Montpelier Reinsurance Ltd.
US$50,000,000 Letter of Credit Facility
Appendix

     
Account Party:
  Montpelier Reinsurance Ltd. (the “Account Party”).
 
   
Lender:
  HSBC Bank USA, National Association (the “Bank”)
 
   
Facility Type:
  The facility is by way of Letters of Credit (“LOC”).
 
   
Amount:
  The aggregate total of issued LOC is not to exceed US$50,000,000.
 
   
Purpose:
  To support obligations of the Account Party under its reinsurance arrangements
with primary insurance and reinsurance counterparties.
 
   
Availability:
  LOC will be issued for periods not exceeding one year and may have an
automatic extension clause subject to written notice of non-renewal 60 days
prior to the expiry date. Each LOC shall contain language, and otherwise in all
respects be, satisfactory to the Bank in its sole discretion.
 
   

  Subject to the terms and conditions herein and contained in any related legal
documentation, the LOC facility is available for the period from December 20,
2004 to December 19, 2005.
 
   
Commitment Fee:
  The Account Party shall pay the Bank a commitment fee of 7.5 basis points per
annum, calculated daily on the unused portion of the commitment and payable
quarterly in arrears.
 
   
LOC Issuance Fee:
  A fee equivalent to 27.5 basis points per annum based on the issued amount of
each LOC shall be payable quarterly in arrears.
 
   
General Indemnity:
  The Account Party shall reimburse the Bank for any additional costs or
reduction in income arising as a result of the imposition of or increase in
taxes (other than on the overall net income of the Bank) on amounts paid by the
Account Party to the Bank, an imposition of or increase in reserve requirements
(other than such imposition or increase that is not also required generally of
other banks in the same general regulatory jurisdiction and the same general
regulatory category), or the imposition of any other condition affecting the LOC
Facility by any government, governmental agency or body, tribunal or regulatory
authority.

 

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Repayment:
  Drawings, if any, will be charged to general account of the Account Party.
 
   
Collateral:
  The Account Party’s obligations to the Bank shall be secured by first priority
security interest in and charge over the Account Party’s Corporate Account
#831154 at Bank of Bermuda (the “Account”). The funds in the Account shall be
invested in the “USD Allpoints Corporate Money Fund” or such other investment as
may be acceptable to the Bank. The Account shall at all times contain securities
having a market value in excess of the aggregate of the total amount of all
LOC’s issued on the Account Party’s behalf, after applying Bank’s applicable
credit margins.
 
   
Conditions to Initial Issuance:
  Prior to the issuance of the initial LOC, the Bank shall have received the
following documentation, duly executed and otherwise satisfactory in all
respects to Bank’s counsel:

(i)   The facility letter to which is attached this Appendix.   (ii)   The
Reimbursement Agreement.   (iii)   The Pledge Agreement.   (iv)   Notice under
the Charge Over Accounts.   (v)   Acknowledgment of Charge by Bank of Bermuda  
(vi)   Resolutions and evidence of incumbency.   (vii)   Opinion of Bermuda
counsel.

     
Conditions to Each Issuance:
  No default shall have occurred under the Reimbursement Agreement or any
related legal documentation and the Representations and Warranties contained in
the Reimbursement Agreement shall be true and correct as if made at the time of
each such issuance.

Covenants:
(i)   Provision of audited annual financial statements within 120 days of each
fiscal year-end.
 
   
 
(ii)   Maintenance of the Account Party’s corporate status in good standing.
 
   
 
(iii)   Compliance with all laws.
 
   
 
(iv)   Payment of all sums when due.
 
   
 
(v)   No change in ownership.
 
   
 
(vi)   Provision of notice of any litigation, proceeding or dispute, threatened
or commenced, if the litigation, proceeding or dispute could, if adversely
determined, have a material adverse effect.

 

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  (vii) Provision of notice of material adverse change.
 
   
Expenses:
  All out of pocket expenses and all other costs whatsoever in relation to the
facility, this Appendix or any other facility document incurred by the Bank,
including without limitation any legal fees, or expenses related to the
realisation of assets or the preservation or enforcement of any of the Bank’s
rights hereunder are for the Borrower’s account.
 
