 also clarifies the types of financial guarantee contracts that are included in the scope exception of SFAS No. 133 and the characteristics of a derivative that contains financing components. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and should be applied prospectively. The provisions of the Statement that relate to Statement 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003 should continue to be applied in accordance with their respective effective dates. The Company is currently evaluating the effects implementing SFAS No. 149; however, the Company does not expect that its adoption will have a material effect on the Company’s financial condition and results of operations.

5. Variable Interest Entities

The Company participates in transactions which utilize variable interest entities in the ordinary course of business. The Company provides financial guaranty insurance of structured transactions backed by pools of assets of specified types, municipal obligations supported by the issuers’ ability to charge fees for specified services

XL Capital Assurance Inc. and Subsidiary
Notes to Condensed Consolidated Financial Statements
(UNAUDITED)

5. Variable Interest Entities (continued)

or projects, and corporate risk obligations including essential infrastructure projects and obligations backed by receivables from future sales of commodities and other specified services. The obligations related to these transactions are often securitized through off-balance sheet variable interest entities. In synthetic transactions, the Company guarantees payment obligations of counterparties, including variable interest entities, through credit default swaps referencing asset portfolios. The Company only provides financial guaranty insurance of the senior interests of these variable interest entities that would otherwise be rated investment grade, without the Company’s credit enhancement, for fixed premiums at market rates, but does not hold any equity positions or subordinated debt in these off-balance sheet arrangements. Accordingly, the Company does not consider its participation to be a significant variable interest in the entity and therefore these variable interest entities are not consolidated.

6. Tax Sharing Agreement

The Company’s U.S. Federal income tax return is consolidated with XLA and its subsidiaries. XLA maintains a tax sharing agreement with its subsidiaries, whereby the consolidated U.S. Federal income tax liability is allocated among affiliates in the ratio that each affiliate’s separate return liability bears to the sum of the separate return liabilities of all affiliates that are members of the consolidated group. In addition, a complementary method is used which results in reimbursement by profitable affiliates to loss affiliates for tax benefits generated by loss affiliates. At June 30, 2003 and December 31, 2002, the Company had a deferred Federal income tax asset of $5,727,000 and $5,003,000, respectively. Management has concluded that the Federal tax assets are more likely than not to be realized, therefore, no valuation allowance has been provided.

7. Facultative Quota Share Reinsurance Treaty

On October 6, 1999, the Company entered into a Facultative Quota Share Reinsurance Treaty (“Treaty”) with XL Financial Assurance Ltd. (“XLFA”), a Bermuda financial guaranty insurer, which is 86.8% owned by XL Insurance. The remaining 13.2% is owned by Financial Security Assurance Holdings Ltd., an unrelated company. The Treaty was amended and restated on June 22, 2001. Under the terms of this agreement, XLFA agrees to reinsure up to 90% of the Company’s acceptable risks. The Company is allowed a 30% ceding commission on premiums written ceded under the terms of the Treaty.

XL Insurance entered into a reinsurance agreement dated October 6, 1999 with the Company, that unconditionally and irrevocably guarantees the full and complete performance of all obligations of XLFA to the Company under the above described Facultative Quota Share Reinsurance Treaty. In connection with the amendment and restatement of the Treaty, XL Insurance entered into another reinsurance agreement guarantee on June 22, 2001.

The Company entered into a Facultative Master Certificate (the “XL Re Treaty”) with XL RE AM, a New York insurance corporation with Administrative Offices in Stamford, Connecticut and the direct parent of the Company. The XL Re Treaty is effective as of November 1, 2002. Under the terms of the XL Re Treaty, XL RE AM agrees automatically to reinsure risk assumed by the Company under financial guaranty insurance policies up to the amount necessary for the Company to comply with single risk limitations set forth in Section 6904(d) of the New York Insurance Laws. The reinsurance provided by XL RE AM may be on an excess of loss or quota share basis. The Company is allowed a 30% ceding commission on premiums written ceded under the terms of the XL Re Treaty.

EX-99.2

XL FINANCIAL ASSURANCE LTD.
(Incorporated in Bermuda)

CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

FOR THE SIX MONTH PERIODS ENDED
JUNE 30, 2003 AND 2002

XL FINANCIAL ASSURANCE LTD.
CONDENSED BALANCE SHEETs
AS AT JUNE 30, 2003 AND DECEMBER 31, 2002
(UNAUDITED)
(U.S. dollars in thousands, except per share amounts)

	2003 $		2002 $
Assets:
Investments :
Fixed maturities, at fair value
(amortized cost: 2003 - $282,258; 2002 - $273,241)		288,900		279,296
Short-term investments, at fair value
(amortized cost: 2003 - $163,702; 2002 - $76,411)		163,733		76,451
Total investments available for sale		452,633		355,747
Cash and cash equivalents		84,435		125,073
Accrued investment income		2,509		1,926
Reinsurance balances receivable		46,821		21,066
Deferred acquisition costs		34,634		19,324
Prepaid reinsurance premiums		85,877		71,129
Unpaid losses and loss expenses recoverable		6,781		3,678
Amounts due from parent and affiliates		10,432		13,769
Derivative assets		15,410		1,375
Other assets		89		79
Total assets		739,621		613,166
Liabilities, Redeemable Preferred Shares and Shareholders’ Equity
Liabilities:
Accounts payable and accrued liabilities		656		1,139
Derivative liabilities		20,462		17,643
Deferred premium revenue		271,272		188,464
Unpaid losses and loss expenses		28,041		14,064
Reinsurance premiums payable		13,676		23,697
Net payable for investments purchased		1,623		168
Dividend payable on preferred shares		7,608		1,950
Total liabilities		343,338		247,125
Redeemable Preferred Shares:
Redeemable preferred shares (par value of $120 per share;
10,000 shares authorized; 363 issued and outstanding as at
June 30, 2003 and December 31, 2002, respectively)		44		44
Additional paid-in capital		38,956		38,956
Total redeemable preferred shares		39,000		39,000
Shareholders’ Equity:
Common shares (par value of $120 per share;
10,000 shares authorized; 2,057 issued and outstanding as at
June 30, 2003 and December 31, 2002, respectively)		247		247
Additional paid-in capital		220,653		220,653
Accumulated other comprehensive income		6,675		6,095
Retained earnings		129,708		100,046
Total shareholders’ equity		357,283		327,041
Total liabilities, redeemable preferred shares and shareholders’ equity		739,621		613,166

The accompanying notes are an integral part of these condensed financial statements.

XL FINANCIAL ASSURANCE LTD.
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
(U.S. dollars in thousands, except per share amounts)

	Three Months ended June 30,				Six Months ended June 30,
	2003 $		2002 $		2003 $		2002 $
REVENUES :
Net premiums earned		18,924		7,714		32,112		14,484
Net investment income		3,404		5,048		7,474		9,704
Net realized gains on investments		1,731		2,231		2,434		4,028
Net realized and unrealized gains (losses) on    derivative instruments		13, 595		4,169		21,529		13,024
Total revenues		37,654		19,162		63,549		41,240
EXPENSES :
Losses and loss expenses		5,015		1,974		10,876		3,684
Acquisition costs		8,296		4,522		13,763		6,790
Operating expenses		2,825		1,439		3,590		3,201
Total expenses		16,136		7,935		28,229		13,675
NET INCOME		21,518		11,227		35,320		27,565
COMPREHENSIVE INCOME
Net income		21,518		11,227		35,320		27,565
Unrealized (losses) gains		2,635		8,289		3,014		5,048
Less: reclassification for gains realized in income		1,731		2,231		2,434		4,028
Other comprehensive (loss) gain		904		6,058		580		1,020
COMPREHENSIVE INCOME		22,422		17,285		35,900		28,585

            The accompanying notes are an integral part of these condensed financial statements.

XL FINANCIAL ASSURANCE LTD.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2003 AND FOR THE YEAR ENDED
DECEMBER 31, 2002
(UNAUDITED)
(U.S. dollars in thousands, except per share amounts)

	2003			2002
Common Shares – Authorized
Number of shares, beginning of year and period		2,057			2,057
Number of shares, end of year and period		2,057			2,057
		$			$
Common Shares – Issued
Balance - beginning of year and period		247			247
Balance - end of year and period		247			247
Additional Paid-in Capital
Balance - beginning of year and period		220,653			220,653
Balance - end of year and period		220,653			220,653
Accumulated Other Comprehensive Income
Balance - beginning of year and period		6,095			1,998
Net change in unrealized appreciation of investments		580			4,097
Balance - end of year and period		6,675			6,095
Retained Earnings
Balance - beginning of year and period		100,046			37,237
Net income		35,320			69,492
Dividends on preferred shares		(5,658	)		(6,683	)
Balance - end of year and period		129,708			100,046
TOTAL SHAREHOLDERS’ EQUITY		357,283			327,041

            The accompanying notes are an integral part of these condensed financial statements.

XL FINANCIAL ASSURANCE LTD.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
(U.S. dollars in thousands, except per share amounts)

	2003 $			2002 $
Cash flows provided by operating activities:
Net income for the period		35,320			27,565
Adjustments to reconcile net income to net cash provided by operating    activities:
Realized gains on investments		(2,434	)		(4,028	)
Amortization of discount on fixed maturities		(473	)		(517	)
Net realized gains on investment derivatives		(3,999	)		—
Net realized and unrealized losses (gains) on credit derivatives            excluding cash received and paid		(11,217	)		(7,511)
Accrued investment income		(583	)		(178	)
Reinsurance premiums receivable		(25,755	)		(30,254	)
Deferred acquisition costs		(15,310	)		(1,513	)
Prepaid reinsurance premiums		(14,748	)		(34,407	)
Unpaid losses and loss expenses recoverable		(3,103	)		(1,603	)
Amounts due from parent and affiliates		3,337			(7,824	)
Accounts payable and accrued liabilities		(483	)		(867	)
Reinsurance premiums payable		(10,021	)		20,487
Deferred premium revenue		82,808			65,452
Unpaid losses and loss expenses		13,977			7,123
Other assets and liabilities		(10	)		(18	)
Total adjustments		11,986			4,342
Net cash provided by operating activities		47,306			31,907
Cash flows used in investing activities:
Proceeds from sale of fixed maturities and short-term investments		140,526			1,040,503
Proceeds from redemption of fixed maturities and short-term investments		3,252,914			19,663
Purchase of fixed maturities and short-term investments		(3,481,384	)		(1,080,341	)
Net cash used in investing activities		(87,944	)		(20,175	)
Increase (decrease) in Cash and Cash Equivalents		(40,638	)		11,732
Cash and Cash Equivalents – Beginning of period		125,073			50,243
Cash and Cash Equivalents – End of period		84,435			61,975

            The accompanying notes are an integral part of these condensed financial statements.

XL FINANCIAL ASSURANCE LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR SIX MONTH PERIODS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
(U.S. dollars in thousands, except per share amounts)

1. Organization and Business

XL Financial Assurance Ltd. (the “Company”) was incorporated with limited liability under the Bermuda Companies Act 1981 on October 14, 1998 and is registered as a Class 3 insurer under The Insurance Act 1978, amendments thereto and related regulations (“The Act”). At March 31, 2003 and December 31, 2002, the Company was approximately 85% owned by XL Insurance (Bermuda) Ltd (a wholly-owned subsidiary of XL Capital Ltd); 6% by Financial Security Assurance Inc. (a wholly-owned subsidiary of Financial Security Assurance Holdings Ltd.) and 9% by Financial Security Assurance International Ltd. (owned 20% by XL Insurance (Bermuda) Ltd and 80% by Financial Security Assurance Inc.). The Company is an integral part of a joint venture agreement between XL Capital Ltd and Financial Security Assurance Holdings Ltd.

The Company is primarily engaged in the business of providing reinsurance of financial guaranties on asset-backed and municipal obligations underwritten by XL Insurance (Bermuda) Ltd, Financial Security Assurance Inc. and XL Capital Assurance Inc. (a wholly-owned subsidiary of XL Capital Ltd) and other monoline and multiline insurance companies. This may be in the form of traditional financial guaranty insurance or via a credit default swap execution. The Company’s underwriting policy is to provide reinsurance of asset-backed and municipal obligations that would be of a lower investment-grade quality without the benefit of the Company’s reinsurance. The asset-backed obligations reinsured by the Company are generally issued in structured transactions and are backed by pools of assets such as residential mortgage loans, consumer or trade receivables, securities or other assets having ascertainable cash flows or market value. The municipal obligations reinsured by the Compan y consist primarily of general obligation bonds that are supported by the issuers’ taxing power and of special revenue bonds and other special obligations of states and local governments that are supported by the issuers’ ability to impose and collect fees and charges for public services or specific projects. Reinsurance written by the Company guarantees payment when due of scheduled payments on an issuers’ obligation. In the case of a payment default on an insured obligation, the Company is generally required to pay the principal, interest or other such amounts due in accordance with the obligations’ original payment schedule or, at its option, to pay such amounts on an accelerated basis. The Company conducts surveillance on its exposures to try and ensure early identification of any loss events. In addition, in the normal course of business, the Company seeks to reduce the loss that may arise from such events by reinsuring certain levels of risks in various areas of exposure with other insurance enterprises or reinsurers.

On October 6, 1999, the Company entered into a Facultative Quota Share Reinsurance Treaty (“Treaty”) with XL Capital Assurance Inc. (“XLCA”). The Treaty was amended and restated on June 22, 2001. Under the terms of this Treaty, the Company agrees to reinsure up to 90% of XLCA’s compliant risks. The Company is subject to ceding commissions of up to 30% on business assumed under the terms of this Treaty.

On December 6, 2000, the Company entered into an excess of loss agreement, which reinsures 100% of net incurred losses in excess of $250 million up to a limit of liability of $100 million. On June 30, the Company terminated the agreement which reinsures 100% of net incurred losses in excess of $250 million up to a limit of liability of $100 million. On October 3, 2001, the Company entered into an excess of loss reinsurance agreement with XL Insurance (Bermuda) Ltd, which indemnifies the Company up to an aggregate limit of liability of $500 million in excess of defined obligor losses.

2. Significant Accounting Policies

Basis of Preparation

The accompanying condensed financial statements have been prepared by the Company and are unaudited. In the opinion of management, all adjustments, which include only normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows at June 30, 2003 and for all periods presented, have been made.

XL FINANCIAL ASSURANCE LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR SIX MONTH PERIODS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
(U.S. dollars in thousands, except per share amounts)

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These statements should be read in conjunction with the Company’s December 31, 2002 financial statements and notes thereto. The year-end condensed balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the periods ended June 30, 2003 and 2002 are not necessarily indicative of the operating results for the full year.

The preparation of condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Any such adjustments are reflected in income in the period in which the adjustments are made. The financial statement estimates subject to most uncertainty are estimates for loss reserves and calculation of the fair value of credit default swap instruments.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Recent Accounting Pronouncements

In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS No. 149”). SFAS No. 149 is intended to amend and clarify financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under Statement 133 by requiring that contracts with comparable characteristics be accounted for similarly. SFAS No. 149 also clarifies the scope exception paragraph of Statement 133 for certain financial guarantee contracts. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. The provisions of this Statement that relate to Statement 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003 should continue to be applied in accordance with their respective effective dates. The Company does not believe the adoption of SFAS No. 149 will have a material effect on our financial position, results of operations or cash flows.

In January 2003, FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). The objective of FIN 46 is to improve financial reporting by companies involved with variable interest entities. This new model for consolidation applies to an entity which either (1) the powers or rights of the equity holders do not give them sufficient decision making powers or (2) the equity investment at risk is insufficient to finance that entity’s activities without receiving additional subordinated financial support from other parties. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requir ements apply to older entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The effect of adoption of this standard on the Company’s financial condition has been evaluated and there is no impact.

In December 2002, the Financial Accounting Statements Board (“FASB”) issued FAS 148, “Accounting for Stock-Based Compensation - Transition and Disclosure”. FAS 148 amends FAS 123, “Accounting for Stock-Based

XL FINANCIAL ASSURANCE LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR SIX MONTH PERIODS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
(U.S. dollars in thousands, except per share amounts)

Compensation,” by providing alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, FAS 148 amends the disclosure requirements of FAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company’s ultimate parent, XL Capital Ltd, recorded option expense for options granted on behalf of its subsidiaries subsequent to January 1, 2003, in accordance with SFAS No. 123, as amended by SFAS No. 148. The effect of the adoption of SFAS No. 148 on the Company for the first six months of 2003 was not significant.

3. Derivative Instruments

Credit default swaps issued by the Company meet the definition of a derivative under FAS 133. The Company has recorded these products at fair value, modeled on prevailing market conditions and certain other factors relating to the structure of the transaction. The Company considers credit default swaps to be, in substance, financial guaranty contracts as the Company has the intent to hold them to maturity. The change resulting from movement in credit spreads is unrealized as the credit default swaps are not traded to realize this value and is included in net unrealized gains and losses on derivatives. Other elements of the change in fair value are based on pricing established at the inception of the contact.

Credit default swaps generally enhance a synthetic portfolio of securities. The credit ratings of the underlying securities vary and a single rating is calculated for the portfolio at the inception of the transaction by an independent agency. In order to effectively price and market the transaction, different tranches are modeled for the purpose of assigning credit ratings based upon the level of subordination. Generally, a primary layer is created to enable the originator of the transaction to participate in the risk. The Company generally participates in senior or rated tranches of a risk. The Company has not participated in any primary layers.

The rated tranches are fair valued using changes in credit spreads to reflect current market conditions. The Company will also consider the characteristics and credit ratings of the underlying portfolio in order to apply the model to obtain an estimate of fair value. The change in fair value recorded for the rated tranches as of June 30, 2003 and 2002 was a gain of $11,217 and $7,511 respectively.

The Company’s credit default swap portfolio generally requires the Company to meet payment obligations for referenced credits within the portfolio in the event of specific credit events after erosion or exhaustion of various first loss protection levels. These credit events are contract specific, but generally cover bankruptcy, failure to pay and repudiation.

4. Variable Interest Entities

The Company utilizes variable interest entities (as defined in FIN 46) indirectly in the ordinary course of the Company’s business. The obligations related to these transactions are often securitized through variable interest entities. The Company only provides financial guaranty reinsurance or enters into a credit default swap on the senior interests that would otherwise be rated investment grade. The Company does not hold any equity positions or subordinated debt in these arrangements. Accordingly, the Company does not consider its participation to be a significant variable interest in the entity and therefore these variable interest entities are not expected to be consolidated.

XL FINANCIAL ASSURANCE LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR SIX MONTH PERIODS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)
(U.S. dollars in thousands, except per share amounts)

5. Reinsurance

The effect of reinsurance on premiums written and earned for the three month periods ended June 30, 2003 and 2002 is shown below:

	Assumed $		Ceded $			Net $
Three months ended June 30, 2003
Premium written		88,756		(19,080	)		69,676
Premium earned		24,451		(5,527	)		18,924
Losses and loss adjustment expenses		6,375		(1,360	)		5,015
Three months ended June 30, 2002
Premium written		69,382		(35,584	)		33,798
Premium earned		15,035		(7,321	)		7,714
Losses and loss adjustment expenses		2,262		(288	)		1,974
Six months ended June 30, 2003
Premium written		127,549		(27,378	)		100,171
Premium earned		44,741		(12,629	)		32,112
Losses and loss adjustment expenses		13,977		(3,101	)		10,876
Six months ended June 30, 2002
Premium written		86,150		(40,622	)		45,528
Premium earned		21,168		(6,684	)		14,484
Losses and loss adjustment expenses		5,171		(1,487	)		3,684

EX-99.3

DECLARATION OF TRUST

OF

MANGROVE BAY PASS-THROUGH TRUST

Dated as of May 22, 2003

TABLE OF CONTENTS

		Page
ARTICLE 1	INTERPRETATION AND DEFINITIONS	1
SECTION 1.1	Definitions	1
ARTICLE 2	CERTAIN RIGHTS OF HOLDERS	7
SECTION 2.1	Trust Indenture Act; Application	7
SECTION 2.2	Lists of Holders of Pass-Through Securities	7
SECTION 2.3	Reports by the Trustee	7
ARTICLE 3	ORGANIZATION	7
SECTION 3.1	Name	7
SECTION 3.2	Office	8
SECTION 3.3	Nature and Purpose of the Trust	8
SECTION 3.4	Authority	8
SECTION 3.5	Powers and Duties of the Trustee	8
SECTION 3.6	Certain Responsibilities of the Trustee	11
SECTION 3.7	Certain Rights of Trustee	12
SECTION 3.8	Prohibition of Actions by the Trust and the Trustee	15
SECTION 3.9	Execution of Documents	16
SECTION 3.10	No Representations of Trustee	16
SECTION 3.11	Duration of Trust	16
SECTION 3.12	Mergers	16
SECTION 3.13	Limitation on Directions to Trustee	16
ARTICLE 4	RESPONSIBILITIES OF THE INITIAL PURCHASER	16
SECTION 4.1	Responsibilities of the Initial Purchaser	16
ARTICLE 5	TRUSTEES	17
SECTION 5.1	Trustee; Eligibility	17
SECTION 5.2	Appointment, Removal and Resignation of Trustees	18
SECTION 5.3	Delegation of Power	20
SECTION 5.4	Merger, Conversion, Consolidation or Succession to
	Business	20
ARTICLE 6	TERMS OF PASS THROUGH SECURITIES	20

i

TABLE OF CONTENTS

	(continued)
		Page
SECTION 6.1	Authorization and Designation of Pass-Through
	Securities	20
SECTION 6.2	No Preemptive Rights	21
SECTION 6.3	Status of Pass-Through Securities	21
SECTION 6.4	CUSIP Numbers	22
SECTION 6.5	Distributions	22
ARTICLE 7	ACCOUNTING AND RECORDS	22
SECTION 7.1	Annual Tax Information	22
SECTION 7.2	Outside Advisors	23
SECTION 7.3	Certain Accounting Matters	23
ARTICLE 8	DISSOLUTION AND TERMINATION; LIQUIDATION;
	REDEMPTION	23
SECTION 8.1	Dissolution and Termination of the Trust	23
SECTION 8.2	Liquidation; Redemption	23
ARTICLE 9	TRANSFER OF PASS-THROUGH SECURITIES	25
SECTION 9.1	Restrictions on Transfer of Pass-Through Securities	25
SECTION 9.2	Transfer of Certificates	26
SECTION 9.3	Deemed Security Holders	27
SECTION 9.4	Book Entry Interests	27
SECTION 9.5	Notices to Clearing Agency	27
SECTION 9.6	Appointment of Successor Clearing Agency	28
SECTION 9.7	Mutilated, Destroyed, Lost or Stolen Certificates	28
ARTICLE 10	LIMITATION OF LIABILITY OF HOLDERS, THE
	TRUSTEE, THE DELAWARE TRUSTEE OR OTHERS	28
SECTION 10.1	Liability	28
SECTION 10.2	Outside Businesses	29
ARTICLE 11	VOTING, AMENDMENTS AND MEETINGS	29
SECTION 11.1	General	29
SECTION 11.2	Voting	30
SECTION 11.3	Amendments	30

ii

TABLE OF CONTENTS

	(continued)
		Page
SECTION 11.4	Other Matters	31
SECTION 11.5	Meetings of the Holders	31
ARTICLE 12	REPRESENTATIONS OF THE TRUSTEE AND THE
	DELAWARE TRUSTEE	32
SECTION 12.1	Representations and Warranties of the Trustee	32
SECTION 12.2	Representations and Warranties of Delaware Trustee	33
ARTICLE 13	MISCELLANEOUS	34
SECTION 13.1	Notices	34
SECTION 13.2	GOVERNING LAW	35
SECTION 13.3	Change in Law	35
SECTION 13.4	Headings	36
SECTION 13.5	Successors and Assigns	36
SECTION 13.6	Partial Enforceability	36
SECTION 13.7	Counterparts	36

iii

DECLARATION OF TRUST

OF

Mangrove Bay Pass-Through Trust

     This Declaration of Trust (as amended, modified or supplemented from time to time, this “Declaration”) is dated as of May 22, 2003, among Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation (as the “Initial Purchaser”) and The Bank of New York (Delaware), a Delaware banking corporation (in its capacity as trustee, the “Trustee”).

     WHEREAS, the parties hereto desire to establish a trust pursuant to the Statutory Trust Act (as defined herein) for the sole purpose of issuing and selling Pass-Through Securities (as defined herein) representing undivided beneficial interests in the property of the Trust and investing the proceeds received from the sale of its Pass-Through Securities in ABC Securities (as defined herein); and

     NOW, THEREFORE, it being the intention of the parties hereto that the Trust constitute a statutory trust under the Statutory Trust Act and that this Declaration constitute the governing instrument of such statutory trust, the Trustee declares that all assets contributed to the Trust will be held in trust for the benefit of the Holders (as defined herein), from time to time, of the Pass-Through Securities representing undivided beneficial interests in the property of the Trust, subject to the provisions of this Declaration.

ARTICLE 1

INTERPRETATION AND DEFINITIONS

     SECTION 1.1 Definitions. Unless the context otherwise requires:

     (a) capitalized terms used in this Declaration have the respective meanings assigned to them in this Section 1.1;

     (b) a term defined anywhere in this Declaration has the same meaning throughout;

     (c) all references to “the Declaration” or “this Declaration” are to this Declaration of Trust as modified, supplemented or amended from time to time, together with all Exhibits, each of which is incorporated herein by reference;

     (d) all references in this Declaration to Articles, Sections and Exhibits are to Articles and Sections of, and Exhibits to, this Declaration, unless otherwise specified;

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     (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires;

     (f) a reference to the singular includes the plural and vice versa; and

     (g) the following terms have the following meanings:

     “ABC Declaration” means the declaration of trust for the ABC Trust, dated as of the date hereof, among The Bank of New York (Delaware), as trustee, GSS Holdings II, Inc., as tax matters partner, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial purchaser, as the same may be amended from time to time.

     “ABC Securities” means the Asset-Backed Capital Commitment Securities issued by, and each representing an undivided beneficial interest in the property of, the ABC Trust.

     “ABC Trust” means Mangrove Bay Trust, a Delaware statutory trust, formed pursuant to the ABC Declaration.

     “ABC Trustee” means the trustee under the ABC Declaration, which initially is The Bank of New York (Delaware), not in its individual capacity but solely as trustee of the ABC Trust.

     “Affiliate” with respect to a specified Person, means any other Person that directly or indirectly controls, is controlled by, or is under common control with, such specified Person. For the purposes of this definition, “control”, when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or otherwise; and the terms “controlling”, “controlled” and “under common control with” have meanings correlative to the foregoing.

     “Appreciation Account” has the meaning given to such term in the ABC Declaration.

     “Asset Master Agreement” means the ISDA Master Agreement (including the Schedule and Credit Support Annex related thereto, the Confirmations and certain other related documents), dated as of July 11, 2003, between the Asset Swap Counterparty, the ABC Trust and, for certain limited purposes, the Grantor, as the same may be amended or restated from time to time.

     “Asset Put Option Agreement” has the meaning given to such term in the Schedule to the Asset Master Agreement.

     “Asset Swap Arrangement” means, collectively, the Collateral Agreement, the Asset Put Option Agreement, the Guarantee and the Asset Master Agreement, and any swap agreement subsequently entered into between the ABC Trust

E-2

and a replacement asset swap counterparty, in each case, as the same may be amended or restated from time to time.

     “Asset Swap Counterparty” means, initially, Merrill Lynch International, or any replacement asset swap counterparty appointed in accordance with Section 13.7 of the ABC Declaration.

     “Asset Swap Guarantor” means Merrill Lynch Derivative Products AG.

     “Beneficial Owner” means, with respect to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, or in each case in accordance with the rules of such Clearing Agency).

     “Book Entry Interest” means a beneficial interest in a Global Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as set forth in Section 9.4 of this Declaration.

     “Business Day” means a day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or any other day on which banks in New York, New York, London, England or Bermuda are authorized or obligated by law to close or are closed for business due to an act of God, natural disaster, act of war, civil or military disturbance, act of terrorism, sabotage, riots or a loss or malfunction of utilities or communications services or the distribution payable on such date may not be paid for any such reason.

     “Ceding Insurer” means XL Reinsurance America, Inc., a New York corporation.

     “Certificate” means a certificate representing a Pass-Through Security and in the form attached hereto as Exhibit A.

     “Certificate of Designation” means the Certificate of Designation creating, and describing the terms of, the Pass-Through Securities, attached hereto as Exhibit B.

     “Class I Indemnified Person” has the meaning set forth in Section 10.1(c) of this Declaration.

     “Class II Indemnified Person” has the meaning set forth in Section 10.1(c) of this Declaration.

     “Clearing Agency” means an organization registered as a “Clearing Agency” pursuant to Section 17A of the Exchange Act that is acting as depository for the Pass-Through Securities and in whose name or in whose nominee’s name shall be

E-3

registered a Global Certificate and which shall undertake to effect book entry transfers and pledges of beneficial interests in the Pass-Through Securities and, initially, is DTC.

     “Clearing Agency Participant” means a broker, dealer, bank, other financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of interests in securities deposited with the Clearing Agency.

     “Code” means the U.S. Internal Revenue Code of 1986, as amended, or any successor legislation, and the rules and regulations promulgated thereunder.

     “Collateral Agreement” means the Third Amended and Restated Intermediation and Security Agreement, dated as of April 1, 1996, between the Asset Swap Counterparty and the Asset Swap Guarantor, as the same may be amended from time to time.

     “Commission” means the United States Securities and Exchange Commission.

     “Confirmation” or “Confirmations” means, initially, the swap confirmation, dated July 11, 2003, from the Asset Swap Counterparty to the ABC Trust, and each additional swap confirmation from the Asset Swap Counterparty to the ABC Trust with respect to each Eligible Asset acquired by the Regulation 114 Trust or deposited in the Appreciation Account.

     “Corporate Trust Office” means the principal corporate trust office of the Delaware Trustee located in Newark, Delaware.

     “Declaration” has the meaning set forth in the preamble hereto.

     “Default” means the failure of the ABC Trust to pay distributions on the ABC Securities when such distributions are due pursuant to the ABC Declaration or to any agreements to which the ABC Trust is a party.

     “Delaware Trustee” means a trustee required to be appointed pursuant to Section 3807(a) of the Statutory Trust Act, which shall initially be The Bank of New York (Delaware), not in its individual capacity but solely as Delaware trustee to the Trust.

     “Distribution” means a payment made by the Trust to a Holder.

     “Distribution Date” means, during the Fixed Rate Period, January 15 and July 15 in each year, and, during the Floating Rate Period, January 15, April 15, July 15 and October 15 in each year, provided that if any such day is not a Business Day, the respective Distribution will be paid on the first succeeding Business Day.

E-4

     “DTC” means The Depository Trust Company, the initial Clearing Agency.

     “Eligible Asset” has the meaning given to such term in the Asset Swap Arrangement.

     “Eligible Investment Program” has the meaning set forth in Section 8.2(d) of this Declaration.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor legislation, and the rules and regulations promulgated thereunder.

     “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, or any successor legislation, and the rules and regulations promulgated thereunder.

     “Fiscal Year” means the calendar year or such other period as required by the Code.

     “Fixed Rate Payment” shall have the meaning given to such term in the Rate Swap Arrangement.

     “Fixed Rate Period” shall have the meaning given to such term in the Certificate of Designation.

     “Floating Rate Payment” shall have the meaning given to such term in the Asset Swap Arrangement.

     “Floating Rate Period” shall have the meaning given to such term in the Certificate of Designation.

     “Global Certificate” has the meaning set forth in Section 9.4 of this Declaration.

     “Grantor” means XL Re Ltd, a company organized under the laws of Bermuda and a wholly-owned subsidiary of the Put Counterparty.

     “Holder” means a Person in whose name a Pass-Through Security is registered on the books and records of the Trust.

     “Initial Purchaser” has the meaning set forth in the preamble hereto, or any successor entity in a merger, consolidation or amalgamation, in its capacity as initial purchaser of the Pass-Through Securities.

     “Investment Company” means an investment company as defined in the 1940 Act.

E-5

     “Legal Action” has the meaning set forth in Section 3.5(a)(ix) of this Declaration.

     “Liquidation Shareholders Meeting” has the meaning assigned thereto in the ABC Declaration.

     “List of Holders” has the meaning set forth in Section 2.2(a) of this Declaration.

     “Majority in Face Amount” means Holders of outstanding Pass-Through Securities of the Trust who are the record owners of more than 50% of the aggregate face amount of all of the then outstanding Pass-Through Securities.

     “Moody’s” means Moody’s Investors Service, Inc., or any successor thereto.

     “1940 Act” means the U.S. Investment Company Act of 1940, as amended, or any successor legislation, and the rules and regulations promulgated thereunder.

     “Officer’s Certificate” means, with respect to any Person (that is not an individual), a certificate signed by the Chairman of the Board, the President, a Vice President, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of such Person and, if such Person is a trust, any trustee of the trust. Any Officer’s Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include:

     (a) a statement that each officer signing the Officer’s Certificate has read the covenant or condition and the definitions relating thereto;

     (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officer’s Certificate;

     (c) a statement that each such officer has made such examination or investigation as, in such officer’s opinion, is reasonably necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and

     (d) a statement as to whether, to the best knowledge of each such officer, such condition or covenant has been complied with.

     “Pass-Through Securities” means the Asset-Backed Capital Commitment Pass-Through Securities issued by, and each representing an undivided beneficial interest in the property of, the Trust. The parties to this Declaration intend that

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the Pass-Through Securities be treated as equity securities for all purposes under Delaware law.

     “Paying Agent” has the meaning set forth in Section 3.5(d) of this Declaration.

     “Person” means a legal person, including any individual, corporation, association, partnership (general or limited), joint venture, trust, estate, limited liability company, or other legal entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

     “Pro Rata” means, unless the context otherwise requires, in reference to any Distributions on the Pass-Through Securities, pro rata to each Holder according to the aggregate face amount of Pass-Through Securities held by the relevant Holder in relation to the aggregate face amount of all Pass-Through Securities outstanding at the relevant time.

     “Purchase Agreement” means the purchase agreement, dated July 3, 2003, among the Put Counterparty, the Trust, the ABC Trust and the Initial Purchaser.

     “Put Agreement” means the Put Option Agreement, dated as of July 11, 2003, between the ABC Trust and the Put Counterparty, as the same may be amended from time to time.

     “Put Counterparty” means XL Capital Ltd, a Cayman Islands exempted limited company.

     “Put Option Premium” has the meaning given to such term in the Put Agreement.

     “Rate Swap Arrangement” means, collectively, the ISDA Master Agreement (and the Schedule thereto) and a confirmation, each dated as of July 11, 2003, between the ABC Trust and the Put Counterparty, substantially in the form attached as Exhibit H to the ABC Declaration, as the same may be amended from time to time.

     “Regulation 114 Trust” means the trust established on July 11, 2003 by the Grantor for the benefit of XL Reinsurance America, Inc. pursuant to Regulation 114 of the New York Insurance Department.

     “Responsible Officer” means, with respect to the Delaware Trustee and the Trustee, any vice president (whether or not designated by a number or a word or words added before or after the title “vice president”), the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, or any other officer of the Delaware Trustee or the Trustee, as appropriate, customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or

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her knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Declaration.

     “Securities Act” means the U.S. Securities Act of 1933, as amended, or any successor legislation, and the rules and regulations promulgated thereunder.

     “Standard & Poor’s” means Standard & Poor’s Ratings Services, or any successor thereto.

     “Statutory Trust Act” means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801 et seq., as it may be amended from time to time, or any successor legislation, and any rules or regulations promulgated thereunder.

     “Successor Trustee” has the meaning set forth in Section 5.2(a)(i) of this Declaration.

     “Transfer” means to sell, convey, assign, transfer, create, grant a lien upon and a security interest in and right of setoff against, deposit, set over and contribute to the Trustee pursuant to this Declaration.

     “Transfer Agent” has the meaning set forth in Section 3.5(a)(xiv) of this Declaration.

     “Trust” means the Mangrove Bay Pass-Through Trust, a Delaware statutory trust.

     “Trust Documents” means, collectively, the Declaration, the Certificate of Designation and the Purchase Agreement.

     “Trustee” means, initially, The Bank of New York (Delaware), not in its individual capacity but solely as trustee of the Trust and also means any successor thereto that meets the eligibility requirements set forth in Section 5.1 of this Declaration.

     “Trust Indenture Act” means the U.S. Trust Indenture Act of 1939, as amended from time to time, or any successor legislation, and any rules or regulations promulgated thereunder.

     “Trust Property” means, as of any particular time, any and all property which shall have been transferred, conveyed or paid to the Trust or the Trustee (in its capacity as such) on behalf thereof, and all interest thereon, and which at such time are owned or held by, or for the account of, the Trust or the Trustee on behalf thereof.

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ARTICLE 2

CERTAIN RIGHTS OF HOLDERS

     SECTION 2.1 Trust Indenture Act; Application. This Declaration is not subject to the provisions of the Trust Indenture Act. References herein to the Trust Indenture Act are solely for the contractual benefit of the parties hereto.

     SECTION 2.2 Lists of Holders of Pass-Through Securities. (a) The Transfer Agent (if the Trustee is not acting in such capacity) shall provide the Trustee (i) within 14 days after each record date for payment of a Distribution on the Pass-Through Securities, a list, in such form as the Trustee may reasonably require, of the names and addresses of the registered Holders of such Pass-Through Securities (“List of Holders”) as of such record date; provided, however, that the Transfer Agent shall not be obligated to provide such List of Holders if at any time the List of Holders does not differ from the most recent List of Holders given to the Trustee by the Transfer Agent; but, in such circumstances, the Transfer Agent shall notify the Trustee that the List of Holders does not differ, and (ii) a List of Holders at any time the Trustee requests a List of Holders, which List of Holders shall be provided to the Trustee by the Transfer Agent within 10 days of the Trustee delivering a written request for the List of Holders to the Transfer Agent, and the information on the list shall be no more than 14 days old on the date it is delivered to the Trustee. The Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in any List of Holders given to it or which it receives in its capacity as Paying Agent (if acting in such capacity); provided, however, that the Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders.

     (b) The Trustee shall comply with the requirements of Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act (see Exhibit E), as if the Trust Indenture Act applied to this Declaration.

     SECTION 2.3 Reports by the Trustee. Within 60 days after each May 15, commencing May 15, 2004, the Trustee shall provide to the Holders such reports as are required by Sections 313(a), 313(b) and 313(c) of the Trust Indenture Act (see Exhibit E), if any, in the form and in the manner provided by Sections 313(a), 313(b) and 313(c) of the Trust Indenture Act, as if the Trust Indenture Act applied to this Declaration.

ARTICLE 3

ORGANIZATION

     SECTION 3.1 Name. The Trust is named “Mangrove Bay Pass-Through Trust” as such name may be modified from time to time by the Trustee following written notice to the Holders. The Trust’s activities may be conducted under the name of the Trust, or any other name deemed advisable by the Trustee.

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     SECTION 3.2 Office. The address of the principal office of the Trust is c/o The Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711. On ten (10) Business Days’ prior written notice to the Holders, the Trustee may designate another principal office.

     SECTION 3.3 Nature and Purpose of the Trust. (a) The Trust shall be a “statutory trust” as defined in the Statutory Trust Act. Except as provided herein, the Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for U.S. federal income tax purposes as a grantor trust.

     (b) The exclusive purposes and functions of the Trust are to:

     (i) issue and sell the Pass-Through Securities having an initial aggregate face amount of $500,000,000 with an issue price and face amount of $1,000 per security;

     (ii) use the gross proceeds received from the issuance and sale of the Pass-Through Securities to purchase ABC Securities having an initial aggregate face amount of $500,000,000 from the ABC Trust;

     (iii) distribute to the Holders of the Pass-Through Securities all amounts received by the Pass-Through Trust from the ABC Trust on the ABC Securities, net of any fees and expenses, and if such distributions are not made immediately, investing such amounts in an overnight or sweep account for the benefit of the Holders;

     (iv) except as otherwise set forth herein, engage in only those other activities necessary or incidental thereto to conduct its business as described herein; and

     (v) to enter into and perform its obligations under the Trust Documents and any other documents or agreements to which the Trust is a party.

     SECTION 3.4 Authority. Subject to the limitations provided in this Declaration, the Trustee shall have authority to take all actions reasonably required to carry out the purposes of the Trust as set forth in Section 3.3. An action taken by the Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustee acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustee to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustee as set forth in this Declaration.

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 SECTION 3.5 Powers and Duties of the Trustee.

     (a) In furtherance of and not in limitation of the purposes of the Trust as provided for in Section 3.3(b), the Trustee shall have the power and authority to cause the Trust to engage in the following activities:

     (i) to issue and sell up to $500,000,000 aggregate face amount of the Pass-Through Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one class of Pass-Through Securities; and, provided further, that there shall be no interests in the Trust other than the Pass-Through Securities;

     (ii) to use the proceeds received from the issuance and sale of the Pass-Through Securities to purchase ABC Securities having an initial aggregate face amount of $500,000,000;

     (iii) to establish a record date with respect to all actions to be taken hereunder that require a record date to be established, including with respect to Distributions, voting rights, exchanges and distributions in connection with any liquidation of the Trust, and to issue relevant notices to Holders as to such actions and applicable record dates;

     (iv) to give prompt written notice to Holders of any Default, upon a Responsible Officer receiving actual or written notice of such Default;

     (v) to give prompt written notice to Holders of any failure by the Put Counterparty to pay the Put Option Premium on the scheduled due date for such payment, upon receipt by a Responsible Officer of actual or written notice of such failure;

     (vi) to give prompt written notice to Holders of any failure by the Put Counterparty to make a required payment under the Rate Swap Arrangement when due, upon receipt by a Responsible Officer of actual or written notice of such failure;

     (vii) to give prompt written notice, substantially in the form attached hereto as Exhibit C, to Holders of any written notice received from the ABC Trustee regarding the Put Counterparty’s intention to exercise its rights under the Put Agreement or of any deemed automatic exercise of the Put Agreement, in full or in part;

     (viii) to give prompt written notice to Holders of any failure by the Asset Swap Counterparty to make a required payment under the Asset Swap Arrangement when due, upon receipt by a Responsible Officer of actual or written notice of such failure;

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     (ix) at the written instruction of the Initial Purchaser or the Holders, to bring or defend, pay from the Trust Property, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust (“Legal Action”);

     (x) to take all actions and perform such duties as may be required of the Trustee pursuant to the terms of the Pass-Through Securities;

     (xi) to employ or otherwise engage agents, managers, contractors, advisors and consultants and to pay from the Trust Property reasonable compensation for such services;

     (xii) to establish and maintain trust accounts in the name of and under the exclusive control of the Trustee on behalf of the Trust and the Holders to hold payments and distributions received in respect of the Trust Property which may not be immediately distributed and to distribute such amounts to the Holders as soon as practicable thereafter and to invest any amounts on deposit in any such accounts in accordance with the terms of this Agreement;

     (xiii) to incur reasonable expenses that are reasonably necessary or incidental to carry out any of the purposes of the Trust described in Section 3.3 and the Trustee’s duties set forth herein and to provide notice to the Put Counterparty of such expenses in accordance with the Put Agreement;

     (xiv) to act as, or appoint another Person to act as, registrar and transfer agent (the “Transfer Agent,” initially the Trustee) for the Trust. Any Transfer Agent may be removed by the Trustee at any time and a successor Transfer Agent or additional Transfer Agents may be appointed at any time by the Trustee;

     (xv) to execute and deliver the Trust Documents, and to perform its obligations and exercise and enforce its rights thereunder;

     (xvi) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing, as the Initial Purchaser may direct in writing;

     (xvii) to take any action that may be necessary or appropriate for the preservation and the continuation of the Trust’s valid existence, rights, franchises and privileges as a statutory trust under the laws of the State of Delaware;

     (xviii) to take any action or refrain from any action so long as such action or inaction is not in violation of this Declaration or with applicable law, and as instructed in writing by the Initial Purchaser, in carrying out the activities of the Trust as set out in this Section 3.5; and

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     (xix) to take any action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed on behalf of the Trust.

     (b) Legal title to all assets of the Trust shall be vested at all times in the Trust, except where applicable law in any jurisdiction requires title to any part of the assets to be vested in a trustee or trustees, in which case legal title shall be deemed to be vested in the trustee or co-trustee appointed hereunder for such purpose. None of the Holders shall have legal title to any part of the assets of the Trust, but shall have an undivided beneficial ownership interest in the assets of the Trust.

     (c) The Trustee shall take all actions and perform such duties as may be required of the Trustee as it may be directed from time to time in writing by the Initial Purchaser or a Majority in Face Amount (except for actions that require a different threshold in accordance with the terms of this Declaration, in which case such threshold) of the Holders, where appropriate, to protect the interests of the Trust and the Holders.

     (d) The Trustee may authorize one or more Persons (each, a “Paying Agent” and, initially, the Trustee) to pay Distributions or redemption or liquidation payments with respect to the Pass-Through Securities. Any Paying Agent may be removed by the Trustee, the Initial Purchaser or a Majority in Face Amount at any time, and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Trustee.

     (e) The Trustee shall continue to serve as a trustee until either:

(i)	the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders pursuant to the terms of the Pass-Through Securities; or
(ii)	a Successor Trustee has been appointed and has accepted that appointment in accordance with Section 5.2.

     (f) Notwithstanding any other provision herein or elsewhere, the Trustee shall not have any duty or obligation to manage, control, use, make any payment in respect of, register, record, insure, inspect, sell, dispose of or otherwise deal with the Trust Property or to otherwise take or refrain from taking any action under, or in connection with, this Declaration or any other document to which the Trust is a party, except for (i) duties expressly required to be performed by the Trustee by the terms of this Declaration or in accordance with written instructions from the Initial Purchaser or a Majority in Face Amount (except where a different threshold is required in accordance with the terms of this Declaration, in which case such threshold) or any other person authorized to instruct the Trustee hereunder and (ii) duties required to be performed by the Trust by any Trust Document.

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     Reasonable expenses incurred by the Trustee necessary for exercising its powers and fulfilling its duties pursuant to this Declaration shall be reimbursed out of the assets of the Trust.

     The Trustee shall exercise the powers set forth in this Section 3.5 in a manner that is consistent with the purposes and intentions of the Trust set forth in Section 3.3, and the Trustee shall not take, nor shall the Holders or the Initial Purchaser instruct the Trustee to take, any action that is inconsistent with the purposes and intentions of the Trust set forth in Section 3.3. Any action inconsistent with the purposes and intentions of the Trust as set forth in Section 3.3 shall be of no effect and shall not bind the Trust.

     SECTION 3.6 Certain Responsibilities of the Trustee. (a) No provision of this Declaration shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, bad faith or willful misconduct, except that:

     (i) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

     (ii) subject to the requirement of the Trustee being provided with an opinion of counsel as set forth in Sections 11.3(b)(i), the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in Face Amount of the Pass-Through Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Declaration;

     (iii) no provision of this Declaration shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or protection from such liability is not reasonably assured to it under the terms of this Declaration or indemnity reasonably satisfactory to the Trustee against such risk or liability is not reasonably assured to it;

     (iv) the Trustee’s sole duty with respect to the custody, safe keeping and physical preservation of Trust Property shall be to deal with such property in a similar manner as the Trustee deals with similar property for its own account, subject to the protections, benefits, privileges, immunities and limitations on liability afforded to the Trustee under this Declaration; and

     (v) the Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Trust Property or the payment of any taxes or assessments levied thereon or in connection therewith or for or in respect of the validity or sufficiency of the documents to which the

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Trust or the Trustee is a party and the Trustee shall in no event assume or incur any liability, duty or obligation to any Person other than as expressly provided for herein; and

     (b) In no event shall the Trustee or the Delaware Trustee, if any, be personally liable (i) for special, consequential or punitive damages, (ii) for the acts or omissions of its nominees, correspondents, clearing agencies or securities depositories, (iii) for the acts or omissions of brokers or dealers and (iv) for any losses due to forces reasonably beyond the control of the Trustee or the Delaware Trustee including, without limitation, strikes, work stoppages, acts of war or terrorism, insurrection, revolution, nuclear or natural catastrophes or acts of God and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services including, without limitation, Internet services. Neither the Trustee nor the Delaware Trustee, if any, shall have any responsibility for the accuracy of any information provided to the Holders or any other person that has been obtained from, or provided to the Trustee or the Delaware Trustee by, any other entity.

     SECTION 3.7 Certain Rights of Trustee. (a) Subject to the provisions of Section 3.6:

     (i) the Trustee may conclusively rely on and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document whether in its original or facsimile form reasonably believed by it to be genuine and to have been signed, sent or presented by the proper party or parties;

     (ii) any direction or act of the Initial Purchaser acting on behalf of or in connection with the Trust as contemplated by this Declaration shall be sufficiently evidenced by an Officer’s Certificate of the Initial Purchaser;

     (iii) whenever in the administration of this Declaration, the Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting to take any action hereunder, the Trustee (unless other evidence is herein specifically prescribed) may request and in the absence of bad faith on its part conclusively rely upon an Officer’s Certificate;

     (iv) except as expressly set forth in this Declaration the Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any re-recording, refiling or reregistration thereof;

     (v) the Trustee may consult with counsel or other experts of its own selection, and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts’ areas of expertise shall be full and complete authorization and protection in respect of any action taken,

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suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion; such counsel may be, but shall not be limited to, counsel to the Initial Purchaser or any of its Affiliates, and may include any of its employees. The Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction;

     (vi) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration or at the request or direction of any Holder or the Initial Purchaser, unless (a) such Holder or the Initial Purchaser shall have provided to the Trustee security and indemnity, reasonably satisfactory to the Trustee, against the costs, expenses (including reasonable attorneys’ fees and expenses and the reasonable expenses of the Trustee’s agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Trustee and (b) the Trustee has been provided with the legal opinions, if any, required by this Declaration;

     (vii) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its reasonable discretion, may make such further inquiry or investigation into such facts or matters as it may deem necessary at the expense of the Trust and shall incur no liability of any kind by reason of such inquiry or investigation;

     (viii) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney selected in good faith and with due care (other than an agent or attorney that is an Affiliate of the Trustee); furthermore, the Trustee shall be under no obligation to monitor, and shall assume no personal liability for, the actions of the Initial Purchaser or any other Person in connection with their duties under this Declaration or in connection with the Trust generally;

     (ix) any action taken by the Trustee or its agents hereunder shall bind the Trust and the Holders, and the signature of the Trustee or its agents alone shall be sufficient and effective to perform any such action, and no third party shall be required to inquire as to the authority of the Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Trustee’s or its agent’s taking such action;

     (x) whenever in the administration of this Declaration the Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Trustee (i) may

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request instructions from the Holders or the Initial Purchaser; provided, however, that instructions from the Holders may only be given by the Holders of the same proportion in face amount of the Pass-Through Securities as would be entitled to direct the Trustee under the terms of the Pass-Through Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be fully protected and shall be treated as acting reasonably in conclusively relying upon or acting in accordance with such instructions and in not acting, to the extent instructions are not received within a specified period; provided, however, that to the extent the Trustee receives conflicting instructions from the Initial Purchaser and the Holders, the Trustee shall assume no liability for relying upon the instructions received from the Holders;

     (xi) except as otherwise expressly provided by this Declaration, the Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration;

     (xii) the Trustee shall not be required to take any action if the Trustee shall reasonably determine, or shall be advised by counsel, that such action is likely to result in personal liability for the Trustee or is contrary to applicable law or the terms of this Declaration;

     (xiii) under no circumstances shall the Trustee be personally liable for indebtedness evidenced by or arising under any of the documents to which the Trust or the Trustee is a party; and

     (xiv) the Trustee shall not be liable for the default or misconduct of any agent, appointed by the Trustee in good faith and with due care, under any of the documents to which the Trust or the Trustee is a party or otherwise (provided that such agent is not an Affiliate of the Trustee), and the Trustee shall have no obligation or liability to perform the obligations of the Trust under this Declaration or the other documents to which the Trust or the Trustee is a party that are required to be performed by other Persons, including, without limitation, the Put Counterparty, the Regulation 114 Trust, the ABC Trust, the Asset Swap Counterparty and the Initial Purchaser.

     (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Trustee shall be construed to be a duty.

     SECTION 3.8 Prohibition of Actions by the Trust and the Trustee. The Trust shall not, and the Trustee shall not cause the Trust to, nor shall the Initial Purchaser

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or the Holders direct the Trustee to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustee shall not cause the Trust to:

(a)	invest any interest or other distributions paid in respect of the Trust Property, other than pursuant to the terms of this Declaration, the Pass-Through Securities and the Trust Documents, but shall distribute all such proceeds to the Holders pursuant to the terms of this Declaration and of the Pass-Through Securities;
(b)	acquire any assets other than as expressly provided herein;
(c)	possess Trust Property for a purpose other than those described in Section 3.3;
(d)	sell the ABC Securities;
(e)	make any loans or incur any indebtedness or acquire any securities other than ABC Securities or any securities distributed from the ABC Trust;
(f)	except as expressly set forth herein, act in such a way as to vary the terms of the Pass-Through Securities in any way whatsoever;
(g)	issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust, other than the Pass-Through Securities;
(h)	(i) direct the time, method and place of conducting any proceeding for any remedy available to the Trust as the holder of Trust Property or exercising any power conferred upon holders of Trust Property, (ii) waive any past default or violation that is waivable under the terms of any Trust Property or (iii) consent to any amendment or modification of the terms of any Trust Property where such consent shall be required, except in each case after receiving instructions from the Holders pursuant to Article 11 hereof;
(i)	file a certificate of cancellation of the Trust or take any other action to terminate the Trust, except in connection with a liquidation of the Trust pursuant to Article 8 hereof;
(j)	take any action that would cause the Trust to be classified other than as a grantor trust for U.S. federal income tax purposes; or
(j)	take any action that would cause the Trust to be deemed or classified as an Investment Company.

     SECTION 3.9 Execution of Documents. Except as otherwise required by the Statutory Trust Act, the Trustee is authorized to execute on behalf of the Trust any documents that the Trustee has the power and authority to cause the Trust to execute pursuant to Section 3.5.

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     SECTION 3.10 No Representations of Trustee. The Trustee makes no representations as to the value or condition of the Trust Property or any part thereof. Except as expressly set forth in Article 12, the Trustee makes no representations as to the validity or sufficiency of this Declaration or the Pass-Through Securities.

     SECTION 3.11 Duration of Trust. The Trust, unless terminated pursuant to the provisions of Article 8 hereof, shall have perpetual existence.

     SECTION 3.12 Mergers. (a) The Trust may not consolidate, amalgamate, merge or convert with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any Person, except as described in Section 3.12(b), and except that the Trust may distribute its assets to the Holders or to such persons as the Holders may direct upon liquidation of the Trust in accordance herewith.

     (b) The Trust may, with the unanimous consent of the Holders, consolidate, amalgamate, merge or convert with or into, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to a trust organized as such under the laws of any state of the United States.

     SECTION 3.13 Limitation on Directions to Trustee. The Holders and the Initial Purchaser shall not direct the Trustee to take or refrain from taking any action if such action or inaction would be contrary to any obligation of the Trust or the Trustee under this Declaration or any of the documents to which the Trust is a party or would be contrary to Section 3.3 hereof, nor shall the Trustee be obligated to follow any such direction, if given.

ARTICLE 4

RESPONSIBILITIES OF THE INITIAL PURCHASER

     SECTION 4.1 Responsibilities of the Initial Purchaser. In connection with the issue and sale of the Pass-Through Securities, the Initial Purchaser shall have the exclusive right and responsibility to engage in the following activities:

     (a) to determine the states in which to take appropriate action to qualify or register for sale all or part of the Pass-Through Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust, the Trustee and their Affiliates or agents of actions they must take, and prepare for execution and filing any documents to be executed and filed by the Trust as the Initial Purchaser deems necessary or advisable in order to comply with the applicable laws of any such states;

     (b) to, at the Trust’s expense, advise the Trust, the Trustee and their Affiliates or agents, of actions they must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Initial Purchaser deems necessary

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or advisable in order to comply with any applicable rules and regulations of the Commission promulgated under the Securities Act, the Exchange Act, the Trust Indenture Act and the 1940 Act and to obtain or maintain exemptions therefrom or other forms of relief thereunder or to make any filings or take any actions required thereby or deemed necessary or advisable with respect to the Pass-Through Securities or any Trust Property; and

     (c) to, at the Trust’s expense, take all reasonable action necessary to enable Standard & Poor’s and Moody’s to provide their respective ratings with respect to the Pass-Through Securities; provided, however, that if Standard & Poor’s or Moody’s shall cease to make such ratings available, the Initial Purchaser shall take all reasonable action to obtain a rating from another nationally recognized rating agency.

ARTICLE 5

TRUSTEES

     SECTION 5.1 Trustee; Eligibility. (a) There shall at all times be one primary trustee which shall act as Trustee and which shall:

     (i) not be an Affiliate of the Initial Purchaser or the Put Counterparty; and

     (ii) be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.l(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

     (b) If at any time the Trustee ceases to be eligible to so act under Section 5.1(a), the Trustee shall immediately resign in the manner and with the effect set forth in Section 5.2(b).

     (c) If the Trustee has or shall acquire any “conflicting interest” within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the Initial Purchaser shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act.

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     (d) The initial Trustee shall be The Bank of New York (Delaware). Such Trustee shall be entitled to receive a fee for serving as Trustee in accordance with the letter attached hereto as Exhibit D.

     (e) In accepting the trust hereby created, the Trustee agrees to act solely as trustee hereunder and not in its individual capacity, except as expressly provided herein and in the other documents to which the Trust is a party.

     (f) All Persons having any claim against the Trustee in its capacity as such by reason of the transactions contemplated by the documents to which the Trust is a party shall look only to the Trust Property (or a part thereof, as the case may be) and not to the Trustee in its individual capacity. Without limiting the generality of the foregoing, the Trustee in its capacity as such or individually shall not be responsible or liable for or in respect of the validity or sufficiency of this Declaration or for the due execution hereof by the Initial Purchaser, or for the form, character, genuineness, sufficiency, value, or validity of the Trust Property.

     SECTION 5.2 Appointment, Removal and Resignation of Trustees. (a) Subject to the provisions of this Section 5.2, the Trustee or the Delaware Trustee, if any, may be appointed, removed or replaced without cause at any time by a vote of the Holders of 75% of the then-outstanding face amount of the Pass-Through Securities; provided, however, that at all times there shall be a Trustee and a Delaware Trustee (which shall initially be The Bank of New York (Delaware)); and, provided further, that:

     (i) The Trustee shall not be removed in accordance with this Section 5.2(a) until a successor Trustee possessing the qualifications to act as Trustee under Section 5.1 (a “Successor Trustee”) has been appointed by a vote of 75% of the then-outstanding face amount of the Pass-Through Securities and has accepted such appointment by written instrument executed by such Successor Trustee and delivered to the Initial Purchaser.

     (ii) The Trustee shall not be removed in accordance with this Section 5.2(a) unless the Successor Trustee is also a Delaware Trustee; provided, however, that if the Successor Trustee is not a Delaware Trustee, the Trustee may be removed if a Delaware Trustee is appointed concurrently with the Successor Trustee; and, provided further, that if the Successor Trustee is not a Delaware Trustee and a Delaware Trustee is appointed for the sole purpose of satisfying Section 3807(a) of the Statutory Trust Act, such Delaware Trustee shall not be entitled to exercise any powers, nor have any of the duties and responsibilities of a Trustee described in this Declaration, except as may be mandated by the Statutory Trust Act.

     (iii) A Delaware Trustee that is not also the Successor Trustee may not be removed in accordance with Section 5.2(a) until a successor Delaware Trustee (a “Successor Delaware Trustee”) has been appointed by a vote of the Holders of 75% of the then-outstanding face amount of the Pass-Through

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Securities and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Trustee.

     (b) A trustee appointed to office shall hold office until its successor shall have been appointed by the Holders in accordance with this Declaration or until its termination, removal or resignation. Any trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the trustee and delivered to the Initial Purchaser, the Trust and all of the Holders, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that:

     (i) No such resignation of a Trustee shall be effective:

          (A) until a Successor Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Trustee and delivered to the Trust, the Initial Purchaser, the Delaware Trustee, if any, and the resigning trustee; or

          (B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders; and

     (ii) No such resignation of a Delaware Trustee, if any, shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Initial Purchaser, the Trustee and such resigning Delaware Trustee.

     (c) If no Successor Trustee or Successor Delaware Trustee, if any, shall have been appointed and accepted appointment as provided in this Section 5.2 within ninety (90) days after delivery to the Initial Purchaser and the Trust of an instrument of resignation, the resigning Trustee or Delaware Trustee, as applicable, may petition at the expense of the Trust any court of competent jurisdiction for appointment of a Successor Trustee or Successor Delaware Trustee, as the case may be. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Trustee or Successor Delaware Trustee, as the case may be.

     (d) No Trustee or Delaware Trustee, if any, shall be liable for the acts or omissions to act of any Successor Trustee or Successor Delaware Trustee, as the case may be.

     SECTION 5.3 Delegation of Power. The rights, duties and powers of the Trustee as set forth in this Declaration may be delegated to one or more Affiliates of the Trustee; provided, however, that each such delegatee meets the eligibility requirements set forth in Section 5.1; and, provided further, that as a condition to any such delegation, the delegatee shall expressly agree to be jointly and severally liable with the Trustee for

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any liability arising out of or in connection with such delegation; provided, however, that such delegation shall in no manner relieve the Trustee from its duties or obligations under this Declaration or any Trust Document nor relieve the Trustee of its liabilities, if any, for such actions. The Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 3.5; provided, however, that such delegation shall in no manner relieve the Trustee from its duties or obligations arising under this Declaration or any Trust Document nor relieve the Trustee of its liability for such actions.

     SECTION 5.4 Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee or the Delaware Trustee, if any, may be merged or converted or with which either may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee or the Delaware Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee or the Delaware Trustee shall be the successor of the Trustee or the Delaware Trustee, as the case may be, hereunder; provided, however, that such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto.

ARTICLE 6

TERMS OF PASS THROUGH SECURITIES

     SECTION 6.1 Authorization and Designation of Pass-Through Securities.

     (a) The Trust is authorized to issue undivided beneficial interests in the assets of the Trust up to an aggregate initial face amount of $500,000,000, which shall constitute and be designated the “Asset Backed Capital Commitment Pass-Through Securities.”

     (b) The Trust shall issue only one class of Pass-Through Securities and is not authorized to issue any other securities.

     (c) The Initial Purchaser hereby instructs the Trustee to authorize the Pass-Through Securities by executing the Certificate of Designation attached to this Declaration as Exhibit B, which shall be deemed to be a part of this Declaration, and the Certificates and any certificate of authentication on such Certificates relating to the Pass-Through Securities required to be executed pursuant to Section 9.4 and any other certificate required to be executed pursuant to Section 9.7, to execute each of the Trust Documents on behalf of the Trust, and to cause the Trust to perform its obligations thereunder.

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     (d) Each Pass-Through Security shall represent an undivided beneficial interest in the Trust Property. The specific rights, terms and powers of the Pass-Through Securities are set forth in the Certificate of Designation, which may be amended or supplemented by the Trustee upon receipt of written instructions from the Initial Purchaser, subject to compliance with the terms of this Declaration (including the requirements of Section 11.3 of this Declaration). Any amendment to the Certificate of Designation shall have the status of an amendment to this Declaration.

     (e) The authorization of the Pass-Through Securities shall be effective upon the execution by the Trustee of the Certificate of Designation. The Pass-Through Securities are deemed to be equity securities for all purposes under Delaware law.

     (f) Pass-Through Securities issued and sold as contemplated herein and in the Purchase Agreement shall be deemed to be duly issued, fully paid and nonassessable; provided, however, that Pass-Through Securities will be issued only in denominations of $1,000, and a minimum initial investment per Holder of $100,000.

     (g) All Pass-Through Securities shall represent equal proportionate beneficial interests in the assets of the Trust (subject to the liabilities of the Trust), and each Pass-Through Security shall rank equal to each other Pass-Through Security. The Trustee may from time to time, upon the written instructions of the Initial Purchaser or a Majority in Face Amount of the Pass-Through Securities, divide or combine the Pass-Through Securities into a greater or lesser number of Pass-Through Securities without thereby changing the proportionate beneficial interest in the assets of the Trust or in any way affecting the rights of the Holders; provided, however, that upon any such division or combination of Pass-Through Securities, any fractional shares resulting from such recombination shall be redeemed and the face amount of such redeemed shares shall be distributed to Holders in cash.

     SECTION 6.2 No Preemptive Rights. No Holder, by virtue of holding Pass-Through Securities, shall have any preemptive or other right to subscribe to any additional Pass-Through Securities.

     SECTION 6.3 Status of Pass-Through Securities. Every Holder, by virtue of having become a Holder, shall be deemed to have expressly assented and agreed to the terms hereof and the Certificate of Designation and to have become a party hereto. Pass-Through Securities shall be deemed to be personal property, giving only the rights provided herein. Ownership of Pass-Through Securities shall not entitle the Holder to any title in, or to the whole or any part of, the Trust Property or right to call for a partition or division of the same or for an accounting. The bankruptcy of a Holder during the continuance of the Trust shall not operate to terminate the Trust nor entitle the representative of any bankrupt Holder to an accounting or to take any action in court or elsewhere against the Trust or the Trustee.

     SECTION 6.4 CUSIP Numbers. The Trust, in issuing the Pass-Through Securities, may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee

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shall use “CUSIP” numbers in notices of liquidation as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Pass-Through Securities or as contained in any notice of a liquidation and that reliance may be placed only on the other identification numbers printed on the Pass-Through Securities, and any such liquidation shall not be affected by any defect in or omission of such numbers.

     SECTION 6.5 Distributions.

     (a) Distributions shall be paid to the Holders with such frequency as set forth in the Certificate of Designation. Distributions shall be paid from such of the income, accrued or realized, if any, and capital gains, realized or unrealized, if any, and out of the payments received from the ABC Trust and out of the assets of the Trust, after providing for actual and accrued liabilities of the Trust, if any. Distributions on Pass-Through Securities not in connection with a liquidation or dissolution of the Trust shall be distributed Pro Rata to the Holders after payment of all of the Trust’s expenses.

     (b) Except as otherwise provided in Article 8, any amounts received by the Trust upon a distribution by the ABC Trust on ABC Securities shall, upon receipt by the Trustee or the Paying Agent, as the case may be, be distributed Pro Rata to the Holders, and shall be made on the same day that the Trust receives such distribution, to the extent practicable. If such Distribution is not made on the same day that a distribution is received by the Trust, the Distribution will be made as soon as practicable thereafter, and such distribution from the ABC Trust will be placed by the Trust in an interest-bearing overnight or “sweep” account for the beneficial interest of the Holders pending Distribution, such account to be The Bank of New York Cash Reserve Fund unless the Initial Purchaser instructs the Trustee otherwise. Holders will continue to have an undivided beneficial interest in such amounts together with any earnings thereon until such amounts are distributed in accordance with the terms hereof.

     (c) The record date for the determination of Holders entitled to receive payment of a Distribution referred to in Section 6.5(a) will be the open of business on the Business Day immediately preceding the scheduled distribution payment date on the ABC Securities.

     (d) Distributions on Pass-Through Securities in connection with any redemption of Pass-Through Securities or with a liquidation or dissolution of the Trust shall be made as required by Section 8.2 hereof.

     (e) Distributions made in accordance with the provisions of this Declaration in connection with a liquidation or dissolution may be made in cash or Trust Property or a combination thereof. All other Distributions shall be made in cash.

     SECTION 6.6 No Redemption Rights . The Pass-Through Securities shall not be redeemable at the option of the Holders, except as otherwise provided in this Declaration.

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ARTICLE 7

ACCOUNTING AND RECORDS

     SECTION 7.1 Annual Tax Information. The Trustee shall file or cause to be filed, within the time limits established by law, federal and state income tax returns and information statements as a grantor trust for each of the Trust’s taxable years. The Trust’s taxable year shall be the calendar year unless otherwise required by law. Notwithstanding any other provision of the Trust Agreement to the contrary, the Trustee shall comply with all federal withholding requirements respecting distributions to, or receipts of amounts on behalf of, Holders that the Trustee reasonably believes are applicable under the Code. The consent of the Holders shall not be required for such withholding. The Trustee shall in no event cause the Trust, and each Holder of Pass-Through Securities by its purchase thereof, shall be deemed to have agreed not to make any election to cause the Trust, to be treated as a corporation for federal income tax purposes.

     SECTION 7.2 Outside Advisors. With regard to the matters covered by this Article 7, the Trustee may consult with counsel or other experts of its own selection, and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts’ area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion; such counsel may be, but shall not be limited to, counsel to the Initial Purchaser or any of its Affiliates, and may include any of its employees.

     SECTION 7.3 Certain Accounting Matters. At all times during the existence of the Trust, the Trustee shall keep record of any action it takes with respect to the Trust.

ARTICLE 8

DISSOLUTION AND TERMINATION; LIQUIDATION; REDEMPTION

     SECTION 8.1 Dissolution and Termination of the Trust. The Trust shall dissolve upon, and only upon, the distribution to the Holders of all liquidating distributions received by the Trust on the ABC Securities in connection with the liquidation of the ABC Trust; provided, however, that the Trust shall not dissolve prior to the termination of the Put Agreement, the Asset Swap Arrangement or the Rate Swap Arrangement.

     SECTION 8.2 Liquidation; Redemption.

      (a) Following any liquidation of the ABC Trust, the Trust shall distribute to the Holders all liquidating distributions received by the Trust on the ABC

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Securities, net of any fees or expenses, and subsequently liquidate as soon as practicable after the ABC Trust has made its last liquidating distribution.

     (b) The Trust shall not liquidate prior to the liquidation of and receipt and distribution of all liquidation payments received from, the ABC Trust without the prior approval of a Majority in Face Amount of the then-outstanding Pass-Through Securities nor will the Trust liquidate prior to the termination of the Put Agreement, the Asset Swap Arrangement and the Rate Swap Arrangement.

     (c) In the event that the ABC Trustee shall call a Liquidation Shareholders Meeting, no less than 10 but no more than 30 days prior to any such Liquidation Shareholders Meeting, the Trustee shall call a vote of the Holders on whether to have the Pass-Through Securities redeemed. At any such Liquidation Shareholders Meeting, the Trustee shall vote the ABC Securities held by the Trust in the same manner and proportion as directed by the Holders.

     (d) With respect to any such Liquidation Shareholders Meeting, if Holders of a majority in face amount of the Pass-Through Securities actually voting on such matter vote to have their Pass-Through Securities redeemed and all the ABC Securities shall have been redeemed in accordance with the terms thereof and the ABC Trust shall have been liquidated, then, as soon as practicable after the ABC Trust has been liquidated, all of the Pass-Through Securities shall be redeemed and the Trust shall liquidate in accordance with the terms of this Section 8.2.

     (e) With respect to any such Liquidation Shareholders Meeting, if Holders of less than a majority in face amount of the Pass-Through Securities actually voting on such matter vote to have their Pass-Through Securities redeemed and the ABC Trust shall have redeemed an amount of ABC Securities in accordance with the terms thereof, then the Trust shall distribute the proceeds received in connection with such redemption of ABC Securities Pro Rata to the Holders that had voted to have their Pass-Through Securities redeemed, and such Holders’ Pass-Through Securities shall be canceled. Holders that do not vote to have their Pass-Through Securities redeemed will continue to hold their Pass-Through Securities. Thereafter, Holders of such remaining Pass-Through Securities shall have the authority to direct the Trustee to direct the ABC Trustee (i) to invest the assets of the ABC Trust in an investment program to be determined at a meeting of such Holders or (ii) to redeem the remaining ABC Securities and liquidate the ABC Trust, after which the Trust shall redeem the remaining Pass-Through Securities and the Trust shall liquidate in accordance with the terms of this Section 8.2.

