Document:

EX-10.6 EMPLOYMENT AGREEMENT LAWRENCE MARGOLIS

 

Exhibit 10.6

FIRST AMENDMENT TO

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     THIS FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Amendment”) is made
and entered into effective as of the 8th day of December, 2006, by and between Arris Group, Inc., a
Delaware corporation (“Company”), and Lawrence Margolis (“Executive”).

W I T N E S S E T H:

     WHEREAS, the parties hereto have entered into that certain Amended and Restated Employment
Agreement dated as of April 29, 1999 (the “Agreement”), providing for the employment of Executive
by Company on the terms and conditions therein; and

     WHEREAS, the parties hereto desire to amend the Agreement as provided herein;

     NOW, THEREFORE, for and in consideration of Executive’s continued employment with Company and
the premises and the mutual covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Executive
hereby agree as follows:

     1. Capitalized terms that are used but not defined in this Amendment shall have the meanings
specified in the Agreement.

     2. Section 4 of the Agreement is amended in its entirety to read as follows:

	 	4.	 	EQUITY AWARDS. From time to time, Executive will
be granted equity awards (which may consist of, without
limitation, shares of restricted stock and options and/or warrants
to purchase shares of Company stock) as determined by the Board or
its Compensation Committee in its good faith judgment to be
appropriate. Any such awards or grants will be granted at the
same time such equity awards are granted generally to other senior
executives of Company. The terms of such awards, including, if
applicable, exercise price and vesting, shall be determined by the
Board or its Compensation Committee at the time of grant.

     3. Section 5(c) of the Agreement is amended by (a) inserting after the words “stock options”
the words “and other equity awards,” and (b) inserting the words “fully vest and” before the words
“become immediately and fully exercisable.”

 

 

     4. A new Section 5(e) is added to the Agreement, which reads as follows:

(e) It is expressly contemplated by the parties that this Agreement
will conform to, and be interpreted to comply with, Section 409A of the
Internal Revenue Code as currently written (the “Code”). Unless
expressly provided otherwise, all of the payments due to Executive
under subsection (c) of this Section will be made within fifteen (15)
days following the Termination Date; provided, however, that if under
Section 409A of the Code, such payments must be delayed to conform with
the applicable tax rules, the Company will defer any such payment until
no later than one day following the first date upon which such payment
may be made without incurring the tax imposed thereunder; provided,
further, that if Executive incurs any additional tax, interest or
penalties under Section 409A of the Code, the Company will pay
Executive an additional amount so that, after all taxes on such amount,
Executive has an amount equal to such additional tax.

     5. Except as amended hereby, the Agreement shall remain in full force and effect.

     6. The provisions of Sections 10 through 13 of the Agreement shall apply to this
Amendment as if set forth in their entirety.

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

	 	 	 	 	 
	 	 	“Company”

ARRIS GROUP, INC.

 	 
	 	By:  	/s/ Robert J. Stanzione
 	 
	 	 	Name:  	Robert J. Stanzione 	 
	 	 	Title:  	President 	 
	 
	 	 	“Executive”

 	 
	 	 	/s/ Lawrence Margolis
 	 
	 	 	Lawrence Margolis 	 
	 	 	 

2EX-10.7 EMPLOYMENT AGREEMENT ROBERT STANZIONE

 

	 	 	 	 	 

Exhibit 10.7

FIRST AMENDMENT TO

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     THIS FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Amendment”) is made
and entered into effective as of the 8th day of December, 2006, by and between Arris
Group, Inc., a Delaware corporation (“Company”), and Robert Stanzione (“Executive”).

W I T N E S S E T H:

     WHEREAS, the parties hereto have entered into that certain Amended and Restated Employment
Agreement dated as of August 6, 2001 (the “Agreement”), providing for the employment of Executive
by Company on the terms and conditions therein; and

     WHEREAS, the parties hereto desire to amend the Agreement as provided herein;

     NOW, THEREFORE, for and in consideration of Executive’s continued employment with Company and
the premises and the mutual covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Executive
hereby agree as follows:

     1. Capitalized terms that are used but not defined in this Amendment shall have the meanings
specified in the Agreement.

     2. Section 4 of the Agreement is amended in its entirety to read as follows:

	 	4.	 	EQUITY AWARDS. From time to time, Executive will
be granted equity awards (which may consist of, without
limitation, shares of restricted stock and options and/or warrants
to purchase shares of Company stock) as determined by the Board or
its Compensation Committee in its good faith judgment to be
appropriate. Any such awards or grants will be granted at the
same time such equity awards are granted generally to other senior
executives of Company. The terms of such awards, including, if
applicable, exercise price and vesting, shall be determined by the
Board or its Compensation Committee at the time of grant.

     3. Section 5(b) of the agreement is amended by eliminating the parenthetical phrase “(65% in
the case of Nortel Networks and its affiliates)”. Section 5(c) of the Agreement is amended by (a)
inserting after the words “stock options” the words “and other equity awards,”

 

 

and (b) inserting the words “fully vest and” before the words “become immediately and fully
exercisable.”

     4. A new Section 5(f) is added to the Agreement, which reads as follows:

(f) It is expressly contemplated by the parties that this Agreement
will conform to, and be interpreted to comply with, Section 409A of the
Internal Revenue Code as currently written (the “Code”). Unless
expressly provided otherwise, all of the payments due to Executive
under subsection (c) of this Section will be made within fifteen (15)
days following the Termination Date; provided, however, that if under
Section 409A of the Code, such payments must be delayed to conform with
the applicable tax rules, the Company will defer any such payment until
no later than one day following the first date upon which such payment
may be made without incurring the tax imposed thereunder; provided,
further, that if Executive incurs any additional tax, interest or
penalties under Section 409A of the Code, the Company will pay
Executive an additional amount so that, after all taxes on such amount,
Executive has an amount equal to such additional tax.

     5. Except as amended hereby, the Agreement shall remain in full force and effect.

     6. The provisions of Sections 9 through 12 of the Agreement shall apply to this
Amendment as if set forth in their entirety.

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

	 	 	 	 	 
	 	 	“Company”

ARRIS GROUP, INC.

 	 
	 	By:  	/s/ Lawrence Margolis
 	 
	 	 	Name:  	Lawrence Margolis 	 
	 	 	Title:  	Executive Vice President 	 
	 
	 	 	“Executive”

 	 
	 	 	/s/ Robert Stanzione
 	 
	 	 	Robert Stanzione 	 
	 	 	 
	 

2Exhibit 10.1

S

     

    Exhibit
      10.1

     

    EXECUTION
      COPY

     

    XL
      Capital Ltd

     

    Non-Cumulative
      Perpetual Preferred Securities

     

    ________

     

    Subscription
      Agreement

     

    December
      5, 2006

     

    Goldman
      Sachs International

    Peterborough
      Court

    133
      Fleet
      Street

    London
      EC4A 2BB

    England

    

     

    Ladies
      and
      Gentlemen:

     

    Stoneheath
      Re, a Cayman Islands exempted company (the “Issuer”),
      and XL
      Capital Ltd, a Cayman Islands exempted limited company (the “Company”),
      confirm their respective agreements with Goldman Sachs International (the
“Manager”)
      with
      respect to the issue and sale by the Issuer of U.S.$350,000,000 aggregate
      liquidation preference of non-cumulative perpetual preferred securities, having
      a liquidation preference of U.S.$1,000 per share (the “Issuer
      Preferred Securities”).
      Any
      references in this Agreement to “you” relate to Goldman Sachs International as
      Manager. All capitalized terms used herein but not defined herein shall have
      the
      meanings given to such terms in the Pricing Memorandum (as defined in Section
      1(a)).

     

    The
      Issuer
      is licensed as a Restricted Class B insurer under the laws of the Cayman Islands
      (including the Insurance Law (2004 Revision)) and was formed for the purpose
      of
      providing certain insurance and reinsurance subsidiaries (the “Ceding
      Insurers”)
      of the
      Company with multi-year excess of loss reinsurance capacity. At the Time of
      Delivery (as defined in Section 5(a)), the Issuer and the Ceding Insurers will
      enter into a reinsurance agreement (the “Reinsurance
      Agreement”)
      providing for such reinsurance by the Issuer, and the Issuer and the Company
      will enter into a securities issuance agreement (the “Securities
      Issuance Agreement”)
      providing that whenever the Issuer makes a payment to a Ceding Insurer under
      the
      Reinsurance Agreement, the Company will issue and deliver to the Issuer Series
      D
      Preference Ordinary Shares of the Company (the “XL
      Preferred Securities”)
      having
      an aggregate liquidation preference equal to the amount of such payment on
      such
      terms as are set out in the Securities Issuance Agreement. At the Time of
      Delivery, the Issuer will pay the Company in advance the aggregate par value
      of
      the maximum number of XL Preferred Securities that may be issued under the
      Securities Issuance Agreement and such payment will be funded with the proceeds
      of an interest free loan (the “Par
      Value Loan”)
      from
      the Company.

     

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    

     

    Pursuant
      to the Reinsurance Agreement, the gross proceeds from the issue and sale of
      the
      Issuer Preferred Securities will be deposited in a trust account (the
“Trust
      Account”)
      established in accordance with a trust agreement (the “Trust
      Agreement”)
      with
      The Bank of New York, as trustee (the “Account
      Trustee”)
      and
      will be available to satisfy obligations of the Issuer to the Ceding Insurers
      under the Reinsurance Agreement. In addition, the Company may be required or
      permitted in certain circumstances to issue and deliver to the Issuer an amount
      of XL Preferred Securities having an aggregate liquidation preference equal
      to
      the remaining assets in the Trust Account in exchange for a distribution of
      such
      assets from the Trust Account to the Company.

     

    The
      Issuer
      will also enter into an asset swap agreement (the “Asset
      Swap Agreement”)
      with
      Goldman Sachs International, as asset swap counterparty (the “Asset
      Swap Counterparty”).
      The
      primary purpose of the Asset Swap Agreement is to (i) convert the interest
      yield
      on the eligible assets held in the Trust Account to a rate that is consistent
      with the accrual of dividends on the Issuer Preferred Securities and (ii) enable
      the Issuer to receive the amount initially invested in eligible assets in the
      Trust Account as and when such eligible assets are liquidated, regardless of
      the
      amounts actually realized upon the related sale, in each case subject to the
      limitations described in the Pricing Memorandum.

     

    The
      Issuer
      will also enter into a interest rate swap agreement (the “Interest
      Rate Swap Agreement”)
      with
      IXIS Financial Products Inc. (the “Interest
      Rate Swap Counterparty”)
      in
      order to swap floating rate payments received from the Asset Swap Counterparty
      under the Asset Swap Agreement for fixed rate payments.

     

    Furthermore,
      the Issuer will also enter into an administration agreement (the “Administration
      Agreement”)
      with
      HSBC Financial Services (Cayman) Limited, as administrator (the “Administrator”)
      and a
      paying agency agreement (the “Paying
      Agency Agreement”)
      with
      The Bank of New York (the “Agent).

     

    Each
      of
      the transactions set forth in the foregoing paragraphs and as more fully
      described in the Pricing Memorandum and the Offering Memorandum (each as defined
      in Section 1(a)), is collectively referred to herein as the “Transactions.”