   
 
  The Account Party hereby authorizes the Bank to debit the Account with the
full amount of any amount due or payable to the Bank pursuant to this section,
without prejudice to the provisions of the Bank’s rights following demand for
repayment.

 

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REIMBURSEMENT AGREEMENT

     1. Definitions. As used herein, the following terms shall have the
following meanings:

          (a) “Agreement” shall mean, collectively, each Application for Standby
Letter of Credit submitted by Applicant to Bank, in the form required by Bank,
and this Reimbursement Agreement, as the same may be amended and supplemented
from time to time.

          (b) “Applicant” shall mean the person or entity executing this
Agreement as Applicant; provided that if two or more persons or entities shall
have executed this Agreement as Applicant and the term “Applicant” is preceded
by the word “any” or “each” or a word or words of similar import, in which case
such term shall be deemed to refer to each of such persons or entities,
individually.

          (c) “Bank” shall mean HSBC Bank USA, National Association, its
successors, transferees and assigns.

          (d) “Credit” shall mean each irrevocable standby letter of credit
issued by the Bank pursuant to this Agreement upon Applicant’s request, as the
same may be amended and supplemented from time to time, and any and all
renewals, increases, extensions and replacements thereof and therefor.

          (e) “Dollar Equivalent” shall mean (i) the number of Dollars that is
equivalent to an amount of a currency other than Dollars, determined by applying
the Bank’s selling rate for the relevant currency against Dollars applicable to
cable transfers to the place where and in the currency in which the relevant
amount is payable, or (ii) in the event that the Bank shall not at the time be
offering such a rate, the amount of Dollars that the Bank, in its sole judgment,
specifies as sufficient to reimburse or provide funds to the Bank in respect of
amounts drawn or drawable under the relevant Credit; in either case as and when
determined by the Bank.

          (f) “Dollars” shall mean lawful currency of the United States of
America.

          (g) “Obligations” shall mean and include all indebtedness, obligations
and liabilities of Applicant to the Bank, present or future, due or to become
due, absolute or contingent, arising hereunder or in connection with the Credits
or any financing or refinancing thereof.

     2. Payment Terms. Applicant agrees to pay to the Bank on demand, at the
Bank’s office located at 452 Fifth Avenue, New York, New York 10018, in Dollars,
in immediately available funds and without set-off, counterclaim or withholding
of any type: (i) each amount drawn under each Credit, in Dollars or, in the
event that drafts under any Credit are payable in a currency other than Dollars,
the Dollar Equivalent of each amount so drawn; (ii) interest on each amount (or
the Dollar Equivalent thereof) so drawn for each day from the date of payment of
the relevant draft to and including the date of payment in full of such amount
by Applicant to the Bank, at a rate per annum equal to the rate per annum
announced from time to time by the Bank as its U.S. Dollar prime rate for loans
made in the United States as in effect on each such day, the rate of interest
hereunder to change as of the opening of business on the effective date of each
change in said prime rate; and (iii) any and all commissions and charges of the
Bank and each of its correspondents in relation to the

 

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issuance and maintenance of each Credit and all drafts thereunder.

     3. Administration of Credit. (a) Applicant will, promptly, but in any event
within 2 business days, examine the copy of each Credit (and any amendments
thereof) sent to Applicant by the Bank, as well as all other instruments and
documents delivered to Applicant from time to time, and, in the event Applicant
has any claim of non-compliance with the instructions or of any discrepancy or
other irregularity, Applicant will, promptly notify the Bank thereof in writing,
and Applicant will conclusively be deemed to have waived any such claim against
the Bank and its correspondents unless such immediate notice is given as
aforesaid.

          (b) The Bank may (but need not) pay any drafts otherwise in order
which are signed or issued by, or accompanied by required statements or other
documents otherwise in order which are signed or issued by, the custodian,
executor, administrator, trustee in bankruptcy, debtor in possession, assignees
for the benefit of creditors, liquidator, receiver or other agent or legal
representative of the beneficiary of any Credit or other party who is authorized
under such Credit to draw or issue any drafts, required statements or other
documents.

