Document:

Exhibit 10.3

    Exhibit
      10.3

     

     

     

    TRUST
      AGREEMENT

     

    among

     

    THE
      ASSET SWAP COUNTERPARTY,

     

    THE
      CEDING INSURERS

     

    and

     

    XL
      CAPITAL LTD

     

    as
      Beneficiaries

     

    and

     

    STONEHEATH
      RE,

     

    as
      Grantor and Beneficiary

     

    and

     

    THE
      BANK OF NEW YORK,

    as
      Trustee

    

    

    

    December
      12, 2006

    

    

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    PREAMBLE

     

    This
      trust
      agreement (the “Trust
      Agreement”),
      dated
      as of December 12, 2006, is made and entered into by and among the ASSET SWAP
      COUNTERPARTY, the CEDING INSURERS and XL CAPITAL LTD, a Cayman Islands exempted
      company, as Beneficiaries, STONEHEATH RE, a Cayman Islands exempted company,
      as
      Grantor and Beneficiary, and THE BANK OF NEW YORK, a New York banking
      corporation, not in its individual capacity but solely as Trustee.

     

    ARTICLE
      I

     

    DEFINITIONS

     

    “Account”
has
      the
      meaning ascribed to such term in Section 3.1 hereof.

     

    “Actual
      RO Coupon Payments”
means
      the “Actual RO Coupon Payments” as such term is defined in, and determined in
      accordance with the provisions of, the Asset Swap Agreement.

     

    “Actual
      RO Principal Repayments”
means
      the “Actual RO Principal Repayments” as such term is defined in, and determined
      in accordance with the provisions of, the Asset Swap Agreement.

     

    “Asset”
means
      an
      asset in the Trust Account, including cash.

     

    “Asset
      Swap Agreement”
means
      that certain 1992 ISDA Master Agreement (Multicurrency-Cross Border), as
      supplemented by a schedule and confirmation thereto, dated as of the date
      hereof, between the Grantor and the Asset Swap Counterparty, and as further
      amended, supplemented or otherwise modified from time to time in accordance
      with
      the terms thereof and the terms of the Securities Issuance
      Agreement.

     

    “Asset
      Swap Counterparty”
means
      Goldman Sachs International as the initial Asset Swap Counterparty under the
      Asset Swap Agreement and any permitted successor, assign or replacement
      counterparty which assumes the obligations of the initial counterparty in
      accordance with the terms thereof and the terms of the Securities Issuance
      Agreement.

     

    “Authorized
      Representative”
has
      the
      meaning ascribed to such term in Section 3.16 hereof.

     

    “Beneficiaries”
means
      the Grantor and the Other Beneficiaries, for whose benefit the Trust hereunder
      has been established. As used herein, the term “Beneficiaries” shall include any
      respective permitted successor, assign or, in the case of the Asset Swap
      Agreement and the Interest Rate Swap Agreement, replacement swap counterparty
      of
      the Asset Swap Counterparty, the Interest Rate Swap Counterparty, a Ceding
      Insurer or XL Capital, including any liquidator, rehabilitator, receiver,
      conservator or court-appointed successor-in-interest. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    “Business
      Day”
means
      a
      day on which commercial banks and foreign exchange markets settle payments
      and
      are open for general business (including dealings in foreign exchange and
      foreign currency deposits) in Bermuda, the Cayman Islands, New York City and
      London.

     

    “Ceding
      Insurers”
means
      XLIB and any other insurance or reinsurance subsidiaries of XL Capital that
      are
      party to the Reinsurance Agreement from time to time.

     

    “Confirmation”
means
      the “Confirmation” as such term is defined in the Asset Swap
      Agreement.

     

    “Designated
      Dealer”
means,
      at any time, a dealer in securities of the type which constitute the Portfolio,
      which shall be a third party designated by the Asset Swap
      Counterparty.

     

    “Eligible
      Assets”
means
      (i) debt securities with a term not to exceed forty years from the date of
      investment or contractual commitment to invest therein issued or fully
      guaranteed or insured by the United States government or any agency thereof;
      (ii) commercial paper payable 183 days or less from the date of original
      issuance and with a rating from Moody’s of “P-1” and from S&P of at least
“A-1” at the time of investment or contractual commitment to invest therein, and
      not placed on watchlist for a possible downgrade by either Moody’s or S&P;
      (iii) other debt securities with a final maturity not to exceed forty years
      and
      an average life not to exceed fifteen years from the date of investment or
      contractual commitment to invest therein and with a rating from Moody’s of at
      least “Aaa” and from S&P of at least “AAA” at the time of investment or
      contractual commitment to invest therein; and (iv) money market funds rated
      in
      the highest investment category by Moody’s and S&P and whose distributions
      to, or for the benefit of, the Grantor would not be subject to tax by any
      jurisdiction; provided,
      that (a)
      such Eligible Assets shall be denominated in U.S. dollars and (b) any Eligible
      Asset whose maturity exceeds six months shall bear interest at a rate that
      is
      determined from time to time by reference to a specified benchmark or
      index.

     

    “Exercise
      Notice”
has
      the
      meaning ascribed to such term in Section 6.1 hereof.

     

    “Extraordinary
      Expenses”
has
      the
      meaning ascribed to such term in the Securities Issuance Agreement.

     

    “Final
      Redemption Date”
means
      the date specified in the notice of redemption by the Grantor to the holders
      of
      record of the outstanding Issuer Preferred Securities following (i) the
      termination of the Reinsurance Agreement (whether upon its expiry or as a result
      of the occurrence of an early termination of the Securities Issuance Agreement)
      and (ii) if required by the terms of the Reinsurance Agreement, the commutation
      of the rights and obligations of the Grantor and the Ceding Insurers under
      the
      Reinsurance Agreement.

     

    “Grantor”
means
      Stoneheath Re, a Cayman Islands exempted company, which has established the
      Trust hereunder for the sole benefit of itself and the Other Beneficiaries
      as
      set forth more fully herein.

     

    
      
         

      

      
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    “Initial
      Permitted Investments”
has
      the
      meaning ascribed to such term in the Investment Guidelines.

     

    “Interest
      Rate Swap Agreement”
means
      that certain long form transaction confirmation incorporating by reference
      the
      1992 ISDA Master Agreement (Multicurrency-Cross Border), dated as of the date
      hereof, between the Grantor and the Interest Rate Swap Counterparty, as amended,
      supplemented or otherwise modified from time to time in accordance with the
      terms thereof and the terms of the Securities Issuance Agreement.

     

    “Interest
      Rate Swap Counterparty”
means
      IXIS Financial Products Inc., as the initial counterparty under the Interest
      Rate Swap Agreement, and any permitted successor, assign or replacement
      counterparty which assumes the obligations of the initial counterparty in
      accordance with the terms thereof and the terms of the Securities Issuance
      Agreement.

     

    “Investment
      Account”
means
      the account, number 348226, established for the benefit of the Beneficiaries
      and
      maintained in the name “The Bank of New York f/b/o Beneficiaries,” consisting of
      the Investment Account Assets. 

     

    “Investment
      Account Assets”
has
      the
      meaning ascribed to such term in Section 3.2 hereof.

     

    “Investment
      Guidelines”
means
      the Investment Guidelines attached hereto as Exhibit A and made part of this
      Trust Agreement.

     

    “Investment
      Notice”
means
      a
      written notice, substantially in the form attached hereto as Exhibit B, received
      by the Trustee from the Asset Swap Counterparty or its Authorized Representative
      in respect of an Asset.

     

    “Issuer
      Preferred Securities”
means
      the non-cumulative perpetual preferred shares, liquidation preference U.S.
      $1,000 per share, of the Grantor.

     

    “Loss
      Verification Agent”
means
      the “Loss Verification Agent” under the Reinsurance Agreement.

     

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

     

    “Other
      Beneficiaries”
means
      the Asset Swap Counterparty, the Interest Rate Swap Counterparty, the Ceding
      Insurers and XL Capital, for whose benefit the Trust hereunder has been
      established as set forth more fully herein.

     

    “Payment
      Account”
means
      the account, number 348227, established for the benefit of the Beneficiaries
      and
      maintained with the Trustee in the name “The Bank of New York f/b/o
      Beneficiaries,” consisting of the Payment Account Assets. 

     

    “Payment
      Account Assets”
has
      the
      meaning ascribed to such term in Section 3.3 hereof.

     

    
      
         

      

      
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    “Payment
      Account Net Earnings”
has
      the
      meaning ascribed to such term in Section 3.3 hereof.

     

    “Policy
      Aggregate Limit”
means
      the “Policy Aggregate Limit” as such term is defined in, and determined in
      accordance with the provisions of, the Reinsurance Agreement.

     

    “Policy
      Repayments”
means
      all amounts payable by the Ceding Insurers to the Grantor pursuant to the
      Article entitled “Commutation and Quantum Dispute Resolution” of the Reinsurance
      Agreement.

     

    “Portfolio”
means
      the “Portfolio” as such term is defined in, and determined in accordance with
      the provisions of, the Asset Swap Agreement.

     

    “Reference
      Obligation”
means
      each “Reference Obligation” as such term is defined in, and determined in
      accordance with the provisions of, the Asset Swap Agreement.

     

    “Reinsurance
      Agreement”
means
      that certain Excess of Loss Reinsurance Agreement, dated as of the date hereof,
      between the Grantor and the Ceding Insurers, as amended, supplemented or
      otherwise modified from time to time in accordance with the terms
      thereof.

     

    “Reinsurance
      Premium”
means
      the premium payable by the Ceding Insurers to the Grantor pursuant to the
      Reinsurance Agreement.

     

    “Reinvestment
      Proceeds”
has
      the
      meaning ascribed to such term in the Investment Guidelines.

     

    “Remaining
      Aggregate Limit”
means,
      on any date, an amount equal to the Policy Aggregate Limit as reduced as of
      such
      date by any payments made by the Grantor under the Reinsurance Agreement and
      any
      distributions from the Trust Account made to the Grantor to permit it to pay
      Extraordinary Expenses. 

     

    “Repayment
      Account”
has
      the
      meaning ascribed to such term in Section 3.1 hereof.

