Exhibit 10.2
 
 
 

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364-DAY CREDIT AGREEMENT

dated as of

December 19, 2006

between

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

DEUTSCHE BANK AG NEW YORK BRANCH,
as Lender

_____________

$100,000,000
_____________
 

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TABLE OF CONTENTS
 
Page
 
ARTICLE I
 
DEFINITIONS
 
SECTION 1.01.
Defined Terms
1
SECTION 1.02.
Terms Generally
15
SECTION 1.03.
Accounting Terms; GAAP and SAP
15

 
ARTICLE II
 
THE CREDITS
 
SECTION 2.01.
Dollar Letters of Credit
15
SECTION 2.02.
Alternative Currency Letters of Credit
16
SECTION 2.03.
Reimbursement of LC Disbursements, Etc.
17
SECTION 2.04.
Loans and Borrowings
19
SECTION 2.05.
Requests for Borrowings
20
SECTION 2.06.
Funding of Borrowings
21
SECTION 2.07.
Interest Elections
21
SECTION 2.08.
Termination and Reduction of the Commitment
22
SECTION 2.09.
Repayment of Loans; Term-Out Option; Evidence of Debt
23
SECTION 2.10.
Prepayment of Loans
24
SECTION 2.11.
Fees
25
SECTION 2.12.
Interest
26
SECTION 2.13.
Alternate Rate of Interest
26
SECTION 2.14.
Increased Costs
27
SECTION 2.15.
Break Funding Payments
28
SECTION 2.16.
Taxes
28
SECTION 2.17.
Payments Generally; Pro Rata Treatment; Sharing of Set-offs
30
SECTION 2.18.
Designation of a Different Lending Office
31

 
ARTICLE III
 
GUARANTEE
 
SECTION 3.01.
The Guarantee
31
SECTION 3.02.
Obligations Unconditional
32
SECTION 3.03.
Reinstatement
32
SECTION 3.04.
Subrogation
33
SECTION 3.05.
Remedies
33

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SECTION 3.06.
Continuing Guarantee
33
SECTION 3.07.
Rights of Contribution
33
SECTION 3.08.
General Limitation on Guarantee Obligations
34

 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES
 
SECTION 4.01.
Organization; Powers
34
SECTION 4.02.
Authorization; Enforceability
34
SECTION 4.03.
Governmental Approvals; No Conflicts
35
SECTION 4.04.
Financial Condition; No Material Adverse Change
35
SECTION 4.05.
Properties
35
SECTION 4.06.
Litigation and Environmental Matters
36
SECTION 4.07.
Compliance with Laws and Agreements
36
SECTION 4.08.
Investment and Holding Company Status
36
SECTION 4.09.
Taxes
36
SECTION 4.10.
ERISA
37
SECTION 4.11.
Disclosure
37
SECTION 4.12.
Use of Credit
37
SECTION 4.13.
Subsidiaries
38
SECTION 4.14.
Withholding Taxes
38
SECTION 4.15.
Stamp Taxes
38
SECTION 4.16.
Legal Form
38

 
ARTICLE V
 
CONDITIONS
 
SECTION 5.01.
Effective Date
38
SECTION 5.02.
Each Credit Event
40

 
ARTICLE VI
 
AFFIRMATIVE COVENANTS
 
SECTION 6.01.
Financial Statements and Other Information
40
SECTION 6.02.
Notices of Material Events
43
SECTION 6.03.
Preservation of Existence and Franchises
43
SECTION 6.04.
Insurance
43
SECTION 6.05.
Maintenance of Properties
43
SECTION 6.06.
Payment of Taxes and Other Potential Charges and Priority Claims; Payment of
Other Current Liabilities
44
SECTION 6.07.
Financial Accounting Practices
44

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SECTION 6.08.
Compliance with Applicable Laws
44
SECTION 6.09.
Use of Letters of Credit and Proceeds
45
SECTION 6.10.
Continuation of and Change in Businesses
45
SECTION 6.11.
Visitation
45

 
ARTICLE VII
 
NEGATIVE COVENANTS
 
SECTION 7.01.
Mergers
45
SECTION 7.02.
Dispositions
46
SECTION 7.03.
Liens
46
SECTION 7.04.
Transactions with Affiliates
48
SECTION 7.05.
Ratio of Total Funded Debt to Total Capitalization
49
SECTION 7.06.
Consolidated Net Worth
49
SECTION 7.07.
Indebtedness
49
SECTION 7.08.
Financial Strength Ratings
49
SECTION 7.09.
Private Act
50

 
ARTICLE VIII
 
EVENTS OF DEFAULT
 
 
ARTICLE IX
 
MISCELLANEOUS
 
SECTION 9.01.
Notices
53
SECTION 9.02.
Waivers; Amendments
54
SECTION 9.03.
Expenses; Indemnity; Damage Waiver
54
SECTION 9.04.
Successors and Assigns
55
SECTION 9.05.
Survival
55
SECTION 9.06.
Counterparts; Integration; Effectiveness
56
SECTION 9.07.
Severability
56
SECTION 9.08.
Right of Setoff
56
SECTION 9.09.
Governing Law; Jurisdiction; Etc.
57
SECTION 9.10.
WAIVER OF JURY TRIAL
58
SECTION 9.11.
Headings
58
SECTION 9.12.
Treatment of Certain Information; Confidentiality
58
SECTION 9.13.
Judgment Currency
59
SECTION 9.14.
USA PATRIOT Act
60

 
 
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SCHEDULES AND EXHIBITS
 
SCHEDULE I
-
Indebtedness and Liens
SCHEDULE II
-
Litigation
SCHEDULE III
-
Environmental Matters
SCHEDULE IV
 
-
 
Subsidiaries
 
EXHIBIT A -1
-
Form of Opinion of Counsel to XL Capital
EXHIBIT A -2
-
Form of Opinion of Counsel to XL America
EXHIBIT A -3
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Form of Opinion of Special U.S. Counsel to the Obligors
EXHIBIT A -4
-
Form of Opinion of Special Bermuda Counsel to XL Insurance
and XL Re
   
EXHIBIT A -5
-
Form of Opinion of Special Cayman Islands Counsel to XL Capital

 

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364-DAY CREDIT AGREEMENT dated as of December 19, 2006, between XL CAPITAL LTD,
a Cayman Islands exempted limited liability company (“XL Capital”), X.L.
AMERICA, INC., a Delaware corporation (“XL America”), XL INSURANCE (BERMUDA)
LTD, a Bermuda limited liability company (“XL Insurance”) and XL RE LTD, a
Bermuda limited liability company (“XL Re” and, together with XL Capital, XL
America and XL Insurance, each an “Account Party” and each a “Guarantor” and
collectively, the “Account Parties” and the “Guarantors”; the Account Parties
and the Guarantors being collectively referred to as the “Obligors”), and
DEUTSCHE BANK AG NEW YORK BRANCH, as the Lender.
 
The Account Parties have requested that the Lender issue letters of credit for
their account and make loans to them in an aggregate face or principal amount
not exceeding $100,000,000 at any one time outstanding, and the Lender is
prepared to issue such letters of credit and make such loans upon the terms and
conditions hereof. Accordingly, the parties hereto agree as follows:
 
 
ARTICLE I
 
DEFINITIONS
 
SECTION 1.01.  Defined Terms. As used in this Agreement, the following terms
have the meanings specified below:
 
“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans constituting such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.
 
“Account Parties” means each of XL Capital, XL America, XL Insurance and XL Re.
 
“Account Party Jurisdiction” means (a) Bermuda, (b) the Cayman Islands and (c)
any other country (i) where any Account Party is licensed or qualified to do
business or (ii) from or through which payments hereunder are made by any
Account Party.
 
“Adjusted LIBO Rate” means, for the Interest Period for any Eurodollar
Borrowing, an interest rate per annum (rounded upwards, if necessary, to the
next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate for such Interest Period.
 
“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly, Controls or is Controlled by or is under common Control
with the Person specified.
 
“Alternate Base Rate” means, for any day, a rate per annum equal to the greater
of (a) the Prime Rate in effect on such day, and (b) the Federal Funds Effective
Rate
 

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for such day plus½ of 1%. Any change in the Alternate Base Rate due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be effective from
and including the effective date of such change in the Prime Rate or the Federal
Funds Effective Rate, as the case may be.
 
“Alternative Currency” means any currency other than Dollars (a) that is freely
transferable and convertible into Dollars in the London foreign exchange market
and (b) for which no central bank or other governmental authorization in the
country of issue of such currency is required to permit use of such currency by
the Lender for issuing, renewing, extending or amending letter of credits or
funding or making drawings thereunder and/or to permit any Account Party to pay
the reimbursement obligations and interest thereon, each as contemplated
hereunder, unless such authorization has been obtained and is in full force and
effect.
 
“Alternative Currency LC Exposure” means, at any time, the sum of (a) the Dollar
Equivalent of the aggregate undrawn amount of all outstanding Alternative
Currency Letters of Credit at such time plus (b) the Dollar Equivalent of the
aggregate amount of all LC Disbursements under Alternative Currency Letters of
Credit that have not been reimbursed by or on behalf of the Account Parties at
such time.
 
“Alternative Currency Letter of Credit” means a letter of credit issued by the
Lender in an Alternative Currency pursuant to Section 2.02.
 
“Applicable Facility Fee Rate” means 0.05%.
 
“Applicable Letter of Credit Fee Rate” means 0.25%.
 
“Applicable Margin” means a rate per annum equal to, (a) for the period from and
including the date hereof to but not including the Commitment Termination Date,
0.25% and (b) in the event that the Term-Out Option has been exercised and is in
effect, for the period from and including the Commitment Termination Date to but
not including the date of payment in full of the Loans, 0.50%.
 
“Applicable Additional Margin” means a rate per annum equal to 0.10% (a) for any
period during which the aggregate outstanding principal amount of the Loans
shall be greater than 50% of the RC Sublimit then in effect and (b) from and
after the Term-Out Option has been exercised and is in effect.
 
“Availability Period” means the period from and including the Effective Date to
and including the Commitment Termination Date.
 
“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.
 

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“Borrowing” means, with respect to any Account Party, (a) all ABR Loans of such
Account Party made, converted or continued on the same date or (b) all
Eurodollar Loans of such Account Party that have the same Interest Period.
 
“Borrowing Request” means a request by an Account Party for a Borrowing in
accordance with Section 2.05.
 
“Business Day” means any day (a) that is not a Saturday, Sunday or other day on
which commercial banks in New York City, London, the Cayman Islands or Bermuda
are authorized or required by law to remain closed and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
continuation or conversion of or into, or the Interest Period for, a Eurodollar
Loan, or to a notice by an Account Party with respect to any such borrowing,
payment, prepayment, continuation, conversion, or Interest Period, that is also
a day on which dealings in Dollar deposits are carried out in the London
interbank market.
 
“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.
 
“Change in Control” means the occurrence of any of the following events or
conditions: (a) any Person, including any syndicate or group deemed to be a
Person under Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, acquires beneficial ownership, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of transactions, of
shares of XL Capital entitling such Person to exercise 40% or more of the total
voting power of all shares of XL Capital that is entitled to vote generally in
elections of directors, other than an acquisition by XL Capital, any of its
Subsidiaries or any employee benefit plans of XL Capital; or (b) XL Capital
merges or consolidates with or into any other Person (other than a Subsidiary),
another Person (other than a Subsidiary) merges into XL Capital or XL Capital
conveys, sells, transfers or leases all or substantially all of its assets to
another Person (other than a Subsidiary), other than any transaction: (i) that
does not result in a reclassification, conversion, exchange or cancellation of
the outstanding shares of XL Capital (other than the cancellation of any
outstanding shares of XL Capital held by the Person with whom it merges or
consolidates) or (ii) which is effected solely to change the jurisdiction of
incorporation of XL Capital and results in a reclassification, conversion or
exchange of outstanding shares of XL Capital solely into shares of the surviving
entity; or (c) a majority of the members of XL Capital’s board of directors are
persons who are then serving on the board of directors without having been
elected by the board of directors or having been nominated for election by its
shareholders.
 

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“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by the Lender (or, for purposes of
Section 2.14(b), by any lending office of the Lender or by the Lender’s holding
company, if any) with any request, guideline or directive (whether or not having
the force of law) of any Governmental Authority made or issued after the date of
this Agreement.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
 
“Commitment” means, the Lender’s commitment (a) to issue Letters of Credit and
 
(b) to make Loans, in each case expressed as an amount representing the maximum
aggregate amount of the Lender’s Credit Exposure hereunder, as such commitment
may be reduced from time to time pursuant to Section 2.08. The initial aggregate
amount of the Lender’s Commitment is $100,000,000.
 
“Commitment Termination Date” means December 19, 2007.
 
“Consolidated Net Worth” means, at any time, the consolidated shareholders’
equity of XL Capital and its Subsidiaries, provided that the calculation of such
consolidated shareholders’ equity shall exclude (a) the effect thereon of any
adjustments required under Statement of Financial Accounting Standard No. 115
(“Accounting for Certain Investments in Debt and Equity Securities”) (b) any
Exempt Indebtedness (and the assets relating thereto) in the event such Exempt
Indebtedness is consolidated on the balance sheet of XL Capital and its
consolidated Subsidiaries in accordance with GAAP.
 
“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.
 
“Credit Documents” means, collectively, this Agreement and the Letter of Credit
Documents.
 
“Credit Exposure” means the sum of the outstanding principal amount of the
Lender’s Loans and its LC Exposure at any time.
 
“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.
 

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“Dollar Equivalent” means, in respect of any Alternative Currency Letter of
Credit, the amount of Dollars obtained by converting the Alternative Currency LC
Exposure with respect to such Alternative Currency Letter of Credit, into
Dollars at the spot rate for the purchase of Dollars with such currency as
quoted by the Lender at approximately 11:00 a.m. (London time) on the second
Business Day before the date such Dollar Equivalent shall be calculated (unless
another rate or time is agreed to by XL Capital and the Lender).
 
“Dollar Letter of Credit” means a letter of credit issued by the Lender in
Dollars pursuant to Section 2.01.
 
“Dollars” or “$” refers to lawful money of the United States of America.
 
“Effective Date” means the date on which the conditions specified in
Section 5.01 are satisfied (or waived in accordance with Section 9.02).
 
“Environmental Laws” means any Law, whether now existing or subsequently enacted
or amended, relating to (a) pollution or protection of the environment,
including natural resources, (b) exposure of Persons, including but not limited
to employees, to Hazardous Materials, (c) protection of the public health or
welfare from the effects of products, by-products, wastes, emissions, discharges
or releases of Hazardous Materials or (d) regulation of the manufacture, use or
introduction into commerce of Hazardous Materials, including their manufacture,
formulation, packaging, labeling, distribution, transportation, handling,
storage or disposal.
 
“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of an Account Party or any Subsidiary resulting from
or based upon (a) violation of any Environmental Law, (b) the generation, use,
handling, transportation, storage, treatment or disposal of any Hazardous
Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract or agreement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.
 
“Equity Rights” means, with respect to any Person, any subscriptions, options,
warrants, commitments, preemptive rights or agreements of any kind (including
any shareholders’ or voting trust agreements) for the issuance, sale,
registration or voting of, or securities convertible into, any additional shares
of any class, or partnership or other ownership interests of any type in, such
Person.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.
 
“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with any Account Party, is treated as a single employer under
Section 414(b)
 

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or (c) of the Code, or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer under Section 414 of
the Code.
 
“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Account Party or any of such Account Party’s
ERISA Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by any Account Party or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (f) the incurrence by any Account Party or any of its ERISA Affiliates
of any liability with respect to the withdrawal or partial withdrawal from any
Plan or Multiemployer Plan; or (g) the receipt by any Account Party or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from any
Account Party or any ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.
 
“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans constituting such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.
 
“Event of Default” has the meaning assigned to such term in Article VIII.
 
“Excess Funding Guarantor” has the meaning assigned to such term in
Section 3.07.
 
“Excess Payment” has the meaning assigned to such term in Section 3.07.
 
