Exhibit 1.1
SECURITY CAPITAL ASSURANCE LTD
COMMON SHARES
UNDERWRITING AGREEMENT
----------------------
_______________, 2006
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
▇.▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Security Capital Assurance Ltd, a Bermuda limited company (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters") an aggregate of _____ common shares, $0.01 par value per common
share ("Common Shares"), of the Company and XL Insurance (Bermuda) Ltd, a
Bermuda limited company that is the sole shareholder of the Company (the
"Selling Shareholder"), proposes, subject to the terms and conditions stated
herein, to sell to the Underwriters an aggregate of _____ Common Shares and, at
the election of the Underwriters, up to _____ additional Common Shares. The
aggregate of _____ Common Shares to be sold by the Company and the Selling
Shareholder are referred to herein as the "Firm Shares" and the aggregate of
_____ additional Common Shares to be sold by the Selling Shareholder at the
election of the Underwriters are referred to herein as the "Optional Shares."
The Firm Shares and the Optional Shares that the Underwriters elect to purchase
pursuant to Section 2 hereof are collectively referred to herein as the
"Shares."
1. (a) The Company represents and warrants to, and agrees with,
each of the Underwriters that:
(i) A registration statement on Form S-1 (File No.
333-133066) (the "Initial Registration Statement") in respect of the Shares has
been filed with the Securities and Exchange Commission (the "Commission"); the
Initial Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto, to you
for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any, increasing
the size of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Act"), which became effective upon filing, no other document with respect to
the Initial Registration Statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act is hereinafter called a "Preliminary Prospectus"; the
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and
deemed by virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective, each as amended at
the time such part of the Initial Registration Statement became effective or
such part of the Rule 462(b) Registration Statement, if any, became or hereafter
becomes effective, are hereinafter collectively called the "Registration
Statement"; the Preliminary Prospectus relating to the Shares that was included
in the Registration Statement immediately prior to the Applicable Time (as
defined in Section 1(a)(iii) hereof) is hereinafter called the "Pricing
Prospectus"; such final prospectus, in the form first filed pursuant to Rule
424(b) under the Act, is hereinafter called the "Prospectus"; and any "issuer
free writing prospectus" as defined in Rule 433 under the Act relating to the
Shares is hereinafter called an "Issuer Free Writing Prospectus");
(ii) No order preventing or suspending the use of any
Preliminary Prospectus or any Issuer Free Writing Prospectus has been issued by
the Commission, and each Preliminary Prospectus, at the time of filing thereof,
conformed in all material respects to the requirements of the Act and the rules
and regulations of the Commission thereunder, and did 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 the 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
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omissions made in reliance upon and in conformity with information furnished in
writing to the Company by (a) an Underwriter through ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. or (b)
the Selling Shareholder (and relating to the Selling Shareholder), in each case
expressly for use therein;
(iii) For the purposes of this Agreement, the "Applicable
Time" is ___:___ __P.M. (Eastern daylight savings time) on the date of this
Agreement. The Pricing Prospectus 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 Issuer Free Writing Prospectus
listed on Schedule III hereto does not conflict with the information contained
in the Registration Statement, the Pricing Prospectus or the Prospectus and each
such Issuer Free Writing Prospectus, as supplemented by and taken together with
the Pricing Prospectus 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; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to statements or omissions made in
an Issuer Free Writing Prospectus in reliance upon and in conformity with
information furnished in writing to the Company by (a) an Underwriter through
▇▇▇▇▇▇▇, Sachs & Co. or (b) the Selling Shareholder (and relating to the Selling
Shareholder), in each case expressly for use therein;
(iv) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement and the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to each part of the Registration
Statement and as of the applicable filing date as to the Prospectus and any
amendment or supplement thereto, 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 in the Registration Statement not misleading and the
statements in the Prospectus in the 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 (a) an
Underwriter through ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. or (b) the Selling Shareholder (and
relating to the Selling Shareholder), in each case expressly for use therein;
(v) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements included in
the Pricing Prospectus 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 Prospectus, which loss or
interference would
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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 Registration Statement
and the Pricing Prospectus, there has not been any change in the share capital
(other than changes resulting from the exercise of options or the conversions of
warrants or securities 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 securities) or long-term debt of the Company or any of
its 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, shareholders'
equity or results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Pricing Prospectus;
(vi) The Company has been duly incorporated and is validly
existing as a limited company in good standing under the laws of Bermuda, with
full power and authority to own its properties and conduct its business as
described in the Pricing Prospectus and has been duly qualified as a foreign
corporation 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 the transactions
contemplated by this Agreement (a "Material Adverse Effect"); and each
subsidiary of the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation;
(vii) The Company has an authorized capitalization as set
forth in the Pricing Prospectus and Prospectus and all of the issued Common
Shares of the Company have been duly and validly authorized and issued and are
fully paid and non-assessable and conform to the description thereof contained
in the Pricing Prospectus and Prospectus under "Description of Share Capital";
(viii) The unissued Shares to be issued and sold by the Company
hereunder have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein, will be duly and validly issued and
fully paid and non-assessable and will conform to the description of the Common
Shares contained in the Pricing Prospectus and the Prospectus under "Description
of Share Capital"; the shareholders of the Company have no preemptive or similar
rights with respect to the unissued Shares to be issued and sold by the Company
hereunder and no shareholder consents are required in connection with the
Company's issuance and sale of such Shares;
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(ix) This Agreement has been duly authorized, executed and
delivered by the Company;
(x) The issue and sale of the Shares, the execution and
delivery of this Agreement and the compliance by the Company with all of the
provisions of this Agreement and the consummation of the transactions
contemplated herein 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 Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will such action result
in any violation of the provisions of the Memorandum of Association, Bye-laws or
similar organizational documents of the Company or any of its subsidiaries or
any statute or any order, rule or regulation of any court or governmental agency
or body (a "Governmental Agency") having jurisdiction over the Company or any of
its subsidiaries or any of its or their respective properties, except in each
case (other than with respect to such Memorandum of Association, Bye-laws or
similar organizational documents) for such conflicts, violations, breaches or
defaults which would not result in a Material Adverse Effect;
(xi) No consent, approval, authorization, order, filing,
registration or qualification of or with any Governmental Agency (a
"Governmental Authorization") is required for the issue and sale by the Company
of the Shares or the consummation by the Company of the transactions
contemplated by this Agreement, except such as have been, or will have been
prior to the first Time of Delivery, obtained under the Act and such consents,
approvals, authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(xii) The subsidiaries of the Company listed on Schedule IV
hereto are the only "subsidiaries" of the Company as defined in the Act. All of
the issued share capital of each subsidiary of the Company has been duly and
validly authorized and issued, is fully paid and non-assessable and (except for
(i) a 15% ownership interest in XL Financial Assurance Ltd. that is owned by a
third party and (ii) directors' qualifying shares) is owned directly or
indirectly by the Company, free and clear of all liens, encumbrances, equities
or claims;
(xiii) 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 Shares in violation of the
Exchange Act;
(xiv) Other than as set forth in the Pricing Prospectus and
Prospectus prior to the date hereof, or as encountered in the ordinary course of
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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
subsidiaries is a party or of which any property of the Company or any of its
subsidiaries is the subject, which would individually or in the aggregate
reasonably be expected to have a Material Adverse Effect; and, to the best of
the Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(xv) The Company and its subsidiaries possess adequate
