Exhibit 10.54

                                17 NOVEMBER 2004

                                 XL CAPITAL LTD
                                AS ACCOUNT PARTY

                                 THE GUARANTORS
                               (AS DEFINED HEREIN)

                            THE LENDERS PARTY HERETO
                               (AS DEFINED HEREIN)

                           CITIBANK INTERNATIONAL PLC
                          AS AGENT AND SECURITY TRUSTEE

              CITIGROUP GLOBAL MARKETS LIMITED AND BARCLAYS CAPITAL
                                  AS ARRANGERS

                          =============================

                          LETTER OF CREDIT FACILITY AND
                            REIMBURSEMENT AGREEMENT

                          =============================

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                                    CONTENTS

CLAUSE                                                                      PAGE

1.      DEFINITIONS............................................................1

2.      THE FACILITY..........................................................14

3.      UTILISATION OF THE FACILITY...........................................16

4.      TERMINATION OF LETTERS OF CREDIT......................................17

5.      PAYMENT OF DEMANDS....................................................21

6.      THE ACCOUNT PARTY'S LIABILITIES IN RELATION TO LETTERS OF CREDIT......22

7.      DEFAULT INTEREST......................................................23

8.      TERMINATION AND REDUCTION OF THE COMMITMENTS..........................23

9.      FEES..................................................................24

10.     TAXES.................................................................26

11.     TAX RECEIPTS..........................................................27

12.     INCREASED COSTS.......................................................28

13.     ILLEGALITY............................................................29

14.     MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS........................30

15.     PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SET-OFFS...........31

16.     GUARANTEE AND INDEMNITY...............................................33

17.     REPRESENTATIONS AND WARRANTIES........................................36

18.     AFFIRMATIVE COVENANTS.................................................40

19.     NEGATIVE COVENANTS....................................................45

20.     EVENTS OF DEFAULT.....................................................49

21.     THE AGENT, THE ARRANGERS AND THE LENDERS..............................52

22.     NOTICES...............................................................59

23.     WAIVERS AND AMENDMENTS................................................59

24.     COSTS AND EXPENSES....................................................60

25.     INDEMNITIES...........................................................61

26.     ALTERATION TO THE PARTIES.............................................62

27.     SET OFF...............................................................67

28.     MISCELLANEOUS PROVISIONS..............................................68

29.     GOVERNING LAW AND JURISDICTION........................................69
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30.     TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.....................70

31.     THIRD PARTY RIGHTS....................................................71
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                                                                  Conformed Copy

LETTER OF CREDIT FACILITY AND REIMBURSEMENT AGREEMENT dated 17 November 2004

BETWEEN:

(1)   XL  CAPITAL  LTD,  a company  incorporated  under  the laws of the  Cayman
      Islands (the ACCOUNT PARTY);

(2)   The GUARANTORS as defined below;

(3)   The LENDERS as defined below;

(4)   CITIBANK INTERNATIONAL PLC, as agent and trustee for the Lenders (and when
      acting in such  capacities the AGENT and SECURITY  TRUSTEE  respectively);
      and

(5)   BARCLAYS  CAPITAL and CITIGROUP  GLOBAL  MARKETS  LIMITED as mandated lead
      arrangers (the ARRANGERS).

1.    DEFINITIONS

DEFINED TERMS

1.1   As used in this Agreement, the following terms have the meanings specified
      below:

ACCELERATION  EVENT means the  provision by the Agent to the Account Party of an
Acceleration  Notice  and/or the  occurrence  of any event  with  respect to any
Obligor described in Clause 20(e) or 20(f);

ACCELERATION NOTICE has the meaning assigned to such term in Clause 20;

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;

AMB CASH COLLATERAL has the meaning assigned to such term in Clause 19.8;

AMB RATING UNDERTAKING has the meaning assigned to such term in Clause 19.8;

APPLICABLE  PERCENTAGE means, with respect to any Lender,  the percentage of the
Total  Commitments  represented  by  such  Lender's  Commitment.  If  the  Total
Commitments or Commitment of a Lender have terminated or expired, the Applicable
Percentage shall be determined based upon the Total Commitments or Commitment of
such Lender (as the case may be) most  recently in effect,  giving effect to any
permitted assignments or transfers;

APPLICANT means each of Mid Ocean,  Stonebridge  Underwriting,  NAC Reinsurance,
Dornoch,  County Down, XL London Market and XL Re and any other Affiliate of the
Account  Party as may be agreed by the Agent and the Account  Party from time to
time;

APPROVED CREDIT INSTITUTION means a credit institution within the meaning of the
First  Council  Directive  on  the   co-ordination  of  laws,   regulations  and
administrative  provisions relating to the taking up and pursuit of the business
of credit  institutions  (No 77/780/EEC)  which has been approved by Lloyd's for
the purpose of providing  guarantees and issuing or confirming letters of credit
comprising a member's Funds at Lloyd's;

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AUTHORISED  SIGNATORY  means, in relation to an Obligor,  any person who is duly
authorised (in such manner as may be reasonably  acceptable to the Agent) and in
respect of whom the Agent has  received a  certificate  signed by a director  or
another Authorised  Signatory of such Obligor setting out the name and signature
of such person and confirming such person's authority to act;

AVAILABLE  COMMITMENT  means in  relation  to a  Lender  at any time and save as
otherwise provided herein its Commitment less the amount of its participation in
the LC Exposures at such time  PROVIDED  THAT such amount shall not be less than
zero;

AVAILABLE   FACILITY  means,  at  any  time,  the  aggregate  of  the  Available
Commitments  adjusted,  in the  case of a  proposed  utilisation  pursuant  to a
Utilisation Request, so as to take into account:

(a)   any reduction in the Commitment of a Lender  pursuant to the terms hereof;
      and

(b)   any Letter of Credit which pursuant to any other Utilisation Request is to
      be issued;

on or  before  the  proposed  Utilisation  Date  relating  to such  utilisation;
AVAILABILITY  PERIOD means the period from (and  including)  the Closing Date to
(and including) the Commitment Termination Date;

BILATERAL LETTER OF CREDIT has the meaning given to it in Clause 4.5(b);

BIS QUALIFYING  ASSETS means fixed income  securities issued or guaranteed by US
Government  Agencies or by the Central  Governments of any OECD country having a
financial  strength  rating  of at least  "A+"  from  Standard  & Poor's  Rating
Services (or its successor);

BOARD means the Board of Governors of the Federal  Reserve  System of the United
States of America;

BUSINESS DAY means any day that is not a Saturday,  Sunday or other day on which
commercial banks in New York City,  London or Bermuda are authorised or required
by Law to remain closed;

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

CENTRAL GOVERNMENT means, without limitation, government departments, ministries
and central banks;

CHANGE  IN  CONTROL  means  the  occurrence  of any of the  following  events or
conditions:

(a)   any Person,  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 capital  stock of the  Account  Party  entitling  such Person to
      exercise  40% or more of the total  voting  power of all shares of capital
      stock of the Account Party that is entitled to vote generally in elections
      of

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      directors,  other than an  acquisition  by the Account  Party,  any of its
      subsidiaries or any employee benefit plans of the Account Party; or

(b)   the Account  Party  merges or  consolidates  with or into any other Person
      (other than a Subsidiary), another person (other than a subsidiary) merges
      into the Account Party or the Account Party 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 capital  stock of the Account Party (other than the
      cancellation  of any  outstanding  shares of capital  stock of the Account
      Party  held by the  Person  with whom it merges or  consolidates)  or (ii)
      which is effected solely to change the  jurisdiction of  incorporation  of
      the  Account  Party  and  results  in a  reclassification,  conversion  or
      exchange  of  outstanding  shares of capital  stock of the  Account  Party
      solely into shares of capital stock of the surviving entity; or

(c)   a majority of the members of the Account  Party's  board of directors  are
      persons who are then serving on the board of directors without having been
      elected by the board of directors or having been nominated for election by
      its shareholders.

CHANGE IN LAW means (a) the adoption of any Law,  rule or  regulation  after the
date of this Agreement,  (b) any change in any Law, rule or regulation or in the
interpretation  or application  thereof by any Governmental  Authority after the
date of this  Agreement  or (c)  compliance  by any Lender (or,  for purposes of
Clause  12.1 and 13, by any lending  office of such  Lender or by such  Lender's
holding company,  if any) with any request,  guideline or directive  (whether or
not having the force of Law) of any Governmental  Authority made or issued after
the date of this Agreement;

CHARGE AGREEMENT means the charge  agreement,  in substantially the form set out
in Schedule 9 that may be required  to be entered  into by the Account  Party as
chargor  pursuant to the terms  hereof and  pursuant to which the Account  Party
will grant cash cover in favour of the Security Trustee;

CLOSING  DATE  means  the date on which the  conditions  set out in  Schedule  5
(CONDITIONS  PRECEDENT)  have,  in the  reasonable  opinion of the  Agent,  been
satisfied;

CODE means the Internal Revenue Code of 1986 of the United States of America, as
amended from time to time;

COMMENCEMENT DATE means, in respect of a Letter of Credit, the date upon which a
Letter of Credit shall become effective, being any date from (and including) the
Closing Date to (but excluding) 1 December 2005;

COMMITMENT means, with respect to each Lender,  the commitment of such Lender to
participate in the issue of Letters of Credit  hereunder.  The initial amount of
each  Lender's  Commitment  is set  forth  on  Schedule  1,  or in the  Transfer
Certificate pursuant to which such Lender shall have assumed its Commitment,  as
applicable, but in each case as such Commitment may be:

(a)   reduced from time to time pursuant to Clause 8 (TERMINATION  AND REDUCTION
      OF THE COMMITMENTS) or Clause 4.5(b) (REPLACEMENT LETTERS OF CREDIT); and

(b)   reduced or increased  from time to time pursuant to  assignments  by or to
      such Lender pursuant to Clause 26.3 (TRANSFERS BY LENDERS);

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COMMITMENT  LETTER means the letters so titled from each Arranger to the Account
Party dated 16 September 2004;

COMMITMENT TERMINATION DATE means 30 November 2005;

CONSOLIDATED NET WORTH means, at any time, the consolidated shareholders' equity
of the Account Party and its Subsidiaries;

CONTROL means the possession,  directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person,  whether  through
the ability to exercise voting power, by contract or otherwise.  CONTROLLING and
CONTROLLED have meanings correlative thereto;

COUNTY DOWN means County Down Limited, a company  incorporated under the laws of
England and Wales;

DEFAULT means any event or condition which  constitutes an Event of Default or a
Potential Event of Default;

DEFAULT  PERIOD means the period from and  including the date on which the Agent
makes  payment of a Demand Amount to but excluding the date on which the Account
Party  makes a  corresponding  reimbursement  under  Clause  6.1(a) and (b) (THE
ACCOUNT PARTY'S INDEMNITY TO LENDERS);

DEMAND AMOUNT means a principal  amount to be paid by the Account Party pursuant
to Clause 6.1(a) and (b) (THE ACCOUNT PARTY'S INDEMNITY TO LENDERS);

DOLLARS or $ refers to the lawful  money of the  United  States of America  from
time to time;

DORNOCH means Dornoch Limited, a company  incorporated under the laws of England
and Wales;

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

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

EQUITY RIGHTS means,  with respect to any Person,  any  subscriptions,  options,
warrants,  commitments,  pre-emptive rights or agreements of any kind (including
any  shareholders'  or  voting  trust   agreements)  for  the  issuance,   sale,
registration or voting of, or securities convertible into, any additional shares
of capital stock of any class,  or partnership or other  ownership  interests of
any type in, such Person;

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ERISA means the Employee  Retirement  Income  Security Act of 1974 of the United
States of America, as amended from time to time;

ERISA AFFILIATE means any trade or business (whether or not incorporated)  that,
together with the Account  Party,  is treated as a single  employer under Clause
414(b) or (c) of the Code,  or,  solely for  purposes of Clause 302 of ERISA and
Clause 412 of the Code, is treated as a single  employer under Clause 414 of the
Code;

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

EVENT OF DEFAULT has the meaning assigned to such term in Clause 20;

FACILITY  means the  letter of credit  facility  granted  to the  Account  Party
pursuant to this Agreement;

FACILITY OFFICE means the office or offices notified by a Lender to the Agent in
writing on or before the date it becomes a Lender (or,  following  that date, by
not less than five  Business  Days'  written  notice)  as the  office or offices
through which it will perform its obligations under this Agreement;

FEE LETTER  means the letter from the  Arrangers  to the Account  Party dated 16
September 2004, relating to the payment of certain fees;

FINANCE  DOCUMENTS means this Agreement,  the Charge  Agreement,  the Commitment
Letter, the Fee Letter, any Letter of Credit and any other document or documents
as may be agreed by the Agent and the Account Party;

FINAL  EXPIRATION DATE means the date on which a Letter of Credit  terminates in
accordance with its terms;

FINANCE  PARTIES  means the Lenders,  the Agent,  the Arrangers and the Security
Trustee;

FINANCIAL  OFFICER  means,  with respect to any Obligor,  a principal  financial
officer of such Obligor;

FINANCIAL STRENGTH RATING has the meaning assigned to such term in Clause 9.3.

FUNDS AT LLOYD'S has the meaning  given to it in  paragraph 4 of the  Membership
Bylaw (No. 17 of 1993);

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FUNDS AT  LLOYD'S  REQUIREMENTS  means,  in respect  of any  member,  the amount
required to be maintained by that member as Funds at Lloyd's;

FUNDS DATE means the date notified by Lloyd's each year as being the latest date
in that year by which Funds at Lloyd's  can be placed  with  Lloyd's in order to
satisfy Funds at Lloyd's  Requirements in respect of the immediately  succeeding
calendar year being,  in respect of the 2004 calendar  year, 26 November 2004 or
such other date as may be advised by Lloyd's;

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

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

GOVERNMENTAL  AUTHORITY  means the government of the United  Kingdom,  or of any
other nation, or any political subdivision thereof,  whether state or local, and
any agency, authority, instrumentality,  regulatory body, court, central bank or
other entity exercising executive, legislative,  judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government;

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

GUARANTORS means each of the Account Party, XL America, XL Bermuda, and XL Re;

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

HEDGING AGREEMENT means any interest rate protection agreement, foreign currency
exchange  agreement,  commodity price protection  agreement or other interest or
currency exchange rate or commodity price hedging arrangement;

INDEBTEDNESS  means, for any Person,  without  duplication (it being understood,
for the avoidance of doubt,  that insurance  payment  liabilities,  as such, and
liabilities  arising in the  ordinary  course of such  Person's  business  as an
insurance or reinsurance  company  (including GICs and Stable Value  Instruments
and any Specified Transaction Agreement relating

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thereto)  or  corporate  member 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) (in each case other
than in connection with the provision of financing to such Person or any of such
Person's  Affiliates) shall not be deemed to constitute  Indebtedness):  (i) all
indebtedness  or liability for or on account of money  borrowed by, or for or on
account of  deposits  with or  advances to (but not  including  accrued  pension
costs,  deferred  income  taxes or accounts  payable of) such  Person;  (ii) all
obligations  (including  contingent  liabilities)  of such Person  evidenced  by
bonds, debentures, notes, banker's acceptances or similar instruments; (iii) all
indebtedness or liability for or on account of property or services purchased or
acquired by such Person;  (iv) any amount secured by a Lien on property owned by
such Person  (whether or not  assumed)  and Capital  Lease  Obligations  of such
Person  (without  regard to any  limitation  of the rights and  remedies  of the
holder of such Lien or the lessor under such capital  lease to  repossession  or
sale of such property);  (v) the maximum available amount of all standby letters
of credit issued for the account of such Person and,  without  duplication,  all
drafts drawn thereunder (to the extent unreimbursed); and (vi) all Guarantees of
such Person;

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

ISDA has the meaning assigned to such term in Clause 19.3(f);

ISSUING  LENDER  means any  Lender in its  capacity  as an issuer of one or more
Letters of Credit hereunder;

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

LC DISBURSEMENT means a payment made by a Lender pursuant to a Letter of Credit;

LC EXPOSURE means the sum of (a) the aggregate undrawn amount of all outstanding
Letters  of  Credit at such time  plus (b) the  aggregate  amount of all  Demand
Amounts.  The LC  Exposure  of any  Lender  at any time  shall be the sum of its
participation  in the outstanding  Letters of Credit at such time and the Demand
Amounts owed to it at such time;

LC  PROPORTION  means,  in  relation  to the  Lender in respect of any Letter of
Credit and save as otherwise  provided  herein,  the proportion  (expressed as a
percentage)  of such Lender's  Available  Commitment  to the Available  Facility
immediately prior to the issue of such Letter of Credit;

LENDER  AFFILIATE  means with  respect to any Lender,  (a) an  Affiliate of such
Lender  or  (b)  any  entity  (whether  a  corporation,  partnership,  trust  or
otherwise) that is engaged in making, purchasing, holding or otherwise investing
in bank loans and similar  extensions  of credit in the  ordinary  course of its
business  and is  administered  or managed by a Lender or an  Affiliate  of such
Lender;

LENDERS means any of the Persons listed in Schedule 1 (COMMITMENTS) or any other
Person that shall have become a party hereto  pursuant to Clause 26.3 (TRANSFERS
BY Lenders),  and which has not ceased to be a party hereto in  accordance  with
the terms hereof;

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LETTERS OF CREDIT means Letters of Credit  issued  pursuant to the terms of this
Agreement  (including,  for the  avoidance  of doubt,  any New Letter of Credit,
Reduced Letter of Credit or Bilateral Letter of Credit referred to in Clause 4.5
(REPLACEMENT LETTERS OF CREDIT));

LETTER OF CREDIT FEES means the fees  payable by the Account  Party  pursuant to
Clause 9.2 (LETTER OF CREDIT FEES) (as adjusted  from time to time in accordance
with the provisions of Clause 9.3) (ADJUSTMENT OF LETTER OF CREDIT FEE);

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

LIBOR means, in relation to any unpaid sum:

(a)   the display rate per annum of the offered quotation for overnight deposits
      in the currency of the relevant  unpaid sum which appears on Telerate Page
      3750 or Telerate Page 3740 (as  appropriate) at or about 11.00 a.m. on any
      relevant day; or

(b)   if the display rate cannot be determined  under  paragraph (a) above,  the
      rate  determined  by the  Agent to be the  arithmetic  mean  (rounded,  if
      necessary,  to the nearest five decimal  places with the midpoint  rounded
      upwards) of the rates notified to the Agent by each of the Reference Banks
      quoting  (provided  that at least two Reference  Banks are quoting) as the
      rate at which such  Reference Bank is offering  overnight  deposits in the
      required currency in an amount comparable to that amount to prime banks in
      the London  Interbank  Market at or about 11.00 a.m. on any relevant  day;
      and

for the  purposes  of this  definition:  TELERATE  PAGE 3750  means the  display
designated as Page 3750, and TELERATE PAGE 3740 means the display  designated as
Page 3740,  in each case on the  Telerate  Service  (or such other  pages as may
replace Page 3750 or Page 3740 on that  service or such other  service as may be
nominated by the British Bankers' Association  (including the Reuters Screen) as
the  information   vendor  for  the  purposes  of  displaying  British  Bankers'
Association Interest Settlement Rates for deposits in the currency concerned);

LLOYD'S  means  the  society  incorporated  by  Lloyd's  Act 1871 by the name of
Lloyd's;

MAJORITY  LENDERS means, at any time,  Lenders having  Commitments  representing
more than 50% of the sum of the total  Commitments at such time;  PROVIDED THAT,
if the  Commitments  have expired or been  terminated,  MAJORITY  LENDERS  means
Lenders having more than 50% of the aggregate LC Exposure of the Lenders;

MANDATORY COSTS means, in relation to any unpaid sum for any period,  a rate per
annum calculated in accordance with Schedule 4;

MARGIN STOCK means MARGIN STOCK within the meaning of  Regulations T, U and X of
the Board;

MATERIAL  ADVERSE  EFFECT  means a material  adverse  effect on: (a) the assets,
business,  financial  condition or operations of an Obligor and its Subsidiaries
taken as a whole; or (b) the ability of an Obligor to perform any of its payment
or other material obligations under this Agreement;

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MID OCEAN means Mid Ocean Limited, a company  incorporated under the laws of the
Cayman Islands;

MULTIEMPLOYER PLAN means a multiemployer plan as defined in Clause 4001(a)(3) of
ERISA;

NAC REINSURANCE means NAC Reinsurance  International Ltd, a company incorporated
under the laws of England and Wales;

NON-U.S.  BENEFIT PLAN means any plan, fund (including any superannuation  fund)
or other similar program  established or maintained outside the United States by
any Obligor or any of its  Subsidiaries,  with  respect to which such Obligor or
the Subsidiary has an obligation to contribute,  for the benefit of employees of
such  Obligor or such  Subsidiary,  which plan,  fund or other  similar  program
provides,  or results in, the type of benefits  described in Clause 3(1) or 3(2)
of ERISA, and which plan is not subject to ERISA or the Code;

OBLIGOR  JURISDICTION  means (a)  Bermuda,  (b) the Cayman  Islands,  (c) United
States, and (d) any other country (i) where any Obligor is licensed or qualified
to do business or (ii) from or through which payments  hereunder are made by any
Obligor;

OBLIGORS means each of the Account Party and the Guarantors;

OECD COUNTRY means any member of the Organisation for Economic  Co-operation and
Development;

ORIGINAL AGREEMENT means the letter of credit and reimbursement  agreement dated
14 November  2003 between,  inter alios,  the Account  Party,  the Agent and the
lenders thereto;

ORIGINAL LETTERS OF CREDIT means the letters of credit issued under the Original
Agreement;

ORIGINAL PARTIES means the parties to the Original Agreement;

PARTICIPATING  MEMBER STATE means any member  state of the European  Communities
that adopts or has adopted the euro as its lawful  currency in  accordance  with
legislation of the European Union relating to European Monetary Union;

PARTY means any party to this Agreement;

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

PERSON means any natural person, corporation,  limited liability company, trust,
joint venture,  association,  company,  partnership,  Governmental  Authority or
other entity;

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

POTENTIAL EVENT OF DEFAULT means an event or condition which upon notice,  lapse
of time or both would, unless cured or waived, become an Event of Default;

PRIVATE ACT means  separate  legislation  enacted in Bermuda with the  intention
that such legislation apply specifically to an Obligor, in whole or in part;

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PROCESS AGENT has the meaning assigned to such term in Clause 29.3.

