Exhibit 4.1

  

 

 

 

 

MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT 

 


among 

 


XL Capital Ltd; XL Insurance (Bermuda) Ltd; XL Reinsurance America Inc.; X.L. Global 

Services, Inc.; XL Services (Bermuda) Ltd and X.L. America, Inc.;

 


Security Capital Assurance Ltd; XL Financial Assurance Ltd.; XL Capital Assurance Inc.; XL 

Financial Administrative Services Inc.; SCA Bermuda Administrative Ltd.; XL Capital 

Assurance (U.K.) Limited; and Certain Portfolio Trusts that are Affiliates of XL Capital 

Assurance Inc. and may become party to this Agreement from time to time; 

 


and 

 


Counterparties to Credit Default Swap Agreements with XL Capital Assurance Inc. and 

Affiliates of XL Capital Assurance Inc. that may become party to this Agreement from time to 

time. 

 

 


Dated as of July 28, 2008 

 

 

 

 

  

 











TABLE OF CONTENTS 

	   	   	   	
Page  
	   
	
ARTICLE I  
	   
	
DEFINITIONS  
	   
	
Section 1.01  	
Certain Defined Terms  	   	
2  
	
Section 1.02  	
Definitions  	   	
10  
	
Section 1.03  	
Interpretation and Rules of Construction  	   	
11  
	   
	
ARTICLE II  
	   
	
COMMUTATION AND RELEASE  
	   
	
Section 2.01  	
Commutation and Release of Reinsurance Agreements  	   	
12  
	
Section 2.02  	
Termination of the Other Terminated Agreements  	   	
12  
	
Section 2.03  	
Commutation and Release of Quota Share Treaty  	   	
12  
	
Section 2.04  	
Commutation and Amendment of Other Reinsurance Agreements  	   	
12  
	
Section 2.05  	
Mutual Releases  	   	
13  
	
Section 2.06  	
Consideration  	   	
17  
	
Section 2.07  	
Closing  	   	
17  
	
Section 2.08  	
Closing Deliveries by the SCA Parties  	   	
17  
	
Section 2.09  	
Closing Deliveries by the XL Parties  	   	
18  
	
Section 2.10          	
Escrow  	   	
19  
	   
	
ARTICLE III  
	   
	
REPRESENTATIONS AND WARRANTIES OF THE SCA PARTIES  
	   
	
Section 3.01  	
Organization, Authority and Qualification of the SCA Parties  	   	
20  
	
Section 3.02  	
No Conflict  	   	
20  
	
Section 3.03  	
Governmental Consents and Approvals  	   	
20  
	
Section 3.04  	
Financial Information  	   	
21  
	
Section 3.05  	
Compliance with Laws  	   	
21  
	
Section 3.06  	
Effect of Commutations  	   	
22  
	
Section 3.07  	
Litigation  	   	
22  
	
Section 3.08  	
Placement of Stock Consideration  	   	
22  
	
Section 3.09  	
Regulatory Approvals  	   	
23  
	
Section 3.10  	
MLI CDS Agreements  	   	
24  
	
Section 3.11  	
Financial Security Master Facultative Commutation Agreement  	   	
24  
	
Section 3.12  	
Third-Party Agreements  	   	
24  
	
Section 3.13  	
Brokers  	   	
24  





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ARTICLE IV  
	   
	
REPRESENTATIONS AND WARRANTIES OF THE XL PARTIES  
	   
	
Section 4.01          	
Organization and Authority of the XL Parties  	   	
    24 

	
Section 4.02  	
No Conflict  	   	
    25 

	
Section 4.03  	
Governmental Consents and Approvals  	   	
    25 

	
Section 4.04  	
Capitalization  	   	
    26 

	
Section 4.05  	
XL Owned SCA Common Shares  	   	
    26 

	
Section 4.06  	
Litigation  	   	
    26 

	
Section 4.07  	
Regulatory Approvals  	   	
    26 

	
Section 4.08  	
Brokers  	   	
    26 

	   
	
ARTICLE V  
	   
	
REPRESENTATIONS AND WARRANTIES OF THE CDS COUNTERPARTIES  	   	  

	   
	
Section 5.01  	
Status  	   	
    27 

	
Section 5.02  	
Powers  	   	
    27 

	
Section 5.03  	
No Violation or Conflict  	   	
    27 

	
Section 5.04  	
Consents  	   	
    27 

	
Section 5.05  	
Obligations Binding  	   	
    27 

	
Section 5.06  	
Absence of Litigation  	   	
    27 

	
Section 5.07  	
Consent to Transactions  	   	
    27 

	
Section 5.08  	
Ownership of Insurance Instruments  	   	
    28 

	
Section 5.09  	
Brokers  	   	
    28 

	   
	
ARTICLE VI  
	   
	
ADDITIONAL AGREEMENTS  
	   
	
Section 6.01  	
Public Disclosure and Confidentiality  	   	
    28 

	
Section 6.02  	
Regulatory and Other Authorizations; Notices and Consents  	   	
    30 

	
Section 6.03  	
Notice of Developments  	   	
    30 

	
Section 6.04  	
MLI ABS CDO Credit Default Swap Agreements  	   	
    31 

	
Section 6.05  	
Third-Party Reinsurance Agreements  	   	
    31 

	
Section 6.06  	
Ownership of Insurance Instruments  	   	
    31 

	
Section 6.07  	
Compliance with Securities Laws  	   	
    32 

	
Section 6.08  	
Passive Investor  	   	
    32 

	
Section 6.09  	
XL Owned SCA Common Shares Covenant  	   	
    32 

	
Section 6.10  	
Forbearance  	   	
    32 

	
Section 6.11  	
Control of Litigation and Cooperation  	   	
    34 

	
Section 6.12  	
CDS Counterparty Restructuring  	   	
    35 

	
Section 6.13  	
Restriction on Commutations  	   	
    35 

	
Section 6.14  	
Treatment of Public Finance Business  	   	
    36 

	
Section 6.15  	
Further Action  	   	
    37 






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Section 6.16          	
Resignation of XL Nominees  	   	
    37 

	
Section 6.17  	
Disclosure Schedules; Supplementation and Amendment of Schedules  	   	
    37 

	
Section 6.18  	
SCA Shareholder Entity  	   	
    37 

	
Section 6.19  	
Portfolio Trust  	   	
    38 

	
Section 6.20  	
BlackRock  	   	
    38 

	
Section 6.21  	
XLFA Merger  	   	
    38 

	
Section 6.22  	
Collipulli Temuco and Banco de Brasil Policies  	   	
    38 

	
Section 6.23  	
XLFA Redomestication  	   	
    39 

	   
	
ARTICLE VII  
	   
	
CONDITIONS TO CLOSING  
	   
	
Section 7.01  	
Conditions to Obligations of the SCA Parties  	   	
    39 

	
Section 7.02  	
Conditions to Obligations of the XL Parties  	   	
    40 

	
Section 7.03  	
Conditions to Obligations of the CDS Counterparties  	   	
    41 

	
Section 7.04  	
Frustration of Closing Conditions  	   	
    42 

	   
	
ARTICLE VIII  
	   
	
TERMINATION AND WITHDRAWAL  
	   
	
Section 8.01  	
Termination  	   	
    42 

	
Section 8.02  	
Effect of Termination  	   	
    43 

	
Section 8.03  	
CDS Counterparty Withdrawal  	   	
    44 

	   
	
ARTICLE IX  
	   
	
GENERAL PROVISIONS  
	   
	
Section 9.01  	
Expenses  	   	
    44 

	
Section 9.02  	
Notices  	   	
    44 

	
Section 9.03  	
Severability  	   	
    45 

	
Section 9.04  	
Joinder of CDS Counterparties and Additional SCA Parties  	   	
    45 

	
Section 9.05  	
Entire Agreement  	   	
    46 

	
Section 9.06  	
Assignment  	   	
    46 

	
Section 9.07  	
Amendment  	   	
    46 

	
Section 9.08  	
Waiver  	   	
    46 

	
Section 9.09  	
No Third-Party Beneficiaries  	   	
    47 

	
Section 9.10  	
Rights and Remedies  	   	
    47 

	
Section 9.11  	
Indemnification  	   	
    47 

	
Section 9.12  	
No Survival  	   	
    48 

	
Section 9.13  	
Several Liability of the CDS Counterparties  	   	
    48 

	
Section 9.14  	
Governing Law and Jurisdiction  	   	
    48 

	
Section 9.15  	
Waiver of Jury Trial  	   	
    48 

	
Section 9.16  	
Fully Negotiated Agreement  	   	
    49 






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Section 9.17          	
Currency  	   	
    49 

	
Section 9.18  	
Counterparts  	   	
    49 






EXHIBITS 

	
Exhibit No.  	   	 Description 

	   
	
1.01(a)  	   	
2001 Facultative Quota Share Commutation Agreement  
	
1.01(b)  	   	
Adverse Development Cover Commutation Agreement  
	
1.01(c)  	   	
Joinder Agreement  
	
1.01(d)  	   	
Excess of Loss Commutation Agreement  
	
1.01(e)  	   	
Facultative Master Certificate Commutation Agreement  
	
1.01(f)  	   	
Quota Share Treaty Commutation Agreement  
	
1.01(g)  	   	
Subscription Agreement  
	
1.01(h)  	   	
XL Stock Resale and Registration Rights Agreement  
	
1.01(i)  	   	
SCA Shareholder Entity Agreement  
	
1.01(j)  	   	
SCA Registration Rights Agreement  
	
1.01(k)  	   	
Transition Agreement Amendment  
	
2.06  	   	
Securities Law Representations of the SCA Shareholder Entity  
	
6.18  	   	
Form of SCA Shareholder Entity Trust Agreement  
	   
	   
	
    SCHEDULES 

	   
	
Schedule  	   	 Description 

	   
	
1.01(a)  	   	
MLI ABS CDO Credit Default Swap Agreements  
	
1.01(b)  	   	
Other Terminated Agreements  
	
1.01(c)  	   	
Knowledge of SCA  
	
1.01(d)  	   	
Terms of the Escrow Agreement  
	
2.01  	   	
Commuted Reinsurance Agreements  
	
2.04  	   	
Other Reinsurance to be Commuted or Amended  
	
2.05  	   	
Schedule 2.05 Agreements  
	
2.06(a)  	   	
SCA Parties Receiving a Portion of the Cash Consideration Amount  
	
2.06(b)  	   	
SCA Parties Receiving a Portion of the Stock Consideration  
	
9.02  	   	
Addresses for the CDS Counterparties  
	   
	   
	
    SCA PARTIES’ DISCLOSURE SCHEDULE 

	   
	
Section  	   	Description 

	
Section 3.02  	   	
Conflicts  
	
Section 3.03  	   	
Governmental Consents and Approvals  
	
Section 3.05  	   	
Compliance with Laws  





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XL PARTIES’ DISCLOSURE SCHEDULE

	 Section 
	   	 Description 

	
Section 4.02  	   	
Conflicts  
	
Section 4.03  	   	
Governmental Consents and Approvals  
	
Section 4.04(a)  	   	
Capitalization  



 

 

 

 

 

 

 

 

 

 

 

 

 

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PREAMBLE 


                    MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT, dated as of July 28, 2008, is entered into by and among: 


                    (a)      XL CAPITAL LTD, an exempted limited company incorporated under the Laws of Cayman Islands (“XL”), XL INSURANCE (BERMUDA) LTD
(formerly known as X.L. Insurance Ltd), a Bermuda exempted company (“XLI”), XL REINSURANCE AMERICA INC., a New York insurance corporation (“XLRA”), X.L. GLOBAL SERVICES, INC., a service company incorporated under the Laws of Delaware (“XLGS”), XL SERVICES (BERMUDA)
LTD, a service company incorporated under the Laws of Bermuda (“XLBS”) and X.L. AMERICA, INC., a company incorporated under the Laws of Delaware (“XLA”); 


                    (b)      SECURITY CAPITAL ASSURANCE LTD, a Bermuda exempted company (“SCA”), XL FINANCIAL ASSURANCE LTD., a Bermuda exempted company
(“XLFA”), XL CAPITAL ASSURANCE INC., a New York insurance company (“XLCA”), XL FINANCIAL ADMINISTRATIVE
SERVICES INC., a company incorporated under the Laws of Delaware (“XLFAS”), SCA BERMUDA ADMINISTRATIVE LTD., a company incorporated under the Laws of Bermuda
(“SCAB”), XL CAPITAL ASSURANCE (U.K.) LIMITED, an insurance company regulated by the Financial Services Authority and incorporated under the Laws of England and Wales
(“XLCAUK”), and those portfolio trusts that are Affiliates of XLCA and become a Party to this Agreement from time to time pursuant to the execution of a joinder agreement in the
form attached hereto as Exhibit 1.01(c); and 


                    (c)      Such counterparties to credit default swap agreements with XLCA or Affiliates of XLCA that may become a Party to this Agreement from time to time pursuant to the execution of a joinder agreement
in the form attached hereto as Exhibit 1.01(c). 


RECITALS


                    WHEREAS, XLI is the record and beneficial owner of approximately forty-six percent (46%) of SCA’s issued and outstanding common shares (the “XL Owned SCA
Common Shares”); 


                    WHEREAS, certain XL Parties and SCA Parties have entered into the Excess of Loss Agreement, the Adverse Development Cover, the Facultative Master Certificate and the 2001 Facultative Quota Share
Treaty (all as defined in Article I); 


                    WHEREAS, XLCA and XLFA previously entered into a Facultative Quota Share Reinsurance Treaty, dated as of October 6, 1999, as amended and restated by an Amended and Restated Facultative Quota Share
Reinsurance Treaty, dated as of June 22, 2001, as further amended and restated by a Second Amended and Restated Facultative Quota Share Reinsurance Treaty, dated as of May 1, 2004, and as further amended and restated by a Third Amended and Restated
Facultative Quota Share Reinsurance Treaty, dated as of June 29, 2006 and effective July 1, 2006 (the “Quota Share Treaty”); 












                    WHEREAS, XLI guarantees the obligations of XLFA to XLCA under the Quota Share Treaty pursuant to the Reinsurance Agreement Guarantee, dated as of October 6, 1999, as amended as of June 22, 2001, as
further amended as of May 1, 2004, and as further amended as of August 4, 2006 (the “Guarantee”);


                    WHEREAS, XLFA and XLCA wish to (i) commute the Quota Share Treaty and all individual risk cessions thereunder and (ii) fully and finally extinguish all rights and obligations thereunder and thereby
render the Guarantee null and void; 


                    WHEREAS, the XL Parties and the SCA Parties wish to (i) commute the Excess of Loss Agreement, the Adverse Development Cover, the Facultative Master Certificate and all individual risk cessions
thereunder, and the 2001 Facultative Quota Share Treaty and all individual risk cessions thereunder and (ii) fully and finally extinguish all the Parties’ rights and obligations under all such agreements; 


                    WHEREAS, the XL Parties and the SCA Parties have previously entered into those agreements listed on Schedule 1.01(b) and now wish to (i)
terminate such agreements listed in Part I of Schedule 1.01(b) and (ii) fully and finally extinguish all the Parties’ rights
and obligations under such agreements, except as may be explicitly set forth in this Agreement; and 


                    WHEREAS, certain CDS Counterparties now and, on or prior to the Closing Date, additional CDS Counterparties may, wish to enter into this Agreement and agree to consent to the Transactions on the terms
and conditions set forth in this Agreement relating to the restructuring of SCA and its Affiliates. 


                    NOW, THEREFORE, in consideration of the payments, covenants, conditions, promises and releases contained herein, and for other fair and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties agree as follows: 


ARTICLE I 



DEFINITIONS


                    Section 1.01 Certain Defined Terms. For purposes of this Agreement:


                    “1505 Application” means an application filed under Section 1505 of the New York Insurance Laws. 


                    “2001 Facultative Quota Share Commutation Agreement” means the 2001 Facultative Quota Share Commutation Agreement to be executed
by XLFA and XLI and delivered at the Closing, in the form of Exhibit 1.01(a). 


                    “2001 Facultative Quota Share Treaty” means the Facultative Quota Share Reinsurance Agreement, dated as of August 17, 2001, as
amended by Amendment No. 1 to the


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Facultative Quota Share Reinsurance Agreement, dated as of August 4, 2006, between XLFA and XLI. 


                    “ABS CDO CDSs” means the asset backed securities collateralized debt obligation credit default swaps between XLCA or an Affiliate
of XLCA and a CDS Counterparty that are listed on an official schedule held by the SCA Parties and the CDS Financial Advisor. 


                    “Action” means any judicial, administrative or arbitral action, suit, or proceeding by or before any Governmental Authority.



                    “Adverse Development Cover” means the Adverse Development Reinsurance Agreement, dated as of August 4, 2006, between XLCA and
XLRA, and the Indemnification Agreement, dated as of August 4, 2006, between XLFA and XLI. 


                    “Adverse Development Cover Commutation Agreement” means the Adverse Development Cover Commutation Agreement to be executed by
XLCA, XLRA, XLFA and XLI delivered at the Closing, in the form of Exhibit 1.01(b). 


                    “Affiliate” means, with respect to any Person, any other Person directly or indirectly Controlling, Controlled by, or under
common Control with such Person, provided, that none of the SCA Parties shall be deemed to be an Affiliate of any XL Party. 


                    “Agreement” or “this Agreement” means this Master
Commutation, Release and Restructuring Agreement among the Parties (including the Exhibits and Schedules hereto, the SCA Parties’ Disclosure Schedule and the XL Parties’ Disclosure Schedule) and all amendments or waivers hereto made in
accordance with the provisions of Sections 9.07 or 9.08 and joinder agreements hereto made in accordance with the provisions of
Section 9.04. 


                    “Ancillary Agreements” means the 2001 Facultative Quota Share Commutation Agreement, the Excess of Loss Commutation Agreement,
the Adverse Development Cover Commutation Agreement, the Facultative Master Certificate Commutation Agreement, the Quota Share Treaty Commutation Agreement, the Subscription Agreement, the XL Stock Resale and Registration Rights Agreement and the
SCA Shareholder Entity Agreement. 


                    “Banco de Brasil Policy” means the Financial Guaranty Insurance Policy No. CA00127A, dated December 27, 2001, issued by XLCA in
favor of MLI, together with any endorsements thereto, relating to payments that are required to be paid by FF Trust 2 to MLI in accordance with the original terms of a Single Transaction ISDA Master Agreement and Schedule thereto, dated as of
December 27, 2001 between FF Trust 2 and MLI. 


                    “BlackRock” means BlackRock Financial Management, Inc.


                    “BMA” means the Bermuda Monetary Authority. 


                    “Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be
closed in Bermuda or New York. 


-3-












                    “CDS Counterparties” means those counterparties to credit default swap agreements with XLCA or Affiliates of XLCA that may become
a Party to this Agreement from time to time on or prior to Closing by way of executing a joinder agreement pursuant to Section 9.04 in the form of Exhibit
1.01(c), either collectively or individually, as the context requires. 


                    “CDS Financial Advisor” means FTI Consulting, Inc. or another advisor designated by the Required Consenting Counterparties.



                    “Closing Date” means the date of the Closing.


                    “Control,” “Controlled,” or “Controlling,” with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, or as trustee, personal representative or executor, of the power to
direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, as personal representative or executor, by contract, by credit arrangement or otherwise. 


                    “Collipulli Temuco Policy” means the Financial Guaranty Insurance Policy No. 10030-X, together with any endorsements thereto,
relating to up to UF 1,150,000 aggregate principal amount of outstanding borrowings under the Contrato de Apertura de Línea de Crédito, dated as of July 27, 2005, between Banco de Crédito e Inversiones and Ruta de la
Araucanía Sociedad Concesionaria S.A. and issued pursuant to the Insurance and Reimbursement Agreement, dated as of November 29, 2005, between XLI and Banco de Crédito e Inversiones and Ruta de la Araucanía Sociedad
Concesionaria S.A. 


                    “Credit Agreement” means that certain Credit Agreement, dated as of August 1, 2006, among SCA, XLCA, and XLFA, the various
lenders from time to time party thereto and Citibank, N.A., as administrative agent (as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof). 


                    “Declaration of Trust” means a trust agreement in the form attached hereto as Exhibit
6.18 (with such reasonable changes thereto as the trustee of the SCA Shareholder Entity or its counsel may require and that are approved by counsel to the CDS Counterparties and counsel to the SCA Parties).


                    “EIB” means European Investment Bank, a non-profit bank owned by the Member States of the European Union and established under
the Treaty of Rome. 


                    “EIB Guarantees” means (i) the Financial Guaranty 10017-X, dated July 5, 2001, issued by XLI in favor of EIB (Algarve), (ii) the
Financial Guaranty Number 10028-X, dated May 28, 2004, issued by XLI in favor of EIB (Autovia del Camino, S.A.), (iii) the Financial Guaranty Number 10029-X, dated October 28, 2004, issued by XLI in favor of EIB (Autovia del los Vinedos), (iv) the
Financial Guaranty Number 10023-X, dated June 8, 2005, issued by XLI in favor of EIB (Transform School (North Lanarkshire) Funding plc), and (v) the Financial Guaranty Number 10019-X, dated May 4, 2005, issued by XLI in favor of EIB (Healthcare
Support (Newcastle) Finance plc). 


-4-












                    “EIB Policies” means (i) the Financial Guaranty Number CA00041A, dated July 5, 2001, issued by XLCA in favor of EIB, (ii) the
Financial Guaranty Number CA00995A, dated May 28, 2004, issued by XLCA in favor of EIB and the Financial Guaranty Number UK0003A, dated May 28, 2004 issued by XLCAUK in favor of EIB, (iii) the Financial Guaranty Number CA01220A, dated October 28,
2004, issued by XLCA in favor of EIB and the Financial Guaranty Number UK0004A, dated October 28, 2004, issued by XLCAUK in favor of EIB, (iv) the Financial Guaranty Number CA02062A, dated June 8, 2005, issued by XLCA in favor of EIB and the
Financial Guaranty Number UK0008A, dated June 8, 2005, issued by XLCAUK in favor of EIB and (v) the Financial Guaranty Number CA01937A, dated May 4, 2005 issued by XLCA in favor of EIB and the Financial Guaranty Number UK0007B, dated May 4, 2005,
issued by XLCAUK in favor of EIB. 


                    “EIB Resolution Event” means (i) commutation of all of the EIB Policies and full and final extinguishment of all Persons’
rights and obligations thereunder, (ii) a general release in form reasonably acceptable to the XL Parties by EIB of the XL Parties’ obligations with respect to all of the EIB Guarantees or (iii) the provision by a creditworthy entity
reasonably acceptable to the XL Parties of a guaranty guaranteeing 100% of the XL Parties’ obligations under all of the EIB Guarantees. 


                    “Escrow Agent” means HSBC Private Bank, Bermuda Trust Company Limited.


                    “Escrow Agreement” means the agreement pursuant to which the Escrow Agent will hold the XL Owned SCA Common Shares pursuant to
terms substantially the same as those set forth in Schedule 1.01(d), if the XL Owned SCA Common Shares are transferred to the Escrow Agent pursuant to Section
2.10. 


                    “Excess of Loss Agreement” means the Excess of Loss Reinsurance Agreement by and between XLFA and XLI, dated as of October 3,
2001. 


                    “Excess of Loss Commutation Agreement” means the Excess of Loss Commutation Agreement to be executed by XLFA and XLI and
delivered at the Closing, in the form of Exhibit 1.01(d). 


                    “Facultative Master Certificate” means the Facultative Master Certificate effective as of November 1, 2002, as amended and
restated pursuant to the First Amended and Restated Facultative Master Certificate, effective as of August 4, 2006, and as further amended and restated pursuant to the Second Amended and Restated Facultative Master Certificate by and between XLRA
and XLCA, dated as of March 1, 2007. 


                    “Facultative Master Certificate Commutation Agreement” means the Facultative Master Certificate Commutation Agreement to be
executed by XLCA and XLRA and delivered at the Closing, in the form attached hereto as Exhibit 1.01(e). 


                    “Financial Statements” means the GAAP Financial Statements, the XLCA Statutory Financial Statements and the XLFA Statutory
Financial Statements. 


                    “Financial Security” means Financial Security Assurance Inc.


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                    “Financial Security Commutations” means the Financial Security Master Facultative Commutation and the commutations of the Other
Financial Security Agreements. 


                    “Financial Security Agreements” means the Financial Security Master Facultative Agreement and the Other Financial Security
Agreements. 


                    “Financial Security Guarantee” means the Reinsurance Agreement Guarantee, dated November 3, 1998 and amended on July 5, 2006,
issued by X.L. Insurance Company, Ltd (later renamed XLI), guaranteeing XLFA’s obligations to Financial Security under the Financial Security Master Facultative Agreement. 


                    “Financial Security Master Facultative Agreement” means the Amended and Restated Master Facultative Reinsurance Agreement, dated
as of November 3, 1998, between Financial Security and XLFA; as amended by the First Amendment to the Master Facultative Reinsurance Agreement, dated as of November 3, 1998, between Financial Security and XLFA; as amended by the First Amendment to
the Amended and Restated Master Facultative Reinsurance Agreement, dated as of July 6, 2006, between Financial Security and XLFA. 


                    “Financial Security Master Facultative Commutation” means the commutation of the Financial Security Master Facultative Agreement
pursuant to a commutation and release agreement. 


                    “GAAP” means United States generally accepted accounting principles in effect from time to time. 


                    “GAAP Financial Statements” means (i) the audited balance sheet of each of SCA, XLFA and XLCA for the fiscal year ended December
31, 2007 and the related audited statements of income, retained earnings, stockholders’ equity and changes in financial position, together with all related notes and schedules thereto and accompanied by the reports thereon of the SCA
Parties’ accountants, and (ii) the unaudited balance sheet of each of SCA, XLFA and XLCA for the three month period ended March 31, 2008 and the related unaudited statements of income, retained earnings, stockholders’ equity and changes
in financial position, together with all related notes and schedules thereto. 


                    “Governmental Authority” means any federal, national, supranational, state, provincial, local, or similar government,
governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body. 


                    “Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award issued or entered
by or with any Governmental Authority. 


                    “Jeffco Policies” means (i) the Municipal Bond Insurance Policy Number CA00370A, together with any endorsements thereto, relating
to $839,500,000 Jefferson County, Alabama, Sewer Revenue Refunding Warrants Series 2002-C, consisting of $74,450,000 Series 2002-C-1-A Warrants, $74,450,000 Series 2002-C-1-B Warrants, $74,450,000 Series 2002-C-1-C Warrants, $75,450,000 Series
2002-C-1-D Warrants, $73,700,000 Series 2002-C-2 Warrants, $98,300,000 Series 2002-C-3 Warrants, $73,700,000 Series 2002-C-4 Warrants, $98,300,000 Series 2002-C-5 Warrants, $147,600,000 Series 2002-C-6 Warrants and $49,100,000 Series


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2002-C-7 Warrants; (ii) the Municipal Bond Insurance Policy Number CA00522A, together with any endorsements thereto, relating to $300,000,000 Jefferson County, Alabama Sewer Revenue Refunding Warrants, Series 2003-B, consisting of
$55,000,000 Series 2003-B-2 Warrants, $25,000,000 Series 2003B-3 Warrants, $25,000,000 Series 2003B-4 Warrants, $75,000,000 Series 2003B-5 Warrants, $15,000,000 Series 2003B-6 and $105,000,000 Series 2003B-7 Warrants; and (iii) the Debt Service
Reserve Insurance Policy Number CA01568A, together with any endorsements thereto, relating to up to $164,863,746.40 Parity Securities as defined in the Trust Indenture, dated as of February 1, 1997, between Jefferson County, Alabama and The Bank of
New York (as successor to AmSouth Bank of Alabama), as trustee, as such Indenture has been supplemented and amended. 


                    “Knowledge of SCA” means the actual knowledge after due inquiry of those Persons identified on Schedule 1.01(c). 


                    “Law” means any federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule
(including any rules regarding discovery), code, order, requirement or rule of law (including common law). 


                    “Lien” means any lien, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, proxy, voting trust or agreement, transfer restriction under any shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever. 


                    “Minimum Consenting CDS Counterparty Restructuring Threshold” means (i) at least seventy-five percent (75%) in notional amount of
the aggregate sum of the notional amounts of (A) the ABS CDO CDSs and (B) the collateralized debt obligation credit default swaps between XLCA or an Affiliate of XLCA and a CDS Counterparty that are listed on an official schedule held by the SCA
Parties and the CDS Financial Advisor; (ii) at least sixty-six and two-thirds percent (66  2 / 3 %) in total notional amount of the ABS CDO CDSs; and (iii) at least
sixty-six and two-thirds percent (66  2 / 3 %) in aggregate number of the CDS Counterparties. 


                    “MLI CDS Agreements” means the eight asset backed securities collateralized debt obligation credit default swap agreements listed
on Schedule 1.01(a). 


                    “NYID” means the New York State Insurance Department.


                    “Other Financial Security Agreements” means all agreements between any SCA Party and Financial Security, other than the Financial
Security Master Facultative Agreement, as to which the obligations of such SCA Parties are secured by a letter of credit issued by the lenders pursuant to the Credit Agreement for the benefit of Financial Security on September 19, 2006, as
heretofore amended, extended and renewed, bearing Citibank, N.A. reference number 61652611. 


                    “Other Terminated Agreements” means those agreements listed on Schedule 1.01(b). 


                    “Party” means any party to this Agreement.


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                    “Person” means an individual, corporation, partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof. 


                    “Quota Share Treaty Commutation” means the commutation of the Quota Share Treaty pursuant to the Quota Share Treaty Commutation
Agreement. 


                    “Quota Share Treaty Commutation Agreement” means the Quota Share Treaty Commutation Agreement to be executed by XLFA and XLCA and
delivered at the Closing, in the form of Exhibit 1.01(f). 


                    “Reinsurance Guarantees” means (i) the Guarantee, (ii) the Financial Security Guarantee and (iii) the EIB Guarantees. 


                    “Required Consenting CDS Counterparties” means greater than 50% of the total notional amount of all the credit default swaps
between XLCA or an Affiliate of XLCA and the CDS Counterparties. 


                    “SCA Parties” means SCA, XLFA, XLCA, XLFAS, SCAB, XLCAUK and each of the portfolio trusts that executes a joinder agreement
pursuant to Section 9.04 in the form attached hereto as Exhibit 1.01(c), either collectively or individually, as the context
requires. 


                    “SCA Registration Rights Agreement” means a registration rights agreement for the XL Owned SCA Common Shares in substantially the
form attached hereto as Exhibit 1.01(j). 


                    “SCA Share Sale Proceeds” means the proceeds, together with any interest that may accrue thereon, of any sale of the XL Owned SCA
Common Shares as owned by the SCA Shareholder Entity and any cash dividends or distributions paid with respect to such shares during such time as the XL Owned SCA Common Shares are owned by the SCA Shareholder Entity. 


                    “SCA Shareholder Entity” means a special purpose trust or other entity formed pursuant to the Declaration of Trust. 


                    “SCA Shareholder Entity Agreement” means an agreement substantially in the form attached hereto as Exhibit 1.01(i). 


                    “SCA
Shareholder Entity Formation Conditions” means
(i) the selection of a trustee of the SCA Shareholder Entity mutually  acceptable
to the Required Consenting CDS Counterparties and the SCA Parties; (ii) the establishment
of the SCA Shareholder Entity; (iii) the delivery by the SCA Shareholder Entity
of a true and correct written copy of customary securities Law  representations
and agreements set forth on Exhibit 2.06 to
the XL Parties (or to the Escrow Agent, with a copy to the XL Parties, if the
XL Owned Common Shares have been transferred to the  Escrow Agent pursuant to Section
2.10); and (iv) any required approval by the NYID,
the Delaware Insurance Department and the UK FSA of the SCA Shareholder Entity’s
acquisition of the XL Owned SCA Common Shares will have been obtained. 


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                    “SCA Shareholder Entity Formation Conditions Certificate” means a certificate certified by the Secretaries of SCA, XLFA and XLCA
stating that the SCA Shareholder Entity Formation Conditions have been satisfied. 


                    “Securities Act” means the Securities Act of 1933, as amended.


                    “Subscription Agreement” means the Subscription Agreement to be executed by XLFA and XL and delivered at the Closing, in the form
of Exhibit 1.01(g). 


                    “Subsidiary” or “Subsidiaries” means, with respect to a
specified Person, any corporation, partnership, limited partnership, limited liability company or other entity as to which the specified Person, directly or indirectly (including through one or more Subsidiaries), owns a majority of the outstanding
shares of stock or other ownership interests having voting power under ordinary circumstances to elect directors of such corporation or other Persons performing similar functions for such entity. 


                    “Third-Party Reinsurance Agreements” means (i) the Financial Security Master Facultative Agreement, and all individual risk
cessions thereunder and (ii) the EIB Policies. 


                    “Transaction Documents” means this Agreement, the Ancillary Agreements and any certificate, Financial Statement, report, list,
writing or other document delivered pursuant to this Agreement or the transactions contemplated by this Agreement. 


                    “Transactions” means all transactions contemplated by this Agreement and the Ancillary Agreements. 


                    “Transfer” means, with respect to a given security, any transaction whereby a Person (a) offers, pledges, sells or contracts to
sell any option or contract to purchase, purchases any option or contract to sell, grants any option, right or warrant to purchase, lends, or otherwise transfers or disposes of, directly or indirectly, such security or any security convertible into,
or exercisable or exchangeable for, any or all of such security; or (b) enters into any swap or other arrangement that transfers to another Person, in whole or in part, any of the economic consequences of ownership of any or all of the given
security, whether any such transaction described in clause (a) or (b) is to be settled by delivery of any or all of the given security or any other security, in cash or otherwise.  Notwithstanding the foregoing, in no event shall any transfer or
other transaction solely between or among the SCA Parties constitute a “Transfer.” 


                    “Transition Agreement” means the Transition Agreement, dated as of August 4, 2006 and amended on May 3, 2007, among XL, XLI, XLA
and SCA. 


                    “Transition Agreement Amendment” means the Transition Agreement Amendment No. 2 among XL, XLI, XLA and SCA in the form attached
hereto as Exhibit 1.01(k). 


                    “Triggered Enforcement Rights” means a Party’s right to accelerate, liquidate, close out, terminate, assess or demand
damages or termination payments under, withhold or set off payments under, alter the payment terms of, demand collateral in respect of, or otherwise exercise remedies or enforcement rights in respect of one or more transactions (including
swap


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transactions), agreements, policies, guarantees or treaties to which an SCA Party or an Affiliate thereof is a party, other than in respect of the Credit Agreement; provided, that, solely for purposes of Section 6.10(b), the definition of “Triggered Enforcement Rights” includes the right of any counterparty to a credit default swap
agreement with XLCA or Affiliates of XLCA to accelerate, liquidate, close out, terminate, assess or demand damages or termination payments under, withhold or set off payments under, alter the payment terms of, demand collateral in respect of, or
otherwise exercise remedies or enforcement rights in respect of one or more transactions (including swap transactions), agreements, policies, guarantees or treaties to which an SCA Party or an Affiliate thereof is a party, other than in respect of
the Credit Agreement. 


                    “UK FSA” means the Financial Services Authority in the United Kingdom.


                    “XLCA Statutory Financial Statements” means the annual financial statements of XLCA filed with the NYID for the year ended
December 31, 2007, the quarterly financial statements of XLCA filed with the NYID for the quarter ended March 31, 2008 and the Statement of Actuarial Opinion of XLCA filed with the NYID for the year ended December 31, 2007. 


                    “XLFA Redomestication” means the discontinuance of XLFA as a company existing under the Laws of Bermuda and its continuation as a
Delaware corporation and the contribution to XLCA by the SCA Parties of all of the common shares and Series A Redeemable Preferred Shares of XLFA. 


                    “XLFA Statutory Financial Statements” means the annual financial statements of XLFA filed with the BMA for the year ended
December 31, 2007, and the quarterly financial statements of XLFA filed with the BMA for the quarter ended March 31, 2008, each prepared in accordance with Bermuda statutory accounting principles applied on a basis consistent with past practices,
and the Statement of Actuarial Opinion of XLFA filed with the BMA for the year ended December 31, 2007. 


                    “XL Parties” means XL, XLI, XLRA, XLGS, XLBS and XLA, either collectively or individually, as the context requires. 


                    “XL Public Offering” means an offering of XL’s Class A Ordinary Shares, par value $0.01 per share, and equity security
units, in each case, registered pursuant to the Securities Act. 


                    “XL Stock Resale and Registration Rights Agreement” means the Resale Registration Rights Agreement to be executed by XLFA and XL
and delivered at the Closing, in the form of Exhibit 1.01(h). 


                    “XL/SCA Commutation Agreements” means (i) the 2001 Facultative Quota Share Commutation Agreement, (ii) the Excess of Loss
Commutation Agreement, (iii) the Adverse Development Cover Commutation Agreement and (iv) the Facultative Master Certificate Commutation Agreement. 


                    Section 1.02 Definitions.  The following terms have the meanings set forth in the Sections set forth below:



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  	Definition 
	   	           Location          

	Allocated Funds 	 	Section 6.12 
	Cash Consideration Amount 	 	Section 2.06 
	CDS Counterparty Restructuring 	 	Section 6.12 
	Challenging Action 	 	Section 6.11(a) 
	Closing 	 	Section 2.07 
	Confidential Information 	 	Section 6.01(b) 
	Consideration 	 	Section 2.06 
	Guarantee 	 	Recitals 
	Losses 	 	Section 9.11(a) 
	MLI 	 	Section 3.10 
	MLI Agreement 	 	Section 3.10 
	Providing Group 	 	Section 6.01(b) 
	Quota Share Treaty 	 	Recitals 
	Receiving Group 	 	Section 6.01(b) 
	SCA 	 	Preamble 
	SCA Indemnitees 	 	Section 9.11(a) 
	SCAB 	 	Preamble 
	SEC 	 	Section 3.08(e) 
	Stock Consideration 	 	Section 2.06 
	XL 	 	Preamble 
	XL Indemnitees 	 	Section 9.11(b) 
	XL Owned SCA Common
          Shares 	 	Recitals 
	XLA 	 	Preamble 
	XLBS 	 	Preamble 
	XLCA 	 	Preamble 
	XLCAUK 	 	Preamble 
	XLFA 	 	Preamble 
	XLFAS 	 	Preamble 
	XLGS 	 	Preamble 
	XLI 	 	Preamble 
	XLRA 	 	Preamble 







                    Section 1.03 Interpretation and Rules of Construction.  In this Agreement, except to the extent otherwise
provided or that the context otherwise requires: 


                    (a)      when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or a
Schedule or Exhibit to, this Agreement unless otherwise indicated; 


                    (b)      the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or
interpretation of this Agreement; 


                    (c)      whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to
be followed by the words “without limitation”; 


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                    (d)      the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement,
refer to this Agreement as a whole and not to any particular provision of this Agreement; 


                    (e)      all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant
hereto, unless otherwise defined therein; 


                    (f)      the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms; 


                    (g)      any Law defined or referred to herein or in any agreement or instrument that is referred to herein means such Law or statute as from time
to time amended, modified or supplemented, including by succession of comparable successor Laws; 


                    (h)      references to a Person are also to its successors and permitted assigns; and 


                    (i)      the use of “or” is not intended to be exclusive unless expressly indicated otherwise. 

 

ARTICLE II


COMMUTATION AND RELEASE


                    Subject to the terms and conditions of this Agreement, at or prior to the Closing:


                    Section 2.01 Commutation and Release of Reinsurance Agreements. The SCA Parties and the XL Parties shall (i)
commute the agreements listed in Part I of Schedule 2.01 and (ii) fully and finally extinguish all the Parties’ rights and
obligations under all such agreements pursuant to the XL/SCA Commutation Agreements. 


                    Section 2.02 Termination of the Other Terminated Agreements.  The SCA Parties and the XL Parties shall
terminate the Other Terminated Agreements listed in Part I of Schedule 1.01(b) and, notwithstanding anything in any of the Other
Terminated Agreements listed in Part I of Schedule 1.01(b) that provides that any term or condition survives termination, fully and
finally extinguish all rights and obligations of the Parties under all such agreements. 


                    Section 2.03 Commutation and Release of Quota Share Treaty.  XLCA and XLFA shall (i) commute the Quota Share
Treaty and (ii) fully and finally extinguish all rights and obligations under the Quota Share Treaty pursuant to the Quota Share Treaty Commutation Agreement. 


                    Section 2.04 Commutation and Amendment of Other Reinsurance Agreements. (a) The SCA Parties intend to, but
shall not be obligated to, commute or amend the reinsurance agreements the SCA Parties have with third parties that are identified on Schedule 2.04; provided, that until October 15, 2008, no commutation or amendment of any agreement listed on


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Schedule 2.04 may involve the payment of cash or other consideration by any SCA Party. For the avoidance of doubt, no commutation or amendment of any agreement listed on Schedule 2.04 shall involve the payment of Allocated Funds. 


                    (b)      Notwithstanding the foregoing, (i) the Financial Security Commutations, (ii) the commutations of each EIB Policy, (iii) the general
releases in a form reasonably acceptable to the XL Parties of the XL Parties with respect to each EIB Guarantee or (iv) the provision by a creditworthy entity reasonably acceptable to the XL Parties of a guarantee guaranteeing 100% of the XL
Parties’ obligations under each EIB Guarantee may involve payment of cash or other consideration payable at any time by any SCA Party.


                    Section 2.05 Mutual Releases. (a) As of the Closing Date:


            (i)      each
      SCA Party, on behalf of itself and its respective Subsidiaries, hereby
      irrevocably and unconditionally releases and forever discharges each XL
      Party, its parents, Subsidiaries and Affiliates, and its respective predecessors,
      successors, assigns, officers, directors, agents, employees, shareholders,
      representatives, underwriters, and attorneys, from any and all past, present
      and future actions, causes of action, suits, debts, Liens, contracts, rights,
      agreements, obligations, promises, liabilities, claims, counterclaims,
      demands, damages, controversies, losses, costs and expenses (including
      attorneys’ fees and costs actually incurred) of any kind, character,
      description or nature whatsoever, known or unknown to any of the SCA Parties,
      suspected or unsuspected, reported or unreported, fixed or contingent,
      accrued or unaccrued, liquidated or unliquidated, whether grounded in Law
      or equity or sounding in tort or contract or otherwise, which the SCA Party
      now has, owns, holds or claims to have, own, or hold, or at any time heretofore
      had, owned, or held or claimed to have had, owned, or held, or may hereafter
      have, own, or hold or claim to have, own, or hold, arising directly or
      indirectly out of, based upon, or in any way related to or in connection
      with (A) (1) the Financial Security Agreements; (2) the agreements, understandings,
      arrangements commuted or terminated pursuant to Sections
      2.01, 2.02 and 2.03,
      and Other Terminated Agreements listed in Part
      II of Schedule
      1.01(b); (3) any of the Reinsurance Guarantees;
      (4) any commutation of an EIB Policy; (5) the commutation or termination
      of any of the foregoing listed in clauses (1), (2), (3) and (4); or (6)
      any commutation or amendment of any agreement listed on Schedule
      2.04 pursuant to or in accordance with this
      Agreement; (B) conduct or other matters occurring on or prior to the Closing,
      other than contractual obligations arising under written agreements between
      any XL Party and any SCA Party (including those described on Schedule
      2.05, but excluding those expressly commuted
      or terminated pursuant to this Agreement or any Ancillary Agreement) or
      (C) any tax liability, whether stemming from policies issued by Subsidiaries
      of SCA prior to SCA’s IPO, after SCA’s IPO or otherwise, that
      results from the XLFA Redomestication; provided, however,
      with respect to both clauses (A) and (B), the provisions of this paragraph
      shall not discharge any obligation of any of the XL Parties that has been
      undertaken or imposed by the express terms of this Agreement or any Ancillary
      Agreement. 

             (ii)      each
      SCA Party hereby irrevocably and unconditionally releases and forever discharges
      each CDS Counterparty, its parents, Subsidiaries and Affiliates, and its



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  respective predecessors, successors,
      assigns, officers, directors, agents, employees, shareholders, representatives,
      underwriters, and attorneys, from any and all past, present and future
      actions, causes of action, suits, debts, Liens, contracts, rights, agreements,
      obligations, promises, liabilities, claims, counterclaims, demands, damages,
      controversies, losses, costs and expenses (including attorneys’ fees
      and costs actually incurred) of any kind, character, description or nature
      whatsoever, known or unknown to any of the SCA Parties, suspected or unsuspected,
      reported or unreported, fixed or contingent, accrued or unaccrued, liquidated
      or unliquidated, whether grounded in Law or equity or sounding in tort
      or contract or otherwise, which the SCA Party now has, owns, holds or claims
      to have, own, or hold, or at any time heretofore had, owned, or held or
      claimed to have had, owned, or held, or may hereafter have, own, or hold
      or claim to have, own, or hold, arising directly or indirectly out of,
      based upon, or in any way related to or in connection with (A) (1) the
      Financial Security Agreements; (2) the agreements, understandings, arrangements
      commuted or terminated pursuant to Sections
      2.01, 2.02 and 2.03,
      and Other Terminated Agreements listed in Part
      II of Schedule
      1.01(b); (3) any of the Reinsurance Guarantees;
      (4) the commutation or termination of any of the foregoing listed in clauses
      (1), (2) and (3); (5) any commutation of an EIB Policy, any general release
      by EIB of the XL Parties’ obligations with respect to an EIB Guarantee,
      or any guaranty by a creditworthy entity reasonably acceptable to the XL
      Parties of the XL Parties’ obligations under any EIB Guarantee, each
      in accordance with this Agreement; or (6) any commutation or amendment
      of any agreement listed on Schedule 2.04 pursuant
      to or in accordance with this Agreement or (B) conduct occurring on or
      prior to the Closing with respect to this Agreement and the Transactions; provided, however,
      with respect to both clauses (A) and (B), the provisions of this paragraph
      shall not discharge any obligation of any of the CDS Counterparties that
      has been undertaken or imposed by the express terms of this Agreement,
      any Ancillary Agreement or any other agreement to which such CDS Counterparty
      is a party. 

             (b)      As
      of the Closing Date: 

             (i)      each
      XL Party, on behalf of itself and its respective Subsidiaries, hereby irrevocably
      and unconditionally releases and forever discharges each SCA Party, its
      parents, Subsidiaries and Affiliates, and its respective predecessors,
      successors, assigns, officers, directors, agents, employees, shareholders,
      representatives, underwriters, and attorneys, from any and all past, present
      and future actions, causes of action, suits, debts, Liens, contracts, rights,
      agreements, obligations, promises, liabilities, claims, counterclaims,
      demands, damages, controversies, losses, costs and expenses (including
      attorneys’ fees and costs actually incurred) of any kind, character,
      description or nature whatsoever, known or unknown to any of the XL Parties,
      suspected or unsuspected, reported or unreported, fixed or contingent,
      whether grounded in Law or equity or sounding in tort or contract or otherwise,
      which the XL Party now has, owns, holds or claims to have, own, or hold,
      or at any time heretofore had, owned, or held or claimed to have had, owned,
      or held, or may hereafter have, own, or hold or claim to have, own, or
      hold, arising directly or indirectly out of, based upon, or in any way
      related to or in connection with (A) (1) the Financial Security Agreements;
      (2) the agreements, understandings, arrangements commuted or terminated
      pursuant to Sections 2.01, 2.02 and 2.03,
      and Other Terminated Agreements listed in Part
      II of Schedule
      1.01(b); (3) any 



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  of the Reinsurance Guarantees; (4) any
      commutation of an EIB Policy; (5) the commutation or termination of any
      of the foregoing listed in clauses (1), (2), (3) and (4); or (6) any commutation
      or amendment of any agreement listed on Schedule
      2.04 pursuant to or in accordance with this
      Agreement or (B) conduct or other matters occurring on or prior to the
      Closing, other than contractual obligations arising under written agreements
      between any XL Party and any SCA Party (including those described on Schedule
      2.05, but excluding those expressly commuted
      or terminated pursuant to this Agreement or any Ancillary Agreement); provided, however,
      with respect to both clauses (A) and (B), the provisions of this paragraph
      shall not discharge any obligation of any of the SCA Parties that has been
      undertaken or imposed by the express terms of this Agreement or any Ancillary
      Agreement. 

             (ii)      each
      XL Party hereby irrevocably and unconditionally releases and forever discharges
      each CDS Counterparty, its parents, Subsidiaries and Affiliates, and its
      respective predecessors, successors, assigns, officers, directors, agents,
      employees, shareholders, representatives, underwriters, and attorneys,
      from any and all past, present and future actions, causes of action, suits,
      debts, Liens, contracts, rights, agreements, obligations, promises, liabilities,
      claims, counterclaims, demands, damages, controversies, losses, costs and
      expenses (including attorneys’ fees and costs actually incurred)
      of any kind, character, description or nature whatsoever, known or unknown
      to any of the XL Parties, suspected or unsuspected, reported or unreported,
      fixed or contingent, accrued or unaccrued, liquidated or unliquidated,
      whether grounded in Law or equity or sounding in tort or contract or otherwise,
      which the XL Party now has, owns, holds or claims to have, own, or hold,
      or at any time heretofore had, owned, or held or claimed to have had, owned,
      or held, or may hereafter have, own, or hold or claim to have, own, or
      hold, arising directly or indirectly out of, based upon, or in any way
      related to or in connection with (A) (1) the Financial Security Agreements;
      (2) the agreements, understandings, arrangements commuted or terminated
      pursuant to Sections 2.01, 2.02 and 2.03,
      and Other Terminated Agreements listed in Part
      II of Schedule
      1.01(b); (3) any of the Reinsurance Guarantees;
      (4) the commutation or termination of any of the foregoing listed in clauses
      (1), (2) and (3); (5) any commutation of an EIB Policy, any general release
      by EIB of the XL Parties’ obligations with respect to an EIB Guarantee,
      or any guaranty by a creditworthy entity reasonably acceptable to the XL
      Parties of the XL Parties’ obligations under any EIB Guarantee, each
      in accordance with this Agreement; or (6) any commutation or amendment
      of any agreement listed on Schedule 2.04 pursuant
      to or in accordance with this Agreement, or (B) conduct occurring on or
      prior to the Closing with respect to this Agreement and the Transactions; provided, however,
      with respect to both clauses (A) and (B), the provisions of this paragraph
      shall not discharge any obligation of any of the CDS Counterparties that
      has been undertaken or imposed by the express terms of this Agreement,
      any Ancillary Agreement or any other agreement to which such CDS Counterparty
      is a party. 