“Excluded Taxes” means, with respect to the Lender or any other recipient of any
payment to be made by or on account of any obligation of any Account Party
hereunder, (a) Taxes imposed on (or measured by) its net income, net profits or
overall gross receipts (including, without limitation, branch profits or similar
taxes) by the United States of America, or by any jurisdiction under the laws of
which such recipient is organized or resident, in which such recipient has an
office or with which such recipient has any other connection (other than a
connection that is deemed to arise solely by reason of both (I) the transactions
contemplated by this Agreement and (II) an Account Party being organized in,
maintaining an office in, conducting business in, or having a connection with,
such jurisdiction), (b) any Taxes not described in clause (a) above (other than
Other Taxes) that are imposed as a result of a connection the Lender has with
the relevant jurisdiction (other than a connection that is
 

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deemed to arise solely by reason of both (I) the transactions contemplated by
this Agreement and (II) an Account Party being organized or resident in,
maintaining an office in, conducting business in, or having a connection with,
such jurisdiction), (c) any U.S. federal withholding tax that is imposed on
amounts payable to a Lender under a law that was in effect at the time such
Lender becomes a party to this Agreement (or designates a new lending office),
except to the extent that such Lender (or its assignor, if any) was entitled,
immediately prior to the designation of a new lending office (or assignment), to
receive additional amounts from Borrower with respect to such withholding tax
pursuant to Section 2.16(a) and (d) any Tax that is not imposed solely as a
result of a Change in Law formally announced after the date hereof.
 
“Exempt Indebtedness” means any Indebtedness of any Person (other than XL
Capital or any of its Affiliates) that is consolidated on the balance sheet of
XL Capital and its consolidated Subsidiaries in accordance with GAAP (whether or
not required to be so consolidated); provided that (a) at the time of the
incurrence of such Indebtedness by such Person, the cash flows from the assets
of such Person shall reasonably be expected by such Person to liquidate such
Indebtedness and all other liabilities (contingent or otherwise) of such Person
and (b) no portion of such Indebtedness of such Person shall be Guaranteed
(other than by guarantees of the type referred to in clause (a) or (b) of the
definition of the term “Indebtedness”) by, or shall be secured by a Lien on any
assets owned by, XL Capital or any of its Subsidiaries and neither such Person
nor any of the holders of such Indebtedness shall have any direct or indirect
recourse to XL Capital or any of its Subsidiaries (other than in respect of
liabilities and guarantees of the type referred to in clause (a) or (b) of the
definition of the term “Indebtedness”).
 
“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Lender from three Federal funds brokers of recognized standing
selected by it.
 
“Financial Officer” means, with respect to any Obligor, a principal financial
officer of such Obligor.
 
“GAAP” means generally accepted accounting principles in the United States of
America.
 
“GIC” means a guaranteed investment contract or funding agreement or other
similar agreement issued by an Account Party or any of its Subsidiaries that
guarantees to a counterparty a rate of return on the invested capital over the
life of such contract or agreement.
 

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“Governmental Authority” means the government of the United States of America,
or of any other nation (including the European Union), or any political
subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.
 
“Guarantee” means, with respect to any Person, without duplication, any
obligations of such Person (other than endorsements in the ordinary course of
business of negotiable instruments for deposit or collection) guaranteeing or
intended to guarantee any Indebtedness of any other Person in any manner,
whether direct or indirect, and including any obligation, whether or not
contingent, (i) to purchase any such Indebtedness or any property constituting
security therefor for the purpose of assuring the holder of such Indebtedness,
(ii) to advance or provide funds or other support for the payment or purchase of
any such Indebtedness or to maintain working capital, solvency or other balance
sheet condition of such other Person (including keepwell agreements, maintenance
agreements, comfort letters or similar agreements or arrangements) for the
benefit of any holder of Indebtedness of such other Person, (iii) to lease or
purchase property, securities or services primarily for the purpose of assuring
the holder of such Indebtedness or (iv) to otherwise assure or hold harmless the
holder of such Indebtedness against loss in respect thereof. The amount of any
Guarantee hereunder shall (subject to any limitations set forth therein) be
deemed to be an amount equal to the outstanding principal amount of the
Indebtedness in respect of which such Guarantee is made. The terms “Guarantee”
and “Guaranteed” used as a verb shall have a correlative meaning.
 
“Guaranteed Obligations” has the meaning assigned to such term in Section 3.01.
 
“Guarantors” means each of XL Capital, XL America, XL Insurance and XL Re.
 
“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.
 
“Hedging Agreement” means any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity price hedging arrangement.
 
“Indebtedness” means, for any Person, without duplication: (i) all indebtedness
or liability for or on account of money borrowed by, or for or on account of
deposits with or advances to (but not including accrued pension costs, deferred
income taxes or accounts payable of) such Person; (ii) all obligations
(including contingent liabilities) of such Person evi-
 

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denced by bonds, debentures, notes, banker’s acceptances or similar instruments;
(iii) all indebtedness or liability for or on account of property or services
purchased or acquired by such Person; (iv) any amount secured by a Lien on
property owned by such Person (whether or not assumed) and Capital Lease
Obligations of such Person (without regard to any limitation of the rights and
remedies of the holder of such Lien or the lessor under such capital lease to
repossession or sale of such property); (v) the maximum available amount of all
standby letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed); and (vi)
all Guarantees of such Person; provided that the following shall be excluded
from Indebtedness of XL Capital and any of its Subsidiaries for purposes of this
Agreement: (a) all payment liabilities of any such Person under insurance and
reinsurance policies from time to time issued by such Person, including
guarantees of any such payment liabilities; (b) all other liabilities (or
guarantees thereof) arising in the ordinary course of any such Person’s business
as an insurance or reinsurance company (including GICs and Stable Value
Instruments and any Specified Transaction Agreement relating thereto), or as a
corporate member of The Council of Lloyd’s, or as a provider of financial or
investment services or contracts (including GICs and Stable Value Instruments
and any Specified Transaction Agreement relating thereto); and (c) any Exempt
Indebtedness.
 
“Indemnified Taxes” means Taxes imposed on the Lender on or with respect to any
payment hereunder, other than Excluded Taxes and Other Taxes.
 
“Insurance Subsidiary” means any Subsidiary which is subject to the regulation
of, and is required to file statutory financial statements with, any
governmental body, agency or official in any State or territory of the United
States or the District of Columbia which regulates insurance companies or the
doing of an insurance business therein.
 
“Interest Election Request” means a request by an Account Party to convert or
continue a Borrowing in accordance with Section 2.07.
 
“Interest Payment Date” means (a) with respect to any ABR Loan, each Quarterly
Date and (b) with respect to any Eurodollar Loan, the last day of each Interest
Period therefor and, in the case of any Interest Period of more than three
months’ duration, each day prior to the last day of such Interest Period that
occurs at three-month intervals after the first day of such Interest Period.
 
“Interest Period” means, for any Eurodollar Loan or Borrowing, the period
commencing on the date of such Loan or Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as specified in the applicable Borrowing Request or Interest
Election Request; provided that (i) if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day, and (ii) any Interest Period that commences on the
last Business Day
 

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of a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period. For purposes
hereof, the date of a Loan initially shall be the date on which such Loan is
made and thereafter shall be the effective date of the most recent conversion or
continuation of such Loan, and the date of a Borrowing comprising Loans that
have been converted or continued shall be the effective date of the most recent
conversion or continuation of such Loans.
 
“ISDA” has the meaning assigned to such term in Section 7.03(f).
 
“Law” means any law (including common law), constitution, statute, treaty,
regulation, rule, ordinance, order, injunction, writ, decree or award of any
Governmental Authority.
 
“LC Disbursement” means with respect to any Letter of Credit a payment made by
the Lender pursuant thereto.
 
“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements under Letters of Credit that have not yet been reimbursed
by or on behalf of the Account Parties at such time. The LC Exposure of the
Lender at the time shall be the sum of (i) LC Exposure (excluding any
Alternative Currency LC Exposure) plus (ii) the Alternative Currency LC Exposure
(if any) at such time.
 
“Lender” means Deutsche Bank AG New York Branch, or its successors or assigns.
 
“Letter of Credit Documents” means, with respect to any Letter of Credit,
collectively, any application therefor and any other agreements, instruments,
guarantees or other documents (whether general in application or applicable only
to such Letter of Credit) governing or providing for the rights and obligations
of the parties concerned or at risk with respect to such Letter of Credit.
 
“Letters of Credit” means each of the Dollar Letters of Credit and the
Alternative Currency Letters of Credit.
 
“LIBO Rate” means, for the Interest Period for any Eurodollar Borrowing, the
rate appearing on Page 3750 of the Telerate Service (or on any successor or
substitute page of such Service, or any successor to or substitute for such
Service, providing rate quotations comparable to those currently provided on
such page of such Service, as determined by the Lender from time to time for
purposes of providing quotations of interest rates applicable to Dollar deposits
in the London interbank market) at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period, as the rate for
the offering of Dollar deposits with a maturity comparable to such Interest
Period. In the event that
 

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such rate is not available at such time for any reason, then the LIBO Rate for
such Interest Period shall be the rate at which Dollar deposits of $5,000,000
and for a maturity comparable to such Interest Period are offered by the
principal London office of the Lender in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period.
 
“Lien” means, with respect to any asset, any mortgage, deed of trust, pledge,
lien, security interest, charge or other encumbrance or security arrangement of
any nature whatsoever, including but not limited to any conditional sale or
title retention arrangement, and any assignment, deposit arrangement or lease
intended as, or having the effect of, security.
 
“Loans” means the loans made by the Lender to the Account Parties pursuant to
Section 2.04.
 
“Margin Stock” means “margin stock” within the meaning of Regulations T, U and X
of the Board.
 
“Material Adverse Effect” means a material adverse effect on: (a) the assets,
business, financial condition or operations of an Account Party and its
Subsidiaries taken as a whole; or (b) the ability of an Account Party to perform
any of its payment or other material obligations under this Agreement.
 
“Maturity Date” means the Commitment Termination Date, as such date may be
extended pursuant to the Term-Out Option.
 
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA.
 
“Non-U.S. Benefit Plan” means any plan, fund (including any superannuation fund)
or other similar program established or maintained outside the United States by
any Account Party or any of their Subsidiaries, with respect to which such
Account Party or such Subsidiary has an obligation to contribute, for the
benefit of employees of such Account Party or such Subsidiary, which plan, fund
or other similar program provides, or results in, the type of benefits described
in Section 3(1) or 3(2) of ERISA, and which plan is not subject to ERISA or the
Code.
 
“Obligors” means each of the Account Parties and each of the Guarantors.
 
“Other Taxes” means any and all present or future stamp or documentary taxes or
any other similar excise or property Taxes, arising from any payment made
hereunder or from the execution, delivery or enforcement of this Agreement, but
excluding property or similar Taxes other than any such Taxes imposed in such
circumstances solely as a result of
 

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the Account Party being organized or resident in, maintaining an office in,
conducting business in or maintaining property located in the taxing
jurisdiction in question.
 
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.
 
“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
 
“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which any Account Party or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
 
“Prime Rate” means the rate of interest per annum publicly announced from time
to time by the Lender as its prime rate in effect at its principal office in New
York City; each change in the Prime Rate shall be effective from and including
the date such change is publicly announced as being effective.
 
“Private Act” means separate legislation enacted in Bermuda with the intention
that such legislation apply specifically to an Account Party, in whole or in
part.
 
“Pro Rata Share” has the meaning assigned to such term in Section 3.07.
 
“Quarterly Date” means the last Business Day of March, June, September and
December in each year, the first of which shall be the first such day after the
date hereof.
 
“RC Sublimit” means $100,000,000, as such amount may be reduced from time to
time pursuant to Section 2.08.
 
“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.
 
“SAP” means, as to each Account Party and each Subsidiary that offers insurance
products, the statutory accounting practices prescribed or permitted by the
relevant Governmental Authority for such Account Party’s or such Subsidiary’s
domicile for the preparation of its financial statements and other reports by
insurance corporations of the same type as such Account Party or such Subsidiary
in effect on the date such statements or reports are to be prepared, except if
otherwise notified by XL Capital as provided in Section 1.03.
 

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“SCA” means Security Capital Assurance Ltd, a Bermuda limited liability company.
 
“SEC” means the Securities and Exchange Commission or any successor entity.
 
“Significant Subsidiary” means, at any time, each Subsidiary of XL Capital that,
as of such time, meets the definition of a “significant subsidiary” under
Regulation S-X of the SEC; provided, however, that for purposes of this
Agreement, neither SCA nor any of its Subsidiaries shall be a “Significant
Subsidiary” of XL Capital.
 
“Specified Account Party” has the meaning assigned to such term in Section
2.03(e).
 
“Specified Transaction Agreement” means any agreement, contract or documentation
with respect to the following types of transactions: rate swap transaction, swap
option, basis swap, asset swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index option,
bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, current swap transaction,
cross-currency rate swap transaction, currency option, credit protection
transaction, credit swap, credit default swap, credit default option, total
return swap, credit spread transaction, repurchase transaction, reverse
repurchase transaction, buy/sell-back transaction, securities lending or
borrowing transaction, weather index transaction or forward purchase or sale of
a security, commodity or other financial instrument or interest, and
transactions on any commodity futures or other exchanges, markets and their
associated clearing houses (including any option with respect to any of these
transactions).
 
“Stable Value Instrument” means any insurance, derivative or similar financial
contract or instrument designed to mitigate the volatility of returns during a
given period on a specified portfolio of securities held by one party (the
“customer”) through the commitment of the other party (the “SVI provider”) to
provide the customer with a credited rate of return on the portfolio, typically
determined through an interest-crediting mechanism (and in exchange for which
the SVI provider typically receives a fee).
 
“Statutory Reserve Rate” means, for any day (or for the Interest Period for any
Eurodollar Borrowing), a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus the
aggregate of the maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves) expressed as a decimal established by the
Board to which the Lender is subject on such day (or, with respect to an
Interest Period, the denominator of which is the number one minus the arithmetic
mean of such aggregates for the days in such Interest Period) with respect to
the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as
“Eurocurrency liabilities” in Regulation D of the Board). Such reserve
percentages shall include those
 

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imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to
constitute eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to the Lender under such Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
 
“Subsidiary” means, with respect to any Person (the “parent”), at any date, any
corporation (or similar entity) of which a majority of the shares of outstanding
capital stock normally entitled to vote for the election of directors
(regardless of any contingency which does or may suspend or dilute the voting
rights of such capital stock) is at such time owned directly or indirectly by
the parent or one or more subsidiaries of the parent; provided, however, that
for purposes of this Agreement neither SCA nor any of its Subsidiaries shall be
a “Subsidiary” of any Account Party. Unless otherwise specified, “Subsidiary”
means a Subsidiary of an Account Party.
 
“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
 
“Term-Out Option” has the meaning assigned to such term in Section 2.09(b).
 
“Total Funded Debt” means, at any time, all Indebtedness of XL Capital and its
Subsidiaries and any other Person which would at such time be classified in
whole or in part as a liability on the consolidated balance sheet of XL Capital
and its consolidated Subsidiaries in accordance with GAAP (it being understood
for avoidance of doubt that any liability or obligation excluded from the
definition of Indebtedness shall not constitute Indebtedness for purposes of
this definition).
 
“Transactions” means the execution, delivery and performance by the Obligors of
this Agreement and the other Credit Documents to which any Account Party is
intended to be a party, the issuance of Letters of Credit, the borrowing of
Loans and the use of the proceeds thereof.
 
“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans constituting such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
 
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
 
“XL Capital Group” means XL Capital Group as determined from time to time by
A.M. Best & Co. (or its successor).
 

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SECTION 1.02.  Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”.
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
 
 
SECTION 1.03.  Accounting Terms; GAAP and SAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP or SAP, as the context requires, each as in
effect from time to time; provided that, if XL Capital notifies the Lender that
the Account Parties request an amendment to any provision hereof to eliminate
the effect of any change occurring after the date hereof in GAAP or SAP, as the
case may be, or in the application thereof on the operation of such provision,
regardless of whether any such notice is given before or after such change in
GAAP or SAP, as the case may be, or in the application thereof, then such
provision shall be interpreted on the basis of GAAP or SAP, as the case may be,
as in effect and applied immediately before such change shall have become
effective until such notice shall have been withdrawn or such provision amended
in accordance herewith.
 
