AMENDMENT NO. 1 TO MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT

EXHIBIT 4.2

AMENDMENT NO. 1 TO MASTER COMMUTATION, RELEASE AND
RESTRUCTURING AGREEMENT

      AMENDMENT NO. 1 dated as of August 1, 2008 (this “ Amendment No. 1 ”) among XL CAPITAL LTD, an exempted limited company incorporated under the Laws of Cayman Islands, XL INSURANCE (BERMUDA) LTD (formerly known as X.L. Insurance Ltd), a Bermuda exempted company, XL REINSURANCE AMERICA INC., a New York insurance corporation, X.L. GLOBAL SERVICES, INC., a service company incorporated under the Laws of Delaware, XL SERVICES (BERMUDA) LTD, a service company incorporated under the Laws of Bermuda, X.L. AMERICA, INC., a company incorporated under the Laws of Delaware, SECURITY CAPITAL ASSURANCE LTD, a Bermuda exempted company, XL FINANCIAL ASSURANCE LTD., a Bermuda exempted company, XL CAPITAL ASSURANCE INC., a New York insurance company, XL FINANCIAL ADMINISTRATIVE SERVICES INC., a company incorporated under the Laws of Delaware, SCA BERMUDA ADMINISTRATIVE LTD., a company incorporated under the Laws of Bermuda, XL CAPITAL ASSURANCE (U.K.) LIMITED, an insurance company regulated by the Financial Services Authority and incorporated under the Laws of England and Wales, and those portfolio trusts that are Affiliates of XLCA and become a Party to the Master Agreement from time to time pursuant to the execution of a joinder agreement.

      WHEREAS, on July 28, 2008, the parties hereto (the “ Parties ”) entered into a certain Master Commutation, Release and Restructuring Agreement (the “ Master Agreement ”);

      WHEREAS, the Parties wish to reallocate the Stock Consideration and the Cash Consideration Amount pursuant to Schedule 2.01 ; and

      WHEREAS, the Parties wish to take such actions necessary to give effect to such reallocation;

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

      Section 1. Definitions. Capitalized terms not otherwise defined in this Amendment No. 1 shall have the meanings ascribed to them in the Master Agreement.

      Section 2. Amendments. Articles I and II, Exhibits 1.01(e) , 1.01(f) , 1.01(g) , and 1.01(h) and Schedules 2.01 , 2.06(a) and 2.06(b) of the Master Agreement are hereby amended as follows:

      2.1 The definition of “Subscription Agreement” in Section 1.01 of the Master Agreement will be stricken and deleted in its entirety and replaced with the following text:

           “ Subscription Agreements ” means the subscription agreement to be executed by XLFA and XL and delivered at the Closing, in the form of Exhibit 1.01(g-1) , and the subscription agreement to be executed by XLCA and XL and delivered at the Closing in the form of Exhibit 1.01(g-2) .

      2.2 Section 2.08(ii) of the Master Agreement will be stricken and deleted in its entirety and replaced with the following text:

           the Subscription Agreements executed by each SCA Party which is a party thereto;

      2.3 Section 2.09(iii) of the Master Agreement will be stricken and deleted in its entirety and replaced with the following text:

           the Subscription Agreements executed by each XL Party which is a party thereto;

      2.4 The contents of Exhibit 1.01(e) to the Master Agreement shall be stricken and deleted in their entirety and replaced with the contents of Exhibit 1.01(e-1) attached hereto.

      2.5 The contents of Exhibit 1.01(f) to the Master Agreement shall be stricken and deleted in their entirety and replaced with the contents of Exhibit 1.01(f-1) attached hereto.

      2.6 The contents of Exhibit 1.01(g) to the Master Agreement shall be stricken and deleted in their entirety and replaced with the contents of Exhibits 1.01(g-1) attached hereto.

      2.7 The contents of Exhibit 1.01(g-2) attached hereto will be added as Exhibit 1.01(g-2) to the Master Agreement.

      2.8 The contents of Exhibit 1.01(h) to the Master Agreement shall be stricken and deleted in their entirety and replaced with Exhibits 1.01(h-1) attached hereto.

      2.9 The contents of Schedule 2.01 to the Master Agreement shall be stricken and deleted in their entirety and replaced with the contents of Schedule 2.01-1 attached hereto.

      2.10 The contents of Schedule 2.06(a) to the Master Agreement shall be stricken and deleted in their entirety and replaced with the contents of Schedule 2.06(a)-1 attached hereto.

      2.11 The contents of Schedule 2.06(b) to the Master Agreement shall be stricken and deleted in their entirety and replaced with the contents of Schedule 2.06(b)-1 attached hereto.

      Section 3. Miscellaneous .

      3.1 This Amendment No. 1 may be executed and delivered in multiple counterparts, each of which, when so executed and delivered, shall be an original, but such counterparts shall together constitute but one and the same instrument and agreement. A facsimile or Portable Document Format copy of a signature shall have the same force and effect as an original signature.

      3.2 This Amendment No. 1 is to be interpreted under and governed by the Laws of the State of New York without giving effect to conflicts of law provisions thereof. In the event that there is a dispute between or among the Parties arising under this Amendment No. 1, the Parties (i) agree that the exclusive forum to seek remedy shall be to institute a legal proceeding in the courts of the State of New York located in the City and County of New York, (ii) hereby expressly submit to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waive any claim of lack of personal jurisdiction and improper venue and any claim that such courts are an inconvenient forum and (iii) agree that the prevailing Parties shall be entitled to recover their reasonable attorneys’ fees, costs and disbursements from the other Parties (in addition to any other relief to which the prevailing Parties may be entitled). Each Party hereby irrevo cably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the address provided to the Parties in accordance with Section 9.02, of the Master Agreement, such service to become effective ten (10) days after such mailing.

      3.3 Each of the Parties hereby waives to the fullest extent permitted by applicable Law any right it may have to a trial by jury with respect to any litigation directly or indirectly arising out of, under, or in connection with this Amendment No. 1. Each of the Parties hereby (i) certifies that no representative, agent or attorney of any other Party has represented, expressly or otherwise, that such other Party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it has been induced to enter into this Amendment No. 1 by, among other things, the mutual waivers and certifications in this Section 3.3 .

      3.4 Each Party has had the opportunity to negotiate the terms, consult with counsel, and modify the provisions of this Amendment No. 1. Therefore, the terms of this Amendment No. 1 will be considered and interpreted without any presumption, inference or rule requiring construction or interpretation of any provision of this Amendment No. 1 against the interests of the drafter of this Amendment No. 1.

[Signature Page to Follow]

      IN WITNESS HEREOF, the Parties have caused this Amendment No. 1 to be duly executed and delivered as of the day and year first written above.

