Document:

Exhibit 10.2 - 364-Credit Agree. dated as of 12/19/06

    Exhibit
      10.2

     

     

     

    
      

      

    

     

     

    364-DAY
      CREDIT AGREEMENT

    

    dated
      as
      of

    

    December
      19, 2006 

    

    between

    

    XL
      CAPITAL
      LTD,

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

    as
      Account
      Parties and Guarantors,

    

    DEUTSCHE
      BANK AG NEW YORK BRANCH,

    as
      Lender

    

    _____________

    

    $100,000,000

    _____________

     

    

    
      

      

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TABLE
      OF
      CONTENTS

     

    Page

     

    ARTICLE
      I

     

    DEFINITIONS

     

    
      	
              SECTION
                1.01.

            	
              Defined
                Terms

            	
              1

            
	
              SECTION
                1.02.

            	
              Terms
                Generally

            	
              15

            
	
              SECTION
                1.03.

            	
              Accounting
                Terms; GAAP and SAP

            	
              15

            

    

     

    ARTICLE
      II

     

    THE
      CREDITS

     

    
      	
              SECTION
                2.01.

            	
              Dollar
                Letters of Credit

            	
              15

            
	
              SECTION
                2.02.

            	
              Alternative
                Currency Letters of Credit

            	
              16

            
	
              SECTION
                2.03.

            	
              Reimbursement
                of LC Disbursements, Etc.

            	
              17

            
	
              SECTION
                2.04.

            	
              Loans
                and Borrowings

            	
              19

            
	
              SECTION
                2.05.

            	
              Requests
                for Borrowings

            	
              20

            
	
              SECTION
                2.06.

            	
              Funding
                of Borrowings

            	
              21

            
	
              SECTION
                2.07.

            	
              Interest
                Elections

            	
              21

            
	
              SECTION
                2.08.

            	
              Termination
                and Reduction of the Commitment

            	
              22

            
	
              SECTION
                2.09.

            	
              Repayment
                of Loans; Term-Out Option; Evidence of Debt

            	
              23

            
	
              SECTION
                2.10.

            	
              Prepayment
                of Loans

            	
              24

            
	
              SECTION
                2.11.

            	
              Fees

            	
              25

            
	
              SECTION
                2.12.

            	
              Interest

            	
              26

            
	
              SECTION
                2.13.

            	
              Alternate
                Rate of Interest

            	
              26

            
	
              SECTION
                2.14.

            	
              Increased
                Costs

            	
              27

            
	
              SECTION
                2.15.

            	
              Break
                Funding Payments

            	
              28

            
	
              SECTION
                2.16.

            	
              Taxes

            	
              28

            
	
              SECTION
                2.17.

            	
              Payments
                Generally; Pro Rata Treatment; Sharing of Set-offs

            	
              30

            
	
              SECTION
                2.18.

            	
              Designation
                of a Different Lending Office

            	
              31

            

    

     

    ARTICLE
      III

     

    GUARANTEE

     

    
      	
              SECTION
                3.01.

            	
              The
                Guarantee

            	
              31

            
	
              SECTION
                3.02.

            	
              Obligations
                Unconditional

            	
              32

            
	
              SECTION
                3.03.

            	
              Reinstatement

            	
              32

            
	
              SECTION
                3.04.

            	
              Subrogation

            	
              33

            
	
              SECTION
                3.05.

            	
              Remedies

            	
              33

            

    

    
      
        
        

      

      
        -i-

        
          

        

      

      
        
        

      

    

    

    
      	
              SECTION
                3.06.

            	
              Continuing
                Guarantee

            	
              33

            
	
              SECTION
                3.07.

            	
              Rights
                of Contribution

            	
              33

            
	
              SECTION
                3.08.

            	
              General
                Limitation on Guarantee Obligations

            	
              34

            

    

     

    ARTICLE
      IV

     

    REPRESENTATIONS
      AND WARRANTIES

     

    
      	
              SECTION
                4.01.

            	
              Organization;
                Powers

            	
              34

            
	
              SECTION
                4.02.

            	
              Authorization;
                Enforceability

            	
              34

            
	
              SECTION
                4.03.

            	
              Governmental
                Approvals; No Conflicts

            	
              35

            
	
              SECTION
                4.04.

            	
              Financial
                Condition; No Material Adverse Change

            	
              35

            
	
              SECTION
                4.05.

            	
              Properties

            	
              35

            
	
              SECTION
                4.06.

            	
              Litigation
                and Environmental Matters

            	
              36

            
	
              SECTION
                4.07.

            	
              Compliance
                with Laws and Agreements

            	
              36

            
	
              SECTION
                4.08.

            	
              Investment
                and Holding Company Status

            	
              36

            
	
              SECTION
                4.09.

            	
              Taxes

            	
              36

            
	
              SECTION
                4.10.

            	
              ERISA

            	
              37

            
	
              SECTION
                4.11.

            	
              Disclosure

            	
              37

            
	
              SECTION
                4.12.

            	
              Use
                of Credit

            	
              37

            
	
              SECTION
                4.13.

            	
              Subsidiaries

            	
              38

            
	
              SECTION
                4.14.

            	
              Withholding
                Taxes

            	
              38

            
	
              SECTION
                4.15.

            	
              Stamp
                Taxes

            	
              38

            
	
              SECTION
                4.16.

            	
              Legal
                Form

            	
              38

            

    

     

    ARTICLE
      V

     

    CONDITIONS

     

    
      	
              SECTION
                5.01.

            	
              Effective
                Date

            	
              38

            
	
              SECTION
                5.02.

            	
              Each
                Credit Event

            	
              40

            

    

     

    ARTICLE
      VI

     

    AFFIRMATIVE
      COVENANTS

     

    
      	
              SECTION
                6.01.

            	
              Financial
                Statements and Other Information

            	
              40

            
	
              SECTION
                6.02.

            	
              Notices
                of Material Events

            	
              43

            
	
              SECTION
                6.03.

            	
              Preservation
                of Existence and Franchises

            	
              43

            
	
              SECTION
                6.04.

            	
              Insurance

            	
              43

            
	
              SECTION
                6.05.

            	
              Maintenance
                of Properties

            	
              43

            
	
              SECTION
                6.06.

            	
              Payment
                of Taxes and Other Potential Charges and Priority Claims; Payment
                of Other
                Current Liabilities

            	
              44

            
	
              SECTION
                6.07.

            	
              Financial
                Accounting Practices

            	
              44

            

    

    
      
        
        

      

      
        -ii-

        
          

        

      

      
        
        

      

    

    

    
      	
              SECTION
                6.08.

            	
              Compliance
                with Applicable Laws

            	
              44

            
	
              SECTION
                6.09.

            	
              Use
                of Letters of Credit and Proceeds

            	
              45

            
	
              SECTION
                6.10.

            	
              Continuation
                of and Change in Businesses

            	
              45

            
	
              SECTION
                6.11.

            	
              Visitation

            	
              45

            

    

     

    ARTICLE
      VII

     

    NEGATIVE
      COVENANTS

     

    
      	
              SECTION
                7.01.

            	
              Mergers

            	
              45

            
	
              SECTION
                7.02.

            	
              Dispositions

            	
              46

            
	
              SECTION
                7.03.

            	
              Liens

            	
              46

            
	
              SECTION
                7.04.

            	
              Transactions
                with Affiliates

            	
              48

            
	
              SECTION
                7.05.

            	
              Ratio
                of Total Funded Debt to Total Capitalization

            	
              49

            
	
              SECTION
                7.06.

            	
              Consolidated
                Net Worth

            	
              49

            
	
              SECTION
                7.07.

            	
              Indebtedness

            	
              49

            
	
              SECTION
                7.08.

            	
              Financial
                Strength Ratings

            	
              49

            
	
              SECTION
                7.09.

            	
              Private
                Act

            	
              50

            

    

     

    ARTICLE
      VIII

     

    EVENTS
      OF DEFAULT

     

     

    ARTICLE
      IX

     

    MISCELLANEOUS

     

    
      	
              SECTION
                9.01.

            	
              Notices

            	
              53

            
	
              SECTION
                9.02.

            	
              Waivers;
                Amendments

            	
              54

            
	
              SECTION
                9.03.

            	
              Expenses;
                Indemnity; Damage Waiver

            	
              54

            
	
              SECTION
                9.04.

            	
              Successors
                and Assigns

            	
              55

            
	
              SECTION
                9.05.

            	
              Survival

            	
              55

            
	
              SECTION
                9.06.

            	
              Counterparts;
                Integration; Effectiveness

            	
              56

            
	
              SECTION
                9.07.

            	
              Severability

            	
              56

            
	
              SECTION
                9.08.

            	
              Right
                of Setoff

            	
              56

            
	
              SECTION
                9.09.

            	
              Governing
                Law; Jurisdiction; Etc.

            	
              57

            
	
              SECTION
                9.10.

            	
              WAIVER
                OF JURY TRIAL

            	
              58

            
	
              SECTION
                9.11.

            	
              Headings

            	
              58

            
	
              SECTION
                9.12.

            	
              Treatment
                of Certain Information; Confidentiality

            	
              58

            
	
              SECTION
                9.13.

            	
              Judgment
                Currency

            	
              59

            
	
              SECTION
                9.14.

            	
              USA
                PATRIOT Act

            	
              60

            

    

     

     

    
      
        
        

      

      
        -iii-

        
          

        

      

      
        
        

      

    

    
 

    SCHEDULES
      AND EXHIBITS

     

    
      	
              SCHEDULE
                I

            	
              -

            	
              Indebtedness
                and Liens

            
	
              SCHEDULE
                II

            	
              -

            	
              Litigation

            
	
              SCHEDULE
                III

            	
              -

            	
              Environmental
                Matters

            
	
              SCHEDULE
                IV

               

            	
              -

               

            	
              Subsidiaries

               

            
	
              EXHIBIT
                A -1

            	
              -

            	
              Form
                of Opinion of Counsel to XL Capital

            
	
              EXHIBIT
                A -2

            	
              -

            	
              Form
                of Opinion of Counsel to XL America

            
	
              EXHIBIT
                A -3

            	
              -

            	
              Form
                of Opinion of Special U.S. Counsel to the Obligors

            
	
              EXHIBIT
                A -4

            	
              -

            	
              Form
                of Opinion of Special Bermuda Counsel to XL Insurance

            
	
              and
                XL Re

            	 	 
	
              EXHIBIT
                A -5

            	
              -

            	
              Form
                of Opinion of Special Cayman Islands Counsel to XL
                Capital

            

    

    

    

     

    
      
        
        

      

      
        -iv-

        
          

        

      

      
        
        

      

    

    364-DAY
      CREDIT AGREEMENT dated as of December 19, 2006, between XL CAPITAL LTD, a Cayman
      Islands exempted limited liability company (“XL
      Capital”),
      X.L.
      AMERICA, INC., a Delaware corporation (“XL
      America”),
      XL
      INSURANCE (BERMUDA) LTD, a Bermuda limited liability company (“XL
      Insurance”)
      and XL
      RE LTD, a Bermuda limited liability company (“XL
      Re”
and,
      together with XL Capital, XL America and XL Insurance, each an “Account
      Party”
and
      each
      a “Guarantor”
and
      collectively, the “Account
      Parties”
and
      the
“Guarantors”;
      the
      Account Parties and the Guarantors being collectively referred to as the
“Obligors”),
      and
      DEUTSCHE BANK AG NEW YORK BRANCH, as the Lender.

     

    The
      Account Parties have requested that the Lender issue letters of credit for
      their
      account and make loans to them in an aggregate face or principal amount not
      exceeding $100,000,000 at any one time outstanding, and the Lender is prepared
      to issue such letters of credit and make such loans upon the terms and
      conditions hereof. Accordingly, the parties hereto agree as
      follows:

     

     

    ARTICLE
      I

     

    DEFINITIONS

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Alternate
      Base Rate”
means,
      for any day, a rate per annum equal to the greater of (a) the Prime Rate in
      effect on such day, and (b) the Federal Funds Effective Rate 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    for
      such
      day plus1⁄2
of
      1%.
      Any change in the Alternate Base Rate due to a change in the Prime Rate or
      the
      Federal Funds Effective Rate shall be effective from and including the effective
      date of such change in the Prime Rate or the Federal Funds Effective Rate,
      as
      the case may be.

     

    “Alternative
      Currency”
means
      any currency other than Dollars (a) that is freely transferable and
      convertible into Dollars in the London foreign exchange market and (b) for
      which no central bank or other governmental authorization in the country of
      issue of such currency is required to permit use of such currency by the Lender
      for issuing, renewing, extending or amending letter of credits or funding or
      making drawings thereunder and/or to permit any Account Party to pay the
      reimbursement obligations and interest thereon, each as contemplated hereunder,
      unless such authorization has been obtained and is in full force and
      effect.

     

    “Alternative
      Currency LC Exposure”
means,
      at any time, the sum of (a) the Dollar Equivalent of the aggregate undrawn
      amount of all outstanding Alternative Currency Letters of Credit at such time
      plus
      (b) the Dollar Equivalent of the aggregate amount of all LC Disbursements
      under Alternative Currency Letters of Credit that have not been reimbursed
      by or
      on behalf of the Account Parties at such time.

     

    “Alternative
      Currency Letter of Credit”
means
      a
      letter of credit issued by the Lender in an Alternative Currency pursuant to
      Section 2.02.

     

    “Applicable
      Facility Fee Rate”
means
      0.05%.

     

    “Applicable
      Letter of Credit Fee Rate”
means
      0.25%.

     

    “Applicable
      Margin”
means
      a
      rate per annum equal to, (a) for the period from and including the date hereof
      to but not including the Commitment Termination Date, 0.25% and (b) in the
      event
      that the Term-Out Option has been exercised and is in effect, for the period
      from and including the Commitment Termination Date to but not including the
      date
      of payment in full of the Loans, 0.50%.

     

    “Applicable
      Additional Margin”
means
      a
      rate per annum equal to 0.10% (a) for any period during which the aggregate
      outstanding principal amount of the Loans shall be greater than 50% of the
      RC
      Sublimit then in effect and (b) from and after the Term-Out Option has been
      exercised and is in effect.

     

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

     

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

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    

     

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

     

    “Borrowing
      Request”
means
      a
      request by an Account Party for a Borrowing in accordance with
      Section 2.05.

     

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

     

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

     

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

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    

     

    “Change
      in Law”
means
      (a) the adoption of any law, rule or regulation after the date of this
      Agreement, (b) any change in any law, rule or regulation or in the
      interpretation or application thereof by any Governmental Authority after the
      date of this Agreement or (c) compliance by the Lender (or, for purposes of
      Section 2.14(b), by any lending office of the Lender or by the Lender’s
      holding company, if any) with any request, guideline or directive (whether
      or
      not having the force of law) of any Governmental Authority made or issued after
      the date of this Agreement.

     

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

     

    “Commitment”
means,
      the Lender’s commitment (a) to issue Letters of Credit and 

     

    (b) to
      make Loans, in each case expressed as an amount representing the maximum
      aggregate amount of the Lender’s Credit Exposure hereunder, as such commitment
      may be reduced from time to time pursuant to Section 2.08. The initial
      aggregate amount of the Lender’s Commitment is $100,000,000.

     

    “Commitment
      Termination Date”
means
      December 19, 2007.

     

    “Consolidated
      Net Worth”
means,
      at any time, the consolidated shareholders’ equity of XL Capital and its
      Subsidiaries, provided that the calculation of such consolidated shareholders’
equity shall exclude (a) the effect thereon of any adjustments required under
      Statement of Financial Accounting Standard No. 115 (“Accounting for Certain
      Investments in Debt and Equity Securities”) (b) any Exempt Indebtedness (and the
      assets relating thereto) in the event such Exempt Indebtedness is consolidated
      on the balance sheet of XL Capital and its consolidated Subsidiaries in
      accordance with GAAP.

     

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

     

    “Credit
      Documents”
means,
      collectively, this Agreement and the Letter of Credit Documents.

     

    “Credit
      Exposure”
means
      the sum of the outstanding principal amount of the Lender’s Loans and its LC
      Exposure at any time.

     

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

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    

     

    “Dollar
      Equivalent”
means,
      in respect of any Alternative Currency Letter of Credit, the amount of Dollars
      obtained by converting the Alternative Currency LC Exposure with respect to
      such
      Alternative Currency Letter of Credit, into Dollars at the spot rate for the
      purchase of Dollars with such currency as quoted by the Lender at approximately
      11:00 a.m. (London time) on the second Business Day before the date such Dollar
      Equivalent shall be calculated (unless another rate or time is agreed to by
      XL
      Capital and the Lender).