     (f) Distributions made upon a liquidation of the Trust pursuant to Section 8.2(a), (c) or (d) shall be applied in the following order of priority:

      (i) to the expenses of liquidation; and then

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     (ii) to the payment of the debts and liabilities of the Trust, as required by applicable law, including, without limitation, any outstanding expenses, fees or indemnity obligations owing to the Trustee; and then

     (iii) to the Holders, Pro Rata.

     (g) Upon completion of the winding up of the Trust and the distribution of the Trust’s assets following a liquidation, the Delaware Trustee shall file a certificate of cancellation with the Secretary of State of the State of Delaware terminating the Trust. The Trustee shall use its best efforts to liquidate the Trust within 30 days of the occurrence of an event referred to in Section 8.1.

     (h) The provisions of Sections 3.5, 3.6 and Article 10 shall survive the termination of the Trust.

ARTICLE 9

TRANSFER OF PASS-THROUGH SECURITIES

     SECTION 9.1 Restrictions on Transfer of Pass-Through Securities.

     (a) The Pass-Through Securities may not be offered, sold, pledged or otherwise transferred except, for so long as the Pass-Through Securities are eligible for resale pursuant to Rule 144A under the Securities Act (“Rule 144A”), to a Person that is (i) (a) for United States federal income tax purposes, (x) a U.S. corporation (other than an “S Corporation”), (y) a U.S. tax-exempt entity or (z) an entity characterized as a corporation which is created or organized outside the United States and that is not engaged in a trade or business within the United States to which income on the Pass-Through Securities is or would be effectively connected (within the meaning of Section 864(c) of the Code); (ii) a qualified institutional buyer (a “QIB”) within the meaning of Rule 144A of the Securities Act that purchases for its own account or for the account of a QIB to whom notice is given that the transfer is being made in reliance on Rule 144A; and (iii) a qualified purchaser (a “QP”) within the meaning of Section 2(a)(51) of the 1940 Act and the rules and regulations thereunder and is conducted in compliance with all applicable securities laws of the states of the United States and other jurisdictions.

     (b) Each purchaser who acquires Pass-Through Securities or any interest therein will be deemed to have acknowledged, represented, warranted and covenanted (i) that any purchase of Pass-Through Securities made by such purchaser shall be for its own account or for the account of one or more other persons for which such purchaser is acting as trustee or agent with complete investment discretion and with authority to bind such party and that such purchase is not made with a view to any public resale or distribution thereof and that such purchaser and the party for whom such purchaser is acting which shall acquire Pass-Through Securities meets all of the requirements set forth in Section 9.1(a); (ii) that the Pass-Through Securities have not been and will not be registered under the Securities Act or any other applicable securities

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law and that the Pass-Through Securities are being offered for resale in transactions that do not require registration under the Securities Act and, accordingly, such securities may not be reoffered, resold or otherwise pledged, hypothecated or transferred unless so registered or an applicable exemption from the registration requirements of the Securities Act is available; (iii) that the Trust is not registered as an Investment Company, but the Trust is exempt from registration as such by virtue of Section 3(c)(7) of the 1940 Act; (iv) that all of the outstanding Pass-Through Securities are represented by one or more Certificates registered in the name of DTC or its nominee, and that such purchaser will not be entitled to receive any Certificate representing Pass-Through Securities that it acquires, and that the ownership of Pass-Through Securities as to which such purchaser is the existing holder shall be maintained in book-entry form by DTC, for the account of its participants, which in turn shall maintain such records of such purchaser’s beneficial ownership; (v) that (A) neither it nor any person for which it is acting (1) was formed, reformed or recapitalized for the specific purpose of investing in the Pass-Through Securities or (2) has or will have after giving effect to such purchases invested more than 40% of its assets in the Pass-Through Securities; (B) if such purchaser or any person for which such purchaser is acting is organized as a corporation, partnership, common trust fund, special trust, pension fund or retirement plan or other entity, none of the shareholders, partners, beneficiaries, beneficial owners or participants, as the case may be, of any such entity may designate the particular investments to be made by any such entity or the allocation of such investment to the shareholders, partners, beneficiaries, beneficial owners or participants, as the case may be, of such entity; and (C) that if such purchaser or any person for which such purchaser is acting is a company excluded from the definition of investment company pursuant to Section 3(c)(1) or Section 3(c)(7) of the 1940 Act and was formed on or before April 30, 1996, it has received the consent of those of its beneficial owners who acquired their interests on or before April 30, 1996 with respect to its treatment as a QP in the manner required by Section 2(a)(51)(C) of the 1940 Act; (vi) that (A) if such purchaser is a dealer as described in paragraph (a)(1)(ii) of Rule 144A, such purchaser owns and/or invests on a discretionary basis at least U.S.$25 million in securities of issuers that are not affiliated persons of such purchaser, and is therefore a QP pursuant to Rule 2a51-1(g)(1)(i) under the 1940 Act; and (B) if such purchaser is a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the assets of such plan, investment decisions with respect to such plan are made solely by the fiduciary, trustee or sponsor of such plan, and such plan or trust fund is therefore a QP pursuant to Rule 2a51-1(g)(1)(ii) under the 1940 Act; (vii) that in making decisions as to whether to purchase or sell any Pass-Through Securities, such purchaser must rely on its own examination of the Trust, the ABC Trust, the Put Counterparty, the Put Agreement, the Rate Swap Arrangement, the Asset Swap Arrangement, the Asset Swap Counterparty, the Asset Swap Guarantor, the Regulation 114 Trust and the terms of the Pass-Through Securities; (viii) that such purchaser understands that the Trust may receive a list of participants holding positions in its securities from one or more book-entry depositories; (ix) that such purchaser agrees that it will give to each person to whom a Pass-Through Security is transferred a notice substantially to the effect of the legend described in Section 9.1(d); (x) that such purchaser agrees that it will only hold and transfer Pass-

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Through Securities, if at all, having a minimum aggregate face amount of $100,000; (xi) that (A) for the entire period during which such purchaser holds its interest in Pass-Through Securities or any interest therein, no portion of the assets used by such purchaser to acquire or hold Pass-Through Securities or any interest therein constitute the assets of any “employee benefit plan” within the meaning of Section 3(3) of ERISA, whether or not subject to Title I of ERISA (including, without limitation, any U.S. governmental, non-U.S. and church pension plan) or any “plan” as defined in Section 4975(e)(1) of the Code whether or not subject to such section of the Code, or any entity whose underlying assets include plan assets by reason of such an employee benefit plan's or plan's investment in such entity (each a “Covered Plan”) or (B) the assets used by such purchaser to acquire Pass-Through Securities (or any interest therein) constitute assets of an insurance company general account, and (w) such purchaser (other than a Covered Plan) does not have any discretionary authority or control and does not provide any investment advice for a fee (direct or indirect) with respect to the assets of the Pass-Through Trust, and is not an affiliate of any such purchaser, (x) for the entire period during which such Person holds its interest in Pass-Through Securities (or any interest therein), less than 25% of the assets of such insurance company general account will constitute “plan assets” of any Covered Plan, (y) the acquisition and holding of Pass-Through Securities (or any interest therein) by such purchaser will satisfy the requirements of U.S. Department of Labor Prohibited Transaction Class Exemption 95-60 and will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code, and (z) if, notwithstanding the foregoing representation, at any time during any month 25% or more of the assets of any such insurance company general account constitute plan assets for purposes of ERISA or Section 4975 of the Code, then such insurance company shall take such steps as necessary to reduce such percentage of plan assets held in its general account or, in a manner consistent with the restrictions on transfer set forth herein, dispose of any and all of its interest in the Pass-Through Securities held in its general account by the end of the next following month; and (xii) that if the taxable year of the purchaser at the time it purchases Pass-Through Securities (or any interest therein) does not end on December 31 or if the purchaser changes its taxable year while it holds Pass-Through Securities (or any interest therein), the purchaser agrees that it will promptly notify the Trustee of the purchaser’s taxable year or any changes to such purchaser’s taxable year.

     (c) No Pass-Through Securities shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Declaration. Any purported transfer of Pass-Through Securities not made in accordance with this Declaration (including without limitation any transfer that violates Section 9.1 or Section 9.2 hereof) shall be void and of no legal effect whatsoever. Any intended transferee in a purported transfer not made in accordance with this Declaration (including without limitation any Transfer that violates Section 9.1 or Section 9.2 hereof) is hereby deemed not to be the Beneficial Owner of any Pass-Through Securities or any other interest in the Trust for any purpose, including but not limited to, the receipt of Distributions and any other payments on such Pass-Through Securities, and is deemed to have no interest whatsoever in such Pass-Through Securities or in the Trust. The purported transferor of such Pass-

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Through Securities is hereby deemed to be the Beneficial Owner of such Pass-Through Securities for all purposes notwithstanding such purported transfer. The Registrar shall not register the issuance of, the transfer of or exchange any of the Pass-Through Securities not made in accordance with this Declaration (including without limitation any transfer that violates Section 9.1, Section 9.2 or Section 9.4 hereof).

     (d) All Certificates issued pursuant to this Declaration shall bear a legend with regard to the foregoing restrictions on transfer, substantially in the form set forth in the form of Pass-Through Security Certificate attached hereto as Exhibit A.

     (e) If it is determined that a Holder of Pass-Through Securities was in violation of the transfer restrictions set forth in this Section 9.1 at the time such Holder acquired the Pass-Through Securities or an interest therein, such Holder shall, upon demand of the Trust and in any event within ten Business Days of receiving such demand, sell all of such Holder’s Pass-Through Securities or interests therein to a transferee whom such Holder and the Trust reasonably believe satisfies the transfer restrictions set forth in this Section 9.1.

     SECTION 9.2 Authentication and Transfer of Certificates. The Trustee shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Trustee may reasonably require) in respect of any tax or other government charges that may be imposed in relation to such transfer. Upon surrender for registration or transfer of any Certificate representing the Pass-Through Securities, the Trustee shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every such Certificate surrendered for registration or transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by the Holder or such Holder’s attorney duly authorized in writing representing that such Holder has complied with the restrictions set forth in this Article 9. Each Certificate surrendered for registration or transfer shall be canceled by the Trustee. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration.

     SECTION 9.3 Deemed Security Holders. The Trustee may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole Holder of such Certificate and of the Pass-Through Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever (other than Section 9.1 hereof) and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Pass-Through Securities represented by such Certificate on the part of any Person, whether or not the Trust shall have actual or other notice thereof.

     SECTION 9.4 Book Entry Interests. (a) Certificates for Pass-Through Securities will be issued only in the form of one or more fully registered, global Certificates (each a “Global Certificate”), to be held by the Trustee, as custodian for DTC, the initial Clearing Agency and shall be authenticated and executed by the Trustee.

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Such Global Certificates shall initially be registered on the books and records of the Trust in the name of Cede & Co., the nominee of DTC, and no Beneficial Owner will receive a definitive certificate representing such Beneficial Owner’s interests in such Global Certificates.

     (b) So long as the Certificates are in global form, the Trust and the Trustee shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes, instructions or consents hereunder) as the Holder of the Pass-Through Securities and the sole Holder of the Global Certificates and shall have no obligation to the Beneficial Owners.

     (c) To the extent that the provisions of this Section 9.4 conflict with any other provisions of this Declaration, the provisions of this Section 9.4 shall control.

     (d) The rights of the Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants, and the Clearing Agency shall receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. The Clearing Agency will make book entry transfers among the Clearing Agency Participants; provided, however, that solely for the purposes of determining whether the Beneficial Owners of the requisite amount of Pass-Through Securities have voted on any matter provided for in this Declaration, the Trustee may conclusively rely on, and shall be fully protected in relying on, any written instrument (including a proxy) delivered to the Trustee by the Clearing Agency setting forth the Beneficial Owners’ votes or instructions or assigning the right to vote or instruct on any matter to any other Persons either in whole or in part.

     (e) A Global Certificate will be exchangeable for Pass-Through Securities registered in the names of persons other than DTC or its nominee or a successor Clearing Agency or its nominee only if (i) DTC or such successor Clearing Agency, as applicable, notifies the Trust that it is unwilling or unable to continue as a Clearing Agency for such Global Certificate and no successor Clearing Agency will have been appointed by the Trust within 90 days of such notice, (ii) DTC or such successor Clearing Agency, as applicable, at any time, ceases to be a clearing agency registered under the Exchange Act at which time DTC or such successor Clearing Agency, as applicable, is required to be so registered to act as such clearing agency and no successor Clearing Agency shall have been appointed, (iii) subject to obtaining an opinion of a nationally recognized tax counsel with experience in such matters that there will be no adverse income or franchise tax consequences under the laws of New York or general corporation or unincorporated business tax consequences under the laws of the City of New York upon the issuance of the Pass-Through Securities in certificated form, the Trust determines that such Global Certificate will be so exchangeable by the Trust within 90 days, or (iv) the Trust voluntarily elects to discontinue the use of the book-entry transfer system. Any Global Certificate that is exchangeable pursuant to the preceding

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sentence shall be exchangeable for Pass-Through Securities registered in such names as DTC or any successor Clearing Agency or the Trust, as applicable, shall direct.

     (f) If the Global Certificates are exchanged pursuant to Section 9.4(e), Distributions may, at the Trust’s option, be paid by check mailed to the persons entitled thereto as shown on the register maintained by the Transfer Agent; provided, however, a Holder of $5,000,000 or more in aggregate face amount of Pass-Through Securities shall be entitled to received Distributions, if any, on any Distribution Date by wire transfer of immediately available funds if appropriate wire transfer instructions have been received in writing by the Trust not less than 15 days prior to such Distribution Date. Any such wire transfer instructions received by the Trust will remain in effect until revoked by such Holder.

     SECTION 9.5 Notices to Clearing Agency. Whenever a notice or other communication to the Holders is required under this Declaration, the Trustee shall give all such notices and communications specified herein to be given to the Holders to the Clearing Agency and shall have no notice obligations to the Beneficial Owners.

     SECTION 9.6 Appointment of Authenticating Agent . At any time when any Certificates remain outstanding, the Trustee may appoint an authenticating Agent or agents (each an “Authenticating Agent”) with respect to the Certificates which shall be authorized to act on behalf of the Trustee to authenticate Certificates issued upon original issuance, exchange or registration of transfer. The Trustee may revoke such power and remove any Authenticating Agent at any time.

     If any Authenticating Agent is appointed hereunder, the Certificates may have endorsed thereon, in addition to the Trustee’s certificate of authentication, an alternate certificate of authentication in the following form:

     This is one of the Certificates referred to in the within-mentioned Trust Declaration.

      [Name of Trustee], not in its individual capacity but solely as Trustee

By: _____________________________

as Authenticating Agent

By: _____________________________

Authorized Signatory

     SECTION 9.7 Appointment of Successor Clearing Agency. If any Clearing Agency elects to discontinue its services as securities depository with respect to

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the Pass-Through Securities, the Trustee may appoint a successor Clearing Agency with respect to such Pass-Through Securities.

     SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificate. If (a) any mutilated Certificate is surrendered to the Trustee, or if the Trustee shall receive evidence to its satisfaction of the destruction, loss or theft of any Certificate; and (b) there shall be delivered to the Trustee such security or indemnity as may be required by it to keep it harmless, then, in the absence of notice that such Certificate shall have been acquired by a protected purchaser, the Trustee on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 9.7, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Pass-Through Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time.

ARTICLE 10

     LIMITATION OF LIABILITY OF HOLDERS,
THE TRUSTEE, THE DELAWARE TRUSTEE OR OTHERS

     SECTION 10.1 Liability. (a) Except as expressly set forth in this Declaration and the terms of the Pass-Through Securities, the Initial Purchaser, the Trustee and the Delaware Trustee, if any, shall not be:

     (i) personally liable for the return of any portion of the investment of Holders of Pass-Through Securities (or any return thereon) which shall be made solely from assets of the Trust;

     (ii) required to pay to the Trust, or to any Holder any deficit upon dissolution of the Trust or otherwise; and

     (iii) required to pay any fees or expenses relating to the operation of the Trust.

     (b) Pursuant to Section 3803(a) of the Statutory Trust Act, Holders shall be entitled to the same limitation of personal liability extended to shareholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. Each Certificate is fully paid and non-assessable.

     (c) To the fullest extent permitted by law, the assets of the Trust will be used to indemnify the (i) Trustee, (ii) the Delaware Trustee, if any, (iii) any Affiliate of the Trustee or the Delaware Trustee, if any, and (iv) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or

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agents of the Trustee or the Delaware Trustee, if any, (each of the Persons in (i) through (iv) being referred to as an “Class I Indemnified Person”) for, and each Class I Indemnified Person will be held harmless against, any loss, obligation, action, suit, damage, claim, liability or expense including taxes (other than taxes based on or determined (in whole or in part) by reference to the income of the Trustee, the Delaware Trustee, if any, or such other Person) incurred without gross negligence (or ordinary negligence with respect to allocations of funds or payment of Distributions) or bad faith or willful misconduct on the part of the Trustee or the Delaware Trustee, if any, arising out of or in connection with the acceptance or administration of the Trust, the Trust Property, or relating to this Declaration or any other document or agreement entered into by or on behalf of the Trust, or the Trustee, including the costs, disbursements and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating any claim or liability in connection with, the exercise or performance of any of its powers or duties hereunder.

     In addition, to the fullest extent permitted by law, and only after the use of assets to provide any indemnification required by the preceding paragraph, if applicable, the assets of the Trust will be used to indemnify (i) the Initial Purchaser (solely in connection with the Initial Purchaser acting in its capacity as the Initial Purchaser of the Trust and not in connection with its purchase or ownership of Pass-Through Securities), and (ii) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Initial Purchaser (each of the Persons in (i) through (ii) being referred to as a "Class II Indemnified Person") for, and each Class II Indemnified Person will be held harmless against, any loss, obligation, action, suit, damage, claim, liability or expense including taxes (other than taxes based on or determined (in whole or in part) by reference to the income of the Initial Purchaser or such other Person) incurred without gross negligence or bad faith or willful misconduct on the part of the Initial Purchaser (solely in connection with the Initial Purchaser acting in its capacity as the Initial Purchaser of the Trust and not in connection with its purchase or ownership of Pass-Through Securities) arising out of or in connection with the acceptance or administration of the Trust, the Trust Property, or relating to this Declaration or any other document or agreement entered into by or on behalf of the Trust or the Trustee, including the costs, disbursements and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating any claim or liability in connection with, the exercise or performance of any of its powers or duties hereunder.

      The obligation to indemnify as set forth in this Section 10.1(c) shall survive the satisfaction and discharge of this Declaration, the redemption of the Pass-Through Securities or the resignation or removal of the Trustee, the Delaware Trustee, if any, the Initial Purchaser or such other Person.

     (d) The Trustee shall have a first priority lien on Trust Property for the payment of all amounts owed under this Declaration.

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     (e) The Initial Purchaser undertakes to perform such duties and only such duties as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration.

     (f) In the absence of gross negligence or willful misconduct on the part of the Initial Purchaser, the Initial Purchaser shall not be liable for any action taken, suffered or omitted or for any error in judgment made by it in the performance of its duties under this Declaration. The Initial Purchaser shall not be liable for any error resulting from the use or reliance on a source of information used in good faith and without gross negligence to make any determination or declaration hereunder. The Initial Purchaser shall not be liable for any error in judgment made in good faith unless the Initial Purchaser shall have been grossly negligent in ascertaining or failing to ascertain the pertinent facts. In no event shall the Initial Purchaser be liable for special, consequential or punitive damages or for any failure or delay in the performance of its obligations under this Declaration due to forces reasonably beyond the control of the Initial Purchaser including, without limitation, strikes, work stoppages, acts of war or terrorism, insurrection, revolution, nuclear or natural catastrophes or acts of God and interruptions, loss or malfunctions of utilities, communications or computer (software or hardware) services including, without limitation, Internet services; it being understood that the Initial Purchaser shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

     SECTION 10.2 Outside Businesses. Any of the Initial Purchaser, the Trustee, the Delaware Trustee, if any, the Trust’s officers, directors, shareholders, partners, members, representatives, employees or Affiliates, and the Holders may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. None of the foregoing Persons shall be obligated to present any particular investment or other opportunity to the Trust, even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any such Person shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any of the foregoing Persons may engage or be interested in any financial or other transaction with the Initial Purchaser or any Affiliate of the Initial Purchaser, or may act as depository for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Initial Purchaser or its Affiliates.

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ARTICLE 11

VOTING, AMENDMENTS AND MEETINGS

     SECTION 11.1 General. Except as provided in Section 5.2, Article 8 or in this Article 11, Holders will not have any voting rights.

     SECTION 11.2 Voting. Holders shall be entitled to vote as a single class on all matters submitted to the vote of the Holders. Each Pass-Through Security will have one vote on all matters submitted to the vote of the Holders, provided that for purposes of any vote of the Holders, any Pass-Through Securities owned by the Put Counterparty or any of its Affiliates shall be deemed not to be outstanding.

     SECTION 11.3 Amendments.

     (a) Except as provided in this Section 11.3, so long as any Pass-Through Securities are outstanding, any amendment, restatement or revision to this Declaration (including the Certificate of Designation) that would materially and adversely alter the rights, terms or preferences of the Pass-Through Securities may be effected only with the approval of the Holders of a majority in face amount of Pass-Through Securities voting on such matter.

     (b) No amendment to this Declaration shall be made, and any such purported amendment shall be void and ineffective:

     (i) unless, in the case of any purported amendment, the Trustee shall have first received (A) an opinion of nationally recognized independent counsel experienced in such matters (who may be counsel to the Initial Purchaser or the Trust) that such purported amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Pass-Through Securities), provided that, in rendering such an opinion, counsel may consult with and rely upon the opinion of investment banks, accountants and other experts outside of its area of expertise, and (B) an Officer’s Certificate stating that such purported amendment could not reasonably be expected to materially and adversely affect the rights, terms or preferences of the Pass-Through Securities or impair the Trust’s ability to fully perform its obligations under each of its contractual arrangements, unless each party affected thereby consents thereto;

     (ii) unless, in the case of any purported amendment which affects the rights or powers of the Trustee, the Trustee shall have consented to such amendment; and

     (iii) if the result of such amendment would be to:

          (A) cause the Trust to be classified other than as a grantor trust for U.S. federal income tax purposes; or

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          (B) cause the Trust to be deemed to be an investment company required to be registered under the 1940 Act.

     (c) The unanimous consent of the Holders shall be required in order to amend Sections 6.5, 10.1, 11.2, 11.3, 11.4 or 11.5 of this Declaration.

     (d) Notwithstanding the other provisions of this Section 11.3, this Declaration may not be amended without the unanimous consent of the Holders of the Pass-Through Securities with respect to:

     (i) the liability, and limitations thereon, of the Trustee and any of its affiliates;

     (ii) the right of the Holders of the Pass-Through Securities to vote on matters submitted to the vote of Holders of the Pass-Through Securities;

     (iii) the provisions of this Declaration relating to amendments to this Declaration; and

     (iv) the rights of the Holders of the Pass-Through Securities to receive Distributions on the Pass-Through Securities in accordance with their terms, including Distributions in connection with a liquidation of the Trust.

     (e) This Declaration may be amended without the consent of the Holders to:

     (i) cure any ambiguity

     (ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; or

     (iii) conform to any change in the 1940 Act or written change in interpretation or application of the rules and regulations promulgated thereunder by any legislative body, court, government agency or regulatory authority;

provided, however, that any such amendment made pursuant to this Section 11.3(e) shall be void if such amendment materially and adversely affects the Holders, unless first approved by the Holders of a majority in face amount of the Pass-Through Securities voting on such matter.

     (f) Notwithstanding the foregoing, the consent of the Asset Swap Counterparty, the Put Counterparty or the Grantor shall be required for any amendment to this Declaration to the extent that such entity would be adversely affected thereby.

     SECTION 11.4 Other Matters.

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     (a) If the consent of the holders of the ABC Securities is required with respect to any amendment, modification or waiver of the terms of or rights or preferences under, or other matter in respect of the ABC Securities, the ABC Trust or any agreement to which the ABC Trust is a party, the Trustee shall request the direction of the Holders with respect to such matter and shall vote the Trust’s interest in the ABC Securities with respect thereto in the same manner and proportion as directed by the Holders providing direction. At least a Majority in Face Amount of the Holders entitled to provide such direction shall be represented in any such direction of Holders given pursuant to this Section 11.4(a).

     (b) Prior to taking any Legal Action with respect to any Trust Property that would materially and adversely affect the rights, terms or preferences of the ABC Securities, the Trustee, as the holder of the Trust Property shall request the direction of the Holders with respect to such Legal Action and shall act with respect to such Legal Action as directed by a majority in face amount of the Pass-Through Securities actually voting on such matter.

     (c) Notwithstanding Sections 11.4(a) and 11.4(b), the unanimous consent of the Holders of the Pass-Through Securities is required to amend the Put Agreement, the Rate Swap Arrangement or the Asset Swap Arrangement in any manner that would reduce the amount of, or delay the timing of, any receipt by the ABC Trust of payments due thereunder, except where such reduction or delay is expressly provided for in the applicable foregoing document.

     SECTION 11.5 Meetings of the Holders.

     (a) Meetings of the Holders may be called at any time by the Trustee, the Initial Purchaser or a Majority in Face Amount of the Holders as provided by this Declaration. Except to the extent otherwise provided in this Declaration, the following provisions of this Section 11.5 shall apply to meetings of Holders.

     (b) Whenever a vote, consent or approval of Holders is permitted or required under this Declaration, such vote, consent or approval may be given at a meeting of Holders, in person or by proxy, or by written consent.

     (c) Each Holder may authorize any Person to act for it by proxy on all matters in which a Holder is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Holder or its attorney-in-fact. Every proxy shall be revocable at the pleasure of the Holder executing it at any time before it is voted.

     (d) Each meeting of Holders shall be conducted by the Trustee or by such other Person that the Trustee may designate in accordance with the terms of this Declaration.

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     (e) A quorum with respect to any such meeting shall be not less than a Majority in Face Amount of the Holders entitled to vote at the meeting. The Trustee shall cause a notice of any meeting at which Holders are entitled to vote, or of any matter upon which action may be taken by written consent of such Holders, to be mailed to each Holder of record of the Pass-Through Securities at least ten (10) days before such meeting or such action is to become effective. Each such notice shall include a statement setting forth (i) the date and time of such meeting or the date and time by which such action is to be taken, (ii) a description of any action proposed to be taken at such meeting on which such Holders are entitled to vote or of such matters upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. Any and all meetings of Holders shall be held during normal business hours.

     (f) A quorum shall not be required with respect to any meeting of Holders in connection with a Liquidation Shareholders Meeting as referred to in Section 8.2.

     (g) The Trustee shall establish all other provisions relating to meetings of Holders, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote.

ARTICLE 12

REPRESENTATIONS OF
THE TRUSTEE AND THE DELAWARE TRUSTEE

     SECTION 12.1 Representations and Warranties of the Trustee. The trustee that acts as initial Trustee represents and warrants to the Trust and to the Initial Purchaser at the date of this Declaration, and each Successor Trustee represents and warrants to the Trust and the Initial Purchaser at the time of the Successor Trustee’s acceptance of its appointment as Trustee that:

     (a) The Trustee is a Delaware banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of the State of Delaware, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration;

     (b) The execution, delivery and performance by the Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Trustee. The Declaration has been duly executed and delivered by the Trustee and constitutes a legal, valid and binding obligation of the Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors’ rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law);

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     (c) The execution, delivery and performance of this Declaration by the Trustee (i) does not conflict with or constitute a breach of (A) the certificate of incorporation or by-laws or similar organizational documents of the Trustee, (B) any law or regulation of any governmental body, authority or agency to which the Trustee is subject or (C) any agreement to which the Trustee is a party, which conflict or breach (in the case of (B) or (C)) would have a material adverse effect on the Trustee’s ability to perform its obligations under this Declaration and (ii) will not create a lien or encumber any of the Trust Property;

     (d) No consent, approval or authorization of, or registration with or notice to, any state or federal banking authority or other authority regulating the banking or corporate trust activities of the Trustee is required for the execution, delivery or performance by the Trustee of this Declaration; and

     (e) The Trustee, except as expressly provided or contemplated by this Declaration, will not create, incur or assume, or suffer to exist any mortgage, pledge, hypothecation, encumbrance, lien or other charge or security interest upon the Trust Property and agrees to take all actions within its power to eliminate any such liens.

     SECTION 12.2 Representations and Warranties of Delaware Trustee. The Delaware Trustee represents and warrants to the Trust and to the Initial Purchaser at the time of the Delaware Trustee’s acceptance of its appointment as Delaware Trustee, and each Successor Delaware Trustee represents and warrants to the Trust and the Initial Purchaser at the time of the Successor Delaware Trustee’s acceptance of its appointment as Delaware Trustee, that:

     (a) The Delaware Trustee is a Delaware banking corporation with trust powers, duly organized, validly existing and in good standing under the laws of the State of Delaware, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration;

     (b) The Delaware Trustee fulfills the requirements of Section 3807 of the Statutory Trust Act and has the power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration;

     (c) The Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and the Declaration and such performance (i) does not conflict with or constitute a breach of (A) the certificate of incorporation or bylaws or similar organizational documents of the Delaware Trustee, (B) any law or regulation of any governmental body, authority or agency to which the Delaware Trustee is subject or (C) any agreement to which the Delaware Trustee is a party, which conflict or breach (in the case of (B) or (C)) would have a material adverse effect on the Delaware Trustee’s ability to perform its obligations under this Declaration, and (ii) will not create a lien or encumber any of the Trust Property. This Declaration has been duly authorized, executed and delivered by the Delaware Trustee and, under Delaware law, constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in

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accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors’ rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law);

     (d) The execution, delivery and performance of the Declaration by the Delaware Trustee does not conflict with or constitute a breach of the Articles of Organization or By-laws (or other organizational documents) of the Delaware Trustee;

     (e) No consent, approval or authorization of, or registration with or notice to, any state or federal banking authority or other authority regulating the banking or corporate trust activities of the Delaware Trustee is required for the execution, delivery or performance by the Delaware Trustee of the Declaration; and

     (f) The Delaware Trustee is an entity which has its principal place of business in the State of Delaware.

ARTICLE 13

MISCELLANEOUS

     SECTION 13.1 Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, by facsimile or mailed by first-class mail, unless otherwise indicated below, as follows:

     (a) if given to the Trust, in care of the Trustee at the Trust’s mailing address set forth below (or such other address as the Trust may give notice of to the Holders):

The Bank of New York (Delaware)

White Clay Center

Route 273

Newark, Delaware 19711

     (b) if given to the Delaware Trustee, at its Corporate Trust Office set forth below (or such other address as the Delaware Trustee may give notice of to the Holders):

The Bank of New York (Delaware)

White Clay Center

Route 273

Newark, Delaware 19711

     (c) if given to the Initial Purchaser, at its address set forth below (or such other address as the Initial Purchaser may give notice of to the Holders):

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Merrill Lynch, Pierce, Fenner & Smith Incorporated

4 World Financial Center

New York, New York 10080

Facsimile number: (646) 805-0218

Attn: Marc Zindle

     (d) A copy of any notice given pursuant to Section 13.1(a) or (b) shall be delivered to the following:

The Bank of New York

100 Church Street

8th Floor

New York, New York 10286

Facsimile number: (212) 437-6157

Attn: Corporate Trust - Dealing and Trading

and

Merrill Lynch, Pierce, Fenner & Smith Incorporated

4 World Financial Center

New York, New York 10080

Facsimile number: (646) 805-0218

Attn: Marc Zindle

     (e) if given to any Holder by first class mail (or by facsimile if requested by such Holder), at the address set forth on the books and records of the Trust.

     All such notices shall be deemed to have been given when received in person, by facsimile, email or similar form of electronic communication or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.

     SECTION 13.2 Non-Petition To the fullest extent permitted by applicable law, notwithstanding any prior termination of this Declaration, none of the Initial Purchaser, the Trustee, or the Delaware Trustee, any Paying Agent or any Holder of Pass-Through Securities will acquiesce, petition or otherwise invoke or cause the Trust to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Trust under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Trust or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Trust until payment in full of the Pass-Through Securities and the expiration of a period equal to the longest applicable “preference period” prescribed by the federal Bankruptcy Court or other applicable law, plus ten (10) days, following such payment.

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     SECTION 13.3 GOVERNING LAW. THIS DECLARATION, THE PASS-THROUGH SECURITIES AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION THAT WOULD CALL FOR THE APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE; PROVIDED, HOWEVER, THAT THERE SHALL NOT BE APPLICABLE TO THE PARTIES HEREUNDER OR THIS DECLARATION ANY PROVISION OF THE LAWS (STATUTORY OR COMMON, OTHER THAN THE STATUTORY TRUST ACT) OF THE STATE OF DELAWARE PERTAINING TO TRUSTS THAT RELATE TO OR REGULATE, IN A MANNER INCONSISTENT WITH THE TERMS HEREOF, INCLUDING (A) THE FILING WITH ANY COURT OR GOVERNMENTAL BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE FEES AND CHARGES, (B) AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF REAL OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS AND EXPENDITURES TO INCOME OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE NATURE, AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO THE TITLING, STORAGE OR OTHER MANNER OF HOLDING OR INVESTING TRUST ASSETS OR (G) THE ESTABLISHMENT OF FIDUCIARY OR OTHER STANDARDS OR RESPONSIBILITY OR LIMITATIONS ON THE ACTS OR POWERS OF TRUSTEES THAT ARE INCONSISTENT WITH THE LIMITATIONS OR LIABILITIES OR AUTHORITIES AND POWERS OF THE TRUSTEES HEREUNDER AS SET FORTH OR REFERENCED IN THIS TRUST AGREEMENT. SECTIONS 3540 AND 3561 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO THE TRUST.

     SECTION 13.4 Change in Law. If, after the date of this Declaration, there is (i) a change in any law, rule or regulation, (ii) a judicial decision or (iii) a pronouncement of any administrative or professional standards setting body, in each case that would adversely affect any of the terms of this Declaration or the obligations of the parties hereto, the parties shall use their reasonable efforts to determine by negotiation and discussion the manner in which to address the impact of such change, decision or pronouncement, as the case may be; provided, however, that no amendment may be made to this Declaration without first complying with Article 11 of this Declaration.

     SECTION 13.5 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof.

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     SECTION 13.6 Successors and Assigns. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Initial Purchaser and the Trustee shall bind and inure to the benefit of their respective successors and assigns, whether so expressed.

     SECTION 13.7 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby.

     SECTION 13.8 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signatures of the Trustee and a duly authorized officer of the Initial Purchaser to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page.

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     IN WITNESS WHEREOF, each of the undersigned has caused these presents to be executed as of the day and year first above written.

THE BANK OF NEW YORK (DELAWARE)

as Trustee

By: /s/ Michael Santino                                           

       Name Michael Santino

       Title SVP

MERRILL LYNCH, PIERCE, FENNER & SMITH

        INCORPORATED

as Initial Purchaser

By: /s/ Kerry A. Cannella                                         

       Name Kerry A. Cannella

       Title Authorized Signatory

E-46

EX-99.4

PUT OPTION AGREEMENT

between

XL CAPITAL LTD

and

MANGROVE BAY TRUST

Dated July 11, 2003

Preamble

     This Put Option Agreement, dated as of July 11, 2003 (the "Agreement"), is by and between XL Capital Ltd, a Cayman Islands exempted limited company (the "Counterparty"), and Mangrove Bay Trust, a Delaware statutory trust (the "Trust").

Recitals

     WHEREAS, the Counterparty is authorized to and has reserved for issue 20,000,000 Series C Cumulative Preference Ordinary Shares, par value U.S. $0.01 per share, with a liquidation preference of $25 per share, having an aggregate liquidation preference as of the date hereof of U.S. $500,000,000, as the same may be adjusted from time to time as provided herein, designated "XL Capital Preference Ordinary Shares, Series C" (the "Shares"), which Shares shall not be registered with the Securities and Exchange Commission under the United States Securities Act of 1933, as amended, on or before the Voluntary Put Option Payment Date or the Deemed Put Option Payment Date in connection with an exercise of the Put Option in respect of 100% of the Available Liquidation Preference (as such terms are defined below), and may, but are not required to be, so registered thereafter;

     WHEREAS, the Counterparty and the Trust desire to enter into a binding agreement pursuant to which the Counterparty will have the right to issue and sell the Shares to the Trust, and the Trust will have an obligation to purchase the Shares upon the Counterparty's exercise of its option and upon the other terms and conditions agreed upon by the parties; and

     WHEREAS, the Trust hereby acknowledges having paid to the Counterparty, and the Counterparty hereby acknowledges having received from the Trust, cash in an amount equal to U.S. $200,000, as a prepayment of that portion of the purchase price for the Shares equal to the aggregate par value of the Shares (the "Put Option Exercise Price Prepaid Amount").

     NOW THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1.	Definitions; Interpretation
1.1	The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section, clause or other subdivision, and references to "Sections" refer to Sections of this Agreement except as otherwise expressly provided.
1.2	In this Agreement:
	"ABC Securities" has the meaning set forth in the Declaration.

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"Accrued Interest on Sale" has the meaning set forth in Part 3 (Interest and Principal) of the Standard Terms of Asset Transactions.

"Agreement" has the meaning set forth above in the Preamble.

"Appreciation Account" has the meaning set forth in the Declaration.

"Asset Amount" has the meaning set forth in Part 3 (Interest and Principal) of the Standard Terms of Asset Transactions.

"Assets" has the meaning set forth in Part 2 (General Terms of Each Asset Transaction) of the Standard Terms of Asset Transactions.

"Asset Master Agreement" means the ISDA Master Agreement (including the Schedule thereto), dated as of July 11, 2003, between the Asset Swap Counterparty and the Trust and, for certain limited purposes, the Grantor, as the same may be amended or restated from time to time.

"Asset Swap Arrangement" has the meaning set forth in the Declaration; provided that terms defined by reference to the Asset Swap Arrangement in this Agreement shall have the meanings given to such terms in the Asset Swap Arrangement as of the date of this Agreement, unless the Counterparty consents in writing to the use of a different meaning as set forth in an amendment to this Agreement.

"Asset Swap Counterparty" has the meaning set forth in the Declaration.

"Asset Swap Repricing Event" has the meaning set forth in the Declaration.

"Asset Transaction" has the meaning set forth in Part 1 (Option of Party A to Enter Into Asset Transactions) of the Standard Terms of Asset Transactions.

"Asset Transaction Confirmation" has the meaning set forth in Part 1 (Option of Party A to Enter Into Asset Transactions) of the Standard Terms of Asset Transactions.

"Assignment Agreement" has the meaning set forth in the Declaration; provided, that terms defined by reference to the Assignment Agreement in this Agreement shall have the meanings given to such terms in the Assignment Agreement as of the date of this Agreement, unless the Counterparty consents in writing to the use of a different meaning as set forth in an amendment to this Agreement.

"Available Liquidation Preference" has the meaning set forth in Section 3.5.

"Business Day" has the meaning set forth in the Declaration.

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"Cash Settlement Amounts" has the meaning set forth in Part 6 (Cash Settlement) of the Standard Terms of Asset Transactions.

"Ceding Insurer" has the meaning set forth in the Declaration.

"Change in Tax Law" means (a) a change in or amendment to laws, regulations or rulings of any jurisdiction, political subdivision or taxing authority described in the next sentence, (b) a change in the official application or interpretation of those laws, regulations or rulings, or (c) any execution of or amendment to any treaty affecting taxation to which any jurisdiction, political subdivision or taxing authority described in the next sentence is party after July 3, 2003. The jurisdictions, political subdivisions and taxing authorities referred to in the previous sentence are (a) the Cayman Islands or any political subdivision or governmental authority of or in the Cayman Islands with the power to tax, (b) any jurisdiction from or through which the Counterparty or its paying agent is making payments on the Shares or any political subdivision or governmental authority of or in that jurisdiction with the power to tax, or (c) any other jurisdiction in which the Counterparty or its Successor Company is organized or generally subject to taxation or any political subdivision or governmental authority of or in that jurisdiction with the power to tax.

"Closing Date" means the date of this Agreement.

"Counterparty" has the meaning set forth above in the Preamble.

"Counterparty Promissory Note" means the promissory note, dated as of July 11, 2003, by the Trust in favor of the Counterparty in the aggregate initial principal amount of $200,000.

"Credit Support Annex" has the meaning set forth in the Asset Swap Arrangement.

"Declaration" means the Declaration of Trust of the Trust, dated as of May 22, 2003, as the same may be amended or restated from time to time, provided that terms defined by reference to the Declaration in this Agreement shall have the meanings given to such terms in the Declaration as of the date of this Agreement, unless the Counterparty consents in writing to the use of a different meaning as set forth in an amendment to this Agreement.

"Deemed Interest Payment Upon Draw" means, with respect to any Asset subject to an Asset Transaction or portion thereof that is Drawn, an amount of Interest that is deemed to have been received by the Regulation 114 Trust for purposes of the Asset Swap Arrangement, in an amount equal to the sum of:

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(1)	the portion, stated as a dollar amount, of the Market Value, determined as of the Deemed Put Option Payment Date, of the Drawn portion of the Asset that is attributable to accrued interest; and
(2)	the amount of any interest and other income received in cash by the Ceding Insurer with respect to the Drawn portion of the Asset from and including the date of the Draw to but excluding the Deemed Put Option Payment Date.

"Deemed Put Option Payment Date" has the meaning set forth in Section 3.2(d).

"Designated Asset Percentage" means, with respect to an exercise in part of the Put Option (other than where the Put Option has been exercised previously), the following amount, expressed as a percentage:

(1/2 * ALP) - Drawn

Desig.

Where:

ALP	=	The Available Liquidation Preference immediately prior to the exercise (or the Draw or other event giving rise to such exercise, in the case of a deemed exercise);
Drawn	=	The total Asset Amount of the Drawn Assets; and
Desig.	=	The total Asset Amount of the Designated Assets in connection with such Draw.

"Designated Assets" has the meaning set forth in Part 5 (Procedures Upon Partial Exercise of Options Under Put Agreement) of the Standard Terms of Asset Transactions.

"Distribution Date" has the meaning set forth in the Declaration.

"Distribution Period" has the meaning set forth in the Certificate of Designation of the ABC Securities attached to the Declaration as Appendix A.

"Draw" or "Drawn" means all or a portion of any Asset (to the extent held in the Regulation 114 Trust) is drawn by the Ceding Insurer from the Regulation 114 Trust pursuant to Section 4.l of the Regulation 114 Trust Agreement or any other provision thereof (except to the extent that the Assets so drawn are paid to the Trust on or prior to the Business Day following the date of such draw).

"Fixed Rate" means 6.102% per annum.

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"Fixed Rate Period" means the period from and including the Closing Date to and including July 15, 2013 (or, if such day is not a Business Day, the next Business Day).

"Floating Rate" means, with respect to any Distribution Period, a per annum rate equal to the sum of (i) the Three-Month LIBOR Rate (as defined in the Certificate of Designation attached to the Declaration as Appendix A) for such Distribution Period plus (ii) the Floating Rate Spread Percentage.

"Floating Rate Period" means, unless the Final Termination Date occurs prior to July 15, 2013 or, if such day is not a Business Day, the next Business Day (in which case the Floating Rate Period shall not be applicable), the period from and including the day immediately following the last day of the Fixed Rate Period to but excluding the earlier of July 15, 2033 (or, if such day is not a Business Day, the next Business Day) and the Final Termination Date.

"Floating Rate Spread Percentage" means 3.145%.

"Grantor" has the meaning set forth in the Declaration.

"Interest" has the meaning set forth in Part 3 (Interest and Principal) of the Standard Terms of Asset Transactions.

"Interest Payments" has the meaning set forth in Part 4 (Interest Payments) of the Standard Terms of Asset Transactions.

"Moody's" means Moody's Investors Service, Inc. or any successor thereto.

"Par Value" means, with respect to the Shares, U.S.$0.01 per share.

"Pass-Through Trust" has the meaning set forth in the Declaration.

"Put Notice" means a written notice substantially in the form attached hereto as

Annex A.

"Put Option" has the meaning set forth in Section 2.1.

"Put Option Premium" has the meaning set forth in Section 5.1(b).

"Put Option Premium Rate" has the meaning set forth in Section 5.1(a)(i)(A).

"Put Option Premium Calculation Amount" means, on any day, the Available Liquidation Preference plus $1,000.

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"Put Option Premium Certificate" has the meaning set forth in Section 5.2.

"Put Option Exercise Price" means the amount that is due and payable in connection with an exercise of the Put Option, which amount is equal to:

(A)	in the case of an exercise of the Put Option in full or, if the Put Option is exercised in part, in the case of the second partial exercise of the Put Option:
	(1)	the sum of:
		(i)	the amount of the aggregate cash proceeds received by the Trust and/or the Regulation 114 Trust in respect of the sale of all of the Assets pursuant to Part 6 (Cash Settlement) of the Standard Terms of Asset Transactions; and
		(ii)	the aggregate net Cash Settlement Amount, if any, required to be paid by the Asset Swap Counterparty to the Trust pursuant to all of the Asset Transactions (whether or not actually paid); minus
	(2)	the sum of:
		(i)	the aggregate net Cash Settlement Amount required to be paid by the Trust to the Asset Swap Counterparty pursuant to all of the Asset Transactions (whether or not actually paid);
		(ii)	an amount equal to any Deemed Interest Payment Upon Draw; and
		(iii)	the Put Option Exercise Price Prepaid Amount; and
(B)	if the Put Option is exercised in part, in the case of the first partial exercise of the Put Option:
	(1)	the sum of:
		(i)	the Designated Asset Percentage of the amount of the aggregate cash proceeds received by the Trust and/or the Regulation 114 Trust in respect of the sale of the Designated Assets pursuant to Part 6 (Cash Settlement) of the Standard Terms of Asset Transactions;
		(ii)	the aggregate net Cash Settlement Amount, if any, required to be paid by the Asset Swap Counterparty to the Trust pursuant to the

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		Asset Transactions relating to any Drawn Assets (whether or not actually paid); and
	(iii)	the aggregate net Cash Settlement Amount, if any, required to be paid by the Asset Swap Counterparty to the Trust pursuant to the Asset Transactions relating to any Designated Assets (whether or not actually paid) multiplied by the Designated Asset Percentage; minus
(2)	the sum of:
	(i)	the aggregate net Cash Settlement Amount, if any, required to be paid by the Trust to the Asset Swap Counterparty pursuant to the Asset Transactions relating to any Drawn Assets (whether or not actually paid);
	(ii)	the aggregate net Cash Settlement Amount, if any, required to be paid by the Trust to the Asset Swap Counterparty pursuant to the Asset Transactions relating to any Designated Assets (whether or not actually paid) multiplied by the Put Option, the Designated Asset Percentage;
	(iii)	an amount equal to any Deemed Interest Payment Upon Draw; and
	(iv)	one-half of the Put Option Exercise Price Prepaid Amount.

"Put Option Exercise Price Prepaid Amount" has the meaning set forth in the Recitals to this Agreement.

"Rate Swap Arrangement" has the meaning set forth in the Declaration.

"Rate Swap Arrangement Confirmation" means the confirmation entered into in connection with, and comprising a part of, the Rate Swap Arrangement.

"Register of Members" means the Counterparty's Register of Members.

"Regulation 114 Trust" has the meaning set forth in the Declaration.

"Regulation 114 Trust Agreement" means the agreement dated as of July 11, 2003, among the Grantor, as grantor, the Ceding Insurer, as beneficiary, and The Bank of New York, as trustee, pursuant to which the Regulation 114 Trust was established, as the same may be amended or restated from time to time.

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"Required Counterparty Ratings" has the meaning set forth in Part 1(h)(ii) of the Asset Master Agreement.
"Required Put Option Premium Rate" means, with respect to any Asset Swap Repricing Event, a rate (which may be positive or negative) equal to:
	(i)	with respect to the Fixed Rate Period:
		(A)	the Fixed Rate (as defined in this Section 1.2); minus
		(B)	the sum of:
			(x)	3.93%; plus
			(y)	the Spread (as adjusted in connection with such Asset Swap Repricing Event pursuant to and in accordance with Section 13.7 of the Declaration) (or, if the Spread is negative, minus the absolute value of the Spread); and
	(ii)	with respect to the Floating Rate Period:
		(A)	the Floating Rate Spread Percentage (as defined in this Section 1.2); minus
		(B)	the Spread (as adjusted in connection with such Asset Swap Repricing Event pursuant to and in accordance with Section 13.7 of the Declaration) (or, if the Spread is negative, plus the absolute value of the Spread).
"S&P" means Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc., or any successor thereto.
"Shares" has the meaning set forth in the Recitals to this Agreement.
"Spread" has the meaning set forth in Part 9 of the Standard Terms of Asset Transactions.
"Standard Terms of Asset Transactions" has the meaning set forth in the Asset Swap Arrangement.
"Successor Company" means an entity formed by a consolidation, merger or amalgamation involving the Counterparty or an entity to which the Counterparty conveys, transfers or leases substantially all of its properties and assets.

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"Trust" has the meaning set forth above in the Preamble.
"Trust Assets" has the meaning set forth in Part 2 (General Terms of Each Asset Transaction) of the Standard Terms of Asset Transactions.
"Trustee" has the meaning set forth in the Declaration.
"Valuation Date" has the meaning set forth in Paragraph 13(c) of the Credit Support Annex.
"Voluntary Put Option Payment Date" has the meaning set forth in Section 3.2(a).
		In this Agreement, any reference to a "company" shall be construed so as to include any corporation, trust, partnership, limited liability company or other legal entity, wheresoever incorporated or established.
1.3		In this Agreement, save where the contrary is indicated, any reference to:
	(a)	this Agreement or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented in accordance with its terms; and
	(b)	a statute shall be construed as a reference to such statute as the same may have been, or may from time to time be, amended or re-enacted.
1.4		In this Agreement, any definition shall be equally applicable to both the singular and plural forms of the defined terms.
2.		Put Option; Term
2.1		In consideration of the payment of the Put Option Premium, the Trust hereby grants to the Counterparty the absolute, irrevocable and unconditional right to require the Trust to purchase the Shares on the terms set forth in this Agreement. Such right is referred to herein as the "Put Option."
2.2		Subject to Section 2.3, this Agreement shall remain in effect until the earliest to occur of the following:
	(a)	July 15, 2033 (or, if such day is not a Business Day, the next Business Day);

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	(b)	A Final Termination Date (as defined in Part 1(l) of the Schedule to the Asset Master Agreement) (unless the Final Termination Date results from a Party A Termination (as defined in Part 1(l)(vii) of the Schedule to the Asset Master Agreement) where the Asset Swap Counterparty is not replaced pursuant to Section 13.7 of the Declaration, in which case this Agreement shall remain in effect until the 30th day following such Final Termination Date);
	(c)	The date on which the Counterparty takes or elects to take any action to amend (i) the Counterparty's Memorandum of Association, (ii) the Counterparty's Articles of Association or (iii) the resolutions establishing the terms and preferences of the Shares, in each case in a manner that would adversely affect the rights of the holders of the Shares, without the prior consent of the Trust (acting at the direction of the holders of the ABC Securities pursuant to Section 13.4(b) of the Declaration); provided that as of such date, the Counterparty has not issued any Shares pursuant to this Agreement (and, for avoidance of doubt, this subsection (c) shall not apply after any Shares have been issued);
	(d)	The fifth Business Day following the first Distribution Date occurring on or after July 15, 2013 subsequent to the provision of written notice by the Counterparty to the Trust stating that the Counterparty is terminating this Agreement so long as payment of the Put Option Premium accrued through the effective date of such termination has been paid in full. Delivery of a termination notice by the Counterparty pursuant to this Section 2.2(d) shall be irrevocable (and may not be given with respect to any Distribution Date prior to July 15, 2013);
	(e)	On or after July 15, 2013, if the Counterparty fails to pay the Put Option Premium when due and does not cure the default, including the payment of interest accrued thereon within five (5) Business Days thereafter, the first Business Day after the expiration of such cure period;
	(f)	The Voluntary Put Option Payment Date or the Deemed Put Option Payment Date in respect of a voluntary or deemed automatic exercise in full of the Put Option, as the case may be, so long as the Put Option Exercise Price is paid in full and the Shares are delivered to the Trust in accordance with this Agreement; and
	(g)	The date on which the liquidation of the Trust is commenced, so long as all required payments under this Agreement have been made.
2.3	Notwithstanding Section 2.2:
	(a)	At any time during the Fixed Rate Period, provided that there already has been an exercise in part of the Put Option (whether due to a voluntary or a deemed automatic exercise), if the Counterparty shall have submitted to holders of its

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		ordinary shares a proposal for (i) an amalgamation, consolidation, merger, arrangement, reconstruction, reincorporation, de-registration or any other similar transaction involving the Counterparty that requires, or (ii) any other matter that, as a result of any change in Cayman Islands law (whether by enactment or official interpretation) after the date of this Agreement requires, in the case of either (i) or (ii), a vote of the holders of the Shares at the time outstanding, voting separately as a single class (alone or with one or more class or series of preference ordinary shares), then the Counterparty will have the right to terminate this Agreement upon four Business Days prior written notice to the Trust and the Asset Swap Counterparty, so long as payment of the Put Option Premium accrued through the effective date of such termination has been paid in full;
	(b)	If, at any time, there is a Change in Tax Law that would require the Counterparty or any Successor Company to pay additional amounts with respect to any Shares, and the payment of those additional amounts cannot be avoided by the use of any reasonable measures available to the Counterparty or any Successor Company, then the Counterparty will have the right to terminate this Agreement upon four Business Days prior written notice to the Trust and the Asset Swap Counterparty, so long as payment of the Put Option Premium accrued through the effective date of such termination has been paid in full; and
	(c)	At any time during the Fixed Rate Period, if any action is taken to commence a winding up, liquidation or an insolvency-related reorganization of the Counterparty (including, without limitation, the serving on the Counterparty of a statutory demand requiring the Counterparty to pay a sum due and the calling of a meeting of the shareholders of the Counterparty), then the Counterparty will have the right to terminate this Agreement, subject to applicable law, upon four Business Days prior written notice to the Trust and the Asset Swap Counterparty, so long as payment of the Put Option Premium accrued through the effective date of such termination has been paid in full, provided that, if an event described in Section 3.2(d)(vi) occurs prior to the second Business Day after the Counterparty delivers written notice pursuant to this Section 2.3(c), then the Counterparty's right to terminate this Agreement shall cease immediately and there will be a deemed automatic exercise of the Put Option in accordance with Section 3.2(d).
2.4	Notwithstanding any other part of this Section 2, any termination pursuant to Section 2.2 or Section 2.3 (other than pursuant to Section 2.2(f)) shall not become effective unless and until all of the Assets are released to the ABC Trust from the Regulation 114 Trust. The parties acknowledge that, if the Assets are not released on or prior to the date of the applicable event described in Section 2.2 or Section 2.3,there will be a deemed automatic exercise of the Put Option in full pursuant to Section 3.2(d)(vi) prior to the effective date of the termination of this Agreement.

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2.5	Upon termination of this Agreement pursuant to Section 2.2 where the Put Option has not been exercised in full, the Counterparty shall return to the Trust (i) if the Put Option has not been previously exercised, the Put Option Exercise Price Prepaid Amount and (ii) if the Put Option has been previously exercised in part, one-half of the Put Option Exercise Price Prepaid Amount.
3.	Exercise of Put Option
3.1	The Trust agrees that it shall, upon exercise of the Put Option as provided in Section 3.2, purchase the Shares from the Counterparty for a purchase price equal to the Put Option Exercise Price. The Put Option Exercise Price shall be payable on the Voluntary Put Option Payment Date or the Deemed Put Option Payment Date (each as defined below), as the case may be.
3.2	(a) Voluntary Exercise. The Counterparty may exercise the Put Option at any time upon four (4) Business Days' prior written notice after the date hereof and prior to the termination of this Agreement by providing a Put Notice to the Trust (with a copy to the Asset Swap Counterparty), specifying a payment date (the "Voluntary Put Option Payment Date"), which shall be the fourth (4th) Business Day after receipt of the Put Notice by the Trust (provided, that if a Final Termination Event (as defined in Part 1(l) of the Schedule to the Asset Master Agreement) occurs on or prior to the fourth (4th) Business Day after delivery of the Put Notice, then the Voluntary Put Option Payment Date shall be the Final Termination Date).
	(b)	An exercise of the Put Option pursuant to Section 3.2(a) may be made either (i) in full or (ii) in part, provided that a partial exercise of the Put Option, if it is the first partial exercise, must be for an amount equal to 50% of the Available Liquidation Preference on the date of such exercise; and any subsequent exercise must be for the full Available Liquidation Preference remaining on the date of such exercise.
	(c)	Any notice of exercise provided pursuant to Section 3.2(a) shall be irrevocable.
	(d)	Deemed Automatic Exercise. The Put Option will be deemed automatically exercised by the Counterparty upon the occurrence of any of the following events, in which case the payment date (the "Deemed Put Option Payment Date") shall be the fourth (4th) Business Day following the date on which notice of the occurrence of such event has been received by the Asset Swap Counterparty and, solely in the case of clause (v) below, the Counterparty (provided,that if a Final Termination Event occurs on or prior to the fourth (4th) Business Day after the occurrence of the event giving rise to such Deemed Put Option Payment Date, then the Deemed Put Option Payment Date shall be the Final Termination Date):

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(i)	if, prior to July 15, 2013, the Counterparty fails to pay the Put Option Premium when due and does not cure such payment default, including the payment of interest accrued thereon, within five (5) Business Days thereafter;
(ii)	if the Counterparty fails to make a payment due under the Rate Swap Arrangement and does not cure the payment default, including the payment of interest accrued thereon, within five (5) Business Days thereafter;
(iii)	if the rating of the senior unsecured indebtedness of the Counterparty is reduced below "BBB-" by S&P or below "Baa3" by Moody's;
(iv)	a Draw;
(v)	if, at any time, the Regulation 114 Trust fails to (including, without limitation, as a result of the Ceding Insurer's failure to provide its consent) act in accordance with instructions given by the Asset Swap Counterparty with respect to the purchase or sale of an Asset given in accordance with the Asset Swap Arrangement, including without limitation the Standard Terms of Asset Transactions and the Grantor Letter of Instruction (as defined in the Asset Swap Arrangement), and such failure is continuing on the second (2nd) Business Day following the date on which such action was first required to be taken;
(vi)	if, at any time, the Regulation 114 Trust fails to (including, without limitation, as a result of the Ceding Insurer's failure to provide its consent) distribute to the Trust:
	(A)	cash in an amount equal to Interest (other than Accrued Interest on Sale) in respect of the Trust Assets on or prior to the last day of the grace period provided under Section 5(a)(i) of the Asset Master Agreement following the date on which a related Interest Payment is required to be made to the Asset Swap Counterparty pursuant to Part 4 (Interest Payments) of the Standard Terms of Asset Transactions or Part 2 (Interest Payments) of the Confirmation entered into between Party A and Party B in the form set forth as Exhibit A-1 to the Schedule to the Asset Master Agreement;
	(B)	cash or other Assets on or prior to the last day of the grace period provided under Part 1(e)(iv) of the Schedule to the Asset Master

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Agreement following the date on which such cash or other Assets are required to be deposited into the Appreciation Account pursuant to the Credit Support Annex to the Asset Swap Arrangement;
		(C)	cash in an amount equal to the Cash Settlement Amounts and Accrued Interest on Sale required to be paid with respect to any Assets (other than Drawn Assets) from Trust Assets pursuant to Part 6 (Cash Settlement) and Part 10 (Weekly Release of Cash Settlement Amounts and Certain Interest Payments) of the Standard Terms of Asset Transactions on or prior to the last day of the grace period provided under Section 5(a)(i) of the Asset Master Agreement following the date on which such payments are required to be made pursuant toPart 6 (Cash Settlement) or Part 10 (Weekly Release of Cash Settlement Amounts and Certain Interest Payments), as the case may be, of the Standard Terms of Asset Transactions;
		(D)	upon an exercise in part of the Put Option pursuant to Section 3.2(a) or Section 3.2(d), as the case may be, an amount of cash equal to the Asset Amount of the Assets designated or deemed to be designated as Designated Assets pursuant to Part 5 (Procedures Upon Partial Exercise of Option Under Put Agreement) of the Standard Terms of Asset Transactions on or prior to the last day of the grace period provided under Section 5(a)(i) of the Asset Master Agreement following the Voluntary Put Exercise Date or the Deemed Put Option Exercise Date, as the case may be; or
		(E)	all of the Trust Assets (x) upon the occurrence of a liquidation or termination of the Regulation 114 Trust Agreement or (y) on or prior to the last day of the grace period provided under Section 5(a)(i) of the Asset Master Agreement following the Final Termination Date; and
	(vii)	if:
		(A)	a special resolution of the Counterparty requiring the Counterparty to be wound up voluntarily is passed;
		(B)	a petition for the winding up of the Counterparty is filed with the Grand Court of the Cayman Islands; or

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			(C)	an order is made by the Grand Court of the Cayman Islands for the summoning of a meeting of the creditors of the Counterparty or any class of them or the members of the Counterparty or any class of them, to agree to any compromise or arrangement between the Counterparty and its creditors or any class of them or between the Counterparty and its members or any class of them;
			provided that, upon an exercise of the Put Option due to an event described in this Section 3.2(d)(vii), the Put Option will have been deemed automatically exercised and 100% of the Shares that may be put to the Trust under this Agreement at such time (which, for the avoidance of doubt, shall have an aggregate liquidation preference equal to 100% of the Available Liquidation Preference) will be deemed to have been issued to the Trust immediately prior to the occurrence of such event.
	(e)	An exercise of the Put Option pursuant to Section 3.2(d) will be deemed to be an exercise in full; provided, however, that an exercise pursuant to Section 3.2(d)(iv) at a time when there has been no previous voluntary or deemed automatic exercise of the Put Option and where the aggregate Asset Amount (as defined in Part 3(Interest and Principal) of the Standard Terms of Asset Transactions) of the Drawn Assets is less than or equal to 50% of the aggregate Asset Amount of all of the Assets at the time of such Draw, will be deemed to be an exercise in part, in an amount equal to 50% of the Available Liquidation Preference on such date.
	(f)	The Counterparty shall promptly notify the Trust and the Asset Swap Counterparty upon the occurrence of an event described in Section 3.2(d)(iii), (iv), or (vii) stating the date on which the event occurred and the Deemed Put Option Payment Date. The Trust shall promptly notify the Counterparty and the Asset Swap Counterparty upon the occurrence of an event described in Section 3.2(d)(v) stating the date on which the event occurred and the Deemed Put Option Payment Date. A notice delivered in accordance with this Section 3.2(f) upon the occurrence of an event described in Section 3.2(d)(iv) shall specify (i) the aggregate Asset Amount of the Assets Drawn and (ii) the date on which such Assets were Drawn. The failure of the Counterparty to deliver the notice required by this Section 3.2(f) shall not relieve the Counterparty of any of its obligations under this Agreement.
3.3	(a)	Subject to the satisfaction of the obligations contained in Section 3.3(b), on the Voluntary Put Option Payment Date or Deemed Put Option Payment Date, as the case may be, the Counterparty will cause to be delivered and issued to the Trust 100% of the Shares that may be put to the Trust under this Agreement at such time (which, for the avoidance of doubt, shall have an aggregate liquidation preference equal to 100% of the Available Liquidation Preference), in the event of

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		an exercise in full, or 50% of the Shares (which, for the avoidance of doubt, shall have an aggregate liquidation preference equal to 50% of the Available Liquidation Preference) that may be put to the Trust under this Agreement at such time, in the event of an exercise in part, and shall take all other actions necessary to issue and deliver such Shares.
	(b)	If the Put Option is exercised (whether pursuant to Section 3.2(a) or Section 3.2(d)), then on the Voluntary Put Option Payment Date or the Deemed Put Option Payment Date, as the case may be, the Trust will deliver to the Counterparty cash in an amount equal to the Put Option Exercise Price; provided, that if the Put Option Exercise Price is negative, the Counterparty shall pay such amount to the Trust. The aggregate Asset Amount of any Assets Drawn will be considered a portion of the consideration received by the Counterparty in exchange for the Shares (which consideration, for avoidance of doubt, has been reflected as a reduction to the Put Option Exercise Price as defined in this Agreement and shall not result in further reduction of such amount).
	(c)	The Shares issued and delivered pursuant to this Section 3.3 and registered in the Counterparty's Register of Members shall be duly authorized, validly issued, fully paid and non-assessable and shall be delivered free and clear of any defect in title, together with all transfer and registration documents (or all notices, instructions or other communications) and the payment of any transfer taxes as are necessary to convey title to the Shares to the Trust (or its nominee).
3.4	Payment of the Put Option Exercise Price on the Voluntary Put Option Payment Date or the Deemed Put Option Payment Date shall be subordinate in right of payment to the prior payment in full in cash of all net amounts due by the Trust to the Asset Swap Counterparty under the Asset Swap Arrangement on such date. The subordination contained in this Section 3.4 is for the benefit of the Asset Swap Counterparty, who may enforce this Section 3.4 to the same extent as if it were a party to this Agreement.
3.5	Available Shares. Commencing on the Closing Date, the Counterparty will have the absolute, irrevocable and unconditional right to sell to the Trust pursuant to Section 3.2 Shares having an aggregate liquidation preference equal to $500,000,000 (as adjusted from time to time in accordance with this Section 3.5, the "Available Liquidation Preference"). The Available Liquidation Preference shall be subject to reduction in the manner set forth in subsections (a) and (b) below.
	(a)	Upon a partial exercise of the Put Option, the Available Liquidation Preference shall be reduced by the amount of the aggregate liquidation preference of the Shares issued to the Trust in connection with such partial exercise. Any such reduction shall be effective for all purposes of this Agreement, the Asset Swap

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		Arrangement and the Rate Swap Arrangement, as of the Deemed Put Option Payment Date or Voluntary Put Option Payment Date, as the case may be.
	(b)	Upon an exercise in full of the Put Option, the Available Liquidation Preference shall be reduced to zero, effective as of the related Deemed Put Option Payment Date or Voluntary Put Option Payment Date, as the case may be.
4.	Set Off
4.1	The Trust shall be entitled to set off any amounts (or, in the case of the Rate Swap Arrangement, net amounts) due and payable (but not yet paid) by the Trust to the Counterparty on or before the Voluntary Put Option Payment Date or the Deemed Put Option Payment Date, as the case may be, in respect of the Put Option Exercise Price, under the Rate Swap Arrangement (including accrued and unpaid interest on such amounts), the Counterparty Promissory Note. Such amounts may be set off against, and to the extent of, any amounts (or, in the case of the Rate Swap Arrangement, net amounts) due and payable (but not yet paid) by the Counterparty to the Trust on or prior to such date, in respect of the Put Option Premium, under the Rate Swap Arrangement (including accrued and unpaid interest on such amounts) and the Put Option Exercise Price Prepaid Amount (or portion thereof) that is returned by the Counterparty to the Trust pursuant to Section 2.5.
5.	Put Option Premium
5.1	(a)	In consideration for the Trust's agreement to purchase the Shares in accordance with the terms of this Agreement, the Counterparty agrees to pay to the Trust, in U.S. dollars, on the last Business Day of each Distribution Period, an amount equal to the sum of:
		(i)	the product of:
			(A)	2.272%, as such rate may be adjusted in connection with an Asset Swap Repricing Event pursuant to and in accordance with Section 13.7 of the Declaration (as so adjusted from time to time and in effect, the "Put Option Premium Rate");
			(B)	the average daily Put Option Premium Calculation Amount for such Distribution Period; and
			(C)	a fraction, (x) the numerator of which, with respect to any Distribution Period ending during the Fixed Rate Period, will be 180 (or, (x) in the case of the payment made on the first distribution payment date, 184 and (y) if this Agreement is

18

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				terminated during the Fixed Rate Period other than on the last day of a Distribution Period, with respect to the payment due on such date, the actual number of days elapsed in the applicable Distribution Period to but excluding such date), and, with respect to any Distribution Period ending during the Floating Rate Period, will be the actual number of days in the Distribution Period, and (y) the denominator of which will be 360; plus
		(ii)	the ordinary fees and expenses of the Trust, the Pass-Through Trust and, on behalf of the Grantor, the Regulation 114 Trust incurred during such Distribution Period (including ordinary administrative expenses, such as the fees of the Trustee as set forth in Section 5.1(d) of the Declaration, but excluding any extraordinary, or unanticipated, expenses, such as legal fees relating to litigation involving the Trust or the Pass-Through Trust, all of which shall be borne by the Trust) (as reflected in the Put Option Premium Certificate described below).
	(b)	The amount derived in accordance with the formula set forth in Section 5.1(a) shall be known herein as the "Put Option Premium."
5.2	Put Option Premium Certificate. The amount of the Put Option Premium shall be calculated by the Trustee and delivered in writing (the "Put Option Premium Certificate"), substantially in the form attached hereto as Annex B, to the Counterparty prior to 4:00 p.m. New York time on the third Business Day preceding the last Business Day of each Distribution Period. The Put Option Premium Certificate shall set forth any fees and ordinary expenses that were paid or incurred by the Trustee on behalf of the Trust and the trustee of the Pass-Through Trust on behalf of the Pass-Through Trust for the respective Distribution Period, to the extent that such fees and ordinary expenses may be included in the Put Option Premium pursuant to Section 5.1(a)(ii).
5.3	Accrual of Interest on Unpaid Put Option Premium. If the Put Option Premium is not paid on the date on which it is due, interest shall accrue thereon (from and including the original due date for such payment) at a rate equal to the Fixed Rate, during the Fixed Rate Period, and at the Floating Rate, during the Floating Rate Period, in each case calculated on the basis of daily compounding and the actual number of days elapsed, until such Put Option Premium is paid, either directly or by set off as provided in Section 4.1. Upon (i) a Voluntary Put Option Payment Date as a result of an exercise of the Put Option in full or the second partial exercise of the Put Option, or (ii) the date of the termination of this Agreement, any accrued and unpaid Put Option Premium through such date shall be paid in full. The Counterparty's obligation to pay any accrued and unpaid Put Option Premium, including interest accrued thereon, through and including the date on which such amount is paid, shall survive the termination of this Agreement, notwithstanding any provision of Section 7.1 to the contrary.

