The objectives of Polimatrix include: demonstrating effective radiological detection and communication response to terrorist or border crossing threats; and mitigation of threats by using technology supporting emergency response teams deployed in the field.

"We are excited and honored to be one of the companies chosen to participate in this premier event," said former Maryland Congressman C. Thomas McMillen, Homeland Security Capital Corporation's Chairman and CEO. "These training events are critical in establishing a coordinated response to both natural and terrorism disasters and we are pleased to have this opportunity to demonstrate our radiation and nuclear detection technologies."

About Golden Phoenix

Golden Phoenix is a multi-agency collaborative training event designed to assist local, state, tribal and federal agencies such as the San Diego Police, S.W.A.T. Team, Border Patrol, and the Marine Corps in preparing for large and often-complex incident response scenarios. To further this goal, CivMil.org is proud to help sponsor Golden Phoenix '08 by providing a social networking outlet for all those interested in the training.

About Polimatrix, Inc.

Polimatrix, Inc., a system integrator and total solutions provider delivering advanced radiation and nuclear protection and detection services. The company has been operating since September 2006 as a joint venture between Homeland Security Capital Corporation and Polimaster, Inc. For more information about Polimatrix, visit www.polimatrix.com.

About Homeland Security Capital Corporation

Homeland Security Capital Corporation is a company engaged in the strategic acquisition, development, and consolidation of homeland security-related businesses, within the fragmented homeland security industry. The company is focused on creating long-term value by taking controlling interest and developing its subsidiary companies through superior operations and management. The company is headed by former Congressman C. Thomas McMillen, who served three consecutive terms in the U.S. House of Representatives from the 4th Congressional District of Maryland. Homeland Security Capital Corporation operates businesses that provide homeland security products and services solutions, growing organically and by acquisitions. The company is targeting emerging companies that are generating revenues but face challenges in scaling their businesses to capitalize on homeland security opportunities.

Homeland Security Capital Corporation's portfolio of companies, in addition to Polimatrix, Inc., include:

Nexus Technologies Group, a mid-Atlantic security integrator for the corporate and governmental security markets that specializes in non-proprietary integrated security solutions including access control, alarm, video, communication, perimeter protection and bomb and metal detection security systems. Nexus provides integrated security solutions for the corporate and government security markets. For more information about Nexus, visit www.nexusna.com.

Safety and Ecology Corporation is a rapidly growing environmental services companies in the U.S., providing services nationally, in Europe and the Caribbean. The Company specializes in the removal and remediation of hazardous nuclear materials for the U.S. Department of Energy, U.S. Department of Defense, and other federal agencies. S & E Corp also provides advanced environmental services for private industry across the country and internationally. Since its founding in 1991, S & E Corp has grown approximately 30 percent per year, and has emerged as a technology innovator with more than 420 personnel worldwide and with annual revenues of more than U.S. $50 million. For more information on S & E Corp, visit www.sec-tn.com.

For more information about Homeland Security Capital Corporation, or to be added to our e-mail distribution list, please visit www.hscapcorp.com.

Forward-Looking Statement

This release includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical facts, that address future activities, performance, events or developments, are forward-looking statements. Although Homeland Security Capital Corporation believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance, and actual results or developments may differ materially from those in the forward-looking statements.

SOURCE: Homeland Security Capital Corporation

Homeland Security Capital Corporation, Arlington, VA
Marianne Ricci, 703-528-7073 Ext. 100
IR@hscapcorp.com
or
SEC Public Relations
Anne Smith, 865-342-7668
asmith@sec-tn.com
or
The Investor Relations Group
212-825-3210
Investor Relations:
Conrad F. Mir
conrad@investorrelationsgroup.com
or
Christine A. Berni
christine@investorrelationsgroup.com
or
Public Relations:
Susan Morgenbesser
smorgenbesser@investorrelationsgroup.com

Nexus continues its success in obtaining long-term service and maintenance contracts on system installs, which provides the company with recurring monthly revenue, long-term client relationships and additional business as these clients expand, upgrade, and/or add new facilities. Contemporaneously, Nexus signed new maintenance and service agreements that is anticipated to grow its annual service and repair business sector to over $1 million.

