SECTION1. Recitals. The recitals set forth above are hereby incorporated into thisAgreement.     SECTION2. Defined Terms. Capitalized terms used but not defined herein shall have the meaningset forth in the Master Agreement and the Confirmation, provided that if terms are defined in boththe Master Agreement and the Confirmation, the definition provided in the Confirmation shallcontrol.     SECTION3. Collateral. SALIC and HSBC agree and acknowledge that HSBC shall continue to haverights pursuant to the Master Agreement and the Confirmation with respect to the US$25,000,000which is currently held as Eligible Collateral as Credit Support under the Master Agreement. HSBCshall be entitled to take any action with respect to such amount as may be permitted under theMaster Agreement and Confirmation.     SECTION4. Forbearance. Subject to the terms and conditions of this Agreement, including thetimely remittance of amounts due pursuant to Sections 4.12, 5.10, 5.15, 5.16, 5.22, 5.23 and 5.24,HSBC agrees that during the Forbearance Period, HSBC will not seek to require the posting of,and/or make any request or demand for, any additional Eligible Collateral as Credit Support underthe Master Agreement and the Confirmation. The Forbearance Period shall terminate if any of theevents set forth in Section 4.1 through 4.15 has occurred.     Section 4.1 Trigger Event. The occurrence after the date hereof of any trigger event(other than as a result of a downgrade by Standard & Poor’s Ratings Services, a division ofThe McGraw-Hill Companies, Inc. (“S&P”) or Moody’s Investors Services, Inc. (“Moody’s”) ofthe insurer financial strength rating assigned to SALIC or any of its affiliates), event ofdefault or any early termination event (each as defined in the relevant agreement), underthat certain Coinsurance Retrocession Agreement (Treaty Number 8074) effective as ofDecember 22, 2005 (the “Coinsurance Agreement”), by and between Scottish (Dublin) andScottish Re (U.S.), Inc. (“Scottish (U.S.)”), the Security Agreement dated December 22,2005 (the “Security Agreement”) by and between Scottish(Dublin) and the STructured AssetRepackaged Trust II, 2005-A (the “STARTS Trust”), the Master Agreement, the Confirmation orthe August 4, 2006, Letter Agreement.     Section 4.2 Litigation. Any litigation, case, proceeding or similar action isinstituted or brought against SALIC, SRGL or any of SRGL’s direct or indirect subsidiaries(collectively, the “Scottish Parties” and each a “Scottish Party”) (other than by HSBCunder the Master Agreement) to collect upon or enforce any indebtedness equal to orexceeding US$25,000,000 of any Scottish Party that individually or in the aggregate, ifdetermined adversely, would reasonably be expected to adversely affect the rights of or theability to collect payment by HSBC or the STARTS Trust under the Covered Agreements.     Section 4.3 Covenants. The failure by SALIC, SRGL or any of their respectiveaffiliates to comply with any of the covenants contained in Section 5 of this Agreement.
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     Section 4.4 Liquidity. The failure by SRGL or SALIC to maintain liquidity in accordance withthe applicable liquidity requirements set forth on Schedule 4.4.     Section 4.5 Bankruptcy. SRGL, SALIC, Scottish (Dublin) or Scottish (U.S.) (i) is dissolved(other than pursuant to a consolidation, amalgamation or merger); (ii) becomes insolvent or isunable to pay its debts or fails or admits in writing in a judicial, regulatory or administrativeproceeding or filing its inability generally to pay its debts as they become due; (iii) makes ageneral assignment, arrangement or composition with or for the benefit of its creditors; (iv)institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcyor any other relief under any bankruptcy or insolvency law or other similar law affectingcreditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the caseof any such proceeding or petition instituted or presented against it; (v) has a resolution passedfor its winding-up, official management or liquidation (other than pursuant to a consolidation,amalgamation or merger); (vi) seeks or becomes subject to the appointment of an administrator,provisional liquidator, conservator, receiver, rehabilitator, supervisor, trustee, custodian orother similar official for it or for all or substantially all its assets; (vii) has a secured partytake possession of all or substantially all its assets or has a distress, execution, attachment,sequestration or other legal process levied, enforced or sued on or against all or substantiallyall its assets; (viii) voluntarily agrees to become subject to a consent order or other voluntarybinding agreement that has the effect of a consent order with any regulatory authority; or (ix)causes or is subject to any event with respect to it which, under the applicable laws of anyapplicable jurisdiction, has an analogous effect to any of the events specified in clauses (i) to(ix) (inclusive).     Section 4.6 Dividend Payments. SRGL or SALIC declares any cash dividend, return of capital,capital distribution or similar payment; provided that the foregoing shall not limit any suchdividend, return of capital, capital distribution or similar payment solely made between SRGL andSALIC.     Section 4.7 Contractual Rights Under Sale Agreements. SRGL fails to maintain in place one ormore written enforceable agreements which provide for aggregate minimum sale net cash proceeds tobe received by SRGL or SALIC on the date such sale is consummated of at least (i) US$6,000,000 inconnection with the sale of its wealth management business (the “Wealth Management Business”) and(ii) US$65,000,000 in connection with the sale of its international life reinsurance business (the“International Business”).     Section 4.8 Sales of Blocks of Business. With respect to SRGL’s sale of the Wealth ManagementBusiness, the International Business or its North America life reinsurance business (the “NorthAmerica Business”), (i) SRGL is denied in writing any required consents or approvals for suchsales, including, but not limited to, the approvals or consents of the shareholders of SRGL(“Shareholder Approval”), the approvals or consents of any relevant regulatory authority or anymaterial third party or (ii) SALIC or SRGL amends or terminates any definitive documentationrelating to such sales withoutthe prior written consent of HSBC, if such amendments would reasonably be expected toadversely affect the rights of or the ability to collect payment by HSBC or the STARTS
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Trust under the Covered Agreements.     Section 4.9 Material Adverse Change. A material adverse change occurs with respect to SRGL,SALIC, Scottish (Dublin) or Scottish (U.S.) on or after the date of this Agreement that reasonablywould be expected to adversely affect the rights of or the ability to collect payment by HSBC orthe STARTS Trust under the Covered Agreements.     Section 4.10 Formula Amount. Scottish (Dublin) fails to maintain in Reinsurance Trust AccountA an amount at least equal to the sum of the Formula Amount (as defined in the CoinsuranceAgreement) in accordance with the applicable provisions of the Coinsurance Agreement.     Section 4.11 Other Obligations. Any Scottish Party fails to perform any of its obligationsunder or is not in compliance with any agreement or transaction to which it is a party, including,but not limited to, (i) in connection with the capital markets collateral facility with StingrayInvestor Trust (the “Stingray Facility”), (ii) under any funding agreement issued in connectionwith any repackaging or resecuritization special purpose vehicle (“SPV”) (each, a “FundingAgreement Facility”) or (iii) relating to securitization transactions to fund Regulation XXXreserve requirements for business ceded by a Scottish Party and reinsured by Ballantyne Re plc (the“Ballantyne XXX Facility”), Orkney Re, Inc., Orkney Re II plc (the “Orkney II XXX Facility”),Clearwater Re Limited (the “Clearwater XXX Facility”) or any other party in a similar transactionand, in each case, (A) such failure would reasonably be expected to adversely affect the rights ofor the ability to collect payment by HSBC or the STARTS Trust under the Covered Agreements or (B)such failure would constitute an event of default or event that with the passage of time or noticeor both would constitute an event of default with respect to the Stingray Facility, a FundingAgreement Facility or the Clearwater XXX Facility.     