     

    “Dollar
      Letter of Credit”
means
      a
      letter of credit issued by the Lender in Dollars pursuant to
      Section 2.01.

     

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

     

    “Effective
      Date”
means
      the date on which the conditions specified in Section 5.01 are satisfied
      (or waived in accordance with Section 9.02).

     

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

     

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

     

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

     

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

     

    “ERISA
      Affiliate”
means
      any trade or business (whether or not incorporated) that, together with any
      Account Party, is treated as a single employer under Section 414(b)

     

    
      
        
        

      

      
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    or (c)
      of the Code, or, solely for purposes of Section 302 of ERISA and
      Section 412 of the Code, is treated as a single employer under
      Section 414 of the Code.

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    deemed
      to
      arise solely by reason of both (I) the transactions contemplated by this
      Agreement and (II) an Account Party being organized or resident in, maintaining
      an office in, conducting business in, or having a connection with, such
      jurisdiction), (c) any U.S. federal withholding tax that is imposed on
      amounts payable to a Lender under a law that was in effect at the time such
      Lender becomes a party to this Agreement (or designates a new lending office),
      except to the extent that such Lender (or its assignor, if any) was entitled,
      immediately prior to the designation of a new lending office (or assignment),
      to
      receive additional amounts from Borrower with respect to such withholding tax
      pursuant to Section 2.16(a) and (d) any Tax that is not imposed solely
      as a result of a Change in Law formally announced after the date
      hereof.

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Indebtedness”
means,
      for any Person, without duplication: (i) all indebtedness or liability for
      or on
      account of money borrowed by, or for or on account of deposits with or advances
      to (but not including accrued pension costs, deferred income taxes or accounts
      payable of) such Person; (ii) all obligations (including contingent liabilities)
      of such Person evi-

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    denced
      by
      bonds, debentures, notes, banker’s acceptances or similar instruments; (iii) all
      indebtedness or liability for or on account of property or services purchased
      or
      acquired by such Person; (iv) any amount secured by a Lien on property owned
      by
      such Person (whether or not assumed) and Capital Lease Obligations of such
      Person (without regard to any limitation of the rights and remedies of the
      holder of such Lien or the lessor under such capital lease to repossession
      or
      sale of such property); (v) the maximum available amount of all standby letters
      of credit issued for the account of such Person and, without duplication, all
      drafts drawn thereunder (to the extent unreimbursed); and (vi) all Guarantees
      of
      such Person; provided that the following shall be excluded from Indebtedness
      of
      XL Capital and any of its Subsidiaries for purposes of this Agreement: (a)
      all
      payment liabilities of any such Person under insurance and reinsurance policies
      from time to time issued by such Person, including guarantees of any such
      payment liabilities; (b) all other liabilities (or guarantees thereof) arising
      in the ordinary course of any such Person’s business as an insurance or
      reinsurance company (including GICs and Stable Value Instruments and any
      Specified Transaction Agreement relating thereto), or as a corporate member
      of
      The Council of Lloyd’s, or as a provider of financial or investment services or
      contracts (including GICs and Stable Value Instruments and any Specified
      Transaction Agreement relating thereto); and (c) any Exempt
      Indebtedness.

     

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

     

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

     

    “Interest
      Election Request”
means
      a
      request by an Account Party to convert or continue a Borrowing in accordance
      with Section 2.07.

     

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

     

    “Interest
      Period”
means,
      for any Eurodollar Loan or Borrowing, the period commencing on the date of
      such
      Loan or Borrowing and ending on the numerically corresponding day in the
      calendar month that is one, two, three or six months thereafter, as specified
      in
      the applicable Borrowing Request or Interest Election Request; provided
      that
      (i) if any Interest Period would end on a day other than a Business Day,
      such Interest Period shall be extended to the next succeeding Business Day
      unless such next succeeding Business Day would fall in the next calendar month,
      in which case such Interest Period shall end on the next preceding Business
      Day,
      and (ii) any Interest Period that commences on the last Business Day

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    of
      a
      calendar month (or on a day for which there is no numerically corresponding
      day
      in the last calendar month of such Interest Period) shall end on the last
      Business Day of the last calendar month of such Interest Period. For purposes
      hereof, the date of a Loan initially shall be the date on which such Loan is
      made and thereafter shall be the effective date of the most recent conversion
      or
      continuation of such Loan, and the date of a Borrowing comprising Loans that
      have been converted or continued shall be the effective date of the most recent
      conversion or continuation of such Loans.

     

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

     

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

     

    “LC
      Disbursement”
means
      with respect to any Letter of Credit a payment made by the Lender pursuant
      thereto.

     

    “LC Exposure”
means,
      at any time, the sum of (a) the aggregate undrawn amount of all outstanding
      Letters of Credit at such time plus (b) the aggregate amount of all LC
      Disbursements under Letters of Credit that have not yet been reimbursed by
      or on
      behalf of the Account Parties at such time. The LC Exposure of the Lender
      at the time shall be the sum of (i) LC Exposure (excluding any Alternative
      Currency LC Exposure) plus (ii) the Alternative Currency LC Exposure (if any)
      at
      such time.

     

    “Lender”
means
      Deutsche Bank AG New York Branch, or its successors or assigns.

     

    “Letter
      of Credit Documents”
means,
      with respect to any Letter of Credit, collectively, any application therefor
      and
      any other agreements, instruments, guarantees or other documents (whether
      general in application or applicable only to such Letter of Credit) governing
      or
      providing for the rights and obligations of the parties concerned or at risk
      with respect to such Letter of Credit.

     

    “Letters
      of Credit”
means
      each of the Dollar Letters of Credit and the Alternative Currency Letters of
      Credit.

     

    “LIBO
      Rate”
means,
      for the Interest Period for any Eurodollar Borrowing, the rate appearing on
      Page 3750 of the Telerate Service (or on any successor or substitute page
      of such Service, or any successor to or substitute for such Service, providing
      rate quotations comparable to those currently provided on such page of such
      Service, as determined by the Lender from time to time for purposes of providing
      quotations of interest rates applicable to Dollar deposits in the London
      interbank market) at approximately 11:00 a.m., London time, two Business
      Days prior to the commencement of such Interest Period, as the rate for the
      offering of Dollar deposits with a maturity comparable to such Interest Period.
      In the event that 

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    such
      rate
      is not available at such time for any reason, then the LIBO Rate for such
      Interest Period shall be the rate at which Dollar deposits of $5,000,000 and
      for
      a maturity comparable to such Interest Period are offered by the principal
      London office of the Lender in immediately available funds in the London
      interbank market at approximately 11:00 a.m., London time, two Business
      Days prior to the commencement of such Interest Period.

     

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

     

    “Loans”
means
      the loans made by the Lender to the Account Parties pursuant to Section
      2.04.

     

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

     

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

     

    “Maturity
      Date”
means
      the Commitment Termination Date, as such date may be extended pursuant to the
      Term-Out Option.

     

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

     

    “Non-U.S.
      Benefit Plan”
means
      any plan, fund (including any superannuation fund) or other similar program
      established or maintained outside the United States by any Account Party or
      any
      of their Subsidiaries, with respect to which such Account Party or such
      Subsidiary has an obligation to contribute, for the benefit of employees of
      such
      Account Party or such Subsidiary, which plan, fund or other similar program
      provides, or results in, the type of benefits described in Section 3(1) or
      3(2)
      of ERISA, and which plan is not subject to ERISA or the Code.

     

    “Obligors”
means
      each of the Account Parties and each of the Guarantors.

     

    “Other
      Taxes”
means
      any and all present or future stamp or documentary taxes or any other similar
      excise or property Taxes, arising from any payment made hereunder or from the
      execution, delivery or enforcement of this Agreement, but excluding property
      or
      similar Taxes other than any such Taxes imposed in such circumstances solely
      as
      a result of 

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    the
      Account Party being organized or resident in, maintaining an office in,
      conducting business in or maintaining property located in the taxing
      jurisdiction in question.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    “RC
      Sublimit”
means
      $100,000,000, as such amount may be reduced from time to time pursuant to
      Section 2.08.

     

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

     

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

     

    
      
        
        

      

      
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    “SCA”
means
      Security Capital Assurance Ltd, a Bermuda limited liability
      company.

     

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

     

    “Significant
      Subsidiary”
means,
      at any time, each Subsidiary of XL Capital that, as of such time, meets the
      definition of a “significant subsidiary” under Regulation S-X of the SEC;
provided,
      however,
      that for
      purposes of this Agreement, neither SCA nor any of its Subsidiaries shall be
      a
“Significant Subsidiary” of XL Capital.

     

    “Specified
      Account Party”
has
      the
      meaning assigned to such term in Section 2.03(e).

     

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

     

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

     

    “Statutory
      Reserve Rate”
means,
      for any day (or for the Interest Period for any Eurodollar Borrowing), a
      fraction (expressed as a decimal), the numerator of which is the number one
      and
      the denominator of which is the number one minus
      the
      aggregate of the maximum reserve percentages (including any marginal, special,
      emergency or supplemental reserves) expressed as a decimal established by the
      Board to which the Lender is subject on such day (or, with respect to an
      Interest Period, the denominator of which is the number one minus
      the
      arithmetic mean of such aggregates for the days in such Interest Period) with
      respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
      to as “Eurocurrency liabilities” in Regulation D of the Board). Such
      reserve percentages shall include those 

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    imposed
      pursuant to such Regulation D. Eurodollar Loans shall be deemed to
      constitute eurocurrency funding and to be subject to such reserve requirements
      without benefit of or credit for proration, exemptions or offsets that may
      be
      available from time to time to the Lender under such Regulation D or any
      comparable regulation. The Statutory Reserve Rate shall be adjusted
      automatically on and as of the effective date of any change in any reserve
      percentage.

     

    “Subsidiary”
means,
      with respect to any Person (the “parent”),
      at any
      date, any corporation (or similar entity) of which a majority of the shares
      of
      outstanding capital stock normally entitled to vote for the election of
      directors (regardless of any contingency which does or may suspend or dilute
      the
      voting rights of such capital stock) is at such time owned directly or
      indirectly by the parent or one or more subsidiaries of the parent; provided,
      however,
      that for
      purposes of this Agreement neither SCA nor any of its Subsidiaries shall be
      a
“Subsidiary” of any Account Party. Unless otherwise specified, “Subsidiary”
means a Subsidiary of an Account Party.

     

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

     

    “Term-Out
      Option”
has
      the
      meaning assigned to such term in Section 2.09(b).

     

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

     

    “Transactions”
means
      the execution, delivery and performance by the Obligors of this Agreement and
      the other Credit Documents to which any Account Party is intended to be a party,
      the issuance of Letters of Credit, the borrowing of Loans and the use of the
      proceeds thereof.

     

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

     

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

     

    “XL
      Capital Group”
means
      XL
      Capital Group as determined from time to time by A.M. Best & Co. (or its
      successor).

     

    
      
        
        

      

      
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    SECTION
      1.02.  Terms
      Generally.
      The
      definitions of terms herein shall apply equally to the singular and plural
      forms
      of the terms defined. Whenever the context may require, any pronoun shall
      include the corresponding masculine, feminine and neuter forms. The words
“include”, “includes” and “including” shall be deemed to be followed by the
      phrase “without limitation”. The word “will” shall be construed to have the same
      meaning and effect as the word “shall”. Unless the context requires otherwise
      (a) any definition of or reference to any agreement, instrument or other
      document herein shall be construed as referring to such agreement, instrument
      or
      other document as from time to time amended, supplemented or otherwise modified
      (subject to any restrictions on such amendments, supplements or modifications
      set forth herein), (b) any reference herein to any Person shall be
      construed to include such Person’s successors and assigns, (c) the words
“herein”, “hereof” and “hereunder”, and words of similar import, shall be
      construed to refer to this Agreement in its entirety and not to any particular
      provision hereof, (d) all references herein to Articles, Sections, Exhibits
      and Schedules shall be construed to refer to Articles and Sections of, and
      Exhibits and Schedules to, this Agreement and (e) the words “asset” and
“property” shall be construed to have the same meaning and effect and to refer
      to any and all tangible and intangible assets and properties, including cash,
      securities, accounts and contract rights.

     

     

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

     

     

    ARTICLE
      II

     

    THE
      CREDITS

     

    SECTION
      2.01.  Dollar
      Letters of Credit.

     

    (a)  General.
      Subject
      to the terms and conditions set forth herein, at the request of any Account
      Party the Lender agrees at any time and from time to time during the
      Availability Period to issue Dollar Letters of Credit for the account of such
      Account Party in an aggregate amount that will not result in the Credit Exposure
      exceeding the Commitment (it being understood that Dollar Letters of Credit
      may
      be issued, or be outstanding, for the account of more than one of the Account
      Parties at any time). Each Dollar Letter of Credit shall be in such form as
      is
      consistent with the requirements of the applicable regulatory authorities

     

    
      
        
        

      

      
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    in
      Illinois, California, Wisconsin or New York, as reasonably determined by the
      Lender or as otherwise agreed to by the Lender and XL Capital.

     

    (b)  Notice
      of Issuance, Amendment, Renewal or Extension.
      To
      request the issuance of Dollar Letters of Credit (or the amendment, renewal
      or
      extension of outstanding Dollar Letters of Credit), an Account Party shall
      hand
      deliver or telecopy (or transmit by electronic communication, if arrangements
      for doing so have been approved by the Lender) to the Lender (reasonably in
      advance of the requested date of issuance, amendment, renewal or extension)
      a
      notice requesting the issuance of Letters of Credit, or identifying the Dollar
      Letters of Credit to be amended, renewed or extended, and specifying the date
      of
      issuance, amendment, renewal or extension, as the case may be (which shall
      be a
      Business Day), the date on which such Dollar Letters of Credit are to expire
      (which shall comply with paragraph (d) of this Section), the aggregate
      amount of all Dollar Letters of Credit to be issued in connection with such
      request, the name and address of the beneficiary thereof and the terms and
      conditions of (and such other information as shall be necessary to prepare,
      amend, renew or extend, as the case may be) such Dollar Letters of Credit.
      If
      requested by the Lender, such Account Party also shall submit a letter of credit
      application on Lender’s standard form in connection with any request for a
      Letter of Credit. In the event of any inconsistency between the terms and
      conditions of this Agreement and the terms and conditions of any form of letter
      of credit application or other agreement submitted by any Account Party to,
      or
      entered into by any Account Party with, the Lender relating to any Dollar Letter
      of Credit, the terms and conditions of this Agreement shall
      control.

     

    (c)  Limitations
      on Amounts.
      A Dollar
      Letter of Credit shall be issued, amended, renewed or extended only if (and
      upon
      such issuance, amendment, renewal or extension of each Dollar Letter of Credit
      the Account Parties shall be deemed to represent and warrant that), after giving
      effect to such issuance, amendment, renewal or extension, the Credit Exposure
      shall not exceed the aggregate amount of the Commitment.

     

    (d)  Expiry
      Date.
      Each
      Dollar Letter of Credit shall expire at or prior to the close of business on
      the
      date one year after the date of the issuance of such Dollar Letter of Credit
      (or, in the case of any renewal or extension thereof, one year after such
      renewal or extension).

     

     

    SECTION
      2.02.  Alternative
      Currency Letters of Credit.
      From
      time to time during the Availability Period, an Account Party may request the
      Lender to make offers to issue an Alternative Currency Letter of Credit for
      the
      account of such Account Party. The Lender may, but shall have no obligation
      to,
      make such offers on terms and conditions that are satisfactory to the Lender,
      and such Account Party may, but shall have no obligation to, accept any such
      offers. An Alternative Currency Letter of Credit shall be issued, amended,
      renewed or extended only if (and upon such issuance, amendment, renewal or
      extension of each Alternative Currency Letter of Credit the Account Parties
      shall be deemed to represent and warrant that), after giving effect to such
      issuance, amendment, renewal or extension, the 

     

    
      
        
        

      

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

     

     

    SECTION
      2.03.  Reimbursement
      of LC Disbursements, Etc.