 
ARTICLE II
 
THE CREDITS
 
SECTION 2.01.  Dollar Letters of Credit.
 
(a)  General. Subject to the terms and conditions set forth herein, at the
request of any Account Party the Lender agrees at any time and from time to time
during the Availability Period to issue Dollar Letters of Credit for the account
of such Account Party in an aggregate amount that will not result in the Credit
Exposure exceeding the Commitment (it being understood that Dollar Letters of
Credit may be issued, or be outstanding, for the account of more than one of the
Account Parties at any time). Each Dollar Letter of Credit shall be in such form
as is consistent with the requirements of the applicable regulatory authorities
 

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in Illinois, California, Wisconsin or New York, as reasonably determined by the
Lender or as otherwise agreed to by the Lender and XL Capital.
 
(b)  Notice of Issuance, Amendment, Renewal or Extension. To request the
issuance of Dollar Letters of Credit (or the amendment, renewal or extension of
outstanding Dollar Letters of Credit), an Account Party shall hand deliver or
telecopy (or transmit by electronic communication, if arrangements for doing so
have been approved by the Lender) to the Lender (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice requesting
the issuance of Letters of Credit, or identifying the Dollar Letters of Credit
to be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension, as the case may be (which shall be a Business
Day), the date on which such Dollar Letters of Credit are to expire (which shall
comply with paragraph (d) of this Section), the aggregate amount of all Dollar
Letters of Credit to be issued in connection with such request, the name and
address of the beneficiary thereof and the terms and conditions of (and such
other information as shall be necessary to prepare, amend, renew or extend, as
the case may be) such Dollar Letters of Credit. If requested by the Lender, such
Account Party also shall submit a letter of credit application on Lender’s
standard form in connection with any request for a Letter of Credit. In the
event of any inconsistency between the terms and conditions of this Agreement
and the terms and conditions of any form of letter of credit application or
other agreement submitted by any Account Party to, or entered into by any
Account Party with, the Lender relating to any Dollar Letter of Credit, the
terms and conditions of this Agreement shall control.
 
(c)  Limitations on Amounts. A Dollar Letter of Credit shall be issued, amended,
renewed or extended only if (and upon such issuance, amendment, renewal or
extension of each Dollar Letter of Credit the Account Parties shall be deemed to
represent and warrant that), after giving effect to such issuance, amendment,
renewal or extension, the Credit Exposure shall not exceed the aggregate amount
of the Commitment.
 
(d)  Expiry Date. Each Dollar Letter of Credit shall expire at or prior to the
close of business on the date one year after the date of the issuance of such
Dollar Letter of Credit (or, in the case of any renewal or extension thereof,
one year after such renewal or extension).
 
 
SECTION 2.02.  Alternative Currency Letters of Credit. From time to time during
the Availability Period, an Account Party may request the Lender to make offers
to issue an Alternative Currency Letter of Credit for the account of such
Account Party. The Lender may, but shall have no obligation to, make such offers
on terms and conditions that are satisfactory to the Lender, and such Account
Party may, but shall have no obligation to, accept any such offers. An
Alternative Currency Letter of Credit shall be issued, amended, renewed or
extended only if (and upon such issuance, amendment, renewal or extension of
each Alternative Currency Letter of Credit the Account Parties shall be deemed
to represent and warrant that), after giving effect to such issuance, amendment,
renewal or extension, the
 

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Credit Exposure shall not exceed the amount of the Commitment. Each such
Alternative Currency Letter of Credit shall be issued, and subsequently,
renewed, extended, amended and confirmed, on such terms as XL Capital, the
applicable Account Party and the Lender shall agree, including expiry, drawing
conditions, reimbursement, interest, fees and provision of cover; provided that
the expiry of any Alternative Currency Letter of Credit shall not be later than
the one-year anniversary from the date of issuance thereof (or, in the case of
any renewal or extension thereof, one-year after such renewal or extension).
 
 
SECTION 2.03.  Reimbursement of LC Disbursements, Etc.

 
(a)  Reimbursement. If the Lender shall make any LC Disbursement, regardless of
the identity of the Account Party of such Letter of Credit, the Account Parties
jointly and severally agree that they shall reimburse the Lender in respect of
such LC Disbursement under (x) a Dollar Letter of Credit, by paying to the
Lender an amount equal to such LC Disbursement not later than noon, New York
City time, on (i) the Business Day that the Account Parties receive notice of
such LC Disbursement, if such notice is received prior to 10:00 a.m., New York
City time, or (ii) the Business Day immediately following the day that the
Account Parties receive such notice, if such notice is not received prior to
such time and (y) an Alternative Currency Letter of Credit, by paying the Lender
on the date, in the currency and amount thereof, together with interest thereon
(if any), and in the manner (including the place of payment) as the Lender and
such Account Party shall have separately agreed pursuant to Section 2.02.
 
(b)  Reimbursement Obligations Absolute. The Account Parties’ joint and several
obligations to reimburse LC Disbursements as provided in paragraph (a) of this
Section shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any Letter of Credit or any term or provision therein,
(ii) any draft or other document presented under a Letter of Credit proving to
be forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment under a Letter of Credit
against presentation of a draft or other document that does not comply strictly
with the terms of such Letter of Credit (provided that the Account Parties shall
not be obligated to reimburse such LC Disbursements unless payment is made
against presentation of a draft or other document that at least substantially
complies with the terms of such Letter of Credit), (iv) at any time or from time
to time, without notice to any Account Party, the time for any performance of or
compliance with any of such reimbursement obligations of any other Account Party
shall be waived, extended or renewed, (v) any of such reimbursement obligations
of any other Account Party being amended or otherwise modified in any respect,
or any guarantee of any of such reimbursement obligations being released,
substituted or exchanged in whole or in part or otherwise dealt with, (vi) the
occurrence of any Default, (vii) the existence of any proceedings of the type
described in clause (g) or (h) of Article VIII with respect to any other Account
Party or any guarantor of any of such reimbursement obligations, (viii) any lack
of validity or enforceability of any of
 

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such reimbursement obligations against any other Account Party or any guarantor
of any of such reimbursement obligations, or (ix) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this Section, constitute a legal or equitable
discharge of the obligations of any Account Party hereunder.
 
Neither the Lender nor any of its Related Parties shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit or any payment or failure to make any payment thereunder
(irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from
causes beyond their control; provided that the foregoing shall not be construed
to excuse the Lender from liability to any Account Party to the extent of any
direct damages (as opposed to consequential damages, claims in respect of which
are hereby waived by the Account Parties to the extent permitted by applicable
law) suffered by any Account Party that are caused by the gross negligence or
willful misconduct of the Lender determined in a final, non-appealable judgment
by a court of competent jurisdiction. The parties hereto expressly agree that:
 
(i)  the Lender may accept documents that appear on their face to be in
substantial compliance with the terms of a Letter of Credit without
responsibility for further investigation, regardless of any notice or
information to the contrary, and may make payment upon presentation of documents
that appear on their face to be in substantial compliance with the terms of such
Letter of Credit;
 
(ii)  the Lender shall have the right, in its sole discretion, to decline to
accept such documents and to make such payment if such documents are not in
strict compliance with the terms of such Letter of Credit; and
 
(iii)  this sentence shall establish the standard of care to be exercised by the
Lender when determining whether drafts and other documents presented under a
Letter of Credit comply with the terms thereof (and the parties hereto hereby
waive, to the extent permitted by applicable law, any standard of care
inconsistent with the foregoing).
 
(c)  Disbursement Procedures. The Lender shall, within a reasonable time
following its receipt thereof, examine all documents purporting to represent a
demand for payment under any Letter of Credit. The Lender shall promptly after
such examination notify each of the Account Parties by telephone (confirmed by
telecopy) of such demand for payment. The Lender will make any such LC
Disbursement available to the beneficiary of such Letter of Credit by promptly
crediting the amounts so received, in like funds, to the account identified by
such beneficiary in connection with such demand for payment. Promptly following
any LC Disbursement by the Lender in respect of any Letter of Credit, the Lender
will
 

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notify the Account Parties of such LC Disbursement; provided that any failure to
give or delay in giving such notice shall not relieve the Account Parties of
their obligation to reimburse the Lender with respect to any such LC
Disbursement,
 
(d)  Interim Interest. If any LC Disbursement with respect to a Letter of Credit
is made, then, unless the Account Parties shall reimburse such LC Disbursement
in full on the date such LC Disbursement is made, the unpaid amount thereof
shall bear interest, for each day from and including the date such LC
Disbursement is made to but excluding the date that the Account Parties
reimburse such LC Disbursement, at the rate per annum equal to (i) 1% plus the
Alternate Base Rate to but excluding the date three Business Days after such LC
Disbursement is made and (ii) from and including the date three Business Days
after such LC Disbursement is made, 3% plus the Alternate Base Rate.
 
(e)  Right of Contribution. The Account Parties hereby agree, as between
themselves, that if any Account Party shall pay any reimbursement obligation in
respect of any LC Disbursement with respect to a Letter of Credit issued to
support the obligations of another Account Party (the “Specified Account
Party”), the Specified Account Party shall, on demand (but subject to the next
sentence), pay to such first Account Party an amount equal to the amount of such
reimbursement. The payment obligation of a Specified Account Party to another
Account Party under this paragraph (e) shall be subordinate and subject in right
of payment to the prior payment in full of the obligations of the Specified
Account Party under this Agreement and each other Credit Document, and such
other Account Party shall not exercise any right or remedy with respect to such
reimbursement until payment and satisfaction in full of all of such obligations
of the Specified Account Party.
 
 
SECTION 2.04.  Loans and Borrowings.
 
(a)  General. Subject to the terms and conditions set forth herein, the Lender
agrees to make Loans to an Account Party from time to time during the
Availability Period in an aggregate principal amount that will not result in (i)
the Lender’s outstanding Loans exceeding the RC Sublimit and (ii) the Credit
Exposure exceeding the aggregate amount of the Commitment. Loans may be made, or
be outstanding, to more than one of the Account Parties at any time. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Account Parties may borrow, prepay and reborrow Loans.
 
(b)  Type of Loans. Subject to Section 2.12, each Borrowing shall be constituted
entirely of ABR Loans or of Eurodollar Loans as any Account Party may request in
accordance herewith. The Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of the Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Account Parties to repay such Loan in accordance with the terms of this
Agreement.
 

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(c)  Minimum Amounts; Limitation on Number of Borrowings. Each Eurodollar
Borrowing shall be in an aggregate amount of $10,000,000 or a larger multiple of
$1,000,000. Each ABR Borrowing shall be in an aggregate amount equal to
$10,000,000 or a larger multiple of $1,000,000; provided that an ABR Borrowing
may be in an aggregate amount that is equal to the entire unused balance of the
Commitment or that is requested to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.03(a). Borrowings of more than one
Type may be outstanding at the same time; provided that there shall not at any
time be more than a total of ten Eurodollar Borrowings outstanding.
 
(d)  Limitations on Interest Periods. Notwithstanding any other provision of
this Agreement, no Account Party shall be entitled to request (or to elect to
convert to or continue as a Eurodollar Borrowing) any Borrowing if the Interest
Period requested therefor would end after the Maturity Date.
 
 
SECTION 2.05.  Requests for Borrowings.
 
(a)  Notice by the Account Parties. To request a Borrowing, XL Capital shall
notify the Lender of such request by telephone (i) in the case of a Eurodollar
Borrowing, not later than 11:00 a.m., New York City time, three (3) Business
Days before the date of the proposed Borrowing or (ii) in the case of an
ABR Borrowing, not later than 11:00 a.m., New York City time, on the date of the
proposed Borrowing; provided that any such notice of an ABR Borrowing to finance
the reimbursement of an LC Disbursement as contemplated by Section 2.03(a) may
be given not later than 11:00 a.m., New York City time, on the date of the
proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable
and shall be confirmed promptly by hand delivery or telecopy to the Lender of a
written Borrowing Request in a form approved by the Lender and signed by XL
Capital.
 
(b)  Content of Borrowing Requests. Each telephonic and written Borrowing
Request shall specify the following information in compliance with Section 2.04:
 
(i)  the relevant Account Party;
 
(ii)  the aggregate amount of the requested Borrowing;
 
(iii)  the date of such Borrowing, which shall be a Business Day;
 
(iv)  whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
 
(v)  in the case of a Eurodollar Borrowing, the Interest Period therefor, which
shall be a period contemplated by the definition of the term “Interest Period”
and permitted under Section 2.04(d); and
 

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(vi)  the location and number of such Account Party’s account to which funds are
to be disbursed, which shall comply with the requirements of Section 2.06.
 
(c)  Failure to Elect. If no election as to the Type of a Borrowing is
specified, then the requested Borrowing shall be an ABR Borrowing. If no
Interest Period is specified with respect to any requested Eurodollar Borrowing,
then the requested Borrowing shall be made instead as an ABR Borrowing.
 
 
SECTION 2.06.  Funding of Borrowings. The Lender shall make each Loan to be made
by it hereunder on the proposed date thereof by wire transfer of immediately
available funds by 12:00 noon, New York City time (or 1:00 p.m., New York City
time with respect to ABR Loans requested by XL Capital no later than 11:00 a.m.
on the same day), available to the relevant Account Party by promptly crediting
the amounts so received, in like funds, to an account of such Account Party
maintained with the Lender in New York City and designated by such Account Party
in the applicable Borrowing Request.
 
 
SECTION 2.07.  Interest Elections.
 
(a)  Elections by the Account Parties. The Loans constituting each Borrowing
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurodollar Borrowing, shall have the Interest Period
specified in such Borrowing Request. Thereafter, the relevant Account Party may
elect to convert such Borrowing to a Borrowing of a different Type or to
continue such Borrowing as a Borrowing of the same Type and, in the case of a
Eurodollar Borrowing, may elect the Interest Period therefor, all as provided in
this Section. The relevant Account Party may elect different options with
respect to different portions of the affected Borrowing, and the Loans
constituting each such portion shall be considered a separate Borrowing.
 
(b)  Notice of Elections. To make an election pursuant to this Section, XL
Capital shall notify the Lender of such election by telephone by the time that a
Borrowing Request would be required under Section 2.05 if XL Capital were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Lender of a written Interest Election Request in a form approved
by the Lender and signed by XL Capital.
 
(c)  Content of Interest Election Requests. Each telephonic and written Interest
Election Request shall specify the following information in compliance with
Section 2.04:
 
(i)  the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the infor-
 

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mation to be specified pursuant to clauses (iii) and (iv) of this paragraph
shall be specified for each resulting Borrowing);
 
(ii)  the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;
 
(iii)  whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and
 
(iv)  if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
therefor after giving effect to such election, which shall be a period
contemplated by the definition of the term “Interest Period” and permitted under
Section 2.04(d).
 
(d)  Failure to Elect; Events of Default. If XL Capital fails to deliver a
timely and complete Interest Election Request with respect to a Eurodollar
Borrowing prior to the end of the Interest Period therefor, then, unless such
Borrowing is repaid as provided herein, at the end of such Interest Period such
Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary
provision hereof, if an Event of Default has occurred and is continuing and the
Lender so notifies XL Capital, then, so long as an Event of Default is
continuing (i) no outstanding Borrowing may be converted to or continued as a
Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be
converted to an ABR Borrowing at the end of the Interest Period therefor.
 
 
SECTION 2.08.  Termination and Reduction of the Commitment.
 
(a)  Scheduled Termination. Unless previously terminated, the Commitment shall
terminate at the close of business on the Commitment Termination Date.
 