Section 4.12 Sale of Assets. Any Block of Business Sale (as defined in Section 5.10) orrecapture by any Scottish Party of any block of business occurs which constitutes more than fivepercent (5%) of the associated United States statutory reserves attributable to the North AmericaBusiness (as detailed on page 4, Tables 1 and 2, of the Actuarial Appraisal developed by theScottish Parties in connection with the sale of the North America Business and attached hereto asExhibit A), in any one or more related transactions without the prior written consent of HSBC,which consent shall be requested prior to the execution of the definitive documentation; providedthat the foregoing limitation shall in no event prohibit the Scottish Parties from transferring theassets currently funded under and terminating the liabilities related to the Clearwater XXXFacility, in whole but not in part, including the underlying insurance policies and all paymentsdue thereon to a third party (the “Clearwater Block”) without the consent of HSBC so long as (1)the aggregate amounts paid to the Clearwater Lenders (as defined below) and any third parties inconnection with the termination of all of the liabilities related to the Clearwater XXX Facility donot exceed the current assets funded under the Clearwater XXX Facility, (2) such transfer andtermination does not, in the aggregate,negatively impact the liquidity profile of SRGL or SALIC, (3) HSBC is notified within one (1)Business Day of the Scottish Parties agreeing to transfer the Clearwater Block,
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including the terms and conditions thereof; provided, however, that such notification must actuallybe received by HSBC promptly but no later than 5 p.m. (Prevailing Eastern Time) on the Business Daybefore the consummation of such transfer or termination of the Clearwater Block and (4) HSBC shallreceive, on the same day as such transfer or termination of the Clearwater Block is consummated, anamount of Eligible Collateral as Credit Support under the Master Agreement and the Confirmationequal to fifty percent (50%) of any and all amounts transferred or otherwise funded to theClearwater Lenders or Clearwater Re Limited, whether as collateral, capital or any other type ofpayment made to the surplus account at Clearwater Re Limited, in connection with the ClearwaterForbearance Agreement (as defined in Section 4.13 below).     Section 4.13 Clearwater Forbearance Agreement. The termination or amendment of theforbearance agreement with Citibank N.A. and Calyon New York Branch (together, the “ClearwaterLenders”) with respect to the Clearwater XXX Facility (the “Clearwater Forbearance Agreement”)prior to the end of the Forbearance Period, other than in connection with a termination andsatisfaction in full, or assignment, transfer or other solution pursuant to which the ScottishParties are relieved from continuing obligations to the Clearwater Lenders.     Section 4.14 Representations. Any of the representations in Section 10 was not true when made.     Section 4.15 RBC. Except with respect to contractual payments or contributions requiredpursuant to written agreements currently in effect as of the date hereof (unless as otherwise setforth in Schedule 4.15) of the types generally described on Schedule 4.15 of this Agreement (eachsuch payment, a “Permitted Contractual Payment”), on or after July 31, 2008, SALIC or SRGL makesany payment or contribution, directly or indirectly, to (i) any special purpose reinsurance companyor SPV (ii) (a) Scottish (U.S.), which payment or contribution would cause Scottish (U.S.)’s totaladjusted capital to exceed one hundred fifty percent 150% of its company action level risk-basedcapital as determine pursuant to the laws of the State of Delaware (“CAL RBC”), (b) Scottish(Dublin), which payment or contribution would cause Scottish (Dublin)’s solvency margin to exceedone hundred fifty percent 150% of its targeted level, or (c) Scottish Re Life Corporation(“Scottish Re Life”), which payment or contribution would cause Scottish Re Life’s total adjustedcapital to exceed one hundred seventy five percent 175% of its CAL RBC, in each case, as such totaladjusted capital or funds available for solvency, as applicable, is based upon an estimatedcalculation determined in good faith and in accordance with the requirements set forth for suchcalculations by the applicable Scottish Party’s domiciliary regulatory authority, as of the datesuch funding is made; it being understood that no Scottish Party identified in this clause (ii)shall be obligated to reduce its capital to the extent that as of the date of this Agreement, suchScottish Party has capital in excess of the applicable percentage set forth in clauses (ii)(a)through (c) of this Section 4.15. For the avoidance of doubt, no capital contribution or otherpayment relating to reserve strengthening or cash flow analysis will be deemed a PermittedContractual Payment for the purposes of this Section 4.15.
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If the Forbearance Period has not been terminated prior to 11:59 p.m. (prevailing Eastern Time) onDecember 15, 2008, it shall terminate on 11:59 p.m. (prevailing Eastern Time) on December 15, 2008.SECTION5. SALIC Covenants. During the Forbearance Period, SALIC shall comply with thefollowing covenants:     Section 5.1 Delivery of Information. SALIC shall, and shall cause its affiliates to,furnish (i) promptly but not later than five (5) Business Days following the request toHSBC and its advisors and attorneys all information in the possession of SALIC or any ofits affiliates reasonably requested by HSBC, and (ii) within a reasonable time, othersummaries and reports as are reasonably requested by HSBC relating to (A) the financialcondition, (B) regulatory matters and related correspondence, (C) litigation, (D) noticefrom the government of the United States or any other nation, or any political subdivisionthereof, whether state or local, and any agency, authority, instrumentality, regulatorybody, court, central bank or other entity exercising executive, legislative, judicial,taxing, regulatory or administrative powers or functions of or pertaining to government(including any supra-national bodies such as the European Union or the European CentralBank) (each, a “Governmental Authority”), (E) sale process or (F) strategic direction, ineach case, with respect to any Scottish Party. HSBC will send all requests under thisSection 5.1 in writing to SALIC (such requests may be sent toHSBC.forbearance@scottishre.com with a copy to Gregg Klingenberg (such copy may be sent togregg.klingenberg@scottishre.com). SALIC shall provide a weekly summary of the status ofthe North America Business sale process, and SALIC shall provide a copy of the bidsreceived in connection with such sale process within three (3) Business Days of receipt byany Scottish Party. SALIC shall provide HSBC with bi-weekly updates (which may betelephonic) regarding material litigation affecting SALIC, SRGL, Scottish (U.S.) orScottish (Dublin); provided that, solely with respect to the bi-weekly updates regardingmaterial litigation and solely to the extent a portion of the information furnished bySALIC to HSBC in connection therewith would reasonably be deemed to be covered by attorneyclient privilege (such information, the “Privileged Information”), unless HSBC enters intoa specific confidentiality and common interest agreement in relation to such PrivilegedInformation, in a form reasonably acceptable to HSBC and SRGL, such updates will be limitedto the discussion of information other than Privileged Information. SALIC shall provide toHSBC notice within two (2) Business Days of any material changes with respect to theinformation covered under this Section 5.1.     Section 5.2 Access to Data Room. On and after the date hereof, SALIC shall provideHSBC access to all information in any data room prepared and maintained for prospectivepurchasers of any Scottish Party; provided that HSBC hereby acknowledges that access tocertain portions of any such data room or to certain documents therein may be madecontingent upon the execution by HSBC of certain reasonably requested third-party consentsor waivers. For the avoidanceof doubt, the parties acknowledge that the Scottish Parties shall have no obligationto maintain any such data room for the purposes of this Agreement.     Section 5.3 Bi-Weekly Liquidity Projections. SALIC shall, and shall cause