XL CAPITAL LTD
By:	/s/ Fiona Luck
	Name: Fiona Luck
	Title: Executive Vice President and Chief of Staff

 

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

XL INSURANCE (BERMUDA) LTD
By:	/s/ Fiona Luck
	Name: Fiona Luck
	Title: Director

 

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

XL REINSURANCE AMERICA INC.
By:	/s/ Steven P. Agosta
	Name: Steven P. Agosta
	Title: Vice President, General Counsel and Secretary

 

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

X.L. GLOBAL SERVICES, INC.
By:	/s/ Kenneth P. Meagher
	Name: Kenneth P. Meagher
	Title: Assistant Secretary

 

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

XL SERVICES (BERMUDA) LTD
By:	Fiona Luck
	Name: /s/ Fiona Luck
	Title: Deputy Chairman

 

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

X.L. AMERICA, INC.
By:	/s/ Richard G. McCarty
	Name: Richard G. McCarty
	Title: Senior Vice President, General Counsel and Secretary

 

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

SECURITY CAPITAL ASSURANCE LTD
By:	/s/ Claude Le Blanc
	Name: Claude Le Blanc
	Title: EVP

 

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

XL FINANCIAL ASSURANCE LTD.
By:	/s/ Tom Cume
	Name: Tom Cume
	Title: SVP

 

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

XL CAPITAL ASSURANCE INC.
By:	/s/ Susan Comparato
	Name: Susan Comparato
	Title: SVP & General Counsel

 

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

XL FINANCIAL ADMINISTRATIVE
SERVICES INC.
By:	/s/ Susan Comparato
	Name: Susan Comparato
	Title: Managing Director & Secretary

 

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

SCA BERMUDA ADMINISTRATIVE LTD.
By:	/s/ Tom Cume
	Name: Tom Cume
	Title: SVP

 

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

XL CAPITAL ASSURANCE (U.K.) LIMITED
By:	/s/ Fredrick B. Hnat
	Name: Fredrick B. Hnat
	Title: Managing Director & Chief Operating Officer

 

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

[INSERT SIGNATURE PAGES FOR EACH PORTFOLIO TRUST THAT CORRESPONDS
TO THE CDS COUNTERPARTIES THAT ARE SIGNATORIES]

[AMENDMENT NO. 1 TO THE MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

EXHIBIT 1.01(e-1)

FACULTATIVE MASTER CERTIFICATE COMMUTATION AGREEMENT

Exh. 1.01(e-1)

COMMUTATION AND RELEASE AGREEMENT

      This Commutation and Release Agreement (the “ Agreement ”) dated as of August 5, 2008, is made by and between Syncora Guarantee Inc. (formerly known as XL Capital Assurance Inc.), a company domiciled in New York (the “ Company ”) and XL Reinsurance America Inc., a company also domiciled in New York (the “ Reinsurer ”). The Reinsurer and the Company are hereinafter referred to collectively as the “ Parties .”

RECITALS

           WHEREAS , the Parties previously entered into a Facultative Master Certificate effective as of November 1, 2002, which was amended and restated pursuant to the First Amended and Restated Facultative Master Certificate, effective as of August 4, 2006, and which was further amended and restated pursuant to the Second Amended and Restated Facultative Master Certificate, effective as of March 1, 2007, pursuant to which the Reinsurer agreed to reinsure certain liabilities of the Company (together, the “ Reinsurance Agreement ”); and

           WHEREAS , the Parties are parties to that certain Master Commutation, Release and Restructuring Agreement, dated as of July 28, 2008, by and among the Company, the Reinsurer, Security Capital Assurance Ltd and the other parties thereto (the “ Master Transaction Agreement ”), pursuant to which the Company and the Reinsurer have agreed to enter into this Agreement; and

           WHEREAS , the Parties agree that it is in each of their best interests to freely and voluntarily enter into this Agreement and to fully and forever release and discharge each other from their respective existing and future liabilities and obligations, including contingent and uncertain liabilities, both known and unknown, under the Reinsurance Agreement and the individual risk cessions thereunder and to compromise, resolve and settle all amounts due, or which may become due, between each other arising out of, in respect of, or relating to the Reinsurance Agreement and/or the individual risk cessions thereunder; and

           WHEREAS , Company and Reinsurer, or their affiliates, may be parties to agreements other than the Reinsurance Agreement, and it is the intent of the Parties that this Agreement will not have any effect upon such other agreements.

           NOW, THEREFORE , in consideration of the covenants, conditions, promises and releases contained herein, and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

ARTICLE I

PAYMENT

           (a) XL Capital Ltd shall, on behalf of the Reinsurer, issue to the Company Five Million, Seven Hundred and Seventy-Six Thousand, Six Hundred and Twenty-One (5,776,621) of Class A Ordinary Shares of XL Capital Ltd (the “ Commutation Amount ”) on the Closing Date (as such term is defined in the Master Transaction Agreement). The date on which the Commutation Amount is paid and received shall be referred to hereinafter as the “ Effective Date. ”

           (b) The Company shall accept the Commutation Amount in full satisfaction of all of the Reinsurer’s liabilities and obligations under the Reinsurance Agreement and/or the individual risk cessions thereunder.

ARTICLE II

RELEASE

           (a) Upon the Reinsurer’s payment of the Commutation Amount to the Company, the Company, on behalf of itself and its shareholders, parents, affiliates and subsidiaries, and their respective officers, directors, and employees, hereby irrevocably and unconditionally releases and forever discharges the Reinsurer, its parents, subsidiaries and affiliates, and their respective predecessors, successors, assigns, officers, directors, agents, employees, shareholders, representatives, and attorneys from any and all present and future actions, causes of action, suits, debts, liens, contracts, rights, agreements, obligations, promises, liabilities, claims, counterclaims, demands, damages, controversies, losses, costs and expenses (including attorneys’ fees and costs actually incurred) of any kind, character, description or nature whatsoever, known or unknown to either or both Parties, suspected or unsuspected, reported or unreported, fixed or contingent, which the Company now has, owns or holds or claims to have, own, or hold, or at any time heretofore had, owned, or held or claimed to have had, owned, or held, or may hereafter have, own, or hold or claim to have, own, or hold, arising out of conduct or matters occurring on, prior to or subsequent to the Effective Date, against the Reinsurer, arising directly or indirectly out of, based upon, or in any way related to or in connection with the Reinsurance Agreement and/or the individual risk cessions thereunder, whether grounded in law or equity, or sounding in tort or contract or otherwise; provided , however , that the provisions of this Article II(a) shall not discharge obligations of the Reinsurer, which have been undertaken or imposed by the express terms of this Agreement or the Master Transaction Agreement (including the Ancillary Agreements).

