Document:

EXECUTION COPY

  

  
    

        CREDIT AGREEMENT

    

        dated as of 

    

        August 3, 2005

    

      between 

    

  

XL CAPITAL LTD, 

X.L. AMERICA, INC.,
XL INSURANCE (BERMUDA) LTD and XL RE LTD,

as Borrowers and Guarantors, 

   

  and

  

BEAR STEARNS CORPORATE LENDING INC.,

as Lender 

  _____________

  

  $100,000,000 

  _____________

  

	
    TABLE OF CONTENTS    
	

	 	 	
	 	Page  

	ARTICLE I  
	1  
	
	DEFINITIONS 
	1  
	 	 	SECTION  1.01.  
	 	Defined Terms  	1  
	 	 	SECTION  1.02.  
	 	Terms Generally  	13  
	 	 	SECTION  1.03.  
	 	Accounting Terms; GAAP and
          SAP  	14  
	ARTICLE II  
	14  
	 	THE CREDITS 
	14  
	 	 	SECTION  2.01.  
	 	Loans and Borrowings  	14  
	 	 	SECTION  2.02.  
	 	Requests for Borrowings  	15  
	 	 	SECTION  2.03.  
	 	Funding of Borrowings  	16  
	 	 	SECTION  2.04.  
	 	Interest Elections  	17  
	 	 	SECTION  2.05.  
	 	Termination and Reduction
          of the Commitments  	18  
	 	 	SECTION  2.06.  
	 	Repayment of Loans; Evidence
          of Debt  	18  
	 	 	SECTION  2.07.  
	 	Prepayment of Loans  	19  
	 	 	SECTION  2.08.  
	 	Fees  	20  
	 	 	SECTION  2.09.  
	 	Interest  	20  
	 	 	SECTION  2.10.  
	 	Alternate Rate of Interest  	21  
	 	 	SECTION  2.11.  
	 	Increased Costs  	21  
	 	 	SECTION  2.12.  
	 	Break Funding Payments  	22  
	 	 	SECTION  2.13.  
	 	Taxes  	23  
	 	 	SECTION  2.14.  
	 	Payments Generally; Pro Rata
          Treatment; Sharing of Set-offs  	24  
	 	 	SECTION  2.15.  
	 	Mitigation Obligations; Replacement
          of Lenders  	26  
	ARTICLE III  
	27  
	
	GUARANTEE 
	27  
	 	 	SECTION  3.01.  
	 	The Guarantee  	27  
	 	 	SECTION  3.02.  
	 	Obligations Unconditional  	27  
	 	 	SECTION  3.03.  
	 	Reinstatement  	28  
	 	 	SECTION  3.04.  
	 	Subrogation  	28  
	 	 	SECTION  3.05.  
	 	Remedies  	28  
	 	 	SECTION  3.06.  
	 	Continuing Guarantee  	28  
	 	 	SECTION  3.07.  
	 	Rights of Contribution  	28  
	 	 	SECTION  3.08.  
	 	General Limitation on Guarantee
          Obligations  	29  
	
      ARTICLE IV  
	30  
	 	
      REPRESENTATIONS
    AND WARRANTIES  
	30  
	 	 	SECTION  4.01.  
	 	Organization; Powers  	30  
	 	 	SECTION  4.02.  
	 	Authorization; Enforceability  	30  
	 	 	SECTION  4.03.  
	 	Governmental Approvals; No
          Conflicts  	30  
	 	 	SECTION  4.04.  
	 	Financial Condition; No Material
          Adverse Change  	30  

  

  

  i

	 	 	SECTION  4.05.  
	 	Properties  	31  
	 	 	SECTION  4.06.  
	 	Litigation and Environmental
          Matters  	31  
	 	 	SECTION  4.07.  
	 	Compliance with Laws and Agreements  	31  
	 	 	SECTION  4.08.  
	 	Investment and Holding Company
          Status  	31  
	 	 	SECTION  4.09.  
	 	Taxes  	32  
	 	 	SECTION  4.10.  
	 	ERISA  	32  
	 	 	SECTION  4.11.  
	 	Disclosure  	32  
	 	 	SECTION  4.12.  
	 	Use of Credit  	32  
	 	 	SECTION  4.13.  
	 	Subsidiaries  	33  
	 	 	SECTION  4.14.  
	 	Withholding Taxes  	33  
	 	 	SECTION  4.15.  
	 	Stamp Taxes  	33  
	 	 	SECTION  4.16.  
	 	Legal Form  	33  
	ARTICLE V  
	33  
	
	CONDITIONS 
	33  
	 	 	SECTION  5.01.  
	 	Effective Date  	33  
	 	 	SECTION  5.02.  
	 	Each Credit Event  	34  
	ARTICLE VI  
	35  
	 	
      AFFIRMATIVE
    COVENANTS  
	35  
	 	 	SECTION  6.01.  
	 	Financial Statements and Other
          Information  	35  
	 	 	SECTION  6.02.  
	 	Notices of Material Events  	37  
	 	 	SECTION  6.03.  
	 	Preservation of Existence
          and Franchises  	37  
	 	 	SECTION  6.04.  
	 	Insurance  	37  
	 	 	SECTION  6.05.  
	 	Maintenance of Properties  	37  
	 	 	SECTION  6.06.  
	 	Payment of Taxes and Other
          Potential Charges and Priority Claims;  	 
	 	 	
	 	Payment of Other Current Liabilities  	38  
	 	 	SECTION  6.07.  
	 	Financial Accounting Practices  	38  
	 	 	SECTION  6.08.  
	 	Compliance with Applicable
          Laws  	38  
	 	 	SECTION  6.09.  
	 	Use of Loan Proceeds  	39  
	 	 	SECTION  6.10.  
	 	Continuation of and Change
          in Businesses  	39  
	 	 	SECTION  6.11.  
	 	Visitation  	39  
	 	 	SECTION  6.12.  
	 	Most Favored Lender Status  	39  
	ARTICLE VII  
	40  
	 	
    NEGATIVE COVENANTS  
	40  
	 	 	SECTION  7.01.  
	 	Mergers  	40  
	 	 	SECTION  7.02.  
	 	Dispositions  	40  
	 	 	SECTION  7.03.  
	 	Liens  	41  
	 	 	SECTION  7.04.  
	 	Transactions with Affiliates  	42  
	 	 	SECTION  7.05.  
	 	Ratio of Total Funded Debt
          to Total Capitalization  	43  
	 	 	SECTION  7.06.  
	 	Consolidated Net Worth  	43  
	 	 	SECTION  7.07.  
	 	Indebtedness  	43  
	 	 	SECTION  7.08.  
	 	Financial Strength Ratings  	43  
	 	 	SECTION  7.09.  
	 	Private Act  	43  
	 	 	SECTION  7.10.  
	 	Ratable Borrowings  	43  

  

  

  ii

	ARTICLE VIII  
	44  
	
	
      EVENTS OF
    DEFAULT  	44  
	      ARTICLE IX       
	46  
	
	
      THE ADMINISTRATIVE
    AGENT  	46  
	ARTICLE X  
	48  
	
	MISCELLANEOUS 
	48  
	
	
	SECTION  10.01.  	 	Notices  	48  
	
	
	SECTION  10.02.  	 	Waivers; Amendments  	49  
	
	
	SECTION  10.03.  	 	Expenses; Indemnity; Damage
          Waiver  	50  
	
	
	SECTION  10.04.  	 	Successors and Assigns  	51  
	
	
	SECTION  10.05.  	 	Survival  	54  
	
	
	SECTION  10.06.  	 	Counterparts; Integration;
          Effectiveness  	54  
	
	
	SECTION  10.07.  	 	Severability  	55  
	
	
	SECTION  10.08.  	 	Right of Setoff  	55  
	
	
	SECTION  10.09.  	 	Governing Law; Jurisdiction;
          Etc  	55  
	
	
	SECTION  10.10.  	 	WAIVER OF JURY TRIAL  	56  
	
	
	SECTION  10.11.  	 	Headings  	56  
	
	
	SECTION  10.12.  	 	Treatment of Certain Information;
          Confidentiality  	56  
	
	
	SECTION  10.13.  	 	Judgment Currency  	57  
	
	
	SECTION  10.14.  	 	USA PATRIOT Act  	58  

  

  

  iii

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

  

iv

               CREDIT AGREEMENT dated as of August 3, 2005, between XL CAPITAL LTD, a Cayman Islands exempted limited liability company (“XL Capital”), X.L. AMERICA, INC., a Delaware corporation (“XL America”), XL INSURANCE (BERMUDA) LTD, a Bermuda limited liability company (“XL Insurance”) and XL RE LTD, a Bermuda limited liability company (“XL Re” and, together with XL Capital, XL America and XL
Insurance, each a “Borrower” and each a “Guarantor” and collectively, the “Borrowers” and the “Guarantors”; the Borrowers and the Guarantors being collectively referred to as the “Obligors”), the LENDERS party hereto, and BEAR STEARNS CORPORATE LENDING INC., as Administrative Agent. 

               The Borrowers have requested that the Lenders make loans to them in an aggregate principal amount not exceeding $100,000,000 at any one time outstanding, and the Lenders are prepared to make such
loans upon the terms and conditions hereof. Accordingly, the parties hereto agree as follows: 

  ARTICLE I 

  

  DEFINITIONS

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

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

               “Adjusted LIBO Rate” means, for the Interest Period for any Eurodollar Borrowing, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate for such Interest Period. 

               “Administrative Agent” means Bear Stearns Corporate Lending Inc., in its capacity as administrative agent for the Lenders
hereunder. 

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

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

               “Aggregate Credit Exposure” means the aggregate amount of the Credit Exposures of each of the Lenders. 

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

  
  Credit Agreement

- 2 -

               “Applicable Additional Margin” means a rate per annum equal to 0.10% for any period during which the aggregate outstanding
principal amount of the Loans shall be greater than 50% of the Commitments then in effect. 

               “Applicable Margin” means, with respect to any Eurodollar Loan, the rate per annum specified under the caption “Applicable
Margin” in the table contained in the definition of “Applicable Rate” in this Section or otherwise determined in accordance with such definition. 

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

               “Applicable Rate” means, for any day, with respect to interest margins applicable to Eurodollar Loans or the facility fees payable
hereunder, as the case may be, the applicable rate per annum set forth below under the caption “Applicable Margin ” or “Applicable Facility Fee Rate”, respectively, based upon the S&P Rating and/or Moody’s Rating, on
such date: 

	
      S&P/ Moody’s 
    	
      Applicable
    	
    Applicable    
	
      Ratings 
    	
    Margin    	
    Facility Fee Rate    
	

    	

    	

    
	 
	> A+/A1  	
      0.19% 
    	
      0.06% 
    
	

    	

    	

    
	A/A2  	
      0.23% 
    	
      0.07% 
    
	

    	

    	

    
	A-/A3  	
      0.27% 
    	
      0.08% 
    
	

    	

    	

    
	< BBB+/Baa1or  	
      0.40% 
    	
      0.10% 
    
	unrated  		 
	

    	

    	

    

               For purposes of the foregoing, (i) if either Moody’s or S&P shall not have in effect a Moody’s Rating or a S&P Rating, as the case may be (other than by reason of the circumstances
referred to in the last sentence of this definition), then the Applicable Rate shall be based upon the remaining rating, (ii) if the Moody’s Rating and the S&P Rating shall fall within different ratings, the Applicable Rate shall be based
on the higher of the two ratings unless one of the two ratings is two or more Categories higher than the other, in which case the Applicable Rate shall be determined by reference to the ratings level next above that of the lower of the two ratings,
and (iii) if the Moody’s Rating and the S&P Rating established or deemed to have been established by Moody’s and S&P, respectively, shall be changed (other than as a result of a change in the rating system of Moody’s or
S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on
the date immediately preceding the effective date of the next such change. If the rating system of 

  
  Credit Agreement

- 3 -

Moody’s or S&P shall change, or if either such rating agency shall cease to be in the business of providing insurance ratings, XL Capital and the Lenders shall negotiate in good faith to amend this definition to reflect
such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change
or cessation.

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

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

               “Availability Period” means the period from and including the Effective Date to but excluding the Commitment Termination Date.

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

               “Borrower Jurisdiction” means (a) Bermuda, (b) the Cayman Islands and (c) any other country (i) where any Borrower is licensed or
qualified to do business or (ii) from or through which payments hereunder are made by any Borrower. 

               “Borrowers” means each of XL Capital, XL America, XL Insurance and XL Re. 

               “Borrowing” means, with respect to any Borrower, (a) all ABR Loans of such Borrower made, converted or continued on the same date
or (b) all Eurodollar Loans of such Borrower that have the same Interest Period. 

               “Borrowing Request” means a request by a Borrower for a Borrowing in accordance with Section 2.02. 

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

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

  Credit Agreement

- 4 -

the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. 

               “Change in Control” means the occurrence of any of the following events or conditions: (a) any Person, including any syndicate or
group deemed to be a Person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of
shares of capital stock of XL Capital entitling such Person to exercise 40% or more of the total voting power of all shares of capital stock of XL Capital that is entitled to vote generally in elections of directors, other than an acquisition by XL
Capital, any of its Subsidiaries or any employee benefit plans of XL Capital; or (b) XL Capital merges or consolidates with or into any other Person (other than a Subsidiary), another Person (other than a Subsidiary) merges into XL Capital or XL
Capital conveys, sells, transfers or leases all or substantially all of its assets to another Person (other than a Subsidiary), other than any transaction: (i) that does not result in a reclassification, conversion, exchange or cancellation of the
outstanding shares of capital stock of XL Capital (other than the cancellation of any outstanding shares of capital stock of XL Capital held by the Person with whom it merges or consolidates) or (ii) which is effected solely to change the
jurisdiction of incorporation of XL Capital and results in a reclassification, conversion or exchange of outstanding shares of capital stock of XL Capital solely into shares of capital stock of the surviving entity; or (c) a majority of the members
of XL Capital’s board of directors are persons who are then serving on the board of directors without having been elected by the board of directors or having been nominated for election by its shareholders. 

               “Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law,
rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.11(b), by any lending office of such Lender or by such
Lender’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. 

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

               “Commitment” means, with respect to any Lender, the commitment of such Lender to make Loans under Section 2.01, in each case
expressed as an amount representing the maximum aggregate amount of such Lender’s Credit Exposure hereunder, as such commitment may be (i) reduced from time to time pursuant to Section 2.05 and (ii) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender’s Commitment is set forth on Schedule I or in the Assignment and Assumption pursuant to which such Lender shall have assumed its
Commitment, as applicable. The initial aggregate amount of the Lenders’ Commitments is $100,000,000. 

               “Commitment Termination Date” means August 3, 2010. 

               “Consolidated Net Worth” means, at any time, the consolidated stockholders’ equity of XL Capital and its Subsidiaries,
provided that the calculation of such consolidated stockholders’ equity shall exclude (a) the effect thereon of any adjustments required under 

  Credit Agreement

- 5 -

Statement of Financial Accounting Standards No. 115 (“Accounting for Certain Investments in Debt and Equity Securities”) and (b) any Exempt Indebtedness (and the assets relating thereto) in the event such Exempt
Indebtedness is consolidated on the consolidated balance sheet of XL Capital and its consolidated Subsidiaries in accordance with GAAP. 

