Exhibit 10.7


AMENDED EMPLOYMENT
AGREEMENT 

(dated as of 4/25, 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”), X.L. Global
Services, Inc. (“XLGS”), and James H. Veghte (the “Executive”).


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


                    WHEREAS,
the Company and the Executive previously entered into an Amended Employment
Agreement, dated as of August 1, 2006;


                    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 Officer-Reinsurance
General 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$500,000,
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 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-l(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,
including, without limitation, the Employment Agreement between the Company and the Executive
dated as of August 1, 2006.


                    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


	
 

	
 

	



	
 

	
 

	
 


	
 

	
JAMES H. VEGHTE 


	
 

	
 

	
 


	
 

	
By:

	
/s/ James H. Veghte


	
 

	
 

	



	
 

	
 

	
 


	
 

	
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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