Document:

c48347_ex10-2.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

EXHIBIT 10.2 

CONFIDENTIAL INFORMATION (IDENTIFIED BY * ) HAS BEEN OMITTED BASED UPON A REQUEST 

FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE

SECURITIES EXCHANGE ACT OF 1934 AND HAS BEEN SEPARATELY FILED

WITH THE SECURITIES AND EXCHANGE COMMISSION 

February 21, 2007 

Larry Smith 

Koch Foods, Inc. 

9401 W. Thunderbird Road, Suite 186 

Peoria, AZ 85381 

Dear Larry: 

As discussed and agreed, Koch Foods, Inc. will supply to the El Pollo Loco system up to * pounds annually of saddle cut chicken, EPL Specification *. Pricing will be * per pound delivered to MBM, Rancho Cucamonga, CA and MBM, Pleasanton, CA. Please continue to review the weight range and
target with your processing facility to best insure that the specification is met. 

Additionally, contingent on becoming an approved supplier for El Pollo Loco whole chicken, Un-marinated Breast Meat, and Marinated Thigh Meat, Koch Foods’ pricing would be as follows: 

EPL Specification *, Koch Foods, Inc. will be awarded up to * pounds for the El Pollo Loco system. Pricing will
be * per pound delivered into MBM, Rancho Cucamonga, CA and MBM, Pleasanton, CA.

EPL Specification *, Koch Foods, Inc. will be awarded up to * pounds for the El Pollo Loco system. Pricing will
be * per pound delivered into MBM, Rancho Cucamonga, CA and MBM, Pleasanton, CA. 

EPL Specification *, Koch Foods, Inc. will be awarded up to * pounds for the El Pollo Loco system. Pricing will
be * per pound delivered into MBM, Rancho Cucamonga, CA and MBM, Pleasanton, CA. 

In the event El Pollo Loco (“EPL”), for any reason or through any method, increases the number of restaurants to which product is to be supplied hereunder, whether owned by EPL or franchisees of EPL, then EPL shall
receive the same or better pricing as that shown in this agreement for existing restaurants. Nothing herein shall obligate supplier to supply more than the amount of product described herein. Further, should freight or distribution charges for the
product sold to distribution centers servicing the additional restaurants be substantially different from the agreed to freight and distribution fees, EPL and supplier agree to make reasonable adjustments based on such actual increased charges and
negotiated between the parties in good faith.

As part of this Purchase Agreement, Supplier warrants that the prices for the items identified herein are not higher than those currently extended to any other customer for the same or like items in equal or less quantities. If
Supplier reduces its price for such items to any other customer during the term of this Purchase Agreement, Supplier agrees to correspondingly reduce the price quoted herein. 

Page 1 of 15 

El Pollo Loco’s decision to enter into this Purchase Agreement is independent of any support your firm may or may not choose to provide to the El Pollo Loco system. 

This Purchase Agreement is subject to and incorporates the General Terms and Conditions of Supply (“T/C”) executed by the parties hereto and currently on file with El Pollo Loco, Inc. The Purchase Agreement and the T/C
collectively constitute the entire agreement between the parties and supersede all prior or contemporaneous oral or written agreements. 

Terms: Net 7 Days.

Pricing contract
period 03/01/07 through 2/29/08

Please sign and return both copies of this letter. After I have received the signed copy, I will sign and return a copy for your files. Signing this letter acknowledges acceptance of the terms and conditions as presented
above.

Larry, thank you for your help and support on this matter and please contact me with any questions. 

	
/S/ LARRY P. SMITH
		 
		
/S/ JOE STEIN
	
	
Larry P. Smith
		 
		
Joe Stein
	
	
Koch Foods, Inc.
		 
		
El Pollo Loco, Inc.
	

cc: Jennifer Benus, Shanae Brown/MBM 

Page 2 of 15 

El Pollo Loco 

GENERAL TERMS AND CONDITIONS OF SUPPLY 

          THESE GENERAL TERMS AND CONDITIONS shall govern the supply of approved products (herein referred to, whether singularly or collectively as the “Products”) to
the EPL system of company-owned and franchisee-owned El Pollo Loco Restaurants and shall constitute the agreement between El Pollo Loco Corporation and those parties, which have been approved as suppliers (each such approved supplier is referred to
herein as “Supplier”) to the EPL system. 

          In consideration of the designation by EPL as an approved Supplier and intending to be legally bound, Supplier, through the act of supplying the Products to and for use within the El Pollo Loco system, agrees to the following:

	
1.	
Approval – The approval by EPL of a Supplier to the El Pollo Loco system (the “Approval”) shall be confirmed in a written
approval letter (the “Approval Letter”) signed by EPL authorized representative, Stephen E. Lash, Director of Supply Chain Management. The Approval Letter shall identify a) the
Products for which Supplier is approved, b) the approved product specification, and c) the specific facility(ies) approved to manufacture the product. Supplier’s acceptance of the Approval and these General Terms And Conditions shall be manifested exclusively through the act of Supplier’s selling the Products for use within the El Pollo Loco system.	
	          	 
	
2.	
Sale And Distribution – Supplier shall sell the Products within the El Pollo Loco system only to distributors approved by EPL (collectively “Approved
Distributors”) who are authorized to resell or otherwise transfer the Products to El Pollo Loco restaurants. EPL shall inform Supplier of the identity of Approved Distributors by periodic written notification. In
certain circumstances Supplier may be authorized by EPL to sell Products within the El Pollo Loco system directly to restaurants or by such other distribution means as shall have the prior written approval of EPL. Supplier warrants that it will not sell or otherwise transfer Products bearing the EPL, Fosters, Coca-Cola, Dr. Pepper or other trademarks owned by or authorized for use by or licensed by EPL (“The Marks) trademark, logo or
other indicia of Fosters®, Dr. Pepper® or Coca-Cola® to any third party, except as contemplated above, without the prior written authorization of 
	 

Page 3 of 15 

	          	
(including distribution of excess products to charitable or other organizations, e.g. Second Harvest).	
	 
	
3.	
Specifications – As a condition to retention of Approval, Supplier shall satisfy and comply diligently with all written quality assurance requirements of EPL, as they may be amended from time
to time in the sole discretion of EPL, including but not limited to the EPL product specifications which have been furnished to Supplier, the EPL Quality Assurance Policies and Procedures which have been furnished to Supplier, and all other written
quality assurance communications from EPL (together the “Specifications”). The Products shall be manufactured, stored and shipped by Supplier in strict compliance with all
applicable federal, state and local laws and the Specifications. Supplier recognized and acknowledges that EPL may, from time to time, make representations to third parties regarding the content of various EPL products. Accordingly Supplier may not change or materially alter Product formulations or processing procedures without EPL prior knowledge and written approval. Any deviation whatsoever by Supplier from the Specifications may result in
immediate termination of the Approval. If the Products are to carry the EPL marks, Supplier shall not undertake any activities which are not authorized by EPL and which are intended or designed, directly or indirectly, to differentiate those
Products produced by Supplier from identically specified Products produced by other Suppliers for the El Pollo Loco system.	
	 
	
4.	
Unapproved Products – Supplier will not knowingly sell any unapproved products for use within the El Pollo Loco system. If Supplier is advised by EPL that unapproved products produced by
Supplier are being sold by identified third parties to the El Pollo Loco system, Supplier will undertake best efforts and all commercially reasonable necessary steps which are legally within its power to bring about a discontinuance of this
activity.	
	 
	
5.	
Confidentiality – Supplier acknowledges that the Specifications are the confidential, and proprietary information of EPL to be used by Supplier solely for the purpose of supplying Product to
the El Pollo Loco system. Supplier specifically warrants for itself, its employees and agents, that it (they) will not: (a) disclose the Specifications (or any portion thereof) nor cause them to be revealed to the general public not to any person, corporation or other business	
	 

Page 4 of 15 

	          	
 association (including any of the
Approved Distributors or franchisees of El Pollo Loco not specifically authorized
in writing by EPL to receive them; (b) permit disclosure of the Specifications
to any of its employees except those who have a “need to know” to enable
Supplier to perform its obligations; (c) permit anyone to reproduce, copy or exhibit the Specifications or any portion thereof or any other confidential or proprietary information received from EPL, or (d) use the Specifications to produce the
Products either for Supplier’s own use or for sale or distribution to customers outside the El Pollo Loco system. No obligation will exist with respect to any information contained in the Specifications which Supplier can establish through
written documents was (1) known to Supplier from a source other than EPL, or parties authorized to act on behalf of EPL or the El Pollo Loco system, prior to receipt of the Specification from EPL or parties authorized to act on behalf of EPL or the
El Pollo Loco system, or (2) substantially the same information that was previously published or became available to third parties without restriction through no act or failure to act on the part of Supplier, or (3) substantially the same
information previously available to Supplier from a third party having no obligation to hold such information in confidence. If EPL or parties authorized to act on behalf of EPL or the El Pollo Loco system, provide Supplier with any information
which relates to the purchase and sale of the Products, including but not limited to Product sales estimates, purchase expectations, geographical expansion plans and the like, Supplier shall likewise maintain the confidentiality of such
information.	
	 
	
6.	
“Intentionally Left Blank”	
	 
	
7.	
Inspection of Facilities – EPL shall have the right to inspect without advance notice (a) the premises of Supplier at which the Products are produced; (b) all of the Supplier’s facilities
and equipment relating to manufacture, storage and delivery of the Products and all components’ and (c) the Products, prior to their shipment to the El Pollo Loco system. Neither EPL nor its employees or agents shall be required by Supplier to
execute a confidentiality agreement, waiver or other agreement as a condition to engaging in inspections related to the Products. EPL may engage the services of an independent inspection firm, selected in the sole discretion of EPL, to perform these
inspections. Supplier will pay the reasonable cost of this third party inspection so
long as the cost for routine inspection does not exceed the sum of Three Thousand Dollars ($3,000.00) per annum per individual approved location.	
	 

Page 5 of 15 

	
8.	
Laboratory Testing – At EPL request, Supplier shall promptly submit for analysis, samples of the Products or samples of any components in accordance with any testing schedule established from
time to time by EPL Supplier agrees to send the samples to facilities selected in the sole discretion of EPL, and Supplier agrees to pay the reasonable costs of any third party laboratory testing so long as the cost for routine inspections does not
exceed the sum of Three Thousand Dollars ($3,000.00) per annum per individual approved product per location.	
	          	 
	
9.	
Records Retention – For a period of at least two (2) years from the date of shipment (or for such longer period if requested by EPL), Supplier agrees to keep corporate records of the
manufacture, storage, shipment and sale of the Products and, upon request by EPL, to make these records available to EPL.	
	 
	
10.	
Indemnification – As a condition of the Approval, Supplier will defend, indemnify and hold harmless El Pollo Loco its parents, subsidiaries, affiliates, Approved Distributors, directors,
officers, employees, representatives, system purchasing agent(s) and El Pollo Loco franchisees, of and from all claims, demands, losses, damages, liabilities, costs and expenses, including reasonable attorneys’ fees and costs resulting form
injury, illness and/or death caused, in whole or in part, by (i) contact with, use and/or consumption of the Products, including, without limitation, any product liability, strict product liability, or any variation thereof, (ii) failure of the
Products to comply with applicable specifications’ warranties and certifications under this Agreement unless (and then only to the extent) such injury, illness and/or death is directly caused by EPL, its parents, subsidiaries, affiliates,
Approved Distributors, El Pollo Loco franchisees, system purchasing agent(s) or unrelated third parties. Such indemnification obligation shall continue during the term of this Agreement and for anytime thereafter agrees to advise Supplier if EPL
receives notice that a claim has been or will be filed with respect to a matter covered by this indemnity and Supplier shall be given the opportunity to assume the defense thereof. If Supplier fails to assume such defense, EPL may defend the action
in the manner it deems appropriate, and Supplier shall pay to EPL all costs, including reasonable attorneys’ fees, incurred by EPL in effecting such defense and any subsequent legal appeal, in addition to any sum which EPL may pay by reason of any settlement or judgment against EPL. This right to indemnify hereunder shall exist notwithstanding that joint or several liability may be imposed upon EPL (or the other persons identified
above) by statute, ordinance, regulation or judicial decision.	
	 

Page 6 of 15 

	
11.	
Insurance – Supplier will maintain, during the entire term of the indemnification, comprehensive liability insurance, including product liability coverage, in minimum amounts of Ten Million
Dollars ($10,000,000.00) U.S. currency per occurrence for damage, injury and/or death to persons, One Million Dollars ($1,000,000.00) U.S. currency per occurrence for damage and/or injury to property and Worker’s Compensation Insurance
as required by law. Such coverage shall be on a Date of Occurrence Form. The insurance coverage required herein shall be provided by an insurance company or companies with a Bests rating of A-X or better reasonably acceptable to EPL Supplier shall,
promptly after receipt of the Approval Letter and annually thereafter, provide the Supply Chain Management Department with certificates of insurance evidencing such coverage and naming El Pollo Loco, its parents, subsidiaries, and affiliates as
additional named insured’s. Each certificate shall indicated that the coverage represented thereby shall not be canceled nor modified until at least thirty (30) days prior written notice has been given to EPL. Such insurance shall be carried
during the term of this Agreement, including extension, and for at least three (3) years thereafter.	
	          	 
	
12.	
Financial Reports – Upon request and at least once annually, Supplier will provide to EPL financial information sufficient to reasonably demonstrate Supplier’s satisfactory financial
condition. Such information may include annual or quarterly reports, bank references or other information reasonably directed towards a description of Supplier’s current financial status. If such information is held confidential by Supplier,
release may be conditioned upon execution by EPL of a reasonable and limited confidentiality agreement.	
	 
	
13.	
Audit – During the term of this Agreement and for a period of two years after termination, Supplier’s correspondence, records and books of account related to the supply of product to the
El Pollo Loco system, shall be open to inspection and audit by EPL during Supplier’s normal business hours.	
	 
	14.	Product Withdrawal – If
      it deemed necessary at any time by either EPL or Supplier to recall or
      withdraw from Approved Distributors or from the El Pollo Loco system any
      quantity of any Products, either as a result of failure of the Products,
      Supplier will comply diligently with the written Quality Assurance Product
      Withdrawal Procedures established from time to time by a current copy of
      which has been provided to Supplier. [See Attachment “A”]. Furthermore,
       
	 	 

Page 7 of 15 

	
          	Supplier will bear all costs and expenses incurred by it and/or
EPL and/or any of the Approved Distributors in complying with the recall or withdrawal
procedures (including w/o limitation, costs of notifying customers, customer
refunds, costs of returning product, loss profits, and other expenses incurred
to meet obligation to third parties), unless (and then only to the extent) such
recall or withdrawal is solely the result of the negligence or misconduct by
Approved Distributors, agent EPL, or El Pollo Loco franchisees. If Supplier fails
or reuses to promptly comply with the recall or withdrawal of the Products upon
request by EPL, EPL shall take such action as it deems necessary to recall or
withdraw the Products from the El Pollo Loco system and Supplier shall immediately
reimburse for the costs and expenses incurred.	
	 
	
15.	
Product Allocation – During an emergency shortage of the Product, as announced by EPL, or its designated representative, Supplier shall stand ready to allocate sales of the Product within the
El Pollo Loco system among Approved Distributors or otherwise, as reasonable directed by EPL, or its designated representative.	
	 
	
16.	
New Products – The manufacture, storage, shipment and/or distribution by Supplier of any new or modified product intended for use within the El Pollo Loco system shall be directed at the sole
discretion of EPL or is designated representative, during the EPL related research, market testing and roll-out stages of development of such product. With respect to distribution and sale within the El Pollo Loco system, EPL man, in its sole
discretion, direct Supplier to allocate sales of the new or modified product among Approved Distributors or otherwise.	
	 
	
17.	
No Gratuities – Supplier will not pay any gratuities, commissions, fees or grant any rebates to any employee or officer of EPL his or her personal or private benefit, nor favor any officer or
employee of EPL with gifts, travel or entertainment of any substantial cost or value, nor enter into any business arrangements with employees or officers of EPL which benefit them personally or privately. If EPL employs third party inspection or
testing firms, or a system purchasing agent, Supplier agrees that these restrictions shall also apply
      to the officers and employees of such firms as if they were officers and
    employees of EPL. 
	 
	18.	No Hidden Payments – An
      Approved Supplier has an obligation to provide fair and equitable treatment
      of the El Pollo Loco system as a whole. In connection with the direct or
      indirect sale of the Products to the El Pollo Loco system, Supplier will
      not pay or procure or authorize a third 
	 

Page 8 of 15 

	          	 party to pay and direct or indirect product or cash allowances,
rebates, brokerage fees, finders fees, commissions or any other consideration
of any kind to any third party, including without limitation any Approved Distributor,
EPL or its employees, any El Pollo Loco franchisee or their representative or
employees, or any other third party associated with the transactions, except
as explicitly provided in any purchase agreement between the Supplier and any
system purchasing agent. Supplier warrants and represents that it has not paid,
is not obligated to pay and will not pay any allowance, rebate or fees to any
third party in connection with any recommendation or subsequent approval of the
Supplier as an EPL Supplier.	
	 