           (b) Contemporaneous with the payment of the Commutation Amount to the Company, the Reinsurer, on behalf of itself and its shareholders, parents, affiliates and subsidiaries, and their respective officers, directors and employees, hereby irrevocably and unconditionally releases and forever discharges the Company, its shareholders, parents, subsidiaries and affiliates, and their respective predecessors, successors, assigns, officers, directors, agents, employees, shareholders, representatives, and attorneys from any and all present and future actions, causes of action, suits, debts, liens, contracts, rights, agreements,

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obligations, promises, liabilities, claims, counterclaims, demands, damages, controversies, losses, costs and expenses (including attorneys’ fees and costs actually incurred) of any kind, character, description or nature whatsoever, known or unknown to either or both Parties, suspected or unsuspected, reported or unreported, fixed or contingent, which the Reinsurer now has, owns, holds or claims to have, own, or hold, or at any time heretofore had, owned, or held or claimed to have had, owned, or held, or may hereafter have, own, or hold or claim to have, own, or hold, arising out of conduct or matters occurring on, prior to or subsequent to the Effective Date, against the Company, arising directly or indirectly out of, based upon, or in any way related to or in connection with the Reinsurance Agreement and/or the individual risk cessions thereunder, whether grounded in law or equity or sounding in tort or contract or otherwise; provided , however , that the provisions of this Article II(b) shall not discharge obligations of the Company, which have been undertaken or imposed by the express terms of this Agreement or the Master Transaction Agreement (including the Ancillary Agreements).

           (c) The Parties understand that it is possible that unknown losses or claims may exist, or that present or future losses or claims may be underestimated in amounts or severity. Furthermore, the Parties expressly accept and assume the risk that the factual or legal assumptions made by any Party in connection with this Agreement may be found hereafter to be different from the true facts or law, and the Parties agree that this Agreement shall be and shall remain in full force and effect notwithstanding such differences in facts or law. Each Party expressly takes all of the foregoing into account in determining the amount of consideration to be given and paid for the giving of this Agreement, and a portion of the said consideration, having been bargained for between the Parties with the knowledge of the possibility of such unknown losses and claims, is given in exchange for the full accord, satisfaction and discharge of all such losses and claims.

           (d) Full payment of the Commutation Amount shall be in complete accord, satisfaction, settlement and commutation of any and all past, current and future liabilities and obligations that each Party owes or may owe to the other arising directly or indirectly out of or related to or in connection with the Reinsurance Agreement and/or the individual risk cessions thereunder and that upon payment of the Commutation Amount, the Reinsurance Agreement shall be terminated as of the Effective Date and neither Party shall have any further obligation or liability to the other Party under the Reinsurance Agreement and/or the individual risk cessions thereunder.

ARTICLE III

NON-RELIANCE

           (a) This Agreement fully and finally resolves the rights, duties and obligations of the Company and the Reinsurer under the Reinsurance Agreement, and neither Party shall:

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           (b) The Company and the Reinsurer have voluntarily entered into this Agreement based: (i) upon their own independent assessment of the relevant facts and their rights and obligations under the Reinsurance Agreement and (ii) except as expressly set forth in Article III and Article IV of the Master Transaction Agreement, not upon any representations that were made or disclosures that were made by the other Party, their affiliates, officers, directors, shareholders, employees, representatives, agents, attorneys or their respective heirs, administrators, predecessors, successors and assigns. Each Party acknowledges that it has carefully read, and that it understands the scope and effect of this Agreement and has had a full and fair opportunity to consult with, and seek the advice and recommendations of its attorneys, actuaries and other professional advisors prior to its execution of this Agreement.

           (c) This Agreement and the negotiations and proceedings leading to this Agreement shall not form the basis of any claim by either Party against the other Party or against any officer, director, consultant, professional or shareholder of the other Party, except with respect to an action for enforcement of this Agreement or the Master Transaction Agreement (including the Ancillary Agreements).

ARTICLE IV

EXCLUSIVE BENEFIT OF THE PARTIES
AND BINDING EFFECT

           The rights, duties and obligations set forth herein shall inure to the benefit of and be binding upon the Company and the Reinsurer as they are identified in this Agreement and their parents, subsidiaries and affiliates, and their respective predecessors, successors, assigns, officers, directors, agents, employees, shareholders, representatives, and attorneys and this Agreement is not intended to confer any rights or benefits upon persons or entities other than the foregoing parties.

ARTICLE V

COMPROMISE

           This Agreement sets forth a compromise and shall never at any time for any purpose be considered as an admission of liability or responsibility on the part of any party hereto regarding any aspect of the Reinsurance Agreement. Neither this Agreement nor any of its terms shall be admissible in any action, arbitration, or proceeding other than one to enforce the terms of this Agreement or the Master Transaction Agreement (including the Ancillary Agreements), including, but not limited to, the releases provided in Article II .

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ARTICLE VI

FURTHER ASSURANCES

           The Parties, without further consideration, shall execute and deliver such other documents and take such other action as may be necessary to effect this Agreement.

ARTICLE VII

MISCELLANEOUS

           (a) Should any part, term or provision of this Agreement, except Article I or Article II , be declared or determined to be illegal or invalid pursuant to a final and unappealable order of a court of competent jurisdiction, the validity of the remaining parts, terms and provisions shall not be affected thereby and such illegal or invalid part, term or provision shall be deemed not to be part of this Agreement. If either Article I or Article II is determined by a court of competent jurisdiction or regulatory authority to be unenforceable, either Party, at its option, shall be entitled to rescind this Agreement, and the Reinsurer shall be entitled to repayment of the Commutation Amount immediately upon such rescission. Upon such rescission, the Reinsurance Agreement and all rights, obligations and liabilities of the Parties under the Reinsurance Agreement shall be reinstated as if this Agreement had never been executed. Notwithstanding the foregoing, the releases given pursuant to Article II shall remain in full force and effect as to the Parties’ officers, directors, agents, employees, shareholders, representatives, advisors and attorneys.

           (b) This Agreement and the Master Transaction Agreement (including the Ancillary Agreements) set forth the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements or understanding between them pertaining to the subject matter hereof. A facsimile copy of a signature shall have the same force and effect as an original signature.

           (c) This Agreement may not be amended, altered, supplemented or modified, except by written agreement signed by the Parties.

           (d) This Agreement may be executed and delivered in multiple counterparts, each of which, when so executed and delivered, shall be an original, but such counterparts shall together constitute but one and the same instrument and agreement.

           (e) For purposes of this Agreement, a “ Business Day ” is any day other than a Saturday, Sunday or a public holiday in New York.

           (f) This Agreement shall be governed by and construed in accordance with the laws of New York without regard to principles of conflicts of law or choice of law and the Parties submit to the exclusive jurisdiction of the Supreme Court of the State of New York in respect of all disputes arising out of or in connection with this Agreement.