     

    “Repayment
      Account Assets”
means
      the Repayment Cash Account Assets and the Returned Securities Account
      Assets.

     

    “Repayment
      Cash Account”
means
      the account, number 348228, established for the benefit of the Grantor and
      XLIB,
      as Beneficiaries, and maintained in the name “The Bank of New York f/b/o
      Stoneheath Re and XL Insurance (Bermuda) Ltd,” consisting of the Repayment Cash
      Account Assets, if any.

     

    “Repayment
      Cash Account Assets”
has
      the
      meaning ascribed to such term in Section 3.4 hereof.

     

    
      
         

      

      
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    “Repayment
      Cash Account Net Earnings”
has
      the
      meaning ascribed to such term in Section 3.4 hereof.

     

    “Repayment
      Option”
has
      the
      meaning ascribed to such term in Section 6.1 hereof.

     

    “Repayment
      Option Period”
has
      the
      meaning ascribed to such term in Section 6.1 hereof.

     

    “Returned
      Securities Account”
means
      the account, number 348229, established for the benefit of the Grantor and
      XLIB,
      as Beneficiaries, and maintained with the Trustee in the name “The Bank of New
      York f/b/o Stoneheath Re and XL Insurance (Bermuda) Ltd,” consisting of the
      Returned Securities Account Assets, if any. 

     

    “Returned
      Securities Account Assets”
has
      the
      meaning ascribed to such term in Section 3.5 hereof.

     

    “Returned
      XL Preferred Securities”
has
      the
      meaning ascribed to such term in Section 3.6 hereof.

     

    “RO
      Termination Payments”
means
      the “RO Termination Payments” as such term is used in, and determined in
      accordance with the provisions of, the Asset Swap Agreement.

     

    “S&P”
means
      Standard & Poor’s Ratings Services, a Division of The McGraw-Hill Companies,
      Inc., or any successor thereto.

     

    “Securities
      Issuance Agreement”
means
      that certain Securities Issuance Agreement, dated as of the date hereof, among
      the Grantor and XL Capital, as amended, supplemented or otherwise modified
      from
      time to time in accordance with the terms thereof.

     

    “Securities
      Return Period”
has
      the
      meaning ascribed to such term in Section 3.6 hereof.

     

    “Specified
      Distribution Date”
means
      the date on which a distribution from the Payment Account is to be made to
      a
      Beneficiary. The Specified Distribution Date shall be set forth in the written
      certification delivered by or on behalf of such Beneficiary pursuant to Section
      5.3, 5.4, 5.5, 5.6, 5.7 or 5.8 hereof and shall not be earlier
      than:

     

    
      	
              (i)

            	
              3
                Business Days from the date on which the written certification was
                delivered to the Trustee in the case of a distribution to the Asset
                Swap
                Counterparty or its designee pursuant to Section 5.3 hereof;
                

            

    

     

    
      	
              (ii)

            	
              3
                Business Days from the date on which the written certification was
                delivered to the Trustee in the case of a distribution to the Interest
                Rate Swap Counterparty or its designee pursuant to Section 5.4 hereof;
                

            

    

     

    
      
         

      

      
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              (iii)

            	
              20
                Business Days from the date on which the written certification was
                delivered to the Trustee in the case of a distribution to a Ceding
                Insurer
                or its designee pursuant to Section 5.5 hereof;

            

    

     

    
      	
              (iv)

            	
              10
                Business Days from the date on which the written certification was
                delivered to the Trustee in the case of a distribution to XLIB or
                its
                designee pursuant to Section 5.6 hereof;

            

    

     

    
      	
              (v)

            	
              3
                Business Days from the date on which the written certification was
                delivered to the Trustee in the case of a distribution to XL Capital
                or
                its designee pursuant to Section 5.7 hereof;
                and

            

    

     

    
      	
              (vi)

            	
              10
                Business Days from the date on which the written certification was
                delivered to the Trustee in the case of a distribution to the Grantor
                or
                its designee pursuant to Section 5.8
                hereof.

            

    

     

    In
      the
      case of a distribution of Payment Account Net Earnings to XL Capital or its
      designee pursuant to Section 5.7 hereof, the Specified Distribution Date shall
      also be a date on which the holders of outstanding Issuer Preferred Securities
      are paid all accrued (but unpaid) dividends on the Issuer Preferred Securities
      in respect of the period from and including the immediately preceding dividend
      payment date (or the date of original issuance if there has not been a dividend
      payment date) to but excluding such date.

     

    “Temporary
      Repayment Cash Account Net Earnings”
has
      the
      meaning ascribed to such term in Section 6.2(b). 

     

    “Termination
      Date”
has
      the
      meaning ascribed to such term in Section 8.1(a) hereof.

     

    “Trust”
has
      the
      meaning ascribed to such term in Section 2.1 hereof.

     

    “Trust
      Account”
has
      the
      meaning ascribed to such term in Section 3.1 hereof.

     

    “Trustee”
means
      The Bank of New York, a New York banking corporation, as trustee
      hereunder.

     

    “XL
      Capital”
means
      XL
      Capital Ltd, a Cayman Islands exempted company, and its permitted successors
      and
      assigns.

     

    “XLIB”
means
      XL
      Insurance (Bermuda) Ltd, a Bermuda exempted limited liability company, and
      its
      permitted successors and assigns.

     

    “XL
      Preferred Securities”
means
      Series D Preference Ordinary Shares, liquidation preference U.S. $1,000 per
      share, of XL Capital which may be issued and delivered to the Grantor from
      time
      to time under the Securities Issuance Agreement.

     

    
      
         

      

      
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    ARTICLE
      II

     

    ESTABLISHMENT
      OF TRUST

     

    Section
      2.1.  Establishment
      of Trust.
      By
      execution of this Trust Agreement, the Grantor hereby establishes a trust (the
      “Trust”)
      for the
      sole benefit of the Beneficiaries as set forth more fully herein.

     

    ARTICLE
      III

     

    CREATION
      OF TRUST ACCOUNT AND DEPOSITS

     

    Section
      3.1.  Establishment
      of Accounts.
      The
      Grantor hereby agrees to establish and maintain with the Trustee the Investment
      Account, the Payment Account, the Repayment Cash Account and the Returned
      Securities Account. Each of the Investment Account, the Payment Account, the
      Repayment Cash Account and the Returned Securities Account shall be maintained
      separately from any other Account maintained with the Trustee, and the Assets
      in
      each Account shall be segregated from the Assets in any other Account. Each
      of
      the Investment Account, the Payment Account, the Repayment Cash Account and
      the
      Returned Securities Account, including any successor account or accounts
      thereto, is referred to herein as an “Account”
and
      the
      Accounts are collectively referred to herein as the “Trust
      Account.”
The
      Repayment Cash Account and the Returned Securities Account, including any
      successor account or accounts thereto, are collectively referred to herein
      as
      the “Repayment
      Account.”
Each
      Account shall form part of the Trust created hereunder. 

     

    Section
      3.2.  Investment
      Account Assets.
      The
      Assets in the Investment Account (the “Investment
      Account Assets”)
      shall
      consist of (i) cash deposited by the Grantor pursuant to Section 3.6 hereof,
      (ii) Assets transferred from the Payment Account to the Investment Account
      in
      accordance with Section 3.7 hereof, (iii) Assets acquired in connection with
      the
      investment and reinvestment of Investment Account Assets in accordance with
      Section 4.1 hereof and (iv) the net earnings, if any, on the foregoing. The
      Trustee shall transfer Investment Account Assets from the Investment Account
      to
      the Payment Account from time to time in accordance with Section 5.1 whereupon
      such transferred Investment Account Assets shall constitute Payment Account
      Assets. The Trustee shall not, under any circumstance, transfer Investment
      Account Assets to the Repayment Account or otherwise transfer Investment Account
      Assets to the Payment Account.

     

    Section
      3.3.  Payment
      Account Assets.
      The
      Assets in the Payment Account (the “Payment
      Account Assets”)
      shall
      consist of (i) cash deposited by the Asset Swap Counterparty pursuant to Section
      3.7 hereof, (ii) cash deposited by the Interest Rate Swap Counterparty pursuant
      to Section 3.8 hereof, (iii) cash deposited by the Ceding Insurers pursuant
      to
      Section 3.9 hereof (other than Policy Repayments), (iv) cash deposited by XL
      Capital pursuant to Section 3.10 hereof, (v) Assets transferred from the
      Investment Account to the Payment Account in accordance with Section 3.2 hereof,
      (vi) Assets acquired in connection with the investment and reinvestment of
      Payment Account Assets in accordance with Section 4.2 hereof and (vii) the
      net

     

    
      
         

      

      
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    earnings
      (the “Payment
      Account Net Earnings”),
      if
      any, on the foregoing. The Trustee shall transfer Payment Account Assets from
      the Payment Account to the Investment Account from time to time in accordance
      with Section 3.7 hereof whereupon such Payment Account Assets shall constitute
      Investment Account Assets. The Trustee shall not, under any circumstance,
      transfer Payment Account Assets to the Repayment Account or otherwise transfer
      Payment Account Assets to the Investment Account.

     

    Section
      3.4.  Repayment
      Cash Account Assets.
      The
      Assets in the Repayment Cash Account (the “Repayment
      Cash Account Assets”),
      if
      any, shall consist of (i) the Policy Repayments deposited by the Ceding Insurers
      pursuant to Section 3.9 hereof, (ii) Assets acquired in connection with the
      investment and reinvestment of Repayment Cash Account Assets in accordance
      with
      Section 4.2 hereof and (iii) the net earnings (the “Repayment
      Cash Account Net Earnings”),
      if
      any, on the foregoing. The Trustee shall not, under any circumstance, transfer
      Repayment Cash Account Assets to any other Account. Except for the Grantor
      and
      XLIB, none of the Beneficiaries shall have any claim, interest or right
      hereunder or otherwise in the Repayment Cash Account Assets.