     

    (a)  Reimbursement.
      If the
      Lender shall make any LC Disbursement, regardless of the identity of the Account
      Party of such Letter of Credit, the Account Parties jointly and severally agree
      that they shall reimburse the Lender in respect of such LC Disbursement under
      (x) a Dollar Letter of Credit, by paying to the Lender an amount equal to
      such LC Disbursement not later than noon, New York City time, on (i) the
      Business Day that the Account Parties receive notice of such LC Disbursement,
      if
      such notice is received prior to 10:00 a.m., New York City time, or
      (ii) the Business Day immediately following the day that the Account
      Parties receive such notice, if such notice is not received prior to such time
      and (y) an Alternative Currency Letter of Credit, by paying the Lender on
      the date, in the currency and amount thereof, together with interest thereon
      (if
      any), and in the manner (including the place of payment) as the Lender and
      such
      Account Party shall have separately agreed pursuant to
      Section 2.02.

     

    (b)  Reimbursement
      Obligations Absolute.
      The
      Account Parties’ joint and several obligations to reimburse LC Disbursements as
provided
      in
      paragraph (a) of this Section shall be absolute, unconditional and
      irrevocable, and shall be performed strictly in accordance with the terms of
      this Agreement under any and all circumstances whatsoever and irrespective
      of
      (i) any lack of validity or enforceability of any Letter of Credit or any
      term or provision therein, (ii) any draft or other document presented under
      a Letter of Credit proving to be forged, fraudulent or invalid in any respect
      or
      any statement therein being untrue or inaccurate in any respect,
      (iii) payment under a Letter of Credit against presentation of a draft or
      other document that does not comply strictly with the terms of such Letter
      of
      Credit (provided that the Account Parties shall not be obligated to reimburse
      such LC Disbursements unless payment is made against presentation of a draft
      or
      other document that at least substantially complies with the terms of such
      Letter of Credit), (iv) at any time or from time to time, without notice to
      any
      Account Party, the time for any performance of or compliance with any of such
      reimbursement obligations of any other Account Party shall be waived, extended
      or renewed, (v) any of such reimbursement obligations of any other Account
      Party
      being amended or otherwise modified in any respect, or any guarantee of any
      of
      such reimbursement obligations being released, substituted or exchanged in
      whole
      or in part or otherwise dealt with, (vi) the occurrence of any Default, (vii)
      the existence of any proceedings of the type described in clause (g) or (h)
      of
      Article VIII with respect to any other Account Party or any guarantor of any
      of
      such reimbursement obligations, (viii) any lack of validity or enforceability
      of
      any of 

     

    
      
        
        

      

      
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    such
      reimbursement obligations against any other Account Party or any guarantor
      of
      any of such reimbursement obligations, or (ix) any other event or
      circumstance whatsoever, whether or not similar to any of the foregoing, that
      might, but for the provisions of this Section, constitute a legal or equitable
      discharge of the obligations of any Account Party hereunder.

     

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

     

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

     

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

     

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

     

    (c)  Disbursement
      Procedures.
      The
      Lender shall, within a reasonable time following its receipt thereof, examine
      all documents purporting to represent a demand for payment under any Letter
      of
      Credit. The Lender shall promptly after such examination notify each of the
      Account Parties by telephone (confirmed by telecopy) of such demand for payment.
      The Lender will make any such LC Disbursement available to the beneficiary
      of
      such Letter of Credit by promptly crediting the amounts so received, in like
      funds, to the account identified by such beneficiary in connection with such
      demand for payment. Promptly following any LC Disbursement by the Lender in
      respect of any Letter of Credit, the Lender will 

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    notify
      the
      Account Parties of such LC Disbursement; provided
      that any
      failure to give or delay in giving such notice shall not relieve the Account
      Parties of their obligation to reimburse the Lender with respect to any such
      LC
      Disbursement,

     

    (d)  Interim
      Interest.
      If any
      LC Disbursement with respect to a Letter of Credit is made, then, unless the
      Account Parties shall reimburse such LC Disbursement in full on the date such
      LC
      Disbursement is made, the unpaid amount thereof shall bear interest, for each
      day from and including the date such LC Disbursement is made to but excluding
      the date that the Account Parties reimburse such LC Disbursement, at the rate
      per annum equal to (i) 1% plus
      the
      Alternate Base Rate to but excluding the date three Business Days after such
      LC
      Disbursement is made and (ii) from and including the date three Business Days
      after such LC Disbursement is made, 3% plus
      the
      Alternate Base Rate.

     

    (e)  Right
      of Contribution.
      The
      Account Parties hereby agree, as between themselves, that if any Account Party
      shall pay any reimbursement obligation in respect of any LC Disbursement with
      respect to a Letter of Credit issued to support the obligations of another
      Account Party (the “Specified
      Account Party”),
      the
      Specified Account Party shall, on demand (but subject to the next sentence),
      pay
      to such first Account Party an amount equal to the amount of such reimbursement.
      The payment obligation of a Specified Account Party to another Account Party
      under this paragraph (e) shall be subordinate and subject in right of payment
      to
      the prior payment in full of the obligations of the Specified Account Party
      under this Agreement and each other Credit Document, and such other Account
      Party shall not exercise any right or remedy with respect to such reimbursement
      until payment and satisfaction in full of all of such obligations of the
      Specified Account Party.

     

     

    SECTION
      2.04.  Loans
      and Borrowings.

     

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

     

    (b)  Type
      of
      Loans.
      Subject
      to Section 2.12, each Borrowing shall be constituted entirely of
      ABR Loans or of Eurodollar Loans as any Account Party may request in
      accordance herewith. The Lender at its option may make any Eurodollar Loan
      by
      causing any domestic or foreign branch or Affiliate of the Lender to make such
      Loan; provided that any exercise of such option shall not affect the obligation
      of the Account Parties to repay such Loan in accordance with the terms of this
      Agreement.

     

    
      
        
        

      

      
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    (c)  Minimum
      Amounts; Limitation on Number of Borrowings.
      Each
      Eurodollar Borrowing shall be in an aggregate amount of $10,000,000 or a larger
      multiple of $1,000,000. Each ABR Borrowing shall be in an aggregate amount
      equal to $10,000,000 or a larger multiple of $1,000,000; provided
      that an
      ABR Borrowing may be in an aggregate amount that is equal to the entire
      unused balance of the Commitment or that is requested to finance the
      reimbursement of an LC Disbursement as contemplated by Section 2.03(a).
      Borrowings of more than one Type may be outstanding at the same time;
provided
      that
      there shall not at any time be more than a total of ten Eurodollar Borrowings
      outstanding.

     

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

     

     

    SECTION
      2.05.  Requests
      for Borrowings.

     

    (a)  Notice
      by the Account Parties.
      To
      request a Borrowing, XL Capital shall notify the Lender of such request by
      telephone (i) in the case of a Eurodollar Borrowing, not later than
      11:00 a.m., New York City time, three (3) Business Days before the date of
      the proposed Borrowing or (ii) in the case of an ABR Borrowing, not
      later than 11:00 a.m., New York City time, on the date of the proposed
      Borrowing; provided that any such notice of an ABR Borrowing to finance the
      reimbursement of an LC Disbursement as contemplated by Section 2.03(a) may
      be
      given not later than 11:00 a.m., New York City time, on the date of the proposed
      Borrowing. Each such telephonic Borrowing Request shall be irrevocable and
      shall
      be confirmed promptly by hand delivery or telecopy to the Lender of a written
      Borrowing Request in a form approved by the Lender and signed by XL
      Capital.

     

    (b)  Content
      of Borrowing Requests.
      Each
      telephonic and written Borrowing Request shall specify the following information
      in compliance with Section 2.04:

     

    (i)  the
      relevant Account Party;

     

    (ii)  the
      aggregate amount of the requested Borrowing;

     

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

     

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

     

    (v)  in
      the
      case of a Eurodollar Borrowing, the Interest Period therefor, which shall be
      a
      period contemplated by the definition of the term “Interest Period” and
      permitted under Section 2.04(d); and

     

    
      
        
        

      

      
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    (vi)  the
      location and number of such Account Party’s account to which funds are to be
      disbursed, which shall comply with the requirements of
      Section 2.06.

     

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

     

     

    SECTION
      2.06.  Funding
      of Borrowings.
      The
      Lender shall make each Loan to be made by it hereunder on the proposed date
      thereof by wire transfer of immediately available funds by 12:00 noon, New
      York City time (or 1:00 p.m., New York City time with respect to ABR Loans
      requested by XL Capital no later than 11:00 a.m. on the same day), available
      to
      the relevant Account Party by promptly crediting the amounts so received, in
      like funds, to an account of such Account Party maintained with the Lender
      in
      New York City and designated by such Account Party in the applicable Borrowing
      Request.

     

     

    SECTION
      2.07.  Interest
      Elections.

     

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

     

    (b)  Notice
      of Elections.
      To make
      an election pursuant to this Section, XL Capital shall notify the Lender of
      such
      election by telephone by the time that a Borrowing Request would be required
      under Section 2.05 if XL Capital were requesting a Borrowing of the Type
      resulting from such election to be made on the effective date of such election.
      Each such telephonic Interest Election Request shall be irrevocable and shall
      be
      confirmed promptly by hand delivery or telecopy to the Lender of a written
      Interest Election Request in a form approved by the Lender and signed by XL
      Capital.

     

    (c)  Content
      of Interest Election Requests.
      Each
      telephonic and written Interest Election Request shall specify the following
      information in compliance with Section 2.04:

     

    (i)  the
      Borrowing to which such Interest Election Request applies and, if different
      options are being elected with respect to different portions thereof, the
      portions thereof to be allocated to each resulting Borrowing (in which case
      the
      infor-

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    mation
      to
      be specified pursuant to clauses (iii) and (iv) of this paragraph
      shall be specified for each resulting Borrowing);

     

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

     

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

     

    (iv)  if
      the
      resulting Borrowing is a Eurodollar Borrowing, the Interest Period therefor
      after giving effect to such election, which shall be a period contemplated
      by
      the definition of the term “Interest Period” and permitted under
      Section 2.04(d).

     

    (d)  Failure
      to Elect; Events of Default.
      If XL
      Capital fails to deliver a timely and complete Interest Election Request with
      respect to a Eurodollar Borrowing prior to the end of the Interest Period
      therefor, then, unless such Borrowing is repaid as provided herein, at the
      end
      of such Interest Period such Borrowing shall be converted to an
      ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event
      of Default has occurred and is continuing and the Lender so notifies XL Capital,
      then, so long as an Event of Default is continuing (i) no outstanding
      Borrowing may be converted to or continued as a Eurodollar Borrowing and
      (ii) unless repaid, each Eurodollar Borrowing shall be converted to an
      ABR Borrowing at the end of the Interest Period therefor.

     

     

    SECTION
      2.08.  Termination
      and Reduction of the Commitment.

     

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

     

    (b)  Voluntary
      Termination or Reduction.
      The
      Account Parties may at any time terminate, or from time to time reduce, the
      Commitment and/or RC Sublimit; provided
      that
      (i) each reduction of the Commitment or RC Sublimit shall be in an amount
      that is $25,000,000 or a larger multiple of $5,000,000 and (ii) the Account
      Parties shall not terminate or reduce the Commitment or RC Sublimit if the
      Credit Exposure would exceed the Commitment or the outstanding Loans would
      exceed the RC Sublimit, as the case may be. XL Capital shall notify the Lender
      of any election to terminate or reduce the Commitment or RC Sublimit under
      this
      paragraph (b) at least three Business Days prior to the effective date of
      such termination or reduction, specifying such election and the effective date
      thereof, provided
      that no
      reduction of the RC Sublimit shall occur in connection with a reduction of
      the
      Commitment unless specified in such notice, except that upon the earlier of
      (x) the termination of the Commitment and (y) the Commitment
      Termination Date, the RC Sublimit shall be reduced to zero. Each notice
      delivered by XL Capital pursuant to this paragraph (b) shall be
      irrevocable; provided
      that a
      notice of termination of the Commitment delivered by XL Capital may state that
      such notice is conditioned upon the effectiveness of other credit facilities,
      in
      which case 

     

    
      
        
        

      

      
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    such
      notice may be revoked by XL Capital (by notice to the Lender on or prior to
      the
      specified effective date) if such condition is not satisfied. Subject to the
      proviso in the immediately preceding sentence, any termination or reduction
      of
      the Commitment or the RC Sublimit shall be permanent.

     

     

    SECTION
      2.09.  Repayment
      of Loans; Term-Out Option; Evidence of Debt.

     

    (a)  Repayment.
      Each
      Account Party hereby unconditionally promises to pay to the Lender, (i) in
      the
      event that the Term-Out Option has not been exercised, the outstanding principal
      amount of the Loans made to such Account Party on the Commitment Termination
      Date and (ii) in the event that the Term-Out Option has been exercised and
      is in
      effect, the outstanding principal amount of the Loans made to such Account
      Party
      on the Maturity Date.

     

    (b)  Term-Out
      Option.
      The
      Account Parties may, by notice given by XL Capital to the Lender not less than
      15 days prior to the Commitment Termination Date, extend the Maturity Date
      for
      all Loans outstanding at the close of business New York City time on the
      Commitment Termination Date to the first anniversary of the Commitment
      Termination Date (the “Term-Out
      Option”);
      provided
      that such
      extension shall not be effective with respect to the Lender unless:

     

    (i)  no
      Default
      shall have occurred and be continuing on each of the date of the notice
      requesting such extension and on the Commitment Termination Date;
      and

     

    (ii)  the
      representations and warranties of the Obligors set forth in this Agreement
      (other than in Section 4.04(b)) shall be true and correct on and as of each
      of
      the date of the notice requesting such extension and the Commitment Termination
      Date (or, if any such representation or warranty is expressly stated to have
      been made as of a specific date, as of such specific date).

     

    Such
      notice shall be deemed to constitute a representation and warranty by XL Capital
      as to the matters specified in clauses (i) and (ii) of the immediately preceding
      sentence as of each such date.

     

    Notwithstanding
      the foregoing, the Commitment of the Lender to make Loans shall terminate on
      the
      Commitment Termination Date.

     

    (c)  Manner
      of Payment.
      Prior to
      any repayment or prepayment of any Borrowings hereunder, XL Capital shall select
      the Borrowing or Borrowings to be paid and shall notify the Lender by telephone
      (confirmed by telecopy) of such selection not later than 11:00 a.m., New
      York City time, three Business Days before the scheduled date of such repayment;
      provided
      that each
      repayment of Borrowings shall be applied to repay any out-

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

    standing
      ABR Borrowings before any other Borrowings. If XL Capital fails to make a
      timely selection of the Borrowing or Borrowings to be repaid or prepaid, such
      payment shall be applied, first, to pay any outstanding ABR Borrowings and,
      second, to other Borrowings in the order of the remaining duration of their
      respective Interest Periods (the Borrowing with the shortest remaining Interest
      Period to be repaid first). Each payment of a Borrowing shall be applied ratably
      to the Loans included in such Borrowing.

     

    (d)  Maintenance
      of Records by Lender.
      The
      Lender shall maintain in accordance with its usual practice records evidencing
      the indebtedness of each Account Party to the Lender resulting from each Loan
      made by the Lender to such Account Party, including the amounts of principal
      and
      interest payable and paid to the Lender from time to time hereunder. The entries
      made in the records maintained pursuant to paragraph (d) or (e) of
      this Section shall be prima facie
      evidence
      of the existence and amounts of the obligations recorded therein; provided
      that the
      failure of the Lender to maintain such records or any error therein shall not
      in
      any manner affect the obligation of the Account Parties to repay the Loans
      in
      accordance with the terms of this Agreement.

     

    (e)  Promissory
      Notes.
      The
      Lender may request that Loans made by it to any Account Party be evidenced
      by a
      promissory note of such Account Party. In such event, each Account Party shall
      prepare, execute and deliver to the Lender a promissory note payable to the
      Lender (or, if requested by the Lender, to the Lender and its registered
      assigns) and in a form approved by the Lender. Thereafter, the Loans evidenced
      by such promissory note and interest thereon shall at all times be represented
      by one or more promissory notes in such form payable to the payee named therein
      (or, if such promissory note is a registered note, to such payee and its
      registered assigns).

     

     

    SECTION
      2.10.  Prepayment
      of Loans.

     

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

     

    (b)  Notices,
      Etc.
      XL
      Capital shall notify the Lender by telephone (confirmed by telecopy) of any
      prepayment hereunder (i) in the case of prepayment of a Eurodollar
      Borrowing, not later than 11:00 a.m., New York City time, three Business
      Days before the date of prepayment or (ii) in the case of prepayment of an
      ABR Borrowing, not later than 11:00 a.m., New York City time, one
      Business Day before the date of prepayment. Each such notice shall be
      irrevocable and shall specify the prepayment date and the principal amount
      of
      each Borrowing or portion thereof to be prepaid; provided that, if a notice
      of
      prepayment is given in connection with a conditional notice of termination
      of
      the Commitment as contemplated by Section 2.08, then such notice of
      prepayment may be revoked if such notice of termination is revoked in accordance
      with Section 2.08. Each partial prepayment of any Borrowing shall be in an
      amount that would be permitted in the case of a Borrowing of the same

     

    
      
        
        

      

      
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    Type
      as
      provided in Section 2.04. Each prepayment of a Borrowing shall be applied
      ratably to the Loans included in the prepaid Borrowing. Prepayments shall be
      accompanied by accrued interest to the extent required by Section 2.12 and
      shall be made in the manner specified in Section 2.09(c).

