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EXHIBIT 4.(v) 
  
  

 MTN
    Conditions

The following are the MTN
      Conditions which, as supplemented, amended, modified or replaced in relation
      to any MTN by any relevant Supplement, apply to each Series of MTNs constituted
      by the Note Deed Poll described below. References below to the “Supplement” are
      references to any Supplement applicable to the relevant Tranche of MTNs
      but do not limit the provisions which may be supplemented, amended, modified
      or replaced by a relevant Supplement in relation to that particular Tranche
of MTNs. 

Each Holder and any person claiming through or under a Holder is deemed to have notice of, and is bound by, these Conditions, the Note Deed Poll, the Information Memorandum, the applicable Agency Agreement and any
applicable Supplement. 

Copies of the above documents (to the extent they relate to a Tranche of MTNs) will be available for inspection by Holders of any MTN of such Tranche during normal business hours at the respective offices of the
Issuer and the Registrar. 

Definitions and interpretation provisions are set out in Condition 1 (“Interpretation”).  All capitalised terms that are not defined in these Conditions will have the meanings given to them in the
applicable Supplement. References in these conditions to “MTNs” are to the MTNs of one specific Series only, not to all MTNs that may be issued under the Programme. 

Part 1 Introduction 

	 

	 	 
	
1	
Interpretation

	 	 
	
(a)	
Definitions

	 	 
	 	
In these Conditions the following expressions have the following meanings:

  
	 	 
	 	
Additional Amount means an additional amount payable by the Issuer under Condition 13 (“Taxation”).

  
	 	 
	 	
Agency Agreement means:

  
	 	 	 
	 	
(a)	
the Australian Registry Services Agreement;

	 	 	 
	 	
(b)	
the New Zealand Registry Services Agreement; or

	 	 	 
	 	
(c)	
any other agency agreement entered into by the Issuer in relation to an issue of MTNs.

	 	 	 
	 	
  Agent means:

	 	 	 
	 	
(a)	
in the case of an issue of Australian Domestic MTNs, the Australian Registrar;

	 	 	 
	 	
(b)	
in the case of an issue of New Zealand Domestic MTNs, the New Zealand Registrar;

	 	 	 
	 	
(c)	
the Calculation Agent; and

	 	 	 
	 	
(d)	
such other person appointed by the Issuer in relation to any MTNs from time to time.

	 	 	 
	 	
  Amortised Face Amount means, in relation to an MTN, an amount equal to the sum of:

	 	 	 
	 	
(a)	
the issue price specified in the Supplement; and

 

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	 	(b)  	the amount resulting from
        the application of the amortisation yield specified in the Supplement
        (compounded annually) to the issue price (as specified in the Supplement)
        from (and including) the Issue Date specified in the Supplement to (but
        excluding) the date fixed for redemption or (as the case may be) the
    date the MTN becomes due and repayable. 
	 	 	 
	 	If the
          calculation is to be made for a period which is not a whole number
          of years, the calculation in respect of the period of less than a full
          year must be made on the basis of the Day Count Fraction specified
          in the Supplement. 

       Austraclear means
          Austraclear Limited (ABN 94 002 060 773). 

       Austraclear New Zealand
            Regulations means the regulations known as the “Austraclear New Zealand System Rules”
			established by the Reserve Bank of New Zealand to govern the use of the Austraclear New Zealand System. 

       Austraclear New Zealand
            System means the system
            operated by the Reserve Bank of New Zealand in New Zealand for holding
            securities and electronic recording and settling of transactions
            in those securities between members of that system. 

       Austraclear Regulations means
          the regulations known as the “Austraclear System Regulations” established
          by Austraclear to govern the use of the Austraclear System. 

       Austraclear System means
          the system operated by Austraclear in Australia for holding securities
          and electronic recording and settling of transactions in those securities
          between members of the system. 

       Australian Domestic
            MTN means an MTN issued
            in the Australian domestic markets and specified as such in the applicable
            Supplement. 

       Australian Registrar means,
          in relation to Australian Domestic MTNs, Austraclear Services Limited
          (ABN 33 051 775 556) or such other person appointed by the Issuer pursuant
          to the Australian Registry Services Agreement to maintain a Register
          in relation to Australian Domestic MTNs and perform such payment and
          other duties as specified in that agreement. 

       Australian Registry
            Services Agreement means
            the agreement titled “Agency and Registry Services Agreement” dated
            on or about the date of this agreement between the Issuer and the
            Australian Registrar. 

 Australian Tax Act  means
            the Income Tax Assessment Act of 1936 of Australia and, where applicable, the Income Tax Assessment Act 1997 of Australia. 

 Business Day means
    a day on which banks are open for general banking business in: 

	 	 	 
	 	(a)	for Australian Domestic MTNs, Sydney,
    Australia; 
	 	 	 
	 	(b)	 for New Zealand Domestic MTNs, Auckland
    and Wellington, New Zealand, 
	 	 	 
	 	and in
          each (if any) Relevant Financial Centre specified in the Supplement
          (not being a Saturday, Sunday or public holiday in that place) and,
          if an MTN is to be issued or paid on that day, a day on which each
          Clearing System is operating. 

       Business Day Convention means
          a convention for adjusting any date if it would otherwise fall on a
          day that is not a Business Day and the following conventions, where
          specified in the Supplement in relation to any date applicable to any
          MTN, have the following meanings:
    
	 	 	 
	 	(a) 	“Floating
          Rate Convention” means
          that the date is postponed to the next following day which is a Business
    Day unless that day falls in the next calendar month, in which event:

 

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	 	 	(i) 	 that date is brought forward
    to the first preceding day that is a Business Day; and 
	 	 	 	 	 
	 	 	(ii) 	 each subsequent Interest
        Payment Date is the last Business Day in the month which falls the number
        of months or other period specified as the Interest Period in the Supplement
    after the preceding applicable Interest Payment Date occurred; 
	 	 	 	 	 
	 	(b)	 “Following
          Business Day Convention”  means
          that the date is postponed to the first following day that is a Business
    Day; 
	 	 	 	 	 
	 	(c) 	“Modified
          Following Business Day Convention or Modified Business Day Convention” means
          that the date is postponed to the first following day that is a Business
          Day unless that day falls in the next calendar month in which case
          that date is brought forward to the first preceding day that is a Business
    Day; 
	 	 	 	 	 
	 	(d)	 “Preceding
          Business Day Convention”  means
          that the date is brought forward to the first preceding day that is
    a Business Day; and 
	 	 	 	 	 
	 	(e)	 “No
          Adjustment”  means
          that the relevant date must not be adjusted in accordance with any
    Business Day Convention. 
	 	 	 	 	 
	 	If no convention
          is specified in the Supplement, the Following Business Day Convention
          applies. Different conventions may be specified in relation to, or
          apply to, different dates. 

       Calculation Agent means
          the Registrar or any other person specified in the Supplement as the
          party responsible for calculating the Interest Rate and other amounts
          required to be calculated under these Conditions. 

     Clearing System means:

	 	 	 	 	 
	 	(a) 	the Austraclear System;
	 	 	 	 	 
	 	(b)  	the Austraclear New Zealand
    System; or 
	 	 	 	 	 
	 	(c) 	any other clearing system
    specified in the Supplement. 
	 	 	 	 	 
	 	Corporations
            Act means the Corporations
            Act 2001 of Australia. 

       Custodian means
          New Zealand Central Securities Depositary Limited or any other entity
          appointed from time to time by the Operator, under the Austraclear
          New Zealand Regulations, as custodian trustee to hold securities on
          the Austraclear New Zealand System. 

       Day Count Fraction means,
          in respect of the calculation of interest for any period of time (“Calculation
          Period”), the day count
    fraction specified in the Supplement and: 

	 	 	 	 	 
	 	(a)	if “Actual/Actual
          (ICMA)” is
    so specified, means: 
	 	 	 	 	 
	 	 	(i) 	 where the Calculation Period
        is equal to or shorter than the Regular Period during which it falls,
        the actual number of days in the Calculation Period divided by the product
        of (1) the actual number of days in such Regular Period and (2) the number
    of Regular Periods normally ending in any year; and 
	 	 	 	 	 
	 	 	(ii) 	 where the Calculation Period
    is longer than one Regular Period, the sum of: 
	 	 	 	 	 

 

 

3

 

	 	 	 	(I)	 the actual number of days
        in such Calculation Period falling in the Regular Period in which it
        begins divided by the product of (1) the actual number of days in such
    Regular Period and (2) the number of Regular Periods in any year; and 
	 	 	 	 	 
	 	 	 	(II)	  the actual number of days
        in such Calculation Period falling in the next Regular Period divided
        by the product of (1) the actual number of days in such Regular Period
    and (2) the number of Regular Periods normally ending in any year; 
	 	 	 	 	 
	 	(b)  	if “Actual/365”     or “Actual/Actual
          (ISDA) ” is
          so specified, means the actual number of days in the Calculation Period
          divided by 365 (or, if any portion of the Calculation Period falls
    in a leap year, the sum of: 
	 	 	 	 	 
	 	 	(i) 	 the actual number
        of days in that portion of the Calculation Period falling in a leap year
    divided by 366; and
	 	 	 	 	 
	 	 	(ii) 	 the actual number
        of days in that portion of the Calculation Period falling in a non-leap
    year divided by 365); 
	 	 	 	 	 
	 	(c)	 if “Actual/365
          (Fixed) ” is
          so specified, means the actual number of days in the Calculation Period
    divided by 365; 
	 	 	 	 	 
	 	(d)	 if “Actual/360”     is
        so specified, means the actual number of days in the Calculation Period
    divided by 360; 
	 	 	 	 	 
	 	(e)  	if “30/360”     is
        so specified, means the number of days in the Calculation Period divided
        by 360 (the number of days to be calculated on the basis of a year of
    360 days with twelve 30-day months unless: 
	 	 	 	 	 
	 	 	(i)  	the last day of the Calculation
        Period is the 31st day of a month but the first day of the Calculation
        Period is a day other than the 30th or 31st day of a month, in which
        case the month that includes that last day is not considered to be shortened
    to a 30-day month; or
	 	 	 	 	 
	 	 	(ii)  	the last day of the Calculation
        Period is the last day of the month of February, in which case the month
    of February is not considered to be lengthened to a 30-day month); 
	 	 	 	 	 
	 	(f)  	if “30E/360 ”  or “Eurobond
          Basis”  is
          so specified means, the number of days in the Calculation Period divided
          by 360 (the number of days to be calculated on the basis of a year
          of 360 days with twelve 30-day months, without regard to the date of
          the first day or last day of the Calculation Period unless, in the
          case of a Calculation Period ending on the Maturity Date, the Maturity
          Date is the last day of the month of February, in which case the month
    of February is not considered to be lengthened to a 30-day month); 
	 	 	 	 	 
	 	(g) 	 if “RBA
          Bond Basis” or “Australian
          Bond Basis” is so specified,
          means one divided by the number of Interest Payment Dates in a year;
    and 
	 	 	 	 	 
	 	(h)	 any other day count fraction
    specified in the Supplement. 
	 	 	 	 	 
	 	Debt means
          all obligations that in accordance with generally accepted accounting
          principles would be included in determining the total liabilities of
          an entity and all obligations guaranteeing the debt of any third person. 

       Denomination means
          the notional face value of an MTN specified in the Supplement. 

       Event of Default means
    an event so described in Condition 15 (“Events of Default”).

	 	 	 	 	 

 

4

 

	 	Extraordinary
            Resolution has the meaning
            given in the Meetings Provisions. 

       Fixed Rate MTN means
          an MTN on which interest is calculated at a fixed rate payable in arrears
          on a fixed date or fixed dates in each year and on redemption or on
          any other dates as specified in the Supplement. 

       Floating Rate MTN means
          an MTN on which interest is calculated at a floating rate payable 1,
          2, 3, 6, or 12 monthly or in respect of any other period or on any
          date specified in the Supplement. 

       Governmental Agency means
          any government or any governmental, semi-governmental, administrative,
          fiscal or judicial body, department, commission, authority, tribunal,
          agency or entity. It also includes a self-regulatory organisation established
          under statute or a stock exchange. 

       Holder means,
          in respect of an MTN, the person whose name is entered in the Register
          as the holder of that MTN. 

       For the avoidance
            of doubt, where an MTN is held in a Clearing System, references to
            a Holder include the operator of that system or a nominee for that
            operator or a common depository for one or more Clearing Systems
            (in each case acting in accordance with the rules and regulations
            of the Clearing System or Systems). 

       Index Linked MTN means
          an MTN in respect of which the amount payable in respect of interest
          is calculated by reference to an index or a formula or both as specified
          in the Supplement. 

       Information Memorandum in
          respect of an MTN means the information memorandum, disclosure document
          (as defined in the Corporations Act) or other offering document referred
          to in the Supplement. 

       Instalment Amounts has
          the meaning given in the Supplement. 

       Instalment MTN means
          an MTN which is redeemable in one or more instalments, as specified
          in the Supplement. 

       Interest Commencement
            Date means, for an MTN,
            the Issue Date of the MTN or any other date so specified in the Supplement. 

       Interest Determination
            Date has the meaning given
            in the Supplement. 

       Interest Payment
            Date means each date so
            specified in, or determined in accordance with, the Supplement. 

       Interest Period means
          each period beginning on (and including) an Interest Payment Date and
    ending on (but excluding) the next Interest Payment Date. However: 

	 	 	 	 	 
	 	(a) 	 the first Interest
    Period commences on (and includes) the Interest Commencement Date; and 
	 	 	 	 	 
	 	(b)	 the final Interest
    Period ends on (but excludes) the Maturity Date. 
	 	 	 	 	 
	 	 Interest
            Rate means, for an MTN,
            the interest rate (expressed as a percentage per annum) payable in
            respect of that MTN specified in the Supplement or calculated or
            determined in accordance with these Conditions and the Supplement. 

       ISDA Definitions means
          the 2000 ISDA Definitions published by the International Swaps and
          Derivatives Association, Inc. (as supplemented, amended and updated
          as at the Issue Date of the first Series or Tranche of the MTNs of
    the Series). 

	 	 	 	 	 

 

5

 

	 	Issue
            Date means the date on
            which an MTN is, or is to be issued, as specified in, or determined
            in accordance with, the Supplement. 
       Issuer means
          American Express Credit Corporation. 
       Issuer's Borrowing Base means
    the sum of:

	 	 
	

          
          (a) 

	          the outstanding Debt owed by the Issuer to American Express Company, or a Subsidiary of American Express Company, that has been subordinated to the MTNs; plus
	 	 
	(b) 	at any date, the aggregate stated value of all classes of the Issuer's capital stock plus the aggregate amount of the consolidated surplus, whether capital, earned or other, of the Issuer and its consolidated Subsidiaries, calculated in accordance with generally accepted accounting principles;

   Margin means
          the margin specified in, or determined in accordance with, the Supplement. 

       Maturity Date means,
          the date so specified in, or determined in accordance with, the Supplement. 

       Meetings Provisions means
          the provisions relating to meetings of Holders set out in the schedule
          to the Note Deed Poll. 

       MTN means
          a medium
          term debt obligation issued or to be issued by the Issuer which is
          constituted by, and owing under the Note Deed Poll, the details of
          which are recorded in, and evidenced by, entry in, the Register.  

       New Zealand Domestic
            MTN means an MTN issued
            in the New Zealand domestic markets and specified as such in the
            applicable Supplement. 

       New Zealand Registrar means,
          in relation to New Zealand Domestic MTNs, Computershare Investor Services
          Limited or such other person appointed by the Issuer pursuant to the
          New Zealand Registry Services Agreement to maintain a Register in relation
          to New Zealand Domestic MTNs and perform such payment and other duties
          as specified in that agreement. 

       New Zealand Registry
            Services Agreement means
            the agreement titled “Registrar and Paying Agency Agreement”   dated
            on or about the date of this agreement between the Issuer and the
            New Zealand Registrar. 

       Note Deed Poll means
          the deed so entitled dated 15 November   2006
          and executed by the Issuer. 

       Offshore Associate means
          an associate (as defined in section 128F of the Australian Tax Act) of the Issuer that either:

      	
              (a) 

          
	a non-resident of Australia which does not acquire the MTNs in carrying on a business at or through a permanent establishment in Australia; or 
	 	 
	(b) 	a resident of Australia that acquires the MTNs in carrying on a business at or through a permanent establishment outside Australia. 

      Operator means
            the Reserve Bank of New Zealand or its successor or replacement from
            time to time in its capacity as operator of the Austraclear New Zealand
            System.  

       Ordinary Resolution has
          the meaning given in the Meetings Provisions. 

       Partly Paid MTN means
          an MTN in relation to which the initial subscription moneys are payable
          to the Issuer in two or more instalments. 

       Process Agent means
          Emesco Agents Pty Ltd (ABN 38 000 405 265).

     Record Date means: 

  
  	 	 	 	 	 

	 	(a)	  for Australian
        Domestic MTNs, the close of business in the place where the Register
    is maintained on the eighth calendar day before the payment date;  
	 	 	 	 	 
	 	(b)	  for New Zealand Domestic
        MTNs, the close of business in the place where the Register is maintained
    on the tenth calendar day before the payment date; or 
	 	 	 	 	 
	 	(c)	  any other date so specified
    in the Supplement. 
	 	 	 	 	 
	 	Redemption Amount means:
	 	 	 	 	 
	 	(a)	 for an MTN (other than a
        Zero Coupon MTN or a Structured MTN), the outstanding principal amount
    as at the date of redemption; 
	 	 	 	 	 
	 	(b)	 for a Zero Coupon MTN, the
    Amortised Face Amount calculated as at the date of redemption; and 
	 	 	 	 	 

 

6

 

	 	(c)	 for a Structured
        MTN, the amount determined by the Calculation Agent in the manner specified
    in the Supplement, 
	 	 	 	 	 
	 	and
          also includes any final instalment and any other amount in the nature
          of a redemption amount specified in, or determined in accordance with,
          the Supplement or these Conditions. 

       Reference Banks means
          the institutions so described in the Supplement or, if none, four major
          banks selected by the Calculation Agent in the market that is most
          closely connected with the Reference Rate. 

       Reference Rate has
          the meaning given in the Supplement. 

       Register means
          any register, including any branch register, of MTNs established and
          maintained by or on behalf of the Issuer in which is entered the names
          and addresses of Holders whose MTNs are carried on that register, the
          amount of MTNs held by each Holder and the Tranche, Series and date
          of issue and transfer of those MTNs, and any other particulars which
          the Issuer sees fit. 

     Registrar means: 

	 	 	 	 	 
	 	(a)	 for Australian
    Domestic MTNs, the Australian Registrar;
	 	 	 	 	 
	 	(b)	 for New Zealand
    Domestic MTNs, the New Zealand Registrar; and 
	 	 	 	 	 
	 	(c)	 any other party
        expressed to be the registrar in respect of any Tranche of MTNs in an
    Agency Agreement. 
	 	 	 	 	 
	 	 Regular Period means: 
	 	 	 	 	 
	 	(a) 	  in
        the case of MTNs where interest is scheduled to be paid only by means
    of regular payments, each Interest Period; 
	 	 	 	 	 
	 	(b) 	  in
        the case of MTNs where, apart from the first Interest Period, interest
        is scheduled to be paid only by means of regular payments, each period
        from and including a Regular Date falling in any year to but excluding
        the next Regular Date, where "Regular
        Date" means the day and month
    (but not the year) on which any Interest Payment Date falls; and 
	 	 	 	 	 
	 	(c)  	 in
        the case of MTNs where, apart from one Interest Period other than the
        first Interest Period, interest is scheduled to be paid only by means
        of regular payments, each period from and including a Regular Date falling
        in any year to but excluding the next Regular Date, where "Regular
        Date" means the day and month
        (but not the year) on which any Interest Payment Date falls other than
        the Interest Payment Date falling at the end of the irregular Interest
    Period. 
	 	 	 	 	 
	 	Relevant
            Financial Centre has the
            meaning given in the Supplement. 

       Relevant Indebtedness means
          any present or future indebtedness of the Issuer or a Subsidiary of
          the Issuer or any other person or entity in the form of, or represented
          by, bonds, notes, debentures, loan stock or other securities. 

     Relevant Screen Page means:

	 	 	 	 	 
	 	(a) 	 the page, section or other
        part of a particular information service (including the Reuters Monitor
        Money Rates Service and the Dow Jones Telerate Service) specified as
    the Relevant Screen Page in the Supplement; or
	 	 	 	 	 
	 	(b)	  any
        other page, section or other part as may replace it on that information
        service or such other information service, in each case, as may be nominated
    by the person 

 

 

7

 

	 	 	providing or sponsoring
        the information appearing there for the purpose of displaying rates or
    prices comparable to the Reference Rate. 
	 	 	 	 	 
	 	Relevant
            Time has the meaning given
            in the Supplement. 

       Security Interest means
          any mortgage, pledge, lien or charge or any security or preferential
          interest or arrangement of any kind or any other right of, or arrangement
          with, any creditor to have its claims satisfied in priority to other
          creditors with, or from the proceeds of, any asset. Without limitation,
          it includes security by way of deposit of moneys or other property
          and title retention other than in the ordinary course of day-to-day
    trading, but does not include: 

	 	 	 	 	 
	 	(i)	  any lien arising
    by operation of law in the ordinary course of business; 
	 	 	 	 	 
	 	(ii)	  any charge or
        lien in favour of a Governmental Agency arising by operation of law;
    
	 	 	 	 	 
	 	(iii)	  deposits
        of money or property in the ordinary course of business by way of security
        for the performance of statutory obligations, where there is no default
    in respect of the secured obligations. 
	 	 	 	 	 