     

    Section
      3.5.  Returned
      Securities Account Assets.
      The
      Assets in the Returned Securities Account (the “Returned
      Securities Account Assets”),
      if
      any, shall consist of (i) the Returned XL Preferred Securities deposited by
      the
      Grantor pursuant to Section 3.6 and Section 6.1 hereof and (ii) dividends and
      other payments, if any, paid on the Returned XL Preferred Securities
      (irrespective of when declared) while such Returned XL Preferred Securities
      are
      in the Returned Securities Account. The Trustee shall not, under any
      circumstance, transfer Returned Securities Account Assets to any other Account.
      Except for the Grantor and XLIB, none of the Beneficiaries shall have any claim,
      interest or right hereunder or otherwise in the Returned Securities Account
      Assets.

     

    Section
      3.6.  Deposits
      by the Grantor.
      On the
      date hereof, the Grantor shall deposit into the Investment Account an amount
      of
      cash that is equal to the gross proceeds to the Grantor from the issuance of
      Issuer Preferred Securities on the date hereof. In addition, upon receipt by
      the
      Grantor of a written notice that the Ceding Insurers have deposited Policy
      Repayments into the Repayment Cash Account pursuant to Section 3.9 hereof,
      the
      Grantor shall have the option, exercisable during the period commencing on
      the
      date of receipt of such written notice and ending at 5 p.m., New York time,
      on the tenth Business Day thereafter (the “Securities
      Return Period”),
      to
      deposit into the Returned Securities Account an amount of XL Preferred
      Securities having an aggregate liquidation preference that, when added to the
      accrued and unpaid dividends on such XL Preferred Securities for the
      then-current dividend period, is equal to the aggregate amount of Policy
      Repayments deposited in the Repayment Cash Account by the Ceding Insurers (the
      “Returned
      XL Preferred Securities”).
      

     

    Section
      3.7.  Deposits
      by the Asset Swap Counterparty.
      From
      time to time after the date hereof, the Asset Swap Counterparty shall deposit
      into the Payment Account, on behalf of the Grantor, any amounts that are paid
      by
      the Asset Swap Counterparty to the Grantor under the Asset Swap Agreement.
      The
      Trustee shall transfer from the Payment Account to the Investment Account any
      RO
      Termination Payments that are deposited in the Payment Account 

     

    
      
         

      

      
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    pursuant
      to this Section 3.7 to the extent that such amounts are to be used by the
      Trustee to acquire an Asset pursuant to the Investment Guidelines and any
      Investment Notice received from the Asset Swap Counterparty.

     

    Section
      3.8.  Deposits
      by the Interest Rate Swap Counterparty.
      The
      Interest Rate Swap Counterparty has been instructed by the Grantor to deposit,
      from time to time after the date hereof, into the Payment Account any amounts
      that are paid by the Interest Rate Swap Counterparty to the Grantor under the
      Interest Rate Swap Agreement. 

     

    Section
      3.9.  Deposits
      by the Ceding Insurers.
      From
      time to time after the date hereof, the Ceding Insurers shall deposit into
      the
      Payment Account, on behalf of the Grantor, any Reinsurance Premiums that are
      paid to the Grantor under the Reinsurance Agreement. In addition, to the extent
      that any Policy Repayments are paid to the Grantor under the Reinsurance
      Agreement, the Ceding Insurers shall deposit such Policy Repayments, on behalf
      of the Grantor, into the Repayment Cash Account. 

     

    Section
      3.10.  Deposits
      by XL Capital.
      From
      time to time after the date hereof, XL Capital shall deposit into the Payment
      Account, on behalf of the Grantor, any amounts that are paid by XL Capital
      to
      the Grantor under the Securities Issuance Agreement (other than amounts payable
      pursuant to Section 3.3 of the Securities Issuance Agreement, which amounts
      shall not be deposited into the Trust Account). 

     

    Section
      3.11.  Requirements
      for Deposits.
      All
      deposits into the Trust Account (other than Returned XL Preferred Securities,
      if
      any, deposited pursuant to Sections 3.6 and Section 6.1 hereof) shall be in
      U.S.
      dollars and shall be made by wire transfer of immediately available funds to
      such account as may be specified by the Trustee in writing from time to time.
      Any deposit of Returned XL Preferred Securities by the Grantor shall be made
      by
      delivering to the Trustee certificates evidencing such Returned XL Preferred
      Securities in negotiable and proper deliverable form or accompanied by a duly
      executed stock power, in blank, bearing the signature of the
      transferor.

     

    Section
      3.12.  Access
      to Trust Account Information.
      The
      Beneficiaries will be given real-time access to all information with respect
      to
      the Trust Account through the Trustee’s electronic account system.

     

    Section
      3.13.  Payments
      by Guarantors.
      For the
      purposes of this Trust Agreement, any reference to a payment that is made by
      a
      specified person shall include any payment that is made by a guarantor of such
      specified person pursuant to a guarantee or by any other person that makes
      a
      payment for or on behalf of such specified person. 

     

    Section
      3.14.  Grant
      of Trust Power.
      The
      Grantor hereby grants to the Trustee all trust powers necessary and reasonable
      in the performance of its duties and obligations hereunder.

     

    Section
      3.15.  Purpose
      of Trust.
      The
      Assets in the Trust Account shall be held by the Trustee for the sole use and
      benefit of the Beneficiaries as provided for herein. 

     

    
      
         

      

      
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    Section
      3.16.  Designation
      of Agents.
      Except
      as otherwise expressly provided in this Trust Agreement, any statement,
      certificate, notice, request, consent, approval, or other instrument to be
      delivered or furnished by a Beneficiary, as the case may be, shall be
      sufficiently executed if executed in the name of such Beneficiary by such
      officer or officers of such Beneficiary, or by such other agent or agents of
      such Beneficiary, as may be designated in a resolution or letter of advice
      by
      such Beneficiary (each such person, an “Authorized
      Representative”).
      Written notice of such designation by such Beneficiary shall be filed with
      the
      Trustee. The Trustee shall be protected in acting upon any written statement
      or
      other instrument made by such Authorized Representative of such Beneficiary
      with
      respect to the authority conferred on such person; provided,
      that
      each Beneficiary or its Authorized Representative may only represent its own
      respective interest.

     

    Section
      3.17.  No
      Other Conditions or Qualifications.
      This
      Trust Agreement and the enforceability hereof are not subject to any conditions
      or qualifications not expressly included herein.

     

    ARTICLE
      IV

     

    MAINTENANCE
      OF THE TRUST ACCOUNT

     

    Section
      4.1.  Administration
      of Investment Account by the Trustee.
      The
      Investment Account Assets shall be invested in accordance with the Investment
      Guidelines and any Investment Notice received by the Trustee from the Asset
      Swap
      Counterparty or its Authorized Representative, and the Trustee is hereby
      authorized and instructed to act in accordance with such Investment Guidelines
      and Investment Notice. Except as otherwise provided by this Trust Agreement,
      including the Investment Guidelines, or by any Investment Notice received from
      the Asset Swap Counterparty or its Authorized Representative, the Trustee shall
      not be required or permitted to take any action with respect to the investment
      or reinvestment of the Investment Account Assets. Subject to Section 7.4 hereof,
      any loss on an investment made pursuant to this Section 4.1 shall be borne
      exclusively by the Investment Account and the Trustee shall not be liable for
      such loss. 

     

    Section
      4.2.  Administration
      of the Payment Account and the Repayment Account by the Trustee.
      The
      Payment Account Assets and, if applicable, the Repayment Cash Account Assets
      shall be invested in accordance with any written notices received by the Trustee
      from XL Capital or its Authorized Representative, and the Trustee is hereby
      authorized and instructed to act in accordance with such written notices. Any
      investment of Payment Account Assets or Repayment Cash Account Assets shall
      be
      made in financial instruments selected from time to time by XL Capital which
      (x)
      satisfy the criteria set forth in clauses (ii) and (iv) and the proviso (a)
      of
      the definition of Eligible Assets and (y) are capable of being liquidated within
      one Business Day of the receipt by the Trustee of a written notice from XL
      Capital. Investments made pursuant to this Section 4.2 shall not be deemed
      Reference Obligations for the purpose of the Asset Swap Agreement, and the
      Portfolio shall not be modified to reflect such investments. Except as otherwise
      provided by this Trust Agreement or by any written notice received by the
      Trustee from XL Capital, the Trustee shall not be required or permitted to
      take
      any action with 

     

    
      
         

      

      
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    respect
      to
      the investment or reinvestment of the Payment Account Assets and, if applicable,
      the Repayment Cash Account Assets. Subject to Section 7.4 hereof, any loss
      on an
      investment made pursuant to this Section 4.2 shall be borne exclusively by
      the
      Payment Account or the Repayment Cash Account, as applicable, and the respective
      Beneficiaries thereof and the Trustee shall not be liable for such
      loss.

     

    Section
      4.3.  Voting
      and Redemption of Securities.
      The
      Trustee shall exercise the right to vote with respect to any Investment Account
      Assets solely as directed by the Asset Swap Counterparty and, if the Trustee
      does not receive any direction from the Asset Swap Counterparty with respect
      to
      any vote, abstain from such vote. The Trustee shall exercise the right to vote
      with respect to any Payment Account Assets and any Repayment Cash Account Assets
      solely as directed by XL Capital and, if the Trustee does not receive any
      direction from XL Capital with respect to any vote, abstain from such vote.
      The
      Trustee shall exercise the right to vote with respect to the Returned XL
      Preferred Securities, if any, in the Returned Securities Account solely as
      directed by the Grantor and, if the Trustee does not receive any direction
      from
      the Grantor with respect to any vote, abstain from such vote. The Trustee shall
      exercise any right to redeem Returned XL Preferred Securities in the Returned
      Securities Account, if any, solely as directed by the Grantor and if the Trustee
      does not receive any direction from the Grantor with respect to any such
      redemption right, abstain from exercising such redemption right. 

     

    Section
      4.4.  Books
      and Records

     

    .
      The
      Trustee shall keep full and complete records of the administration of the Trust
      Account and each Account. Each of the Beneficiaries may, with reasonable prior
      notice, examine such Trust Account and Account records during business hours
      through any person or persons duly authorized in writing by such
      Beneficiary.

     

    Section
      4.5.  Disclosure
      of Interests.
      Each
      Beneficiary hereby authorizes the Trustee to disclose its respective name,
      address and interest in the Assets in the Trust Account if and to the extent
      that such disclosure is required by law.