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SRGL to, furnish liquidity projections substantially in the form of the current liquidity scheduleprovided to HSBC (a copy of which is attached as Exhibit B hereto) and information with respect tothe variance of the most recent bi-weekly liquidity projection to the bi-weekly liquidityprojection previously provided (i) promptly but not later than three (3) calendar days after anymaterial change in the liquidity profile of SRGL or SALIC since the most recent liquidityprojection delivered to HSBC and (ii) promptly but not later than every other Thursday of everycalendar month beginning on July 3, 2008, showing updated liquidity projections with respect toSRGL and SALIC for the next succeeding twelve calendar months, certified by any of the chiefexecutive officer, president, chief financial officer, executive vice president, treasurer, anydirector, manager or authorized officer (as appointed by the relevant board of directors) (each, a“Responsible Officer”) of SRGL or SALIC, and reviewed by a Responsible Officer of FTI Consulting,Inc. who has knowledge of and is familiar with matters relating to the liquidity of SRGL and SALIC,to the effect that such updated liquidity projections are fairly stated in all material respects;provided that, if such liquidity projections are not delivered as set forth in this Section, SALICshall have a two (2) day cure period to remedy the non-delivery.     Section 5.4 Forbearance Milestones. SALIC shall, and shall cause its affiliates to, (i)furnish to HSBC, promptly but not later than 11:59 p.m. (prevailing Eastern Time) on June 30, 2008,unaudited other-than-temporary impairment amounts for SRGL for the year ended and as of December31, 2007, calculated in accordance with generally accepted accounting principles in the UnitedStates (“GAAP”), and the resulting effects of such amounts on the liquidity of SRGL, (ii) file withthe Securities and Exchange Commission, or any Governmental Authority succeeding to any of itsprincipal functions (the “SEC”), SRGL’s audited financial statements for the year ended December31, 2007 and Annual Report on Form 10-K not later than 5 p.m. (prevailing Eastern Time) on July 15,2008 with respect to SRGL, (iii) provide to HSBC, upon execution of this Agreement, unauditedfinancial statements prepared in accordance with GAAP for the year ended December 31, 2007 withrespect to SRGL, (iv) provide to HSBC promptly but not later than 5 p.m. (prevailing Eastern Time)on July 31, 2008, audited financial statements prepared in accordance with GAAP for the year endedDecember 31, 2007 with respect to SALIC, (v) furnish to HSBC, promptly but not later than 5 p.m.(prevailing Eastern Time) on August 31, 2008, unaudited financial statements prepared in accordancewith GAAP for the three month period ended March 31, 2008 with respect to SRGL and SALIC, (vi)furnish to HSBC, promptly but not later than 5 p.m. (prevailing Eastern Time) on September 30,2008, unaudited financial information prepared in accordance with GAAP for the three month periodended June 30, 2008 with respect to SRGL and SALIC, (vii) furnish to HSBC, promptly but not laterthan 5 p.m. (prevailing Eastern Time) on November 30, 2008, the unaudited financial statementsprepared in accordance with GAAP for the period ended September 30, 2008 with respect to SRGL andSALIC, (viii) furnish to HSBC, promptly but not later than 5 p.m. (prevailing Eastern Time) on July15, 2008, a copy of the binding letter of intent entered into between certain Scottish Parties andone or more of ING North America Insurance Corporation, ING America Insurance Holdings, Inc.,Security Life of Denver Insurance Company (“SLD”) and Security Life of Denver International Ltd(collectively, the “ING Parties”) to effect a
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partial recapture and reinsurance transaction, effective as of June 30, 2008 (the “Recapture”), ofthe business ceded by Scottish (U.S.) to the Ballantyne XXX Facility, (ix) execute all definitivedocumentation and consummate the Recapture, promptly but not later than 5 p.m. (prevailing EasternTime) on August 15, 2008 with an effective date not later than June 30, 2008, and permit HSBC toreview any and all documentation relating to the Recapture, (x) furnish to HSBC, promptly but notlater than 5 p.m. (prevailing Eastern Time) on September 30, 2008, a copy of the binding letter ofintent entered into between certain Scottish Parties and one or more ING Parties to effect theassignment to SLD of Scottish (U.S.)’s interests in the reinsurance agreement and reinsurance trustagreement between Scottish (U.S.) and Ballantyne Re plc (the “Assignment Transaction”), (xi)execute all definitive documentation and consummate the Assignment Transaction, promptly but notlater than 5 p.m. (prevailing Eastern Time) on November 15, 2008 with an effective date not laterthan September 30, 2008, and permit HSBC to review any and all documentation relating to theAssignment Transaction and (xii) execute all definitive documentation and consummate the ClearwaterForbearance Agreement on terms reasonably satisfactory to HSBC (including, for the avoidance ofdoubt, terms relating to any existing event of default under the Clearwater XXX Facility), promptlybut not later than 11:59 p.m. (prevailing Eastern Time) on June 30, 2008, and, immediately upon theexecution of this Agreement, furnish to HSBC a true, correct and complete copy of the ClearwaterForbearance Agreement.     Section 5.5 Wealth Management Business Milestones. SALIC shall, and shall cause SRGL to, withrespect to the sale of the Wealth Management Business, (i) obtain Shareholder Approval, ifnecessary, promptly but not later than 5 p.m. (prevailing Eastern Time) on July 1, 2008, (ii)obtain all required regulatory approvals and other required consents promptly but not later than 5p.m. (prevailing Eastern Time) on July 15, 2008, and (iii) consummate such sales, and actuallyreceive net cash proceeds from such sales of at least US$6,000,000 not later than 5 p.m.(prevailing Eastern Time) on July 15, 2008.     Section 5.6 International Business Milestones. SALIC shall, and shall cause SRGL to, withrespect to the sale of the International Business, (i) obtain Shareholder Approval, if necessary,promptly but not later than 5 p.m. (prevailing Eastern Time) on July 31, 2008, (ii) obtain allrequired regulatory approvals and other required consents promptly but not later than 5 p.m.(prevailing Eastern Time) on September 20, 2008, and (iii) consummate such sales, and actuallyreceive net cash proceeds from such sales of at least US$65,000,000 (other than with respect to theInternational Business relating to SALIC, Singapore branch) not later than 5 p.m. (prevailingEastern Time) on September 20, 2008.     Section 5.7 North America Business Milestones. SALIC shall, and shall cause SRGL to, withrespect to the sale of the North America Business, (i) obtain binding offers to purchase the NorthAmerica Business by 5 p.m. (prevailing Eastern Time) on July 31, 2008, (ii) select a bidder withwhich to proceed on an exclusive basis not later than 5 p.m. (prevailing Eastern Time) on August 8,2008, (iii) execute all definitive documentation with such bidder promptly but not later than 5p.m. (prevailing Eastern Time) onSeptember 15, 2008, and furnish substantially final drafts of such definitive documentation toHSBC at least one (1) Business Day prior to the execution, (iv) obtain
