Document:

Exhibit 10.3

                               GUARANTEE AGREEMENT

                                 Monroe Bancorp

                            Dated as of July 24, 2006

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                                Table of Contents

                                                                           Page

                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.01. Definitions and Interpretation.................................1

                                   ARTICLE II
               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

SECTION 2.01. Powers and Duties of the Guarantee Trustee.....................4

SECTION 2.02. Certain Rights of the Guarantee Trustee........................5

SECTION 2.03. Not Responsible for Recitals or Issuance of Guarantee..........7

SECTION 2.04. Events of Default; Waiver......................................7

SECTION 2.05. Events of Default; Notice......................................8

                                   ARTICLE III
                              THE GUARANTEE TRUSTEE

SECTION 3.01. The Guarantee Trustee; Eligibility.............................8

SECTION 3.02. Appointment, Removal and Resignation of the Guarantee Trustee..9

                                   ARTICLE IV
                                    GUARANTEE

SECTION 4.01. Guarantee......................................................9

SECTION 4.02. Waiver of Notice and Demand...................................10

SECTION 4.03. Obligations Not Affected......................................10

SECTION 4.04. Rights of Holders.............................................11

SECTION 4.05. Guarantee of Payment..........................................11

SECTION 4.06. Subrogation...................................................11

SECTION 4.07. Independent Obligations.......................................12

SECTION 4.08. Enforcement...................................................12

                                    ARTICLE V
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 5.01. Limitation of Transactions....................................12

SECTION 5.02. Ranking.......................................................13

                                   ARTICLE VI
                                   TERMINATION

SECTION 6.01. Termination...................................................13

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                                Table of Contents
                                   (continued)

                                                                           Page

                                   ARTICLE VII
                                 INDEMNIFICATION

SECTION 7.01. Exculpation...................................................14

SECTION 7.02. Indemnification...............................................14

SECTION 7.03. Compensation; Reimbursement of Expenses.......................15

                                  ARTICLE VIII
                                  MISCELLANEOUS

SECTION 8.01. Successors and Assigns........................................16

SECTION 8.02. Amendments....................................................16

SECTION 8.03. Notices.......................................................16

SECTION 8.04. Benefit.......................................................17

SECTION 8.05. Governing Law.................................................17

SECTION 8.06. Counterparts..................................................17

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                               GUARANTEE AGREEMENT
                               -------------------

         This GUARANTEE AGREEMENT (the "Guarantee"), dated as of July 24, 2006,
is executed and delivered by Monroe Bancorp, incorporated in Indiana (the
"Guarantor"), and Wells Fargo Bank, National Association, a national banking
association with its principal place of business in the State of Delaware, as
trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Capital Securities (as defined herein) of
Monroe Bancorp Capital Trust I, a Delaware statutory trust (the "Issuer").

         WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of July 24, 2006, among the administrators and trustees
named therein of the Issuer, Monroe Bancorp, as sponsor, and the Holders from
time to time of undivided beneficial interests in the assets of the Issuer, the
Issuer is issuing on the date hereof securities, having an aggregate liquidation
amount of up to $3,000,000, designated the Capital Securities (the "Capital
Securities"); and

         WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Guarantee, to pay to the Holders of Capital
Securities the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the purchase by each Holder of the
Capital Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of
the Holders.

                                   ARTICLE I
                         DEFINITIONS AND INTERPRETATION

         SECTION 1.01. Definitions and Interpretation.

         In this Guarantee, unless the context otherwise requires:

         capitalized terms used in this Guarantee but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;

         a term defined anywhere in this Guarantee has the same meaning
throughout;

         all references to "the Guarantee" or "this Guarantee" are to this
Guarantee as modified, supplemented or amended from time to time;

         all references in this Guarantee to Articles and Sections are to
Articles and Sections of this Guarantee, unless otherwise specified;

         terms defined in the Declaration as of the date of execution of this
Guarantee have the same meanings when used in this Guarantee, unless otherwise
defined in this Guarantee or unless the context otherwise requires; and

         a reference to the singular includes the plural and vice versa.

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         "Beneficiaries" means any Person to whom the Issuer is or hereafter
becomes indebted or liable.

         "Corporate Trust Office" means the office of the Guarantee Trustee at
which the corporate trust business of the Guarantee Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Guarantee is located at 919 Market Street, Suite 700,
Wilmington, DE 19801.

         "Covered Person" means any Holder of Capital Securities.

         "Debentures" means the junior subordinated debentures of Monroe
Bancorp, designated the Junior Subordinated Debt Securities due 2036, held by
the Institutional Trustee (as defined in the Declaration) of the Issuer.

         "Event of Default" has the meaning set forth in Section 2.4.

         "Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Capital Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined
in the Declaration) which are required to be paid on such Capital Securities to
the extent the Issuer has funds available in the Property Account (as defined in
the Declaration) therefor at such time, (ii) the Redemption Price (as defined in
the Indenture) to the extent the Issuer has funds available in the Property
Account therefor at such time, with respect to any Capital Securities called for
redemption by the Issuer, (iii) the Special Redemption Price (as defined in the
Indenture) to the extent the Issuer has funds available in the Property Account
therefor at such time, with respect to Capital Securities called for redemption
upon the occurrence of a Special Event (as defined in the Indenture), and (iv)
upon a voluntary or involuntary liquidation, dissolution, winding-up or
termination of the Issuer (other than in connection with the distribution of
Debentures to the Holders of the Capital Securities in exchange therefor as
provided in the Declaration), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Capital Securities to the
date of payment, to the extent the Issuer has funds available in the Property
Account therefor at such time, and (b) the amount of assets of the Issuer
remaining available for distribution to Holders in liquidation of the Issuer
after satisfaction of liabilities to creditors of the Issuer as required by
applicable law (in either case, the "Liquidation Distribution").

         "Guarantee Trustee" means Wells Fargo Bank, National Association, until
a Successor Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Guarantee and thereafter means each
such Successor Guarantee Trustee.

         "Holder" means any holder, as registered on the books and records of
the Issuer, of any Capital Securities; provided, however, that, in determining
whether the holders of the requisite percentage of Capital Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliate of the Guarantor.

         "Indemnified Person" means the Guarantee Trustee (including in its
individual capacity), any Affiliate of the Guarantee Trustee, or any officers,
directors, shareholders, members, partners, employees, representatives,
nominees, custodians or agents of the Guarantee Trustee.

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         "Indenture" means the Indenture, dated as of July 24, 2006, between the
Guarantor and Wells Fargo Bank, National Association, not in its individual
capacity but solely as trustee, and any indenture supplemental thereto pursuant
to which the Debentures are to be issued to the Institutional Trustee of the
Issuer.

         "Liquidation Distribution" has the meaning set forth in the definition
of "Guarantee Payments" herein.

         "Majority in liquidation amount of the Capital Securities" means
Holder(s) of outstanding Capital Securities, voting together as a class, but
separately from the holders of Common Securities, of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to,
but excluding, the date upon which the voting percentages are determined) of all
Capital Securities then outstanding.

         "Obligations" means any costs, expenses or liabilities (but not
including liabilities related to taxes) of the Issuer, other than obligations of
the Issuer to pay to holders of any Trust Securities the amounts due such
holders pursuant to the terms of the Trust Securities.

         "Officer's Certificate" means, with respect to any Person, a
certificate signed by one Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Guarantee shall include:

         a statement that each officer signing the Officer's Certificate has
read the covenant or condition and the definitions relating thereto;

         a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officer's Certificate;

         a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and

         a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.

         "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

         "Responsible Officer" means, with respect to the Guarantee Trustee, any
officer within the Corporate Trust Office of the Guarantee Trustee with direct
responsibility for the administration of any matters relating to this Guarantee,
including any vice president, any assistant vice president, any secretary, any
assistant secretary, the treasurer, any assistant treasurer, any trust officer
or other officer of the Corporate Trust Office of the Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated

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officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.

         "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 3.1.

         "Trust Securities" means the Common Securities and the Capital
Securities.

                                   ARTICLE II
               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

         SECTION 2.01. Powers and Duties of the Guarantee Trustee.

         This Guarantee shall be held by the Guarantee Trustee for the benefit
         of the Holders of the Capital Securities, and the Guarantee Trustee
         shall not transfer this Guarantee to any Person except a Holder of
         Capital Securities exercising his or her rights pursuant to Section
         4.4(b) or to a Successor Guarantee Trustee on acceptance by such
         Successor Guarantee Trustee of its appointment to act as Successor
         Guarantee Trustee. The right, title and interest of the Guarantee
         Trustee shall automatically vest in any Successor Guarantee Trustee,
         and such vesting and cessation of title shall be effective whether or
         not conveyancing documents have been executed and delivered pursuant to
         the appointment of such Successor Guarantee Trustee.

         If an Event of Default actually known to a Responsible Officer of the
         Guarantee Trustee has occurred and is continuing, the Guarantee Trustee
         shall enforce this Guarantee for the benefit of the Holders of the
         Capital Securities.

         The Guarantee Trustee, before the occurrence of any Event of Default
         and after the curing or waiving of all Events of Default that may have
         occurred, shall undertake to perform only such duties as are
         specifically set forth in this Guarantee, and no implied covenants
         shall be read into this Guarantee against the Guarantee Trustee. In
         case an Event of Default has occurred (that has not been cured or
         waived pursuant to Section 2.4(b)) and is actually known to a
         Responsible Officer of the Guarantee Trustee, the Guarantee Trustee
         shall exercise such of the rights and powers vested in it by this
         Guarantee, and use the same degree of care and skill in its exercise
         thereof, as a prudent person would exercise or use under the
         circumstances in the conduct of his or her own affairs.

         No provision of this Guarantee shall be construed to relieve the
         Guarantee Trustee from liability for its own negligent action, its own
         negligent failure to act, or its own willful misconduct, except that:

         (a)      prior to the occurrence of any Event of Default and after the
                  curing or waiving of all Events of Default that may have
                  occurred:

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         (1)      the duties and obligations of the Guarantee Trustee shall be
                  determined solely by the express provisions of this Guarantee,
                  and the Guarantee Trustee shall not be liable except for the
                  performance of such duties and obligations as are specifically
                  set forth in this Guarantee, and no implied covenants or
                  obligations shall be read into this Guarantee against the
                  Guarantee Trustee; and

         (2)      in the absence of bad faith on the part of the Guarantee
                  Trustee, the Guarantee Trustee may conclusively rely, as to
                  the truth of the statements and the correctness of the
                  opinions expressed therein, upon any certificates or opinions
                  furnished to the Guarantee Trustee and conforming to the
                  requirements of this Guarantee; but in the case of any such
                  certificates or opinions furnished to the Guarantee Trustee,
                  the Guarantee Trustee shall be under a duty to examine the
                  same to determine whether or not on their face they conform to
                  the requirements of this Guarantee;

         (b)      the Guarantee Trustee shall not be liable for any error of
                  judgment made in good faith by a Responsible Officer of the
                  Guarantee Trustee, unless it shall be proved that such
                  Responsible Officer of the Guarantee Trustee or the Guarantee
                  Trustee was negligent in ascertaining the pertinent facts upon
                  which such judgment was made;

         (c)      the Guarantee Trustee shall not be liable with respect to any
                  action taken or omitted to be taken by it in good faith in
                  accordance with the written direction of the Holders of not
                  less than a Majority in liquidation amount of the Capital
                  Securities relating to the time, method and place of
                  conducting any proceeding for any remedy available to the
                  Guarantee Trustee, or exercising any trust or power conferred
                  upon the Guarantee Trustee under this Guarantee; and

         (d)      no provision of this Guarantee shall require the Guarantee
                  Trustee to expend or risk its own funds or otherwise incur
                  personal financial liability in the performance of any of its
                  duties or in the exercise of any of its rights or powers, if
                  the Guarantee Trustee shall have reasonable grounds for
                  believing that the repayment of such funds is not reasonably
                  assured to it under the terms of this Guarantee, or security
                  and indemnity, reasonably satisfactory to the Guarantee
                  Trustee, against such risk or liability is not reasonably
                  assured to it.

         SECTION 2.02. Certain Rights of the Guarantee Trustee.

         Subject to the provisions of Section 2.1:

         (a)      The Guarantee Trustee may conclusively rely, and shall be
                  fully protected in acting or refraining from acting upon, any
                  resolution, certificate, statement, instrument, opinion,
                  report, notice, request, direction, consent, order, bond,
                  debenture, note, other evidence of indebtedness or other paper
                  or document believed by it to be genuine and to have been
                  signed, sent or presented by the proper party or parties.

         (b)      Any direction or act of the Guarantor contemplated by this
                  Guarantee shall be sufficiently evidenced by an Officer's
                  Certificate.

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         (c)      Whenever, in the administration of this Guarantee, the
                  Guarantee Trustee shall deem it desirable that a matter be
                  proved or established before taking, suffering or omitting any
                  action hereunder, the Guarantee Trustee (unless other evidence
                  is herein specifically prescribed) may, in the absence of bad
                  faith on its part, request and conclusively rely upon an
                  Officer's Certificate of the Guarantor which, upon receipt of
                  such request, shall be promptly delivered by the Guarantor.

         (d)      The Guarantee Trustee shall have no duty to see to any
                  recording, filing or registration of any instrument or other
                  writing (or any rerecording, refiling or reregistration
                  thereof).

         (e)      The Guarantee Trustee may consult with counsel of its
                  selection, and the advice or opinion of such counsel with
                  respect to legal matters shall be full and complete
                  authorization and protection in respect of any action taken,
                  suffered or omitted by it hereunder in good faith and in
                  accordance with such advice or opinion. Such counsel may be
                  counsel to the Guarantor or any of its Affiliates and may
                  include any of its employees. The Guarantee Trustee shall have
                  the right at any time to seek instructions concerning the
                  administration of this Guarantee from any court of competent
                  jurisdiction.