     

    ARTICLE
      V

     

    DISTRIBUTIONS
      FROM THE PAYMENT ACCOUNT

     

    Section
      5.1.  Distributions
      Generally.
      (a)
      Except as provided in Sections 5.2, 6.2 and 6.3 hereof, all distributions from
      the Trust Account shall be made from the Payment Account and shall be subject
      to
      Section 5.9 hereof. If the Payment Account does not have sufficient Assets
      to
      fund a distribution that is required to be made pursuant to Section 5.2,
      5.3, 5.4, 5.5, 5.6, 5.7 or 5.8 hereof, the Trustee shall (i) transfer cash
      from
      the Investment Account to the Payment Account or (ii) liquidate one or more
      Investment Account Assets in accordance with Section 4.1 hereof (but only to
      the
      extent that such liquidation is necessary to generate funds for any such
      distribution or distributions) and transfer such liquidation proceeds to the
      Payment Account. In the case of a distribution to be made to the Grantor
      pursuant to Section 5.8 hereof in order to permit the Grantor to pay
      Extraordinary Expenses stated by the Grantor to be due and payable, the Trustee
      shall (x) liquidate one or more Investment Account Assets in accordance

     

    
      
         

      

      
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    with
      Section 4.1 hereof (but only to the extent that such liquidation is necessary
      to
      generate funds for such distribution), (y) transfer any proceeds from such
      liquidation to the Payment Account and (z) make such distribution to the Grantor
      solely from such liquidation proceeds. 

     

    Section
      5.2.  Distributions
      to the Trustee.
      The
      Trustee may from time to time make distributions from the Payment Account to
      itself in order to satisfy any obligations that are then due and payable to
      it
      pursuant to Section 7.11 hereof; provided,
      that the
      Trustee has previously sought but not obtained payment from the Grantor and
      XL
      Capital and any grace periods for the payment of such obligations have expired.
      If after all Assets have been distributed from the Payment Account (after giving
      effect to a liquidation of Investment Account Assets and the transfer of the
      proceeds from such liquidation to the Payment Account pursuant to Section 5.1
      hereof) any obligations that are then due and payable to the Trustee pursuant
      to
      Section 7.11 hereof remain unsatisfied, the Trustee may make such further
      distributions to itself from the Repayment Account as are necessary to satisfy
      such remaining obligations; provided,
      that the
      Trustee has previously sought but not obtained payment from the Grantor or
      XL
      Capital and any grace periods for the payment of such obligations have expired.
      The Trustee shall notify each of the Beneficiaries in writing at least five
      Business Days prior to making a distribution pursuant to this Section
      5.2.

     

    Section
      5.3.  Distributions
      from the Payment Account to the Asset Swap Counterparty.
      The
      Asset Swap Counterparty may, by delivering via facsimile a written certification
      substantially in the form attached hereto as Exhibit C to the Trustee and a
      copy
      of such written certification to each other Beneficiary, from time to time
      request a distribution from the Payment Account in order to satisfy any
      obligations stated by the Asset Swap Counterparty to be due and payable
      (irrespective of whether any grace periods applicable thereto have expired)
      on
      the Specified Distribution Date by the Grantor to the Asset Swap Counterparty
      under the Asset Swap Agreement. The Trustee shall, subject to Section 5.9
      hereof, distribute the requested amount to the Asset Swap Counterparty or its
      designee on the Specified Distribution Date. 

     

    Section
      5.4.  Distributions
      from the Payment Account to the Interest Rate Swap Counterparty.
      The
      Interest Rate Swap Counterparty may, by delivering via facsimile a written
      certification in the form customarily produced in accordance with its internal
      procedures to the Trustee and a copy of such written certification to each
      other
      Beneficiary, from time to time request a distribution from the Payment Account
      in order to satisfy any obligations stated by the Interest Rate Swap
      Counterparty to be due and payable (irrespective of whether any grace periods
      applicable thereto have expired) on the Specified Distribution Date by the
      Grantor to the Interest Rate Swap Counterparty under the Interest Rate Swap
      Agreement. The Trustee shall, subject to Section 5.9 hereof, distribute the
      requested amount to the Interest Rate Swap Counterparty or its designee on
      the
      Specified Distribution Date.

     

    Section
      5.5.  Distributions
      from the Payment Account to the Ceding Insurers.
      Any
      Ceding Insurer may, by delivering via facsimile a written certification
      substantially in the form attached hereto as Exhibit C to the Trustee and a
      copy
      of such written certification to each other Beneficiary, from time to time
      request a distribution from the Payment Account in order to satisfy any
      obligations stated by the Ceding Insurer to be due and payable (irrespective
      of

     

    
      
         

      

      
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    whether
      any grace periods applicable thereto have expired) on the Specified Distribution
      Date by the Grantor to the Ceding Insurer under the Reinsurance Agreement;
      provided,
      in each
      case, that (i) such written certification certifies that (a) the distribution
      will not result in the total amount of funds distributed from the Trust Account
      pursuant to this Section 5.5 and Section 5.6 hereof exceeding, in the aggregate,
      $350,000,000 as of the time of distribution and (b) there has not been commenced
      any winding up, liquidation or insolvency-related reorganization of XL Capital
      and (ii), if the distribution is requested in respect of a claim under the
      Reinsurance Agreement, a copy of the quarterly or interim report or the
      commutation report relating to such claim is attached to the written
      certification. The Trustee shall, subject to Section 5.9 hereof, distribute
      the
      requested amount to the Ceding Insurer or its designee on the Specified
      Distribution Date, but only against the concurrent issuance and delivery to
      the
      Grantor by XL Capital of an amount of XL Preferred Securities having an
      aggregate liquidation preference that is equal to the amount of funds so
      distributed. Any written certification to be delivered by a Ceding Insurer
      hereunder may be executed and delivered on its behalf by XLIB.

     

    Section
      5.6.  Distributions
      from the Payment Account to XLIB.
      XLIB
      may, by delivering via facsimile a written certification substantially in the
      form attached hereto as Exhibit C to the Trustee and a copy of such written
      certification to each other Beneficiary, request a distribution from the Payment
      Account to fund amounts stated to be due and payable (irrespective of whether
      any grace periods applicable thereto have expired) to XLIB or its designee
      on
      the Specified Distribution Date against the issuance and delivery of XL
      Preferred Securities to the Grantor pursuant to Sections 2.2(a)(ii) and 2.3(a)
      of the Securities Issuance Agreement; provided,
      in each
      case, that such written certification certifies that (i) the distribution will
      not result in the total amount of funds distributed from the Trust Account
      pursuant to Section 5.5 hereof and this Section 5.6 exceeding, in the aggregate,
      $350,000,000 as of the time of distribution and (ii) there has not been
      commenced any winding up, liquidation or insolvency-related reorganization
      of XL
      Capital. The Trustee shall, subject to Section 5.9 hereof, distribute the
      requested amount to XLIB or its designee on the Specified Distribution Date,
      but
      only against the concurrent issuance and delivery to the Grantor by XL Capital
      of an amount of XL Preferred Securities having an aggregate liquidation
      preference that is equal to the amount of funds so distributed. 

     

    Section
      5.7.  Distributions
      from the Payment Account to XL Capital.
      XL
      Capital may, by delivering via facsimile a written certification substantially
      in the form attached hereto as Exhibit C to the Trustee and a copy of such
      written certification to each other Beneficiary, from time to time request
      a
      distribution from the Payment Account (i) in order to satisfy any obligations
      stated by XL Capital to be due and payable (irrespective of whether any grace
      periods applicable thereto have expired) on the Specified Distribution Date
      by
      the Grantor to XL Capital under Section 3.4 of the Securities Issuance Agreement
      or (ii) of Payment Account Net Earnings. The Trustee shall, subject to Section
      5.9 hereof and the limitation set forth in the immediately succeeding sentence,
      distribute the requested amount to XL Capital or its designee on the Specified
      Distribution Date. Any distribution of Payment Account Net Earnings to XL
      Capital pursuant to this Section 5.7 shall be limited to the Payment Account
      Net
      Earnings in the Payment Account on the Specified Distribution Date after any
      distributions that are required to 

     

    
      
         

      

      
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    be
      made to
      the Trustee, the Asset Swap Counterparty, the Interest Rate Swap Counterparty,
      the Ceding Insurers and XLIB, or any of them, on the Specified Distribution
      Date
      have been made.

     

    Section
      5.8.  Distributions
      from the Payment Account to the Grantor.
      The
      Grantor may, by delivering via facsimile a written certification substantially
      in the form attached hereto as Exhibit C to the Trustee and a copy of such
      written certification to each other Beneficiary, from time to time request
      a
      distribution from the Payment Account in order to (i) pay any Extraordinary
      Expenses stated by the Grantor to be due and payable (irrespective of whether
      any grace periods applicable thereto have expired) on the Specified Distribution
      Date or (ii) make payments on the Issuer Preferred Securities on the Specified
      Distribution Date in accordance with their terms, as in effect on the date
      hereof. The Trustee shall, subject to Section 5.9 hereof, distribute the
      requested amount to the Grantor or its designee on the Specified Distribution
      Date. 

     

    Section
      5.9.  Priority
      of Distributions from the Payment Account.
      If two
      or more distributions from the Payment Account are to be made on the same date,
      the Trustee shall make such distributions in the following order of priority:
      first,
      to the
      Trustee pursuant to Section 5.2 hereof; second,
      to the
      Asset Swap Counterparty or its designee pursuant to Section 5.3 hereof;
third,
      to the
      Interest Rate Swap Counterparty or its designee pursuant to Section 5.4 hereof;
      fourth,
      to the
      Ceding Insurers or their respective designees pursuant to Section 5.5 hereof;
      fifth,
      to XLIB
      or its designee pursuant to Section 5.6 hereof; sixth,
      to XL
      Capital or its designee pursuant to Section 5.7 hereof; and, seventh,
      to the
      Grantor or its designee pursuant to Section 5.8 or 8.1(b) hereof.