	
19.	
Product Information – Supplier warrants that any and all “Product Information and Nutritional Data Sheet” or “Supplier Profile” or similar information request forms
provided by EPL to Supplier have been and will in the future be completed by Supplier accurately and to the best of Supplier’s knowledge.	
	 
	
20.	
Supplier Disclosure – Supplier, on behalf of itself and its principal officers, warrants and represents that they presently do not own any interest, whether direct or indirect, in any El Pollo
Loco franchise, in any El Pollo Loco restaurant, or in any corporation or partnership operating an El Pollo Loco restaurant or in any entity leasing real estate for the operation of an El Pollo Loco restaurant. Supplier further warrants and
represents, on behalf of itself and its principal officers, that they do not claim any right to become an El Pollo Loco franchisee, to own an interest in any El Pollo Loco restaurant or in a corporation operating an El Pollo Loco restaurant.
Supplier warrants and represents that during the term of this Agreement it will not knowingly hereafter acquire, whether directly or indirectly, any interest in any El Pollo Loco restaurant, in any El Pollo Loco franchise or in any entity leasing
real estate for the operation of any El Pollo Loco restaurant.	
	 
	21.	Food Warranties – Supplier
      warrant to EPL parents, subsidiaries, affiliates, any system purchasing
      agent, Approved Distributors and its franchisees that all food products
      including food articles, food ingredients and food packaging comprising
      any approved Products, or any part thereof delivered, sold or transferred
      to EPL, to any system purchasing agent, to any Approved Distributor or
      to any El Pollo Loco Restaurant hereunder (a) shall be in full compliance
      with either Federal Food, Drug and Cosmetic Act )’FDCA), as amended,
      or the rules and regulations promulgated from time to time by the United
      States Department of Agriculture (“USDA”), or 
	 

Page 9 of 15 

	          	any other
applicable country, federal, state or local law, rule or regulation, as the case
may be; (b) shall be manufactured, stored and delivered in accordance with appropriate “Good Manufacturing Practices” under the FDCA or comparable regulations
of the USDA and any other applicable country, federal, state, or local law, rule or regulation, as applicable; (c) shall not be adulterated or misbranded within the meaning of the FDCA or USDA and any other applicable country, federal state, or
local law, rule or regulation, as applicable; (d) shall not be a food product which may not, under applicable laws, rules and regulations, be introduced into interstate commerce; and (e) shall not be a food product adulterated or misbranded under
any applicable country, federal, state or local law, rule or regulation.	
	 
	
22.	
Product Warranties – Supplier warrants to EPL its parents, subsidiaries, affiliates, any system purchasing agent, Approved Distributors and its franchisees that that the Products shall be
merchantable, fit for their intended purpose, pass without objection in the trade under the contract description, are of fair average quality within the description such that the products shall meet or exceed the Specifications in every respect.
Supplier warrants that the products are labeled as required by the specification and conform to the promises or affirmations of fact made on the containers or label if any. Supplier further warrants to EPL that unless excluded or modified, other
implied warranties may arise from course of dealing usage or trade.	
	 
	
23.	
Inventory and Production – Supplier shall be required to maintain adequate service levels to its EPL customers on a day to day basis but responsibility for decisions regarding the maintenance
of inventory, the addition of new production lines, the construction of a new plant and similar element of Supplier’s business shall rest entirely with the Supplier. EPL shall have no liability or other responsibility whatsoever for loss or
damage incurred by Supplier with respect to these decisions, including but not limited to loss or damage which may result from changes in the
 Specifications (though EPL will use reasonable efforts
      to provide advance notice of such changes), marketing or sales plans or
      projections, the introduction or deletion of EPL menu items, the termination
      of the Approval pursuant to its terms, or the termination of any other
      agreement between EPL and the Supplier pursuant to its terms. An exception
      with regard to Supplier’s inventory decisions will exist in those
      instances in which written inventory directions are issued by EPL with
      respect to emergency shortages or new products and, in such case, EPL liability
      shall be limited to the price allocable to the goods which are subject
    to the inventory direction. 
	 

Page 10 of 15 

	
24.	
No Financial Warranty – EPL does no represent or warrant in any respect, whether express or implied, the financial condition of any Approved Distributor, any El Pollo Loco franchisee or any
other party and EPL shall have no liability to Supplier in connection therewith.	
	          	 
	
25.	
EPL Trademarks – Supplier shall not, without the prior written consent of EPL use the marks or service marks of EPL in any manner whatsoever, unless, and then only to the extent, such use is
authorized by EPL in the Specifications.	
	 
	
26.	
Supplier Suspension – Supplier’s approval may be suspended or terminated in accordance with the attached EPL Approval/Qualification Suspension Procedures, if, in the sole judgment of EPL
either, (a) any Product as produced by Supplier presents, or is likely to present in the immediate future, an imminent health or safety risk to consumers, to restaurant employees, to any third party or to the El Pollo Loco system in violation of the
Specifications or applicable governmental health safety or sanitation standards or (b) Supplier has repeatedly failed or refused to comply with the Specifications.	
	 
	
27.	
Term – Supplier’s status and obligations as an Approved Supplier may be terminated by EPL during the term of the Purchase Agreement only due to (a) a material breach by EPL of these
General Terms and Conditions, or (b) a material change in the Specifications which substantially affects the cost of producing the Products, or, (c) in EPL’s sole discretion and with 60 days advance written notice to Supplier, in the event of,
the deletion of menu items from the El Pollo Loco menu.	
	 
	28.	Termination – Upon
      termination of the Supplier’s designation as an Approved Supplier,
      Supplier shall not thereafter identify or represent itself as an Approved
      Supplier of EPL nor use the Specifications nor any of EPL trade secrets
      and proprietary information for any purpose. Supplier shall also cease
      to use, in any manner whatsoever, any of the trademarks and/or service
      marks of EPL and shall return to EPL (or at the option of EPL shall destroy)
      all copies of the Specifications. Upon termination of the Supplier’s
      designation as an Approved Supplier, the former Supplier will remain liable
      to EPL for any loss resulting from the unauthorized use of any intellectual
      property. It is the express intention of the parties that this liability
      survive the Supplier’s termination. 

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29.	
Approval No Promise of Sale – The Approval and these General Terms And Conditions do not constitute a commitment on the part of EPL or any Approved Distributor or any system purchasing agent
or any El Pollo Loco franchisee or any other person to purchase any Products from Supplier. The purpose of the Approval and the General Terms and Conditions is to set forth the terms under which Supplier may provide the Products to the El Pollo Loco
system.	
	          	          	 
	
30.	
Governing Terms And Conditions – These General Terms And Conditions shall govern and control any Purchase Agreement regardless of conflicting terms which may be
contained in any form or document previously or hereafter submitted by Supplier and all such competing and conflicting terms are hereby unconditionally rejected.	
	 
	
31.	
EPL Not A Fiduciary – To the extent that EPL elect to negotiate a Purchase Agreement with Supplier on behalf of third party Approved Distributors and established commitments between these
parties for the sale and purchase of products, it is understood and agreed that EPL will not be acting as a fiduciary on behalf of any such third party Approved Distributor.	
	 
	
32.	
Transportation of Products – Supplier represents and warrants the following with respect to all interstate product shipments to any Approved Distributors, pursuant to any Purchase Agreement,
which are arranged and/or paid for by Supplier:	
	 
	 	
(1)	
That Supplier will use duly authorized contract and/or common carriers that comply with Surface Transportation Board (“STB”) rules and regulations and that supplier agrees to
  follow and comply with any EPL specifications which
      may exist with respect to the shipment of the product. 
	 
	 	(2) 	That all transportation rates of common carriers
      selected by the Supplier to perform such movements to EPL or an Approved
      Distributor are published and on file with the STB and have become effective
      prior to the tender of such shipments to those carriers; and
	 
	 	 (3) 	That the contract carriage rates of contract carriages
      selected by the Supplier to effectuate such hauls to EPL or an Approved
      Distributor are commemorated in bilateral written transportation contracts
      between the Supplier and those contract carriers wherein the Supplier has
      committed itself to tender a series of shipments during the term of each
      such contact and the contract carriers have agreed either to dedicate equipment
    to the needs of 

Page 12 of 15 

	          	          	
the Supplier
or to render the specialized carriage services identified in the body of those
contracts. Supplier shall indemnify and hold harmless EPL and each Approved Distributor
from any and all claims, suits or liabilities, including attorneys fees, arising
out of a breach of the foregoing representation and warranty.	
	 
	
33.	
No Waiver – Failure of EPL to exercise any right or option given to it under these General Terms and Conditions, or to insist upon strict compliance by Supplier with these General Terms And
Conditions shall not constitute a waiver with respect to any other or subsequent breach, nor a waiver by EPL of its right at
any time thereafter to require exact and strict compliance with these General Terms And Conditions. The rights or
remedies set forth herein are in addition to any other rights or remedies which may be granted by law.	
	 
	
34.	
Independent Contractor – Supplier acknowledges that it is an independent contractor and is not an agent, partner, joint venture nor employee of EPL Supplier shall have no authority to bind or
otherwise obligate EPL in any manner nor shall Supplier represent to anyone that it has a right to do so.	
	 
	
35.	
Notices – All notices required hereunder shall be in writing and shall be deemed given when delivered or deposited in the United States mail addressed, if to EPL Attention: Supply Chain
Management, with a copy to the Attention of Steve Lash located at the same address, and if to Supplier, to the person and at the address identified on the Approval Letter. Notice may also be given by transmitting a facsimile to the
      facsimile number provided by the other party. Either party may change its
      mailing address or facsimile number by giving notice to the other party
    as described herein. 
	 	 	 
	36.	Governing Law and Forum – The agreement
        represented by the Approval, and the General Terms And Conditions shall
        be deemed made and entered into in the State of California and shall
        be governed and construed under and in accordance with the laws of the
        State of California. The U.S. District Court for the Central District
        of California if such court lacks jurisdiction, the Superior Court of
        the State California, County of Orange, shall be the venue and exclusive
        proper forum in which to adjudicate any case or controversy arising either,
        directly or indirectly, under or in connection with the Approval or the
        
	 

Page 13 of 15 

	          	
 General Terms And Conditions. EPL and Supplier further
agree that, in the event of litigation arising out of or in connection with these
matters, they will not contest or challenge the jurisdiction or venue of these
courts.	
	 
	
37.	
Amendments – These General Terms And Conditions may not be waived, modified or amended unless expressly stated in writing signed by both parties.	
	 
	
38.	
Severability – If any provision of the Approval Letter or the General Terms And Conditions, or any related agreement may be construed in two ways, one of which would render the provision
illegal or otherwise voidable and unenforceable and the other of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable. The language of all provisions of these agreements
shall be construed according to its fair meaning and not strictly against EPL or Supplier. It is the intention of the parties that the provisions of these agreements be enforced to the fullest extent. In the event that any court shall determine that
any provision in these agreements is unenforceable as written, the parties agree that the provision shall be amended so that it is enforceable to the fullest extent permissible under the law. The provisions of these agreements are severable and they
shall be interpreted and enforced as if all completely invalid or unenforceable provisions were not contained in these agreements. Partially valid and enforceable provisions shall be enforced to the extent that they are partially valid and
enforceable.	
	 
	39.	Survival – Any
      provision of these Terms And Conditions which imposes, whether expressly
      or by its nature, upon either party an obligation after termination or
      expiration of the related agreement shall survive termination or expiration
      thereof and be binding upon either party. 
	 	 	 
	40.	Interpretation – Paragraph
      captions are used only for convenience and are in no way to be construed
      as part of these Terms and Conditions or as a limitation of the scope of
      the particular paragraphs to which they refer. Words of any gender used
      in the Terms and Conditions shall include any other gender, and words in
      the singular shall include the plural where the context requires. 
	 
	41.	Binding Effect And Assignment – This
      Agreement represented by the Approval and the General Terms and Conditions
      of Supply shall be binding upon the parties, their successors, heirs
	 

Page 14 of 15 

	          	and
assigns, provided that it shall not be assigned or transferred in whole or in
part by Supplier without the express written consent of EPL.	
	 
	
42.	
Integration Clause – These General Terms And Conditions shall together with the Approval Letter, constitute the entire agreement between EPL and Supplier with respect to the Approval and
shall, when effective supersede any and all prior negotiations, understandings, and/or agreements, oral or written, between the parties hereto with respect to the subject matter hereof.	
	 

Page 15 of 15EXHIBIT 10.1

EXECUTION

                        INSURANCE AND INDEMNITY AGREEMENT

                                      among

                           XL CAPITAL ASSURANCE INC.,

                         XL ASSET FUNDING COMPANY I LLC,

                                       and

                       XL LIFE AND ANNUITY HOLDING COMPANY

                          Dated as of October 13, 2006

<PAGE>

                                TABLE OF CONTENTS

APPENDIX I - Definitions

APPENDIX II - Qualified Investment Agreement Criteria

APPENDIX III - Investment Guidelines

APPENDIX IV - Approved Investment Managers

APPENDIX V - Form of Monthly Report

APPENDIX VI - Form of Policy Request Form

                                        i

<PAGE>

                  INSURANCE  AND  INDEMNITY  AGREEMENT  dated as of October  13,
2006,  among XL  CAPITAL  ASSURANCE  INC.,  a New York stock  insurance  company
(together with its successors and assigns,  "XLCA"),  XL ASSET FUNDING COMPANY I
LLC, a Delaware limited liability company (the "INVESTMENT AGREEMENT PROVIDER"),
and XL LIFE AND ANNUITY HOLDING COMPANY, a Delaware  corporation  (together with
its  successors and assigns,  "HOLDING  COMPANY" and,  together with  Investment
Agreement Provider, the "PROVIDER ENTITIES").

                             INTRODUCTORY STATEMENTS

                  The Provider Entities have requested that XLCA issue financial
guaranty  insurance  policies  guaranteeing  certain  required  payments  of the
principal of and interest on all Qualified Investment Agreements (as hereinafter
defined) (including any such payments subsequently avoided as a preference under
applicable bankruptcy law) upon the terms and subject to the conditions provided
herein.

                  The parties hereto desire to specify the conditions  precedent
to the issuance of each Policy by XLCA, the payment of premium and other amounts
in respect of each Policy, the indemnity and reimbursement to be provided by the
Provider  Entities  in  respect of amounts  paid by XLCA under the  Policies  or
otherwise and certain other matters.

                  The  Provider  Entities and XLCA intend that from time to time
XLCA may provide the Provider Entities with information,  identify opportunities
and provide  assistance to the Provider Entities in connection with the Provider
Entities' marketing of the Qualified Investment  Agreements.  In addition,  from
time to time the  Investment  Agreement  Provider  may  request  XLCA to provide
certain limited,  existing  surveillance-related  information on XLCA's existing
insured credits.

                  In consideration of the premises and of the agreements  herein
contained, XLCA and the Provider Entities hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

                  Capitalized terms used herein shall have the meanings provided
in Appendix I hereto unless the context  otherwise  requires.  Capitalized terms
used herein and not defined shall have the meanings  provided in the  Collateral
Management Agreement.

                                   ARTICLE II

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

         Section 2.1.   Representations and Warranties of the Provider Entities.

         Each  of the  Provider  Entities  severally  represents,  warrants  and
covenants  as of the  date  hereof  and as of the  issuance  of each  Policy  as
follows:

                                       1
<PAGE>

                  (a) DUE ORGANIZATION AND QUALIFICATION.  Investment  Agreement
Provider is a single member limited liability company,  duly organized,  validly
existing and in good standing  under the laws of the State of Delaware.  Holding
Company is a corporation  duly organized,  validly existing and in good standing
under the laws of the State of Delaware.  Each of Investment  Agreement Provider
and Holding  Company is duly  qualified to do business,  is in good standing and
has  obtained all  necessary  licenses,  permits,  charters,  registrations  and
approvals (together,  "approvals")  necessary for the conduct of its business as
currently  conducted and the  performance of its  obligations  under the Related
Agreements to which it is a party.

                  (b) POWER AND AUTHORITY. Each of the Provider Entities has all
necessary  entity  power and  authority  to conduct its  business  as  currently
conducted and as to be conducted,  as contemplated by the Related  Agreements to
execute,  deliver and perform its  obligations  under the Related  Agreements to
which it is a party and to consummate the Transaction.

                  (c) DUE AUTHORIZATION. The execution, delivery and performance
of the Related  Agreements by the Provider  Entities to which it is a party have
been duly authorized by all necessary entities and do not require any additional
approvals  or  consents  or other  action by or any notice to or filing with any
Person, including, without limitation, any governmental entity or the members or
stockholders of the Provider  Entities,  except (in each case) such as have been
obtained and are in full force and effect.