                    (c)      As of the Closing Date, each CDS Counterparty hereby irrevocably and unconditionally releases and forever discharges each SCA Party, each
XL Party, each of their respective parents, Subsidiaries and Affiliates, and each of their respective predecessors, successors, assigns, officers, directors, agents, employees, shareholders, representatives, underwriters, and attorneys, from any and
all past, present and future actions, causes of action,


-15-












suits, debts, Liens, contracts, rights, agreements, obligations, promises, liabilities, claims, counterclaims, demands, damages, controversies, losses, costs and expenses (including attorneys’ fees and costs actually
incurred, except those costs and expenses expressly agreed in writing to be paid by the SCA Parties) of any kind, character, description or nature whatsoever, known or unknown to any of the CDS Counterparties, suspected or unsuspected, reported or
unreported, fixed or contingent, accrued or unaccrued, liquidated or unliquidated, whether grounded in Law or equity or sounding in tort or contract or otherwise, which the CDS Counterparty now has, owns, holds or claims to have, own, or hold, or at
any time heretofore had, owned, or held or claimed to have had, owned, or held, or may hereafter have, own, or hold or claim to have, own, or hold, arising directly or indirectly out of, based upon, or in any way related to or in connection with (A)
(1) the Financial Security Agreements; (2) the agreements, understandings, arrangements commuted or terminated pursuant to Sections 2.01, 2.02 and 2.03, and Other Terminated Agreements listed in Part II of Schedule
1.01(b); (3) any of the Reinsurance Guarantees; (4) the commutation or termination of any of the foregoing listed in clauses (1), (2) and (3); (5) any commutation of an EIB Policy, any general release by EIB of the XL
Parties’ obligations with respect to an EIB Guarantee, or any guaranty by a creditworthy entity reasonably acceptable to the XL Parties of the XL Parties’ obligations under any EIB Guarantee, each in accordance with this Agreement; or
(6) commutation or amendment of any agreement listed on Schedule 2.04 pursuant to or in accordance with this Agreement; or (B) conduct occurring on or prior to the Closing with respect to
this Agreement and the Transactions; provided, however, that nothing in this Section
2.05(c) releases any SCA Party or any XL Party from fraud or intentional misconduct; provided, further, that with respect to both clauses (A) and (B), the provisions of this paragraph shall not discharge any obligation of any of the SCA Parties or XL Parties that has been undertaken or imposed by the express terms of this Agreement, any
Ancillary Agreement or any other written agreement under which such CDS Counterparty has any rights (whether as a party or otherwise) or otherwise amend existing credit default swaps to which such CDS Counterparty is a party. 


                    (d)      The Parties acknowledge and agree that (A) the SCA Parties shall not be responsible for the performance, or lack thereof, of any other
Party’s obligations pursuant to this Agreement or the Ancillary Agreements, (B) the XL Parties shall not be responsible for the performance, or lack thereof, of any other Party's obligations pursuant to this Agreement or the Ancillary
Agreements and (C) a CDS Counterparty shall not be responsible for the performance, or lack thereof, of any other Party’s obligations pursuant to this Agreement or the Ancillary Agreements. 


                    (e)     Waiver of Statutory Rights.  In connection with the releases granted herein, each of the Parties hereby
waives all rights conferred by the provisions of California Civil Code Section 1542 and/or any similar state or federal law.  California Civil Code § 1542 provides as follows:


A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.


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The Parties understand and acknowledge the significance and consequence of their waiver of § 1542 of the California Civil Code, as well as any other federal or state statute or common law principle of similar effect, and
acknowledge that this waiver is a material inducement to and consideration for each Party’s execution of this Agreement; provided, however, the provisions of this paragraph shall not discharge any obligation of any of the Parties that has been undertaken or imposed by the express terms of this Agreement, any Ancillary or any other written agreement to which such Party is
a party. 


                    Section 2.06 Consideration. At the Closing, the XL Parties shall (i) pay to the SCA Parties an aggregate
amount (inclusive of any amounts specified within the XL/SCA Commutation Agreements) equal to One Billion, Seven Hundred and Seventy-Five Million Dollars ($1,775,000,000) (the “Cash Consideration
Amount”), which will be paid to each of the SCA Parties in the amounts set forth on Schedule 2.06(a); (ii) issue and transfer to the SCA Parties, free and
clear of any Liens, an aggregate of eight million (8,000,000) shares of XL’s Class A Ordinary Shares, par value $0.01 per share (the “Stock Consideration”), which will be
transferred to each of the SCA Parties in the number of shares set forth on Schedule 2.06(b), pursuant to the terms of the Subscription Agreement and the XL Stock Resale and Registration
Rights Agreement; and (iii) subject to Section 2.10, transfer to the SCA Shareholder Entity, free and clear of any Liens, all of the XL Owned SCA Common Shares to be held in accordance with
the terms of the Declaration of Trust (the XL Owned SCA Common Shares, together with the Cash Consideration Amount and the Stock Consideration, the “Consideration”). 


                    Section 2.07 Closing. (a) Subject to (i) satisfaction or waiver of all conditions to the obligations of the
parties set forth in Article VII (other than those conditions anticipated to occur at Closing) and (ii) the completion of an XL Public Offering, the closing of the commutations, terminations
and releases that are the subject of this Agreement (the “Closing”) will be held at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, NY 10153 at 10:00
a.m., New York time, on the same Business Day as the completion of an XL Public Offering, or at such other place or at such other time or on such other date as the Parties may mutually agree upon in writing. Notwithstanding anything to the contrary
contained herein, under no circumstances will the XL Parties have any obligation to consummate any of the Transactions required to be completed on or prior to the Closing until the completion of an XL Public Offering. 


                    (b)      All of the actions to be taken at Closing will be deemed to occur simultaneously, except that the Cash Consideration Amount to be received by XLFA shall be received prior to the XLFA Redomestication, and the commutation of the Quota Share Treaty shall occur after the XLFA Redomestication. 


                    Section 2.08 Closing Deliveries by the SCA Parties. (a) At Closing, the SCA Parties shall deliver or cause to
be delivered to the XL Parties: 


            (i)      receipt
      for the Cash Consideration Amount and the Stock Consideration received
      by the applicable SCA Parties; 

             (ii)      the
      Subscription Agreement executed by each SCA Party which is a party thereto; 



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            (iii)      the
      XL Stock Resale and Registration Rights Agreement executed by each SCA
  Party which is a party thereto; 

             (iv)      the
      2001 Facultative Quota Share Commutation Agreement executed by each SCA
      Party which is a party thereto; 

             (v)      the
      Excess of Loss Commutation Agreement executed by each SCA Party which is
      a party thereto; 

             (vi)      the
      Adverse Development Cover Commutation Agreement executed by each SCA Party
      which is a party thereto; 

             (vii)     the
      Facultative Master Certificate Commutation Agreement executed by each SCA
      Party which is a party thereto; 

             (viii)    a
      true and complete original copy of a fully executed Quota Share Treaty
      Commutation Agreement; 

             (ix)      the
      Transition Agreement Amendment executed by each SCA Party which is a party
      thereto; and 

             (x)      an
      SCA Shareholder Entity Formation Conditions Certificate, if the SCA Shareholder
      Entity Formation Conditions have been satisfied. 




                    (b)      At Closing, the SCA Parties shall deliver or cause to be delivered to the XL Parties and the CDS Counterparties a true and complete copy,
certified by the Secretary or Director of each of the SCA Parties, of the resolutions duly and validly adopted by the Boards of Directors (or, in the case of each portfolio trust that is an SCA Party, a direction letter authorized by its unitholder)
of each of the SCA Parties evidencing its authorization of the execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the Transactions. 


                    Section 2.09 Closing Deliveries by the XL Parties.  (a) At Closing, the XL Parties shall deliver to the SCA
Parties: 


            (i)      the
      Cash Consideration Amount by wire transfer in immediately available funds
      to a bank account or bank accounts of XLFA or XLCA (and, for the avoidance
      of doubt, no other entity) as SCA may direct, consistent with the allocation
      of the Cash Consideration Amount attached hereto as Schedule
      2.06(a), in writing to XL at least three
      days prior to Closing; 

             (ii)      stock
      certificates evidencing the Stock Consideration registered in the names
      of those SCA Parties designated on Schedule 2.06(b), together with an executed
      share transfer form evidencing the transfer of the XL Owned SCA Common
      Shares; 



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            (iii)      the
  Subscription Agreement executed by each XL Party which is a party thereto; 

             (iv)      the
      XL Stock Resale and Registration Rights Agreement executed by each XL Party
      which is a party thereto; 

             (v)      the
      2001 Facultative Quota Share Commutation Agreement executed by each XL
      Party which is a party thereto; 

             (vi)      the
      Excess of Loss Commutation Agreement executed by each XL Party which is
      a party thereto; 

             (vii)     the
      Adverse Development Cover Commutation Agreement executed by each XL Party
      which is a party thereto; 

             (viii)    the
      Facultative Master Certificate Commutation Agreement executed by each XL
      Party which is a party thereto; and

             (ix)      the
      Transition Agreement Amendment executed by each XL Party which is a party
      thereto. 



                    (b)      At Closing, the XL Parties shall deliver to the SCA Parties and the CDS Counterparties a true and complete copy, certified by the Secretary
or Director of each of the XL Parties, of the resolutions duly and validly adopted by the Boards of Directors of each of the XL Parties evidencing its authorization of the execution and delivery of this Agreement and the Ancillary Agreements to
which it is a party and the consummation of the Transactions. 


                    (c)      At
Closing, but subject to Section 2.10,
the XL Parties shall cause the XL Owned SCA Common Shares (together with certificates
evidencing such XL Owned SCA Common Shares and stock powers duly endorsed in
blank) to be transferred to the SCA Shareholder Entity, which will be owned and
managed pursuant to the terms of the Declaration of Trust. 


                    Section 2.10 Escrow.  Notwithstanding anything to the contrary contained in this Agreement, if XL does not
receive an SCA Shareholder Entity Formation Conditions Certificate from the SCA Parties in accordance with Section 2.08(a) at or prior to the Closing, the XL Parties shall, at Closing,
deposit with the Escrow Agent certificates evidencing all of the XL Owned SCA Common Shares, free and clear of any Liens, together with stock powers duly endorsed in blank, which are to be held by the Escrow Agent until released in accordance with
the Escrow Agreement. From and after delivery of such certificates to the Escrow Agent at Closing, the XL Parties shall refrain from exercising, and hereby irrevocably disclaim, any and all voting, economic or other rights with respect to the XL
Owned SCA Common Shares, and the XL Parties will have no liability or further obligations to the SCA Parties or the CDS Counterparties thereafter with respect to the XL Owned SCA Common Shares. 

 

 

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ARTICLE III


REPRESENTATIONS AND WARRANTIES OF THE SCA PARTIES


                    The SCA Parties hereby jointly and severally represent and warrant to each of the XL Parties and CDS Counterparties as follows: 


                    Section 3.01 Organization, Authority and Qualification of the SCA Parties. Each of the SCA Parties is a
corporation, company or business entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization and has all necessary power and authority to enter into this Agreement and the
Ancillary Agreements to which it may be a party, to carry out its obligations hereunder and thereunder and to consummate the Transactions. Except as set forth in Section 3.01 of the SCA
Parties’ Disclosure Schedule, each of the SCA Parties is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing
or qualification necessary.  The execution and delivery of this Agreement and the Ancillary Agreements to which each SCA Party is a party, the performance by each SCA Party of its obligations hereunder and thereunder and the consummation by each SCA
Party of the Transactions have been duly authorized by all requisite action on the part of each SCA Party and its shareholders.  This Agreement, the Transition Agreement Amendment, the SCA Shareholder Entity Agreement and each Transaction have been
approved by an independent committee of SCA’s Board of Directors that did not include any member that was nominated to SCA’s Board by any of the XL Parties, and this Agreement and each Ancillary Agreement and Transaction to which each
other SCA Party is a party has been approved by such SCA Party’s Board of Directors (or, in the case of each portfolio trust that is an SCA Party, a direction letter authorized by its unitholder) or other appropriate authorizing body or
Person. This Agreement has been, and, upon their execution, the Ancillary Agreements to which each SCA Party is a party shall have been, duly executed and delivered by each SCA Party, and, assuming due authorization, execution and delivery by each
of the XL Parties and CDS Counterparties and receipt of all consents and approvals by Governmental Authorities as required by Law, this Agreement constitutes, and, upon their execution, the Ancillary Agreements shall constitute, legal, valid and
binding obligations of the SCA Parties enforceable against each of the SCA Parties in accordance with their respective terms, subject to remedies under applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting
creditors’ rights.


                    Section 3.02 No Conflict.  Assuming the making and obtaining of all filings, notifications, consents,
approvals, authorizations and other actions referred to in Section 3.03, the execution, delivery and performance by each of the SCA Parties of this Agreement and the Ancillary Agreements to
which it is a party do not and will not (a) violate, conflict with or result in the breach of any provision of the Certificate of Incorporation or Bye-Laws (or similar organizational documents) of any SCA Party, (b) conflict with or violate any Law
or Governmental Order applicable to any of the SCA Parties or any of their assets, properties or businesses or, (c) except as set forth in Section 3.02 of the SCA Parties’ Disclosure
Schedule, conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or


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cancellation of, any note, bond, mortgage, indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which any SCA Party is a party, which would adversely affect the ability
of any SCA Party to carry out its obligations under this Agreement or any Ancillary Agreement or to consummate the Transactions. 


                    Section 3.03 Governmental Consents and Approvals.  (a) The execution, delivery and performance of this
Agreement and each Ancillary Agreement to which any SCA Party is a party by the SCA Parties does not and will not require any consent, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority,
except as described in Section 3.03 of the SCA Parties’ Disclosure Schedule. 


                    (b)      The SCA Parties sought and obtained (other than with respect to obtaining confirmation from the NYID, the Delaware Insurance Department and
the UK FSA that they do not object to the transfer of the XL Owned SCA Common Shares to the SCA Shareholder Entity, which confirmation will be sought and is anticipated to be obtained promptly after the completion of the documentation related to the
Shareholder Entity) approval of this Agreement and each commutation or other Transaction to which XLCA is a party from the NYID on the grounds that (among other things) they are collectively, and each is individually, fair and equitable.  The SCA
Parties have obtained (other than with respect to obtaining confirmation from the NYID, the Delaware Insurance Department and the UK FSA that they do not object to the transfer of the XL Owned SCA Common Shares to the SCA Shareholder Entity, which
confirmation will be sought and is anticipated to be obtained promptly after the completion of the documentation related to the Shareholder Entity) or completed all consents, approvals, authorizations, orders, actions, filings or notifications
listed on Section 3.03 of the SCA Parties’ Disclosure Schedule. The SCA Parties have provided true and correct copies of such approvals to the XL Parties. To the Knowledge of SCA, such
approvals have not been rescinded, modified or amended in any way. 


                    Section 3.04 Financial Information.  (a) True and complete copies of the Financial Statements have been
delivered by the SCA Parties to the XL Parties and CDS Counterparties.  The Financial Statements (i) were prepared in accordance with the books of account and other financial records of the SCA Parties and (ii) present fairly the financial condition
and results of operations of the SCA Parties as of the dates thereof or for the periods covered thereby.  The GAAP Financial Statements have been prepared in accordance with GAAP applied on a basis consistent with past practices.  The XLCA Statutory
Financial Statements have been prepared in accordance with New York State statutory accounting principles applied on a basis consistent with past practices.  The XLFA Statutory Financial Statements have been prepared in accordance with Bermuda
statutory accounting principles applied on a basis consistent with past practices.


                    (b)      True and complete copies of all pro forma balance sheets of the SCA Parties and any related statements of income, retained earnings,
stockholders’ equity, changes in financial position and related notes and schedules thereto, prepared to reflect each of the SCA Parties’ financial condition after giving effect to the Transactions and provided to the NYID, have been
delivered by the SCA Parties to the XL Parties and the CDS Counterparties. 


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                    Section 3.05 Compliance with Laws. (a) There is no violation of Law by any SCA Party that has, or, if known by
an appropriate Governmental Authority, could reasonably be expected to adversely affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the Transactions and (b) except as provided in
Section 3.05 of the SCA Parties’ Disclosure Schedule, there is no Governmental Order that is applicable to any SCA Party that has or could reasonably be expected to adversely affect
the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the Transactions. 


                    Section 3.06 Effect of Commutations.  As of the Closing, as a result of (i) commutation of the Quota Share
Treaty pursuant to the Quota Share Commutation Agreement and (ii) commutation of the Financial Security Master Facultative Agreement, the Guarantee and the Financial Security Guarantee shall no longer have any force or effect and for all purposes
shall be considered a nullity.  If any of the EIB Policies are commutated, then each EIB Guarantee that guarantees XLCA’s obligations under each commuted EIB Policy will no longer have any force or effect and will, for all purposes, be
considered a nullity. 


                    Section 3.07 Litigation.  No Action by or against any of the SCA Parties is pending or, to the Knowledge of
SCA, threatened, which could reasonably be expected to affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the Transactions. 


                    Section 3.08 Placement of Stock Consideration. Each of the SCA Parties that will acquire a portion of the
Stock Consideration: 


                    (a)      is acquiring the Stock Consideration for investment purposes only and not with a view to or for distributing or reselling such Stock
Consideration or any part thereof, without prejudice, however, to such SCA Party’s right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Stock Consideration pursuant to an
effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities or “blue sky” Laws.  Each such SCA Party understands that it must bear
the economic risk of this investment indefinitely, unless the Stock Consideration is registered pursuant to the Securities Act and any applicable state securities or “blue sky” Laws or an exemption from such registration is available.
None of the SCA Parties has any intention of participating in the formulation, determination, or direction of the basic business decisions of any of the XL Parties; 


                    (b)      at the time it was first offered the Stock Consideration was, and at the date hereof is, an “accredited investor” as defined in
Rule 501(a) under the Securities Act; 


                    (c)      understands that the Stock Consideration is being offered and provided as partial consideration to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities or “blue sky” Laws, and that the XL Parties are relying upon the truth and accuracy of, and such SCA Party’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such SCA Party set forth herein in order to determine the availability of such exemptions and the eligibility of such SCA Party to acquire the Stock Consideration; 


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                    (d)      has, either alone or together with its representatives, such knowledge, sophistication and experience in business and financial matters so
as to be capable of evaluating the merits and risks of the prospective investment in the Stock Consideration, and has so evaluated the merits and risks of such investment.  Such SCA Party understands that an investment in the Stock Consideration
involves a high degree of risk that could result in complete loss, is able to bear the economic risk of an investment in the Stock Consideration and, at the present time, is able to afford a complete loss of such investment; 


                    (e)      is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in securities
representing an investment decision like that involved in the acquisition of the Stock Consideration.  Such SCA Party acknowledges that it has (i) access to XL’s disclosures about its Class A Ordinary Shares made in XL’s filings with the
Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K for its last completed fiscal year, its Quarterly Reports on Form 10-Q for its latest fiscal
quarters, and any Current Report on Form 8-K filed by XL since the date of its last respective Annual Report on Form 10-K for its last completed fiscal year; (ii) access to information about XL and its financial condition, results of operations,
business, properties, management and prospects contained in an offering memorandum related to the issuance of the Stock Consideration provided to the SCA Parties; and (iii) adequate access and opportunity to discuss the investment opportunity with
the management of the XL Parties; 


                    (f)      in connection with its acceptance of the Stock Consideration, has not relied upon any representations made by, or other information
(whether oral or written) furnished by or on behalf of, any of the XL Parties other than as set forth in this Agreement, the Ancillary Agreements , XL’s filings with the SEC or an offering memorandum related to the issuance of the Stock
Consideration provided to the SCA Parties; 


                    (g)      acknowledges that the Stock Consideration was offered and will be issued to the SCA Parties without any general solicitation or general
advertising, including any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising; 


                    (h)      understands that nothing in this Agreement or any other materials presented by or on behalf of XL to the SCA Parties in connection with the
issuance of the Stock Consideration constitutes legal, tax or investment advice. Each SCA Party has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its receipt
of the Stock Consideration; and 


                    (i)      if located or domiciled outside the United States, has complied with all Laws in each foreign jurisdiction in which it will receive or be
the record or beneficial owner of the Stock Consideration. 


                    Section 3.09 Regulatory Approvals.  The NYID has approved in writing the terms of this Agreement and any
Transaction to which XLCA is a party, including the Quota Share Treaty Commutation Agreement, pursuant to applicable Law, including Section 1505 of the New York Insurance Law. The BMA has approved in writing the terms of this Agreement as


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they relate to XLFA prior to the XLFA Redomestication.  The UK FSA has been provided a copy of this Agreement and has raised no objection to XLCAUK entering into this Agreement, and the UK FSA has confirmed in writing that the
14-day waiting period applicable under the Letter of Undertaking, dated May 20, 2008, will not apply to XLCAUK’s execution of this Agreement. A copy of each such written approval has been delivered to the XL Parties and the CDS Counterparties
and such written approvals have not been withdrawn, rescinded, revoked, amended or altered in any way. The SCA Parties have provided the NYID, the BMA and the UK FSA with all information the SCA Parties deemed material and all information requested
by the NYID, the BMA or the UK FSA. All information provided by the SCA Parties to the NYID, the BMA or the UK FSA was true, correct and complete in all material respects. Notwithstanding anything to the contrary, the NYID, the BMA and the UK FSA
have not confirmed that they are not objecting to the transfer of the XL Owned SCA Common Shares to the SCA Shareholder Entity but the SCA Parties will seek to obtain such confirmations promptly and anticipate that such confirmations will be
obtained promptly after the completion of the documentation related to the Shareholder Entity. 


                    Section 3.10 MLI CDS Agreements.  The SCA Parties have entered into an agreement with Merrill Lynch
International (“MLI”) pursuant to which MLI will terminate the MLI CDS Agreements prior to or simultaneously with the Closing (the “MLI
Agreement”). A true and correct copy of the MLI Agreement has been delivered to the XL Parties. The MLI Agreement remains in full force and effect and has not been amended, waived, terminated or repealed in any
way.  The amount of consideration for the termination of the MLI CDS Agreements pursuant to the MLI Agreement is no greater than $500 million in the aggregate together with the release of all claims related to such MLI CDS Agreements. 


                    Section 3.11 Financial Security Master Facultative Commutation Agreement. The SCA Parties have entered into an
agreement with Financial Security pursuant to which the Financial Security Master Facultative Agreement will be commuted prior to, or simultaneously with, the Closing.  A true and correct copy of the Financial Security Master Facultative Commutation
Agreement has been delivered to the XL Parties. The Financial Security Master Facultative Commutation Agreement remains in full force and effect and has not been amended, waived, terminated or repealed in any way. 


                    Section 3.12 Third-Party Agreements.  None of the transactions contemplated by Section 2.04 and listed on Schedule 2.04 is between any SCA Party or any of its affiliates, officers, directors, employees, agents, counsel,
sub-contractors or other representatives or related parties, on the one hand, and any other SCA Party or any of its affiliates, officers, directors, employees, agents, counsel, sub-contractors or other representatives or related parties, on the
other hand. 


                    Section 3.13 Brokers. Except for Rothschild & Sons Limited, whose fees will be paid exclusively by the SCA
Parties, no broker, advisor, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the SCA Parties. 


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ARTICLE IV


REPRESENTATIONS AND WARRANTIES OF THE XL PARTIES


                    The XL Parties hereby jointly and severally represent and warrant to each of the SCA Parties and the CDS Counterparties as follows: 


                    Section 4.01 Organization and Authority of the XL Parties.  Each of the XL Parties is a corporation, company
or business entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization and has all necessary power and authority to enter into this Agreement and the Ancillary Agreements to
which it may be a party, to carry out its obligations hereunder and thereunder and to consummate the Transactions. Each of the XL Parties is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the
properties owned or leased by it or the operation of its business makes such licensing or qualification necessary. The execution and delivery of this Agreement and the Ancillary Agreements to which each XL Party is a party, the performance by each
XL Party of its obligations hereunder and thereunder, and the consummation by each XL Party of the Transactions have been duly authorized by all requisite action on the part of each XL Party. This Agreement has been, and, upon the execution of the
Ancillary Agreements to which each XL Party is a party, shall have been, duly executed and delivered by each XL Party, and, assuming due authorization, execution and delivery by each of the SCA Parties and CDS Counterparties and receipt of all
consents and approvals by Governmental Authorities as required by Law, this Agreement constitutes, and upon their execution, the Ancillary Agreements shall constitute, legal, valid and binding obligations of the XL Parties enforceable against each
of the XL Parties in accordance with their respective terms, subject to remedies under applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights. 


                    Section 4.02 No Conflict.  Assuming the making and obtaining of all filings, notifications, consents,
approvals, authorizations and other actions referred to in Section 4.03, the execution, delivery and performance by each of the XL Parties of this Agreement and the Ancillary Agreements to
which it is a party do not and will not (a) violate, conflict with or result in the breach of any provision of the Certificate of Incorporation or Bye-Laws (or similar organizational documents) of each XL Party, (b) conflict with or violate any Law
or Governmental Order applicable to any XL Party or (c) except as set forth in Section 4.02 of the XL Parties’ Disclosure Schedule, conflict with, or result in any breach of,
constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, any note, bond, mortgage, indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which any XL Party is a party, which would adversely affect the ability of any XL Party to
carry out its obligations under this Agreement or any Ancillary Agreement and to consummate the Transactions. 


                    Section 4.03 Governmental Consents and Approvals.  (a) The execution, delivery and performance of this
Agreement and each Ancillary Agreement to which it is a party by each of the XL Parties does not and will not require any consent, approval, authorization or


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other order of, action by, filing with or notification to any Governmental Authority, except as described in Section 4.03 of the XL Parties’ Disclosure Schedule.



                    (b)      The XL Parties sought and obtained approval of this Agreement and each commutation or other Transaction to which XLRA is a party from the
NYID on the grounds that (among other things) they are collectively, and each is individually, fair and equitable. The XL Parties have provided true and correct copies of such approval to the SCA Parties.  To the knowledge of XL’s executive
officers, after due inquiry, such approval has not been rescinded, modified or amended in any way. 


                    Section 4.04 Capitalization.  (a) Section 4.04(a)
of the XL Parties’ Disclosure Schedule sets forth the type and number of
authorized equity securities of XL and the type and number of such equity securities
that are issued and outstanding as at July 25, 2008. 


                    (b)      All issued and outstanding shares of XL’s capital stock as at July 28, 2008 have been duly authorized for issuance, are validly
issued and are fully paid and nonassessable. The Stock Consideration has been duly authorized and, upon issuance to the SCA Parties pursuant to the terms of this Agreement and the Subscription Agreement, will be validly issued, fully paid and
nonassessable, free and clear of all Liens other than those contained in applicable securities Laws. 


                    Section 4.05 XL Owned SCA Common Shares.  XLI is the record and beneficial owner of the XL Owned SCA Common
Shares, free and clear of any and all Liens other than restrictions on transfer imposed by applicable securities and insurance Laws, has all right, title and interest in and to the XL Owned SCA Common Shares and has all requisite power and authority
to sell, assign, transfer and deliver the XL Owned SCA Common Shares, free and clear of all Liens other than restrictions on transfer contained in applicable securities or insurance Laws, or deposit with the Escrow Agent certificates evidencing all
of the XL Owned SCA Common Shares, free and clear of any Liens, together with stock powers duly endorsed in blank pursuant to Section 2.10, as the case may be, to the SCA Shareholder Entity.



                    Section 4.06 Litigation.  No Action by or against any of the XL Parties is pending or, to the actual knowledge
of each of the XL Parties after due inquiry, threatened, which could reasonably be expected to affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the Transactions. 


                    Section 4.07 Regulatory Approvals.  The NYID has approved in writing the terms of this Agreement and any
Transaction to which XLRA is a party, including the Adverse Development Cover Commutation Agreement, pursuant to applicable Law, including Section 1505 of the New York State Insurance Laws. A copy of each such written approval has been delivered to
the SCA Parties and the CDS Counterparties and such written approvals have not been withdrawn, rescinded, revoked, amended or altered. The XL Parties have provided the NYID, the BMA and the UK FSA with all information the XL Parties deemed material
and all information requested by the NYID, the BMA or the UK FSA. All information provided by the XL Parties to the NYID, the BMA or the UK FSA was true, correct and complete in all material respects. 


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                    Section 4.08 Brokers. Except for The Blackstone Group L.P., whose fees will be paid exclusively by the XL
Parties, no broker, advisor, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions (other than in respect of the XL Public Offering) based upon arrangements made by or
on behalf of the XL Parties. 

 

ARTICLE V


REPRESENTATIONS AND WARRANTIES OF THE CDS COUNTERPARTIES 


                    Each of the CDS Counterparties hereby represents and warrants as to itself only, and neither jointly nor jointly and severally with the other CDS Counterparties, to each of the XL Parties and SCA
Parties as follows: 


                    Section 5.01 Status. It is duly organized and validly existing under the laws of the jurisdiction of its
organization or incorporation and, if relevant under such laws, is in good standing. 


                    Section 5.02 Powers. It has the power to execute this Agreement and any other documentation relating to this
Agreement (including the Ancillary Agreements to which it is a party), to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver, and to perform its obligations under this
Agreement, and it has taken all necessary action to authorize such execution, delivery and performance. 


                    Section 5.03 No Violation or Conflict.  Such execution, delivery and performance do not violate or conflict
with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of
its assets. 


                    Section 5.04 Consents. All governmental and other consents that are required to have been obtained by it with
respect to this Agreement have been obtained and are in full force and effect and all conditions of any such consents have been complied with. 


                    Section 5.05 Obligations Binding.  Its obligations under this Agreement constitute its legal, valid and
binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights generally, and subject, as to enforceability, to
equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at Law)). 


                    Section 5.06 Absence of Litigation. There is no pending, and it has not received written threat of any action,
suit or proceeding at Law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability of this Agreement against it or its ability to perform
its obligations under this Agreement. 


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                    Section 5.07 Consent to Transactions.  It consents to the effect of the consummation of the covenants
contained in this Agreement and the Ancillary Agreements, including (i) the commutation of the Quota Share Treaty pursuant to the Quota Share Commutation Agreement, (ii) the commutation of the Financial Security Master Facultative Agreement, (iii)
the commutation of any EIB Policy in accordance with Section 6.05(c) and (iv) as a consequence of the foregoing, the effective nullity of the Guarantee and the Financial Security Guarantee
and, if any EIB Policy is commuted, the EIB Guarantee that guarantees XLCA’s obligation under such commuted EIB Policy, such that each has no further force or effect.


                    Section 5.08 Ownership of Insurance Instruments. (a) It has:


            (i)      provided
      to the SCA Parties a written list (prepared in good faith by, and reflecting
      the best belief of, an officer of such CDS Counterparty) of (A) those credit
      default swap agreements with XLCA or Affiliates of XLCA to which such CDS
      Counterparty is party, and of which such CDS Counterparty is a beneficial
      owner, at the time it became a Party and (B) the notional amount of each
      such credit default swap agreement; or 

             (ii)      confirmed
      in writing by an officer of such CDS Counterparty, to the best belief of
      such confirming officer, a list provided by the SCA Parties of (A) those
      credit default swap agreements with XLCA or Affiliates of XLCA to which
      such CDS Counterparty is party, and of which such CDS Counterparty is a
      beneficial owner, at the time it became a Party and (B) the notional amount
      of each such credit default swap agreement. 



                    (b)      For an abundance of clarity, the foregoing representations and warranties contained in Section
5.08(a) only reflect the best belief of the officer of the CDS Counterparty preparing the list or confirming a list prepared by SCA. The CDS Counterparty is not making any representation or warranty that is not
qualified by the best belief of such officer, and it will not be bound by or subject to liability based on any inaccuracy contained in any such list that ultimately results from such officer’s best belief being inadvertently inaccurate.



                    Section 5.09 Brokers. Except for the CDS Financial Advisor and BlackRock, whose fees will be paid exclusively
by the SCA Parties, no broker, advisor, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission from it in connection with the Transactions based upon arrangements made by or on behalf of any of the CDS
Counterparties. 

 

ARTICLE VI


ADDITIONAL AGREEMENTS


                    Section 6.01 Public Disclosure and Confidentiality.  (a) No SCA Party or XL Party shall make or permit any of
its officers, employees, agents, counsel, sub-contractors or other representatives to make any public disclosure simultaneously with, or close in time to, the


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execution of this Agreement or the Closing, other than in conjunction with an XL Public Offering (such information disclosed in conjunction with an XL Public Offering to be pursuant to a Quarterly Report on Form 10-Q, a Current
Report on Form 8-K, a prospectus supplement, or other material that complies with the requirements of the Securities Act, including any press release, other material or internet postings) regarding the existence or terms of this Agreement, to any
person or company or to the public, without the prior written consent of the other Parties subject to this Section 6.01, such consent not to be unreasonably withheld or delayed;
provided, further, that XL and any of its officers, employees, agents, counsels, sub-contractors or other representatives
(expressly including any investment banks) may make disclosures relating to the existence and terms of this Agreement and the Transactions to rating agencies and potential investors in connection with the marketing of an XL Public Offering,
including, for the avoidance of doubt, information relating to the reinsurance agreements and guarantees being terminated pursuant to this Agreement such as exposures, valuations and other data; provided, further, that if a disclosure is required by Law, the SCA Party or the XL Party so required may make such disclosure so long as (i) it uses its reasonable best efforts to
reasonably cooperate as to the timing and content of such disclosure to the extent reasonably practicable without violating any Law and (ii) other than with respect to press releases, securities filings and similar public disclosure or disclosures
in conjunction with an XL Public Offering, it reasonably cooperates with any other SCA Party or XL Party seeking to obtain a protective order concerning such disclosure if such XL Party or SCA Party requesting cooperation shall pay for all
reasonable fees and expenses, including legal fees, associated with such cooperation. 


                    (b)     Past Confidential Information.  The SCA Parties and their officers, employees, agents, counsel,
sub-contractors and other representatives, as a group, and the XL Parties and their officers, employees, agents, counsel, sub-contractors and other representatives, as a group, agree to keep confidential within their groups any information received
prior to Closing from any Party in the other group pursuant to a confidentiality agreement, arrangement or understanding in place prior to Closing between the SCA Parties and the XL Parties that was commuted or terminated pursuant to Sections 2.01, 2.02 or 2.03 of this Agreement or set forth in Part II of Schedule 1.01(b) (“Confidential Information”), including
information about exposure, claims, mark or other information related to an individual CDS Counterparty; provided, that Confidential Information will not include any information that (i) was
publicly available prior to its disclosure to a member of the group receiving the Confidential Information (a “Receiving Group”), (ii) was known to a member of the Receiving
Group prior to disclosure by a member of the group providing the Confidential Information (a “Providing Group”) and was not received under obligations of confidentiality or from
a Person obligated to keep such information confidential or (iii) is or becomes available to the Receiving Group on a nonconfidential basis from a source other than the Providing Group or its agents, provided, that such other Person is not bound by a confidentiality agreement with the Providing Group, provided, further, that XL and any of its officers, employees, agents, counsels, sub-contractors or other representatives (expressly including any investment banks) may make disclosures relating to the existence and
terms of this Agreement and the transactions contemplated in this Agreement to rating agencies and investors in connection with the marketing of an XL Public Offering, including, for the avoidance of doubt, information relating to the reinsurance
agreements and guarantees being terminated pursuant to this Agreement such as exposures, valuations and other data. In the event that any Party subject to this Section 6.01(b), or such
Party’s agents, becomes legally compelled by deposition, subpoena, or other court or action by a Governmental Authority to disclose any of


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the Confidential Information covered by this Agreement, the Receiving Group with which such Party is associated is permitted to make such disclosure of Confidential Information as it determines is reasonably necessary, upon
consultation with counsel, to comply with applicable Laws; provided, that such Receiving Group makes a reasonable effort to provide the Providing Group with prompt written notice to that
effect and such Receiving Group reasonably cooperates with the Providing Group if the Providing Group seeks to obtain a protective order concerning such Confidential Information, provided,
that the Providing Group pays for all of the Receiving Group’s fees and expenses, including legal fees, associated with such cooperation. Notwithstanding anything contained in any other agreement, arrangement or understanding between the SCA
Parties and the XL Parties, (i) the XL Parties may disclose Confidential Information, as reasonably needed, to any other XL Party, any nationally recognized rating agency then providing a financial strength rating for any XL Party or any officer,
employee, agent, counselor, sub-contractor and other representative of any such agency or any XL Party, (ii) the SCA Parties may disclose Confidential Information, as reasonably needed, to any other SCA Party, any nationally recognized rating agency
then providing a financial strength rating for any SCA Party, or any officer, employee, agent, counselor, sub-contractor and other representative of any such agency or any SCA Party and (iii) this Section
6.01(b) supersedes all prior confidentiality rights and obligations between the SCA Parties and the XL Parties with respect to “Confidential Information,” as defined above. 


                    (c)     Regulatory Compliance. The SCA Parties will provide the XL Parties, at the XL Parties’ sole cost and
expense, upon reasonable notice and during normal business hours, all documents, files, books and records and reasonable access to, and will request reasonable cooperation from, all employees of the SCA Parties, as the XL Parties may reasonably
request from time to time, for the limited use by the XL Parties in compliance with any legal, regulatory, accounting, or audit requirement or examination. The XL Parties will provide the SCA Parties, at the SCA Parties’ sole cost and expense,
upon reasonable notice and during normal business hours, all documents, files, books and records and reasonable access to, and will request reasonable cooperation from, all employees of the XL Parties, as the SCA Parties may reasonably request from
time to time, for the limited use by the SCA Parties in compliance with any legal, regulatory, accounting, or audit requirement or examination. The XL Parties and the SCA Parties will treat all information received pursuant to this Section 6.01(c) as if it were Confidential Information subject to Section 6.01(b). 


                    Section 6.02 Regulatory and Other Authorizations; Notices and Consents. The SCA Parties and the XL Parties
shall use their reasonable best efforts to obtain and maintain all authorizations, consents, orders and approvals of all Governmental Authorities and officials that may be or become necessary for the execution and delivery of, and the performance of
their obligations pursuant to, this Agreement and the Ancillary Agreements, and will reasonably cooperate with the other SCA Parties and XL Parties in promptly seeking to obtain all such authorizations, consents, orders and approvals. Each of the
SCA Parties and XL Parties shall use reasonable best efforts to resolve objections, if any, as may be asserted by any Governmental Authority with respect to the Transactions under any Law.  In connection therewith, if any Action is instituted (or
threatened to be instituted) challenging any Transaction as violative of any Law, subject to and in accordance with Section 6.11, the SCA Parties and the XL Parties shall use their
reasonable best efforts and reasonably cooperate with one another to contest and resist any such Action and to have vacated, lifted, reversed, or overturned any decree, judgment,


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injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents, or restricts consummation of the Transactions, including by pursuing all available avenues of administrative
and judicial appeal, unless, by mutual agreement, the SCA Parties and the XL Parties decide that litigation is not in their respective best interests. 


                    Section 6.03 Notice of Developments.  Prior to the Closing, each Party shall promptly notify the other Parties
in writing of all events, circumstances, facts and occurrences arising subsequent to the date of this Agreement which could reasonably be expected to result in any material breach of a representation or warranty or covenant of such Party contained
in this Agreement or which could have the effect of making any material representation or warranty of such Party contained in this Agreement untrue or incorrect in any respect. 


                    Section 6.04 MLI ABS CDO Credit Default Swap Agreements.  Prior to the Closing, the SCA Parties shall not
amend, alter, waive or repeal any of the terms of the MLI CDS Agreement without the prior written approval of the XL Parties. 


                    Section 6.05 Third-Party Reinsurance Agreements.  (a) The SCA Parties shall (i) provide the XL Parties with
copies of all documents, files, books and records relating to any Third-Party Reinsurance Agreement for so long as it remains in force as reasonably requested by the XL Parties from time to time, and reasonable access to, and will request reasonable
cooperation from, upon reasonable notice during normal business hours, all employees of the SCA Parties whose employment responsibilities are related to any Third-Party Reinsurance Agreement for so long as it remains in force and (ii) subject to any
applicable Law, pay all claims under any Third-Party Reinsurance Agreement for so long as it remains in force as they become due, other than claims reasonably contested by the SCA Parties in good faith. 


                    (b)      Prior to the Closing, the SCA Parties shall not amend, alter, waive or repeal any of the terms of the Financial Security Master Facultative
Commutation Agreement without the prior written approval of the XL Parties. 


                    (c)      The SCA Parties shall use their commercially reasonable efforts to commute each of the EIB Policies and fully and finally extinguish each
Person’s rights and obligations thereunder pursuant to commutation and release agreements in forms reasonably satisfactory to the XL Parties or effectuate another EIB Resolution Event; provided, however, that the use of such commercially reasonable efforts shall not require the SCA Parties to pay amounts in excess of those set forth in a letter delivered concurrently
herewith to the XL Parties and the CDS Financial Advisor. Until an EIB Resolution Event occurs, XLCA shall (i) refrain from novating or assigning the EIB Policies to any Person, provided,
that it may reinsure the EIB Policies as it sees fit and (ii) refrain from selling, leasing, assigning, reinsuring or transferring in any way (whether in one transaction or a series of related transactions) a majority of its assets to any Person,
unless either (A) the EIB Policies are sold, leased, assigned, reinsured or transferred (as the case may be) with all or substantially all of such assets to the Person purchasing, leasing, reinsuring, or receiving all or substantially all of such
assets or (B) the XL Parties provide their consent, which consent shall not be unreasonably withheld or delayed.  Notwithstanding the foregoing, nothing in this paragraph shall in any way restrict or limit the SCA Parties from selling, leasing,
assigning, reinsuring, transferring or otherwise disposing of, in any manner (whether in one or more transactions) the public finance business of the SCA Parties. 


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                    Section 6.06 Ownership of Insurance Instruments.  (a) On and as of the date hereof, and on the Closing Date
(at a time prior to the Closing) and as of the Closing, the SCA Parties shall provide written notice to the XL Parties setting forth, to the Knowledge of SCA, the then current aggregate notional value of all credit default swap agreements with XLCA
or Affiliates of XLCA of which the CDS Counterparties have either represented in writing to the SCA Parties in accordance with Section 5.08 or confirmed in writing to the SCA Parties in
accordance with Section 5.08, as being a party thereto and a beneficial owner thereof. 


                    (b)      Each CDS Counterparty, in respect of itself, agrees that, prior to Closing, it will not sell or transfer in any way any right to or title
in any credit default swap agreement with XLCA or an Affiliate of XLCA in which such CDS Counterparty has beneficial ownership, or to which it is party, unless the transferee agrees to become a Party to this Agreement pursuant to Section 9.04 by signing a joinder agreement immediately upon consummation of any such sale or transfer. 


                    Section 6.07 Compliance with Securities Laws. If any SCA Party is or becomes the record or beneficial owner of
any or all of the Stock Consideration, it will comply with all Laws applicable to the Transfer of any or all of the Stock Consideration.


                    Section 6.08 Passive Investor. For a period of two years from the Closing, none of the SCA Parties will take
any action to participate in the formulation, determination or direction of the basic business decisions of any of the XL Parties. 


                    Section 6.09 XL Owned SCA Common Shares Covenant.  If any CDS Counterparty becomes the record or beneficial
owner of any or all of the XL Owned SCA Common Shares, it will comply with all Laws applicable to the Transfer of any or all of the XL Owned SCA Common Shares. 


                    Section 6.10 Forbearance. The Parties covenant and agree with each other and their respective Affiliates,
successors and assigns, that: 


                    (a)      subsequent to the date hereof: 



          (i)      none
of the SCA Parties shall hereinafter, for any reason whatsoever, demand, claim,
file suit or initiate any Action against any of the XL  Parties or the CDS Counterparties
in respect of any rights released pursuant to Section
2.05(a); 


          (ii)      none
of the XL Parties shall hereinafter, for any reason whatsoever, demand, claim,
file suit or initiate any Action against any of the  SCA Parties or the CDS Counterparties
in respect of any rights released pursuant to Section
2.05(b); and 


          (iii)     none
of the CDS Counterparties shall hereinafter, for any reason whatsoever, demand,
claim, file suit or initiate any Action against any  of the SCA Parties or the
XL Parties in respect of any rights released pursuant to Section
2.05(c). 




                    (b)      Subsequent to the date hereof and until the earlier of (i) October 15, 2008 or (ii) the termination of this Agreement pursuant to
Section 8.01, no CDS Counterparty will exercise any Triggered Enforcement Right to the extent triggered (or argued by any CDS 


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Counterparty to be triggered) as a result of the fact that any of the SCA Parties or any of their Affiliates (A) is or is becoming insolvent (either because its financial condition is such that the sum of its debts is greater than
the fair market value of its assets, or because the fair saleable value of its assets is less than the amount required to pay its probable liabilities on its existing debts as they mature), (B) has or will have unreasonably small capital with which
to engage in its business, (C) has or will have incurred debts beyond its ability to pay as they become due, (D) does not have or will not have an excess of required reserves and other liabilities over admitted assets, (E) has or will have
insufficient assets to reinsure all outstanding risks with other solvent authorized assuming insurers after paying all accrued claims owed, (F) has a credit rating that has been downgraded or withdrawn by any rating agency, or has sold credit
protection or provided a guarantee with respect to an asset-backed security or other reference obligation and the credit rating with respect to such asset-backed security or other reference obligation has been downgraded or withdrawn by any rating
agency, (G) is a party to an agreement with or for the benefit of a CDS Counterparty where a cross-default or termination event has occurred or to the extent it results from the occurrence of an event described in clauses (A) through (F), or (H) has
admitted in writing to any set of circumstances described in clauses (A) through (G); provided, that if any counterparty to a credit default swap agreement with XLCA or Affiliates of XLCA
exercises a Triggered Enforcement Right in respect of such credit default swap as a result of the occurrence of an event described in clauses (A) through (E) or (H) (but solely with respect to clauses (A) through (E)), and the CDS Counterparties
representing the Minimum Consenting CDS Counterparty Restructuring Threshold so elect in writing, this Section 6.10(b) shall no longer apply to any CDS Counterparty; provided, further that this sentence shall not apply with respect to any such Triggered Enforcement Right (x) withdrawn by such counterparty or
deemed ineffective by a Governmental Authority within five (5) Business Days or (y) if the current payment obligation of the SCA Parties arising from the exercise of such Triggered Enforcement Right does not exceed $35 million with respect to any
given counterparty. The SCA Parties shall give notice to the CDS Counterparties promptly after receiving notice of the exercise of a Triggered Enforcement Right. 


                    (c)      Subsequent to the date hereof and until the earlier of (i) Closing or (ii) the termination of this Agreement pursuant to Section 8.01, the XL Parties will not exercise any Triggered Enforcement Rights to the extent triggered as a result of the fact that any of the SCA Parties or any of their Affiliates (A) is or is becoming
insolvent (either because its financial condition is such that the sum of its debts is greater than the fair market value of its assets or because the fair saleable value of its assets is less than the amount required to pay its probable liabilities
on its existing debts as they mature), (B) has or will have unreasonably small capital with which to engage in its business and (C) has or will have incurred debts beyond its ability to pay as they become due, (D) does not have or will not have an
excess of required reserves and other liabilities over admitted assets, (E) has or will have insufficient assets to reinsure all outstanding risks with other solvent authorized assuming insurers after paying all accrued claims owed, (F) has a credit
rating that has been downgraded or withdrawn by any rating agency, or has sold credit protection or provided a guarantee with respect to an asset-backed security or other reference obligation and the credit rating with respect to such asset-backed
security or other reference obligation has been downgraded or withdrawn by any rating agency, (G) is a party to an agreement with or for the benefit of a CDS Counterparty where a cross-default or termination event has occurred or to the extent it
results from the occurrence of an event described in clauses


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(A) through (F), or (H) has admitted in writing to any set of circumstances described in clauses (A) through (G). 


                    (d)      For the avoidance of doubt, nothing herein shall restrict or impair the exercise of Triggered Enforcement Rights by any CDS Counterparty or
by any XL Party in the event that any of the SCA Parties or any of their Affiliates institutes or has instituted against it a proceeding relating to its insolvency, bankruptcy, rehabilitation, liquidation, or reorganization under any bankruptcy or
insolvency Law or other similar Law affecting creditors’ rights, or has a petition presented relating to its winding-up, rehabilitation, insolvency, bankruptcy, reorganization or liquidation, regardless of whether or not such proceeding or
petition (i) results in a judgment of insolvency or bankruptcy or the entry of an order against it relating to any rehabilitation, insolvency, bankruptcy, reorganization or liquidation or (ii) is not dismissed, discharged, stayed or restrained.
Further, for the avoidance of doubt, the CDS Counterparties may submit claims on account of their credit default swaps, policies or other agreements with any SCA Party to the SCA Parties as they become due in the ordinary course, other than claims
subject to forbearance pursuant to Section 6.10(b). 


                    Section 6.11 Control of Litigation and Cooperation.  (a) As between the SCA Parties and the XL Parties, the XL
Parties shall have the right (but not the obligation) to control and direct, through counsel of its own choosing, the defense and settlement of any Action against any SCA Party brought by any Person that challenges the validity or enforceability of
this Agreement or any Ancillary Agreement, including any fraudulent conveyance Action or any other Action under any bankruptcy or insolvency Law or other similar Law affecting creditors’ rights (a “Challenging Action”). The SCA Parties and the XL Parties shall promptly provide written notice to each other and the CDS Counterparties upon becoming aware of any Challenging Action or threatened
Challenging Action.  Subject to the first sentence of this Section 6.11(a), the SCA Parties shall be entitled to participate fully in the defense of such Challenging Action with internal
counsel or with outside counsel (at the SCA Parties’ own expense). 


                    (b)      The SCA Parties shall actively and in good faith reasonably cooperate in any defense of a Challenging Action controlled by the XL Parties.
Such cooperation by the SCA Parties shall include (i) providing to the XL Parties, upon their reasonable request, all documents and information necessary to, or which could assist in, the defense, appeal or settlement of any such Challenging Action,
(ii) making the SCA Parties’ employees (and using its commercially reasonable efforts to make the SCA Parties’ former employees) and representatives available to be interviewed by the XL Parties upon reasonable notice and at reasonable
times and (iii) offering truthful deposition and trial testimony upon the request of the XL Parties. 


                    (c)      The XL Parties and the SCA Parties shall actively and in good faith reasonably cooperate in the defense of any third-party Actions other
than Challenging Actions brought or made against any such Party relating to the subject matter of, or any Transactions consummated or to be consummated under, this Agreement or any Ancillary Agreement. Such cooperation shall include (i) providing to
any such Party against which any such Action is made, upon such Party’s reasonable request, all documents and information necessary to, or which could assist in, the defense, appeal or settlement of any such Action, (ii) making its employees
(and using its commercially reasonable efforts to make its former employees) and representatives 


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available to be interviewed by the Party against which any such Action is made upon reasonable notice and at reasonable times, (iii) offering truthful deposition and trial testimony upon the request of the Party against which any
such Action is made and (iv) otherwise consulting with the Party against which any such Action is made and, to the extent the Action is made against more than one Party, coordinating, to the extent feasible, the handling and defense of any such
Action; provided, however, that nothing herein shall require disclosure by any such Party of any information subject to the
attorney-client privilege or in conflict with any contractual confidentiality restriction to which such Party is bound, except when a protective order issued by a Governmental Authority would reasonably ensure Confidentiality of the disclosed.



