-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IqBft6Fn9084Rag6NM+kwnIMn7xKSGAIYlJvL5ZXfZhD5K4IbLf01QfOqH1QcDeG rS7FrwRDOAO7ZW3JvJHQMw== 0000950162-01-500541.txt : 20010808 0000950162-01-500541.hdr.sgml : 20010808 ACCESSION NUMBER: 0000950162-01-500541 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20010806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: XL CAPITAL LTD CENTRAL INDEX KEY: 0000875159 STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [6351] IRS NUMBER: 980058718 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-66976 FILM NUMBER: 1699247 BUSINESS ADDRESS: STREET 1: CUMBERLAND HOUSE STREET 2: 1 VICTORIA ST CITY: HAMILTON HM11 BERMUD STATE: D2 BUSINESS PHONE: 4412928515 MAIL ADDRESS: STREET 1: CAHILL GORDON & REINDEL(IMMANUEL KOHN) STREET 2: 80 PINE STREET CITY: NEW YORKI STATE: NY ZIP: 10005 FORMER COMPANY: FORMER CONFORMED NAME: EXEL LTD DATE OF NAME CHANGE: 19950720 S-3 1 xls3080601.txt FORM S-3 As filed with the Securities and Exchange Commission on August 6, 2001 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------- XL CAPITAL LTD (Exact name of registrant as specified in its charter) Cayman Islands 98-0191089 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) XL House One Bermudiana Road Hamilton HM11 Bermuda (441) 292-8515 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Paul S. Giordano, Esq. Executive Vice President, General Counsel and Secretary XL Capital Ltd c/o CT Corporation System 1633 Broadway New York, New York 10019 (212) 246-5070 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------- Copy to: Immanuel Kohn, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10005-1702 ------------------- Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / /
CALCULATION OF REGISTRATION FEE =================================================================================================================== Proposed Maximum Title of Securities to Amount to be Offering Price Proposed Maximum Amount of be Registered Registered (1) Per Debenture (2) Aggregate Offering Price Registration Fee (3) (2) - ------------------------------------------------------------------------------------------------------------------- Zero-Coupon Convertible Debentures due May 23, 2021 $1,010,834,000 59.662% $603,083,782 $150,771 - ------------------------------------------------------------------------------------------------------------------- Class A Ordinary Shares, par value $.01 per share (4) (5) -- -- (6) ===================================================================================================================
(1) The Debentures were issued at an original price of $593.57 per $1,000 principal amount at maturity, which represents an aggregate initial issue price of $600,000,738 and an initial aggregate principal amount at maturity of $1,010,834,000. (2) This estimate is made pursuant to Rule 457(c) of the Securities Act solely for purposes of determining the registration fee. The above calculation is based on the average bid and ask prices for the registrant's Debentures in secondary market transactions executed by the Initial Purchaser of the Debentures on August 1, 2001, as reported to the registrant by the Initial Purchaser. (3) The registrant filed a registration statement on Form S-3 (No. 333-62257) on August 26, 1998 covering 3,000,000 Ordinary Shares, of which 1,389,786 Ordinary Shares have not been issued by the registrant under such prior registration statement and for which the registrant previously paid a filing fee of $29,956. Pursuant to Rule 457(p) under the Securities Act, the registrant has offset the $150,771 registration fee due herewith with that portion of the fee paid on August 26, 1998 covering the aforementioned unissued shares. A registration fee in the amount of $120,815 is submitted herewith ($150,771-$29,956=$120,815). (4) Includes an equal number of Ordinary Share Purchase Rights (the "Rights"). The Rights are issued with the Ordinary Shares for no additional consideration, and therefore no registration fee is required. (5) There is being registered hereunder an indeterminate number of Ordinary Shares issuable upon conversion of the Debentures. Initially the number of Ordinary Shares issuable upon conversion of the Debentures is 6,011,127. The Debentures are convertible into Ordinary Shares at the rate of 5.9467 Ordinary Shares for each $1,000 principal amount at maturity of the Debentures, subject to adjustment under certain circumstances. Pursuant to Rule 416 under the Securities Act, such number of Ordinary Shares registered hereby shall include an indeterminate number of Ordinary Shares that may be issued in connection with a stock split, stock dividend, recapitalization or similar event or adjustment in the number of Ordinary Shares issuable as provided in the indenture governing the Debentures. (6) Pursuant to Rule 457(i), there is no additional filing fee required with respect to the Ordinary Shares issuable upon conversion of the Debentures because no additional consideration will be received in connection with the exercise of the conversion privilege. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ The information in this prospectus is not complete and may be changed. The selling securityholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED AUGUST 6, 2001 PROSPECTUS $1,010,834,000 XL Capital Ltd Zero-Coupon Convertible Debentures Due May 23, 2021 and Class A Ordinary Shares issuable upon conversion of the Debentures --------------- We issued the debentures (which we refer to in this prospectus as the "Debentures") in a private placement in May 2001 at an issue price of $593.57 per Debenture (59.357% of the principal amount at maturity) and a principal amount at maturity of $1,000 per Debenture, subject to an upward adjustment in certain circumstances. Selling securityholders will use this prospectus to resell their Debentures and the Class A Ordinary Shares (which we refer to in this prospectus as the "Ordinary Shares") issuable upon conversion of their Debentures. The Debentures are unsecured and unsubordinated obligations of XL Capital Ltd, a Cayman Islands exempted limited company. The Debentures rank equal in right of payment with all of our other unsecured and unsubordinated indebtedness. The Debentures are convertible into our Ordinary Shares, as described below. We will not pay cash interest on the Debentures unless an interest adjustment becomes payable. The issue price represents an initial accretion rate of 2.625% per annum unless an upward interest adjustment becomes payable. On or after May 23, 2004, we may redeem for cash all or a portion of the Debentures, upon notice to the holders, at a redemption price equal to the Accreted Value (as defined in this prospectus) plus accrued and unpaid cash interest, if any, up to the redemption date. On May 23, 2002, May 23, 2004, May 23, 2006, May 23, 2008, May 23, 2011 and May 23, 2016, each of which is a repurchase date, holders may require us to repurchase the Debentures. The repurchase price will be the Accreted Value plus accrued and unpaid cash interest, if any, of the Debentures. We may choose to pay the repurchase price in cash or Ordinary Shares or any combination of cash and Ordinary Shares. In addition, upon a Change in Control (as defined in this prospectus), holders may require us to repurchase all or a portion of their Debentures at a repurchase price equal to the Accreted Value plus accrued and unpaid cash interest, if any. The Debentures will mature on May 23, 2021 unless earlier redeemed or repurchased. At maturity, we will pay the Accreted Value plus accrued and unpaid cash interest, if any, of the Debentures in cash. Holders may convert their Debentures into 5.9467 Ordinary Shares per Debenture under any of the following circumstances: o during any conversion period (as defined in this prospectus) if the closing sale price of our Ordinary Shares for at least 20 trading days in the 30 consecutive trading days ending on the first day of such conversion period is more than 110% of the Accreted Conversion Price (as defined below) per Ordinary Share on the first day of the conversion period; o during the five business day period beginning 10 business days following any 10 consecutive trading-day period in which the average of the trading prices (as defined in this prospectus) for a Debenture was less than 95% of the average closing sale prices of our Ordinary Shares multiplied by the number of Ordinary Shares into which such Debenture is convertible for that period; o if the Debentures have been called for redemption; o during such period, if any, that the credit rating assigned to the Debentures by Standard & Poor's Ratings Services is below a specified level, or if such rating agency (or its successor) is not rating the Debentures; and o upon the occurrence and continuance of specified corporate transactions. This is equivalent to an initial conversion price of $99.81 per Ordinary Share based on the issue price of the Debentures. The conversion rate may be adjusted as described in this prospectus. Our Ordinary Shares are listed on the New York Stock Exchange under the symbol "XL." On August 1, 2001, the closing price of our Ordinary Shares as reported on the New York Stock Exchange was $76.30 per share. If the average of the sale prices of our Ordinary Shares is less than or equal to 60% of the Accreted Conversion Price (as defined in this prospectus) of the Debentures for any 20 out of the last 30 trading days ending five days prior to any repurchase date, then the yield-to-maturity on the Debentures will be subject to an upward interest adjustment to the applicable Reset Rate (as defined in this prospectus) for the subsequent six-month period. The upward interest adjustment will result in the interest rate on the Debentures being equivalent to the per annum Reset Rate (as defined in this prospectus) during any period in which such adjustment is in effect. If an upward interest adjustment is then in effect and the average of the sale prices of our Ordinary Shares is less than or equal to 60% of the Accreted Conversion Price of the Debentures for 20 out of the last 30 trading days of such semi-annual period ending on the fifth day preceding November 23 and May 23, as applicable, then the applicable Reset Rate in effect shall remain in effect for the next succeeding six-month period. If the Reset Rate is then in effect and the average of the sale prices of our Ordinary Shares is greater than 60% of the Accreted Conversion Price of the Debentures for 20 out of the last 30 trading days of any semi-annual period ending on the fifth day preceding November 23 or May 23, as applicable, occurring before the next repurchase date, then the interest rate on the Debentures will revert to 2.625% per annum for the subsequent six-month period, and no upward interest adjustment will apply to any subsequent semi-annual period ending on or prior to the next succeeding repurchase date. The "Accreted Conversion Price" as of any day will equal the Accreted Value of a Debenture divided by the number of Ordinary Shares issuable upon conversion of such Debenture on that day. "Accreted Value" means, as of any date, the sum of the issue price of the Debentures and the accrued and unpaid interest as of such date (excluding any accrued and unpaid interest payable as cash interest). If an upward interest adjustment is in effect for a particular semi-annual period, we will pay a portion of the interest adjustment as cash interest at a rate of 0.25% per annum (0.125% per semi-annual period) of the Accreted Value, and the remaining interest will be accrued and payable at maturity. As a result, and as and to the extent set forth above and described herein, following any upward interest adjustment, the Debentures will accrete interest in an amount equal to the effective yield-to-maturity that results from the upward interest adjustment on the Debentures. We will not pay cash interest on the Debentures unless an upward interest adjustment occurs. See "Risk Factors" beginning on page 14 of this prospectus to read about important factors you should consider before buying the Debentures or our Ordinary Shares. -2- --------------- We will not receive any of the proceeds from the sale of the Debentures or the Ordinary Shares by any of the selling securityholders. The Debentures and the Ordinary Shares may be offered in negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices. In addition, the Ordinary Shares may be offered from time to time through ordinary brokerage transactions on the New York Stock Exchange. See "Plan of Distribution." The selling securityholders may be deemed to be "underwriters" as defined in the Securities Act of 1933. Any profits realized by the selling securityholders may be deemed to be underwriting commissions. If the selling securityholders use any broker-dealers, any commissions paid to broker-dealers and, if broker-dealers purchase any Debentures or Ordinary Shares as principals, any profits received by such broker-dealers on the resale of the Debentures or Ordinary Shares may be deemed to be underwriting discounts or commissions under the Securities Act. --------------- The date of this prospectus is , 2001. --------------- -3- TABLE OF CONTENTS Prospectus CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS...................6 AVAILABLE INFORMATION........................................................7 INCORPORATION OF DOCUMENTS BY REFERENCE......................................7 SUMMARY......................................................................8 RISK FACTORS................................................................14 USE OF PROCEEDS.............................................................14 RATIOS OF EARNINGS TO FIXED CHARGES.........................................14 PRICE RANGE OF ORDINARY SHARES AND DIVIDENDS................................15 DESCRIPTION OF DEBENTURES...................................................16 DESCRIPTION OF ORDINARY SHARES..............................................37 CERTAIN CAYMAN ISLANDS AND UNITED STATES FEDERAL INCOME TAX CONSEQUENCES....40 SELLING SECURITYHOLDERS.....................................................46 PLAN OF DISTRIBUTION........................................................51 ENFORCEMENT OF CIVIL LIABILITIES............................................53 LEGAL MATTERS...............................................................53 EXPERTS.....................................................................53 -4- THE SECURITIES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY UNITED STATES FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ABOUT THIS PROSPECTUS This prospectus constitutes part of a registration statement on Form S-3 that we filed with the SEC using a "shelf" registration process. Under this shelf process, any selling securityholder may sell any combination of the securities described in this prospectus in one or more offerings up to a total dollar amount of proceeds of $1,010,834,000. This prospectus provides you with a general description of the securities the selling securityholders may offer. Each time the selling securityholders sell securities, we or the selling securityholders will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update, or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with additional information described under the heading "Available Information." -5- CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 ("PSLRA") provides a "safe harbor" for forward-looking statements. This prospectus, our most recent annual report on Form 10-K, our Annual Report to Stockholders, any of our proxy statements, Forms 10-K, Forms 10-Q or Forms 8-K or any other of our written or oral statements made by or on behalf of us may include forward-looking statements which reflect our current views with respect to future events and financial performance. Such statements include forward-looking statements both with respect to XL Capital and the insurance and reinsurance sectors in general (both as to underwriting and investment matters). Statements which include the words "expect", "intend", "plan", "believe", "project", "anticipate", "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. We believe that these factors include, but are not limited to, the following: o ineffectiveness or obsolescence of our business strategy due to changes in current or future market conditions; o increased competition on the basis of pricing, capacity, coverage terms or other factors; o greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than our underwriting, reserving or investment practices anticipate based on historical experience or industry data; o developments in the world's financial and capital markets which adversely affect the performance of our investments; o changes in regulation or tax laws applicable to us, our subsidiaries, brokers or customers; o acceptance of our products and services, including new products and services; o changes in the availability, cost or quality of reinsurance; o changes in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers; o loss of key personnel; o the effects of mergers, acquisitions and divestitures, including, without limitation, the Winterthur International acquisition; o changes in rating agency policies or practices; o changes in accounting policies or practices; and o changes in general economic conditions, including inflation, foreign currency exchange rates and other factors. 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 or incorporated by reference herein or elsewhere. -6- We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. AVAILABLE INFORMATION We are subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith file reports, proxy and information statements and other information with the Securities and Exchange Commission (the "SEC"). Such reports, proxy statements and other information can be inspected and copied at prescribed rates at the public reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains a website that contains reports, proxy and information statements and other information. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. The website address is http://www.sec.gov. In addition, such material can be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. INCORPORATION OF DOCUMENTS BY REFERENCE The SEC allows us to "incorporate by reference" into this prospectus the information we file with the SEC, which means that we can disclose important information to you by referring to another document filed separately with the SEC. The information that XL Capital files after the date of the initial registration statement and prior to the effectiveness of the registration statement shall be deemed to be incorporated by reference into this prospectus. The information that XL Capital files after the date of this prospectus with the SEC will automatically update and supersede this information. XL Capital incorporates by reference into this prospectus the documents listed below and any future filings made with the SEC under sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. o Annual Report on Form 10-K for the year ended December 31, 2000, filed on March 29, 2001; o Quarterly Report on Form 10-Q for the period ended March 31, 2001, filed on May 15, 2001; o Current Report on Form 8-K filed on February 23, 2001; o Current Reports on Form 8-K filed on May 18, 2001; o Current Report on Form 8-K filed on July 27, 2001; and o Proxy Statement dated April 6, 2001, filed on April 6, 2001. Any statement contained in a document incorporated or considered to be incorporated by reference in this prospectus shall be considered to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any subsequently filed document that is or is considered to be incorporated by reference modifies or supersedes such statement. Any statement that is modified or superseded shall not, except as so modified or superseded, constitute a part of this prospectus. You may request a copy of any of the documents which are incorporated by reference in this prospectus, other than exhibits which are not specifically incorporated by reference into such documents, and our Articles of Association and Memorandum of Association, at no cost, by writing or telephoning us at the following: Investor Relations XL Capital Ltd XL House One Bermudiana Road -7- Hamilton, Bermuda HM11 Telephone: (441) 292-8515 UNTIL __________, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATIONS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this prospectus. Prospective investors should consider carefully the information set forth in this prospectus under the heading "Risk Factors" beginning on page 14 and the documents incorporated in this prospectus by reference. All selling securityholders must deliver a prospectus at or prior to the time of any sale of the Debentures or the Ordinary Shares issuable upon conversion of the Debentures. In this prospectus, unless the context requires otherwise, "XL Capital," "we," "us," and "our" refer to XL Capital Ltd and its subsidiaries. XL CAPITAL We are a leading provider of insurance and reinsurance coverages and financial products and services to industrial, commercial and professional service firms, insurance companies and other enterprises on a worldwide basis. We were incorporated with limited liability under the Cayman Islands Companies Law on March 16, 1998, as EXEL Merger Company Ltd. We were formed as a result of the merger of EXEL Merger Company Ltd, EXEL Limited and Mid Ocean Limited on August 7, 1998, and were renamed EXEL Limited on that date. This merger was accounted for as a purchase business combination. EXEL and Mid Ocean were companies that were incorporated in the Cayman Islands in 1986 and 1992, respectively. At a special general meeting held on February 1, 1999, the shareholders of EXEL Limited approved a resolution changing the name of EXEL Limited to XL Capital Ltd. On June 18, 1999, we merged with NAC Re Corp., a Delaware corporation that was organized in 1985, in a stock merger. The NAC merger was accounted for as a pooling of interests under U.S. generally accepted accounting principles. Accordingly, all prior period information contained in this prospectus includes the results of NAC as though it had always been a part of XL Capital. Following the merger, we changed our fiscal year end from November 30 to December 31 as a conforming pooling adjustment. On July 24, 2001, we announced that we had completed the acquisition of the Winterthur International insurance operations from Winterthur Swiss Insurance Company, an indirect subsidiary of the Credit Suisse Group. We are incorporated in the Cayman Islands. Our principal executive offices are located at XL House, One Bermudiana Road, Hamilton, Bermuda HM11. Our telephone number is (441) 292-8515. Our website is www.xlcapital.com. The information contained on our website is not incorporated by reference into this prospectus. -8- THE OFFERING Debentures......................... $1,010,834,000 aggregate principal amount at maturity of Zero-Coupon Convertible Debentures Due May 23, 2021, subject to an upward adjustment in the event there is an upward interest adjustment. Issue Price........................ Each Debenture was issued at a price of $593.57 per Debenture and an initial principal amount at maturity of $1,000 per Debenture, subject to an upward adjustment in the event there is an upward interest adjustment. Maturity........................... May 23, 2021. Ranking............................ The Debentures are unsecured and unsubordinated obligations of XL Capital and rank equal in right of payment with all of our other unsecured and unsubordinated indebtedness. Interest Adjustment................ If the average of the sale prices of our Ordinary Shares is less than or equal to 60% of the Accreted Conversion Price of the Debentures for any 20 out of the last 30 trading days ending five days prior to any repurchase date, then the yield-to-maturity on the Debentures will be subject to an upward interest adjustment to the applicable Reset Rate for the subsequent six-month period. If an upward interest adjustment is in effect and the average of the sale prices of our Ordinary Shares is less than or equal to 60% of the Accreted Conversion Price of the Debentures for 20 out of the last 30 trading days of such semi-annual period ending on the fifth day preceding November 23 and May 23, as applicable, then the applicable Reset Rate in effect shall remain in effect for the next succeeding six-month period. If an upward interest adjustment is then in effect and the average of the sale prices of our Ordinary Shares is greater than 60% of the Accreted Conversion Price of the Debentures for 20 out of the last 30 trading days of any semi-annual period ending on the fifth day preceding November 23 and May 23, as applicable, then the interest rate on the Debentures will revert to 2.625% per annum for the subsequent six-month period, and no upward interest adjustment will apply to any subsequent semi-annual period ending on or prior to the next succeeding repurchase date. The "applicable Reset Rate" for any such six-month period in which there is an upward interest adjustment will be equal to the rate (the "Reference Fixed Rate") that would, in the judgment of the Reset Rate Agent (as defined in this prospectus) and one other independent investment bank, result in a trading price of par with a hypothetical issue of senior, non-convertible, fixed rate debt securities of XL Capital with (i) a final maturity equal to the term from the current repurchase date with respect to which the applicable Reset Rate is determined until the next repurchase date; (ii) an aggregate principal amount equal to the then Accreted Value of the Debentures; and (iii) provisions that are, insofar as would be practicable for an issue of senior, non-convertible, fixed-rate debt securities, substantially identical to those of the Debentures. In no case, however, will the applicable Reset Rate ever be greater than 10% without our prior written consent. Also, if the Reset Rate Agent determines in its sole -9- judgment that there is no suitable Reference Fixed Rate, the applicable rate of accretion for that period will be the applicable rate of accretion then in effect, such rate of accretion to remain in effect until the Reset Rate Agent determines that there is a suitable Reference Fixed Rate at which time the Reset Rate Agent shall determine a new applicable Reset Rate for the period ending on the next Reset Rate determination date. The applicable Reset Rate for a Debenture that is subject to an upward interest adjustment shall be determined as to any period for which such adjustment is applicable until a new applicable Reset Rate is in effect or until the original accretion rate is again in effect. If an upward interest adjustment is in effect for a particular semi-annual period, we will pay a portion of the interest adjustment as cash interest at a annualized rate of 0.25% per annum (0.125% per semi-annual period) of the Accreted Value and the remaining interest will be accrued and payable at maturity. As a result, during any semi-annual period in which an upward interest adjustment is in effect, the Debentures will accrete interest at a rate equal to the applicable Reset Rate less 0.25%. Cash Interest Payment.............. We will not pay cash interest on the Debentures prior to maturity unless an upward interest adjustment is in effect. If an upward interest adjustment is in effect for a particular semi-annual period, we will pay a portion of the interest adjustment as cash interest at the rate of 0.25% per annum (0.125% for each semi-annual period) of the Accreted Value at the beginning of the applicable semi- annual period. Cash interest, if any, will be paid semi- annually on each November 23 or May 23 to the holders of record of the Debentures as of the record date. Conversion Rights.................. Holders may convert their De- bentures prior to stated maturity: (i) during any conversion period if the closing sale price of our Ordinary Shares for a period of at least 20 trading days in the period of 30 consecutive trading days ending on the first day of such conversion period is more than 110% of the Accreted Conversion Price per Ordinary Share on the first day of the conversion period, then the Debentures are convertible at the applicable conversion rate, subject to adjustment under certain circumstances. A conversion period will be the period from and including the thirtieth trading day in a fiscal quarter to but not including the thirtieth trading day in the immediately following fiscal quarter; (ii) during the five business-day period beginning 10 business days following any 10 consecutive trading-day period in which the average of the trading prices (as defined in this prospectus) for a Debenture was less than 95% of the average closing sale prices of our Ordinary Shares multiplied by the number of shares into which such Debenture is convertible for that period, then the Debentures are convertible into Ordinary Shares at the applicable conversion rate; provided, however, if at conversion, the closing price of the Ordinary Shares is greater than 100% of the Accreted Conversion Price but less than or equal to 110% of the Accreted Conversion Price, then the holders will receive, in lieu of Ordi- -10- nary Shares based on the applicable conversion rate, cash or Ordinary Shares, or a combination of both cash and Ordinary Shares, with a value equal to the then Accreted Value of the Debentures; (iii) if the Debentures have been called for redemption, then such Debentures are convertible at the applicable conversion rate, subject to adjustment under certain circumstances; (iv) during such period, if any, that the credit rating assigned to the Debentures by Standard & Poor's Ratings Services, a division of McGraw Hill Companies, Inc., is below a specified level, or if such rating agency is not rating the Debentures, then the Debentures are convertible at the applicable conversion rate, subject to adjustment under certain circumstances; and (v) upon the occurrence of specified corporate transactions described under "Description of Debentures -- Conversion Rights," then the Debentures are convertible at the applicable conversion rate, subject to adjustment under certain circumstances. For each Debenture surrendered for conversion, a holder will receive 5.9467 Ordinary Shares. This is equivalent to an initial conversion price of $99.81 per Ordinary Share based on the issue price of the Debentures. The conversion rate may be adjusted under certain circumstances, but will not be adjusted for accrued interest. Upon conversion, holders will not receive any cash payment representing accrued interest. Instead, accrued interest will be deemed paid by the Ordinary Shares received by holders on conversion. Debentures called for redemption may be surrendered for conversion until the close of business one business day prior to the redemption date. Redemption of the Debentures at Our Option..................... On or after May 23, 2004, we may redeem for cash all or part of the Debentures at any time, upon not less than 15 nor more than 60 days' notice by mail to holders of the Debentures, for a price equal to the Accreted Value plus accrued and unpaid cash interest, if any, on such redemption date. Purchase of Debentures at Your Option... You have the right to require us to repurchase the Debentures on May 23, 2002, May 23, 2004, May 23, 2006, May 23, 2008, May 23, 2011 and May 23, 2016, each a repurchase date. In each case, the repurchase price payable will be equal to the Accreted Value plus accrued and unpaid cash interest, if any, on such repurchase date. We may choose to pay the repurchase price in cash or Ordinary Shares or a combination of cash and Ordinary Shares. If we elect to pay the repurchase price in Ordinary Shares or a combination of cash and Ordinary Shares, we must notify holders not less than 20 days prior to the repurchase date. The Ordinary Shares will be valued at 100% of the average closing sales price for five trading days ending on the third day prior to the repurchase date. -11- Change in Control.................. If we undergo a Change in Control (as defined in this prospectus), you will have the option to require us to repurchase all of your Debentures not previously called for redemption or any portion thereof for cash or, at our option, Ordinary Shares (which are valued at 95% of the average closing sales prices of our Ordinary Shares for the five trading days immediately preceding the third trading day prior to the repurchase date). We will pay a repurchase price equal to the Accreted Value plus accrued and unpaid cash interest, if any, on the repurchase date. Events of Default.................. If there is an event of default on the Debentures, an amount equal to the Accreted Value plus accrued and unpaid cash interest, if any, may be declared immediately due and payable. These amounts automatically become due and payable in some circumstances. The following are events of default with respect to the Debentures (in the bullet points below references to "our" means XL Capital Ltd and not any of its subsidiaries): o our failure for 30 days to pay when due any cash interest on the Debentures (after any upward interest adjustment); o our failure to pay principal of the Debentures and accrued interest (including any interest payable pursuant to an upward interest adjustment) at maturity, upon redemption, repurchase or following a Change in Control, when the same becomes due and payable; o our default under any of our other instruments of indebtedness with an outstanding principal amount of $100,000,000 or more, individually or in the aggregate, which has caused the holders of such indebtedness to declare such indebtedness due and payable prior to its stated maturity; o our default in the payment of principal or premium under any of our other instruments of indebtedness, which default is in an aggregate principal amount exceeding $100,000,000 and continues unremedied or unwaived for more than 30 business days; o our failure to comply with any of our covenants or agreements in the Debentures or the Indenture for 60 days after written notice by the Trustee or by the holders of at least 25% in aggregate principal amount of all outstanding Debentures affected by that failure; and o some events involving bankruptcy, insolvency or reorganization of XL Capital. Tax............................. Each holder has agreed in the Indenture, for United States federal income tax purposes, to treat the Debentures as "contingent payment debt instruments" and to be bound by our application of the Treasury regulations that govern contingent payment debt instruments, including our determi- -12- nation that the rate at which interest will be deemed to accrue for United States federal income tax purposes will be 7.64%, which is the rate comparable to the rate at which we would borrow on a noncontingent, nonconvertible borrowing. Based on the agreement, (i) each holder is required to accrue interest on a constant yield to maturity basis at that rate, with the result that a holder will recognize taxable income significantly in excess of cash received while the Debentures are outstanding and (ii) a holder will recognize ordinary income upon a conversion of a Debenture into Ordinary Shares equal to the excess, if any, between the value of the stock received on the conversion and the sum of the original purchase price of the Holder's Debenture and accrued but unpaid interest. The proper application of the regulations that govern contingent payment debt instruments to a holder of a Debenture is uncertain in a number of respects, and if our treatment were successfully challenged by the Internal Revenue Service, it might be determined that, among other differences, a holder should have accrued interest income at a lower rate, should not have recognized income or gain upon the conversion, and should not have recognized ordinary income upon a taxable disposition of its Debenture. EACH INVESTOR SHOULD CONSULT ITS TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF AN INVESTMENT IN THE DEBENTURES AND WHETHER AN INVESTMENT IN THE DEBENTURES IS ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND THE INVESTOR'S PARTICULAR TAX SITUATION. Use of Proceeds.................... We will not receive any of the proceeds from the sale by any selling securityholder of the Debentures or the Ordinary Shares issuable upon conversion of the Debentures. Book Entry Form.................... The Debentures have been issued in book-entry form and are represented by permanent global certificates deposited with a custodian for and registered in the name of a nominee of The Depository Trust Company, commonly known as DTC, in New York, New York. Beneficial interests in any of the Debentures are shown on, and transfers are effected only through, records maintained by DTC and its direct and indirect participants and any such interest may not be exchanged for certificated Debentures, except in limited circumstances. Trading............................ The Debentures are not listed on any securities exchange or included in any automated quotation system. Our Ordinary Shares are traded on the New York Stock Exchange under the symbol "XL." -13- RISK FACTORS You should carefully consider the following factors and other information in this prospectus before deciding to purchase any Debentures. An active trading market for the Debentures may not develop We cannot assure you that an active trading market for the Debentures will develop or as to the liquidity or sustainability of any such market, the ability of the holders to sell their Debentures or the price at which holders of the Debentures will be able to sell their Debentures. Future trading prices of the Debentures will depend on many factors, including, among other things, prevailing interest rates, the market for similar securities, the price of our Ordinary Shares, our performance and other factors. The amount you must include in your income for United States federal income tax purposes will exceed the amount of cash interest you receive While the proper tax treatment of a holder of the Debentures is uncertain, we and each holder have agreed in the Indenture to treat the Debentures as "contingent payment debt instruments" and to be bound by our application of the Treasury regulations that govern contingent payment debt instruments. Pursuant to this agreement, a holder will be required to accrue interest on a constant yield to maturity basis at a rate comparable to the rate at which we would borrow in a noncontingent, nonconvertible borrowing (7.64%). However, the proper application of the regulations that govern contingent payment debt instruments to a holder of a Debenture is uncertain in a number of respects, and if our treatment were successfully challenged by the Internal Revenue Service, it might be determined that, among other differences, a holder should have accrued interest income at a lower rate, should not have recognized income or gain upon the conversion, and should not have recognized ordinary income upon a taxable disposition of its Debenture. A holder will recognize taxable income significantly in excess of cash received while the Debentures are outstanding. In addition, under the Indenture, a holder will recognize ordinary income, if any, upon a sale, exchange, conversion or redemption of the Debentures at a gain. See "Certain Cayman Islands and United States Federal Income Tax Consequences." USE OF PROCEEDS We will not receive any of the proceeds from the sale by any selling securityholder of the Debentures or the Ordinary Shares issuable upon conversion of the Debentures. RATIOS OF EARNINGS TO FIXED CHARGES Our ratio of earnings to fixed charges for each of the periods indicated is as follows: Fiscal Year Ended December 31, Three Months Ended 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- March 31, 2001 21.6x 11.0x 10.5x 18.9x 25.3x 20.0x We have computed the ratio of earnings to fixed charges by dividing (i) income from continuing operations before income taxes and minority interest, plus fixed charges, less equity income in unconsolidated affiliates, capitalized interest and minority interest by (ii) fixed charges. Fixed charges consist of interest expense on all indebtedness (including amortization of deferred financing costs), capitalized interest, minority interest and the portion of -14- operating lease rental expense that is representative of the interest factor (deemed to be one-third of operating lease rentals). PRICE RANGE OF ORDINARY SHARES AND DIVIDENDS Our Ordinary Shares are listed and traded on the New York Stock Exchange under the symbol "XL." The following table provides, for the calendar quarters indicated, the high and low closing sales prices per share on the New York Stock Exchange for the periods shown below as reported on the New York Stock Exchange Composite Tape and the quarterly cash dividends declared per Ordinary Share. Cash Dividends Period High Low Declared ------ ---- --- -------------- 1999: First Quarter.......... $75.188 $56.750 $0.44 Second Quarter......... 66.500 56.750 0.44 Third Quarter.......... 57.688 42.188 0.44 Fourth Quarter......... 58.063 44.938 0.44 2000: First Quarter.......... 55.375 39.563 0.45 Second Quarter......... 61.000 45.750 0.45 Third Quarter.......... 78.188 54.938 0.45 Fourth Quarter......... 88.563 69.375 0.45 2001: First Quarter.......... 88.50 67.25 0.46 Second Quarter......... 84.10 65.40 0.46 The declaration and payment of future dividends by us will be at the discretion of our Board of Directors and will depend upon many factors, including our earnings, financial condition, business needs, capital and surplus requirements of our operating subsidiaries and regulatory restrictions. -15- DESCRIPTION OF DEBENTURES The Debentures were issued under an indenture (which we refer to in this prospectus as the "Indenture") between the Company and State Street Bank and Trust Company, as trustee (which we refer to in this prospectus as the "Trustee"). In this section, references to "XL Capital," "we," "our" or "us" refer solely to XL Capital Ltd and not its subsidiaries. General The Debentures: o are unsecured and unsubordinated obligations of XL Capital; o are limited to an aggregate principal amount at maturity of $1,010,834,000, plus accrued interest pursuant to any interest adjustments; o will mature on May 23, 2021; and o rank equally in right of payment with all of our other unsecured and unsubordinated indebtedness. The Debentures were issued at a price to investors of $593.57 per Debenture. We will not pay cash interest on the Debentures unless an upward interest adjustment becomes payable. The maturity value of each Debenture may exceed $1,000 in the event an upward interest adjustment becomes payable on the Debentures. The issue price represents a yield to maturity of 2.625% per annum unless an upward interest adjustment occurs. The Debentures were issued only in denominations of $1,000 principal amount and multiples of $1,000 principal amount. You have the option to convert your Debentures into our Ordinary Shares at a conversion rate of 5.9467 Ordinary Shares per Debenture. This is equivalent to an initial conversion price of $99.81 per Ordinary Share based on the issue price of the Debentures. The conversion rate is subject to adjustment if certain events occur. Upon conversion, you will receive only Ordinary Shares. You will not receive any cash payment for interest adjustments, if any, to the conversion date. Each holder has agreed in the Indenture, for United States federal income tax purposes, to treat the Debentures as "contingent payment debt instruments" and to be bound by our application of the Treasury regulations that govern contingent payment debt instruments, including our determination that the rate at which interest will be deemed to accrue for United States federal income tax purposes will be 7.64%, which is the rate comparable to the rate at which we would borrow on a noncontingent, nonconvertible borrowing. Accordingly, each holder will be required to accrue interest on a constant yield to maturity basis at that rate, with the result that a holder will recognize taxable income significantly in excess of cash received while the Debentures are outstanding. In addition, a holder will recognize ordinary income upon a conversion of a Debenture into our Ordinary Shares equal to the excess, if any, between the value of the stock received on the conversion and the sum of the original purchase price of the holder's Debenture and accrued but unpaid interest. However, the proper application of the regulations that govern contingent payment debt instruments to a holder of a Debenture is uncertain in a number of respects, and if our treatment were successfully challenged by the Internal Revenue Service, it might be determined that, among other differences, a holder should have accrued interest income at a lower rate, should not have recognized income or gain upon the conversion, and should not have recognized ordinary income upon a taxable disposition of its Debenture. -16- EACH INVESTOR SHOULD CONSULT ITS TAX ADVISOR REGARDING THE TAX TREATMENT OF AN INVESTMENT IN THE DEBENTURES AND WHETHER AN INVESTMENT IN THE DEBENTURES IS ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND THE INVESTOR'S PARTICULAR TAX SITUATION. Interest Adjustment If the average of the sale prices of our Ordinary Shares is less than or equal to 60% of the Accreted Conversion Price of the Debentures for any 20 out of the last 30 trading days ending five days prior to any repurchase date, then the yield-to-maturity on the Debentures will be subject to an upward interest adjustment to the applicable Reset Rate for the subsequent six-month period. The upward interest adjustment will result in the interest rate on the Debentures being equivalent to the applicable Reset Rate. If an upward interest adjustment is in effect and the average of the sale prices of our Ordinary Shares is less than or equal to 60% of the Accreted Conversion Price of the Debentures for 20 out of the last 30 trading days of such semi-annual period ending on the fifth day preceding November 23 or May 23, as applicable, then the applicable Reset Rate in effect shall remain in effect for the next succeeding six-month period. If an upward interest adjustment is in effect and the average of the sale prices of our Ordinary Shares is greater than 60% of the Accreted Conversion Price of the Debentures for 20 out of the last 30 trading days of any semi-annual period ending on the fifth day preceding November 23 or May 23, as applicable, then the interest rate on the Debentures will revert to 2.625% per annum for the subsequent six-month period, and an upward interest adjustment will not apply to any subsequent semi-annual period ending on or prior to the next succeeding repurchase date. If an upward interest adjustment is in effect for a particular semi-annual period, we will pay a portion of the interest adjustment as cash interest at a rate of 0.25% per annum (0.125% per semi-annual period) of the Accreted Value and the remaining interest will be accrued and payable at maturity or earlier redemption. As a result, following any such upward interest adjustment, and for so long as such upward interest adjustment is in effect, the Debentures will accrete interest at a rate equal to the applicable Reset Rate less 0.25%. The "sale price" of our Ordinary Shares on any date means the closing per share sale price (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average asked prices) on that date as reported on the New York Stock Exchange or, if our Ordinary Shares are not listed on the New York Stock Exchange, then as reported by the Nasdaq system. The "applicable Reset Rate" for any such six-month period, as determined by the Reset Rate Agent (as defined below), will be equal to the rate (the "Reference Fixed Rate") that would, in the sole judgment of the Reset Rate Agent, result in a trading price of par with a hypothetical issue of senior, non-convertible, fixed rate debt securities of XL Capital with: (i) a final maturity equal to the term from the current repurchase date on which the applicable Reset Rate is determined until the next repurchase date; (ii) an aggregate principal amount equal to the accreted issue price of the Debentures; and (iii) provisions that are, insofar as would be practicable for an issue of senior, non-convertible, fixed-rate debt securities, substantially identical to those of the Debentures. In no case, however, will the applicable Reset Rate ever be greater than 10% per annum without our prior written consent. Also, if the Reset Rate Agent determines in its sole judgment that there is no suitable Reference Fixed Rate, the applicable rate of accretion for that period will be the applicable rate of accretion then in effect. -17- In the event of any upward interest adjustment, we will disseminate a press release through Dow Jones & Company, Inc. or Bloomberg Business News containing this information or publish the information on our Web site or through such other public medium as we may use at that time. Reset Rate Agent; Determinations Conclusive Goldman, Sachs & Co. will act as the Reset Rate Agent. For the determination of the applicable Reset Rate, the Reset Rate Agent shall seek indicative reference rates from one other nationally recognized investment bank. The determination of any applicable Reset Rate shall be made by the Reset Rate Agent by averaging the indicative reference rates obtained by Goldman, Sachs & Co. and such other investment bank. The determination of any applicable Reset Rate by the Reset Rate Agent will be conclusive and binding upon us, the Reset Rate Agent, the Trustee and the holders of the Debentures, in the absence of manifest error. The Reset Rate Agent may be removed at any time with or without cause by us giving at least sixty (60) days' written notice to the Reset Rate Agent; provided that the Reset Rate Agent may not be removed by us without cause for a period of six months after the date of this prospectus. The Reset Rate Agent may resign at any time upon giving at least thirty (30) days' written notice to us. A successor Reset Rate Agent will be appointed by us. Interest We will not pay cash interest on the Debentures unless there is an upward interest adjustment. Interest will be based on a 360-day year comprised of twelve 30-day months, and will be payable semi-annually on November 23 and May 23. Cash interest as a result of an upward interest adjustment will be paid at the rate of 0.25% per annum (0.125% per semi-annual period). Cash interest following an upward interest adjustment will be paid at a rate of 2.625% per annum on the Debentures during any period in which an upward interest adjustment is in effect. The record date for the payment of cash interest to holders will be November 8 and May 8 of each year. We will give notice to the holders of the Debentures, no later than 30 days prior to each record date, of the amount of cash interest to be paid as of the next interest payment date. We will pay interest on the Debentures by wire transfer of federal (same-day) funds or check mailed to the address of the registered holders of the Debentures as of the record date relating to each interest payment date. You should be aware that interest that accrues for the period you hold the Debentures must be included in your gross income for United States federal income tax purposes in accordance with the Treasury regulations that govern debt instruments providing for contingent payments. For more information, see "Risk Factors--The amount you must include in your income for United States federal income tax purposes will exceed the amount of cash interest you receive" and the discussion below in the section captioned "Certain Cayman Islands and United States Federal Income Tax Consequences." Redemption Rights We must repay the Debentures at their stated maturity on May 23, 2021, unless earlier redeemed. The circumstances in which we may, or we are required to, redeem the Debentures prior to their stated maturity are described below. We will have the right to redeem the Debentures in whole or in part, at any time or from time to time, on or after May 23, 2004 upon 15 to 60 days' notice by mail, for a cash price equal to the Accreted Value plus accrued and unpaid cash interest, if any, up to the redemption date. The table below shows the redemption prices of the Debentures at May 23, 2004, at each following May 23 prior to maturity and at maturity on May 23, 2021, assuming that an upward interest adjustment does not occur. The prices reflect the Accreted Value calculated through each date. The redemption prices of a Debenture re- -18- deemed between these dates would include an additional increase in the Accreted Value since the immediately preceding date in the table to the actual redemption date. Redemption Date Accrued Interest Redemption Price - --------------- ---------------- ---------------- May 23, 2004.................. -- $641.88 May 23, 2005.................. $16.96 $658.84 May 23, 2006.................. $17.40 $676.24 May 23, 2007.................. $17.87 $694.11 May 23, 2008.................. $18.34 $712.45 May 23, 2009.................. $18.83 $731.28 May 23, 2010.................. $19.32 $750.60 May 23, 2011.................. $19.83 $770.43 May 23, 2012.................. $20.36 $790.79 May 23, 2013.................. $20.90 $811.69 May 23, 2014.................. $21.44 $833.13 May 23, 2015.................. $22.02 $855.15 May 23, 2016.................. $22.59 $877.74 May 23, 2017.................. $23.20 $900.94 May 23, 2018.................. $23.80 $924.74 May 23, 2019.................. $24.44 $949.18 May 23, 2020.................. $25.08 $974.26 May 23, 2021.................. $25.74 $1,000.00 If we decide to redeem fewer than all of the outstanding Debentures, the Trustee