Exhibit 10.1



EMPLOYMENT
AGREEMENT

(dated as of January 25, 2008)


                    AGREEMENT,
made and entered into as of the date first above written, by and between, XL
Capital Ltd, a Cayman Islands corporation (the “Company”), and David B. Duclos
(the “Executive”).


                    WHEREAS,
the Executive has been in the employ of the Company and certain of its
subsidiaries;


                    WHEREAS,
the Company and the Executive desire to continue such employment and to amend
the terms and conditions of such employment as set forth herein;


                    NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
herein and for other good and valuable consideration, the Company, the
Guarantors (as hereinafter defined) and the Executive (the “Parties”) agree as
follows:


                    1.
EMPLOYMENT.


                    The
Company hereby employs the Executive, and the Executive hereby accepts
employment with the Company, for the term of this Agreement as set forth in
Section 2, below, in the position and with duties and responsibilities set
forth in Section 3, below, and upon such other terms and conditions as are
hereinafter stated.


                    2.
TERM OF EMPLOYMENT.


                    The
stated term of employment under this Agreement shall commence on the date first
above written (the “Date of the Agreement”) and shall continue through the
close of business on the first anniversary of the Date of the Agreement,
subject to earlier termination as provided in Section 8, below, and extension
as provided in the next succeeding sentence. On the first anniversary of the
Date of the Agreement and on each anniversary thereafter, the stated term of
employment shall be automatically extended for an additional one year unless
the Company gives notice in writing to the Executive or the Executive gives
notice in writing to the Company at least six months prior to such anniversary
that the term is not to be so extended.


                    3.
POSITIONS, DUTIES AND RESPONSIBILITIES.


                    (a)
GENERAL. The Executive shall be employed as the Chief Executive, Insurance
Operations of the Company. In such position, the Executive shall have the duties,
responsibilities and authority normally associated with the office, position and
titles of such an officer of an insurance, reinsurance and financial services
company, or holding company, whose shares are publicly traded in the United
States. In carrying out his duties and responsibilities, the Executive shall
report to the Chief Operating Officer of the Company. During the term of this
Agreement, the Executive shall devote his full business time to the business
and affairs of the Company, and shall use his best efforts, skills and
abilities to promote the Company’s interests.


                    (b)
PERFORMANCE OF SERVICES. The Executive’s services under this Agreement, which
are global in nature, shall be performed at the location or locations
reasonably






requested by the Company. The Executive acknowledges
that the Company may require the Executive to travel to the extent such travel
is reasonably necessary to perform the services here under and that such travel
may be extensive. To the extent reasonably requested by the Company, the
Executive shall allocate greater business time to a location other than his
principal business location, and if reasonably requested by the Company, the
Executive shall relocate to such other locations. Any such relocation will not
be considered to be a breach of this Agreement.


                    4.
BASE SALARY.


                    The
Executive shall be paid a Base Salary by the Company equal to US$550,000,
payable in accordance with the Company’s regular pay practices. Such Base
Salary shall be subject to annual review in accordance with the Company’s
practices for executives as in effect from time to time and may be increased at
the discretion of the Compensation Committee of the Board of Directors of the
Company (the “Compensation Committee”).


                    5.
BONUSES.


                    In
addition to the Base Salary provided for in Section 4, above, the Executive
shall be eligible for an annual cash bonus under the Company’s Annual Incentive
Compensation Plan as in effect from time to time, with a bonus opportunity
which is substantially similar to that of similarly situated executives. The
Executive may be awarded such annual bonuses thereunder as may be approved by
the Compensation Committee based on corporate, individual and business unit
performance measures, as appropriate, established or approved from time to
time, by the Compensation Committee. Any annual bonus shall be paid in cash in
a lump sum after the end of the calendar year for which the annual bonus is
paid and no later than March 15 following such calendar year, unless deferred
at the Executive’s option in accordance with the provisions of any applicable
deferred compensation plan of the Company or it subsidiaries in effect from
time to time. Nothing in this Section 5 shall confer upon the Executive any
right to a minimum annual bonus.


                    6.
EMPLOYEE BENEFIT PROGRAMS.


                    During the term of the Executive’s employment under
this Agreement, the Executive shall be entitled to participate in all employee
benefit programs of the Company as are in effect from time to time and in which
similarly situated senior executives of the Company are eligible to
participate.


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                    7.
BUSINESS EXPENSE REIMBURSEMENT AND FRINGE BENEFITS. During the term of the
Executive’s employment under this Agreement, the Executive shall be entitled to
participate in the Company’s travel and entertainment expense reimbursement
programs and its executive fringe benefit plans and arrangements, all in
accordance with the terms and conditions of such programs, plans and arrangements
as in effect from time to time as applied to the Company’s similarly situated
executives.


                    8.
TERMINATION OF EMPLOYMENT.


                    (a)
TERMINATION DUE TO DEATH. In the event the Executive dies during the term of
employment hereunder, the Executive’s spouse, if the spouse survives the Executive,
(or, if the Executive’s spouse does not survive him, the estate or other legal
representative of the Executive) shall be entitled to receive the Base Salary
as provided in Section 4, above, at the rate in effect at the time of
Executive’s death, to be paid in accordance with the Company’s regular payroll
practices (as in effect at the time of death) through the end of the sixth
month after the month in which the Executive dies. In addition to the above,
the estate or other legal representative of the Executive shall be entitled
to:


	
 

	
 


	
 

	
          (i)
 any annual bonus awarded in accordance with the Company’s bonus program but
 not yet paid under Section 5, above, to be paid at the time such bonus would
 otherwise be due under Section 5 above, and reimbursement of business
 expenses incurred prior to death in accordance with Section 7 above,


	
 

	
 


	
 

	
          (ii)
 within 45 days after the date of death (with the actual date of payment
 within such 45 day period to be determined by the Company), a pro rata bonus
 for the year of death in an amount determined by the Compensation Committee,
 but in no event less than a pro rata portion of the Executive’s average
 annual bonus for the immediately preceding three years (or the period of the
 Executive’s employment with the Company, if less),


	
 

	
 


	
 

	
          (iii)
 the rights under any options to purchase equity securities of the Company or
 other rights with respect to equity securities of the Company, including any
 restricted stock or other securities, held by the Executive determined in
 accordance with the terms thereof,


	
 

	
 


	
 

	
          (iv)
 for a period of six months following the Executive’s death, continued medical
 benefit plan coverage (including dental and vision benefits if provided under
 the applicable plans) for the Executive’s dependents, if any, under the
 Company’s medical benefit plans upon substantially the same terms and
 conditions (including cost of coverage to the dependents) as is then in existence
 for other executives during the coverage period; provided, that, if the
 Executive’s dependents cannot continue to participate in the Company plans
 providing such benefits, the Company shall otherwise provide such benefits
 on substantially the same after-tax basis as if continued participation had
 been permitted (and any payment made by the Company in respect of any taxes
 imposed with respect to such benefits shall be paid to the Executive’s
 dependents, or to the applicable taxing authority on their behalf, no later
 than the due date of such taxes), and





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          (v)
 the vested accrued benefits, if any, under the employee benefit programs of
 the Company, as provided in Section 6, above, determined in accordance with
 the applicable terms and provisions of such programs.


