Document:

EX-10.1

	 
	Exhibit 10.1

	 

	LETTER OF CREDIT REIMBURSEMENT AGREEMENT

	 

	dated as of November 23, 2004

	 

	between

	 

	MAX RE LTD.

	 

	and

	 

	ING BANK N.V., LONDON BRANCH

	 	 	 	 	 	 	 	 	 
	ARTICLE I.DEFINITIONS
	 	 	1	 	 	 	 	 
	SECTION 1.1
	 	Definitions                                               
	 	 	1	 
	SECTION 1.2
	 	Other Interpretive Provisions                             
	 	 	13	 
	SECTION 1.3
	 	Accounting Principles                                     
	 	 	13	 
	ARTICLE II.AMOUNT AND TERMS OF COMMITMENT
	 	 	14	 
	SECTION 2.1
	 	Letter of Credit Commitment                               
	 	 	14	 
	SECTION 2.2
	 	Drawings                                                  
	 	 	14	 
	SECTION 2.3
	 	Repayment of Reimbursement Obligations                    
	 	 	15	 
	SECTION 2.4
	 	Role of the Lender                                        
	 	 	15	 
	SECTION 2.5
	 	Obligations Absolute                                      
	 	 	16	 
	SECTION 2.6
	 	Applicability of ISP98                                    
	 	 	16	 
	SECTION 2.7
	 	Interest                                                  
	 	 	17	 
	SECTION 2.8
	 	Payments by the Borrower                                  
	 	 	17	 
	SECTION 2.9
	 	Warranty                                                  
	 	 	17	 
	SECTION 2.10
	 	Collateral Matters                                        
	 	 	17	 
	SECTION 2.11
	 	Letter of Credit Fees                                     
	 	 	18	 
	SECTION 2.12
	 	Computation of Fees and Interest                          
	 	 	18	 
	ARTICLE III.TAXES, YIELD PROTECTION AND ILLEGALITY
	 	 	19	 
	SECTION 3.1
	 	Taxes                                                     
	 	 	19	 
	SECTION 3.2
	 	Illegality                                                
	 	 	20	 
	SECTION 3.3
	 	Increased Costs and Reduction of Return                   
	 	 	20	 
	SECTION 3.4
	 	Certificates of Lender                                    
	 	 	20	 
	SECTION 3.5
	 	Tax Form                                                  
	 	 	21	 
	SECTION 3.6
	 	Survival                                                  
	 	 	21	 
	ARTICLE IV.REPRESENTATIONS AND WARRANTIES
	 	 	21	 
	SECTION 4.1
	 	Due Organization, Authorization, etc                      
	 	 	21	 
	SECTION 4.2
	 	Litigation and Contingent Liabilities                     
	 	 	21	 
	SECTION 4.3
	 	Employee Benefit Plans                                    
	 	 	22	 
	SECTION 4.4
	 	Regulated Entities                                        
	 	 	22	 
	SECTION 4.5
	 	Regulations U and X                                       
	 	 	22	 
	SECTION 4.6
	 	Proceeds                                                  
	 	 	22	 
	SECTION 4.7
	 	Business Locations                                        
	 	 	22	 
	SECTION 4.8
	 	Accuracy of Information                                   
	 	 	22	 
	SECTION 4.9
	 	Subsidiaries                                              
	 	 	23	 
	SECTION 4.10
	 	Insurance Licenses                                        
	 	 	23	 
	SECTION 4.11
	 	Taxes                                                     
	 	 	23	 
	SECTION 4.12
	 	Securities Laws                                           
	 	 	23	 
	SECTION 4.13
	 	Compliance with Laws                                      
	 	 	23	 
	SECTION 4.14
	 	Financial Condition                                       
	 	 	24	 
	SECTION 4.15
	 	Insurance Act                                             
	 	 	24	 
	SECTION 4.16
	 	First Priority Security Interest                          
	 	 	24	 
	ARTICLE V.AFFIRMATIVE COVENANTS
	 	 	 	 	 	 	24	 
	SECTION 5.1
	 	Reports, Certificates and Other Information               
	 	 	24	 
	SECTION 5.2
	 	Corporate Existence; Foreign Qualification                
	 	 	27	 
	SECTION 5.3
	 	Books, Records and Inspections                            
	 	 	28	 
	SECTION 5.4
	 	Insurance                                                 
	 	 	28	 
	SECTION 5.5
	 	Taxes and Liabilities                                     
	 	 	28	 
	SECTION 5.6
	 	Compliance with Laws                                      
	 	 	28	 
	SECTION 5.7
	 	Maintenance of Permits                                    
	 	 	28	 
	SECTION 5.8
	 	Conduct of Business                                       
	 	 	28	 
	SECTION 5.9
	 	Use of Letter of Credit                                   
	 	 	28	 
	SECTION 5.10
	 	Further Assurances                                        
	 	 	28	 
	ARTICLE VI.NEGATIVE COVENANTS
	 	 	 	 	 	 	29	 
	SECTION 6.1
	 	Net Worth                                                 
	 	 	29	 
	SECTION 6.2
	 	Unencumbered Reserve Requirement                          
	 	 	29	 
	SECTION 6.3
	 	Debt                                                      
	 	 	29	 
	SECTION 6.4
	 	Mergers, Consolidations and Sales                         
	 	 	29	 
	SECTION 6.5
	 	Other Agreements                                          
	 	 	29	 
	SECTION 6.6
	 	Transactions with Affiliates                              
	 	 	30	 
	SECTION 6.7
	 	Liens                                                     
	 	 	30	 
	SECTION 6.8
	 	Restrictions On Negative Pledge Agreements                
	 	 	30	 
	SECTION 6.9
	 	Dividends, Etc                                            
	 	 	31	 
	SECTION 6.10
	 	Eligible Investments                                      
	 	 	31	 
	ARTICLE VII.EVENTS OF DEFAULT AND THEIR EFFECT
	 	 	31	 
	SECTION 7.1
	 	Events of Default                                         
	 	 	31	 
	SECTION 7.2
	 	Effect of Event of Default                                
	 	 	33	 
	SECTION 7.3
	 	LC Collateral Account                                     
	 	 	33	 
	ARTICLE VIII.CONDITIONS
	 	 	 	 	 	 	34	 
	SECTION 8.1
	 	Conditions to Occurrence of the Effective Date            
	 	 	34	 
	SECTION 8.2
	 	Conditions to All Credit Extensions                       
	 	 	35	 
	ARTICLE IX.MISCELLANEOUS
	 	 	 	 	 	 	36	 
	SECTION 9.1
	 	Amendments and Waivers                                    
	 	 	36	 
	SECTION 9.2
	 	Notices                                                   
	 	 	36	 
	SECTION 9.3
	 	No Waiver; Cumulative Remedies                            
	 	 	37	 
	SECTION 9.4
	 	Costs and Expenses                                        
	 	 	37	 
	SECTION 9.5
	 	Indemnity                                                 
	 	 	37	 
	SECTION 9.6
	 	Payments Set Aside.                                       
	 	 	38	 
	SECTION 9.7
	 	Successors and Assigns                                    
	 	 	38	 
	SECTION 9.8
	 	Confidentiality                                           
	 	 	38	 
	SECTION 9.9
	 	Set-off                                                   
	 	 	38	 
	SECTION 9.10
	 	Counterparts; Facsimile                                   
	 	 	39	 
	SECTION 9.11
	 	Severability                                              
	 	 	39	 
	SECTION 9.12
	 	No Third Parties Benefitted                               
	 	 	39	 
	SECTION 9.13
	 	Governing Law and Jurisdiction                            
	 	 	39	 
	SECTION 9.14
	 	Waiver of Jury Trial                                      
	 	 	40	 
	SECTION 9.15
	 	Currency Indemnity                                        
	 	 	40	 
	SECTION 9.16
	 	Service of Process                                        
	 	 	41	 
	SECTION 9.17
	 	Entire Agreement                                          
	 	 	41	 

1

	 	 	 
	SCHEDULE 1.1

	 	Concentration Limits
	 
	 	 
	SCHEDULE 1.2

	 	Borrowing Base Calculation
	 
	 	 
	SCHEDULE 4.1

	 	Jurisdictions
	 
	 	 
	SCHEDULE 4.2

	 	Litigation and Contingent Liabilities
	 
	 	 
	SCHEDULE 4.7

	 	Locations
	 
	 	 
	SCHEDULE 4.9

	 	Subsidiaries
	 
	 	 
	SCHEDULE 4.10

	 	Insurance Licenses
	 
	 	 
	SCHEDULE 6.7

	 	Liens
	 
	 	 
	SCHEDULE 9.2

	 	Addresses
	 
	 	 
	EXHIBIT A

	 	Form of Compliance Certificate
	 
	 	 
	EXHIBIT B

	 	Form of Borrowing Base Certificate
	 
	 	 
	EXHIBIT C

	 	Form of Security Agreement
	 
	 	 
	EXHIBIT D

	 	Form of Letter of Credit

2

LETTER OF CREDIT REIMBURSEMENT AGREEMENT

THIS LETTER OF CREDIT REIMBURSEMENT AGREEMENT, dated as of November 23, 2004, is entered into
by and between Max Re Ltd., a Bermuda company (the “Borrower”), and ING Bank N.V., London Branch
(the “Lender”).

W I T N E S S E T H:

WHEREAS, the Borrower, has requested the Lender to issue a letter of credit to a member of the
Lloyd’s syndicate for its 2005 year of account;

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained
herein, the parties agree as follows:

ARTICLE I.

DEFINITIONS

SECTION 1.1 Definitions. When used herein the following terms shall have the
following meanings:

ABS means any fixed-income instrument which is rated AAA/Aaa by S&P or Moody’s or the
equivalent rating from another nationally recognized rating agency that entitles the holder of, or
beneficial owner under, the instrument to the whole or any part of the rights or entitlements of a
holder of a receivable or other asset and any other rights or entitlements in respect of a pool of
receivables or other assets or any money payable by obligors under those receivables or other
assets (whether or not the money is payable to the holder of, or beneficial owner under, the
instrument on the same terms and conditions as under the receivables or other assets) in relation
to receivables or other assets; provided however, such receivables or assets shall
be limited to automobile loans, credit card receivables and home equity loans and such other ABS
assets as may be acceptable to the Lender.

Adjusted Fair Market Value means, with respect to any Eligible Investments, an amount
equal to the product of the Fair Market Value of such Eligible Investments and the applicable
percentage with respect to such Eligible Investment as set forth on Schedule 1.2.

Affiliate of any Person means any other Person which, directly or indirectly, controls
or is controlled by or is under common control with such Person (excluding any trustee under, or
any committee with responsibility for administering, any Plan). A Person shall be deemed to be:

(a) “controlled by” any other Person if such other Person possesses, directly or indirectly,
power:

(i) to vote 20% or more of the securities having at the time of any determination
hereunder voting power for the election of directors of such Person; or

(ii) to direct or cause the direction of the management and policies of such Person
whether by contract or otherwise; or

(b) “controlled by” or “under common control with” such other Person if such other Person is
the executor, administrator, or other personal representative of such Person.

Agreement means this Letter of Credit Reimbursement Agreement.

Annual Statement means, as to any Person, the annual financial statement of such
Person as required to be filed with the Minister (or similar Governmental Authority) of such
Person’s domicile, together with all exhibits or schedules filed therewith, prepared in conformity
with SAP.

Attorney Costs means and includes all fees and disbursements of any law firm or other
external counsel, the allocated cost of internal legal services and all disbursements of internal
counsel.

Authorized Officers means those officers of the Borrower whose signatures and
incumbency shall have been certified to the Lender pursuant to Section 8.1(c).

Beneficiary means each Person for whose benefit the Letter of Credit has been issued
hereunder.

Borrower is defined in the Preamble.

Borrowing Base means, on any date, an amount equal to the sum of the Adjusted Fair
Market Value of all Eligible Investments.

Borrowing Base Certificate means a certificate substantially in the form of
Exhibit B with such changes therein as the Lender may request from time to time.

Business Day means any day other than a Saturday, Sunday or other day on which
commercial banks in New York City, London, or Hamilton, Bermuda are authorized or required by law
to close.

Capital Adequacy Regulation means any guideline, request or directive of any central
bank or other Governmental Authority, or any other law, rule or regulation, whether or not having
the force of law, in each case, regarding capital adequacy of any bank or of any Person controlling
a bank.

Capital Stock means, as to any Person, any and all shares, interests, partnership
interest, participations, rights in or other equivalents (however designated) of such Person’s
equity interest (however designated).

Capitalized Lease means, as to any Person, any lease which is or should be capitalized
on the balance sheet in accordance with GAAP, together with any other lease which is in substance a
financing lease, including, without limitation, any lease under which (a) such Person has or will
have an option to purchase the property subject thereto at a nominal amount or an amount less than
a reasonable estimate of the fair market value of such property as of the date the lease is entered
into or (b) the term of the lease approximates or exceeds the expected useful life of the property
leased thereunder.

Cash shall mean Dollars held by the Borrower in the Custody Account.

Cash Equivalents means, at any time:

(a) Government Debt, maturing not more than one year after such time;

(b) commercial paper, maturing not more than one year from the date of issue, which is issued
by

(i) a corporation (except an Affiliate of the Borrower) rated at least A-1 by S&P or
P-1 by Moody’s or the equivalent rating from another nationally recognized agency, or

(ii) the Lender (or its holding company);

(c) any certificate of deposit or bankers’ acceptance or eurodollar time deposit, maturing not
more than one year after the date of issue, which is issued by either

(i) a financial institution which is rated at least BBB- by S&P or Baa3 by Moody’s or 2
or above by the National Association of Insurance Commissioners, or

(ii) the Lender; or

(d) any repurchase agreement with a term of one year or less which

(i) is entered into with

(A) the Lender, or

(B) any other commercial banking institution of the stature referred to in
clause (c)(i), and

(ii) is secured by a fully perfected Lien in any obligation of the type described in
any of clauses (a) through (c) that has a market value at the time such
repurchase agreement is entered into of not less than 100% of the repurchase obligation of
the Lender (or other commercial banking institution) thereunder;

(e) investments in money market funds that invest solely in Cash Equivalents described in
clauses (a) through (d); and

(f) investments in short-term asset management accounts offered by the Lender for the purpose
of investing in loans to any corporation (other than an Affiliate of the Borrower) organized under
the laws of any state of the United States or of the District of Columbia and rated at least A-1 by
S&P or P-1 by Moody’s.

Change in Control shall be deemed to have occurred if (a) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all, or substantially
all, of the assets of Parent or the Borrower occurs; (b) any “person” as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
is or becomes, directly or indirectly, the “beneficial owner,” as defined in Rule 13d-3 under the
Exchange Act, of securities of the Parent that represent 51% or more of the combined voting power
of the Parent’s then outstanding securities other than Moore Holdings and Capital Z Partners, (c)
during any period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Borrower (together with any new directors whose election
by the Board of Directors or whose nomination by the stockholders of Parent was approved by a vote
of the directors of the Parent then still in office who are either directors at the beginning of
such period or whose election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Parent’s Board of Directors then in office; or (d) the
Parent ceases to own, directly or indirectly, 100% of the Capital Stock of and beneficial interest
in the Borrower entitled to vote upon general matters submitted to shareholders including election
of the board of directors.