         (f)      The Guarantee Trustee shall be under no obligation to exercise
                  any of the rights or powers vested in it by this Guarantee at
                  the request or direction of any Holder, unless such Holder
                  shall have provided to the Guarantee Trustee such security and
                  indemnity, reasonably satisfactory to the Guarantee Trustee,
                  against the costs, expenses (including attorneys' fees and
                  expenses and the expenses of the Guarantee Trustee's agents,
                  nominees or custodians) and liabilities that might be incurred
                  by it in complying with such request or direction, including
                  such reasonable advances as may be requested by the Guarantee
                  Trustee; provided, however, that nothing contained in this
                  Section -------- ------- 2.2(a)(vi) shall be taken to relieve
                  the Guarantee Trustee, upon the occurrence of an Event of
                  Default, of its obligation to exercise the rights and powers
                  vested in it by this Guarantee.

         (g)      The Guarantee Trustee shall not be bound to make any
                  investigation into the facts or matters stated in any
                  resolution, certificate, statement, instrument, opinion,
                  report, notice, request, direction, consent, order, bond,
                  debenture, note, other evidence of indebtedness or other paper
                  or document, but the Guarantee Trustee, in its discretion, may
                  make such further inquiry or investigation into such facts or
                  matters as it may see fit.

         (h)      The Guarantee Trustee may execute any of the trusts or powers
                  hereunder or perform any duties hereunder either directly or
                  by or through agents, nominees, custodians or attorneys, and
                  the Guarantee Trustee shall not be responsible for any
                  misconduct or negligence on the part of any agent or attorney
                  appointed with due care by it hereunder.

         (i)      Any action taken by the Guarantee Trustee or its agents
                  hereunder shall bind the Holders of the Capital Securities,
                  and the signature of the Guarantee Trustee or its

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                  agents alone shall be sufficient and effective to perform any
                  such action. No third party shall be required to inquire as to
                  the authority of the Guarantee Trustee to so act or as to its
                  compliance with any of the terms and provisions of this
                  Guarantee, both of which shall be conclusively evidenced by
                  the Guarantee Trustee's or its agent's taking such action.

         (j)      Whenever in the administration of this Guarantee the Guarantee
                  Trustee shall deem it desirable to receive instructions with
                  respect to enforcing any remedy or right or taking any other
                  action hereunder, the Guarantee Trustee (A) may request
                  instructions from the Holders of a Majority in liquidation
                  amount of the Capital Securities, (B) may refrain from
                  enforcing such remedy or right or taking such other action
                  until such instructions are received and (C) shall be
                  protected in conclusively relying on or acting in accordance
                  with such instructions.

         (k)      The Guarantee Trustee shall not be liable for any action
                  taken, suffered, or omitted to be taken by it in good faith
                  and reasonably believed by it to be authorized or within the
                  discretion or rights or powers conferred upon it by this
                  Guarantee.

                  No provision of this Guarantee shall be deemed to impose any
                  duty or obligation on the Guarantee Trustee to perform any act
                  or acts or exercise any right, power, duty or obligation
                  conferred or imposed on it, in any jurisdiction in which it
                  shall be illegal or in which the Guarantee Trustee shall be
                  unqualified or incompetent in accordance with applicable law
                  to perform any such act or acts or to exercise any such right,
                  power, duty or obligation. No permissive power or authority
                  available to the Guarantee Trustee shall be construed to be a
                  duty.

         SECTION 2.03. Not Responsible for Recitals or Issuance of Guarantee.

         The recitals contained in this Guarantee shall be taken as the
         statements of the Guarantor, and the Guarantee Trustee does not assume
         any responsibility for their correctness. The Guarantee Trustee makes
         no representation as to the validity or sufficiency of this Guarantee.

         SECTION 2.04. Events of Default; Waiver.

         An Event of Default under this Guarantee will occur upon the failure of
         the Guarantor to perform any of its payment or other obligations
         hereunder.

         The Holders of a Majority in liquidation amount of the Capital
         Securities may, voting or consenting as a class, on behalf of the
         Holders of all of the Capital Securities, waive any past Event of
         Default and its consequences. Upon such waiver, any such Event of
         Default shall cease to exist, and shall be deemed to have been cured,
         for every purpose of this Guarantee, but no such waiver shall extend to
         any subsequent or other default or Event of Default or impair any right
         consequent thereon.

SECTION 2.05. Events of Default; Notice.

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         The Guarantee Trustee shall, within 90 days after the occurrence of an
         Event of Default, transmit by mail, first class postage prepaid, to the
         Holders of the Capital Securities, notices of all Events of Default
         actually known to a Responsible Officer of the Guarantee Trustee,
         unless such defaults have been cured before the giving of such notice,
         provided, however, that the Guarantee Trustee shall be protected in
         withholding such notice if and so long as a Responsible Officer of the
         Guarantee Trustee in good faith determines that the withholding of such
         notice is in the interests of the Holders of the Capital Securities.

         The Guarantee Trustee shall not be charged with knowledge of any Event
         of Default unless the Guarantee Trustee shall have received written
         notice thereof from the Guarantor or a Holder of the Capital
         Securities, or a Responsible Officer of the Guarantee Trustee charged
         with the administration of this Guarantee shall have actual knowledge
         thereof.

                                  ARTICLE III
                              THE GUARANTEE TRUSTEE

         SECTION 3.01. The Guarantee Trustee; Eligibility.

         There shall at all times be a Guarantee Trustee which shall:

         (a)      not be an Affiliate of the Guarantor; and

         (b)      be a corporation or national association organized and doing
                  business under the laws of the United States of America or any
                  state or territory thereof or of the District of Columbia, or
                  Person authorized under such laws to exercise corporate trust
                  powers, having a combined capital and surplus of at least
                  Fifty Million U.S. Dollars ($50,000,000), and subject to
                  supervision or examination by federal, state, territorial or
                  District of Columbia authority. If such corporation or
                  national association publishes reports of condition at least
                  annually, pursuant to law or to the requirements of the
                  supervising or examining authority referred to above, then,
                  for the purposes of this Section 3.1(a)(ii), the combined
                  capital and surplus of such corporation or national
                  association shall be deemed to be its combined capital and
                  surplus as set forth in its most recent report of condition so
                  published.

                  If at any time the Guarantee Trustee shall cease to be
                  eligible to so act under Section 3.1(a), the Guarantee Trustee
                  shall immediately resign in the manner and with the effect set
                  forth in Section 3.2(c).

                  If the Guarantee Trustee has or shall acquire any "conflicting
                  interest' within the meaning of Section 310(b) of the Trust
                  Indenture Act, the Guarantee Trustee shall either eliminate
                  such interest or resign to the extent and in the manner
                  provided by, and subject to, this Guarantee.

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<PAGE>

         SECTION 3.02. Appointment, Removal and Resignation of the Guarantee
Trustee.

         Subject to Section 3.2(b), the Guarantee Trustee may be appointed or
         removed without cause at any time by the Guarantor except during an
         Event of Default.

         The Guarantee Trustee shall not be removed in accordance with Section
         3.2(a) until a Successor Guarantee Trustee has been appointed and has
         accepted such appointment by written instrument executed by such
         Successor Guarantee Trustee and delivered to the Guarantor.

         The Guarantee Trustee appointed to office shall hold office until a
         Successor Guarantee Trustee shall have been appointed or until its
         removal or resignation. The Guarantee Trustee may resign from office
         (without need for prior or subsequent accounting) by an instrument in
         writing executed by the Guarantee Trustee and delivered to the
         Guarantor, which resignation shall not take effect until a Successor
         Guarantee Trustee has been appointed and has accepted such appointment
         by an instrument in writing executed by such Successor Guarantee
         Trustee and delivered to the Guarantor and the resigning Guarantee
         Trustee.

         If no Successor Guarantee Trustee shall have been appointed and
         accepted appointment as provided in this Section 3.2 within 60 days
         after delivery of an instrument of removal or resignation, the
         Guarantee Trustee resigning or being removed may petition any court of
         competent jurisdiction for appointment of a Successor Guarantee
         Trustee. Such court may thereupon, after prescribing such notice, if
         any, as it may deem proper, appoint a Successor Guarantee Trustee.

         No Guarantee Trustee shall be liable for the acts or omissions to act
         of any Successor Guarantee Trustee.

         Upon termination of this Guarantee or removal or resignation of the
         Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay
         to the Guarantee Trustee all amounts owing to the Guarantee Trustee
         under Sections 7.2 and 7.3 accrued to the date of such termination,
         removal or resignation.

                                   ARTICLE IV
                                    GUARANTEE

         SECTION 4.01. Guarantee.

         The Guarantor irrevocably and unconditionally agrees to pay in full to
         the Holders the Guarantee Payments (without duplication of amounts
         theretofore paid by the Issuer), as and when due, regardless of any
         defense (except as defense of payment by the Issuer), right of set-off
         or counterclaim that the Issuer may have or assert. The Guarantor's
         obligation to make a Guarantee Payment may be satisfied by direct
         payment of the required amounts by the Guarantor to the Holders or by
         causing the Issuer to pay such amounts to the Holders.

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<PAGE>

         The Guarantor hereby also agrees to assume any and all Obligations of
         the Issuer and in the event any such Obligation is not so assumed,
         subject to the terms and conditions hereof, the Guarantor hereby
         irrevocably and unconditionally guarantees to each Beneficiary the full
         payment, when and as due, of any and all Obligations to such
         Beneficiaries. This Guarantee is intended to be for the Beneficiaries
         who have received notice hereof.

SECTION 4.02. Waiver of Notice and Demand.

         The Guarantor hereby waives notice of acceptance of this Guarantee and
of any liability to which it applies or may apply, presentment, demand for
payment, any right to require a proceeding first against the Issuer or any other
Person before proceeding against the Guarantor, protest, notice of nonpayment,
notice of dishonor, notice of redemption and all other notices and demands.

SECTION 4.03. Obligations Not Affected.

         The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:

         the release or waiver, by operation of law or otherwise, of the
         performance or observance by the Issuer of any express or implied
         agreement, covenant, term or condition relating to the Capital
         Securities to be performed or observed by the Issuer;

         the extension of time for the payment by the Issuer of all or any
         portion of the Distributions, Redemption Price, Special Redemption
         Price, Liquidation Distribution or any other sums payable under the
         terms of the Capital Securities or the extension of time for the
         performance of any other obligation under, arising out of, or in
         connection with, the Capital Securities (other than an extension of
         time for the payment of the Distributions, Redemption Price, Special
         Redemption Price, Liquidation Distribution or other sums payable that
         results from the extension of any interest payment period on the
         Debentures or any extension of the maturity date of the Debentures
         permitted by the Indenture);

         any failure, omission, delay or lack of diligence on the part of the
         Holders to enforce, assert or exercise any right, privilege, power or
         remedy conferred on the Holders pursuant to the terms of the Capital
         Securities, or any action on the part of the Issuer granting indulgence
         or extension of any kind;

         the voluntary or involuntary liquidation, dissolution, sale of any
         collateral, receivership, insolvency, bankruptcy, assignment for the
         benefit of creditors, reorganization, arrangement, composition or
         readjustment of debt of, or other similar proceedings affecting, the
         Issuer or any of the assets of the Issuer;

         any invalidity of, or defect or deficiency in, the Capital Securities;

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<PAGE>

         the settlement or compromise of any obligation guaranteed hereby or
         hereby incurred; or

         any other circumstance whatsoever that might otherwise constitute a
         legal or equitable discharge or defense of a guarantor, it being the
         intent of this Section 4.3 that the obligations of the Guarantor
         hereunder shall be absolute and unconditional under any and all
         circumstances.

         There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.

SECTION 4.04. Rights of Holders.

         The Holders of a Majority in liquidation amount of the Capital
         Securities have the right to direct the time, method and place of
         conducting any proceeding for any remedy available to the Guarantee
         Trustee in respect of this Guarantee or to direct the exercise of any
         trust or power conferred upon the Guarantee Trustee under this
         Guarantee; provided, however, that (subject to Sections 2.1 and 2.2)
         the Guarantee Trustee shall have the right to decline to follow any
         such direction if the Guarantee Trustee shall determine that the
         actions so directed would be unjustly prejudicial to the Holders not
         taking part in such direction or if the Guarantee Trustee being advised
         by legal counsel determines that the action or proceeding so directed
         may not lawfully be taken or if the Guarantee Trustee in good faith by
         its board of directors or trustees, executive committee or a trust
         committee of directors or trustees and/or Responsible Officers shall
         determine that the action or proceeding so directed would involve the
         Guarantee Trustee in personal liability.

         Any Holder of Capital Securities may institute a legal proceeding
         directly against the Guarantor to enforce the Guarantee Trustee's
         rights under this Guarantee, without first instituting a legal
         proceeding against the Issuer, the Guarantee Trustee or any other
         Person. The Guarantor waives any right or remedy to require that any
         such action be brought first against the Issuer, the Guarantee Trustee
         or any other Person before so proceeding directly against the
         Guarantor.

SECTION 4.05. Guarantee of Payment.

         This Guarantee creates a guarantee of payment and not of collection.

SECTION 4.06. Subrogation.

         The Guarantor shall be subrogated to all (if any) rights of the Holders
of Capital Securities against the Issuer in respect of any amounts paid to such
Holders by the Guarantor under this Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by applicable provisions of
law) be entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee, if, after giving effect to any such
payment, any amounts are due and unpaid under this Guarantee. If any amount
shall be paid to the Guarantor

                                      -11-
<PAGE>

in violation of the preceding sentence, the Guarantor agrees to hold such amount
in trust for the Holders and to pay over such amount to the Holders.

SECTION 4.07. Independent Obligations.

         The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Capital
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 4.3 hereof.

SECTION 4.08. Enforcement.

         A Beneficiary may enforce the Obligations of the Guarantor contained in
Section 4.1 (b) directly against the Guarantor, and the Guarantor waives any
right or remedy to require that any action be brought against the Issuer or any
other person or entity before proceeding against the Guarantor.

         The Guarantor shall be subrogated to all rights (if any) of any
Beneficiary against the Issuer in respect of any amounts paid to the
Beneficiaries by the Guarantor under this Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by applicable provisions of
law) be entitled to enforce or exercise any rights that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee, if, after giving effect to such
payment, any amounts are due and unpaid under this Guarantee.

                                   ARTICLE V
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

         SECTION 5.01. Limitation of Transactions.