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

               “Credit Exposure” means, with respect to any Lender at any time, the aggregate outstanding principal amount of such Lender’s
Loans at such time. 

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

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

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

               “Eligible Transferee” means (a) any Lender, (b) any Other Lender, (b) an Affiliate of a Lender or any Other Lender, (c) an Approved
Fund or (d) if an Event of Default under clause (a), (b), (g) or (h) of Article VIII has occurred and is continuing, any other Person. 

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

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

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

  Credit Agreement

- 6 -

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

               “ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with any Borrower, is treated as a
single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. 

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

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

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

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

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

               “Excluded Taxes” means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or
on account of any obligation of any Borrower hereunder, (a) Taxes imposed on (or measured by) its net income, net profits or overall gross receipts (including, without limitation, branch profits or similar taxes) by the United States of America, or
by any jurisdiction under the laws of which such recipient is organized or resident, in which such recipient has an office or with which such recipient has any other connection (other than a connection that is deemed to arise solely by reason of
both (I) the transactions contemplated by this Agreement and (II) a Borrower being organized in, maintaining an office in, conducting business in, or having a connection with, such jurisdiction), (b) any Taxes not described in clause (a) above
(other than Other Taxes) that are imposed as a result of a connection the Administrative Agent or any Lender, as the case may be, has with the relevant jurisdiction (other than a connection that is deemed to arise solely by reason of both (I)

  Credit Agreement

- 7 -

the transactions contemplated by this Agreement and (II) a Borrower being organized or resident in, maintaining an office in, conducting business in, or having a connection with, such jurisdiction) and (c) any Tax imposed pursuant
to a law in effect at the time such Lender first becomes a party to this Agreement except to the extent that such Lender’s assignor, if any, was entitled at the time of the assignment to receive additional amounts from the Borrowers with
respect to such Tax under Sections 2.13(a) or 2.13(c) and (d) any Tax that is attributable to such Lender’s failure or inability (other than as a result of a Change in Law formally announced after such Lender becomes a party to this Agreement)
to comply with Section 2.13(e) . 

               “Exempt Indebtedness” means any Indebtedness of any Person (other than XL Capital or any of its Affiliates) that is consolidated on
the balance sheet of XL Capital and its consolidated Subsidiaries in accordance with GAAP (whether or not required to be so consolidated); provided that (a) at the time of the incurrence of
such Indebtedness by such Person, the cash flows from the assets of such Person shall reasonably be expected by such Person to liquidate such Indebtedness and all other liabilities (contingent or otherwise) of such Person and (b) no portion of such
Indebtedness of such Person shall be Guaranteed (other than guarantees of the type referred to in clause (a) or (b) of the definition of Indebtedness) by, or shall be secured by a Lien on any assets owned by, XL Capital or any of its Subsidiaries
and neither such Person nor any of the holders of such Indebtedness shall have any direct or indirect recourse to XL Capital or any of its Subsidiaries (other than in respect of liabilities and guarantees of the type referred to in clause (a) or (b)
of the definition of Indebtedness). 

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

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

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

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

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

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

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

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

               “Guarantors” means each of XL Capital, XL America, XL Insurance and XL Re. 

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

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

               “Indebtedness” means, for any Person, without duplication: (i) all indebtedness or liability for or on account of money borrowed
by, or for or on account of deposits with or advances to (but not including accrued pension costs, deferred income taxes or accounts payable of) such Person; (ii) all obligations (including contingent liabilities) of such Person evidenced by bonds,
debentures, notes, banker’s acceptances or similar instruments; (iii) all indebtedness or liability for or on account of property or services purchased or acquired by such Person; (iv) any amount secured by a Lien on property owned by such
Person (whether or not assumed) and Capital Lease Obligations of such Person (without regard to any limitation of the rights and remedies of the holder of such Lien or the lessor under such capital lease to repossession or sale of such property);
(v) the maximum available amount of all standby letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed); and (vi) all Guarantees of such Person; provided that the following shall be excluded from Indebtedness of XL Capital and any of its Subsidiaries for purposes of this Agreement: (a) all payment liabilities of any such Person under insurance and
reinsurance policies from time to time issued by such Person, including guarantees of any such payment 

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liabilities; (b) all other liabilities (or guarantees thereof) arising in the ordinary course of any such Person’s business as an insurance or reinsurance company (including GICs and Stable Value Instruments and any Specified
Transaction Agreement relating thereto), or as a corporate member of The Council of Lloyd’s, or as a provider of financial or investment services or contracts (including GICs and Stable Value Instruments and any Specified Transaction Agreement
relating thereto); and (c) any Exempt Indebtedness. 

               “Indemnified Taxes” means Taxes imposed on the Administrative Agent or any Lender on or with respect to any payment hereunder,
other than Excluded Taxes and Other Taxes. 

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

               “Interest Election Request” means a request by a Borrower to convert or continue a Borrowing in accordance with Section 2.04.

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

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

               “ISDA” has the meaning assigned to such term in Section 7.03(f) . 

               “JPMCB” means JPMorgan Chase Bank, N.A.

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

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               “Lenders” means the Persons listed on Schedule I and any other Person that shall have become a party hereto pursuant to an
Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. As of the Closing Date, the only Lender hereunder is Bear Stearns Corporate Lending Inc. 

               “LIBO Rate” means, for the Interest Period for any Eurodollar Borrowing, the rate appearing on Page 3750 of the Telerate Service
(or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent
from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as
the rate for the offering of Dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the LIBO Rate for such Interest Period shall be the rate at which Dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent (or any Affiliate of the Person serving as the Administrative Agent or any other Person
reasonably selected by the Administrative Agent for this purpose) in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

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

               “Loans” means
the loans made by the Lenders to the Borrower pursuant to Section
2.01.

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

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

               “Moody’s” means Moody’s Investors Service, Inc., or any successor thereto. 

               “Moody’s Rating” means, at any time, the rating of XL Capital’s long-term senior unsecured debt (provided that such debt is not supported by any other Person). 

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

               “Non-U.S. Benefit Plan” means any plan, fund (including any superannuation fund) or other similar program established or maintained
outside the United States by any Borrower or any of their Subsidiaries, with respect to which such Borrower or such Subsidiary 

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has an obligation to contribute, for the benefit of employees of such Borrower or such
Subsidiary, which plan, fund or other similar program provides, or results in, the type of benefits described in Section 3(1) or 3(2) of ERISA, and which plan is not subject to ERISA or the Code.

               “Obligors” means each of the Borrowers and each of the Guarantors. 

               “Other Credit Agreements” shall mean (a) the Three-Year Credit Agreement dated as of June 23, 2004 among the Borrowers, the lenders
party thereto and JPMCB (formerly JPMorgan Chase Bank), as Administrative Agent and (b) the Credit Agreement dated as of June 22, 2005 among the Borrowers, the lenders party thereto and JPMCB, as Administrative Agent, in each case as amended and in
effect from time to time, including any renewals, extensions, restatements or replacements thereof. 

               “Other Lender” shall mean any Person party as a lender to any Other Credit Agreement.

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

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

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

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

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

               “Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMCB as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. 

               “Private Act” means separate legislation enacted in Bermuda with the intention that such legislation apply specifically to a
Borrower, in whole or in part. 

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

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

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

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

               “Required Lenders” means, at any time, Lenders having Commitments representing more than 50% of the aggregate amount of the
Commitments at such time; provided that, if the Commitments have expired or been terminated, “Required Lenders” means Lenders having more than 50% of the Aggregate Credit Exposure
at such time. 

               “S&P” means Standard & Poor’s Ratings, or any successor thereto. 

               “S&P Rating” means, at any time, the rating of XL Capital’s long-term senior unsecured debt (provided that such debt is not supported by any other Person). 

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

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

               “Significant Subsidiary” means, at any time, each Subsidiary of XL Capital that, as of such time, meets the definition of a
"significant subsidiary" under Regulation S-X of the SEC. 

               “Specified Transaction Agreement” means any agreement, contract or documentation with respect to the following types of
transactions: rate swap transaction, swap option, basis swap, asset swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange
transaction, cap transaction, floor transaction, collar transaction, current swap transaction, cross-currency rate swap transaction, currency option, credit protection transaction, credit swap, credit default swap, credit default option, total
return swap, credit spread transaction, repurchase transaction, reverse repurchase transaction, buy/sell-back transaction, securities lending or borrowing transaction, weather index transaction or forward purchase or sale of a security, commodity or
other financial instrument or interest, and transactions on any commodity futures or other exchanges, markets and their associated clearing houses (including any option with respect to any of these transactions). 

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

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

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

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

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

               “Total Funded Debt” means, at any time, all Indebtedness of XL Capital and its Subsidiaries and any other Person which would at
such time be classified in whole or in part as a liability on the consolidated balance sheet of XL Capital and its consolidated Subsidiaries in accordance with GAAP (it being understood for avoidance of doubt that any liability or obligation
excluded from the definition of Indebtedness shall not constitute Indebtedness for purposes of this definition). 

               “Transactions” means the execution, delivery and performance by the Obligors of this Agreement, the borrowing of Loans and the use
of the proceeds thereof. 

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

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

               SECTION 1.02. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase
“without limitation”. The word “will” shall be construed to have the same meaning and effect as the word

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“shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s
successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to
have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. 

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

  ARTICLE II 

    

    THE CREDITS

    

               SECTION 2.01. Loans and Borrowings.    

               (a) Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Loans to a Borrower from time to time
during the Availability Period in an aggregate principal amount that will not result in (i) such Lender’s Credit Exposure exceeding such Lender’s Commitment or (ii) the Aggregate Credit Exposure exceeding the total Commitments. Loans may
be made, or be outstanding, to more than one of the Borrowers at any time. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow Loans. 

               (b) Obligations of Lenders. Except as provided herein, each Loan shall be made as part of a Borrowing consisting of Loans of the same Type
made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders to make Loans hereunder are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required. 

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               (c) Type of Loans. Subject to Section 2.02, each Borrowing shall be constituted entirely of ABR Loans or of Eurodollar Loans as any Borrower
may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided
that any exercise of such option shall not affect the obligation of the Borrowers to repay such Loan in accordance with the terms of this Agreement. 

               (d) Minimum Amounts; Limitation on Number of Borrowings. Each Eurodollar Borrowing shall be in an aggregate amount of $10,000,000 or a
larger multiple of $1,000,000. Each ABR Borrowing shall be in an aggregate amount equal to $10,000,000 or a larger multiple of $1,000,000. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of ten Eurodollar Borrowings outstanding. 

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

SECTION 2.02. Requests for Borrowings.

               (a) Notice by the Borrowers. To request a Borrowing, XL Capital shall notify the Administrative Agent of such request by telephone (i) in the
case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (ii) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day
before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the
Administrative Agent and signed by XL Capital. 

               (b) Content of Borrowing Requests. Each telephonic and written Borrowing Request shall specify the following information in compliance with
Section 2.07: 

     (i) the relevant Borrower; 

     (ii) the aggregate amount of the requested Borrowing; 

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

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

     (v) in the case of a Eurodollar Borrowing, the Interest Period therefor, which shall be a period contemplated by the definition of the term “Interest Period” and permitted under Section
2.01(e); and 

     (vi) the location and number of such Borrower’s account to which funds are to be disbursed. 

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

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

SECTION 2.03. Funding of Borrowings.

               (a) Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the
relevant Borrower by promptly remitting the amounts so received, in like funds, to the account of such Borrower designated by such Borrower in the applicable Borrowing Request. 

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

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               SECTION 2.04. Interest Elections.

               (a) Elections by the Borrowers. The Loans constituting each Borrowing initially shall be of the Type specified in the applicable Borrowing
Request and, in the case of a Eurodollar Borrowing, shall have the Interest Period specified in such Borrowing Request. Thereafter, the relevant Borrower may elect to convert such Borrowing to a Borrowing of a different Type or to continue such
Borrowing as a Borrowing of the same Type and, in the case of a Eurodollar Borrowing, may elect the Interest Period therefor, all as provided in this Section. The relevant Borrower may elect different options with respect to different portions of
the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans constituting such Borrowing, and the Loans constituting each such portion shall be considered a separate Borrowing. 

               (b) Notice of Elections. To make an election pursuant to this Section, XL Capital shall notify the Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under Section 2.02 if XL Capital were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by XL Capital.

               (c) Content of Interest Election Requests. Each telephonic and written Interest Election Request shall specify the following information in
compliance with Section 2.01: 

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

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

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

     (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period therefor after giving effect to such election, which shall be a period contemplated by the definition of the term
“Interest Period” and permitted under Section 2.01(e). 

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

               (e) Failure to Elect; Events of Default. If XL Capital fails to deliver a timely and complete Interest Election Request with respect to a
Eurodollar Borrowing prior to the end of the Interest Period therefor, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary
provision hereof, if an Event of Default has occurred and is continuing and the 

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Administrative Agent, at the request of the Required Lenders, so notifies XL Capital, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and
(ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period therefor. 

               SECTION 2.05. Termination and Reduction of the Commitments. 

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

               (b) Voluntary Termination or Reduction. The Borrowers may at any time terminate, or from time to time reduce, the Commitments;
provided that (i) each reduction of the Commitments shall be in an amount that is $25,000,000 or a larger multiple of $5,000,000 and (ii) the Borrowers shall not terminate or reduce
the Commitments if the Aggregate Credit Exposure would exceed the Commitments. XL Capital shall notify the Administrative Agent of any election to terminate or reduce the Commitments under this paragraph (b) at least three Business Days prior to the
effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered
by XL Capital pursuant to this paragraph (b) shall be irrevocable; provided that a notice of termination of the Commitments delivered by XL Capital may state that such notice is conditioned
upon the effectiveness of other credit facilities, in which case such notice may be revoked by XL Capital (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Subject to the proviso
in the immediately preceding sentence, any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. 

               SECTION 2.06. Repayment of Loans; Evidence of Debt. 

               (a) Repayment. Each Borrower hereby unconditionally promises to pay to the Administrative Agent for account of the relevant Lenders the
outstanding principal amount of the Loans made to such Borrower on the Commitment Termination Date. 

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

               (c) Maintenance of Records by Lenders. Each Lender shall maintain in accordance with its usual practice records evidencing the indebtedness
of each Borrower to such 

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Lender resulting from each Loan made by such Lender to such Borrower, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. 

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

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

               (f) Promissory Notes. Any Lender may request that Loans made by it to any Borrower be evidenced by a promissory note of such Borrower. In
such event, each Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent.
Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the payee named therein
(or, if such promissory note is a registered note, to such payee and its registered assigns). 

SECTION 2.07. Prepayment of Loans.

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

               (b) Notices, Etc. XL Capital shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in
the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time,
one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.05, then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.05. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the relevant Lenders of the contents thereof. Each partial prepayment
of any Borrowing shall be in an amount that would be permitted in the case of a Borrowing of the same Type as provided in Section 2.01. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing.
Prepayments shall be accompanied by accrued interest to the extent required by Section 2.09 and shall be made in the manner specified in Section 2.06(b) . 

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               SECTION 2.08. Fees.