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Shareholder Approval, if necessary, promptly but not later than 5 p.m. (prevailing Eastern Time) onNovember 30, 2008, (v) obtain all required regulatory approvals and other required consents,including, but not limited to, consents from cedents and reinsurers, as applicable, promptly butnot later than 5 p.m. (prevailing Eastern Time) on November 30, 2008 and (vi) consummate suchsale(s) not later than 5 p.m. (prevailing Eastern Time) on December 15, 2008.     Section 5.8 Non-Contractual Payments, Distributions, Redemptions or Restructurings. SALICshall, and shall cause its affiliates to, (i) not make any payments (except for PermittedContractual Payments), distributions of funds or assets (including posting or delivering ofcollateral), redemptions or restructurings in connection with or involving any Scottish Party(including any securitization transactions used to fund Regulation XXX reserve requirements)without the consent of HSBC in its sole discretion and (ii) permit HSBC to review any and alldocumentation relating to any non-contractual payments, distributions, redemptions orrestructurings approved by HSBC; provided, however, that the foregoing limitation shall not applyto (A) amounts paid or distributed by SRGL, including indemnification payments to certainunderwriters named as defendants (other than such underwriters’ legal fees), in settlement of the2006 securities class action lawsuit in which SRGL and certain of its former officers and directorsare named defendants, to the extent such amounts, individually or in the aggregate, do not have anegative impact of more than US$3,000,000 on the liquidity of SRGL and/or SALIC and (B) payments inrespect of each of the Recapture and the Assignment Transaction, provided such payments do not, inthe aggregate, negatively impact the liquidity profile of SRGL or SALIC in an amount exceedingUS$1,500,000 in addition to the amounts already reflected in the current liquidity scheduleprovided to HSBC.     Section 5.9 HSBC XXX Facility. SALIC shall, and shall cause its affiliates to, cause anypurchaser of any block of the business of any Scottish Party which is part of the reserves financedby the STARTS Trust or includes any obligation of any Scottish Party to HSBC or the STARTS Trustunder the Covered Agreements and any other documentation with respect to any agreement between HSBCand a Scottish Party (collectively and together with the Coinsurance Agreement, the “HSBC XXXFacility”), to (a) assume all the obligations of any Scottish Party to HSBC or the STARTS Trustunder the HSBC XXX Facility, provided that HSBC must be satisfied in its sole discretion with theidentity of the party assuming such obligations and the terms and other aspects of such assumption,(b) redeem the HSBC XXX Facility in full at a price determined by HSBC calculated in accordancewith the terms of the Transaction Documents and this Agreement, or (c) arrange for SALIC to makereasonable and adequate provisions, other than through the assumption or redemption set forth inthe foregoing clauses (a) and (b), respectively, with respect to the HSBC XXX Facility to HSBC’ssatisfaction in its sole discretion.     Section 5.10 Application of Proceeds. Except with respect to the sale of the InternationalBusiness or the Wealth Management Business, SALIC shall, and shall causeits affiliates to, (i) deposit an amount equal to twenty five percent (25%) of the SaleProceeds (as defined below) into Reinsurance Trust Account B and (ii) use an amount
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equal to the lesser of the outstanding balance under the Clearwater XXX Facility or Twenty fivepercent (25%) of the Sale Proceeds (as defined below) to deposit into the surplus account ofClearwater Re Limited in connection with the Clearwater Forbearance Agreement, in each case,promptly but not later than 5 p.m. (prevailing Eastern Time) on the second (2nd)Business Day following the consummation of the sale by any Scottish Party of any block of businessof any Scottish Party (each such sale, a “Block of Business Sale”) which does not include the HSBCXXX Facility or the Clearwater XXX Facility; provided, however, that if a Block of Business Saleincludes the Clearwater XXX Facility but does not include the HSBC XXX Facility, SALIC shall, andshall cause its affiliates to, deposit fifty percent (50%) of the Sale Proceeds (as defined below)into Reinsurance Trust Account B promptly but not later than 5 p.m. (prevailing Eastern Time) onthe second (2nd) Business Day following the consummation of such Block of Business Sale.Notwithstanding anything in this Section 5.10 to the contrary, prior to the redemption in full ofthe Clearwater XXX Facility, SALIC shall be permitted to post as additional Eligible Collateral asCredit Support under the Master Agreement and Confirmation an amount equal to the amount to bedeposited into Reinsurance Trust Account B in lieu of making such a deposit into Reinsurance TrustAccount B. In the event that the Clearwater XXX Facility is redeemed in full, an amount equal tofifty percent (50%) of the Sale Proceeds (as defined below) shall be deposited into ReinsuranceTrust Account B or posted as additional Eligible Collateral. As used in this Section 5.10, “SaleProceeds” means all net cash sale proceeds from a Block of Business Sale. For the avoidance ofdoubt, a Block of Business Sale may include individual blocks or all the business of one or moreScottish Parties and may be a stock sale, asset sale, reinsurance transaction or any othertransaction with similar effect.     Section 5.11 Discussions Regarding HSBC XXX Facility. SALIC shall, and shall cause itsaffiliates to, permit HSBC to have discussions and negotiations with any of MassMutual FinancialGroup, Cerberus Capital Management, L.P., the ING Parties or Merrill Lynch and, following noticefrom SRGL that it has selected a bidder or bidders with which to proceed on an exclusive basis forthe purchase of the Wealth Management Business, the International Business or the North AmericaBusiness, such bidder or bidders, concerning the HSBC XXX Facility, including, but not limited to,the disclosure of the terms of this Agreement; provided that HSBC will provide SALIC with advancenotice prior to commencing any such discussions or negotiations (provided that, except with respectto discussions and negotiations between HSBC and the ING Parties, HSBC shall permit SALIC and itsaffiliates to participate in the discussions and negotiations permitted under this Section). Forthe avoidance of doubt, the parties agree that HSBC has already provided the notice required underthis Section 5.11 with respect to discussions and negotiations with the ING Parties and MerrillLynch. Upon termination of the Forbearance Period as scheduled, HSBC shall be permitted to havediscussions or negotiations concerning the HSBC XXX Facility with any person, provided (i) suchperson is subject to an obligation not to disclose confidential information to the extent requiredunder the Transaction Documents and (ii) HSBC is otherwise permitted under the terms of anyrelevant confidentiality agreement executed with SALIC or its affiliates to discuss any matterscovered thereby.