         So long as any Capital Securities remain outstanding, if (a) there
shall have occurred and be continuing an Event of Default or (b) the Guarantor
shall have selected an Extension Period as provided in the Declaration and such
period, or any extension thereof, shall have commenced and be continuing, then
the Guarantor may not (x) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Guarantor's capital stock or (y) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Guarantor that rank pari passu in all respects with or junior
in interest to the Debentures (other than (i) payments under this Guarantee,
(ii) repurchases, redemptions or other acquisitions of shares of capital stock
of the Guarantor (A) in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of one or more employees,
officers, directors, or consultants, (B) in connection with a dividend
reinvestment or stockholder stock purchase plan or (C) in connection with the
issuance of capital stock of the Guarantor (or securities convertible into or
exercisable for such capital stock), as consideration in an acquisition
transaction entered into prior to the occurrence of the Event of Default or the
applicable Extension Period, (iii) as a result of any exchange,
reclassification, combination or conversion of any class or series of the
Guarantor's capital stock (or any capital stock of a subsidiary of the
Guarantor) for any class or

                                      -12-
<PAGE>

series of the Guarantor's capital stock or of any class or series of the
Guarantor's indebtedness for any class or series of the Guarantor's capital
stock, (iv) the purchase of fractional interests in shares of the Guarantor's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (v) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (vi) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks pari passu with
or junior to such stock).

SECTION 5.02. Ranking.

         This Guarantee will constitute an unsecured obligation of the Guarantor
and will rank subordinate and junior in right of payment to all present and
future Senior Indebtedness (as defined in the Indenture) of the Guarantor. By
their acceptance thereof, each Holder of Capital Securities agrees to the
foregoing provisions of this Guarantee and the other terms set forth herein.

         The right of the Guarantor to participate in any distribution of assets
of any of its subsidiaries upon any such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of that
subsidiary, except to the extent the Guarantor may itself be recognized as a
creditor of that subsidiary. Accordingly, the Guarantor's obligations under this
Guarantee will be effectively subordinated to all existing and future
liabilities of the Guarantor's subsidiaries, and claimants should look only to
the assets of the Guarantor for payments thereunder. This Guarantee does not
limit the incurrence or issuance of other secured or unsecured debt of the
Guarantor, including Senior Indebtedness of the Guarantor, under any indenture
or agreement that the Guarantor may enter into in the future or otherwise.

                                   ARTICLE VI
                                   TERMINATION

         SECTION 6.01. Termination.

         This Guarantee shall terminate as to the Capital Securities (i) upon
full payment of the Redemption Price or the Special Redemption Price, as the
case may be, of all Capital Securities then outstanding, (ii) upon the
distribution of all of the Debentures to the Holders of all of the Capital
Securities or (iii) upon full payment of the amounts payable in accordance with
the Declaration upon dissolution of the Issuer. This Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
Holder of Capital Securities must restore payment of any sums paid under the
Capital Securities or under this Guarantee.

                                  ARTICLE VII
                                 INDEMNIFICATION

         SECTION 7.01. Exculpation.

         No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission of such Indemnified Person in
good faith in accordance with this Guarantee and in a manner that such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.

         An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Issuer or the Guarantor and upon such information,
opinions, reports or statements presented to the Issuer or the Guarantor by any
Person as to matters the Indemnified Person reasonably believes are within such
other Person's professional or expert competence and who, if selected by such
Indemnified Person, has been selected with reasonable care by such Indemnified
Person, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Capital Securities might properly be paid.

SECTION 7.02. Indemnification.

         The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any and all loss, liability,
damage, claim or expense incurred without negligence or willful misconduct on
the part of the Indemnified Person, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder, including but not
limited to the costs and expenses (including reasonable legal fees and expenses)
of the Indemnified Person defending itself against, or investigating, any claim
or liability in connection with the exercise or performance of any of the
Indemnified Person's powers or duties hereunder. The obligation to indemnify as
set forth in this Section 7.2 shall survive the resignation or removal of the
Guarantee Trustee and the termination of this Guarantee.

         Promptly after receipt by an Indemnified Person under this Section 7.2
of notice of the commencement of any action, such Indemnified Person will, if a
claim in respect thereof is to be made against the Guarantor under this Section
7.2, notify the Guarantor in writing of the commencement thereof; but the
failure so to notify the Guarantor (i) will not relieve the Guarantor from
liability under paragraph (a) above unless and to the extent that the Guarantor
did not otherwise learn of such action and such failure results in the
forfeiture by the Guarantor of substantial rights and defenses and (ii) will
not, in any event, relieve the Guarantor from any obligations to any Indemnified
Person other than the indemnification obligation provided in paragraph (a)
above. The Guarantor shall be entitled to appoint counsel of the Guarantor's
choice at the Guarantor's expense to represent the Indemnified Person in any
action for which indemnification is sought (in which case the Guarantor shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the Indemnified Person or Persons except as set

                                      -14-
<PAGE>

forth below); provided, however, that such counsel shall be satisfactory to the
Indemnified Person. Notwithstanding the Guarantor's election to appoint counsel
to represent the Indemnified Person in any action, the Indemnified Person shall
have the right to employ separate counsel (including local counsel), and the
Guarantor shall bear the reasonable fees, costs and expenses of such separate
counsel (and local counsel), if (i) the use of counsel chosen by the Guarantor
to represent the Indemnified Person would present such counsel with a conflict
of interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the Indemnified Person and the Guarantor and the Indemnified
Person shall have reasonably concluded that there may be legal defenses
available to it and/or other Indemnified Persons which are different from or
additional to those available to the Guarantor, (iii) the Guarantor shall not
have employed counsel satisfactory to the Indemnified Person to represent the
Indemnified Person within a reasonable time after notice of the institution of
such action or (iv) the Guarantor shall authorize the Indemnified Person to
employ separate counsel at the expense of the Guarantor. The Guarantor will not,
without the prior written consent of the Indemnified Persons, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
Indemnified Persons are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each Indemnified Person from all liability arising out of such claim, action,
suit or proceeding.

         SECTION 7.03. Compensation; Reimbursement of Expenses.

         The Guarantor agrees:

         to pay to the Guarantee Trustee from time to time such compensation for
         all services rendered by it hereunder as the parties shall agree to
         from time to time (which compensation shall not be limited by any
         provision of law in regard to the compensation of a trustee of an
         express trust); and

         except as otherwise expressly provided herein, to reimburse the
         Guarantee Trustee upon request for all reasonable expenses,
         disbursements and advances incurred or made by it in accordance with
         any provision of this Guarantee (including the reasonable compensation
         and the expenses and disbursements of its agents and counsel), except
         any such expense, disbursement or advance as may be attributable to its
         negligence or willful misconduct.

         The provisions of this Section 7.3 shall survive the resignation or
removal of the Guarantee Trustee and the termination of this Guarantee.

                                      -15-
<PAGE>

                                  ARTICLE VIII
                                  MISCELLANEOUS

         SECTION 8.01. Successors and Assigns.

         All guarantees and agreements contained in this Guarantee shall bind
the successors, assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders of the Capital
Securities then outstanding. Except in connection with any merger or
consolidation of the Guarantor with or into another entity or any sale, transfer
or lease of the Guarantor's assets to another entity, in each case to the extent
permitted under the Indenture, the Guarantor may not assign its rights or
delegate its obligations under this Guarantee without the prior approval of the
Holders of not less than a Majority in liquidation amount of the Capital
Securities.

         SECTION 8.02. Amendments.

         Except with respect to any changes that do not adversely affect the
rights of Holders of the Capital Securities in any material respect (in which
case no consent of Holders will be required), this Guarantee may be amended only
with the prior approval of the Holders of not less than a Majority in
liquidation amount of the Capital Securities. The provisions of the Declaration
with respect to amendments thereof shall apply equally with respect to
amendments of the Guarantee.

         SECTION 8.03. Notices.

         All notices provided for in this Guarantee shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by first class mail, as follows:

         If given to the Guarantee Trustee, at the Guarantee Trustee's mailing
         address set forth below (or such other address as the Guarantee Trustee
         may give notice of to the Holders of the Capital Securities):

                           Wells Fargo Bank, National Association
                           919 Market Street
                           Suite 700
                           Wilmington, DE 19801
                           Attention: Corporate Trust Division
                           Telecopy: 302-575-2006
                           Telephone: 302-575-2005

                                      -16-
<PAGE>

         If given to the Guarantor, at the Guarantor's mailing address set forth
         below (or such other address as the Guarantor may give notice of to the
         Holders of the Capital Securities and to the Guarantee Trustee):

                           Monroe Bancorp
                           210 E. Kirkwood Avenue
                           Bloomington, Indiana 47408
                           Attention: Gordon M. Dyott
                           Telecopy: (812) 331-3419
                           Telephone: (812) 331-3433

         If given to any Holder of the Capital Securities, at the address set
         forth on the books and records of the Issuer.

         All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.

         SECTION 8.04. Benefit.

         This Guarantee is solely for the benefit of the Holders of the Capital
Securities and, subject to Section 2.1(a), is not separately transferable from
the Capital Securities.

         SECTION 8.05. Governing Law.

         THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES
THEREOF.

         SECTION 8.06. Counterparts.

         This Guarantee may contain more than one counterpart of the signature
page and this Guarantee may be executed by the affixing of the signature of the
Guarantor and the Guarantee Trustee to any of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.

                                      -17-
<PAGE>

         THIS GUARANTEE is executed as of the day and year first above written.

                                                   Monroe Bancorp,
                                                    as Guarantor

                                          By:
                                             --------------------------------
                                          Name:
                                               ------------------------------
                                          Title:
                                                -----------------------------

                                          WELLS FARGO BANK, NATIONAL
                                          ASSOCIATION, as Guarantee Trustee

                                          By:
                                             --------------------------------
                                          Name:
                                               ------------------------------
                                          Title:
                                                -----------------------------

                                      -18-EXHIBIT 10.1

        TRANSITION AGREEMENT, dated as of [ ], 2006 (this "Agreement"), among XL
Capital Ltd, a Cayman Islands company ("XL Capital"), XL Insurance (Bermuda)
Ltd, a Bermuda company ("XLI"), X.L. America, Inc., a Delaware corporation
("XLA" and, together with XL Capital and XLI, the "XL Parties"), and Securities
Capital Assurance Ltd, a Bermuda company ("SCA"). Certain terms used in this
Agreement are defined in Section 1.1.

                              W I T N E S S E T H:

        WHEREAS, SCA has been recently organized solely for the purposes, and
has not engaged in activities except, as contemplated hereby;

        WHEREAS, the respective boards of directors of the XL Parties and SCA
have approved the transactions described in this Agreement and the Ancillary
Agreements, including the consummation of the Public Offering;

        WHEREAS, it is appropriate and desirable to set forth the principal
corporate transactions required to effect the transition of SCA to a public
company and certain other agreements that will, following the consummation of
the Public Offering, govern certain matters relating to such transition, the
Public Offering and the ongoing relationship of XL Capital, SCA and their
respective Subsidiaries.

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

                                    ARTICLE I

                                   DEFINITIONS

         Section 1.1    DEFINITIONS. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):

        "Activities" has the meaning specified in Section 7.1.

        "Action" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.

        "Administrative Subsidiaries" has the meaning specified in Section 2.1.

        "Affiliate" means, with respect to any Person, an individual or
organization that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with such Person. For
the purposes of this definition, "control", with respect to any Person, means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract, or otherwise.

        "Ancillary Agreements" has the meaning specified in Section 3.1.

        "Business Day" means any day excluding Saturday, Sunday and any day on
which banks in New York, New York or Hamilton, Bermuda have the option by law or
other governmental action to close.

         "Closing" has the meaning specified in Section 3.4.

        "Closing Time" has the meaning specified in Section 3.4.

        "Code" means the U.S. Internal Revenue Code of 1986, as amended and in
effect from time to time.

        "Commission" means the U.S. Securities and Exchange Commission.
<PAGE>

        "Common Shares" means the common shares of SCA.

        "Confidential Information" has the meaning specified in Section 7.9.

        "Determined Price" means the cash price paid by offerees of New
Securities (which may be a variable cash price set in reference to trading
prices of the Common Shares on the New York Stock Exchange, or any other
national securities exchange on which the Common Shares then trade) (less, if
applicable, any underwriting commission, brokerage or other discount or fee paid
to an underwriter, broker or agent acting in connection with the sale or
distribution of such New Securities), or if all or part of the issuance of New
Securities is to be for consideration other than cash, with respect to the
non-cash portion, (or if the New Securities are not then tracked on a national
securities exchange) the fair market value thereof as determined in good faith
by the SCA Board.

        "Effective Date" has the meaning specified in the recitals of this
Agreement.

        "Encumbrance" means any security interest, pledge, hypothecation,
mortgage, lien (including, without limitation, environmental and tax liens),
violation, charge, lease, license, encumbrance, servient easement, adverse
claim, reversion, reverter, preferential arrangement, restrictive covenant or
restriction of any kind, including, without limitation, any restriction on the
use, voting, transfer, receipt of income or other exercise of any attributes of
ownership.

        "FSA" means Financial Security Assurance Inc.

        "Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any
self-regulatory organization having jurisdiction over any of the parties hereto
or any of the parties to any of the Ancillary Agreements, any United States or
non-United States federal, national, supranational, state, provincial, local or
similar government, governmental, regulatory (including, without limitation,
insurance regulatory) or administrative authority, legislative body, agency or
commission or any court, tribunal or judicial or arbitral body.

        "Indemnified Party" has the meaning specified in Section 8.2.

        "Indemnifying Party" has the meaning specified in Section 8.2.

        "Information" has the meaning specified in Section 7.3.

         "Losses" means any and all losses, liabilities, claims, damages,
obligations, payments, interest, penalties, fines, costs and expenses, matured
or unmatured, absolute or contingent, disclosed or undisclosed, determined or
determinable, accrued or unaccrued, liquidated or unliquidated, known or unknown
(including, without limitation, the costs and expenses of any Action, threatened
Action, demand, assessment, judgment, settlement and compromise relating thereto
and attorneys' fees and any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against, or settling any such Action or
threatened Action).