QUARTERLY  DATES  means the last  Business  Day of March,  June,  September  and
December in each year,  the first of which shall be the first such day after the
date hereof;

REFERENCE BANKS means,  subject to Clause 26.6 (REFERENCE  BANKS), the principal
London offices of Citibank, N.A., ING Bank N.V., London Branch , Lloyds TSB Bank
plc and Barclays Bank PLC;

REGISTER has the meaning given to it in Clause 26.11 (MAINTENANCE OF REGISTER BY
AGENT);

RELATED  PARTIES  means,  with respect to any  specified  Person,  such Person's
Affiliates  and  the  respective  directors,  officers,  employees,  agents  and
advisors of such Person and such Person's Affiliates;

REPRESENTATIONS  means each of the  representations  and  warranties  set out in
Clause 17 (REPRESENTATIONS AND WARRANTIES);

SAP  means,  as to each  Obligor  and  each  Subsidiary  that  offers  insurance
products,  the  statutory  accounting  practices  prescribed or permitted by the
relevant Governmental Authority for such Obligor's or such Subsidiary's domicile
for the  preparation of its financial  statements and other reports by insurance
corporations  of the same type as such Obligor or such  Subsidiary  in effect on
the date such  statements  or reports are to be  prepared,  except if  otherwise
notified by the Account Party as provided in Clause 1.3;

SEC means the Securities and Exchange Commission of the United States of America
or any successor entity;

SIGNIFICANT  SUBSIDIARY means, at any time, each Subsidiary of the Account Party
that, as of such time, meets the definition of a "significant  subsidiary" under
Regulation S-X of the SEC;

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;  in  exchange,  the  SVI
Provider typically receives a fee;

STERLING or (POUND)  refers to the lawful  currency of the United  Kingdom  from
time to time;

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STONEBRIDGE  UNDERWRITING  means  Stonebridge  Underwriting  Limited,  a company
incorporated under the laws of England and Wales;

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

SUBSTITUTE LENDER has the meaning give to it in Clause 4.4(a);

TAXES  means any and all  present  or future  taxes,  levies,  imposts,  duties,
deductions,  charges  or  withholdings  imposed by any  Governmental  Authority.
TAXATION and TAX shall be construed accordingly;

TOTAL COMMITMENTS means, at any time, the aggregate of the Lenders'  Commitments
(being on the date hereof (pound)450,000,000);

TOTAL FUNDED DEBT means, at any time, all  Indebtedness of the Account Party and
its Subsidiaries which would at such time be classified in whole or in part as a
liability on the  consolidated  balance sheet of the Account Party in accordance
with GAAP;

TOTAL LC  EXPOSURES  means,  at any  time,  the  aggregate  of the  Lenders'  LC
Exposures;

TRANSACTIONS  means the execution,  delivery and  performance by the Obligors of
this Agreement and the other Finance  Documents to which any Obligor is intended
to be a party and the issuance of Letters of Credit hereunder;

TRANSFER  CERTIFICATE  means a  certificate  in the form of  Schedule 8 (FORM OF
TRANSFER CERTIFICATE) delivered pursuant to Clause 26.4 (TRANSFER PROCEDURE);

TRANSFEREE means a Person to which a Lender seeks to transfer by novation all or
part of such  Lender's  rights,  benefits  and  obligations  under  the  Finance
Documents;

US GOVERNMENT  AGENCIES means US government  agencies whose debt obligations are
fully and  explicitly  guaranteed  as to the timely  repayment of principal  and
interest by the full faith and credit of the US federal government;

UTILISATION DATE means the date on which a Letter of Credit is to be issued;

UTILISATION REQUEST means a notice substantially in the form set out in Schedule
6 (FORM OF UTILISATION REQUEST);

WITHDRAWAL  LIABILITY means  liability to a Multiemployer  Plan as a result of a
complete or partial withdrawal from such  Multiemployer  Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA;

XL AMERICA means X.L. America,  Inc., a company  incorporated  under the laws of
Delaware, USA;

XL BERMUDA means XL Insurance  (Bermuda) Ltd, a company organised under the laws
of Bermuda;

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XL LONDON  MARKET means XL London Market Ltd (formerly  known as  Brockbank),  a
company incorporated under the laws of England and Wales;

XL RE means XL Re Ltd, a company organised under the laws of Bermuda.

INTERPRETATION

1.2   Any reference in this Agreement to:

(a)   the AGENT, SECURITY TRUSTEE,  ARRANGERS,  LENDER or any other Person shall
      be  construed  so as to  include  its and any  subsequent  successors  and
      permitted transferees in accordance with their respective interests;

(b)   BARCLAYS  CAPITAL is a  reference  to  Barclays  Capital,  the  investment
      banking  division of Barclays Bank PLC (and any  references  shall include
      Barclays Bank PLC);

(c)   CONTINUING,  in the context of an Event of Default shall be construed as a
      reference to an Event of Default  which has not been remedied or waived in
      accordance  with the terms hereof and in relation to a POTENTIAL  EVENT OF
      DEFAULT,  one which has not been remedied within the relevant grace period
      or waived in accordance with the terms hereof;

(d)   a HOLDING  COMPANY of a company or  corporation  shall be  construed  as a
      reference  to any  company  or  corporation  of which the  first-mentioned
      company or corporation is a subsidiary;

(e)   the  EQUIVALENT  on any date in one  currency  (the FIRST  CURRENCY) of an
      amount  denominated  in  another  currency  (the  SECOND  CURRENCY)  is  a
      reference  to the amount of the first  currency  which could be  purchased
      with the  amount of the  second  currency  at the spot rate  quoted by the
      Agent at or about  11.00 a.m.  on such date for the  purchase of the first
      currency with the second currency;

(f)   a MEMBER shall be construed (as the context may require) as a reference to
      an underwriting member of Lloyd's;

(g)   a MONTH is a reference to a period starting on one day in a calendar month
      and ending on the  numerically  corresponding  day in the next  succeeding
      calendar month save that,  where any such period would  otherwise end on a
      day  which is not a  Business  Day,  it shall  end on the next  succeeding
      Business Day, unless that day falls in the calendar month  succeeding that
      in which it would  otherwise have ended, in which case it shall end on the
      immediately  preceding  Business Day, PROVIDED THAT, if a period starts on
      the last  Business Day in a calendar  month or if there is no  numerically
      corresponding  day in the month in which that  period  ends,  that  period
      shall end on the last Business Day in that later month (and  references to
      MONTHS shall be construed accordingly);

(h)   a Lender's  PARTICIPATION,  in  relation  to a Letter of Credit,  shall be
      construed as a reference to the rights and  obligations  of such Lender in
      relation  to  such  Letter  of  Credit  as are  expressly  set out in this
      Agreement;

(i)   a SUCCESSOR  shall be  construed so as to include an assignee or successor
      in  title  of  such  party  and  any  person  who  under  the  laws of its
      jurisdiction  of  incorporation  or  domicile  has  assumed the rights and
      obligations  of such party under this  Agreement  or to which,  under such
      laws, such rights and obligations have been transferred;

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(j)   an ASSET or  PROPERTY  shall be  construed  to have the same  meaning  and
      effect  and to refer to any and all  tangible  and  intangible  assets and
      properties, including cash, securities, accounts and contract rights;

(k)   TAX shall be  construed  so as to  include  any and all  present or future
      stamp or documentary taxes or any other excise or property taxes, charges,
      interest,  penalties  or similar  levies  arising  from any  payment  made
      hereunder or from the execution,  delivery or enforcement of, or otherwise
      with respect to, this Agreement;

(l)   VAT shall be  construed as a reference  to value added tax  including  any
      similar tax which may be imposed in place thereof from time to time;

(m)   the WINDING-UP,  DISSOLUTION or ADMINISTRATION of a company or corporation
      shall  be  construed  so  as  to  include  any   equivalent  or  analogous
      proceedings  under the Law of the  jurisdiction  in which such  company or
      corporation is incorporated  or any  jurisdiction in which such company or
      corporation  carries on business  including  the  seeking of  liquidation,
      winding-up,  reorganisation,   dissolution,  administration,  arrangement,
      adjustment, protection or relief of debtors; and

(n)   unless the contrary intention appears:

      (i)   a Letter of Credit is CANCELLED, REPAID or PREPAID by:

            (A)   providing  the Issuing  Lender(s)  with cash cover (as defined
                  below); or

            (B)   reducing (in  accordance  with the terms of this Agreement and
                  the Letter of Credit) the amount  that may be  demanded  under
                  the Letter of Credit (or by that amount automatically reducing
                  in accordance with the terms of the Letter of Credit); or

            (C)   cancelling  the  Letter  of Credit  by (x)  providing  written
                  confirmation (in form and substance  satisfactory to the Agent
                  or the Issuing Lender) from Lloyd's that the Issuing Lender(s)
                  has no further liability under the Letter of Credit (including
                  by way of a notice  specifying that Lloyd's does not accept or
                  unconditionally  rejects a Letter of Credit  (unless the Agent
                  or the Issuing  Lender as the case may be, acting  reasonably,
                  considers that Lloyd's remains  entitled to make a claim under
                  such  Letter  of  Credit)),  and  (y) if  Lloyd's  agrees,  by
                  procuring the return of the original to the Agent;

      (ii)  CASH  COVER  is  provided,  pursuant  to the  terms  of  the  Charge
            Agreement,  in respect of a  Lender's  participation  in a Letter of
            Credit at any time by paying  an  amount  in  Sterling  equal to the
            outstanding  amount  of  that  participation  at  that  time to such
            account or accounts as the Agent may specify and creating  effective
            security  over such  amount in favour  of the  Security  Trustee  on
            behalf of the Finance Parties in form and substance  satisfactory to
            the Security  Trustee  (together  with legal  opinions,  evidence of
            corporate   authorisation,   and  similar  documentation  reasonably
            required by the Security Trustee),  in the name of the Account Party
            from which the only  withdrawals  which may be made are  withdrawals
            made with the prior  written  consent  of the  Security  Trustee  in
            accordance with the terms of the Charge Agreement; and

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      (iii) a  reference  to  PRINCIPAL  AMOUNT in respect of a Letter of Credit
            means the maximum  amount  which is expressed to be capable of being
            demanded under a Letter of Credit  ignoring the aggregate  amount of
            any cash cover held in relation to that Letter of Credit.

ACCOUNTING TERMS; GAAP AND SAP

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

AGREEMENTS AND STATUTES

1.4 Any reference in this Agreement to:

(a)   this Agreement or any other  agreement or document shall be construed as a
      reference to this  Agreement or, as the case may be, such other  agreement
      or  document  as the  same  may have  been,  or may from  time to time be,
      amended, varied, novated or supplemented;

(b)   a statute or treaty  shall be  construed as a reference to such statute or
      treaty as the same may have been, or may from time to time be, amended or,
      in the case of a statute, re-enacted; and

(c)   a bylaw shall be construed  as a reference  to a bylaw made under  Lloyd's
      Acts 1871 to 1982 as the same may have been,  or may from time to time be,
      amended or replaced.

HEADINGS

1.5 Clause and Schedule headings are for ease of reference only.

TIME

1.6 Any  reference in this  Agreement to a time of day shall,  unless a contrary
indication appears, be a reference to London time.

2.    THE FACILITY

GRANT OF THE FACILITY

2.1 The Lenders, upon the terms and subject to other conditions hereof, grant to
the  Account  Party a letter  of  credit  facility  in an  aggregate  amount  of
(pound)450,000,000.

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PURPOSE AND APPLICATION

2.2 (a) The   Facility  is  intended  to  support   Funds  at  Lloyd's  for  the
        underwriting business of the Applicants,  and, accordingly,  the Account
        Party shall apply all Letters of Credit  issued  hereunder in or towards
        satisfaction of such purpose.

    (b) Without prejudice to the Account Party's obligations under Clause 2.2(a)
        and the  remaining  provisions  of this  Agreement,  none of the Finance
        Parties  shall be bound  to  enquire  as to,  nor  shall  any of them be
        responsible  for, the purpose of, or  application of the proceeds of any
        Letter of Credit issued hereunder.

CONDITIONS PRECEDENT

2.3 Save as the Lenders may otherwise  agree,  the Account Party may not deliver
any Utilisation  Request unless the Agent has confirmed to the Account Party and
the Lenders that it has waived  and/or  received all of the  documents and other
evidence  listed in Schedule 5 (CONDITIONS  PRECEDENT) and that each is, in form
and substance, reasonably satisfactory to the Agent.

SEVERAL OBLIGATIONS

2.4 The  obligations  of each  Lender are several and the failure by a Lender to
perform  its  obligations  hereunder  and/or  under any Letter of Credit  issued
hereunder  shall not affect the  obligations of either Obligor towards any other
party  hereto nor shall any other party be liable for the failure by such Lender
to perform its obligations hereunder and/or under such Letter of Credit.

SEVERAL RIGHTS

2.5 The rights of each Finance Party are several and any debt arising  hereunder
at any time  from an  Obligor  to any  Finance  Party  shall be a  separate  and
independent  debt.  Each such party shall be entitled to protect and enforce its
individual rights arising out of this Agreement independently of any other party
(so that it shall  not be  necessary  for any  party  hereto  to be joined as an
additional party in any proceedings for this purpose).

CHANGE OF CURRENCY

2.6 (a) If, after the date of this Agreement, more than one currency or currency
        unit denomination are at the same time recognised by the central bank of
        any country as the lawful currency of that country, then:

      (i)   any  reference  in the  Finance  Documents  to, and any  obligations
            arising under the Finance Documents in, the currency of that country
            shall be translated  into, or paid in, the currency or currency unit
            of that country designated by the Agent; and

      (ii)  any translation  from one currency or currency unit to another shall
            be at the official rate of exchange or conversion rate recognised by
            the central  bank for the  conversion  of that  currency or currency
            unit  into  the  other,  rounded  up or  down  by the  Agent  acting
            reasonably.

    (b) If a change in any currency of a country occurs,  this Agreement will be
        amended in the manner determined by the Agent (acting  reasonably) so as
        to reflect the change in

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      currency  and to  place  the  parties  in  the  same  position,  so far as
      possible,  that they  would  have been in if no  change  in  currency  had
      occurred.

CANCELLATION OF ORIGINAL AGREEMENT

2.7 (a) From the date of this  Agreement the Account Party shall not deliver any
        Utilisation  Request (as defined in the  Original  Agreement)  under the
        Original Agreement.

    (b) The Original  Parties hereby agree that the Original  Agreement shall be
        automatically  terminated and the Total Commitments thereunder cancelled
        upon  cancellation  of all the Original  Letters of Credit in accordance
        with the terms of the Original Agreement.

3.    UTILISATION OF THE FACILITY

UTILISATION CONDITIONS FOR THE FACILITY

3.1 Save as otherwise  provided herein, a Letter of Credit will be issued at the
request of the Account Party on behalf of an Applicant if:

(a)   no later than 10.00 a.m. two Business Days before the proposed Utilisation
      Date, the Agent has received a duly completed Utilisation Request from the
      Account Party;

(b)   the  proposed  Utilisation  Date is a  Business  Day  falling  within  the
      Availability Period;

(c)   the proposed  amount of such Letter of Credit is less than or equal to the
      Available Facility;

(d)   the Letter of Credit is  substantially  in the form set out in  Schedule 7
      (FORM OF LETTER OF CREDIT) or in such other form  requested by the Account
      Party which is approved by Lloyd's and the Lenders  (such  approval by the
      Lenders  not to be  unreasonably  withheld  or  delayed  and  shall not be
      required unless the other form requested differs  materially from the form
      set out in Schedule 7);

(e)   the beneficiary of such Letter of Credit is Lloyd's; and

(f)   on and as of the proposed Utilisation Date (a) no Default has occurred and
      is  continuing  and  (b) the  Representations  are  true  in all  material
      respects.

REQUEST FOR LETTERS OF CREDIT

3.2 The Account Party may request the issue by the Lenders  hereunder of a total
of up to thirty  Letters  of  Credit  in  respect  of the  Applicants.  A single
Utilisation Request may be issued in respect of more than one Letter of Credit.

COMPLETION OF LETTERS OF CREDIT

3.3 The Agent is  authorised  to  arrange  for the issue of any Letter of Credit
pursuant to Clause 3.1 (UTILISATION CONDITIONS FOR THE FACILITY) by:

(a)   completing the Commencement Date of such Letter of Credit;

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(b)   completing  the  schedule  to such  Letter of Credit  with the  percentage
      participation  of each Lender as allocated  pursuant to the terms  hereof;
      and

(c)   executing  such  Letter of Credit on behalf of each  Lender and  following
      such  execution  delivering  such  Letter  of  Credit  to  Lloyd's  on the
      Utilisation Date.

FINAL EXPIRATION DATE

3.4   Each Letter of Credit shall expire on its Final Expiration Date.

EACH LENDER'S PARTICIPATION IN LETTERS OF CREDIT

3.5 (a) Save as otherwise provided herein,  each Lender will participate in each
        Letter of Credit  issued  pursuant  to this  Clause 3 in the  proportion
        borne by its Available  Commitment to the Available Facility immediately
        prior to the issue of such Letter of Credit.

    (b) No Lender  shall  participate  in or issue  any  Letter of Credit to the
        extent that its LC Exposure  would exceed its  Commitment  following the
        issue of that Letter of Credit.

NOTIFICATION TO LENDERS

3.6 On or before each Utilisation Date the Agent shall notify each Lender of the
Letter of Credit that is to be issued by the Agent on behalf of the Lenders, the
name of the  Applicant  in respect of whom the Letter of Credit is being  issued
and the aggregate principal amount of the relevant Letter of Credit allocated to
such Lender pursuant to this Agreement.

CANCELLATION OF AVAILABLE COMMITMENTS

3.7 On the expiry of the Availability  Period,  the Available  Facility and each
Lender's  Available  Commitment  shall be  reduced to zero and  accordingly  the
remaining  Commitments  of each  Lender  shall be equal to their  respective  LC
Exposure under any issued Letters of Credit.

4.    TERMINATION OF LETTERS OF CREDIT

CONTINUATION UNTIL LLOYD'S TERMINATION DATE

4.1 Each Party acknowledges that, subject to the terms of this Agreement:

(a)   each  issued  Letter of Credit  shall  continue  in force  unless  Lloyd's
      receives a notice  from the Agent (or any  Finance  Party,  if pursuant to
      Clause 4.6(b)) giving Lloyd's not less than four years' notice in writing,
      terminating  such  Letter of Credit  pursuant to Clause 3 of the Letter of
      Credit (a LLOYD'S TERMINATION NOTICE):

      (i)   on the later of (x) 31 December 2009 and (y) any subsequent  date as
            specified in such notice (a LLOYD'S TERMINATION DATE); or

      (ii)  at any time after the occurrence of an Acceleration  Event or whilst
            any   Continuation  CP  Event  (as  defined  in  Clause  4.6(b))  is
            continuing;

(b)   no Party,  other  than the Agent (or any  Lender,  if  pursuant  to Clause
      4.6(b)),  may deliver a Lloyd's Termination Notice (and the Agent may only
      deliver a Lloyd's Termination Notice pursuant to Clause 3 of the Letter of
      Credit and this Clause 4);

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(c)   if the  Account  Party or any Lender (a  RELEVANT  PARTY) so  requests  (a
      TERMINATION REQUEST), the Agent shall deliver a Lloyd's Termination Notice
      as required by this Clause 4, on the later of:

      (i)   the expiration of the period ending on the day three weeks after the
            corresponding Termination Request Receipt Date, as defined in Clause
            4.2(b); and

      (ii)  the expiration of any Declining Lender Notice Period,  as defined in
            Clause 4.3(a);

(d)   the  Agent  shall,  promptly  after  delivery  by the  Agent of a  Lloyd's
      Termination  Notice,  provide a copy of such Lloyd's Termination Notice to
      each Lender (and shall inform the Account Party of the Lloyd's Termination
      Date); and

(e)   a Letter of Credit will terminate on the Lloyd's Termination Date.

DELIVERY BY A RELEVANT PARTY OF A TERMINATION REQUEST

4.2 A Termination  Request may be delivered by a Relevant  Party to the Agent in
accordance with the following:

(a)   no Termination Request may be delivered before 1 January 2005;

(b)   any  Termination  Request  delivered  on a  date  (a  TERMINATION  REQUEST
      DELIVERY  DATE) from 1 January 2005 to and including 30 November 2005 will
      be deemed to have been  received  by the Agent on (a  TERMINATION  REQUEST
      RECEIPT DATE) 30 November 2005 and the corresponding  Lloyd's  Termination
      Date shall be 31 December 2009; and

(c)   from 1 December 2005,  any  Termination  Request  Receipt Date will be the
      later of (i) 1 January 2006 and (ii) the corresponding Termination Request
      Delivery Date.

DECLINING LENDER MECHANICS (ON DELIVERY BY A LENDER OF A TERMINATION REQUEST)

4.3 (a) If a Lender (a DECLINING  LENDER) delivers a Termination  Request to the
        Agent:

      (i)   the Agent shall  notify the  Account  Party  accordingly  within two
            Business Days thereafter; and

      (ii)  during  the  period   ending  on  the  day  three  weeks  after  the
            corresponding  Termination  Request Receipt Date (a DECLINING LENDER
            NOTICE  PERIOD) the Account Party may designate a Substitute  Lender
            as contemplated in Clause 4.4.

(b)   Unless a Substitute Lender has been designated  pursuant to Clause 4.4 (in
      which case the provisions of Clause 4.5(a) shall apply) upon expiry of the
      Declining Lender Notice Period the Agent shall issue a Lloyd's Termination
      Notice (in accordance with Clause 3 of the Letter of Credit)  specifying a
      Lloyd's Termination Date of the later of (i) 31 December 2009 and (ii) the
      fourth  anniversary  of the date of that notice,  whereupon  the Letter of
      Credit will terminate on such Lloyd's Termination Date.

(c)   Unless  notice  is given to the Agent as  aforesaid  each  Lender  will be
      deemed  automatically to have agreed to continue its participation in each
      Letter of Credit.

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                                                                  Conformed Copy


SUBSTITUTE LENDER

4.4 (a) If any  Declining  Lender  delivers a Termination  Request,  the Account
        Party may  designate  by the date which falls no later than two Business
        Days before the end of the corresponding  Declining Lender Notice Period
        an  Approved  Credit  Institution  (which may be an  existing  Lender or
        Lenders) (the  SUBSTITUTE  LENDER) which is willing to assume all of the
        rights  and  obligations  of the  Declining  Lender  in  respect  of its
        participation  in the  relevant  Letter  of  Credit  (the OLD  LETTER OF
        CREDIT).

    (b) If the Account  Party has found a  Substitute  Lender it shall  promptly
        notify the Agent and the Declining Lender thereof and shall use its best
        efforts  to procure  the  release by Lloyd's of the Old Letter of Credit
        (an OLD  LETTER OF CREDIT  RELEASE)  from the  Funds at  Lloyd's  of the
        relevant Applicant.

    (c) The  Declining  Lender  shall as soon as  reasonably  practicable  after
        receipt  of notice  from the  Account  Party  transfer  its  rights  and
        obligations  hereunder to the Substitute  Lender in accordance  with the
        provisions of Clause 26.3 (TRANSFERS BY LENDERS).

    (d) The Substitute Lender shall pay to the Declining Lender all amounts then
        due and owing (and all fees  accrued to but  excluding  the date of such
        transfer) to the Declining Lender in respect of its participation in the
        Old Letter of Credit.

REPLACEMENT LETTERS OF CREDIT

4.5 (a) If a Substitute  Lender has become  party hereto  pursuant to Clause 4.4
        (SUBSTITUTE  LENDER),  then  subject  to the  provisions  of Clause  4.6
        (CONTINUATION  CONDITIONS  PRECEDENT) the Lenders who are deemed to have
        agreed to the  continuation  of the Old Letter of Credit (the  EXTENDING
        LENDERS) shall, together with the Substitute Lender, participate in, and
        issue as soon as reasonably practicable (on or immediately after the Old
        Letter of Credit  Release),  a new  Letter of Credit  (the NEW LETTER OF
        CREDIT)  which shall (i) replace the Old Letter of Credit and (ii) be in
        an amount equal to the Old Letter of Credit. If the New Letter of Credit
        has not been issued by the end of the Declining  Lender  Notice  Period,
        Clause 4.5(b) shall apply (on the  assumption,  if not the case,  that a
        Substitute  Lender  has not been found by the time  specified  in Clause
        4.4(a))  and the Agent  shall  promptly  deliver  a Lloyd's  Termination
        Notice (in accordance with Clause 4.3 (DECLINING LENDER MECHANICS)).