	 	(iv)	 liens for taxes, assessments or governmental charges that are not at the time due or that are payable without penalty or as to which the Issuer or any of its Subsidiaries has not yet been officially assessed or notified or that are being contested in good faith by appropriate proceedings; 
	 	 	 	 	 
	 	(v)	 any security interest incidental to the conduct of business or the ownership of properties or assets that were not incurred in connection with the issuance or assumption of Debt, and that do not in the aggregate materially detract from the value of any properties or assets or materially impair their use in the operation of business; 
	 	 	 	 	 
	 	(vi)	 liens on deposits of money in connection with the provision of financial accomodation to any person in the ordinary course of business; 
	 	 	 	 	 
	 	(vii)	 any security interest on properties or assets of a Subsidiary of the Issuer to secure obligations of such Subsidiary to the Issuer or to one or more of the Issuer's Subsidiaries; 
	 	 	 	 	 
	 	(viii)	 any security interest existing on any tangible property of any corporation at the time it becomes a Subsidiary of the Issuer, or existing prior to the time of acquisition upon any tangible property acquired through purchase, merger or consolidation or otherwise, whether or not assumed or placed upon tangible property being constructed or acquired to secure all or a portion of the purhcase price thereof; or 
	 	 	 	 	 
	 	(ix)	 any extension, renewal or replacement, in whole or in part, of any mortgage, pledge, encumbrance, security interest or charge referred to in the foregoing clauses (i) to (viii) inclusive.
	 	 	 	 	 
	 	 Security Record: 
	 	 	 	 	 
	 	(a) 	 for Australian
        Domestic MTNs, has the meaning given to it in the Austraclear Regulations;
    and 
	 	 	 	 	 
	 	(b)	  for New Zealand Domestic
        MTNs, has the meaning given to the term “Security Account” in
    the Austraclear New Zealand Regulations. 
	 	 	 	 	 
	 	Series means
          an issue of MTNs made up of one or more Tranches all of which form
          a single Series and are issued on the same Conditions except that the
          Issue Date and Interest Commencement Date may be different in respect
          of different Tranches of a Series. 

       Specified Office means
          the office specified in the Information Memorandum or any other address
          notified to Holders from time to time. 

     Structured MTN means: 

	 	 	 	 	 
	 	(a)	 an Index Linked MTN; or 
	 	 	 	 	 
	 	(b) 	  an
    Instalment MTN. 
	 	 	 	 	 
	 	Subsidiary of
          an entity means any corporation, partnership or other entity of which
          the first entity owns or controls, directly or indirectly more than
          50% of the outstanding Voting Stock. 

       Supplement means,
          in respect of a Tranche of MTNs, the pricing or other supplement in
          relation to such MTNs which may be in the form, or substantially in
          the form, set out in the Information Memorandum. 

       Taxes means
          taxes, levies, imposts, charges and duties (including stamp and transaction
          duties) imposed by any authority together with any related interest,
          penalties, fines and expenses in connection with them except if imposed
          on, or calculated having regard to, the net income of a Holder. 

       Tranche means
          an issue of MTNs specified as such in any applicable Supplement issued
          on the same Issue Date and on the same Conditions. 

       United States means
          the United States of America (including the States and the District
          of Columbia), its territories, its possessions and other areas subject
    to its jurisdiction. 

	 	 	 	 	 

 

 

8

	 	
United States Alien means any person who is, for United States federal income tax purposes, as to the United States:

  
	 	 	 
	 	
(a)	
a foreign corporation;
  
	 	 	 
	 	
(b)	
a foreign partnership any member of which is, as to the United States, a foreign corporation, a non-resident alien individual or a non-resident alien fiduciary of a foreign estate or trust;
  
	 	 	 
	 	
(c)	
a non-resident alien individual; or
  
	 	 	 
	 	
(d)	
a non-resident alien fiduciary of a foreign estate or trust.
  
	 	 
	 	
Voting Stock shall mean stock or other interests evidencing ownership in a corporation, partnership or other entity which ordinarily has voting power for
the election of directors, or other persons performing equivalent functions, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.

  
	 	 
	 	
Zero Coupon MTN means an MTN which does not carry entitlement to periodic payment of interest before the redemption date of the MTN and which is issued at
a discount to its principal amount.

  
	 	 
	
(b)	
References to certain general terms
  
	 	 
	 	
Unless the contrary intention appears, a reference in these Conditions to:

  
	 	 	 
	 	
(i)	
a group of persons is a reference to any two or more of them jointly and to each of them individually;
  
	 	 	 
	 	
(ii)	
a document (including these Conditions) includes any variation or replacement of it;
  
	 	 	 
	 	
(iii)	
law means common law, principles of equity and laws made by any parliament (and laws made by parliament include and regulations and other instruments under them, and consolidations, amendments,
re-enactments or replacements of any of them);
  
	 	 	 
	 	
(iv)	
a directive means a treaty, an official directive, request, regulation, guideline or policy (whether or not having the force of law) with which responsible participants in the relevant market
generally comply;
  
	 	 	 
	 	
(v)	
Australian dollars or A$ is a reference to the lawful currency of Australia;
  
	 	 	 
	 	
(vi)	
New Zealand dollars or NZ$ is a reference to the lawful currency of New Zealand;
  
	 	 	 
	 	
(vii)	
a time of day is a reference to Sydney time;
  
	 	 	 
	 	
(viii)	
the word “person” includes an individual, a firm, a body corporate, an unincorporated association and an authority;
  
	 	 	 
	 	
(ix)	
a particular person includes a reference to the person’s executors, administrators, successors, substitutes (including persons taking by novation) and assigns;
  
	 	 	 
	 	
(x)	
an agreement, representation or warranty in favour of two or more persons is for the benefit of them jointly and each of them individually;
  
	 	 	 
	 	
(xi)	
anything (including any amount) is a reference to the whole and each part of it;
  
	 	 	 
	 	
(xii)	
the words “including”, “for example” or “such as” when introducing an example, do not limit the meaning of the words to which the example relates to that example or
examples of a similar kind; and
  

9

	 	
(xiii)	
a reference to an accounting term is to be interpreted in accordance with generally accepted principals in the United States applicable at the time.
  
	 	 
	
(c)	
References to particular terms
  
	 	 
	 	
Unless the contrary intention appears, in these Conditions:

  
	 	 	 
	 	
(i)	
a reference to the Issuer, the Registrar, the Calculation Agent or another Agent is a reference to the person so specified in the Supplement;
  
	 	 	 
	 	
(ii)	
a reference to the Agency Agreement is a reference to the Agency Agreement applicable to the MTNs of the relevant Series;
  
	 	 	 
	 	
(iii)	
a reference to an MTN is a reference to an MTN of a particular Series issued by the Issuer specified in the Supplement;
  
	 	 	 
	 	
(iv)	
a reference to a Holder is a reference to the holder of MTNs of a particular Series;
  
	 	 	 
	 	
(v)	
if the MTNs are Zero Coupon MTNs or Structured MTNs which do not bear interest, references to interest are not applicable;
  
	 	 	 
	 	
(vi)	
a reference to a particular date is a reference to that date adjusted in accordance with the applicable Business Day Convention; and
  
	 	 	 
	 	
(vii)	
a reference to a Tranche is a reference to a Tranche of a particular Series.
  
	 	 
	
(d)	
References to principal and interest
  
	 	 
	 	
Unless the contrary intention appears, in these Conditions:

  
	 	 	 
	 	
(i)	
any reference to “principal” is taken to include the Redemption Amount, any additional amounts in respect of principal which may be payable under Condition 13 (“Taxation”), all
Instalment Amounts, any premium payable in respect of an MTN, and any other amount in the nature of principal payable in respect of the MTNs under these Conditions;
  
	 	 	 
	 	 	 
	 	
(ii)	
the principal amount of an MTN issued at a discount is to be taken as at any time to equal the lesser of:
  
	 	 	 	 
	 	 	
(i)	
its Denomination; and
  
	 	 	 	 
	 	 	
(ii)	
if specified in the Supplement, its Amortised Face Amount at that time;
  
	 	 	 
	 	
(iii)	
the principal amount of an MTN which is to vary by reference to a schedule or formula (where such determination has been previously made in accordance with these Conditions) is to be taken as at any
time to equal its varied amount;
  
	 	 	 
	 	
(iv)	
the principal amount of a Partly Paid MTN is to be taken to equal its paid up principal amount;
  
	 	 	 
	 	
(v)	
the principal amount of an Instalment MTN at any time is to be taken to be its Denomination less the total instalments repaid to the extent that such instalments relate to a repayment of
principal;
  
	 	 	 
	 	
(vi)	
any reference to “interest” is taken to include all interest payable and all other amounts in the nature of interest payable in respect of the MTNs under these Conditions; and
  
	 	 	 
	 	(vii)	any reference to “interest” is taken to include any additional amounts in respect of interest which may be payable under Condition 13 (“Taxation”).

10

	
(e)	
Number
  
	 	 
	 	
The singular includes the plural and vice versa.

  
	 	 
	
(f)	
Headings
  
	 	 
	 	
Headings (including those in brackets at the beginning of paragraphs) are for convenience only and do not affect the interpretation of these Conditions.

  
	 	 
	
(g)	
Terms defined in Supplement
  
	 	 
	 	
Terms which are defined in any applicable Supplement as having a defined meaning have the same meaning when used in these Conditions but if any applicable Supplement gives no meaning or specifies
that the definition is “Not Applicable”, then that definition is not applicable to the MTNs.

  
	 

	
2	
Introduction
  
	 	 
	
(a)	
Programme
  
	 	 
	 	
MTNs are issued under a debt issuance programme established by the Issuer.

  
	 	 
	
(b)	
Supplement
  
	 	 
	 	
MTNs are issued in Series. A Series may comprise one or more Tranches having one or more Issue Dates and on conditions otherwise identical (other than in respect of the first payment of interest). A
Tranche is the subject of a Supplement which supplements, amends or replaces these Conditions. If there is any inconsistency between these Conditions and any applicable Supplement, that Supplement prevails.

  
	 	 
	 	
Copies of any applicable Supplement are available for inspection or on request by a Holder or prospective Holder during normal business hours at the Specified Office of the Issuer or the
Registrar.

  
	 	 
	
(c)	
Types of MTNs
  
	 	 
	 	
An MTN may be:

  
	 	 	 
	 	
(i)	
a Fixed Rate MTN; or
  
	 	 	 
	 	
(ii)	
a Floating Rate MTN; or
  
	 	 	 
	 	
(iii)	
a Zero Coupon MTN; or
  
	 	 	 
	 	
(iv)	
a Structured MTN (being either an Index Linked MTN or an Instalment MTN),
  
	 	 	
or a combination of the above
    (or any other type of debt obligation including a certificate of deposit),
    as specified in the relevant Supplement.

  
	 	 
	
(d)	
Denomination
  
	 	 
	 	
MTNs are issued in a single Denomination of A$10,000 unless otherwise specified in the relevant Supplement.

  
	 	 
	(e)	Currency 
	 	 
	 	 MTNs are denominated in the currency
    specified in the relevant Supplement. 

11

 

	(f)	 Clearing
    Systems 
	 	 	 	 	 
	 	 MTNs may be held
        in a Clearing System, in which case the rights of a person holding an
        interest in the MTNs lodged in the Clearing System are subject to the
    rules and regulations of the Clearing System. 
	 	 	 	 	 
	(g)	  Issue restrictions
    and tenor
	 	 	 	 	 
	 	 Unless otherwise
    specified in any relevant Supplement, MTNs may only be issued if: 
	 	 	 	 	 
	 	(i)	  in the case of: 
	 	 	 	 	 
	 	 	(i)	  Australian Domestic
        MTNs, the aggregate consideration payable to the Issuer by the relevant
        Holder is at least A$500,000 (or its equivalent in other currencies)
        (disregarding moneys lent by the Issuer or its associates to the Holder)
        or, if the offer or invitation for the issue of the MTNs otherwise does
        not require disclosure to investors under Part 6D.2 of the Corporations
    Act 2001 of Australia;
	 	 	 	 	 
	 	 	(ii)	  New Zealand
        Domestic MTNs, the aggregate consideration payable to the Issuer by the
        relevant Holder is not less than NZ$500,000 (disregarding any amount
        lent by the offeror, the Issuer or any associated person of the offeror
        or Issuer) or the New Zealand Domestic MTNs are issued to persons whose
        principal business is the investment of money or who in the course of
        and for the purposes of their business, habitually invest money within
    the meaning of the Securities Act 1978 of New Zealand; and 
	 	 	 	 	 
	 	(ii)	  the issue complies with
    all other applicable laws. 
	 	 	 	 	 
	 Part 2 The
    MTNs 
	 	 	 	 	 
	   

	3	  Form 
	 	 	 	 	 
	(a)	 Constitution under
    Note Deed Poll 
	 	 	 	 	 
	 	 MTNs are debt obligations
    of the Issuer constituted by, and owing under, the Note Deed Poll.  
	 	 	 	 	 
	(b)	  Form 
	 	 	 	 	 
	 	 MTNs are issued in registered
    form by entry in the Register. 
	 	 	 	 	 
	(c)	  No certificates 
	 	 	 	 	 
	 	 No certificates will be issued
        to Holders unless the Issuer determines that certificates should be available
    or are required by any applicable law. 
	 	 	 	 	 
	(d)	  Status 
	 	 	 	 	 
	 	 MTNs constitute direct, unconditional,
    unsubordinated and unsecured obligations of the Issuer. 
	 	 	 	 	 
	(e)	  Ranking 	 
	 	 	 	 	 
	 	 MTNs rank equally among themselves
        and at least equally with all other unsubordinated and unsecured obligations
    of the Issuer except for liabilities mandatorily preferred by law. 
	 	 	 	 	 

 

12

	 

	
4	
Restrictions on the Issuer
  
	 	 
	
(a)	
Negative pledge
  
	 	 
	 	
So long as any of the MTNs remain outstanding, the Issuer will not, and will ensure that none of its Subsidiaries will, create or permit to subsist any Security Interest upon the whole or any part of
its present or future assets or revenues as security for any Relevant Indebtedness or any guarantee given in respect of any Relevant Indebtedness unless: (i) in the case of the creation of the Security Interest, prior to or simultaneously therewith, and
in any other case, promptly, the Issuer either:

  
	 	 	 
	 	
(a)	
grants or procures to be granted a Security Interest or Security Interests securing its obligations under the MTNs, equally and rateably in all respects so as to rank pari passu with the applicable
Relevant Indebtedness or guarantee; or
  
	 	 	 
	 	
(b)	
grants or procures to be granted such other Security Interest or Security Interests in respect of its obligations under the MTNs, as shall be approved by an Extraordinary Resolution of the
Holders, or 
  
	 	 	 
	 	(c)	the aggregate amount of the secured Relevant Indebtedness of the Issuer and its Subsidiaries does not exceed 10% of the Issuers Borrowing Base. 

	 	 
	
(b)	
Consolidation and merger
  
	 	 
	 	
The Issuer may, without the consent of the Holders consolidate with or merge into any other company, or sell, lease or convey all or substantially all of its assets to any company organised and
existing under the laws of the United States of America, provided that:

  
	 	 	 
	 	
(A)	
the company formed by or resulting from any such consolidation or merger or that has received such assets expressly assumes (in place of the Issuer) payment and delivery of all amounts payable
(including Additional Amounts) and deliverable in respect of the MTNs and the performance and observance of these Conditions; and
  
	 	 	 
	 	
(B)	
immediately after such consolidation or merger or receiving such assets, the Issuer and the successor company are not in default under these Conditions.
  
	 

	
5	
Title and transfer of MTNs
  
	 	 
	
(a)	
Title
  
	 	 
	 	
Title to MTNs passes when details of the transfer are entered in the Register.

  
	 	 
	
(b)	
Effect of entries in Register
  
	 	 
	 	
Each entry in the Register in respect of an MTN constitutes:

  
	 	 	 
	 	
(i)	
an unconditional and irrevocable undertaking by the Issuer to the Holder to pay principal and (if applicable) interest and any other amount in accordance with these Conditions; and
  
	 	 	 
	 	
(ii)	
an entitlement to the other benefits given to Holders under these Conditions in respect of the relevant MTN.
  
	 	 
	
(c)	
Register conclusive as to ownership
  
	 	 
	 	
Entries in the Register in relation to an MTN constitute conclusive evidence that the person so entered is the absolute owner of the MTN subject to correction for fraud or error.

  
	 	 
	 (d)	Non-recognition of interests
	 	 
	 	Except as required by law, the
      Issuer and the Registrar must treat the person whose name is entered in
      the Register as the holder of an MTN as the absolute owner of that MTN.
    This 
	 	 

13

	 	
Condition applies whether or
    not an MTN is overdue and despite any notice of ownership, trust or interest
    in the MTN.
  
	 	 
	
(e)	
Joint holders
  
	 	 
	 	
Where two or more persons are entered in the Register as the joint holders of an MTN then they are taken to hold the MTN as joint tenants with rights of survivorship, but the Registrar is not bound
to register more than four persons as joint holders of an MTN.

  
	 	 
	
(f)	
Transfers in whole
  
	 	 
	 	
MTNs may be transferred in whole but not in part.

  
	 	 
	
(g)	
Compliance with laws
  
	 	 
	 	
MTNs may only be transferred if:

  
	 	 	 
	 	
(i)	
in the case of Australian Domestic MTNs:
  
	 	 	 	 
	 	 	
(i)	
the offer or invitation giving rise to the transfer does not constitute an offer or invitation for which disclosure is required to be made to investors under Part 6D.2 of the Corporations Act;
and
  
	 	 	 	 
	 	 	
(ii)	
the transfer complies with any applicable law or directive of the jurisdiction where the transfer takes place; and
  
	 	 	 
	 	
(ii)	
in the case of New Zealand Domestic MTNs, the offer or invitation giving rise to the transfer does not require a registered prospectus under the Securities Act 1978 of New Zealand and the transfer, and the offer or invitation giving rise to the transfer, and complies with
all other applicable laws and directives of New Zealand and the jurisdiction where the transfer takes place.
  
	 	 
	
(h)	
Transfer procedures
  
	 	
Interests in MTNs held in a Clearing System are transferable only in accordance with the rules and regulations of that Clearing System.

  
	 	 
	 	
In particular, where the Custodian is the Holder and the MTN is lodged in the Austraclear New Zealand System, the Operator may, in its absolute discretion and, to the extent not prohibited by the
Austraclear New Zealand Regulations, instruct the New Zealand Registrar to transfer the MTN to the person in whose Security Record that MTN is recorded without any consent or action of such transferee and, as a consequence, remove that MTN from the
Austraclear New Zealand System.

  
	 	 
	 	
Application for the transfer of MTNs not held in a Clearing System must be made by the lodgment of a transfer form with the Registrar at its Specified Office. Transfer forms must be in the form
available from the Registrar. Each transfer form must be:

  
	 	 	 
	 	
(a)	
duly completed;
  
	 	 	 
	 	
(b)	
accompanied by any evidence the Registrar may require to establish that the transfer form has been duly executed; and
  
	 	 	 
	 	
(c)	
signed by, or on behalf of, both the transferor and the transferee.
  
	 	 	 
	 	 	
Transfers are registered without charge provided all applicable Taxes have been paid.

  
	 	 	 
	(i)	  Effect of transfer 
	 	 	 
	 	Upon registration and entry
      of the transferee in the Register the transferor ceases to be entitled
      to future benefits under these Conditions in respect of the transferred
    MTNs and the

14

 

	 	transferee becomes
        so entitled in accordance with Condition 5.2 (“Effect of entries
    in Register”). 
	 	 	 	 	 
	(j)	  [CHESS]
	 	 	 	 	 
	 	 [MTNs listed on
        the Australian Stock Exchange Limited (ABN 98 008 624 691) will not be
        transferred through, or registered on, the Clearing House Electronic
        Subregister System operated by the Australian Stock Exchange and will
        not be “Approved Financial Products” (as defined for the purposes
    of that system).] 
	 	 	 	 	 
	5.11	  Austraclear
    or Custodian as Holder 
	 	 	 	 	 
	 	 If Austraclear
        or the Custodian is recorded in the Register as the Holder, each person
        in whose Security Record an MTN is recorded is taken to acknowledge in
        favour of the Issuer, the Registrar and the relevant Holder (and, if
    the Holder is the Custodian, the Operator) that: 
	 	 	 	 	 
	 	(i)	  the Registrar’s
        decision to act as the Registrar of that MTN is not a recommendation
        or endorsement by the Registrar or the relevant Holder (or, if the Holder
        is the Custodian, the Operator) in relation to that MTN, but only indicates
        that the Registrar considers that the holding of the MTN is compatible
        with the performance by it of its obligations as Registrar under an Agency
    Agreement; and 
	 	 	 	 	 
	 	(ii)	  the relevant
        Holder does not rely on any fact, matter or circumstance contrary to
    paragraph (a). 
	 	 	 	 	 
	 Part 3 Interest 
	 	 	 	 	 
	 

	6 	 Fixed Rate MTNs 
	 	 	 	 	 
	 	 This Condition 6 (“Fixed
          Rate MTNs”) applies to the MTNs only if the Supplement states
    that it applies. 
	 	 	 	 	 
	(a)	  Interest on Fixed
    Rate MTNs 
	 	 	 	 	 
	 	 Each Fixed Rate MTN bears
        interest on its outstanding principal amount from (and including) its
        Interest Commencement Date to (but excluding) its Maturity Date at the
        Interest Rate. Interest is payable in arrear on each Interest Payment
    Date. 
	 	 	 	 	 
	(b)	  Fixed Coupon Amount 
	 	 	 	 	 
	 	 Unless otherwise specified
        in the Supplement, the amount of interest payable on each Interest Payment
        Date in respect of the preceding Interest Period is the Fixed Coupon
    Amount specified in the Supplement. 
	 	 	 	 	 
	(c)	 Calculation of interest
    payable 
	 	 	 	 	 
	 	 The amount of interest payable
        in respect of a Fixed Rate MTN for any period for which a Fixed Coupon
        Amount is not specified in the Supplement is calculated by multiplying
        the Interest Rate for that period, the outstanding principal amount of
    the Fixed Rate MTN and the applicable Day Count Fraction. 
	 	 	 	 	 
	   

	 7	Floating Rate MTNs
	 	 	 	 	 
	 	This Condition 7 (“Floating
          Rate MTNs”) applies to the MTNs only if the Supplement states
    that it applies.

 

 

15

	 	
 

  
	
(a)	
Interest on Floating Rate MTNs
  
	 	 
	 	
Each Floating Rate MTN bears interest on its outstanding principal amount from (and including) its Interest Commencement Date to (but excluding) its Maturity Date at the Interest Rate.