certificates, authorities 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;
(xvi) Neither the Company nor any of its subsidiaries is in
violation of its Memorandum of Association, Bye-laws 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;
(xvii) The statements set forth in the Pricing Prospectus and
Prospectus under the captions "Description of Share Capital" and "Certain
Relationships and Related Party Transactions", insofar as they purport to
constitute a summary of the terms of the Common Shares and the other documents
described therein, and the statements set forth in the Pricing Prospectus and
Prospectus and under the captions "Certain Tax Considerations" and "Regulation"
insofar as they purport to describe the provisions of the laws referred to
therein, are accurate, complete and fair in all material respects;
(xviii) The Company is not and, after giving effect to the
offering and sale of the Shares will not be an "investment company", as such
term is defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(xix) PricewaterhouseCoopers LLP, who have certified the
combined financial statements of the XL Financial Guaranty Companies that is
included in the Pricing Prospectus and Prospectus, is an independent registered
public accounting firm as required by the Act and the rules and regulations of
the Commission thereunder;
(xx) 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 Underwriters to Bermuda or any political subdivision or taxing
authority thereof or therein in connection with (A) the issuance, sale and
delivery by the Company
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to or for the respective accounts of the Underwriters of the Shares or (B) the
sale or delivery outside Bermuda by the Underwriters of the Shares to the
initial purchasers thereof, other than as described in the opinion of ▇▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇ delivered pursuant to Section 8(d) of this Agreement;
(xxi) At the time of filing the Initial Registration
Statement, the Company was not and is not an "ineligible issuer" as defined in
Rule 405 under the Act;
(xxii) The Company and its subsidiaries (i) make and keep
accurate books and records and (ii) maintain systems of internal accounting
controls sufficient to provide reasonable assurance regarding the reliability of
financial reporting and that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences; and
(xxiii) The Company maintains disclosure controls and procedures
(as such term is defined in Rule 13a-15(e) under the Exchange Act) that comply
with the requirements of the Exchange Act; such disclosure controls and
procedures have been designed to ensure that material information relating to
the Company and its subsidiaries is made known to the Company's principal
executive officer and principal financial officer by others within those
entities; and such disclosure controls and procedures are effective.
(b) The Company represents and warrants to Citigroup Global
Markets Inc. ("Citigroup") that:
(i) The Registration Statement, the Prospectus, the Pricing
Prospectus, any Preliminary Prospectus, any Issuer Free Writing Prospectus and
any other materials prepared by or with the consent of the Company for
distribution to the Participants (as defined below) in connection with the
Directed Share Program (as defined below) comply, and any further amendments or
supplements thereto will comply, with any applicable laws or regulations of
foreign jurisdictions in which the Prospectus, the Pricing Prospectus, any
Preliminary Prospectus, any Issuer Free Writing Prospectus as amended or
supplemented, if applicable, and any other materials prepared by or with the
consent of the Company for distribution to the Participants in connection with
the Directed Share Program are distributed in connection with the Directed Share
Program, and no authorization, approval, consent, license, order, registration
or qualification of or with any government, governmental instrumentality or
court, other than such as have been obtained, is necessary under the securities
laws and regulations of foreign jurisdictions in which the Directed Shares are
offered outside the United States. The Company
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has not offered, or caused the Underwriters to offer, Securities to any person
pursuant to the Directed Share Program with the specific intent to unlawfully
influence (a) a customer or supplier of the Company to alter the customer's or
supplier's level or type of business with the Company, or (b) a trade journalist
or publication to write or publish favorable information about the Company or
its products; and
(ii) Except for the materials attached hereto in Annex VI,
the Company has not provided or consented to the distribution of any written
materials to the Participants in connection with the Directed Share Program. The
Company will not issue any such materials to the Participants without the prior
written consent of Citigroup.
(c) The Selling Shareholder represents and warrants to, and agrees
with, each of the Underwriters that:
(i) To the extent that any statements or omissions made in
the Registration Statement, the Prospectus, the Pricing Prospectus, any
Preliminary Prospectus or any Issuer Free Writing Prospectus, or any further
amendments or supplements thereto are made in reliance upon and in conformity
with information furnished by and relating to the Selling Shareholder, the
Registration Statement did not, when it became effective, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Prospectus, the Pricing Prospectus, such Preliminary Prospectus, such Issuer
Free Writing Prospectus and any further amendments or supplements thereto, when
they were or are filed with the Commission, as the case may be, did not and will
not, as the case may be, contain 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 the Registration Statement, the Prospectus, the
Pricing Prospectus, any Preliminary Prospectus or any Issuer Free Writing
Prospectus, or any further amendments or supplements thereto, in reliance upon
and in conformity with written information furnished to the Company by an
Underwriter through ▇▇▇▇▇▇▇, Sachs & Co. expressly for use therein;
(ii) This Agreement has been duly authorized, executed and
delivered by the Selling Shareholder;
(iii) All consents, approvals, authorizations and orders
necessary for the execution and delivery by the Selling Shareholder of this
Agreement, and for the sale and delivery of the Shares to be sold by the Selling
Shareholder hereunder, have been obtained; and the Selling Shareholder has full
right, power and authority to enter into this Agreement and to sell, assign,
transfer and deliver the Shares to be sold by the Selling Shareholder hereunder;
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(iv) The sale of the Shares to be sold by the Selling
Shareholder hereunder, the execution of this Agreement and the compliance by the
Selling Shareholder with all of the provisions hereof and the consummation of
the transactions contemplated herein 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 Selling Shareholder is a party or by which
the Selling Shareholder is bound or to which any of the property or assets of
the Selling Shareholder is subject, nor will such action result in any violation
of the provisions of the Memorandum of Association, Bye-laws or similar
organizational documents of the Selling Shareholder or any statute or any order,
rule or regulation of any Governmental Agency having jurisdiction over the
Selling Shareholder or the property of the Selling Shareholder;
(v) The Selling Shareholder has, and immediately prior to
each Time of Delivery (as defined in Section 4 hereof) the Selling Shareholder
will have, good and valid title to the Shares to be sold by it hereunder, free
and clear of all liens, encumbrances, equities or claims; and, upon delivery of
such Shares and payment therefor pursuant hereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities or claims, will pass
to the several Underwriters;
(vi) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the Prospectus
(the initial "Lock-Up Period"), not to offer, sell, contract to sell, pledge,
hedge, grant any option to purchase, make any short sale or otherwise dispose,
except as provided hereunder, of any shares of the Company that are
substantially similar to the Shares, including, but not limited to, any options
or warrants to purchase shares or any shares that are convertible into or
exchangeable for, or that represent the right to receive, shares or any such
substantially similar securities, without your prior written consent; PROVIDED,
HOWEVER, that if (1) during the last 17 days of the initial Lock-Up Period, the
Company releases earnings results or announces material news or a material event
or (2) prior to the expiration of the initial Lock-Up period, the Company
announces that it will release earnings results during the 15-day Period
following the last day of the initial Lock-Up Period, then in each case the
Lock-Up Period will be automatically extended until the expiration of the 18-day
period beginning on the date of release of the earnings results or the
announcement of the material news or material event, as applicable, unless
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. waives, in writing, such extension; the Selling Shareholder
hereby acknowledges that the Company has agreed herein to provide written notice
of any event that would result in an extension of the Lock-Up Period pursuant to
the previous sentence to the Selling Shareholder (in accordance with Section 13
hereof) and agrees that any such notice properly delivered will be deemed to
have been given to, and received by, the Selling Shareholder; the Selling
Shareholder hereby further agrees that, prior to engaging
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in any transaction or taking any other action that is subject to the terms of
this provision during the period from the date hereof to and including the 34th
day following the expiration of the initial Lock-Up Period, it will give notice
thereof to the Company and will not consummate such transaction or take any such
action unless it has received written confirmation from the Company that the
Lock-Up Period (as such may have been extended pursuant to the previous
paragraph) has expired.