(b)  Voluntary Termination or Reduction. The Account Parties may at any time
terminate, or from time to time reduce, the Commitment and/or RC Sublimit;
provided that (i) each reduction of the Commitment or RC Sublimit shall be in an
amount that is $25,000,000 or a larger multiple of $5,000,000 and (ii) the
Account Parties shall not terminate or reduce the Commitment or RC Sublimit if
the Credit Exposure would exceed the Commitment or the outstanding Loans would
exceed the RC Sublimit, as the case may be. XL Capital shall notify the Lender
of any election to terminate or reduce the Commitment or RC Sublimit under this
paragraph (b) at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof, provided that no reduction of the RC Sublimit shall occur in connection
with a reduction of the Commitment unless specified in such notice, except that
upon the earlier of (x) the termination of the Commitment and (y) the Commitment
Termination Date, the RC Sublimit shall be reduced to zero. Each notice
delivered by XL Capital pursuant to this paragraph (b) shall be irrevocable;
provided that a notice of termination of the Commitment delivered by XL Capital
may state that such notice is conditioned upon the effectiveness of other credit
facilities, in which case
 

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such notice may be revoked by XL Capital (by notice to the Lender on or prior to
the specified effective date) if such condition is not satisfied. Subject to the
proviso in the immediately preceding sentence, any termination or reduction of
the Commitment or the RC Sublimit shall be permanent.
 
 
SECTION 2.09.  Repayment of Loans; Term-Out Option; Evidence of Debt.
 
(a)  Repayment. Each Account Party hereby unconditionally promises to pay to the
Lender, (i) in the event that the Term-Out Option has not been exercised, the
outstanding principal amount of the Loans made to such Account Party on the
Commitment Termination Date and (ii) in the event that the Term-Out Option has
been exercised and is in effect, the outstanding principal amount of the Loans
made to such Account Party on the Maturity Date.
 
(b)  Term-Out Option. The Account Parties may, by notice given by XL Capital to
the Lender not less than 15 days prior to the Commitment Termination Date,
extend the Maturity Date for all Loans outstanding at the close of business New
York City time on the Commitment Termination Date to the first anniversary of
the Commitment Termination Date (the “Term-Out Option”); provided that such
extension shall not be effective with respect to the Lender unless:
 
(i)  no Default shall have occurred and be continuing on each of the date of the
notice requesting such extension and on the Commitment Termination Date; and
 
(ii)  the representations and warranties of the Obligors set forth in this
Agreement (other than in Section 4.04(b)) shall be true and correct on and as of
each of the date of the notice requesting such extension and the Commitment
Termination Date (or, if any such representation or warranty is expressly stated
to have been made as of a specific date, as of such specific date).
 
Such notice shall be deemed to constitute a representation and warranty by XL
Capital as to the matters specified in clauses (i) and (ii) of the immediately
preceding sentence as of each such date.
 
Notwithstanding the foregoing, the Commitment of the Lender to make Loans shall
terminate on the Commitment Termination Date.
 
(c)  Manner of Payment. Prior to any repayment or prepayment of any Borrowings
hereunder, XL Capital shall select the Borrowing or Borrowings to be paid and
shall notify the Lender by telephone (confirmed by telecopy) of such selection
not later than 11:00 a.m., New York City time, three Business Days before the
scheduled date of such repayment; provided that each repayment of Borrowings
shall be applied to repay any out-
 

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standing ABR Borrowings before any other Borrowings. If XL Capital fails to make
a timely selection of the Borrowing or Borrowings to be repaid or prepaid, such
payment shall be applied, first, to pay any outstanding ABR Borrowings and,
second, to other Borrowings in the order of the remaining duration of their
respective Interest Periods (the Borrowing with the shortest remaining Interest
Period to be repaid first). Each payment of a Borrowing shall be applied ratably
to the Loans included in such Borrowing.
 
(d)  Maintenance of Records by Lender. The Lender shall maintain in accordance
with its usual practice records evidencing the indebtedness of each Account
Party to the Lender resulting from each Loan made by the Lender to such Account
Party, including the amounts of principal and interest payable and paid to the
Lender from time to time hereunder. The entries made in the records maintained
pursuant to paragraph (d) or (e) of this Section shall be prima facie evidence
of the existence and amounts of the obligations recorded therein; provided that
the failure of the Lender to maintain such records or any error therein shall
not in any manner affect the obligation of the Account Parties to repay the
Loans in accordance with the terms of this Agreement.
 
(e)  Promissory Notes. The Lender may request that Loans made by it to any
Account Party be evidenced by a promissory note of such Account Party. In such
event, each Account Party shall prepare, execute and deliver to the Lender a
promissory note payable to the Lender (or, if requested by the Lender, to the
Lender and its registered assigns) and in a form approved by the Lender.
Thereafter, the Loans evidenced by such promissory note and interest thereon
shall at all times be represented by one or more promissory notes in such form
payable to the payee named therein (or, if such promissory note is a registered
note, to such payee and its registered assigns).
 
 
SECTION 2.10.  Prepayment of Loans.
 
(a)  Right to Prepay Borrowings. The Account Parties shall have the right at any
time and from time to time to prepay any Borrowing in whole or in part, subject
to the requirements of this Section.
 
(b)  Notices, Etc. XL Capital shall notify the Lender by telephone (confirmed by
telecopy) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three
Business Days before the date of prepayment or (ii) in the case of prepayment of
an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business
Day before the date of prepayment. Each such notice shall be irrevocable and
shall specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid; provided that, if a notice of prepayment is given
in connection with a conditional notice of termination of the Commitment as
contemplated by Section 2.08, then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.08. Each
partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of a Borrowing of the same
 

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Type as provided in Section 2.04. Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by accrued interest to the extent required by Section 2.12
and shall be made in the manner specified in Section 2.09(c).
 
 
SECTION 2.11.  Fees.
 
(a)  Facility Fee. XL Capital agrees to pay to the Lender a facility fee which
shall accrue at a rate per annum equal to the Applicable Facility Fee Rate, (i)
prior to the termination of the Lender’s Commitment, on the daily amount of such
Commitment (whether used or unused) during the period from and including the
Effective Date to but excluding the earlier of the date on which such Commitment
terminates and the Commitment Termination Date and (ii) if the Lender continues
to have any Credit Exposure after its Commitment terminates, on the daily amount
of the Lender’s Credit Exposure from and including the date on which the
Lender’s Commitment terminates to but excluding the date on which the Lender
ceases to have any Credit Exposure. Accrued facility fees shall be payable on
each Quarterly Date and on (i) in the event the Term-Out Option has not been
exercised, the earlier of the date the Commitment terminates and the Commitment
Termination Date or (ii) in the event the Term-Out Option has been exercised and
is in effect, on the Maturity Date; provided that any facility fees accruing
after such earlier date or the Maturity Date, as the case may be, shall be
payable on demand.
 
(b)  Letter of Credit Fees. XL Capital agrees to pay to the Lender a letter of
credit fee which shall accrue at a rate per annum equal to the Applicable Letter
of Credit Fee Rate on the average daily aggregate undrawn amount of all
outstanding Letters of Credit during the period from and including the Effective
Date to but excluding the later of the date on which the Lender’s Commitment
terminates and the date on which the Lender ceases to have any LC Exposure.
Letter of Credit fees accrued through and including each Quarterly Date shall be
payable on the third Business Day following such Quarterly Date, commencing on
the first such date to occur after the Effective Date; provided that all such
fees shall be payable on the date on which the Commitment terminates and any
such fees accruing after the date on which the Commitment terminates shall be
payable on demand.
 
(c)  Payment and Computation of Fees. All fees payable hereunder shall be paid
on the dates due, in immediately available funds, to the Lender entitled
thereto. Fees paid shall not be refundable under any circumstances. All fees
payable under paragraphs (a) and (b) of this Section shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
 

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SECTION 2.12.  Interest.
 
(a)  ABR Loans. The Loans constituting each ABR Borrowing shall bear interest at
a rate per annum equal to the Alternate Base Rate plus the Applicable Additional
Margin, if any.
 
(b)  Eurodollar Loans. The Loans constituting each Eurodollar Borrowing shall
bear interest at a rate per annum equal to the Adjusted LIBO Rate for the
Interest Period for such Borrowing plus the Applicable Margin plus the
Applicable Additional Margin, if any.
 
(c)  Default Interest. Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable (other that in respect
of any LC Disbursement under Section 2.03(d)) by the Account Parties hereunder
is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided above
or (ii) in the case of any other amount, 2% plus the rate applicable to
ABR Loans as provided in paragraph (a) of this Section.
 
(d)  Payment of Interest. Accrued interest on each Loan shall be payable by the
applicable Account Party in arrears on each Interest Payment Date for such Loan
and upon (i) in the event the Term-Out Option has not been exercised, the date
the Commitment terminates or (ii) in the event the Term-Out Option has been
exercised and is in effect, the Maturity Date; provided that (x) interest
accrued pursuant to paragraph (c) of this Section shall be payable on demand,
(y) in the event of any repayment or prepayment of any Loan (other than a
prepayment of an ABR Loan prior to the later of the Commitment Termination Date
and the Maturity Date), accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment and (z) in
the event of any conversion of any Eurodollar Borrowing prior to the end of the
Interest Period therefor, accrued interest on such Borrowing shall be payable on
the effective date of such conversion.
 
(e)  Computation. All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate or
Adjusted LIBO Rate shall be determined by the Lender, and such determination
shall be conclusive absent manifest error.
 
 
SECTION 2.13.  Alternate Rate of Interest. If prior to the commencement of the
Interest Period for any Eurodollar Borrowing, the Lender determines in good
faith that the Adjusted LIBO Rate for such Interest Period will not adequately
and fairly reflect the cost to the Lender of making or maintaining its
respective Loans included in such Borrowing for such Interest Period, then the
Lender shall give notice thereof to XL Capital by telephone
 

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or telecopy as promptly as practicable thereafter and, until the Lender notifies
XL Capital that the circumstances giving rise to such notice no longer exist,
(i) any Interest Election Request that requests the conversion of any Borrowing
to, or the continuation of any Borrowing as, a Eurodollar Borrowing shall be
ineffective and such Borrowing (unless prepaid) shall be continued as, or
converted to, an ABR Borrowing and (ii) if any Borrowing Request requests a
Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.
 
 
SECTION 2.14.  Increased Costs.
 
(a)  Increased Costs Generally. If any Change in Law shall:
 
(i)  impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for account of, or credit
extended by, the Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate); or
 
(ii)  impose on the Lender or the London interbank market any other condition
affecting this Agreement, any Letter of Credit (or any participation therein) or
any Eurodollar Loan made by the Lender;
 
and the result of any of the foregoing shall be to increase the cost to the
Lender of making or maintaining, or participating in, any Letter of Credit (or
of maintaining any participation therein) or Eurodollar Loan (or of maintaining
its obligation to make any such Loan) or to reduce the amount of any sum
received or receivable by the Lender hereunder (whether of principal, interest
or otherwise), then the Account Parties jointly and severally agree that they
will pay to the Lender such additional amount or amounts as will compensate the
Lender for such additional costs incurred or reduction suffered.
 
(b)  Capital Requirements. If the Lender determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on the Lender’s capital or on the capital of the Lender’s holding
company, if any, as a consequence of this Agreement or the Letters of Credit
issued or participated in, or the Loans made, by the Lender to a level below
that which the Lender or the Lender’s holding company could have achieved but
for such Change in Law (taking into consideration the Lender’s policies and the
policies of the Lender’s holding company with respect to capital adequacy), then
from time to time the Account Parties will pay to the Lender such additional
amount or amounts as will compensate the Lender or the Lender’s holding company
for any such reduction suffered.
 
(c)  Certificates from Lender. A certificate of the Lender setting forth the
Lender’s good faith determination of the amount or amounts necessary to
compensate the Lender or its holding company, as the case may be, as specified
in paragraph (a) or (b) of this Section shall be delivered to XL Capital and
shall be conclusive absent manifest error. The Account Parties shall pay the
Lender the amount shown as due on any such certificate within 10 days after
receipt thereof by XL Capital.
 

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(d)  Delay in Requests. Failure or delay on the part of the Lender to demand
compensation pursuant to this Section shall not constitute a waiver of the
Lender’s right to demand such compensation; provided that the Account Parties
shall not be required to compensate the Lender pursuant to this Section for any
increased costs or reductions incurred more than 90 days prior to the date that
the Lender notifies XL Capital of the Change in Law giving rise to such
increased costs or reductions and of the Lender’s intention to claim
compensation therefor; provided, further, that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 90 day period
referred to above shall be extended to include the period of retroactive effect
thereof.
 
(e)  Application to Taxes. Notwithstanding anything in this Section to the
contrary, this Section shall not apply to Taxes, which shall be governed solely
by Section 2.16.
 
 
SECTION 2.15.  Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period therefor (including as a result of an Event of Default), (b) the
conversion of any Eurodollar Loan other than on the last day of an Interest
Period therefor or (c) the failure to borrow, convert, continue or prepay any
Loan on the date specified in any notice delivered pursuant hereto (regardless
of whether such notice is permitted to be revocable under Section 2.10(b) and is
revoked in accordance herewith), then, in any such event, the Account Parties
shall compensate the Lender for the loss attributable to such event. The loss to
the Lender attributable to any such event shall be deemed to be an amount
determined by the Lender to be equal to the excess, if any, of (i) the amount of
interest that the Lender would pay for a deposit equal to the principal amount
of such Loan for the period from the date of such payment, conversion, failure
or assignment to the last day of the then current Interest Period for such Loan
(or, in the case of a failure to borrow, convert or continue, the duration of
the Interest Period that would have resulted from such borrowing, conversion or
continuation) if the interest rate payable on such deposit were equal to the
Adjusted LIBO Rate for such Interest Period, over (ii) the amount of interest
that the Lender would earn on such principal amount for such period if the
Lender were to invest such principal amount for such period at the interest rate
that would be bid by the Lender (or an affiliate of the Lender) for Dollar
deposits from other banks in the eurodollar market at the commencement of such
period. A certificate of the Lender setting forth the Lender’s good faith
determination of any amount or amounts that the Lender is entitled to receive
pursuant to this Section shall be delivered to XL Capital and shall be
conclusive absent manifest error. The Account Parties shall pay the Lender the
amount shown as due on any such certificate within 10 days after receipt thereof
by XL Capital.
 
 
SECTION 2.16.  Taxes.
 
(a)  Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Account Parties hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes; provided that if any Account Party
shall be required to
 

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deduct any Indemnified Taxes from such payments, then (i) the sum payable shall
be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
the Lender (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) such Account Party shall
make such deductions and (iii) such Account Party shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.
 
(b)  Payment of Other Taxes by the Account Parties. In addition, each Account
Party shall pay any Other Taxes to the relevant Governmental Authority in
accordance with applicable law.
 
(c)  Indemnification by the Account Parties. The Account Parties shall indemnify
the Lender, within 10 days after written demand to XL Capital therefor, for the
full amount of any Indemnified Taxes and Other Taxes (including Indemnified
Taxes imposed or asserted on or attributable to amounts payable under this
Section) paid by the Lender and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes
or Other Taxes, as the case may be, were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate setting forth the
Lender’s good faith determination of the amount of such payment or liability
delivered to XL Capital by the Lender, shall be conclusive as between the Lender
and the Account Parties absent manifest error.
 
(d)  Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by any Account Party to a Governmental
Authority, XL Capital on behalf of such Account Party shall deliver to the
Lender the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Lender.
 
(e)  Exemptions. The Lender shall, at the written request of XL Capital, provide
to any Account Party such form, certification or similar documentation, if any
(each duly completed, accurate and signed) as is currently required by any
Account Party Jurisdiction or any other jurisdiction, or comply with such other
requirements, if any, as is currently applicable in such Account Party
Jurisdiction or any other jurisdiction, in order to obtain an exemption from, or
reduced rate of, deduction, payment or withholding of Indemnified Taxes or Other
Taxes to which the Lender is entitled pursuant to an applicable tax treaty or
the law of such Account Party Jurisdiction or any other jurisdiction; provided
that XL Capital shall have furnished to the Lender in a reasonably timely manner
copies of such documentation and notice of such requirements together with
applicable instructions. Upon the reasonable request of XL Capital in writing,
the Lender will provide to XL Capital such form, certification or similar
documentation (each duly completed, accurate and signed) as may in the future be
required by any Account Party Jurisdiction or any other jurisdiction, or comply
with such
 

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other requirements, if any, as may be applicable in such Account Party
Jurisdiction or any other jurisdiction in order to obtain an exemption from, or
reduced rate of, deduction, payment or withholding of Indemnified Taxes or Other
Taxes to which the Lender is entitled pursuant to an applicable tax treaty or
the law of the relevant jurisdiction. The Account Parties shall not be required
to pay additional amount to, or to indemnify, the Lender under paragraph (a) or
(c) of this Section for any Indemnified Taxes or Other Taxes to the extent such
Indemnified Taxes or Other Taxes would not have been imposed but for the failure
by the Lender to comply with the foregoing provisions of this paragraph (e).
 