               (a) Facility Fee. XL Capital agrees to pay to the Administrative Agent for account of each Lender a facility fee which shall accrue at a rate
per annum equal to the Applicable Rate (i) prior to the termination of such Lender’s Commitment, on the daily amount of such Commitment (whether used or unused) during the period from and including the Effective Date to but excluding the
earlier of the date on which such Commitment terminates and the Commitment Termination Date and (ii) if such Lender continues to have any Credit Exposure after its Commitment terminates, on the daily amount of such Lender’s Credit Exposure from
and including the date on which such Lender’s Commitment terminates to but excluding the date on which such Lender ceases to have any Credit Exposure. Accrued facility fees shall be payable on each Quarterly Date and on the earlier of the date
the Commitments terminate and the Commitment Termination Date; provided that any facility fees accruing after such earlier date shall be payable on demand. 

               (b) Payment and Computation of Fees. All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the
Administrative Agent for distribution, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances. All fees payable under this Section shall be computed on the basis of a year of 360 days and shall be payable for the
actual number of days elapsed (including the first day but excluding the last day). 

SECTION 2.09. Interest.

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

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

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

               (d) Payment of Interest. Accrued interest on each Loan shall be payable by the applicable Borrower in arrears on each Interest Payment Date
for such Loan and upon the date the Commitments terminate; provided that (x) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (y) in the event of any
repayment or prepayment of any Loan (other than a prepayment of an ABR Loan prior to the Commitment Termination Date), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (z) in
the event of any conversion of any Eurodollar Borrowing prior to the end of the Interest Period therefor, accrued interest on such Borrowing shall be payable on the effective date of such conversion. 

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

               SECTION 2.10. Alternate Rate of Interest. If prior to the commencement of the Interest Period for any Eurodollar Borrowing: 

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

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

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

SECTION 2.11. Increased Costs. 

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

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

     (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or any Eurodollar Loan made by such Lender; 

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

               (b) Capital Requirements. If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of
reducing the rate of return on such

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Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender’s holding
company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrowers will pay to
such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered. 

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

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

               (e) Application to Taxes. Notwithstanding anything in this Section to the contrary, this Section shall not apply to Taxes, which shall be
governed solely by Section 2.13. 

               SECTION 2.12. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of
an Interest Period therefor (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of an Interest Period therefor, (c) the failure to borrow, convert, continue or prepay any Loan on the
date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable under Section 2.07(b) and is revoked in accordance herewith), or (d) the assignment as a result of a request by XL Capital
pursuant to Section 2.15(b) of any Eurodollar Loan other than on the last day of an Interest Period therefor, then, in any such event, the Borrowers shall compensate each Lender for the loss attributable to such event. The loss to any Lender
attributable to any such event shall be deemed to be an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan for the
period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would
have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the
amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for
Dollar deposits from other banks in the eurodollar market at the commencement

  Credit Agreement

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

SECTION 2.13. Taxes.

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

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

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

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

               (e) Exemptions. Each Lender and the Administrative Agent shall, at the written request of XL Capital, provide to any Borrower such form,
certification or similar documentation, if any (each duly completed, accurate and signed) as is currently required by any Borrower Jurisdiction or any other jurisdiction, or comply with such other requirements, if any, as is currently applicable in
such Borrower Jurisdiction or any other jurisdiction, in order to obtain an exemption from, or reduced rate of, deduction, payment or withholding of Indemnified Taxes or Other Taxes to which such Lender or the Administrative Agent is entitled
pursuant to 

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an applicable tax treaty or the law of such Borrower Jurisdiction or any other jurisdiction; provided that XL Capital shall have furnished to such Lender or the
Administrative Agent in a reasonably timely manner copies of such documentation and notice of such requirements together with applicable instructions. Upon the reasonable request of XL Capital in writing, each Lender and the Administrative Agent
will provide to XL Capital such form, certification or similar documentation (each duly completed, accurate and signed) as may in the future be required by any Borrower Jurisdiction or any other jurisdiction, or comply with such other requirements,
if any, as may be applicable in such Borrower Jurisdiction or any other jurisdiction in order to obtain an exemption from, or reduced rate of, deduction, payment or withholding of Indemnified Taxes or Other Taxes to which such Lender or the
Administrative Agent is entitled pursuant to an applicable tax treaty or the law of the relevant jurisdiction. In addition, each Lender agrees from time to time when a lapse in time or change in circumstances renders the previous documentation
obsolete or inaccurate in any material respect, it will deliver to the Borrowers such properly completed and executed documentation as will permit such payments to continue to be made without withholding or at a reduced rate, or notify the Borrowers
that it is unable to do so. 

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

               SECTION 2.14. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. 

               (a) Payments
by the Borrowers. The Borrowers shall make each
payment required to be made by them hereunder (whether of principal, interest
or  fees, under Section 2.11, 2.12 or 2.13, or otherwise) prior to 12:00 noon,
New York City time, on the date when due, in immediately available funds, without
set-off or counterclaim. Any amounts received after such time on any date may,
in the  discretion of the Administrative Agent, be deemed to have been received
on the next succeeding Business Day for purposes of calculating interest thereon.
All such payments shall be made to the Administrative Agent at its offices at
383 Madison  Avenue, New York, New York 10179, except payments pursuant to
Sections 2.11, 2.12, 2.13 and 10.03, which shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for  account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment 

  Credit Agreement

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

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

               (c) Pro Rata Treatment. Except to the extent otherwise provided herein: (i) each Borrowing shall be made from the Lenders, each payment of
fees under Section 2.08 shall be made for account of the relevant Lenders, and each termination or reduction of the amount of the Commitments under Section 2.05 shall be applied to the respective Commitments, in each case pro rata according to the
amounts of their respective Commitments (or, in the case of any such payment after the termination of the Commitments, pro rata according to the Aggregate Credit Exposure); (ii) each Borrowing shall be allocated pro rata among the Lenders according
to the amounts of their respective Commitments (in the case of the making of Loans) or their respective Loans that are to be included in such Borrowing (in the case of conversions and continuations of Loans); (iii) each payment or prepayment of
principal of Loans by any Borrower shall be made for account of the Lenders pro rata according to the respective unpaid principal amounts of the Loans of such Borrower; and (iv) each payment of interest on Loans by a Borrower shall be made for
account of the Lenders pro rata according to the amounts of interest on such Loans then due and payable thereunder. 

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

  Credit Agreement

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

               (f) Certain Deductions by the Administrative Agent. If any Lender shall fail to make any payment required to be made by it pursuant to
Section 2.14(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for account of such Lender to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are fully paid. 

               SECTION 2.15. Mitigation Obligations; Replacement of Lenders. 

               (a) Designation of a Different Lending Office. If any Lender requests compensation under Section 2.11, or if any Borrower is required to pay
any additional amount or indemnification payment to any Lender or any Governmental Authority for account of any Lender pursuant to Section 2.13, then such Lender shall use reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.11 or 2.13, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Each Borrower hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. 

               (b) Replacement of Lenders. If any Lender requests compensation under Section 2.11, or if any Borrower is required to pay any additional
amount to any Lender or any Governmental Authority for account of any Lender pursuant to Section 2.13, or if any Lender defaults in its obligation to fund Loans, then XL Capital may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement to an assignee
selected by XL Capital that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) XL Capital shall have received the
prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees
and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the relevant Borrower (in the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.11 or payments required to be made pursuant to Section 2.13, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a 

  Credit Agreement

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result of a waiver by such Lender or otherwise, the circumstances entitling the relevant Borrower to require such assignment and delegation cease to apply. 

  ARTICLE III 
  GUARANTEE

               SECTION 3.01. The Guarantee. Each Guarantor hereby jointly and severally guarantees to each Lender and the Administrative Agent and their
respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Loans made by the Lenders to each of the Borrowers (other than such Guarantor in
its capacity as a Borrower hereunder) and all other amounts from time to time owing to the Lenders or the Administrative Agent by such Borrowers under this Agreement, in each case strictly in accordance with the terms thereof (such obligations being
herein collectively called the “Guaranteed Obligations”). Each Guarantor hereby further jointly and severally agrees that if any Borrower (other than such Guarantor in its capacity
as a Borrower hereunder) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, such Guarantor will promptly pay the same, without any demand or notice whatsoever, and that in
the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension
or renewal. 

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

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

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

     (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this
Agreement or any other agreement or instrument referred 

  Credit Agreement

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          to herein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with. 

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

               SECTION 3.03. Reinstatement. The obligations of the Guarantors under this Article shall be automatically reinstated if and to the extent that
for any reason any payment by or on behalf of any Borrower in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise, and the Guarantors jointly and severally agree that they will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including reasonable fees of counsel) incurred by the
Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar
payment under any bankruptcy, insolvency or similar law. 

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

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

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

               SECTION 3.07. Rights of Contribution. The Guarantors (other than XL Capital) hereby agree, as between themselves, that if any such Guarantor
shall become an Excess Funding Guarantor (as defined below) by reason of the payment by such Guarantor of any Guaranteed Obligations, each other Guarantor (other than XL Capital) shall, on demand of such Excess 

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Funding Guarantor (but subject to the next sentence), pay to such Excess Funding Guarantor an amount equal to such Guarantor’s Pro Rata Share (as defined below and determined, for this purpose, without reference to the
properties, debts and liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of such Guaranteed Obligations. The payment obligation of a Guarantor to any Excess Funding Guarantor under this Section shall be
subordinate and subject in right of payment to the prior payment in full of the obligations of such Guarantor under the other provisions of this Article III and such Excess Funding Guarantor shall not exercise any right or remedy with respect to
such excess until payment and satisfaction in full of all of such obligations. 

                 For purposes of this Section, (i) “Excess Funding Guarantor” means, in respect of any Guaranteed Obligations, a Guarantor that has paid an amount in excess of
its Pro Rata Share of such Guaranteed Obligations, (ii) “Excess Payment” means, in respect of any Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess
of its Pro Rata Share of such Guaranteed Obligations and (iii) “Pro Rata Share” means, for any Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the
aggregate present fair saleable value of all properties of such Guarantor (excluding any shares of stock of any other Guarantor) exceeds the amount of all the debts and liabilities of such Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Guarantor hereunder and any obligations of any other Guarantor that have been Guaranteed by such Guarantor) to (y) the amount by which the aggregate fair saleable value of all
properties of all of the Guarantors (other than XL Capital) exceeds the amount of all the debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of the Guarantors under this
Article III) of all of the Guarantors (other than XL Capital), determined (A) with respect to any Guarantor that is a party hereto on the date hereof, as of the date hereof, and (B) with respect to any other Guarantor, as of the date such Guarantor
becomes a Guarantor hereunder. 

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

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ARTICLE IV

  REPRESENTATIONS AND WARRANTIES

               Each Borrower represents and warrants to the Lenders that: 

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

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

               SECTION 4.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of (including any exchange
control approval), registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter,
by-laws or other organizational documents of such Borrower or any of its Significant Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any material indenture, agreement or other instrument
binding upon such Borrower or any of its Significant Subsidiaries or assets, or give rise to a right thereunder to require any payment to be made by any such Person, and (d) will not result in the creation or imposition of any Lien on any asset of
such Borrower or any of its Significant Subsidiaries. 

               SECTION 4.04. Financial Condition; No Material Adverse Change. 

               (a) Financial Condition. Such Borrower has heretofore furnished to the Lenders the consolidated balance sheet and statements of income,
stockholders’ equity and cash flows of such Borrower and its consolidated Subsidiaries (A) as of and for the fiscal year ended December 31, 2004, reported on by PricewaterhouseCoopers LLP, independent public accountants (as provided in XL
Capital’s Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2004), and (B) as of and for the fiscal quarter ended March 31, 2005, as provided in XL Capital’s Report on Form 10-Q filed with the SEC for the fiscal
quarter ended March 31, 2005. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of such Borrower and its respective consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP or (in the case of XL Insurance or XL Re) SAP, subject to year-end audit adjustments and the absence 

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of footnotes in the case of the statements referred to in clause (B) of the first sentence of this paragraph. 

               (b) No Material Adverse Change. Since December 31, 2004, there has been no material adverse change in the assets, business, financial
condition or operations of such Borrower and its Subsidiaries, taken as a whole. 

SECTION 4.05. Properties.

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

               (b) Intellectual Property. Such Borrower and each of its Significant Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents and other intellectual property material to its business, and the use thereof by such Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse Effect. 

SECTION 4.06. Litigation and Environmental Matters. 

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

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

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

               SECTION 4.08. Investment and Holding Company Status. Such Borrower is not (a) an “investment company” as defined in, or subject to
regulation under, the Investment 

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Company Act of 1940 or (b) a “holding company” as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. 

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

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

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

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

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

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               SECTION 4.13. Subsidiaries. Set forth in Schedule V is a complete and correct list of all of the Subsidiaries of XL Capital as of March 31,
2005, together with, for each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary and (iii) the percentage of ownership of such Subsidiary represented by such
ownership interests. Except as disclosed in Schedule V, (x) each of XL Capital and its Subsidiaries owns, free and clear of Liens, and has the unencumbered right to vote, all outstanding ownership interests in each Person shown to be held by it in
Schedule V, (y) all of the issued and outstanding capital stock of each such Person organized as a corporation is validly issued, fully paid and nonassessable and (z) except as disclosed in filings of XL Capital with the SEC prior to the date
hereof, there are no outstanding Equity Rights with respect to any Borrower. 

               SECTION 4.14. Withholding Taxes. Based upon information with respect to each Lender provided by each Lender to the Administrative Agent, as
of the date hereof, the payment of the principal of and interest on the Loans, the fees under Section 2.08 and all other amounts payable hereunder will not be subject, by withholding or deduction, to any Indemnified Taxes imposed by Bermuda or the
Cayman Islands. 

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

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

ARTICLE V

CONDITIONS

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

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

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     (b) Opinions of Counsel to the Obligors. Opinions, each dated the Effective Date, of (i) Charles F. Barr, Esq., counsel to XL Capital,
substantially in the form of Exhibit B-1, (ii) Richard G. McCarty, Esq., counsel to XL America, substantially in the form of Exhibit B-2, (iii) Cahill Gordon & Reindel LLP, special U.S.
counsel for the Obligors, substantially in the form of Exhibit B-3, (iv) Conyers, Dill & Pearman, special Bermuda counsel to XL Insurance and XL Re, substantially in the form of Exhibit B-4 and (v) Appleby Spurling Hunter, special Cayman Islands
counsel to XL Capital, substantially in the form of Exhibit B-5. 

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

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

     (e) Other Documents. Such other documents as the Administrative Agent or any Lender or its counsel may reasonably request. 

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

               The Administrative Agent shall notify the Borrowers and the Lenders of the Effective Date, and such notice shall be conclusive and binding. 

               SECTION 5.02. Each Credit Event. The obligation of each Lender to make any Loan is additionally subject to the satisfaction of the following
conditions: 

     (a) the representations and warranties of the Obligors set forth in this Agreement (other than, at any time after the Effective Date, in Section 4.04(b)) shall be true and correct on and as of the
date of such Loan (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and 

     (b) at the time of and immediately after giving effect to the making of such Loan, no Default shall have occurred and be continuing. 

Each Borrowing shall be deemed to constitute a representation and warranty by the Obligors on the date thereof as to the matters specified in clauses (a) and (b) of the immediately preceding sentence. 