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     Section 5.12 Investment Manager Reports. SALIC shall, and shall cause its affiliates to, usecommercially reasonable best efforts to cause the Investment Manager to furnish to HSBC, by thelast Business Day of each calendar month but not later than 5 p.m. (prevailing Eastern Time) on thesecond (2nd) Business Day following the last Business Day of each calendar month, areport, in form and substance satisfactory to HSBC, of the compliance or non-compliance with theinvestment guidelines and the status of its removal of the assets set forth in Schedule 5.18-2,5.18-3, 5.18-4 or other assets that are to be removed from the Reinsurance Trust Account B, asdetermined by HSBC, pursuant to the investment guidelines applicable to Reinsurance Trust AccountB.     Section 5.13 Additional Covenants. SALIC shall, and shall cause its affiliates to, comply withall the covenants set forth on Schedule 5.13 of this Agreement.     Section 5.14 Future Funding Requests. SALIC and Scottish (Dublin) agree, and SALIC shall causeits affiliates to agree, that immediately upon the earlier of (A) any early termination of theForbearance Period pursuant to Section 4 or (B) 5 p.m. (prevailing Eastern Time) on December 15,2008, (i) any and all rights of Scottish (Dublin) or any of its affiliates to request or obtainfunding from the STARTS Trust pursuant to Section 3.3(h) of that certain Trust Assignment Agreementdated as of December 22, 2005, by and between the STARTS Trust and Scottish (Dublin) (the“Assignment Agreement”) shall automatically terminate and (ii) the STARTS Trust shall have nofurther obligation to make any deposits into Reinsurance Trust Account B pursuant to Section 3.3(h)of the Assignment Agreement and all such obligations shall immediately and forever terminate.     Section 5.15 Additional Collateral Upon Execution of Agreement. No later than 12:00 p.m.(prevailing Eastern Time) on July 1, 2008, SALIC shall, and/or shall cause its affiliates to, postadditional Eligible Collateral as Credit Support under the Master Agreement and the Confirmationequal to the greater of (i) US$22,000,000 and (ii) any and all amounts paid to the ClearwaterLenders or Clearwater Re Limited, whether as collateral, capital or any other type of payment, inconnection with the Clearwater Forbearance Agreement.     Section 5.16 Additional Collateral Upon Liquidity Trigger. SALIC shall, and shall cause itsaffiliates to, (i) post additional Eligible Collateral as Credit Support under the Master Agreementand the Confirmation in an amount equal to fifty percent (50%) of the amount by which the liquidityof SRGL exceeds the amount set forth for the relevant two week period in the liquidity pro formaattached hereto as Exhibit B by the lesser of (A) the amount set forth in Exhibit B plusUS$10,000,000 or (B) one hundred ten percent (110%) of the amount set forth in Exhibit B (the“Excess Liquidity Amount”) if such increase in the liquidity of SRGL remains at or above such levelfor two consecutive biweekly liquidity reporting periods and (ii) use an amount equal to fiftypercent (50%) of the Excess Liquidity Amount in connection with its obligations with respect to theClearwater XXX Facility, in each case, promptly but not later than 5 p.m. (prevailing Eastern Time)on the third (3rd) Business Day following the last Business Day of the consecutivebi-weekly liquidity reporting periods. Notwithstanding anything in this Agreement to the contrary,the calculation of the Excess Liquidity Amount shall not
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include liquidity resulting directly from the facts and circumstances resulting in payments beingmade under Sections 4.12, 5.10 or 5.24 hereof.     Section 5.17 Revision of this Agreement upon Certain Events. SALIC agrees that if any ScottishParty is (a) currently a party to any forbearance or other similar agreement or (b) enters into anyfuture forbearance or other future similar agreement with a creditor other than HSBC on terms morefavorable to such other creditor than the terms of this Agreement, the terms of this Agreement willbe revised so that HSBC will obtain treatment at least as relatively favorable as any such othercreditor. For the avoidance of doubt, HSBC shall have the right to (i) incorporate any term fromthe Clearwater Forbearance Agreement into this Agreement or (ii) replace any terms in thisAgreement with a substantially similar term from the Clearwater Forbearance Agreement, in eachcase, with two (2) Business Days notice to SALIC; provided that the parties shall agree to timing,in good faith, with respect to any term which would require regulatory approval prior toeffectiveness.     Section 5.18 Replacement of Assets in Reinsurance Trust Account B. Within one (1) BusinessDay of the date hereof (the “First Replacement Date”), SALIC shall, and shall cause its affiliatesto, deliver instructions to the trustee of Reinsurance Trust Account B and take all commerciallyreasonable best efforts to cause the trustee to remove all the assets listed on Schedule 5.18-1from Reinsurance Trust Account B and replace such assets with an amount of cash or securitiesconsented to by HSBC in its sole discretion with a market value equal to the current market valueof such assets as of the First Replacement Date. Promptly but not later than 5 p.m. (prevailingEastern Time) on August 31, 2008 (the “Second Replacement Date”), SALIC shall, and shall cause itsaffiliates to, deliver instructions to the trustee of Reinsurance Trust Account B and take allcommercially reasonable best efforts to cause the trustee to remove all the assets listed onSchedule 5.18-2 from Reinsurance Trust Account B and replace such assets with an amount of cash orsecurities consented to by HSBC in its sole discretion with a market value equal to the currentmarket value of such assets as of the Second Replacement Date. Promptly but not later than 5 p.m.(prevailing Eastern Time) on September 30, 2008 (the “Third Replacement Date”), SALIC shall, andshall cause its affiliates to, deliver instructions to the trustee of Reinsurance Trust Account Band take all commercially reasonable best efforts to cause the trustee to remove all the assetslisted on Schedule 5.18-3 from Reinsurance Trust Account B and replace such assets with an amountof cash or securities consented to by HSBC in its sole discretion with a market value equal to thecurrent market value of such assets as of the Third Replacement Date. Promptly but not later than 5p.m. (prevailing Eastern Time) on December 14, 2008 (the “Fourth Replacement Date”), SALIC shall,and shall cause its affiliates to, deliver instructions to the trustee of Reinsurance Trust AccountB and take all commercially reasonable best efforts to cause the trustee to remove all the assetslisted on Schedule 5.18-4 from Reinsurance Trust Account B and replace such assets with an amountof cash or securities consented to by HSBC in its sole discretion with a market value equal to thecurrent market value of such assets as of the Fourth Replacement Date. For the purposes of thisSection 5.18, market value shall be calculated in accordance with Section 7 of the InvestmentManagement Agreement relating to Reinsurance Trust Account B. HSBC