will select the Debentures to be redeemed by lot, on a pro rata basis or by another method the Trustee considers fair and appropriate. If the Trustee selects a portion of your Debenture for partial redemption and you convert a portion of the same Debenture, the converted portion will be deemed to be from the portion selected for redemption. Each Debenture will be redeemed in whole. In the event of any redemption in part, we will not be required to: o issue, register the transfer of or exchange any Debenture during a period beginning at the opening of business 15 days before any selection of Debentures for redemption and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all holders of Debentures to be so redeemed and o register the transfer of or exchange any Debenture so selected for redemption, in whole or in part, except the unredeemed portion of any Debenture being redeemed in part. Conversion Rights Subject to the conditions described below, holders may convert their Debentures into our Ordinary Shares at a conversion ratio of 5.9467 Ordinary Shares per $1,000 principal amount at maturity of Debentures (equivalent to an initial conversion price of $99.81 per Ordinary Share). The conversion ratio and the equivalent conversion price in effect at any given time are referred to in this prospectus as the "applicable conversion rate" and the "applicable conversion price," respectively, and will be subject to adjustment as described below. If a Debenture has been called for redemption, holders will be entitled to convert such Debenture from the date of notice of the redemption until the close of business on the business day immediately preceding the date of redemption. A holder -19- may convert fewer than all of such holder's Debentures so long as the Debentures converted are an integral multiple of $1,000 principal amount. Holders may surrender their Debentures for conversion into our Ordinary Shares prior to stated maturity: o during any conversion period (as defined below) if the closing sale price of our Ordinary Shares for at least 20 trading days in the 30 trading-day period ending on the first day of such conversion period is more than 110% of the Accreted Conversion Price per Ordinary Share on the first day of the conversion period; or o during the five business-day period following any 10 consecutive trading-day period in which the average of the trading prices (as defined below) for a Debenture was less than 95% of the average closing sales price of our Ordinary Shares multiplied by the number of shares into which such Debenture is convertible for that period, then the Debentures are convertible into Ordinary Shares at the conversion rate; provided, however, if at conversion, the closing price of the Ordinary Shares is greater than 100% of the Accreted Conversion Price but less than or equal to 110% of the Accreted Conversion Price, then the holders may receive, in lieu of Ordinary Shares based on the applicable conversion rate, cash or Ordinary Shares, or a combination of both cash and Ordinary Shares, with a value equal to the then Accreted Value of the Debentures on the conversion date (the "Accreted Value Conversion"); or o if we have called such holders' Debentures for redemption; or o during such period, if any, that the credit rating assigned to the Debentures by Standard & Poor's is below a specified level, or if such rating agency is not rating the Debentures; or o upon the occurrence and continuance of specified corporate transactions. Conversion Upon Satisfaction of Market Price Condition A holder may surrender any of its Debentures for conversion into our Ordinary Shares during any conversion period if the closing sale prices of our Ordinary Shares on the principal national securities exchange on which the Ordinary Shares are listed, for a period of at least 20 trading days in the period of 30 consecutive trading days ending on the first day of such conversion period, is more than 110% of the Accreted Conversion Price per Ordinary Share on the first day of the conversion period. The Accreted Conversion Price per Ordinary Share as of any day will equal the Accreted Value of the Debentures divided by the number of Ordinary Shares issuable upon conversion of the Debentures on that day. A conversion period will be the period from and including the thirtieth trading day in a fiscal quarter to but not including the thirtieth trading day in the immediately following fiscal quarter. The conversion agent, which is State Street Bank and Trust Company, will, on our behalf, determine daily if the Debentures are convertible as a result of the market price of our Ordinary Shares and notify us and the Trustee. Conversion Upon Satisfaction of Trading Price Condition A holder may surrender any of its Debentures for conversion into our Ordinary Shares during the five business-day period beginning 10 business days following any 10 consecutive trading-day period in which the average of the trading prices for a Debenture was less than 95% of the average closing sales price of our Ordinary Shares multiplied by the number of shares into which such Debenture is convertible for that period; provided, however, that if at conversion, the closing price of the Ordinary Shares is greater than 100% of the Accreted Conversion Price but less than or equal to 110% of the Accreted Conversion Price, then the holders will receive, in lieu of Ordi- -20- nary Shares based on the applicable conversion rate, cash or Ordinary Shares, or a combination of both cash and Ordinary Shares, with a value equal to the then Accreted Value of the Debentures. If there is an Accreted Value Conversion, we may choose to pay the Accreted Value in cash or Ordinary Shares or a combination of cash and Ordinary Shares, in which event the Ordinary Shares will be valued at 100% of the average closing sales prices for the five trading days ending on the third day prior to the date of conversion. If we elect to pay all or a portion of the Accreted Value upon an Accreted Value Conversion in Ordinary Shares, we must notify holders not less than five business days prior to the beginning of the five day period in which holders can convert pursuant to an Accreted Value Conversion. The "trading price" of the Debentures on any date of determination means the average of the secondary market bid quotations per Debenture obtained by State Street Bank and Trust Company for $10,000,000 principal amount at maturity of the Debentures at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers we select, provided that if at least three such bids cannot reasonably be obtained by State Street Bank and Trust Company, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by State Street Bank and Trust Company, this one bid shall be used. If State Street Bank and Trust Company cannot reasonably obtain at least one bid for $10,000,000 principal amount at maturity of the Debentures from a nationally recognized securities dealer or in our reasonable judgment, the bid quotations are not indicative of the secondary market value of the Debentures, then the trading price of the Debentures will equal (a) the then-applicable conversion rate of the Debentures multiplied by (b) the closing price on the New York Stock Exchange of our Ordinary Shares on such determination date; provided that State Street Bank and Trust Company shall not determine the trading price of the Debentures unless requested by us; and provided, further, that we shall have no obligation to make such request unless a holder of Debentures provides us with reasonable evidence that the trading price of the Debenture may be less than 95% of the average closing sales price of our Ordinary Shares multiplied by the number of shares into which such Debentures are convertible for that period ("parity value"); and at which time, we shall instruct State Street Bank and Trust Company to determine the trading price of the Debentures beginning on the next trading day on each successive trading day until the trading price is greater than or equal to 95% of the parity value of the Debentures. State Street Bank and Trust Company shall be entitled to select the appropriate method for determining the trading price of the Debentures and shall be entitled to all of the rights of the trustee set forth in the Indenture in connection with any such determination. Any such determination shall be conclusive absent manifest error. A conversion period will be the five trading days beginning 10 business days following the 10th consecutive trading day on which the average of the trading prices of a Debenture was less than 95% of the average closing sales price of our Ordinary Shares multiplied by the number of shares into which such Debenture is convertible for that period. Conversion Upon Notice of Redemption A holder may surrender for conversion any of the Debentures called for redemption at any time prior to the close of business one business day prior to the redemption date, even if it is not otherwise convertible at such time. If a holder has already delivered a purchase notice or a change in control purchase notice with respect to a Debenture, however, the holder may not surrender that Debenture for conversion until the holder has withdrawn the notice in accordance with the Indenture. Conversion Upon Credit Rating Event A holder may surrender any of its Debentures for conversion during any period in which the credit rating assigned to the Debentures by Standard & Poor's is below BBB+, if the credit rating assigned to the Debentures is suspended or withdrawn by such rating agency or if such rating agency is not rating the Debentures. Conversion Upon Specified Corporate Transactions Even if the market price condition described above has not occurred, if we elect to: -21- o distribute to all holders of our Ordinary Shares certain rights entitling them to purchase, for a period expiring within 60 days, Ordinary Shares at less than the quoted price at the time or o distribute to all holders of our Ordinary Shares our assets, debt securities or certain rights to purchase our securities, which distribution has a per share value exceeding 12.5% of the closing price of Ordinary Shares on the day preceding the declaration date for such distribution, we must notify the holders of Debentures at least 20 days prior to the ex-dividend date for such distribution. Once we have given such notice, holders may surrender their Debentures for conversion at any time until the earlier of close of business on the business day prior to the ex-dividend date or our announcement that such distribution will not take place. No adjustment to the ability of a holder to convert will be made if the holder will otherwise participate in the distribution without conversion. In addition, if we are party to a consolidation, merger or binding share exchange pursuant to which our Ordinary Shares would be converted into cash, securities or other property, a holder may surrender Debentures for conversion at any time from and after the date which is 15 days prior to the anticipated effective date of the transaction until 15 days after the actual date of such transaction. If we are a party to a consolidation, merger or binding share exchange pursuant to which our Ordinary Shares are converted into cash, securities or other property, then at the effective time of the transaction, the right to convert a Debenture into Ordinary Shares will be changed into a right to convert it into the kind and amount of cash, securities or other property which the holder would have received if the holder had converted its Debentures immediately prior to the transaction. If the transaction also constitutes a "Change in Control," as defined below, the holder can require us to purchase all or a portion of its Debentures as described under " -- Change in Control." The initial conversion rate is 5.9467 Ordinary Shares for each $1,000 principal amount at maturity of Debentures. This is equivalent to an initial conversion price of $99.81 per Ordinary Share based on the issue price of the Debentures. You will not receive any cash payment representing accrued interest upon conversion of a Debenture. Instead, upon conversion we will deliver to the holders a fixed number of Ordinary Shares and any cash payment to account for fractional shares. The cash payment for fractional shares will be based on the closing price of our Ordinary Shares on the trading day immediately prior to the conversion date. Delivery of Ordinary Shares will be deemed to satisfy our obligation to pay the principal amount of the Debentures, including any accrued interest. Accrued interest will be deemed paid in full rather than canceled, extinguished or forfeited. We will not adjust the conversion ratio to account for the accrued interest. If you wish to exercise your conversion right, you must deliver an irrevocable conversion notice, together, if the Debentures are in certificated form, with the certificated security, to the conversion agent, which is State Street Bank and Trust Company who will, on your behalf, convert the Debentures into Ordinary Shares. You may obtain copies of the required form of the conversion notice from the conversion agent. Upon a conversion, based on our treatment of the Debentures for United States federal income tax purposes, as discussed above, a holder would be required to recognize ordinary income upon a conversion of a Debenture into our Ordinary Shares equal to the excess, if any, between the value of the stock received on the conversion and the sum of the original purchase price of the holder's Debenture and any accrued but unpaid interest. For a more detailed discussion, see "Certain Cayman Islands and United States Federal Income Tax Consequences." The conversion rate will be subject to adjustment upon the following events: o the payment of dividends and other distributions to all holders of our Ordinary Shares payable exclusively in our Ordinary Shares on our Ordinary Shares; -22- o the issuance to all holders of our Ordinary Shares of rights or warrants that allow the holders to purchase Ordinary Shares at less than the current market price; provided that no adjustment will be made if holders of the Debentures may participate in the transaction on a basis and with notice that our board of directors determines to be fair and appropriate or in some other cases; o subdivisions or combinations of our Ordinary Shares; o the payment of dividends and other distributions to all holders of our Ordinary Shares consisting of our debt, securities or assets or certain rights to purchase our securities, except for those rights or warrants referred to in the second bullet clause above and dividends and other distributions paid exclusively in cash, provided that no adjustment will be made if all holders of the Debenture may participate in the transactions; o the payment to holders of our Ordinary Shares in respect of a tender or exchange offer, other than an odd-lot offer, by us or any of our subsidiaries for our Ordinary Shares to the extent that the offer involves aggregate consideration that, together with (1) any cash and the fair market value of any other consideration payable in respect of any tender offer by us or any of our subsidiaries for shares of our Ordinary Shares consummated within the preceding 12 months not triggering a conversion price adjustment and (2) all-cash distributions to all or substantially all stockholders made within the preceding 12 months not triggering a conversion price adjustment, exceeds an amount equal to 12.5% of the market capitalization of our Ordinary Shares on the expiration date of the tender offer; and o the distribution to all or substantially all stockholders of all-cash distributions in an aggregate amount that, together with (1) any cash and the fair market value of any other consideration payable in respect of any tender offer by us or any of our subsidiaries for shares of our Ordinary Shares consummated within the preceding 12 months not triggering a conversion price adjustment and (2) all other all-cash distributions to all or substantially all stockholders made within the preceding 12 months not triggering a conversion price adjustment, exceeds an amount equal to 12.5% of the market capitalization of our Ordinary Shares on the business day immediately preceding the day on which we declare the distribution. There shall not be any adjustment to the conversion rate as a result of: o the issuance of rights, o the distribution of separate certificates representing rights, o the exercise or redemption of rights in accordance with any rights agreement, or o the termination or invalidation of rights, in each case, pursuant to our Rights Plan dated as of September 1998 filed as an exhibit to our annual report which is incorporated herein by reference or any other rights plan of XL Capital. The applicable conversion price will not be adjusted: o upon the issuance of any Ordinary Shares pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on our securities and the investment of additional optional amounts in Ordinary Shares under any plan; -23- o upon the issuance of any Ordinary Shares or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by us or any of our subsidiaries; or o upon the issuance of any Ordinary Shares pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security outstanding as of the date the Debentures were first issued. We may increase the conversion rate as permitted by law for at least 20 days, so long as the increase is irrevocable during the period. No adjustment in the applicable conversion price will be required unless the adjustment would require an increase or decrease of at least 1% of the applicable conversion price. If the adjustment is not made because the adjustment does not change the applicable conversion price by more than 1%, then the adjustment that is not made will be carried forward and taken into account in any future adjustment. Except as specifically described above, the applicable conversion price will not be subject to adjustment in the case of the issuance of any Ordinary Shares, or securities convertible into or exchangeable for Ordinary Shares. If a holder submits its Debenture for conversion after we have elected to exercise our option to pay cash interest instead of accruing interest if we are required to make a cash payment pursuant to an upward interest adjustment, between a record date and the opening of business on the next interest payment date (except for Debentures or portions of Debentures called for redemption on a redemption date occurring during the period from the close of business on a record date and ending on the opening of business on the first business day after the next interest payment date, or if this interest payment date is not a business day, the second business day after the interest payment date), such holder must pay funds equal to the interest payable on the converted principal amount. Repurchase Rights Holders have the right to require us to repurchase the Debentures on May 23, 2002, May 23, 2004, May 23, 2006, May 23, 2008, May 23, 2011 and May 23, 2016, each a repurchase date. We will be required to repurchase any outstanding Debentures for which you deliver a written repurchase notice to the paying agent, which is State Street Bank and Trust Company. This notice must be delivered during the period beginning at any time from the opening of business on the date that is 20 business days prior to the relevant repurchase date until the close of business on the last day prior to the repurchase date. If the repurchase notice is given and withdrawn during the period, we will not be obligated to repurchase the related Debentures. Our repurchase obligation will be subject to some additional conditions. The repurchase price payable will be equal to the Accreted Value plus accrued and unpaid cash interest, if any, on such repurchase date. The repurchase prices of a Debenture (assuming that an upward interest adjustment does not occur) as of each of the repurchase dates will be: o $609.25 per Debenture on May 23, 2002 o $641.88 per Debenture on May 23, 2004 o $676.24 per Debenture on May 23, 2006 o $712.45 per Debenture on May 23, 2008 o $770.43 per Debenture on May 23, 2011 o $877.74 per Debenture on May 23, 2016 -24- We may choose to pay the repurchase price in cash or Ordinary Shares or a combination of cash and Ordinary Shares. For a discussion of the tax treatment of a holder receiving cash, Ordinary Shares or any combination thereof, see "Certain Cayman Islands and United States Federal Income Tax Consequences." If we choose to pay the repurchase price in whole or in part in Ordinary Shares or a combination of cash and Ordinary Shares, we will be required to give notice on a date not less than 20 business days prior to each repurchase date to all holders at their addresses shown in the register of the registrar, and to beneficial owners as required by applicable law (i.e., if no notice is given, we will pay the repurchase price with cash), stating, among other things: o whether we will pay the repurchase price of the Debentures in cash, in Ordinary Shares, or any combination thereof, specifying the percentages of each; o if we elect to pay with Ordinary Shares, the method of calculating the price of our Ordinary Shares; and o the procedures that holders must follow to require us to repurchase their Debentures. If we pay with Ordinary Shares, they will be valued at 100% of the average closing sales prices of our Ordinary Shares for the five trading days ending on the third trading day prior to the repurchase date. Simultaneously with such notice of repurchase, we will disseminate a press release through Dow Jones & Company, Inc. or Bloomberg Business News containing this information or publish the information on our Web site or through such other public medium as we may use at that time. A holder's notice electing to require us to repurchase such holder's Debentures must state: o if certificated Debentures have been issued, the Debentures certificate numbers, or if not certificated, your notice must comply with appropriate DTC procedures; o the portion of the principal amount of Debentures to be repurchased, in multiples of $1,000; o that the Debentures are to be repurchased by us pursuant to the applicable provisions of the Debentures; and o in the event we elect, pursuant to the notice that we are required to give, to pay the repurchase price in Ordinary Shares, in whole or in part, but the repurchase price is ultimately to be paid to the holder entirely in cash because any of the conditions to payment of the repurchase price or portion of the repurchase price in Ordinary Shares is not satisfied prior to the close of business on the last day prior to the repurchase date, as described below, whether the holder elects: (1) to withdraw the repurchase notice as to some or all of the Debentures to which it relates, or (2) to receive cash in respect of the entire repurchase price for all Debentures or portions of Debentures subject to the repurchase notice. If the holder fails to indicate the holder's choice with respect to the election described in the final bullet point above, the holder will be deemed to have elected to receive cash in respect of the entire repurchase price for all Debentures subject to the repurchase notice in these circumstances. For a discussion of the tax treatment of a -25- holder receiving cash instead of our Ordinary Shares, see "Certain Cayman Islands and United States Federal Income Tax Consequences." You may withdraw any repurchase notice by a written notice of withdrawal delivered to the paying agent prior to the close of business on the last day prior to the repurchase date. The notice of withdrawal must state: o the principal amount of the withdrawn Debentures; o if certificated Debentures have been issued, the certificate numbers of the withdrawn Debentures, or if not certificated, your notice must comply with appropriate DTC procedures; and o the principal amount, if any, which remains subject to the repurchase notice. If we elect to pay the repurchase price, in whole or in part, in Ordinary Shares, the number of Ordinary Shares to be delivered by us will be equal to the portion of the repurchase price to be paid in Ordinary Shares divided by the market price of one of our Ordinary Shares as determined by us in our repurchase notice. We will pay cash based on the market price for all fractional shares. The "market price" means the average of the sale prices of our Ordinary Shares for the five trading day period ending on the third business day prior to the applicable repurchase date (if the third business day prior to the applicable repurchase date is a trading day, or if not, then on the last trading day prior to the third business day), appropriately adjusted to take into account the occurrence, during the period commencing on the first of the trading days during the five-trading day period and ending on the repurchase date, of some events that would result in an adjustment of the conversion rate with respect to our Ordinary Shares. The "sale price" of our Ordinary Shares on any date means the closing per share sale price (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average asked prices) on that date as reported in composite transactions for the principal U.S. securities exchange on which our Ordinary Shares are traded or, if our Ordinary Shares are not listed on a U.S. national or regional securities exchange, as reported by the Nasdaq system. Because the market price of our Ordinary Shares is determined prior to the applicable repurchase date, holders of Debentures bear the market risk with respect to the value of our Ordinary Shares to be received from the date the market price is determined to the repurchase date. We may pay the repurchase price or any portion of the repurchase price in Ordinary Shares only if the information necessary to calculate the market price is published in a daily newspaper of national circulation. Upon determination of the actual number of Ordinary Shares to be paid upon redemption of the Debentures, we will disseminate a press release through Dow Jones & Company, Inc. or Bloomberg Business News containing this information or publish the information on our Web site or through such other public medium as we may use at that time. A holder must either effect book-entry transfer or deliver the Debentures, together with necessary endorsements, to the office of the paying agent after delivery of the repurchase notice to receive payment of the repurchase price. A holder will receive payment on the repurchase date or the time of book-entry transfer or the delivery of the Debentures. If the paying agent holds money or securities sufficient to pay the repurchase price of the Debentures on the business day following the repurchase date, then: o the Debentures will cease to be outstanding; -26- o interest, including any interest payable pursuant to an interest adjustment (including any cash interest) will cease to accrue; and o all other rights of the holder will terminate. This will be the case whether or not book-entry transfer of the Debentures is made or whether or not the Debenture is delivered to the paying agent. We will comply with the provisions of Rule 13e-4 and any other tender offer rules under the Exchange Act which may be applicable at the time. We will file Schedule TO or any other schedule required in connection with any offer by us to repurchase the Debentures at your option. Ranking The Debentures are our unsecured and unsubordinated obligations and rank equal with all of our existing and future unsecured and unsubordinated indebtedness. We currently conduct substantially all our operations through our subsidiaries and our subsidiaries generate substantially all of our operating income and cash flow. As a result, distributions and advances from our subsidiaries are the principal source of funds necessary to meet our debt service obligations. Contractual provisions or laws, as well as our subsidiaries' financial condition and operating and regulatory requirements, may limit our ability to obtain cash from our subsidiaries that we require to pay our debt service obligations, including cash payments on the Debentures. In addition, holders of the Debentures will have a junior position to the claims of creditors of our subsidiaries on their assets and earnings. As of March 31, 2001, our subsidiaries had approximately $500.0 million of indebtedness, without giving effect to the anticipated use of proceeds, to which the Debentures would have been structurally subordinated. Change in Control If a Change in Control as defined below occurs, a holder of Debentures will have the right, at its option, to require us to repurchase all of its Debentures not previously called for redemption, or any portion of the principal amount thereof that is equal to $1,000 or an integral multiple of $1,000. The price we are required to pay is equal to the Accreted Value plus accrued and unpaid cash interest, if any, on the repurchase date. At our option, instead of paying the repurchase price in cash, we may pay the repurchase price in Ordinary Shares valued at 95% of the average of the closing sales prices of our Ordinary Shares for five trading days immediately preceding the third trading day prior to the repurchase date. We may only pay the repurchase price in our Ordinary Shares if we satisfy the conditions provided in the Indenture. Within 30 days after the occurrence of a Change in Control, we are obligated to give to the holders of the Debentures notice of the Change in Control and of the repurchase right arising as a result of the Change in Control. We must also deliver a copy of this notice to the Trustee. To exercise the repurchase right, a holder of the Debentures must deliver on or before the 30th day after the date of our notice irrevocable written notice to the Trustee of the holder's exercise of its repurchase right, together with the Debentures with respect to which the right is being exercised. We are required to repurchase the Debentures on the date that is 45 days after the date of our notice. A Change in Control will be deemed to have occurred at the time after the Debentures are originally issued that any of the following occurs: (1) any person, including any syndicate or group deemed to be a "person" under Section 13(d)(3) of the Exchange Act, acquires beneficial ownership, directly or indirectly, through a pur- -27- chase, merger or other acquisition transaction or series of transactions, of shares of our capital stock entitling the person to exercise 50% or more of the total voting power of all shares of our capital stock that is entitled to vote generally in elections of directors, other than an acquisition by us, any of our subsidiaries or any of our employee benefit plans and other than any transaction contemplated by the second bullet point of clause (2) below; or (2) we merge or consolidate with or into any other person (other than a subsidiary), any merger of another person (other than a subsidiary) into us, or we convey, sell, transfer or lease all or substantially all of our assets to another person (other than a subsidiary), other than any transaction: o that does not result in a reclassification, conversion, exchange or cancellation of outstanding Ordinary Shares (other than the cancellation of any of our outstanding Ordinary Shares held by the person with whom we merge or consolidate), or o pursuant to which the holders of our Ordinary Shares immediately prior to the transaction have the entitlement to exercise, directly or indirectly, 50% or more of the total voting power of all shares of capital stock entitled to vote generally in the election of directors of the continuing or surviving corporation immediately after the transaction, or o which is effected solely to change our jurisdiction of incorporation and results in a reclassification, conversion or exchange of outstanding shares of our Ordinary Shares solely into shares of common stock of the surviving entity. However, a Change in Control will not be deemed to have occurred if either: (A) the closing price per Ordinary Share for any five trading days within the period of 10 consecutive trading days ending immediately after the later of the Change in Control or the public announcement of the Change in Control, in the case of a Change in Control relating to an acquisition of capital stock, or the period of 10 consecutive trading days ending immediately before the Change in Control, in the case of Change in Control relating to a merger, consolidation or asset sale, equals or exceeds 105% of the conversion price of the Debentures in effect on each of those trading days or (B) all of the consideration (excluding cash payments for fractional shares and cash payments made pursuant to dissenters' appraisal rights) in a merger or consolidation otherwise constituting a Change in Control under clause (1) and/or clause (2) above consists of shares of common stock traded on a national securities exchange or quoted on the Nasdaq National Market (or will be so traded or quoted immediately following the merger or consolidation) and as a result of the merger or consolidation the Debentures become convertible into such shares of common stock. For purposes of these provisions: o the conversion price is equal to $1,000 divided by the conversion rate; o whether a person is a "beneficial owner" will be determined in accordance with Rule 13d-3 under the Exchange Act; and o "person" includes any syndicate or group that would be deemed to be a "person" under Section 13(d)(3) of the Exchange Act. -28- Rule 13e-4 under the Exchange Act requires the dissemination of prescribed information to security holders in the event of an issuer tender offer and may apply in the event that the repurchase option becomes available to the holders of Debentures. We will comply with this rule to the extent it applies at that time. The definition of Change in Control includes a phrase relating to the conveyance, transfer, sale, lease or disposition of "all or substantially all" of our and our subsidiaries' assets. There is no precise, established definition of the phrase "substantially all" under applicable law. Accordingly, the ability of a holder of Debentures to require us to repurchase its Debentures as a result of the conveyance, transfer, sale, lease or other disposition of less than all of our and our subsidiaries' assets may be uncertain. The foregoing provisions would not necessarily provide the holders of Debentures with protection if we are involved in a highly leveraged or other transaction that may adversely affect the holders. We have, and may in the future incur, other indebtedness with similar change in control provisions permitting its holders to accelerate or to require us to repurchase our indebtedness upon the occurrence of similar events or on some specified dates. If we fail to repurchase the Debentures when required following a Change in Control, we will be in default under the Indenture whether or not repurchase is permitted by the related subordination provisions. Merger and Sales of Assets by XL Capital We may not (1) consolidate with or merge into any other person or convey, transfer, sell or lease our properties and assets substantially as an entirety to any person, (2) permit any person to consolidate with or merge into us or (3) permit any person to convey, transfer, sell or lease that person's properties and assets substantially as an entirety to us unless: o in the case of (1) and (2) above, if we are not the surviving person, the surviving person assumes the payment of the principal of, premium, if any, and interest on the Debentures and the performance of our other covenants under the Indenture, and o in all cases, immediately after giving effect to the transaction, no Event of Default, and no event that, after notice or lapse of time or both, would become an Event of Default, will have occurred and be continuing. Events of Default The following are events of default with respect to the Debentures: o default for 30 days in payment of any interest installment due and payable on the Debentures (after any upward interest adjustment); o default in payment of principal of the Debentures and accrued interest (including any interest payable pursuant to any upward interest adjustment) at maturity, upon redemption, repurchase or following a Change in Control, when the same becomes due and payable; o default by us under any instrument or instruments under which there is or may be secured or evidenced any of our indebtedness (other than the Debentures) having an outstanding principal amount of $100,000,000 (or its equivalent in any other currency or currencies) or more, individually or in the aggregate, that has caused the holders thereof to declare such indebtedness to be due and payable prior to its stated maturity, unless such declaration has been rescinded within 30 days; -29- o default in the payment of the principal or premium, if any, of any bond, debenture, note or other evidence of our indebtedness, in each case for money borrowed, or in the payment of principal or premium, if any, under any mortgage, indenture, agreement or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness of us for money borrowed, which default for payment of principal or premium, if any, is in an aggregate principal amount exceeding $100,000,000 (or its equivalent in any other currency or currencies) when such indebtedness becomes due and payable (whether at maturity, upon redemption or acceleration or otherwise), if such default shall continue unremedied or unwaived for more than 30 business days after the expiration of any grace period or extension of the time for payment applicable thereto; o default in our performance of any other covenants or agreements in respect of the Debentures contained in the Indenture or the Debentures for 60 days after written notice to us by the Trustee or to us and the Trustee by the holders of at least 25% in aggregate principal amount of the Debentures then outstanding; and o certain events of bankruptcy, insolvency and reorganization of XL Capital. The Indenture requires that we file annually with the Trustee a certificate describing any Default by us in the performance of any conditions or covenants that has occurred under the Indenture and its status. We must give the Trustee written notice within 30 days of any default under the Indenture that could mature into an Event of Default described in the fourth or fifth clause above. The Indenture provides that if an Event of Default occurs and is continuing with respect to the Debentures, either the Trustee or the registered holders of at least 25% in aggregate principal amount of the Debentures, may declare the Accreted Value plus accrued and unpaid cash interest, if any, on the Debentures to be due and payable immediately. If an Event of Default relating to some events or bankruptcy, insolvency or reorganization occurs, the issue price plus accrued interest on the Debentures will become immediately due and payable without any action on the part of the Trustee or any holder. At any time after a declaration of acceleration, but before a judgment or decree for payment of money has been obtained, if all Events of Default with respect to the Debentures have been cured (other than the nonpayment of principal of the Debentures which has become due solely by reason of the declaration of acceleration) then the declaration of acceleration shall be automatically annulled and rescinded. A holder of Debentures may pursue any remedy under the Indenture only if: o the holder gives the Trustee written notice of a continuing event of default for the Debentures; o the holders of at least 25% in principal amount of the outstanding Debentures make a written request to the Trustee to pursue the remedy; o the holder offers to the Trustee indemnity reasonably satisfactory to the Trustee; o the Trustee fails to act for a period of 60 days after receipt of notice and offer of indemnity; and o during that 60-day period, the holders of a majority in principal amount of the Debentures do not give the Trustee a direction inconsistent with the request. This provision does not, however, affect the right of a holder of Debentures to sue for enforcement of payment of the principal of or interest, including liquidated damages, on the holder's Debenture on or after the respective due dates expressed in its Debenture or the holder's right to convert its Debenture in accordance with the Indenture. -30- The Trustee is entitled under the Indenture, subject to the duty of the Trustee during a Default to act with the required standard of care, to be indemnified before proceeding to exercise any right or power under the Indenture at the direction of the registered holders of the Debentures or which requires the Trustee to expend or risk its own funds or otherwise incur any financial liability. The Indenture also provides that the registered holders of a majority in principal amount of the outstanding Debentures (or of all debt securities affected, voting as one class) may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to that series of debt securities. The Trustee, however, may refuse to follow any such direction that conflicts with law or the Indenture, is unduly prejudicial to the rights of other registered holders of that series of debt securities, or would involve the Trustee in personal liability. The Indenture provides that while the Trustee generally must mail notice of a default or Event of Default to the registered holders of the debt securities of any series issued under the Indenture within 90 days of occurrence, the Trustee may withhold notice of any Default or Event of Default (except in payment on the debt securities) if the Trustee in good faith determines that the withholding of such notice is in the interest of the registered holders of that series of debt securities. Withholding Taxes All amounts payable (whether in respect of principal, interest or otherwise) in respect of the Debentures will be made free and clear of and without withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or governmental charges of whatever nature imposed or levied by or on behalf of the Cayman Islands or any political subdivision thereof or any authority or agency therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, levies, assessments or governmental charges is required by law. In that event, we will pay, or cause to be paid, such additional amounts as may be necessary in order that the net amounts receivable by the holder after such withholding or deduction shall equal the respective amounts which would have been receivable by such holder in the absence of such withholding or deduction; except that no such additional amounts shall be payable in relation to any payment in respect of any of the Debentures: o to, or to a third party on behalf of, a person who is liable for such taxes, duties, levies, assessments or governmental charges in respect of such Debenture by reason of his having some connection with (including, without limitation, being a citizen of, being incorporated or engaged in a trade or business in, or having a residence or principal place of business or other presence in) the Cayman Islands other than (a) the mere holding of such Debenture or (b) the receipt of principal, interest or other amount in respect such Debenture; or o presented for payment more than 30 days after the Relevant Date (as defined below), except to the extent that the relevant holder would have been entitled to such additional amounts on presenting the same for payment on or before the expiry of such period of thirty days; or o on account of any inheritance, gift, estate, personal property, sales, or transfer or similar taxes duties, levies, assessments or similar governmental charges; or o on account of any taxes, duties, levies, assessments or governmental charges that are payable otherwise than by withholding from payments in respect of such Debenture. 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 Trustee 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 Debentures. -31- If we become subject generally at any time to any taxing jurisdiction other than or in addition to the Cayman Islands, references in this section to the Cayman Islands shall be read and construed as references to such other jurisdiction(s) and/or to the Cayman Islands. In the event that any deduction or withholding on account of tax is required to be made, or is made, in connection with any European Union directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of November 26-27, 2000, or any law implementing or complying with, or introduced in order to conform to, such directive, no additional amounts shall be payable or paid by XL Capital to any holder in respect of the Debentures. Any reference in this section to "principal" and/or "interest" in respect of the Debentures shall be deemed also to refer to any additional amounts which may be payable under this section. Unless the context otherwise requires, any reference in this section to "principal" shall include any premium payable in respect of a Debenture, any redemption amount and any other amounts in the nature of principal payable pursuant to this section and "interest" shall include all amounts payable pursuant to this section and any other amounts in the nature of interest payable pursuant to this section. Modification and Waiver We may amend or supplement the Indenture if the holders of a majority in principal amount of the Debentures consent to it. Without the consent of the holder of each Debenture, however, no modification may: o reduce the amount of Debentures whose holders must consent to an amendment, supplement or waiver; o reduce the rate or accrual of interest or change the time for payment of interest on the Debentures; o reduce the calculation of the value of our Ordinary Shares to which reference is made in determining whether an interest adjustment will be made on the Debentures, or change the method by which this value is calculated; o reduce the issue price, the principal amount of the Debentures or change its final stated maturity; o reduce the redemption or repurchase price of the Debentures or change the time at which the Debentures may or must be redeemed or repurchased; o make payments on the Debentures payable in currency other than as originally stated in the Debentures; o impair the holder's right to institute suit for the enforcement of any payment on the Debentures; o make any change in the percentage of principal amount of Debentures necessary to waive compliance with some provisions of the Indenture or to make any change in this provision for modification; o waive a continuing default or event of default regarding any payment on the Debentures; or o adversely affect the conversion or repurchase provisions of the Debentures. We may amend or supplement the Indenture or waive any provision of it without the consent of any holders of Debentures in some circumstances, including: -32- o to cure any ambiguity, omission, defect or inconsistency; o to provide for the assumption of our obligations under the Indenture by a successor upon any merger, consolidation or asset transfer permitted under the Indenture; o to provide for uncertificated Debentures in addition to or in place of certificated Debentures or to provide for bearer Debentures; o to provide any security for or guarantees of the Debentures; o to comply with any requirement to effect or maintain the qualification of the Indenture under the Trust Indenture Act of 1939; o to add covenants that would benefit the holders of Debentures or to surrender any rights we have under the Indenture; o to add events of default with respect to the Debentures; or o to make any change that does not adversely affect any outstanding Debentures of any series in any material respect. The holders of a majority in principal amount of the outstanding Debentures may waive any existing or past default or Event of Default. Those holders may not, however, waive any default or event of default in any payment on any Debenture or compliance with a provision that cannot be amended or supplemented without the consent of each holder affected. Calculations in Respect of Debentures We are responsible for making all calculations called for under the Debentures, except for such calculations made by the Reset Rate Agent. These calculations include, but are not limited to, determinations of the market prices of the Debentures and of our Ordinary Shares, any accrued interest payable on the Debentures, the Accreted Value of the Debentures, and the Accreted Conversion Price of the Debentures. We will make all these calculations in good faith and, absent manifest error, our calculations will be final and binding on holders of Debentures. We will provide a schedule of our calculations to the Trustee, and the Trustee is entitled to rely upon the accuracy of our calculations without independent verification. The Trustee will forward our calculations to any holder of Debentures upon the request of that holder. Governing Law The Indenture and the Debentures are governed by, and construed in accordance with, the laws of the State of New York. Trustee State Street Bank and Trust Company is the Trustee, registrar, conversion agent and paying agent. If an Event of Default occurs and is continuing, the Trustee is required to use the degree of care and skill of a prudent man in the conduct of his own affairs. The Trustee will become obligated to exercise any of its powers under the Indenture at the request of any of the holders of any Debentures only after those holders have offered the Trustee indemnity reasonably satisfactory to it. -33- If the Trustee becomes one of our creditors, it will be subject to limitations in the Indenture on its rights to obtain payment of claims or to realize on some property received for any such claim, as security or otherwise. The Trustee is permitted to engage in other transactions with us. If, however, it acquires any conflicting interest, it must eliminate that conflict or resign. Form, Exchange, Registration and Transfer We issued the Debentures in registered form, without interest coupons. We will not charge a service charge for any registration of transfer or exchange of the Debentures. We may, however, require the payment of any tax or other governmental charge payable for that registration. Debentures are exchangeable for other Debentures, for the same Accreted Value and for the same terms but in different authorized denominations in accordance with the Indenture. Holders may present Debentures for registration of transfer at the office of the security registrar or any transfer agent we designate. The security registrar or transfer agent will effect the transfer or exchange when it is satisfied with the documents of title and identity of the person making the request. We have appointed the Trustee as security registrar for the Debentures. We may at any time rescind that designation or approve a change in the location through which any registrar acts. We are required to maintain an office or agency for transfers and exchanges in each place of payment. We may at any time designate additional registrars for the Debentures. In the case of any redemption, the security registrar will not be required to register the transfer or exchange of any Debentures either: o during a period beginning 15 business days prior to the mailing of the relevant notice of redemption and ending on the close of business on the day of mailing of the notice, or o if the Debentures have been called for redemption in whole or in part, except the unredeemed portion of any Debentures being redeemed in part. Payment and Paying Agents Payments on the Debentures will be made in U.S. dollars at the office of the Trustee. At our option, however, we may make payments by check mailed to the holder's registered address or, with respect to global Debentures, by wire transfer. We will make any required interest payments to the person in whose name each Debenture is registered at the close of business on the record date for the interest payment. The Trustee has been designated as our paying agent for payments on the Debentures. We may at any time designate additional paying agents or rescind the designation of any paying agent or approve a change in the office through which any paying agent acts. Subject to the requirements of any applicable abandoned property laws, the Trustee and paying agent shall pay to us upon written request any money held by them for payments on the Debentures that remain unclaimed for two years after the date upon which that payment has become due. After payment to us, holders entitled to the money must look to us for payment. In that case, all liability of the Trustee or paying agent with respect to that money will cease. -34- Notices Except as otherwise described herein, notice to registered holders of the Debentures will be given by mail to the addresses as they appear in the security register. Notices will be deemed to have been given on the date of such mailing. Replacement of Debentures We will replace any Debentures that become mutilated, destroyed, stolen or lost at the expense of the holder upon delivery to the Trustee of the mutilated Debentures or evidence of the loss, theft or destruction satisfactory to us and the Trustee. In the case of a lost, stolen or destroyed Debentures, indemnity satisfactory to the Trustee and us may be required at the expense of the holder of the Debentures before a replacement note will be issued. Payment of Stamp and Other Taxes We will pay all stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance of the Debentures. We will not be required to make any payment with respect to any other tax, assessment or governmental charge imposed by any government or any political subdivision thereof or taxing authority thereof or therein. Book-Entry System The Debentures are represented by one or more global securities (each a "Global Security"). Each Global