     

    For
      purposes of this Agreement, the “Transaction
      Documents”
shall
      mean:

     

    (1) the
      Reinsurance Agreement;

     

    (2) the
      Securities Issuance Agreement;

     

    (3)
       the
      Par
      Value Loan documents;

     

    (4) the
      Trust
      Agreement;

     

    (5)
       the
      Asset
      Swap Agreement;

     

    (6) the
      Interest Rate Swap Agreement;

     

    (7) the
      Administration Agreement; and

     

    (8) the
      Paying
      Agency Agreement.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    

     

    1.  The
      Company represents and warrants to, and agrees with, the Manager that (for
      all
      purposes of this Section 1, and the opinions delivered pursuant to Section
      9
      hereof, references to Ceding Insurers shall only include those Ceding Insurers
      that are bound by the Reinsurance Agreement at the Time of
      Delivery):

     

    (a)  A
      preliminary offering memorandum,
      dated November 27, 2006 (the “Preliminary
      Offering Memorandum”)
      and
      an offering
      memorandum, dated December 5, 2006 (the “Offering
      Memorandum”),
      have
      been prepared in connection with the offering of the Issuer Preferred Securities
      and the XL Preferred Securities issuable pursuant to the Securities Issuance
      Agreement. The Preliminary Offering
      Memorandum, as amended and supplemented immediately prior to the Applicable
      Time
      (as defined in Section 1(b)), is hereinafter referred to the “Pricing
      Memorandum”.
      Any
      reference to the Preliminary Offering Memorandum, the Pricing Memorandum or
      the Offering
      Memorandum shall be deemed to refer to and include the Company’s Annual Report
      on Form 10-K for the year ended December 31, 2005, as amended, Quarterly Reports
      on Form 10-Q for the periods ended March 31, 2006, June 30, 2006 and September
      30, 2006, each as amended, Current Reports on Form 8-K filed on March 17, 2006,
      April 11, 2006, May 4, 2006, May 11, 2006, May 19, 2006, May 30, 2006, June
      6,
      2006, June 8, 2006, June 9, 2006, June 19, 2006, July 17, 2006, September 1,
      2006, September 21, 2006, October 3, 2006, October 17, 2006, November 9, 2006,
      November 16, 2006, November 27, 2006, December 4, 2006 and December 5, 2006
      and
      the Proxy Statement filed on March 23, 2006, respectively, and any amendment
      or
      supplement thereto, as well as all subsequent documents filed with the United
      States Securities and Exchange Commission (the “Commission”)
      pursuant to Section 13(a), 13(c), 14 or 15(d) of the United States Securities
      Exchange Act of 1934, as amended (the “Exchange
      Act”)
      on or
      prior to the date of such memorandum and any reference to the Preliminary
      Offering Memorandum or the Offering Memorandum, as the case may be, as amended
      or supplemented, as of any specified date, shall be deemed to include any
      documents filed with the Commission pursuant to Section 13(a), 13(c), 14 or
      15(d) of the Exchange Act after the date of the Preliminary Offering Memorandum
      or the Offering Memorandum, as the case may be, and prior to such specified
      date
      furnished by the Company prior to the completion of the distribution of the
      Issuer Preferred Securities; and all documents filed under the Exchange Act
      and
      so deemed to be included in the Preliminary Offering Memorandum, the Pricing
      Memorandum or the Offering Memorandum, as the case may be, or any amendment
      or
      supplement thereto are hereinafter called the “Exchange
      Act Reports”.
      The
      Exchange Act Reports, when they were or are filed with the Commission, conformed
      or will conform in all material respects to the applicable requirements of
      the
      Exchange Act and the applicable rules and regulations of the Commission
      thereunder; and no such documents were filed with the Commission since the
      Commission’s close of business on the business day immediately prior to the date
      of this Agreement and prior to the execution of this Agreement, except as set
      forth on Schedule I(a) hereof. The Preliminary Offering Memorandum or the
      Offering Memorandum and any amendments or supplements thereto and the Exchange
      Act Reports did not and will not, as of their respective dates, contain an
      untrue statement of a material fact or omit to state a material fact necessary
      in order to make the statements therein, in the 

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    light
      of
      the circumstances under which they were made, not misleading; provided,
      however,
      that
      this representation and warranty shall not apply to any statements or omissions
      made in reliance upon and in conformity with information furnished in writing
      to
      the Company by the Manager expressly for use therein;

     

    (b)  For
      the
      purposes of this Agreement, the “Applicable
      Time”
is
      2:45
      pm (London time) on the date of this Agreement; the Pricing Memorandum as
      supplemented by the information set forth in Schedule II hereto, taken together
      (collectively, the “Pricing
      Disclosure Package”)
      as of
      the Applicable Time, did not include any untrue statement of a material fact
      or
      omit to state any material fact necessary in order to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading; and each Company Supplemental Disclosure Document (as defined in
      Section 7(a) listed on Schedule I(b) hereto does not conflict with the
      information contained in the Pricing Memorandum or the Offering Memorandum
      and
      each such Company Supplemental Disclosure Document, as supplemented by and
      taken
      together with the Pricing Disclosure Package as of the Applicable Time,
      including all of the risk factors and other disclosures included therein, did
      not include any untrue statement of a material fact or omit to state any
      material fact necessary in order to make the statements therein, in the light
      of
      the circumstances under which they were made, not misleading; provided,
      however,
      that
      this representation and warranty shall not apply to statements or omissions
      made
      in a Company Supplemental Disclosure Document in reliance upon and in conformity
      with information furnished in writing to the Company by the Manager expressly
      for use therein;

     

    (c)  The
      documents incorporated by reference in the Pricing Memorandum and the Offering
      Memorandum, when they were filed with the Commission, as the case may be,
      conformed in all material respects to the requirements of the Exchange Act
      and
      the rules and regulations of the Commission thereunder, and none of such
      documents contained an untrue statement of a material fact or omitted to state
      a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances in which they were made, not misleading;
      any further documents so filed and incorporated by reference in the Offering
      Memorandum or any further amendment or supplement thereto, when such documents
      become effective or are filed with the Commission, as the case may be, will
      conform in all material respects to the requirements of the Exchange Act and
      the
      rules and regulations of the Commission thereunder and will not contain an
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein or necessary to make the statements therein, in light of
      the
      circumstances in which they were made, not misleading; and no such documents
      were filed with the Commission since the Commission’s close of business on the
      business day immediately prior to the date of this Agreement and prior to the
      execution of this Agreement, except as set forth on Schedule I(a)
      hereto;

     

    (d)  Neither
      the Company nor any of its Significant Subsidiaries (as defined below) has
      sustained since the date of the latest audited financial statements included
      or
      incorporated by reference in the Pricing Memorandum any loss or interference
      with its business from fire, explosion, flood or other 

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    calamity,
      whether or not covered by insurance, or from any labor dispute or court or
      governmental action, order or decree, otherwise than as set forth or
      contemplated in the Pricing Memorandum, which loss or interference would have
      a
      Material Adverse Effect (as defined below), or would reasonably be expected
      to
      have a prospective Material Adverse Effect; and, since the respective dates
      as
      of which information is given in the Pricing Memorandum, there has not been
      any
      change in the capital stock (other than changes resulting from the exercise
      of
      stock options or the conversions of warrants or capital stock which were
      outstanding as of such date, or from the exercise of options granted after
      such
      date in the ordinary course of business or from repurchases of capital stock)
      or
      long-term debt of the Company or any of its Significant Subsidiaries or any
      material adverse change, or any development that would reasonably be expected
      to
      involve a prospective material adverse change, in or affecting the general
      affairs, management, financial position, stockholders’ equity or results of
      operations of the Company and its Significant Subsidiaries, taken as a whole,
      otherwise than as set forth or contemplated in the Pricing
      Memorandum;

     

    (e)  The
      Company and each of the Ceding Insurers has been duly organized and is validly
      existing and in good standing as an exempted limited company or other business
      entity under the laws of its jurisdiction of organization, with full power
      and
      authority to own its properties and conduct its business as described in the
      Pricing Memorandum and to enter into and perform its obligations under this
      Agreement and the Transaction Documents to which it is a party and to consummate
      the Transactions to be performed by it pursuant to the Transaction Documents,
      and has been duly qualified as a foreign company for the transaction of business
      and is in good standing under the laws of each other jurisdiction in which
      it
      owns or leases properties or conducts any business so as to require such
      qualification, except where such failure to be so qualified in any such
      jurisdiction or to have any such power or authority would not have a material
      adverse effect on the current or future condition (financial or other),
      business, properties or results of operations of the Company and its
      Subsidiaries taken as a whole or on the transactions contemplated by this
      Agreement and the Transaction Documents (a “Material
      Adverse Effect”);
      and
      each Significant Subsidiary of the Company has been duly incorporated or
      organized and is validly existing as a corporation or such other entity, as
      the
      case may be, in good standing under the laws of its jurisdiction of
      incorporation or organization, as the case may be;

     

    (f)  Each
      of
      the Transaction Documents to which the Company and/or a Ceding Insurer is to
      be
      a party has been duly authorized by the Company and/or such Ceding Insurer,
      as
      the case may be, and as of the Time of Delivery will have been duly executed
      and
      delivered by the Company and/or such Ceding Insurer, as the case may be, and
      will be a valid and legally binding agreement of the Company and/or such Ceding
      Insurer, as the case may be, enforceable against the Company and/or such Ceding
      Insurer, as the case may be, in accordance with its terms, except as enforcement
      thereof may be limited by bankruptcy, insolvency, liquidation, winding up,
      reorganization, moratorium or other similar laws affecting the enforcement
      of
      creditors’ rights generally or by general equitable principles (regardless of
      whether enforcement is considered in equity or at law). 