     

     

    SECTION
      2.11.  Fees.

     

    (a)  Facility
      Fee.
      XL
      Capital agrees to pay to the Lender a facility fee which shall accrue at a
      rate
      per annum equal to the Applicable Facility Fee Rate, (i) prior to the
      termination of the Lender’s Commitment, on the daily amount of such Commitment
      (whether used or unused) during the period from and including the Effective
      Date
      to but excluding the earlier of the date on which such Commitment terminates
      and
      the Commitment Termination Date and (ii) if the Lender continues to have any
      Credit Exposure after its Commitment terminates, on the daily amount of the
      Lender’s Credit Exposure from and including the date on which the Lender’s
      Commitment terminates to but excluding the date on which the Lender ceases
      to
      have any Credit Exposure. Accrued facility fees shall be payable on each
      Quarterly Date and on (i) in the event the Term-Out Option has not been
      exercised, the earlier of the date the Commitment terminates and the Commitment
      Termination Date or (ii) in the event the Term-Out Option has been exercised
      and
      is in effect, on the Maturity Date; provided
      that any
      facility fees accruing after such earlier date or the Maturity Date, as the
      case
      may be, shall be payable on demand.

     

    (b)  Letter
      of Credit Fees.
      XL
      Capital agrees to pay to the Lender a letter of credit fee which shall accrue
      at
      a rate per annum equal to the Applicable Letter of Credit Fee Rate on the
      average daily aggregate undrawn amount of all outstanding Letters of Credit
      during the period from and including the Effective Date to but excluding the
      later of the date on which the Lender’s Commitment terminates and the date on
      which the Lender ceases to have any LC Exposure. Letter of Credit fees accrued
      through and including each Quarterly Date shall be payable on the third Business
      Day following such Quarterly Date, commencing on the first such date to occur
      after the Effective Date; provided that all such fees shall be payable on the
      date on which the Commitment terminates and any such fees accruing after the
      date on which the Commitment terminates shall be payable on demand.

     

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

     

    
      
        
        

      

      
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    SECTION
      2.12.  Interest.

     

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

     

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

     

    (c)  Default
      Interest.
      Notwithstanding the foregoing, if any principal of or interest on any Loan
      or
      any fee or other amount payable (other that in respect of any LC Disbursement
      under Section 2.03(d)) by the Account Parties hereunder is not paid when
      due, whether at stated maturity, upon acceleration or otherwise, such overdue
      amount shall bear interest, after as well as before judgment, at a rate per
      annum equal to (i) in the case of overdue principal of any Loan, 2%
plus
      the rate
      otherwise applicable to such Loan as provided
      above or
      (ii) in the case of any other amount, 2% plus
      the rate
      applicable to ABR Loans as provided
      in
      paragraph (a) of this Section.

     

    (d)  Payment
      of Interest.
      Accrued
      interest on each Loan shall be payable by the applicable Account Party in
      arrears on each Interest Payment Date for such Loan and upon (i) in the event
      the Term-Out Option has not been exercised, the date the Commitment terminates
      or (ii) in the event the Term-Out Option has been exercised and is in effect,
      the Maturity Date; provided
      that
      (x) interest accrued pursuant to paragraph (c) of this Section shall
      be payable on demand, (y) in the event of any repayment or prepayment of
      any Loan (other than a prepayment of an ABR Loan prior to the later of the
      Commitment Termination Date and the Maturity Date), accrued interest on the
      principal amount repaid or prepaid shall be payable on the date of such
      repayment or prepayment and (z) in the event of any conversion of any
      Eurodollar Borrowing prior to the end of the Interest Period therefor, accrued
      interest on such Borrowing shall be payable on the effective date of such
      conversion.

     

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

     

     

    SECTION
      2.13.  Alternate
      Rate of Interest.
      If prior
      to the commencement of the Interest Period for any Eurodollar Borrowing, the
      Lender determines in good faith that the Adjusted LIBO Rate for such Interest
      Period will not adequately and fairly reflect the cost to the Lender of making
      or maintaining its respective Loans included in such Borrowing for such Interest
      Period, then the Lender shall give notice thereof to XL Capital by telephone
      

     

    
      
        
        

      

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

     

     

    SECTION
      2.14.  Increased
      Costs.

     

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

     

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

     

    (ii)  impose
      on
      the Lender or the London interbank market any other condition affecting this
      Agreement, any Letter of Credit (or any participation therein) or any Eurodollar
      Loan made by the Lender;

     

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

     

    (b)  Capital
      Requirements.
      If the
      Lender determines that any Change in Law regarding capital requirements has
      or
      would have the effect of reducing the rate of return on the Lender’s capital or
      on the capital of the Lender’s holding company, if any, as a consequence of this
      Agreement or the Letters of Credit issued or participated in, or the Loans
      made,
      by the Lender to a level below that which the Lender or the Lender’s holding
      company could have achieved but for such Change in Law (taking into
      consideration the Lender’s policies and the policies of the Lender’s holding
      company with respect to capital adequacy), then from time to time the Account
      Parties will pay to the Lender such additional amount or amounts as will
      compensate the Lender or the Lender’s holding company for any such reduction
      suffered.

     

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

     

    
      
        
        

      

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

     

    (e)  Application
      to Taxes.
      Notwithstanding anything in this Section to the contrary, this Section shall
      not
      apply to Taxes, which shall be governed solely by Section 2.16.

     

     

    SECTION
      2.15.  Break
      Funding Payments.
      In the
      event of (a) the payment of any principal of any Eurodollar Loan other than
      on the last day of an Interest Period therefor (including as a result of an
      Event of Default), (b) the conversion of any Eurodollar Loan other than on
      the last day of an Interest Period therefor or (c) the failure to borrow,
      convert, continue or prepay any Loan on the date specified in any notice
      delivered pursuant hereto (regardless of whether such notice is permitted to
      be
      revocable under Section 2.10(b) and is revoked in accordance herewith),
      then, in any such event, the Account Parties shall compensate the Lender for
      the
      loss attributable to such event. The loss to the Lender attributable to any
      such
      event shall be deemed to be an amount determined by the Lender to be equal
      to
      the excess, if any, of (i) the amount of interest that the Lender would pay
      for a deposit equal to the principal amount of such Loan for the period from
      the
      date of such payment, conversion, failure or assignment to the last day of
      the
      then current Interest Period for such Loan (or, in the case of a failure to
      borrow, convert or continue, the duration of the Interest Period that would
      have
      resulted from such borrowing, conversion or continuation) if the interest rate
      payable on such deposit were equal to the Adjusted LIBO Rate for such Interest
      Period, over
      (ii) the amount of interest that the Lender would earn on such principal
      amount for such period if the Lender were to invest such principal amount for
      such period at the interest rate that would be bid by the Lender (or an
      affiliate of the Lender) for Dollar deposits from other banks in the eurodollar
      market at the commencement of such period. A certificate of the Lender setting
      forth the Lender’s good faith determination of any amount or amounts that the
      Lender is entitled to receive pursuant to this Section shall be delivered to
      XL
      Capital and shall be conclusive absent manifest error. The Account Parties
      shall
      pay the Lender the amount shown as due on any such certificate within 10 days
      after receipt thereof by XL Capital.

     

     

    SECTION
      2.16.  Taxes.

     

    (a)  Payments
      Free of Taxes.
      Any and
      all payments by or on account of any obligation of the Account Parties hereunder
      shall be made free and clear of and without deduction for any Indemnified Taxes;
      provided
      that if
      any Account Party shall be required to 

     

    
      
        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

    deduct
      any
      Indemnified Taxes from such payments, then (i) the sum payable shall be
      increased as necessary so that after making all required deductions (including
      deductions applicable to additional sums payable under this Section) the Lender
      (as the case may be) receives an amount equal to the sum it would have received
      had no such deductions been made, (ii) such Account Party shall make such
      deductions and (iii) such Account Party shall pay the full amount deducted
      to the relevant Governmental Authority in accordance with applicable
      law.

     

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

     

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

     

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

     

    (e)  Exemptions.
      The
      Lender shall, at the written request of XL Capital, provide to any Account
      Party
      such form, certification or similar documentation, if any (each duly completed,
      accurate and signed) as is currently required by any Account Party Jurisdiction
      or any other jurisdiction, or comply with such other requirements, if any,
      as is
      currently applicable in such Account Party Jurisdiction or any other
      jurisdiction, in order to obtain an exemption from, or reduced rate of,
      deduction, payment or withholding of Indemnified Taxes or Other Taxes to which
      the Lender is entitled pursuant to an applicable tax treaty or the law of such
      Account Party Jurisdiction or any other jurisdiction; provided
      that XL
      Capital shall have furnished to the Lender in a reasonably timely manner copies
      of such documentation and notice of such requirements together with applicable
      instructions. Upon the reasonable request of XL Capital in writing, the Lender
      will provide to XL Capital such form, certification or similar documentation
      (each duly completed, accurate and signed) as may in the future be required
      by
      any Account Party Jurisdiction or any other jurisdiction, or comply with such
      

     

    
      
        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

    other
      requirements, if any, as may be applicable in such Account Party Jurisdiction
      or
      any other jurisdiction in order to obtain an exemption from, or reduced rate
      of,
      deduction, payment or withholding of Indemnified Taxes or Other Taxes to which
      the Lender is entitled pursuant to an applicable tax treaty or the law of the
      relevant jurisdiction. The Account Parties shall not be required to pay
      additional amount to, or to indemnify, the Lender under paragraph (a) or (c)
      of
      this Section for any Indemnified Taxes or Other Taxes to the extent such
      Indemnified Taxes or Other Taxes would not have been imposed but for the failure
      by the Lender to comply with the foregoing provisions of this paragraph
      (e).

     

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

     

     

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

     

    (a)  Payments
      by the Account Parties.
      The
      Account Parties shall make each payment required to be made by them hereunder
      (whether of principal, interest, fees or reimbursement of LC Disbursements,
      interest or fees, or under Section 2.14, 2.15 or 2.16, or otherwise) or
      under any other Credit Document (except to the extent otherwise provided
      therein) prior to 12:00 noon, New York City time, on the date when due, in
      immediately available funds, without set-off or counterclaim; provided
      that any
      payments in respect of Alternative Currency Letters of Credit shall be made
      in
      the manner (including the time and place of payment) as shall have been
      separately agreed between the relevant Account Party and Lender pursuant to
      Section 2.02. Any amounts received after such time on any date may, in the
      discretion of the Lender, be deemed to have been received on the next succeeding
      Business Day for purposes of calculating interest thereon. All such payments
      shall be made to the Lender at its offices at 60 Wall Street, New York, New
      York
      10005, except payments pursuant to Sections 2.14, 2.15, 2.16 and 9.03,
      which shall be made directly to the Persons entitled thereto. If any payment
      hereunder shall be due on a day that is not a Business Day, the date for payment
      shall be extended to the next succeeding Business Day and, in the case of any
      payment accru-

     

    
      
        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

    ing
      interest, interest thereon shall be payable for the period of such extension.
      All payments hereunder shall be made in Dollars.

     

    (b)  Application
      of Insufficient Payments.
      If at
      any time insufficient funds are received by and available to the Lender to
      pay
      fully all amounts of principal, unreimbursed LC Disbursements, interest and
      fees
      then due hereunder, such funds shall be applied (i) first, to pay interest
      and fees then due hereunder, and (ii) second, to pay principal and
      unreimbursed LC Disbursements then due hereunder.

     

     

    SECTION
      2.18.  Designation
      of a Different Lending Office

     

     

    .
      If the
      Lender requests compensation under Section 2.14, or if any Account Party is
      required to pay any additional amount or indemnification payment to the Lender
      or any Governmental Authority for account of the Lender pursuant to
      Section 2.16, then the Lender shall use reasonable efforts to designate a
      different lending office for funding or booking its Loans and/or Letters of
      Credit hereunder or to assign its rights and obligations hereunder to another
      of
      its offices, branches or Affiliates, if, in the reasonable judgment of the
      Lender, such designation or assignment (i) would eliminate or reduce
      amounts payable pursuant to Section 2.14 or 2.16, as the case may be,
      in the future and (ii) would not subject the Lender to any unreimbursed
      cost or expense and would not otherwise be disadvantageous to the Lender. Each
      Account Party hereby agrees to pay all reasonable costs and expenses incurred
      by
      the Lender in connection with any such designation or assignment.

     

     

    ARTICLE
      III

     

    GUARANTEE

     

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

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

     

     

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

     

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

     

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

     

    (iii)  the
      maturity of any of the Guaranteed Obligations shall be accelerated, or any
      of
      the Guaranteed Obligations shall be modified, supplemented or amended in any
      respect, or any right under this Agreement or any other agreement or instrument
      referred to herein shall be waived or any other guarantee of any of the
      Guaranteed Obligations or any security therefor shall be released or exchanged
      in whole or in part or otherwise dealt with.

     

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

     

     

    SECTION
      3.03.  Reinstatement.
      The
      obligations of the Guarantors under this Article shall be automatically
      reinstated if and to the extent that for any reason any payment by or on behalf
      of any Account Party in respect of the Guaranteed Obligations is rescinded
      or
      must be otherwise restored by any holder of any of the Guaranteed Obligations,
      whether as a result of any proceedings in bankruptcy or reorganization or
      otherwise, and the Guarantors jointly and severally agree that they will
      indemnify the Lender on demand for all reasonable costs and expenses (including
      reasonable fees of counsel) incurred by the Lender in connection with such
      rescission or restoration, including any such costs and expenses
      in-

     

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

     

    curred
      in
      defending against any claim alleging that such payment constituted a preference,
      fraudulent transfer or similar payment under any bankruptcy, insolvency or
      similar law.

     

     

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

     

     

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

     

     

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

     

     

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

     

    For
      purposes of this Section, (i) “Excess
      Funding Guarantor”
means,
      in respect of any Guaranteed Obligations, a Guarantor that has paid an amount
      in
      excess of its Pro Rata Share of such Guaranteed Obligations,
      (ii) “Excess
      Payment”
means,
      in respect of any Guaranteed Obligations, the amount paid by an Excess Funding
      Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations and
      (iii) “Pro
      Rata Share”
means,
      for any Guarantor, 

     

    
      
        
        

      

      
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    the
      ratio
      (expressed as a percentage) of (x) the amount by which the aggregate
      present fair saleable value of all properties of such Guarantor (excluding
      any
      shares of stock of any other Guarantor) exceeds the amount of all the debts
      and
      liabilities of such Guarantor (including contingent, subordinated, unmatured
      and
      unliquidated liabilities, but excluding the obligations of such Guarantor
      hereunder and any obligations of any other Guarantor that have been Guaranteed
      by such Guarantor) to (y) the amount by which the aggregate fair saleable
      value of all properties of all of the Guarantors (other than XL Capital) exceeds
      the amount of all the debts and liabilities (including contingent, subordinated,
      unmatured and unliquidated liabilities, but excluding the obligations of the
      Guarantors under this Article III) of all of the Guarantors (other than XL
      Capital), determined (A) with respect to any Guarantor that is a party
      hereto on the date hereof, as of the date hereof, and (B) with respect to any
      other Guarantor, as of the date such Guarantor becomes a Guarantor
      hereunder.

     

     

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

     

     

    ARTICLE
      IV

     

    REPRESENTATIONS
      AND WARRANTIES

     

    Each
      Account Party represents and warrants to the Lender that:

     

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

     

     

    SECTION
      4.02.  Authorization;
      Enforceability.
      The
      Transactions are within such Account Parties’ corporate powers and have been
      duly authorized by all necessary corporate and, if required, by all necessary
      shareholder action. This Agreement has been duly executed and delivered by
      such
      Account Party and constitutes a legal, valid and binding obligation of such
      Account Party, enforceable against such Account Party in accordance with

     

    
      
        
        

      

      
        -34-

        
          

        

      

      
        
        

      

    

     

    its
      terms,
      except as such enforceability may be limited by (a) bankruptcy, insolvency,
      reorganization, moratorium, examination or similar laws of general applicability
      affecting the enforcement of creditors’ rights and (b) the application of
      general principles of equity (regardless of whether such enforceability is
      considered in a proceeding in equity or at law).