(f)  If the Lender determines, in its reasonable discretion, that it has
received a refund of any Taxes or Other Taxes as to which it has been
indemnified by an Account Party or with respect to which an Account Party has
paid additional amounts pursuant to this Section, it shall pay over such refund
to such Account Party (but only to the extent of indemnity payments made, or
additional amounts paid, by such Account Party under this Section with respect
to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Lender and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund); provided that such Account Party, upon the request of the Lender,
agrees to repay the amount paid over to such Account Party (plus any penalties,
interest or other charges imposed by the relevant Governmental Authority) to the
Lender in the event the Lender is required to repay such refund to such
Governmental Authority. This Section shall not be construed to require the
Lender to make available its tax returns (or any other information relating to
its taxes which it deems confidential) to any Account Party or any other Person.
 
 
SECTION 2.17.  Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
 
(a)  Payments by the Account Parties. The Account Parties shall make each
payment required to be made by them hereunder (whether of principal, interest,
fees or reimbursement of LC Disbursements, interest or fees, or under
Section 2.14, 2.15 or 2.16, or otherwise) or under any other Credit Document
(except to the extent otherwise provided therein) prior to 12:00 noon, New York
City time, on the date when due, in immediately available funds, without set-off
or counterclaim; provided that any payments in respect of Alternative Currency
Letters of Credit shall be made in the manner (including the time and place of
payment) as shall have been separately agreed between the relevant Account Party
and Lender pursuant to Section 2.02. Any amounts received after such time on any
date may, in the discretion of the Lender, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest thereon.
All such payments shall be made to the Lender at its offices at 60 Wall Street,
New York, New York 10005, except payments pursuant to Sections 2.14, 2.15, 2.16
and 9.03, which shall be made directly to the Persons entitled thereto. If any
payment hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day and, in the case
of any payment accru-
 

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ing interest, interest thereon shall be payable for the period of such
extension. All payments hereunder shall be made in Dollars.
 
(b)  Application of Insufficient Payments. If at any time insufficient funds are
received by and available to the Lender to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds
shall be applied (i) first, to pay interest and fees then due hereunder, and
(ii) second, to pay principal and unreimbursed LC Disbursements then due
hereunder.
 
 
SECTION 2.18.  Designation of a Different Lending Office
 
 
. If the Lender requests compensation under Section 2.14, or if any Account
Party is required to pay any additional amount or indemnification payment to the
Lender or any Governmental Authority for account of the Lender pursuant to
Section 2.16, then the Lender shall use reasonable efforts to designate a
different lending office for funding or booking its Loans and/or Letters of
Credit hereunder or to assign its rights and obligations hereunder to another of
its offices, branches or Affiliates, if, in the reasonable judgment of the
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.14 or 2.16, as the case may be, in the future and
(ii) would not subject the Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to the Lender. Each Account Party hereby agrees
to pay all reasonable costs and expenses incurred by the Lender in connection
with any such designation or assignment.
 
 
ARTICLE III
 
GUARANTEE
 
SECTION 3.01.  The Guarantee. Each Guarantor hereby jointly and severally
guarantees to the Lender and its respective successors and assigns the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the principal of and interest on the Loans and LC Disbursements
(and interest thereon) made by the Lender to each of the Account Parties (other
than such Guarantor in its capacity as an Account Party hereunder) and all other
amounts from time to time owing to the Lender by such Account Parties under this
Agreement, in each case strictly in accordance with the terms thereof (such
obligations being herein collectively called the “Guaranteed Obligations”). Each
Guarantor hereby further jointly and severally agrees that if any Account Party
(other than such Guarantor in its capacity as an Account Party hereunder) shall
fail to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Guaranteed Obligations, such Guarantor will promptly pay
the same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
by acceleration or otherwise) in accordance with the terms of such extension or
renewal.
 

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SECTION 3.02.  Obligations Unconditional. The obligations of the Guarantors
under Section 3.01 are absolute and unconditional, joint and several,
irrespective of the value, genuineness, validity, regularity or enforceability
of the obligations of the Account Parties under this Agreement or any other
agreement or instrument referred to herein or therein, or any substitution,
release or exchange of any other guarantee of or security for any of the
Guaranteed Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Article that the obligations of the Guarantors
hereunder shall be absolute and unconditional, joint and several, under any and
all circumstances. Without limiting the generality of the foregoing, it is
agreed that the occurrence of any one or more of the following shall not alter
or impair the liability of the Guarantors hereunder, which shall remain absolute
and unconditional as described above:
 
(i)  at any time or from time to time, without notice to the Guarantors, the
time for any performance of or compliance with any of the Guaranteed Obligations
shall be extended, or such performance or compliance shall be waived;
 
(ii)  any of the acts mentioned in any of the provisions of this Agreement or
any other agreement or instrument referred to herein shall be done or omitted;
or
 
(iii)  the maturity of any of the Guaranteed Obligations shall be accelerated,
or any of the Guaranteed Obligations shall be modified, supplemented or amended
in any respect, or any right under this Agreement or any other agreement or
instrument referred to herein shall be waived or any other guarantee of any of
the Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with.
 
The Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Lender exhaust
any right, power or remedy or proceed against any Account Party under this
Agreement or any other agreement or instrument referred to herein, or against
any other Person under any other guarantee of, or security for, any of the
Guaranteed Obligations.
 
 
SECTION 3.03.  Reinstatement. The obligations of the Guarantors under this
Article shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of any Account Party in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Guarantors jointly and
severally agree that they will indemnify the Lender on demand for all reasonable
costs and expenses (including reasonable fees of counsel) incurred by the Lender
in connection with such rescission or restoration, including any such costs and
expenses in-
 

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curred in defending against any claim alleging that such payment constituted a
preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law.
 
 
SECTION 3.04.  Subrogation. The Guarantors hereby jointly and severally agree
that until the payment and satisfaction in full of all Guaranteed Obligations
and the expiration and termination of the Commitment they shall not exercise any
right or remedy arising by reason of any performance by them of their guarantee
in Section 3.01, whether by subrogation or otherwise, against any Account Party
or any other guarantor of any of the Guaranteed Obligations or any security for
any of the Guaranteed Obligations.
 
 
SECTION 3.05.  Remedies. The Guarantors jointly and severally agree that, as
between the Guarantors and the Lender, the obligations of the Account Parties
under this Agreement may be declared to be forthwith due and payable as provided
in Article VIII (and shall be deemed to have become automatically due and
payable in the circumstances provided in Article VIII) for purposes of
Section 3.01 notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically due
and payable) as against any Account Party and that, in the event of such
declaration (or such obligations being deemed to have become automatically due
and payable), such obligations (whether or not due and payable by any Account
Party) shall forthwith become due and payable by the Guarantors for purposes of
Section 3.01.
 
 
SECTION 3.06.  Continuing Guarantee. The guarantee in this Article is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
 
 
SECTION 3.07.  Rights of Contribution. The Guarantors (other than XL Capital)
hereby agree, as between themselves, that if any such Guarantor shall become an
Excess Funding Guarantor (as defined below) by reason of the payment by such
Guarantor of any Guaranteed Obligations, each other Guarantor (other than XL
Capital) shall, on demand of such Excess Funding Guarantor (but subject to the
next sentence), pay to such Excess Funding Guarantor an amount equal to such
Guarantor’s Pro Rata Share (as defined below and determined, for this purpose,
without reference to the properties, debts and liabilities of such Excess
Funding Guarantor) of the Excess Payment (as defined below) in respect of such
Guaranteed Obligations. The payment obligation of a Guarantor to any Excess
Funding Guarantor under this Section shall be subordinate and subject in right
of payment to the prior payment in full of the obligations of such Guarantor
under the other provisions of this Article III and such Excess Funding Guarantor
shall not exercise any right or remedy with respect to such excess until payment
and satisfaction in full of all of such obligations.
 
For purposes of this Section, (i) “Excess Funding Guarantor” means, in respect
of any Guaranteed Obligations, a Guarantor that has paid an amount in excess of
its Pro Rata Share of such Guaranteed Obligations, (ii) “Excess Payment” means,
in respect of any Guaranteed Obligations, the amount paid by an Excess Funding
Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations and
(iii) “Pro Rata Share” means, for any Guarantor,
 

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the ratio (expressed as a percentage) of (x) the amount by which the aggregate
present fair saleable value of all properties of such Guarantor (excluding any
shares of stock of any other Guarantor) exceeds the amount of all the debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder and any obligations of any other Guarantor that have been Guaranteed
by such Guarantor) to (y) the amount by which the aggregate fair saleable value
of all properties of all of the Guarantors (other than XL Capital) exceeds the
amount of all the debts and liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities, but excluding the obligations of the
Guarantors under this Article III) of all of the Guarantors (other than XL
Capital), determined (A) with respect to any Guarantor that is a party hereto on
the date hereof, as of the date hereof, and (B) with respect to any other
Guarantor, as of the date such Guarantor becomes a Guarantor hereunder.
 
 
SECTION 3.08.  General Limitation on Guarantee Obligations. In any action or
proceeding involving any corporate law, or any bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the
obligations of any Guarantor under Section 3.01 would otherwise, taking into
account the provisions of Section 3.07, be held or determined to be void,
invalid or unenforceable, or subordinated to the claims of any other creditors,
on account of the amount of its liability under Section 3.01, then,
notwithstanding any other provision hereof to the contrary, the amount of such
liability shall, without any further action by such Guarantor, the Lender or any
other Person, be automatically limited and reduced to the highest amount that is
valid and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
 
 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES

 
Each Account Party represents and warrants to the Lender that:
 
SECTION 4.01.  Organization; Powers. Such Account Party and each of its
Significant Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required.
 
 
SECTION 4.02.  Authorization; Enforceability. The Transactions are within such
Account Parties’ corporate powers and have been duly authorized by all necessary
corporate and, if required, by all necessary shareholder action. This Agreement
has been duly executed and delivered by such Account Party and constitutes a
legal, valid and binding obligation of such Account Party, enforceable against
such Account Party in accordance with
 

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its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium, examination or similar laws of general
applicability affecting the enforcement of creditors’ rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
 
 
SECTION 4.03.  Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of (including any exchange control approval),
registration or filing with, or any other action by, any Governmental Authority,
except such as have been obtained or made and are in full force and effect,
(b) will not violate any applicable law or regulation or the charter, by-laws or
other organizational documents of such Account Party or any of its Significant
Subsidiaries or any order of any Governmental Authority, (c) will not violate or
result in a default under any material indenture, agreement or other instrument
binding upon such Account Party or any of its Significant Subsidiaries or
assets, or give rise to a right thereunder to require any payment to be made by
any such Person, and (d) will not result in the creation or imposition of any
Lien on any asset of such Account Party or any of its Significant Subsidiaries.
 
 
SECTION 4.04.  Financial Condition; No Material Adverse Change.
 
(a)  Financial Condition. Such Account Party has heretofore furnished to the
Lender the consolidated balance sheet and statements of income, stockholders’
equity and cash flows of such Account Party and its consolidated Subsidiaries
(A) as of and for the fiscal year ended December 31, 2005, reported on by
PricewaterhouseCoopers LLP, independent public accountants (as provided in XL
Capital’s Report on Form 10-K filed with the SEC for the fiscal year ended
December 31, 2005), and (B) as of and for the fiscal quarter ended September 30,
2006, as provided in XL Capital’s Report on Form 10-Q filed with the SEC for the
fiscal quarter ended September 30, 2006. Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of such Account Party and its respective consolidated
Subsidiaries as of such dates and for such periods in accordance with GAAP or
(in the case of XL Insurance or XL Re) SAP, subject to year-end audit
adjustments and the absence of footnotes in the case of the statements referred
to in clause (B) of the first sentence of this paragraph.
 
(b)  No Material Adverse Change. Since December 31, 2005, there has been no
material adverse change in the assets, business, financial condition or
operations of such Account Party and its Subsidiaries, taken as a whole, except
as disclosed in XL Capital’s filings with the SEC.
 
 
SECTION 4.05.  Properties.
 
(a)  Property Generally. Such Account Party and each of its Significant
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, subject only to Liens permitted
by Section 7.03 and except for minor
 

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defects in title that do not interfere with its ability to conduct its business
as currently conducted or to utilize such properties for their intended
purposes.
 
(b)  Intellectual Property. Such Account Party and each of its Significant
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents and other intellectual property material to its business,
and the use thereof by such Account Party and its Subsidiaries does not infringe
upon the rights of any other Person, except for any such infringements that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
 
 
SECTION 4.06.  Litigation and Environmental Matters.
 
(a)  Actions, Suits and Proceedings. Except as disclosed in Schedule II or
contemplated by our SEC reports, or as routinely encountered in claims activity,
there are no actions, suits or proceedings by or before any arbitrator or
Governmental Authority now pending against or, to the knowledge of such Account
Party, threatened against or affecting such Account Party or any of its
Subsidiaries (i) as to which there is a reasonable possibility of an adverse
determination and that could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect or (ii) that involve this
Agreement or the Transactions.
 
(b)  Environmental Matters. Except as disclosed in Schedule III and except with
respect to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither such
Account Party nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required for its business under any Environmental Law, (ii) has
incurred any Environmental Liability, (iii) has received notice of any claim
with respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability.
 
 
SECTION 4.07.  Compliance with Laws and Agreements. Such Account Party and each
of its Subsidiaries is in compliance with all laws, regulations and orders of
any Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.
 
 
SECTION 4.08.  Investment and Holding Company Status. Such Account Party is not
(a) an “investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a “holding company” as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
 
 
SECTION 4.09.  Taxes. Such Account Party and each of its Subsidiaries has timely
filed or caused to be filed all Tax returns and reports required to have been
filed
 

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and has paid or caused to be paid all Taxes required to have been paid by it,
except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which such Person has set aside on its books adequate
reserves or (b) to the extent that the failure to file any such Tax return or
pay any such Taxes could not reasonably be expected to result in a Material
Adverse Effect.
 
 
SECTION 4.10.  ERISA. No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed the fair
market value of the assets of such Plan by an amount that could reasonably be
expected to result in a Material Adverse Effect.
 
Except as could not reasonably be expected to result in a Material Adverse
Effect, (i) all contributions required to be made by any Account Party or any of
their Subsidiaries with respect to a Non-U.S. Benefit Plan have been timely
made, (ii) each Non-U.S. Benefit Plan has been maintained in compliance with its
terms and with the requirements of any and all applicable laws and has been
maintained, where required, in good standing with the applicable Governmental
Authority and (iii) neither any Account Party nor any of their Subsidiaries has
incurred any obligation in connection with the termination or withdrawal from
any Non-U.S. Benefit Plan.
 
 
SECTION 4.11.  Disclosure. The reports, financial statements, certificates or
other information furnished by such Account Party to the Lender in connection
with the negotiation of this Agreement or delivered hereunder (taken as a whole)
do not contain any material misstatement of fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to
projected financial information, such Account Party represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.
 
 
SECTION 4.12.  Use of Credit. Neither such Account Party nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying Margin Stock, and no Letter of Credit will be
used in connection with buying or carrying any Margin Stock. No part of the
proceeds of any Loan hereunder will be used to buy or carry any Margin Stock
(except for repurchases of the capital stock of XL Capital and purchases of
Margin Stock in accordance with XL Capital’s Statement of Investment Policy
Objectives and Guidelines as in effect on the date hereof or as it may be
changed from time to time by a resolution duly adopted by the board of directors
of XL Capital (or any committee thereof)). The purchase of any Margin Stock with
the proceeds of any Loan will not be in
 

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violation of Regulation U or X of the Board and, after applying the proceeds of
such Loan, not more than 25% of the value of the assets of XL Capital and its
Subsidiaries taken as a whole consists or will consist of Margin Stock.
 