(vii) Neither the Selling Shareholder nor, to the Selling
Shareholder's knowledge, any of its affiliates has taken or will take, directly
or indirectly, any action which is designed to or which has constituted or which
might reasonably be 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 Shares in violation of the Exchange Act;
(viii) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein contemplated,
the Selling Shareholder will deliver to you prior to or at the First Time of
Delivery (as hereinafter defined) a properly completed and executed United
States Treasury Department Form W-8 BEN (or other applicable form or statement
specified by Treasury Department regulations in lieu thereof);
(ix) Certificates in negotiable form representing all of the
Shares to be sold by the Selling Shareholder hereunder have been, or will be at
the applicable Time of Delivery, duly and properly endorsed in blank for
transfer, accompanied by all documents, including stock powers, duly and
properly executed that are necessary to validate the transfer of title thereto,
to the Underwriters, free of any legend, restriction on transferability, proxy,
lien or claim whatsoever.
2. Subject to the terms and conditions herein set forth, (a) the
Company and the Selling Shareholder agree, severally and not jointly, to issue
and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company and the Selling
Shareholder, at a purchase price per share of $_____, the number of Firm Shares
(to be adjusted by you so as to eliminate fractional shares) determined by
multiplying the aggregate number of Firm Shares to be sold by the Company and
the Selling Shareholder as set forth opposite their respective names in Schedule
II hereto by a fraction, the numerator of which is the aggregate number of Firm
Shares to be purchased by such Underwriter as set forth opposite the name of
such Underwriter in Schedule I hereto and the denominator of which is the
aggregate number of Firm Shares to be purchased by all of the Underwriters from
the Company and the Selling Shareholder hereunder and (b) in the event and to
the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Selling Shareholder agrees to sell to
each of the Underwriters, and
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each of the Underwriters agrees, severally and not jointly, to purchase from the
Selling Shareholder, at the purchase price per share set forth in clause (a) of
this Section 2, that portion of the number of Optional Shares as to which such
election shall have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such number of Optional Shares by a
fraction, the numerator of which is the maximum number of Optional Shares which
such Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.
The Selling Shareholder hereby grants to the Underwriters the
right to purchase at their election up to _____ Optional Shares, at the purchase
price per share set forth in the paragraph above, for the sole purpose of
covering sales of shares in excess of the number of Firm Shares, provided that
the purchase price per Optional Share shall be reduced by an amount per share
equal to any dividends or distributions declared by the Company and payable on
the Firm Shares but not payable on the Optional Shares. Any such election to
purchase Optional Shares may be exercised only by written notice from ▇▇▇▇▇▇▇,
▇▇▇▇▇ & Co. to the Company and the Selling Shareholder given within a period of
30 calendar days after the date of this Agreement, setting forth the aggregate
number of Optional Shares to be purchased and the date on which such Optional
Shares are to be delivered, as determined by ▇▇▇▇▇▇▇, Sachs & Co. but in no
event earlier than the First Time of Delivery (as defined in Section 4 hereof)
or, unless you and the Company and the Selling Shareholder otherwise agree in
writing, earlier than two or later than ten business days after the date of such
notice.
As part of the offering contemplated by this Agreement, Citigroup has
agreed to reserve out of the Securities set forth opposite its name on Schedule
I to this Agreement, up to $_____ of Common Shares, for sale to the Company's
officers and directors (collectively, "Participants"), as set forth in the
Prospectus under the heading "Underwriting" (the "Directed Share Program"). The
Securities to be sold by Citigroup pursuant to the Directed Share Program (the
"Directed Shares") will be sold by Citigroup pursuant to this Agreement at the
public offering price. Any Directed Shares not orally confirmed for purchase by
any Participants by 7:30 a.m. New York City time on the business day following
the date on which this Agreement is executed will be offered to the public by
Citigroup as set forth in the Preliminary Prospectus and the Prospectus.
3. Upon the authorization by you of the release of the Firm Shares,
the several Underwriters propose to offer the Firm Shares for sale upon the
terms and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder,
will be represented by one or more definitive global shares in book-entry form
which
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will be deposited by or on behalf of the Company and the Selling Shareholder
with the Depository Trust Company ("DTC") or its designated custodian. The
Company and the Selling Shareholder will deliver the such Shares to ▇▇▇▇▇▇▇,
▇▇▇▇▇ & Co. for the account of each Underwriter, against payment by or on behalf
of such Underwriter of the purchase price therefor by wire transfer of Federal
(same-day) funds to the account specified by the Company, in the case of Shares
sold by the Company, and the Selling Shareholder, in the case of Shares sold by
the Selling Shareholder, as their interests may appear to ▇▇▇▇▇▇▇, Sachs & Co.