                    Section
6.12 CDS Counterparty
Restructuring.  Following the Closing Date (except
to the extent the Allocated  Funds, as defined below, are paid to or for the
benefit of the CDS Counterparties pursuant to clause (i) or (ii) of this Section
6.12), XLCA shall segregate and hold an aggregate
amount of  Eight Hundred and Twenty Million Dollars ($820,000,000) in cash (together
with any SCA Share Sale Proceeds and the premiums or other payments described
in the last sentence of this Section 6.12)
separately in an interest bearing account or otherwise invested as may be agreed
in writing between the SCA Parties and the Required Consenting CDS Counterparties
(together with any interest earned thereon, the “Allocated
Funds”), it being understood that such interest
bearing account or other investment vehicle described in this sentence will be
maintained at Wilmington Trust Corporation. or, if maintained  with a CDS Counterparty
or an Affiliate of a CDS Counterparty, such CDS Counterparty shall have waived
in writing its rights of set-off with respect to, and any security interest or
other lien on, the Allocated Funds, solely for purposes of (i)  commuting, terminating,
amending and/or otherwise restructuring, as applicable, existing agreements (a “CDS
Counterparty Restructuring”) pursuant to
an agreement among the  applicable SCA Parties and CDS Counterparties representing
not less than the Minimum Consenting CDS Counterparty Restructuring Threshold
and (ii) after October 15, 2008, the payment of any actual claims or losses on
existing agreements and insurance  policies issued to or for the benefit of CDS
Counterparties and, it being understood that, such funds shall not be used for
any other purpose, except that, in the event that XLCA becomes subject to a rehabilitation
or liquidation proceeding, the  Allocated Funds shall no longer be separately
held or segregated or limited in use to the purpose stated above and shall be
part of the general assets of XLCA. XLCA shall provide quarterly reports to the
CDS Counterparties setting forth an  accounting, in reasonable detail, with respect
to the Allocated Funds and any investments maintained therein; provided,
that nothing in this Section
6.12, including the creation of the Allocated Funds,
shall (i) in any way limit the rights or claims of the CDS Counterparties, the
liabilities of the SCA Parties in respect of such claims, or the rights of the
CDS  Counterparties in respect of other assets of the SCA Parties or (ii) constitute
a waiver of any defense the SCA Parties may have with respect to any such claims
or liabilities. Notwithstanding anything else herein, no CDS Counterparty has
any  obligation to participate in the CDS Counterparty Restructuring, including,
for the avoidance of doubt, commuting, terminating, amending and/or otherwise
restructuring, as applicable, existing agreements. The premiums or other payments
that a CDS  Counterparty makes in respect of its credit default swap agreements
with XLCA or Affiliates of XLCA during the period that such CDS Counterparty
forbears from exercising any Triggered Enforcement Right under such credit default
swap pursuant to
Section 6.10(b) shall
be included in the Allocated Funds. After the Closing, the SCA Parties and the
CDS Counterparties will negotiate in good faith in an effort to reach agreement
on a CDS Counterparty Restructuring on or prior to October 15, 2008 that is fair
and equitable to both the SCA Parties and the CDS Counterparties.


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                    Section 6.13 Restriction on Commutations.  Until October 15, 2008, the SCA Parties shall not effect any
commutations, settlements, restructurings or terminations of policies or contracts not expressly contemplated by this Agreement that involve the payment of any consideration by the SCA Parties, without the consent of CDS Counterparties representing
the Minimum Consenting CDS Counterparty Restructuring Threshold, provided, that during such period the SCA Parties may effect any action (including commutations) related to the EIB Policies
in accordance with Section 6.05, may consummate the Financial Security Commutations, and may effect commutations, settlements, restructurings and terminations (i) that involve cash payments
not in excess of an aggregate amount set forth in a letter delivered concurrently herewith to the XL Parties and the CDS Financial Advisor during such period (of which (A) an amount set forth in such letter may not be used for the commutation,
settlement, restructuring or termination of any policy or contract other than JeffCo Policies and (B) no more than an amount set forth in such letter may be for CDS policies and contracts); provided, however, that no such commutation, settlement, restructuring or termination (other than with respect to JeffCo Policies) may involve payment by the SCA Parties of cash, debt
or other consideration in excess of the reserves (including case and unearned premium reserves) related to the risks being commuted; (ii) of the reinsurance contracts provided in Schedule 2.04 (in accordance with Section 2.04); (iii) that are settlements required pursuant to the express terms of insurance policies and contracts of the SCA Parties; and (iv) that are
for cash collateralization of up to $24 million of letters of credit issued under the Credit Agreement; provided, that such outstanding letters of credit shall be extended for one year;
provided, further, that until October 15, 2008, prior to effecting any commutation, settlement, restructuring or termination
permitted under Section 6.13(i) or (ii): (w) XLCA shall provide the CDS Financial Advisor reasonable advance notice and such information as may be reasonably necessary to evaluate such
proposed commutation, settlement, restructuring or termination (which advance notice and information shall be supplied to the CDS Financial Advisor not later than five (5) Business Days prior to consideration of such commutation, settlement,
restructuring or termination by XLCA’s board of directors as provided below); (x) at the option of the CDS Financial Advisor, and no later than five (5) Business Days after being provided such notice and information by XLCA regarding such
proposed commutation, settlement, restructuring or termination, the CDS Financial Advisor may provide XLCA with a written response to such proposed commutation, settlement, restructuring or termination; (y) XLCA shall provide such written response
to its board of directors for consideration at the XLCA board of directors meeting at which such commutation, settlement, restructuring or termination will be presented for approval; and (z) will obtain the approval of the XLCA board of directors
for such commutation, settlement, restructuring or termination after so providing such response to the board. For the avoidance of doubt, no such commutation, settlement, restructuring or amendment shall involve the payment of Allocated Funds except
to the extent provided in Section 6.12.


                    Section 6.14 Treatment of Public Finance Business. The SCA Parties and the CDS Counterparties understand that
the approval by the NYID of any CDS Counterparty Restructuring will require addressing XLCA’s public finance business to the satisfaction of the NYID. The SCA Parties and the CDS Counterparties hereby agree to negotiate in good faith in an
effort to reach an agreement on the appropriate treatment of such public finance business in


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connection with the CDS Counterparty Restructuring (it being understood that failure to reach such agreement, notwithstanding good faith negotiations, shall not constitute a default hereunder or give rise to any cause of action
against any Party hereto).  Without the consent of CDS Counterparties representing the Minimum Consenting CDS Counterparty Restructuring Threshold, the SCA Parties shall not transfer or otherwise dispose of such public finance business prior to
October 15, 2008, except for reinsurance cessions for risk management purposes not intended to effectuate a transfer of the business in whole or any substantial part or to the extent it is agreed between the NYID and the SCA Parties that to transfer
such public finance business is necessary and/or in the public interest (as to which the CDS Counterparties reserve all rights to challenge or object). 


                    Section 6.15 Further Action. Subject to the next sentence, each of the Parties shall use its reasonable best
efforts to take, or cause to be taken, all appropriate action, to do or cause to be done all things necessary, proper or advisable under applicable Law, and to execute and deliver such documents and other papers, as may be required to carry out the
provisions of this Agreement and the Ancillary Agreements to which it is a party and to consummate and make effective the Transactions reasonably as requested by the Parties, including the matters contemplated by Section
6.18. Notwithstanding anything to the contrary herein or otherwise, the Parties agree that the XL Parties have (i) complete and sole discretion whether or not any XL Public Offering will be completed and (ii) no
obligation to the SCA Parties or the CDS Counterparties to complete any XL Public Offering. 


                    Section
6.16 Resignation
of XL Nominees.  The XL Parties shall use their
reasonable best efforts to cause  those four members of the SCA Board of Directors
nominated by any of the XL Parties to resign from SCA’s Board of Directors
effective as of the Closing. From and after the Closing, XL shall refrain from
exercising any rights granted to it  under SCA’s Bye-Laws. 


                    Section 6.17 Disclosure Schedules; Supplementation and Amendment of Schedules. The SCA Parties may, at their
option, include in the Schedules items that are not material in order to avoid any misunderstanding, and such inclusion, or any references to dollar amounts, shall not be deemed to be an acknowledgement or representation that such items are
material, to establish any standard of materiality or to define further the meaning of such terms for purposes of this Agreement.  Information disclosed in the Schedules shall constitute a disclosure for all purposes under this Agreement
notwithstanding any reference to a specific section, and all such information shall be deemed to qualify the entire Agreement and not just such section. From time to time, prior to the Closing, the SCA Parties shall have the right to supplement or
amend the Schedules with respect to any matter arising hereafter or discovered after the delivery of the Schedules pursuant to this Agreement.  No such supplement or amendment shall have any effect on the satisfaction of the condition to closing set
forth in Section 7.01(a); provided, however, if the Closing shall occur,
then the Parties (other than the SCA Parties) shall be deemed to have waived any right or claim pursuant to the terms of this Agreement or otherwise, including pursuant to Section 9.11
hereof, with respect to any and all matters disclosed pursuant to any such supplement or amendment prior to the Closing. 



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                    Section
6.18 SCA Shareholder
Entity.  The SCA Parties and the CDS Counterparties
agree to cause the SCA  Shareholder Entity to be promptly created, and in no
event later than ten (10) days after the Closing, by taking all actions reasonably
necessary to cause a trustee to enter into the Declaration of Trust. SCA and
the SCA Shareholder Entity shall  enter into the SCA Shareholder Entity Agreement
and the SCA Registration Rights Agreement concurrent with or promptly after creation
of the SCA Shareholder Entity. If the XL Owned SCA Common Shares are transferred
to the Escrow Agent pursuant to Section
 2.10, then SCA and XLCA shall promptly, but in
 no event later than two (2) Business Days following the satisfaction of the
 SCA Shareholder Entity Formation Conditions, deliver a written notice to the
 Escrow Agent  conforming to the requirements of the Escrow Agreement directing
 the Escrow Agreement to release all of the XL Owned SCA Common Shares (together
 with the related certificates and stock powers) to the SCA Shareholder Entity.
 The vacancies on the  board of directors of SCA created by the resignations
 as of the Closing of the four directors of SCA nominated by the XL Parties shall
 be filled by appointment of the initial nominees of the SCA Shareholder Entity
 to the board of directors of SCA in  accordance with the SCA Shareholder Entity
 Agreement. Each of the SCA Parties and the Required Consenting CDS Counterparties
 will use their reasonable best efforts to take all appropriate action and will
 cooperate fully with each other and their  respective officers, directors, employees,
 agents, counsel, accountants and other designees in connection with any steps
 required to be taken to satisfy each of the SCA Shareholder Entity Formation
 Conditions. Furthermore, the SCA Parties and the  CDS Counterparties shall work
 together in good faith to achieve the goals of the SCA Parties and the CDS Counterparties
 as set forth in this Agreement and any Ancillary Agreement to which an SCA Party
 and a CDS Counterparty is a party, and those  described in this Section
 6.18.  Notwithstanding Sections
 9.07 and 9.08,
  the SCA Shareholder Entity Formation Conditions may be amended and modified
 from time to time upon the written agreement of SCA and the Required Consenting
 CDS Counterparties. 


                    Section 6.19 Portfolio Trust.  The SCA Parties will direct each portfolio trust that is a party to a credit
default swap agreement with a CDS Counterparty to execute a joinder agreement in the form attached hereto as Exhibit 1.01(c) and become a Party to this Agreement promptly upon receiving
notice that such CDS Counterparty became a Party, and in no event later than the earlier of (i) the Closing or (ii) three (3) Business Days after such CDS Counterparty became a Party. 


                    Section 6.20 BlackRock.  The SCA Parties shall reasonably cooperate with BlackRock, including providing
BlackRock with reasonable access to information and reasonable access to, and will request reasonable cooperation from, personnel of the SCA Parties, in order to permit BlackRock to complete its work as early in the month of August 2008 as is
reasonably practicable. 


                    Section 6.21 XLFA Merger. As soon as practicable following the later of (i) the Closing and (ii) the
occurrence of the XLFA Redomestication, XLFA as continued in Delaware or its successor pursuant to the XLFA Redomestication shall merge into and with XLCA. 


                    Section 6.22 Collipulli Temuco and Banco de Brasil Policies. (a) (i) The SCA Parties will provide the XL
Parties with copies of all documents, files, books and records relating to either the Collipulli Temuco Policy or the Banco de Brasil Policy as reasonably requested by the XL Parties from time to time, and reasonable access to, and will request
reasonable


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cooperation from, upon reasonable notice and during normal business hours, all employees of the SCA Parties whose employment responsibilities are related to either the Collipulli Temuco Policy or the Banco de Brasil Policy.



            (ii)      The
      XL Parties will provide the SCA Parties with copies of all documents, files,
      books and records relating to either the Collipulli Temuco Policy or the
      Banco de Brasil Policy as reasonably requested by the SCA Parties from
      time to time, and reasonable access to, and will request reasonable cooperation
      from, upon reasonable notice and during normal business hours, all employees
      of the XL Parties whose employment responsibilities are related to either
      the Collipulli Temuco Policy or the Banco de Brasil Policy. 



                    (b)      The XL Parties will reasonably cooperate with the SCA Parties in connection with the remediation of the Collipulli Temuco Policy and will
cause XLI to issue a replacement policy for the Collipulli Temuco Policy to the new liquidity provider on substantially the same terms as the XLI policy currently in force. 


                    (c)      Upon written direction of the SCA Parties, and only upon written direction of the SCA Parties, the XL Parties will exercise any right,
power or authority provided to it with respect to the Collipulli Temuco transaction, including the giving of consents, providing appropriate waivers and taking any other actions related to the performance and enforcement of its rights under the
financing documents; provided, that the XL Parties are not required to take any action that will be in violation of any Law, and may take any action required by, or necessary to be in
compliance with, any applicable Law. 


                    Section 6.23 XLFA Redomestication.  Prior to the Closing, the SCA Parties shall pre-clear the certificate that
will effect the XLFA Redomestication with the Delaware Secretary of State and provide evidence of such pre-clearance to the other parties hereto. At the Closing, after XLFA receives the Cash Consideration Amount to be received by it under
Section 2.08, the SCA Parties shall cause such pre-cleared certificate to be filed with the Secretary of State of Delaware, thereby effecting the XLFA Redomestication. 

 

ARTICLE VII


CONDITIONS TO CLOSING


                    Section 7.01 Conditions to Obligations of the SCA Parties. The obligations of the SCA Parties to consummate
the Transactions are subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions: 


                    (a)      Representations, Warranties and Covenants. (i) The representations and warranties of the XL Parties
contained in this Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and
effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as


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of the Closing, except to the extent such representations and warranties are as of another date, in which case such representations and warranties will be true and correct as of that date, (ii) the covenants and agreements
contained in this Agreement to be complied with by the XL Parties on or before the Closing will have been complied with in all material respects, (iii) the representations and warranties of the CDS Counterparties contained in this Agreement (A) that
are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing,
and (B) that are qualified by “materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as of the Closing, except to the extent such representations
and warranties are as of another date, in which case such representations and warranties will be true and correct as of that date, and (iv) the covenants and agreements contained in this Agreement to be complied with by the CDS Counterparties on or
before the Closing will have been complied with in all material respects; 


                    (b)      No Proceeding or Litigation. No Action will have been commenced by any Governmental Authority against any
of the Parties seeking to restrain or materially and adversely alter the Transactions which, in the reasonable, good faith determination of the Board of Directors of each of the SCA Parties, after consulting with legal counsel, is likely to render
it impossible or unlawful to consummate such transactions; 


                    (c)      Outside Date. 10:00 a.m., New York time, on August 5, 2008, shall have passed; 


                    (d)      Closing Deliveries. All closing documents required to be delivered under Section 2.08 and Section 2.09 hereof shall have been delivered; 


                    (e)      Financial Security Commutations. The Financial Security Commutations shall have been consummated prior to
or simultaneously with the Closing; 


                    (f)      MLI CDS Agreements.  Termination of the MLI CDS Agreements will have occurred prior to, or will occur
simultaneously with, the Closing; 


                    (g)      Effectiveness of Board Resignations.  All four directors of SCA designated by the XL Parties shall have
tendered their resignations effective as of the Closing; 


                    (h)      Consents. None of the consents listed in Section 3.03 of the SCA Parties’ Disclosure Schedule or Section 4.03 of the XL Parties’ Disclosure Schedule have been withdrawn, rescinded, revised, amended or altered in any
way; and 


                    (i)      Officers Certificate.  Receipt of a certificate simultaneously with the Closing of a duly authorized
officer of each of the XL Parties certifying in respect of such XL Party as to the matters set forth in Sections 7.01(a)(i) and 7.01(a)(ii). 


                    Section 7.02 Conditions to Obligations of the XL Parties. The obligations of the XL Parties to consummate the
Transactions are subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions: 


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                    (a)      Representations, Warranties and Covenants.  (i) The representations and warranties of the SCA Parties
contained in this Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and
effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as of the Closing, except
to the extent such representations and warranties are as of another date, in which case such representations and warranties will be true and correct as of that date, (ii) the covenants and agreements contained in this Agreement to be complied with
by the SCA Parties on or before the Closing will have been complied with in all material respects, (iii) the representations and warranties of the CDS Counterparties contained in this Agreement (A) that are not qualified by “materiality”
will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing, and (B) that are qualified by
“materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as of the Closing, except to the extent such representations and warranties are as of
another date, in which case such representations and warranties will be true and correct as of that date, and (iv) the covenants and agreements contained in this Agreement to be complied with by the CDS Counterparties on or before the Closing will
have been complied with in all material respects; 


                    (b)      Financial Security Commutations. The Financial Security Commutations shall have been consummated prior to
or simultaneously with the Closing; 


                    (c)      No Proceeding or Litigation. No Action will have been commenced by any Governmental Authority against any
of the Parties seeking to restrain or materially and adversely alter the Transactions which, in the reasonable, good faith determination of the Board of Directors of each of the XL Parties, after consulting with legal counsel, is likely to render it
impossible or unlawful to consummate such transactions; 


                    (d)      Consents. None of the consents listed in Section 3.03 of the SCA Parties’ Disclosure Schedule or Section 4.03 of the XL Parties’ Disclosure Schedule have been withdrawn, rescinded, revised, amended or altered in any
way; 


                    (e)      Closing Deliveries. The closing documents required to be delivered under Section 2.08 and Section 2.09 hereof shall have been delivered; 


                    (f)      MLI CDS Agreements.  Termination of the MLI CDS Agreements will have occurred prior to, or will occur
simultaneously with, the Closing; and 


                    (g)      Officers Certificate.  Receipt of a certificate simultaneously with the Closing of a duly authorized
officer of each of the SCA Parties certifying in respect of such SCA Party as to the matters set forth in Sections 7.02(a)(i) and 7.02(a)(ii). 


                    Section 7.03 Conditions to Obligations of the CDS Counterparties.  The obligations of each CDS Counterparty to
consummate the Transactions are subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions: 


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                    (a)      Representations, Warranties and Covenants.  (i) The representations and warranties of the SCA Parties
contained in this Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and
effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as of the Closing, except
to the extent such representations and warranties are as of another date, in which case such representations and warranties will be true and correct as of that date, (ii) the covenants and agreements contained in this Agreement to be complied with
by the SCA Parties on or before the Closing will have been complied with in all material respects, (iii) the representations and warranties of the XL Parties contained in this Agreement (A) that are not qualified by “materiality” will
have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing, and (B) that are qualified by
“materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as of the Closing, except to the extent such representations and warranties are as of
another date, in which case such representations and warranties will be true and correct as of that date, and (iv) the covenants and agreements contained in this Agreement to be complied with by the XL Parties on or before the Closing will have been
complied with in all material respects; 


                    (b)      No Proceeding or Litigation. No Action will have been commenced by any Governmental Authority against any
of the Parties seeking to restrain or materially and adversely alter the Transactions which, in the reasonable, good faith determination of the CDS Counterparties, after consulting with legal counsel, is likely to render it impossible or unlawful to
consummate such Transactions; 


                    (c)      Effectiveness of Board Resignations.  All four directors of SCA designated by the XL Parties shall have
tendered their resignations effective as of the Closing; and 


                    (d)      Closing Deliveries. The closing documents required to be delivered under Section 2.08 and Section 2.09 hereof shall have been delivered. 


                    Section 7.04 Frustration of Closing Conditions.  None of the XL Parties, the SCA Parties or any CDS
Counterparty may rely on the failure of any condition set forth in Section 7.01, Section 7.02 or Section 7.03, as the case may be, to be satisfied if such failure was primarily caused by such Party’s or Parties’ breach of any provision of this Agreement or failure to use its or their
reasonable best efforts to consummate the Transactions in accordance with the terms of this Agreement. 

 

ARTICLE VIII


TERMINATION AND WITHDRAWAL


                    Section 8.01 Termination. This Agreement may be terminated at any time prior to the Closing: 


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                    (a)      by the XL Parties, provided, that they are not in breach of this Agreement, if
between the date hereof and the Closing Date if: (i) any of the representations and warranties of any of the SCA Parties or the CDS Counterparties contained in this Agreement, (A) that are not qualified by “materiality,” were not true
and correct in all material respects when made, or, (B) that are qualified by “materiality,” were not true and correct when made; (ii) any of the SCA Parties or the CDS Counterparties failed to comply in any material respect with the
covenants or agreements contained in this Agreement to be complied with by it; or (iii) any of the SCA Parties makes a general assignment for the benefit of its creditors or any proceeding is instituted by or against any of the SCA Parties seeking
to adjudicate any one of them as bankrupt or insolvent, seeking the liquidation, winding up or reorganization of any one of them, or seeking any arrangement, adjustment, protection, relief or composition of its debts under any Law relating to
bankruptcy, insolvency, rehabilitation or reorganization as to any one of them; provided, however, that prior to termination for
any breach of this Agreement described in the preceding subsection (i) or (ii), the XL Parties must provide written notice of such breach to the SCA Parties and such breach must remain outstanding without material cure for fifteen (15) days after
delivery of such notice; 


                    (b)      by the SCA Parties, provided, that they are not in breach of this Agreement, if
between the date hereof and the Closing Date if: (i) any of the representations and warranties of any of the XL Parties or the CDS Counterparties contained in this Agreement, (A) that are not qualified by “materiality,” were not true and
correct in all material respects when made, or, (B) that are qualified by “materiality,” were not true and correct when made; (ii) any of the XL Parties or the CDS Counterparties failed to comply in any material respect with the
covenants or agreements contained in this Agreement to be complied with by it; or (iii) any of the XL Parties makes a general assignment for the benefit of its creditors or any proceeding is instituted by or against any XL Party seeking to
adjudicate any one of them as bankrupt or insolvent, seeking the liquidation, winding up or reorganization of any one of them, or seeking any arrangement, adjustment, protection, relief or composition of its debts under any Law relating to
bankruptcy, insolvency, rehabilitation or reorganization as to any one of them; provided, however, that prior to termination for
any breach of this Agreement described in the preceding subsection (i) or (ii), the SCA Parties must provide written notice of such
breach to the XL Parties and such breach must remain outstanding without material cure for fifteen (15) days after delivery of such notice; 


                    (c)      by the SCA Parties, as a group, or the XL Parties, as a group, if the Closing shall not have occurred on or prior to August 15, 2008;
provided, however, that the right to terminate this Agreement under this Section
8.01(c) shall not be available to the SCA Parties, as a group, or the XL Parties, as a group, if failure to fulfill any obligation under this Agreement by any member of such group shall have been the cause of, or shall
have resulted in, the failure of the Closing to occur on or prior to such date;


                    (d)      by any Party, in the event that any Governmental Authority shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Transactions, and such order, decree, ruling or other action shall have become final and non-appealable; or 


                    (e)      by the mutual written consent of the SCA Parties and the XL Parties.


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                    Section 8.02 Effect of Termination.  In the event of termination of this Agreement as provided in
Section 8.01, this Agreement shall forthwith become void and there shall be no continuing obligations on the part of any Party hereto except (a) as set forth in Sections 6.01, 9.01, 9.11, 9.12, 9.13 and 9.14, and (b) that nothing herein shall relieve any Party from liability for any breach of this Agreement
prior to its termination. 


                    Section 8.03 CDS Counterparty Withdrawal. If the Closing does not take place on or prior to August 15, 2008, a
CDS Counterparty may withdraw from this Agreement and such CDS Counterparty shall have no obligations or rights hereunder or in connection with the Transactions (including under Sections 2.05(c) and 6.10(b) and notwithstanding any provision to the contrary in Section 9.08 or otherwise), by providing notice of
such withdrawal to all Parties by August 20, 2008, and after such withdrawal, such CDS Counterparty will no longer be deemed to be a “CDS Counterparty” for purposes of this Agreement and any Ancillary Agreement. 


ARTICLE IX


GENERAL PROVISIONS


                    Section 9.01 Expenses. Except as otherwise specified in this Agreement or any other written agreement, all
costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the Transactions, shall be paid by the Party incurring such costs and expenses, whether or not the
Closing shall have occurred. 


                    Section 9.02 Notices.  All notices, requests, claims, demands and other communications hereunder shall be in
writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by facsimile or electronic mail (upon electronic confirmation of
delivery), or by registered or certified mail (postage prepaid, return receipt requested), to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this
Section 9.02): 

	                    	
(a)        	
if to any of the SCA Parties:  
	   
	 	   	
Address:  	
c/o XL Capital Assurance Inc.  
	 	   	   	
1221 Avenue of the Americas  
	 	   	   	
New York, NY 10020-1001  
	 	   	
Facsimile:  	
212.478.3579  
	 	   	
Electronic Mail:        	
susan.comparato@scafg.com  
	 	   	
Attention:  	
Susan Comparato, General Counsel  
	   
	 	   	
with a copy to:  	   




 

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Address:  	
Weil, Gotshal & Manges  
	 	   	   	
767 Fifth Avenue  
	 	   	   	
New York, NY 10153  
	 	   	
Facsimile:  	
212.310.8007  
	 	   	
Electronic Mail:        	
gary.holtzer@weil.com  
	 	   	
Attention:  	
Gary T. Holtzer  
	   
	 	
(b)        	
if to any of the XL Parties:  
	   
	 	   	
Address:  	
c/o XL Capital Ltd  
	 	 	 	XL House 

	 	   	   	
One Bermudiana Road  
	 	   	   	
Hamilton  
	 	   	   	
Bermuda, HM 11  
	 	   	
Facsimile:  	
441.294.7307  
	 	   	
Electronic Mail:  	
kirstin.gould@xlgroup.com  
	 	   	
Attention:  	
Kirstin Gould, General Counsel  
	   
	 	with a copy to:   
	   
	 	   	
Address:  	
Cadwalader, Wickersham & Taft LLP  
	 	   	   	
One World Financial Center  
	 	   	   	
New York, NY 10281  
	 	   	
Facsimile:  	
212.504.6666  
	 	   	
Electronic Mail:  	
louis.bevilacqua@cwt.com  
	 	   	
Attention:  	
Louis J. Bevilacqua  





                    (c)      if
to the CDS Counterparties, to the address, facsimile or electronic mail address
listed on Schedule
9.02 hereto, which shall be kept on file by XL, and updated
by XL from time to time (with copies of updates provided to the SCA Parties and
Davis Polk & Wardwell at the address listed below) based on the execution and
delivery of joinder agreements by additional CDS Counterparties in accordance
with Section
 9.04 below: 

	 	
    with a copy to:  	   
	   
	                    	           	 Address:  	
Davis Polk & Wardwell  
	 	 	   	
450 Lexington Avenue  
	 	 	   	
New York, NY 10017  
	 	 	 Facsimile:  	
212.450.3092  
	 	 	 Electronic Mail:        	
donald.bernstein@dpw.com  
	 	 	 Attention:  	
Donald S. Bernstein  





                    Section 9.03 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced under any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the Transactions is not affected in any manner
materially adverse to either Party hereto.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an


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acceptable manner so that the Transactions are consummated as originally contemplated to the greatest extent possible. 


                    Section 9.04 Joinder of CDS Counterparties and Additional SCA Parties. Any counterparty to a credit default
swap agreement with XLCA or an Affiliate of XLCA or any portfolio trust that is an Affiliate of XLCA may become a Party to this Agreement prior to the Closing by executing a joinder agreement in the form attached hereto as Exhibit 1.01(c). Upon execution and delivery of each joinder agreement pursuant to its terms, each party will be deemed to be a CDS Counterparty or an SCA Party (as applicable) for all purposes related
hereto and shall be deemed, without limitation, to have made the releases set forth in Section 2.05(c) hereof (with respect to the CDS Counterparties) or in Section 2.05(a) hereof (with respect to the SCA Parties). 


                    Section 9.05 Entire Agreement. This Agreement and the Ancillary Agreements constitute the entire agreement of
the Parties with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between any of the Parties with respect to the subject matter hereof and thereof. 


                    Section 9.06 Assignment. This Agreement may not be assigned by operation of Law or otherwise without the
express written consent of all Parties (which consent may be granted or withheld in the sole discretion of each of the Parties) and any such assignment or attempted assignment without such consent shall be void. 


                    Section 9.07 Amendment.  This Agreement may not be amended, altered, supplemented or modified except (a) by an
instrument in writing signed by, or on behalf of, all Parties, or (b) by a waiver in accordance with Section 9.08; provided, that,
notwithstanding anything to the contrary in this Section 9.07 or in Section 9.08 below, the following sections and definitions set
forth in this Agreement may not be amended, altered, supplemented, modified or waived without the unanimous consent of the CDS Counterparties: the definitions of “XLFA Redomestication,” “Minimum Consenting CDS Counterparty
Restructuring Threshold” and “Required Consenting CDS Counterparties,” and Sections 2.05, 2.06, 2.07(b), 2.10, 6.03, 6.04,
6.05, 6.06, 6.07, 6.10(b), 6.10(d), 6.12, 6.13, 6.14, 6.16, 6.18, 6.20,
6.21, 6.23, 9.07 and 9.08.


                    Section 9.08 Waiver.  Subject to the provisions in Section 9.07 above, which provide that, notwithstanding anything to the contrary in Section 9.07 or this Section 9.08, the
following sections and definitions set forth in this Agreement may not be amended, altered, supplemented, modified or waived without the unanimous consent of the CDS Counterparties: the definitions of “XLFA Redomestication,”
“Minimum Consenting CDS Counterparty Restructuring Threshold” and “Required Consenting CDS Counterparties,” and Sections 2.05, 2.06, 2.07(b), 2.10, 6.03,
6.04, 6.05, 6.06, 6.07, 6.10(b), 6.10(d), 6.12, 6.13, 6.14, 6.16, 6.18,
6.20, 6.21, 6.23, 9.07 and 9.08, the SCA Parties, acting unanimously as a group, and the XL Parties, acting unanimously as a group, may (a) extend the time for the performance of any of the
obligations that one or more members of another group owes to one or more of its members, (b) waive any right that one or more of its members may have due to inaccuracies in the representations and warranties made by any member of another group or
contained in any Transaction Document or (c) waive compliance with any of the agreements of any member of another group, solely as they relate to the members of such waiving group, or conditions to the


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obligations of the members of such waiving group contained herein. Any such extension, waiver or amendment shall be valid only if set forth in an instrument in writing signed by all of the SCA Parties and XL Parties to be bound
thereby.  Any such extension, waiver or amendment will promptly be provided to all CDS Counterparties in writing and, if any CDS Counterparty objects to such extension, waiver or amendment, such CDS Counterparty will have five (5) Business Days from
receipt of such extension, waiver or amendment to provide written notice to all other Parties that it intends to withdraw from this Agreement.  If such CDS Counterparty provides such timely notice, it will be deemed to have withdrawn as a Party to
this Agreement on the date that such waiver, extension or amendment becomes effective and the terms hereof shall have no further force or effect with regard to such CDS Counterparty; provided, that (i) any release made by any CDS Counterparty withdrawing as a party to this Agreement pursuant to this Section 9.08 and any release made by any SCA Party or any XL Party
with respect to such withdrawing CDS Counterparty, in each case to the extent such releases shall have become effective prior to the time of such withdrawal, shall in each case remain in full force and effect after such withdrawal, and (ii)
following such withdrawal, subject to the preceding clause (i), such withdrawing CDS Counterparty shall cease to have any other obligations or rights hereunder or in connection with the
Transactions (including under Sections 2.05(c) and 6.10(b)), and after such withdrawal, such CDS Counterparty will no longer be
deemed to be a “CDS Counterparty” for purposes of this Agreement or any Ancillary Agreement. If the CDS Counterparty does not provide such timely notice, it shall be deemed to have approved the waiver, extension or amendment. Any waiver
of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition or as a waiver of any other term or condition of this Agreement. The failure of any Party hereto to assert any
of its rights hereunder shall not constitute a waiver of any other rights. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. 


                    Section 9.09 No Third-Party Beneficiaries.  This Agreement shall be binding upon and inure solely to the
benefit of the Parties and, except as provided in Section 2.05, their respective successors and permitted assigns, and nothing herein, express or implied, is intended to or shall confer upon
any other Person any legal or equitable right, benefit, remedy or right of action of any nature whatsoever, arising directly or indirectly out of, based upon, or in any way related to or in connection with this Agreement or the Ancillary Agreements.



                    Section 9.10 Rights and Remedies.  Each Party acknowledges and agrees that each Party would be irreparably
damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any material breach of this Agreement by another Party could not be adequately compensated by monetary damages alone. Accordingly,
in addition to any other right or remedy to which such Party may be entitled, at Law or in equity, it shall be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent
injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking. For the avoidance of doubt, any liability of any CDS Counterparty that may arise in connection
with this Agreement shall neither be joint nor joint and several with any other CDS Counterparty. 


                    Section 9.11 Indemnification.  (a) The XL Parties shall jointly and severally indemnify and hold harmless each
of the SCA Parties, and their respective Subsidiaries,


-47-












Affiliates, officers, directors, employees, agents, successors and permitted assigns (collectively, “SCA Indemnitees”), for and against any and all
liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties (including attorneys’ and consultants’ fees and expenses) actually suffered or incurred (including any action, claim, suit or other
proceeding brought or otherwise initiated by any of them) (“Losses”) by any such SCA Indemnitee arising out of or resulting from the breach of any provision of this Agreement
prior to Closing by any of the XL Parties. 


                    (b)      The SCA Parties shall jointly and severally indemnify and hold harmless each of the XL Parties, and their respective Subsidiaries,
Affiliates, officers, directors, employees, agents, successors and permitted assigns (collectively, “XL Indemnitees”), for and against any and all Losses incurred by any such XL
Indemnitee arising out of or resulting from (i) the breach of any provision of this Agreement prior to Closing by any of the SCA Parties or (ii) any action taken pursuant to the written direction of the SCA Parties under Section 6.22 or prohibited to be taken pursuant to Section 6.22. 


                    Section 9.12 No Survival.  None of the representations and warranties other than those contained in
Sections 3.01 (other than as to enforceability for reasons other than fraud, ultra vires action, improper authorization, or failure
to be duly organized, validly existing or in good standing in any applicable jurisdiction), 3.02, 3.03, 4.01, 4.02, 4.03, 4.04,
4.05, 5.01, 5.02 and 5.03 shall survive the Closing.  The representations and warranties contained in Sections 3.01 (other than as to enforceability for reasons other than fraud, ultra vires action, improper authorization, or failure to be duly organized, validly existing or in good standing in any applicable jurisdiction), 3.02, 3.03, 
4.01, 4.02, 
4.03, 4.04, 4.05, 5.01,
5.02 and 5.03 shall survive for the statute of limitations for contracts of the nature of this Agreement. 


                    Section 9.13 Several Liability of the CDS Counterparties. For the avoidance of doubt, the obligations of the
CDS Counterparties under this Agreement shall be several and not joint and several. 


                    Section 9.14 Governing Law and Jurisdiction.  This Agreement shall be interpreted under and governed by the
Laws of the State of New York without giving effect to conflicts of law provisions thereof. In the event that there is a dispute between or among the Parties arising under this Agreement, other than with respect to events arising under the 2001
Facultative Quota Share Commutation Agreement or the Excess of Loss Commutation Agreement, the Parties (i) agree that the exclusive forum to seek remedy shall be to institute a legal proceeding in the courts of the State of New York located in the
City and County of New York, (ii) hereby expressly submit to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waive any claim of lack of personal jurisdiction and improper venue and any claim that such courts
are an inconvenient forum and (iii) agree that the prevailing Parties shall be entitled to recover their reasonable attorneys’ fees, costs and disbursements from the other Parties (in addition to any other relief to which the prevailing
Parties may be entitled). Each Party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid,
to the address provided to the Parties in accordance with Section 9.02, such service to become effective ten (10) days after such mailing. 


-48-












                    Section 9.15 Waiver of Jury Trial.  Each of the Parties hereby waives to the fullest extent permitted by
applicable Law any right it may have to a trial by jury with respect to any litigation directly or indirectly arising out of, under, or in connection with this Agreement or the Transactions. Each of the Parties hereby (i) certifies that no
representative, agent or attorney of any other Party has represented, expressly or otherwise, that such other Party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it has been induced to enter
into this Agreement and the Transactions, as applicable, by, among other things, the mutual waivers and certifications in this Section 9.15. 


                    Section 9.16 Fully Negotiated Agreement. Each Party has had the opportunity to negotiate the terms, consult
with counsel, and modify the provisions of this Agreement and the Ancillary Agreements. Therefore, the terms of this Agreement and the Ancillary Agreements shall be considered and interpreted without any presumption, inference or rule requiring
construction or interpretation of any provision of this Agreement against the interests of the drafter of the Agreement. 


                    Section 9.17 Currency.  Unless otherwise specified in this Agreement, all references to currency, monetary
values and dollars set forth herein shall mean United States (U.S.) Dollars and all payments hereunder shall be made in United States Dollars. 


                    Section 9.18 Counterparts. This Agreement may be executed and delivered in multiple counterparts, each of
which, when so executed and delivered, shall be an original, but such counterparts shall together constitute but one and the same instrument and agreement. A facsimile or Portable Document Format copy of a signature shall have the same force and
effect as an original signature. 


[NO FURTHER TEXT ON THIS PAGE]

 

 

 

 

 

 

 

 

 


-49-












                    IN WITNESS WHEREOF, the SCA Parties, XL Parties and CDS Counterparties have caused this Agreement to be executed as of the date first written above. 


  	 
	
        XL CAPITAL LTD  
	 	   
	 	   
	 	   
	By:
	/s/
          Fiona Luck 

	 	Name: Fiona
      Luck  
	 	 Title: Executive Vice
          President and Chief of Staff  
	 	   
	 	   
	
        XL INSURANCE (BERMUDA) LTD  
	 	   
	 	   
	 	   
	By:
	  /s/
          Fiona Luck 

	 	Name: Fiona
            Luck 
	 	Title: Director 
	 	   
	 	   
	
        XL REINSURANCE AMERICA INC.  
	 	   
	 	   
	 	   
	By:
	/s/
          Steven P. Agosta

	 	Name: Steven
      P. Agosta 
	 	Title: Vice President,
          General Counsel and Secretary 
	 	   
	 	   
	
        X.L. GLOBAL SERVICES, INC.  
	 	   
	 	   
	 	   
	By:
	/s/
          Kenneth P. Meagher

	 	Name: Kenneth
      P. Meagher 
	 	Title: Assistant Secretary 
	 	   
	 	   
	
        XL SERVICES (BERMUDA) LTD  
	 	   
	 	   
	 	   
	By: 
	  /s/
          Fiona Luck 

	 	Name: Fiona
            Luck 
	 	Title: Deputy Chairman 


  



 

[SIGNATURE PAGE – COMMUTATION,
    RELEASE AND RESTRUCTURING AGREEMENT]











  	
        X.L. AMERICA, INC.  
	 	   
	 	   
	 	   
	By:
	/s/
          Richard G. McCarty

	 	Name: Richard
      G. McCarty 
	 	Title: Senior Vice President,
          General Counsel and Secretary 
	 	   
	 	   
	
        SECURITY CAPITAL ASSURANCE LTD  
	 	   
	 	   
	 	   
	By:
	/s/
          Claude LeBlanc

	 	Name: Claude
      LeBlanc 
	 	Title: Executive Vice
          President 
	 	   
	 	   
	
        XL FINANCIAL ASSURANCE LTD.  
	 	   
	 	   
	 	   
	By:
	/s/
          Tom Currie

	 	Name: Tom
      Currie 
	 	Title: Senior Vice President 
	 	   
	 	   
	
        XL CAPITAL ASSURANCE INC.  
	 	   
	 	   
	 	   
	By:
	/s/
          Susan Comparato

	 	Name: Susan
      Comparato 
	 	Title: Senior Vice President
          and General Counsel 
	 	   
	 	   
	
        XL FINANCIAL ADMINISTRATIVE  
	      SERVICES
        INC.  
	 	   
	 	   
	 	   
	By: 
	/s/
          Susan Comparato

	 	Name: Susan Comparato 
	 	Title: Managing Director
          and Secretary 


  



 

[SIGNATURE PAGE – COMMUTATION,
    RELEASE AND RESTRUCTURING AGREEMENT]











  	
        SCA BERMUDA ADMINISTRATIVE LTD.  
	 	   
	 	   
	 	   
	By: 
	/s/
          Tom Currie

	 	Name: Tom
            Currie 
	 	Title: Senior Vice President 
	 	   
	 	   
	
        XL CAPITAL ASSURANCE (U.K.) LIMITED  
	 	   
	 	   
	 	   
	By:
	/s/
          Fredrick B. Hnat

	 	Name: Fredrick
      B. Hnat 
	 	Title: Managing Director
          and COO 


   

   

   

   

   

   

   

   

   

   

   

   

  

  




[SIGNATURE PAGE – COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]












EXHIBIT 1.01(a) 


FORM OF 2001 FACULTATIVE QUOTA SHARE COMMUTATION AGREEMENT 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exh. 1.01(a)-1 





COMMUTATION AND RELEASE AGREEMENT 

                     This
    Commutation and Release Agreement (the “Agreement”)
    dated as of ________, 2008, is made by and between XL Financial Assurance
    Ltd, a company domiciled in Bermuda (the “Company”)
    and XL Insurance (Bermuda) Ltd, formerly known as XL Insurance Ltd, a company
    also domiciled in Bermuda (the
  “Reinsurer”).
  The Reinsurer and the Company are hereinafter referred to collectively as the “Parties.” 

 RECITALS 

                     WHEREAS,
    the Parties previously entered into a Facultative Quota Share Reinsurance
    Treaty dated August 17, 2001, as amended, pursuant to which the Reinsurer
    agreed to reinsure certain liabilities of the Company (the “Reinsurance
    Agreement”); and 

                     WHEREAS,
    the Parties are parties to that certain Master Commutation, Release and Restructuring
    Agreement, dated as of July __, 2008, by and among the Company, the Reinsurer,
    Security Capital Assurance Ltd and the other parties thereto (the “Master
    Transaction Agreement”),
    pursuant to which the Company and the Reinsurer have agreed to enter into
    this Agreement; and 

                     WHEREAS,
    the Parties agree that it is in each of their best interests to freely and
    voluntarily enter into this Agreement and to fully and forever release and
    discharge each other from their respective existing and future liabilities
    and obligations, including contingent and uncertain liabilities, both known
    and unknown, under the Reinsurance Agreement and the individual risk cessions
    thereunder and to compromise, resolve and settle all amounts due, or which
    may become due, between each other arising out of, in respect of, or relating
    to the Reinsurance Agreement and/or the individual risk cessions thereunder;
    and 

                     WHEREAS,
    Company and Reinsurer, or their affiliates, may be parties to agreements
    other than the Reinsurance Agreement, and it is the intent of the Parties
    that this Agreement will not have any effect upon such other agreements. 

                     NOW,
      THEREFORE, in consideration of the covenants,
      conditions, promises and releases contained herein, and for other valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the Parties agree as follows: 

 ARTICLE I 

 PAYMENT 

                     (a)     The
    Reinsurer shall pay to the Company the sum of Twenty Five Million Dollars
    ($25,000,000.00) (the “Commutation Amount”)
    via direct wire transfer, in immediately available funds, in accordance with
    the payment instructions set forth on Schedule
    A hereto on the Closing Date (as such term
    is defined in the Master Transaction Agreement). The date on 

Exh. 1.01(a)-2






 which the Commutation Amount is paid and
    received shall be referred to hereinafter as the “Effective
    Date.” 

                     (b)     The
    Company shall accept the Commutation Amount in full satisfaction of all of
    the Reinsurer’s liabilities and obligations under the Reinsurance Agreement
    and/or the individual risk cessions thereunder. 

 ARTICLE II 

 RELEASE 

                     (a)     Upon
    the Reinsurer’s payment of the Commutation Amount to the Company, the
    Company, on behalf of itself and its shareholders, parents, affiliates and
    subsidiaries, and their respective officers, directors, and employees, hereby
    irrevocably and unconditionally releases and forever discharges the Reinsurer,
    its parents, subsidiaries and affiliates, and their respective predecessors,
    successors, assigns, officers, directors, agents, employees, shareholders,
    representatives, and attorneys from any and all present and future actions,
    causes of action, suits, debts, liens, contracts, rights, agreements, obligations,
    promises, liabilities, claims, counterclaims, demands, damages, controversies,
    losses, costs and expenses (including attorneys’ fees and costs actually
    incurred) of any kind, character, description or nature whatsoever, known
    or unknown to either or both Parties, suspected or unsuspected, reported
    or unreported, fixed or contingent, which the Company now has, owns or holds
    or claims to have, own, or hold, or at any time heretofore had, owned, or
    held or claimed to have had, owned, or held, or may hereafter have, own,
    or hold or claim to have, own, or hold, arising out of conduct or matters
    occurring on, prior to or subsequent to the Effective Date, against the Reinsurer,
    arising directly or indirectly out of, based upon, or in any way related
    to or in connection with the Reinsurance Agreement and/or the individual
    risk cessions thereunder, whether grounded in law or equity, or sounding
    in tort or contract or otherwise; provided, however,
    that the provisions of this Article II(a) shall
    not discharge obligations of the Reinsurer, which have been undertaken or
    imposed by the express terms of this Agreement or the Master Transaction
    Agreement (including the Ancillary Agreements). 

                     (b)     Contemporaneous
    with the payment of the Commutation Amount to the Company, the Reinsurer,
    on behalf of itself and its shareholders, parents, affiliates and subsidiaries,
    and their respective officers, directors and employees, hereby irrevocably
    and unconditionally releases and forever discharges the Company, its shareholders,
    parents, subsidiaries and affiliates, and their respective predecessors,
    successors, assigns, officers, directors, agents, employees, shareholders,
    representatives, and attorneys from any and all present and future actions,
    causes of action, suits, debts, liens, contracts, rights, agreements, obligations,
    promises, liabilities, claims, counterclaims, demands, damages, controversies,
    losses, costs and expenses (including attorneys’ fees and costs actually
    incurred) of any kind, character, description or nature whatsoever, known
    or unknown to either or both Parties, suspected or unsuspected, reported
    or unreported, fixed or contingent, which the Reinsurer now has, owns, holds
    or claims to have, own, or hold, or at any time heretofore had, owned, or
    held or claimed to have had, owned, or held, or may hereafter have, own,
    or hold or claim to have, own, or hold, arising out of conduct or matters
    occurring on, prior to or subsequent to the Effective Date, against the Company,
    arising directly or indirectly out of, based upon, or in any way 

Exh. 1.01(a)-3






 related to or in connection with the Reinsurance
    Agreement and/or the individual risk cessions thereunder, whether grounded
    in law or equity or sounding in tort or contract or otherwise; provided, however,
    that the provisions of this Article II(b) shall
    not discharge obligations of the Company, which have been undertaken or imposed
    by the express terms of this Agreement or the Master Transaction Agreement
    (including the Ancillary Agreements). 

                     (c)     The
    Parties understand that it is possible that unknown losses or claims may
    exist, or that present or future losses or claims may be underestimated in
    amounts or severity. Furthermore, the Parties expressly accept and assume
    the risk that the factual or legal assumptions made by any Party in connection
    with this Agreement may be found hereafter to be different from the true
    facts or law, and the Parties agree that this Agreement shall be and shall
    remain in full force and effect notwithstanding such differences in facts
    or law. Each Party expressly takes all of the foregoing into account in determining
    the amount of consideration to be given and paid for the giving of this Agreement,
    and a portion of the said consideration, having been bargained for between
    the Parties with the knowledge of the possibility of such unknown losses
    and claims, is given in exchange for the full accord, satisfaction and discharge
    of all such losses and claims. 

                     (d)     Full
    payment of the Commutation Amount shall be in complete accord, satisfaction,
    settlement and commutation of any and all past, current and future liabilities
    and obligations that each Party owes or may owe to the other arising directly
    or indirectly out of or related to or in connection with the Reinsurance
    Agreement and/or the individual risk cessions thereunder and that upon payment
    of the Commutation Amount, the Reinsurance Agreement shall be terminated
    as of the Effective Date and neither Party shall have any further obligation
    or liability to the other Party under the Reinsurance Agreement and/or the
    individual risk cessions thereunder. 

 ARTICLE III 

 NON-RELIANCE 

                     (a)     This
    Agreement fully and finally resolves the rights, duties and obligations of
    the Company and the Reinsurer under the Reinsurance Agreement, and neither
    Party shall: 


            (i)      have
      any remedy in respect of any representation, warranty or undertaking of
      the other that is not specifically set forth in this Agreement, the Master
      Transaction Agreement, or the Ancillary Agreements commuting the reinsurance
      agreements listed in Part I of Schedule 2.01 of the Master Transaction
      Agreement, whether or not relied upon by the other Party; or 

             (ii)     seek
      to reopen or set aside this Agreement or the Reinsurance Agreement on any
      basis whatsoever, including, without limitation, that this Agreement or
      the Reinsurance Agreement is void or voidable due to a mistake or change
      in law or a unilateral or mutual mistake of fact in any way related to
      this Agreement or the Reinsurance Agreement. 



Exh. 1.01(a)-4






                     (b)     The
    Company and the Reinsurer have voluntarily entered into this Agreement based:
    (i) upon their own independent assessment of the relevant facts and their
    rights and obligations under the Reinsurance Agreement and (ii) except as
    expressly set forth in Article III and Article
    IV of the Master Transaction Agreement, not
    upon any representations that were made or disclosures that were made by
    the other Party, their affiliates, officers, directors, shareholders, employees,
    representatives, agents, attorneys or their respective heirs, administrators,
    predecessors, successors and assigns. Each Party acknowledges that it has
    carefully read, and that it understands the scope and effect of this Agreement
    and has had a full and fair opportunity to consult with, and seek the advice
    and recommendations of its attorneys, actuaries and other professional advisors
    prior to its execution of this Agreement. 

                     (c)     This
    Agreement and the negotiations and proceedings leading to this Agreement
    shall not form the basis of any claim by either Party against the other Party
    or against any officer, director, consultant, professional or shareholder
    of the other Party, except with respect to an action for enforcement of this
    Agreement or the Master Transaction Agreement (including the Ancillary Agreements). 