5.4	Resolution of Disputed Amounts. In the event that the Counterparty disputes in good faith any portion of the Put Option Premium reflected in any Put Option Premium Certificate, the Counterparty shall pay the undisputed portion of the Put Option Premium and shall provide written notice to the Trustee identifying the disputed portion and the nature of the dispute no later than the day on which the Put Option Premium is due. The parties will consult with one another in an attempt to resolve the dispute and, in the event that the dispute cannot be resolved within three (3) Business Days following the date on which the Put Option Premium is due, shall petition a court of competent jurisdiction to resolve the dispute. The disputed portion of such amount shall not be deemed due and payable for purposes of Section 2.2(e), Section 3.2(d)(i) or Section 5.3 until the Business Day following the date on which the parties resolve the dispute or such dispute is resolved by a court of competent jurisdiction (in each case, to the extent that the dispute is resolved in favor of the Trustee). To the extent that any such dispute is resolved in favor of the Trustee, interest shall be deemed to have accrued on such unpaid amount pursuant to Section 5.3 from and after the date on which such amount originally was due, and such interest shall be payable by the Counterparty.
5.5	Additional Payment for Default Interest and Certain Expenses Under Asset Swap Arrangement. In the event that the ABC Trust is required to pay to the Asset Swap Counterparty any interest accrued pursuant to Section 2(e) of the Master Agreement or any amount in respect of expenses pursuant to Section 11 of the Asset Master Agreement or Part 4(l) of the Schedule thereto, the Put Counterparty shall pay an equivalent amount to the Asset Swap Counterparty to the extent that the ABC Trust's obligation to make such payment results from an event described in clauses (v) or (vi) of Section 3.2(d).
6.	Replacement of Asset Swap Counterparty
6.1	In the event that a search for a replacement asset swap counterparty is required by Section 13.7 of the Declaration, within ten (10) days of such event, the Counterparty will seek bids from four major dealers in the swap market with a rating consistent with the Required Counterparty Ratings. The Counterparty will instruct the potential bidders to submit their bids in writing to the Trustee, with a copy to the Counterparty. If all of the bids received by the Trustee specify rates that are less than the Required Put Option Premium Rate, the Counterparty will have the option to:
		(i)	agree to increase the Put Option Premium Rate to the Required Put Option Premium Rate (calculated using the highest Spread offered by the bidders), in which case the Trustee will be required to engage the bidder offering the highest Spread as the replacement asset swap counterparty;
		(ii)	exercise the Put Option in full; or

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		(iii)	have the Trustee reject all of the bids and terminate the Agreement (provided, that prior to any such liquidation, all payments accrued or owing hereunder shall have been paid and the Assets have been released from the Regulation 114 Trust).
6.2	If no potential replacement asset swap counterparties are identified in connection with a search conducted in accordance with Section 13.7 of the Declaration, then the Counterparty will have the option to (i) exercise the Put Option in full or (ii) terminate this Agreement.
6.3	If the Trust engages a replacement asset swap counterparty, the Put Option Premium Rate will be adjusted automatically (if necessary) to be equal to the Required Put Option Premium Rate (and, if the Required Put Option Premium Rate would be less than or equal to zero, then the Put Option Premium Rate will be equal to zero and no Put Option Premium pursuant to Section 5.1(a)(i) will be due (although the Counterparty will continue to be required to pay a Put Option Premium in respect of Section 5.1(a)(ii)).
6.4	The procedures contained in this Section 6 will be performed each time an asset swap counterparty is replaced under the Asset Swap Arrangement in accordance with Section 13.7 of the Declaration.
6.5	In the event that pursuant to Section 13.7 of the Declaration in connection with a Swap Repricing Event the Asset Swap Counterparty:
		(i)	is not replaced (either as described in clause (iii) of Section 6.1 or as described in Section 6.2 above), the Counterparty shall reimburse the Trust for the administrative costs of the search for the replacement asset swap counterparty; and
		(i)	is replaced, the replacement asset swap counterparty shall reimburse the Trust for the administrative costs of the search for the replacement asset swap counterparty (and the Trust shall require that the replacement asset swap counterparty agree to pay such amount as a condition to becoming the replacement asset swap counterparty).
7.	Obligations Absolute
7.1	Each of the Counterparty and the Trust acknowledges that, provided the other party has complied with the terms of this Agreement, the obligations of the Counterparty and the Trust, as the case may be, undertaken under this Agreement are absolute, irrevocable and unconditional irrespective of any circumstances whatsoever, including any defense otherwise available to the Counterparty or the Trust, respectively, in equity or at law, including, without limitation, the defense of fraud, any defense based on the failure of the

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	Trust or the Counterparty, respectively, to disclose any matter, whether or not material, to the Counterparty or the Trust, respectively, or any other person, and any defense of breach of warranty or misrepresentation, and irrespective of any other circumstance which might otherwise constitute a legal or equitable discharge or defense of an insurer, surety or guarantor under any and all circumstances. For the avoidance of doubt, the right of the Counterparty to exercise the Put Option shall not be limited by, and shall be without regard to, the compliance or non-compliance of the Trust and the Counterparty with the representations and warranties set forth in Section 10.1 and Section 10.2, whether on the Closing Date or at any time thereafter. Further, the enforceability and effectiveness of this Agreement and the liability of the Counterparty or the Trust and the rights, remedies, powers and privileges of the Counterparty or the Trust under this Agreement shall not be affected, limited, reduced, discharged or terminated, and the Counterparty and the Trust hereby expressly waive, to the fullest extent permitted by applicable law, any defense now or in the future arising by reason of:
	(a)	the illegality, invalidity or unenforceability of all or any part of the Declaration;
	(b)	any action taken by the Counterparty or the Trust expressly provided for herein;
	(c)	any change in the direct or indirect ownership or control of the Counterparty or the Trust or of any shares or ownership interests thereof not in contravention of Section 8.1 hereof; or
	(d)	any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of or for the Counterparty or the Trust;
	provided, however, that notwithstanding the provisions of this Section 7.1, neither the Trust nor the Counterparty shall have any further obligations under this Agreement after the termination of this Agreement (other than as expressly provided for herein). In addition, the breach of any covenant made in this Agreement by the Trust shall not terminate this Agreement or limit the rights of the Counterparty hereunder.
7.2	No failure or delay by the Counterparty or Trust in exercising its rights hereunder shall operate as a waiver of its rights hereunder (except as specifically provided in this Agreement, including, without limitation, in respect of the notice periods and payment dates set forth in Section 3.2 and Section 3.3) and, subject to the termination of this Agreement not having occurred, the Counterparty and Trust may continue to exercise their rights hereunder at any time.
8.	Covenants
8.1	Notwithstanding Section 2.2(c), the Counterparty hereby covenants and agrees that, at all times prior to the earlier of the termination of this Agreement or completion of the

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	issuance and sale of any of the Shares to the Trust pursuant to this Agreement, it shall not amend (i) its Memorandum of Association, (ii) its Articles of Association or (iii) the resolutions establishing the terms and preferences of the Shares in a manner that would adversely affect the rights of the holders of Shares, without the prior consent of the Trust (acting at the direction of the holders of the ABC Securities pursuant to Section 13.4(b) of the Declaration). If the Counterparty takes or elects to take any such action that would otherwise require the prior consent of the holders of a majority in face amount of ABC Securities, without obtaining such consent, it shall immediately notify the Trust of such action in writing and this Agreement shall terminate in accordance with the procedures contained in Section 2; provided that, if the Assets are not released from the Regulation 114 Trust upon such termination, there will be a deemed automatic exercise of the Put Option pursuant to Section 3.2(d)(vi) prior to the effectiveness of the termination of this Agreement. Upon the issuance of Shares due to the events described in this Section 8.1, holders of the Shares will have the right to have their Shares redeemed by the Counterparty for cash at a redemption price of U.S.$26 per share plus accrued dividends, if any, to the date of such redemption, and the Shares will have the additional rights, preferences, limitations and other terms contained, and shall be subject to, in the resolutions setting forth the terms and conditions of the Shares.
8.2	The Counterparty hereby covenants and agrees that the Counterparty will not register the Shares with the Securities and Exchange Commission under the United States Securities Act of 1933, as amended, on or before the Voluntary Put Option Payment Date or Deemed Put Option Payment Date, as the case may be, and will maintain an adequate reserve of Shares for the issuance thereof in connection with this Agreement.
8.3	The Trust hereby covenants and agrees that, at all times prior to the earlier of the termination of this Agreement or completion of the sale of the Shares to the Trust, pursuant to this Agreement, it shall not amend, restate, revise or otherwise alter the rights, terms and preferences of the ABC Securities whether by operation of merger, reorganization or otherwise, other than in accordance with the Declaration, and it will not register the ABC Securities with the Securities and Exchange Commission under the United States Securities Act of 1933, as amended.
8.4	The Counterparty hereby covenants and agrees that any Shares delivered to the Trust shall rank, at the time of delivery and issuance, (a) senior to the ordinary shares of the Counterparty and (b) pari passu with the most senior preference ordinary shares of the Counterparty then issued and outstanding. The Counterparty further agrees and covenants that it shall take all action necessary to issue and deliver the Shares upon exercise, including registration in the Counterparty's Register of Members.

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9.	This Agreement to Govern
	If there is any inconsistency between any provision of this Agreement and any other agreement to which each of the Trust and the Counterparty is a party, the provisions of this Agreement shall prevail to the extent of such inconsistency but not otherwise.
10.	Representations and Warranties
10.1	The Trust represents and warrants to the Counterparty that, as of the date hereof:
	(a)	it is duly organized and validly existing under the Delaware Statutory Trust Act and has the power and authority to own its assets and to conduct the activities which it conducts;
	(b)	its entry into, exercise of its rights and/or performance of or compliance with its obligations under this Agreement do not and will not violate (1) any law to which it is subject, (2) any of its constitutional documents or (3) any agreement to which it is a party or which is binding on it or its assets;
	(c)	it has the power to enter into, exercise its rights and perform and comply with its obligations under this Agreement and has taken all necessary action to authorize the execution, delivery and performance of this Agreement;
	(d)	it will obtain and maintain in effect and comply with the terms of all necessary consents, registrations and the like of or with any government or other regulatory body or authority applicable to this Agreement;
	(e)	it has duly authorized, executed and delivered this Agreement and the Agreement is fully enforceable against it;
	(f)	its obligations under this Agreement are valid, binding and enforceable at law;
	(g)	it is not in default under any agreement to which it is a party or by which it or its assets is or are bound and no litigation, arbitration or administrative proceedings are current or pending, which default, litigation, arbitration or administrative proceedings are material in the context of this Agreement;
	(h)	it is not necessary or advisable in order to ensure the validity, effectiveness, performance or enforceability of this Agreement that any document be filed, registered or recorded in any public office or elsewhere;
	(i)	no consent, approval, authorization or order of any court or governmental authority, agency, commission or commissioner or other regulatory authority is

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		required for the consummation by the Trust of the transactions contemplated by this Agreement; and
	(j)	assuming compliance with the transfer restrictions with respect to the ABC Securities set forth in the Declaration, the Trust is not required to register with Securities and Exchange Commission as an investment company under the States Investment Company Act of 1940, as amended.
10.2	The Counterparty represents and warrants to the Trust that, as of the date hereof:
	(a)	it is duly organized and validly existing as an exempted limited company under the laws of the Cayman Islands and has full power and authority to own its assets and to conduct the activities which it conducts;
	(b)	its entry into, exercise of its rights and/or performance of or compliance with obligations under this Agreement do not and will not violate (1) any law, rule, regulation or order to which it is subject, (2) any of its constitutional documents (3) any agreement to which it is a party or which is binding on it or its assets;
	(c)	it has the power to enter into, exercise its rights and perform and comply with obligations under this Agreement and has taken all necessary action to authorize the execution, delivery and performance of this Agreement;
	(d)	it will obtain and maintain in effect and comply with the terms of all necessary consents, registrations and the like of or with any government or other regulatory body or authority applicable to this Agreement;
	(e)	it has duly authorized, executed and delivered this Agreement and the Agreement is fully enforceable against it;
	(f)	its obligations under this Agreement are valid, binding and enforceable at law;
	(g)	it is not in default under any agreement to which it is a party or by which it or assets is or are bound or under its Articles or Memorandum of Association and litigation, arbitration or administrative proceedings are current or pending, which default, litigation, arbitration or administrative proceedings are material in the context of this Agreement;
	(h)	it is not necessary or advisable in order to ensure the validity, effectiveness, performance or enforceability of this Agreement that any document be filed, registered or recorded in any public office or elsewhere;

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	(i)	no consent, approval, authorization or order of any court or governmental authority, agency, commission or commissioner or other regulatory authority is required for the consummation by the Counterparty of the transactions contemplated by this Agreement and the sale of the Shares to the Trust pursuant to the terms hereof need not be registered with the Securities and Exchange Commission under the United States Securities Act of 1933, as amended; and
	(j)	as of the date hereof the Counterparty has, and as of any Voluntary Put Option Payment Date or Deemed Put Option Payment Date, the Counterparty will have, sufficient authorized share capital to comply with this Agreement, the Shares will be duly authorized for issuance and sale to the Trust pursuant to this Agreement and, when issued, delivered and registered in the Counterparty's Register of Members by the Counterparty pursuant to this Agreement against the applicable payment(s), as prescribed in Section 3.3, the Shares will be validly issued, fully paid and nonassessable; the Shares will conform in all respects to the terms of the Shares set forth in the Resolutions adopted by the Counterparty attached hereto as Annex C and the description of the Shares in the offering memorandum for the Pass-Through Securities dated July 3, 2003; and the Shares will not be subject to preemptive or other similar rights.
11.	Severability
11.1	Any provision of this Agreement which is or becomes illegal, invalid or unenforceable in any jurisdiction may be severed from the other provisions of this Agreement without invalidating the remaining provisions hereof, and any such illegality, invalidity or unenforceability shall not invalidate or render illegal or unenforceable such provision in any other jurisdiction.
12.	Notices
12.1	Each communication to be made hereunder shall be deemed to have been given (i) five (5) days after deposit of such communication with a reputable national courier service addressed to such party at its address specified below (or at such other address as such party shall specify to the other party hereto in writing) or (ii) when transmitted by facsimile to such party at its facsimile number specified below (or at such other facsimile number as such party shall specify to the other party hereto in writing):

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If to the Counterparty at:

XL Capital Ltd
XL House
One Bermudiana Road
Hamilton, Bermuda HM11
Attention: Roderick Gray
Facsimile: (441) 296-6399

Copies to:

Attention: Paul Giordano
Facsimile: (441) 296-4867

If to the Trust at:

The Bank of New York (Delaware)
P.O. Box 6973
White Clay Center
Route 273
Newark, Delaware 19714
Attention: Kristine Gullo
Facsimile: (302) 283-8279

Copies to:

The Bank of New York
Corporate Trust - Dealing and Trading
100 Church Street
New York, New York 10286
Attention: Corporate Trust - Dealing and Trading Group
Facsimile: (212) 437-6157

If to the Asset Swap Counterparty at:

Merrill Lynch International
Telephone: (212) 449-1734
Telecopy: (646) 805-0218
Attention: Marc Zindle, Swaps Group

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13.	Counterparts
	This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which when executed and delivered shall constitute an original, but all the counterparts shall together constitute but one and the same instrument.
14.	Benefit of Agreement and Disclaimer
14.1	This Agreement shall enure to the benefit of each party hereto and to the Pass-Through Trust, and each of their respective successors and assigns and transferees; provided that, subject to Section 15.2, neither party hereto may transfer its rights and obligations hereunder, by operation of law or otherwise, without the prior written consent of the party.
15.	Amendment and Assignment
15.1	This Agreement may not be amended or modified in any respect, nor may any provision be waived, without the written agreement of both parties hereto and the Asset Swap Counterparty. No waiver by one party of any obligation of the other hereunder shall be considered a waiver of any other obligation of such party.
15.2	Neither the Trust nor the Counterparty may assign its rights or obligations under this Agreement to any other person, except that the Counterparty may assign its rights and obligations under this Agreement to another person as a result of a merger of the Counterparty with such other person, if such person is the surviving entity, or as a result of a sale of all or substantially all of the assets of the Counterparty to such other person such other person expressly assumes all of the rights and obligations of the Counterparty under this Agreement; and immediately following the merger or sale of all or substantially all of its assets, the rating of the preferred stock or the unsecured debt obligations of the other person is at least as high as the credit rating of the Shares or the senior unsecured debt obligations of the Counterparty, as the case may be, immediately prior to the merger or sale.
16.	Governing Law
16.1	THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

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17	Jurisdiction
17.1	Each of the parties hereto irrevocably and unconditionally submits to the exclusive jurisdiction of the courts of the State of New York or the courts of the United States of America located in the Southern District of New York in respect of any action or proceeding arising out of or in connection with this Agreement (and the parties agree not to commence any proceedings except in such courts). Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceedings in the courts of the State of New York or the courts of the United States of America located in the Southern District of New York and any claim that any Proceeding brought in any such court has been brought in an inconvenient forum. Each of the Trust and the Counterparty agrees that it shall at all times have an authorized agent in the State of New York upon whom process may be served in connection with any proceedings, and each of the Trust and the Counterparty hereby authorizes and appoints the Trustee to accept service of all legal process arising out of or connected with this Agreement in the State of New York and service on such person (or substitute) shall be deemed to be service on the Trust or the Counterparty, as the case may be. Except upon such a substitution, the Trust and the Counterparty shall not revoke any such authority or appointment and shall at all times maintain an agent for service of process in the State of New York. If for any reason such person shall cease to act as agent for the service of process, the Trust and the Counterparty shall promptly appoint another such agent, and shall forthwith notify each other of such appointment. The submission to jurisdiction reflected in this paragraph shall not (and shall not be construed so as to) limit the right of any person to take proceedings in any court of competent jurisdiction, nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by law.
18.	Limitation of Liability
18.1	It is expressly understood that (a) this Agreement is executed and delivered by The Bank of New York (Delaware), not individually or personally but solely as Trustee, in the exercise of the powers and authority conferred and vested in it under the Declaration, (b) each of the representations, undertakings and agreements herein made on the part of the Trust is made and intended not as personal representations, undertakings and agreements by The Bank of New York (Delaware), but is made and intended for the purpose of binding only the Trust and (c) under no circumstances shall The Bank of New York (Delaware) be personally liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trust under this Agreement or the other related documents, except as provided for in the Declaration.

.

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19.

Annual Audits

19.1

The parties acknowledge that Section 9.4 of the Declaration provides that the books and records of the Trust shall be audited or reviewed as of the end of each Fiscal Year by an independent accounting firm selected by the Trust. The Trust agrees that the independent accounting firm selected by it shall be subject to the prior written consent of the Counterparty; provided, that the Counterparty hereby consents to McGladrey & Pullen, LLP as the initial independent accounting firm.

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     IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed as a deed on the day and year first above written.

Executed as a deed for and on behalf of MANGROVE BAY TRUST
By:	The Bank of New York (Delaware), not in its individual capacity but solely as Trustee
By:	/s/ Michael Santino________________
Name:	Michael Santino
Title:	Senior Vice President
Executed as a deed for and on behalf of XL CAPITAL LTD
By:	/s/ Jerry M. de St. Paer_____________
Name:	Jerry M. de St. Paer
Title:	Executive Vice President & Chief Financial Officer

[Put Option Agreement]

EX-99.5

DECLARATION OF TRUST

OF

MANGROVE BAY TRUST

Dated as of May 22, 2003

TABLE OF CONTENTS

ARTICLE I INTERPRETATION AND DEFINITIONS

Section 1.1 Definitions	6
ARTICLE II TRUST INDENTURE ACT
Section 2.1 Trust Indenture Act; Non-Application	15
Section 2.2 Reports by the Trustee	16
ARTICLE III ORGANIZATION
Section 3.1 Name	16
Section 3.2 Office	16
Section 3.3 Nature and Purpose of the Trust.	16
Section 3.4 Authority	17
Section 3.5 Title to Property	17
Section 3.6 Powers and Duties of the Trustee	17
Section 3.7 Certain Responsibilities of the Trustee.	22
Section 3.8 Certain Rights of Trustee	24
Section 3.9 Prohibition of Actions by the Trust and the Trustee	26
Section 3.10 Execution of Documents	27
Section 3.11 No Representations of Trustee	27
Section 3.12 Duration of the Trust	27
Section 3.13 Mergers	27
Section 3.14 Limitation on Directions to Trustee	28
ARTICLE IV RESPONSIBILITIES OF THE INITIAL PURCHASER
Section 4.1 Responsibilities of the Initial Purchaser	28
ARTICLE V TRUSTEES
Section 5.1 Trustee; Eligibility	29
Section 5.2 Appointment, Removal and Resignation of Trustees	30
Section 5.3 Delegation of Power	31
Section 5.4 Merger, Conversion, Consolidation or Succession to Business	31

B-1

ARTICLE VI TERMS OF ABC SECURITIES

Section 6.1 Authorization and Designation of ABC Securities.	32
Section 6.2 Distributions.	33
Section 6.3 No Preemptive Rights	33
Section 6.4 No Redemption Rights	33
Section 6.5 Mandatory Redemption	33
Section 6.6 Optional Redemption	34
Section 6.7 Program Meeting	34
Section 6.8 Status of ABC Securities	35
Section 6.9 CUSIP Numbers	35
ARTICLE VII CAPITAL
Section 7.1 Initial Capital	35
Section 7.2 Capital Accounts	35
Section 7.3 Interest	36
Section 7.4 Additional Capital Contributions	36
ARTICLE VIII NET PROFIT AND NET LOSS
Section 8.1 Net Profit and Net Loss.	36
Section 8.2 Adjustments and Special Allocations	37
Section 8.3 Tax Allocations.	38
Section 8.4 Determination by Tax Matters Partner of Certain Matters	38
Section 8.5 Treatment as Partnership	39
ARTICLE IX ACCOUNTING AND RECORDS
Section 9.1 Tax Elections	39
Section 9.2 Annual Tax Information	39
Section 9.3 Tax Matters Partner	39
Section 9.4 Annual Audit or Review	41
Section 9.5 Certain Accounting Matters	41
ARTICLE X DISSOLUTION AND TERMINATION OF THE TRUST
Section 10.1 Dissolution and Termination of the Trust	41
Section 10.2 Liquidation and Dissolution.	41
B-2

ARTICLE XI TRANSFER OF ABC SECURITIES

Section 11.1 Restrictions on Transfer of ABC Securities	42
Section 11.2 Authentication and Transfer of Certificates	43
Section 11.3 Deemed Security Holders	43
Section 11.4 Certificates	43
Section 11.5 Appointment of Authenticating Agent	43
Section 11.6 Mutilated, Destroyed, Lost or Stolen ABC Securities	44

ARTICLE XII LIMITATION OF LIABILITY OF HOLDERS, THE TRUSTEE, THE

DELAWARE TRUSTEE OR OTHERS

Section 12.1 Liability.	44
Section 12.2 Outside Businesses	46
ARTICLE XIII VOTING, AMENDMENTS AND MEETINGS
Section 13.1 General	47
Section 13.2 Voting	47
Section 13.3 Amendments.	47
Section 13.4 Certain Other Matters.	49
Section 13.5 Meetings of the Holders.	49
Section 13.6 Liquidation Shareholders Meeting	50
Section 13.7 Replacement of Asset Swap Counterparty.	51

ARTICLE XIV REPRESENTATIONS OF THE TRUSTEE AND THE DELAWARE

TRUSTEE

Section 14.1 Representations and Warranties of the Trustee	55
Section 14.2 Representations and Warranties of Delaware Trustee	55
ARTICLE XV MISCELLANEOUS
Section 15.1 Notices	56
Section 15.2 Non-Petition	58
Section 15.3 GOVERNING LAW	59
Section 15.4 Change in Law	59
Section 15.5 Headings	60
Section 15.6 Successors and Assigns	60
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Section 15.7 Enforcement Rights	60
Section 15.8 Partial Enforceability	60
Section 15.9 Counterpart	60

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DECLARATION OF TRUST

OF

MANGROVE BAY TRUST

     This Declaration of Trust (as amended, modified or supplemented from time to time, this "Declaration") is dated as of May 22, 2003, between The Bank of New York (Delaware), a Delaware banking corporation (in its capacity as trustee, the "Trustee"), GSS Holdings II, Inc., a Delaware corporation, as tax matters partner (the "Tax Matters Partner") and Merrill Lynch, Pierce, Fenner & Smith Incorporated (as the "Initial Purchaser").

     WHEREAS, the parties hereto desire to establish a trust pursuant to the Statutory Trust Act (as defined herein) for the sole purposes of: (i) issuing and selling ABC Securities (as defined herein) to the Pass-Through Trust (as defined herein) and the Tax Matters Partner (as defined herein); (ii) contributing the gross proceeds received from the issuance and sale of the ABC Securities to the Regulation 114 Trust (as defined herein); (iii) entering into the Assignment Agreement (as defined herein) with the Grantor (as defined herein) and, for a limited purpose, the Regulation 114 Trust; (iv) entering into the Put Agreement (as defined herein) with the Put Counterparty (as defined herein) and acquiring the Put Counterparty's Preference Ordinary Shares (as defined herein) if and when the put option is exercised in full or in part; (v) entering into the Asset Swap Arrangement (as defined herein) with the Asset Swap Counterparty (as defined herein) (certain of whose obligations thereunder are guaranteed by the Asset Swap Guarantor (as defined herein)) and, for certain limited purposes, the Grantor; (vi) entering into the Rate Swap Arrangement (as defined herein) with the Put Counterparty (as defined herein); (vii) executing the Promissory Note; (viii) entering into all other Trust Documents (as defined herein) to which it is a party; (ix) except as set forth herein, distributing to the holders of the ABC Securities all payments received by the Trust, net of any fees, expenses, and payments due to the Asset Swap Counterparty under the Asset Swap Arrangement or the Put Counterparty under the Put Agreement and the Rate Swap Arrangement, and if such distributions are not made immediately, investing such amounts in an overnight or sweep account for the benefit of the Holders, in each case in accordance with the terms of this Declaration and the Certificate of Designation (as defined herein); (x) engaging in such other activities as may be approved by the Holders (as defined herein) and/or such other parties as provided for herein; and (xi) engaging in actions necessary or incidental to the foregoing.

     NOW, THEREFORE, it being the intention of the parties hereto that the Trust constitute a statutory trust under the Statutory Trust Act and that this Declaration constitute the governing instrument of such statutory trust, the Trustee declares that all assets contributed to the Trust be held in trust for the benefit of the Holders, from time to time, of the ABC Securities representing undivided beneficial interests in the property of the Trust, subject to the provisions of this Declaration.

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ARTICLE I

INTERPRETATION AND DEFINITIONS

Section 1.1 Definitions. Unless the context otherwise requires:

     (a) capitalized terms used in this Declaration have the respective meanings assigned to them in this Section 1.1;

     (b) a term defined anywhere in this Declaration has the same meaning throughout;

     (c) all references to "the Declaration" or "this Declaration" are to this Declaration of Trust as modified, supplemented or amended from time to time, together with all Exhibits and Appendices, each of which is incorporated herein by reference;

     (d) all references in this Declaration to Articles, Sections, Appendices and Exhibits are to Articles and Sections of, and Appendices and Exhibits to, this Declaration, unless otherwise specified;

     (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires;

     (f) a reference to the singular includes the plural and vice versa; and

     (g) the following terms have the following meanings:

     "ABC Securities" means the Asset-Backed Capital Commitment Securities issued by, and each representing an undivided beneficial interest in the property of, the Trust. The parties to this Declaration intend that the ABC Securities be treated as equity securities for all purposes under Delaware law.

     "Accounting Period" means the period from and including the date of issuance of ABC Securities to and excluding the first Distribution Date, and thereafter, the period from and including the Distribution Date for the preceding Distribution Period to and excluding the Distribution Date of the then current Distribution Period.

     "Adjusted Capital Account Deficit" means, with respect to any Beneficial Owner, the deficit balance, if any, in such Beneficial Owner's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

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      (i) Credit to such Capital Account any amounts which such Beneficial Owner is obligated to restore or is deemed to be obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c); and

      (ii) Debit to such Capital Account the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

     The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

     "Affiliate" means with respect to any Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

     "Appreciation Account" has the meaning set forth in Section 3.6(c) of this Declaration.

     "Asset" has the meaning set forth in the Asset Swap Arrangement.

     "Asset Master Agreement" means the ISDA Master Agreement (including the Schedule and Credit Support Annex related thereto, the Confirmations and certain other related documents), dated as of July 11, 2003, between the Asset Swap Counter-party and the Trust and, for certain limited purposes, the Grantor, as the same may be amended or restated from time to time.

     "Asset Put Option Agreement" has the meaning given to such term in the Schedule to the Asset Master Agreement.

     "Asset Swap Arrangement" means, collectively, the Collateral Agreement, the Asset Put Option Agreement, the Guarantee and the Asset Master Agreement, substantially in the form attached hereto as Exhibit E, and any swap arrangement subsequently entered into between the Trust and a replacement asset swap counterparty, in each case as the same may be amended or restated from time to time.

     "Asset Swap Counterparty" means, initially, Merrill Lynch International, or any replacement asset swap counterparty appointed in accordance with Section 13.7 hereof.

     "Asset Swap Counterparty Account" has the meaning set forth in Section 3.6(d) of this Declaration.

     "Asset Swap Guarantor" means Merrill Lynch Derivative Products AG.

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     "Asset Swap Renewal Date" has the meaning set forth in Section 13.7(a) of this Declaration.

     "Asset Swap Repricing Event" has the meaning set forth in Section 13.7(a) of this Declaration.

     "Assigned Interest" has the meaning given to such term in the Assignment Agreement.

     "Assignment Agreement" means the Assignment Agreement dated as of July 11, 2003 between the Grantor and the Trust and, for a limited purpose, the Regulation 114 Trust, substantially in the form attached hereto as Exhibit F, as the same may be amended from time to time.

     "Authenticating Agent" has the meaning set forth in Section 11.5.

     "Authorized Officer" of a Person means any Person that is authorized to bind such Person.

     "Beneficial Owner" means any Person beneficially owning ABC Securities.

     "Beneficial Owner Nonrecourse Debt" has the same meaning as "partner nonrecourse debt" as set forth in Regulation Section 1.704-2(b)(4).

     "Beneficial Owner Nonrecourse Debt Minimum Gain" means an amount, with respect to each Beneficial Owner Nonrecourse Debt, equal to the Trust Minimum Gain that would result if such Beneficial Owner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulation Section 1.704-2(i)(2).

     "Business Day" means a day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or any other day on which banks in New York, New York, London, England or Bermuda are authorized or obligated by law to close or are closed for business due to an act of God, natural disaster, act of war, civil or military disturbance, act of terrorism, sabotage, riots or a loss or malfunction of utilities or communications services or the distribution payable on such date cannot be paid for any such reason.

     "Capital Account" has the meaning set forth in Section 7.2.

     "Capital Contribution" means, with respect to each Beneficial Owner, each amount set forth in the books and records of the Trust to reflect a contribution of capital (whether cash or the fair market value of property) to the Trust by such Beneficial Owner.

     "Ceding Insurer" means XL Reinsurance America Inc., a New York Corporation.

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     "Certificate" has the meaning set forth in Section 11.4. The parties to this Declaration intend that the Certificates be treated as equity securities for all purposes under Delaware law.

     "Certificate of Designation" means the Certificate of Designation creating, and describing the terms of, the ABC Securities, attached hereto as Appendix A.

     "Certificate of Trust" shall mean the Certificate of Trust filed with the Secretary of State of the State of Delaware on May 22, 2003, with respect to the Trust pursuant to Section 3810 of the Statutory Trust Act.

     "Class I Indemnified Person" has the meaning set forth in Section 12.1(c) of this Declaration.

     "Class II Indemnified Person" has the meaning set forth in Section 12.1(c) of this Declaration.

     "Code" means the United States Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

     "Collateral Agreement" means the Third Amended and Restated Intermediation and Security Agreement, dated as of April 1, 1996, between the Asset Swap Counterparty and the Asset Swap Guarantor, as the same may be amended from time to time.

     "Commission" means the United States Securities and Exchange Commission.

     "Confirmation" or "Confirmations" means, initially, the swap confirmation, dated July 11, 2003, from the Asset Swap Counterparty to the Trust, and each additional swap confirmation from the Asset Swap Counterparty to the Trust with respect to each Eligible Asset acquired by the Regulation 114 Trust or deposited in the Appreciation Account.

     "Corporate Trust Office" means the principal corporate trust office of the Trustee located in Newark, Delaware.

     "Credit Support Annex" has the meaning given to such term in the Asset Swap Arrangement.

     "Cross-Receipt" means the cross-receipt attached hereto as Exhibit C.

     "Delaware Trustee" means a trustee required to be appointed pursuant to Section 3807(a) of the Statutory Trust Act. Initially, The Bank of New York (Delaware), not in its individual capacity but solely in its capacity as Trustee hereunder, shall be the Delaware Trustee.

     "Distribution" means a payment made by the Trust to a Holder.

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     "Distribution Date" means, during the Fixed Rate Period, January 15 and July 15 in each year, and, during the Floating Rate Period, January 15, April 15, July 15 and October 15 in each year, provided that if any such day is not a Business Day, the respective Distribution will be paid on the first succeeding Business Day.

     "Distribution Period" has the meaning set forth in the Certificate of Designation.

     "Eligible Assets" has the meaning given to such term in the Asset Swap Arrangement.

     "Eligible Investment Program" has the meaning set forth in Section 6.7(a) of this Declaration.

     "Fiscal Year" means the calendar year or such other period as required by the Code.

     "Fixed Rate Payment" has the meaning given to such term in the Rate Swap Arrangement.

     "Fixed Rate Period" shall have the meaning given to such term in the Certificate of Designation.

     "Floating Rate Payment" shall have the meaning given to such term in the Asset Swap Arrangement.

     "Floating Rate Period" shall have the meaning given to such term in the Certificate of Designation.

     "Grantor" means XL Re Ltd, a company organized under the laws of Bermuda and a wholly-owned subsidiary of the Put Counterparty.

     "Guarantee" shall have the meaning given to such term in the Asset Swap Arrangement.

     "Holder" means any person in whose name an ABC Security is registered on the books and records of the Trust.

     "Ineligible Asset" has the meaning given to such term in the Asset Swap Arrangement.

     "Interest Percentage" means, with respect to a particular Holder or Beneficial Owner, the aggregate face amount of ABC Securities held by such Holder, or beneficially owned by such Beneficial Owner, as the case may be, as a percentage of the total aggregate face amount of ABC Securities then outstanding.

     "Investment Company" means an investment company as defined in the Investment Company Act.

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     "Investment Company Act" means the United States Investment Company Act of 1940, as amended from time to time, or any successor legislation, and the rules and regulations promulgated thereunder.

     "Legal Action" has the meaning set forth in Section 3.6(a)(vii) of this Declaration.

     "Liquidation Shareholders Meeting" has the meaning set forth in Section 13.6 of this Declaration.

     "List of Holders" has the meaning set forth in Section 2.1(a) of this Declaration.

     "Majority in Face Amount" means Holders of outstanding ABC Securities who are the record owners of more than 50% of the aggregate face amount of all of the then outstanding ABC Securities.

     "Net Profit" and "Net Loss" mean, for each Accounting Period, an amount equal to the Trust's taxable income or loss for such Accounting Period, determined in accordance with Section 703(a) of the Code, provided, however, that any expenditures of the Trust described in Section 705(a)(2)(B) of the Code or treated as described therein pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Net Profit or Net Loss pursuant to this definition shall be subtracted.

     "Officer's Certificate" means, with respect to any Person (that is not an individual), a certificate signed by the Chairman of the Board, the President, a Vice President, the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of such Person and, if such Person is a trust, any trustee of the trust. Any Officer's Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include:

     (a) a statement that each officer signing the Officer's Certificate has read the covenant or condition and the definitions relating thereto;

     (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officer's Certificate;

     (c) a statement that each such officer has made such examination or investigation as, in such officer’s opinion, is reasonably necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and

     (d) a statement as to whether, to the best knowledge of each such officer, such condition or covenant has been complied with.

     "Pass-Through Securities" means the Asset Backed Capital Commitment Pass-Through Securities issued by the Pass-Through Trust.

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     "Pass-Through Trust" means the Mangrove Bay Pass-Through Trust, a Delaware statutory trust.

     "Paying Agent" has the meaning set forth in Section 3.6(h) of this Declaration.

     "Payment Default" means the failure of the Put Counterparty, the Regulation 114 Trust or the Asset Swap Counterparty to make a required payment to the Trust when due under any of the Trust Documents (or within any applicable grace period provided for in the applicable Trust Document).

     "Person" means a legal person, including any individual, corporation, association, partnership (general or limited), joint venture, trust, estate, limited liability company, or other legal entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

     "Preference Ordinary Shares" means the Series C Cumulative Preference Ordinary Shares, par value U.S.$.01 per share, of the Put Counterparty, having a liquidation preference of U.S.$25 per share.

     "Program Meeting" has the meaning set forth in Section 6.7(a) of this Declaration.

     "Promissory Note" means the Promissory Note, dated as of July 11, 2003, of the Trust in favor of the Put Counterparty.

     "Property Account" has the meaning set forth in Section 3.6(b) of this Declaration.

     "Pro Rata" means, unless the context otherwise requires, in reference to any Distributions on ABC Securities, pro rata to each Holder according to the aggregate face amount of ABC Securities held by the relevant Holder in relation to the aggregate face amount of all ABC Securities outstanding at the relevant time.

     "Purchase Agreement" means the Purchase Agreement, dated July 3, 2003, among the Trust, the Pass-Through Trust, the Put Counterparty and the Initial Purchaser relating to the Pass-Through Securities.

     "Put Agreement" means the Put Option Agreement dated as of July 11, 2003 between the Put Counterparty and the Trust substantially in the form attached hereto as Exhibit G, as the same may be amended from time to time.

     "Put Counterparty" means XL Capital Ltd, a Cayman Islands exempted limited company.

     "Put Counterparty Account" has the meaning set forth in Section 3.6(e) of this Declaration.

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     "Put Option Premium" shall have the meaning given to such term in the Put Agreement.

     "Put Option Premium Rate" shall have the meaning given to such term in the Put Agreement.

     "Rate Swap Arrangement" means, collectively, the ISDA Master Agreement (and the Schedule thereto) and a confirmation, each dated as of July 11, 2003, between the Trust and the Put Counterparty, substantially in the form attached hereto as Exhibit H, as the same may be amended from time to time.

     "Regulation 114 Trust" means the trust established on July 11, 2003 by the Grantor for the benefit of the Ceding Insurer pursuant to Regulation 114 of the New York Insurance Department.

     "Regulation 114 Trustee" means, initially, The Bank of New York, a New York banking corporation, or any replacement trustee pursuant to the terms of the Regulation 114 Trust Agreement.

     "Regulations" means the tax regulations promulgated under the Code.

     "Remaining Holders" has the meaning set forth in Section 6.7(a) of this Declaration.

     "Required Counterparty Ratings" has the meaning set forth in Section 13.7(b) of this Declaration.

     "Responsible Officer" means, with respect to the Trustee, any Vice President (whether or not designated by a number or a word or words added before or after the title "Vice President"), the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers, who shall have direct responsibility for the administration of this Declaration, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject.

     "Securities Act" means the United States Securities Act of 1933, as amended, or any successor legislation, and the rules and regulations promulgated there-under.

     "Securities Exchange Act" means the United States Securities Exchange Act of 1934, as amended, or any successor legislation, and the rules and regulations promulgated thereunder.

     "Service Agreements" means, collectively, the agreements entered into by the Trust, with the Put Counterparty's prior written consent, pursuant to Section 3.6(a)(ix) of this Declaration, and shall include (i) the contracts dated as of July 11, 2003,

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between the Trust and McGladrey & Pullen LLP and (ii) the contracts dated as of July 11, 2003, between the Trust and Customized Accounting Solutions.

     "Six-Month LIBOR Rate" has the meaning given to such term in the Certificate of Designation.

     "Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801 et seq., as it may be amended from time to time, or any successor legislation.

     "Successor Delaware Trustee" has the meaning set forth in Section 5.2(a)(iii) of this Declaration.

     "Successor Trustee" has the meaning set forth in Section 5.2(a)(i) of this Declaration.

     "Swap Valuation Date" means each date on which the Asset Swap Counterparty values the Regulation 114 Trust's and the Appreciation Account's assets pursuant to the Asset Swap Arrangement.

     "Tax Matters Partner" has the meaning set forth in the preamble hereto or any successor thereto.

     "Tax Matters Partner Agreement" means initially the tax matters partner agreement, dated as of July 11, 2003, between the Trust and GSS Holdings II, Inc., substantially in the form attached hereto as Exhibit D, and any tax matters partner agreement subsequently entered into between the Trust and a tax matters partner, in each case as the same may be amended or restated from time to time.

     "Three-Month LIBOR Rate" has the meaning given to such term in the Certificate of Designation.

     "Transfer" means to sell, convey, assign, transfer, create or grant a lien upon and a security interest in and right of setoff against, or to deposit, set over and contribute to the Trust pursuant to this Declaration.

     "Transfer Agent" has the meaning set forth in Section 3.6(a)(xi) of this Declaration.

     "Trust" means Mangrove Bay Trust, a Delaware statutory trust.

     "Trust Documents" means, collectively, the Declaration, the Certificate of Designation, the Cross-Receipt, the Put Agreement, the Asset Swap Arrangement, the Rate Swap Arrangement, the Assignment Agreement, the Promissory Note, the Purchase Agreement, the Service Agreements and the Tax Matters Partner Agreement.

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     "Trustee" has the meaning set forth in the preamble hereto or such other successor trustee meeting the eligibility requirements set forth in Section 5.1 of this Declaration.

     "Trust Indenture Act" means the United States Trust Indenture Act of 1939, as amended from time to time, or any successor legislation, and any rules or regulations promulgated thereunder.

     "Trust Minimum Gain" has the same meaning as "partnership minimum gain" as set forth in Regulation Section 1.704-2(b)(2) and 1.704-2(d).

     "Trust Property" means the Assigned Interest, the Put Agreement, the Asset Swap Arrangement, the Rate Swap Arrangement, the Assignment Agreement, the Purchase Agreement, the Promissory Note and (if applicable) the Preference Ordinary Shares and any funds deposited in the Property Account, the Asset Swap Counterparty Account, the Put Counterparty Account and the Appreciation Account and all interest, dividends, income, earnings, profits and gains therefrom, and proceeds thereof, including any proceeds derived from the sale, substitution, exchange or liquidation thereof, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, and which at such time is owned or held by, or for the account of, the Trust or the Trustee on behalf thereof.

ARTICLE II

TRUST INDENTURE ACT

     Section 2.1 Trust Indenture Act; Non-Application. This Declaration is not subject to the provisions of the Trust Indenture Act. References herein to the Trust Indenture Act are solely for the contractual benefit of the parties hereto.

     (a) The Transfer Agent (if the Trustee is not acting in such capacity) shall provide the Trustee (i) within 14 days after each record date for payment of a Distribution on the ABC Securities, a list, in such form as the Trustee may reasonably require, of the names and addresses of the registered Holders of such ABC Securities ("List of Holders") as of such record date; provided, however, that the Transfer Agent shall not be obligated to provide such List of Holders if at any time the List of Holders does not differ from the most recent List of Holders given to the Trustee by the Transfer Agent; but, in such circumstances, the Transfer Agent shall notify the Trustee that the List of Holders does not differ, and (ii) a List of Holders at any time the Trustee requests a List of Holders, which List of Holders shall be provided to the Trustee by the Transfer Agent within 30 days of the Trustee delivering a written request for the List of Holders to the Transfer Agent, and the information on the list shall be no more than 14 days old on the date it is delivered to the Trustee. The Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in any List of Holders given to it or which it receives in its capacity as Paying Agent (if acting in such capacity); provided,

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however, that the Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders.

     (b) The Trustee shall comply with the requirements of Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act (see Appendix B), as if the Trust Indenture Act applied to this Declaration.

     Section 2.2 Reports by the Trustee. Within 60 days after each May 15, commencing May 15, 2004, the Trustee shall provide to the Holders such reports as are required by Sections 313(a), 313(b) and 313(c) of the Trust Indenture Act (see Appendix B), if any, in the form and in the manner provided by Sections 313(a), 313(b) and 313(c) of the Trust Indenture Act, as if the Trust Indenture Act applied to this Declaration.

ARTICLE III

ORGANIZATION

     Section 3.1 Name. The Trust is named "Mangrove Bay Trust" as such name may be modified from time to time by the Trustee following written notice to the Holders. The Trust’s activities may be conducted under the name of the Trust or any other name deemed advisable by the Trustee.

     Section 3.2 Office. The address of the principal office of the Trust is c/o The Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware 19711. On ten (10) Business Days’ prior written notice to the Holders, the Trustee may designate another principal office.

Section 3.3 Nature and Purpose of the Trust.

     (a) The Trust shall be a "statutory trust" as defined in the Statutory Trust Act.

     (b) The exclusive purposes and functions of the Trust are:

          (i) issuing and selling the ABC Securities to the Pass-Through Trust and the Tax Matters Partner;

          (ii) contributing the gross proceeds received from the issuance and sale of the ABC Securities to the Regulation 114 Trust;

          (iii) entering into the Assignment Agreement with the Grantor and, for a limited purpose, the Regulation 114 Trust;

          (iv) entering into the Put Agreement with the Put Counterparty and acquiring the Put Counterparty's Preference Ordinary Shares if and when the put option is exercised in full or in part;

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     (v) entering into the Asset Swap Arrangement with the Asset Swap Counterparty (certain of whose obligations thereunder are guaranteed by the Asset Swap Guarantor) and, for certain limited purposes, the Grantor;

     (vi) entering into the Rate Swap Arrangement with the Put Counterparty;

     (vii) executing the Promissory Note;

     (viii) entering into the Tax Matters Partner Agreement;

     (ix) entering into all other Trust Documents to which it is a party;

     (x) except as set forth herein, distributing to the Holders of the ABC Securities all payments received by the Trust, net of any fees, expenses and payments due to the Asset Swap Counterparty under the Asset Swap Arrangement and payments due to the Put Counterparty under the Put Agreement and the Rate Swap Arrangement, and if such distributions are not made immediately, investing such amounts in an overnight or sweep account for the benefit of the Holders, in each case in accordance with the terms of this Declaration and the Certificate of Designation;

     (xi) engaging in such other activities as may be approved by the Holders of the ABC Securities and/or such other parties as provided for herein; and

     (xii) engaging in actions necessary or incidental to the foregoing.

     Section 3.4 Authority. Subject to the limitations provided in this Declaration, the Trustee shall have authority to take all actions reasonably required to carry out the purposes of the Trust as set forth in Section 3.3. An action taken by the Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustee acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Trustee to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustee as set forth in this Declaration.

     Section 3.5 Title to Property. Legal title to all assets of the Trust shall be vested at all times in the Trust, except where applicable law in any jurisdiction requires title to any part of the assets to be vested in a trustee or trustees, in which case legal title shall be deemed to be vested in the trustee or co-trustee appointed hereunder for such purpose. None of the Holders shall have legal title to any part of the assets of the Trust but shall have an undivided beneficial interest in the assets of the Trust.

     Section 3.6 Powers and Duties of the Trustee.

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     (a) In furtherance of and not in limitation of the purposes of the Trust as provided for in Section 3.3(b), the Trustee shall have the power and authority to cause the Trust to engage in the following activities:

     (i) to issue and sell up to $500,001,000 aggregate face amount of ABC Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one class of ABC Securities; and, provided further, that there shall be no interests in the Trust other than the ABC Securities;

     (ii) to contribute the proceeds received from the issuance and sale of the ABC Securities to the Regulation 114 Trust;

     (iii) to establish a record date with respect to all actions to be taken hereunder that require a record date to be established, including with respect to Distributions, voting rights, exchanges and distributions in connection with any liquidation of the Trust, and to issue relevant notices to Holders as to such actions and applicable record dates;

     (iv) to give prompt written notice to Holders of any Payment Default actually known to a Responsible Officer;

     (v) to give prompt written notice to Holders of any notice received regarding the Put Counterparty's intention to exercise its rights under the Put Agreement or of any deemed automatic exercise of the put option under the Put Agreement or the Put Counterparty's failure to pay the Put Option Premium on the scheduled due date for such payment (including any applicable grace period);

     (vi) to acquire and hold on behalf of the Trust the Preference Ordinary Shares, if and when issued pursuant to the Put Agreement;

     (vii) at the written instruction of the Initial Purchaser or the Holders, to bring or defend, pay from the Property Account, collect, compromise, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust, or take any action described in Section 13.4(b) ("Legal Action");

     (viii) to take all actions and perform such duties as may be required of the Trustee pursuant to the terms of the ABC Securities;

     (ix) with the Put Counterparty's prior written consent, to employ or otherwise engage agents, managers, contractors, advisors and consultants and to pay from the Property Account reasonable compensation for such services;

     (x) to cause the Trust to execute, deliver and perform each of the agreements or other documents listed in Section 3.3;

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     (xi) to incur expenses that are necessary or incidental to carry out any of the purposes of the Trust described in Section 3.3 and the Trustee's duties set forth herein and to provide notice to the Put Counterparty of such expenses in accordance with the Put Agreement;

     (xii) to act as, or appoint another Person to act as, registrar and transfer agent (the "Transfer Agent," initially the Trustee) for the Trust. Any Transfer Agent may be removed by the Trustee at any time and a successor Transfer Agent or additional Transfer Agents may be appointed at any time by the Trustee;

     (xiii) to execute and deliver the Trust Documents, and to perform its obligations and exercise and enforce its rights thereunder;

     (xiv) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing, as the Initial Purchaser may direct in writing, including, without limitation, executing any cross-receipt or pricing agreement providing for the sale of the ABC Securities;

     (xv) to take any action that may be necessary or appropriate for the preservation and the continuation of the Trust’s valid existence, rights, franchises and privileges as a statutory trust under the laws of the State of Delaware;

     (xvi) to take any action, or to refrain from taking any action, so long as such action or such inaction is not in violation of this Declaration or with applicable law, and as instructed in writing by the Initial Purchaser, in carrying out the activities of the Trust as set out in this Section 3.6, including, but not limited to:

     (1) actions to ensure that the Trust is not deemed to be an Investment Company required to be registered under the Investment Company Act; and

     (2) actions to ensure that the Trust is not characterized as an association or publicly traded partnership taxable as a corporation for United States federal income tax purposes;

provided that any such action does not materially and adversely affect any of the rights, preferences and privileges of the Holders;

     (xvii) to take any action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed on behalf of the Trust; and

     (xviii) to hold, on behalf of the Tax Matters Partner, one ABC Security issued pursuant to Section 9.3(b), and to pay to an account designated by

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the Tax Matters Partner distributions in respect of such ABC Security in a manner consistent with Section 6.2.

     (b) The Trustee shall establish and maintain a segregated account (the "Property Account") in the name of and under the exclusive control of the Trustee on behalf of the Trust and the Holders and, upon receipt of payments of funds made in respect of the Trust Property which are to be paid to the Holders, the Trustee shall deposit such funds into the Property Account and shall make payments to the Holders from the Property Account in accordance with this Declaration. Amounts to be deposited in the Property Account include, without limitation, the Fixed Rate Payment (during the Fixed Rate Period), the Floating Rate Payment (during the Floating Rate Period), the Put Option Premium, the Preference Ordinary Shares and any dividends on the Preference Ordinary Shares, if and when issued, any amounts received from the Regulation 114 Trust by the Trust upon the liquidation or winding up of the Regulation 114 Trust due to the Holders and any other amounts due to the Holders pursuant to the Rate Swap Arrangement, the Asset Swap Arrangement, the Put Agreement and the Assignment Agreement or otherwise. Amounts that are deposited in the Property Account and not distributed from such account on the same day they are received by the Trust shall be invested in accordance with Section 6.2(b).

     (c) The Trustee shall establish and maintain a segregated interest-bearing trust account (the "Appreciation Account") in the name of and under the exclusive control of the Trustee for the benefit of the Asset Swap Counterparty, and upon the receipt by the Trustee of cash and/or other Assets (or any part thereof) distributed from the Regulation 114 Trust to the Trust for deposit into the Appreciation Account pursuant to the Asset Swap Arrangement on or in connection with a Swap Valuation Date, or upon the disposition (by substitution or otherwise) of an Asset held in the Appreciation Account at the direction of the Asset Swap Counterparty in accordance with the Asset Swap Arrangement, deposit such cash and/or other Assets in the Appreciation Account. Upon receipt by the Trustee of written instructions from the Asset Swap Counterparty in accordance with the Asset Swap Arrangement, the Trustee shall transfer assets from or to the Appreciation Account as instructed by the Asset Swap Counterparty; provided, however, that if the instructions from the Asset Swap Counterparty call for a transfer to be made from the Appreciation Account to the Asset Swap Counterparty, the Trustee shall notify the Put Counterparty of such instructions and shall not make such transfer until it receives written instructions from the Put Counterparty authorizing such transfer. For the avoidance of doubt, funds held in the Appreciation Account will not be available to make Distributions to the Holders.

     (d) The Trustee shall establish and maintain a segregated account (the "Asset Swap Counterparty Account") in the name of and under the exclusive control of the Trustee for the benefit of the Asset Swap Counterparty, and upon the receipt by the Trust of any amounts that the Trust is required to pay to the Asset Swap Counterparty under the Asset Swap Arrangement (that is, amounts that are paid to the Trust by the Put Counterparty designated to be deposited in such account in accordance with the Put Agreement or received by the Trust as a payment of interest or other income on the assets held in the Appreciation Account or the Regulation 114 Trust), the Trustee shall deposit

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such assets or distributions into the Asset Swap Counterparty Account. The Trustee shall pay amounts deposited in the Asset Swap Counterparty Account to the Asset Swap Counterparty as soon as practicable following the Trust's receipt thereof. Amounts that are deposited in the Asset Swap Counterparty Account and not distributed from such account on the same day they are received by the Trust shall be invested in accordance with Section 6.2(b).

     (e) The Trustee shall establish and maintain a segregated account (the "Put Counterparty Account") in the name and under the exclusive control of the Trustee for the benefit of the Put Counterparty, and (i) upon the receipt of any amounts received by the Trust from the Asset Swap Counterparty in connection with an exercise of the Put Agreement (except amounts due to the Holders, which shall be deposited in the Property Account), (ii) upon the receipt of any amounts from the Put Counterparty in connection with the execution of the Promissory Note and (iii) upon receipt by the Trust of any amounts that the Trust is required to pay to the Put Counterparty under the Rate Swap Arrangement, deposit such amounts in the Put Counterparty Account. The Trustee shall pay amounts deposited in the Put Counterparty Account in connection with an exercise of the put option under the Put Agreement to the Put Counterparty as consideration for the issuance by the Put Counterparty of its Preference Ordinary Shares to the Trust, as required by the Put Agreement, and the Trustee shall pay amounts deposited in the Put Counterparty Account in connection with the Rate Swap Arrangement to the Put Counterparty as required by the Rate Swap Arrangement. If, in connection with an exercise of the put option under the Put Agreement, the Trust is entitled to set off against the purchase price for the Preference Ordinary Shares any unpaid Put Option Premium, in accordance with the terms of the Put Agreement, the amount set off against such purchase price (less the amount allocable to the Trust's ordinary expenses) shall be promptly transferred to the Property Account and, promptly thereafter, distributed to the Holders. The amount allocable to the Trust's expenses shall be applied accordingly. Amounts that are deposited in the Put Counterparty Account and not distributed from such account on the same day they are received by the Trust shall be invested in accordance with Section 6.2(b).

     (f) Each of the Property Account, the Appreciation Account, the Asset Swap Counterparty Account and the Put Counterparty Account shall be maintained with a banking institution (including the Trustee, if it qualifies hereunder) authorized to exercise corporate trust powers and having a combined capital and surplus of at least $50,000,000 and that is subject to supervision or examination by Federal or state authority. Money held by the Trustee shall be segregated from its funds and other funds held by it.

     (g) The Trustee shall take all actions and perform such duties as may be required of the Trustee as it may be directed from time to time in writing by the Initial Purchaser or a Majority in Face Amount (except for actions that require a different threshold in accordance with the terms of this Declaration, in which case such threshold), where appropriate, to protect the interests of the Trust and the Holders.

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     (h) The Trustee may authorize one or more Persons (each, a "Paying Agent" and, initially, the Trustee) to pay Distributions or liquidation payments with respect to the ABC Securities. Any Paying Agent may be removed by the Trustee, the Initial Purchaser or a Majority in Face Amount at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Trustee.

     (i) The Trustee shall continue to serve as a trustee until either:

         (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders pursuant to the terms of the ABC Securities; or

(ii) a Successor Trustee has been appointed and has accepted that appointment in accordance with Section 5.2.

     (j) Notwithstanding any other provision herein or elsewhere, the Trustee shall not have any duty or obligation to manage, control, use, make any payment in respect of, register, record, insure, inspect, sell, dispose of or otherwise deal with the Trust Property or to otherwise take or refrain from taking any action under, or in connection with, this Declaration or any other document to which the Trust is a party, except for (i) duties expressly required to be performed by the Trustee by the terms of this Declaration or in accordance with written instructions from the Initial Purchaser, a Majority in Face Amount (except where a different threshold is required in accordance with the terms of this Declaration, in which case such threshold) or any other person authorized to instruct the Trustee hereunder and (ii) duties required to be performed by the Trust by any Trust Document.

     Reasonable expenses incurred by the Trustee necessary for exercising its powers and fulfilling its duties pursuant to this Declaration shall be reimbursed out of the assets of the Trust. If there is a dispute regarding any expenses of the Trust incurred by the Trustee and not accounted for in the Put Option Premium, the Trustee shall not be entitled to reimburse itself out of the assets of the Trust until thirty Business Days following the next succeeding Distribution Date provided that such reimbursement is otherwise permitted hereunder.

     The Trustee shall exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and intentions of the Trust set forth in Section 3.3, and the Trustee shall not take, nor shall the Holders or the Initial Purchaser instruct the Trustee to take, any action that is inconsistent with the purposes and intentions of the Trust set forth in Section 3.3. Any action inconsistent with the purposes and intentions of the Trust as set forth in Section 3.3 shall be of no effect and shall not bind the Trust.

Section 3.7 Certain Responsibilities of the Trustee.

     (a) No provision of this Declaration shall be construed to relieve the Trustee from liability for its own gross negligence, its own grossly negligent failure to act, bad faith or willful misconduct (or ordinary negligence with respect to allocation of

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funds or obligations to make payment on the ABC Securities or to the Asset Swap Counterparty (in the manner described in this Declaration) or calculations made by it with respect thereto) except that:

     (i) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

     (ii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of at least a Majority in Face Amount relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Declaration or when acting at the direction of the Initial Purchaser pursuant to the terms of this Declaration or the Asset Swap Counterparty pursuant to Section 3.6(c) of this Declaration;

     (iii) no provision of this Declaration shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that the repayment of such funds or protection from such liability is not reasonably assured to it under the terms of this Declaration or indemnity reasonably satisfactory to the Trustee against such risk or liability is not reasonably assured to it;

     (iv) the Trustee’s sole duty with respect to the custody, safe keeping and physical preservation of Trust Property, the Property Account, the Appreciation Account, the Asset Swap Counterparty Account and the Put Counterparty Account shall be to deal with such property in a similar manner as the Trustee deals with similar property for its own account, subject to the protections, benefits, privileges, immunities and limitations on liability afforded to the Trustee under this Declaration; and

     (v) the Trustee shall have no duty or personal liability for or with respect to the value, genuineness, existence or sufficiency of the Trust Property or the payment of any taxes or assessments levied thereon or in connection therewith or for or in respect of the validity or sufficiency of the documents to which the Trust or the Trustee is a party and the Trustee shall in no event assume or incur any liability, duty or obligation to any Person other than as expressly provided for herein.

     (b) In no event shall the Trustee or the Delaware Trustee be personally liable (i) for special, consequential or punitive damages, (ii) for the acts or omissions of its nominees, correspondents, clearing agencies or securities depositories, (iii) for the acts or omissions of brokers and dealers and (iv) for any losses due to forces reasonably beyond the control of the Trustee or the Delaware Trustee including, without limitation, strikes, work stoppages, acts of war or terrorism, insurrection, revolution, nuclear or natural catastrophes or acts of God and interruptions, loss or malfunctions of utilities, com-

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munications or computer (software and hardware) services including, without limitation, Internet services. Neither the Trustee nor the Delaware Trustee shall have any responsibility for the accuracy of any information provided to the Holders or any other person that has been obtained from, or provided to the Trustee or the Delaware Trustee by, any other entity.

Section 3.8 Certain Rights of Trustee.

(a)   Subject to the provisions of Section 3.7:

     (i) the Trustee may conclusively rely on and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document whether in its original or facsimile form reasonably believed by it to be genuine and to have been signed, sent or presented by the proper party or parties;

     (ii) any direction or act of the Initial Purchaser acting on behalf of or in connection with the Trust as contemplated by this Declaration shall be sufficiently evidenced by an Officer's Certificate;

     (iii) whenever in the administration of this Declaration the Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting to take any action hereunder, the Trustee (unless other evidence is herein specifically prescribed) may request and in the absence of bad faith on its part conclusively rely upon an Officer's Certificate of the Initial Purchaser;

     (iv) except as expressly set forth in this Declaration, the Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any re-recording, refiling or re-registration thereof;

     (v) the Trustee may consult with counsel or other experts of its own selection, and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts’ area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion; such counsel may be, but shall not be limited to, counsel to the Initial Purchaser or any of its Affiliates, and may include any of its employees. The Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction;

     (vi) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder or the Initial Purchaser, unless (a) such Holder or the Initial Purchaser shall have provided to the Trustee security and indemnity, reasonably satisfactory to the Trustee, against the costs, expenses (including reasonable attorneys’ fees

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and expenses and the reasonable expenses of the Trustee’s agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Trustee and (b) the Trustee has been provided with the legal opinions, if any, required by this Declaration;

     (vii) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its reasonable discretion, may make such further inquiry or investigation into such facts or matters as it may deem necessary at the expense of the Trust and shall incur no liability of any kind by reason of such inquiry or investigation;

     (viii) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney selected in good faith (other than an agent or attorney that is an Affiliate of the Trustee); furthermore, the Trustee shall be under no obligation to monitor, and shall assume no personal liability for, the actions of the Asset Swap Counterparty, the Put Counterparty, the Tax Matters Partner or the Initial Purchaser in connection with their duties under this Declaration or in connection with the Trust generally;

     (ix) any action taken by the Trustee or its agents hereunder shall bind the Trust and the Holders, and the signature of the Trustee or its agents alone shall be sufficient and effective to perform any such action, and no third party shall be required to inquire as to the authority of the Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Trustee’s or its agent’s taking such action;

     (x) whenever in the administration of this Declaration the Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Trustee (A) may request instructions from the Holders or the Initial Purchaser; provided, however, that instructions from the Holders may only be given by the Holders of the same proportion in face amount of the ABC Securities as would be entitled to direct the Trustee under the terms of the ABC Securities in respect of such remedy, right or action, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (C) shall be fully protected and shall be treated as acting reasonably in conclusively relying upon or acting in accordance with such instructions and in not acting, to the extent instructions are not received within a specified period; provided, however, that to the extent the Trustee receives conflicting instructions from the Initial Purchaser and the Holders, the Trustee shall assume no liability for relying upon the instructions received from the Holders;

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     (xi) except as otherwise expressly provided by this Declaration, the Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration;

     (xii) the Trustee shall not be required to take any action if the Trustee shall reasonably determine, or shall be advised by counsel in good faith that such action is likely to result in personal liability for the Trustee or is contrary to applicable law or the terms of this Declaration;

     (xiii) under no circumstances shall the Trustee be personally liable for indebtedness evidenced by or arising under any of the documents to which the Trust or the Trustee is a party; and

     (xiv) the Trustee shall not be liable for the default or misconduct of any agent, appointed by the Trustee in good faith, under any of the documents to which the Trust or the Trustee is a party or otherwise (provided that such agent is not an Affiliate of the Trustee), and the Trustee shall have no obligation or liability to perform the obligations of the Trust under this Declaration or the other documents to which the Trust or the Trustee is a party that are required to be performed by other Persons, including, without limitation, the Put Counterparty, the Regulation 114 Trust, the Asset Swap Counterparty and the Initial Purchaser.

     (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Trustee shall be construed to be a duty.

     Section 3.9 Prohibition of Actions by the Trust and the Trustee. The Trust shall not, and the Trustee shall not cause the Trust to, nor shall the Initial Purchaser or the Holders direct the Trustee to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not, and the Trustee shall not cause the Trust to:

     (a) invest any interest or other distributions paid in respect of the Trust Property, other than pursuant to the terms of this Declaration, the ABC Securities and the Trust Documents;

     (b) acquire any assets other than as expressly provided herein;

     (c) possess Trust Property for a purpose other than those described in Section 3.3;

     (d) make any loans or incur any indebtedness other than the Promissory Note or acquire any securities other than the Assigned Interest, the Preference Ordinary

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Shares (if applicable), assets to be deposited in the Appreciation Account and any other indebtedness or securities acquired pursuant to a Trust Document;

     (e) except as expressly set forth herein, act in such a way as to vary the terms of the ABC Securities in any way whatsoever;

     (f) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust, other than the ABC Securities;

     (g) (i) direct the time, method and place of conducting any proceeding for any remedy available to the Trust as the holder of Trust Property or exercising any power conferred upon holders of Trust Property, (ii) waive any past Payment Default or violation that is waivable under the terms of any Trust Property or (iii) consent to any amendment or modification of the terms of any Trust Property where such consent shall be required, except in each case after receiving instructions from the Holders and/or the other applicable parties as provided for in Article 13 hereof;

     (h) file a certificate of cancellation of the Trust or take any other action to terminate the Trust, except in connection with a liquidation of the Trust pursuant to Article 10 hereof;

     (i) take any action that would cause the Trust to be deemed or classified as an Investment Company within the meaning of the Investment Company Act or as an association or publicly traded partnership taxable as a corporation for United States federal income tax purposes; or

     (j) amend any of the Service Agreements, including but not limited to amendments regarding the fees payable by the Trust pursuant to such Service Agreements, without the prior written consent of the Put Counterparty, which consent will not be unreasonably withheld.

     Section 3.10 Execution of Documents. Except as otherwise required by the Statutory Trust Act, the Trustee is authorized to execute on behalf of the Trust any documents that the Trustee has the power and authority to cause the Trust to execute pursuant to Section 3.6.

     Section 3.11 No Representations of Trustee. The Trustee makes no representations as to the value or condition of the Trust Property or any part thereof. Except as expressly set forth in Article 14, the Trustee makes no representations as to the validity or sufficiency of this Declaration or the ABC Securities.

     Section 3.12 Duration of the Trust. The Trust, unless terminated earlier pursuant to the provisions of Article 6 or Article 10 hereof, shall have perpetual existence.

Section 3.13 Mergers

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     (a) The Trust may not consolidate, amalgamate, merge or convert with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any Person, except as described in Section 3.13(b), and except that the Trust may distribute its assets to the Holders or to such persons as the Holders may direct upon liquidation of the Trust in accordance herewith, and to the Asset Swap Counterparty pursuant to the terms of the Asset Swap Arrangement and to the Put Counterparty pursuant to the terms of the Put Agreement and the Rate Swap Arrangement.

     (b) The Trust may, with the unanimous consent of the Holders, consolidate, amalgamate, merge or convert with or into, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to a trust organized as such under the laws of any state of the United States.

     Section 3.14 Limitation on Directions to Trustee. The Holders and the Initial Purchaser shall not direct the Trustee to take or refrain from taking any action if such action or inaction would be contrary to any obligation of the Trust or the Trustee under this Declaration or any of the documents to which the Trust is a party or would be contrary to Section 3.3 hereof, nor shall the Trustee be obligated to follow any such direction, if given.

ARTICLE IV

RESPONSIBILITIES OF THE INITIAL PURCHASER

     Section 4.1 Responsibilities of the Initial Purchaser. In connection with the issue and sale of the ABC Securities, the Initial Purchaser shall have the exclusive right and responsibility to engage in the following activities:

     (a) to determine the states in which to take appropriate action to qualify or register for sale all or part of the ABC Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust, the Trustee and their Affiliates or agents of actions they must take, and prepare for execution and filing any documents to be executed and filed by the Trust as the Initial Purchaser deems necessary or advisable in order to comply with the applicable laws of any such states; and

     (b) to, at the Trust's expense, advise the Trust, the Trustee and their Affiliates or agents of actions they must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Initial Purchaser deems necessary or advisable in order to comply with any applicable rules and regulations of the Commission promulgated under the Securities Act, the Exchange Act, the Trust Indenture Act and the Investment Company Act and to obtain or maintain exemptions therefrom or other forms of relief thereunder or to make any filings or take any actions required thereby or deemed necessary or advisable with respect to the ABC Securities or any Trust Property.

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ARTICLE V

TRUSTEES

Section 5.1 Trustee; Eligibility

     (a) There shall at all times be one primary trustee (the "Trustee") which shall act as Trustee and which shall:

     (i) not be an Affiliate of the Initial Purchaser or the Put Counterparty; and

     (ii) be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or a corporation or Person permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 5.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

     (b) If at any time the Trustee shall cease to be eligible to so act under Section 5.1(a), the Trustee shall immediately resign in the manner and with the effect set forth in Section 5.2(b).

     (c) If the Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act (see Appendix B), the Trustee and the Initial Purchaser shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act.

     (d) The initial Trustee shall be The Bank of New York (Delaware), a Delaware banking corporation. Such Trustee shall be entitled to receive a fee for serving as Trustee in accordance with the letter attached hereto as Exhibit B.

     (e) In accepting the trust hereby created, the Trustee agrees to act solely as trustee hereunder and not in its individual capacity, except as expressly provided herein and in the Trust Documents. All Persons having any claim against the Trustee in its capacity as such by reason of the transactions contemplated by the Trust Documents shall look only to the Trust Property (or a part thereof, as the case may be) and not to the Trustee in its individual capacity. Without limiting the generality of the foregoing, the Trustee in its capacity as such or individually shall not be responsible or liable for or in respect of the validity or sufficiency of this Declaration, or for the form, character, genuineness, sufficiency, value, or validity of the Trust Property.

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Section 5.2 Appointment, Removal and Resignation of Trustees.

     (a) Subject to the provisions of this Section 5.2, the Trustee or the Delaware Trustee may be appointed or removed or replaced without cause at any time by a vote of 75% of the then outstanding face amount of ABC Securities; provided, however, that at all times there shall be a Trustee and a Delaware Trustee (which shall initially be The Bank of New York (Delaware)); and provided further that:

     (i) The Trustee shall not be removed in accordance with this Section 5.2(a) until a successor Trustee possessing the qualifications to act as Trustee under Section 5.1 (a "Successor Trustee") has been appointed by a vote of 75% of the then outstanding face amount of ABC Securities and has accepted such appointment by written instrument executed by such Successor Trustee and delivered to the Initial Purchaser.

     (ii) The Trustee shall not be removed in accordance with Section 5.2(a) unless the Successor Trustee is also a Delaware Trustee; provided, however, that if the Successor Trustee is not a Delaware Trustee, the Trustee may be removed if a Delaware Trustee is appointed concurrently with the Successor Trustee; provided further, however, that if the Successor Trustee is not a Delaware Trustee and a Delaware Trustee is appointed for the sole purpose of satisfying Section 3807(a) of the Statutory Trust Act, such Delaware Trustee shall not be entitled to exercise any powers, nor have any of the duties and responsibilities of a Trustee described in this Declaration, except as may be mandated by the Statutory Trust Act.

     (iii) A Delaware Trustee that is not also the Successor Trustee shall not be removed in accordance with Section 5.2(a) until a successor Delaware Trustee (a "Successor Delaware Trustee") has been appointed by a vote of 75% of the then outstanding face amount of ABC Securities and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Trustee.

          (b) A trustee appointed to office shall hold office until its successor shall have been appointed by the Holders in accordance with this Declaration or until its termination, removal or resignation. Any trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the trustee and delivered to the Initial Purchaser, the Trust and all of the Holders, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that:

               (i) No such resignation of a Trustee shall be effective:

               (A) until a Successor Trustee has been appointed and has accepted such appointment by an instrument executed by such Successor Trustee and delivered to the Trust, the Initial Purchaser, the Delaware Trustee and the resigning trustee; or

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(B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the Holders; and

(ii) No such resignation of a Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by an instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Initial Purchaser, the Trustee and such resigning Delaware Trustee.