          (c) Neither the Bank nor any of its correspondents shall be
responsible for, and neither the Bank’s powers and rights hereunder nor
Applicant’s Obligations shall be affected by, (i) any act or omission pursuant
to Applicant’s instructions, (ii) any other act or omission of the Bank or its
correspondents or their respective agents or employees for which the Bank is not
responsible under the provisions of the ICC Uniform Customs and Practice for
Documentary Credits, the ICC International Standby Practices or Article 5 of the
Uniform Commercial Code, each as in effect from time to time and as applicable
to the relevant Credit, other than any such act or omission arising from its or
their gross negligence or willful misconduct, (iii) the form, validity, accuracy
or genuineness of drafts, documents (including documents of assignment or
transfer) or required statements, even if such drafts, documents or statements
should in fact prove to be in any or all respects invalid, inaccurate,
fraudulent or forged (and notwithstanding that Applicant shall have notified
Bank thereof), (iv) failure of any draft to bear any reference or adequate
reference to the relevant Credit, (v) errors, omissions, interruptions or delays
in transmission or delivery of any messages however sent and whether or not in
code or cipher, (vi) any act, default, omission, insolvency or failure in
business of any other person (including any correspondent) or any consequences
arising from causes beyond the Bank’s control, (vii) errors in translation or
for errors in interpretation of technical terms, (viii) any loss or delay, in
the transmission or otherwise, of any such document or draft or the proceeds
thereof, or (ix) any acts or omissions of any beneficiary of any Credit or any
transferee of any Credit, if transferrable.

          (d) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Bank or by
any of its correspondents, under or in connection with any of the Credits or the
related drafts or document(s), if taken or omitted in good faith, shall be
binding upon the Applicant and shall not put the Bank or its correspondents
under any resulting liability to the Applicant. The Bank shall in no event be
liable for consequential damages.

     4. Extensions, Increases and Modifications of Credits. Each Applicant
agrees that the Bank may at any time and from time to time, in its discretion,
by agreement with one or more other Applicants, (a) further finance or refinance
any transaction under any Credit, (b) renew, extend or change the time of
payment or the manner, place or terms of payment of any of the Obligations,
(c) settle or compromise any of the Obligations or subordinate the payment
thereof to the payment of any other debts of or claims against any Applicant
which may at the time be due or owing to Bank, or (d) release any Applicant or
forgo any right of setoff, or modify or amend in any way this Agreement or any
Credit, or give any waiver or consent under this Agreement; all in such manner
and on such terms as Bank may deem proper and without notice or further assent
from such Applicant. In any such event, such Applicant shall remain bound by
such event and this Agreement after

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giving effect to such event, and the Obligations under this Agreement shall be
continuing Obligations in respect of any transaction so financed or refinanced.

     5. Reserve Requirements, etc. If the Bank now is or hereafter becomes
subject to (a) any reserve, special deposit or similar requirement against the
Bank’s assets, deposits maintained with the Bank or for the Bank’s account, or
credit extended by the Bank, or any other acquisition of funds for extension of
credit, (b) any reserve, special deposit or similar requirement against or with
respect to or measured by reference to any Credit, (c) any change in the basis
of taxation of any payments due to the Bank hereunder (other than a change in
taxation of the Bank’s overall net income), (d) any requirement relating to
capital adequacy, or (e) any other condition imposed upon the Bank which imposes
a cost upon the Bank, and the result, in the Bank’s determination, of any
requirement or condition specified in clauses (a)-(e) above is to increase the
cost to the Bank of maintaining the Credits or paying or funding the payment of
any draft or demand thereunder, or to reduce the amount of any sum received or
receivable by the Bank hereunder, or (in the case of clause (d) above) to reduce
the Bank’s rate of return on the Bank’s capital to a level below which the Bank
could have otherwise achieved (using any reasonable averaging and attribution
methods), Applicant will pay to the Bank upon demand such amount in respect of
such increased cost or reduction as the Bank may determine to be the additional
amount or amounts required to compensate the Bank for such increased cost or
reduction, provided, however, that Applicant shall not be obligated to
compensate the Bank for any such costs which arise from any required increase in
the Bank’s level of capital that is not also required generally of other banks
in the same general regulatory jurisdiction and the same general regulatory
category as the Bank. The Bank’s determination of such increased cost or
reduction shall be conclusive absent manifest error.