 ARTICLE IV 

 EXCLUSIVE BENEFIT OF THE PARTIES AND
      BINDING EFFECT 

                     The
    rights, duties and obligations set forth herein shall inure to the benefit
    of and be binding upon the Company and the Reinsurer as they are identified
    in this Agreement and their parents, subsidiaries and affiliates, and their
    respective predecessors, successors, assigns, officers, directors, agents,
    employees, shareholders, representatives, and attorneys and this Agreement
    is not intended to confer any rights or benefits upon persons or entities
    other than the foregoing parties. 

 ARTICLE V 

 COMPROMISE 

                     This
    Agreement sets forth a compromise and shall never at any time for any purpose
    be considered as an admission of liability or responsibility on the part
    of any party hereto regarding any aspect of the Reinsurance Agreement. Neither
    this Agreement nor any of its terms shall be admissible in any action, arbitration,
    or proceeding other than one to enforce the terms of this Agreement or the
    Master Transaction Agreement (including the Ancillary Agreements), including,
    but not limited to, the releases provided in Article
    II. 

 ARTICLE VI 

 FURTHER ASSURANCES 

                     The
    Parties, without further consideration, shall execute and deliver such other
    documents and take such other action as may be necessary to effect this Agreement. 

Exh. 1.01(a)-5






 ARTICLE VII 

 MISCELLANEOUS 

                     (a)     Should
    any part, term or provision of this Agreement, except Article
    I or Article II,
    be declared or determined to be illegal or invalid pursuant to a final and
    unappealable order of a court of competent jurisdiction, the validity of
    the remaining parts, terms and provisions shall not be affected thereby and
    such illegal or invalid part, term or provision shall be deemed not to be
    part of this Agreement. If either Article I or Article
    II is determined by a court of competent jurisdiction
    or regulatory authority to be unenforceable, either Party, at its option,
    shall be entitled to rescind this Agreement, and the Reinsurer shall be entitled
    to repayment of the Commutation Amount immediately upon such rescission.
    Upon such rescission, the Reinsurance Agreement and all rights, obligations
    and liabilities of the Parties under the Reinsurance Agreement shall be reinstated
    as if this Agreement had never been executed. Notwithstanding the foregoing,
    the releases given pursuant to Article II shall
    remain in full force and effect as to the Parties’ officers, directors,
    agents, employees, shareholders, representatives, advisors and attorneys. 

                     (b)     This
    Agreement and the Master Transaction Agreement (including the Ancillary Agreements)
    set forth the entire agreement between the Parties with respect to the subject
    matter hereof and supersedes all prior agreements or understanding between
    them pertaining to the subject matter hereof. A facsimile copy of a signature
    shall have the same force and effect as an original signature. 

                     (c)     This
    Agreement may not be amended, altered, supplemented or modified, except by
    written agreement signed by the Parties. 

                     (d)     This
    Agreement may be executed and delivered in multiple counterparts, each of
    which, when so executed and delivered, shall be an original, but such counterparts
    shall together constitute but one and the same instrument and agreement. 

                     (e)     For
    purposes of this Agreement, a “Business
    Day” is any day other than a Saturday,
    Sunday or a public holiday in Bermuda. 

                     (f)     This
    Agreement shall be governed by and construed in accordance with the laws
    of Bermuda without regard to principles of conflicts of law or choice of
    law and the Parties submit to the exclusive jurisdiction of the Supreme Court
    of Bermuda in respect of all disputes arising out of or in connection with
    this Agreement. 

                     (g)     All
    notices under this Agreement shall be in writing and shall be deemed to be
    duly given and received (i) upon delivery if delivered by certified mail;
    or (ii) on the next Business Day if sent by overnight courier (iii) on the
    date sent by facsimile if sent during the recipient’s normal business
    hours or, if sent by facsimile outside such hours, on the next Business Day;
    provided, that such notices are sent to a Party to its Address for Notices
    set forth on Schedule B hereto
    or to such other address as either Party may have furnished to the other
    in writing. 

Exh. 1.01(a)-6






                     (h)     For
    all purposes this Agreement shall be deemed to have been drafted jointly
    by both Parties. 

                     (i)     This
    Agreement is an agreement solely between the Company and the Reinsurer. No
    right of action against the Reinsurer shall accrue to any insured, policyholder,
    or other contracting party of the Company unless granted herein by virtue
    of this Agreement. 

Exh. 1.01(a)-7






                     IN
    WITNESS WHEREOF, the Parties have executed this Agreement by their respective
    authorized officers as of the day and year first written below. 

	Dated:  	  
	 	XL FINANCIAL ASSURANCE LTD 
	 
	 
	 
	 	 	 	By:  	  

	 	 	 	 	Name: 
	 	 	 	 	Title: 
	 
	 
	 
	Dated:  	                                                        
	 	XL INSURANCE (BERMUDA) LTD 
	 	 	 	FORMERLY KNOWN AS 
	 	 	 	XL INSURANCE LTD 
	 
	 
	 
	 	 	 	By: 	  

	 	 	 	 	Name: 
	 	 	 	 	Title: 




    Exh. 1.01(a)-8






 SCHEDULE A 

 WIRE TRANSFER INSTRUCTIONS 

 Transfer instructions for remitting
        funds to XL Financial Assurance Ltd

 [Intentionally omitted]

  

 Please send e-mail / fax containing
      details of the transfer to: 

 [Intentionally omitted]

 Rebecca O’Connell (VP & Assistant
    Treasurer) at SCA 

    Phone: (212) 478-3629 

    Fax: (212) 478-3587 

    E-mail: rebecca.oconnell@xlgroup.com 

Exh. 1.01(a)-9






 SCHEDULE B 

 ADDRESS FOR NOTICE 

	TO THE COMPANY: 
	 
	                           XL
        Financial Assurance Ltd 
	                           A.S.
        Cooper Building 
	                           26
        Reid Street, 4th Floor 
	                           Hamilton,
        Bermuda HM 11 
	                            Attn:
          President 

	                           Facsimile:
        441-296-4351 
	 
	                           and 
	 
	                           XL
        Capital Assurance Inc. 
	                           1221
        Avenue of the Americas 
	                           New
        York, New York 10022 
	                           Attn:
        General Counsel 
	                           Facsimile:
        212-478-3579 
	 
	TO THE REINSURER: 
	 
	                           XL
        Insurance (Bermuda) Ltd 
	                           XL
        House 
	                           One
        Bermudiana Road 
	                           Hamilton
        HM 11 
	                           Bermuda 
	                           Attention:
        General Counsel 
	                           Facsimile:
        441-295-2840 


Exh. 1.01(a)-10











EXHIBIT 1.01(b) 


FORM OF ADVERSE DEVELOPMENT COVER COMMUTATION AGREEMENT 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exh. 1.01(b)-1





COMMUTATION AND RELEASE AGREEMENT 

                     This
    Commutation and Release Agreement (the “Agreement”)
    dated as of ________, 2008, is made by and among XL Capital Assurance Inc.,
    a company domiciled in New York (“XLCA”), XL Financial Assurance
    Ltd, a company domiciled in Bermuda (“XLFA”), XL Reinsurance
    America Inc., a company also domiciled in New York (“XLRA”),
    and XL Insurance (Bermuda) Ltd, formerly known as XL Insurance Ltd, a company
    also domiciled in Bermuda (“XLI”). XLCA and XLFA are hereinafter
    referred to collectively as the “SCA Companies;”  XLRA and XLI
    are hereinafter referred to collectively as the “XL Companies;” and
    the SCA Companies and the XL Companies are hereinafter referred to collectively
    as the “Parties.” 

 RECITALS 

                     WHEREAS,
    XLCA and XLRA previously entered into an Adverse Development Reinsurance
    Agreement effective as of August 4, 2006, pursuant to which XLRA agreed to
    reinsure certain liabilities of XLCA (the “Reinsurance
    Agreement”); and 

                     WHEREAS, XLFA
    and XLI previously entered into an Indemnification Agreement, dated August
    4, 2006, pursuant to which XLI agreed to indemnify XLFA in respect of future
    adverse development as respect certain of its liabilities (the “Indemnification
    Agreement,” the Reinsurance Agreement and the Indemnification Agreement
    are hereinafter referred to collectively as the “Adverse
    Development Cover”); and 

                     WHEREAS,
    the Parties are parties to that certain Master Commutation, Release and Restructuring
    Agreement, dated as of July __, 2008, by and among the SCA Companies, the
    XL Companies, Security Capital Assurance Ltd and the other parties thereto
    (the “Master Transaction
    Agreement”), pursuant to which the Parties
    have agreed to enter into this Agreement; and 

                     WHEREAS,
    the Parties agree that it is in each of their best interests to freely and
    voluntarily enter into this Agreement and to fully and forever release and
    discharge each other from their respective existing and future liabilities
    and obligations, including contingent and uncertain liabilities, both known
    and unknown, under the Adverse Development Cover and to compromise, resolve
    and settle all amounts due, or which may become due, between each other arising
    out of, in respect of, or relating to the Adverse Development Cover; and 

                     WHEREAS,
    the Parties or their affiliates, may be parties to agreements other than
    the Adverse Development Cover, and it is the intent of the Parties that this
    Agreement will not have any effect upon such other agreements. 

                     NOW,
      THEREFORE, in consideration of the covenants,
      conditions, promises and releases contained herein, and for other valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the Parties agree as follows: 

Exh. 1.01(b)-2






 ARTICLE I 

 PAYMENT 

                     (a)     The
    XL Companies shall pay to the SCA Companies the sum of Sixty Five Million,
    Three Hundred Thousand Dollars ($65,300,000.00) (the
  “Commutation Amount”)
  via direct wire transfer, in immediately available funds, in accordance with
  the payment instructions set forth on Schedule
  A hereto on the Closing Date (as such term is
  defined in the Master Transaction Agreement) as follows: (i) XLI shall pay
  to XLFA the sum of Fifty Eight Million, Three Hundred Thousand Dollars ($58,300,000.00);
  and (ii) XLRA shall pay to XLCA the sum of Seven Million Dollars ($7,000,000.00)
  . The date on which the Commutation Amount is paid and received shall be referred
  to hereinafter as the “Effective Date.” 

                     (b)     The
    SCA Companies shall accept the Commutation Amount in full satisfaction of
    all of the XL Companies’ liabilities and obligations under the Adverse
    Development Cover. 

 ARTICLE II 

 RELEASE 

                     (a)     Upon
    the XL Companies’ payment of the Commutation Amount to the SCA Companies,
    the SCA Companies, on behalf of themselves and their shareholders, parents,
    affiliates and subsidiaries, and their respective officers, directors and
    employees, hereby irrevocably and unconditionally releases and forever discharges
    the XL Companies, their parents, subsidiaries and affiliates, and their respective
    predecessors, successors, assigns, officers, directors, agents, employees,
    shareholders, representatives, and attorneys from any and all present and
    future actions, causes of action, suits, debts, liens, contracts, rights,
    agreements, obligations, promises, liabilities, claims, counterclaims, demands,
    damages, controversies, losses, costs and expenses (including attorneys’ fees
    and costs actually incurred) of any kind, character, description or nature
    whatsoever, known or unknown to any or all of the Parties, suspected or unsuspected,
    reported or unreported, fixed or contingent, which the SCA Companies now
    have, own or hold or claim to have, own, or hold, or at any time heretofore
    had, owned, or held or claimed to have had, owned, or held, or may hereafter
    have, own, or hold or claim to have, own, or hold, arising out of conduct
    or matters occurring on, prior to or subsequent to the Effective Date, against
    the XL Companies, arising directly or indirectly out of, based upon, or in
    any way related to or in connection with the Adverse Development Cover, whether
    grounded in law or equity, or sounding in tort or contract or otherwise; provided, however,
    that the provisions of this Article II(a) shall
    not discharge obligations of the XL Companies, which have been undertaken
    or imposed by the express terms of this Agreement or the Master Transaction
    Agreement (including the Ancillary Agreements). 

                     (b)     Contemporaneous
    with the payment of the Commutation Amount to the SCA Companies, the XL Companies,
    on behalf of themselves and their shareholders, parents, affiliates and subsidiaries,
    and their respective officers, directors and employees, hereby irrevocably
    and unconditionally releases and forever discharges the SCA Companies, their
    shareholders, parents, subsidiaries and affiliates, and their respective
    predecessors, successors, 

Exh. 1.01(b)-3






 assigns, officers, directors, agents,
    employees, shareholders, representatives, and attorneys from any and all
    present and future actions, causes of action, suits, debts, liens, contracts,
    rights, agreements, obligations, promises, liabilities, claims, counterclaims,
    demands, damages, controversies, losses, costs and expenses (including attorneys’ fees
    and costs actually incurred) of any kind, character, description or nature
    whatsoever, known or unknown to any or all of the Parties, suspected or unsuspected,
    reported or unreported, fixed or contingent, which the XL Companies now have,
    own, hold or claim to have, own, or hold, or at any time heretofore had,
    owned, or held or claimed to have had, owned, or held, or may hereafter have,
    own, or hold or claim to have, own, or hold, arising out of conduct or matters
    occurring on, prior to or subsequent to the Effective Date, against the SCA
    Companies, arising directly or indirectly out of, based upon, or in any way
    related to or in connection with the Adverse Development Cover, whether grounded
    in law or equity or sounding in tort or contract or otherwise; provided, however,
    that the provisions of this Article II(b) shall
    not discharge obligations of the SCA Companies, which have been undertaken
    or imposed by the express terms of this Agreement or the Master Transaction
    Agreement (including the Ancillary Agreements). 

                     (c)     The
    Parties understand that it is possible that unknown losses or claims may
    exist, or that present or future losses or claims may be underestimated in
    amounts or severity. Furthermore, the Parties expressly accept and assume
    the risk that the factual or legal assumptions made by any Party in connection
    with this Agreement may be found hereafter to be different from the true
    facts or law, and the Parties agree that this Agreement shall be and shall
    remain in full force and effect notwithstanding such differences in facts
    or law. Each Party expressly takes all of the foregoing into account in determining
    the amount of consideration to be given and paid for the giving of this Agreement,
    and a portion of the said consideration, having been bargained for between
    the Parties with the knowledge of the possibility of such unknown losses
    and claims, is given in exchange for the full accord, satisfaction and discharge
    of all such losses and claims. 

                     (d)     Full
    payment of the Commutation Amount shall be in complete accord, satisfaction,
    settlement and commutation of any and all past, current and future liabilities
    and obligations that each Party owes or may owe to the other arising directly
    or indirectly out of or related to or in connection with the Adverse Development
    Cover and that upon payment of the Commutation Amount, the Adverse Development
    Cover shall be terminated as of the Effective Date and no Party shall have
    any further obligation or liability to the other Party under the Adverse
    Development Cover. 

 ARTICLE III 

 NON-RELIANCE 

                     (a)     This
    Agreement fully and finally resolves the rights, duties and obligations of
    the Parties under the Adverse Development Cover, and no Party shall: 


            (i)      have
      any remedy in respect of any representation, warranty or undertaking of
      the other that is not specifically set forth in this Agreement, the Master
      Transaction Agreement, or the Ancillary Agreements commuting the reinsurance
      agreements listed in 



Exh. 1.01(b)-4







  Part I of Schedule 2.01 of the Master
      Transaction Agreement, whether or not relied upon by the other Party; or 

             (ii)     seek
      to reopen or set aside this Agreement or the Adverse Development Cover
      on any basis whatsoever, including, without limitation, that this Agreement
      or the Adverse Development Cover are void or voidable due to a mistake
      or change in law or a unilateral or mutual mistake of fact in any way related
      to this Agreement or the Adverse Development Cover. 



                    (b)     The
    SCA Companies and the XL Companies have voluntarily entered into this Agreement
    based: (i) upon their own independent assessment of the relevant facts and
    their rights and obligations under the Adverse Development Cover and (ii)
    except as expressly set forth in Article III and Article
    IV of the Master Transaction Agreement, not
    upon any representations that were made or disclosures that were made by
    the other Party, their affiliates, officers, directors, shareholders, employees,
    representatives, agents, attorneys or their respective heirs, administrators,
    predecessors, successors and assigns. Each Party acknowledges that it has
    carefully read, and that it understands the scope and effect of this Agreement
    and has had a full and fair opportunity to consult with, and seek the advice
    and recommendations of its attorneys, actuaries and other professional advisors
    prior to its execution of this Agreement. 

                     (c)     This
    Agreement and the negotiations and proceedings leading to this Agreement
    shall not form the basis of any claim by a Party against another Party or
    against any officer, director, consultant, professional or shareholder of
    the another Party, except with respect to an action for enforcement of this
    Agreement or the Master Transaction Agreement (including the Ancillary Agreements). 

 ARTICLE IV 

 EXCLUSIVE BENEFIT OF THE PARTIES AND
      BINDING EFFECT 

                     The
    rights, duties and obligations set forth herein shall inure to the benefit
    of and be binding upon the SCA Companies and the XL Companies as they are
    identified in this Agreement and their parents, subsidiaries and affiliates,
    and their respective predecessors, successors, assigns, officers, directors,
    agents, employees, shareholders, representatives, and attorneys and this
    Agreement is not intended to confer any rights or benefits upon persons or
    entities other than the foregoing parties. 

 ARTICLE V 

 COMPROMISE 

                     This
    Agreement sets forth a compromise and shall never at any time for any purpose
    be considered as an admission of liability or responsibility on the part
    of any party hereto regarding any aspect of the Adverse Development Cover.
    Neither this Agreement nor any of its terms shall be admissible in any action,
    arbitration, or proceeding other than one to enforce the terms of this Agreement
    or the Master Transaction Agreement (including the Ancillary Agreements),
    including, but not limited to, the releases provided in Article
    II. 

Exh. 1.01(b)-5






 ARTICLE VI 

 FURTHER ASSURANCES 

                     The
    Parties, without further consideration, shall execute and deliver such other
    documents and take such other action as may be necessary to effect this Agreement. 

 ARTICLE VII 

 MISCELLANEOUS 

                     (a)     Should
    any part, term or provision of this Agreement, except Article
    I or Article II,
    be declared or determined to be illegal or invalid pursuant to a final and
    unappealable order of a court of competent jurisdiction, the validity of
    the remaining parts, terms and provisions shall not be affected thereby and
    such illegal or invalid part, term or provision shall be deemed not to be
    part of this Agreement. If either Article I or Article
    II is determined by a court of competent jurisdiction
    or regulatory authority to be unenforceable, any Party, at its option, shall
    be entitled to rescind this Agreement, and the XL Companies shall be entitled
    to repayment of the Commutation Amount immediately upon such rescission.
    Upon such rescission, the Adverse Development Cover and all rights, obligations
    and liabilities of the Parties under the Adverse Development Cover shall
    be reinstated as if this Agreement had never been executed. Notwithstanding
    the foregoing, the releases given pursuant to Article
    II shall remain in full force and effect as
    to the Parties’ officers, directors, agents, employees, shareholders,
    representatives, advisors and attorneys. 

                     (b)     This
    Agreement and the Master Transaction Agreement (including the Ancillary Agreements)
    set forth the entire agreement between the Parties with respect to the subject
    matter hereof and supersedes all prior agreements or understanding between
    them pertaining to the subject matter hereof. A facsimile copy of a signature
    shall have the same force and effect as an original signature. 

                     (c)     This
    Agreement may not be amended, altered, supplemented or modified, except by
    written agreement signed by the Parties. 

                     (d)     This
    Agreement may be executed and delivered in multiple counterparts, each of
    which, when so executed and delivered, shall be an original, but such counterparts
    shall together constitute but one and the same instrument and agreement. 

                     (e)     For
    purposes of this Agreement, a “Business
    Day” is any day other than a Saturday,
    Sunday or a public holiday in New York. 

                     (f)     This
    Agreement shall be governed by and construed in accordance with the laws
    of New York without regard to principles of conflicts of law or choice of
    law and the Parties submit to the exclusive jurisdiction of the Supreme Court
    of the State of New York in respect of all disputes arising out of or in
    connection with this Agreement. 

Exh. 1.01(b)-6






                     (g)     All
    notices under this Agreement shall be in writing and shall be deemed to be
    duly given and received (i) upon delivery if delivered by certified mail;
    or (ii) on the next Business Day if sent by overnight courier (iii) on the
    date sent by facsimile if sent during the recipient’s normal business
    hours or, if sent by facsimile outside such hours, on the next Business Day;
    provided, that such notices are sent to a Party to its Address for Notices
    set forth on Schedule B hereto
    or to such other address as either Party may have furnished to the other
    in writing. 

                     (h)     For
    all purposes this Agreement shall be deemed to have been drafted jointly
    by the Parties. 

                     (i)     This
    Agreement is an agreement solely between the SCA Companies and the XL Companies.
    No right of action against the XL Companies shall accrue to any insured,
    policyholder, or other contracting party of the SCA Companies unless granted
    herein by virtue of this Agreement. 

Exh. 1.01(b)-7






                     IN
      WITNESS WHEREOF, the Parties have executed
      this Agreement by their respective authorized officers as of the day and
      year first written below. 

	Dated:  	                                                              
	 	XL CAPITAL ASSURANCE INC. 
	 
	 
	 
	 	 	 	By:  	  

	 	 	 	 	Name: 
	 	 	 	 	Title: 
	 
	 
	 
	 
	Dated: 	  
	 	XL FINANCIAL ASSURANCE LTD 
	 
	 
	 
	 	 	 	By:  	  

	 	 	 	 	Name: 
	 	 	 	 	Title: 
	 
	 
	 
	 
	Dated: 	  
	 	XL REINSURANCE AMERICA INC. 
	 
	 
	 
	 	 	 	By:  	  

	 	 	 	 	Name: 
	 	 	 	 	Title: 
	 
	 
	 
	 
	Dated: 	  
	 	XL INSURANCE (BERMUDA) LTD 
	 	 	 	FORMERLY KNOWN AS 
	 	 	 	XL INSURANCE LTD 
	 
	 
	 
	 	 	 	By:  	  

	 	 	 	 	Name: 
	 	 	 	 	Title: 
	 	 	 	 	 


Exh. 1.01(b)-8






 SCHEDULE A 

 WIRE TRANSFER INSTRUCTIONS 

 Transfer instructions for remitting
        funds to XL Capital Assurance Inc. 

 [Intentionally omitted]

  

 Please send e-mail / fax containing
      details of the transfer to: 

 [Intentionally omitted]

 Rebecca O’Connell (VP & Assistant
    Treasurer) at SCA 

    Phone: (212) 478-3629 

    Fax: (212) 478-3587 

    E-mail: rebecca.oconnell@xlgroup.com 

 Transfer instructions for remitting
        funds to XL Financial Assurance Ltd

 [Intentionally omitted]

  

 Please send e-mail / fax containing
      details of the transfer to: 

 [Intentionally omitted]

  

Exh. 1.01(b)-9 







 Rebecca O’Connell (VP & Assistant
    Treasurer) at SCA 

    Phone: (212) 478-3629 

    Fax: (212) 478-3587 

    E-mail: rebecca.oconnell@xlgroup.com 

Exh. 1.01(b)-10






 SCHEDULE B 

 ADDRESS FOR NOTICE 

	TO XLCA: 	    	 
	 
	 	 	XL Capital Assurance Inc. 
	 	 	1221 Avenue of the Americas 
	 	 	New York, New York 10022 
	 	 	Attn: General Counsel 
	 	 	Facsimile: 212-478-3579 
	 
	TO XLFA: 	 	 
	 
	 	 	XL Financial Assurance Ltd 
	 	 	A.S. Cooper Building 
	 	 	26 Reid Street, 4th Floor 
	 	 	Hamilton, Bermuda HM 11 
	Attn: President 
	 	 	Facsimile: 441-296-4351 
	 
	 	 	and 
	 
	 	 	XL Capital Assurance Inc. 
	 	 	1221 Avenue of the Americas 
	 	 	New York, New York 10022 
	 	 	Attn: General Counsel 
	 	 	Facsimile: 212-478-3579 
	 
	TO XLRA: 	 	 
	 
	 	 	XL Reinsurance America Inc. 
	Seaview House 
	 	 	70 Seaview Avenue 
	 	 	Stamford, CT 06902-6040 
	 	 	Attention: General Counsel 
	 	 	Facsimile: 203-964-5309 
	 
	TO XLI: 	 	 
	 
	 	 	XL Insurance (Bermuda) Ltd 
	 	 	XL House 
	 	 	One Bermudiana Road 
	 	 	Hamilton HM 11 
	 	 	Bermuda 
	 	 	Attention: General Counsel 
	 	 	Facsimile: 441-295-2840 




    Exh. 1.01(b)-11











EXHIBIT 1.01(c)


JOINDER AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Exh. 1.01(c)-1












JOINDER AGREEMENT


                    JOINDER
AGREEMENT (this “Joinder Agreement”),
dated as of _____, 2008, is entered into pursuant to the Master
Commutation, Release and Restructuring Agreement (as amended, supplemented or
otherwise modified from time to time, the “Master
Agreement”), dated as of July __, 2008, among
XL  CAPITAL LTD, an exempted limited company incorporated under the Laws of the
Cayman Islands (“XL”),
XL INSURANCE (BERMUDA) LTD, (formerly known as X.L. Insurance Ltd) a Bermuda
 exempted company (“XLI”),
 XL REINSURANCE AMERICA INC., a New York insurance corporation (“XLRA”),
 X.L.  GLOBAL SERVICES, INC., a service company incorporated under the Laws of
 Delaware (“XLGS”),
 XL SERVICES (BERMUDA) LTD, a service company incorporated under the Laws of
 Bermuda  (“XLBS”),
 X.L. AMERICA, INC., a company incorporated under the Laws of Delaware (“XLA”),
 SECURITY CAPITAL  ASSURANCE LTD, a Bermuda exempted company (“SCA”),
 XL FINANCIAL ASSURANCE LTD., a Bermuda exempted company (“XLFA”),
 XL CAPITAL ASSURANCE INC., a New York insurance company (“XLCA”),
 XL FINANCIAL ADMINISTRATIVE SERVICES INC., a company incorporated under the
 Laws of  Delaware (“XLFAS”),
 SCA BERMUDA ADMINISTRATIVE LTD., a company incorporated under the Laws of Bermuda
 (“SCAB”),
 XL CAPITAL ASSURANCE (U.K.) LIMITED, an insurance company regulated by the Financial
 Services Authority and incorporated under the Laws of England and Wales (“XLCAUK”),
 those portfolio trusts that may become a Party to the Agreement from time to
 time, and such counterparties to credit default swap agreements with Affiliates
 of XLCA that may become Party to the Agreement from time to time.  Unless otherwise
 defined herein, capitalized terms used herein and defined in the Master Agreement
and shall have the meanings given to them in the Master Agreement. 


RECITALS:


          WHEREAS, the party hereto wishes to enter into the Master Agreement;


          NOW, THEREFORE, IT IS AGREED:


          1.       Joinder to the Master Agreement. The party hereto confirms that it has received a copy of the Master Agreement and such other documents and information as it has
deemed appropriate to conduct its own analysis and make its own decision to enter into this Joinder Agreement and agrees to: 


                    (a)      join the Master Agreement as a [CDS Counterparty/portfolio trust Affiliate of XLCA that is an SCA Party] thereunder with the same force and effect as if originally named therein as a CDS Counterparty and, without limiting
the generality of the foregoing, hereby expressly accepts and assumes all rights and obligations of a [CDS Counterparty/SCA Party] thereunder, including the releases entered into by such party pursuant to Section
2.05 of the Master Agreement; 


                    (b)      be bound by, and hereby confirms, all covenants, agreements, consents, submissions, appointments, benefits and acknowledgments attributable to a [CDS Counterparty/SCA Party] in the Master Agreement; and 


Exh. 1.01(c)-2












                    (c)      perform all obligations required of it as a [CDS Counterparty/SCA Party] by the Master Agreement. 


          2.       Representations and Warranties.  Each [CDS Counterparty/SCA Party] hereby represents and warrants that the representations and warranties with respect to it contained
in, or made by it in, [Article V/III] of the Master Agreement, are true and correct in all material respects on the date hereof (after giving effect to this Joinder Agreement) as if made on and as of the date hereof (except that any applicable
representation or warranty that by its terms is made as of an earlier date is true and correct as of such earlier date). 


          3.       Effective Date.  The effective date of this Joinder Agreement shall be the date hereof (the “Effective Date”). Upon execution, the party hereto shall promptly provide delivery of an executed copy of this Joinder Agreement to the XL Parties, the SCA Parties and Davis Polk & Wardwell as counsel to the CDS Counterparties along with
all disclosure schedules and information required to be delivered pursuant to the Master Agreement. This Joinder Agreement shall become effective upon delivery to XL. 


          4.       Governing Law. This Joinder Agreement shall be interpreted under and governed by the Laws of the State of New York, without giving effect to conflicts of law
provisions thereof. 


          5.       Signature Pages. A facsimile or Portable Document Format copy of a signature shall have the same force and effect as an original signature.


[SIGNATURE FOLLOWS IMMEDIATELY HEREAFTER]

 

 

 

 

 

 

 

 

 


Exh. 1.01(c)-3












                    IN
WITNESS WHEREOF, the party hereto has caused this Joinder Agreement to be duly
executed and delivered by its proper and duly authorized officers as of this
[___] day of [_______], 2008.


 


  	
        [CDS Counterparty/Portfolio Trust]  
	 	   
	 	   
	 	   
	By:
	  

	 	Name: 
	 	Title: 


  




[Notice Information]

 

 

 

 

 

 

 

 

 

 

 

 

 


Exh. 1.01(c)-4












EXHIBIT 1.01(d)


FORM OF EXCESS OF LOSS COMMUTATION AGREEMENT 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Exh. 1.01(d)-1









COMMUTATION AND RELEASE AGREEMENT 

                     This
    Commutation and Release Agreement (the “Agreement”)
    dated as of ________, 2008, is made by and between XL Financial Assurance
    Ltd, a company domiciled in Bermuda (the “Company”)
    and XL Insurance (Bermuda) Ltd, formerly known as XL Insurance Ltd, a company
    also domiciled in Bermuda ( the
  “Reinsurer”).
  The Reinsurer and the Company are hereinafter referred to collectively as the “Parties.” 

 RECITALS 

                     WHEREAS,
    the Parties previously entered into a reinsurance agreement entitled the
    Excess of Loss Reinsurance Agreement executed on October 3, 2001, as amended,
    pursuant to which the Reinsurer agreed to reinsure certain liabilities of
    the Company (the “Reinsurance Agreement”);
    and 

                     WHEREAS,
    the vast majority of the Reinsurer’s exposure under the Reinsurance
    Agreement is attributable to a Facultative Quota Share Reinsurance Treaty
    dated as of October 6, 1999 as amended and restated by an Amended and Restated
    Facultative Quota Share Reinsurance Treaty dated as of June 22, 2001, as
    further amended and restated by a Second Amended and Restated Facultative
    Quota Share Reinsurance Treaty dated as of May 1, 2004, and as further amended
    and restated by a Third Amended and Restated Facultative Quota Share Reinsurance
    Treaty dated as of June 29, 2006 (the “Quota
    Share”) pursuant to which the Company
    reinsures certain liabilities of XL Capital Assurance Inc. (“XLCA”);
    and 

                     WHEREAS,
    the Parties and XLCA are parties to that certain Master Commutation, Release
    and Restructuring Agreement, dated as of July __, 2008, by and among the
    Company, the Reinsurer, Security Capital Assurance Ltd and other parties
    thereto (the “Master Transaction Agreement”),
    pursuant to which (a) the Company and the Reinsurer have agreed to enter
    into this Agreement; and (b) XLCA and the Company have agreed to commute
    the Quota Share and fully and finally extinguish all of the parties’ rights
    and obligations under the Quota Share (the “Quota
    Share Commutation”); and 

                     WHEREAS,
    the Reinsurer believes it is entitled to terminate the Reinsurance Agreement
    upon thirty (30) days notice and to seek reimbursement of the monies it previously
    paid under the Reinsurance Agreement based upon its belief that the Company
    used an improper “Threshold Amount” for purposes of calculating
    the “Liability Amount” under the Reinsurance Agreement, and the
    Company believes that the Reinsurer has no such entitlement and confirms
    its position that it had used the proper Threshold Amount for purposes of
    calculating the Liability Amount under the Reinsurance Agreement (the “Dispute”);
    and 

                     WHEREAS,
    the Parties agree that it is in each of their best interests to freely and
    voluntarily enter into this Agreement and the Master Transaction Agreement
    and to settle the Dispute and to fully and forever release and discharge
    each other from their respective existing and future liabilities and obligations,
    including contingent and uncertain liabilities, both known 

Exh. 1.01(d)-2 






 and unknown, under the Reinsurance Agreement
    and to compromise, resolve and settle all amounts due, or which may become
    due, between each other arising out of, in respect of, or relating to the
    Reinsurance Agreement; and 

                     WHEREAS,
    the Company has agreed that it will pay the Commutation Amount it receives
    under this Agreement as part of the consideration it pays to XLCA under the
    Quota Share Commutation; 

                     WHEREAS,
    the Company and the Reinsurer, or their affiliates, may be parties to agreements
    other than the Reinsurance Agreement, and it is the intent of the Parties
    that this Agreement will not have any effect upon such other agreements. 

                     NOW,
      THEREFORE, in consideration of the covenants,
      conditions, promises and releases contained herein, and for other valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the Parties agree as follows: 

 ARTICLE I 

 PAYMENT 

                     (a)     The
    Reinsurer shall pay to the Company the sum of One Hundred Million Dollars
    ($100,000,000.00) (the “Commutation Amount”)
    via direct wire transfer, in immediately available funds, in accordance with
    the payment instructions set forth on Schedule
    A hereto on the Closing Date (as such term
    is defined in the Master Transaction Agreement). The date on which the Commutation
    Amount is paid and received shall be referred to hereinafter as the “Effective
    Date.” 

                     (b)     The
    Company shall accept the Commutation Amount in full satisfaction of all of
    the Reinsurer’s liabilities and obligations under the Reinsurance Agreement. 

 ARTICLE II 

 RELEASE 

                     (a)     Upon
    the Reinsurer’s payment of the Commutation Amount to the Company, the
    Company, on behalf of itself and its shareholders, parents, affiliates and
    subsidiaries, and their respective officers, directors and employees, hereby
    irrevocably and unconditionally releases and forever discharges the Reinsurer,
    its parents, subsidiaries and affiliates, and their respective predecessors,
    successors, assigns, officers, directors, agents, employees, shareholders,
    representatives, and attorneys from any and all present and future actions,
    causes of action, suits, debts, liens, contracts, rights, agreements, obligations,
    promises, liabilities, claims, counterclaims, demands, damages, controversies,
    losses, costs and expenses (including attorneys’ fees and costs actually
    incurred) of any kind, character, description or nature whatsoever, known
    or unknown to either or both Parties, suspected or unsuspected, reported
    or unreported, fixed or contingent, which the Company now has, owns or holds
    or claims to have, own, or hold, or at any time heretofore had, owned, or
    held or claimed to have 

Exh. 1.01(d)-3 






 had, owned, or held, or may hereafter
    have, own, or hold or claim to have, own, or hold, arising out of conduct
    or matters occurring on, prior to or subsequent to the Effective Date, against
    the Reinsurer, arising directly or indirectly out of, based upon, or in any
    way related to or in connection with the Reinsurance Agreement, whether grounded
    in law or equity, or sounding in tort or contract or otherwise; provided, however,
    that the provisions of this Article II(a) shall
    not discharge obligations of the Reinsurer, which have been undertaken or
    imposed by the express terms of this Agreement or the Master Transaction
    Agreement (including the Ancillary Agreements). 

                     (b)     Contemporaneous
    with the payment of the Commutation Amount to the Company, the Reinsurer,
    on behalf of itself and its shareholders, parents, affiliates and subsidiaries,
    and their respective officers, directors and employees, hereby irrevocably
    and unconditionally releases and forever discharges the Company, its shareholders,
    parents, subsidiaries and affiliates, and their respective predecessors,
    successors, assigns, officers, directors, agents, employees, shareholders,
    representatives, and attorneys from any and all present and future actions,
    causes of action, suits, debts, liens, contracts, rights, agreements, obligations,
    promises, liabilities, claims, counterclaims, demands, damages, controversies,
    losses, costs and expenses (including attorneys’ fees and costs actually
    incurred) of any kind, character, description or nature whatsoever, known
    or unknown to either or both Parties, suspected or unsuspected, reported
    or unreported, fixed or contingent, which the Reinsurer now has, owns, holds
    or claims to have, own, or hold, or at any time heretofore had, owned, or
    held or claimed to have had, owned, or held, or may hereafter have, own,
    or hold or claim to have, own, or hold, arising out of conduct or matters
    occurring on, prior to or subsequent to the Effective Date, against the Company,
    arising directly or indirectly out of, based upon, or in any way related
    to or in connection with the Reinsurance Agreement, whether grounded in law
    or equity or sounding in tort or contract or otherwise; provided, however,
    that the provisions of this Article II(b) shall
    not discharge obligations of the Company, which have been undertaken or imposed
    by the express terms of this Agreement or the Master Transaction Agreement
    (including the Ancillary Agreements). 

                     (c)     The
    Parties understand that it is possible that unknown losses or claims may
    exist, or that present or future losses or claims may be underestimated in
    amounts or severity. Furthermore, the Parties expressly accept and assume
    the risk that the factual or legal assumptions made by any Party in connection
    with this Agreement may be found hereafter to be different from the true
    facts or law, and the Parties agree that this Agreement shall be and shall
    remain in full force and effect notwithstanding such differences in facts
    or law. Each Party expressly takes all of the foregoing into account in determining
    the amount of consideration to be given and paid for the giving of this Agreement,
    and a portion of the said consideration, having been bargained for between
    the Parties with the knowledge of the possibility of such unknown losses
    and claims, is given in exchange for the full accord, satisfaction and discharge
    of all such losses and claims. 

                     (d)     Full
    payment of the Commutation Amount shall be in complete accord, satisfaction,
    settlement and commutation of any and all past, current and future liabilities
    and obligations that each Party owes or may owe to the other arising directly
    or indirectly out of or related to or in connection with the Reinsurance
    Agreement and that upon payment of the Commutation Amount, the Reinsurance
    Agreement shall be terminated as of the Effective Date 

Exh. 1.01(d)-4 






 and neither Party shall have any further
    obligation or liability to the other Party under the Reinsurance Agreement. 

 ARTICLE III 

 NON-RELIANCE 

                     (a)     This
    Agreement fully and finally resolves the rights, duties and obligations of
    the Company and the Reinsurer under the Reinsurance Agreement, and neither
    Party shall: 


            (i)      have
      any remedy in respect of any representation, warranty or undertaking of
      the other that is not specifically set forth in this Agreement, the Master
      Transaction Agreement, or the Ancillary Agreements commuting the reinsurance
      agreements listed in Part I of Schedule 2.01 of the Master Transaction
      Agreement, whether or not relied upon by the other Party; or 

             (ii)     seek
      to reopen or set aside this Agreement or the Reinsurance Agreement on any
      basis whatsoever, including, without limitation, that this Agreement or
      the Reinsurance Agreement is void or voidable due to a mistake or change
      in law or a unilateral or mutual mistake of fact in any way related to
      this Agreement or the Reinsurance Agreement. 



                    (b)     The
    Company and the Reinsurer have voluntarily entered into this Agreement based:
    (i) upon their own independent assessment of the relevant facts and their
    rights and obligations under the Reinsurance Agreement and (ii) except as
    expressly set forth in Article III and Article
    IV of the Master Transaction Agreement, not
    upon any representations that were made or disclosures that were made by
    the other Party, their affiliates, officers, directors, shareholders, employees,
    representatives, agents, attorneys or their respective heirs, administrators,
    predecessors, successors and assigns. Each Party acknowledges that it has
    carefully read, and that it understands the scope and effect of this Agreement
    and has had a full and fair opportunity to consult with, and seek the advice
    and recommendations of its attorneys, actuaries and other professional advisors
    prior to its execution of this Agreement. 

                     (c)     This
    Agreement and the negotiations and proceedings leading to this Agreement
    shall not form the basis of any claim by either Party against the other Party
    or against any officer, director, consultant, professional or shareholder
    of the other Party, except with respect to an action for enforcement of this
    Agreement or the Master Transaction Agreement (including the Ancillary Agreements). 

 ARTICLE IV 

 EXCLUSIVE BENEFIT OF THE PARTIES AND
      BINDING EFFECT 

                     The
    rights, duties and obligations set forth herein shall inure to the benefit
    of and be binding upon the Company and the Reinsurer as they are identified
    in this Agreement and their parents, subsidiaries and affiliates, and their
    respective predecessors, successors, assigns, officers, directors, agents,
    employees, shareholders, representatives, and attorneys and this 

Exh. 1.01(d)-5 






 Agreement is not intended to confer any
    rights or benefits upon persons or entities other than the foregoing parties. 

 ARTICLE V 

 COMPROMISE 

                     This
    Agreement sets forth a compromise and shall never at any time for any purpose
    be considered as an admission of liability or responsibility on the part
    of any party hereto regarding any aspect of the Reinsurance Agreement. Neither
    this Agreement nor any of its terms shall be admissible in any action, arbitration,
    or proceeding other than one to enforce the terms of this Agreement or the
    Master Transaction Agreement (including the Ancillary Agreements), including,
    but not limited to, the releases provided in Article
    II. 

 ARTICLE VI 

 FURTHER ASSURANCES 

                     The
    Parties, without further consideration, shall execute and deliver such other
    documents and take such other action as may be necessary to effect this Agreement. 

 ARTICLE VII 

 MISCELLANEOUS 

                     (a)     Should
    any part, term or provision of this Agreement, except Article
    I or Article II,
    be declared or determined to be illegal or invalid pursuant to a final and
    unappealable order of a court of competent jurisdiction, the validity of
    the remaining parts, terms and provisions shall not be affected thereby and
    such illegal or invalid part, term or provision shall be deemed not to be
    part of this Agreement. If either Article I or Article
    II is determined by a court of competent jurisdiction
    or regulatory authority to be unenforceable, either Party, at its option,
    shall be entitled to rescind this Agreement, and the Reinsurer shall be entitled
    to repayment of the Commutation Amount immediately upon such rescission.
    Upon such rescission, the Reinsurance Agreement and all rights, obligations
    and liabilities of the Parties under the Reinsurance Agreement shall be reinstated
    as if this Agreement had never been executed. Notwithstanding the foregoing,
    the releases given pursuant to Article II shall
    remain in full force and effect as to the Parties’ officers, directors,
    agents, employees, shareholders, representatives, advisors and attorneys. 

                     (b)     This
    Agreement and the Master Transaction Agreement (including the Ancillary Agreements
    thereto) set forth the entire agreement between the Parties with respect
    to the subject matter hereof and supersedes all prior agreements or understanding
    between them pertaining to the subject matter hereof. A facsimile copy of
    a signature shall have the same force and effect as an original signature. 

                     (c)     This
    Agreement may not be amended, altered, supplemented or modified, except by
    written agreement signed by the Parties. 

Exh. 1.01(d)-6 






                     (d)     This
    Agreement may be executed and delivered in multiple counterparts, each of
    which, when so executed and delivered, shall be an original, but such counterparts
    shall together constitute but one and the same instrument and agreement. 

                     (e)     For
    purposes of this Agreement, a “Business
    Day” is any day other than a Saturday,
    Sunday or a public holiday in Bermuda. 

                     (f)     This
    Agreement shall be governed by and construed in accordance with the laws
    of Bermuda without regard to principles of conflicts of law or choice of
    law and the Parties submit to the exclusive jurisdiction of the Supreme Court
    of Bermuda in respect of all disputes arising out of or in connection with
    this Agreement. 

                     (g)     All
    notices under this Agreement shall be in writing and shall be deemed to be
    duly given and received (i) upon delivery if delivered by certified mail;
    or (ii) on the next Business Day if sent by overnight courier (iii) on the
    date sent by facsimile if sent during the recipient’s normal business
    hours or, if sent by facsimile outside such hours, on the next Business Day;
    provided, that such notices are sent to a Party to its Address for Notices
    set forth on Schedule B hereto
    or to such other address as either Party may have furnished to the other
    in writing. 

                     (h)     For
    all purposes this Agreement shall be deemed to have been drafted jointly
    by the Parties. 

                     (i)     This
    Agreement is an agreement solely between the Company and the Reinsurer. No
    right of action against the Reinsurer shall accrue to any insured, policyholder,
    or other contracting party of the Company unless granted herein by virtue
    of this Agreement. 

Exh. 1.01(d)-7 






                     IN
      WITNESS WHEREOF, the Parties have executed
      this Agreement by their respective authorized officers as of the day and
      year first written below. 

	Dated:  	                                                              
	 	XL FINANCIAL ASSURANCE LTD 
	 
	 
	 
	 	 	 	By:  	  

	 	 	 	 	Name: 
	 	 	 	 	Title: 
	 
	 
	 
	Dated: 	  
	 	XL INSURANCE (BERMUDA) LTD 
	 	 	 	FORMERLY KNOWN AS XL 
	 	 	 	INSURANCE LTD 
	 
	 
	 
	 	 	 	By:  	  

	 	 	 	 	Name: 
	 	 	 	 	Title: 




    Exh. 1.01(d)-8 






 SCHEDULE A 

 WIRE TRANSFER INSTRUCTIONS 

 Transfer instructions for remitting
        funds to XL Financial Assurance Ltd

 [Intentionally omitted]

 

 Please send e-mail / fax containing
      details of the transfer to: 

 [Intentionally omitted]

 Rebecca O’Connell (VP & Assistant
    Treasurer) at SCA 

    Phone: (212) 478-3629 

    Fax: (212) 478-3587 

    E-mail: rebecca.oconnell@xlgroup.com 



    Exh. 1.01(d)-9 






 SCHEDULE B 

 ADDRESS FOR NOTICE 

	TO THE COMPANY: 
	 
	                   XL
        Financial Assurance Ltd 
	                   A.S.
        Cooper Building 
	                   26
        Reid Street, 4th Floor 
	                   Hamilton,
        Bermuda HM 11 
	                    Attn:
          President 

	                   Facsimile:
        441-296-4351 
	 
	                   and 
	 
	                   XL
        Capital Assurance Inc. 
	                   1221
        Avenue of the Americas 
	                   New
        York, New York 10022 
	                   Attn:
        General Counsel 
	                   Facsimile:
        212-478-3579 
	 
	TO THE REINSURER: 
	 
	                   XL
        Insurance (Bermuda) Ltd 
	                   XL
        House 
	                   One
        Bermudiana Road 
	                   Hamilton
        HM 11 
	                   Bermuda 
	                   Attention:
        General Counsel 
	                   Facsimile:
        441-295-2840 




    Exh. 1.01(d)-10






EXHIBIT 1.01(e)


FORM OF FACULTATIVE MASTER CERTIFICATE COMMUTATION AGREEMENT 

 

 

 

[Intentionally omitted—superseded by

Amendment No. 1 to Master Transaction Agreement]

 

 

 

 

 

 

 

 

 

 

 


Exh. 1.01(e)-1







EXHIBIT 1.01(f)


FORM OF QUOTA SHARE TREATY COMMUTATION AGREEMENT 

 

 

 

[Intentionally omitted—superseded by

Amendment No. 1 to Master Transaction Agreement]

 

 

 

 

 

 

 

 

 

 

 


Exh. 1.01(f)-1







EXHIBIT 1.01(g)


FORM OF SUBSCRIPTION AGREEMENT

 

 

 

[Intentionally omitted—superseded by

Amendment No. 1 to Master Transaction Agreement]

 

 

 

 

 

 

 

 

 

 

 


Exh. 1.01(g)-1







EXHIBIT 1.01(h)


FORM OF XL STOCK RESALE AND REGISTRATION RIGHTS AGREEMENT 

 

 

 

[Intentionally omitted—superseded by

Amendment No. 1 to Master Transaction Agreement]

 

 

 

 

 

 

 

 

 

 

 


Exh. 1.01(h)-1






EXHIBIT 1.01(i)


FORM OF SCA SHAREHOLDER ENTITY AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Exh. 1.01(i)-1












Form of Shareholder Agreement 

 SHAREHOLDER AGREEMENT 

           THIS
    SHAREHOLDER AGREEMENT (this “Agreement”)
    dated August [__], 2008, is entered into between [HSBC Private Bank, Bermuda
    Trust Company Limited] (the “Trustee”),
    a Bermuda exempted company as trustee of the special purpose trust (the “Trust”)
    established by the Declaration of Trust defined below and known as [name
    of trust] (the “SCA Shareholder Entity”),
    and Security Capital Assurance Ltd, a Bermuda exempted company (“SCA”). 

           WHEREAS,
    SCA has entered into the Master Commutation, Release and Restructuring Agreement
    dated as of July [__], 2008 (the “Master
    Restructuring Agreement”) among SCA,
    XL Capital Assurance Inc. (“XLCA”),
    XL Financial Assurance Ltd., XL Financial Administrative Services Inc., SCA
    Bermuda Administrative Ltd., XL Capital Assurance (U.K.) Limited and those
    Portfolio Trusts a party thereto, XL Capital Ltd., XL Insurance (Bermuda)
    Ltd. (“XLI”),
    XL Reinsurance America Inc., X.L. Global Services Inc., XL Services (Bermuda)
    Limited and X.L. America, Inc. and the consenting counterparties party thereto
    (the “Consenting Counterparties”);

           WHEREAS,
    the parties to the Master Restructuring Agreement have agreed that 30,069,049
    Common Shares (as hereinafter defined), which represent approximately 46%
    of the outstanding Common Shares and all of the Common Shares beneficially
    owned by XLI as of the date of this Agreement (the “SCA
    Shares”), shall be transferred to the
    SCA Shareholder Entity, which shall hold the SCA Shares in accordance with
    the terms of that certain Declaration of Trust dated as of the date hereof
    (the “Declaration of Trust”)
    establishing the SCA Shareholder Entity; and 

            WHEREAS,
    the parties to the Master Restructuring Agreement have agreed that in connection
    with the transfer of the SCA Shares to the SCA Shareholder Entity, certain
    rights afforded to XLI under the Bye-Laws (as hereinafter defined) and under
    that certain transition agreement entered into on August 4, 2006 between
    XLI, SCA and the other parties thereto shall be transferred to the SCA Shareholder
    Entity.

           NOW,
    THEREFORE, in consideration of the covenants and agreements contained herein,
    the parties hereto agree as follows: 

           SECTION
      1. Definitions. 

           (a)     “Act” means
    the Companies Act 1981 of Bermuda, as amended from time to time.