     (c) If no Successor Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.2 within ninety (90) days after delivery to the Initial Purchaser and the Trust of an instrument of resignation, the resigning Trustee or Delaware Trustee, as applicable, may petition at the expense of the Trust any court of competent jurisdiction for appointment of a Successor Trustee or Successor Delaware Trustee, as the case may be. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Trustee or Successor Delaware Trustee, as the case may be.

     (d) No Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Trustee or Successor Delaware Trustee, as the case may be.

     Section 5.3 Delegation of Power. The rights, duties and powers of the Trustee as set forth in this Declaration may be delegated to one or more Affiliates of the Trustee; provided, however, that each such delegatee meets the eligibility requirements set forth in Section 5.1; and, provided further, that as a condition to any such delegation, the delegatee shall expressly agree to be jointly and severally liable with the Trustee for any liability arising out of or in connection with such delegation; provided, however, that such delegation shall in no manner relieve the Trustee from its duties or obligations under this Declaration nor relieve the Trustee of its liabilities, if any, for such actions. The Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 3.6; provided, however, that such delegation shall in no manner relieve the Trustee from its duties or obligations under this Declaration nor relieve the Trustee of its liabilities, if any, for such actions.

     Section 5.4 Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee or the Delaware Trustee may be merged or converted or with which either may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee or the Delaware Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee or the Delaware Trustee shall be the successor of the Trustee or the Delaware Trustee, as the case may be, hereunder; provided, however, that such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto.

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ARTICLE VI

TERMS OF ABC SECURITIES

Section 6.1 Authorization and Designation of ABC Securities.

     (a) The Trust is authorized to issue undivided beneficial interests in the assets of the Trust up to an aggregate initial face amount of $500,001,000, which shall constitute and be designated the "Asset Backed Capital Commitment Securities."

     (b) The Trust shall issue only one class of ABC Securities and is not authorized to issue more than one class of securities.

     (c) ABC Securities issued and sold as contemplated herein shall be deemed to be duly issued, fully paid and nonassessable; provided, however, that ABC Securities will be issued only in denominations of $1,000.

     (d) The Initial Purchaser hereby instructs the Trustee to authorize the ABC Securities by executing the Certificate of Designation attached to this Declaration as Appendix A, which shall be deemed to be a part of this Declaration, and the Certificates and any certificate of authentication on such Certificates relating to the ABC Securities required to be executed pursuant to Sections 11.4 and 11.5 and any other certificate required to be executed pursuant to Section 11.6, to execute each of the Trust Documents on behalf of the Trust, and to cause the Trust to perform its obligations thereunder.

     (e) Each ABC Security shall represent an undivided beneficial interest in the Trust Property. The specific rights, terms and powers of the ABC Securities are set forth in the Certificate of Designation, which may be amended or supplemented by the Trustee upon receipt of written instructions from the Initial Purchaser, subject to compliance with the terms of this Declaration (including the requirements of Section 13.3 of this Declaration). Any amendment to the Certificate of Designation shall have the status of an amendment to this Declaration.

     (f) The authorization of the ABC Securities shall be effective upon the execution by the Trustee of the Certificate of Designation setting forth the establishment and the terms of the ABC Securities. The ABC Securities shall be deemed to be equity securities for all purposes under Delaware law.

     (g) All ABC Securities shall represent equal proportionate beneficial interests in the assets of the Trust (subject to the liabilities of the Trust), and each ABC Security shall rank equal to each other ABC Security. The Trustee may from time to time, upon the written instructions of the Initial Purchaser or a Majority in Face Amount, divide or combine the ABC Securities into a greater or lesser number of ABC Securities without thereby changing the proportionate beneficial interest in the assets of the Trust or in any way affecting the rights of the Holders; provided, however, that upon any such division or combination of ABC Securities, any fractional shares resulting from such recombination are redeemed and the face amount of such redeemed shares is distributed to Holders in cash.

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Section 6.2 Distributions.

     (a) Distributions shall be paid to the Holders with such frequency as may be set forth in the Certificate of Designation. Distributions shall be paid from the Property Account out of such of the income, accrued or realized, and capital gains, realized or unrealized, and out of the assets of the Trust held in the Property Account, after providing for certain of the actual and accrued liabilities of the Trust. The Trust intends to distribute any residual cash, after payment of all the Trust's expenses, to Holders on a Pro Rata basis. Distributions not in connection with a liquidation or dissolution of the Trust shall be distributed Pro Rata to the Holders. Distributions in connection with a liquidation or dissolution of the Trust shall be distributed as required by Section 10.2 hereof. Distributions made in accordance with the provisions of this Declaration in connection with a liquidation or dissolution may be made in cash or Trust Property or a combination thereof. All other distributions shall be made in cash, except as provided in Section 6.6.

     (b) Subject to any provision to the contrary in any of the Trust Documents, any amounts received by the Trust in respect of the Trust Property shall, upon receipt by the Trustee or the Paying Agent, as the case may be, be deposited in the Property Account; provided, however, that (i) cash and/or other Assets (or any part thereof) distributed to the Trust as described in Section 3.6(c) shall be deposited in the Appreciation Account; (ii) amounts distributed or paid to the Trust as described in Section 3.6(d) shall be deposited in the Asset Swap Counterparty Account; and (iii) amounts distributed or paid to the Trust as described in Section 3.6(e) shall be deposited in the Put Counterparty Account. On each Distribution Date, all amounts on deposit in the Property Account shall be distributed by the Paying Agent to the Holders pursuant to this Declaration. Any amounts that are on deposit in any of the Property Account, the Asset Swap Counterparty Account or the Put Counterparty Account and which are not distributed on the day such amounts are received by the Trust shall be deposited, in the name of the respective account from which such amounts originated, in The Bank of New York Money Market Fund (or such other account as may be determined from time to time by the written agreement of the Trustee, the Asset Swap Counterparty and the Put Counterparty) until such amounts are distributed in accordance with this Declaration.

     Section 6.3 No Preemptive Rights. No Holder, by virtue of holding ABC Securities, shall have any preemptive or other right to subscribe for any additional ABC Securities.

     Section 6.4 No Redemption Rights. The ABC Securities shall not be redeemable at the option of the Holder, except as provided for in Section 6.6 hereof.

     Section 6.5 Mandatory Redemption. The Trust will redeem the ABC Securities for cash (and/or Preference Ordinary Shares) and liquidate in accordance with Section 10.2 hereof without a vote of the Holders only upon the termination of the Asset Swap Arrangement for any reason other than as a result of: (i) a voluntary or deemed automatic exercise in full of the put option under the Put Agreement; or (ii) a voluntary termination of the Put Agreement by the Put Counterparty.

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Section 6.6 Optional Redemption. At any Liquidation Shareholders Meeting, the Holders of ABC Securities will be asked to vote on whether to elect to have their ABC Securities redeemed, with such vote being conducted in accordance with Section 13.5 hereof, except to the extent provided otherwise in this Section 6.6 and Section 13.6. If Holders of a majority in face amount of ABC Securities actually voting on such matters elect to have their ABC Securities redeemed, then all of the ABC Securities will be redeemed and the Trust will be liquidated in accordance with Article 10 hereof. If Holders of less than a majority in face amount of ABC Securities actually voting on such matters elect to have their ABC Securities redeemed, the Trust will redeem the ABC Securities of such Holders and will distribute to such Holders their Pro Rata portion of the assets of the Trust. In such event, those Holders of ABC Securities that do not vote to elect to have their ABC Securities redeemed will continue to hold their ABC Securities. Redemption proceeds will consist of cash and/or Preference Ordinary Shares which will depend on whether as of the time the liquidation commences, the option under the Put Agreement has been exercised (in part or in full).

Section 6.7 Program Meeting

     (a) No more than 60 days after a partial redemption of ABC Securities following a Liquidation Shareholders Meeting, the Trustee will call a meeting of the remaining Holders (the "Remaining Holders") to vote on a new investment program (a "Program Meeting"). At the Program Meeting, the Remaining Holders will have the authority to direct the Trustee to invest the assets of the Trust in a new eligible investment program (an "Eligible Investment Program"). An Eligible Investment Program means an investment program that: (i) shall be submitted to the Trustee in the name of the Remaining Holders representing at least 5% in face amount of ABC Securities still outstanding following a redemption in accordance with Section 6.6 hereof; (ii) contains a reasonably detailed description of the investment program; and (iii) is distributed to the other Remaining Holders at least 20 days prior to the Program Meeting.

     (b) If more than one Eligible Investment Program is submitted to the Remaining Holders for approval, the Eligible Investment Program receiving a plurality of the votes at the Program Meeting will become the investment program under which the remaining assets of the Trust are invested. If only one Eligible Investment Program is submitted to the Remaining Holders for approval, then the Holders of a majority in face amount of ABC Securities voting on such matter at the Program Meeting must vote in favor of such investment program in order to have it become the investment program of the Trust. If an Eligible Investment Program is not submitted to the Remaining Holders, or if only one Eligible Investment Program is submitted but it fails to be approved by a the Holders of a majority in face amount of ABC Securities actually voting on such matter, then all ABC Securities will be redeemed and the Trust will liquidate in accordance with Article 10 hereof. Every Remaining Holder will bear its pro rata portion of the expenses incurred by the Trust and the Trustee in connection with a Program Meeting and the implementation of an Eligible Investment Program, unless such amounts are otherwise provided for in such Eligible Investment Program.

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     Section 6.8 Status of ABC Securities. Every Holder, by virtue of having become a Holder, shall be deemed to have expressly assented and agreed to the terms hereof and the Certificate of Designation and to have become a party hereto. ABC Securities shall be deemed to be personal property, giving only the rights provided herein. Ownership of ABC Securities shall not entitle the Holder to any title in, or to the whole or any part of, the Trust Property or right to call for a partition or division of the same or for an accounting. The bankruptcy of a Holder during the continuance of the Trust shall not operate to terminate the Trust nor entitle the representative of any bankrupt Holder to an accounting or to take any action in court or elsewhere against the Trust or the Trustee.

     Section 6.9 CUSIP Numbers. The Trust, in issuing the ABC Securities, may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of liquidation as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the ABC Securities or as contained in any notice of a liquidation and that reliance may be placed only on the other identification numbers printed on the ABC Securities, and any such liquidation shall not be affected by any defect in or omission of such numbers.

ARTICLE VII

CAPITAL

     Section 7.1 Initial Capital. The capital of the Trust as of the date hereof shall be equal to the aggregate of the Capital Accounts of the Trust as of the date hereof.

     Section 7.2 Capital Accounts. A Capital Account shall be established and maintained for each Beneficial Owner on the books of the Trust. The term "Capital Account" shall mean the capital account maintained for such Beneficial Owner in accordance with the following provisions. The Capital Account of each Beneficial Owner as of the date hereof shall be equal to the cash transferred by such Beneficial Owner to the Trust as of the date hereof.

(a) Each Beneficial Owner's Capital Account shall be increased by:

     (i) The amount of Capital Contributions to the Trust made by any Beneficial Owner subsequent to the date hereof;

     (ii) The amount of Net Profit allocated to the Beneficial Owner pursuant to Article VIII hereof; and

     (iii) Any other increases required by the Regulations.

(b) Each Beneficial Owner's Capital Account shall be decreased by:

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     (i) The amount of Net Loss allocated to the Beneficial Owner pursuant to Article VIII hereof;

     (ii) All amounts paid or distributed to the Beneficial Owner pursuant to Section 6.2(a) hereof, other than amounts required to be treated as a payment for property or services under the Code;

     (iii) The fair market value of any property distributed in kind to the Beneficial Owner (net of any liabilities secured by such distributed property that such Beneficial Owner is considered to assume or take subject to for purposes of Section 752 of the Code); and

     (iv) Any other decreases required by the Regulations.

     (c) In determining the amount of any liability for purposes of Section 7.2(b) hereof, there shall be taken into account Section 752 of the Code and any other applicable provisions of the Code and any Regulations promulgated thereunder. The Tax Matters Partner shall instruct the Trustee as to what action, if any, the Trustee shall take in connection with determinations by the Tax Matters Partner.

     (d) All provisions of this Declaration relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b)(2)(iv), as amended, and shall be interpreted and applied in a manner consistent with such Regulations. The Trust shall make any appropriate modifications in the event unanticipated events might otherwise cause this Declaration not to comply with Regulations under Section 704 of the Code. The Tax Matters Partner shall instruct the Trustee as to what action, if any, the Trustee shall take in connection with determinations by the Tax Matters Partner.

     (e) In the event that a Beneficial Owner's interest in the Trust or a portion thereof is transferred in accordance with the provisions of this Declaration, the transferee shall succeed to the Capital Account of the transferor to the extent that it relates to the interest or portion thereof so transferred.

     Section 7.3 Interest. Except as provided herein, no Beneficial Owner shall be entitled to interest on or with respect to any Capital Contribution to the Trust.

     Section 7.4 Additional Capital Contributions. In no event shall any Beneficial Owner be required to make any additional Capital Contribution to the Trust.

ARTICLE VIII

NET PROFIT AND NET LOSS

     Section 8.1 Net Profit and Net Loss. Beneficial Owners shall share in all Net Profit and Net Loss in proportion to their Interest Percentages.

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     (b) Notwithstanding the foregoing, no item of loss or deduction of the Trust shall be allocated to a Beneficial Owner if such allocation would cause or increase an Adjusted Capital Account Deficit, and such items shall instead be allocated (i) to the Beneficial Owners who do not have Adjusted Capital Account Deficits, in proportion to their Interest Percentages or (ii) if all Beneficial Owners have Adjusted Capital Account Deficits, in accordance with Sections 8.2(d) or (e) hereof (whichever applies).

     Section 8.2 Adjustments and Special Allocations. The following special allocations shall be made in the following order and prior to any other allocations under this Declaration:

     (a) Minimum Gain Chargeback. Notwithstanding any other provision of this Article VIII and except as otherwise provided in Regulation Section 1.704-2(f), if there is a net decrease in Trust Minimum Gain during any Fiscal Year, each Beneficial Owner shall be specially allocated items of the Trust's income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Beneficial Owner's share of the net decrease in Trust Minimum Gain, as determined under Regulation Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Beneficial Owner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulation Section 1.704-2. This Section 8.2(a) is intended to comply with the minimum gain chargeback requirement in Regulation Section 1.704-2 and shall be interpreted consistently therewith.

     (b) Beneficial Owner Minimum Gain Chargeback. Except as otherwise provided in Regulation Section 1.704-2(i)(4), notwithstanding any other provision of this Article VIII, if there is a net decrease in Beneficial Owner Nonrecourse Debt Minimum Gain attributable to a Beneficial Owner Nonrecourse Debt, each Beneficial Owner who has a share of the Beneficial Owner Nonrecourse Debt Minimum Gain attributable to such Beneficial Owner Nonrecourse Debt, determined in accordance with Regulation Section 1.704-2(i)(5), shall be specially allocated items of the Trust's income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Beneficial Owner's share of the net decrease in Beneficial Owner Nonrecourse Debt Minimum Gain attributable to such Holder Nonrecourse Debt, determined in accordance with Regulation Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Beneficial Owner pursuant thereto. The items to be allocated shall be determined in accordance with Regulation Section 1.704-2(i)(4) and (j)(2). This Section 8.2(b) is intended to comply with the minimum gain chargeback requirement in Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

     (c) Qualified Income Offset. In the event any Beneficial Owner unexpectedly receives any adjustments, allocations, or distributions described in Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of the Trust's income and gain shall be specially allocated to such Beneficial Owner in an amount and manner sufficient to eliminate, to the extent required by the Regulations, any Adjusted Capital Account Deficit as quickly as possible, provided that an allocation pursuant to this Section 8.2(c) shall

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be made only if and to the extent that such Beneficial Owner would have an Adjusted Capital Account Deficit after all other allocations provided for in this Section 8.2(c) have been tentatively made as if this Section 8.2(c) were not in the Declaration. This Section 8.2(c) is intended to constitute a "qualified income offset" within the meaning of Regulation 1.704-1(b)(2)(ii)(d) and should be interpreted consistently therewith.

     (d) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year or other period shall be allocated among the Beneficial Owners in accordance with their respective Interest Percentages.

     (e) Beneficial Owner Nonrecourse Deductions. Any Beneficial Owner Nonrecourse Deductions for any Fiscal Year of the Trust or portion thereof shall be allocated to the Beneficial Owner who bears the economic risk of loss with respect to the Beneficial Owner Nonrecourse Debt to which such Beneficial Owner Nonrecourse Deductions are attributable, in accordance with Regulation Section 1.704-2(i)(1).

Section 8.3 Tax Allocations.

     (a) Items of income, gain, loss, deduction and credit of the Trust for each Distribution Period will be allocated for U.S. federal, state and local income tax purposes, among the Beneficial Owners in the same manner as the Net Profit (or items thereof) or Net Loss (or items thereof) of which such items are components were allocated pursuant to Sections 8.1 and 8.2 hereof, subject, however, to any adjustment required to comply with Section 704(c) of the Code or the Regulations promulgated under Section 704 of the Code.

     (b) In the event of a transfer of ABC Securities during a Distribution Period, items to be allocated pursuant to Sections 8.3(a) above shall be allocated between the transferor and transferee based on the number of days that the transferor or transferee (as the case may be) owns ABC Securities during such Distribution Period.

     Section 8.4 Determination by Tax Matters Partner of Certain Matters. All matters concerning the computation of Capital Accounts, the allocation of Net Profit (and items thereof) and Net Loss (and items thereof), the allocation of items of income, gain, loss, deduction, expense and credit for tax purposes and the adoption of any accounting procedures not expressly provided for by the terms of this Declaration shall be determined by the Tax Matters Partner in its discretion acting in good faith and taking into account the interests of all Beneficial Owners. Such determination shall be final and conclusive as to all Beneficial Owners. Notwithstanding anything expressed or implied to the contrary in this Declaration, in the event that the Tax Matters Partner shall determine, in its discretion acting in good faith and taking into account the interests of all Beneficial Owners, that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto, are computed (including, without limitation, allocations pursuant to Section 8.3) in order to effectuate the intended economic sharing arrangement of the Beneficial Owners as reflected in this Article VIII (including, without limitation, to avoid any economic distortions resulting from the special allocations in Sections 8.1(b) and 8.2 hereof), the Tax Matters Partner may make such modification. The Tax Matters

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Partner shall instruct the Trustee as to what action, if any, the Trustee shall take in connection with determinations by the Tax Matters Partner, and the Trustee shall assume no liability for relying upon such instructions.

     Section 8.5 Treatment as Partnership. The Trust will be treated as a partnership for United States federal income tax purposes and will not be treated as an association or a publicly traded partnership subject to tax as a corporation and no election will be made by or on behalf of the Trust to treat the Trust as a corporation for United States federal income tax purposes. The provisions of this Declaration shall be interpreted to further this intention of the parties.

ARTICLE IX

ACCOUNTING AND RECORDS

Section 9.1 Tax Elections. The Tax Matters Partner shall:

     (a) adopt the calendar year, or such other period as required by the Code, as the Trust's Fiscal Year;

     (b) adopt the accrual method of accounting;

     (c) make elections to integrate each Confirmation with the relevant Eligible Asset pursuant to Regulation Section 1.1275-6; and

     (d) make any other elections with respect to federal, state and local tax matters as the Tax Matters Partner shall determine from time to time.

Section 9.2 Annual Tax Information.

     (a) The Trustee shall cause the Trust to deliver to each Beneficial Owner a Schedule K-1 setting forth such Beneficial Owner's allocable share of income, gain, loss and deduction (as computed by the Tax Matters Partner) of the Trust for the prior Fiscal Year within one hundred and twenty (120) days of the close of such Fiscal Year.

     (b) The Trustee shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States federal income tax return and any other annual income tax returns required to be filed on behalf of the Trust with any state or local taxing authority.

Section 9.3 Tax Matters Partner.

     (a) GSS Holdings II, Inc. shall be designated on the Trust's annual United States federal information tax return as the Tax Matters Partner as provided in Section 6231(a)(7) of the Code and Regulations Section 301.6231(a)(7)-2. In the event the Trust shall be the subject of an income tax audit by any federal, state or local author-

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ity, to the extent the Trust is treated as an entity for purposes of such audit, including administrative settlement and judicial review, the Tax Matters Partner shall be authorized to act for, and its decision shall be final and binding upon, the Trust and each Beneficial Owner thereof. All expenses incurred in connection with any such audit, investigation, settlement or review shall be borne by the Trust.

     (b) The Trust shall issue to the Tax Matters Partner one ABC Security with a face amount of $1,000. Such ABC Security shall be held by the Trustee for the benefit of the Tax Matters Partner. The Tax Matters Partner may not sell or transfer such ABC Security except as provided in this Section 9.3(b). The Tax Matters Partner may only sell or transfer its ABC Security if it is removed, or otherwise no longer serves, as Tax Matters Partner of the Trust; provided that, any such sale or transfer permitted by this Section 9.3(b) may only be made to the successor Tax Matters Partner. Upon the redemption of the ABC Securities, the Tax Matters Partner is entitled to have the ABC Security issued in its name redeemed only for cash, and only to the extent that there is excess cash available to make such redemption after all of the ABC Securities held by the other Holders have been redeemed and the Distribution at the Fixed Rate or the Floating Rate, as the case may be, has been made to the Holders. If there is not cash available to redeem the ABC Security held by the Tax Matters Partner, such ABC Security will be cancelled and the Tax Matters Partner will have no claim against the Trustee, the Trust or the Holders for such cancellation or a right to any Preference Ordinary Shares, if such shares are issued. Except as otherwise provided in this Section 9.3 and except for purposes of applying the limitations on the maximum number of Beneficial Owners of ABC Securities, the Tax Matters Partner shall be treated as a Beneficial Owner for purposes of applying the provisions of this Declaration.

     (c) The Beneficial Owners shall not take any position on their tax returns inconsistent with the reporting of tax items on the Trust's tax return.

     (d) No provision of this Declaration shall require the Tax Matters Partner to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that the repayment of such funds or protection from such liability is not reasonably assured to it under the terms of this Declaration or indemnity reasonably satisfactory to the Tax Matters Partner against such risk or liability is not reasonably assured to it.

     (e) The Tax Matters Partner may consult with counsel or other experts of its own selection and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion; such counsel may be, but shall not be limited to, counsel to the Initial Purchaser or any of its Affiliates, and may include any of its employees.

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     (f) Under no circumstances shall the Tax Matters Partner be liable for indebtedness evidenced by or arising under any of the documents to which the Trust, or the Tax Matters Partner, is a party, including, without limitation, the ABC Securities.

     Section 9.4 Annual Audit or Review. The books and records of the Trust shall be audited or reviewed as of the end of each Fiscal Year by an independent accounting firm selected by the Trustee.

     Section 9.5 Certain Accounting Matters. At all times during the existence of the Trust, the Trustee shall keep, or cause to be kept, full books of account, records and supporting documents, which shall reflect in reasonable detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting, in accordance with generally accepted accounting principles, consistently applied.

ARTICLE X

DISSOLUTION AND TERMINATION OF THE TRUST

     Section 10.1 Dissolution and Termination of the Trust. The Trust shall dissolve upon, and only upon, the earliest to occur of the following:

     (a)  the entry of a judicial dissolution of the Trust;

     (b) before the issuance of any ABC Securities by the Trust, the receipt by the Trustee of written instruction from the Initial Purchaser; or

     (c) redemption in full of the ABC Securities (including, but not limited to, a redemption in full as provided for in Section 6.5 and Section 6.6 hereof).

Section 10.2 Liquidation and Dissolution.

     (a) Upon the occurrence of an event described in Section 10.1, the Trustee shall proceed to wind up the affairs of the Trust, distribute its assets in the order of priority described in Section 10.2(b), and liquidate, subject to, in the case of the Tax Matters Partner, Section 9.3(b).

     (b) The proceeds referred to in Section 10.2(a) shall be applied in the following order of priority:

          (i)  to the expenses of liquidation; and then

          (ii) to the payment of the debts and liabilities of the Trust, as required by applicable law, including, without limitation, any outstanding expenses, fees or indemnity obligations owing to the Trustee, the Delaware Trustee and the Tax Matters Partner; and then

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     (iii) to the Holders in accordance with each Holder's positive Capital Account balance having made all Capital Account adjustments for the Trust's final Fiscal Year in which such liquidation or dissolution occurs.

     (c) For purposes of the application of this Section 10.2 and determining the Holders' Capital Accounts on liquidation or dissolution, all unrealized income, gain, loss and deduction of the Trust shall be treated as realized and recognized immediately before any such distributions.

     (d) In connection with any liquidation of the Trust described in this Article 10, a liquidation payment will be made with respect to the ABC Securities on the first Distribution Date occurring after the determination to liquidate the Trust is made, or as soon thereafter as the Trustee determines to be practicable.

     (e) Upon completion of the distribution of the Trust's assets, the Delaware Trustee shall file a certificate of cancellation with the Secretary of State of the State of Delaware terminating the Trust.

     (f) The provisions of Sections 3.6, 3.7 and Article 12 shall survive the termination of the Trust.

ARTICLE XI

TRANSFER OF ABC SECURITIES

Section 11.1 Restrictions on Transfer of ABC Securities.

     (a) The ABC Securities may not be offered, sold, pledged or otherwise transferred except (i) pursuant to an applicable exemption from the registration requirements of the Securities Act and (ii) to a person who is a qualified purchaser (referred to as a "QP") (as defined under the Investment Company Act) and a qualified institutional buyer (referred to as a "QIB") (as defined under Rule 144A under the Securities Act).

     (b) No ABC Securities shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Declaration. Any purported transfer of ABC Securities not made in accordance with this Declaration (including without limitation any transfer that violates this Section 11.1 or Section 11.2 hereof) shall be void and of no legal effect whatsoever. Any intended transferee in a purported transfer not made in accordance with this Declaration (including without limitation any transfer that violates this Section 11.1 or Section 11.2 hereof) is hereby deemed not to be the beneficial owner of any ABC Securities or any other interest in the Trust for any purpose, including but not limited to, the receipt of Distributions and any other payments on such ABC Securities, and is deemed to have no interest whatsoever in such ABC Securities or in the Trust. In such a case, the purported transferor of such ABC Securities is hereby deemed to be the Beneficial Owner of such ABC Securities for all purposes notwithstanding its purported transfer of such ABC Securities. The Registrar shall not register

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the issuance of, the transfer of or exchange any ABC Securities not made in accordance with this Declaration (including without limitation any transfer that violates Section 11.1 or 11.2 hereof).

     Section 11.2 Authentication and Transfer of Certificates. The Trustee shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Trustee may reasonably require) in respect of any tax or other government charges that may be imposed in relation to such transfer. Upon surrender for registration or transfer of any Certificate representing ABC Securities, the Trustee shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every such Certificate surrendered for registration or transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by the Holder or such Holder’s attorney duly authorized in writing representing that such Holder has complied with the restrictions set forth in this Article XI. Each Certificate surrendered for registration or transfer shall be canceled by the Trustee. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration.

     Section 11.3 Deemed Security Holders. The Trustee may treat the Person in whose name any ABC Securities shall be registered on the books and records of the Trust as the sole Holder of such ABC Securities for purposes of receiving Distributions and for all other purposes whatsoever (other than Section 11.1 hereof) and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such ABC Securities on the part of any Person, whether or not the Trust shall have actual or other notice thereof.

Section 11.4 Certificates.

     (a) ABC Securities will be initially evidenced by one or more fully registered certificates (each a "Certificate"), in the form attached hereto as Exhibit A, and shall be authenticated and executed by the Trustee on behalf of the Trust. Such Certificates shall initially be registered on the books and records of the Trust in the name of the Pass-Through Trust and the Tax Matters Partner (as provided for in Section 9.3(b)).

     (b) To the extent that the provisions of this Section 11.4 conflict with any other provisions of this Declaration, the provisions of this Section 11.4 shall control.

     Section 11.5 Appointment of Authenticating Agent. At any time when any Certificates remain outstanding, the Trustee may appoint an authenticating agent or agents (each an "Authenticating Agent") with respect to the Certificates which shall be authorized to act on behalf of the Trustee to authenticate Certificates issued upon original issuance, exchange or registration of transfer. The Trustee may revoke such power and remove any Authenticating Agent at any time.

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     If any Authenticating Agent is appointed hereunder, the Certificates may have endorsed thereon, in addition to the Trustee’s certificate of authentication, an alternate certificate of authentication in the following form:

     This is one of the Certificates referred to in the within-mentioned Trust Declaration.

[Name of Trustee], not in its individual capacity

but solely as Trustee

By:  ______________________

       as Authenticating Agent

By:  ______________________

       Authorized Signatory

     Section 11.6 Mutilated, Destroyed, Lost or Stolen ABC Securities. If (a) any mutilated Certificates are surrendered to the Trustee, or if the Trustee shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificates; and (b) there shall be delivered to the Trustee such security or indemnity as may be required by them to keep each of them harmless; then, in the absence of notice that such Certificates shall have been acquired by a protected purchaser, the Trustee on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificates, new Certificates of like denomination. In connection with the issuance of any new Certificates under this Section 11.6 the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificates issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Certificates, as if originally issued, whether or not the lost, stolen or destroyed Certificates shall be found at any time.

ARTICLE XII

     LIMITATION OF LIABILITY OF HOLDERS, THE TRUSTEE, THE DELAWARE TRUSTEE OR OTHERS

Section 12.1 Liability.

     (a) Except as expressly set forth in this Declaration and the terms of the ABC Securities, the Initial Purchaser, the Tax Matters Partner, the Trustee and the Delaware Trustee shall not be:

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     (i) personally liable for the return of any portion of the investment of Holders in the ABC Securities (or any return thereon), which shall be made solely from assets of the Trust;

     (ii) required to pay to the Trust or to any Holder any deficit upon dissolution of the Trust or otherwise; and

     (iii) required to pay any fees or expenses relating to the operation of the Trust.

     (b) Pursuant to Section 3803(a) of the Statutory Trust Act, Holders shall be entitled to the same limitation of personal liability extended to shareholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. Each Certificate is fully paid and non-assessable.

     (c) To the fullest extent permitted by law, the assets of the Trust will be used to indemnify the (i) Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Trustee or the Delaware Trustee and (iv) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Trustee and the Delaware Trustee (each of the Persons in (i) through (iv) being referred to as a "Class I Indemnified Person") for, and each Class I Indemnified Person will be held harmless against, any loss, obligation, action, suit, damage, claim, liability or expense including taxes (other than taxes based on or determined (in whole or in part) by reference to the income of the Trustee, the Delaware Trustee or such other Person) incurred without gross negligence (or ordinary negligence with respect to allocation of funds or obligations to cause payments to be made on the ABC Securities or calculations made with respect thereto) or bad faith or willful misconduct on the part of the Trustee or the Delaware Trustee arising out of or in connection with the acceptance or administration of the Trust, the Trust Property, or relating to this Declaration or any other document or agreement entered into by or on behalf of the Trust or the Trustee, including the costs, disbursements and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating any claim or liability in connection with, the exercise or performance of any of its powers or duties hereunder.

     In addition, to the fullest extent permitted by law, and only after the use of assets to provide any indemnification required by the preceding paragraph, if applicable, the assets of the Trust will be used to indemnify the (x) the Initial Purchaser (solely in connection with the Initial Purchaser acting in its capacity as the Initial Purchaser of the Trust and not in connection with its purchase or ownership of ABC Securities), (y) the Tax Matters Partner and (z) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Initial Purchaser or the Tax Matters Partner (each of the Persons in (x) through (z) being referred to as a "Class II Indemnified Person") for, and each Class II Indemnified Person will be held harmless against, any loss, obligation, action, suit, damage, claim, liability or expense including taxes (other than taxes based on or determined (in whole or in part) by reference to the income of the Initial Purchaser, the Tax Matters Partner or such other Person) incurred without gross negligence or bad faith or willful misconduct on the part of the Initial Pur-

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chaser (solely in connection with the Initial Purchaser acting in its capacity as the Initial Purchaser of the Trust and not in connection with its purchase or ownership of ABC Securities) or the Tax Matters Partner arising out of or in connection with the acceptance or administration of the Trust, the Trust Property, or relating to this Declaration or any other document or agreement entered into by or on behalf of the Trust or the Trustee, including the costs, disbursements and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating any claim or liability in connection with, the exercise or performance of any of its powers or duties hereunder.

     The obligation to indemnify as set forth in this Section 12.1(c) shall survive the satisfaction and discharge of this Declaration, the redemption of ABC Securities or the resignation or removal of the Trustee, the Delaware Trustee, the Initial Purchaser or the Tax Matters Partner.

     (d) The Trustee shall have a first priority lien on Trust Property for the payment of all amounts owed to it under this Declaration, provided that any transfer of Trust Property pursuant to a Trust Document shall be made free and clear of such lien, but such lien shall apply instead to any proceeds of such Trust Property.

     (e) The Initial Purchaser undertakes to perform such duties and only such duties as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration.

     (f) In the absence of gross negligence or willful misconduct on the part of the Initial Purchaser, the Initial Purchaser shall not be liable for any action taken, suffered, or omitted or for any error in judgment made by it in the performance of its duties under this Declaration. The Initial Purchaser shall not be liable for any error resulting from the use or reliance on a source of information used in good faith and without gross negligence to make any determination or declaration hereunder. The Initial Purchaser shall not be liable for any error in judgment made in good faith unless the Initial Purchaser shall have been grossly negligent in ascertaining or failing to ascertain the pertinent facts. In no event shall the Initial Purchaser be liable for special, consequential or punitive damages or for any failure or delay in the performance of its obligations under this Declaration due to forces reasonably beyond the control of the Initial Purchaser including, without limitation, strikes, work stoppages, acts of war or terrorism, insurrection, revolution, nuclear or natural catastrophes or acts of God and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services including, without limitation, Internet services; it being understood that the Initial Purchaser shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

     Section 12.2 Outside Businesses. Any of the Initial Purchaser, the Trustee, the Delaware Trustee, the Tax Matters Partner, the Trust’s officers, directors, shareholders, partners, members, representatives, employees or Affiliates, and the Holders may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders shall have no rights by virtue of this Declaration in and to such

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independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. None of the foregoing Persons shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any such Person shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any of the foregoing Persons may engage or be interested in any financial or other transaction with the Initial Purchaser or any Affiliate of the Initial Purchaser, or may act as depository for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Initial Purchaser or its Affiliates.

ARTICLE XIII

VOTING, AMENDMENTS AND MEETINGS

     Section 13.1 General. Except as provided in Article 6, this Article 13 and in Section 5.2, Holders will not have any voting rights.

     Section 13.2 Voting. Holders shall be entitled to vote as a single class on all matters submitted to the vote of Holders. Each ABC Security shall have, on such matters submitted to the vote of Holders, one vote.

Section 13.3 Amendments.

     (a) No amendment to this Declaration shall be made, and any such purported amendment shall be void and ineffective:

     (i) unless, in the case of any purported amendment, the Trustee shall have first received (A) an opinion of nationally recognized independent counsel (who may be counsel to the Initial Purchaser or the Trust) that such purported amendment is permitted by the terms of this Declaration (including the terms of the ABC Securities), provided that, in rendering such an opinion, counsel may consult with and rely upon the opinion of investment banks, accountants and other experts outside of its area of expertise, and (B) an Officer's Certificate stating that such purported amendment could not reasonably be expected to materially and adversely affect the rights, terms or preferences of the ABC Securities or impair the Trust's ability to fully perform its obligations under each of its contractual arrangements, unless the party affected thereby consents thereto;

     (ii) unless, in the case of any purported amendment which affects the rights or powers of the Trustee or any of its Affiliates, the Trustee shall have consented to such amendment in writing;

     (iii) unless, in the case of any amendment, restatement or revision to this Declaration that would materially and adversely alter the rights, terms

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or preferences of the ABC Securities, the Holders of at least a majority in face amount of ABC Securities voting on such matter approve such amendement, restatement or revision; or

(iv)   to the extent the result of such amendment would be to:

             (A) cause the Trust to be classified as an association or publicly traded partnership taxable as a corporation for United States federal income tax purposes; or

             (B) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act.

     (b) Notwithstanding the other provisions of this Section 13.3 and Section 13.4, this Declaration may not be amended without the unanimous consent of the Holders of ABC Securities with respect to:

     (i) the liability, and limitations thereon, of the Trustee (and any such amendment that affects the Trustee shall require the consent of the Trustee) and any of its affiliates;

     (ii) the right of Holders of ABC Securities to vote on matters submitted to the vote of Holders of ABC Securities;

     (iii) the provisions of this Declaration governing amendments to this Declaration; and

     (iv) the rights of Holders of ABC Securities to receive Distributions on ABC Securities in accordance with their terms, including Distributions in connection with a liquidation of the Trust.

     (c) This Declaration may be amended without the consent of the Holders and the Asset Swap Counterparty:

     (i) to cure any ambiguity;

     (ii) to correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration; or

     (iii) to conform to any change in the Investment Company Act or written change in interpretation or application of the rules and regulations promulgated thereunder by any legislative body, court, government agency or regulatory authority;

provided, however, that any amendment made pursuant to this Section 13.3(c) shall be void if such amendment materially and adversely affects the Holders of ABC Securities,

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unless first approved by the Holders of at least a majority in face amount of ABC Securities voting on such matter.

     (d) Notwithstanding any other provision of this Declaration to the contrary, any amendment to this Declaration shall be void if such amendment adversely affects the Initial Purchaser, the Asset Swap Counterparty, the Put Counterparty or the Grantor, unless first approved by the Initial Purchaser, the Asset Swap Counterparty, the Put Counterparty or the Grantor, as the case may be.

Section 13.4 Certain Other Matters.

     (a) In the event the consent of the holders of any security (including Preference Ordinary Shares and the Put Option Agreement) comprising a portion of the Trust Property is required with respect to any amendment, modification or waiver of the terms of or rights under, or other matter in respect of, such security, the Trustee shall request the direction of the Holders with respect to such matter and shall vote with respect thereto in the same manner and proportion as directed by the Holders providing direction.

     (b) Prior to (i) taking any Legal Action with respect to any Trust Property, (ii) providing consent to any amendment to the Put Agreement, the Rate Swap Arrangement or the Asset Swap Arrangement, in each case that would materially and adversely alter the rights, terms or preferences of the ABC Securities, or (iii) providing consent to any amendment to the Put Counterparty's Memorandum of Association, Articles of Association or the resolutions providing for the terms and preferences of the Preference Ordinary Shares, in a manner that would adversely affect the rights of holders of the Preference Ordinary Shares, the Trustee, as the holder of the Trust Property, shall request the direction of the Holders with respect to such Legal Action and shall act with respect to such Legal Action as directed by a majority in face amount of the ABC Securities actually voting on such matter; provided, however, that to the extent that the provisions of this Section 13.4(e) conflict with the provisions of Section 13.3, the provisions of Section 13.3 shall control.

     (c) Notwithstanding any other provisions of Section 13 to the contrary, the unanimous consent of the Holders is required to amend the Put Agreement, the Rate Swap Arrangement or the Asset Swap Arrangement in any manner that would reduce the amount of, or delay the timing of, any receipt by the Trust of payments due thereunder, except where such reduction or delay is expressly provided for in the applicable forgoing document.

Section 13.5 Meetings of the Holders.

     (a) Meetings of the Holders may be called at any time by the Trustee, the Initial Purchaser or a Majority in Face Amount as provided by this Declaration. Except to the extent otherwise provided in this Declaration, the following provisions of this Section 13.5 shall apply to meetings of Holders.

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     (b) Whenever a vote, consent or approval of Holders is permitted or required under this Declaration, such vote, consent or approval may be given at a meeting of Holders, in person or by proxy, or by written consent.

     (c) Each Holder may authorize any Person to act for it by proxy on all matters in which a Holder is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Holder or its attorney-in-fact. Every proxy shall be revocable at the pleasure of the Holder executing it at any time before it is voted.

     (d) Each meeting of Holders shall be conducted by the Trustee or by such other Person that the Trustee may designate in accordance with the terms of this Declaration.

     (e) A quorum with respect to any such meeting shall be not less than a Majority in Face Amount entitled to vote at the meeting, except as provided for otherwise in this Declaration. The Trustee shall cause a notice of any meeting at which Holders are entitled to vote, or of any matter upon which action may be taken by written consent of such Holders, to be mailed to each Holder of record of ABC Securities at least ten (10) days before such meeting or such action is to become effective. Each such notice shall include a statement setting forth (i) the date and time of such meeting or the date and time by which such action is to be taken, (ii) a description of any action proposed to be taken at such meeting on which such Holders are entitled to vote or of such matters upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. Any and all meetings of Holders shall be held during normal business hours.

     (f) A quorum shall not be required with respect to any meeting of Holders in connection with a Liquidation Shareholders Meeting as referred to in Section 13.6.

     (g) The Trustee shall establish all other provisions relating to meetings of Holders, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote.

Section 13.6 Liquidation Shareholders Meeting. The Trustee shall, at the expense of the Trust, call a meeting of the Holders of ABC Securities no less than 35 but no more than 60 days:

     (a) prior to July 15, 2033 (if the Trust has not been liquidated prior to this date);

     (b) after a Responsible Officer of the Trustee has received notice that the option under the Put Agreement has been exercised in full (as a result of a deemed or voluntary exercise) or the Put Agreement is terminated for any reason; and/or

     (c) after a Responsible Officer of the Trustee has received notice that the Regulation 114 Trust Agreement has been terminated;

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(each, a "Liquidation Shareholders Meeting").

     (d) Liquidation Shareholders Meetings shall be conducted in accordance with Section 6.6 and Section 13.5, except that the quorum requirement contained in Section 13.5(e) shall not apply to such meetings. For the avoidance of doubt, votes sought in connection with a Liquidation Shareholders Meeting may be given at a meeting of Holders, in person or by proxy, or by written consent.

Section 13.7 Replacement of Asset Swap Counterparty.

     (a) The Asset Swap Arrangement will be considered for renewal for another 10-year term by the Asset Swap Counterparty on July 15 of each of 2013 and, if renewed, 2023 (each date being referred to as an "Asset Swap Renewal Date"), unless the Put Counterparty elects to terminate the Put Agreement on the Asset Swap Renewal Date. On or prior to the 20^th day preceding each Asset Swap Renewal Date, the Asset Swap Counterparty may elect (i) to renew the Asset Swap Arrangement on the same terms as the Asset Swap Arrangement then in effect, (ii) to seek to renew the Asset Swap Arrangement on the same terms as those then in effect, except for the number of basis points relative to the Three-Month LIBOR Rate that the Asset Swap Counterparty is willing to pay in respect of the periodic Floating Rate Payments due under the Asset Swap Arrangement, or (iii) to terminate the Asset Swap Arrangement then in effect, in which case the Trustee will seek a replacement asset swap counterparty in accordance with the procedures described in Sections 13.7(b) through (g). If the Asset Swap Counterparty elects option (ii) in the preceding sentence, it will submit a bid to the Trustee (with a copy to the Put Counterparty) setting forth the number of basis points relative to the Three-Month LIBOR Rate that it is willing to pay in respect of the periodic Floating Rate Payments under the Asset Swap Arrangement. The Asset Swap Counterparty's election of options (ii) or (iii) of this Section 13.7(a) shall be referred to as an "Asset Swap Repricing Event," which will occur on the 20^th day preceding the related Asset Swap Renewal Date.

     (b) At any time that an Asset Swap Arrangement is in effect, within 10 days of the occurrence of any of the following events where the Asset Swap Counterparty is the sole defaulting or affected party (as determined in reference to the Asset Swap Arrangement):

     (i) for so long as the Pass-Through Securities are rated by Standard & Poor's Ratings Group, the Asset Swap Counterparty failing to have a long term unsecured debt or counterparty rating by Standard & Poor's Ratings Group of "AA-" or above , unless the Asset Swap Counterparty's obligation to make the termination payments under the Asset Swap Arrangement upon an early or scheduled termination thereof is unconditionally guaranteed (including pursuant to the Guarantee) by an entity with a long-term unsecured debt or counterparty rating by Standard & Poor's Ratings Group of "AA-" or above;

     (ii) for so long as the Pass-Through Securities are rated by Moody's Investors Service, Inc., the Asset Swap Counterparty failing to have a

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long term unsecured debt or issuer rating by Moody's Investors Service, Inc. of "Aa3" or above, unless the Asset Swap Counterparty's obligation to make the termination payments under the Asset Swap Arrangement upon a scheduled or early termination thereof is unconditionally guaranteed (including pursuant to the Guarantee) by an entity with a long-term unsecured debt or issuer rating by Moody's Investors Service, Inc. of "Aa3" or above;

and, in the case of Sections 13.7(b)(i) and (ii) above, such failure continues for five Business Days. The minimum rating levels established by Sections 13.7(b)(i) and (ii) are referred to as the "Required Counterparty Ratings."

     (iii) for so long as Merrill Lynch International remains the Asset Swap Counterparty, the receipt of notice by the Trust from the Asset Swap Coun-terparty or the Asset Swap Guarantor of the termination of the Collateral Agreement;

     (iv) the Asset Swap Counterparty or the Trust failing to make a required swap payment or delivery when due (including a required deposit into the Appreciation Account), provided that such failure is not cured within 3 Business Days after notice of such failure has been given to the party;

     (v) either party electing to terminate upon the imposition of certain additional withholding taxes;

     (vi) the bankruptcy, dissolution, insolvency, liquidation, receivership or winding-up of the Trust, the Asset Swap Counterparty or, if the Asset Swap Counterparty does not have the Required Counterparty Ratings, the Asset Swap Guarantor or any equivalent or analogous proceedings or the voluntary or involuntary filing of any document, certificate or other instrument to commence any such action. However, (A) any of these actions taken in connection with a consolidation, amalgamation or merger shall not qualify as a default and (B) in the case of any proceeding or petition entered against the Trust, the Asset Swap Counterparty or the Asset Swap Guarantor, as the case may be, involuntarily, such proceeding or petition shall not terminate the Asset Swap Arrangement if such proceeding or petition is dismissed, discharged, stayed or restrained within 30 days of the institution or presentation thereof);

     (vii) the Trust, the Asset Swap Counterparty or the Asset Swap Guarantor merging or consolidating with, or transferring all or substantially all its assets to, another entity which fails to assume all the obligations of such party under the Asset Swap Arrangement or, following any such transfer, the benefits of the Guarantee or the Credit Support Annex, as the case may be, fails to extend to the performance by the successor entity under the Asset Swap Arrangement;

     (viii) due to the adoption of, or any change in, any applicable law after the date on which the Asset Swap Arrangement is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or

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regulatory authority with competent jurisdiction of any applicable law after such date, such that it becomes unlawful (other than as a result of a failure by the party to maintain appropriate government authorizations) for the Asset Swap Counter-party to perform certain of its material obligations under the Asset Swap Arrangement;

     (ix) the Trust, the Asset Swap Counterparty or the Asset Swap Guarantor assigning all or a part of its rights and obligations under the Asset Swap Arrangement, except in the case of an assignment by the Asset Swap Counterparty in connection with a permitted assignment as described in the Asset Swap Arrangement;

     (x) the Asset Swap Guarantor or the Asset Swap Counterparty failing to purchase an Asset or cause a third party to purchase an Asset: (A) from the Regulation 114 Trust or the Trust, as the case may be, in connection with a deletion of the Asset from the Asset Swap Arrangement or a termination of the Asset Swap Arrangement; or (B) from the Ceding Insurer pursuant to the Asset Put Option Agreement in connection with the exercise of the put option; or

     (xi) an Asset Swap Repricing Event occurring,

the Put Counterparty, acting on behalf of the Trust, will seek bids from four major dealers in the swap market acceptable to the Grantor and the Trust with ratings consistent with the Required Counterparty Ratings to serve as the replacement asset swap counterparty. The Put Counterparty will instruct the potential bidders to submit their bids in writing to the Trustee, with a copy to the Put Counterparty. In the event that the Asset Swap Counterparty elects option (ii) of Section 13.7(a), then the Asset Swap Counterparty's bid shall be one of the four bids considered. All four bids will be sought at the same time on the same day, will remain valid for 24 hours from the time of receipt by the Trustee and shall be on the same terms as the Asset Swap Arrangement most recently in effect, including the obligation to pay any unpaid amounts due from the predecessor asset swap counter-party to the extent not paid by such predecessor asset swap counterparty; provided, however, that other than the obligation to pay such unpaid amounts, the only permitted material variation from the terms of the asset swap arrangement then in effect will be the number of basis points relative to the Six-Month LIBOR Rate (in the case of a bid with respect to the Fixed Rate Period) or the Three-Month LIBOR Rate (in the case of a bid with respect to the Floating Rate Period) that the potential replacement asset swap coun-terparty offers to pay in respect of the Floating Rate Payments.

     (c) With respect to the Fixed Rate Period, if all of the bids received specify rates that, when added to the then-current Put Option Premium Rate, and adjusted, if applicable, by payments to be made under the Rate Swap Arrangement, would be less than the Fixed Rate or, with respect to the Floating Rate Period, irrespective of the rates specified in the bids, the Put Counterparty will have the option to (i) adjust the amount of the Put Option Premium Rate such that the Put Option Premium Rate plus the rate offered by the highest bidder, as adjusted, if applicable, by payments to be made under the Rate Swap Arrangement, is equal to the Fixed Rate (with respect to

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the Fixed Rate Period) or the Floating Rate (with respect to the Floating Rate Period), in which case the Trustee shall be required to engage the highest bidder (i.e., the bidder whose rate is the fewest number of basis points below, or the greatest number of basis points in excess of, the Six-Month LIBOR Rate or the Three-Month LIBOR Rate, as the case may be) as the replacement asset swap counterparty, (ii) exercise the Put Agreement in full, or (iii) take no action, in which case the Trustee will reject all of the bids received, following which the Asset Swap Arrangement and the Put Agreement will terminate and the Trust will be liquidated in accordance with Section 10.2.

     (d) If the bids received do not satisfy the requirements of Section 13.7(c), the Trustee will be required to engage the replacement asset swap counterparty bidding the highest rate (i.e., the bidder, if any, whose rate is the greatest number of basis points above, or the lowest number of basis points below, the Six-Month LIBOR Rate or the Three-Month LIBOR Rate, as the case may be).

     (e) If the highest bid is made by more than one bidder, then the Trustee shall select between or among such bidders by lot.

     (f) If a replacement asset swap counterparty is identified in accordance with the foregoing procedures, the Trust will release the Asset Swap Counterparty from its obligations under the Asset Swap Arrangement and engage the replacement asset swap counterparty to execute a new asset swap arrangement on the same terms as the previous asset swap arrangement, except for the permitted variation in price.

     (g) If no potential replacement asset swap counterparties are identified pursuant to this Section 13.7, then (i) the Put Counterparty will have the option to exercise its Put Agreement in full, or (ii) take no action, in which case the Trustee will reject all of the bids received, following which the Asset Swap Arrangement and the Put Agreement will terminate and the Trust will be liquidated in accordance with Section 10.2.

     (h) Prior to taking any action pursuant to this Article 13, the Trustee shall be entitled to receive and rely upon written instruction of the Initial Purchaser and shall have no liability for any action it takes in accordance therewith.

     (i) The administrative costs of the search for a replacement asset swap counterparty under this Section 13.7, (i) if successful, will be borne by the replacement asset swap counterparty, or (ii) if unsuccessful, will be borne by the Put Counterparty.

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ARTICLE XIV

REPRESENTATIONS OF THE TRUSTEE AND THE DELAWARE TRUSTEE

     Section 14.1 Representations and Warranties of the Trustee. The trustee that acts as initial Trustee represents and warrants to the Trust and to the Initial Purchaser at the date of this Declaration, and each Successor Trustee represents and warrants to the Trust and the Initial Purchaser at the time of the Successor Trustee’s acceptance of its appointment as Trustee that:

     (a) The Trustee is a Delaware banking corporation with trust powers, duly incorporated, validly existing and in good standing under the laws of the state of Delaware, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration;

     (b) The execution, delivery and performance by the Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Trustee. This Declaration has been duly executed and delivered by the Trustee and constitutes a legal, valid and binding obligation of the Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors’ rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law);

     (c) The execution, delivery and performance of this Declaration by the Trustee (i) does not conflict with or constitute a breach of (A) the certificate of incorporation or by-laws or similar organizational documents of the Trustee, (B) any law or regulation of any governmental body, authority or agency to which the Trustee is subject or (C) any agreement to which the Trustee is a party, which conflict or breach would have a material adverse effect on the Trustee's ability to perform its obligations under this Declaration and (ii) will not create a lien or encumber any of the Assets or property of the Trust;

     (d) No consent, approval or authorization of, or registration with or notice to, any state or federal banking authority or other authority regulating the banking or corporate trust activities of the Trustee is required for the execution, delivery or performance by the Trustee of this Declaration; and

     (e) The Trustee, except as expressly provided or contemplated by this Declaration, will not create, incur or assume, or suffer to exist any mortgage, pledge, hypothecation, encumbrance, lien or other charge or security interest upon the Trust Property and agrees to take all actions within its power to eliminate such liens.

     Section 14.2 Representations and Warranties of Delaware Trustee. The Delaware Trustee represents and warrants to the Trust and to the Initial Purchaser at the time of the Delaware Trustee’s acceptance of its appointment as Delaware Trustee, and each Successor Delaware Trustee represents and warrants to the Trust and the Initial Pur-

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chaser at the time of the Successor Delaware Trustee’s acceptance of its appointment as Delaware Trustee, that:

     (a) The Delaware Trustee is a Delaware banking corporation with trust powers, duly incorporated, validly existing and in good standing under the laws of the state of Delaware, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration;

     (b) The Delaware Trustee fulfills the requirements of Section 3807 of the Statutory Trust Act and has the power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration;

     (c) The Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and this Declaration and such performance (i) does not conflict with or constitute a breach of (A) the certificate of incorporation or by-laws or similar organizational documents of the Delaware Trustee, (B) any law or regulation of any governmental body, authority or agency to which the Delaware Trustee is subject or (C) any agreement to which the Delaware Trustee is a party, which conflict or breach would have a material adverse effect on the Delaware Trustee's ability to perform its obligations under this Declaration, and (ii) will not create a lien or encumber any of the Assets or property of the Trust. This Declaration has been duly authorized, executed and delivered by the Delaware Trustee, and, under Delaware law, constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors’ rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law);

     (d) No consent, approval or authorization of, or registration with or notice to, any state or federal banking authority or other authority regulating the banking or corporate trust activities of the Delaware Trustee is required for the execution, delivery or performance by the Delaware Trustee of this Declaration; and

     (e) The Delaware Trustee is an entity which has its principal place of business in the State of Delaware.

ARTICLE XV

MISCELLANEOUS

     Section 15.1 Notices. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, by email, facsimile, by a nationally recognized overnight delivery service or mailed by first-class mail, unless otherwise indicated below, as follows:

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     (a) if given to the Trust, in care of the Trustee at the Trust’s mailing address set forth below (or such other address as the Trust may give notice of to the Holders):

The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Facsimile number: (302) 283-8279
Attention: Kris Gullo

     (b) if given to the Trustee, at its corporate trust office set forth below (or such other address as the Trustee may give notice of to the Holders):

The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Facsimile number: (302) 283-8279
Attention: Kris Gullo

     (c) if given to the Put Counterparty, a copy to the attention of each of the General Counsel, Treasury and Investment Departments at the following address (or such other address as the Put Counterparty may give notice of to the Holders):

XL Capital Ltd
XL House
One Bermudiana Road
Hamilton HM 11, Bermuda
Facsimile number: (441) 296-4867 (General Counsel)
                              (441) 296-6399 (Treasury)
                              (441) 296-4268 (Investment)
Attention: General Counsel, Treasury and Investment Departments, respectively

The address for XL Capital Ltd and XL Re Ltd is XL House, One Bermudiana Road, Hamilton HM 11, Bermuda. The telephone number for both companies is 441-292-8515. The General Counsel's fax number is 441-295-4867, Treasury Dept's is 441-296-6399 and the Investment Dept's is 441-296-4268. XL Re's CFO's fax number is 441-292-3919.

     (d) if given to the Initial Purchaser, at its address set forth below (or such other address as the Initial Purchaser may give notice of to the Holders):

Merrill Lynch, Pierce, Fenner & Smith Incorporated
4 World Financial Center

B-57

New York, New York 10080

Facsimile number: (646) 805-0218, Attention: Marc Zindle
                               and
                               (212) 738-2390, Attention: Scott Hendry

     (e) a copy of any notice given pursuant to Section 15.1(a), (b) or (c) shall be delivered to the following:

The Bank of New York
100 Church Street 8^th Floor
New York, New York 10286
Facsimile number: (212) 437-6157
Attention: Corporate Trust – Dealing and Trading

and

Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Facsimile number: (212) 735-2000
Attention: Michael K. Hoffman

and

Merrill Lynch, Pierce, Fenner & Smith Incorporated
4 World Financial Center
New York, New York 10080
Facsimile number: (646) 805-0218, Attention: Marc Zindle
                               and
                               (212) 738-2390, Attention: Scott Hendry

     (f) if given to any Holder by a nationally recognized overnight delivery service or by first class mail (or by facsimile if requested by such Holder), at the address set forth on the books and records of the Trust.

     All such notices shall be deemed to have been given when received in person, by facsimile, email or similar form of electronic communication or mailed by a nationally recognized overnight delivery service or by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.

     Section 15.2 Non-Petition. To the fullest extent permitted by applicable law, notwithstanding any prior termination of this Declaration, none of the Initial Pur-

B-58

chaser, the Trustee, or the Delaware Trustee, any Paying Agent or any Holder of ABC Securities will acquiesce, petition or otherwise invoke or cause the Trust to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Trust under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Trust or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Trust until payment in full of the ABC Securities and the expiration of a period equal to the longest applicable "preference period" prescribed by the federal Bankruptcy Court or other applicable law, plus ten (10) days, following such payment.

     Section 15.3 GOVERNING LAW. THIS DECLARATION, THE ABC SECURITIES AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION THAT WOULD CALL FOR THE APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE; PROVIDED, HOWEVER, THAT THERE SHALL NOT BE APPLICABLE TO THE PARTIES HEREUNDER OR THIS DECLARATION ANY PROVISION OF THE LAWS (STATUTORY OR COMMON, OTHER THAN THE STATUTORY TRUST ACT) OF THE STATE OF DELAWARE PERTAINING TO TRUSTS THAT RELATE TO OR REGULATE THE PARTIES HEREUNDER OR THIS DECLARATION IN A MANNER INCONSISTENT WITH THE TERMS HEREOF, INCLUDING (A) THE FILING WITH ANY COURT OR GOVERNMENTAL BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE FEES AND CHARGES, (B) AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF REAL OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS AND EXPENDITURES TO INCOME OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE NATURE, AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO THE TITLING, STORAGE OR OTHER MANNER OF HOLDING OR INVESTING TRUST ASSETS OR (G) THE ESTABLISHMENT OF FIDUCIARY OR OTHER STANDARDS OR RESPONSIBILITY OR LIMITATIONS ON THE ACTS OR POWERS OF TRUSTEES THAT ARE INCONSISTENT WITH THE LIMITATIONS OR LIABILITIES OR AUTHORITIES AND POWERS OF THE TRUSTEES HEREUNDER AS SET FORTH OR REFERENCED IN THIS DECLARATION. SECTIONS 3540 AND 3561 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO THE TRUST.

     Section 15.4 Change in Law. If, after the date of this Declaration, there is (i) a change in any law, rule or regulation, (ii) a judicial decision or (iii) a pronounce-

B-59

ment of any administrative or professional standards setting body, in each case that would adversely affect any of the terms of this Declaration or the obligations of the parties hereto, the parties shall use their reasonable efforts to determine by negotiation and discussion the manner in which to address the impact of such change, decision or pronouncement, as the case may be; provided, however, that no amendment may be made to this Declaration without first complying with Article 13 of this Declaration.

     Section 15.5 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof.

     Section 15.6 Successors and Assigns. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Initial Purchaser and the Trustee shall bind and inure to the benefit of their respective successors and assigns, whether so expressed.

     Section 15.7 Enforcement Rights. The Put Counterparty shall have the right to enforce Sections 3.6(a)(ix), (c) and (e), Section 3.9(j), Section 3.13(a), Section 6.2(b) and Sections 13.3(b) and (c) as if the Put Counterparty were a party to this Declaration.

     Section 15.8 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby.

     Section 15.9 Counterpart. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signatures of the Trustee and a duly authorized officer of the Tax Matters Partner and the Initial Purchaser to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page.

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     IN WITNESS WHEREOF, each of the undersigned has caused these presents to be executed as of the day and year first above written.

THE BANK OF NEW YORK

(DELAWARE)

as Trustee

By: /s/ Michael Santino

      Name: Michael Santino

      Title: SVP

GSS HOLDINGS II, INC.

as Tax Matters Partner

By: /s/ Frank B. Bilotta

      Name: Frank B. Bilotta

      Title: Vice President

MERRILL LYNCH, PIERCE, FENNER &

SMITH INCORPORATED,

as the Initial Purchaser

By: /s/ Kerry A. Cannella

      Name: Kerry A. Cannella

      Title: Authorized Signatory

[ABC Declaration of Trust]

B-61

EX-99.6

TRUST AGREEMENT

among

XL REINSURANCE AMERICA INC.

and

XL RE LTD

and

THE BANK OF NEW YORK

PREAMBLE

     This trust agreement (the "Trust Agreement"), made and entered into by and between XL REINSURANCE AMERICA INC. (formerly known as NAC Reinsurance Corporation), a New York property and casualty insurance company, XL RE LTD (formerly known as XL Mid Ocean Reinsurance), a Bermuda property and casualty reinsurer, and THE BANK OF NEW YORK, a banking association organized under the laws of New York.

ARTICLE I

CERTAIN DEFINITIONS

A. "Beneficiary" means XL REINSURANCE AMERICA INC., for whose sole benefit the trust hereunder has been established. As used herein, the term "Beneficiary" shall include any successor of the Beneficiary by operation of law, including, without limitation, any liquidator, rehabilitator, receiver, or conservator.

B. "Grantor" means XL RE LTD, which has established the trust hereunder for the sole benefit of the Beneficiary.

C. "Trustee" means THE BANK OF NEW YORK.

ARTICLE II

CREATION OF TRUST ACCOUNT

     Section 2.1 Continuing Obligation of the Grantor (a) The Grantor agrees to place and maintain with the Trustee a trust account (which in its totality shall be hereinafter referred to as the "Trust Account"). The Trust Account shall consist of cash (United States legal tender), certificates of deposit issued by a United States bank and payable in United States legal tender, and investments of the types specified in section 1404(a) (1), (2), (3), (8) and (10) of the New York Insurance Law, provided that such investments are issued by an institution that is not the parent, subsidiary, or affiliate of either the Grantor or Beneficiary (hereinafter collectively referred to as the "Assets").

     (b) The Trustee shall not accept any Assets unless the Trustee determines that such Assets are in such form that the Beneficiary or the Trustee, upon direction by the Beneficiary may, whenever necessary, negotiate any such Assets, without consent or signature from the Grantor or any other person or entity. Any Assets received by the Trustee which are not in such proper negotiable form shall not be accepted by the Trustee and shall be returned to the Grantor as unacceptable.

1

     (c) The Trustee shall utilize the services of a nationally recognized reporting service in order to determine the fair market value of any Assets in the Trust Account on a monthly basis.

     (d) The Grantor grants to the Trustee all trust powers necessary and reasonable in the performance hereunder.

     Section 2.2 Purpose of Trust. The Assets in the Trust Account shall be held by the Trustee for the sole use and benefit of the Beneficiary. The Grantor grants to the Trustee all trust powers necessary and reasonable in the performance hereunder.

     Section 2.3 Designation of Agents. Except as otherwise expressly provided in this Trust Agreement, any statement, certificate, notice, request, consent, approval, or other instrument to be delivered or furnished by Grantor and/or Beneficiary shall be sufficiently executed if executed in the name of Grantor and/or Beneficiary by such officer or officers of Grantor and/or Beneficiary or by such other agent or agents of Grantor and/or Beneficiary as may be designated in a resolution or letter of advice by Grantor and/or Beneficiary (each such person, an "Authorized Representative"). Written notice of such designation by Grantor and/or Beneficiary shall be filed with the Trustee. The Trustee shall be protected in acting upon any written statement or other instrument made by such officer or agent of Grantor and/or Beneficiary with respect to the authority conferred on him. However, in no instance may the Grantor, his agents or officers represent the interests of the Beneficiary.

     Section 2.4 No Other Conditions or Qualifications. This Trust Agreement is not subject to any conditions or qualifications outside of this Trust Agreement.

ARTICLE III

MAINTENANCE OF THE TRUST

Section 3.1 Substitution of Trust Account Assets.

     (1) By the Trustee. The Trustee may, without the consent of the Beneficiary, but with written notice to it, upon call or maturity of any security or other Asset in the Trust Account, withdraw such security or other Asset upon conditions that either (i) the proceeds thereof are to be used in whole or in part to acquire substitute Assets, with such Assets to be deposited or credited to the Trust Account on such day and any remaining proceeds thereof, if any, to be paid to or deposited into the Trust Account, or (ii) the proceeds are to be paid or deposited into the Trust Account.

2

     (2) By the Grantor. The Grantor may from time to time substitute or exchange Assets contained within the Trust Account, provided the Assets received and deposited in the Trust Account in such substitution or exchange (the "Replacement Assets") satisfy the definition of "Assets" in Section 2.1(a) of this Trust Agreement and provided further that either (i) the aggregate fair market value (determined by the Trustee in accordance with Section 2.1(c) on such day) of such Replacement Assets to be deposited in or credited to the Trust Account on such day is at least equal, in the aggregate, to the fair market value of the Assets being removed from the Trust Account on such day, or (ii) the Beneficiary has given its prior written consent to such substitution or exchange, which consent shall not be unreasonably withheld.

Section 3.2 Transfer of Interests and Dividends to Grantor

     The Trustee shall attend to such details as are necessary and incident to the receipt of dividends, interest and other income resulting from the investment of the Assets, and furnish copies of receipts and accounts therefor to the Grantor or its designee. All payments of interest, dividends and other income in respect to Assets in the Trust Account shall be forwarded promptly upon receipt by the Trustee to the Grantor or its designee.

     Section 3.3 Books and Records. The Trustee shall keep full and complete records of the administration of the Trust Account. Grantor, the Superintendent of Insurance of New York and/or Beneficiary may examine such records at any time during business hours through any person or persons duly authorized in writing by Grantor, the Superintendent of Insurance of New York and/or Beneficiary.

ARTICLE IV

RELEASE OF TRUST ACCOUNT ASSETS

     Section 4.1 Release of Trust Account Assets to the Beneficiary. Notwithstanding anything in this Agreement to the contrary, the Beneficiary shall have the right to withdraw Assets from the Trust Account at any time, without notice to the Grantor, subject only to written notice from an Authorized Representative of the Beneficiary to the Trusteegiven in accordance with this Agreement. Other than such notice, no statement or document need be accepted for the Beneficiary to withdraw such Assets except that the Beneficiary shall acknowledge to the Trustee receipt of such withdrawn Assets. Upon such written notice of demand of the Beneficiary, the Trustee

3

shall immediately take any and all steps necessary to transfer absolutely and unequivocally all right, title and interest in the Assets to the Beneficiary and deliver physical custody of such Assets to the Beneficiary. The Trustee shall be under no liability for any payment made by it to the Beneficiary pursuant to such written demand by an Authorized Representative of the Beneficiary.

     Section 4.2 Release of Trust Account Assets to the Grantor. Subject to receipt of the Beneficiary's prior written instructions, the Trustee may, from time to time, release Assets to the Grantor, or its designee,which are in excess of the actual amount of trust funds required. In connection with any such release of Assets, the Trustee shall take any and all necessary steps to transfer absolutely and unequivocally all right, title and interest in such released Assets to the Grantor or its designee.

     Section 4.3 Beneficiary's Use of Amounts Drawn Upon Trust Account. Notwithstanding the first sentence of Section 4.1 or the second sentence of Section 7.4, the Beneficiary shall undertake to use and apply any amounts drawn upon the Trust Account, without diminution because of the insolvency of the Beneficiary or the Grantor, for the following purposes:

     (1) to pay or reimburse the Beneficiary for the Grantor's share under that certain Quota Share Reinsurance Agreement between the Beneficiary and the Grantor (the "Quota Share Reinsurance Agreement"), regarding any losses and allocated loss expenses paid by the Beneficiary but not recovered from the Grantor or for unearned premiums due to the Beneficiary, if not otherwise paid by the Grantor in accordance with the terms of such agreement;

     (2) to make payment to the Grantor of any amounts held in the Trust Account that exceed 102 percent of the actual amount required to fund the Grantor's entire Obligations (as defined below) under the Quota Share Reinsurance Agreement; or

     (3) where the Beneficiary has received notification of termination of the Trust Account, and where an amount of the Grantor's Obligations (as defined below) under the Quota Share Reinsurance Agreement remain unliquidated and undischarged 10 days prior to such termination date, to withdraw amounts equal to such Obligations and deposit such amounts in a separate account, in the name of the Beneficiary, in any United States bank or trust company, apart from its general assets, in trust for such uses and purposes specified in paragraphs (1) and (2) of this Section as may remain executory after such withdrawal and for any period after such termination date. "Obligations" within the meaning of this Section shall include:

4

(i)	losses and allocated loss expenses paid by the Beneficiary, but not recovered from the Grantor;
(ii)	reserves for losses reported and outstanding;
(iii)	reserves for losses incurred but not reported;
(iv)	reserves for allocated loss expenses; and
(v)	reserves for unearned premiums.

ARTICLE V

DUTIES OF THE TRUSTEE

     Section 5.1 Acceptance of Assets by the Trustee. The Trustee shall not accept any Asset for deposit into the Trust Account (other than cash) unless such Assets are issued or registered in such form that they are readily negotiable to the Trustee — i.e., such Assets shall be either issued in "bearer" form or issued or registered in the name of the Trustee or its nominee. In no case will any Asset credited to the Trust Account be registered in the name of the Grantor, payable to the order of the Grantor or specially endorsed to the Grantor except to the extent the foregoing have been specially endorsed to the Trustee or in blank. All securities, other than cash, deposited by the Grantor shall:

(1)	be free and clear of all encumbrances; and
(2)	be fully negotiable or in such form that the Beneficiary or the Trustee, upon direction by the Beneficiary, may sell, transfer or otherwise deposit the same without any additional signature or agreement from the Grantor or any other person or entity.

     The Trustee and its lawfully appointed successors is and are authorized and shall have the power to receive such securities and other property as Grantor from time to time may transfer or remit to or vest in said Trustee or place in such Trustee's hands or under said Trustee's control, and to hold and dispose of the same for the uses and purposes and in the manner and according to the provisions herein set forth. All such trusteed Assets at all times shall be maintained as a trust in the Trust Account and shall be held separate and distinct from all other Assets on the books and records of the Trustee for the benefit of the Beneficiary, and shall be continuously kept in a safe place within the United States.

     Section 5.2 Collection of Interest and Dividends; Voting Rights. The Trustee is hereby authorized, without prior notice to the Beneficiary, to demand payment of and collect all interest or dividends on the Assets comprising the Trust Account if any, and promptly upon receipt the Trustee shall forward all such interest and dividends to the Grantor in accordance with Section 3.2. The Grantor shall have the full and unqualified

5

right to vote and execute consents with respect to any shares of stock comprising the Trust Account.