                  (d)  NONCONTRAVENTION.  Neither the  execution and delivery of
the Related  Agreements to which it is a party by any of the Provider  Entities,
the  consummation  of the  Transaction  nor the  satisfaction  of the  terms and
conditions of the Related Agreements to which it is a party:

                           (i)  conflicts  with  or  results  in any  breach  or
                  violation  of any  provision  of its Organic  Documents or any
                  law, rule,  regulation,  order,  writ,  judgment,  injunction,
                  decree,  determination  or award  currently  in effect  having
                  applicability  to it  or  any  of  its  properties,  including
                  regulations  issued  by  an  administrative  agency  or  other
                  governmental  authority having  supervisory  powers over it or
                  other authority having jurisdiction over it or its properties,

                           (ii)  constitutes a default (or an event which,  with
                  the giving of notice or the  passage of time,  or both,  would
                  constitute  a  default)  by  it  under,  or a  breach  of  any
                  provision of, any loan agreement, mortgage, indenture or other
                  agreement or  instrument to which it is a party or by which it
                  or any of its properties is or may be bound or affected, or

                           (iii) results in or requires the creation of any Lien
                  (other than the Lien of XLCA under the  Collateral  Management
                  Agreement,  the Securities  Account Control Agreement or Liens
                  for Required Third Party Collateral) upon or in respect of any
                  of  the  Provider   Entities'   respective  assets  except  as
                  otherwise expressly contemplated by the Related Agreements.

                                       2
<PAGE>

                  (e) NO LITIGATION.  There are no actions, suits or proceedings
pending or, to its  knowledge,  threatened  against it or any of its  properties
before any court,  arbitrator or  governmental  department,  commission,  board,
bureau,  agency or  instrumentality,  domestic  or foreign  (including,  without
limitation,  any regulatory  commission of any jurisdiction) which, if adversely
determined,  could reasonably be expected to result in a Material Adverse Change
with respect to it or the Transaction.

                  (f) NO DEFAULT.  It is not in default under or with respect to
any of its  contractual  obligations  in any respect which could have a material
adverse  effect on the rights,  interests or remedies of XLCA hereunder or under
the other  Related  Agreements to which it is a party or on the ability of it to
perform its obligations hereunder or under the other Related Agreements to which
it is a party. No Default,  Wind Down Event or Event of Default has occurred and
is continuing.

                  (g) VALID AND BINDING  OBLIGATIONS.  The Related Agreements to
which  it is a party  constitute  its  legal,  valid  and  binding  obligations,
enforceable against it in accordance with their respective terms, except as such
enforceability  may  be  limited  by  bankruptcy,  insolvency,   reorganization,
moratorium  or other  similar laws  affecting  creditors'  rights  generally and
general equitable principles.

                  (h)  NO   CONSENTS.   No   consent,   license,   approval   or
authorization from, or registration,  filing or declaration with, any regulatory
body,  administrative  agency, or other  governmental  instrumentality,  nor any
consent,  approval,  waiver or  notification  of any  creditor,  lessor or other
nongovernmental  person, is required in connection with the execution,  delivery
and  performance by it of any of the Related  Agreements to which it is a party,
except  (in each  case)  such as have been  obtained  and are in full  force and
effect or the failure of which to be obtained  could not  reasonably be expected
to result in a Material Adverse Change with respect to it or the Transaction.

                  (i) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed  or  proposed  to be  employed  by it in the  conduct  of its  business
violates any law, regulation, judgment, agreement, order or decree applicable to
it which,  if  enforced,  would (i) result in a  Material  Adverse  Change  with
respect to it or the Transaction or (ii)  constitute  grounds for the revocation
of any license, charter, permit or registration which is material to the conduct
of its business.

                  (j)  GOOD  TITLE;  ABSENCE  OF  LIENS  OR  SECURITY  INTEREST;
PERFECTION OF SECURITY INTEREST.  The Investment Agreement Provider is the owner
of, and has good and marketable  title to, all of the Collateral  free and clear
of all  Liens  (other  than the Lien of XLCA  under  the  Collateral  Management
Agreement,  the Securities Account Control Agreement or Liens for Required Third
Party  Collateral)  and has full right,  power and lawful  authority  to assign,
transfer and pledge the Collateral  (and any documents which are a part thereof)
and all such  substitutions  therefor and additions  thereto delivered under the
Collateral  Management  Agreement or the Securities  Account Control  Agreement.
XLCA  has a  valid  and  perfected  first  priority  security  interest  in  the
Collateral  free and  clear of all  Liens and  restrictions  on  transferability
except for Permitted Liens.

                                       3
<PAGE>

                  (k)  TAXES.  It has filed all  federal  and state tax  returns
which  are  required  to be  filed,  and  has  paid  all  taxes,  including  any
assessments received by it, to the extent that such taxes have become due.

                  (l) ACCURACY OF INFORMATION. Neither the Related Agreements to
which  it is a party  nor any  documents,  agreements,  instruments,  schedules,
certificates,  statements, cash flow schedules, number runs or other writings or
data  (collectively,  the  "Documents")  furnished  to  XLCA by it  contain  any
statement  of a  material  fact by it which  was  untrue  or  misleading  in any
material  respect  when made.  There is no fact known to it which has a material
possibility  of  causing a Material  Adverse  Change  with  respect to it or the
Transaction.  Since the furnishing of the Related Agreements,  there has been no
change nor any development or event  involving a prospective  change known to it
which  would  render any of the  Related  Documents  untrue or  misleading  in a
material respect.

                  (m) COMPLIANCE WITH SECURITIES  LAWS. The  consummation of the
Transaction, the execution of the Related Agreements to which it is a party, the
pledge of the Collateral and the Additional  Collateral and the entering into by
the Investment Agreement Provider of the Qualified Investment Agreements, comply
with  all  requirements  of law,  including  all  registration  requirements  of
applicable  securities laws. The consummation of the Transaction,  the execution
of the Related  Agreements  to which it is a party the pledge of the  Collateral
and the Additional  Collateral and the entering into by the Investment Agreement
Provider of the  Qualified  Investment  Agreements,  are not in violation of the
Securities Act, or any other federal or state securities laws and neither it nor
the Related Agreements are required to be registered under applicable securities
laws. The Investment  Agreement  Provider is not required to be registered as an
"investment company" under the Investment Company Act.

                  (n)  RELATED  AGREEMENTS.  Each  of  its  representations  and
warranties  contained in the Related  Agreements  to which it is a party that is
qualified by reference to  materiality is true and correct as of the date hereof
and as of the date made and each of its representations and warranties contained
in the Related  Agreements  to which it is a party that is not so  qualified  is
true and  correct in all  material  respects as of the date hereof and as of the
date made.

                  (o) NO INDEBTEDNESS. Except with respect to amounts owed under
the Related  Agreements and  liabilities  and fees and expenses  provided for or
otherwise incurred in connection with the preparation,  execution,  delivery and
performance  of the  Related  Agreements  (all of which have been  disclosed  to
XLCA), Investment Agreement Provider has not incurred any Indebtedness.

                  (p) SUBSIDIARIES.  The Investment  Agreement Provider does not
have any Subsidiaries.

                  (q) INVESTMENT AGREEMENT PROVIDER.  With respect to Investment
Agreement Provider only:

                           (i) Its  capital is  adequate  for its  business  and
undertakings.

                                       4
<PAGE>

                           (ii) Its  funds  and  assets  equal  to or below  the
                  Overcollaterlization  Percentage  are  not,  and  will not be,
                  commingled  with those of any other entity,  including but not
                  limited to any of the other Provider Entities, as applicable.

                           (iii) Its Organic  Documents  require it to keep true
                  and  full  books  and  records  regarding  the  status  of the
                  business and financial  condition of the Investment  Agreement
                  Provider.

                           (iv) It is solvent and will not be rendered insolvent
                  by the  transactions  contemplated  by the Related  Agreements
                  and, after giving effect to such transactions,  it will not be
                  left with an  unreasonably  small amount of capital with which
                  to engage in its business  nor will it incur,  or believe that
                  it has incurred, debts beyond its ability to pay such debts as
                  they  mature.  It does not  contemplate  the  commencement  of
                  insolvency,    bankruptcy,    liquidation   or   consolidation
                  proceedings  or the  appointment  of a  receiver,  liquidator,
                  conservator, trustee or similar official.

                  (r) XLCA Information,  Co-Marketing and Surveillance.  Each of
the Provider Entities  understands and agrees that while XLCA intends to provide
the  information  and to assist with the  identification  of  opportunities  and
co-marketing  activities as well as surveillance activities described above, the
performance of these services is non-binding upon XLCA and the Provider Entities
shall have no recourse to XLCA for breach or enforcement thereof.

         Section 2.2.      Affirmative Covenants of the Provider Entities.

         The Provider Entities each hereby severally agrees that during the Term
of the Agreement, unless XLCA shall otherwise expressly consent in writing:

                  (a) COMPLIANCE WITH RELATED AGREEMENTS. It shall comply in all
material  respects with the terms and  conditions  of, and enforce its rights in
all material  respects  under,  each  Related  Agreement to which it is a party,
shall provide XLCA with written  notice  immediately  upon becoming aware of any
material breach by it or any of the other Provider  Entities of any provision of
any Related Agreement to which it is a party.

                  (b) COMPLIANCE  WITH  APPLICABLE  LAWS. It shall comply in all
material respects with all applicable laws, rules,  regulations,  orders, writs,
judgments,  injunctions,  decrees, determinations and awards (including, without
limitation,  any fiscal and accounting  rules and regulations and any foreign or
domestic law, rule or regulation),  including, without limitation, in connection
with the entering into of all Qualified  Investment  Agreements  contemplated by
the Transaction and the Related Agreements.

                  (c)  EXISTENCE.   The  Investment   Agreement  Provider  shall
maintain its existence as a limited  liability  company and each entity shall at
all times continue to be duly organized under the laws of the state of Delaware,
duly qualified and duly authorized (as described in Sections 2.1(a), (b) and (c)
hereof) and it shall  conduct  its  business  in  accordance  with and remain in
compliance with the terms of its Organic Documents.

                                       5
<PAGE>

                  (d) ACCOUNTANTS'  REPORTS;  OTHER  INFORMATION.  It shall keep
proper books of accounts and records and appoint  independent public accountants
in accordance with the Related Agreements.  Investment  Agreement Provider shall
furnish or caused to be furnished to XLCA:

                           (i)   ANNUAL   FINANCIAL   STATEMENTS.   As  soon  as
                  available,  and in any event within 90 days after the close of
                  each fiscal year, beginning with 2007, of Investment Agreement
                  Provider,   the  unaudited   consolidated  balance  sheets  of
                  Investment  Agreement  Provider,  as of the end of such fiscal
                  year and the  unaudited  consolidated  statements  of  income,
                  changes  in  equity  and cash  flows of  Investment  Agreement
                  Provider,  for such fiscal year, all in reasonable  detail and
                  stating in  comparative  form the  respective  figures for the
                  corresponding  date and period in the  preceding  fiscal year,
                  prepared in  accordance  with  generally  accepted  accounting
                  principles, consistently applied.

                           (ii)  QUARTERLY  FINANCIAL  STATEMENTS.  As  soon  as
                  available,  and in any event within 45 days after the close of
                  each  quarter of each fiscal year,  beginning in 2006,  of the
                  Investment  Agreement  Provider  the  unaudited   consolidated
                  balance sheets of the Investment Agreement Provider, as of the
                  end of such quarter and the  unaudited  statements  of income,
                  changes in equity and cash flows of the  Investment  Agreement
                  Provider,  to the  extent  produced  in the  normal  course of
                  business of the Investment  Agreement Provider for the portion
                  of the fiscal year then ended,  prepared  in  accordance  with
                  generally accepted accounting principles, consistently applied
                  (subject to normal year-end adjustments).

                           (iii) CERTAIN  INFORMATION.  Upon request,  copies of
                  all  proxy  statements,   financial  statements,  reports  and
                  registration  statements  which it files with,  or delivers to
                  the  Commission  or  any  other  federal   government  agency,
                  authority or body which  supervises the issuance of securities
                  by it, or any national securities exchange; PROVIDED, HOWEVER,
                  that it shall not be  required  to deliver  any tax returns or
                  exhibits or schedules to tax returns filed with the IRS.

                           (iv) OTHER  INFORMATION.  Such other data as XLCA may
                  reasonably request.

                  (e)  ACCESS  TO  RECORDS;   DISCUSSIONS   WITH   OFFICERS  AND
ACCOUNTANTS.  It shall,  upon the request of XLCA, permit XLCA or its authorized
agents at reasonable times and upon reasonable prior written notice:

                           (i) to  inspect  its books and  records,  as they may
                  relate  to  the  Related  Agreements,   the  Collateral,   the
                  Additional  Collateral,  its  obligations  under  the  Related
                  Agreements, its business and the Transaction;

                           (ii) to discuss its  affairs,  finances  and accounts
                  with the Provider Entities Representative; and

                           (iii) to discuss its  affairs,  finances and accounts
                  with its  accountants;  provided,  that the Provider  Entities
                  Representative  shall have the right to be present during such
                  discussions.

                                       6
<PAGE>

Such inspections and discussions shall be conducted during normal business hours
and shall not  unreasonably  disrupt  the  business of the  applicable  Provider
Entity.  Its books and records  will be  maintained  at its  address  designated
herein for  receipt of  notices,  unless it shall  otherwise  advise the parties
hereto in writing.

                  (f) AUDITS. The Investment  Agreement Provider,  on reasonable
prior notice, shall permit XLCA or its authorized agents, during normal business
hours to examine its  respective  books and  records,  as they may relate to the
Related  Agreements  and the Collateral  and its  obligations  under the Related
Agreements  and to make copies and extracts  therefrom.  The  Provider  Entities
shall  reimburse  XLCA for reasonable  out-of-pocket  costs and expenses for one
audit in total for the Holding Company and the Investment  Agreement Provider in
any twelve  (12) month  period,  subject  to a cap of Fifteen  Thousand  Dollars
($15,000) per year, unless an Event of Default is then continuing.

                  (g) NOTICE OF MATERIAL EVENTS.  Each Provider Entity shall, in
addition to any notices,  certificates or information  provided pursuant to this
Agreement,  promptly  inform  XLCA in  writing of the  occurrence  of any of the
following:

                           (i) the  submission of any claim or the initiation of
                  any legal process,  litigation or  administrative  or judicial
                  investigation  against  it,  involving  potential  damages  or
                  penalties which, if adversely determined,  could reasonably be
                  expected to result in a Material  Adverse  Change with respect
                  to it or the Transaction;

                           (ii) any  change in its  name,  the  location  of its
                  principal office or jurisdiction of organization or any change
                  in the location of any of its books and records;

                           (iii) the occurrence of any Default,  Wind Down Event
                  or Event of Default  (without  waiting  for any Person to take
                  any action);

                           (iv)  the   commencement   of  any  rule   making  or
                  disciplinary proceedings or any proceedings, of which it shall
                  have  knowledge,  instituted by or against any of the Provider
                  Entities, as applicable,  in any federal, state or local court
                  or before  any  governmental  body or  agency,  or before  any
                  arbitration  board,  or the  promulgation of any proceeding or
                  any  proposed or final rule which,  if  adversely  determined,
                  could  reasonably be expected to result in a Material  Adverse
                  Change  with  respect  to  the  related  Provider  Entity,  as
                  applicable, or the Transaction;

                           (v) the commencement of any proceedings,  of which it
                  shall  have  knowledge,  by or  against  any of  the  Provider
                  Entities  as  applicable,  under  any  applicable  bankruptcy,
                  reorganization,  liquidation,  rehabilitation,  insolvency  or
                  other  similar  law  now  or  hereafter  in  effect  or of any
                  proceeding  in  which  a  receiver,  liquidator,  conservator,
                  trustee  or  similar  official  shall  have  been,  or may be,
                  appointed or requested  for any of the Provider  Entities,  as
                  applicable, or any of its assets; or

                                       7
<PAGE>

                           (vi)  the  receipt  of  notice  that  (A)  any of the
                  Provider  Entities,  as  applicable,  is  being  placed  under
                  regulatory  supervision,  (B) any  license,  permit,  charter,
                  registration  or approval  necessary for the conduct of any of
                  the  Provider  Entities'  business,  is  to  be,  or  may  be,
                  suspended or revoked, or (C) any of the Provider Entities,  as
                  applicable, is to cease and desist any practice,  procedure or
                  policy  known to any of them  employed by any of the  Provider
                  Entities, as applicable,  in the conduct of its business,  and
                  such  cessation  could  reasonably  be expected to result in a
                  Material  Adverse  Change with  respect to any of the Provider
                  Entities, as applicable, or the Transaction.

                  (h) [Reserved]

                  (i)  MAINTENANCE  OF LICENSES.  Each of the Provider  Entities
shall  maintain all  licenses,  permits,  charters and  registrations  which are
material to the conduct of its business  unless the failure to maintain the same
would  not  result  in a  Material  Adverse  Change  with  respect  to it or the
Transaction.