 
SECTION 4.13.  Subsidiaries. Set forth in Schedule IV is a complete and correct
list of all of the Subsidiaries of XL Capital as of September 30, 2006, together
with, for each such Subsidiary, (i) the jurisdiction of organization of such
Subsidiary, (ii) each Person holding ownership interests in such Subsidiary and
(iii) the percentage of ownership of such Subsidiary represented by such
ownership interests. Except as disclosed in Schedule IV, (x) each of XL Capital
and its Subsidiaries owns, free and clear of Liens, and has the unencumbered
right to vote, all outstanding ownership interests in each Person shown to be
held by it in Schedule IV, (y) all of the issued and outstanding capital stock
of each such Person organized as a corporation is validly issued, fully paid and
nonassessable and (z) except as disclosed in filings of XL Capital with the SEC
prior to the date hereof, there are no outstanding Equity Rights with respect to
any Account Party.
 
 
SECTION 4.14.  Withholding Taxes. Based upon information with respect to the
Lender provided as of the date hereof, the payment of the LC Disbursements and
interest thereon, principal of and interest on the Loans, the fees under Section
2.11 and all other amounts payable hereunder will not be subject, by withholding
or deduction, to any Indemnified Taxes imposed by Bermuda or the Cayman Islands.
 
 
SECTION 4.15.  Stamp Taxes. To ensure the legality, validity, enforceability or
admissibility in evidence of this Agreement or any promissory notes evidencing
Loans made (or to be made), it is not necessary, as of the date hereof, that
this Agreement or such promissory notes or any other document be filed or
recorded with any Governmental Authority in Bermuda or the Cayman Islands, or
that any stamp or similar tax be paid on or in respect of this Agreement in any
such jurisdiction, or such promissory notes or any other document other than
such filings and recordations that have already been made and such stamp or
similar taxes that have been paid.
 
 
SECTION 4.16.  Legal Form. Each of this Agreement and any promissory notes
evidencing Loans made (or to be made) is in proper legal form under the laws of
any Account Party Jurisdiction for the admissibility thereof in the courts of
such Account Party Jurisdiction.
 
 
ARTICLE V
 
CONDITIONS
 
SECTION 5.01.  Effective Date. The obligations of the Lender to issue or
continue Letters of Credit and to make Loans hereunder are subject to the
receipt by the Lender of each of the following documents, each of which shall be
satisfactory to the Lender
 

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in form and substance (or such condition shall have been waived in accordance
with Section 9.02):
 
(a)  Executed Counterparts. From each party hereto either (i) a counterpart of
this Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Lender (which may include telecopy transmission of a signed
signature page to this Agreement) that such party has signed a counterpart of
this Agreement.
 
(b)  Opinions of Counsel to the Obligors. Opinions, each dated the Effective
Date, of (i) Kirstin Romann Gould, Esq., counsel to XL Capital, substantially in
the form of Exhibit A-1, (ii) Richard G. McCarty, Esq., counsel to XL America,
substantially in the form of Exhibit A-2, (iii) Cahill Gordon & Reindel LLP,
special U.S. counsel for the Obligors, substantially in the form of Exhibit A-3,
(iv) Conyers, Dill & Pearman, special Bermuda counsel to XL Insurance and XL Re,
substantially in the form of Exhibit A-4, and (v) Appleby Spurling Hunter,
special Cayman Islands counsel to XL Capital, substantially in the form of
Exhibit A-5.
 
(c)  Corporate Documents. Such documents and certificates as the Lender or its
counsel may reasonably request relating to the organization, existence and good
standing, if applicable, of the Obligors, the authorization of the Transactions
and any other legal matters relating to the Obligors, this Agreement or the
Transactions, all in form and substance reasonably satisfactory to the Lender
and its counsel.
 
(d)  Officer’s Certificate. A certificate, dated the Effective Date and signed
by the President, a Vice President or a Financial Officer of XL Capital,
confirming compliance with the conditions set forth in the lettered clauses of
the first sentence of Section 5.02.
 
(e)  Other Documents. Such other documents as the Lender may reasonably request.
 
The obligation of the Lender to make its initial extension of credit hereunder
is also subject to the payment by XL Capital of such fees as XL Capital shall
have agreed to pay to the Lender in connection herewith, (to the extent that
reasonably detailed statements for such fees and expenses have been delivered to
XL Capital).
 
The Lender shall notify the Account Parties of the Effective Date, and such
notice shall be conclusive and binding. Notwithstanding the foregoing, the
obligations of the Lender to issue or continue Letters of Credit or to make
Loans hereunder shall not become effective unless each of the foregoing
conditions is satisfied (or waived pursuant to Section 9.02) at or prior to
5:00 p.m., New York City time, on December 19, 2006 (and, in the event such
conditions are not so satisfied or waived, the Commitment shall terminate at
such time).
 

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SECTION 5.02.  Each Credit Event. The obligation of the Lender to issue,
continue, amend, renew or extend any Letter of Credit or to make any Loan is
additionally subject to the satisfaction of the following conditions:
 
(a)  the representations and warranties of the Obligors set forth in this
Agreement (other than, at any time after the Effective Date, in Section 4.04(b))
shall be true and correct on and as of the date of issuance, continuation,
amendment, renewal or extension of such Letter of Credit or the date of such
Loan, as applicable (or, if any such representation or warranty is expressly
stated to have been made as of a specific date, as of such specific date);
 
(b)  at the time of and immediately after giving effect to the issuance,
amendment, renewal or extension of such Letter of Credit or such Loan, as
applicable, no Default shall have occurred and be continuing; and
 
(c)  in the case of any Alternative Currency Letter of Credit, receipt by the
Lender of a request for offers as required by Section 2.02.
 
Each issuance, continuation, amendment, renewal or extension of a Letter of
Credit and each Borrowing shall be deemed to constitute a representation and
warranty by the Obligors on the date thereof as to the matters specified in
clauses (a) and (b) of the immediately preceding sentence.
 
 
ARTICLE VI
 
AFFIRMATIVE COVENANTS

 
Until the Commitment has expired or been terminated, the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full, all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Account Parties covenant and agree
with the Lender that:
 
 
SECTION 6.01.  Financial Statements and Other Information. Each Account Party
will furnish to the Lender:
 
(a)  within 135 days after the end of each fiscal year of each Account Party
except for XL America (but in the case of XL Capital, within 100 days after the
end of each fiscal year of XL Capital), the audited consolidated balance sheet
and related statements of operations, stockholders’ equity and cash flows of
such Account Party and its consolidated Subsidiaries as of the end of and for
such year, setting forth in each case in comparative form the figures for the
previous fiscal year (if such figures were already produced for such
corresponding period or periods) (it being understood that delivery to the
Lender of XL Capital’s Report on Form 10-K filed with the SEC shall satisfy the
financial statement delivery requirements of this paragraph (a) to deliver the
annual financial statements of XL Capital so
 

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long as the financial information required to be contained in such Report is
substantially the same as the financial information required under this
paragraph (a)), all reported on by independent public accountants of recognized
national standing (without a “going concern” or like qualification or exception
and without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of such
Account Party and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP or (in the case of XL Insurance and XL Re) SAP, as the case
may be, consistently applied;
 
(b)  by June 15 of each year, (i) an unaudited consolidated balance sheet and
related statements of operations, stockholders’ equity and cash flows of XL
America and its consolidated Subsidiaries as of the end of and for the
immediately preceding fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year (if such figures were already
produced for such corresponding period or periods), all certified by a Financial
Officer of XL America as presenting fairly in all material respects the
financial condition and results of operations of XL America and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of
footnotes, and (ii) audited statutory financial statements for each Insurance
Subsidiary of XL America reported on by independent public accountants of
recognized national standing (without a “going concern” or like qualification or
exception and without any qualification or exception as to the scope of such
audit) to the effect that such audited consolidated financial statements present
fairly in all material respects the financial condition and results of
operations of such Insurance Subsidiaries in accordance with SAP, consistently
applied;
 
(c)  within 60 days after the end of each of the first three fiscal quarters of
each fiscal year of such Account Party, the consolidated balance sheet and
related statements of operations, stockholders’ equity and cash flows of such
Account Party and its consolidated Subsidiaries as of the end of and for such
fiscal quarter and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for (or, in the case of the balance
sheet, as of the end of) the corresponding period or periods of the previous
fiscal year (if such figures were already produced for such corresponding period
or periods), all certified by a Financial Officer of such Account Party as
presenting fairly in all material respects the financial condition and results
of operations of such Account Party and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP or (in the case of XL Insurance and
XL Re) SAP, as the case may be, consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes (it being understood that
delivery to the Lender of XL Capital’s Report on Form 10-Q filed with the SEC
shall satisfy the financial statement delivery requirements of this paragraph to
deliver the quarterly financial statements of XL Capital so long as the
financial information required to be contained in such Report is substantially
the same as the financial information required under this paragraph (c));
 

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(d)  concurrently with any delivery of financial statements under clause (a),
(b) or (c) of this Section, a certificate signed on behalf of each Account Party
by a Financial Officer (i) certifying as to whether a Default has occurred and,
if a Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with Sections 7.03, 7.05, 7.06
and 7.07 and (iii) stating whether any change in GAAP or (in the case of XL
Insurance, XL Re and any Insurance Subsidiary of XL America) SAP or in the
application thereof has occurred since the date of the audited financial
statements referred to in Section 4.04 and, if any such change has occurred,
specifying any material effect of such change on the financial statements
accompanying such certificate;
 
(e)  concurrently with any delivery of financial statements under clauses (a)
and (b)(ii) of this Section, a certificate of the accounting firm that reported
on such financial statements stating whether they obtained knowledge during the
course of their examination of such financial statements of any Default (which
certificate may be limited to the extent required by accounting rules or
guidelines);
 
(f)  promptly after the same become publicly available, copies of all periodic
and other reports, proxy statements and other materials filed by such Account
Party or any of its respective Subsidiaries with the SEC, or any Governmental
Authority succeeding to any or all of the functions of said Commission, or with
any U.S. or other securities exchange, or distributed by such Account Party to
its shareholders generally, as the case may be;
 
(g)  concurrently with any delivery of financial statements under clause (a),
(b) or (c) of this Section, a certificate of a Financial Officer of XL Capital,
setting forth on a consolidated basis for XL Capital and its consolidated
Subsidiaries as of the end of the fiscal year or quarter to which such
certificate relates (i) the aggregate book value of assets which are subject to
Liens permitted under Section 7.03(h) and the aggregate book value of
liabilities which are subject to Liens permitted under Section 7.03(h) (it being
understood that the reports required by paragraphs (a), (b) and (c) of this
Section shall satisfy the requirement of this clause (i) of this paragraph (g)
if such reports set forth separately, in accordance with GAAP, line items
corresponding to such aggregate book values) and (ii) a calculation showing the
portion of each of such aggregate amounts which portion is attributable to
transactions among wholly-owned Subsidiaries of XL Capital;
 
(h)  within 90 days after the end of each of the first three fiscal quarters of
each fiscal year and within 135 days after the end of each fiscal year of XL
Capital (commencing with the fiscal year ending December 31, 2005), a statement
of a Financial Officer of XL Capital listing, as of the end of the immediately
preceding fiscal quarter of XL Capital, the amount of cash and the securities of
the Account Parties and their Subsidiaries that have been posted as collateral
under Section 7.03(f); and
 

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(i)  promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of XL Capital or any of
its Subsidiaries, or compliance with the terms of this Agreement, as the Lender
may reasonably request.
 
 
SECTION 6.02.  Notices of Material Events. Each Account Party will furnish to
the Lender prompt written notice of the following:
 
(a)  the occurrence of any Default; and
 
(b)  any event or condition constituting, or which could reasonably be expected
to have a Material Adverse Effect.
 
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the relevant Account Party
setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken by such Account Party with respect
thereto.
 
 
SECTION 6.03.  Preservation of Existence and Franchises. Each Account Party
will, and will cause each of its Significant Subsidiaries to, maintain its
corporate existence and its material rights and franchises in full force and
effect in its jurisdiction of incorporation; provided that the foregoing shall
not prohibit any merger or consolidation permitted under Section 7.01. Each
Account Party will, and will cause each of its Subsidiaries to, qualify and
remain qualified as a foreign corporation in each jurisdiction in which failure
to receive or retain such qualification would have a Material Adverse Effect.
 
 
SECTION 6.04.  Insurance. Each Account Party will, and will cause each of its
Significant Subsidiaries to, maintain with financially sound and reputable
insurers, insurance with respect to its properties in such amounts as is
customary in the case of corporations engaged in the same or similar businesses
having similar properties similarly situated.
 
 
SECTION 6.05.  Maintenance of Properties. Each Account Party will, and will
cause each of its Subsidiaries to, maintain or cause to be maintained in good
repair, working order and condition the properties now or hereafter owned,
leased or otherwise possessed by and used or useful in its business and will
make or cause to be made all needful and proper repairs, renewals, replacements
and improvements thereto so that the business carried on in connection therewith
may be properly conducted at all times except if the failure to do so would not
have a Material Adverse Effect, provided, however, that the foregoing shall not
impose on such Account Party or any Subsidiary of such Account Party any
obligation in respect of any property leased by such Account Party or such
Subsidiary in addition to such Account Party’s obligations under the applicable
document creating such Account Party’s or such Subsidiary’s lease or tenancy.
 

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SECTION 6.06.  Payment of Taxes and Other Potential Charges and Priority Claims;
Payment of Other Current Liabilities. Each Account Party will, and will cause
each of its Subsidiaries to, pay or discharge:
 
(a)  on or prior to the date on which penalties attach thereto, all taxes,
assessments and other governmental charges or levies imposed upon it or any of
its properties or income;
 
(b)  on or prior to the date when due, all lawful claims of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons which, if
unpaid, might result in the creation of a Lien upon any such property; and
 
(c)  on or prior to the date when due, all other lawful claims which, if unpaid,
might result in the creation of a Lien upon any such property (other than Liens
not forbidden by Section 7.03) or which, if unpaid, might give rise to a claim
entitled to priority over general creditors of such Account Party or such
Subsidiary in any proceeding under the Bermuda Companies Law or Bermuda
Insurance Law, or any insolvency proceeding, liquidation, receivership,
rehabilitation, dissolution or winding-up involving such Account Party or such
Subsidiary;
 
provided that unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced, such Account Party or such Subsidiary
need not pay or discharge any such tax, assessment, charge, levy or claim (i) so
long as the validity thereof is contested in good faith and by appropriate
proceedings diligently conducted and so long as such reserves or other
appropriate provisions as may be required by GAAP or SAP, as the case may be,
shall have been made therefor or (ii) so long as such failure to pay or
discharge would not have a Material Adverse Effect.
 
 
SECTION 6.07.  Financial Accounting Practices. Such Account Party will, and will
cause each of its consolidated Subsidiaries to, make and keep books, records and
accounts which, in reasonable detail, accurately and fairly reflect its
transactions and dispositions of its assets and maintain a system of internal
accounting controls sufficient to provide reasonable assurances that
transactions are recorded as necessary to permit preparation of financial
statements required under Section 6.01 in conformity with GAAP and SAP, as
applicable, and to maintain accountability for assets.
 
 
SECTION 6.08.  Compliance with Applicable Laws. Each Account Party will, and
will cause each of its Subsidiaries to, comply with all applicable Laws
(including but not limited to the Bermuda Companies Law and Bermuda Insurance
Laws) in all respects; provided that such Account Party or any Subsidiary of
such Account Party will not be deemed to be in violation of this Section as a
result of any failure to comply with any such Law which would not (i) result in
fines, penalties, injunctive relief or other civil or criminal liabilities
 

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which, in the aggregate, would have a Material Adverse Effect or (ii) otherwise
impair the ability of such Account Party to perform its obligations under this
Agreement.
 