Security has been deposited with, or on behalf of, DTC and has been registered in the name of a nominee of DTC. Except under circumstances described below, the Debentures will not be issued in definitive form. Ownership of beneficial interests in a Global Security is limited to persons that have accounts with DTC or its nominee ("participants") or persons that may hold interests through participants. Ownership of beneficial interests in a Global Security will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of persons other than participants). The laws of some states require that some purchasers of securities take physical delivery of the securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a Global Security. So long as DTC or its nominee is the registered owner of a Global Security, DTC or its nominee, as the case may be, will be considered the sole owner or holder of the Debentures represented by that Global Security for all purposes under the Indenture. Except as provided below, owners of beneficial interests in a Global Security will not be entitled to have the Debentures represented by that Global Security registered in their names, will not receive or be entitled to receive physical delivery of the Debentures in definitive form, and will not be considered the owners or holders thereof under the Indenture. Principal and interest payments, if any, on the Debentures registered in the name of DTC or its nominee will be made to DTC or its nominee, as the case may be, as the registered owner of the relevant Global Security. Neither XL Capital, the Trustee, any paying agent or the registrar for the Debentures will have any responsibility or liability for any aspect of the records relating to nor payments made on account of beneficial interests in a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial interests. We expect that DTC or its nominee, upon receipt of any payment of principal or interest, if any, will credit immediately participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the relevant Global Security as shown on the records of DTC or its nominee. We also expect that payments by participants to owners of beneficial interests in a Global Security held through these participants will be governed by standing instructions and customary practices, as is the case with securities held for the -35- accounts of customers in bearer form or registered in "street name," and will be the responsibility of the participants. If DTC is at any time unwilling or unable to continue as a depositary and a successor depositary is not appointed by us within 90 days, we will issue the Debentures in definitive form in exchange for the entire Global Security for the Debentures. In addition, we may at any time and in our sole discretion determine not to have the Debentures represented by a Global Security and, in such event, will issue the Debentures in definitive form in exchange for the entire Global Security relating to the Debentures. In any such instance, an owner of a beneficial interest in a Global Security will be entitled to physical delivery in definitive form of the Debentures represented by the Global Security equal in principal amount to the beneficial interest and to have the Debentures registered in its name. Debentures so issued in definitive form will be issued as registered Debentures in denominations of $1,000 and integral multiples thereof, unless otherwise specified by us. -36- DESCRIPTION OF ORDINARY SHARES We are a Cayman Islands exempted liability company. Our authorized share capital is $9,990,000 divided into 999,990,000 Class A Ordinary Shares, par value $0.01. As of March 31, 2001, there were 125,172,419 Ordinary Shares outstanding. The following description of our Ordinary Shares is a summary. This summary is not complete and is subject to the complete text of our Memorandum of Association and our Articles of Association. Voting The holders of our Ordinary Shares are entitled to one vote per share. Under the Cayman Islands Companies Law (2001 Revision) (the "Law") and our Memorandum and Articles of Association, some matters, such as altering the Memorandum or the Articles of Association, changing the name of a company, voluntarily winding up a company or removing a director, require approval of shareholders by a special resolution. A special resolution is a resolution: o passed by a majority of not less than two-thirds of such shareholders, as being entitled to do so, vote in person or by proxy at a general meeting or o approved in writing by all shareholders entitled to vote at a general meeting of the company. Our Articles of Association restrict the voting power of any shareholder to less than approximately 10% of total voting power. Dividend Rights Subject to the Law and any rights and restrictions of any other class or series of shares, the Board of Directors may, from time to time, declare dividends on the shares issued and authorize payment of the dividends out of our profit realized or unrealized or out of monies otherwise available for dividends in accordance with the Law. The Board of Directors may declare that any dividend be paid wholly or partly by the distribution of our shares and/or specific assets. Our declaration and payment of future dividends will be at the discretion of our Board of Directors and will depend upon many factors, including our earnings, financial condition, business needs, and the capital and surplus requirements of our operating subsidiaries and regulatory restrictions. As a holding company, our principal source of income is dividends or other statutorily permissible payments from our subsidiaries. The ability of our subsidiaries to pay such dividends is limited by the applicable laws and regulations of the Cayman Islands, the United States, and the United Kingdom, including the Society of Lloyd's. Rights Upon Liquidation Upon our liquidation, after the payments to be made in accordance with the Law and the full amounts that holders of any issued shares ranking senior to the Ordinary Shares as to distribution on liquidation or winding up are entitled to receive have been paid or set aside for payment, the holders of the Ordinary Shares are entitled to receive, pro rata, any remaining assets available for distribution to the holders of Ordinary Shares. The liquidator may deduct from the amount payable in respect of those Ordinary Shares any liabilities the holder has to or with us. The -37- assets received by the holders of Ordinary Shares in a liquidation may consist in whole or in part of property. That property is not required to be of the same kind for all shareholders. Stock Plans Our executive stock plan, the "1991 Performance Incentive Program", provides for grants of non-qualified or incentive stock options, restricted stock awards and stock appreciation rights ("SARs"). The plan is administered by us and the Compensation Committee of the Board of Directors. Stock options may be granted with or without SARs. Grant prices are established at the fair market value of our common stock at the date of grant. Options and SARs have a life of 10 years and vest annually over three years from date of grant. Restricted stock awards issued under the 1991 Performance Incentive Program plan vest over a five year period from the date of grant. These shares contained certain restrictions, for said period, relating to, among other things, forfeiture in the event of termination of employment and transferability. As the shares are issued, deferred compensation equivalent to the difference between the issue price and the estimated fair market value on the date of the grant is charged to shareholders' equity and subsequently amortized over the five-year restriction period. Restricted stock issued under the plan totaled 77,472 shares, 113,100 shares and 147,836 shares in 2000, 1999 and 1998, respectively. Restricted stock awards granted by NAC Re Corp. prior to our merger with it amounted to 3,627 shares and 23,700 shares in 1999 and 1998, respectively. Vesting for such shares generally occurs over a six year period. We also have stock plans in place for our non-employee directors. The "Stock and Option Plan" issues non-qualified options to the directors, 4,000 shares, at the commencement of their directorship and 5,000 shares each year thereafter. All options vest immediately on the grant date. Effective April 11, 1997, all options granted to non-employee directors are granted under the 1991 Performance Incentive Program. Directors may also make an irrevocable election preceding the beginning of each fiscal year to defer cash compensation that would otherwise be payable as his or her annual retainer in increments of $5,000. The deferred payments are credited in the form of shares calculated by dividing 110% of the deferred payment by the market value of our stock at the beginning of the fiscal year. Each anniversary thereafter, 20% of these shares are distributed. Shares issued under the plan totaled 7,846, nil and 2,737 in 2000, 1999 and 1998, respectively. A second stock plan, intended to replace the directors' "Retirement Plan for Non-Employee Directors," provides for the issuance of share units equal to the amount that would have been credited to the Retirement Plan, divided by the market price our stock on January 1 of each year. These units receive dividends in the form of additional units equal to the cash value divided by the market price on the payment date. Share units totaling 13,237, 1,217 and 5,531 were issued in 2000, 1999 and 1998, respectively. Options generally have a five or six year vesting schedule, with the majority expiring 10 years from the date of grant; the remainder having no expiration. A stock plan is also maintained for non-employee directors. Options expire 10 years from the date of grant and are fully exercisable six months after their grant date. In 1999, we adopted our 1999 Performance Incentive Plan under which 1,250,000 options were available and issued to employees who were not directors or executive officers. Share Rights Plan Rights to purchase Ordinary Shares (the "Rights") were distributed as a dividend at the rate of one Right for each Ordinary Share held of record as of the close of business on October 31, 1998. Each Right entitles holders of Ordinary Shares to buy one Ordinary Share at an exercise price of $350. The Rights would be exercisable, and would detach from the Ordinary Shares, only if a person or group were to acquire 20% or more of our outstanding Ordinary Shares, or were to announce a tender or exchange offer that, if consummated, would result in a person or -38- group beneficially owning 20% or more of Ordinary Shares. Upon a person or group without prior approval of the Board acquiring 20% or more of Ordinary Shares, each Right would entitle the holder (other than such an acquiring person or group) to purchase Ordinary Shares (or, in certain circumstances, Ordinary Shares of the acquiring person) with a value of twice the Rights exercise price upon payment of the Rights exercise price. We will be entitled to redeem the Rights at $0.01 per Right at any time until the close of business on the tenth day after the Rights become exercisable. The Rights will expire at the close of business on September 30, 2008, and do not initially have a fair value. We have initially reserved 119,073,878 authorized Ordinary Shares for issue upon exercise of Rights. Classified Board Our Board of Directors is divided into three classes that are elected for staggered three-year terms. A director may be removed by the shareholders without cause only by special resolution of the total voting power of our issued shares determined in accordance with our Articles of Association. -39- CERTAIN CAYMAN ISLANDS AND UNITED STATES FEDERAL INCOME TAX CONSEQUENCES Cayman Islands The Cayman Islands at present impose no taxes on income, profits, capital gains or appreciations of XL Capital. There are also currently no taxes imposed in the Cayman Islands on income, profits, capital gains or appreciations of the holders of the Debentures nor any taxes on the holders of the Debentures in the nature of estate duty or capital transfer tax. Further, as an exempted company, we have obtained an undertaking from the Cayman Islands Government authorities that, for a period of twenty years from the date of our incorporation, no law which is enacted in the Cayman Islands imposing any tax on profit, income, capital gains or appreciations will apply to us and that, for the same period of twenty years, no taxes on profit, income, capital gains or appreciations nor any tax in the nature of estate duty or inheritance tax will be payable on the Ordinary Shares, Debentures or other obligations of XL Capital. United States This discussion describes the material United States federal income tax consequences to holders of the Debentures. It applies to you only if you acquire Debentures and you hold your Debentures as capital assets for United States federal income tax purposes. This section does not apply to you if you are a member of a class of holders subject to special rules, such as: o a dealer in securities or currencies, o a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings, o a bank, o a life insurance company, o a tax-exempt organization, o a person treated as a partnership for United States federal income tax purposes, o a person that owns Debentures that are a hedge or that are hedged against interest rate risks, o a person that owns Debentures as part of a straddle or conversion transaction for United States federal income tax purposes, or o a person whose functional currency for United States federal income tax purposes is not the U.S. dollar. The summary below does not address all of the tax consequences that may be relevant to a holder of the Debentures. In particular, it does not address: o the U.S. federal estate, gift or alternative minimum tax consequences of the purchase, ownership or disposition of the Debentures, o state, local or foreign tax consequences of the purchase, ownership or disposition of the Debentures, or -40- o federal (except in respect of Non-U.S. Holders (as defined below)), state, local or foreign tax consequences of owning or disposing of our Ordinary Shares. Accordingly, you should consult your tax advisor regarding the tax consequences of purchasing, owning and disposing of the Debentures and our Ordinary Shares in light of your own circumstances. If a partnership holds the Debentures, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner in a partnership holding the Debentures, you should consult your tax advisors. This discussion is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations under the Internal Revenue Code, published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. No statutory, administrative or judicial authority directly addresses the treatment of the Debentures or instruments similar to the Debentures for United States federal income tax purposes. No rulings have been sought or are expected to be sought from the Internal Revenue Service (the "IRS") with respect to any of the United States federal income tax consequences discussed below, and no assurance can be given that the IRS will not take contrary positions. As a result, no assurance can be given that the IRS will agree with the tax characterizations and the tax consequences described below. We urge prospective investors to consult their tax advisors with respect to the tax consequences to them of the purchase, ownership and disposition of the Debentures and our Ordinary Shares in light of their own particular circumstances, including the tax consequences under state, local, foreign and other tax laws and the possible effects of changes in United States federal or other tax laws. Classification of the Debentures Pursuant to the terms of the Indenture, each holder of the Debentures agreed, for United States federal income tax purposes, to treat the Debentures as indebtedness for United States federal income tax purposes subject to the regulations governing contingent payment debt instruments and to be bound by our application of those regulations to the Debentures, including our determination of the rate at which interest will be deemed to accrue on the Debentures for United States federal income tax purposes. The remainder of this discussion assumes that the Debentures will be treated in accordance with that agreement and our determinations. However, the proper application of the regulations governing contingent payment debt instruments to a holder of a Debenture is uncertain in a number of respects, and no assurance can be given that the IRS will not assert that the Debentures should be treated differently or that such an assertion would not prevail. Such treatment could affect the amount, timing and character of income, gain or loss in respect of an investment in the Debentures. In particular, it might be determined that a holder should have accrued interest income at a lower rate, should not have recognized income or gain upon the conversion, and should not have recognized ordinary income upon a taxable disposition of its Debentures. U.S. Holders This discussion applies to U.S. Holders. You are a U.S. holder if you are a beneficial owner of a Debenture and you are, for United States federal income tax purposes: o a citizen or resident of the United States, o a domestic corporation, -41- o an estate whose income is subject to United States federal income tax regardless of its source, or o a trust if a United States court can exercise primary supervision over the trust's administration and one or more United States persons are authorized to control all substantial decisions of the trust. You are a non-U.S. Holder, and should see "Treatment of Non-U.S. Holders" below, if you are a beneficial owner of a Debenture and you are, for United States federal income tax purposes: o a nonresident alien individual, o a foreign corporation, or o a foreign estate or trust that is not subject to United States federal income taxation on its worldwide income. Under the rules governing contingent payment debt obligations, a U.S. Holder generally will be required to accrue interest income on the Debentures, in the amounts described below, regardless of whether the U.S. Holder uses the cash or accrual method of tax accounting. Accordingly, U.S. Holders would likely be required to include interest in taxable income in each year in excess of the accruals on the Debentures for non-tax purposes and in excess of any contingent interest payments actually received in that year. A U.S. Holder must accrue an amount of original issue discount as ordinary income for United States federal income tax purposes, for each accrual period prior to and including the maturity date of the Debentures that equals: o the product of (i) the adjusted issue price (as defined below) of the Debentures as of the beginning of the accrual period; and (ii) the comparable yield to maturity (as defined below) of the Debentures, adjusted for the length of the accrual period; o divided by the number of days in the accrual period; and o multiplied by the number of days during the accrual period that the U.S. Holder held the Debentures. The issue price of a Debenture is the first price at which a substantial amount of the Debentures is sold to the public, excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. The adjusted issue price of a Debenture is its issue price increased by any interest income previously accrued, determined without regard to any adjustments to interest accruals described below and decreased by the projected amounts of any payments with respect to the Debentures. Under the rules governing contingent payment debt obligations, we are required to establish the "comparable yield" for the Debentures. We have determined that the comparable yield for the Debentures is the annual yield we would incur, as of the initial issue date, on a fixed rate nonconvertible debt security with no contingent payments, but with terms and conditions otherwise comparable to those of the Debentures including the level of subordination, term, timing of payments and general market conditions, but excluding any adjustments for liquidity or the riskiness of the contingencies with respect to the Debentures. Accordingly, we have determined the comparable yield to be 7.64% compounded semi-annually. We are required to provide to U.S. Holders, solely for United States federal income tax purposes, a schedule of the projected amounts of payments on the Debentures. This schedule must produce the comparable yield. Our determination of the projected payment schedule for the Debentures includes estimates for payments of contin- -42- gent interest and an estimate for a payment at maturity taking into account the conversion feature. U.S. Holders may obtain the projected payment schedule by submitting a written request for it to XL Capital at the address set forth in "Incorporation of Documents by Reference." THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT DETERMINED FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF A U.S. HOLDER'S INTEREST ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE DEBENTURES FOR UNITED STATES FEDERAL INCOME TAX PURPOSES AND DO NOT CONSTITUTE A PROJECTION OR REPRESENTATION REGARDING THE ACTUAL AMOUNTS PAYABLE TO U.S. HOLDERS OF THE DEBENTURES. Adjustments to Interest Accruals on the Debentures If a U.S. Holder receives actual payments with respect to the Debentures in a taxable year that in the aggregate exceed the total amount of projected payments for that taxable year, the U.S. Holder would incur a "net positive adjustment" equal to the amount of such excess. The U.S. Holder would treat the "net positive adjustment" as additional interest income for the taxable year. For this purpose, the payments in a taxable year include the fair market value of property received in that year. If a U.S. Holder receives actual payments with respect to the Debentures in a taxable year that in the aggregate are less than the amount of the projected payments for that taxable year, the U.S. Holder would incur a "net negative adjustment" equal to the amount of such deficit. This adjustment will (a) reduce the U.S. Holder's interest income on the Debentures for that taxable year, and (b) to the extent of any excess after the application of (a), give rise to an ordinary loss to the extent of the U.S. Holder's interest income on the Debentures during prior taxable years, reduced to the extent such interest was offset by prior net negative adjustments. Sale, Exchange, Conversion or Redemption Generally, the sale or exchange of a Debenture, or the redemption of a Debenture for cash, will result in taxable gain or loss to a U.S. Holder. In addition, as described above, our calculation of the comparable yield and the schedule of projected payments for the Debentures includes the receipt of stock upon conversion of a Debenture into our Ordinary Shares as a contingent payment with respect to the Debentures. Accordingly, we intend to treat the receipt of our Ordinary Shares by a U.S. Holder upon the conversion of a Debenture, or upon the redemption of a Debenture where we elect to pay in Ordinary Shares, as a contingent payment. As described above, holders are generally bound by our determination of the comparable yield and the schedule of projected payments. Under this treatment, a sale or exchange, or such a conversion or redemption, also will result in taxable gain or loss to the U.S. Holder. The amount of gain or loss on a taxable sale, exchange, conversion or redemption will equal the difference between: o the amount of cash plus the fair market value of any other property received by the U.S. Holder, including the fair market value of any Ordinary Shares received, and o the U.S. Holder's adjusted tax basis in the Debentures. A U.S. Holder's adjusted tax basis in a Debenture generally will equal the U.S. Holder's original purchase price for the Debentures, increased by any original issue discount previously accrued by the U.S. Holder (determined without regard to any positive or negative adjustments to interest accruals described above), and decreased by the amount of any projected payments on the Debentures. Gain recognized upon a sale, exchange, conversion or redemption of a Debenture generally will be treated as ordinary interest income; any loss will be ordinary loss to the extent of interest previously included in income, and thereafter, capital loss (which will be long-term if the Debenture is held for more than one year). The deductibility of net capital losses is subject to limitations. -43- A U.S. Holder's tax basis in our Ordinary Shares received upon a conversion of a Debenture or upon a holder's exercise of a put right that we elect to pay in Ordinary Shares will equal the then current fair market value of such Ordinary Shares. The U.S. Holder's holding period for the Ordinary Shares received will commence on the day after the date of conversion or redemption. Constructive Dividends If at any time we make a distribution of property to our shareholders that would be taxable to the shareholders as a dividend for United States federal income tax purposes and, in accordance with the anti-dilution provisions of the Debentures, the exchange rate of the Debentures is increased, such increase may be deemed to be the payment of a taxable dividend to holders of the Debentures. For example, an increase in the exchange rate in the event of distribution of our evidence of indebtedness or our assets or an increase in the event of an extraordinary cash dividend will generally result in deemed dividend treatment to holders of the Debentures, but generally an increase in the event of share dividends or the distribution of rights to subscribe for our Ordinary Shares will not. Treatment of Non-U.S. Holders Payments on the Debentures or the Ordinary Shares to a non-U.S. Holder, or gain realized on the sale, exchange or redemption of the Debentures or the Ordinary Shares by a non-U.S. Holder, will not be subject to U.S. federal income or withholding tax, as the case may be, unless such income is effectively connected with a trade or business conducted by such non-U.S. Holder in the United States, or, in the case of gain, such non-U.S. Holder is a nonresident alien individual who holds the Debentures or Ordinary Shares, as the case may be, as a capital asset and who is present in the United States more than 182 days in the taxable year of the sale and certain other conditions are met. U.S. trade or business income of a non-U.S. Holder will generally be subject to regular United States federal income tax in the same manner as if it were realized by a U.S. Holder. Non-U.S. Holders that realize U.S. trade or business income with respect of the Debentures or Ordinary Shares should consult their tax advisors as to the treatment of such income or gain. Back-up Withholding and Information Reporting U.S. Holders Payments of interest or dividends made by us on, or the proceeds of the sale or other disposition of, the Debentures or Ordinary Shares may be subject to information reporting and United States federal backup withholding tax at the rate of 31% if the recipient of such payment fails to supply an accurate taxpayer identification number or otherwise fails to comply with applicable United States information reporting or certification requirements. Any amount withheld from a payment to a U.S. Holder under the backup withholding rules is allowable as a credit against the holder's United States federal income tax, provided that the required information is furnished to the IRS. Non-U.S. Holders A non-U.S. Holder may be required to comply with certification procedures to establish that the holder is not a U.S. person in order to avoid backup withholding tax and information reporting requirements. -44- Proposed European Union Tax Directive The European Union is currently considering proposals for a new directive regarding the taxation of savings income. Subject to a number of important conditions being met, it is proposed that Member States be required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by an issuer or its paying agent within its jurisdiction to an individual resident in that other Member State, subject to the right of certain Member States to opt instead for a withholding system for a transitional period in relation to such payments. Accordingly, it is possible that payments on the Debentures may be subject to withholding tax under this directive. In such event, XL Capital would not make any additional payments to Holders to compensate them for the amounts so withheld. THE PROPER TAX TREATMENT OF A HOLDER OF DEBENTURES IS HIGHLY UNCERTAIN IN A NUMBER OF RESPECTS. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF AN INVESTMENT IN THE DEBENTURES AND WHETHER AN INVESTMENT IN THE DEBENTURES IS ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND THE HOLDER'S PARTICULAR TAX SITUATION. -45- SELLING SECURITYHOLDERS The Debentures were originally issued by us and sold by Goldman, Sachs & Co., Deutsche Banc Alex. Brown Inc. and Dresdner Kleinwort Wasserstein LLC (the "Initial Purchasers") in a transaction exempt from the registration requirements of the Securities Act to persons reasonably believed by the Initial Purchasers to be "qualified institutional buyers" as defined by Rule 144A under the Securities Act. The selling securityholders may from time to time offer and sell pursuant to this prospectus any or all of the Debentures listed below and our Ordinary Shares issued upon conversion of such Debentures. When we refer to the "selling securityholders" in this prospectus, we mean those persons listed in the table below, as well as the permitted pledgees, donees, assignees, transferees, successors and others who later hold any of the selling securityholders' interests. The table below sets forth the name of each selling securityholder, the principal amount at maturity of Debentures, as of August 3, 2001, that each selling securityholder may offer pursuant to this prospectus and the number of our Ordinary Shares into which such Debentures are convertible. Unless set forth below, none of the selling securityholders has, or within the past three years has had, any material relationship with us or any of our predecessors or affiliates. We have prepared the table below based on information given to us by the selling securityholders on or prior to August 3, 2001. However, any or all of the Debentures or our Ordinary Shares listed below may be offered for sale pursuant to this prospectus by the selling securityholders from time to time. Accordingly, no estimate can be given as to the amounts of Debentures or our Ordinary Shares that will be held by the selling securityholders upon consummation of any such sales. In addition, the selling securityholders listed in the table below may have acquired, sold or transferred, in transactions exempt from the registration requirements of the Securities Act, some or all of their Debentures since the date as of which the information in the table is presented. Information about the selling securityholders may change over time. Any changed information will be set forth in prospectus supplements. From time to time, additional information concerning ownership of the Debentures and our Ordinary Shares may rest with certain holders thereof not named in the table below and of whom we are unaware.
Aggregate Principal Percentage Number of Our Percentage of Amount at Maturity of Ordinary Shares Our Ordinary of Debentures That Debentures That May be Sold Shares Name May be Sold Outstanding (1) Outstanding (2) - ------------------------------------ ------------------- ----------- ---------------- --------------- Tribeca Investments, L.L.C......... 20,000,000 2.0 118,934 * Continental Casualty Company....... 4,300,000 * 25,571 * J.P. Morgan Securities 14,500,000 1.4 86,228 * Inc................ RAM Trading Ltd.................... 5,000,000 * 29,734 * SAM Investments LDC................ 50,000,000 5.0 297,335 * Royal Bank of Canada............... 9,000,000 * 53,520 * Lord Abbett Bond Debenture Fund, Inc............................. 12,500,000 1.2 74,334 * -46- Aggregate Principal Percentage Number of Our Percentage of Amount at Maturity of Ordinary Shares Our Ordinary of Debentures That Debentures That May be Sold Shares Name May be Sold Outstanding (1) Outstanding (2) - ------------------------------------- ------------------- ----------- ---------------- --------------- CFFX, LLC.......................... 11,000,000 1.1 65,414 * Global Bermuda Limited Partnership. 3,000,000 * 17,840 * Lakeshore International Ltd........ 7,000,000 * 41,627 * MedAmerica Insurance c/o Income Research & Management........... 2,900,000 * 17,245 * MedAmerica New York Insurance c/o Income Research & Management.... 1,200,000 * 7,136 * Blue Cross Blue Shield of Rochester c/o Income Research & Management...................... 4,400,000 * 26,166 * Van Kampen Harbor Fund................. 10,000,000 1.0 59,467 * Putnam Convertible Income- Growth 9,110,000 * 54,174 * Trust................................... Putnam Variable Trust- Putnam VT Global Asset Allocation 320,000 * 1,903 * Fund.............................. Putnam Convertible Opportunities and Income 320,000 * 1,903 * Trust............................ Putnam Asset Allocation Funds-Balanced 1,210,000 * 7,196 * Portfolio................ Putnam Asset Allocation Funds-Conservative Portfolio......... 940,000 * 5,590 * Lincoln National Global Asset Allocation Fund, 150,000 * 892 * Inc.............................. Museum of Fine Arts, Boston............. 30,000 * 178 * Parker-Hannifin 250,000 * 1,487 * Corporation.............. -47- Aggregate Principal Percentage Number of Our Percentage of Amount at Maturity of Ordinary Shares Our Ordinary of Debentures That Debentures That May be Sold Shares Name May be Sold Outstanding (1) Outstanding (2) - ------------------------------------- ------------------- ----------- ---------------- --------------- Zola Partners, 1,000,000 * * LP................................ 5,947 HSBC Ttee Zola Managed Trust............................. 1,100,000 * 6,541 * Lyxor Master 900,000 * 5,352 * Fund............................. JMG Triton Offshore Fund, LTD....... 15,000,000 1.5 89,201 * Sage 200,000 * 1,189 * Capital........................................ D.E. Shaw Investments, 4,400,000 * 26,166 * L.P............... D.E. Shaw Valence, 17,600,000 1.7 104,662 * L.P..................... R2 Investments, 8,000,000 * 47,574 * LDC.......................... Highbridge International LLC............ 59,000,000 5.8 350,855 * NCMIC Insurance 500,000 * 2,973 * Co......................... The Reciprocal of 575,000 * 3,419 * America................. Primex, 325,000 * 1,933 * Ltd......................................... OHIC Insurance 825,000 * 4,906 * Co............................ Princeton Insurance 3,000,000 * 17,840 * Co....................... Healthcare Underwriters Mutual Insurance 1,400,000 * 8,325 * Co....................... Medical Liability Mutual Insurance 42,000,000 4.2 249,761 * Co................................... Mag Mutual Insurance 400,000 * 2,379 * Co.................. Landesbank Schleswig-Holstein International 30,000,000 3.0 178,401 * S.A................................ Purchase Associates, 559,000 * 3,324 * L.P.................... Commonfund Event Driven Company c/o IBT Fund Services (Cayman).... 67,000 * 398 * -48- Aggregate Principal Percentage Number of Our Percentage of Amount at Maturity of Ordinary Shares Our Ordinary of Debentures That Debentures That May be Sold Shares Name May be Sold Outstanding (1) Outstanding (2) - ------------------------------------- ------------------- ----------- ---------------- --------------- Levco Alternative Fund, 2,114,000 * 12,571 * Ltd............... Continental Assurance Company Separate Account (E)...................... 700,000 * 4,163 * Alta Partners Holdings, 8,000,000 * 47,574 * LDC.............. Aristeia International, 3,600,000 * 21,408 * Limited............ Aristeia Partners, 1,400,000 * 8,325 * L.P.......................... 20,000,000 2.0 118,934 * OFIVM............................... Citi JL, Ltd........................ 88,000 * 523 * Credit Suisse Asset Management....... 3,000,000 * 17,840 * All other holders of Debentures or future transferees, pledgees, donees, assignees or successors of any such holders(3)(4)....... 617,951,000 61.1 3,674,769 2.9 Total.............................. 1,010,834,000 100.0 6,011,127 4.6
* Less than one percent (1%). (1) Assumes conversion of all of the holder's Debentures at a conversion rate of 5.9467 Ordinary Shares per $1,000 principal amount at maturity of the Debentures. This conversion rate is subject to adjustment, however, as described under "Description of the Debentures -- Conversion Rights." As a result, the number of our Ordinary Shares issuable upon conversion of the Debentures may increase or decrease in the future. Does not include our Ordinary Shares that may be issued by us upon purchase of the Debentures by us at the option of the holder. (2) Calculated based on Rule 13d-3(d)(i) of the Exchange Act, using 125,172,419 Ordinary Shares outstanding as of March 31, 2001. In calculating this amount for each holder, we treated as outstanding the number of our Ordinary Shares issuable upon conversion of all of that holder's Debentures, but we did not assume conversion of any other holder's Debentures. Does not include our Ordinary Shares that may be issued by us upon purchase of the Debentures by us at the option of the holder. (3) Information about other selling securityholders will be set forth in prospectus supplements, if required. (4) Assumes that any other holders of Debentures, or any future pledgees, donees, assignees, transferees or successors of or from any such other holders of Debentures, do not beneficially own any of our Ordinary -49- Shares other than the Ordinary Shares issuable upon conversion of the Debentures at the initial conversion rate. -50- PLAN OF DISTRIBUTION We are registering the Debentures and our Ordinary Shares covered by this prospectus to permit holders to conduct public secondary trading of these securities from time to time after the date of this prospectus. We have agreed, among other things, to bear all expenses, other than underwriting discounts and selling commissions, in connection with the registration and sale of the Debentures and our Ordinary Shares covered by this prospectus. We will not receive any of the proceeds from the offering of the Debentures or our Ordinary Shares by the selling securityholders. We have been advised by the selling securityholders that the selling securityholders may sell all or a portion of the Debentures and our Ordinary Shares beneficially owned by them and offered hereby from time to time: o directly; or o through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, commissions or concessions from the selling securityholders or from the purchasers of the Debentures and our Ordinary Shares for whom they may act as agent. The Debentures and our Ordinary Shares may be sold from time to time in one or more transactions at: o fixed prices, which may be changed; o prevailing market prices at the time of sale; o varying prices determined at the time of sale; or o negotiated prices. These prices will be determined by the holders of the securities or by agreement between these holders and underwriters or dealers who may receive fees or commissions in connection with the sale. The aggregate proceeds to the selling securityholders from the sale of the Debentures or our Ordinary Shares offered by them hereby will be the purchase price of the Debentures or our Ordinary Shares less discounts and commissions, if any. The sales described in the preceding paragraph may be effected in transactions: o on any national securities exchange or quotation service on which the Debentures and our Ordinary Shares may be listed or quoted at the time of sale, including the New York Stock Exchange in the case of the Ordinary Shares; o in the over-the-counter market; o in transactions otherwise than on such exchanges or services or in the over-the-counter market; or o through the writing of options. These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the trade. In connection with sales of the Debentures and our Ordinary Shares or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers. These broker-dealers may in turn engage in short sales of the Debentures and our Ordinary Shares in the course of hedging their positions. The selling securityholders may -51- also sell the Debentures and our Ordinary Shares short and deliver Debentures and our Ordinary Shares to close out short positions, or loan or pledge Debentures and our Ordinary Shares to broker-dealers that in turn may sell the Debentures and our Ordinary Shares. To our knowledge, there are currently no plans, arrangements or understandings between any selling securityholders and any underwriters, broker-dealer or agent regarding the sale of the Debentures and our Ordinary Shares by the selling securityholders. Selling securityholders may not sell any, or may not sell all, of the Debentures and our Ordinary Shares offered by them pursuant to this prospectus. In addition, we cannot assure you that a selling securityholder will not transfer, devise or gift the Debentures and our Ordinary Shares by other means not described in this prospectus. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to this prospectus. Our outstanding Ordinary Shares are listed for trading on the New York Stock Exchange. The selling securityholders and any broker and any broker-dealers, agents or underwriters that participate with the selling securityholders in the distribution of the Debentures or our Ordinary Shares may be deemed to be "underwriters" within the meaning of the Securities Act. In this case, any commissions received by these broker-dealers, agents or underwriters and any profit on the resale of the Debentures or our Ordinary Shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. In addition, any profits realized by the selling securityholders may be deemed to be underwriting commissions. The Debentures were issued and sold in May 2001 in transactions exempt from the registration requirements of the Securities Act to persons reasonably believed by the Initial Purchasers to be "qualified institutional buyers," as defined in Rule 144A under the Securities Act. We have agreed to indemnify the initial purchasers and each selling securityholder, and each selling securityholder has agreed to indemnify us, the initial purchasers and each other selling securityholder, against specified liabilities arising under the Securities Act. The selling securityholders and any other person participating in such distribution will be subject to the Exchange Act. The Exchange Act rules include, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the Debentures and the underlying Ordinary Shares by the selling securityholders and any such other person. In addition, Regulation M of the Exchange Act may restrict the ability of any person engaged in the distribution of the Debentures and the underlying Ordinary Shares to engage in market-making activities with respect to the particular Debentures and the underlying Ordinary Shares being distributed for a period of up to five business days prior to the commencement of the distribution. This may affect the marketability of the Debentures and the underlying Ordinary Shares and the ability of any person or entity to engage in market-making activities with respect to the Debentures and the underlying Ordinary Shares. We will use our reasonable best efforts to keep the registration statement of which this prospectus is a part effective until the earlier of: o the date when all Debentures and the underlying Ordinary Shares offered hereunder have been disposed of in accordance with the registration statement; o the expiration of the period referred to in Rule 144(k) of the Act with respect to all Debentures and the underlying Ordinary Shares held by persons that are not affiliates of XL Capital; o the date when there are no outstanding Debentures or underlying Ordinary Shares; or o two years from the date the registration statement is declared effective. -52- Our obligation to keep the registration statement to which this prospectus relates effective is subject to specified, permitted exceptions. In these cases, we may prohibit offers and sales of the Debentures and our Ordinary Shares pursuant to the registration statement to which this prospectus relates. ENFORCEMENT OF CIVIL LIABILITIES We are a Cayman Islands exempted limited company. We have consented in the Indenture to jurisdiction in the United States federal and state courts in The City of New York and to service of process in The City of New York in any legal suit, action or proceeding brought to enforce any rights under or with respect to the Indenture and the Debentures. Accordingly, any judgment against us in respect of the Indenture or the Debentures, including for civil liabilities under the United States federal securities laws, obtained in any United States federal or state court may have to be enforced in the courts of the Cayman Islands. Investors should not assume that the courts of the Cayman Islands would enforce judgments of United States courts obtained against us predicated upon the civil liability provisions of the United States federal securities laws or that such courts would enforce, in original actions, liabilities against us predicated solely upon such laws. LEGAL MATTERS Certain U.S. legal matters with respect to the Debentures are being passed upon for us by Cahill Gordon & Reindel, New York, New York. Certain legal matters with respect to the Ordinary Shares under the laws of the Cayman Islands are being passed upon for us by Hunter & Hunter, Grand Cayman, Cayman Islands. EXPERTS The consolidated financial statements of XL Capital and our subsidiaries as of December 31, 2000 and 1999 and for the three years ended December 31, 2000, incorporated by reference in this prospectus from our Annual Report on Form 10-K for the year ended December 31, 2000 have been audited by PricewaterhouseCoopers LLP, independent auditors, as stated in their report, which is incorporated herein by reference. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the Debentures and Ordinary Shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date. -53- PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the costs and expenses, other than underwriting discounts and commissions, incurred in connection with the sale of Debentures and Ordinary Shares being registered (all amounts are estimated (on the assumption that all shares will be sold in a single transaction), except the SEC registration fee). SEC registration fee......................................... $ 150,771 New York Stock Exchange listing fee for Ordinary Shares...... 1,500 Printing and engraving expenses.............................. Legal fees and expenses...................................... Accounting fees and expenses................................. 50,565 Blue Sky fees and expenses................................... Trustee and transfer agent fees.............................. 40,094 Miscellaneous................................................ ============ Total............................................... $ ============ Item 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Article 109 of our Articles of Association, incorporated by reference to Exhibit 3.2 to our Annual Report on Form 10-K for the year ended December 31, 2000 filed on March 29, 2001, contains provisions with respect to indemnification of our directors and officers. The general effect of these provisions is to provide for the indemnity by XL Capital Ltd ("XL Capital") of an officer, director, employee or agent of XL Capital for threatened, pending or completed actions, suits or proceedings (other than an action by or in the right of XL Capital) brought against such indemnified person by reason of the fact that such person was an officer, director, employee or agent of XL Capital, if such indemnified person acted in good faith and in a manner he reasonably believed to be in or not opposed to our best interest and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. The Articles of Association also provide for the indemnification of such person against expenses actually and reasonably incurred in connection with suits brought by or in the right of XL Capital by reason of the fact that such indemnified person is an officer, director, employee or agent of XL Capital if such indemnified person acted in good faith and in a manner he reasonably believed to be in or not opposed to our best interest; provided that no such indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for willful neglect or default in the performance of his duty to us unless and only to the extent that the Grand Court of the Cayman Islands or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Grand Court or other such court shall deem proper. To the extent that such indemnified person shall be successful on the merits or otherwise in defense of any such action, suit or proceeding, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Our directors and officers are also provided with indemnification against certain liabilities pursuant to a directors and officers liability insurance policy. II-1 Item 16. EXHIBITS. Exhibit Number Description 3(a) Memorandum of Association of the Registrant (incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K for the year ended December 31, 2000 filed on March 29, 2001). 3(b) Articles of Association (incorporated by reference to Exhibit 3.2 to our Annual Report on Form 10-K for the year ended December 31, 2000 filed on March 29, 2001). 3(c) Rights Agreement, dated as of September 11, 1998, between XL Capital Ltd and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (incorporated by reference to Exhibit 3.3 to our Annual Report on Form 10-K for the year ended December 31, 2000 filed on March 29, 2001). 4(a) Indenture dated May 23, 2001 between XL Capital Ltd and State Street Bank and Trust Company, as trustee. 4(b) Form of zero coupon convertible debenture (included in Exhibit 4(a)). 4(c) Registration Rights Agreement dated May 23, 2001 between XL Capital Ltd and Goldman, Sachs & Co., Deutsche Banc Alex. Brown, and Dresdner Kleinwort Wasserstein L.L.C., as initial purchasers. 5(a) Opinion of Cahill Gordon & Reindel. *5(b) Opinion of Hunter & Hunter. 12 Statement regarding Computation of Ratio of Earnings to Fixed Charges. 23(a) Consent of PricewaterhouseCoopers. 23(b) Consent of Ernst & Young. 23(c) Consent of Cahill Gordon & Reindel (included in Exhibit 5(a)). *23(d) Consent of Hunter & Hunter (included in Exhibit 5(b)). 24 Powers of Attorney 25 Form T-1 Statement of Eligibility of Trustee under the Indenture. 99(a) Appointment of CT Corporation System as U.S. agent for Service of Process. - ---------- * To be filed by amendment. II-2 Item 17. UNDERTAKINGS. The undersigned registrant hereby undertakes: 1. To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (a) To include any prospectus required by Section 10(a)(3) of the Securities Act; (b) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (c) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that paragraphs 1(a) and 1(b) do not apply if the information required to be included in such post-effective amendment is contained in a periodic report filed by the Company pursuant to Section 13 or Section 15(d) of the Exchange Act and incorporated herein by reference. 2. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 4. That, for purposes of determining any liability under the Securities Act, each filing of an annual report pursuant to Section 13(a) or 15(d) of the Exchange Act that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 5. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the undersigned pursuant to the provisions described under Item 15 above, or otherwise, the undersigned have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the undersigned of expenses incurred or paid by a director, officer or controlling person of the under- II-3 signed in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the undersigned will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Montreal and Country of Canada, on August 1, 2001. XL CAPITAL LTD By: /s/ Paul S. Giordano -------------------------------------- Name: Paul S. Giordano Title: Executive Vice President, General Counsel and Secretary Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Brian M. O'Hara President, Chief Executive Officer and Director August 1, 2001 - --------------------------------- (Principal Executive Officer) Name: Brian M. O'Hara /s/ Jerry de St. Paer Executive Vice President and Chief Financial August 1, 2001 - --------------------------------- Officer (Principal Financial Officer and Name: Jerry de St. Paer Principal Accounting Officer) /s/ Michael P. Esposito, Jr. * Chairman and Director August 1, 2001 - ------------------------------------ Name: Michael P. Esposito, Jr. /s/ Ronald L. Bornhuetter * Director August 1, 2001 - --------------------------------- Name: Ronald L. Bornhuetter /s/ Michael A. Butt * Director August 1, 2001 - --------------------------------- Name: Michael A. Butt /s/ Robert Clements * Director August 1, 2001 - --------------------------------- Name: Robert Clements /s/ Sir Brian Corby * Director August 1, 2001 - --------------------------------- Name: Sir Brian Corby /s/ Robert R. Glauber * Director August 1, 2001 - --------------------------------- Name: Robert R. Glauber /s/ Paul Jeanbart * Director August 1, 2001 - --------------------------------- Name: Paul Jeanbart II-5 /s/ John Loudon * Director August 1, 2001 - --------------------------------- Name: John Loudon /s/ Robert S. Parker * Director August 1, 2001 - --------------------------------- Name: Robert S. Parker /s/ Cyril Rance * Director August 1, 2001 - --------------------------------- Name: Cyril Rance /s/ Alan Z. Senter * Director August 1, 2001 - --------------------------------- Name: Alan Z. Senter /s/ John T. Thornton * Director August 1, 2001 - --------------------------------- Name: John T. Thornton /s/ Ellen E. Thrower * Director August 1, 2001 - --------------------------------- Name: Ellen E. Thrower /s/ John W. Weiser * Director August 1, 2001 - --------------------------------- Name: John W. Weiser *By: /s/ Paul S. Giordano --------------------------- Attorney-in-fact