                  (j) USE OF ASSETS.  The  Investment  Agreement  Provider shall
apply  its  Cash  Assets  equal  to or  less  than  the  Over  Collateralization
Percentage only as expressly  permitted under the Related  Agreements and for no
other purpose.

                  (k)  SURRENDER  OF POLICIES.  XLCA may contact  each  Investor
under each  Investment  Agreement,  upon the expiration of the term of a Policy,
and request such Investor to surrender the Policy to XLCA for cancellation.

                  (l) INVESTMENT AGREEMENT PROVIDER.

                           (i) Investment  Agreement  Provider shall conduct its
                  business  solely in its own name  through its duly  authorized
                  members, officers or agents.

                           (ii) Investment Agreement Provider shall maintain its
                  records and books of account  separate from those of all other
                  entities.

                           (iii)  Investment  Agreement  Provider  shall  obtain
                  proper  authorization  from its  managing  member,  manager or
                  members, as applicable, of all action requiring approval.

                           (iv) Operating expenses and liabilities of Investment
                  Agreement  Provider  shall be paid  from its own funds or from
                  any Deposited  Assets in excess of the Over  Collateralization
                  Percentage.

                  (m)  THIRD-PARTY  BENEFICIARY.  Each of the Provider  Entities
agree that XLCA shall have all rights of a third-party beneficiary in respect of
the Related  Agreements and each hereby severally  incorporates and restates its
representations,  warranties  and covenants as set forth therein for the benefit
of XLCA.

                  (n) REPORTS.  The Provider Entities will provide to XLCA on or
before the  fifteenth  (15th) of each month a report  comprised  of the group of
reports listed on Appendix V

                                       8
<PAGE>

(collectively,  the "Monthly  Report") which shall be substantially in the forms
shown on Appendix V hereto.

                  (o) CLOSING  DOCUMENTS.  Each of the Provider  Entities  shall
provide or cause to be provided to XLCA (i) an  executed  original  copy of each
document  executed in  connection  with the Initial  Transaction  within 60 days
after the  Initial  Closing  Date and (ii) a copy of each  document  executed in
connection  with  each  Qualified  Investment  Agreement  within  60 days of the
Agreement Date.

                  (p) INCORPORATION OF COVENANTS.  Each of the Provider Entities
agrees to comply  with its  covenants  set forth in the Related  Agreements  and
hereby  incorporates  such  covenants  by  reference  as if each  were set forth
herein.

                  (q) EXEMPT FROM SECURITIES ACT  REGISTRATION.  (i) Each of the
Provider  Entities shall take all reasonable  actions  necessary so as to exempt
from  registration  or  qualification  the  sale  of  the  Qualified  Investment
Agreements or the  consummation of the  Transaction  under the Securities Act or
under any applicable United States,  state securities or "blue sky" laws (or, to
the  extent  any such  registration  or  qualification  is  required  under  the
Securities Act or under any applicable United States,  state securities or "blue
sky" law,  each  Provider  Entity  shall take all action  necessary  in order to
obtain such  registration or  qualification  in accordance with applicable law);
(ii) the Investment  Agreement  Provider shall take all reasonable actions so as
to maintain its exemption from the Investment Company Act.

                  (r)  MAINTENANCE  OF CORPORATE  RECORDS.  Each of the Provider
Entities shall maintain corporate records and books of account separate from any
other Person.

                  (s)  PAYMENT  OF  INDEBTEDNESS.  Each  Provider  Entity  shall
generally pay its Indebtednesses as they become due.

         Section 2.3.   Negative Covenants of the Investment Agreement Provider.

         The Investment  Agreement  Provider hereby severally agrees that during
the Term of the  Agreement,  unless XLCA shall  otherwise  expressly  consent in
writing:

                  (a) AMENDMENTS TO ORGANIC DOCUMENTS.  The Investment Agreement
Provider shall not amend,  supplement or otherwise modify its respective Organic
Documents  (or  permit  any of  the  foregoing);  provided,  however,  that  the
Investment  Agreement  Provider  may make such  amendment,  supplement  or other
modification  so long as any such  amendment,  supplement or other  modification
would not result in a Material Adverse Change.

                  (b) LIMITATION ON INDEBTEDNESS.  Investment Agreement Provider
shall  not  create,  incur or suffer to exist  any  Indebtedness  other  than as
specified in the Related Agreements.

                  (c) SUBSIDIARIES. Investment Agreement Provider shall not form
or acquire, or cause to be formed or acquired, any Subsidiaries.

                                       9
<PAGE>

                  (d)  LIMITATION  ON  DIVIDENDS.  Except  as  provided  in  the
Collateral  Management  Agreement,  Investment  Agreement  Provider  shall  not,
directly or indirectly (i) except as expressly permitted by applicable law, make
any  distribution  (by  reduction  of  capital or  otherwise),  whether in cash,
properties,  securities or a combination  thereof,  to any owner of a beneficial
interest in Investment  Agreement  Provider,  or otherwise,  with respect to any
ownership or equity interest or similar  security in or of Investment  Agreement
Provider, (ii) redeem, purchase,  retire or otherwise acquire for value any such
ownership  or equity  interest in similar  security or (iii) except as expressly
permitted  by  applicable  law with  respect to clause  (i) above,  set aside or
otherwise segregate any amounts for any such purpose; provided, however, nothing
herein or in the Collateral Management Agreement shall be understood to prohibit
the Investment  Agreement  Provider from disbursing  amounts due and owing under
each and every Qualified Investment Agreement as the same become due and payable
under the terms thereof.

                  (e) RESTRICTIONS ON LIENS. The Investment  Agreement  Provider
shall not (i)  create,  incur or suffer to exist,  or agree to create,  incur or
suffer to exist, or consent to cause or permit in the future (upon the happening
of a contingency or otherwise) the creation, incurrence or existence of any Lien
on the Collateral,  except for: (I) (A) Liens created by the Related Agreements,
(B) Liens the validity of which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect thereto are maintained
on the books of Investment Agreement Provider,  (C) Liens for taxes that are not
then due and payable or that can be paid thereafter  without  penalty,  provided
that  adequate  reserves  with respect  thereto are  maintained  on the books of
Investment Agreement Provider, (D) Liens to secure payment for services rendered
by the  Collateral  Agent,  and (E)  Liens  in  favor  of XLCA  (the  foregoing,
"Permitted  Liens")  and (II) for the sake of  clarity,  Liens on Cash Assets as
provided in Section 3.12 or (ii) sign or file under the Uniform  Commercial Code
(or similar law) of any jurisdiction any financing statement with respect to the
Collateral which names the Investment  Agreement  Provider as a debtor,  or sign
any security  agreement  authorizing  any secured party  thereunder to file such
financing statement, except in each case any such instrument solely securing the
rights and preserving the Lien of XLCA in the Collateral.

                  (f) IMPAIRMENT OF RIGHTS. It shall not (i) take any action, or
fail to take any action,  if such action or failure to take action may interfere
with the  enforcement  of any  rights  under  the  Related  Agreements  that are
material to the rights, benefits or obligations of XLCA or the Collateral Agent,
on behalf of XLCA under the Related  Agreements;  (ii) waive or alter any rights
with  respect  to the  Collateral  (or  any  agreement  or  instrument  relating
thereto), other than as expressly permitted under the Related Agreements;  (iii)
take any action,  or fail to take any action,  if such action or failure to take
action may interfere with the  enforcement of any rights of XLCA with respect to
the  Collateral  ; or (iv) fail to pay any tax,  assessment,  charge or fee with
respect to the  Collateral or fail to defend any action,  if such failure to pay
or defend may adversely  affect the priority or  enforceability  of XLCA's first
priority  lien  on or  perfected  security  interest  in the  Collateral  or the
Investment  Agreement  Provider's  right,  title or interest  in the  Collateral
except as expressly set forth in the Related Agreements.

                  (g)  LIMITATIONS ON FUNDAMENTAL  CHANGES.  Except as permitted
under the  Related  Agreements,  the  Investment  Agreement  Provider  shall not
liquidate, wind up or dissolve itself (or suffer any liquidation,  winding up or
dissolution),  or convey, sell, lease, assign,  transfer or otherwise dispose of
all or  substantially  all of its  property,  business  or  assets,  or make any

                                       10
<PAGE>

material change in its methods of conducting business as contemplated by, or for
the purposes  incidental to, the Collateral and the  Transaction  and Investment
Agreement   Provider  shall  not  enter  into  any  merger,   consolidation   or
amalgamation.

                  (h) WAIVER,  AMENDMENTS,  ETC.  It shall not waive,  modify or
amend,  or consent to any waiver,  modification or amendment or fail to take any
action if such failure to take action requested by XLCA would permit any waiver,
modification  or  amendment  of,  any of the  provisions  of any of the  Related
Agreements  or the  Qualified  Investment  Agreements  without the prior written
consent of XLCA; provided,  however, that such consent shall not be unreasonably
withheld,  provided however,  such consent shall not be required if after giving
effect to such waiver,  modification  or  amendment  such  Qualified  Investment
Agreement will still qualify as a Qualified Investment Agreement and no Event of
Default  or Wind  Down  Event  results  from any such  waiver,  modification  or
amendment  or could  reasonably  be  expected  to result  from any such  waiver,
modification or amendment.

                  (i)  PRESERVATION OF COLLATERAL.  Without the consent of XLCA,
it shall not take any  action,  or fail to take any  action as  required  by the
Collateral Management Agreement or the Securities Account Control Agreement with
respect to any item of Collateral.

                  (j) SECURITY  INTERESTS.  It shall not permit the Lien hereof,
the  Securities  Account  Control  Agreement  and of the  Collateral  Management
Agreement not to constitute a valid first priority  perfected  security interest
in the Collateral.

                  (k) OWNERSHIP.  Investment  Agreement Provider shall not issue
any  capital  shares or  rights,  warrants  or  options  or other  evidences  of
ownership rights in respect of capital shares or securities  convertible into or
exchangeable  for capital  shares or other  evidences of ownership  rights other
than to Holding Company or one or more of its subsidiaries or affiliates.

                  (l) INSOLVENCY.  It shall not voluntarily initiate or commence
any case or  proceeding  seeking  liquidation,  rehabilitation,  reorganization,
conservation or other relief with respect to its debts under any Insolvency Law,
seek the appointment of a bankruptcy custodian for any of its property,  consent
to any  such  relief  or  the  taking  possession  by any  such  official  in an
involuntary  case or other  proceeding  commenced  against  any of the  Provider
Entities,  as  applicable,  file any  petition  or  answer  or  consent  seeking
liquidation, rehabilitation,  reorganization, conservation or other relief under
any  applicable  Insolvency  Law, make a general  assignment  for the benefit of
creditors,  or admit in writing its inability to pay its debts generally as they
become  due.  It shall  not  institute  against,  or join any  other  Person  in
instituting  against  any  of  the  Provider  Entities,  as  applicable,  or any
affiliate thereof, any bankruptcy,  reorganization,  arrangement,  insolvency or
liquidation proceeding, or other proceeding under any bankruptcy or similar law,
for one  year  and a day  after  the  termination  of all  Qualified  Investment
Agreements.

                  (m) EXEMPT FROM INVESTMENT COMPANY REGISTRATION.  It shall not
take any  action,  or  permit  the  taking of any  action,  that  would  require
Investment  Agreement Provider to register as an "investment  company" under the
Investment Company Act.

                                       11
<PAGE>

                  (n)   COLLATERAL   PROVIDED   UNDER  A  QUALIFIED   INVESTMENT
AGREEMENT. As set forth in the Qualified Investment Agreement, in the event of a
downgrade  of XLCA and the Provider  Entities  decide to provide  collateral  as
permitted  thereunder,  the Provider  Entities  shall notify XLCA three Business
Days prior to providing such collateral and the Provider  Entities may only post
collateral  thereunder  to the extent and only to the extent that the posting of
such  collateral  will  not  cause  XLCA to be in  violation  of the  single  or
aggregate  risk  limitations  set forth in  Section  6904 of the New York  State
Insurance Laws.

         Section 2.4.      Representations and Warranties of XLCA.

         XLCA represents, warrants and covenants as of the date hereof and as of
the issuance of each Policy as follows:

                  (a)  ORGANIZATION AND LICENSING.  XLCA is a duly  incorporated
and existing  New York stock  insurance  company  licensed to do business in the
State of New York and is in good standing under the laws of such state.

                  (b)  CORPORATE  POWER.   XLCA  has  the  corporate  power  and
authority to issue each Policy, execute and deliver this Insurance Agreement and
perform all of its obligations hereunder and thereunder.

                  (c) AUTHORIZATION;  APPROVALS. The issuance of each Policy and
the  execution,  delivery  and  performance  of this  Agreement  have  been duly
authorized  by all  necessary  corporate  proceedings.  No further  approvals or
filings of any kind, including,  without limitation, any further approvals of or
further filings with any governmental agency or other governmental authority, or
any approval of XLCA's board of directors or  stockholders,  are  necessary  for
such Policy and this  Insurance  Agreement to  constitute  the legal,  valid and
binding obligations of XLCA.

                  (d)  ENFORCEABILITY.   Each  Policy,  when  issued,  and  this
Insurance  Agreement will each constitute a legal,  valid and binding obligation
of XLCA,  enforceable in accordance  with its terms,  subject to applicable laws
affecting the enforcement of creditors' rights generally.

                  (e) NO LITIGATION. There are no actions, suits, proceedings or
investigations  pending or, to the best of XLCA's knowledge,  threatened against
it at law or in equity or before or by any court,  governmental agency, board or
commission or any arbitrator  which should  reasonably be expected to materially
and adversely affect its ability to perform its obligations  under the Policy or
this Insurance Agreement.

                  (f) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed,  or proposed to be  employed,  by XLCA in the conduct of its  business
violates any law, regulation, judgment, agreement, order or decree applicable to
XLCA that,  if  enforced,  should  reasonably  be  expected  to  materially  and
adversely affect its ability to perform its obligations under the Policy or this
Insurance Agreement.

                  (g) EXCLUSIVITY.  XLCA shall only provide financial  guarantee
policies for investment  agreements similar to Qualified  Investment  Agreements
only for the Investment  Agreement  Provider and not for any other Person unless
(i) the Investment Agreement Provider

                                       12
<PAGE>

consents,  (ii) the Program Limit has been met as provided in Section 3.9, (iii)
XLCA shall have  delivered the notice  described in Section  3.14(iii) or (iv) a
Wind Down Event or an Event of Default shall have occurred.

                                  ARTICLE III

          THE POLICIES; REIMBURSEMENT; INDEMNIFICATION; RELATED SPECIAL
                            COVENANTS AND AGREEMENTS

         Section 3.1.      Issuance of the Policies.

         XLCA agrees to enter into this  Agreement  on the Initial  Closing Date
and to  issue  a  Policy  (and  deliver  a  copy  thereof  and  of  any  related
endorsements to the Investment Agreement Provider) for each Qualified Investment
Agreement to the Investor  together  with all required  endorsements  subject to
satisfaction of the conditions precedent set forth below on the Agreement Date:

                  (a)  PAYMENT OF PREMIUM AND  EXPENSES;  PREMIUM  LETTER.  XLCA
shall have been paid,  by or on behalf of the  Provider  Entities,  the  initial
nonrefundable  payment of the Premium,  if applicable,  specified in the Premium
Letter and shall have been reimbursed for other fees and expenses  identified in
the  Premium  Letter or in Section  3.2 below as payable  upon  delivery of such
Policy or upon delivery of this document, as applicable.

                  (b)  RELATED  AGREEMENTS.  XLCA shall  have  received a Policy
Request Form from the  Investment  Agreement  Provider and a copy of the Related
Agreements,  in form  and  substance  satisfactory  to  XLCA,  duly  authorized,
executed  and  delivered by each party  thereto on or as of the Initial  Closing
Date or the applicable Agreement Date, as applicable.

                  (c)  CERTIFIED  DOCUMENTS  AND  RESOLUTIONS.  XLCA  shall have
received a copy of (i) the Organic  Documents of each of the  Provider  Entities
and (ii) the resolutions  and consents of the applicable  governing body of each
of  the  Provider  Entities,  in  form  and  substance   satisfactory  to  XLCA,
authorizing  the  entering  into  of the  Insurance  Agreement,  the  Collateral
Management  Agreement  and the  Securities  Account  Control  Agreement  and the
execution,  delivery and  performance  by the  Provider  Entities of the Related
Agreements and the transactions  contemplated thereby, in each case certified by
the Secretary of each of the Provider  Entities (which  certificate  shall state
that such Organic  Documents and  resolutions and consents are in full force and
effect without  modification  on the Agreement Date or Initial  Closing Date, as
applicable.