    (b) If a  Substitute  Lender  has not been  found by the time  specified  in
        Clause  4.4(a),  then the Account  Party  shall use its best  efforts to
        procure an Old Letter of Credit  Release,  and on or  immediately  after
        such Old  Letter of Credit  Release  (i)  subject to the  provisions  of
        Clause 4.6 (CONTINUATION  CONDITIONS  PRECEDENT),  the Extending Lenders
        shall participate in, and issue as soon as reasonably practicable, a new
        Letter of Credit (the REDUCED  LETTER OF CREDIT) which shall (x) replace
        their  participation in the Old Letter of Credit and (y) be in an amount
        equal to the Old  Letter of  Credit  LESS the  amount  of the  Declining
        Lender's  participation  and (ii) the Declining Lender shall participate
        in a separate  Letter of Credit (a  BILATERAL  LETTER OF  CREDIT)  which
        shall (x) replace its participation in the Old Letter of Credit,  (y) be
        in an amount equal to the Declining  Lender's  participation  in the Old
        Letter  of  Credit  and (z) have a Final  Expiration  Date  which is the
        Lloyd's  Termination  Date designated  pursuant to Clause 4.3 (DECLINING
        LENDER MECHANICS).

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CONTINUATION CONDITIONS PRECEDENT

4.6 (a) On or prior to close of business on 1  September  of each year (each,  a
        CONTINUATION CP DATE), the Account Party shall promptly notify the Agent
        if (as of such Continuation CP Date):

      (i)   an Event of Default or  Potential  Event of Default  occurs which is
            continuing;

      (ii)  any of the  Representations  cease  to be  correct  in all  material
            respects, or become misleading in any material respect; or

      (iii) any  Letter  of  Credit  ceases  solely  to be used to  support  the
            relevant Applicant's underwriting business at Lloyd's which has been
            provided in accordance with the  requirements of Lloyd's  applicable
            to it.

    (b) If on any  Continuation  CP Date any of the events  specified  in Clause
        4.6(a) (each, a  CONTINUATION  CP EVENT) has occurred and is continuing,
        then at any time  thereafter  (so long as any  Continuation  CP Event is
        continuing):

      (i)   the Agent may,  and at the request of the  Majority  Lenders  shall,
            issue a Lloyd's Termination Notice (containing the earliest possible
            Lloyd's Termination Date); and

      (ii)  any Lender shall be entitled to issue a Lloyd's  Termination  Notice
            (containing the earliest possible Lloyd's Termination Date) and such
            Lender shall  promptly  provide a copy of such  Lloyd's  Termination
            Notice to the Agent,

        and  the  Agent  shall,  in each  case,  provide  a copy of the  Lloyd's
        Termination  Notice to the Account Party (and each other Lender)  within
        two Business Days of the Agent (x) issuing a Lloyd's  Termination Notice
        (in the  case of  paragraph  (i)  above)  or (y)  receiving  a copy of a
        Lloyd's  Termination Notice from a Lender (in the case of paragraph (ii)
        above).

CANCELLATION OF BILATERAL LETTERS OF CREDIT

4.7 At any time after the issue of a  Bilateral  Letter of Credit by a Declining
Lender the Account  Party may give the Agent and the  Declining  Lender not less
than fourteen  days' prior  written  notice of its intention to procure that the
liability of the Declining Lender under such Letter of Credit is reduced to zero
(whereupon it shall do so).

REVISED LETTERS OF CREDIT

4.8 In the event that the Funds at Lloyd's  Requirements of an Applicant changes
at or around  the time of any given  Funds  Date in terms of amount  and/or  the
identity  of the  Applicant,  subject to the  approval of Lloyd's and subject to
each  Lender's LC Exposures  under the Letters of Credit  issued  hereunder  not
being  increased,  the Lenders shall co-operate with the Account Party to ensure
to the extent  reasonably  possible  that the Letters of Credit  provide for the
revised Funds at Lloyd's Requirements of the Applicants.

INCREASE TO FACILITY

4.9 If at any time a  Bilateral  Letter of Credit is  outstanding,  the  Account
Party  shall have the right to  increase  the size of the  Facility by up to the
principal amount of the Bilateral

<PAGE>

Letter of Credit(s)  outstanding  by  introducing  a new lender (which may be an
existing Lender) and on terms that one or more outstanding  Bilateral Letters of
Credit having an aggregate  principal  amount at least equal to the increase are
cancelled at the time the increase  takes effect.  Each Lender agrees to execute
any documentation giving effect to this increase and new lender provided that no
such documentation may increase the Commitment of any Lender without the express
consent of that Lender at the time such documentation is executed.

5.    PAYMENT OF DEMANDS

DISBURSEMENT PROCEDURES

5.1 (a) The Agent shall, within a reasonable time following its receipt thereof,
        examine all documents purporting to represent a demand for payment under
        any Letter of Credit.  The Agent shall promptly  after such  examination
        (and in any event by 12 noon on the Business Day  immediately  following
        receipt of such  demand)  (i) notify each of the Lenders and the Account
        Party by  facsimile  of such demand for payment and (ii) deliver to each
        Lender  and the  Account  Party a copy of each  document  purporting  to
        represent a demand for payment under such Letter of Credit.

    (b) With respect to any drawing properly made under a Letter of Credit, each
        Lender will make an LC  Disbursement in respect of such Letter of Credit
        in accordance  with its  liability  under such Letter of Credit and this
        Agreement,  such LC  Disbursement to be made to the account of the Agent
        most recently designated by it for such purpose by notice to the Lenders
        within two Business  Days of receipt of a demand for payment  under such
        Letter of Credit by the Agent;

    (c) The Agent will and undertakes to each Lender that it will:

      (i)   make  any  such  LC   Disbursement   available  to  Lloyd's  as  the
            beneficiary  of such  Letter  of Credit by  promptly  crediting  the
            amounts so received from the Lenders,  in like funds, to the account
            identified by Lloyd's in connection  with such demand for payment on
            the date  following two Business Days after the receipt by the Agent
            of such demand; and

      (ii)  notify  each Lender on the third  Business  Day after the receipt by
            the Agent of such  demand  for  payment  that it has  credited  such
            amounts to the account identified by Lloyd's.

    (d) Promptly  following any LC  Disbursement by any Lender in respect of any
        Letter of Credit,  the Agent will  notify the  Account  Party of such LC
        Disbursement  provided  that any failure to give or delay in giving such
        notice  shall not  relieve  the  Account  Party of their  obligation  to
        reimburse the Lenders with respect to any such LC Disbursement.

RIGHT TO MAKE PAYMENTS UNDER LETTERS OF CREDIT

5.2 Each Lender  shall be entitled  to make any payment in  accordance  with the
terms of the  relevant  Letter of Credit  without  any  reference  to or further
authority from the Account Party or any other investigation or enquiry.

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                                                                  Conformed Copy


LIABILITY OF LENDERS

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

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

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

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

6.    THE ACCOUNT PARTY'S LIABILITIES IN RELATION TO LETTERS OF CREDIT

THE ACCOUNT PARTY'S INDEMNITY TO LENDERS

6.1 The  Account  Party  shall  irrevocably  and  unconditionally  as a  primary
obligation  indemnify  (on demand by the Agent (and any Lender may  require  the
Agent to make such demand)) each Lender against:

(a)   any LC Disbursement  paid or payable by such Lender in accordance with the
      terms of any Letter of Credit requested by the Account Party; and

(b)   all liabilities,  reasonable costs  (including,  without  limitation,  any
      costs  incurred in funding any amount  which falls due from such Lender in
      connection  with such Letter of  Credit),  claims,  losses and  reasonable
      expenses  which such Lender may at any time  properly  incur or sustain in
      connection with any Letter of Credit.

PRESERVATION OF RIGHTS

6.2 Neither the  obligations  of the Account  Party set out in this Clause 6 nor
the rights,  powers and remedies conferred on any Lender by this Agreement or by
Law shall be discharged, impaired or otherwise affected by:

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                                                                  Conformed Copy


(a)   the winding-up,  dissolution,  administration  or  re-organisation  of any
      Lender or any other person or any change in its status, function,  control
      or ownership;

(b)   any of the  obligations  of any Lender or any other  person  hereunder  or
      under any Letter of Credit or under any other security taken in respect of
      the Account Party's obligations  hereunder or otherwise in connection with
      any Letter of Credit being or becoming illegal, invalid,  unenforceable or
      ineffective in any respect;

(c)   time or other  indulgence  being  granted  or agreed to be  granted to any
      Lender or any other  person in respect  of its  obligations  hereunder  or
      under or in  connection  with any Letter of Credit or under any such other
      security;

(d)   any amendment to, or any  variation,  waiver or release of, any obligation
      of any  Lender or any  other  person  under  any  Letter of Credit or this
      Agreement;

(e)   any  other  act,  event or  omission  which,  but for this  Clause 6 might
      operate to discharge, impair or otherwise affect any of the obligations of
      the Account Party set out in this Clause 6 or any of the rights, powers or
      remedies conferred upon any Lender by this Agreement or by Law.

The  obligations  of the  Account  Party  set out in this  Clause  6 shall be in
addition to and  independent of every other security which any Lender may at any
time hold in respect of the Account Party's obligations hereunder.

SETTLEMENT CONDITIONAL

6.3 Any settlement or discharge  between the Account Party and a Lender shall be
conditional  upon no security or payment to such Lender by the Account  Party or
any other  person on behalf of the Account  Party,  being  avoided or reduced by
virtue of any Laws relating to  bankruptcy,  insolvency,  liquidation or similar
Laws of general  application  and, if any such security or payment is so avoided
or reduced, such Lender shall be entitled to recover the value or amount of such
security or payment from the Account Party subsequently as if such settlement or
discharge had not occurred.

7.    DEFAULT INTEREST

A Demand  Amount  shall bear  interest  during  each  Default  Period in respect
thereof,  and any other amount unpaid  hereunder shall bear interest for so long
as it remains outstanding at rate of the sum of (i) two per cent. per annum (ii)
the Mandatory Costs in respect thereof at such time, and (iii) LIBOR on each day
whilst such amount  remains  outstanding.  Such interest shall be payable by the
Account Party on the date on which it reimburses the Lenders under Clause 6.1(a)
and (b) (THE ACCOUNT PARTY'S INDEMNITY TO LENDERS).

8.    TERMINATION AND REDUCTION OF THE COMMITMENTS

SCHEDULED TERMINATION

8.1 Unless previously terminated,  the unutilised Commitments shall terminate at
the close of business on the Commitment Termination Date.

VOLUNTARY CANCELLATION OR REDUCTION

8.2 The Account Party may at any time cancel,  or from time to time reduce,  the
Total  Commitments;  provided that (a) each  reduction of the Total  Commitments
shall be in an

<PAGE>

amount of (pound)5,000,000 or a larger multiple of (pound)1,000,000  and (b) the
Account  Party  shall  not  cancel  or reduce  the  Commitments  if the Total LC
Exposures would exceed the Total Commitments.

NOTICE OF VOLUNTARY CANCELLATION OR REDUCTION

8.3 The Account Party shall notify the Agent of any election to cancel or reduce
the Total Commitments under Clause 8.2 at least three Business Days prior to the
effective date of such  cancellation or reduction,  specifying such election and
the effective date thereof.  Promptly following receipt of any notice, the Agent
shall advise the Lenders of the contents  thereof.  Each notice delivered by the
Account  Party  pursuant to this Clause shall be  irrevocable;  provided  that a
notice of  cancellation  of the  Commitments  delivered by the Account Party may
state that such notice is  conditioned  upon the  effectiveness  of other credit
facilities,  in which case such notice may be revoked by the  Account  Party (by
notice  to the  Agent  on or  prior  to the  specified  effective  date) if such
condition is not satisfied.

NO OTHER REPAYMENTS OR CANCELLATION

8.4 The  Account  Party  shall  not  repay or  cancel  all or any part of the LC
Exposures except at the times and in the manner  expressly  provided for in this
Agreement.

EFFECT OF CANCELLATION OR REDUCTION

8.5 Any  cancellation or reduction of the Commitments  shall be permanent.  Each
reduction  of the  Commitments  shall be made  rateably  among  the  Lenders  in
accordance with their respective Commitments.

9.    FEES

PARTICIPATION FEE

9.1 The Account  Party shall pay to the Agent for the account of the Lenders the
participation fees specified in the Fee Letter.

LETTER OF CREDIT FEE

9.2 (a) The Account  Party shall pay to the Agent for account of each Lender pro
        rata  according to their  respective LC Exposures  hereunder a letter of
        credit  fee  computed  at the rate of 0.65 per cent.  per annum (as such
        rate may be adjusted from time to time in accordance with the provisions
        of Clause 9.3) on the  principal  amount of each issued Letter of Credit
        payable from the  Utilisation  Date until the Final  Expiration Date (as
        extended)  of  that  Letter  of  Credit  or  any  earlier  cancellation,
        repayment  or  prepayment  of the  Letter of Credit in  accordance  with
        Clause  8  (TERMINATION  AND  REDUCTION  OF  THE  COMMITMENTS)  of  this
        Agreement;

    (b) The Letter of Credit Fees shall be payable  quarterly in arrears on each
        Quarterly Date and on the date on which the Lenders cease to have any LC
        Exposure.  Letter of Credit  Fees  accrued  through and  including  each
        Quarterly Date shall be payable on the fifth Business Day following such
        Quarterly  Date,  commencing  on the first such date to occur  after the
        Commencement Date; and

    (c) The  Agent  shall  notify  the  Account  Party in  writing  at least ten
        Business Days prior to each  Quarterly  Date of (i) the letter of credit
        fee payable in respect of each Letter

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                                                                  Conformed Copy


      of Credit  issued and (ii) the  aggregate  letter of credit fee payable in
      respect of all Letters of Credit issued.

ADJUSTMENT OF LETTER OF CREDIT FEE

9.3 (a) Notwithstanding  Clause 9.2(a) above, when the Financial Strength Rating
        (as defined below) corresponds to a rating set out in Column 1 or Column
        2 below of the fee chart  (the FEE  CHART),  the  Letter  of Credit  Fee
        payable in accordance with Clause 9.2 shall be the amount set out in the
        corresponding row in Column 3 of the Fee Chart;  provided however,  that
        whilst AMB Cash  Collateral is posted in compliance  with the provisions
        of Clause  19.8  (RATINGS  DOWNGRADE)  the Letter of Credit Fee shall be
        0.30 per cent. per annum.  Upon any AMB Cash  Collateral  which has been
        posted being fully released, in each case in compliance with Clause 19.8
        (RATINGS  DOWNGRADE),  then the Letter of Credit Fee shall once again be
        payable in accordance with the Fee Chart.

    (b) Any change to the Letter of Credit Fee described above shall take effect
        on the day on which the  Financial  Strength  Rating  change is publicly
        announced by the applicable  rating  agency;  or, in the event either of
        the conditions set forth in Clause 19.8(a) or (b) are not satisfied, the
        day on which the provisions of Clause 19.8 (RATINGS DOWNGRADE) have been
        complied with.

FEE CHART

--------------------------------------------------------------------------------

     A.M. BEST & CO.            STANDARD & POOR'S         LETTER OF CREDIT FEE
FINANCIAL-STRENGTH RATING        RATING SERVICES                Column 3
        Column 1            FINANCIAL-STRENGTH RATING
                                    Column 2
--------------------------------------------------------------------------------
    A++                   Greater than or equal to AA+  0.55 per cent. per annum
--------------------------------------------------------------------------------
    A+                    AA                            0.60 per cent. per annum
--------------------------------------------------------------------------------
    A                     AA-                           0.65 per cent. per annum
--------------------------------------------------------------------------------
    A-                    A+                            0.725 per cent. per annu
--------------------------------------------------------------------------------
    B++ and below         A and below                   0.80 per cent. per annum
--------------------------------------------------------------------------------

    (c) In this Clause 9.3 and in Clause 19.8,  FINANCIAL  STRENGTH RATING means
        the lower of:

      (i)   the financial-strength  rating of the Account Party from A.M. Best &
            Co. (or its successor); and

      (ii)  the lower of the  financial-strength  rating from  Standard & Poor's
            Rating Services (or its successor) of XL Bermuda and XL Re.

        In the event that  either A.M.  Best & Co. or Standard & Poor's  Ratings
        Services  changes  the  designation  of its ratings  (including  without
        limitation  by  increasing  the number of ratings  available  or notches
        within  ratings),  then the Agent and all the Lenders shall negotiate in
        good faith such amendments to this Clause 9.3 as are necessary to ensure
        that (in the opinion of the Lenders, acting reasonably) the Letter

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        of Credit Fees payable  relative to the strength of the relevant  rating
        are the same as they are on the date hereof.

COMMITMENT FEE

9.4 (a) The Account  Party shall pay to the Agent for the account of each Lender
        a fee computed at the rate of 33 per cent.  per annum of the  applicable
        Letter  of  Credit  Fee  from  time to time on that  Lender's  Available
        Commitment for the Availability Period.

    (b) The  accrued  commitment  fee is  payable  quarterly  in arrears on each
        Quarterly Date during the  Availability  Period,  on the last day of the
        Availability  Period and, if cancelled in full, on the cancelled  amount
        of the relevant  Lender's  Commitment  at the time the  cancellation  is
        effective.

AGENT FEES

9.5 The  Account  Party  agrees to pay to the Agent,  for its own  account,  the
agency fees payable in the amounts and at the times specified in the Fee Letter.

PAYMENT OF FEES

9.6 All fees payable  hereunder  shall be paid on the dates due, in  immediately
available  funds,  to the Agent for  distribution,  in the case of the Letter of
Credit Fees referred to in Clause 9.2 and the  commitment fee referred in Clause
9.4, to the Lenders  entitled  thereto.  Fees paid shall not be refundable under
any  circumstances  absent  manifest error in the calculation or payment of fees
due and payable.

BASIS OF CALCULATION

9.7 The fees payable pursuant to Clauses 9.1, 9.2 and 9.4 shall be calculated on
the basis of actual days elapsed and a 365 day year.

10.   TAXES

TAX GROSS-UP

10.1 All  payments  to be made by an Obligor  to any  Finance  Party  hereunder,
whether in respect of principal, interest, fees or any other item, shall be made
free and clear of and  without  deduction  for or on account of tax unless  such
Obligor  is  required  to  make  such a  payment  subject  to the  deduction  or
withholding of tax, in which case the sum payable by such Obligor (in respect of
which such  deduction or  withholding is required to be made) shall be increased
to the extent  necessary to ensure that such Finance Party receives a sum net of
any deduction or  withholding  equal to the sum which it would have received had
no such deduction or withholding been made or required to be made.

TAX INDEMNITY

10.2 Without  prejudice to Clause 10.1 (TAX  GROSS-UP),  if any Finance Party is
required  to make any  payment of or on account of tax on or in  relation to any
sum received or receivable  hereunder  (including any sum deemed for purposes of
tax to be received or  receivable  by such Finance Party whether or not actually
received or  receivable)  or if any  liability in respect of any such payment is
asserted,  imposed,  levied or assessed  against any Finance Party,  the Account
Party shall,  upon demand of the Agent,  promptly  indemnify  the Finance  Party
which

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suffers a loss or  liability  as a result  against  such  payment or  liability,
together with any interest, penalties, costs and expenses payable or incurred in
connection therewith, PROVIDED THAT this Clause 10.2 shall not apply to:

(a)   any tax imposed on and calculated by reference to the net income  actually
      received or receivable by such Finance Party by the  jurisdiction in which
      such Finance Party is incorporated; or

(b)   any tax imposed on and  calculated  by  reference to the net income of the
      Facility  Office of such Finance Party actually  received or receivable by
      such Finance  Party by the  jurisdiction  in which its Facility  Office is
      located; or

(c)   the extent a loss,  liability or cost is  compensated  for by an increased
      payment under Clause 10.1 (TAX GROSS-UP).

CLAIMS BY LENDERS

10.3 A Lender  intending to make a claim pursuant to Clause 10.2 (TAX INDEMNITY)
shall promptly notify the Agent of the event giving rise to the claim, whereupon
the Agent shall promptly notify the Account Party thereof.

11.   TAX RECEIPTS

NOTIFICATION OF REQUIREMENT TO DEDUCT TAX

11.1 If, at any time,  an Obligor is  required by Law to make any  deduction  or
withholding  from any sum payable by it hereunder (or if thereafter there is any
change  in the  rates  at which  or the  manner  in  which  such  deductions  or
withholdings are calculated),  such Obligor shall promptly,  upon becoming aware
of the same, notify the Agent.

EVIDENCE OF PAYMENT OF TAX

11.2 If an  Obligor  makes  any  payment  hereunder  in  respect  of which it is
required  to make any  deduction  or  withholding,  it shall pay the full amount
required to be deducted or withheld to the relevant  taxation or other authority
within the time allowed for such payment under  applicable Law and shall deliver
to the Agent for each Lender,  within thirty days after it has made such payment
to the applicable  authority,  an original receipt (or a certified copy thereof)
issued by such authority evidencing the payment to such authority of all amounts
so required to be deducted or withheld in respect of that Lender's share of such
payment.

TAX CREDIT PAYMENT

11.3 If an additional  payment is made under Clause 10 (TAXES) by an Obligor for
the benefit of any Finance Party and such Finance Party, in its sole discretion,
determines  that it has obtained  (and has derived full use and benefit  from) a
credit  against,  a relief or remission  for, or repayment of, any tax, then, if
and to the extent that such Finance Party, in its sole opinion, determines that:

(a)   such credit, relief, remission or repayment is in respect of or calculated
      with  reference  to the  additional  payment  made  pursuant  to Clause 10
      (TAXES); and

(b)   its tax affairs for its tax year in respect of which such credit,  relief,
      remission or repayment was obtained have been finally settled,

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such Finance Party shall,  to the extent that it can do so without  prejudice to
the retention of the amount of such credit, relief,  remission or repayment, pay
to such Obligor such amount as such Finance  Party shall,  in its sole  opinion,
determine  to be the amount  which will leave such  Finance  Party  (after  such
payment)  in no worse  after-tax  position  than it would  have  been in had the
additional payment in question not been required to be made by such Obligor.

TAX CREDIT CLAWBACK

11.4 If any Finance  Party  makes any  payment to an Obligor  pursuant to Clause
11.3 (TAX CREDIT PAYMENT) and such Finance Party subsequently determines, in its
sole  opinion,  that the credit,  relief,  remission  or repayment in respect of
which such payment was made was not  available or has been  withdrawn or that it
was unable to use such credit,  relief,  remission  or  repayment  in full,  the
Obligor  shall  reimburse  such Finance  Party such amount as such Finance Party
determines,  in its sole opinion, is necessary to place it in the same after-tax
position as it would have been in if such credit, relief, remission or repayment
had been obtained and fully used and retained by such Finance Party.

TAX AND OTHER AFFAIRS

11.5 No  provision  of this  Agreement  shall  interfere  with the  right of any
Finance  Party to arrange  its tax or any other  affairs in  whatever  manner it
thinks fit, oblige any Finance Party to claim any credit,  relief,  remission or
repayment in respect of any payment under Clause 10.1 (TAX GROSS-UP) in priority
to any other credit,  relief,  remission or repayment available to it nor oblige
any  Finance  Party to  disclose  any  information  relating to its tax or other
affairs or any computations in respect thereof.