at least twenty-four hours in advance by causing DTC to credit the Shares to the
account of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. at DTC. The Company and the Selling Shareholder,
upon request by ▇▇▇▇▇▇▇, Sachs. & Co., will cause the certificates representing
such Shares to be made available to ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. for checking at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 9:30 a.m., New York City time, on _____, 2006 or such other
time and date as ▇▇▇▇▇▇▇, Sachs & Co., the Company and the Selling Shareholder
may agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m.,
New York City time, on the date specified by ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. in the written
notice given by ▇▇▇▇▇▇▇, Sachs & Co. of the Underwriters' election to purchase
such Optional Shares, or such other time and date as ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., the
Company and the Selling Shareholder may agree upon in writing. Such time and
date for delivery of the Firm Shares is herein called the "First Time of
Delivery", such time and date for delivery of the Optional Shares if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 8 hereof, including the
cross-receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 8(n) hereof, will be delivered at the offices
of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Closing Location"), and the Shares will be delivered at the Designated Office,
all at such Time of Delivery. A meeting will be held at the Closing Location at
4:30 p.m., New York City time, on the New York Business Day next preceding such
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.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement or, if applicable, such earlier time as
may be required by Rule 430A(a)(3) under the Act; to make no further amendment
or any
12
supplement to the Registration Statement or the Prospectus prior to the last
Time of Delivery which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed or becomes
effective or any amendment or supplement to the Prospectus has been filed and to
furnish you with copies thereof; to file promptly any material required to be
filed by the Company with the Commission pursuant to Rule 433(d) under the Act
within the time required by such Rule; to advise you, promptly after it receives
notice thereof, of the issuance by the Commission prior to the completion of the
distribution of the Shares contemplated by this Agreement (the date of which
shall be confirmed to the Company by you) of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or other
prospectus in respect of the Shares, of any notice of objection of the
Commission to the use of the Registration Statement or any post-effective
amendment thereto pursuant to Rule 401(g)(2) under the Act, of the suspension of
the qualification of the Shares for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or of any
request by the Commission prior to the completion of the distribution of the
Shares contemplated by this Agreement for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or other prospectus or
suspending any such qualification, to promptly use its best efforts to obtain
the withdrawal of such order; and in the event of the issuance of any such
notice, promptly to amend the Registration Statement in such manner as may be
required to permit offers and sales of the Shares;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for 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 of the Shares, provided that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(c) Prior to 3:00 p.m., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to furnish
the Underwriters with written and electronic copies of the Prospectus in New
York City in such quantities as you may reasonably request, and, if the delivery
of a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under
the Act) is required at any time prior to the expiration of nine months after
the time of issue of the Prospectus in connection with the offering or sale of
the Shares and if at such time any event shall have occurred as a result of
which the Prospectus 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
13
therein, in the light of the circumstances under which they were made when such
Prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the
Act) is delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus or to
file under the Exchange Act any document incorporated by reference in the
Prospectus in order to comply with the Act or the Exchange Act, to notify you
and upon your request to file such document and to prepare and furnish without
charge to each Underwriter and to any dealer in securities as many written and
electronic copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such statement
or omission or effect such compliance; and in case any Underwriter is required
to deliver a prospectus (or in lieu thereof, the notice referred to in Rule
173(a) under the Act) in connection with sales of any of the Shares at any time
nine months or more after the time of issue of the Prospectus, upon your request
but at the expense of such Underwriter, to prepare and deliver to such
Underwriter as many written and electronic copies as you may request of an
amended or supplemented Prospectus complying with Section 10(a)(3) of the Act;
you will inform the Company when the Underwriters' obligation to deliver a
prospectus has expired;
(d) To make generally available to its security holders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
of the Commission thereunder (including, at the option of the Company, Rule
158);
(e) During the period beginning from the date hereof and continuing
to and including the date 180 days after the date of the Prospectus not to
offer, sell, contract to sell, pledge, hedge, grant any option to purchase, make
any short sale or otherwise dispose, except as provided hereunder, of any shares
or any securities of the Company that are substantially similar to the Shares,
including, but not limited to, any options or warrants to purchase shares or any
securities that are convertible into or exchangeable for, or that represent the
right to receive, shares or any such substantially similar securities (other
than (i) pursuant to the Company's 2006 Long Term Incentive and Share Award
Plan, Annual Incentive Compensation Plan or Deferred Compensation Program, or
upon the conversion or exchange of convertible or exchangeable securities
outstanding as of the date of this Agreement and (ii) the issuance by the
Company of restricted Common Shares, options to receive Common Shares and other
equity-based awards to directors, officers and employees of the Company in
exchange for similar securities of XL Capital Ltd as described in the Pricing
Prospectus under "Management- Treatment of Outstanding XL Capital Equity Awards
for Our Employees" ), without your prior written consent; PROVIDED, HOWEVER,
that if (1) during the last 17 days of the initial Lock-Up Period, the Company
releases earnings results or announces material news or a material event or (2)
prior to
14
the expiration of the initial Lock-Up period, the Company announces that it will
release earnings results during the 15-day period following the last day of the
initial Lock-Up Period, then in each case the Lock-Up Period will be
automatically extended until the expiration of the 18-day period beginning on
the date of release of the earnings results or the announcement of the material
news or material event, as applicable, unless ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. waives, in
writing, such extension; the Company will provide ▇▇▇▇▇▇▇, Sachs & Co., the
Selling Shareholder and the directors and officers of the Company who execute
and deliver lock-up letters pursuant to Section 8(l) hereof with prior notice of
any such announcement that gives rise to an extension of the Lock-Up Period;
(f) During a period of three years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to shareholders generally, and to
deliver to you (i) as soon as they are publicly available, copies of any reports
and financial statements furnished to or filed with the Commission; PROVIDED,
HOWEVER that any information or documents filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System or otherwise made
available on the Company's website shall be considered sufficiently furnished to
you for the purposes of this Section 5(f);
(g) To use its best efforts to list, subject to notice of issuance,
the Shares on the Exchange;
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the Pricing
Prospectus and Prospectus under the caption "Use of Proceeds";
(i) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of
this Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or give
irrevocable instructions for the payment of such fee pursuant to Rule 111(b)
under the Act; and
(j) Upon request of any Underwriter, to furnish, or cause to be
furnished, to such Underwriter an electronic version of the Company's corporate
logo for use on the website, if any, operated by such Underwriter for the
purpose of facilitating the on-line offering of the Shares (the "License");
PROVIDED, HOWEVER, that the License shall be used solely for the purpose
described above, is granted without any fee and may not be assigned or
transferred.
In addition, the Company covenants with Citigroup that the Company will
comply with all applicable securities and other applicable laws, rules and
regulations in each foreign jurisdiction in which the Directed Shares are
offered in connection with the Directed Share Program.
15
6. (a)The Company represents and agrees that, without the prior
consent of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., it has not made and will not make any offer
relating to the Shares that would constitute a "free writing prospectus" as
defined in Rule 405 under the Act; and each Underwriter represents and agrees
that, without the prior consent of the Company and ▇▇▇▇▇▇▇, Sachs & Co. (as to
both form and content), it has not made and will not make any offer relating to
the Shares that would constitute a free writing prospectus; any such free
writing prospectus, the use and content of which have been consented to by the
Company and ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. is listed on Schedule III hereto;
(b) The Company has complied and will comply with the requirements
of Rule 433 under the Act applicable to any Issuer Free Writing Prospectus,
including timely filing with the Commission or retention where required and
legending; and the Company represents that it has satisfied and agrees that it
will satisfy the conditions under Rule 433 under the Act to avoid a requirement
to file with the Commission any electronic road show;
(c) The Company agrees that if at any time following issuance of an
Issuer Free Writing Prospectus any event occurred or occurs as a result of which
such Issuer Free Writing Prospectus would conflict with the information in the
Registration Statement, the Pricing Prospectus or the Prospectus or 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 then prevailing, not misleading, the Company will give prompt
notice thereof to ▇▇▇▇▇▇▇, Sachs & Co. and, if requested by ▇▇▇▇▇▇▇, ▇▇▇▇▇ &
Co., will prepare and furnish without charge to each Underwriter an Issuer Free
Writing Prospectus or other document which will correct such conflict, statement
or omission; PROVIDED, HOWEVER, that this covenant shall not apply to any
statements or omissions in an Issuer Free Writing Prospectus made in reliance
upon and in conformity with information furnished in writing to the Company by
an Underwriter through ▇▇▇▇▇▇▇, Sachs & Co. expressly for use therein.