        "Misstatement" has the meaning specified in Section 8.1.

        "Person" includes an individual, a partnership, a joint venture, a
limited liability company, a corporation, a trust, a body corporate, an
unincorporated organization, a group and a government or other department or
agency thereof.

        "Plan Shares" has the meaning specified in Section 7.7(a).

        "Post-Closing Subsidiaries" with respect to either XL Capital or SCA
means collectively all of the Persons that will, immediately following the
Closing Time, be Subsidiaries of such entity.

        "Privilege" has the meaning specified in Section 9.3.

                                      -2-
<PAGE>

        "Public Offering" means the offering of common shares of SCA pursuant to
the Registration Statement.

        "Registration Statement" means the Registration Statement No. 333-133066
on Form S-1, as amended and supplemented from time to time at or prior to the
Closing Time, filed with the Commission under the Securities Act relating to the
Public Offering.

        "Representatives" has the meaning specified in Section 7.3.

        "SCA" has the meaning specified in the preamble to this Agreement.

        "SCA Board" means the board of directors of SCA.

        "SCA Business" means the business conducted by SCA Group, as described
in the Registration Statement.

        "SCA Confidential Information" has the meaning specified in Section 7.9.

        "SCA Group" means SCA and each Post-Closing Subsidiary of SCA.

        "SCA Indemnified Parties" has the meaning specified in Section 8.1.

        "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.

        "Subsidiary" means, as to any Person, any corporation, partnership or
other entity of which at the time of determination more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and/or
one or more Subsidiaries of such Person.

        "Termination of License Date" has the meaning specified in Section
7.5(e).

         "Underwriting Agreement" has the meaning specified in Section 6.1.

         "Voting Restriction Termination Event" means the time at which XL
Group's ownership of the then-outstanding common shares of SCA is first equal to
or less than 35% provided that at the time thereof, neither any Offer Notice (as
defined in Section 7.7) nor any election thereunder by XL Capital to purchase
New Securities is outstanding.

        "Voting Stock" means stock of any class or classes or other ownership
interest having general voting power under ordinary circumstances to elect a
majority of the board of directors, managers, trustees or persons with similar
functions of the entity in question; provided that, for the purposes of this
definition, stock which carries only the right to vote conditionally on the
happening of an event will not be considered Voting Stock, whether or not that
event has happened.

        "XL Capital" has the meaning specified in the preamble to this
Agreement.

        "XL Capital Group" means XL Capital and each Subsidiary of XL Capital
(other than the SCA Group).

        "XL Capital Confidential Information" has the meaning specified in
Section 7.9.

        "XLFA" has the meaning specified in Section 2.1.

        "XLFA Preferred Shares" means the Series A Redeemable Preferred Shares
of XLFA.

        "XLFA Shareholders Agreement" means the Amended and Restated
Shareholders Agreement dated as of April 27, 2001, among XLFA, XL Capital, XLI,
and parties related to Financial Security Assurance Inc. setting forth the
relative rights of each party thereto with respect to XLFA, as amended.

                                      -3-
<PAGE>

        "XL Parties" means XL Capital and each Post-Closing Subsidiary of XL
Capital (other than the SCA Group).

        "XL Indemnified Party" has the meaning specified in Section 8.1.

        "XL Information" means the two paragraphs under the heading "Principal
and Selling Shareholder" in the Registration Statement.

        Section 1.2     OTHER DEFINITIONAL PROVISIONS. The words "hereof,"
"hereto," "herein," "hereunder" and words of similar import when used in this
Agreement refer to this Agreement as a whole and not to any particular provision
of this Agreement, and references to any Article, Section, Exhibit or Schedule
are references to Articles, Sections, Exhibits or Schedules in or to this
Agreement unless otherwise specified.

                                   ARTICLE II

                      FORMATION TRANSACTIONS AND TRANSFERS

        Section 2.1     FORMATION TRANSACTIONS.

        (a)     XLI has formed SCA. SCA has issued certain of its common shares,
comprising 100% of its issued and outstanding common shares immediately prior to
the Closing Time and the events described in clause (b) of this Section 2.1, to
XLI.

        (b)     On or immediately prior to the Closing Time, the XL Capital
Group and SCA will enter into the transactions described under "Formation" in
the Registration Statement.

        (c)     The Bye-laws of SCA, as of the Closing Time, shall be in the
form of EXHIBIT 2.1(c).

                                   ARTICLE III

                          ANCILLARY AGREEMENTS; CLOSING

        Section 3.1     ANCILLARY AGREEMENTS.

               The appropriate parties hereto shall enter into, and (to the
extent indicated as parties thereto) shall cause their respective Subsidiaries
to enter into, the agreements listed in ANNEX 3.1 (collectively, the "Ancillary
Agreements"), in each case (unless otherwise specified in the form of Ancillary
Agreement) effective as of the Closing Time.

        Section 3.2     SETTLEMENT OF CERTAIN INTERCOMPANY ACCOUNTS. Except as
otherwise provided for in this Agreement or any of the Ancillary Agreements, all
intercompany accounts or balances arising on or prior to the Closing Time,
between any member of SCA Group and any member of the XL Capital Group shall be
invoiced promptly after the Closing Date and paid within 30 days of receipt of
invoice. For the avoidance of doubt, SCA shall pay (or, to the extent incurred
by and paid for by any member of the XL Parties prior to the Closing Time shall,
at or prior to the Closing Time, and, if incurred on or following the Closing
Time, promptly upon receipt of an invoice therefor, reimburse such member of the
XL Parties for any and all amounts so paid) the costs, fees, distributions and
expenses set forth in Schedule 3.2(a).

        Section 3.3     INSURANCE COVERAGE. It is expected that after the
Closing Time, other than as respects claims made after the Closing in respect of
acts, omissions or events or occurrences occurring up to and including the
Closing Time, each member of the SCA Group will cease to be covered under the
insurance policies covering XL Capital and its affiliates with respect to: (i)
directors' and officers' liability, (ii) employment practices liability, (iii)
errors and omission liability, (iv) pension trustees liability and (v) fidelity.
For a minimum of six years after

                                      -4-
<PAGE>

the Closing Time, XL shall purchase annual limits of insurance consistent with
its levels of insurance coverage in place at the Closing Time, covering the SCA
Indemnified Parties with respect to acts, omissions or events or occurrences
that took place prior to the Closing Time, to the extent that, XL Capital has
reasonably determined that such limits are available on substantially the same
economic and other terms as to which they were available at the Closing Time. XL
Capital agrees that coverage provided under its corporate insurance program
(subject to the terms of such policies) shall include, but shall not be limited
to, claims arising out of or relating to (i) the Public Offering, (ii) any
public document connected with the Public Offering, including, but not limited
to, the Registration Statement or (iii) any actions taken by the any one or more
of the parties insured under the insurance policies and other welfare and
benefit plans covering XL Capital and its subsidiaries and affiliates, and their
employees and directors, including the SCA Group and its directors and
employees, prior to the Closing Time.

        It is expected that from and after the Closing until the Voting
Restriction Termination Event, each member of the SCA Group will continue to be
covered under the insurance policies covering XL Capital and its subsidiaries
with respect to: (i) commercial general liability, (ii) property, (iii) workers'
compensation, and (iv) certain other coverages previously agreed, all as set
forth in the applicable agreement listed on Annex 3.1(a), provided that no later
than 90 days prior to the applicable renewal of any policy the SCA Group may
give notice to XL Capital that it no longer wishes to be covered by any such
insurance policies which notice shall be irrevocable once delivered. SCA
acknowledges that coverages under such policies will be subject to the terms and
conditions, including limits, as from time to time established by XL Capital
with respect to such coverages for XL Capital and its subsidiaries, including
the SCA Group. Employees of members of SCA Group shall continue to be included
in insurance policies and other welfare and benefit plans of members of the XL
Parties in accordance with the Master Services Level Agreement (which is listed
on ANNEX 3.1(A)). XL Capital agrees that it will not change or alter coverages
under such policies with respect to such acts, omissions, events or occurrences
in a manner that would materially and adversely negatively effect the ability of
the SCA Group (or such officers or directors), based upon such policies as in
effect on the date hereof, to make a recovery thereunder.

        Premiums shall be paid in accordance with the applicable Ancillary
Agreement.

        XL Capital acknowledges, for the benefit of the directors and officers
of SCA Group, that the indemnification and related expense reimbursement
arrangements provided in the Articles of Association of XL Capital, as in effect
on the Closing Time shall, to the extent available by its applicable terms,
continue with respect to acts or omissions occurring prior to the Closing Time.
XL Capital also acknowledges that each of the directors of SCA Group designated
as a director designee in the Registration Statement is serving at the direction
of XL Capital through the Closing Time and are, therefore, covered by the
provisions of the Articles of Association of XL Capital.

        Section 3.4     CLOSING. All transactions contemplated by this Agreement
shall be consummated at a closing (the "Closing") to be held at the offices of
Cahill Gordon & Reindel LLP, New York, New York, on the date of the closing of
the Public Offering (and immediately prior to the consummation of the Public
Offering), or at such other place or at such other time or on such other date as
XL Capital and SCA may mutually agree upon in writing (the date and time at
which the Closing takes place being the "Closing Time").

        Section 3.5     DELIVERIES BY THE PARTIES. On or prior to the Closing
Time:

                (a)     XL Capital shall deliver or cause to be delivered to SCA
        copies of all Ancillary Agreements, executed by the relevant XL Capital
        Parties;

                (b)     SCA shall deliver or cause to be delivered to XL Capital
        copies of all Ancillary Agreements, executed by the relevant members of
        the SCA Group; and

                (c)     Certificates representing the issued and outstanding
        shares of common stock (or interests, as applicable) of XLFA, US Holdco,
        XLCA and each of the Administrative Subsidiaries shall be delivered by
        the respective owners to the appropriate transferees, as contemplated by
        Section 2.1, with blank stock powers duly executed.

                                      -5-
<PAGE>

        Section 3.6     THIRD PARTY CONSENTS.

        (a)     Each member of the XL Parties and SCA Group shall use all
commercially reasonable efforts to obtain, and cooperate with the other in
obtaining, at or prior to the Closing Time any consent, approval or
authorization necessary for the transactions contemplated herein or in any of
the Ancillary Agreements to be performed or consummated by it at or prior to the
Closing Time.

        (b)     If any consent, approval or authorization necessary for the
transactions contemplated by this Agreement or any Ancillary Agreement has not
been obtained at or prior to the Closing Time, XL Capital shall, and shall cause
the appropriate member of the XL Parties to, and SCA shall, and shall cause the
appropriate member of SCA Group to, each at its own expense, reasonably
cooperate with the appropriate members of the XL Parties or SCA Group, as the
case may be, in continuing to attempt to obtain such consents, approvals or
authorizations as promptly thereafter as practicable except that no such member
shall be required to incur any material liability or undertake any material
obligation.

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF XL PARTIES

        XL Capital represents and warrants to SCA, as to itself and each other
member of the XL Parties, as of the date of this Agreement and as of the Closing
Time, as follows:

        Section 4.1     ORGANIZATION AND AUTHORITY.

        (a)     Each member of the XL Parties is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or the laws under which it currently exists, and in good standing
in all jurisdictions in which the failure to qualify or be in good standing
could materially adversely affect the consummation or the validity of the
transactions provided for in this Agreement or any of the Ancillary Agreements.

        (b)     Each member of the XL Parties that is a party to this Agreement
has full corporate power and authority and has taken all corporate action
necessary to execute and deliver this Agreement and each member of the XL
Parties will have taken all corporate action necessary to execute and deliver
the Ancillary Agreements to which it is a party and to perform its obligations
hereunder and thereunder. This Agreement has been, and each of the Ancillary
Agreements will be, duly authorized, executed and delivered by each member of
the XL Parties that is a party hereto and thereto and, assuming due
authorization, execution and delivery by all other parties to such agreement,
each of this Agreement and such Ancillary Agreements constitutes or will
constitute, as the case may be, the valid and legally binding obligation of such
member of the XL Parties, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

        Section 4.2     NO CONFLICT. The authorization, execution, delivery and
performance of this Agreement and the Ancillary Agreements by each of the
members of the XL Parties that are parties hereto and thereto do not and will
not:

                (a)     violate, conflict with or result in the breach of any
        provision of the certificate of incorporation, the memorandum of
        association or by-laws (or similar organizational documents) of such
        member of the XL Parties; or

                (b)     conflict with or violate in any material respect any law
        or Governmental Order applicable to such member of the XL Parties or any
        of their respective assets, properties or businesses.

        Section 4.3     TRANSFERRED CAPITAL STOCK. Upon the transfers described
in Section 3.6(c), SCA will acquire good and marketable title to the shares or
interests of XLCA and XLFA indicated therein and in Section 2.1, free and clear
of any Encumbrance, and SCA will have acquired 100% of the then issued and
outstanding capital stock of XLFA and XLCA and each of the Administrative
Subsidiaries, except in the case of XLFA, to the extent of

                                      -6-
<PAGE>

the XLFA Preferred Shares held by FSA. The shares of capital stock of each of
XLFA, XLCA and each of the Administrative Subsidiaries then issued and
outstanding constitute validly issued, fully paid and non-assessable shares (or
interests). None of the XLFA Shares other than as set forth in the XLFA
Shareholders Agreement (as described in the Registration Statement), the XLCA
Shares and the Administrative Subsidiaries interests, nor any of XLFA (except as
set forth in the XLFA Shareholders Agreement), XLCA, nor any of the
Administrative Subsidiaries are subject to any voting trust agreement or other
contract, agreement, arrangement, commitment or understanding, including any
such agreement, arrangement, commitment or understanding restricting or
otherwise relating to, the voting, dividend rights or disposition of the XLFA
Shares, the XLCA Shares or the Administrative Subsidiaries interests, and there
are no options, warrants or any other rights to acquire any of the XLFA Shares,
the XLCA Shares and the Administrative Subsidiaries interests.