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    

     

    (g)  This
      Agreement has been duly authorized, executed and delivered by the
      Company;

     

    (h)  As
      of the
      Time of Delivery, the XL Preferred Securities will have been duly and validly
      authorized and reserved for issuance in such amounts as shall be required to
      consummate the transactions contemplated by this Agreement and the Transaction
      Documents, and, when (and if) issued and delivered in accordance with the terms
      of the Securities Issuance Agreement and the resolutions of the Board of
      Directors of the Company or any attorney-in-fact thereof designating such XL
      Preferred Securities against payment of the purchase price therefor, will be
      duly and validly issued and fully paid and nonassessable; the issuance of the
      XL
      Preferred Securities is not subject to any preemptive or other similar rights
      and no holder of XL Preferred Securities will be subject to personal liability
      by reason by reason of being such a holder; the resolutions of the Company’s
      Board of Directors or any attorney-in-fact thereof creating the XL Preferred
      Securities will be in full force and effect prior to the Time of Delivery and
      a
      copy of which shall have been delivered to the Manager; 

     

    (i)  The
      issue
      and sale by the Company of the XL Preferred Securities, if and when issued,
      the
      execution and delivery of this Agreement and the Transaction Documents to which
      the Company or any Ceding Insurer is to be a party and the compliance by the
      Company or any Ceding Insurer with all the provisions of the Issuer Preferred
      Securities, the XL Preferred Securities, this Agreement and the Transaction
      Documents to which such entities are to be a party at the Time of Delivery,
      and
      the consummation of the transactions contemplated herein and therein and by
      the
      Pricing Memorandum and the Offering Memorandum to be performed by them will
      not
      conflict with or result in a breach or violation of any of the terms or
      provisions of, or constitute a default under, any indenture, mortgage, deed
      of
      trust, loan agreement or other agreement or instrument to which any Ceding
      Insurer, the Company or any of its Significant Subsidiaries is a party or by
      which any Ceding Insurer, the Company or any of its Significant Subsidiaries
      is
      bound or to which any of the property or assets of any Ceding Insurer, the
      Company or any of its Significant Subsidiaries is subject, nor will such action
      result in any violation of the provisions of the Articles of Association or
      the
      Memorandum of Association (or similar organizational documents) of any Ceding
      Insurer, the Company or any of its Significant Subsidiaries, or any statute
      or
      any order, rule or regulation of any court or governmental agency or body
      (“Governmental
      Agency”)
      having
      jurisdiction over any Ceding Insurer, the Company or any of its Significant
      Subsidiaries or any of their respective properties except in each case (other
      than with respect to such Articles of Association or Memorandum of Association
      (or similar organizational documents)) for such conflicts, violations, breaches
      or defaults which would not result in a Material Adverse Effect;

     

    (j)  Except
      as
      disclosed on Schedule III with respect to the Cayman Islands Monetary
      Authority,
      and
      in
      full force and effect at the Applicable Time, no
      consent, approval, authorization, order, filing, registration or qualification
      of or with any Governmental Agency (a “Governmental Authorization”)
      is
      required for (i) the issue and sale by the Company of the XL Preferred
      Securities pursuant to the Securities Issuance Agreement, (ii) the execution,
      delivery and performance by any Ceding Insurer or the Company of this Agreement
      or the Transaction 

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    Documents
      to which such entities are party or (iii) the consummation of the Transactions;
      

     

    (k)  All
      of the
      issued share capital of the Company and each Significant Subsidiary has been
      duly and validly authorized and issued and is fully paid and non-assessable;
      and
      all of the issued share capital of each Significant Subsidiary of the Company
      has been duly and validly authorized and issued, is fully paid and
      non-assessable and (except for (i) an approximately 37% interest in Security
      Capital Assurance Ltd owned by third parties, (ii) a 15% ownership interest
      in
      XL Financial Assurance Ltd. owned by a third party and (iii) directors’
qualifying shares) is owned directly or indirectly by the Company, free and
      clear of all liens, encumbrances, equities or claims (for purposes of this
      Agreement, “Subsidiary”
means,
      as applied to any person, any corporation, limited or general partnership,
      trust, association or other business entity of which an aggregate of greater
      than 50% of the outstanding Voting Shares of such person is, at any time,
      directly or indirectly, owned by such person and/or one or more subsidiaries
      of
      such person and “Significant
      Subsidiary”
shall
      have the meaning of “significant subsidiary” as set forth in Regulation S-X
      under the United States Securities Act of 1933, as amended (the “Securities
      Act”);
      for
      purposes of the definition of “Subsidiary,” “Voting
      Shares”
means,
      with respect to any corporation, the capital stock having the general voting
      power under ordinary circumstances to elect at least a majority of the board
      of
      directors (irrespective of whether or not at the time stock of any other class
      or classes shall have or might have voting power by reason of the happening
      of
      any contingency)); 

     

    (l)  Prior
      to
      the date hereof, neither the Company nor, to the Company’s knowledge, any of its
      affiliates has taken any action which is designed to or which has constituted
      or
      which might have been expected to cause or result in stabilization or
      manipulation of the price of any security of the Company in connection with
      the
      offering of the Issuer Preferred Securities in violation of the Exchange
      Act;

     

    (m)  Other
      than
      as set forth or incorporated by reference in the Pricing Memorandum prior to
      the
      date hereof, or as encountered in the ordinary course of business in the
      Company’s claims activities, there are no legal or governmental actions, suits
      or proceedings pending to which the Company or any of its Significant
      Subsidiaries is a party or of which any property of the Company or any of its
      Significant Subsidiaries is the subject, which would individually or in the
      aggregate reasonably be expected to have a Material Adverse Effect on the
      operations of the Company and its Significant Subsidiaries; and, to the best
      of
      the Company’s knowledge, no such proceedings are threatened or contemplated by
      governmental authorities or threatened by others;

     

    (n)  The
      financial statements of the Company and its consolidated Subsidiaries
      incorporated by reference in the Pricing Memorandum and the Offering Memorandum
      present fairly the financial position of the Company and its consolidated
      Subsidiaries as of the dates shown and their results of operations and cash
      flows for the periods shown, and except as otherwise disclosed in the Pricing
      Memorandum, such financial statements have been prepared in conformity with
      generally accepted accounting principles in the United States applied on a
      consistent basis;

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    

     

    (o)  Each
      of
      the Company and its Significant Subsidiaries possess adequate certificates,
      authorities, licenses or permits issued by appropriate governmental agencies
      or
      bodies necessary to conduct the business now operated by them and have not
      received any written notice of proceedings relating to the revocation or
      modification of any such certificate, authority or permit that would,
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect;

     

    (p)  None
      of
      the Ceding Insurers, the Company or any of its Significant Subsidiaries is
      in
      violation of its Articles of Association or Memorandum of Association (or
      similar organizational documents) or in default in the performance or observance
      of any material obligation, agreement, covenant or condition contained in any
      indenture, mortgage, deed of trust, loan agreement, lease or other agreement
      or
      instrument to which it is a party or by which it or any of its properties may
      be
      bound, except for such defaults which would not result in a Material Adverse
      Effect;

     

    (q)  The
      statements set forth in the Pricing Memorandum and the Offering Memorandum
      under
      the captions “Notice to Investors”, “Summary”, “Ratings”, “Description of the
      Issuer Preferred Securities”, “Description of the Reinsurance Agreement”,
“Description of the Securities Issuance Agreement”, “Description of the Asset
      Swap Agreement”, “Description of the Interest Rate Swap Agreement”, “Description
      of the Trust Account and the Trust Agreement”, “Description of the XL Preferred
      Securities”, “Book-Entry Issuance”, and “Certain Tax Considerations”, insofar as
      they purport to constitute a summary of the terms of the Issuer Preferred
      Securities, the XL Preferred Securities, if and when issued, and the Transaction
      Documents and, insofar as they purport to describe the provisions of the
      documents or laws referred to therein, are accurate, complete and fair in all
      material respects;

     

    (r)  The
      Company is subject to Section 13 or 15(d) of the Exchange Act;

     

    (s)  The
      Company is not and, after giving effect to the offering and sale of the Issuer
      Preferred Securities and the XL Preferred Securities, if any, assuming the
      XL
      Preferred Securities were issued as of the date hereof, and the other
      transactions contemplated by the Pricing Memorandum and the Offering Memorandum,
      will not be an “investment company”, as such term is defined in the Investment
      Company Act of 1940, as amended (the “Investment
      Company Act”);

     

    (t)  The
      Company has not, nor has any person acting on behalf of the Company (excluding
      the Manager, as to which no representation is made), offered or sold Issuer
      Preferred Securities or XL Preferred Securities outside the United States to
      non-U.S. persons (as defined in Rule 902 under the Securities Act), by means
      of
      any directed selling efforts within the meaning of Rule 902 under the Securities
      Act, and the Company and any affiliate of the Company and any person acting
      on
      its or their behalf (excluding the Manager, as to which no representation is
      made) has complied with and will implement the “offering restriction” within the
      meaning of such Rule 902;

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    

     

    (u)  PricewaterhouseCoopers
      LLP, who have certified certain financial statements of the Company and its
      Subsidiaries, and have audited the Company’s internal control over financial
      reporting and management’s assessment thereof, are an independent registered
      public accounting firm as required by the Securities Act and the rules and
      regulations of the Commission thereunder; 

     

    (v)  No
      stamp
      or other issuance or transfer taxes or duties and no capital gains, income,
      withholding or other taxes are payable by or on behalf of the Manager to the
      Cayman Islands or any political subdivision or taxing authority thereof or
      therein in connection with the issuance, sale and delivery by the Company to
      the
      Issuer of the XL Preferred Securities, if issued, pursuant to the terms of
      the
      Securities Issuance Agreement;

     

    (w)  The
      Company and its Subsidiaries maintain a system of "internal control over
      financial reporting" (as such term is defined in Rule 13a-15(f) under the
      Exchange Act). The Company's and its Subsidiaries' internal control over
      financial reporting is effective and the Company and its Subsidiaries are not
      aware of any material weaknesses in its internal control over financial
      reporting; 

     

    (x)  The
      Company and its Subsidiaries maintain "disclosure controls and procedures"
      (as
      such term is defined in Rule 13a-15(e) under the Exchange Act); such disclosure
      controls and procedures are effective; and

     

    (y)  Subject
      to
      compliance by the Manager with the representations, warranties and agreements
      set forth in Section 4, it is not necessary in connection with the offer, sale
      and delivery of the Issuer Preferred Securities to the Manager and to each
      subsequent purchaser in the manner contemplated by this Agreement, the
      Transaction Documents, the Pricing Memorandum and the Offering Memorandum,
      or
      the XL Preferred Securities, if and when issued, to the Issuer pursuant to
      the
      Securities Issuance Agreement to register the Issuer Preferred Securities or
      the
      XL Preferred Securities, if and when so issued, under the Securities
      Act.

     

    2.  The
      Issuer
      represents and warrants to, and agrees with, the Manager that:

     

    (a)  The
      Preliminary Offering Memorandum or the Offering Memorandum and any amendments
      or
      supplements thereto did not and will not, as of their respective dates, and
      the
      Pricing Disclosure Package at the Applicable Time, contain an untrue statement
      of a material fact or omit to state a material fact necessary in order to make
      the statements therein, in light of the circumstances under which they were
      made, not misleading; provided,
      however,
      that
      this representation, warranty and agreement shall not apply to (i) any
      statements in or omissions made in reliance upon and in conformity with
      information furnished in writing to the Issuer by the Manager expressly for
      use
      in the Preliminary Offering Memorandum and the Offering Memorandum and (ii)
      the
      information under the “Description of the XL Preferred Securities” and the
      information contained in the Exchange Act Reports incorporated by reference
      into
      the Preliminary Offering Memorandum and the Offering Memorandum;

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    

     

    (b)  The
      Issuer
      has not sustained any loss or interference with its business from any court
      or
      governmental action, order or decree, otherwise than as set forth or
      contemplated in the Pricing Memorandum and the Offering Memorandum, which loss
      or interference would have a material adverse effect on the current or future
      condition (financial or other), business, properties or results of operations
      of
      the Issuer, or the transactions contemplated by this Agreement and the
      Transaction Documents (an “Issuer
      Material Adverse Effect”),
      or
      would reasonably be expected to have a prospective Issuer Material
      Adverse Effect; and, since the respective dates as of which information is
      given
      in the Pricing Memorandum and the Offering Memorandum, there has not been any
      event that would have a prospective material adverse change or an Issuer
      Material Adverse Effect, otherwise than as set forth or contemplated in the
      Pricing Memorandum and the Offering Memorandum;

     