     Section 5.3 Obligations of the Trustee. The Trustee agrees to hold and disburse the various Assets of the Trust Account in accordance with the provisions expressed herein.

     Section 5.4 Responsibilities of Trustee. The Trustee, in the administration of this Trust Account, is to be bound solely by the express provisions herein, and such further written and signed directions as the appropriate party or parties may, under the conditions herein provided, deliver to the Trustee. The Trustee shall be under no obligation to enforce the Grantor's obligations under this Agreement, except as otherwise expressly provided or directed pursuant hereto; the Trustee's responsibilities shall be limited to the safe holding of the Assets comprising the Trust Account, and the Trustee shall be liable only for its own negligence, willful misconduct, lack of good faith or breach of fiduciary duty and for the breach of the Trustee's express obligations under this Agreement. The Trustee further agrees to forward upon request to the Beneficiary, the Grantor or upon request of any Commissioner of Insurance a certified list and valuation of all Assets held under this Trust Agreement.

     Section 5.5 Monthly Report. The Trustee agrees to provide an activity report (the "Trustee Activity Report") to the Beneficiary and the Grantor upon inception and within ten (10) days following the end of each month, which report shall, in reasonable detail, show (i) all deposits, withdrawals and substitutions during such month; (ii) a listing of securities held and cash and cash equivalent balances in the Trust Account as of the last day of such month; and (iii) the fair market value (determined in accordance with Section 2.1) of each Asset held in the Trust Account (other than cash) and the amount of cash held in the Trust Account as of the last day of such month. The Trustee agrees to provide written notification to the Grantor and the Beneficiary within five (5) days of any deposits to or withdrawals from the Trust Account.

6

     Section 5.6 Resignation or Removal of the Trustee. The Trustee may at any time resign from, and terminate its capacity hereunder by delivery of written notice of resignation, effective not less than ninety (90) days after receipt by both the Beneficiary and the Grantor. The Trustee may be removed by the Grantor by (i) delivery to the Trustee and the Beneficiary of a written notice of removal, effective not less than ninety (90) days after receipt by the Trustee and the Beneficiary of the notice and (ii) receipt of Beneficiary's consent to such action, which consent shall not be unreasonably withheld. However, no such resignation by the Trustee or removal by the Grantor shall be effective until a successor to the Trustee shall have been duly appointed and approved by the Beneficiaryand the Grantor and all the securities and other Assets in the Trust Account have been duly transferred to such successor. The Grantor, upon receipt of such notice, shall undertake to obtain the agreement of a qualified, successor depository, agreeable to the Beneficiary, to act in accordance with all agreements of the Trustee herein. The Beneficiary agrees not to unreasonably withhold approval. Upon the Trustee's delivery of the Assets to the qualified successor depository along with a closing statement showing all activities from the last month report, the Trustee shall be discharged of further responsibilities hereunder.

     Section 5.7 Release of Information. The Trustee shall respond to any and all reasonable requests for information concerning the Trust Account or the Assets held therein by either of the parties to this Agreement. Furthermore, the Trustee shall fully and completely respond to any direct inquiries of the Superintendent of Insurance of the State of New York, or any of its representatives, concerning the Trust Account or the Assets held hereunder, including, but not limited to, detailed inventories of securities or funds, and the Trustee will permit the Superintendent of Insurance of the State of New York, or its representatives, to examine and audit all securities or funds held hereunder. The Trustee shall promptly provide notice to the Beneficiary concerning all such inquiries, and shall provide seven (7) days prior notice to the Beneficiary of all such examinations and audits.

     Section 5.8 Indemnification of the Trustee. The Grantor hereby indemnifies the Trustee for, and holds it harmless against, any loss, liability, costs or expenses (including attorney's fees and expenses) incurred or made without negligence, willful misconduct or lack of good faith on the part of the Trustee, arising out of or in connection with the performance of its obligations in accordance with the provisions of this Agreement, including any loss, liability, costs or expenses arising out of or in connection with the status of the Trustee and its nominee as the holder of record of the Assets. The Grantor hereby acknowledges that the foregoing indemnities shall survive the resignation or discharge of the Trustee or the termination of this Agreement.

     Section 5.9 Charges of the Trustee. The Grantoragrees to pay all costs or fees charged by the Trustee for acting as the Trustee pursuant to this Agreement, including fees incurred by the Trustee for legal services deemed necessary by the Trustee

7

as a result of the Trustee's so acting; provided, however, that no such costs, fees or expenses shall be paid out of the Assets held in or credited to the Trust Account.

     Section 5.10 Limitations of Trustee. The Trustee shall in no way be responsible for determining the amount of Assets required to be deposited; or to monitor whether or not the Assets held within such Trust Account conform to the investment requirements contained herein.

ARTICLE VI

TERMINATION OF TRUST ACCOUNT

     Section 6.1 Termination. Upon receipt of the Beneficiary's written consent, the Grantor shall terminate this Agreement by:

     (1) giving thirty five (35) days' advance written notice to the Trustee and the Trustee giving thirty (30) days' advance written notice of such termination via certified mail to the Beneficiary; and

     (2) providing the Beneficiary with alternative security acceptable to the Beneficiary, in its sole discretion, prior to the effective date of termination.

     Upon such termination, the Trustee shall release Assets held and deposited under this Agreement, subject to the written approval of the Beneficiary, to the Grantor and shall take any and all steps necessary to transfer absolutely and unequivocally all right, title and interest in such Assets and to deliver physical custody, if applicable, in such Assets to the Grantor or as otherwise directed by the Grantor.

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ARTICLE VII

GENERAL PROVISIONS

     Section 7.1 Failure to Act. The Beneficiary's failure at any time to exercise any of the rights or powers conferred upon it herein shall constitute neither a waiver of its right to exercise, nor stop it from exercising, any rights at any subsequent time, nor shall such failure reduce in any degree any liability or obligation for which the Grantor is bound hereunder.

     Section 7.2 Amendments. This Trust Agreement may be altered, amended or terminated at any time by written agreement executed by each party hereto and, in the case of Grantor's and Beneficiary's written agreement, delivered to the Trustee. However, no amendment to this Trust Agreement may be considered valid unless filed with, and not disapproved by, the New York Superintendent of Insurance thirty days prior to the effective date of the change.

     Section 7.3 Assignment. This Agreement may not be assigned without the consent of the parties hereto and, subject to the receipt of such consent, shall be binding upon and inure to the benefit of the parties hereto, their successor and assigns. Notwithstanding anything in this Trust Agreement to the contrary, in no event shall any resignation or removal of the Trustee be effective until a successor trustee has been duly appointed and approved by the Beneficiary and the Grantor and all Assets in the Trust Account have been duly transferred to the new trustee, as provided in Section 5.6.

     Section 7.4 Construction and Effect. This Trust Agreement shall be construed and enforced in accordance with and governed by the laws of the State of New York. This Trust Agreement and the enforceability hereof shall not be subject to the satisfaction of any conditions or qualifications not expressly included herein.

     Section 7.5 Paragraph Headings. The paragraph headings contained herein are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

     Section 7.6 Counterparts. This Agreement may be executed in any number of counterparts or by attached documents, all of which shall constitute one and the same original.

     Section 7.7 Notices. Unless otherwise specifically provided herein, every notice required or permitted to be given under this Agreement shall be given or made under the terms hereof shall be in writing and shall be deemed to have been duly given or made (a)(i) when delivered personally, (ii) when made or given by prepaid telex, telegraph, telecopier, facsimile or electronic media, or (iii) in the case of mail delivery,

9

upon the expiration of three days after any such notice, direction, request, demand, acknowledgment or other communication shall have been deposited in the United States mail for transmission by first class mail, postage prepaid, or upon receipt thereof, whichever shall first occur and (b) when addressed as follows:

Trustee:	THE BANK OF NEW YORK
	101 Barclay Street - 8W
	Insurance Trust and Escrow
	New York, New York 10286
	Fax: (212) 815-5875/5877
Grantor:	XL RE LTD
	XL House
	One Bermudiana Road
	Hamilton HM 11, Bermuda
	Fax: (441) 292-5280
Beneficiary:	XL REINSURANCE AMERICA INC.
	Seaview House
	70 Seaview Avenue
	Stamford, CT 06902-6040
	Attention: General Counsel
	Fax: (203) 964-9857
and, with respect to items delivered pursuant to Section 5.5, to
	XL REINSURANCE AMERICA INC.
	Seaview House
	70 Seaview Avenue
	Stamford, CT 06902-6040
	Attention: Chief Financial Officer
	Fax: (203) 356-9304

Each party may from time to time designate a different address for notices, directions, requests, demands, acknowledgments and other communications by giving written notice of such change to the other parties. All notices, directions, requests, demands, acknowledgments and other communications relating to the Beneficiary's approval of the Grantor's authorization to substitute Trust Assets and to the termination of the Trust Account shall be in writing and may be made or given by prepaid telex, telegraph, telecopier, facsimile or electronic media.

10

     Section 7.8 Severability. In the event any provision of this Trust Agreement shall be held invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the remaining provisions of this Trust Agreement.

     Section 7.9 Governing Law. This Trust Agreement shall be governed by the law of New York.

11

EFFECTIVE DATE AND EXECUTION

     IN WITNESS OF THE ABOVE, this Trust Agreement is executed in triplicate by the parties' duly authorized officers on the dates indicated below with an effective date of July 11, 2003.

XL REINSURANCE AMERICA INC. (Beneficiary)
By:      /s/ Martha G. Bannerman
Title:    Executive Vice President, General Counsel & Secretary
Date: July 11, 2003
	Attest:      /s/ Charles Barr
	Title:         Assistant Secretary & Assistant General Counsel
	Date:        July 11, 2003

XL RE LTD (Grantor)
By:      /s/ Paul S. Giordano
Title:    Executive Vice President, General Counsel & Secretary
Date: July 11, 2003
	Attest:      /s/ Jerry de St. Paer
	Title:         Director
	Date:        July 11, 2003

[Regulation 114 Trust Agreement]

12

THE BANK OF NEW YORK (Trustee)
By:      /s/ Robert W. Rich
Title:    Vice President
Date: July 11, 2003
	Attest:      /s/ Stephen M. Bruce
	Title:        Authorized Signatory
	Date:       July 11, 2003

[Regulation 114 Trust Agreement]

13

EX-99.7

(Multicurrency—Cross Border)

ISDA®

International Swap Dealers Association, Inc.

MASTER AGREEMENT

dated as of July 11, 2003

MERRIL LYNCH INTERNATIONAL and MANGROVE BAY TRUST

have entered and/or anticipate entering into one or more transactions (each a “Transaction”) that are or will be governed by this Master Agreement, which includes the schedule (the “Schedule”), and the documents and other confirming evidence (each a “Confirmation”) exchanged between the parties confirming those Transactions.

Accordingly, the parties agree as follows:–

1.	Interpretation
(a)	Definitions. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement.
(b)	Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction.
(c)	Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this “Agreement”), and the parties would not otherwise enter into any Transactions.

2.	Obligations
(a)	General Conditions.

(i)	Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement.
(ii)	Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement.
(iii)	Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement.

Copyright © by International Swap Dealers Association Inc.

(b)	Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change.
(c)	Netting. If on any date amounts would otherwise be payable:—

(i)	in the same currency; and
(ii)	in respect of the same Transaction,

by each party to the other, then, on such date, each party’s obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount.

The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries.

(d) Deduction or Withholding for Tax.

(i) Gross-Up. All payments under this Agreement will be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party (“X”) will:—

(1)	promptly notify the other party (“Y”) of such requirement;
(2)	Pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y;
(3)	promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such authorities; and
(4)	if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for:—
(A)	the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4 (a)(iii) or 4(d); or
(B)	the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law.

2 ISDA®1992

(ii) Liability. If:—

(1)	X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect to which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4);
(2)	X does not so deduct or withhold; and
(3)	a liability resulting from such Tax is assessed directly against X,

then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).

(e)

Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement.

3.

Representations

Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement) that:—

(a) Basic Representations.

(i)	Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws, in good standing;
(ii)	Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance;
(iii)	No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets;
(iv)	Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and
(v)	Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).

3 ISDA®1992

(b)	Absence of Certain Events. No Event or Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party.
(c)	Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of the Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document.
(d)	Accuracy of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect.
(e)	Payer Tax Representation. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true.
(f)	Payee Tax Representations. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(f) is accurate and true.
4.	Agreements

Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:—

(a) Furnish Specified Information. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs:—

(i)	any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation;
(ii)	any other documents specified in the Schedule or any Confirmation; and
(iii)	upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification,

in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable.

(b)	Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future.
(c)	Comply with Laws. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party.
(d)	Tax Agreement. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure.
(e)	Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated,

4 ISDA®1992

organised, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement is located (“Stamp Tax Jurisdiction”) and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party’s execution or performance of this Agreement by any such Stamp Tax jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party.

5.	Events of Default and Termination Events
(a)	Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an “Event of Default”) with respect to such party:—

(i)	Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party:
(ii)	Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party;
(iii)	Credit Support Default.

(1)	Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed;
(2)	the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or
(3)	the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document;

(iv)	Misrepresentation. A representation (other than a representation under Section 3(e) or (f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated;
(v)	Default under Specified Transaction. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or any early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf);
(vi)	Cross Default. If “Cross Default” is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however

5 ISDA®1992

described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period);

(vii)  Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:—

(1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or

(viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer:—

(1)	the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or
(2)	the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement.

(b) Termination Events. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and if specified to be applicable, a Credit Event

6 ISDA®1992

Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:—

(i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):—

(1)	to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect to such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or
(2)	to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction;

(ii)	Tax Event. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B));
(iii)	Tax Event Upon Merger. The party (the “Burdened Party”) on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii);
(iv)	Credit Event Upon Merger. If “Credit Event Upon Merger” is specified in the Schedule as applying to the party, such party (“X”), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or
(v)	Additional Termination Event. If any “Additional Termination Event” is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation).

(c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default.

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6.	Early Termination
(a)	Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the “Defaulting Party”) has occurred and is then continuing, the other party (the “Non-defaulting Party”) may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, “Automatic Early Termination” is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b)	Right to Terminate Following Termination Event.

(i)	Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require.
(ii)	Transfer to Avoid Termination Event. If either an Illegality under Section 5(b)(i)(I) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist.
	If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i).
	Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party’s policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed.
(iii)	Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event.
(iv)	Right to Terminate If:—

(1)	a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or
(2)	an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party,

either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then

8 ISDA®1992

continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions.

(c) Effect of Designation.

(i)	If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing.
(ii)	Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to section 6(e).

(d) Calculations.

(i)

Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation.

(ii)

Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed.

(e) Payments on Early Termination. If an Early Termination Date occurs, the following provisions shall apply based on the parties’ election in the Schedule of a payment measure, either “Market Quotation” or “Loss”, and a payment method, either the “First Method” or the “Second Method”. If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that “Market Quotation” or the “Second Method”, as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off.

(i) Events of Default. If the Early Termination Date results from an Event of Default:—

(1)	First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party.
(2)	First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party’s Loss in respect of this Agreement.
(3)	Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the

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Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party.

(4)

Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party’s Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party.

(ii) Termination Events. If the Early Termination Date results from a Termination Event:—

(1)	One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect to all Terminated Transactions.
(2)	Two Affected Parties. If there are two Affected Parties:—
(A)	if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount (“X”) and the Settlement Amount of the party with the lower Settlement Amount (“Y”) and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and
(B)	if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss (“X”) and the Loss of the party with the lower Loss (“Y”).
	If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y.

(iii)

Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs because “Automatic Early Termination” applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii).

(iii)

Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses.

10 ISDA®1992

7. Transfer

Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that:—

(a)	a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and
(b)	a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e).

Any purported transfer that is not in compliance with this Section will be void.

8.	Contractual Currency
(a)	Payment in the Contractual Currency. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the “Contractual Currency”). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess.
(b)	Judgments. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually received by such party. The term “rate of exchange” includes, without limitation, any premiums and costs or exchange payable in connection with the purchase of or conversion into the Contractual Currency.
(c)	Separate Indemnities. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in the Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums payable in respect of this Agreement.
(d)	Evidence of Loss. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made.

11 ISDA®1992

9.	Miscellaneous
(a)	Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto.
(b)	Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system.
(c)	Survival of Obligations. Without prejudice to sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction.
(d)	Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law.
(e)	Counterparts and Confirmations.

(i)

This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original.

(ii)

The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation.

(f)	No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege.
(g)	Headings. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement.
10.	Offices; Multibranch Parties
(a)	If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organisation of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into.
(b)	Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party.
(c)	If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation.
11.	Expenses

A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document

12 ISDA®1992

to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection.

12.

Notices

(a)

Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated:—

(i)	if in writing and delivered in person or by courier, on the date it is delivered;
(ii)	if sent by telex, on the date the recipient’s answerback is received;
(iii)	if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender’s facsimile machine);
(iv)	if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or
(v)	if sent by electronic messaging system, on the date that electronic message is received,

unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day.

(b)	Change of Addresses. Either party may by notice to the other change the address, telex or facsimile number of electronic messaging system details at which notices or other communications are to be given to it.
13.	Governing Law and Jurisdiction
(a)	Governing Law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule.
(b)	Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement (“Proceedings”), each party irrevocably:—

(i)	submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and
(ii)	waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party.

Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction.

(c) Service of Process. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any

13 ISDA®1992

	reason any party’s Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to service process in any other manner permitted by law.
(d)	Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings.
14.	Definitions

As used in this Agreement:—

“Additional Termination Event” has the meaning specified in Section 5(b).

“Affected Party” has the meaning specified in Section 5(b)

“Affected Transactions” means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination event, all Transactions.

“Affiliate” means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, “control” of any entity or person means ownership of a majority of the voting power of the entity or person.

“Applicable Rate” means:—

(a)	in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b)	in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate;
(c)	in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and
(d)	in all other cases, the Termination Rate.

“Burdened Party” has the meaning specified in Section 5(b).

“Change in Tax Law” means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into.

“consent” includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent.

“Credit Event Upon Merger” has the meaning specified in Section 5(b).

“Credit Support Document” means any agreement or instrument that is specified as such in this Agreement.

“Credit Support Provider” has the meaning specified in the Schedule.

“Default Rate” means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum.

14 ISDA®1992

“Defaulting Party” has the meaning specified in Section 6(a).

“Early Termination Date” means the date determined in accordance with Section 6(a) or 6(b)(iv).

“Event of Default” has the meaning specified in Section 5(a) and, if applicable, in the Schedule.

“Illegality” has the meaning specified in Section 5(b).

“Indemnifiable Tax” means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document).

“law” includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and “lawful” and “unlawful” will be construed accordingly.

“Local Business Day” means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction.

“Loss” means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and the party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)A) applies. Loss does not include a party’s legal fees and out-of-pocket expenses referred to under Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets.

“Market Quotation” means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the “Replacement Transaction”) that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have

15 ISDA®1992

been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Sect ion 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined.

“Non-default Rate” means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount.

“Non-defaulting Party” has the meaning specified in Section 6(a).

“Office” means a branch or office of a party, which may be such party’s head or home office.

“Potential Event of Default” means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default.

“Reference Market-makers” means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city.

“Relevant Jurisdiction” means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organised, managed and controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made.

“Scheduled Payment Date” means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction.

“Set-off” means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer.

“Settlement Amount” means, with respect to a party and any Early Termination Date, the sum of:—

(a)   the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and

(b)   such party’s Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result.

“Specified Entity” has the meaning specified in the Schedule.

16 ISDA®1992

“Specified Indebtedness” means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money.

“Specified Transaction” means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party of any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rte transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation.

“Stamp Tax” means any stamp, registration, documentation or similar tax.

“Tax” means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax.

“Tax Event” has the meaning specified in Section 5(b).

“Tax Event Upon Merger” has the meaning specified in Section 5(b).

“Terminated Transactions” means with respect to any Early Termination Date (a) if resulting from a Termination event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if “Automatic Early Termination” applies, immediately before that Early Termination Date).

“Termination Currency” has the meaning specified in the Schedule.

“Termination Currency Equivalent” means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the “Other Currency”), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties.

“Termination Event” means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event.

“Termination Rate” means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts.

“Unpaid Amounts” owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market

17 ISDA®1992

value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties.

IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document.

MERRIL LYNCH INTERNATIONAL	MANGROVE BAY TRUST By: The Bank of New York (Delaware), not in its individual capacity but solely as Trustee
_________________________________	________________________________
(Name of Party)	(Name of Party)
By: /s/ Hamish Pritchard       ___________________________________	By: /s/ Michael Santino         _________________________________
Name: Hamish Pritchard     Title: Authorised Signatory     Date: July 11, 2003	Name:   Title:   Michael Santino, SVP Date:   July 11, 2003

18 ISDA®1992

SCHEDULE to the MASTER AGREEMENT dated as of July 11, 2003 between MERRILL LYNCH INTERNATIONAL (“Party A”) and MANGROVE BAY TRUST (“Party B”)
Part 1. Termination Provisions
(a)	Specified Entity.
“Specified Entity” means in relation to Party A for the purpose of:
Section 5(a)(v), Not Applicable.      Section 5(a)(vi), Not Applicable.      Section 5(a)(vii), Not Applicable.      Section 5(b)(iv), Not Applicable.
and in relation to Party B for the purpose of:
Section 5(a)(v), Not Applicable.      Section 5(a)(vi), Not Applicable.      Section 5(a)(vii), Not Applicable.      Section 5(b)(iv), Not Applicable.
(b)	Applicability of Event of Default and Termination Events. The provisions of Section 5(a) and Section 5(b) (as modified by subsection (e) below) will apply to Party A and to Party B as follows:

Section 5(a)	Party A	Party B
(i) "Failure to Pay or Deliver"	Applicable.	Applicable.
(ii) "Breach of Agreement"	Not Applicable.	Not Applicable.
(iii) "Credit Support Default"	Applicable.	Applicable.
(iv) "Misrepresentation"	Not Applicable.	Not Applicable.

19

Section 5(a)	Party A	Party B
(v) "Default under Specified	Not Applicable.	Not Applicable.
Transaction"
(vi) "Cross Default"	Not Applicable.	Not Applicable.
(vii) "Bankruptcy"	Applicable.	Applicable.
(viii) "Merger Without Assumption"	Applicable.	Applicable.
Section 5(b)	Party A	Party B
(i) "Illegality"	Applicable.	Applicable.
(ii) "Tax Event"	Applicable.	Applicable.
(iii) "Tax Event Upon Merger"	Applicable.	Applicable.
(iv) "Credit Event Upon Merger"	Not Applicable.	Not Applicable.

(c)	Specified Transaction. “Specified Transaction” has the meaning provided in Section 14 of this Agreement.
(d)	Threshold Amount. “Threshold Amount” means: Not Applicable.
(e)	Illegality; Bankruptcy; Credit Support Default.
	(i)	Section 5(b)(i) of the Agreement is hereby modified to read in its entirety as follows:
		"(i) Illegality. Due to the adoption of, or any change in, any applicable law after the date of this Agreement, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):—
		"(1) to perform any absolute or contingent material obligation to make a material payment or delivery or to receive a material payment or delivery in respect of this Agreement or any Transaction entered into pursuant hereto or to comply with any other material provision of this Agreement or any Transaction entered into pursuant hereto; or
		"(2) to perform, or for any Credit Support Provider of such party to perform, any material contingent or other obligation which the party (or such Credit Support Provider) has
20

		under any Credit Support Document relating to this Agreement or any Transaction entered into pursuant hereto;"
	(ii)	Section 5(c) of this Agreement shall be without effect.
	(iii)	Section 5(a)(vii) of this Agreement shall apply to the Credit Support Provider with respect to Party A only if and for so long as Party A shall fail to have the Required Counterparty Ratings.
	(iv)	A Credit Support Default pursuant to Section 5(a)(iii)(1) of this Agreement will apply with respect to Party B only upon a failure by Party B to Transfer collateral pursuant to the Credit Support Annex if (and only if) such failure is not remedied on or before the third Local Business Day after notice of such failure is given to Party B.
(f)	Business Day; Local Business Day. Notwithstanding Section 14 of this Agreement, “Business Day” or “Local Business Day” means any NYSE Business Day that is not a Saturday or Sunday or any other day on which banking institutions are authorized or required by law, regulation or executive order to close for business in New York City, London, England or Bermuda or are closed for business in New York City, London, England or Bermuda due to an act of God, natural disaster, act of war, civil or military disturbance, act of terrorism, sabotage, riot, or a loss or malfunction of utilities or communications services, or the payment due on such date cannot be made for any such reason.
(g)	Termination Currency. “Termination Currency” means United States Dollars.
(h)	Additional Termination Events.
The applicable Additional Termination Events are described in this Part 1(h) below.
	(i)	Certain Events Relating to the Put Agreement. The earliest to occur of the following: (A)  the Put Option Agreement, dated as of July 11, 2003 (as the same may be amended from time to time, the "Put Option Agreement") between XL Capital Ltd, a Cayman Islands exempt limited company (the "Put Counterparty") and Party B is terminated, (B) a Put Notice (as defined in the Put Option Agreement) is delivered with respect to a voluntary exercise of the option under the Put Agreement in full, (C) the occurrence of one of the events specified in clauses (i) through (vii) of Section 3.2(d) of the Put Agreement (other than an event specified in clause (iv) of such Section 3.2(d) which results in the first partial exercise of the option under the Put Agreement), (D) the fourth (4th) Business Day preceding the date on which the Put Agreement is to be terminated pursuant to (x) a notice delivered pursuant to Section 2.2(d) thereof or (y) a default pursuant to Section 2.2(e) thereof. Party
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	B shall be the sole Affected Party upon the occurrence of a Termination Event under this clause (h)(i).
(ii)	Downgrade of Party A. So long as any Pass-Through Securities are rated by:
	(A)	S&P, Party A fails to have a long term unsecured debt or counterparty rating by S&P of “AA-” or above, unless Party A's obligation to make the termination payments described in Section 6(e) of this Agreement (as restated in Part 1(l) of this Schedule) are unconditionally guaranteed (including pursuant to the Guarantee) by an entity with a long-term unsecured debt or counterparty rating by S&P of “AA-” or above; or
	(B)	Moody’s, Party A fails to have a long term unsecured debt or issuer rating by Moody’s of “Aa3” or above, unless Party A's obligation to make the termination payments described in Section 6(e) of this Agreement (as restated in Part 1(l) of this Schedule) are unconditionally guaranteed (including pursuant to the Guarantee) by an entity with a long-term unsecured debt or counterparty rating by Moody's of “Aa3” or above,
	and, in the case of clause (A) or (B) above, such failure shall continue for five Business Days. The minimum rating level established by such clauses (A) and (B) above, is referred to as the “Required Counterparty Rating." Party A shall be the sole Affected Party upon the occurrence of a Termination Event under this clause (ii)
(iii)	Termination of the Collateral Agreement. So long as MLI remains Party A hereunder, Party A or the Guarantor has given notice to Party B that the Third Amended and Restated Intermediation and Security Agreement, dated as of April 1, 1996, as amended or supplemented from time to time (the “Collateral Agreement”), between Merrill Lynch Capital Services, Inc. and the Guarantor has been terminated, upon which Party A shall be the sole Affected Party.
(iv)	Non-Permitted Assignment. Party A or Party B has transferred or assigned, all or a part of its rights and obligations under this Agreement (including this Schedule, the Credit Support Annex and the Transactions outstanding hereunder) or the Asset Put Option Agreement, dated as of July 11, 2003 (as the same may be amended from time to time, the "Asset Put Option Agreement"), between MLI and XL Reinsurance America Inc., a New York property and casualty insurer (the "Ceding Insurer"), or the Guarantor (as defined in Part 4(f)(i) of this Schedule) has transferred or assigned all or a part of its rights and obligations under the Guarantee (as defined in Part 4(f)(i) of this Schedule), excluding, however, an assignment by Party A in accordance with Part 5(i) of this Schedule. Upon the occurrence of a
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		Termination Event described under this clause (iv), the party so assigning (or, in the case of an assignment by the Guarantor, Party A) shall be the sole Affected Party.
	(v)	Failure to Purchase. A Failure to Purchase occurs pursuant to Part 6 (Cash Settlement) or Part 7 (Procedures Upon Failure to Purchase Drawn Asset Under Asset Put Option Agreement) of the Letter Agreement entered into between Party A and Party B in the form set forth as Exhibit A-3 to this Schedule (the "Standard Terms of Asset Transactions"), upon which Party A shall be the sole Affected Party.
	(vi)	Failure to Add or Delete Assets. Party B fails to either (A) enter into one or more Asset Transactions or purchase (or cause the Regulation 114 Trust to purchase) the related Asset pursuant to and in accordance with Part 1 of the Standard Terms of Asset Transactions within the time period specified therein or (B) deliver an Asset for sale within the applicable time period specified in Part 6 (Cash Settlement) of the Standard Terms of Asset Transactions, upon which Party B shall be the sole Affected Party.
	Upon the occurrence of any Illegality (as defined in Section 5(b)(i) of this Agreement (as modified pursuant to Part 1(e) of this Schedule)), Tax Event (as defined in Section 5(b)(ii) of this Agreement), Tax Event Upon Merger (as defined in Section 5(b)(iii) of this Agreement) or Additional Termination Event (as defined in Part 1(h) of this Agreement), each Transaction shall constitute an Affected Transaction.
(i)	Modification of Right to Terminate Following Event of Default. Section 6(a) of this Agreement is hereby deleted and replaced in its entirety with the following:
	"(a) Right to Terminate Following Event of Default. If an Event of Default occurs, an Early Termination Date in respect of all outstanding Transactions will occur on the fourth (4th) Business Day following the date on which such Event of Default occurs without any further action by either party."
(j)	Modification of Right to Terminate Following Termination Events.
	(i)	Section 6(b)(iv) of this Agreement shall apply only to Illegality, Tax Event and Tax Event Upon Merger (and shall not apply to any Additional Termination Event, which shall be governed solely by Section 6(b)(v) of this Agreement). Any transfer pursuant to Section 6(b)(ii) shall be to a Person having the Required Counterparty Rating (as defined in Part 1(h)(ii) of this Schedule). An Early Termination Date with respect to all outstanding Transactions shall occur on the fourth (4th) Business Day following the delivery of a termination notice pursuant to Section 6(b)(iv) of this Agreement (a "6(b)(iv) Termination Notice") in connection with an Illegality, Tax Event or Tax Event Upon Merger (notwithstanding any other date that may be specified in such notice).
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	(ii)	A Section 6(b)(v) of this Agreement shall be inserted as follows:
		"(v)	Termination Following Additional Termination Event. If an Additional Termination Event specified in Part 1(h) of the Schedule occurs, an Early Termination Date in respect of all outstanding Transactions will occur on the fourth (4th) Business Day following the date on which such Additional Termination Event occurs without any further action by either party; provided, however, that, if an event resulting in a deemed exercise in full of the option under the Put Agreement occurs following the occurrence of an Additional Termination Event described in clause (i) of Part 1(h), the Early Termination Date will be the related Deemed Put Option Payment Date (as defined in the Put Option Agreement)."
(k)	Deletion of Certain Termination Provisions. Section 6(c) and Section 6(d) of this Agreement hereby are deleted and reserved.
(l)	Payments on Early Termination. Section 6(e) of this Agreement is hereby deleted and replaced in its entirety with the following:
"(e) Payments on Early Termination.
	(i)	Sale of Assets for Cash and Payments Made Under Outstanding Transactions. The following shall occur on the earliest to occur of (1) the fourth (4th) Business Day prior to the Scheduled Termination Date (as defined in clause (vii) below), (2) the occurrence of an Additional Termination Event specified in Part 1(h) of this Schedule, (3) the occurrence of an Event of Default pursuant to clause (i) (Failure to Pay or Deliver), clause (iii) (Credit Support Default), clause (vii) (Bankruptcy) or clause (viii) (Merger Without Assumption) of Section 5(a) of this Agreement (as modified pursuant to this Schedule) and (4) the delivery of a 6(b)(iv) Termination Notice (as defined in Part 1(j)(i) of the Schedule) (any such event, a "Final Termination Event"):
		(A)	Reduction of Asset Principal Amounts and Termination of Asset Transactions. The Asset Principal Amounts with respect to all of the Asset Transactions shall be reduced to zero and all of the Assets (other than Cash or other Floating Balance Assets) shall be sold pursuant to and in accordance with Part 6 (Cash Settlement) of the Standard Terms of Asset Transactions.
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	(B)	Payment of Accrued Aggregate Floating Rate Payments. Party A shall pay to Party B the amount of the Aggregate Floating Rate Payments (as defined in clause (vii) below) accrued to but excluding the fourth (4th) Business Day following the date on which the Final Termination Event occurs (the "Final Termination Date"). Such payment shall be made on the Final Termination Date. Notwithstanding any other part of this subclause (B), solely for purposes of Section 2.2(b) of the Put Agreement, a "Final Termination Date" shall not occur if the Asset Swap Counterparty is replaced pursuant to Section 13.7 of the Declaration.
	(C)	Excess Credited Amounts. Party A shall pay to the Regulation 114 Trustee (for the benefit of Party B) on the Final Termination Date any Excess Credited Amounts (as defined in Part 1 of the Floating Balance Swap Confirmation and Part 2 of the Standard Terms of Asset Transactions) owed under the Transactions.
	(D)	Interest Payments. Party B shall pay to Party A any unpaid Interest Payments due under the Transactions to but excluding the Final Termination Date. Such payment shall be made on the Final Termination Date.
	(E)	Payment of Default Interest. Party A shall pay to Party B, or Party B shall pay to Party A, as the case may be, on the Final Termination Date, the net amount due under Section 2(e) of this Agreement (as modified by Part 5(j) of this Schedule).
	(F)	Cash Settlements Under Asset Transactions. On the Final Termination Date, the parties shall pay, with respect to each Asset, an amount equal to the Cash Settlement Amount (as defined in the Standard Terms of Asset Transactions) due under the related Asset Transaction (including any Cash Settlement Amounts due prior to such date and unpaid). For avoidance of doubt, such amounts shall include (and the Guarantee shall cover) all Cash Settlement Amounts described in Part 6 (Cash Settlement) and Part 7 (Procedures Upon Failure to Purchase Drawn Asset Under Asset Put Option Agreement) of the Standard Terms of Asset Transactions.
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		(G)	Party A Accrued Interest Payment Amounts. Party A shall pay to Party B an amount equal to any Party A Accrued Interest Payment Amounts (as defined in Part 1 (Option of Party A to Enter Into Asset Transactions) of the Standard Terms of Asset Transactions).
	(ii)	Additional Payment of Accrued Aggregate Floating Rate Payment for Interim Period. If a Final Termination Event occurs as a result of a Party A Termination (as defined in clause (vii) below), then, in addition to the amounts payable by Party A pursuant to clause (i) above, Party A shall pay to Party B, on the Final Termination Date, with respect to the period from and including the Final Termination Date to but excluding the earlier of (1) the next Swap Renewal Date (as defined in Part 5(i)(iii) of this Schedule) and (2) the thirtieth (30th) day following the Final Termination Date (such period, as applicable, the "Interim Period"), an amount equal to the Aggregate Floating Rate Payment that would have accrued with respect to the Interim Period if the transactions had remained outstanding. If a Floating Rate Payer Payment Date would have been scheduled to occur during the Interim Period if the Transactions had remained outstanding, the Aggregate Floating Rate Payment, for purposes of determining the amount payable pursuant to this clause (ii), shall be calculated based on the assumption that the applicable LIBOR rate remains for the next Calculation Period at the level applicable to the then-current Calculation Period.
	(iii)	Purchase of 30-Day Assets. On or prior to the third (3rd) Business Day following the Final Termination Date relating to a Party A Termination, Party A shall direct the Regulation 114 Trust (or cause the Regulation 114 Trustee to be directed) to apply all available Cash (to the extent feasible) to acquire one or more debt securities that mature on or prior to the last day of the Interim Period and that are fully guaranteed or insured by the full faith and credit of the U.S. federal government (such securities, and proceeds thereof, the "30-Day Assets") (which the parties acknowledge should have, at the time that such investment is made, a Market Value (determined in accordance with the procedures set forth in Part 8 (Valuation) of the Standard Terms of Asset Transactions) equal to the Put Option Premium Calculation Amount (as defined in the Put Agreement) assuming the timely performance of the parties' obligations under each of the Basic Documents (as defined in Part 3(b)(iii) below).
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		If the direction specified in this subclause (iii) is not given by Party A, then Party B shall take the actions specified above.
	(iv)	Adjustment for Change in LIBOR Rate During Interim Period. If a Floating Rate Payer Payment Date would have been scheduled to occur during the Interim Period if the Transactions had remained outstanding then, subject to clause (vi) below, Party A shall pay to Party B, on the last day of the Interim Period (or, if such day is not a Business Day, on the next Business Day):
		(A)	the Aggregate Floating Rate Payment that would have accrued during the Interim Period based on the actual LIBOR rates for such period (as determined by Party A as Calculation Agent pursuant to the procedures applicable under Part 9 (Floating Rate Payments by Party A) of the Standard Terms of Asset Transactions; minus
		(B)	the amount paid by Party A to Party B pursuant to clause (ii) above;
		provided, that if that amount is negative, Party B shall pay the absolute value of that negative amount to Party A. The parties acknowledge that the amount, if any, that is payable by Party A to Party B pursuant to this clause (iv) will not be guaranteed by the Guarantor.
	(v)	Payment of 30-Day Asset Accrued Amount. Subject to clause (vi) below, on the last day of the Interim Period (or, if such day is not a Business Day, the next Business Day), Party B shall pay to Party A an amount (the "30-Day Asset Accrued Amount") equal to:
		(A)	all uninvested Cash and proceeds of the 30-Day Assets on such day, minus
		(B)	the initial amount of cash proceeds and settlement amounts used to purchase the 30-Day Assets pursuant to clause (iii) above.
	(vi)	Amounts Paid on Net Basis; Reduction for Reasonable Costs of Search for Replacement Counterparty. The parties shall make the payments described under clauses (iv) and (v) above on a net basis. However, to the extent that the search for a replacement counterparty pursuant to
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		Section 13.7 of the ABC Declaration is unsuccessful, and a net amount is payable by Party B to Party A, the Put Counterparty shall be reimbursed for the reasonable costs of the search for the replacement counterparty from the 30-Day Asset Accrued Amount, and any remaining amounts shall be paid to Party A.
	(vii)	Certain Definitions. For purposes of this Section 6(e):
		1) "Aggregate Floating Rate Payment" means:
		(i) with respect to any period prior to the Final Termination Date, the aggregate amount of the Floating Rate Payments with respect to Party A accrued during such period under Part 4 of the Confirmation entered into between Party A and Party B in the form set forth as Exhibit A-1 to this Schedule (the "Floating Balance Swap Confirmation") and Part 9 (Floating Rate Payments by Party A) of the Standard Terms of Asset Transactions with respect to all Asset Transactions (whether or not a payment is due thereunder), and
		(ii) with respect to the Interim Period, the aggregate amount of the Floating Rate Payments with respect to Party A that would have accrued during such period (as determined pursuant to clause (i) above) if the Transactions outstanding immediately prior to the Final Termination Date, with an aggregate notional amount equal to the Put Option Premium Calculation Amount (as defined in the Put Agreement), were to remain outstanding during such period.
		2) "Floating Balance Asset" has the meaning set forth in Part 1 (General Terms) of the Floating Balance Swap Confirmation.
		3) "Party A Termination" means an Event of Default where Party A is the sole Defaulting Party or a Termination Event where Party A is the sole Affected Party.
		4) "Scheduled Termination Date" means July 15, 2013; provided, that if this Transaction is renewed in the manner specified in
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		Part 5(i)(iii) of this Schedule, then the Scheduled Termination Date shall be the next Swap Renewal Date.
	(viii)	Survival. For avoidance of doubt, the obligations of the parties hereto pursuant to clauses (ii) through (vii) above shall survive termination of this Agreement.
(m)	Put Counterparty Entitled to Rely on No Violation or Conflict Representation. Party A (and, for the avoidance of doubt, not the Guarantor) acknowledges that XL Capital Ltd, a Cayman Islands exempted limited company (the "Put Counterparty"), and its Affiliates are entitled to rely, and have relied, on the representation and warranty of Party A set forth in Section 3(a)(iii) (No Violation or Conflict) of this Agreement, including in connection with its preparation of the Preliminary Offering Memorandum dated June 19, 2003 and the Final Offering Memorandum dated July 3, 2003 with respect to the Pass-Through Securities to be issued by Mangrove Bay Pass-Through Trust, a Delaware statutory trust, and the Put Counterparty constitutes an intended third-party beneficiary with respect to the representation and warranty made by Party A in such Section 3(a)(iii) in the same manner as if it were a party hereto.
(n)	Grantor Entitled to Rely on Representation and Warranties. For avoidance of doubt, the Grantor shall be entitled to rely on the representations and warranties given by Party A pursuant to Section 3 of this Agreement.
Part 2.  Tax Provisions
(a)	Payer Tax Representations. For the purpose of Section 3(e) of this Agreement, each party makes the following representation:
	(i)	It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e) or 6(e) of this Agreement) to be made by it to the other party under this Agreement.
	(ii)	In making this representation, a party may rely on (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement, provided that it shall not be a breach of this representation where reliance is placed on clause (ii) above and the other party does not
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			deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position.
(b)	Withholding Tax. Notwithstanding Section 2(d) of the Agreement, (i) for purposes of Section 2(d) of this Agreement, all withholding taxes shall be Indemnifiable Taxes and (ii) (A) Party B shall not be required to pay any additional amounts in respect of an Indemnifiable Tax or be under any obligation to pay any amount to Party A in respect of any liability of Party A for or on account of any Indemnifiable Tax and (B) the limitations set forth in Section 2(d)(i)(4)(A) and (B) of this Agreement shall not apply.
Part 3.  Documents; Conditions Precedent
(a)	Tax forms, documents or certificates. For the purpose of Section 4(a)(i) of this Agreement, each party agrees to deliver the following documents upon request by the other party: Any form, document or certificate as may be requested by the other party pursuant to Section 4(a)(iii) of this Agreement.
(b)	Other Documents to be Delivered. For the purpose of Section 4(a)(ii) of this Agreement, the parties agree to deliver the Closing Documents with respect to such party as described below, promptly after execution and delivery of this Agreement, but no later than the Closing Date:
	(i)	Party A. For Party A, “Closing Documents” mean:
		(A)	Agreement, Schedule, Floating Balance Swap Confirmation, Standard Terms of Asset Transactions and Asset Put Option Agreement. A counterpart to this Agreement (including this Schedule and the Credit Support Annex), the Floating Balance Swap Confirmation, the Standard Terms of Asset Transactions, and the Asset Put Option Agreement, in each case duly executed by Party A and, in the case of the Floating Balance Swap Confirmation, duly endorsed by the Guarantor in accordance with Part 8 of this Schedule.
		(B)	Guarantee. A Guarantee duly executed by the Guarantor.
		(C)	Secretary's Certificates.
			(a)	Party A. A copy, certified by the secretary or assistant secretary of Party A, of evidence of:
				(i)	the authorization, execution, delivery and performance by Party A of this Agreement (including this Schedule and the Credit Support Annex), the Floating Balance Swap Confirmation, the Standard Terms of Asset
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					Transactions, the Asset Transaction Confirmations to be executed and delivered from time to time and the Asset Put Option Agreement; and
				(ii)	the incumbency of the applicable signatory certifying the name and true signature of each person that is executing this Agreement (including this Schedule and the Credit Support Annex), the Floating Balance Swap Confirmation, the Standard Terms of Asset Transactions, the Asset Transaction Confirmations to be executed and delivered from time to time and the Asset Put Option Agreement for Party A.
			(b)	Guarantor. A copy, certified by the secretary or assistant secretary of the Guarantor, of evidence of:
				(i)	the authorization, execution, delivery and performance by the Guarantor of the Guarantee; and
				(ii)	the incumbency of the applicable signatory certifying the name and true signature of each person that is executing the Guarantee for the Guarantor.
		(D)	Legal Opinions.
			(a)	Party A. Opinions of Party A’s counsel addressed to Party B and each of the Rating Agencies in the form of Exhibit B-1 and Exhibit B-2; and
			(b)	Guarantor. Opinion of the Guarantor's counsel addressed to Party A and each of the Rating Agencies in the form of Exhibit B-3 hereto.
	(ii)	Party B. For Party B, “Closing Documents” mean:
		(A)	Basic Documents and Floating Balance Swap Confirmation. Copies of (1) each of the Basic Documents duly executed by each party thereto (other than Party A and the Guarantor) and (2) the Floating Balance Swap Confirmation duly executed by Party B.
		(B)	Secretary's Certificates.
			(a)	Party B. A copy, certified by the secretary or assistant secretary of the ABC Trustee, of evidence of:
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				(i)	the authorization of officers of the ABC Trustee to execute documents on behalf of the ABC Trustee, and the execution and delivery of the Basic Documents to which Party B is party by such officers; and
				(ii)	the incumbency of the applicable signatory certifying the name and true signature of each person that is executing this Agreement (including this Schedule and the Credit Support Annex), the Floating Balance Swap Confirmation, the Standard Terms of Asset Transactions, the Asset Transaction Confirmations to be executed and delivered from time to time or any of the other Basic Documents to which Party B is a party for the ABC Trustee, on behalf of Party B.
			(b)	Grantor. A copy, certified by the secretary or assistant secretary of the Grantor, of evidence of:
				(i)	the authorization, execution, delivery and performance by the Grantor of this Schedule and each of the other Basic Documents to which the Grantor is a party; and
				(ii)	the incumbency of the applicable signatory certifying the name and true signature of each person that is executing this Schedule or any of the other Basic Documents to which the Grantor is a party for the Grantor.
		(C)	Legal Opinions.
			(a)	Party B. Opinion of Party B’s counsel addressed to Party A and each of the Rating Agencies in the form of Exhibit B-4 hereto.
			(b)	Grantor. Opinion of the Grantor's counsel addressed to Party A and each of the Rating Agencies in the form of Exhibit B-5 hereto.
	(iii)	Basic Documents. "Basic Documents" shall mean:
		(A)	the Master Agreement (including the Schedule, Confirmations and Credit Support Annex);
		(B)	the ABC Assignment Agreement;
		(C)	the Put Agreement;
		(D)	the Regulation 114 Trust Agreement;
		(E)	the Guarantee;
		(F)	the Joint Letter of Instruction;
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		(G)	the Grantor Letter of Instruction;
		(H)	the ABC Declaration;
		(I)	the Rate Swap;
		(J)	the Pass-Through Declaration; and
		(K)	the Asset Put Option Agreement.
(c)	Covered by Section 3(d) Representation. Each of the Closing Documents referred to in Part 3(b) (other than the legal opinions referred to in Part 3(b)(i)(D) and Part 3(b)(ii)(C)) shall be covered by the representations in Section 3(d) of this Agreement.
(d)	Delivery of Incumbency Certificates With Respect to Transactions. For each Asset Transaction, each of Party A and the ABC Trustee shall deliver, and Party A shall cause the Guarantor to deliver, a duly executed incumbency certificate (or other document satisfactory to the other party which establishes the incumbency of the applicable signatory) for the person(s) executing the Confirmation for that Asset Transaction on behalf of that party promptly after execution of such Confirmation. The incumbency certificates delivered from time to time in connection with the Asset Transactions shall establish the incumbency of all persons from time to time delivering instructions or otherwise acting pursuant to this Agreement, including this Schedule, and the Transactions.
(e)	Conditions Precedent. It shall be a condition precedent to the effectiveness of this Agreement, the Guarantee and the Transactions entered into on the Closing Date that, as of the Closing Date:
	(i)	MLDP (as defined in Part 4(g)(i) of this Schedule) shall have an issuer rating of (A) "Aaa" from Moody's and (B) a counterparty rating of "AAA" from S&P;
	(ii)	the Collateral Agreement shall be in full force and effect; and
	(iii)	each of the Closing Documents required to be delivered pursuant to subpart (a) and (b) of this Part 3 shall have been delivered.
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Part 4.  Miscellaneous
(a)   Addresses for Notices.
To Party A:	To Party B:
MERRILL LYNCH INTERNATIONAL	MANGROVE BAY TRUST
Telephone: (212) 449-5967	c/o The Bank of New York (Delaware)
Telecopy: (212) 449-1235	P.O. Box 6973
Attention: Marc Zindle, Swaps Group	White Clay Center
	Route 273
with copies to:	Newark, Delaware 19711
Alan Levy, Finance Department	Attention: Kristine Gullo
Telecopy: (212) 738-1033	Facsimile: (302) 283-8279
E-mail: alan_levy@ml.com
	with a copy to:
GMI Counsel
Merrill Lynch World Headquarters	The Bank of New York
4 World Financial Center, 12th Floor	Corporate Trust - Dealing and Trading
New York, NY 10080	100 Church Street
Attention: Swaps Legal	New York, New York 10286
Telecopy: 212-449-6993	Attention: Corporate Trust - Dealing and
	Trading Group
	Facsimile: (212) 437-6157
To the Credit Support Provider for Party A:	To the ABC Trustee:
MERRILL LYNCH DERIVATIVE PRODUCTS	The address set forth in Section 13.1 of the Put
AG	Agreement.
Stauffacherstrasse 5
8004 Zurich	To the Regulation 114 Trustee or the Ceding
Switzerland	Insurer:
Telecopy: (411) 297-7808	The address set forth in Section 7.7 of the
Attention: Jacqui Cassidy	Regulation 114 Trust Agreement.

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Notwithstanding any other part of this Section 4(a), notices delivered pursuant to the Standard Terms of the Asset Transactions, including without limitation delivery of the Weekly Consent and Release, shall be made in accordance with Schedule A to the form of Weekly Consent and Release attached as Attachment B to Exhibit A-3 hereto.
(b)	Calculation Agent. “Calculation Agent” means Party A.
(c)	Process Agent. For the purpose of Section 13(c) of this Agreement:
	(i)	Party A irrevocably appoints as its Process Agent: Merrill Lynch, Pierce, Fenner & Smith Incorporated, Attention: Litigation Department, 222 Broadway, 16th Floor, New York, NY 10038; and
	(ii)	Party B irrevocably appoints as its Process Agent: Not Applicable.
(d)	Offices. Section 10(a) applies.
(e)	Multibranch Party. Neither party is a Multibranch Party.
(f)	Credit Support Document.
	(i)	For Party A, the following is a Credit Support Document: the Guarantee of the Credit Support Provider for Party A (the “Guarantor”) in favor of Party B with respect to the Transactions entered into from time to time hereunder, substantially in the form set forth as Exhibit C hereto (the “Guarantee”).
	(ii)	For Party A and Party B, the following is a Credit Support Document: The Credit Support Annex made a part of this Agreement.
(g)	Credit Support Provider.
	(i)	For Party A, Credit Support Provider means: Merrill Lynch Derivative Products AG, a Swiss share company with its principal place of business located at Stauffacherstrasse 5, CH 8004, Zurich, Switzerland (“MLDP”).
	(ii)	For Party B, Credit Support Provider means: none specified.
(h)	Affiliate. “Affiliate” has the meaning provided in Section 14 of this Agreement.
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(i)	Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j)	Jurisdiction. Section 13(b) of the Agreement is hereby deleted and replaced in its entirety with the following:
	"(b)	Jurisdiction. With respect to any suit, action or proceedings relating to any dispute arising out of or in connection with this Agreement ("Proceedings"), each party irrevocably:
		(i) agrees that it shall submit to the exclusive jurisdiction and venue of the United States District Court for the Southern District of New York;
		(ii) agrees that, if the United States District Court for the Southern District of New York does not have jurisdiction over such Proceedings, then as of the date of this Agreement each party shall be deemed to have irrevocably submitted to the jurisdiction and venue of the courts of the State of New York located in the Borough of Manhattan, which submission shall be exclusive;
		(iii) agrees that, if neither the United States District Court for the Southern District of New York nor the courts of the State of New York located in the Borough of Manhattan have jurisdiction over such Proceedings, then as of the date of this Agreement each party shall be deemed to have irrevocably submitted to the jurisdiction and venue of any court that has lawful jurisdiction over such Proceedings;
		(iv) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court set forth in subparts (b)(i) and (ii) above, waives any objection or defense that such Proceedings have been brought in any inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have personal jurisdiction over such party; and
		(v) agrees, to the extent permitted by applicable law, that the bringing of Proceedings in any such court set forth in subparts (b)(i) and (ii) shall preclude the party who has commenced the Proceeding from bringing Proceedings in any other jurisdiction."
(k)		Jury Trial. Each party irrevocably waives any and all right to trial by jury with respect to any legal proceeding arising out of or relating to this Agreement.
(l)		Expenses. Section 11 of this Agreement shall apply where Party A is the Defaulting Party and shall apply where Party B is the Defaulting Party.
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Part 5.  Other Provisions.
(a)		Inconsistency. In the event of any inconsistency between the provisions of (A) this Agreement (including the Definitions) and (B) any Confirmation, the terms of such Confirmation shall prevail.
(b)		Recorded Conversations. Each party may electronically record all telephone conversations between them in connection with this Agreement or any Transaction.
(c)	Additional Representations. Section 3 of this Agreement is amended by adding the following Sections 3(g) and 3(h):
	“(g)	Non-Reliance. For any Relevant Agreement: (i) it acts as principal and not as agent, (ii) it acknowledges that the other party acts only at arm’s length and is not its agent, broker, advisor or fiduciary in any respect, and any agency, brokerage, advisory or fiduciary services that the other party (or any of its affiliates) may otherwise provide to it (or to any of its affiliates) excludes the Relevant Agreement, (iii) it is relying solely upon its own evaluation of the Relevant Agreement (including the present and future results, consequences, risks, and benefits thereof, whether financial, accounting, tax, legal, or otherwise) and upon advice from its own professional advisors, (iv) it understands the Relevant Agreement and those risks, has determined they are appropriate for it, and willingly assumes those risks, and (v) it has not relied and will not be relying upon any evaluation or advice (including any recommendation, opinion, or representation) from the other party, its affiliates or the representatives or advisors of the other party or its affiliates (except representations expressly made in the Relevant Agreement or an opinion of counsel required thereunder).
		“Relevant Agreement” means this Agreement, each Transaction, each Confirmation, any Credit Support Document, the Standard Terms of Asset Transactions, the Asset Put Option Agreement, and any agreement (including any amendment, modification, transfer or early termination) between the parties relating thereto or to any Transaction.
	“(h)	Eligibility. Party A represents that it is (i) an “eligible contract participant” within the meaning of the Commodity Exchange Act (as amended by the Commodity Futures Modernization Act of 2000), and (ii) a “financial institution” within the meaning of the Federal Deposit Insurance Corporation Improvement Act of 1991 as supplemented by Regulation EE of the Federal Reserve Board.
(d)	Account Details. Each of Party A and Party B hereby agrees that, unless notified in writing by the other party hereto of other payment instructions, with respect to all of the Transactions from time to time entered into hereunder:
37

Any and all amounts payable by Party B to Party A	Any and all amounts to be credited to the
(or by the Credit Support Provider on its behalf)	Appreciation Account may be directed as follows:
may be directed as follows:
	The Bank of New York, NY, NY
Deutsche Bank Trust Company Americas, NY, NY	(Fed ABA 021000018)
(Fed ABA: 021001033)	Acct.: GLA 111-565 for further credit to sub-
FAO: Merrill Lynch International, London	account 223-214 (Appreciation Account)
Acct: 00-882-277
Any and all amounts to be credited to the Asset	Any and all amounts payable by Party A to Party B
Swap Counterparty Account pursuant to Part 5(h)	other than amounts to be credited to the
may be directed as follows:	Appreciation Account or the Regulation 114 Trust
	may be directed as follows:
The Bank of New York, NY, NY
(Fed ABA 021000018)	The Bank of New York, NY, NY
Acct: GLA 111-565 (for further credit to	(Fed ABA 021000018)
sub-account 223-215)	Acct: GLA 111-565 for further credit to sub-
	account 223-216 (Property Account)
Any and all amounts to be credited to the
Regulation 114 Trust may be directed as follows:
The Bank of New York, NY, NY
(Fed ABA 021000018)
Acct: GLA 111-565 (for further credit to sub-
account 396-169) (Regulation 114 Trust)

(e)	Amendment. Notwithstanding Section 9(b) of this Agreement, no amendment, modification or waiver in respect of this Agreement or any of the Confirmations (including the termination of this Agreement or all or any of the Transactions other than as provided in this Agreement or in the related Confirmations) will be effective unless:
	(i)	in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties hereto; and
	(ii)	prior written consent thereto (including consent set forth in a writing evidenced by a facsimile transmission) has been given by the Grantor and the Guarantor.

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(f)	Set-off. The following Set-off provision shall apply:
	(i)	In the event that Party A is an obligor or guarantor with respect to any Asset, Party A hereby waives any and all right to counterclaim or set-off of its obligations under such Asset against amounts owed by Party B under this Agreement, the Standard Terms of Asset Transactions or any related Transaction.
	(ii)	Section 2(c)(ii) shall not apply at any time with respect to any of the Transactions.
(g)	No Bankruptcy Petition. With respect to any amounts owed by Party B under this Agreement, each of Party A and the Guarantor agrees that, prior to the date which is at least one year and one day after all of the ABC Securities and the Pass-Through Securities have been redeemed or, if longer, the applicable preference period then in effect, it will not institute against, or join any other person or entity in instituting against, Party B, the Pass-Through Trust or the Regulation 114 Trust any bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceedings, or other proceedings under federal or state bankruptcy or similar laws; provided, that nothing herein shall preclude, or be deemed to estop, Party A or the Guarantor from (i) taking any action prior to the expiration of the aforementioned one-year and one-day period of, if longer, the applicable preference period then in effect in (A) any case or proceeding voluntarily filed or commenced by Party B or the Pass-Through Trust or (B) any involuntary case or insolvency proceeding filed or commenced against Party B, the Pass-Through Trust or the Regulation 114 Trust by a person other than Party A or the Guarantor or (ii) commencing against Party B or any of its properties any legal action that is not a bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceeding. For purposes of this subpart (g), "Guarantor" shall be deemed to refer to the Guarantor and any guarantor of all or a part of the obligations of any successor to Party A hereunder.
(h)	Asset Swap Counterparty Account. On any day on which Party B is required to make any payment to Party A pursuant to the Asset Swap Documents (as defined in subpart (i) below), if it is not practicable for the ABC Trustee to deliver cash in such amount or on such date, Party B may deposit the applicable amount into the Asset Swap Counterparty Account (as defined in Section 3.6(d) of the ABC Declaration) for the benefit of Party A, and any such deposit shall be treated as a payment pursuant to the related Transaction on the date on which such deposit is made, and shall be subject to reduction pursuant to Section 2(c). Any amounts deposited into the Asset Swap Counterparty Account on any Business Day shall be paid to Party A on the next following Business Day.
(i)	Restriction on Assignment by Party A; Renewal of Agreement; Permitted Assignment.
	(i)	General Restriction on Assignment. Section 7 of this Agreement shall be deleted in its entirety and replaced with the following:
39

		"Except as otherwise provided in Part 5(i)(ii) of the Schedule, neither this Agreement nor any interest or obligation in or under this Agreement (including this Schedule, the Credit Support Annex, the Transactions outstanding hereunder and the Standard Terms of Asset Transactions), the Grantor Letter of Instruction, the Regulation 114 Indemnity Letter or the Asset Put Option Agreement (collectively, the "Asset Swap Documents") may be transferred (whether by way of security or otherwise) by either party."
	(ii)	Permitted Assignment by Party A. Except as described in clause (iii) below, Party A may transfer its rights and obligations under the Asset Swap Documents, in whole and not in part, to an assignee with a long-term unsecured debt or counterparty rating of (or whose obligations to make the termination payments described in Section 6(e) of this Agreement (as restated in Part 1(l) of this Schedule) are unconditionally guaranteed (in the same manner as such amounts are guaranteed by the Guarantor by an entity with a long-term unsecured debt or counterparty rating of):
		(A)	if MLI (or a permitted assignee of MLI pursuant to this Part 5(i)(ii)) is Party A immediately prior to such transfer, "AAA" from S&P and "Aaa" from Moody's; and
		(B)	otherwise, equivalent to the Required Counterparty Ratings.
		Notwithstanding any other part of this clause (ii), if a Termination Event described in Section 5(b)(i) (Illegality) or Section 5(b)(ii) (Tax Event) occurs where Party A is the sole Affected Party, Party A may transfer its rights and obligations under this Agreement (including this Schedule, the Credit Support Annex and the Transactions outstanding hereunder and the Standard Terms of Asset Transactions) and the Asset Put Option Agreement pursuant to and in accordance with Section 6(b)(ii) of this Agreement, in whole but not in part, provided, that the assignee has the Required Counterparty Ratings.
	(iii)	Renewal of Agreement. This Agreement shall be considered for renewal for another 10-year term on July 15, 2013 and, if renewed, July 15, 2023 or, in each case, if not a Business Day, the next Business Day (each, a "Swap Renewal Date"). On or prior to the twentieth (20th) day preceding each Swap Renewal Date, Party A may elect, by written notice to Party B, the ABC Trustee, the Regulation 114 Trustee and the Put Counterparty:
		(A)	to renew this Agreement, the Guarantee (if the Guarantee continues to remain in effect at such time) and the other Asset Swap Documents, on the same terms (including the Spread) currently applicable thereto on the Swap Renewal Date;
		(B)	to seek to renew this Agreement on the same terms as those then in effect, except for the Spread (as defined below); or
40

		(C)	to terminate this Agreement and the other Asset Swap Documents, in which case Party B will seek to enter into an agreement with a replacement swap counterparty on the same terms as those then in effect (other than the Spread) in accordance with the procedures described under clause (iv) below.
		If a Party A fails to deliver notice of such an election as specified above on or prior to the twentieth (20th) day preceding any Swap Renewal Date, Party A shall be deemed to have elected the option set forth in subclause (C) above. If Party A elects the option specified under subclause (B) of this clause (iii), Party A shall submit a bid to Party B setting forth a proposed Spread. If Party A selects the option under subclause (B) or (C) with respect to any Swap Renewal Date, a "Swap Repricing Event" shall occur on the twentieth (20th) day preceding the related Swap Renewal Date, and Party B shall effect the procedures set forth in Section 13.7 of the ABC Declaration. If this Agreement and the other Asset Swap Documents are renewed with the same counterparty pursuant to Section 13.7 of the ABC Declaration, then the Spread applicable to such documents shall be deemed amended as set forth in, and determined pursuant to the procedures set forth in, such Section 13.7, and the Scheduled Termination Date thereafter shall be the next Swap Renewal Date.
	(iv)	Notification. Party A shall provide prompt written notification to Party B, Moody’s (if any Pass-Through Securities at such time are outstanding and are rated by Moody’s) and S&P (if any Pass-Through Securities at such time are outstanding and are rated by S&P), that a transfer or replacement pursuant to this Part 5(i) and Section 13.7 of the ABC Declaration has occurred.
	(v)	Spread. "Spread" has the meaning set forth in Part 3 (Floating Rate Payments by Party A) of the Floating Balance Swap Confirmation and Part 9 (Floating Rate Payments by Party A) of the Standard Terms of Asset Transactions, as applicable.
(j)	Default Rate; Payment of Default Interest.
	(i)	Notwithstanding the definition of "Default Rate" set forth in Section 14 of this Agreement, for purposes of Section 2(e) of this Agreement, "Default Rate" shall mean, with respect to any Calculation Period, the sum of (A) the Floating Rate applicable to such Calculation Period pursuant to Part 9 (Floating Rate Payments by Party A) of the Standard Terms of Asset Transactions and (B) the Spread; provided, however, that interest shall accrue with respect to any amount that remains unpaid on and after an ABC Security Payment Date (as defined in Part 9 (Floating Rate Payments by Party A) of the Standard Terms of Asset Transactions) from and after such date at, with respect to any Calculation Period ending during the Fixed Rate Period, the Fixed ABC Security Rate and, with respect to any
41

		Calculation Period ending during the Floating Rate Period, the Floating ABC Security Rate. For purposes of this clause (i):
		(A)	"Fixed ABC Security Rate" means 6.102% per annum.
		(B)	"Fixed Rate Period" means the period from and including the Closing Date to and including July 15, 2013 (or, if such day is not a Business Day, the next Business Day).
		(C)	"Floating ABC Security Rate" means, with respect to any Calculation Period ending during the Floating Rate Period (if applicable), the sum of:
			(a)	LIBOR, with a Designated Maturity of three months, as determined in accordance with the procedures set forth in the Standard Terms of Asset Transactions for such Calculation Period; and
			(b)	3.145%.
		(D)	"Floating Rate Period" means, unless the Final Termination Date occurs prior to July 15, 2013 or, if such day is not a Business Day, the next Business Day (in which case the Floating Rate Period shall not be applicable), the period from and including the day immediately following the last day of the Fixed Rate Period to but excluding the earlier of July 15, 2033 (or, if such day is not a Business Day, the next Business Day) and the Final Termination Date.
		(E)	"Put Option Premium Rate" has the meaning set forth in Section 5.1(a)(i)(A) of the Put Agreement.
	(ii)	Section 2(e) of this Agreement shall be modified by deleting (A) the words "Prior to the occurrence or effective designation of an Early Termination in respect of the relevant Transaction," (B) the words "and subject to Section 6(c)" and (C) the last sentence thereof.
(k)	Limited Recourse. The obligations of Party B under this Agreement and each of the Transactions are limited recourse obligations of Party B payable solely from Assets distributed to Party B by the Regulation 114 Trust, including Assets (or portions thereof) credited to the Appreciation Account (as defined in Paragraph 13(m)(ii) of the Credit Support Annex) and amounts payable in respect of the Transactions by the Put Counterparty pursuant to Section 5.5 of the Put Agreement (the “Available Amounts”). For purposes of clarification, Available Amounts shall not include any part of the Put Option Premium, net amounts received under the Rate Swap or the Shares (as defined in the Recitals to the Put Agreement) (if and when issued) or any proceeds thereof or dividends or other distributions, including interest, thereon. Following realization of the Available Amounts and payment to Party A of

42

	such amounts due, any claims of Party A and/or the Guarantor hereunder shall be extinguished and shall not thereafter revive and none of Party A, the Guarantor or any person acting on its behalf shall be entitled to take any further steps against Party B to recover any sums due to Party A or the Guarantor but still unpaid, and all claims in respect of such sums due but still unpaid shall be extinguished and shall not thereafter revive. No recourse shall be had against any officer, director, employee, stockholder or incorporator of Party B, the Grantor, the Pass-Through Trust, the Put Counterparty, the Regulation 114 Trust or their respective successors or assigns for any amounts payable hereunder. It is understood that the foregoing provisions of this subpart (k) shall not constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Agreement or any Confirmation until such Available Amounts have been realized, whereupon any outstanding indebtedness or obligation shall be extinguished and shall not thereafter revive. It is further understood that the foregoing provisions of this subpart (k) shall not limit the right of any person to name Party B, the Grantor, the Put Counterparty, the Regulation 114 Trust or their respective successors and assigns as a party defendant in any action or suit or in the exercise of any other remedy under this Agreement or any Confirmation, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against Party B, the Grantor, the Put Counterparty, the Regulation 114 Trust or their respective successors or assigns.
(l)	Limitation of Liability. It is expressly understood that (a) this Agreement is executed and delivered by The Bank of New York (Delaware), not individually or personally but solely as ABC Trustee, in the exercise of the powers and authority conferred and vested in it under the ABC Declaration, (b) each of the representations, undertakings and agreements herein made on the part of Party B is made and intended not as personal representations, undertakings and agreements by The Bank of New York (Delaware), but is made and intended for the purpose of binding only Party B and (c) under no circumstances shall The Bank of New York (Delaware) be personally liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by Party B under this Agreement or any other related document.
(m)	Termination of Regulation 114 Trust. Grantor hereby agrees for the benefit of Party A that it shall not cause the Regulation 114 Trust to be terminated at any time on or prior to the later of (i) the Final Termination Date and (ii) the earlier to occur of (x) the satisfaction of all of Party B's obligations under this Agreement (including this Schedule and the Credit Support Annex) and the Transactions outstanding hereunder and (y) the distribution of all of the Trust Assets to Party B.
Part 6.  Definitions.
(a)	Capitalized terms used but not otherwise defined in this Agreement (including this Schedule and the Credit Support Annex) shall have the meaning assigned to such terms in Appendix A to this Schedule or, if not defined therein, shall have the meanings set forth in the 2000 ISDA Definitions (including its Annex) (together, the “2000 ISDA Definitions”), as published by the International Swaps and Derivatives Association, Inc., which are incorporated herein and shall form a part of this Agreement.

43

(b)	Notwithstanding subsection (a) above:
	(i)	the provisions of this Agreement (including Appendix A to this Schedule but exclusive of the 2000 ISDA Definitions) shall prevail in the event of any conflict between such provisions and the 2000 ISDA Definitions; and
	(ii)	the provisions of this Agreement (exclusive of Appendix A to the Schedule and the 2000 ISDA Definitions) shall prevail in the event of any conflict between such provisions, on the one hand, and either the Appendix A to the Schedule or the 2000 ISDA Definitions on the other.
Part 7.  Third-Party Beneficiary. Each of the Grantor and the Regulation 114 Trust shall be an intended third-party beneficiary of this Agreement (including this Schedule and the Standard Terms of Asset Transactions) and each Confirmation executed pursuant hereto.
Part 8.  Provisions Relating to the Guarantee of MLDP.
(a)	Each of Party A and Party B acknowledges and agrees that:
	(i)	the Guarantee applies only to the portion of the amount (if any) payable by Party A or the Guarantor pursuant to Section 6(e) (other than Section 6(e)(iv)) of this Agreement, as restated in Part 1(l) of this Schedule, upon the designation or occurrence of a Final Termination Date (the "Guaranteed Termination Payment") that is applicable to the Guaranteed Transactions as provided in the Guarantee;
	(ii)	the amount payable by MLDP under the Guarantee will not exceed the amount of the Guaranteed Termination Payment;
	(iii)	no Transaction shall constitute a Guaranteed Transaction for the purpose of the Guarantee or this Agreement unless and until the Confirmation evidencing such Transaction has been endorsed by MLDP as provided in subsection (b) of this Part 8;
	(iv)	amounts payable by MLDP under the Guarantee in respect of the obligations of Party A under this Agreement shall be determined by reference to and in accordance with the express provisions of this Agreement;
	(v)	so long as the Guarantee remains in effect and MLDP remains the Guarantor thereunder, no amendment to or modification of this Agreement or any Guaranteed Transaction or Confirmation evidencing a Guaranteed Transaction shall become effective without the written consent of MLDP;

44

	(vi)	neither party may transfer this Agreement or any Guaranteed Transaction or any interest or obligation in or under this Agreement or a Guaranteed Transaction without the prior written consent of MLDP except as expressly set froth in this Agreement; and
	(vii)	MLDP is issuing the Guarantee on the basis of and in reliance upon the acknowledgments and agreements of the parties set forth in clauses (i), (ii), (iii), (iv), (v) and (vi) above.
(b)	For purposes of this Agreement, "Guaranteed Transaction" shall mean any outstanding Transaction for which MLDP shall have executed on the Confirmation evidencing such Transaction an endorsement in the following form:
Endorsement of Merrill Lynch Derivative Products AG
The Transaction evidenced by this Confirmation constitutes a Guaranteed Transaction as defined in and for the purposes of the Guarantee of Merrill Lynch Derivative Products AG dated as of July 11, 2003.