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           (g) All notices under this Agreement shall be in writing and shall be deemed to be duly given and received (i) upon delivery if delivered by certified mail; or (ii) on the next Business Day if sent by overnight courier (iii) on the date sent by facsimile if sent during the recipient’s normal business hours or, if sent by facsimile outside such hours, on the next Business Day; provided, that such notices are sent to a Party to its Address for Notices set forth on Schedule B hereto or to such other address as either Party may have furnished to the other in writing.

           (h) For all purposes this Agreement shall be deemed to have been drafted jointly by the Parties.

           (i) This Agreement is an agreement solely between the Company and the Reinsurer. No right of action against the Reinsurer shall accrue to any insured, policyholder, or other contracting party of the Company unless granted herein by virtue of this Agreement.

[ Signature Page to follow ]

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           IN WITNESS WHEREOF , the Parties have executed this Agreement by their respective authorized officers as of the day and year first written below.

Dated:__________________________________	SYNCORA GUARANTEE INC.
	FORMERLY KNOWN AS
	XL CAPITAL ASSURANCE INC.
	By:
		Name:
		Title:

 

 

 

[SIGNATURE PAGE – FACULTATIVE MASTER CERTIFICATE COMMUTATION
AGREEMENT]

Dated: ________________________________________	XL REINSURANCE AMERICA INC.
	By:
		Name:
		Title:

 

 

 

 

[SIGNATURE PAGE – FACULTATIVE MASTER CERTIFICATE COMMUTATION
AGREEMENT]

SCHEDULE A

WIRE TRANSFER INSTRUCTIONS

Transfer instructions for remitting funds to Syncora Guarantee Inc. (formerly known as XL Capital Assurance Inc.)

[Intentionally omitted]

 

Please send e-mail / fax containing details of the transfer to:

[Intentionally omitted]

Rebecca O’Connell (VP & Assistant Treasurer) at SCA
Phone: (212) 478-3629
Fax: (212) 478-3587
E-mail: rebecca.oconnell@scafg.com

SCHEDULE B

ADDRESS FOR NOTICE

TO THE COMPANY:

TO THE REINSURER:

EXHIBIT 1.01(f-1)

QUOTA SHARE TREATY COMMUTATION AGREEMENT

Exh. 1.01(f-1)

COMMUTATION AND RELEASE AGREEMENT

           This Commutation and Release Agreement (the “ Agreement ”) dated as of August 5, 2008, is made by and between Syncora Guarantee Inc., a company domiciled in New York formerly known as XL Capital Assurance Inc. (the “ Company ”), and Syncora Guarantee Re Ltd., a company organized in Delaware, formerly domiciled in Bermuda and known as XL Financial Assurance Ltd (the “ Reinsurer ”). The Reinsurer and the Company are hereinafter referred to collectively as the “ Parties .”

RECITALS

           WHEREAS , the Parties previously entered into a Facultative Quota Share Reinsurance Treaty dated as of October 6, 1999 as amended and restated by an Amended and Restated Facultative Quota Share Reinsurance Treaty dated as of June 22, 2001, as further amended and restated by a Second Amended and Restated Facultative Quota Share Reinsurance Treaty dated as of May 1, 2004, and as further amended and restated by a Third Amended and Restated Facultative Quota Share Reinsurance Treaty dated as of June 29, 2006 (together, the “ Reinsurance Agreement ”); and

           WHEREAS , XL Insurance (Bermuda) Ltd, formerly known as XL Insurance Ltd, a company domiciled in Bermuda (“ XLIB ”) guarantees the obligations of the Reinsurer to the Company under the Second Amended and Restated Facultative Quota Share Reinsurance Treaty;

           WHEREAS , XLIB reinsures the Reinsurer pursuant to an Excess of Loss Reinsurance Agreement executed on October 3, 2001 (the “ Excess of Loss Reinsurance Agreement ”) that covers certain business assumed by the Reinsurer under the Reinsurance Agreement; and

           WHEREAS , the Parties and XLIB are parties to that certain Master Commutation, Release and Restructuring Agreement, dated as of July 28, 2008, by and among the Company, the Reinsurer, Security Capital Assurance Ltd and other parties thereto (the “ Master Transaction Agreement ”), pursuant to which (a) the Company and the Reinsurer have agreed to enter into this Agreement; and (b) XLIB and the Reinsurer have agreed to commute the Excess of Loss Reinsurance Agreement and fully and finally extinguish all of the parties’ rights and obligations under the Excess of Loss Reinsurance Agreement (the “ Excess of Loss Commutation ”);

          WHEREAS , XL Capital Ltd (“XL Capital”) is the ultimate parent of XLIB;

           WHEREAS , XLIB has agreed pursuant to the Master Transaction Agreement to pay the sum of One Billion, Five Hundred and Eighty-Four Million, Seven Hundred Thousand Dollars ($1,584,700,000.00) to the Reinsurer and XL Capital has agreed to issue and transfer to the Reinsurer 2,223,379 of its Class A Ordinary Shares (together, the “ XL Consideration ”) on the express condition that the Company and the Reinsurer commute the Reinsurance Agreement

and the individual risk cessions thereunder and fully and finally extinguish the parties’ rights and obligations under the Reinsurance Agreement and/or the individual risk cessions thereunder; and

           WHEREAS , the Reinsurer has agreed that it will pay the Commutation Amount (as that term is defined in the Excess of Loss Commutation) it received under the Excess of Loss Commutation as part of the consideration it pays to the Company under this Agreement;

           WHEREAS , the Parties agree that it is in each of their best interests to freely and voluntarily enter into this Agreement and to fully and forever release and discharge each other from their respective existing and future liabilities and obligations, including contingent and uncertain liabilities, both known and unknown, under the Reinsurance Agreement and the individual risk cessions thereunder and to compromise, resolve and settle all amounts due, or which may become due, between each other arising out of, in respect of, or relating to the Reinsurance Agreement and/or the individual risk cessions thereunder; and

           WHEREAS , Company and Reinsurer, or their affiliates, may be parties to agreements other than the Reinsurance Agreement, and it is the intent of the Parties that this Agreement will not have any effect upon such other agreements.