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and SALIC agree that the provisions and procedures in the Confirmation relating toAlternate Valuation shall apply with respect to any dispute regarding market value of thesecurities to be removed and replaced hereunder.     Section 5.19 Compliance Certificate. On and after the date hereof, SALIC shall cause acompliance certificate in the form attached hereto as Exhibit C to be provided by Scottish (Dublin)within fifteen (15) days following the delivery of a Quarterly Reinsurance Report (as defined inthe Coinsurance Agreement), provided that, if such certificate is not delivered, SALIC shall have afifteen (15) day cure period to remedy the non-delivery.     Section 5.20 Amendments. Within eight (8) Business Days of the date hereof, SALIC shall, andshall cause its affiliates to, execute the amendments described in Exhibit D; provided that theamendments to the Coinsurance Agreement set forth in paragraph 5 of Exhibit D hereto shall besubject to the timing requirements specified in Section 5.25.     Section 5.21 Formation or Acquisition of Subsidiaries. SALIC shall not, and shall cause itsaffiliates not to, form or acquire any direct or indirect subsidiary after the date hereof with aninitial capitalization of US$1,000,000 or more or after the capital of a previously unreportedsubsidiary is increased above US$1,000,000 without the consent of HSBC.     Section 5.22 Redemption Fee and North America Business Sale Fee. SRGL and SALIC shall, andshall cause their respective affiliates to, pay any fee specified in clauses (1), (2) and (3) belowto HSBC, as applicable.(1) If the HSBC XXX Facility is redeemed in full on or prior to August 1,2008, a fee shall be paid directly to HSBC in the aggregate amount ofUS$1,000,000.(2) If the HSBC XXX Facility is redeemed in full after August 1, 2008 buton or prior to August 31, 2008, a fee shall be paid directly to HSBC in theaggregate amount of US$2,000,000.(3) After August 31, 2008, (A) a fee shall be paid directly to HSBC in theaggregate amount of US$6,000,000 (the “Redemption Fee”) upon the redemptionin full of the HSBC XXX Facility; and (B) prior to the redemption of theHSBC XXX Facility, upon the transfer or sale of any portion of the assetsor liabilities comprisingthe North America Business, other than the transfer or sale of theliabilities reinsured in the Clearwater XXX Facility, a portion of theRedemption Fee based on the Transfer Ratio (as defined below) shall becomedue and shall be paid to HSBC on the date of the transfer of the NorthAmerica Business (the “Distribution Date”); provided, that upon thetransfer or sale of seventy-five percent (75%) of the liabilitiescomprising the North America Business in
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the aggregate, other than the transfer or sale of the liabilities reinsuredin the Clearwater XXX Facility, in any one or series of transactions, theentire remaining portion of the Redemption Fee remaining unpaid on suchdate shall become immediately due and payable to HSBC; provided, further,that upon the notice by HSBC that the HSBC XXX Facility shall be redeemedin full, in which case the entire Redemption Fee less any portion of suchfee paid to HSBC prior to such date pursuant to this clause (B) shallbecome immediately due and payable. For purpose of this Section, “TransferRatio” means a quotient, the numerator of which is the liabilities of theNorth America Business transferred or sold to any third party, other thanthe transfer or sale of the liabilities reinsured in the Clearwater XXXFacility, and the denominator of which is the total liabilities of theNorth America Business, other than the transfer or sale of the liabilitiesreinsured in the Clearwater XXX Facility, on the date hereof.     Section 5.23 Additional Collateral On Or Prior to August 15, 2008. Prior to 5 p.m. (PrevailingEastern Time) on August 15, 2008, SALIC shall, and/or shall cause its affiliates to, postadditional Eligible Collateral as Credit Support under the Master Agreement and the Confirmationequal to US$6,000,000.     Section 5.24 Petition For Reduction of RBC and Application of Released Funds. SRGL and SALICshall, and shall cause any other applicable Scottish Party to, use their respective commerciallyreasonable best efforts, subject to any required regulatory approval, which such Scottish Partiesshall also use their respective commercially reasonable best efforts to obtain, to reduce the ratioof Scottish (U.S.)’s total adjusted capital to one hundred twenty five (125%) of its CAL RBC on orprior to August 15, 2008. SALIC shall, and/or shall cause its affiliates to, post additionalEligible Collateral as Credit Support under the Master Agreement and the Confirmation equal tothirty-three percent (33%) of any increase in liquidity from a reduction in capital in Scottish(U.S.) within two (2) Business Days of any related release of funds or increase in liquidity.     Section 5.25 Form D Filing Milestones. SALIC shall, and shall cause its affiliates to, (i)file on Form D a request for approval for the amendments to the Coinsurance Agreement set forth inparagraph 5 of Exhibit D hereto with the Delaware Department ofInsurance (the “Department”), promptly but not later than 12 p.m. (prevailing Eastern Time) onthe eighth (8th) Business Day after the date of this Agreement, provided SALIC and HSBChave agreed on the form of amendment to the Coinsurance Agreement promptly but no later than 11:59p.m. (prevailing Eastern Time) on the sixth (6th) Business Day after the date of thisAgreement and (ii) furnish to HSBC, promptly but not later than 5 p.m. (prevailing Eastern Time) onthe thirtieth (30th) day following the date on which the Department receives the Form D,written confirmation of the Department’s approval or non-disapproval of such amendments.     Section 5.26 Funding Amounts During the Forbearance Period. SALIC and Scottish (Dublin)agree, and SALIC shall cause its affiliates to agree that, during the
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Forbearance Period, (i) the amount of each deposit to be made by the STARTS Trust intoReinsurance Trust Account B pursuant to Section 3.3(h) of the Assignment Agreement shall inno case exceed the lesser of (A) US$18,000,000 or (B) the applicable actual increase inExcess Reserve (as defined in the Coinsurance Agreement) and (ii) the aggregate amount ofall deposits to be made by the STARTS Trust into Reinsurance Trust Account B pursuant toSection 3.3(h) of the Assignment Agreement shall in no case exceed US$25,000,000.     SECTION 6. HSBC Covenants. During the Forbearance Period, HSBC shall comply with thefollowing covenants:     Section 6.1 Amendments. Within thirty (30) days of the date hereof, HSBC shallexecute, or use reasonable efforts to cause the STARTS Trust to execute, the amendmentsdescribed in Exhibit D.     Section 6.2 Make-Whole Amount Waiver. In the event that the HSBC XXX Facility isredeemed in full on or prior to December 15, 2008, HSBC shall waive any amount of theMake-Whole Amount exceeding US$4,000,000.     SECTION 7. Events of Default. SALIC and HSBC agree and acknowledge that (i) any failure tomake timely payment under Sections 4.12, 5.10, 5.15, 5.16, 5.22, 5.23, 5.24 or (ii) any earlytermination of the Forbearance Period pursuant to Section 4, including, but not limited to, as aresult of the failure by SALIC to comply with any of the covenants contained in Section 5 of thisAgreement, will be deemed an Event of Default under the Master Agreement.     SECTION 8. Release. To the fullest extent permitted by applicable law, in consideration ofHSBC’s execution of this Agreement, each of SRGL, SALIC and Scottish (Dublin) does hereby foreverrelease, discharge and acquit HSBC and its parent, subsidiary and affiliate corporations orpartnerships, the STARTS Trust and each of the foregoing’s respective officers, directors,partners, trustees, shareholders, agents, attorneys and employees, and their respective successors,heirs and assigns (collectively, the “Releasees”) of and from any and all claims, demands,liabilities, responsibilities,disputes, causes of action (whether at law or equity) (collectively, “Claims”), of every type,kind, nature, description or character, and irrespective of how, why or by reason of what facts,whether such Claims have heretofore arisen, are now existing or hereafter arise, or which could,might, or may be claimed to exist, of whatever kind or name, whether known or unknown, suspected orunsuspected, liquidated or unliquidated, each as though fully set forth herein at length, which inany way arise out of, are connected with or in any way relate to actions or omissions whichoccurred on or prior to the date hereof in connection with the Transaction Documents, the MasterAgreement, the Confirmation, the August 4, 2006, Letter Agreement, this Agreement or any otherrelated agreement (collectively, the “Covered Agreements”). For the avoidance of doubt, the partiesagree that nothing in this Section 8 shall release any Claims against the Releasees relating to anydemand for Eligible Collateral after the termination of the Forbearance Period or relating to anybreach of the Covered Agreements occurring after the date hereof. Each of SRGL and SALIC, jointlyand severally, further agree to indemnify, within ten (10) days of receipt of any request therefor,the Releasees and hold each of the Releasees harmless from and against any and all such Claimswhich might be brought against any of the Releasees on behalf of any person or entity, including,