                  (d) INCUMBENCY  CERTIFICATE.  Upon request of XLCA, XLCA shall
have  received a certificate  of the Secretary of each of the Provider  Entities
certifying  the name and  signatures  of the  officers  of each of the  Provider
Entities,  authorized to execute and deliver the Related  Agreements to which it
is a party  required to be executed,  and that all consents to the execution and
delivery of such documents have been obtained.

                  (e)   REPRESENTATIONS   AND   WARRANTIES;   CERTIFICATE.   The
representations  and  warranties  of the  Provider  Entities  in this  Insurance
Agreement and each of the Related Agreements shall be true and correct as of the
applicable Agreement Date or the Initial Closing Date, as applicable, as if made
on such date.

                                       13
<PAGE>

                  (f) OPINIONS OF COUNSEL.  XLCA shall have received opinions of
counsel  addressed to XLCA as to the creation and perfection of XLCA's  interest
in the Collateral within thirty (30) days of the date of this Agreement.

                  (g) NO LITIGATION,  ETC. No suit,  action or other proceeding,
investigation,  or  injunction  or final  judgment  relating  thereto,  shall be
pending or  threatened  before any court or  governmental  agency in which it is
sought  to  restrain  or  prohibit  or to  obtain  damages  or other  relief  in
connection  with  any of the  Related  Agreements  or  the  consummation  of the
Transaction.

                  (h)  LEGALITY;   REGULATIONS;  RATING  AGENCY  COMPLIANCE.  No
statute,  rule,  regulation or order shall have been enacted,  entered or deemed
applicable by any government or governmental or  administrative  agency or court
which would make the Transaction or the execution and delivery of the applicable
Qualified  Investment  Agreement  any Policy,  illegal or otherwise  prevent the
consummation  thereof.  For the  sake of  clarity,  this  shall  include  XLCA's
compliance with its aggregate and single risk limits and the requirements of the
Rating Agencies.

                  (i) FILINGS AND RECORDINGS.  XLCA shall have received evidence
satisfactory   to  it  of  the  filing  and/or   recording  in  all   applicable
jurisdictions  (or such filing  and/or  recording  having been provided for in a
manner  satisfactory to XLCA) of all documents,  including,  without limitation,
duly  executed and  delivered  copies of the  Collateral  Management  Agreement,
Securities  Account  Control  Agreement,   financing   statements,   termination
statements and other appropriate instruments, in form and substance satisfactory
to XLCA,  as may be  necessary  in the  opinion  of XLCA to  perfect  the  first
priority Liens created by the Collateral  Management  Agreement,  and all taxes,
fees and other charges  payable in  connection  with such  execution,  delivery,
recording and filing shall have been paid.

                  (j) NO DEFAULT. No Wind Down Event shall then be continuing or
Default or Event of Default shall have occurred.

                  (k)  ADDITIONAL  ITEMS.  XLCA shall have  received  such other
documents,  instruments,  approvals  or  opinions  requested  by  XLCA as may be
reasonably  necessary to effect the  Transaction,  including  but not limited to
evidence  satisfactory  to XLCA that the  conditions  precedent,  if any, in the
Related Agreements have been satisfied.

                  (l)  COMPLIANCE.  Each  Provider  Entity  shall  be, as of the
applicable  agreement  date,  in  compliance  with  the  terms  of  the  Related
Agreements to which it is a party.

                  (m)  SATISFACTION  OF  CONDITIONS IN THE PREMIUM  LETTER.  All
conditions contained in the Premium Letter shall have been satisfied or waived.

                  (n) QUALIFIED INVESTMENT AGREEMENT.  The investment agreement,
if any, to be entered into shall be a Qualified Investment Agreement meeting the
criteria set forth in Appendix II hereto.

                  (o) PROGRAM LIMIT.  The Program Limit is Five Billion  Dollars
($5,000,000,000) which may be increased subject to the approval of XLCA's credit
committee.

                                       14
<PAGE>

                  (p) ARTICLE 69 LIMIT NOT EXCEEDED.  After giving effect to the
proposed Policy,  XLCA's aggregate exposure to the Investment Agreement Provider
would not exceed XLCA's single risk limit as provided by Section 6904 of the NYS
Insurance Law, calculated using the methodology set forth on Appendix V.

         Upon the execution and delivery  hereof and XLCA's issuance of a Policy
on the applicable  Agreement Date, the foregoing  conditions  precedent shall be
deemed to have been  satisfied or waived by XLCA in connection  with the Initial
Closing Date or particular  Agreement  Date, as applicable;  PROVIDED,  HOWEVER,
that XLCA  reserves all of its rights and remedies  against each of the Provider
Entities  with respect to the accuracy or  completion  of each of the  foregoing
conditions precedent.

         Section 3.2.      Payment of Fees and Premium.

                  (a) RATING AGENCY FEES. The Rating Agencies  directly  related
to the transactions  contemplated hereby shall be paid by the Provider Entities.
All periodic and  subsequent  fees of the Rating  Agencies  with respect to, and
directly allocable to, the entering into of the Qualified Investment  Agreements
shall be for the  account  of,  and shall be  billed  to,  Investment  Agreement
Provider.

                  (b) PREMIUM.  In consideration of the issuance by XLCA of each
Policy,  the Provider  Entities shall pay to XLCA the Premium in accordance with
the terms of the Premium Letter.  The Premium paid hereunder and pursuant to the
Related Agreements and the Premium Letter shall be nonrefundable  without regard
to whether  XLCA makes any payment  under the Policy or any other  circumstances
relating to the  Qualified  Investment  Agreements  or provision  being made for
payment of the Qualified Investment  Agreements prior to maturity.  The Provider
Entities  shall make all  payments  of Premium  by wire  transfer  to an account
designated from time to time by XLCA by written notice to the Provider Entities.
The Premium for each Policy  shall be  calculated  as  specified  in the Premium
Letter.  Anything  herein or in any of the Related  Agreements  notwithstanding,
upon the  occurrence  of a Wind Down  Event or an Event of  Default,  the entire
outstanding  balance of further  installments  of the Premium  for the  Policies
issued shall be immediately due and payable.

         Section 3.3.      Reimbursement and Additional Payment Obligation.

         The Investment Agreement Provider agrees to pay to XLCA as follows:

                  (a) a sum equal to the total of all amounts paid by XLCA under
the Policies;

                  (b) any and all  advances,  loans,  charges,  fees,  costs and
expenses which XLCA may reasonably pay or incur, including,  but not limited to,
reasonable attorneys' and accountants' fees and expenses, in connection with (i)
in the  event  of  payments  under  the  Policy,  any  accounts  established  to
facilitate payments under the Policy to the extent XLCA has not been immediately
reimbursed  on the date that any amount is paid by XLCA under the  Policy,  (ii)
the enforcement,  defense or preservation of any rights in respect of any of the
Related  Agreements,  including  defending,  monitoring or  participating in any
litigation or proceeding  (including any insolvency or bankruptcy  proceeding in
respect of any Transaction participant or any affiliate thereof) relating to any
of the Related Agreements, any party to any of the Related Agreements

                                       15
<PAGE>

or the Transaction, and (iii) the foreclosure against, sale or other disposition
of any  Collateral,  or pursuit of any other  remedies  under any of the Related
Agreements,  to the extent such costs and expenses are not  recovered  from such
foreclosure, sale or other disposition;

                  (c)  interest on any and all amounts  described in Section 3.3
hereunder from the date paid by XLCA until payment  thereof in full and interest
on any and all  amounts  described  in Section 3.2  hereunder  from the date due
until payment thereof in full, in each case, payable to XLCA at the Late Payment
Rate  per  annum  (to  the  extent  permitted  by  law,  if in  respect  of  any
unreimbursed amounts representing interest); and

                  (d) any payments  (other than as set forth in Sections  3.3(a)
or (b)) made by XLCA on behalf of, or advanced to, any of the Provider  Entities
including,  without  limitation,  any  amounts  payable  by any of the  Provider
Entities, as the case may be, pursuant to the Collateral Management Agreement or
any other Related  Agreements;  and any payments made by XLCA as, or in lieu of,
any  servicing,  management,  agent,  custodial  lockbox  payment  processing or
administrative fees payable, in the sole discretion of XLCA, to third parties in
connection with the Transaction.

         All such amounts are to be immediately  due and payable without demand,
in full,  without any requirement on the part of XLCA to seek reimbursement from
any other  sources  of  indemnity  therefor  or to  allocate  expenses  to other
transactions  benefiting  therefrom.  Notwithstanding  the forgoing,  XLCA shall
promptly  deliver copies of any third party invoices it receives to the Provider
Entities.

         Section 3.4.      Indemnification.

                  (a)  INDEMNIFICATION  BY  INVESTMENT  AGREEMENT  PROVIDER.  In
addition to any and all rights of  reimbursement,  indemnification,  subrogation
and any other rights pursuant hereto,  the other Related Agreements or under law
or in equity, the Investment Agreement Provider and the Holding Company (each an
"Indemnifying Party" and collectively,  the "Indemnifying  Parties") jointly and
severally, each agree to pay, and to protect, indemnify and save harmless, XLCA,
any  officer,  director,  shareholder,  employee  or agent of XLCA or any Person
controlling  XLCA within the meaning of either  Section 15 of the Securities Act
or Section 20 of the  Securities  Exchange Act  (individually,  an  "Indemnified
Party" and,  collectively,  the "Indemnified  Parties") from and against any and
all  claims,  losses,   liabilities  (including  penalties),   actions,   suits,
judgments,  demands, damages, costs or expenses (including,  without limitation,
fees and expenses of attorneys, consultants and auditors and reasonable costs of
investigations)  of any nature arising out of or relating to the  Transaction or
the  execution,  delivery,  enforcement,  performance or  administration  of the
Related  Agreements (except those arising due to the willful  misconduct,  gross
negligence  or bad  faith of  either  of the  Indemnified  Parties),  including,
without limitation, those arising out of or relating to:

                           (i) any statement,  omission or action (other than of
                  or by XLCA) in  connection  with the execution and delivery of
                  or performance under the Qualified Investment Agreements,  the
                  consummation of the Transaction or the negotiation,  execution
                  or delivery of any Related Agreements;

                                       16
<PAGE>

                           (ii)  the  gross  negligence,   bad  faith,   willful
                  misconduct, misfeasance, malfeasance or theft committed by any
                  director, officer, employee or agent of either of any Provider
                  Entity in connection  with the  Transaction or relating to the
                  Related Agreements;

                           (iii) the  violation by any of the Provider  Entities
                  of any domestic or foreign law, rule or regulation; or

                           (iv)  the  breach  by  any  Provider  Entity  of  any
                  representation,  warranty or covenant under any of the Related
                  Agreements  or  the  occurrence,  in  respect  of  any  of the
                  Provider Entities,  under any of the Related Agreements of any
                  "event of  default"  or any event  which,  with the  giving of
                  notice or lapse of time or both,  would  constitute any "event
                  of default."

                  (b)  INDEMNIFICATION  BY XLCA. XLCA (an "Indemnifying  Party")
agrees to pay and to protect,  indemnify and save  harmless the Holding  Company
and the  Investment  Agreement  Provider,  any officer,  director,  shareholder,
employee or agent of the Holding Company or the Investment Agreement Provider or
any Person controlling the Holding Company or the Investment  Agreement Provider
within the meaning of either  Section 15 of the  Securities Act or Section 20 of
the  Securities   Exchange  Act  (individually,   an  "Indemnified  Party"  and,
collectively,  the  "Indemnified  Parties") from and against any and all claims,
losses, liabilities (including penalties),  actions, suits, judgments,  demands,
damages, costs or expenses (including,  without limitation, fees and expenses of
attorneys,  consultants and auditors and reasonable costs of  investigations) of
any nature  arising  out of or  relating to the  Transaction  or the  execution,
delivery,  enforcement,  performance or administration of the Related Agreements
(except those  arising due to the willful  misconduct,  gross  negligence or bad
faith of either of the  Indemnified  Parties),  including,  without  limitation,
those arising out of or relating to:

                           (i)  the  gross   negligence,   bad  faith,   willful
                  misconduct, misfeasance, malfeasance or theft committed by any
                  director,  officer,  employee  or agent of XLCA in  connection
                  with the Transaction or relating to the Related Agreements; or

                           (ii) a breach by XLCA of any representation, warranty
                  or covenant under any of the Related Agreements.

                  (c)  CONDUCT  OF  ACTIONS  OR  PROCEEDINGS.  If any  action or
proceeding  (including  any  governmental  investigation)  shall be  brought  or
asserted  against any  Indemnified  Party in respect of which  indemnity  may be
sought from the Indemnifying  Parties  hereunder,  such Indemnified  Party shall
promptly  notify the  Indemnifying  Parties  in  writing,  and the  Indemnifying
Parties shall assume the defense  thereof,  including the  employment of counsel
reasonably  satisfactory  to  the  Indemnified  Party  and  the  payment  of all
expenses.  An Indemnified  Party shall have the right to employ separate counsel
in any such action and to participate  in the defense  thereof at the expense of
the Indemnified  Party;  provided,  however,  that the fees and expenses of such
separate counsel shall be at the expense of the Indemnifying  Parties if (i) the
Indemnifying  Parties  have  agreed  to pay  such  fees and  expenses,  (ii) the
Indemnifying  Parties  shall have failed  promptly to assume the defense of such
action or

                                       17
<PAGE>

proceeding and employ counsel  reasonably  satisfactory to the Indemnified Party
in any such action or  proceeding  or (iii) the named parties to any such action
or proceeding  (including any impleaded  parties)  include both the  Indemnified
Party and either or both of the Indemnifying  Parties, and the Indemnified Party
shall  have been  advised  by  counsel  that (A) there may be one or more  legal
defenses  available  to it  which  are  different  from or  additional  to those
available  to  either  or  both  of  the   Indemnifying   Parties  and  (B)  the
representation of either or both of the Indemnifying Parties and the Indemnified
Party by the same counsel would be inappropriate or contrary to prudent practice
(in which case, if the Indemnified  Party notifies the  Indemnifying  Parties in
writing  that it  elects  to  employ  separate  counsel  at the  expense  of the
Indemnifying  Parties,  the  Indemnifying  Parties  shall  not have the right to
assume the defense of such action or  proceeding  on behalf of such  Indemnified
Party, it being understood, however, that the Indemnifying Parties shall not, in
connection with any one such action or proceeding or separate but  substantially
similar or related actions or proceedings in the same  jurisdiction  arising out
of the same general  allegations or circumstances,  be liable for the reasonable
fees and  expenses of more than one  separate  firm of attorneys at any time (in
addition to local counsel, if necessary) for the Indemnified Parties, which firm
(or firms) shall be designated  in writing by XLCA).  The  Indemnifying  Parties
shall not be liable for any settlement of any such action or proceeding effected
without its  written  consent to the extent  that any such  settlement  shall be
prejudicial  to the  Indemnifying  Parties,  but,  if settled  with its  written
consent, or if there be a final judgment for the plaintiff in any such action or
proceeding  with respect to which the  Indemnifying  Parties shall have received
notice in accordance with this Section 3.4(b), the Indemnifying Parties agree to
indemnify and hold the Indemnified Parties harmless from and against any loss or
liability by reason of such settlement or judgment.

                  (d)   CONTRIBUTION.   To  provide   for  just  and   equitable
contribution  if  the  indemnification  provided  by an  Indemnifying  Party  is
determined  to be  unavailable  for any  Indemnified  Party  (other  than due to
application of this Section 3.4), such  Indemnifying  Party shall  contribute to
the losses incurred by the Indemnified  Party on the basis of the relative fault
of the  Indemnifying  Party, on the one hand, and the Indemnified  Party, on the
other hand. Upon the incurrence of any costs by the  Indemnified  Party to which
the Indemnified  Party is entitled to contribution  hereunder,  the Indemnifying
Parties shall reimburse the Indemnified Party promptly upon demand.

         Section 3.5.      Subrogation.

         Subject only to the priority of payment  provisions  of the  Investment
Agreements and not in limitation of XLCA's  equitable right of subrogation,  the
parties  hereto  acknowledge  that,  to the extent of any  payment  made by XLCA
pursuant  to the  Policy  or  Insured  Payment  for  which  XLCA  has  not  been
reimbursed, XLCA is to be fully subrogated to the extent of such payment and any
additional  interest due on any late payment,  to the rights of the Investors to
any moneys paid or payable under the  Investment  Agreements  or otherwise.  The
parties hereto agree to such  subrogation  and,  further,  agree to execute such
instruments  and to take such  actions  as, in the sole  judgment  of XLCA,  are
necessary  to  evidence  such  subrogation  and to perfect the rights of XLCA to
receive any moneys paid or payable in respect of the Investment Agreements under
the Related Agreements or otherwise.

         Section 3.6.      Payments by Investment Agreement Provider.

                                       18
<PAGE>

         XLCA hereby acknowledges that all payments by the Investment  Agreement
Provider  hereunder  or under  any  Related  Agreement  shall  not be made  from
Required Third Party Collateral.