           NOW, THEREFORE , in consideration of the covenants, conditions, promises and releases contained herein, and for other valuable consideration including but not limited to the XL Consideration that XLIB and XL Capital agreed to pay on the express condition that Company and Reinsurer commute the Reinsurance Agreement and the individual risk cessions thereunder, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

ARTICLE I

PAYMENT

           (a) The Reinsurer shall on the Closing Date (as such term is defined in the Master Transaction Agreement): transfer to the Company the following, having an aggregate value of Three Billion, Nine Hundred and Twenty-Six Million Dollars ($3,926,000,000.00) (i) the XL Capital shares it received as part of the XL Consideration, valued at market value as of market close on the immediately preceding trading day, (ii) withdrawal by the Company and retention for its own account of all assets from the trust account established pursuant to the Reinsurance Agreement, such assets to be valued at market value as of market close on August 1, 2008, and (iii) the balance in cash via direct wire transfer, in immediately available funds, in accordance with the payment instructions set forth on Schedule A hereto (collectively, the “ Commutation Amount ”). The date on which the Commutation Amount is paid and received shall be referred to hereinafter as the “ Effective Date .”

           (b) The Company shall accept the Commutation Amount in full satisfaction of all of the Reinsurer’s liabilities and obligations under the Reinsurance Agreement and/or the individual risk cessions thereunder.

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ARTICLE II

RELEASE

           (a) Upon the Reinsurer’s payment of the Commutation Amount to the Company, the Company, on behalf of itself and its shareholders, parents, affiliates and subsidiaries, and their respective officers, directors, and employees, hereby irrevocably and unconditionally releases and forever discharges the Reinsurer, its parents, subsidiaries and affiliates, and their respective predecessors, successors, assigns, officers, directors, agents, employees, shareholders, representatives, and attorneys from any and all present and future actions, causes of action, suits, debts, liens, contracts, rights, agreements, obligations, promises, liabilities, claims, counterclaims, demands, damages, controversies, losses, costs and expenses (including attorneys’ fees and costs actually incurred) of any kind, character, description or nature whatsoever, known or unknown to either or both Parties, suspected or unsuspected, reported or unreported, fixed or contingent, which the Company now has, owns or holds or claims to have, own, or hold, or at any time heretofore had, owned, or held or claimed to have had, owned, or held, or may hereafter have, own, or hold or claim to have, own, or hold, arising out of conduct or matters occurring on, prior to or subsequent to the Effective Date, against the Reinsurer, arising directly or indirectly out of, based upon, or in any way related to or in connection with the Reinsurance Agreement and/or the individual risk cessions thereunder, whether grounded in law or equity, or sounding in tort or contract or otherwise; provided , however , that the provisions of this Article II(a) shall not discharge obligations of the Reinsurer, which have been undertaken or imposed by the express terms of this Agreement or the Master Transaction Agreement (including the Ancillary Agreements).

           (b) Contemporaneous with the payment of the Commutation Amount to the Company, the Reinsurer, on behalf of itself and its shareholders, parents, affiliates and subsidiaries, and their respective officers, directors and employees, hereby irrevocably and unconditionally releases and forever discharges the Company, its shareholders, parents, subsidiaries and affiliates, and their respective predecessors, successors, assigns, officers, directors, agents, employees, shareholders, representatives, and attorneys from any and all present and future actions, causes of action, suits, debts, liens, contracts, rights, agreements, obligations, promises, liabilities, claims, counterclaims, demands, damages, controversies, losses, costs and expenses (including attorneys’ fees and costs actually incurred) of any kind, character, description or nature whatsoever, known or unknown to either or both Parties, suspected or unsuspected, reported or unreported, fixed or contingent, which the Reinsurer now has, owns, holds or claims to have, own, or hold, or at any time heretofore had, owned, or held or claimed to have had, owned, or held, or may hereafter have, own, or hold or claim to have, own, or hold, arising out of conduct or matters occurring on, prior to or subsequent to the Effective Date, against the Company, arising directly or indirectly out of, based upon, or in any way related to or in connection with the Reinsurance Agreement and/or the individual risk cessions thereunder, whether grounded in law or equity or sounding in tort or contract or otherwise; provided , however , that the provisions of this Article II(b) shall not discharge obligations of the Company, which have been undertaken or imposed by the express terms of this Agreement or the Master Transaction Agreement (including the Ancillary Agreements).

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           (c) The Parties understand that it is possible that unknown losses or claims may exist, or that present or future losses or claims may be underestimated in amounts or severity. Furthermore, the Parties expressly accept and assume the risk that the factual or legal assumptions made by any Party in connection with this Agreement may be found hereafter to be different from the true facts or law, and the Parties agree that this Agreement shall be and shall remain in full force and effect notwithstanding such differences in facts or law. Each Party expressly takes all of the foregoing into account in determining the amount of consideration to be given and paid for the giving of this Agreement, and a portion of the said consideration, having been bargained for between the Parties with the knowledge of the possibility of such unknown losses and claims, is given in exchange for the full accord, satisfaction and discharge of all such losses and claims.

           (d) Full payment of the Commutation Amount shall be in complete accord, satisfaction, settlement and commutation of any and all past, current and future liabilities and obligations that each Party owes or may owe to the other arising directly or indirectly out of or related to or in connection with the Reinsurance Agreement and/or the individual risk cessions thereunder and that upon payment of the Commutation Amount, the Reinsurance Agreement shall be terminated as of the Effective Date and neither Party shall have any further obligation or liability to the other Party under the Reinsurance Agreement and/or the individual risk cessions thereunder.

ARTICLE III

NON-RELIANCE

           (a) This Agreement fully and finally resolves the rights, duties and obligations of the Company and the Reinsurer under the Reinsurance Agreement, and neither Party shall:

           (b) The Company and the Reinsurer have voluntarily entered into this Agreement based: (i) upon their own independent assessment of the relevant facts and their rights and obligations under the Reinsurance Agreement and (ii) except as expressly set forth in Article III and Article IV of the Master Transaction Agreement, not upon any representations that were made or disclosures that were made by the other Party, their affiliates, officers, directors, shareholders, employees, representatives, agents, attorneys or their respective heirs, administrators, predecessors, successors and assigns. Each Party acknowledges that it has

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carefully read, and that it understands the scope and effect of this Agreement and has had a full and fair opportunity to consult with, and seek the advice and recommendations of its attorneys, actuaries and other professional advisors prior to its execution of this Agreement.

           (c) This Agreement and the negotiations and proceedings leading to this Agreement shall not form the basis of any claim by either Party against the other Party or against any officer, director, consultant, professional or shareholder of the other Party, except with respect to an action for enforcement of this Agreement or the Master Transaction Agreement (including the Ancillary Agreements).

ARTICLE IV

COMPROMISE

           This Agreement sets forth a compromise and shall never at any time for any purpose be considered as an admission of liability or responsibility on the part of any party hereto regarding any aspect of the Reinsurance Agreement. Neither this Agreement nor any of its terms shall be admissible in any action, arbitration, or proceeding other than one to enforce the terms of this Agreement or the Master Transaction Agreement (including the Ancillary Agreements), including, but not limited to, the releases provided in Article II .