	
 

	
 


	
                    (b)
 TERMINATION DUE TO DISABILITY. In the event the Executive’s employment
 hereunder is terminated due to his disability, as determined under the
 Company’s long-term disability plan, the Executive shall be entitled to:


	
 


	
 

	
          (i)
 a cash lump sum payment made, subject to Section 25 below, 60 days after the
 date of termination in an amount equal to the Base Salary as provided in
 Section 4, above, that would have been paid to the Executive had he remained
 employed through the end of the sixth month after the month in which the
 Executive’s employment terminates due to disability,


	
 

	
 


	
 

	
          (ii)
 any annual bonus awarded in accordance with the Company’s bonus program but
 not yet paid under Section 5, to be paid, subject to Section 25 below, at the
 time such bonus would otherwise be due under Section 5 above, and
 reimbursement of business expenses incurred prior to termination of
 employment in accordance with Section 7 above,


	
 

	
 


	
 

	
          (iii)
 subject to Section 25 below, 60 days after the date of termination, a pro
 rata bonus for the year of termination in an amount determined by the
 Compensation Committee, but in no event less than a pro rata portion of the
 Executive’s average annual bonus for the immediately preceding three years
 (or the period of the Executive’s employment with the Company, if less),


	
 

	
 


	
 

	
          (iv)
 the rights under any options to purchase equity securities of the Company or
 other rights with respect to equity securities of the Company, including any
 restricted stock or other securities, held by the Executive, determined in
 accordance with the terms thereof,


	
 

	
 


	
 

	
          (v)
 for a period of six months following the termination of the Executive’s
 employment, continued medical benefit plan coverage (including dental and
 vision benefits if provided under the applicable plans) for the Executive
 (and the Executive’s dependents, if any) under the Company’s medical benefit
 plans upon substantially the same terms and conditions (including cost of
 coverage to the Executive) as is then in existence for other executives
 during the coverage period; provided, that, if the Executive cannot
 continue to participate in the Company plans providing such benefits, the
 Company shall otherwise provide such benefits on substantially the same
 after-tax basis as if continued participation had been permitted (and any
 payment made by the Company in respect of any taxes imposed with respect to
 such benefits shall be paid to the Executive, or to the applicable taxing
 authority on his behalf, no later than the due date of such taxes); provided
 further, however, that, in the event the Executive becomes reemployed
 with another employer and becomes eligible to receive medical benefits from
 such employer, the medical benefits described herein shall immediately cease,
 and





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          (vi)
 the vested accrued benefits, if any, under the employee benefit programs of
 the Company, as provided in Section 6 above, determined in accordance with
 the applicable terms and provisions of such programs.


	
 

	
 


	
 

	
          (c)
 TERMINATION FOR CAUSE.


	
 

	
 


	
 

	
          (i)
 The employment of the Executive under this Agreement may be terminated by the
 Company for Cause, such termination to be effective upon the Company giving
 the Executive written notice of termination in accordance with the provisions
 of this Agreement. For this purpose, “Cause” shall mean:


	
 

	
 


	
 

	
          (A)
 conviction of the Executive of a felony involving moral turpitude, dishonesty
 or laws to which the Company or its Affiliates are subject in connection with
 the conduct of its or their business;


	
 

	
 


	
 

	
          (B)
 the Executive, in carrying out his duties for the Company under this
 Agreement, has been guilty of (1) willful misconduct or (2) substantial and
 continual refusal by the Executive to perform the duties assigned to the
 Executive pursuant to the terms hereof; provided, however, that any
 act or failure to act by the Executive shall not constitute Cause for
 purposes of this Section 8(c)(i)(B) if such act or failure to act was
 committed, or omitted, by the Executive in good faith and in a manner he
 reasonably believed to be in the overall best interests of the Company, as
 the case may be. The determination of whether the Executive acted in good
 faith and that he reasonably believed his action to be in the Company’s
 overall best interest, as the case may be, will be in the reasonable judgment
 of the General Counsel of the Company or, if the General Counsel shall have
 an actual or potential conflict of interest, the Compensation Committee; or


	
 

	
 


	
 

	
          (C)
 the Executive’s continued willful refusal to obey any lawful policy or
 requirement duly adopted by the Board of Directors of the Company and the
 continuance of such refusal after receipt of written notice.


	
 

	
 


	
 

	
          (ii)
 In the event of a termination for Cause under Section 8(c)(i), above, the
 Executive shall be entitled only to:


	
 

	
 


	
 

	
          (A)
 Base Salary as provided in Section 4, above, at the rate in effect at the
 time of his termination of employment for Cause, through the date on which
 termination for Cause occurs, to be paid in accordance with the Company’s
 regular payroll practices,


	
 

	
 


	
 

	
          (B)
 the rights under any options to purchase equity securities of the Company or
 other rights with respect to equity securities of the Company, including any
 restricted stock or other securities, held by the Executive, determined in
 accordance with the terms thereof, and


	
 

	
 


	
 

	
          (C)
 the vested accrued benefits, if any, under employee benefit programs of the
 Company, as provided in Section 6, above, and reimbursement of properly
 incurred unreimbursed business expenses under the business expense
 reimbursement program as described in Section 7, above, determined in
 accordance with the applicable terms and provisions of such employee benefit
 and expense reimbursement programs; provided that





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the Executive shall not be
 entitled to any such benefits unless the terms and provisions of such
 programs expressly state that the Executive shall be entitled thereto in the
 event his employment is terminated for Cause (as defined in this Agreement or
 otherwise).


	
 

	
 


	
 

	
          (d)
 TERMINATION WITHOUT CAUSE.


	
 

	
 


	
 

	
          (i)
 Anything in this Agreement to the contrary notwithstanding, the Executive’s
 employment may be terminated by the Company without Cause as provided in this
 Section 8(d). A termination due to death or disability, as described in
 Section 8(a) or (b), above, or a termination for Cause, as described in
 Section 8(c), above, shall not be deemed a termination without Cause under
 this Section 8(d). For the avoidance of doubt, if a notice of non-renewal of
 this Agreement pursuant to Section 2 is issued by the Company, the
 termination of the Executive’s employment at the end of the term shall be
 considered a termination by the Company without Cause hereunder.