        Section 4.4     NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Agreement and the Ancillary
Agreements, neither XL Capital nor any other Person makes any express or implied
representation or warranty on behalf of or with respect to XL Capital or any
other member of the XL Parties, and XL Capital hereby disclaims any
representation or warranty not contained herein or therein.

                                    ARTICLE V

                 REPRESENTATIONS AND WARRANTIES OF THE SCA GROUP

        SCA represents and warrants to XL Capital, as to itself and each other
member of SCA Group, as of the date of this Agreement and as of the Closing
Time, as follows:

        Section 5.1     ORGANIZATION AND AUTHORITY.

        (a)     SCA is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, and in good standing in all
jurisdictions in which the failure to qualify or be in good standing could
materially adversely affect the consummation or the validity of the transactions
provided for in this Agreement or any of the Ancillary Agreements.

        (b)     SCA has full corporate power and authority and has taken all
corporate action necessary to execute and deliver this Agreement and SCA will
have taken all corporate action necessary to execute and deliver the Ancillary
Agreements to which it is a party and to perform its obligations hereunder and
thereunder. This Agreement has been, and each of the Ancillary Agreements will
be, duly authorized, executed and delivered by SCA and, assuming due
authorization, execution and delivery by all other parties to such agreement,
each of this Agreement and such Ancillary Agreements constitutes or will
constitute, as the case may be, the valid and legally binding obligation of SCA,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.

        Section 5.2     NO CONFLICT. The authorization, execution, delivery and
performance of this Agreement and the Ancillary Agreements by SCA does not and
will not:

                (a)     violate, conflict with or result in the breach of any
        provision of the certificate of incorporation, the memorandum of
        association or by-laws (or similar organizational documents) of SCA; or

                (b)     conflict with or violate in any material respect any law
        or Governmental Order applicable to SCA or any of its assets, properties
        or businesses.

        Section 5.3     COMMON SHARES. The Common Shares issued to XLI
constitute, immediately prior to the Closing Time, all of the issued and
outstanding share capital of SCA, are validly authorized and issued, fully paid
and non-assessable and are not subject to any voting trust agreement or other
contract, agreement, arrangement, commitment or understanding, including any
such agreement, arrangement, commitment or understanding restricting or
otherwise relating to the voting, dividend rights or disposition of the Common
Shares, except as may be described in the Registration Statement as existing at
the Closing Time; and as of the Closing Time there shall be no

                                      -7-
<PAGE>

options, warrants or any other rights to acquire Common Shares except for any
such options, warrants or other rights described in the Registration Statement
as existing at the Closing Time.

        Section 5.4     NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Agreement and the Ancillary
Agreements, neither SCA nor any other Person makes any express or implied
representation or warranty on behalf of or with respect to SCA or any other
member of SCA Group, and SCA hereby disclaims any representation or warranty not
contained herein or therein.

                                   ARTICLE VI

           THE PUBLIC OFFERING AND ACTIONS PENDING THE PUBLIC OFFERING

        Section 6.1     TRANSACTIONS PRIOR TO THE PUBLIC OFFERING. SCA and XL
Capital shall use all reasonable commercial efforts to consummate the Public
Offering in accordance with the terms of the underwriting agreement (the
"Underwriting Agreement") in the form filed as an exhibit to the Registration
Statement at the date of this Agreement. Notwithstanding anything to the
contrary contained herein, prior to the Closing Time, as between SCA and XL
Capital, XL Capital may in its sole discretion terminate or abandon any aspect
of the Public Offering and the other transactions contemplated hereby or by any
Ancillary Agreement in connection with such Public Offering, and SCA shall, at
XL Capital's expense, take all actions directed by XL Capital in that regard.

                                   ARTICLE VII

           OTHER AGREEMENTS; ACCESS TO INFORMATION; FURTHER ASSURANCES

        Section 7.1     ACCESS TO INFORMATION. (a) From and after the Closing
Time, XL Capital shall afford to SCA and its Subsidiaries and their respective
authorized accountants and independent public accountants, regulators, counsel
and other designated representatives (collectively, "Representatives")
reasonable, and reasonably prompt, access (including using commercially
reasonable efforts to give access to Persons possessing information) during
normal business hours to all data and information (collectively, "Information")
within the possession or under the control of XL Capital or any Post-Closing
Subsidiary of XL Capital relating to SCA Business. From and after the Closing
Time, SCA shall afford to XL Capital, any Post-Closing Subsidiary of XL Capital
and their respective Representatives reasonable, and reasonably prompt, access
(including using commercially reasonable efforts to give access to Persons
possessing information) during normal business hours to Information within the
possession or under the control of SCA or any Post-Closing Subsidiary of SCA (x)
relating to XL Capital or any Post-Closing Subsidiary of XL Capital or (y)
relating to SCA or any Post Closing Subsidiary of SCA with respect to the other
matters contemplated by this Agreement, including with respect to the matters
referred to in SCHEDULE 7.5 (including to the extent necessary so that XL
Capital can meet any legal, regulatory, accounting, audit or regulatory
examination requirements or requests that may be applicable to it). Information
may be requested under this Article VII for, without limitation, fulfilling
disclosure and reporting obligations. SCA shall (i) deliver to XL Capital SCA's
quarterly and annual financial statements and related information on a timely
basis in order to enable XL Capital to meet its timetable for the printing,
filing and public dissemination of its quarterly and annual earnings releases,
financial statements and filings with any regulatory body (including the
Securities and Exchange Commission) and (ii) use its commercially reasonably
efforts to facilitate XL Capital's independent certified public accountants
completing their audit on a timely basis and to enable XL Capital to meet its
timetable for the printing, filing and public dissemination of its annual
statements. SCA will request its independent certified accountants to make
available to the XL Capital's independent certified accountants both the
personnel who performed or are performing the annual audit ( and any review of
interim financial statements) of and, consistent with customary professional
practice and courtesy of such auditors with respect to the furnishing of work
papers, work papers related to the annual audit (and any review of interim
financial statements) of SCA, in all cases within a reasonable time that the XL
Capital's auditors are able to perform the procedures they consider necessary to
statements. In the case of access by XL Capital, until XL Capital no longer uses
the consolidation or equity accounting methods to account for its interest in
the Company, representatives shall include XL Capital's internal audit
department to conduct reviews in accordance with XL Capital's then internal
audit policies and procedures.

        (b)     Without limiting any of the foregoing:

                                      -8-
<PAGE>

                (i)     Each party undertakes to the other party that it will
        provide to the other party reasonable access to (i) the first party's
        accounting records underlying transactions processed by the first party
        on behalf of the other party and (ii) related information technology
        systems and (iii) related employees involved in the processing, control
        and maintenance of systems with respect to services provided by the
        first party to the other party pursuant to any Ancillary Agreement where
        the service is viewed as a key control over financial reporting by the
        other party's management (collectively, the "Activities");

                (ii)    Each party undertakes to the other party that it will
        provide to the other party's independent public accountants reasonable
        access to (i) the other party's accounting records underlying
        transactions processed by the first party on behalf of the other party,
        (ii) related information technology systems and (iii) related employees
        involved in the processing, control and maintenance of systems; provided
        that, such access directly relates to the independent public
        accountants' financial statement and Section 404 audits over the
        Activities;

                (iii)   The key controls described in (i) above shall be
        identified in writing by a party to the other party, at a minimum, on an
        annual basis, and from time to time when a party's management identifies
        additional Activities within the scope of subsection (i) above; and

                (iv)    Each party shall give the other party reasonable notice
        of any proposed on site meetings or visits with employees and/or
        consultants within the scope of subsections (i) or (ii) above.

                The costs and expenses of the other party relating to this
Section 7(b), including the costs and expenses of the other party's independent
public accountants, shall be borne by such other party. Each party reserves the
right to charge the other party for the first party's employee and/or consultant
time related to the Activities described in this Section if significant time is
spent by such party's employees or consultants on the matters referred to in
this Section and each party hereby agrees to pay such reasonable amounts called
for by the terms hereof if and when billed for such time.

                This Section 7(b) shall cease upon the occurrence of the Voting
Restriction Termination Event.

        Section 7.2     RETENTION OF RECORDS. Each of XL Capital and SCA and
their respective Post-Closing Subsidiaries shall retain, at their own expense,
and shall cause their respective Post-Closing Subsidiaries to retain, following
the Closing Time, for a period consistent with the longer of their respective
document retention policies or such period as may be required by applicable law
or regulations, respectively, all significant information relating to the
business of the other and the other's Subsidiaries or the obligations of the
other or the other's Subsidiaries, and shall notify the other parties hereto
prior to disposing of such information and provide them with an opportunity to
obtain such information, at their own expense, prior to such disposal.

        Section 7.3     ATTORNEY CLIENT PRIVILEGE. The provision of any
Information or personnel pursuant to this Article VII shall not be deemed a
waiver of any privilege, including privileges arising under or related to the
attorney-client or any other applicable privilege (a "Privilege"). Neither party
nor its Subsidiaries will be required to provide any Information or personnel
pursuant to this Article VII if the provision of such information would serve as
a waiver of any Privilege afforded such information. Any Information owned by
one party that is provided to another party or its Representatives shall be
deemed to remain the property of the providing person. No party shall have any
liability to any other party in the event that any Information exchanged or
provided pursuant to this Agreement which is an estimate or forecast, or which
is based on an estimate or forecast, is found to be inaccurate in the absence of
willful misconduct by the party providing such Information. No party shall have
any liability to any other party, if any Information is destroyed after
commercially reasonable efforts by such party to comply with the provisions of
this Agreement.

                                      -9-
<PAGE>

        Section 7.4     OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF INFORMATION.

        (a)     The rights and obligations granted under this Article VII are
subject to any specific limitations, qualifications or additional provisions on
the sharing, exchange, retention or confidential treatment of Information set
forth in any Ancillary Agreement.

        (b)     When any Information provided by one Group to the other (other
than Information provided pursuant to Section 4.13) is no longer needed for the
purposes contemplated by this Agreement or any other Transaction Document or is
no longer required to be retained by applicable law, rule or regulation, the
receiving party will promptly after request of the other party either return to
the other party all Information in a tangible form (including all copies thereof
and all notes, extracts or summaries based thereon) or certify to the other
party that it has destroyed such Information (and such copies thereof and such
notes, extracts or summaries based thereon).

        Section 7.5     CONTINUING ARRANGEMENTS; POLICIES AND RIGHTS OF XL GROUP

        (a)     Until the occurrence of the Voting Restriction Termination
Event, SCA agrees that it shall, and shall cause each then member of the SCA
Group to be subject to the corporate policies and procedures then applicable to
Subsidiaries of XL Capital and communicated to SCA in writing, relating to the
matters listed in Schedule 7.5, unless (but only to the extent): (i) otherwise
agreed with XL Capital, or (ii) upon advice from counsel to SCA Group, the
adherence by such member of the SCA Group to such policy or procedure reasonably
would violate (or result in a violation of) any law, rule or regulation
(including without limitation any regulation of any applicable national
securities exchange on which the securities of SCA are then registered)
applicable to such member, (iii) if such policy or procedure is an accounting
matter, upon advice from the Audit Committee of SCA or the independent
accountants of SCA that adherence by such member of the SCA Group to such policy
or procedure would reasonably violate or be contrary to any United States
generally accepted accounting principle or rule or regulation of any regulatory
body applicable to such member; and in the case of clause (ii) or (iii) such
policy or procedure has not been otherwise amended by XL Capital to the extent
necessary to avoid such violation or contradiction within five Business Days
after notice thereof from SCA to XL Capital, or (iii) SCA and XL Capital have
been advised in writing by one of the leading national ratings agencies of
consequence to SCA that compliance therewith by a member of the SCA Group at the
Closing Time that is then rated by such rating agency would be unacceptable and
consequential to the then current ratings of such member.

        (b)     Until the occurrence of the Voting Restriction Termination
Event, SCA shall coordinate and give at least 48 hours prior notice to XL
Capital with respect to any written presentations by any members of the SCA
Group made to, or other communications with, any rating agencies (other than
ordinary course written communication with agencies with respect to the
prospective rating, or effect on the SCA Group's rating of, potential ordinary
course transactions to be entered into by a member of the SCA Group). SCA shall
promptly inform XL Capital in advance of any matters of potential consequence to
any member of the SCA Group or XL Capital as a result of any other
communications or presentations with rating agencies.

        (c)     Until the occurrence of the Voting Restriction Termination
Event, SCA shall coordinate and give at least 48 hours prior notice (with, to
the extent such presentation or communication is written, accompanied with
copies thereof) to XL Capital with respect to any presentations by any members
of the SCA Group made to, or other material communications with equity research
analysts and/or the investment banking community in general. SCA shall promptly
inform XL Capital of any matters of potential consequence to any member of the
SCA Group or XL Capital as a result of any communication or presentations with
research analysts or investment banks. Communications with investment bankers,
in their capacity as actual or prospective clients or sources of business for,
SCA Group shall not be covered by this paragraph. Until the occurrence of the
Voting Restriction Termination Event (unless otherwise prohibited by applicable
law, rule or regulation), SCA shall provide to XL Capital copies of all reports
and examinations of any applicable regulators or rating agencies of any member
of the SCA Group, promptly upon receipt thereof by the SCA Group.

        (d)     Notwithstanding that the Voting Restriction Termination Event
has occurred, if any member of the XL Capital Group is required during any
fiscal period, for external financial reporting purposes, to account for its
investment in SCA on a consolidated basis or under the equity method of
accounting, then in respect of all such fiscal periods, SCA shall reasonably
cooperate with XL Capital to, at XL Capital's expense, facilitate such
reporting.

                                      -10-
<PAGE>

        (e)     From and including the date hereof, until the second anniversary
of the date of this Agreement, SCA shall have the rights with respect to the XL
name and related matters as set forth in Schedule 7.5(e) hereto. (Such date
being referred to as the "Termination of License Date"). Until the Termination
of License Date, SCA shall continue to use the XL name in accordance with past
practice unless SCA determines that it no longer wishes to use the XL name in
which event SCA shall obtain the consent of XL Capital not to use the XL name,
such consent not to be unreasonably withheld by XL Capital. In the event such
consent is granted, such termination shall be subject to a reasonable and
mutually agreeable transition period.