    (c)  The
      Issuer
      has been duly incorporated and is validly existing as an exempted company in
      good standing under the laws of the Cayman Islands, with full power and
      authority to own its properties and to conduct its activities as described
      in
      the Pricing Memorandum and to enter into and perform its obligations under
      this
      Agreement and the Transaction Documents to which it is a party and to consummate
      the Transactions and is licensed as a Restricted Class B insurer under the
      laws
      of the Cayman Islands (including the Insurance Laws (2004 Revision)); and the
      Issuer does not need to be qualified as a foreign corporation to conduct
      activities in any other jurisdiction, except where such failure to be so
      qualified in any such jurisdiction or to have any such power or authority would
      not have an Issuer Material Adverse Effect. The Issuer (i) has conducted and
      will conduct no business other than the transactions contemplated by this
      Agreement and the Transaction Documents as described in the Pricing Memorandum
      and the Offering Memorandum; (ii) is not a party to or bound by, nor are any
      of
      its assets or property subject to, any indenture, mortgage, deed of trust,
      loan
      agreement, other agreement or instrument other than this Agreement and the
      Transaction Documents to which it is a party; (iii) does not have any employees,
      has no indebtedness and has no liabilities or obligations other than those
      arising out of the transactions contemplated by this Agreement and the
      Transaction Documents, and described in the Pricing Memorandum and the Offering
      Memorandum; and (iv) is not a party or subject to, nor are its assets or
      properties subject to, any action, suit or proceeding of any nature and, to
      the
      best of the Issuer’s knowledge, no such proceedings are threatened or
      contemplated by Governmental Agencies or threatened by others;

     

    (d)  Each
      of
      the Transaction Documents to which the Issuer is a party has been duly
      authorized by the Issuer and, as of the Time of Delivery, will have been duly
      executed and delivered by the Issuer; and upon execution and delivery by the
      other parties thereto, will constitute a valid and legally binding agreement
      of
      the Issuer, enforceable against it in accordance with its terms, except as
      enforcement thereof may be limited by bankruptcy, insolvency, liquidation,
      winding up, reorganization, moratorium or other similar laws affecting the
      enforcement of creditors’ rights generally or by general equitable principles
      (regardless of whether enforcement is considered in equity or at
      law);

     

    (e)  This
      Agreement has been duly authorized, executed and delivered by the
      Issuer;

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    

     

    (f)  The
      Issuer
      Preferred Securities have been duly and validly authorized and, as of the Time
      of Delivery, will have been duly executed by the Issuer, and, when delivered
      against payment of the purchase price therefor as contemplated in this Agreement
      will constitute valid and legally binding obligations of the Issuer, enforceable
      against such entity in accordance with their terms, except as the enforcement
      thereof may be limited by bankruptcy, insolvency, reorganization, moratorium
      or
      other similar laws affecting the enforcement of creditors’ rights generally, or
      by general equitable principles (regardless of whether enforcement is considered
      in a proceeding in equity or at law), and will conform to the descriptions
      thereof in the Pricing Disclosure Package and the Offering
      Memorandum;

     

    (g)  The
      issue
      and sale by the Issuer of the Issuer Preferred Securities, the execution and
      delivery of this Agreement and the Transaction Documents and the compliance
      by
      the Issuer with all of the provisions of the Issuer Preferred Securities, this
      Agreement and the Transaction Documents and the consummation of the transactions
      contemplated herein and therein and by the Pricing Memorandum and the Offering
      Memorandum will not conflict with or result in a breach or violation of any
      of
      the terms or provisions of, or constitute a default under, any indenture,
      mortgage, deed of trust, loan agreement or other agreement or instrument to
      which the Issuer is a party or by which the Issuer is bound or to which any
      of
      the property or assets of the Issuer is subject, nor will such action result
      in
      any violation of the provisions of the Articles of Association or the Memorandum
      of Association (or similar organizational documents) of the Issuer, or any
      statute or any order, rule or regulation of any Governmental Agency having
      jurisdiction over the Issuer or any of its properties, except in each case
      (other than with respect to such Articles of Association or Memorandum of
      Association (or similar organizational documents)) for such conflicts,
      violations, breaches or defaults which would not result in an Issuer Material
      Adverse Effect;

     

    (h)  The
      Issuer
      possesses adequate certificates, authorities, licenses or permits issued by
      appropriate governmental agencies or bodies necessary to conduct the business
      now operated by it, or to be operated by it as described in the Pricing
      Memorandum or the Offering Memorandum, and has not received any written notice
      of proceedings relating to the revocation or modification of any such
      certificate, authority or permit that would, individually or in the aggregate,
      reasonably be expected to have an Issuer Material Adverse Effect;

     

    (i)  The
      Issuer
      is not in violation of its Articles of Association or Memorandum of Association
      (or similar organizational documents) or in default in the performance or
      observance of any material obligation, agreement, covenant or condition
      contained in any indenture, mortgage, deed of trust, loan agreement, lease
      or
      other agreement or instrument to which it is a party or by which it or any
      of
      its properties may be bound, except for such defaults which would not result
      in
      an Issuer Material Adverse Effect;

     

    (j)  The
      Issuer
      Preferred Securities and the Transaction Documents to which the Issuer is a
      party conform in all material respects to the statements relating thereto and
      descriptions thereof contained in the Pricing Memorandum and the Offering
      Memorandum; and the statements set forth in the Pricing Memorandum and the
      Offering Memorandum under the captions “Summary”, 

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    “Ratings”,
      “Description of the Issuer Preferred Securities”, “Description of the
      Reinsurance Agreement”, “Description of the Securities Issuance Agreement”,
“Description of the Asset Swap Agreement”, “Description of the Interest Rate
      Swap Agreement”, “Description of the Trust Account and the Trust Agreement”,
“Book-Entry Issuance”, and “Certain Tax Considerations”, insofar as they purport
      to constitute a summary of the terms of the Issuer Preferred Securities and
      the
      Transaction Documents and, insofar as they purport to describe the provisions
      of
      the documents or laws referred to therein, fairly summarize such documents
      and
      laws in all material respects;

     

    (k)  The
      Issuer
      is not, and after giving effect to the offering and sale of the Issuer Preferred
      Securities and the other transactions contemplated by the Pricing Memorandum
      and
      the Offering Memorandum, will not be an “investment company”, as such term is
      defined in the Investment Company Act;

     

    (l)  The
      Issuer
      has not, nor has any person acting on its behalf (excluding the Manager, as
      to
      which no representation is made), offered or sold the Issuer Preferred
      Securities outside the United States to non-U.S. persons (as defined in Rule
      902
      under the Securities Act), by means of any directed selling efforts within
      the
      meaning of Rule 902 under the Securities Act and the Issuer, and any affiliate
      of the Issuer and any person acting on its or their behalf has complied with
      and
      will implement the “offering restriction” within the meaning of such Rule
      902;

     

    (m)  Assuming
      the accuracy of the representations, warranties and agreements of the Manager
      in
      Section 4, no Governmental Authorization is required, other than those which
      have been obtained and are in full force and effect at the Applicable Time
      and
      at the Time of Delivery, for (i) the issue and sale by the Issuer of the Issuer
      Preferred Securities pursuant to this Agreement, (ii) the execution, delivery
      and performance by the Issuer of this Agreement, the Issuer Preferred Securities
      or the Transaction Documents or (iii) the consummation of the Transactions;
      and

     

    (n)  Subject
      to
      compliance by the Manager with the representations, warranties and agreements
      set forth in Section 4, it is not necessary in connection with the offer, sale
      and delivery of the Issuer Preferred Securities to the Manager and to each
      subsequent purchaser in the manner contemplated by this Agreement, the
      Transaction Documents, the Pricing Memorandum and the Offering Memorandum to
      register the Issuer Preferred Securities under the Securities Act.

     

    3.  Subject
      to
      the terms and conditions herein set forth:

     

    (a)  the
      Issuer
      agrees to issue and sell to the Manager, and the Manager agrees to purchase
      from
      the Issuer, the Issuer Preferred Securities at a purchase price of U.S.$1,000
      per security; and

     

    (b)  the
      Company agrees to pay the Manager a commission of U.S.$12.50 for each security
      the Manager purchases from the Issuer. The Manager shall not be obligated to
      purchase any Issuer Preferred Securities for which it does not receive such
      commission.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    

     

    4.  Upon
      the
      authorization by the Issuer of the release of the Issuer Preferred Securities,
      the Manager proposes to offer the Issuer Preferred Securities for sale upon
      the
      terms and conditions set forth in this Agreement and the Offering Memorandum
      and
      the Manager hereby represents and warrants to and agrees with the Company and
      the Issuer that it will offer and sell the Issuer Preferred Securities only
      upon
      the terms and conditions set forth in Annex I to this Agreement.

     

    5.  (a)  The
      Issuer
      Preferred Securities to be purchased by the Manager hereunder will be
      represented by one or more definitive global securities in book-entry form
      which
      will be registered in the name of, and deposited by or on behalf of the Issuer
      with, a nominee for Euroclear Bank S.A./N.A. (“Euroclear”)
      and
      Clearstream Banking, société anonyme (“Clearstream”).
      The
      Issuer will deliver the Issuer Preferred Securities to the Manager against
      payment by or on behalf of the Manager of the purchase price therefor by wire
      transfer of immediately available funds to the account specified by the Issuer
      to the Manager at least twenty-four hours in advance, by causing Euroclear
      and
      Clearstream to credit the Issuer Preferred Securities to the account of the
      Manager. The Issuer will, upon request by the Manager, cause the certificates
      representing the Issuer Preferred Securities to be made available to the Manager
      for checking at least twenty-four hours prior to the Time of Delivery (as
      defined below) with respect thereto at the office of the nominee of Euroclear
      and Clearstream (the “Designated
      Office”). The
      time
      and date of such delivery and payment shall be 2:00 p.m., London time, on
      December 12, 2006 or such other time and date as the Manager and the Issuer
      may
      agree upon in writing. Such time and date for delivery of the Issuer Preferred
      Securities is herein called the “Time
      of
      Delivery”.

     

    (b)  The
      documents to be delivered at the Time of Delivery by or on behalf of the parties
      hereto pursuant to Section 9 hereof, including the cross-receipt for the Issuer
      Preferred Securities and any additional documents requested by the Manager
      pursuant to Section 9(s) hereof, will be delivered at the offices of Simpson
      Thacher & Bartlett LLP, One Ropemaker Street, London EC2Y 9HU, England (the
“Closing
      Location”),
      and
      the Issuer Preferred Securities will be delivered at the Designated Office,
      all
      at the Time of Delivery. A meeting will be held at the Closing Location at
      7:00
      p.m., London time, on the London Business Day next preceding the Time of
      Delivery, at which meeting the final drafts of the documents to be delivered
      pursuant to the preceding sentence will be available for review by the parties
      hereto.