"We are pleased to see this progress in new business especially in light of the very tough economic conditions in the construction and renovation sectors," commented Homeland Security Capital Corporation's Chairman and CEO C. Thomas McMillen.

Nexus President Len Maleonskie said, "We continue to leverage our excellent industry reputation in securing new business in a very competitive environment."

About Nexus Technologies Group

Nexus Technologies Group, a mid-Atlantic security integrator for the corporate and governmental security markets that specializes in non-proprietary integrated security solutions including access control, alarm, video, communication, perimeter protection, and bomb and metal detection security systems. Utilizing cutting-edge technologies, Nexus provides innovative, engineered and scalable solutions to effectively protect people, property and assets. For more information about Nexus, visit www.nexusna.com.

About Homeland Security Capital Corporation

Homeland Security Capital Corporation is a company engaged in the strategic acquisition, development, and consolidation of homeland security-related businesses, within the fragmented homeland security industry. The company is focused on creating long-term value by taking controlling interest and developing its subsidiary companies through superior operations and management. Former Maryland Congressman C. Thomas McMillen, who served three consecutive terms in the U.S. House of Representatives from the 4th Congressional District of Maryland, heads the company.

Homeland Security Capital Corporation operates businesses that provide homeland security products and services solutions, growing organically and by acquisitions. The company is targeting emerging companies that are generating revenues but face challenges in scaling their businesses to capitalize on homeland security opportunities. In addition to Nexus Technologies Group, the company holds a majority equity stake in the following companies:

Safety and Ecology Corporation, a rapidly growing environmental services companies in the U.S., providing services nationally, in Europe and the Caribbean. The Company specializes in the removal and remediation of hazardous nuclear materials for the U.S. Department of Energy, U.S. Department of Defense, and other federal agencies. SEC also provides advanced environmental services for private industry across the country and internationally. Since its founding in 1991, SEC has grown approximately 30 percent per year, and has emerged as a technology innovator with more than 420 personnel worldwide and with annual revenues of more than U.S. $50 million. For more information on SEC, visit www.sec-tn.com.

Polimatrix, Inc., a system integrator and total solutions provider delivering advanced radiation and nuclear protection and detection services. The company has been operating since September 2006 as a joint venture between Homeland Security Capital Corporation and Polimaster, Inc. For more information about Polimatrix, visit www.polimatrix.com.

For more information about Homeland Security Capital Corporation, please visit our website:www.hscapcorp.com.

Forward-Looking Statement

This release includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical facts, that address future activities, performance, events or developments, are forward-looking statements. Although Homeland Security Capital Corporation believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance, and actual results or developments may differ materially from those in the forward-looking statements.

SOURCE: Homeland Security Capital Corporation

Homeland Security Capital Corporation, Arlington, VA
Marianne Ricci, 703-528-7073 Ext. 100
IR@hscapcorp.com
or
SEC Public Relations
Anne Smith, 865-342-7668
asmith@sec-tn.com
or
The Investor Relations Group
212-825-3210
Investor Relations:
Conrad F. Mir
cmir@investorrelationsgroup.com
or
Christine A. Berni
cberni@investorrelationsgroup.com
or
Public Relations:
Susan Morgenbesser
smorgenbesser@investorrelationsgroup.com

Concurrent with the Master Transaction Agreement, SCA also entered into an agreement (the "Merrill Agreement") with Merrill Lynch & Co., Inc. ("Merrill Lynch") for the termination of eight credit default swaps and the related financial guarantee insurance policies that were issued by XLCA.

Additionally, as of June 30, 2008, due to significant adverse development on loss reserves, XLCA will report negative statutory surplus and XLFA will report negative total statutory capital and surplus. Upon the successful closing of the transactions contemplated by the Master Transaction Agreement, the Merrill Agreement and related agreements, XLCA expects to have positive statutory surplus, and XLFA expects to have positive total statutory capital and surplus.

SCA and XL Capital have obtained approval from the New York Insurance Department and the Bermuda Monetary Authority for the Master Transaction Agreement and the transactions contemplated thereby. Other required approvals related to the agreement have been received from the Delaware Department of Insurance. The New York Insurance Department has also approved the Merrill Agreement and the transactions contemplated thereby.