ARTICLE V

FURTHER ASSURANCES

           The Parties, without further consideration, shall execute and deliver such other documents and take such other action as may be necessary to effect this Agreement.

ARTICLE VI

MISCELLANEOUS

           (a) This Agreement and the Master Transaction Agreement (including the Ancillary Agreements) set forth the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements or understanding between them pertaining to the subject matter hereof. A facsimile copy of a signature shall have the same force and effect as an original signature.

           (b) This Agreement may not be amended, altered, supplemented or modified, except by written agreement signed by the Parties.

           (c) This Agreement may be executed and delivered in multiple counterparts, each of which, when so executed and delivered, shall be an original, but such counterparts shall together constitute but one and the same instrument and agreement.

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           (d) For purposes of this Agreement, a “ Business Day ” is any day other than a Saturday, Sunday or a public holiday in New York.

           (e) This Agreement shall be governed by and construed in accordance with the laws of New York without regard to principles of conflicts of law or choice of law and the Parties submit to the exclusive jurisdiction of the Supreme Court of the State of New York in respect of all disputes arising out of or in connection with this Agreement.

           (f) All notices under this Agreement shall be in writing and shall be deemed to be duly given and received (i) upon delivery if delivered by certified mail; or (ii) on the next Business Day if sent by overnight courier (iii) on the date sent by facsimile if sent during the recipient’s normal business hours or, if sent by facsimile outside such hours, on the next Business Day; provided, that such notices are sent to a Party to its Address for Notices set forth on Schedule B hereto or to such other address as either Party may have furnished to the other in writing.

           (g) For all purposes this Agreement shall be deemed to have been drafted jointly by the Parties.

           (h) This Agreement is an agreement solely between the Company and the Reinsurer. No right of action against the Reinsurer shall accrue to any insured or policyholder of the Company.

[ Signature Page to follow ]

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           IN WITNESS WHEREOF , the Parties have executed this Agreement by their respective authorized officers as of the day and year first written below.

Dated: _______________________________________	SYNCORA GUARANTEE INC.
	FORMERLY KNOWN AS
	XL CAPITAL ASSURANCE INC.
	By:
		Name:
		Title:

 

 

 

 

[SIGNATURE PAGE – QUOTA SHARE TREATY COMMUTATION AGREEMENT]

Dated: ________________________________	SYNCORA GUARANTEE RE LTD.
	FORMERLY KNOWN AS
	XL FINANCIAL ASSURANCE LTD
	By:
		Name:
		Title:

 

 

 

 

 

 

[SIGNATURE PAGE – QUOTA SHARE TREATY COMMUTATION AGREEMENT]

SCHEDULE A

WIRE TRANSFER INSTRUCTIONS

Transfer instructions for remitting funds to Syncora Guarantee Inc. (formerly known as XL Capital Assurance Inc.)

[Intentionally omitted]

 

Please send e-mail / fax containing details of the transfer to:

[Intentionally omitted]

Rebecca O’Connell (VP & Assistant Treasurer) at SCA
Phone: (212) 478-3629
Fax: (212) 478-3587
E-mail: rebecca.oconnell@scafg.com

SCHEDULE B

ADDRESS FOR NOTICE

TO THE COMPANY:

TO THE REINSURER:

EXHIBIT 1.01(g-1)

XLFA SUBSCRIPTION AGREEMENT

Exh. 1.01(g-1)

XL CAPITAL LTD

SUBSCRIPTION AGREEMENT

This SUBSCRIPTION AGREEMENT (this “ Agreement ”), dated as of August 5, 2008, by and between XL Capital Ltd, a Cayman Islands exempted limited company (the “ Company ”), and Syncora Guarantee Re Ltd. (formerly known as XL Financial Assurance Ltd), a Bermuda exempted company (the “ Subscriber ”).

           WHEREAS, the Company and the Subscriber are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “ Securities Act ”);

          WHEREAS, this Agreement is being entered into for the purpose of setting forth the terms, conditions and agreements between the Company and the Subscriber in connection with the Company’s issuance to the Subscriber of 2,223,379 shares (the “ Shares ”) of its Class A Ordinary Shares, par value $0.01 per share (“ Common Stock ”), pursuant to the Master Commutation, Release and Restructuring Agreement dated as of July 28, 2008 among the Company, Security Capital Assurance Ltd, XL Financial Assurance Ltd, XL Capital Assurance Inc. and the other parties thereto (the “ Master Agreement ”); and

          WHEREAS, on the Closing Date (as defined below), the parties hereto and Syncora Guarantee Inc. (formerly known as XL Capital Assurance Inc.) will execute and deliver a Registration Rights Agreement (the “ Registration Rights Agreement ”), substantially in the form attached hereto as Exhibit A , pursuant to which the Company has agreed to provide certain registration rights under the Securities Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and intending to be legally bound, the Company and the Subscriber hereby agree as follows:

     1.      SUBSCRIPTION FOR SHARES; CLOSING .

          (a) Subject to the terms and conditions herein and in reliance upon the respective representations, warranties and covenants contained herein, the Subscriber hereby subscribes for the Shares and the Company hereby agrees to issue the Shares as consideration for the Subscriber and certain of its affiliates entering into the Master Agreement and related transactions contemplated thereby, as set forth therein.

           (b) The issuance of the Shares shall be effected on the Closing Date (defined below) by the Company executing and delivering to the Subscriber, duly registered in its name, a duly executed stock certificate evidencing the Shares being purchased by it. The closing of the purchase and sale of the Shares pursuant to this Section 1(b) will take place at the time and location set forth for the closing in Section 2.07 of the Master Agreement or at such other time and location as the Company and the Subscriber shall otherwise mutually agree (the “ Closing Date ”).

2.      REPRESENTATIONS AND WARRANTIES OF THE COMPANY .

           The Company represents and warrants, as of the date hereof and as of the Closing Date, that:

           (a) Incorporation and Good Standing . The Company is duly organized, validly existing and in good standing under the laws of the Cayman Islands and has all requisite power and authority to carry on its business as now conducted and as proposed to be conducted.

           (b) Authorization . The board of directors of the Company (the “ Board ”) has authorized the execution, delivery and performance of this Agreement and the transactions contemplated hereby and the Company has the requisite power, authority and legal capacity to execute, deliver and perform this Agreement and the transactions contemplated hereby. No other corporate action is necessary to authorize such execution, delivery and performance, and upon such execution and delivery by the Company, this Agreement shall constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except as enforceability may be (i) limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditor’s rights, or (ii) subject to general principles of equity. The Board has authorized the issuance and delivery of the Shares in accordance with this Agreement.