     

    6.  The
      Company and
      the
      Issuer, severally and not jointly, agree with the Manager (each as to itself
      only):

     

    (a)  To
      prepare
      the Offering Memorandum in a form approved by you; to make no amendment or
      any
      supplement to the Offering Memorandum which shall be disapproved by you promptly
      after reasonable notice thereof; and to furnish you with copies thereof;

     

    (b)  Promptly
      from time to time to take such action as you may reasonably request to qualify
      the Issuer Preferred Securities and
      the XL
      Preferred Securities issuable pursuant to the Securities Issuance Agreement
      at
      the time of issuance, for 

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    offering
      and sale under the securities laws of such jurisdictions as you may reasonably
      request and to comply with such laws so as to permit the continuance of sales
      and dealings therein in such jurisdictions for as long as may be necessary
      to
      complete the distribution to subsequent purchasers of the Issuer Preferred
      Securities, or the XL Preferred Securities pursuant to the Securities Issuance
      Agreement, as the case may be, provided that in connection therewith neither
      the
      Company nor the Issuer shall be required to qualify as a foreign corporation
      or
      to file a general consent to service of process in any
      jurisdiction;

     

    (c)  To
      furnish
      the Manager with copies of the Exchange Act Reports, the Preliminary Offering
      Memorandum and the Final Offering Memorandum and each amendment or supplement
      thereto and additional written and
      electronic copies thereof in such quantities as you may from time to time
      reasonably request, and if, at any time prior to the expiration of three months
      after the date of the Offering Memorandum, any event shall have occurred as
      a
      result of which the Offering Memorandum as then amended or supplemented would
      include an untrue statement of a material fact or omit to state any material
      fact necessary in order to make the statements therein, in the light of the
      circumstances under which they were made when such Offering Memorandum is
      delivered, not misleading, or, if for any other reason it shall be necessary
      or
      desirable during such same period to amend or supplement the Offering
      Memorandum, to notify you and upon your request to prepare and furnish without
      charge to you and to any dealer in securities as many written and
      electronic copies as you may from time to time reasonably request of an amended
      Offering Memorandum or a supplement to the Offering Memorandum which will
      correct such statement or omission or effect such compliance;

     

    (d)  During
      the
      period beginning from the date hereof and continuing until the date 60 days
      after the Time of Delivery, not to directly or indirectly, without the Manager’s
      prior written consent, other than as contemplated by the Securities Issuance
      Agreement and other than with respect to the Series C Ordinary Preference Shares
      of the Company: (i) offer, pledge, sell, contract to sell or otherwise dispose
      of, except as provided hereunder, any Issuer Preferred Securities, XL Preferred
      Securities or substantially similar securities; (ii) sell any option or contract
      to purchase any Issuer Preferred Securities, XL Preferred Securities or
      substantially similar securities; (iii) purchase any option or contract to
      sell
      any Issuer Preferred Securities, XL Preferred Securities or substantially
      similar securities; (iv) grant any option, right or warrant for any Issuer
      Preferred Securities, XL Preferred Securities or substantially similar
      securities; (v) file a registration statement for any Issuer Preferred
      Securities, XL Preferred Securities or substantially similar securities; or
      (iv)
      lend or otherwise dispose of or transfer any Issuer Preferred Securities, XL
      Preferred Securities or substantially similar securities;

     

    (e)  Not
      to be
      or become an open-end investment company, unit investment trust, closed-end
      investment company or face-amount certificate company that is or is required
      to
      be registered under Section 8 of the Investment Company Act, unless the Company
      determines, after taking all reasonable measures to counteract such status,
      such
      status is required in order to comply with any change in the Investment Company
      Act or written change in interpretations or application of the rules and
      regulations thereunder;

     

    (f)  Prior
      to
      the expiration of two years after the Time of Delivery, for (i) the Company
      to
      furnish to the Issuer who will furnish holders of the Issuer Preferred

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    Securities
      and (ii) the Company to furnish to holders of XL Preferred Securities, if any,
      as soon as practicable after the end of each fiscal year an annual report
      (including a balance sheet and statements of income, stockholders' equity and
      cash flows of the Company and its consolidated subsidiaries certified by
      independent public accountants) and, as soon as practicable after the end of
      each of the first three quarters of each fiscal year (beginning with the fiscal
      quarter ending after the date of the Offering Memorandum), to make available
      to
      its securityholders consolidated summary financial information of the Company
      and its subsidiaries for such quarter in reasonable detail, except, in each
      case, to the extent such reports, communications, statements or other
      information are publicly available or the deadline of such reports or
      information to the Commission has not yet occurred;

     

    (g)  During
      a
      period of two years after the Time of Delivery, that the Company, on behalf
      of
      the Issuer, shall furnish to the Manager upon request copies of all reports
      or
      other communications (financial or other) furnished to stockholders of the
      Company, and to deliver to the Manager (i) as soon as they are available, copies
      of any reports and financial statements furnished to or filed with the
      Commission or any securities exchange on which the Issuer Preferred Securities
      or XL Preferred Securities, if any, or any class of securities of the Company
      is
      listed (such financial statements to be on a consolidated basis to the extent
      the accounts of the Company and its subsidiaries are consolidated in reports
      furnished to its stockholders generally or to the Commission); and (ii) such
      additional information concerning the business and financial condition of the
      Company as the Manager may from time to time reasonably request, except, in
      each
      case, such information that the Company determines, in its sole discretion,
      constitutes material non-public information (such financial statements to be
      on
      a consolidated basis to the extent the accounts of the Company and its
      subsidiaries are consolidated in reports furnished to its stockholders generally
      or to the Commission), except, in each case, to the extent such reports,
      communications, statements or other information are publicly available or the
      deadline of such reports or information to the Commission has not yet
      occurred;

     

    (h)  To
      take
      all reasonable actions necessary, including engaging advisers to act on behalf
      of the Company or the Issuer, to enable Moody’s, S&P, Fitch and A.M. Best to
      provide at the Time of Delivery their respective credit ratings of the Issuer
      Preferred Securities and the XL Preferred Securities, if issued;

     

    (i)  To
      cooperate with the Manager and use their reasonable best efforts to permit
      the
      Issuer Preferred Securities and/or XL Preferred Securities to be eligible for
      clearance and settlement through the facilities of Euroclear and
      Clearstream;

     

    (j)  To
      use the
      proceeds from the Issuer Preferred Securities and the XL Preferred Securities,
      if and when issued, in the manner specified in the Pricing Memorandum under
      the
      caption “Use of Proceeds”;

     

    (k)  In
      the
      case of the Company, so long as any XL Preferred Securities remain issuable
      pursuant to the Securities Issuance Agreement or are issued and outstanding,
      to
      file all documents, if any, required to be filed with the Commission pursuant
      to
      the Exchange Act within the time periods prescribed by the Exchange Act and
      the
      rules and regulations thereunder, including any applicable grace periods
      thereunder; and

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    

     

    (l)  For
      the
      Company, to reserve and keep available at all times, free of preemptive rights,
      XL Preferred Securities for the purpose of enabling the Company to satisfy
      any
      obligations to issue XL Preferred Securities pursuant to the Securities Issuance
      Agreement and in such amounts as shall be sufficient to satisfy such
      obligations.

     

    7.  (a)  The
      Company and
      the
      Issuer each represent and agree with the Manager that, without the Manager’s
      prior consent, it has not made and will not make any offer relating to the
      Issuer Preferred Securities that, if the offering of the Issuer Preferred
      Securities contemplated by this Agreement were conducted as a public offering
      pursuant to a registration statement filed under the Securities Act with the
      Commission, would constitute an “issuer free writing prospectus,” as defined in
      Rule 433 under the Securities Act (any such offer is hereinafter referred to
      as
      a “Company
      Supplemental Disclosure Document”);

     

    (b)  The
      Manager represents and agrees that, without the prior consent of the Company
      and
      the Issuer, other than one or more term sheets relating to the Issuer Preferred
      Securities containing customary information and conveyed to purchasers of
      securities, it has not made and will not make any offer relating to the Issuer
      Preferred Securities that, if the offering of the Issuer Preferred Securities
      contemplated by this Agreement were conducted as a public offering pursuant
      to a
      registration statement filed under the Securities Act with the Commission,
      would
      constitute a “free writing prospectus,” as defined in Rule 405 under the
      Securities Act (any such offer (other than any such term sheets), is hereinafter
      referred to as a “Manager
      Supplemental Disclosure Document”);
      and

     

    (c)  Any
      Company Supplemental Disclosure Document or Manager Supplemental Disclosure
      Document the use of which has been consented to by the Company, the Issuer
      and
      Goldman Sachs International is listed on Schedule I(b) hereto.

     

    8.  The
      Company covenants and agrees with the Manager that the Company will pay or
      cause
      to be paid the following: (i) the fees, disbursements and expenses of the
      Company's and the Issuer’s counsel and accountants in connection with the issue
      and sale of the Issuer Preferred Securities and XL Preferred Securities, if
      any,
      and all other expenses in connection with the preparation and printing of any
      Preliminary Offering Memorandum, the Pricing Memorandum and the Offering
      Memorandum and any amendments and supplements thereto and the mailing and
      delivering of copies thereof to the Manager and dealers; (ii) any fees,
      disbursements and expenses of the Manager’s counsel in excess of an aggregate of
      U.S.$750,000 of such counsel’s fees, disbursements and expenses; (iii) the fees,
      disbursements and expenses of the Administrator, the Agent and their respective
      counsel in connection with the Administration Agreement; (iv) the fees,
      disbursements and expenses of the Account Trustee and its counsel in connection
      with the Trust Agreement; (v) the cost of printing or producing this Agreement,
      the Transaction Documents, closing documents (including any compilations
      thereof) and any other documents in connection with the offering, purchase,
      sale
      and delivery of the Issuer Preferred Securities or the XL Preferred Securities;
      (vi) all expenses in connection with the qualification of the Issuer Preferred
      Securities and the XL Preferred Securities, if any, for offering and sale under
      the securities laws of such jurisdictions as provided in Section 6(b) hereof,
      including the 

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    fees
      and
      disbursements of counsel for the Manager in connection with such qualification;
      (vii) any fees charged by securities rating services for rating the Issuer
      Preferred Securities or the XL Preferred Securities; (viii) the cost of
      preparing the Issuer Preferred Securities or the XL Preferred Securities; (ix)
      the fees and expenses of any transfer agent or registrar or dividend disbursing
      agent; (x) all expenses and taxes arising as a result of the issuance, sale
      and
      delivery of the Issuer Preferred Securities or the XL Preferred Securities,
      of
      the sale and delivery outside of the Cayman Islands of the Issuer Preferred
      Securities or the XL Preferred Securities by the Manager to the purchasers
      thereof in the manner contemplated under this Agreement and the Transaction
      Documents, including, in any such case, any Cayman Islands income, capital
      gains, withholding, transfer or other tax asserted against the Manager by reason
      of the purchase and sale of the Issuer Preferred Securities or XL Preferred
      Securities pursuant to this Agreement and the Transaction Documents; and (xi)
      all other costs and expenses incident to the performance of the Company’s and
      the Issuer’s obligations hereunder which are not otherwise specifically provided
      for in this Section (including but not limited to pre-marketing and roadshow
      expenses, including travel, lodging, conference calls and other related
      expenses).
      It is
      understood, however, that, except as provided in this Section, and Sections
      10,
      12 and 22 hereof and Annex I hereto, the Manager will pay all of its own costs
      and expenses, including up to U.S.$750,000 for fees, disbursements and expenses
      of its counsel, transfer taxes on resale of any of the Issuer Preferred
      Securities or XL Preferred Securities by them, and any advertising expenses
      connected with any offers they may make.