         Section 3.7.      Required Over-Collateralization Deposits.

         The  Holding  Company  shall  contribute  to the  Investment  Agreement
Provider the initial Required Over Collateralization  Deposit and all subsequent
Required Over Collateralization  Deposits, which shall become Cash Assets and be
deposited,  held, invested and released as provided in the Collateral Management
Agreement as part of the Collateral.

         Section 3.8.      Administration of Investment Agreement Provider.

         The Investment  Agreement Provider shall be managed and operated by the
Holding  Company and its  designees,  and the Holding  Company and its designees
will  provide all  administrative  support  required  to operate the  Investment
Agreement  Provider in a commercially  responsible manner and in accordance with
all applicable legal requirements and in accordance with the terms hereof and of
the Related Agreements.

         Section 3.9.      Maximum Size of Program.

         The  Investment  Agreement  Provider  shall  not enter  into  Qualified
Investment  Agreements which would cause the Investment Agreement Provider to be
providing investments to Investors in excess of the Program Limit, as designated
or  changed  from time to time by  written  notice  from XLCA to the  Investment
Agreement Provider.

         Section 3.10.     Investment of Amounts Deposited.

         All amounts deposited with the Investment  Agreement  Provider pursuant
to the  Qualified  Investment  Agreements  and all earnings  thereon  other than
Required  Third Party  Collateral  and all other Cash Assets shall be deposited,
held,  invested and released only in accordance  with the Collateral  Management
Agreement.

         Section 3.11.     Other Cash Assets.

         All  Cash  Assets  received   pursuant  to  the  Qualified   Investment
Agreements and not  constituting  Required Third Party  Collateral shall also be
deposited,  held,  invested and released only in accordance  with the Collateral
Management Agreement.

         Section 3.12.     Required Third Party Collateral;  Other Collateral.

         Notwithstanding anything herein to the contrary, to the extent required
pursuant  to the  Qualified  Investment  Agreements,  the  Investment  Agreement
Provider shall deliver  Required Third Party  Collateral to the party authorized
or required to hold the same  pursuant to the  applicable  Qualified  Investment
Agreement.

Notwithstanding  anything  contained  in any Related  Agreement  to the contrary
(including,  in particular,  Section 3.2(e)),  the Investment Agreement Provider
may

                                       19
<PAGE>

transfer Cash Assets held in the Collateral  Account to third parties to hold as
collateral as part of the management of its  investment  portfolio or as part of
and related to the business of the Investment Agreement Provider pursuant to the
terms of any  International  Swaps and  Derivatives  Association,  Inc  ("ISDA")
documentation and  documentation for any rate swap, asset swap,  liability swap,
forward rate transaction,  interest rate option,  foreign exchange  transaction,
cap transaction, floor transaction, collar transaction,  currency swap, currency
option, credit protection  transaction,  credit swap, credit default swap, total
return  swap,  credit  spread  transaction,   repurchase  transaction,   reverse
repurchase  transaction,   buy/sell-back  transaction,   securities  lending  or
borrowing  transaction  or  forward  purchase  or sale of a  security  or  other
financial instrument or interest in connection with the hedging of its business,
the Investment Agreement Provider may deliver Required Third Party Collateral to
the party  authorized  or required to hold the same  pursuant to the  applicable
agreement to the extent that after giving effect to any new  insurance  policies
issued by XLCA, XLCA's aggregate Policy exposure has not been increased.

         Section 3.13.     Qualified Investment Agreements.

         The  Investment  Agreement  Provider shall not enter into any agreement
pursuant  to which it offers a return on an  investment  which does not meet the
requirements to be a Qualified Investment Agreement.

         Section 3.14.     Program Investment Period.

         The  Investment  Agreement  Provider shall not enter into any Qualified
Investment Agreement and XLCA shall not provide any new Policy:

                           (i) during any period where  amounts  invested  under
                  Qualified  Investment  Agreements  exceed the then  applicable
                  Program Limit;

                           (ii) during any period when a Wind Down Event is then
                  contining;

                           (iii) after the occurrence of an Event of Default;

                           (iv)  from and  after the date set forth in a written
                  notice from XLCA to the Investment  Agreement  Provider (which
                  notice  may be sent for any  reason),  which  date shall be at
                  least  twelve (12) months  after the date on which such notice
                  is sent, unless such notice is withdrawn; or

                           (v) from and  after  the date set  forth in a written
                  notice from XLCA to the Investment  Agreement  Provider (which
                  may be sent if XLCA has a good  faith  belief  that a material
                  event  has or could  reasonably  be  expected  to  occur  with
                  respect to the Transaction or the Provider Entities, or XLCA's
                  rating agencies or regulators, with respect to the Transaction
                  or the Provider  Entities) which date shall be at least ninety
                  (90) days (or such earlier date as XLCA's  rating  agencies or
                  regulators  shall require) after the date on which such notice
                  is sent, unless such notice is withdrawn;

                                       20
<PAGE>

provided,  however,  that if (i) the amounts  invested in  Qualified  Investment
Agreements  exceed the  applicable  Program  Limit or (ii) a Wind Down Event has
occurred,  in either  case for more than one (1)  time,  then XLCA  shall not be
required to provide any Policies.

         Section 3.15.     Management of Investments.

         All Cash Assets of the Investment Agreement Provider, including without
limitation,  all  Collateral and Required  Third Party  Collateral  shall at all
times be managed pursuant to investment  guidelines  attached hereto as Appendix
III by one or more Portfolio  Managers approved by XLCA.  Appendix IV sets forth
the list of approved Portfolio Investment Managers.

         Each  Portfolio  Manager shall be removed by the  Investment  Agreement
Provider only with the prior written consent of XLCA (which consent shall not be
unreasonably withheld,  conditioned or delayed). Any replacement selected by the
Investment  Agreement  Provider  shall be appointed  only with the prior written
consent  of XLCA  (which  shall not be  unreasonably  withheld,  conditioned  or
delayed).

                  Section 3.16.     Notice of Potential Insufficiency.

                  The  Investment  Agreement  Provider  shall  deliver a written
notice (a "Notice of Potential  Insufficiency") to XLCA at least 2 Business Days
prior to the due date of any required  payment  under any  Qualified  Investment
Agreement of the amount,  if any,  that the  Investment  Agreement  Provider has
reason to expect will be  required  to be paid under the related  Policy on such
due date.

                                   ARTICLE IV

                               FURTHER AGREEMENTS

         Section 4.1.      Effective Date; Term of Agreement.

         This Insurance  Agreement shall take effect on the Initial Closing Date
and shall remain in effect until the later of (a) such time as XLCA is no longer
subject to a claim under any Policy and (b) such time as all amounts  payable by
the Provider Entities to XLCA hereunder and under each of the Related Agreements
have been  irrevocably paid in full and any period during which any such payment
to XLCA could  have been  avoided  in whole or in part as a  preference  payment
under applicable bankruptcy, insolvency,  receivership or similar law shall have
expired.; provided, however, that the provisions of SECTIONS 3.2, 3.3, 3.4, 3.5,
3.6 and 3.7 hereof shall survive any termination of this Insurance Agreement.

         Section 4.2.      Further Assurances and Corrective Instruments.

                  (a) So  long  as  this  Agreement  is in  effect,  none of the
Provider  Entities  shall  grant any waiver of rights  under any of the  Related
Agreements to which it is a party without the prior written consent of XLCA.

                  (b) To the extent  permitted  by law,  the  Provider  Entities
agree that they will, from time to time,  execute,  acknowledge and deliver,  or
cause to be executed,  acknowledged and

                                       21
<PAGE>

delivered within a reasonable  period of time, such supplements  hereto and such
further instruments as XLCA may request and may be required in XLCA's reasonable
judgment to effectuate  the intention of or facilitate  the  performance  of the
Related Agreements.

         Section 4.3.      Obligations Absolute.

                  (a) The obligations of the Provider  Entities  hereunder shall
be  absolute  and  unconditional,  and shall be paid or  performed  strictly  in
accordance with this Insurance Agreement.

                  (b) Notwithstanding anything to the contrary in this Insurance
Agreement,  none of the Provider  Entities waives any notice of or right to cure
any Wind Down Event or Event of Default or other  event of default to the extent
any such  notice  or  right to cure is  specifically  set  forth in any  Related
Agreement.

                  (c) Nothing  herein shall be construed as  prohibiting  any of
the Provider Entities,  as the case may be, from pursuing any rights or remedies
it may have against any other Person in a separate legal proceeding.

         Section 4.4.      Assignments; Reinsurance; Third-Party Rights.

                  (a) This Insurance Agreement shall be a continuing  obligation
of the parties  hereto and shall be binding upon and inure to the benefit of the
parties hereto and their respective  successors and permitted  assigns.  None of
the Provider  Entities may assign its rights or obligations under this Insurance
Agreement,  or delegate any of its duties  hereunder,  without the prior written
consent of XLCA.  Any assignment  made in violation of this Insurance  Agreement
shall be null and void.

                  (b) XLCA  shall  have the  right to enter  into  contracts  of
reinsurance  with respect to the Policy upon such terms and  conditions  as XLCA
may in its discretion  determine;  PROVIDED,  HOWEVER,  that no such reinsurance
agreement or arrangement shall relieve XLCA of any of its obligations  hereunder
or under the Policy or shall give such  reinsurer  direct  rights as against the
Provider Entities.

                  (c)  Nothing  in this  Insurance  Agreement  shall  confer any
right,  remedy or claim,  express or implied,  upon any  Person,  other than the
parties  hereto,  and  all  the  terms,  covenants,   conditions,  promises  and
agreements  contained herein shall be for the sole and exclusive  benefit of the
parties hereto and their successors and permitted assigns.

                  (d) Any party assigning rights or obligations  hereunder shall
provide prompt written notice to the Rating  Agencies of such action  specifying
the rights and obligations assigned and the assignee.

         Section 4.5.  Confidentiality.

         Each  party  hereto  agrees  to keep  the  information  and  any  other
materials  and  documents  which are  furnished to the other  parties  hereto in
connection   with  the   Transaction  and  in  which  are  identified  as  being
confidential (collectively,  the "Information") in

                                       22
<PAGE>

accordance  with  the  receiving  party's  customary   procedures  for  handling
confidential information,  except that the receiving party shall be permitted to
disclose the Information:

                           (i) to  such of its  and  its  affiliates,  officers,
                  directors,  employees,  counsel, advisors and representatives,
                  each of whom shall be informed of the  confidential  nature of
                  the Information,

                           (ii) to the extent  required by  applicable  laws and
                  regulations   or  by  a  subpoena  or  similar  legal  process
                  (provided   that  we  shall  give  you  prior  notice  of  the
                  disclosure  unless  such  notice  is  prohibited  by the  law,
                  subpoena or similar legal process),

                           (iii) to the extent  requested by any rating  agency,
                  reinsurer, prospective reinsurer or regulatory authority,

                           (iv)  to the  extent  such  Information  (A)  becomes
                  publicly  available other than as a result of a breach of this
                  agreement,  (B) becomes available to us on a  non-confidential
                  basis from a source other than the receiving  party or (C) was
                  available to the receiving party on a  non-confidential  basis
                  from a source other than the delivering party provided in each
                  case  under (B) or (C) such  source is not,  to the  receiving
                  party's knowledge,  bound by a confidentiality  agreement with
                  the  delivering  party  or is not  otherwise  believed  by the
                  receiving  party  to  be  prohibited  from   transmitting  the
                  information to the receiving party,

                           (v) to the extent  the  delivering  party  shall have
                  consented to such disclosure in writing, and

                           (vi)  to  the  extent   that  such   Information   is
                  independently developed by the receiving party.

         Section 4.6.      Liability of XLCA.

         Neither XLCA nor any of its officers,  directors or employees  shall be
liable or responsible for: (a) the use which may be made of the Policy by or for
any beneficiary or agent for beneficiaries thereunder, any depository, any bank,
or any other Person or for any acts or omissions of any beneficiary or agent for
any  beneficiary  of any  Policy;  (b) the  validity,  sufficiency,  accuracy or
genuineness  of documents or of any  endorsements  thereon  delivered to XLCA in
connection with any claim under the Policy, or of any signatures  thereon,  even
if  such  documents  or  signatures  should  in fact  prove  to be in any or all
respects  invalid,  insufficient,  fraudulent  or  forged  or (c)  any  acts  or
omissions  to act  of  any of the  Provider  Entities  or any  other  person  in
connection with the Collateral or the Additional Collateral,  unless such act or
omission was at the direction of XLCA. In  furtherance  and not in limitation of
the  foregoing,  XLCA may accept  documents  that  appear on their face to be in
order, without responsibility for further investigation.

                                       23
<PAGE>

                                    ARTICLE V

                  WIND DOWN EVENTS; EVENTS OF DEFAULT; REMEDIES

         Section 5.1.      Wind Down Events.

         The  occurrence  of any of the  following  events  shall  constitute  a
"Wind-Down Event:"

                           (i)   an Event of Default is then contining;

                           (ii)  amounts  invested  under  Qualified  Investment
                  Agreements exceed the then applicable Program Limit;

                           (iii) from and after the date set forth in a written
                  notice from XLCA to the Investment  Agreement Provider,  which
                  date shall be as set forth in Section 3.14 (iv) or (v) hereof,
                  unless such notice is withdrawn; or

                           (iv)  any  Provider  Entity  is  required to register
                  under the Investment Company Act.

The Wind Down Event set forth in clause (ii) above may be cured by the  Provider
Entities one time.  Any subsequent  occurrence of such event or condition  shall
only be subject to waiver by XLCA.

         Section 5.2.      Events of Default.

         The  occurrence  of any of the  following  events shall  constitute  an
"Event of Default:"

                  (a) any of the Provider  Entities  shall fail to make when due
and payable any payment of Premium required hereunder and a continuation of such
failure for a period of twenty (20) Business Days thereafter;

                  (b) XLCA shall make any payment under any Policy;

                  (c) any of the Provider  Entities  shall fail to pay its debts
generally  as they come due, or shall admit in writing its  inability to pay its
debts  generally,  or  shall  make a  general  assignment  for  the  benefit  of
creditors,  or shall  institute any proceeding  seeking to adjudicate any of the
Provider Entities insolvent or seeking a liquidation, or shall take advantage of
any Insolvency Act, or shall commence a case or other  proceeding  naming any of
the  Provider  Entities as debtor under any  Insolvency  Act, or a case or other
proceeding  against any of the Provider  Entities under any Insolvency Act shall
be instituted against any of the Provider Entities seeking liquidation of any of
the Provider  Entities,  as applicable,  shall fail to take  appropriate  action
resulting in the  withdrawal or dismissal of such  proceeding  within 60 days or
there shall be appointed or any of the Provider  Entities  shall  consent to, or
acquiesce in, the appointment of a receiver, liquidator, conservator, trustee or
similar  official in respect of itself or the whole or any  substantial  part of
its  properties  or  assets  or any of the  Provider  Entities  shall  take  any
corporate action in furtherance of any of the foregoing;

                                       24
<PAGE>

                  (d) a Portfolio Manager is removed or resigns and the Provider
Entities  fail to  appoint  a  successor  from  the list of  approved  Portfolio
Managers on APPENDIX IV or approved by XLCA in  accordance  with the  provisions
hereof and such failure  continues for a period of twenty (20) Business Days (or
such longer period as is approved in writing by XLCA) from the effective date of
such removable or resignation;

                  (e)  the  Required  Collateral  Amount  is not on  deposit  as
reported in any Monthly  Report and the Investment  Agreement  Provider fails to
deliver  additional  Eligible   Investments   necessary  to  meet  the  Required
Collateral  Amount to the Collateral  Agent within fifteen (15) Business Days of
the date on which the Monthly Report was due;

                  (f) the absolute  difference between the Duration of Portfolio
and the  Duration of  Investment  Agreements  as reported in any Monthly  Report
exceeds 365 days as of any Monthly  Valuation  Date and such  difference  is not
reduced to 365 days or fewer within  twenty (20)  Business  Days of such Monthly
Valuation Date;

                  (g) any representation or warranty made by any Provider Entity
under any of the Related  Agreements,  or in any certificate or report furnished
under any of the  Related  Agreements,  shall prove to be untrue,  incorrect  or
incomplete  in any  material  respect  as of the  date  such  representation  or
warranty was made;  provided,  however,  that if any Provider Entity effectively
cures any such  defect  in any  representation  or  warranty  under any  Related
Agreement,  or  certificate  or report  furnished  under any Related  Agreement,
within  twenty (20) Business Days (or such longer period as XLCA shall permit in
writing)  after the earlier to occur of (1) the discovery  thereof by such party
or (2) the receipt by such party of written  notice thereof from XLCA; or within
the time period specified in the relevant  Related  Agreement as the cure period
therefor,  such defect shall not in and of itself constitute an Event of Default
hereunder;

                  (h) any of the Provider  Entities shall have asserted that any
of the Related Agreements to which it is a party is not valid and binding on the
parties  thereto;  or (ii) any court,  governmental  authority or agency  having
jurisdiction  over any of the  parties to any of the Related  Agreements  or any
property  thereof  shall find or rule that any material  provision of any of the
Related  Agreements  is not valid and  binding on the  parties  thereto  and all
appeals  therefrom  have been  decided or the time to appeal has run;  in either
case for a period of twenty (20) Business Days after the earlier to occur of (1)
the discovery  thereof by such party or (2) the receipt by such party of written
notice thereof from XLCA;

                  (i) any of the  Provider  Entities  shall  fail to  perform or
observe any other material  covenant or agreement  contained herein or in any of
the Related Agreements (except for the obligations  otherwise  described Section
5.1 or Section 5.2 and such failure  shall  continue for a period of twenty (20)
Business Days (or such longer period as XLCA shall permit in writing)  after the
earlier to occur of (1) the  discovery  thereof by such party or (2) the receipt
by such party of written notice thereof from XLCA; PROVIDED,  HOWEVER,  that, if
such  failure  shall be of a nature  that it cannot be cured  within  the period
otherwise  permitted,  such  failure  shall not  constitute  an Event of Default
hereunder if within such period, as applicable,  the applicable  Provider Entity
shall have given notice to XLCA of corrective  action it proposes to take, which

                                       25
<PAGE>

corrective  action is  agreed  in  writing  by XLCA to be  satisfactory  and the
applicable  Provider  Entity  shall  thereafter  pursue such  corrective  action
diligently until such default is cured;

                  (j) the occurrence of an event of default (with all notice and
cure periods herewith ended) under the Related  Agreements except for the Policy
and such event of default shall  continue for twenty (20) Business Days (or such
longer period as XLCA shall permit in writing) after the earlier to occur of (1)
the discovery  thereof by such party or (2) the receipt by such party of written
notice thereof from XLCA;

                  (k) any of the Provider  Entities shall have consolidated with
or merged  with or into any Person or any of the  Provider  Entities  shall have
transferred all or any material amount of its assets to any Person or liquidated
or dissolved (an "Acquisition  Event"), in each case without the written consent
of XLCA; or

                  (l) the amount invested under Qualified Investment  Agreements
exceeds the then applicable  Program Limit by ten percent (10%) or more over the
then applicable Program Limit.