"The agreements with XL Capital and Merrill Lynch represent a significant step in the restructuring process of SCA and are critical to our efforts to stabilize the company," commented Paul S. Giordano, Chief Executive Officer of SCA. "While we are very pleased with the progress made to date, our company remains exposed to potentially significant adverse loss development and there is still much work to be done. In the next phase, we will commence discussions with swap counterparties seeking to commute, terminate or restructure our remaining credit default swaps. The New York Insurance Department, the Bermuda Monetary Authority, the Delaware Department of Insurance and the UK Financial Services Authority, as well as our other regulators, have been extremely supportive in this process, and we look forward to continuing to work constructively with them in the future."

Master Transaction Agreement

According to the Master Transaction Agreement signed today, a number of reinsurance, guarantees and other arrangements among SCA and its subsidiaries and XL Capital and its subsidiaries will be terminated, eliminated or commuted in return for the payment by XL Capital and certain of its affiliates of $1.775 billion in cash, 8 million of XL Capital's Class A Ordinary Shares to XLCA and XLFA and the transfer of XL Capital's 46% ownership of SCA into a trust.

It is expected that the SCA shares currently owned by XL Capital will be transferred at the closing of the Master Transaction Agreement into a trust for the benefit of XLCA until such time as an agreement between XLCA and the Financial Counterparties is reached, and thereafter such SCA shares will be held for the benefit of the Financial Counterparties. To the extent that the required regulatory approvals for the transfer are not received prior to such closing, the SCA shares will be deposited into escrow pending the transfer. Upon any such deposit into escrow, XL will irrevocably disclaim any and all voting, economic and other rights with respect to the SCA shares. In connection with the transfer of the SCA shares, XL Capital will no longer have the right to nominate directors to SCA's Board of Directors. As a condition to closing, the four XL Capital-nominated Directors on SCA's Board of Directors, Messrs. Fred Corrado, Paul Hellmers, Gardner Grant, Jr. and Jonathan Bank, are expected to resign from SCA's Board of Directors at closing.

After the closing of the transactions contemplated by the Master Transaction Agreement, substantially all reinsurance agreements and guarantees with XL Capital and subsidiaries will be eliminated.

Merrill Agreement

Pursuant to the Merrill Agreement, SCA, XLCA, Merrill Lynch, Merrill Lynch International ("MLI") and eight trusts affiliated with SCA, the obligations of which are guaranteed by policies issued by XLCA, agreed to terminate eight credit default swaps (the "Swaps") and the related financial guarantee insurance policies issued by XLCA, with an insured gross par outstanding as of June 30, 2008 of $3.74 billion, in exchange for a payment by XLCA to Merrill Lynch of an aggregate amount of $500 million. As part of the closing of the transactions contemplated by the Merrill Agreement, the parties will provide mutual releases of claims with respect to the Swaps and the related policies. In addition, XLCA and MLI have agreed to dismiss, after the closing of the transaction, the litigation related to seven of the Swaps.

Second Quarter 2008 Developments

SCA also announced that it has conducted a review of its June 30, 2008 loss reserves. Based on the preliminary results of this review, SCA believes that its case reserves will have increased substantially as of June 30, 2008, primarily due to significant deterioration with respect to the Company's exposure to collateralized debt obligations of asset-backed securities and residential mortgage-backed securities. As a result, SCA's New York-based insurance subsidiary, XLCA, will report negative statutory surplus and its Bermuda-based reinsurance subsidiary, XLFA, will report negative total statutory capital and surplus as of June 30, 2008. Upon the successful closing of the transactions contemplated by the Master Transaction Agreement, the Merrill Agreement and related agreements, pending the satisfaction of the conditions noted below, XLCA expects to have positive statutory surplus and XLFA expects to have positive total statutory capital and surplus. In the absence of the consummation of the transactions contemplated by the Master Transaction Agreement, the Merrill Agreement and related agreements, XLCA and XLFA would likely be subject to regulatory action by their primary regulators, the New York Insurance Department and the Bermuda Monetary Authority. As a result of these developments, there is substantial doubt about the Company's ability to continue as a going concern. Upon the closing of the transactions contemplated by the Master Transaction Agreement, the Merrill Agreement and other related agreements, SCA intends to re-assess whether substantial doubt exists about the Company's ability to continue as a going concern.