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without limitation, officers, directors, agents, trustees, creditors or shareholders of theScottish Parties in connection with the Covered Agreements, except for such Claims brought by or onbehalf of a third party that is not a Scottish Party which are finally determined to arise from theReleasees’ gross negligence, willful misconduct or bad faith. For purposes of the releasecontained in this Section 8, any reference to the Scottish Parties shall mean the Scottish Partiesand shall include, as applicable, each of their respective successors and assigns, including,without limitation, any receiver, trustee or debtor-in-possession, acting on behalf of suchparties.     SECTION 9. Reservation of Rights. Except as specifically set forth in this Agreement, theMaster Agreement, the Confirmation and other documents shall remain in full force and effect andare hereby ratified and confirmed. HSBC expressly reserves all rights, and nothing herein shallconstitute a waiver by HSBC or otherwise entitle SALIC or any Scottish Party to a waiver of anyexisting or hereafter arising (whether known or unknown by HSBC) (i) event requiring an earlysettlement, (ii) any event of default under any document, (iii) any trigger event (as defined inthe Coinsurance Agreement), or (iv) other provision under any documents, nor shall HSBC’s orSALIC’s execution and delivery of this Agreement establish a course of dealing among HSBC and SALICor in any other way obligate HSBC to hereafter provide any waiver or further forbearance prior tothe enforcement of its rights or to provide any financial or other accommodations to or on behalfof SALIC or any Scottish Party. Except as specifically set forth in this Agreement, including therelease provided in Section 8, SALIC and any Scottish Party that is a signatory hereto expresslyreserves all rights, and, except as set forth in the release provided in Section 8, nothing hereinshall constitute a waiver by SALIC or any such Scottish Party under the Master Agreement, theConfirmation and other documents.     SECTION 10. Additional Representations and Warranties. SALIC represents and warrants to HSBCthat, (i) other than as a result of the ratings downgrades, no trigger event, event of default orearly termination event (as defined in the relevant agreement) under any of the Covered Agreementshas occurred and is continuing or shall result from the execution of this Agreement and (ii) noevent has occurred which would permit HSBC to terminate the Forbearance Period (as such term isdefined in the Amended and Restated Forbearance Agreement) under the Amended and RestatedForbearance Agreement. SALIC further represents and warrants to HSBC that (A) the total adjustedcapital and surplus of Scottish (U.S.) as of March 31, 2008 was one hundred eighty percent (180%)of its CAL RBC, (B) the liquidity strain relating to the Orkney II XXX Facility shown on Exhibit Bis not the result of the recent restructuring of such facility, (C) the Clearwater Lenders orClearwater Re Limited received collateral, capital or any other payments on the execution of theClearwater Forbearance Agreement in an amount equal to or less than US$22,000,000 in connectiontherewith, (D) SALIC has determined, in good faith, that the Clearwater Forbearance Agreement doesnot contain any terms which would reasonably be deemed to be more favorable to the ClearwaterLenders or Clearwater Re Limited than the terms contained in this Agreement and (E) for Scottish(U.S.), Scottish (Dublin) and Scottish Re Life, respectively, all applicable net worth maintenance“keepwell” agreements or any other similar agreements require payments in respect of capital andsurplus only in the event that the applicable CAL RBC or solvency margin of Scottish (U.S.),Scottish (Dublin) or Scottish Re Life, as applicable, falls at or below the applicable CAL RBC orsolvency margin amounts set forth in Section 4.15.     SECTION 11. Conditions to Effectiveness. This Agreement shall become effective and
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be deemed effective as of the date hereof if the parties have received a counterpart of thisAgreement executed by the other.     SECTION 12. Fees and Expenses. SALIC shall reimburse HSBC for all fees, costs, and expensesincurred by HSBC in connection with this Agreement and each of the other documents, instruments andagreements executed in connection herewith, including, but not limited to, such reasonable fees,costs and expenses incurred in connection with the negotiation, drafting, implementation andenforcement of this Agreement. For the avoidance of doubt, SALIC shall pay by wire transfer ofimmediately available funds to HSBC (i) no later than 5:00 p.m. (prevailing Eastern Time) on thefifth (5th) Business Day following receipt of an invoice, for disbursement to HSBC’sadvisors or attorneys, as applicable, all such reasonable fees and expenses of HSBC’s advisors andattorneys, (ii) within two (2) days of execution of this Agreement, all outstanding fees payablepursuant to this Agreement as of the date hereof and (iii) no later than 5:00 p.m. (prevailingEastern Time) on the fifteenth (15th) Business Day following receipt of an invoice, anyother amounts payable pursuant to this Agreement after the date hereof. HSBC will send allrequests for payment under this Section 12 in writing to SALIC (such requests may be sent toHSBC.forbearance@scottishre.com), with a copy to Gregg Klingenberg (such copy may be sent togregg.klingenberg@scottishre.com).     SECTION 13. Counterparts. This Agreement may be executed in one or more counterparts, each ofwhich shall be considered an original counterpart. Each of the parties hereto agrees that asignature transmitted to HSBC or its counsel by facsimile or electronic transmission shall beeffective to bind the party so transmitting its signature.     SECTION 14. Waiver of Rights under this Agreement. Any single or partial exercise of any rightunder this Agreement shall not preclude other or further exercise thereof or the exercise of anyother right, and no waiver, amendment or other variation of the terms, conditions or provisions ofthis Agreement whatsoever shall be valid unless in writing signed by each of the parties and thenonly to the extent in such writing specifically set forth. The failure of any party to enforce atany time any provision of this Agreement shall not be construed to be a waiver of such provisions,nor in any way to affect the validity of this Agreement or any part hereof or the right of suchparty thereafter to enforce each and every such provision. No waiver of any breach of thisAgreement shall be held to constitute a waiver of any other or subsequent breach.     SECTION 15. Binding Effect. This Agreement shall be binding upon and inure to the benefit ofthe parties hereto and their respective successors and assigns. This Agreement is solely for thebenefit of the parties hereto and is not intended to confer upon any other third party any rightsor benefits.     SECTION 16. Governing Law. This Agreement shall be construed in accordance with the laws ofNew York (without reference to choice of law doctrine).     SECTION 17. Confidentiality. Each party shall treat as confidential all information relatingto the provisions and negotiation of this Agreement, provided that a party may discloseconfidential information (i) if and to the extent required by law, (ii) if and to the extent theinformation has come into the public domain through no fault of that party, or (iii) if and to theextent the other parties have given prior written consent to the disclosure. Notwithstanding