Code means the Internal Revenue Code of 1986, as amended and any successor statute of
similar import, together with the regulations thereunder, as amended, reformed or otherwise
modified and in effect from time to time. References to sections of the Code shall be construed to
also refer to successor sections.

Collateral means all property and assets that are from time to time subject to the
Security Agreement.

Commitment means the commitment of the Lender to issue the Letter of Credit for the
account of the Borrower pursuant to Section 2.1.

Commitment Termination Date means the earliest to occur of (a) December 24, 2004 or
(b) the date on which any Commitment Termination Event occurs.

Commitment Termination Event means (a) the occurrence of a Default described in
Section 7.1(e) or (b) the occurrence and continuance of any other Event of Default and
either (i) the Obligations are declared to be due and payable pursuant to Section 7.2, or
(ii) in the absence of such declaration, the Lender gives notice to the Borrower that the
Commitment has been terminated.

Compliance Certificate means a certificate substantially in the form of Exhibit
A but with such changes as the Lender may from time to time request for purposes of monitoring
the Borrower’s compliance herewith.

Concentration Limits means the limitations on issuers and other investment parameters
set forth on Schedule 1.1.

Contingent Liability means any agreement, undertaking or arrangement by which any
Person (outside the ordinary course of business) guarantees, endorses, acts as surety for or
otherwise becomes or is contingently liable for (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment by, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the Debt, obligation or other liability of
any other Person (other than by endorsements of instruments in the course of collection), or for
the payment of dividends or other distributions upon the shares of any other Person or undertakes
or agrees (contingently or otherwise) to purchase, repurchase, or otherwise acquire or become
responsible for any Debt, obligation or liability or any security therefor, or to provide funds for
the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), or to maintain solvency, assets, level of income, or other financial
condition of any other Person, or to make payment or transfer property to any other Person other
than for fair value received; provided, however, that obligations of the Borrower
and its Subsidiaries under Reinsurance Agreements and Primary Policies which are entered into in
the ordinary course of business shall not be deemed to be Contingent Liabilities for the purposes
of this Agreement. The amount of any Person’s obligation under any Contingent Liability shall
(subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or
maximum permitted principal amount, if larger) of the Debt, obligation or other liability
guaranteed or supported thereby.

Contractual Obligation means, relative to any Person, any obligation, commitment or
undertaking under any agreement or other instrument to which such Person is a party or by which it
or any of its property is bound or subject.

Control Agreement means an Account Control Agreement substantially in the form of
Schedule I to the Security Agreement or such other form as may be acceptable to the Lender entered
into among Mellon Bank N.A., the Lender and the Borrower.

Corporate/Municipal Securities means publicly traded securities (other than preferred
stock) issued by a corporation organized in the United States or by any state or municipality
located in the United States.

Credit Documents means this Agreement, the LC Application, the Security Agreement and
all other agreements, instruments, certificates, documents, schedules or other written indicia
delivered by the Borrower in connection with any of the foregoing.

Credit Extension means the issuance of the Letter of Credit.

Currency Due is defined in Section 9.15.

Custody Account means account no. MRLF 0121142 at Mellon Bank N.A. as to which Mellon
Bank N.A. and the Lender have entered into the Control Agreement.

Debt means, with respect to any Person, at any date, without duplication, (a) all
obligations of such Person for borrowed money or in respect of loans or advances; (b) all
obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c)
all obligations in respect of letters of credit which have been drawn but not reimbursed by the
Person for whose account such letter of credit was issued, and bankers’ acceptances issued for the
account of such Person; (d) all obligations in respect of Capitalized Leases of such Person; (e)
all net Hedging Obligations of such Person; (f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property
or services; (g) Debt of such Person secured by a Lien on property owned or being purchased by such
Person (including Debt arising under conditional sales or other title retention agreements) whether
or not such Debt is limited in recourse; (h) any Debt of another Person secured by a Lien on any
assets of such first Person, whether or not such Debt is assumed by such first Person (it being
understood that if such Person has not assumed or otherwise become personally liable for any such
Debt, the amount of the Debt of such person in connection therewith shall be limited to the lesser
of the face amount of such Debt and the fair market value of all property of such Person securing
such Debt); (i) any Debt of a partnership in which such Person is a general partner unless such
Debt is nonrecourse to such Person; and (j) all Contingent Liabilities of such Person whether or
not in connection with the foregoing; provided that, notwithstanding anything to contrary contained
herein, Debt shall not include (x) contingent liabilities arising out of endorsements of checks and
other negotiable instruments for deposit or collection in the ordinary course of business or, (y)
unsecured current liabilities incurred in the ordinary course of business and paid within 90 days
after the due date (unless contested diligently in good faith by appropriate proceedings and, if
requested by the Lender, reserved against in conformity with GAAP) other than liabilities that are
for money borrowed or are evidenced by bonds, debentures, notes or other similar instruments
(except as described in clause (x) above) or (z) any obligations of such Person under any
Reinsurance Agreement or Primary Policy.

Default means any condition or event, which, after notice or lapse of time or both,
would constitute an Event of Default.

Dollar(s) and the sign “$” means lawful money of the United States of America.

Drawing Request is defined in Section 2.2.

Drawing Request Date is defined in Section 2.2.

Effective Date means the date on which the conditions precedent for the effectiveness
of this Agreement specified in Section 8.1 shall be met.

Eligible Investments means Cash, Cash Equivalents, MBS Investments, ABSs,
Corporate/Municipal Securities, Government Securities and G7 Securities which (a) have the required
rating as set forth on Schedule 1.2, (b) are capable of being marked to market on a daily
basis and (c) are held in the Custody Account.

ERISA means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute of similar import, together with the regulations promulgated thereunder and under
the Code, in each case as in effect from time to time. References to sections of ERISA also refer
to successor sections.

Event of Default means any of the events described in Section 7.1.

Executive Officer means, as to any Person, the president, the chief financial officer,
the chief executive officer or a senior vice president who performs similar functions.

Fair Market Value shall mean (a) with respect to any publicly-traded security (other
than those set forth in clause (b)) the closing price for such security on the largest
exchange on which such security is traded (or if not traded on an exchange, then the average of the
closing bid and ask prices quoted over-the-counter) on the date of the determination (as such
prices are reported in The Wall Street Journal (Midwest Edition) or if not so reported, in any
nationally recognized financial journal or newspaper), (b) with respect to Cash and Cash
Equivalents, the amounts thereof, (c) with respect to the MDS Shares, on any date of calculation,
the amount that would be received with respect thereto if the entire amount of the applicable
capital or other similar account relating thereto were withdrawn on such date (regardless of
whether a contractual right exists to make any withdrawal on such date) and (d) with respect to any
Investment (other than those set forth in clauses (a), (b) and (c)), the
price for such Investment on the date of calculation obtained from a generally recognized source
approved by the Lender or the most recent bid quotation from such approved source (or, if no
generally recognized source exists as to a particular Investment, any other source specified by the
Borrower to which the Lender does not reasonably object).

Final Maturity Date means the earliest date on which (a) the Letter of Credit has
expired or been terminated and (b) the Letter of Credit has been fully drawn.

Fiscal Quarter means any quarter of a Fiscal Year.

Fiscal Year means any period of twelve consecutive calendar months ending on the last
day of December.

FRB means the Board of Governors of the Federal Reserve System, and any Governmental
Authority succeeding to any of its principal functions.

G7 Government Securities means any evidence of Debt, maturing not more than five years
after such time, issued or guaranteed by any country which is a member of the G7 other than the
United States.

GAAP means generally accepted accounting principles set forth from time to time in the
opinions and pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the date of
determination.

Governmental Authority means any nation or government, any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.

Government Debt means evidence of Debt issued or guaranteed by the United States
Government or any agency thereof.

Hedging Obligations means, with respect to any Person, (a) the net liability of such
Person under any futures contract or options contract (including property catastrophe futures and
options), interest rate swap agreements and interest rate collar agreements and all other
agreements or arrangements designed to protect such Person against catastrophic events,
fluctuations in interest rates or currency exchange rates and (b) Total Return Equity Swaps.

Indemnified Liabilities is defined in Section 9.5.

Indemnified Person is defined in Section 9.5.

Information is defined in Section 9.8.

Insurance Code means, with respect to the Borrower and its Subsidiaries, the insurance
regulation of such Person’s domicile and any successor statute of similar import, together with the
regulations thereunder, as amended or otherwise modified and in effect from time to time.
References to sections of the Insurance Code shall be construed to also refer to successor
sections.

Insurance Policies means policies purchased from insurance companies by the Borrower
or any of its Subsidiaries for its own account to insure against its own liability and property
loss (including, without limitation, casualty, liability and workers’ compensation insurance).

Investment means, as to any Person, any investment of any Person, whether by means of
security purchase, capital contribution, loan, time deposit or otherwise, and shall include without
limitation Cash and Cash Equivalents.

Investment Grade Assets means Cash Equivalents, Government Debt, MBS Investments,
ABSs, Corporate/Municipal Securities and G7 Securities which are rated at least BBB- by S&P or Baa3
by Moody’s.

IRS means the U.S. Internal Revenue Service, and any Governmental Authority succeeding
to any of its principal functions under the Code.

January 7, 2002 Letter Agreement means the January 7, 2002 Letter Agreement whereby
the Lender consented to the pledge of collateral and limited guaranty by MDS of the referenced
letter of credit facility.

Judgment Currency is defined in Section 9.15.

LC Application means an application form for issuances of the letter of credit as
shall at any time be in use by the Lender.

LC Collateral Account is defined in Section 7.3.

LC Obligations means, at any time, the sum, without duplication, of (a) the aggregate
undrawn stated amount of the Letter of Credit plus (b) the aggregate unpaid amount of all
Reimbursement Obligations with respect to the Letter of Credit.

LC Related Documents means the Letter of Credit, the LC Application and any other
document relating to the Letter of Credit, including any of the Lender’s standard form documents
for Letter of Credit issuances.

Lender is defined in the Preamble.

Lender-Related Persons means the Lender, together with its Affiliates, and the
officers, directors, employees, agents and attorneys-in-fact of such Person and Affiliates.

Lender’s Payment Office means the address for payments set forth on Schedule
9.2 in relation to the Lender, or such other address as the Lender may from time to time
specify.

Letter of Credit means the standby letter of credit substantially in the form of
Exhibit D issued pursuant to Section 2.1.

LIBOR means the rate per annum equal to the British Bankers Association LIBOR Rate, as
published by Reuters (or other commercially available source providing quotations of British
Bankers Association LIBOR as designated by the Lender from time to time) for deposits in Dollars
(for delivery on such day) with a term equal to 30 days, determined as of approximately 11:00 a.m.
(London time) on such Business Day.

License(s) is defined in Section 4.10.

Lien means, when used with respect to any Person, any interest in any real or personal
property, asset or other right held, owned or being purchased or acquired by such Person for its
own use, consumption or enjoyment which secures payment or performance of any obligation and shall
include any mortgage, lien, pledge, encumbrance, charge, retained title of a conditional vendor or
lessor, or other security agreement, mortgage, deed of trust, chattel mortgage, assignment, pledge,
retention of title, financing or similar statement or notice, or other encumbrance arising as a
matter of law, judicial process or otherwise.

Margin Stock means “margin stock” as such term is defined in Regulation U or X of the
FRB.

Material Adverse Effect means, the occurrence of an event (including any adverse
determination in any litigation, arbitration, or governmental investigation or proceeding), which
has or could reasonably be expected to have a materially adverse effect on:

(a) the assets, business, financial condition, operation or prospects of the Borrower; or

(b) the ability of the Borrower to perform any of its payment or other material obligations
under any of the Credit Documents; or

(c) the legality, validity, binding effect or enforceability against the Borrower of any
Credit Document that by its terms purports to bind the Borrower.

MBS (Agency Pass-Throughs) means any instrument, issued by the Federal National
Mortgage Association, the Government National Mortgage Association or the Federal Home Loan
Mortgage Corporation, that entitles the holder of, or beneficial owner under, the instrument to the
whole or any part of the rights or entitlements of a mortgagee and any other rights or entitlements
in respect of a pool of mortgages or any money payable by mortgagors under those mortgages in
relation to real estate mortgages, and the money payable to the holder of, or beneficiary owner
under, the instrument is based on actual or scheduled payments on the underlying mortgages.

MBS (Agency CMOs) means collateralized mortgage obligations or real estate mortgage
investment conduit pass through securities, in any case issued by the Federal National Mortgage
Association, the Government National Mortgage Association or the Federal Home Loan Mortgage
Corporation.

MBS Investments means MBS (Agency CMOs) and MBS (Non-Agency CMOs) which constitute
TACs, PACs and Sequentials (as such terms are defined by Bloomberg Inc.) and shall not include
Support Tranches (as such term is defined by Bloomberg Inc.) and MBS (Agency Pass-Throughs). The
weighted average duration of such MBS Investments shall be less than or equal to seven years. The
maximum weighted average life of any single MBS Investment shall not exceed 12 years. To the
extent MBS Investments included within Eligible Investments violate the restrictions set forth
herein, the Fair Market Value of such MBS Investments shall be excluded from the Borrowing Base;
provided, however, that only those MBS Investments having the lowest aggregate Fair Market Value
whose exclusions will result in compliance shall be excluded from the Borrowing Base.

MBS (Non-Agency CMOs) means collateralized commercial mortgage obligations or
commercial real estate mortgage investment conduit pass through securities, not issued by the
Federal National Mortgage Association, the Government National Mortgage Association or the Federal
Home Loan Mortgage Corporation.

MDS means Max Re Diversified Strategies Ltd.

MDS Shares means common shares of MDS so long as (a) MDS is an investment vehicle
which is not required to be registered as an investment company under the Investment Company Act of
1940, (b) MDS permits equity withdrawals not less frequently than quarterly, (c) MDS has Moore
Capital Management LLC or one of its wholly-owned Subsidiaries as either its manager or investment
advisor, (d) the Borrower possesses directly or indirectly, (x) power to vote the securities having
at the time of any determination hereunder more than 51% of the voting power for the election of
directors of MDS and (y) power to direct or cause the direction of the management and policies of
MDS whether by contract or otherwise, and (e) not less than 85% of MDS’ investments are capable of
being marked to market daily.

Minister means the Minister of Finance of Bermuda or similar Governmental Authority in
the applicable jurisdiction.

Moody’s means Moody’s Investors Service, Inc.

Net Worth means, for any Person, shareholders equity calculated in accordance with
GAAP.

Obligations means all obligations and liabilities of the Borrower to the Lender
howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent,
primary or secondary, joint or several, recourse or nonrecourse or now or hereafter existing or due
or to become due, whether for Reimbursement Obligations, interest, fees, expenses, claims,
indemnities or otherwise, under or in connection with this Agreement, or any other Credit Document.

Ordinary Course Litigation is defined in Section 4.2.

Organization Documents means, for any corporation, the certificate or articles of
incorporation, the bylaws, any certificate of determination or instrument relating to the rights of
preferred shareholders of such corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of such corporation.

Other Taxes means any present or future stamp or documentary taxes or any other excise
or property taxes, charges or similar levies which arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with respect to, this Agreement or any
other Credit Documents.

Parent means MaxRe Capital Ltd., a Bermuda company (f/k/a Maximus Capital Holdings,
Ltd.).

PBGC means the Pension Benefit Guaranty Corporation or any entity succeeding to any or
all of its functions.