MERRILL LYNCH DERIVATIVE PRODUCTS AG

By: ___________________________________

     Name:

     Title:

Date: __________________________________

[SIGNATURE PAGE FOLLOWS]

45

     IN WITNESS WHEREOF, the parties have executed this Schedule by their duly authorized signatories as of the date hereof.

	MERRILL LYNCH INTERNATIONAL
	By:	/s/ Hamish Pritchard
	Name:	Hamish Pritchard
	Title:	Authorized Signatory
	MANGROVE BAY TRUST
	By:	The Bank of New York (Delaware),
		not in its individual capacity but solely
		as trustee
	By:	/s/ Michael Santino
	Name:	Michael Santino
	Title:	Senior Vice President
Agreed and Acknowledged
(solely for purposes of Section 5(n)):
XL RE LTD
By: /s/ Paul S. Giordano
Name: Paul S. Giordano
Title: Executive Vice President, General Counsel & Secretary

[Schedule to ISDA Master Agreement]

EXHIBIT A-1

(Form of Floating Balance Swap Confirmation)

Swap Confirmation

DATE:	July 11, 2003
TO:	Mangrove Bay Trust
FROM:	Merrill Lynch International
SUBJECT:	Mangrove Bay Trust

     The purpose of this letter is to confirm the terms and conditions of a transaction entered into between Merrill Lynch International ("MLI") and Mangrove Bay Trust, a Delaware statutory trust ("ABC Trust"), on the Trade Date set forth below (the "Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the Master Agreement specified below, and the Transaction referenced by this Confirmation constitutes the "Floating Balance Swap Confirmation" and represents the "Floating Balance Swap" as referred to in the Schedule to such Master Agreement.

     This Confirmation supplements, forms a part of and is subject to the 1992 ISDA Master Agreement (Multicurrency - Cross Border), dated as of July 11, 2003 (as the same may be amended from time to time, the "Master Agreement") (including the Schedule thereto), between MLI, ABC Trust and, for certain limited purposes, the Grantor. All provisions contained in, or incorporated by reference into, such Master Agreement shall govern this Confirmation as expressly modified below.

     This Confirmation incorporates the definitions and provisions contained in the 2000 ISDA Definitions (the "2000 Definitions"), as published by the International Swaps and Derivatives Association, Inc. ("ISDA"). Capitalized terms used in any part of this Confirmation but not defined herein shall have the meanings ascribed to them in the Master Agreement (as determined pursuant to Part 6 of the Schedule thereto). Reference also is made to the Letter Agreement entered into by Party A and Party B in the form attached as Exhibit A-3 to the Schedule to the Master Agreement (as amended from time to time, the

"Standard Terms of Asset Transactions").

The terms of the Transaction to which this Confirmation relates are as follows:

A-1-1

1.  General Terms:
Trade Date:	July 11, 2003.
Effective Date:	July 11, 2003.
Notional Amount:	On any day:
	(1)	the Put Option Premium Calculation Amount (as
		defined in the Put Agreement); minus
	(2)	the aggregate Notional Amount (as defined in Part
		2 (General Terms of Each Asset Transaction) of the
		Standard Terms of Asset Transactions) with respect
		to each of the Asset Transactions outstanding on
		such day (which amount may be positive or
		negative).
Business Day Convention:	Following (which shall apply to any date referred to in this
	Confirmation that falls on a day that is not a Business Day
	unless otherwise specified for such date).
Business Day:	Any NYSE Business Day that is not a Saturday or Sunday
	or any other day on which banking institutions are
	authorized or required by law, regulation or executive order
	to close for business in New York City, London, England or
	Bermuda or are closed for business in New York City,
	London, England or Bermuda due to an act of God, natural
	disaster, act of war, civil or military disturbance, act of
	terrorism, sabotage, riot, or a loss or malfunction of utilities
	or communications services.
Calculation Agent:	Party A.
Excess Credited Amounts:	Any interest or other income with respect to any Trust
	Asset that is automatically forwarded to the ABC Trust, as
	designee of the Grantor, pursuant to Section 3.2 of the
	Regulation 114 Trust Agreement, and that is not
	subsequently received by the Regulation 114 Trustee from
	the issuer of or obligor on such Trust Asset (directly or
	through a paying agent or clearing agency).
A-1-2

Final Termination Date:	As defined in Section 6(e)(i)(B) of the Master Agreement
	(as restated in Part 1(l) of the Schedule).
Final Termination Event:	As defined in Section 6(e)(i) of the Master Agreement (as
	restated in Part 1(l) of the Schedule).
Floating Balance Assets:	All Cash and all demand deposit, money market or similar
	accounts (which may but shall not be required to bear
	interest), in each case that are credited from time to time to
	the Appreciation Account (as defined in Paragraph
	13(m)(ii) of the Credit Support Annex) or the Regulation
	114 Trust; provided, that, in the case of an account:
	(1)	the amounts credited thereto may be withdrawn in
		Cash by the depositor upon demand on any
		Business Day; and
	(2)	such account constitutes an Eligible Asset (as
		defined in Part 1 of the Standard Terms of Asset
		Transactions).
	If any such account ceases to meet the criteria specified in
	clauses (1) and (2) above, or if an event constituting
	Bankruptcy, as defined in the 1999 Credit Derivatives
	Definitions published by ISDA, occurs with respect to the
	institution at which such account is maintained or any other
	obligor on such account (the "Depository Institution"),
	Party A shall direct all funds in such account to be
	withdrawn immediately in Cash. In the event that the
	Depository Institution fails to deliver such Cash, Party A
	shall deposit into the Appreciation Account (as defined in
	Paragraph 13(m)(ii) of the Credit Support Annex) (to the
	extent of the portion of such Floating Balance Asset
	consisting of an Appreciation Account Asset, as defined in
	Part 6 of the Standard Terms of Asset Transactions) or the
	Regulation 114 Trust (to the extent of the portion of such
	Floating Balance Asset consisting of a Trust Asset, as
	defined in Part 2 of the Standard Terms of Asset
	Transactions), an amount, in the aggregate, equal to the
	portion of the Notional Amount that is attributable to such
	Floating Balance Asset.
A-1-3

Schedule:	The Schedule to the Master Agreement.
Scheduled Termination Date:	July 15, 2013; provided, that if this Transaction is renewed
	in the manner specified in Part 5(i)(iii) of the Schedule,
	then the Scheduled Termination Date shall be the next
	Swap Renewal Date.
2.  Interest Payments:
Interest Payment Payer:	Party B.
Interest Payments:	For any Interest Payment Payer Payment Date, the amount
	of any Interest received by Party B and/or the Regulation
	114 Trust on or prior to such date and not previously paid
	as Interest Payments.
Interest Payment Payer Payment Dates:	In the case of Interest that is received by the Regulation 114
	Trust or Party B:
	(A)	prior to 3:00 p.m. on any day, such day (if a
		Business Day and otherwise the next Business
		Day); and
	(B)	after 3:00 p.m. on any day, no later than the next
		Business Day (although Party B shall use
		reasonable efforts to make payments due with
		respect to Interest on the same day on which such
		Interest is received).
Interest:	All interest and other income received in Cash by Party B
	and/or the Regulation 114 Trust, as the case may be on any
	Floating Balance Asset; provided, that "Interest" shall not
	include any Excess Credited Amounts.
A-1-4

3.   Floating Rate Payments by Party A:
Floating Rate Payer:	Party A.
Floating Rate Payer Calculation Amount:	For purposes of determining the Floating Amount for any
	Floating Rate Payer Payment Date, an amount equal to the
	sum of the Notional Amount for each day during the related
	Calculation Period divided by the actual number of days in
	such Calculation Period. The Floating Rate Payer
	Calculation Amount may be negative if the Notional
	Amount is negative (in which case Party B shall pay to
	Party A an amount equal to the absolute value of the
	Floating Amount determined pursuant to this Part 3).
Floating Rate Payer Payment Dates:	(A) One Business Day before each Floating Rate Payer
	Period End Date and (B) the Final Termination Date.
Floating Rate Payer Period End Date:	(A) During the Fixed Rate Period, each January 15 and July
	15 from the Effective Date to and including the Final
	Termination Date, if any, occurring during such period; and
	(B) with respect to each Calculation Period ending during
	the Floating Rate Period (if applicable), each January 15,
	April 15, July 15 and October 15 to and including the Final
	Termination Date,
	or, in the case of clauses (A) and (B), if such day is not a
	Business Day, the next Business Day, from and including
	the Effective Date to and including the Termination Date.
Floating Rate Period:	Unless the Final Termination Date occurs prior to July 15,
	2013 or, if such day is not a Business Day, the next
	Business Day (in which case the Floating Rate Period shall
	not be applicable), the period from and including the day
	immediately following the last day of the Fixed Rate Period
	to but excluding the earlier of July 15, 2033 (or, if such day
	is not a Business Day, the next Business Day) and the Final
	Termination Date.
Floating Rate Option:	USD-LIBOR-BBA (as modified pursuant to the Standard
	Terms of Asset Transactions).
A-1-5

Designated Maturity:	(A) with respect to any Calculation Period ending during
	the Fixed Rate Period, six months and (B) with respect to
	any Calculation Period ending during the Floating Rate
	Period (if applicable), three months.
Spread:	Minus 0.10%; provided, that, if a Swap Repricing Event
	has occurred, the "Spread" shall be the Spread that most
	recently become effective pursuant to Part 5(i)(iii) of the
	Schedule.
Floating Rate Day Count Fraction:	Actual/360.
Floating Rate for Initial Calculation Period:	1.12%.
Reset Dates:	The first day of each Calculation Period.
Method of Averaging:	Inapplicable.
Compounding:	Inapplicable.
Fixed Rate Period:	The period from and including the Closing Date to and
	including July 15, 2013.
4.  Other Terms.
Return of Excess Credited Amounts:	The Regulation 114 Trustee shall notify Party A upon
	becoming aware that any Excess Credited Amounts have
	been paid to Party A and, as soon as practicable (but no
	later than one Business Day) following receipt of such
	notice, Party A shall pay an amount equal to any such
	Excess Credited Amounts (without interest thereon) to the
	Regulation 114 Trust.
Return of Amounts Not Received in
Accordance Herewith:	Party A agrees that if Party A or any of its Affiliates receive
	any amounts in respect of a Floating Balance Asset (other
	than Excess Credited Amounts) which do not constitute
	Interest Payments, Party A shall, or shall cause such
	Affiliate, as the case may be, to (A) deposit into the
	Appreciation Account the portion of such amounts that
A-1-6

	relate to Appreciation Account Assets and (B) deposit the
	remainder of such amount to the Regulation 114 Trust.
[SIGNATURE PAGE FOLLOWS]
A-1-7

     Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Confirmation and returning it to us.

	Yours sincerely,
	MERRILL LYNCH INTERNATIONAL
	By:
	Name:
	Title:
Accepted and confirmed as
of the Trade Date written above:
MANGROVE BAY TRUST
By: The Bank of New York (Delaware), not
in its individual capacity but solely as trustee
By:
Name:
Title:
Endorsement
The Transaction evidenced by this Confirmation constitutes a Guaranteed Transaction as defined in
and for the purposes of the Guarantee of Merrill Lynch Derivative Products AG dated as of July 11, 2003.
	MERRILL LYNCH DERIVATIVE PRODUCTS AG
	By:
	Name:
	Title:
	Date:

[Floating Balance Swap Confirmation]

A-1-8

EXHIBIT A-2

(Form of Asset Transaction Confirmation)

Swap Confirmation

DATE:	July [    ], 2003
TO:	Mangrove Bay Trust
FROM:	Merrill Lynch International
SUBJECT:	Mangrove Bay Trust

     The purpose of this letter is to confirm the terms and conditions of a transaction entered into between Merrill Lynch International ("MLI") and Mangrove Bay Trust, a Delaware statutory trust ("ABC Trust"), on the Trade Dates as set forth below (each, a "Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the Master Agreement specified below, and the Transaction referenced by this Confirmation represents an "Asset Transaction" as referred to in the Schedule to such Master Agreement.

     This Confirmation supplements, forms a part of and is subject to the 1992 ISDA Master Agreement (Multicurrency - Cross Border), dated as of July 11, 2003 (as the same may be amended from time to time, the "Master Agreement") (including the Schedule thereto), between MLI, ABC Trust and, for certain limited purposes, the Grantor. All provisions contained in, or incorporated by reference into, such Master Agreement shall govern this Confirmation as expressly modified below.

     This Confirmation incorporates the definitions and provisions contained in the 2000 ISDA Definitions (the "2000 Definitions"), as published by the International Swaps and Derivatives Association, Inc. ("ISDA"). In addition, this Confirmation incorporates the Standard Terms of Asset Transactions entered into between the parties hereto in the form set forth as Exhibit A-3 to the Schedule to the Master Agreement (the "Standard Terms") and the terms set forth therein shall be deemed to constitute a part of the terms of the Transaction represented hereby as if set forth herein. Capitalized terms used in any part of this Confirmation but not defined herein shall have the meanings ascribed to them in the Standard Terms or, if not defined therein, in the Master Agreement (as determined pursuant to Part 6 of the Schedule thereto).

A-2-1

1. The additional terms of the Transaction to which this Confirmation relates are as follows (references being to the applicable parts of the Standard Terms of Asset Transactions):

Transaction Number:
Trade Date:
Effective Date:
Reference Entity (Part 2):	[Issuer]
	[Guarantor] [if applicable]
	[Surety] [if applicable]
Reference Obligation (Part 2):
Rating(s):
Stated Maturity:
Scheduled Interest Payment Dates:
Form:
Clearing System:
CUSIP:
ISIN/Common Code:
Reference Price (Part 2):	_________ %
Asset Principal Amount (Part 2) as of the
Effective Date:	$ _________
Floating Rate for Initial Calculation Period
(Part 9):	_________ %
Party A Accrued Interest Payment Amount	$ _________
(Part 1):

This Transaction shall become effective only after the conditions set forth in Part 1 of the Standard Terms of Asset Transactions have been met and shall be terminated in the manner set forth therein.

* * *

The following tax integration identification by the ABC Trust is not part of the Transactions between the parties:

The notional principal contract constituted by this Transaction is hereby identified by the ABC Trust as a “§ 1.1275-6 hedge” with respect to the Reference Obligation identified in Part 1 of this Confirmation, under section 1.1275-6 of the Treasury regulations.

(i)     The “qualifying debt instrument” is such Reference Obligation. It was acquired and the § 1.1275-6 hedge was entered into on the Effective Date specified in Part 1 of this Confirmation.

A-2-2

(ii)	The § 1.1275-6 hedge is an interest rate swap, the terms and conditions of which are specified in the Standard Terms of Asset Transactions (together with the Master Agreement, Schedule and this Swap Confirmation).
(iii)	The synthetic debt instrument resulting from the integration of the qualifying debt instrument and the § 1.1275-6 hedge has a principal amount equal to the notional amount of the § 1.1275-6 hedge; bears floating interest reset periodically at USD-LIBOR-BBA plus the Spread; and matures on the maturity date (such maturity date being reasonably determined by MLI under applicable U.S. federal income tax principles) of the qualifying debt instrument.
[SIGNATURE PAGE FOLLOWS]

A-2-3

     Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Letter Agreement and returning it us by facsimile transmission on (212) 738-1033, attention: Alan Levy, Finance Department, telephone: (212) 445-4736.

		Yours sincerely,
		MERRILL LYNCH INTERNATIONAL
		By:
		Name:
		Title:
Accepted and confirmed as
of the Trade Date written above:
MANGROVE BAY TRUST
By:	The Bank of New York (Delaware), not
	in its individual capacity but solely as trustee
By:
Name:
Title:
Endorsement
The Transaction evidenced by this Confirmation constitutes a Guaranteed Transaction as defined in
and for the purposes of the Guarantee of Merrill Lynch Derivative Products AG dated as of July 11, 2003.
		MERRILL LYNCH DERIVATIVE PRODUCTS AG
		By:
		Name:
		Title:
		Date:

[Asset Transaction Confirmation]

A-2-4

EXHIBIT A-3

(Standard Terms of Asset Transactions)

DATE:	July 11, 2003
TO:	Mangrove Bay Trust
FROM:	Merrill Lynch International
SUBJECT:	Mangrove Bay Trust

     The purpose of this letter (as the same may be amended from time to time, this "Letter Agreement" or these "Standard Terms") is to provide the terms and conditions of certain transactions to be entered into between Merrill Lynch International ("MLI" or "Party A") and Mangrove Bay Trust, a Delaware statutory trust ("ABC Trust" or "Party B") from time to time as provided herein (each, a "Transaction"). This Letter Agreement constitutes the "Standard Terms of Asset Transactions" as referred to in the Schedule to the Master Agreement (as defined below).

     This Letter Agreement supplements, forms a part of and is subject to the 1992 ISDA Master Agreement (Multicurrency - Cross Border), dated as of July 11, 2003 (as the same may be amended from time to time, the "Master Agreement") (including the Schedule thereto), among MLI, ABC Trust and, for certain limited purposes, the Grantor. All provisions contained in, or incorporated by reference into, such Master Agreement shall govern this Letter Agreement as expressly modified below.

     This Letter Agreement incorporates the definitions and provisions contained in the 2000 ISDA Definitions (the "2000 Definitions"), as published by the International Swaps and Derivatives Association, Inc. ("ISDA"). Capitalized terms used in any part of this Letter Agreement but not defined herein shall have the meanings ascribed to them in the Master Agreement (as determined pursuant to Part 6 of the Schedule thereto).

1. Option of Party A to Enter Into Asset Transactions.

Designation of Asset Transactions:	From time to time, on and after the Closing Date, Party A
	may direct Party B to (and, on or prior to the third (3rd)
	Business Day following receipt of any such direction, Party
	B shall) enter into Transactions (each, an "Asset
	Transaction"), each represented by a Confirmation in the
	form set forth as Exhibit A-2 to the Schedule (each, an
	"Asset Transaction Confirmation"), with respect to
A-3-1

	Reference Obligations designated by Party A, in each case
	subject to the conditions set forth herein. As a condition to
	the effectiveness of each Asset Transaction, Party A shall
	direct the Regulation 114 Trustee and/or Party B, as the
	case may be, to acquire, in each case for Cash (and Party B
	shall acquire, or cause the Regulation 114 Trust to acquire,
	as the case may be, on or prior to the third (3rd) Business
	Day following receipt of any such direction), the related
	Reference Obligation with an aggregate principal amount
	equal to the initial Asset Principal Amount set forth in such
	Asset Transaction Confirmation (and to the extent that only
	a portion of such principal amount is so purchased, such
	Asset Transaction shall become effective only to the extent
	of such portion purchased and the Asset Principal Amount
	set forth in the related Asset Transaction Confirmation).
Purchase from Party A or Third Party:	With respect to each Reference Obligation to be purchased
	in connection with a new Asset Transaction, Party A may
	sell the Reference Obligation, or cause one or more of its
	Affiliates to arrange for an unaffiliated third party to sell
	the Reference Obligation, to Party B and/or the Regulation
	114 Trust, as the case may be (and if the Reference
	Obligation is to be acquired by (x) Party B, Party B shall so
	purchase such Reference Obligation or (y) the Regulation
	114 Trust, Party A shall cause and direct the Regulation
	114 Trustee to purchase such Reference Obligation
	pursuant to authority granted to Party A under the Grantor
	Letter of Instruction).
	Any sale of such Reference Obligation to Party B and/or
	the Regulation 114 Trust, as the case may be, by Party A or
	an Affiliate thereof shall be made at a sale price equal to
	the Market Value (as defined in Part 8 (Valuation) of this
	Letter Agreement); provided, however, that any portion of
	such purchase price that is attributable to the accrued
	interest thereon at the time of purchase shall be paid by
	Party A (each a "Party A Accrued Interest Payment
	Amount"). Each purchase of a Reference Obligation from
	Party A or an Affiliate thereof or from any other Person
A-3-2

	shall be made free of any commissions chargeable by the
	seller or any agent of the seller (and any such commissions
	shall be paid by Party A).
Reference Obligation Credited to
Regulation 114 Trust or Appreciation
Account:	To the extent that such Reference Obligation is purchased
	with:
	(A)	Cash on deposit in the Regulation 114 Trust, such
		Reference Obligation shall be credited to the
		Regulation 114 Trust; or
	(B)	Cash on deposit on the Appreciation Account (as
		defined in Paragraph 13(m)(ii) of the Credit Support
		Annex), such Asset shall be credited to the
		Appreciation Account.
Conditions to New Transactions:	Notwithstanding the foregoing, Party A shall not direct
	Party B to enter into an Asset Transaction or purchase the
	related Reference Obligation, and Party B shall not (and
	shall not be required to) enter into an Asset Transaction or
	purchase the related Reference Obligation, except upon
	satisfaction of the following conditions precedent:
	(A)	sufficient Cash shall be available in the Appreciation
		Account and/or the Regulation 114 Trust on or prior
		to the Effective Date of such Asset Transaction such
		that Party B and/or the Regulation 114 Trust may pay
		the purchase price for the Reference Obligation
		(excluding the Party A Accrued Interest Payment
		Amount);
	(B)	notwithstanding any other provision in this Letter
		Agreement, the Reference Obligation designated with
		respect to such Asset Transaction shall (i) not be part
		of a single "issue" (within the meaning of Treas. Reg.
		§ 1.1275-6(c)(1)(v)) with any Asset that is sold or
		otherwise disposed of by the Regulation 114 Trust or
		Party B on the Effective Date of such Asset
		Transaction or during the 30 days preceding such date
	A-3-3

		and (ii) have a maturity date (such maturity date being
		reasonably determined by MLI under applicable U.S.
		federal income tax principles) on or before the
		Scheduled Termination Date;
	(C)	Party A shall have paid the related Party A Accrued
		Interest Payment Amount, if any;
	(D)	Party A shall have delivered to Party B a counterpart
		of the Asset Transaction Confirmation relating to the
		Asset Transaction proposed to be entered into that is
		duly executed by Party A and duly endorsed by the
		Guarantor; and
	(E)	Party A shall have delivered to each of Party B, the
		Grantor and the Regulation 114 Trustee:
		(1) a copy of the form of Asset Transaction
		Confirmation relating to the Asset Transaction
		proposed to be entered into;
		(2) any instructions required to be delivered in
		order to effect the acquisition of the related
		Reference Obligation; and
		(3) such certificates and other documents (including
		without limitation the documents referred to in
		Part 3(d) of the Schedule) as are necessary in
		order to verify that such counterpart has been
		duly executed and delivered by Party A and duly
		endorsed by the Guarantor);
	(F)	no Final Termination Event (as defined in Section
		6(e)(i) of the Master Agreement (as restated in Part
		1(l) of the Schedule)) shall have occurred;
	(G)	no Put Notice (as defined in the Put Agreement) shall
		have been delivered (unless the related Voluntary Put
		Option Payment Date (as defined in Section 3.2(a) of
		the Put Agreement) shall have occurred); and
A-3-4

	(H)	no Draw (as defined in Part 2 (General Terms of Each
		Asset Transaction) of this Letter Agreement) shall
		have occurred (unless the related Deemed Put Option
		Payment Date (as defined in Section 3.2(d) of the Put
		Agreement) shall have occurred).
	Party A shall be deemed to represent and warrant, as of the
	Effective Date of each Asset Transaction, that such Asset
	Transaction constitutes a Guaranteed Transaction (as
	defined in Part 8(b) of the Schedule) entitled to the benefits
	of the Guarantee.
Eligible Asset:	Any of the assets described in clauses (1), (2) or (3) below:
	(1)	Cash;
	(2)	money market instruments or commercial paper that
		have a maturity date within 360 days from the time of
		investment or contractual commitment to invest
		therein and have a short term rating of "A-1+" by S&P
		and "P-1" by Moody's; and
	(3)	corporate debt securities or obligations, bank accounts
		and similar accounts and asset backed securities
		backed by and limited to (i) credit card obligations,
		(ii) auto loans, (iii) student loans, (iv) home equity
		loans, (v) manufactured housing, and (vi) commercial
		mortgages, which in each case (A) have a floating rate
		coupon that resets by reference to LIBOR, (B) have a
		scheduled maturity date (as reasonably determined by
		Party A) within ten (10) years from the time of
		investment or contractual commitment to invest
		therein and (C) satisfy one or more of the following:
		(x)	are fully guaranteed or insured by the U.S.
			federal government or any agency thereof;
		(y)	have a long term rating of "AAA" by S&P and
			"Aaa" by Moody's; or
A-3-5

		(z)	with respect to an asset with a stated maturity
			that is 364 or fewer days from the date of
			issuance thereof, have a short term rating of "A
			1+" by S&P and "P 1" by Moody's;
	provided, that any such obligations (i) are treated as
	indebtedness for U.S. federal income tax purposes and are
	eligible for the portfolio interest exemption from
	withholding tax and (ii) constitute investments of the types
	specified in section 1404(a) (1), (2), (3), (8) and (10) of the
	New York Insurance Law, as those provisions may be
	amended from time to time, or any successor provisions, as
	prescribed by 11 NYCRR 126.5(a)(2) under Regulation
	114, as such provision may be amended from time to time,
	or any successor provision thereto. An Asset will no longer
	qualify as an Eligible Asset if a Credit Event, or an event
	that would be a Credit Event with passage of time, has
	occurred with respect to that Asset. For the avoidance of
	doubt, "Eligible Asset" excludes Collateralized Bond
	Obligations.
Collateralized Bond Obligation:	A structured debt security backed by a portfolio consisting
	of the following:
	(1)	secured or unsecured senior or junior bonds issued by
		a variety of corporate or sovereign obligors; and/or
	(2)	secured or unsecured loans made to a variety of
		corporate commercial and industrial loan customers of
		one or more lending banks.
	Notwithstanding the foregoing, a "Collateralized Bond
	Obligation" shall not include any structured debt security
	backed primarily by a portfolio of automobile, light-duty
	truck and sport utility vehicle leases and/or retail
	installment contracts, credit card obligations, student loans,
	home equity loans, manufactured housing loans, residential
	mortgages or commercial mortgages. Further, for the
	avoidance of doubt, "Collateralized Bond Obligation"
	shall not include any obligations which do not strictly
	satisfy the requirements of clauses (1) and (2) above.
A-3-6

Credit Event:	Bankruptcy or Failure to Pay, each as defined in the 1999
	Credit Derivatives Definitions published by ISDA (the
	"Credit Derivatives Definitions").
2.  General Terms of Each Asset Transaction.
The following terms shall apply to each Asset Transaction:
Notional Amount:	With respect to any day and any Asset Transaction, the
	product of (A) the Asset Principal Amount (as defined
	below) and (B) the Reference Price.
	For avoidance of doubt, it is the intention of the parties that,
	on any day from and including the Closing Date through
	and including the Final Termination Date, the sum of
	(1) the aggregate Notional Amount with respect to each of
	the Asset Transactions outstanding on such day plus (2) the
	Notional Amount with respect to the Floating Balance
	Swap (as defined below), as such term is defined in Part 1
	(General Terms) of the Floating Balance Swap
	Confirmation as of such day, shall be equal to the Put
	Option Premium Calculation Amount (as defined in the Put
	Agreement) as of such day.
Asset Principal Amount:	For any date of determination, the outstanding principal
	balance (or face amount) of the Reference Obligation as of
	such date; provided, however, that the Asset Principal
	Amount shall be subject to reduction pursuant to Part 6
	(Cash Settlement) of this Letter Agreement (where a Cash
	Settlement Amount generally shall be payable in
	connection with such reduction).
Asset Put Option Agreement:	The Asset Put Option Agreement, dated as of the date
	hereof, between Party A and the Ceding Insurer, as the
	same may be amended or restated from time to time.
Assets:	The Trust Assets (as defined in this Part 2) and the
	Appreciation Account Assets (as defined in Part 6 (Cash
	Settlement)).
A-3-7

Available Liquidation Preference:	As defined in Section 3.5 of the Put Agreement.
Business Day Convention:	Following (which shall apply to any date referred to in this
	Letter Agreement or in the related Asset Transaction
	Confirmation that falls on a day that is not a Business Day
	unless otherwise specified for such date).
Business Day:	Any NYSE Business Day that is not a Saturday or Sunday
	or any other day on which banking institutions are
	authorized or required by law, regulation or executive order
	to close for business in New York City, London, England or
	Bermuda or are closed for business in New York City,
	London, England or Bermuda due to an act of God, natural
	disaster, act of war, civil or military disturbance, act of
	terrorism, sabotage, riots, or a loss or malfunction of
	utilities or communications services or a day on which the
	payment or distribution payable on such date cannot be paid
	for any such reason.
Calculation Agent:	Party A.
Ceding Insurer:	XL Reinsurance America Inc., a New York insurance
	company.
Credit Support Annex:	The Credit Support Annex to the Master Agreement.
Draw or Drawn:	All or a portion of any Reference Obligation (to the extent
	held in the Regulation 114 Trust) is drawn by the Ceding
	Insurer from the Regulation 114 Trust pursuant to Section
	4.l of the Regulation 114 Trust Agreement or any other
	provision thereof (except to the extent that the Assets so
	drawn are paid to Party B on or prior to the Business Day
	following the date of such draw).
Effective Date:	The Effective Date set forth in the related Asset
	Transaction Confirmation (which Effective Date shall be
	the settlement date on which the Asset is acquired by the
	Regulation 114 Trust and/or the Appreciation Account, as
	the case may be, at which time a corresponding reduction of
	the Notional Amount of the Floating Balance Swap shall be
	made).
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Excess Credited Amounts:	Any interest or other income with respect to any Trust
	Asset that is automatically forwarded to Party B, as
	designee of the Grantor, pursuant to Section 3.2 of the
	Regulation 114 Trust Agreement, and that is not
	subsequently received by the Regulation 114 Trustee from
	the issuer of or obligor on such Trust Asset (directly or
	through a paying agent or clearing agency).
Final Termination Date:	As defined in Part 1(l) of the Schedule.
Final Termination Event:	As defined in Part 1(l) of the Schedule.
Floating Balance Asset:	As defined in Part 1 (General Terms) of the Floating
	Balance Swap Confirmation.
Floating Balance Swap:	The Transaction represented by the Floating Balance Swap
	Confirmation.
Floating Balance Swap Confirmation:	The Confirmation entered into by Party A and Party B in
	the form set forth as Exhibit A-1 to the Schedule to the
	Master Agreement.
Grantor:	XL Re Ltd, as Grantor under the Regulation 114 Trust
	Agreement.
Reference Entity:	The Reference Entity set forth in the related Asset
	Transaction Confirmation (which Reference Entity shall be
	the issuer of, or primary obligor on, the related Reference
	Obligation).
Reference Obligation:	The Reference Obligation set forth in the related Asset
	Transaction Confirmation (which Reference Obligation
	shall be the obligation designated by Party A pursuant to
	Part 1 (Option of Party A to Enter Into Asset Transactions)
	of this Letter Agreement).

A-3-9

	The terms of the Reference Obligation shall be deemed to
	be the terms of such Obligation as existing on the date of
	determination, rather than as of the Trade Date.
Reference Price:	The Reference Price set forth in the related Asset
	Transaction Confirmation (which Reference Price shall be
	equal to the total amount of Cash paid by the Regulation
	114 Trust and/or Party B in respect of such Asset,
	expressed as a percentage of the initial Asset Principal
	Amount (as of the settlement date as of which such Asset
	was purchased), at which such Asset was acquired by Party
	B and/or the Regulation 114 Trust, excluding, however, the
	Party A Accrued Interest Payment Amount).
Regulation 114 Trust:	The trust established pursuant to the Regulation 114 Trust
	Agreement.
Regulation 114 Trust Agreement:	The trust agreement dated as of July 11, 2003 among the
	Grantor, the Ceding Insurer, as Beneficiary thereunder, and
	the Regulation 114 Trustee, as the same may be amended or
	restated from time to time.
Regulation 114 Trustee:	The Bank of New York, a banking association organized
	under the laws of New York, as trustee under the
	Regulation 114 Trust Agreement, and its successors and
	assigns in such capacity.
Schedule:	The Schedule to the Master Agreement.
Scheduled Termination Date:	July 15, 2013; provided, that if such Transaction is renewed
	in the manner specified in Part 5(i)(iii) of the Schedule,
	then the Scheduled Termination Date shall be the next
	Swap Renewal Date (as defined therein).
Termination Date:	The earlier of:
	(1)	the date on which the Asset Principal Amount has
		been reduced to zero; provided, that if such date is not
		a Floating Rate Payer Payment Date, the amount due
		from Party A in respect of the Floating Amount
		pursuant to Part 9 (Floating Rate Payments by Party
A-3-10

		A) of this Letter Agreement shall not be payable until
		the next Floating Rate Payer Payment Date; and
	(2)	the Final Termination Date.
Trade Date:	The Trade Date set forth in the related Asset Transaction
	Confirmation.
Trust Asset:	Any asset (whether or not constituting an Eligible Asset at
	such time) or portion thereof (including Cash) then credited
	to the Regulation 114 Trust.
3.  Interest and Principal.
The following definitions shall apply with respect to each Asset Transaction:
Accrued Interest on Sale:	Any portion of the sale proceeds or redemption price of a
	Reference Obligation that is attributable to interest accrued
	thereon at the time of sale or redemption.
Asset Amount:	For purposes of calculating the amount of Assets to be
	designated for sale upon a partial exercise of the option
	under the Put Agreement pursuant to Part 5 (Procedures
	Upon Partial Exercise of Option Under Put Agreement)
	and any reduction to the Available Liquidation Preference
	(and, accordingly, to the Put Option Premium Calculation
	Amount) pursuant to Section 3.5 of the Put Agreement, the
	"Asset Amount" shall be equal to:
	(1)	With respect to Cash, the amount thereof.
	(2)	With respect to a Floating Balance Asset, the balance
		thereof (excluding any interest).
	(3)	With respect to any other Asset, the product of (A) the
		Asset Principal Amount and (B) the Reference Price.
Interest:	All interest and any other income received in Cash by Party
	B and/or the Regulation 114 Trust, as the case may be, with
	respect to the Reference Obligation from or on behalf of the
A-3-11

	Reference Entity plus any Accrued Interest on Sale;
	provided, however, that "Interest" shall not include any
	Excess Credited Amounts. For avoidance of doubt,
	"Interest" and references elsewhere herein to "accrued
	interest" do not include the accretion in value over time of a
	zero coupon security or a security purchased at a discount
	to the aggregate principal amount or par amount thereof.
Principal:	All amounts other than Interest received by Party B and/or
	the Regulation 114 Trust, as the case may be, with respect
	to a Reference Obligation, whether in respect of principal
	or upon sale or redemption or otherwise (which, in the case
	of sale proceeds, shall be net of any fees and commissions
	charged by the purchaser of the Reference Obligation or
	any agent of such seller); provided, however, that
	"Principal" shall not include any Excess Credited
	Amounts.
Notice of Principal:	Party B shall provide written notice to Party A, the Grantor
	and the Regulation 114 Trustee upon receipt of any
	Principal on the date on which such Principal is received.
	Party A shall then notify Party B on such day of the
	computation of the related Cash Settlement Amount, if any,
	due in respect of such Principal pursuant to Part 6 (Cash
	Settlement) of this Letter Agreement.
Rule for Allocation of Principal:	If multiple Asset Transactions relate to Reference
	Obligations that are of the same issue, any Interest or
	Principal received with respect to such Reference
	Obligations shall be deemed allocated among such Asset
	Transactions on a pro rata basis, based on their respective
	Asset Principal Amounts.
A-3-12

4.  Interest Payments.
The following terms shall apply to each Asset Transaction:
Interest Payment Payer:	Party B.
Interest Payments:	For any Interest Payment Payer Payment Date, the amount
	of any Interest received by Party B and/or the Regulation
	114 Trust on or prior to such date and not previously paid
	as Interest Payments.
Deemed Interest Payment Upon Draw:	If all or a portion of the Reference Obligation is Drawn, the
	Regulation 114 Trust shall be deemed to have received
	Interest, and an Interest Payment shall be due on the related
	Deemed Put Option Payment Date, in an amount equal to
	the sum of:
	(1)	the portion, stated as a dollar amount, of the Market
		Value, determined as of the Deemed Put Option
		Payment Date, of the Drawn portion of the Reference
		Obligation that is attributable to accrued interest
		(other than any amounts included in clause (2) below);
		and
	(2)	the amount of any interest and other income received
		in Cash by the Ceding Insurer with respect to the
		Drawn portion of the Reference Obligation from and
		including the date of the Draw to and including the
		Deemed Put Option Payment Date.
Interest Payment Payer Payment Dates:		In the case of—
	(I)	Interest that is received by the Regulation 114 Trust,
		Party B and/or the Ceding Insurer, as the case may
		be—
		(A)	prior to 3:00 p.m. on any day, such day (if a
			Business Day and otherwise the next Business
			Day); and
A-3-13

		(B)	after 3:00 p.m. on any day, no later than the next
			Business Day (although Party B shall use
			reasonable efforts to make payments due with
			respect to Interest on the day on which such
			Interest is received);
		provided, however, that the "Interest Payment Payer
		Payment Dates" with respect to Accrued Interest on
		Sale (as defined under Part 3 (Interest and Principal)
		of this Letter Agreement) shall be as set forth under
		Part 10 (Weekly Release of Cash Settlement Amounts
		and Certain Interest Payments) of this Letter
		Agreement; and
	(II)	Interest that is deemed to be received in respect of a
		Drawn Asset, as described above under "Deemed
		Interest Payment Upon Draw," the Deemed Put Option
		Payment Date relating to such Draw.
5.  Procedures Upon Partial Exercise of Option Under Put Agreement.
The following terms shall apply generally to the Asset Transactions:
Deemed Designated Assets:	If the Reference Obligation with respect to any Asset
	Transaction has been Drawn in part, the remaining portion
	of such Reference Obligation shall be deemed to constitute
	a Designated Asset (each a "Deemed Designated Asset").
Procedures Upon Deemed Exercise:	On or prior to the Business Day following the date that
	Party A receives notice of a Draw resulting in the first
	exercise in part of the option under the Put Agreement
	pursuant to Section 3.2(d)(iv) and Section 3.2(e)(iii) of the
	Put Agreement, Party A shall designate, by notice to the
	ABC Trustee, the Regulation 114 Trustee and the Grantor,
	from the Assets remaining after giving effect to the related
	Draw, one or more additional Assets (which may include
	Cash or other Floating Balance Assets subject to the
	Floating Balance Swap) having an aggregate Asset Amount
	(as defined in Part 3 (Interest and Principal)) which is
	greater than or equal to the excess, if any, of:
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	(i)	one-half of the Available Liquidation Preference (as
		defined in Section 3.5 of the Put Agreement) as
		determined immediately prior to the Draw; over
	(ii)	the aggregate Asset Amount of the Assets (or portions
		thereof) subject to the Draw plus the aggregate Asset
		Amount of any Deemed Designated Assets.
	The Assets designated pursuant to the preceding paragraph
	are referred to, together with any Deemed Designated
	Assets, as "Designated Assets."
Procedures Upon Voluntary Exercise:	On or prior to the Business Day following the delivery of a
	Put Notice (as defined in the Put Agreement) with respect
	to a voluntary partial exercise of the put option under the
	Put Agreement pursuant to Section 3.2(a) of the Put
	Agreement, Party A shall designate, by notice to the ABC
	Trustee, the Regulation 114 Trustee and the Grantor, one or
	more Assets (which may include Cash or other Floating
	Balance Assets subject to the Floating Balance Swap) (such
	Assets also, "Designated Assets") with an aggregate Asset
	Amount that is greater than or equal to one-half of the
	Available Liquidation Preference.
Designation in Whole:	Each Designated Asset (other than Cash or another Floating
	Balance Asset) shall consist of all (and not part) of the
	Reference Obligation with respect to the related Asset
	Transaction.
Rule for Designation of Asset Transactions:	For avoidance of doubt, if multiple Asset Transactions
	relate to Reference Obligations that are of the same issue,
	and part but not all of such Reference Obligations are
	Drawn, Party A may designate the specific Asset
	Transactions that relate to such Draw in its discretion.
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6.  Cash Settlement.
The following terms shall apply to each Asset Transaction:
Cash Settlement Amount:	The Asset Principal Amount may be reduced under the
	circumstances specified under the caption "Cash
	Settlement; Reduction of Asset Principal Amount" in this
	Part 6 below. A Cash Settlement Amount (as defined
	below) shall be payable on the Cash Settlement Date
	specified below in connection with each reduction of the
	Asset Principal Amount on the related Cash Settlement
	Date (as defined below). "Cash Settlement Amount"
	means:
	P - (NR * RP)
	Where:
	P	=	The amount of Principal (as defined in Part 3
			(Interest and Principal)) received in connection
			with the reduction of the Asset Principal
			Amount; provided, however, that where the
			Reference Obligation is Drawn, in whole or in
			part, with respect to the Drawn portion, "P"
			shall be equal to the Market Value of such
			portion as of the date on which such Draw
			occurs (as determined by the Calculation Agent
			in accordance with the procedures set forth in
			Part 8 (Valuation)), excluding, however, any
			portion of such Market Value that is attributable
			to accrued interest;
	NR	=	The amount of the reduction in the Asset
			Principal Amount in connection with the related
			payment of Principal; and
	RP	=	The Reference Price.
	Notwithstanding the foregoing (and subject to Part 7), if the
	Reference Obligation has not been sold on or prior to 3:00
	p.m. New York time on the fourth (4th) Business Day
A-3-16

	following the occurrence of a Final Termination Event, the
	Cash Settlement Amount shall be equal to the Asset
	Amount, and Party B shall deliver (or Party B shall cause
	the Regulation 114 Trust to deliver) the Reference
	Obligation to Party A (to the extent that Party A pays the
	related Cash Settlement Amount) or the Guarantor or its
	designee (to the extent that the Guarantor pays the related
	Cash Settlement Amount) against payment of such Cash
	Settlement Amount; provided, however, that if such failure
	occurs because the Regulation 114 Trust or Party B, as the
	case may be, fails to release the Reference Obligation for
	delivery to Party A, the Guarantor or its designee, as the
	case may be, on the Final Termination Date, the Cash
	Settlement Amount shall be equal to the amount that would
	have been payable, as determined by reference to the
	formula immediately preceding this paragraph, if the
	Reference Obligation were sold for an amount equal to the
	Market Value of such Asset (determined by the Calculation
	Agent in the manner set forth in Part 8 (Valuation) below)
	(excluding, however, the portion of such Market Value that
	is attributable to the accrued interest thereon). In addition,
	a Cash Settlement Amount (or additional Cash Settlement
	Amount) may be payable following a Failure to Purchase
	under the Asset Swap Arrangement as described under Part
	7 (Procedures Upon Failure to Purchase Drawn Asset
	Under Asset Put Option Agreement).
Payments in Respect of Cash Settlement
Amount:	If the Cash Settlement Amount is positive, then Party B
	shall pay the Cash Settlement Amount to Party A on the
	Cash Settlement Date. If the Cash Settlement Amount is
	negative, then Party A shall pay the absolute value of the
	Cash Settlement Amount to Party B on the Cash Settlement
	Date.
Cash Settlement; Reduction of Asset
Principal Amount:	The Asset Principal Amount may be reduced under the
	circumstances specified in clauses (1) through (6) below.
	(1)	Payment of Principal. The Asset Principal Amount
		shall be reduced in connection with each payment of
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		principal, amount in respect of redemption or other
		amount (other than Interest) that is received by the
		Regulation 114 Trust and/or Party B in respect of the
		Reference Obligation by an amount equal to the
		related reduction (if any) in the outstanding principal
		balance (or face amount) of the Reference Obligation.
		Such reduction shall be effective on the date on which
		such payment is received, and such date shall be the
		Cash Settlement Date, except as and to the extent
		provided in Part 10 (Weekly Release of Cash
		Settlement Amounts and Certain Interest Payments) of
		this Letter Agreement.
	(2)	Reference Obligation Drawn. If all or a portion of
		the Reference Obligation is Drawn (as defined in Part
		2 (General Terms of Each Asset Transaction)):
		(A)	the Regulation 114 Trustee shall immediately
			provide notice of such Draw to Party A and
			Party B (identifying the Reference Obligation
			(or the issue of which such Reference
			Obligation is a part, in the event that there is
			more than one Reference Obligation relating to
			such issue) and the portion of the principal
			amount thereof that is being Drawn);
		(B)	the Asset Principal Amount shall be reduced
			proportionally based on the portion of the
			principal amount of the Reference Obligation
			that is being Drawn; and
		(C)	such reduction shall be effective on the Deemed
			Put Option Payment Date (as defined in Section
			3.2(d) of the Put Agreement) resulting from
			such Draw, and such date shall be the Cash
			Settlement Date.
	(3)	Voluntary Reduction. Party A may, at its election, at
		any time (including, without limitation, following the
		receipt by Party A of a Cash Election Notice pursuant
		to Part 12 (Other Provisions) of this Letter
A-3-18

		Agreement) cause the Asset Principal Amount to be
		reduced to zero. Party A shall cause such reduction by
		providing notice thereof to Party B, the Regulation
		114 Trustee and the Grantor, which notice shall direct
		Party B and/or the Regulation 114 Trust to sell the
		Reference Obligation. Notice of the sale of the
		Reference Obligation or direction to sell the Reference
		Obligation delivered to Party B, the Regulation 114
		Trust and the Grantor shall be deemed to satisfy the
		notice requirement set forth in the preceding sentence.
		On or prior to 3:00 p.m. New York time on the fourth
		(4th) Business Day following the date on which such
		notice is delivered, Party A shall purchase the
		Reference Obligation, cause one or more of its
		Affiliates to purchase the Reference Obligation or
		arrange for the sale of the Reference Obligation to a
		third party purchaser. Such reduction in the Asset
		Principal Amount shall be effective as of the
		settlement date on which the proceeds from such sale
		are credited to the Appreciation Account or the
		Regulation 114 Trust, as the case may be, and such
		date shall be the Cash Settlement Date, except as and
		to the extent provided in Part 10 (Weekly Release of
		Cash Settlement Amounts and Certain Interest
		Payments) of this Letter Agreement.
	(4)	Reference Obligation a Designated Asset. If the
		Reference Obligation is designated or deemed to be
		designated as a Designated Asset pursuant to Part 5
		(Procedures Upon Partial Exercise of Option Under
		Put Agreement) of this Letter Agreement, then, prior
		to noon, New York time, on the related Deemed Put
		Option Payment Date or Voluntary Put Option
		Payment Date, as the case may be, Party A shall
		purchase the Reference Obligation, cause one or more
		of its Affiliates to purchase the Reference Obligation
		or arrange for the sale of the Reference Obligation to a
		third party purchaser. Such reduction in the Asset
		Principal Amount shall be effective as of the related
		Deemed Put Option Payment Date or Voluntary Put
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		Option Payment Date, as the case may be, and such
		date shall be the Cash Settlement Date.
	(5)	Asset Becomes Ineligible. If Party A becomes aware
		that the Reference Obligation has ceased to constitute
		an Eligible Asset (as defined in Part 1 (Option of
		Party A to Enter Into Asset Transactions) of this
		Letter Agreement), Party A shall (i) by no later than
		the fifth (5th) Business Day following the date that
		Party A became so aware, provide notice of such
		ineligibility to Party B, the Regulation 114 Trust and
		the Grantor and (ii) by no later than the tenth (10th)
		Business Day following the date that Party A became
		so aware, purchase the Reference Obligation, cause
		one or more of its Affiliates to purchase the Reference
		Obligation or arrange for the sale of the Reference
		Obligation to a third party purchaser. Such reduction
		in the Asset Principal Amount shall be effective as of
		the settlement date on which the proceeds from such
		sale are credited to the Appreciation Account or the
		Regulation 114 Trust, as the case may be, and such
		date shall be the Cash Settlement Date, except as and
		to the extent provided in Part 10 (Weekly Release of
		Cash Settlement Amounts and Certain Interest
		Payments) of this Letter Agreement.
	(6)	Occurrence of Final Termination Event. The Asset
		Principal Amount shall be reduced to zero if a Final
		Termination Event (as defined in Section 6(e)(i) of the
		Master Agreement (as restated in Part 1(l) of the
		Schedule)) occurs. Following the occurrence of a
		Final Termination Event, Party A shall (or, if such
		Final Termination Event results from a Party A
		Termination, the Guarantor shall, or shall cause Party
		A or another Person appointed by the Guarantor as its
		agent to) either cause one or more of its Affiliates to
		purchase the Reference Obligation or arrange for the
		sale of the Reference Obligation to a third party
		purchaser.
A-3-20

	Notwithstanding any part of clauses (2), (3), (4) or (5),
	above, if a Final Termination Date has occurred at any time
	prior to the effective date of the reduction of the Asset
	Principal Amount, then paragraph (6) above shall govern
	and such clause (2), (3), (4) or (5), as the case may be, shall
	not apply.
	Party B shall cooperate with Party A to facilitate any such
	sale. Unless the Reference Obligation is purchased from
	Party B and/or the Regulation 114 Trust by a Person other
	than Party A, the Guarantor or an Affiliate of Party A or the
	Guarantor in an arms'-length transaction, such purchase
	shall be made at a price equal to the Market Value of such
	Reference Obligation (determined by the Calculation Agent
	in the manner set forth in Part 8 (Valuation) below). A
	failure by Party A, the Guarantor or another Person
	designated thereby to purchase or cause the Reference
	Obligation to be purchased in accordance with clauses (3)
	through (6) above within the time period specified therein
	(including where such failure results from the failure of a
	third party purchaser to take delivery of the Reference
	Obligation) shall constitute a "Failure to Purchase." The
	parties acknowledge that a Failure to Purchase (under either
	of the circumstances specified above) will result in a Final
	Termination Event pursuant to Part 1(h)(v) (Failure to
	Purchase) of the Schedule.
Application of Principal and Cash
Settlement Amounts:	All Principal and Cash Settlement Amounts received by
	Party B and/or the Regulation 114 Trust shall be applied:
	(A)	to the extent of amounts received with respect to
		Appreciation Account Assets (as defined below), to be
		deposited into the Appreciation Account; and
	(B)	to the extent of amounts received with respect to Trust
		Assets, to be deposited into the Regulation 114 Trust,
	and in each case shall not be offset against any Cash
	Settlement Amount or other amount due by Party B to Party
A-3-21

		A (and Party A hereby waives any right of such offset to the
		extent that it receives or holds any such Principal).
	Appreciation Account Asset:	Any asset (whether or not constituting an Eligible Asset at
		such time) or portion thereof (including Cash) then credited
		to the Appreciation Account.
7.  Procedures Upon Failure to Purchase Drawn Asset Under Asset Put Option Agreement.
The following terms shall apply to each Asset Transaction:
Failure to Purchase:		A "Failure to Purchase" also shall occur if Party A fails
		to purchase an asset from the Ceding Insurer on or before
		the close of business on the second (2nd) Business Day
		following the related Put Option Exercise Date in
		accordance with Section 3.2 and Section 3.3 of the Asset
		Put Option Agreement (as defined in Part 1 (Option of
		Party A to Enter Into Asset Transactions)). The parties
		acknowledge that a Failure to Purchase will result in a Final
		Termination Event pursuant to Part 1(l)(v) (Failure to
		Purchase) of the Schedule.
Procedures Upon Failure to Purchase
Drawn Asset Under Asset Put
Option Agreement:		If all or a portion of the Reference Obligation has been
		Drawn and, as of any day following the occurrence of a
		Final Termination Event and prior to the Final Termination
		Date, Party A (or the Guarantor, on its behalf) has failed to
		purchase the Reference Obligation from the Ceding Insurer
		following delivery of a Put Notice pursuant to (and within
		the time period specified in) Section 3.2 and Section 3.3 of
		the Asset Put Option Agreement, the Cash Settlement
		Amount shall be equal to the Put Option Price (as defined
		in the Asset Put Option Agreement), as reduced by any
		amounts previously paid in respect of the Settlement
		Amount, and the Ceding Insurer shall deliver the Reference
		Obligation to Party A (to the extent that Party A pays the
		related Cash Settlement Amount) or the Guarantor or its
		designee (to the extent that the Guarantor pays the related
		Cash Settlement Amount) against payment of such Cash
		Settlement Amount to Party B. Any obligation to pay a
A-3-22

	Cash Settlement Amount pursuant to this paragraph shall
	survive termination of the related Asset Transaction.
8.  Valuation.	The "Market Value" of an Asset (or portion thereof) as of
	any date shall be determined as follows:
Cash:	The Market Value of Cash shall be equal to the amount
	thereof.
Other Floating Balance Asset:	The Market Value of any Floating Balance Asset other than
	Cash (for all purposes of this Letter Agreement and for
	purposes of the Credit Support Annex) shall be equal to the
	balance thereof.
All Other Assets:	The Market Value of an Asset other than Cash or another
	Floating Balance Asset shall be (subject to the "Dispute
	Resolution" provisions below) equal to the value of such
	Asset, including accrued interest, as determined by the
	Calculation Agent as of the close of business on the date of
	determination, in New York, New York in good faith and in
	a commercially reasonable manner as of the close of
	business on the date of determination.
Dispute Resolution:	If the Grantor disputes the Calculation Agent's calculation
	of the Market Value of an Asset (other than Cash or another
	Floating Balance Asset), then the Grantor shall notify the
	Calculation Agent not later than the close of business on the
	Business Day following the applicable date of
	determination. Following delivery of such notice, the
	parties will consult with each other in an attempt to resolve
	the dispute, and, if they fail to resolve the dispute by 1:00
	p.m., New York time, on the Business Day following the
	date on which the notice is given that gives rise to the
	dispute (the "Resolution Time"), then the Calculation
	Agent will recalculate the Market Value in dispute as of the
	original date of determination that gave rise to the dispute
	by seeking:
	(i)	in the case of a dispute involving the purchase of an
		Asset by the Regulation 114 Trust and/or Party B, four
		actual offer quotations; and
A-3-23

	(ii)	in the case of a dispute involving the sale of an Asset
		by the Regulation 114 Trust and/or Party B or an
		Asset that was Drawn, four actual bid quotations,
	in each case from leading dealers in the relevant market
	based on quotations for an aggregate principal amount of
	the applicable issue equal to the aggregate principal amount
	of the Asset or portion thereof being valued, and taking the
	arithmetic average of those obtained; provided, that if four
	quotations are not available, then fewer than four
	quotations may be used; and if no quotations are available
	then the Calculation Agent's original calculations will be
	used.
	Following a recalculation pursuant to the preceding
	paragraph, the Calculation Agent will notify Party B and
	the Grantor not later than 1:00 p.m. New York time on the
	Business Day following the Resolution Time. No dispute
	regarding Market Value hereunder shall delay any
	transaction that otherwise would occur pursuant to and in
	accordance with this Letter Agreement, or with the Master
	Agreement including the Schedule thereto or any
	Transaction entered into pursuant thereto, but instead shall
	give rise to an offsetting payment or transfer at or as soon
	as practicable following the Resolution Time.
Threshold Amount for Market Value
Determination:	Notwithstanding the value determined pursuant to the
	provisions under the heading "Dispute Resolution," above,
	the Calculation Agent's original calculations will be used in
	the event that the Market Value determined pursuant to the
	"Dispute Resolution" provisions above is 99% or more of
	the Market Value determined pursuant to the Calculation
	Agent's original calculations (if the Grantor alleges that the
	correct value is lower than the Market Value determined by
	the Calculation Agent) or less than 101% of the Market
	Value determined pursuant to the Calculation Agent's
	original calculations (if the Grantor alleges that the correct
	value is higher than the Market Value determined by the
	Calculation Agent).
A-3-24

9.  Floating Rate Payments by Party A.
The following terms shall apply to each Asset Transaction:
Floating Rate Payer:	Party A.
Floating Rate Payer Calculation Amount:	For purposes of determining the Floating Amount for any
	Floating Rate Payer Payment Date, an amount equal to the
	sum of the Notional Amount (as defined in Part 2 (General
	Terms of Each Asset Transaction) for each day during the
	related Calculation Period divided by the actual number of
	days in such Calculation Period.
Floating Rate Payer Payment Dates:	One Business Day before Floating Rate Payer Period End
	Dates.
Floating Rate Payer Period End Dates:	(A)	During the Fixed Rate Period, each January 15 and
		July 15; and
	(B)	during the Floating Rate Period (if applicable), each
		January 15, April 15, July 15 and October 15,
	or, in the case of clauses (A) and (B), if such day is not a
	Business Day, the next Business Day, from and including
	the Effective Date to and including the Termination Date.
Floating Rate Option:	USD-LIBOR-BBA.
	For purposes of this Letter Agreement and the Floating
	Balance Swap Confirmation, the definition of "USD-
	LIBOR-Reference Banks," as incorporated by reference
	into the definition of "USD-LIBOR-BBA," as set forth in
	the Annex to the 2000 ISDA Definitions, shall be modified
	by inserting the following at the end thereof:
	"Notwithstanding the foregoing, if the banks selected
	as aforesaid by Party A are not quoting rates as
	mentioned in the preceding sentence, the rate will be
	the same as the rate determined on the immediately
	preceding Reset Date (except that, in the case of the
	first Calculation Period during the Floating Rate
A-3-25

	Period (if applicable), the rate will be the same as
	determined on the most recent London Banking Day,
	as of which the applicable rate appeared on Telerate
	Page 3750 or such page as may have replaced Telerate
	Page 3750)."
	For purposes of the definitions of "USD-LIBOR-Reference
	Banks" and "USD-LIBOR-BBA," "London Banking Day"
	shall mean any day on which dealings in deposits in United
	States dollars are transacted in the London interbank
	market.
Designated Maturity:	(A) with respect to any Calculation Period ending during
	the Fixed Rate Period, six months and (B) with respect to
	any Calculation Period ending during the Floating Rate
	Period (if applicable), three months.
Spread:	Minus 0.10%; provided, that, if a Swap Repricing Event (as
	defined in Part 5(i)(iii) of the Schedule) has occurred, the
	"Spread" shall be the Spread that most recently become
	effective pursuant to Part 5(i)(iii) of the Schedule.
Floating Rate Day Count Fraction:	Actual/360.
Floating Rate for Initial Calculation Period:	Solely in the case of Asset Transactions entered into with
	Effective Dates that are prior to (but not including) the first
	ABC Security Payment Date (as defined below), 1.12%.
	For all other Asset Transactions, the Floating Rate
	determined in the manner set forth in this Letter Agreement
	based on a Reset Date which is (A) during the Fixed Rate
	Period, the latest of the most recent January 15 or July 15
	on or before the Effective Date and (B) during the Floating
	Rate Period (if applicable), the latest of the most recent
	January 15, April 15, July 15 or October 15 on or before the
	Effective Date or, in the case of this clause (B), if such day
	is not a Business Day, the next Business Day.
Reset Dates:	The first day of each Calculation Period.
Method of Averaging:	Inapplicable.
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Compounding:	Inapplicable.
ABC Security Payment Date:	(I)	During the Fixed Date Period, each January 15 and
		July 15; and
	(II)	during the Floating Rate Period, each January 15,
		April 15, July 15 and October 15,
	or, in the case of clauses (I) and (II), if any such date is not
	a Business Day, the next following Business Day.
Fixed Rate Period:	The period from and including the Closing Date to and
	including July 15, 2013 (or, if such day is not a Business
	Day, the next Business Day).
Floating Rate Period:	Unless the Final Termination Date occurs prior to July 15,
	2013 or, if such day is not a Business Day, the next
	Business Day (in which case the Floating Rate Period shall
	not be applicable), the period from and including the day
	immediately following the last day of the Fixed Rate Period
	to but excluding the earlier of July 15, 2033 (or, if such day
	is not a Business Day, the next Business Day) and the Final
	Termination Date.
10.  Weekly Release of Cash Settlement Amounts and Certain Interest Payments.
The following terms shall apply to each Asset Transaction:
Priority of Application of Assets to
Cash Settlement Amounts:	Accrued Interest on Sale (as defined in Part 3 (Interest and
	Principal) of this Letter Agreement) and Cash Settlement
	Amounts (pursuant to Part 6 (Cash Settlement) of this
	Letter Agreement) shall be paid from Appreciation Account
	Assets (to the extent available) and, to the extent that there
	are insufficient Appreciation Account Assets consisting of
	Cash, from Trust Assets; provided, that, prior to the
	occurrence of a Final Termination Event, Accrued Interest
	on Sale and Cash Settlement Amounts may be paid from
	Trust Assets only on Weekly Release Dates in accordance
	with this Part 10 and not on any other day, and the
	"Interest Payment Payer Payment Dates" or "Cash
A-3-27

	Settlement Dates, " as the case may be, with respect to
	such amounts shall be the day on which such amounts are
	payable pursuant to this Part 10.
Weekly Release of Funds Where
Ceding Insurer Consent is Required:	With respect to each Weekly Release Date, Party A shall
	prepare and deliver to each of the Grantor, the Regulation
	114 Trustee, the Ceding Insurer and Party B on or prior to
	1:00 p.m., New York time, on the third Business Day
	preceding each Weekly Release Date (each, a "Weekly
	Release Notice Date"), a report in the form set forth as
	Attachment B or in such other form as may be agreed to
	from time to time by the Grantor, Party A and Party B
	(each, a "Weekly Consent and Release"). Party A shall
	set forth on each Weekly Consent and Release:
	(i) each amount payable in respect of Accrued Interest on
	Sale or Cash Settlement Amounts, in each case to the
	extent that such amounts were not paid from
	Appreciation Account Assets and were not previously
	paid pursuant to a Weekly Consent and Release; and
	(ii) if such Weekly Release Date is also a Transfer Date
	(for purposes of paragraph 13(c)(iii) of the Credit
	Support Annex), the Delivery Amount (for purposes
	of the Credit Support Annex), if any, with respect to
	Party B, together with the Assets (or portions thereof)
	to be distributed by the Regulation 114 Trust to Party
	B pursuant to paragraph 13(m)(iv) of the Credit
	Support Annex, and the Value (as defined in the
	Credit Support Annex) of such Assets (or portions
	thereof), stated separately and in the aggregate.
	Any Accrued Interest on Sale and Cash Settlement
	Amounts shall be payable on a Weekly Release Date only
	to the extent that the Regulation 114 Trust has sufficient
	Cash available to make the payment (after giving effect to
	any other payments required to be made on such date), and
	otherwise shall be due on the next succeeding Weekly
	Release Date on which sufficient Cash is available.
A-3-28

Weekly Release Date:	(I) Each Thursday from but excluding the Closing Date to
	but excluding the Final Termination Date (or, if any such
	day is not a Business Day, the next Business Day), (II) in
	the event of an exercise in part of the option under the Put
	Agreement, the related Deemed Put Option Payment Date
	or Voluntary Put Option Payment Date, as the case may be
	and (III) the Final Termination Date.
11.  Other Obligations of Party A.
Reporting:	Party A shall deliver statements to Party B, the Grantor or
	its designee and the Regulation 114 Trustee and, if
	instructed, to an independent auditor designated by the
	Grantor identifying all Assets and their respective Market
	Values (and the total thereof) as of the Valuation Time on
	each Valuation Date (each, as defined in Paragraph 13(c) of
	the Credit Support Annex) (which may be included as a
	part of the Weekly Consent and Release). In addition,
	without limiting the generality of the foregoing, no later
	than the fifth (5th) Business Day following the last day of
	each calendar month, Party A shall deliver a statement to
	Party B, the Grantor or its designee, the Regulation 114
	Trustee and, if instructed, to an independent auditor
	designated by the Grantor identifying all Assets and their
	respective Market Values as of the close of business on the
	last day of the preceding calendar month, together with a
	schedule of purchases and sales and other activity with
	respect to the Assets during such calendar month.
Title:	Title to all Trust Assets shall be held in the name of and for
	the benefit of the Regulation 114 Trust and title to all
	Appreciation Account Assets shall be held in the name of
	and for the benefit of Party B. Neither Party A nor any
	Affiliate thereof shall take possession of or handle any
	cash, securities, mortgages or deeds of trust, or other indicia
	of ownership of the Assets, or otherwise act as custodian of
	such investments.
Confidentiality:	It is not intended that the Grantor, the Put Counterparty or
	the Ceding Insurer (the "Party B Parties") divulge
	information regarding their business affairs to Party A or
A-3-29

	the Guarantor (the "Party A Parties"), or that the Party A
	Parties request or receive any such information. Further, it
	is not intended that the Party A Parties divulge information
	regarding their business affairs to the Party B Parties or that
	the Party B Parties request or receive any such information.
	However, in the event that, notwithstanding the preceding
	sentence, (i) any Party A Party receives such information,
	the Party A Parties shall maintain such information in the
	strictest confidence or (ii) any Party B Party receives such
	information, the Party B Parties shall maintain such
	information in the strictest confidence.
	Notwithstanding the foregoing, the Party A Parties and the
	Party B Parties (and each employee, representative, or other
	agent of such parties) may disclose to any and all persons,
	without limitation of any kind, the tax treatment and any
	facts that may be relevant to the tax structure of the
	transaction, so long as such information is relevant to
	understanding the tax treatment and tax structure of the
	transaction.
12.  Other Provisions.
Return of Excess Credited Amounts:	The Regulation 114 Trustee shall notify Party A upon
	becoming aware that any Excess Credited Amounts have
	been paid to Party A (whether in respect of Interest
	Payments, Cash Settlement Amounts or otherwise), and, as
	soon as practicable (but no later than one Business Day)
	following receipt of such notice, Party A shall pay an
	amount equal to any such Excess Credited Amounts
	(without interest thereon) to the Regulation 114 Trust.
Return of Interest Payments and
Cash Settlement Amounts Not Received
in Accordance Herewith:	Party A agrees that if Party A or any of its Affiliates receive
	any amounts in respect of the Reference Obligation (other
	than Excess Credited Amounts) to which it is not entitled,
	Party A shall, or shall cause such Affiliate, as the case may
	be, to (A) deposit into the Appreciation Account the portion
	of such amounts that relate to Appreciation Account Assets
A-3-30

	and (B) deposit the remainder of such amount to the
	Regulation 114 Trust.
Election by Ceding Insurer to Receive Cash:	In the event that the Ceding Insurer elects to receive Cash
	in a Draw, the Ceding Insurer may provide advance notice
	of such election to Party A (each a "Cash Election
	Notice"). Each Cash Election Notice shall be substantially
	in the form set forth as Attachment A hereto or in such
	other form acceptable to the Ceding Insurer and Party A.
	Each Cash Election Notice shall specify the total amount of
	Cash that the Ceding Insurer intends to receive in such
	Draw. Within one Business Day after receipt of a Cash
	Election Notice, Party A shall cause one or more of the
	Assets selected by Party A to be sold for Cash in an amount
	that is equal to or greater than the amount specified in the
	applicable Cash Election Notice. The Cash proceeds of
	such Assets shall be paid directly to or at the direction of
	the Ceding Insurer on a gross basis without any reduction
	being made in respect of a Cash Settlement Amount that is
	required to be paid by Party B in respect of any Asset
	Transaction with respect to which any such Asset is the
	Reference Obligation. For avoidance of doubt, the
	preceding sentence shall not operate to reduce the amount
	of any Cash Settlement Amount payable by Party B to Party
	A in connection with any such Asset.
[SIGNATURE PAGE FOLLOWS]

A-3-31

     Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Letter Agreement and returning it to us.

		Yours sincerely,
		MERRILL LYNCH INTERNATIONAL
		By:
		Name:
		Title:
Accepted and confirmed as
of the Trade Date written above:
MANGROVE BAY TRUST
By:	The Bank of New York (Delaware), not
	in its individual capacity but solely as trustee
By:
	Name:
	Title:

[Standard Terms of Asset Transactions]

A-3-32

Acceptance of Certain Terms and Conditions by the Bank of New York

     By signing below, the Bank of New York hereby agrees, for the benefit of Party A, Party B, the Grantor and the Regulation 114 Trust, to be bound by the provisions of, and shall become a party to and receive the benefits of this Letter Agreement and the Floating Balance Swap identified herein solely to the extent relating to (i) the rights and obligations of the Regulation 114 Trustee with respect to the return of Excess Credited Amounts and (ii) the obligation to provide notices as specified herein. The signature of the Bank of New York shall not construed (by negative inference or otherwise) to limit any rights of The Bank of New York as a third-party beneficiary to this Letter Agreement, the Master Agreement (including the Schedule), the Guarantee or any Transaction.

THE BANK OF NEW YORK

By: ____________________________________
       Name:
       Title:

[Standard Terms of Asset Transactions]

A-3-33

EXHIBIT C

FORM OF GUARANTEE OF MERRILL LYNCH DERIVATIVE PRODUCTS AG
DATED AS OF JULY 11, 2003

     FOR VALUE RECEIVED, receipt of which is hereby acknowledged, MERRILL LYNCH DERIVATIVE PRODUCTS AG, a Swiss share corporation ("MLDP"), hereby unconditionally guarantees to Mangrove Bay Trust (the "Company"), subject to the limitations hereinafter specified, the payment of the aggregate net amount (if any) payable by Merrill Lynch International ("MLI") and/or MLDP pursuant to the terms of Section 6(e) (other than Section 6(e)(iv)) of the Master Agreement dated as of July 11, 2003, between MLI and the Company (including the Schedule and the Exhibits thereto and the Standard Terms of Asset Transactions (as defined in the Schedule), the "Agreement"), as modified pursuant to Part 1(l) of the Schedule to the Agreement (the "Guaranteed Termination Payment") that is allocable to the "Guaranteed Transactions". For the purpose of this Guarantee, "Guaranteed Transactions" shall include any outstanding Transaction under the Agreement where MLDP has endorsed the Confirmation as set forth in Part 8 of the Schedule to the Agreement. In case of the failure of MLI punctually to make any such payment, MLDP hereby agrees to make such payment, or cause such payment to be made, promptly upon demand made by the Company to MLDP; provided, however that delay by the Company in giving such demand shall in no event affect MLDP's obligations under this Guarantee. The amount payable by MLDP under this Guarantee shall not exceed the amount of the Guaranteed Termination Payment and MLDP shall not be obligated to make payments under this Guarantee to the extent that the Company has received any payment guaranteed hereunder from any other Credit Support Provider of MLI or pursuant to any other Credit Support Document.

     Capitalized terms used in this Guarantee and not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement. For the purpose of this Guarantee, the amount of the Guaranteed Termination Payment allocable to the Guaranteed Transactions in respect of an Early Termination Date shall mean the amount (if any) that would be payable by MLI pursuant to the terms of Section 6(e) of the Agreement if the Guaranteed Transactions were the only Terminated Transactions in respect of such Early Termination Date. To the extent that the obligations of MLDP under this Guarantee are determined by reference to obligations of MLI under the Agreement, such obligations shall be determined by reference to and in accordance with the express provisions of the Agreement regardless of whether the same shall be enforceable in accordance with their terms between the Company and MLI.

     This Guarantee shall remain in full force and effect or shall be reinstated (as the case may be) if at any time any payment guaranteed hereunder, in whole or in part, is rescinded or must otherwise be returned by the Company upon the insolvency, bankruptcy or reorganization of MLI or otherwise, all as though such payment had not been made.

     MLDP hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Agreement; the absence of any action to enforce the same; any waiver or

C-1

consent by the Company concerning any provisions thereof; the rendering of any judgment against MLI or any action to enforce the same; or any other circumstances that might otherwise constitute a legal or equitable discharge of a guarantor or a defense of a guarantor. This Guarantee shall continue to be effective if MLI merges or consolidates with or into another entity, loses its separate legal identity or ceases to exist.

     MLDP hereby waives diligence; presentment; protest; notice of protest, acceleration, and dishonor; filing of claims with a court in the event of insolvency or bankruptcy of MLI; all demands whatsoever (except as provided in the first paragraph hereof); and any right to require a proceeding first against MLI.