        Section 7.6     VOTING BY XL CAPITAL GROUP; NOMINEES OF DIRECTORS; RISK
OVERSIGHT Committee.

        (a)     XL Capital will vote its Common Shares, and shall cause its
Subsidiaries to vote Common Shares held by them, to elect a majority of the SCA
Board that is both (i) "independent" (as defined in the corporate governance
rules of the listing standards of the New York Stock Exchange Inc) and (ii)
neither a director nor an officer of any member of the XL Capital Group.

        (b)     Until the occurrence of the Voting Restriction Termination
Event, XL Capital will have the right to nominate for the SCA Board (i) four of
the nine nominees for director and (ii) if, for any reason, the SCA Board
consists of more than nine directors, such number of nominees as would equal one
nominee less than a majority of the nominees for director. Such nominees will be
allocated among the classes of the SCA Board as follows: (i) two to the Class of
Directors that initially has a one year term and (ii) one each to the Classes of
Directors that initially have a two year and three year term (or as
substantially equivalent thereto if for any reason the Board consists of more
than nine directors). If, for any reason, there is a vacancy in the SCA Board,
which vacancy is of a director so nominated by XL Capital, SCA shall replace
that directorship as soon as practicable with a nominee selected by XL Capital.
Similarly, if there is a vacancy created by an increase in the number of
directors, then such vacancy shall be filled in a manner consistent with XL
Capital's rights set forth in the second sentence of this Section 7.6(b).

        (c)     Until the occurrence of the Voting Restriction Termination
Event, (i) XL Capital will have the right to nominate one member of the SCA
Compensation Committee and (ii) the SCA Compensation Committee shall consist of
three members which number of members shall not be changed without XL's prior
consent (subject to any restrictions imposed by applicable law, rule or
regulation).

        (d)     Until the occurrence of the Voting Restriction Termination
Event, SCA will maintain a Finance and Risk Oversight Committee whose charter
shall be substantially in the form of EXHIBIT 7.6(E) hereto (with such changes
thereto as may be agreed by a majority of the members of that Committee and the
SCA Board of Directors), and a majority of the members of such Committee shall
be directors of SCA appointed by those directors of the SCA Board of Directors
nominated by XL Capital, as contemplated by Section 7.6(b).

        (e)     As SCA intends to utilize the controlled company exemption under
the rules of the New York Stock Exchange Inc (or other national securities
exchange on which the Common Shares are then listed), so long as SCA meets the
definition of a controlled company under the rules of such exchange as may be
amended from time to time, SCA shall not take any action to change such status
without the prior consent of XL Capital. For the avoidance of doubt, nothing in
this Section 7(e) shall affect SCA's ability to sell Common Shares or enter into
other transactions if such sale or transaction is otherwise made in accordance
with the terms of this Agreement and the SCA Bye-Laws.

        (f)     All provisions of this Section 7.6 shall cease upon the
occurrence of the Voting Restriction Termination Event.

        Section 7.7     RIGHT TO MAINTAIN OWNERSHIP.

        (a)     If SCA proposes to issue any additional Common Shares or
securities or options exercisable or exchangeable for or convertible into Common
Shares, (other than (i) the issuance or grant of options or rights or the
issuance of Common Shares, in each case, pursuant to any SCA's Board of
Directors approved incentive plans for directors, employees or officers and
excluding, in the case of such options or rights, the issuance of Common Shares
upon exercise thereof, which are separately covered by Section 7.7(d) below;
(the issuance of Common Shares,

                                      -11-
<PAGE>

whether directly under such Plans or upon the exercise of such options or
rights, is collectively referred to hereinafter as "Plan Shares"); (ii) Common
Shares, securities or options issued pursuant to the terms of securities
exercisable or exchangeable for or convertible into common shares if such
securities have been issued or granted previously in compliance with this
Section 7.7 or (iii) pursuant to the Registration Statement) (collectively, "New
Securities"), SCA shall, not less than 20 days prior to such issuance (or such
lesser time as may be applicable if SCA shall have determined to issue such
securities less than 20 days prior to their issuance), give written notice (the
"Offer Notice") to XL Capital, stating the number of New Securities and the
price per share or unit, the terms of payment and all other terms and conditions
on which SCA proposes to make such issuance, as well as a calculation of the
maximum number and type of New Securities that XL Capital would have the right
to purchase under this Section 7.7 and the Determined Price therefor; provided
that XL Capital Group shall not be entitled to purchase New Securities to the
extent that the principal national securities exchange in the United States on
which the Common Shares is listed, if any, prohibits or limits that purchase. XL
Capital shall have the option to purchase, for a thirty day period commencing
contemporaneously with the issuance of such New Securities (such period to be
shortened or extended to the extent necessary to accommodate any legal,
regulatory or other similar requirement), without conditions other than payment
for such New Securities and compliance with laws, up to the number of New
Securities determined as set forth in Section 7.7(b) at their Determined Price.
In order to facilitate an issuance of New Securities, SCA may give the Offer
Notice prior to (but subject to) any issuance of New Securities and require XL
Capital to unconditionally elect, as a condition to participating in that offer,
whether or not (and to what extent) it will purchase New Securities.

        (b)     Subject to Section 7.7(a), XL Capital shall be entitled to
purchase up to that number of the New Securities necessary to maintain XL
Capital Group's then-outstanding and fully diluted equity ownership (assuming
for the purposes of such calculations, the exercise, exchange or conversion of
all New Securities exercisable, exchangeable for, or convertible into, Common
Shares (I.E., that XL Capital Group's economic ownership both before and after
giving effect to the issuance and, if applicable, exercise, exchange or
conversion, of New Securities would be the same)). In order to make such a
purchase, XL Capital must give written notice to the Company within 5 days after
SCA gives the Offer Notice, stating the number of New Securities which XL
Capital desires to purchase.

        (c)     If no notice is provided pursuant to Section 7.7(b) for the
purchase of any of the New Securities within such time period (or if the option
is exercised in the aggregate for less than the total amount of the New
Securities), SCA shall be free for a period of 90 days thereafter to sell the
New Securities as to which such option has not been exercised to the proposed
offerees at no less than the sale price set forth in the Offer Notice. If,
however, at the expiration of such 90 day period, such New Securities have not
been issued in accordance with the terms set forth in the Offer Notice, then any
other issuance or proposed issuance thereof shall be subject to all of the
provisions of Section 7.7(b) hereof. For the avoidance of doubt, options or
rights issued pursuant to plans described in clause (i) of the first sentence of
Section 7.7(a) shall be excluded in any calculation of fully diluted shares.

        (d)     Upon the issuance of Plan Shares, XL Capital shall have the
right to purchase a number of Common Shares from SCA necessary to maintain XL
Capital's then-outstanding and fully diluted equity ownership (calculated as
specified in Section 7.7(b). SCA shall give an Offer Notice with respect thereto
in accordance with the provisions of Sections (a), (b) and (c) of this Section
7.7 (MUTATIS MUTANDIS) except that (i) SCA may defer the giving of any Offer
Notice that results solely from the issuance of Plan Shares until the earlier
of: (x) the next succeeding time when an Offer Notice is otherwise required to
be delivered under this Section 7.7 and (y) five days prior to the expiration of
the final period in each fiscal year (commencing with the fiscal year ending
December 31, 2006), in which officers and directors of SCA are generally
permitted by SCA policy to purchase or sell Common Shares; and (ii) the purchase
price for any Common Shares that may be purchase by XL Capital pursuant to this
Section 7.7(d) shall be the average closing price of the Common Shares on the
principal national securities exchange on which the Common Shares then trade for
a 20 trading day period ending nearest to the date the Offer Notice is first
required to be delivered, excluding any dates on which officers and directors of
SCA are generally precluded by SCA policy from purchasing or selling Common
Shares (provided that if the Common Shares are not then listed on a principal
national securities exchange such price shall be set at the fair value thereof
as determined by the Board of Directors of SCA in good faith). Plan Shares
issued after the second Business Day prior to the giving of any Offer Notice as
a result of clause (ii) of the first sentence of this Section 7.7(d) need not be
included in that Offer Notice, but will be included in any subsequent Offer
Notice.

                                      -12-
<PAGE>

        (e)     XL Capital shall not be entitled to purchase shares pursuant to
any offer (and no offer need be made under this Section 7.7) to the extent that,
after giving effect thereto of such purchase, the XL Capital Group's would
exceed the lesser of (i) 65% (subject to upward adjustment as described in the
next succeeding sentence) or (ii) the maximum number that XL Capital may own
without such ownership having an adverse effect on any financial strength rating
provided by a nationally recognized rating agency with respect to any member of
the SCA Group. The percentage set forth in clause (i) of the prior sentence
shall be adjusted upwards upon receipt by SCA of written confirmation from each
nationally recognized rating agency then providing a financial strength rating
for SCA and/or its subsidiaries that such financial strength rating is or will
be determined without reference to the ratings of any member of the XL Group or
that the then financial strength rating issued by it will not at the time of
such confirmation be adversely affected by the elimination or adjustment of such
limitation.

        (f)     This Section 7.7 shall have no force and effect with respect to
any issuance of New Securities or Plan Shares subsequent to the occurrence of
the Voting Restriction Termination Event.

        (g)     XL Capital may assign all or any portion of its rights under
this Section 7.7 to members of the XL Group that then own securities of SCA,
subject, in each case, to applicable law, rule or regulation and provided that
no such assignment shall be effective if such assignment, in the good faith
judgment of SCA, would have material adverse tax, regulatory or ratings
consequences to any member of the SCA Group.

        Section 7.8     REGISTRATION RIGHTS. XL Capital shall have the
registration rights described in SCHEDULE 7.8(A).

        Section 7.9     CONFIDENTIAL INFORMATION.

        (a)     SCA shall not, and shall not permit any of its Post-Closing
Subsidiaries or any of their respective directors, officers and agents to
disclose any information of a known confidential nature received from a member
of the XL Parties ("XL Capital Confidential Information") and XL Capital shall
not, and shall not permit any of its Post-Closing Subsidiaries or any of their
respective directors, officers and agents to disclose any information of a
confidential nature received from a member of SCA Group ("SCA Confidential
Information" and, together with the XL Capital Confidential Information,
"Confidential Information").

        (b)     Confidential Information shall not include information which is
or becomes generally known on a non-confidential basis, provided that the source
of such information was not bound by a confidentiality agreement or other
obligation of confidentiality.

        (c)     If SCA or XL Capital or any of its Subsidiaries or any of their
respective directors, officers or agents is legally requested or required under
an order or subpoena issued by a court, administrative agency or arbitration
panel, or to comply with regulatory or ratings agency requests or requirements,
(through oral examination, interrogatories, requests for information or
documents, civil investigation demand or other legal, administrative or
arbitration processes) to disclose any Confidential Information, the party being
so requested or required to disclose such Confidential Information shall use
reasonable efforts to give the party whose Confidential Information is subject
to such request or requirement prompt written notice of the request,
requirement, subpoena or order to permit (to the extent reasonable) such other
party (if it so elects at its expense) to seek an appropriate protective order
preventing or limiting disclosure. If, in the absence of such protective order,
a party is compelled to disclose Confidential Information, such party may
disclose such Confidential Information without liability hereunder.

        (d)     Each party agrees that money damages would not be a sufficient
remedy for any breach of this Section 7.9 and that, in addition to all other
remedies, each party shall be entitled to specific performance and injunctive or
other equitable relief as a remedy for any such breach.

        Section 7.10    FURTHER ASSURANCES; NO AGENCY; SPECIFIC PERFORMANCE. If
at any time after the Closing Time any further action is reasonably necessary or
advisable to carry out the purposes of this Agreement or any Ancillary
Agreement, the proper officers of each party to this Agreement shall take all
such reasonable necessary or advisable action or cause the applicable
Post-Closing Subsidiaries to take all such action. Each of XL Capital and its
Post-Closing Subsidiaries and SCA and its Post-Closing Subsidiaries shall use
its commercially reasonable ef-

                                      -13-
<PAGE>

forts to obtain all consents and approvals, to enter into all amendatory
agreements and to make all filings and applications that may be required for the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, including, without limitation, all applicable
governmental, regulatory and rating agency requests or filings. Under no
circumstances does this Agreement or any of the Ancillary Agreements create an
agency relationship between XL Capital and SCA, except to the extent specified
in any such Ancillary Agreement. The parties each agree and acknowledge that
remedies at law for any breach of their obligations under this Section 7.10 are
inadequate and that in addition thereto each party, as applicable, shall be
entitled to equitable relief, including injunction and specific performance, in
the event of any such breach.

                                  ARTICLE VIII

                                 INDEMNIFICATION

        Section 8.1     GENERAL.

        (a)     Effective upon the Closing Time, XL Capital shall indemnify,
defend and hold harmless each member of SCA Group and their respective officers,
directors (which include director designees designated as such in the
Registration Statement), employees, representatives and agents (each an "SCA
Indemnified Party") from and against any and all Losses of such SCA Indemnified
Party arising out of, relating to, by reason of or otherwise in connection with:

                (i)     any untrue statement or alleged untrue statement of
        material fact relating to the XL Information contained in the
        Registration Statement or the prospectus that forms a part thereof, or
        any amendment or supplement thereto, or any omission or alleged omission
        to state therein a material fact required to be stated therein or
        necessary to make the statements therein, in light of the circumstances
        under which they are made, not misleading (a "Misstatement") but only to
        the extent such relates to the XL Parties; provided that Losses under
        this clause shall be limited to third-party claims by purchasers of the
        Common Shares in the Public Offering or thereafter (including, without
        limitation, the underwriters of the Public Offering);

                (ii)    any breach by any member of the XL Parties of any of
        their representations or warranties in, or any covenant, commitment,
        obligation, agreement or undertaking to be performed or complied with by
        any of them under, this Agreement or any Ancillary Agreement; and

                (iii)   any act or omission occurring on or prior to the Closing
        Time (other than with respect to policies of insurance, contracts of
        reinsurance or credit default swaps, or similar credit enhancement
        products provided by any member of the SCA Group or its Affiliates), but
        only if and to the extent that such act or omission (x) was covered by
        the indemnity provisions in XL Capital's Articles of Association as in
        effect on the Closing Time or (y) would constitute a Claim (as defined
        in the insurance policy described below) covered by the wording of the
        policy of insurance of Zurich American Insurance Company -- [Policy No.
        EOC 4911685 03] (irrespective of the dollar deductibles and aggregate
        dollar policy limits contained therein and assuming that SCA would be an
        insured party under such policy, but subject, in all cases, to the
        exclusions and other policy terms therein).