Closings of the Master Transaction Agreement and the Merrill Agreement

The closings of the transactions contemplated by the Master Transaction Agreement, the Merrill Agreement, and other agreements are expected to occur concurrently in early August 2008. In addition to customary closing conditions, the closings are also subject to the completion by XL Capital of a registered public offering of its equity and equity units announced today. The parties may choose to terminate the Master Transaction Agreement if the closing does not occur by August 15, 2008. Further, concurrent with the execution of the Master Transaction Agreement, XLFA has entered into an agreement with Financial Security Assurance to commute all business reinsured by XLFA under reinsurance agreements between the parties. XLCA has agreed to directly reinsure a portion of such commuted business. In addition, XLFA has entered into agreements to commute certain other ceded reinsurance contracts.

The negotiations of the Master Transaction Agreement and the Merrill Agreement, as well as the continuing discussions among SCA, certain policyholders and other interested parties, have been facilitated by the New York Insurance Department. SCA has also worked closely with the Bermuda Monetary Authority, the UK Financial Services Authority, the Delaware Department of Insurance and other relevant authorities regarding these agreements.

While SCA expects the transactions contemplated by the Master Transaction Agreement, the Merrill Agreement and the other related agreements to close by August 15, 2008, there can be no assurance that all the closing conditions will be satisfied or waived. Therefore, there can be no assurance that the transactions described under the Master Transaction Agreement, the Merrill Agreement and other related agreements will be consummated or that the New York Insurance Department and the Bermuda Monetary Authority, or other regulators, will not take regulatory action at any time with respect to SCA's operating subsidiaries.

Agreement with Financial Counterparties

In consideration of the releases and waivers agreed to by the Financial Counterparties as part of the Master Transaction Agreement, XLCA has agreed to hold an aggregate amount of $820 million in cash (plus the interest thereon, premiums paid by the Financial Counterparties from today through October 15, 2008 and any proceeds from the sale by the trust of the SCA shares, in the event such shares are sold) for the purpose of commuting, terminating, amending or otherwise restructuring existing agreements with the Financial Counterparties pursuant to an agreement to be negotiated with the Financial Counterparties. In the event that such agreement is not reached by October 15, 2008, XLCA has agreed to use such proceeds only to pay claims under the credit default swaps of the Financial Counterparties. In addition, through such date, XLCA and XLFA have agreed to restrictions on their ability to commute, terminate, amend or otherwise restructure policies and contracts to which either is a party.

Agreement with Credit Agreement Lenders

On July 28, 2008 SCA also entered into an amendment, forbearance and limited waiver agreement (the "Credit Agreement Amendment") with respect to its Credit Agreement, dated as of August 1, 2006, as amended (the "Credit Agreement"). Pursuant to the Credit Agreement Amendment, SCA agreed (i) to permanently reduce the availability under its revolving credit facility from $250,000,000 to zero, (ii) to reduce the availability under the letter of credit facility to the amount of the letter of credit exposure as of July 28, 2008, and (iii) that upon the closing of the Master Transaction Agreement, it will cash collateralize the remaining letters of credit after giving effect to the transactions contemplated by the Master Transaction Agreement. In consideration of the foregoing, the lenders under the Credit Agreement have agreed to (i) forbear from declaring certain defaults, if any, set forth in the Credit Agreement Amendment, (ii) waive such defaults, if any, upon the satisfaction of certain conditions set forth in the Credit Agreement Amendment, and (iii) grant certain waivers in connection with the consummation of the Master Transaction Agreement.

Corporate Name Change

As previously announced, SCA will formally change its corporate name on August 4, 2008 from Security Capital Assurance Ltd. to Syncora Holdings Ltd. SCA's operating subsidiaries will also change names on the same date: XLCA will become Syncora Guarantee Inc. and XLFA will become Syncora Guarantee Re Ltd. As of August 4, 2008, SCA is no longer permitted to use the "XL" name. The Company's stock ticker symbol will remain "SCA".

About Security Capital Assurance Ltd

Security Capital Assurance Ltd is a Bermuda-domiciled holding company whose common shares are listed on the New York Stock Exchange (NYSE: SCA). For more information please visit http://www.scafg.com.