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ARTICLE VI

  AFFIRMATIVE COVENANTS

               Until the Commitments have expired or been terminated, the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, the Borrowers covenant and agree with the
Lenders that: 

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

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

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

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

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

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

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

     
(g) concurrently with any delivery
  of financial statements under clause (a), (b) or (c) of this Section, a certificate
  of a Financial Officer of XL Capital, setting forth on a consolidated basis for
   XL Capital and its consolidated Subsidiaries as of the end of the fiscal year
  or quarter to which such certificate relates (i) the aggregate book value of
  assets which are subject to Liens permitted under Section 7.03(h) and the aggregate
  book value  of liabilities which are subject to Liens permitted under Section
  7.03(h)(it being understood that the reports required by paragraphs (a), (b)
  and (c) of this Section shall 

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satisfy the requirement of this clause (i) of this paragraph (g) if such reports set forth separately, in accordance with GAAP, line items corresponding to such aggregate book values) and (ii) a calculation showing the portion of
each of such aggregate amounts which portion is attributable to transactions among wholly-owned Subsidiaries of XL Capital;

     (h) within 90 days after the end of each of the first three fiscal quarters of each fiscal year and within 135 days after the end of each fiscal year of XL Capital (commencing with the fiscal year
ending December 31, 2005), a statement of a Financial Officer of XL Capital listing, as of the end of the immediately preceding fiscal quarter of XL Capital, the amount of cash and the securities of the Borrowers and their Subsidiaries that have
been posted as collateral under Section 7.03(f); and 

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

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

     (a)
        the occurrence of any Default; and 

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

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

               SECTION 6.03. Preservation of Existence and Franchises. Each Borrower will, and will cause each of its Significant Subsidiaries to, maintain
its corporate existence and its material rights and franchises in full force and effect in its jurisdiction of incorporation; provided that the foregoing shall not prohibit any merger or
consolidation permitted under Section 7.01. Each Borrower will, and will cause each of its Subsidiaries to, qualify and remain qualified as a foreign corporation in each jurisdiction in which failure to receive or retain such qualification would
have a Material Adverse Effect. 

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

               SECTION 6.05. Maintenance of Properties. Each Borrower will, and will cause each of its Subsidiaries to, maintain or cause to be maintained
in good repair, working order and condition the properties now or hereafter owned, leased or otherwise possessed by and used or useful in its business and will make or cause to be made all needful and proper repairs, renewals, 

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replacements and improvements thereto so that the business carried on in connection therewith may be properly conducted at all times except if the failure to do so would not have a Material Adverse Effect, provided, however, that the foregoing shall not impose on such Borrower or any Subsidiary of such Borrower any obligation in respect of any
property leased by such Borrower or such Subsidiary in addition to such Borrower’s obligations under the applicable document creating such Borrower’s or such Subsidiary’s lease or tenancy. 

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

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

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

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

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

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

               SECTION 6.08. Compliance with Applicable Laws. Each Borrower will, and will cause each of its Subsidiaries to, comply with all applicable
Laws (including but not limited to the Bermuda Companies Law and Bermuda Insurance Laws) in all respects; provided that such Borrower or any Subsidiary of such Borrower will not be deemed to
be in violation of this Section as a result of any failure to comply with any such Law which would not (i) result in 

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fines, penalties, injunctive relief or other civil or criminal liabilities which, in the aggregate, would have a Material Adverse Effect or (ii) otherwise impair the ability of such Borrower to perform its obligations under this
Agreement. 

               SECTION 6.09. Use of Loan Proceeds. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that
entails a violation of any of the Regulations of the Board, including Regulations U and X. Each Borrower will use the proceeds of all Loans made to it for the general corporate purposes of, such Borrower and its Affiliates. 

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

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

               SECTION
6.12. “Most Favored Lender” Status.
If at any time after the Effective Date XL Capital shall enter into any new syndicated
 credit facility (including any increase, renewal, extension, amendment, restatement
or replacement of either of the Other Credit Agreements) that contains any provision
(each a “Subject Provision”) which is more beneficial to the lenders under such new syndicated
credit facility, or is more restrictive on XL Capital or any of its Subsidiaries,
than the provisions of this Agreement, then XL Capital shall provide prompt
written notice thereof to the Administrative Agent (and furnish the Administrative
Agent a copy of the definitive documentation for such new syndicated credit facility).
Thereupon, unless waived in writing by the Required Lenders within 10 Business
 Days of the Administrative Agent’s receipt of such notice, such Subject
 Provision shall be deemed incorporated by reference into this Agreement, mutatis
 mutandis, as if set forth fully
herein effective as of the date when such Subject Provision became effective
 under such new syndicated credit facility. If at any time the terms of any Subject
 Provision incorporated into this Agreement pursuant to this Section shall be
 amended or  otherwise modified in a manner that is beneficial to XL Capital,
 then, upon notice thereof by XL Capital to the Administrative Agent, such Subject
 Provision shall be deemed so amended or otherwise modified in this Agreement,
 provided that, to the  extent that XL Capital shall directly or indirectly pay
 or cause to be paid any amendment or similar fee to lenders (but not including
 any agency or upfront fees in connection with any such new syndicated credit
 facility) as consideration for or as an inducement to the entering into of any
 amendment or modification of any Subject Provision, XL Capital shall pay such
 fee, on the same terms, ratably to each Lender. Upon the request of the Required
 Lenders, the Obligors shall enter into such amendments to this Agreement as
 the Required Lenders may reasonably request, evidencing the incorporation of
 such Subject Provision into this Agreement. 

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ARTICLE VII

NEGATIVE COVENANTS

               Until the Commitments have expired or terminated, the principal of and interest on each Loan and all fees payable hereunder have been paid in full, each of the Borrowers covenants and agrees with the
Lenders that:

                SECTION 7.01. Mergers. No Borrower will merge with or into or consolidate with any other Person, except that if no Default shall occur and be
  continuing or shall exist at the time of such merger or consolidation or immediately thereafter and after giving effect thereto (a) any Borrower may merge or consolidate with any other corporation, including a Subsidiary, if such Borrower shall be
  the surviving corporation, (b) XL Capital may merge with or into or consolidate with any other Person in a transaction that does not result in a reclassification, conversion, exchange or cancellation of the outstanding shares of capital stock of XL
  Capital (other than the cancellation of any outstanding shares of capital stock of XL Capital held by the Person with whom it merges or consolidates) and (c) any Borrower may enter into a merger or consolidation which is effected solely to change
  the jurisdiction of incorporation of such Borrower and results in a reclassification, conversion or exchange of outstanding shares of capital stock of such Borrower solely into shares of capital stock of the surviving entity.

                SECTION 7.02. Dispositions. No Borrower will, nor will it permit any of its Significant Subsidiaries to, sell, convey, assign, lease, abandon
  or otherwise transfer or dispose of, voluntarily or involuntarily (any of the foregoing being referred to in this Section as a “Disposition” and any series of related Dispositions
  constituting but a single Disposition), any of its properties or assets, tangible or intangible (including but not limited to sale, assignment, discount or other disposition of accounts, contract rights, chattel paper or general intangibles with or
  without recourse), except:

     (a) Dispositions in the ordinary course of business involving current assets or other invested assets classified on such Borrower’s or its respective Subsidiaries’ balance sheet as available
  for sale or as a trading account;

     (b) sales, conveyances, assignments or other transfers or dispositions in immediate exchange for cash or tangible assets, provided that any
  such sales, conveyances or transfers shall not individually, or in the aggregate for the Borrowers and their respective Subsidiaries, exceed $500,000,000 in any calendar year;

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

     (d) Dispositions from a Borrower or a wholly-owned Subsidiary to any other Borrower or wholly-owned Subsidiary. 

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     SECTION 7.03. Liens. No Borrower will, nor will it permit any of its Subsidiaries to, create, incur, assume or permit to exist any Lien on
any property or assets, tangible or intangible, now owned or hereafter acquired by it, except: 

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

     (b) Liens arising from taxes, assessments, charges, levies or claims described in Section 6.06 that are not yet due or that remain payable without penalty or to the extent permitted to remain unpaid
  under the provision of Section 6.06;

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

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

     (e) Liens securing Indebtedness permitted by Section 7.07(b) covering assets whose market value is not materially greater than the amount of the Indebtedness secured thereby plus a commercially
  reasonable margin;

     (f) Liens on cash and securities of a Borrower or any of its Subsidiaries incurred as part of the management of its investment portfolio including, but not limited to, pursuant to any International
  Swaps and Derivatives Association, Inc. (“ISDA”) documentation or any Specified Transaction Agreement in accordance with XL Capital’s Statement of Investment Policy Objectives
  and Guidelines as in effect on the date hereof or as it may be changed from time to time by a resolution duly adopted by the board of directors of XL Capital (or any committee thereof);

     (g) Liens on cash and securities not to exceed $500,000,000 in the aggregate securing obligations of a Borrower or any of its Subsidiaries arising under any ISDA documentation or any other
  Specified Transaction Agreement (it being understood that in no event shall this clause (g) preclude any Person (other than any Subsidiary of XL Capital) in which XL Capital or any of its Subsidiaries shall invest (each an “investee”) from granting Liens on such Person’s assets to secure hedging obligations of such Person, so long as such obligations are non-recourse to XL Capital or any of its Subsidiaries (other
  than any investees)), provided that, for purposes of determining the aggregate amount of cash and/or securities subject to such Liens under this clause (g), the aggregate 

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amount of cash and/or securities on which any Borrower or any Subsidiary shall have granted a Lien in favor of a counterparty at any time shall be netted against the aggregate amount of cash and/or securities on which such
counterparty shall have granted a Lien in favor of such Borrower or such Subsidiary, as the case may be, at such time, so long as the relevant agreement between such Borrower or such Subsidiary, as the case may be, provides for the netting of their
respective obligations thereunder; 

     (h) Liens on (i) assets received, and on actual or imputed investment income on such assets received incurred as part of its business including activities utilizing ISDA documentation or any Specified
Transaction Agreement relating and identified to specific insurance payment liabilities or to liabilities arising in the ordinary course of any Borrowers’ or any of their Subsidiary’s business as an insurance or reinsurance company
(including GICs and Stable Value Instruments) or corporate member of The Council of Lloyd’s or as a provider of financial or investment services or contracts, or the proceeds thereof (including GICs and Stable Value Instruments), in each case
held in a segregated trust, trust or other account and securing such liabilities, (ii) assets securing Exempt Indebtedness of any Person (other than XL Capital or any of its Affiliates) in the event such Exempt Indebtedness is consolidated on the
consolidated balance sheet of XL Capital and its consolidated Subsidiaries in accordance with GAAP or (iii) any other assets subject to any trust or other account arising out of or as a result of contractual, regulatory or any other requirements;
provided that in no case shall any such Lien secure Indebtedness and any Lien which secures Indebtedness shall not be permitted under this clause (h); 

     (i) statutory and common law Liens of materialmen, mechanics, carriers, warehousemen and landlords and other similar Liens arising in the ordinary course of business; and 

     (j) Liens existing on property of a Person immediately prior to its being consolidated with or merged into any Borrower or any of their Subsidiaries or its becoming a Subsidiary, and Liens existing on
any property acquired by any Borrower or any of their Subsidiaries at the time such property is so acquired (whether or not the Indebtedness secured thereby shall have been assumed) (and extension, renewal and replacement Liens upon the same
property, provided that the amount secured by each Lien constituting such an extension, renewal or replacement Lien shall not exceed the amount secured by the Lien theretofore existing),
provided that (i) no such Lien shall have been created or assumed in contemplation of such consolidation or merger or such Person’s becoming a Subsidiary or such acquisition of property
and (ii) each such Lien shall extend solely to the item or items of property so acquired and, if required by terms of the instrument originally creating such Lien, other property which is an improvement to or is acquired for specific use in
connection with such acquired property. 
               SECTION 7.04. Transactions with Affiliates. No Borrower will, nor will it permit any of its Significant Subsidiaries to, enter into or carry
out any transaction with (including purchase or lease property or services to, loan or advance to or enter into, suffer to remain in existence or amend any contract, agreement or arrangement with) any Affiliate of such Borrower, or directly or
indirectly agree to do any of the foregoing, except (i) transactions 

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involving guarantees or co-obligors with respect to any Indebtedness described in Part A of Schedule II, (ii) transactions among the Borrowers and their wholly-owned Subsidiaries and (iii) transactions with Affiliates in good
faith in the ordinary course of such Borrower’s business consistent with past practice and on terms no less favorable to such Borrower or any Subsidiary than those that could have been obtained in a comparable transaction on an arm’s
length basis from an unrelated Person.

                SECTION 7.05. Ratio of Total Funded Debt to Total Capitalization. XL Capital will not permit its ratio of (a) Total Funded Debt to (b) the
  sum of Total Funded Debt plus Consolidated Net Worth to be greater than 0.35:1.00 at any time.

               SECTION 7.06. Consolidated Net Worth. XL Capital will not permit its Consolidated Net Worth to be less than the sum of (a) $5,000,000,000
  plus (b) 25% of consolidated net income (if positive) of XL Capital and its Subsidiaries for each fiscal quarter ending on or after June 30, 2005. 

               SECTION 7.07. Indebtedness. No Borrower will, nor will it permit any of its Subsidiaries to, at any time create, incur, assume or permit to
exist any Indebtedness, or agree, become or remain liable (contingent or otherwise) to do any of the foregoing, except: 

     (a) Indebtedness created hereunder;	

     (b) secured Indebtedness (including secured reimbursement
  obligations with respect to letters of credit) of any Borrower
  or any Subsidiary in an aggregate principal amount (for all Borrowers and their
  respective Subsidiaries) not exceeding at any time outstanding 15% of Consolidated
  Net Worth;

     (c) other unsecured Indebtedness, so long as upon the incurrence thereof no Default would occur or exist; 

     (d) Indebtedness consisting of accounts or claims payable and accrued and deferred compensation (including options) incurred in the ordinary course of business by any Borrower or any Subsidiary;

     (e) Indebtedness incurred in transactions described in Section 7.03(f) and (g); and

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

               SECTION 7.08. Financial Strength Ratings. None of XL Capital, XL Insurance and XL Re will permit at any time its financial strength ratings
to be less than “A-” from A.M. Best & Co. (or its successor). 

               SECTION 7.09. Private Act. No Borrower will become subject to a Private Act other than the X.L. Insurance Company, Ltd. Act, 1989. 

               SECTION 7.10. Ratable Borrowings. No Borrower shall permit Loans to be outstanding hereunder in an aggregate principal amount greater than
the Maximum Percentage of

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the Aggregate Revolving Credit Exposure for a period of more than 10 Business Days; provided that, if an Event of Default shall have occurred and be continuing, no
Borrower shall permit Loans to be outstanding hereunder in an aggregate principal amount greater than the Maximum Percentage of the Aggregate Revolving Credit Exposure at any time. For this purpose, (i) “Aggregate
Revolving Credit Commitments” means, at any time, the sum of, without duplication, (a) the Commitments then in effect and (b) the maximum amount of commitments to make loans (whether used or unused) by the lenders
under the Other Credit Agreements then in effect; (ii) “Aggregate Revolving Credit Exposure” means, at any time, the sum of (a) the Aggregate Credit Exposure and (b) the aggregate
outstanding principal amount of the loans under the Other Credit Agreements at such time; and (iii) “Maximum Percentage” means the percentage of the Aggregate Revolving Credit
Commitments represented by the Commitments. 