        (b)     Effective upon the Closing Time, SCA shall indemnify, defend and
hold harmless each member of the XL Parties and their respective officers,
directors, employees, representatives and agents (each an "XL Indemnified
Party") from and against any and all Losses of such XL Indemnified Party arising
out of, relating to, by reason of or otherwise in connection with:

                (i)     any Misstatement other than to the extent such
        Misstatement relates to the XL Parties; provided that Losses under this
        clause shall be limited to third-party claims by purchasers of the
        Common Shares in the Public Offering or thereafter (including, without
        limitation, the underwriters of the Public Offering); and

                                      -14-
<PAGE>

                (ii)    any breach by any member of SCA Group of any of their
        representations or warranties in, or any covenant, commitment,
        obligation, agreement or undertaking to be performed or complied with by
        any of them under, this Agreement or any Ancillary Agreement;

provided that the indemnity set forth in this Section 8.1(b) shall not cover any
matter to the extent indemnity from XL Capital would otherwise be available
under Section 8.1(a).

        (c)     The indemnity obligations contained in this Section 8.1 shall
(x) not cover any liabilities or other matters that are separately provided for
in any Ancillary Agreement and (y) be applicable whether or not any Action or
the facts or transactions giving rise to such Action arose prior to, on or
subsequent to the date of this Agreement. The Indemnifying Party shall (upon
payment to the Indemnified Party of all amounts with respect thereto) be
subrogated with respect to all rights and remedies of the Indemnified Party with
respect to the related claim.

        Section 8.2     INDEMNIFICATION PROCEDURES. If any Action is brought in
respect of which indemnity may be sought pursuant to this Agreement, the Person
seeking indemnification (the "Indemnified Party") shall promptly notify the
Person against whom indemnification is sought (the "Indemnifying Party") in
writing of the institution of such Action (but the failure so to notify will not
relieve the Indemnifying Party from any liability that it may have to the
Indemnified Party under this Article VIII to the extent the Indemnifying Party
is not materially prejudiced as a result thereof, and in no event shall it
relieve the Indemnifying Party from any liability it may have otherwise than
pursuant to this Article VIII), and the Indemnifying Party shall assume the
defense of such Action, including the employment of counsel reasonably
satisfactory to the Indemnified Party and payment of expenses. The Indemnified
Party shall have the right to employ its own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of Indemnified Party
unless (i) the employment of such counsel shall have been authorized in writing
by the Indemnifying Party, (ii) the Indemnifying Party shall not have employed
counsel reasonably satisfactory to the Indemnified Party within a reasonable
time or (iii) such Indemnified Party shall have reasonably concluded (based on
the advice of counsel) that there may be defenses available to it or them which
are different from or additional to those available to the Indemnifying Party
and may present a conflict for counsel representing the Indemnified Party and
the Indemnifying Party (in which case the Indemnifying Party shall not have the
right to direct the defense of such Action on behalf of the Indemnified Party),
in any of which events such fees and expenses shall be borne by the Indemnifying
Party and paid as incurred (it being understood, however, that the Indemnifying
Party shall not be liable for the fees and expenses of more than one separate
counsel (in addition to local counsel) for the Indemnified Parties in any one
Action or series of related Actions in the same jurisdiction representing the
Indemnified Parties, unless such Indemnifying Party shall not have employed
counsel reasonably satisfactory to the Indemnified Party within a reasonable
time or such Indemnified Party shall have reasonably concluded (based on the
advice of counsel) that there may be defenses available to it or them which are
different from or additional to those available to the other Indemnified Party).
Anything in this Section 8.2 to the contrary notwithstanding, the Indemnifying
Party shall not be liable for any settlement effected without its prior written
consent unless the Indemnifying Party shall have failed to assume the defense of
such Action. An Indemnifying Party will not, without the prior written consent
of the Indemnified Party (which shall not be unreasonably withheld or delayed),
settle or compromise or consent to the entry of any judgment in any Action in
respect of which indemnification may be sought hereunder unless such settlement,
compromise or consent includes an unconditional release of the Indemnified
Parties from all liability arising out of the Action and does not subject any of
the Indemnified Parties to any admission of liability, consent decree, or any
other material and adverse condition or restriction of any kind.

        Section 8.3     REMEDIES CUMULATIVE. The remedies provided in this
Article VIII shall be cumulative and shall not preclude assertion by an
Indemnified Party of any other rights at law or in equity or the seeking of any
and all other remedies against any Indemnifying Party.

        Section 8.4     CONTRIBUTION. If any indemnification provided for in
this Article VIII is unavailable to an Indemnified Party in respect of any Loss
arising out of or related to information contained in the Registration Statement
as provided in Section 8.1(a)(ii) or Section 8.1(b)(ii), then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Loss, in
such proportion as is appropriate to reflect the relative fault of SCA and each
other member of SCA Group, on the one hand, and XL Capital and each other member
of the XL Parties, on the other hand, in connection with the Misstatements that
resulted in such Loss. With respect to any Loss relating to matters covered by
Section 8.1(a)(ii) or 8.1(b)(ii) or otherwise relating to misstatements or
omissions under securities or antifraud laws, the relative fault of

                                      -15-
<PAGE>

a member of SCA Group, on the one hand, and of a member of the XL Parties, on
the other hand, shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to a member of SCA Group or a
member of the XL Parties and was supplied by such member.

        Section 8.5     SURVIVAL OF INDEMNITIES. The obligations of SCA and XL
Capital under this Article VIII shall survive indefinitely.

        Section 8.6     OTHER INDEMNIFICATION PROVISIONS.

        (a)     Notwithstanding any provision of this Agreement to the contrary,
if a member of the SCA Group seeks to assert any right to indemnification
hereunder from XL Capital and such claim may be asserted against a Post-Closing
Subsidiary of XL Capital, such member of SCA Group shall first seek to recover
from the such Post-Closing Subsidiary unless doing so would materially prejudice
such member of SCA Group in obtaining relief.

        (b)     Claims for indemnification under any Ancillary Agreement shall
be subject to the procedures set forth in this Article VIII unless otherwise
specified in the Ancillary Agreement.

        (c)     For the avoidance of doubt, (i) indemnity claims that are
covered by both this Section 8.6 and an Ancillary Agreement shall, or that are
expressly waived or excluded by operation of the terms of an Ancillary Agreement
shall, not be covered by the provisions of this Section 8.6 and (ii) nothing
contained in this Article VIII shall affect, limit or amend any of the
indemnification provisions contained in any of the Ancillary Agreements.

                                   ARTICLE IX

                                  MISCELLANEOUS

        Section 9.1     TERMINATION. Notwithstanding any provision of this
Agreement or any Ancillary Agreement to the contrary, this Agreement may be
terminated and the Public Offering and other transactions contemplated hereby
may be abandoned at any time prior to the Closing Time by and in the sole
discretion of XL Capital. In the event of such termination, no party shall have
any liability of any kind to any other party on account of such termination,
except as set forth in Section 9.11.

        Section 9.2     SURVIVAL. All representations, covenants and agreements
contained or provided for herein shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the party
benefiting from any such covenant or agreement, and shall survive the execution
of this Agreement.

        Section 9.3     GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the state of New York, without regard
to its conflict of laws principles. The parties hereto consent to the
non-exclusive jurisdiction of the Courts of New York.

        Section 9.4     NOTICES. All notices, requests, claims, demands and
other communications hereunder and under the Ancillary Agreements shall be in
writing and shall be deemed to have been duly given if delivered by hand (with
receipt confirmed), or by certified mail, postage prepaid and return receipt
requested, or facsimile transmission addressed as follows (or to such other
address as a party may designate by written notice to the others) and shall be
deemed given on the date on which such notice is received:

                        If to XL Capital:

                        XL House
                        One Bermudiana Road
                        Hamilton HM 11, Bermuda
                        facsimile: (441) 296-7340
                        Attention:  Chief Financial Officer

                                      -16-
<PAGE>

                        with a copy to:

                        XL America Inc.
                        70 Seaview Avenue
                        Stamford, Connecticut  06902
                        facsimile (203) 964-5309
                        Attention:  General Counsel

                        If to SCA:

                        One Bermudiana Road
                        Hamilton HM 11, Bermuda
                        facsimile: (441) 295-5602
                        Attention:  Executive Vice President--
                          Financial Guaranty Reinsurance

                        with a copy to:

                        XL Capital Assurance, Ltd.
                        1221 Avenue of the Americas
                        New York, New York
                        facsimile:  (212) 478-3605
                        Attention:  Chief Financial Officer

        Section 9.5     AMENDMENT AND MODIFICATION. This Agreement may not be
amended, modified or waived, except by an instrument in writing duly signed on
behalf of the parties hereto.

        Section 9.6     SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.

        Section 9.7     NO THIRD PARTY BENEFICIARIES. Except for the provisions
of Article VIII and Schedule 7.6(a), this Agreement is solely for the benefit of
the parties hereto and shall not be deemed to confer upon third parties
(including stockholders or members of any party hereto) any remedy, claim,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.

        Section 9.8     HEADINGS. The Article and Section headings contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.

        Section 9.9     SEVERABILITY. To the extent any provision of this
Agreement shall be invalid or unenforceable, it shall be considered deleted
herefrom and the remaining provisions of this Agreement shall be unaffected and
shall continue in full force and effect.

        Section 9.10    WAIVER. No failure by any party to take any action or
assert any right hereunder shall be deemed to be a waiver of such right in the
event of the continuation or repetition of the circumstances giving rise to such
right, unless expressly waived in writing.

        Section 9.11    EXPENSES. Except as otherwise specified in this
Agreement or any of the Ancillary Agreements, all costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement, the Ancillary
Agreements and the transactions contemplated hereby shall be paid by the party
for which such costs and expenses were borne or benefited, whether or not the
Closing Time shall have occurred. The parties shall cooperate with one another
with respect to allocation of any costs and expenses that are not clearly
allocable to, or borne for the benefit of, a particular party.

        Section 9.12    PUBLIC ANNOUNCEMENT. No party to this Agreement shall
make, or cause to be made, any press release or public announcement in respect
of this Agreement or the transactions contemplated hereby or oth-

                                      -17-
<PAGE>

erwise communicate with any news media without the prior consent of the other
party and the parties shall cooperate as to the timing and contents of any such
press release or public announcement.

        Section 9.13    ENTIRE AGREEMENT. This Agreement and the Ancillary
Agreements constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, between XL Capital and SCA with respect to
the subject matter hereof and thereof.

        Section 9.14    ASSIGNMENT OF THIS AGREEMENT. No party may assign this
Agreement by operation of law or otherwise without the express written consent
of the other parties; provided, however, this Agreement may be assigned by
operation of law or otherwise without the express written consent of the other
parties hereto by XL Capital and/or SCA to their respective Post-Closing
Subsidiaries so long as such assignment does not relieve the assigning party of
liability hereunder.

        Section 9.15    COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.

                           [Intentionally left blank]

                                      -18-
<PAGE>

        IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.

                                             XL CAPITAL LTD

                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                             XL INSURANCE (BERMUDA) LTD

                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                             X.L. AMERICA, INC.

                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                             SECURITY CAPITAL ASSURANCE LTD

                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:

                             [Transition Agreement]

<PAGE>

                                                                 Schedule 3.2(a)

                           Expenses to be Borne by SCA

All expenses of the Public Offering including, without limitation, (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, issuance and delivery of the certificates for the
Common Shares to the underwriters, including any stock or other transfer taxes
and any stamp or other duties payable upon the sale, issuance or delivery of the
Common Shares to the underwriters or as a result of the Transactions referred to
in Article II, (iii) the fees and disbursements of SCA' counsel, accountants and
other advisors, (iv) fees and expenses SCA is required to reimburse the
underwriters for in connection with the qualification of the Common Shares under
Blue Sky or state securities laws, (v) the printing and delivery to the
underwriters of copies of each preliminary prospectus and the prospectus and any
amendments or supplements thereto, (vi) the fees and expenses incurred in
connection with the listing of the Common Shares on the New York Stock Exchange,
and (vii) the out of pocket expenses incurred in connection with the road show.
For the avoidance of doubt, expenses shall not include underwriting discounts or
commissions with respect to shares sold by persons other than SCA.

<PAGE>

                                                                    Schedule 7.5

                  XL CAPITAL CORPORATE POLICIES AND PROCEDURES
                            TO APPLY TO THE SCA GROUP

                o   INTERNAL AND EXTERNAL ACCOUNTING POLICIES, PRACTICES AND
                    PROCEDURES. It is understood that SCA and its Post Closing
                    Subsidiaries shall comply with XL Capital's accounting
                    policies, practices and procedures generally applicable to
                    XL Capital's Subsidiaries, as they may be amended from time
                    to time, to the extent that such policies, practices and
                    procedures are applicable to SCA or its Post Closing
                    Subsidiaries business. SCA and its Post Closing Subsidiaries
                    shall give XL Capital reasonable notice of any proposed
                    material change in accounting policies or principles
                    including any changes mandated or required by the Securities
                    and Exchange Commission (the "SEC"); Financial Accounting
                    Standards Board or the Public Company Accounting Oversight
                    Board. In connection therewith, SCA and/or its Post Closing
                    Subsidiaries will consult with XL Capital and, if requested
                    by XL Capital, the independent public accountant for XL
                    Capital. Promptly, but in no event later than five business
                    days following the receipt thereof, SCA shall deliver to XL
                    Capital all reports submitted to SCA or any of its Post
                    Closing Subsidiaries by their independent public accountant,
                    including, without limitation, each report submitted to SCA
                    or its Subsidiaries concerning its accounting practices and
                    systems (including systems of internal controls) and any
                    comment letter submitted to management in connection with
                    any audit and all responses by management to such reports
                    and letters. SCA shall assist XL Capital in responding to
                    any inquiries from XL Capital's auditors with respect to
                    financial or accounting matters concerning the business of
                    SCA.

                o   COMPLIANCE, ETHICS AND CORE VALUES. SCA and its Post Closing
                    Subsidiaries shall adopt a Code of Business Conduct & Ethics
                    and Code of Ethics for Senior Financial Officers, which
                    shall be substantially the same as that then in effect from
                    time to time of XL Capital. Such code shall be applicable to
                    all current or future employees of SCA and its Post Closing
                    SUBSIDIARIES.

                o   ACTUARIAL POLICIES AND PROCEDURES;

                    It is understood that SCA and its Post Closing Subsidiaries
                    shall comply with XL Capital's actuarial policies, practices
                    and procedures generally applicable to XL Capital's
                    Subsidiaries, as they may be amended from time to time, to
                    the extent that such policies, practices and procedures are
                    applicable to SCA and its Post Closing Subsidiaries.

                o   INTERNAL AND EXTERNAL FINANCIAL AND REGULATORY REPORTING.