           (c) Authorization of Shares . The Shares to be issued and sold by the Company pursuant to this Agreement, when issued and paid for in accordance with the provisions hereof, will be duly authorized, validly issued, fully paid and nonassessable shares of Common Stock free and clear of all liens and the issuance of the Shares will not be subject to any preemptive or similar rights.

           (d) Non-Contravention . Except as set forth on Schedule 2(d) and except with respect to any filings made in connection with exemptions from registration under state or federal securities laws, the creation, authorization, issuance, offer and sale of the Shares do not require any consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of the Company or the vote, consent or approval in any manner of the holders of any security of the Company as a condition to the execution and delivery of this Agreement or the creation, authorization, issuance, offer and sale of the Shares. Except as set forth on Schedule 2(d), the execution and delivery by the Company of this Agreement and the performance by the Company of its obligations hereunder will not violate (i) the terms and conditions of the Memorandum and Articles of Association of the Company, or any material agreement to which the Company is a party or by which it is bound or (ii) subject to the accuracy of the Subscriber’s representations and warranties contained in Section 3 hereof, any federal or state securities law.

           (e) No General Solicitation . The Company has not engaged in a general solicitation of the public for sale of the Shares in violation of the Securities Act, and the offering and sale of the Shares are exempt from registration under the Securities Act.

           (f) Capitalization . As of December 31, 2007, the Company had the authorized capitalization as set forth in the Company’s Annual Report on Form 10-K for its most recent fiscal year, and all of the issued shares of capital stock of the Company have been duly

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authorized and validly issued, are fully paid and non-assessable, and were issued in compliance with federal and state securities laws and not in violation of any preemptive right, resale right, right of first refusal or similar right. All of the Company's options, warrants and other rights to purchase or exchange any securities for shares of the Company's capital stock have been duly authorized and validly issued and were issued in compliance with federal and state securities laws. The Company has not, in the twelve months preceding the date hereof, received notice (written or oral) from the NYSE to the effect that the Company is not in compliance with its listing or maintenance requirements.

           (g) No Integration . There has been no sale, offer for sale, solicitation of an offer to buy or negotiation by the Company or any of its subsidiaries in respect of any security that would be integrated with the Shares issued pursuant to this Agreement in a manner that would require the registration of the Shares under the Securities Act.

           (h) Listing . The Common Stock is registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 and prior to the Closing Date, the Shares will be approved for listing on the NYSE, subject to official notice of issuance.

          (i) No Registration . Assuming the accuracy of the representations and warranties of the Subscriber contained in Section 3 and its compliance with the agreements set forth herein, it is not necessary, in connection with the issuance and sale of the Shares to the Subscriber in the manner contemplated by this Agreement, to register the Shares under the Securities Act.

     3.      REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER .

      The Subscriber represents and warrants, as of the date hereof and as of the Closing Date, that:

           (a) Investment Purpose . The Subscriber is obtaining the Shares for investment purposes only and not with a view to or for distributing or reselling such Shares or any part thereof, without prejudice, however, to the Subscriber’s right, subject to the provisions of this Agreement (including, without limitation, Section 5 ), to sell or otherwise dispose of all or any part of the Shares pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities or “blue sky” laws. The Subscriber understands that it may bear the economic risk of this investment indefinitely.

           (b) Institutional Accredited Investor Status . The Subscriber was at the time it was first offered the Shares, and at the date hereof is, an institutional “accredited investor” as defined in Rule 501(a) under the Securities Act.

           (c) Reliance on Exemptions . The Subscriber understands that the Shares are being offered and issued to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities or “blue sky” laws, including Section 4(2) of the Securities Act and that the Company is relying upon the truth and accuracy of, and the Subscriber’s compliance with, the representations, warranties, agreements,

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acknowledgments and understandings of the Subscriber set forth herein in order to determine the availability of such exemptions and the eligibility of the Subscriber to acquire the Shares.

           (d) Knowledge . The Subscriber has, either alone or together with its representatives, such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the ownership of the Shares, and has so evaluated the merits and risks of such investment. The Subscriber understands that ownership of the Shares involves a high degree of risk, is able to bear the economic risk of ownership of the Shares and, at the present time, is able to afford a complete loss with respect to such ownership.

           (e) Access to Information . The Subscriber acknowledges that it has access to and has reviewed the Company’s disclosures about its Common Stock made in its filings with the SEC including the Company’s Annual Report on Form 10-K for its latest fiscal year, the Company’s Quarterly Report on Form 10-Q for its latest fiscal quarter, and any Current Report on Form 8-K filed by the Company since the date of such Quarterly Report on Form 10-Q and has access to information about the Company and its subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects contained in the Company’s public filings with the SEC, and acknowledges that such information is sufficient to enable it to evaluate its investment.

           (f) No Reliance . In connection with its acceptance of the Shares, the Subscriber has not relied upon any representations made by, or other information (whether oral or written) furnished by or on behalf of, the Company other than as set forth in this Agreement, the Master Agreement or any Ancillary Agreements (as defined in the Master Agreement).

           (g) No General Solicitation . The Subscriber acknowledges that the Shares were offered and will be issued to the Subscriber without any general solicitation or general advertising, including, but not limited to, any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

           (h) No Advice Provided . The Subscriber understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to the Subscriber in connection with the issuance of the Shares constitutes legal, tax or investment advice. The Subscriber has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its receipt of the Shares.

           (i) Authorization; Enforceability . This Agreement has been duly and validly authorized by the Subscriber. This Agreement has been duly executed and delivered on behalf of the Subscriber, and constitutes the valid and binding agreement of the Subscriber enforceable in accordance with their terms, subject, in each case, to applicable bankruptcy, insolvency, reorganization or similar laws affecting generally the enforcement of creditors’ rights and subject to a court’s discretionary authority with respect to the granting of specific performance or other equitable remedies.

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           (j) No Conflicts . The execution and performance of this Agreement does not conflict with any agreement to which the Subscriber is a party or is bound thereby, any court order or judgment addressed to the Subscriber, or the constituent documents of the Subscriber.

     4.      TRANSFER RESTRICTIONS

           (a) Restrictions . The Subscriber recognizes and agrees that (i) the Shares will be subject to a Holding Period (as defined in the Registration Rights Agreement) and other restrictions on transferability pursuant to this Agreement and the Registration Rights Agreement and (ii) as a result of the foregoing, the marketability of the Shares will be severely limited. The Subscriber agrees that it will not Transfer (as such term is defined in the Registration Rights Agreement) the Shares in any manner that will violate such restrictions under this Agreement, the Registration Rights Agreement, the Securities Act or any state securities laws, the rules and regulations of the SEC or any other state or municipality having jurisdiction thereof.

           (b) Legends . The Subscriber understands and agrees that the Shares will bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against the transfer of the certificates for the Shares).