ARTICLE VIII

EVENTS OF DEFAULT

               If any of the following events (“Events of Default”)
  shall occur: 

     (a) any Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

     (b) any Borrower shall fail to pay any interest on any Loan or any fee payable under this Agreement or any other amount (other than an amount referred to in clause (a) of this Article) payable under
this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of 5 or more days; 

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

     (d) any Borrower shall fail to observe or perform any covenant, condition or agreement contained in Article VII; 

     (e) any Obligor shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article or the reporting
requirement pursuant to Section 6.01(h)) and such failure shall continue unremedied for a period of 20 or more days after notice thereof from the Administrative Agent (given at the request of any Lender) to such Obligor; 

     (f) any Borrower or any of its Subsidiaries shall default (i) in any payment of principal of or interest on any other obligation for borrowed money in principal amount of $50,000,000 or more, or
any payment of any principal amount of $50,000,000 or more under Hedging Agreements, in each case beyond any period of grace provided with respect thereto, or (ii) in the performance of any other agreement, term or condition 

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contained in any such agreement (other than Hedging Agreements) under which any such obligation in principal amount of $50,000,000 or more is created, if the effect of such
default is to cause or permit the holder or holders of such obligation (or trustee on behalf of such holder or holders) to cause such obligation to become due prior to its stated maturity or to terminate its commitment under such agreement,
provided that this clause (f) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;

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

     (h) any Borrower shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent
seeking reorganization under the Bermuda Companies Law or the Cayman Islands Companies Law or any other similar applicable Law, or shall consent to the filing of any such petition, or shall consent to the appointment of an examiner, receiver or
liquidator or trustee or assignee in bankruptcy or insolvency of it or a substantial part of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become
due, or corporate or other action shall be taken by such Borrower in furtherance of any of the aforesaid purposes; 

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

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

     (k) a Change in Control shall occur; 

     (l) XL Capital shall cease to own, beneficially and of
  record, directly or indirectly all of the outstanding voting shares of capital stock of XL Insurance, XL Re or XL America; or 

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     (m) the guarantee contained in Article III shall terminate or cease, in whole or material part, to be a legally valid and binding obligation of each Guarantor or any Guarantor or any Person acting for
or on behalf of any of such parties shall contest such validity or binding nature of such guarantee itself or the Transactions, or any other Person shall assert any of the foregoing; 

then, and in every such event (other than an event with respect to any Borrower described in clause (g) or (h) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at
the request of the Required Lenders shall, by notice to the Borrowers, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared
to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrowers; and in case of any event with respect to any Borrower described in clause (g) or (h) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together
with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the
Borrowers. 

ARTICLE IX

THE ADMINISTRATIVE AGENT

               Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are
delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. 

               The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent, and such Person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with any Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent
hereunder. 

               The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the 
Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Required Lenders, and (c) except as expressly set forth herein,
the Administrative Agent shall not have any duty to disclose, and shall not be liable for 

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the failure to disclose, any information relating to any Borrower or any of their Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed
not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by a Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth
in Article V or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. 

               The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing
believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur
any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for any Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by
it in accordance with the advice of any such counsel, accountants or experts. 

               The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent
and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. 

               The Administrative Agent may resign at any time by notifying the Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right, in consultation with XL Capital, to
appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent’s resignation shall nonetheless become effective and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and (2) the Required Lenders shall perform the duties of the
Administrative Agent (and all payments and communications provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly) until such time as the Required Lenders appoint a successor agent as
provided for above in this paragraph. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring (or
retired) Administrative 

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Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder (if not already discharged therefrom as provided above in this paragraph). The fees payable by XL Capital to a successor
Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between XL Capital and such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 10.03
shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. 

               Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as
it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. 

ARTICLE X

MISCELLANEOUS

               SECTION 10.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: 

     (a) if to any Borrower, to XL Capital at XL House, One Bermudiana Road, Hamilton HM 11 Bermuda, Attention of Roderick Gray (Telecopy No. (441) 296-6399); with a
copy to Kirstin Romann Gould, Esq. at the same address and telecopy number (441) 295-2840);

     (b) if to the Administrative Agent, to Bear Stearns Corporate Lending Inc., 383 Madison Avenue, New York, New York 10179, Attention of Randall Trombley (Telecopy No. (212) 272-8871; Telephone No. (212) 272-9184); and 

     (c) if to a Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. 
Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto (or, in the case of any such change by a Lender, by notice to the Borrowers and the
  Administrative Agent). All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.     

               Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless 

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otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or any Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. Without limiting the foregoing, the Borrowers may
furnish to the Administrative Agent and the Lenders the financial statements required to be furnished by it pursuant to Section 6.01(a), 6.01(b) or 6.01(c) by electronic communications pursuant to procedures approved by the Administrative Agent.

SECTION 10.02. Waivers; Amendments.

               (a) No Deemed Waivers; Remedies Cumulative. No failure or delay by the Administrative Agent or any Lender in exercising any right or power
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this

Agreement or consent to any departure by the Borrowers therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have
had notice or knowledge of such Default at the time. 

               (b) Amendments.
Neither this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to an agreement or  agreements in writing entered into by the
Obligors and the Required Lenders or by the Obligors and the Administrative Agent
with the consent of the Required Lenders; provided that no such
agreement shall:

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

     (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees or other amounts payable hereunder, without the written consent of each Lender directly affected
thereby, 

     (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender directly affected thereby, 

     (iv) change Section 2.20(c) or 2.20(d) without the consent of each Lender directly affected thereby, 

     (v) release any of the Guarantors from any of their guarantee obligations under Article III without the written consent of each Lender, and 

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     (vi) change any of the provisions of this Section or the percentage in the definition of the term “Required Lenders” or any other provision hereof specifying the number or percentage of
Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender;
and provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent hereunder without the prior written consent of the Administrative Agent.

               
  SECTION 10.03. Expenses; Indemnity; Damage Waiver. 

               (a) Costs and Expenses. The Borrowers jointly and severally agree to pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and
administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket expenses incurred by the
Administrative Agent or any Lender, including the fees, charges and disbursements of one legal counsel for the Administrative Agent and one legal counsel for the Lenders, in connection with the enforcement or protection of its rights in connection
with this Agreement, including its rights under this Section, or in connection with the Loans made hereunder, including in connection with any workout, restructuring or negotiations in respect thereof. 

               (b) Indemnification by the Borrowers. The Borrowers shall jointly and severally indemnify the Administrative Agent and each Lender, and each
Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee (but not including Excluded Taxes), incurred by or asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or the use of the proceeds thereof, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by any Borrower or any of its Subsidiaries, or any
Environmental Liability related in any way to any Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other
theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses result from or arise out of the gross negligence or willful misconduct of such Indemnitee. 

               (c) Reimbursement by Lenders. To the extent that the Borrowers fail to pay any amount required to be paid by them to the Administrative Agent
under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or 

  Credit Agreement

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indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the
Administrative Agent in its capacity as such. 

               (d) Waiver of Consequential Damages, Etc. To the extent permitted by applicable law, no Borrower shall assert, and each Borrower hereby
waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. 

               (e) Payments. All amounts due under this Section shall be payable promptly after written demand therefor.

                SECTION 10.04. Successors and Assigns. 

               (a) Assignments Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that (i) no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by
a Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. 

               (b) Assignments by Lenders. (i) Subject to the conditions set forth in paragraph (b)(ii) of this Section, any Lender may assign all or a
portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans) to (A) any Eligible Transferee or (B) with the prior written consent of the Borrowers and the Administrative Agent (such consent,
in each case, not to be unreasonably withheld) any other Person. 

     (ii) Assignments shall be subject to the following additional conditions:     

                 (A) except in the case of an assignment to any Eligible
          Transferee or an assignment of the entire remaining amount of the assigning
          Lender’s Commitment, the amount of the Commitment of the assigning Lender subject to each
          such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000
          unless each of the Borrowers and the Administrative Agent otherwise
          consent, provided that no such consent of the Borrowers shall be required if an Event of Default under clause (a), (b), (g) or (h) of Article VIII has occurred and is continuing;
      

               (B) each partial assignment shall be made as an assignment
          of a proportionate part of all the assigning Lender’s rights and
          obligations under this Agreement; 

  Credit Agreement

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                 (C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and 

                 (D)
    the assignee, if it shall not be a Lender, shall deliver an Administrative
    Questionnaire to the Administrative Agent (with a copy to XL Capital). 

               (iii) Subject to acceptance and recording thereof pursuant
    to paragraph (b)(v) of this Section, from and after the effective date specified
    in each Assignment and Assumption, the assignee thereunder shall be a party
    hereto and, to the extent of the interest assigned by such Assignment and
    Assumption, have the rights and obligations of a Lender under this Agreement,
    and the assigning Lender thereunder shall, to the extent of the interest
    assigned by such Assignment and Assumption, be released from its obligations
    under this Agreement (and, in the case of an Assignment and Assumption covering
    all of the assigning Lender’s rights and obligations under this Agreement,
    such Lender shall cease to be a party hereto but shall continue to be entitled
    to the benefits of Sections 2.11, 2.12, 2.13 and 10.03) . Any assignment
    or transfer by a Lender of rights or obligations under this Agreement that
    does not comply with this Section 10.04 shall be treated for purposes of
    this Agreement as a sale by such Lender of a participation in such rights
    and obligations in accordance with paragraph (c) of this Section.     

               (iv) Notwithstanding anything to the contrary contained
      herein, any Lender (a “Granting Lender”) may grant to
      a special purpose vehicle (an “SPV”) of such Granting
      Lender, identified as such in writing from time to time by the Granting
      Lender to the Administrative Agent and the Borrowers, the option to provide
      to the Borrowers all or any part of any Loan that such Granting Lender
      would otherwise be obligated to make to the Borrowers pursuant to Section
      2.01, provided that (i) nothing herein shall
    constitute a commitment by any SPV to make any Loan, (ii) if an SPV elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof
    and (iii) the Borrowers may bring any proceeding against either or both the Granting Lender or the SPV in order to enforce any rights of the Borrowers hereunder. The making of a Loan by an SPV hereunder shall utilize the Commitment of the Granting
    Lender to the same extent, and as if, such Loan were made by the Granting Lender. Each party hereto hereby agrees that no SPV shall be liable for any payment under this Agreement for which a Lender would otherwise be liable, for so long as, and to
    the extent, the related Granting Lender makes such payment. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after
    the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or
    liquidation proceedings or similar proceedings under the laws of the United States or any State thereof arising out of any claim against such SPV under this Agreement. In addition, notwithstanding anything to the contrary contained in this Section,
    any SPV may with notice to, but without the prior written consent of, the Borrowers or the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loan to its Granting Lender or to any
    financial institutions (consented to by the Borrowers and the Administrative Agent) providing liquidity and/or credit support (if any) with respect to commercial paper issued by such

  Credit Agreement

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SPV to fund such Loans and such SPV may disclose, on a confidential basis, confidential information with respect to any Borrower and its Subsidiaries to any rating agency, commercial paper dealer or provider of a surety, guarantee
or credit liquidity enhancement to such SPV. Notwithstanding anything to the contrary in this Agreement, no SPV shall be entitled to any greater rights under Section 2.11 or Section 2.13 than its Granting Lender would have been entitled to absent
the use of such SPV. This paragraph may not be amended without the consent of any SPV at the time holding Loans under this Agreement.

                 (v) The Administrative Agent, acting for this purpose as an agent of the 
  Borrowers, shall maintain at one of its offices in New York City a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, the Commitment of, and
  principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the
  Borrowers, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The
  Register shall be available for inspection by any Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

                  (vi) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender
    hereunder), the processing and recordation fee referred to in paragraph (b)(ii)(C) of this Section and any written consent to such assignment required by paragraph (b)(i) of this Section, the Administrative Agent shall accept such Assignment and
  Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

                  (c) Participations. (i) Any Lender may sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment, the Loans owing to it); provided
  that (A) any such participation sold to a Participant which is not an Eligible Transferee or a Federal Reserve Bank shall be made only with the consent (which in each case shall not be unreasonably withheld) of XL Capital and the Administrative
  Agent, (B) such Lender’s obligations under this Agreement shall remain unchanged, (C) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (D) the Borrowers, the Administrative
      Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a
      participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that affects such
      Participant. Subject to paragraph (c)(ii) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of Sections 2.11, 2.12 and 2.13 (subject to the requirements of such Sections) to the same extent as if it were a
  Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent 

  Credit Agreement

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permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided that such Participant agrees to be subject
to Section 2.14(d) as though it were a Lender.

                 (ii) A Participant shall not be entitled to receive any greater payment under Section 2.11, 2.12 or 2.13 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant
  or the Lender interest assigned, unless (A) the sale of the participation to such Participant is made with the Borrowers’ prior written consent and (B) in the case of Section 2.11 or 2.13, the entitlement to greater payment results solely from
a Change in Law formally announced after such Participant became a Participant.

                 (d) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of
  such Lender, including any such pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. 

               (e) No Assignments to Borrowers or Affiliates. Anything in this Section to the contrary notwithstanding, no Lender may assign or participate
any interest in any Loan held by it hereunder to any Borrower or any of its Affiliates or Subsidiaries without the prior consent of each Lender. 

               SECTION 10.05. Survival. All covenants, agreements, representations and warranties made by the Borrowers herein and in the certificates or
other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans,
regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as long as the principal of, or any accrued interest on, any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid is outstanding and so
long as the Commitments have not expired or terminated. The provisions of Sections 2.11, 2.12, 2.13 and 10.03 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans and the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. 

               SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement constitutes the entire contract between and among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 5.01, this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding 

  Credit Agreement

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upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page to this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement. 

               SECTION 10.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a
particular jurisdiction shall not invalidate such provision in any other jurisdiction. 

               SECTION 10.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for
the credit or the account of any Borrower against any of and all the obligations of such Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this
Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

                SECTION 10.09. Governing Law; Jurisdiction; Etc. 

               (a) Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of New York. 

               (b) Submission to Jurisdiction. Each Obligor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of
or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in
such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the 
Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Obligor or its properties in the courts of any jurisdiction. 

               (c) Waiver of Venue. Each Obligor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so,
any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 

  Credit Agreement

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               (d) Service of Process. By the execution and delivery of this Agreement, XL Capital Ltd, XL Insurance (Bermuda) Ltd and XL Re Ltd acknowledge
that they have by a separate written instrument, designated and appointed CT Corporation System, 111 Eighth Avenue, 13th floor, New York, New York 10011 (or any successor entity
thereto), as its authorized agent upon which process may be served in any suit or proceeding arising out of or relating to this Agreement that may be instituted in any federal or state court in the State of New York. Each party to this Agreement
irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. 

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

               SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON 
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 

               SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 10.12. Treatment of Certain Information; Confidentiality. 