	
 

	
 


	
 

	
          (ii)
 In the event the Executive’s employment is terminated by the Company without
 Cause (x) prior to a Change in Control (other than as provided in the last
 paragraph of Section 8(d)(iii), in which case the provisions of Section
 8(d)(iii) shall apply in lieu of this Section 8(d)(ii)) or (y) following the
 Post-Change Period (as hereinafter defined), the Executive shall be entitled
 to:


	
 

	
 


	
 

	
          (A)
 Base Salary as provided in Section 4, above, at the rate in effect at the
 time of his termination of employment without Cause, through the date on
 which termination without Cause occurs, to be paid in accordance with the
 Company’s regular payroll practices,


	
 

	
 


	
 

	
          (B)
 provided the Executive executes, on or before the date that is fifty (50)
 days following the date of his termination of employment, a general release
 of claims against the Company and its Affiliates (as defined below) in form
 and substance satisfactory to the Company and does not revoke such release
 prior to the end of the seven day statutory revocation period, a cash lump
 sum payment made, subject to Section 25 below, sixty (60) days after
 termination of employment equal to (x) two times the Executive’s annual Base
 Salary, at the annual rate in effect in accordance with Section 4, above,
 immediately prior to such termination and (y) one times the higher of the
 targeted annual bonus for the year of such termination, if any, or the
 average of the Executive’s annual bonus payable by the Company for the three
 years immediately preceding the year of termination (or such shorter period
 during which the Executive has been employed by the Company),


	
 

	
 


	
 

	
          (C)
 any annual bonus awarded in accordance with the Company’s bonus program but
 not yet paid under Section 5, above, to be paid, subject to Section 25 below,
 at the time such bonus would otherwise be due under Section 5 above, and
 reimbursement of business expenses incurred prior to termination of employment
 in accordance with Section 7 above,


	
 

	
 


	
 

	
          (D)
 the rights under any options to purchase equity securities of the Company or
 other rights with respect to equity securities of the Company, including any
 restricted





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stock or other securities, held by the Executive,
 determined in accordance with the terms thereof,


	
 

	
 


	
 

	
          (E)
 for a period of twenty-four months following the termination of the
 Executive’s employment, continued medical benefit plan coverage (including
 dental and vision benefits if provided under the applicable plans) for the
 Executive (and the Executive’s dependents, if any) under the Company’s
 medical benefit plans upon substantially the same terms and conditions
 (including cost of coverage to the Executive) as is then in existence for
 other executives during the coverage period; provided, that, if the
 Executive cannot continue to participate in the Company plans providing such
 benefits, the Company shall otherwise provide such benefits on substantially
 the same after-tax basis as if continued participation had been permitted
 (and any payment made by the Company in respect of any taxes imposed with
 respect to such benefits shall be paid to the Executive, or to the applicable
 taxing authority on his behalf, no later than the due date of such taxes); provided,
 however, with respect to the participation by the Executive in the
 medical insurance plan hereunder, the following conditions shall be met: (i)
 the amount eligible for reimbursement or payment under any such plan in one
 calendar year may not affect the amount eligible for reimbursement or payment
 under such plan in any other calendar year (except that the plan may impose a
 limit on the amount that may be reimbursed or paid if such limit is imposed
 on all participants), and (ii) any reimbursement must be made on or before
 the last day of the calendar year following the calendar year in which the
 expense was incurred; provided, further, however, that, in the event
 the Executive becomes reemployed with another employer and becomes eligible
 to receive medical benefits from such employer, the medical benefits
 described herein shall immediately cease, and


	
 

	
 


	
 

	
          (F)
 the vested accrued benefits, if any, under the employee benefit programs of
 the Company, as provided in Section 6 above, determined in accordance with
 the applicable terms and provisions of such programs.


	
 

	
 


	
 

	
          (iii)
 In the event the Executive’s employment is terminated by (x) the Company
 without Cause within the twenty-four month period following a Change in
 Control (as defined in Exhibit A hereto) (the “Post-Change Period”) or (y)
 the Executive terminates his employment for “Good Reason” (as defined in
 Exhibit B hereto) during the Post-Change Period, the Executive shall be
 entitled to the following, paid in the case of amounts set forth in (B), (C)
 and (D) below, subject to Section 25 below, 60 days after termination of
 employment:


	
 

	
 


	
 

	
          (A)
 Base Salary as provided in Section 4, above, at the rate in effect at the
 time of his termination of employment, through the date on which termination
 occurs, to be paid in accordance with the Company’s regular payroll
 practices,


	
 

	
 


	
 

	
          (B)
 a cash lump sum payment equal to two times the Executive’s annual Base
 Salary, at the rate in effect in accordance with Section 4, above, or
 immediately prior to such termination or Change in Control, whichever is
 greater,





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          (C)
 a cash lump sum payment equal to two times the average annual bonus awarded to the Executive by the Company in the
 three years prior to the year in which the Change in Control occurs
 (or shorter period during which the Executive had been employed by the
 Company); provided such bonuses shall be at least equal to the targeted
 annual bonus, if any, for the year of such termination,


	
 

	
 


	
 

	
          (D)
 an amount equal to (i) the higher
 of (x) the bonus actually awarded to the Executive by the Company for
 the year immediately preceding the year in which the Change in Control occurs
 or (y) the targeted amount of bonus, if any, that would have been awarded to
 the Executive in respect of the year in which the termination of employment
 occurs, multiplied by (ii) a fraction, the numerator of which is the number
 of months or fraction thereof in which the
 Executive was employed by the Company in the year of termination of
 employment, and the denominator of which is 12,


	
 

	
 


	
 

	
          (E)
 options to purchase equity securities of the Company or other rights
 with respect to equity securities of the Company held by the Executive shall
 immediately vest in full and shall continue to be exercisable for three years
 from the date of termination of employment, notwithstanding the Executive’s
 termination of employment, or the original full term of the option or other
 right, if shorter,


	
 

	
 


	
 

	
          (F)
 for a period of twenty-four months following the termination of the
 Executive’s employment, continued medical benefit plan coverage (including
 dental and vision benefits if provided under the applicable plans) for the
 Executive (and the Executive’s dependents, if any) under the Company’s
 medical benefit plans upon substantially the same terms and conditions
 (including cost of coverage to the Executive) as is then in existence for
 other executives during the coverage period; provided, that, if the
 Executive cannot continue to participate in the Company plans providing such
 benefits, the Company shall otherwise provide such benefits on substantially
 the same after-tax basis as if continued participation had been permitted
 (and any payment made by the Company in respect of any taxes imposed with
 respect to such benefits shall be paid to the Executive, or to the applicable
 taxing authority on his behalf, no later than the due date of such taxes); provided,
 however, with respect to the participation by the Executive in the
 medical insurance plan hereunder, the following conditions shall be met: (i)
 the amount eligible for reimbursement or payment under any such plan in one
 calendar year may not affect the amount eligible for reimbursement or payment
 under such plan in any other calendar year (except that the plan may impose a
 limit on the amount that may be reimbursed or paid if such limit is imposed
 on all participants), and (ii) any reimbursement must be made on or before the last day of the calendar year
following
 the calendar year in which the expense was incurred; provided
 further, however, that, in the event the Executive becomes reemployed
 with another employer and becomes eligible to receive medical benefits from
 such employer, the medical benefits described herein shall immediately cease, and


	
 

	
 


	
 

	
          (G)
 full and immediate vesting under the Company’s retirement plans as of
 the date of termination, to the extent permitted by applicable law; provided,
 however, that if such full and immediate vesting cannot be provided under
 a “qualified employer plan” (within the meaning of Treas. Reg. Section
 1.409A-l(a)(2)) under applicable law, then





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the present value of economically equivalent
 benefits, determined using reasonable assumptions
 and on an after-tax basis to the Executive, shall be paid in a cash lump sum
 to the Executive, subject to Section 25 below, 60 days after
 termination of employment.