12.   INCREASED COSTS

INCREASED COSTS

12.1 Subject to Clause 12.2  (EXCEPTIONS),  if after the date of this Agreement,
the result of:

(a)   the   introduction   of  or  any  change  in  the   official  or  judicial
      interpretation  or  application  of any Law (having the force of law or if
      not  having  the  force of law,  generally  complied  with by a Lender  in
      relation to any relevant jurisdiction); and/or

(b)   compliance (without adopting materially less prudent policies or standards
      than  those  previously  adopted  by it) by any  Lender or by the  holding
      company of any Lender with any of the matters  mentioned in paragraph  (a)
      above,

including in each case, without limitation, those Laws relating to Taxation, any
change in  currency,  any reserve,  special  deposit,  cash ratio,  liquidity or
capital adequacy  requirement or any other form of banking or monetary controls,
is that:

      (i)   a Lender  or its  holding  company  incurs an  additional  cost as a
            result of that Finance Party having  entered  into,  or  performing,
            maintaining or funding its obligations under this Agreement; or

      (ii)  a Lender or its holding company incurs an additional cost in making,
            funding or  maintaining  any Letters of Credit made or to be made by
            it under this Agreement; or

      (iii) any amount  payable to a Lender or the effective  return to a Lender
            under  this  Agreement  or the  effective  return to a Lender or its
            holding  company on its

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            capital is reduced as a result of any change in the amount or nature
            of the capital  resources  required to be  allocated in respect of a
            Lender's participation under this Agreement; or

      (iv)  a Lender  makes any payment or foregoes any interest or other return
            on or calculated  by reference to any amount  received or receivable
            by it from the Account Party or the Agent under this Agreement;

            then and in each such case:

            (A)   the Lender shall notify the Account Party through the Agent of
                  the relevant  event  promptly upon becoming aware of the event
                  giving  details of any costs or amount  likely to be  demanded
                  under paragraph (B);

            (B)   promptly following any demand from time to time by that Lender
                  through the Agent,  the  Account  Party shall pay to the Agent
                  for the account of that Finance Party (or, as the case may be,
                  its  holding  company)  such amount as shall  compensate  such
                  Finance Party or its holding company for the additional  cost,
                  reduction, payment or foregone interest or other return.

EXCEPTIONS

12.2 Clause 12.1 shall not apply to or in respect of:

(a)   any circumstances referred to in Clause 10.2 (TAX INDEMNITY);

(b)   any  circumstances  for which a relevant  Lender has been  compensated for
      under Clause 11.3 (TAX CREDIT PAYMENT).

13.   ILLEGALITY

If,  after the date of this  Agreement,  any Change in Law or in the official or
judicial  interpretation  or  application  thereof  shall  make it  unlawful  or
contrary to an official  directive  in any  jurisdiction  for any Lender to make
available  or  fund  or  maintain  or to  give  effect  to  its  obligations  as
contemplated by this Agreement or the Letters of Credit (or, by reason only of a
Change of Law,  the Lender  ceases to be an Approved  Credit  Institution),  the
Lender shall  promptly on becoming  aware of the same give notice thereof to the
Account Party through the Agent, whereupon:

(a)   where such change  makes it unlawful or contrary to an official  directive
      to maintain or give effect to its obligations under this Agreement, if the
      Agent on behalf of such Lender so requires,  the Account Party shall by no
      later than the last day of any  applicable  grace period  specified by the
      applicable  Law ensure that the  liabilities  of such  Lender  under or in
      respect of each  Letter of Credit  are  cancelled  within  the  meaning of
      Clause  1.2(l)(i)(A)  (or  use  its  best  efforts  to  ensure  that  such
      liabilities are cancelled within the meaning of Clause 1.2(l)(i)(C)),  the
      Commitment  of that Lender shall  forthwith  be cancelled  and the Account
      Party shall prepay  forthwith fees,  costs and expenses due to that Lender
      hereunder;

(b)   where such  change  only makes it  unlawful  or  contrary  to an  official
      directive  to  participate  in  further   Letters  of  Credit  under  this
      Agreement,  then upon receipt by the Agent of that notice,  the  Available
      Commitment of that Lender shall be reduced to

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      zero,  and  upon  the  expiry  of each  Letter  of  Credit  in which it is
      participating at such time, its resulting Available  Commitment shall also
      be  cancelled,  provided  that if the  Lender  subsequently  transfers  or
      assigns its rights and  obligations  under this  Agreement to a new lender
      pursuant to Clause 26.5 (RIGHTS TO SUBSTITUTE A SINGLE BANK),  the Account
      Party  may by  notice to the Agent  increase  the  Commitment  of such new
      lender  by the  amount of the  Available  Commitment  that was  previously
      cancelled.

14.   MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.

DESIGNATION OF A DIFFERENT LENDING OFFICE

14.1 If any Lender requests  compensation  under Clause 12 (INCREASED COSTS), or
if the Account Party is required to pay any  additional  amount to any Lender or
any  Governmental  Authority  for  account of any Lender  pursuant  to Clause 10
(TAXES),  then such Lender shall use reasonable efforts to designate a different
lending  office for  funding or booking its  Letters of Credit  hereunder  or to
transfer  its  rights and  obligations  hereunder  to  another  of its  offices,
branches or  Affiliates,  if, in the  reasonable  judgment of such Lender,  such
designation or assignment (a) would eliminate or reduce amounts payable pursuant
to Clause 12 (INCREASED COSTS) or 10 (TAXES),  as the case may be, in the future
and (b) would not subject  such Lender to any  unreimbursed  cost or expense and
would not otherwise be  disadvantageous to such Lender. The Account Party hereby
agrees  to pay all  reasonable  costs and  expenses  incurred  by any  Lender in
connection with any such designation or assignment.

REPLACEMENT OF LENDERS

14.2 If any Lender requests  compensation  under Clause 12 (INCREASED COSTS), or
if any Account Party is required to pay any  additional  amount to any Lender or
any  Governmental  Authority  for  account of any Lender  pursuant  to Clause 10
(TAXES),  or if any Lender  defaults in its obligation to make LC  Disbursements
hereunder,  or if any Lender ceases to be an Approved Credit  Institution,  then
the  Account  Party may, at its sole  expense  and  effort,  upon notice to such
Lender and the  Agent,  require  such  Lender to assign  and  delegate,  without
recourse (in accordance with and subject to the restrictions contained in Clause
26.5  (RIGHT TO  SUBSTITUTE  SINGLE  LENDER)),  all its  interests,  rights  and
obligations  under this Agreement to an Approved Credit  Institution  that shall
assume such  obligations  (which  assignee  may be another  Lender,  if a Lender
accepts such assignment); provided that:

(a)   the Account  Party shall have  received the prior  written  consent of the
      Agent, which consent shall not unreasonably be withheld;

(b)   such  Lender  shall  have  received  payment  of an  amount  equal  to the
      outstanding  amount of its LC  Disbursements,  accrued  interest  thereon,
      accrued  fees and all other  amounts  payable  to it  hereunder,  from the
      assignee (to the extent of such outstanding principal and accrued interest
      and  fees)  or the  relevant  Account  Party  (in the  case  of all  other
      amounts); and

(c)   in the case of any such assignment resulting from a claim for compensation
      under Clause 12 (INCREASED COSTS) or payments required to be made pursuant
      to Clause 10 (TAXES),  such  assignment will result in a reduction in such
      compensation or payments.

A Lender shall not be required to make any such  assignment  and  delegation if,
prior  thereto,  as a result  of a  waiver  by such  Lender  or  otherwise,  the
circumstances  entitling the relevant  Account Party to require such  assignment
and delegation cease to apply.

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15.   PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SET-OFFS.

PAYMENTS BY THE ACCOUNT PARTY

15.1 (a) The Account  Party shall make each payment  required to be made by them
         hereunder  or under any other  Finance  Document  (except to the extent
         otherwise  provided  therein)  in  Sterling  on the date when  due,  in
         immediately  available  cleared funds,  without set-off or counterclaim
         (and in the case of  payments  required  pursuant to Clause 6, by 11.00
         a.m. on the due date). Any amounts received after such time on any date
         may, in the discretion of the Agent, be deemed to have been received on
         the  next  succeeding  Business  Day for the  purposes  of  calculating
         interest  thereon.  All such payments shall be made to the Agent at the
         account  most  recently  notified by it,  except  payments  pursuant to
         Clauses 12 (INCREASED  Costs), 10 (TAXES),  24 (COSTS AND EXPENSES) and
         25 (INDEMNITIES),  which shall be made directly to the Persons entitled
         thereto.  The Agent shall  distribute any such payments  received by it
         for account of any other Person to the appropriate  recipient  promptly
         following receipt thereof.

     (b) If any payment  hereunder  shall be due on a day that is not a Business
         Day,  the date for payment  shall be  extended  to the next  succeeding
         Business  Day  and,  in the  case  of any  payment  accruing  interest,
         interest thereon shall be payable for the period of such extension.

CURRENCY

15.2 All amounts payable under this Agreement in respect of any Letter of Credit
shall be payable in Sterling.

APPLICATION OF INSUFFICIENT PAYMENTS

15.3 If at any time  insufficient  funds are  received by and  available  to the
Agent to pay fully all Demand  Amounts,  interest,  fees and  expenses  then due
hereunder, such funds shall be applied:

(a)   FIRST, in or towards payment pro rata of any unpaid fees, costs, expenses,
      indemnity  payments  and other  amounts due to the Agent and the  Security
      Trustee under the Finance Documents;

(b)   SECONDLY,  in or towards payment pro rata of any unpaid costs and expenses
      of the Lenders under the Finance Documents;

(c)   THIRDLY,  in or towards  payment pro rata of any  outstanding  fees (other
      than  Letter of Credit  Fees)  payable to the  Lenders  under the  Finance
      Documents;

(d)   FOURTHLY,  in or towards  payment pro rata of all accrued Letter of Credit
      Fees due to Issuing Lenders but unsatisfied under this Agreement;

(e)   FIFTHLY, in or towards payment pro rata of any interest on Demand Amounts;

(f)   SIXTHLY, in or towards payment pro rata of Demand Amounts;

(g)   SEVENTHLY,  in or towards payment pro rata of any principal  (other than a
      Demand Amount) due but unsatisfied  under this Agreement  (including,  for
      the  avoidance of doubt,  any cash cover to be provided  under a Letter of
      Credit); and

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(h)   EIGHTHLY,  in or  towards  payment  pro  rata  of any  other  sum  due but
      unsatisfied under this Agreement.

PRO RATA TREATMENT

15.4 Except to the extent otherwise provided herein:

(a)   each reimbursement of LC Disbursements shall be made to the Lenders,  each
      payment of fees  under  Clause 9 (FEES)  shall be made for  account of the
      Lenders, and each termination or reduction of the Commitments under Clause
      8 (TERMINATION AND REDUCTION OF THE  COMMITMENTS)  shall be applied to the
      respective  Commitments  of the  Lenders,  pro  rata  according  to  their
      respective Commitments; and

(b)   each payment of interest shall be made for account of the Lenders pro rata
      in  accordance  with the amounts of  interest  then due and payable to the
      respective Lenders.

SHARING OF PAYMENTS BY LENDERS

15.5 If any Lender shall,  by exercising any right of set-off or counterclaim or
otherwise,  obtain  payment  in respect of any LC  Exposures  resulting  in such
Lender receiving payment of a greater  proportion of the aggregate amount of its
LC Exposures and accrued interest thereon then due than the proportion  received
by any other Lender,  then the Lender  receiving such greater  proportion  shall
purchase  (for cash at face value)  participations  in the LC Exposures of other
Lenders to the extent  necessary so that the benefit of all such payments  shall
be shared by the Lenders  rateably in accordance with the aggregate amount of LC
Exposures; provided that:

(a)   if any such  participations  are  purchased  and all or any portion of the
      payment  giving rise thereto is recovered,  such  participations  shall be
      rescinded and the purchase  price restored to the extent of such recovery,
      without interest; and

(b)   the  provisions  of this  Clause  shall not be  construed  to apply to any
      payment made by any Obligor pursuant to and in accordance with the express
      terms  of  this  Agreement  or  any  payment   obtained  by  a  Lender  as
      consideration  for the  assignment  of or sale  of a  participation  in LC
      Disbursements  to any assignee or  participant,  other than to the Account
      Party or any  Subsidiary or Affiliate  thereof (as to which the provisions
      of this paragraph shall apply).

Each  Obligor  consents  to the  foregoing  and  agrees,  to the  extent  it may
effectively  do  so  under   applicable   Law,  that  any  Lender   acquiring  a
participation  pursuant to the foregoing  arrangements  may exercise against the
Account  Party  rights  of  set-off  and  counterclaim   with  respect  to  such
participation  as fully as if such Lender were a direct  creditor of the Account
Party in the amount of such participation and the Obligors authorise the Lenders
to exchange Transfer  Certificates and any other documentation to give effect to
those purchases of participations.

PRESUMPTIONS OF PAYMENT

15.6  Unless the Agent  shall have  received  notice from any party prior to the
date on which any payment is due to the Agent  hereunder that the payor will not
make such payment,  the Agent may assume that the payor has made such payment on
such date in  accordance  herewith  and may, in reliance  upon such  assumption,
distribute to the relevant payee the amount due. In such event, if the payor has
not in fact made such payment, then each of the

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payees  severally agrees to repay to the Agent forthwith on demand the amount so
distributed to that payee with interest thereon, for each day from and including
the date such amount is  distributed  to it to but excluding the date of payment
to the Agent,  at the Agent's  cost of funds from such  sources as the Agent may
reasonably select.

CERTAIN DEDUCTIONS BY THE AGENT

15.7 If any Lender  shall  fail to make any  payment  required  to be made by it
pursuant to Clause 15.5 (SHARING OF PAYMENTS BY LENDERS), then the Agent may, in
its  discretion  (notwithstanding  any  contrary  provision  hereof),  apply any
amounts  thereafter  received by the Agent for account of such Lender to satisfy
such  Lender's  obligations  under  such  Clauses  until  all  such  unsatisfied
obligations are fully paid.

16.   GUARANTEE AND INDEMNITY

GUARANTEE AND INDEMNITY

16.1 The Guarantors, jointly and severally, irrevocably and unconditionally:

(a)   guarantee to each Finance Party the due and punctual  payment from time to
      time on demand any and every sum or sums of money which the Account  Party
      is at any time liable to pay to any Finance Party under or pursuant to the
      Finance  Documents  and which has become due and  payable but has not been
      paid at the time such demand is made (the GUARANTEED OBLIGATIONS); and

(b)   agree as a primary obligation to indemnify each Finance Party from time to
      time on demand from and against any loss  incurred by any Finance Party as
      a result of any of the  obligations of the Account Party under or pursuant
      to the Finance Documents being or becoming void,  voidable,  unenforceable
      or  ineffective  as against the Account  Party for any reason  whatsoever,
      whether or not known to any Finance Party or any other person,  the amount
      of such loss being the amount  which the  person or persons  suffering  it
      would otherwise have been entitled to recover from the Account Party.

ADDITIONAL SECURITY

16.2 The obligations of each Guarantor  herein contained shall be in addition to
and  independent of every other security which any Finance Party may at any time
hold in respect of any of the  Account  Party's  obligations  under the  Finance
Documents.

CONTINUING OBLIGATIONS

16.3 The obligations of each Guarantor  herein contained shall constitute and be
continuing obligations notwithstanding any settlement of account or other matter
or thing  whatsoever and shall not be considered  satisfied by any  intermediate
payment or  satisfaction  of all or any of the  obligations of the Account Party
under the Finance  Documents  and shall  continue in full force and effect until
final  payment in full of all  amounts  owing by the  Account  Party  under this
Agreement  and  total  satisfaction  of  all  the  Account  Party's  actual  and
contingent obligations under the Finance Documents.

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OBLIGATIONS NOT DISCHARGED

16.4 Neither the obligations of the Guarantors  herein contained nor the rights,
powers and  remedies  conferred  in respect of the  Guarantors  upon any Finance
Party by the  Finance  Documents  or by Law  shall be  discharged,  impaired  or
otherwise affected by:

(a)   the winding-up,  dissolution,  administration  or  re-organisation  of the
      Account  Party or any other person or any change in its status,  function,
      control or ownership;

(b)   any of the  obligations of the Account Party or any other person under the
      Finance  Documents or under any other  security taken in respect of any of
      its obligations  under the Finance  Documents  being or becoming  illegal,
      invalid, unenforceable or ineffective in any respect;

(c)   time or other  indulgence  being  granted  or agreed to be  granted to any
      Obligor in respect of its obligations under the Finance Documents or under
      any such other security;

(d)   any amendment to, or any  variation,  waiver or release of, any obligation
      of any  Obligor  under  the  Finance  Documents  or under  any such  other
      security;

(e)   any failure to take, or fully to take, any security contemplated hereby or
      otherwise agreed to be taken in respect of the Obligors' obligations under
      the Finance Documents;

(f)   any failure to realise or fully to realise  the value of, or any  release,
      discharge,  exchange or substitution  of, any security taken in respect of
      the Obligors' obligations under the Finance Documents; or

(g)   any other act, event or omission  which,  but for this Clause 16.4,  might
      operate to discharge, impair or otherwise affect any of the obligations of
      any Guarantor  herein  contained or any of the rights,  powers or remedies
      conferred upon any of the Finance  Parties by the Finance  Documents or by
      Law.

SETTLEMENT CONDITIONAL

16.5 Any  settlement  or  discharge  between  any Obligor and any of the Finance
Parties shall be conditional upon no security or payment to any Finance Party by
the  Account  Party or any other  person on behalf of the  Account  Party  being
avoided or reduced by virtue of any Laws  relating  to  bankruptcy,  insolvency,
liquidation or similar Laws of general  application and, if any such security or
payment is so avoided or  reduced,  each  Finance  Party  shall be  entitled  to
recover the value or amount of such  security or payment from the Account  Party
subsequently as if such settlement or discharge had not occurred.

EXERCISE OF RIGHTS

16.6 No Finance  Party  shall be obliged  before  exercising  any of the rights,
powers or  remedies  conferred  upon them in  respect  of any  Guarantor  by the
Finance Documents or by Law to:

(a)   make any demand of the Account Party or any other Obligor;

(b)   take any action or obtain  judgment in any court against the Account Party
      or any other Obligor;

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(c)   make or file any  claim or proof in a  winding-up  or  dissolution  of the
      Account Party or any other Obligor; or

(d)   enforce or seek to enforce any other  security  taken in respect of any of
      the  obligations  of the  Account  Party or any  other  Obligor  under the
      Finance Documents.

DEFERRAL OF GUARANTOR'S RIGHTS

16.7 Each  Guarantor  agrees that,  so long as any amounts are or may be owed by
the Account Party under the Finance  Documents or the Account Party is under any
actual or  contingent  obligations  under the  Finance  Documents,  it shall not
exercise any rights which it may at any time have by reason of performance by it
of its obligations under the Finance Documents:

(a)   to be indemnified by the Account Party; and/or

(b)   to claim any contribution  from any other Guarantor of the Account Party's
      obligations under the Finance Documents; and/or

(c)   to take the benefit (in whole or in part and whether by way of subrogation
      or  otherwise)  of any rights of the  Finance  Parties  under the  Finance
      Documents or of any other  security  taken  pursuant to, or in  connection
      with, this Agreement by all or any of the Finance Documents.

RIGHTS OF CONTRIBUTION

16.8 The  Guarantors  (other than the Account  Party) hereby  agree,  as between
themselves,  that if any such Guarantor shall become an Excess Funding Guarantor
(as defined  below) by reason of the payment by such Guarantor of any Guaranteed
Obligations,  each other  Guarantor  (other than the Account  Party)  shall,  on
demand of such Excess Funding Guarantor (but subject to the next sentence),  pay
to such Excess Funding  Guarantor an amount equal to such  Guarantor's  Pro Rata
Share (as defined below and determined,  for this purpose,  without reference to
the properties,  debts and liabilities of such Excess Funding  Guarantor) of the
Excess Payment (as defined below) in respect of such Guaranteed Obligations. The
payment  obligation of a Guarantor to any Excess  Funding  Guarantor  under this
Clause shall be subordinate and subject in right of payment to the prior payment
in full of the obligations of such Guarantor under the other  provisions of this
Clause 16 and such Excess  Funding  Guarantor  shall not  exercise  any right or
remedy with respect to such excess until payment and satisfaction in full of all
of such obligations.

For purposes of this Clause,  (i) EXCESS FUNDING  GUARANTOR means, in respect of
any Guaranteed Obligations, a Guarantor that has paid an amount in excess of its
Pro Rata Share of such  Guaranteed  Obligations,  (ii) EXCESS PAYMENT means,  in
respect of any  Guaranteed  Obligations,  the amount  paid by an Excess  Funding
Guarantor  in excess of its Pro Rata Share of such  Guaranteed  Obligations  and
(iii)  PRO RATA  SHARE  means,  for any  Guarantor,  the ratio  (expressed  as a
percentage) of (x) the amount by which the aggregate present fair saleable value
of all properties of such Guarantor  (excluding any shares of stock of any other
Guarantor) exceeds the amount of all the debts and liabilities of such Guarantor
(including contingent, subordinated, unmatured and unliquidated liabilities, but
excluding the obligations of such Guarantor hereunder and any obligations of any
other  Guarantor that have been  Guaranteed by such Guarantor) to (y) the amount
by which the  aggregate  fair  saleable  value of all  properties  of all of the
Guarantors  (other than the Account  Party)  exceeds the amount of all the debts
and liabilities (including contingent,  subordinated, unmatured and unliquidated
liabilities,  but excluding the obligations of the Guarantors  under this Clause
16) of all of the

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Guarantors  (other than the Account  Party),  determined (A) with respect to any
Guarantor that is a party hereto on the date hereof, as of the date hereof,  and
(B) with respect to any other Guarantor, as of the date such Guarantor becomes a
Guarantor hereunder.

GENERAL LIMITATION ON GUARANTEE OBLIGATIONS

16.9 In any action or proceeding involving any state corporate Law, or any state
or  Federal  bankruptcy,  insolvency,  reorganisation  or other Law in any other
jurisdiction affecting the rights of creditors generally,  if the obligations of
any Guarantor  under Clause 16.1  (GUARANTEE  AND  INDEMNITY)  would  otherwise,
taking into account the  provisions  of Clause 16.8, be held or determined to be
void,  invalid  or  unenforceable,  or  subordinated  to the claims of any other
creditors,  on  account  of  the  amount  of its  liability  under  Clause  16.1
(GUARANTEE AND INDEMNITY),  then,  notwithstanding any other provision hereof to
the contrary,  the amount of such liability shall, without any further action by
such  Guarantor,  any Lender,  the Agent or any other Person,  be  automatically
limited and reduced to the highest amount that is valid and  enforceable and not
subordinated  to the claims of other  creditors as  determined in such action or
proceeding.

17.   REPRESENTATIONS AND WARRANTIES

17.1 Each  Obligor  represents  and  warrants to the Lenders on the date of this
Agreement,  the Closing  Date and on 1 September  of each year unless all of the
Letters of Credit will  terminate  on or before the fourth  anniversary  of such
date (with  reference  to the facts and  circumstances  subsisting  on each such
date) as follows.