7. The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing, reproduction and filing
of the Registration Statement, any Preliminary Prospectus, any Issuer Free
Writing Prospectus and the Prospectus and amendments and supplements thereto and
the mailing and delivering of copies thereof to the Underwriters and dealers;
(ii) the cost of printing or producing any Agreement among Underwriters, this
Agreement, the Blue Sky Memorandum, closing documents (including any
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Shares; (iii) all expenses in connection with
the qualification of the Shares for offering and sale under state securities
laws as provided in Section 5(b) hereof, including the fees and disbursements of
counsel
16
for the Underwriters in connection with such qualification and in connection
with the Blue Sky survey; (iv) all fees and expenses in connection with listing
the Shares on the Exchange; the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of the sale of the Shares; (v) the cost of preparing share certificates;
(vi) the cost and charges of any transfer agent or registrar; (vii) fees and
disbursements of counsel incurred by the Underwriters in connection with the
Directed Share Program not to exceed $10,000; (viii) all costs and expenses
incurred by the Underwriters in connection with the printing (or reproduction)
and delivery (including postage, air freight charges and charges for counting
and packaging) of copies of the Directed Share Program materials; (ix) all stamp
duties, similar taxes or duties or other taxes, if any, incurred by the
Underwriters in connection with the Directed Share Program; and (x) all other
costs and expenses incident to the performance of its obligations hereunder
which are not otherwise specifically provided for in this Section. The Selling
Shareholder covenants and agrees with the several Underwriters that it will pay
or cause to be paid all costs and expenses incident to the performance of the
Selling Shareholder's obligations hereunder which are not otherwise specifically
provided for in this Section, including (i) any fees and expenses of counsel for
the Selling Shareholder and (ii) all expenses and taxes incident to the sale and
delivery of the Shares to be sold by the Selling Shareholder to the Underwriters
hereunder. It is understood, however, that the Company shall bear, and the
Selling Shareholder shall not be required to pay or to reimburse the Company
for, the cost of any other matters not directly relating to the sale and
purchase of the Shares pursuant to this Agreement, and that, except as provided
in this Section, and Sections 9 and 11 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees of their counsel, share
transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
8. The obligations of the Underwriters hereunder, as to the Shares
to be delivered at each Time of Delivery, shall be subject, in their discretion,
to the condition that all representations and warranties and other statements of
the Company and the Selling Shareholder herein are, at and as of such Time of
Delivery, true and correct, the condition that the Company and the Selling
Shareholder shall have performed all of its obligations hereunder theretofore to
be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) under the Act within the applicable time period
prescribed for such filing by the rules and regulations under the Act
and in accordance with Section 5(a) hereof and any other material
required to be filed by the Company pursuant to Rule 433(d) under the
Act shall have been filed with the Commission within the applicable time
periods prescribed for such filings by Rule 433; if the Company has
elected to rely
17
upon Rule 462(b) under the Act, the Rule 462(b) Registration Statement
shall have become effective by 10:00 P.M., Washington, D.C. time, on the
date of this Agreement; no stop order suspending the effectiveness of
the Registration Statement or any part thereof shall have been issued
and no proceeding for that purpose shall have been initiated or
threatened by the Commission; no stop order suspending or preventing the
use of the Prospectus or any Issuer Free Writing Prospectus shall have
been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP counsel for the
Underwriters, shall have furnished to you their written opinion or
opinions and letter, dated such 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;
(c) ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, United States counsel for
the Company and the Selling Shareholder, shall have furnished to you
their written opinion or opinions and letter, dated such Time of
Delivery, in the form attached hereto in Annex II-1 and Annex II-2,
respectively;
(d) ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇, Bermudian counsel for the
Company and the Selling Shareholder, shall have furnished to you their
written opinion or opinions, dated such Time of Delivery, in the form
attached hereto in Annex III;
(e) ▇▇▇▇▇▇▇▇▇ & May, English counsel for the Company, shall
have furnished to you their written opinion or opinions, dated such Time
of Delivery, in the form attached hereto in Annex IV;
(f) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement but prior to
the last Time of Delivery and also at each Time of Delivery,
PricewaterhouseCoopers LLP, the independent registered public accounting
firm of the Company, who has certified the combined financial statements
of the XL Financial Guaranty Companies that are included in the Pricing
Prospectus and Prospectus, 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;
(g)(i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial statements
included in the Pricing Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by
18
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Pricing Prospectus, and (ii) since the respective dates as of which
information is given in the Pricing Prospectus there shall not have been
any change in the share capital (other than changes resulting from the
exercise of options or the conversion of warrants or securities 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 securities) or long-term debt of the Company or any of
its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or
contemplated in the Pricing Prospectus, 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
public offering or the delivery of the Shares on the terms and in the
manner contemplated in the Prospectus;
(h) On or after the Applicable Time (i) no downgrading shall
have occurred in the rating accorded the debt securities of the Company
or any of its subsidiaries or the financial strength or claims paying
ability of the Company or any of its subsidiaries by any "nationally
recognized statistical rating organization", as that term is defined by
the Commission for purposes of Rule 436(g)(2) under the Act, and (ii)
other than any announcements made prior to the date of this Agreement,
no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating
of any of the debt securities or the financial strength or claims paying
ability;
(i) On or after 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 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 or Bermuda declared by the relevant authority or
a material disruption in commercial banking or securities settlement or
clearance services in the United States or any other relevant
jurisdiction; (iv) the outbreak or escalation of hostilities involving
the United States or Bermuda or the declaration by the United States 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
public offering or the delivery of the Shares being delivered at such
Time of Delivery on the terms and in the manner contemplated in the
Prospectus; (v) a change or development involving a prospective change
in Bermuda taxation affecting the Company, the
19
Shares or the transfer thereof or the imposition of exchange controls by
the United States or Bermuda; 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 or Bermuda or elsewhere, if the effect of any such
event specified in this clause in your judgment is so material and
adverse as to make it impractical or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered at such
Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(j) The Shares shall have been duly listed, subject to
notice of issuance on the Exchange;
(k) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on
the New York Business Day next succeeding the date of this Agreement;
(l) You shall have received lock-up letters, dated the date
of this Agreement, in the form attached hereto in Annex I-1 from each of
the directors and officers of the Company set forth in Annex I-2;
(m) The Company and the Selling Shareholder shall have
furnished or caused to be furnished to you at such Time of Delivery
certificates of officers of the Company and the Selling Shareholder,
respectively, satisfactory to you as to the accuracy of the
representations and warranties of the Company and the Selling
Shareholder, respectively, herein at and as of such Time of Delivery, as
to the performance by the Company and the Selling Shareholder of all of
their respective obligations hereunder to be performed at or prior to
such Time of Delivery, as to the matters set forth in subsections (a),
(g) and (h) of this Section and as to such other matters as you may
reasonably request; and
(n) Prior to each Time of Delivery, the Company and the
Selling Shareholder shall have furnished to you such further
information, certificates and documents as you may reasonably request;
and
(o) _______, in-house counsel for the Company, shall have
furnished to you such person's written opinion or opinions, dated such
Time of Delivery, in the form attached hereto in Annex V.