     6. Events of Default; Remedies; Pre-funding. (a) It shall be an Event of
Default if: (i) Applicant defaults in the payment when due of any of the
Obligations; (ii) Applicant otherwise defaults in the performance of any of the
Obligations; (iii) an event of default occurs under the Amended and Restated
Letter of Credit Reimbursement and Pledge Agreement dated May 27, 2004 and
amended October 28, 2004 (the “Credit Agreement”), among Montpelier Reinsurance
Ltd., Montpelier Re Holdings Ltd., the various financial institutions parties
thereto and Bank of America, N.A., as administrative agent for the Lenders, or
under any other agreement or instrument relating to indebtedness of Applicant in
an amount in excess of $25,000,000; (iv) any representation or warranty made by
any Applicant to the Bank in connection with the Credits or otherwise for the
purpose of obtaining credit proves to have been incorrect or misleading in any
material respect when made; (v) any Applicant challenges, or institutes any
proceedings or any proceedings are instituted, to challenge the validity,
binding effect or enforceability of this Agreement; (vi) any Applicant is
dissolved or is a party to any merger or consolidation or sells or otherwise
disposes of all or substantially all of its assets without the written consent
of the Bank; (vii) any Applicant or any partnership of which any Applicant is a
member is expelled from or suspended by any stock or securities exchange or
other exchange; (viii) any Applicant becomes insolvent or unable to meet its
debts as they mature, or is generally not paying its debts as they become due,
or suspends or ceases its present business, or a custodian, as defined in Title
11 of the United States Code, of substantially all of its property, or a
receiver or other person or entity serving a similar function, shall have been
appointed or taken possession; (ix) a case under such Title 11, or any
proceeding under any other federal, state or foreign bankruptcy, insolvency or
other law relating to the relief of debtors, the readjustment, composition or
extension of indebtedness or reorganization, is commenced by or against any
Applicant; or (x) there occurs any material adverse change in the business,
financial condition or prospects of Applicant.

          (b) If any Event of Default shall have occurred and be continuing,
other than an Event of Default specified in Section 6(a)(viii) or 6(a)(ix), the
Bank may terminate any commitment to issue Credits and may declare all
Obligations (including any such which may be contingent and not matured) to be
immediately due and payable, and in the case of any Event of Default specified
in Section 6(a)(viii) or 6(a)(ix), any commitment of the Bank to issue Credits
shall automatically and immediately terminate and all such Obligations shall
automatically be immediately due and payable, in each case without presentment,
demand, protest or other notice of any kind, all of which are expressly waived.

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          (c) Without limiting the generality of the foregoing, Applicant agrees
that if (i) any Event of Default shall have occurred and be continuing or (ii)
the transactions contemplated by this Agreement are unlawful or contrary to any
regulations to which Bank may be subject or (iii) any Credit is denominated in a
currency other than Dollars and the Bank determines that such currency is
unavailable or that due to currency fluctuations the Dollar Equivalent of the
amount of such Credit exceeds the amount of Dollars that Bank in its sole
judgment expected to be its maximum exposure under such Credit, then, Applicant
will upon demand pay to Bank an amount equal to the undisbursed portion, if any,
of all outstanding Credits if pertaining to (i) or (ii) above, or any such
Credit if pertaining to (iii) above, and such amount shall be held as additional
collateral for the payment of all Obligations hereunder, and after the
expiration of the related Credit or Credits, to the extent not applied to the
Obligations, shall be returned to Applicant.