                    Anything
in this Agreement to the contrary notwithstanding, the Executive shall be
entitled to the benefits described in (A)-(G) above, if the Executive’s
employment with the Company is terminated by the Company (other than for Cause)
within one year prior to the date on which a “409A Change in Control” (as
defined below) occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third
party
who has taken steps reasonably calculated or intended to effect the 409A
Change in Control or (ii) otherwise arose in connection with or anticipation of
the 409A Change in Control; provided, however, that in such event,
amounts in excess of those otherwise payable to the Executive under Section
8(d)(ii) above will be payable hereunder
only following the 409A Change in Control (and, subject to Section 25 below,
10 days thereafter). For purposes hereof, a “409A Change in Control” means a
“change in control event” (as defined in Treas. Reg. Section 1.409A-3(i)(5))
with respect to the Company that also constitutes a Change in Control.


                    (iv)
If, in situations where Section 8(d)(iii) does not apply, at any time
during the term of the Executive’s employment hereunder and without the
Executive’s written consent, duties are assigned to the Executive that are
materially inconsistent with his position as described in Section 3 above, or
the Company does not cure any material breach by it of any provision of Sections 4 through 7 of this Agreement
within 30
calendar days following written notice of same by the Executive (which written
notice must be given within 30 calendar days after such breach), the
Executive shall have the right to terminate his employment within 30 calendar days
of the Company’s failure to rescind such assignment in accordance with the
proviso below or of such failure to cure a breach, as the case may be, and such
termination shall be deemed a termination by the Company without Cause under
Section 8(d)(ii), above, provided, in the case of assignment of duties that are materially
inconsistent
with those set forth in Section 3 above, the Executive shall have given
the Company written notice of such assignment within 30 calendar days of such
assignment and shall not, within 30 calendar days thereafter, have had the
assignment of inconsistent duties rescinded.


                    (e)
VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may voluntarily terminate
his employment prior to the expiration of the term of this Agreement upon at
least three months’ prior written notice to the Company. Such termination shall
constitute a voluntary termination and, except as provided in Section
8(d)(iii) or Section 8(d)(iv), above, in such event the Executive shall be
limited to the same rights and benefits as applicable to a termination by the
Company for Cause as provided in Section 8(c), above. A voluntary termination
in accordance with this Section 8(e) shall not be deemed a breach of this
Agreement. A termination of the Executive’s employment due to disability or
death as described in Section 8(b) or 8(a), above, a termination by the
Executive which the Executive is entitled to treat as a termination by the
Company pursuant to Section 8(d), above, or a termination by the Executive
under Section 8(d)(iv), above, shall not be deemed a voluntary termination
within the meaning of this Section 8(e).


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                    9.
EXCISE TAX PAYMENTS.


                    (a)
Anything
in this Agreement to the contrary notwithstanding, in the event it shall be determined that
(i) any payment or distribution made, or benefit provided (including, without limitation, the
acceleration of any payment, distribution or benefit or accelerated vesting or
exercisability of any award) by the Company, any acquirer or any party related
to the Company or the acquirer to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional payments required under
this Section 9) (a “Payment”) would be subject to the excise tax imposed by
Section 4999 of the United States Internal Revenue Code of 1986, as amended (the “Code”)
(or any successor provision or similar excise tax), or any interest or penalties are incurred
by the Executive with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to
as the “Excise Tax”), (ii) the aggregate amount of the Executive’s Parachute Payments (as
defined in Section 280G(b)(2)(A) of the Code) is less than 3.25 times the
Executive’s Base Amount (as defined in Section 280G(b)(3)(A) of the Code), and (iii) no
such Payment would be subject to the Excise Tax if the payments set forth in Section
8(d)(iii)(B) and (C) hereof were each reduced by up to 20 percent, then the
payments set forth in Section 8(d)(iii)(B) and (C) will each be reduced to the
smallest extent possible (and in no event by more than 20 percent in the aggregate)
such that no Payment is subject to the Excise Tax.


                    (b)
Anything
in this Agreement to the contrary notwithstanding, in the event it shall be determined that
(i) the aggregate amount of the Executive’s Parachute Payments equals or exceeds 3.25 times
the Executive’s Base Amount, (ii) the aggregate amount of the Executive’s
Parachute Payments is less than 3.25 times the Base Amount but one or more
Payments would be subject to the Excise Tax even if the payments set forth in Section
8(d)(iii)(B) and (C) hereof were each reduced by 20 percent, or (iii)
notwithstanding a reduction in payments pursuant to Section 9(a) above, an
Excise Tax is payable by the Executive on one or more Payments, then, in any such case, Payments
shall not be reduced and the Executive shall be entitled to receive an additional payment (a
“Gross-Up Payment”) in an amount such that after payment by the Executive of
all taxes (including any income or Excise Tax) imposed upon the Gross-Up
Payment and any
interest or penalties imposed with respect to such taxes, the Executive retains
from the Gross-Up
Payment an amount equal to the Excise Tax imposed upon the Payments.


                    (c)
Subject
to the provisions of Section 9(d), all determinations required to be made under this Section
9, including determination of whether a Gross-Up Payment is required and of the amount of any
such Gross-Up Payment, shall be made by a nationally recognized public accounting firm
selected by the Company (the “Accounting Firm”) which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of the date of termination
of the Executive’s employment, if applicable, or such earlier time as is reasonably requested.
The initial Gross-Up Payment, if any, as determined pursuant to this Section 9(c), shall be paid
to the Executive within five business days of the receipt of the Accounting Firm’s
determination. If the Accounting Firm determines that no Excise Tax is payable
by the
Executive, it shall furnish the Executive with a written opinion that he has
substantial authority not to report any Excise Tax on his Federal income tax
return. Any determination by the Accounting Firm meeting the requirements of
this Section 9(c) shall be binding upon the Company and the Executive, subject
only to payments pursuant to the following sentence based on a de-


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termination
that additional Gross-Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such additional
payments are referred to herein as the “Gross-Up Underpayment”). In the event
that the Company exhausts its remedies pursuant to Section 9(d) and the Executive
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Gross-Up Underpayment that
has occurred and any such Gross-Up Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive. The fees and disbursements of
the Accounting Firm shall be paid by the Company.


                    (d)
The Executive shall notify the Company in writing of any claim by the United States Internal
Revenue Service that, if successful, would require the payment by the Executive
of any Excise Tax and, therefore, the payment by the Company of a Gross-Up
Payment. Such
notification shall be given as soon as practicable but not later than 30
business days after the Executive receives written notice of such claim and
shall apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which he
gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires, in
good faith, to contest such claim (which notice shall set forth the bases for
such contest) and that it will bear the costs and provide the indemnification
as required by this sentence, the Executive shall, in good faith:


	
 

	
 


	
 

	
          
 (i) give the Company any information reasonably requested by the Company relating to such
 claim,


	
 

	
 


	
 

	
           (ii)
 take such action in connection with contesting such claim as the Company shall, in good faith,
 reasonably request in writing from time to time, including, without
 limitation, accepting legal representation with respect to such claim by an
 attorney selected by the Company and reasonably acceptable to the Executive,


	
 

	
 


	
 

	
           (iii)
 cooperate with the Company in good faith in order effectively to contest such
 claim, and


	
 

	
 


	
 

	
           (iv)
 permit the Company to participate, in good faith, in any proceedings relating
 to such claim;





provided, however, that the Company shall bear and
pay directly all costs and expenses (including additional interest and penalties) incurred
in connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis to the Executive, for any Excise Tax or income
tax, including interest and penalties with respect thereto, imposed as a result
of such representation and payment of all costs and expenses.