9. (a) The Company and the Selling Shareholder, jointly and
severally, will indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter may
become subject, under the 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 the Registration Statement, any Preliminary Prospectus, the Pricing
Prospectus or the Prospectus, or any amendment or supplement thereto, any Issuer
Free Writing
20
Prospectus or any "issuer information" filed or required to be filed pursuant to
Rule 433(d) under the Act, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal expenses of one counsel (in addition to any local
counsel) engaged reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; PROVIDED, HOWEVER, that the Company and the Selling Shareholder 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 the Registration
Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus,
or any amendment or supplement thereto, or any Issuer Free Writing Prospectus,
in reliance upon and in conformity with written information furnished to the
Company by any Underwriter through ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. expressly for use
therein; and PROVIDED FURTHER that the aggregate amounts payable by the Selling
Shareholder under this Section 8(a) shall not exceed the net proceeds received
by the Selling Shareholder from the sale of Shares pursuant to this Agreement
after deducting underwriting commissions and discounts.
(b) Each Underwriter will indemnify and hold harmless the Company
and the Selling Shareholder against any losses, claims, damages or liabilities
to which the Company or the Selling Shareholder may become subject, under the
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 the Registration
Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus,
or any amendment or supplement thereto, or any Issuer Free Writing Prospectus,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein 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 the Registration Statement, any Preliminary
Prospectus, the Pricing Prospectus or the Prospectus, or any such amendment or
supplement thereto, or any Issuer Free Writing Prospectus, in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through ▇▇▇▇▇▇▇, Sachs & Co. expressly for use therein, and will
reimburse the Company and the Selling Shareholder for any legal or other
expenses reasonably incurred by the Company or the Selling Shareholder 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) The Company will indemnify and hold harmless Citigroup, the
directors, officers, employees and agents of Citigroup and each person who
21
controls Citigroup within the meaning of the Exchange Act (the "Citigroup
Entities") against any losses, claims, damages and liabilities, joint or
several, to which they may become subject under the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims damages or liabilities (or actions in respect
thereof) (i) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any of the materials prepared
by or with the consent of the Company for distribution to the Participants in
connection with the Directed Share Program, the prospectus wrapper material
prepared by or with the consent of the Company for distribution in foreign
jurisdictions in connection with the Directed Share Program attached to the
Prospectus, any Preliminary Prospectus or any Issuer Free Writing Prospectus, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, when considered in conjunction with the Prospectus or any
applicable Preliminary Prospectus, not misleading; (ii) are caused by the
failure of any Participant to pay for and accept delivery of the securities that
were, immediately following the date of this Agreement, subject to a properly
confirmed agreement to purchase; or (iii) are related to or arising out of, or
in connection with, the Directed Share Program, and in each case, will reimburse
the Citigroup Entities for any legal expenses of one counsel (in addition to
local counsel), which shall be the same counsel engaged pursuant to subsection
(a) above (unless such counsel advises the Citigroup Entities that it cannot act
as counsel in connection with both this subsection (c) and subsection (a)) if
any such counsel is engaged pursuant to subsection (a) above (but which
otherwise may be separate counsel), reasonably incurred by the Citigroup
Entities in connection with investigating or defending any such action or claim
as such expenses are incurred; PROVIDED, HOWEVER, that in the case of clause
(iii) the Company shall not be liable to the extent that any such loss, claim,
damage or liability is finally judicially determined to have resulted primarily
from the gross negligence or willful misconduct of the Citigroup Entities.
(d) Promptly after receipt by an indemnified party under subsection
(a),(b) or (c) 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
22
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
(except as set forth below). 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
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 (1) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (2) 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.
(e) If the indemnification provided for in this Section 9 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a),(b) or (c) 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 Selling
23
Shareholder on the one hand and the Underwriters on the other from the offering
of the Shares. 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 (d) 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 Selling Shareholder on the
one hand and the Underwriters 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 Selling
Shareholder on the one hand and the Underwriters on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Shareholder bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus. 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 Selling Shareholder on the one hand or the Underwriters 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
Selling Shareholder and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (e) were determined by
PRO RATA allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (e). 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 (e) 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 (e), (i) no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission and (ii) the aggregate amount that the Selling Shareholder shall be
required to contribute shall not exceed the amount by which the net proceeds
received by the Selling Shareholder from the sale of Shares pursuant to this
Agreement after deducting underwriting commissions and discounts exceeds the
amount of any damages which the Selling Shareholder have otherwise been required
to pay by reason of such untrue or alleged statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (e) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Shareholder under
this Section 9 shall be in addition to any liability which the Company and the
24
Selling Shareholder may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section 9
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls the
Company or the Selling Shareholder within the meaning of the Act.
10. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties satisfactory to the Company and the Selling Shareholder to purchase such
Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Company and the Selling Shareholder shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the event
that, within the respective prescribed periods, you notify the Company and the
Selling Shareholder that you have so arranged for the purchase of such Shares,
or the Company and the Selling Shareholder notify you that they have so arranged
for the purchase of such Shares, you or the Company and the Selling Shareholder
shall have the right to postpone such Time of Delivery for a period of not more
than seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments or supplements to the Registration Statement or the Prospectus which
in your opinion may thereby be made necessary. The term "Underwriter" as used in
this Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the Company
and the Selling Shareholder as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company and the Selling Shareholder shall have the right to require
each non-defaulting Underwriter to purchase the number of shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the Company
and
25
the Selling Shareholder as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery, or
if the Company and the Selling Shareholder shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Selling Shareholders to sell the Optional
Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company or the Selling Shareholder, except for
the expenses to be borne by the Company and the Selling Shareholder and the
Underwriters as provided in Section 7 hereof and the indemnity and contribution
agreements in Section 9 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
11. The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Selling Shareholder and the
several Underwriters, 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 any Underwriter or any controlling person of
any Underwriter, or the Company, or the Selling Shareholder, or any officer or
director or controlling person of the Company, or any controlling person of the
Selling Shareholder, and shall survive delivery of and payment for the Shares.
12. If this Agreement shall be terminated pursuant to Section 10
hereof, neither the Company nor the Selling Shareholder shall then be under any
liability to any Underwriter except as provided in Sections 7, 9 and 24 hereof;
but, if for any other reason, any Shares are not delivered by or on behalf of
the Company and the Selling Shareholder as provided herein, the Company will
reimburse the Underwriters through you for all out-of-pocket expenses approved
in writing by you, including reasonable fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company and the
Selling Shareholder shall then be under no further liability to any Underwriter
except as provided in Sections 7, 9 and 24 hereof.
13. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made or
given by you.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of ▇▇▇▇▇▇▇, ▇▇▇▇▇ &
Co., ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
26
Registration Department; if to the Selling Shareholder shall be delivered or
sent by mail, telex or facsimile transmission to the Selling Shareholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 9(c) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company or the Selling Shareholder by you upon request; provided, however, that
notices under subsection 1(b)(vi) and 5(e) shall be in writing, and if to the
Underwriters shall be delivered or sent by mail, telex or facsimile transmission
to you as the representatives at ▇▇▇▇▇▇▇, Sachs & Co., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Control Room; and if to the directors and
officers who have executed and delivered lock-up letters pursuant to section
8(l) shall be delivered or sent by mail, telex or facsimile transmission to such
persons at the address of the Company set forth in the Registration Statement,
Attention: Secretary. 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 Underwriters, the Company, the Selling Shareholder and, to the
extent provided in Sections 9 and 11 hereof, the officers and directors of the
Company and each person who controls the Company, the Selling Shareholder or any
Underwriter, 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 Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
15. The Selling Shareholder covenants and agrees with each of the
Underwriters that the Selling Shareholder and its subsidiaries will not directly
or indirectly transfer, distribute (by dividend or otherwise), convey or
otherwise dispose of all or substantially all of the assets of the Selling
Shareholder and its subsidiaries taken as a whole to any person (other than the
Selling Shareholder or one or more subsidiaries of the Selling Shareholder) in
one or more related transactions unless (i) the person or persons to whom such
assets are transferred, distributed, conveyed or otherwise disposed or (ii) at
the option of the Selling Shareholder, XL Capital Ltd agrees in writing to
assume and perform the Selling Shareholder's obligations under this Agreement,
including the Selling Shareholder's obligations pursuant to Section 9 hereof.
16. The Company and the Selling Shareholder irrevocably (i) agree
that any legal suit, action or proceeding against the Company and/or the Selling
Shareholder brought by any Underwriter or by any person who controls any
Underwriter 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) waive, to the
fullest
27
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) submit to the
exclusive jurisdiction of such courts in any such suit, action or proceeding.
Each of the Company and the Selling Shareholder has appointed _____, 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 any
Underwriter or by any person who controls any Underwriter, expressly consent to
the jurisdiction of any such court in respect of any such action, and waive any
other requirements of or objections to personal jurisdiction with respect
thereto. Such appointment shall be irrevocable. The Company and the Selling
Shareholder represent and warrant that the Authorized Agent has agreed to act as
such agent for service of process and agree 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 Selling Shareholder shall be deemed, in every respect,
effective service of process upon the Company or the Selling Shareholder.
17. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business. "New York Business Day" shall mean each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
18. The Company and the Selling Shareholder acknowledge and agree
that (i) the purchase and sale of the Shares pursuant to this Agreement is an
arm's-length commercial transaction between the Company and the Selling
Shareholder, on the one hand, and the several Underwriters, on the other, (ii)
in connection therewith and with the process leading to such transaction each
Underwriter is acting solely as a principal and not as the agent or fiduciary of
the Company or the Selling Shareholder, (iii) no Underwriter has assumed an
advisory or fiduciary responsibility in favor of the Company or the Selling
Shareholder with respect to the offering contemplated hereby or the process
leading thereto (irrespective of whether such Underwriter has advised or is
currently advising the Company or the Selling Shareholder on other matters) or
any other obligation to the Company or the Selling Shareholder except the
obligations expressly set forth in this Agreement and (iv) the Company and the
Selling Shareholder have consulted their own legal and financial advisors to the
extent they deemed appropriate. The Company and the Selling Shareholder agree
that they will not claim that the Underwriters, or any of them, has rendered
advisory services of any nature or respect, or owes a fiduciary or similar duty
to
28
the Company or the Selling Shareholder, in connection with such transaction or
the process leading thereto.
19. This Agreement supersedes all prior agreements and
understandings (whether written or oral) between the Company, the Selling
Shareholder and the Underwriters, or any of them, with respect to the subject
matter hereof.
20. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
21. Each of the Company, the Selling Shareholder and each of the
Underwriters 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.
22. 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.
23. Notwithstanding anything herein to the contrary, the Company and
the Selling Shareholder are authorized to disclose to any persons the U.S.
federal and state income tax treatment and tax structure of the potential
transaction and all materials of any kind (including tax opinions and other tax
analyses) provided to the Company and the Selling Shareholder relating to that
treatment and structure, without the Underwriters imposing any limitation of any
kind. However, any information relating to the tax treatment and tax structure
shall remain confidential (and the foregoing sentence shall not apply) to the
extent necessary to enable any person to comply with securities laws. For this
purpose, "tax structure" is limited to any facts that may be relevant to that
treatment.
24. 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 Selling Shareholder
jointly and severally will indemnify each Underwriter against any loss incurred
by such Underwriter 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 an Underwriter is able to purchase United States dollars with the
amount of judgment currency actually received by such Underwriter. The foregoing
indemnity shall constitute a separate and independent obligation of the Company
and the Selling Shareholder and shall continue in full force and effect
notwithstanding any such judgment or order 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.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
29
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company, the Selling Shareholder and each of you,
plus one for each counsel, counterparts hereof, and upon the acceptance hereof
by you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters, the
Company and the Selling Shareholder. It is understood that your acceptance of
this letter on behalf of each of the Underwriters is pursuant to the authority
set forth in a form of Agreement among Underwriters, the form of which shall be
submitted to the Company and the Selling Shareholder for examination upon
request, but without warranty on your part as to the authority of the signers
thereof.
30
Very truly yours,
Security Capital Assurance Ltd
By:________________________
Name:
Title:
XL Insurance (Bermuda) Ltd
By:________________________
Name:
Title:
31
Accepted as of the date hereof:
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
By: ________________________
Name:
Title:
▇.▇. ▇▇▇▇▇▇ Securities Inc.
By: ________________________
Name:
Title:
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
By: ________________________
Name:
Title:
On Behalf of Each of the Underwriters
32
SCHEDULE I
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER PURCHASED IF
OF FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
-------------- ------------------
▇▇▇▇▇▇▇, Sachs & Co.....................
▇.▇. ▇▇▇▇▇▇ Securities Inc..............
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated................
Citigroup Global Markets Inc. ..........
Deutsche Bank Securities Inc. ..........
UBS Securities LLC......................
Banc of America Securities LLC..........
Barclays Capital, Inc. .................
Bear, ▇▇▇▇▇▇▇ & Co. Inc.................
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C..........
Calyon Securities (USA) Inc. ...........
▇▇▇▇▇▇▇ & Partners Securities, LLC .....
▇▇▇-▇▇▇▇, ▇▇▇▇▇▇ Incorporated...........
HSBC Securities (USA) Inc...............
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. ..........
Wachovia Capital Markets, LLC...........
Total................................