     

    ARTICLE
      VI

     

    DISTRIBUTIONS
      FROM THE REPAYMENT ACCOUNT

     

    Section
      6.1.  Repayment
      Option.
      The
      Grantor shall have the option to deposit the full amount of Returned XL
      Preferred Securities into the Returned Securities Account at any time during
      the
      Securities Return Period. If at the time of expiration of the Securities Return
      Period the Grantor has not deposited the full amount of Returned XL Preferred
      Securities into the Returned Securities Account, the Trustee shall distribute
      all Repayment Cash Account Assets to XLIB or its designee on the first Business
      Day following the expiration of the Securities Return Period. If the Grantor
      deposits the full amount of Returned XL Preferred Securities into the Returned
      Securities Account at any time during the Securities Return Period, the Grantor
      shall have the option (the “Repayment
      Option”),
      exercisable during the period commencing on the first date on which the Ceding
      Insurers deposited the full amount of the Policy Repayments into the Repayment
      Cash Account and ending at 5 p.m., New York time, on the tenth Business Day
      thereafter (the “Repayment
      Option Period”),
      to
      receive a distribution of either (i) all the Returned Securities Account Assets
      in the Returned Securities Account at the time of the distribution or (ii)
      all
      Repayment Cash Account Assets in the Repayment Cash Account at the time of
      the
      distribution. The Grantor may exercise the Repayment Option at any time during
      the Repayment Option Period by delivering a written notice (an “Exercise
      Notice”)
      to the
      Trustee

     

    
      
         

      

      
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    (with
      a
      copy to XLIB) stating that the Grantor has exercised the Repayment Option and
      the type of distribution that the Grantor has elected to receive.

     

    Section
      6.2.  Distributions
      Prior to the Exercise of the Repayment Option.
      

     

    (a)  The
      Trustee shall, subject to Section 6.4 hereof, promptly following the receipt
      thereof distribute to the Grantor all dividends, if any, paid on the Returned
      XL
      Preferred Securities (irrespective of when declared) while such Returned XL
      Preferred Securities are in the Returned Securities Account. Upon making any
      distribution to the Grantor pursuant to this Section 6.2(a), the Trustee shall,
      subject to Section 6.4 hereof, contemporaneously distribute to XLIB or its
      designee all Repayment Cash Account Net Earnings, if any, in the Repayment
      Cash
      Account at the time of the distribution. 

     

    (b)  If
      during
      the Repayment Option Period all or a portion of the Returned XL Preferred
      Securities in the Returned Securities Account are redeemed in accordance with
      their terms, the Trustee shall, subject to Section 6.4 hereof, promptly
      following the receipt thereof distribute to the Grantor the full redemption
      price (including any accrued dividends) paid on the Returned XL Preferred
      Securities so redeemed. Upon making any distribution to the Grantor pursuant
      to
      this Section 6.2(b), the Trustee shall, subject to Section 6.4 hereof,
      contemporaneously distribute to XLIB or its designee an amount of Repayment
      Cash
      Account Assets that is equal to the sum of (i) the aggregate liquidation
      preference of the Returned XL Preferred Securities redeemed in connection with
      the distribution to the Grantor and (ii) the Temporary Repayment Cash Account
      Net Earnings as determined and notified to the Trustee by XLIB. For purposes
      of
      this Trust Agreement, “Temporary
      Repayment Cash Account Net Earnings”
means
      an
      amount of Repayment Cash Account Net Earnings that is equal to the product
      of
      (a) the Repayment Cash Account Net Earnings in the Repayment Cash Account at
      the
      time of the distribution to XLIB or its designee multiplied by (b) a fraction,
      the numerator of which is the aggregate liquidation preference of the Returned
      XL Preferred Securities redeemed in connection with the distribution to the
      Grantor and the denominator of which is the aggregate liquidation preference
      of
      all of the Returned XL Preferred Securities in the Returned Securities Account
      immediately prior to such redemption. 

     

    (c)  Subject
      to
      Section 6.4 hereof, any distribution pursuant to this Section 6.2 to the Grantor
      or its designee or to XLIB or its designee shall be made free and clear of
      any
      claim by any other person.

     

    Section
      6.3.  Distributions
      following the Exercise of the Repayment Option.
      Within
      one Business Day of receiving a completed Exercise Notice from the Grantor,
      the
      Trustee shall, subject to Section 6.4 hereof, make a distribution from the
      Repayment Account to the Grantor or its designee in accordance with the election
      made by the Grantor in the Exercise Notice. If by the expiration of the
      Repayment Option Period the Trustee shall not have received a properly completed
      Exercise Notice from the Grantor, (i) the Grantor shall be deemed to have
      elected to receive a distribution from the Returned Securities Account
      consisting of all Returned Securities Account Assets at the time of the
      distribution and (ii) the Trustee shall, subject to Section 6.4 hereof, make
      a
      distribution on the first Business Day following the expiration of the

     

    
      
         

      

      
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    Repayment
      Option Period to the Grantor or its designee in accordance with such deemed
      election. Upon making any distribution to the Grantor pursuant to this Section
      6.3, the Trustee shall, subject to Section 6.4 hereof, contemporaneously
      distribute all other Repayment Account Assets in the Repayment Account at the
      time of the distribution to XLIB or its designee. Subject to Section 6.4 hereof,
      any distribution pursuant to this Section 6.3 to the Grantor or its designee
      or
      to XLIB or its designee shall be made free and clear of any claim by any other
      person. 

     

    Section
      6.4.  Priority
      of Distributions from the Repayment Account.
      If the
      Trustee is to make a distribution from the Repayment Account to itself pursuant
      to Section 5.2 hereof on any date on which a distribution from the Repayment
      Account is also to be made to the Grantor or its designee or XLIB or its
      designee pursuant to Section 6.2 or Section 6.3 hereof, the Trustee shall make
      such distributions, first,
      to the
      Trustee and, second,
      to XLIB
      or its designee and, if applicable, to the Grantor or its designee. Any
      distribution from the Repayment Account to the Trustee pursuant to this Section
      6.4 shall be made equally out of the Repayment Cash Account Assets and the
      Returned Securities Account Assets.

     

    ARTICLE
      VII

     

    RIGHTS
      AND DUTIES OF THE TRUSTEE

     

    Section
      7.1.  Acceptance
      of Assets by the Trustee.
      The
      Trustee shall not accept any Assets for deposit into the Trust Account (other
      than cash) unless such Assets are issued or registered in such form that they
      are readily negotiable to the Trustee. For the purposes of the preceding
      sentence, Assets that are either issued in “bearer” form or issued or registered
      in the name of the Trustee or its nominee shall be deemed to be in such
      negotiable form or specifically endorsed by the Grantor to the Trustee in blank.
      Any Assets received by the Trustee that are not in such proper negotiable form
      shall not be accepted by the Trustee and shall be returned to the appropriate
      person as unacceptable. In no case shall any Asset to be credited to the Trust
      Account be registered in the name of the Grantor, payable to the order of the
      Grantor or specially endorsed to the Grantor except to the extent the foregoing
      have been specially endorsed by the Grantor to the Trustee or in blank.

     

    Section
      7.2.  Collection
      of Interest, Dividends and Other Investment Income.
      The
      Trustee is hereby authorized, without prior direction from, or notice to, any
      of
      the Beneficiaries to demand payment of and collect all interest payments and
      other investment income on the Assets comprising the Trust Account, if any.
      The
      Trustee shall initially (i) deposit all interest payments and other investment
      income on Investment Account Assets into the Investment Account, (ii) all
      interest payments and other investment income on Payment Account Assets into
      the
      Payment Account, (iii) all interest payments and other investment income on
      Repayment Cash Account Assets into the Repayment Cash Account and (iv) all
      dividend payments and other investment income on Returned Securities Account
      Assets into the Returned Securities Account. 

     

    Section
      7.3.  Obligations
      of the Trustee.
      The
      Trustee agrees to hold, transfer and distribute Assets in the Trust Account
      in
      accordance with the provisions expressed herein.

     

    
      
         

      

      
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    Section
      7.4.  Responsibilities
      of Trustee.
      The
      Trustee, in the administration of this Trust Account, shall be bound solely
      by
      the express provisions herein, the written notices and certifications
      contemplated hereby and such further directions as the appropriate party or
      parties may, under the conditions herein provided, deliver to the Trustee.
      The
      Trustee shall be under no obligation to enforce the Grantor’s obligations under
      this Trust Agreement, except as otherwise expressly provided or directed
      pursuant hereto. The Trustee’s responsibilities shall be limited to the safe
      holding of the Assets comprising the Trust Account, and the Trustee shall be
      liable only for its own negligence, willful misconduct, lack of good faith
      or
      breaches of fiduciary duties or express obligations under this Trust Agreement.
      The Trustee undertakes to perform such duties and only such duties as are
      specifically set forth in this Trust Agreement, and no implied covenants or
      obligations shall be read into this Trust Agreement against the Trustee.

     

    Section
      7.5.  Consultation
      with Counsel.
      The
      Trustee may consult with counsel selected by it, who may be counsel for a
      Beneficiary. If such counsel is not an employee of the Trustee, the Grantor
      or
      any of the Other Beneficiaries, the reasonable fees and expenses of such counsel
      shall be jointly and severally borne by the Grantor and XL Capital. The opinion
      of said counsel shall be full and complete authority and protection for the
      Trustee with respect to any action taken, suffered or omitted by it in good
      faith and in accordance with the opinion of said counsel.

     

    Section
      7.6.  Monthly
      Report, Etc.
      (a)The
      Trustee shall provide an activity report to the Beneficiaries upon inception
      of
      the Trust Account and within five Business Days following the end of each month,
      which report shall, in reasonable detail, show with respect to each of the
      Investment Account, the Payment Account and the Repayment Account (i) all
      deposits, distributions, transfers and substitutions during such month; (ii)
      a
      listing of securities held and cash and cash equivalent balances as of the
      day
      of such report; (iii) the fair market value of each Asset held in such Account
      (other than cash held in U.S. dollars) and the amount of cash held in U.S.
      dollars as of the day of such report; and (iv) the cost basis of each Asset
      held
      in such Account (other than cash held in U.S. dollars). The Trustee further
      agrees to forward upon request to the Beneficiaries a certified list and
      valuation of all Assets held under this Trust Agreement.