  
	 	 
	 	
Interest is payable in arrears:

  
	 	 	 
	 	
(i)	
on each Interest Payment Date; or
  
	 	 	 
	 	
(ii)	
if no Interest Payment Date is specified in the Supplement, each date which falls the number of months or other period specified as the Specified Period in the Supplement after the preceding Interest
Payment Date (or in the case of the first Interest Payment Date, after the Interest Commencement Date).
  
	 	 
	
(b)	
Interest Rate determination
  
	 	 
	 	
The Interest Rate payable in respect of a Floating Rate MTN must be determined by the Calculation Agent in accordance with these Conditions.

  
	 	 
	
(c)	
Fallback Interest Rate
  
	 	 
	 	
Unless otherwise specified in the Supplement, if, in respect of an Interest Period, the Calculation Agent is unable to determine a rate in accordance with Condition 7.2 (“Interest Rate
determination”), the Interest Rate for the Interest Period is the Interest Rate applicable to the Floating Rate MTNs during the immediately preceding Interest Period.

  
	 	 
	
(d)	
ISDA Determination
  
	 	 
	 	
If ISDA Determination is specified in the Supplement as the manner in which the Interest Rate is to be determined, the Interest Rate applicable to the Floating Rate MTNs for each Interest Period is
the sum of the Margin and the ISDA Rate.

  
	 	 
	 	
In this Condition:

  
	 	 	 
	 	
(i)	
“ISDA Rate” means for an Interest Period, a rate equal to the Floating Rate that would be determined by
the Calculation Agent under a Swap Transaction if the Calculation Agent for the Floating Rate MTNs were acting as Calculation Agent for that Swap Transaction under the terms of an agreement incorporating the ISDA
  
	 	 	
Definitions and under which:

  
	 	 	 	 
	 	 	
(A)	
the Floating Rate Option, the Designated Maturity and the Reset Date are as specified in the Supplement; and
  
	 	 	 	 
	 	 	
(B)	
the Period End Dates are each Interest Payment Date, the Spread is the Margin and the Floating Rate Day Count Fraction is the Day Count Fraction; and
  
	 	 	 
	 	
(ii)	
“Swap
      Transaction”, “Floating
      Rate”, “Calculation
      Agent” (except references
      to “Calculation Agent for
      the Floating Rate  MTNs”), “Floating
      Rate Option”, “Designated
       Maturity”, “Reset
       Date”, “Period
       End Date”, “Spread” and “Floating
       Rate Day Count Fraction” have
    the meanings given to those terms in the ISDA Definitions
  
	 	 	
.

  
	 (e)	Screen Rate Determination
	 	 	 
	 	If Screen Rate Determination
      is specified in the Supplement as the manner in which the Interest Rate
      is to be determined, the Interest Rate applicable to the Floating Rate
    MTNs for each Interest Period is the sum of the Margin and the Screen Rate.
	 	 	 
	 	 	 

16

	 	
 
  
	 	
 

  
	 	 
	 	
In this Condition, “Screen Rate” means, for an Interest Period, the quotation offered for the Reference
Rate appearing on the Relevant Screen Page at the Relevant Time on the Interest Determination Date. However:

  
	 	 	 
	 	
(i)	
if there is more than one offered quotation displayed on the Relevant Screen Page at the Relevant Time on the Interest Determination Date, the “Screen
Rate” means the rate calculated by the Calculation Agent as the average of the offered quotations. If there are more than five offered quotations, the Calculation Agent must exclude the highest and
lowest quotations (or in the case of equality, one of the highest and one of the lowest quotations) from its calculation;
  
	 	 	 
	 	
(ii)	
if an offered quotation is not displayed by the Relevant Time on the Interest Determination Date or if it is displayed but the Calculation Agent determines that there is an obvious error in that
rate, the “Screen Rate” means:
  
	 	 	 	 
	 	 	
(A)	
the rate the Calculation Agent calculates as the average mean of the Reference Rates that each Reference Bank quoted to the leading banks in the Relevant Financial Centre specified in the Supplement
at the Relevant Time on the Interest Determination Date; or
  
	 	 	 	 
	 	 	
(B)	
where the Calculation Agent is unable to calculate a rate under paragraph (i) because it is unable to obtain at least two quotes, the rate the Calculation Agent calculates as the average of the rates
(being the nearest equivalent to the Reference Rate) quoted by two or more banks chosen by the Calculation Agent in the Relevant Financial Centre at approximately the Relevant Time on the Interest Determination Date for a period equivalent to the
Interest Period to leading banks carrying on business in the Relevant Financial Centre in good faith; or
  
	 	 	 
	 	
(iii)	
if the Supplement specifies an alternative method for the determination of the Screen Rate Determination, then that alternative method applies.
  
	 	 
	
(f)	
Bank Bill Rate Determination
  
	 	 
	 	
If Bank Bill Rate Determination is specified in the Supplement as the manner in which the Interest Rate is to be determined, the Interest Rate applicable to the Floating Rate MTNs for each Interest
Period is the sum of the Margin and the Bank Bill Rate.

  
	 	 
	 	
In this Condition:

  
	 	 	 
	 	
(i)	
Bank Bill Rate means, for an Interest Period:
  
	 	 	 	 
	 	 	(A)	In the case of Australian Domestic Notes, the average mid rate for Bills having a tenor closest to the Interest Period as displayed on the “BBSW” page of the Reuters Monitor System on the first day of that Interest Period; and 

	 	 	 	 
	 	 	(B)	In the case of New Zealand Domestic MTNs, the average mid rate for Bills having a tenor closest to the Interest Period as displayed on the "BKBM" page of the Reuters Monitor System on the first day of the Interest Period. 

	 	 	 
	 	 	
However, if the average mid rate is not displayed by 10:30 am on that day (or, in the case of New Zealand Domestic Notes, as close as reasonably practicable to 10.45 am (New Zealand time) on that
day), or if it is displayed but the Calculation Agent determines that there is an obvious error in that rate, Bank Bill Rate means the rate determined by the
Calculation Agent in good faith at approximately 10:30 am on that day (or, in the case of New Zealand Domestic Notes, as close as reasonably practicable to 10.45 am (New Zealand time) on that day), having regard, to the extent possible, to the mid
rate of the rates otherwise bid and offered for bank accepted Bills of that tenor at or around that time; and

  
	 	 	 
	 	 (ii)	Bill has
      the meaning it has in the Bills of Exchange Act 1909 of Australia and a
      reference to the acceptance of a Bill is to be interpreted in accordance
    with that Act.
	 	 	 
	 	 	 

17

	 	 	
 
  
	
(g)	
Interpolation
  
	 	 
	 	
If the Supplement states that "Linear Interpolation" applies to an Interest Period, the Interest Rate for that Interest Period is determined through the use of straight line interpolation by
reference to two ISDA Rates, Screen Rates, Bank Bill Rates or other floating rates specified in the Supplement.

  
	 	 
	 	
The first rate must be determined as if the Interest Period were the period of time for which rates are available next shorter than the length of the Interest Period (or any alternative Interest
Period specified in the Supplement).

  
	 	 
	 	
The second rate must be determined as if the Interest Period were the period of time for which rates are available next longer than the length of the Interest Period (or any alternative Interest
Period specified in the Supplement).

  
	 	 
	  

	
8	
Structured MTNs
  
	 	 
	 	
This Condition 8 (“Structured MTNs”) applies to the MTNs only if the Supplement states that it applies.

  
	 	 
	
(a)	
Interest on Structured MTNs
  
	 	 
	 	
Each interest bearing Structured MTN bears interest on its outstanding principal amount from (and including) its Interest Commencement Date to (but excluding) its Maturity Date at the Interest
Rate.

  
	 	 
	 	
Interest is payable in arrears:

  
	 	 	 
	 	
(i)	
on each Interest Payment Date; or
  
	 	 	 
	 	
(ii)	
if no Interest Payment Date is specified in the Supplement, each date which falls the number of months or other period specified as the Specified Period in the Supplement after the preceding Interest
Payment Date (or in the case of the first Interest Payment Date, after the Interest Commencement Date).
  
	 	 
	
(b)	
Interest Rate
  
	 	 
	 	
The Interest Rate payable in respect of an interest bearing Structured MTN must be determined in the manner specified in the Supplement.

  
	 	 
	  

	
9	
General provisions applicable to interest
  
	 	 
	
(a)	
Maximum or Minimum Interest Rate
  
	 	 
	 	
If the Supplement specifies a Maximum Interest Rate or Minimum Interest Rate for any Interest Period, then the Interest Rate for the Interest Period must not be greater than the maximum, or be less
than the minimum, so specified.

  
	 	 
	
(b)	
Calculation of Interest Rate and interest payable
  
	 	 
	 	
The Calculation Agent must, as soon as practicable after determining the Interest Rate in relation to each Interest Period for each Floating Rate MTN and interest bearing Structured MTN, calculate
the amount of interest payable for the Interest Period in respect of the outstanding principal amount of that MTN.

  
	 	 
	 	Unless otherwise specified in
      the Supplement, the amount of interest payable is calculated by multiplying
      the product of the Interest Rate for the Interest Period and the outstanding
    principal amount of the MTN by the applicable Day Count Fraction.
	 	 
	 	 

18

	 	
 

  
	 	
The rate determined by the Calculation Agent must be expressed as a percentage rate per annum.

  
	 	 
	
(c)	
Calculation of other amounts
  
	 	 
	 	
If the Supplement specifies that any other amount is to be calculated by the Calculation Agent, the Calculation Agent must, as soon as practicable after the time at which that amount is to be
determined, calculate the amount in the manner specified in the Supplement.

  
	 	 
	
(d)	
Notification of Interest Rate, interest payable and other items
  
	 	 
	 	
The Calculation Agent must notify the Issuer, the Registrar, the Holders, each other Agent and any stock exchange or other relevant authority on which the MTNs are listed of:

  
	 	 	 
	 	
(i)	
each Interest Rate, the amount of interest payable and each other amount, item or date calculated or determined by it together with the Interest Payment Date; and
  
	 	 	 
	 	
(ii)	
any amendment to any amount, item or date referred to in paragraph (a) arising from any extension or reduction in any Interest Period or calculation period.
  
	 	 
	 	
The Calculation Agent must give notice under this Condition as soon as practicable after it makes its determination. However, it must give notice of each Interest Rate, the amount of interest payable
and each Interest Payment Date by the fourth day of the Interest Period.

  
	 	 
	 	
The Calculation Agent may amend its determination of any amount, item or date (or make appropriate alternative arrangements by way of adjustment) as a result of the extension or reduction of the
Interest Period or calculation period without prior notice but must notify the Issuer, the Registrar, the Holders, each other Agent and each stock exchange or other relevant authority on which the MTNs are listed after doing so.

  
	 	 
	
(e)	
Determination final
  
	 	 
	 	
The determination by the Calculation Agent of all amounts, rates and dates falling to be determined by it under these Conditions is, in the absence of manifest error, final and binding on the Issuer,
the Registrar, each Holder and each other Agent.

  
	 	 
	
(f)	
Rounding
  
	 	 
	 	
For the purposes of any calculations required under these Conditions (unless otherwise specified in the Supplement):

  
	 	 	 
	 	
(i)	
all percentages resulting from the calculations must be rounded, if necessary, to the nearest ten-thousandth of a percentage point (with 0.00005 per cent. being rounded up to 0.0001 per
cent.);
  
	 	 	 
	 	
(ii)	
all figures must be rounded to four decimal places (with halves being rounded up); and
  
	 	 	 
	 	
(iii)	
all amounts that are due and payable must be rounded (with halves being rounded up) to:
  
	 	 	 	 
	 	 	
(A)	
in the case of Australian dollars or euro, one cent; and
  
	 	 	 	 
	 	 	
(B)	
in the case of any other currency, the lowest amount of that currency available as legal tender in the country of that currency.
  

19

 

	Part 4 Redemption
    and purchase 
	 	 	 	 	 
	  

	10 	 Redemption 
	 	 	 	 	 
	(a)	 Scheduled
    redemption
	 	 	 	 	 
	 	 Each MTN is redeemable
    by the Issuer on the Maturity Date at its Redemption Amount unless: 
	 	 	 	 	 
	 	(i) 	 the MTN has been
    previously redeemed; 
	 	 	 	 	 
	 	(ii)	  the MTN has
    been purchased and cancelled; 
	 	 	 	 	 
	 	(iii) 	 the Supplement states
    that the MTN has no fixed maturity date; or 
	 	 	 	 	 
	 	(iv)	  its maturity is varied
        pursuant to any Issuer’s or Holder’s option in accordance with
        Conditions 10.5 (“Early redemption at option of the Holders (Holder
        put)”) or 11.6 (“Early redemption at option of the Issuer (Issuer
    call)”). 
	 	 	 	 	 
	(b)	 Partly Paid MTNs 
	 	 	 	 	 
	 	 Each Partly Paid MTN is redeemable
    on the Maturity Date in accordance with the Supplement. 
	 	 	 	 	 
	(c)	  Instalment MTNs 
	 	 	 	 	 
	 	 Each Instalment MTN is partially
        redeemable in the Instalment Amounts and on the Instalment Dates specified
        in the Supplement. The principal amount of each Instalment MTN is reduced
    by the Instalment Amount with effect from the related Instalment Date. 
	 	 	 	 	 
	(d)	  Early redemption
    for taxation reasons 
	 	 	 	 	 
	 	 The Issuer may redeem all
        (but not some) of the MTNs of a Series in whole, but not in part, at
        any time before their Maturity Date at the Redemption Amount and any
        interest accrued on the Redemption Amount to (but excluding) the redemption
    date and any Additional Amounts if: 
	 	 	 	 	 
	 	(i)	  the Issuer is required under
        Condition 13 (“Taxation”) to pay an Additional Amount in respect
    of an MTN; or 
	 	 	 	 	 
	 	(ii)	  any action has been taken
        by any taxing authority of, or any action has been brought in a court
        of competent jurisdiction in, the United States, whether or not such
        action was taken or brought with respect to the Issuer, or any change,
        amendment, application or interpretation shall be officially proposed
        on or after the Issue Date, which, in any such case, in the written opinion
        of independent legal counsel of recognised standing results in a substantial
        probability that the Issuer will be required to pay Additional Amounts
    on the MTNs as described under Condition 13 (“Taxation”). 
	 	 	 	 	 
	 	 However, the Issuer may only
    do so if: 
	 	 	 	 	 
	 	(A)	  the Issuer has given
        at least 30 days’ (and no more than 60 days’) (or any other
        period specified in the Supplement) notice to the Registrar, the Holders,
        each other Agent and any stock exchange or other relevant authority on
    which the MTNs are listed; and 
	 	 	 	 	 
	 	(B)	  before the Issuer gives
    the notice under paragraph (a), the Registrar has received: 
	 	 	 	 	 
	 	 	(I) 	a certificate signed by
    two directors of the Issuer that the Issuer would be required under Condition
        13 (“Taxation”) to pay an Additional Amount in respect of the
    MTNs; and
	 	 	 	 	 
	 	 	 (II)	(if applicable) an opinion
    of independent legal advisers of recognised standing; and
	 	 	 	 	 
	 	 	 	 	 

 

 

 

20

	 	
 

  
	 	 	 	
 
  
	 	
(C)	
in the case of Fixed Rate MTNs, no notice of redemption is given earlier than 90 days before the earliest date on which the Issuer would be obliged to pay Additional Amounts; and
  
	 	 	 
	 	(D) 	in the case of Floating Rate MTNs
    and Structured MTNs bearing a floating rate of interest:
	 	
 

  
	 	
 

  	(I) 	the proposed redemption date is an Interest
    Payment Date; and
	 	
 

  
	 	 	(II) 	no notice of redemption is given earlier
      than 60 days before the Interest Payment Date occurring immediately before
      the earliest date on which the Issuer would be obliged to pay Additional
    Amounts.
	 	 	
 

  
	 	 
	
(e)	
Early redemption at the option of Holders (Holder put)
  
	 	 
	 	
If the Supplement states that a Holder may require the Issuer to redeem all or some of the MTNs of a Series held by that Holder before their Maturity Date, the Issuer must redeem the MTNs specified
by the Holder at the Redemption Amount and any interest accrued on the Redemption Amount to (but excluding) the redemption date if the following conditions are satisfied:

  
	 	 	 
	 	
(i)	
the amount of MTNs to be redeemed is a multiple of their Denomination;
  
	 	 	 
	 	
(ii)	
the Holder has given at least 30 days’ (and no more than 60 days’) (or any other period specified in the Supplement) notice, to the Issuer and the Registrar by delivering to the Specified
Office of the Registrar during normal business hours a completed and signed redemption notice in the form obtainable from the Specified Office of the Registrar together with any evidence the Registrar may require to establish title of the Holder to
the MTN; and
  
	 	 	 
	 	
(iii)	
the notice referred to in paragraph (b) specifies an account in the country of the currency in which the MTN is denominated to which the payment should be made or an address to where a cheque for
payment should be sent; and
  
	 	 	 
	 	
(iv)	
the redemption date is an Early Redemption Date (Put) specified in the Supplement; and
  
	 	 	 
	 	
(v)	
any other condition specified in the Supplement is satisfied.
  
	 	 	 
	 	 	
A Holder cannot require the Issuer to redeem any MTN under this Condition 10.5 if the Issuer has given notice that it will redeem that MTN under Condition 10.4 (“Early redemption for taxation
reasons”) or Condition 10.6 (“Early redemption at the option of the Issuer (Issuer call)”).

  
	 	 
	
(f)	
Early redemption at the option of the Issuer (Issuer call)
  
	 	 
	 	
If the Supplement states that the Issuer may redeem all or some of the MTNs of a Series before their Maturity Date under this Condition, the Issuer may redeem such MTNs at the Redemption Amount and
any interest accrued on the Redemption Amount to (but excluding) the redemption date.

  
	 	 
	 	However, the Issuer may only do
    so if:
	 	 
	 	 (i)	the amount of MTNs to be redeemed
    is, or is a multiple of, their Denomination;
	 	 
	 	 (ii)	the Issuer has given at least
      30 days’ (and no more than 60 days’) (or any other period specified
      in the Supplement) notice to the Registrar, the Holders, each other Agent
      and any stock exchange or other relevant authority on which the MTNs are
    listed; and

21

	 	 	
 
  
	 	
(iii)	
the proposed redemption date is an Early Redemption Date (Call) specified in the Supplement; and
  
	 	 	 
	 	
(iv)	
any other condition specified in the Supplement is satisfied.
  
	 	 
	
(g)	
Partial redemptions
  
	 	 
	 	
If only some of the MTNs are to be redeemed under Condition 10.6 (“Early redemption at the option of the Issuer (Issuer call)”), the MTNs to be redeemed must be specified in the notice and
selected:

  
	 	 	 
	 	
(i)	
in a fair and reasonable manner; and
  
	 	 	 
	 	
(ii)	
in compliance with any applicable law, directive or requirement of any stock exchange or other relevant authority on which the MTNs are listed.
  
	 	 
	
(h)	
Effect of notice of redemption
  
	 	 
	 	
Any notice of redemption given under this Condition 10 (“Redemption”) is irrevocable.

  
	 	 
	
(i)	
Late payment
  
	 	 
	 	
If an amount is not paid under this Condition 10 (“Redemption”) when due, then:

  
	 	 	 
	 	
(i)	
for an MTN (other than a Zero Coupon MTN or a Structured MTN), interest continues to accrue on the unpaid amount (both before and after any demand or judgment) at the default rate specified in the
Supplement (or, if no default rate is specified, the last applicable Interest Rate) until the date on which payment is made to the Holder;
  
	 	 	 
	 	
(ii)	
for a Zero Coupon MTN, the obligation to pay the amount is replaced by an obligation to pay the Amortised Face Amount recalculated as at the date on which payment is made to the Holder; and
  
	 	 	 
	 	
(iii)	
for a Structured MTN as specified in the Supplement:
  
	 	 	 	 
	 	 	
(I)	
interest continues to accrue at the default rate specified in the Supplement (or, if no default rate is specified, the last applicable Interest Rate) until the date on which payment is made to the
Holder; or
  
	 	 	 	 
	 	 	
(II)	
the obligation to pay the amount is replaced by an obligation to pay an amount determined in the manner specified in the Supplement.
  
	 	 
	
(j)	
Purchase
  
	 	 
	 	
The Issuer and any of its Related Entities may at any time purchase MTNs in the open market or otherwise and at any price. If purchases are made by tender, tenders must be available to all Holders
alike. MTNs purchased under this Condition 10.10 may be held, resold or cancelled at the discretion of the purchaser and (if the MTNs are to be cancelled, the Issuer), subject to compliance with any applicable law or requirement of any stock
exchange or other relevant authority on which the MTNs are listed.

  
	 	 
	Part 5 Payments 
	 	 
	  

	11	  General provisions 
	 	 
	(a)	  Summary of payment provisions 
	 	 
	 	 Payments in respect of MTNs must
    be made in accordance with this Condition 11 and with Condition 12 (“Payments”). 

22

 

	(b)	  Payments
    subject to law 
	 	 	 	 	 
	 	 All payments are
        subject to applicable law, but without prejudice to the provisions of
    Condition 13 (“Taxation”). 
	 	 	 	 	 
	(c)	  Payments
    on business days 
	 	 	 	 	 
	 	 If a payment is
        due on a day which is not a Business Day then the due date for payment
    is adjusted in accordance with the applicable Business Day Convention. 
	 	 	 	 	 
	 	 The Holder is
    not entitled to any additional payment in respect of that delay. 
	 	 	 	 	 
	(d)	  Impositions
    of exchange controls 
	 	 	 	 	 
	 	 If the Issuer
        reasonably determines that a payment on the MTNs cannot be made in Australian
        dollars due to restrictions imposed by the government of the Commonwealth
        of Australia or any agency or instrumentality thereof or any monetary
        authority in the Commonwealth of Australia, such payment will be made
        outside Australia in U. S. dollars by a cheque drawn on, or by credit
        or transfer to an account maintained by the holder with a bank located
        outside Australia. The Issuer shall give prompt notice to the holders
        of the MTNs if such a determination is made. The amount of U. S. dollars
        to be paid with respect to any such payment shall be the amount of U.
        S. dollars that could be purchased by the Issuer with the amount of Australian
        dollars payable on the date the payment is due, at the rate for sale
        in financial transactions of U. S. dollars (for delivery in Sydney two
        Business Days later) quoted by such bank at 10:00 a. m. local time in
    Sydney on the second Business Day prior to the date the payment is due. 
	 	 	 	 	 