     

     

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

     

     

    SECTION
      4.04.  Financial
      Condition; No Material Adverse Change.

     

    (a)  Financial
      Condition.
      Such
      Account Party has heretofore furnished to the Lender the consolidated balance
      sheet and statements of income, stockholders’ equity and cash flows of such
      Account Party and its consolidated Subsidiaries (A) as of and for the
      fiscal year ended December 31, 2005, reported on by PricewaterhouseCoopers
      LLP,
      independent public accountants (as provided in XL Capital’s Report on Form 10-K
      filed with the SEC for the fiscal year ended December 31, 2005), and (B) as
      of and for the fiscal quarter ended September 30, 2006, as provided in XL
      Capital’s Report on Form 10-Q filed with the SEC for the fiscal quarter ended
      September 30, 2006. Such financial statements present fairly, in all material
      respects, the financial position and results of operations and cash flows of
      such Account Party and its respective consolidated Subsidiaries as of such
      dates
      and for such periods in accordance with GAAP or (in the case of XL Insurance
      or
      XL Re) SAP, subject to year-end audit adjustments and the absence of footnotes
      in the case of the statements referred to in clause (B) of the first
      sentence of this paragraph.

     

    (b)  No
      Material Adverse Change.
      Since
      December 31, 2005, there has been no material adverse change in the assets,
      business, financial condition or operations of such Account Party and its
      Subsidiaries, taken as a whole, except as disclosed in XL Capital’s filings with
      the SEC.

     

     

    SECTION
      4.05.  Properties.

     

    (a)  Property
      Generally.
      Such
      Account Party and each of its Significant Subsidiaries has good title to, or
      valid leasehold interests in, all its real and personal property material to
      its
      business, subject only to Liens permitted by Section 7.03 and except for
      minor 

     

    
      
        
        

      

      
        -35-

        
          

        

      

      
        
        

      

    

    defects
      in
      title that do not interfere with its ability to conduct its business as
      currently conducted or to utilize such properties for their intended
      purposes.

     

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

     

     

    SECTION
      4.06.  Litigation
      and Environmental Matters.

     

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

     

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

     

     

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

     

     

    SECTION
      4.08.  Investment
      and Holding Company Status.
      Such
      Account Party is not (a) an “investment company” as defined in, or subject
      to regulation under, the Investment Company Act of 1940 or (b) a “holding
      company” as defined in, or subject to regulation under, the Public Utility
      Holding Company Act of 1935.

     

     

    SECTION
      4.09.  Taxes.
      Such
      Account Party and each of its Subsidiaries has timely filed or caused to be
      filed all Tax returns and reports required to have been filed 

     

    
      
        
        

      

      
        -36-

        
          

        

      

      
        
        

      

    

     

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

     

     

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

     

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

     

     

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

     

     

    SECTION
      4.12.  Use
      of
      Credit.
      Neither
      such Account Party nor any of its Subsidiaries is engaged principally, or as
      one
      of its important activities, in the business of extending credit for the
      purpose, whether immediate, incidental or ultimate, of buying or carrying Margin
      Stock, and no Letter of Credit will be used in connection with buying or
      carrying any Margin Stock. No part of the proceeds of any Loan hereunder will
      be
      used to buy or carry any Margin Stock (except for repurchases of the capital
      stock of XL Capital and purchases of Margin Stock in accordance with XL
      Capital’s Statement of Investment Policy Objectives and Guidelines as in effect
      on the date hereof or as it may be changed from time to time by a resolution
      duly adopted by the board of directors of XL Capital (or any committee
      thereof)). The purchase of any Margin Stock with the proceeds of any Loan will
      not be in 

     

    
      
        
        

      

      
        -37-

        
          

        

      

      
        
        

      

    

     

    violation
      of Regulation U or X of the Board and, after applying the proceeds of such
      Loan,
      not more than 25% of the value of the assets of XL Capital and its Subsidiaries
      taken as a whole consists or will consist of Margin Stock.

     

     

    SECTION
      4.13.  Subsidiaries.
      Set
      forth in Schedule IV is a complete and correct list of all of the
      Subsidiaries of XL Capital as of September 30, 2006, together with, for each
      such Subsidiary, (i) the jurisdiction of organization of such Subsidiary,
      (ii) each Person holding ownership interests in such Subsidiary and
      (iii) the percentage of ownership of such Subsidiary represented by such
      ownership interests. Except as disclosed in Schedule IV, (x) each of
      XL Capital and its Subsidiaries owns, free and clear of Liens, and has the
      unencumbered right to vote, all outstanding ownership interests in each Person
      shown to be held by it in Schedule IV, (y) all of the issued and
      outstanding capital stock of each such Person organized as a corporation is
      validly issued, fully paid and nonassessable and (z) except as disclosed in
      filings of XL Capital with the SEC prior to the date hereof, there are no
      outstanding Equity Rights with respect to any Account Party.

     

     

    SECTION
      4.14.  Withholding
      Taxes.
      Based
      upon information with respect to the Lender provided as of the date hereof,
      the
      payment of the LC Disbursements and interest thereon, principal of and interest
      on the Loans, the fees under Section 2.11 and all other amounts payable
      hereunder will not be subject, by withholding or deduction, to any Indemnified
      Taxes imposed by Bermuda or the Cayman Islands.

     

     

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

     

     

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

     

     

    ARTICLE
      V

     

    CONDITIONS

     

    SECTION
      5.01.  Effective
      Date.
      The
      obligations of the Lender to issue or continue Letters of Credit and to make
      Loans hereunder are subject to the receipt by the Lender of each of the
      following documents, each of which shall be satisfactory to the Lender

     

    
      
        
        

      

      
        -38-

        
          

        

      

      
        
        

      

    

     

    in
      form
      and substance (or such condition shall have been waived in accordance with
      Section 9.02):

     

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

     

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

     

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

     

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

     

    (e)  Other
      Documents.
      Such
      other documents as the Lender may reasonably request.

     

    The
      obligation of the Lender to make its initial extension of credit hereunder
      is
      also subject to the payment by XL Capital of such fees as XL Capital shall
      have
      agreed to pay to the Lender in connection herewith, (to the extent that
      reasonably detailed statements for such fees and expenses have been delivered
      to
      XL Capital).

     

    The
      Lender
      shall notify the Account Parties of the Effective Date, and such notice shall
      be
      conclusive and binding. Notwithstanding the foregoing, the obligations of the
      Lender to issue or continue Letters of Credit or to make Loans hereunder shall
      not become effective unless each of the foregoing conditions is satisfied (or
      waived pursuant to Section 9.02) at or prior to 5:00 p.m., New York
      City time, on December 19, 2006 (and, in the event such conditions are not
      so
      satisfied or waived, the Commitment shall terminate at such time).

     

    
      
        
        

      

      
        -39-

        
          

        

      

      
        
        

      

    

    

     

     

    SECTION
      5.02.  Each
      Credit Event.
      The
      obligation of the Lender to issue, continue, amend, renew or extend any Letter
      of Credit or to make any Loan is additionally subject to the satisfaction of
      the
      following conditions:

     

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

     

    (b)  at
      the
      time of and immediately after giving effect to the issuance, amendment, renewal
      or extension of such Letter of Credit or such Loan, as applicable, no Default
      shall have occurred and be continuing; and

     

    (c)  in
      the
      case of any Alternative Currency Letter of Credit, receipt by the Lender of
      a
      request for offers as required by Section 2.02.

     

    Each
      issuance, continuation, amendment, renewal or extension of a Letter of Credit
      and each Borrowing shall be deemed to constitute a representation and warranty
      by the Obligors on the date thereof as to the matters specified in clauses
      (a)
      and (b) of the immediately preceding sentence.

     

     

    ARTICLE
      VI

     

    AFFIRMATIVE
      COVENANTS

    

     

    Until
      the
      Commitment has expired or been terminated, the principal of and interest on
      each
      Loan and all fees payable hereunder shall have been paid in full, all Letters
      of
      Credit shall have expired or terminated and all LC Disbursements shall have
      been
      reimbursed, the Account Parties covenant and agree with the Lender
      that:

     

     

    SECTION
      6.01.  Financial
      Statements and Other Information.
      Each
      Account Party will furnish to the Lender:

     

    (a)  within
      135
      days after the end of each fiscal year of each Account Party except for XL
      America (but in the case of XL Capital, within 100 days after the end of each
      fiscal year of XL Capital), the audited consolidated balance sheet and related
      statements of operations, stockholders’ equity and cash flows of such Account
      Party and its consolidated Subsidiaries as of the end of and for such year,
      setting forth in each case in comparative form the figures for the previous
      fiscal year (if such figures were already produced for such corresponding period
      or periods) (it being understood that delivery to the Lender of XL Capital’s
      Report on Form 10-K filed with the SEC shall satisfy the financial statement
      delivery requirements of this paragraph (a) to deliver the annual financial
      statements of XL Capital so 

     

    
      
        
        

      

      
        -40-

        
          

        

      

      
        
        

      

    

    long
      as
      the financial information required to be contained in such Report is
      substantially the same as the financial information required under this
      paragraph (a)), all reported on by independent public accountants of recognized
      national standing (without a “going concern” or like qualification or exception
      and without any qualification or exception as to the scope of such audit) to
      the
      effect that such consolidated financial statements present fairly in all
      material respects the financial condition and results of operations of such
      Account Party and its consolidated Subsidiaries on a consolidated basis in
      accordance with GAAP or (in the case of XL Insurance and XL Re) SAP, as the
      case
      may be, consistently applied;

     

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

     

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

     

    
      
        
        

      

      
        -41-

        
          

        

      

      
        
        

      

    

    

     

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

     

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

     

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

     

    (g)  concurrently
      with any delivery of financial statements under clause (a), (b) or (c) of this
      Section, a certificate of a Financial Officer of XL Capital, setting forth
      on a
      consolidated basis for XL Capital and its consolidated Subsidiaries as of the
      end of the fiscal year or quarter to which such certificate relates (i) the
      aggregate book value of assets which are subject to Liens permitted under
      Section 7.03(h) and the aggregate book value of liabilities which are subject
      to
      Liens permitted under Section 7.03(h) (it being understood that the reports
      required by paragraphs (a), (b) and (c) of this Section shall satisfy the
      requirement of this clause (i) of this paragraph (g) if such reports set forth
      separately, in accordance with GAAP, line items corresponding to such aggregate
      book values) and (ii) a calculation showing the portion of each of such
      aggregate amounts which portion is attributable to transactions among
      wholly-owned Subsidiaries of XL Capital;

     

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

     

    
      
        
        

      

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

     

     

    SECTION
      6.02.  Notices
      of Material Events.
      Each
      Account Party will furnish to the Lender prompt written notice of the
      following:

     

    (a)  the
      occurrence of any Default; and

     

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

     

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

     

     

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

     

     

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

     

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

     

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

     

     

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

     

    
      
        
        

      

      
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    which,
      in
      the aggregate, would have a Material Adverse Effect or (ii) otherwise impair
      the
      ability of such Account Party to perform its obligations under this
      Agreement.

     

     

    SECTION
      6.09.  Use
      of
      Letters of Credit and Proceeds.
      No part
      of the proceeds of any Loan and no Letter of Credit will be used, whether
      directly or indirectly, for any purpose that entails a violation of any of
      the
      Regulations of the Board, including Regulations U and X. Each Account Party
      will
      use the Letters of Credit issued for its account hereunder in the ordinary
      course of business of, and will use the proceeds of all Loans made to it for
      the
      general corporate purposes of, such Account Party and its Affiliates. For the
      avoidance of doubt, the parties agree that any Account Party may apply for
      a
      Letter of Credit hereunder to support the obligations of any Affiliate of XL
      Capital, it being understood that such Account Party shall nonetheless remain
      the account party and as such be liable with respect to such Letter of
      Credit.
      Notwithstanding anything in this Section to the contrary, no Account Party
      will
      issue any Letter of Credit, or renew or permit to renew any Letter of Credit,
      existing as of August 4, 2006, or use the proceeds of any Loan, to support
      the
      obligations of, or otherwise primarily for the general corporate purposes of,
      SCA and its Subsidiaries.

     

     

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

     

     

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

     

     

    ARTICLE
      VII

     

    NEGATIVE
      COVENANTS

    

     

    Until
      the
      Commitment has expired or terminated, the principal of and interest on each
      Loan
      and all fees payable hereunder have been paid in full, all Letters of Credit
      have expired or terminated and all LC Disbursements have been reimbursed, each
      of the Account Parties covenants and agrees with the Lender that:

     

     

    SECTION
      7.01.  Mergers.
      No
      Account Party will merge with or into or consolidate with any other Person,
      except that if no Default shall occur and be continuing or shall exist at the
      time of such merger or consolidation or immediately thereafter and after giving
      effect thereto (a) any Account Party may merge or consolidate with any other
      corporation, including a Subsidiary, if such Account Party shall be the
      surviving corporation, (b) XL Capi-

     

    
      
        
        

      

      
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    tal
      may
      merge with or into or consolidate with any other Person in a transaction that
      does not result in a reclassification, conversion, exchange or cancellation
      of
      the outstanding shares of capital stock of XL Capital (other than the
      cancellation of any outstanding shares of capital stock of XL Capital held
      by
      the Person with whom it merges or consolidates) and (c) any Account Party may
      enter into a merger or consolidation which is effected solely to change the
      jurisdiction of incorporation of such Account Party and results in a
      reclassification, conversion or exchange of outstanding shares of capital stock
      of such Account Party solely into shares of capital stock of the surviving
      entity.

     

     

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

     

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

     

    (b)  sales,
      conveyances, assignments or other transfers or dispositions in immediate
      exchange for cash or tangible assets, provided
      that any
      such sales, conveyances or transfers shall not individually, or in the aggregate
      for the Account Parties and their respective Subsidiaries, exceed $500,000,000
      in any calendar year; Dispositions of equipment or other property which is
      obsolete or no longer used or useful in the conduct of the business of such
      Account Party or its Subsidiaries; 

     

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

     

    (d)  Dispositions
      from an Account Party or a wholly-owned Subsidiary to any other Account Party
      or
      wholly-owned Subsidiary.

     

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
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    Account
      Party or such Subsidiary, as the case may be, provides for the netting of their
      respective obligations thereunder;

     

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

     

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

     

    (j)  Liens
      existing on property of a Person immediately prior to its being consolidated
      with or merged into any Account Party or any of their Subsidiaries or its
      becoming a Subsidiary, and Liens existing on any property acquired by any
      Account Party or any of their Subsidiaries at the time such property is so
      acquired (whether or not the Indebtedness secured thereby shall have been
      assumed) (and extension, renewal and replacement Liens upon the same property,
      provided
      that the
      amount secured by each Lien constituting such an extension, renewal or
      replacement Lien shall not exceed the amount secured by the Lien theretofore
      existing), provided
      that (i)
      no such Lien shall have been created or assumed in contemplation of such
      consolidation or merger or such Person’s becoming a Subsidiary or such
      acquisition of property and (ii) each such Lien shall extend solely to the
      item
      or items of property so acquired and, if required by terms of the instrument
      originally creating such Lien, other property which is an improvement to or
      is
      acquired for specific use in connection with such acquired
      property.

     

     

    SECTION
      7.04.  Transactions
      with Affiliates.
      No
      Account Party will, nor will it permit any of its Significant Subsidiaries
      to,
      enter into or carry out any transaction with (including purchase or lease
      property or services to, loan or advance to or enter into, suffer to remain
      in
      existence or amend any contract, agreement or arrangement with) any Affiliate
      of
      such Account Party, or directly or indirectly agree to do any of the foregoing,
      except (i) transactions involving guarantees or co-obligors with respect to
      any
      Indebtedness described in 

     

    
      
        
        

      

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

     

     

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

     

     

    SECTION
      7.06.  Consolidated
      Net Worth.
      XL
      Capital will not permit its Consolidated Net Worth to be less than the sum
      of
      (a) $5,000,000,000 plus (b) 25% of consolidated net income (if positive) of
      XL
      Capital and its Subsidiaries for each fiscal quarter ending on or after December
      31, 2006.