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anything herein to the contrary, each party is hereby expressly authorized to disclose to any andall persons, without limitation of any kind, the tax treatment and tax structure of thetransactions contemplated by this Agreement.     SECTION 18. Miscellaneous. For all purposes of this Agreement except as otherwise expresslyprovided or unless the context otherwise requires (i) all terms shall include the plural as well asthe singular, (ii) any agreement, instrument, statute or certificate referred to in this Agreementshall mean such agreement, instrument, statute or certificate as the same may be amended, modified,restated, supplemented or replaced from time to time (as permitted hereby in the case ofagreements, instruments or certificates) and includes all attachments thereto and instrumentsincorporated therein, (iii) the words “herein”, “hereof” and “hereunder” and other words of similarimport refer to this Agreement as a whole and not to any particular Part, Section or othersubdivision,(iv) the words “include”, “includes” and “including” shall be construed to be followed by thewords “without limitation”, (v) the word “or” is not exclusive, and (vi) Section headings are forthe convenience of the reader and shall not be considered in interpreting this Agreement or theintent of the parties hereto.     SECTION 19. SRGL Guarantee.     Section 19.1 Unconditional Guarantee. For valuable consideration, receipt whereof ishereby acknowledged, and to induce HSBC to enter into this Agreement, SRGL herebyunconditionally and irrevocably guarantees to HSBC all debts, liabilities, obligations,covenants and duties of SALIC under the Covered Agreements (the “Guaranteed Obligations”).Without limiting the generality of the foregoing, SRGL’s liability shall extend to allamounts that constitute part of the Guaranteed Obligations and would be owed by SALIC toHSBC under the Covered Agreements but for the fact that they are unenforceable or notallowable due to the existence of a bankruptcy, reorganization or similar proceedinginvolving SALIC. For the avoidance of doubt, this Section 19.1 contains a guarantee ofpayment and not of collection merely.     Section 19.2 Guarantee Absolute. SRGL hereby guarantees that the GuaranteedObligations will be paid, fulfilled and completed strictly in accordance with the terms ofthe Covered Agreements, regardless of the requirements of any law, order, writ, injunctionand decree applicable to it or to its business or property now or hereafter in effect inany jurisdictions affecting any of such terms or the rights of HSBC with respect thereto.The obligations of SRGL under the guarantee contained in this Section 19 are independent ofthe Guaranteed Obligations, and a separate action or actions may be brought and prosecutedagainst SRGL to enforce the guarantee contained in this Section 19, irrespective of whetherany action is brought against the SALIC or whether SALIC is joined in any such action oractions. The liability of SRGL under the guarantee contained in this Section 19 shall beirrevocable, absolute and unconditional, irrespective of, and SRGL hereby irrevocablywaives any defense it may now or hereafter have in any way relating to, any or all of thefollowing:     a) any lack of validity or enforceability of the Covered Agreements or anyother agreement or instrument relating thereto;
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b) any change in the time, manner or place of payment of, or in any otherterm of, all or any of the Guaranteed Obligations, or any other amendmentor waiver of, or any consent to departure from, the Covered Agreements;c) any taking, exchange, release or non-perfection of any collateral orany taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the GuaranteedObligations;d) any change, restructuring or termination of the corporate structure orexistence of SALIC; ore) any other circumstance (including, without limitation, any statute oflimitations to the fullest extent permitted by applicable law) which mightotherwise constitute a defense available to, or a discharge of, SALIC.     The guarantee of payment contained in this Section 19 shall continue to be effective or bereinstated, as the case may be, if at any time any payment of any of the GuaranteedObligations is rescinded or must otherwise be returned by HSBC upon the insolvency,bankruptcy or reorganization of SALIC or otherwise, all as though such payment had not beenmade.     Section 19.3 Waivers. SRGL hereby expressly waives promptness, diligence, notice ofacceptance, presentment, demand for payment, protest, any requirement that any right orpower be exhausted or any action be taken against SALIC of all or any portion of theGuaranteed Obligations, and all other notices and demands whatsoever.a) SRGL hereby waives any right to revoke the guarantee contained in thisSection 19, and acknowledges that the guarantee contained in this Section19 is continuing in nature and applies to all Guaranteed Obligations,whether existing now or in the future, direct or indirect, at statedmaturity, by acceleration or otherwise and absolute or contingent andregardless of whether any Guaranteed Obligation is reduced to zero at anytime or from time to time.b) SRGL acknowledges that it will receive substantial direct and indirectbenefits from the arrangements contemplated in this Agreement and that thewaivers set forth in Sections 19.3 and 19.4 are knowingly made incontemplation of such benefits.     Section 19.4 Subrogation. SRGL waives the exercise of any rights that it may now orhereafter acquire against SALIC that arise from the existence, payment, performance orenforcement of the Guaranteed Obligations, including, without limitation, any right ofsubrogation, reimbursement, exoneration, contribution or indemnification and any right toparticipate in any claim or remedy of HSBC against SALIC or any collateral, whether or notsuch claim, remedy or right arises in equity or under contract, statute or common law,including, without limitation, the right to take or receive from SALIC, directly orindirectly, in cash or other property or by set-off or in any other
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manner, payment or security on account of such claim, remedy or right, unless and until allof the Guaranteed Obligations and all other amounts payable under the guarantee containedin this Section 19 shall have been paid in full in cash and the Guaranteed Obligationsshall have terminated. If any amount shall be paid to SRGL in violation of the precedingsentence at any time prior to the later of the payment in full in cash of all GuaranteedObligations that are payments and all other amounts payable under the guarantee containedin this Section 19 and the termination of the Guaranteed Obligations, such amount shall beheld in constructive trust for the benefit of HSBC and shall forthwith be paid to HSBC tobe credited and applied to the Guaranteed Obligations and all other amounts payable underthe guarantee contained in this Section 19, whether matured or unmatured, in accordancewith the terms of the Covered Agreements, or to be held as collateral for any GuaranteedObligations or other amounts payable under the guarantee contained in this Section 19thereafter arising.     Section 19.5 Survival. The guarantee contained in this Section 19 is a continuingguarantee and shall (a) remain in full force and effect until payment, fulfillment orcompletion of the Guaranteed Obligations, (b) be binding upon SRGL, its successors andassigns, (c) inure to the benefit of and be enforceable by HSBC and its respectivesuccessors, transferees and assigns and (d) shall be reinstated if at any time any paymentto HSBC hereunder is required to be restored.[Signature Pages Follow]
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          IN WITNESS WHEREOF, the parties hereto have caused this Second Amended and RestatedForbearance Agreement to be executed by their respective officers thereto duly authorized as of thedate first written above.      HSBC BANK USA, NATIONAL ASSOCIATION