	(e)	  Currency indemnity 
	 	 	 	 	 
	 	 The Issuer waives any right
        it has in any jurisdiction to pay an amount other than in the currency
        in which it is due. However, if a Holder receives an amount in a currency
    other than that in which it is due: 
	 	 	 	 	 
	 	(i)	  it may convert the amount
        received into the due currency (even though it may be necessary to convert
        through a third currency to do so) on the day and at such rates (including
        spot rate, same day value rate or value tomorrow rate) as it reasonably
        considers appropriate. It may deduct its usual costs in connection with
    the conversion; and 
	 	 	 	 	 
	 	(ii)	  the Issuer satisfies
        its obligation to pay in the due currency only to the extent of the amount
        of the due currency obtained by the Holder from the conversion referred
    to in Condition 11.5(a) after deducting the costs of the conversion. 
	 	 	 	 	 
	
       

	12	Payments
	 	 	 	 	 
	 (a)	Payment of principal
	 	 	 	 	 
	 	Payments of principal and
        any final Instalment Amount in respect of an MTN will be made to each
        person registered at the opening of business on the payment date as the
    holder of an MTN.
	 	 	 	 	 
	 (b)	Payment of interest
	 	 	 	 	 
	 	Payments of interest and Instalment
        Amounts (other than the final Instalment Amount) in respect of an MTN
        will be made to each person registered at the close of business on the
    Record Date as the holder of that MTN.

 

 

23

	
	

  
	
(c)	
Payments to accounts
  
	 	 
	 	
Payments in respect of MTNs will be made:

  
	 	 	 
	 	
(i)	
if the MTNs are held in the Austraclear System, by crediting on the payment date, the amount due to:
  
	 	 	 	 
	 	 	
(A)	
the account of Austraclear (as the Holder) in the country of the currency in which the MTN is denominated previously notified to the Issuer and the Registrar; or
  
	 	 	 	 
	 	 	
(B)	
if requested by Austraclear, the accounts of the persons in whose Security Record (as defined in the Austraclear Regulations) an MTN is recorded in the country of the currency in which the MTN is
denominated as previously notified by Austraclear to the Issuer and the Registrar in accordance with Austraclear Regulations;
  
	 	 	 
	 	
(ii)	
if the MTNs are held in the Austraclear New Zealand System, by crediting on the Payment Date, the amount due to:
  
	 	 	 	 
	 	 	
(ii)	
the account of the Custodian (as the Holder) in the country of the currency in which the MTN is denominated previously notified to the Issuer and the Registrar; or
  
	 	 	 	 
	 	 	
(iii)	
if requested by the Custodian, the accounts of the persons in whose Security Record an MTN is recorded in the country of the currency in which the MTN is denominated as previously notified by the
Custodian to the Issuer and the Registrar in accordance with the Austraclear New Zealand Regulations; and
  
	 	 	 
	 	
(iii)	
if the MTNs are not held in a Clearing System, by crediting on the payment date, the amount then due under each MTN to an account in the country of the currency in which the MTN is denominated
previously notified by the Holder to the Issuer and the Registrar.
  
	 	 
	
(d)	
Payments by cheque
  
	 	 
	 	
If the Holder has not notified the Registrar of an account to which payments to it must be made by the close of business on the Record Date, payments in respect of the MTN will be made by cheque sent
by prepaid post on the Business Day immediately before the payment date, at the risk of the registered Holder, to the Holder (or to the first named joint holder of the MTN) at its address appearing in the Register at the close of business on the
Record Date. Cheques sent to the nominated address of a Holder are taken to have been received by the Holder on the payment date and, no further amount is payable by the Issuer in respect of the MTNs as a result of the Holder not receiving payment
on the due date.

  
	 	 
	  

	 13	Taxation
	 	 
	 	All payments of principal and
      interest on the MTNs will be made without deduction or withholding for
      or on account of any present or future tax, assessment or other governmental
      charge, of whatever nature, imposed or levied by or within the United States
      or Australia or by or within any political subdivision or taxing authority thereof or
      therein, except as required by law. The Issuer will, subject to certain
    limitations and exceptions set forth below, pay to a Holder who is a United
      States Alien (as the case may be) such additional amounts (“Additional
      Amounts”) as may be necessary
      so that every net payment by the Issuer or any of its Agents of principal
      or interest with respect to the MTNs after deduction or withholding for
      or on account of any present or future tax, assessment or other governmental
      charge imposed upon such Holder (or as a result of such payment) by or
      within the United States or Australia (or any political subdivision or taxing authority
      thereof or therein), will not be less than the amount provided for in such
      MTNs to be then due and payable. However, the Issuer will not be required
    to make any payment of Additional Amounts for or on account of:

24

	 	
 
  
	 	
 
  
	 	        	
 
  
	 	
 
  
	 	
(i) 
  	any tax, assessment or other governmental
    charge which would not have been so imposed but for:
	 	 	
 
  	 
	 	 	(A) 	the existence of any present or former
      connection between such holder (or between a fiduciary, settlor, beneficiary,
      member or shareholder of, or possessor of a power over, such holder, if
      such holder is an estate, a trust, a partnership or a corporation) and
      the United States, including, without limitation, such holder (or such
      fiduciary, settlor, beneficiary, member, shareholder or possessor) being
      or having been present therein, being or having been a citizen or resident
      thereof, being or having been engaged in a trade or business therein or
    having or having had a permanent establishment therein;
	 	 	 	 
	 	 	(B) 	the failure of such holder to comply
      with any certification, identification or information reporting requirements
      under the income tax laws and regulations of the United States, without
      regard to any tax treaty, or any political subdivision or taxing authority
      thereof or therein to establish entitlement to an exemption from withholding
    as a United States Alien; or
	 	 	 	 
	 	 	(C)	 the claim for payment in relation
      to an MTN being made on a date more than 10 days after the date on which
    such payment is due or is duly provided for, whichever occurs later;
	 	 	 	 
	 	(ii)	
 a holder who would have been
    able to avoid such withholding or deduction by satisfying any statutory or
    procedural requirements including, without limitation, the provision of information;
  
	 	 	 
	 	(iii)	
 any estate, inheritance, gift,
    sales, transfer, personal property, or any similar tax, assessment or governmental
    charge;
  
	 	 	 
	 	(iv)	
 any tax, assessment or other
    governmental charge which is payable other than by withholding from payments
    of principal of or interest on such MTN;
  
	 	 	 
	 	(v)	
 any tax, assessment or other
    governmental charge imposed by reason of such holder's past or present status
    as a personal holding company, private foundation or other tax exempt organisation,
    passive foreign investment company, foreign personal holding company bank
    or controlled foreign corporation with respect to the United States or as
    a corporation that accumulates earnings to avoid United States federal income
    tax;
  
	 	 	 
	 	(vi)	
 any tax, assessment or other
    governmental charge imposed by reason of such holder's past or present status
    as the actual or constructive owner of 10% or more of the total combined
    voting power of all classes of stock of the Issuer entitled to vote; or
  
	 	 	 
	 	(vii)	to, or to a third party on behalf of, a Holder who is liable to such Taxes in respect of such MTN by reason of the person having some connection with a Relevant Tax Jurisdiction other than the mere holding of such MTN or receipt of payment in respect of the MTN provided that a Holder shall not be regarded as having a connection with Australia for the reason that the Holder is a resident of Australia within the meaning of the Australian Tax Act where, and to the extent that, such taxes are payable by reason of section 128B(2A) of the Australian Tax Act; 

	 	 	 
	 	(viii)	to, or to a third party on behalf of, a Holder who could lawfully avoid (but has not so avoided) such Taxes by complying or procuring that any third party complies with any statutory requirements or by making or procuring that any third party makes a declaration of non-residence or similar case for exemption to any tax authority;
	 	 	 
	 	(ix)	to, or to a third party on behalf of, a Holder who is an Offshore Associate of the Issuer and not acting in the capacity of a clearing house, paying agent, custodian, funds manager or responsible entity of a registered scheme within the meaning of the Corporations Act;
	 	 	 
	 	(x)	to, or to a third party on behalf of an Australian resident Holder or a non-resident Holder carrying on business in Australia at or through a permanent establishment of the non-resident in Australia. If the Holder has not supplied an appropriate tax file number, an Australian business number or other exemption details;
	 	 	 
	 	(xi)	in such other circumstances as may be specified in the Supplement; or 
	 	 	 
	 	(xii)	any combination of paragraphs (a) to (k) above, 
	 	 	 
	 	 nor shall Additional Amounts
      be paid with respect to a payment of principal of or interest on any MTN
      to a holder that is not the beneficial owner of such MTN to the extent
      that the beneficial owner thereof would not have been entitled to the payment
      of such Additional Amounts had such beneficial owner been the holder of
    such MTN. 
	 	 	 
	  

	14	  Time limit for claims 
	 	 	 
	 	 A claim against the Issuer
    for a payment under an MTN is void unless made within: 
	 	 	 
	 	(i)	 in the case of principal,
    10 years; and 
	 	 	 
	 	(ii)	 in the case of interest
      and other amounts, 5 years, from the date on which payment first becomes
    due. 
	 	 	 
	 	 	 

25

 

	 Part 6 Events
    of Default 
	 	 	 	 	 
	  

	 	 	 	 	 
	15	  Events of
    Default 
	 	 	 	 	 
	(a)	  Events
    of Default	 
	 	 	 	 	 
	 	 An Event of Default
        in relation to a Series of MTNs means any one of the following events
        (whatever the reason for such Event of Default and whether it shall be
        voluntary or involuntary or be effected by operation of law, pursuant
        to any judgment, decree or order of any court or any order, rule or regulation
    of any administrative or governmental body): 
	 	 	 	 	 
	 	(i)	 Non-payment: default
        in the payment of any interest upon any MTN of that Series when it becomes
        due and payable, and continuance of such default for a period of 30 days;
        or default in the payment of the principal of or any premium on any MTN
        of that Series at its Maturity Date, and continuance of such default
    for a period of five days;
	 	 	 	 	 
	 	(ii)	 Breach
          of other obligations: the
          Issuer does not perform or comply with any one or more of its other
          obligations in the MTNs (other than an obligation a default in whose
          performance or whose breach is elsewhere in these Conditions specifically
          dealt with or which has expressly been included in these Conditions
          solely for the benefit of a Series of MTNs other than that Series)
          which default is incapable of remedy or is not remedied within 60 days
          after a written notice specifying such default or breach and requiring
          it to be remedied and stating that such notice is a “Notice of
          Default” hereunder shall have been given to the Issuer by the
          Registrar, or to the Issuer and the Registrar by a Holder at its Specified Office by registered or certified mail;
	 	 	 	 	 
	 	(iii)	 Cross
          default: default in respect
          of any other indebtedness for borrowed money of the Issuer or its Subsidiary
          in excess of US$50,000,000 that has become or has been declared
    due and payable prior to maturity, which default has continued for 15 days after the Issuer or the Issuer on behalf of the Subsidiaries, has received notice from a Holder requiring such default to be remedied; 
	 	 	 	 	 
	 	(iv)	 Ownership:
        the failure at any time of American Express Company or any successor
    corporation: 
	 	 	 	 	 
	 	 	(A)	  to own, directly or through
        one or more wholly-owned Subsidiaries, 100% of the Voting Stock of the
    Issuer; and 
	 	 	 	 	 
	 	 	(B)	  if the Issuer has outstanding
        any shares of capital stock, other than Voting Stock, to own, directly
        or through one or more wholly-owned Subsidiaries, shares representing
    at least 80% of the Voting Stock of the Issuer; 
	 	 	 	 	 
	 	 (v)	Breach of Condition 4: the
        failure of the Issuer to observe and perform the covenants contained
    in Condition 4 (“Restriction on the Issuer”);
	 	 	 	 	 
	 	 (vi)	Insolvency:
    the entry by a court having jurisdiction in the premises of:
	 	 	 	 	 
	 	 	 (A)	a decree or order for relief
        in respect of the Issuer in an involuntary case or proceeding under any
        applicable United States federal or state bankruptcy, insolvency, reorganisation
    or other similar law; or
	 	 	 	 	 
	 	 	 (B)	a decree or order adjudging
        the Issuer a bankrupt or insolvent, or approving as properly filed a
        petition seeking reorganisation, arrangement, adjustment or composition
        of or in respect of the Issuer under any applicable United States federal
        or state law, or appointing a custodian, receiver, liquidator, assignee,
        trustee, sequestrator or other similar official of the Issuer or of any
        substantial part of its property, or ordering the winding up or liquidation
    of its 
	 	 	 	 	 

 

 

 

26

	 	 	 	affairs, and the continuance of any such
      decree or order for relief or any such other decree or order unstayed and
    in effect for a period of 60 consecutive days; or
	 	 	 
	 	
(vii)	
Winding up:

  
	 	 	
(A)	
the commencement by the Issuer of a voluntary case or proceeding under any applicable United States federal or state bankruptcy, insolvency, reorganisation or other similar law, or of any other case
or proceeding to be adjudicated a bankrupt or insolvent; or

  
	 	 	 	 
	 	 	
(B)	
the consent by the Issuer to the entry of a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable United States federal or state bankruptcy,
insolvency, reorganisation or other similar law, or to the commencement of any bankruptcy or insolvency case or proceeding against it; or

  
	 	 	 	 
	 	 	
(C)	
the filing by the Issuer of a petition or answer or consent seeking reorganisation or relief under any applicable United States federal or state law, or the consent by the Issuer to the filing of
such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Issuer or of any substantial part of its property; or

  
	 	 	 	 
	 	 	
(D)	
the making by the Issuer of an assignment for the benefit of creditors; or

  
	 	 	 	 
	 	 	
(E)	
the admission by the Issuer in writing of its inability to pay its debts generally as they become due; or

  
	 	 	 	 
	 	 	
(F)	
the taking of corporate action by the Issuer in furtherance of any action in (i) to (v) above.

  
	 	 
	
(b)	
Consequences of an Event of Default

  
	 	 
	 	
If an Event of Default occurs and continues unremedied in relation to the MTNs, then a Holder may declare by notice to the Issuer (with a copy to the Registrar) that each MTN held by it is to be
redeemed at its Redemption Amount (together with any accrued interest) in which case those amounts become immediately due and payable.

  
	 	 
	
(c)	
Rectification

  
	 	 
	 	
The Holder’s right to declare the MTNs of any Series due and payable terminates if the situation giving cause to it has been cured before such right is exercised, or the Holders waive the Event
of Default by Extraordinary Resolution.

  
	 	 
	(d)	 Notification 
	 	 
	 	 If an Event of Default occurs,
      the Issuer must promptly after becoming aware of it notify the Registrar
      of the occurrence of the Event of Default (specifying details of it) and
      use its reasonable endeavours to ensure that the Registrar promptly notifies
      Holders, each other Agent and any stock exchange or other relevant authority
    on which the MTNs are listed of the occurrence of the Event of Default. 

27

 

	 Part 7 General 
	 	 	 	 	 
	  

	16 	 Agents 
	 	 	 	 	 
	(a)	  Role of
    Agents 
	 	 	 	 	 
	 	 In acting under
        an Agency Agreement, each Agent acts solely as agent of the Issuer and
        does not assume any obligations towards or relationship of agency or
        trust for or with any Holder, except that any funds held by the Agent
        for payment of principal or of interest on, or Additional Amounts with
        respect to, any MTN shall be held in trust by it and applied as set forth
        herein, but need not be segregated from other funds held by it, except
        as required by law. For a description of the duties and the immunities
        and rights of an Agent under the relevant Agency Agreement, reference
        is made to the relevant Agency Agreement, and the obligations of the
    Agent to the Holders are subject to such immunities and rights. 
	 	 	 	 	 
	(b)	  Appointment
    and replacement of Agents 
	 	 	 	 	 
	 	 Each initial Agent
        for a Series of MTNs is specified in the Supplement. Subject to Condition
        16.4 (“Required Agents”), the Issuer reserves the right at
        any time to vary or terminate the appointment of any Agent and to appoint
    a successor. 
	 	 	 	 	 
	(c)	  Change of Agent 
	 	 	 	 	 
	 	 Notice of any change of an
        Agent or its Specified Offices must promptly be given to the Holders
    by the Issuer or the Agent on its behalf. 
	 	 	 	 	 
	(d)	  Required Agents 
	 	 	 	 	 
	 	 The Issuer must: 
	 	 	 	 	 
	 	(i) 	 at all times maintain
    a Registrar; and 
	 	 	 	 	 
	 	(ii) 	 if a Calculation Agent
    is specified in the Supplement, at all times maintain a Calculation Agent. 
	 	 	 	 	 
	  

	17	  Meetings of Holders 
	 	 	 	 	 
	 	 The Meetings Provisions contain
        provisions (which have effect as if incorporated in these Conditions)
        for convening meetings of the Holders of any Series to consider any matter
        affecting their interests, including any variation of these Conditions
    by Extraordinary Resolution. 
	 	 	 	 	 
	   

	18 	 Variation 
	 	 	 	 	 
	(a)	  Variation with consent 
	 	 	 	 	 
	 	 Unless Condition 18.2 (“Variation
        without consent”) applies, any Condition may be varied by the Holders
    by Extraordinary Resolution in accordance with the Meetings Provisions. 
	 	 	 	 	 
	 (b)	Variation without consent
	 	 	 	 	 
	 	Any Condition may be amended
    by the Issuer without the consent of the Holders if the amendment:
	 	 	 	 	 
	 	 (i)	is of a formal, minor or technical
    nature;
	 	 	 	 	 
	 	 (ii)	is made to correct a manifest
    error;

 

 

28

	 	
 

  
	 	
 

  
	 	 	
 

  
	 	 	
 

  
	 	
(iii)	
is made to cure any ambiguity or correct or supplement any defective or inconsistent provision and, in the reasonable opinion of the Issuer, is not materially prejudicial to the interests of the
Holders; or

  
	 	 	 
	 	
(iv)	
only applies to MTNs issued by it after the date of amendment.

  
	 	 
	  
      

	
19	
Further issues

  
	 	 
	 	
The Issuer may from time to time, without the consent of the Holders, issue further Tranches of MTNs having the same Conditions as the MTNs of any Series in all respects (or in all respects except
for the first payment of interest) so as to form a single series with the MTNs of that Series.

  
	 	 
	  
      

	
20	
Notices

  
	 	 
	
(a)	
Notices to Holders

  
	 	 
	 	
All notices and other communications to Holders must be in writing and must be left at the address of or sent by prepaid post (airmail, if appropriate) to the address of the Holder (as shown in the
Register at the close of business on the day which is 3 Business Days before the date of the notice or communication).

  
	 	 
	 	
They may also be:

  
	 	 	 
	 	
(i)	
given by an advertisement published in the Australian Financial Review or The Australian; or

  
	 	 	 
	 	
(ii)	
if the Supplement specifies an additional or alternate newspaper, given by an advertisement published in that newspaper.

  
	 	 
	
(b)	
Notices to the Issuer and the Agents

  
	 	 
	 	
All notices and other communications to the Issuer or an Agent must be in writing and may be left at the address of, or sent by prepaid post (airmail, if appropriate) to, the Specified Office of the
Issuer or the Agent.

  
	 	 
	
(c)	
When effective

  
	 	 
	 	
All notices and communications provided pursuant to clause 21.1 and 21.2 take effect from the time they are received unless a later time is specified in them.

  
	 	 
	
(d)	
Deemed receipt - publication in newspaper

  
	 	 
	 	
If published in a newspaper, they are taken to be received on the first date that publication has been made in all the required newspapers.

  
	 	 
	
(e)	
Deemed receipt - postal

  
	 	 
	 	
If sent by post, they are taken to be received five days after posting.

  
	 	 
	  
    

	21	Governing law
	 	 
	 (a)	Governing law
	 	 
	 	The MTNs are governed by the law
    in force in New South Wales.

29

	
	
 

  
	 	
 

  
	
(b)	
Jurisdiction

  
	 	 
	 	
The Issuer submits, and each Holder is taken to have submitted, to the non-exclusive jurisdiction of the courts of New South Wales and courts of appeal from them. The Issuer waives any right it has
to object to an action being brought in those courts including by claiming that the action has been brought in an inconvenient forum or that those courts do not have jurisdiction.

  
	 	 
	
(c)	
Serving documents

  
	 	 
	 	
Without preventing any other method of service, any document in any action may be served on the Issuer or a Holder by being delivered to, or left at, their registered office or principal place of
business .

  
	 	 
	
(d)	
Process agent

  
	 	 
	 	
The Issuer appoints Emesco Agents Pty Ltd (ABN 38 000 405 265) currently of Level 19, Aurora Place, 88 Phillip Street, Sydney NSW 2000 Australia to receive any document referred to in clause 22.3
(“Serving documents”). If for any reason that person ceases to be able to act as such, the Issuer must immediately appoint another person with an office located in the Commonwealth of Australia to receive any such document and promptly
notify the Holders of such appointment.

  

30

 Form
    of Supplement 

The Supplement that will be issued in respect of each Tranche of Notes will be substantially in the form set out below. 

 

	Series No.:	 [•]
	 	 
	 Tranche No.: 	[•] 

 

AMERICAN EXPRESS CREDIT CORPORATION 

(incorporated in the State of Delaware, the United States of America) 

(registered in Australia as a foreign company 
under the Corporations Act 2001 of Australia with ABN 99 110 265 088)

A$6,000,000,000

Australian Debt Issuance Programme 

Issue of 

[Aggregate Principal Amount of Series/Tranche] 

[Title of Notes] (“Notes”) 

The date of this Supplement is [•]. 

This Supplement (as referred to in the Information Memorandum dated [•] 2006 (“Information
Memorandum”) in relation to the above Programme) relates to the Tranche of Notes referred to above. It is supplementary to, and should be read in conjunction with the Information Memorandum and the Note
Deed Poll executed by the Issuer dated [•] (“Note Deed Poll”). 

This Supplement does not constitute, and may not be used for the purposes of, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is
unlawful to make such offer or solicitation, and no action is being taken to permit an offering of the Notes or the distribution of this Supplement in any jurisdiction where such action is required. 