                    Without
limitation on the foregoing provisions of this Section 9(d), the Company shall,
exercising good faith, control all proceedings taken in connection with such
contest and, at its sole option (but in good faith), may pursue or
forego any and all administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option (but in good faith), either
direct the Executive to pay the tax claimed and sue for a


-11-






refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to the Executive
on an interest-free basis and shall indemnify and hold the Executive harmless,
on an after-tax basis to the Executive, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the
statute of limitations relating to the payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company’s control
of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(d), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the
Company’s complying with the requirements of Section 9(d)) promptly pay to the
Company, as the case may be, the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Company pursuant to
Section 9(d), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such
determination, then any obligation of the Executive to repay such advance shall
be forgiven and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.


                    Notwithstanding
any provision herein to the contrary, the Executive’s failure to strictly comply with the notice provisions
set
forth in this Section 9, so long as such failure does not prevent the
Company from contesting an excise tax claim, shall not adversely affect the
Executive’s rights under this Section 9. Any amount advanced shall be deemed a
nonrefundable payment to the extent a refundable advance would be a violation
of the Sarbanes-Oxley Act. Anything in this Agreement to the contrary
notwithstanding, except as otherwise provided in Treas. Reg. Section
1.409A-3(i)(l)(v), in no event shall any payment by the Company pursuant to
this Section 9 be made later than the end of the Executive’s taxable year next
following the Executive’s taxable year in which he remits the related taxes.


                    10.
NO MITIGATION; NO OFFSET.


                    In
the event of any termination of employment under Section 8, above, the Executive
shall be under no obligation to mitigate damages or seek other employment, and,
except as expressly set forth herein, there shall be no offset against amounts
due the Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that he may obtain.


-12-






                    11.
NONCOMPETITION AND NONSOLICITATION.


                    The
Executive represents and warrants that, to the best of his knowledge, he is not
using the confidential or proprietary information of any other person in
violation of any agreement or rights of others known to him. The Executive
agrees that the products of the Company and its Affiliates shall constitute the
exclusive property of the Company and its Affiliates.

                     For the avoidance of
doubt, all trademarks, policy language or forms, products or services (including products and services under
development), trade names, trade secrets, service marks, designs, computer
programs and software, utility models, copyrights, know-how and confidential
information, applications for registration of any of the foregoing and the
right to apply for them in any part of the world (whether any of the foregoing
shall be registered or unregistered) created or discovered or participated in
by the Executive during the course of his employment (whether or not pursuant
to the terms of this Agreement) or under the instructions of the Company or its
Affiliates are and shall be the absolute property of the Company and its
Affiliates, as appropriate. Without limiting the foregoing, the Executive
hereby assigns to the Company any and all of the Executive’s right, title and
interest, if any, pertaining to the insurance and reinsurance (including,
without limitation, finite insurance and reinsurance), risk assumption, risk
management, brokerage, financial and other products or services developed or
improved upon by the Executive (including, without limitation, any related
“know-how”) while employed by the Company or its Affiliates, including any
patent, trademark, trade name, copyright, ownership or other right that may
pertain thereto.


                    Since
Executive has obtained and is likely to obtain in the course of Executive’s employment with the Company and
its Affiliates
knowledge of trade names, trade secrets, know-how, products and services
(including products and services under development), techniques, methods, lists, computer programs and software and
other confidential information relating to the Company and its
Affiliates, and their employees, clients, business or business opportunities,
Executive hereby undertakes that:


	
 

	
 


	
 

	
          (i)
 Executive will not (either alone or jointly with or on behalf of others and
 whether directly or indirectly) encourage, entice, solicit or endeavor to
 encourage, entice or solicit away from employment with the Company or its
 Affiliates, or hire or cause to be hired,
 any officer or employee of the Company or its Affiliates (or any individual
 who was within the prior twelve months an officer or employee of the
 Company or its Affiliates), or encourage,
 entice, solicit or endeavor to encourage, entice or solicit any individual to
 violate the terms of any employment agreement or arrangement between such
 individual and the Company or any of its Affiliates;


	
 

	
 


	
 

	
          (ii)
 Executive will not (either alone or jointly with or on behalf of others and
 whether directly or indirectly) interfere with or disrupt or seek to
 interfere with or disrupt (A) the relationships between the Company and its
 Affiliates, on the one hand, and any customer or client of the Company and
 its Affiliates, on the other hand, (including any insured or reinsured party)
 who during the period of twenty-four months immediately preceding such termination shall have been such
 a customer or client, or (B) the supply to the Company and its
 Affiliates of any services by any supplier or agent or broker who during the
 period of twenty-four months immediately preceding such termination shall





-13-






	
 

	
 


	
 

	
have
 supplied services to any such person, nor will Executive interfere or seek to
 interfere with the terms on which such supply or agency or brokering
 services during such period as aforesaid have been made or provided; and


	
 

	
 


	
 

	
          (iii)
 Executive will not (either alone or jointly with or on behalf of others and whether directly or
 indirectly) whether as an employee, consultant, partner, principal, agent, distributor,
 representative or stockholder (except solely as a less than one percent stockholder of a
 publicly traded company), engage in any activities in Bermuda, the United States or
 greater London if such activities are competitive with the businesses that (i) are then being
 conducted by the Company or its Affiliates and (ii) during the period of the Executive’s
 employment were either being conducted by the Company or its Affiliates or actively
 being developed by the Company or its Affiliates.





                    The
provisions of the immediately preceding sentence shall continue as long as the Executive is
employed by the Company or its Affiliates and such provisions shall continue in
effect
after such employment is terminated for any reason until the first anniversary
of such termination,
provided that if such employment is terminated by the Company under Section 8(d)(iii) or by the
Executive under Section 8(d)(iii), the provisions of clauses (ii) and (iii)
shall automatically
terminate upon such termination of employment, unless the Company elects, in
writing, upon such termination to continue the provisions of clauses (ii) and
(iii) in effect through the six-month anniversary of such termination of
employment in which case the Company shall be obligated to pay the Executive, in addition to
any of the Executive’s rights under Section 8(d)(iii), a lump sum payment equal to the sum of
(x) six months of his Base Salary and (y) one half of the Executive’s average annual bonus
payable by the Company or its subsidiaries for the three years (or shorter
period of employment by any of such entities) immediately preceding the year of termination,
and such lump sum payment shall, subject to Section 25 below, be made 60 days
following his “separation from service” (within the meaning Treas. Reg. Section
1.409A-1(h)) with the Company.