               (a) Treatment of Certain Information. Each of the Borrowers acknowledge that from time to time financial advisory, investment banking and
other services may be offered or provided to any Borrower or one or more of their Subsidiaries (in connection with this Agreement or otherwise) by any Lender or by one or more subsidiaries or affiliates of such Lender and each of the Borrowers
hereby authorizes each Lender to share any information delivered to such Lender by such Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such subsidiary
or affiliate, it being understood that (i) any such information shall be used only for the purpose of advising the Borrowers or preparing presentation materials for the benefit of the Borrowers and (ii) any such subsidiary or affiliate receiving
such information shall be bound by the provisions of paragraph (b) of this Section as if it were a Lender hereunder. Such authorization shall 

  Credit Agreement

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survive the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. 

               (b) Confidentiality. Each of the Administrative Agent, the Lenders and each SPV agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (i) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority (including self-regulating organizations) having
jurisdiction over the Administrative Agent or any Lender (or any Affiliate thereof), (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) in
connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (vi) subject to an agreement in writing containing provisions substantially the same as those
of this paragraph and for the benefit of the Borrowers, to (a) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (b) any actual or prospective counterparty
(or its advisors) to any swap or derivative transaction relating to any Borrower and its obligations, (vii) with the consent of the Borrowers or (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach
of this paragraph or (B) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than a Borrower. For the purposes of this paragraph, “Information” means all information received from a Borrower relating to a Borrower or its business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by
such Borrower; provided that, in the case of information received from a Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any
Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information. Notwithstanding the foregoing, each of the Administrative Agent and the Lenders agree that they will not trade the securities of any of the Borrowers based upon non-public
Information that is received by them. 

               SECTION 10.13. Judgment Currency. This is an international loan transaction in which the obligations of each Borrower under this Agreement to
make payment hereunder shall be satisfied only in Dollars and only if such payment shall be made in New York City, and the obligations of each Borrower under this Agreement to make payment to (or for account of) a Lender in Dollars shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any other currency or in another place except to the extent that such tender or recovery results in the effective receipt by such Lender in New
York City of the full amount of Dollars payable to such Lender under this Agreement. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency (in this Section called the
“judgment currency”), the rate of exchange that shall be applied shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase such
Dollars at the principal office of the Administrative Agent in New York City with the judgment currency on the Business Day next preceding the day on which such judgment is rendered. The obligation of each Borrower in 

  Credit Agreement

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respect of any such sum due from it to the Administrative Agent or any Lender hereunder (in this Section called an “Entitled Person”) shall, notwithstanding the
rate of exchange actually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by such Entitled Person of any sum adjudged to be due hereunder in the judgment currency such Entitled Person
may in accordance with normal banking procedures purchase and transfer Dollars to New York City with the amount of the judgment currency so adjudged to be due; and each Borrower hereby, as a separate obligation and notwithstanding any such judgment,
agrees to indemnify such Entitled Person against, and to pay such Entitled Person on demand, in Dollars, the amount (if any) by which the sum originally due to such Entitled Person in Dollars hereunder exceeds the amount of the Dollars so purchased
and transferred. 

               SECTION 10.14. USA PATRIOT Act. Each Lender hereby notifies the Borrowers that pursuant to the requirements of the USA Patriot Act (Title III
of Pub. L. 107-56 (signed into law October 26, 2001)), such Lender is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of the Borrowers and other information that will
allow such Lender to identify each Borrower in accordance with said Act. 

  Credit Agreement

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               IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

	 	XL CAPITAL LTD,  
	 	as a Borrower and a Guarantor  
	 
	 
	 
	 	By	

          /s/ SIMON RICH  
	 	 	Name:  SIMON
      RICH  
	 	 	Title:  SVP & Controller 
	 
	 	U.S. Federal Tax Identification
        No.: 98-0191089  
	 

	
	 
	 	X.L. AMERICA, INC.,  	 
	 	as a Borrower and a Guarantor 	 
	 	 	 
	 	 	 
	 

		 	 
	 	By	
      

      /s/ CAROL A. McFATE 
	 	 	
 Name: 
  CAROL A. McFATE 	
	 	 	
Title: 
Managing Director, Treasury Department	
	 

	
	 	
U.S. Federal Tax Identification No.: 06-1516268 	
	 

	
	 

	
	 	XL INSURANCE (BERMUDA) LTD,  
	 	
as a Borrower and a Guarantor 	
	 

	
	 

	
	 	By	

 /s/ CHRISTOPHER A. COELHO   
 	
	 	 	
        Name: 
 CHRISTOPHER A. COELHO  	
	 	 	       Title:  Senior
    Vice President & 
	 	 	
        Chief
 Financial Officer

	 

	
	 	
U.S. Federal Tax Identification No. : 98-0354869 	
	 

	
	 

	
	 	
XL RE LTD, 	
	 	
as a Borrower and a Guarantor 	
	 

	
	 

	
	 	By	
      

      /s/ MARK BERRY   
	  
	 	 	
Name: 
MARK BERRY    	
	 	 	
Title:  Senior Vice President
	 

	
	 	
U.S. Federal Tax Identification No.: 98-0351953 	
	 

	

  Credit Agreement

- 60 -

	 	
LENDERS 	
	 	 	 

	
	 	
BEAR STEARNS CORPORATE LENDING INC., 	
	 	individually and as Administrative Agent 	
	 	 	 

	
	 	 	 

	
	 	By: 	/s/ KEITH C. BARNISH 
	 	 	
 Name: 
 KEITH C. BARNISH 	
	 	 	
Title:  Executive Vice President

  Credit Agreement<PAGE>

                                                                     EXHIBIT 4.3

                          NEUROCRINE BIOSCIENCES, INC.

                            2003 INCENTIVE STOCK PLAN

                                   AS AMENDED

1.    PURPOSE OF THE PLAN. The purposes of this Incentive Stock Plan are to
attract and retain the best available personnel, to provide additional incentive
to the employees of Neurocrine Biosciences, Inc. (the "Company") and to promote
the success of the Company's business. Options granted hereunder may be either
Incentive Stock Options or Nonstatutory Stock Options, at the discretion of the
Board and as reflected in the terms of the written option agreement. The Board
also has the discretion to grant Restricted Stock Awards and Stock Bonus Awards.

2.    DEFINITIONS.

            (a)   "Award" shall mean any right granted under the Plan, including
an Option, a Restricted Stock Award and a Stock Bonus Award.

            (b)   "Board" shall mean the Committee, if one has been appointed,
or the Board of Directors of the Company, if no Committee is appointed.

            (c)   "Code" shall mean the Internal Revenue Code of 1986, as
amended.

            (d)   "Committee" shall mean the Committee appointed by the Board in
accordance with Section 4(a) of the Plan, if one is appointed.

            (e)   "Common Stock" shall mean the common stock of the Company, par
value $.001 per share.

            (f)   "Company" shall mean Neurocrine Biosciences, Inc.

            (g)   "Consultant" shall mean any natural person who is engaged by
the Company or any Parent or Subsidiary to render bona fide consulting services
and is compensated for such consulting services, and any Director whether
compensated for such services or not.

            (h)   "Continuous Status as an Employee or Consultant" shall mean
the absence of any interruption or termination of service as an Employee or
Consultant, as applicable. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Board; provided that such leave is for a
period of not more than ninety (90) days or reemployment upon the expiration of
such leave is guaranteed by contract or statute.

            (i)   "Director" means a member of the Board.

<PAGE>

            (j)   "Employee" shall mean any persons, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.

            (k)   "Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.

            (l)   "Nonstatutory Stock Option" shall mean an Option not intended
to qualify as an Incentive Stock Option.

            (m)   "Option" shall mean a stock option granted pursuant to the
Plan.

            (n)   "Optioned Stock" shall mean the Common Stock subject to an
Option.

            (o)   "Optionee" shall mean an Employee or Consultant who receives
an Option.

            (p)   "Outside Director" means a Director who is not an Employee.

            (q)   "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

            (r)   "Performance Criteria" shall mean the following business
criteria with respect to the Company, any Subsidiary or any division or
operating unit: (a) net income, (b) pre-tax income, (c) operating income, (d)
cash flow, (e) earnings per share, (f) return on equity, (g) return on invested
capital or assets, (h) cost reductions or savings, (i) funds from operations,
(j) appreciation in the fair market value of Common Stock, and (k) earnings
before any one or more of the following items: interest, taxes, depreciation or
amortization; each as determined in accordance with generally accepted
accounting principles or subject to such adjustments as may be specified by the
Board.

            (s)   "Plan" shall mean this Incentive Stock Plan.

            (t)   "Purchaser" shall mean an Employee or Consultant who exercises
a Restricted Stock Award or receives a Stock Bonus Award.

            (u)   "Restricted Stock Award" shall mean a right to purchase Common
Stock pursuant to Section 11 of the Plan.

            (v)   "Section 162(m) Participant" shall mean any key Employee
designated by the Board as a key Employee whose compensation for the fiscal year
in which the key Employee is so designated or a future fiscal year may be
subject to the limit on deductible compensation imposed by Section 162(m) of the
Code.

            (w)   "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.

            (x)   "Stock Bonus Award" shall mean the right to receive a bonus of
Common Stock for past services pursuant to Section 12 of the Plan.

                                       -2-

<PAGE>

            (y)   "Subsidiary" shall mean a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.

3.    STOCK SUBJECT TO THE PLAN.

      (a)   Subject to the provisions of Section 14 of the Plan, the maximum
aggregate number of shares under the Plan is three million three hundred
thousand (3,300,000) shares of Common Stock. The Shares may be authorized but
unissued, or reacquired Common Stock. If an Award should expire or become
unexercisable for any reason without having been exercised in full, then the
unpurchased Shares which were subject thereto shall, unless the Plan shall have
been terminated, become available for future grant or sale under the Plan.
Notwithstanding any other provision of the Plan, shares issued under the Plan
and later repurchased by the Company shall not become available for future grant
or sale under the Plan.

      (b)   The following limitations shall apply to grants of Awards to
Employees:

                  (i)   No Employee shall be granted, in any fiscal year of the
            Company, Awards pursuant to which more than an aggregate of two
            hundred and fifty thousand (250,000) Shares are issuable to such
            Employee.

                  (ii)  In connection with his or her initial employment, an
            Employee may be granted Awards to purchase and/or receive up to an
            additional two hundred and fifty thousand (250,000) Shares which
            shall not count against the limit set forth in subsection (i) above.

                  (iii) The foregoing limitations shall be adjusted
            proportionately in connection with any change in the Company's
            capitalization as described in Section 14.

                  (iv)  If an Option is canceled in the same fiscal year of the
            Company in which it was granted (other than in connection with a
            transaction described in Section 14), the canceled Option shall be
            counted against the limit set forth in subsection (i) above.

4.    ADMINISTRATION OF THE PLAN.

      (a)   Procedure.

                  (i)   Multiple Administrative Bodies. The Plan may be
            administered by different Committees with respect to different
            groups of Employees and Consultants.

                  (ii)  Section 162(m). To the extent that the Board determines
            it to be desirable to qualify Awards granted hereunder as
            "performance-based compensation" within the meaning of Section
            162(m) of the Code, the Plan shall be administered by a Committee of
            two or more "outside directors" within the meaning of Section 162(m)
            of the Code.

                                      -3-

<PAGE>

                  (iii) Rule 16b-3. To the extent desirable to qualify
            transactions hereunder as exempt under Rule 16b-3, the transactions
            contemplated hereunder shall be structured to satisfy the
            requirements for exemption under Rule 16b-3.

                  (iv)  Other Administration. Other than as provided above, the
            Plan shall be administered by (A) the Board or (B) a Committee,
            which committee shall be constituted to satisfy applicable laws.

      (b)   Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options, Nonstatutory Stock Options, Restricted Stock Awards or Stock Bonus
Awards; (ii) to determine, upon review of relevant information and in accordance
with Section 7 of the Plan, the fair market value of the Common Stock; (iii) to
determine the exercise price per share of each Award to be granted, if any,
which exercise price shall be determined in accordance with Section 7 of the
Plan; (iv) to determine the Employees or Consultants to whom, and the time or
times at which, Awards shall be granted and, subject to the limitations of
Section 3(b) above, the number of shares to be represented by each Award; (v) to
interpret the Plan; (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan; (vii) to determine the terms and provisions of each Award
granted (which need not be identical) and, with the consent of the holder
thereof, modify or amend any provisions (including provisions relating to
exercise price) of any Award; (viii) to accelerate or defer (with the consent of
the Optionee) the exercise date of any Option, consistent with the provisions of
Section 5 of the Plan; (ix) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Award previously
granted by the Board; (x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Award that number of Shares having a fair market
value equal to the statutory minimum amount required to be withheld. The fair
market value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an Award
holder to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Board may deem necessary or advisable; and (xi) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.

      (c)   Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees,
Purchasers and any other holders of any Awards granted under the Plan.

      (d)   Provisions Applicable to Section 162(m) Participants.

                  (i)   The Board, in its discretion, may determine whether an
            Award is to qualify as performance-based compensation as described
            in Section 162(m)(4)(C) of the Code.

                  (ii)  Notwithstanding anything in the Plan to the contrary,
            the Board may grant any Award to a Section 162(m) Participant,
            including a Restricted Stock Award or Stock Bonus Award the
            restrictions with respect to which lapse upon the attainment of
            performance goals which are related to one or more of the
            Performance Criteria.

                                       -4-

<PAGE>

                  (iii) To the extent necessary to comply with the
            performance-based compensation requirements of Section 162(m)(4)(C)
            of the Code, with respect to any Restricted Stock Award or Stock
            Bonus Award granted under the Plan to one or more Section 162(m)
            Participants, no later than ninety (90) days following the
            commencement of any fiscal year in question or any other designated
            fiscal period or period of service (or such other time as may be
            required or permitted by Section 162(m) of the Code), the Board
            shall, in writing, (i) designate one or more Section 162(m)
            Participants, (ii) select the Performance Criteria applicable to the
            fiscal year or other designated fiscal period or period of service,
            (iii) establish the various performance targets, in terms of an
            objective formula or standard, and amounts of such Restricted Stock
            Awards and Stock Bonus Awards, as applicable, which may be earned
            for such fiscal year or other designated fiscal period or period of
            service, and (iv) specify the relationship between Performance
            Criteria and the performance targets and the amounts of such
            Restricted Stock Awards and Stock Bonus Awards, as applicable, to be
            earned by each Section 162(m) Participant for such fiscal year or
            other designated fiscal period or period of service. Following the
            completion of each fiscal year or other designated fiscal period or
            period of service, the Board shall certify in writing whether the
            applicable performance targets have been achieved for such fiscal
            year or other designated fiscal period or period of service. In
            determining the amount earned by a Section 162(m) Participant, the
            Board shall have the right to reduce (but not to increase) the
            amount payable at a given level of performance to take into account
            additional factors that the Board may deem relevant to the
            assessment of individual or corporate performance for the fiscal
            year or other designated fiscal period or period of service.

                  (iv)  Furthermore, notwithstanding any other provision of the
            Plan, any Award which is granted to a Section 162(m) Participant and
            is intended to qualify as performance-based compensation as
            described in Section 162(m)(4)(C) of the Code shall be subject to
            any additional limitations set forth in Section 162(m) of the Code
            (including any amendment to Section 162(m) of the Code) or any
            regulations or rulings issued thereunder that are requirements for
            qualification as performance-based compensation as described in
            Section 162(m)(4)(C) of the Code, and the Plan shall be deemed
            amended to the extent necessary to conform to such requirements.