Permitted Guarantees means (a) guarantees by the Borrower or any of its Subsidiaries
of the obligations of another Subsidiary under Reinsurance Agreements and Primary Policies issued
by such Subsidiary, (b) the guarantee listed on Schedule 4.2 and (c) agreements by the
Borrower in favor of a Subsidiary to maintain the capital of such Subsidiary at 150% of the
required regulatory level.

Person means any natural person, corporation, partnership, firm, trust, association,
government, governmental agency or other entity, whether acting in an individual, fiduciary or
other capacity.

Plan means any “employee pension benefit plan” or “employee welfare benefit plan” as
such terms are defined in ERISA, and as to which the Borrower has or may have any liability,
including any liability by reason of having been a substantial employer within the meaning of
section 4063 of ERISA for any time within the preceding five years or by reason of being deemed to
be a contributing sponsor under section 4069 of ERISA.

Primary Policies means any insurance policies issued by the Borrower or any of its
Subsidiaries.

Purchase Money Debt means and includes (a) Debt (other than the Obligations) for the
payment of all or any part of the purchase price of any fixed assets, (b) any Debt (other than the
Obligations) incurred at the time of or within ten (10) days prior to or after the acquisition of
any fixed assets for the purpose of financing all or any part of the purchase price thereof, and
(c) any renewals, extensions, or refinancings thereof, but not any increases in the principal
amounts thereof outstanding at such time, but excluding, for purposes of this definition, any such
Debt constituting a Capitalized Lease.

Purchase Money Lien means a Lien upon fixed assets which secures Purchase Money Debt,
but only if such Lien shall at all times be confined solely to the fixed assets the purchase price
of which was financed through the incurrence of the Purchase Money Debt secured by such Lien.

Reimbursement Obligation means the obligation of the Borrower under Section
2.3 to reimburse the Lender for amounts paid by the Lender in respect of each drawing under any
of the Letter of Credit.

Reinsurance Agreements means any agreement, contract, treaty, certificate or other
arrangement whereby the Borrower or any of its Subsidiaries agrees to assume from or reinsure
another insurer or reinsurer all or part of the liability of such insurer or reinsurer under a
policy or policies of insurance issued by such insurer or reinsurer.

Requirement of Law for any Person means the Organization Documents of such Person, and
any law, treaty, rule, ordinance or regulation or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

SAP means the statutory accounting practices prescribed or permitted by the Minister
(or other similar Governmental Authority) in the Borrower’s or such Subsidiary’s domicile for the
preparation of Annual Statements and other financial reports by insurance corporations of the same
type as the Borrower or such Subsidiary as the case may be.

Security Agreement means a Security Agreement substantially in the form of Exhibit
C between the Borrower and the Lender, as such Security Agreement may be amended, modified or
supplemented from time to time.

S&P means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies,
Inc.

Subsidiary means a corporation of which the indicated Person and/or its other
Subsidiaries, individually or in the aggregate, own, directly or indirectly, such number of
outstanding shares as have at the time of any determination hereunder more than 50% of the ordinary
voting power. Unless otherwise specified, “Subsidiary” shall mean a Subsidiary of the Borrower.

Taxes means any and all present or future taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto, excluding, in the case of the Lender,
such taxes (including income taxes or franchise taxes) as are imposed on or measured by the
Lender’s net income by the jurisdiction (or any political subdivision thereof) under the laws of
which the Lender is organized or maintains a lending office.

Total Return Equity Swap shall mean any total return equity swap entered into by the
Borrower in connection with the common shares of MDS.

Unencumbered Asset Reserve Requirement is defined in Section 6.2.

Unencumbered Assets means Investment Grade Assets of the Borrower and MDS Shares which
are not subject to any Liens.

SECTION 1.2 Other Interpretive Provisions.

(a) The meanings of defined terms are equally applicable to the singular and plural forms of
the defined terms.

(b) The words “hereof”, “herein”, “hereunder” and similar words refer to this Agreement as a
whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.

(c) (i) The term “documents” includes any and all instruments, documents, agreements,
certificates, indentures, notices and other writings, however evidenced.

(ii) The term “including” is not limiting and means “including without limitation.”

(iii) In the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including”; the words “to” and “until” each mean “to
but excluding”, and the word “through” means “to and including.”

(d) Unless otherwise expressly provided herein, (i) references to agreements (including this
Agreement) and other contractual instruments shall be deemed to include all subsequent amendments
and other modifications thereto, but only to the extent such amendments and other modifications are
not prohibited by the terms of any Credit Document, and (ii) references to any statute or
regulation are to be construed as including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute or regulation.

(e) The captions and headings of this Agreement are for convenience of reference only and
shall not affect the interpretation of this Agreement.

(f) This Agreement and other Credit Documents may use several different limitations, tests or
measurements to regulate the same or similar matters. All such limitations, tests and measurements
are cumulative and shall each be performed in accordance with their terms.

(g) This Agreement and the other Credit Documents are the result of negotiations among and
have been reviewed by counsel to the Lender and the Borrower, and are the products of all parties.
Accordingly, they shall not be construed against the Lender merely because of the Lender’s
involvement in their preparation.

SECTION 1.3 Accounting Principles. Unless otherwise defined or the context otherwise
requires, all financial and accounting terms used herein or in any of the Credit Documents or any
certificate or other document made or delivered pursuant hereto shall be defined in accordance with
GAAP or SAP, as the context may require. When used in this Agreement, the term “financial
statements” shall include the notes and schedules thereto. In addition, when used herein, the
terms “best knowledge of” or “to the best knowledge of” any Person shall mean matters within the
actual knowledge of such Person (or an Executive Officer of such Person) or which should have been
known by such Person after reasonable inquiry.

ARTICLE II.

AMOUNT AND TERMS OF COMMITMENT

SECTION 2.1 Letter of Credit Commitment.

(a) Upon and subject to the terms and conditions hereof, the Lender hereby agrees to issue the
Letter of Credit at the request of and for the account of the Borrower before the Commitment
Termination Date within one Business Day of receipt of an LC Application, provided that the Lender
shall not be obligated to issue the Letter of Credit if as of the date of issuance of the Letter of
Credit (i) the LC Obligations outstanding shall exceed the lesser of (x) $20,000,000 and (y) the
Borrowing Base or (ii) the conditions in Section 2.1(b) are not met.

(b) The Lender shall not be under any obligation to issue the Letter of Credit if:

(i) such issuance would be prohibited under Section 3.2;

(ii) one or more of the applicable conditions contained in Section 8.2 is not
then satisfied;

(iii) the Letter of Credit is denominated in a currency other than Dollars; or

(iv) a Default or Event of Default has occurred and is continuing.

(c) The Letter of Credit and the Reimbursement Obligations with respect thereto shall be
evidenced by one or more accounts or records maintained by the Lender in the ordinary course of
business. The accounts or records maintained by the Lender shall be conclusive (absent manifest
error) as to the amount of the Reimbursement Obligations made to the Borrower and the Letter of
Credit issued for the account of the Borrower, and the amounts of principal, interest and fees
owing hereunder. Any failure so to record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to
any Reimbursement Obligation or the Letter of Credit.

(d) The Lender may, at its election, deliver any notices of termination or other
communications to the Beneficiary or transferee, and take any other action as necessary or
appropriate, at any time and from time to time, in order to cause the expiry date of the Letter of
Credit to be a date not later than September 30, 2009.

(e) This Agreement shall control in the event of any conflict with any LC Related Document
(other than the Letter of Credit).

SECTION 2.2 Drawings. Upon receipt by the Lender of a request for a drawing with
respect to the Letter of Credit which is in form and substance reasonably satisfactory to the
Lender (a “Drawing Request”), if such Drawing Request is received prior to 10:00 a.m. (London time)
on any Business Day, such Business Day shall be the “Drawing Request Date” and if such Drawing
Request is received after 10:00 a.m. (London time) on any Business Day, the following Business Day
shall be the “Drawing Request Date.” Upon receiving a Drawing Request, the Lender shall promptly
notify the Borrower of such Drawing Request (which notice may be oral if immediately confirmed in
writing (including by facsimile)) and upon receipt of such notification, the Borrower shall
promptly reimburse the Lender for the amount of such drawing by delivering to the Lender in
immediately available funds the amount of the Drawing Request. Nothing herein stated shall be
deemed a waiver by the Lender of the obligation of the Borrower to make such prompt reimbursement.
To the extent that funds are received by the Lender prior to 3:00 p.m. (London time) on the first
Business Day after the Drawing Request Date, the Lender shall promptly make an equivalent amount
available to the Beneficiary of the related Letter of Credit on such first Business Day after the
Drawing Request Date and shall reimburse itself for such amount with the funds provided by the
Borrower.

SECTION 2.3 Repayment of Reimbursement Obligations. The Borrower hereby
unconditionally and irrevocably agrees to reimburse the Lender for each payment or disbursement
made by the Lender under the Letter of Credit honoring any demand for payment made by the
Beneficiary thereunder, in each case on the date that such payment or disbursement is made.

SECTION 2.4 Role of the Lender. The Borrower agrees that, in paying any drawing under
the Letter of Credit, the Lender shall not have any responsibility to obtain any document (other
than any sight draft and certificate expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of the Person
executing or delivering any such document; provided that the Lender shall exercise that standard of
care customarily exercised by it in the review and processing of drawings under letters of credit
issued by it.

(a) No Lender-Related Person nor any of their respective correspondents shall be liable to the
Borrower for: (i) any action taken or omitted in the absence of gross negligence or willful
misconduct; or (ii) the due execution, effectiveness, validity or enforceability of any LC Related
Document.

(b) The Borrower hereby assumes all risks of the acts or omissions of any Beneficiary or
transferee with respect to its use of the Letter of Credit; provided that this assumption
is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it
may have against the Beneficiary or transferee at law or under any other agreement. Neither any
Lender-Related Person nor any of their respective correspondents shall be liable or responsible for
any of the matters described in clauses (i) through (vii) of Section 2.5;
provided that, anything in such clauses to the contrary notwithstanding, the Borrower may
have a claim against the Lender, and the Lender may be liable to the Borrower, to the extent, but
only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by
the Borrower which the Borrower, in a final judgment of a court of competent jurisdiction, proves
were caused primarily by the Lender’s willful misconduct or gross negligence or the Lender’s
willful failure to pay under the Letter of Credit after the presentation to it by the Beneficiary
of a sight draft and certificate(s) strictly complying with the terms and conditions of the Letter
of Credit. In furtherance and not in limitation of the foregoing: (i) the Lender may accept
documents that appear on their face to be in order, without responsibility for further
investigation; and (ii) the Lender shall not be responsible for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign the Letter of Credit or
the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.

SECTION 2.5 Obligations Absolute. The obligations of the Borrower under this
Agreement and any LC Related Document to reimburse the Lender for a drawing under the Letter of
Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement and each such other L/C-Related Document under all circumstances, including
the following:

(i) any lack of validity or enforceability of this Agreement or any LC Related
Document;

(ii) any change in the time, manner or place of payment of, or in any other term of,
all or any of the obligations of the Borrower in respect of the Letter of Credit or any
other amendment or waiver of or any consent to departure from all or any of the LC Related
Documents;

(iii) the existence of any claim, set-off, defense or other right that the Borrower may
have at any time against any Beneficiary or any transferee of the Letter of Credit (or any
Person for whom any such Beneficiary or any such transferee may be acting), the Lender or
any other Person, whether in connection with this Agreement, the transactions contemplated
hereby or by the LC Related Documents or any unrelated transaction;

(iv) any draft, demand, certificate or other document presented under the Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a drawing under the
Letter of Credit;

(v) any payment by the Lender under the Letter of Credit against presentation of a
draft or certificate that does not strictly comply with the terms of the Letter of Credit;
or any payment made by the Lender under the Letter of Credit to any Person purporting to be
a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any Beneficiary or any
transferee of the Letter of Credit, including any arising in connection with any insolvency
proceeding;

(vi) any exchange, release or non-perfection of any collateral, or any release or
amendment or waiver of or consent to departure from any guarantee, for all or any of the
obligations of the Borrower in respect of the Letter of Credit; or

(vii) any other circumstance or happening whatsoever, whether or not similar to any of
the foregoing, including any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or a guarantor.

SECTION 2.6 Applicability of ISP98. Unless otherwise agreed by the Lender and the
Borrower when the Letter of Credit is issued and subject to applicable laws, the rules of the
“International Standby Practices 1998” (ISP98) or such later revision as may be published by the
International Chamber of Commerce shall apply to the Letter of Credit.

SECTION 2.7 Interest. (a) Reimbursement Obligations shall bear interest (after as
well as before entry of judgment thereon to the extent permitted by law) on the outstanding
principal amount thereof from the date the Reimbursement Obligation arises at a rate per annum
equal to LIBOR plus 2.5% and shall be immediately due and payable.

(b) Anything herein to the contrary notwithstanding, the obligations of the Borrower to the
Lender hereunder shall be subject to the limitation that payments of interest shall not be required
for any period for which interest is computed hereunder to the extent (but only to the extent) that
contracting for or receiving such payment by the Lender would be contrary to the provisions of any
law applicable to the Lender limiting the highest rate of interest that may be lawfully contracted
for, charged or received by the Lender, and in such event the Borrower shall pay the Lender
interest at the highest rate permitted by applicable law.

SECTION 2.8 Payments by the Borrower.

(a) All payments to be made by the Borrower shall be made without set-off, recoupment or
counterclaim. Except as otherwise expressly provided herein, all payments by the Borrower shall be
made to the Lender at the Lender’s Payment Office, and shall be made in dollars and in immediately
available funds, no later than 1:00 p.m. (New York time) on the date specified herein. Any payment
received by the Lender later than 1:00 p.m. (New York time) shall be deemed to have been received
on the following Business Day and any applicable interest or fee shall continue to accrue.

(b) Whenever any payment is due on a day other than a Business Day, such payment shall be made
on the following Business Day (unless such following Business Day is the first Business Day of a
calendar month, in which case such payment shall be made on the preceding Business Day), and such
extension of time shall in such case be included in the computation of interest or fees, as the
case may be.

SECTION 2.9 Warranty. The delivery of the LC Application shall automatically
constitute a warranty by the Borrower to the Lender to the effect that on the date of such
requested Credit Extension the conditions of Section 8.2 have been satisfied.

SECTION 2.10 Collateral Matters.

(a) The Borrower shall cause the Borrowing Base to be equal to or greater than the LC
Obligations. If on any day the LC Obligations exceed the Borrowing Base on such day, the Borrower
shall immediately deposit into the Custody Account Eligible Investments or reduce the LC
Obligations, or a combination of the foregoing, in an amount sufficient to eliminate such excess.
Failure to do so within two (2) Business Days shall constitute an immediate and automatic Event of
Default. Notwithstanding the monthly reporting obligation set forth in Section 5.1(d), the
covenant contained herein shall be tested at all times.

(b) (i) The Borrower shall not, and shall not permit any investment manager appointed by
the Borrower to manage the Custody Account to, substitute (but may trade pursuant to
subsection (ii) below) Collateral in or withdraw Collateral from the Custody Account
without the prior written consent of the Lender.