                    For
purposes of this Agreement, an “Affiliate” of the Company includes any person,
directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with the Company, and such term shall
specifically include, without limitation, the Company’s majority-owned subsidiaries.


                    The
limitations on the Executive set forth in this Section shall also apply to any agent or other
representative acting on behalf of Executive.


                    While
the restrictions aforesaid are considered by both parties to be reasonable in all the circumstances it
is recognized that restrictions of the nature in question may fail for reasons unforeseen and
accordingly it is hereby declared and agreed that if any of such restrictions
or the geographic or other scope thereof shall be adjudged to be void as going
beyond what is reasonable in the circumstances for the protection of the interests of
the Company and its Affiliates but would be valid if part of the wording thereof
were deleted and/or the periods (if any) thereof reduced and/or geographic or
other area dealt with thereby reduced in scope then said restrictions shall apply
with such modifications as may be necessary to make them valid and effective.


-14-






                    Nothing
contained in this Section 11 shall limit in any manner any additional
obligations to which Executive may be bound pursuant to any other agreement or
any applicable law, rule or regulation and
Section 11 shall apply, subject to its terms, after employment has terminated
for any reason.


                    12.
CONFIDENTIAL INFORMATION.


                    The
Executive covenants that he shall not, without the prior written consent of the
Company, use for the Executive’s own benefit or the benefit of any other
person or entity other than the Company and its Affiliates or disclose to any
person, other than an employee of the Company or other person to whom
disclosure is necessary to the performance by the Executive of his duties in
the employ of the Company, any confidential, proprietary, secret, or privileged
information about the Company or its
Affiliates or their business or operations, including, but not limited
to, information concerning trade secrets, know-how, software, data processing
systems, policy language and forms, inventions, designs, processes, formulae,
notations, improvements, financial
information, business plans, prospects, referral sources, lists of suppliers
and customers, legal advice and other information with respect to the affairs,
business, clients, customers, agents or other business relationships of
the Company or its Affiliates. Executive shall hold in a fiduciary capacity for
the benefit of the Company all secret, confidential proprietary or privileged
information or data relating to the Company or any of its Affiliates or
predecessor companies, and their respective
businesses, which shall have been obtained by Executive during his employment, unless
and until such information has become known to the public generally (other than
as a result of unauthorized disclosure by the Executive) or unless he is
required to disclose such information by a court or by a governmental body with
apparent authority to require such disclosure. The foregoing covenant by the
Executive shall be without limitation as to time and geographic application and
this Section 12 shall apply in accordance with its terms after employment has
terminated for any reason. The Executive acknowledges and agrees that he shall
have no authority to waive any
attorney-client or other privilege without the express prior written consent of
the Compensation Committee as evidenced by the signature of the
Company’s General Counsel.


                    13.
WITHHOLDING.


                    Anything
in this Agreement to the contrary notwithstanding, all payments required to be
made by the Company hereunder to the Executive shall be subject to withholding
of such amounts relating to taxes as the Company may reasonably determine
should be withheld pursuant to any applicable law or regulation. In lieu of
withholding such amounts, in whole or in part, the Company may, in its sole
discretion, accept other provision for payment of taxes as required by law,
provided it is satisfied that all requirements of law affecting its
responsibilities to withhold such taxes have been satisfied.


                    14.
GUARANTY AND AFFILIATE SERVICES.


                    (a)
LIABILITY. Each of XL Insurance Ltd and XL Re Ltd (together, the “Guarantors”)
hereby agrees to be jointly and severally liable together with the Company, for
the performance of all obligations and duties, and the payment of all amounts,
due to the Executive under this Agreement.


-15-






                    (b)
RESPONSIBILITY. All of the other terms and provisions of this Agreement relating to the
Executive’s employment by the Company shall likewise apply mutatis mutandis to the
Executive’s employment by any of its Affiliates, it being understood that if
the Executive’s employment with the Company is terminated, his employment with
its Affiliates shall also be terminated and the Executive shall be required to resign
immediately from all directorships and other positions held by the Executive in the
Company and its Affiliates or in any other entities in respect of which the
Executive was acting as a representative or designee of the Company or its
Affiliates in connection with his employment.


                    15.
ENTIRE
AGREEMENT.


                    This
Agreement, together with the Exhibits, contains the entire agreement between
the Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, between the Company and the Executive with respect thereto.


                    16.
ASSIGNABILITY;
BINDING NATURE.


                    This
Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors,
heirs and assigns. No rights or obligations of the Executive under this
Agreement may be assigned or transferred by the Executive other than his right
to compensation
and benefits hereunder, which may be transferred by will or operation of law subject
to the limitations
of this Agreement. No rights or obligations of the Company under this Agreement
may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation or
amalgamation or scheme of arrangement in which the Company is not the continuing
entity, or the sale or liquidation of all or substantially all of the assets of the Company,
provided that the assignee or transferee is the successor to all or substantially
all of the assets of the Company and such assignee or transferee assumes by
operation of law or in writing duly executed by the assignee or transferee all
of the liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law.


                    17.
INDEMNIFICATION.


                    The
Executive shall be provided indemnification by the Company to the maximum extent permitted by applicable law and
its
charter documents against expenses incurred and damages paid or payable
by the Executive with respect to claims based on actions or failures to act by
the Executive in his capacity as an officer, director or employee of the
Company or its Affiliates or in any other
capacity, including any fiduciary capacity, in which the Executive served at
the request of the Company or an Affiliate. In addition, he shall be covered by
a directors’ and officers’ liability policy with coverage for all
directors and officers of the Company in an amount equal to at least US $75,000,000. Such directors’ and
officers’
liability insurance shall be maintained in effect for a period of six
years following termination of the Executive’s employment for any reason other
than pursuant to Section 8(c) or Section 8(e) hereof.


-16-






                    18.
SETTLEMENT OF DISPUTES.


                    (a)
Any dispute between the Parties arising from or relating to the terms of this
Agreement or the Executive’s employment with the Company or its Affiliates
shall, except as provided in Section 18(b) or Section 18(c), be resolved by
binding arbitration held in New York City in accordance with the rules of the
American Arbitration Association.


                    (b)
Executive acknowledges that the Company and its Affiliates will suffer irreparable
injury, not readily susceptible of valuation in monetary damages, if Executive
breaches his obligations under Section 11 or 12. Accordingly, Executive agrees
that the Company and its Affiliates will be entitled, in addition to any other
available remedies, to obtain injunctive relief against any breach or
prospective breach by Executive of his obligations under Section 11 or 12 in
any Federal or state court sitting in the City and State of New York or court
sitting in Bermuda or the United Kingdom, or, at the Company’s or any
Affiliate’s election, in any other jurisdiction in which Executive maintains
his residence or his principal place of business. Executive hereby submits to
the non-exclusive jurisdiction of all those courts for the purposes of any
actions or proceedings instituted by the Company or its Affiliates to obtain
such injunctive relief, and Executive agrees that process in any or all of
those actions or proceedings may be served by registered mail or delivery,
addressed to the last address of Executive known to the Company or its
Affiliates, or in any other manner authorized by law. Executive further agrees
that, in addition to any other remedies available to the Company or its
Affiliates by operation of law or otherwise, because of any breach by Executive
of his obligations under Section 11 or 12 he will forfeit any and all bonus and
rights to any payments to which he might otherwise then be entitled by virtue
hereof and such payments may be suspended so long as any good faith dispute with
respect thereto is continuing; provided, however,  that payments,
benefits and other rights and privileges of the Executive under this Agreement
following termination of the Executive’s employment during a Post-Change Period
shall not be forfeited, suspended, offset, diminished or otherwise altered in
any way on account of any breach or prospective breach of Section 11, Section
12 or any other provision of this Agreement alleged by the Company.