5.    ELIGIBILITY.

      (a)   Awards may be granted to Employees and Consultants, provided that
Incentive Stock Options may only be granted to Employees. An Employee or
Consultant who has been granted an Award may, if such Employee or Consultant is
otherwise eligible, be granted additional Awards. Each Outside Director shall be
eligible to be automatically granted Options at the times and in the manner set
forth in Section 10.

      (b)   Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate fair market
value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year

                                       -5-

<PAGE>

(under all plans of the Company) exceeds one hundred thousand dollars
($100,000), such Options shall be treated as Nonstatutory Stock Options.

      (c)   For purposes of Section 5(b), Options shall be taken into account in
the order in which they were granted, and the fair market value of the Shares
shall be determined as of the time the Option with respect to such Shares is
granted.

      (d)   The Plan shall not confer upon any Optionee or Purchaser any right
with respect to continuation of employment by or the rendition of consulting
services to the Company, nor shall it interfere in any way with his or her right
or the Company's right to terminate his or her employment or services at any
time, with or without cause.

6.    TERM OF PLAN. The Plan shall become effective upon the earlier to occur of
its adoption by the Board or its approval by vote of holders of a majority of
the outstanding shares of the Company entitled to vote on the adoption of the
Plan. It shall continue in effect until terminated under Section 15 of the Plan.
Notwithstanding the foregoing, no Incentive Stock Option may be granted under
this Plan after the first to occur of (a) the expiration of ten (10) years from
the date the Plan is adopted by the Board or (b) the expiration of ten (10)
years from the date the Plan is approved by the Company's stockholders under
Section 20.

7.    EXERCISE PRICE AND CONSIDERATION.

      (a)   The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be no less than one hundred percent (100%) of the
fair market value per Share on the date of grant; provided, however, that in the
case of an Incentive Stock Option granted to an Employee who, at the time of
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than one
hundred and ten percent (110%) of the fair market value per Share on the date of
grant. Notwithstanding the foregoing, Options may be granted with a per Share
exercise price of less than one hundred percent (100%) of the fair market value
per Share on the date of grant pursuant to a merger or other corporate
transaction.

      (b)   The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices (or the closing price per share if the Common Stock is listed on
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System) of the Common Stock for the date of grant, as reported
in the Wall Street Journal (or, if not so reported, as otherwise reported by the
NASDAQ System) or, in the event the Common Stock is listed on a stock exchange,
the fair market value per Share shall be the closing price on such exchange on
the date of grant of the Option or Restricted Stock Award, as reported in the
Wall Street Journal.

      (c)   The consideration to be paid for the Shares to be issued upon
exercise of an Award, including the method of payment, shall be determined by
the Board (and in the case of an Incentive Stock Option, shall be determined at
the time of grant) and to the extent permitted under applicable laws may consist
entirely of cash, check, promissory note, other Shares of Common Stock which

                                       -6-

<PAGE>

(i) either have been owned by the Optionee for more than six (6) months on the
date of surrender or were not acquired directly or indirectly, from the Company,
and (ii) have a fair market value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, or any combination of such methods of payment, or such other
consideration and method of payment for the issuance of Shares to the extent
permitted under applicable law.

8.    TERM OF OPTION. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.

9.    EXERCISE OF OPTION.

      (a)   Procedure for Exercise; Rights as a Shareholder.

                  (i)   Any Option granted hereunder shall be exercisable at
            such times and under such conditions as determined by the Board,
            including performance criteria with respect to the Company and/or
            the Optionee, and as shall be permissible under the terms of the
            Plan.

                  (ii)  An Option may not be exercised for a fraction of a
            Share.

                  (iii) An Option shall be deemed to be exercised when written
            notice of such exercise has been given to the Company in accordance
            with the terms of the Option by the person entitled to exercise the
            Option and full payment for the Shares with respect to which the
            Option is exercised has been received by the Company. Full payment
            may, as authorized by the Board, consist of any consideration and
            method of payment allowable under Section 7 of the Plan. Until the
            issuance (as evidenced by the appropriate entry on the books of the
            Company or of a duly authorized transfer agent of the Company) of
            the stock certificate evidencing such Shares, no right to vote or
            receive dividends or any other rights as a stockholder shall exist
            with respect to the Optioned Stock, notwithstanding the exercise of
            the Option. Upon an Optionee's request, the Company shall issue (or
            cause to be issued) such stock certificate promptly upon exercise of
            the Option. To the extent an Option designated as an Incentive Stock
            Option at grant that is treated as the exercise of a Nonstatutory
            Stock Option pursuant to Section 5(b), the Company shall issue a
            separate stock certificate evidencing the Shares treated as acquired
            upon exercise of an Incentive Stock Option and a separate stock
            certificate evidencing the Shares treated as acquired upon exercise
            of a Nonstatutory Stock Option and shall identify each such
            certificate accordingly in its stock transfer records. No adjustment
            will be made for a dividend or other right for which the record date
            is prior to the date the stock certificate is issued, except as
            provided in Section 14 of the Plan.

                                       -7-
<PAGE>

         (iv)     Exercise of an Option in any manner shall result in a decrease
                  in the number of Shares which thereafter may be available,
                  both for purposes of the Plan and for sale under the Option,
                  by the number of Shares as to which the Option is exercised.

      (b)   Termination of Status as an Employee or Consultant. In the event of
termination of an Optionee's Continuous Status as an Employee or Consultant (as
the case may be), such Optionee may, but only within such period of time as is
determined by the Board, with such determination in the case of an Incentive
Stock Option not exceeding three (3) months and in the case of Nonstatutory
Stock Option not exceeding six (6) months after the date of termination
(provided that such period shall be three (3) months in the case of an Option
granted to an Outside Director pursuant to Section 10), with such determination
in the case of an Incentive Stock Option being made at the time of grant of the
Option, exercise the Option to the extent that such Employee or Consultant was
entitled to exercise it at the date of such termination (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement). To the extent that such Employee or Consultant was not
entitled to exercise the Option at the date of such termination, or if such
Employee or Consultant does not exercise such Option (which such Employee or
Consultant was entitled to exercise) within the time specified herein, the
Option shall terminate.

      (c)   Disability of Optionee. Notwithstanding the provisions of Section
8(b) above, in the event of termination of an Optionee's Continuous Status as an
Employee or Consultant as a result of such Employee's or Consultant's total and
permanent disability (as defined in Section 22(e)(3) of the Code), such Employee
or Consultant may, but only within six (6) months (twelve (12) months in the
case of an Option granted to an Outside Director pursuant to Section 10) (or
such other period of time not exceeding twelve (12) months as in determined by
the Board, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option) from the date of such termination
(but in no event later than the date of expiration of the term of such Option as
set forth in the Option Agreement), exercise the Option to the extent the right
to exercise would have accrued had the Optionee continued Continuous Status as
an Employee or Consultant for a period of six (6) months following termination
of Continuous Status by reason of disability. To the extent that such Employee
or Consultant was not entitled to exercise an Option in this period, or if such
Employee or Consultant does not exercise such Option (which such Employee or
Consultant was entitled to exercise) within the time specified herein, the
Option shall terminate.

      (d)   Retirement of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Employee Optionee's Continuous
Status as an Employee as a result of such Employee's retirement from the Company
at age fifty five (55) or greater after having Continuous Status for (5) years
or more, all Options held by such Optionee shall vest and such Employee may, but
only within three (3) years from the date of such termination (but in no event
later than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent such Employee was entitled
to exercise it at the date of such termination.

      (e)   Death of Optionee. In the event of the death of an Optionee:

                                       -8-

<PAGE>

                  (i)   during the term of the Option who is at the time of his
            or her death an Employee or Consultant of the Company and who shall
            have been in Continuous Status as an Employee or Consultant since
            the date of grant of the Option, the Option may be exercised, at any
            time within six (6) months (twelve (12) months in the case of an
            Option granted to an Outside Director pursuant to Section 10) (or at
            such later time as may be determined by the Board but in no event
            later than the date of expiration of the term of such Option as set
            forth in the Option Agreement), by the Optionee's estate or by a
            person who acquired the right to exercise the Option by bequest or
            inheritance, but only to the extent that the right to exercise would
            have accrued had the Optionee continued living and remained in
            Continuous Status as an Employee or Consultant six (6) months (or
            such other period of time as in determined by the Board) after the
            date of death; or

                  (ii)  within thirty (30) days (or such other period of time
            not exceeding three (3) months as is determined by the Board, with
            such determination in the case of an Incentive Stock Option being
            made at the time of grant of the Option) after the termination of
            Continuous Status as an Employee or Consultant, the Option may be
            exercised, at any time within six (6) months (twelve (12) months in
            the case of an Option granted to an Outside Director pursuant to
            Section 10) (or such other period of time as is determined by the
            Board at the time of grant of the Option) following the date of
            death (but in no event later than the date of expiration of the term
            of such Option as set forth in the Option Agreement), by the
            Optionee's estate or by a person who acquired the right to exercise
            the Option by bequest or inheritance, but only to the extent that
            the right to exercise that had accrued at the date of termination.

                                       -9-
<PAGE>

10.   AUTOMATIC GRANTING OF OPTIONS TO OUTSIDE DIRECTORS.

      (a)   First Option Grants. Unless otherwise determined by the Board, each
new Outside Director shall be automatically granted an Option to purchase twenty
thousand (20,000) Shares (a "First Option") on the date on which such person
first becomes a Director, whether through election by the stockholders of the
Company or appointment by the Board to fill a vacancy.

      (b)   Subsequent Option Grants. Unless otherwise determined by the Board,
each Outside Director and the Chairman of the Board of Directors shall be
automatically granted an annual Option (a "Subsequent Option") to purchase, in
the case of an Outside Director, twelve thousand (12,000) Shares, and in the
case of the Chairman of the Board of Directors, fifteen thousand (15,000)
Shares, each on the date of each annual meeting of the stockholders of the
Company, if on such date, he or she shall have served on the Board for at least
six (6) months.

      (c)   Terms of Options Granted to Outside Directors. Options granted to
Outside Directors pursuant to this Section 10 shall have a per Share exercise
price of no less than one hundred percent (100%) of the fair market value per
Share on the date of grant. Subject to Section 9, the term of each Option
granted to an Outside Director pursuant to this Section 10 shall be ten (10)
years from the date of grant thereof. First Options and Subsequent Options shall
become exercisable in cumulative monthly installments of 1/12 of the Shares
subject to such Option on each of the monthly anniversaries of the date of grant
of the Option, commencing with the first such monthly anniversary, such that
each such Option shall be one hundred percent (100%) vested on the third
anniversary of its date of grant.

11.   RESTRICTED STOCK AWARDS.

      (a)   Rights to Purchase. After the Board determines that it will offer an
Employee or Consultant a Restricted Stock Award, it shall deliver to the offeree
a stock purchase agreement setting forth the terms, conditions and restrictions
relating to the offer. Such agreement shall further specify the number of Shares
which such person shall be entitled to purchase, and the time within which such
person must accept such offer, which shall in no event exceed six (6) months
from the date upon which the Board or its Committee made the determination to
grant the Restricted Stock Award. The offer shall be accepted by execution of a
stock purchase agreement in the form determined by the Board.

      (b)   Purchase Price. The Board shall establish the purchase price, if
any, and form of payment for each Restricted Stock Award; provided, however,
that such purchase price shall be no less than one hundred percent (100%) of the
fair market value per Share on the date of grant; provided, further, however,
that the purchase price per Share may be reduced on a dollar-for-dollar basis to
the extent the Restricted Stock Award is granted to the Purchaser in lieu of
cash compensation otherwise payable to the Purchaser. In all cases, legal
consideration shall be required for each issuance of a Restricted Stock Award.

      (c)   Issuance of Shares. Forthwith after payment therefor, the Shares
purchased shall be duly issued; provided, however, that the Board may require
that the Purchaser make adequate

                                      -10-

<PAGE>

provision for any Federal and State withholding obligations of the Company as a
condition to the Purchaser purchasing such Shares.

      (d)   Repurchase Option. Unless the Board determines otherwise, the stock
purchase agreement shall grant the Company a repurchase option exercisable upon
the voluntary or involuntary termination of the Purchaser's employment with the
Company for any reason (including death or disability). Subject to applicable
laws, if the Board so determines, the purchase price for shares repurchased may
be paid by cancellation of any indebtedness of the Purchaser to the Company.
Subject to Section 4(d) with respect to Restricted Stock Awards granted to
Section 162(m) Participants, the repurchase option shall lapse at such rate as
the Board may determine.

      (e)   Other Provisions. The stock purchase agreement shall contain such
other terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Board.

12.   STOCK BONUS AWARDS.

      (a)   Terms of Award. After the Board determines that it will offer an
Employee or Consultant a Stock Bonus Award, it shall deliver to the offeree a
stock bonus agreement setting forth the terms, conditions and restrictions
relating to the offer and the number of shares to be awarded. The offer shall be
accepted by execution of a stock bonus agreement in the form determined by the
Board.

      (b)   Purchase Price. The Board shall establish the purchase price, if
any, and form of payment for each Stock Bonus Award; provided, however, that
such purchase price shall be no less than one hundred percent (100%) of the fair
market value per Share on the date of grant; provided, further, however, that
the purchase price per Share may be reduced on a dollar-for-dollar basis to the
extent the Stock Bonus Award is granted to the Purchaser in lieu of cash
compensation otherwise payable to the Purchaser.

      (c)   Issuance of Shares. Forthwith after payment therefor, the Shares
purchased shall be duly issued; provided, however, that the Board may require
that the Purchaser make adequate provision for any Federal and State withholding
obligations of the Company as a condition to the Purchaser purchasing such
Shares.

      (d)   Repurchase Option. Unless the Board determines otherwise, the stock
bonus agreement shall grant the Company a repurchase option exercisable upon the
voluntary or involuntary termination of the Purchaser's employment with the
Company for any reason (including death or disability). Subject to applicable
laws, if the Board so determines, the purchase price for shares repurchased may
be paid by cancellation of any indebtedness of the Purchaser to the Company.
Subject to Section 4(d) with respect to Stock Bonus Awards granted to Section
162(m) Participants, the repurchase option shall lapse at such rate as the Board
may determine.

      (e)   Other Provisions. The stock bonus agreement shall contain such other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Board.

13.   NON-TRANSFERABILITY OF AWARDS. Unless determined otherwise by the Board,
an Award may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by

                                      -11-

<PAGE>

will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee. If the Board makes an Award
transferable, such Award shall contain such additional terms and conditions as
the Board deems appropriate.

14.   ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.

      (a)   Changes in Capitalization. Subject to any action by the Company
required by applicable law or regulations or the requirements of the Nasdaq
Stock Market or an established stock exchange on which the Company's securities
are traded, and subject to Section 14(d), the number and kind of shares of
Common Stock (or other securities or property) covered by each outstanding
Award, and the number and kind of shares of Common Stock (or other securities or
property) which have been authorized for issuance under the Plan but as to which
no Awards have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Award, as well as the price per share of Common
Stock (or other securities or property) covered by each such outstanding Award,
shall be adjusted proportionately to the extent the Board determines that any
increase, decrease or adjustment in the number or kind of issued shares of
Common Stock (or other securities or property), dividend, distribution, stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, reorganization, merger, consolidation, split-up, repurchase,
liquidation, dissolution, or sale, transfer, exchange or other disposition of
all or substantially all of the assets of the Company, exchange of Common Stock
or other securities of the Company, or other similar corporate transaction or
event, in the Board's sole discretion, affects the Common Stock such that an
adjustment is determined by the Board to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to an Award. Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Award.