Terms used but not otherwise defined in this Supplement have the meaning given in the Conditions. A reference to a “Condition” in this Supplement is a reference to the corresponding Condition as set out in
the Information Memorandum. 

The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended ("Securities Act''). Notes may not be offered, sold or delivered within the United States or to or for
the account of U.S. persons unless registered under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act and applicable U.S. tax law requirements are satisfied. For a description of certain
restrictions on offers and sales of Notes and on distribution of this Supplement and the Information Memorandum, see the section entitled "Selling Restrictions'' in the Information Memorandum. 

The Notes are not guaranteed by the Commonwealth of Australia. 

31

The particulars to be specified in relation to the Tranche of Notes referred to above are as follows: 

	
1 
  	 
  	
Issuer 
  	 
  	
: American Express Credit Corporation 
  
	 	 	 	 	 
	
2 
  	 
  	
Type of Notes 
  	 
  	
: [Fixed Rate / Floating Rate / Zero Coupon / 
  
	 

  	 
  	 

  	 
  	Index Linked / Instalment / other] 
  

	 

  	 
  	 

  	 
  	[Australian Domestic MTN / New Zealand 
  

	 

  	 
  	 

  	 
  	Domestic MTN] 
  

	 	 	 	 	 
	
3 
  	 
  	
If to form a single Series with an 
  	 
  	
: [Specify] 
  
	 

  	 
  	
existing Series, specify the existing 
  	 
  	 

  
	 

  	 
  	
Series and the date on which all 
  	 
  	 

  
	 

  	 
  	
Notes of the Series are 
  	 
  	 

  
	 

  	 
  	
consolidated, if not the Issue Date 
  	 
  	 

  
	 	 	 	 	 
	
4 
  	 
  	
Method of distribution 
  	 
  	
: [Private / Syndicated Issue] 
  
	 	 	 	 	 
	
5 
  	 
  	
Lead Manager 
  	 
  	
: [Name(s)] 
  
	 	 	 	 	 
	
6 
  	 
  	
Purchasing Dealer[s] 
  	 
  	
: [Name] 
  
	 	 	 	 	 
	
7 
  	 
  	
Principal Amount of 
  	 
  	
: [Specify] 
  
	 

  	 
  	
[Series/Tranche] 
  	 
  	 

  
	 	 	 	 	 
	
8 
  	 
  	
Issue Date 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	
9 
  	 
  	
Issue Price 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	
10 
  	 
  	
Net proceeds 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	
11 
  	 
  	
Currency and denomination 
  	 
  	
: [Specify currency and amount] 
  
	 	 	 	 	 
	
12 
  	 
  	
Maturity Date 
  	 
  	
: [Specify] [In the case of an amortising Notes, 
  
	 

  	 
  	 

  	 
  	
 insert the date on which the last instalment of 
  

	 

  	 
  	 

  	 
  	principal is payable]. 
  

	
13 
  	 
  	
Status of the Notes: 
  	 
  	The Notes constitute unsecured and 
  

	 

  	 
  	 

  	 
  	unsubordinated obligations of the Issuer. 
  

	 

  
	
14 
  	 
  	
If the Notes are Fixed Rate Notes 
  	 
  	
: Condition 6 applies: [Yes / No] 
  
	 	 	 	 	 
	 

  	 
  	
Fixed Coupon Amount 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	 

  	 
  	
Interest Rate 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	 

  	 
  	
Interest Commencement Date, if not 
  	 
  	
: [Specify] 
  
	 

  	 
  	
Issue Date 	 
  	 

  
	 	 	 	 	 
	 

  	 
  	
Interest Payment Dates 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	 

  	 
  	
Business Day Convention 
  	 
  	
: [Following Business Day Convention / 
  
	 

  	 
  	 

  	 
  	Preceding Business Day Convention / No 
  

	 

  	 
  	 

  	 
  	Adjustment / other] 
  

32

	 

  	 
  	
Day Count Fraction 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	
15 
  	 
  	
If the Notes are Floating Rate Notes 
  	 
  	
: Condition 7 applies: [Yes / No] 
  
	 	 	 	 	 
	 

  	 
  	
Interest Commencement Date, if not 
  	 
  	
: [Specify / Not applicable] 
  
	 

  	 
  	
Issue Date 
  	 
  	 

  
	 	 	 	 	 
	 

  	 
  	
Interest Rate 
  	 
  	
: [Specify method of calculation] 
  
	 	 	 	 	 
	 

  	 
  	
Interest Payment Dates 
  	 
  	
: [Specify dates or the Specified Period] 
  
	 	 	 	 	 
	 

  	 
  	
Business Day Convention 
  	 
  	
: [Floating Rate Convention (specify interest 
  
	 

  	 
  	 

  	 
  	period) / Following Business Day Convention / 
  

	 

  	 
  	 

  	 
  	Modified Following Business Day Convention / 
  

	 

  	 
  	 

  	 
  	Preceding Business Day Convention / No 
  

	 

  	 
  	 

  	 
  	Adjustment / other] 
  

	 	 	 	 	 
	 

  	 
  	
Margin 
  	 
  	
: [Specify] (state if positive or negative) 
  
	 	 	 	 	 
	 

  	 
  	
Day Count Fraction 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	 

  	 
  	
Fallback Interest Rate 
  	 
  	
: [Specify / Not applicable] 
  
	 	 	 	 	 
	 

  	 
  	
Interest Rate Determination 
  	 
  	
: [ISDA Determination / Screen Rate 
  
	 

  	 
  	 

  	 
  	Determination / Bank Bill Rate Determination] 
  

	 	 	 	 	 
	 

  	 
  	
[If ISDA Determination applies, 
  	 
  	 

  
	 

  	 
  	
specify] 
  	 
  	 

  
	 	 	 	 	 
	 

  	 
  	
Floating Rate Option 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	 

  	 
  	
Designated Maturity 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	 

  	 
  	
Reset Date 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	 

  	 
  	
[If Screen Rate Determination applies, 
  	 
  	 

  
	 

  	 
  	
specify] 
  	 
  	 

  
	 	 	 	 	 
	 

  	 
  	
Relevant Screen Page 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	 

  	 
  	
Relevant Time 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	 

  	 
  	
Reference Rate 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	 

  	 
  	
Reference Banks 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	 

  	 
  	
Interest Determination Date 
  	 
  	
: [Specify] 
  
	 	 	 	 	 
	 

  	 
  	
[If Bank Bill Rate Determination 
  	 
  	 

  
	 

  	 
  	
applies, specify] 
  	 
  	 

  
	 	 	 	 	 
	 

  	 
  	
Bank Bill Rate 
  	 
  	
: [Yes / No] [Set out any variation to the 
  
	 

  	 
  	 

  	 
  	Conditions] 
  

	 	 	 	 	 
	
16 
  	 
  	
Relevant Financial Centre 
  	 
  	
: [Applicable (specify) / Not applicable] 
  
	 	 	 	 	 
	
17 
  	 
  	
Linear Interpolation 
  	 
  	
: [Applicable / Not applicable] [If applicable, 
  
	 

  	 
  	 

  	 
  	provide details] 
  

33

	
18 
  	 
  	
If Notes are Structured Notes 
  	 
  	
    : Condition 8 applies: [Yes / No] 
    

	 

  
	 

  	 
  	 

  	 
  	[Specify full interest determination provisions, 
  

	 

  	 
  	 

  	 
  	including Interest Commencement Date, rate or 
  

	 

  	 
  	 

  	 
  	calculation basis for interest or actual amounts 
  

	 

  	 
  	 

  	 
  	of interest payable, amount and dates for 
  

	 

  	 
  	 

  	 
  	payment, minimum / maximum rates / late 
  

	 

  	 
  	 

  	 
  	payment default] 
  

	 

  
	 

  	 
  	 

  	 
  	[Specify any relevant investment risks] 
  

	 

  
	
19 
  	 
  	
Amortisation Yield 
  	 
  	
    : [Specify] [In the case of Zero Coupon Notes, 
    

	 

  	 
  	 

  	 
  	specify the Reference Price] 
  

	 

  
	
20 
  	 
  	
If Notes are Instalment Notes 
  	 
  	
    : [Specify details of Instalments including 
    

	 

  	 
  	 

  	 
  	Instalment Amount and Instalment Dates] 
  

	 

  
	
21 
  	 
  	
If Notes are Partly Paid Notes 
  	 
  	
    : [Specify details] 
    

	 

  
	
22 
  	 
  	
Business Day Convention 
  	 
  	
    : [Specify] 
    

	 

  
	
23 
  	 
  	
Redemption Amount 
  	 
  	
    : [Specify any variations to the Redemption 
    

	 

  	 
  	 

  	 
  	Amount as defined in the Conditions] 
  

	 

  
	
24 
  	 
  	
Early Redemption Amount (Tax) 
  	 
  	

    

	 

  
	 

  	 
  	
If Early Redemption Amount (Tax) 
  	 
  	
    : [Specify] 
    

	 

  	 
  	
is not the Redemption Amount plus 
  	 
  	

    

	 

  	 
  	
interest accrued on each Note to 
  	 
  	

    

	 

  	 
  	
(but excluding) the redemption date 
  	 
  	

    

	 

  	 
  	
insert amount or full calculation 
  	 
  	

    

	 

  	 
  	
provisions 
  	 
  	

    

	 

  
	
25 
  	 
  	
Early Redemption Amount (Default) 
  	 
  	
    : [Specify] 
    

	 

  
	 

  	 
  	
If Early Redemption Amount 
  	 
  	

    

	 

  	 
  	
(Default) is not the Redemption 
  	 
  	

    

	 

  	 
  	
Amount plus interest accrued on 
  	 
  	

    

	 

  	 
  	
each Note to (but excluding) the 
  	 
  	

    

	 

  	 
  	
redemption date insert amount or 
  	 
  	

    

	 

  	 
  	
full calculation provisions 
  	 
  	

    

	 

  
	
26
  	 
  	
[Events of Default] 
  	 
  	
    : [Specify any additional (or modifications to) 
    

	 

  	 
  	 

  	 
  	
            
 Events of Default] 
  

	 

  
	
27 
  	 
  	
[Additional or alternate 
  	 
  	
    : [Specify any additional or alternate newspapers 
    

	 

  	 
  	
newspapers] 
  	 
  	for the purposes of Condition 20.1(b)] 
  

	 

  
	
28	 
  	
[Taxation] 
  	 
  	
    : [Specify any additional circumstances in which 
    

	 

  	 
  	 

  	 
  	an exception to the gross up obligation are to 
  

	 

  	 
  	 

  	 
  	apply pursuant to Condition 13] 
  

	 

  
	
29 
  	 
  	
Other relevant terms and 
  	 
  	
    : [Specify any Conditions to be altered, varied, 
    

	 

  	 
  	
conditions 
  	 
  	deleted otherwise than as provided above and 
  

	 

  	 
  	 

  	 
  	also any additional Conditions to be included] 
  

34

	
30	 
  	
Registrar 
  	 
  	
    : [Name and address] 
    

	 	 	 	 	 
	 

  	 
  	 

  	 
  	[If required, specify details of Agency 
  

	 

  	 
  	 

  	 
  	Agreement] 
  

	 	 	 	 	 
	 

  	 
  	 

  	 
  	[If required, specify any other Agents] 
  

	 	 	 	 	 
	
31
  	 
  	
[Calculation Agent] 
  	 
  	
    : [Name and address] 
    

	 

  	 
  	 

  	 
  	[If required, specify details of Agency 
  

	 

  	 
  	 

  	 
  	Agreement] 
  

	 	 	 	 	 
	
32 
  	 
  	
Clearing System(s) 
  	 
  	
    : [Austraclear / Specify others] 
    

	 	 	 	 	 
	
33
  	 
  	
ISIN 
  	 
  	
    : [Specify] 
    

	 	 	 	 	 
	
34 
  	 
  	
[Common Code] 
  	 
  	
    : [Specify] 
    

	 	 	 	 	 
	
35
  	 
  	
[Selling restrictions] 
  	 
  	
    : [Specify any variation to the selling restrictions] 
    

	 	 	 	 	 
	
36
  	 
  	
Listing 
  	 
  	
    : [Unlisted / Specify] 
    

	 	 	 	 	 
	
37 
  	 
  	
[Investment risks] 
  	 
  	[Specify any relevant investment risks] 
  

	 	 	 	 	 
	
38
  	 
  	
[Other amendments] 
  	 
  	
    : [Specify] 
    

	 	 	 	 	 
	39 	 	Australian interest withholding tax 	 	: [The [Notes] satisfy the public offer test as the
	 	 	 	 	issue resulted from the [Notes] being offered for 
	 	 	 	 	issue to at least 10 persons each of whom 
	 	 	 	 	was carrying on a business of providing finance,
	 	 	 	 	or investing or dealing in securities, in the course
	 	 	 	 	of operating in financial markets and was not 
	 	 	 	 	known, or suspected, by the Dealer to be an
	 	 	 	 	associate (as defined in section (8F(9)) of any
	 	 	 	 	of the above persons as a result of the IM 
	 
	 
  	

  	 
  	
         being publicly available in capital markets.] 
    

CONFIRMED 

For and on behalf of

American Express Credit Corporation 

	By:	  

	 	 
	Name: 	  
    

	 	 
	Title: 	  

	 	 
	Date: 	  

	 	 

  

  

  

35Exhibit 10.01 

SECURITY CAPITAL ASSURANCE LTD 

Fixed/Floating Series A Perpetual Non-Cumulative Preference Shares 

PURCHASE AGREEMENT 

March 29, 2007 

LEHMAN BROTHERS INC.
 

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED 

WACHOVIA CAPITAL MARKETS, LLC

As Representatives of the several 

   Initial Purchasers named in Schedule
I attached hereto, 

c/o Lehman Brothers Inc. 

745 Seventh Avenue 

New York, New York 10019 

Ladies and Gentlemen: 

          Security Capital Assurance Ltd, a Bermuda limited company (the “Company”), proposes, upon the terms and conditions set forth in
this agreement (this “Agreement”), to issue and sell to you, as the initial purchasers (the “Initial Purchasers”), an aggregate of 250,000 Fixed/Floating Series A Perpetual Non-Cumulative Preference Shares, having a liquidation preference of $1,000 per share (the “Preference Shares”).  The Preference Shares will have terms and provisions that are summarized in the Offering Memorandum (as defined below). This is to confirm the agreement concerning the purchase of the Preference Shares from the Company by the
Initial Purchasers. 

          1.           Purchase and Resale of the Preference Shares.  The Preference Shares will be offered and sold to the
Initial Purchasers without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on an exemption pursuant to Section 4(2) under the
Securities Act. The Company has prepared a preliminary offering memorandum, dated March 26, 2007 (the “Preliminary Offering Memorandum”), a pricing term sheet substantially in the
form attached hereto as Schedule II (the “Pricing Term Sheet”) setting forth the terms of the Preference Shares omitted from the Preliminary Offering Memorandum and an offering
memorandum, dated March 29, 2007 (the “Offering Memorandum”), setting forth information regarding the Company, the Preference Shares and the Exchange Preference Shares (as defined
herein).  The Preliminary Offering Memorandum, as supplemented and amended as of the Applicable Time (as defined below), together with the Pricing Term Sheet and any of the documents listed on Schedule III hereto are collectively referred to as the
“Pricing Disclosure Package.” The Company hereby confirms that it has authorized the use of the Pricing Disclosure Package and the Offering Memorandum in connection with the
offering and resale of the 

1 

Preference Shares by the Initial Purchasers. “Applicable Time” means 6:45 p.m. (New York City time) on the date of this Agreement. 

          Any reference to the Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum shall be deemed to refer to
and include the Company’s most recent Annual Report on Form 10-K and all subsequent documents filed with the United States Securities and Exchange Commission (the “Commission”) pursuant to Section 13(a) or 15(d) of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), on or prior to the date of the
Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum, as the case may be.  Any reference to the Preliminary Offering Memorandum, Pricing Disclosure Package or the Offering Memorandum, as the case may be, as amended or supplemented, as of any specified date, shall be deemed to include (i) any documents filed with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act after the date
of the Preliminary Offering Memorandum, Pricing Disclosure Package or the Offering Memorandum, as the case may be, and prior to such specified date.  All documents filed under the Exchange Act and so deemed to be included in the Preliminary Offering
Memorandum, Pricing Disclosure Package or the Offering Memorandum, as the case may be, or any amendment or supplement thereto are hereinafter called the “Exchange Act Reports.” The
Exchange Act Reports, when they were or are filed with the Commission, conformed or will conform in all material respects to the applicable requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder.

          It is understood and acknowledged that upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Preference
Shares (and all securities issued in exchange therefor or in substitution thereof) shall bear the following legend (along with such other legends as the Initial Purchasers and their counsel deem necessary): 

  
    ‘‘THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
    HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
    EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1)
    REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING ITS SECURITY IN AN “OFFSHORE TRANSACTION” PURSUANT TO RULE 904 OF
    REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH

2

  
    SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH
    THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE “RESALE RESTRICTION TERMINATION DATE”), OFFER, SELL
    OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
    PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
    TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
    FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY AND THE TRANSFER AGENT AND
    REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE
    REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
    UNDER THE SECURITIES ACT.” 

          You have advised the Company that you will make offers (the “Exempt Resales”) of the Preference Shares purchased by you hereunder
on the terms set forth in each of the Pricing Disclosure Package and the Offering Memorandum, as amended or supplemented, solely to (i) persons whom you reasonably believe to be “qualified institutional buyers” as defined in Rule 144A
under the Securities Act (“QIBs”) and (ii) outside the United States to certain persons who are not U.S. Persons (as defined in Regulation S under the Securities Act
(“Regulation S”)) (such persons, “Non-U.S. Persons”) in offshore transactions in reliance on Regulation S.
Those persons specified in clauses (i) and (ii) are referred to herein as the (“Eligible Purchasers”). You will offer the Preference Shares to Eligible Purchasers initially at a
price equal to 100.00% of liquation preference. Such price may be changed at any time without notice. 

3

          Holders (including subsequent transferees) of the Preferred Shares will have the registration rights set forth in the registration rights agreement attached hereto as Exhibit A (the “Registration Rights Agreement”) between the Company and the Initial Purchasers to be dated April 5, 2007 (the
“Closing Date”), for so long as such Preferred Shares constitute “Transfer Restricted Securities” (as defined
in the Registration Rights Agreement).  Pursuant to the Registration Rights Agreement, the Company will agree to file with the Commission under the circumstances set forth therein, a registration statement under the Securities Act (the
“Exchange Offer Registration Statement”) relating to the Company’s Fixed/Floating Series A Perpetual Non-Cumulative Preference Shares (the “Exchange Preference Shares”) to be offered in exchange for the Preference Shares. Such portion of the offering is referred to as the “Exchange Offer.” 

          2.           Representations, Warranties and Agreements of the Company.  The Company represents, warrants and agrees as
follows:

                       (a)           When
the Preference Shares are issued and delivered pursuant to this Agreement, such
Preference Shares will not be of the same class  (within the meaning of Rule
144A under the Securities Act) as securities of the Company that are listed on
a United States national securities exchange registered or that are quoted in
a United States automated inter-dealer quotation system.

                       (b)           Assuming that your representations and warranties in Section 3(b) are true, the purchase and resale of the Preference Shares pursuant
hereto (including pursuant to the Exempt Resales) is exempt from the registration requirements of the Securities Act. No form of general solicitation or general advertising within the meaning of Regulation D (including, but not limited to,
advertisements, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or
general advertising) was used by the Company or any of its representatives (other than you, as to whom the Company makes no representation) in connection with the offer and sale of the Preference Shares.

                       (c)           No
form of general solicitation or general advertising was used by the Company or
any of its representatives (other than you, as to whom  the Company makes no
representation) with respect to Preference Shares sold outside the United States
to Non-U.S. Persons, by means of any directed selling efforts within the meaning
of Rule 902 under the Securities Act, and the Company, any  affiliate of the
Company and any person acting on its or their behalf (other than you, as to whom
the Company makes no representation) has complied with and will implement the “offering
restrictions” required by Rule 902 under the
Securities Act. 

                       (d)           Each
of the Preliminary Offering Memorandum, the Pricing Disclosure Package and the
Offering Memorandum, each as of its respective date,  contains all the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities
Act. 

                       (e)           The
Preliminary Offering Memorandum, the Pricing Disclosure Package and the Offering
Memorandum have been prepared by the Company for use  by the Initial

4

Purchasers in connection with the Exempt Resales. No order or decree preventing the use of the Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum, or any order asserting that the
transactions contemplated by this Agreement are subject to the registration requirements of the Securities Act has been issued, and no proceeding for that purpose has commenced or is pending or, to the knowledge of the Company is contemplated.

                       (f)           The
Pricing Disclosure Package (including the documents incorporated by reference)
did not, as of the Applicable Time, and will not, as of  the Closing Date, contain
an untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading; provided that
no representation or warranty is made as to information contained in or omitted
from the Pricing Disclosure Package in reliance upon and in conformity with written
information furnished to the  Company through the Representatives by or on behalf
of any Initial Purchaser specifically for inclusion therein. 

                       (g)           The
Offering Memorandum will not, as of its date and as of the Closing Date, contain
an untrue statement of a material fact or omit to  state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading; provided that
no representation or  warranty is made as to information contained in or omitted
from the Offering Memorandum in reliance upon and in conformity with written
information furnished to the Company through the Representatives by or on behalf
of any Initial Purchaser  specifically for inclusion therein. 

                       (h)           The
Company has not made any offer to sell or solicitation of an offer to buy the
Preference Shares that would constitute a “free
writing prospectus” (if the offering of the Preference Shares were made
pursuant to a registered offering under the Securities Act), as defined in Rule
405 under the Securities Act (a “Free Writing
Offering  Document”) without the prior consent
of the Representatives; any such Free Writing Offering Document the use of which
has been previously consented to by the Initial Purchasers is set forth substantially
in form  and substance as attached hereto on Schedule III. 

                       (i)           The
Exchange Act Reports did not, when filed with the Commission, contain an untrue
statement of material fact or omit to state a material  fact necessary in order
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading. 