     7. Representations and Warranties. Applicant hereby represents and warrants
to the Bank that (a) Applicant has duly executed and delivered this Agreement;
(b) this Agreement constitutes Applicant’s legal, valid and binding obligation,
enforceable against it in accordance with its terms; (c) the execution, delivery
and performance of this Agreement (i) are within Applicant’s authority and have
been duly authorized by all proper corporate action, (ii) will not violate or
conflict with any provision of law or with Applicant’s charter or by-laws and
(iii) will not conflict with, or constitute a default under, or result in a
violation of, any agreement, instrument, judgment, decree, statute, rule or
regulation to which Applicant or any of such Applicant’s assets is subject;
(d) the transactions covered by the Credits are not prohibited under the Foreign
Assets Control Regulations of the United States Treasury Department or Tax
Reform Act of 1976 as amended or the Export Administration Act of 1977 as
amended or related laws and regulations and that any transfer of moneys covered
by the Credits conforms in every respect with all existing United States laws
and Government regulations; and (e) the financial statements of Applicant
heretofore furnished to the Bank fairly present its financial condition as of
the dates of, and for the periods covered by, such statements, and there have
been no material adverse changes in Applicant’s business or financial condition
since the date of the last such audited statements, except as disclosed in
material change reports.

     8. Expenses, Indemnification. Applicant agrees to reimburse the Bank upon
demand for and to indemnify and hold the Bank harmless from and against all
claims, liabilities, losses, costs and expenses, attorneys’ fees and
disbursements (including allocated costs and expenses of counsel who are
employees of the Bank), incurred or suffered by the Bank in connection with the
Credits; such claims, liabilities, losses, costs and expenses shall include but
not be limited to all such incurred or suffered by the Bank in connection with
(a) the Bank’s exercise of any right or remedy granted to it hereunder, (b) any
claim and the prosecution or defense thereof arising out of or in any way
connected with this Agreement, (c) the collection or enforcement of the
Obligations, and (d) any of the events or circumstances referred to in Section
3(c) hereof.

     9. No Waivers of Rights hereunder; Rights Cumulative. No failure to
exercise or delay in exercising, on the part of the Bank, any of its options,
powers or rights,or partial or single exercise thereof, shall constitute a
waiver thereof. No waiver of any of its rights hereunder, and no modification or
amendment of this Agreement, shall be deemed to be made by the Bank unless the
same shall be in writing, duly signed on behalf of the Bank, and each such
waiver, if any, shall apply only with respect to the specific instance involved,
and shall in no way impair the rights of the Bank or the Obligations of
Applicant to the Bank in any other respect or at any other time. This Agreement
is in addition to and not in substitution for any other obligations or security
held by the Bank for satisfaction of the Obligations. The remedies herein
provided are cumulative and are not exclusive of any other right or remedy
provided by law, in equity, or under any agreement or instrument.

     10. Financial Statements, etc. Applicant agrees to furnish to the Bank
copies of its annual consolidated financial statements within 120 days of each
fiscal year-end, and such other information relating

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to its business and finances as the Bank may from time to time reasonably
request. Applicant agrees to furnish, immediately after such reports are filed
with any securities or other governmental regulator, all material change reports
that disclose a material adverse change.

     11. Other Agreements. The Bank shall not be bound by any representations,
collateral agreements or conditions with respect to the subject matter of this
Agreement or Applicant’s liability hereunder other than as contained or referred
to herein, provided that the Bank and Applicant may make provision for the terms
and conditions governing electronic transmission of requests for the issuance of
Credits by separate agreement.

     12. Continuing Agreement; Termination. This Agreement shall continue in
full force and effect until the expiration of the Credits, but notwithstanding
any such expiration, this Agreement shall continue in full force and effect
until all Obligations then outstanding (whether absolute or contingent) shall
have been paid in full and all rights of Bank hereunder shall have been
satisfied or other arrangements for the securing of such rights satisfactory to
Bank shall have been made.

     13. Governing Law; Jurisdiction; Waiver of Trial by Jury. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, and the Bank shall have the rights and remedies of a secured party
under applicable law, including but not limited to the Uniform Commercial Code
of New York. For the purpose of any proceeding, action or suit involving this
Agreement, the Applicant hereby expressly submits to the jurisdiction of any
court of record of New York State or the United States located in the City of
New York and agrees that any order, process or other paper may be served upon
the Applicant within or without such court’s jurisdiction by mailing a copy
thereof to the Applicant at its address shown below. The Applicant waives any
claim that such proceeding, action or suit has been brought in an inconvenient
forum. THE PARTIES HERETO MUTUALLY AGREE TO WAIVE TRIAL BY JURY.