II-6 EXHIBIT INDEX Exhibit Number Description 3(a) Memorandum of Association of the Registrant (incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K for the year ended December 31, 2000 filed on March 29, 2001). 3(b) Articles of Association (incorporated by reference to Exhibit 3.2 to our Annual Report on Form 10-K for the year ended December 31, 2000 filed on March 29, 2001). 3(c) Rights Agreement, dated as of September 11, 1998, between XL Capital Ltd and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (incorporated by reference to Exhibit 3.3 to our Annual Report on Form 10-K for the year ended December 31, 2000 filed on March 29, 2001). 4(a) Indenture dated May 23, 2001 between XL Capital Ltd and State Street Bank and Trust Company, as trustee. 4(b) Form of zero coupon convertible debenture (included in Exhibit 4(a)). 4(c) Registration Rights Agreement dated May 23, 2001 between XL Capital Ltd and Goldman, Sachs & Co., Deutsche Banc Alex. Brown, and Dresdner Kleinwort Wasserstein LLC, as initial purchasers. 5(a) Opinion of Cahill Gordon & Reindel. *5(b) Opinion of Hunter & Hunter. 12 Statement regarding Computation of Ratio of Earnings to Fixed Charges. 23(a) Consent of PricewaterhouseCoopers. 23(b) Consent of Ernst & Young. 23(c) Consent of Cahill Gordon & Reindel (included in Exhibit 5(a)). *23(d) Consent of Hunter & Hunter (included in Exhibit 5(b)). 24 Powers of Attorney 25 Form T-1 Statement of Eligibility of Trustee under the Indenture. - ---------- * To be filed by amendment. II-7 Exhibit Number Description 99(a) Appointment of CT Corporation System as U.S. agent for Service of Process. II-8 EX-4.A 4 xlindex.txt INDENTURE XL Capital Ltd Zero-Coupon Convertible Debentures due 2021 - -------------------------------------------------------------------------------- INDENTURE Dated as of May 23, 2001 - -------------------------------------------------------------------------------- State Street Bank and Trust Company TRUSTEE - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.1 Definitions..............................................1 Section 1.2 Other Definitions........................................5 Section 1.3 Incorporation by Reference of Trust Indenture Act........6 Section 1.4 Rules of Construction....................................7 Section 1.5 Acts of Holders..........................................7 ARTICLE II THE SECURITIES Section 2.1 Form and Dating..........................................9 Section 2.2 Execution and Authentication............................11 Section 2.3 Registrar, Paying Agent and Conversion Agent............11 Section 2.4 Reset Rate Agent........................................12 Section 2.5 Paying Agent to Hold Money and Securities in Trust......12 Section 2.6 Securityholder Lists....................................13 Section 2.7 Transfer and Exchange...................................13 Section 2.8 Replacement Securities..................................15 Section 2.9 Outstanding Securities; Determinations of Holders' Action................................................15 Section 2.10 Temporary Securities....................................16 Section 2.11 Cancellation............................................17 Section 2.12 Persons Deemed Owners...................................17 Section 2.13 Global Securities.......................................17 Section 2.14 CUSIP Numbers...........................................22 Section 2.15 Original Issue Discount.................................23 ARTICLE III REDEMPTION AND PURCHASES Section 3.1 Company's Right to Redeem; Notices to Trustee...........23 Section 3.2 Selection of Securities to Be Redeemed..................23 Section 3.3 Notice of Redemption....................................24 Section 3.4 Effect of Notice of Redemption..........................25 Section 3.5 Deposit of Redemption Price.............................25 Section 3.6 Securities Redeemed in Part.............................25 -i- Page Section 3.7 Purchase of Securities by the Company at Option of the Holder............................................25 Section 3.8 Purchase of Securities at Option of the Holder upon a Change in Control.....................................33 Section 3.9 Effect of Purchase Notice or Change in Control Purchase Notice.......................................40 Section 3.10 Deposit of Purchase Price or Change in Control Purchase Price........................................41 Section 3.11 Securities Purchased in Part............................41 Section 3.12 Covenant to Comply With Securities Laws Upon Purchase of Securities................................42 Section 3.13 Repayment to the Company................................42 ARTICLE IV COVENANTS Section 4.1 Payment of Securities...................................42 Section 4.2 SEC and Other Reports...................................43 Section 4.3 Compliance Certificate..................................43 Section 4.4 Further Instruments and Acts............................43 Section 4.5 Maintenance of Office or Agency.........................44 Section 4.6 Delivery of Certain Information.........................44 Section 4.7 Notification of Upward Interest Adjustment..............44 Section 4.8 Additional Amounts......................................45 ARTICLE V SUCCESSOR CORPORATION Section 5.1 When Company May Merge or Transfer Assets...............46 ARTICLE VI DEFAULTS AND REMEDIES Section 6.1 Events of Default.......................................47 Section 6.2 Acceleration............................................49 Section 6.3 Other Remedies..........................................49 Section 6.4 Waiver of Past Defaults.................................49 Section 6.5 Control by Majority.....................................50 Section 6.6 Limitation on Suits.....................................50 Section 6.7 Rights of Holders to Receive Payment....................50 Section 6.8 Collection Suit by Trustee..............................51 Section 6.9 Trustee May File Proofs of Claim........................51 Section 6.10 Priorities..............................................51 -ii- Page Section 6.11 Undertaking for Costs...................................52 Section 6.12 Waiver of Stay, Extension or Usury Laws.................52 ARTICLE VII TRUSTEE Section 7.1 Duties of Trustee.......................................53 Section 7.2 Rights of Trustee.......................................54 Section 7.3 Individual Rights of Trustee............................56 Section 7.4 Trustee's Disclaimer....................................56 Section 7.5 Notice of Defaults......................................56 Section 7.6 Reports by Trustee to Holders...........................56 Section 7.7 Compensation and Indemnity..............................56 Section 7.8 Replacement of Trustee..................................57 Section 7.9 Successor Trustee by Merger.............................58 Section 7.10 Eligibility; Disqualification...........................58 Section 7.11 Preferential Collection of Claims Against Company.......59 ARTICLE VIII DISCHARGE OF INDENTURE Section 8.1 Discharge of Liability on Securities....................59 Section 8.2 Repayment to the Company................................59 ARTICLE IX AMENDMENTS Section 9.1 Without Consent of Holders..............................59 Section 9.2 With Consent of Holders.................................60 Section 9.3 Compliance with Trust Indenture Act.....................61 Section 9.4 Revocation and Effect of Consents, Waivers and Actions...............................................61 Section 9.5 Notation on or Exchange of Securities...................62 Section 9.6 Trustee to Sign Supplemental Indentures.................62 Section 9.7 Effect of Supplemental Indentures.......................62 ARTICLE X CONVERSIONS Section 10.1 Conversion Privilege....................................62 Section 10.2 Conversion Procedure....................................63 -iii- Page Section 10.3 Fractional Shares.......................................64 Section 10.4 Taxes on Conversion.....................................64 Section 10.5 Company to Provide Stock................................65 Section 10.6 Adjustment for Change in Capital Stock..................65 Section 10.7 Adjustment for Rights Issue.............................66 Section 10.8 Adjustment for Other Distributions......................67 Section 10.9 Adjustment for Company Tender Offer.....................69 Section 10.10 When Adjustment May Be Deferred.........................70 Section 10.11 When No Adjustment Required.............................70 Section 10.12 Notice of Adjustment....................................71 Section 10.13 Voluntary Increase......................................71 Section 10.14 Notice of Certain Transactions..........................71 Section 10.15 Reorganization of Company; Special Distributions........72 Section 10.16 Company Determination Final.............................72 Section 10.17 Trustee's Adjustment Disclaimer.........................72 Section 10.18 Simultaneous Adjustments................................73 Section 10.19 Successive Adjustments..................................73 ARTICLE XI MISCELLANEOUS Section 11.1 Trust Indenture Act Controls............................73 Section 11.2 Notices.................................................73 Section 11.3 Communication by Holders with Other Holders.............74 Section 11.4 Certificate and Opinion as to Conditions Precedent......74 Section 11.5 Statements Required in Certificate or Opinion...........75 Section 11.6 Separability Clause.....................................75 Section 11.7 Rules by Trustee, Paying Agent, Conversion Agent, Reset Rate Agent and Registrar........................75 Section 11.8 Legal Holidays..........................................75 Section 11.9 GOVERNING LAW...........................................75 Section 11.10 No Recourse Against Others..............................75 Section 11.11 Successors..............................................76 Section 11.12 Multiple Originals......................................76 EXHIBIT A Form of Global Security EXHIBIT B Transfer Certificate -iv- INDENTURE dated as of May 23, 2001 between XL CAPITAL LTD, a Cayman Islands exempted limited company ("Company"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company ("Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's Zero-Coupon Convertible Debentures due 2021: ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.1 Definitions. "Additional Amount" means any amounts that are required under this Indenture to be paid to the Holders by the Company as described in Section 4.8. "Affiliate" of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect 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 or cause the direction of the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable Procedures" means, with respect to any transfer or transaction involving a Global Security or any beneficial interest therein, the rules and procedures of the Depositary for such Security, in each case to the extent applicable to such transfer or transaction and as in effect from time to time. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of such board. "Business Day" means, with respect to any Security, a day that in the City of New York or the City of Boston, Massachusetts, is not a day on which banking institutions are authorized by law or regulation to close. "Capital Stock" for any entity means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that corporation. "Certificated Securities" means securities that are in registered definitive form. -2- "Company" means the party named as the "Company" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. "Company Order" means a written request or order signed in the name of the Company by any two Officers. "Corporate Trust Office" means the corporate trust office of the Trustee at which at any time the trust created by this Indenture shall be administered, which office at the date hereof is located at 225 Asylum Street, 23rd Floor, Hartford, Connecticut 06103, Attention: Corporate Trust Administration, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the corporate trust office of any successor Trustee at which such trust shall be administered (or such other address as a successor Trustee may designate from time to time by notice to the Holders and the Company). "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "GAAP" means generally accepted accounting principles in the United States of America as in effect and, to the extent optional, adopted by the Company, on the date of this Indenture, consistently applied. "Global Security" means a permanent Global Security that is in the form of the Security attached hereto as Exhibit A, and that is deposited with and registered in the name of the Depositary. "Holder" or "Securityholder" means a person in whose name a Security is registered on the Registrar's books. "Indebtedness" means, without duplication, the principal or face amount of (i) all obligations for borrowed money, (ii) all obligations evidenced by debentures, notes or other similar instruments, (iii) all obligations in respect of letters of credit or bankers acceptances or similar instruments (or reimbursement obligations with respect thereto), (iv) all obligations to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (v) all obligations as lessee which are capitalized in accordance with generally accepted accounting principles, and (vi) all Indebtedness of others guaranteed by the Company or for which the Company is legally responsible or liable (whether by agreement to purchase indebtedness of, or to supply funds or to invest in, others) (it being understood, for the avoidance of doubt, that insurance payment liabilities, as such, -3- and liabilities arising in the ordinary course of such Company's business as an insurance or reinsurance company (including GIC's) or corporate member of The Council of Lloyds or as a provider of financial or investment services or contracts (in each case other than in connection with the provision of financing to the Company or any Affiliate of the Company) shall not be deemed to constitute Indebtedness). "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof, including the provisions of the TIA that are deemed to be a part hereof. "Issue Date" of any Security means the date on which the Security was originally issued or deemed issued as set forth on the face of the Security. "NYSE" means The New York Stock Exchange. "Officer" means the Chairman of the Board, the Vice Chairman, the Chief Executive Officer, the President, the Chief Financial Officer, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer or the Secretary or any Assistant Treasurer or Assistant Secretary of the Company. "Officers' Certificate" means a written certificate containing the information specified in Sections 11.4 and 11.5, signed in the name of the Company by any two Officers, and delivered to the Trustee. An Officers' Certificate given pursuant to Section 4.3 shall be signed by a financial or accounting Officer of the Company but need not contain the information specified in Sections 11.4 and 11.5. "Opinion of Counsel" means a written opinion containing the information specified in Sections 11.4 and 11.5, from legal counsel who is acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Company or the Trustee. "Ordinary Shares" shall mean the Class A ordinary shares, $0.01 par value per share, of the Company existing on the date of this Indenture or any other shares of Capital Stock of the Company into which such Class A ordinary shares shall be reclassified or changed. "Non-U.S. Person" means any person who, for United States federal income tax purposes, is not (i) a corporation or partnership created or organized in or under the laws of the United States, any state thereof or the District of Columbia or, in the case of a partnership, otherwise treated as a U.S. person under applicable U.S. Treasury Regulations, (ii) a citizen or resident of the United States, (iii) an estate the income of which is subject to United States federal income tax without regard to its source or (iv) a trust, if a court within the -4- United States is able to exercise primary supervision over administration of the trust and one or more United States persons have authority to control all substantial decisions of the trust. "person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof. "Redemption Date" or "redemption date" shall mean the date specified in a notice of redemption on which the Securities may be redeemed in accordance with the terms of the Securities and this Indenture. "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 Trustee 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 Securities. "Responsible Officer" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "Restricted Security" means a Security required to bear the restrictive legend set forth in the form of Security set forth in Exhibit A of this Indenture. "Rule 144A" means Rule 144A under the Securities Act (or any successor provision), as it may be amended from time to time. "SEC" means the Securities and Exchange Commission. "Securities" means any of the Company's Zero-Coupon Convertible Debentures due May 23, 2021, as amended or supplemented from time to time, issued under this Indenture. "Securityholder" or "Holder" means a person in whose name a Security is registered on the Registrar's books. "Stated Maturity", when used with respect to any Security, means May 23, 2021. -5- "Subsidiary" means any person of which at least a majority of the outstanding Voting Stock shall at the time directly or indirectly be owned or controlled by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries. "TIA" means the Trust Indenture Act of 1939 as in effect on the date of this Indenture, provided, however, that in the event the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended. "trading day" means a day during which trading in securities generally occurs on the NYSE or, if the Ordinary Shares are not listed on the NYSE, on the principal other national or regional securities exchange on which the Ordinary Shares then are listed or, if the Ordinary Shares are not listed on a national or regional securities exchange, on the National Association of Securities Dealers Automated Quotation System or, if the Ordinary Shares are not quoted on the National Association of Securities Dealers Automated Quotation System, on the principal other market on which the Ordinary Shares are then traded. "Trustee" means the party named as the "Trustee" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. "Voting Stock" of a person means Capital Stock of such person of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such person (irrespective of whether or not at the time Capital Stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). Section 1.2 Other Definitions. Term Section: Defined in: "Accreted Conversion Price"................................ Exhibit A "Accreted Value"........................................... Exhibit A "Accreted Value Conversion"................................ Exhibit A "Agent Members"............................................ 2.12(e) "Average Sale Price"....................................... 10.7 "beneficial owner"......................................... 3.8(a) "cash"..................................................... 3.7(b) "Change in Control"........................................ 3.8(a) "Change in Control Purchase Date".......................... 3.8(a) -6- "Change in Control Purchase Notice"........................ 3.8(c) "Change in Control Purchase Price"......................... 3.8(a) "Company Notice"........................................... 3.7(e) "Company Notice Date"...................................... 3.7(c) "Conversion Agent"......................................... 2.3 "Conversion Date".......................................... 10.2 "Conversion Period"........................................ Exhibit A "Conversion Rate".......................................... 10.1 "Depositary"............................................... 2.1(a) "DTC"...................................................... 2.1(a) "Event of Default"......................................... 6.1 "Exchange Act"............................................. 3.7(d) "Ex-Dividend Time"......................................... 10.1 "Extraordinary Cash Dividend".............................. 10.8 "Interest Payment Date".................................... Exhibit A "Legal Holiday"............................................ 11.8 "Legend"................................................... 2.6(f) "Market Price"............................................. 3.7(d) "Notice of Default"........................................ 6.1 "Parity Value"............................................. Exhibit A "Paying Agent"............................................. 2.3 "Purchase Date"............................................ 3.7(a) "Purchase Notice".......................................... 3.7(a) "Purchase Price"........................................... 3.7(a) "QIB"...................................................... 2.1(a) "Redemption Price"......................................... Exhibit A "Registrar"................................................ 2.3 "Reset Rate"............................................... Exhibit A "Reset Rate Agent"......................................... 2.4 "Rule 144A Information".................................... 4.6 "Sale Price"............................................... 3.7(d) "Securities Act"........................................... 3.7(d) "Time of Determination".................................... 10.1 "Trading Price"............................................ Exhibit A "Upward Interest Adjustment"............................... Exhibit A Section 1.3 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in -7- and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. Section 1.4 Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it and shall be construed in accordance with "U.S. GAAP"; (3) "or" is not exclusive; (4) "including" means including, without limitation; (5) words in the singular include the plural, and words in the plural include the singular; (6) all references to $, dollars, cash payments or money refer to United States currency; and (7) all references to "interest" on any Security in this Indenture shall mean accretion to the principal amount of such Security unless such reference is to "cash interest." Section 1.5 Acts of Holders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except -8- as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (a) The fact and date of the execution by any person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such officer the execution thereof. Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (b) The ownership of Securities shall be proved by the register for the Securities. (c) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, the Company, the Conversion Agent or the Reset Rate Agent in reliance thereon, whether or not notation of such action is made upon such Security. (d) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date -9- shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. ARTICLE II THE SECURITIES Section 2.1 Form and Dating. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which are a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage (provided that any such notation, legend or endorsement required by usage is in a form acceptable to the Company). The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication. (a) Global Securities. Securities offered and sold within the United States to qualified institutional buyers as defined in Rule 144A ("QIBs") in reliance on Rule 144A shall be issued, initially in the form of a Global Security, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for the Depositary (as defined below) and registered in the name of The Depository Trust Company ("DTC") or the nominee thereof (DTC, or any successor thereto, and any such nominee being hereinafter referred to as the "Depositary"), duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary as hereinafter provided. (b) Global Securities in General. Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate principal amount at maturity of outstanding Securities from time to time endorsed thereon and that the aggregate principal amount at maturity of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions, purchases and conversions. Any adjustment of the aggregate principal amount of a Global Security to reflect the amount of any increase or decrease in the amount of outstanding Securities represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.12 hereof and shall be made on the records of the Trustee and the Depositary. -10- (c) Book-Entry Provisions. This Section 2.1(c) shall apply only to Global Securities deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(c), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depositary, (b) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions and (c) shall bear legends substantially to the following effect: "THIS SECURITY AND ANY ORDINARY SHARES ISSUABLE UPON THE CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HERBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF XL CAPITAL LTD THAT THIS SECURITY AND ANY ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. THIS SECURITY, ANY ORDINARY SHARES ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS SECURITY AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION OR -11- INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY AND ANY SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT." Section 2.2 Execution and Authentication. The Securities shall be executed on behalf of the Company by any Officer. The signature of the Officer on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at the time of the execution of the Securities Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of authentication of such Securities. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by signature of an authorized officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee shall authenticate and deliver the Securities for original issue in an initial aggregate principal amount at maturity (subject to adjustment) of up to $1,020,000,000 upon one or more Company Orders without any further action by the Company. The aggregate principal amount of the Securities due at the Stated Maturity thereof outstanding at any time may not exceed the amount set forth in the foregoing sentence, except as provided in Section 2.7 and upon the occurrence of an Upward Interest Adjustment as contemplated in the form of Security attached hereto as Exhibit A. The Securities shall originally be issued only in registered form without coupons and only in denominations of $1,000 of principal amount at maturity and any integral multiple thereof. Section 2.3 Registrar, Paying Agent and Conversion Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar"), an office or agency where Securities may be presented for purchase or payment ("Paying Agent") and an office or agency where Securities may be presented for conversion ("Conversion Agent"). The Registrar shall keep a register of the Securities and of their transfer, exchange and conversion. The Company may have one or more co-registrars, one or more additional paying agents and one or more additional conversion -12- agents. The term Paying Agent includes any additional paying agent, including any named pursuant to Section 4.5. The term Conversion Agent includes any additional conversion agent, including any named pursuant to Section 4.5. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent, Conversion Agent or co-registrar (other than the Trustee). The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.7. The Company or any Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar, Conversion Agent or co-registrar. The Company initially appoints the Trustee as Registrar, Conversion Agent and Paying Agent in connection with the Securities. Section 2.4 Reset Rate Agent. The Company and the Trustee agree that Goldman, Sachs & Co. will act as the Reset Rate Agent. For the determination of the applicable Reset Rate, the Reset Rate Agent shall seek indicative reference rates from one other nationally recognized investment bank. The determination of any applicable Reset Rate shall be made by the Reset Rate Agent by averaging the indicative reference rates obtained by Goldman, Sachs & Co. and such other investment bank. The determination of any applicable Reset Rate by the Reset Rate Agent will be conclusive and binding upon the Reset Rate Agent, the Company, the Trustee and the holders of the Debentures, in the absence of manifest error. The Reset Rate Agent may be removed at any time with or without cause by the Company giving at least sixty (60) days' written notice to the Reset Rate Agent; provided that the Reset Rate Agent may not be removed by the Company without cause for a period of six months after the date of the offering circular. The Reset Rate Agent may resign at any time upon giving at least thirty (30) days' written notice to the Company. A successor Reset Rate Agent will be appointed by the Company. Section 2.5 Paying Agent to Hold Money and Securities in Trust. Except as otherwise provided herein, on or prior to each due date of payments in respect of any Security, the Company shall deposit with the Paying Agent a sum of money (in immediately available funds if deposited on the due date) or Ordinary Shares or, as permitted by this Indenture, a combination thereof, sufficient to make such payments when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money and Ordinary Shares held by the Paying Agent for the making of payments in respect of the Securities and shall notify the Trustee of any default by the Company in making any such payment. At -13- any time during the continuance of any such default, the Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all money and Ordinary Shares so held in trust. If the Company or a Subsidiary or an Affiliate of any of them acts as Paying Agent, it shall segregate the money and Ordinary Shares held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money and Ordinary Shares held by it to the Trustee and to account for any funds and Ordinary Shares disbursed by it. Upon doing so, the Paying Agent shall have no further liability for the money or the Ordinary Shares. Section 2.6 Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee at least semiannually on May 1 and November 1 a listing of Securityholders dated within 15 days of the date on which the list is furnished and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. Section 2.7 Transfer and Exchange. Subject to Section 2.12 hereof, (a) upon surrender for registration of transfer of any Security, together with a written instrument of transfer satisfactory to the Registrar duly executed by the Securityholder or such Securityholder's attorney duly authorized in writing, at the office or agency of the Company designated as Registrar or co-registrar pursuant to Section 2.3, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denomination or denominations, of a like aggregate principal amount at maturity. The Company shall not charge a service charge for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of the Securities from the Securityholder requesting such transfer or exchange. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denomination or denominations, of a like aggregate principal amount at maturity, upon surrender of the Securities to be exchanged, together with a written instrument of transfer satisfactory to the Registrar duly executed by the Securityholder or such Securityholder's attorney duly authorized in writing, at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. The Company shall not be required to make, and the Registrar need not register, transfers or exchanges of Securities selected for redemption (except, in the case of Securi- -14- ties to be redeemed in part, the portion thereof not to be redeemed) or any Securities in respect of which a Purchase Notice or Change in Control Purchase Notice has been given and not withdrawn by the Holder thereof in accordance with the terms of this Indenture (except, in the case of Securities to be purchased in part, the portion thereof not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed. (a) Notwithstanding any provision to the contrary herein, so long as a Global Security remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.13 and this Section 2.6(b). Transfers of a Global Security shall be limited to transfers of such Global Security, to the Depositary, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee. (b) Successive registrations and registrations of transfers and exchanges as aforesaid may be made from time to time as desired, and each such registration shall be noted on the register for the Securities. (c) Any Registrar appointed pursuant to Section 2.3 hereof shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Securities upon transfer or exchange of Securities. (d) No Registrar shall be required to make registrations of transfer or exchange of Securities during any periods designated in the text of the Securities or in this Indenture as periods during which such registration of transfers and exchanges need not be made. (e) If Securities are issued upon the transfer, exchange or replacement of Securities subject to restrictions on transfer and bearing the legends set forth on the form of Security attached hereto as Exhibit A setting forth such restrictions (collectively, the "Legend"), or if a request is made to remove the Legend on a Security, the Securities so issued shall bear the Legend, or the Legend shall not be removed, as the case may be, unless there is delivered to the Company and the Registrar such satisfactory evidence, which shall include an Opinion of Counsel, as may be reasonably required by the Company and the Registrar, that neither the Legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or Rule 144 under the Securities Act or that such Securities are not "restricted" within the meaning of Rule 144 under the Securities Act. Upon (i) provision of such satisfactory evidence, or (ii) notification by the Company to the Trustee and Registrar of the sale of such Security pursuant to a registration statement that is effective at the time of such sale, the Trustee, pursuant to a Company Order, shall authenticate and deliver a Security that does not bear the Legend. If the Legend is removed from the face -15- of a Security and the Security is subsequently held by the Company or an Affiliate of the Company, the Legend shall be reinstated. Section 2.8 Replacement Securities. If (a) any mutilated Security is surrendered to the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon a Company Order, the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, bearing a certificate number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be purchased by the Company pursuant to Article III hereof, the Company in its discretion may, instead of issuing a new Security, pay or purchase such Security, in cash, Ordinary Shares or a combination thereof as permitted in this Indenture, as the case may be. Upon the issuance of any new Securities under this Section 2.7, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section 2.7 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section 2.7 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 2.9 Outstanding Securities; Determinations of Holders' Action. Securities outstanding at any time are all the Securities authenticated by the Trustee except for those cancelled by it, those paid pursuant to Section 2.7, those delivered to it for cancellation and those described in this Section 2.8 as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate thereof holds the Security; provided, however, that in determining whether the Holders of the requisite principal amount of Securities have given or concurred in any request, demand, authorization, direction, notice, consent, -16- waiver or other action hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination (including, without limitation, determinations pursuant to Articles VI and IX). If a Security is replaced pursuant to Section 2.7, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. If the Paying Agent holds, in accordance with this Indenture, on a Redemption Date, or on the Business Day following a Purchase Date or a Change in Control Purchase Date, or on Stated Maturity, money or securities, if permitted hereunder, sufficient to pay Securities payable on that date, then immediately after such Redemption Date, Purchase Date, Change in Control Purchase Date or Stated Maturity, as the case may be, such Securities shall cease to be outstanding and interest, if any, on such Securities shall cease to accrue and such Securities shall cease to be convertible; provided, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made. If a Security is converted in accordance with Article X, then from and after the time of conversion on the Conversion Date, such Security shall cease to be outstanding and interest, if any, shall cease to accrue on such Security. Section 2.10 Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 2.3, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Company shall execute and the Trustee shall authenticate -17- and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. Section 2.11 Cancellation. All Securities surrendered for payment, purchase by the Company pursuant to Article III, conversion, redemption or registration of transfer or exchange shall, if surrendered to any person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article X. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section 2.10, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of by the Trustee in accordance with the Trustee's customary procedure. Section 2.12 Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of the Security or the payment of any Redemption Price, Purchase Price or Change in Control Purchase Price in respect thereof, and interest thereon, for the purpose of conversion and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. Section 2.13 Global Securities. (a) Notwithstanding any other provisions of this Indenture or the Securities, (A) transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.6 and Section 2.13(a)(i), (B) transfers of a beneficial interest in a Global Security for a Certificated Security shall comply with Section 2.6 and Section 2.13(a)(ii) below, and (C) transfers of a Certificated Security shall comply with Section 2.6 and Sections 2.13(a)(iii) and (iv) below. (i) Transfer of Global Security. A Global Security may not be transferred, in whole or in part, to any person other than the Depositary or a nominee or any successor thereof, and no such transfer to any such other person may be registered; provided that this clause (i) shall not prohibit any transfer of a Security that is issued in exchange for a Global Security but is not itself a Global Security. No transfer of a Security to any person shall be effective under this Indenture or the Securities unless and until such Security has been registered in the name of such person. Nothing in this Section 2.13(a)(i) shall prohibit or render ineffective any transfer of a bene- -18- ficial interest in a Global Security effected in accordance with the other provisions of this Section 2.13(a). (ii) Restrictions on Transfer of a Beneficial Interest in a Global Security for a Certificated Security. A beneficial interest in a Global Security may not be exchanged for a Certificated Security except if DTC is at any time unwilling or unable to continue as a Depositary and a successor Depositary is not appointed by the Company within 90 days and upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a transfer of a beneficial interest in a Global Security in accordance with Applicable Procedures for a Certificated Security in the form satisfactory to the Trustee, together with: (A) so long as the Securities are Restricted Securities, certification in the form set forth in Exhibit B-1; (B) written instructions to the Trustee to make, or direct the Registrar to make, an adjustment on its books and records with respect to such Global Security to reflect a decrease in the aggregate principal amount or Accreted Value of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such decrease; and (C) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the Legend, then the Trustee shall cause, or direct the Registrar to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Registrar, the aggregate principal amount at maturity of the Securities represented by the Global Security to be decreased by the aggregate principal amount at maturity of the Certificated Security to be issued, shall issue such Certificated Security and shall debit or cause to be debited to the account of the person specified in such instructions a beneficial interest in the Global Security equal to the principal amount at maturity of the Certificated Security so issued. (iii) Transfer and Exchange of Certificated Securities. When Certificated Securities are presented to the Registrar with a request: (y) to register the transfer of such Certificated Securities; or (z) to exchange such Certificated Securities for an equal principal amount at maturity of Certificated Securities of other authorized denominations, the Registrar shall -19- register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Certificated Securities surrendered for transfer or exchange: (1) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (2) so long as such Securities are Restricted Securities, such Securities are being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable: (A) if such Certificated Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or (B) if such Certificated Securities are being transferred to the Company, a certification to that effect; or (C) if such Certificated Securities are being transferred pursuant to an exemption from registration, (i) a certification to that effect (in the form set forth in Exhibit B-1, if applicable) and (ii) if the Company so requests, an opinion of counsel in form and substance reasonably satisfactory to it or other evidence in form and substance reasonably satisfactory to it as to the compliance with the restrictions set forth in the Legend. (iv) Restrictions on Transfer of a Certificated Security for a Beneficial Interest in a Global Security. A Certificated Security may not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Certificated Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with: (I) so long as the Securities are Restricted Securities, certification, in the form set forth in Exhibit B-1, that such Certificated Security is being transferred to a QIB in accordance with Rule 144A; and (II) written instructions directing the Trustee to make, or to direct the Registrar to make, an adjustment on its books and records with respect to such -20- Global Security to reflect an increase in the aggregate principal amount at maturity of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such increase, then the Trustee shall cancel such Certificated Security and cause, or direct the Registrar to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Registrar, the aggregate principal amount at maturity of Securities represented by the Global Security to be increased by the aggregate principal amount at maturity of the Certificated Security to be exchanged, and shall credit or cause to be credited to the account of the person specified in such instructions a beneficial interest in the Global Security equal to the principal amount at maturity of the Certificated Security so cancelled. If no Global Securities are then outstanding, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Global Security in the appropriate principal amount at maturity. (b) Subject to the succeeding paragraph (c), every Security shall be subject to the restrictions on transfer provided in the Legend including the delivery of an opinion of counsel, if so provided. Whenever any Restricted Security is presented or surrendered for registration of transfer or for exchange for a Security registered in a name other than that of the Holder, such Security must be accompanied by a certificate in substantially the form set forth in Exhibit B-1, dated the date of such surrender and signed by the Holder of such Security, as to compliance with such restrictions on transfer. The Registrar shall not be required to accept for such registration of transfer or exchange any Security not so accompanied by a properly completed certificate. (c) The restrictions imposed by the Legend upon the transferability of any Security shall cease and terminate when such Security has been sold pursuant to an effective registration statement under the Securities Act or transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto) or, if earlier, upon the expiration of the holding period applicable to sales thereof under Rule 144(k) under the Securities Act (or any successor provision). Any Security as to which such restrictions on transfer shall have expired in accordance with their terms or shall have terminated may, upon a surrender of such Security for exchange to the Registrar in accordance with the provisions of this Section 2.13 (accompanied, in the event that such restrictions on transfer have terminated by reason of a transfer in compliance with Rule 144 or any successor provision, by an opinion of counsel having substantial experience in practice under the Securities Act and otherwise reasonably acceptable in form and substance to the Company, addressed to the Company, to the effect that the transfer of such Security has been made in compliance with Rule 144 or such successor provision), be exchanged for a new Security, of like tenor and aggregate principal amount, -21- which shall not bear the restrictive Legend. The Company shall inform the Trustee of the effective date of any registration statement registering the Securities under the Securities Act. The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned opinion of counsel or registration statement. (d) As used in the preceding two paragraphs of this Section 2.13, the term "transfer" encompasses any sale, pledge, transfer, loan, hypothecation, or other disposition of any Security. (e) The provisions of clauses (1), (2), (3) and (4) below shall apply only to Global Securities: (1) Notwithstanding any other provisions of this Indenture or the Securities, a Global Security shall not be exchanged in whole or in part for a Security registered in the name of any person other than the Depositary or one or more nominees thereof, provided that a Global Security may be exchanged for Securities registered in the names of any person designated by the Depositary in the event that (i) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or such Depositary has ceased to be a "clearing agency" registered under the Exchange Act, and a successor Depositary is not appointed by the Company within 90 days or (ii) an Event of Default has occurred and is continuing with respect to the Securities. Any Global Security exchanged pursuant to clause (i) above shall be so exchanged in whole and not in part, and any Global Security exchanged pursuant to clause (ii) above may be exchanged in whole or from time to time in part as directed by the Depositary. Any Security issued in exchange for a Global Security or any portion thereof shall be a Global Security; provided that any such Security so issued that is registered in the name of a person other than the Depositary or a nominee thereof shall not be a Global Security. (2) Securities issued in exchange for a Global Security or any portion thereof shall be issued in definitive, fully registered form, without interest coupons, shall have an aggregate principal amount at maturity equal to that of such Global Security or portion thereof to be so exchanged, shall be registered in such names and be in such authorized denominations as the Depositary shall designate and shall bear the applicable legends provided for herein. Any Global Security to be exchanged in whole shall be surrendered by the Depositary to the Trustee, as Registrar. With regard to any Global Security to be exchanged in -22- part, either such Global Security shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depositary or its nominee with respect to such Global Security, the principal amount at maturity thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the Trustee shall authenticate and deliver the Security issuable on such exchange to or upon the order of the Depositary or an authorized representative thereof. (3) Subject to the provisions of clause (5) below, the registered Holder may grant proxies and otherwise authorize any person, including Agent Members (as defined below) and persons that may hold interests through Agent Members, to take any action which a holder is entitled to take under this Indenture or the Securities. (4) In the event of the occurrence of any of the events specified in clause (1) above, the Company will promptly make available to the Trustee a reasonable supply of Certificated Securities in definitive, fully registered form, without interest coupons. (5) Neither any members of, or participants in, the Depositary (collectively, the "Agent Members") nor any other persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Security registered in the name of the Depositary or any nominee thereof, or under any such Global Security, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or impair, as between the Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a holder of any Security. Section 2.14 CUSIP Numbers. The Company may issue the Securities with one or more "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any -23- such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers. Section 2.15 Original Issue Discount. The Trustee on behalf of the Holders agrees (i) that for United States federal income tax purposes the Securities will be treated as indebtedness subject to the Treasury regulations governing contingent payment debt instruments, (ii) that the Holders will report original issue discount and interest on the Securities in accordance with the Company's determination of both the "comparable yield" and the "projected payment schedule" and (iii) to be bound by the Company's application of the Treasury regulations that govern contingent payment debt instruments. For this purpose, the "comparable yield" for the Securities is 7.64% compounded semi-annually and the "projected payment schedule" may be obtained by contacting the Company at the address set forth in Section 11.2. The Company shall file with the Trustee no later than the end of each calendar year (i) a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on outstanding Securities as of the end of such year and (ii) such other specific information relating to such original issue discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time. ARTICLE III REDEMPTION AND PURCHASES Section 3.1 Company's Right to Redeem; Notices to Trustee. The Company, at its option, may redeem the Securities in accordance with the provisions of Paragraph 5 of the Securities. If the Company elects to redeem Securities pursuant to Paragraph 5 of the Securities, it shall notify the Trustee in writing of the Redemption Date, the principal amount at maturity of Securities to be redeemed and the Redemption Price. The Company shall give the notice to the Trustee provided for in this Section 3.1 by a Company Order, at least 20 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). Section 3.2 Selection of Securities to Be Redeemed. If less than all the Securities are to be redeemed, unless the procedures of the Depositary provide otherwise, the Trustee shall select the Securities to be redeemed by lot, on a pro rata basis or by another method the Trustee considers fair and appropriate (so long as such method is not prohibited by the rules of any stock exchange on which the Securities are then listed). The Trustee shall -24- make the selection at least 15 days but not more than 60 days before the Redemption Date from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal amount at maturity of Securities that have denominations larger than $1,000. Securities and portions of Securities that the Trustee selects shall be in principal amounts at maturity of $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of the Securities to be redeemed. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection. Section 3.3 Notice of Redemption. At least 15 days but not more than 60 days before a Redemption Date, the Company or the Trustee shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price; (3) the then existing Conversion Rate; (4) the name and address of the Paying Agent and the Conversion Agent; (5) that Securities called for redemption may be converted at any time before the close of business on the date that is two Business Days prior to the Redemption Date; (6) that Holders who want to convert their Securities must satisfy the requirements set forth in Paragraph 8 of the Securities; (7) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; -25- (8) if fewer than all of the outstanding Securities are to be redeemed, the certificate numbers, if any, and principal amounts of the particular Securities to be redeemed; (9) that, unless the Company defaults in making payment of such Redemption Price, interest, if any, on Securities called for redemption will cease to accrue on and after the Redemption Date; and (10) the CUSIP number(s) of the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense, provided that the Company makes such request at least three Business Days prior to the date by which such notice of redemption must be given to Holders in accordance with this Section 3.3. Section 3.4 Effect of Notice of Redemption. Once notice of redemption is given, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price stated in the notice except for Securities which are converted in accordance with the terms of this Indenture. Upon surrender to the Paying Agent, such Securities shall be paid at the Redemption Price stated in the notice. Section 3.5 Deposit of Redemption Price. Prior to 10:00 a.m. (New York City time), on the Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary or an Affiliate of any of them is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the Redemption Price of all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which on or prior thereto have been delivered by the Company to the Trustee for cancellation or have been converted. The Paying Agent shall as promptly as practicable return to the Company any money not required for that purpose because of conversion of Securities pursuant to Article X. If such money is then held by the Company in trust and is not required for such purpose it shall be discharged from such trust. Section 3.6 Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Security in an authorized denomination equal in principal amount at maturity to the unredeemed portion of the Security surrendered. Section 3.7 Purchase of Securities by the Company at Option of the Holder. (a) General. Securities shall be purchased by the Company pursuant to Paragraph 7 of the Securities at the option of the Holder on May 23, 2002, May 23, 2004, May 23, 2006, May 23, 2008, May 23, 2011 and May 23, 2016 or the next Business Day following such dates to the -26- extent such dates are not Business Days (each, a "Purchase Date"), at the Accreted Value plus accrued and unpaid cash interest, if any, on such Purchase Date (the "Purchase Price"). Purchases of Securities hereunder shall be made, at the option of the Holder thereof, upon: (1) delivery to the Paying Agent by the Holder of a written notice of purchase (a "Purchase Notice") during the period beginning at any time from the opening of business on the date that is 20 Business Days prior to the relevant Purchase Date until the close of business on the last day prior to such Purchase Date stating: (A) the certificate number of the Security which the Holder will deliver to be purchased or the appropriate Depositary procedures if Certificated Securities have not been issued, (B) the portion of the principal amount at maturity of the Security which the Holder will deliver to be purchased, which portion must be in principal amounts at maturity of $1,000 or an integral multiple thereof, (C) that such Security shall be purchased by the Company as of the Purchase Date pursuant to the terms and conditions specified in Paragraph 7 of the Securities and in this Indenture, and (D) in the event the Company elects, pursuant to Section 3.7(b), to pay the Purchase Price, in whole or in part, in Ordinary Shares but such portion of the Purchase Price shall ultimately be paid to such Holder entirely in cash because any of the conditions to payment of the Purchase Price in Ordinary Shares is not satisfied prior to the close of business on the last day prior to the relevant Purchase Date, as set forth in Section 3.7(d), whether such Holder elects (i) to withdraw such Purchase Notice as to some or all of the Securities to which such Purchase Notice relates (stating the principal amount and certificate numbers, if any, of the Securities as to which such withdrawal shall relate), or (ii) to receive cash in respect of the entire Purchase Price for all Securities (or portions thereof) to which such Purchase Notice relates; and (2) delivery of such Security to the Paying Agent prior to, on or after the Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Purchase Price therefor; provided, however, that such Purchase Price shall be so paid pursuant to this Section 3.7 only if the Security so delivered to the Paying Agent shall conform in all respects -27- to the description thereof in the related Purchase Notice, as determined by the Company. If a Holder, in such Holder's Purchase Notice and in any written notice of withdrawal delivered by such Holder pursuant to the terms of Section 3.9, fails to indicate such Holder's choice with respect to the election set forth in clause (D) of Section 3.7(a)(1), such Holder shall be deemed to have elected to receive cash in respect of the entire Purchase Price for all Securities subject to such Purchase Notice in the circumstances set forth in such clause (D). The Company shall purchase from the Holder thereof, pursuant to this Section 3.7, a portion of a Security, if the principal amount at maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.7 shall be consummated by the delivery to the Paying Agent of the consideration to be received by the Holder promptly following the later of the Purchase Date and the time of delivery of the Security. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Purchase Notice contemplated by this Section 3.7(a) shall have the right to withdraw such Purchase Notice at any time prior to the close of business on the last day prior to the Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.9. The Paying Agent shall promptly notify the Company of the receipt by it of any Purchase Notice or written notice of withdrawal thereof. (b) Company's Right to Elect Manner of Payment of Purchase Price for Payment. The Securities to be purchased on any Purchase Date pursuant to Section 3.7(a) may be paid for, in whole or in part, at the election of the Company, in U.S. legal tender ("cash") or Ordinary Shares, or in any combination of cash and Ordinary Shares, subject to the conditions set forth in Sections 3.7(c) and (d). The Company shall designate, in the Company Notice delivered pursuant to Section 3.7(e), whether the Company will purchase the Securities for cash or Ordinary Shares, or, if a combination thereof, the percentages of the Purchase Price of Securities in respect of which it will pay in cash and in Ordinary Shares; provided that the Company will pay cash for fractional interests in Ordinary Shares. For purposes of determining the existence of potential fractional interests, all Securities subject to purchase by the Company held by a Holder shall be considered together (no matter how many separate certificates are to be presented). Each Holder whose Securities are purchased pursuant to this Section 3.7 -28- shall receive the same percentage of cash or Ordinary Shares in payment of the Purchase Price for such Securities, except (i) as provided in Section 3.7(d) with regard to the payment of cash in lieu of fractional Ordinary Shares and (ii) in the event that the Company is unable to purchase the Securities of a Holder or Holders for Ordinary Shares because any necessary qualifications or registrations of the Ordinary Shares under applicable state securities laws cannot be obtained, the Company may purchase the Securities of such Holder or Holders for cash. The Company may not change its election with respect to the consideration (or components or percentages of components thereof) to be paid once the Company has given its Company Notice to Holders except pursuant to this Section 3.7(b) or pursuant to Section 3.7(d) in the event of a failure to satisfy, prior to the close of business on the last day prior to the Purchase Date, any condition to the payment of the Purchase Price, in whole or in part, in Ordinary Shares. At least three Business Days before each Company Notice Date, the Company shall deliver an Officers' Certificate to the Trustee specifying: (i) the manner of payment selected by the Company, (ii) the information required by Section 3.7(e) in the Company Notice, (iii) if the Company elects to pay the Purchase Price, or a specified percentage thereof, in Ordinary Shares, that the conditions to such manner of payment set forth in Section 3.7(d) have been or will be complied with and (iv) whether the Company desires the Trustee to give the Company Notice required by Section 3.7(e). (c) Purchase with Cash. At the option of the Company, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.7(a) has been given, or a specified percentage thereof, may be paid by the Company with cash equal to the aggregate Purchase Price of such Securities. (d) Payment by Issuance of Ordinary Shares. At the option of the Company, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.7(a) has been given, or a specified percentage thereof, may be paid by the Company by the issuance of a number of Ordinary Shares equal to the quotient obtained by dividing (i) the portion of the Purchase Price to be paid in Ordinary Shares by (ii) the Market Price of one Ordinary Share as determined by the Company in the Company Notice, subject to the next succeeding paragraph. -29- The Company will not issue fractional Ordinary Shares in payment of the Purchase Price. Instead, the Company will pay cash based on the current Market Price for all fractional shares. The current market value of a fractional share shall be determined to the nearest 1/1,000th of a share, by multiplying the Market Price of a full share by the fractional amount and rounding to the nearest whole cent. It is understood that if a Holder elects to have more than one Security purchased, the number of Ordinary Shares shall be based on the aggregate amount of Securities to be purchased. If the Company elects to purchase the Securities in whole or in part by the issuance of Ordinary Shares, the Company Notice, as provided in Section 3.7(e), shall be sent to the Holders (and to beneficial owners as and to the extent required by applicable law) not less than 20 Business Days prior to such Purchase Date (the "Company Notice Date"). The Company's right to exercise its election to purchase Securities through the issuance of Ordinary Shares shall be conditioned upon: (i) the Company's having given timely Company Notice of an election to purchase all or a specified percentage of the Securities with Ordinary Shares as provided herein; (ii) the registration of such Ordinary Shares under the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case, if required; (iii) the listing of such Ordinary Shares on the principal national securities exchange (currently the NYSE) on which the Ordinary Shares are listed; (iv) any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration; and (v) the receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel each stating that (A) the terms of the issuance of the Ordinary Shares are in conformity with this Indenture and (B) the Ordinary Shares to be issued by the Company in payment of the Purchase Price in respect of Securities have been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the Purchase Price in respect of the Securities, will be validly issued, fully paid and non-assessable and, to the best of such counsel's knowledge, free from preemptive rights, and, in the case of such Officers' Certificate, stating that the conditions above and the condition set forth in the second succeeding sentence have been -30- satisfied and, in the case of such Opinion of Counsel, stating that the conditions in clauses (i) through (iv) above have been satisfied. Such Officers' Certificate shall also set forth the number of Ordinary Shares to be issued for each $1,000 principal amount at maturity of Securities and the Sale Price of an Ordinary Share on each trading day during the period beginning on the first trading day of the period during which the Market Price is calculated and ending on the third day prior to the applicable Purchase Date. The Company may pay the Purchase Price (or any portion thereof) in Ordinary Shares only if the information necessary to calculate the Market Price is published in a daily newspaper of national circulation or is otherwise publicly available. If the foregoing conditions are not satisfied with respect to a Holder or Holders prior to the close of business on the last day prior to the Purchase Date, and the Company has elected to purchase the Securities pursuant to this Section 3.7 through the issuance of Ordinary Shares, the Company shall pay the entire Purchase Price of the Securities of such Holder or Holders in cash. The "Market Price" means the average of the Sale Prices of the Ordinary Shares for the five trading day period ending on the third Business Day prior to the applicable Purchase Date (if the third Business Day prior to the applicable Purchase Date is a trading day, or if not, then on the last trading day prior to the third Business Day), appropriately adjusted to take into account the occurrence, during the period commencing on the first of the trading days during the five trading day period and ending on the Purchase Date, of any event described in Sections 10.6, 10.7 or 10.8; subject, however, to the conditions set forth in Sections 10.10 and 10.11. The "Sale Price" of the Ordinary Shares on any date means the closing per share sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average asked prices) on such date as reported on the NYSE or, if the Ordinary Shares are not listed on the NYSE, then on the principal other national or regional securities exchange on which the Ordinary Shares then are listed, or if the Ordinary Shares are not listed on a U.S. national or regional exchange, as reported on the National Association of Securities Dealers Automated Quotation System, or if the Ordinary Shares are not quoted on the National Association of Securities Dealers Automated Quotation System, as reported on the principal other market on which the Ordinary Shares are then traded. In the absence of such quotations, the Company shall be entitled to determine the sales price on the basis of such quotations as it considers appropriate. Upon determination of the actual number of Ordinary Shares to be issued upon redemption of Securities, the Company will disseminate a press release through Dow Jones & Company, Inc. or Bloomberg Business News containing this information or publish the in- -31- formation on the Company's Web site or through such other public medium as the Company may use at that time. (e) Notice of Election. In connection with any election by the Company to pay the Purchase Price for the Securities in whole or in part by the issuance of Ordinary Shares pursuant to Paragraph 7 of the Securities, the Company shall give notice to Holders setting forth information specified in this Section 3.7(e) (the "Company Notice"). The Company Notice shall: (1) state that each Holder will receive Ordinary Shares with a Market Price determined as of a specified date prior to the Purchase Date equal to such specified percentage of the Purchase Price of the Securities held by such Holder (except any cash amount to be paid in lieu of fractional shares); (2) set forth the method of calculating the Market Price of the Ordinary Shares; and (3) state that because the Market Price of Ordinary Shares will be determined prior to the Purchase Date, Holders of the Securities will bear the market risk with respect to the value of the Ordinary Shares to be received from the date such Market Price is determined to the Purchase Date. In any case, each Company Notice shall include a form of Purchase Notice to be completed by a Holder and shall state: (i) the Purchase Price and the then Conversion Rate; (ii) the name and address of the Paying Agent and the Conversion Agent; (iii) that Securities as to which a Purchase Notice has been given may be converted if they are otherwise convertible only in accordance with Article X hereof and Paragraph 8 of the Securities if the applicable Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (iv) that Securities must be surrendered to the Paying Agent to collect payment; -32- (v) that the Purchase Price for any security as to which a Purchase Notice has been given and not withdrawn will be paid promptly following the later of the Purchase Date and the time of surrender of such Security as described in (iv); (vi) the procedures the Holder must follow to exercise its put rights under this Section 3.7 and a brief description of those rights; (vii) briefly, the conversion rights of the Securities; (viii) the procedures for withdrawing a Purchase Notice (including, without limitation, for a conditional withdrawal pursuant to the terms of Section 3.7(a)(1)(D) or Section 3.9); (ix) that, unless the Company defaults in making payment on Securities for which a Purchase Notice has been submitted, interest, if any, on such Securities will cease to accrue on the Purchase Date; and (x) the CUSIP number of the Securities. At the Company's request, the Trustee shall give such Company Notice in the Company's name and at the Company's expense; provided, however, that, in all cases, the text of such Company Notice shall be prepared by the Company. (f) Covenants of the Company. All Ordinary Shares delivered upon purchase of the Securities pursuant to Section 3.7 or Section 3.8 shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and nonassessable, and shall be free from preemptive rights and free of any lien or adverse claim. (g) Procedure upon Purchase. The Company shall deposit cash (in respect of cash purchases under this Section 3.7 or for fractional interests, as applicable) or Ordinary Shares, or a combination thereof, as applicable, at the time and in the manner as provided in Section 3.10, sufficient to pay the aggregate Purchase Price of all Securities to be purchased pursuant to this Section 3.7. As soon as practicable after the Purchase Date, the Company shall deliver to each Holder entitled to receive Ordinary Shares through the Paying Agent, a certificate for the number of full Ordinary Shares issuable in payment of the Purchase Price and cash in lieu of any fractional interests. The person in whose name the certificate in global form for the Ordinary Shares is registered shall be treated as a holder of record of the Ordinary Shares on the Business Day following the Purchase Date. No payment or adjustment will be made for dividends on the Ordinary Shares on the record date for which occurred on or prior to the Purchase Date. -33- (h) Taxes. If a Holder of a purchased Security is paid in Ordinary Shares pursuant to this Section 3.7, the Company shall pay all stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance of Ordinary Shares. However, the Holder shall pay any such tax which is due because the Holder requests the Ordinary Shares to be issued in a name other than the Holder's name. The Paying Agent may refuse to deliver the certificates representing the Ordinary Shares being issued in a name other than the Holder's name until the Paying Agent receives a sum sufficient to pay any tax which will be due because the Ordinary Shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any income tax withholding required by law or regulations. Section 3.8 Purchase of Securities at Option of the Holder upon a Change in Control. (a) If a Change in Control occurs, the Securities not previously purchased by the Company shall be purchased by the Company, at the option of the Holder thereof, at the Purchase Price on the Change in Control Purchase Date (the "Change in Control Purchase Price"), as of the date that is 45 days after the date of the Change in Control Purchase Notice delivered by the Company (the "Change in Control Purchase Date"), subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 3.8(c). A "Change in Control" shall be deemed to have occurred at such time after the Securities are originally issued as either of the following events shall occur: (i) any person, including any syndicate or group deemed to be a "person" under Section 13(d)(3) of the Exchange Act, acquires beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of the Company's Capital Stock entitling the person to exercise 50% or more of the total voting power of all shares of the Company's Capital Stock that are entitled to vote generally in elections of directors, other than an acquisition by the Company, any of its Subsidiaries or any of its employee benefit plans and other than any transaction contemplated by clause (a)(ii)(B) of this Section 3.8; or (ii) the Company merges or consolidates with or into any other person (other than a Subsidiary), any merger of another person (other than a Subsidiary) into the Company, or the Company conveys, sells, transfers or leases all or substantially all of its assets to another person (other than a Subsidiary), other than any transaction: (A) that does not result in any reclassification, conversion, exchange or cancellation of the Company's outstanding Ordinary Shares (other than the cancellation of any of the Company's outstanding Ordinary Shares held by the person with whom the Company mergers or consolidates), or (B) pursuant to which the holders of the Company's Ordinary Shares immediately prior to the transaction have the entitlement to exercise, directly or indirectly, 50% or more of the total voting power of all shares of -34- Capital Stock entitled to vote generally in the election of directors of the continuing or surviving corporation immediately after the transaction, or (C) which is effected solely to change the Company's jurisdiction of incorporation and results in a reclassification, conversion or exchange of outstanding Ordinary Shares solely into shares of common stock of the surviving entity. Notwithstanding the foregoing provisions of this Section 3.8, a Change in Control shall not be deemed to have occurred if (A) the closing price per Ordinary Share on the NYSE or, if the Ordinary Shares are not listed on the NYSE, on the principal other national or regional securities exchange on which the Ordinary Shares are then listed, or if the Ordinary Shares are not listed on a U.S. national or regional exchange, as reported on the National Association of Securities Dealers Automated Quotation System, of if the Ordinary Shares are not quoted on the National Association of Securities Dealers Automated Quotation System, as reported on the principal other market on which the Ordinary Shares are then traded, for any five trading days within the period of 10 consecutive trading days ending immediately after the later of the Change in Control or the public announcement of the Change in Control, in the case of a Change in Control relating to an acquisition of Capital Stock, or the period of 10 consecutive trading days ending immediately before the Change in Control, in the case of Change in Control relating to a merger, consolidation or asset sale, equals or exceeds 105% of the conversion price of the Securities in effect on each of those trading days or (B) all of the consideration (excluding cash payments for fractional shares and cash payments made pursuant to dissenters' appraisal rights) in a merger or consolidation otherwise constituting a Change in Control under clause (i) and/or clause (ii) above consists of shares of common stock traded on a national securities exchange or quoted on the Nasdaq National Market (or will be so traded or quoted immediately following the merger or consolidation) and as a result of the merger or consolidation the Securities become convertible into such common stock. For purposes of this Section 3.8, (x) the conversion price is equal to $1,000 divided by the Conversion Rate, (y) whether a person is a "beneficial owner" shall be determined in accordance with Rule 13d-3 under the Exchange Act and (z) "person" includes any syndicate or group that would be deemed to be a "person" under Section 13(d)(3) of the Exchange Act. At the option of the Company, the Change in Control Purchase Price of Securities in respect of which a Change in Control Purchase Notice pursuant to Section 3.8(b) has been given may be paid by the Company by the issuance of a number of Ordinary Shares equal to the quotient obtained by dividing (i) the amount of cash to which the Holders would have been entitled had the Company elected to pay all of the Change in Control Purchase Price of such Securities in cash, (ii) the product of (A) the Market Price of Ordinary Shares, subject to the next succeeding paragraph and (B) 0.95. The Company will not issue fractional Ordinary Shares in payment of the Change in Control Purchase Price. Instead the Company will pay cash based on the current -35- Market Price for all fractional shares. The current market value of a fractional share shall be determined to the nearest 1/1,000th of a share, by multiplying the Market Price of a full share by the fractional amount and rounding to the nearest whole cent. It is understood that if a Holder elects to have more than one Security purchased, the number of Ordinary Shares shall be based on the aggregate amount of Securities to be purchased. In the event that the Company is unable to purchase the Securities of a Holder or Holders for Ordinary Shares because any necessary qualifications or registrations of the Ordinary Shares under applicable state securities laws cannot be obtained, the Company may purchase the Securities of such Holder or Holders for cash. The Company may not change its election with respect to the consideration to be paid once the Company has given its Change in Control Notice to Securityholders except pursuant to this Section 3.8(a) or pursuant to Section 3.8(b) in the event of a failure to satisfy, prior to the close of business on the Change in Control Purchase Date, any condition to the payment of the Change in Control Purchase Price in Ordinary Shares. At least three Business Days before the Change in Control Notice Date (as defined below), the Company shall deliver an Officers' Certificate to the Trustee specifying: (i) the manner of payment selected by the Company; (ii) the information required by Section 3.8(b); (iii) if the Company elects to pay the Change in Control Purchase Price in Ordinary Shares, that the conditions to such manner of payment set forth in Section 3.8(a) have been or will be complied with; and (iv) whether the Company desires the Trustee to give the Change in Control Notice required by Section 3.8(b). The Company's right to exercise its election to purchase Securities through the issuance of Ordinary Shares shall be conditioned upon: (i) the Company's giving of timely Change in Control Notice to purchase all of the Securities with Ordinary Shares as provided herein; (ii) the registration of such Ordinary Shares under the Securities Act or the Exchange Act, in each case, if required; (iii) such Ordinary Shares shall have been listed on the principal national or regional securities exchange (currently the NYSE) on which the Ordinary Shares are then listed, or if the Ordinary Shares are not listed on a national or regional -36- exchange, then on the National Association of Securities Dealers Automated Quotation System, of if the Ordinary Shares are not quoted on the National Association of Securities Dealers Automated Quotation System, then on the principal other market on which the Ordinary Shares are then traded; (iv) any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration; and (v) the receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel each stating that (A) the terms of the issuance of the Ordinary Shares are in conformity with this Indenture and (B) the Ordinary Shares to be issued by the Company in payment of the Change in Control Purchase Price in respect of Securities have been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the Change in Control Purchase Price in respect of the Securities, will be validly issued, fully paid and non-assessable and, to the best of such counsel's knowledge, free from preemptive rights, and, in the case of such Officers' Certificate, stating that the conditions above and the condition set forth in the second succeeding sentence have been satisfied and, in the case of such Opinion of Counsel, stating that the conditions above have been satisfied. Such Officers' Certificate shall also set forth (i) the number of Ordinary Shares of to be issued for each $1,000 principal amount at maturity of Securities, (ii) the Sale Price of an Ordinary Share on each trading day during the period commencing on the first trading day of the period during which the Market Price is calculated and ending on the third Business Day prior to the Change in Control Purchase Date and (iii) the Market Price of the Ordinary Shares. The Company may pay the Change in Control Purchase Price in Ordinary Shares only if the information necessary to calculate the Market Price is published in a daily newspaper of national circulation or is otherwise publicly available or obtainable (e.g., by dissemination on the World Wide Web or by other public means). If the foregoing conditions are not satisfied with respect to a Holder or Holders prior to the close of business on the Change in Control Purchase Date and the Company has elected to purchase the Securities pursuant to this Section 3.8 through the issuance of Ordinary Shares, the Company shall pay the entire Purchase Price of the Securities of such Holder or Holders in cash. Upon determination of the actual number of Ordinary Shares to be issued for each $1,000 principal amount at maturity of Securities (not later than the third Business Day prior to the Change in Control Purchase Date), the Company shall publish such determination through Dow Jones & Company, Inc. or Bloomberg Business News or otherwise make such information publicly available. -37- (b) No later than 30 days after the occurrence of a Change in Control, the Company shall mail a written notice of the Change in Control (the "Change in Control Notice," the date of such mailing, the "Change in Control Notice Date") by first- class mail to the Trustee and to each Holder (and to beneficial owners as required by applicable law). The notice shall include a form of Change in Control Purchase Notice to be completed by the Holder and shall state: (1) briefly, the nature of the Change in Control and the date of such Change in Control; (2) the date by which the Change in Control Purchase Notice pursuant to this Section 3.8 must be given; (3) the Change in Control Purchase Date; (4) the Change in Control Purchase Price; (5) the name and address of the Paying Agent and the Conversion Agent; (6) the then existing Conversion Rate and any adjustments thereto; (7) that the Securities as to which a Change in Control Purchase Notice has been given may be converted if they are otherwise convertible pursuant to Article 10 hereof only if the Change in Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (8) that the Securities must be surrendered to the Paying Agent to collect payment; (9) that the Change in Control Purchase Price for any Security as to which a Change in Control Purchase Notice has been duly given and not withdrawn will be paid promptly following the later of the Change in Control Purchase Date and the time of surrender of such Security as described in (8); (10) briefly, the procedures the Holder must follow to exercise rights under this Section 3.8; (11) briefly, the conversion rights, if any, of the Securities; (12) the procedures for withdrawing a Change in Control Purchase Notice; -38- (13) that, unless the Company defaults in making payment of such Change in Control Purchase Price, interest, if any, on Securities surrendered for purchase by the Company will cease to accrue on and after the Change in Control Purchase Date; and (14) the CUSIP number(s) of the Securities. In the event the Company has elected to pay the Change in Control Purchase Price with Ordinary Shares, the Change in Control Notice shall: (1) state that the Company will pay the Change in Control Purchase Price with Ordinary Shares of Common Stock; (2) set forth the method of calculating the number of Ordinary Shares to be paid; (3) state that because the Market Price of the Ordinary Shares will be determined prior to the Change in Control Purchase Date, Holders will bear the market risk with respect to the value of the shares of Common Stock to be received from the date such Market Price is determined to the Change in Control Purchase Date. (c) A Holder may exercise its rights specified in Section 3.8(a) upon delivery of a written notice of purchase (a "Change in Control Purchase Notice") to the Paying Agent at any time on or prior to the 30th day after the date the Company delivers its written Change in Control Purchase Notice, stating: (1) the certificate number of the Security which the Holder will deliver to be purchased; (2) the portion of the principal amount of the Security which the Holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof; (3) that such Security shall be purchased pursuant to the terms and conditions specified in Paragraph 7 of the Securities; and (4) in the event the Company elects, pursuant to Section 3.8(b), to pay the Change in Control Purchase Price in Ordinary Shares but the Change in Control Purchase Price shall ultimately be payable to such Holder in cash because any of the conditions to payment of the Change in Control Purchase Price in Ordinary Shares are not satisfied prior to the close of business on the Change in Control Purchase Date, whether such Holder -39- elects (i) to withdraw such Change in Control Purchase Notice as to some or all of the Securities to which such Change in Control Purchase Notice relates (stating the principal amount at maturity and certificate numbers, if any, of the Securities as to which such withdrawal shall relate), or (ii) to receive cash in respect of the entire Change in Control Purchase Price for all Securities (or portions thereof) to which such Change in Control Purchase Notice relates. If a Holder, in such Holder's Change in Control Purchase Notice and in any written notice of withdrawal delivered by such Holder pursuant to the terms of Section 3.9, fails to indicate such Holder's choice with respect to the election set forth in clause (4) above, such Holder shall be deemed to have elected to receive cash in respect of the Change in Control Purchase Price for all Securities subject to such Change in Control Purchase Notice in the circumstances set forth in such clause (4). The delivery of such Security to the Paying Agent with the Change in Control Purchase Notice (together with all necessary endorsements) at the offices of the Paying Agent shall be a condition to the receipt by the Holder of the Change in Control Purchase Price therefor; provided, however, that such Change in Control Purchase Price shall be so paid pursuant to this Section 3.8 only if the Security so delivered to the Paying Agent shall conform in all material respects to the description thereof set forth in the related Change in Control Purchase Notice. The Company shall purchase from the Holder thereof, pursuant to this Section 3.8, a portion of a Security if the principal amount at maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.8 shall be consummated by the delivery of the consideration to be received by the Holder on the Change of Control Purchase Date. (d) Covenants of the Company. All Ordinary Shares delivered upon purchase of the Securities shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and nonassessable, and shall be free from preemptive rights and free of any lien or adverse claim. (e) Procedure upon Purchase. The Company shall deposit cash (in respect of a cash purchases under Section 3.8 or for fractional Ordinary Shares, as applicable) or Ordinary Shares, or a combination thereof, as applicable, at the time and in the manner as provided in Section 3.10, sufficient to pay the aggregate Change in Control Purchase Price of all Securi- -40- ties to be purchased pursuant to this Section 3.8. As soon as practicable after the Purchase Date, the Company shall deliver to each Holder entitled to receive Ordinary Shares through the Paying Agent, a certificate in global form for the number of full Ordinary Shares issuable in payment of the Change in Control Purchase Price and cash in lieu of any fractional shares. The person in whose name the certificate for Ordinary Shares is registered shall be treated as a holder of record of Ordinary Shares on the Business Day following the Change in Control Purchase Date. No payment or adjustment will be made for dividends on the Ordinary Shares on the record date for which occurred on or prior to the Change in Control Purchase Date. (f) Taxes. If a Holder of a purchased Security is paid in Ordinary Shares pursuant to this Section 3.8, the Company shall pay all, stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance of Ordinary Shares. However, the Holder shall pay any such tax which is due because the Holder requests the Ordinary Shares to be issued in a name other than the Holder's name. The Paying Agent may refuse to deliver the certificates representing the Ordinary Shares being issued in a name other than the Holder's name until the Paying Agent receives a sum sufficient to pay any tax which will be due because the Ordinary Shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any income tax withholding required by law or regulations. Section 3.9 Effect of Purchase Notice or Change in Control Purchase Notice. Upon receipt by the Paying Agent of the Purchase Notice or Change in Control Purchase Notice specified in Section 3.7(a) or Section 3.8(c), as applicable, the Holder of the Security in respect of which such Purchase Notice or Change in Control Purchase Notice, as the case may be, was given shall (unless such Purchase Notice or Change in Control Purchase Notice, as the case may be, is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price or Change in Control Purchase Price, as the case may be, with respect to such Security. Such Purchase Price or Change in Control Purchase Price shall be paid to such Holder, subject to receipts of funds and/or securities by the Paying Agent, promptly following the later of (x) the Purchase Date or the Change in Control Purchase Date, as the case may be, with respect to such Security (provided the conditions in Section 3.7(d) or Section 3.8(c), as applicable, have been satisfied) and (y) the time of delivery of such Security to the Paying Agent by the Holder thereof in the manner required by Section 3.7(d) or Section 3.8(c), as applicable. Securities in respect of which a Purchase Notice or Change in Control Purchase Notice has been given by the Holder thereof may not be converted pursuant to Article X hereof on or after the date of the delivery of such Purchase Notice or Change in Control Purchase Notice unless such Purchase Notice or Change in Control Purchase Notice has first been validly withdrawn as specified in the following two paragraphs. A Purchase Notice or Change in Control Purchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in ac- -41- cordance with the Purchase Notice or Change in Control Purchase Notice, as the case may be, at any time prior to the close of business on the last day prior to the Purchase Date or the Change in Control Purchase Date, as the case may be, specifying: (1) the certificate number of the Security in respect of which such notice of withdrawal is being submitted or the appropriate Depositary procedures if Certificated Securities have been issued, (2) the principal amount of the Security with respect to which such notice of withdrawal is being submitted, and (3) the principal amount, if any, of such Security which remains subject to the original Purchase Notice or Change in Control Purchase Notice, as the case may be, and which has been or will be delivered for purchase by the Company. A written notice of withdrawal of a Purchase Notice may be in the form set forth in the preceding paragraph or may be in the form of (i) a conditional withdrawal contained in a Purchase Notice pursuant to the terms of Section 3.7(a)(1)(D) or (ii) a conditional withdrawal containing the information set forth in Section 3.7(a)(1)(D) and the preceding paragraph and contained in a written notice of withdrawal delivered to the Paying Agent as set forth in the preceding paragraph. Section 3.10 Deposit of Purchase Price or Change in Control Purchase Price. Prior to 10:00 a.m. New York City time on the Business Day following the Purchase Date or the Change in Control Purchase Date, as the case may be, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.5) an amount of cash (in immediately available funds if deposited on such Business Day) and/or Ordinary Shares, if permitted hereunder, sufficient to pay the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of all the Securities or portions thereof which are to be purchased as of the Purchase Date or Change in Control Purchase Date, as the case may be. Section 3.11 Securities Purchased in Part. Any Certificated Security which is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in -42- aggregate principal amount at maturity equal to, and in exchange for, the portion of the principal amount at maturity of the Security so surrendered which is not purchased. Section 3.12 Covenant to Comply With Securities Laws Upon Purchase of Securities. When complying with the provisions of Section 3.7 or 3.8 hereof (provided that such offer or purchase constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), the Company shall (i) comply with Rule 13e- 4 and Rule 14e-1 (or any successor provision) under the Exchange Act, (ii) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, and (iii) otherwise comply with any applicable Federal and state securities laws so as to permit the rights and obligations under Sections 3.7 and 3.8 to be exercised in the time and in the manner specified in Sections 3.7 and 3.8. Section 3.13 Repayment to the Company. The Trustee and the Paying Agent shall return to the Company any cash or Ordinary Shares that remain unclaimed as provided in Paragraph 12 of the Securities, together with interest or dividends, if any, thereon (subject to the provisions of Section 7.1(f)), held by them for the payment of the Purchase Price or Change in Control Purchase Price, as the case may be; provided, however, that to the extent that the aggregate amount of cash or Ordinary Shares deposited by the Company pursuant to Section 3.10 exceeds the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of the Securities or portions thereof which the Company is obligated to purchase as of the Purchase Date or Change in Control Purchase Date, as the case may be, then, unless otherwise agreed in writing with the Company, promptly after the Business Day following the Purchase Date or Change in Control Purchase Date, as the case may be, the Trustee shall return any such excess to the Company together with interest or dividends, if any, thereon (subject to the provisions of Section 7.1(f)). ARTICLE IV COVENANTS Section 4.1 Payment of Securities. The Company shall promptly make all payments in respect of the Securities on the dates and in the manner provided in the Securities or pursuant to this Indenture. Any amounts of cash or Ordinary Shares to be given to the Trustee or Paying Agent, shall be deposited with the Trustee or Paying Agent by 10:00 a.m. New York City time by the Company on the required date. The Company may, at its option, make payments in respect of the Securities by check mailed to a Holder's registered address or, with respect to global Securities, by wire transfer. The Company shall make any required interest payments to the person in whose name each Security is registered at the close of busi- -43- ness on the record date for such interest payment. Principal amount, Accreted Value plus accrued interest, if any, Redemption Price, Purchase Price, Change in Control Purchase Price, cash interest, if any, and Additional Amounts, if any, shall be considered paid on the applicable date due if on such date (or, in the case of a Purchase Price or Change in Control Purchase Price, on the Business Day following the applicable Purchase Date or Change in Control Purchase Date, as the case may be) the Trustee or the Paying Agent holds, in accordance with this Indenture, cash or securities, if permitted hereunder, sufficient to pay all such amounts then due. Section 4.2 SEC and Other Reports. The Company shall file with the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company is at any time no longer subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall continue to provide the Trustee with annual and quarterly reports containing substantially the same information as would have been required to be filed with the SEC had the Company continued to have been subject to such reporting requirements. In such event, such annual and quarterly reports shall be provided at the times the Company would have been required to provide reports had it continued to have been subject to such reporting requirements. The Company also shall comply with the other provisions of TIA Section 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely conclusively on Officers' Certificates). Section 4.3 Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company (beginning with the fiscal year ending on December 31, 2001) an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof, the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. Section 4.4 Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. -44- Section 4.5 Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, the City of New York, an office or agency of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer, exchange, purchase, redemption or conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The office of State Street Bank and Trust Company, N.A., an affiliate of the Trustee, at 61 Broadway, 15th floor, New York, NY 10022 (Attention: Corporate Trust Trustee Administration: XL Capital Ltd Zero-Coupon Convertible Debentures due 2021), shall initially be such office or agency for all of the aforesaid purposes. The Company shall give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency (other than a change in the location of the Corporate Trust Office of the Trustee). If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.2. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York, for such purposes. Section 4.6 Delivery of Certain Information. At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder or any beneficial owner of Securities or holder or beneficial owner of Ordinary Shares issued upon conversion thereof, or in accordance with Section 3.8(c), the Company will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder or any beneficial owner of Securities or holder or beneficial owner of Ordinary Shares, or to a prospective purchaser of any such security designated by any such holder, as the case may be, to the extent required to permit compliance by such Holder or holder with Rule 144A under the Securities Act in connection with the resale of any such security. "Rule 144A Information" shall be such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act. Whether a person is a beneficial owner shall be determined by the Company to the Company's reasonable satisfaction. Section 4.7 Notification of Upward Interest Adjustment. The Company shall notify the Trustee upon the occurrence of an Upward Interest Adjustment as contemplated by the form of Security attached hereto as Exhibit A and of the effect that such Upward Interest Adjustment has upon transfers permitted by Section 2.7. Unless and until the Trustee receives such certificate, the Trustee may assume without inquiry that no Upward Interest Adjustment has occurred or is required to have occurred. -45- Section 4.8 Additional Amounts. All amounts payable (whether in respect of principal, interest or otherwise) in respect of the Securities will be made free and clear of and without withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or governmental charges of whatever nature imposed or levied by or on behalf of the Cayman Islands or any political subdivision thereof or any authority or agency therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, levies, assessment or governmental charges is required by law. In that event, the Company will pay, or cause to be paid, such Additional Amounts as may be necessary in order that the net amounts receivable by a Holder after such withholding or deduction shall equal the respective amounts that would have been receivable by such Holder had no such withholding or deduction been required, except that no such Additional Amounts shall be payable in relation to any payment in respect of any of the Securities (a) to, or to a third party on behalf of, a person who is liable for such taxes, duties, levies, assessments or governmental charges in respect of such Security by reason of his having some connection with (including, without limitation, being a citizen of, being incorporated or engaged in a trade or business in, or having a residence or principal place of business or other presence in) the Cayman Islands other than (i) the mere holding of such Security or (ii) the receipt of principal, interest or other amount in respect of such Security; (b) presented for payment more than 30 days after the Relevant Date, except to the extent that the relevant Holder would have been entitled to such Additional Amounts on presenting the same for payment on or before the expiry of such period of 30 days; (c) on account of any inheritance, gift, estate, personal property, sales or transfer or similar taxes, duties, levies, assessments or similar governmental charges; or (d) on account of any taxes, duties, levies, assessments or governmental charges that are payable otherwise than by withholding from payments in respect of such Security. If the Company becomes subject generally at any time to any taxing jurisdiction other than or in addition to the Cayman Islands, references in this section to the Cayman Islands shall be read and construed as references to such other jurisdiction(s) and/or to the Cayman Islands. Notwithstanding anything herein to the contrary, in the event that any deduction or withholding on account of tax be required to be made, or be made, in connection with any European Union directive on the taxable of savings implementing the conclusions of the ECOFIN Council meeting of November 26-27, 2000, or any law implementing or complying with, or introduced in order to conform to, such directive, no additional amounts shall be payable or paid by the Company to any holder in respect of the Securities. Any reference in this Indenture to principal, premium or interest in respect of the Securities, any redemption amount and any other amounts in the nature of principal, shall be deemed also to refer to any Additional Amounts that may be payable under this Indenture, and the express mention of the payment of Additional Amounts (if applicable) in any provi- -46- sion hereof shall not be construed as excluding Additional Amounts in those provision hereof where such express mention is not made. Except as otherwise provided in or pursuant to this Indenture, if the Securities require the payment of Additional Amounts, at least 10 days prior to the first Relevant Date with respect to such Securities, and at least 10 days prior to each Relevant Date if there has been any change with respect to the matters set forth in the below-mentioned Officers' Certificate, the Company or its designee shall furnish to the Trustee, the Registrar and the Paying Agent an Officer's Certificate instructing the Trustee and such Paying Agents whether such payment of principal of or interest on the Securities shall be made to Holders who are Non-U.S. Persons without withholding for or on account of any tax assessment or other governmental charge described above due to the payment of Additional Amounts by the Company. If any such payment of Additional Amounts shall be required, then such certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders, and the Company agrees to pay to the Trustee, the Registrar or the Paying Agent the Additional Amounts required. ARTICLE V SUCCESSOR CORPORATION Section 5.1 When Company May Merge or Transfer Assets. The Company shall not consolidate with or merge with or into any other person (other than a Subsidiary) or convey, transfer, sell or lease its properties and assets substantially as an entirety to any person (other than a Subsidiary), permit any person (other than a Subsidiary) to consolidate with or merge into the Company, or permit any person (other than a Subsidiary) to convey, transfer, sell or lease that person's properties and assets substantially as an entirety to the Company, unless: (a) either (1) the Company shall be the surviving person or (2) the person (if other than the Company) formed by such consolidation or into which the Company is merged or the person which acquires by conveyance, transfer or lease the properties and assets of the Company substantially as an entirety shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all of the obligations of the Company under the Securities and this Indenture; (b) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and -47- (c) the Company shall have delivered to the Trustee an Officers' Certificate stating that such consolidation, merger, conveyance, transfer, sale or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article V and that all conditions precedent herein provided for relating to such transaction have been satisfied. The successor person formed by such consolidation or into which the Company is merged or the successor person to which such conveyance, transfer, sale or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor had been named as the Company herein; and thereafter, except in the case of a lease and obligations the Company may have under a supplemental indenture pursuant to Section 10.15, the Company shall be discharged from all obligations and covenants under this Indenture and the Securities. Subject to Section 9.6, the Company, the Trustee and the successor person shall enter into a supplemental indenture to evidence the succession and substitution of such successor person and such discharge and release of the Company. ARTICLE VI DEFAULTS AND REMEDIES Section 6.1 Events of Default. An "Event of Default" occurs if: (1) the Company defaults in the payment of the Accreted Value (including any interest payable pursuant to an Upward Interest Adjustment, other than the portion of such interest payable as cash interest) at maturity, upon redemption, repurchase or following a Change in Control, when the same becomes due and payable; (2) the Company defaults in the payment of any cash interest (after an Upward Interest Adjustment) when due and payable, and continuance of such default for a period of 30 days; (3) the Company fails to comply with any of its agreements or covenants in the Securities or this Indenture (other than those referred to in clause (1) or (2) above) and such failure continues for 60 days after receipt by the Company of a Notice of Default; (4) there shall have occurred either (i) a default by the Company under any instrument or instruments under which there is or may be secured or evidenced any Indebtedness of the Company (other than the Securities) having an outstanding principal amount of $100,000,000 (or its foreign currency equivalent) or more, individually or in the aggregate, -48- that has caused the holders thereof to declare such Indebtedness to be due and payable prior to its stated maturity, unless such declaration has been rescinded within 30 days or (ii) a default by the Company in the payment when due of the principal or premium, if any, of any bond, debenture, note or other evidence of the Company's Indebtedness, in each case for money borrowed, or in the payment of principal or premium under any mortgage, indenture, agreement or instrument of the Company under which there may be issued or by which there may be secured or evidenced any Indebtedness of the Company for money borrowed, which default for payment of principal or premium, if any, is in an aggregate principal amount exceeding $100,000,000 (or its foreign currency equivalent) when such Indebtedness becomes due and payable (whether at maturity, upon redemption or acceleration or otherwise), if such default shall continue unremedied or unwaived for more than 30 Business Days after the expiration of any grace period or extension of the time for payment applicable thereto; (5) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or for any substantial part of its property or ordering the winding up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (6) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or for any substantial part of its property or make any general assignment for the benefit of creditors. A Default under clause (3) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount of the Securities at the time outstanding notify the Company and the Trustee, of the Default and the Company does not cure such Default (and such Default is not waived) within the time specified in clause (3) above after actual receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after it becomes aware of the occurrence thereof, written notice of any event which with the giving of notice or the lapse of time, or both, would mature into an Event of Default under clauses (3) or (4) above, its status and what action the Company is taking or proposes to take with respect thereto. -49- Section 6.2 Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.1(5) or (6) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Securities at the time outstanding by notice to the Company and the Trustee, may declare the Accreted Value plus accrued and unpaid cash interest, if any, on all the Securities to be immediately due and payable. Upon such a declaration, such accelerated amount shall be due and payable immediately. If an Event of Default specified in Section 6.1(5) or (6) occurs and is continuing, the Accreted Value plus accrued and unpaid cash interest, if any, on all the Securities shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Security holders. The Holders of a majority in aggregate principal amount of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Security holder) may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of the Accreted Value plus accrued and cash unpaid interest, if any, that have become due solely as a result of acceleration and if all amounts due to the Trustee under Section 7.7 have been paid. No such rescission shall affect any subsequent Default or impair any right consequent thereto. Section 6.3 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of the Accreted Value plus accrued and unpaid cash interest, if any, on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of the Securities in the proceeding. A delay or omission by the Trustee or any Security holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. Section 6.4 Waiver of Past Defaults. The Holders of a majority in aggregate principal amount of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Securityholder), may waive an existing Default and its consequences except (1) an Event of Default described in Section 6.1(1) or (2), (2) a Default in respect of a provision that under Section 9.2 cannot be amended without the consent of each Securityholder affected or (3) a Default which constitutes a failure to convert any Security in accordance with the terms of Article X. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. This Section 6.4 shall be in lieu of Section 316(a)1(B) of the TIA and such Section 316(a)1(B) is hereby expressly excluded from this Indenture, as permitted by the TIA. -50- Section 6.5 Control by Majority. The Holders of a majority in aggregate principal amount of the Securities at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability unless the Trustee is offered indemnity satisfactory to it. This Section 6.5 shall be in lieu of Section 316(a)1(A) of the TIA and such Section 316(a)1(A) is hereby expressly excluded from this Indenture, as permitted by the TIA. Section 6.6 Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in aggregate principal amount at maturity of the Securities at the time outstanding make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer to the Trustee security or indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of such notice, request and offer of security or indemnity; and (5) the Holders of a majority in aggregate principal amount at maturity of the Securities at the time outstanding do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of any other Securityholder or to obtain a preference or priority over any other Securityholder. Section 6.7 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of the Accreted Value, Redemption Price, Purchase Price, Change in Control Purchase Price or interest, if any, in respect of the Securities held by such Holder, on or after the respective due dates expressed in the Securities or any Redemption Date, and to convert the Securities in accordance with Article X, or to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, shall not be impaired or affected adversely without the consent of such Holder. -51- Section 6.8 Collection Suit by Trustee. If an Event of Default described in Section 6.1(1) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then owing with respect to the Securities and the amounts provided for in Section 7.7. Section 6.9 Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the Accreted Value, Redemption Price, Purchase Price, Change in Control Purchase Price or interest, if any, in respect of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of any such amount) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of the Accreted Value, Redemption Price, Purchase Price, Change in Control Purchase Price, or interest, if any, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel or any other amounts due the Trustee under Section 7.7) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10 Priorities. If the Trustee collects any money pursuant to this Article VI, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.7; -52- SECOND: to Securityholders for amounts due and unpaid on the Securities for the Accreted Value, Redemption Price, Purchase Price, Change in Control Purchase Price or interest, if any, as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Securities; and THIRD: the balance, if any, to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that states the record date, the payment date and the amount to be paid. Section 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in aggregate principal amount of the Securities at the time outstanding. This Section 6.11 shall be in lieu of Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded from this Indenture, as permitted by the TIA. Section 6.12 Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company from paying all or any portion of the Accreted Value, Redemption Price, Purchase Price or Change in Control Purchase Price in respect of Securities, or interest, if any, as contemplated herein, or which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. -53- ARTICLE VII TRUSTEE Section 7.1 Duties of Trustee. If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (a) Except during the continuance of an Event of Default: (1) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but in case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein. This Section 7.1(b) shall be in lieu of Section 3.15(a) of the TIA and such Section 315(a) is hereby expressly excluded from this Indenture, as permitted by the TIA. (b) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (1) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.1; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5. -54- Subparagraphs (c)(1), (2) and (3) shall be in lieu of Sections 315(d)(1), 315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and 315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the TIA. (c) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.1. (d) The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives indemnity satisfactory to it against any loss, liability or expense. (e) Money or Ordinary Shares held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee (acting in any capacity hereunder) shall be under no liability for interest on any money received by it hereunder unless otherwise agreed in writing with the Company. Section 7.2 Rights of Trustee. Subject to its duties and responsibilities under the TIA, (a) the Trustee may conclusively rely and shall be 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 believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate; (c) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (d) The Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith which it believes to be authorized or within its rights or powers conferred under this Indenture; (e) The Trustee may consult with counsel selected by it and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any -55- action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel. (f) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby. (g) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (h) 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 discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation; (i) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture; (j) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other person employed to act hereunder; and (k) the Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded. -56- Section 7.3 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or any of its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, Conversion Agent, Reset Rate Agent or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. Section 7.4 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use or application of the proceeds from the Securities, it shall not be responsible for any statement in the registration statement for the Securities under the Securities Act or in any offering document for the Securities, the Indenture or the Securities (other than its certificate of authentication), or the determination as to which beneficial owners are entitled to receive any notices hereunder. Section 7.5 Notice of Defaults. If a Default occurs and if it is known to the Trustee, the Trustee shall give to each Securityholder notice of the Default within 90 days after it occurs or, if later, within 15 days after it is known to the Trustee, unless such Default shall have been cured or waived before the giving of such notice. Notwithstanding the preceding sentence, except in the case of a Default described in Section 6.1(1) or (2), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Securityholders. The second sentence of this Section 7.5 shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso is hereby expressly excluded from this Indenture, as permitted by the TIA. The Trustee shall not be deemed to have knowledge of a Default unless a Responsible Officer of the Trustee has received written notice of such Default. Section 7.6 Reports by Trustee to Holders. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such May 15 that complies with TIA Section 313(a), if required by such Section 313(a). The Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each securities exchange, if any, on which the Securities are listed. The Company agrees to notify the Trustee promptly whenever the Securities become listed on any securities exchange and of any delisting thereof. Section 7.7 Compensation and Indemnity. The Company agrees: -57- (a) to pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited (to the extent permitted by law) by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses, advances and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (c) to indemnify the Trustee or any predecessor, Trustee and their agents for, and to hold them harmless against, any loss, damage, claim, liability, cost or expense (including attorney's fees and expenses, and taxes (other than taxes based upon, measured by or determined by the income of the Trustee)) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder. To secure the Company's payment obligations in this Section 7.7, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay the principal amount, Accreted Value, Redemption Price, Purchase Price, Change in Control Purchase Price or interest, if any, as the case may be, on particular Securities. The Company's payment obligations pursuant to this Section 7.7 shall survive the discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.1(5) or (6), the expenses including the reasonable charges and expenses of its counsel, are intended to constitute expenses of administration under any bankruptcy law. Section 7.8 Replacement of Trustee. The Trustee may resign by so notifying the Company; provided, however, no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.8. The Holders of a majority in aggregate principal amount of the Securities at the time outstanding may remove the Trustee by so notifying the Trustee and the Company. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; -58- (3) a receiver or public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by resolution of its Board of Directors, a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company satisfactory in form and substance to the retiring Trustee and the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.7. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate principal amount of the Securities at the time outstanding may petition any court of competent jurisdiction at the expense of the Company for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Section 7.9 Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets (including the administration of the trust created by this Indenture) to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. Section 7.10 Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The Trustee (or its parent holding company) shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. Nothing herein contained shall prevent the Trustee from filing with the Commission the application referred to in the penultimate paragraph of TIA Section 310(b). -59- Section 7.11 Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE VIII DISCHARGE OF INDENTURE Section 8.1 Discharge of Liability on Securities. When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced or repaid pursuant to Section 2.8) for cancellation or (ii) all outstanding Securities have become due and payable and the Company deposits with the Trustee cash or Ordinary Shares sufficient to pay all amounts due and owing on all outstanding Securities (other than Securities replaced pursuant to Section 2.8), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 7.7, cease to be of further effect. The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and Opinion of Counsel and at the cost and expense of the Company. Section 8.2 Repayment to the Company. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person and the Trustee and the Paying Agent shall have no further liability to the Securityholders with respect to such money or securities for that period commencing after the return thereof. ARTICLE IX AMENDMENTS Section 9.1 Without Consent of Holders. The Company and the Trustee may amend or supplement this Indenture or the Securities without the consent of any Securityholder, so long as such changes, other than those in clause (2), do not materially and adversely affect the interests of the Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; -60- (2) to make any modifications or amendments that do not, in the good faith opinion of the Company's Board of Directors and the Trustee, adversely affect the interests of the holders of the Securities in any material respect; (3) to provide for the assumption of the Company's obligations under this Indenture by a successor upon any merger, consolidation or asset transfer as permitted by and in compliance with Article V or Section 10.15; (4) to provide any security for or guarantees of the Securities; (5) to add Events of Default with respect to the Securities; or (6) to add to the Company's covenants for the benefit of the Securityholders or to surrender any right or power conferred upon the Company by this Indenture; (7) to make any change necessary for the registration of the Securities under the Securities Act or to comply with the TIA, or any amendment thereto, or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA, provided that such modification or amendment does not, in the good faith opinion of the Company's Board of Directors and the Trustee, adversely affect the interests of the holders of the Securities in any material respect; or (8) to provide for uncertificated Securities in addition to or in place of certificated Securities or to provide for bearer Securities. Section 9.2 With Consent of Holders. With the written consent of the Holders of at least a majority in aggregate principal amount of the Securities at the time outstanding, the Company and the Trustee may amend or supplement this Indenture or the Securities. However, without the consent of each Securityholder affected, an amendment to this Indenture or the Securities may not: (1) reduce the rate or accrual of interest referred to in paragraph 1 of the Securities or change the time for payment of interest thereon; (2) reduce the principal amount at maturity or the Accreted Value of or extend the Stated Maturity of any Security; (3) reduce the calculation of the value of the Ordinary Shares to which reference is made in determining whether an Upward Interest Adjustment will be made on the Securities, or change the method by which this value is calculated; -61- (4) reduce the Redemption Price, Purchase Price or Change in Control Purchase Price of any Security or change the time at which the Securities may be redeemed or repurchased; (5) make any payments on the Securities payable in currency other than as stated in the Security; (6) make any change in the percentage of principal amount of Securities necessary to waive compliance with the provisions of Section 6.4 or this Section 9.2, except to increase any percentage set forth therein; (7) make any change that in the good faith judgment of the Company's Board of Directors and the Trustee adversely affects the right to convert any Security in accordance with the terms thereof and this Indenture; (8) make any change that in the good faith judgment of the Company's Board of Directors and the Trustee adversely affects the right to require the Company to purchase the Securities in accordance with the terms thereof and this Indenture; (9) impair a Holder's right to institute suit for the enforcement of any payment on the Securities; or (10) waive a continuing default or Event of Default regarding any payment on the Securities. It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section 9.2 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment. Section 9.3 Compliance with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall comply with the TIA. Section 9.4 Revocation and Effect of Consents, Waivers and Actions. Until an amendment, waiver or other action by Holders becomes effective, a consent thereto by a Holder of a Security hereunder is a continuing consent by the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same obligation as the consenting Holder's Security, even if notation of the consent, waiver or action is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder's Security or portion of the Security if the Trustee receives -62- the notice of revocation before the date the amendment, waiver or action becomes effective. After an amendment, waiver or action becomes effective, it shall bind every Securityholder. (1) impair a Holder's right to institute suit for the enforcement of any payment on the Securities; or (2) waive a continuing default or event of default regarding any payment on the Securities. Section 9.5 Notation on or Exchange of Securities. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for outstanding Securities. Section 9.6 Trustee to Sign Supplemental Indentures. The Trustee shall sign any supplemental indenture authorized pursuant to this Article 9 if the amendment contained therein does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign such supplemental indenture. In signing such supplemental indenture the Trustee shall receive, and (subject to the provisions of Section 7.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. Section 9.7 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. ARTICLE X CONVERSIONS Section 10.1 Conversion Privilege. A Holder of a Security may convert such Security into Ordinary Shares at any time during the period stated in Paragraph 8 of the Securities. The number of Ordinary Shares issuable upon conversion of a Security per $1,000 of principal amount at maturity thereof (the "Conversion Rate") shall be that set forth in Paragraph 8 of the Securities, subject to adjustment as herein set forth. The Company shall notify -63- the Trustee of the date on which the Securities first become convertible, which certificate shall set forth the calculations on which such determination was made. Unless and until the Trustee receives such certificate, the Trustee may assume without inquiry that the Securities are not convertible. A Holder may convert a portion of the principal amount at maturity of a Security if the portion converted is in a $1,000 principal amount at maturity or an integral multiple of $1,000. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security. In the event that the Ex-Dividend Time (as defined below) (or in the case of a subdivision, combination or reclassification, the effective date with respect thereto) with respect to a dividend, subdivision, combination or reclassification to which Section 10.6(1), (2), (3) or (5) applies occurs during the period applicable for calculating "Average Sale Price" pursuant to the definition in the preceding sentence, "Average Sale Price" shall be calculated for such period in a manner determined by the Board of Directors to reflect the impact of such dividend, subdivision, combination or reclassification on the Sale Price of the Ordinary Shares during such period. "Time of Determination" means the time and date of the earlier of (i) the determination of stockholders entitled to receive rights, warrants or options or a distribution, in each case, to which Section 10.7 or 10.8 applies and (ii) the time ("Ex-Dividend Time") immediately prior to the commencement of "ex-dividend" trading for such rights, warrants or options or distribution on the NYSE or such other U.S. national or regional exchange or market on which the Ordinary Shares are then listed or quoted. Section 10.2 Conversion Procedure. To convert a Security a Holder must satisfy the requirements in Paragraph 8 of the Securities. The first Business Day on which the Holder satisfies all those requirements and submits such Holder's Securities for conversion is the conversion date (the "Conversion Date"). As soon as practicable after the Conversion Date, the Company shall deliver to the Holder, through the Conversion Agent, a certificate in global form for the number of full Ordinary Shares issuable upon the conversion or exchange and cash in lieu of any fractional share determined pursuant to Section 10.3. The person in whose name the certificate is registered shall be treated as a shareholder of record as of the close of business on the Conversion Date. Upon conversion of a Security in its entirety, such person shall no longer be a Holder of such Security. No payment or adjustment will be made for dividends on, or other distributions with respect to, any Ordinary Shares except as provided in this Article X. On conversion of a -64- Security, that portion of accrued and unpaid cash interest, if any, through the Conversion Date with respect to the converted Security shall not be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the Ordinary Shares (together with the cash payment, if any, in lieu of fractional shares) for the Security being converted pursuant to the provisions hereof; and the fair market value of such Ordinary Shares (together with any such cash payment in lieu of fractional shares) shall be treated as issued, to the extent thereof, first in exchange for accrued and unpaid cash interest, if any, through the Conversion Date, and the balance, if any, of such fair market value of such Ordinary Shares (and any such cash payment) shall be treated as issued for the Accreted Value of the Security being converted pursuant to the provisions hereof. The Company will not adjust the conversion ratio to account for accrued interest, if any. If the Holder converts more than one Security at the same time, the number of Ordinary Shares issuable upon the conversion shall be based on the total Accreted Value of the Securities converted. If the last day on which a Security may be converted is a Legal Holiday, the Security may be surrendered on the next succeeding day that is not a Legal Holiday. Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security in an authorized denomination equal in principal amount to the unconverted portion of the Security surrendered. Section 10.3 Fractional Shares. The Company will not issue fractional Ordinary Shares upon conversion of a Security. Instead, the Company will pay cash based on the current Market Price for all fractional shares. The current market value of a fractional share shall be determined, to the nearest 1/1,000th of a share, by multiplying the Market Price of a full share by the fractional amount and rounding the product to the nearest whole cent. It is understood that if a Holder elects to have more than one Security converted, the number of Ordinary Shares shall be based on the Accreted Value of Securities to be purchased. Section 10.4 Taxes on Conversion. If a Holder submits a Security for conversion, the Company shall pay all stamp and all other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance of Ordinary Shares upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name. The Conversion Agent may refuse to deliver the certificates representing the Ordinary Shares being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulations. -65- Section 10.5 Company to Provide Stock. The Company shall, prior to issuance of any Securities under this Article X, and from time to time as may be necessary, reserve out of its authorized but unissued Ordinary Shares a sufficient number of Ordinary Shares to permit the conversion of the Securities. All Ordinary Shares delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable, and shall be free from preemptive rights and free of any lien or adverse claim. The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of Ordinary Shares upon conversion of Securities, if any, and will list or cause to have quoted such Ordinary Shares on each national securities exchange or in the over-the-counter market or such other market on which the Ordinary Shares are then listed or quoted. Section 10.6 Adjustment for Change in Capital Stock. If, after the Issue Date of the Securities, the Company, or in the case of (4) below, any Subsidiary of the Company: (1) pays a dividend or makes another distribution to all holders of the Company's Ordinary Shares payable exclusively in Ordinary Shares on the Company's Ordinary Shares; (2) subdivides the outstanding Ordinary Shares into a greater number of shares; (3) combines the outstanding Ordinary Shares into a smaller number of shares; or (4) pays a dividend or makes another distribution to all holders of the Company's Ordinary Shares consisting of the Company's debt, securities or assets or certain rights to purchase the Company's securities (other than Ordinary Shares or rights, warrants or options referred to in Section 10.7 and dividends on other distributions paid exclusively in cash), then the conversion privilege and the Conversion Rate in effect immediately prior to such action shall be adjusted so that the Holder of a Security thereafter converted may receive the number of shares of Capital Stock of the Company which such Holder would have owned immediately following such action if such Holder had converted the Security immediately prior to such action; provided, however, that no adjustment shall be made pursuant to clause (4) if all the Holders of the Securities may participate. The adjustment shall become effective immediately after the record date in the case of a dividend, distribution or subdivision and immediately after the effective date in the case of a combination or reclassification. -66- If after an adjustment a Holder of a Security upon conversion of such Security may receive shares of two or more classes of Capital Stock of the Company, the Conversion Rate shall thereafter be subject to adjustment upon the occurrence of an action taken with respect to any such class of Capital Stock as is contemplated by this Article X with respect to the Ordinary Shares, on terms comparable to those applicable to Ordinary Shares in this Article X. Section 10.7 Adjustment for Rights Issue. If after the Issue Date of the Securities, the Company distributes any rights or warrants to all holders of the Company's Ordinary Shares entitling them to purchase, for a period expiring within 60 days, Ordinary Shares at a price per share less than the then current Market Price as of the Time of Determination (except that no adjustment will be made if Holders of the Securities may participate in the distribution on a basis and with the notice that the Company's Board of Directors determines to be fair and appropriate), the Conversion Rate shall be adjusted in accordance with the formula: R' = R x (O + N) --------------- (O + (N x P)/M) where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. O = the number of Ordinary Shares outstanding on the record date for the distribution to which this Section 10.7 is being applied. N = the number of additional Ordinary Shares offered pursuant to the distribution. P = the offering price per share of the additional shares. M = the Market Price, minus, in the case of (i) a distribution to which Section 10.6(4) applies or (ii) a distribution to which Section 10.8 applies, for which, in each case, (x) the record date shall occur on or before the record date for the distribution to which this Section 10.7 applies and (y) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 10.7 applies, the fair market value (on the record date for the distribution to which this Section 10.7 applies) of the (1) Capital Stock of the Company distributed in respect of each Ordinary Share in such Section 10.6(4) distribution and -67- (2) the Company's or debt, securities or assets or certain rights, warrants or options to purchase securities of the Company distributed in respect of each Ordinary share in such Section 10.8 distribution. The Board of Directors shall determine fair market values for the purposes of this Section 10.7, except as Section 10.8 otherwise provides in the case of a spin-off. The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the rights, warrants or options to which this Section 10.7 applies. If all of the Ordinary Shares subject to such rights, warrants or options have not been issued when such rights, warrants or options expire, then the Conversion Rate shall promptly be readjusted to the Conversion Rate which would then be in effect had the adjustment upon the issuance of such rights, warrants or options been made on the basis of the actual number of Ordinary Shares issued upon the exercise of such rights, warrants or options. No adjustment shall be made under this Section 10.7 if the application of the formula stated above in this Section 10.7 would result in a value of R' that is equal to or less than the value of R. Section 10.8 Adjustment for Other Distributions. If, after the Issue Date of the Securities, the Company distributes to all holders of its Ordinary Shares any of its debt, securities or assets or any rights, warrants or options to purchase securities of the Company (including securities or cash, but excluding (x) distributions of Capital Stock referred to in Section 10.6 and distributions of rights, warrants or options referred to in Section 10.7 and (y) cash dividends or other cash distributions that are paid out of net income or retained earnings as shown on the books of the Company unless such cash dividends or other cash distributions are Extraordinary Cash Dividends) the Conversion Rate shall be adjusted, subject to the provisions of the last paragraph of this Section 10.8, in accordance with the formula: R' = R x M ----------- (M-F) where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. M = the Market Price, minus, in the case of a distribution to which Section 10.6(4) applies, for which (i) the record date shall occur on or before the record date for the distribution to which this Section 10.8 applies and (ii) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 10.8 applies, the fair market value (on the record date for the distribution to which this Section 10.8 ap- -68- plies) of any Capital Stock of the Company distributed in respect of each Ordinary Share in such Section 10.6(4) distribution. F = the fair market value (on the record date for the distribution to which this Section 10.8 applies) of the assets, securities, rights, warrants or options to be distributed in respect of each Ordinary Share in the distribution to which this Section 10.8 is being applied (including, in the case of cash dividends or other cash distributions giving rise to an adjustment, all such cash distributed concurrently). In the event the Company distributes shares of Capital Stock of a Subsidiary, the Conversion Rate will be adjusted, if at all, based on the market value of the Subsidiary stock so distributed relative to the market value of the Ordinary Shares, as discussed below. The Board of Directors shall determine fair market values for the purposes of this Section 10.8, except that in respect of a dividend or other distribution of shares of Capital Stock of any class or series, or similar equity interests, of or relating to a Subsidiary or other business unit of the Company (a "Spin-off"), the fair market value of the securities to be distributed shall equal the average of the daily Sale Prices of those securities for the five consecutive trading days commencing on and including the sixth day of trading of those securities after the effectiveness of the Spin-off. In the event, however, that an underwritten initial public offering of the securities in the Spin-off occurs simultaneously with the Spin-off, fair market value of the securities distributed in the Spin-off shall mean the initial public offering price of such securities and the Market Price shall mean the Sale Price for the Ordinary Shares on the same trading day. The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the distribution to which this Section 10.8 applies, except that an adjustment related to a Spin-off shall become effective at the earlier to occur of (i) 10 trading days after the effective date of the Spin-off and (ii) the initial public offering of the securities distributed in the Spin-off. For purposes of this Section 10.8, the term "Extraordinary Cash Dividend" shall mean the sum of (i) any cash and the fair market value of any other consideration payable in respect of any tender offer by the Company or any of its Subsidiaries for Ordinary Shares consummated within the preceding 12 months not triggering a Conversion Rate adjustment and (ii) all other all-cash distributions to all or substantially all holders of Ordinary Shares made within the preceding 12 months not triggering a Conversion Rate adjustment, exceeds an amount equal to 12.5% of the market capitalization of the Ordinary Shares on the Business Day immediately preceding the day on which the Company declares the distribution. -69- If, upon the date prior to the Ex-Dividend Time with respect to a cash dividend on the Ordinary Shares, the aggregate amount of such cash dividend together with the amounts of all other cash dividends or cash distributions gives rise to an adjustment of the Conversion Rate pursuant to Section 10.6, then such cash dividend together with all such other cash dividends or cash distributions shall, for purposes of applying the formula set forth above in this Section 10.8, cause the value of "F" to equal (y) the aggregate amount of such cash dividend together with the amounts of such other cash dividends or cash distributions, minus (z) the aggregate amount of all cash dividends or cash distributions for which a prior adjustment in the Conversion Rate was previously made. In the event that, with respect to any distribution to which this Section 10.8 would otherwise apply, the difference "M-F" as defined in the above formula is less than $1.00 or "F" is equal to or greater than "M", then the adjustment provided by this Section 10.8 shall not be made and in lieu thereof the provisions of Section 10.16 shall apply to such distribution. Section 10.9 Adjustment for Company Tender Offer If, after the Issue Date of the Securities, the Company or any Subsidiary of the Company pays holders of the Ordinary Shares in respect of a tender or exchange offer, other than an odd-lot offer, by the Company or any of its Subsidiaries for Ordinary Shares to the extent that the offer involves aggregate consideration that, together with (i) any cash and the fair market value of any other consideration payable in respect of any tender offer by the Company or any of its Subsidiaries for shares of Ordinary Shares consummated within the preceding 12 months not triggering a Conversion Rate adjustment and (ii) all-cash distributions to all or substantially all holders of Ordinary Shares made within the preceding 12 months not triggering a Conversion Rate adjustment in each case, exceeds an amount equal to 12.5% of the market capitalization of the Ordinary Shares on the expiration date of the tender offer, the Conversion Rate shall be increased so that the same shall equal the price determined by multiplying the Conversion Rate in effect immediately prior to the effectiveness of the Conversion Rate increase contemplated by this Section 10.9 by a fraction of which the denominator shall be the number of Ordinary Shares outstanding (including any tendered or exchanged shares) at the last time tenders of exchanges may be made pursuant to such tender or exchange offer (the "Expiration Time") multiplied by the current Market Value per Ordinary Share on the trading day on the NYSE next succeeding the Expiration Time and the numerator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of Ordinary Shares (less any Purchased Shares) at the Expiration Time and the current Market Value -70- per Ordinary Share on the trading day on the NYSE next succeeding the Expiration Time, such increase to become effective immediately prior to the opening of business on the day following the Expiration Time. Section 10.10 When Adjustment May Be Deferred. No adjustment in the Conversion Rate need be made unless the adjustment would require an increase or decrease of at least 1% in the Conversion Rate. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 10 shall be made to the nearest cent or to the nearest 1/1,000th of a share, as the case may be. Section 10.11 When No Adjustment Required. No adjustment need be made as a result of: (i) the issuance of the rights; (ii) the distribution of separate certificates representing the rights; (iii) the exercise or redemption of the rights in accordance with any rights agreement; or (iv) the termination or invalidation of the rights, in each case, pursuant to the Company's existing stockholders rights plan, as amended, modified, or supplemented from time to time or any newly adopted stockholders rights plans: (1) upon the issuance of any Ordinary Shares pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in Ordinary Shares under any plan; (2) upon the issuance of any Ordinary Shares or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Company or any of its Subsidiaries; or (3) upon the issuance of any Ordinary Shares pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security outstanding as of the date the Securities were first issued. No adjustment need be made for a transaction referred to in 10.7 or 10.8 if Holders of the Securities may participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Ordinary Shares participate in the transaction. No adjustment need be made for a transaction referred to in 10.8 above if all Holders of the Securities may participate in the transaction. No adjustment need be made for a change in the par value or no par value of the Ordinary Shares. -71- To the extent the Securities become convertible pursuant to this Article 10 in whole or in part into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. Section 10.12 Notice of Adjustment. Whenever the Conversion Rate is adjusted, the Company shall promptly mail to Holders a notice of the adjustment. The Company shall file with the Trustee and the Conversion Agent such notice briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any Holder desiring inspection thereof. Section 10.13 Voluntary Increase. The Company from time to time may increase the Conversion Rate by any amount at any time for at least 20 days, so long as the increase is irrevocable during such period. Whenever the Conversion Rate is increased, the Company shall mail to Securityholders and file with the Trustee and the Conversion Agent a notice of the increase. The Company shall mail the notice at least 15 days before the date the increased Conversion Rate takes effect. The notice shall state the increased Conversion Rate and the period it will be in effect. A voluntary increase of the Conversion Rate does not change or adjust the Conversion Rate otherwise in effect for purposes of Section 10.6, 10.7 or 10.8. Section 10.14 Notice of Certain Transactions. If: (1) the Company takes any action that would require an adjustment in the Conversion Rate pursuant to Section 10.6, 10.7, 10.8 or 10.9 (unless no adjustment is to occur pursuant to Section 10.11); or (2) the Company takes any action that would require a supplemental indenture pursuant to Section 10.16; or (3) there is a liquidation or dissolution of the Company; then the Company shall mail to Holders and file with the Trustee and the Conversion Agent a notice stating the proposed record date for a dividend, distribution or subdivision or the proposed effective date of a combination, reclassification, consolidation, merger, binding share exchange, transfer, liquidation or dissolution. The Company shall file and mail the notice at least 15 days before such date. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction. -72- Section 10.15 Reorganization of Company; Special Distributions. If the Company is a party to a transaction subject to Section 5.1 (other than a sale of all or substantially all of the assets of the Company in a transaction in which the holders of Ordinary Shares immediately prior to such transaction do not receive securities, cash or other assets of the Company or any other person) or a merger or binding share exchange which reclassifies or changes its outstanding Ordinary Shares, the person obligated to deliver securities, cash or other assets upon conversion of Securities shall enter into a supplemental indenture. If the issuer of securities deliverable upon conversion of Securities is an Affiliate of the successor Company, that issuer shall join in the supplemental indenture. The supplemental indenture shall provide that the Holder of a Security may convert it into the kind and amount of securities, cash or other assets which such Holder would have received immediately after the consolidation, merger, binding share exchange or transfer if such Holder had converted the Security immediately before the effective date of the transaction, assuming (to the extent applicable) that such Holder (i) was not a constituent person or an Affiliate of a constituent person to such transaction; (ii) made no election with respect thereto; and (iii) was treated alike with the plurality of non- electing Holders. The supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Article X. The successor Company shall mail to Securityholders a notice briefly describing the supplemental indenture. If the Company makes a distribution to all holders of its Ordinary Shares of any of its assets, or debt securities or any rights, warrants or options to purchase securities of the Company that, but for the provisions of the last paragraph of Section 10.8, would otherwise result in an adjustment in the Conversion Rate pursuant to the provisions of Section 10.8, then, from and after the record date for determining the holders of Ordinary Shares entitled to receive the distribution, a Holder of a Security that converts such Security in accordance with the provisions of this Indenture shall upon such conversion be entitled to receive, in addition to the shares of Ordinary Shares into which the Security is convertible, the kind and amount of securities, cash or other assets comprising the distribution that such Holder would have received if such Holder had converted the Security immediately prior to the record date for determining the holders of Ordinary Shares entitled to receive the distribution. Section 10.16 Company Determination Final. Any determination that the Company or the Board of Directors must make pursuant to Section 10.3, 10.6, 10.7, 10.8, 10.9, 10.10, 10.11, 10.15 or 10.17 is conclusive, absent manifest error. Section 10.17 Trustee's Adjustment Disclaimer. The Trustee has no duty to determine when an adjustment under this Article X should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a supplemental indenture under Section 10.15 need be entered into or whether any provisions of any supplemental in- -73- denture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities. The Trustee shall not be responsible for the Company's failure to comply with this Article X. Each Conversion Agent shall have the same protection under this Section 10.17 as the Trustee. Section 10.18 Simultaneous Adjustments. In the event that this Article X requires adjustments to the Conversion Rate under more than one of Sections 10.6(4), 10.7 or 10.8, and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 10.6, second, the provisions of Section 10.8 and, third, the provisions of Section 10.7. Section 10.19 Successive Adjustments. After an adjustment to the Conversion Rate under this Article X, any subsequent event requiring an adjustment under this Article X shall cause an adjustment to the Conversion Rate as so adjusted. ARTICLE XI MISCELLANEOUS Section 11.1 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. Section 11.2 Notices. Any request, demand, authorization, notice, waiver, consent or communication shall be in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows or transmitted by facsimile transmission (confirmed by guaranteed overnight courier) to the following facsimile numbers: if to the Company: XL Capital Ltd XL House One Bermudiana Road Hamilton, Bermuda HM11 Facsimile No. (441) 292-5280 Telephone No. (441) 292-8515 Attention: Paul S. Giordano if to the Trustee: -74- State Street Bank and Trust Company 225 Asylum Street 23rd Floor Hartford, Connecticut 06103 Telephone No. (860) 244-1817 Facsimile No. (860) 244-1889 Attention: Corporate Trust Administration The Company or the Trustee by notice given to the other in the manner provided above may designate additional or different addresses for subsequent notices or communications. Any notice or communication given to a Securityholder shall be mailed to the Securityholder, by first-class mail, postage prepaid, at the Securityholder's address as it appears on the registration books of the Registrar and shall be deemed sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. If the Company mails a notice or communication to the Securityholders, it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent or co-registrar. Section 11.3 Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar, the Paying Agent, the Conversion Agent and anyone else shall have the protection of TIA Section 312(c). Section 11.4 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and -75- (2) if required by the Trustee, an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent (to the extent of legal conclusions) have been complied with. Section 11.5 Statements Required in Certificate or Opinion. Each Officers' Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that each person making such Officers' Certificate or Opinion of Counsel has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based; (3) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement that, in the opinion of such person, such covenant or condition has been complied with. Section 11.6 Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 11.7 Rules by Trustee, Paying Agent, Conversion Agent, Reset Rate Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar, the Conversion Agent, the Paying Agent and the Reset Rate Agent may make reasonable rules for their functions. Section 11.8 Legal Holidays. A "Legal Holiday" is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding day that is not a Legal Holiday, and, if the action to be taken on such date is a payment in respect of the Securities, no interest, if any, shall accrue for the intervening period. Section 11.9 GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE SECURITIES. Section 11.10 No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the -76- Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. Section 11.11 Successors. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. Section 11.12 Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. IN WITNESS WHEREOF, XL CAPITAL LTD has caused this Indenture to be duly executed as a deed the day and year first before written. The common seal of ) XL CAPITAL LTD ) was hereunto affixed ) in the presence of ) _______________________________________ Name: Paul S. Giordano Title: Executive Vice President General Counsel & Secretary Witness: _______________________________________ Name: Jerry de St. Paer Title: Executive Vice President Chief Financial Officer S-1 IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed this Indenture as of the date first above written. STATE STREET BANK AND TRUST COMPANY By: ----------------------------------------------- Name: Title: S-2 EXHIBIT A [FORM OF FACE OF GLOBAL SECURITY] FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THIS SECURITY IS ISSUED WITH AN INDETERMINATE AMOUNT OF ORIGINAL ISSUE DISCOUNT FOR UNITED STATES FEDERAL INCOME TAX PURPOSES AND WILL BE SUBJECT TO THE REGULATIONS GOVERNING CONTINGENT PAYMENT DEBT INSTRUMENTS FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. THE ISSUE DATE AND THE COMMENCEMENT DATE FOR THE ACCRUAL OF ORIGINAL ISSUE DISCOUNT IS MAY 23, 2001, AND THE YIELD TO MATURITY FOR PURPOSES OF ACCRUING ORIGINAL ISSUE DISCOUNT IS 2.625% PER ANNUM. AS REQUIRED UNDER APPLICABLE TREASURY REGULATIONS, THE "COMPARABLE YIELD" IS SET FORTH IN SECTION 2.15 OF THE INDENTURE PURSUANT TO WHICH THIS SECURITY IS BEING ISSUED. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. THIS SECURITY AND ANY ORDINARY SHARES ISSUABLE UPON THE CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF XL CAPITAL LTD THAT THIS SECURITY AND ANY ORDINARY SHARES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (3) TO AN INSTITUTIONAL INVESTOR THAT IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. THIS SECURITY, ANY ORDINARY SHARES ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS SECURITY AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION OR INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY AND ANY SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT. -2- XL CAPITAL LTD Zero-Coupon Convertible Debentures due 2021 No. CUSIP: Issue Date: May 23, 2001 Original Issue Discount: $406.43 (for Issue Price: $593.57 (for each $1,000 each $1,000 principal amount at principal amount at maturity) maturity) XL CAPITAL LTD, a Cayman Islands exempted limited company, promises to pay to Cede & Co. or registered assigns, the principal amount of [ ] (U.S.