     

     

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

     

    (a)  Indebtedness
      created hereunder;

     

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

     

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

     

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

     

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

     

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

     

     

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

     

    
      
        
        

      

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

     

     

    ARTICLE
      VIII

     

    EVENTS
      OF DEFAULT

    

     

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

     

    (a)  any
      Account Party shall fail to pay any principal of any Loan or any reimbursement
      obligation in respect of any LC Disbursement when and as the same shall become
      due and payable, whether at the due date thereof or at a date fixed for
      prepayment thereof or otherwise;

     

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

     

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

     

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

     

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

     

    (f)  any
      Account Party or any of its Subsidiaries shall default (i) in any payment
      of principal of or interest on any other obligation for borrowed money in
      principal amount of $50,000,000 or more, or any payment of any principal amount
      of $50,000,000 or more under Hedging Agreements, in each case beyond any period
      of grace provided with respect thereto, or (ii) in the performance of any
      other agreement, term or condition contained in any such agreement (other than
      Hedging Agreements) under which any such obligation in principal amount of
      $50,000,000 or more is created, if the effect of such default is to cause or
      permit the holder or holders of such obligation (or trustee on behalf of such
      holder or holders) to cause such obligation to become due prior to its stated
      maturity or to terminate its commit-

     

    
      
        
        

      

      
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    ment
      under
      such agreement, provided
      that this
      clause (f) shall not apply to secured Indebtedness that becomes due as a result
      of the voluntary sale or transfer of the property or assets securing such
      Indebtedness;

     

    (g)  a
      decree
      or order by a court having jurisdiction in the premises shall have been entered
      adjudging any Account Party a bankrupt or insolvent, or approving as properly
      filed a petition seeking reorganization of such Account Party under the Bermuda
      Companies Law or the Cayman Islands Companies Law (2004 Revision) or any other
      similar applicable Law, and such decree or order shall have continued
      undischarged or unstayed for a period of 60 days; or a decree or order of a
      court having jurisdiction in the premises for the appointment of an examiner,
      receiver or liquidator or trustee or assignee in bankruptcy or insolvency of
      such Account Party or a substantial part of its property, or for the winding
      up
      or liquidation of its affairs, shall have been entered, and such decree or
      order
      shall have continued undischarged and unstayed for a period of 60
      days;

     

    (h)  any
      Account Party shall institute proceedings to be adjudicated a voluntary
      bankrupt, or shall consent to the filing of a bankruptcy proceeding against
      it,
      or shall file a petition or answer or consent seeking reorganization under
      the
      Bermuda Companies Law or the Cayman Islands Companies Law (2004 Revision) or
      any
      other similar applicable Law, or shall consent to the filing of any such
      petition, or shall consent to the appointment of an examiner, receiver or
      liquidator or trustee or assignee in bankruptcy or insolvency of it or a
      substantial part of its property, or shall make an assignment for the benefit
      of
      creditors, or shall admit in writing its inability to pay its debts generally
      as
      they become due, or corporate or other action shall be taken by such Account
      Party in furtherance of any of the aforesaid purposes;

     

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

     

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

     

    (k)  a
      Change
      in Control shall occur;

     

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

     

    
      
        
        

      

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

     

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

     

    If
      an
      Event of Default shall occur and be continuing and XL Capital receives notice
      from the Lender demanding the deposit of cash collateral for the aggregate
      LC
      Exposure of the Lender pursuant to this paragraph, the Account Parties shall
      immediately deposit into an account established and maintained on the books
      and
      records of the Lender, which account may be a “securities account” (within the
      meaning of Section 8-501 of the Uniform Commercial Code as in effect in the
      State of New York (the “Uniform
      Commercial Code”)),
      in
      the name of the Lender, an amount in cash equal to the total LC Exposure as
      of
      such date plus any accrued and unpaid interest thereon; provided
      that the
      obligation to deposit such cash collateral shall become effective immediately,
      and such deposit shall become immediately due and payable, without demand or
      other notice of any kind, upon the occurrence of any Event of Default with
      respect to any Account Party described in clause (g) or (h) of this
      Article. Such deposit shall be held by the Lender as collateral for the LC
      Exposure under this Agreement.

     

    In
      addition to the provisions of this Article, each Account Party agrees that
      upon
      the occurrence and during the continuance of any Event of Default the Lender
      which has issued any Alternative Currency Letter of Credit may, by notice to
      XL
      Capital: (a) declare that all fees and other obligations of the Account
      Parties accrued in respect of Alternative Currency Letters of Credit issued
      by
      the Lender shall become due and payable immediately, without presentment,
      demand, protest or other notice of any kind, all of which are hereby

     

    
      
        
        

      

      
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    waived
      by
      each Account Party and (b) demand the deposit of cash collateral from the
      Account Parties in immediately available funds in the currency of such
      Alternative Currency Letter of Credit or, at the option of the Lender, in
      Dollars in an amount equal to the then aggregate undrawn face amount of all
      such
      Alternative Currency Letters of Credit and in such manner as previously agreed
      to by the Account Parties and the Lender; provided
      that, in
      the case of any of the Events of Default specified in clause (g) or (h) of
      this Article, without any notice to any Account Party or any other act by the
      Lender, all fees and other obligations of the Account Parties accrued in respect
      of all Alternative Currency Letters of Credit shall become due and payable
      immediately, without presentment, demand, protest or other notice of any kind,
      all of which are hereby waived by each Account Party.

     

     

    ARTICLE
      IX

     

    MISCELLANEOUS

     

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

     

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

     

    (b)  if
      to the
      Lender, to [Deutsche Bank AG New York Branch, 60 Wall Street, 38th Floor, New
      York, New York 10005, Attention of Global Technology & Operations—Loan
      Division (Telecopy No. (212) 797-0403; Telephone No. (212) 250-1014), with
      a
      copy to Deutsche Bank Securities Inc., 60 Wall Street, New York, New York 10005,
      Attention of Ruth Leung (Telecopy No. (212) 797-0270; Telephone No. (212)
      250-8650).]

     

    Any
      party
      hereto may change its address or telecopy number for notices and other
      communications hereunder by notice to the other parties hereto. All notices
      and
      other communications given to any party hereto in accordance with the provisions
      of this Agreement shall be deemed to have been given on the date of
      receipt.

     

    Notices
      and other communications to the Lender hereunder may be delivered or furnished
      by electronic communications; provided
      that the
      foregoing shall not apply to notices pursuant to Article II unless otherwise
      agreed by the Lender. Any Account Party may, in its discretion, agree to accept
      notices and other communications to it hereunder by electronic communications
      pursuant to procedures approved by it; provided
      that
      approval of such procedures may be limited to particular notices or
      communications. Without limiting the foregoing, the Account Parties may furnish
      to the Lender the financial statements required to 

     

    
      
        
        

      

      
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    be
      furnished by it pursuant to Section 6.01(a), 6.01(b) or 6.01(c) by electronic
      communications.

     

     

    SECTION
      9.02.  Waivers;
      Amendments.

     

    (a)  No
      Deemed Waivers; Remedies Cumulative.
      No
      failure or delay by the Lender in exercising any right or power hereunder shall
      operate as a waiver thereof, nor shall any single or partial exercise of any
      such right or power, or any abandonment or discontinuance of steps to enforce
      such a right or power, preclude any other or further exercise thereof or the
      exercise of any other right or power. The rights and remedies of the Lender
      hereunder are cumulative and are not exclusive of any rights or remedies that
      they would otherwise have. No waiver of any provision of this Agreement or
      consent to any departure by the Account Parties therefrom shall in any event
      be
      effective unless the same shall be permitted by paragraph (b) of this
      Section, and then such waiver or consent shall be effective only in the specific
      instance and for the purpose for which given. Without limiting the generality
      of
      the foregoing, the making of a Loan or issuance of a Letter of Credit shall
      not
      be construed as a waiver of any Default, regardless of whether the Lender may
      have had notice or knowledge of such Default at the time.

     

    (b)  Amendments.
      Neither
      this Agreement nor any provision hereof may be waived, amended or modified
      except pursuant to an agreement or agreements in writing entered into by the
      Obligors and the Lender.

     

     

    SECTION
      9.03.  Expenses;
      Indemnity; Damage Waiver.

     

    (a)  Costs
      and Expenses.
      The
      Account Parties jointly and severally agree to pay all out-of-pocket expenses
      incurred by the Lender, including the fees, charges and disbursements of one
      legal counsel for the Lender, in connection with the enforcement or protection
      of its rights in connection with this Agreement, including its rights under
      this
      Section, or in connection with the Loans made or Letters of Credit issued
      hereunder, including in connection with any workout, restructuring or
      negotiations in respect thereof.

     

    Indemnification
      by the Account Parties.
      The
      Account Parties shall jointly and severally indemnify the Lender and its Related
      Party (each such Person being called an “Indemnitee”)
      against, and to hold each Indemnitee harmless from, any and all losses, claims,
      damages, liabilities and related expenses, including the fees, charges and
      disbursements of any counsel for any Indemnitee (but not including Excluded
      Taxes), incurred by or asserted against any Indemnitee arising out of, in
      connection with, or as a result of (i) the execution or delivery of this
      Agreement or any agreement or instrument contemplated hereby, the performance
      by
      the parties hereto of their respective obligations hereunder or the consummation
      of the Transactions or any other transactions contemplated hereby, (ii) any
      Loan or the use of the proceeds thereof or any Letter of Credit or the use
      thereof (including any refusal by the Lender to honor a demand for payment
      under
      a Letter of Credit if the documents presented in connection with 

     

    
      
        
        

      

      
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    such
      demand do not strictly comply with the terms of such Letter of Credit),
      (iii) any actual or alleged presence or release of Hazardous Materials on
      or from any property owned or operated by any Account Party or any of its
      Subsidiaries, or any Environmental Liability related in any way to any Account
      Party or any of its Subsidiaries, or (iv) any actual or prospective claim,
      litigation, investigation or proceeding relating to any of the foregoing,
      whether based on contract, tort or any other theory and regardless of whether
      any Indemnitee is a party thereto; provided
      that such
      indemnity shall not, as to any Indemnitee, be available to the extent that
      such
      losses, claims, damages, liabilities or related expenses result from or arise
      out of the gross negligence or willful misconduct of such Indemnitee as
      determined in a final non-appealable judgment by a court of competent
      jurisdiction.

     

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

     

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

     

     

    SECTION
      9.04.  Successors
      and Assigns.

     

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

     

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

     

     

    SECTION
      9.05.  Survival.
      All
      covenants, agreements, representations and warranties made by the Account
      Parties herein and in the certificates or other instruments 

     

    
      
        
        

      

      
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    delivered
      in connection with or pursuant to this Agreement shall be considered to have
      been relied upon by the other parties hereto and shall survive the execution
      and
      delivery of this Agreement and the making of any Loans and the issuance of
      any
      Letters of Credit, regardless of any investigation made by any such other party
      or on its behalf and notwithstanding that the Lender may have had notice or
      knowledge of any Default or incorrect representation or warranty at the time
      any
      credit is extended hereunder, and shall continue in full force and effect as
      long as the principal of, or any accrued interest on, any Loan or any fee or
      any
      other amount payable under this Agreement is outstanding and unpaid or any
      Letter of Credit is outstanding and so long as the Commitment has not expired
      or
      terminated. The provisions of Sections 2.14, 2.15, 2.16 and 9.03 and
      Article VIII shall survive and remain in full force and effect regardless
      of the consummation of the transactions contemplated hereby, the repayment
      of
      the Loans, the expiration or termination of the Letters of Credit and the
      expiration or termination of the Commitment or the termination of this Agreement
      or any provision hereof.

     

     

    SECTION
      9.06.  Counterparts;
      Integration; Effectiveness.
      This
      Agreement may be executed in counterparts (and by different parties hereto
      on
      different counterparts), each of which shall constitute an original, but all
      of
      which when taken together shall constitute a single contract. This Agreement
      and
      any separate letter agreements with respect to fees payable to the Lender
      constitute the entire contract between and among the parties relating to the
      subject matter hereof and supersede any and all previous agreements and
      understandings, oral or written, relating to the subject matter hereof. Except
      as provided in Section 5.01, this Agreement shall become effective when it
      shall have been executed by the Lender and when the Lender shall have received
      counterparts hereof which, when taken together, bear the signatures of each
      of
      the other parties hereto, and thereafter shall be binding upon and inure to
      the
      benefit of the parties hereto and their respective successors and assigns.
      Delivery of an executed counterpart of a signature page to this Agreement by
      telecopy shall be effective as delivery of a manually executed counterpart
      of
      this Agreement.

     

     

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

     

     

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

     

    
      
        
        

      

      
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    Lender
      under this Section are in addition to other rights and remedies (including
      other
      rights of setoff) which the Lender may have.

     

     

    SECTION
      9.09.  Governing
      Law; Jurisdiction; Etc.

     

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

     

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

     

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

     

    (d)  Service
      of Process.
      By the
      execution and delivery of this Agreement, XL Capital, XL Insurance and XL Re
      acknowledge that they have by a separate written instrument, designated and
      appointed CT Corporation System, 111 Eighth Avenue, 13th floor, New York, New
      York 10011 (or any successor entity thereto), as its authorized agent upon
      which
      process may be served in any suit or proceeding arising out of or relating
      to
      this Agreement that may be instituted in any federal or state court in the
      State
      of New York. Each party to this Agreement irrevocably consents to service of
      process in the manner provided for notices in Section 9.01. Nothing in this
      Agreement will affect the right of any party to this Agreement to serve process
      in any other manner permitted by law.

     

    (e)  Waiver
      of Immunities.
      To the
      extent that any Account Party has or hereafter may acquire any immunity from
      jurisdiction of any court or from any legal process (whether through service
      of
      notice, attachment prior to judgment, attachment in aid of execu-

     

    
      
        
        

      

      
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    tion
      or
      execution, on the ground of sovereignty or otherwise) with respect to itself
      or
      its property, it hereby irrevocably waives, to the fullest extent permitted
      by
      applicable law, such immunity in respect of its obligations under this
      Agreement.

     

     

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

     

     

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

     

     

    SECTION
      9.12.  Treatment
      of Certain Information; Confidentiality.

     

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

     

    (b)  Confidentiality.
      The
      Lender agrees to maintain the confidentiality of the Information (as defined
      below), except that Information may be disclosed (i) to its and its
      Affiliates’ directors, officers, employees and agents, including accountants,
      legal counsel and 

     

    
      
        
        

      

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

     

     

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

     

    
      
        
        

      

      
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    such
      Entitled Person of any sum adjudged to be due hereunder in the judgment currency
      such Entitled Person may in accordance with normal banking procedures purchase
      and transfer Dollars to New York City with the amount of the judgment currency
      so adjudged to be due; and each Account Party hereby, as a separate obligation
      and notwithstanding any such judgment, agrees to indemnify such Entitled Person
      against, and to pay such Entitled Person on demand, in Dollars, the amount
      (if
      any) by which the sum originally due to such Entitled Person in Dollars
      hereunder exceeds the amount of the Dollars so purchased and
      transferred.

     

     

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

     

    
      
        
        

      

      
        -60-

        
          

        

      

      
        
        

      

    

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

     

     

    XL
      Capital
      Ltd

    as
      an
      Account Party and a Guarantor

     

    By: /s/
      Simon Rich

    Name:
      Simon Rich

    Title:
      Senior Vice President and Controller

     

     

    U.S.
      Federal Tax Identification No.:
      98-0191089

     

     

    X.L.
      AMERICA, INC.,

    as
      an
      Account Party and a Guarantor

     

    By: /s/
      Richard G. McCarty

    Name:
      Richard G. McCarty

    Title:
      SVP, Gen. Counsel, Secretary

     

     

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

     

     

    XL
      INSURANCE (BERMUDA) LTD,

    as
      an
      Account Party and a Guarantor

     

    By: /s/
      C.
      Stanley Lee

    Name:
      C.
      Stanley Lee

    Title:
      SVP, Chief Financial Officer

     

     

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

     

    
      
        
        

      

      
        -61-

        
          

        

      

      
        
        

      

    

     

    XL
      RE
      LTD,

    as
      an
      Account Party and a Guarantor

     

    By: /s/
      Andrew Turnbull

    Name:
      Andrew Turnbull

    Title:
      Senior Vice President

     

     

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

     

     

    DEUTSCHE
      BANK AG NEW YORK BRANCH,

    as
      Lender

     

    By: /s/
      Ruth Leung

    Name:
      Ruth
      Leung

    Title:
      Director

     

     

    By: /s/
      Richard Herder

    Name:
      Richard Herder

    Title:
      Managing Director

     

    

     

     

     

    -62-Power Supply Agreement, dated 12/18/06 between Ameren Energy Marketing Co.
      and Ameren Energy Generating Co.