(ii) Notwithstanding the foregoing, provided no Event of Default or Default under
Section 2.10(a) has occurred and is continuing or would result therefrom (x) the
Borrower may withdraw all interest and regular cash dividends deposited in the Custody
Account, (y) the Borrower may trade Collateral held in the Custody Account provided that the
proceeds of such trade or Eligible Investments purchased with such proceeds are deposited
into the Custody Account on the same day and (z) in the event the Borrowing Base exceeds the
LC Obligations (the “Excess Collateral Amount”), upon request of the Borrower, the
Lender will consent to the withdrawal by the Borrower of Eligible Investments having a Fair
Market Value not exceeding the Excess Collateral Amount.

(c) The Borrower shall take such action and give such instructions to Mellon Bank, N.A. so as
are necessary to authorize the Lender to access information regarding the Custody Account and the
Collateral therein on a daily basis.

SECTION 2.11 Letter of Credit Fees.

(a) The Borrower shall pay to the Lender a letter of credit fee for the Letter of Credit in an
amount per annum of the average maximum stated amount of the Letter of Credit during such period
(less any Reimbursement Obligation with respect thereto) equal to (x) 0.375% per annum. Such
letter of credit fees shall be computed on a quarterly basis in arrears on the last Business Day of
each calendar quarter, and shall be due and payable quarterly in arrears on the last Business Day
of each March, June, September and December commencing on December 31, 2004 through the Final
Maturity Date with the final payment to be made on the Final Maturity Date.

(b) In addition, the Borrower agrees to pay to the Lender such fees and expenses as the Lender
customarily requires in connection with the issuance, amendment, transfer, negotiation, processing
and/or administration of letters of credit.

SECTION 2.12 Computation of Fees and Interest.

(a) All computations of fees and interest shall be made on the basis of a 360-day year and
actual days elapsed. Interest and fees shall accrue during each period during which interest or
such fees are computed from the first day thereof to the last day thereof.

(b) Each determination of an interest rate by the Lender shall be conclusive and binding on
the Borrower in the absence of manifest error.

(c) Anything herein to the contrary notwithstanding, the obligations of the Borrower to the
Lender hereunder shall be subject to the limitation that payments of interest shall not be required
for any period for which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by the Lender would be contrary to the provisions of
any law applicable to the Lender limiting the highest rate of interest that may be lawfully
contracted for, charged or received by the Lender, and in such event the Borrower shall pay the
Lender interest at the highest rate permitted by applicable law.

ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY

SECTION 3.1 Taxes.

(a) Any and all payments by the Borrower to the Lender under this Agreement and any other
Credit Document shall be made free and clear of, and without deduction or withholding for any Taxes
except as required by law. In addition, the Borrower shall pay all Other Taxes.

(b) The Borrower agrees to indemnify and hold harmless the Lender for the full amount of Taxes
or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable
under this Section) paid by the Lender and any liability (including penalties, interest, additions
to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. Payment under this indemnification shall be made within
30 days after the date the Lender makes written demand therefor.

(c) If the Borrower shall be required by law to deduct or withhold any Taxes or Other Taxes
from or in respect of any sum payable hereunder to the Lender provided that the Lender has provided
the forms required in Section 3.5, then:

(i) the sum payable shall be increased as necessary so that after making all required
deductions and withholdings (including deductions and withholdings applicable to additional
sums payable under this Section) the Lender receives an amount equal to the sum it would
have received had no such deductions or withholdings been made;

(ii) the Borrower shall make such deductions and withholdings;

(iii) the Borrower shall pay the full amount deducted or withheld to the relevant
taxing authority or other authority in accordance with applicable law; and

(iv) the Borrower shall also pay, without duplication, the Lender, at the time interest
is paid, all additional amounts which the Lender specifies as reasonably necessary to
preserve the after-tax yield the Lender would have received if such Taxes or Other Taxes had
not been imposed.

(d) Within 30 days after the date of any payment by the Borrower of Taxes or Other Taxes, the
Borrower shall furnish the Lender the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to the Lender.

(e) If the Lender receives a refund in respect of Taxes or Other Taxes paid by the Borrower
pursuant to this Section 3.1, which in the good faith judgment of the Lender is allocable
to such payment, it shall promptly pay such refund to the Borrower, net of all out-of-pocket
expenses of the Lender incurred in obtaining such refund, provided, however, that the Borrower
agrees to promptly return such refund to the applicable Person if it receives notice from the
Lender that the Lender is required to repay such refund. Nothing contained herein shall require
the Lender to make its tax returns (or any other information relating to its taxes which it deems
confidential) available to the Borrower.

SECTION 3.2 Illegality. If the Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, in each case after the date hereof, has made it unlawful,
or that any central bank or other Governmental Authority has asserted that it is unlawful, for the
Lender or its applicable lending office to make any Credit Extensions, then, on notice thereof by
the Lender to the Borrower, the obligation of the Lender to make Credit Extensions shall be
suspended until the Lender notifies the Borrower that the circumstances giving rise to such
determination no longer exist.

SECTION 3.3 Increased Costs and Reduction of Return.

(a) If the Lender determines that, due to either (i) the introduction of or any change in or
in the interpretation of any law or regulation, in each case after the date hereof, or (ii) the
compliance by the Lender with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law) after the date hereof, there shall be any
increase in the cost to the Lender of agreeing to make or making, funding or maintaining the Letter
of Credit, then the Borrower shall be liable for, and shall from time to time, upon demand (with a
copy of such demand to be sent to the Lender), pay to the Lender, additional amounts as are
sufficient to compensate the Lender for such increased costs; provided that, to the extent such
increased costs are not specifically related to the Obligations, the Lender is charging such
amounts to its customers on a non-discriminatory basis, provided further that the Borrower shall
not be obligated to pay any additional amounts which were incurred by the Lender more than 90 days
prior to the date of such request.

(b) If the Lender shall have determined that (i) the introduction of any Capital Adequacy
Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Lender (or its lending office) or any corporation controlling the Lender with any
Capital Adequacy Regulation, in each case after the date hereof, affects or would affect the amount
of capital required or expected to be maintained by the Lender or any corporation controlling the
Lender and (taking into consideration the Lender’s or such corporation’s policies with respect to
capital adequacy and the Lender’s desired return on capital) determines that the amount of such
capital is increased or its rate of return is decreased as a consequence of its Commitment, Credit
Extensions, or obligations under this Agreement, then, upon demand of the Lender to the Borrower,
the Borrower shall pay to the Lender, from time to time as specified by the Lender, additional
amounts sufficient to compensate the Lender for such increase; provided that to the extent such
increased costs are not specifically related to the Obligations, the Lender is charging such
amounts to its customers on a non-discriminatory basis, provided further that the Borrower shall
not be obligated to pay any additional amounts which were incurred by the Lender more than 90 days
prior to the date of such request.

SECTION 3.4 Certificates of Lender. If claiming reimbursement or compensation under
this Article III, the Lender shall deliver to the Borrower a certificate setting forth in
reasonable detail the amount payable hereunder and such certificate shall be conclusive and binding
on the Borrower in the absence of manifest error.

SECTION 3.5 Tax Form. Lender agrees to furnish to the Borrower on or before the first
scheduled payment date, a United States Internal Revenue Service Form W8BEN (or successor form)
properly completed and executed.

SECTION 3.6 Survival. The agreements and obligations of the Borrower in this
Article III shall survive the payment of all other Obligations.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

To induce the Lender to enter into this Agreement and to make Credit Extensions hereunder, the
Borrower represents and warrants to the Lender that:

SECTION 4.1 Due Organization, Authorization, etc. The Borrower and each of its
Subsidiaries (a) is a company duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, (b) is duly qualified to do business and in good standing in
each jurisdiction where, because of the nature of its activities or properties, such qualification
is required except where the failure to qualify would not have a Material Adverse Effect, which
jurisdictions are set forth with respect to the Borrower and each of its Subsidiaries on
Schedule 4.1 as revised from time to time by the Borrower pursuant to Section
5.1(m), (c) has the requisite company power and authority and the right to own and operate its
properties, to lease the property it operates under lease, and to conduct its business as now and
proposed to be conducted, and (d) has obtained all material licenses, permits, consents or
approvals from or by, and has made all filings with, and given all notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership, operation and conduct
(including, without limitation, the consummation of the transactions contemplated by this
Agreement) as to each of the foregoing, except where the failure to do so would not have a Material
Adverse Effect. The execution, delivery and performance by the Borrower of this Agreement and the
consummation of the transactions contemplated hereby and thereby are within its corporate powers
and have been duly authorized by all necessary corporate action (including, without limitation,
shareholder approval, if required). The Borrower has received all other material consents and
approvals (if any shall be required) necessary for such execution, delivery and performance, and
such execution, delivery and performance do not and will not contravene or conflict with, or create
a Lien (other than pursuant to the Credit Documents) or right of termination or acceleration under,
any Requirement of Law or Contractual Obligation binding upon the Borrower. This Agreement and
each of the Credit Documents is (or when executed and delivered will be) the legal, valid, and
binding obligation of the Borrower enforceable against the Borrower in accordance with its
respective terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting creditors’ rights and general
equity principles.

SECTION 4.2 Litigation and Contingent Liabilities. Except (a) as set forth (including
estimates of the dollar amounts involved) in Schedule 4.2 hereto, (b) for claims which are
covered by Insurance Policies, coverage for which has not been denied in writing, (c) for claims
which relate to Reinsurance Agreements or Primary Policies issued by the Borrower or its
Subsidiaries which involve a potential liability which does not exceed 10% of the Borrower’s Net
Worth, and (d) for claims which related to Reinsurance Agreements or Primary Policies to which it
is a party entered into by the Borrower or its Subsidiaries in the ordinary course of business
(referred to herein as “Ordinary Course Litigation”), no claim, litigation (including,
without limitation, derivative actions), arbitration, governmental investigation or proceeding or
inquiry is pending or, to the knowledge of the Borrower, threatened against the Borrower or its
Subsidiaries (i) which would, if adversely determined, have a Material Adverse Effect or (ii) which
relates to any of the transactions contemplated hereby. Other than any liability incident to such
claims, litigation or proceedings, the Borrower and its Subsidiaries have no material Contingent
Liabilities other than Permitted Guarantees.

SECTION 4.3 Employee Benefit Plans. The Borrower has no Plans.

SECTION 4.4 Regulated Entities. Neither the Parent nor the Borrower is an “investment
company” or a company “controlled by an investment company,” for the purpose of the Investment
Company Act of 1940, as amended. The Borrower is not engaged in the “investment business” as
defined in The Investment Business Act of 2003 of Bermuda. The Borrower is not subject to
regulation under the Public Utility Holding Act of 1935, the Federal Power Act, the Interstate
Commerce Act, any public utilities code, or any other Requirement of Law limiting its ability to
incur Debt.

SECTION 4.5 Regulations U and X. The Borrower is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock. None of the Borrower, any Affiliate or any Person acting on its behalf has
taken or will take action to cause the execution, delivery or performance of this Agreement, the
making or existence of the Credit Extensions or the use of proceeds of the Credit Extensions to
violate Regulations U or X of the FRB.

SECTION 4.6 Proceeds. The Letter of Credit issued hereunder will be used solely to
secure the Borrower’s obligations under Reinsurance Agreements and Primary Policies. None of the
proceeds of the Letter of Credit will be used in violation of applicable law, and none of such
proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying any margin stock as defined in Regulation U of the FRB.

SECTION 4.7 Business Locations. Schedule 4.7 as revised from time to time by
the Borrower pursuant to Section 5.1(m) lists each of the locations where the Borrower and
its Subsidiaries maintain an office, a place of business.

SECTION 4.8 Accuracy of Information. All factual written information furnished
heretofore or contemporaneously herewith by or on behalf of the Borrower or the Parent to the
Lender for purposes of or in connection with this Agreement or any of the transactions contemplated
hereby, as supplemented to the date hereof, is and all other such factual written information
hereafter furnished by or on behalf of the Borrower or the Parent to the Lender will be, true and
accurate in every material respect on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such information not
misleading under the circumstances in which given.

SECTION 4.9 Subsidiaries. The Borrower has no Subsidiaries other than those specified
on Schedule 4.9.

SECTION 4.10 Insurance Licenses. Schedule 4.10 as revised from time to time
by the Borrower pursuant to Section 5.1(m) lists all of the jurisdictions in which the
Borrower and its Subsidiaries hold licenses (including, without limitation, licenses or
certificates of authority from applicable insurance departments), permits or authorizations to
transact insurance and reinsurance business (collectively, the “Licenses”). Except as set
forth on Schedule 4.10, to the best of the Borrower’s knowledge, no such License is the
subject of a proceeding for suspension or revocation or any similar proceedings, there is no
sustainable basis for such a suspension or revocation, and no such suspension or revocation is
threatened by a Governmental Authority. Schedule 4.10 as revised from time to time by the
Borrower pursuant to Section 5.1(m) indicates the line or lines of insurance which the
Borrower and its Subsidiaries is permitted to be engaged in with respect to each License therein
listed. Neither the Borrower nor any of its Subsidiaries transact any insurance business, directly
or indirectly, in any jurisdiction other than those enumerated on Schedule 4.10 as revised
from time to time by the Borrower pursuant to Section 5.1(m) hereto, where such business
requires that the Borrower or any of its Subsidiaries obtain any license, permit, governmental
approval, consent or other authorization.

SECTION 4.11 Taxes. The Borrower and its Subsidiaries have filed by the required
filing date all tax returns that are required to be filed by it, and has paid or provided adequate
reserves for the payment of all material taxes, including, without limitation, all payroll taxes
and federal and state withholding taxes, and all assessments payable by it that have become due,
other than (a) those that are not yet delinquent and are being contested in good faith by
appropriate proceedings and with respect to which reserves have been established, and are being
maintained, in accordance with GAAP or (b) those which the failure to file or pay would not have a
Material Adverse Effect. On the Effective Date there is no ongoing audit by a taxing authority or,
to the Borrower’s knowledge, other governmental investigation of the tax liability of the Borrower
and there is no unresolved claim by a taxing authority concerning the Borrower’s tax liability, for
any period for which returns have been filed or were due. As used in this Section 4.11,
the term “taxes” includes all taxes of any nature whatsoever and however denominated, including,
without limitation, excise, import, governmental fees, duties and all other charges, as well as
additions to tax, penalties and interest thereon, imposed by any government or instrumentality,
whether federal, state, local, foreign or other.

SECTION 4.12 Securities Laws. Neither the Borrower nor any Affiliate, nor to the
Borrower’s knowledge anyone acting on behalf of any such Person, has directly or indirectly offered
any interest in the Credit Extensions or any other Obligation for sale to, or solicited any offer
to acquire any such interest from, or has sold any such interest to any Person that would cause the
issuance or sale of the Credit Extensions to be required to be registered under the Securities Act
of 1933, as amended.

SECTION 4.13 Compliance with Laws. Neither the Borrower nor any of its Subsidiaries
is in violation of any law, ordinance, rule, regulation, order, policy, guideline or other
requirement of any Governmental Authority, where the effect of such violation could reasonably be
expected to have a Material Adverse Effect on the Borrower and, to the best of the Borrower’s
knowledge, no such violation has been alleged and the Borrower and each of its Subsidiaries (i) has
filed in a timely manner all reports, documents and other materials required to be filed by it with
any Governmental Authority, if such failure to so file could reasonably be expected to have a
Material Adverse Effect; and the information contained in each of such filings is true, correct and
complete in all material respects and (ii) has retained all records and documents required to be
retained by it pursuant to any law, ordinance, rule, regulation, order, policy, guideline or other
requirement of any Governmental Authority, if the failure to so retain such records and documents
could reasonably be expected to have a Material Adverse Effect.