$ ) (subject to increase in certain circumstances as described on the other side of this Security) on May 23, 2021. This Security shall not bear interest except as specified on the other side of this Security. This Security shall accrete interest as specified on the other side of this Security. This Security is convertible as specified on the other side of this Security. Additional provisions of this Security are set forth on the other side of this Security. Dated: XL CAPITAL LTD By: _________________________________ Title: _________________________________ TRUSTEE'S CERTIFICATE OF AUTHENTICATION STATE STREET BANK AND TRUST COMPANY, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture. By ------------------------------------------------ Authorized Signatory Dated: [FORM OF REVERSE OF GLOBAL SECURITY] Zero-Coupon Convertible Debentures due 2021 1. Interest. Except as provided below, this Security shall not bear periodic interest. This Security shall accrete interest at a rate of 2.625% per annum, on a semi-annual bond equivalent basis using a 360-day year composed of twelve 30-day months, commencing on the Issue Date of this Security. The initial rate of accretion is subject to an upward interest adjustment in certain circumstances as described below. General. The Company will not pay cash interest on the Security unless there is an Upward Interest Adjustment and only then as and to the extent specifically provided herein. Interest will be based on a 360-day year comprised of twelve 30-day months, and will be payable semi-annually on November 23 and May 23 (each, an "interest payment date"). The record date for the payment of cash interest to Holders will be the close of business on November 8 and May 8 of each year (whether or not a Business Day); provided, that interest payable at Stated Maturity or upon redemption or repurchase will be payable to the person to whom the Accreted Value is payable. Cash interest on Securities converted after a record date but prior to the corresponding interest payment date will be paid to the Holder of the Securities on the record date but, upon conversion the Holder must pay the Company the interest which has accrued and will be paid on such interest payment date. No such payment need be made with respect to Securities which will be redeemed after a record date and prior to the corresponding interest payment date. If the Purchase Price, Redemption Price or Change of Control Purchase Price or Accreted Value, as applicable, of a Security or any portion of such Purchase Price, Redemption Price or Change of Control Purchase Price or Accreted Value, as applicable, is not paid when due (whether upon acceleration pursuant to Section 6.2 of the Indenture, upon the date set for payment of the Redemption Price pursuant to Paragraph 5 hereof, upon the date set for payment of the Purchase Price or the Change in Control Purchase Price pursuant to Paragraph 7 hereof, or upon the Stated Maturity of this Security), then in each such case the overdue amount shall, to the extent permitted by law, bear interest at the rate of 2.625% per annum, compounded semi-annually, which interest shall accrue from the date of such overdue amount was originally due to the date of payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand and shall be based on a 360-day year comprised of twelve 30-day months. Upward Interest Adjustment. The Issue Price of this Security represents an accretion rate of 2.625% per annum through the Stated Maturity unless an Upward Interest Adjustment (as defined below) occurs. If the average of the Sale Prices of the Company's Ordinary Shares (as defined below) is less than or equal to 60% of the Accreted Conversion Price of this Security for any 20 out of the last 30 trading days ending five days prior to any Purchase Date (as defined in the Indenture), then the yield-to-maturity on this Security will be subject to an upward interest adjustment for the subsequent six-month period (an "Upward Interest Adjustment"). The Upward Interest Adjustment will result in the interest on this Security being equivalent to the applicable Reset Rate (as defined below). If an Upward Interest Adjustment is then in effect for any semi-annual period and the average of the Sale Prices of the Ordinary Shares is less than or equal to 60% of the Accreted Conversion Price of this Security for 20 out of the last 30 trading days of such semi-annual period ending on the fifth day preceding such November 23 or May 23, as applicable, then the Reset Rate then in effect shall remain in effect for the next succeeding six-month period ending on or prior to the next Purchase Date; provided that if the next succeeding six-month period ends after the next succeeding Purchase Date, the rate of accretion on this Security shall be the applicable Rest Rate. If an Upward Interest Adjustment is in effect for any semi-annual period and the average of the Sale Prices of the Ordinary Shares is greater than 60% of the Accreted Conversion Price of this Security for 20 out of the last 30 trading days of such semi-annual period ending on the fifth day preceding November 23 or May 23, as applicable, then the interest rate on this Security will revert to 2.625% per annum for each subsequent six-month period ending on or prior to the next Purchase Date, and an Upward Interest Adjustment will not apply to any subsequent semi-annual period ending on or prior to the next succeeding Purchase Date. If an Upward Interest Adjustment is in effect for a particular semi-annual period, the Company will pay a portion of the Upward Interest Adjustment as cash interest at a rate of 0.25% per annum (0.125% per semi-annual period) of the Accreted Value and the remaining interest will be accrued and payable at maturity or earlier redemption or repurchase of the Securities. As a result, following any such Upward Interest Adjustment and for so long as such Upward Interest Adjustment is in effect, this Security will accrete interest at a rate equal to the applicable Reset Rate then in effect less 0.25%. The "applicable Reset Rate" for any six-month period, as determined by the Reset Rate Agent (as defined below), will be equal to the rate (the "Reference Fixed Rate") that would, in the sole judgment of the Reset Rate Agent, result in a trading price of par with a hypothetical issue of senior, non-convertible, fixed rate debt securities of the Company with: (i) a final maturity equal to the term from the current Purchase Date on which the applicable Reset Rate is determined until the next Purchase Date; (ii) an aggregate principal amount equal to the then Accreted Value of the Debentures; and -2- (iii) provisions that are, insofar as would be practicable for an issue of senior, non-convertible, fixed-rate debt securities with no restrictive covenants, substantially identical to those of the Securities. In no case, however, will the applicable Reset Rate ever be greater than 10% per annum without the prior written consent of the Company. Also, if the Reset Rate Agent determines in its sole judgment that there is no suitable Reference Fixed Rate, the applicable rate of accretion for that period will be the applicable rate of accretion then in effect. "Accreted Conversion Price" means, as of any date, the Accreted Value of this Security divided by the number of Ordinary Shares issuable upon conversion of this Security on that day. "Accreted Value" means, as of any date, the sum of the Issue Price of the Securities and the accrued and unpaid interest as of such date (excluding any accrued and unpaid interest payable as cash interest). The "Sale Price" of the Ordinary Shares on any date means the closing per share sale price (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average asked prices) on such date as reported on The New York Stock Exchange or, if the Ordinary Shares are not listed on The New York Stock Exchange, then on the principal other national or regional securities exchange on which the Ordinary Shares then are listed or, if the Ordinary Shares are not listed on a U.S. national or regional securities exchange, as reported on the National Association of Securities Dealers Automated Quotation System or, if the Ordinary Shares are not quoted on the National Association of Securities Dealers Automated Quotation System, on the principal other market on which the Ordinary Shares are then traded. In the absence of such quotations, the Company will be entitled to determine the Sale Price on the basis of such quotations as the Company considers appropriate. The Company and the Trustee agree that Goldman, Sachs & Co. will act as the Reset Rate Agent unless and until removed as provided below. For the determination of the applicable Reset Rate, the Reset Rate Agent shall seek indicative reference rates from one other nationally recognized investment bank. The determination of any applicable Reset Rate shall be made by the Reset Rate Agent by averaging the indicative reference rates obtained by Goldman, Sachs & Co. and such other investment bank. The determination of any applicable Reset Rate by the Reset Rate Agent will be conclusive and binding upon the Reset Rate Agent, the Company, the Trustee and the holders of the Debentures, in the absence of manifest error. The Reset Rate Agent may be removed at any time with or without cause by the Company giving at least sixty (60) days' written notice to the Reset Rate Agent; provided that the Reset Rate Agent may not be removed by the Company without cause for a period of six months after May 18, 2001. The Reset Rate Agent may resign at any time upon giving at -3- least thirty (30) days' written notice to the Company. A successor Reset Rate Agent, if any, will be appointed by the Company. In the event of any Upward Interest Adjustment, the Company will disseminate a press release through Dow Jones & Company, Inc. or Bloomberg Business News containing this information or through such other public medium as the Company may use at that time. 2. Method of Payment. Subject to the terms and conditions of the Indenture and except as provided above in the case of an upward interest adjustment, the Company will make payments in cash at Stated Maturity and payments in cash, Ordinary Shares or a combination thereof, as the case may be, in respect of Redemption Prices, Purchase Prices and Change in Control Purchase Prices to Holders who surrender Securities to a Paying Agent to collect such payments in respect of the Securities. The Company will pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may make such cash payments by wire transfers of immediately available funds or, at the Company's option, by check payable in such money. 3. Paying Agent, Conversion Agent and Registrar. Initially, the Trustee will act as Paying Agent, Conversion Agent and Registrar. The Company may appoint and change any Paying Agent, Conversion Agent or Registrar without notice, other than notice to the Trustee; provided that the Company will maintain at least one Paying Agent in the State of New York, City of New York, Borough of Manhattan, which shall initially be an office or agency of the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent or Registrar. 4. Indenture. The Company issued the Securities under an Indenture dated as of May 23, 2001 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effect from time to time (the "TIA"). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are general unsecured obligations of the Company limited to $1,020,000,000 aggregate principal amount at maturity (subject to increase pursuant to Section 2.7 of the Indenture and Upward Interest Adjustments). The Indenture does not limit other indebtedness of the Company, secured or unsecured. -4- 5. Redemption at the Option of the Company. No sinking fund is provided for the Securities. Subject to the terms and conditions of this Indenture, the Securities are redeemable at the option of the Company in whole or in part, at any time or from time to time on, or after May 23, 2004 for a cash price equal to the Accreted Value plus accrued and unpaid cash interest, if any, up to the Redemption Date (the "Redemption Price"). 6. Notice of Redemption. Notice of redemption pursuant to Paragraph 5 of this Security will be mailed at least 15 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at the Holder's registered address. If money sufficient to pay the Redemption Price of all Securities (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent prior to or on the Redemption Date, immediately after such Redemption Date interest ceases to accrue on such Securities or portions thereof. Securities in denominations larger than $1,000 of principal amount may be redeemed in part but only in integral multiples of $1,000 of principal amount. 7. Purchase By the Company at the Option of the Holder. (a) Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the Holder, all or any portion of the Securities held by such Holder on May 23, 2002, May 23, 2004, May 23, 2006, May 23, 2008, May 23, 2011 and May 23, 2016 or the next Business Day following such dates to the extent such dates are not Business Days in integral multiples of $1,000 at a Purchase Price equal to the Accreted Value plus accrued and unpaid cash interest, if any, on the Purchase Date. To exercise such right, a Holder shall deliver to the Company a Purchase Notice containing the information set forth in the Indenture, at any time from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on the last day prior to such Purchase Date, and shall deliver the Securities to the Paying Agent as set forth in the Indenture. The Purchase Price may be paid, at the option of the Company, in cash or by the issuance and delivery of Ordinary Shares, or in any combination thereof. (b) At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to offer to purchase the Securities held by such Holder within 30 days (which purchase shall occur 45 days after the date of such offer) after the occurrence of a Change in Control of the Company (as defined in the Indenture) for a Change in Control Purchase Price equal to the Accreted Value plus accrued and unpaid cash interest, if any, on the Change in Control Purchase Date, which Change in Control Purchase Price shall be paid in cash or, at the Company's option, Ordinary Shares (valued at 95% of the -5- average closing Sales Prices of the Ordinary Shares for the five trading days immediately preceding the third trading day prior to the Change in Control Purchase Date). (c) Holders have the right to withdraw any Purchase Notice delivered pursuant to Paragraph 7(a) above or Change in Control Purchase Notice delivered pursuant to Paragraph 7(c), as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture. If cash (and/or Ordinary Shares if permitted under the Indenture) sufficient to pay the Purchase Price or Change in Control Purchase Price, as the case may be, of all Securities or portions thereof to be purchased as of the Purchase Date or the Change in Control Purchase Date, as the case may be, is deposited with the Paying Agent on the Business Day following the Purchase Date or the Change in Control Purchase Date and other interest ceases to accrue on such Securities (or portions thereof) immediately after such Purchase Date or Change in Control Purchase Date, and the Holder thereof shall have no other rights as such other than the right to receive the Purchase Price or Change in Control Purchase Price upon surrender of such Security. 8. Conversion. (a) The initial Conversion Rate is 5.9467 Ordinary Shares per $1,000 principal amount at maturity, subject to adjustment in certain events described in the Indenture. A Holder that surrenders Securities for conversion will receive cash in lieu of any fractional Ordinary Share based on the closing price of the Ordinary Shares of the Company on the trading day immediately prior to the conversion date. (b) Holders may surrender Securities for conversion into Ordinary Shares if the Sale Price of the Ordinary Shares for at least 20 trading days in the 30 trading day period ending on the first day of such Conversion Period is more than 110% of the Accreted Conversion Price per Ordinary Share as determined by the Conversion Agent on the first day of the Conversion Period. A "Conversion Period" will be the period from and including the thirtieth trading day in a fiscal quarter to but not including the thirtieth trading day in the immediately following fiscal quarter. (c) A Holder may also surrender for conversion a Security or portion of a Security which has been called for redemption pursuant to Paragraph 5 hereof, and such Securities may be surrendered for conversion until the close of business on the Business Day prior to the Redemption Date. A Security in respect of which a Holder has delivered a Purchase Notice or a Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be converted only if such notice of exercise is withdrawn in accordance with the terms of the Indenture. -6- (d) (i) Holders may also surrender Securities for conversion into Ordinary Shares during the five trading day period beginning 10 Business Days following any consecutive 10 trading-day period in which the average of the trading prices for a Security was less than 95% of the average Parity Value (as defined below) for that period. The "trading price" of the Securities on any date of determination means the average of the secondary market bid quotations per Security obtained by State Street Bank and Trust Company for $10,000,000 principal amount at maturity of the Securities at approximately 3:30 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers selected by the Company; provided that if at least three such bids cannot reasonably be obtained by State Street Bank and Trust Company, but two such bids are obtained, then the average of the two bids shall be used, and if only one such bid can reasonably be obtained by State Street Bank and Trust Company, this one bid shall be used. If State Street Bank and Trust Company cannot reasonably obtain at least one bid for $10,000,000 principal amount of maturity of the Securities from a nationally recognized securities dealer or in the reasonable judgment of the Company, the bid quotations are not indicative of the secondary market value of the Securities, then the trading price of the Securities will equal (a) the then-applicable conversion rate of the Securities multiplied by (b) the closing price on the New York Stock Exchange of the Company's Ordinary Shares on such determination date; provided that the Trustee shall not determine the trading price of the Securities unless requested by the Company; and provided, further, that the Company shall have no obligation to make such request unless a holder of Securities provides the Company with reasonable evidence that the trading price of the Security may be less than 95% of the average Parity Value; and at which time, the Company shall instruct the Trustee to determine the trading price of the Securities beginning on the next trading day on each successive trading day until the trading price is greater than or equal to 95% of the Parity Value of the Securities. The Trustee shall be entitled to select the appropriate method for determining the trading price of the Securities and shall be entitled to all of the rights of the trustee set forth in the Indenture in connection with any such determination. Any such determination shall be conclusive absent manifest error. The "Parity Value" of the Securities on any date of determination means the product of (x) the Sale Price of the Ordinary Shares on such date and (y) the number of Ordinary Shares including fractional shares into which such Securities are convertible on such date. (ii) If at conversion the Sales Price of the Ordinary Shares is greater than 100% of the Accreted Conversion Price but equal to or less than the 110% of the Accreted Conversion Price, then the Holders will receive, in lieu of Ordinary Shares based on the applicable Conversion Rate, cash or Ordinary Shares, or a combination of both cash and Ordinary Shares, with a value equal to the then Accreted Value of the Securities on the Conversion Date (an "Accreted Value Conversion"). If there is an Accreted Value Conversion, the Ordinary Shares will be valued at 100% of the average Sales Price for the five trading days ending on the third day prior to the date of conversion. If the Company elects to pay all or a portion -7- of the Accreted Value upon an Accreted Value Conversion in Ordinary Shares, the Company will notify holders not less than five Business Days prior to the beginning of the five day period in which Holders can convert their Securities pursuant to an Accreted Value Conversion. (e) In the event that the Company declares a dividend or distribution described in Section 10.7 of the Indenture, or a dividend or a distribution described in Section 10.8 of the Indenture where the fair market value of such dividend or distribution per Ordinary Share, as determined in the Indenture, exceeds 12.5% of the Sale Price of an Ordinary Share as of the Business Day prior to the date of declaration for such distribution, the Securities may be surrendered for conversion beginning on the date the Company gives notice to the Holders of such right, which shall be not less than 20 days prior to the Ex-Dividend Time for such dividend or distribution and Securities may be surrendered for conversion at any time thereafter until the close of business on the Business Day prior to the Ex-Dividend Time or until the Company announces that such distribution will not take place. (f) A Holder may surrender for conversion a Security or portion of a Security during such period, if any, as (i) the credit rating assigned to the Securities by Standard & Poor's Rating Group is below BBB+, (ii) the credit rating assigned to the Securities by such rating agency is suspended or withdrawn or (iii) such rating agency is no longer rating the Securities. (g) In the event the Company is a party to a consolidation, merger or binding share exchange, as set forth in Section 5.1 of the Indenture, pursuant to which the Ordinary Shares would be converted into cash, securities or other property as set forth in Section 10.15 of the Indenture, the Securities may be surrendered for conversion at any time from and after the date which is 15 days prior to the date the Company announces as the anticipated effective time until 15 days after the actual date of such transaction. (h) To surrender a Security for conversion, a Holder must (1) complete and manually sign the irrevocable conversion notice below (or complete and manually sign a facsimile of such notice) and deliver such notice to the Conversion Agent, (2) surrender the Security to the Conversion Agent, (3) furnish appropriate endorsements and transfer documents and (4) pay any transfer or similar tax, if required. (i) A Holder may convert a portion of a Security if the principal amount at maturity of such portion is $1,000 or an integral multiple of $1,000. No payment or adjustment will be made for dividends on the Ordinary Shares except as provided in the Indenture. Except as provided in Paragraph 1 hereof, on conversion of a Security, the Holder will not receive any cash payment representing accrued interest with respect to the converted Securities. Instead, upon conversion the Company will deliver to the Holder a fixed number of Ordinary Shares and any cash payment to account for fractional shares. Accrued interest will be deemed paid in full rather than canceled, extinguished or forfeited. The Company will not adjust the Conversion Rate to account for accrued interest. -8- (j) The Conversion Rate will be adjusted as provided in Article 10 of the Indenture. The Company may increase the Conversion Rate for at least 20 days, so long as the increase is irrevocable during such period. (k) If the Company is a party to a consolidation, merger or binding share exchange or a transfer of all or substantially all of its assets as set forth in Section 5.1 of the Indenture, or upon certain distributions described in Section 10.8 of the Indenture, the right to convert a Security into Ordinary Shares may be changed into a right to convert it into securities, cash or other assets of the Company or another person. 9. Conversion Arrangement on Call for Redemption. A Holder may surrender for conversion any of the Securities called for redemption at any time prior to the close of business one Business Day prior to the Redemption Date, even if it is not otherwise convertible at such time. If a Holder has already delivered a Purchase Notice or a Change in Control Purchase Notice with respect to a Security, however, the Holder may not surrender that Security for conversion until the Holder has withdrawn the notice in accordance with the Indenture. 10. Denominations; Transfer; Exchange. The Securities are in fully registered form, without coupons, in denominations of $1,000 of principal amount at maturity and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities in respect of which a Purchase Notice or Change in Control Purchase Notice has been given and not withdrawn (except, in the case of a Security to be purchased in part, the portion of the Security not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed. 11. Persons Deemed Owners. The registered Holder of this Security may be treated as the owner of this Security for all purposes. 12. Unclaimed Money or Securities. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property -9- law. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person. 13. Trustee Dealings with the Company. Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 14. Calculations in Respect of Securities. The Company will be responsible for making all calculations called for under the Securities, except for such calculations made by the Reset Rate Agent. These calculations include, but not limited to, determinations of the market prices of the Securities and the Ordinary Shares, any accrued interest payable on the Securities, the Accreted Value of the Securities and the Accreted Conversion Price of the Securities. The Company will make these calculations in good faith and, absent manifest error, the calculations will be final and binding on Holders of the Securities. The Company will provide to the Trustee a schedule of its calculations, and the Trustee is entitled to rely upon the accuracy of such calculations without independent verification. The Trustee will forward the Company's calculations to any Holder of the Securities upon the request of such Holder. 15. No Recourse Against Others. A director, officer, employee or shareholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 16. Authentication. This Security shall not be valid until an authorize signatory of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Security. 17. Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT -10- TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 18. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS SECURITY. The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: XL Capital Ltd XL House One Bermudiana Road Hamilton, Bermuda HM11 Attn: Gavin R. Arton 19. Registration Rights. The Holders of the Securities are entitled to the benefits of a Registration Rights Agreement, dated as of May 23, 2001, between the Company and Goldman, Sachs & Co., Deutsche Banc Alex. Brown Inc. and Dresdner Kleinwort Wasserstein LLC including the receipt of liquidated damages upon a registration default (as defined in such agreement). -11-
- ------------------------------------------------- ------- -------------------------------------------- ASSIGNMENT FORM CONVERSION NOTICE - ------------------------------------------------- ------- -------------------------------------------- To assign this Security, fill in the form below: To convert this Security into Ordinary Shares of the Company, check the box [ ] - ------------------------------------------------- ------- -------------------------------------------- I or we assign and transfer this Security to To convert only part of this Security, _________________________ state the principal amount to be converted _________________________ (which must be $1,000 or an integral multiple of $1,000): (Insert assignee's soc. sec. or tax ID no.) _________________________ If you want the stock certificate made out _________________________ in another person's name fill in the form _________________________ below: (Print or type assignee's name, address and zip _________________________ code) _________________________ (Insert the other person's soc. sec. tax and irrevocably appoint ID no.) ____________________ agent to transfer this __________________________ Security on the books of the Company. The __________________________ agent may substitute another to act for him. __________________________ (Print or type other person's name, address and zip code) - ------------------------------------------------- ------- -------------------------------------------- Date: __________ Your Signature: _________________________________ ______________________________________________________________________ (Sign exactly as your name appears on the other side of this Security)
Signature Guaranteed ________________________________________________ Participant in a Recognized Signature Guarantee Medallion Program By: -------------------------------------------- Authorized Signatory -12-
SCHEDULE OF INCREASES AND DECREASES OF GLOBAL SECURITY Initial Principal Amount at Maturity of Global Security: _________($_________). - ------------------------- ---------------------- ----------------------- ---------------------- ---------------------- Date Amount of Increase Amount of Decrease in Principal Amount at Notation by in Principal Amount Principal Amount at Maturity of Global Registrar or at Maturity of Maturity of Global Security After Security Global Security Security Increase or Custodian Decrease - ------------------------- ---------------------- ----------------------- ---------------------- ---------------------- - ------------------------- ---------------------- ----------------------- ---------------------- ---------------------- - ------------------------- ---------------------- ----------------------- ---------------------- ---------------------- - ------------------------- ---------------------- ----------------------- ---------------------- ---------------------- - ------------------------- ---------------------- ----------------------- ---------------------- ---------------------- - ------------------------- ---------------------- ----------------------- ---------------------- ---------------------- - ------------------------- ---------------------- ----------------------- ---------------------- ---------------------- - ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
-13- EXHIBIT B Zero-Coupon Convertible Debentures due 2021 Transfer Certificate In connection with any transfer of any of the Securities within the period prior to the expiration of the holding period applicable to the sales thereof under Rule 144(k) under the Securities Act of 1933, as amended (the "Securities Act") (or any successor provision), the undersigned registered owner of this Security hereby certifies with respect to $____________ principal amount at maturity of the above-captioned Securities presented or surrendered on the date hereof (the "Surrendered Securities") for registration of transfer, or for exchange or conversion where the securities issuable upon such exchange or conversion are to be registered in a name other than that of the undersigned registered owner (each such transaction being a "transfer"), that such transfer complies with the restrictive legend set forth on the face of the Surrendered Securities for the reason checked below: [_] A transfer of the Surrendered Securities is made to the Company or any of its subsidiaries; or [_] The transfer of the Surrendered Securities complies with Rule 144A under the Securities Act; or [_] The transfer of the Surrendered Securities is pursuant to an effective registration statement under the Securities Act, or [_] The transfer of the Surrendered Securities is pursuant to another available exemption from the registration requirement of the Securities Act. and unless the box below is checked, the undersigned confirms that, to the undersigned's knowledge, such Securities are not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act (an "Affiliate"). [_] The transferee is an Affiliate of the Company. DATE: __________________________________ Signature(s) (If the registered owner is a corporation, partnership or fiduciary, the title of the person signing on behalf of such registered owner must be stated.) Signature Guaranteed _________________________________________________ Participant in a Recognized Signature Guarantee Medallion Program By: ---------------------------------------------- Authorized Signatory -2- EX-4.C 5 xls3ex1.txt REGISTRATION RIGHTS AGREEMENT XL Capital Ltd Zero - Coupon Convertible Debentures due May 23, 2021 Registration Rights Agreement May 23, 2001 Goldman, Sachs & Co., Deutsche Banc Alex. Brown, Dresdner Kleinwort Wasserstein LLC, c/o Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Ladies and Gentlemen: XL Capital Ltd, a Cayman Islands exempted limited company (the "Company"), proposes to issue and sell to the Purchasers (as defined herein) upon the terms and conditions set forth in the Purchase Agreement (as defined herein) its Zero-Coupon Convertible Debentures due May 23, 2021 (the "Securities"), convertible into Ordinary Shares (as defined herein). In satisfaction of a condition to the obligations of the Purchasers thereunder, the Company agrees with the Purchasers for the benefit of Holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as follows: 1. Definitions. (a) Capitalized terms used herein without definition shall have the meanings ascribed to them in the Purchase Agreement. As used in this Agreement, the following defined terms shall have the following meanings: "Act" or "Securities Act" means the United States Securities Act of 1933, as amended. "Affiliate" of any specified person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with such specified -2- person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Applicable Amount" means, with respect to each $1,000 principal amount at maturity of Securities, the Accreted Value (as defined in the Indenture) plus accrued and unpaid cash interest, if any, through the date of determination, or, with respect to Securities that have been converted to Ordinary Shares pursuant to the Indenture, such sum calculated as if such Securities had not been so converted. "Closing Date" means the First Time of Delivery as defined in the Purchase Agreement. "Commission" means the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose. "DTC" means The Depository Trust Company. "Effectiveness Period" has the meaning assigned thereto in Section 2(b)(i) hereof. "Effective Time" means the date on which the Commission declares the Shelf Registration Statement effective or on which the Shelf Registration Statement otherwise becomes effective. "Electing Holder" has the meaning assigned thereto in Section 3(a)(iv) hereof. "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. "Holder" means, any person that is the record owner of Registrable Securities (and includes any person that has a beneficial interest in any Registrable Security in book-entry form). "Indenture" means the Indenture, dated as of May 23, 2001, between the Company and State Street Bank and Trust Company, as amended and supplemented from time to time in accordance with its terms. "Liquidated Damages" has the meaning assigned thereto in Section 7(a) hereof. -3- "Managing Underwriters" means the investment banker or investment bankers and manager or managers that shall administer an underwritten offering, if any, conducted pursuant to Section 7 hereof. "NASD Rules" means the Rules of the National Association of Securities Dealers, Inc., as amended from time to time. "Notice and Questionnaire" means a Notice of Registration Statement and Selling Securityholder Questionnaire substantially in the form of Exhibit A hereto. "Ordinary Shares" means the Company's Class A ordinary shares, par value $0.01 per share. The term "person" means an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" means the prospectus (including, without limitation, any preliminary prospectus, any final prospectus and any prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act) included in the Shelf Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by the Shelf Registration Statement and by all other amendments and supplements to such prospectus, including all material incorporated by reference in such prospectus and all documents filed after the date of such prospectus by the Company under the Exchange Act and incorporated by reference therein. "Purchase Agreement" means the purchase agreement, dated as of May 18, 2001, among the Purchasers and the Company relating to the Securities. "Purchasers" means Goldman, Sachs & Co., Deutsche Banc Alex. Brown Inc. and Dresdner Kleinwort Wasserstein LLC. "Registrable Securities" means all or any portion of the Securities issued from time to time under the Indenture in registered form and the Ordinary Shares issuable upon conversion of such Securities; provided, however, that a security ceases to be a Registrable Security when it is no longer a Restricted Security. "Registration Default" has the meaning assigned thereto in Section 7(a) hereof. "Restricted Security" means any Security or Ordinary Share issuable upon conversion thereof except any such Security or Ordinary Share which (i) has been effectively registered under the Securities Act and sold in a manner contemplated by the Shelf Registra- -4- tion Statement, (ii) has been transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any successor provision thereto), (iii) has been sold in compliance with Regulation S under the Securities Act (or any successor thereto) and does not constitute the unsold allotment of a distributor within the meaning of Regulation S under the Securities Act, (iv) has otherwise been transferred and a new Security or Ordinary Share not subject to transfer restrictions under the Securities Act has been delivered by or on behalf of the Company in accordance with Section 2.6(f) of the Indenture or (v) is otherwise transferable without restriction under the Securities Act. "Rules and Regulations" means the published rules and regulations of the Commission promulgated under the Securities Act or the Exchange Act, as in effect at any relevant time. "Shelf Registration" means a registration effected pursuant to Section 2 hereof. "Shelf Registration Statement" means a "shelf" registration statement filed under the Securities Act providing for the registration of, and the sale on a continuous or delayed basis by the Holders of, all of the Registrable Securities (other than Registrable Securities, the holders of which have failed to comply with Section 3(a)(iii) hereof) pursuant to Rule 415 under the Securities Act and/or any similar rule that may be adopted by the Commission, filed by the Company pursuant to the provisions of Section 2 of this Agreement, including the Prospectus contained therein, any amendments and supplements to such registration statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement. "Trust Indenture Act" means the Trust Indenture Act of 1939, or any successor thereto, and the rules, regulations and forms promulgated thereunder, as the same shall be amended from time to time. The term "underwriter" means any underwriter of Registrable Securities in connection with an offering thereof under a Shelf Registration Statement. (b) Wherever there is a reference in this Agreement to a percentage of the "principal amount" of Registrable Securities or to a percentage of Registrable Securities, Ordinary Shares shall be treated as representing the Applicable Amount. 2. Shelf Registration. (a) The Company shall, no later than 120 calendar days following the Closing Date, file with the Commission a Shelf Registration Statement relating to the offer -5- and sale of the Registrable Securities by the Holders from time to time and, thereafter, shall use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective under the Act as promptly as practicable, but in no event later than 210 calendar days following the Closing Date; provided, however, that the Company may, upon written notice to all Holders, postpone having the Shelf Registration Statement declared effective for a reasonable period not to exceed 90 days in any 360-day period if the Company possesses material non-public information and the Company reasonably determines that the disclosure of this material non-public information would have a material adverse effect on the Company and its subsidiaries taken as a whole or would impede the consummation of any proposed or pending material business transaction; provided, further, however, that no Holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement or to use the Prospectus forming a part thereof for resales of Registrable Securities unless such Holder is an Electing Holder. (b) The Company shall use its reasonable best efforts: (i) To keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming a part thereof to be usable by Holders until the earliest of (1) the date when all Registrable Securities of Holders that complete and deliver in a timely manner (as described in Section 3(a) hereof) the Notice and Questionnaire are registered under the Shelf Registration Statement and have been registered and disposed of in accordance with the Shelf Registration Statement; (2) the expiration of the period referred to in Rule 144(k) of the Act with respect to all Registrable Securities held by Persons that are not Affiliates of the Company; (3) the date when there are no outstanding Registerable Securities; and (4) two years from the date (the "Effective Date") such Shelf Registration Statement is declared effective (such period being referred to herein as the "Effectiveness Period"); and (ii) If at any time the Securities, pursuant to Article X of the Indenture, are convertible into securities other than Ordinary Shares, the Company shall, or shall cause any successor under the Indenture to agree to, cause such securities to be included in the Shelf Registration Statement no later than the date on which the Securities may then be convertible into such securities. Other than due to any suspension of the use of the Prospectus pursuant to Section 2(c) hereof, the Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if the Company voluntarily takes any action that would result in Holders of Registrable Securities covered thereby not being able to offer and sell any of such Registrable Securities during that period, unless such action is required by applicable law and the Company thereafter promptly complies with the requirements of paragraph 3(j) below. -6- (c) The Company may suspend the use of the Prospectus for a period not to exceed 45 days in any 90-day period or an aggregate of 90 days in any 360-day period if (i) the Prospectus would, in the Company's judgment, contain a material misstatement or omission as a result of an event that has occurred and is continuing or as a result of any proposed or pending material business transaction; and (ii) the Company reasonably determines that the disclosure of this material non-public information would have a material adverse effect on the Company and its subsidiaries taken as a whole or would impede the consummation of any proposed or pending material business transaction, provided; however, that prior to suspending the use of the Prospectus, the Company provides the Trustee with written notice of such suspension, which notice need not specify the nature of the event giving rise to such suspension. However, if the disclosure relates to a previously undisclosed proposed or pending material business transaction, the disclosure of which would impede the Company's ability to consummate such transaction, the Company may extend the suspension period from 45 days to 75 days. Each holder, by its acceptance of the Registrable Securities, agrees to hold any communication by the Company in response to a notice of a proposed sale in confidence. 3. Registration Procedures. In connection with the Shelf Registration Statement, the following provisions shall apply: (a) (i) Not less than 30 calendar days prior to the Effective Time of the Shelf Registration Statement, the Company shall give notice of its intention to file the Shelf Registration Statement to each holder of Registrable Securities in the manner provided by Section 11.2 of the Indenture; such notice shall be substantially in the form of the Notice and Questionnaire set forth as Exhibit A hereto; no Holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement as of the Effective Time, and no Holder shall be entitled to use the Prospectus forming a part thereof for resales of Registrable Securities at any time, unless such Holder has returned a completed and signed Notice and Questionnaire to the Company by the deadline for response set forth therein; provided, however, that Holders of Registrable Securities shall have at least 20 business days from the date on which the Notice and Questionnaire is first mailed to such Holders to return a completed and signed Notice and Questionnaire to the Company. (ii) Holders who have not returned a completed and signed Notice and Questionnaire to the Company by the deadline for response set forth therein may receive an additional Notice and Questionnaire from the Company upon request by the Holder. Following the receipt of a completed and signed Notice and Questionnaire, the Company will, prior to the Effective Time, include the Securities covered thereby in the Shelf Registration Statement, subject to restrictions on the timing and number of -7- supplements to the Shelf Registration Statement provided for in this Section 3 and Section 6 hereof. (iii) After the Effective Time of the Shelf Registration Statement, and subject to the Rules and Regulations and policies of the Commission, the Company shall, upon the request of any Holder of Registrable Securities that is not then an Electing Holder, promptly send a Notice and Questionnaire to such Holder. The Company shall not be required to take any action to name such Holder as a selling securityholder in the Shelf Registration Statement or to enable such Holder to use the Prospectus forming a part thereof for resales of Registrable Securities until such Holder has returned a completed and signed Notice and Questionnaire to the Company. (iv) The term "Electing Holder" shall mean any Holder of Registrable Securities that has returned a completed and signed Notice and Questionnaire to the Company in accordance with (a)(i), (a)(ii) or (a)(iii) of this Section 3. (b) The Company shall furnish to counsel for the Holders of Registrable Securities, prior to the filing thereof with the Commission, a copy of the Shelf Registration Statement and each amendment or supplement, if any, to the Prospectus included therein, and shall afford such counsel a reasonable opportunity to comment thereon. (c) The Company shall promptly take such action as may be necessary so that (i) each of the Shelf Registration Statement and any amendment thereto and the Prospectus forming a part thereof and any amendment or supplement thereto (and each report or other document incorporated therein by reference in each case) complies in all material respects with the Securities Act and the Exchange Act and the respective rules and regulations thereunder, (ii) each of the Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) each of the Prospectus forming a part of the Shelf Registration Statement, and any amendment or supplement to such Prospectus, does not at any time during the Effectiveness Period include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) The Company shall promptly advise each Electing Holder: (i) when a Shelf Registration Statement and any amendment thereto has been filed with the Commission and when a Shelf Registration Statement or any post-effective amendment thereto has become effective, in each case, at the op- -8- tion of the Company, by making a public announcement thereof by a press release made through Dow Jones & Company, Inc. or Bloomberg Business News or such other public medium as the Company may use at such time; (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for such purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included in the Shelf Registration Statement for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (iv) of the happening of any event or the existence of any state of facts that requires the making of any changes in the Shelf Registration Statement or the Prospectus included therein so that, as of such date, such Shelf Registration Statement and Prospectus do not contain an untrue statement of a material fact and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading (which advice shall be accompanied by an instruction to such Holders to suspend the use of the Prospectus until the requisite changes have been made, which notice need not specify the nature of the event giving rise to such suspension). (e) The Company shall use its reasonable best efforts to prevent the issuance, and if issued to obtain the withdrawal, of any order suspending the effectiveness of the Shelf Registration Statement at the earliest possible time. (f) The Company shall furnish to each Electing Holder, without charge, at least one copy of the Shelf Registration Statement and all post-effective amendments thereto, including financial statements and schedules, and, if such Holder so requests in writing, all other documents and exhibits that are filed with or incorporated by reference in the Shelf Registration Statement. (g) The Company shall, during the Effectiveness Period, deliver to each Electing Holder, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such Electing Holder may reasonably request; and the Company consents (except during the continuance of any event described in Section 3(d)(v) above) to the use of the Prospectus and any amendment or supplement thereto by each of the Electing Holders in connection with the offering and sale of the Registrable Securities covered by the Prospectus and any amendment or supplement thereto during the Effectiveness Period. -9- (h) Prior to any offering of Registrable Securities pursuant to the Shelf Registration Statement, the Company shall (i) register or qualify or cooperate with the Electing Holders and their counsel (which shall be Skadden, Arps, Slate, Meagher & Flom LLP) in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or "blue sky" laws of such jurisdictions within the United States as any Electing Holder may reasonably request (other than the State of Florida), (ii) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers and sales in such jurisdictions for so long as may be necessary to enable any Electing Holder or underwriter, if any, to complete its distribution of Registrable Securities pursuant to the Shelf Registration Statement, and (iii) take any and all other actions necessary or advisable to enable the disposition in such jurisdictions of such Registrable Securities; provided, however, that in no event shall the Company be obligated to (A) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to so qualify but for this Section 3(h) or (B) file any general consent to service of process in any jurisdiction where it is not as of the date hereof so subject. (i) Upon the occurrence of any fact or event contemplated by paragraph 3(d)(v) above, the Company shall, subject to Section 2(c) hereof, promptly prepare a post-effective amendment to the Shelf Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to Purchaser of the Registrable Securities included therein, the Prospectus will not include an untrue statement of a material 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. If the Company notifies the Electing Holders of the occurrence of any event contemplated by paragraph 3(d)(v) above, the Electing Holder shall suspend the use of the Prospectus until the requisite changes to the Prospectus have been made. (j) Not later than the Effective Time of the Shelf Registration Statement, the Company shall provide a CUSIP number for the Registrable Securities that are debt Securities. (k) The Company shall use its reasonable best efforts to comply with all applicable Rules and Regulations, and to make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after (i) the effective date (as defined in Rule 158(c) under the Securities Act) of the Shelf Registration Statement, (ii) the effective date of each post-effective amendment to the Shelf Registration Statement, and (iii) the date of each filing by the Company with the Commission of an Annual Report on Form 10-K that is incorporated by reference in the Shelf Registration Statement, an earning statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158). -10- (l) Not later than the Effective Time of the Shelf Registration Statement, the Company shall cause the Indenture to be qualified under the Trust Indenture Act; in connection with such qualification, the Company shall cooperate with the Trustee under the Indenture and the Holders (as defined in the Indenture) to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and the Company shall execute, and shall use all reasonable efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner. In the event that any such amendment or modification referred to in this Section 3(m) involves the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (m) In the event of an underwritten offering conducted pursuant to Section 6 hereof, the Company shall, if requested, promptly include or incorporate in a Prospectus supplement or post-effective amendment to the Shelf Registration Statement such information as the Company and the Managing Underwriters reasonably agree should be included therein and shall make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after it is notified of the matters to be included or incorporated in such Prospectus supplement or post-effective amendment. (n) The Company shall enter into such customary agreements, other than lock-up agreements unless the Company otherwise consents, (including an underwriting agreement in customary form in the event of an underwritten offering conducted pursuant to Section 6 hereof) and use its reasonable best efforts to take all other necessary action in order to effect the registration of the Registrable Securities in accordance with this Agreement, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures substantially identical to those set forth in Section 5 hereof with respect to all parties to be indemnified pursuant to Section 5 hereof. (o) The Company shall use its reasonable best efforts to: (i) (A) make reasonably available for inspection by Electing Holders, any underwriter participating in any disposition pursuant to the Shelf Registration Statement, and any attorney, accountant or other agent retained by such Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and (B) cause the Company's officers, directors and employees to supply all information reasonably requested by such Holders or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as is customary for similar due diligence examinations; provided, however, that all records, information -11- and documents that are designated in writing by the Company, in good faith, as confidential shall be kept confidential by such Electing Holders and any such underwriter, attorney, accountant or agent, unless such disclosure is made, after prior written notice to the Company and a reasonable opportunity on the part of the Company to prevent and/or limit such disclosure, in connection with a court proceeding or required by law, or such records, information or documents become available to the public generally; and provided, further, that such inspection and information gathering shall be coordinated on behalf of the Electing Holders by one counsel designated by and on behalf of Electing Holders and other parties, which shall be Skadden, Arps, Slate, Meagher & Flom LLP; (ii) in connection with any underwritten offering conducted pursuant to Section 6 hereof, make such representations and warranties to the Holders participating in such underwritten offering and to the Managing Underwriters, in form, substance and scope, and subject to such exceptions and qualifications, as are customarily made by the Company to underwriters in primary underwritten offerings of equity and convertible debt securities and covering matters including those set forth in the Purchase Agreement; (iii) in connection with any underwritten offering conducted pursuant to Section 6 hereof, obtain opinions of counsel to the Company (which counsel and opinions (in form, scope and substance, and subject to such exceptions and qualifications) shall be reasonably satisfactory to the Managing Underwriters) addressed to each Holder participating in such underwritten offering and the underwriters, covering such matters as are customarily covered in opinions requested in primary underwritten offerings of equity and convertible debt securities (it being agreed that the matters to be covered by such opinions shall include, without limitation, as of the date of the opinion and as of the Effective Time of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from the Shelf Registration Statement and the Prospectus, including the documents incorporated by reference therein, of an untrue statement of a material fact or the omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading); (iv) in connection with any underwritten offering conducted pursuant to Section 6 hereof, if requested, obtain "cold comfort" letters and updates thereof from the independent public accountants of the Company (and, if necessary, from the independent public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Shelf Registration Statement), addressed to the underwriters, in customary form and covering matters of the type customarily covered in -12- "cold comfort" letters in connection with primary underwritten offerings of offerings of equity and convertible debt securities of the Company; (v) in connection with any underwritten offering conducted pursuant to Section 6 hereof, deliver such documents and certificates concerning such matters as are customarily covered by or in such documents and certificates as may be reasonably requested by the Managing Underwriters, if any, or Skadden, Arps, Slate, Meagher & Flom LLP, on behalf of all Electing Holders, including, without limitation, certificates to evidence compliance with Section 3(j) hereof and with any conditions contained in the underwriting agreement or other agreements entered into by the Company. (p) The Company will use its reasonable best efforts to cause the Ordinary Shares issuable upon conversion of the Securities to be listed on the New York Stock Exchange or other stock exchange or trading system on which the Ordinary Shares primarily trade on or prior to the Effective Time of the Shelf Registration Statement hereunder. (q) In the event that any broker-dealer registered under the Exchange Act shall be an "affiliate" (as defined in Rule 2720(b)(1) of the NASD Rules (or any successor provision thereto)) of the Company or has a "conflict of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor provision thereto)) and such broker-dealer shall underwrite, participate as a member of an underwriting syndicate or selling group or assist in the distribution of any Registrable Securities covered by the Shelf Registration Statement, whether as a Holder of such Registrable Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company shall assist such broker-dealer (at such broker-dealer's expense) in complying with the requirements of the NASD Rules, including, without limitation, by (A) engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15) of the NASD Rules (or any successor provision thereto)) to participate in the preparation of the registration statement relating to such Registrable Securities, to exercise usual standards of due diligence in respect thereto and to recommend the public offering price of such Registrable Securities, (B) indemnifying such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof, and (C) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the NASD Rules. 