    Exhibit
      10.1 

    

    

    

    

    POWER
      SUPPLY AGREEMENT

    

    BETWEEN

    

    AMEREN
      ENERGY MARKETING COMPANY

    

    AND

    

    AMEREN
      ENERGY GENERATING COMPANY

    

    DATED
      AS
      OF DECEMBER 18, 2006

    

    

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Power
      Supply Agreement

    Between

    Ameren
      Energy Marketing Company

    And
      

    Ameren
      Energy Generating Company

    

    This
      Power Supply Agreement (referred to as the "Agreement"), entered into this
      18th
      day of December, 2006, by and between Ameren Energy Marketing Company (“Buyer”),
      and Ameren Energy Generating Company (“Seller”), where Buyer and Seller shall be
      referred to herein collectively as “Parties” and individually as a “Party.”

    

    WITNESSETH
      THAT:

    

    WHEREAS,
      Seller
      is a wholly-owned subsidiary of Ameren Energy Development Company and has been
      authorized to sell power at market-based rates; and

    

    WHEREAS,
      Buyer
      is
      a power marketer that has been authorized to sell power at market-based rates;
      and

    

    WHEREAS,
      Seller
      has a fleet of coal and gas fired generating units which currently has a total
      generating capacity of approximately 4,030 MW that operate throughout the states
      of Missouri and Illinois (“Seller’s Generation Fleet”); and

    

    WHEREAS,
      the
      Buyer
      desires to obtain rights to the capacity and energy from the Seller’s Generation
      Fleet pursuant to the terms and conditions of this Agreement in order to, among
      other things sell the capacity and energy into the market using Buyer’s market
      based rate authority; and 

    

    WHEREAS,
      the
      Parties hereto desire to establish herein the terms and conditions under which
      Buyer shall procure the capacity and energy from Seller throughout the term
      of
      this Agreement.

    

    NOW,
      THEREFORE,
      in
      consideration of the premises and provisions of this Agreement and in
      consideration of the mutual agreements and undertakings of the Parties, the
      Parties do hereby agree that the terms and provisions of the Articles and
      Sections shall read in their entirety as follows:

    

    Article
      I

    Term

    

    1.1  Except
      as
      otherwise provided in Section 7.6, this Agreement shall be effective as of
      the
      date set forth above and deliveries shall commence January 1, 2007 and shall
      continue through December 31, 2022 and from year to year thereafter unless
      either Party elects to terminate by providing the other Party with no less
      than
      six (6) months advanced written notice of its desire to terminate. 

    

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    Article
      II

    Delivery
      Point and Transfer of Title

    

    2.1  Seller
      shall sell and deliver and the Buyer shall purchase and receive energy at the
      high side of each generator bus of the Seller’s Generation Fleet (“Delivery
      Point”). All energy delivered hereunder shall be metered as three phase, 60
      hertz at the high side of the step-up transformer. The Buyer shall arrange
      and
      be responsible for all transmission services and costs relative to the capacity
      and associated energy Buyer schedules at and from the Delivery
      Point.

    

    2.2 Title
      to
      and risk of loss related to Buyer’s capacity and associated energy purchased
      hereunder shall transfer from Seller to Buyer at the Delivery Point. Seller
      warrants that it will deliver to Buyer such capacity and energy free and clear
      of all liens, security interests, claims and encumbrances or any interest
      therein or thereto by any person arising prior to the Delivery
      Point.

    

    Article
      III

    Quantity
      and Scheduling

    

    3.1  Seller
      agrees to sell and Buyer agrees to purchase all of the capacity available from
      the Seller’s Generation Fleet and such amount of associated energy from Seller.
      Seller also agrees to provide to Buyer, in addition to capacity and energy,
      ancillary services that Seller has not directly sold to another third party.
      Before any of its ancillary services are sold to a third party, Seller shall
      consult with Buyer and shall offer to sell to Buyer any such ancillary services.
      Buyer and Seller shall discuss the appropriate charges and billing procedures
      for such ancillary services, and if necessary shall amend this agreement
      accordingly.

    

    3.2 For
      planning purposes, sixty (60) days prior to the commencement of each calendar
      year during the term of this Agreement or at such other times as may be
      appropriate, the Parties shall determine in accordance with Section 3.3 below
      the total available MW of capacity and energy which Seller anticipates the
      Seller’s Generation Fleet shall be capable of providing (“Net Generation
      Capability”) during the next succeeding calendar year or during the time period
      remaining until the next determination of Net Generation Capability. Should
      the
      Parties fail to agree to a reasonable value for the Net Generation Capability
      for the next succeeding calendar year, the prior year’s determination shall be
      used. 

    

    3.3 In
      determining the Net Generation Capability of the Seller’s Generation
      Fleet, the
      Parties shall review the actual performance experience of the Seller’s
      Generation Fleet for the past calendar year and determine by mutual agreement
      a
      reasonable value for the Net Generation Capability of the Seller’s Generation
      Fleet for the next succeeding calendar year or during the time period remaining
      until the next calendar year determination. The Parties shall give due
      consideration to pollution control restrictions, the effect of any outage time
      required for expected replacements, extensions, and improvements or major
      maintenance of an unusual nature which is in excess of four weeks' duration
      which would affect the daily capability of the Seller’s Generation Fleet and any
      other factors as may be reasonably determined by the Parties to have an impact
      on the Net Generation Capability of the Seller’s Generation Fleet. 

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    3.4 Unless
      otherwise agreed to by the Parties, the
      scheduling of energy shall be in accordance with the following: 

    

    (a) Seller
      shall provide to Buyer notice of the amount of hourly capacity it has
      available (“Hourly Available Capacity”) to sell for next day
      delivery during a morning generation conference call which will
      be held at 0700 CPT each day.  Seller shall provide such prior notice
      to Buyer so that Buyer may schedule the generation into the MISO Day Ahead
      (DA) market (which currently closes at 1100 EST) or into another market on
      the
      business day prior to the next delivery day that quantity of associated energy
      Buyer needs to sell into the applicable market for next day
      delivery.   Seller should also provide, via an electronic means
      made available by the Buyer, the Hourly Available Capacity to the Buyer by
      0800 CPT.  Further, the Seller shall make all efforts to immediately notify
      the Buyer prior to the close of the MISO DA market as to changes following
      the
      0800 CPT electronic declaration that will affect the next day
      deliverability so the Buyer may update the next day schedule.

     

    (b) Seller
      shall immediately notify Buyer via a phone call of any change in
      the amount of capacity it has available on an intra-day basis so that Buyer
      may
      adjust Buyer’s energy schedule accordingly for  both the current and
      next hour delivery. 

    

    (c) In
      addition to the quantity of energy Seller indicated would be available to Buyer
      for next day delivery, Buyer shall use commercially reasonable efforts to
      schedule, no later than  thirty  minutes prior to the start of
      the next clock hour, that quantity of additional energy that Seller timely
      indicates to Buyer will become available for next hour
      delivery.   

    

    (d) All
      energy shall be scheduled for delivery in whole megawatts. Seller shall be
      excused from its obligation to deliver and shall not be obligated to operate
      any
      unit or units within the Seller’s Generation fleet for delivery of energy
      hereunder where the amount of energy scheduled by Buyer cannot be delivered
      by
      operating one or more of the units in the Seller’s Generation Fleet at or above
      the minimum run requirement for such unit or units (“Minimum Run Requirement”).
      Seller shall provide reasonable notice to Buyer when Buyer fails to schedule
      a
      sufficient amount of energy to satisfy the Minimum Run Requirement.

    

    Article
      IV

    Pricing

     

    4.1 Energy
      Charge: For
      each
      MWh of associated energy delivered by Seller and purchased by Buyer during
      the
      month of delivery, Buyer shall pay an Energy Charge equal to the amount
      calculated in accordance with the following formula:

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    Energy
      Charge = (Buyer’s Monthly Net Revenues - Monthly Capacity Charge) / Total Energy
      Purchased by Buyer 

    

    Where:

    

    Buyer’s
      Monthly Net Revenues = Buyer’s Total Revenues less Buyer’s Expenses.

    

    Buyer’s
      Total Revenues = Buyer’s gross revenues less any gross revenues associated with
      activities not supported in whole or in part by Seller’s generation or the
      generation owned and operated by AmerenEnergy Resources Generating Company
      (“AERG”).

    

    Buyer’s
      Expenses = All administrative and general, transmission, purchased power or
      other expenses less those expenses not supporting in whole or in part the gross
      revenues associated with Seller’s generation or the generation owned and
      operated by AERG.

    

    Monthly
      Capacity Charge = the capacity charge assessed by Seller to Buyer each month
      for
      capacity purchased pursuant to this Agreement and by AERG for capacity purchased
      pursuant to the Power Supply Agreement between Buyer and AERG dated December
      18,
      2006.

    

    Total
      Energy Purchased by Buyer = the total MWhs of energy purchased by Buyer from
      Seller and Seller’s affiliate AERG.

    

    4.2 Monthly
      Capacity Charge: Buyer
      shall also pay a Monthly Capacity Charge, which shall be calculated in
      accordance with Attachment A. If accounting information is not available to
      exactly determine the Monthly Capacity Charge by the invoicing deadline for
      a
      given month, the Monthly Capacity charge will be estimated in a commercially
      reasonable manner and adjusted to actual on the following month’s
      invoice.

    

    Article
      V

    Billing
      and Payment

    

    5.1 
      By the
      twentieth business day of the month immediately following the month of service,
      Seller shall render to Buyer an invoice indicating the Energy Charge and the
      Monthly Capacity Charge for such month of delivery and any credit or assessment
      to reflect any adjustment needed to rectify differences between the estimated
      Monthly Capacity Charge and the actual Monthly Capacity Charge for prior months
      of delivery. Buyer shall make payment promptly upon the receipt of such
      statement, and, in any event, no later than the 25th
      day of
      the month in which such invoice is rendered, provided, however, such due date
      shall be extended by the number of days Seller is late in rendering the invoice.
      

    

    5.2 Seller
      shall keep complete and accurate records, meter readings and memoranda of its
      operations and costs for the Seller’s Generation Fleet and the sale of its
      capacity and energy under this Agreement and shall maintain such data for a
      period of at least five (5) years 

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    after
      the
      completion of each billing month of this Agreement. In addition to the right
      of
      Buyer to review certain costs sixty (60) days prior to the end of the first
      calendar year and each calendar year thereafter as set forth in Article IV,
      Buyer shall have the right, at its own expense and during reasonable hours,
      to
      examine the records of Seller to enable it to determine the accuracy and
      reasonableness of payments made for energy and capacity purchased under this
      Agreement. Such right shall continue for two (2) years after receipt of each
      monthly billing statement. Buyer shall have the right to dispute any billing
      up
      to two (2) years after it is rendered. Buyer shall likewise make available
      to
      Seller any statements, invoices or other documents evidencing the quantity
      of
      energy delivered at the Delivery Point. If any such examination reveals any
      inaccuracy in any statement, Seller shall promptly revise such statement and
      the
      Party owing the adjusted amount shall promptly make payment.

    

    Article
      VI

    Operations

    

    6.1 Metering:
      Seller
      shall own and maintain such metering equipment as may be necessary to provide
      complete information regarding the delivery of capacity and energy to or for
      the
      account of Buyer at the Delivery Point. Seller shall make such periodic tests
      and inspections of its meters as may be necessary to maintain them at the
      highest practical commercial standard of accuracy, and shall advise Buyer
      promptly of the results of any such test showing an inaccuracy of more than
      1
      percent. Seller shall make additional tests of its meters at the request of
      Buyer. Buyer shall be given notice of, and may have representatives present
      at,
      such tests and inspections. If any periodic or additional test shows that a
      meter is within 1 percent of accuracy, no correction shall be made in billings;
      but if any test shows that the meter is inaccurate by more than 1 percent,
      a
      correction shall be made in the billing for one-half the elapsed period since
      the last test was made. The cost of any additional test requested by Buyer
      shall
      be borne by Buyer if such test shows the meter to be within 1 percent of
      accuracy, and by Seller if such test shows it to be inaccurate by more than
      1
      percent.

    

    6.2 Winter
      Operations: The
      Parties recognize that there may be some units within the Seller’s Generation
      Fleet that operate primarily during the months of April through October of
      each
      year. The Parties further recognize that additional costs may be incurred in
      order to commence operations of certain units during the winter season after
      cessation of operations for a time, and that certain modifications to such
      units
      such as installation of inlet air de-icing equipment may be needed. Upon Buyer’s
      request, Seller shall provide Buyer an estimate of such additional costs for
      the
      modifications necessary for winter operations. Should Buyer agree to incur
      the
      additional costs and/or to pay the costs for necessary modification, Seller
      shall make such necessary modifications. The additional fixed costs of such
      modifications upon their completion shall be included in Monthly Capacity
      Charge. 

    

    6.3 Operating
      Committee:
      Seller
      and Buyer shall appoint one or more members to an Operating Committee, which
      shall have the authority to establish normal system control procedures, and
      to
      act in matters relating to the sale and purchase of capacity and energy under
      this Agreement, in addition to specific authority set out elsewhere in this
      Agreement. The Operating Committee shall have no authority to modify the terms
      or conditions of this Agreement except pursuant to Section 8.9. All decisions
      of
      the Operating Committee shall be 

     

     

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

     

    unanimous
      and shall be set forth in writing, with copies to be delivered to each Party.
      Buyer shall also aid in providing guidance to Seller relative to other matters
      arising under this Agreement. All recommendations or determinations of the
      Operating Committee shall conform to good utility practice. In the event that
      the Operating Committee members cannot agree on such matters for which this
      Agreement requires the Operating Committee’s approval, the Seller may seek
      resolution of the question or controversy by arbitration pursuant to Section
      8.4; provided, however, no initial meeting prior to initiating arbitration
      procedures shall be required.

    

    6.4.
       Construction
      and Operating Plans:
      Seller
      agrees to operate and maintain the Seller’s Generation Fleet so that the total
      net megawatts deliverable from the Seller’s Generation Fleet shall be at its
      highest level possible consistent with safe, prudent and efficient operation
      and
      the requirements of Buyer. By September 1 of each year, Seller shall submit
      to
      the Operating Committee Sellers proposed construction and operating plans,
      and
      any proposed plans for retirement of any unit or units within the Seller’s
      Generation Fleet for the next calendar year. 

    

    6.5
       Scheduled
      Maintenance: On
      or
      before September 1 of each year, Seller shall provide to the Operating Committee
      its schedule of planned maintenance outages for the following calendar year.
      

    

    Article
      VII

    Events
      of Force Majeure and Default

    

    7.1 Force
      Majeure Definition: As
      used
      in this Agreement, an Event of Force Majeure means an event or circumstances
      which prevents one Party (the Claiming Party) from performing its obligations
      or
      causes delay in the Claiming Party’s performance under this Agreement, which
      event is beyond the reasonable control of, and is not the result of the
      negligence of the Claiming Party, and which, even with the exercise of due
      diligence or use of good utility practice, the Claiming Party is unable to
      overcome or avoid or cause to be avoided, such as, but not limited to acts
      of
      God; fire; flood; earthquake; war; riots; requirements, actions or failure
      to
      act on the part of governmental authorities; adoption or change in any law,
      regulation, statute, rule or regulation imposed by federal, state or local
      governmental bodies, including, without limitation, a change in the
      interpretation thereof; or any lawful order by any court or administrative
      agency. Interruptions or curtailment of (i) non-firm transmission by Buyer’s
      transmission provider or (ii) interruptible transportation by Seller’s natural
      gas pipeline shall not constitute Events of Force Majeure.

    

    7.2
       Excused
      Performance: Except
      for obligations to make any payments under this Agreement, the Parties shall
      be
      excused from performing their respective obligations if and to the extent that
      they are unable to so perform or are
      prevented from performing by a Force Majeure, provided that (1) the
      non-performing Party, as promptly as practicable after the Party reasonably
      determines that a Force Majeure event has occurred, gives the other Party
      written notice describing the particulars of the occurrence; (2)
      the
      suspension of performance is of no greater scope and of no longer duration
      than
      is reasonably required by the Force Majeure; (3) the non-performing Party uses
      due diligence to remedy its inability to perform; and (4) as soon as the
      non-performing Party is able to resume performance of its obligations excused
      as
      a result of the occurrence, it gives prompt written notification thereof to
      the
      other Parties. Seller’s failure to 

     

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    deliver
      unit firm capacity and associated energy scheduled by Buyer shall be excused,
      in
      addition to an Event of Force Majeure, in the event that any one or more units
      of the Seller’s Generation Fleet is unavailable as a result of a Forced Outage
      (as defined in the NERC Generating Unit Availability Data System (GADS) Forced
      Outage reporting guidelines). 