                    SCA and its Post Closing Subsidiaries shall deliver (on a
                    timely basis) to XL Capital the information reasonably
                    requested by XL Capital for inclusion with respect to: (i)
                    budgeting and financial planning processes; (ii) preparation
                    of annual and quarterly financial statements and related
                    earnings and other reports and press releases; and (iii)
                    meetings with regulators, rating agencies or equity
                    analysts.

                    Promptly following the filing by SCA or any of its Post
                    Closing Subsidiaries of quarterly or annual or other reports
                    with any state or other insurance regulatory authorities in
                    any jurisdiction, SCA shall deliver (or cause to be
                    delivered) such reports or copies thereof (in the form
                    filed) to XL Capital.

                o   DISCLOSURE CONTROLS AND PROCEDURES. SCA's Chief Executive
                    Officer and Chief Financial Officer shall submit quarterly
                    representations to XL Capital (consistent with those
                    required to be submitted in SCA's annual and quarterly
                    filings with the Securities and Exchange Commission and
                    those provided to SCA's independent public accountants)
                    attesting to the accuracy and completeness of the financial
                    and accounting records and other information provided to XL

                                      -19-
<PAGE>

                    Capital for pur-poses of preparing XL Capital's: (i) filings
                    with the SEC or any other regulatory body (including
                    insurance regulators) and (ii) earnings press releases. SCA
                    shall assist XL Capital in responding to any inquiries from
                    regulatory or rating agencies with respect to matters
                    concerning the business of SCA.

                o   INDEPENDENT PUBLIC ACCOUNTANT. SCA and its Post Closing
                    Subsidiaries shall endeavor (subject to applicable law, rule
                    and regulation) to engage the same independent public
                    accountant as shall be engaged by XL Capital Ltd from time
                    to time.

                o   OPERATING PRINCIPLES (See Appendix I to this Schedule 7.5)

<PAGE>

                                                                 Schedule 7.5(e)

        XL Capital is the owner of the trademarks, trade names, service marks,
brand names, trade dress and logos identified on ANNEX A (the "Licensed Marks"),
which are and have been used in connection with the SCA Business.

        In consideration of the premises and mutual covenants and agreements
contained in this Agreement, the XL Capitals and SCA agree as follows:

        1.      XL Capital hereby grants, subject to the terms and conditions
set forth in this Schedule 7.5(e), to the Licensee and the other entities in the
SCA Group (collectively, the "Licensees") a non-exclusive, non-transferable,
non-assignable, non-sublicenseable, royalty-free license (the "License") to use
the Licensed Marks solely in the SCA Business. SCA agrees that it shall, and
shall cause the other Licensees to, use the Licensed Marks in conformity in all
material respects to (i) the standards used by the Licensees in connection with
the operation of the SCA Business as of the date of this Agreement and (ii) XL
Capital Corporate Standards with respect to the general use of the Licensed
Marks or similar marks as from time to time communicated to SCA. SCA shall use
only the Licensed Marks, as provided by XL Capital. SCA shall not form any
combination marks or combine any other materials with the Licensed Marks. SCA
shall not modify, for public display or otherwise, any Licensed Marks. SCA shall
not sublicense, resell, assign or transfer any of its rights hereunder, without
the prior written approval of XL Capital, which approval shall be granted or
withheld in XL Capital's sole discretion. Any attempt to resell, assign or
transfer such rights absent such approval is void and shall, at XL Capital's
election, result in immediate termination of this License, without liability to
XL Capital. Additionally, SCA acknowledges that its breach of this provision
would cause XL Capital irreparable harm, and in addition to other available
remedies, XL Capital shall be entitled to appropriate injunctive relief in the
event of such a breach or threatened breach. All rights not expressly granted
hereunder are reserved to XL Capital. For the avoidance of doubt, this License
shall include, for the term of such License, the use of "XL" in the name of
those members of the SCA Group who have that name in their name as of the date
of this Agreement.

        2.      SCA acknowledges, on its behalf and on behalf of the other
Licensees and cause all other Licensees to acknowledge, that the Licensed Marks
and the goodwill associated therewith are the sole and exclusive property of XL
Capital, and agrees, on its behalf and on behalf of the other Licensees, that
all goodwill arising from Licensees' use of the Licensed Marks hereunder shall
inure to the benefit of and be the property of XL Capital hereunder, it being
expressly agreed that in any case, no compensation whatsoever will be due by XL
Capital to any Licensee for the creation, as the case may be, of any goodwill
arising from the use of the Licensed Marks pursuant to this Agreement. SCA
shall, and shall cause the other Licensees to, not contest, either directly or
indirectly, the validity, originality, or value of the Licensed Marks, or XL
Capital's exclusive rights to the Licensed Marks and the goodwill represented
thereby.

        3.      SCA agrees that it will, and will cause the other Licensees to,
cooperate promptly with XL Capital in maintaining the nature and quality of the
Licensees' use of the Licensed Marks. SCA shall, and shall cause the other
Licensees to, refrain from any act that would reasonably be expected to tarnish
any of the Licensed Marks or bring any of the Licensed Marks into disrepute. SCA
shall, and shall cause the other Licensees to, promptly provide XL Capital with
such data relating to the use of the Licensed Marks hereunder as XL Capital may
reasonably request.

        4.      SCA shall not, and shall cause or permit the other Licensees not
to, use the Licensed Marks except as expressly authorized by this Agreement.

        5.      Immediately upon the Termination of License Date, SCA shall, and
shall cause the other Licensees to, cease all use of such Licensed Marks,
including all marketing and advertising use of such Licensed Marks and all uses
of such Licensed Marks. No later than the Termination of License Date, SCA shall
cause the other Licensees to make all necessary filings and take all other
necessary actions to change the names of the other Licensees and to discontinue
any reference to any Licensed Mark.

        6.      SCA and the other Licensees may retain and use in the ordinary
course of business, which may include reproduction and delivery to third parties
and to governmental entities, its internal memoranda, reports, documents and
other records (collectively "Internal Documents") which bear a Licensed Mark or
any other trademark,

<PAGE>

trade name, service mark, brand name, trade dress or logo of XL Capital
(collectively "Other Marks"), which, in the case of Internal Documents bearing a
Licensed Mark, were created prior to the termination of the License for such
Licensed Mark, and in the case of Internal Documents bearing an Other Mark, were
created prior to the date of this Agreement, for so long as such Internal
Documents are retained pursuant to record retention standards.

        7.      THE LICENSED MARKS ARE PROVIDED "AS IS." XL CAPITAL DISCLAIMS
ALL WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION THE
IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE
AND NONINFRINGEMENT.

                                      -2-
<PAGE>

                                                                 Annex A
                                                                   to
                                                                 Schedule 7.5(e)

                                 LICENSED MARKS

        ""XL"

        "XLCA"

        "XLFA"

        "XL" in combination with any other letters

<PAGE>

                                                                 Schedule 7.8(a)

                       REGISTRATION RIGHTS AND PROCEDURES

        (a)     PIGGYBACK RIGHTS. If SCA at any time proposes to register Common
Shares or any other equity securities under the Securities Act, for its own
account or for the account of any holder of its securities, on a form which
would permit registration of Common Shares held by XL Capital and its
Subsidiaries ("Registrable Shares") for sale to the public under the Securities
Act, or proposes to register any equity securities in a so-called "unallocated"
or "universal" shelf registration statement, SCA will at such time give 30 days
written notice to XL Capital of its intention to do so. XL Capital may by
written response delivered to SCA within 10 days after the giving of any such
notice request that all or a specified part of the Registrable Shares be
included in such registration. Such response shall also specify the intended
method of disposition of such Registrable Shares. SCA thereupon will use its
reasonable commercial efforts as a part of its filing of such form to effect the
registration under the Securities Act of all Registrable Shares which SCA has
been so requested to register, to the extent required to permit the disposition
(in accordance with the intended methods thereof as aforesaid) of the
Registrable Shares so to be registered; provided that if a recognized financial
advisor and potential underwriter advises SCA that the number of shares to be
included in a registration pursuant hereto should be limited because the
inclusion thereof would adversely affect the market for the Common Shares or
such proposed offering, all or a part of the Registrable Shares sought to be
included as part of such proposed registration shall be excluded from such
registration to the extent necessary to comply with such advice. SCA shall be
under no obligation to complete any offering of its securities it proposes to
make and shall incur no liability for its failure to do so.

        (b)     DEMAND REGISTRATION. At any time after the 90th day following
the Closing Time (subject to any contractual agreement that XL Capital may have
entered into in connection with the Public Offering), XL Capital may request a
registration (a "Demand Registration") of an amount of Common Shares of at least
$50 million in value (or, if XL Capital and its Subsidiaries then hold Common
Shares in value less than such amount, all of the Common Shares held by XL
Capital and its Subsidiaries), calculated at the average of the closing price of
the Common Shares on the NYSE for the five preceding trading days, of the then
outstanding Registrable Shares held by XL Capital and its Subsidiaries as may be
specified in such request. Any such request will also specify the intended
method of disposition thereof. After receipt of a notice of a Demand
Registration pursuant to this provision, SCA will use all reasonable commercial
efforts to effect expeditiously the registration under the Securities Act (and,
if eligible to do so, on Form S-3 thereunder) of the Registrable Shares which
SCA has been requested to register. XL Capital shall have the right to
effectuate five Demand Registrations under this subsection (b). XL Capital shall
have the right (to the extent the applicable rules of the Securities and
Exchange Commission so provide) to require that any demand registration be in
the form of a "shelf" registration.

        (c)     POSTPONEMENT. SCA may postpone for a period of up to 60 days the
filing or the effectiveness of any requested registration if the Board of
Directors of SCA in good faith determines that such registration is likely to
have a material adverse effect on SCA (or require material change in its public
disclosures) provided, however, that SCA shall promptly provide written notice
of any such postponement to XL Capital.

        (d)     PAYMENT OF EXPENSES; INDEMNITY. SCA shall pay all expenses of
registration as specified in Section 3.2 as if the registration effected
hereunder were the "Public Offering" referenced in such Section.

        (e)     MISCELLANEOUS REGISTRATION MATTERS; COOPERATION OF SCA. In
connection with a registration hereunder: (i) if such registration is to be in
respect of an underwritten offering, the SCA Board in its discretion will select
a managing underwriter or underwriters (subject to the consent of XL Capital not
to be unreasonably withheld or delayed); (ii) SCA will use its reasonable
commercial efforts to cooperate with XL Capital in the disposition of the shares
covered by a registration statement, including without limitation in the case of
an underwritten offering, causing key executives of SCA to participate under the
direction of the managing underwriter in a "road show" scheduled by such
managing underwriter in such locations and of such duration as in the judgment
of such managing underwriter are appropriate for such underwritten offering;
(iii) SCA will use its reasonable commercial efforts to register or qualify such
Registrable Shares under such securities or blue sky laws of such jurisdictions
as XL Capital shall reasonably request, and do any and all other acts and things
which may be necessary or advisable to enable each seller to consummate the
disposition in such jurisdictions of its Registrable Shares covered by such reg-

                                      -3-
<PAGE>

istration statement; provided, however, that SCA shall not be obligated to file
any general consent to service of process or to qualify as a foreign corporation
or subject SCA to taxation in any jurisdiction in which it is not so qualified;
and (iv) SCA will use its reasonable commercial efforts (A) to prepare or cause
to be prepared all reasonably required customary documentation, (B) to do or
cause to be done all actions, to obtain all opinions, certifications,
accountants "cold comfort" letters, and (C) to enter into standard agreements,
in each case as may customarily be required to effect registration of securities
under the Securities Act.

        (f)     COOPERATION OF XL CAPITAL. To participate in any registration of
shares pursuant hereto, XL Capital and its Subsidiaries shall be required to
provide such information and enter into such agreements (including underwriting
and "lock-up" agreements) as are customary and reasonably required by, if such
registration is in respect of an underwritten offering, the managing
underwriter(s). In connection with a registration hereunder, XL Capital and SCA
agree in good faith to give effect to the registration contemplated by this
Schedule 7.8(a) and otherwise cooperate with the registration processes
contemplated by this provision.

        (g)     ASSIGNABLE REGISTRATION RIGHTS. XL Capital may assign its rights
hereunder, in whole or in part in connection with any sale or transfer of Common
Shares by XL Capital in a transaction exempt from registration under the
Securities Act (other than any sale pursuant to Rule 144 thereunder), it being
understood that (x) such assignee may assign its rights hereunder to transferees
who acquire Common Shares in a transaction exempt from registration under the
Securities Act (other than any sale pursuant to Rule 144 thereunder) and (y)
with respect to any such assignee covered by this clause (g), other than a
member of the XL Capital Group, the provisions of this Schedule 7.8(a) will not
include shares that can be sold under Rule 144 without manner of sale or volume
limitations.

                                      -2-
<PAGE>

                                                                       ANNEX 3.1

                              ANCILLARY AGREEMENTS

        The Following Exhibits To The Registration Statement:

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