         Section 5.3.      Remedies on a Wind Down Event.

                  (a) Upon the occurrence and continuation of a Wind Down Event,
XLCA may exercise any one or more of the rights and remedies set forth below:

                      (i) the Investment Agreement Provider shall not enter into
any Qualified Investment Agreement;

                      (ii)  XLCA  shall  not be  required  to  provide  any  new
Policies.

         Section 5.4.      Remedies on an Event of Default.

                  (a)  Upon  the  occurrence  and  continuation  of an  Event of
Default,  XLCA may exercise any one or more of the rights and remedies set forth
below:

                           (i) declare all  obligations or indebtedness of every
                  type or  description  owed by any of the Provider  Entities to
                  XLCA to be  immediately  due and  payable,  and the same shall
                  thereupon be immediately due and payable;

                           (ii) declare all or a portion of the Premium that has
                  accrued  or will  accrue  to be  payable,  and the same  shall
                  thereupon  be  immediately  due and payable to the extent then
                  accrued and shall thereupon become immediately due and payable
                  upon accrual to the extent accruing thereafter, whether or not
                  XLCA shall have  declared  an "Event of Default" or shall have
                  exercised,  or be entitled to  exercise,  any other  rights or
                  remedies hereunder;

                           (iii)  exercise  any  rights and  remedies  available
                  under the Related  Agreements as provided  therein,  including
                  foreclosing on the Collateral and

                                       26
<PAGE>

                  delivering  the  Notice  of  Sole  Control and any entitlement
                  orders  to  the Securities  Intermediary as provided under the
                  Securities Account Control Agreement;

                           (iv) removal of any Portfolio Manager and replacement
                  of the same in its sole discretion;

                           (v) take  whatever  action at law or in equity as may
                  appear  necessary  or desirable in its judgment to collect the
                  amounts  then due and  thereafter  to  become  due  under  the
                  Related Agreements or to enforce performance of any obligation
                  of the Provider Entities under the Related Agreements, in each
                  case in accordance with the terms thereof; or

                           (vi)  XLCA may in its sole and  absolute  discretion,
                  and without notice,  remove the Holding Company and any or all
                  of its  designees  and take control of all or a portion of the
                  management  and   operations  of  the   Investment   Agreement
                  Provider, either directly or through designees.

         Section 5.5.      Waivers.

                  (a) No remedy herein conferred upon or reserved is intended to
be exclusive of any other available remedy,  but each remedy shall be cumulative
and shall be in addition to other remedies given under the Related Agreements or
existing at law or in equity. No delay or failure to exercise any right or power
accruing  under any  Related  Agreement  upon the  occurrence  of any,  Event of
Default or Wind Down Event or otherwise,  nor any single or partial  exercise of
any right or power,  shall  impair any such right or power or shall be construed
to be a waiver thereof,  but any such right and power may be exercised from time
to time and as often as may be deemed  expedient.  In order to  entitle  XLCA to
exercise any remedy reserved to XLCA in this Article,  it shall not be necessary
to give any notice,  other than such notice as may be expressly required in this
Article or any Related  Agreement  under which XLCA is  exercising  a particular
remedy in connection  with its rights  hereunder,  provided that any such notice
shall be in writing.

                  (b) If any  proceeding has been commenced to enforce any right
or  remedy  under  this  Insurance  Agreement,  and  such  proceeding  has  been
discontinued or abandoned for any reason,  or has been  determined  adversely to
XLCA,  then and in every  such case the  parties  hereto  shall,  subject to any
determination  in such  proceeding,  be  restored  to  their  respective  former
positions  hereunder,  and,  thereafter,  all rights and  remedies of XLCA shall
continue as though no such proceeding had been instituted.

                  (c) XLCA shall have the right, to be exercised in its complete
discretion,  to waive any breach of any covenant,  default or Wind-Down Event or
Event of Default by a writing setting forth the terms,  conditions and extent of
such waiver signed by XLCA and delivered to the other parties  hereto.  Any such
waiver may only be  effected  in writing  duly  executed  by XLCA,  and no other
course of conduct shall constitute a waiver of any provision hereof. Unless such
writing expressly  provides to the contrary,  any waiver so granted shall extend
only to the specific  event or occurrence so waived and not to any other similar
event or occurrence.

                                       27
<PAGE>

                                   ARTICLE VI

                                  MISCELLANEOUS

         Section 6.1.      Amendments, etc.

         This Insurance Agreement may be amended, modified or terminated only by
written  instrument or written  instruments signed by the parties hereto. No act
or course of dealing shall be deemed to constitute an amendment, modification or
termination  hereof  unless it is  communicated  in writing and agreed to by the
parties.

         Section 6.2.      Notices.

         All demands,  notices and other  communications  to be given  hereunder
shall be in writing (except as otherwise specifically provided herein) and shall
be mailed by registered mail or personally delivered or telecopied (confirmation
received) to the recipient as follows:

                  (a) To XLCA:

                      XL Capital Assurance Inc.
                      1221 Avenue of the Americas
                      New York, New York  10020-1001
                      Attention:  Surveillance
                      Confirmation:  (212) 478-3400
                      Facsimile:  (212) 478-3587

                  (in each case in which notice or other  communication  to XLCA
                  refers to a Wind-Down Event, an Event of Default or a claim on
                  the  Policy or with  respect  to which  failure on the part of
                  XLCA to  respond  shall be deemed  to  constitute  consent  or
                  acceptance,  then a copy of such notice or other communication
                  should also be sent to the attention Surveillance and shall be
                  marked to indicate "URGENT MATERIAL ENCLOSED.")

                  (b) To Investment Agreement Provider:

                      XL Asset Funding Company I LLC
                      20 N. Martingale Road, Suite 200
                      Schaumburg, IL 60173
                      Attention:  Financial Administration Department
                      Confirmation:  1-800-394-3909
                      Facsimile:  (203) 569-5595

                  (c) To Holding Company:

                      The President and General Counsel
                      XL Life and Annuity Holding Company
                      20 N. Martingale Road, Suite 200
                      Schaumburg, IL 60173
                      Phone: 847-517-2990
                      Fax::  847-517-2399

                                       28
<PAGE>

A party may specify an additional  or different  address or addresses by writing
mailed or delivered to the other  parties and each Rating  Agency as  aforesaid.
All such notices and other communications shall be effective upon receipt.

         Section 6.3.      Payment Procedure.

         In the  event of any  payment  by XLCA for which it is  entitled  to be
reimbursed  or  indemnified  as  provided  in  or  pursuant  to  this  Insurance
Agreement,  the Provider  Entities agree to accept the voucher or other evidence
of payment as prima facie  evidence of the  propriety  thereof and the liability
therefor to XLCA in the absence of manifest  error.  All  payments to be made to
XLCA under this Insurance  Agreement shall be made to XLCA in lawful currency of
the United  States of  America in  immediately  available  funds to the  account
number provided in the Premium Letter before 1:00 p.m. (New York, New York time)
on the date when due or as XLCA shall otherwise  direct by written notice to the
other parties  hereto.  In the event that the date of any payment to XLCA or the
expiration of any time period  hereunder occurs on a day which is not a Business
Day,  then such payment or  expiration  of time period shall be made or occur on
the next  succeeding  Business  Day with the same  force  and  effect as if such
payment  was made or time  period  expired on the  scheduled  date of payment or
Termination  Date.  Payments to be made to XLCA under Section 3.2 or 3.3 of this
Insurance  Agreement  or the  Premium  Letter  shall bear  interest  at the Late
Payment Rate from the date when due to the date paid.

         Section 6.4.      Severability.

         In the event that any provision of this  Insurance  Agreement  shall be
held  invalid  or  unenforceable  by any court of  competent  jurisdiction,  the
parties   hereto  agree  that  such  holding  shall  not  invalidate  or  render
unenforceable any other provision hereof.  The parties hereto further agree that
the holding by any court of competent  jurisdiction  that any remedy  pursued by
any party hereto is unavailable or unenforceable shall not affect in any way the
ability of such party to pursue any other remedy available to it.

         Section 6.5.      Limitation on Interest.

         No provision in this Agreement  shall require the payment or permit the
collection of interest in excess of the maximum rate by applicable law.

         Section 6.6.      Governing Law.

         THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED,  IN ACCORDANCE
WITH THE LAWS OF THE  STATE OF NEW  YORK,  WITHOUT  REGARD  TO  CONFLICT  OF LAW
PRINCIPLES.

                                       29
<PAGE>

         Section 6.7.      Consent to Jurisdiction.

                  (a)  THE  PARTIES  HERETO  HEREBY  IRREVOCABLY  SUBMIT  TO THE
JURISDICTION  OF THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF
NEW YORK AND ANY COURT IN THE STATE OF NEW YORK  LOCATED  IN THE CITY AND COUNTY
OF NEW YORK, AND ANY APPELLATE  COURT FROM ANY THEREOF,  IN ANY ACTION,  SUIT OR
PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS  CONTEMPLATED  HEREUNDER OR FOR  RECOGNITION  OR ENFORCEMENT OF ANY
JUDGMENT,  AND THE PARTIES HERETO HEREBY IRREVOCABLY AND  UNCONDITIONALLY  AGREE
THAT ALL  CLAIMS IN  RESPECT OF ANY SUCH  ACTION OR  PROCEEDING  MAY BE HEARD OR
DETERMINED  IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT  PERMITTED BY LAW, IN
SUCH FEDERAL  COURT.  THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH
ACTION,  SUIT 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. TO
THE EXTENT  PERMITTED BY  APPLICABLE  LAW, THE PARTIES  HERETO  HEREBY WAIVE AND
AGREE NOT TO ASSERT BY WAY OF  MOTION,  AS A DEFENSE  OR  OTHERWISE  IN ANY SUCH
SUIT, ACTION OR PROCEEDING,  ANY CLAIM THAT IT IS NOT PERSONALLY  SUBJECT TO THE
JURISDICTION OF SUCH COURTS,  THAT THE SUIT,  ACTION OR PROCEEDING IS BROUGHT IN
AN  INCONVENIENT  FORUM,  THAT THE VENUE OF THE SUIT,  ACTION OR  PROCEEDING  IS
IMPROPER OR THAT THE RELATED  DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE
LITIGATED IN OR BY SUCH COURTS.

                  (b) To the extent  permitted  by  applicable  law, the parties
hereto  shall not seek and hereby  waive the right to any review of the judgment
of any such court by any court of any other nation or jurisdiction  which may be
called upon to grant an enforcement of such judgment.

                  (c) Each of the Provider Entities hereby irrevocably  appoints
and  designates  the Persons  specified  in Section 6.2 hereof,  as its true and
lawful  attorney and duly  authorized  agent for  acceptance of service of legal
process,  and  agrees to  maintain  such  person as such.  Each of the  Provider
Entities  agrees  that  service of such  process  upon such Person by mail shall
constitute personal service of such process upon it.

                  (d) Nothing contained in this Insurance  Agreement shall limit
or affect XLCA's right to serve process in any other manner  permitted by law or
to start legal proceedings relating to any of the Related Agreements against any
of the Provider Entities or their property in the courts of any jurisdiction.

         Section 6.8.      Consent of XLCA.

         In the event that XLCA's  consent is required  under any of the Related
Agreements, the determination whether to grant or withhold such consent shall be
made by XLCA in its sole  discretion  without any implied duty towards any other
Person, except as otherwise provided therein.

                                       30
<PAGE>

         Section 6.9.      Counterparts.

         This Insurance Agreement may be executed in counterparts by the parties
hereto, and all such counterparts shall constitute one and the same instrument.

         Section 6.10.     Trial by Jury Waived.

         EACH PARTY HERETO HEREBY  WAIVES,  TO THE FULLEST  EXTENT  PERMITTED BY
LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION  ARISING DIRECTLY
OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION  WITH ANY OF THE RELATED  DOCUMENTS
OR ANY OF THE  TRANSACTIONS  CONTEMPLATED  THEREUNDER.  EACH  PARTY  HERETO  (A)
CERTIFIES  THAT NO  REPRESENTATIVE,  AGENT OR ATTORNEY  OF ANY PARTY  HERETO HAS
REPRESENTED,  EXPRESSLY  OR  OTHERWISE,  THAT IT  WOULD  NOT,  IN THE  EVENT  OF
LITIGATION,  SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)  ACKNOWLEDGES  THAT IT
HAS BEEN INDUCED TO ENTER INTO THE RELATED  DOCUMENTS TO WHICH IT IS A PARTY BY,
AMONG OTHER THINGS, THIS WAIVER.

         Section 6.11.     Limited Liability.

         No recourse under any Related  Agreement  shall be had against,  and no
personal liability shall attach to, any officer, employee,  director,  affiliate
member,  beneficial  owner or shareholder  of any party hereto,  as such, by the
enforcement of any assessment or by any legal or equitable proceeding, by virtue
of any statute or otherwise in respect of any of the Related Agreements,  or the
Policy,  it being expressly agreed and understood that each Related Agreement is
solely  a  corporate  obligation  of each  party  hereto,  and  that any and all
personal  liability,  either  at  common  law or in  equity,  or by  statute  or
constitution,   of  every  such  officer,  employee,   director,   affiliate  or
shareholder  for  breaches  by any  party  hereto of any  obligations  under any
Related  Agreement  is  hereby  expressly  waived  as  a  condition  of  and  in
consideration for the execution and delivery of this Insurance Agreement.

         Section 6.12.     Entire Agreement.

         This Insurance  Agreement,  the Premium Letter,  the Related Agreements
and the Policy set forth the entire  agreement  between the parties with respect
to the subject  matter  thereof,  and this  Insurance  Agreement  supersedes and
replaces  any  agreement  or  understanding  that may have  existed  between the
parties prior to the date hereof in respect of such subject matter.

         Section 6.13.     Headings.

         The  headings  of  articles  and  sections  and the  table of  contents
contained in this Insurance  Agreement are provided for  convenience  only. They
form no part of this Insurance  Agreement and shall not affect its  construction
or interpretation.  Unless otherwise  indicated,  all references to articles and
sections in this Insurance  Agreement  refer to the  corresponding  articles and
sections of this Insurance Agreement.

         Section 6.14.     No Partnership.

                                       31
<PAGE>

         Nothing in this Insurance Agreement or any other agreement entered into
in connection with the Transaction shall be deemed to constitute XLCA a partner,
co-venturer or joint owner of property with any other entity.

         Section 6.15.     No Proceedings.