SECTION 4.14 Financial Condition. The audited consolidated financial statements of
the Borrower as at December 31, 2003 and the unaudited consolidated financial statements of the
Borrower as at June 30, 2004, copies of which have been delivered to the Lender, are true and
correct in all material respects, have been prepared in accordance with GAAP consistently applied
throughout the periods involved (except as disclosed therein) and present fairly the consolidated
financial condition of the Borrower and its Subsidiaries at such date and the result of its
operations for the periods then ended.

SECTION 4.15 Insurance Act. The Borrower has not received any direction or other
notification by the Minister pursuant to Section 32 of Insurance Act, 1978 of Bermuda.

SECTION 4.16 First Priority Security Interest. The Lender has a first priority
perfected security interest in the Collateral pledged by the Borrower pursuant to the Security
Agreement.

ARTICLE V.

AFFIRMATIVE COVENANTS

Until the LC Obligations and all other Obligations are paid in full, and until the Final
Maturity Date, the Borrower agrees that, unless at any time the Lender shall otherwise expressly
consent in writing, it will:

SECTION 5.1 Reports, Certificates and Other Information. Furnish or cause to be
furnished to the Lender:

(a) GAAP Financial Statements:

(i) Within 45 days after the close of each of the first three Fiscal Quarters of each
Fiscal Year (A) of the Borrower, a copy of the unaudited consolidated balance sheets of the
Borrower and its Subsidiaries, as of the close of such quarter and the related statements of
income and cash flows for that portion of the Fiscal Year ending as of the close of such
Fiscal Quarter, all prepared in accordance with GAAP (subject to normal year-end
adjustments) and accompanied by the certification of an Executive Officer of the Borrower
that all such financial statements are complete and correct and present fairly in accordance
with GAAP (subject to normal year-end adjustments) the consolidated results of operations
and cash flows of the Borrower and its Subsidiaries as at the end of such Fiscal Quarter and
for the period then ended and (B) of the Parent, a copy of the unaudited consolidated and
consolidating balance sheets of the Parent, as of the close of such quarter and the related
consolidated and consolidating statements of income and cash flows for that portion of the
Fiscal Year ending as of the close of such Fiscal Quarter, all prepared in accordance with
GAAP (subject to normal year-end adjustments) and accompanied by the certification of an
Executive Officer of the Parent that all such financial statements are complete and correct
and present fairly in accordance with GAAP (subject to normal year-end adjustments) the
consolidated results of operations and cash flows of the Parent as at the end of such Fiscal
Quarter and for the period then ended.

(ii) Within 90 days after the close of each Fiscal Year (A) of the Borrower, a copy of
the annual audited consolidated financial statements of the Borrower and its Subsidiaries
consisting of balance sheets and statements of income and retained earnings and cash flows,
setting forth in comparative form in each case the figures for the previous Fiscal Year,
which financial statements shall be prepared in accordance with GAAP, certified without
material qualification by KPMG or any other firm of independent certified public accountants
of recognized national standing selected by the Borrower and reasonably acceptable to the
Lender that all such financial statements are complete and correct and present fairly in
accordance with GAAP the financial position and the results of operations and cash flows of
the Borrower and its Subsidiaries as at the end of such year and for the period then ended
and (B) of the Parent, a copy of the annual audited financial statements of the Parent
consisting of consolidated and consolidating balance sheets and consolidated and
consolidating statements of income and retained earnings and cash flows, setting forth in
comparative form in each case the figures for the previous Fiscal Year, which financial
statements shall be prepared in accordance with GAAP, certified without material
qualification by KPMG or any other firm of independent certified public accountants of
recognized national standing selected by the Parent and reasonably acceptable to the Lender
that all such financial statements are complete and correct and present fairly in accordance
with GAAP the financial position and the results of operations and cash flows of the Parent
as at the end of such year and for the period then ended.

(b) Tax Returns. If requested by the Lender, copies of all federal, state, local and
foreign tax returns and reports in respect of income, franchise or other taxes on or measured by
income (excluding sales, use or like taxes) filed by the Borrower and its Subsidiaries.

(c) SAP Financial Statements. Within 5 days after the date filed with the Minister
for each of its Fiscal Years, but in any event within 120 days after the end of each Fiscal Year of
the Borrower a copy of the Annual Statement of the Borrower and each of its Subsidiaries for such
Fiscal Year prepared in accordance with SAP and accompanied by the certification of an Executive
Officer of the Borrower that such financial statement is complete and correct and presents fairly
in accordance with SAP the financial position of the Borrower or such Subsidiary for the period
then ended.

(d) Monthly Report and Borrowing Base Certificate. As soon as available, but in any
event within 20 days after the end of each calendar month of each Fiscal Year, (i) a report listing
each of the Borrower’s Eligible Investments, (ii) a report listing each of Borrower’s Unencumbered
Assets and calculating the Unencumbered Asset Reserve Requirement and (iii) a Borrowing Base
Certificate executed by an Executive Officer. For purposes of such report and of completing the
Borrowing Base Certificate required under this Section 5.1(d), each Eligible Investment and
MDS Shares shall be valued based on its Fair Market Value as at the last Business Day of the
calendar month for which such report or Borrowing Base Certificate is being delivered.

(e) Projections. As soon as available, but not later than March 31 of each year,
commencing with the year 2005, a three-year projection of the Borrower’s results covering the
then-current Fiscal Year and each of the next two Fiscal Years.

(f) Reports to Shareholders. Promptly upon the filing or making thereof copies of (i)
all financial statements and reports that the Parent or the Borrower sends to its shareholders or
its other holders of Debt; (ii) copies of all financial statements and regular, periodic or special
reports that the Parent or the Borrower may make to, or file with, any Government Authority.

(g) Additional Borrowing Base Certificates. Promptly, at the request of the Lender, a
Borrowing Base Certificate for any given Business Day executed by an Executive Officer of the
Borrower.

(h) Notice of Default, etc. Immediately after an Executive Officer of the Borrower
knows or has reason to know of the existence of any Default, or any development or other
information which would have a Material Adverse Effect, telephonic or telegraphic notice specifying
the nature of such Default or development or information, including the anticipated effect thereof,
which notice shall be promptly confirmed in writing within two (2) Business Days.

(i) Other Information. The following certificates and other information related to
the Borrower:

(i) Within five (5) Business Days of receipt, a copy of any financial examination
reports by a Governmental Authority with respect to the Borrower or any of its Subsidiaries
relating to the insurance business of the Borrower or such Subsidiary (when, and if,
prepared); provided, the Borrower shall only be required to deliver any interim
report hereunder at such time as Borrower has knowledge that a final report will not be
issued and delivered to the Lender within 90 days of any such interim report.

(ii) Copies of all filings (other than nonmaterial filings) with Governmental
Authorities by the Borrower or any of its Subsidiaries not later than five (5) Business Days
after such filings are made, including, without limitation, filings which seek approval of
Governmental Authorities with respect to transactions between the Borrower or any of its
Subsidiaries and its Affiliates.

(iii) Within five (5) Business Days of such notice, notice of proposed or actual
suspension, termination or revocation of any material License of the Borrower or any of its
Subsidiaries by any Governmental Authority or of receipt of notice from any Governmental
Authority notifying the Borrower or any of its Subsidiaries of a hearing relating to such a
suspension, termination or revocation, including any request by a Governmental Authority
which commits the Borrower or any of its Subsidiaries to take, or refrain from taking, any
action or which otherwise materially and adversely affects the authority of the Borrower or
any of its Subsidiaries to conduct its business.

(iv) Within five (5) Business Days of such notice, notice of any pending or threatened
investigation or regulatory proceeding (other than routine periodic investigations or
reviews) by any Governmental Authority concerning the business, practices or operations of
the Borrower or any of its Subsidiaries.

(v) Promptly, notice of any actual or, to the best of the Borrower’s knowledge,
proposed material changes in the Insurance Code governing the investment or dividend
practices of the Borrower.

(vi) Promptly, such additional financial and other information as the Lender may from
time to time reasonably request.

(j) Compliance Certificates. Concurrently with the delivery to the Lender of the GAAP
financial statements under Sections 5.1(a)(i) and 5.1(a)(ii), for each Fiscal
Quarter and Fiscal Year of the Borrower, and at any other time no later than ten (10) Business Days
following a written request of the Lender, a duly completed Compliance Certificate, signed by the
chief financial officer, treasurer or senior vice president of the Borrower.

(k) Notice of Litigation, License, etc. Promptly upon learning of the occurrence of
any of the following, written notice thereof, describing the same and the steps being taken by the
Borrower with respect thereto: (i) the institution of, or any adverse determination in, any
litigation, arbitration proceeding or governmental proceeding which could, if adversely determined,
be reasonably expected to have a Material Adverse Effect and which is not Ordinary Course
Litigation, (ii) the institution of , or any adverse determination in, any litigation or
arbitration proceeding with respect to a Reinsurance Agreement or Primary Policy issued by the
Borrower or any of its Subsidiaries involving unreserved claims in excess of 10% of the Borrower’s
Net Worth, (iii) the commencement of any dispute which might lead to the modification, transfer,
revocation, suspension or termination of this Agreement or any Credit Document or (iv) any event
which could be reasonably expected to have a Material Adverse Effect.

(l) Insurance Reports. Within five (5) Business Days of receipt of such notice by the
Borrower, written notice of any cancellation or material adverse change in any material Insurance
Policy carried by the Borrower.

(m) Updated Schedules. From time to time, and in any event concurrently with delivery
of the financial statements under Section 5.1(a)(i) and (ii), revised Schedules
4.1, 4.7, and 4.10, if applicable, showing changes from the
Schedules previously delivered.

(n) Other Information. From time to time such other information concerning the
Borrower as the Lender may reasonably request.

SECTION 5.2 Corporate Existence; Foreign Qualification. Do and cause to be done at
all times all things necessary to (a) maintain and preserve the corporate existence of the Borrower
and each of its Subsidiaries, (b) be, and ensure that the Borrower and each of its Subsidiaries is,
duly qualified to do business and be in good standing as a foreign corporation in each jurisdiction
where the nature of its business makes such qualification necessary unless the failure to be so
qualified would not have a Material Adverse Effect, and (c) do or cause to be done all things
necessary to preserve and keep in full force and effect the Borrower’s corporate existence.

SECTION 5.3 Books, Records and Inspections. Maintain, and cause its Subsidiaries to
maintain materially complete and accurate books and records in accordance with GAAP and SAP, (b)
permit access at reasonable times by the Lender to its books and records, (c) permit the Lender or
its designated representative to inspect at reasonable times its properties and operations, and (d)
permit the Lender to discuss its business, operations and financial condition with its officers and
its independent accountants.

SECTION 5.4 Insurance. Maintain Insurance Policies to such extent and against such
hazards and liabilities as is required by law.

SECTION 5.5 Taxes and Liabilities. Pay, and cause each Subsidiary to pay, when due
all material taxes, assessments and other material liabilities except as contested in good faith
and by appropriate proceedings with respect to which reserves have been established, and are being
maintained, in accordance with GAAP if and so long as such contest could not reasonably be expected
to have a Material Adverse Effect.

SECTION 5.6 Compliance with Laws. Comply, and cause each Subsidiary to comply (a)
with all federal and local laws, rules and regulations related to its businesses (including,
without limitation, the establishment of all insurance reserves required to be established under
SAP and applicable laws restricting the investments of the Borrower and its Subsidiaries), and (b)
with all Contractual Obligations binding upon it, except where failure to so comply would not in
the aggregate have a Material Adverse Effect on the Borrower.

SECTION 5.7 Maintenance of Permits. Maintain, and cause each Subsidiary to maintain,
all permits, licenses and consents as may be required for the conduct of its business by any
federal or local government agency or instrumentality except where failure to maintain the same
could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.8 Conduct of Business. Engage, and cause each Subsidiary to engage,
primarily in the same business or businesses described in the Borrower’s 2003 Annual Report.

SECTION 5.9 Use of Letter of Credit. The Borrower shall request the Letter of Credit
only to support its obligations under Reinsurance Agreements and Primary Policies.

SECTION 5.10 Further Assurances. Promptly upon the request of the Lender, the
Borrower shall execute, acknowledge, deliver and record and do any and all such further acts and
deeds as the Lender may reasonably request from time to time in order to insure that the
obligations of the Borrower hereunder are secured by a first priority perfected interest in the
assets of the Borrower stated to be pledged pursuant to the Security Agreement and to perfect and
maintain the validity, effectiveness and priority of the Security Agreement and the Liens intended
to be created thereby.

ARTICLE VI.

NEGATIVE COVENANTS

Until the LC Obligations and all other Obligations are paid in full and until the Final
Maturity Date, the Borrower agrees that, unless at any time the Lender shall otherwise expressly
consent in writing, it will:

SECTION 6.1 Net Worth. Not permit the Net Worth of (a) the Borrower to be less than
$635,000,000 and (b) the Parent to be less than $645,000,000.

SECTION 6.2 Unencumbered Reserve Requirement. Not permit the Fair Market Value of the
Unencumbered Assets to be less than $60,000,000; provided, however that in calculating the Fair
Market Value of Unencumbered Assets, no more than 50% of the Fair Market Value of Unencumbered
Assets shall be attributable to MDS Shares.

SECTION 6.3 Debt. Not, and not permit any Subsidiary to, incur any Debt other than
(a) Debt under this Agreement; (b) Purchase Money Debt provided the aggregate principal amount
outstanding at any time does not exceed $500,000; (c) Debt pursuant to Capitalized Leases provided
such Leases do not cover any property other than property acquired in connection therewith and the
aggregate principal amount of all such Debt outstanding at any time does not exceed $1,500,000; (d)
Hedging Obligations entered into in the ordinary course of business in order to hedge currency,
commodity or interest rate risks, and not for purposes of speculation; (e) Debt for standby letters
of credit which have been, or may be from time to time in the future, issued to insurance or
reinsurance cedents in the ordinary course of business; (f) Debt in connection with Total Return
Equity Swaps provided the proceeds of such Debt is invested in assets of the type described in the
definition of Eligible Investments; (g) Debt in connection with Permitted Guarantees; and (h) Debt
not included in paragraphs (a) through (g) which does not exceed at any time; in the aggregate,
$1,000,000.

SECTION 6.4 Mergers, Consolidations and Sales. Not, and not permit any Subsidiary to,
(a) merge or consolidate, (b) purchase or otherwise acquire all or substantially all of the assets
or stock of any class of, or any partnership or joint venture interest in, any other Person
provided that the Borrower may make any such purchase or acquisition provided (i) no Default or
Event of Default has occurred and is continuing or would result from such purchase or acquisition,
(ii) the Borrower provides the Lender with a pro forma Compliance Certificate giving effect to such
purchase or acquisition and (iii) the aggregate purchase price of all such purchases and
acquisitions after the date hereof does not exceed $75,000,000, or (c) sell, transfer, convey or
lease all or any substantial part of its assets, other than (i) any sale, transfer, conveyance or
lease in the ordinary course of business, (ii) any sale or assignment of receivables, (iii) any
sale, transfer, conveyance or lease not in the ordinary course of business provided the aggregate
fair market value of all such sales, transfers, conveyances or leases after the date hereof does
not exceed $75,000,000 and (iv) Total Return Equity Swaps permitted under Section 6.3(f).