                    (c)
Notwithstanding any other provision of this Agreement, the Executive may elect
to resolve any dispute involving a breach or alleged breach of this Agreement
following termination of the Executive’s employment during a Post-Change Period
in any Federal or State court sitting in the City and State of New York or
court sitting in Bermuda or the United Kingdom. The Company and the Guarantors
hereby submit to the non-exclusive jurisdiction of all those courts for the
purposes of any such actions or proceedings instituted by the Executive, and
the Company and the Guarantors agree that process in any or all of such actions
or proceedings may be served by registered mail or delivery, addressed to the
Company as set forth in Section 20, or in any other manner authorized by law.
The Company and the Guarantors shall pay all costs associated with any court
proceeding under this Section 18(c) without regard to the outcome of such
proceeding, including all legal fees and expenses of the Executive, who shall
be reimbursed for all such costs within ten (10) days following written demand
therefor by the Executive (which written demand shall be made no later than six
(6) months following the end of the calendar year in which such costs were
incurred).


                    (d)
Each Party shall bear its own costs incurred in connection with any proceeding
under Sections 18(a) or 18(b) hereof, including all legal fees and expenses: provided,


-17-






however, that the Company shall bear all such
costs of the Executive (to the extent such costs are reasonable) if the Executive
substantially prevails in the proceeding. Following the final determination of
the dispute in which the Executive has substantially prevailed, the Company
shall reimburse all such reasonable costs within ten (10) days following
written demand therefor (supported by documentation of such costs) by the
Executive, and the Executive shall make such written demand within sixty (60)
days following the final determination of the dispute; provided, however,
that such payment shall be made no later than on or prior to the end of the
calendar year following the calendar year in which the cost is incurred.
Notwithstanding the foregoing, in the event a final determination of the
dispute has not been made by December 20 of the year following the calendar
year in which the cost is incurred, the Company shall, within ten (10) days
after such December 20, reimburse such reasonable costs (supported by
documentation of such costs) incurred in the prior taxable year; provided, however, that the Executive shall return such amounts to the Company
within ten (10) business days following the final determination if the
Executive did not substantially prevail in the dispute.


                    (e)
The amount of any expenses eligible for payment under this Section 18 during a
calendar year will not affect the amount of any expenses eligible for payment
under this Section 18 in any other taxable year.


                    19.
AMENDMENT OR WAIVER.


                    No
provision in this Agreement may be amended unless such amendment is agreed to
in writing, signed by the Executive and by a duly authorized officer of the
Company and the Guarantors. No waiver by any Party of any breach by the other
Party of any condition or provision of this Agreement to be performed by such
other Party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or any prior or subsequent time. Except as set forth in
Section 8(d)(iv) or Exhibit B, any waiver must be in writing and signed by the
Executive or a duly authorized officer of the Company and the Guarantors, as
the case may be.


                    20.
NOTICES.


                    Any
notice required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
sent by courier, or by certified or registered mail, postage prepaid, return
receipt requested, duly addressed to the Party concerned at the address
indicated below or to such changed address as such Party may subsequently by
similar process give notice of:


	
 

	
 


	
If to the
 Company:


	
 

	
 


	
 

	
XL Capital
 Ltd


	
 

	
One
 Bermudiana Road 


	
 

	
Hamilton
 HM11, Bermuda 


	
 

	
Att’n:
 General Counsel


	
 


	
If to the
 Executive:





-18-






	
 

	
 


	
 

	
To the last
 address delivered to


	
 

	
 the Company by the Executive in 


	
 

	
the manner
 set forth herein.





                    21. SEVERABILITY.


                    In
the event that any provision or portion of this Agreement shall be determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.


                    22.
SURVIVORSHIP.


                    The
respective rights and obligations of the Parties shall survive any termination
of this Agreement to the extent necessary to the intended preservation of such
rights and obligations.


                    23.
REFERENCE.


                    In
the event of the Executive’s death or a judicial determination of his
incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his estate or other legal representative.


                    24.
GOVERNING LAW.


                    This
Agreement shall be governed by and construed and interpreted in accordance with
the laws of the State of New York without reference to the principles of
conflict of laws.


                    25.
SECTION 409A.


                    (a)
It is intended that this Agreement will comply with Section 409A of the Code
(and any regulations and guidelines issued thereunder) to the extent the
Agreement is subject thereto, and the Agreement shall be interpreted on a basis
consistent with such intent. If an amendment of the Agreement is necessary in
order for it to comply with Section 409A, the parties hereto will negotiate in
good faith to amend the Agreement in a manner that preserves the original
intent of the parties to the extent reasonably possible. No action or failure
to act, pursuant to this Section 25 shall subject the Company to any claim,
liability, or expense, and the Company shall not have any obligation to
indemnify or otherwise protect the Executive from the obligation to pay any
taxes pursuant to Section 409A of the Code.


                    (b)
Notwithstanding any provision to the contrary in this Agreement, if the
Executive is deemed on the date of his “separation from service” (within the
meaning of Treas. Reg. Section 1.409A-l(h)) to be a “specified employee”
(within the meaning of Treas. Reg. Section 1.409A-l(i)), then with regard to
any payment that is required to be delayed pursuant to Section 409A(a)(2)(B) of
the Code, such payment shall not be made prior to the earlier of (i) the
expiration of the six (6)-month period measured from the date of his
“separation from service,” or (ii) the date of his death (the “Delay Period”).
Upon the expiration of the Delay Period, all payments delayed pursuant to this
Section 25 (whether they would have otherwise been payable in a


-19-






single sum or
in installments in the absence of such delay) shall be paid to the Executive in
a lump sum, and any remaining payments due under this Agreement shall be paid
in accordance with the normal payment dates specified for them herein. In no
case will compliance with this Section by the Company constitute a breach of
the Company’s or the Guarantors’ obligations under this Agreement.
Notwithstanding any provision of this Agreement to the contrary, for purposes
of Sections 8(b) and 8(d) above, the Executive will be deemed to have
terminated his employment on the date of his “separation from service” (within
the meaning of Treas. Reg. Section 1.409A-l(h)) with the Company.


                    26.
HEADINGS.


                    The
heading of the sections contained in this Agreement are for convenience only
and shall not be deemed to control or affect the meaning or construction of any
provision of this Agreement.