         XLCA  hereby  agrees  that it will  not  institute  against  Investment
Agreement  Provider,  or join any other Person in instituting against Investment
Agreement  Provider,  any Insolvency  Proceeding  prior to the date which is one
year  and one day  after  the  payment  in full  of all  obligations  under  the
Investment  Agreements.  Nothing in the foregoing sentence shall limit the right
of XLCA to file any claim in or  otherwise  take any action with  respect to any
Insolvency  Proceeding that was instituted against Investment Agreement Provider
by any Person other than XLCA.

                                       32
<PAGE>

                  IN WITNESS WHEREOF,  the parties hereto have duly executed and
delivered this Insurance Agreement, all on the day and year first above written.

                                           XL CAPITAL ASSURANCE INC., a New York
                         `                 stock insurance corporation

                                           By: /s/ Thomas Randazzo
                                              __________________________________
                                               Name:   Thomas Randazzo
                                               Title:  Senior Managing Director

                                           XL ASSET FUNDING COMPANY I LLC, a
                                           Delaware limited liability company

                                           By: /s/ Frank Beardsley
                                              __________________________________
                                               Name:  Frank Beardsley
                                               Title: President

                                           XL LIFE AND ANNUITY HOLDING COMPANY,
                                           a Delaware Corporation

                                           By: /s/ Frank Beardsley
                                              __________________________________
                                               Name:  Frank Beardsley
                                               Title: President

              [SIGNATURE PAGE TO INSURANCE AND INDEMNITY AGREEMENT]

                                       33
<PAGE>

                                   APPENDIX I

                                   DEFINITIONS

                  "AGREEMENT  DATE"  means  the  date  a  particular   Qualified
Investment  Agreement is executed  and  delivered  by the  Investment  Agreement
Provider.

                  "APPROVALS"  shall have the meaning assigned in SECTION 2.1(A)
of this Insurance Agreement.

                  "BANKRUPTCY CODE" means the federal  Bankruptcy Code, Title 11
of the United States Code (11 U.S.C.  101 et seq), as amended from time to time,
and any successor statute.

                  "BUSINESS  DAY"  means  any day which is not a  Saturday  or a
Sunday or a day on which banks located in the City of New York are authorized or
required by law or executive order to close or any day on which any party hereto
is not closed to normal business due to force majeure (including but not limited
to war, civil or political unrest, fire, flood).

                  "CASH  ASSETS"  means cash and  investments  belonging  to the
Investment   Agreement   Provider   resulting  from  the  Qualified   Investment
Agreements.

                  "CODE"  means the Internal  Revenue  Code of 1986,  including,
unless the context otherwise requires, the rules and regulations thereunder,  as
amended from time to time.

                  "COLLATERAL"  shall have the meaning  ascribed to such term in
the Collateral Management Agreement.

                  "COLLATERAL  ACCOUNT" shall have the meaning  ascribed to such
term in the Collateral Management Agreement.

                  "COLLATERAL AGENT" means Mellon Bank, N.A.

                  "COLLATERAL   MANAGEMENT   AGREEMENT"   means   that   certain
Collateral  Pledge,  Security and  Management  Agreement by and among XLCA,  the
Provider  Entities and the Collateral Agent dated as of October 13, 2006, as the
same may be amended, modified and supplemented from time to time.

                  "COMMISSION" means the Securities and Exchange Commission.

                  "COMMONLY  CONTROLLED ENTITY" means the Provider Entities,  as
the  case  may be,  and  each  entity,  whether  or not  incorporated,  which is
affiliated with any of the foregoing pursuant to Section 414(b), (c), (m) or (o)
of the Code.

                  "DEFAULT" means any event or condition which results, or which
with the  giving  of notice or the  lapse of time or both  could  reasonably  be
expected to result, in an Event of Default.

                                      I-1
<PAGE>

                  "DURATION  OF  INVESTMENT  AGREEMENT"  shall have the  meaning
given thereto in the applicable Monthly Report.

                  "DURATION OF  PORTFOLIO"  shall have the meaning given thereto
in the applicable Monthly Report.

                  "EVENT OF DEFAULT" shall have the meaning specified in Section
5.2 of this Insurance Agreement.

                  "HOLDING COMPANY" means XL Life and Annuity Holding Company, a
Delaware corporation and any successor thereto or assign thereof.

                  "INVESTMENT AGREEMENT PROVIDER" means XL Asset Funding Company
I, LLC, a Delaware  limited  liability  company,  and any  successor  thereto or
assign thereof.

                  "INDEBTEDNESS"  means,  with  respect to any  Person,  without
duplication  (it being  understood,  for the  avoidance of doubt that  Qualified
Investment Agreement liabilities shall not be deemed to constitute Indebtedness)
at any time,  (a)  indebtedness  or liability of such Person for borrowed  money
whether or not evidenced by bonds,  debentures,  notes or other instruments,  or
for the  deferred  purchase  price of  property  or  services  (including  trade
obligations); (b) obligations of such Person as lessee under leases which should
have been or should be, in  accordance  with United  States  generally  accepted
accounting principles, recorded as capital leases; (c) obligations issued for or
liabilities  incurred  on  the  account  of  such  Person;  (d)  obligations  or
liabilities of such Person arising under acceptance facilities;  (e) obligations
of such Person under any guarantees,  endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent  obligations to
purchase,  to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor  against loss; (f)  obligations of such Person
secured by any Lien on  property  or assets of such  Person,  whether or not the
obligations  have been  assumed by such  Person,  except for Liens for  Required
Third Party  Collateral;  or (g)  obligations  of such Person under any interest
rate or currency exchange agreement; provided Indebtedness shall not include (i)
Qualified  Investment Agreement  liabilities,  (ii) liabilities arising from the
management of its investment portfolio,  including, but not limited to, pursuant
to  any   International   Swaps  and  Derivatives   Association,   Inc  ("ISDA")
documentation,  (iii) Liens related to the business of the Investment  Agreement
Provider under any agreement  related to transactions such as a rate swap, asset
swap,  liability swap, forward rate transaction,  interest rate option,  foreign
exchange transaction,  cap transaction,  floor transaction,  collar transaction,
currency swap,  currency option,  credit  protection  transaction,  credit swap,
credit default swap, total return swap,  credit spread  transaction,  repurchase
transaction,   reverse  repurchase   transaction,   buy/sell-back   transaction,
securities  lending or borrowing  transaction  or forward  purchase or sale of a
security or other financial  instrument or interest or (iv) expenses  payable in
the ordinary course of business.

                  "INDEMNIFIED PARTY" or  "INDEMNIFIED  PARTIES"  shall have the
meaning assigned in SECTION 3.4(A) of this Insurance Agreement.

                  "INDEMNIFYING  PARTY"  shall  have  the  meaning  assigned  in
SECTION 3.4(A) of this Insurance Agreement.

                                      I-2
<PAGE>

                  "INITIAL  CLOSING  DATE"  means  the date  this  Agreement  is
executed and delivered by the parties hereto.

                  "INITIAL TRANSACTION" means the execution and delivery of this
Agreement and the  Collateral  Management  Agreement and all related  actions to
effect such events.

                  "INSOLVENCY  LAW"  means any  existing  or  future  law of any
jurisdiction,   domestic  or  foreign,   relating  to  bankruptcy,   insolvency,
reorganization or relief of debtors.

                  "INSOLVENCY  PROCEEDING"  shall have the  meaning  assigned to
such term in the Notice of Claim.

                  "INSURANCE  AGREEMENT"  means  this  Insurance  and  Indemnity
Agreement dated as of October 13, 2006,  among  Investment  Agreement  Provider,
Holding Company and XLCA, as the same may be amended from time to time.

                  "INSURER  DEFAULT" means the existence and  continuance of any
of the  following:  (a) a failure by XLCA to make a payment  when or as required
under this Insurance  Agreement in accordance with its terms or under the Policy
in accordance with its terms and the  continuation  thereof for two (2) Business
Days;  or (b)(i) XLCA (A) files any petition or commences any case or proceeding
under any  provision  or chapter  of the  Bankruptcy  Code or any other  similar
federal  or  state  law  relating  to  insolvency,  bankruptcy,  rehabilitation,
liquidation or reorganization, (B) makes a general assignment for the benefit of
its  creditors,  or (C) has an order for  relief  entered  against  it under the
Bankruptcy  Code  or  any  other  similar  federal  or  state  law  relating  to
insolvency, bankruptcy,  rehabilitation,  liquidation or reorganization which is
final and nonappealable; or (ii) a court of competent jurisdiction, the New York
Department of Insurance or other competent  regulatory  authority enters a final
and nonappealable order, judgment or decree (A) appointing a custodian, trustee,
agent or receiver for XLCA or for all or any material portion of its property or
(B)  authorizing  the taking of  possession  by a custodian,  trustee,  agent or
receiver of XLCA (or the taking if possession of all or any material  portion of
the property of XLCA).

                  "INVESTMENT" means the principal invested by an Investor under
a Qualified Investment Agreement.

                  "INVESTMENT  COMPANY ACT" means the Investment  Company Act of
1940,  including,   unless  the  context  otherwise  requires,   the  rules  and
regulations thereunder, as amended from time to time.

                  "INVESTOR"   means  the  party   entering   into  a  Qualified
Investment Agreement with the Investment Agreement Provider.

                  "IRS" means the Internal Revenue Service.

                  "LATE  PAYMENT  RATE"  means the  lesser of (a) the Prime Rate
plus 2% and the maximum rate permissible  under applicable usury or similar laws
limiting interest rates. The Late Payment Rate shall be computed on the basis of
the actual number of days elapsed over a

                                      I-3
<PAGE>

year of 360  days.  The  Late  Payment  Rate  shall  be  calculated  by XLCA and
evidenced by a certificate of XLCA delivered to the Trustee.

                  "LIEN"  means,  as applied to the  property  or assets (or the
income or profits  therefrom)  of any Person,  in each case  whether the same is
consensual  or  nonconsensual  or arises by contract,  operation  of law,  legal
process or otherwise: (a) any mortgage, lien, pledge, hypothecation, assignment,
deposit  arrangement,   preference  priority  or  other  security  agreement  of
preferential arrangement,  attachment,  charge, lease, conditional sale or other
title  retention  agreement,  or other  security  interest or encumbrance of any
kind; or (b) any arrangement,  express or implied,  under which such property or
assets are transferred,  sequestered or otherwise  identified for the purpose of
subjecting or making  available the same for the payment of debt or  performance
of any other  obligation  in priority to the payment of the  general,  unsecured
creditors of such Person.

                  "MATERIAL ADVERSE CHANGE" means, (A) in respect of any Person,
a material adverse change in (i) the business,  financial condition,  results of
operations,  properties of such Person or any of the Provider Entities,  or (ii)
the ability of such Person to perform its  obligations  under any of the Related
Agreements to which it is a party;  and (B) with respect to the  Transaction,  a
material adverse change in (i) the Collateral or the Additional Collateral, (ii)
the first  priority  perfected  security  interest of the Collateral  Agent,  on
behalf of the XLCA in the Collateral,  (iii) the ability of the Collateral Agent
to  liquidate,  or foreclose  against,  the  Collateral,  or (iv) the  practical
realization by XLCA of any of the benefits or security afforded under any of the
Related Agreements.

                  "MONTHLY  VALUATION  DATE" shall have the meaning set forth in
the Collateral Management Agreement.

                  "NOTICE OF CLAIM" means a Payment  Notice in the form attached
as Exhibit A to Endorsement No. 1 to the Policy.

                  "NOTICE OF POTENTIAL INSUFFICIENCY" shall have the meaning set
forth in Section 3.16 hereof.

                  "OPERATING  ACCOUNT"  shall have the meaning  ascribed to such
term in the Collateral Management Agreement.

                  "ORGANIC   DOCUMENTS"   means  the  documents   governing  the
formation, governance and dissolution of an entity.

                  "OVER   COLLATERALIZATION   RATIO"  means  the  ratio  of  the
aggregate  market value of  Collateral  plus  Required  Third Party  Collateral,
including accrued interest, to the aggregate amount of the Investments under the
Qualified  Investment  Agreements  (as defined  therein) and  aggregate  accrued
earnings owed thereunder (as defined therein).

                  "PERMITTED LIENS" has the meaning set forth in Section 2.3(e).

                                      I-4
<PAGE>

                  "PERSON"  means an  individual,  joint stock  company,  trust,
unincorporated association, joint venture, corporation, business or owner trust,
limited liability company,  partnership or other organization or entity (whether
governmental or private).

                  "POLICY" means,  any one of the financial  guaranty  insurance
policies, issued by XLCA, pursuant to the Insurance Agreement.

                  "POLICY  REQUEST  FORM" means the form to be  delivered by the
Investment  Agreement  Provider  to  XLCA  prior  to the  issuance  of a  Policy
substantially in the form of Appendix VI hereto.

                  "PORTFOLIO MANAGER" means any party that enters into a written
agreement  with the Investment  Agreement  Provider to manage any Cash Assets or
investments  thereof  for  the  Investment  Agreement  Provider,   appointed  in
accordance with Section 3.9 hereof.

                  "PREMIUM" means the premium payable in accordance with SECTION
3.2 of this Insurance Agreement.

                  "PREMIUM LETTER" means the letter agreement among XLCA and the
Investment  Agreement  Provider  dated the date hereof in respect of the premium
payable by the Provider Entities in consideration of the issuance of the Policy.

                  "PRIME  RATE"  means the rate of interest  per annum  publicly
announced  from time to time by Citibank,  N.A. or any successor  thereto 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.

                  "PROGRAM  LIMIT" shall mean the amount  designated  by XLCA in
accordance with Section 3.9 hereof as the maximum  principal amount  outstanding
at any one time under all Qualified Investment Agreements collectively.

                  "PROVIDER ENTITIES" means Investment Agreement  Provider,  and
Holding Company.

                  "PROVIDER ENTITIES  REPRESENTATIVE"  means any representative,
manager or  officer  of any of the  Provider  Entities  or any Person  acting on
behalf of the Provider Entities  designated as such by the management  committee
of any of the  Provider  Entities  and  communicated  in  writing  to  XLCA  and
reasonably acceptable to XLCA.

                  "QUALIFIED INVESTMENT AGREEMENT" means an Investment Agreement
entered into by the Investment  Agreement  Provider meeting the requirements set
forth in Appendix II hereto.

                  "RATING AGENCIES" shall mean Moody's Investors Service,  Inc.,
Standard & Poor's Ratings Services and Fitch,  Inc., and any successor  to  same
thereof.

                  "RELATED  AGREEMENTS"  shall  mean the  Collateral  Management
Agreement,  the Qualified Investment Agreements,  the Securities Account Control
Agreement, the Insurance Agreement, each Policy and Premium Letter.

                                      I-5
<PAGE>

                  "REQUIRED  COLLATERAL  AMOUNT" shall have the meaning ascribed
thereto in the Collateral Management Agreement.

                  "REQUIRED  OVER  COLLATERALIZATION  DEPOSITS"  shall  have the
meaning ascribed thereto in the Collateral Management Agreement.

                  "REQUIRED THIRD PARTY  COLLATERAL" means money and investments
held as collateral  for an Investor under a Qualified  Investment  Agreement and
any  other  similar  agreement  including  but  not  limited  to  collateralized
investment agreements, repos and reverse repos.

                  "SECURITIES  ACCOUNT  CONTROL  AGREEMENT"  means the agreement
among the Investment Agreement Provider,  XLCA and Mellon Bank, N.A. as amended,
modified or supplemented.

                  "SECURITIES ACT" means the Securities Act of 1933,  including,
unless the context otherwise requires, the rules and regulations thereunder,  as
amended from time to time.

                  "SECURITY  DOCUMENTS"  means the  Guaranty  and any  ancillary
documents  executed or filed to evidence or perfect the security interest of the
XLCA Class A.

                  "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934,  including,   unless  the  context  otherwise  requires,   the  rules  and
regulations thereunder, as amended from time to time.

                  "SUBSIDIARY"   means,   with   respect  to  any  Person,   any
corporation,  partnership,  association  or  other  business  entity  of which a
majority of the  outstanding  shares of capital stock or other equity  interests
having ordinary  voting power for the election of directors or their  equivalent
is  at  the  time  owned  by  such  Person  directly  or  through  one  or  more
Subsidiaries.

                  "TERM OF THE  AGREEMENT"  shall be  determined  as provided in
Section 4.1 of this Insurance Agreement.

                  "TERMINATION  DATE"  means the  final  date of the term of the
Policy with the longest remaining term, as specified in such Policy.

                  "TRANSACTION"  means  the  transactions  contemplated  by  the
Related Agreements.

                  "TRUST  INDENTURE ACT" means the Trust  Indenture Act of 1939,
including,  unless the context  otherwise  requires,  the rules and  regulations
thereunder, as amended from time to time.

                  "WIND DOWN EVENT" shall have the meaning  specified in Section
5.1 of this Insurance Agreement.

                  "XLCA"  means XL  Capital  Assurance  Inc.,  a New York  stock
insurance company and its successors and assigns.

                                      I-6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}]]