 
SECTION 6.09.  Use of Letters of Credit and Proceeds. No part of the proceeds of
any Loan and no Letter of Credit will be used, whether directly or indirectly,
for any purpose that entails a violation of any of the Regulations of the Board,
including Regulations U and X. Each Account Party will use the Letters of Credit
issued for its account hereunder in the ordinary course of business of, and will
use the proceeds of all Loans made to it for the general corporate purposes of,
such Account Party and its Affiliates. For the avoidance of doubt, the parties
agree that any Account Party may apply for a Letter of Credit hereunder to
support the obligations of any Affiliate of XL Capital, it being understood that
such Account Party shall nonetheless remain the account party and as such be
liable with respect to such Letter of Credit. Notwithstanding anything in this
Section to the contrary, no Account Party will issue any Letter of Credit, or
renew or permit to renew any Letter of Credit, existing as of August 4, 2006, or
use the proceeds of any Loan, to support the obligations of, or otherwise
primarily for the general corporate purposes of, SCA and its Subsidiaries.
 
 
SECTION 6.10.  Continuation of and Change in Businesses. Each Account Party and
its Significant Subsidiaries will continue to engage in substantially the same
business or businesses it engaged in (or proposes to engage in) on the date of
this Agreement and businesses related or incidental thereto.
 
 
SECTION 6.11.  Visitation. Each Account Party will permit such Persons as the
Lender may reasonably designate to visit and inspect any of the properties of
such Account Party, to discuss its affairs with its financial management, and
provide such other information relating to the business and financial condition
of such Account Party at such times as the Lender may reasonably request. Each
Account Party hereby authorizes its financial management to discuss with the
Lender the affairs of such Account Party.
 
 
ARTICLE VII
 
NEGATIVE COVENANTS

 
Until the Commitment has expired or terminated, the principal of and interest on
each Loan and all fees payable hereunder have been paid in full, all Letters of
Credit have expired or terminated and all LC Disbursements have been reimbursed,
each of the Account Parties covenants and agrees with the Lender that:
 
 
SECTION 7.01.  Mergers. No Account Party will merge with or into or consolidate
with any other Person, except that if no Default shall occur and be continuing
or shall exist at the time of such merger or consolidation or immediately
thereafter and after giving effect thereto (a) any Account Party may merge or
consolidate with any other corporation, including a Subsidiary, if such Account
Party shall be the surviving corporation, (b) XL Capi-
 

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tal may merge with or into or consolidate with any other Person in a transaction
that does not result in a reclassification, conversion, exchange or cancellation
of the outstanding shares of capital stock of XL Capital (other than the
cancellation of any outstanding shares of capital stock of XL Capital held by
the Person with whom it merges or consolidates) and (c) any Account Party may
enter into a merger or consolidation which is effected solely to change the
jurisdiction of incorporation of such Account Party and results in a
reclassification, conversion or exchange of outstanding shares of capital stock
of such Account Party solely into shares of capital stock of the surviving
entity.
 
 
SECTION 7.02.  Dispositions. No Account Party will, nor will it permit any of
its Significant Subsidiaries to, sell, convey, assign, lease, abandon or
otherwise transfer or dispose of, voluntarily or involuntarily (any of the
foregoing being referred to in this Section as a “Disposition” and any series of
related Dispositions constituting but a single Disposition), any of its
properties or assets, tangible or intangible (including but not limited to sale,
assignment, discount or other disposition of accounts, contract rights, chattel
paper or general intangibles with or without recourse), except:
 
(a)  Dispositions in the ordinary course of business involving current assets or
other invested assets classified on such Account Party’s or its respective
Subsidiaries’ balance sheet as available for sale or as a trading account;
 
(b)  sales, conveyances, assignments or other transfers or dispositions in
immediate exchange for cash or tangible assets, provided that any such sales,
conveyances or transfers shall not individually, or in the aggregate for the
Account Parties and their respective Subsidiaries, exceed $500,000,000 in any
calendar year; Dispositions of equipment or other property which is obsolete or
no longer used or useful in the conduct of the business of such Account Party or
its Subsidiaries;
 
(c)  Dispositions of equipment or other property which is obsolete or no longer
used or useful in the conduct of the business of such Account Party or its
Subsidiaries; and
 
(d)  Dispositions from an Account Party or a wholly-owned Subsidiary to any
other Account Party or wholly-owned Subsidiary.
 
 
SECTION 7.03.  Liens. No Account Party will, nor will it permit any of its
Subsidiaries to, create, incur, assume or permit to exist any Lien on any
property or assets, tangible or intangible, now owned or hereafter acquired by
it, except:
 
(a)  Liens existing on the date hereof (and extension, renewal and replacement
Liens upon the same property, provided that the amount secured by each Lien
constituting such an extension, renewal or replacement Lien shall not exceed the
amount secured by the Lien theretofore existing) and listed on Part B of
Schedule I;
 

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(b)  Liens arising from taxes, assessments, charges, levies or claims described
in Section 6.06 that are not yet due or that remain payable without penalty or
to the extent permitted to remain unpaid under the provision of Section 6.06;
 
(c)  Liens on property securing all or part of the purchase price thereof to
such Account Party and Liens (whether or not assumed) existing on property at
the time of purchase thereof by such Account Party (and extension, renewal and
replacement Liens upon the same property); provided (i) each such Lien is
confined solely to the property so purchased, improvements thereto and proceeds
thereof, and (ii) the aggregate amount of the obligations secured by all such
Liens on any particular property at any time purchased by such Account Party, as
applicable, shall not exceed 100% of the lesser of the fair market value of such
property at such time or the actual purchase price of such property;
 
(d)  zoning restrictions, easements, minor restrictions on the use of real
property, minor irregularities in title thereto and other minor Liens that do
not in the aggregate materially detract from the value of a property or asset
to, or materially impair its use in the business of, such Account Party or any
such Subsidiary;
 
(e)  Liens securing Indebtedness permitted by Section 7.07(b) covering assets
whose market value is not materially greater than the amount of the Indebtedness
secured thereby plus a commercially reasonable margin;
 
(f)  Liens on cash and securities of an Account Party or any of its Subsidiaries
incurred as part of the management of its investment portfolio including, but
not limited to, pursuant to any International Swaps and Derivatives Association,
Inc. (“ISDA”) documentation or any Specified Transaction Agreement in accordance
with XL Capital’s Statement of Investment Policy Objectives and Guidelines as in
effect on the date hereof or as it may be changed from time to time by a
resolution duly adopted by the board of directors of XL Capital (or any
committee thereof);
 
(g)  Liens on cash and securities not to exceed $500,000,000 in the aggregate
securing obligations of an Account Party or any of its Subsidiaries arising
under any ISDA documentation or any other Specified Transaction Agreement (it
being understood that in no event shall this clause (g) preclude any Person
(other than any Subsidiary of XL Capital) in which XL Capital or any of its
Subsidiaries shall invest (each an “investee”) from granting Liens on such
Person’s assets to secure hedging obligations of such Person, so long as such
obligations are non-recourse to XL Capital or any of its Subsidiaries (other
than any investees)), provided that, for purposes of determining the aggregate
amount of cash and/or securities subject to such Liens under this clause (g),
the aggregate amount of cash and/or securities on which any Account Party or any
Subsidiary shall have granted a Lien in favor of a counterparty at any time
shall be netted against the aggregate amount of cash and/or securities on which
such counterparty shall have granted a Lien in favor of such Account Party or
such Subsidiary, as the case may be, at such time, so long as the relevant
agreement between such
 

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Account Party or such Subsidiary, as the case may be, provides for the netting
of their respective obligations thereunder;
 
(h)  Liens on (i) assets received, and on actual or imputed investment income on
such assets received incurred as part of its business including activities
utilizing ISDA documentation or any Specified Transaction Agreement relating and
identified to specific insurance payment liabilities or to liabilities arising
in the ordinary course of any Account Parties’ or any of their Subsidiary’s
business as an insurance or reinsurance company (including GICs and Stable Value
Instruments) or corporate member of Lloyd’s or as a provider of financial or
investment services or contracts, or the proceeds thereof (including GICs and
Stable Value Instruments), in each case held in a segregated trust, trust or
other account and securing such liabilities, (ii) assets securing Exempt
Indebtedness of any Person (other than XL Capital or any of its Affiliates) in
the event such Exempt Indebtedness is consolidated on the consolidated balance
sheet of XL Capital and its consolidated Subsidiaries in accordance with GAAP or
(iii) any other assets subject to any trust or other account arising out of or
as a result of contractual, regulatory or any other requirements; provided that
in no case shall any such Lien secure Indebtedness and any Lien which secures
Indebtedness shall not be permitted under this clause (h);
 
(i)  statutory and common law Liens of materialmen, mechanics, carriers,
warehousemen and landlords and other similar Liens arising in the ordinary
course of business; and
 
(j)  Liens existing on property of a Person immediately prior to its being
consolidated with or merged into any Account Party or any of their Subsidiaries
or its becoming a Subsidiary, and Liens existing on any property acquired by any
Account Party or any of their Subsidiaries at the time such property is so
acquired (whether or not the Indebtedness secured thereby shall have been
assumed) (and extension, renewal and replacement Liens upon the same property,
provided that the amount secured by each Lien constituting such an extension,
renewal or replacement Lien shall not exceed the amount secured by the Lien
theretofore existing), provided that (i) no such Lien shall have been created or
assumed in contemplation of such consolidation or merger or such Person’s
becoming a Subsidiary or such acquisition of property and (ii) each such Lien
shall extend solely to the item or items of property so acquired and, if
required by terms of the instrument originally creating such Lien, other
property which is an improvement to or is acquired for specific use in
connection with such acquired property.
 
 
SECTION 7.04.  Transactions with Affiliates. No Account Party will, nor will it
permit any of its Significant Subsidiaries to, enter into or carry out any
transaction with (including purchase or lease property or services to, loan or
advance to or enter into, suffer to remain in existence or amend any contract,
agreement or arrangement with) any Affiliate of such Account Party, or directly
or indirectly agree to do any of the foregoing, except (i) transactions
involving guarantees or co-obligors with respect to any Indebtedness described
in
 

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Part A of Schedule I, (ii) transactions among the Account Parties and their
wholly-owned Subsidiaries and (iii) transactions with Affiliates in good faith
in the ordinary course of such Account Party’s business consistent with past
practice and on terms no less favorable to such Account Party or any Subsidiary
than those that could have been obtained in a comparable transaction on an arm’s
length basis from an unrelated Person.
 
 
SECTION 7.05.  Ratio of Total Funded Debt to Total Capitalization. XL Capital
will not permit its ratio of (a) Total Funded Debt to (b) the sum of Total
Funded Debt plus Consolidated Net Worth to be greater than 0.35:1.00 at any
time.
 
 
SECTION 7.06.  Consolidated Net Worth. XL Capital will not permit its
Consolidated Net Worth to be less than the sum of (a) $5,000,000,000 plus (b)
25% of consolidated net income (if positive) of XL Capital and its Subsidiaries
for each fiscal quarter ending on or after December 31, 2006.
 
 
SECTION 7.07.  Indebtedness. No Account Party will, nor will it permit any of
its Subsidiaries to, at any time create, incur, assume or permit to exist any
Indebtedness, or agree, become or remain liable (contingent or otherwise) to do
any of the foregoing, except:
 
(a)  Indebtedness created hereunder;
 
(b)  secured Indebtedness (including secured reimbursement obligations with
respect to letters of credit) of any Account Party or any Subsidiary in an
aggregate principal amount (for all Account Parties and their respective
Subsidiaries) not exceeding at any time outstanding 15% of Consolidated Net
Worth;
 
(c)  other unsecured Indebtedness, so long as upon the incurrence thereof no
Default would occur or exist;
 
(d)  Indebtedness consisting of accounts or claims payable and accrued and
deferred compensation (including options) incurred in the ordinary course of
business by any Account Party or any Subsidiary;
 
(e)  Indebtedness incurred in transactions described in Section 7.03(f) and (g);
and
 
(f)  Indebtedness existing on the date hereof and described in Part A of
Schedule I and extensions, renewals and replacements of any such Indebtedness
that do not increase the outstanding principal amount thereof.
 
 
SECTION 7.08.  Financial Strength Ratings. None of XL Capital Group, XL
Insurance and XL Re will permit at any time its financial strength ratings to be
less than “A-” from A.M. Best & Co. (or its successor).
 

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SECTION 7.09.  Private Act. No Account Party will become subject to a Private
Act other than the X.L. Insurance Company, Ltd. Act, 1989.
 
 
ARTICLE VIII
 
EVENTS OF DEFAULT

 
If any of the following events (“Events of Default”) shall occur:
 
(a)  any Account Party shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise;
 
(b)  any Account Party shall fail to pay any interest on any Loan or LC
Disbursement or any fee payable under this Agreement or any other amount (other
than an amount referred to in clause (a) of this Article) payable under this
Agreement, when and as the same shall become due and payable, and such failure
shall continue unremedied for a period of 5 or more days;
 
(c)  any representation or warranty made or deemed made by any Account Party in
or in connection with this Agreement or any amendment or modification hereof, or
in any certificate or financial statement furnished pursuant to the provisions
hereof, shall prove to have been false or misleading in any material respect as
of the time made (or deemed made) or furnished;
 
(d)  any Account Party shall fail to observe or perform any covenant, condition
or agreement contained in Article VII;
 
(e)  any Obligor shall fail to observe or perform any covenant, condition or
agreement contained in this Agreement (other than those specified in clause (a),
(b) or (d) of this Article or the reporting requirement pursuant to Section
6.01(h)) and such failure shall continue unremedied for a period of 20 or more
days after notice thereof from the Lender to such Obligor;
 
(f)  any Account Party or any of its Subsidiaries shall default (i) in any
payment of principal of or interest on any other obligation for borrowed money
in principal amount of $50,000,000 or more, or any payment of any principal
amount of $50,000,000 or more under Hedging Agreements, in each case beyond any
period of grace provided with respect thereto, or (ii) in the performance of any
other agreement, term or condition contained in any such agreement (other than
Hedging Agreements) under which any such obligation in principal amount of
$50,000,000 or more is created, if the effect of such default is to cause or
permit the holder or holders of such obligation (or trustee on behalf of such
holder or holders) to cause such obligation to become due prior to its stated
maturity or to terminate its commit-
 

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ment under such agreement, provided that this clause (f) shall not apply to
secured Indebtedness that becomes due as a result of the voluntary sale or
transfer of the property or assets securing such Indebtedness;
 
(g)  a decree or order by a court having jurisdiction in the premises shall have
been entered adjudging any Account Party a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization of such Account Party under
the Bermuda Companies Law or the Cayman Islands Companies Law (2004 Revision) or
any other similar applicable Law, and such decree or order shall have continued
undischarged or unstayed for a period of 60 days; or a decree or order of a
court having jurisdiction in the premises for the appointment of an examiner,
receiver or liquidator or trustee or assignee in bankruptcy or insolvency of
such Account Party or a substantial part of its property, or for the winding up
or liquidation of its affairs, shall have been entered, and such decree or order
shall have continued undischarged and unstayed for a period of 60 days;
 
(h)  any Account Party shall institute proceedings to be adjudicated a voluntary
bankrupt, or shall consent to the filing of a bankruptcy proceeding against it,
or shall file a petition or answer or consent seeking reorganization under the
Bermuda Companies Law or the Cayman Islands Companies Law (2004 Revision) or any
other similar applicable Law, or shall consent to the filing of any such
petition, or shall consent to the appointment of an examiner, receiver or
liquidator or trustee or assignee in bankruptcy or insolvency of it or a
substantial part of its property, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts generally as
they become due, or corporate or other action shall be taken by such Account
Party in furtherance of any of the aforesaid purposes;
 
(i)  one or more judgments for the payment of money in an aggregate amount in
excess of $100,000,000 shall be rendered against any Account Party or any of its
Subsidiaries or any combination thereof and the same shall not have been
vacated, discharged, stayed (whether by appeal or otherwise) or bonded pending
appeal within 45 days from the entry thereof;
 
(j)  an ERISA Event (or similar event with respect to any Non-U.S. Benefit Plan)
shall have occurred that, in the opinion of the Lender, when taken together with
all other ERISA Events and such similar events that have occurred, could
reasonably be expected to result in liability of the Account Parties and their
Subsidiaries in an aggregate amount exceeding $100,000,000;
 
(k)  a Change in Control shall occur;
 
(l)  XL Capital shall cease to own, beneficially and of record, directly or
indirectly all of the outstanding voting shares of capital stock of XL
Insurance, XL Re or XL America; or
 

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(m)  the guarantee contained in Article III shall terminate or cease, in whole
or material part, to be a legally valid and binding obligation of each Guarantor
or any Guarantor or any Person acting for or on behalf of any of such parties
shall contest such validity or binding nature of such guarantee itself or the
Transactions, or any other Person shall assert any of the foregoing;
 
then, and in every such event (other than an event with respect to any Account
Party described in clause (g) or (h) of this Article), and at any time
thereafter during the continuance of such event, the Lender shall, by notice to
the Account Parties, take either or both of the following actions, at the same
or different times: (i) terminate the Commitment, and thereupon the Commitment
shall terminate immediately, and (ii) declare the Loans then outstanding to be
due and payable in whole (or in part, in which case any principal not so
declared to be due and payable may thereafter be declared to be due and
payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other
obligations of the Account Parties accrued hereunder, shall become due and
payable immediately, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Account Parties; and in case of any
event with respect to any Account Party described in clause (g) or (h) of this
Article, the Commitment shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Account Parties accrued hereunder, shall automatically
become due and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Account Parties.
 