           (b)     “Affiliate” means,
    with respect to any Person, any other Person directly or indirectly controlling,
    controlled by or under common control with such Person. For purposes of this
    definition, the term “control” (including its correlative meanings,
    the terms “controlling”, “controlled by” and “under
    common control with”) shall mean the possession, directly or indirectly,
    of the 

Exh. 1.01(i)-2 






 power to direct or cause the direction of
    the management and policies of a Person, whether through the ownership of
    voting securities, by contract or otherwise. For purposes of this Agreement,
    no Consenting Counterparty shall be deemed to be an Affiliate of the SCA
    Shareholder Entity and the SCA Shareholder Entity shall not be deemed to
    be an Affiliate of SCA or any of its Subsidiaries. 

           (c)     “Business
      Day” means any day excluding Saturday,
      Sunday and any day on which banks in New York, New York or Hamilton, Bermuda
      have the option or are required by law or other governmental action to
      close. 

           (d)     “Bye-Laws” means
    the Amended and Restated Bye-Laws of SCA, as amended from time to time. 

           (e)     “Common
      Shares” means the common shares, $0.01
      par value per common share, of SCA, and any share capital into which such
      common shares shall have been converted or any share capital resulting
      from a reclassification of such common shares. 

           (f)     “Finance
      and Risk Oversight Committee” means
      the finance and risk oversight committee of the SCA Board. 

           (g)     “Independent” means,
    with respect to any director or nominee for director, an individual who is
    both (i) “independent” (as defined in the corporate governance
    rules of the listing standards of the New York Stock Exchange) of (A) SCA
    and its subsidiaries and (B) each Consenting Counterparty and the SCA Shareholder
    Entity assuming for purposes of this clause (B) that such independence standard
    were applied to, and such individual were a director of, each such Consenting
    Counterparty and the SCA Shareholder Entity and (ii) not a director, officer
    or employee of the SCA Shareholder Entity or any Consenting Counterparty,
    or an officer or employee of SCA or any of its Affiliates. 

           (h)     “Material
      Subsidiary” means at any time, (i)
      XLCA and (ii) any subsidiary of SCA which at such time is a “significant
      subsidiary” under Regulation S-X of the Securities Exchange Act of
      1934, as amended. 

           (i)     “New
      York Stock Exchange” means the New
      York Stock Exchange Inc. 

           (j)     “Person” means
    an individual, corporation, partnership, association, trust, limited liability
    company or any other entity or organization, including a government or political
    subdivision or an agency, unit or instrumentality thereof. 

           (k)     “Representatives” means
    with respect to any Person, such Person’s Affiliates and its and their
    respective officers, directors, employees, accountants, counsel, consultants,
    advisors, agents and representatives. 

           (l)     “SCA
      Board” means the board of directors
      of SCA. 

Exh. 1.01(i)-3 






           (m)     “SCA
      Board Nominee” means an individual
      who was nominated for election by the SCA Board (and who is not an SCA
      Shareholder Entity Nominee). 

           (n)     “Voting
      Restriction Termination Event” means
      the time at which the SCA Shareholder Entity’s and its Affiliates’ aggregate
      ownership of the then outstanding Common Shares is first equal to or less
      than 35%. 

           SECTION
      2. Corporate Governance. 

           (a)     Voting
      of SCA Shares. The SCA Shareholder Entity
      will vote the SCA Shares at each annual or special meeting of stockholders
      of SCA at which directors are to be elected, or execute proxies or written
      consents, as the case may be, in favor of (i) each SCA Shareholder Entity
      Nominee then standing for election and (ii) with respect to each other
      open board seat then standing for election that is not required to be filled
      by an SCA Shareholder Entity Nominee pursuant to Section 2(b) below, an
      individual that is Independent or, at the SCA Shareholder Entity’s
      election, an SCA Board Nominee; provided that
      in exercising its discretion pursuant to the foregoing clause (ii), the
      SCA Shareholder Entity will vote the SCA Shares so that a majority of the
      SCA Board is at all times Independent; provided,
      however, that the SCA Shareholder Entity
      shall not vote in favor of any individual who, to the SCA Shareholder Entity’s
      knowledge (after reasonable inquiry), is either receiving or entitled to
      receive, directly or indirectly, any compensation or entitlement to indemnification,
      or is named or entitled to be named as a beneficiary under any D&O
      insurance policy, for service on the SCA Board, any SCA Board committees
      or any SCA subsidiary boards or committees from the Consenting Counterparties
      or the SCA Shareholder Entity. 

           (b)     SCA
      Shareholder Entity Nominees. 


            (i)     Until
      the occurrence of a Voting Restriction Termination Event, the SCA Shareholder
      Entity will have the right to nominate for the SCA Board (i) for so long
      as the SCA Board consists of nine or fewer directors, such number of nominees
      as would equal one nominee less than a majority of the directors and (ii)
      for so long as the SCA Board consists of ten or more directors, such number
      of nominees as would equal two nominees less than a majority of the directors
      (the “SCA Shareholder Entity Nominees”); provided that
      until the occurrence of a Voting Restriction Termination Event, the SCA
      Shareholder Entity shall at all times be entitled to nominate at least
      one nominee to the SCA Board. Such SCA Shareholder Entity Nominees will
      be allocated among the classes of the SCA Board as follows: (i) two to
      the “Class I” directors and (ii) one each to the “Class
      II” directors and “Class III” directors (or as substantially
      equivalent thereto if for any reason the SCA Board consists of more or
      fewer than nine directors), in each case, as such “classes” of
      directors are described in paragraph (3) of Section 8 of the Bye-Laws.
      For the avoidance of doubt, so long as the SCA Board consists of eleven 



Exh. 1.01(i)-4 







  directors, the SCA Shareholder Entity will
      have the right to nominate four of the eleven directors. If, for any reason,
      there is a vacancy in the SCA Board, which vacancy is of a director so
      nominated by the SCA Shareholder Entity, SCA shall replace that directorship
      as soon as practicable with a nominee selected by the SCA Shareholder Entity.
      Similarly, if there is a vacancy created by an increase in the number of
      directors, then such vacancy shall be filled in a manner consistent with
      the SCA Shareholder Entity’s rights set forth in this Section 2(b)(i).
      Moreover, if the size of the SCA Board is at any time reduced, the SCA
      Shareholder Entity shall cause such number of SCA Shareholder Entity Nominees,
      if any, in excess of those to which the SCA Shareholder Entity is entitled
      based on the reduced size of the SCA Board to resign from the SCA Board
      and any directorships they hold with subsidiaries of SCA. All SCA Shareholder
      Entity Nominees shall be Independent and shall be designated for nomination
      in accordance with Section 1.2.3 of Schedule B of the Declaration of Trust.
      SCA shall, subject to Section 2(b)(vi), take all action reasonably necessary
      to appoint the initial SCA Shareholder Entity Nominees to the SCA Board
      as promptly as practicable following the execution and delivery hereof.

             (ii)     SCA
      shall include the SCA Shareholder Entity Nominees in each slate of directors
      proposed, recommended or nominated for election by SCA or the SCA Board,
      and will use the same efforts to cause the election of such nominees as
      it uses for the SCA Board Nominees in connection with that election (it
      being understood that for so long as the SCA Board shall remain classified
      under the Act, this Section 2(b)(ii) shall apply to only the SCA Shareholder
      Entity Nominees assigned to the appropriate “class” then up
      for election). 

             (iii)     SCA
      agrees that each SCA Shareholder Entity Nominee shall be entitled to receive
      compensation and indemnification from SCA and its subsidiaries, and to
      be covered by D&O insurance policies of SCA and its subsidiaries, on
      the same terms as the SCA Board Nominees who are Independent. The SCA Shareholder
      Entity agrees that no SCA Shareholder Entity Nominee shall receive, directly
      or indirectly, any compensation or entitlement to indemnification, or be
      named as a beneficiary under any D&O insurance policy, for service
      on the SCA Board, any SCA Board committees or any SCA subsidiary boards
      or committees from the Consenting Counterparties or the SCA Shareholder
      Entity. 

             (iv)     Notwithstanding
      any provision of SCA’s Corporate Governance Guidelines and any confidentiality
      undertaking by the SCA Shareholder Entity or any SCA Shareholder Entity
      Nominee to the contrary, the parties acknowledge and agree that each SCA
      Shareholder Entity Nominee (i) is hereby authorized to disclose information
      to the SCA Shareholder Entity and its Representatives, (ii) is under no
      obligation 



Exh. 1.01(i)-5 







  to communicate any information received
      from the SCA Shareholder Entity or any of its Representatives to the SCA
      Chairman or any other Person and (iii) is authorized to initiate communications,
      directly or indirectly, with the SCA Shareholder Entity and its Representatives
      without any requirement to first pre-clear such communications with the
      SCA Chairman or any other Person, in each case, to the extent such SCA
      Shareholder Entity Nominee determines in good faith that the taking or
      the failure to take any such actions will not be inconsistent with his
      or her fiduciary duties to SCA under applicable law. For the avoidance
      of doubt, the provisions of the immediately preceding sentence shall not
      apply to disclosures to or communications with the Consenting Counterparties
      or their Representatives. SCA shall, effective as of the date hereof, amend
      SCA’s Corporate Governance Guidelines to extent necessary so that
      SCA’s Corporate Governance Guidelines do not contain any provisions
      inconsistent with the second preceding sentence. 

             (v)     Until
      the occurrence of a Voting Restriction Termination Event, the SCA Shareholder
      Entity will not form or join a “group”
    within the meaning of Section 13(d)(3) of the Exchange Act with any other
    Person, including without limitation any of the Consenting Counterparties,
    for the purpose of seeking to elect more than the number of SCA Shareholder
    Entity Nominees to which it is then entitled under Section 2(b)(i); provided that,
    subject to Section 2(a), the foregoing shall in no way prohibit the SCA Shareholder
    Entity from voting any securities of SCA in its discretion (including in
    connection with any election contest) or otherwise independently exercising
    its rights as a stockholder of SCA. 

             (vi)     The
      SCA Shareholder Entity agrees not to nominate any individual that SCA’s
      Nominating & Governance Committee, after having the opportunity to
      conduct a reasonable inquiry, reasonably determines in the good faith discharge
      of its fiduciary duties (i) does not meet the requirements set forth in
      the penultimate sentence of Section 2(b)(i) or would be a party to or benefit
      from any arrangement that would violate the last sentence of Section 2(b)(iii)
      or (ii) does not meet the suitability criteria of the SCA Board, which
      criteria shall be consistently applied to individuals presented as SCA
      Shareholder Entity Nominees to the same extent as those presented as Independent
      SCA Board Nominees. 

   (c)     Committees;
        Subsidiary Boards. 

             (i)     Until
      the occurrence of the Voting Restriction Termination Event, (i) the SCA
      Shareholder Entity will have the right to designate one member of the SCA
      Compensation Committee and (ii) the Compensation Committee of the SCA Board
      shall consist of at least five members which number of members shall not
      be changed without the SCA Shareholder Entity’s prior consent (subject
      to any restrictions imposed by applicable law, rule or regulation). 



Exh. 1.01(i)-6 







            (ii)     Until
      the occurrence of the Voting Restriction Termination Event, (i) SCA will
      maintain a Finance and Risk Oversight Committee whose charter shall be
      substantially in its current form (with such changes thereto as may be
      agreed by a majority of the members of the Finance and Risk Oversight Committee
      and the SCA Board), (ii) the Finance and Risk Oversight Committee shall
      consist of at five members which number of members shall not be changed
      without the SCA Shareholder Entity’s prior consent, and (iii) two
      of the members of such Committee shall be SCA Shareholder Entity Nominees. 

             (iii)     Other
      than the Audit Committee, a Compensation Committee, a Nominating & Governance
      Committee and a Finance and Risk Oversight Committee, SCA shall establish
      no other committees of the SCA Board without the prior written consent
      of at least a majority of the SCA Shareholder Entity Nominees then in office
      (which shall not unreasonably be withheld).

             (iv)     Subject
      to applicable law (including the Act) and New York Stock Exchange regulations,
      until the occurrence of the Voting Restriction Termination Event, upon
      the request of the SCA Shareholder Entity, SCA and the SCA Board shall
      take all actions necessary so that the composition of the board of directors,
      general partner, managing member (or controlling committee thereof) or
      any other board or committee serving a similar function with respect to
      each of SCA’s Material Subsidiaries (each a “Subsidiary
      Board”) shall be proportionate to the
      composition requirements of the SCA Board such that the SCA Shareholder
      Entity shall have the same proportional representation (rounded to the
      nearest whole number of directors, but in no event less than one) on each
      such Subsidiary Board and committee thereof as it has on the SCA Board. 

             (v)     In
      each case where the SCA Shareholder Entity has the right to designate one
      or more members to any committee of the SCA Board, any Subsidiary Board
      or any committee thereof in accordance with this Section 2(c), the SCA
      Board shall select the SCA Shareholder Entity Nominee or SCA Shareholder
      Entity Nominees, as the case may be, to serve on such Subsidiary Board
      or committee in the same manner as Independent SCA Board Nominees are selected
      to serve on such Subsidiary Board or committee.  



          (d)     Notice
      of SCA Board Meetings. In addition to any
      other notice required by the Act or the Bye-Laws, SCA shall give each SCA
      Shareholder Entity Nominee the same notice and information provided to
      any other member of the SCA Board with respect to each meeting of the SCA
      Board or any committee thereof (even if such SCA Shareholder Entity Nominee
      is not a member of such committee), at the same time such notice is first
      made available to any such other member of the SCA Board; provided that
      if such notice and information is given 

Exh. 1.01(i)-7 






 by means other than email, SCA shall, simultaneously
    with the giving of such notice and information by such other means, deliver
    such notice and information to each SCA Shareholder Entity Nominee by email
    to the email address of such SCA Shareholder Entity Nominee provided to SCA. 

           (e)     Approval
      of Certain Matters. In addition to any other
      actions or approvals required under the Act or the Bye-Laws, each of SCA
      and the Shareholder Entity Nominee agree that until the occurrence of the
      Voting Restriction Termination Event, (i) the acquisition, sale, lease
      or transfer of all or substantially all of the assets of SCA, (ii) the
      discontinuance or redomestication of SCA out of Bermuda to another jurisdiction,
      (iii) mergers or amalgamations and (iv) the liquidation, dissolution or
      winding-up of SCA shall, in each case, require, as a condition to consummation
      thereof, the approval by the affirmative vote of at least sixty-six and
      two-thirds percent (66 2/3%) of the votes cast in accordance with the provisions
      of the Bye-Laws; provided that
      this Section 2(e) shall not apply to the approval of any of the Transactions
      (as such term is defined in the Master Restructuring Agreement). 

           SECTION
      3. Certain Additional Agreements.  

           (a)     No
      Voting Reduction of SCA Shares. SCA hereby
      acknowledges and agrees that for purposes of Section 44 of the Bye-Laws,
      (x) clause (ii) of paragraph (1) of Section 44 of the Bye-Laws applies
      to the transfer of the SCA Shares by XLI to the SCA Shareholder Entity
      and, in accordance with such clause, no reduction in votes contemplated
      by Section 44 of the Bye-Laws shall occur with respect to the SCA Shares
      or any other Common Shares acquired by the SCA Shareholder Entity (or any
      Affiliate thereof) for so long as the SCA Shareholder Entity (or any Affiliate
      thereof) continues to hold such shares, (y) the Master Restructuring Agreement
      shall be deemed to constitute for all purposes of Section 44 of the Bye-Laws
      the notice required to be delivered by XLI to the SCA Board pursuant clause
      (ii) of paragraph (1) of Section 44 of the Bye-Laws in connection with
      the transfer of the SCA Shares and no other condition as to the applicability
      of such clause is required to be satisfied and (z) the SCA Shareholder
      Entity (and its Affiliates) are entitled to the full benefit of clause
      (ii) of paragraph (1) of Section 44 of the Bye-Laws (including as to the
      applicability of such benefit to Section 45 of the Bye-Laws).

           (b)     Applicability
      of Paragraph (2) of Bye-Law 44. The SCA Shareholder
      Entity agrees that paragraph (2) of Section 44 of the Bye-Laws shall apply
      to the SCA Shareholder Entity on a mutatis
      mutandis basis as though the SCA Shareholder
      Entity were XL for purposes of such paragraph. 

           (c)     Information
      Rights. Until the occurrence of the Voting
      Restriction Termination Event, SCA shall furnish or make available to the
      SCA Shareholder Entity, promptly after such information becomes available
      to SCA: 

Exh. 1.01(i)-8 







            (i)     such
      annual budget, business plans and financial forecasts as are customarily
      provided to the SCA Board; 

             (ii)     following
      the end of each fiscal quarter and fiscal year of SCA, such consolidated
      financial statements and operations reports of SCA (including audit reports
      with respect to fiscal years) as are customarily provided to the SCA Board;
      and 

             (iii)     all
      information that is provided to members of the Finance and Risk Oversight
      Committee in their capacity as such. 



          (d)     Access.
    Until the occurrence of the Voting Restriction Termination Event, SCA will,
    and will cause its subsidiaries, officers, directors and employees to, afford
    that SCA Shareholder Entity and its Representatives the opportunity to discuss
    SCA’s and its subsidiaries’ affairs, finances and accounts with
    SCA’s and its subsidiaries’ officers from time to time as the
    SCA Shareholder Entity may reasonably request, in each event, only to the
    extent necessary or reasonably appropriate to accomplish the reasonable purpose
    of the proposed inspection.  

           (e)     Confidentiality.


            (i)     The
      SCA Shareholder Entity shall not, and shall not permit any of its Representatives
      to, disclose any information of a known confidential nature received from
      SCA or any of its subsidiaries in connection with the SCA Shareholder Entity’s
      investment in SCA (“Confidential Information”). The
      SCA Shareholder Entity may disclose Confidential Information to its Representatives
      so long as such Representatives are informed by the SCA Shareholder Entity
      of the confidential nature of such information and provided that in any
      event the SCA Shareholder Entity will be responsible for any breach of
      this Section 3(e) by its Representatives. For the avoidance of doubt, the
      SCA Shareholder Entity shall not disclose any Confidential Information
      to the Consenting Counterparties or any of their respective Representatives; provided that
      a Person that serves as an accountant, counsel, consultant, advisor, agent
      and/or other representative to both a Consenting Counterparty and the SCA
      Shareholder Entity shall not be deemed to be a Representative of such Consenting
      Counterparty if (A) such Person is not acting as a Representative of such
      Consenting Counterparty in connection with the transactions contemplated
      by the Master Restructuring Agreement and (B) internal information barriers
      customary for the applicable industry are established as may be reasonably
      necessary to prevent the unauthorized disclosure of Confidential Information
      between such Person and any Person serving as a Representative to such
      Consenting Counterparty with respect to the transactions contemplated by
      the Master Restructuring Agreement. 



Exh. 1.01(i)-9 







            (ii)     “Confidential
      Information” shall not include information (A) that is or becomes
      generally known on a non-confidential basis from a source other than the
      SCA Shareholder Entity or its Representatives, (B) that has become available
      to the SCA Shareholder Entity on a non-confidential basis from a source
      that is not, to the SCA Shareholder Entity’s knowledge, under an
      obligation of confidentiality or (C) that has been developed by or on behalf
      of the SCA Shareholder Entity or any of its Representatives independently
      of any disclosure from SCA or its subsidiaries. 

             (iii)     If
      the SCA Shareholder Entity or any of its Representatives is legally requested
      or required under an order or subpoena issued by a court, administrative
      agency or arbitration panel, or to comply with regulatory or ratings agency
      requests or requirements (through oral examination, interrogatories, requests
      for information or documents, civil investigation demand or other legal,
      administrative or arbitration processes) to disclose any Confidential Information,
      such Person being so requested or required to disclose such Confidential
      Information shall use reasonable efforts to give SCA such request or requirement
      prompt written notice of the request, requirement, subpoena or order to
      permit (to the extent reasonable) SCA (if it so elects at its expense)
      to seek an appropriate protective order preventing or limiting disclosure
      or waive compliance with the provisions of this Section 3(e). If, in the
      absence of such protective order or waiver, the SCA Shareholder Entity
      or any of its Representatives is compelled to disclose Confidential Information,
      such Person may disclose such Confidential Information without liability
      hereunder. 

             (iv)     The
      SCA Shareholder Entity agrees that money damages would not be a sufficient
      remedy for any breach of this Section 3(e) and that, in addition to all
      other remedies, SCA shall be entitled to specific performance and injunctive
      or other equitable relief as a remedy for any such breach. 

             (v)     The
      SCA Shareholder Entity acknowledges that any information provided to the
      SCA Shareholder Entity or any of its Representatives by SCA pursuant to
      Section 3(c) or Section 3(d) may constitute material non-public information
      and that its possession of such information may subject the SCA Shareholder
      Entity to the restrictions imposed by federal and state securities laws
      on Persons in possession of material non-public information. 

   (f)     Constituent
        Documents.

             (i)     SCA
      shall take or cause to be taken all lawful action necessary or appropriate
      to ensure that none of SCA’s Memorandum of Association, Bye-Laws,
      Corporate Governance Guidelines and any other 



Exh. 1.01(i)-10 







  similar documents of SCA and any of the
      corresponding constituent documents of SCA’s subsidiaries contain
      any provisions inconsistent with this Agreement or which would in any way
      nullify or impair the terms of this Agreement or the rights of the SCA
      Shareholder Entity hereunder. 

             (ii)     Until
      the occurrence of the Voting Restriction Termination Event, SCA shall not,
      without the prior written consent of the SCA Shareholder Entity, amend,
      alter or repeal its Memorandum of Association, Bye-Laws, Corporate Governance
      Guidelines and any other similar document of SCA in any manner adverse
      to the SCA Shareholder Entity. 

   SECTION 4.
        Miscellaneous.



          (a)     Interpretation.
    In this Agreement, the SCA Shareholder Entity shall be deemed to be the Trust,
    the Trustee (or any trustee or trustees of the Trust) acting in its capacity
    as such trustee, in each case as the context may require to be most protective
    of the interests of SCA. 

           (b)     Termination.
    This Agreement (except for the provisions of Sections 3(a) and 3(e)) shall
    terminate upon the occurrence of the Voting Restriction Termination Event
    at which time the SCA Shareholder Entity shall cause the SCA Shareholder
    Entity Nominees to resign from the SCA Board and all directorships they hold
    in subsidiaries of SCA. 

           (c)     Amendment
      and Waiver. This Agreement may not be amended
      except by an instrument in writing signed on behalf of each of the SCA
      and the SCA Shareholder Entity. Any party hereto may waive any right of
      such party hereunder by an instrument in writing signed by such party and
      delivered to the other party. The failure of any party to enforce any of
      the provisions of this Agreement shall in no way be construed as a waiver
      of such provisions and shall not affect the right of such party thereafter
      to enforce each and every provision of this Agreement in accordance with
      its terms. 

           (d)     Severability.
    If any provision of this Agreement shall be declared by any court of competent
    jurisdiction to be illegal, void or unenforceable, all other provisions of
    this Agreement shall not be affected and shall remain in full force and effect. 

           (e)     Entire
      Agreement. This Agreement embodies the complete
      agreement and understanding among the parties hereto with respect to the
      subject matter hereof and supersedes and preempts any prior understandings,
      agreements or representations by or among the parties, written or oral,
      that may have related to the subject matter hereof in any way. 

           (f)     Successors
      and Assigns. Neither this Agreement nor any
      right or obligation hereunder is assignable in whole or in part by any
      party without the prior written consent of the other party hereto; provided,
      that the SCA 

Exh. 1.01(i)-11 






 Shareholder Entity may assign any or all
    its rights under this Agreement to one or more of its Affiliates; provided, further,
    that no such assignment shall relieve the SCA Shareholder Entity of any of
    its obligations hereunder and all Common Shares held by any subsidiary or
    Affiliate of the SCA Shareholder Entity shall be deemed to be held by the
    SCA Shareholder Entity for all purposes under this Agreement. 

           (g)     Counterparts;
      Execution by Facsimile Signature. This Agreement
      may be executed in any number of counterparts, each of which shall be an
      original, but all of which together shall constitute one instrument. This
      Agreement may be executed by facsimile signature(s). 

           (h)     Public
      Announcement. No party to this Agreement
      shall make, or cause to be made, any press release or public announcement
      or otherwise communicate with any news media in respect of this Agreement
      or the transactions contemplated hereby without the prior consent of the
      other party and the parties shall cooperate as to the timing of any such
      press release or public announcement; provided, however,
      that this provision does not apply to any disclosures required by law. 

           (i)     Notices.
    All notices required or permitted hereunder shall be in writing and shall
    be deemed effectively given (i) upon personal delivery to the party to be
    notified, (ii) when sent by confirmed facsimile if sent during normal business
    hours of the recipient, if not, then on the next Business Day or (iii) one
    Business Day after deposit with a nationally recognized overnight courier,
    specifying next day delivery, with written verification of receipt. All communications
    shall be sent to the addresses set forth below or such other address or facsimile
    number as a party may from time to time specify by notice to the other parties
    hereto: 


  	If to SCA: 
	 
	           A.S.
          Cooper Building 
	           26
          Reid Street, 4th Floor 
	           Hamilton
          HM 11 
	           Bermuda 
	           Attention:
          General Counsel 
	           Fax:
          (441) 296-4351 
	 
	with a copy (which
          shall not constitute notice) to: 
	 
	           Weil,
          Gotshal & Manges LLP, 
	           767
          Fifth Avenue 
	           New
          York, New York 10153 
	             Attention:
          Gary Holtzer 
	             Fax:
          (212) 310-8007 






    Exh. 1.01(i)-12 







  	If to the SCA Shareholder Entity: 
	 
	           [__________________] 
	           [__________________] 
	           [__________________] 
	           [__________________] 
	           Attention:
          [__________] 
	           Fax:
          [______________] 
	 
	with a copy (which shall not constitute
          notice) to: 
	 
	           [__________________] 
	           [__________________] 
	           [__________________] 
	           Attention:
          [__________] 
	           Fax:
          [______________] 







  (j)     Governing
        Law; Consent to Jurisdiction.

             (i)      This
      Agreement shall be governed in all respects by the laws of the State of
      New York, without regard to its conflicts of laws principles. 

             (ii)     Each
      of the parties hereto agrees that any suit, action or proceeding seeking
      to enforce any provision of, or based on any matter arising out of or in
      connection with, this Agreement or the transactions contemplated hereby
      shall be brought in any Federal or state court located in the Borough of
      Manhattan in the City of New York, New York, and each of the parties hereby
      consents to the exclusive jurisdiction of such courts (and of the appropriate
      appellate courts therefrom) in any such suit, action or proceeding and
      irrevocably waives, to the fullest extent permitted by law, any objection
      which it may now or hereafter have to the laying of the venue of any such
      suit, action or proceeding in any such court or that any such suit, action
      or proceeding which is brought in any such court has been brought in an
      inconvenient forum. Process in any such suit, action or proceeding may
      be served on any party anywhere in the world, whether within or without
      the jurisdiction of any such court. Without limiting the foregoing, each
      party agrees that service of process on such party as provided in Section
      4(i) shall be deemed effective service of process on such party. 

             (iii)     Each
      of the parties hereto hereby irrevocably and unconditionally waives trial
      by jury in any legal Action or proceeding in relation to this Agreement
      and for any counterclaim therein. 



          (k)     Headings.
    The headings used in this Agreement have been inserted for convenience of
    reference only and do not define or limit the provisions hereof. 

Exh. 1.01(i)-13 






           (l)     No
      Third Party Beneficiaries. This Agreement
      is solely for the benefit of the parties hereto and shall not be deemed
      to confer upon third parties (including stockholders or members of any
      party hereto) any remedy, claim, reimbursement, claim of action or other
      right in excess of those existing without reference to this Agreement. 

           (m)     Specific
      Performance. Each party hereto acknowledges
      that the remedies at law of the other parties for a breach or threatened
      breach of this Agreement would be inadequate and, in recognition of this
      fact, any party to this Agreement, without posting any bond, and in addition
      to all other remedies that may be available, shall be entitled to obtain
      equitable relief in the form of specific performance, a temporary restraining
      order, a temporary or permanent injunction or any other equitable remedy
      that may then be available. 

 [signature page follows] 

 

 

Exh. 1.01(i)-14 






           IN
    WITNESS WHEREOF, the parties hereto have executed this Shareholders Agreement
    as of the date first written above. 


  	SECURITY CAPITAL ASSURANCE
          LTD.       
	 	 
	By: 	  

	 	Name: 
	 	Title: 
	 	 
	[SCA SHAREHOLDER ENTITY] 
	 	 
	By: 	  

	 	Name: 
	 	Title: 





  

  

   

  Exh. 1.01(i)-15







EXHIBIT 1.01(j)


FORM OF SCA REGISTRATION RIGHTS AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Exh. 1.01(j)-1












Form of SCA Registration Rights Agreement 

 REGISTRATION RIGHTS AGREEMENT 

           REGISTRATION
    RIGHTS AGREEMENT, dated as of August [__], 2008, by and between Security
    Capital Assurance Ltd., a Bermuda exempted company (the “Company”),
    and [ HSBC Private Bank, Bermuda Trust Company Limited] (the “Trustee”),
    a Bermuda exempted company as trustee of the special purpose trust (the “Trust”)
    established by that certain Declaration of Trust dated as of the date hereof
    and known as [name of trust] (the “SCA
    Shareholder Entity”).

           WHEREAS,
    pursuant to that certain Master Commutation, Release and Restructuring Agreement,
    dated as of July [__], 2008, by and among the Company, XL Capital Assurance
    Ltd., XL Financial Assurance Ltd., XL Capital Ltd. and the other parties
    thereto (the “Master
    Transaction Agreement”),
    among other things, the Company has agreed to provide the SCA Shareholder
    Entity certain rights as set forth herein. 

           NOW,
    THEREFORE, in consideration of the premises and of the mutual covenants and
    obligations hereinafter set forth (and for other good and valuable consideration
    the receipt and sufficiency of which are hereby acknowledged by the Company),
    the parties hereto hereby agree as follows: 

 ARTICLE I 

 DEFINITIONS 

           Section
    1.1       Certain
    Defined Terms. As used herein, the following
    terms shall have the following meanings: 

           “Action” means
    any legal, administrative, regulatory or other suit, action, claim, audit,
    assessment, arbitration or other proceeding, investigation or inquiry. 

           “Affiliate” shall
    mean, with respect to any Person, any other Person directly or indirectly
    controlling, controlled by or under common control with, such Person. For
    purposes of this definition, “control” (including its correlative
    meanings, “controlled by” and “under common control with”)
    when used with respect to any Person, means the possession, directly or indirectly,
    of the power to cause the direction of management and/or policies of such
    Person, whether through the ownership of voting securities, by contract or
    otherwise. 

           “Agreement” means
    this Registration Rights Agreement as it may be amended, supplemented, restated
    or modified from time to time. 

           “Beneficial
        Ownership” by
        a Person of any securities includes ownership by any Person who, directly
        or indirectly, through any contract, arrangement, understanding, relationship
        or otherwise, has or shares (i) voting power which includes the power
        to vote, or to direct the voting of, such security; and/or (ii) investment
        power which includes the power to dispose, or to direct the disposition,
        of such security; and shall otherwise be interpreted in accordance with
        the term “beneficial ownership” as defined in Rule 13d-3
        adopted by the SEC under the Exchange Act. The term “Beneficially
        Own” shall
        have a correlative meaning. 

Exh. 1.01(j)-2






           “Business
        Day” means
        any day, other than a Saturday, Sunday or a day on which banking institutions
        in New York, New York are authorized or obligated to close. 

           “Common
        Shares” means
        the Common Shares, $0.01 par value per share, of the Company. 

           “Exchange
        Act” means
        the Securities Exchange Act of 1934, as amended, and the rules and regulations
        promulgated by the SEC from time to time thereunder. 

           “Form
        S-3” means
        such form under the Securities Act as is in effect on the date hereof
        or any successor registration form under the Securities Act subsequently
        adopted by the SEC which permits inclusion or incorporation of substantial
        information by reference to other documents filed by the Company with
        the SEC. 

           “Governmental
        Entity” shall
        mean any court, administrative agency or commission or other governmental
        authority or instrumentality, whether federal, state, local or foreign
        and any applicable industry self-regulatory organization. 

           “Holders” means
    the SCA Shareholder Entity and any Transferee of Registrable Securities that
    agrees to be bound by the terms of this Agreement pursuant to Section 3.6
    hereof (and “Holder” means
    any of such Persons). 

           “Holders’ Representative” means
    the SCA Shareholder Entity or any or any other Holder designated by the SCA
    Shareholder Entity as the Holders’ Representative. 

           “Issuer
        Free Writing Prospectus” means
        an issuer free writing prospectus, as defined in Rule 433 under the Securities
        Act, relating to an offer of the Registrable Securities. 

           “Law” means
    any statute, law, code, ordinance, rule or regulation of any Governmental
    Entity. 

           “Other
        Securities” means
        Common Shares other than Registrable Securities. 

           “Person” means
    any individual, corporation, limited liability company, limited or general
    partnership, joint venture, association, joint stock company, trust, unincorporated
    organization, government or any agency or political subdivisions thereof
    or any group (within the meaning of Section 13(d)(3) of the Exchange Act)
    comprised of two or more of the foregoing. 

           “Prospectus” means
    the prospectus included in any Registration Statement (including a prospectus
    that discloses information previously omitted from a prospectus filed as
    part of an effective Registration Statement in reliance upon Rule 430A or
    Rule 430B promulgated under the Securities Act), as amended or supplemented
    by any prospectus supplement with respect to the terms of the offering of
    any portion of the Registrable Securities covered by such Registration Statement,
    any Issuer Free Writing Prospectus related thereto, and all other amendments
    and supplements to such prospectus, including post-effective amendments,
    and all material incorporated by reference or deemed to be incorporated by
    reference in such prospectus. 

           “Registrable
        Securities” means
        (a) all Common Shares held by the SCA Shareholder 

Exh. 1.01(j)-3






 Entity as of the date of this Agreement,
    and (b) any securities issued directly or indirectly with respect to such
    shares described in clause (a) because of stock splits, stock dividends,
    reclassifications, recapitalizations, mergers, consolidations, or similar
    events. As to any particular Registrable Securities, such Registrable Securities
    shall cease to be Registrable Securities when (i) a Registration Statement
    with respect to the sale of such securities shall have become effective under
    the Securities Act and such securities shall have been disposed of in accordance
    with such Registration Statement, or (ii) such securities shall have been
    disposed of pursuant to Rule 144, or (iii) following any transfer of such
    securities to a Transferee, such securities are eligible to be sold to the
    public without volume limitations pursuant to Rule 144, it being understood
    that in the event that such securities cease to be eligible to be sold to
    the public without volume limitations pursuant to Rule 144 as a result of
    any act or failure to act of the Company, then subject to clauses (i) and
    (ii) above such securities will again be Registrable Securities hereunder
    until such time as such securities are eligible to be sold to the public
    without volume limitations pursuant to Rule 144. 

           “Registration
        Statement” means
        any registration statement of the Company under the Securities Act which
        permits the public offering of any of the Registrable Securities pursuant
        to the provisions of this Agreement, including the Prospectus, amendments
        and supplements to such registration statement, including post-effective
        amendments, all exhibits and all material incorporated by reference or
        deemed to be incorporated by reference in such registration statement. 

           “Rule
        144” means
        Rule 144 under the Securities Act (or any successor provision). 

           “SEC” means
    the United States Securities and Exchange Commission. 

           “Securities
        Act” means
        the Securities Act of 1933, as amended, and the rules and regulations
        promulgated by the SEC from time to time thereunder. 

           “Selling
        Holder” means
        each Holder of Registrable Securities included in a registration pursuant
        to Article II. 

           “Shelf
        Registration Statement” means
        a Registration Statement of the Company filed with the SEC on Form S-3
        for an offering to be made on a continuous or delayed basis pursuant
        to Rule 415 under the Securities Act covering Registrable Securities.
        To the extent the Company is a well-known seasoned issuer (as defined
        in Rule 405 under the Securities Act), a
  “Shelf Registration Statement” shall be deemed to refer to an automatic
  shelf registration statement (as defined in Rule 405 under the Securities Act)
  on Form S-3. 

           A “Subsidiary” of
    any person means another person, an amount of the voting securities, other
    voting ownership or voting partnership interests of which is sufficient to
    elect at least a majority of its board of directors or other governing body
    (or, if there are no such voting interests, 50% or more of the equity interests
    of which) is owned directly or indirectly by such first person. 

           “Transferee” means
    any of (i) the transferee of all or any portion of the Registrable Securities
    held by the SCA Shareholder Entity or (ii) the subsequent transferee of all
    or any portion of the Registrable Securities held by any such transferee; provided,
    that no Transferee shall be entitled to any benefits of a Transferee hereunder
    unless such Transferee executes and 

Exh. 1.01(j)-4






 delivers to the Company an instrument substantially
    in the form provided as Exhibit A attached
    hereto. 

           Section
    1.2       Terms
    Generally. The definitions in Section 1.1 shall
    apply equally to both the singular and plural forms of the terms defined.
    Whenever the context may require, any pronoun shall include the corresponding
    masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall
    be deemed to be followed by the phrase “without limitation”,
    unless the context expressly provides otherwise. All references herein to
    Articles, Sections, paragraphs, subparagraphs, clauses or Exhibits shall
    be deemed references to Articles, Sections, paragraphs, subparagraphs or
    clauses of, or Exhibits to, this Agreement, unless the context requires otherwise.
    Unless otherwise expressly defined, terms defined in this Agreement have
    the same meanings when used in any Exhibit hereto. Unless otherwise specified,
    the words “this Agreement”, “herein”, “hereof”, “hereto” and “hereunder” and
    other words of similar import refer to this Agreement as a whole (including
    the Exhibits) and not to any particular provision of this Agreement. The
    term “or” is not exclusive. The word “extent” in
    the phrase “to the extent” shall mean the degree to which a subject
    or other thing extends, and such phrase shall not mean simply “if”.
    Unless expressly stated otherwise, any Law defined or referred to herein
    means such Law as from time to time amended, modified or supplemented, including
    by succession of comparable successor Laws and references to all attachments
    thereto and instruments incorporated therein. References to a Person are
    also to its permitted successors and assigns. The headings contained in this
    Agreement are for reference purposes only and shall not affect in any way
    the meaning or interpretation of this Agreement. 

 ARTICLE II 

 REGISTRATION RIGHTS 

           Section
    2.1       Demand
    Registrations. (a) Subject to Section 2.1(h),
    at any time and from time to time, the Holders’ Representative shall
    have the right by delivering a written notice to the Company (a “Demand
    Notice”) to require the Company to,
    pursuant to the terms of this Agreement, register under and in accordance
    with the provisions of the Securities Act the number of Registrable Securities
    Beneficially Owned by Holders and requested by such Demand Notice to be so
    registered (a “Demand
    Registration”); provided, however,
    that a Demand Notice may only be made if the amount of Registrable Securities
    requested to be registered is either (i) at least 20% of the aggregate number
    of Registrable Securities then held by all Holders or (ii) reasonably expected
    to generate aggregate gross proceeds on sale (prior to deducting underwriting
    discounts and commissions and offering expenses) of at least $10 million.
    A Demand Notice shall also specify the expected method or methods of disposition
    of the applicable Registrable Securities. Following receipt of a Demand Notice,
    the Company shall use its reasonable best efforts to file, as promptly as
    reasonably practicable, but not later than, 60 days with respect to any underwritten
    offering, or 30 days with respect to any other offering, after receipt by
    the Company of such Demand Notice (subject to paragraph (e) of this Section
    2.1), a Registration Statement relating to the offer and sale of the Registrable
    Securities requested to be included therein by the Holders thereof in accordance
    with the methods of distribution elected by such Holders (a “Demand
    Registration Statement”)
    and shall use its reasonable best efforts to cause such Registration Statement
    to be declared effective under the Securities Act as promptly as practicable
    after the filing thereof. 

Exh. 1.01(j)-5






                (b)       No
    securities shall be included under any Demand Registration Statement related
    to an underwritten offering without the written consent of the Holders’ Representative,
    except Registrable Securities requested to be included therein pursuant to
    Section 2.1(a) . Subject to the preceding sentence, if any of the Registrable
    Securities to be registered pursuant to a Demand Registration are to be sold
    in a firm commitment underwritten offering, and the managing underwriter(s)
    of such underwritten offering advise the Holders in writing that it is their
    good faith opinion that the total number or dollar amount of Registrable
    Securities proposed to be sold in such offering, together with any Other
    Securities proposed to be included by holders thereof which are entitled
    to include securities in such Registration Statement, exceeds the total number
    or dollar amount of such securities that can be sold without having an adverse
    effect on the price, timing or distribution of the Registrable Securities
    to be so included together with all such Other Securities, then there shall
    be included in such firm commitment underwritten offering the number or dollar
    amount of Registrable Securities and such Other Securities that in the opinion
    of such managing underwriter(s) can be sold without so adversely affecting
    such offering, and such number of Registrable Securities and Other Securities
    shall be allocated for inclusion as follows: 


                  (i)       first,
      the Registrable Securities for which inclusion in such demand offering
      was requested by the Holders, pro rata (if
      applicable), based on the number of Registrable Securities Beneficially
      Owned by each such Holder; and 

                  (ii)       second,
      among any holders of Other Securities, pro
      rata, based on the number of Other Securities
      Beneficially Owned by each such holder. 



                (c)       The
    Holders collectively shall be entitled to request no more than three Demand
    Registrations pursuant to this Section 2.1; provided, however,
    that (i) in no event shall the Company be required to effect more than one
    Demand Registration in any three-month period and (ii) subject to Section
    2.1(h), in case the Company shall receive from the Holders’ Representative
    a Demand Notice requesting that the Company effect a registration on Form
    S-3 (provided that the Company is eligible to effect such registration on
    Form S-3 at such time), the Company shall be obligated to effect any such
    Demand Registration without regard to the number of Demand Registrations
    made. 

                (d)       In
    the event of a Demand Registration, the Company shall use its reasonable
    best efforts to maintain the continuous effectiveness of the applicable Registration
    Statement for a period of at least 180 days after the effective date thereof
    or such shorter period in which all Registrable Securities included in such
    Registration Statement have actually been sold. For the avoidance of doubt,
    the foregoing sentence is not intended to limit the obligation of the Company
    to maintain the continuous effectiveness of the Short-Form Registration contemplated
    by Section 2.2 as required by Section 2.2. 

                (e)       The
    Company shall be entitled to postpone (but not more than once in any six-month
    period), for a reasonable period of time, together with any postponement
    under Section 2.2(c), not in excess of 60 days (and not for periods exceeding,
    in the aggregate, 90 days during any twelve-month period), the filing or
    initial effectiveness of, or suspend the use of, a Demand Registration Statement
    if the Company delivers to the Holders’ Representative a certificate
    signed by both the Chief Executive Officer and Chief Financial Officer of
    the Company certifying that, in their good faith judgment, such registration,
    offering or use would reasonably be expected to 

Exh. 1.01(j)-6






 materially adversely affect or materially
    interfere with any bona fide and imminent material financing of the Company
    or any imminent material transaction under consideration by the Company or
    would require the disclosure of information that has not been, and is not
    otherwise required to be, disclosed to the public, the premature disclosure
    of which would materially adversely affect the Company. Such certificate
    shall contain, if requested by the Holders’
  Representative (and subject to their entering into a customary confidentiality
  obligation as to such information), a reasonably detailed statement of the
  reasons for such postponement or suspension and an approximation of the anticipated
  delay. If the Company so postpones the filing of a Registration Statement,
  the Holders’ Representative will have the right to withdraw the request
  for registration by giving written notice to the Company within ten days of
  the anticipated termination date of the postponement period, as provided in
  the notice delivered to the Holders’ Representative and such withdrawn
  registration will not count as a Demand Registration. 

                (f)       The
    Holders’ Representative shall have the right to notify the Company
    that it has determined that the Registration Statement relating to a Demand
    Registration be abandoned or withdrawn, in which event the Company shall
    promptly abandon or withdraw such Registration Statement. 

                (g)       No
    request for registration will count for the purposes of the limitations in
    Section 2.1(c) if: (A) the Holders’ Representative determines in good
    faith to withdraw the proposed registration prior to the effectiveness of
    the Registration Statement relating to such request due to marketing conditions
    or regulatory reasons relating to the Company, (B) the Registration Statement
    relating to such request is not declared effective within 60 days of the
    date such Registration Statement is first filed with the SEC (other than
    solely by reason of the applicable Holders having refused to proceed), (C)
    the Registration Statement is not maintained effective for the period required
    pursuant to this Section 2.1(d), (D) prior to the sale of at least 90% of
    the Registrable Securities included in the applicable registration relating
    to such request, such registration is adversely affected by any stop order,
    injunction or other order or requirement of the SEC or other Governmental
    Entity or court, (E) more than 10% of the Registrable Securities requested
    by the Holders to be included in the registration are not so included pursuant
    to Section 2.1(b), or (F) the conditions to closing specified in any underwriting
    agreement or purchase agreement entered into in connection with the registration
    relating to such request are not satisfied (other than as a result of a material
    default or breach thereunder by the applicable Holders). Notwithstanding
    anything to the contrary, the Company will pay all expenses (in accordance
    with Section 2.9) in connection with any request for registration pursuant
    to this Agreement regardless of whether or not such request counts toward
    the limitation set forth above. 

                (h)       Notwithstanding
    anything else to the contrary in this Section 2.1, if, prior to any request
    for registration pursuant to this Section 2.1, (i) the Company shall have
    filed a Shelf Registration Statement covering all of the Registrable Securities
    in accordance with Section 2.2, (ii) the plan of distribution set forth in
    such Shelf Registration Statement includes underwritten offerings and (iii)
    the Shelf Registration Statement is effective when the Holders’ Representative
    would otherwise make a request for registration under this Section 2.1, the
    Company shall not be required to separately register any Registrable Securities
    (including, for the avoidance of doubt, any request that the Company effect
    a registration on Form S-3 pursuant to clause (ii) of Section 2.1(c)) in
    response to such request, and such request shall be deemed to be a request
    that the Company cooperate in effecting a Takedown of the Registrable Securities
    pursuant to such Shelf 

Exh. 1.01(j)-7






 Registration Statement. Subject to Section
    2.2(e), the Company may also register Other Securities on any such Shelf
    Registration Statement. 

           Section
    2.2       Shelf
    Registration. (a) As promptly as practicable
    (but no later than 60 days) after the Company becomes eligible to effect
    a registration on Form S-3 (and provided that the Company is eligible to
    effect such registration at such time), the Company shall file with the SEC
    a Shelf Registration Statement providing for the registration and sale of
    all of the Registrable Securities by the Holders and shall use its reasonable
    best efforts to cause such Shelf Registration Statement to be declared effective
    under the Securities Act as soon as reasonably practicable thereafter (provided
    that the Company is eligible to effect such registration at such time). 

                (b)       Subject
    to the Company being eligible to do so under the Securities Act, the Company
    shall use its reasonable best efforts to keep such Shelf Registration Statement
    continuously effective under the Securities Act in order to permit the Prospectus
    forming a part thereof to be usable by Holders until the earlier of (i) all
    Common Shares held by all Holders are no longer Registrable Securities and
    (ii) the date
    as of which all Registrable Securities have been sold pursuant to the Shelf
    Registration Statement or another Registration Statement has been filed under
    the Securities Act (but in no event prior to the applicable period referred
    to in Section 4(3) of the Securities Act and Rule 174 thereunder) (such period
    of effectiveness, the “Shelf Period”).
    Subject to Section 2.2(c), the Company shall not be deemed to have used its
    reasonable best efforts to keep the Shelf Registration Statement effective
    during the Shelf Period if the Company voluntarily takes any action or omits
    to take any action that would result in Holders of Registrable Securities
    covered thereby not being able to offer and sell any Registrable Securities
    pursuant to such Shelf Registration Statement during the Shelf Period, unless
    such action or omission is required by applicable Law.

                (c)       The
    Company shall be entitled to postpone (but not more than once in any six-month
    period), for a reasonable period of time, together with any postponement
    under Section 2.1(e), not in excess of 60 days (and not for periods exceeding,
    in the aggregate, 90 days during any twelve-month period), the filing or
    initial effectiveness of, or suspend the use of, a Shelf Registration Statement
    if the Company delivers to the Holders’ Representative a certificate
    signed by both the Chief Executive Officer and Chief Financial Officer of
    the Company certifying that, in their good faith judgment, such registration,
    offering or use would reasonably be expected to materially adversely affect
    or materially interfere with any bona fide material financing of the Company
    or any material transaction under consideration by the Company or would require
    the disclosure of information that has not been, and is not otherwise required
    to be, disclosed to the public, the premature disclosure of which would materially
    adversely affect the Company. Such certificate shall contain, if requested
    by the Holders’ Representative (and subject to their entering into
    a customary confidentiality obligation as to such information), a reasonably
    detailed statement of the reasons for such postponement or suspension and
    an approximation of the anticipated delay. 

                (d)       Upon
    a written request from any Holder (an “Initiating
    Holder”) to effect an offering under
    the Shelf Registration Statement (a “Takedown”),
    provided that the Company is eligible to utilize such Registration Statement
    at such time, the Company will, as soon as practicable, (x) deliver a written
    notice relating to the proposed Takedown to all other Holders and (y) promptly
    (and in any event not later than twenty days after receiving such Initiating
    Holder’s request) supplement the Prospectus included in the Shelf Registration
    Statement as would permit 

Exh. 1.01(j)-8






 or facilitate the sale and distribution of
    all or such portion of such Initiating Holder’s Registrable Securities
    as are specified in such request together with the Registrable Securities
    requested to be included in such Takedown by any other Holders who notify
    the Company in writing within ten business days after receipt of such written
    notice from the Company. If the Company and/or the holders of any Other Securities
    request inclusion of Other Securities in a Takedown, such Other Securities
    shall be included in the Takedown if, and only if, inclusion of such Other
    Securities would not be reasonably likely to delay in any material respect
    the timely effectuation of the Takedown or the sale of Registrable Securities
    pursuant to the Takedown. In the case of a request for or effectuation of
    a Takedown, all references in this Agreement to the effective date of a Registration
    Statement shall be deemed to refer to the date of pricing of such Takedown
    and all references to registration shall be deemed to refer to the Takedown. 

                (e)       If
    any of the Registrable Securities to be sold pursuant to a Shelf Registration
    Statement are to be sold in a firm commitment underwritten offering, and
    the managing underwriter(s) of such underwritten offering advise the Holders
    in writing that it is their good faith opinion that the total number or dollar
    amount of Registrable Securities proposed to be sold in such offering, together
    with any Other Securities proposed to be included by holders thereof which
    are entitled to include securities in such Registration Statement, exceeds
    the total number or dollar amount of such securities that can be sold without
    having an adverse effect on the price, timing or distribution of the Registrable
    Securities to be so included together with all such Other Securities, then
    there shall be included in such firm commitment underwritten offering the
    number or dollar amount of Registrable Securities and such Other Securities
    that in the opinion of such managing underwriter(s) can be sold without so
    adversely affecting such offering, and such number of Registrable Securities
    and Other Securities shall be allocated for inclusion as follows: 


                  (i)       first,
      the Registrable Securities for which inclusion in such underwritten offering
      requested by the Holders, pro rata (if
      applicable), based on the number of Registrable Securities Beneficially
      Owned by each such Holder; and 

                  (ii)       second,
      among any holders of Other Securities, pro
      rata, based on the number of Other Securities
      Beneficially Owned by each such holder of Other Securities. 