     

    9.  The
      obligations of the Manager hereunder shall be subject, in its discretion, to
      the
      condition that all representations and warranties and other statements of the
      Company and the Issuer herein are, at and as of the Time of Delivery, true
      and
      correct, the condition that the Company and the Issuer shall have performed
      all
      of their respective obligations hereunder theretofore to be performed, and
      the
      following additional conditions:

     

    (a)  Simpson
      Thacher & Bartlett LLP, counsel for the Manager, shall have furnished to you
      their written opinion or opinions, dated the Time of Delivery, in form and
      substance reasonably satisfactory to you, and such counsel shall have received
      such papers and information as they may reasonably request to enable them to
      pass upon such matters; 

     

    (b)  Cahill
      Gordon & Reindel llp,
      United
      States counsel for the Company, shall have furnished to you their written
      opinion or opinions, dated the Time of Delivery, in form and substance
      reasonably satisfactory to you, substantially in the form attached hereto in
      Annex II;

     

    (c)  Cadwalader,
      Wickersham & Taft LLP, United States counsel for the Issuer shall have
      furnished to you their written opinion or opinions, dated the Time of Delivery,
      in form and substance reasonably satisfactory to you, substantially in the
      form
      attached hereto in Annex III

     

    (d)  Cadwalader,
      Wickersham & Taft LLP, United Kingdom counsel for the Issuer shall have
      furnished to you their written opinion or opinions, dated the Time of Delivery,
      in form and substance reasonably satisfactory to you, substantially in the
      form
      attached hereto in Annex IV;

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    

     

    (e)  Appleby
      Hunter Bailhache, Cayman Islands counsel for the Company, shall have furnished
      to you their written opinion or opinions, dated the Time of Delivery, in form
      and substance reasonably satisfactory to you, substantially in the form attached
      hereto in Annex V; 

     

    (f)  Appleby
      Hunter Bailhache, Bermuda counsel for the Company, shall have furnished to
      you
      their written opinion or opinions, dated the Time of Delivery, in form and
      substance reasonably satisfactory to you, substantially in the form attached
      hereto in Annex VI;

     

    (g)  Maples
      and
      Calder, Cayman Islands counsel for the Issuer, shall have furnished to you
      their
      written opinion or opinions, dated the Time of Delivery, in form and substance
      reasonably satisfactory to you, substantially in the form attached hereto in
      Annex VII;

     

    (h)  Slaughter
      and May, special United Kingdom tax counsel for the Company, shall have
      furnished to you’re their written opinion or opinions, dated the Time of
      Delivery, in form and substance reasonably satisfactory to you, substantially
      in
      the form attached hereto in Annex VIII;

     

    (i)  Kirstin
      Romann Gould, Executive Vice President and General Counsel Corporate Affairs
      to
      the Company, shall have furnished to you her written opinion or opinions, dated
      the Time of Delivery, in form and substance reasonably satisfactory to you,
      substantially in the form attached hereto in Annex IX;

     

    (j)  Albert
      P
      Zakes, General Counsel to IXIS Capital Markets North America Inc., counsel
      to
      the Interest Rate Swap Counterparty, shall have furnished to you his written
      opinion or opinions, dated the Time of Delivery, in form and substance
      reasonably satisfactory to you, substantially in the form attached hereto in
      Annex X;

     

    (k)  On
      the
      date of the Offering Memorandum prior to the execution of this Agreement and
      also at the Time of Delivery, PricewaterhouseCoopers LLP, the independent
      registered public accounting firm of the Company, who have certified the
      financial statements of the Company and its Subsidiaries and have audited the
      Company’s internal control over financial reporting and management’s assessment
      thereof, shall have furnished to you a “comfort” letter or letters, dated the
      respective dates of delivery thereof, in form and substance reasonably
      satisfactory to you;

     

    (l)  At
      the
      time this Agreement is executed and at the Time of Delivery, you shall have
      received a comfort letter from the Company, signed by the Chief Financial
      Officer of the Company, dated the respective dates of delivery thereof, in
      form
      and substance reasonably satisfactory to you, in the form attached hereto as
      Annex XI;

     

    (m)  (i)
      None of
      the Issuer, the Company nor any of its Significant Subsidiaries shall have
      sustained since the date of the latest audited financial statements included
      or
      incorporated by reference in the Pricing Memorandum any loss or interference
      with its business from fire, explosion, flood or other calamity, whether or
      not
      covered by insurance, or from any labor dispute or court or governmental action,
      order or decree, otherwise than as set forth or contemplated in the Pricing
      Memorandum, and (ii) since the respective dates as of which information is
      given
      in the Pricing Memorandum, there shall not have been any change in the capital
      stock (other than changes resulting from 

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    the
      exercise of options or the conversion of warrants or capital stock which were
      outstanding as of such date, or from the exercise of options granted after
      such
      date in the ordinary course of business or from repurchases of capital stock)
      or
      long-term debt of any of the Issuer, the Company or any of its Significant
      Subsidiaries or any change, or any development involving a prospective change,
      in or affecting the general affairs, management, financial position,
      stockholders’ equity or results of operations of any of the Issuer, the Company
      and its Significant Subsidiaries, taken as a whole, otherwise than as set forth
      or contemplated in the Pricing Memorandum, the effect of which, in any such
      case
      described in clause (i) or (ii), is in your judgment so material and adverse
      as
      to make it impractical or inadvisable to proceed with the offering or the
      delivery of the Issuer Preferred Securities on the terms and in the manner
      contemplated in this Agreement and in the Offering Memorandum;

     

    (n)  At
      the
      Time of Delivery, the Issuer Preferred Securities shall be rated at least “Baa2”
by Moody’s , “BBB” by S&P, “A-” by Fitch and “bbb” by A.M. Best and each
      such rating agency shall have delivered to the Manager a letter dated as of
      the
      Time of Delivery, or other evidence satisfactory to the Manager, confirming
      that
      the Issuer Preferred Securities have such ratings; and on or after the
      Applicable Time (i) no downgrading shall have occurred in the rating accorded
      the Issuer Preferred Securities or debt securities or preference shares of
      any
      of the Issuer, the Company or its Significant Subsidiaries or any such entity’s
      financial strength or claims paying ability by any “nationally recognized
      statistical rating organization”, as that term is defined by the Commission for
      purposes of Rule 436(g)(2) under the Securities Act, and (ii) no such
      organization shall have publicly announced that it has under surveillance or
      review, with possible negative implications, its rating of the Issuer Preferred
      Securities, the XL Preferred Securities, the Company or its Significant
      Subsidiaries or any such entity’s debt securities or claims paying
      ability;

     

    (o)  On
      or
      after the date of the Applicable Time there shall not have occurred any of
      the
      following: (i) a suspension or material limitation in trading in securities
      generally on the New York Stock Exchange (the “Exchange”);
      (ii) a suspension or material limitation in trading in the Company’s
      securities on the Exchange; (iii) a general moratorium on commercial
      banking activities in New York, London, the Cayman Islands or Bermuda declared
      by the relevant authority or a material disruption in commercial banking or
      securities settlement or clearance services in the United States, Belgium,
      Luxembourg or any other relevant jurisdiction; (iv) the outbreak or escalation
      of hostilities involving the United States, any member state of the European
      Union, the Cayman Islands or Bermuda or the declaration by the United States,
      any member state of the European Union, the Cayman Islands or Bermuda of a
      national emergency or war, if the effect of any such event specified in this
      clause (iv) in your judgment is so material and adverse as to make it
      impractical or inadvisable to proceed with the offering or the delivery of
      the
      Issuer Preferred Securities being delivered at the Time of Delivery on the
      terms
      and in the manner contemplated in the Offering Memorandum; (v) a change or
      development involving a prospective change in the Cayman Islands, Bermuda or
      United Kingdom taxation affecting the Company, the Issuer Preferred Securities,
      the XL Preferred Securities or the transfer thereof or the imposition of
      exchange controls by the United States, Bermuda or the Cayman Islands; or (vi)
      the occurrence of any other calamity or crisis or any change in financial,
      political or economic conditions in the United States or currency exchange
      rates
      or controls in the United States, the United Kingdom, the Cayman Islands,
      Bermuda or elsewhere, if the effect of any such event specified in this clause
      (vi) in your judgment is so material and adverse as to make it

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    impractical
      or inadvisable to proceed with the offering or the delivery of the Issuer
      Preferred Securities being delivered at the Time of Delivery on the terms and
      in
      the manner contemplated in the Offering Memorandum;

     

    (p)  Each
      of
      the Company and the Issuer shall have furnished or caused to be furnished to
      you
      at the Time of Delivery certificates of officers of the Company and the Issuer,
      respectively, satisfactory to you as to the accuracy of the representations
      and
      warranties of the Company and the Issuer herein at and as of the Time of
      Delivery, as to the performance by the Company and the Issuer of all of their
      respective obligations hereunder to be performed at or prior to the Time of
      Delivery, as to the matters set forth in subsections (m) and (n) of this Section
      and as to such other matters as you may reasonably request;

     

    (q)  All
      documentation with respect to the Transactions shall be in form and substance
      reasonably satisfactory to the Manager, and all of such Transactions shall
      have
      been consummated, or shall be consummated simultaneously with the sale of the
      Issuer Preferred Securities hereunder, that in the reasonable judgment of the
      Manager all of the transactions described in the Offering Memorandum shall
      have
      been consummated by and as of the Time of Delivery in form and substance
      reasonably satisfactory to the Manager;

     

    (r)  All
      consents, approvals, authorizations, orders, filings, registrations or
      qualifications of or with any Governmental Agency (including those listed on
      Schedule III) shall have been made or obtained and be in full force and effect
      by and as of the Time of Delivery; and

     

    (s)  The
      Company and the Issuer shall have furnished to the Manager such further
      information, certificates and documents as the Manager may reasonably request
      to
      evidence compliance with the conditions set forth in this Section 9 and all
      proceedings taken by the Company and the Issuer,
      if any,
      shall be reasonably satisfactory to the Manager and its counsel.

     

    10.  (a)The
      Company and the Issuer will, jointly and severally, indemnify and hold harmless
      the Manager against any losses, claims, damages or liabilities to which the
      Manager may become subject, under the Securities Act or otherwise, insofar
      as
      such losses, claims, damages or liabilities (or actions in respect thereof)
      arise out of or are based upon an untrue statement or alleged untrue statement
      of a material fact contained in any Preliminary Offering Memorandum, the Pricing
      Memorandum, the Offering Memorandum, or any amendment or supplement thereto,
      any
      Company Supplemental Disclosure Document, or arise out of or are based upon
      the
      omission or alleged omission to state therein a material fact or necessary
      to
      make the statements therein, in light of the circumstances under which they
      were
      made, not misleading and will reimburse the Manager for expenses reasonably
      incurred by the Manager in connection with investigating or defending any such
      action or claim as such expenses are incurred, including the reasonable fees
      and
      expenses of one counsel (in addition to any applicable local counsel);
provided,
      however,
      that the
      Company and the Issuer shall not be liable in any such case to the extent that
      any such loss, claim, damage or liability arises out of or is based upon an
      untrue statement or alleged untrue statement or omission or alleged omission
      made in any Preliminary Offering Memorandum, the Pricing Memorandum, the
      Offering Memorandum or any such amendment or supplement thereto, or any Company
      Supplemental Disclosure Document, in reliance 

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

    upon
      and
      in conformity with written information furnished to the Company by the Manager
      expressly for use therein.