     

    (b)  The
      Trustee shall utilize the services of a nationally recognized reporting service
      in order to determine the fair market value of any Assets in the Trust Account
      (other than cash held in United States dollars) on a monthly basis, and the
      Beneficiaries shall accept and agree to such values absent manifest error;
      provided,
      that
      such values are to be stated in United States dollars. The Trustee shall notify
      the Beneficiaries of the identity of the reporting service utilized by the
      Trustee for such purpose. 

     

    (c)  The
      Trustee shall, promptly following receipt by the Trustee, send to the Asset
      Swap
      Counterparty and XL Capital copies of any notices, reports or information that
      the Trustee receives concerning any security then being held as part of the
      Portfolio, including, information concerning any unscheduled payment the Trustee
      receives in respect of any such security.

     

    
      
         

      

      
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    (d)  The
      Trustee shall, if requested by the Asset Swap Counterparty, request copies
      of
      any notices, reports or information with respect to any security then being
      held
      as part of the Portfolio which the Asset Swap Counterparty would be entitled
      to
      receive if such security were held by the Asset Swap Counterparty.

     

    Section
      7.7.  Resignation
      or Removal of the Trustee.
      (a)Subject
      to
      clause (b) below, the Trustee may, at any time, resign from, and terminate
      its
      capacity hereunder by providing at least ninety days’ prior written notice to
      the Beneficiaries. The Grantor may remove the Trustee by providing at least
      ninety days’ prior written notice of such removal to the Trustee, provided
      that such
      removal is consented to in writing by each of the Other Beneficiaries (who
      may
      not unreasonably withhold or delay their consent). A resignation or removal
      of
      the Trustee shall not become effective until a successor to the Trustee shall
      have been duly appointed and approved by the Beneficiaries or by a court
      pursuant to Section 7.7(b) hereof and all Assets held within the Trust Account
      have been duly transferred to such successor.

     

    (b)  The
      Grantor, upon receiving a notice of resignation from the Trustee or delivering
      a
      notice of removal to the Trustee, shall promptly appoint a successor trustee
      acceptable to the Other Beneficiaries, by written instrument, copies of which
      instrument shall be delivered to the retiring Trustee, the Other Beneficiaries
      and the successor trustee. If no successor trustee shall have been appointed
      and
      accepted appointment as provided in this Section 7.7 within ninety days
      following the written notice of resignation or removal, as the case may be,
      the
      retiring Trustee may petition, at the expense of the Grantor, any court of
      competent jurisdiction for appointment of a successor trustee. Such court may
      thereupon, after prescribing such notice, if any, as it may deem proper, appoint
      a successor trustee. Upon the Trustee’s delivery of the Assets in the Trust
      Account to the successor trustee along with a closing statement showing all
      activities from the last month report, the Trustee shall be discharged of
      further responsibilities hereunder.

     

    Section
      7.8.  Successor
      Trustee.
      Any
      successor trustee appointed as provided in Section 7.7 hereof, shall execute,
      acknowledge and deliver to the Beneficiaries and to its predecessor Trustee
      an
      instrument accepting such appointment hereunder and agreeing to be bound by
      the
      terms and conditions hereof. Upon the Trustee’s delivery of the Assets held in
      the Trust Account to the successor trustee along with a closing statement
      showing all activities from the last month report, the successor trustee,
      without any further act, deed or conveyance, shall become fully vested with
      all
      rights, powers, duties and obligations of its predecessor hereunder, with like
      effect as if originally named as Trustee herein. The predecessor Trustee shall
      deliver to the successor trustee all documents relating to the Assets held
      within the Trust Account delivered to it, together with any Assets remaining
      in
      the Trust Account. In addition, the predecessor Trustee and, upon request of
      the
      successor trustee, the Grantor shall execute and deliver such instruments and
      do
      such other things as may reasonably be required for more fully and certainly
      vesting and confirming in the successor trustee all such rights, powers, duties
      and obligations. 

     

    Section
      7.9.  Merger,
      Conversion, Consolidation or Succession to Business.
      Any
      corporation or national association into which the Trustee may be merged or
      converted or with which it may be consolidated, or any corporation or national
      association resulting from any 

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    merger,
      conversion or consolidation to which the Trustee shall be a party, or any
      corporation or national association succeeding to all or substantially all
      of
      the corporate trust business of the Trustee shall be the successor of the
      Trustee hereunder. 

     

    Section
      7.10.  Release
      of Information.
      The
      Trustee shall respond to any and all reasonable requests for information
      concerning the Trust Account or the Assets held therein by any of the parties
      to
      this Trust Agreement.

     

    Section
      7.11.  Indemnification
      and Charges of the Trustee.
      (a)The
      Grantor and XL Capital hereby jointly and severally agree to indemnify the
      Trustee and its directors, officers, employees and agents for, and hold the
      Trustee and its directors, officers, employees and agents harmless against,
      any
      loss, liability, costs or expenses (including reasonable attorneys’ fees and
      expenses and the costs and expenses of defending the Trustee or its directors,
      officers, employees or agents against any claim) incurred or made without
      negligence, willful misconduct, lack of good faith or breach of the Trustee’s
      fiduciary duties or express obligations under this Trust Agreement, arising
      out
      of or in connection with the performance of the Trustee’s obligations in
      accordance with the provisions of this Trust Agreement. The Grantor and XL
      Capital hereby acknowledge that the foregoing indemnities shall survive the
      resignation or removal of the Trustee.

     

    (b)  The
      Grantor and XL Capital hereby jointly and severally agree to pay all costs,
      fees
      or expenses charged by the Trustee (including reasonable fees and expenses
      of
      counsel as provided for in Section 7.5 hereof) for acting as the Trustee
      pursuant to this Trust Agreement as set forth in the fee letter between the
      Grantor and the Trustee.

     

    (c)  The
      provisions of this Section 7.11 shall survive the termination of this Trust
      Agreement.

     

    Section
      7.12.  Limitations
      of Responsibilities of Trustee.
      (a)The
      Trustee shall not be responsible for determining the amount of Assets required
      to be deposited into any Account. 

     

    (b)  Subject
      to
      Section 7.4 hereof, the Trustee shall not be liable with respect to any action
      taken or omitted to be taken by it (i) in accordance with the Investment
      Guidelines and Investment Notices received from the Asset Swap Counterparty
      and
      (ii) the written notices from XL Capital pursuant to Section 4.2 hereof. In
      addition, subject to the immediately succeeding sentence the Trustee shall
      not
      be liable with respect to any action taken or omitted to be taken by it in
      accordance with any written directions received by the Trustee from the Grantor
      or the Other Beneficiaries relating to the time, method and place of conducting
      any proceeding for any remedy available to the Trustee, or exercising any trust
      or power conferred upon the Trustee, under this Trust Agreement. If any such
      written direction conflicts on its face with another direction signed by or
      on
      behalf of a Beneficiary or its Authorized Representative and delivered to the
      Trustee, the Trustee shall, to the extent any such direction pertains to a
      distribution to be made hereunder, make such distribution as provided in Section
      5.9 hereof and shall not be liable for doing so. No provision of this Trust
      Agreement shall require the Trustee to 

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    expend
      or
      risk its own funds or otherwise incur any financial liability in the performance
      of any of its duties hereunder, or in the exercise of any of its rights or
      powers unless the Trustee shall have received reasonable assurance that it
      will
      be reimbursed therefor.

     

    (c)  The
      Trustee shall not be bound to make any investigation into the facts or matters
      stated in any resolution, certificate, statement, instrument, opinion, report,
      notice, request, direction, consent, order, bond, debenture, note, other
      evidence of indebtedness or other paper or document. The
      Trustee may execute any of the trusts or powers hereunder or perform any duties
      hereunder either directly or by or through agents, attorneys, custodians or
      nominees. The
      Trustee makes no representations as to the validity or sufficiency of this
      Trust
      Agreement. 

     

    (d)  Notwithstanding
      anything to the contrary in this Trust Agreement, in no event shall the Trustee
      be liable under or in connection with this Trust Agreement for indirect,
      special, incidental, punitive or consequential losses or damages of any kind
      whatsoever, including but not limited to lost profits, whether or not
      foreseeable, even if the Trustee, has been advised of the possibility thereof
      and regardless of the form of action in which such damages are
      sought.

     

    (e)  Subject
      to
      Section 7.4 hereof, the Trustee shall be protected in acting upon any statement,
      notice, resolution, request, consent, order certificate, report, appraisal,
      opinion, telegram, cablegram, letter or other paper or document believed by
      the
      Trustee to be genuine and to have been signed, sent or presented by the proper
      party or parties or their Authorized Representatives. 

     

    Section
      7.13.  Force
      Majeure.
      Notwithstanding anything contained in this Trust Agreement to the contrary,
      the
      Trustee shall not be responsible or liable for its failure to perform under
      this
      Trust Agreement or for any losses to the Trust Account resulting from any event
      beyond the reasonable
      control of the Trustee, its agents, or its subcustodians, including but not
      limited to nationalization, strikes, expropriation, devaluation, seizure, or
      similar action by any governmental authority, agency or body de facto or de
      jure; or enactment, promulgation, imposition, or enforcement by any such
      governmental authority, agency or body of currency restrictions, exchange
      controls, levies, or other charges affecting the Assets; or the breakdown,
      failure, or malfunction of any utilities or telecommunications systems; or
      any
      order or regulation of any banking or securities industry regulatory body or
      organization including changes in market rules and market conditions affecting
      the execution or settlement of transactions; or acts of war, terrorism,
      insurrection, or revolution; or acts of God; or any other similar event or
      the
      unavailability of the Federal Reserve Bank wire or telex or other wire or
      communication facility maintained by a clearing system or otherwise. This
      Section 7.13 shall survive the termination of this Trust Agreement.