                       (j)           Neither
the Company nor any of its subsidiaries has sustained since the date of the latest
audited financial statements included in the  Pricing Disclosure Package any
loss or interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as  set forth or contemplated in the
Pricing Disclosure Package, which loss or interference would have a Material
Adverse Effect (as defined below) or would reasonably be expected to have a prospective
Material Adverse Effect; and, since the respective  dates as of which information
is given in the Pricing Disclosure Package and the Offering Memorandum, there
has not been any change in the share capital (other than changes resulting from
the exercise of options or the conversions of warrants or  securities which were
outstanding as of such date, or

5

from the exercise of options granted after such date in the ordinary course of business or from repurchases of securities) or long term debt of the Company or any of its subsidiaries or any material adverse change, or any
development that would reasonably be expected to involve a prospective material adverse change, in or affecting the general affairs, management, financial position, shareholders’ equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Pricing Disclosure Package. 

                       (k)           The
Company has been duly incorporated and is validly existing as a limited company
in good standing under the laws of Bermuda, with full  power and authority to
own its properties and conduct its business as described in the Pricing Disclosure
Package and has been duly qualified as a foreign corporation for the transaction
of business and is in good standing under the laws of each  other jurisdiction
in which it owns or leases properties or conducts any business so as to require
such qualification, except where such failure to be so qualified in any such
jurisdiction or to have any such power or authority would not have a  material
adverse effect on the current or future condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries taken
as a whole or the transactions contemplated by this Agreement (a
“Material Adverse Effect”);
and each subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its  jurisdiction
of incorporation. 

                       (l)           The
Company has an authorized capitalization as set forth in the Pricing Disclosure
Package and the Offering Memorandum and all of the  issued Preference Shares
of the Company have been duly and validly authorized and issued and are fully
paid and non-assessable and conform to the description thereof contained in the
Pricing Disclosure Package and the Offering Memorandum under
“Description of the Preference Shares.” 

                       (m)         The
Preference Shares to be issued and sold by the Company hereunder have been duly
and validly authorized and, when issued and delivered  against payment therefor
as provided herein, will be duly and validly issued and fully paid and non assessable
and will conform to the description of the Preference Shares contained in the
Pricing Disclosure Package and the Offering Memorandum under
“Description of the Preference Shares”; the shareholders of the Company
have no preemptive or similar rights with respect to the Preference Shares to
be issued and sold by the Company hereunder and no shareholder consents are required
in  connection with the Company’s issuance and sale of such Preference Shares. 

                       (n)           This
Agreement has been duly authorized, executed and delivered by the Company. 

                       (o)           The
Company has all requisite corporate power and authority to execute, deliver and
perform its obligations under the Registration Rights  Agreement. The Registration
Rights Agreement has been duly authorized by the Company and, when executed and
delivered by the Company in accordance with the terms hereof and thereof, will
be validly executed and delivered and (assuming the due  authorization, execution
and delivery thereof by you) will be the legally valid and binding obligation
of the Company in accordance with the terms thereof, enforceable against the
Company in accordance with its terms, except as such enforceability  may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditor’s rights generally, by general equitable
principles (regardless of whether 

6 

such enforceability is considered in a proceeding in equity or at law) and, as to rights of indemnification and contribution, by principles of public policy.  The Registration Rights Agreement will conform in all material respects
to the description thereof in each of the Pricing Disclosure Package and the Offering Memorandum. 

                       (p)           The
issue and sale of the Preference Shares, the execution and delivery of this Agreement
and the Registration Rights Agreement and the  compliance by the Company with
all of the provisions of this Agreement and the Registration Rights Agreement
and the consummation of the transactions contemplated herein will not conflict
with or result in a breach or violation of any of the terms  or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is  bound or to
which any of the property or assets of the Company or any of its subsidiaries
is subject, nor will such action result in any violation of the provisions of
the Memorandum of Association, Bye-laws or similar organizational documents of
 the Company or any of its subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body (a “Governmental
Agency”) having jurisdiction
over the Company or any of its subsidiaries or any of its or their respective
properties, except in each case (other than with respect to such Memorandum of
Association, Bye-laws or similar organizational documents) for such conflicts,
violations,  breaches or defaults which would not result in a Material Adverse
Effect. 

                       (q)           No
consent, approval, authorization, order, filing, registration or qualification
of or with any Governmental Agency (a
“Governmental Authorization”)
is required for the issue and sale by the Company of the Preference Shares or
the consummation by the Company of the transactions contemplated by this  Agreement
and the Registration Rights Agreement, except such as have been, or will have
been prior to the time of execution of this Agreement obtained under the Act
and such consents, approvals, authorizations, registrations or qualifications
as may  be required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Preference Shares by the Initial Purchasers,
and the filing of a registration statement by the Company with the Commission
pursuant to the  Securities Act as required by the Registration Rights Agreement.

                       (r)           The
subsidiaries of the Company listed on Schedule IV hereto are the only “subsidiaries” of
the Company as defined in the  Securities Act. All of the issued share capital
of each subsidiary of the Company has been duly and validly authorized and issued,
is fully paid and non-assessable and (except for (i) a 15% ownership interest
in XL Financial Assurance Ltd. that is  owned by a third party and (ii) directors’ qualifying
shares) is owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims.

                       (s)           Prior to the date hereof, neither the Company nor, to the Company’s knowledge, any of its affiliates has taken any action which is
designed to or which has constituted or which might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company in connection with the offering of the Preference Shares in violation of the
Exchange Act. 

                       (t)           Other
than as set forth in the Pricing Disclosure Package and the Offering Memorandum
prior to the date hereof, or as encountered in the  ordinary course of business
in the

7

Company’s claims activities, there are no legal or governmental actions, suits or proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its
subsidiaries is the subject, which would individually or in the aggregate reasonably be expected to have a Material Adverse Effect;  and, to the best of the Company’s knowledge, no such proceedings are threatened or contemplated by governmental
authorities or threatened by others. 

                       (u)           The
Company and its subsidiaries possess adequate certificates, authorities or permits
issued by appropriate governmental agencies or  bodies necessary to conduct the
business now operated by them and have not received any written notice of proceedings
relating to the revocation or modification of any such certificate, authority
or permit that would, individually or in the  aggregate, reasonably be expected
to have a Material Adverse Effect. 

                       (v)           Neither
the Company nor any of its subsidiaries is in violation of its Memorandum of
Association, Bye-laws or similar organizational  documents or in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which it is a party  or by which it
or any of its properties may be bound, except for such defaults which would not
result in a Material Adverse Effect. 

                       (w)           The
statements set forth in the Pricing Disclosure Package and the Offering Memorandum
under the captions “Description of the
Preference Shares” and “Certain Relationships and Related Transactions”,
insofar as they purport to constitute a summary of the terms of the Preference
Shares and the other documents described therein, and the statements set forth
in  the Pricing Disclosure Package and the Offering Memorandum and under the
captions “Certain Tax Considerations” and “Business—Regulation” insofar
as they purport to describe the provisions of the laws referred to therein, are
 accurate, complete and fair in all material respects. 

                       (x)           The
Company is not and, after giving effect to the offering and sale of the Preference
Shares will not be an “investment
company”, as such term is defined in the Investment Company Act of 1940,
as amended (the “Investment Company Act”).

                       (y)           PricewaterhouseCoopers
LLP, who have certified the financial statements of the Company that is included
(or incorporated by reference) in  the Pricing Disclosure Package and the Offering
Memorandum, is an independent registered public accounting firm as required by
the Securities Act and the rules and regulations of the Commission thereunder.

                       (z)           No
stamp or other issuance or transfer taxes or duties and no capital gains, income,
withholding or other taxes are payable by or on behalf  of the Initial Purchasers
to Bermuda or any political subdivision or taxing authority thereof or therein
in connection with (A) the issuance, sale and delivery by the Company to or for
the respective accounts of the Initial Purchasers of the  Preference Shares or
(B) the sale or delivery outside Bermuda by the Initial Purchaser of the Preference
Shares to the initial purchasers thereof, other than as described in the opinion
of Conyers Dill & Pearman delivered pursuant to Section
7(d) of this Agreement. 

8

                       (aa)       The
Company and its subsidiaries (i) make and keep accurate books and records and
(ii) maintain systems of internal accounting controls  sufficient to provide
reasonable assurance regarding the reliability of financial reporting and that
(i) transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to  permit preparation
of financial statements in conformity with generally accepted accounting principles
and to maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization;  and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any differences. 

                       (bb)      The
Company maintains disclosure controls and procedures (as such term is defined
in Rule 13a-15(e) under the Exchange Act) that comply  with the requirements
of the Exchange Act; such disclosure controls and procedures have been designed
to ensure that material information relating to the Company and its subsidiaries
is made known to the Company's principal executive officer and  principal financial
officer by others within those entities; and such disclosure controls and procedures
are effective. 

                       (cc)      The
Exchange Preference Shares have been duly and validly authorized by the Company
and if and when issued and authenticated and delivered  in accordance with the
Exchange Offer provided for in the Registration Rights Agreement, will be validly
issued and delivered and will constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their  terms, except
as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors’ rights
generally and by general equitable principles  (regardless of whether such enforceability
is considered in a proceeding in equity or at law). 

                       (dd)      There
are no legal or governmental proceedings or contracts or other documents that
would be required to be described in a registration  statement filed under the
Securities Act or, in the case of documents, would be required to be filed as
exhibits to a registration statement of the Company pursuant to Item 601(10)
of Regulation S-K that have not been described in the Pricing  Disclosure Package.

                       (ee)      Neither
the Company nor any other person acting on behalf of the Company has sold or
issued any securities that would be integrated with  the offering of the Preference
Shares contemplated by this Agreement pursuant to the Securities Act, the rules
and regulations thereunder or the interpretations thereof by the Commission.
The Company will take reasonable precautions designed to  insure that any offer
or sale, direct or indirect, in the United States or to any U.S. person (as defined
in Rule 902 under the Securities Act), of any Preference Shares or any substantially
similar security issued by the Company, within six months  subsequent to the
date on which the distribution of the Preference Shares has been completed (as
notified to the Company by the Initial Purchasers), is made under restrictions
and other circumstances reasonably designed not to affect the status of  the
offer and sale of the Preference Shares in the United States and to U.S. persons
contemplated by this Agreement as transactions exempt from the registration provisions
of the Securities Act, including any sales pursuant to Rule 144A under, or  Regulations
D or S of, the Securities Act. 

9

                         Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Initial Purchasers in connection with the offering of the Preference Shares shall be deemed
a representation and warranty by the Company, as to matters covered thereby, to each Initial Purchaser.

          3.           Purchase of the Preference Shares by the Initial Purchasers, Agreements to Sell, Purchase and Resell.  (a)
The Company hereby agrees, on the basis of the representations, warranties and agreements of the Initial Purchasers contained herein and subject to all the terms and conditions set forth herein, to issue and sell to the Initial Purchasers and, upon
the basis of the representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions set forth herein, the Initial Purchasers agree, severally and not jointly, to purchase from the Company, at a
purchase price of 99.00% of the liquidation preference, the number of Preference Shares set forth opposite the name of such Initial Purchaser in Schedule I hereto. The Company shall not be obligated to deliver any of the securities to be delivered
hereunder except upon payment for all of the securities to be purchased as provided herein. 

                       (b)           Each
of the Initial Purchasers, severally and not jointly hereby represents and warrants
to the Company that it will offer the Preference  Shares for sale upon the terms
and conditions set forth in this Agreement and in the Pricing Disclosure Package.
Each of the Initial Purchasers hereby represents and warrants to, and agrees
with, the Company, on the basis of the representations,  warranties and agreements
of the Company, that such Initial Purchaser: (i) is a QIB with such knowledge
and experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Preference  Shares; (ii)
is purchasing the Preference Shares pursuant to a private sale exempt from registration
under the Securities Act; (iii) in connection with the Exempt Resales, will solicit
offers to buy the Preference Shares only from, and will offer to  sell the Preference
Shares only to, the Eligible Purchasers in accordance with this Agreement and
on the terms contemplated by the Pricing Disclosure Package; and (iv) will not
offer or sell the Preference Shares, nor has it offered or sold the  Preference
Shares by, or otherwise engaged in, any form of general solicitation or general
advertising (within the meaning of Regulation D, including, but not limited to,
advertisements, articles, notices or other communications published in any  newspaper,
magazine, or similar medium or broadcast over television or radio, or any seminar
or meeting whose attendees have been invited by any general solicitation or general
advertising) and will not engage in any directed selling efforts within  the
meaning of Rule 902 under the Securities Act, in connection with the offering
of the Preference Shares. The Initial Purchasers have advised the Company that
they will offer the Preference Shares to Eligible Purchasers at a purchase price
of  100.00% of the liquidation preference. Such price may be changed by the Initial
Purchasers at any time without notice.  

                       (c)           Such
Initial Purchaser has not nor, prior to the later to occur of (A) the Closing
Date and (B) completion of the distribution of the  Preference Shares, will not,
use, authorize use of, refer to or distribute any material in connection with
the offering and sale of the Preference Shares other than (i) the Preliminary
Offering Memorandum, the Pricing Disclosure Package, the  Offering Memorandum,
(ii) any written communication that contains no “issuer information” (as
defined in Rule 433(h)(2) under the Act) that was not included (including through
incorporation by reference) in the Preliminary Offering  Memorandum or any Free

10

Writing Offering Document listed on Schedule III hereto, (iii) the Free Writing Offering Documents listed on Schedule III hereto, (iv) any written communication prepared by such Initial Purchaser and approved by the Company in
writing, or (v) any written communication relating to or that contains the terms of the Preference Shares and/or other information that was included (including through incorporation by reference) in the Preliminary Offering Memorandum, the Pricing
Disclosure Package or the Offering Memorandum. 

                         Each of the Initial Purchasers understands that the Company and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Sections 7(b) through 7(e) hereof, counsel to the
Company and counsel to the Initial Purchasers, will rely upon the accuracy and truth of the foregoing representations, warranties and agreements, and the Initial Purchasers hereby consents to such reliance. 

          4.           Delivery of the Preference Shares and Payment Therefor. Delivery to the Initial Purchasers of and payment
for the Preference Shares shall be made at the office of Simpson Thacher & Bartlett LLP, at 9:00 A.M., New York City time, on April 5, 2007 (the “Closing Date”). The place of
closing for the Preference Shares and the Closing Date may be varied by agreement between the Initial Purchasers and the Company. 

                         The Preference Shares will be delivered to the Initial Purchasers, and deposited with The Depository Trust Company (“DTC”) or its
designated custodian, against payment by or on behalf of the Initial Purchasers of the purchase price therefor by wire transfer in immediately available funds, by causing DTC to credit the Preference Shares to the account of the Initial Purchasers
at DTC. The Preference Shares will be evidenced by one or more global securities (the “Global Preference Shares”) and will be registered in the name of Cede & Co. as nominee of
DTC, and in the other cases, in such names and in such denominations as the Initial Purchasers shall request prior to 9:30 A.M., New York City time, on the second business day preceding the Closing Date. The Preference Shares to be delivered to the
Initial Purchasers shall be made available to the Initial Purchasers in New York City for inspection and packaging not later than 9:30 A.M., New York City time, on the business day next preceding the Closing Date. 

                         On the Closing Date, the Company shall pay Lehman Brothers Inc. a $250,000 structuring fee, either by wire transfer of immediately available funds to an account with a bank, the account number and
the ABA number for such bank to be provided by Lehman Brothers Inc. to the Company at least two business days in advance of the Closing Date, or by such other manner of payment as may be agreed by Company and Lehman Brothers Inc. 

          5.           Agreements of the Company.  The Company agrees with each of the Initial Purchasers as follows: 

                       (a)           The
Company will promptly furnish to the Initial Purchasers, without charge, such
number of copies of the Offering Memorandum as may then  be amended or supplemented
as they may reasonably request. 

                       (b)           The
Company will not make any amendment or supplement to the Pricing Disclosure Package
or to the Offering Memorandum of which the Initial  Purchasers shall not previously
have been advised or to which they shall reasonably object after being so advised. 

11

                       (c)           The Company consents to the use of the Pricing Disclosure Package and the Offering Memorandum in accordance with the securities or Blue Sky
laws of the jurisdictions in which the Preference Shares are offered by the Initial Purchasers and by all dealers to whom Preference Shares may be sold, in connection with the offering and sale of the Preference Shares.

                       (d)           If, at any time prior to completion of the distribution of the Preference Shares by the Initial Purchasers to Eligible Purchasers, any
event occurs or information becomes known that, in the judgment of the Company or in the opinion of counsel for the Initial Purchasers, should be set forth in the Pricing Disclosure Package or the Offering Memorandum so that the Pricing Disclosure
Package or the Offering Memorandum, as then amended or supplemented, does not include any untrue statement of material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or amend the Pricing Disclosure Package or the Offering Memorandum in order to comply with any law, the Company will forthwith prepare an appropriate supplement or amendment
thereto, and will expeditiously furnish to the Initial Purchasers and dealers a reasonable number of copies thereof. 

                       (e)           The Company will not make any offer to sell or solicitation of an offer to buy the Preference Shares that would constitute a Free Writing
Offering Document without the prior consent of the Representatives, which consent shall not be unreasonably withheld or delayed; if at any time following issuance of a Free Writing Offering Document and prior to completion of the distribution of the
Preference Shares by the Initial Purchasers to Eligible Purchasers, any event occurred or occurs as a result of which such Free Writing Offering Document conflicts with the information in the Preliminary Offering Memorandum, the Pricing Disclosure
Package or the Offering Memorandum or, when taken together with the information in the Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum, includes an untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in the light of the circumstances then prevailing, not misleading, as promptly as practicable after becoming aware thereof, the Company will give notice thereof to the Initial
Purchasers through the Representatives and, if requested by the Representatives, will prepare and furnish without charge to each Initial Purchaser a Free Writing Offering Document or other document which will correct such conflict, statement or
omission. 

                       (f)           Promptly from time to time to take such action as the Initial Purchasers may reasonably request to cooperate with the Initial Purchasers
and their counsel to qualify the Preference Shares for offering and sale under the securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may reasonably request and to comply with such laws so as to permit the continuance of
sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Preference Shares; provided that in connection therewith the Company
shall not be required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in any jurisdiction in which it would not otherwise be required to so qualify, (ii) file a general consent to service of process in any such
jurisdiction, (iii) subject itself to taxation in any jurisdiction in which it would not otherwise be subject or (iv) make any changes to its certificate of incorporation, bye-laws or other organization documents. 

12

                       (g)           For a period commencing on the date hereof and ending on the 10th day after the date of the Offering Memorandum, the Company agrees not to,
directly or indirectly, (1) offer for sale, sell, or otherwise dispose of any Preference Shares or any securities substantially similar to the Preference Shares or securities convertible into or exchangeable for such Preference Shares, or sell or
grant options, rights or warrants with respect to such Preference Shares or securities convertible into or exchangeable for such Preference Shares of the Company, (2) file or cause to be filed a registration statement, including any amendments, with
respect to the registration of Preference Shares or any security substantially similar to the Preference Shares or securities convertible, exercisable or exchangeable into Preference Shares or (3) publicly announce an offering of any preference
securities of the Company substantially similar to the Preference Shares or securities convertible or exchangeable into such Preference Shares, in each case without the prior written consent of the Representatives, on behalf of the Initial
Purchasers. 

                       (h)           The Company will furnish to the holders of the Preference Shares as soon as practicable after the end of each fiscal year an annual report
(including a balance sheet and statements of income, stockholders’ equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the
first three quarters of each fiscal year (beginning with the fiscal quarter ending after the date of the Offering Memorandum), will make available to its securityholders consolidated summary financial information of the Company and its subsidiaries
for such quarter in reasonable detail; provided that so long as the Company files periodic reports pursuant to Section 13 or 15(d) of the Exchange Act for the foregoing periods, the Company
shall be deemed to comply with this Section 5(h). 

                       (i)           The Company will apply the net proceeds from the sale of the Preference Shares to be sold by it hereunder substantially in accordance with
the description set forth in the Offering Memorandum under the caption “Use of Proceeds.” 

                       (j)           The Company and its affiliates will not take, directly or indirectly, any action designed to or that has constituted or that reasonably
would be expected to cause or result in the stabilization or manipulation of the price of any security of the Company in connection with the offering of the Preference Shares. 

                       (k)           The Company will not, and will not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the
Preference Shares that have been acquired by any of them, except for Preference Shares purchased by the Company or any of its affiliates and resold in a transaction registered under the Securities Act. 

                       (l)           The Company agrees not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in
the Securities Act) that would be integrated with the sale of the Preference Shares in a manner that would require the registration under the Securities Act of the sale to the Initial Purchasers or the Eligible Purchasers of the Preference Shares.

                       (m)           The Company will do and perform all things required or necessary to be done and performed under this Agreement by it prior to the Closing
Date, and to satisfy all

13

conditions precedent to the Initial Purchasers’ obligations hereunder to purchase the Preference Shares. 

          6.           Expenses. Whether or not the transactions contemplated by this Agreement are consummated or this Agreement
becomes effective or is terminated, the Company agrees, to pay all costs, expenses, fees and taxes incident to and in connection with: (i) the preparation, printing, filing and distribution of the Preliminary Offering Memorandum, the Pricing
Disclosure Package and the Offering Memorandum (including, without limitation, financial statements and exhibits) and all amendments and supplements thereto prepared by or on behalf of the Company (including the fees, disbursements and expenses of
the Company’s accountants and counsel, but not, however, legal fees and expenses of the Initial Purchasers’ counsel incurred in connection therewith); (ii) the preparation, printing (including, without limitation, word processing and
duplication costs) and delivery of this Agreement, the Registration Rights Agreement, all Blue Sky memoranda and all other agreements, memoranda, correspondence and other documents printed and delivered in connection therewith and with the Exempt
Resales (but not, however, legal fees and expenses of the Initial Purchasers’ counsel incurred in connection with any of the foregoing other than reasonable fees of such counsel plus reasonable disbursements incurred in connection with the
preparation, printing and delivery of such Blue Sky memoranda); (iii) the issuance and delivery by the Company of the Preference Shares and any taxes payable in connection therewith; (iv) the qualification of the Preference Shares and Exchange
Preference Shares for offer and sale under the securities or Blue Sky laws of the several states (including, without limitation, the reasonable fees and disbursements of the Initial Purchasers’ counsel relating to such registration or
qualification); (v) the furnishing of such copies of the Pricing Disclosure Package and the Offering Memorandum, and all amendments and supplements thereto, as may be reasonably requested for use in connection with the Exempt Resales; (vi) the
preparation of certificates for the Preference Shares (including, without limitation, printing and engraving thereof); (vii) the approval of the Preference Shares by DTC for “book-entry” transfer (including fees and expenses of counsel);
(viii) the rating of the Preference Shares and the Exchange Preference Shares; (ix) the obligations of the Transfer Agent, any agent of the Transfer Agent and the counsel for the Transfer Agent in connection with the Preference Shares and the
Exchange Preference Shares; (x) the performance by the Company of its other obligations under this Agreement; and (xi) all expenses associated with any electronic road show. It is understood, however, that, except as provided in this Section, the
Initial Purchasers will pay all of their own costs and expenses, including the fees of their counsel, share transfer taxes on resale of any of the Preference Shares by them, and any advertising expenses connected with any offers they may make.