           Section
    2.3       Piggyback
    Registrations. (a) If, other than pursuant
    to Section 2.1 or Section 2.2, the Company proposes or is required to file
    a registration statement under the Securities Act with respect to an offering
    of Common Shares, whether or not for sale for its own account (other than
    a registration statement (i) on Form S-4, Form S-8 or any successor forms
    thereto, (ii) filed solely in connection with any employee benefit or dividend
    reinvestment plan, or (iii) so long as a Shelf Registration Statement is
    effective and available pursuant to Section 2.2 hereof, filed solely in connection
    with the issuance or resale of Common Shares issuable upon conversion, exercise
    or exchange of any securities of the Company or any of its Subsidiaries,
    where such convertible, exercisable or exchangeable securities were issued
    in, or as part of, a financing transaction), in a manner that would permit
    registration of Registrable Securities for sale to the public under the Securities
    Act, then the Company shall give prompt written notice of such proposed filing
    at least 30 days before the anticipated filing date (the “Piggyback
    Notice”)
    to the Holders. The Piggyback Notice shall offer the Holders the opportunity
    to include in such 

Exh. 1.01(j)-9






 registration statement the number of Registrable
    Securities as they may request (a “Piggyback
    Registration”).
    Subject to Section 2.3(b) hereof, the Company shall include in each such
    Piggyback Registration all Registrable Securities with respect to which the
    Company has received written requests for inclusion therein within 15 days
    after notice has been given to the Holders, to permit the distribution of
    such Registrable Securities in accordance with the methods of distribution
    elected by such Holders. The Holders shall be permitted to withdraw all or
    part of the Registrable Securities from a Piggyback Registration at any time
    at least two Business Days prior to the effective date of the Registration
    Statement relating to such Piggyback Registration. The Company shall use
    its reasonable best efforts to maintain the effectiveness of the Registration
    Statement for a Piggyback Registration for a period of at least 180 days
    after the effective date thereof or such shorter period in which all Registrable
    Securities included in such Registration Statement have actually been sold.
    No Piggyback Registration shall count towards registrations required under
    Section 2.1. 

                (b)       If
    any of the securities to be registered pursuant to the registration giving
    rise to the Holders’ rights under this Section 2.3 are to be sold in
    an underwritten offering, the Holders shall be permitted to include all Registrable
    Securities requested to be included in such registration in such offering
    on the same terms and conditions as any Other Securities included therein; provided, however,
    that if such offering involves a firm commitment underwritten offering and
    the managing underwriter(s) of such underwritten offering advise the Company
    in writing that it is their good faith opinion that the total amount of Registrable
    Securities requested to be so included, together with all Other Securities
    that the Company and any other Persons having rights to participate in such
    registration intend to include in such offering, exceeds the total number
    or dollar amount of such securities that can be sold without having an adverse
    effect on the price, timing or distribution of the Registrable Securities
    to be so included together with all Other Securities, then there shall be
    included in such firm commitment underwritten offering the number or dollar
    amount of Registrable Securities and such Other Securities that in the opinion
    of such managing underwriter(s) can be sold without so adversely affecting
    such offering, and such number of Registrable Securities and Other Securities
    shall be allocated for inclusion as follows: 


                  (i)       first,
      all Other Securities being sold by the Company for its own account or by
      any Person (other than a Holder) exercising a contractual right to demand
      registration; 

                  (ii)       second,
      all Registrable Securities requested to be included by the Holders, pro
      rata (if applicable), based on the number
      of Registrable Securities Beneficially Owned by each such Holder; and 

                  (iii)       third,
      among any other holders of Other Securities requesting such registration, pro
      rata, based on the number of Other Securities
      Beneficially Owned by each such holder of Other Securities. 



           Section
    2.4       Registration
    Procedures. If and whenever the Company is
    required to use its reasonable best efforts to effect the registration of
    any Registrable Securities under the Securities Act as provided in Article
    II, the Company shall effect such registration to permit the sale of such
    Registrable Securities in accordance with the intended method or methods
    of 

Exh. 1.01(j)-10






 disposition thereof, and pursuant thereto
    the Company shall cooperate in the sale of the securities and shall, as expeditiously
    as possible (to the extent applicable, in the case of a Takedown): 

                (a)       Prepare
    and file with the SEC a Registration Statement or Registration Statements
    on such form which shall be available for the sale of the Registrable Securities
    by the Holders or the Company in accordance with the intended method or methods
    of distribution thereof, and use its reasonable best efforts to cause such
    Registration Statement to become effective and to remain effective as provided
    herein; provided, however,
    that before filing a Registration Statement or Prospectus or any amendments
    or supplements thereto (excluding documents that would be incorporated or
    deemed to be incorporated therein by reference), the Company shall furnish
    or otherwise make available to the Selling Holders, their counsel and the
    managing underwriter(s), if any, copies of all such documents proposed to
    be filed, which documents will be subject to the reasonable review and comment
    of such counsel, and such other documents reasonably requested by such counsel,
    including any comment letter from the SEC, and, if requested by such counsel,
    provide such counsel reasonable opportunity to participate in the preparation
    of such Registration Statement and each Prospectus included therein and such
    other opportunities to conduct a reasonable investigation within the meaning
    of the Securities Act, including reasonable access to the Company’s
    books and records, officers, accountants and other advisors. The Company
    shall not file any such Registration Statement or Prospectus or any amendments
    or supplements thereto (excluding such documents that, upon filing, would
    be incorporated or deemed to be incorporated by reference therein) with respect
    to any registration pursuant to Section 2.1, 2.2 or 2.3 to which any Holder
    (if such Registration Statement includes Registrable Securities of such Holder),
    its counsel, or the managing underwriter(s), if any, shall reasonably object,
    in writing, on a timely basis, unless, in the opinion of the Company, such
    filing is necessary to comply with applicable Law. 

                (b)       Prepare
    and file with the SEC such amendments and post-effective amendments to each
    Registration Statement as may be necessary to keep such Registration Statement
    continuously effective during the period provided herein and comply in all
    material respects with the provisions of the Securities Act with respect
    to the disposition of all securities covered by such Registration Statement,
    and cause the related Prospectus to be supplemented by any Prospectus supplement
    or Issuer Free Writing Prospectus as may be necessary to comply with the
    provisions of the Securities Act with respect to the disposition of the securities
    covered by such Registration Statement, and as so supplemented to be filed
    pursuant to Rule 424 (or any similar provisions then in force) under the
    Securities Act. 

                (c)       Notify
    each Selling Holder and the managing underwriter(s), if any, promptly, and
    (if requested by any such Person) confirm such notice in writing, (i) when
    a Prospectus or any Prospectus supplement, Issuer Free Writing Prospectus
    or post-effective amendment has been filed, and, with respect to a Registration
    Statement or any post-effective amendment, when the same has become effective,
    (ii) of any request by the SEC or any other Governmental Entity for amendments
    or supplements to a Registration Statement or related Prospectus or Issuer
    Free Writing Prospectus or for additional information, (iii) of the issuance
    by the SEC of any stop order suspending the effectiveness of a Registration
    Statement or the initiation of any proceedings for that purpose, (iv) if
    at any time the representations and warranties of the Company contained in
    any agreement (including any underwriting agreement contemplated by Section
    2.4(o) below) cease to be true and correct, (v) of the receipt by the Company
    of any 

Exh. 1.01(j)-11






 notification with respect to the suspension
    of the qualification or exemption from qualification of any of the Registrable
    Securities for sale in any jurisdiction, or the initiation or threatening
    of any proceeding for such purpose, and (vi) of the happening of any event
    that makes any statement made in such Registration Statement or related Prospectus
    or any document incorporated or deemed to be incorporated therein by reference
    or any Issuer Free Writing Prospectus related thereto untrue in any material
    respect or that requires the making of any changes in such Registration Statement,
    Prospectus, documents or Issuer Free Writing Prospectus so that, in the case
    of the Registration Statement, it will not contain any untrue statement of
    a material fact or omit to state any material fact required to be stated
    therein or necessary to make the statements therein, not misleading, and
    that in the case of any Prospectus or Issuer Free Writing Prospectus, it
    will not contain any untrue statement of a material fact or omit to state
    any material fact necessary in order to make the statements therein, in light
    of the circumstances under which they were made, not misleading. 

                (d)       Use
    its reasonable best efforts to avoid the issuance of any order suspending
    the effectiveness of a Registration Statement or any suspension of the qualification
    (or exemption from qualification) of any of the Registrable Securities for
    sale in any jurisdiction, or, if issued, to obtain the withdrawal or lifting
    of any such order or suspension at the reasonably earliest practicable date. 

                (e)       If
    requested by the managing underwriter(s), if any, or the Holders of a majority
    of the Registrable Securities being sold in connection with an underwritten
    offering, promptly include in a Prospectus supplement, post-effective amendment
    or Issuer Free Writing Prospectus such information as the managing underwriter(s),
    if any, or such Holders may reasonably request in order to permit the intended
    method of distribution of such securities and make all required filings of
    such Prospectus supplement, such post-effective amendment or Issuer Free
    Writing Prospectus as soon as practicable after the Company has received
    such request. 

                (f)       Furnish
    or make available to each Selling Holder, and each managing underwriter,
    if any, without charge, such number of conformed copies of the Registration
    Statement and each post-effective amendment thereto, including financial
    statements (but excluding schedules, all documents incorporated or deemed
    to be incorporated therein by reference, and all exhibits, unless requested
    in writing by such Holder, counsel or managing underwriter(s)), and such
    other documents, as such Holders or such managing underwriter(s) may reasonably
    request, and upon request a copy of any and all transmittal letters or other
    correspondence to or received from, the SEC or any other Governmental Entity
    relating to such offering.

                (g)       Deliver
    to each Selling Holder, and the managing underwriter(s), if any, without
    charge, as many copies of the Prospectus or Prospectuses (including each
    form of Prospectus and any Issuer Free Writing Prospectus related to any
    such Prospectuses) and each amendment or supplement thereto as such Persons
    may reasonably request in connection with the distribution of the Registrable
    Securities; and the Company, subject to Section 2.5(b), hereby consents to
    the use of such Prospectus and each amendment or supplement thereto by each
    of the Selling Holders and the managing underwriter(s), if any, in connection
    with the offering and sale of the Registrable Securities covered by such
    Prospectus and any such amendment or supplement thereto. 

Exh. 1.01(j)-12






                (h)       Prior
    to any public offering of Registrable Securities, use its reasonable best
    efforts to register or qualify or cooperate with the Selling Holders, the
    managing underwriter(s), if any, and their respective counsel in connection
    with the registration or qualification (or exemption from such registration
    or qualification) of such Registrable Securities for offer and sale under
    the securities or “Blue Sky” laws of such jurisdictions within
    the United States as any Selling Holder or managing underwriter(s) reasonably
    requests in writing and to keep each such registration or qualification (or
    exemption therefrom) effective during the period such Registration Statement
    is required to be kept effective and to take any other action that may be
    necessary or advisable to enable such Selling Holders to consummate the disposition
    of such Registrable Securities in such jurisdiction; provided, however,
    that the Company will not be required to (i) qualify generally to do business
    in any jurisdiction where it is not then so qualified, (ii) subject itself
    to material taxation in any such jurisdiction where it is not then so subject,
    or (iii) take any action that would subject it to general service of process
    in any such jurisdiction where it is not then so subject. 

                (i)       Cooperate
    with the Selling Holders and the managing underwriter(s), if any, to facilitate
    the timely preparation and delivery of certificates (not bearing any legends)
    representing Registrable Securities to be sold after receiving written representations
    from each Selling Holder that the Registrable Securities represented by the
    certificates so delivered by such Selling Holder will be transferred in accordance
    with the Registration Statement, and enable such Registrable Securities to
    be in such denominations and registered in such names as the managing underwriter(s),
    if any, or the Selling Holders may request at least two Business Days prior
    to any sale of Registrable Securities. 

                (j)       Use
    its reasonable best efforts to cause the Registrable Securities covered by
    the Registration Statement to be registered with or approved by such other
    Governmental Entities within the United States, except as may be required
    solely as a consequence of the nature of such Selling Holder’s business,
    in which case the Company will cooperate in all reasonable respects with
    the filing of such Registration Statement and the granting of such approvals,
    as may be necessary to enable the seller or sellers thereof or the managing
    underwriter(s), if any, to consummate the disposition of such Registrable
    Securities. 

                (k)       Upon
    the occurrence of any event contemplated by Section 2.4(c)(ii), (c)(iii),
    (c)(iv), (c)(v) or (c)(vi) above, prepare a supplement or post-effective
    amendment to the Registration Statement or a supplement to the related Prospectus
    or any document incorporated or deemed to be incorporated therein by reference
    or an Issuer Free Writing Prospectus related thereto, or file any other required
    document so that, as thereafter delivered to the Selling Holders, such Prospectus
    will not contain an untrue statement of a material fact or omit to state
    a material fact required to be stated therein or necessary to make the statements
    therein, in light of the circumstances under which they were made, not misleading. 

                (l)       Prior
    to the effective date of the Registration Statement relating to the Registrable
    Securities, provide a CUSIP number for the Registrable Securities. 

                (m)       Provide
    and cause to be maintained a transfer agent and registrar for all Registrable
    Securities covered by such Registration Statement from and after a date not
    later than the effective date of such Registration Statement. 

Exh. 1.01(j)-13






                (n)       To
    the extent that the Common Shares are then listed on any national securities
    exchange, use reasonable best efforts to cause all Registrable Securities
    covered by such Registration Statement to be authorized to be listed on such
    national securities exchange, provided, however, that the Company shall have
    no obligation under this Section 2.3(n) if at the time of such registration
    the Company or Common Shares do not satisfy all criteria imposed by such
    national securities exchange to maintain such listing. 

                (o)       Enter
    into such agreements (including an underwriting agreement in form, scope
    and substance as is customary in underwritten offerings) and take all such
    other actions reasonably requested by the Holders of a majority of the Registrable
    Securities being sold in connection therewith or by the managing underwriter(s),
    if any, to expedite or facilitate the disposition of such Registrable Securities,
    and in connection therewith, whether or not an underwriting agreement is
    entered into and whether or not the registration is an underwritten registration,
    (i) make such representations and warranties to the Selling Holders and the
    managing underwriter(s), if any, with respect to the business of the Company
    and its Subsidiaries, and the Registration Statement, Prospectus and documents,
    if any, incorporated or deemed to be incorporated by reference therein, in
    each case, in form, substance and scope as are customarily made by issuers
    in underwritten offerings, and, if true, confirm the same if and when requested,
    (ii) use its reasonable best efforts to furnish to the Selling Holders of
    such Registrable Securities opinions of counsel to the Company and updates
    thereof (which counsel and opinions (in form, scope and substance) shall
    be reasonably satisfactory to the managing underwriter(s), if any, and counsels
    to the Selling Holders of the Registrable Securities), addressed to each
    Selling Holder of Registrable Securities and each of the managing underwriter(s),
    if any, covering the matters customarily covered in opinions requested in
    underwritten offerings and such other matters as may be reasonably requested
    by such counsel and managing underwriter(s), (iii) use its reasonable best
    efforts to obtain “comfort” letters and updates thereof from
    the independent certified public accountants of the Company (and, if necessary,
    any other independent certified public accountants of any Subsidiary of the
    Company or of any business acquired by the Company for which financial statements
    and financial data are, or are required to be, included in the Registration
    Statement) who have certified the financial statements included in such Registration
    Statement, addressed to each Selling Holder of Registrable Securities (unless
    such accountants shall be prohibited from so addressing such letters by applicable
    standards of the accounting profession or such action is otherwise inconsistent
    with the then current practice in the accounting profession) and each of
    the managing underwriter(s), if any, such letters to be in customary form
    and covering matters of the type customarily covered in “comfort” letters
    in connection with underwritten offerings, (iv) if an underwriting agreement
    is entered into, the same shall contain customary indemnification provisions
    and procedures, except as otherwise agreed by the Holders of a majority of
    the Registrable Securities being sold in connection therewith and the managing
    underwriter(s), if any, and (v) deliver such documents and certificates as
    may be reasonably requested by the Holders of a majority of the Registrable
    Securities being sold in connection therewith, their counsel and the managing
    underwriter(s), if any, to evidence the continued validity of the representations
    and warranties made pursuant to clause (i) above and to evidence compliance
    with any customary conditions contained in the underwriting agreement or
    other agreement entered into by the Company. The above shall be done at each
    closing under such underwriting or similar agreement, or as and to the extent
    required thereunder.

Exh. 1.01(j)-14






                (p)       Upon
    execution of a customary confidentiality agreement, make available for inspection
    by a representative of the Selling Holders, the managing underwriter(s),
    if any, and any attorneys or accountants retained by such Selling Holders
    or managing underwriter(s), at the offices where normally kept, during reasonable
    business hours, financial and other records, pertinent corporate documents
    and properties of the Company and its Subsidiaries, and cause the officers,
    directors and employees of the Company and its Subsidiaries to supply all
    information in each case reasonably requested by any such representative,
    managing underwriter(s), attorney or accountant in connection with such Registration
    Statement. 

                (q)       Cause
    its officers to use their reasonable best efforts to support the marketing
    of the Registrable Securities covered by the Registration Statement (including,
    without limitation, by participation in “road shows” and appearing
    before rating agencies) taking into account the Company’s business
    needs. 

                (r)       Otherwise
    use its reasonable best efforts to comply with all applicable rules and regulations
    of the SEC and any applicable national securities exchange, and make available
    to its security holders, as soon as reasonably practicable (but not more
    than 18 months) after the effective date of the registration statement, an
    earnings statement which shall satisfy the provisions of Section 11(a) of
    the Securities Act. 

           Section
    2.5       Certain
    Additional Agreements.

                (a)       The
    Company may require each Selling Holder to furnish to the Company in writing
    such information required in connection with such registration regarding
    such Selling Holder and the distribution of such Registrable Securities as
    the Company may, from time to time, reasonably request in writing and the
    Company may exclude from such registration the Registrable Securities of
    any Selling Holder who fails to furnish such information within a reasonable
    time after receiving such request. 

                (b)       Each
    Selling Holder agrees that upon receipt of any notice from the Company of
    the happening of any event of the kind described in Section 2.4(c)(iii) or
    (c)(vi) hereof, such Holder will forthwith discontinue disposition of such
    Registrable Securities covered by such Registration Statement or Prospectus
    until such Holder’s receipt of the copies of the supplemented or amended
    Prospectus contemplated by Section 2.4(k) hereof, or until it is advised
    in writing by the Company that the use of the applicable Prospectus may be
    resumed, and has received copies of any additional or supplemental filings
    that are incorporated or deemed to be incorporated by reference in such Prospectus;
    provided, however, that (i) in no event shall such discontinuance exceed
    the time period set forth in Section 2.1(e) hereof, and (ii) the Company
    shall extend the time periods under Section 2.1 and Section 2.3 with respect
    to the length of time that the effectiveness of a Registration Statement
    must be maintained by the amount of time the Holder is required to discontinue
    disposition of such securities. 

                (c)       The
    Company covenants and agrees that, so long as any Holder holds any Registrable
    Securities in respect of which any registration rights provided for in this
    Article II remain in effect, the Company will not, directly or indirectly,
    grant to any Person or agree to or otherwise become obligated in respect
    of rights of registration in the nature or substantially in the nature of
    those set forth in this Article II that would have priority over the Registrable
    Securities 

Exh. 1.01(j)-15






 with respect to the inclusion of such securities
    in any registration by the Company (other than rights granted to a new registration
    rights holder after the date hereof to exercise a contractual right to demand
    registration that have terms no more favorable than the demand registration
    rights granted to the Holders in this Agreement), without the prior written
    consent of the Holders’ Representative. The Company has not entered
    into and will not enter into any agreement that is inconsistent with the
    rights granted to the Holders in this Agreement or otherwise conflicts with
    the provisions hereof. The rights granted to the Holders hereunder do not
    in any way conflict with and are not inconsistent with the rights granted
    prior to the date hereof to the holders of any of the Company’s other
    issued and outstanding securities under any such agreements.

                (d)      E
    ach Holder covenants and agrees that it will comply with the prospectus delivery
    requirements of the Securities Act as applicable to it or an exemption therefrom
    in connection with sale of Registrable Securities pursuant to the Registration
    Statement. 

           Section
    2.6       Indemnification.

                (a)       Indemnification
      by the Company. The Company shall indemnify
      and hold harmless, to the fullest extent permitted by Law, each Selling
      Holder whose Registrable Securities are covered by a Registration Statement
      or Prospectus, the officers, directors, partners (limited and general),
      members, managers, shareholders, accountants, attorneys, agents and employees
      of each of them, each Person who controls (within the meaning of Section
      15 of the Securities Act or Section 20 of the Exchange Act) each such Selling
      Holder and the officers, directors, partners (limited and general), members,
      managers, shareholders, accountants, attorneys, agents and employees of
      each such controlling Person, each underwriter (including any Holder that
      is deemed to be an underwriter pursuant to any SEC comments or policies),
      if any, and each Person who controls (within the meaning of Section 15
      of the Securities Act or Section 20 of the Exchange Act) such underwriter
      (collectively, “Holder Indemnitees”), from and against any
      and all losses, claims, damages, liabilities, expenses (including, without
      limitation, costs of preparation and reasonable attorneys’ fees and
      any other reasonable fees or expenses incurred by such party in connection
      with any investigation or Action), judgments, fines, penalties, charges
      and amounts paid in settlement (collectively, “Losses”),
      as incurred, arising out of or based upon any untrue statement (or alleged
      untrue statement) of a material fact contained in any applicable Registration
      Statement (or in any preliminary or final Prospectus contained therein,
      any document incorporated by reference therein or Issuer Free Writing Prospectus
      related thereto) amendment of or supplement to any of the foregoing or
      other document incident to any such registration, qualification, or compliance,
      or based on any omission (or alleged omission) to state therein (in the
      case of a final or preliminary Prospectus, in light of the circumstances
      under which they were made) a material fact required to be stated therein
      or necessary to make the statements therein not misleading, or any violation
      by the Company of the Securities Act or of the Exchange Act in connection
      with any such registration, qualification, or compliance; provided, that
      the Company will not be liable to a Selling Holder or underwriter, as the
      case may be, in any such case to the extent that any such Loss arises out
      of or is based on any untrue statement or omission by such Selling Holder
      or underwriter, as the case may be, but only to the extent, that such untrue
      statement (or alleged untrue statement) or omission (or alleged omission)
      is made in such Registration Statement (or in any preliminary or final
      Prospectus contained therein, any document incorporated by reference therein
      or Issuer Free Writing Prospectus related thereto), amendment of or supplement
      to any of the foregoing or other document in reliance upon and in conformity
      with 

Exh. 1.01(j)-16






 written information furnished to the Company
    by such Selling Holder or underwriter specifically for inclusion in such
    document; and provided, further, that the Company will not be liable to any
    Person who participates as an underwriter in any underwritten offering or
    sale of Registrable Securities, or to any Person who is a Selling Holder
    in any non-underwritten offering or sale of Registrable Securities, or any
    other Person, if any, who controls such underwriter or Selling Holder within
    the meaning of the Securities Act, under the indemnity agreement in this
    Section 2.6 with respect to any preliminary Prospectus or the final Prospectus
    (including any amended or supplemented preliminary or final Prospectus),
    as the case may be, to the extent that any such loss, claim, damage or liability
    of such underwriter, Selling Holder or controlling Person results from the
    fact that such underwriter or Selling Holder sold Registrable Securities
    to a Person to whom there was not sent or given, at or prior to the written
    confirmation of such sale, a copy of the final Prospectus as then amended
    or supplemented, whichever is most recent, if the Company has previously
    furnished copies thereof to such underwriter or Selling Holder and such final
    Prospectus, as then amended or supplemented, has corrected any such misstatement
    or omission. Such indemnity shall remain in full force and effect regardless
    of any investigation made by or on behalf of any Holder Indemnitee or any
    other Holder and shall survive the transfer of such securities. The foregoing
    indemnity agreement is in addition to any liability that the Company may
    otherwise have to each Holder Indemnitee. 

                (b)     Indemnification
      by Selling Holders. In connection with any
      Registration Statement in which a Selling Holder is participating by registering
      Registrable Securities, such Selling Holder shall furnish to the Company
      in writing such information as the Company reasonably requests specifically
      for use in connection with any Registration Statement or Prospectus and
      agrees, severally and not jointly with any other Person, to indemnify and
      hold harmless, to the fullest extent permitted by Law, the Company, the
      officers and directors of the Company, and each Person who controls (within
      the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
      Act) the Company, and each underwriter, if any, and each Person who controls
      (within the meaning of Section 15 of the Securities Act or Section 20 of
      the Exchange Act) such underwriter (collectively, “Company
      Indemnitees”),
      from and against all Losses, as incurred, arising out of or based on any
      untrue statement (or alleged untrue statement) of a material fact contained
      in any such Registration Statement (or in any preliminary or final Prospectus
      contained therein, any document incorporated by reference therein or Issuer
      Free Writing Prospectus related thereto) or any amendment of or supplement
      to any of the foregoing or any other document incident to such registration,
      or any omission (or alleged omission) to state therein a material fact
      required to be stated therein or necessary to make the statements therein
      (in the case of a final or preliminary Prospectus, in light of the circumstances
      under which they were made) not misleading, in each case solely to the
      extent that such untrue statement (or alleged untrue statement) or omission
      (or alleged omission) is made in such Registration Statement (or in any
      preliminary or final Prospectus contained therein, any document incorporated
      by reference therein or Issuer Free Writing Prospectus related thereto),
      offering circular, or any amendment of or supplement to any of the foregoing
      or other document in reliance upon and in conformity with written information
      furnished to the Company by such Selling Holder expressly for inclusion
      in such document. Such indemnity shall remain in full force and effect
      regardless of any investigation made by or on behalf of the Company or
      any of its directors, officers or controlling Persons. The Company may
      require as a condition to its including Registrable Securities in any Registration
      Statement filed hereunder that the holder thereof acknowledge its agreement
      to be bound by the provisions of this Agreement (including Section 2.6)
      applicable to it. 

Exh. 1.01(j)-17






                (c)     Conduct
      of Indemnification Proceedings. If any Person
      shall be entitled to indemnity hereunder (an “indemnified
      party”),
      such indemnified party shall give prompt notice to the party from which
      such indemnity is sought (the “indemnifying
      party”)
      of any claim or of the commencement of any Action with respect to which
      such indemnified party seeks indemnification or contribution pursuant hereto;
      provided, however, that the delay or failure to so notify the indemnifying
      party shall not relieve the indemnifying party from any obligation or liability
      except to the extent that the indemnifying party has been actually prejudiced
      by such delay or failure. The indemnifying party shall have the right,
      exercisable by giving written notice to an indemnified party promptly after
      the receipt of written notice from such indemnified party of such claim
      or Action, to assume, at the indemnifying party’s expense, the defense
      of any such Action, with counsel reasonably satisfactory to such indemnified
      party; provided, however, that an indemnified party shall have the right
      to employ separate counsel in any such Action and to participate in the
      defense thereof, but the fees and expenses of such counsel shall be at
      the expense of such indemnified party unless: (i) the indemnifying party
      agrees to pay such fees and expenses; (ii) the indemnifying party fails
      reasonably promptly to assume, or in the event of a conflict of interest,
      as determined after receiving written advice from outside counsel, cannot
      assume, the defense of such Action or fails to employ counsel reasonably
      satisfactory to such indemnified party, in which case the indemnified party
      shall also have the right to employ counsel and to assume the defense of
      such Action; or (iii) in the indemnified party’s reasonable judgment,
      after receiving written advice from outside counsel, a conflict of interest
      between such indemnified and indemnifying parties may exist in respect
      of such Action; provided, further, however, that the indemnifying party
      shall not, in connection with any one such Action or separate but substantially
      similar or related Actions in the same jurisdiction, arising out of the
      same general allegations or circumstances, be liable for the fees and expenses
      of more than one firm of attorneys (together with appropriate local counsel)
      at any time for all of the indemnified parties, or for fees and expenses
      that are not reasonable. Whether or not such defense is assumed by the
      indemnifying party, such indemnified party will not be subject to any liability
      for any settlement made without its written consent (but such consent will
      not be unreasonably withheld or delayed). No indemnifying party will be
      subject to any liability for any settlement made without its written consent
      (but such consent will not be unreasonably withheld or delayed). The indemnifying
      party shall not consent to entry of any judgment or enter into any settlement
      that does not include as an unconditional term thereof the giving by all
      claimants or plaintiffs to such indemnified party of a release, in form
      and substance reasonably satisfactory to the indemnified party, from all
      liability in respect of such claim or litigation. 

                (d)       Contribution.
    (i) If the indemnification provided for in this Section 2.6 is unavailable
    to an indemnified party in respect of any Losses (other than in accordance
    with its terms), then each applicable indemnifying party, in lieu of indemnifying
    such indemnified party, shall contribute to the amount paid or payable by
    such indemnified party as a result of such Losses, in such proportion as
    is appropriate to reflect the relative fault of the indemnifying party, on
    the one hand, and such indemnified party, on the other hand, in connection
    with the actions, statements or omissions that resulted in such Losses as
    well as any other relevant equitable considerations. The relative fault of
    such indemnifying party, on the one hand, and indemnified party, on the other
    hand, shall be determined by reference to, among other things, whether any
    action in question, including any untrue or alleged untrue statement of a
    material fact or omission or alleged omission to state a material fact, has
    been taken by, or relates to information supplied 

Exh. 1.01(j)-18






 by, such indemnifying party or indemnified
    party, and the parties’ relative intent, knowledge, access to information
    and opportunity to correct or prevent any such action, statement or omission. 


                  (ii)       The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 2.6(d) were determined by pro rata allocation
      or by any other method of allocation that does not take account of the
      equitable considerations referred to in the immediately preceding paragraph. 

                  (iii)       No
      Person guilty of fraudulent misrepresentation (within the meaning of Section
      11(f) of the Securities Act) shall be entitled to contribution from any
      Person who was not guilty of such fraudulent misrepresentation. 



                (e)       Limitation
      on Holder Liability. Notwithstanding anything
      to the contrary contained in this Agreement, an indemnifying party that
      is a Holder shall not be required to indemnify or contribute any amount
      in excess of the amount by which the net proceeds received by such Holder
      from the sale of the Registrable Securities sold by such Holder in the
      applicable offering exceeds the amount of any damages that such indemnifying
      party has otherwise been required to pay by reason of the applicable untrue
      or alleged untrue statement or omission or alleged omission. 

           Section
    2.7       Rule
    144; Rule 144A. The Company covenants that
    it will file the reports required to be filed by it under the Securities
    Act and the Exchange Act and the rules and regulations adopted by the SEC
    thereunder (or, if the Company is not required to file such reports, it will,
    upon the request of any Holder, make publicly available other information
    so long as necessary to permit sales pursuant to Rule 144 or 144A under the
    Securities Act), and it will take such further action as any Holder may reasonably
    request, all to the extent required from time to time to enable such Holder
    to sell Registrable Securities without registration under the Securities
    Act within the limitation of the exemptions provided by (i) Rule 144 or 144A
    or Regulation S under the Securities Act, as such Rules may be amended from
    time to time, or (ii) any similar rule or regulation hereafter adopted by
    the SEC. Upon the request of any Holder, the Company will deliver to such
    Holder a written statement as to whether it has complied with such requirements
    and, if not, the specifics thereof. 

           Section
    2.8     Underwritten
    Registrations. (a) If any offering of Registrable
    Securities is an underwritten offering, the Holders’ Representative
    shall have the right to select the investment banker or investment bankers
    and managers to administer the offering, subject to approval by the Company,
    not to be unreasonably withheld or delayed. The Company shall have the right
    to select the investment banker or investment bankers and managers to administer
    any incidental or piggyback registration. 

                (b)       No
    Person may participate in any underwritten registration hereunder unless
    such Person (i) agrees to sell the Registrable Securities or Other Securities
    it desires to have covered by the registration on the basis provided in any
    underwriting arrangements in customary form (including pursuant to the terms
    of any over-allotment or “green shoe” option requested by the
    managing underwriter, provided that no such Person will be required to sell
    more than the number of Registrable Securities that such Person has requested
    the Company to include in any registration), and (ii) completes and executes
    all questionnaires, powers of attorney, indemnities, 

Exh. 1.01(j)-19






 underwriting agreements and other documents
    required under the terms of such underwriting arrangements, provided that
    such Person (other than the Company) shall not be required to make any representations
    or warranties other than those related to title and ownership of shares and
    as to the accuracy and completeness of statements made in a Registration
    Statement, Prospectus or other document in reliance upon and in conformity
    with written information furnished to the Company or the managing underwriter(s)
    by such Person and, provided further,
    that such Person’s (other than the Company’s) liability in respect
    of such representations and warranties shall not exceed such Person’s
    net proceeds from the offering. 

           Section
    2.9       Registration
    Expenses. The Company shall pay all reasonable
    documented expenses incident to the Company’s performance of or compliance
    with its obligations under this Article II, including, without limitation,
    (i) all registration and filing fees (including fees and expenses (A) with
    respect to filings required to be made with the SEC, all applicable securities
    exchanges and/or the Financial Industry Regulatory Authority and (B) of compliance
    with securities or Blue Sky laws including any fees and disbursements of
    counsel for the underwriter(s) in connection with Blue Sky qualifications
    of the Registrable Securities pursuant to Section 2.4(h)), (ii) printing
    expenses (including expenses of printing certificates for Registrable Securities
    in a form eligible for deposit with The Depository Trust Company and of printing
    Prospectuses if the printing of Prospectuses is requested by the managing
    underwriter(s), if any, or by the Holders of a majority of the Registrable
    Securities included in any Registration Statement), (iii) messenger, telephone
    and delivery expenses of the Company, (iv) fees and disbursements of counsel
    for the Company, (v) expenses of the Company incurred in connection with
    any road show, and (vi) fees and disbursements of all independent certified
    public accountants (including, without limitation, the expenses of any “comfort” letters
    required by this Agreement) and any other Persons, including special experts
    retained by the Company. In addition, the Company shall bear all of its internal
    expenses (including all salaries and expenses of its officers and employees
    performing legal or accounting duties), the expense of any annual audit,
    the fees and expenses incurred in connection with the listing of the securities
    to be registered on any securities exchange on which similar securities issued
    by the Company are then listed and rating agency fees and the fees and expenses
    of any Person, including special experts, retained by the Company. In addition,
    the Company shall pay the reasonable documented fees and disbursements of
    one firm of counsel (and, if needed, one firm of local counsel) for the SCA
    Shareholder Entity (but no Transferee or any other Person) in connection
    with registrations under Article II, but the Company shall not be obligated
    to pay any underwriting discounts attributable to sales of Registrable Securities
    by any Holder including the SCA Shareholder Entity.

           Section
    2.10       Securities
    Held by the Company or its Subsidiaries. Whenever
    the consent or approval of Holders of a specified percentage of Registrable
    Securities is required hereunder, in the event that the Company or any of
    its Subsidiaries holds Registrable Securities, such Registrable Securities
    shall not be counted in determining whether such consent or approval was
    given by the Holders of such required percentage. 

Exh. 1.01(j)-20






 ARTICLE III 

 MISCELLANEOUS 

           Section
    3.1       Conflicting
    Agreements. Each party represents and warrants
    that it has not granted and is not a party to any proxy, voting trust or
    other agreement that is inconsistent with or conflicts with any provision
    of this Agreement. 

           Section
    3.2       Termination.
    This Agreement shall terminate at such time as there are no Registrable Securities,
    except for the provisions of Sections 2.6, 2.7, 2.9 and this Article III,
    which shall survive such termination. 

           Section
    3.3       Amendment
    and Waiver. This Agreement may not be amended
    except by an instrument in writing signed on behalf of each of the Company
    and the SCA Shareholder Entity (or, in the case of an amendment at any time
    when the SCA Shareholder Entity is not the sole Holder, signed on behalf
    of each of (i) the Company and (ii) the Holders of a majority of the aggregate
    number of Registrable Securities then held by all Holders). Any party hereto
    may waive any right of such party hereunder by an instrument in writing signed
    by such party and delivered to the other parties (or, in the case of a waiver
    of any rights of the Holders at any time when the SCA Shareholder Entity
    is not the sole Holder, by an instrument in writing signed by the Holders
    of a majority of the aggregate number of Registrable Securities then held
    by all Holders and delivered to the Company and the Holders’ Representative).
    The failure of any party to enforce any of the provisions of this Agreement
    shall in no way be construed as a waiver of such provisions and shall not
    affect the right of such party thereafter to enforce each and every provision
    of this Agreement in accordance with its terms. 

           Section
    3.4       Severability.
    If any provision of this Agreement shall be declared by any court of competent
    jurisdiction to be illegal, void or unenforceable, all other provisions of
    this Agreement shall not be affected and shall remain in full force and effect. 

           Section
    3.5       Entire
    Agreement. Except as otherwise expressly set
    forth herein, this Agreement and the Master Transaction Agreement, together
    with the several agreements and other documents and instruments referred
    to herein or therein or annexed hereto or thereto, embody the complete agreement
    and understanding among the parties hereto with respect to the subject matter
    hereof and supersedes and preempts any prior understandings, agreements or
    representations by or among the parties, written or oral, that may have related
    to the subject matter hereof in any way. 

           Section
    3.6       Successors
    and Assigns. Neither this Agreement nor any
    right or obligation hereunder is assignable in whole or in part by any party
    without the prior written consent of the other party hereto; provided that
    the SCA Shareholder Entity may transfer its rights and obligations hereunder
    (in whole or in part) to any Transferee (and any Transferee may transfer
    such rights and obligations to any subsequent Transferee) without the prior
    written consent of the Company. Any such assignment shall be effective upon
    receipt by the Company of (x) written notice from the transferring Holder
    stating the name and address of any Transferee and identifying the number
    of shares of Registrable Securities being acquired by the Transferee and
    with respect to which the rights under this Agreement are being transferred
    and the nature of the rights so transferred and (y) a written agreement in
    substantially the form attached as Exhibit A hereto
    from such Transferee to be bound by the applicable terms of this Agreement. 

           Section
    3.7       Counterparts;
    Execution by Facsimile Signature. This Agreement
    may be executed in any number of counterparts, each of which shall be an
    original, but all of which 

Exh. 1.01(j)-21






 together shall constitute one instrument.
    This Agreement may be executed by facsimile signature(s). 

           Section
    3.8       Remedies.
    (a) Each party hereto acknowledges that monetary damages would not be an
    adequate remedy in the event that any of the covenants or agreements in this
    Agreement is not performed in accordance with its terms, and it is therefore
    agreed that, in addition to and without limiting any other remedy or right
    it may have, the non-breaching party will have the right to an injunction,
    temporary restraining order or other equitable relief in any court of competent
    jurisdiction enjoining any such breach or threatened breach and enforcing
    specifically the terms and provisions hereof. Each party hereto agrees to
    waive any requirement for the securing or posting of any bond in connection
    with such remedy. 

                (b)       All
    rights, powers and remedies provided under this Agreement or otherwise available
    in respect hereof at law or in equity shall be cumulative and not alternative,
    and the exercise or beginning of the exercise of any thereof by any party
    shall not preclude the simultaneous or later exercise of any other such right,
    power or remedy by such party. 

           Section
    3.9       Notices.
    All notices required or permitted hereunder shall be in writing and shall
    be deemed effectively given (i) upon personal delivery to the party to be
    notified, (ii) when sent by confirmed facsimile if sent during normal business
    hours of the recipient, if not, then on the next Business Day or (iii) one
    Business Day after deposit with a nationally recognized overnight courier,
    specifying next day delivery, with written verification of receipt. All communications
    shall be sent to the addresses set forth below or such other address or facsimile
    number as a party may from time to time specify by notice to the other parties
    hereto: 

           If
    to the Company: Security Capital Assurance Ltd.,
    1221 Avenue of the Americas, New York NY 10020-1001;
    Attention: General Counsel; Fax: (212) 478-3587; and with a copy (which shall
    not constitute notice) to: Weil, Gotshal & Manges LLP, 767 Fifth Avenue,
    New York, New York 10153; Attention: Joseph Verdesca; Fax: (212) 310-8007. 

           If
    to the SCA Shareholder Entity: ___________________, [insert address]; Attention:
    ________________; Fax: (___) ___-_____; and with a copy (which shall not
    constitute notice) to: [insert law firm and address]; Attention: ____________;
    Fax: (___) ____-_____. 

           Section
    3.10       Governing
    Law; Consent to Jurisdiction. (a) This Agreement
    shall be governed in all respects by the laws of the State of New York, without
    regard to its conflicts of laws principles. 

                (b)       Each
    of the parties hereto (i) consents to submit itself to the personal jurisdiction
    of any Federal or state court located in the Borough of Manhattan in the
    City of New York, New York in the event any dispute arises out of this Agreement,
    (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction
    by motion or other request for leave from any such court and (iii) agrees
    that it will not bring any Action relating to this Agreement in any court
    other than a Federal or state court located in the Borough of Manhattan in
    the City of New York, New York. 

Exh. 1.01(j)-22






                (c)       Each
    of the parties hereto hereby irrevocably and unconditionally waives trial
    by jury in any legal Action or proceeding in relation to this Agreement and
    for any counterclaim therein. 

           Section
    3.11       Interpretation.
    In this Agreement, the SCA Shareholder Entity shall be deemed to be the Trust,
    the Trustee (or any trustee or trustees of the Trust) acting in its capacity
    as such trustee, in each case as the context may require to be most protective
    of the interests of the Company. 

 

[signature page follows] 

           IN
    WITNESS WHEREOF, the parties hereto have executed this Registration Rights
    Agreement as of the date first written above. 


  	SECURITY CAPITAL ASSURANCE
          LTD. 
	 	 
	By:  	 
	 
	Name: 
	Title: 
	 	 
	 	 
	 	 
	[SCA SHAREHOLDER ENTITY] 
	 	 
	By:	 
	 
	Name: 
	Title: 




 

Exh. 1.01(j)-23








 EXHIBIT A 

  JOINDER 

            Reference
    is made to the Registration Rights Agreement dated as of July [•],
    2008 (as amended from time to time, the “Registration
    Rights Agreement”) among Security Capital
    Assurance Ltd., a Bermuda exempted company, ______________ [a Bermuda exempted
    company [limited by guarantee]], and each other person who shall have become
    a party to the Registration Rights Agreement in accordance with the terms
    thereof. 

            By
    execution of this Joinder, the undersigned agrees to become a party to the
    Registration Rights Agreement and to be bound by the terms, conditions, restrictions
    and provisions thereof as a “Holder” thereunder, entitled to
    all of the rights available thereto and subject to all of the burdens imposed
    thereon. 

	Name:	 	 
	 	 	 
	 	 	 
	 	 	 
	Address for Notices:	 	With Copies to:
	  	 	 	  
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 
	Signature:	 	 
	 	 	 
	  	 	 
	Date:	 	 
	 	 	 
	 	 	 


 

Exh. 1.01(j)-24







EXHIBIT 1.01(k)


TRANSITION AGREEMENT AMENDMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Exh. 1.01(k)-1









AMENDMENT NO. 2 TO TRANSITION AGREEMENT 

                AMENDMENT
    NO. 2 dated as of July [ ], 2008 (this “Amendment
    No. 2”) among XL Capital Ltd., a Cayman
    Islands company (“XL Capital”),
    XL Insurance (Bermuda) Ltd., a Bermuda company (“XLI”),
    X.L. America, Inc., a Delaware corporation (“XLA”),
    and Security Capital Assurance Ltd., a Bermuda company (“SCA” and
    collectively with XL Capital, XLI, and XLA, the “Parties”).

                WHEREAS,
    on August 4, 2006, the Parties entered into a certain transition agreement,
    as amended on May 3, 2007 (the “Transition
    Agreement”); and 

                WHEREAS,
    the Parties have entered into that certain Master Commutation, Release and
    Restructuring Agreement dated as of July __, 2008 (the “Master
    Restructuring Agreement”) among SCA,
    XL Capital Assurance Inc., XL Financial Assurance Ltd., XL Financial Administrative
    Services Inc., SCA Bermuda Administrative Ltd., XL Capital Assurance (U.K.)
    Limited and those Portfolio Trusts a party thereto, XL Capital, XLI, XL Reinsurance
    America Inc., X.L. Global Services Inc., XL Services (Bermuda) Limited and
    XLA and the consenting counterparties party thereto, pursuant to which the
    Parties have agreed to amend the Transition Agreement. 

                NOW,
    THEREFORE, in consideration of the premises and the covenants and agreements
    contained herein and in the Master Restructuring Agreement, and for other
    good and valuable consideration, the receipt and sufficiency of which are
    hereby acknowledged, and intending to be legally bound hereby, the Parties
    agree as follows:

                Section
    1. Definitions.
    Capitalized terms not otherwise defined in this Amendment No. 1 shall have
    the meanings ascribed to them in the Transition Agreement. 

                Section
    2. Amendments.
    Articles III, VII, and IX of the Transition Agreement are hereby amended
    as follows: 

                2.1      The
    second and third paragraphs of Section 3.3 shall be stricken and deleted
    in their entirety, including any other references to such paragraphs of such
    section as it appears in the Transition Agreement. 

                2.2      Section
    7.1 of the Transition Agreement shall be stricken and deleted in its entirety,
    including any other references to such section as it appears in the Transition
    Agreement.

                2.3      The
    second sentence of Section 7.5(b) and the second sentence of Section 7.5(c)
    of the Transition Agreement shall be stricken and deleted in their entirety,
    including any other references to such sections as it appears in the Transition
    Agreement.

                2.4      Section
    7.7 of the Transition Agreement shall be stricken and deleted in its entirety,
    including any other references to such section as it appears in the Transition
    Agreement. 

Exh. 1.01(k)-2






                2.5      Section
    7.8 of the Transition Agreement shall be stricken and deleted in its entirety,
    including any other references to such section as it appears in the Transition
    Agreement. 

                2.6      Section
    9.12 of the Transition Agreement shall be stricken and deleted in its entirety,
    including any other references to such section as it appears in the Transition
    Agreement. 

                Section
    3. Voting Restriction Termination Event.
    The Parties hereby acknowledge and agree that upon transfer of all of the
    SCA common shares owned by the XL Group to the SCA Shareholder Entity (as
    defined in the Master Restructuring Agreement) or upon deposit of certificates
    evidencing all of the SCA common shares owned by the XL Group with the Escrow
    Agent (as defined in the Master Restructuring Agreement) pursuant to the
    terms of the Master Restructuring Agreement, a Voting Restriction Termination
    Event will be deemed to occur. 

                Section
    4. Miscellaneous.

                4.1      Except
    as provided herein, the Transition Agreement shall remain unchanged and in
    full force and effect.

                4.2      This
    Amendment No. 2 may be executed in any number of counterparts, each of which
    shall be an original, but all of which together shall constitute one and
    the same amendatory instrument. This Amendment No. 2 may be executed by facsimile
    signature(s). 

                4.3      This
    Amendment No. 2 shall be governed by, and construed in accordance with, the
    laws of the state of New York, without regard to its conflict of laws principles.
    The Parties consent to the non-exclusive jurisdiction of the courts of New
    York.

                4.4      The
    Parties hereby forever waive and release each other and their respective
    subsidiaries, affiliates, predecessors, and successors in interest, and all
    of their current, past, and future officers, directors, partners, principals,
    agents, insurers, servants, employees, representatives, attorneys, and advisors,
    acting in their capacities as such, from any and all claims, liabilities,
    causes of action, demands, and damages of whatever kind or nature and whether
    known or unknown arising under the Transition Agreement prior to the Closing
    Date (as defined in the Master Restructuring Agreement). 

 

[Signature Page to Follow] 

 

Exh. 1.01(k)-3






                 IN
    WITNESS HEREOF, the Parties have caused this Amendment No. 2 to the Transition
    Agreement to be duly executed and delivered as of the day and year first
    written above. 

	 	XL Capital Ltd. 
	 	 	 
	 	 	 
	 	By:  	 

	 	Name: 
	 	Title: 
	 	 	 
	 	 	 
	 	XL Insurance (Bermuda)
          Ltd. 
	 	 	 
	 	 	 
	 	By:  	 

	 	Name: 
	 	Title: 
	 	 	 
	 	 	 
	 	X.L. America, Inc. 
	 	 	 
	 	 	 
	 	By:  	 

	 	Name: 
	 	Title: 
	 	 	 
	 	 	 
	 	Security Capital
          Assurance Ltd. 
	 	 	 
	 	 	 
	 	By:  	 

	 	Name: 
	 	Title: 


 

Exh. 1.01(k)-4







EXHIBIT 2.06


CUSTOMARY SECURITIES LAW REPRESENTATIONS


Capitalized terms used, but not otherwise defined herein, have the same meaning as defined in the Agreement to which this document is attached as Exhibit 2.06. 


                    The SCA Shareholder Entity represents, warrants and agrees as follows:


                    (a)      Investment Purpose.  The SCA Shareholder Entity is obtaining the XL Owned SCA Common Shares for investment
purposes only and not with a view to or for distributing or reselling such XL Owned SCA Common Shares or any part thereof, without prejudice, however, to its right, subject to any transfer restrictions, to sell or otherwise dispose of all or any
part of the XL Owned SCA Common Shares pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities or “blue sky”
laws. 


                    (b)      Compliance with Securities Act. The SCA Shareholder Entity agrees that any sale of the XL Owned SCA Common
Shares shall be made in compliance with the registration requirements of the Securities Act or any applicable exemption therefrom. 


                    (c)      Reliance on Exemptions.  The SCA Shareholder Entity understands that the XL Owned SCA Common Shares are
being offered and issued to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities or “blue sky” laws, and, assuming that the transfer of the XL Owned SCA Common Shares to
the SCA Shareholder Entity in accordance with the terms of the Agreement is made in compliance with the Securities Act, the SCA Shareholder Entity agrees that any subsequent sale of the XL Owned SCA Common Shares by it will not cause such transfer
by the XL Parties to violate the provisions of the Securities Act. 


                    (d)      Authorization; Enforceability. This Agreement has been duly and validly authorized by the SCA Shareholder
Entity.  This Agreement has been duly executed and delivered on behalf of the SCA Shareholder Entity, and constitutes the valid and binding agreement of the SCA Shareholder Entity enforceable in accordance with their terms, subject, in each case, to
applicable bankruptcy, insolvency, reorganization or similar laws affecting generally the enforcement of creditors’ rights and subject to a court’s discretionary authority with respect to the granting of specific performance or other
equitable remedies. 


                    (e)      No Conflicts. The execution and performance of this Agreement does not conflict with any agreement to
which the SCA Shareholder Entity is a party or is bound thereby, any court order or judgment addressed to the SCA Shareholder Entity, or the constituent documents of the SCA Shareholder Entity. 