SECTION 6.5 Other Agreements. Not enter into any agreement containing any provision
which would be violated or breached by the performance of obligations hereunder or under any
instrument or document delivered or to be delivered by it hereunder or in connection herewith.

SECTION 6.6 Transactions with Affiliates. Not, and not permit any Subsidiary to,
enter into, or cause, suffer or permit to exist, directly or indirectly, any arrangement,
transaction or contract with any of its Affiliates other than that described in the January 7, 2002
Letter Agreement and Permitted Guarantees unless such arrangement, transaction or contract is on an
arm’s length basis.

SECTION 6.7 Liens. Not create or permit to exist, nor allow any of its Subsidiaries
to create or permit to exist, any Lien with respect to any assets now or hereafter existing or
acquired, except the following: (i) Liens for current taxes not delinquent or for taxes being
contested in good faith and by appropriate proceedings and with respect to which adequate reserves
have been established, and are being maintained, in accordance with GAAP, (ii) easements, party
wall agreements, rights of way, restrictions, minor defects or irregularities in title and other
similar Liens not interfering in any material respect with the ordinary course of the business of
such Person; (iii) Liens incurred in the ordinary course of business in connection with workers’
compensation, unemployment insurance or other forms of governmental insurance or benefits and Liens
pursuant to letters of credit or other security arrangements in connection with such insurance or
benefits, (iv) mechanics’, workers’, materialmen’s, landlord liens and other like Liens arising in
the ordinary course of business in respect of obligations which are not delinquent or which are
being contested in good faith and by appropriate proceedings and with respect to which adequate
reserves have been established, and are being maintained, in accordance with GAAP, (v) Liens listed
on Schedule 6.7 in effect on the date hereof; (vi) attachments, judgments and other similar
Liens for sums not exceeding $5,000,000 (excluding any portion thereof which is covered by
insurance so long as the insurer is reasonably likely to be able to pay and has accepted a tender
of defense and indemnification without reservation of rights); (vii) attachments, judgments and
other similar Liens for sums of $5,000,000 or more (excluding any portion thereof which is covered
by insurance so long as the insurer is reasonably likely to be able to pay and has accepted a
tender of defense and indemnification without reservation of rights) provided the execution or
other enforcement of such Liens is effectively stayed and claims secured thereby are being actively
contested in good faith and by appropriate proceedings and have been bonded off; (viii) Liens on
cash and Investments (other than Collateral) pursuant to trusts or other security arrangements in
connection with Reinsurance Agreements or Primary Policies and Liens securing Debt permitted under
Section 6.3(e); (ix) Liens in connection with Debt permitted under Section 6.3(f);
(x) Liens in favor of the Lender; (xi) Purchase Money Liens securing Purchase Money Debt permitted
under Section 6.3(b); (xii) any interest or title of a lessor in assets subject to any
Capitalized Lease or operating lease which is permitted under this Agreement; and (xiii) Liens not
permitted by any other clause of this Section 6.7 securing Debt in an aggregate amount not
to exceed $250,000, provided any Liens granted (other than Liens pursuant to Section
6.7(x)) do not extend to any Collateral and after giving effect to all Liens under clauses
(viii) through (xiii), there are Unencumbered Assets sufficient to ensure compliance
with Section 6.2.

SECTION 6.8 Restrictions On Negative Pledge Agreements. Not create, incur or assume
any agreement to which it is a signatory, other than this Agreement which places any restrictions
upon the right of the Borrower to sell, pledge or otherwise dispose of any material portion of its
properties now owned or hereafter acquired (other than with respect to property secured by Liens
permitted under Section 6.7) except for such restrictions imposed under this Agreement or
by federal or state laws upon the right of the Borrower to sell, pledge or otherwise dispose of
securities owned by it.

SECTION 6.9 Dividends, Etc. Not (a) declare or pay any dividends on any of its
Capital Stock, (b) purchase or redeem any Capital Stock of the Parent, the Borrower or any of its
Subsidiaries or any warrants, options or other rights in respect of such stock, or (c) set aside
funds for any of the foregoing, except that the Borrower may declare or pay dividends on any of its
Capital Stock provided no Default or Event of Default has occurred and is continuing on the date of
or would result from such declaration or payment.

SECTION 6.10 Eligible Investments. The Borrower shall not permit:

(a) the minimum weighted average credit quality rating of the Eligible Investments to be less
than AA/Aa2 or the equivalent; or

(b) the Eligible Investments to exceed the Concentration Limits;

provided, however, that the Borrower shall not be in violation of this Section 6.10 if such
violation occurs as a result of a change in the Fair Market Value or ratings of such Eligible
Investments (as opposed to a change in the makeup of such Eligible Investments) unless such
deficiency exists for thirty days.

ARTICLE VII.

EVENTS OF DEFAULT AND THEIR EFFECT

SECTION 7.1 Events of Default. Each of the following shall constitute an Event of
Default under this Agreement:

(a) Non-Payment of Reimbursement Obligations. Default in the payment when due of any
Reimbursement Obligation.

(b) Non-Payment of Interest, Fees, etc. Default, and continuance thereof for three
(3) Business Days, in the payment when due of fees or of any other amount payable hereunder or
under the Credit Documents.

(c) Non-Payment of Other Debt. (i) Default in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise, of any other Debt of, or guaranteed
by, the Borrower if the aggregate amount of Debt of the Borrower which is accelerated or due and
payable, or which (subject to any applicable grace period) may be accelerated or otherwise become
due and payable, by reason of such default or defaults is $5,000,000 or more, or (ii) default in
the performance or observance of any obligation or condition with respect to any such other Debt
of, or guaranteed by, the Borrower if the effect of such default or defaults is to accelerate the
maturity (subject to any applicable grace period) of any such Debt of $5,000,000 or more in the
aggregate or to permit the holder or holders of such Debt of $5,000,000 or more in the aggregate,
or any trustee or agent for such holders, to cause such Debt to become due and payable prior to its
expressed maturity.

(d) Other Material Obligations. Except for obligations covered under other provisions
of this Article VII, default in the payment when due, or in the performance or observance
of, any material obligation of, or material condition agreed to by, the Borrower with respect to
any material purchase or lease obligation of $5,000,000 or more (unless the existence of any such
default is being contested by the Borrower in good faith and by appropriate proceedings and the
Borrower has established, and is maintaining, adequate reserves therefor in accordance with GAAP)
which default continues for a period of 30 days.

(e) Bankruptcy, Insolvency, etc. (i) The Parent or the Borrower becomes insolvent
or generally fails to pay, or admits in writing its inability to pay, debts as they become due;
(ii) there shall be commenced by or against any of such Persons any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, supervision, conservatorship, liquidation, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, rehabilitation, conservation, supervision,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, obligations or liabilities, or (B) seeking appointment of a receiver,
trustee, custodian, rehabilitator, conservator, supervisor, liquidator or other similar official
for it or for all or any substantial part of its assets, in each case which (1) results in the
entry of an order for relief or any such adjudication or appointment or (2) if filed against such
Person, remains undismissed, undischarged or unstayed for a period of 60 days; or (iii) there shall
be commenced against any of such Persons any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or any substantial part
of its assets which results in the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or
(iv) any of such Persons shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause(ii) or (iii)
above; or (v) any Governmental Authority shall issue any order of conservation, supervision or any
other order of like effect relating to any of such Persons.

(f) Financial Statements. Failure by the Borrower to comply with its covenants set
forth in Section 5.1 and continuance of such failure for five Business Days after notice
thereof from the Lender.

(g) Specific Defaults. Failure by the Borrower to comply with its covenants set forth
in Sections 2.10 (subject to any applicable cure period), 5.9, 6.1,
6.3, 6.4, 6.6, 6.7(viii), 6.7(ix), 6.7(x),
6.7(xi), 6.7(xii), 6.7 (xiii), 6.8 or 6.9.

(h) Non-compliance With Other Provisions. Failure by the Borrower to comply with or
to perform any provision of this Agreement or any other Credit Document (and not constituting an
Event of Default under any of the other provisions of this Article VII) and continuance of
such failure for 30 days after notice thereof from the Lender to the Borrower.

(i) Warranties and Representations. Any warranty or representation made by or on
behalf of the Borrower herein or in any Credit Document is inaccurate or incorrect or is breached
or false or misleading in any material respect as of the date such warranty or representation is
made; or any schedule, certificate, financial statement, report, notice, or other instrument
furnished by or on behalf of Borrower to the Lender is false or misleading in any material respect
on the date as of which the facts therein set forth are stated or certified.

(j) Employee Benefit Plans. The Borrower establishes any Plan other than a 401(k)
plan.

(k) Credit Documents. The Security Agreement or any other Credit Document shall cease
to be in full force and effect with respect to the Borrower, the Borrower shall fail (subject to
any applicable grace period) to comply with or to perform any applicable provision of the Security
Agreement, any action shall be taken by or on behalf of the Borrower or any Affiliate thereof to
discontinue any of the Credit Documents or to contest the validity, binding nature or
enforceability of any thereof or the Lender shall fail to have a first priority perfected Lien on
any Collateral.

(l) Change in Control. A Change in Control occurs.

(m) Judgments. A final judgment or judgments which exceed an aggregate of $5,000,000
(excluding any portion thereof which is covered by insurance so long as the insurer is reasonably
likely to be able to pay and has accepted a tender of defense and indemnification without
reservation of rights) shall be rendered against the Borrower and shall not have been discharged or
vacated or had execution thereof stayed pending appeal within 60 days after entry or filing of such
judgment(s).

SECTION 7.2 Effect of Event of Default. If any Event of Default described in
Section 7.1(e) shall occur, all Obligations shall become immediately due and payable, and
the Borrower shall become immediately obligated to deliver to the Lender cash collateral in
accordance with Section 7.3 all without notice of any kind; and, in the case of any other
Event of Default, the Lender may terminate the Commitment hereunder and declare all or any portion
of the Obligations to be due and payable, and/or demand that the Borrower immediately deliver to
the Lender Cash and Cash Equivalents in accordance with Section 7.3 whereupon the
Commitment shall terminate and all or such portion of the Obligations shall become immediately due
and payable, and/or demand that the Borrower immediately deliver to the Lender Cash and Cash
Equivalents in an amount equal to the outstanding LC Obligations all without further notice of any
kind. The Lender shall promptly advise the Borrower of any such declaration but failure to do so
shall not impair the effect of such declaration. Notwithstanding the foregoing, the effect as an
Event of Default of any event described in Section 7.1(a) may not be waived except by
consent of the Lender in writing.

SECTION 7.3 LC Collateral Account.

(a) If the Obligations are accelerated pursuant to Section 7.2, then until the final
expiration date of the Letter of Credit and thereafter so long as any Obligations are outstanding
and payable hereunder, the Lender shall have the right to transfer the Collateral from the Custody
Account to a special collateral account pursuant to arrangements satisfactory to the Lender (the
“LC Collateral Account”) at the Lender’s office in the name of the Borrower but under the
sole dominion and control of the Lender, and the Borrower shall have no interest therein except as
set forth in this Section 7.3. The Borrower hereby pledges, assigns and grants to the
Lender a security interest in all of the Borrower’s right, title and interest in and to the LC
Collateral Account, all funds and Cash Equivalents which may from time to time be on deposit in the
LC Collateral Account to secure the prompt and complete payment and performance of the Obligations.
The Lender may invest any funds on deposit from time to time in the LC Collateral Account in Cash
Equivalents having a maturity not exceeding 30 days. Funds earned on such Cash Equivalents shall
be deposited into the LC Collateral Account.

(b) If at any time after the Borrower has been required to deposit amounts in the LC
Collateral Account pursuant to Section 2.10, the Lender determines that the amount on
deposit in the LC Collateral Account is less than 102% of the amount of the outstanding LC
Obligations at such time, the Lender may demand the Borrower to deposit, and the Borrower shall,
upon such demand and without any further notice, pay to the Lender for deposit in the LC Collateral
Account, funds necessary to cure any shortfall.

(c) The Lender may, at any time or from time to time, after funds are deposited in the LC
Collateral Account apply such funds to the payment of the Obligations then due and payable by the
Borrower to the Lender under the Credit Documents.

(d) Neither the Borrower nor any Person claiming on behalf of or through the Borrower shall
have any right to withdraw any of the funds held in the LC Collateral Account until all of the
Obligations have been indefeasibly paid in full and the Letter of Credit has been terminated or
expired, at which time any funds remaining in the LC Collateral Account shall be returned by the
Lender to the Borrower.

ARTICLE VIII.

CONDITIONS

SECTION 8.1 Conditions to Occurrence of the Effective Date. The occurrence of the
Effective Date shall be subject to receipt by the Lender of all of the following, each duly
executed and dated the Effective Date (or such earlier date as shall be satisfactory to the
Lender), each in form and substance satisfactory to the Lender:

(a) Credit Documents. This Agreement and the Security Agreement executed by each
party thereto.

(b) Organization Documents, Resolutions. Certified copies of the Organization
Documents of the Borrower and resolutions of the Finance committee of the Board of Directors of the
Borrower authorizing the execution, delivery and performance, respectively, of those documents and
matters required of it with respect to this Agreement or the other Credit Documents.

(c) Incumbency and Signatures. A certificate of an Authorized Officer certifying the
names of the individual or individuals authorized to sign this Agreement and the other Credit
Documents, together with a sample of the true signature of each such individual. (The Lender may
conclusively rely on each such certificate until formally advised by a like certificate of any
changes therein.)

(d) Opinion of Counsel. An opinion of counsel of the Borrower, addressed to the
Lender from each of (i) Akin Gump Strauss Hauer & Feld LLP, New York counsel to the Borrower (ii)
Sarene Loar, counsel to the Borrower and (iii) Conyers, Dill and Pearman, Bermuda counsel to the
Borrower, each in form and substance satisfactory to the Lender.

(e) Certificate. Certificate of an Executive Officer dated as of the Effective Date
stating that: (i) that there are no material insurance regulatory proceedings pending or threatened
against the Borrower in any jurisdiction; (ii) no Default or Event of Default exists or will result
from the initial Credit Extension; and (iii) there has occurred since December 31, 2003, no event
or circumstance that has resulted or in the judgment of such Executive Officer could reasonably be
expected to result in a Material Adverse Effect.

(f) Borrowing Base Certificate. The Borrower shall have delivered a Borrowing Base
Certificate calculated as of the most recent Business Day.

(g) Control Agreement. A Control Agreement substantially in the form of Schedule I to
the Security Agreement executed by the Borrower, the Lender and the Custodian.

(h) Process Agent. Evidence that the Borrower has appointed CT Corporation as its
agent for service of process pursuant to Section 9.16.

(i) Other. Such other documents as the Lender may reasonably request.

SECTION 8.2 Conditions to All Credit Extensions. The obligation of the Lender to make
all Credit Extensions shall be subject to the prior or concurrent satisfaction (in form and
substance satisfactory to the Lender) of each of the conditions precedent set forth below:

(a) LC Application/Borrowing Base Certificate. The Borrower shall have delivered a LC
Application and a Borrowing Base Certificate calculated as of the most recent Business Day.

(b) No Default. No Default or Event of Default shall have occurred and be continuing
or will result from the making of the Credit Extensions and no Default or Event of Default shall
have occurred and be continuing under the Credit Documents or will result from the making of the
Credit Extensions.