                    27.
COUNTERPARTS.


                    This
Agreement may be executed simultaneously in two or more counterparts, any one of
which need not contain the signatures of more than one party, but all of which
counterparts taken together will constitute one and the same agreement.


-20-






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


	
 

	
 

	
 


	
 

	
XL CAPITAL LTD


	
 

	
 

	
 


	
 

	
By:

	
/s/ Kirstin R. Gould


	
 

	
 

	



	
 

	
 

	
 


	
 

	
DAVID B. DUCLOS


	
 

	
 

	
 


	
 

	
By:

	
/s/ David B. Duclos


	
 

	



	
 

	
 

	
 


	
 

	
GUARANTORS:


	
 

	
 

	
 


	
 

	
XL INSURANCE LTD


	
 

	
 


	
 

	
By:

	
/s/ Kirstin R. Gould


	
 

	
 

	



	
 

	
 

	
 


	
 

	
XL RE LTD


	
 

	
 

	
 


	
 

	
By:

	
/s/ Kirstin R. Gould


	
 

	
 

	






-21-






EXHIBIT A 


CHANGE IN CONTROL


                    A
“Change in Control” shall be deemed to have occurred:


                    (i)
any person (which, for all purposes hereof, shall include, without limitation,
an individual, sole proprietorship, partnership, unincorporated association,
unincorporated syndicate, unincorporated organization, trust, body corporate
and a trustee, executor, administrator or other legal representative) (a
“Person”) or any group, as defined in Sections 13(d) or 14(d) of the United
States Securities Exchange Act of 1934 (other than a group of which the
Executive is a member or which has been organized by the Executive), becomes
the beneficial owner, directly or indirectly, of securities of the Company
representing, or acquires the right to control or direct, or to acquire through
the conversion of securities or the exercise of warrants or other rights to
acquire securities, 30% or more of either (I) the outstanding Ordinary Shares
of the Company, (II) the outstanding securities of the Company having a right
to vote in the election of directors, or (III) the combined voting power of the
outstanding securities of the Company having a right to vote in the election of
directors; or


                    (ii)
if there shall be elected or appointed to the Board of Directors of the Company
(the “Board”) any director or directors whose appointment or election by the
Board or nomination for election by the Company’s shareholders was not approved
by a vote of at least a majority of the directors then still in office who were
either directors on the date of execution of this Agreement or whose election
or appointment or nomination for election was previously so approved; or


                    (iii)
upon consummation of a reorganization, scheme of arrangement, merger,
consolidation, combination, amalgamation, corporate restructuring, liquidation,
winding up, exchange of securities, or similar transaction (each, an “Event”),
in each case, in respect of which the beneficial owners of the outstanding
Company Ordinary Shares immediately prior to such Event do not, following such
Event, beneficially own, directly or indirectly, more than 60% of each of the
outstanding equity share capital, and the combined voting power of the then
outstanding voting securities entitled to vote in the election of the
directors, of the Company and any resulting entity, in substantially the same
proportions as their ownership, immediately prior to such Event, of the
Ordinary Shares and voting power of the Company; or


                    (iv)
if there occurs an Event involving the Company as a result of which 25% of more
of the members of the Board of the Company are not persons who were members of
the Board immediately prior to the earlier of (x) the Event, (y) execution of
an agreement, the consummation of which would result in the Event, or (z)
announcement by the Company of an intention to effect the Event; or


                    (v)
if the Board adopts a resolution to the effect that, for purposes of this
Agreement, a Change in Control has occurred.






EXHIBIT B 


GOOD REASON


                    For
purposes of this Agreement, “Good Reason” shall mean any of the following,
unless done with the prior express written consent of the Executive:


	
 

	
 


	
 

	
                    (i)
 (A) The assignment to Executive of duties inconsistent with Executive’s
 position (including duties, responsibilities, status, titles or offices as
 set forth in Section 3 hereof); or (B) any elimination, diminution or
 reduction of Executive’s duties or responsibilities except in connection with
 the termination of Executive’s employment for Cause, disability or as a
 result of Executive’s death or by Executive other than for Good Reason; and
 for purposes for this clause (i), the determination of whether there has been
 a reduction of duties or responsibilities or an assignment of duties inconsistent
 with the Executive’s position shall take into account the Executive’s duties,
 responsibilities and position with the ultimate parent of the
 parent/subsidiary group as a whole which includes the Company;


	
 

	
 


	
 

	
                    (ii)
 The (A) reduction in Executive’s Base Salary from the level in effect
 immediately prior to the Change in Control, or (B) payment of an annual bonus
 in an amount less than the lesser of (x) the most recent annual bonus paid
 prior to the Change in Control or (y) the greater of (I) the most recent
 target bonus, if any, established prior to the Change in Control or (II) the
 annual average bonus paid for the preceding three complete years prior to the
 Change in Control (or such lesser number of complete years as the Executive
 shall have been employed by the Company);


	
 

	
 


	
 

	
                    (iii)
 The failure by the Company or the Guarantors to obtain the specific written
 assumption of this Agreement by any successor or assign of the Company or the
 Guarantors or any person acquiring substantially all of the Company’s or the
 Guarantors’ assets;


	
 

	
 


	
 

	
                    (iv)
 Any breach by the Company or the Guarantors of any provision of this
 Agreement or any agreements entered into pursuant thereto that remains
 uncured for 20 calendar days following written notice of same by the
 Executive;


	
 

	
 


	
 

	
                    (v)
 Notwithstanding the provisions of Section 3(b) of this Agreement, requiring
 the Executive to be based at any office or location that is greater than 35
 miles from the office or location at which the Executive was principally
 located immediately prior to the Change in Control;


	
 

	
 


	
 

	
                    (vi)
 During the Post-Change Period, (A) the failure to continue in effect any
 compensation or incentive plan in which Executive participates immediately
 prior to the time of the Change in Control unless an equitable arrangement
 (embodied in an ongoing substitute or alternative plan providing Executive
 with at least the same aggregate economic opportunity on an after-tax basis
 available to the Executive immediately prior to the Change in Control) has
 been made with respect to such plan in connection with the Change in Control,
 or the failure to continue Executive’s participation therein on substantially
 the same basis both in terms of the amount of benefits provided 












	
 

	

	
 

	
 


	
 

	
and the
 level of his participation relative to other participants, as existed at the
 time of the Change in Control; or (B) the failure to continue to provide
 Executive with benefits and coverage at least as favorable in the aggregate
 as those enjoyed by him under the Company’s pension, life insurance, medical,
 health and accident, disability, deferred compensation or savings plans in
 which he was participating at the time of the Change in Control; or


	
 

	
 


	
 

	
                    (vii)
 The failure by the Company to pay within 7 calendar days of the due date any
 amounts due under any benefit or compensation plan, including any deferred
 compensation plan.





Notwithstanding
any provision in this Agreement to the contrary, the Executive must give
written notice of his intention to terminate his employment for Good Reason
within sixty (60) days after the act or omission which constitutes Good Reason,
and any failure to give such written notice within such period will result in a
waiver by the Executive of his right to terminate for Good Reason as a result
of such act or omission.


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