                    (f)      Interpretation.  Any reference to the “SCA Shareholder Entity” for purposes of this letter
shall be deemed to be the relevant trust and/or the trustee(s) thereof acting in its(their) capacities as such trustee(s), in each case as the context may require to be most


Exh. 2.06-1












protective of the XL Parties, including for purposes of such trustee(s)’ representations and warranties as to their power and authority as trustee(s) and the non-contravention of the trust’s governing
instruments. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Exh. 2.06-2












EXHIBIT 6.18


FORM OF SCA SHAREHOLDER ENTITY TRUST AGREEMENT 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Exh. 6.18-1









DATED                                                      2008 


  
     * Subject to further
            review and comment by the parties, including by the trustee and its
            counsel 

  


 

 

[      ] 

 

 [Draft 30/07/2008] 

 DEED CONSTITUTING 

 The [                ]
    Purpose Trust 

 

 

Exh. 6.18-2






 THIS DECLARATION OF TRUST dated                               2008
    is made BY [           ], a
    company incorporated under the laws of Bermuda whose registered office is
    at [           ], Bermuda
    ("the First Trustee"). 

 BACKGROUND 

	(A)      	The First
          Trustee wishes to create a purpose trust within the meaning of the
          Trusts (Special Provisions) Act 1989, in the terms set out below and
          wishes to declare that it holds the Trust Fund upon the trusts and
          subject to the powers and provisions set out below.

	 
	(B) 	Further
          money investments or other property may be paid or transferred to the
          Trustees to hold on the trusts set out below.

	 
	(C) 	Simultaneously
          with the execution of this deed, the Company (as defined below) has
          entered into a deed of covenant and indemnity in favour of the First
          Trustee in the form set out in Schedule D.

	 


 OPERATIVE PROVISIONS

	1.	NAME
	 	 
	 	This Trust shall be known as
        [ ] or by such other title as the Trustees may from time to time determine
        in writing. 
	 	 
	2.      	DEFINITIONS
              AND CONSTRUCTION

	 
	 	In
          this Trust where the context admits the following definitions and rules
          of construction shall apply:

	 
	 	2.1        	“affiliate” means,
          with respect to any person, any other person directly or indirectly
          Controlling, Controlled by or under common Control with such person,
          provided that none of the SCA Parties shall be deemed to be an affiliate
          of any XL Party. “Control,” “Controlled,” or “Controlling,” with
          respect to the relationship between or among two or more persons, means
          the possession, directly or indirectly, or as trustee, personal representative
          or executor, of the power to direct or cause the direction of the affairs
          or management of a person, whether through the ownership of voting
          securities, as trustee, as personal representative or executor, by
          contract, by credit arrangement or otherwise.

	 
	 	2.2 	"assets" shall
          be construed according to the widest generality and any reference in
          this Trust to any asset other than money shall include the proceeds
          of sale of that asset.

	 
	 	2.3 	"charitable
          purposes" means purposes and objects recognised as charitable by the
          Governing Law.

	 
	 	2.4 	"charity" means
          any trust, foundation, institution, corporation or unincorporated body
          in any part of the world established exclusively for charitable purposes.

	 
	 	2.5 	“the
          Company” shall mean Security Capital Assurance Ltd, a Bermuda
          exempted company.

	 
	 	2.6 	“the
          Consenting Counterparties” means such counterparties to credit
          default swap agreements with affiliates of XLCA that may become party
          to the Master Restructuring Agreement from time to time in accordance
          with the terms thereof .

	 


Exh. 6.18-3






	       	2.7         	“the
          Consenting Counterparty Restructuring Agreement” means that certain
          agreement entered into after the date hereof among the SCA Parties
          and Consenting Counterparties representing not less than the Minimum
          Consenting CDS Counterparty Restructuring Threshold (as such term is
          defined in the Master Restructuring Agreement) to give effect to the
          CDS Counterparty Restructuring (as such term is defined in the Master
          Restructuring Agreement).

	 
	 	2.8 	“the
          Consenting Counterparties Enforcer” means the Consenting Counterparties
          or the Consenting Counterparties Enforcer for the time being of this
          Trust as appointed in accordance with the provisions of Schedule C.

	 
	 	2.9 	"corporation" or "corporate
          body" means any body, public or private, incorporated anywhere in the
          world and includes any company or corporation whether limited by shares
          or by guarantee and any other legal entity or organisation, such as
          without limitation, a limited partnership, a general partnership, limited
          liability company or a limited duration company.

	 
	 	2.10 	"the Enforcers" shall
          be the persons named in Schedule C or such additional or other person
          or persons who is or are for the time being occupying the office of
          Enforcers pursuant to the provisions of Schedule C.

	 
	 	2.11 	"the Governing
          Law" means, subject to any change effected by clause 9, the law of
          Bermuda which law shall govern all matters of validity, construction,
          effect and administration of this Trust.

	 	 	 
	 	2.12	“the Master Restructuring Agreement” means
        the Master Commutation, Release and Restructuring Agreement dated as
        of July [ ], 2008 among the Company, XLCA, XLI, the Consenting Counterparties
        and the other parties thereto, as amended, supplemented or otherwise
        modified from time to time.
	 	 	 
	 	2.13 	"person" means
          any individual or corporation and shall be taken to include any charity
          (whether or not incorporated) and any non-charitable unincorporated
          body.

	 
	 	2.14 	“proceeds” means
          all assets received upon the sale or other any disposition of an asset
          comprised in the Trust Fund other than new additional or changed number
          of the Shares of the Company received in a transaction described in
          Clause 7.2.

	 
	 	2.15 	“the
          Purposes” means those purposes set out in Clause 3.

	 
	 	2.16 	“SCA
          Registration Rights Agreement” means the Registration Rights
          Agreement dated as of the date hereof between the Company and the First
          Trustee, as amended, supplemented or otherwise modified from time to
          time.

	 
	 	2.17 	“the
          Restructuring Effective Time” shall mean such time that the Consenting
          Counterparty Restructuring Agreement shall first become effective.

	 
	 	2.18 	"securities" includes
          shares, stocks, bonds, notes, debentures and debenture stock and any
          interest of a member in a corporation (and any options or warrants
          in respect of any of them) and includes securities payable to bearer
          and otherwise transferable by delivery, with or without endorsement.

	 
	 	2.19 	“SCA
          Parties” has the meaning set forth in the Master Restructuring
          Agreement.

	 


Exh. 6.18-4






	       	2.20       	“SCA
          Shareholder Agreement” means the Shareholder Agreement [dated
          as of the date hereof] between the Company and the Trustees, as amended,
          supplemented or otherwise modified from time to time.

	 	 	 
	 	2.21	“the Shares” means
        the [ ] common shares of the Company which represent approximately [46]%
        of the outstanding common shares of the Company and all of the common
        shares of the Company beneficially owned by XLI immediately prior to
        the transfer of such common shares to this Trust in accordance with the
        terms of the Master Restructuring Agreement. 
	 	 	 	 
	 	2.22 	"taxes" means
          any tax, duty or other fiscal imposition arising anywhere in the world.

	 
	 	2.23 	"the
          Termination Date" means the earliest to occur of:

	 
	 	 	2.23.1      	the expiration
          of the period of five years commencing at the date of this Trust (which
          period shall be the applicable perpetuity period) if the Restructuring
          Effective Time shall not have occurred prior to such time;

	 
	 	 	2.23.2 	the Trustees’ distribution
          of all proceeds from the sale or other disposition of all assets comprised
          in the Trust Fund to the relevant parties in accordance with the provisions
          of Clause 5.1; and

	 
	 	 	2.23.3 	from and
          after the Restructuring Effective Time, in accordance with the terms
          of the Consenting Counterparty Restructuring Agreement.

	 
	 	2.24 	"this
          Trust" means the trust created by this deed.

	 
	 	2.25 	"trust
          corporation" has the meaning, if any, given to that term under the
          Governing Law.

	 
	 	2.26 	"the
          Trustees" means the First Trustee or the trustee or trustees for the
          time being of this Trust.

	 
	 	2.27 	"the
          Trust Fund" means:-

	 
	 	 	2.27.1 	the Shares;

	 
	 	 	2.27.2 	all assets
          paid or transferred to, or so as to be under the control of the Trustees
          as additions to the Trust Fund;

	 
	 	 	2.27.3 	all accumulations
          (if any) of income added to the Trust Fund; and

	 
	 	 	2.27.4 	the assets
          from time to time representing the above.

	 
	 	2.28 	“XLCA” means
          XL Capital Assurance Inc., a New York insurance company.

	 
	 	2.29 	The “XLCA
          Enforcer” means XLCA or the XLCA Enforcer for the time being
          of this Trust as appointed in accordance with the provisions of Schedule
          C.

	 
	 	2.30 	“XLI” means
          XL Insurance (Bermuda) Ltd (formerly known as X.L. Insurance Ltd),
          a Bermuda exempted company.

	 
	 	2.31 	“XL
          Party” has the meaning set forth in the Master Restructuring
          Agreement.

	 
	 	2.32 	Words
          denoting the singular shall include the plural and vice versa.

	 


Exh. 6.18-5






	 	2.33      	Words
          denoting any gender shall include both the other genders.

	 
	 	2.34 	References
          to any statutory provision shall include any statutory modification
          or re- enactment of such provision.

	 
	 	2.35 	Clause
          headings are included for reference and shall not affect the interpretation
          of this deed.

	 
	3.      	PURPOSES

	 
	 	3.1 	Subject
          to the provisions of Clause 4 and Clause 5, the Trustees shall hold
          the Trust Fund and the income of the Trust Fund on trust to pay or
          apply all or any part or parts of the Trust Fund and the income of
          the Trust Fund, at such time or times and in such manner, for or towards
          or in furtherance of the following purposes as the Trustees may in
          their discretion think fit.

	 
	 	3.2 	The
          purposes of this Trust are:-

	 
	 	 	3.2.1      	To
          subscribe for or otherwise acquire, whether by purchase or receipt
          of a contribution or gift, ownership or effective control of the Shares
          and to take such actions as are necessary or appropriate, consistent
          with the terms of this Trust as determined in the Trustees’ discretion
          exercised in good faith, to maximise the value of the Trust Fund for;

	 
	 	 	 	(a)    	XLCA prior
          to the Restructuring Effective Time; and

	 
	 	 	 	(b) 	the Consenting
          Counterparties in accordance with the Consenting Counterparty Restructuring
          Agreement from and after the Restructuring Effective Time.

	 
	 	 	3.2.2 	Without
          limiting the foregoing to engage in the following activities:

	 
	 	 	 	(a) 	to own,
          hold, manage and/or dispose of the Trust Fund in accordance with the
          terms of this Trust;

	 
	 	 	 	(b) 	to pay any
          dividends or distributions arising from the Trust Fund and any proceeds
          of any sale or other disposition of any or all of the Trust Fund to
          (a) prior to the Restructuring Effective Time, XLCA, which dividends,
          distribution or payment to XLCA shall be treated as “SCA Share
          Sale Proceeds” for purposes of Section 6.12 of the Master Restructuring
          Agreement, or (b) from and after the Restructuring Effective Time,
          as set forth in the Consenting Counterparty Restructuring Agreement;
          and

	 
	 	 	 	(c) 	to perform
          or cause to be performed all of the other obligations of the Trustees
          under this Trust.

	 
	 	 	3.2.3 	To
          exercise the Trustees’ rights as shareholder of the Company and
          provide such support and assistance as considered advisable by the
          Trustees in accordance with Clause 1.2.3 of Schedule B and Clause 1.2.4
          of Schedule B but otherwise in their absolute discretion and any other
          actions that in the sole judgement and absolute discretion of the Trustees
          are necessary, advisable or desirable to accomplish the foregoing or
          are incidental thereto.

	 
	 	 	3.2.4 	To
          exercise the voting rights attaching to the Shares as may be appropriate
          to carry out the purposes of this Trust.

	 


Exh. 6.18-6






	4.      	PAYMENT
              OF DIVIDENDS AND ACCUMULATION OF INCOME

	 
	 	4.1        	If the Company
          pays or issues dividends or makes other distributions relating to the
          Trust Fund or if any other income arises from the Trust Fund, the Trustees
          shall accept and receive such dividends, distributions and other income.
          Upon receipt of any such dividends, distributions or other income and
          subject to the provisions of Clause 4.2, such dividends, distributions
          and other income shall be distributed promptly:

	 
	 	 	4.1.1      	prior to the Restructuring
          Effective Time, to XLCA, which payment or distribution to XLCA shall
          be treated as “SCA Share Sale Proceeds” for purposes of
          Section 

	 	 	 	6.12 of the Master Restructuring Agreement;
        and
	 
	 	 	4.1.2 	from and after the
          Restructuring Effective Time, pursuant to the terms of the Consenting
          Counterparty Restructuring Agreement.

	 
	 	4.2 	If the dividend,
          distribution or other income is in securities, such securities shall
          be held in accordance with the terms of this Trust.

	 
	5. 	PROCEEDS
              OF DISPOSITION

	 
	 	5.1 	The proceeds
          of any sale or other disposition of all or any assets comprised in
          the Trust Fund shall be paid promptly and in no event later than two
          business days after such sale, together with any interest earned thereon:

	 
	 	 	5.1.1 	prior to the Restructuring
          Effective Time, to XLCA, which payment or distribution to XLCA shall
          be treated as “SCA Share Sale Proceeds” for purposes of
          Section

	 	 	 	6.12 of the Master Restructuring
        Agreement; and
	 
	 	 	5.1.2 	from and after the
          Restructuring Effective Time, pursuant to the terms of the Consenting
          Counterparty Restructuring Agreement.

	 
	 	5.2 	Together
          with the proceeds of any disposition as described in Clause 5.1, the
          Trustees shall deliver a notice setting forth the calculation thereof
          to XLCA and the Consenting Counterparties.

	 
	6. 	TERMINATION
              PROVISIONS

	 
	 	On the Termination
          Date the Trustees shall cease the application of the capital and income
          of the Trust Fund towards the Purposes and:

	 
	 	6.1 	Upon termination
          of this Trust in accordance with Clause 2.23.1 the Trustees shall deliver
          to XLCA a certificate or certificates for the Shares, properly endorsed
          for transfer and any other property constituting the Trust Fund.

	 
	 	6.2 	Upon termination
          of the Trust in accordance with Clause 2.23.3, the Trustees shall deliver
          a certificate or certificates for the Shares, properly endorsed for
          transfer and any other property constituting the Trust Fund in accordance
          with the provisions of the Consenting Counterparty Restructuring Agreement.

	 
	7. 	BUSINESS
              COMBINATIONS AND RECAPITALISATIONS

	 
	 	7.1 	Any merger,
          consolidation, reorganisation or dissolution of the Company or the
          sale of all or substantially all of the assets of the Company pursuant
          to which common shares or other voting securities of another corporation
          are to be issued in payment or exchange

	 


Exh. 6.18-7






	 	for
          or upon conversion of the Shares shall constitute a disposition of
          the Shares which shall be subject to the provisions of Clause 5.

	 
	 	7.2        	In the event
          of an increase in the amount of outstanding common shares of the Company
          by virtue of a stock split or the decrease in the number of common
          shares of the Company because of a contraction of shares or a change
          in the number of outstanding shares as a result of some other capitalisation
          in which the Company receives no consideration for the issuance of
          the additional or reduced amount of common shares, the new additional
          or changed number of the Shares shall be held by the Trustees.

	 
	8.      	ADMINISTRATION
              AND MANAGEMENT

	 
	 	8.1 	Subject
          to the provisions of Clause 1.2.3 of Schedule B and Clause 1.2.4 of
          Schedule B the Trustees shall conduct the affairs of this Trust in
          such manner as they may consider appropriate, and they shall make such
          arrangements in relation to the administration of this Trust as they
          consider advisable to further the purposes of this Trust.

	 
	 	8.2 	The Trustees
          shall in addition and without prejudice to all other powers at law
          have the powers and immunities set out in the Schedule to section 17
          of The Trusts (Special Provisions) Act 1989 (except those contained
          in Clauses 3(b) and 4(6) thereof) which shall be incorporated herein
          by reference to form Clause 1 of Schedule A hereto and renumbered to
          follow sequentially without the incorporation of the above mentioned
          excepted clauses provided that all references to a beneficiary or beneficiaries
          in such Schedule shall be deemed to refer to the purposes of this Trust
          and additionally the Trustees shall have the powers and provisions
          set out in Clause 2 of Schedule A provided that the Trustees shall
          not exercise any of their powers other than in furtherance of the purposes
          of this Trust.

	 
	 	8.3 	In the event
          that there is any conflict between any one or more of the provisions
          comprised in or incorporated into Schedule A hereto (“the servient
          provisions”) and any provision or provisions of this Trust other
          than those comprised in or incorporated into Schedule A hereto (“the
          dominant provisions”), the dominant provisions shall prevail.

	 
	9. 	POWER
              TO CHANGE GOVERNING LAW AND FORUM

	 
	 	9.1 	The Trustees
          may at any time or times before the Termination Date declare by writing
          (with the written consent of the Enforcers) that from the date of the
          declaration (and subject to any future declaration in exercise of this
          power) the Governing Law shall be changed to the law of some other
          jurisdiction, state or territory in any part of the world.

	 
	 	9.2 	So often
          as any declaration shall be made the Trustees may make such consequential
          alterations or additions in or to the trusts, powers and provisions
          of this Trust as the Trustees may consider necessary or desirable to
          ensure that the trusts, powers and provisions of this Trust shall (mutatis
          mutandis) be as valid and effective under the new Governing Law as
          they are under the original Governing Law of this Trust.

	 
	 	9.3 	Subject
          to the power to change the forum for the administration of this Trust
          contained below, the forum for the administration of this Trust shall
          be the courts of the Governing Law.

	 
	 	9.4 	The Trustees
          may at any time or times declare by writing (with the written consent
          of the Enforcers) that from the date of the declaration (and subject
          to any future declaration in exercise of this power) the forum for
          the administration of this Trust shall be the courts of

	 


Exh. 6.18-8






	 	any
          jurisdiction in the world, whether or not such courts are of the jurisdiction
          which is for the time being the Governing Law of this Trust.

	 
	 	9.5        	The Trustees
          may carry on the general administration of this Trust in any jurisdiction
          in the world, whether or not the jurisdiction is for the time being
          the Governing Law of this Trust or the courts of the jurisdiction are
          for the time being the forum for the administration of these trusts
          and whether or not the Trustees or any of them are for the time being
          resident and/or domiciled in, or incorporated in and/or carrying on
          business in, or otherwise connected with, the jurisdiction.

	 
	10.    	IRREVOCABLE
              TRUST AND POWER TO VARY

	 
	 	This
          Trust is irrevocable provided however that, subject to the provisions
          of Clause 11, the Trustees may in writing (but only with the written
          consent of the Enforcers) vary, add to, alter or amend any or all of
          the provisions of this Trust (including, without limitation, the purposes
          in clause 3) as the Trustees in their absolute discretion think fit.

	 
	11. 	BENEFICIAL
              OWNERSHIP AND PROHIBITED TRANSFERS OR SALES

	 
	 	11.1 	Notwithstanding
          any provision of this Trust to the contrary the Trustees shall be obligated
          at all times prior to the Termination Date to retain beneficial ownership
          of the Shares until they are sold or otherwise disposed of in accordance
          with the terms of this Trust.

	 
	 	11.2 	Notwithstanding
          any provision of this Trust to the contrary, the Trustees may not,
          under any circumstances, transfer any of the Shares to any SCA party,
          any Consenting Counterparty or any of their respective affiliates prior
          to the Termination Date.

	 
	 	11.3 	Notwithstanding
          any provision of this Trust to the contrary no sale or other disposition
          of the Shares may be made prior to October 15, 2008, except as set
          forth in the Consenting Counterparty Restructuring Agreement.

	 


 IN WITNESS whereof the First
    Trustee has executed and delivered this instrument as its deed on the date
    shown on page one. 

Exh. 6.18-9






 SCHEDULE A 

 In furtherance of the Purposes
    and subject to Clause 8.2 and Clause 8.3 above but not further or otherwise
    the Trustees shall have the following additional powers:- 

	1.      	Incorporation
            by Reference

	 
	 	Further
          administrative powers incorporated by reference to the Trusts (Special
          Provisions) Act 1989, as amended.

	 
	2. 	Further
            Powers

	 
	 	2.1        	to construct,
          maintain, improve or alter any buildings or works (so far as necessary
          for carrying out the purposes of the this Trust) on land comprised
          in the Trust Fund;

	 
	 	2.2 	to sell,
          lease, demise, let, license and generally manage and deal with any
          land or buildings or interest therein in such manner as the Trustees
          shall think fit;

	 
	 	2.3 	to borrow
          money subject to such consents as may be required by law on such terms
          as to interest repayment or otherwise as the Trustees may think fit
          without security or (subject as aforesaid) upon the security of the
          whole or any part or parts of the Trust Fund and to use such money
          so borrowed for any purpose for which capital of the Trust Fund may
          be used;

	 
	 	2.4 	to seek
          the advice of any person who is in the opinion of the Trustees qualified
          to advise on the management of any land comprised in the Trust Fund
          or the making and changing of investments of this Trust;

	 
	 	2.5 	to employ
          any person firm or company not being a Trustee to manage or assist
          in managing the Trust Fund upon such reasonable terms as the Trustees
          think fit and to pay a secretary and other such officials or staff
          not being a trustee as the Trustees may in their discretion from time
          to time determine and to enter into agreements and to fix such reasonable
          salaries as the Trustees may deem proper and to enter into any service
          agreements which they shall consider to be necessary including the
          power to determine any such employment upon such terms as the Trustees
          may decide and to make all reasonable and necessary provisions for
          the payment of pensions and superannuation to or on behalf of employees
          and their widows or widowers and dependants;

	 
	 	2.6 	to apply
          capital or income in insuring any buildings or other property to their
          full value;

	 
	 	2.7 	when making
          grants of any funds to any charities to accept as a good discharge
          in respect of any such funds the receipt of the treasurer or secretary
          or other authorized officer for the time being of such charities;

	 
	 	2.8 	in respect
          of any property subject to the trust hereof to vest the same in any
          corporation or any other person or persons (whether or not being one
          or more of the Trustees) as nominee or nominees for the Trustees;

	 
	 	2.9 	to make
          contributions as they may think fit or otherwise to assist (and whether
          out of capital or income) towards the purposes of this Trust;

	 
	 	2.10 	to pay and
          discharge any rent rates taxes costs of insurance improvements repairs
          or other outgoings payable from time to time in respect of any property
          held subject to these trusts and to pay and discharge all expenses
          incurred in the exercise of any powers conferred upon the Trustees
          by, or in conformity with, the provisions of this deed

	 


Exh. 6.18-10






	 	 	or by any
          transfer to the Trustees upon these trusts of any freehold leasehold
          or other property any legal or other administrative expenses payable
          from time to time in connection with these trusts or with any property
          held on such trusts;

	 
	       	2.11      	to invest
          any moneys for the time being comprised in the Trust Fund and also
          in the hands of the Trustees and for the time being unapplied in the
          names or under the control of the Trustees in or upon any investments
          authorised by this deed with power to vary or transpose investments
          for or into others of any nature so authorised;

	 
	 	2.12 	to do all
          such lawful acts or things as shall further the attainment of the purposes
          of this Trust and so far as may be necessary to do such acts or things
          in collaboration with any person.

	 


 

 

Exh. 6.18-11






 SCHEDULE B 

 Rights and Immunities of the
    Trustees 

	1.      	Width
            of discretions

	 
	 	1.1        	Every
          power by this Trust or by law conferred on the Trustees shall confer
          an absolute discretion.

	 
	 	1.2 	In
          amplification of the foregoing;

	 
	 	 	1.2.1      	subject
          to the provisions of Clause 11.3 above, the Trustees shall have the
          exclusive power and authority in their sole discretion, exercised in
          good faith in accordance with the Purposes, to sell (and to determine
          the terms and conditions of such a sale), all or a portion of the Shares
          in one or more private or public transactions in accordance with the
          applicable laws, whether in whole or in part;

	 
	 	 	1.2.2 	subject
          to the provisions of Clause 1.2.3 of this Schedule, the Trustees shall
          have the exclusive right and obligation to vote the Shares and at all
          times prior to the Termination Date the Trustees shall have full power
          and authority, and are empowered to vote (or give written consent in
          person or by proxy, at all meetings of shareholders of the Company),
          the Shares as they in their sole judgement, believe to be in accordance
          with the Purposes and to do any and all other things and take any and
          all other actions as fully as any shareholder of the Company might
          do if personally present at a meeting of the shareholders of the Company
          or otherwise, all to the fullest extent permitted by law;

	 
	 	 	1.2.3 	if at any
          time the Trustees shall have the right pursuant to the SCA Shareholder
          Agreement to nominate one or more nominees to the Company’s board
          of directors, the Trustees shall nominate such person or persons in
          accordance with the procedures set forth on Schedule E;

	 
	 	 	1.2.4 	the Trustees
          shall not amend or modify the SCA Shareholder Agreement or the Registration
          Rights Agreement without the prior written consent of the Enforcers;
          and

	 
	 	 	1.2.5 	subject
          to the above the Trustees shall have the exclusive power and authority
          in their sole discretion exercised in good faith in accordance with
          the Purposes, to exercise, direct and enforce any and all rights that
          the Trustees may have under the SCA Shareholder Agreement (including
          the determination as to whether to assert any claim, commence any action
          or settle, dismiss or continue the prosecution of any such action).

	 
	 	1.3 	The
          Trustees may exercise any power by this Trust or by law conferred by
          majority. Any trustee who is not a member of such majority (including
          a dissenting trustee) shall be obliged to join in any deed or writing
          made, or act to be done, in the name of the Trustees pursuant to a
          majority decision of the Trustees if requested by the majority of the
          Trustees to do so.

	 
	2. 	Release
            or restriction of powers

	 
	 	The
          Trustees may release or restrict the future exercise of any power by
          this Trust or by law conferred on the Trustees notwithstanding the
          fiduciary nature of such power. Any release or restriction shall bind
          any future trustee unless the contrary is expressly stated.

	 


Exh. 6.18-12






	3.      	Indemnity

	 
	 	3.1        	Each
          Trustee shall be entitled to a full indemnity out of the capital and/or
          income of the Trust Fund in respect of any costs, expenses or any other
          liabilities of whatsoever nature (including any taxes and associated
          penalties and interest for which they are personally liable and any
          liability which may be payable to an Outgoing Trustee (as defined below))
          incurred by the trustee in or about the professed execution of the
          trusts and powers of this Trust, but not in respect of any costs, expenses
          or any other liabilities incurred by any trustee in acting or omitting
          to act in a manner in which the trustee is not entitled to the protection
          of the exclusion of liability provisions contained in this Trust.

	 
	 	3.2 	Any
          of the Trustees (including an Outgoing Trustee as defined below) shall
          be entitled to assert a lien over any of the capital and/or income
          of the Trust Fund in order to secure his right of indemnity or, at
          his election, to release any capital and/or income of the Trust Fund
          subject to the recipient and/or the continuing trustee (as the case
          may be) granting to the trustee (and the trustee’s successors
          and assigns) a charge over the released assets securing the right of
          indemnity and/or an express indemnity.

	 
	 	3.3 	Without
          prejudice to the entitlement of a retiring or removed trustee to request
          that the trustee be granted an express indemnity on retirement or removal,
          the rights of indemnity conferred by this Trust shall endure following
          the retirement or removal, death or (as the case may be) liquidation
          of a trustee (an "Outgoing Trustee") to the intent that an Outgoing
          Trustee and his personal representatives or (as the case may be) its
          liquidator shall be entitled to assert the same rights of indemnity
          in respect of costs, expenses or other liabilities of whatsoever nature
          (including any taxes for which the Outgoing Trustee is personally liable)
          as the Outgoing Trustee would have been entitled to assert had the
          Outgoing Trustee remained in office as a trustee of this Trust at the
          time when the right of indemnity is asserted.

	 
	4. 	Exclusion
            of liability

	 
	 	4.1 	In
          the professed execution of the trusts and powers of this Trust, no
          trustee or member or officer or employee of any corporation which is
          a trustee of this Trust shall be liable for any loss to the Trust Fund
          or the income of the Trust Fund arising by reason of any improper investment
          made or retained in good faith, or for the negligence or fraud of any
          agent, nominee, delegate or sub-delegate appointed by or with the authority
          of the Trustees or any of them (notwithstanding that the appointment
          of the agent, nominee, delegate or sub-delegate was not strictly necessary
          or expedient), or by reason of any mistake or omission made in good
          faith by any trustee, or by reason of any other matter or thing whatsoever
          undertaken in good faith, except:

	 
	 	 	4.1.1      	deliberate
          fraud or other deliberate wrongdoing;

	 
	 	 	4.1.2 	wilful misconduct
          or wilful neglect; and

	 
	 	 	4.1.3 	in the case
          of a professional trustee or a corporate trustee in business as a trustee,
          reckless misconduct on the part of the particular trustee who it is
          sought to make liable.

	 
	 	4.2 	Without
          prejudice to the generality of the foregoing:

	 
	 	 	4.2.1 	in any case
          where the Trustees have appointed and reasonably relied in good faith
          on a person or persons to manage investments, the Trustees shall not
          be liable for any loss arising out of the failure of the investment
          policy implemented by or at the direction of that person or those persons;
          and

	 


Exh. 6.18-13






	 
	 	 	4.2.2     
	the exclusion of liability provided
        for above shall extend to any matter or thing arising out of any trustee,
        or any member or officer or employee of a corporate trustee, acting in
        good faith as a member or officer or employee of any corporation incorporated
        or acquired pursuant to the powers of the Trustees.
	 
	5.      	Supervision
            of officers of corporations

	 
	 	The Trustees
          shall not be bound or required to interfere in the management or conduct
          of the business of any corporation and may waive any requirement for
          the appointment of auditors or for the preparation of accounts even
          though the Trustees control the whole or the majority of the securities
          of such corporation (or of its parent corporation). So long as the
          Trustees shall have no notice of any act of dishonesty or misappropriation
          of assets or other deliberate misconduct on the part of the officers
          or employees having the management of any corporation, the Trustees
          shall be at liberty to leave the conduct of its business (including
          the payment or non-payment of dividends) wholly to its officers or
          employees.

	 
	6. 	Charging
            clauses

	 
	 	6.1        	Any of the
          Trustees who shall be an individual engaged in any profession or business
          either alone or in partnership:

	 
	 	 	6.1.1 	may be appointed to
          act as a trustee on a like charging basis to that provided for in relation
          to corporate trustees below; and

	 
	 	 	6.1.2 	subject to that, shall
          be entitled to charge and be paid all professional or other proper
          charges for business done or time spent or services rendered by the
          trustee or his firm in connection with this Trust, whether or not within
          the usual scope of his or his firm's profession or business and including
          acts which a trustee not being in any profession or business could
          have done personally.

	 
	 	6.2 	Any of the
          Trustees which shall be a trust corporation or other corporate trustee
          shall be entitled to charge and be paid the fees for its services as
          may be agreed at the time of its appointment by the Enforcers and the
          terms and conditions relating to fees may include provision for the
          subsequent variation of the fees from time to time with the agreement
          of the Enforcers. In the absence of an agreement, any trust corporation
          or corporate trustee shall be entitled to charge and be paid fees for
          its services in accordance with its usual scale or schedule of fees
          from time to time in effect.

	 
	7. 	Incidental
            profits

	 
	 	7.1 	Any trustee
          or any member or officer or employee of any corporate trustee of this
          Trust may act as an officer or employee of any corporation (or of any
          subsidiary of such corporation) the securities of which are comprised
          in the Trust Fund and may retain any remuneration or other benefits
          received by virtue of the office or employment notwithstanding that
          any votes or other rights attaching to the securities have been instrumental
          in procuring or maintaining that person in the remunerated office or
          employment.

	 
	 	7.2 	Any trustee
          or any member or officer or employee of any corporate trustee of this
          Trust or any corporation in the same group of corporations as any corporate
          trustee of this Trust shall be entitled to retain any brokerage or
          commission paid by any broker, agent or insurance office to that person
          (or his firm) in connection with the acquisition or dealing with any
          assets or the effecting of, or payment of, any premium on any policy
          subject or intended to become subject to this Trust.

	 


Exh. 6.18-14






	 	7.3        	Any trustee
          or any firm or corporation of which a trustee is a member or officer
          or employee or any corporation in the same group of corporations as
          any corporate trustee of this Trust which carries on the business of
          banking or providing investment services may act as banker or investment
          adviser (as the case may be) to this Trust on the same terms as are
          offered to any ordinary customer without being liable to account for
          any profits arising therefrom.

	 
	8.      	Conflicts
            of interest

	 
	 	Any
          of the Trustees may join in exercising any of the powers by this Trust
          or by law conferred on the Trustees (whether of a beneficial or administrative
          nature) notwithstanding that he may have some other interest (either
          personally or in some other fiduciary capacity) in the manner or result
          of exercising the power.

	 


 Appointment and Retirement
      of the Trustees 

	9.      	Persons
            who may serve as trustees

	 
	 	9.1        	Any individual
          or corporation may be appointed and serve as a trustee notwithstanding
          that the individual or corporation is resident and/or domiciled, or
          incorporated and/or carrying on business, outside the jurisdiction
          of the Governing Law and that as a result of the appointment (and any
          retirement occurring in connection with the appointment) all, or a
          majority, of the Trustees are resident and/or domiciled, or incorporated
          and/or carrying on business, outside the jurisdiction of the Governing
          Law and carrying on the administration of this Trust outside the jurisdiction
          of the Governing Law and notwithstanding that all or any of the assets
          subject to the trusts of this Trust are situated in the jurisdiction
          of the Governing Law.

	 
	 	9.2 	The power
          of appointing new trustees shall not be exercisable solely by virtue
          of a trustee remaining outside the jurisdiction of the Governing Law
          for any period.

	 
	10. 	Number
            of trustees

	 
	 	Subject
          to any express provision of this Trust to the contrary and without
          prejudice to any restriction under the Governing Law on the number
          of trustees necessary to give a receipt for capital money or otherwise,
          a single trustee (whether or not being a trust corporation) may act
          for all the purposes of this Trust.

	 
	11. 	Power
            of appointment and removal of new trustees

	 
	 	The
          power of appointing new trustees and the power to remove trustees of
          this Trust shall be exercisable by writing and shall be vested in the
          Enforcers.

	 
	12. 	Retirement
            of trustees

	 
	 	12.1 	Any trustee
          may retire from the office of trustee either forthwith or at some specified
          future date or event by writing (which may be in counterparts) to which
          the trustee retiring and the other trustees of this Trust are party
          and written notice and a copy of which shall be given to the Enforcers.

	 
	 	12.2 	No retirement
          shall take effect unless following the retirement there will be at
          least one trustee (or the greater number of trustees as may be required
          by any mandatory provision of the Governing Law) remaining in office.

	 


Exh. 6.18-15






 Separate Bodies Of Trustees 

	13.      	Appointment
            of separate bodies of trustees

	 
	 	13.1      	A separate
          person or body of persons may be appointed to act as the Trustees in
          relation to any specified share or part of the Trust Fund and the income
          of the Trust Fund.

	 
	 	13.2 	If and so
          long as one or more shares or parts of the Trust Fund and the income
          of the Trust Fund have a separate person or body of persons acting
          as the Trustees in relation to such assets, the provisions of this
          schedule shall apply to each such person or body of persons as if references
          to the share or part of the Trust Fund and the income of the Trust
          Fund in question were substituted for references to the Trust Fund
          and the income of the Trust Fund.

	 


 

Exh. 6.18-16






 SCHEDULE C 

	1.      	Initial
            Enforcers and Unanimity

	 
	 	1.1        	Subject
          to the provisions of Clauses 2, 3, 5 and 6 of this Schedule, the Enforcers
          shall be XLCA and the Consenting Counterparties (together “the
          First Enforcers”).

	 
	 	1.2 	All
          actions of the Enforcers shall only be effective if they are the result
          of a unanimous decision of the XLCA Enforcer and the Consenting Counterparties
          Enforcer.

	 
	2. 	Appointment
            and Resignation of the XLCA Enforcer

	 
	 	2.1 	The
          XLCA Enforcer shall have the power, by writing:-

	 
	 	 	2.1.1      	to add to
          the number of persons then serving as the XLCA Enforcer;

	 
	 	 	2.1.2 	to appoint
          a person or persons to serve as the XLCA Enforcer in the event all
          other persons cease to serve as the XLCA Enforcer and that appointment
          may be made irrevocably or may be made so as to be revocable up until
          the time it takes effect; and

	 
	 	 	2.1.3 	to make
          provisions concerning how any two or more persons entitled to exercise
          the powers of the XLCA Enforcer at a given time shall exercise those
          powers.

	 
	 	2.2 	Any
          person other than XLCA appointed to serve as the XLCA Enforcer shall
          accept that appointment in writing. Copies of any appointment and acceptance
          shall be supplied to the Trustees and all other Enforcers in office
          at that time as soon as is practicable.

	 
	3. 	Persons
            who may serve as XLCA Enforcers

	 
	 	Any
          individual or corporation may be appointed and serve as an XLCA Enforcer
          notwithstanding that the individual or corporation is resident and/or
          domiciled, or incorporated and/or carrying on business, outside the
          jurisdiction of the Governing Law.

	 
	4. 	XLCA
            Enforcers acting together

	 
	 	Subject
          to the exercise of the power contained in Clause 2.1.3 of this Schedule,
          in any case where there are two or more persons entitled to exercise
          the powers of the XLCA Enforcer at a given time, the powers shall be
          exercisable by majority.

	 
	5. 	Resignation
            of the XLCA Enforcer

	 
	 	5.1 	Subject
          to the provisions of Clause 5.2 of this Schedule, any person serving
          as an XLCA Enforcer or appointed to be an XLCA Enforcer:

	 
	 	 	5.1.1 	may resign
          by writing to that effect which may be signed in advance of assuming
          office as an XLCA Enforcer;

	 
	 	 	5.1.2 	shall, as
          soon as is practicable, supply the Trustees and all other Enforcers
          in office at that time with a copy of the resignation;

	 
	 	 	5.1.3 	shall, in
          the case of any prospective resignation, as soon as is practicable
          supply the Trustees and all other Enforcers in office at that time
          with a copy of the resignation.

	 


Exh. 6.18-17






	 	5.2        
	No XLCA Enforcer may resign
        if as a consequence there would be no XLCA Enforcer.
	 
	6.      	The
            Consenting Counterparties Enforcer

	 
	 	The provisions
          of Clauses 2 to 5 of this Schedule shall apply to the Consenting Counterparties
          Enforcer as if those clauses had been repeated verbatim herein provided
          that all references to the XLCA Enforcer or the XLCA Enforcers shall
          be deemed to refer to the Consenting Counterparties Enforcer or the
          Consenting Counterparties Enforcers respectively.

	 


 Rights and Immunities of
      the Enforcer 

	7.      	Width
            of discretions

	 
	 	Every
          power conferred on the Enforcers shall confer an absolute and non-fiduciary
          discretion and no person shall be entitled to compel control or otherwise
          interfere with the exercise by the Enforcers of any such power.

	 
	8. 	Statutory
            Power to Enforce

	 
	 	The
          Enforcers, XLCA and any person appointed by a majority of the Consenting
          Counterparties are each appointed by this Trust as a person entitled
          to make application to the Supreme Court for an order relating to the
          enforcement of this Trust in accordance with the provisions of Section
          12B of the Trusts (Special Provisions) Act 1989.

	 
	9. 	Release
            or restriction of powers

	 
	 	9.1        	The Enforcers
          may by writing release or restrict the future exercise of any power
          conferred on the Enforcer. Any release or restriction shall bind any
          persons appointed in the future to be Enforcers unless the contrary
          is expressly stated.

	 
	 	9.2 	The Enforcers
          shall, as soon as is practicable, supply the Trustees with any release
          or restriction of power.

	 
	10. 	Indemnity

	 
	 	Each
          Enforcer other than the First Enforcers and any of their respective
          affiliates shall be entitled to a full indemnity out of the Trust Fund
          and/or the income of the Trust Fund in respect of any costs, expenses
          or any other liabilities of whatsoever nature incurred in or about
          the professed execution of powers under this Trust, but not in respect
          of any costs, expenses or any other liabilities incurred by any such
          Enforcer in acting or omitting to act in a manner in which that person
          is not entitled to the protection of the exclusion of liability provisions
          contained in this Trust.

	 
	11. 	Exclusion
            of liability

	 
	 	In
          the professed execution of powers under this Trust no Enforcer or member
          or officer or employee of any corporation which is an Enforcer of this
          Trust shall be liable for any loss to the Trust Fund or the income
          of the Trust Fund arising by reason of any mistake or omission made
          in good faith by any such Enforcer or by reason of any other matter
          or thing whatsoever undertaken in good faith except:

	 
	 	11.1 	deliberate
          fraud or other deliberate wrongdoing; and

	 
	 	11.2 	in the case
          of a professional Enforcer or a corporation in business as an Enforcer,
          reckless misconduct on the part of the particular Enforcer who it is
          sought to make liable.

	 


Exh. 6.18-18






	12.     	Charging
            clauses

	 
	 	12.1       	Any
          Enforcer other than the First Enforcers and any of their respective
          affiliates who shall be an individual engaged in any profession or
          business either alone or in partnership:

	 
	 	 	12.1.1      	may be appointed
          to act as an Enforcer on a like charging basis to that provided for
          in relation to corporate Enforcers below; and

	 
	 	 	12.1.2 	subject
          to that, shall be entitled to charge and be paid all professional or
          other proper charges for business done or time spent or services rendered
          by the Enforcer or his firm in connection with this Trust, whether
          or not within the usual scope of his or his firm's profession or business
          and including acts which an Enforcer not being in any profession or
          business could have done personally.

	 
	 	12.2 	Any
          corporation which is an Enforcer shall be entitled to charge and be
          paid the fees for its services as may be agreed at the time of its
          appointment by the Trustees. The terms and conditions relating to its
          appointment may include provision for the subsequent variation of such
          fees from time to time with the agreement of the Trustees as may be
          specified in those terms and conditions for the purpose of approving
          any variation. In the absence of agreement, it shall be entitled to
          charge and be paid fees for its services in accordance with its usual
          scale or schedule of fees from time to time in effect.

	 
	13. 	Incidental
            profits

	 
	 	13.1 	Any
          Enforcer or any member or officer or employee of any corporate Enforcer
          of this Trust may act as an officer or employee of any corporation
          (or of any subsidiary of such corporation) the securities of which
          are comprised in the Trust Fund and may retain any remuneration or
          other benefit which is received by virtue of such office or employment
          notwithstanding that any votes or other rights attaching to the securities
          have been instrumental in procuring or maintaining that person in such
          remunerated office or employment.

	 
	 	13.2 	Any
          Enforcer or any member or officer or employee of any corporate Enforcer
          of this Trust or any corporation in the same group of corporations
          as any corporate Enforcer of this Trust shall be entitled to retain
          any brokerage or commission paid by any broker, agent or insurance
          office to that person (or his firm) in connection with the acquisition
          or dealing with any assets or the effecting of, or payment of, any
          premium on any policy subject or intended to become subject to this
          Trust.

	 
	 	13.3 	Any
          Enforcer or any firm or corporation of which an Enforcer is a member
          or officer or employee or any corporation in the same group of corporations
          as any corporate Enforcer of this Trust which carries on the business
          of banking or providing investment services may act as banker or investment
          adviser (as the case may be) to this Trust on the same terms as are
          offered to any ordinary customer without being liable to account for
          any profits arising therefrom.

	 
	14. 	Conflicts
            of interest

	 
	 	Any
          Enforcer may join in exercising any of the powers by this Trust or
          by law conferred on the Enforcers notwithstanding that he or it may
          have some other interest (either personally or in some fiduciary capacity)
          in the manner or result of exercising the power.

	 


Exh. 6.18-19








 All Incidental Powers 

	15.      	All
            incidental powers

	 
	 	15.1       	The Enforcers
          shall have and be entitled to exercise all powers otherwise enjoyed
          by an absolute beneficial owner which the Enforcers consider necessary
          or expedient in order to carry out the functions of the office of the
          Enforcers under this Trust including (without prejudice to the generality
          of the foregoing) similar powers to those conferred on the Trustees
          by Schedule A concerning agents and disputes.

	 
	 	15.2 	The provisions
          in Schedule A concerning confidentiality shall apply to the Enforcers
          as if references to the Enforcers had been substituted for references
          to the Trustees therein.

	 


 

Exh. 6.18-20






 SCHEDULE D 

 Form of Covenant and Indemnity 

 THIS DEED OF COVENANT AND
      INDEMNITY dated                                              2008
      (“the Commencement Date”) is made by [                                                            ]
      (“the Company”) in favour of [                ],
      a Bermuda exempted company (“the Trustee”). 

 BACKGROUND 

	(A)    	This deed
        is supplemental to a trust (“the Trust”) established by a
        Declaration of Trust made by 
	 	the Trustee
        of even date herewith (the “Trust Deed”) and known as The
        [           ] Purpose	 
	 	Trust. 	 
	 
	(B) 	The Trustee is the present
        trustee of the Trust. 	 
	 
	(C) 	The Company
        has agreed to covenant with and indemnify the Trustee, its successors
        in title, the 
	 	officers and
        employees of the Trustee and the officers and employees of its successors
        in title 
	 	(together “the
        Covenantees”) in the terms set out below. 	 




 OPERATIVE PROVISIONS 

	1.      	DEFINITIONS
	 	 	 
	 	In this
        Deed, where the context admits, the following definitions shall apply
        and subject thereto the definitions and rules of construction contained
        in the Trust shall apply:
	 	 	 
	 	1.1        	“The Agreed Fee” means
        [a single payment/monthly payments
        of/quarterly payments of/annual payments of] US$ [              ]. 
	 	 	 
	 	1.2 	“Excepted
          Liabilities” means any loss to any of the Covenantees, the Trust
          Fund or the income of the Trust Fund arising by reason of any act or
          omission of any Covenantee that amounts to

	 
	 	 	1.2.1      	deliberate
          fraud or deliberate wrongdoing;

	 
	 	 	1.2.2 	wilful misconduct
          or wilful neglect; or

	 
	 	 	1.2.3 	in the case
          of a professional trustee or a corporate trustee in business as a trustee,
          reckless misconduct on the part of the particular trustee who it is
          sought to make liable.

	 
	 	1.3 	“The
          Liabilities” means all liabilities, actions, proceedings, claims,
          demands, taxes and duties and all associated interest, penalties and
          costs, and all other costs and expenses whatever (including but not
          limited to costs and expenses incurred by or payable by the Covenantees
          or any of them in connection with the Trustee’s role as trustee
          of the Trust) other than Excepted Liabilities.

	 
	2. 	COVENANT
              AND INDEMNITY

	 
	 	The Company
          hereby covenants with the Covenantees:

	 
	 	2.1 	To pay the
          Agreed Fee to the Trustee [on
          the Commencement Date in consideration of the Trustee providing the
          service of acting as trustee of the Trust for the period beginning
          with the Commencement Date and ending on the Termination Date/on the

	 


Exh. 6.18-21






	 	Commencement
            date and monthly/quarterly/annually thereafter in advance for the
            period commencing on the date when payment is due and ending one
            month/one quarter/one year after that date].

	 
	 	2.2        	At all times
          fully and effectually to indemnify the Covenantees in respect of any
          Liabilities which are not otherwise paid to the Covenantees from the
          property of the Trust pursuant to the provisions of the Trust Deed..

	 
	3.      	GOVERNING
              LAW

	 
	 	This
          Deed shall be governed by the law of Bermuda and the Company submits
          to the exclusive jurisdiction of the Courts of Bermuda.

	 


 IN WITNESS whereof the Company
    has executed and delivered this instrument as its deed on the date shown
    above. 

 THE COMMON SEAL OF THE
      COMPANY) was hereunto affixed
      in the presence of: ) 

	 	Director	 

	 	 	 
	 	 	 
	 	 	 
	 	Director/Officer 	 



 

 

Exh. 6.18-22








	The COMMON
        SEAL of 	) 	 
	 	 	 
	[             ] 	) 	 
	 	 	 
	was hereunto affixed
        in the presence of           	) 	 	 
	 	     	Director 
	 
	 
	 	 	 	 
	 	 	Director
        / Officer 


 

 

Exh. 6.18-23








 Schedule E 

 SCA Shareholder Entity Nominee
    Nomination Procedures 

            If
    at any time the Trustees shall have the right pursuant to the SCA Shareholder
    Agreement to nominate one or more SCA Shareholder Entity Nominees (as such
    term is defined in the SCA Shareholder Agreement) to the Company’s
    board of directors, the Trustees shall nominate such person or persons in
    accordance with the following procedures: 

	1.       	With
          respect to each open board seat for which the Trustees shall have the
          right to nominate an SCA Shareholder Entity Nominee, the XLCA Enforcer
          and the Consenting Counterparties Enforcer or their respective designees
          shall each have the right to submit the names of up to two individuals
          as candidates to fill such board seat (each, a “Proposed
          Nominee”).

	 
	2. 	The
          XLCA Enforcer and the Consenting Counterparties Enforcer shall upon
          the Trustees request, jointly submit within a reasonable period of
          time requested by the Trustees a single consolidated list of their
          respective Proposed Nominees. The consolidated list shall be a “blind” written
          submission containing no information regarding which Enforcer has submitted
          a particular name.

	 
	3. 	Each
          written submission with respect to a Proposed Nominee:

	 
	 	(a)       	shall
          set forth the following information:

	 
	 	 	(i) 	the name,
          age, business address and residence address of such Proposed Nominee;

	 
	 	 	(ii) 	the principal
          occupation or employment of such Proposed Nominee, and such other biographical
          information regarding the Proposed Nominee as the submitting enforcer
          deems relevant;

	 
	 	 	(iii)      	the number
          of shares of capital stock of the Company or any Consenting Counterparty
          which are owned of record and beneficially by such Proposed Nominee;
          and

	 
	 	(b) 	shall
          include a completed and signed written director questionnaire (in the
          form provided by the Secretary of the Company) with respect to the
          background, independence and qualification of such Proposed Nominee.

	 
	4. 	The
          Enforcers shall, upon the Trustees request, endeavor to provide the
          Trustees with such other information reasonably requested by the Trustees
          with respect to any Proposed Nominee, which information shall be made
          available to the Trustees in the same “blind” manner as
          the initial written submissions are submitted to the Trustees.

	 
	5. 	With
          respect to each open board seat for which the Trustees shall have the
          right to nominate an SCA Shareholder Entity Nominee, the Trustees shall
          then choose among the Proposed Nominees the person the Trustees deem,
          in their sole and absolute discretion, to be the most qualified director
          of the Company.