    

    7.3
       Performance
      Assurance:
      If
      either Party ("X") has reasonable grounds to believe that the other Party's
      ("Y") creditworthiness or performance under this Agreement has become
      unsatisfactory, X may provide Y with written notice requesting Performance
      Assurance in an amount determined by X in a commercially reasonable manner.
      Upon
      receipt of such notice, Y shall have three (3) Business Days to remedy the
      situation by providing Performance Assurance to X. Failure of Y to provide
      Performance Assurance, or a guaranty or other credit assurance, acceptable
      to X
      within three (3) Business Days after written notice shall constitute an Event
      of
      Default under the Agreement. "Performance Assurance" means collateral in the
      form of either cash, Letter(s) of Credit, or other security acceptable to the
      requesting Party. "Letter(s) of Credit" means one or more irrevocable,
      transferable standby letters of credit issued by a U.S. commercial bank or
      a
      foreign bank with a U.S. branch with such bank having a credit rating of at
      least A- from the Standard & Poor's Rating Group or A3 from Moody's Investor
      Services, Inc. "Business Day" means any day except a Saturday, Sunday or a
      Federal Reserve Bank holiday.

    

    7.4
       Grant
      of Security Interest:
      To
      secure
      its obligations under this Agreement and to the extent either or both Parties
      deliver Performance Assurance hereunder, each Party (a "Pledgor") hereby grants
      to the other Party (the "Secured Party") a present and continuing first priority
      secured interest in, and lien on (and right of recoupment and set-off against),
      and assignment of, all cash collateral and cash equivalent collateral and any
      and all proceeds resulting therefrom or the liquidation thereof, whether now
      or
      hereafter held by, on behalf of, or for the benefit of, such Secured Party,
      and
      each Party agrees to take such action as the other Party reasonably
      requires in order to perfect the Secured Party's first-priority security
      interest in, and lien on (and right of recoupment and/or setoff against), such
      collateral and any and all proceeds resulting therefrom or from the liquidation
      thereof.

    

    7.5
       Event
      of Default: An
      "Event
      of Default" shall occur:  

    

    (a) With
      respect to Seller, if a Forced Outage continues for a period of one (1) year
      on
      one or more units of Seller's Generation Fleet;

    

    (b) With
      respect to Buyer, if Buyer fails to make, when due, any payment required
      pursuant to this Agreement if such failure is not remedied within five (5)
      calendar days after written notice;

    

    (c)
       With
      respect to either Seller or Buyer, if it fails to perform any material covenant
      or obligation set forth in this Agreement (except to the extent constituting
      a
      separate Event of Default) if such failure is not cured within fifteen (15)
      calendar days after written notice; 

     

    (d) With
      respect to either Seller or Buyer, if it (i) files a petition or otherwise
      commences, authorizes, or acquiesces in the commencement of a proceeding or
      cause of 

     

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    action
      under any bankruptcy, insolvency, reorganization or similar law, or has any
      such
      petition filed against it, (ii) makes an assignment or general arrangement
      for
      the benefit of creditors, (iii) otherwise becomes bankrupt or insolvent (however
      evidenced), or (iv) has a liquidator, administrator, receiver, trustee,
      conservator or similar official appointed with respect to it or any substantial
      portion of its property or assets; 

    

    (e) With
      respect to either Seller or Buyer, if it fails to provide Performance Assurance
      in accordance with Section 7.3 of this Agreement within three (3) Business
      Days
      after written notice.

    

    7.6 Termination
      in Event of Default: If
      an
      Event of Default, as defined above, occurs, the Party not in default shall,
      in
      addition to any other rights and remedies provided by law, have the right to
      immediately suspend its performance to the Party in default or to immediately
      terminate this Agreement.

    

    Article
      VIII

    General
      Provisions

    

    8.1
       Notices:
      All
      notices, requests statements or payments shall be made as specified in the
      Notice and Contact Appendix attached to this Agreement and shall, unless
      otherwise specified herein, be in writing (unless otherwise provided) and shall
      be considered duly delivered when received by mail, facsimile, wire, e-mail
      or
      overnight courier. 

    

    8.2 Indemnity
      and Limitation of Damages: Each
      Party (the Indemnifying Party) shall indemnify, save harmless and defend the
      other Party, including the other Party’s parents, subsidiaries, affiliates and
      their respective officers, directors, agents and employees, from and against
      all
      claims, demands, costs and expenses (including reasonable attorneys’ fees and
      court costs) in any manner, directly or indirectly, connected with or arising
      from any loss, damage or injury to any person(s) or property occurring on the
      Indemnifying Party’s side of the Delivery Point. Neither Party shall be liable
      to the other, whether in contract, in tort (including negligence, but not
      including gross negligence) under any warranty or otherwise, for damages for
      loss of profits or revenue, loss of use of any property, cost of capital, or
      other similar incidental or consequential damages.  

     

    8.3 Regulatory
      Approvals and Saving Clause: The
      Parties recognize that the sale and delivery of capacity and energy under this
      Agreement may be subject to regulation by federal and state agencies having
      jurisdiction over the Agreement, Buyer, Seller and various aspects of the
      transmission and delivery of capacity and energy to Buyer. Any provision
      declared or rendered unlawful by any applicable court of law or such regulatory
      agency or deemed unlawful because of a statutory or regulatory change shall
      not
      otherwise affect the remaining lawful obligations that arise under the
      Agreement. In the event that any order of a court or regulatory agency with
      competent jurisdiction, including the Federal Energy Regulatory Commission,
      results in substantive modification of the Agreement or otherwise affects the
      Parties’ economic benefits intended under the Agreement, the Parties shall use
      good faith efforts to reform the Agreement in order to give effect to the
      original intention and economic bargain of the Parties.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    8.4 Resolution
      of Disputes: If
      a
      question or controversy arises among the Parties concerning the observance
      or
      performance of any of the terms, provisions or conditions contained herein
      or
      the rights or obligations of any of the Parties under this Agreement, such
      question or controversy shall in the first instance be the subject of a meeting
      among the Parties to negotiate a resolution of such dispute. Such meeting shall
      be held within fifteen (15) days of a request by any Party. If within fifteen
      (15) days after that meeting, the Parties have not negotiated a resolution
      or
      mutually extended the period of negotiation, any Party may seek resolution
      of
      the question or controversy by arbitration in accordance with arbitration
      procedures established from time to time by the American Arbitration Association
      (“AAA”). Any decision and award of the majority of arbitrators shall be binding
      upon all Parties to the arbitration. The arbitrators shall not award any
      indirect, special, incidental or consequential damages against a Party; but
      may
      award reasonable attorney fees and related legal expenses to the prevailing
      Party. Judgment upon the award rendered may be entered in any court of competent
      jurisdiction. Such judgment shall be consistent with the terms and conditions,
      and the spirit of this Agreement.

     

    8.5 Assignment:
      This
      Agreement shall inure to the benefit of and be binding upon each Party’s
      successors and permitted assigns. No Party shall assign this Agreement or their
      related contractual rights without the prior written consent of the other Party,
      which prior written consent shall not be unreasonably withheld or delayed;
      provided, however, any Party may, with ten (10) days written notice to the
      other
      Party, and without written consent of the other Party, assign or transfer this
      Agreement to (i) its affiliate or subsidiary; or (ii) a successor to all or
      substantially all the properties and assets of such Party; provided that the
      assignee is at least as creditworthy as the assigning Party. No assignment
      of
      this Agreement shall release or discharge Buyer or Seller from their future
      obligations hereunder unless all such obligations are assumed by the successor
      or assignee of Buyer or Seller, as the case may be.

    

    8.6 Jurisdiction:
      Except
      as
      to matters within the jurisdiction of particular regulatory bodies outside
      the
      State of Illinois, this Agreement
      shall be construed under the laws of the State of Illinois. 

    

    8.7 No
      Confidentiality: The
      Parties acknowledge that this Agreement will be filed with the Securities and
      Exchange Commission. Thus, its terms and conditions will be placed in the public
      domain. 

    

    8.8 Survivorship
      of Obligations:
      The
      termination of this Agreement shall not discharge any Party from any obligation
      it owed to any other Party under the Agreement by reason of any delivery, loss,
      cost, damage, expense or liability which shall occur or arise prior to such
      termination. It is the intent of the Parties that any such obligation owed
      (whether the same shall be known or unknown as of the termination of this
      Agreement) shall survive the termination of this Agreement. The Parties also
      intend that the indemnification and limitation of liability provisions contained
      in this Agreement shall remain operative and in full force and effect,
      regardless of any termination of this Agreement, except with respect to actions
      or events occurring or arising after such termination is effective.

    

    8.9 Construction
      of Agreement:  This
      Agreement shall not be modified except in writing by amendment executed by
      all
      Parties. This
      Agreement shall not impart any rights 

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    enforceable
      by any third party (other than a permitted successor or assignee bound to this
      Agreement). Waiver by a Party of any default by another Party shall not be
      construed as a waiver of any other default. The Article and Section headings
      in
      this Agreement have been inserted as a matter of convenience and reference
      only, and are not a part of this Agreement.

    

    8.10 Buyer
      and
      Seller each acknowledge that it is a "forward contract merchant" and that this
      Agreement constitutes a "forward contract" within the meaning of the United
      States Bankruptcy Code.

     

    IN
      WITNESS WHEREOF, that
      this
      Power Supply Agreement between Ameren Energy Marketing Company and Ameren Energy
      Generating Company may be executed in any number of counterparts, all of which
      shall constitute but one and the same document, the Parties hereto have caused
      this Agreement to be executed by their duly authorized officers, as of the
      day
      and year first above written:

    

    

    Ameren
      Energy Marketing Company

    

    By     /s/Andrew
      M.
      Serri                                                     

     
Andrew
      M. Serri

    

    Title  President                                       
                                     

    

    

    

    Ameren
      Energy Generating Company

    

    By     /s/
      Jerry L.
      Simpson                                                   

      Jerry
      L. Simpson

    

    Title  Vice
      President                                                                           

    

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    
      
        	
                 POWER
                  SUPPLY AGREEMENT

              
	
                 BETWEEN
                  AMEREN ENERGY MARKETING COMPANY

              
	
                 AND

              
	
                 AMEREN
                  ENERGY GENERATING
                  COMPANY

              
	 
	
                 NOTICE
                  AND CONTACT APPENDIX

              
	 	 
	
                AMEREN
                  ENERGY MARKETING

              	
                AMEREN
                  ENERGY GENERATING

                COMPANY

              
	 	 
	
                All
                  Notices:

              	
                All
                  Notices:

              
	 	 
	
                Street:
                  1901 Chouteau Avenue

              	
                Street:
                  1901 Chouteau Avenue

              
	
                 M/C
                  AME-950

              	
                 M/C
                  AME-950

              
	
                City/State/Zip:
                  St. Louis, MO 63103 

              	
                City/State/Zip:
                  St. Louis, MO 63103 

              
	 	
                 

              
	
                Contract
                  Administration 

              	
                Contract
                  Administration

              
	
                Attn:
                  Daphyne Bradley

              	
                Attn:
                  Daphyne Bradley

              
	
                Phone:
                  (314) 613-9413 

              	
                Phone:
                  (314) 613-9413

              
	
                Facsimile:
                  (314) 613-9015

              	
                Facsimile:
                  (314) 613-9015

              
	
                Email:
                  dbradley@ameren.com

              	
                Email:
                  dbradley@ameren.com

              
	 	 
	
                Invoices

              	
                Invoices

              
	
                Attn:
                  Greg Weiss

              	
                Attn:
                  Greg Weiss

              
	
                Phone:
                  (314) 613-9477

              	
                Phone:
                  (314) 613-9477

              
	
                Facsimile:
                  (314) 613-9015

              	
                Facsimile:
                  (314) 613-9015

              
	
                Email:
                  gweiss2@ameren.com 

              	
                Email:
                  gweiss2@ameren.com

              
	 	 
	
                Scheduling 

              	
                Scheduling

              
	
                Attn:
                  Jinna Hopson

              	
                Attn:
                  Jinna Hopson

              
	
                Phone:
                  (314) 613-9043

              	
                Phone:
                  (314) 613-9043

              
	
                Facsimile:
                  (314) 206-1682

              	
                Facsimile:
                  (314) 206-1682

              
	
                Email:
                  jhopson@ameren.com 

              	
                Email:
                  jhopson@ameren.com

              
	 	 
	
                Credit

              	
                Credit

              
	
                Attn:
                  Director of Credit

              	
                Attn:
                  Director of Credit

              
	
                Phone:
                  (314) 613-9139

              	
                Phone:
                  (314) 613-9139

              
	
                Facsimile:
                  (314) 613-9006

              	
                Facsimile:
                  (314) 613-9006

              
	
                Email:
                  tmoloney@ameren.com 

              	
                Email:
                  tmoloney@ameren.com

              
	 	 

      

       

      
        
          
          

        

        
          -1-

          
            

          

        

        

          Attachment
            A

           

          Capacity
            Charge Calculation

           

          	I.   
                   	
                  Definitions

                

           

        

      

    

    When
      used
      in this Attachment A, the following capitalized terms shall have the meanings
      ascribed to them below.

     

    Administrative
      and General Expenses means
      those Generating Resource Expenses chargeable to Accounts 920 through 935 as
      defined in the Uniform System of Accounts. 

     

    Depreciation
      means
      Generating Resource Expenses properly chargeable to Accounts 403, 404, 405
      and
      406 as defined in the Uniform System of Accounts.

    

    Generating
      Resources
      shall
      means those generating assets owned and operated by Seller from which Seller
      provides capacity and energy to Buyer under the terms and conditions of this
      Agreement. 

     

    Generating
      Resource Expense
      shall
      mean all charges properly recorded in accounts herein per Generally Accepted
      Accounting Principles (“GAAP”) and the Uniform System of Accounts (“Charges”)
      that are incurred by Seller to own, operate and maintain its Generating
      Resources. The Parties understand and agree that Seller shall have charges
      that
      are directly attributable to such Generating Resources and other Charges that
      are necessary to support the ownership, maintenance and operation of such
      Generating Resources but cannot be directly or specifically assigned to such
      Generating Resources (hereinafter “Non-Direct Charges”) (e.g.,
      administrative and general expenses) and are therefore, for purposes of this
      Agreement, also considered Generating Resource Expenses.

    

    Operations
      and Maintenance Expenses
      means
      those Generating Resource Expenses chargeable to Accounts 500 through 557
      (excluding Accounts 501, 509, 547, and 555) as defined in the Uniform System
      of
      Accounts.

    

    Other
      Taxes
      means
      those amounts which are not based upon income, applicable to Generating
      Resources, and chargeable to Account 408 as defined in the Uniform System of
      Accounts.

    

    Seller
      Federal and State Income Taxes
      means
      those amounts based upon income applicable to the Seller Generating Resources
      chargeable to Accounts 408.1, 409.1, 410.1, 411.1, and 411.4 as defined in
      the
      Uniform System of Accounts.

    

    Seller
      Interest Expense
      means
      those Generating Resource Expenses chargeable to Accounts 427 through 432 as
      defined in the Uniform System of Accounts.

     

    

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

     

    
      	II.
                	
              Capacity
                Payment

            

    

     

    The
      Capacity Payment for a given Month shall be calculated as follows:

    

    Capacity
      Payment = OM + AG + D + IT+ OT + I

    

    Where:

    

    OM
      =
      Operations and Maintenance Expenses - those Generating Resource Expenses
      chargeable to Accounts 500 through 557 (excluding Accounts 501, 509, 547, and
      555) as defined in the Uniform System of Accounts.

    

    AG
      =
      Administrative and General Expenses - those Generating Resource Expenses
      chargeable to Accounts 920 through 935 as defined in the Uniform System of
      Accounts.

    

    D
      =
      Depreciation consists of Generating Resource Expenses properly chargeable to
      Accounts 403, 404, 405 and 406 as defined in the Uniform System of
      Accounts.

    

    IT
      =
      Seller Federal and State Income Taxes.

    

    OT
      =
      Other Taxes - those amounts which are not based upon income, applicable to
      Generating Resources, and chargeable to Account 408 as defined in the Uniform
      System of Accounts. 

    

    I
      =
      Seller Interest Expense - those Generating Resource Expenses chargeable to
      Accounts 427 through 432 as defined in the Uniform System of Accounts.

    

    
-2-

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