FORWARD-LOOKING STATEMENTS

This release contains statements about future results, plans and events that may constitute "forward-looking" statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You are cautioned that these statements are not guarantees of future results, plans or events and such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company's control. These factors include, but are not limited to: the outcome of SCA's negotiations with third parties concerning the restructuring of SCA; the closing of the transactions contemplated by the Master Transaction Agreement, Merrill Agreement and other related agreements; the decision by the New York Insurance Department and the Bermuda Monetary Authority, or other regulators to take regulatory action with respect to SCA's operating subsidiaries at any time; recent and future rating agency statements and ratings actions; the outcome of our negotiations with the Financial Counterparties concerning the commutation, termination, amendment or otherwise restructuring of their credit default swap contracts; the Company's ability to successfully implement its strategic plan; higher risk of loss in connection with obligations guaranteed by the Company due to recent deterioration in the credit markets stemming from the poor performance of subprime residential mortgage loans; the suspension of writing substantially all new business and the Company's ability to continue to operate its business in its historic form; developments in the world's financial and capital markets that adversely affect the performance of the Company's investments and its access to such markets; the performance of invested assets, losses on credit derivatives or changes in the fair value of credit derivatives; the availability of capital and liquidity; the timing of claims payments and the receipt of reinsurance recoverables; greater frequency or severity of claims and loss activity including in excess of the Company's loss reserves; changes in the Company's reinsurance agreements with certain of its subsidiaries; the impact of provisions in business arrangements and agreements triggered by the ratings downgrades; the impact of other triggers in business arrangements including credit default swap contracts; changes in regulation, tax laws, legislation or accounting policies or practices; changes in officers; general economic conditions; changes in the availability, cost or quality of reinsurance or retrocessions; possible downgrade of the Company's reinsurers; possible default by the counterparties to the Company's reinsurance arrangements; the Company's ability to compete; changes that may occur in Company operations and ownership as the Company matures; and other additional factors, risks or uncertainties described in Company filings with the Securities and Exchange Commission, including in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and also disclosed from time to time in subsequent reports on Form 10-Q and Form 8-K. Readers are cautioned not to place undue reliance on forward-looking statements which speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements are made.

    Contact:

    Investors
    Frank Constantinople
    +1 441-279-7450
    frank.constantinople@scafg.com

    Media
    Michael Gormley
    +1 441-279-7450
    michael.gormley@scafg.com

    Michele Loguidice
    +1 212-333-3810
    mloguidice@brunswickgroup.com

SOURCE Security Capital Assurance Ltd

http://www.scafg.com

On a pro forma basis, the sale will reduce Merrill's total ABS CDO long exposures to $8.8 billion from $19.9 billion, the company said.

Merrill said it also entered into a deal to terminate ABS CDO hedges with monoline guarantor XL Capital Assurance Inc. in exchange for an upfront cash payment to Merrill Lynch of $500 million. The hedges had a carrying value of around $1 billion.

In addition, the investment bank said it plans to issue new common shares, generating gross proceeds of roughly $8.5 billion, through a public offering launched Monday. The amount excludes a $1.3 billion option granted to the underwriter to purchase additional shares to cover over-allotments.

Temasek Holdings will purchase $3.4 billion of stock in the offering, while Merrill executives will purchase around 750,000 shares in the offering.

Merrill also said it will exchange all of its outstanding mandatory convertible preferred securities for common stock or new preferred securities, eliminating the reset features in the original securities.

As a result of the transactions, the company expects to record a pre-tax write-down in the third quarter of $5.7 billion. The write-down includes a $4.4 billion loss associated with the sale of CDOs, a $500 million net loss on the termination of hedges with XL Capital, and a $800 million maximum loss related to the potential settlement of other CDO hedges with monoline counterparties.

In the third quarter, Merrill also expects to record an expense of $2.5 billion related to its reset payment to Temasek and $2.4 billion of additional dividends as a result of the exchange of certain existing mandatory convertible preferred stock for common stock.

"The sale of the substantial majority of our CDO positions represents a significant milestone in our risk reduction efforts," said John Thain, Merrill chairman and CEO, in a statement. "Our consistent focus has been to opportunistically reduce risk, and in order to take advantage of this sizeable sale on an accelerated basis, we have decided to further enhance our capital position by issuing common stock."

Shares of Merrill closed at $24.33 and fell more than 4% in after-hours trading. Gabriel Madway gm

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