     14. Notices. Any notice to Bank shall be effective only if in writing or by
authenticated teletransmission acceptable to the Bank, directed to the attention
of and received by the Bank’s Trade Services Department at the address appearing
below the Bank’s signature or at such other address as may hereafter be
specified in a notice designated as a notice of change of address under this
Section.. Any notice to or demand on Applicant shall be effective when made to
Applicant, by mail, telegraph, cable, telephone or otherwise, in the case of
mailed, telegraphed or cabled notices, to the address appearing below such
Applicant’s signature or at such other address as may hereafter be specified in
a notice designated as a notice of change of address under this Section, and in
the case of telephonic notices, to the last telephone number of such Applicant
appearing on the Bank’s records. Any requirement under applicable law of
reasonable notice by the Bank to Applicant of any event shall be met if notice
is given to Applicant in the manner prescribed above at least seven days before
(a) the date of such event or (b) the date after which such event will occur.

          The Bank is authorized (but not obligated) to accept and rely on
instructions received by telefax or telephone which it believes in good faith to
have been given by a person authorized to give instructions hereunder on
Applicant’s behalf. The Bank shall incur no liability to Applicant or any other
person as a result of any act or omission on the Bank’s part in accordance with
instructions on which the Bank is authorized to rely nor for any failure or
refusal on the Bank’s part to accept instructions by telephone or telefax that
are not confirmed or authenticated to its satisfaction. Any instructions
delivered to the Bank by telephone shall be confirmed in writing or by telefax
on the same day, but the Bank will incur no liability for Applicant’s failure to
send such confirmation, the failure of any such confirmation to conform to the
telephone instructions the Bank received or the Bank’s failure to produce such
confirmation at any subsequent time. The Bank may record any telephone
discussion with respect to the Credits.

     15. Miscellaneous. (a) If this Agreement is executed by two or more
Applicants, they shall be jointly

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and severally liable for all Obligations hereunder including, without
limitation, Obligations relating to all Credits, regardless of whether a Credit
was issued at the request of a single Applicant or at the request of both
Applicants. The happening of any Event of Default as specified in Section 6 of
this Agreement with respect to any Applicant shall mature the Obligations of all
Applicants.

          (b) This Agreement shall be binding upon the assigns or successors of
each of the Applicants and shall inure to the benefit of and be enforceable by
Bank, its successors, transferees and assigns.

          (c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof in that jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.

          (d) The Credits shall be subject to the Uniform Customs and Practice
for Documentary Credits of the International Chamber of Commerce, as adopted
from time to time.

                    MONTPELIER REINSURANCE LTD.,
as Applicant   Date:  December 16, 2004             By:   Neil McConachie      
    Title: Treasurer and Chief Accounting Officer           Address:
Fax No.:   

                    HSBC BANK USA, NATIONAL ASSOCIATION, as
Bank   Date:  December 13, 2004             By:   Daniel Serrao          
Title: Senior Vice President           Address:
Fax No.:   

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P L E D G E    A G R E E M E N T

In consideration of HSBC Bank USA, National Association (the “Bank”) making or
continuing advances and/or granting or continuing banking accommodation or
facilities to the undersigned (the “Customer”), the Customer hereby charges by
way of a first fixed charge in favour of, and pledges and assigns to, the Bank
all of the securities, accounts and interest listed in the Schedule hereto
together with any renewals thereof, substitutions therefor and proceeds thereof
and all interest, dividends, income and revenue therefrom (hereinafter
collectively called the “Collateral”) all as continuing security for the prompt
payment to the Bank of all the present and future, actual and contingent
indebtedness and liability (the “Indebtedness”) of the Customer to the Bank,
subject to the following terms and conditions.