          7.           Conditions to Initial Purchasers’ Obligations. The respective obligations of the Initial Purchasers
hereunder are subject to the accuracy, when made and on and as of the Closing Date, of the representations and warranties of the Company contained herein, to the performance by the Company of its obligations hereunder, and to each of the following
additional terms and conditions: 

                       (a)           The Initial Purchasers shall not have discovered and disclosed to the Company on or prior to the Closing Date that the Pricing Disclosure
Package or the Offering Memorandum, or any amendment or supplement thereto, contains an untrue statement of a fact which, in the opinion of counsel to the Initial Purchasers, is material or omits to state a fact

14

which, in the opinion of such counsel, is material and is necessary to make the statements therein not misleading. 

                       (b)           Cahill Gordon & Reindell LLP, shall have furnished to the Initial Purchasers its written opinion, as United States counsel to the
Company addressed to the Initial Purchasers and dated the Closing Date, substantially in the form of Exhibit B-1 hereto. 

                       (c)           Conyers Dill & Pearman shall have furnished to the Initial Purchasers its written opinion, as Bermuda counsel to the Company addressed
to the Initial Purchasers and dated the Closing Date, substantially in the form of Exhibit B-2 hereto. 

                       (d)           Susan Comparato, General Counsel of XL Capital Assurance Inc., shall have furnished to the Initial Purchasers his written opinion, dated
the Closing Date, substantially in the form of Exhibit B-3 hereto. 

                       (e)           The Initial Purchasers shall have received from Simpson Thacher & Bartlett LLP, counsel for the Initial Purchasers, such opinion or
opinions, dated the Closing Date, with respect to the issuance and sale of the Preference Shares, the Pricing Disclosure Package, the Offering Memorandum and other related matters as the Initial Purchasers may reasonably require, and the Company
shall have furnished to such counsel such documents and information as they reasonably request for the purpose of enabling them to pass upon such matters. 

                       (f)           Concurrently with the execution of this Agreement and on the Closing Date, PricewaterhouseCoopers LLP, the independent registered public
accounting firm of the Company, who has certified the consolidated financial statements of the Company that are included in the Pricing Disclosure Package or in the Offering Memorandum, shall have furnished to you a “comfort” letter or
letters, dated the respective dates of delivery thereof, in form and substance reasonably satisfactory to you. 

                       (g)           (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included
in the Pricing Disclosure Package any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Pricing Disclosure Package, and (ii) since the respective dates as of which information is given in the Pricing Disclosure Package there shall not have been any change in the share capital (other than changes
resulting from the exercise of options or the conversion of warrants or securities which were outstanding as of such date, or from the exercise of options granted after such date in the ordinary course of business or from repurchases of securities)
or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, shareholders’ equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or contemplated in the Pricing Disclosure Package, the effect of which, in any such case described in clause (i) or (ii), is in your judgment so material and adverse as to make it
impractical or inadvisable to proceed with the offering or the delivery of the Preference Shares on the terms and in the manner contemplated in the Offering Memorandum. 

15

                       (h)           The Company shall have furnished or caused to be furnished to you on the Closing Date certificates of officers of the Company, satisfactory
to you as to the accuracy of the representations and warranties of the Company herein at and as of the Closing Date, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to the Closing Date, as to the
matters set forth in subsections (g) and (i) of this Section and as to such other matters as you may reasonably request. 

                       (i)           Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Company’s
debt securities or preferred stock by any “nationally recognized statistical rating organization,” as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act and (ii) no such organization shall have
publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities or preferred stock. 

                       (j)           The Company shall have executed and delivered the Registration Rights Agreement, and the Initial Purchasers shall have received an original
copy thereof, duly executed by the Company. 

                       (k)           Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the New York Stock Exchange; (ii) a suspension or material limitation in trading in the Company's securities on the New York Stock Exchange; (iii) a general moratorium on commercial banking activities
in New York or Bermuda declared by the relevant authority or a material disruption in commercial banking or securities settlement or clearance services in the United States or any other relevant jurisdiction; (iv) the outbreak or escalation of
hostilities involving the United States or Bermuda or the declaration by the United States or Bermuda of a national emergency or war if the effect of any such event specified in this clause (iv) in your judgment is so material and adverse as to make
it impractical or inadvisable to proceed with the offering or delivery of the Preference Shares being delivered on the Closing Date on the terms and in the manner contemplated in the Offering Memorandum; (v) a change or development involving a
prospective change in Bermuda taxation affecting the Company, the Preference Shares or the transfer thereof or the imposition of exchange controls by the United States or Bermuda; or (vi) the occurrence of any other calamity or crisis or any change
in financial, political or economic conditions in the United States or currency exchange rates or controls in the United States or Bermuda or elsewhere, if the effect of any such event specified in this clause in your judgment is so material and
adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Preference Shares being delivered on the Closing Date on the terms and in the manner contemplated in the Offering Memorandum. 

                        All
opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance  reasonably satisfactory to counsel for
the Initial Purchasers. 

16

          8.           Indemnification and Contribution. 

                       (a)           The Company will indemnify and hold harmless each Initial Purchaser against any losses, claims, damages or liabilities, joint or several,
to which such Initial Purchaser may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of
a material fact contained in the Pricing Disclosure Package or the Offering Memorandum, or any amendment or supplement thereto, any Free Writing Offering Document, or arise out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Initial Purchaser for any legal expenses of one counsel (in addition to any local counsel) engaged reasonably incurred by
such Initial Purchaser in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Pricing Disclosure Package or the Offering Memorandum, or any amendment or supplement thereto, or any Free Writing
Offering Document, in reliance upon and in conformity with written information furnished to the Company by any Initial Purchaser through Lehman Brothers Inc. expressly for use therein.

                       (b)           Each Initial Purchaser will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company
may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the
Pricing Disclosure Package, the Offering Memorandum or any amendment or supplement thereto, or any Free Writing Offering Document, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Pricing Disclosure
Package, the Offering Memorandum or any such amendment or supplement thereto, or any Free Writing Offering Document, in reliance upon and in conformity with written information furnished to the Company by such Initial Purchaser through Lehman
Brothers Inc. expressly for use therein, and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred,
including the reasonable fees and expenses of one counsel (in addition to any applicable local counsel). 

                       (c)           Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the 

17 

indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation
(except as set forth below).  Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of
interest; (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party, and the indemnified party shall have reasonably concluded that there may be legal defenses available
to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party.  No indemnifying
party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (1) includes an unconditional release of the indemnified party from
all liability arising out of such action or claim and (2) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. 

                       (d)           If the indemnification provided for in this Section 9 is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Initial Purchasers on the other from the
offering of the Preference Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Initial
Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Initial Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total purchasing
discounts and commissions received by the Initial Purchasers.  The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand or the Initial Purchasers on the other and the parties' relative

18

intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in
this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total price at which the Preference Shares purchased by it and distributed to the public were offered to the public exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations in this subsection (d) to contribute are several in proportion to their respective purchasing obligations and not joint. 

                       (e)           The obligations of the Company under this Section 9 shall be in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls any Initial Purchaser within the meaning of the Act; and the obligations of the Initial Purchasers under this Section 9 shall be in addition to any liability which the
respective Initial Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company within the meaning of the Act. 

          9.           Defaulting Initial Purchasers.  If, on the Closing Date, any Initial Purchaser defaults in the performance
of its obligations under this Agreement, the remaining non-defaulting Initial Purchasers shall be obligated to purchase the Preference Shares that the defaulting Initial Purchaser agreed but failed to purchase on the Closing Date in the respective
proportions that the number of Preference Shares set opposite the name of each remaining non-defaulting Initial Purchaser in Schedule I hereto bears to the total number of Preference Shares set opposite the names of all the remaining non-defaulting
Initial Purchasers in Schedule I hereto; provided, however, that the remaining non-defaulting Initial Purchasers shall not be
obligated to purchase any of the Preference Shares on the Closing Date if the aggregate principal amount of Preference Shares that the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase on such date exceeds 9.09% of the
aggregate principal amount of Preference Shares to be purchased on the Closing Date, and any remaining non-defaulting Initial Purchasers shall not be obligated to purchase more than 110% of the aggregate principal amount of Preference Shares that it
agreed to purchase on the Closing Date pursuant to the terms of Section 3. If the foregoing maximums are exceeded, the remaining non-defaulting Initial Purchasers, or those other Initial Purchasers satisfactory to the Initial Purchasers who so agree, shall have the right, but shall not be obligated,
to purchase, in such proportion as may be agreed upon among them, all the Preference Shares to be purchased on the Closing Date. If the remaining Initial Purchasers or other Initial Purchasers satisfactory to the Initial Purchasers do not elect to
purchase the Preference Shares that the defaulting Initial Purchaser or Initial Purchasers agreed

19

but failed to purchase on the Closing Date, this Agreement shall terminate without liability on the part of any non-defaulting Initial Purchaser or the Company, except that the Company will continue to be liable for the payment of
expenses to the extent set forth in Sections 6 and 11. As used in this Agreement, the term “Initial Purchaser” includes, for all purposes of this Agreement unless the context requires otherwise, any party not listed in Schedule I hereto
that, pursuant to this Section 9, purchases Preference Shares that a defaulting Initial Purchaser agreed but failed to purchase.

                         Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company for damages caused by its default.  If other Initial Purchasers are obligated or agree
to purchase the Preference Shares of a defaulting or withdrawing Initial Purchaser, either the remaining Initial Purchasers or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the
opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in the Pricing Disclosure Package, the Offering Memorandum or in any other document or arrangement. 

          10.         Termination.
The obligations of the Initial Purchasers hereunder may be terminated by the
Initial  Purchasers by notice given to and received by the Company prior to delivery
of and payment for the Preference Shares if, prior to that time, any of the events
described in Sections 7(j), (l) or (n) shall have occurred or if the Initial
Purchasers  shall decline to purchase the Preference Shares for any reason permitted
under this Agreement. 

          11.         Reimbursement
of Initial Purchasers’ Expenses.  If this
Agreement shall be terminated pursuant to  Section 9 hereof, the Company shall
not be under any liability to any Initial Purchasers except as provided in Sections
6, 8 and 15 hereof; but, if for any other reason, any Preference Shares are not
delivered by or on behalf of the Company as  provided herein, the Company will
reimburse the Initial Purchasers through you for all out-of-pocket expenses approved
in writing by you, including reasonable fees and disbursements of counsel, reasonably
incurred by the Initial Purchasers in making  preparations for the purchase,
sale and delivery of the Preference Shares not so delivered, but the Company
shall then be under no further liability to any Initial Purchasers except as
provided in Sections 6, 8 and 15 hereof. 

          12.         Notices,
etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:

                       (a)           if to any Initial Purchasers, shall be delivered or sent by hand delivery, mail, telex, overnight courier or facsimile transmission to
Lehman Brothers Inc., 745 Seventh Avenue, New York, New York 10019, Attention: Debt Capital Markets, Financial Institutions Group (Fax:  646-834-8133) with a copy to the General Counsel at the above address and Simpson Thacher & Bartlett LLP,
425 Lexington Avenue, New York, New York 10017, Attention: Lee Meyerson, Esq. (Fax: 212-455-2502), and with a copy, in the case of any notice pursuant to Section 8(c), to the Director of Litigation, Office of the General Counsel, Lehman Brothers
Inc., 399 Park Avenue, 10th Floor, New York, New York 10022 (Fax: 212-520-0421); 

                       (b)           if to the Company, shall be delivered or sent by mail, telex, overnight courier or facsimile transmission to Security Capital Assurance
Ltd, One Bermudiana Road,

20

Hamilton HM 11, Bermuda, Attention: Kirstin Romann Gould (Fax: 441-295-2840), with a copy to Michael A. Becker Cahill Gordon & Reindell LLP, Eighty Pine Street, New York, New York 10005, Attention: Michael A. Becker (Fax:
212-328-2165).

          13.         Persons
Entitled to Benefit of Agreement.  This Agreement
shall inure to the benefit of and be binding  upon the Initial Purchasers, the
Company, and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that the representations,
warranties, indemnities and agreements of  the Company contained in this Agreement
shall also be deemed to be for the benefit of directors, officers and employees
of the Initial Purchasers and each person or persons, if any, controlling any
Initial Purchaser within the meaning of Section 15  of the Securities Act. Nothing
in this Agreement is intended or shall be construed to give any person, other
than the persons referred to in this Section 13, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any  provision contained
herein. 

          14.         Submission
to Jurisdiction.  The Company irrevocably (i) agrees
that any legal suit, action or proceeding  against the Company brought by any
Initial Purchaser or by any person who controls any Initial Purchaser arising
out of or based upon this Agreement or the transactions contemplated hereby may
be instituted in the federal district court for the  Southern District of New
York and the New York County Court, (ii) waives, to the fullest extent it may
effectively do so, any objection which it may now or hereafter have to the laying
of venue of any such proceeding and (iii) submits to the  exclusive jurisdiction
of such courts in any such suit, action or proceeding. The Company has appointed
CT Corporation System, New York, New York, as its authorized agent (the “Authorized
Agent”) upon whom process may be served in
any such action arising out of or based on this Agreement or the transactions
contemplated hereby which may be instituted in the federal district court for
the Southern District of New York and  the New York County Court by any Initial
Purchaser or by any person who controls any Initial Purchaser, expressly consents
to the jurisdiction of any such court in respect of any such action, and waives
any other requirements of or objections to  personal jurisdiction with respect
thereto. Such appointment shall be irrevocable. The Company represents and warrants
that the Authorized Agent has agreed to act as such agent for service of process
and agrees to take any and all action, including  the filing of any and all documents
and instruments that may be necessary to continue such appointment in full force
and effect as aforesaid. Service of process upon the Authorized Agent and written
notice of such service to the Company shall be  deemed, in every respect, effective
service of process upon the Company. 

          15.         Judgment
Currency. In respect of any judgment or order given
or made for any amount due hereunder that is  expressed and paid in a currency
(the “judgment currency”) other than United States dollars, the Company
will indemnify each Initial Purchaser against any loss incurred by such Initial
Purchaser as a result of any variation between (i) the  rate of exchange at which
the United States dollar amount is converted into the judgment currency for the
purpose of such judgment or order and (ii) the rate of exchange at which an Initial
Purchaser is able to purchase United States dollars with  the amount of judgment
currency actually received by such Initial Purchaser. The foregoing indemnity
shall constitute a separate and independent obligation of the Company and shall
continue in full force and effect notwithstanding any such judgment  or order
aforesaid. The term “rate of exchange” shall include any premiums and
costs of exchange payable in connection with the purchase of or conversion into
United States dollars. 

21

          16.         Survival.
The respective indemnities, representations, warranties and agreements of the
Company and the  Initial Purchasers contained in this Agreement or made by or
on behalf on them, respectively, pursuant to this Agreement, shall survive the
delivery of and payment for the Preference Shares and shall remain in full force
and effect, regardless of  any investigation made by or on behalf of any of them
or any person controlling any of them. 

          17.         Definition
of the Terms “Business Day,” “Affiliate” and “Subsidiary.”  For
 purposes of this Agreement, (a) “business day” means any day on which
 the New York Stock Exchange, Inc. is open for trading and (b) “affiliate” and “subsidiary” have
 the meanings set forth in Rule 405 under the  Securities Act. 

          18.         Governing
Law.  This Agreement
shall be governed by and construed in  accordance with the laws of New York. 

          19.         No
Fiduciary Duty. The Company acknowledges and agrees
that (i) the purchase and sale of the Preference  Shares pursuant to this Agreement
is an arm's-length commercial transaction between the Company, on the one hand,
and the several Initial Purchasers, on the other, (ii) in connection therewith
and with the process leading to such transaction each  Initial Purchaser is acting
solely as a principal and not as the agent or fiduciary of the Company, (iii)
no Initial Purchaser has assumed an advisory or fiduciary responsibility in favor
of the Company with respect to the offering contemplated  hereby or the process
leading thereto (irrespective of whether such Initial Purchasers has advised
or is currently advising the Company on other matters) or any other obligation
to the Company except the obligations expressly set forth in this  Agreement
and (iv) the Company has consulted its own legal and financial advisors to the
extent they deemed appropriate. The Company agrees that it will not claim that
the Initial Purchasers, or any of them, has rendered advisory services of any
 nature or respect, or owes a fiduciary or similar duty to the Company, in connection
with such transaction or the process leading thereto. 

          20.         Counterparts.
This Agreement may be executed in one or more counterparts and, if executed in
more than one  counterpart, the executed counterparts shall each be deemed to
be an original but all such counterparts shall together constitute one and the
same instrument. 

          21.         Headings.
The headings herein are inserted for convenience of reference only and are not
intended to be  part of, or to affect the meaning or interpretation of, this
Agreement. 

22

                         If
the foregoing correctly sets forth the agreement between the Company and the Initial Purchasers, please indicate your acceptance in the space provided for that purpose below. 

	 	 Very truly yours, 
	 

  
	 	 SECURITY CAPITAL ASSURANCE LTD 
	 

  
	 

  
	 	
By
  	
         /s/ Kirstin Romann
 Gould
  
	 	 

  	
Name: Kirstin Romann Gould
  
	 	 

  	
Title:    Secretary
  

Accepted: 

LEHMAN BROTHERS INC. 

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED 

WACHOVIA CAPITAL MARKETS, LLC

By LEHMAN BROTHERS INC., as Authorized Representative 

	 	 	 
	By     	
 /s/ William Gartland
  	 
	      Name: William Gartland  	 
	      Title: Managing Director  	 

23 

SCHEDULE I 

	 

  	 
  	
Number of
  
	 

  	 
  	
Preference
  
	 

  	 
  	
Shares
  
	 

  	 
  	
to be
  
	 
    Initial Purchasers
  	 
  	
Purchased
  
	
Lehman Brothers Inc
  	 
  	
87,250
  
	
Merrill Lynch, Pierce, Fenner & Smith
  	 
  	 

  
	
                       Incorporated
    
	 
  	
52,000
  
	
Wachovia Capital Markets, LLC
  	 
  	
52,000
  
	
Citigroup Global Markets Inc
  	 
  	
10,313
  
	
Goldman, Sachs & Co
  	 
  	
10,313
  
	
J.P. Morgan Securities Inc
  	 
  	
10,312
  
	
UBS Securities LLC
  	 
  	
10,312
  
	
Banc of America Securities LLC
  	 
  	
2,500
  
	
Calyon Securities (USA) Inc
  	 
  	
2,500
  
	
Deutsche Bank Securities Inc
  	 
  	
2,500
  
	
Fox-Pitt, Kelton Incorporated
  	 
  	
2,500
  
	
HSBC Securities (USA) Inc
  	 
  	
2,500
  
	
Keefe, Bruyette & Woods, Inc
  	 
  	
2,500
  
	
William Blair & Company, L.L.C
  	 
  	
2,500
  
	
        Total
  	 
  	
250,000
  

I-1 

SCHEDULE II 

SECURITY CAPITAL ASSURANCE LTD 

Pricing Term Sheet dated March 29, 2007 

250,000 Fixed/Floating Series A Perpetual Non-Cumulative Preference Shares 

	
Issuer:
  	 
  	
Security Capital Assurance Ltd
  
	 

  
	
Issuance Format:
  	 
  	
144A and Regulation S with registration rights as set forth
  
	 

  	 
  	
in the Preliminary Offering Memorandum
  
	 

  
	
Security Type:
  	 
  	
Fixed/Floating Series A Perpetual Non-Cumulative
  
	 

  	 
  	
Preference Shares (the “Preference Shares”)
  
	 

  
	
Number of Series A Preference Shares:
  	 
  	
250,000
  
	 

  
	
Liquidation Preference:
  	 
  	
$1,000
  
	 

  
	
Pricing Date:
  	 
  	
March 29, 2007
  
	 

  
	
Settlement Date:
  	 
  	
April 5, 2007 (T+5)
  
	 

  
	
Maturity:
  	 
  	
Perpetual
  
	 

  
	
No Listing:
  	 
  	
Notwithstanding disclosure in Preliminary Offering
  
	 

  	 
  	
Memorandum, the Issuer does not intend to list the
  
	 

  	 
  	
Preference Shares on the New York Stock Exchange at
  
	 

  	 
  	
issuance or upon future registration. Accordingly,
  
	 

  	 
  	
dividends paid on the Preference Shares to U.S. holders
  
	 

  	 
  	
who are individuals will not be eligible for reduced tax
  
	 

  	 
  	
rates as "qualified dividend income." In addition, the
  
	 

  	 
  	
Issuer will not be required to pay additional non-
  
	 

  	 
  	
cumulative dividends to the holders of Preference Shares
  
	 

  	 
  	
for failure to list on the New York Stock Exchange in
  
	 

  	 
  	
connection with a registered exchange offer.
  