-------------- ------------------
============== ==================
S-1
SCHEDULE II
NUMBER OF
TOTAL NUMBER OPTIONAL SHARES
OF FIRM TO BE SOLD
SHARES TO BE IF MAXIMUM OPTION
SOLD EXERCISED
-------------- -------------------
The Company.............................
The Selling Shareholder (a)(b):.........
-------------- -------------------
Total............................
============== ===================
(a) The Selling Shareholder is represented by ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP.
(b) The address of the Selling Shareholder is: One ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇ ▇▇, ▇▇▇▇▇▇▇.
▇-▇
SCHEDULE III
Issuer Free Writing Prospectuses
S-3
SCHEDULE IV
Subsidiaries of the Company
SCA Bermuda Administrative Ltd
XL Financial Assurance Ltd.
SCA Holdings US Inc.
SCA Administrative Holdings US Inc.
XL Financial Administrative Services
XL Portfolio Advisors Inc.
XLCA Admin LLC
XLCDS LLC
XL Capital Assurance Inc.
XL Capital Assurance (U.K.) Limited
S-4
ANNEX I-1
SECURITY CAPITAL ASSURANCE LTD
LOCK-UP AGREEMENT
_____, 2006
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
▇.▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
c/o Goldman, Sachs & Co.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: SECURITY CAPITAL ASSURANCE LTD - LOCK-UP AGREEMENT
Ladies and Gentlemen:
The undersigned understands that you, as representatives (the
"Representatives"), propose to enter into an Underwriting Agreement on behalf of
the several Underwriters named in Schedule I to such agreement (collectively,
the "Underwriters"), with Security Capital Assurance Ltd, a Bermuda limited
company (the "Company"), and the selling shareholder party thereto providing for
a public offering of the Common Shares of the Company (the "Shares") pursuant to
a Registration Statement on Form S-1 filed with the Securities and Exchange
Commission (the "SEC").
In consideration of the agreement by the Underwriters to offer and sell
the Shares, and of other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the undersigned agrees that, during
the period specified in the following paragraph (the "Lock-Up Period"), the
undersigned will not offer, sell, contract to sell, pledge, grant any option to
purchase, make any short sale or otherwise dispose of any shares of the Company,
or any options or warrants to purchase any Common Shares of the Company, or any
securities convertible into, exchangeable for or that represent the right to
receive Common Shares of the Company, whether now owned or hereinafter acquired,
owned directly by the undersigned (including holding as a custodian) or with
respect to which the undersigned has beneficial ownership within the rules and
regulations of the SEC (collectively the "Undersigned's Shares"). The foregoing
restriction is expressly agreed to preclude the undersigned from engaging in any
hedging or other transaction which is designed to or which reasonably could be
expected to lead to or result in a sale or disposition of the Undersigned's
Shares even if such Shares would be disposed of by someone other than the
undersigned. Such prohibited hedging or other transactions would include without
limitation any short sale or any purchase, sale or grant of any right (including
without limitation any put or call option) with respect to any of the
Undersigned's Shares or with respect to any security that includes, relates to,
or derives any significant part of its value from such Shares.
The initial Lock-Up Period will commence on the date of this Lock-Up
Agreement and continue for 180 days after the public offering date set forth on
the final prospectus used to sell the Shares (the "Public Offering Date")
pursuant to the Underwriting Agreement; provided, however, that if (1) during
the last 17 days of the initial Lock-Up Period, the Company releases earnings
results or announces material news or a material event or (2) prior to the
expiration of the initial Lock-Up Period, the Company an-
A-1
nounces that it will release earnings results during the 15-day period following
the last day of the initial Lock-Up Period, then in each case the Lock-Up Period
will be automatically extended until the expiration of the 18-day period
beginning on the date of release of the earnings results or the announcement of
the material news or material event, as applicable, unless ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
waives, in writing, such extension.
The undersigned hereby acknowledges that the Company has agreed in
the Underwriting Agreement to provide written notice of any event that would
result in an extension of the Lock-Up Period pursuant to the previous paragraph
to the undersigned (in accordance with Section 13 of the Underwriting Agreement)
and agrees that any such notice properly delivered will be deemed to have been
given to, and received by, the undersigned. The undersigned hereby further
agrees that, prior to engaging in any transaction or taking any other action
that is subject to the terms of this Lock-Up Agreement during the period from
the date of this Lock-Up Agreement to and including the 34th day following the
expiration of the initial Lock-Up Period, it will give notice thereof to the
Company and will not consummate such transaction or take any such action unless
it has received written confirmation from the Company that the Lock-Up Period
(as such may have been extended pursuant to the previous paragraph) has expired.
Notwithstanding the foregoing, the undersigned may transfer the
Undersigned's Shares (i) at any time after the date on which such person ceases
to be a director or officer of the Company, (ii) as a BONA FIDE gift or gifts,
provided that the donee or donees thereof agree to be bound in writing by the
restrictions set forth herein, (iii) to any trust for the direct or indirect
benefit of the undersigned or the immediate family of the undersigned, provided
that the trustee of the trust agrees to be bound in writing by the restrictions
set forth herein, and provided further that any such transfer shall not involve
a disposition for value, (iv) for BONA FIDE tax planning purposes or (v) with
the prior written consent of ▇▇▇▇▇▇▇, Sachs & Co. on behalf of the Underwriters.
For purposes of this Lock-Up Agreement, "immediate family" shall mean any
relationship by blood, marriage or adoption, not more remote than first cousin.
In addition, notwithstanding the foregoing, if the undersigned is a corporation,
the corporation may transfer the capital stock of the Company to any
wholly-owned subsidiary of such corporation; PROVIDED, HOWEVER, that in any such
case, it shall be a condition to the transfer that the transferee execute an
agreement stating that the transferee is receiving and holding such capital
stock subject to the provisions of this Agreement and there shall be no further
transfer of such capital stock except in accordance with this Agreement, and
provided further that any such transfer shall not involve a disposition for
value. The undersigned also agrees and consents to the entry of stop transfer
instructions with the Company's transfer agent and registrar against the
transfer of the Undersigned's Shares except in compliance with the foregoing
restrictions.
The undersigned understands that the Company and the Underwriters are
relying upon this Lock-Up Agreement in proceeding toward consummation of the
offering. The undersigned further understands that this Lock-Up Agreement is
irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors, and assigns.
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Very truly yours,
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Exact Name of Shareholder
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Authorized Signature
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Title
▇-▇
▇▇▇▇▇ ▇-▇
List of Directors and Officers Required to Execute Lock-Up Agreements
A-4
ANNEX II-1
Form of ▇▇▇▇▇▇ Opinion
A-5
ANNEX II-2
Form of ▇▇▇▇▇▇ Negative Assurance Letter
A-6
ANNEX III
Form of ▇▇▇▇▇▇▇ Opinion
A-7
ANNEX IV
Form of ▇▇▇▇▇▇▇▇▇ & May Opinion
A-8
ANNEX V
Form of In-House Counsel Opinion
A-9
ANNEX VI
Written Materials Provided to Participants in Directed Share Program
A-10