If an Event of Default shall occur and be continuing and XL Capital receives
notice from the Lender demanding the deposit of cash collateral for the
aggregate LC Exposure of the Lender pursuant to this paragraph, the Account
Parties shall immediately deposit into an account established and maintained on
the books and records of the Lender, which account may be a “securities account”
(within the meaning of Section 8-501 of the Uniform Commercial Code as in effect
in the State of New York (the “Uniform Commercial Code”)), in the name of the
Lender, an amount in cash equal to the total LC Exposure as of such date plus
any accrued and unpaid interest thereon; provided that the obligation to deposit
such cash collateral shall become effective immediately, and such deposit shall
become immediately due and payable, without demand or other notice of any kind,
upon the occurrence of any Event of Default with respect to any Account Party
described in clause (g) or (h) of this Article. Such deposit shall be held by
the Lender as collateral for the LC Exposure under this Agreement.
 
In addition to the provisions of this Article, each Account Party agrees that
upon the occurrence and during the continuance of any Event of Default the
Lender which has issued any Alternative Currency Letter of Credit may, by notice
to XL Capital: (a) declare that all fees and other obligations of the Account
Parties accrued in respect of Alternative Currency Letters of Credit issued by
the Lender shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby
 

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waived by each Account Party and (b) demand the deposit of cash collateral from
the Account Parties in immediately available funds in the currency of such
Alternative Currency Letter of Credit or, at the option of the Lender, in
Dollars in an amount equal to the then aggregate undrawn face amount of all such
Alternative Currency Letters of Credit and in such manner as previously agreed
to by the Account Parties and the Lender; provided that, in the case of any of
the Events of Default specified in clause (g) or (h) of this Article, without
any notice to any Account Party or any other act by the Lender, all fees and
other obligations of the Account Parties accrued in respect of all Alternative
Currency Letters of Credit shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Account Party.
 
 
ARTICLE IX
 
MISCELLANEOUS
 
SECTION 9.01.  Notices. Except in the case of notices and other communications
expressly permitted to be given by telephone, all notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by telecopy, as follows:
 
(a)  if to any Account Party, to XL Capital at XL House, One Bermudiana Road,
Hamilton HM 11 Bermuda, Attention of Roderick Gray (telecopy no. (441)
296-6399); with a copy to Kirstin Romann Gould, Esq. at the same address and
telecopy number (441) 295-2840);
 
(b)  if to the Lender, to [Deutsche Bank AG New York Branch, 60 Wall Street,
38th Floor, New York, New York 10005, Attention of Global Technology &
Operations—Loan Division (Telecopy No. (212) 797-0403; Telephone No. (212)
250-1014), with a copy to Deutsche Bank Securities Inc., 60 Wall Street, New
York, New York 10005, Attention of Ruth Leung (Telecopy No. (212) 797-0270;
Telephone No. (212) 250-8650).]
 
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
 
Notices and other communications to the Lender hereunder may be delivered or
furnished by electronic communications; provided that the foregoing shall not
apply to notices pursuant to Article II unless otherwise agreed by the Lender.
Any Account Party may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications. Without limiting the foregoing,
the Account Parties may furnish to the Lender the financial statements required
to
 

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be furnished by it pursuant to Section 6.01(a), 6.01(b) or 6.01(c) by electronic
communications.
 
 
SECTION 9.02.  Waivers; Amendments.
 
(a)  No Deemed Waivers; Remedies Cumulative. No failure or delay by the Lender
in exercising any right or power hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Lender hereunder are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or consent to any departure by the
Account Parties therefrom shall in any event be effective unless the same shall
be permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. Without limiting the generality of the foregoing, the making of a Loan or
issuance of a Letter of Credit shall not be construed as a waiver of any
Default, regardless of whether the Lender may have had notice or knowledge of
such Default at the time.
 
(b)  Amendments. Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Obligors and the Lender.
 
 
SECTION 9.03.  Expenses; Indemnity; Damage Waiver.
 
(a)  Costs and Expenses. The Account Parties jointly and severally agree to pay
all out-of-pocket expenses incurred by the Lender, including the fees, charges
and disbursements of one legal counsel for the Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement,
including its rights under this Section, or in connection with the Loans made or
Letters of Credit issued hereunder, including in connection with any workout,
restructuring or negotiations in respect thereof.
 
Indemnification by the Account Parties. The Account Parties shall jointly and
severally indemnify the Lender and its Related Party (each such Person being
called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses, including the
fees, charges and disbursements of any counsel for any Indemnitee (but not
including Excluded Taxes), incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of (i) the execution or
delivery of this Agreement or any agreement or instrument contemplated hereby,
the performance by the parties hereto of their respective obligations hereunder
or the consummation of the Transactions or any other transactions contemplated
hereby, (ii) any Loan or the use of the proceeds thereof or any Letter of Credit
or the use thereof (including any refusal by the Lender to honor a demand for
payment under a Letter of Credit if the documents presented in connection with
 

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such demand do not strictly comply with the terms of such Letter of Credit),
(iii) any actual or alleged presence or release of Hazardous Materials on or
from any property owned or operated by any Account Party or any of its
Subsidiaries, or any Environmental Liability related in any way to any Account
Party or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses result from or arise out of the gross negligence
or willful misconduct of such Indemnitee as determined in a final non-appealable
judgment by a court of competent jurisdiction.
 
(b)  Waiver of Consequential Damages, Etc. To the extent permitted by applicable
law, no Account Party shall assert, and each Account Party hereby waives, any
claim against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the Transactions, any Loan or
Letter of Credit or the use of the proceeds thereof.
 
(c)  Payments. All amounts due under this Section shall be payable promptly
after written demand therefor.
 
 
SECTION 9.04.  Successors and Assigns.
 
(a)  Assignments Generally. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that no party hereto may assign
or otherwise transfer any of its rights or obligations hereunder without the
prior written consent of the other parties hereto (and any attempted assignment
or transfer by an Account Party without such consent shall be null and void).
Nothing in this Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby, and, to the extent expressly contemplated hereby, the
Related Parties of the Lender) any legal or equitable right, remedy or claim
under or by reason of this Agreement.
 
(b)  Certain Pledges. The Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of the Lender, including any such pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge
or assignment of a security interest shall release the Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for the Lender
as a party hereto.
 
 
SECTION 9.05.  Survival. All covenants, agreements, representations and
warranties made by the Account Parties herein and in the certificates or other
instruments
 

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delivered in connection with or pursuant to this Agreement shall be considered
to have been relied upon by the other parties hereto and shall survive the
execution and delivery of this Agreement and the making of any Loans and the
issuance of any Letters of Credit, regardless of any investigation made by any
such other party or on its behalf and notwithstanding that the Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of, or any accrued interest on, any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Commitment has
not expired or terminated. The provisions of Sections 2.14, 2.15, 2.16 and 9.03
and Article VIII shall survive and remain in full force and effect regardless of
the consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the expiration
or termination of the Commitment or the termination of this Agreement or any
provision hereof.
 
 
SECTION 9.06.  Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Lender constitute
the entire contract between and among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof. Except as provided in
Section 5.01, this Agreement shall become effective when it shall have been
executed by the Lender and when the Lender shall have received counterparts
hereof which, when taken together, bear the signatures of each of the other
parties hereto, and thereafter shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. Delivery of an
executed counterpart of a signature page to this Agreement by telecopy shall be
effective as delivery of a manually executed counterpart of this Agreement.
 
 
SECTION 9.07.  Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.
 
 
SECTION 9.08.  Right of Setoff. If an Event of Default shall have occurred and
be continuing, the Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Lender to or for the credit
or the account of any Account Party against any of and all the obligations of
such Account Party now or hereafter existing under this Agreement held by the
Lender, irrespective of whether or not the Lender shall have made any demand
under this Agreement and although such obligations may be unmatured. The rights
of the
 

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Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which the Lender may have.
 
 
SECTION 9.09.  Governing Law; Jurisdiction; Etc.

 
(a)  Governing Law. This Agreement shall be construed in accordance with and
governed by the law of the State of New York.
 
(b)  Submission to Jurisdiction. Each Obligor hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Lender may otherwise have to bring any action or proceeding relating to this
Agreement against any Obligor or its properties in the courts of any
jurisdiction.
 
(c)  Waiver of Venue. Each Obligor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any court
referred to in paragraph (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
 
(d)  Service of Process. By the execution and delivery of this Agreement, XL
Capital, XL Insurance and XL Re acknowledge that they have by a separate written
instrument, designated and appointed CT Corporation System, 111 Eighth Avenue,
13th floor, New York, New York 10011 (or any successor entity thereto), as its
authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to this Agreement that may be instituted in any
federal or state court in the State of New York. Each party to this Agreement
irrevocably consents to service of process in the manner provided for notices in
Section 9.01. Nothing in this Agreement will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.
 
(e)  Waiver of Immunities. To the extent that any Account Party has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether through service of notice, attachment prior to judgment,
attachment in aid of execu-
 

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tion or execution, on the ground of sovereignty or otherwise) with respect to
itself or its property, it hereby irrevocably waives, to the fullest extent
permitted by applicable law, such immunity in respect of its obligations under
this Agreement.
 
 
SECTION 9.10.  WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
 
 
SECTION 9.11.  Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
 
 
SECTION 9.12.  Treatment of Certain Information; Confidentiality.
 
(a)  Treatment of Certain Information. Each of the Account Parties acknowledge
that from time to time financial advisory, investment banking and other services
may be offered or provided to any Account Party or one or more of their
Subsidiaries (in connection with this Agreement or otherwise) by the Lender or
by one or more of its subsidiaries or affiliates and each of the Account Parties
hereby authorizes the Lender to share any information delivered to it by such
Account Party and its Subsidiaries pursuant to this Agreement, or in connection
with the decision of the Lender to enter into this Agreement, to any such
subsidiary or affiliate, it being understood that (i) any such information shall
be used only for the purpose of advising the Account Parties or preparing
presentation materials for the benefit of the Account Parties and (ii) any such
subsidiary or affiliate receiving such information shall be bound by the
provisions of paragraph (b) of this Section as if it were a Lender hereunder.
Such authorization shall survive the repayment of the Loans, the expiration or
termination of the Letters of Credit, the expiration or termination of the
Commitment or the termination of this Agreement or any provision hereof.
 
(b)  Confidentiality. The Lender agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (i) to
its and its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and
 

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other advisors (it being understood that the Persons to whom such disclosure is
made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (ii) to the extent requested
by any regulatory authority (including self-regulating organizations) having
jurisdiction over the Lender, (iii) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (iv) to any other party
to this Agreement, (v) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder, (vi) subject to an agreement in writing containing
provisions substantially the same as those of this paragraph and for the benefit
of the Account Parties, to (a) any assignee of, or any prospective assignee of,
any of its rights or obligations under this Agreement or (b) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction
relating to any Account Party and its obligations, (vii) with the consent of the
Account Parties or (viii) to the extent such Information (A) becomes publicly
available other than as a result of a breach of this paragraph or (B) becomes
available to the Lender on a nonconfidential basis from a source other than an
Account Party. For the purposes of this paragraph, “Information” means all
information received from an Account Party relating to an Account Party or its
business, other than any such information that is available to the Lender on a
nonconfidential basis prior to disclosure by such Account Party; provided that,
in the case of information received from an Account Party after the date hereof,
such information is clearly identified at the time of delivery as confidential.
Any Person required to maintain the confidentiality of Information as provided
in this Section shall be considered to have complied with its obligation to do
so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information. Notwithstanding the foregoing, the Lender agrees that
it will not trade the securities of any of the Account Parties based upon
non-public Information that is received by it.
 
 
SECTION 9.13.  Judgment Currency. This is an international loan transaction in
which the obligations of each Account Party under this Agreement to make payment
hereunder shall be satisfied only in Dollars and only if such payment shall be
made in New York City, and the obligations of each Account Party under this
Agreement to make payment to (or for account of) the Lender in Dollars shall not
be discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any other currency or in another place except to
the extent that such tender or recovery results in the effective receipt by the
Lender in New York City of the full amount of Dollars payable to the Lender
under this Agreement. If for the purpose of obtaining judgment in any court it
is necessary to convert a sum due hereunder in Dollars into another currency (in
this Section called the “judgment currency”), the rate of exchange that shall be
applied shall be that at which in accordance with normal banking procedures the
Lender could purchase such Dollars at the principal office of the Lender in New
York City with the judgment currency on the Business Day next preceding the day
on which such judgment is rendered. The obligation of each Account Party in
respect of any such sum due from it to the Lender hereunder (in this Section
called an “Entitled Person”) shall, notwithstanding the rate of exchange
actually applied in rendering such judgment, be discharged only to the extent
that on the Business Day following receipt by
 

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such Entitled Person of any sum adjudged to be due hereunder in the judgment
currency such Entitled Person may in accordance with normal banking procedures
purchase and transfer Dollars to New York City with the amount of the judgment
currency so adjudged to be due; and each Account Party hereby, as a separate
obligation and notwithstanding any such judgment, agrees to indemnify such
Entitled Person against, and to pay such Entitled Person on demand, in Dollars,
the amount (if any) by which the sum originally due to such Entitled Person in
Dollars hereunder exceeds the amount of the Dollars so purchased and
transferred.
 
 
SECTION 9.14.  USA PATRIOT Act. The Lender hereby notifies the Account Parties
that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)), it is required to obtain, verify and
record information that identifies the Account Parties, which information
includes the name and address of the Account Parties and other information that
will allow the Lender to identify each Account Party in accordance with said
Act.
 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
 
 
XL Capital Ltd
as an Account Party and a Guarantor
 
By: /s/ Simon Rich
Name: Simon Rich
Title: Senior Vice President and Controller
 
 
U.S. Federal Tax Identification No.: 98-0191089
 
 
X.L. AMERICA, INC.,
as an Account Party and a Guarantor
 
By: /s/ Richard G. McCarty
Name: Richard G. McCarty
Title: SVP, Gen. Counsel, Secretary
 
 
U.S. Federal Tax Identification No.: 06-1516268
 
 
XL INSURANCE (BERMUDA) LTD,
as an Account Party and a Guarantor
 
By: /s/ C. Stanley Lee
Name: C. Stanley Lee
Title: SVP, Chief Financial Officer
 
 
U.S. Federal Tax Identification No.: 98-0354869
 

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XL RE LTD,
as an Account Party and a Guarantor
 
By: /s/ Andrew Turnbull
Name: Andrew Turnbull
Title: Senior Vice President
 
 
U.S. Federal Tax Identification No.: 98-0351953
 
 
DEUTSCHE BANK AG NEW YORK BRANCH,
as Lender
 
By: /s/ Ruth Leung
Name: Ruth Leung
Title: Director
 
 
By: /s/ Richard Herder
Name: Richard Herder
Title: Managing Director
 

 
 
 
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