      (b)   Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Board shall notify the Optionee or Purchaser
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Award shall terminate immediately prior to
the consummation of such proposed action.

      (c)   Merger or Asset Sale. In the event of a merger, sale of all or
substantially all of the assets of the Company, tender offer or other
transaction or series of related transactions resulting in a change of ownership
of more than fifty percent (50%) of the voting securities of the Company
("Change in Control") approved by the majority of the members of the Board on
the Board prior to the commencement of such Change in Control, each outstanding
Option shall be assumed or an equivalent option or right substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation;
provided, however, in the event that within one year of the date of the
completion of the Change in Control, the successor corporation or a Parent or
Subsidiary of the successor corporation terminates the employment of an Optionee
without Cause (as defined below), such Optionee shall fully vest in and have the
right to exercise the options assumed or substituted for the Option as to all of
the Optioned Stock, including Shares as to which it would not otherwise be
exercisable. In the event that the successor corporation refuses to assume or
substitute for the

                                      -12-

<PAGE>

Option, the Optionee shall fully vest in and have the right to exercise the
Option as to all of the Optioned Stock, including Shares as to which it would
not otherwise be exercisable. If an Option becomes fully vested and exercisable
in lieu of assumption or substitution in the event of a Change of Control, the
Board shall notify the Optionee in writing or electronically that the Option
shall be fully vested and exercisable for a period of fifteen (15) days from the
date of such notice, and the Option shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option shall be considered
assumed if, following the Change of Control, the option confers the right to
purchase, for each Share of Optioned Stock subject to the Option immediately
prior to the Change in Control, the consideration (whether stock, cash, or other
securities or property) received in the Change of Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares); provided, however, that
if such consideration received in the Change of Control is not solely common
stock of the successor corporation or its Parent, the Board may, with the
consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the Change of Control. For purposes of this
paragraph, termination shall be for "Cause" in the event of the occurrence of
any of the following: (a) any intentional action or intentional failure to act
by employee which was performed in bad faith and to the material detriment of
the successor corporation or its Parent or Subsidiary; (b) employee willfully
and habitually neglects the duties of employment; or (c) employee is convicted
of a felony crime involving moral turpitude, provided that in the event that any
of the foregoing events is capable of being cured, the successor corporation or
its Parent or Subsidiary shall provide written notice to the employee describing
the nature of such event and the employee shall thereafter have five (5)
business days to cure such event.

      In the event of a Change in Control which is not approved by the majority
of the members of the Board on the Board prior to the commencement of a Change
in Control, each Optionee shall fully vest in and have the right to exercise all
outstanding Options as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable.

      (d)   With respect to Awards which are granted to Section 162(m)
Participants and are intended to qualify as performance-based compensation under
Section 162(m)(4)(C), no adjustment or action described in this Section 14 or in
any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify under Section
162(m)(4)(C), or any successor provisions thereto.

15.   DATE OF GRANTING AWARDS. The date of grant of an Award shall, for all
purposes, be the date on which the Board makes the determination granting such
Award. Notice of the determination shall be given to each Employee or Consultant
to whom an Award is so granted within a reasonable time after the date of such
grant.

16.   AMENDMENT AND TERMINATION OF THE PLAN.

      (a)   Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made

                                      -13-

<PAGE>

which would impair the rights of any Optionee or Purchaser under any grant
theretofore made, without his or her consent. In addition, to the extent
necessary and desirable to comply with Section 422 of the Code (or any other
applicable laws or regulation, the requirements of the Nasdaq Stock Market or an
established stock exchange), the Company shall obtain stockholder approval of
any Plan amendment in such a manner and to such a degree as required.

      (b)   Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Awards already granted, and such Awards
shall remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee or the
Purchaser, as applicable, and the Board, which agreement must be in writing and
signed by the Optionee or the Purchaser, as applicable, and the Company.

17.   CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant to
the exercise of an Award unless the exercise of such Award and the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of the Nasdaq Stock Market or any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

As a condition to the exercise of an Award, the Company may require the person
exercising such Award to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.

18.   RESERVATION OF SHARES. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

19.   AWARD AGREEMENTS. Options shall be evidenced by written option agreements
in such form as the Board shall approve. Upon the exercise of a Restricted Stock
Award or a Stock Bonus Award, the Purchaser shall sign a stock purchase
agreement or stock bonus agreement in such form as the Board shall approve.

20.   STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to approval
by the stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted. Such stockholder approval shall be obtained in the
degree and manner required under applicable laws and the rules of the Nasdaq
Stock Market or any stock exchange upon which the Common Stock is listed.

                                      -14-
<PAGE>

                          [NEUROCRINE BIOSCIENCES LOGO]

                         FORM OF STOCK OPTION AGREEMENT

      Unless otherwise defined herein, the terms defined in the 2003 Stock
Option Plan, (the "Plan") shall have the same defined meanings in this Option
Agreement.

I. NOTICE OF STOCK OPTION GRANT

      As part of the Company's Performance Options Policy you have been granted
      an option to purchase Common Stock of the Company, subject to the terms
      and conditions of the Plan and this Option Agreement, as follows:

      Date of Grant:

      Vesting Commencement Date

      Exercise Price per Share:

      Total Number of Shares Granted:

      Total Exercise Price:

      Type of Option:
                 Incentive Stock Option
                 Nonstatutory Stock Option

      Term/Expiration Date:

Vesting Schedule:

This Option may be exercised, in whole or in part, in accordance with the
following schedule:

      One forty-eighth (1/48) of the Shares subject to the Option shall vest
      each month beginning one month after the Vesting Commencement Date, and
      1/48 of the Shares subject to the Option shall vest each month thereafter,
      subject to the Optionee continuing to be an Employee or Consultant on such
      dates.

TERMINATION PERIOD:

      This Option may be exercised for ninety (90) days (or such other period of
      time not exceeding six (6) months, as is determined by the Board) after
      Optionee's Continuous Status as an Employee or Consultant terminates. Upon
      the death or Disability of the Optionee, this Option may be exercised for
      six (6) months after Optionee's Continuous Status as an Employee or
      Consultant. In no event shall this Option be exercised later than the
      Term/Expiration Date as provided above.

<PAGE>

II. AGREEMENT

      1. Grant of Option. The Plan Administrator of the Company hereby grants to
the Optionee named in the Notice of Grant attached as Part I of this Agreement
(the "Optionee") an option (the "Option") to purchase the number of Shares, as
set forth in the Notice of Grant, at the exercise price per share set forth in
the Notice of Grant (the "Exercise Price"), subject to the terms and conditions
of the Plan, which is incorporated herein by reference. Subject to Section 13(b)
of the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.

      If designated in the Notice of Grant as an Incentive Stock Option ("ISO"),
this Option is intended to qualify as an Incentive Stock Option under Section
422 of the Code. However, if this Option is intended to be an Incentive Stock
Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d)
it shall be treated as a Nonstatutory Stock Option ("NSO").

      2. Exercise of Option.

            (a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.

            (b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the President, the Chief Financial Officer or
Secretary of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.

            No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.

      3. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee;

            (a) cash; or

            (b) check; or

            (c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or

            (d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares; [or

            (e) with the Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form attached hereto as Exhibit C, in the
amount of the aggregate Exercise Price of the Exercised Shares together with the
execution and delivery by the Optionee of the Security Agreement attached hereto
as Exhibit B. The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase, and shall be
secured by a pledge of the Shares purchased by the Note pursuant to the Security
Agreement.]

<PAGE>

      4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee; only by the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

      5. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.

      6. Tax Consequences. Some of the federal tax consequences relating to this
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.

            (a) Exercising the Option.

                  (i) Nonstatutory Stock Option. The Optionee may incur regular
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their-aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect (from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

                  (ii) Incentive Stock Option. If this Option qualifies as an
ISO, the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but continues
to provide services to the Company, any Incentive Stock Option of the Optionee
that remains unexercised shall cease to qualify as an Incentive Stock Option and
will be treated for tax purposes as a Nonstatutory Stock Option on the date
three (3) months and one (1) day following such change of status.

            (b) Disposition of Shares.

                  (i) NSO. If the Optionee holds NSO Shares for at least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes (holding the Shares for
more than eighteen (18) months may lower the long-term capital gains rate).

                  (ii) ISO. If the Optionee holds ISO Shares for at least one
year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income

<PAGE>

(taxable at ordinary income rates) to the extent of the excess, if any, of the
lesser of (A) the difference between he Fair Market Value of the Shares acquired
on the date of exercise and the aggregate Exercise Price, or (B) the difference
between the sale price of such Shares and the aggregate Exercise Price. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.

            (c) Notice of Disqualifying Disposition of ISO Shares. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of:(i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.

      7. Entire Agreement; Governing Law, The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirely all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.

      8.

NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER).

OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE
OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S
RELATIONSHIP AS AN EMPLOYEE OR CONSULTANT AT ANY TIME, WITH OR WITHOUT CAUSE.

<PAGE>

      By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.

OPTIONEE:                                  NEUROCRINE BIOSCIENCES, INC.

______________________                          ________________________________
Signature                                       For Neurocrine Biosciences, Inc.

______________________                          ________
Date                                            Date

Name:

<PAGE>

                                CONSENT OF SPOUSE

      The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.

                                                     ________________________
                                                        Spouse of Optionee

                                        6

<PAGE>

                                    EXHIBIT A

                          NEUROCRINE BIOSCIENCES, INC.

                             2003 STOCK OPTION PLAN

                                 EXERCISE NOTICE

Neurocrine Biosciences. Inc.
12790 El Camino Real
San Diego, CA 92130

Attention: Secretary

      1. Exercise of Option. Effective as of today,___________________,20__ ,
the undersigned ("Purchaser") hereby elects to) purchase ____________shares (the
"Shares") of the Common Stock of Neurocrine Biosciences, Inc. (the "Company")
under and pursuant to the 2003 Stock Option Plan (the "'Plan") and the Stock
Option Agreement dated _______________, 20______(the "Option Agreement"). The
purchase price for the Shares shall be $__________, as required by the Option
Agreement.

      2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.

      3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

      4. Rights as Shareholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 11 of the
Plan.

      5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.

6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.

<PAGE>

Submitted by:                      Accepted by:

PURCHASER;                         NEUROCRINE BIOSCIENCES, INC.
______________________             ______________________
Signature                             By
______________________             ______________________
Print Name                            Its

Address:                           Address:

                                      Neurocrine Biosciences, Inc.
                                      12790 El. Camino Real
                                      San Diego, CA 92130
                                      __________________________________
                                      Date Received

<PAGE>

                                    EXHIBIT B

                               SECURITY AGREEMENT

      This Security Agreement is made as of_______________________,
20_____between Neurocrine Biosciences, Inc., a Delaware corporation, a
("Pledgee"), and___________________________________________("Pledgor").

                                    Recitals

      Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated______________________ (the "Option"), between Pledgor and
Pledgee under Pledgee's 2003 Stock Option Plan, and Pledgor's election under
the terms of the Option to pay for such shares with his promissory note (the
"Note"), Pledgor has purchased_____________________________shares of Pledgee's
Common Stock (the "Shares") at a price of $______________________per share, for
a total purchase price of $___________________. The Note and the obligations
thereunder are as set forth in Exhibit C to the Option

      NOW, THEREFORE, it is agreed as follows:

      1. Creation and Description of Security Interest. In consideration of the
transfer of the Shares to Pledgor under the Option Agreement, Pledgor, pursuant
to the California Commercial Code, hereby pledges all of such Shares (herein
sometimes referred to as the "Collateral") represented by certificate
number_____________________, duly endorsed in blank or with executed stock
powers, and herewith delivers said certificate to the Secretary of Pledgee
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.

      The pledged stock (together with an executed blank stock assignment for
use in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.

      2. Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:

            a. Payment of Indebtedness. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.

            b. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.

            c. Margin Regulations. In the event that Pledgee's Common Stock is
now or later becomes margin listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.

      3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.

<PAGE>

      4. Stock Adjustments. In the event that during the term of the pledge any
stock dividend, reclassification, readjustment or other changes are declared or
made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor Pledgee and Pledgeholder shall
cooperate and execute such documents as arc reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include, the substituted shares of
capital stock of Pledgor as a result thereof.

      5. Options and Rights. In the event that, during the term of this pledge,
subscription Options or other rights or options shall be issued in connection
with the pledged Shares, such rights, Options and options shall be the property
of Pledgor and, if exercised by Pledgor, all new stock or other securities so
acquired by Pledgor as it relates to the pledged Shares then held by
Pledge-holder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.

      6. Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:

            a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or

            b. Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.

      In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.

      7. Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the Shares
held by Pledgeholder here-under upon payments of the principal of the Note. The
number of the pledged Shares which shall be released shall be that number of
full Shares which bears the same proportion to the initial number of Shares
pledged hereunder as the payment of principal bears to the initial full
principal amount of Note.

      8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.

      9. Term. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.

      10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.

<PAGE>

      11. Pledgeholder Liability. In the absence of willful or gross negligence,
Pledgeholder shall not be liable to any party for any of his acts, or omissions
to act, as Pledgeholder.

      12. Invalidity of Particular Provisions, Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.

      13. Successors or Assigns. Pledgor and Pledgee agree that all of the terms
of this Security Agreement shall be binding on their respective successors and
assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall
be deemed to include, for all purposes, the respective designers, successors,
assigns, heirs, executors and administrators.

      14. Governing Law. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of California.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

"PLEDGOR"

                                                    ________________________
                                                    Signature

                                                    ________________________
                                                    Print Name

                                    Address:______________________________

                                                    ________________________

"PLEDGEE"                                Neurocrine Biosciences, Inc.,
                                               a Delaware corporation

                                                    ________________________
                                                    Signature

                                                    ________________________
                                                    Print Name

                                                    ________________________
                                                    Title

"PLEDGEHOLDER"

                                                    ________________________
                                                    Secretary of
                                                    Neurocrine Biosciences, Inc.

<PAGE>

                                    EXHIBIT C

                                      NOTE

$_______________________                                    SanDiego, California

                                                   _______________-______, 19,_.

      FOR VALUE RECEIVED,____________________________________ promises to pay to
Neurocrine Biosciences, Inc., a Delaware corporation (the "Company"), or order,
the principal sum of _,____________________($_____________________), together
with interest on the unpaid principal hereof from the date hereof at the rate
of_______________________________ percent (________%) per annum, compounded
semiannually.

      Principal and interest shall be due and payable on_______________________,
20_____. Payment of principal and interest shall be made in lawful money of the
United States of America.

      The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.

      This Note is subject to the terms of the Option, dated as
of________________________________. This Note is secured in part by a pledge of
the Company's Common Stock under the terms of a Security Agreement of even date
herewith and is subject to all the provisions thereof.

      The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.

      In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.

      Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.

                                    ________________________

                                    ________________________

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