     

    Section
      7.14.  Deposit.
      The
      Trustee may deposit any Assets in the Trust Account in a book-entry account
      maintained at the Federal Reserve Bank of New York or in depositories such
      as
      the Depository Trust Company and the Participants Trust Company. Assets may
      be
      held in the name of a nominee maintained by the Trustee or by any such
      depository.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    

     

    Section
      7.15.  Certificates
      of the Grantor and the Other Beneficiaries.
      Whenever
      in the administration of the Trust Account created by this Trust Agreement,
      the
      Trustee shall deem it necessary or desirable that a matter be proved or
      established prior to taking, suffering or omitting any action thereunder, such
      matter (unless other evidence in respect thereof be herein specifically
      prescribed) may be deemed to be conclusively proved and established by a
      statement or certificate signed by or on behalf of a Beneficiary or its
      Authorized Representative and delivered to the Trustee and said certificate
      shall, subject to the immediately succeeding sentence, be full warrant to the
      Trustee for any action taken, suffered or omitted by it on the faith thereof;
      provided,
      that the
      Trustee, at its sole discretion, may in lieu thereof accept other evidence
      of
      the fact or matter or may require such other or additional evidence as it may
      deem reasonable. If any such statement or certificate conflicts on its face
      with
      another statement or certificate signed by or on behalf of a Beneficiary or
      its
      Authorized Representative and delivered to the Trustee, the Trustee shall,
      to
      the extent any such statement or certificate pertains to a distribution to
      be
      made hereunder, make such distribution as provided in Section 5.9 hereof and
      shall not be liable for doing so. 

     

    ARTICLE
      VIII

     

    TERMINATION
      OF TRUST AGREEMENT

     

    Section
      8.1.  Termination.
      (a)This
      Trust
      Agreement will terminate on the Final Redemption Date (the “Termination
      Date”).
      The
      Trust Agreement may be terminated by the Grantor prior to the Termination Date
      with the written consent of each of the Other Beneficiaries upon 60 days’
written notice to the Trustee; provided,
      that
      such termination by the Grantor shall not be effective until such time as the
      Grantor has provided the Other Beneficiaries with such alternative security
      for
      the Grantor’s obligations under the Reinsurance Agreement, the Securities
      Issuance Agreement, the Asset Swap Agreement and the Interest Rate Swap
      Agreement, respectively, as the Other Beneficiaries may request in their sole
      discretion.

     

    (b)  Upon
      any
      such termination and subject to Sections 5.1 and 5.9 hereof, the Trustee shall
      distribute any remaining Assets held in the Trust Account to or as directed
      by
      the Grantor, and shall take any and all commercially practicable steps necessary
      to absolutely and unequivocally transfer all right, title and interest in such
      Assets and to deliver physical custody, if applicable, in such Assets to the
      Grantor or as otherwise directed by the Grantor.

     

    ARTICLE
      IX

     

    GENERAL
      PROVISIONS

     

    Section
      9.1.  Failure
      to Act.
      The
      failure of any party hereto at any time to exercise any of the rights or powers
      conferred upon it herein shall not constitute a waiver of its right to exercise,
      or stop it from exercising, any rights at any subsequent time, and such failure
      shall not reduce in any degree any liability or obligation for which any other
      party is bound hereunder.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    

     

    Section
      9.2.  Amendments.
      This
      Trust Agreement may be altered, amended or terminated at any time only by
      written agreement executed by each party hereto; provided
      that the
      consent of the Trustee shall not be required to the extent that any such
      alteration, amendment or termination would not reasonably be expected to have
      the effect of increasing or expanding the Trustee’s obligations or duties under
      this Trust Agreement. A copy of any such written agreement not executed by
      the
      Trustee shall be delivered to the Trustee by the Beneficiaries.

     

    Section
      9.3.  Additional
      Parties.
      Any
      Ceding Insurer who is no a party to this Trust Agreement as of the date hereof
      shall become an additional party to this Trust Agreement as a Beneficiary with
      all of the rights and obligations thereof by executing a counterpart signature
      page and delivering such counterpart signature page to the Trustee.

     

    Section
      9.4.  Assignment.
      This
      Trust Agreement may not be assigned without the written consent of the parties
      hereto. Subject to the receipt of such written consent, any such assignment
      shall be binding upon and inure to the benefit of the parties hereto, their
      successor and assigns. Notwithstanding anything in this Trust Agreement to
      the
      contrary, in no event shall any resignation or removal of the Trustee be
      effective until a successor trustee has been duly appointed and approved by
      the
      Beneficiaries or by a court and all Assets in the Trust Account have been duly
      transferred to the new trustee, as provided in Section 7.7 hereof.

     

    Section
      9.5.  Limited
      Recourse.
      All
      obligations of and any claims against the Grantor under this Trust Agreement
      shall be with recourse solely to the Grantor’s Assets (other than its ordinary
      share capital of U.S. $5,000, the amount equal to U.S. $1,500 paid to the
      Grantor as a transaction fee, any interest income earned on such excluded
      amounts and the Cayman Islands bank account in which such amounts are held)
      for
      satisfaction of the Grantor’s obligations hereunder. 

     

    All
      obligations of and any claims against the Grantor under this Trust Agreement
      shall be extinguished and shall not thereafter revive in the event that, at
      any
      time, the Grantor’s assets (other than the cash amounts representing its
      ordinary share capital of U.S. $5,000, the amount equal to U.S. $1,500
      paid to the Grantor as a transaction fee, any interest income earned on such
      excluded amounts and the Cayman bank account in which such amounts are held)
      are
      exhausted. The Trustee and the Other Beneficiaries shall have no further claim
      thereafter against the Grantor, its directors, officers or shareholders for
      any
      shortfall.

     

    The
      provisions of this Section 9.5 shall survive the termination of this Trust
      Agreement. 

     

    Section
      9.6.  Non-Petition.
      The
      Trustee and the Beneficiaries, by entering into this Trust Agreement, hereby
      covenant and agree that they will not at any time institute against each other,
      or join in any institution against each other of, any bankruptcy,
      reorganization, arrangement, insolvency or liquidation proceedings, or other
      proceedings under U.S. federal or state or any non-U.S. bankruptcy or similar
      law in connection with any obligations hereunder until the expiration of one
      year and one day (or if longer, the applicable preference period then in

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    effect
      (plus one day) under any applicable law) from the Termination Date. The
      provisions of this Section 9.6 shall survive the termination of this Trust
      Agreement.

     

    Section
      9.7.  Paragraph
      Headings.
      The
      paragraph headings contained herein are for convenience of reference only and
      shall not limit or otherwise affect the meaning hereof.

     

    Section
      9.8.  Counterparts.
      This
      Trust Agreement may be executed in any number of counterparts or by attached
      documents, all of which shall constitute one and the same original.

     

    Section
      9.9.  Notices.
      (a)Except
      as
      otherwise provided herein, all notices, requests, demands and other
      communications required or permitted to be given to the Grantor, the Asset
      Swap
      Counterparty, Interest Rate Swap Counterparty, the Ceding Insurers or XL Capital
      under this Trust Agreement shall be in writing and shall be deemed to have
      been
      duly given, made and received when delivered against receipt or upon actual
      receipt of (i) personal delivery, (ii) delivery by reputable overnight courier,
      (iii) delivery by facsimile transmission with telephonic confirmation or (iv)
      delivery by registered or certified mail, postage prepaid, return receipt
      requested, addressed as set forth below:

     

    

    
      	
              Grantor:

            	 	
              Stoneheath
                Re

            	 
	 	 	
              c/o
                HSBC Financial Services (Cayman)

            	 
	 	 	
              Limited

            	 
	 	 	
              Strathvale
                House

            	 
	 	 	
              North
                Church Street

            	 
	 	 	
              P.O.
                Box 1109

            	 
	 	 	
              Georgetown

            	 
	 	 	
              Grand
                Cayman, KY1-1102

            	 
	 	 	
              Cayman
                Islands

            	 
	 	 	
              Attention:
                The Directors

            	 
	 	 	
              Telephone:
                (345)-949-7755

            	 
	 	 	
              Facsimile:
                (345)-949-7634

            	 
	 	 	 	 
	
              Asset
                Swap Counterparty:

            	 	
              Goldman
                Sachs International

            	 
	 	 	
              Goldman
                Sachs International

            	 
	 	 	
              Peterborough
                Court

            	 
	 	 	
              133
                Fleet Street

            	 
	 	 	
              London
                EC4A 2BB

            	 
	 	 	
              England

            	 
	 	 	
              Attention:
                IBD Legal

            	 
	 	 	
              Telephone:
                44-(20)-7774-0374

            	 
	 	 	
              Facsimile:
                44-(20)-7774-4123

            	 
	 	 	 	 
	
              Interest
                Rate Swap Counterparty:

            	 	
              IXIS
                Financial Products Inc.

            	 
	 	 	
              9
                West 57th
                Street, 35th
                Floor 

            	 
	 	 	
              New
                York, New York 10019

            	 

    

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    

    
      	 	 	
              United
                States of America

            	 
	 	 	
              Attention:
                Swaps Administration

            	 
	 	 	
              Telephone:
                (212)-891-6194

            	 
	 	 	
              Facsimile:
                (212)-891-0660

            	 
	 	 	 	 
	
              Ceding
                Insurers:

            	 	
              XL
                Insurance (Bermuda) Ltd

            	 
	 	 	
              XL
                House

            	 
	 	 	
              One
                Bermudiana Road

            	 
	 	 	
              Hamilton,
                HM 11 Bermuda

            	 
	 	 	
              Attention:
                Chief Operating Officer and 

            	 
	 	 	
              Director
                of Global Programs

            	 
	 	 	
              Telephone:
                (441)-294-7742

            	 
	 	 	
              Facsimile:
                (441)-292-3919

            	 
	 	 	 	 
	
              Cc:

            	 	
              XL
                Insurance (Bermuda) Ltd

            	 
	 	 	
              XL
                House

            	 
	 	 	
              One
                Bermudiana Road

            	 
	 	 	
              Hamilton
                HM 11 Bermuda

            	 
	 	 	
              Attention:
                Chief Financial Officer

            	 
	 	 	
              Telephone:
                (441)-294-7379

            	 
	 	 	
              Facsimile:
                (441)-292-3919

            	 
	 	 	 	 
	
              XL
                Capital:

            	 	
              XL
                Capital Ltd

            	 
	 	 	
              XL
                House

            	 
	 	 	
              One
                Bermudiana Road

            	 
	 	 	
              Hamilton,
                HM 11 Bermuda

            	 
	 	 	
              Attention:
                Executive Vice President-

            	 
	 	 	
              General
                Counsel-Corporate Affairs-

            	 
	 	 	
              Secretary

            	 
	 	 	
              Telephone:
                (441)-292-8515

            	 
	 	 	
              Facsimile:
                (441)-295-2840

            	 

    

    

    Each
      party
      hereto may alter the address to which notices, requests, demands and other
      communications are to be sent to such party by giving notice of such change
      of
      address in conformity with the provisions of this Section 9.9.