	 
	6. 	The
          Trustees shall submit the name of each Proposed Nominee selected in
          accordance with paragraph 5 above to the Company’s Nominating & Corporate
          Governance Committee in accordance with Section 2(b)(vi) of the SCA
          Shareholder Agreement, but only to the extent such Proposed Nominee
          first executes a written representation and agreement (in the form
          provided by the Secretary of the Company) stating that he or she (A)
          meets the criteria set forth in the definition of “Independent” in
          the SCA Shareholder Agreement and (B) is not and will not become a
          party to any agreement, arrangement or understanding that would violate
          the last sentence of Section 2(b)(iii) of the SCA Shareholder Agreement.
          [Confirmation from the Consenting
          Counterparties Enforcer under discussion]

	 


Exh. 6.18-24






	7.       	If the Company’s
          Nominating & Corporate Governance Committee does not object to
          the Proposed Nominee submitted to such committee solely on the basis
          provided for in Section 2(b)(vi) of the SCA Shareholder Agreement within
          10 business days after submission of such Proposed Nominee’s
          name to such committee, such Proposed Nominee shall become an SCA Shareholder
          Entity Nominee in accordance with the SCA Shareholder Agreement. If
          the Company’s Nominating & Corporate Governance Committee
          objects to the Proposed Nominee, the Trustees may select another Proposed
          Nominee from the submitted list of Proposed Nominees or, at its option,
          request that the Enforcers submit additional names for consideration
          in accordance with the procedures described above.

	 
	8. 	In performing
          the Trustees’ duties hereunder, the Trustees shall be entitled
          to rely upon any document submitted in connection with the written
          submissions described above including the completed and signed written
          director questionnaires and the signed written representation and agreements,
          and the Trustees shall not be required to investigate the truth or
          accuracy of any statement contained in any such document.

	 
	9. 	The Trustees
          shall not be liable for any error of judgment, or any action taken,
          in selecting the SCA Shareholder Entity Nominees so long as the SCA
          Shareholder Entity Nominees are selected by the Trustees from among
          the Proposed Nominees in good faith.

	 


 

 

Exh. 6.18-25





SCHEDULE 1.01(a)


MLI ABS CDO CREDIT DEFAULT SWAP AGREEMENTS 

	
1.          	
West Trade Funding CDO II Ltd., executed on January 25, 2007, between MLI and Portfolio CDS Trust 138;

  
	 
	
2.          	
Silver Marlin CDO I Ltd., executed on April 11, 2007, between MLI and Portfolio CDS Trust 153;

  
	 
	
3.          	
Tazlina Funding CDO II, Ltd., executed on June 4, 2007, between MLI and Portfolio CDS Trust 164;

  
	 
	
4.          	
West Trade Funding CDO III Ltd., executed on June 4, 2007, between MLI and Portfolio CDS Trust 165;

  
	 
	
5.          	
Jupiter High-Grade CDO VI, Ltd., executed on June 15, 2007, between MLI and Portfolio CDS Trust 170;

  
	 
	
6.          	
Robeco High Grade CDO I, Ltd., executed on June 29, 2007, between MLI and Portfolio CDS Trust 172;

  
	 
	
7.          	
Biltmore CDO 2007-1, Ltd., executed on August 10, 2007, between MLI and Portfolio CDS Trust 186; and

  
	 
	
8.          	
Ipswich Street CDO Ltd., executed on December 14, 2006, between MLI and Portfolio CDS Trust 129.

  
	 


 

 

 

 

 

 

 

 

Sch. 1.01(a)-1











SCHEDULE 1.01(b)


OTHER TERMINATED AGREEMENTS


Part I

	
1.          	
Indemnification Agreement, dated August 4, 2006, between XLCA and XLA;

  
	 
	
2.          	
Master Services Agreement, dated August 4, 2006, between XLA and XLFAS;

  
	 
	
3.          	
Master Services Agreement, dated August 4, 2006, between XL and SCAB;

  
	 
	
4.          	
Master Services Agreement, dated August 4, 2006, between XLGS and XLFAS; and

  
	 
	
5.          	
Master Services Agreement, dated August 4, 2006, between XLBS and SCAB.

  
	 



Part II

	
1.          	
Master Services Agreement, dated July 1, 2006, between XLCAUK, in respect of its Spanish Branch and XL Services UK Limited, in respect of its Spanish Branch;

  
	 
	
2.          	
Master Services Agreement, dated August 4, 2006, between XLCAUK and XL Services UK Limited; and

  
	 
	
3.          	
General Services Agreement, dated as of October 22, 2004, between XLCA and XL Financial Products Ltd., a company formed under the laws of England.

  
	 


 

 

 

 

 

 

 

 

Sch. 1.01(b)-1











SCHEDULE 1.01(c)


KNOWLEDGE OF SCA


Paul Giordano: President and Chief Executive Officer, SCA 


Elizabeth Keys: Senior Vice President and Chief Financial Officer, SCA 


Claude LeBlanc: Executive Vice President, Corporate Development and Strategy, SCA Susan Comparato: General Counsel, SCA; Senior Vice President, General Counsel, XLCA Edward Hubbard: President and Chief Operating Officer, XLCA



Michael Rego: Executive Vice President and Chief Operating Officer, XLFA 

 

 

 

 

 

 

 

 

 

 

 

 

 


Sch. 1.01(c)-1












SCHEDULE 1.01(d)


TERMS OF ESCROW AGREEMENT

	
Certificates evidencing all of the XL Owned SCA Common Shares free and clear of any Liens, together with a stock power duly endorsed in blank will be deposited with the Escrow Agent and held by the Escrow Agent until release in accordance with the Escrow Agreement.

	
If the Escrow Agent receives a certificate signed by the Secretaries of SCA and XLCA stating that the SCA Shareholder Entity Formation Conditions have been satisfied and directing the Escrow Agent to deliver the XL Owned SCA Common Shares (together with the related certificates and stock powers) to the SCA Shareholder Entity, then the Escrow Agent
shall immediately deliver all of the XL Owned SCA Common Shares (together with the related certificates and stock powers) to the SCA Shareholder Entity.

	
The Escrow Agreement will be otherwise drafted to meet applicable regulatory requirements.



 

 

 

 

 

 

 

 

 

 

 

Sch. 1.01(d)-1








ESCROW AGREEMENT 

           ESCROW
    AGREEMENT dated as of July [ ], 2008 (this “Agreement”)
    among Security Capital Assurance Ltd, a Bermuda exempted company (“SCA”),
    XL Capital Assurance Inc., a New York insurance company (“XLCA”),
    and [HSBC Private Bank, Bermuda Trust Company Limited] (the “Escrow
    Agent”). 

 W I T N E S S E T H: 

           WHEREAS,
    on the date hereof, SCA, XLCA, XL Financial Assurance Ltd., XL Financial
    Administrative Services Inc., SCA Bermuda Administrative Ltd., XL Capital
    Assurance (U.K.) Limited, XL Capital Ltd., XL Insurance (Bermuda) Ltd., XL
    Reinsurance America Inc., X.L. Global Services Inc., XL Services (Bermuda)
    Limited and X.L. America, Inc. and certain other parties thereto entered
    into the Master Commutation, Release and Restructuring Agreement (as amended,
    the “Master Restructuring Agreement”),
    a copy of which is annexed hereto as Exhibit
    A (capitalized terms used herein but not otherwise
    defined herein shall have the meanings ascribed to them in the Master Restructuring
    Agreement); 

           WHEREAS,
    the parties hereto desire to enter into this Agreement in the event that,
    pursuant to Section 2.10 of the Master Restructuring Agreement, XL does not
    receive an SCA Shareholder Entity Formation Conditions Certificate from SCA
    and XLCA at or prior to the Closing, in which case the XL Parties will, at
    Closing, deposit with the Escrow Agent certificates evidencing 30,069,049
    common shares, $0.01 par value per common share, of SCA (representing all
    of the XL Owned SCA Common Shares) (the “Escrow
    Shares”), together with stock powers
    duly endorsed in blank (collectively with Escrow Shares, the
  “Escrow Property”),
  to be held by the Escrow Agent until released in accordance with the terms
  of this Agreement; and 

           WHEREAS,
    a copy of the Master Restructuring Agreement has been delivered to the Escrow
    Agent, and the Escrow Agent is willing to act as the Escrow Agent under this
    Agreement. 

           NOW,
    THEREFORE, in consideration of the foregoing and for other good and valuable
    consideration (the receipt and sufficiency of which is hereby acknowledged),
    the parties to this Agreement agree as follows: 

 ARTICLE 1 

ESCROW ARRANGEMENTS 

           Section
      1.01.   Appointment and Agreement
      of Escrow Agent. SCA and XLCA and hereby
      appoint the Escrow Agent to serve as, and the Escrow Agent hereby agrees
      to act as, escrow agent on the terms and conditions set forth in this Agreement. 

Sch. 1.01(d)-2






           Section
      1.02.   Escrow Establishment. In
      accordance with Section 2.10 of the Master Restructuring Agreement, if
      XL does not receive an SCA Shareholder Entity Formation Conditions Certificate
      from SCA and XLCA at or prior to the Closing, XL shall deliver the Escrow
      Property to the Escrow Agent, the delivery of which by XL shall be absolute,
      irrevocable and unconditional. Upon the receipt of the Escrow Property
      at the Closing, the Escrow Agent shall acknowledge receipt of the Escrow
      Property by delivering the acknowledgment attached hereto as Schedule
      A. 

           Section
      1.03.   Purpose of the Escrow. The
      Escrow Agent shall hold and dispose of the Escrow Property only in accordance
      with the terms of this Agreement. 

           Section
      1.04.   Release of Escrow Property. If
      the Escrow Agent receives a certificate in the form attached hereto as Schedule
      B signed by the Secretaries of SCA and XLCA,1 the
      Escrow Agent shall immediately deliver all of the Escrow Property to the
      SCA Shareholder Entity.

           Section
      1.05.   Dividends and Other
      Distributions in Respect of the Escrow Shares.
      During the term of this Agreement, all dividends or other distributions
      with respect to the Escrow Shares shall be delivered to the Escrow Agent
      to hold in accordance with the terms hereof. As used herein, the term “Escrow
      Shares” shall be deemed to include any SCA common shares, if any,
      distributed thereon and “Escrow Property” shall be deemed to
      include any such SCA common shares and all other property, if any, distributed
      thereon. 

 ARTICLE 2 

RIGHTS OF ESCROW AGENT
IN ESCROW SHARES. 

           Section
      2.01. Voting of Escrow Shares. The
      Escrow Agent hereby irrevocably and unconditionally agrees that the Escrow
      Agent shall not vote (or cause to be voted) or take any action by written
      consent (or cause any action to be taken by written consent) with respect
      to any or all of the Escrow Shares. In addition, as holder of the Escrow
      Shares, the Escrow Agent shall not attend, in person or by proxy any meeting
      of the SCA stockholders. The Escrow Agent shall not transfer or register
      in its name any or all of the Escrow Shares. 

           Section
      2.02. Other Stockholder Rights. Without
      limiting Section 2.01 hereof, but subject to Section 1.05, the Escrow Agent
      further agrees, to the fullest extent permitted by applicable Law, not
      to exercise any or all other rights or take any or all other actions as
      a stockholder of SCA that the Escrow Agent may be entitled to make or take
      as a holder of the Escrow Shares pursuant to this Agreement.

 

      1 To
    be determined whether XLFA also needs to execute release. 

Sch. 1.01(d)-3






 ARTICLE 3 

MATTERS RELATING TO
THE ESCROW AGENT 

           Section
      3.01.   Escrow Agent. 

           (a)       Except
    as provided in Section 1.04, the Escrow Agent shall not transfer or otherwise
    dispose of in any manner all or any portion of the Escrow Property, except
    pursuant to an order of a court of competent jurisdiction. 

           (b)       The
    duties and obligations of the Escrow Agent shall be determined solely by
    this Agreement, and the Escrow Agent shall not be liable, except for the
    performance of such duties and obligations as are specifically set forth
    in this Agreement. 

           (c)       In
    the performance of its duties hereunder, the Escrow Agent shall be entitled
    to rely upon any document, instrument or signature believed by it in good
    faith to be genuine and signed by SCA or XLCA or an authorized officer or
    agent thereof, and shall not be required to investigate the truth or accuracy
    of any statement contained in any such document or instrument (including
    any document, instrument or signature executed by SCA and XLCA stating that
    the relevant action has been consented to by the Required Consenting CDS
    Counterparties). The Escrow Agent may assume that any person purporting to
    give any notice on behalf of SCA or XLCA in accordance with the provisions
    of this Agreement has been duly authorized to do so. 

           (d)       The
    Escrow Agent shall not be liable for any error of judgment, or any action
    taken, suffered or omitted to be taken, hereunder, except in the case of
    its gross negligence or willful misconduct. The Escrow Agent may consult
    with counsel of its own choice and shall have full and complete authorization
    and protection for any action taken or suffered by it hereunder in good faith
    and in accordance with the opinion of such counsel. The Escrow Agent shall
    not be bound in any way by the Master Restructuring Agreement or any other
    agreement between the other parties to this Agreement, other than this Agreement,
    whether or not it has knowledge thereof, and the Escrow Agent’s only
    duties and responsibilities shall be to hold and to dispose of the Escrow
    Property in accordance with the terms of this Agreement. 

           (e)       The
    Escrow Agent shall have no duty as to the collection or protection of the
    Escrow Property, nor as to the preservation of any rights pertaining thereto,
    beyond the safe custody of any such Escrow Property actually in its possession. 

           (f)       As
    compensation for its services to be rendered under this Agreement, the Escrow
    Agent shall receive fees in the amounts specified in Schedule
    C to this Agreement and shall be reimbursed
    upon request for all reasonable expenses, disbursements and advances, including
    reasonable fees of outside counsel, if any, reasonably incurred or made by
    it in connection with the preparation of this Agreement and the carrying
    out of its duties under this Agreement. All such fees and expenses shall
    be paid by SCA. 

Sch. 1.01(d)-4






           (g)       SCA
    shall reimburse and indemnify the Escrow Agent for, and hold it harmless
    against, any loss, liability or expense, including, without limitation, reasonable
    attorneys’ fees, incurred without gross negligence or willful misconduct
    on the part of the Escrow Agent arising out of, or connection with the acceptance
    of, or the performance of, its duties and obligations under this Agreement. 

           (h)       The
    Escrow Agent may at any time resign by giving 30 days’ prior written
    notice of resignation to SCA and XLCA. SCA and XLCA (with the consent of
    the Required Consenting CDS Counterparties) may at any time jointly remove
    the Escrow Agent by giving 10 Business Days’ written notice to the
    Escrow Agent signed by the Secretaries of SCA and XLCA stating that the Required
    Consenting CDS Counterparties have consented to such removal. If the Escrow
    Agent shall resign or be removed, a successor Escrow Agent (the “Successor
    Escrow Agent”), shall be appointed jointly
    by XLCA and SCA (with the consent of the Required Consenting CDS Counterparties)
    by written instrument executed by the Secretaries of SCA and XLCA stating
    that the Required Consenting CDS Counterparties have consented to such removal.
    Such written instrument shall be delivered to the Escrow Agent (the “Predecessor
    Escrow Agent”) and to the Successor Escrow
    Agent and, thereupon, the resignation or removal of the Predecessor Escrow
    Agent shall become effective and the Successor Escrow Agent, without any
    further act, deed or conveyance, shall become vested with all right, title
    and interest to all cash and property held hereunder of the Predecessor Escrow
    Agent, and the Predecessor Escrow Agent shall, on the written request of
    the XLCA and SCA or the Successor Escrow Agent, execute and deliver to the
    Successor Escrow Agent all the right, title and interest hereunder in and
    to the Escrow Property held by the Predecessor Escrow Agent and all other
    rights hereunder, and records relating hereto, of the Predecessor Escrow
    Agent. If no successor Escrow Agent shall have been appointed within 20 Business
    Days of a notice of resignation or removal by the Escrow Agent, the Escrow
    Agent may apply to a court of competent jurisdiction for appointment of a
    Successor Escrow Agent. 

           (i)       If
    any controversy arises between the other parties to this Agreement concerning
    the subject matter of this Agreement, its terms or conditions, the Escrow
    Agent will not be required to determine the controversy or to take any action
    regarding it. The Escrow Agent may continue to hold the Escrow Property and
    all documents, assets and funds relating to the Escrow Property and may wait
    for settlement of any such controversy by final appropriate legal proceedings
    or other means. In such event, the Escrow Agent will not be liable for interest
    or damage. Furthermore, the Escrow Agent may, at its option, file an action
    of interpleader requiring the parties other than the Escrow Agent to answer
    and litigate any claims and rights among themselves. The Escrow Agent is
    authorized, at its option, to deposit with the clerk of the court or the
    arbitrator, as applicable, all documents and funds held in escrow, except
    all costs, expenses, charges and reasonable attorneys’ fees incurred
    by the Escrow Agent due to the interpleader action and which the other parties
    to this Agreement agree to pay or are ordered to pay by such court or arbitrator.
    Upon initiating such interpleader action, the Escrow Agent shall be fully
    released and discharged of and from all obligations and liability imposed
    by the terms of this Agreement. 

Sch. 1.01(d)-5






 ARTICLE 4 

MISCELLANEOUS 

           Section
      4.01.  Notices. All
      notices, requests and other communications to any party hereunder shall
      be in writing (including facsimile transmission but not electronic mail)
      and shall be given, 

	          	(a)        	if to SCA or XLCA, to: 
	 
	 	 	c/o XL Capital Assurance Inc. 
	 	 	1221 Avenue of the Americas 
	 	 	New York, NY 10020-1001 
	 	 	Attention: Susan Comparato, General Counsel
	 	 	Facsimile No.: (212) 478-3579 
	 
	 	 	with a copy to: 
	 
	 	 	Weil, Gotshal & Manges 
	 	 	767 Fifth Avenue 
	 	 	New York, NY 10153 
	 	 	Attention: Gary T. Holtzer 
	 	 	Facsimile No.: (212) 310-8007 
	 
	 	 	 if to Escrow Agent, to: 
	 
	 	 	HSBC Private Bank, Bermuda Trust
        Company Limited 
	 	 	Compass Point 
	 	 	9 Bermudiana Road 
	 	 	Hamilton, HM 11, Bermuda 
	 	 	Attention: [•] 
	 	 	Facsimile No.: [•] 
	 
	 	 	with a copy to: 
	 
	 	 	[Name] 
	 	 	[Address] 
	 	 	Attention: [•] 
	 	 	Facsimile No.: [•] 




 or to such other address or facsimile number
    as such party may hereafter specify for the purpose by notice to the other
    parties hereto. All such notices, requests and other communications shall
    be deemed received on the date of receipt by the recipient thereof if received
    prior to 5:00 p.m. on a Business Day in the place of receipt. Otherwise,
    any such notice, request or communication shall be deemed to have been received
    on the next succeeding Business Day in the place of receipt. If any notice,
    other certificate or document is required to be delivered to the Escrow Agent
    and any other party, the 

Sch. 1.01(d)-6






 Escrow Agent may assume without inquiry that
    such document was received by such other party when it was received by the
    Escrow Agent. 

           Section
      4.02.  Headings. The
      headings contained in this Agreement are for reference purposes only and
      shall not affect in any way the meaning or interpretation of this Agreement. 

           Section
      4.03.  Amendments and Waivers. 

           (a)       Any
    provision of this Agreement (including any Schedule hereto) may be amended
    or waived if, but only if, such amendment or waiver is in writing and is
    signed, in the case of an amendment, by SCA, XLCA and the Escrow Agent, or
    in the case of a waiver, by the party against whom the waiver is to be effective; provided that
    neither SCA nor XLCA shall execute any such amendment or waiver hereunder
    without the prior written consent of the Required Consenting CDS Counterparties. 

           (b)       No
    failure or delay by any party in exercising any right, power or privilege
    hereunder shall operate as a waiver thereof nor shall any single or partial
    exercise thereof preclude any other or further exercise thereof or the exercise
    of any other right, power or privilege. The rights and remedies herein provided
    shall be cumulative and not exclusive of any rights or remedies provided
    by law. 

           Section
      4.04. Severability. If
      any term, provision, covenant or restriction of this Agreement is held
      by a court of competent jurisdiction or other Governmental Authority to
      be invalid, void or unenforceable, the remainder of the terms, provisions,
      covenants and restrictions of this Agreement shall remain in full force
      and effect and shall in no way be affected, impaired or invalidated so
      long as the economic or legal substance of the transactions contemplated
      hereby is not affected in any manner materially adverse to any party. Upon
      such a determination, the parties shall negotiate in good faith to modify
      this Agreement so as to effect the original intent of the parties as closely
      as possible in an acceptable manner in order that the transactions contemplated
      hereby be consummated as originally contemplated to the fullest extent
      possible. 

           Section
      4.05. Assignment; Successors. This
      Agreement may not be assigned without the express written consent of the
      other parties hereto (which consent may be granted or withheld in the sole
      discretion of such other parties); provided that
      SCA and XLCA shall not assign, and shall not consent to the assignment
      by any other party hereto of, any of its rights or obligations under this
      Agreement with the prior written consent of the Required Consenting CDS
      Counterparties. This Agreement shall be binding upon and inure solely to
      the benefit of the parties hereto and their permitted assigns.

           Section
      4.06. Third Party Beneficiaries.
      No provision of this Agreement is intended to confer any rights, benefits,
      remedies, obligations, or liabilities hereunder upon any Person other than
      the parties hereto and their respective successors and assigns; provided,
      however, that each CDS Counterparty shall
      be a third party beneficiary under 

Sch. 1.01(d)-7






 this Agreement entitled to enforce, on its
    own, with the same rights to enforcement as if it were party hereto, any
    breach by any party under this Agreement. 

           Section
      4.07.  Entire Agreement. This
      Agreement supersedes all prior agreements and undertakings, both written
      and oral, between the parties, or any of them, with respect to the subject
      matter hereof. 

           Section
      4.08.  Termination of Escrow. This
      Agreement shall terminate upon the earlier of (i) the Closing if XL receives
      an SCA Shareholder Entity Formation Conditions Certificate in accordance
      with Section 2.08(a) of the Master Restructuring Agreement at or prior
      to the Closing and (ii) such time after the Closing when the Escrow Agent
      shall have released from escrow all Escrow Property pursuant to Section
      1.04 hereof. 

           Section
      4.09.  Governing Law. This
      Agreement shall be governed by and construed in accordance with the laws
      of the State of New York, without regard to its conflicts of law principles. 

           Section
      4.10.  Jurisdiction. The
      parties hereto agree that any suit, action or proceeding seeking to enforce
      any provision of, or based on any matter arising out of or in connection
      with, this Agreement or the transactions contemplated hereby shall be brought
      in the United States District Court for the Southern District of New York
      or any New York State court sitting in New York City, so long as one of
      such courts shall have subject matter jurisdiction over such suit, action
      or proceeding, and that any cause of action arising out of this Agreement
      shall be deemed to have arisen from a transaction of business in the State
      of New York, and each of the parties hereby irrevocably consents to the
      jurisdiction of such courts (and of the appropriate appellate courts therefrom)
      in any such suit, action or proceeding and irrevocably waives, to the fullest
      extent permitted by law, any objection that it may now or hereafter have
      to the laying of the venue of any such suit, action or proceeding in any
      such court or that any such suit, action or proceeding brought in any such
      court has been brought in an inconvenient forum. Process in any such suit,
      action or proceeding may be served on any party anywhere in the world,
      whether within or without the jurisdiction of any such court. Without limiting
      the foregoing, each party agrees that service of process on such party
      as provided in Section 4.01 shall be deemed effective service of process
      on such party. 

           Section
      4.11.  WAIVER OF JURY TRIAL. EACH
      OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
      BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT
      OR THE TRANSACTIONS CONTEMPLATED HEREBY. 

           Section
      4.12.  Counterparts. This
      Agreement may be signed in any number of counterparts, each of which shall
      be an original, with the same effect as if the signatures thereto and hereto
      were upon the same instrument. This Agreement shall become effective when
      each party hereto shall have received a counterpart hereof signed by the
      other party hereto. 

Sch. 1.01(d)-8






           Section
      4.13.  Specific Performance. The
      parties hereto agree that irreparable damage would occur if any provision
      of this Agreement were not performed in accordance with the terms hereof
      and that the parties shall be entitled (without the requirement to post
      bond) to an injunction or injunctions to prevent breaches of this Agreement
      or to enforce specifically the performance of the terms and provisions
      hereof in the courts provided for in Section 4.10, in addition to any other
      remedy to which they are entitled at law or in equity. 

           Section
      4.14.  Certain Amendments. If
      the Escrow Shares shall be exchanged for or converted into other securities,
      assets, cash or any combination thereof, then promptly thereafter the parties
      hereto will enter into an appropriate amendment to this Agreement to properly
      account for such exchange or conversion. 

 

 

Sch. 1.01(d)-9






           IN
    WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
    be executed as of the date first written above. 

	 	XL CAPITAL ASSURANCE
          INC. 
	 	 	 
	 	 	 
	 	 	 
	 	By:  	 
	 
	 	Name: 
	 	Title: 
	 	 	 
	 	 	 
	 	 	 
	 	SECURITY CAPITAL
          ASSURANCE LTD 
	 	 	 
	 	 	 
	 	 	 
	 	By:  	 
	 
	 	Name: 
	 	Title: 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	[BANK OF BERMUDA],
        as Escrow Agent 
	 	 	 
	 	 	 
	 	 	 
	 	By:  	 
	 
	 	Name: 
	 	Title: 


 

Sch. 1.01(d)-10








 Schedule A

 ACKNOWLEDGMENT 

 c/o XL Capital Assurance Inc. 

    1221 Avenue of the Americas 

    New York, NY 10020-1001 

 Attention: Susan Comparato, General Counsel 

            Reference
    is made to the Escrow Agreement dated as of July [•],
    2008 (the “Escrow Agreement”)
    among Security Capital Assurance Ltd, a Bermuda exempted company, XL Capital
    Assurance Inc., a New York insurance company, and [HSBC Private Bank, Bermuda
    Trust Company Limited, as Escrow Agent. Capitalized terms used but not defined
    herein shall have the respective meanings as assigned to such terms in the
    Escrow Agreement. 

           The
    Escrow Agent hereby acknowledges receipt from XL of the Escrow Property. 

            Dated:
    August _____, 2008 

	 	[BANK OF BERMUDA], AS
        ESCROW 
	 	 	AGENT 
	 	 	 
	 	 	 
	 	By:  	 
	 
	 	 	Name: 
	 	 	Title: 




 

cc: Weil, Gotshal & Manges 

 

Sch. 1.01(d)-11






 Schedule B 

 RELEASE OF ESCROW PROPERTY 

 [HSBC Private Bank, Bermuda Trust Company
    Limited] 

    [Address] 

 Attention: [•] 

           1.         This
    certificate is delivered pursuant to Section 1.04 of the Escrow Agreement
    dated as of July [•],
    2008 (the “Escrow Agreement”)
    among Security Capital Assurance Ltd, a Bermuda exempted company, XL Capital
    Assurance Inc., a New York insurance company, and [HSBC Private Bank, Bermuda
    Trust Company Limited], as Escrow Agent. Capitalized terms used but not defined
    herein shall have the respective meanings as assigned to such terms in the
    Escrow Agreement. 

           2.        The
    undersigned, [name], the Secretary of SCA, and [name], the Secretary of XLCA,
    each hereby certifies as follows: 

           (a)       The
    SCA Shareholder Entity Formation Conditions have been satisfied in full. 

           (b)       You
    are hereby directed to deliver all of the Escrow Property to the SCA Shareholder
    Entity. 

           IN
    WITNESS WHEREOF, the undersigned has executed this certificate as of this
    ___ day of ___________, 2008. 

 

	 	 	 
	 	Name: 
	 	Title: Secretary of
        Security Capital Assurance Ltd 
	 	 
	 	 
	 	 
	 	 	 
	 	Name: 
	 	Title: Secretary of
        XL Capital Assurance Inc. 




 

cc: [•] 

 

Sch. 1.01(d)-12






 Schedule C 

 ESCROW AGENT FEES 

 

  [To come] 

 

 

 

 

 

 

Sch. 1.01(d)-13






 Exhibit A 

 MASTER RESTRUCTURING AGREEMENT 

 [Attached] 

 

 

 

 

 

 

 

Sch. 1.01(d)-14





SCHEDULE 2.01


COMMUTED REINSURANCE AGREEMENTS

 

 

 

[Intentionally omitted—superseded by

Amendment No. 1 to Master Transaction Agreement]

 

 

 

 

 

 

 

 

 

 

 


Sch. 2.01-1 









SCHEDULE 2.04


REINSURANCE AGREEMENTS WITH THIRD PARTIES

THAT MAY BE COMMUTED 


Master Facultative Retrocession Agreement, effective as of September 15, 2003, between XLFA and RAM Reinsurance Company Limited; and Amended and Restated Variable Comprehensive Automatic Treaty, effective as of January 1, 2006,
between XLFA and RAM Reinsurance Company Ltd.


Master Facultative Retrocession Agreement, effective as of December 1, 2004, between XLFA and BluePoint Re, Limited; and Variable Comprehensive Automatic Treaty Retrocession Agreement, effective as of January 1, 2006, between XLFA
and BluePoint Re.


Master Facultative Retrocession Agreement, effective as of January 1, 2003, between XLFA and ACE Capital Re International Ltd.


Variable Comprehensive Automatic Treaty Retrocession Agreement, effective as of January 1, 2007, between XLFA and Assured Guaranty Re Ltd.


Master Facultative Retrocession Agreement, effective as of December 19, 2000, between XLFA and Radian Reinsurance Inc. 


Master Facultative Retrocession Agreement, effective as of October 25, 2002, between XLFA and CDC IXIS Financial Guaranty North America, Inc.


Master Facultative Retrocession Agreement, effective as of May 1, 2003, between XLFA and AMBAC Assurance Corporation.


Master Facultative Retrocession Agreement, effective as of June 1, 2001, between XLFA and Partner Reinsurance Company, Ltd., Zurich Branch. 

 

 

 

 

 

 


Sch. 2.04-1












SCHEDULE 2.05


SCHEDULE 2.05 AGREEMENTS

	
1.          	
Facultative Quota Share Reinsurance Treaty, dated December 31, 1999, as amended, between XLFA and XLI, which was terminated by agreement of the parties, dated July 20, 2006.

  
	 
	
2.          	
Underwriting Agreement, dated July 28, 2006, between XLI, SCA and the Underwriters (as defined therein).

  
	 
	
3.          	
Underwriting Agreement, dated May 15, 2007, between XLI, SCA and the Underwriters (as defined therein).

  
	 
	
4.          	
General Services Agreement, dated as of August 4, 2006, between XLFAS and XLI (surveillance).

  
	 
	
5.          	
The following agreements relating to third-party payment undertaking agreements entered into by certain Affiliate(s) of XL:

  
	 
	 	
(a)          	
Fixed and Floating Charge Agreement, dated December 31, 2001, between XLI and XLFA.

  
	 
	 	
(b)          	
Reimbursement Agreement, dated December 31, 2001, between XLI and XLFA.

  
	 
	 	
(c)          	
Fixed and Floating Charge Agreement, dated September 30, 2002, between XLI and XLFA.

  
	 
	 	
(d)          	
Reimbursement Agreement, dated September 30, 2002, between XLI and XLFA.

  
	 
	 	
(e)          	
Fixed and Floating Charge Agreement, dated December 18, 2003, between XLI and XLFA.

  
	 
	 	
(f)          	
Reimbursement Agreement, dated December 18, 2003, between XLI and XLFA.

  
	 
	
6.          	
The following agreements relating to third-party guaranteed investment contracts entered into by certain Affiliate(s) of XL:

  
	 
	 	
(a)          	
Securities Account Control Agreement, dated July 20, 2006, among XL Asset Funding Company I LLC, XLCA and Mellon Bank, N.A.

  
	 
	 	
(b)          	
Insurance and Indemnity Agreement, dated October 13, 2006, among XLCA, XL Asset Funding Company I LLC, and XL Life and Annuity Holding Company.

  
	 
	 	
(c)          	
Premium Letter Agreement, dated October 13, 2006, among XLCA, XL Asset Funding Company I LLC, and XL Life and Annuity Holding Company.

  
	 



Sch. 2.05-1











	 	
(d)          	
Collateral Pledge, Security and Management Agreement, dated October 13, 2006, between XLCA, XL Asset Funding Company I LLC, XL Life and Annuity Holding Company, and Mellon Bank, N.A.

  
	 
	 	
(e)          	
Omnibus Amendment Agreement, dated November 30, 2007, between XLCA, XL Asset Funding Company I LLC, and XL Life and Annuity Holding Company.

  
	 
	 	
(f)          	
UCC Financing Statement, dated October 13, 2006 between XL Asset Funding Company I LLC (as debtor) and XLCA (as secured party).

  
	 
	
7.          	
Transition Agreement, dated August 4, 2006, among XL, XLI, XLA and SCA, as amended on May 3, 2007, and as further amended as of the Closing Date.

  
	 
	
8.          	
The following agreements relating to total return swaps:

  
	 
	 	
(a)          	
Detroit Metropolitan Wayne County Airport

  
	 
	 	 	
(i)          	
Insurance and Indemnity Agreement between XLCA and XL Asset Funding Company I LLC, dated October 12, 2005.

  
	 
	 	 	
(ii)          	
Premium letter between XLCA and XL Asset Funding Company I LLC, dated October 12, 2005.

  
	 
	 	 	
(iii)          	
Letter of Agreement between XLCA and XL Asset Funding Company I LLC for Economic Risk of Loss, dated October 18, 2005.

  
	 
	 	
(b)          	
Raleigh-Durham, NC Airport

  
	 
	 	 	
(i)          	
Insurance and Indemnity Agreement between XLCA and XL Asset Funding Company I LLC, dated October 12, 2005.

  
	 
	 	 	
(ii)          	
Premium letter between XLCA and XL Asset Funding Company I LLC, dated October 12, 2005.

  
	 
	 	 	
(iii)          	
Letter of Agreement between XLCA and XL Asset Funding Company I LLC for Economic Risk of Loss, dated October 18, 2005.

  
	 
	 	
(c)          	
Metropolitan Washington Airports Authority

  
	 
	 	 	
(i)          	
Insurance and Indemnity Agreement between XLCA and XL Asset Funding Company I LLC, dated October 12, 2005.

  
	 
	 	 	
(ii)          	
Premium letter between XLCA and XL Asset Funding Company I LLC, dated October 12, 2005.

  
	 
	 	 	
(iii)          	
Letter of Agreement between XLCA and XL Asset Funding Company I LLC for Economic Risk of Loss, dated October 18, 2005.

  
	 
	 	
(d)          	
San Diego County Regional Airport Authority

  
	 



Sch. 2.05-2











	 	 	
(i)          	
Insurance and Indemnity Agreement between XLCA and XL Asset Funding Company I LLC, dated December 6, 2005.
  
	 
	 	 	
(ii)          	
Premium letter between XLCA and XL Asset Funding Company I LLC, dated December 6, 2005.
  
	 
	 	 	
(iii)          	
Letter of Agreement between XLCA and XL Asset Funding Company I LLC for Economic Risk of Loss, dated December 6, 2005.
  
	 
	             	
(e)          	
City of Chicago - Chicago Midway Airport
  
	 
	 	 	
(i)          	
Insurance and Indemnity Agreement between XLCA and XL Asset Funding Company I LLC, dated December 6, 2005.
  
	 
	 	 	
(ii)          	
Premium letter between XLCA and XL Asset Funding Company I LLC, dated December 6, 2005.
  
	 
	 	 	
(iii)          	
Letter of Agreement between XLCA and XL Asset Funding Company I LLC for Economic Risk of Loss, dated December 6, 2005.
  
	 
	 	
(f)          	
City of Chicago - Chicago O’Hare International Airport
  
	 
	 	 	
(i)          	
Insurance and Indemnity Agreement between XLCA and XL Asset Funding Company I LLC, dated December 6, 2005.
  
	 
	 	 	
(ii)          	
Premium letter between XLCA and XL Asset Funding Company I LLC, dated December 6, 2005.
  
	 
	 	 	
(iii)          	
Letter of Agreement between XLCA and XL Asset Funding Company I LLC for Economic Risk of Loss, dated December 6, 2005.
  
	 
	 	
(g)          	
Dallas Fort Worth International Airport
  
	 
	 	 	
(i)          	
Insurance and Indemnity Agreement between XLCA and XL Asset Funding Company I LLC, dated January 13, 2006.
  
	 
	 	 	
(ii)          	
Premium letter between XLCA and XL Asset Funding Company I LLC, dated January 13, 2006.
  
	 
	 	 	
(iii)          	
Letter of Agreement between XLCA and XL Asset Funding Company I LLC for Economic Risk of Loss, dated January 13, 2006.
  
	 
	 	
(h)          	
Milwaukee County Wisconsin
  
	 
	 	 	
(i)          	
Insurance and Indemnity Agreement between XLCA and XL Asset Funding Company I LLC, dated January 13, 2006.
  
	 
	 	 	
(ii)          	
Premium letter between XLCA and XL Asset Funding Company I LLC, dated January 13, 2006.
  
	 



Sch. 2.05-3











	 	 	
(iii)          	
Letter of Agreement between XLCA and XL Asset Funding Company I LLC for Economic Risk of Loss, dated January 13, 2006.
  
	 
	             	
(i)          	
State of Alaska International Airports System
  
	 
	 	 	
(i)          	
Insurance and Indemnity Agreement between XLCA and XL Asset Funding Company I LLC, dated January 13, 2006.
  
	 
	 	 	
(ii)          	
Premium letter between XLCA and XL Asset Funding Company I LLC, dated January 13, 2006.
  
	 
	 	 	
(iii)          	
Letter of Agreement between XLCA and XL Asset Funding Company I LLC for Economic Risk of Loss, dated January 13, 2006.
  
	 
	 	
(j)          	
Rhode Island Economic Development Corp Airport
  
	 
	 	 	
(i)          	
Insurance and Indemnity Agreement between XLCA and XL Asset Funding Company I LLC, dated January 13, 2006.
  
	 
	 	 	
(ii)          	
Premium letter between XLCA and XL Asset Funding Company I LLC, dated January 13, 2006.
  
	 
	 	 	
(iii)          	
Letter of Agreement between XLCA and XL Asset Funding Company I LLC for Economic Risk of Loss, dated January 13, 2006.
  
	 


 

 

 

 

 

 

 

 

 

 

Sch. 2.05-4








SCHEDULE 2.06(a) 


SCA PARTIES RECEIVING A PORTION OF THE CASH CONSIDERATION AMOUNT


 

 

 

[Intentionally omitted—superseded by

Amendment No. 1 to Master Transaction Agreement]

 

 

 

 

 

 

 

 

 

 

 


Sch. 2.06(a)-1 









SCHEDULE 2.06(b)


SCA PARTIES RECEIVING A PORTION OF THE STOCK CONSIDERATION 


 

 

 

[Intentionally omitted—superseded by

Amendment No. 1 to Master Transaction Agreement]

 

 

 

 

 

 

 

 

 

 

 

Sch. 2.06(b)-1









SCHEDULE 9.02


ADDRESSES FOR THE CDS COUNTERPARTIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Sch. 9.02-1









	Bank of America, N.A. 
	Address: 	901 Main St., 66th floor,
        Dallas, TX 75202 
	Fax: 	(214) 290-8314 
	Attention:                     	John W. Woodiel, Senior Vice President 
	 
	Barclays Bank PLC 
	Address: 	200 Park Avenue, New York, NY 10166 
	Email: 	mark.manski@barcap.com 
	Attention: 	Mark Manski 
	 
	Canadian Imperial Bank
          of Commerce 
	Address: 	199 Bay Street, Commerce Court West,
        6th floor, 
	 	Toronto, Ontario, M5L 1A2, Canada 
	Fax: 	(416) 214-8749 
	Attention: 	Frank deVries, Vice-President 
	Copy to: 	199 Bay Street, Commerce Court West,
        11th floor, 
	 	Toronto, Ontario, M5L 1A2, Canada 
	 	Attention: Frank Vivacqua, Assistant
        General Counsel 
	 	Fax: (416) 304-4573 
	 
	Deutsche Bank AG London
          Branch 
	Address: 	60 Wall Street - 11th Floor, New
        York, NY 10005 
	Fax: 	(212) 797-5695 
	Attention: 	Keith Braun, Managing Director,
        Workout 
	Copy to: 	Robert Lee, Director, Legal 
	 	Fax: (732) 578-5271 
	 
	Dresdner Bank AG, London
          Branch 
	Address: 	30 Gresham Street, London EC2P 2XY,
        England 
	Fax: 	+44 870 889 6904 
	Attention: 	Transaction Legal Team 
	Copy to: 	Ivor Wolk 
	 	Fax: (212) 969-7944 
	 
	Hypo Public Finance
          Bank AG 
	Address: 	3 Harbourmaster Place, IFSC, Dublin
        1, Ireland 
	Attention: 	Heather Nesbitt 
	Fax: 	+353 1 611 6183 
	 
	Copies to: 	Nancy Henderson, NY, USA 
	Fax: 	(212) 905-4700 
	 	Tom Glynn, Munich, Germany 
	Fax: 	+49 89 20 30 07 772 


 

Sch. 9.02-2








	Lehman Brothers Inc. 
	Address: 	745 Seventh Avenue,
        8th Floor, New York, NY 10019 
	Fax: 	(646) 758-2211 
	Attention:                     	Daniel J. Sullivan 
	 
	Nomura International
          plc 
	Address: 	1 St Martin’s le-Grand, London
        EC1A 4NP, England 
	Fax: 	+44 207 521 2391 
	Attention: 	Matthew Wadhams/Robert Eveleigh, 
	 	Transaction Legal Derivatives 
	Copy to: 	Douglas Bartner 
	 	Shearman & Sterling LLP 
	 	Fax: (212) 848-7179 
	 
	Royal Bank of Canada 
	Address: 	200 Royal Bank Plaza 
	 	200 Bay St., 2nd Floor,
        Toronto 
	 	Ontario, Canada M5J 2W7 
	Fax: 	(416) 842-4334 
	Attention: 	Matthew Gilchrist 
	 	matthew.gilchrist@rbccm.com 
	 
	The Royal Bank of Scotland 
	Address: 	The Royal Bank of Scotland plc 
	 	c/o Greenwich Capital Markets, Inc. 
	 	600 Steamboat Road 
	 	Greenwich, CT 06830 
	Fax: 	(203) 422-4096 
	Attention: 	Legal Department (Andrew Kwok) 
	 
	Société Générale 
	Address: 	1221 Avenue of the Americas, New
        York, New York 
	10020 	 
	Fax: 	(212) 278-7614 
	Attention: 	Edith Hornick 
	Copy to: 	Richard Stern 
	 	Luskin, Stern & Eisler LLP 
	 	Fax: (212) 293-2705 


 

Sch. 9.02-3








	UBS AG, London branch 
	Address: 	677 Washington Boulevard,
        Stamford, Connecticut 06901 
	Fax: 	(203) 719-0680 
	Attention:                     	Bryan Murtagh 
	 
	Copy to: 	Jamie Tramontana 
	Address 	1285 Avenue of the Americas, 11th Floor,
        New York, NY 
	 	10019-6031 
	Fax: 	(212) 713-1153 
	 
	Copy to: 	Rick B. Antonoff 
	 	Pillsbury Winthrop Shaw Pittman
        LLP 
	Address 	1540 Broadway, New York, NY 10036-4039 
	 	Fax: (212) 858-1500 
	 
	Wachovia Bank, National
          Association 
	Address: 	301 S. College St. NC0630, Charlotte,
        N.C. 28288 
	Fax: 	(267) 321-6903 
	Attention: 	Helen Wessling 
	Copy to: 	Gene Wood 
	Fax: 	(704) 374-4881 
	 	and 
	 	Doug Mundell 
	Fax: 	(704) 383-1383 


 

 

Sch. 9.02-4







SCA PARTIES’ DISCLOSURE SCHEDULE

 


          This
document (the “SCA Parties’ Disclosure Schedule”) has been
delivered by the SCA Parties to the XL Parties and the CDS Counterparties concurrently
with the execution of the  Master Commutation, Release and Restructuring Agreement
(the “Agreement”), dated as of July 28, 2008, by and among the XL
Parties, the SCA Parties and the CDS Counterparties. Capitalized terms used,
but not otherwise defined, in the SCA  Parties’ Disclosure Schedule shall
have the meanings set forth in the Agreement. 


          Any
matter that is disclosed in any section of the SCA Parties’ Disclosure
Schedule will be deemed to be a disclosure for all purposes of the Agreement
to the extent that the relevance of such  matter to other sections of the Agreement
is reasonably apparent. 


          The
disclosure of any matter in any section of the SCA Parties’ Disclosure
Schedule will expressly not be deemed to constitute an admission by any Party
to the Agreement, or to otherwise imply,  that any such matter is material for
the purposes of the Agreement or otherwise, or that any such matter is required
to be disclosed pursuant to the Agreement or otherwise. 


          The
heading and title references in the SCA Parties’ Disclosure Schedule are
for convenience purposes only, do not constitute a part of the SCA Parties’ Disclosure
Schedule and shall not  be deemed to limit or affect anything contained herein. 

 

 

 

 

 

 

 

 

 

 











SECTION 3.02


CONFLICTS


Financial Guaranty Facultative Reinsurance Agreement, effective October 24, 2007, between MBIA Insurance Corporation, Armonk, New York, and XLCA.


Comprehensive Automatic Treaty Reinsurance Agreement, effective July 1, 2003, as amended by Amendment No. 1 to the Comprehensive Automatic Treaty Reinsurance Agreement, effective July 1, 2003, between MBIA Insurance Corporation,
Armonk, New York; and/or MBIA Assurance S.A., Paris France; and/or any other monoline insurance or reinsurance company subsidiary of MBIA Inc. listed in Exhibit 1 attached thereto and XLFA.


Facultative Reinsurance Agreement, dated as of December 1, 2006, between Financial Guaranty Insurance Company and XLFA.


Financial Guaranty Master Facultative Reinsurance Agreement, effective January 1, 2005, between MBIA Insurance Corporation, Armonk, New York; and/or MBIA Assurance S.A., Paris, France; and/or MBIA UK Insurance Limited, London,
England; and/or any other insurance or reinsurance company subsidiary of MBIA Inc. listed in Exhibit 1 attached thereto and XLFA.


Credit Agreement, dated as of August 1, 2006, among SCA, XLCA, XLFA, the various lenders from time to time party thereto and Citibank, N.A., as administrative agent (as the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof). 

 

 

 

 

 

 

 

 

 


Section 3.02-1












SECTION 3.03


GOVERNMENTAL CONSENTS AND APPROVALS


Approval of the New York Insurance Department 


Approval of the Bermuda Monetary Authority 


Approval of the United Kingdom Financial Services Authority


Approval of the Delaware Insurance Department 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Section 3.03-1












SECTION 3.05


COMPLIANCE WITH LAWS


An Undertaking of XLFA, dated as of April 11, 2008, addressed to the Bermuda Monetary Authority. 


A letter, dated as of May 20, 2008, from XLCAUK to Financial Services Authority, Re: XL Capital Assurance (U.K.) Limited. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Section 3.05-1












XL PARTIES’ DISCLOSURE SCHEDULE

 


                    This document (the “XL Parties’ Disclosure Schedule”) has been delivered by the XL Parties to the SCA Parties and the CDS
Counterparties concurrently with the execution of the Master Commutation, Release and Restructuring Agreement (the “Agreement”), dated as of July 28, 2008, by and among the XL
Parties, the SCA Parties and the CDS Counterparties. Capitalized terms used, but not otherwise defined, in the XL Parties’ Disclosure Schedule shall have the meanings set forth in the Agreement. 


                    Any matter that is disclosed in any section of the XL Parties’ Disclosure Schedule will be deemed to be a disclosure for all purposes of the Agreement to the extent that the relevance of such
matter to other sections of the Agreement is reasonably apparent. 


                    The disclosure of any matter in any section of the XL Parties’ Disclosure Schedule will expressly not be deemed to constitute an admission by any Party to the Agreement, or to otherwise imply,
that any such matter is material for the purposes of the Agreement or otherwise, or that any such matter is required to be disclosed pursuant to the Agreement or otherwise. 


                    The heading and title references in the XL Parties’ Disclosure Schedule are for convenience purposes only, do not constitute a part of the XL Parties’ Disclosure Schedule and shall not be
deemed to limit or affect anything contained herein. 

 

 

 

 

 

 

 

 

 











SECTION 4.02

 


CONFLICTS

	
1.          	
Credit Agreement among XL, XLA, XLI, and XL RE LTD (collectively, the “Account Parties”); JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the “Administrative
Agent”); and the Lenders party thereto, with respect to the Credit Agreement, dated as of June 21, 2007, (as may be amended, supplemented or otherwise modified from time to time, the “Credit Agreement”) entered into among the
Account Parties, the Administrative Agent and the other institutions from time to time party thereto as Lenders.

  
	 
	
2.          	
Credit Agreement among XL, XLA, XLI, and XL RE LTD (collectively, the “Obligors”); JPMORGAN CHASE BANK, N.A. (as successor to Bear Stearns Corporate Lending Inc.), as administrative agent (in such
capacity, the “Administrative Agent”); and the Lenders party thereto, with respect to the Credit Agreement, dated as of August 3, 2005, (as may be amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”) entered into among the Obligors, the Administrative Agent and the other institutions from time to time party thereto as Lenders.

  
	 
	
3.          	
Five-Year Credit Agreement among XL, XLA, XLI, and XL RE LTD (collectively, the “Account Parties”); JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the “Administrative
Agent”); and the Lenders party thereto, with respect to the Credit Agreement, dated as of June 22, 2005, (as may be amended, supplemented or otherwise modified from time to time, the “Credit Agreement”) entered into among the
Account Parties, the Administrative Agent and the other institutions from time to time party thereto as Lenders.

  
	 
	
4.          	
Letter of Credit Facility among XL (the “Account Party”), the Guarantors (collectively, with the Account Party, the “Obligors”), and CITIBANK INTERNATIONAL PLC, as agent and trustee for
the Lenders (in such capacity, the “Agent”), with respect to the Letter of Credit Facility and Reimbursement Agreement, dated November 14, 2007, (as may be amended, supplemented or otherwise modified from time to time, the
“Facility Agreement”) entered into among the Obligors, the Agent and the other institutions from time to time party thereto as Lenders.

  
	 
	
5.          	
Note Purchase Agreement, dated April 12, 2001, among XL, XLA, XLI, XL RE LTD, and each of the Purchasers named therein.

  
	 


 

 

 

Section 4.02-1











SECTION 4.03


GOVERNMENTAL CONSENTS AND APPROVALS


Approval of the New York State Insurance Department 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Section 4.03-1












SECTION 4.04(a)

 


XL CAPITALIZATION

	
XL has authorized 999,990,000 Ordinary Shares. As of July 28, 2008, there were 179,064,757 outstanding Class A Ordinary Shares, $0.01 par value per share

	
1,000,000 Series E Preference Ordinary Shares are issued and outstanding.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Section 4.04(a)-1