     

    (b)  The
      Manager will indemnify and hold harmless the Company and the Issuer against
      any
      losses, claims, damages or liabilities to which the Company or the Issuer may
      become subject, under the Securities Act or otherwise, insofar as such losses,
      claims, damages or liabilities (or actions in respect thereof) arise out of
      or
      are based upon an untrue statement or alleged untrue statement of a material
      fact contained in any Preliminary Offering Memorandum, the Pricing Memorandum,
      the Offering Memorandum, or any amendment or supplement thereto, or any Company
      Supplemental Disclosure Document, or arise out of or are based upon the omission
      or alleged omission to state therein a material fact necessary to make the
      statements therein, in light of the circumstances under which they were made,
      not misleading, in each case to the extent, but only to the extent, that such
      untrue statement or alleged untrue statement or omission or alleged omission
      was
      made in any Preliminary Offering Memorandum, the Pricing Memorandum, the
      Offering Memorandum or any such amendment or supplement thereto, or any Company
      Supplemental Disclosure Document in reliance upon and in conformity with written
      information furnished to the Company or the Issuer by the Manager expressly
      for
      use therein; and will reimburse the Company and the Issuer for any legal or
      other expenses reasonably incurred by the Company or the Issuer in connection
      with investigating or defending any such action or claim as such expenses are
      incurred, including the reasonable fees and expenses of one counsel (in addition
      to any applicable local counsel). 

     

    (c)  Promptly
      after receipt by an indemnified party under subsection (a) or (b) above of
      notice of the commencement of any action, such indemnified party shall, if
      a
      claim in respect thereof is to be made against the indemnifying party under
      such
      subsection, notify the indemnifying party in writing of the commencement
      thereof; but the omission so to notify the indemnifying party shall not relieve
      it from any liability which it may have to any indemnified party otherwise
      than
      under such subsection. In case any such action shall be brought against any
      indemnified party and it shall notify the indemnifying party of the commencement
      thereof, the indemnifying party shall be entitled to participate therein and,
      to
      the extent that it shall wish, jointly with any other indemnifying party
      similarly notified, to assume the defense thereof, with counsel satisfactory
      to
      such indemnified party (who shall not, except with the consent of the
      indemnified party, be counsel to the indemnifying party), and, after notice
      from
      the indemnifying party to such indemnified party of its election so to assume
      the defense thereof, the indemnifying party shall not be liable to such
      indemnified party under such subsection for any legal expenses of other counsel
      or any other expenses, in each case subsequently incurred by such indemnified
      party, in connection with the defense thereof other than reasonable costs of
      investigation. Notwithstanding the indemnifying party’s election to appoint
      counsel to represent the indemnified party in an action, the indemnified party
      shall have the right to employ separate counsel (including local counsel),
      and
      the indemnifying party shall bear the reasonable fees, costs and expenses of
      such separate counsel if (i) the use of counsel chosen by the indemnifying
      party
      to represent the indemnified party 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 party and the indemnifying party, and the
      indemnified party shall have reasonably concluded that there may be legal
      defenses available to it and/or other indemnified parties which are different
      from or additional to those available to the indemnifying party; (iii) the
      indemnifying party shall not have employed counsel 

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    satisfactory
      to the indemnified party to represent the indemnified party within a reasonable
      time after notice of the institution of such action, or (iv) the indemnifying
      party shall authorize the indemnified party to employ separate counsel at the
      expense of the indemnifying party. No indemnifying party shall, without the
      written consent of the indemnified party, effect the settlement or compromise
      of, or consent to the entry of any judgment with respect to, any pending or
      threatened action or claim in respect of which indemnification or contribution
      may be sought hereunder (whether or not the indemnified party is an actual
      or
      potential party to such action or claim) unless such settlement, compromise
      or
      judgment (i) includes an unconditional release of the indemnified party from
      all
      liability arising out of such action or claim and (ii) does not include a
      statement as to, or an admission of, fault, culpability or a failure to act,
      by
      or on behalf of any indemnified party.

     

    (d)  If
      the
      indemnification provided for in this Section 10 is unavailable to or
      insufficient to hold harmless an indemnified party under subsection (a) or
      (b)
      above in respect of any losses, claims, damages or liabilities (or actions
      in
      respect thereof) referred to therein, then each indemnifying party shall
      contribute to the amount paid or payable by such indemnified party as a result
      of such losses, claims, damages or liabilities (or actions in respect thereof)
      in such proportion as is appropriate to reflect the relative benefits received
      by the Company and the Issuer on the one hand and the Manager on the other
      from
      the offering of the Issuer Preferred Securities. If, however, the allocation
      provided by the immediately preceding sentence is not permitted by applicable
      law or if the indemnified party failed to give the notice required under
      subsection (c) above, then each indemnifying party shall contribute to such
      amount paid or payable by such indemnified party in such proportion as is
      appropriate to reflect not only such relative benefits but also the relative
      fault of the Company and the Issuer on the one hand and the Manager on the
      other
      in connection with the statements or omissions which resulted in such losses,
      claims, damages or liabilities (or actions in respect thereof), as well as
      any
      other relevant equitable considerations. The relative benefits received by
      the
      Company and the Issuer on the one hand and the Manager on the other shall be
      deemed to be in the same respective proportions as the total net proceeds from
      the offering of the Issuer Preferred Securities pursuant to this Agreement
      (before deducting expenses) received by the Company and the Issuer bear to
      the
      total underwriting discounts and commissions received by the Manager, in each
      case as set forth in the Offering Memorandum. The relative fault 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 information supplied by the Company or the Issuer
      on
      the one hand or the Manager on the other and the parties' relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      statement or omission. The Company, the Issuer and the Manager agree that it
      would not be just and equitable if contribution pursuant to this subsection
      (d)
      were determined by pro rata allocation or by any other method of allocation
      which does not take account of the equitable considerations referred to above
      in
      this subsection (d). The amount paid or payable by an indemnified party as
      a
      result of the losses, claims, damages or liabilities (or actions in respect
      thereof) referred to above in this subsection (d) shall be deemed to include
      any
      legal or other expenses reasonably incurred by such indemnified party in
      connection with investigating or defending any such action or claim.
      Notwithstanding the provisions of this subsection (d), the Manager shall not
      be
      required to contribute any amount in excess of the amount by which the total
      price at which the Issuer Preferred Securities underwritten by it and
      distributed to investors were offered to investors exceeds the amount of any
      damages which the Manager has otherwise been 

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

    required
      to pay by reason of such untrue or alleged untrue statement or omission or
      alleged omission.

     

    (e)  The
      obligations of the Company and the Issuer under this Section 10 shall be in
      addition to any liability which the Company and the Issuer may otherwise have
      and shall extend, upon the same terms and conditions, to each person, if any,
      who controls the Manager within the meaning of the Securities Act; and the
      obligations of the Manager under this Section 10 shall be in addition to any
      liability which the Manager may otherwise have and shall extend, upon the same
      terms and conditions, to each officer and director of the Company and
      the
      Issuer and
      to
      each person, if any, who controls the Company and the Issuer within the meaning
      of the Securities Act.

     

    11.  The
      respective indemnities, agreements, representations, warranties and other
      statements of the Company, the Issuer and the Manager, as set forth in this
      Agreement or made by or on behalf of them, respectively, pursuant to this
      Agreement, shall remain in full force and effect, regardless of any
      investigation (or any statement as to the results thereof) made by or on behalf
      of the Manager or any controlling person of the Manager, or the Company, or
      any
      officer or director or controlling person of the Company, the Issuer, or any
      officer or director or controlling person of the Issuer, and shall survive
      delivery of and payment for the Issuer Preferred Securities.

     

    12.  If,
      for
      any reason other than a default of the Manager, the Issuer Preferred Securities
      are not delivered by or on behalf of the Issuer as provided herein, the Company
      and the Issuer will, jointly and severally, reimburse the Manager for all
      out-of-pocket expenses, including reasonable fees and disbursements of counsel,
      reasonably incurred by the Manager in making preparations for the purchase,
      sale
      and delivery of the Issuer Preferred Securities not so delivered, but the
      Company shall then be under no further liability to the Manager except as
      provided in Sections 8, 10 and 22 hereof.

     

    13.  All
      statements, requests, notices and agreements hereunder shall be in writing,
      and
      if to:

     

    (a)  the
      Manager shall be delivered or sent by mail, telex or facsimile transmission
      to
      the address set forth below (or such other address as the Manager may give
      notice to the parties hereto):

     

    
      	
              Goldman
                Sachs International

            
	
              Peterborough
                Court

            
	
              133
                Fleet Street

            
	
              London
                EC4A 2BB, England

            
	
              Attention:
                IBD Legal

            
	
              (telecopier
                no. 44-(20)-7774-4123);

            

    

     

     

    (b)    
      the Company shall be delivered or sent by mail, telex or facsimile transmission
      to the address set forth below (or such other address as the Company may give
      notice to the parties hereto):

     

    
      	
              XL
                Capital Ltd

            
	
              XL
                House

            
	
              One
                Bermudiana Road

            

    

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

    

    
      	
              Hamilton,
                Bermuda

            
	
              Attention:
                General Counsel Corporate Affairs

            
	
              (telecopier
                no. 441-296-4867); and

            

    

     

    (c)    
      the Issuer shall be delivered or sent by mail, telex or facsimile transmission
      to the address set forth below (or such other address as the Issuer may give
      notice to the parties hereto):

     

    
      	
              Stoneheath
                Re

            
	
              c/o
                HSBC Financial Services (Cayman) Limited

            
	
              Strathvale
                House, North Church Street

            
	
              P.O.
                Box 1109

            
	
              Georgetown

            
	
              Grand
                Cayman KY1-1102

            
	
              Cayman
                Islands

            
	
              Attention:
                The Directors

            
	
              (telecopier
                no. 345-949-7634).

            

    

    

    Any
      such
      statements, requests, notices or agreements shall take effect upon receipt
      thereof.

     

    14.    
      This Agreement shall be binding upon, and inure solely to the benefit of, the
      Manager, the Company, the Issuer and, to the extent provided in Section 10
      hereof, the officers and directors of the Company, the Issuer or the Manager
      and
      each person who controls the Company, the Issuer or the Manager, and their
      respective heirs, executors, administrators, successors and assigns, and no
      other person shall acquire or have any right under or by virtue of this
      Agreement. No purchaser of any of the Issuer Preferred Securities from the
      Manager shall be deemed a successor or assign by reason merely of such
      purchase.