	 

  
	
Dividend Rate During Fixed Rate Period:
  	 
  	
6.88% on the liquidation preference per share up to but
  
	 

  	 
  	
excluding the September 30, 2017 dividend payment date,
  
	 

  	 
  	
payable on a non-cumulative basis
  
	 

  
	
Dividend Rate During Floating Rate Period:
  	 
  	
Commencing on September 30, 2017, dividends will be
  
	 

  	 
  	
payable on a non-cumulative basis at a floating annual rate,
  
	 

  	 
  	
reset quarterly, equal to 3-month LIBOR plus 2.715% on
  
	 

  	 
  	
the liquidation preference per share
  
	 

  
	
First Dividend Payment Date:
  	 
  	
September 30, 2007
  
	 

  
	
Dividend Payment Dates:
  	 
  	
Dividends are payable semi-annually during the Fixed Rate
  
	 

  	 
  	
Period on March 31 and September 30, and quarterly
  
	 

  	 
  	
during the Floating Rate Period, on March 31, June 30,
  
	 

  	 
  	
September 30 and December 31
  

II-1 

	
Price to Public:
  	 
  	
100.00% of the liquidation preference
  
	 

  
	
Purchase Price by Initial Purchasers:
  	 
  	
99.00% of the liquidation preference
  
	 

  
	
Treasury Benchmark:
  	 
  	
4.625% due February 15, 2017
  
	 

  
	
Benchmark Yield:
  	 
  	
4.63%
  
	 

  
	
Spread to Benchmark Treasury:
  	 
  	
Plus 225 basis points
  
	 

  
	
Reoffer Yield:
  	 
  	
6.88%
  
	 

  
	
Mandatory Call:
  	 
  	
None
  
	 

  
	
Par Call:
  	 
  	
At any time on and after September 30, 2017 at 100% of
  
	 

  	 
  	
the liquidation preference plus declared and unpaid
  
	 

  	 
  	
dividends
  
	 

  
	
Submission of Shareholder Proposal Call:
  	 
  	
At any time prior to September 30, 2017 at Make Whole
  
	 

  	 
  	
plus declared and unpaid dividends
  
	 

  
	
Change in Tax Law Call:
  	 
  	
At any time at Make Whole plus declared and unpaid
  
	 

  	 
  	
dividends
  
	 

  
	
Rating Agency Event Call:
  	 
  	
At any time at Make Whole plus declared and unpaid
  
	 

  	 
  	
dividends
  
	 

  
	
Make Whole:
  	 
  	
Greater of (i) aggregate liquidation preference and (ii) sum
  
	 

  	 
  	
of present values of aggregate liquidation preference and
  
	 

  	 
  	
remaining scheduled payments of dividends up to but
  
	 

  	 
  	
excluding September 30, 2017 discounted to the
  
	 

  	 
  	
redemption date on a semi-annual basis at the treasury rate
  
	 

  	 
  	
plus 50 basis points
  
	 

  
	
144A CUSIP / ISIN Number:
  	 
  	
81413U AA2 / US81413UAA25
  
	
Regulation S CUSIP / ISIN Number:
  	 
  	
U81394 AA3 / USU81394AA39
  
	 

  
	
Expected Credit Ratings*
  	 
  	 

  
	
                    Moody’s Investor’s Services, Inc.:
  	 
  	
A2 (Stable)
  
	
                    Standard & Poor’s Rating Services:
  	 
  	
A (Stable)
  
	
                    Fitch, Inc.:
  	 
  	
AA- (Stable)
  

Representatives: 

           Lehman Brothers Inc. (Sole Structuring Advisor and Joint Book-runner) 

           Merrill Lynch, Pierce, Fenner & Smith Incorporated (Joint Book-runner) 

           Wachovia Capital Markets, LLC (Joint Book-runner)

Senior Co-Managers: 

          Citigroup Global Markets Inc. 

          Goldman, Sachs & Co. 

          J.P. Morgan Securities Inc. 

          UBS Securities LLC 

Co-Managers: 

I-2 

          Banc of America Securities LLC 

          Calyon Securities (USA) Inc. 

          Deutsche Bank Securities Inc. 

          Fox-Pitt, Kelton Incorporated 

          HSBC Securities (USA) Inc. 

          Keefe, Bruyette & Woods, Inc. 

          William Blair & Company, L.L.C.

* A security rating is not a recommendation to buy, sell or hold securities and should be evaluated independently of any other rating. The rating is subject to revision or withdrawal at any time by the assigning rating
organization. 

THE PREFERENCE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER STATE SECURITIES LAWS. UNLESS THEY ARE REGISTERED, THE PREFERENCE SHARES MAY BE OFFERED ONLY IN TRANSACTIONS EXEMPT
FROM OR NOT SUBJECT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER STATE SECURITIES LAWS. ACCORDINGLY, THE PREFERENCE SHARES HAVE BEEN OFFERED ONLY TO QUALIFIED INSTITUTIONAL BUYERS UNDER RULE 144A AND TO ELIGIBLE
PURCHASERS PURSUANT TO REGULATION S.

I-3

SCHEDULE III 

1.           Term sheet containing the terms of the securities, substantially in the form of Schedule II.

III-1

SCHEDULE IV 

Subsidiaries 

SCA Bermuda Administrative Ltd 

XL Financial Assurance Ltd. 

SCA Holdings US Inc. 

SCA Administrative Holdings US Inc. 

XL Financial Administrative Services 

XL Portfolio Advisors Inc. 

XLCA Admin LLC 

XLCDS LLC 

XL Capital Assurance Inc. 

XL Capital Assurance (U.K.) Limited 

IV-1 

Exhibit A

Form of Registration Rights Agreement

 

A-1

Exhibit B-1

Cahill Gordon & Reindell LLP Form of Opinion

          1.           Insofar as the laws of the State of New York are applicable thereto, the Purchase Agreement has been duly executed and delivered by the
Company. 

          2.           Insofar as the laws of the State of New York are applicable thereto, the Registration Rights Agreement has been duly executed and delivered
by the Company and is enforceable against the Company in accordance with its terms, except that (i) the enforceability thereof may be subject to (A) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or conveyance or other laws
of general applicability now or hereinafter in effect relating to or affecting creditors’ rights and remedies generally and (B) general equitable principles and the discretion of the court before which any proceeding therefor may be brought
(regardless of whether enforcement is sought in a proceeding at law or in equity), (ii) rights to indemnity and contribution may be limited by applicable securities laws and public policy and (iii) the enforceability of provisions imposing
liquidated damages, penalties or an increase in dividend rate upon the occurrence of certain events. 

          3.           The statements set forth in the Offering Memorandum under the heading “Description of the Preference Shares,” to the extent that
they purport to summarize the terms of the Preference Shares, are fair and accurate in all material respects.  

          4.           To our knowledge, the issuance and sale of the Preference Shares, the execution, delivery and performance by the Company of the Transaction
Documents and the compliance by the Company with all of the provisions of the Transaction Documents and the consummation by the Company of the transactions contemplated therein to be performed by it do not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under, any of the agreements filed as exhibits to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 (the “10-K”) filed with the United States Securities and Exchange Commission (the “Commission”) pursuant to Section 13(a) or 15(d) of the
United States Securities Exchange Act of 1934, as amended (the “Exchange Act”). 

          5.           To our knowledge, the issuance and sale of the Preference Shares, the execution, delivery and performance by the Company of the Transaction
Documents and the compliance by the Company with all of the provisions of the Transaction Documents and the consummation by the Company of the transactions contemplated therein to be performed by it do not (A) require any consent, approval,
authorization or other order of any United States federal or State of New York court or governmental body or agency (except such as may be required under the state securities or Blue Sky laws) or (B) violate or conflict with the terms, conditions or
provisions of the Memorandum of Association or other organizational documents of the Company or any applicable law, rule or administrative regulation of the United States or the State of New York, or any order or administrative or court decree of
any United States or State of New York governmental body or agency or court of which we have knowledge (except we have not been requested to and do not express any opinion as to any state securities or Blue Sky laws).

1

          6.           To our knowledge, other than as set forth in the 10-K, the Preliminary Offering Memorandum and the Final Offering Memorandum, there are no
legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject that are required to be disclosed in the Preliminary Offering
Memorandum or the Final Offering Memorandum and are not so disclosed. 

          7.           Each of the subsidiaries of the Company listed on Schedule A-1 hereto is an
existing corporation in good standing under the laws of the State of Delaware, with the corporate power and authority to own its properties and conduct its business as described in the Preliminary Offering Memorandum and the Final Offering
Memorandum. 

          8.           Each of the subsidiaries of the Company listed on Schedule A-2 hereto is an
existing corporation in good standing under the laws of the State of New York, with the corporate power and authority to own its properties and conduct its business as described in the Preliminary Offering Memorandum and the Final Offering
Memorandum. 

          9.           To our knowledge, there are no contracts, agreements or understandings between the Company and any person granting such person the right
(other than rights which have been waived or satisfied) to require the Company to include any securities of the Company owned by such persons in the Preliminary Offering Memorandum and the Final Offering Memorandum.

          10.         Except
as disclosed in the Preliminary Offering Memorandum and the Final Offering Memorandum,
to our knowledge, there are no preemptive or  other rights to subscribe for or
to purchase, nor any restrictions upon the voting or transfer of, any shares
of the Company’s capital stock pursuant to the Company’s Memorandum
of Association or any agreement or other  instrument. 

          11.         The
Company is not and will not become, as a result of the offering and sale of the
Preference Shares, an “investment company,”
as such term is defined in the Investment Company Act of 1940, as amended. 

          12.         The
statements set forth in the Offering Memorandum under the caption “Certain
Tax Considerations—United States Taxation”,
insofar as they purport to describe the provisions of the federal income tax
laws of the United States of America referred to therein, fairly describe such
provisions in all material respects. 

          13.         To
our knowledge, the Company is not in violation of the Memorandum of Association
and Bye-laws of the Company which could have a Material  Adverse Effect. 

          14.         Assuming,
without independent investigation, (a) that the Preference Shares are sold to
the Initial Purchasers and initially resold by the  Initial Purchasers in accordance
with the terms of, and in the manner contemplated by, the Purchase Agreement
and the Offering Memorandum, (b) the accuracy as to factual matters of the representations
and warranties of the Company set forth in the  Purchase Agreement and in the
certificates delivered by officers of the Company pursuant to the Purchase Agreement,
(c) the accuracy of the representations and warranties of each of the several
Initial Purchasers set forth in Section 2 of the  Purchase Agreement, (d) the
due performance by the Company and each Initial Purchaser of the covenants

2

and agreements set forth in the Purchase Agreement and (e) the compliance by each Initial Purchasers with the offering and transfer procedures and restrictions described in the Offering Memorandum, it is not necessary in
connection with the issuance and sale to you of the Preference Shares by the Company under the circumstances contemplated by the Purchase Agreement or in connection with the initial resale of the Preference Shares by the Initial Purchasers in
accordance with the offering and transfer procedures and restrictions described in the Offering Memorandum and in the Purchase Agreement, to register any of the Preference Shares under the Securities Act of 1933, as amended (the “Act”) (it
being understood that no opinion is expressed as to any subsequent resale of the Preference Shares). 

3

Cahill Gordon & Reindell LLP Form of Negative Assurance Letter

                         We have participated in conferences with representatives of the Company, representatives of Bermudian counsel to the Company, officers and other representatives of the Initial Purchasers,
representatives of counsel to the Initial Purchasers, and representatives of the independent public accountants of the Company and its subsidiaries at which conferences the contents of the Offering Memorandum and the documents and other information
described on Schedule A hereto (the “General Disclosure Package”) and related matters were discussed. Given the
limitations inherent in the role of outside counsel and the character of determinations involved in the preparation of the Offering Memorandum and the General Disclosure Package, we are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Offering Memorandum and the General Disclosure Package and have made no independent check or verification thereof (except to the extent provided in paragraphs 3 and 12 of our
opinion of even date herewith). On the basis of the foregoing, no facts have come to our attention that would lead us to believe (i) that the Offering Memorandum, as of its date or as of the date hereof, contained or contains an untrue statement of
a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (ii) that the General Disclosure Package, as of the Applicable Time
(as defined in the Purchase Agreement), contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (it being
understood, in each case, that we have not been requested to and do not express any comment with respect to the financial statements and the notes thereto and the other financial data included in the Offering Memorandum or the General Disclosure
Package). 

1

Exhibit B-2

Conyers, Dill & Pearman Form of Opinion

	
1.          	
Each of the Company, XLFA and SCABA is duly incorporated and existing under the laws of Bermuda in good standing (meaning solely that it has not failed to make any filing with any Bermuda governmental authority
or to pay any Bermuda government fee or tax which would make it liable to be struck off the Register of Companies and thereby cease to exist under the laws of Bermuda).

  
	 
	
2.	
The authorized share capital of the Company
    is US$5,000,000 divided into 500,000,000 shares of par value US$0.01.
    Based solely on a review of a certified copy of the Registrar of Members
    of the Company dated [_____] 2007, all of the issued shares of the Company
    on [_____] 2007 have been duly authorized and validly issued, fully paid
    and non-assessable (meaning that no further sums are required to be paid
    by the holder thereof in  connection with the issue thereof) and are registered
    in the name of XL Insurance (Bermuda) Ltd. When issued and paid for in accordance with the Documents, the Preference Shares will be validly issued, fully paid and non-assessable (meaning that no further sums are required to be
paid by the holder thereof in connection with the issue thereof) and will not be subject to any statutory pre-emptive or similar rights.
  
	 
	
3.	
The authorized share capital of XLFA is
    US$2,400,000.
    Based solely on a review of a certified copy of the Registrar of Members
    of XLFA dated [_____] 2007, all of the issued shares of XLFA on that
date have been duly authorized and validly issued, fully paid and non-assessable
    (meaning that no further sums are required to be paid by the holder thereof
    in connection with the issue thereof) and are registered in the name of the
     following:

  
	 
	 	   Security Capital Assurance Ltd - 2,449 common shares
      par value US$120.00 

      Financial Security Assurance Inc. - 150 preference shares
    par value US$120.00 

      Financial Security Assurance International Ltd. - 213
    preference shares par value US$120 
	 	 
	 	 Based solely on a review of the
        Bye-laws and Memorandum of Association of XLFA as at [      ], 2007, certified by the Secretary of XLFA
        on [      ], 2007 and the Bermuda Companies
        Act 1981 none of the issued shares of XLFA were issued in violation of
    any pre-emptive or other similar rights under Bermuda law. 

	 	 
	
4.	
The authorized share capital of SCABA is
    US$12,000.
    Based solely on a review of a certified copy of the Registrar of Members
    of SCABA dated [_____] 2007, all of the issued shares of SCABA on that
date have been duly authorized and validly issued, fully paid and non-assessable
    (meaning that no further sums are required to be paid by the holder thereof
    in connection with the issue thereof) and are registered in the name of the
    Company. Based  solely on a review of the Bye-laws and Memorandum of Association
    of SCABA as at [_____] 2007, certified by the Secretary of SCABA on [_____]
    2007 and the Bermuda Companies Act 1981 none of the issued shares of SCABA
    were issued in violation of any pre-emptive or other similar rights under
    Bermuda law.

  
	 

1 

	
5.          	
The Company has the necessary corporate power and authority to execute, deliver and perform its obligations under the Documents and the necessary corporate power to conduct its business as described under the
captions "Business" in the Form 10-K and "Summary – Security Capital Assurance Ltd" in the Offering Memorandum. The execution and delivery of the Documents by the Company and the performance by the Company of its obligations thereunder will not
violate the Constitutional Documents nor any applicable law, regulation, order or decree of Bermuda.

  
	 
	
6.	
XLFA has the necessary corporate power and authority, pursuant to its Memorandum of Association, to carry on its business as described under the captions "Business" in the Form 10-K and "Summary – Security
Capital Assurance Ltd" in the Offering Memorandum, and was registered as a Class 3 insurer in terms of the Insurance Act 1978 effective 3 November 1998 and is authorized to carry on business in that capacity subject to the provisions of the
Insurance Act 1978 and the regulations promulgated thereunder, and the conditions set out in Schedule I to the Certificate of Registration, issued by the Registrar of Companies to XLFA, dated 26 November 1998. A copy of the said Certificate of
Registration, together with the said Schedule I, is attached as Exhibit A to this opinion.

  
	 
	
7.	
The Company has taken all corporate action required to authorise its execution, delivery and performance of the Documents. The Documents have been duly executed and delivered by the Company, and constitute the
valid and binding obligations of the Company, enforceable against the Company in accordance with the terms thereof.

  
	 
	
8.	
No order, consent, approval, licence, authorisation or validation of, filing with or exemption by any government or public body or authority of Bermuda or any sub-division thereof is required to authorise or is
required in connection with the execution, delivery, performance and enforcement of the Documents, except such as have been duly obtained or filed in accordance with Bermuda law.

  
	 
	
9.	
It is not necessary or desirable to ensure the enforceability in Bermuda of the Documents that they be registered in any register kept by, or filed with, any governmental authority or regulatory body in Bermuda.
However, to the extent that any of the Documents create a charge over assets of the Company, it may be desirable to ensure the priority in Bermuda of the charge that it be registered in the Register of Charges in accordance with Section 55 of the
Companies Act 1981. On registration, to the extent that Bermuda law governs the priority of a charge, such charge will have priority in Bermuda over any unregistered charges, and over any subsequently registered charges, in respect of the assets
which are the subject of the charge. A registration fee of $515 will be payable in respect of the registration.

  
	 
	 	
While there is no exhaustive definition of a charge under Bermuda law, a charge includes any interest created in property by way of security (including any mortgage, assignment, pledge, lien or hypothecation).
As the Documents are governed by the Foreign Laws, the

  
	 

2

	 	
question of whether they create such an interest in property would be determined under the Foreign Laws.

  
	 
	
10.        	
The procedure for the service of process on the Company through CT Corporation System in New York, New York, United States of America, acting as agent for the Company, as set out in Section 14 of the Purchase
Agreement and Section 10(h) of the Registration Rights Agreement would be effective, in so far as Bermuda law is concerned, to constitute valid service of the proceedings on the Company.

  
	 
	
11.	
There is no income or other tax of Bermuda imposed by withholding or otherwise on any payment to be made to or by the Company pursuant to the Documents.

  
	 
	
12.	
The Documents will not be subject to ad valorem stamp duty in Bermuda and no registration, documentary, recording, transfer or other similar tax, fee or charge is payable in Bermuda in connection with the
execution, delivery, filing, registration or performance of the Documents, other than as stated in paragraph 9 hereof.

  
	 
	
13.	
The Company has been designated as non-resident of Bermuda for the purposes of the Exchange Control Act, 1972 and, as such, is free to acquire, hold, transfer and sell foreign currency (including the payment of
dividends or other distributions) and securities without restriction.

  
	 
	
14.	
The Company is not entitled to any immunity under the laws of Bermuda, whether characterized as sovereign immunity or otherwise, from any legal proceedings to enforce the Documents in respect of itself or its
property.

  
	 
	
15.	
Based solely upon a search of the Cause
    Book of the Supreme Court of Bermuda conducted at [_____] am on [_____],
    2007 (which would not reveal details of proceedings which have been filed
    but not  actually entered in the Cause Book at the time of our search), there
    are no judgments against the Company, nor any legal or governmental proceedings
    pending in Bermuda to which the Company is subject.

  
	 
	
16.	
The choice of the Foreign Laws as the governing law of the Documents is a valid choice of law and would be recognized and given effect to in any action brought before a court of competent jurisdiction in
Bermuda, except for those laws (i) which such court considers to be procedural in nature, (ii) which are revenue or penal laws or (iii) the application of which would be inconsistent with public policy, as such term is interpreted under the laws of
Bermuda. The submission in the Documents to the non-exclusive jurisdiction of the Foreign Courts is valid and binding upon the Company.

  
	 
	
17.	
The Initial Purchasers will not be deemed to be resident, domiciled or carrying on business in Bermuda by reason only of the execution, performance and/or enforcement of the Documents by the Initial
Purchasers.

  
	 
	
18.	
The Initial Purchasers have standing to bring an action or proceedings before the appropriate courts in Bermuda for the enforcement of the Documents. It is not necessary

  
	 

3

	 	
or advisable in order for the Initial Purchasers to enforce their rights under the Documents, including the exercise of remedies thereunder, that they be licensed, qualified or otherwise entitled to carry on
business in Bermuda.

  
	 
	
19.        	
The consummation of the transactions contemplated by the Documents (including but not limited to the issue and sale of the Preference Shares by the Company and any actions taken pursuant to the indemnification
and contribution provisions contained in the Purchase Agreement or the Registration Rights Agreement) will not, subject to Section 39A(2A) of the Act, constitute unlawful financial assistance by the Company under Bermuda law.

  
	 
	
20.	
The courts of Bermuda would recognize as a valid judgment, a final and conclusive judgment in personam obtained in the Foreign Courts against the Company based upon the Documents under which a sum of money is
payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) and would give a judgment based thereon provided that (a) such courts had proper
jurisdiction over the parties subject to such judgment, (b) such courts did not contravene the rules of natural justices of Bermuda, (c) such judgment was not obtained by fraud, (d) the enforcement of the judgment would not be contrary to the public
policy of Bermuda, (e) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts and (f) there is due compliance with the correct procedures under the laws of Bermuda.

  
	 
	
21.	
Based solely upon a review of the register
    of members of the Company dated [_____] 2007, prepared by the Secretary,
    the issued share capital of the Company consists of [_____] common shares
    par  value US$0.01 and 250,000 Preference Shares, each of which is validly
    issued, fully paid and non-assessable (which term when used herein means
    that no further sums are required to be paid by the holders thereof in connection
    with the issue  thereof).

  
	 
	
22.	
The statements contained in the Offering Memorandum under the captions "Description of the Preference Shares", "Certain Tax Considerations–Bermuda Taxation" and "Risk Factors–We may not be able to pay
dividends on the Preference Shares or redeem the Preference Shares because of limitations imposed by Bermuda law", to the extent that they constitute statements of Bermuda law, are accurate in all material respects. The statements contained in the
Form 10-K under the caption "Business–Regulation– Bermuda", to the extent that they constitute statements of Bermuda law, are accurate in all material respects.

  
	 

4

Exhibit B-3

Susan Comparato Form of Opinion

          1.           The statements set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, incorporated by reference in
the Offering Memorandum, under the caption “Business—Regulation—United States,” insofar as they purport to summarize applicable provisions of the New York Insurance Law and certain state insurance laws referred to therein, fairly
describe such provisions in all material respects. 

1

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