Notwithstanding anything herein to the contrary, MLDP's obligations under this Guarantee shall be subject to the provisions of Part 8 of the Schedule to the Agreement.

     This Guarantee shall be governed by, and construed in accordance with, the laws of the State of New York.

This Guarantee becomes effective as of the date set forth above.

     MLDP hereby certifies and warrants that this Guarantee constitutes the valid obligation of MLDP and complies with all applicable laws.

[SIGNATURE PAGE FOLLOWS]

C-2

     IN WITNESS WHEREOF, MERRILL LYNCH DERIVATIVE PRODUCTS AG has caused this Guarantee to be executed in its corporate name by its duly authorized representative.

MERRILL LYNCH DERIVATIVE PRODUCTS AG

By:

   Name:

   Title:

Date:

[Guarantee]

C-3

APPENDIX A

DEFINED TERMS

       "6(b)(iv) Termination Notice" has the meaning set forth in Part 1(j)(i) of the Schedule.

     "ABC Assignment Agreement" shall mean the Assignment Agreement dated as of July 11, 2003 between the Grantor, as Assignor, and the ABC Trust, as Assignee, as the same may be amended from time to time.

     "ABC Declaration" shall mean the Declaration of Trust of the ABC Trust, dated as of May 22, 2003, among the ABC Trustee, GSS Holdings II, Inc., a Delaware corporation, as tax matters partner, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation, as initial purchaser.

     "ABC Securities" shall mean the Asset-Backed Capital Commitment Securities issued by the ABC Trust.

       "ABC Security Holders" shall mean the holders of the ABC Securities.

       "ABC Trust" shall mean Mangrove Bay Trust, a Delaware statutory trust.

     "ABC Trustee" shall mean, initially, The Bank of New York (Delaware), a Delaware banking corporation, not in its individual capacity, but solely as trustee of the ABC Trust or any successor or replacement trustee.

       "Affected Party" has the meaning set forth in Section 5(b) of the Master Agreement.

     "Aggregate Floating Rate Payments" has the meaning set forth in Part 1(l)(vii) of the Schedule.

     "Appreciation Account" shall mean the account established by Party B pursuant to paragraph 13(m)(ii) of the Credit Support Annex, which initially will be account number GLA 111-565 (sub-account 223-214) at The Bank of New York.

     "Appreciation Account Asset" means any Asset (whether or not constituting an Eligible Asset at such time) or portion thereof (including Cash) then credited to the Appreciation Account.

     "Asset Put Option Agreement" shall mean the Asset Put Option Agreement, dated as of July 11, 2003, between MLI and the Ceding Insurer, as the same may be amended from time to time.

     "Asset Swap Counterparty Account" has the meaning set forth in Section 3.6(d) of the ABC Declaration.

     "Asset Transaction" has the meaning set forth in Part 1 of the Standard Terms of Asset Transactions.

     "Asset Transaction Confirmation" has the meaning set forth in Part 1 of the Standard Terms of Asset Transactions.

Appendix A-1

       "Assets" shall mean the Trust Assets and the Appreciation Account Assets. For all purposes of the Master Agreement (including the Schedule and the Credit Support Annex), the Confirmations, the Standard Terms of Asset Transactions and the Asset Put Option Agreement, at any time, the Reference Obligation relating to any Transaction shall constitute a single "Asset" (irrespective of whether such Reference Obligation is part of the same issue as the Reference Obligation relating to any other Transaction at such time outstanding).

         "Available Amounts" has the meaning set forth in Part 5(k) of the Schedule.

       "Available Liquidation Preference" has the meaning set forth in Section 3.5 of the Put Agreement.

         "Business Day" has the meaning set forth in Part 1(f) of the Schedule.

         "Calculation Agent" shall mean Party A.

       "Cash" shall mean coin or currency of the United States of America as at the time shall be legal tender for payment of all public and private debts.

       "Ceding Insurer" shall mean XL Reinsurance America Inc., a New York property and casualty insurance company.

         "Closing Date" shall mean the date on which the ABC Securities are issued.

         "Collateral Agreement" has the meaning set forth in Part 1(h)(iii) of the Schedule.

       "Draw" or "Drawn" shall mean, with respect to any Trust Asset (but not an Appreciation Account Asset), all or a portion of such Asset is drawn by the Ceding Insurer from the Regulation 114 Trust pursuant to Section 4.l of the Regulation 114 Trust Agreement or any other provision thereof (except to the extent that the Asset so drawn is paid to Party B on or prior to the Business Day following the date of such draw).

       "Eligible Institution" shall mean a depository institution organized under the laws of the United States or any one of the states thereof or incorporated under the laws of a foreign jurisdiction with a branch or agency located in the United States and subject to supervision and examination by federal or state banking authorities which at all times has (i) a long term rating of "A-2" and a short-term deposit rating of "Prime-1" by Moody's and (ii) a short-term rating of "A-1+" and, if deposits are to be held in the account for more than 30 days, a long-term rating of "AA-", by Standard & Poor's, and whose deposits are insured by the Federal Deposit Insurance Corporation or any successor thereto.

       "Failure to Purchase" has the meaning set forth in Part 6 (Cash Settlement) of the Standard Terms of Asset Transactions or Part 7 (Procedures Upon Failure to Purchase Drawn Assets Under Asset Put Option Agreement) of the Standard Terms of Asset Transactions, as the context may require.

       "Final Termination Date" has the meaning set forth in Section 6(e)(i)(B) of the Master Agreement (as restated in Part 1(l) of the Schedule).

Appendix A-2

     "Final Termination Event" has the meaning set forth in Section 6(e)(i) of the Master Agreement (as restated in Part 1(l) of the Schedule).

     "Floating Balance Asset" has the meaning set forth in the Floating Balance Swap Confirmation.

    "Floating Balance Swap" shall mean the Transaction represented by the Floating Balance Swap Confirmation.

    "Floating Balance Swap Confirmation" shall mean the Confirmation entered into by Party A and Party B in the form set forth as Exhibit A-1 to the Schedule to the Master Agreement.

    "Floating Rate Payer Calculation Amount" has, with respect to any Asset, the meaning set forth in the related Confirmation.

     "Grantor" shall mean XL Re Ltd, a Bermuda property and casualty reinsurer.

    "Grantor Letter of Instruction" shall mean the Grantor Letter of Instruction dated as of July 11, 2003, of the Grantor to the Regulation 114 Trust.

     "Guarantee" has the meaning set forth in Part 4(f)(i) of the Schedule.

     "Guaranteed Termination Payment" has the meaning set forth in Part 8(a) of the Schedule.

     "Guaranteed Transaction" has the meaning set forth in Part 8(b) of the Schedule.

     "Guarantor" has the meaning set forth in Part 4(f)(i) of the Schedule.

     "Interim Period" has the meaning set forth in Section 6(e)(ii) of this Agreement (as restated in Part 1(l) of the Schedule).

    "Joint Letter of Instruction" shall mean the Joint Letter of Instruction dated as of July 11, 2003, of the Grantor and the Ceding Insurer to the Regulation 114 Trust.

     "Local Business Day" has the meaning set forth in Part 1(f) of the Schedule.

    "Master Agreement" shall mean the ISDA Master Agreement, dated as of July 11, 2003, between MLI, as Party A, the ABC Trust, as Party B and, for certain limited purposes, the Grantor, including the Schedule thereto, as the same may be amended from time to time.

     "MLDP" has the meaning set forth in Part 4(g)(i) of the Schedule.

    "MLI" shall mean Merrill Lynch International, an English corporation and its successors and assigns.

     "Moody's" shall mean Moody's Investors Service, Inc. or any successor thereto, if any.

    "Party A Termination" has the meaning set forth in Section 6(e)(vii) of this Agreement (as restated in Part 1(l) of the Schedule).

Appendix A-3

     "Pass-Through Declaration" shall mean the Declaration of Trust of the Pass-Through Trust, dated as of May 22, 2003, between the Pass-Through Trustee and Merrill Lynch, Pierce, Fenner & Smith Incorporated, a Delaware corporation, as Initial Purchaser, as the same may be amended from time to time.

     "Pass-Through Securities" shall mean the Asset Backed Capital Commitment Pass-Through Securities, face amount $1,000 per security, issued by the Pass-Through Trust.

     "Pass-Through Trust" shall mean Mangrove Bay Pass-Through Trust, a Delaware statutory trust.

     "Pass-Through Trustee" shall mean, initially, The Bank of New York (Delaware), a Delaware banking corporation, not in its individual capacity, but solely as trustee of the Pass-Through Trust or any successor or replacement trustee.

       "Proceedings" has the meaning set forth in Part 4(j) of the Schedule.

     "Put Agreement" shall mean the Put Option Agreement, dated as of July 11, 2003, between the Put Counterparty and Party B, as the same may be amended from time to time or its successors or assigns as permitted under the Put Option Agreement.

       "Put Counterparty" shall mean XL Capital Ltd., a Cayman Islands exempt limited company.

       "Put Option Premium" has the meaning set forth in Section 5.1(b) of the Put Agreement.

     "Put Option Premium Calculation Amount" has the meaning set forth in Section 1.2 of the Put Agreement.

     "Rate Swap" shall mean the ISDA Master Agreement, dated as of July 11, 2003, between the Put Counterparty, as Party A, and the ABC Trust, as Party B, including the Schedule thereto and the related Swap Confirmation with an Effective Date of even date therewith.

     "Rating Agencies" shall mean S&P and Moody's so long as any of the Pass-Through Securities remain outstanding and rated by such entity.

     "Regulation 114" shall mean Regulation 114 promulgated by the New York Insurance Superintendent under the New York Insurance Law.

     "Regulation 114 Trust" shall mean the trust established pursuant to the Regulation 114 Trust Agreement.

     "Regulation 114 Trust Agreement" shall mean the trust agreement dated as of July 11, 2003 among the Grantor, the Ceding Insurer, as Beneficiary thereunder, and the Regulation 114 Trustee, as the same may be amended from time to time.

     "Regulation 114 Trustee" shall mean, initially, The Bank of New York, a New York banking corporation, and any of its permitted successors and assigns, in its capacity as trustee of the Regulation 114 Trust or any successor or replacement trustee.

     "Required Counterparty Rating" has the meaning set forth in Part 1(h)(ii) of the Schedule.

Appendix A-4

     "Spread" has the meaning set forth in Part 3 (Floating Rate Payments by Party A) of the Floating Balance Swap Confirmation and Part 9 (Floating Rate Payments by Party A) of the Standard Terms of Asset Transactions.

     "S&P" shall mean Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc. or any successor thereto, if any.

     "Schedule" shall mean the Schedule (of which this Appendix A is a part) to the Master Agreement.

     "Scheduled Termination Date" has the meaning set forth in Part 1 (General Terms) the Floating Balance Swap Confirmation and Part 2 (General Terms of Each Asset Transaction) of the Standard Terms of Asset Transactions, as the context may require.

     "Standard Terms of Asset Transactions" shall mean the letter agreement entered into between Party A and Party B in the form set forth as Exhibit A-3 to the Schedule.

     "Swap Renewal Date" shall mean each of July 15, 2013 and July 15, 2023 (or, in each case, if such day is not a Business Day, the next Business Day).

       "Swap Repricing Event" has the meaning set forth in Part 5(i)(iii) of the Schedule.

     "Termination Date" has, with respect to one or more Transactions, the meanings set forth in the related Confirmations.

     "30-Day Assets" has the meaning set forth in Section 6(e)(iii), as modified by Part 1(l) of the Schedule.

       "Transfer Date" has the meaning set forth in Paragraph 13(c)(iii) of the Credit Support Annex.

     "Trust Asset" shall mean, at any time, any asset (whether or not constituting an Eligible Asset at such time) or portion thereof (including Cash) then credited to the Regulation 114 Trust.

     "Valuation Date" has the meaning set forth in Paragraph 13(c)(ii) of the Credit Support Annex to the Master Agreement.

Appendix A-5

(Bilateral Form) (ISDA Agreements Subject to New York Law Only)

ISDA®

International Swaps and Derivatives Association, Inc.

CREDIT SUPPORT ANNEX

to the schedule to the

MASTER AGREEMENT

dated as of July 11, 2003

between

MERRILL LYNCH INTERNATIONAL	and	MANGROVE BAY TRUST
(“Party A”)		(“Party B”)

This Annex supplements, forms part of, and is subject to, the above-referenced Agreement, is part of its Schedule and is a Credit Support Document under this Agreement with respect to each party.

Accordingly, the parties agree as follows:—

Paragraph 1. Interpretation

(a)   Definitions and Inconsistency. Capitalized terms not otherwise defined herein or elsewhere in this Agreement have the meanings specified pursuant to Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of this Schedule, this Annex will prevail, and in the event of any inconsistency between Paragraph 13 and the other provisions of this Annex, Paragraph 13 will prevail.

(b)   Secured Party and Pledgor. All references in this Annex to the “Secured Party” will be to either party when acting in that capacity and all corresponding references to the “Pledgor” will be to the other party when acting in that capacity; provided, however, that if Other Posted Support is held by a party to this Annex, all references herein to that party as the Secured Party with respect to that Other Posted Support will be to that party as the beneficiary thereof and will not subject that support or that party as the beneficiary thereof to provisions of law generally relating to security interests and secured parties.

Paragraph 2. Security Interest

Each party, as the Pledgor, hereby pledges to the other party, as the Secured Party, as security for its Obligations, and grants to the Secured Party a first priority continuing security interest in, lien on and right of Set-off against all Posted Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the security interest and lien granted hereunder on that Posted Collateral will be released immediately and, to the extent possible, without any further action by either party.

Copyright © 1994 by International Swaps and Derivatives Association, Inc.

Paragraph 3. Credit Support Obligations

(a)   Delivery Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Secured Party on or promptly following a Valuation Date, if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor’s Minimum Transfer Amount, then the Pledgor will Transfer to the Secured Party Eligible Credit Support having a Value as of the date of Transfer at least equal to the applicable Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the “Delivery Amount” applicable to the Pledgor for any Valuation Date will equal the amount by which:

(i) the Credit Support Amount

            exceeds

(ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party.

(b)   Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly following a Valuation Date, if the Return Amount for that Valuation Date equals or exceeds the Secured Party’s Minimum Transfer Amount, then the Secured Party will Transfer to the Pledgor Posted Credit Support specified by the Pledgor in that demand having a Value as of the date of Transfer as close as practicable to the applicable Return amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the “Return Amount” applicable to the Secured Party for any Valuation Date will equal the amount by which:

(i) the Value as of that Valuation Date of all Posted Credit Support held by the secured Party

            exceeds

(ii) the Credit Support Amount.

“Credit Support Amount” means, unless otherwise specified in Paragraph 13, for any Valuation Date (i) the Secured Party’s Exposure for that Valuation Date plus (ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any, minus (iii) all Independent Amounts applicable to the Secured Party, if any, minus (iv) the Pledgor’s Threshold; provided, however, that the Credit Support Amount will be deemed to be zero whenever the calculation of Credit Support Amount yields a number less than zero.

Paragraph 4. Conditions Precedent, Transfer Timing, Calculations and Substitutions

(a)   Conditions Precedent. Each Transfer obligation of the Pledgor under Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and 6(d) is subject to the conditions precedent that:

(i)	no Event of Default, Potential Event of Default or Specified Condition has occurred and is continuing with respect to the other party; and
(ii)	no Early Termination Date for which any unsatisfied payment obligations exist has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the other party.

(b)   Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise specified, if a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time, then the relevant Transfer will be made not later than the close of business on the next Local Business Day; if a demand is made after the Notification Time, then the relevant Transfer will be made not later than the close of business on the second Local Business Day thereafter.

(c)   Calculations. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation Time. The Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) of its calculations not later than the Notification Time on the Local Business Day following the applicable Valuation Date (or in the case of Paragraph 6(d), following the date of calculation).

2 ISDA® 1994

(d)   Substitutions.

(i)

Unless otherwise specified in Paragraph 13, upon notice to the Secured Party specifying the items of Posted Credit Support to be exchanged, the Pledgor may, on any Local Business Day, Transfer to the Secured Party substitute Eligible Credit Support (the “Substitute Credit Support”); and

(ii)

subject to Paragraph 4(a), the Secured Party will Transfer to the Pledgor the items of Posted Credit Support specified by the Pledgor in its notice not later than the Local Business Day following the date on which the Secured Party receives the Substitute Credit Support, unless otherwise specified in Paragraph 13 (the “Substitution Date”); provided that the Secured Party will only be obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit Support equal to the Value as of that date of the Substitute Credit Support.

Paragraph 5. Dispute Resolution

If a party (a “Disputing Party”) disputes (I) the Valuation Agent’s calculation of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of Eligible Credit Support or Posted Credit Support, then (1) the Disputing Party will notify the other party and the Valuation Agent (if the Valuation Agent is not the other party) not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (2) subject to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (3) the parties will consult with each other in an attempt to resolve the dispute and (4) if they fail to resolve the dispute by the Resolution Time, then:

(i) In the case of a dispute involving a Delivery Amount or Return Amount, unless otherwise specified in Paragraph 13, the Valuation Agent will recalculate the Exposure and the Value as of the Recalculation Date by:

(A)	utilizing any calculations of Exposure for the Transactions (or Swap Transactions) that the parties have agreed are not in dispute;
(B)	calculating the exposure for the Transactions (or Swap Transactions) in dispute by seeking four actual quotations at mid-market from Reference Market-makers for purposes of calculating Market Quotation, and taking the arithmetic average of those obtained; provided that if four quotations are not available for a particular Transaction (or Swap Transaction), then fewer than four quotations may be used for that Transaction (or Swap Transaction); and if no quotations are available for a particular Transaction (or Swap Transaction), then the Valuation Agent’s original calculations will be used for that Transaction (or Swap Transaction); and
(C)	utilizing the procedures specified in Paragraph 13 for calculating the Value, if disputed, of Posted Credit Support.

(ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted Credit Support, the Valuation Agent will recalculate the Value as of the date of Transfer pursuant to Paragraph 13.

Following a recalculation pursuant to this Paragraph, the Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) not later than the Notification Time on the Local Business Day following the Resolution Time. The appropriate party will, upon demand following that notice by the Valuation Agent or a resolution pursuant to (3) above and subject to Paragraphs 4(a) and 4(b), make the appropriate Transfer.

3 ISDA® 1994

Paragraph 6. Holding and Using Posted Collateral

(a)   Care of Posted Collateral. Without limiting the Secured Party’s rights under Paragraph 6(c), the Secured Party will exercise reasonable care to assure the safe custody of all Posted Collateral to the extent required by applicable law, and in any event the Secured Party will be deemed to have exercised reasonable care if it exercises at least the same degree of care as it would exercise with respect to its own property. Except as specified in the preceding sentence, the Secured Party will have no duty with respect to Posted Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights pertaining thereto.

(b)   Eligibility to Hold Posted Collateral; Custodians.

(i)	General. Subject to the satisfaction of any conditions specified in Paragraph 13 for holding Posted Collateral, the Secured Party will be entitled to hold Posted Collateral or to appoint an agent (a “Custodian”) to hold Posted Collateral for the Secured Party. Upon notice by the Secured Party to the Pledgor of the appointment of a Custodian, the Pledgor’s obligations to make any Transfer will be discharged by making the Transfer to that Custodian. The holding of Posted Collateral by a Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party for which the Custodian is acting.
(ii)	Failure to Satisfy Conditions. If the Secured Party or its Custodian fails to satisfy any conditions for holding Posted Collateral, then upon a demand made by the Pledgor, the Secured Party will, not later than five Local Business Days after the demand, Transfer or cause its Custodian to Transfer all Posted Collateral held by it to a Custodian that satisfies those conditions or to the Secured Party if it satisfies those conditions.
(iii)	Liability. The Secured Party will be liable for the acts or omissions of its Custodian to the same extent that the Secured Party would be liable hereunder for its own acts or omissions.

(c)   Use of Posted Collateral. Unless otherwise specified in Paragraph 13 and without limiting the rights and obligations of the Parties under Paragraphs 3, 4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an Affected Party with respect to a Specified Condition and no Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then the Secured Party will, notwithstanding Section 9-207 of the New York Uniform Commercial Code, have the right to:

(i)	sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business any Posted Collateral it holds, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor; and
(ii)	register any Posted Collateral in the name of the Secured Party, its Custodian or a nominee for either.

For purposes of the obligation to Transfer Eligible Credit Support or Posted Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies authorized under this Agreement, the Secured Party will be deemed to continue to hold all Posted Collateral and to receive Distributions made thereon, regardless of whether the Secured Party has exercised any rights with respect to any Posted Collateral pursuant to (i) or (ii) above.

(d)   Distributions and Interest Amount.

(i) Distributions. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following Local Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose).

4 ISDA® 1994

(ii) Interest Amount. Unless otherwise specified in Paragraph 13 and subject to Paragraph 4(a), in lieu of any interest, dividends or other amounts paid or deemed to have been paid with respect to Posted Collateral in the form of Cash (all of which may be retained by the Secured Party), the Secured Party will Transfer to the Pledgor at the times specified in Paragraph 13 the Interest Amount to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). The Interest Amount or portion thereof not Transferred pursuant to this Paragraph will constitute Posted Collateral in the form of Cash and will be subject to the security interest granted under Paragraph 2.

Paragraph 7. Events of Default

For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default will exist with respect to a party if:

(i)	that party fails (or fails to cause its Custodian) to make, when due, any Transfer of Eligible Collateral, Posted Collateral or the Interest Amount, as applicable, required to be made by it and that failure continues for two Local Business Days after notice of that failure is given to that party;
(ii)	that party fails to comply with any restriction or prohibition specified in this Annex with respect to any of the rights specified in Paragraph 6(c) and that failure continues for five Local Business Days after notice of that failure is given to that party; or
(iii)	that party fails to comply with or perform any agreement or obligation other than those specified in Paragraphs 7(i) and 7(ii) and that failure continues for 30 days after notice of that failure is given to that party.

Paragraph 8. Certain Rights and Remedies

(a)   Secured Party’s Rights and Remedies. If at any time (1) an Event of Default or Specified Condition with respect to the Pledgor has occurred and is continuing or (2) an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Pledgor, then, unless the Pledgor has paid in full all of its Obligations that are then due, the Secured Party may exercise on or more of the following rights and remedies:

(i)	all rights and remedies available to a secured party under applicable law with respect to Posted Collateral held by the Secured Party;
(ii)	any other rights and remedies available to the Secured Party under the terms of Other Posted Support, if any;
(iii)	the right to Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and
(iv)	the right to liquidate any Posted Collateral held by the Secured Party through one or more public or private sales or other dispositions with such notice, if any, as may be required under applicable law, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor (with the Secured Party having the right to purchase any or all of the Posted Collateral to be sold) and to apply the proceeds (or the Cash equivalent thereof) from the liquidation of the Posted Collateral to any amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may elect.

Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value and is of a type customarily sold on a recognized market, and, accordingly, the Pledgor is not entitled to prior notice of any sale of that Posted Collateral by the Secured Party, except any notice that is required under applicable law and cannot be waived.

5 ISDA® 1994

(b)   Pledgor’s Rights and Remedies. If at any time an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then (exception the case of an Early Termination Date relating to less than all Transactions (or Swap Transactions) where the Secured Party has paid in full all of its obligations that are then due under Section 6(e) of this Agreement):

(i)	the Pledgor may exercise all rights and remedies available to a Pledgor under applicable law with respect to Posted Collateral held by the Secured Party;
(ii)	the Pledgor may exercise any other rights and remedies available to the Pledgor under the terms of Other Posted Support, if any;
(iii)	the Secured Party will be obligated immediately to Transfer all Posted Collateral and the Interest Amount to the Pledgor; and
(iv)	to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to (iii) above, the Pledgor may:

(A)	Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and
(B)	to the extent that the Pledgor does not Set-off (iv)(A) above, withhold payment of any remaining amounts payable by the Pledgor with respect to any Obligations, up to the Value of any remaining Posted Collateral held by the Secured Party, until the Posted Collateral is Transferred to the Pledgor.

(c)   Deficiencies and Excess Proceeds. The Secured Party will Transfer to the Pledgor any proceeds and Posted Credit Support remaining after liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in full of all amounts payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for any amounts remaining unpaid after any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b).

(d)   Final Returns. When no amounts are or thereafter may become payable by the Pledgor with respect to any Obligations (except for any potential liability under Section 2(d) of this Agreement), the Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount, if any.

Paragraph 9. Representations

Each party represents to the other party (which representations will be deemed to be repeated as of each date on which it, as the Pledgor, Transfers Eligible Collateral) that:

(i)	it has the power to grant a security interest in and lien on any Eligible Collateral it Transfers as the Pledgor and has taken all necessary actions to authorize the granting of that security interest and lien;
(ii)	it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers to the Secured Party hereunder, free and clear of any security interest, lien, encumbrance or other restrictions other than the security interest and lien granted under Paragraph 2;
(iii)	upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this Annex, the Secured Party will have a valid and perfected first priority security interest therein (assuming that any central clearing corporation or any third-party financial intermediary or other entity not within the control of the Pledgor involved in the Transfer of that Eligible Collateral gives the notices and takes the action required of it under applicable law for perfection of that interest); and
(iv)	the performance by it of its obligations under this Annex will not result in the creation of any security interest, lien or other encumbrance on any Posted Collateral other than the security interest and lien granted under Paragraph 2.

6 ISDA® 1994

Paragraph 10. Expenses

(a)   General. Except as otherwise provided in Paragraphs 10(b) and 10(c), each party will pay its own costs and expenses in connection with performing its obligations under this Annex and neither party will be liable for any costs and expenses incurred by the other party in connection herewith.

(b)   Posted Credit Support. The Pledgor will promptly pay when due all taxes, assessments or charges of any nature that are imposed with respect to Posted Credit Support held by the Secured Party upon becoming aware of the same, regardless of whether any portion of that Posted Credit Support is subsequently disposed of under Paragraph 6(c), except for those taxes, assessments and charges that result from the exercise of the Secured Party’s rights under Paragraph 6(c).

(c)   Liquidation/Application of Posted Credit Support. All reasonable costs and expenses incurred by or on behalf of the Secured Party or the Pledgor in connection with the liquidation and/or application of any Posted Credit Support under Paragraph 8 will be payable, on demand and pursuant to the Expenses Section of this Agreement, by the Defaulting Party or, if there is no Defaulting Party, equally by the parties.

Paragraph 11. Miscellaneous

(a)   Default Interest. A Secured Party that fails to make, when due, any Transfer of Posted Collateral or the Interest Amount will be obligated to pay the Pledgor (to the extent permitted under applicable law) an amount equal to interest at the Default Rate multiplied by the Value of the items of property that were required to be Transferred, from (and including) the date that Posted Collateral or Interest Amount was required to be Transferred to (but excluding) the date of Transfer of that Posted Collateral or Interest Amount. This interest will be calculated on the basis of daily compounding and the actual number of days elapsed.

(b)   Further Assurances. Promptly following a demand made by a party, the other party will execute, deliver, file and record any financing statement, specific assignment or other document and take any other action that may be necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any security interest or lien granted under Paragraph 2, to enable that party to exercise or enforce its rights under this Annex with respect to Posted Credit Support or an Interest Amount or to effect or document a release of a security interest on Posted Collateral or an Interest Amount.

(c)   Further Protection. The Pledgor will promptly give notice to the Secured Party of, and defend against, any suit, action, proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely affect that security interest and lien granted by its under Paragraph 2, unless that suit, action, proceeding or lien results from the exercise of the Secured Party’s rights under Paragraph 6(c).

(d)   Good Faith and Commercially Reasonable Manner. Performance of all obligations under this Annex, including, but not limited to, all calculations, valuations and determinations made by either party, will be made in good faith and in a commercially reasonable manner.

(e)   Demands and Notices. All demands and notices made by a party under this Annex will be made as specified in the Notices Section of this Agreement, except as otherwise provided in Paragraph 13.

(f)   Specifications of Certain Matters. Anything referred to in this Annex as being specified in Paragraph 13 also may be specified in one or more Confirmations or other documents and this annex will be construed accordingly.

7 ISDA® 1994

Paragraph 12. Definitions

As used in this Annex:—

“Cash” means the lawful currency of the United States of America.

“Credit Support Amount” has the meaning specified in Paragraph 3.

“Custodian” has the meaning specified in Paragraph 6(b)(i) and 13.

“Delivery Amount” has the meaning specified in Paragraph 3(a).

“Disputing Party” has the meaning specified in Paragraph 5.

“Distributions” means with respect to Posted Collateral other than Cash, all principal, interest and other payments and distributions of cash or other property with respect thereto, regardless of whether the Secured Party has disposed of that Posted Collateral under Paragraph 6(c). Distributions will not include any item of property acquired by the Secured Party upon any disposition or liquidation of Posted Collateral or, with respect to any Posted Collateral in the form of Cash, any distributions on that collateral, unless otherwise specified herein.

“Eligible Collateral” means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13.

“Eligible Credit Support” means Eligible Collateral and Other Eligible Support.

“Exposure” means for any Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5 in the case of a dispute, the amount, if any, that would be payable to a party that is the Secured Party by the other party (expressed as a positive number) or by a party that is the Secured Party to the other party (expressed as a negative number) pursuant to Section 6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions) were being terminated as of the relevant Valuation Time; provided that Market Quotation will be determined by the Valuation Agent using its estimates at mid-market of the amounts that would be paid for Replacement Transactions (as that term is defined in the definition of “Market Quotation”).

“Independent Amount” means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero.

“Interest Amount” means, with respect to an Interest Period, the aggregate sum of the amounts of interest calculated for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash held by the Secured Party on that day, determined by the Secured Party for each such day as follows:

(x)	the amount of that Cash on that day; multiplied by
(y)	the Interest Rate in effect for that day; divided by
(z)	360.

“Interest Period” means the period from (and including) the last Local Business Day on which an Interest Amount was Transferred (or, if no Interest Amount has yet been Transferred, the Local Business Day on which Posted Collateral in the form of Cash was Transferred to or received by the Secured Party) to (but excluding) the Local Business Day on which the current Interest Amount is to be Transferred.

“Interest Rate” means the rate specified in Paragraph 13.

“Local Business Day”, unless otherwise specified in Paragraph 13, has the meaning specified in the Definitions Section of this Agreement, except that references to a payment in clause (b) thereof will be deemed to include a Transfer under this Annex.

8 ISDA® 1994

“Minimum Transfer Amount” means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero.

“Notification Time” has the meaning specified in Paragraph 13.

“Obligations” means, with respect to a party, all present and future obligations of that party under this Agreement and any additional obligations specified for that party in Paragraph 13.

“Other Eligible Support” means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13.

“Other Posted Support” means all Other Eligible Support Transferred to the Secured Party that remains in effect for the benefit of that Secured Party.

“Pledgor” means either party, when that party (i) receives a demand for or is required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has Transferred Eligible Credit Support under Paragraph 3(a).

“Posted Collateral” means all Eligible Collateral, other property, Distributions, and all proceeds thereof that have been Transferred to or received by the Secured Party under this Annex and not Transferred to the Pledgor pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the Secured Party under Paragraph 8. Any Interest Amount or portion thereof not Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in the form of Cash.

“Posted Credit Support” means Posted Collateral and Other Posted Support.

“Recalculation Date” means the Valuation Date that gives rise to the dispute under Paragraph 5; provided, however, that if a subsequent Valuation Date occurs under Paragraph 3 prior to the resolution of the dispute, then the “Recalculation Date” means the most recent Valuation Date under Paragraph 3.

“Resolution Time” has the meaning specified in Paragraph 13.

“Return Amount” has the meaning specified in Paragraph 3(b).

“Secured Party” means either party, when that party (i) makes a demand for or is entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds or is deemed to hold Posted Credit Support.

“Specified Condition” means, with respect to a party, any event specified as such for that party in Paragraph 13.

“Substitute Credit Support” has the meaning specified in Paragraph 4(d)(i).

“Substitution Date” has the meaning specified in Paragraph 4(d)(ii).

“Threshold” means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero.

“Transfer” means, with respect to any Eligible Credit Support, Posted Credit Support or Interest Amount, and in accordance with the instructions of the Secured Party, Pledgor or Custodian, as applicable:

(i)	in the case of Cash, payment or delivery by wire transfer into one or more bank accounts specified by the recipient;
(ii)	in the case of certificated securities that cannot be paid or delivered by book-entry, payment or delivery in appropriate physical form to the recipient or its account accompanied by any duly executed instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to constitute a legally valid transfer to the recipient;
(iii)	in the case of securities that can be paid or delivered by book-entry, the giving of written instruments to the relevant depository institution or other entity specified by the recipient, together with a written copy thereof to the recipient, sufficient if complied with to result in a legally effective transfer of the relevant interest to the recipient; and
(iv)	in the case of Other Eligible Support or Other Posted Support, as specified in Paragraph 13.

9 ISDA® 1994

“Valuation Agent” has the meaning specified in Paragraph 13.

“Valuation Date” means each date specified in or otherwise determined pursuant to Paragraph 13.

“Valuation Percentage” means, for any item of Eligible Collateral, the percentage specified in Paragraph 13.

“Valuation Time” has the meaning specified in Paragraph 13.

“Value” means for any Valuation Date or other date for which Value is calculated and subject to Paragraph 5 in the case of a dispute, with respect to:

(i) Eligible Collateral or Posted Collateral that is:

(A)	Cash, the amount thereof; and
(B)	a security, the bid price obtained by the Valuation Agent multiplied by the applicable Valuation Percentage, if any;

(ii)	Posted Collateral that consists of items that are not specified as Eligible Collateral, zero; and
(iii)	Other Eligible Support and Other Posted Support, as specified in Paragraph 13.

10 ISDA® 1994

CREDIT SUPPORT ANNEX

to the Schedule to the Master Agreement

dated as of July 11, 2003

between

Merrill Lynch International	Mangrove Bay Trust
("Party A" or "Secured Party")	("Party B" or "Pledgor")

Paragraph 13. Elections and Variables
(a)	Security Interest for "Obligations." The term "Obligations" as used in this Annex includes the following additional obligations:
		With respect to Party A:           Not Applicable. With respect to Party B:            Not Applicable.
(b)	Credit Support Obligations.
	(i)	Delivery Amount, Return Amount and Credit Support Amount.
		(A)	"Delivery Amount" has the meaning specified in Paragraph 3(a).
		(B)	"Return Amount" has the meaning specified in Paragraph 3(b).
		(C)	"Credit Support Amount" has the meaning specified in Paragraph 3; provided, however, that Exposure shall be determined by the Valuation Agent as the aggregate amount that would be payable under all Asset Transactions in respect of Cash Settlement Amounts assuming that (i) the Asset Principal Amount with respect to each Asset Transaction were reduced to zero as of the Valuation Time and (ii) Party B and/or the Regulation 114 Trust received an amount of Principal equal to the Market Value of the related Reference Obligation (as determined pursuant to Part 8 (Valuation) of the Standard Terms of Asset Transactions) (excluding accrued interest).
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     (ii)   Eligible Collateral. The following items will qualify as "Eligible Collateral" for the party specified:

				Valuation
		Party A	Party B	Percentage
(A)	Cash	N/A	[X]	100	%
(B)	Other "Eligible Assets" as defined in	N/A	[X]	100	%
	Part 1 (Option of Party A to Enter Into
	Asset Transactions) of the Standard
	Terms of Asset Transactions

	(iii)	Other Eligible Support. The following items will qualify as "Other Eligible Support" for the party specified: None specified.
	(iv)	Thresholds.
		(A)	"Independent Amount" means with respect to Party A: None.
			"Independent Amount" means with respect to Party B: None.
		(B)	"Threshold" means with respect to Party A: Zero.
			"Threshold" means with respect to Party B: Zero.
		(C)	"Minimum Transfer Amount" means with respect to a party: Zero.
		(D)	Rounding. None.
(c)	Valuation and Timing.
		(i)	"Valuation Agent" means, for all purposes, Party A.
		(ii)	"Valuation Date" means the third Business Day preceding each Transfer Date.
		(iii)	"Transfer Date" means every other Thursday, commencing July 24, 2003 or, if any such day is not a Business Day, the next Business Day.
		(iv)	"Valuation Time" means 10:00 a.m. in the city of the Valuation Agent on the Valuation Date or date of calculation, as applicable; provided that the calculations of Value and Exposure will

12

be made as of approximately the same time on the same date.
		(v)	"Notification Time" means no later than 1:00 p.m., New York time on any Business Day.
		(vi)	Paragraph 4(b) is hereby deleted and replaced with the following:
			"(b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise specified, if a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time on the Valuation Date, then the relevant Transfer will be made not later than the close of business on the Transfer Date; if a demand is made after the Notification Time on the Transfer Date, then the relevant Transfer will be made no later than the close of business or the next following Transfer Date. Any such demand shall be included as a part of the Weekly Consent and Release delivered pursuant to Part 10 of the Standard Terms of Asset Transactions."
		(vii)	Paragraph 4(c) is hereby deleted and replaced with the following:
			"(c) Calculations. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation Time, and shall be included as a part of the Weekly Consent and Release delivered pursuant to Part 10 of the Standard Terms of Asset Transactions, and shall be delivered no later than the Notification Time on the Valuation Date."
(d)	Conditions Precedent and Secured Party's Rights and Remedies. The following Termination Event(s) will be a "Specified Condition" for the party specified (that party being the Affected Party if the Termination Event occurs with respect to that party): None.
(e)	Substitution.
	(i)	"Substitution Date" has the meaning specified in Paragraph 4(d)(ii).
	(ii)	Consent. On any Business Day, Party A may, by written direction to the Grantor, the Regulation 114 Trustee and the ABC Trustee, require one or more of the Assets held in the Appreciation Account to be substituted for one or more Assets in the Regulation 114 Trust of equivalent Market Value (as determined pursuant to Part 8 (Valuation) of the Standard Terms of Asset Transactions).
(f)	Dispute Resolution.
	(i)	"Resolution Time" means 1:00 p.m., New York time, on the Local Business Day following

13

the date on which the notice is given that gives rise to a dispute under Paragraph 5.
	(ii)	"Value." The Value of Posted Credit Support will be, on any Valuation Date, equal to the Market Value thereof as of the Valuation Time on such date. For all purposes of this Paragraph 13, "Market Value" shall mean, with respect to any Asset and any Valuation Date, the Market Value (excluding accrued interest) determined pursuant to Part 8 (Valuation) of the Standard Terms of Asset Transactions (which, in the case of a dispute, shall be determined as if such Asset were to be sold by the Regulation 114 Trust).
	(iii)	"Alternative". The provisions of Paragraph 5 will not apply.
(g)	Holding and Using Posted Collateral.
	(i)	Eligibility to Hold Posted Collateral; Custodians. Notwithstanding any part of this Credit Support Annex, including Paragraph 3(a) thereof, the Posted Collateral pledged to Party A will be held in the Appreciation Account, and will be deposited into such account pursuant to the procedures set forth in Paragraph 13(m)(iv)(A) of this Credit Support Annex.
	(ii)	Use of Posted Collateral. The provisions of Paragraph 6(c) will not apply to Party A and Party B.
(h)	Distributions and Interest Amount.
	(i)	Interest Rate. Zero.
	(ii)	Transfer of Interest Amount. Not applicable.
	(iii)	Alternative to Interest Amount. Not Applicable.
(j)	Other Eligible Support and Other Posted Support.
(i) "Value" with respect to Other Eligible Support and Other Posted Support means: Not Applicable.
(ii) "Transfer" with respect to Other Eligible Support and Other Posted Support means: Not Applicable.
(k)	Demands and Notices.
All demands, specifications and notices under this Annex will be made pursuant to the Notices Section of this Agreement, unless otherwise specified here:
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With respect to Party A:
With respect to Party B:
(l)	Addresses for Transfers.
Party A:
Party B:
(m)	Other Provisions:
	(i) Paragraph 7 Subparagraph (i) Events of Default is hereby amended by changing the words in the third line thereof “ two Local Business Days” to “three Local Business Days”.
	(ii) Establishment of Accounts. From and after the Closing Date, Party B shall establish and maintain an account to be designated as the "Appreciation Account". Such account shall be established at an Eligible Institution (as defined in Appendix A to the Schedule).
	(iii) Authorization to File Financing Statements. Party B hereby authorizes the filing of any financing statements or continuation statements, and amendments to financing statements, in any jurisdictions and with any filing offices as Party A may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted to Party A pursuant to Paragraph 2 of the Credit Support Annex, as modified by clause (v) below. Such financing statements may describe the Posted Collateral with respect to Party B, the Appreciation Account and the property credited thereto, in the same manner as described in this Agreement or may contain an indication or description of collateral that describes such property in any other manner as Party A may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Posted Collateral with respect to Party B, the Appreciation Account and the property credited thereto, granted to Party B in connection herewith, including, without limitation, describing such property as "all assets" or "all personal property," whether now owned or existing or hereafter arising or acquired and wheresoever located.
	(iv) Maintenance of Amounts in Appreciation Account. Notwithstanding the provisions of Paragraph 4(b), with respect to each Transfer Date:
15

(A)	Party A may, at its option, instruct the Regulation 114 Trustee, in the applicable Weekly Consent and Release, to distribute to Party B on such Transfer Date one or more Trust Assets (or any part thereof) with a then-current Value up to but not exceeding the Delivery Amount (if any) with respect to Party B determined as of the related Valuation Date; and
(B)	Party B shall withdraw from the Appreciation Account, and deposit with the Regulation 114 Trust on such Transfer Date, Trust Assets selected by Party A with a then-current Value up to but not exceeding the Return Amount (if any) with respect to Party B determined as of the related Valuation Date (provided, that if Party A fails to designate Trust Assets for such purpose in the applicable Weekly Consent and Release, then Party B shall be entitled to select such Assets).
	Any adjustments to the Posted Collateral based on the "Dispute Resolution" provisions of Part 8 (Valuation) of the Standard Terms of Asset Transactions shall be made promptly upon the resolution of the relevant dispute.
	For purposes of clarification, the transfer of all or a portion of any Asset to the Appreciation Account in the manner described in this clause (iv) shall not affect the Transaction relating to such Asset which shall remain in effect.
(v)	Security Interest. Paragraph 2 of this Credit Support Annex is hereby modified by adding the following immediately after the first sentence thereof:
	"Without limitation of the preceding sentence, Party B, as pledgor, hereby pledges to Party A all of its interest in the Appreciation Account and all property from time to time credited thereto as security for its Obligations."
[SIGNATURE PAGE FOLLOWS]
16

     IN WITNESS WHEREOF the parties have executed this Annex as of the date specified on the first page hereof.

	MERRILL LYNCH INTERNATIONAL
	By: /s/ Hamish Pritchard
	Name: Hamish Pritchard
	Title: Authorized Signatory
:
	MANGROVE BAY TRUST
	By: The Bank of New York (Delaware),
	not in its individual capacity but solely
	as trustee
	By: /s/ Michael Santino
	Name: Michael Santino
	Title: Senior Vice President

[Credit Support Annex]

17

EX-99.8

(Multicurrency—Cross Border)

ISDA®

International Swap Dealers Association, Inc.

MASTER AGREEMENT

dated as of July 11, 2003

XL CAPITAL LTD. and MANGROVE BAY TRUST

have entered and/or anticipate entering into one or more transactions (each a “Transaction”) that are or will be governed by this Master Agreement, which includes the schedule (the “Schedule”), and the documents and other confirming evidence (each a “Confirmation”) exchanged between the parties confirming those Transactions.

Accordingly, the parties agree as follows:–

1.	Interpretation
(a)	Definitions. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement.
(b)	Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction.
(c)	Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this “Agreement”), and the parties would not otherwise enter into any Transactions.

2.	Obligations
(a)	General Conditions.

(i)	Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement.
(ii)	Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement.
(iii)	Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement.

Copyright © by International Swap Dealers Association Inc.

(b)	Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change.
(c)	Netting. If on any date amounts would otherwise be payable:—

(i)	in the same currency; and
(ii)	in respect of the same Transaction,

by each party to the other, then, on such date, each party’s obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount.

The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries.

(d) Deduction or Withholding for Tax.

(i) Gross-Up. All payments under this Agreement will be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party (“X”) will:—

(1)	promptly notify the other party (“Y”) of such requirement;
(2)	Pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y;
(3)	promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such authorities; and
(4)	if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for:—
(A)	the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4 (a)(iii) or 4(d); or
(B)	the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law.

2 ISDA®1992

(ii) Liability. If:—

(1)	X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect to which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4);
(2)	X does not so deduct or withhold; and
(3)	a liability resulting from such Tax is assessed directly against X,

then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).

(e)

Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement.

3.

Representations

Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement) that:—

(a) Basic Representations.

(i)	Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws, in good standing;
(ii)	Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance;
(iii)	No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets;
(iv)	Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and
(v)	Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).

3 ISDA®1992

(b)	Absence of Certain Events. No Event or Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party.
(c)	Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of the Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document.
(d)	Accuracy of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect.
(e)	Payer Tax Representation. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true.
(f)	Payee Tax Representations. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(f) is accurate and true.
4.	Agreements

Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:—

(a) Furnish Specified Information. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs:—

(i)	any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation;
(ii)	any other documents specified in the Schedule or any Confirmation; and
(iii)	upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification,

in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable.

(b)	Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future.
(c)	Comply with Laws. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party.
(d)	Tax Agreement. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure.
(e)	Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated,

4 ISDA®1992

organised, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement is located (“Stamp Tax Jurisdiction”) and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party’s execution or performance of this Agreement by any such Stamp Tax jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party.

5.	Events of Default and Termination Events
(a)	Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an “Event of Default”) with respect to such party:—

(i)	Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party:
(ii)	Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party;
(iii)	Credit Support Default.

(1)	Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed;
(2)	the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or
(3)	the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document;

(iv)	Misrepresentation. A representation (other than a representation under Section 3(e) or (f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated;
(v)	Default under Specified Transaction. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or any early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf);
(vi)	Cross Default. If “Cross Default” is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however

5 ISDA®1992

described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period);

(vii)  Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:—

(1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or

(viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer:—

(1)	the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or
(2)	the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement.

(b) Termination Events. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and if specified to be applicable, a Credit Event

6 ISDA®1992

Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:—

(i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):—

(1)	to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect to such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or
(2)	to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction;

(ii)	Tax Event. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B));
(iii)	Tax Event Upon Merger. The party (the “Burdened Party”) on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii);
(iv)	Credit Event Upon Merger. If “Credit Event Upon Merger” is specified in the Schedule as applying to the party, such party (“X”), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or
(v)	Additional Termination Event. If any “Additional Termination Event” is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation).

(c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default.

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6.	Early Termination
(a)	Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the “Defaulting Party”) has occurred and is then continuing, the other party (the “Non-defaulting Party”) may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, “Automatic Early Termination” is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b)	Right to Terminate Following Termination Event.

(i)	Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require.
(ii)	Transfer to Avoid Termination Event. If either an Illegality under Section 5(b)(i)(I) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist.
	If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i).
	Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party’s policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed.
(iii)	Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event.
(iv)	Right to Terminate If:—

(1)	a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or
(2)	an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party,

either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then

8 ISDA®1992

continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions.

(c) Effect of Designation.

(i)	If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing.
(ii)	Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to section 6(e).

(d) Calculations.

(i)

Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation.

(ii)

Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed.

(e) Payments on Early Termination. If an Early Termination Date occurs, the following provisions shall apply based on the parties’ election in the Schedule of a payment measure, either “Market Quotation” or “Loss”, and a payment method, either the “First Method” or the “Second Method”. If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that “Market Quotation” or the “Second Method”, as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off.

(i) Events of Default. If the Early Termination Date results from an Event of Default:—

(1)	First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party.
(2)	First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party’s Loss in respect of this Agreement.
(3)	Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the

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Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party.

(4)

Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party’s Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party.

(ii) Termination Events. If the Early Termination Date results from a Termination Event:—

(1)	One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect to all Terminated Transactions.
(2)	Two Affected Parties. If there are two Affected Parties:—
(A)	if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount (“X”) and the Settlement Amount of the party with the lower Settlement Amount (“Y”) and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and
(B)	if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss (“X”) and the Loss of the party with the lower Loss (“Y”).
	If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y.

(iii)

Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs because “Automatic Early Termination” applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii).

(iii)

Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses.

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7. Transfer

Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that:—

(a)	a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and
(b)	a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e).

Any purported transfer that is not in compliance with this Section will be void.

8.	Contractual Currency
(a)	Payment in the Contractual Currency. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the “Contractual Currency”). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess.
(b)	Judgments. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually received by such party. The term “rate of exchange” includes, without limitation, any premiums and costs or exchange payable in connection with the purchase of or conversion into the Contractual Currency.
(c)	Separate Indemnities. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in the Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums payable in respect of this Agreement.
(d)	Evidence of Loss. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made.

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9.	Miscellaneous
(a)	Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto.
(b)	Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system.
(c)	Survival of Obligations. Without prejudice to sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction.
(d)	Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law.
(e)	Counterparts and Confirmations.

(i)

This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original.

(ii)

The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation.

(f)	No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege.
(g)	Headings. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement.
10.	Offices; Multibranch Parties
(a)	If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organisation of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into.
(b)	Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party.
(c)	If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation.
11.	Expenses

A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document

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to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection.

12.

Notices

(a)

Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated:—

(i)	if in writing and delivered in person or by courier, on the date it is delivered;
(ii)	if sent by telex, on the date the recipient’s answerback is received;
(iii)	if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender’s facsimile machine);
(iv)	if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or
(v)	if sent by electronic messaging system, on the date that electronic message is received,

unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day.

(b)	Change of Addresses. Either party may by notice to the other change the address, telex or facsimile number of electronic messaging system details at which notices or other communications are to be given to it.
13.	Governing Law and Jurisdiction
(a)	Governing Law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule.
(b)	Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement (“Proceedings”), each party irrevocably:—

(i)	submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and
(ii)	waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party.

Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction.

(c) Service of Process. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any

13 ISDA®1992

	reason any party’s Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to service process in any other manner permitted by law.
(d)	Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings.
14.	Definitions

As used in this Agreement:—

“Additional Termination Event” has the meaning specified in Section 5(b).

“Affected Party” has the meaning specified in Section 5(b)

“Affected Transactions” means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination event, all Transactions.

“Affiliate” means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, “control” of any entity or person means ownership of a majority of the voting power of the entity or person.

“Applicable Rate” means:—

(a)	in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b)	in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate;
(c)	in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and
(d)	in all other cases, the Termination Rate.

“Burdened Party” has the meaning specified in Section 5(b).

“Change in Tax Law” means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into.

“consent” includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent.

“Credit Event Upon Merger” has the meaning specified in Section 5(b).

“Credit Support Document” means any agreement or instrument that is specified as such in this Agreement.

“Credit Support Provider” has the meaning specified in the Schedule.

“Default Rate” means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum.

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“Defaulting Party” has the meaning specified in Section 6(a).

“Early Termination Date” means the date determined in accordance with Section 6(a) or 6(b)(iv).

“Event of Default” has the meaning specified in Section 5(a) and, if applicable, in the Schedule.

“Illegality” has the meaning specified in Section 5(b).

“Indemnifiable Tax” means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document).

“law” includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and “lawful” and “unlawful” will be construed accordingly.

“Local Business Day” means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction.

“Loss” means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and the party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)A) applies. Loss does not include a party’s legal fees and out-of-pocket expenses referred to under Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets.

“Market Quotation” means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the “Replacement Transaction”) that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have

15 ISDA®1992

been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Sect ion 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined.

“Non-default Rate” means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount.

“Non-defaulting Party” has the meaning specified in Section 6(a).

“Office” means a branch or office of a party, which may be such party’s head or home office.

“Potential Event of Default” means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default.

“Reference Market-makers” means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city.

“Relevant Jurisdiction” means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organised, managed and controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made.

“Scheduled Payment Date” means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction.

“Set-off” means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer.

“Settlement Amount” means, with respect to a party and any Early Termination Date, the sum of:—

(a)   the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and

(b)   such party’s Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result.

“Specified Entity” has the meaning specified in the Schedule.

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“Specified Indebtedness” means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money.

“Specified Transaction” means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party of any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rte transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation.

“Stamp Tax” means any stamp, registration, documentation or similar tax.

“Tax” means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax.

“Tax Event” has the meaning specified in Section 5(b).

“Tax Event Upon Merger” has the meaning specified in Section 5(b).

“Terminated Transactions” means with respect to any Early Termination Date (a) if resulting from a Termination event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if “Automatic Early Termination” applies, immediately before that Early Termination Date).

“Termination Currency” has the meaning specified in the Schedule.

“Termination Currency Equivalent” means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the “Other Currency”), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties.

“Termination Event” means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event.

“Termination Rate” means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts.

“Unpaid Amounts” owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market

17 ISDA®1992

value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties.

IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document.

XL CAPITAL LTD.	MANGROVE BAY TRUST By: The Bank of New York (Delaware), not in its individual capacity but solely as Trustee
_________________________________	________________________________
(Name of Party)	(Name of Party)
By: /s/ Jerry de St. Paer       ___________________________________	By: /s/ Michael Santino ___________________________________
Name: Jerry de St. Paer     Title: EVP & CFO     Date: July 11, 2003	Name: Michael Santino Title: SVP Date: July 11, 2003

18 ISDA®1992

SCHEDULE to the MASTER AGREEMENT dated as of July 11, 2003 between XL CAPITAL LTD (“Party A”) and MANGROVE BAY TRUST (“Party B”)
The single Transaction to be outstanding hereunder shall be evidenced by a Confirmation of even date herewith, which Confirmation shall be in the form attached hereto as Exhibit A (the "Confirmation").
Part 1.   Termination Provisions
The provisions of Section 2(a)(iii), Section 5 and Section 6 of this Agreement are without effect.
Part 2.   Tax Provisions
(a)	Payer Tax Representations. For the purpose of Section 3(e) of this Agreement, each party makes the following representation:
	(i)	It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e) of this Agreement) to be made by it to the other party under this Agreement.
	(ii)	In making this representation, a party may rely on (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement; provided that it shall not be a breach of this representation where reliance is placed on clause (ii) above and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position.
19

(b)	Withholding Tax. Notwithstanding Section 2(d) of the Agreement, (i) all withholding taxes shall be Indemnifiable Taxes and (ii) Party B shall not be required to pay any additional amounts in respect of an Indemnifiable Tax or be under any obligation to pay any amount to Party A in respect of any liability of Party A for or on account of any Indemnifiable Tax.
Part 3.   Documents; Conditions Precedent
(a)	Tax forms, documents or certificates. For the purpose of Section 4(a)(i) of this Agreement, each party agrees to deliver the following documents upon request by the other party: Any form, document or certificate as may be requested by the other party pursuant to Section 4(a)(iii) of this Agreement.
(b)	Other Documents to be Delivered. For the purpose of Section 4(a)(ii) of this Agreement, the parties agree to deliver the Closing Documents with respect to such party as described below, promptly after execution and delivery of this Agreement, but no later than the Closing Date.
	(i)	Party A. For Party A, “Closing Documents” mean:
		(A)	Master Agreement, Schedule and Confirmation. A duly executed counterpart to this Agreement (including this Schedule) and the Confirmation, in each case duly executed by Party A.
		(B)	Secretary's Certificates.
			(a)	Party A. A copy, certified by the secretary or assistant secretary of Party A, of evidence of:
				(i)	the authorization, execution, delivery and performance by Party A of this Agreement and each of the other Basic Documents to which Party A is a party and authorizing Party A to enter into the Transaction evidenced by the Confirmation; and
				(ii)	the incumbency of the applicable signatory certifying the name and true signature of each person that is executing this Agreement or any of the other Basic Documents to which Party A is a party for Party A.
		(C)	Legal Opinions. Opinions of Party A’s counsel addressed to Party B and each of the Rating Agencies in the form of Exhibit B-1 and Exhibit B-2.
20

	(ii)	Party B. For Party B, “Closing Documents” mean:
		(A)	Master Agreement, Schedule and Confirmation. A duly executed counterpart to this Agreement (including this Schedule) and the Confirmation, in each case duly executed by Party B.
		(B)	Secretary's Certificates.
			(a)	Party B. A copy, certified by the secretary or assistant secretary of Party B, of evidence of:
				(i)	the authorization, execution, delivery and performance by Party B of this Agreement and each of the other Basic Documents to which Party B is a party and authorizing Party B to enter into the Transaction evidenced by the Confirmation; and
				(ii)	the incumbency of the applicable signatory certifying the name and true signature of each person that is executing this Agreement or any of the other Basic Documents to which Party B is a party for Party B.
		(C)	Legal Opinion. An opinion of Party B’s counsel addressed to Party A and each of the Rating Agencies in the form of Exhibit B-3 hereto.
(c)	Covered by Section 3(d) Representation. Each of the Closing Documents referred to in Part 3(b) (other than the legal opinions referred to in Part 3(b)(i)(C) and Part 3(b)(ii)(C)) shall be covered by the representations in Section 3(d) of this Agreement.
(d)	Conditions Precedent. It shall be a condition precedent to the effectiveness of this Agreement and the Transaction entered into on the Closing Date that, as of the Closing Date, each of the Closing Documents required to be delivered pursuant to subpart (a) and (b) of this Part 3 shall have been delivered.
21

Part 4.   Miscellaneous
(a)  Addresses for Notices.
To Party A:	To Party B:
XL CAPITAL LTD	MANGROVE BAY TRUST
XL House	The Bank of New York (Delaware)
One Bermudiana Road	P.O. Box 6973
Hamilton, Bermuda HM11	White Clay Center
Attention: General Counsel	Route 273
Facsimile: (441) 295-4867	Newark, Delaware 19714
Telephone: (441) 292-8515	Attention: Kristine Gullo
	Facsimile: (302) 283-8279
	with a copy to:
	The Bank of New York
	Corporate Trust - Dealing and Trading
	100 Church Street
	New York, New York 10286
	Attention: Corporate Trust - Dealing and Trading Group
	Facsimile: (212) 437-6157

(b)	Calculation Agent. “Calculation Agent” means Party A.
(c)	Process Agent. For the purpose of Section 13(c) of this Agreement:
	(i)	Party A irrevocably appoints as its Process Agent: Not Applicable.
	(ii)	Party B irrevocably appoints as its Process Agent: Not Applicable.
(d)	Offices. Section 10(a) applies.
(e)	Multibranch Party. Neither party is a Multibranch Party.

22

(f)	Credit Support Document.
	(i)	For Party A, the following is a Credit Support Document: none specified.
	(ii)	For Party B, the following is a Credit Support Document: none specified.
(g)	Credit Support Provider.
	(i)	For Party A, Credit Support Provider means: none specified.
	(ii)	For Party B, Credit Support Provider means: none specified.
(h)	Affiliate. “Affiliate” has the meaning provided in Section 14 of this Agreement.
(i)	Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j)	Jurisdiction. Section 13(b) of the Agreement is hereby deleted and replaced in its entirety with the following:
	"(b) Jurisdiction. With respect to any suit, action or proceedings relating to any dispute arising out of or in connection with this Agreement ("Proceedings"), each party irrevocably:
		(i)	agrees that it shall submit to the exclusive jurisdiction and venue of the United States District Court for the Southern District of New York;
		(ii)	agrees that, if the United States District Court for the Southern District of New York does not have jurisdiction over such Proceedings, then as of the date of this Agreement each party shall be deemed to have irrevocably submitted to the jurisdiction and venue of the courts of the State of New York located in the Borough of Manhattan, which submission shall be exclusive;
		(iii)	agrees that, if neither the United States District Court for the Southern District of New York nor the courts of the State of New York located in the Borough of Manhattan have jurisdiction over such Proceedings, then as of the date of this Agreement each party shall be deemed to have irrevocably submitted to the jurisdiction and venue of any court that has lawful jurisdiction over such Proceedings;
		(iv)	waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court set forth in clauses (i) and (ii) above, waives
23

			any objection or defense that such Proceedings have been brought in any inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have personal jurisdiction over such party; and
		(v)	agrees, to the extent permitted by applicable law, that the bringing of Proceedings in any such court set forth in clauses (i) and (ii) shall preclude the party who has commenced the Proceeding from bringing Proceedings in any other jurisdiction."
(k)	Jury Trial. Each party irrevocably waives any and all right to trial by jury with respect to any legal proceeding arising out of or relating to this Agreement.
(l)	Expenses. The provisions of Section 11 of this Agreement are without effect.
Part 5.   Other Provisions.
(a)	Inconsistency.
	(i)	In the event of any inconsistency between the provisions of this document and the Definitions regarding matters involving the terms of any Transaction, this document shall prevail.
	(ii)	In the event of any inconsistency between the provisions of (A) this Agreement (including the Definitions) and (B) the Confirmation, the terms of the Confirmation shall prevail.
(b)	Recorded Conversations. Each party may electronically record all telephone conversations between them in connection with this Agreement or any Transaction, and any such recordings may be submitted in evidence in any proceeding to establish any matters pertinent to this Agreement or any Transaction; provided, that in the event of a conflict between the terms expressed in any such conversations and the terms set forth in this Agreement and the Confirmation, this Agreement and the Confirmation shall prevail.
(c)	Business Day; Local Business Day. Notwithstanding Section 14 of this Agreement, “Business Day” or “Local Business Day” means any NYSE Business Day that is not a Saturday or Sunday or any other day on which banking institutions are authorized or required by law, regulation or executive order to close for business in New York City, London, England or Bermuda or are closed for business in New York City, London, England or Bermuda due to an act of God, natural disaster, act of war, civil or military disturbance, act of terrorism, sabotage, riot, or a loss or malfunction of utilities or communications services.
24

(d)	Additional Representations. Section 3 of this Agreement is amended by adding the following Sections 3(g), 3(h) and (3)(i):
	“(g)	Non-Reliance. For any Relevant Agreement: (i) it acts as principal and not as agent, (ii) it acknowledges that the other party acts only at arm’s length and is not its agent, broker, advisor or fiduciary in any respect, and any agency, brokerage, advisory or fiduciary services that the other party (or any of its affiliates) may otherwise provide to it (or to any of its affiliates) excludes the Relevant Agreement, (iii) it is relying solely upon its own evaluation of the Relevant Agreement (including the present and future results, consequences, risks, and benefits thereof, whether financial, accounting, tax, legal, or otherwise) and upon advice from its own professional advisors, (iv) it understands the Relevant Agreement and those risks, has determined they are appropriate for it, and willingly assumes those risks, and (v) it has not relied and will not be relying upon any evaluation or advice (including any recommendation, opinion, or representation) from the other party, its affiliates or the representatives or advisors of the other party or its affiliates (except representations expressly made in the Relevant Agreement or an opinion of counsel required thereunder).
		“Relevant Agreement” means this Agreement (including this Schedule) and the Confirmation, and any agreement (including any amendment, modification, transfer or early termination) between the parties relating thereto.
	“(h)	Eligibility. It is an “eligible contract participant” within the meaning of the Commodity Exchange Act (as amended by the Commodity Futures Modernization Act of 2000), and in addition, Party A represents that it is a “financial institution” within the meaning of the Federal Deposit Insurance Corporation Improvement Act of 1991 as supplemented by Regulation EE of the Federal Reserve Board.
(e)	Account Details. Each of Party A and Party B hereby agrees that, unless notified in writing by the Trustee of other payment instructions, with respect to all of the Transactions from time to time entered into hereunder:
25

Any and all amounts payable by Party B to Party A		Any and all amounts payable by Party A to Party B
may be directed as follows:		may be directed as follows:
Citibank NA
ABA# 021000089		The Bank of New York, NY, NY
CHIPS# 0008		(Fed ABA 021000018)
SWIFT CITIUS33		Acct: GLA 111-565 for further credit to
For further credit to:		sub-account 223-216 (Property Account)
The Bank of Bermuda Limited
CHIPS UID# 005584
SWIFT Code BBDA BMHM
Account Number:	10921671
For further credit to:
Account Name:	XL Capital Ltd
Account Number:	1510 803399

(f)	Amendment; Waiver. Notwithstanding Section 9(b) of this Agreement, no amendment, modification or waiver in respect of this Agreement or the Confirmation (including the termination of this Agreement or the Transaction represented by the Confirmation other than as provided in this Agreement or in the Confirmations) will be effective without the written agreement of both parties hereto and the ML Swap Counterparty. No waiver by one party of any obligation of the other hereunder shall be considered a waiver of any other obligation of such party.
(g)	Netting. Net amounts due and payable by either party under the Transactions hereunder may be paid on a net basis against amounts payable by either party under the Put Agreement to the extent and in the manner provided in Section 4.1 of the Put Agreement.
(h)	No Bankruptcy Petition. With respect to any amounts owed by Party B under this Agreement, Party A agrees that, prior to the date which is at least one year and one day after all of the ABC Securities and the Pass-Through Securities have been redeemed or, if longer, the applicable preference period then in effect, it will not institute against, or join any other person or entity in instituting against, Party B, the Pass-Through Trust or the Regulation 114 Trust any bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceedings, or other proceedings under federal or state bankruptcy or similar laws; provided, that nothing herein shall preclude, or be deemed to estop, Party A from:
26

	(i)	taking any action prior to the expiration of the aforementioned one-year and one-day period or, if longer, the applicable preference period then in effect in (A) any case or proceeding voluntarily filed or commenced by Party B, the Pass-Through Trust or the Regulation 114 Trust (or by the Regulation 114 Trust on its behalf) or (B) any involuntary case or insolvency proceeding filed or commenced against Party B, the Pass-Through Trust or the Regulation 114 Trust by a person other than Party A; or
	(ii)	commencing against Party B or any of its properties any legal action that is not a bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceeding.
(i)	Restriction on Merger and Assignment.
	(i)	General Restriction on Merger and Assignment. Section 7 of this Agreement shall be deleted in its entirety and replaced with the following:
		“Neither Party A nor Party B may assign its rights or obligations under this Agreement (including this Schedule) or the Confirmation to any other Person, except that Party A may assign its rights and obligations under this Agreement to another Person as a result of a merger of Party A with another Person or as a result of a sale of all or substantially all of the assets of Party A to another Person if the other Person expressly assumes all of the rights and obligations of Party A under this Agreement; and immediately following the merger or sale of all or substantially all of its assets, the rating of the substitute preferred stock or the unsecured debt obligations of the other Person by Moody's and S&P is at least as high as the credit rating of the Shares by Moody's and S&P or the senior unsecured debt obligations of Party A by Moody's and S&P, as the case may be, immediately prior to the merger or sale.”
(j)	Default Rate; Payment of Default Interest.
	(i)	Notwithstanding the definition of "Default Rate" set forth in Section 14 of this Agreement, for purposes of Section 2(e) of this Agreement, "Default Rate" shall mean, with respect to any Calculation Period, the Floating Rate determined for such Calculation Period pursuant to the related Confirmation; provided, however, that interest shall accrue with respect to any amount that remains unpaid on and after an ABC Security Payment Date (as defined in Part 9 (Floating Rate Payments by Party A) of the Standard Terms of Asset Transactions on and after such date at the Fixed ABC Security Rate or the Floating ABC Security Rate, as the case may be, that is applicable during the related Collection Period. For purposes of this clause (i):
		(A)	"Fixed ABC Security Rate" means 6.102% per annum.
27

		(B)	"Fixed Rate Period" means the period from and including the Closing Date to and including July 15, 2013 (or, if such day is not a Business Day, the next Business Day).
		(C)	"Floating ABC Security Rate" means, with respect to any Calculation Period ending during the Floating Rate Period (if applicable), the sum of:
			(a)	LIBOR, with a Designated Maturity of three months, as determined in accordance with the procedures set forth in the Standard Terms of Asset Transactions for such Calculation Period; and
			(b)	3.145%.
		(D)	"Floating Rate Period" means, unless the Final Termination Date occurs prior to July 15, 2013 or, if such day is not a Business Day, the next Business Day (in which case the Floating Rate Period shall not be applicable), the period from and including the day immediately following the last day of the Fixed Rate Period to but excluding the earlier of July 15, 2033 (or, if such day is not a Business Day, the next Business Day) and the Final Termination Date.
	(ii)	Section 2(e) of this Agreement shall be modified by deleting (A) the words "Prior to the occurrence or effective designation of an Early Termination in respect of the relevant Transaction," (B) the words "and subject to Section 6(c)" and (C) the last sentence thereof.
(k)	Limited Recourse. The obligations of Party B under this Agreement and each of the Transactions are limited recourse obligations of Party B payable solely from the assets of Party B (the “Available Amounts”). Following realization of the Available Amounts, any claims of Party A hereunder shall be extinguished and shall not thereafter revive and neither Party A nor any Person acting on its behalf shall be entitled to take any further steps against Party B to recover any sums due to Party A but still unpaid, and all claims in respect of such sums due but still unpaid shall be extinguished and shall not thereafter revive. No recourse shall be had against any officer, director, employee, stockholder or incorporator of Party B, the Grantor, the Put Counterparty, the Regulation 114 Trust or their respective successors or assigns for any amounts payable hereunder. It is understood that the foregoing provisions of this subpart (k) shall not constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Agreement or the Confirmation until such Available Amounts have been realized, whereupon any outstanding indebtedness or obligation shall be extinguished and shall not thereafter revive. It is further understood that the foregoing provisions of this subpart (k) shall not limit the right of any Person to name Party B, the Grantor, the Put Counterparty, the Regulation 114 Trust or their respective successors or assigns as a party defendant in any action or suit or in the exercise of any other remedy under this Agreement or the Confirmation, so long as no judgment in the
28

	nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against Party B, the Grantor, the Put Counterparty, the Regulation 114 Trust.
(l)	Limitation of Liability. It is expressly understood that (a) this Agreement is executed and delivered by The Bank of New York (Delaware), not individually or personally but solely as Trustee, in the exercise of the powers and authority conferred and vested in it under the ABC Declaration, (b) each of the representations, undertakings and agreements herein made on the part of ABC Trust is made and intended not as personal representations, undertakings and agreements by The Bank of New York (Delaware), but is made and intended for the purpose of binding only the Trust and (c) under no circumstances shall The Bank of New York (Delaware) be personally liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by ABC Trust under this Agreement or the other related document.
Part 6.   Definitions.
(a)	In this Agreement:
“ML Swap Arrangement” means the ISDA Master Agreement, dated as of July 11, 2003 (including the schedule thereto), between Merrill Lynch International, as Party A, ABC Trust, as Party B and, for certain limited purposes, the Grantor, and the related Credit Support Annex and Guarantee, the Standard Terms of Asset Transactions and the Confirmations from time to time representing the Transactions outstanding thereunder.
“ML Swap Counterparty” means Merrill Lynch International, as Party A under the ML Swap Arrangement.
“Put Agreement” means the Put Option Agreement, dated as of July 11, 2003, between Party A and Party B.
"Standard Terms of Asset Transactions" has the meaning set forth in the ML Swap Arrangement.
(b)	Capitalized terms used in this Agreement (including this Schedule) shall have the meaning assigned to such terms herein or:
	(i)	if not defined herein, as defined in (or incorporated by reference in) the Put Agreement; or
	(ii)	if not herein or defined in (or incorporated by reference in) the Put Agreement, as defined in the ML Swap Arrangement; and
29

	(iii)	if not herein or defined in (or incorporated by reference in) the Put Agreement or the ML Swap Arrangement, as defined in the 2000 ISDA Definitions (including its Annex) (together, the “2000 ISDA Definitions”), as published by the International Swaps and Derivatives Association, Inc.
To the extent specified above in this Part 6 (A) this Agreement (including this Schedule) will be governed by the provisions of the 2000 ISDA Definitions, to which this Agreement is subject and (B) the provisions of the Definitions are incorporated by reference in, and shall form part of, this Agreement. However, the provisions of this Agreement (exclusive of the Definitions) shall prevail in the event of any conflict between such provisions and the Definitions.
[SIGNATURE PAGE FOLLOWS]
30

     IN WITNESS WHEREOF, the parties have executed this Schedule by their duly authorized signatories as of the date hereof.