1. The security hereby constituted shall forthwith become enforceable upon the
happening of any of the following events:-

(i) if the Customer fails to make payment to the Bank when due of any part of
the Indebtedness for any reason whatsoever; or

(ii) if the Customer gives notice that the Customer is about to or does default
on any of the Customer’s obligations under this Agreement or under any other
agreement between the Customer and the Bank, or any representation made to the
Bank by the Customer hereunder or otherwise proves to have been false or
incorrect; or

(iii) if distress or execution is levied or issued against any of the property
of the Customer and is not paid out within seven days, or if (if the Customer is
a body corporate) an order is made or an effective resolution is passed for
winding up the Customer or if the Customer ceases or threatens to cease to carry
on the Customer’s business or substantially the whole of the Customer’s
business, or if an encumbrancer takes possession or a receiver is appointed of
any part of the assets of the Customer; or

(iv) if the Bank reasonably believes that the security it holds hereunder is
likely to be endangered whether by the existence or possible creation of any
claim or interest which ranks prior to or pari passu with the Bank’s claim or
interest in the assets which are subject to the security hereby constituted or
otherwise; or

(v) if the Customer is unable to pay the Customer’s debts as they become due or
the Customer otherwise is considered insolvent by the Bank.

 

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[2]

2. In the event the security hereby constituted becomes enforceable then all of
the Indebtedness, at the option of the Bank, shall become immediately due and
payable and the Bank, without notice, advertisement, demand for payment or
observance of any other formality (all of which are hereby waived by the
Customer), may sell by public or private sale or otherwise deal with any part of
the Collateral in such manner as the Bank thinks fit and may hold the proceeds
in lieu of any part of the Collateral realized and appropriate the same on
account of such part of the Indebtedness as the Bank thinks fit, and all costs
and expenses incurred by the Bank in respect of the Collateral and the
realization thereof shall be added to the Indebtedness and shall be a first
charge upon the proceeds of the Collateral.

3. Without prejudice to the Bank’s other rights and remedies hereunder, the Bank
shall be entitled at any time without notice, advertisement, demand for payment
or observance of any other formality, to set-off against the Indebtedness or any
part thereof any and all monies held to the credit of the Customer in any
account with Bank, and such right of set-off may be exercised notwithstanding
that all or part of the monies held to the credit of the Customer are
denominated in a currency other than the currency of the Indebtedness or are
held as a time deposit which has not matured (and the amount applied by the Bank
in set-off shall be net of the Bank’s usual charge for early withdrawal), and
any such set-off may be in respect of any part of the Indebtedness
notwithstanding that it constitutes a present or future, actual or contingent
liability.

4. The Customer shall not be entitled to transfer, sell, assign, encumber or
otherwise deal with any of the Collateral whether or not it is in the Bank’s
possession, nor shall the Customer be entitled to withdraw or to provide
substitutions for any of the Collateral, except with the Bank’s prior written
consent which consent may or may not be given at the Bank’s uncontrolled
discretion.

5. The Bank shall be entitled but not bound to vote in respect of any of the
Collateral at any meeting at which the holder thereof is entitled to vote and
generally to exercise any of the rights which the holder of any of the
Collateral may at any time have, and the Customer hereby assigns to the Bank as
additional continuing security all present and future rights and claims which it
may acquire in connection with any of the Collateral.

6. The Bank shall not be responsible for any loss, damage, or costs incurred by
the Customer arising from the Bank’s failure to exercise its rights hereunder
including, without limitation, the right to sell or otherwise deal in any part
of the Collateral, to exercise any of the voting or other rights attached to any
of the Collateral or to collect any interest, dividends or other income or any
principal or redemption proceeds in respect of any of the Collateral or for any
failure to advise the Customer of the expiry of any rights or warrants in
connection with any of the Collateral.

 

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[3]

7. The Bank may grant extensions, take and give up any part of the Collateral
accept compositions, grant releases and discharges and otherwise deal with any
of the Collateral and all parties thereto as the Bank thinks fit without
affecting the Indebtedness of the Customer to the Bank and without prejudice to
the rights of the Bank in respect of the Collateral.