ORGANISATION; POWERS

17.2 It and each of its  Significant  Subsidiaries  is duly  organised,  validly
existing  and in  good  standing  under  the  Laws  of the  jurisdiction  of its
organisation,  has all requisite power and authority to carry on its business as
now conducted  and,  except where the failure to do so,  individually  or in the
aggregate,  could not  reasonably  be expected  to result in a Material  Adverse
Effect,  is  qualified  to do business  in, and is in good  standing  in,  every
jurisdiction where such qualification is required.

AUTHORISATION; ENFORCEABILITY

17.3 The Transactions  are within such Obligor's  corporate powers and have been
duly  authorised by all necessary  corporate and, if required,  by all necessary
shareholder  action.  Each  Finance  Document to which such Obligor is party has
been duly executed and delivered by such Obligor and constitutes a legal,  valid
and binding  obligation  of such  Obligor,  enforceable  against such Obligor in
accordance with its terms,  except as such  enforceability may be limited by (a)
bankruptcy,  insolvency,  reorganisation,  moratorium or similar Laws of general
applicability  affecting  the  enforcement  of  creditors'  rights  and  (b) the
application  of  general  principles  of  equity  (regardless  of  whether  such
enforceability is considered in a proceeding in equity or at law).

GOVERNMENTAL APPROVALS; NO CONFLICTS

17.4 The  Transactions  (a) do not require any consent or approval of (including
any exchange control approval), registration or filing with, or any other action
by, any  Governmental  Authority,  except such as have been obtained or made and
are in full  force  and  effect,  (b) will not  violate  any  applicable  Law or
regulation  or the charter,  by-laws or other  organisational  documents of such
Obligor or any of its Significant  Subsidiaries or any order of any Governmental
Authority, (c) will not violate or result in a default under any material

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indenture, agreement or other instrument binding upon such Obligor 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 Obligor or any of
its Significant Subsidiaries.

FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE

17.5 (a) FINANCIAL CONDITION.  The Account Party has heretofore furnished to the
         Lenders  the  consolidated  balance  sheet and  statements  of  income,
         stockholders'  equity  and cash  flows  of the  Account  Party  and its
         consolidated  Subsidiaries  (A) as of and for  the  fiscal  year  ended
         December  31,  2003,   reported  on  by   PricewaterhouseCoopers   LLP,
         independent  public  accountants  (as  provided in the Account  Party's
         Report  on Form  10-K  filed  with the SEC for the  fiscal  year  ended
         December  31,  2003),  and (B) as of and for the fiscal  quarter  ended
         September 30, 2004, as provided in the Account  Party's  Report on Form
         10-Q filed  with the SEC for the fiscal  quarter  ended  September  30,
         2004.  Such  financial  statements  present  fairly,  in  all  material
         respects,  the financial  position and results of  operations  and cash
         flows of the Account Party and its respective consolidated Subsidiaries
         as of such dates and for such  periods in  accordance  with GAAP or (in
         the  case of XL  Bermuda  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, 2003, there has been no
         material adverse change in the assets, business, financial condition or
         operations of such Obligor and its Subsidiaries, taken as a whole.

PROPERTIES

17.6 (a) PROPERTY   GENERALLY.   Such  Obligor  and  each  of  its   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 Clause 19.3 (LIENS) and except for minor defects
         in title that do not interfere with its ability to conduct its business
         as currently conducted or to utilise such properties for their intended
         purposes.

     (b) INTELLECTUAL  PROPERTY.  Such  Obligor  and  each  of  its  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  Obligor  and its  Significant
         Subsidiaries  does not  infringe  upon the rights of any other  Person,
         except  for  any  such  infringements  that,  individually  or  in  the
         aggregate,  could not  reasonably  be  expected to result in a Material
         Adverse Effect.

LITIGATION AND ENVIRONMENTAL MATTERS

17.7 (a) ACTIONS, SUITS AND PROCEEDINGS.  Except as disclosed in Schedule 2 Part
         C or as  disclosed in the Account  Party's  filings with the SEC, or as
         routinely encountered in claims activity,  there are no actions,  suits
         or proceedings by or before any  arbitrator or  Governmental  Authority
         now pending  against or, to the knowledge of such  Obligor,  threatened
         against or affecting such Obligor or any of its  Subsidiaries (x) 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 (y) that  involve  the Finance
         Documents or the Transactions.

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(b)   ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 2 Part D and except
      with respect to any other matters that,  individually or in the aggregate,
      could not reasonably be expected to result in a Material  Adverse  Effect,
      neither such Obligor nor any of its  Subsidiaries (i) has failed to comply
      with any  Environmental  Law or to  obtain,  maintain  or comply  with any
      permit,  license or other  approval  required for its  business  under any
      Environmental  Law, (ii) has incurred any Environmental  Liability,  (iii)
      has  received  notice  of any  claim  with  respect  to any  Environmental
      Liability or (iv) knows of any basis for any Environmental Liability.

COMPLIANCE WITH LAWS AND AGREEMENTS

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

INVESTMENT AND HOLDING COMPANY STATUS

17.9 Such Obligor is not (a) an INVESTMENT  COMPANY as defined in, or subject to
regulation under, the Investment Company Act of 1940 or (b) a HOLDING COMPANY as
defined in, or subject to regulation  under,  the Public Utility Holding Company
Act of 1935.

TAXES

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

ERISA

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

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

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DISCLOSURE

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

USE OF CREDIT

17.13 Neither such Obligor nor any of its  Subsidiaries is engaged  principally,
or as one of its important  activities,  in the business of extending credit for
the purpose,  whether immediate,  incidental or ultimate,  of buying or carrying
Margin Stock,  and no Letter of Credit will be used in connection with buying or
carrying any Margin Stock.

SUBSIDIARIES

17.14 Set forth in  Schedule  3 is a  complete  and  correct  list of all of the
Subsidiaries  of the Account Party as of 30 September  2004,  together with, for
each such  Subsidiary,  (i) the jurisdiction of organisation of such Subsidiary,
(ii) each Person holding  ownership  interests in such  Subsidiary and (iii) the
percentage  of  ownership  of such  Subsidiary  represented  by  such  ownership
interests.  Except as disclosed in Schedule 3, (x) each of the Account Party and
its Subsidiaries  owns, free and clear of Liens, and has the unencumbered  right
to vote, all outstanding  ownership interests in each Person shown to be held by
it in Schedule 3, (y) all of the issued and  outstanding  capital  stock of each
such  Person  organised  as a  corporation  is  validly  issued,  fully paid and
nonassessable  and (z) except as disclosed in filings of the Account  Party with
the SEC prior to the date hereof,  there are no  outstanding  Equity Rights with
respect to any Obligor.

WITHHOLDING TAXES

17.15 Based upon information with respect to each Lender provided by each Lender
to the Agent,  as of the date hereof,  the payment of the LC  Disbursements  and
interest  thereon,  the fees under Clause 9 (FEES) and all other amounts payable
hereunder will not be subject, by withholding or deduction, to any Taxes imposed
by any Obligor Jurisdiction.

STAMP TAXES

17.16 To ensure the  legality,  validity,  enforceability  or  admissibility  in
evidence  of  the  Finance  Documents,  it is not  necessary  that  the  Finance
Documents  or any other  document  be filed or  recorded  with any  Governmental
Authority  or that any stamp or  similar  tax be paid on or in respect of any of
the  Finance  Documents,  or any other  document  other  than such  filings  and
recordations  that have already  been made and such stamp or similar  taxes that
have already been paid.

LEGAL FORM

17.17 The  Finance  Documents  are in proper  legal  form  under the Laws of any
Obligor Jurisdiction for the admissibility thereof in the courts of such Obligor
Jurisdiction.

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CLAIMS PARI PASSU

17.18 Under the Laws of its  jurisdiction of  incorporation in force at the date
hereof, the claims of the Finance Parties against it under this Agreement or any
other Finance  Document will rank at least pari passu with the claims of all its
other  unsecured and  unsubordinated  creditors  save (i) those whose claims are
preferred  solely by any  bankruptcy,  insolvency,  liquidation or other similar
Laws of general  application;  and (ii) with respect to XL Re only, those claims
required to be preferred by and under the Bermuda Insurance Act 1978.

18.   AFFIRMATIVE COVENANTS

Until the  Commitments  have  expired or been  terminated  and all fees  payable
hereunder  shall  have been paid in full and all  Letters  of Credit  shall have
expired or terminated and all LC Disbursements  shall have been reimbursed,  the
Obligors covenant and agree with the Lenders that:

FINANCIAL STATEMENTS AND OTHER INFORMATION

18.1 Each Obligor will furnish to the Agent and each Lender:

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

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      material  respects the  financial  condition  and results of operations of
      such Insurance Subsidiaries in accordance with SAP, consistently applied;

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

(d)   concurrently  with any  delivery  of  financial  statements  under  Clause
      18.1(a),  (b) or (c), a certificate  signed on behalf of each Obligor by a
      Financial Officer (i) certifying as to whether a Default has occurred and,
      if a Default has occurred,  specifying the details  thereof and any action
      taken or proposed to be taken with respect  thereto,  (ii)  setting  forth
      reasonably  detailed  calculations  demonstrating  compliance with Clauses
      19.3 (LIENS),  19.5 (RATIO OF TOTAL FUNDED DEBT TO TOTAL  CAPITALISATION),
      19.6  (CONSOLIDATED NET WORTH) and 19.7  (INDEBTEDNESS)  and (iii) stating
      whether  any change in GAAP or (in the case of XL  Bermuda,  XL Re and any
      Insurance  Subsidiary of XL America) SAP or in the application thereof has
      occurred since the date of the audited financial statements referred to in
      Clause  17.5(a)  and,  if any such  change has  occurred,  specifying  any
      material  effect of such change on the financial  statements  accompanying
      such certificate;

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

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

(g)   concurrently  with any  delivery  of  financial  statements  under  Clause
      18.1(a),  (b) or (c) a certificate  of a Financial  Officer of the Account
      Party, setting forth on a consolidated basis for the Account Party and its
      consolidated  Subsidiaries  as of the end of the fiscal year or quarter to
      which such  certificate  relates  (i) the  aggregate  book value of assets
      which are subject to Liens  permitted under Clause 19.3(g) (LIENS) and the
      aggregate book value of liabilities which are subject to Liens

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      permitted  under  Clause  19.3(g)  (it being  understood  that the reports
      required by  paragraphs  (a), (b) and (c) of this Clause shall satisfy the
      requirement  of this Clause (i) of this Clause 18.1(g) if such reports set
      forth  separately,  in accordance with GAAP, line items  corresponding  to
      such aggregate book values) and (ii) a calculation  showing the portion of
      each  of  such  aggregate   amounts  which  portion  is   attributable  to
      transactions among wholly-owned Subsidiaries of the Account Party;

(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
      the Account  Party  (commencing  with the fiscal year ending  December 31,
      2004), a statement of a Financial Officer of the Account Party listing, as
      of the end of the  immediately  preceding  fiscal  quarter of the  Account
      Party,  the amount of cash and the  securities  of the  Obligors and their
      Subsidiaries that have been posted as collateral under Clause 19.3(f); and

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

"KNOW YOUR CUSTOMER" CHECKS

18.2 (a) If:

      (i)   the  introduction  of or any  change  in (or in the  interpretation,
            administration  or application  of) any law or regulation made after
            the date of this Agreement;

      (ii)  any  change  in the  status  of an  Obligor  after  the date of this
            Agreement; or

      (iii) a proposed  assignment  or transfer by a Lender of any of its rights
            and obligations under this Agreement to a party that is not a Lender
            prior to such assignment or transfer,

      obliges the Agent or any Lender (or, in the case of paragraph (iii) above,
      any prospective new Lender) to comply with "know your customer" or similar
      identification procedures in circumstances where the necessary information
      is not already  available  to it, each  Obligor  shall  promptly  upon the
      request of the Agent or any Lender supply,  or procure the supply of, such
      documentation  and other evidence as is reasonably  requested by the Agent
      (for  itself or on behalf of any  Lender) or any Lender (for itself or, in
      the case of the event described in paragraph (iii) above, on behalf of any
      prospective  new  Lender) in order for the Agent,  such  Lender or, in the
      case of the event described in paragraph (iii) above,  any prospective new
      Lender to carry out and be satisfied it has  complied  with all  necessary
      "know your customer" or other similar checks under all applicable laws and
      regulations  pursuant  to the  transactions  contemplated  in the  Finance
      Documents.

(b)   Each  Lender  shall  promptly  upon the  request of the Agent  supply,  or
      procure  the  supply  of,  such  documentation  and other  evidence  as is
      reasonably  requested  by the Agent (for itself) in order for the Agent to
      carry out and be satisfied it has complied with all  necessary  "know your
      customer"  or  other  similar  checks  under  all   applicable   laws  and
      regulations  pursuant  to the  transactions  contemplated  in the  Finance
      Documents.

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NOTICES OF MATERIAL EVENTS

18.3 Each  Obligor  will  furnish to the Agent and each  Lender  prompt  written
notice of the following:

(a)   the occurrence of any Default; and

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

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

PRESERVATION OF EXISTENCE AND FRANCHISES

18.4 Each Obligor 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  except where the failure
to maintain such corporate  existence and material  rights and franchises  would
not reasonably be expected to have, either  individually or in the aggregate,  a
Material  Adverse  Effect;  provided that the  foregoing  shall not prohibit any
merger  or   consolidation   permitted  under  Clause  19.1  (MERGERS)  or  19.2
(DISPOSITIONS).  Each  Obligor  will,  and will  cause  each of its  Significant
Subsidiaries to, qualify and remain  qualified as a foreign  corporation in each
jurisdiction in which failure to receive or retain such qualification would have
a Material Adverse Effect.

INSURANCE

18.5 Each Obligor 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.

MAINTENANCE OF PROPERTIES

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

PAYMENT OF TAXES AND OTHER  POTENTIAL  CHARGES AND  PRIORITY  CLAIMS  PAYMENT OF
OTHER CURRENT LIABILITIES

18.7 Each  Obligor  will,  and will  cause each of its  Subsidiaries  to, pay or
discharge:

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

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

(c)   on or prior to the date  when due,  all  other  lawful  claims  which,  if
      unpaid,  might  result in the  creation  of a Lien upon any such  property
      (other  than Liens not  forbidden  by Clause 19.3  (LIENS))  or which,  if
      unpaid,  might give rise to a claim  entitled  to  priority  over  general
      creditors of such Obligor 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 Obligor or such Subsidiary;

provided that, unless and until  foreclosure,  distraint,  levy, sale or similar
proceedings shall have been commenced,  such Obligor or such Subsidiary need not
pay or discharge any such tax, assessment,  charge, levy or claim so long as (i)
the validity  thereof is contested in good faith and by appropriate  proceedings
diligently  conducted or (ii) such reserves or other  appropriate  provisions as
may be  required  by GAAP or SAP,  as the  case may be,  shall  have  been  made
therefor  and so long as such  failure  to pay or  discharge  would  not  have a
Material Adverse Effect.

FINANCIAL ACCOUNTING PRACTICES

18.8 Such Obligor will, and will cause each of its consolidated Subsidiaries to,
make  and  keep  books,  records  and  accounts  which,  in  reasonable  detail,
accurately and fairly reflect its  transactions  and  dispositions of its assets
and  maintain a system of internal  accounting  controls  sufficient  to provide
reasonable  assurances  that  transactions  are  recorded as necessary to permit
preparation  of  financial  statements  required  under  Clause 18.1  (FINANCIAL
STATEMENTS  AND  OTHER   INFORMATION)  in  conformity  with  GAAP  and  SAP,  as
applicable, and to maintain accountability for assets.

COMPLIANCE WITH APPLICABLE LAWS

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

USE OF LETTERS OF CREDIT AND PROCEEDS

18.10 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  Applicant  will use the Letters of Credit
issued for its  account  hereunder  in the  ordinary  course of business of such
Applicant and its Affiliates. For the avoidance of doubt, the Parties agree that
the  Account  Party may apply for a Letter of Credit  hereunder  to support  the
obligations  of any  Affiliate of an  Applicant,  it being  understood  that the
Account  Party shall  nonetheless  remain the Obligor and as such be liable with
respect to such Letter of Credit.

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CONTINUATION OF AND CHANGE IN BUSINESSES

18.11 Each Obligor 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.

VISITATION

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

19. NEGATIVE COVENANTS

Until the Total  Commitments  have  expired or  terminated  and all fees payable
hereunder  have been paid in full and all  Letters  of Credit  have  expired  or
terminated and all LC Disbursements  have been reimbursed,  each of the Obligors
covenants and agrees with the Lenders that:

MERGERS

19.1 No Obligor will merge with or into or  consolidate  with any other  Person,
except that if no Default  shall occur and be  continuing  or shall exist at the
time of such merger or consolidation or immediately  thereafter and after giving
effect thereto:

(a)   any Obligor may merge or consolidate with any other corporation, including
      a Subsidiary, if such Obligor shall be the surviving corporation;

(b)   the  Account  Party 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 the Account Party (other than the cancellation of any outstanding
      shares of capital  stock of the Account Party held by the Person with whom
      it merges or consolidates); and

(c)   any  Obligor  may enter into a merger or  consolidation  which is effected
      solely to change the  jurisdiction  of  incorporation  of such Obligor and
      results in a  reclassification,  conversion  or  exchange  of  outstanding
      shares of capital  stock of such  Obligor  solely  into  shares of capital
      stock of the surviving entity.

DISPOSITIONS

19.2 No Obligor 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
Clause as a DISPOSITION and any series of related Dispositions  constituting but
a single Disposition),  any of its properties or assets,  tangible or intangible
(including but not limited to sale, assignment, discount or other disposition of
accounts,  contract rights, chattel paper or general intangibles with or without
recourse), except:

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(a)   Dispositions in the ordinary course of business  involving  current assets
      or other  invested  assets  classified on such Obligor'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  Obligor  and  their  respective  Subsidiaries,  exceed
      $500,000,000 in any calendar year;

(c)   Dispositions of equipment or other property which is obsolete or no longer
      used or useful in the  conduct  of the  business  of such  Obligor  or its
      Subsidiaries;

(d)   Dispositions  between  or  among  the  Obligors  and  their  wholly  owned
      Subsidiaries; or

(e)   Dispositions   with   Affiliates   in  accordance   with  Clause   19.4(c)
      (TRANSACTIONS WITH AFFILIATES).

LIENS

19.3 No Obligor will,  nor will it permit any of its  Subsidiaries  to,  create,
incur, assume or permit to exist any Lien on any property or assets, tangible or
intangible, now owned or hereafter acquired by it, except:

(a)   Liens existing on the date hereof (and extension,  renewal and replacement
      Liens upon the same  property,  provided  that the amount  secured by each
      Lien constituting such an extension, renewal or replacement Lien shall not
      exceed the amount secured by the Lien theretofore  existing) and listed on
      Part B of Schedule 2;

(b)   Liens arising from taxes, assessments, charges, levies or claims described
      in Clause 18.7 (PAYMENT OF TAXES AND OTHER POTENTIAL  CHARGES AND PRIORITY
      CLAIMS,  PAYMENTS OF OTHER  CURRENT  LIABILITIES)  that are not yet due or
      that remain payable without  penalty or to the extent  permitted to remain
      unpaid under the provision of Clause 18.7;

(c)   Liens on property  securing all or part of the purchase  price  thereof to
      such Obligor and Liens  (whether or not  assumed)  existing on property at
      the time of purchase  thereof by such Obligor (and extension,  renewal and
      replacement Liens upon the same property);  provided (i) each such Lien is
      confined  solely to the property so  purchased,  improvements  thereto and
      proceeds thereof, and (ii) the aggregate amount of the obligations secured
      by all such Liens on any particular property at any time purchased by such
      Obligor,  as  applicable,  shall not exceed 100% of the lesser of the fair
      market value of such property at such time or the actual purchase price of
      such property;

(d)   zoning  restrictions,  easements,  minor  restrictions  on the use of real
      property, minor irregularities in title thereto and other minor Liens that
      do not in the aggregate materially detract from the value of a property or
      asset to, or materially impair its use in the business of, such Obligor or
      any such Subsidiary;

(e)   Liens securing  Indebtedness  permitted by Clause  19.7(b)  (INDEBTEDNESS)
      covering  assets  whose market  value is not  materially  greater than the
      amount of the Indebtedness secured thereby plus a commercially  reasonable
      margin;

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(f)   Liens on cash and  securities  of an  Obligor  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 the Account  Party's  Statement of Investment
      Policy  Objectives and Guidelines as in effect on the date hereof or as it
      may be changed from time to time by  resolution  duly adopted by the board
      of directors of the Account Party (or any committee thereof);

(g)   Liens on cash and securities not to exceed  $500,000,000  in the aggregate
      securing  obligations  of an  Obligor 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  paragraph (g) preclude
      any Person (other than any  Subsidiary of the Account  Party) in which the
      Account Party 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 the
      Account  Party 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  paragraph  (g) the
      aggregate  amount of cash  and/or  securities  on which any Obligor or any
      Subsidiary  shall have granted a Lien in favour 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 favour
      of such Obligor or  Subsidiary,  as the case may be, at such time, so long
      as the relevant agreement between such Obligor 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
      Obligors'  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,  or (ii) any other assets
      subject  to any trust or other  account  arising  out of or as a result of
      contractual,  regulatory  or any other  requirements;  provided that in no
      case shall any such Lien secure  Indebtedness  and any Lien which  secures
      Indebtedness shall not be permitted under this clause (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 Obligor or any of their  Subsidiaries
      or its becoming a Subsidiary,  and Liens existing on any property acquired
      by any Obligor or any of their  Subsidiaries  at the time such property is
      so acquired  (whether or not the  Indebtedness  secured thereby shall have
      been assumed) (and extension,  renewal and replacement Liens upon the same
      property,  provided that the amount secured by each Lien constituting such
      an  extension,  renewal  or  replacement  Lien shall not exceed the amount
      secured by the Lien theretofore existing),  provided that (i) no such Lien
      shall have been created or assumed in contemplation of such  consolidation
      or merger or such Person's  becoming a Subsidiary or such  acquisition  of
      property and (ii) each such Lien shall extend  solely to the item or items
      of  property so  acquired  and,  if

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      required by terms of the instrument  originally  creating such Lien, other
      property  which is an  improvement  to or is acquired  for specific use in
      connection with such acquired property.

TRANSACTIONS WITH AFFILIATES

19.4 No Obligor will, nor will it permit any of its Significant Subsidiaries to,
enter into or carry out any transaction  with  (including,  without  limitation,
purchase or lease  property  or  services  to, loan or advance to or enter into,
suffer to remain in existence or amend any  contract,  agreement or  arrangement
with) any Affiliate of such Obligor,  or directly or indirectly  agree to do any
of the foregoing, except:

(a)   transactions  involving  guarantees  or  co-obligors  with  respect to any
      Indebtedness described in Part A of Schedule 2;

(b)   transactions between any Obligor and its wholly-owned Subsidiaries; and

(c)   transactions  with Affiliates in good faith in the ordinary course of such
      Obligor's  business  consistent  with past  practice  and on terms no less
      favourable  to such Obligor or any  Subsidiary  than those that could have
      been obtained in a comparable transaction on an arm's length basis from an
      unrelated Person.

RATIO OF TOTAL FUNDED DEBT TO TOTAL CAPITALISATION

19.5 The Account Party will not permit its ratio of (a) Total Funded Debt to (b)
the sum of Total  Funded  Debt plus  Consolidated  Net Worth to be greater  than
0.35:1.00 at any time.