XL CAPITAL LTD

By: /s/ Jerry de St. Paer          

Name: Jerry de St. Paer

Title: Executive Vice President & Chief Financial Officer

MANGROVE BAY TRUST

By: The Bank of New York (Delaware),

   not in its individual capacity but solely

   as Trustee

By: /s/ Michael Santino            

Name: Michael Santino

Title: SVP

[Schedule to ISDA Master Agreement]

31

     EXHIBIT A

Swap Confirmation

DATE:    July 11, 2003

TO:    Mangrove Bay Trust

FROM:    XL Capital Ltd

SUBJECT:    ABC Trust

     The purpose of this letter is to confirm the terms and conditions of a transaction entered into between XL Capital Ltd, a Cayman Islands exempt limited company ("XL") and Mangrove Bay Trust, a Delaware statutory trust ("ABC Trust"), on the Trade Date as set forth below (the "Transaction"). This letter agreement constitutes the "Confirmation" as referred to in the Master Agreement specified below.

     This Confirmation supplements, forms a part of and is subject to the 1992 ISDA Master Agreement (Multicurrency - Cross Border), dated as of July 11, 2003 (the "Master Agreement") (including the Schedule thereto), between XL and ABC Trust. All provisions contained in, or incorporated by reference into, such Master Agreement shall govern this Confirmation as expressly modified below.

     Capitalized terms used in any part of this Confirmation but not defined herein shall have the meanings ascribed to them in (or incorporated by reference in) the Master Agreement (including the Schedule thereto), as provided in Part 6 of the Schedule to the Master Agreement.

The terms of the Transaction to which this Confirmation relates are as follows:

1. General Terms:
Party A:	XL.
Party B:	ABC Trust.
Trade Date:	July 11, 2003.
Effective Date:	July 11, 2003.

A-1

Termination Date:	The earliest of:
	(i)	the Voluntary Put Option Payment Date and the
		Deemed Put Option Payment Date (each, as defined
		in the Put Agreement), as the case may be,
		following which the option under the Put
		Agreement has been exercised in full;
	(ii)	the date on which the Put Agreement otherwise
		terminates; and
	(iv)	July 15, 2013 (or, if such day is not a Business Day,
		the next Business Day).
	Upon the termination of this Agreement and the outstanding
	Transactions pursuant to this Part 1, no further payments or
	deliveries shall be due hereunder, other than any Fixed
	Amounts or Floating Amounts that became due and payable
	on or prior to the Termination Date pursuant to the terms of
	this Confirmation.
Calculation Agent:	Party A.
Calculation Agent City:	New York, New York.
Business Days:	Any NYSE Business Day that is not a Saturday or Sunday
	or any other day on which banking institutions are
	authorized or required by law, regulation or executive order
	to close for business in New York City, London, England or
	Bermuda or are closed for business in New York City,
	London, England or Bermuda due to an act of God, natural
	disaster, act of war, civil or military disturbance, act of
	terrorism, sabotage, riot, or a loss or malfunction of utilities
	or communications services, or the payment due on such
	date cannot be made for any such reason.
Business Day Convention:	Following (which shall apply to any date referred to in this
	Confirmation that falls on a day that is not a Business Day
	unless otherwise specified for such date).
A-2

Notional Amount:	For any Calculation Period, the sum of the Put Option
	Premium Calculation Amount (as defined in the Put
	Agreement) for each day during such Calculation Period
	divided by the actual number of days in such Calculation
	Period.
2.  Fixed Amounts:
Fixed Rate Payer:	Party A.
Fixed Rate Payer Payment Dates:	Same as Floating Rate Payer Payment Dates (see below).
Fixed Rate Payer Period End Dates:	The 15th day of each July and January with No Adjustment.
	(This means that each Calculation Period for the Fixed
	Amounts shall have 180 days, except for the initial
	Calculation Period which shall have 184 days and the final
	Calculation Period which shall end on the Termination
	Date).
Fixed Rate:	3.93%.
Fixed Rate Day Count Fraction:	30/360 (provided, however, that, if the Termination Date
	occurs on a day other than a Fixed Rate Payer Period End
	Date, Actual/360 shall apply with respect to the final
	Calculation Period).
3.  Floating Amounts:
Floating Rate Payer:	Party B.
Floating Rate Payer Payment Dates:	(A) One Business Day before Floating Rate Payer Period
	End Dates and (B) the Termination Date.
Floating Rate Payer Period End Dates:	Each July 15 and January 15, or, if such day is not a
	Business Day, the next Business Day, from and including
	the Effective Date to and including the Termination Date.

A-3

Floating Rate Option:	USD-LIBOR-BBA.
	For purposes of this Confirmation, the definition of "USD-
	LIBOR-Reference Banks," as incorporated by reference
	into the definition of "USD-LIBOR-BBA," as set forth in
	the Annex to the 2000 ISDA Definitions, shall be modified
	by inserting the following at the end thereof:
	"Notwithstanding the foregoing, if the banks
	selected as aforesaid by Party A are not quoting
	rates as mentioned in the preceding sentence, the
	rate will be the same as the rate determined on the
	immediately preceding Reset Date (except that, in
	the case of the first Calculation Period during the
	Floating Rate Period (if applicable), the rate will be
	the same as determined on the most recent London
	Banking Day, as of which the applicable rate
	appeared on Telerate Page 3750 or such page as
	may have replaced Telerate Page 3750)."
	For purposes of the definitions of "USD-LIBOR-Reference
	Banks" and "USD-LIBOR-BBA," "London Banking Day"
	shall mean any day on which dealings in deposits in United
	States dollars are transacted in the London interbank
	market.
Designated Maturity:	Six months.
Spread:	None.
Floating Rate Day Count Fraction:	Actual/360.
Floating Rate for Initial Calculation Period:	1.12%.
Reset Dates:	The first day of each Calculation Period.

A-4

4.  Other Terms.
(a)	Interpretation. Each reference to the singular shall include the plural and vice versa.
(b)	Transfer. Neither party may transfer this Transaction or any interest in or under this Transaction except in accordance with Part5(j)(i) of the Schedule.
[SIGNATURE PAGE FOLLOWS]
A-5

Please confirm that the foregoing correctly sets forth the terms of our agreement by executing this Confirmation and returning it to us.

		Yours sincerely,
		XL CAPITAL LTD
		By: __________________________
		Name:
		Title:
Accepted and confirmed as
of the Trade Date written above:
MANGROVE BAY TRUST
By:	The Bank of New York (Delaware), not
	in its individual capacity but solely as trustee
By:	__________________________
	Name:
	Title:

[Rate Swap Confirmation]

A-6

EX-99.9

ASSIGNMENT AGREEMENT

     This Assignment Agreement (this "Agreement") is entered into as of July 11, 2003, by and among XL Re Ltd, a company organized in Bermuda (the "Assignor"), Mangrove Bay Trust, a Delaware statutory trust (the "Assignee") and, solely for purposes of acknowledging Section 1(b) of this Agreement, The Bank of New York, a banking corporation organized under the laws of New York (the "Trustee").

     WHEREAS, subject to the rights of the Ceding Insurer (as defined below) therein, the Assignor owns all of the beneficial ownership interest (the "Beneficial Interest") in that certain trust (the "Regulation 114 Trust") created in accordance with Regulation 114 of the New York Insurance Department pursuant to a trust agreement, dated as of July 11, 2003 (the "Regulation 114 Trust Agreement"), among XL Reinsurance America, Inc., a New York corporation (the "Ceding Insurer"), as beneficiary, the Assignor, as grantor, and the Trustee;

     WHEREAS, the Assignor is a party to that certain quota share reinsurance agreement, amended and restated as of April 1, 2003 (the "Reinsurance Agreement"), between the Assignor and the Ceding Insurer pursuant to which the Assignor has agreed to reinsure certain risks underwritten by the Ceding Insurer or certain of its affiliates;

     WHEREAS, Mangrove Bay Pass-Through Trust, a Delaware statutory trust (the "Pass-Through Trust"), intends to offer and sell $500,000,000 aggregate face amount of its asset backed capital commitment pass-through securities (the "Pass-Through Securities") and use the proceeds therefrom to purchase asset backed capital commitment securities issued by the Assignee (the "ABC Securities");

     WHEREAS, the Assignee plans to issue and sell $500,000,000 aggregate face amount of ABC Securities to the Pass-Through Trust and $1,000 aggregate face amount of ABC Securities to GSS Holdings II, Inc., as tax matters partner of the Assignee (the "Tax Matters Partner");

     WHEREAS, the Assignee, on behalf of the Assignor, plans to contribute to the Regulation 114 Trust the proceeds received from the issuance and sale of the ABC Securities;

     WHEREAS, pursuant to the Regulation 114 Trust Agreement and the Reinsurance Agreement, and due to the Assignor's ownership of the Beneficial Interest, subject to the rights of the Ceding Insurer, the Assignor beneficially owns the right to receive from time to time, in accordance with the terms of the Regulation 114 Trust Agreement, (i) the interest and other income, as described in Section 3.2 of the Regulation 114 Trust Agreement (the "Income"), (ii) "Assets" released from the "Trust Account" (as such terms are defined in the Regulation 114 Trust Agreement) to the grantor thereof (initially, the Assignor) or its designee in excess of the actual amount of

trust funds required, as described in Section 4.2 of the Regulation 114 Trust Agreement (the "Appreciation"), and (iii) the corpus of the Regulation 114 Trust upon termination of the Regulation 114 Trust distributable to the Grantor in accordance with the terms and conditions of the Regulation 114 Trust Agreement (the "Trust Corpus"), excluding, in the case of the foregoing clause (iii), amounts in respect of the Assignor’s unliquidated and undischarged "Obligations" (as defined in the Regulation 114 Trust Agreement) contemplated by Section 4.3(3) of the Regulation 114 Trust Agreement;

     WHEREAS, subject to Section 1 of this Agreement, the Assignor desires irrevocably and unconditionally to convey, assign, transfer and set over unto the Assignee all of its right, title and interest in and to the Income, the Appreciation and the Trust Corpus, as described in the foregoing paragraph (the right to receive such Income, Appreciation and Trust Corpus being referred to, collectively, as the "Assigned Interest"); and

     WHEREAS, the Assignee desires to accept the conveyance, assignment and transfer of the Assigned Interest.

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

     SECTION 1. Assignment.

     (a) Upon the satisfaction of the conditions set forth in Section 4 hereof and the effectiveness of this Agreement thereafter, the Assignor does hereby irrevocably and unconditionally convey, assign, transfer and set over unto the Assignee all of the Assigned Interest.

     (b) Notwithstanding any other provision of this Agreement, the Assigned Interest shall not include the Assignor's rights, as grantor of the Regulation 114 Trust, subject to the rights of the Ceding Insurer, to provide instructions to the Trustee in respect of property held by the Regulation 114 Trust, which rights shall be retained in full by the Assignor. Pursuant to the foregoing, the Assignor hereby directs the Trustee to forward to the Assignee promptly upon receipt by the Trustee all Income in respect of the Assets as provided for in the Asset Swap Arrangement (as defined below), it being acknowledged that such direction does not constitute an instruction in respect of property held by the Regulation 114 Trust and that nothing herein shall be deemed to subject the Regulation 114 Trust Agreement to any terms or conditions outside of the Regulation 114 Trust Agreement.

     SECTION 2. Acceptance. The Assignee does hereby accept the conveyance, assignment and transfer of the Assigned Interest.

     SECTION 3. Consideration. In consideration for the assignment of the Assigned Interest as set forth herein, the Assignee agrees to contribute to the Regulation 114 Trust, on behalf of the Assignor and upon completion of the offering and sale of the Pass-Through Securities and the issuance and sale of the ABC Securities to the Pass-Through Trust and the Tax Matters Partner, the gross proceeds received by the

Assignee from the issuance and sale of the ABC Securities, in immediately available funds.

     SECTION 4. Conditions to Effectiveness. This Agreement shall become effective as of the date hereof if the following conditions precedent shall have been satisfied:

     (i) the Pass-Through Trust has completed its offering and sale of the Pass-Through Securities generating gross proceeds in the amount of $500,000,000;

     (ii) the Assignee has issued and sold its ABC Securities in exchange for $500,001,000;

     (iii) the Assignee has entered into a swap arrangement with Merrill Lynch International (the "Asset Swap Counterparty"), in the form attached hereto as Annex A (the "Asset Swap Arrangement");

     (iv) the Assignee has entered into a swap arrangement with XL Capital Ltd, in the form attached hereto as Annex B; and

      (v) the Assignee has entered into a put option agreement (the "Put Agreement") with XL Capital Ltd (the "Put Counterparty"), in the form attached hereto as Annex C.

     SECTION 5. Representations and Warranties. The Assignor represents and warrants to the Assignee that, immediately prior to the execution and delivery of this Agreement, the Assignor will hold good and marketable title to the Assigned Interest and there will not exist any mortgage, pledge, hypothecation, encumbrance, lien or other charge or security interest upon the Assigned Interest, other than the rights and interests of the Ceding Insurer pursuant to the Regulation 114 Trust Agreement, and that, upon execution and delivery of this Agreement, the Assignee will have good and marketable title to the Assigned Interest and there will not exist any mortgage, pledge, hypothecation, encumbrance, lien or other charge or security interest upon the Assigned Interest, other than the rights and interests of the Ceding Insurer and Merrill Lynch International pursuant to the Regulation 114 Trust Agreement and the Asset Swap Arrangement (as such term is defined in the Declaration of Trust of the Assignee), respectively. The Assignor and the Assignee each represent and warrant to the other that (i) the execution, delivery and performance by the Assignor and the Assignee, respectively, of this Agreement has been duly authorized by all necessary corporate or trust action, respectively, on the part of the Assignor and the Assignee, respectively; and (ii) this agreement has been duly executed and delivered by the Assignor and the Assignee, respectively, and constitutes a legal, valid and binding obligation of the Assignor and the Assignee, respectively, enforceable against it in accordance with the terms hereof, subject to applicable bankruptcy, reorganization, moratorium, insolvency and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law).

     SECTION 6. Covenants. The Assignor covenants and agrees that it will take all other commercially reasonable actions necessary from time to time to effect the assignment of the Assigned Interest to the Assignee and to ensure that the Assignee receives the benefits thereof.

     SECTION 7. Governing Law. This Agreement shall be construed in accordance with, and be governed by, the laws of the State of New York.

     SECTION 8. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

     SECTION 9. Amendment. This Agreement may not be amended or modified in any respect, nor may any provision be waived, without written agreement of both parties hereto and the Asset Swap Counterparty (or any successor thereto).

     SECTION 10. Termination. This Agreement will terminate immediately following the earliest to occur of (i) the liquidation of the Assignee or (ii) the delivery of the Put Counterparty's Series C Cumulative Preference Ordinary Shares, par value U.S. $0.01 per share, to the Assignee following an exercise in full of the option granted to the Put Counterparty under the Put Agreement.

     SECTION 11. Authorization to File Financing Statements. Assignor hereby authorizes the filing of any financing statements or continuation statements, and amendments to financing statements, in any jurisdictions and with any filing offices as the Assignee may determine, in its sole discretion, are necessary or advisable to perfect the assignment pursuant to Section 1 of this Agreement. The description of the collateral set forth in such financing statement shall be substantially identical to the description set forth in Exhibit A hereto.

     SECTION 12. Limitation of Liability.

     (a) It is expressly understood and agreed by the parties hereto that (i) this Agreement is executed and delivered by The Bank of New York (Delaware), not individually or personally, but solely as trustee of the Assignee in the exercise of the powers and authority conferred and vested in it, (ii) nothing herein contained shall be construed as creating any liability on The Bank of New York (Delaware), individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any person claiming by, through or under the parties hereto and (iii) under no circumstances shall The Bank of New York (Delaware) be personally liable for the payment of any indebtedness or expenses of the Assignee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Assignee under this Agreement, except as provided for in the Assignee's Declaration of Trust as in effect on the date hereof.

     (b) It is expressly understood and agreed by the parties hereto that (i) this Agreement is executed and delivered by the Trustee, not individually or personally, but solely as trustee of the Regulation 114 Trust in the exercise of the powers and authority conferred and vested in it, (ii) nothing herein contained shall be construed as creating any liability on The Bank of New York, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any person claiming by, through or under the parties hereto and (iii) under no circumstances shall The Bank of New York be personally liable for the payment of any indebtedness or expenses of the Regulation 114 Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Regulation 114 Trust under this Agreement, except as provided for in the Regulation 114 Trust Agreement.

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

XL RE LTD

By: /s/ Paul S. Giordano

Name: Paul S. Giordano

Title: Executive Vice President, General Counsel & Secretary

MANGROVE BAY TRUST

By: The Bank of New York (Delaware), not

in its individual capacity but solely as

Trustee of the Assignee

By: /s/ Michael Santino

Name: Michael Santino

Title: SVP

Solely for the purpose of acknowledging

Section 1(b) of this Agreement,

THE BANK OF NEW YORK,

not in its individual capacity but solely as

Trustee of the Regulation 114 Trust

By: /s/ Robert W. Rich

Name: Robert W. Rich

Title: Vice President

[Assignment Agreement]

EX-99.10

ASSET PUT OPTION AGREEMENT

between

MERRILL LYNCH INTERNATIONAL

and

XL REINSURANCE AMERICA INC.

Dated as of July 11, 2003

Preamble

     This ASSET PUT OPTION AGREEMENT, dated as of July 11, 2003 (this Agreement"), is by and between Merrill Lynch International, an English corporation (the "Counterparty") and XL Reinsurance America Inc. (formerly known as NAC Reinsurance Corporation), a New York property and casualty insurance company (the "Option Holder").

Recitals

     WHEREAS, the Option Holder, as Beneficiary, XL Re Ltd, a Bermuda property and casualty reinsurer (the "Grantor"), as Grantor, and The Bank of New York, a banking association organized under the laws of New York, as Trustee (in such capacity, the "Regulation 114 Trustee") have entered into a Trust Agreement (as amended from time to time, the "Regulation 114 Trust Agreement") establishing a trust (the "Regulation 114 Trust") in compliance with Regulation 114 under the New York Insurance Laws which provides, inter alia, the Option Holder with the right to withdraw assets from the Regulation 114 Trust at any time;

     WHEREAS, the Counterparty and Mangrove Bay Trust, a Delaware statutory trust (the "ABC Trust") have entered into an ISDA Master Agreement dated as of the date hereof (as amended from time to time, together with the Schedule thereto, the "Master Agreement") and a letter agreement in the form set forth as Exhibit A-3 to the Schedule to the Master Agreement (as amended from time to time, the "Standard Terms of Asset Transactions" and, together with the Master Agreement and the related Confirmations, the "Asset Swap Arrangement"), under which the Counterparty is entitled to direct the ABC Trust to enter into swap agreements relating to certain Assets (as defined in the Asset Swap Arrangement), and to acquire, or direct the Regulation 114 Trust to acquire, such Assets; and

     WHEREAS, the Counterparty and the Option Holder desire to enter into a binding agreement pursuant to which the Option Holder will have the right to sell to the Counterparty, and the Counterparty will be obligated to purchase from the Option Holder, any Assets drawn by the Counterparty from the Regulation 114 Trust at the price set forth herein and upon the other terms and conditions agreed upon by the parties.

     NOW THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1.	Definitions; Interpretation
1.1	The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section, clause or other subdivision, and references to "Sections" refer to Sections of this Agreement except as otherwise expressly provided.

2

1.2    In this Agreement:

     "Assets" has the meaning set forth in Part 2 (General Terms of Each Asset Transaction) of the Standard Terms of Asset Transactions.

     "Asset Put Notice" means a written notice substantially in the form attached hereto as Annex A.

"Asset Swap Arrangement" has the meaning set forth in the Recitals.

     "Asset Transaction" means, with respect to any Asset, the Asset Transaction (as defined in Part 1 (Option of Party A to Enter Into Asset Transactions) of the Standard Terms of Asset Transactions) entered into with respect to such Asset.

     "Asset Transaction Confirmation" means, with respect to any Asset Transaction, the related Asset Transaction Confirmation (as defined in Part 1 (Option of Party A to Enter Into Asset Transactions) of the Standard Terms of Asset Transactions) entered into with respect to such Asset.

     "Business Day" has the meaning set forth in Part 1(f) of the Schedule to the Master Agreement.

     "Cash Settlement Amount" has the meaning set forth in Part 6 (Cash Settlement) of the Standard Terms of Asset Transactions.

     "Ceding Insurer" means XL Reinsurance America Inc., a New York insurance company.

     "Closing Date" means the date on which the Asset-Backed Capital Commitment Securities issued by the ABC Trust are issued.

     "Counterparty" has the meaning set forth in the Preamble.

     "Draw" or "Drawn" means all or a portion of any Asset (to the extent held in the Regulation 114 Trust) is drawn by the Ceding Insurer from the Regulation 114 Trust pursuant to Section 4.l of the Regulation 114 Trust Agreement or any other provision thereof (except to the extent that the Assets so drawn are paid to Party B on or prior to the Business Day following the date of such draw).

     "Final Termination Date" has the meaning set forth in Section 6(e)(i)(B) of the Standard Terms of Asset Transactions.

     "Grantor" has the meaning set forth in the Recitals.

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     "Market Value" has the meaning set forth in Part 8 (Valuation) of the Standard Terms of Asset Transactions.

     "Master Agreement" has the meaning set forth in the Recitals.

     "Put Option" has the meaning set forth in Section 2.1.

     "Put Option ExerciseDate" has the meaning set forth in Section 3.2(b).

     "Put Option Price" means, with respect to any Asset (or portion thereof) that is Drawn for which the Put Option is exercised pursuant to Section 3.1 and Section 3.2, an amount equal to the Market Value of such Asset (or portion thereof) as of the date on which such Draw occurs (as determined by the Calculation Agent in accordance with the procedures set forth in Part 8 (Valuation) of the Standard Terms of Asset Transactions, excluding, however, any portion of such Market Value that was attributable to accrued interest.

     "Regulation 114 Trust" has the meaning set forth in the Recitals.

     "Regulation 114 Trustee" has the meaning set forth in the Recitals.

     "Regulation 114 Trust Agreement" has the meaning set forth in the Recitals.

     "S&P" means Standard & Poor's Ratings Services, a Division of the McGraw-Hill Companies, Inc., or any successor thereto.

     "Standard Terms of Asset Transactions" has the meaning set forth in the Asset Swap Arrangement.

	In this Agreement, any reference to a "company" shall be construed so as to include any corporation, trust, partnership, limited liability company or other legal entity, wheresoever incorporated or established.
1.3	In this Agreement, save where the contrary is indicated, any reference to:
	(a)	this Agreement or any other agreement or document shall be construed as a
		reference to this Agreement or, as the case may be, such other agreement or
		document as the same may have been, or may from time to time be, amended,
		varied, novated or supplemented in accordance with its terms; and
	(b)	a statute shall be construed as a reference to such statute as the same may have
		been, or may from time to time be, amended or re-enacted.

4

1.4	In this Agreement, any definition shall be equally applicable to both the singular and
	plural forms of the defined terms.
1.5	Capitalized terms used but not defined in this Agreement shall have the meanings
	assigned to such terms in (or incorporated by reference into) the Master Agreement or, if
	not defined or incorporated by reference therein, as defined in the Standard Terms of
	Asset Transactions.

2. Put Option; Term

2.1	In consideration for the parties' entering into the Asset Swap Arrangement and other good
	and valuable consideration the receipt of which is hereby acknowledged, the Counterparty
	hereby grants to the Option Holder the right to require the Counterparty to purchase any
	or all of the Assets Drawn by the Option Holder on the terms set forth in this Agreement.
	Such right is referred to herein as the "Put Option."
2.2	This Agreement shall become effective on the Closing Date and shall remain in effect
	until the later of (i) the Final Termination Date and (ii) the date on which all of the
	obligations of the parties to the Asset Swap Arrangement have been satisfied.

3. Exercise of Put Option

3.1	The Counterparty agrees that it shall, upon exercise of the Put Option with respect to any
	Asset as provided in Section 3.2, purchase such Asset from the Option Holder for a
	purchase price equal to the Put Option Price.
3.2	(a)	Procedure for Exercise. The Counterparty may, at any time after the date hereof
		and prior to the termination of this Agreement, exercise the Put Option by
		providing an Asset Put Notice to the Counterparty.
	(b)	Time for Exercise. As a condition to the exercise of the Put Option with respect
		to any Asset, the Option Holder shall deliver to the Counterparty an Asset Put
		Notice with respect to such exercise, on or prior to the second Business Day
		following the date that such Asset is Drawn by the Option Holder. The exercise
		date (the "Put Option Exercise Date") of the Put Option with respect to each
		Asset shall be the Business Day following the date on which the Asset Put Notice
		has been delivered. For purposes of this Section 3.2(b), the date on which an
		Asset is "Drawn" shall refer to the date on which the applicable Asset is credited
		to the account of the Option Holder or otherwise is received by the Option Holder.
	(c)	Notice of Exercise Irrevocable. Any notice of exercise provided pursuant to
		Section 3.2(a) shall be irrevocable.

5

3.3	Put Option Price. If the Put Option is exercised pursuant to Section 3.2(a) with respect to
	any Asset then, on the Put Option Exercise Date, the Counterparty shall deliver to the
	Option Holder cash in immediately available funds in an amount equal to the Put Option
	Price with respect to such Asset to the account specified by the Option Holder in the
	related Asset Put Notice against delivery of the Asset.
3.4	Delivery of Asset in Event of Failure to Purchase. In the event that the Counterparty fails
	to purchase an Asset in accordance with this Section 3, the Ceding Insurer shall deliver
	such Asset to the Counterparty or the Guarantor when, as and if required pursuant to Part
	7 (Procedures Upon Failure to Purchase Drawn Asset Under Asset Put Option
	Agreement) of the Standard Terms of Asset Transactions.
4.	Obligations Absolute
4.1	Each of the Counterparty and the Option Holder acknowledges that, provided the other
	party has complied with the terms of this Agreement, the obligations of the Counterparty
	and the Option Holder, as the case may be, undertaken under this Agreement are absolute,
	irrevocable and unconditional irrespective of any circumstances whatsoever, including
	any defense otherwise available to the Counterparty or the Option Holder, respectively, in
	equity or at law, including, without limitation, the defense of fraud, any defense based on
	the failure of the Counterparty or the Option Holder to disclose any matter, whether or not
	material, to the Counterparty or the Option Holder, respectively, or any other person, and
	any defense of breach of warranty or misrepresentation, and irrespective of any other
	circumstance which might otherwise constitute a legal or equitable discharge or defense
	of an insurer, surety or guarantor under any and all circumstances. For the avoidance of
	doubt, the right of the Option Holder to exercise the Put Option shall not be limited by,
	and shall be without regard to, the compliance or non-compliance of the Option Holder
	and the Counterparty with the representations and warranties set forth in Section 6,
	whether on the Closing Date or at any time thereafter. Notwithstanding any other part of
	this Section 4.1, neither the Option Holder nor the Counterparty shall have any further
	obligations under this Agreement after the termination of this Agreement. In addition, the
	breach of any covenant made in this Agreement by the Option Holder shall not terminate
	this Agreement or limit the rights of the Counterparty hereunder.
4.2	For the avoidance of doubt, no failure or delay by the Counterparty or Option Holder in
	exercising its rights hereunder shall operate as a waiver of its rights hereunder (except as
	specifically provided in this Agreement, including, without limitation, in respect of the
	notice periods and payment dates set forth in Section 3.2) and, subject to the termination
	of this Agreement not having occurred, the Counterparty and Option Holder may continue
	to exercise their rights hereunder at any time.
5.	This Agreement to Govern

6

	If there is any inconsistency between any provision of this Agreement and any other
	agreement, the provisions of this Agreement shall prevail to the extent of such
	inconsistency but not otherwise.
6.	Representations and Warranties
6.1	The Counterparty hereby repeats, for the benefit of the Option Holder, each of the
	representations and warranties made pursuant to Section 3 of the Master Agreement (as
	modified by the Schedule thereto); provided, that each reference to "this Agreement" in
	such Section 3 shall be deemed to refer also to this Agreement.

7.	Severability
7.1	Any provision of this Agreement which is or becomes illegal, invalid or unenforceable in
	any jurisdiction may be severed from the other provisions of this Agreement without
	invalidating the remaining provisions hereof, and any such illegality, invalidity or
	unenforceability shall not invalidate or render illegal or unenforceable such provision in
	any other jurisdiction.

8.	Notices
8.1	Unless otherwise specifically provided herein, every notice required or permitted to be
	given under this Agreement shall be given or made under the terms hereof shall be in
	writing and shall be deemed to have been duly given or made (a)(i) when delivered
	personally, (ii) when made or given by prepaid telex, telegraph, telecopier, facsimile or
	electronic media, or (iii) in the case of mail delivery, upon the expiration of three days
	after any such notice, direction, request, demand, acknowledgment or other
	communication shall have been deposited in the United States mail for transmission by
	first class mail, postage prepaid, or upon receipt thereof, whichever shall first occur and
	(b) when addressed as follows:
	If to the Counterparty at:
		Merrill Lynch International
		Telephone: (212) 449-5967
		Telecopy: (212) 449-1235
		Attention: Marc Zindle, Swaps Group
		with copies to:
		Alan Levy, Finance Department
		Telecopy: (212) 738-1033

7

		GMI Counsel
		Merrill Lynch World Headquarters
		4 World Financial Center, 12th Floor
		New York, NY 10080
		Attention: Swaps Legal
		Telecopy: 212-449-6993
	If to the Option Holder at:
		XL REINSURANCE AMERICA INC.
		Seaview House
		70 Seaview Avenue
		Stamford, CT 06902-6040
		Attention: General Counsel
		Fax: (203) 964-9857
9.	Counterparts
	This Agreement may be executed in any number of counterparts and by the different
	parties hereto on separate counterparts each of which when executed and delivered shall
	constitute an original, but all the counterparts shall together constitute but one and the
	same instrument.
10.	Amendment and Assignment
10.1	This Agreement may not be amended or modified in any respect, nor may any provision
	be waived, without the written agreement of both parties hereto. No waiver by one party
	of any obligation of the other hereunder shall be considered a waiver of any other
	obligation of such party.
10.2	Whenever in this Agreement any of the parties hereto is named or referred to, the
	successors and assigns of such party shall be deemed to be included, and all covenants
	and agreements in this Agreement by the parties hereto shall bind and inure to the benefit
	of their respective successors and assigns, whether so expressed. Notwithstanding the
	foregoing, neither this Agreement nor any interest or obligation hereunder may be
	assigned by any party hereto, except that the Counterparty may assign its rights and
	obligations under this Agreement (in whole and not in part) in connection with an
	assignment of its rights and obligations (in whole and not in part) under the Asset Swap
	Arrangement pursuant to and in accordance with Part 5(i) of the Schedule to the Master
	Agreement.

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11.	Governing Law
11.1	THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
	ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
12.	Jurisdiction
12.1	Section 13(b) of the Master Agreement (as modified by Part 4(j) of the Schedule) hereby
	is incorporated mutatis mutandis into this Agreement.

[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed as a deed on the day and year first above written.

MERRILL LYNCH INTERNATIONAL

By: /s/ Hamish Pritchard

Name: Hamish Pritchard

Title: Authorized Signatory

XL REINSURANCE AMERICA INC.

By: /s/ Martha G. Bannerman

Name: Martha G. Bannerman

Title: General Counsel & Secretary

[Asset Put Option Agreement]

EX-99.11

XL Capital Ltd
Annex to Minutes of a Meeting of the Special Finance Committee
of the Board of Directors and Resolutions

5.3 Series C Preference Ordinary Shares

RESOLVED that, a class of Ordinary Shares in the capital of the Company be designated as “Series C Preference Ordinary Shares” and that they be issued on a Voluntary Exercise or a Deemed Exercise on the terms of and in accordance with the Put Option Agreement. The Series C Preference Ordinary Shares to be issued would have on the date the Transaction was closed (the “Closing Date”) an aggregate liquidation preference equal to up to US$500,000,000 (the “Aggregate Available Liquidation Preference”). The Series C Preference Ordinary Shares shall be cumulative preference ordinary shares with a nominal par value of US$0.01 per share and, subject to the Articles and the provisions of and restrictions contained in the Companies Law (2003 Revision) and every statutory modification or re-enactment thereof for the time being in force (the “Law”), shall have the following preferences and rights and shall be subject to the following restrictions:

(a) Liquidation Preference.

On any voluntary or involuntary return of assets on liquidation, dissolution, winding-up or otherwise of the Company, the assets of the Company legally available for distribution among shareholders shall be applied first in repaying to the holders of the Series C Preference Ordinary Shares (the “Holders”) an amount equal to US$25.00 per Series C Preference Ordinary Share (inclusive of the nominal amount thereof) plus all accrued and unpaid dividends (whether or not earned or declared), if any, to the date fixed for distribution, in preference to the repayment of such nominal amount of and any share premium or other amounts paid on Class A Ordinary Shares and the Class B Ordinary Shares (together, the “Ordinary Shares”) or any other shares ranking junior in right of payment to the Series C Preference Ordinary Shares as to the voluntary or involuntary return of assets on liquidation, dissolution, winding-up or otherwise of the Company or as to dividends (including the Ordinary Shares, the “Junior Shares”) to the holders of such Junior Shares, without interest on such unpaid dividends. In the event that upon any such voluntary or involuntary return of assets on liquidation, dissolution, winding-up or otherwise, the assets of the Company available are insufficient to pay the amount of the liquidation distributions on all outstanding Series C Preference Ordinary Shares as referred to above and the corresponding amounts payable on all other shares ranking pari passu with the Series C Preference Ordinary Shares with respect to the payment of dividends and amounts upon any voluntary or involuntary return of assets on liquidation, dissolution, winding-up or otherwise of the Company (including, without limitation, the Series A Preference Ordinary Shares and the Series B Preference Ordinary Shares) (“Parity Shares”), then the Holders of the Series C Preference Ordinary Shares and all such Parity Shares shall share ratably in such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. The Series C Preference Ordinary

1 

Shares shall not be convertible into or exchangeable for any other shares of the Company. For purposes of this Section 5.3(a), a consolidation, merger, arrangement or reconstruction involving the Company or the sale or transfer of all or substantially all of the shares or property or business of the Company will not be deemed to constitute a liquidation, dissolution or winding-up.

(b) Dividend Rights.

(i)

During the Fixed Rate Period, Holders of the Series C Preference Ordinary Shares, if any, will be entitled to receive, when, and if declared by the Board of Directors, cumulative preferential cash dividends at a rate per annum of 6.102%. During the Floating Rate Period and thereafter if any Series C Preference Shares remain outstanding, Holders of the Series C Preference Ordinary Shares will be entitled to receive, when, as and if declared by the Board of Directors, cumulative preferential cash dividends at a rate per annum equal to LIBOR for the applicable dividend period plus 3.145%. "LIBOR" means the London Interbank Offered Rate for U.S. dollar deposits for each dividend period as determined by the Company, as calculation agent, as follows:

On or as of the second London banking day prior to each dividend payment date with respect to a dividend period ending during the Floating Rate Period and thereafter if any Series C Preference Shares remain outstanding, the Company will obtain the rate for deposits in U.S. dollars for three months commencing on such dividend payment date, which appears on the Telerate Page 3750, or such page as may have replaced Telerate Page 3750, as of 11:00 a.m., London time, on such date, which will be the LIBOR rate for such dividend period. "London banking day" means any day on which dealings in deposits in United States dollars are transacted in the London interbank market. If the Company determines that Telerate Page 3750 or such page as may replace Telerate Page 3750 is not available on such date, the Company will request the principal London offices of each of four major banks in the London interbank market selected by the Company to provide the Company with its offered quotations for deposits in U.S. dollars for a period of three months commencing on such dividend payment date, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on such date and in a principal amount of not less than US$1,000,000 that is representative of a single transaction in such market at such time. If at least two such quotations are provided, LIBOR for such dividend period will be the arithmetic mean of such quotations. If fewer than two such quotations are provided, LIBOR for such dividend period

2

will be the arithmetic mean of rates quoted by three major banks in The City of New York selected by the Company at approximately 11:00 a.m., New York City time, on such date for loans in U.S. dollars to leading European banks, for a period of three months commencing on such dividend payment date, and in a principal amount of not less than US$1,000,000 that is representative of a single transaction in such market at such time; provided, however, that if the banks selected as aforesaid by the Company are not quoting rates as mentioned in this sentence, LIBOR for such dividend period will be the same as LIBOR for the immediately preceding dividend period (except that, in the case of the first dividend period during the Floating Rate Period, LIBOR will be the same as determined on the most recent London banking day, as of which the applicable rate appeared on Telerate Page 3750 or such page as may have replaced Telerate Page 3750).

The dividend rates applicable during the Fixed Rate Period and the Floating Rate Period are referred to collectively as the “Dividend Rate.”Dividends on the Series C Preference Ordinary Shares will begin to accrue and will be cumulative from the date of original issuance of such shares. Dividends will be payable semi-annually, during the Fixed Rate Period, and quarterly, during the Floating Rate Period and thereafter if any Series C Preference Shares remain outstanding, in each case when, as and if declared by the Put Counterparty's Board of Directors, in arrears, on January 15 and July 15 (or if such date is not a Business Day, on the Business Day immediately after such date), during the Fixed Rate Period, and on January 15, April 15, July 15, and October 15 (or if such date is not a Business Day, on the Business Day immediately after such date), during the Floating Rate Period and thereafter if any Series C Preference Shares remain outstanding, of each year. The first dividend will represent the period of time from and will accrue from and including the date of original issuance to but excluding the following dividend payment date, calculated as described below.

Subject to the next paragraph, with respect to each dividend payment date occurring during the Fixed Rate Period, the amount of the dividend that is to be paid to the Holder of each Series C Preference Ordinary Share with respect to the related dividend period will be calculated as follows: the product of (i) 6.102%, (ii) US$25 and (iii) a fraction, (A) the numerator of which will be 180 (or, in the case of a partial dividend period, the actual number of days elapsed in such dividend period), and (B) the denominator of which will be 360.

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However, if all or a portion of the Series C Preference Ordinary Shares are issued during the Fixed Rate Period, unless such shares are issued on a dividend payment date, the amount of the dividend that is to be paid to the Holder of each Series C Preference Ordinary Share with respect to the dividend period during which the Series C Preference Ordinary Shares are so issued will be calculated as follows: the product of (i) 6.102%, (ii) a fraction, (x) the numerator of which is the product of (1) the number of days during which such share is outstanding during such dividend period and (2) US$25 and (y) the denominator of which is the total number of days in such dividend period and (iii) a fraction (x) the numerator of which will be 180 and (y) the denominator of which will be 360.

Each dividend period during the Fixed Rate Period will commence on and include each January 15 and July 15 (whether or not a Business Day) and will end on and exclude the first day of the next dividend period (whether or not a Business Day).

Subject to the next paragraph, during the Floating Rate Period and thereafter if any Series C Preference Shares remain outstanding, the amount of the dividend that is to be paid to the Holder of each Series C Preference Ordinary Shares with respect to each dividend period will be calculated as follows: the product of (i) LIBOR for such dividend period plus 3.145%, (ii) US$25 and (iii) a fraction, (A) the numerator of which will be the actual number of days in the dividend period, and (B) the denominator of which will be 360.

However, if all or a portion of the Series C Preference Ordinary Shares are issued during the Floating Rate Period, unless such shares are issued on a dividend payment date, the amount of the dividend that is to be paid to the Holder of each Series C Preference Ordinary Share with respect to the dividend period during which the Series C Preference Ordinary Shares are so issued will be calculated as follows: the product of (i) LIBOR for such dividend period plus 3.145%, (ii) a fraction, (x) the numerator of which is the product of (1) the number of days during which such share is outstanding during such dividend period and (2) US$25 and (y) the denominator of which is the total number of days in such dividend period and (iii) a fraction, (A) the numerator of which will be the actual number of days in the dividend period, and (B) the denominator of which will be 360.

4

Each dividend period during the Floating Rate Period and thereafter if any Series C Preference Shares remain outstanding will commence on and include the dividend payment date for the preceding period and end on and exclude the then-current dividend payment date. Notwithstanding the foregoing, if the Series C Preference Ordinary Shares are issued on a date that is not a dividend payment date, the first dividend period will begin on and include the date on which the Series C Preference Ordinary Shares are issued and will end on and exclude the date on which the Series C Preference Ordinary Shares are redeemed. Dividends will be payable to Holders of record as they appear in the Company’s register of members at the close of business on the applicable record date, which will be one day prior to the dividend payment date as long as all of the Series C Preference Ordinary Shares remain in book-entry form. If any of the Series C Preference Ordinary Shares are not in book-entry form, the record date will be 15 days prior to the dividend payment date (whether or not such date is a Business Day). Holders of Series C Preference Ordinary Shares will not be entitled to any dividends in excess of full cumulative dividends as described above. Dividends on the Series C Preference Ordinary Shares will accrue and will be fully cumulative, whether or not there are funds legally available for the payment of such dividends and whether or not the dividends are declared. No interest or sum of money in lieu of interest will be payable on any dividend payment or on any payment on Series C Preference Ordinary Shares which is in arrears. Any dividend payment made on Series C Preference Ordinary Shares will first be credited against the earliest accrued but unpaid dividend due with respect to Series C Preference Ordinary Shares which remains payable. "Business Day" means any day on which the New York Stock Exchange is open for trading and which is not a Saturday, Sunday or any other day on which banks in New York, New York, London, England or Bermuda are authorized or obligated by law, regulation or executive order to close for business or are closed for business due to an act of God, natural disaster, act of war, civil or military disturbance, act of terrorism, sabotage, riots or a loss or malfunction of utilities or communications services or the distribution payable on such date cannot be paid for any such reason.

(ii)

As long as any Series C Preference Ordinary Shares are outstanding, no dividends or other distributions may be declared or paid or set apart for payment on any class or

5 

		series of Parity Shares for any period unless either (1) full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payments on the Series C Preference Ordinary Shares for all dividend periods terminating on or prior to the dividend payment date on such Parity Shares, or (2) all dividends declared upon the Series C Preference Ordinary Shares and any Parity Shares are declared pro rata so that the amount of dividends declared per share on the Series C Preference Ordinary Shares and any Parity Shares will in all cases bear to each other the same ratio that accrued and unpaid dividends per share on the Series C Preference Ordinary Shares and such Parity Shares bear to each other.
	(iii)	As long as any Series C Preference Ordinary Shares are outstanding (1) no dividends (other than those paid in Ordinary Shares or other shares ranking junior in right of payment to the Series C Preference Ordinary Shares as to dividends and as to any voluntary or involuntary return of assets on liquidation, dissolution, winding-up or otherwise of the Company (including the Ordinary Shares, “Fully Junior Shares”), may be declared or paid or set apart for payment upon any Junior Shares, (2) no other distribution (other than those paid in Fully Junior Shares) may be declared or paid or set apart for payment upon any Junior Shares and (3) no Junior Shares will be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Ordinary Shares made for purposes of any employee incentive, stock, benefit or any similar plan of the Company or any of its subsidiaries) for any consideration (or any moneys be paid to or made available for a sinking fund or the redemption of any Junior Shares) by the Company (except by conversion into or exchange for Fully Junior Shares), unless, in any such case, full cumulative dividends on the Series C Preference Ordinary Shares and any Parity Shares have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof set apart for payment, for all dividend periods terminating on or prior to the date such dividends or distributions are declared or paid on the Junior Shares, or such Junior Shares are redeemed, purchased or otherwise acquired.
(c)	Voting Rights.
	(i)	Subject to paragraphs (ii) and (iii) below, and unless required by law or court order, the Holders shall not be entitled to receive notice of nor to attend nor to vote at any general meeting of the Company.

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(ii)

Subsequent to the issuance of the Series C Preference Ordinary Shares, the Holders shall be entitled to one vote for each share held at any separate general meeting of that class or series (i.e., preference ordinary shares or Series C Preference Ordinary Shares, respectively), subject to the provisions of Article 41 of the Articles. Subject to the applicable provisions of the Articles and the Law, unless the Series C Preference Ordinary Shares have been previously redeemed or called for redemption (and funds necessary for such redemption have been set apart by the Company in trust for the benefit of the Series C Preference Ordinary Shares so called for redemption), the Company may not take any action which would vary the rights attached to the Series C Preference Ordinary Shares and no class or series of shares may be created which ranks senior to the Series C Preference Ordinary Shares as to dividend rights or as to the return of assets on liquidation, dissolution, winding-up or otherwise of the Company, in each case, without the approval of a special resolution in writing by the Holders of 100% of the Series C Preference Ordinary Shares or the sanction of a special resolution passed by the votes of at least two-thirds of the outstanding Series C Preference Ordinary Shares cast at a separate general meeting of the Holders. At every separate meeting of the Holders, the necessary quorum shall be any one or more persons present in person or by proxy holding not less than 50% of the issued shares of that class. Notwithstanding the foregoing and subject to the applicable provisions of the Articles and the Law, Holders are not entitled to vote on any sale of all or substantially all of the assets of the Company, and the issuance of any shares that are in parity with the Series C Preference Ordinary Shares with respect to payment of dividends and distribution of assets in liquidation.

(iii)

If at any time dividends payable on the Series C Preference Ordinary Shares shall be in arrears (whether or not such dividends shall have been earned or declared) in an aggregate amount equivalent to dividends for six or more full quarterly periods, which, during the Fixed Rate Period, shall mean three or more dividend periods and, during the Floating Rate Period and thereafter if any Series C Preference Shares remain outstanding, shall mean six or more dividend periods (in each case, whether or not consecutive), then during such period until all such arrearages in dividends shall have been paid in full, and only during such period (the “Voting Period”), the Holders of the Series C Preference Ordinary Shares voting together with any other series or classes of preference ordinary shares also in arrears and having such right shall be entitled by ordinary resolution at a separate meeting of such Holders to elect two

7

persons and nominate such elected persons for appointment by the Board of Directors as additional Directors of the Company. In no event shall there be more than two Directors elected by the holders of the preference ordinary shares (whether voting alone as a series or class or with another series or class so in arrears and having such right). Dividends on the Series C Preference Ordinary Shares may not be deemed due and payable and in arrears for any reason unless and until Series C Preference Ordinary Shares are issued and outstanding and such an arrearage shall thereafter have occurred.

(iv)

Any Director who shall have been elected pursuant to paragraph 5.3(c)(iii) above may be removed at any time during a Voting Period, either for or without cause, by, and only by, ordinary resolution of the holders of the outstanding preference ordinary shares of the relevant series at a special separate general meeting of such holders called for that purpose. Any vacancy thereby created may be filled during such Voting Period by ordinary resolution of the holders of preference ordinary shares of all relevant series at such a meeting. Any Director elected by holders of preference ordinary shares pursuant to this provision, or by any Director so elected as herein contemplated, who dies, resigns or otherwise ceases to be a Director during a Voting Period shall, except as otherwise provided in the preceding sentence, be replaced by the remaining Director theretofore elected by the holders of preference ordinary shares nominating a replacement for appointment by the Board of Directors, provided that if no remaining additional Director is then in office, additional Directors will be elected in accordance with the procedures described above. At the end of the Voting Period, the holders of preference ordinary shares of all the relevant series shall be automatically divested of all voting powers vested in them by the provision, but subject always to subsequent vesting of such voting power in the holders of preference ordinary shares in the event of any similar cumulated arrearage in payment of quarterly dividends occurring thereafter. The term of all Directors elected and appointed pursuant to this provision shall in all events expire at the end of the applicable Voting Period and if the size of the Board was increased for the purpose of the additional Directors, the number of Directors constituting the Board shall be reduced accordingly. The provisions of the Articles relating to general meetings and the provisions of Article 41 of the Articles shall apply, mutatis mutandis, to every such separate meeting, except that the necessary quorum shall be any one or more persons present in person or by proxy holding not less than fifty

8 

		percent (50%) of the issued preference ordinary shares of the relevant series.
(d)	Redemption.
	The Company shall be entitled to redeem all or any of the Series C Preference Ordinary Shares as follows:
	(i)	Subject to Section 5.3(i) and paragraphs (ii), (iii), (iv) and (vi) below, the Series C Preference Ordinary Shares shall not be redeemable by the Company prior to July 15, 2013. On or after such date, but subject to paragraph (v), below, the Company shall be entitled at any time in whole or from time to time in part by not less than thirty (30) days nor more than sixty (60) days’ prior written notice to the relevant Holders, in such form and given in such manner as the Directors shall from time to time determine and in accordance with paragraph (e) below, to redeem all or any of the Series C Preference Ordinary Shares pursuant to this paragraph for cash at a redemption price of US$25.00 per share being redeemed (inclusive of the nominal value thereof) plus all accrued and unpaid dividends, if any, thereon to the date of redemption, without interest on such unpaid dividends.
	(ii)	Redemption on Merger. At any time prior to July 15, 2013, and provided that at such time, some or all of the Series C Preference Ordinary Shares are outstanding, if the Company shall have submitted to the holders of Ordinary Shares a proposal for an amalgamation, consolidation, merger, arrangement, reconstruction, reincorporation, deregistration or any other similar transaction involving the Company that requires, or shall have submitted any proposal for any matter that, as a result of any change in Cayman Islands law after the date of the final Offering Memorandum (whether by enactment or official interpretation), requires, in each case, a vote of the Holders of the Series C Preference Ordinary Shares voting separately as a single class (alone or with one or more class or series of preference ordinary shares, including, without limitation, the Company’s Series A Preference Ordinary Shares and Series B Preference Ordinary Shares), the Company shall be entitled by not less than thirty (30) days nor more than sixty (60) days prior written notice to the relevant Holders, in such form and given in such manner as the Directors shall from time to time determine and in accordance with paragraph (e) below, to redeem all Series C Preference Ordinary Shares pursuant to this paragraph for cash at a redemption price of US$26.00 per share being redeemed (inclusive of the nominal value thereof), plus all accrued and unpaid dividends, if any, to the

9 

	date of redemption, without interest on such unpaid dividends.
(iii)	Redemption on Tax Event. If there is a “change in tax law” that would require the Company or any successor company to pay additional amounts with respect to any then issued and outstanding Series C Preference Ordinary Shares on the next succeeding dividend payment date, and the payment of those additional amounts cannot be avoided by the use of any reasonable measures available to the Company or any successor company, the Company shall be entitled at any time thereafter by not less than thirty (30) days nor more than sixty (60) days prior written notice to the relevant Holders, in such form and given in such manner as the Directors shall from time to time determine and in accordance with paragraph (e) below, to redeem any or all Series C Preference Ordinary Shares pursuant to this paragraph for cash at a redemption price of US$25.00 per share being redeemed (inclusive of the nominal value thereof) plus accrued and unpaid dividends, if any, to the date of redemption, without interest on such unpaid dividends.
	For the purpose of this provision a “change in tax law” shall be (a) a change in or amendment to laws, regulations or rulings of any jurisdiction, political subdivision or taxing authority described in the next sentence, (b) a change in the official application or interpretation of those laws, regulations or rulings, or (c) any execution of or amendment to any treaty affecting taxation to which any jurisdiction, political subdivision or taxing authority described in the next sentence is party after the date of the final Offering Memorandum. The jurisdictions, political subdivisions and taxing authorities referred to in the previous sentence are (a) the Cayman Islands or any political subdivision or governmental authority of or in the Cayman Islands with the power to tax, (b) any jurisdiction from or through which the Company or its paying agent is making payments on the Series C Preference Ordinary Shares or any political subdivision or governmental authority of or in that jurisdiction with the power to tax, or (c) any other jurisdiction in which the Company or its successor company is organized or generally subject to taxation or any political subdivision or governmental authority of or in that jurisdiction with the power to tax.
(iv)	Tax Event on Consolidation. If the entity formed by a consolidation, merger or amalgamation involving the Company or the entity to which the Company conveys,

10 

	transfers or leases substantially all of its properties and assets is required to pay additional amounts in respect of any tax, assessment or governmental charge imposed on any Holder as a result of a change in tax law that occurred after the date of the consolidation, merger, amalgamation, conveyance, transfer or lease, and the payment of those amounts cannot be avoided by the use of any reasonable measures available to the Company or any successor company, the Company shall be entitled to at any time thereafter by not less than thirty (30) days nor more than sixty (60) days prior written notice to the relevant Holders, in such form and given in such manner as the Directors shall from time to time determine and in accordance with paragraph (e) below to redeem any or all Series C Preference Ordinary Shares outstanding at such time, if any pursuant to this paragraph for cash at a redemption price of US$25.00 per share being redeemed, (inclusive of the nominal value thereof), plus all accrued and unpaid dividends, if any, to the date of redemption.
The Company shall be required to redeem all or any of the Series C Preference Ordinary Shares as follows:
(v)	Redemption at Option of Holder.Each Holder of Series C Preference Ordinary Shares will have the right to have all or a portion of its Series C Preference Ordinary Shares redeemed by the Company during the period from and including July 15, 2033 to but excluding the 45th day thereafter (or, if such 45th day is not a Business Day, the next Business Day) at a redemption price of US$25 per share being redeemed (inclusive of the nominal value thereof) plus accrued and unpaid dividends, if any. During this 45-day period, the Company will not have the option to redeem any Series C Preference Ordinary Shares in accordance with subparagraph (i) above. In the event that the Series C Preference Ordinary Shares are not redeemable at any time during such 45-day period due to paragraph 5.3(i) below, such 45-day period shall begin anew on the first day on which such shares are redeemable.
(vi)	Redemption on Breach of Covenant. If the Series C Preference Ordinary Shares are issued as a result of both (i) the failure of the Company to obtain the consent of the ABC Trust, acting at the direction of the holders of a majority in face amount of the ABC Securities actually voting on such matter, to an amendment to the Company's Memorandum of Association, Articles of Association or these resolutions providing for the terms and preferences of the Series C Preference Ordinary Shares in a manner that would

11

		adversely affect the rights of Holders of the Series C Preference Ordinary Shares and (ii) the assets not being released from the Regulation 114 Trust thereafter, upon a liquidation of the ABC Trust, the ABC Trust, acting at the direction of the holders of the ABC Securities, will have the right to have the Series C Preference Ordinary Shares redeemed by the Company for cash at a redemption price of US$26.00 per share being redeemed (inclusive of the nominal value thereof) plus all accrued and unpaid dividends, if any, thereon to the date of redemption, without interest on such unpaid dividends
(e)	Notices of Redemption. Notice of any redemption at the option of the Company described herein will be mailed at least thirty (30) days but not more than sixty (60) days before the redemption date to each Holder of record of Series C Preference Ordinary Shares to be redeemed at the address shown in the register of members of the Company. Each notice will state as appropriate: (1) the redemption date; (2) the number of Series C Preference Ordinary Shares to be redeemed; (3) the redemption price; (4) the place or places where certificates for Series C Preference Ordinary Shares are to be surrendered for payment of the redemption price if any such certificates are outstanding; and (5) where applicable, that dividends on the Series C Preference Ordinary Shares to be redeemed will cease to accrue on such redemption date. If fewer than all Series C Preference Ordinary Shares are to be redeemed, the notice mailed to each such Holder thereof will also specify the number of Series C Preference Ordinary Shares to be redeemed from such Holder. The notice shall contain (i) the name and address of the relevant bank or trust company to be used for purposes of redemption (if any) and (ii) a statement as to the deposit or intent to deposit the redemption funds in such trust account. Notice of any redemption at the option of the Holders described herein will be mailed by the Company at least thirty (30) days but not more than sixty (60) days before the redemption date (or the first day of the 45-day period during which Holders may redeem their Series C Preference Ordinary Shares pursuant to Section 5.3(d)(v) hereof) to each Holder of record of Series C Preference Ordinary Shares at the address shown in the register of members of the Company. Each notice will state as appropriate: (1) the redemption date and period; (2) the address to which the Holders should send any requested response to the notice; (3) the redemption price; (4) the place or places where certificates for Series C Preference Ordinary Shares are to be surrendered for payment of the redemption price if any such certificates are outstanding; (5) where applicable, that dividends on the Series C Preference Ordinary Shares to be redeemed will cease to accrue on

12 

	such redemption date; and (6) such other matters as the Company may deem relevant. The notice shall contain (i) the name and address of the relevant bank or trust company to be used for purposes of redemption (if any) and (ii) a statement as to the deposit or intent to deposit the redemption funds in such trust account.
(f)	Directors Determine Shares Redeemed. If fewer than all of the Series C Preference Ordinary Shares are to be redeemed at the option of the Company, the number of shares to be redeemed will be determined by the Directors in their absolute discretion and such Series C Preference Ordinary Shares may be redeemed pro rata from the Holders of record in proportion to the number of Series C Preference Ordinary Shares held by such Holders (with adjustments to avoid redemption of fractional shares) or by lot.
(g)	Dividends Cease. If notice of redemption of any Series C Preference Ordinary Shares at the option of the Company has been given and if the funds necessary for such redemption have been set apart by the Company in trust for the benefit of the Holders of Series C Preference Ordinary Shares so called for redemption, then from and after the redemption date, dividends will cease to accrue on the Series C Preference Ordinary Shares being redeemed, the Series C Preference Ordinary Shares will no longer be deemed to be outstanding and all rights of the Holders of such shares will terminate, except the right to receive the redemption price.
(h)	Dividends Payable to Record Date. If a redemption date falls after a dividend record date and prior to the corresponding dividend payment date, the Holders of Series C Preference Ordinary Shares at the close of business on the dividend record date will be entitled to receive the dividend payable with respect to such Series C Preference Ordinary Shares on the corresponding dividend payment date notwithstanding the redemption thereof between the dividend record date and the corresponding dividend payment date or a default in the payment of the dividend due on such dividend payment date.
(i)	Dividends Paid. Unless full cumulative dividends on all Series C Preference Ordinary Shares and all Parity Shares shall have been declared and paid, or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods terminating on or prior to the date of a redemption, purchase or other acquisition, no Series C Preference Ordinary Shares or Parity Shares may be redeemed, purchased or otherwise acquired by the Company unless all outstanding Series C Preference Ordinary Shares and any Parity Shares are redeemed; provided, that, the Company may acquire fewer than all of the outstanding Series C Preference Ordinary Shares or any Parity Shares pursuant to a purchase or exchange offer made on the same terms to Holders of

13

	all Series C Preference Ordinary Shares and Parity Shares as determined in good faith by the Board of Directors of the Company.
(j)	Right to Purchase Series C Preference Ordinary Shares. The Company, subject to (1) certain limitations contained in the Company's Articles of Association, (2) the special rights granted to any of the Company’s issued and outstanding shares, (3) applicable law and (4) the Company’s requirement pursuant to paragraph 5.3(i) to make a purchase or exchange offering on the same terms to Holders of all outstanding Series C Preference Ordinary Shares and Parity Shares, may purchase Series C Preference Ordinary Shares. Any such purchase made by the Company may be made in the open market, by tender to all Holders of Series C Preference Ordinary Shares, by private agreement or otherwise as the Directors see fit. Any Series C Preference Ordinary Shares purchased by the Company for its own account (other than in the ordinary course of business of dealing in securities) will be cancelled by the Company and will no longer be issued and outstanding.
(k)	Redemption Proceeds. The Series C Preference Ordinary Shares may be purchased or redeemed by the Company either out of profits or from the proceeds of a fresh issue of shares out of capital or the share premium account.
(l)	Cancellation of Share Certificates. Payment of the redemption amount shall only be effected upon surrender to the Company for cancellation of any share certificate in respect of the Series C Preference Ordinary Shares (to the extent such certificates are outstanding) to be redeemed and shall be made as promptly as practicable. If any certificate so surrendered includes Series C Preference Ordinary Shares not being redeemed, a new certificate for the remaining Series C Preference Ordinary Shares shall be issued to the Holder in accordance with the Articles of Association of the Company without charge to such Holder.
(m)	Redemption Process. The Directors may make such further regulations concerning the administerial process of redemption as they shall from time to time deem necessary so long as the rights of the Holders are not varied.
(n)	Rights Not Varied. The rights conferred upon the Holders of the Series C Preference Ordinary Shares shall not be deemed to be varied by the creation or issue of any Parity Shares, Junior Shares or Fully Junior Shares.
(o)	Payments of Additional Amounts. Payments on the Series C Preference Ordinary Shares shall be made free and clear of and without deduction or withholding for or on account of any present or future taxes, assessments or other governmental charges imposed by any jurisdiction, political subdivision or taxing

14

	authority described in paragraph 5.3(d)(iii) of these Resolutions, unless the deduction or withholding of such taxes, assessments or other governmental charges is required by law, regulations or rulings or the application or official interpretation of such law, regulations or rulings. In that event, the Company shall pay or cause to be paid additional amounts to the registered Holders of the Series C Preference Ordinary Shares as additional dividends to make up for any deduction or withholding for any present or future taxes, assessments or other governmental charges imposed by any jurisdiction, political subdivision or taxing authority described in paragraph 5.3(d)(iii) of these Resolutions in respect of any amounts that the Company or the successor company must pay with respect to the Series C Preference Ordinary Shares, so that the net amounts paid to the Holders of the Series C Preference Ordinary Shares, after that deduction or withholding, shall equal the respective amounts that would have been receivable by such Holders had no such withholding or deduction been required. However, the Company shall not be obligated to pay additional amounts to any Holder that:
	(i)	resides in or is a citizen of the jurisdiction, political subdivision or taxing authority imposing the taxes, assessments or other governmental charges that would otherwise trigger the Company’s obligation to pay additional amounts; or
	(ii)	is a fiduciary, partnership, limited liability company or other pass-through entity if, and to the extent that, the payment of additional amounts would be required by a jurisdiction, political subdivision or taxing authority described in paragraph 5.3(d)(iii) of these Resolutions to be included in the income for tax purposes of a beneficiary or settlor with respect to that fiduciary or a member of that partnership, limited liability company or other pass-through entity who would not have been entitled to any additional amounts had that beneficiary, settlor or member held those Series C Preference Ordinary Shares directly.
(p)	No Payment of Additional Amounts. In addition, the Company shall not be obligated to pay any additional amounts to a Holder of Series C Preference Ordinary Shares on account of:
	(i)	any tax, assessment or other governmental charge that would not have been imposed but for the existence of any present or former connection between the Holder of a Series C Preference Ordinary Share, or certain other persons, and the taxing jurisdiction or political subdivision, or any Series C Preference Ordinary Share presented for payment more than thirty (30) days after the Relevant Date, which means, in respect of any payment, the date on which such payment

15

	first becomes due and payable, but if the full amount of moneys payable has not been received by the depositary on or prior to such due date, it means the first date on which the full amount of such moneys having been so received and being available for payments to Holders of Series C Preference Ordinary Shares, and notice to that effect shall have been duly given to the Holders;
(ii)	any estate, inheritance, gift, sales, transfer, personal property or similar tax, assessment or other governmental charge;
(iii)	any tax, assessment or other governmental charge that is payable otherwise than by withholding or deduction from payment of the liquidation preference of or any dividends on the Series C Preference Ordinary Shares;
(iv)	any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure by the Holder or the beneficial owner of the Series C Preference Ordinary Shares to promptly comply with a request by the Company to (a) provide information, documents, certifications or other evidence concerning the nationality, residence or identity of the Holder or beneficial owner of such Series C Preference Ordinary Shares or (b) make and deliver any declaration or other similar claim, other than a claim for refund of a tax, assessment or other governmental charge withheld by the Company, or satisfy any inormation or reporting requirements, which, in the case of clauses (a) or (b) of this subparagraph, is required or imposed by a statute, treaty, regulation or administrative practice of the taxing jurisdiction as a precondition to exemption from all or part of that tax, assessment or other governmental charge; or
(v)	any combination of the items identified by the subparagraphs above.
The “Relevant Date” means, in respect of any payment, the date on which such payment first becomes due and payable, but if the full amount of the moneys payable has not been received by the depositary on or prior to such due date, it means the first date on which, the full amount of such moneys having been so received and being available for payment to Holders, notice to that effect shall have been duly given to the Holders of the Series C Preference Ordinary Shares.
(q)	No Preemptive Rights. The Series C Preference Ordinary Shares shall not be entitled to the benefits of any sinking fund. No Holder, solely by reason of being a Holder, has or will have any preemptive right to subscribe for any additional issue of the Company’s shares of any class or series or to any security convertible into or carrying rights or options to purchase any such shares.

16

	(r)	Ranking. Any class or series of shares of the Company shall be deemed to rank (1) prior to the Series C Preference Ordinary Shares, as to the payment of dividends and as to any voluntary or involuntary return of assets on liquidation, dissolution, winding-up or otherwise of the Company, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon any voluntary or involuntary return of assets on liquidation, dissolution, winding-up or otherwise, as the case may be, in preference or priority to the Holders of the Series C Preference Ordinary Shares, (2) on a parity with the Series C Preference Ordinary Shares as to the payment of dividends and as to distribution of assets upon any voluntary or involuntary return of assets on liquidation, dissolution, winding-up or otherwise of the Company, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof shall be different from those of the Series C Preference Ordinary Shares, if the holders of such class or series and the Series C Preference Ordinary Shares shall be entitled to the receipt of dividends and of amounts distributable upon any voluntary or involuntary return of assets on liquidation, dissolution, winding-up or otherwise of the Company in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other or (3) junior to the Series C Preference Ordinary Shares, as to the payment of dividends and as to distribution of assets upon any voluntary or involuntary return of assets on liquidation, dissolution, winding-up or otherwise of the Company, if such class or series is ordinary shares or other shares ranking junior in right of payment to Series C Preference Ordinary Shares as to dividends and /or as to the distribution of assets upon any voluntary or involuntary return of assets on liquidation, dissolution, winding-up or otherwise of the Company. The Series C Preference Ordinary Shares will rank on a parity with the Series A Preference Ordinary Shares and the Series B Preference Ordinary Shares as to the payment of dividends and as to distribution of assets upon any voluntary or involuntary return of assets on liquidation, dissolution, winding-up or otherwise of the Company.
5.4	Election of Directors
	(a)	RESOLVED that, in the event that the Holders of the Series C Preference Ordinary Shares may, voting together with any other Parity Shares as necessary, select two persons and nominate such elected persons for appointment by the Board of Directors as additional Directors of the Company pursuant to paragraph 5.3 (c) (iii) of these Resolutions during a Voting Period, the Board of Directors hereby, pursuant to Article 52 of the Articles, increase the number of persons consisting of the Board of Directors by two persons (subject to the limit in the number of Directors stated in Article 52) and hereby appoint, pursuant to Article 82 of the Articles, such persons elected and nominated by the holders of

17

		preference ordinary shares as additional Directors of the Company. Such additional Directors shall be apportioned among the classes of Directors in accordance with Article 81(a) of the Articles. Such appointment is conditional upon and subject to the following:
		(i)	The term of office of each such Director shall in all events automatically expire at the end of the applicable Voting Period; and
		(ii)	Prior to the appointment of each such elected persons as a Director becoming effective, each such person shall provide to the Company notice in writing that he resigns the office of Director, in the form attached to these Resolutions, which form is hereby approved, such notice to only be effective upon the earliest of: (i) the expiration of the Voting Period during which such Director was appointed or (ii) the passing of an ordinary resolution by the holders of the relevant series of outstanding preference ordinary shares for the removal of such Director (in accordance with paragraph 5.3 (c)(iv) of these Resolutions).
	(b)	RESOLVED that, in the event that it is necessary for any Director elected and nominated by the Holders of the Series C Preference Ordinary Shares to be removed from office in accordance with the provisions of paragraph 5.3 (c)(iv) of these Resolutions, the Board of Directors shall put a Special Resolution to the Company at the immediately following Annual General Meeting of the Company for the removal of such Director or Directors pursuant to Article 81(b) of the Articles.
	(c)	RESOLVED that, in the event that to give effect to the rights granted to the Holders of the Series C Preference Ordinary Shares by the provisions of paragraph 5.3 (c)(iii) of these Resolutions it is necessary to increase the limit in the number of Directors specified in Article 52 of the Articles, the Directors shall put an ordinary resolution to the Company at the next Annual General Meeting of the Company to increase the limit in the number of Directors.
5.5	Approval of Transaction and Share Offering
	(a)	RESOLVED, that the Company be, and it hereby is, authorized to issue and sell up to the Aggregate Available Liquidation Preference of Series C Preference Ordinary Shares, par value US$0.01, to the ABC Trust pursuant to the terms of the Put Option Agreement, and that the Series C Preference Ordinary Shares may be issued automatically as a result of a Deemed Exercise, in particular immediately prior to the taking of any action to wind up the Company. The Company does hereby reserve for issuance and sale (and shall at all times until the put option under the Put Option Agreement is exercised in full or the Put Option Agreement is terminated keep available for issuance) 20,000,000 Series C Preference Ordinary Shares representing an

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		aggregate liquidation preference of US$500,000,000. All such determinations in respect of the Series C Preference Ordinary Shares made by any officer or director of the Company, including, without limitation, approval of the form of share certificate, are hereby ratified and confirmed.
	(b)	RESOLVED, that the Company be, and it hereby is, authorised to make any periodic payments required under the Documents.
	(c)	RESOLVED, that any officer or director of the Company be, and each of them individually hereby is, authorised and directed in the name and on behalf of the Company to agree (in his or their absolute discretion and including any variations to the forms and terms thereof) to the terms and conditions of and (where appropriate) to execute under hand, under seal or as a deed and deliver, in the name and on behalf of the Company, the documents relating to the Series C Preference Ordinary Shares and the Transaction (including, without limitation, the Documents) and any and all other documents, instruments and certificates necessary, desirable or advisable to complete the Transaction described at the Meeting, execution thereof by any officer or Director of the Company being conclusive evidence of his or their and the Company’s agreement to the final terms and conditions of such Documents or any other documents.
	(d)	RESOLVED that, the authority of Chase Mellon Services LLC (or its successor at the time of issue or redemption), the Transfer Agent and Registrar of the Company’s Ordinary Shares, is hereby extended to cover the Series C Preference Ordinary Shares that are issued in the offering contemplated by these resolutions (if any).
5.6	Approval of General Enabling Resolutions.
	(a)	RESOLVED, that any officer or director of the Company be, and each of them individually hereby is, authorised and directed in the name and on behalf of the Company, to (i) take or cause to be taken any and all such further actions (including, without limitation, execution and delivery of such agreements, instruments, documents and certificates as each of them shall deem necessary, advisable or desirable) and to cause the Company to prepare, execute and deliver and where necessary or appropriate, file or cause to be filed with the appropriate governmental authorities, all such other instruments and documents, including, but not limited to, all certificates, contracts, bonds, agreements, documents, instruments, receipts or other papers, (ii) incur and pay or cause to be paid all fees and expenses, and (iii) engage such persons as they shall in their judgment determine to be necessary or appropriate to carry out fully the intent and purposes of the foregoing resolutions and each of the transactions contemplated thereby.

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(b)	RESOLVED, that any person dealing with any officer or director of the Company in connection with any of the foregoing matters shall be conclusively entitled to rely upon the authority of such officer or director and by his execution of any document, agreement, instrument or certificate, the same shall be valid and binding obligation of the Company enforceable in accordance with its terms.
(c)	RESOLVED, that all actions previously taken by any officer or director of the Company in connection with the actions contemplated by the foregoing resolutions be, and each hereby is, adopted, ratified, confirmed and approved in all respects.

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