4. Registration Expenses. Except as otherwise provided in Section 3, the Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 2 and 3 hereof and shall reimburse the Electing Holders for the reasonable fees and disbursements of a single counsel, which shall be Skadden, Arps, Slate, Meagher & Flom LLP, to act as counsel therefore in connection therewith. Each Electing Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relat- -13- ing to the sale or disposition of such Electing Holder's Registrable Securities pursuant to the Shelf Registration Statement. 5. Indemnification and Contribution. (a) Indemnification by the Company. Upon the registration of the Registrable Securities pursuant to Section 2 hereof, the Company shall indemnify and hold harmless each Electing Holder and each underwriter, selling agent or other securities professional, if any, which facilitates the disposition of Registrable Securities, and each of their respective officers and directors and each person who controls such Electing Holder, underwriter, selling agent or other securities professional within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each such person being sometimes referred to herein as an "Indemnified Person") against any losses, claims, damages or liabilities, joint or several, to which such Indemnified Person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Shelf Registration Statement under which such Registrable Securities are to be registered under the Securities Act, or any Prospectus contained therein or furnished by the Company to any Indemnified Person, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company hereby agrees to reimburse such Indemnified Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable to any such Indemnified Person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Shelf Registration Statement or Prospectus, or amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by such Indemnified Person expressly for use therein; provided, further, that as to any preliminary Prospectus, this indemnity agreement shall not inure to the benefit of any Indemnified Person on account of any loss, claim, damage, liability or action arising from the sale of the Registrable Securities sold pursuant to the Shelf Registration Statement to any person by such Indemnified Person if (i) that Indemnified Person failed to send or give a copy of the Prospectus, as the same may be amended or supplemented, to that person within the time required by the Securities Act and (ii) the untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact in such preliminary Prospectus was corrected in the Prospectus or a supplement or amendment thereto, as the case may be, unless in each case, such failure resulted from noncompliance by the Company with Section 3. -14- (b) Indemnification by the Holders and any Agents and Underwriters. Each Electing Holder agrees, as a consequence of the inclusion of any of such Holder's Registrable Securities in such Shelf Registration Statement, and each underwriter, selling agent or other securities professional, if any, which facilitates the disposition of Registrable Securities shall agree, as a consequence of facilitating such disposition of Registrable Securities, severally and not jointly, to (i) indemnify and hold harmless the Company, its directors, its officers who sign any Shelf Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities to which the Company or such other persons may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such Shelf Registration Statement or Prospectus, or any amendment or supplement, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Holder, underwriter, selling agent or other securities professional expressly for use therein, and to (ii) reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under this Section 5, notify such indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this Section 5. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, such indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, such indemnifying party shall not be liable to such indemnified party under this Section 5 for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, (i) without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in -15- respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (x) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (y) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss of liability by reason of such settlement or judgment in accordance with this Section 5. (d) Contribution. If the indemnification provided for in this Section 5 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation (even if the Electing Holders or any underwriters, selling agents or other securities professionals or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 5(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Electing Holders and any underwriters, selling agents or other securities professionals in this Section 5(d) to contribute shall be several in proportion to the percentage of principal amount of Registrable Securities registered or underwritten, as the case may be, by them and not joint. -16- (e) Notwithstanding any other provision of this Section 5, in no event will any (i) Electing Holder be required to undertake liability to any person under this Section 5 for any amounts in excess of the dollar amount of the proceeds to be received by such Holder from the sale of such Holder's Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) pursuant to any Shelf Registration Statement under which such Registrable Securities are to be registered under the Securities Act and (ii) underwriter, selling agent or other securities professional be required to undertake liability to any person hereunder for any amounts in excess of the discount, commission or other compensation payable to such underwriter, selling agent or other securities professional with respect to the Registrable Securities underwritten by it and distributed to the public. (f) The obligations of the Company under this Section 5 shall be in addition to any liability which the Company may otherwise have to any Indemnified Person and the obligations of any Indemnified Person under this Section 5 shall be in addition to any liability which such Indemnified Person may otherwise have to the Company. The remedies provided in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to an indemnified party at law or in equity. 6. Underwritten Offering. If Electing Holders of at least 33-1/3% in aggregate principal amount of the Registrable Securities then covered by the Shelf Registration Statement shall so request in writing to the Company, any Holder of Registrable Securities who desires to do so may sell Registrable Securities (in whole or in part) in an underwritten offering; provided, however, that at least $300 million aggregate Accreted Value of such Registrable Securities shall be included in such offering; and the Company shall not be obligated to cooperate with more than one underwritten offering during the Effectiveness Period. Upon receipt of such a request, the Company shall provide all Holders of Registrable Securities written notice of the request, which notice shall inform such Holders that they have the opportunity to participate in the offering. In any such underwritten offering, the investment banker or bankers and manager or managers that will administer the offering will be selected by, and the underwriting arrangements with respect thereto (including the size of the offering) will be approved by, the Company; provided, however, that such investment bankers and managers and underwriting arrangements must be reasonably satisfactory to the Company. No Holder may participate in any underwritten offering contemplated hereby unless (a) such Holder agrees to sell such Holder's Registrable Securities to be included in the underwritten offering in accordance with any approved underwriting arrangements, (b) such Holder completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such approved underwriting arrangements, and (c) if such Holder is not then an Electing Holder, such Holder returns a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(a)(ii) hereof within a reasonable amount of time before such underwritten offering. -17- The Holders participating in any underwritten offering shall be responsible for any underwriting discounts and commissions and fees and, subject to Section 4 hereof, expenses of their own counsel. The Company shall pay all expenses customarily borne by issuers, including but not limited to Commission filing fees, the fees and disbursements of its counsel and independent public accountants and any printing expenses incurred in connection with such underwritten offering. Notwithstanding the foregoing or the provisions of Section 3(n) hereof, upon receipt of a request from the Managing Underwriter or a representative of Holders of a majority of the Registrable Securities to be included in an underwritten offering to prepare and file an amendment or supplement to the Shelf Registration Statement and Prospectus in connection with an underwritten offering, the Company may delay the filing of any such amendment or supplement for up to 90 days if the Board of Directors of the Company shall have determined in good faith that the Company has a bona fide business reason for such delay. 7. Liquidated Damages. (a) Subject to any postponement on the effectiveness of the registration statement pursuant to Section 2(a) hereof or the use of the Prospectus pursuant to Section 2(c) hereof, if (i) on or prior to the 120th day following the Closing Date, a Shelf Registration Statement has not been filed with the Commission, (ii) on or prior to the 210th day following the Closing Date, such Shelf Registration Statement is not declared effective by the Commission, or (iii) (x) the Shelf Registration Statement ceases to be effective or fails to be usable subsequent to the 210th day following the Closing Date and (y) the Company does not cure the Shelf Registration Statement within ten business days by a post-effective amendment or a report filed pursuant to the Exchange Act or (z) if applicable, the Company does not terminate the suspension period pursuant of Section 2(c) hereof, by the 45th or 75th day, as the case may be (each, a "Registration Default"), the Company shall be required to pay in cash liquidated damages ("Liquidated Damages") in respect of the Registrable Securities, from and including the day following such Registration Default, but excluding the day on which such Shelf Registration Statement is either so filed or so filed and subsequently declared effective, as applicable, at a rate per annum equal to an additional one-quarter of one percent (0.25%) of the Applicable Amount, to and including the 90th day following such Registration Default and an additional one-quarter of one percent (0.25%) of the Applicable Amount from and after the 91st day following such Registration Default. (b) In no event will Liquidated Damages accrue at a rate per year exceeding 0.50%. If a Holder has converted some or all of its Securities into Ordinary Shares, the Holder will be entitled to receive equivalent amounts based on the principal amount at maturity of the Securities converted. A Holder will not be entitled to Liquidated Damages unless it has provided all information requested by the Notice and Questionnaire prior to the deadline. -18- (c) In the event the Company fails to file a post-effective amendment to the Shelf Registration Statement required to be filed, or the post-effective amendment is not declared effective, within the periods required by Section 3, the Company shall pay Liquidated Damages at a rate per annum equal to an additional one-quarter of one percent (0.25%) from and including the date of such Registration Default until such time as such Registration Default is cured subject to the limitations on Liquidated Damages pursuant to paragraph (b) of this Section 7. (d) Any amounts to be paid as Liquidated Damages pursuant to paragraphs (a) or (c) of this Section 7 shall be paid in cash semi-annually in arrears, with the first semi-annual payment due on the first November 23 or May 23, as applicable, following the date on which such Liquidated Damages begin to accrue. (e) The Liquidated Damages as set forth in this Section 7 shall be the exclusive monetary remedy available to the Holders of Registrable Securities for such Registration Default or Effective Failure. In no event shall the Company be required to pay Liquidated Damages in excess of the applicable maximum amount of one-half of one percent (0.5%) per year set forth above, regardless of whether one or multiple Registration Defaults exist. 8. Miscellaneous. (a) Other Registration Rights. The Company may grant registration rights that would permit any Person that is a third party the right to piggy-back on any Shelf Registration Statement, provided that if the Managing Underwriter of any underwritten offering conducted pursuant to Section 6 hereof notifies the Company and the Electing Holders that the total amount of securities which the Electing Holders and the holders of such piggy-back rights intend to include in any Shelf Registration Statement is so large as to materially threaten the success of such offering (including the price at which such securities can be sold), then the amount, number or kind of securities to be offered in such registration statement will be reduced on a pro rata basis to the extent necessary to reduce the total amount of securities to be included in such offering to the amount, number and kind recommended by the Managing Underwriter. (b) Amendments and Waivers. This Agreement, including this Section 8(c), may be amended, and waivers or consents to departures from the provisions hereof may be given, only by a written instrument duly executed by the Company and the Holders of a majority in aggregate principal amount of Registrable Securities then outstanding. Each Holder of Registrable Securities outstanding at the time of any such amendment, waiver or consent or thereafter shall be bound by any amendment, waiver or consent effected pursuant to this Section 8(c), whether or not any notice, writing or marking indicating such amendment, waiver or consent appears on the Registrable Securities or is delivered to such Holder. -19- (c) Notices. All notices and other communications provided for or permitted hereunder shall be given as provided in the Indenture. (d) Parties in Interest. The parties to this Agreement intend that all Holders of Registrable Securities shall be entitled to receive the benefits of this Agreement and that any Electing Holder shall be bound by the terms and provisions of this Agreement by reason of such election with respect to the Registrable Securities which are included in a Shelf Registration Statement. All the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the respective permitted successors and assigns of the parties hereto and any Holder from time to time of the Registrable Securities to the aforesaid extent. (e) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. (h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. (i) Survival. The respective indemnities, agreements, representations, warranties and other provisions set forth in this Agreement or made pursuant hereto shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Electing Holder, any director, officer or partner of such Holder, any agent or underwriter, any director, officer or partner of such agent or underwriter, or any controlling person of any of the foregoing, and shall survive the transfer and registration of the Registrable Securities of such Holder. -20- Please confirm that the foregoing correctly sets forth the agreement between the Company and you. Very truly yours, XL Capital Ltd By: -------------------------------------------- Name: Title: Accepted as of the date hereof: Goldman, Sachs & Co. Deutsche Banc Alex. Brown Inc. Dresdner Kleinwort Wasserstein LLC By: --------------------------------------- (Goldman, Sachs & Co.) Exhibit A XL Capital Ltd INSTRUCTION TO DTC PARTICIPANTS (Date of Mailing) URGENT - IMMEDIATE ATTENTION REQUESTED DEADLINE FOR RESPONSE: [DATE] The Depository Trust Company ("DTC") has identified you as a DTC Participant through which beneficial interests in the XL Capital Ltd (the "Company") Zero-Coupon Convertible Debentures due May 23, 2021 (the "Securities") are held. The Company is in the process of registering the Securities under the Securities Act of 1933, as amended, for resale by the beneficial owners thereof. In order to have their Securities included in the registration statement, beneficial owners must complete and return the enclosed Notice of Registration Statement and Selling Securityholder Questionnaire. It is important that beneficial owners of the Securities receive a copy of the enclosed materials as soon as possible as their rights to have the Securities included in the registration statement depend upon their returning the Notice and Questionnaire by [Deadline for response]. Please forward a copy of the enclosed documents to each beneficial owner that holds interests in the Securities through you. If you require more copies of the enclosed materials or have any questions pertaining to this matter, please contact Galvin R. Arton, XL Capital Ltd, XL House, One Bermudiana Road, Hamilton, Bermuda HM11. -2- XL Capital Ltd Notice of Registration Statement and Selling Securityholder Questionnaire (Date) Reference is hereby made to the Registration Rights Agreement, dated May 23, 2001 (the "Registration Rights Agreement") between XL Capital Ltd (the "Company") and Goldman, Sachs & Co., Deutsche Banc Alex. Brown Inc. and Dresdner Kleinwort Wasserstein LLC. Pursuant to the Registration Rights Agreement, the Company plans to file with the United States Securities and Exchange Commission (the "Commission") a registration statement on Form [__] (the "Shelf Registration Statement") for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of the Company's Zero-Coupon Convertible Debentures due May 23, 2021 (the "Securities") and the Class A Ordinary Shares, par value $.01 per share (the "Ordinary Shares"), issuable upon conversion thereof. A copy of the Registration Rights Agreement is attached hereto. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement. Each beneficial owner of Registrable Securities (as defined below) is entitled to have the Registrable Securities beneficially owned by it included in the Shelf Registration Statement. In order to have Registrable Securities included in the Shelf Registration Statement, this Notice of Registration Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire") must be completed, executed and delivered to the Company's counsel at the address set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]. Beneficial owners of Registrable Securities who do not complete, execute and return this Notice and Questionnaire by such date (i) will not be named as selling securityholders in the Shelf Registration Statement and (ii) may not use the Prospectus forming a part thereof for resales of Registrable Securities. Certain legal consequences arise from being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. -3- The term "Registrable Securities" is defined in the Registration Rights Agreement to mean all or any portion of the Securities issued from time to time under the Indenture in registered form and the Ordinary Shares issuable upon conversion of such Securities; provided, however, that a security ceases to be a Registrable Security when it is no longer a Restricted Security. The term "Restricted Security" is defined in the Registration Rights Agreement to mean any Security or Ordinary Share issuable upon conversion thereof except any such Security or Ordinary Share which (i) has been effectively registered under the Securities Act and sold in a manner contemplated by the Shelf Registration Statement, (ii) has been transferred in compliance with Rule 144 under the Securities Act (or any successor provision thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any successor provision thereto), (iii) has been sold in compliance with Regulation S under the Securities Act (or any successor thereto) and does not constitute the unsold allotment of a distributor within the meaning of Regulation S under the Securities Act, (iv) has otherwise been transferred and a new Security or Ordinary Share not subject to transfer restrictions under the Securities Act has been delivered by or on behalf of the Company in accordance with Section 2.6(f) of the Indenture, or (v) is otherwise transferable without restriction under the Securities Act. ELECTION The undersigned holder (the "Selling Securityholder") of Registrable Securities hereby elects to include in the Shelf Registration Statement the Registrable Securities beneficially owned by it and listed below in Item (3). The undersigned, by signing and returning this Notice and Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement, including, without limitation, Section 5 of the Registration Rights Agreement, as if the undersigned Selling Securityholder were an original party thereto. Upon any sale of Registrable Securities pursuant to the Shelf Registration Statement, the Selling Securityholder will be required to deliver to the Company and Trustee the Notice of Transfer set forth as Exhibit B to the Registration Rights Agreement. The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete: -4- QUESTIONNAIRE (1) (a) Full Legal Name of Selling Securityholder: ----------------------------------------------------------------------- (b) Full Legal Name of Registered Holder (if not the same as in (a) above) of Registrable Securities Listed in Item (3) below: ---------------------------------------------------------------------- (c) Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) Through Which Registrable Securities Listed in Item (3) below are Held: ---------------------------------------------------------------------- (2) Address for Notices to Selling Securityholder: ------------------------- ------------------------- ------------------------- ------------------------- Telephone: ------------------------- Fax: ------------------------- Contact Person: ------------------------- (3) Beneficial Ownership of Securities: Except as set forth below in this Item (3), the undersigned does not beneficially own any Securities or Ordinary Shares issued upon conversion of any Securities. (a) Principal amount at maturity (subject to upward interest in the event of an upward interest adjustment) of Registrable Securities (as defined in the Registra- -5- tion Rights Agreement) beneficially owned:____________________________ CUSIP No(s). of such Registrable Securities:__________________________ Number of Ordinary Shares (if any) issued upon conversion of such Registrable Securities:_______________________________________________ (b) Principal amount at maturity (subject to upward interest in the event of an upward interest adjustment) of Securities other than Registrable Securities beneficially owned:________________________________________ CUSIP No(s). of such other Securities:________________________________ Number of Ordinary Shares (if any) issued upon conversion of such other Securities:_____________________________________________________ (c) Principal amount at maturity (subject to upward interest in the event of an upward interest adjustment) of Registrable Securities which the undersigned wishes to be included in the Shelf Registration Statement: ______________________________________________________________________ CUSIP No(s). of such Registrable Securities to be included in the Shelf Registration Statement:_________________________________________ Number of Ordinary Shares (if any) issued upon conversion of Registrable Securities which are to be included in the Shelf Registration Statement:_______________________________________________ (4) Beneficial Ownership of Other Securities of the Company: Except as set forth below in this Item (4), the undersigned Selling Securityholder is not the beneficial or registered owner of any Ordinary Shares or any other securities of the Company, other than the Securities and Ordinary Shares listed above in Item (3). State any exceptions here: (5) Relationships with the Company: Except as set forth below, neither the Selling Securityholder nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. State any exceptions here: -6- (6) Plan of Distribution: Except as set forth below, the undersigned Selling Securityholder intends to distribute the Registrable Securities listed above in Item (3) only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned Selling Securityholder or, alternatively, through underwriters, broker-dealers or agents. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registered Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the Selling Securityholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities in the course of hedging the positions they assume. The Selling Securityholder may also sell Registrable Securities short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities. State any exceptions here: Note: In no event may such method(s) of distribution take the form of an underwritten offering of the Registrable Securities without the prior agreement of the Company. By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M. In the event that the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify in writing the Company and any transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Registration Rights Agreement. By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (6) above and the inclusion of such information in the Shelf Registration Statement and related Prospectus. The Selling Se- -7- curityholder understands that such information will be relied upon by the Company in connection with the preparation of the Shelf Registration Statement and related Prospectus. In accordance with the Selling Securityholder's obligation under Section 3(a) of the Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the Selling Securityholder agrees to promptly notify the Company in writing of any inaccuracies or changes in the information provided herein which may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains in effect. All notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing, by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows: (i) To the Company: XL Capital Ltd One Bermudiana Road Hamilton, Bermuda HM11 (441) 292-8515 Facsimile: (441) 292-5280 Attention: Paul S. Giordano (ii) With a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 (212) 701-3000 Facsimile: (212) 269-5420 Attention: Immanuel Kohn Once this Notice and Questionnaire is executed by the Selling Securityholder and received by the Company's counsel, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company and the Selling Securityholder (with respect to the Registrable Securities beneficially owned by such Selling Securityholder and listed in Item (3) above). This Agreement shall be governed in all respects by the laws of the State of New York. -8- IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent. Dated: __________________ - -------------------------------------------------------------------------------- Selling Securityholder (Print/type full legal name of beneficial owner of Registrable Securities) By: ---------------------------------- Name: Title: PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT: _________________________ _________________________ _________________________ _________________________ _________________________ Exhibit B NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT State Street Bank and Trust Company 225 Asylum Street 23rd Floor Hartford, Connecticut 06103 Attention: [Corporate Trust Services] Re: XL Capital Ltd (the "Company") Zero-Coupon Convertible Debentures due May 23, 2021 (the "Debentures") Dear Sirs: Please be advised that _____________________ has transferred $___________ aggregate principal amount at maturity (subject to upward adjustment in the event of an upward interest adjustment) of the above-referenced Debentures pursuant to an effective Registration Statement on Form [___] (File No. 333-____) filed by the Company. We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied and that the above-named beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus dated _______, or in supplements thereto, and that the aggregate principal amount at maturity (subject to upward adjustment in the event of an upward interest adjustment) of the Debentures transferred are the Debentures listed in such Prospectus opposite such owner's name. Dated: Very truly yours, --------------------------- (Name) By: ________________________ (Authorized Signature) EX-5.A 6 xlex5a.txt OPINION OF CAHILL GORDON & REINDEL EXHIBIT 5(a) (LETTERHEAD OF CAHILL GORDON & REINDEL) August 6, 2001 XL Capital Ltd. XL House One Bermudiana Road Hamilton, Bermuda HM 11 Re: Zero-Coupon Convertible Debentures Due May 23, 2021 Ladies and Gentlemen: We have acted as special New York counsel to XL Capital Ltd, a Cayman Islands exempted limited company (the "Company"), in connection with the registration statement on Form S-3 (the "Registration Statement") filed by the Company with the Securities and Exchange Commission (the "Commission") for registration under the Securities Act of 1933, as amended (the "Act") of $1,010,834,000 aggregate principal amount at maturity, subject to upward adjustment in certain circumstances, of the Company's Zero-Coupon Convertible Debentures Due May 23, 2021 (the "Debentures"). The Debentures were issued under an Indenture (the "Indenture") dated as of May 23, 2001 by and between the Company and State Street Bank and Trust Company, as trustee. In rendering the opinions set forth herein, we have examined originals, photocopies or conformed copies certified to our satisfaction of corporate records, agreements, instruments and documents of the Company, certificates of public officials and other certificates and opinions and have made such other investigations as we have deemed necessary in connection with the opinions set forth herein. In our examination, we have assumed (a) the due organization and valid existence of the Company, (b) the due authorization, execution, authentication and delivery by all persons of each of the Indenture and the Debentures, (c) that each of such parties has the legal power to act in the respective capacity or capacities in which it is to act thereunder, (d) the authenticity of all documents -2- submitted to us as originals, (e) the conformity to the original documents of all documents submitted to us as copies and (f) the genuineness of all signatures on all documents submitted to us. We advise you that, based upon the foregoing, in our opinion: 1. Insofar as the laws of the State of New York are applicable thereto, the Indenture constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except that (a) the enforceability thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to or affecting creditors' rights or remedies generally and (ii) general principles of equity and to the discretion of the court before which any proceedings therefor may be brought (regardless of whether enforcement is sought in a proceeding at law or in equity) and (b) the enforceability of provisions imposing liquidated damages, penalties or an increase in interest rate upon the occurrence of certain events may be limited in certain circumstances. 2. Insofar as the laws of the State of New York are applicable thereto, the Debentures constitute valid and legally binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except that (a) the enforceability thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to or affecting creditors' rights or remedies generally and (ii) general principles of equity and to the discretion of the court before which any proceedings therefor may be brought (regardless of whether enforcement is sought in a proceeding at law or in equity) and (b) the enforceability of provisions imposing liquidated damages, penalties or an increase in interest rate upon the occurrence of certain events may be limited in certain circumstances. We are members of the Bar of the State of New York and do not purport to be experts in or to express any opinion concerning the laws of any jurisdictions other than the laws of the State of New York. In rendering the opinions set forth above, we express no opinion as to the laws of any jurisdictions other than the laws of the State of New York. Accordingly, our opinions expressed in paragraphs 1 and 2 above are not intended as opinions under the laws of the jurisdiction of organization of the Company and are intended to cover only the nature of the Indenture and the Debentures as contracts and obligations created under and governed by the laws of the State of New York. -3- We hereby consent to the reference to our firm in the Registration Statement under the caption "Legal Matters" and to the inclusion of this opinion as an exhibit to the Registration Statement. Our consent to such reference does not constitute a consent under Section 7 of the Act as in consenting to such reference we have not certified any part of the Registration Statement and do not otherwise come within the categories of persons whose consent is required under Section 7 or under the rules and regulations of the Commission thereunder. Very truly yours, Cahill Gordon & Reindel EX-12 7 xlcompex.txt STATEMENT-COMPUTATION OF RATIO XL CAPITAL COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 000s of U.S. Dollars Qtr End Yr End Yr End 31-Mar 31-Dec 31-Dec 2001 2000 1999 ------------ ------------- ------------- Earnings: Pre-tax income from continuing operations(1) 188,801 376,734 390,252 Fixed charges 9,097 38,166 41,215 Distributed income of equity investees 118 4,987 1,266 ------------ ------------- ------------- Subtotal 198,016 419,887 432,733 Less: Minority interest 1,169 1,093 220 ------------ ------------- ------------- Total Earnings 196,847 418,794 432,513 ============ ============= ============= Fixed Charges: Interest costs 7,512 32,147 37,378 Rental expense at 30% (1) 1,585 6,019 3,837 ------------ ------------- ------------- Total fixed charges 9,097 38,166 41,215 ============ ============= ============= Earnings to Fixed Charges 21.6 11.0 10.5 ------------ ------------- ------------- (1) 30% represents a reasonable approximation of the interest factor EX-23.A 8 xl23a.txt CONSENT OF PRICEWATERHOUSECOOPERS Exhibit 23(a) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated February 15, 2001 relating to the financial statements and financial statement schedules, which appear in XL Capital Ltd's Annual Report on Form 10-K for the year ended December 31, 2000. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ PriceWaterhouseCoopers LLP PRICEWATERHOUSECOOPERS LLP New York, New York August 5, 2001 EX-23.B 9 xl23b.txt CONSENT OF ERNST & YOUNG Exhibit 23(b) CONSENT OF INDEPENDENT AUDITORS We consent to the use of our report dated February 3, 1999, except for note 15, as to which the date is February 15, 1999 with respect to the financial statements and schedules of NAC Re Corp. included in the Annual Report (Form 10-K) of XL Capital Ltd for the year ended December 31, 2000, filed with the Securities and Exchange Commission and incorporated by reference in the Registration Statement (Form S-3) of XL Capital Ltd and related prospectus for the registration of $1,010,834,000 of Zero Coupon Convertible Debentures due May 23, 2021. /s/ Ernst & Young LLP ERNST & YOUNG LLP New York, New York July 31, 2001 EX-24 10 xlex24.txt POWERS OF ATTORNEY Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS THAT each person whose signature appears below does hereby constitute and appoint Brian M. O'Hara, Paul S. Giordano and Jerry de St. Paer, and each of them, as his true and lawful attorney-in-fact and agent and in his name, place, and stead, and in any and all capacities, to sign his name to the Registration Statement of XL Capital Ltd, a Cayman Islands company, on Form S-3 under the Securities Act of 1933, as amended, and to any and all amendments or supplements thereto (including any post-effective amendments, including any registration statement filed under Rule 462(b) under the Securities Act of 1933), with all exhibits thereto and other documents in connection therewith and to cause the same to be filed with the Securities and Exchange Commission, granting unto said attorneys and each of them full power and authority to do and perform any act and thing necessary and proper to be done in the premises, as fully and to all intents and purposes as the undersigned could do if personally present, and the undersigned hereby ratifies and confirms all that said attorneys or any one of them shall lawfully do or cause to be done by virtue hereof. Signature Date - --------- ---- /s/ Ronald L. Bornhuetter August 1, 2001 - --------------------------------- Name: Ronald L. Bornhuetter /s/ Michael A. Butt August 1, 2001 - --------------------------------- Name: Michael A. Butt /s/ Robert Clements August 1, 2001 - --------------------------------- Name: Robert Clements /s/ Sir Brian Corby August 1, 2001 - --------------------------------- Name: Sir Brian Corby /s/ Michael P. Esposito, Jr. August 1, 2001 - ------------------------------------ Name: Michael P. Esposito, Jr. /s/ Robert R. Glauber August 1, 2001 - --------------------------------- Name: Robert R. Glauber /s/ Paul Jeanbart August 1, 2001 - --------------------------------- Name: Paul Jeanbart /s/ John Loudon August 1, 2001 - --------------------------------- Name: John Loudon /s/ Robert S. Parker August 1, 2001 - --------------------------------- Name: Robert S. Parker /s/ Cyril Rance August 1, 2001 - --------------------------------- Name: Cyril Rance /s/ Alan Z. Senter August 1, 2001 - --------------------------------- Name: Alan Z. Senter /s/ John T. Thornton August 1, 2001 - --------------------------------- Name: John T. Thornton /s/ Ellen E. Thrower August 1, 2001 - --------------------------------- Name: Ellen E. Thrower /s/ John W. Weiser August 1, 2001 - --------------------------------- Name: John W. Weiser EX-25 11 xlt1ex.txt FORM T-1 STATE. OF ELIGIBILITY SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 --------- STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) STATE STREET BANK AND TRUST COMPANY (Exact name of trustee as specified in its charter) Massachusetts 04-1867445 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.) 225 Franklin Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253 (Name, address and telephone number of agent for service) XL CAPITAL LTD (Exact name of obligor as specified in its charter) Cayman Islands 98-0191089 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) XL House One Bermudiana Road Hamilton HM11 Bermuda (Address of principal executive offices) (Zip Code) Zero-Coupon Convertible Debentures due 2021 (Title of indenture securities) GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervisory authority to which it is subject. Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts. Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Trustee is authorized to exercise corporate trust powers. Item 2. Affiliations with Obligor. If the Obligor is an affiliate of the trustee, describe each such affiliation. The obligor is not an affiliate of the trustee or of its parent, State Street Corporation. (See note on page 2.) Item 3. through Item 15. Not applicable. Item 16. List of Exhibits. List below all exhibits filed as part of this statement of eligibility. 1. A copy of the articles of association of the trustee as now in effect. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A copy of the certificate of authority of the trustee to commence business, if not contained in the articles of association. 2 A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A copy of the authorization of the trustee to exercise corporate trust powers, if such authorization is not contained in the documents specified in paragraph (1) or (2), above. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A copy of the existing by-laws of the trustee, or instruments corresponding thereto. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto. 5. A copy of each indenture referred to in Item 4. if the obligor is in default. Not applicable. 6. The consents of United States institutional trustees required by Section 321(b) of the Act. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. 3 NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Hartford and the State of Connecticut, on the 12th day of July, 2001. STATE STREET BANK AND TRUST COMPANY By: ------------------------------------------- NAME: Elizabeth C. Hammer TITLE: Vice President 4 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by XL Capital LTD of its Zero-Coupon Convertible Debentures due 2021, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY By: -------------------------------------- NAME: Elizabeth C. Hammer TITLE: Vice President Dated: July 12, 2001 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business March 31, 2001 published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
ASSETS Thousands of Dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin 897,105 Interest-bearing balances.................................................. 17,983,011 Securities.......................................................................... 16,720,906 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary........................................ 15,060,119 Loans and lease financing receivables: Loans and leases, net of unearned income......................6,262,440 Allowance for loan and lease losses........................... 57,674 Allocated transfer risk reserve............................... 0 Loans and leases, net of unearned income and allowances.................... 6,204,766 Assets held in trading accounts..................................................... 3,067,581 Premises and fixed assets........................................................... 570,144 Other real estate owned............................................................. 0 Investments in unconsolidated subsidiaries.......................................... 22,733 Customers' liability to this bank on acceptances outstanding........................ 167,024 Intangible assets................................................................... 456,769 Other assets........................................................................ 1,512,531 --------- Total assets........................................................................ 62,662,689 ---------- LIABILITIES Deposits: In domestic offices........................................................ 12,418,125 Noninterest-bearing.........................7,272,865 Interest-bearing............................5,145,260 In foreign offices and Edge subsidiary..................................... 25,631,712 Noninterest-bearing........................ 96,103 Interest-bearing...........................25,535,609 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary............................. 16,541,928 Demand notes issued to the U.S. Treasury............................................ 0 Trading liabilities................................................................. 2,336,011 Other borrowed money................................................................ 184,267 Subordinated notes and debentures................................................... 0 Bank's liability on acceptances executed and outstanding............................ 167,024 Other liabilities................................................................... 1,566,844 Total liabilities................................................................... 58,845,911 ---------- Minority interest in consolidated subsidiaries...................................... 49,273 EQUITY CAPITAL Perpetual preferred stock and related surplus....................................... 0 Common stock........................................................................ 29,931 Surplus............................................................................. 567,089 Retained Earnings................................................................... 3,140,648 Accumulated other comprehensive income..................................... 29,837 Other equity capital components..................................................... 0 Undivided profits and capital reserves/Net unrealized holding gains 0 (losses)................................................................... Net unrealized holding gains (losses) on available-for-sale securities................................................................. 0 Cumulative foreign currency translation adjustments................................. 0 Total equity capital................................................................ 3,767,505 --------- Total liabilities, minority interest and equity capital............................. 62,662,689 ----------
I, Frederick P. Baughman, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Frederick P. Baughman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Ronald E. Logue David A. Spina Truman S. Casner 2 EX-99.A 12 xlex.txt APPOINTMENT OF CT CORP. [LOGO] May 23, 2001 Robert F. Kuzloski, Esq. Cahill Gordon & Reindel Eighty Pine Street New York, N.Y. 10005-1702 Re: XL Capital Ltd., a Cayman Islands exempted limited company (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of $842,361,000 principal amount at maturity (subject to adjustment in the event there is an upward interest adjustment) of the Zero-Coupon Convertible Debentures (the "Debentures"), convertible into Class A Ordinary Shares, par value $0.01 per share (the "Shares" and, together with the Debentures, the "Firm Securities") of the Company, specified above and, at the election of the Purchasers, up to an aggregate of $168,473,000 additional aggregate principal amount at maturity (subject to adjustment in the event there is an upward interest adjustment) of the Debentures (the "Optional Securities"). The Firm Securities and the Optional Securities which the Purchasers elect to purchase pursuant to Section 2 are herein collectively called the "Securities". Dear Mr. Kuzloski: CT Corporation System, located at 111 Eighth Avenue, New York, New York 10011, will accept its appointment as agent for service of process for XL Capital Ltd. in connection with the above referenced Agreements. Any process received by us shall be forwarded as follows: XL Capital Ltd. One Bermudiana Road Hamilton, Bermuda, HM11 Bermuda Attn: Mr. Paul Giordano, General Counsel Tel: 441-294-7162 Fax: 441-295-4867 We acknowledge receiving $4,005.00 payment of our charge for this twenty (20) year appointment commencing on May 23, 2001. Unless we are notified otherwise, our service will terminate on May 23, 2021. Sincerely, /s/ Sandra D. Stewart - ------------------------------- Sandra D. Stewart Customer Specialist Order #4439302 -----END PRIVACY-ENHANCED MESSAGE-----