CONSOLIDATED NET WORTH

19.6 The  Account  Party will not permit its  Consolidated  Net Worth to be less
than the sum of (a)  $5,000,000,000  plus (b) 25% of consolidated net income (if
positive)  of the Account  Party and its  Subsidiaries  for each fiscal  quarter
ending on or after March 31, 2005.

INDEBTEDNESS

19.7 No Obligor will, nor will it permit any of its Subsidiaries to, at any time
create,  incur, assume or permit to exist any Indebtedness,  or agree, become or
remain liable (contingent or otherwise) to do any of the foregoing, except:

(a)   Indebtedness created hereunder and under any other Finance Document;

(b)   secured  Indebtedness  (including secured  reimbursement  obligations with
      respect  to letters of  credit)  of any  Obligor or any  Subsidiary  in an
      aggregate   principal  amount  (for  all  Obligors  and  their  respective
      Subsidiaries)  not exceeding 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 Obligor or any Subsidiary;

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(e)   Indebtedness  incurred in  transactions  described in Clauses  19.3(f) and
      19.3(g); and

(f)   Indebtedness  existing  on the  date  hereof  and  described  in Part A of
      Schedule  2  and  extensions,   renewals  and  replacements  of  any  such
      Indebtedness  that  do  not  increase  the  outstanding  principal  amount
      thereof.

RATINGS DOWNGRADE

19.8 The Account Party will not permit the  financial-strength  rating from A.M.
Best & Co. or its successor (such rating,  an AMB RATING) of each of the Account
Party, XL Bermuda and XL Re to fall below "A-" (the AMB RATING UNDERTAKING). The
Agent may (and if so  instructed  by the  Majority  Lenders  shall)  require the
Account  Party within 5 Business Days of a failure to comply with the AMB Rating
Undertaking, either:

(a)   to provide cash cover in an amount equal to the aggregate LC Exposures for
      the time being; or

(b)   to deposit BIS Qualifying Assets with a custodian acceptable to the Agent,
      and enter into custodian and other relevant  documentation,  together with
      documentation  required  by the  Security  Trustee  to give  the  Security
      Trustee  (for the  benefit of itself  and the other  Finance  Parties)  an
      effective  and  perfected  security  interest  in  respect  of  those  BIS
      Qualifying  Assets,  in an aggregate amount equal to 105% of the aggregate
      LC Exposures for the time being.

      (each of (a) and (b), AMB CASH COLLATERAL)

Notwithstanding  any of the foregoing  provisions of this Clause 19.8, if at any
time  subsequent to the Account Party  posting AMB Cash  Collateral,  any of the
Account  Party,  XL Bermuda  and XL Re has an AMB  Rating of at least  "A",  the
Security  Trustee will instruct a bank holding any cash cover or otherwise  take
all  necessary  actions to release  and  return any AMB Cash  Collateral  to the
Account  Party and the Letter of Credit Fee shall be  determined by reference to
Clause 9.3.

PRIVATE ACT

19.9 No  Obligor  will  become  subject  to a Private  Act  other  than the X.L.
Insurance Company, Ltd. Act, 1989.

20.   EVENTS OF DEFAULT

If any of the following events (EVENTS OF DEFAULT) shall occur:

(a)   FAILURE TO PAY:

      (i)   any Obligor shall fail to pay any Demand Amount when and as the same
            shall become due and payable; or

      (ii)  any Obligor  shall fail to pay any interest or any fee payable under
            this  Agreement  or any other  Finance  Document or any other amount
            (other than an amount referred to in Clause 20(a)(i))  payable under
            this Agreement or any other Finance  Document,  when and as the same
            shall  become  due and  payable,  and such  failure  shall  continue
            unremedied for a period of 3 or more days;

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(b)   MISREPRESENTATION:  any  representation or warranty made or deemed made by
      any Obligor in or in connection  with this  Agreement or any other Finance
      Document or any amendment or modification hereof, or in any certificate or
      financial  statement  furnished pursuant to the provisions  hereof,  shall
      prove to have been false or misleading  in any material  respect as of the
      time made (or deemed made) or furnished;

(c)   BREACH OF OBLIGATIONS:

      (i)   any Obligor shall fail to observe or perform any covenant, condition
            or agreement  contained in Clause 19 (NEGATIVE  COVENANTS)  provided
            that any failure by the Account  Party to comply with the AMB Rating
            Undertaking  shall not  constitute  an Event of Default if, within 5
            Business   Days  of  a  failure  to  comply  with  such  AMB  Rating
            Undertaking,   the  Account  Party  posts  and  maintains  AMB  Cash
            Collateral in accordance with Clause 19.8 (RATINGS DOWNGRADE); or

      (ii)  any Obligor shall fail to observe or perform any covenant, condition
            or  agreement  contained  in this  Agreement  or any  other  Finance
            Document  (other than those specified in Clause 20(a) or (c)(i)) and
            such failure shall  continue  unremedied  for a period of 20 or more
            days after  notice  thereof  from the Agent (given at the request of
            any Lender) to such Obligor;

(d)   CROSS DEFAULT: any Obligor or any of its Subsidiaries shall default (i) in
      any  payment of  principal  of or  interest  on any other  obligation  for
      borrowed money in principal  amount of $50,000,000 or more, or any payment
      of any principal  amount of $50,000,000 or more under Hedging  Agreements,
      in each case beyond any period of grace provided with respect thereto,  or
      (ii)  in the  performance  of  any  other  agreement,  term  or  condition
      contained  in any such  agreement  (other than Hedging  Agreements)  under
      which any such  obligation in principal  amount of  $50,000,000 or more is
      created, if the effect of such default is to cause or permit the holder or
      holders  of such  obligation  (or  trustee  on  behalf  of such  holder or
      holders)  to cause  such  obligation  to become  due  prior to its  stated
      maturity or to terminate its  commitment  under such  agreement,  provided
      that  this  Clause  20(d)  shall not apply to  secured  Indebtedness  that
      becomes due as a result of the voluntary  sale or transfer of the property
      or assets securing such Indebtedness;

(e)   WINDING-UP:  a  decree  or  order by a court  having  jurisdiction  in the
      premises  shall have been  entered  adjudging  any  Obligor a bankrupt  or
      insolvent,   or   approving   as   properly   filed  a  petition   seeking
      reorganisation  of such  Obligor  under the Bermuda  Companies  Law or the
      Cayman  Islands  Companies  Law  (2002  Revision)  or  any  other  similar
      applicable Law, and such decree or order shall have continued undischarged
      or  unstayed  for a  period  of 60 days;  or a decree  or order of a court
      having  jurisdiction  in the premises for the appointment of a receiver or
      liquidator  or trustee or assignee in  bankruptcy  or  insolvency  of such
      Obligor or a substantial  part of its  property,  or for the winding up or
      liquidation  of its affairs,  shall have been entered,  and such decree or
      order shall have  continued  undischarged  and unstayed for a period of 60
      days;

(f)   INSOLVENCY AND RESCHEDULING: any Obligor shall institute proceedings to be
      adjudicated  a  voluntary  bankrupt,  or shall  consent to the filing of a
      bankruptcy  proceeding  against  it, or shall file a petition or answer or
      consent  seeking  reorganisation  under the Bermuda  Companies  Law or the
      Cayman  Islands  Companies  Law  (2002  Revision)  or  any  other  similar
      applicable  Law, or shall consent to the filing of any such  petition,  or
      shall consent to the appointment of a receiver or

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      liquidator  or trustee or assignee in  bankruptcy or insolvency of it or a
      substantial  part of its  property,  or shall make an  assignment  for the
      benefit of  creditors,  or shall admit in writing its inability to pay its
      debts  generally as they become due, or corporate or other action shall be
      taken by such Obligor in furtherance of any of the aforesaid purposes;

(g)   MATERIAL  UNSATISFIED  JUDGMENT OR ORDER:  one or more  judgments  for the
      payment of money in an aggregate amount in excess of $100,000,000 shall be
      rendered against any Obligor or any of its Subsidiaries or any combination
      thereof  and the same  shall not have  been  vacated,  discharged,  stayed
      (whether by appeal or otherwise) or bonded  pending  appeal within 45 days
      from the entry thereof;

(h)   ERISA EVENT: an ERISA Event (or similar event with respect to any Non-U.S.
      Benefit  Plan) shall have  occurred  that,  in the opinion of the Majority
      Lenders,  when taken together with all other ERISA Events and such similar
      events  that have  occurred,  could  reasonably  be  expected to result in
      liability of the Obligors and their  Subsidiaries  in an aggregate  amount
      exceeding $100,000,000;

(i)   CHANGE OF CONTROL: a Change in Control shall occur;

(j)   CHANGE IN OWNERSHIP:  the Account  Party shall cease to own,  beneficially
      and of record, directly or indirectly all of the outstanding voting shares
      of capital stock of XL Bermuda, XL Re or XL America; or

(k)   ILLEGALITY:  at any time it is or  becomes  unlawful  for any  Obligor  to
      perform  or comply  with any or all of its  obligations  hereunder  or any
      court or arbitrator or any governmental body, agency or official which has
      jurisdiction in the matter shall decide,  rule or order that any provision
      of the  Finance  Documents  is invalid or  unenforceable  in any  material
      respect, or any Obligor shall so assert in writing;

(l)   DEFAULT UNDER GUARANTEE:  the guarantee  contained in Clause 16 (GUARANTEE
      AND INDEMNITY)  shall terminate or cease, in whole or material part, to be
      a legally valid and binding  obligation of each Guarantor or any Guarantor
      or any Person acting for or on behalf of any of such parties shall contest
      such  validity  or  binding  nature  of  such  guarantee   itself  or  the
      Transactions, or any other Person shall assert any of the foregoing,

then,  and in every such event  (other than an event with respect to any Obligor
described  in Clause  20(e) or  20(f)),  and at any time  thereafter  during the
continuance  of such event,  the Agent may,  and at the request of the  Majority
Lenders shall, by notice to the Account Party (an ACCELERATION NOTICE), take any
of the following actions, at the same or different times:

      (i)   terminate the Total Commitments, and thereupon the Total Commitments
            shall terminate immediately;

      (ii)  require the Account Party forthwith to provide cash cover in respect
            of any LC Exposure pursuant to a Letter of Credit; and

      (iii) declare all fees and other  obligations of the Account Party accrued
            hereunder to be due and payable in whole (or in part,  in which case
            any fees and other obligations not so declared to be due and payable
            may thereafter be declared to be due and payable) and thereupon such
            fees  and  other   obligations,   shall   become  due  and   payable
            immediately, without presentment, demand, protest

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            or other notice of any kind,  all of which are hereby  waived by the
            Account Party,

      and in case of any event with  respect to any Obligor  described in Clause
      20(e) or 20(f):

            (A)   the Commitments shall automatically terminate; and

            (B)   the Account Party shall  automatically  be required to provide
                  cash cover in respect of any LC Exposure  pursuant to a Letter
                  of Credit; and

            (C)   all fees and other  obligations  of the Account  Party accrued
                  hereunder, shall automatically become due and payable, without
                  presentment,  demand, protest or other notice of any kind, all
                  of which are hereby waived by the Account Party.

21.   THE AGENT, THE ARRANGERS AND THE LENDERS

APPOINTMENT OF THE AGENT

21.1 The Arrangers and each of the Lenders  hereby  appoints the Agent to act as
its agent in  connection  herewith  and  authorises  the Agent to exercise  such
rights, powers, authorities and discretions as are specifically delegated to the
Agent by the terms hereof together with all such rights, powers, authorities and
discretions as are reasonably incidental thereto.

AGENT'S DISCRETIONS

21.2 The Agent may:

(a)   assume, unless it has, in its capacity as agent for the Lenders,  received
      notice  to the  contrary  from  any  other  party  hereto,  that  (a)  any
      representation  made or deemed to be made by an Obligor in connection with
      the Finance  Documents is true, (b) no Event of Default or Potential Event
      of Default has  occurred,  (c) no Obligor is in breach of or default under
      its  obligations  under the Finance  Documents  and (d) any right,  power,
      authority or  discretion  vested  therein upon the Majority  Lenders,  the
      Lenders or any other person or group of persons has not been exercised;

(b)   assume that the Facility  Office of each Lender is that  notified to it by
      such  Lender in writing  prior to the date  hereof  (or,  in the case of a
      Transferee,  at the end of the Transfer Certificate to which it is a party
      as Transferee) until it has received from such Lender a notice designating
      some other  office of such Lender to replace its  Facility  Office and act
      upon any such  notice  until  the same is  superseded  by a  further  such
      notice;

(c)   engage and pay for the advice or  services  of any  lawyers,  accountants,
      surveyors  or  other  experts  whose  advice  or  services  may to it seem
      necessary, expedient or desirable and rely upon any advice so obtained;

(d)   rely as to any  matters of fact which might  reasonably  be expected to be
      within the  knowledge  of an Obligor  upon a  certificate  signed by or on
      behalf of such Obligor;

(e)   rely upon any communication or document believed by it to be genuine;

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(f)   refrain from  exercising  any right,  power or discretion  vested in it as
      agent hereunder  unless and until instructed by the Majority Lenders as to
      whether or not such right,  power or discretion is to be exercised and, if
      it is to be exercised, as to the manner in which it should be exercised;

(g)   refrain from acting in accordance  with any  instructions  of the Majority
      Lenders  to begin any  legal  action or  proceeding  arising  out of or in
      connection  with the Finance  Documents  until it shall have received such
      security  as it may  require  (whether  by way of  payment  in  advance or
      otherwise) for all costs, claims, losses,  expenses (including legal fees)
      and liabilities  together with any VAT thereon which it will or may expend
      or incur in complying with such instructions; and

(h)   assume (unless it has specific  notice to the contrary) that any notice or
      request made by the Account Party is made on behalf of the Obligors.

AGENT'S OBLIGATIONS

21.3 The Agent shall:

(a)   promptly  inform  each  Lender of the  contents  of any notice or document
      received by it in its capacity as Agent from an Obligor  under the Finance
      Documents and shall promptly  deliver to each Lender a copy of each Letter
      of Credit  delivered  to Lloyd's  pursuant  to Clause 3.3  (COMPLETION  OF
      LETTERS OF CREDIT);

(b)   promptly  notify each Lender of the  occurrence of any Event of Default or
      any default by an Obligor in the due performance of or compliance with its
      obligations under the Finance Documents of which the Agent has notice from
      any other party hereto;

(c)   save  as  otherwise  provided  herein,  act as  agent  under  the  Finance
      Documents in accordance with any  instructions  given to it by an Majority
      Lenders,  which  instructions  shall be binding on the  Arrangers  and the
      Lenders; and

(d)   if so  instructed by the Majority  Lenders,  refrain from  exercising  any
      right,  power or  discretion  vested  in it as  agent  under  the  Finance
      Documents.

The  Agent's  duties  under the  Finance  Documents  are solely  mechanical  and
administrative in nature.

EXCLUDED OBLIGATIONS

21.4  Notwithstanding  anything to the  contrary  expressed  or implied  herein,
neither the Agent nor the Arrangers shall:

(a)   be bound to enquire as to (i)  whether or not any  representation  made or
      deemed to be made by an Obligor in connection  with the Finance  Documents
      is true,  (ii) the occurrence of any Default,  (iii) the performance by an
      Obligor of its obligations  under the Finance Documents or (iv) any breach
      of or default by an Obligor of or under its obligations  under the Finance
      Documents;

(b)   be bound to account to any Lender for any sum or the profit element of any
      sum received by it for its own account;

(c)   be bound to disclose to any other person any  information  relating to any
      Obligor  or any  Related  Party  if (i) such  person,  on  providing  such
      information, expressly stated

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      to the Agent or, as the case may be, the Arrangers,  that such information
      was  confidential  or (ii) such  disclosure  would or might in its opinion
      constitute a breach of any Law or be otherwise  actionable  at the suit of
      any person;

(d)   be under any obligations  other than those for which express  provision is
      made herein;

(e)   be or be deemed to be a fiduciary for any other party hereto; or

(f)   be  obliged  to carry  out any "know  your  customer"  or other  checks in
      relation to any person on behalf of any Lender and each Lender confirms to
      the Agent and the  Arranger  that it is  solely  responsible  for any such
      checks  it is  required  to  carry  out and  that  it may not  rely on any
      statement in relation to such checks made by the Agent or the Arranger.

INDEMNIFICATION

21.5 Each Lender shall,  pro rata according to its respective  Commitment,  from
time to time on demand by the Agent,  indemnify  the Agent  against  any and all
costs, claims, losses,  expenses (including legal fees) and liabilities together
with any value  added tax  thereon  (or  equivalent)  which the Agent may incur,
otherwise than by reason of its own gross  negligence or wilful  misconduct,  in
acting in its capacity as agent hereunder.

EXCLUSION OF LIABILITIES

21.6 Except in the case of gross negligence or wilful default, neither the Agent
nor the Arrangers accept any responsibility:

(a)   for the adequacy, accuracy and/or completeness of any information supplied
      by the Agent or the  Arrangers,  by an Obligor  or by any other  person in
      connection with the Finance Documents or any other agreement,  arrangement
      or document entered into, made or executed in anticipation of, pursuant to
      or in connection with the Finance Documents;

(b)   for the legality, validity,  effectiveness,  adequacy or enforceability of
      the Finance  Documents  or any other  agreement,  arrangement  or document
      entered  into,  made or executed  in  anticipation  of,  pursuant to or in
      connection with the Finance Documents; or

(c)   for the exercise of, or the failure to exercise, any judgement, discretion
      or  power  given  to any of  them by or in  connection  with  the  Finance
      Documents or any other  agreement,  arrangement or document  entered into,
      made or executed in anticipation of, pursuant to or in connection with the
      Finance Documents.

Accordingly,  neither the Agent nor the  Arrangers  shall be under any liability
(whether in negligence  or  otherwise)  in respect of such matters,  save in the
case of gross negligence or wilful misconduct.

NO ACTIONS

21.7 Each of the Lenders agree that it will not assert or seek to assert against
any  director,  officer or employee of the Agent or the  Arrangers  any claim it
might have  against any of them in respect of the matters  referred to in Clause
21.6 (EXCLUSION OF LIABILITIES).

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BUSINESS WITH THE GROUP

21.8 The Agent and the Arrangers  may accept  deposits  from,  lend money to and
generally  engage  in any  kind of  banking  or other  business  with any of the
Obligors or their Subsidiaries.

RESIGNATION

21.9 The  Agent  may  resign  its  appointment  hereunder  at any  time  without
assigning any reason  therefor by giving not less than thirty days' prior notice
to that  effect  to each of the  other  parties  hereto,  PROVIDED  THAT no such
resignation  shall be effective  until a successor for the Agent is appointed in
accordance with the succeeding provisions of this Clause 21.

SUCCESSOR AGENT

21.10 If the Agent  gives  notice of its  resignation  pursuant  to Clause  21.9
(RESIGNATION)  then any  reputable  and  experienced  Lender or other  financial
institution may be appointed as a successor to the Agent by the Majority Lenders
(with the  approval of the Account  Party,  not to be  unreasonably  withheld or
delayed,)  during the period of such notice (with the co-operation of the Agent)
but,  if no such  successor  is so  appointed,  the  Agent  may  appoint  such a
successor itself.

RIGHTS AND OBLIGATIONS

21.11 If a successor to the Agent is appointed  under the  provisions  of Clause
21.10  (SUCCESSOR  AGENT),  then (a) the retiring Agent shall be discharged from
any further obligation hereunder but shall remain entitled to the benefit of the
provisions of this Clause 21 and (b) its successor and each of the other parties
hereto shall have the same rights and  obligations  amongst  themselves  as they
would have had if such successor had been a party hereto.

OWN RESPONSIBILITY

21.12 It is understood and agreed by each Lender that at all times it has itself
been, and will continue to be, solely responsible for making its own independent
appraisal of and  investigation  into all risks  arising  under or in connection
with this Agreement including, but not limited to:

(a)   the financial condition, creditworthiness,  condition, affairs, status and
      nature of each member of the Group;

(b)   the legality, validity, effectiveness,  adequacy and enforceability of the
      Finance Documents and any other agreement, arrangement or document entered
      into,  made or executed in  anticipation  of, pursuant to or in connection
      with the Finance Documents;

(c)   whether  such  Lender  has  recourse,  and the  nature  and extent of that
      recourse,  against  an  Obligor  or any other  person or any of its assets
      under or in connection with the Finance Documents, the Transactions or any
      other agreement, arrangement or document entered into, made or executed in
      anticipation of, pursuant to or in connection with the Finance  Documents;
      and

(d)   the adequacy,  accuracy and/or completeness of any information provided by
      the  Agent  or the  Arrangers,  an  Obligor  or by  any  other  person  in
      connection  with the  Finance  Documents,  the  Transactions  or any other
      agreement, arrangement or

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      document entered into, made or executed in anticipation of, pursuant to or
      in connection with the Finance Documents.

Accordingly, each Lender acknowledges to the Agent and the Arrangers that it has
not relied on and will not hereafter  rely on the Agent and the Arrangers or any
of them in respect of any of these matters.

AGENCY DIVISION SEPARATE

21.13 In acting as agent hereunder for the Lenders,  the Agent shall be regarded
as acting  through  its  agency  division  which  shall be treated as a separate
entity from any other of its divisions or departments and,  notwithstanding  the
foregoing  provisions of this Clause 21, any information  received by some other
division or department of the Agent may be treated as confidential and shall not
be regarded as having been given to the Agent's agency division.

DECLARATION OF AGENT AS SECURITY TRUSTEE

21.14 The Agent hereby declares that it shall hold:

(a)   all rights, titles and interests that may hereafter be mortgaged, charged,
      assigned or otherwise secured in favour of the Agent by or pursuant to the
      Finance Documents;

(b)   the benefit of all representations, covenants, guarantees, indemnities and
      other contractual  provisions given in favour of the Agent (other than any
      such  benefits  given  to the  Agent  solely  for its own  benefit)  by or
      pursuant to the Finance Documents (other than this Agreement); and

(c)   all proceeds of the security referred to in paragraph (a) above and of the
      enforcement of the benefits referred to in paragraph (b) above,

on trust for itself and the other Finance Parties from time to time.

Such declaration  shall remain valid  notwithstanding  that the Agent may on the
date hereof or at any other time be the sole Finance Party; for the avoidance of
doubt, however, such declaration shall, in such case, be deemed repeated on each
date on which the Agent ceases to be the sole Finance Party.

Each of the parties  hereto  agrees that the  obligations,  rights and  benefits
vested or to be  vested in the Agent as  trustee  as  aforesaid  by the  Finance
Documents or any document entered into pursuant thereto shall (as well before as
after  enforcement) be performed and (as the case may be) exercised by the Agent
in accordance with the provisions of this Clause 21.