"THIS SECURITY HAS BEEN ACQUIRED FOR INVESTMENT AND WITHOUT A VIEW TO DISTRIBUTION AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE " ACT "), OR UNDER STATE SECURITIES LAWS. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS SECURITY OR ANY INTEREST OR PARTICIPATION THEREIN MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS AND, IN THE CASE OF CLAUSE (B), IF REQUESTED BY THE ISSUER, UNLESS THE ISSUER RECEIVES AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS. THIS SECURITY IS ALSO SUBJECT TO SIGNIFICANT RESTRICTIONS ON TRANSFER (WHICH INCLUDES A RIGHT OF FIRST OFFER) PURSUANT TO THE TERMS OF A REGISTRATION RIGHTS AGREEMENT AMONG THE ISSUER, THE HOLDER AND SYNCORA GUARANTEE INC. (FORMERLY KNOWN AS XL CAPITAL ASSURANCE INC.) DATED AUGUST 5, 2008 AND MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH SUCH AGREEMENT.

     5.      MISCELLANEOUS

           (a) Headings . The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof.

           (b) Notices . All communications under this Agreement shall be in writing and shall be delivered by hand or facsimile or mailed by overnight courier or by registered mail or certified mail, postage prepaid:

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           (i) if to the Company, XL Capital Ltd, One Bermudiana Road, Hamilton HM 11, Bermuda, Attention: General Counsel, Fax: 441-295-2840 or at such other address or facsimile number as may have been furnished in writing.

           (ii) if to the Subscriber, c/o Syncora Guarantee Inc., 1221 Avenue of the Americas, New York, New York 10020-1001, Fax: 212-478-3579; Attention: Susan Comparato, General Counsel; or at such other address or facsimile number as may have been furnished in writing.

Any notice so addressed shall be deemed to be given: if delivered by hand or facsimile, on the date of such delivery, if a business day and delivered during regular business hours, otherwise the first business day thereafter; if mailed by courier, on the first business day following the date of such mailing; and if mailed by registered or certified mail, on the third business day after the date of such mailing.

           (c) Survival . All representations, warranties and covenants made by the Subscriber and the Company herein shall be considered to have been relied upon by the Company or the Subscriber, as the case may be, and shall survive all deliveries to you of the Shares, or regardless of any investigation made by the Company or the Subscriber, as the case may be, or on the Company’s or the Subscriber’s behalf.

           (d) Assignment; No Third Party Beneficiaries . This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties. It is understood that the Subscriber may assign this Agreement or any of their rights or obligations hereunder to any affiliate, provided , however , that any assignment of the obligations under this Agreement shall not release the assignor from any of its obligations under this Agreement. Nothing in this Agreement shall confer upon any person not a party to this Agreement any rights or remedies of any nature or kind whatsoever under or by reason of this Agreement.

           (e) Entire Agreement . This Agreement, the Master Agreement and the Registration Rights Agreement constitute the entire understandings of the parties hereto and supersede all prior agreements or understandings with respect to the subject matter hereof among such parties. This Agreement may be amended, and the observance of any term of this Agreement may be waived, with (and only with) the written consent of each of the parties hereto.

           (f) Severability . In the event that any part or parts of this Agreement shall be held illegal or unenforceable by any court or administrative body of competent jurisdiction, such determination shall not effect the remaining provisions of this Agreement which shall remain in full force and effect.

           (g) Counterparts . This Agreement may be executed in any number of counterparts (including by facsimile), each of which shall be deemed an original and all of which together shall be considered one and the same agreement.

           (h) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.

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           (i) Jurisdiction . The parties to this Agreement irrevocably submit to the non-exclusive jurisdiction of any New York State or federal court sitting in the Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or relating to this Agreement. To the fullest extent permitted by applicable law, the parties to this Agreement irrevocably waive and agree not to assert, by way of motion, as a defense or otherwise, any claim that it is not subject to the jurisdiction of any such court, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

           (j) Specific Performance . The Company and the Subscriber hereby declare that it is impossible to measure in money the damages which will accrue to the parties hereto by reason of the failure of any party hereto to perform any of its obligations set forth in this Agreement. Therefore, the Company and the Subscriber shall have the right to specific performance of such obligations, and if any party hereto shall institute any action or proceeding to enforce the provisions hereof, the Company and the Subscriber hereby waive the claim or defense that the party instituting such action or proceeding has an adequate remedy at law.

 

 

[Signature Page to Follow]

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           IN WITNESS WHEREOF, the Subscriber and the Company have caused this Agreement to be duly executed as of the date first written above.

	SYNCORA GUARANTEE RE LTD.
	FORMERLY KNOWN AS
	XL FINANCIAL ASSURANCE LTD
	By:
		Name:
		Title:

 

 

 

[SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT]

 

Accepted and Agreed
as of the date first written above
XL CAPITAL LTD
By:	___________________________
	Name:
	Title:

 

 

 

[SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT]

Schedule 2(d) – Non-Contravention

EXHIBIT 1.01(g-2)

XLCA SUBSCRIPTION AGREEMENT

Exh. 1.01(g-2)

XL CAPITAL LTD

SUBSCRIPTION AGREEMENT

This SUBSCRIPTION AGREEMENT (this “ Agreement ”), dated as of August 5, 2008, by and between XL Capital Ltd, a Cayman Islands exempted limited company (the “ Company ”), and Syncora Guarantee Inc. (formerly known as XL Capital Assurance Inc.), a New York insurance company (the “ Subscriber ”).

           WHEREAS, the Company and the Subscriber are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “ Securities Act ”);

          WHEREAS, this Agreement is being entered into for the purpose of setting forth the terms, conditions and agreements between the Company and the Subscriber in connection with the Company’s issuance to the Subscriber of 5,776,621 shares (the “ Shares ”) of its Class A Ordinary Shares, par value $0.01 per share (“ Common Stock ”), pursuant to the Master Commutation, Release and Restructuring Agreement dated as of July 28, 2008 among the Company, Security Capital Assurance Ltd, XL Financial Assurance Ltd, XL Capital Assurance Inc. and the other parties thereto (the “ Master Agreement ”); and

          WHEREAS, on the Closing Date (as defined below), the parties hereto and Syncora Guarantee Re Ltd. (formerly known as XL Financial Assurance Ltd) will execute and deliver a Registration Rights Agreement (the “ Registration Rights Agreement ”), substantially in the form attached hereto as Exhibit A , pursuant to which the Company has agreed to provide certain registration rights under the Securities Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained and intending to be legally bound, the Company and the Subscriber hereby agree as follows:

     1.       SUBSCRIPTION FOR SHARES; CLOSING .

             (a) Subject to the terms and conditions herein and in reliance upon the respective representations, warranties and covenants contained herein, the Subscriber hereby subscribes for the Sh