(c) Warranties and Representations. (i) All warranties and representations
contained in this Agreement (other than Section 4.2 except in the case of the initial
Credit Extension) shall be true and correct in all material respects as of the date of any Credit
Extension, with the same effect as though made on the date of and concurrently with the making of
such Credit Extension (except where such representation speaks as of specified date) and (ii) all
covenants contained herein and in such documents to be performed by each of the parties thereto
(other than the Lender) prior to the date of any Credit Extension shall have been performed.

(d) Litigation. (i) No litigation (including, without limitation, derivative
actions), arbitration, governmental investigation or proceeding or inquiry shall be, on the date of
any Credit Extension, pending, or to the knowledge of the Borrower, threatened which seeks to
enjoin or otherwise prevent the consummation of, or to recover any damages or to obtain material
relief as a result of, the transactions contemplated hereunder or, in the reasonable opinion of the
Lender, could be reasonably expected to be materially adverse to any of the parties to this
Agreement and which is not Ordinary Course Litigation, and (ii) in the reasonable opinion of the
Lender, no material adverse development shall have occurred in any litigation (including, without
limitation, derivative actions), arbitration, government investigation or proceeding or inquiry
with respect to any Reinsurance Agreement or Primary Policy issued by the Borrower or its
Subsidiaries in which the unreserved potential liability is in excess of 10% of the Borrower’s Net
Worth or disclosed in Schedule 4.2 which is likely to have a Material Adverse Effect.

(e) Material Adverse Effect. There shall not have occurred any event which, in the
reasonable judgment of the Lender, constitutes a Material Adverse Effect.

ARTICLE IX.

MISCELLANEOUS

SECTION 9.1 Amendments and Waivers. No amendment or waiver of any provision of this
Agreement or any other Credit Document, and no consent with respect to any departure by the
Borrower therefrom, shall be effective unless the same shall be in writing and signed by the Lender
and the Borrower, and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. The Lender and the Borrower are parties to
that certain Fourth Amended and Restated Letter of Credit Reimbursement Agreement dated as of June
4, 2004 among the Borrower, various financial institutions (including the Lender) and Bank of
America, National Association, as Administrative Agent (as in effect on the Effective Date, the
“Bank of America Agreement”). The Borrower and the Lender agree that if any amendment is
made to Article V, Article VI or Section 7.2 of the Bank of America Agreement or any definition
used therein (a “BofA Amendment”) and the Lender has consented to such BofA Amendment,
then, upon the effectiveness of such BofA Amendment, the comparable provisions of this Agreement
shall automatically be deemed to be amended in accordance with such BofA Amendment without further
action, provided that upon request of either party, the Borrower and the Lender shall execute a
document evidencing such amendment.

SECTION 9.2 Notices. All notices, requests and other communications shall be in
writing (including, unless the context expressly otherwise provides, by facsimile transmission,
provided that any matter transmitted by the Borrower by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on Schedule 9.2, and
(ii) shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or
delivered, to the address or facsimile number specified for notices on Schedule 9.2; or, to
such other address as shall be designated by such party in a written notice to the other party.

(a) All such notices, requests and communications shall, when transmitted by overnight
delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted
in legible form by facsimile machine, respectively, or, if delivered, upon delivery, except that
notices pursuant to Article II shall not be effective until actually received by the
Lender.

(b) Any agreement of the Lender herein to receive certain notices by telephone or facsimile is
solely for the convenience and at the request of the Borrower. The Lender shall be entitled to
rely on the authority of any Person purporting to be a Person authorized by the Borrower to give
such notice and the Lender shall not have any liability to the Borrower or other Person on account
of any action taken or not taken by the Lender in reliance upon such telephonic or facsimile
notice. The obligation of the Borrower to repay the Obligations shall not be affected in any way
or to any extent by any failure by the Lender to receive written confirmation of any telephonic or
facsimile notice or the receipt by the Lender of a confirmation which is at variance with the terms
understood by the Lender to be contained in the telephonic or facsimile notice.

SECTION 9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Lender, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.

SECTION 9.4 Costs and Expenses. The Borrower shall:

(a) whether or not the transactions contemplated hereby are consummated, pay or reimburse the
Lender within ten Business Days after demand for all costs and expenses incurred by the Lender, in
connection with the negotiation, preparation, delivery, syndication, administration and execution
of, and any amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Credit Document and any other documents prepared in connection
herewith or therewith, and the consummation of the transactions contemplated hereby and thereby,
including reasonable Attorney Costs incurred by the Lender with respect thereto; and

(b) pay or reimburse the Lender within ten Business Days after demand for all costs and
expenses (including Attorney Costs) incurred by it in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this Agreement or any other Credit
Document during the existence of an Event of Default or after acceleration of the Obligations
(including in connection with any “workout” or restructuring regarding the Obligations, and
including in any insolvency proceeding or appellate proceeding).

SECTION 9.5 Indemnity. Whether or not the transactions contemplated hereby are
consummated, the Borrower shall indemnify and hold the Lender-Related Persons and each of its
respective Affiliates, officers, directors, employees, counsel, agents and attorneys-in-fact (each,
an “Indemnified Person”) harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any
time following repayment of the Obligations) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement or any document contemplated by
or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by
any such Person under or in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any insolvency proceeding or appellate
proceeding) related to or arising out of this Agreement or the Credit Extensions or the use of the
proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing,
collectively, the “Indemnified Liabilities”); provided, that the Borrower shall
have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities
resulting solely from the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.

SECTION 9.6 Payments Set Aside.. To the extent that the Borrower makes a payment to
the Lender or the Lender exercises its right of set-off, and such payment or the proceeds of such
set-off or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement entered into by the
Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection
with any insolvency proceeding or otherwise, then to the extent of such recovery the obligation or
part thereof originally intended to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such set-off had not occurred.

SECTION 9.7 Successors and Assigns. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective successors and permitted
assigns, except that the Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of the Lender.

SECTION 9.8 Confidentiality. The Lender agrees to take and to cause its Affiliates to
take normal and reasonable precautions and exercise due care to maintain the confidentiality of all
information identified as “confidential” or “secret” by the Borrower and provided to it by the
Borrower under this Agreement or any other Credit Document (“Information”), and neither it
nor any of its Affiliates shall use any Information other than in connection with or in enforcement
of this Agreement and the other Credit Documents or in connection with other business now or
hereafter existing or contemplated with the Borrower; except to the extent Information (a) was or
becomes generally available to the public other than as a result of disclosure by the Lender, or
(b) was or becomes available on a non-confidential basis from a source other than the Borrower,
provided that such source is not bound by a confidentiality agreement with the Borrower known to
the Lender; provided, however, that the Lender may disclose Information (i) at the
request or pursuant to any requirement of any Governmental Authority to which the Lender is subject
or in connection with an examination of the Lender by any such authority; (ii) pursuant to subpoena
or other court process; (iii) when required to do so in accordance with the provisions of any
applicable Requirement of Law; (iv) to the extent reasonably required in connection with any
litigation or proceeding to which the Lender or its Affiliates may be party; (v) to the extent
reasonably required in connection with the exercise of any remedy hereunder or under any other
Credit Document; (vi) to the Lender’s independent auditors and other professional advisors; (vii)
as to the Lender or its Affiliate, as expressly permitted under the terms of any other document or
agreement regarding confidentiality to which the Borrower is party or is deemed party with the
Lender or such Affiliate; and (viii) to its Affiliates which are either the Lender’s parent or it
or its parent’s wholly owned Subsidiary or, with the prior written consent of the Borrower which
shall not be unreasonably withheld, its other Affiliates.

SECTION 9.9 Set-off. In addition to any rights and remedies of the Lender provided by
law, if an Event of Default exists or the Obligations have been accelerated, the Lender is
authorized at any time and from time to time, without prior notice to the Borrower, any such notice
being waived by the Borrower to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any time held by, and
other indebtedness at any time owing by, the Lender to or for the credit or the account of the
Borrower against any and all Obligations owing to the Lender, now or hereafter existing,
irrespective of whether or not the Lender shall have made demand under this Agreement or any Credit
Document and although such Obligations may be contingent or unmatured. The Lender agrees promptly
to notify the Borrower after any such set-off and application; provided, however,
that the failure to give such notice shall not affect the validity of such set-off and application.

SECTION 9.10 Counterparts; Facsimile. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an original, and all of
said counterparts taken together shall be deemed to constitute but one and the same instrument.
Credit Documents may be transmitted and/or signed by facsimile. The effectiveness of any such
documents and signatures shall, subject to any Requirement of Law, have the same force and effect
as manually-signed originals and shall be binding on the Borrower and the Lender. The Lender may
also require that any such documents and signatures be confirmed by a manually-signed original
thereof; provided, however, that the failure to request or deliver the same shall
not limit the effectiveness of any facsimile document or signature.

SECTION 9.11 Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in any way affect or
impair the legality or enforceability of the remaining provisions of this Agreement or any
instrument or agreement required hereunder.

SECTION 9.12 No Third Parties Benefitted. This Agreement is made and entered into for
the sole protection and legal benefit of the Borrower and the Lender, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or
have any direct or indirect cause of action or claim in connection with, this Agreement or any of
the other Credit Documents.

SECTION 9.13 Governing Law and Jurisdiction.

(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER AND THE
LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH OF THE BORROWER AND THE LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN
RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE BORROWER AND THE LENDER EACH WAIVE
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND IRREVOCABLY CONSENT TO THE SERVICE
OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID OR BY ANY OTHER MEANS PERMITTED BY NEW YORK OR
FEDERAL LAW.

SECTION 9.14 Waiver of Jury Trial. THE BORROWER AND THE LENDER EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
OR RELATED TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY LENDER-RELATED PERSON, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE BORROWER AND THE LENDER EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS.

SECTION 9.15 Currency Indemnity. If, for the purposes of obtaining judgment in any
court in any jurisdiction with respect to any Credit Document, it becomes necessary to convert into
the currency of such jurisdiction (the “Judgment Currency”) any amount due under any Credit
Document in any currency other than the Judgment Currency (the “Currency Due”), then
conversion shall be made at the rate of exchange prevailing on the Business Day before the day on
which judgment is given. For this purpose, “rate of exchange” means the rate at which the Lender
is able, on the relevant date, to purchase the Currency Due with the Judgment Currency in
accordance with its normal practice at its main branch in London, England. In the event that there
is a change in the rate of exchange prevailing between the Business Day before the day on which the
judgment is given and the date of payment of the amount due, the Borrower will, on the day of
payment, pay such additional amount, if any, or be entitled to receive reimbursement of such
amount, if any, as may be necessary to ensure that the amount paid on such date is the amount in
the Judgment Currency which when converted at the rate of exchange prevailing on the date of
payment is the amount then due under any Credit Document in the Currency Due. If the amount of the
Currency Due which the Lender is so able to purchase is less than the amount of the Currency Due
originally due to it, the Borrower shall indemnify and save the Lender harmless from and against
loss or damage arising as a result of such deficiency. This indemnity shall constitute an
obligation separate and independent from the other obligations contained in any Credit Document,
shall give rise to a separate and independent cause of action, shall apply irrespective of any
indulgence granted by the Lender from time to time and shall continue in full force and effect
notwithstanding any judgment or order for a liquidated sum in respect of an amount due under any
Credit Document or under any judgment or order.

SECTION 9.16 Service of Process. On or prior to the Effective Date, the Borrower
shall appoint CT Corporation System (the “Process Agent”), with an office on the date
hereof at 111 8th Avenue, New York, New York 10011, United States, as its agent to receive on its
behalf and its property service of copies of the summons and complaints and any other process which
may be served in any such action or proceeding, provided that a copy of such process is also mailed
by registered or certified mail, postage prepaid, to the Borrower at its address specified pursuant
to Section 9.2. Such service may be made by mailing or delivering a copy of such process
to the Borrower in care of the Process Agent at the Process Agent’s above address, and the Borrower
hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf.
The Borrower agrees to indemnify the Process Agent in connection with all matters relating to its
appointment as agent of the Borrower for such purposes, to enter into any agreement relating to
such appointment which such Process Agent may customarily require, and to pay such Process Agent’s
customary fees upon demand. As an alternative method of service, the Borrower also irrevocably
consents to the service of any and all process in any such action or proceeding by the mailing of
copies of such process to the Borrower at its address specified pursuant to Section 9.2.
Nothing in this Section 9.16 shall affect the right of the Lender to serve legal process in
any other manner permitted by law or affect the right of the Lender to bring any action or
proceeding against the Borrower, or any of its properties in the courts of any other jurisdiction.

SECTION 9.17 Entire Agreement. This Agreement, together with the other Credit
Documents, embodies the entire agreement and understanding among the Borrower and the Lender, and
supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof.

3

MAX RE LTD.

By:

Title:

4

ING BANK N.V., LONDON BRANCH

By:

Title:

By:

Title:

5

SCHEDULE 1.1

CONCENTRATION LIMITS

	 	 	 	 	 	 	 	 	 
	 
	 	Limitation per	 	Limitation per
	 
	 	Issuer (as Percentage            
	 	Issue (as Percentage

	 
	 	of all such	 	of all such
	Eligible Investments)
	 	Eligible Investments             
	 	Eligible Investments)

	 	 	 	 	 
	ABS
	 	 	7.5	%	 	 	N/A	 
	Corporate/Municipal Securities
	 	 	N/A	 	 	 	7.5	%
	MBS (Non Agency CMOs)
	 	 	5	%	 	 	7.5	%
	G7 Securities
	 	 	N/A	 	 	 	7.5	%

6

SCHEDULE 1.2

BORROWING BASE CALCULATION

	 	 	 	 	 
	Eligible Investments	 	Applicable Percentage of Fair Market Value
	Cash and Cash Equivalents
	 	 	98	%
	A1/P1 Commercial Paper
	 	 	98	%
	Government Debt with maturities
	 	 	98	%
	of more than one year but less
	 	 	 	 
	than five year
	 	 	 	 
	Government Debt with maturities
	 	 	95	%
	of five years or more
	 	 	 	 
	MBS (Agency Pass-Throughs) rated
	 	 	90	%
	AA- by S&P or Aa3 by Moody’s or
	 	 	 	 
	better
	 	 	 	 
	MBS (Agency CMOs) rated AA- by
	 	 	90	%
	S&P or Aa3 by Moody’s or better
	 	 	 	 
	MBS (Non-Agency CMOs) rated AAA
	 	 	90	%
	by S&P or Aaa by Moody’s
	 	 	 	 
	MBS (Non-Agency CMOs) rated AA-
	 	 	87.5	%
	by S&P or Aa3 by Moody’s or better
	 	 	 	 
	ABS
	 	 	95	%
	G7 Securities issued by the Governments
	 	 	95	%
	of Germany or the United Kingdom
	 	 	 	 
	G7 Securities issued by the Governments
	 	 	93	%
	of France, Japan or Canada
	 	 	 	 
	G7 Securities issued by the Government
	 	 	92	%
	of Italy
	 	 	 	 
	Corporate/Municipal Securities rated
	 	 	94	%
	AAA by S&P or Aaa by Moody’s
	 	 	 	 
	Corporate/Municipal Securities rated at
	 	 	93	%
	least AA- by S&P or Aa3 by Moody’s
	 	 	 	 
	Corporate/Municipal Securities rated at
	 	 	92	%
	A- by S&P or A3 by Moody’s
	 	 	 	 

7

SCHEDULE 4.1

JURISDICTIONS

Bermuda

Max Re Ltd.