POWERS AND DISCRETIONS

21.15 The  Agent  shall  have all the  powers  and  discretions  conferred  upon
trustees by the Trustee Act 1925 (to the extent not  inconsistent  herewith) and
by way of supplement it is expressly declared as follows:

(a)   the Agent  shall be at liberty to place any of the Finance  Documents  and
      any other instruments, documents or deeds delivered to it pursuant thereto
      or in  connection  therewith  for the time being in its  possession in any
      safe deposit, safe or receptacle selected by the Agent or with any Lender,
      any  company  whose  business  includes  undertaking  the safe  custody of
      documents or any firm of lawyers of good repute;

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(b)   the Agent may,  whenever it thinks  fit,  delegate by power of attorney or
      otherwise to any person or persons or  fluctuating  body of persons all or
      any of the rights, trusts,  powers,  authorities and discretions vested in
      it by any of the Finance  Documents and such  delegation  may be made upon
      such  terms  and  subject  to such  conditions  (including  the  power  to
      sub-delegate)  and subject to such  regulations as the Agent may think fit
      and  the  Agent  shall  not  be  bound  to  supervise,  or be in  any  way
      responsible  for any loss incurred by reason of any  misconduct or default
      on the part of, any such delegate (or sub-delegate);

(c)   notwithstanding anything else herein contained, the Agent may refrain from
      doing  anything which would or might in its opinion be contrary to any Law
      of any  jurisdiction  or any  directive or regulation of any agency of any
      state or which would or might otherwise render it liable to any person and
      may do anything  which is, in its  opinion,  necessary  to comply with any
      such Law, directive or regulation;

(d)   save in the case of gross negligence or wilful  misconduct,  the Agent and
      every  attorney,  agent,  delegate,  sub-delegate  and  any  other  person
      appointed by any of them under any of the Finance  Documents may indemnify
      itself  or  himself  out of the  security  held by the Agent  against  all
      liabilities,  costs, fees, charges, losses and expenses incurred by any of
      them in  relation to or arising out of the taking or holding of any of the
      security  constituted  by, or any of the benefits  provided by, any of the
      Finance  Documents,  in the exercise or purported  exercise of the rights,
      trusts,  powers and discretions vested in any of them or in respect of any
      other  matter or thing done or omitted to be done in any way  relating  to
      any of the Finance Documents or pursuant to any Law or regulation; and

(e)   without prejudice to the provisions of any of the Finance  Documents,  the
      Agent  shall not be under any  obligation  to insure  any  property  or to
      require any other person to maintain any such  insurance  and shall not be
      responsible  for any loss which may be  suffered by any person as a result
      of the lack of or inadequacy or insufficiency of any such insurance.

LIABILITY

21.16 The Agent shall not be liable for any failure:

(a)   to  require  the  deposit  with  it of any  deed or  document  certifying,
      representing or constituting  the title of the Account Party to any of the
      property  mortgaged,  charged,  assigned  or  otherwise  encumbered  by or
      pursuant to any of the Finance Documents;

(b)   to obtain any  licence,  consent  or other  authority  for the  execution,
      delivery,  validity, legality,  adequacy,  performance,  enforceability or
      admissibility in evidence of any of the Finance Documents;

(c)   to register  or notify any deed or document  mentioned  at  paragraph  (a)
      above in accordance  with the  provisions of any of the documents of title
      of the Account Party;

(d)   to effect or  procure  registration  of or  otherwise  protect  any of the
      security  created by any of the Finance  Documents by registering the same
      under any  applicable  registration  Laws in any territory or otherwise by
      registering any notice,  caution or other entry  prescribed by or pursuant
      to the provisions of relevant Laws;

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(e)   to take or to require  the  Account  Party to take any steps to render the
      security  created or  purported to be created by or pursuant to any of the
      Finance  Documents  effective or to secure the  creation of any  ancillary
      charge under the Laws of any jurisdiction; or

(f)   to require  any  further  assurances  in  relation  to any of the  Finance
      Documents.

TITLE TO SECURITY ETC.

21.17 The Agent may accept without enquiry,  requisition or objection such right
and  title  as the  Account  Party  may  have  to  the  property  belonging  (or
purportedly  belonging) to it (or any part thereof)  which is the subject matter
of any of  the  Finance  Documents  and  shall  not be  bound  or  concerned  to
investigate  or make any enquiry into the right or title of the Account Party to
such property (or any part thereof) or, without  prejudice to the foregoing,  to
require the Account  Party to remedy any defect in the Account  Party's right or
title as aforesaid.

NEW SECURITY TRUSTEE

21.18 The Agent  may at any time  appoint  any  person  (whether  or not a trust
corporation) to act either as a separate trustee or as a co-trustee jointly with
the Agent:

(a)   if the Agent  considers  such  appointment  to be in the  interests of the
      Lenders; or

(b)   for the purposes of conforming to any legal requirements,  restrictions or
      conditions  which the Agent deems relevant for the purposes of the Finance
      Documents  and the Agent shall give prior notice to the Account  Party and
      the Lenders of any such appointment.

Any  person  so  appointed  shall  (subject  to the  provisions  of the  Finance
Documents)  have such powers,  authorities  and  discretions and such duties and
obligations as shall be conferred or imposed or such person by the instrument of
appointment and shall have the same benefits under this Clause 21 as the Agent.

The Agent shall have power in like manner to remove any person so appointed.

Such  reasonable  remuneration  as the Agent may pay to any person so appointed,
and any costs,  charges and expenses  incurred by such person in performing  its
functions pursuant to such appointment, shall for the purposes hereof be treated
as  costs,  charges  and  expenses  incurred  by the  Agent  under  the  Finance
Documents.

PERPETUITY PERIOD

21.19 The perpetuity period under the rule against perpetuities if applicable to
the trusts  constituted in this Clause 21 and the other Finance  Documents shall
be the  period of eighty  years  from the date of this  Agreement  and,  subject
thereto,  if the Agent  determines  that all of the  obligations  of the Account
Party under any of the  Finance  Documents  have been fully and  unconditionally
discharged, such trusts shall be wound up.

LENDER REPRESENTATIONS

21.20 Each Lender represents to the Agent on the date of issue of each Letter of
Credit that:

(a)   the  execution  and  delivery of each Letter of Credit by the Agent on the
      Lender's  behalf has been duly  authorised by all necessary  action on the
      part of the Lender; and

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(b)   the  obligations of the Lender under each Letter of Credit  constitute its
      legal, valid and binding obligations.

LETTERS OF CREDIT

21.21 Each Lender shall,  (a) pro rata according to its  respective  Commitment,
indemnify the Agent against any and all  liabilities,  costs and expenses  which
the Agent  may incur  otherwise  than by reason of its own gross  negligence  or
wilful  misconduct  (in its capacity as Agent) as a result of the  execution and
delivery of any Letter of Credit and any documents executed and delivered by the
Agent in connection therewith;  and (b) inform the Agent promptly if at any time
the collateral securing the repayment of any amounts payable under any Letter of
Credit  comprises  directly or  indirectly a security  interest over a principal
private residence.

22.   NOTICES

Except in the case of notices and other communications expressly permitted to be
given by  telephone,  all notices and other  communications  provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by facsimile, as follows:

(a)   if to any Obligor, to:

      XL Capital Ltd
      XL House
      One Bermudiana Road
      Hamilton HM 11
      Bermuda

      Fax:       1 441 295 4867
      Attention: Kirstin Gould

(b)   if to the Agent:

      2nd Floor
      4 Harbour Exchange Square
      London E14 9GE

      Fax:       44 207 500 4482/4484
      Attention: Loans Agency

(c)   if to a  Lender,  to it at  its  address  (or  facsimile  number)  on  the
      signature  pages of this  Agreement,  or such  other  address  as it shall
      notify to the Agents and the Account Party.

Any party  hereto may change its  address or  facsimile  number for  notices and
other communications hereunder by notice to the other parties hereto (or, in the
case of any such  change by a Lender,  by  notice to the  Account  Party and the
Agent).  All  notices  and other  communications  given to any  party  hereto in
accordance  with the provisions of this  Agreement  shall be deemed to have been
given on the date of receipt.

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23.   WAIVERS AND AMENDMENTS

NO DEEMED WAIVERS

23.1 No failure or delay by any Finance Party in  exercising  any right or power
hereunder  shall  operate as a waiver  thereof,  nor shall any single or partial
exercise of any such right or power,  or any  abandonment or  discontinuance  of
steps to enforce such a right or power,  preclude any other or further  exercise
thereof or the exercise of any other right or power.  No waiver of any provision
of this Agreement or consent to any departure by an Obligor  therefrom  shall in
any event be  effective  unless  the same  shall be  permitted  by  Clause  23.3
(AMENDMENTS),  and then such waiver or consent  shall be  effective  only in the
specific  instance  and for the purpose for which  given.  Without  limiting the
generality  of the  foregoing,  the  issuance of a Letter of Credit shall not be
construed  as a waiver of any  Default,  regardless  of whether the Agent or any
Lender may have had notice or knowledge of such Default at the time.

REMEDIES CUMULATIVE

23.2 The rights and remedies of the Finance Parties hereunder are cumulative and
are not exclusive of any rights or remedies that they would otherwise have.

AMENDMENTS

23.3 Neither this Agreement nor any provision  hereof may be waived,  amended or
modified  except  pursuant to an agreement or agreements in writing entered into
by the Obligors  and the Majority  Lenders or by the Obligors and the Agent with
the consent of the Majority Lenders; PROVIDED that no such agreement shall:

(a)   increase the Commitment of any Lender without the written  consent of such
      Lender,

(b)   reduce the amount of any reimbursement  obligation of the Account Party in
      respect of any LC Disbursement or reduce the rate of interest thereon,  or
      reduce any fees  payable  hereunder,  without the written  consent of each
      Lender affected thereby,

(c)   postpone the scheduled date for  reimbursement of any LC Disbursement,  or
      any interest thereon, or any fees payable hereunder,  or reduce the amount
      of, waive or excuse any such payment,  or postpone the  scheduled  date of
      expiration  of any  Commitment  or any  Letter  of Credit  (other  than an
      extension  thereof  pursuant to Clause 4), without the written  consent of
      each Lender affected thereby,

(d)   change  Clause 15.4 (PRO RATA  TREATMENT)  or 15.5 (SHARING OF PAYMENTS BY
      LENDERS) without the consent of each Lender affected thereby,

(e)   release  any of the  Guarantors  from any of their  guarantee  obligations
      under Clause 16 (GUARANTEE AND INDEMNITY)  without the written  consent of
      each Lender,

(f)   release any security  granted by the Account Party pursuant to Clause 19.8
      (RATINGS  DOWNGRADE) or 20 (EVENTS OF DEFAULT) without the written consent
      of each Lender, and

(g)   change  any of the  provisions  of this  Clause or the  percentage  in the
      definition  of the term  MAJORITY  LENDERS or any other  provision  hereof
      specifying the number or percentage of Lenders required to waive, amend or
      modify any rights hereunder or

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      make any determination or grant any consent hereunder, without the written
      consent of each Lender;

and PROVIDED  FURTHER that no such  agreement  shall amend,  modify or otherwise
affect the rights or duties of the Agent  hereunder  without  the prior  written
consent of the Agent.

24.   COSTS AND EXPENSES

24.1 The Account Party shall pay:

(a)   all reasonable  out-of-pocket  expenses and charges  incurred by the Agent
      and/or the  Arrangers  (together  with VAT or any  similar tax thereon and
      including the reasonable  fees,  charges and  disbursements of counsel for
      the Agent) in connection  with the  syndication  of the credit  facilities
      provided  for  herein,   the  negotiation,   preparation,   execution  and
      administration  of the  Finance  Documents  (subject  to the  terms of the
      Commitment  Letter)  or any  amendments,  modifications  or waivers of the
      provisions hereof (whether or not the transactions  contemplated hereby or
      thereby shall be consummated);

(b)   all reasonable  out-of-pocket expenses incurred by the Agent, the Security
      Trustee or any Lender,  (together  with VAT or any similar tax thereon and
      including the  reasonable  fees,  charges and  disbursements  of one legal
      counsel  for the  Agent  and  one  legal  counsel  for  the  Lenders),  in
      connection with the preservation  and/or  enforcement or protection of its
      rights in  connection  with the Finance  Documents,  including  its rights
      under  this  Clause,  or in  connection  with  Letters  of  Credit  issued
      hereunder,  including in  connection  with any workout,  restructuring  or
      negotiations in respect thereof.

STAMP DUTY

24.2 The  Account  Party shall pay all  transfer,  stamp,  documentary  or other
similar  taxes,  assessments or charges  levied by any  governmental  or revenue
authority in respect of this Agreement or any other document referred to herein.

25.   INDEMNITIES

CURRENCY INDEMNITY

25.1 (a) If:

      (i)   any amount payable by the Account Party under or in connection  with
            this  Agreement is received by any Finance  Party in a currency (the
            PAYMENT  CURRENCY)  other than that  agreed in this  Agreement  (the
            AGREED  CURRENCY)  whether as a result of any  judgement or order or
            the enforcement  thereof, the liquidation of the payer or otherwise;
            and

      (ii)  the amount  produced by converting the Payment  Currency so received
            into the Agreed  Currency  is less than the  relevant  amount of the
            Agreed Currency.

      then the Account Party shall, as an independent obligation, indemnify such
      Finance Party for the deficiency and any loss sustained as a result.  Such
      conversion shall be made at such prevailing rate of exchange, on such date
      and in such market as is

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      determined  by such  Finance  Party  (acting  reasonably)  as  being  most
      appropriate  for the  conversion.  The Account Party shall in addition pay
      the costs of the conversion.

(b)   The Account Party waives any right it may have in any  jurisdiction to pay
      any amount under this  Agreement in a currency other than that in which it
      is expressed to be payable in this Agreement.

OTHER INDEMNITIES

25.2 The Obligors  shall  indemnify the Agent and each Lender,  and each Related
Party  of any of the  foregoing  Persons  (each  such  Person  being  called  an
INDEMNITEE)  against,  and to hold each  Indemnitee  harmless  from, any and all
losses, claims, damages,  liabilities and related expenses,  including the fees,
charges and  disbursements  of any counsel  for any  Indemnitee,  incurred by or
asserted  against any  Indemnitee  arising out of, in  connection  with, or as a
result of:

(a)   the execution or delivery of this Agreement or any agreement or instrument
      contemplated  hereby,  the  performance  by the  parties  hereto  of their
      respective  obligations  hereunder or the consummation of the Transactions
      or any other transactions contemplated hereby;

(b)   any Letter of Credit or the use of any thereof  (including  any refusal by
      any Lender to honour a demand for payment  under a Letter of Credit if the
      documents  presented in connection with such demand do not strictly comply
      with the terms of such Letter of Credit);

(c)   any actual or prospective claim,  litigation,  investigation or proceeding
      relating to any of the foregoing,  whether based on contract,  tort or any
      other theory and  regardless of whether any Indemnitee is a party thereto;
      provided that such indemnity shall not, as to any Indemnitee, be available
      to the extent that such losses,  claims,  damages,  liabilities or related
      expenses  result  from or arise  out of the  gross  negligence  or  wilful
      misconduct of such Indemnitee.

REIMBURSEMENT BY LENDERS

25.3 To the extent that the Obligors fail to pay any amount  required to be paid
by them to the Agent under  Clauses 25 (COSTS AND  EXPENSES)  or 25.1  (CURRENCY
INDEMNITY) and 25.2 (OTHER INDEMNITIES),  each Lender severally agrees to pay to
the Agent such Lender's  Applicable  Percentage  (determined as of the time that
the  applicable  unreimbursed  expense or  indemnity  payment is sought) of such
unpaid  amount;  PROVIDED that the  unreimbursed  expense or  indemnified  loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Agent in its capacity as such.

26.   ALTERATION TO THE PARTIES

SUCCESSORS

26.1 The  provisions  of this  Agreement  shall be binding upon and inure to the
benefit  of the  parties  hereto and their  respective  successors  and  assigns
permitted hereby.

ASSIGNMENTS AND TRANSFERS BY THE ACCOUNT PARTY

26.2 The Account Party shall not assign or otherwise  transfer any of its rights
or obligations  hereunder  without the prior written consent of each Lender (and
any  attempted  assignment or transfer by the Account Party without such consent
shall be null and void).

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TRANSFERS BY LENDERS.

26.3 (a) Any  Lender  (the  TRANSFEROR)  may at any  time  transfer  to  another
         Approved Credit  Institution  (the  TRANSFEREE) all or a portion of its
         rights and obligations under this Agreement (including all or a portion
         of its  Commitment)  and  under  any  Letter of Credit to which it is a
         party; PROVIDED THAT:

      (i)   except in the case of an transfer to a Lender or a Lender Affiliate,
            each of the  Account  Party and the  Agent  must  give  their  prior
            written  consent  to such  assignment  (which  consent  shall not be
            unreasonably withheld or delayed);

      (ii)  except in the case of an transfer to a Lender or a Lender  Affiliate
            or a transfer  of the entire  remaining  amount of the  Transferor's
            Commitment,  the amount of the Commitment of the Transferor  subject
            to each such  transfer  (determined  as of the date of the  Transfer
            Certificate) shall not be less than (pound)3,000,000  unless each of
            the Account Party and the Agent otherwise consent;

      (iii) a transfer of obligations shall only be effective if the Transferee:

            (A)   if it shall not be a Lender,  has delivered  relevant contact,
                  notice and  account  details to the Agent  (with a copy to the
                  Account  Party)  as well as any  information  required  by the
                  Agent to perform "know your customer" or other checks relating
                  to any person  that it is required to carry out in relation to
                  the  Transferee,  the  completion  of which  the  Agent  shall
                  promptly notify to the Transferor and the Transferee; and

            (B)   has  confirmed to the Agent and the Account Party prior to the
                  transfer  taking  effect that it undertakes to be bound by the
                  terms  of this  Agreement  as  Lender  in form  and  substance
                  reasonably  satisfactory  to the Agent and the Account  Party;
                  and on any such transfer  being made the  Transferor  shall be
                  relieved of its obligations to the extent they are transferred
                  to the Transferee.

      PROVIDED FURTHER that any consent of the Account Party otherwise  required
      under this  paragraph  shall not be required if an Event of Default  under
      Clause  20(a),  (e) or (f) has occurred and is  continuing.  Upon transfer
      pursuant  to  Clause  26.4,  from and  after  the last to occur of (i) the
      effective  date  specified  in each  Transfer  Certificate;  and  (ii) the
      cancellation of a Letter of Credit and the issue of a new Letter of Credit
      with the  Transferee  identified as an Issuing  Lender (the ISSUING LENDER
      TRANSFER),  the Transferee  thereunder shall be a party hereto and, to the
      extent of the lesser of the interest assigned by such Transfer Certificate
      and the  Transferee's  participation  as an Issuing  Lender of a re-issued
      Letter  of  Credit  (the  TRANSFERRED  INTEREST),   have  the  rights  and
      obligations  of  a  Lender  under  this  Agreement,   and  the  Transferor
      thereunder shall, to the extent of the Transferred  Interest,  be released
      from its  obligations  under this Agreement  (and, in the case of Transfer
      Certificate  covering all of the Transferor's rights and obligations under
      this  Agreement,  such Lender  shall cease to be a party  hereto but shall
      continue to be entitled to the benefits of Clauses 12  (INCREASED  COSTS),
      10 (TAXES) 24 (COSTS AND EXPENSES) and 25  (INDEMNITIES)).  Any assignment
      or transfer by a Lender of rights or obligations under this Agreement that
      does not comply with this paragraph  shall be treated for purposes of this
      Agreement as a sale by such Lender of a  participation  in such rights and
      obligations in accordance with Clause 26.7 (PARTICIPATIONS).

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      Notwithstanding  anything to the contrary  contained herein, any Lender (a
      GRANTING  LENDER) may grant to a special  purpose vehicle (an SPV) of such
      Granting  Lender,  identified  as such in writing from time to time by the
      Granting Lender to the Agent and the Account Party,  the option to provide
      to the  Account  Party  all or any part of any LC  Disbursement  that such
      Granting  Lender would otherwise be obligated to make to the Account Party
      pursuant to Clause 2.1,  PROVIDED that (i) nothing herein shall constitute
      a commitment by any SPV to make any LC Disbursement, (ii) if an SPV elects
      not to exercise such option or otherwise  fails to provide all or any part
      of such LC  Disbursement,  the Granting  Lender shall be obligated to make
      such LC  Disbursement  pursuant to the terms  hereof and (iii) the Account
      Party may bring any proceeding  against either or both the Granting Lender
      or the SPV in order to enforce any rights of the Account Party  hereunder;
      and   (iv)  the  SPV   shall   agree  to  the   terms   of   Clause   30.2
      (CONFIDENTIALITY).  The making of an LC  Disbursement  by an SPV hereunder
      shall utilise the  Commitment  of the Granting  Lender to the same extent,
      and as if, such LC  Disbursement  were made by the Granting  Lender.  Each
      party  hereto  hereby  agrees  that no SPV shall be liable for any payment
      under this Agreement for which a Lender would otherwise be liable,  for so
      long as,  and to the  extent,  the  related  Granting  Lender  makes  such
      payment. In furtherance of the foregoing,  each party hereto hereby agrees
      (which  agreement shall survive the  termination of this Agreement)  that,
      prior to the date that is one year and one day after the  payment  in full
      of all outstanding  commercial  paper or other senior  indebtedness of any
      SPV,  it  will  not  institute  against,  or  join  any  other  person  in
      instituting against, such SPV any bankruptcy, reorganisation, arrangement,
      insolvency or  liquidation  proceedings or similar  proceedings  under the
      Laws of the United  States or any State  thereof  arising out of any claim
      against  such SPV  under  this  Agreement.  In  addition,  notwithstanding
      anything to the contrary contained in this Clause, any SPV may with notice
      to, but without  the prior  written  consent of, the Account  Party or the
      Agent and without  paying any  processing  fee  therefor,  assign all or a
      portion of its interests in any Letter of Credit to its Granting Lender or
      to any financial  institutions  (consented to by the Account Party and the
      Agent) providing  liquidity and/or credit support (if any) with respect to
      commercial  paper  issued by such SPV to issue such  Letters of Credit and
      such SPV may disclose, on a confidential basis,  confidential  information
      with  respect  to any  Account  Party and its  Subsidiaries  to any rating
      agency,  commercial  paper  dealer or provider of a surety,  guarantee  or
      credit  liquidity  enhancement  to such  SPV.  This  paragraph  may not be
      amended   without  the  consent  of  any  SPV  at  the  time   holding  LC
      Disbursements under this Agreement.

(b)   On each  occasion a  Transferor  assigns,  transfers or novates any of its
      rights and/or obligations under this Agreement,  the Transferee (unless it
      is  already  a  Lender  or a  Lender  Affiliate  immediately  prior to the
      transfer) shall ensure that the Agent has notice of the same and shall, on
      the date the assignment, transfer and/or novation takes effect, pay to the
      Agent for its own account a fee of (pound)1,000.

(c)   Neither a  Transferor  nor any other  Finance  Party is  responsible  to a
      Transferee for:

      (i)   the execution, genuineness,  validity, enforceability or sufficiency
            of any Finance Documents or any other document;

      (ii)  the collectability of amounts payable under any Finance Documents or
            the financial  condition of or the  performance  of its  obligations
            under the Finance Documents by any Obligor; or

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      (iii) the accuracy of any  statements or information  (whether  written or
            oral) made in or in connection  with or supplied in connection  with
            any Finance Documents.

(d)   Each  Transferee  confirms to the Transferor and the other Finance Parties
      that it:

      (i)   has made its own  independent  investigation  and  assessment of the
            financial  condition  and  affairs of each  Obligor  and its related
            entities in connection with its  participation in this Agreement and
            has not relied exclusively on any information  provided to it by the
            Transferor or any other Finance Party in connection with any Finance
            Documents; and

      (ii)  will  continue  to  make  its  own  independent   appraisal  of  the
            creditworthiness  of each  Obligor and its related  entities  for so
            long as  there  are  any  Commitments  or LC  Exposures  under  this
            Agreement.