     

    15.  Each
      of
      the Company and the Issuer irrevocably (i) agrees that any legal suit, action
      or
      proceeding against the Company or the Issuer brought by the Manager or by any
      person who controls the Manager arising out of or based upon this Agreement
      or
      the transactions contemplated hereby may be instituted in the federal district
      court for the Southern District of New York and the New York County Court,
      (ii)
      waives, to the fullest extent it may effectively do so, any objection which
      it
      may now or hereafter have to the laying of venue of any such proceeding and
      (iii) submits to the exclusive jurisdiction of such courts in any such suit,
      action or proceeding. Each of the Company and the Issuer has appointed CT
      Corporation System, New York, New York, as its authorized agent (the
“Authorized
      Agent”)
      upon
      whom process may be served in any such action arising out of or based on this
      Agreement or the transactions contemplated hereby which may be instituted in
      the
      federal district court for the Southern District of New York and the New York
      County Court by the Manager or by any person who controls the Manager, expressly
      consents to the jurisdiction of any such court in respect of any such action,
      and waives any other requirements of or objections to personal jurisdiction
      with
      respect thereto. Such appointment shall be irrevocable. Each of the Company
      and
      the Issuer represents and warrants that the Authorized Agent has agreed to
      act
      as such agent for service of process and agrees to take any and all action,
      including the filing of any and all documents and instruments, that may be
      necessary to continue such appointment in full force and effect as aforesaid.
      Service of process upon the Authorized Agent and written notice of such service
      to the Company or the Issuer 

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

    shall
      be
      deemed, in every respect, effective service of process upon the Company or
      the
      Issuer.

     

    16.  Time
      shall
      be of the essence in this Agreement. As used herein, the term “business day”
shall mean any London Business Day. “London Business Day” shall mean each
      Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
      banking institutions in London are generally authorized or obligated by law
      or
      executive order to close.

     

    17.  Each
      of
      the Company and the Issuer acknowledges and agrees that (i) the purchase and
      sale of the Issuer Preferred Securities pursuant to this Agreement is an
      arm's-length commercial transaction between the Company and the Issuer, on
      the
      one hand, and the Manager, on the other, (ii) in connection therewith and with
      the process leading to such transaction the Manager is acting solely as a
      principal and not as the agent or fiduciary of the Company or the Issuer, (iii)
      the Manager has not assumed an advisory or fiduciary responsibility in favor
      of
      the Company or the Issuer with respect to the offering contemplated hereby
      or the process leading thereto (irrespective of whether the Manager has
      advised or is currently advising the Company or the Issuer on other matters)
      or
      any other obligation to the Company or the Issuer except the obligations
      expressly set forth in this Agreement and (iv) each of the Company and the
      Issuer has consulted its own legal and financial advisors to the extent it
      deemed appropriate.  Each of the Company and the Issuer agrees that it will
      not claim that the Manager has rendered advisory services of any nature or
      respect, or owes a fiduciary or similar duty to the Company or the Issuer,
      in
      connection with such transaction or the process leading
      thereto.

     

    18.  This
      Agreement supersedes all prior agreements and understandings (whether written
      or
      oral) among the Company, the Issuer and the Manager, or any of them, with
      respect to the subject matter hereof.

     

    19.  This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York.

     

    20.  Each
      of
      the Company, the Issuer and the Manager hereby irrevocably waives, to the
      fullest extent permitted by applicable law, any and all right to trial by jury
      in any legal proceeding arising out of or relating to this Agreement or the
      transactions contemplated hereby.

     

    21.  This
      Agreement may be executed by any one or more of the parties hereto in any number
      of counterparts, each of which shall be deemed to be an original, but all such
      respective counterparts shall together constitute one and the same
      instrument.

     

    22.  In
      respect
      of any judgment or order given or made for any amount due hereunder that is
      expressed and paid in a currency (the “judgment
      currency”)
      other
      than United States dollars, the Company and the Issuer will, jointly and
      severally, indemnify the Manager against any loss incurred by such Manager
      as a
      result of any variation between (i) the rate of exchange at which the United
      States dollar amount is converted into the judgment currency for the purpose
      of
      such judgment or order and (ii) the rate of exchange at which the Manager is
      able to purchase United States dollars with the amount of judgment currency
      actually received by the Manager. The foregoing 

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

    indemnity
      shall constitute a separate and independent obligation of the Company and the
      Issuer and shall continue in full force and effect notwithstanding any such
      judgment or order as aforesaid. The term “rate
      of
      exchange”
shall
      include any premiums and costs of exchange payable in connection with the
      purchase of or conversion into United States dollars.

     

    23.  All
      obligations of and any claims against the Issuer under this Agreement shall
      be
      with recourse solely to the Issuer’s assets (other than its ordinary share
      capital of U.S.$5,000, the amount equal to U.S.$1,500 paid to the Issuer as
      a
      transaction fee, any interest income earned on such excluded amounts and the
      Cayman Islands bank account in which such amounts are held). The provisions
      of
      this Section 23 shall survive the termination of this Agreement.

     

    24.  Notwithstanding
      anything to the contrary in this Agreement, all obligations of and any claims
      against the Issuer under this Agreement shall be extinguished and shall not
      thereafter revive in the event that, at any time, the Issuer’s assets (other
      than its ordinary share capital of U.S.$5,000, the amount equal to U.S.$1,500
      paid to the Issuer as a transaction fee, any interest income earned on such
      excluded amounts and the Cayman bank account in which such amounts are held)
      are
      exhausted. The Manager shall have no further claim thereafter against the
      Issuer, its directors, officers or shareholders for any shortfall. The Manager
      shall only have recourse to the Issuer’s assets (other than its ordinary share
      capital of U.S.$5,000, the amount equal to U.S.$1,500 paid to the Issuer as
      a
      transaction fee, any interest income earned on such excluded amounts and the
      Cayman Islands bank account in which such amounts are held) for satisfaction
      of
      the Issuer’s obligations hereunder. The provisions of this Section 24 shall
      survive the termination of this Agreement.

     

    25.  The
      Manager, by entering into this Agreement, hereby covenants and agrees that
      it
      will not at any time institute against the Issuer, or join in any institution
      against the Issuer, of any bankruptcy, reorganization, arrangement, insolvency
      or liquidation proceedings, or other proceedings under any federal, state or
      foreign bankruptcy or similar law in connection with any obligations hereunder.
      The provisions of this Section 25 shall survive the termination of this
      Agreement.

     

    

     

    [Remainder
      of Page Intentionally Left Blank; Signature Page Follows]

     

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

    

     

    If
      the
      foregoing is in accordance with your understanding, please sign and return
      to us
      one for each of the Company, the Issuer and the Manager plus one for each
      counsel counterparts hereof, and upon the acceptance hereof by you, on behalf
      of
      the Manager, this letter and such acceptance hereof shall constitute a binding
      agreement among the Manager, the Company and the Issuer.

     

    Very
      truly
      yours,

    

    

    XL
      Capital
      Ltd

    

    

    By:
      /s/
      Kirstin R. Gould    

    Name:
      Kirstin R. Gould

    Title:
      EVP, General Counsel - 

    Corporate
      Affairs, Secretary

    

    

    Stoneheath
      Re

    

    

    By:
      /s/
      Linda Haddleton    

    Name:
      Linda Haddleton

    Title:
      Director

    

    

    Accepted
      as of the date hereof:

     

    Goldman
      Sachs International

     

     

    By:
      /s/
      Tim
      Grayson    

    Name:
      Tim
      Grayson

    Title:
      Attorney-in-Fact

     

    

     

    

    

    
      
        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      I

     

    (a)  Additional
      Documents Incorporated by Reference:

     

    Current
      Report on Form 8-K filed by the Company on December 5, 2006

     

    (b)  Approved
      Supplemental Disclosure Documents:

     

    Bloomberg
      roadshow

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      II

     

     

    Terms
      are
      used in this Schedule II with the meanings assigned to them in the Preliminary
      Offering Memorandum dated November 27, 2006.

     

    
      	
              Issuer
                Preferred Securities

            	 
	 	 
	
              Number
                of

            	 
	
              Issuer
                Preferred Securities Offered:

            	
              350,000

            
	 	 
	
              Aggregate
                Liquidation Preference of

            	 
	
              Issuer
                Preferred Securities:

            	
              U.S. $350,000,000

            
	 	 
	
              Gross
                Proceeds from Offering of

            	 
	
              Issuer
                Preferred Securities:

            	
              U.S. $350,000,000

            
	 	 
	
              Fixed
                Rate for Dividends on

            	 
	
              Issuer
                Preferred Securities:

            	
              6.868%

            
	 	 
	
              Floating
                Rate for Dividends on

            	 
	
              Issuer
                Preferred Securities:

            	
              Three-Month
                LIBOR plus 3.120%

            
	 	 
	
              XL
                Preferred Securities and

            	 
	
              Securities
                Issuance Agreement

            	 
	 	 
	
              Aggregate
                Liquidation Preference of

            	 
	
              XL
                Preferred Securities Issuable under

            	 
	
              Securities
                Issuance Agreement:

            	
              U.S. $350,000,000

            
	 	 
	
              Fixed
                Rate for Dividends on

            	 
	
              XL
                Preferred Securities:

            	
              6.868%

            
	 	 
	
              Floating
                Rate for Dividends on

            	 
	
              XL
                Preferred Securities:

            	
              Three-Month-LIBOR
                plus 3.120%

            
	 	 
	
              Discount
                Rate for Calculating

            	 
	
              Make-Whole-Amount
                for Each Redemption:

            	
              Treasury
                Rate plus 50 Basis Points

            
	 	 
	
              Approval
                Date for Specific Terms of

            	 
	
              XL
                Preferred Securities:

            	
              December
                5, 2006

            
	 	 
	
              Reinsurance
                Agreement

            	 
	
              Policy
                Aggregate Limit:

            	
              U.S. $350,000,000

            
	 	 
	
              Initial
                Aggregate Retention Amount:

            	
              U.S. $350,000,000

            
	 	 
	
              Reinsurance
                Premium:

            	
              2.320%
                during the Reinsurance Premium 

            
	 	
              Payment
                Period and 3.170% during any

            
	 	 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	 	
              Extended
                Reinsurance Premium Payment

            
	 	
              Period

            
	 	 
	
              Interest
                Rate Swap Agreement

            	 
	 	 
	
              Rate
                for Calculating Fixed Rate Payments:

            	
              4.551%

            
	 	 
	
              Trust
                Agreement and Trust Account

            	 
	 	 
	
              Maximum
                Funds Available for Distribution

            	 
	
              to
                Ceding Insurers:

            	
              U.S.
                $350,000,000

            
	 	 
	
              Maximum
                Funds Available for Distribution

            	 
	
              to
                XLIB:

            	
              U.S.
                $350,000,000

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    SCHEDULE
      III

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      I

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      II

     

    CAHILL
      GORDON & REINDEL LLP FORM OF OPINION

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      III

     

    CADWALADER,
      WICKERSHAM & TAFT LLP FORM OF OPINION

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      IV

     

    CADWALADER,
      WICKERSHAM & TAFT LLP FORM OF OPINION

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      V

     

    APPLEBY
      HUNTER BAILHACHE FORM OF OPINION

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      VI

     

    APPLEBY
      HUNTER BAILHACHE FORM OF OPINION

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      VII

     

    MAPLES
      AND CALDER FORM OF OPINION

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      VIII

     

    SLAUGHTER
      AND MAY FORM OF OPINION

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      IX

     

     

    XL
      CAPITAL LTD FORM OF OPINION

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      X

     

     

    IXIS
      FORM OF OPINION

     

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      XI

     

     

    FORM
      OF
      MANAGEMENT COMFORT LETTER

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