Max Re Diversified Strategies Ltd.

Ireland

Max Europe Holdings Limited

Max Re Europe Limited

Max Insurance Europe Limited

8

SCHEDULE 4.2

LITIGATION AND CONTINGENT LIABILITIES

Litigation

None

Contingent Liabilities

Guaranty by Max Re Ltd. of a lease of an office building in Dublin, Ireland used by European
Subsidiaries.

9

SCHEDULE 4.7

LOCATIONS

Max Re Ltd.

Max Re Diversified Strategies Ltd.

Max Re House

2 Front Street

P.O. Box HM 2565

Hamilton HM KX, Bermuda

Max Europe Holdings Limited

Max Insurance Europe Limited

Max Re Europe Limited

The Harcourt Building

Harcourt Street

Dublin, 2

Ireland

10

SCHEDULE 4.9

SUBSIDIARIES

Max Europe Holdings Limited

Max Re Europe Limited

Max Insurance Europe Limited

Max Re Diversified Strategies Ltd.

11

SCHEDULE 4.10

INSURANCE LICENSES

Bermuda licence for General Business Insurance

Borrower is licensed as a Class IV, General and long-term Insurer in Bermuda, which allows writing
of all property, casualty, life, and health lines.

Max Re Europe Limited is authorized to write reinsurance in Ireland.

Max Insurance Europe Limited is authorized to conduct non-life insurance business in Ireland in the
following classes: 1, 4, 6, 7, 8, 9, 11, 12, 13 and 16.

12

SCHEDULE 6.7

LIENS

None

13

SCHEDULE 9.2

ADDRESSES

ING BANK N.V.

Notices:

ING Bank N.V., London Branch

60 London Wall

London EC2M 5TQ

United Kingdom

Attention: Robert Miners

Telephone: 011 44 207 767 5908

Facsimile: 011 44 207 767 7507

Payment Office:

Chase Manhattan Bank NY

Swift Code CHASUS33

ABA No. 021 000 021

For Account Name: ING London

Account Number: 0011938123

MAX RE LTD.

Notices:

Max Re Ltd.

P.O. Box HM 2565

Max Re House

2 Front Street

Hamilton HM KX, Bermuda

Attention: Keith Hynes, Chief Financial Officer

Telephone: (441) 296-8800

Facsimile: (441) 296-8811

14Exhibit 10.1

CHURCHILL DOWNS
INCORPORATED 
RESTRICTED STOCK
AGREEMENT

        THIS
RESTRICTED STOCK AGREEMENT (the “Agreement”) is made and entered into as of the
____ day of _____________, 2004 by and between _________________________ (the
“Participant”), who resides at  , and Churchill Downs Incorporated (the
“Company”), a Kentucky corporation with its principal place of business at 700
Central Avenue, Louisville, Kentucky 40208, pursuant to the provisions of the Churchill
Downs Incorporated 2004 Restricted Stock Plan (the “Plan”). 

WITNESSETH:

        WHEREAS,
the Board of Directors of the Company at its meeting on November 18, 2004, ratified the
action of the Compensation Committee (the “Committee”) of the Board of Directors
authorizing and directing the Company to make an award of stock to the Participant under
the Plan for the purposes expressed in the Plan; and 

        WHEREAS,
the parties desire to enter into this Agreement to set forth the terms and conditions of
such award.

        NOW, THEREFORE,
in consideration of the foregoing and the mutual undertakings
herein contained, and for other good and valuable consideration, the
mutuality, receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

       1.     Grant of Stock. In accordance with the terms of the Plan and subject to
the further terms, conditions and restrictions contained in this Agreement, the Company
hereby grants to the Participant ____ shares (the “Shares”) of the
Company’s common stock, no par value per share (the “Common Stock”), in
consideration for services to be performed by the Participant as an employee of the
Company and its subsidiaries. As long as the Shares are subject to the Restrictions set
forth in Section 4 of this Agreement, such shares shall be deemed to be, and are referred
to in this Agreement as, the “Restricted Shares.

      2.     
                    Certificates for Shares; Proxies. Certificates evidencing Restricted
                    Shares shall be deposited with the Company or its designee to be held in escrow
                    until such Shares are released to the Participant or forfeited in accordance
                    with this Agreement. The Participant shall, simultaneously with the execution
                    and delivery of this Agreement, execute and deliver to the Company (i) a stock
                    power in blank with respect to the Restricted Shares, and (ii) an irrevocable
                    proxy with respect to the Restricted Shares, appointing the Company as the
                    Participant’s proxy until the lapse of the Restrictions in accordance with
                    Section 6 herein, in form and substance satisfactory to the Company. If any
                    Restricted Shares are forfeited, the Company shall direct the transfer agent of
                    the Common Stock to make the appropriate entries in its records showing the
                    cancellation of the certificate or certificates for such Restricted Shares. 

      3.     Adjustments in Restricted Shares.
                      In the event of any change in the
                    outstanding Common Stock by reason of a stock dividend or distribution,
                    recapitalization, merger, consolidation, split-up, combination, exchange of
                    shares or the like, the Committee shall make equitable adjustments in the
                    Restricted Shares corresponding to adjustments made by the Committee in the
                    number and class of shares of Common Stock that may be issued under the Plan.
                    Any new, additional or different securities to which the Participant shall be
                    entitled in respect of Restricted Shares by reason of such adjustment shall be
                    deemed to be Restricted Shares and shall be subject to the same terms,
                    conditions and restrictions as the Restricted Shares so adjusted. 

	 
	 
	
               Page 1
	

	 
	 

       4.    
                                        Restrictions. During applicable periods of restriction determined in
                    accordance with Section 6 of this Agreement, Restricted Shares, and all rights
                    with respect to such Shares, may not be sold, assigned, transferred, exchanged,
                    pledged, hypothecated or otherwise encumbered or disposed of and shall be
                    subject to the risk of forfeiture contained in Section 5 of this Agreement (such
                    limitations on transferability and risk of forfeiture being herein referred to
                    as the “Restrictions”), but the Participant shall have all other
                    rights of a stockholder; provided, however, that, until such time
                    as the Restrictions lapse, the Participant shall not have the right to vote the
                    Restricted Shares; receive dividends thereon (which dividends shall be
                    irrevocably retained by the Company); or purchase any securities pursuant to
                    that certain Rights Agreement dated as of March 19, 1998, between the Company
                    and The Fifth Third Bank (as successor Rights Agent to Bank of Louisville), as
                    amended, and as the same may be amended, modified or supplemented from time to
                    time, or any similar agreement, document or instrument.

       5.    
                    Forfeiture of Restricted Shares. In the event that the Participant
                    terminates employment with the Company and its subsidiaries for any
                    reason other than his or her death, retirement at or after age 60 or total and
                    permanent disability, such event shall constitute an “Event of
                    Forfeiture” and all Shares which at that time are Restricted Shares shall
                    thereupon be forfeited by the Participant to the Company without payment of any
                    consideration by the Company, and neither the Participant nor any heir, personal
                    representative, successor or assign of the Participant shall have any right,
                    title or interest in or to such Restricted Shares or the certificates evidencing
                    the same.

       6.    
                    Lapse of Restrictions

 

	(a)	
                    Except as otherwise provided in subsection (b) below, the Restrictions on the
                    Restricted Shares shall lapse on the fifth (5th) anniversary of the
                    effective date of this Agreement.

 
	(b) 	
                    In the event that the Participant’s employment with the Company and its
                    subsidiaries terminates as a result of his or her death, retirement at or after
                    age 60 or total and permanent disability, then the Restrictions on the
                    Restricted Shares shall lapse on the later of (i) the date of such event, or
                    (ii) six months after the date of this Agreement. In the event that the Company
                    experiences a Change in Control (as defined below) or the Committee in its sole
                    discretion elects to accelerate the lapse of the Restrictions as of a specified
                    date, then the Restrictions on the Restricted Shares shall lapse as of the date
                    of such event in the case of a Change in Control or such specified date in the
                    case of an acceleration of the lapse of the Restrictions.

 
	(c) 	
                    Upon the lapse of the Restrictions in accordance with this Section, the Company
                    shall, as soon as practicable thereafter, deliver to the Participant a
                    certificate without any restrictive endorsement for the Shares that are no
                    longer subject to such Restrictions. 

	 
	 
	
               Page 2
	

	 
	 

               	(d)	
                    For purposes of this Agreement, a “Change of Control” shall mean the
                    first to occur of the following events: 

	 	(i) 	
                    the acquisition by any individual, entity or group (within the meaning of
                    Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
                    (the “Exchange Act”)) (a “Person”) of beneficial ownership
                    (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
                    more of either the then-outstanding voting securities of the Company (the
                    “Outstanding Company Common Stock”) or the combined voting power of
                    the then-outstanding voting securities of the Company entitled to vote generally
                    in the election of directors (the “Outstanding Company Voting
                    Securities”);

 
	 	(ii) 	
                    individuals who, as of the date of adoption of the Plan, constitute the Board of
                    Directors of the Company (the “Incumbent Board”) cease for any reason
                    to constitute at least a majority of the Board of Directors; provided, however,
                    that any individual becoming a director subsequent to the date of adoption of
                    the Plan whose election, or nomination for election by the Company’s
                    shareholders, was approved by a vote of at least a majority of the directors
                    then comprising the Incumbent Board shall be considered as though such
                    individual were a member of the Incumbent Board, but excluding, for this
                    purpose, any such individual whose initial assumption of office occurs as a
                    result of an actual or threatened election contest with respect to the election
                    or removal of directors or other actual or threatened solicitation of proxies or
                    consents by or on behalf of a Person other than the Board of Directors; or 

	 	(iii) 	
                    consummation of a reorganization, merger or consolidation or sale or other
                    disposition of all or substantially all of the assets of the Company or the
                    acquisition of assets of another entity (a “Corporate Transaction”),
                    in each case, unless, immediately following such Corporate Transaction, (i) all
                    or substantially all of the individuals and entities who were the beneficial
                    owners, respectively, of the Outstanding Company Common Stock and Outstanding
                    Company Voting Securities immediately prior to such Corporate Transaction
                    beneficially own, directly or indirectly, more than 60% of, respectively, the
                    then-outstanding shares of Common Stock and the combined voting power of the
                    then-outstanding voting securities entitled to vote generally in the election of
                    directors, as the case may be, of the Company resulting from such Corporate
                    Transaction (including, without limitation, an entity which as a result of such
                    transaction owns the Company or all or substantially all of the Company’s
                    assets either directly or through one or more subsidiaries) in substantially the
                    same proportions as their ownership, immediately prior to such Corporate
                    Transaction, of the Outstanding Company Common Stock and Outstanding Company
                     

	 
	 
	
               Page 3
	

	 
	 

	 	  	

Voting Securities, as the case may be, (ii) no Person (excluding any employee
                    benefit plan (or related trust) of the Company or such entity resulting from
                    such Corporate Transaction) beneficially owns, directly or indirectly, 20% or
                    more of, respectively, the then Outstanding Company Common Stock resulting from
                    such Corporate Transaction or the Outstanding Company Voting Securities
                    resulting from such Corporate Transaction, except to the extent that such
                    ownership existed prior to the Corporate Transaction, and (iii) at least a
                    majority of the members of the Board of Directors of the Company resulting from
                    the Corporate Transaction were members of the Incumbent Board at the time of the
                    execution of the initial plan or action of the Board of Directors providing for
                    such Corporate Transaction; or 

	 	(iv) 	
                    approval by the shareholders of the Company of a complete liquidation or
                    dissolution of the Company. 

                    

         
Notwithstanding
the foregoing, actions taken in compliance with that certain Stockholder’s Agreement
dated as of September 8, 2000, among the Company, Duchossois Industries, Inc. and
subsequent signatories thereto, as amended, modified or supplemented from time to time,
shall not be deemed a Change in Control. 

        In
addition and anything to the contrary contained herein notwithstanding, if the Company
enters into an agreement or series of agreements or the Board of Directors of the Company
adopts a resolution that results in the occurrence of any of the foregoing events, and the
employment of the Participant is terminated after the entering into of such agreement or
series of agreements or the adoption of such resolution, then, upon the termination of
such Participant’s employment, a Change of Control shall be deemed to have
retroactively occurred on the date of entering into of the earliest of such agreements or
the adoption of such resolution. 

       7.    
          Withholding Requirements. Whenever Restrictions lapse with respect to
          Restricted Shares, the Company shall have the right to (i) withhold from sums
          due to the Participant; (ii) require the Participant to remit to the Company; or
          (iii) retain Shares otherwise deliverable to the Participant; in an amount
          sufficient to satisfy any Federal, state or local withholding tax requirements
          prior to making such payments or delivering any such Shares to the Participant. 

           8.    
          Effect Upon Employment. Nothing contained in this Agreement shall confer
          upon the Participant the right to continue in the employment of the Company or
          its subsidiaries or affect any right that the Company or its subsidiaries may
          have to terminate the employment of the Participant. 

           9.    
          Amendment. This Agreement may not be amended, modified or supplemented
          except with the consent of the Committee and by a written instrument duly
          executed by the Participant and the Company. 

           10.    
          Binding Effect. This Agreement shall be binding upon and shall inure to
          the benefit of the parties hereto and their heirs, personal representatives,
          successors and assigns. Participant acknowledges receipt of a copy of the Plan,
          which is annexed hereto, represents that he or she is familiar with the terms
          and provisions thereof and accepts the award of Shares hereunder subject to all
          of the terms and conditions of the Plan and this Agreement. In the event there
          is a conflict between the provisions of the Plan and this Agreement, the
          provisions of the Plan shall govern and control. Participant hereby agrees to
          accept as binding, conclusive and final all decisions and interpretations of the
          Committee upon any questions arising under the Plan or this Agreement. 

	 
	 
	
               Page 4
	

	 
	 

           11.    
          Notices. Notices shall be deemed delivered if delivered personally or if
          sent by registered or certified mail to the Company at its principal place of
          business, as set forth above, and to Participant at the address set forth above,
          or at such other address as either party may hereafter designate in writing to
          the other. 

           12.    
          Severability. The invalidity or unenforceability of any provision of the
          Agreement shall not affect the validity or enforceability of the remaining
          provisions of the Agreement, and such invalid or unenforceable provision shall
          be stricken to the extent necessary to preserve the validity and enforceability
          of the Agreement. 

           13.    
          Governing Law; Jurisdiction. This Agreement shall be governed by the laws
          of the Commonwealth of Kentucky. The Participant consents to the exclusive
          jurisdiction of the courts of the Commonwealth of Kentucky and of any federal
          court located in Jefferson County, Kentucky in connection with any action or
          proceeding arising out of or relating to this Agreement, any document or
          instrument delivered pursuant to or in connection with this Agreement, or any
          breach of this Agreement or any such document or instrument. 

           14.    
          Entire Agreement. This Agreement and the Plan contain the entire
          agreement between the parties hereto with respect to the subject matter hereof. 

[THE REMAINDER OF THIS
PAGE 
IS INTENTIONALLY LEFT
BLANK] 

	 
	 
	
               Page 5
	

	 
	 

        IN
WITNESS WHEREOF, the Company and the Participant have executed and delivered this
Agreement as of the date first above written and which Agreement is effective as of
November 18, 2004. 

		CHURCHILL DOWNS INCORPORATED
		
By: __________________________________

Title:________________________________

PARTICIPANT:

By:___________________________________

	 
	 
	
               Page 6

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