     

    (b)  Unless
      otherwise specifically provided herein, every notice, direction, request,
      demand, acknowledgment or other communication required or permitted to be given
      to the Trustee under this Trust Agreement shall be given and made under the
      terms hereof, shall be in writing and may be made or given by facsimile and
      shall be deemed to have been duly given or made (i) when received by the Trustee
      and (ii) when addressed as follows:

     

    
      	
              Trustee:

            	 	
              The
                Bank of New York

            	 
	 	 	
              101
                Barclay Street, 21st
                Floor

            	 
	 	 	
              New
                York, New York 10286

               

            	 

    

    

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    

    
      	 	 	
              Attention:
                Global Structured Finance

            
	 	 	
              Telephone:
                (212)-298-1550

            
	 	 	
              Facsimile:
                (212)-815-5915

               

            

    

    

    Section
      9.10.  Severability.
      In the
      event any provision of this Trust Agreement shall be held invalid or
      unenforceable for any reason, such invalidity or unenforceability shall not
      affect the remaining provisions of this Trust Agreement.

     

    Section
      9.11.  Governing
      Law.
      Both
      this Trust Agreement and the Trust Account shall be governed and construed
      by
      the laws of the State of New York.

     

    Section
      9.12.  Dispute
      Resolution.
      Notwithstanding any other provision contained in this Trust Agreement, any
      controversy or claim arising out of or relating to this Trust Agreement shall
      be
      resolved by binding arbitration administered by the American Arbitration
      Association, pursuant to its Commercial Arbitration Rules. This agreement to
      arbitrate shall be enforceable under the Federal Arbitration Act, 9 U.S.C.
§1 et
      seq. The arbitration shall be held in New York, New York before three neutral
      arbitrators, none of which shall be party-appointed and all of which shall
      be
      selected in accordance with Rule 11 of the Commercial Arbitration Rules of
      the
      American Arbitration Association. The arbitrators may hear and rule on
      dispositive motions as part of the arbitration proceeding, including motions
      for
      judgment on the pleadings, summary judgment and partial summary judgment. The
      arbitration award shall be in writing and shall state the findings of fact
      and
      conclusions of law upon which it is based. Judgment upon the award rendered
      by
      the arbitrators may be entered in any court having competent jurisdiction.
      The
      parties covenant that they will participate in the arbitration in good faith
      and
      that they will share equally its costs (which, in the case of the Grantor,
      shall
      constitute Extraordinary Expenses). The provisions of this Section 9.12 shall
      be
      enforceable in any court of competent jurisdiction, and the parties hereto
      shall
      bear their own costs (which, in the case of the Grantor, shall constitute
      Extraordinary Expenses) in the event of any proceeding to enforce this Trust
      Agreement. The decision of the arbitrators shall be final and conclusive and
      shall not be subject to appeal absent manifest error. In no event shall the
      arbitrators award any party punitive, special, consequential or exemplary
      damages. By agreeing to arbitration, the parties hereto do not intend to deprive
      any court with jurisdiction of its ability to issue a preliminary injunction,
      attachment or other form of provisional remedy in aid of the arbitration and
      a
      request for such provisional remedies by a party to a court shall not be deemed
      a waiver of this agreement to arbitrate, and in addition to the authority
      conferred upon the panel by the rules specified above, the panel shall also
      have
      the authority to grant provisional remedies, including injunctive
      relief.

     

    [Remainder
      of page intentionally left blank.]

     

    

     

    

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    IN
      WITNESS
      OF THE ABOVE, this Trust Agreement is executed by the parties’ duly authorized
      officers on the dates indicated below with an effective date of December 12,
      2006.

     

    GOLDMAN
      SACHS INTERNATIONAL,

    as
      Beneficiary

     

    By /s/
      Dan
      Parker        

    Name:
      Dan
      Parker

    Title:
      Authorised Signatory

    Date:
      12-December-2006

     

     

    Attest: /s/
      Sarah Taylor        

    Name:
      Sarah Taylor

    Title:
      Authorised Signatory

    Date:
      12-December-2006

    

    

     

    

     

    
      
         

      

      
        [Signature
          Page (Trust Agreement)]

        
          

        

      

      
         

      

    

    XL
      INSURANCE (BERMUDA) LTD

    on
      behalf
      of itself and the OTHER CEDING INSURERS,

    as
      Beneficiaries

     

    By /s/
      C.
      Stanley Lee        

    Name:
      C.
      Stanley Lee

    Title:
      SVP, Chief Financial Officer

    Date:
      December 12, 2006

     

     

    Attest: /s/
      Georgette Barit        

    Name:
      Georgette Barit

    Title:
      Asst. Secretary

    Date:
      December 12, 2006

    

    

     

    

     

    

     

    

     

    
      
         

      

      
        [Signature
          Page (Trust Agreement)]

        
          

        

      

      
         

      

    

    XL
      CAPITAL
      LTD,

    as
      Beneficiary

     

    By:
      /s/
      Kirstin Romann Gould

    Name:
      Kirstin Romann Gould

    Title:
      Secretary

    Date:
      December 12, 2006

     

     

    Attest: /s/
      Robert Kuzloski        

    Name:
      Robert Kuzloski

    Title:
      Vice President

    Date:
      December 12, 2006

    

     

    

     

    

     

    

     

    
      
         

      

      
        [Signature
          Page (Trust Agreement)]

        
          

        

      

      
         

      

    

    STONEHEATH
      RE,

    as
      Grantor
      and Beneficiary

     

    By /s/
      Linda Haddleton    

    Name:
      Linda Haddleton

    Title:
      Director

    Date:
      December 12, 2006

     

     

    Attest: /s/
      Liz
      Frederick        

    Name:
      Liz
      Frederick

    Title:
      Assistant Manager

    Date:
      December 12, 2006

    

    
      
         

      

      
        [Signature
          Page (Trust Agreement)]

        
          

        

      

      
         

      

    

    THE
      BANK
      OF NEW YORK

    not
      in its
      individual capacity, but solely as the 

    Trustee

     

    By /s/
      Christopher Curti        

    Name:
      Christopher Curti

    Title:
      Assistant Vice President

    Date:
      December 12, 2006

     

     

    Attest: /s/
      Joseph Constantino        

    Name:
      Joseph Constantino

    Title:
      Assistant Vice President

    Date:
      December 12, 2006

     

    

     

    
      
         

      

      
        [Signature
          Page (Trust Agreement)]

        
          

        

      

      
         

      

    

    EXHIBIT
      A

     

     

    INVESTMENT
      GUIDELINES

     

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ANNEX
      A

     

    LIST
      OF INITIAL PERMITTED INVESTMENTS

     

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ANNEX
      B

     

    LIST
      OF ISSUERS OF ELIGIBLE ASSETS

     

     

    

     

     

    

     

     

    

     

     

    

     

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
      B

     

     

    NOTICE
      REGARDING ASSETS

     

    

    

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
      C

     

     

    Form
      of
      Request Notice

    for
      Distributions from the Trust AccountExhibit 4.1 - Specimen Stock Certificate.

Exhibit 4.1

 

	 	 	 
	
Number
	 	
Shares

	 	
WESTERN HEMISPHERE MINING CORPORATION
	 
	 	
INCORPORATED UNDER THE LAWS OF THE STATE OF
	 
	 	
NEVADA 100,000,000 SHARES COMMON STOCK AUTHORIZED,
	 
	 	
$0.00001 PAR VALUE
	 
	 	 	 
	 	 	
CUSIP_______

	 	 	
SEE REVERSE

	 	 	
FOR

	
This
	 	
CERTAIN

	
certifies
	 	
DEFINITIONS

	
that
	 	 
	
is the owner of
	 	 
	 	 	 
	 	 	 
	 	
FULLY PAID AND NON-ASSESSABLE
	 
	 	
SHARES OF COMMON STOCK OF
	 
	 	 	 
	 	 	 
	 	
WESTERN HEMISPHERE MINING CORPORATION
	 
	 	
transferable on the books of the corporation in person or by duly
	 
	 	
authorized attorney upon surrender of this certificate properly
	 
	 	
endorsed.  This certificate and the shares represented hereby
	 
	 	
are subject to the laws of the State of Nevada, and to the
	 
	 	
Articles of Incorporation and Bylaws of the Corporation,
	 
	 	
as now or hereafter amended.  This certificate is not valid
	 
	 	
unless countersigned by the Transfer Agent.  WITNESS
	 
	 	
the facsimile seal of the Corporation and the signature
	 
	 	
of its duly authorized officers
	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	
PRESIDENT
	
[SEAL]
	
SECRETARY

 

 

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations.

	
TEN COM
	
as tenants in common
	
UNIF GIFT MIN ACT
	
____________
	
Custodian
	
____________

	
TEN ENT
	
as tenants by the entireties
	 	
(Cust)
	 	
(Minor)

	
JT TEN
	
as joint tenants with the right of
	
Act
	
_________________________________

	 	
survivorship and not as tenants
	 	
(State)

	 	
in common
	 	 

Additional abbreviations may also be used though not in the above list.

	
For value received, ______________________________________ hereby sell, assign and transfer unto

	 	
PLEASE INSERT SOCIAL SECURITY OR OTHER
	 
	 	
IDENTIFYING NUMBER OF ASSIGNEE
	 
	 
	
_____________________________________________________________________________________

	
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)

	 
	
_____________________________________________________________________________________

	 
	
_____________________________________________________________________________________

	 
	
_____________________________________________________________________________________

	 
	
_____________________________________________________________________________ shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint

	 
	
_____________________________________________________________________________, Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.

	 
	
Dated _______________________

	 
	
X ________________________________________________________________________________

	
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.  THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions)

 

SIGNATURE GUARANTEED:

 

 

TRANSFER FEE WILL APPLY

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