8. The Customer agrees that any deposit slip, bank advice, security receipt or
other document in relation to cash, securities or other property deposited with
or received by the Bank after the date hereof in any account assigned or agreed
to be assigned hereby shall be evidence of such deposit and shall be deemed to
constitute an absolute assignment of such cash, securities or other property on
the terms hereof.

9. The Customer hereby irrevocably constitutes and appoints each officer of the
Bank a true and lawful attorney of the Customer, each such attorney being
authorized in the name and on behalf of the Customer from time to time to
endorse and transfer to the Bank or its nominee any of the Collateral in order
that full title to the same may be vested in the Bank or its nominee and to sign
and deliver on behalf of the Customer such instruments as may be necessary in
order to allow the bank to exercise its rights hereunder.

10. The Customer authorizes the Bank to take such steps, including the
completion of registrations and filings with Government offices, as it deems
necessary to perfect its interest in the Collateral.

11. The Customer hereby covenants with the Bank: (i) to sign and deliver all
such further documents and assurances in writing as the Bank may request from
time to time in order to give effect to the terms of this Agreement; (ii) to pay
all reasonable legal fees, registration fees, stamp duties and other
disbursements as may be incurred by the Bank in perfecting the security hereby
constituted or realizing the same; (iii) to deposit with the Bank such part of
the Collateral as the Bank may from time to time request and/or to have title of
such of the Collateral as the Bank thinks fit registered in the Bank’s name or
in the name of the Bank’s nominee; (iv) upon demand by the Bank to deliver to
the Bank immediately after receipt all interest, dividend or other income
payable in respect of any of the Collateral which is paid after the date of such
demand, which the Bank shall hold as part of the Collateral; (v) to deliver to
the Bank all payments of principal or redemption proceeds payable in respect of
any of the Collateral immediately upon receipt of the same, which the Bank shall
hold as part of the Collateral; and (vi) upon notice from the Bank that the
value of the Collateral in the opinion of the Bank is not sufficient to secure
the Bank in respect of the Indebtedness, to lodge with the Bank further
collateral of a value satisfactory to the Bank.

 

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[4]

12. The Customer, and if the Customer is more than one person each such person
independently, represents and warrants to the Bank that:

(i) the Customer has the necessary power and capacity to enter into this
Agreement and to perform its obligations hereunder, that if necessary the
execution and delivery of this Agreement by the Customer has been properly
authorized, and that this Agreement constitutes valid and legally binding
obligations of the Customer; and

(ii) the Customer is, and shall at all times be, the sole beneficial owner of
the Collateral from time to time, subject to no liens, encumbrances or other
interest of any kind whatsoever, and the Customer hereby agrees to indemnify the
Bank for all liability arising from the Bank dealing with Collateral which is
subject to an interest of a third party, and none of the Collateral is subject
to any assessment rights on the part of the issuer, but is fully paid up.

13. This Agreement may be terminated by either the Customer or the Bank upon
thirty days prior written notice to the other provided that the Customer may so
terminate this Agreement only if no part of the Indebtedness, whether actual or
contingent, remains outstanding as of the date of termination.

14. Any notice to be given under this Agreement shall be deemed to have been
sufficiently given if in writing and sent by pre-paid post to the addressee at
the most recent address the sender has for the addressee, and it shall be deemed
to have reached the addressee in the normal course of the post.

15. This Agreement shall be governed by and construed in accordance with the
Laws of Bermuda. The Customer and the Bank submit to the jurisdiction of the
Courts of Bermuda but without prejudice to the right of the Bank to pursue its
remedies in any other jurisdiction it thinks fit.

IN WITNESS WHEREOF this Agreement has been signed this 16th day of December two
thousand and four.

MONTPELIER REINSURANCE LTD.

     
Neil McConachie

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Signature  Treasurer and Chief Accounting Officer
                  Senior Vice President
                  Montpelier Reinsurance Ltd.
 

SCHEDULE

All cash and securities held from time to time in Account No. 831154 in name of
Montpelier Reinsurance Ltd. held in account with The Bank of Bermuda Limited.