(e)   Nothing in any Finance Document obliges a Transferor to:

      (i)   accept a re-transfer  from an Transferee of any of the rights and/or
            obligations assigned, transferred or novated under this Clause; or

      (ii)  support  any  losses  incurred  by the  Transferee  by reason of the
            non-performance  by any Obligor of its obligations under any Finance
            Document or otherwise.

26.4 TRANSFER PROCEDURE:

(a)   A novation is effected if:

      (i)   the  Transferor  and  the  Transferee  deliver  to the  Agent a duly
            completed  Transfer  Certificate  executed by the Transferor and the
            Transferee; and

      (ii)  the Agent executes it

      PROVIDED  THAT the Agent  shall  only be  obliged  to  execute a  Transfer
      Certificate  delivered to it by the Transferor and the Transferee  once it
      is satisfied it has complied  with all necessary  "know your  customer" or
      similar other checks under all applicable laws and regulations in relation
      to the transfer to such Transferee.

(b)   Each Party  (other than the  Transferor  and the  Transferee)  irrevocably
      authorises the Agent to execute any duly completed Transfer Certificate on
      its behalf.

(c)   To the extent that they are expressed to be the subject of the novation in
      the Transfer Certificate:

      (i)   the Transferor and the other Parties (the EXISTING  PARTIES) will be
            released  from their  obligations  to each other  under the  Finance
            Documents (the DISCHARGED OBLIGATIONS);

      (ii)  the  Transferee  and the existing  Parties  will assume  obligations
            towards each other under the Finance Documents which differ from the
            discharged  obligations  only insofar as they are owed to or assumed
            by the Transferee instead of the Transferor;

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      (iii) the rights of the Transferor  against the existing Parties under the
            Finance  Documents  and vice versa (the  DISCHARGED  RIGHTS) will be
            cancelled; and

      (iv)  the Transferee and the existing  Parties will acquire rights against
            each  other  under  the  Finance  Documents  which  differ  from the
            discharged rights only insofar as they are exercisable by or against
            the Transferee instead of the Transferor,

      all on the date specified in the proviso to Clause 26.3(a).

RIGHT TO SUBSTITUTE SINGLE LENDER

26.5  If:

(a)   any sum payable to any Finance  Party by the Account  Party is required to
      be increased under Clause 10 (TAXES); or

(b)   any Lender claims indemnification from the Account Party under Clause 12.1
      (INCREASED COSTS); or

(c)   a Lender's  Available  Commitment  has been  reduced to zero  pursuant  to
      Clause 13(b) (ILLEGALITY),

the  Account  Party may give the Agent  notice of its  intention  to arrange the
substitution of that Lender with a new bank or financial institution.

On receipt of a notice from the  Account  Party  referred  to above,  the Lender
shall use its best  endeavours to promptly  assign or transfer all of its rights
and obligations under this Agreement to an Approved Credit Institution nominated
by the Account Party.  Such transfer will be effected in accordance  with Clause
26.4 (TRANSFER  PROCEDURE) and the  consideration  for such transfer shall be an
amount equal to the sum of all amounts accrued and owing by the Account Party to
the transferring Lender as calculated on the date of transfer.

REFERENCE BANKS

26.6 If a Reference  Bank ceases to be one of the  Lenders,  the Agent shall (in
consultation with the Account Party) appoint another Lender or an affiliate of a
Lender to replace that Reference Bank.

PARTICIPATIONS

26.7 Any Lender may sell participations to one or more Lenders or other entities
(a  PARTICIPANT)  in all or a portion of such  Lender's  rights and  obligations
under this Agreement and the other Credit Documents  (including all or a portion
of its Commitment); PROVIDED that:

(a)   any such  participation  sold to a Participant  which is not a Lender or a
      Lender  Affiliate  shall be made only with the consent (which in each case
      shall not be  unreasonably  withheld) of the Account  Party and the Agent,
      unless an Event of Default under Clause 20(a), (e) or (f) has occurred and
      is continuing, in which case the consent of the Account Party shall not be
      required;

(b)   such  Lender's  obligations  under this  Agreement  and the other  Finance
      Documents shall remain unchanged;

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(c)   such Lender shall remain solely  responsible  to the other parties  hereto
      for the performance of such obligations;

(d)   the Account Party,  the Agent,  the Security Trustee and the other Lenders
      shall  continue to deal solely and directly with such Lender in connection
      with such Lender's  rights and  obligations  under this  Agreement and the
      other Finance Documents; and

(e)   the Participant shall agree to the terms of Clause 30.2 (CONFIDENTIALITY).

Any  agreement  or   instrument   pursuant  to  which  a  Lender  sells  such  a
participation  shall  provide  that such Lender  shall  retain the sole right to
enforce  this  Agreement  and the other  Finance  Documents  and to approve  any
amendment,  modification  or waiver of any  provision  of this  Agreement or the
other Finance Documents;  PROVIDED that such agreement or instrument may provide
that such Lender will not, without the consent of the Participant,  agree to any
amendment,  modification or waiver described in the first proviso to Clause 23.3
(Amendments) that affects such Participant. Subject to Clause 26.8 (NO INCREASED
COSTS),  the  Obligors  agree that each  Participant  shall be  entitled  to the
benefits of Clauses 12 (INCREASED COSTS) and 10 (TAXES) to the same extent as if
it were a Lender and had acquired its interest by assignment  pursuant to Clause
26.3 (TRANSFERS BY LENDERS).

NO INCREASED COSTS

26.8 No  Participant  or  Transferee  shall be  entitled  to receive any greater
payment  under Clause 12  (INCREASED  COSTS) and 10 (TAXES) than the  applicable
Lender would have been  entitled to receive  with  respect to the  participation
sold to such Participant or the Lender interest transferred.

CERTAIN PLEDGES

26.9 Any Lender may at any time  pledge or assign a security  interest in all or
any portion of its rights  under this  Agreement to secure  obligations  of such
Lender,  and this Clause shall not apply to any such pledge or  assignment  of a
security  interest;  PROVIDED  that no such pledge or  assignment  of a security
interest  shall  release  a Lender  from  any of its  obligations  hereunder  or
substitute any such assignee for such Lender as a party hereto.

NO TRANSFERS TO ANY ACCOUNT PARTY OR AFFILIATES

26.10  Anything in this Clause to the  contrary  notwithstanding,  no Lender may
assign or  participate  any interest in any LC Exposure  held by it hereunder to
any Obligor or any of its Affiliates or  Subsidiaries  without the prior consent
of each Lender.

MAINTENANCE OF REGISTER BY THE AGENT

26.11 The Agent, acting for this purpose as an agent of the Account Party, shall
maintain  at one of its  offices in London a copy of each  Transfer  Certificate
delivered to it and a register of the names and  addresses  of the Lenders,  and
the Commitment of, and principal amount of the LC  Disbursements  owing to, each
Lender  pursuant  to the terms  hereof  from time to time  (the  REGISTER).  The
entries in the Register shall be conclusive,  and the Account Party,  the Agent,
the  Security  Trustee  and the  Lenders  may treat  each  Person  whose name is
recorded in the Register  pursuant to the terms hereof as a Lender hereunder for
all purposes of this  Agreement,  notwithstanding  notice to the  contrary.  The
Register  shall be available for inspection by any Account Party and any Lender,
at any reasonable time and from time to time upon reasonable prior notice.

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27.   SET OFF

RIGHT OF SET-OFF

If an Event of Default shall have occurred and be continuing, each Finance Party
is hereby  authorised at any time and from time to time,  to the fullest  extent
permitted  by Law,  to set off and apply any and all  deposits  in any  currency
(general or special, time or demand,  provisional or final) at any time held and
other indebtedness in any currency at any time owing by such Finance Party to or
for  the  credit  or the  account  of any  Obligor  against  any of and  all the
obligations of such Obligor now or hereafter  existing under this Agreement held
by such Finance Party,  irrespective  of whether or not such Finance Party shall
have made any demand under this Agreement and although such  obligations  may be
unmatured. The rights of each Finance Party under this Clause are in addition to
other rights and remedies (including other rights of set-off) which such Finance
Party may have. The relevant  Finance Party may effect any appropriate  currency
exchanges to implement such set-off.

28.   MISCELLANEOUS PROVISIONS

CERTIFICATES

28.1 Any  determination  or notification by the Agent or any other Finance Party
concerning any rate or amount under the Finance  Documents shall, in the absence
of manifest error, be conclusive evidence as to that matter.

SURVIVAL

28.2 All  covenants,  agreements,  representations  and  warranties  made by the
Account Party herein and in the certificates or other  instruments  delivered in
connection  with or pursuant to this Agreement  shall be considered to have been
relied upon by the other  parties  hereto and shall  survive the  execution  and
delivery of this Agreement and the issuance of any Letters of Credit, regardless
of any  investigation  made  by any  such  other  party  or on  its  behalf  and
notwithstanding that the Agent or any Lender may have had notice or knowledge of
any Default or  incorrect  representation  or warranty at the time any credit is
extended  hereunder,  and shall continue in full force and effect as long as any
fee or any other amount payable under this  Agreement is outstanding  and unpaid
or any Letter of Credit is outstanding and so long as the  Commitments  have not
expired or  terminated.  The  provisions  of Clauses 12  (INCREASED  COSTS),  10
(TAXES), 24 (COSTS AND EXPENSES),  25 (INDEMNITIES) and 21 (AGENT) shall survive
and  remain in full  force and  effect  regardless  of the  consummation  of the
transactions  contemplated  hereby, the expiration or termination of the Letters
of Credit  and the  Commitments  or the  termination  of this  Agreement  or any
provision hereof.

COUNTERPARTS

28.3 This Agreement may be executed in  counterparts  (and by different  parties
hereto on separate  counterparts),  each of which shall  constitute an original,
but all of  which  when  taken  together  shall  constitute  one  and  the  same
instrument.

ENTIRE AGREEMENT

28.4 This  Agreement  and the other  Finance  Documents  constitute  the  entire
contract between the parties relating to the subject matter hereof and supersede
any and all previous agreements and understandings, oral or written, relating to
the subject matter hereof.

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SEVERABILITY

28.5 Any provision of this  Agreement or any other  Finance  Document held to be
invalid,  illegal  or  unenforceable  in  any  jurisdiction  shall,  as to  such
jurisdiction,  be  ineffective to the extent of such  invalidity,  illegality or
unenforceability without affecting the validity,  legality and enforceability of
the remaining  provisions hereof. The invalidity of a particular  provision in a
particular  jurisdiction  shall  not  invalidate  such  provision  in any  other
jurisdiction.  To the extent  permitted by applicable  Law, each Obligor  hereby
waives any provision of Law which renders any provision of the Finance Documents
prohibited or unenforceable in any respect.

29.   GOVERNING LAW AND JURISDICTION

GOVERNING LAW

29.1 This  Agreement  shall be  construed  in  accordance  with and  governed by
English law.

JURISDICTION

29.2 (a) All the parties agree that the courts of England are, subject to Clause
         29.2(b)  and (c) below,  to have  jurisdiction  to settle any  disputes
         which may arise in  connection  with the  creation,  validity,  effect,
         interpretation   or   performance   of,  or  the  legal   relationships
         established by, this Agreement (including,  without limitation,  claims
         for set-off or  counterclaim)  or otherwise  arising in connection with
         this  Agreement  and  for  such  purposes  irrevocably  submit  to  the
         jurisdiction of the English courts;

     (b) notwithstanding the agreement in (a) above, each of the Finance Parties
         shall  retain the right to bring  proceedings  in any other court which
         has  jurisdiction  whether by virtue of the Convention on  Jurisdiction
         and the  Enforcement of Judgments  signed on 27 September 1968 (as from
         time to time amended and  extended) or by virtue of the  Convention  on
         Jurisdiction  and the  Enforcement of Judgments  signed on 16 September
         1988 (from time to time amended and extended) or otherwise;

     (c) with respect to the courts agreed in paragraphs (a) and (b) above, each
         of the Parties irrevocably waives any objections on the ground of venue
         or forum non conveniens or any similar ground;

     (d) each of the Parties  irrevocably agrees that a judgment or order of any
         court  referred to in this Clause in connection  with this Agreement is
         conclusive  and  binding  on it and may be  enforced  against it in the
         courts of any other jurisdiction; and

     (e) each of the Parties irrevocably  consents to service of process by mail
         or in any other manner permitted by the relevant Law.

AGENT FOR SERVICE OF PROCESS

29.3 Each  Obligor  shall at all times  maintain an agent for service of process
and any other  documents in proceedings  in England or any other  proceedings in
connection with this Agreement (a PROCESS AGENT).  The Process Agent shall be XL
Services UK Limited,  XL House,  70 Gracechurch  Street,  London EC3V 0XL (Attn:
Company Secretary) and any writ, judgment or other notice of legal process shall
be sufficiently served on the relevant Obligor if delivered to the Process Agent
marked for the  attention  of the  Finance  Director at its address for the time
being. Each Obligor  undertakes not to revoke the authority of the Process Agent
without promptly appointing a successor and notifying the Agent thereof.

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WAIVER OF IMMUNITIES

29.4 To the extent that any Obligor has or  hereafter  may acquire any  immunity
from  jurisdiction  of any  court or from any  legal  process  (whether  through
service of notice, attachment prior to judgment,  attachment in aid of execution
or execution,  on the ground of sovereignty or otherwise) with respect to itself
or its property,  it hereby irrevocably  waives, to the fullest extent permitted
by applicable Law, such immunity in respect of its obligations under the Finance
Documents.

30.   TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY

TREATMENT OF CERTAIN INFORMATION

30.1  Each of the  Obligors  acknowledges  that  from  time  to  time  financial
advisory,  investment  banking and other  services may be offered or provided to
any  Obligor  or one or more of their  Subsidiaries  (in  connection  with  this
Agreement  or  otherwise)  by  any  Lender  or by one or  more  subsidiaries  or
affiliates of such Lender and each of the Obligors hereby authorises each Lender
to share  any  information  delivered  to such  Lender by such  Obligor  and its
Subsidiaries  pursuant to this Agreement,  or in connection with the decision of
such Lender to enter into this  Agreement,  to any such subsidiary or affiliate,
it being  understood  that (a) any such  information  shall be used only for the
purpose of advising  the Obligor or  preparing  presentation  materials  for the
benefit of the Obligor and (b) any such  subsidiary or affiliate  receiving such
information  shall be bound by  Clause  30.2  (CONFIDENTIALITY)  as if it were a
Lender hereunder. Such authorisation shall survive the expiration or termination
of the  Letters  of  Credit  and  the  Commitments  or the  termination  of this
Agreement or any provision hereof.

CONFIDENTIALITY

30.2 Each of the Finance Parties agrees to maintain the  confidentiality  of the
Information (as defined below), except that Information may be disclosed:

(a)   to its and its  Affiliates'  directors,  officers,  employees  and agents,
      including  accountants,   legal  counsel  and  other  advisors  (it  being
      understood  that the  Persons  to whom  such  disclosure  is made  will be
      informed of the confidential  nature of such Information and instructed to
      keep such Information confidential);

(b)   to the extent requested by any regulatory  authority  having  jurisdiction
      over the Agent or any Lender;

(c)   to the  extent  required  by  applicable  Laws  or  regulations  or by any
      subpoena or similar legal process;

(d)   to any other Party;

(e)   in  connection  with the exercise of any  remedies  hereunder or any suit,
      action or  proceeding  relating to this  Agreement or the  enforcement  of
      rights hereunder;

(f)   subject to an agreement in writing containing provisions substantially the
      same as those of this paragraph and for the benefit of the Obligor, to (i)
      any  assignee  of or  Participant  in, or any  prospective  assignee of or
      Participant  in, any of its rights or obligations  under this Agreement or
      (ii) any actual or prospective  counterparty (or its advisors) to any swap
      or derivative transaction relating to any Obligor and its obligations;

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(g)   with the consent of the Obligor; or

(h)   to the extent such Information (i) becomes  publicly  available other than
      as a result of a breach of this Clause 30.2 or (ii)  becomes  available to
      the Agent or any Lender on a  non-confidential  basis from a source  other
      than an Obligor.

For the purposes of this Clause, INFORMATION means all information received from
an  Obligor  relating  to an  Obligor  or its  business,  other  than  any  such
information that is available to the Finance Parties on a non-confidential basis
prior to disclosure by such Obligor;  PROVIDED  that, in the case of information
received  from an Obligor  after the date hereof,  such  information  is clearly
identified  at the time of  delivery  as  confidential.  Any Person  required to
maintain the  confidentiality of Information as provided in this Clause shall be
considered  to have  complied  with its  obligation  to do so if such Person has
exercised  the same  degree  of care to  maintain  the  confidentiality  of such
Information  as such Person  would accord to its own  confidential  information.
Notwithstanding the foregoing,  each of the Finance Parties agree that they will
not  trade  the  securities  of  any  of  the  Obligors  based  upon  non-public
Information that is received by them.

30.3 Notwithstanding  anything in this Agreement to the contrary, the Agent, the
Lenders  and  the  Account  Party  (and  each  of  their  respective  employees,
representatives  or other  agents) may disclose to any and all persons,  without
limitation  of any kind,  the U.S. tax  treatment  and U.S. tax structure of the
transactions  contemplated  by this  Agreement  and all  materials  of any  kind
(including  opinions  or other tax  analyses)  that are  provided to such person
relating to such tax treatment or tax structure,  other than any information for
which  nondisclosure is reasonably  necessary in order to comply with applicable
securities  laws, and except that,  with respect to any document or similar item
that in either case contains  information  concerning  the U.S. tax treatment or
U.S.  tax  structure of such  transactions  as well as other  information,  this
paragraph shall only apply to such portions of the document or similar item that
relate to such tax treatment or tax structure

31.   THIRD PARTY RIGHTS

A person who is not a Party shall have no rights under the Contracts  (Rights of
Third Parties) Act 1999 to enforce any of its terms.

IN WITNESS  whereof the parties  hereto  have caused this  Agreement  to be duly
executed on the date first written above.

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IN WITNESS WHEREOF, XL CAPITAL LTD has caused this Agreement to be duly executed
as a Deed by an authorised officer on the day and year first above written.

ACCOUNT PARTY

EXECUTED as a DEED
for and on behalf of XL CAPITAL LTD

By:             /s/ JERRY M. DE ST. PAER

In the presence of: /s/ FIONA LUCK

GUARANTORS

EXECUTED as a DEED
for and on behalf of XL CAPITAL LTD

By:             /s/ JERRY M. DE ST. PAER

In the presence of: /s/ FIONA LUCK

SIGNED for and on behalf of XL AMERICA, INC.

By:             /s/ CAROL A. MCFATE

Title:              Managing Director, Treasury

SIGNED for and on behalf of XL INSURANCE (BERMUDA) LTD

By:             /s/ CHRISTOPHER A. COELHO

Title:              Senior Vice - President & Chief Financial Officer

SIGNED for and on behalf of XL RE LTD

By:             /s/ CHRISTOPHER V. GREETHAM

Title:              Executive Vice President and Chief Investment Officer

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AGENT

SIGNED for and on behalf of CITIBANK INTERNATIONAL PLC

By:         /s/ PAUL GIBBS

Address:    Citigroup Centre
            33 Canada Square
            Canary Wharf
            London E14 5LB

Fax:        +44 20 7500 4482/4484
Tel:        +44 20 7500 4712
Attention:  Loans Agency

ARRANGERS

SIGNED for and on behalf of BARCLAYS CAPITAL

By:         /s/ KEITH HATTON

Address:    5 The North Colonnade
            Canary Wharf
            London E14 4BB

Fax:        +44 20 7773 3820
Tel:        +44 20 7773 1572
Attention:  Keith Hatton

SIGNED for and on behalf of CITIGROUP GLOBAL MARKETS LIMITED

By:         /s/ PAUL GIBBS

Address:    Citigroup Centre
            33 Canada Square
            Canary Wharf
            London E14 5LB

Fax:        +44 20 7986 8275
Tel:        +44 20 7986 7569
Attention:  Pareejat Singhal

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SECURITY TRUSTEE

SIGNED for and on behalf of CITIBANK INTERNATIONAL PLC

By:         /s/ PAUL GIBBS

Address:    Citigroup Centre
            33 Canada Square
            Canary Wharf
            London E14 5LB

Fax:        +44 20 7500 4482/4484
Tel:        +44 20 7500 4712
Attention:  Loans Agency

LENDERS

SIGNED for and on behalf of BARCLAYS BANK PLC

By:         /s/ KEITH HATTON

Address:    1st Floor
            54 Lombard Street
            London EC3V 9EX

Fax:        +44 20 7699 2407
Tel:        +44 20 7699 3121
Attention:  Paul Johnson

SIGNED for and on behalf of CITIBANK, N.A.

By:         /s/ PAUL GIBBS

Address:    Citigroup Centre
            33 Canada Square
            Canary Wharf
            London E14 5LB

Fax:        +44 20 7500 5806
Tel:        +44 20 7508 1826
Attention:  Loans Processing Unit

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SIGNED for and on behalf of ING BANK N.V., LONDON BRANCH

By:         /s/ T. BATES & P. GALPIN

Address:    60 London Wall
            London
            EC2M 5TQ

Fax:        +44 20 7767 7507
Tel:        +44 20 7767 5907
Attention:  Lowell McElfresh

SIGNED for and on behalf of LLOYDS TSB BANK PLC

By:         /s/ JAMES BOULDEN

Address:    25 Gresham Street
            London
            EC2V 7HN

Fax:        +44 20 7661 4860
Tel:        +44 20 7661 4978
Attention:  James Boulden

SIGNED for and on behalf of THE ROYAL BANK OF SCOTLAND

By:         /s/ JOHN MALLETT

Address:    9th Floor, 280 Bishopsgate, London EC2M 4RB

Fax:        +44 20 7672 1073
Tel:        +44 20 7672 1057
Attention:  John Mallett

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SIGNED for and on behalf of CALYON NEW YORK BRANCH

By:         /s/ SEBASTIAN ROCCO /s/ WILLIAM DENTON

Address:    1301 Avenue of the Americas
            NY 10019
            USA

Fax:        +1 212 261 3438
Tel:        +1 212 261 7718 / 7227
Attention:  Peter Rasmussen /s/ Anjali Thadani

SIGNED for and on behalf of ABN AMRO BANK N.V.

By:         /s/ KIM SLATER /s/ MARTYN TAPLIN

Address:    250 Bishopsgate, London, EC2m 4AA

Fax:        +44 207 678 8604
Tel:        +44 207 678 5060
Attention:  Martin Byrne

SIGNED for and on behalf of THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH

By:         /s/ CHIMIE T. PEMBA

Address:    1251 Avenue of the Americas
            New York, NY 10020

Fax:        +1 212 782 6440
Tel:        +1 212 782 4340
Attention:  Chimie T. Pemba

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SIGNED for and on behalf of COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES

By:         /s/ ARNDT E. BRUNS /s/ MICHAEL P. MCCARTHY

Address:    2 World Financial Centre
            New York, NY 10281-1050

Fax:        +1 212 266 7629
Tel:        +1 212 266 7736
Attention:  Mr A. Bruns

SIGNED for and on behalf of NATIONAL AUSTRALIA BANK LIMITED
A.B.N. 12 004 044 937

By:         /s/ RAY CATT

Address:    88 Wood Street
            London EC2V 7QQ

Fax:        +44 20 7588 8356
Tel:        +44 20 7710 2100
Attention:  Lending Admin NHH