Document:

<PAGE>   1
                                                                   EXHIBIT 10.11

[REGIONS BANK LOGO]

May 11, 2001

Mr. Lyle Stockstill
Mrs. Lana Hingle Stockstill
Torch Offshore, LLC
401 Whitney Ave., Suite 400
Gretna, LA 70056-2596

Dear Mr. and Mrs. Stockstill:

We are pleased to confirm that Regions Bank (hereinafter referred to as "Bank")
holds available a renewal of the working capital line of credit to Torch
Offshore, LLC. (hereinafter referred to as "Borrower"). If accepted, the total
amount potentially available on the line of credit would be $8,000,000. The
purpose of this facility is to provide working capital. This agreement is joined
herein by Torch, Inc., Lyle Stockstill and Lana Hingle Stockstill as
"Guarantors".

WORKING CAPITAL LINE OF CREDIT - $8,000,000
-------------------------------------------

EXPIRATION DATE:    November 12, 2001

INTEREST RATE:      London Interbank Offered Rate (LIBOR) plus 300 Basis Points
                    adjusted monthly based on 30-day LIBOR rate for the final
                    day of the month. Accrued interest on actual draws shall be
                    due and payable monthly.

INDEBTEDNESS:       Debt under the line shall be evidenced by a Base Note in the
                    amount of $8,000,000 against which cash advances may be
                    made, at Bank's discretion, given availability as defined
                    below and upon written or verbal request from Borrower.
                    Borrower will supply to Bank prior to the first draw in
                    writing the names of those persons authorized on behalf of
                    Borrower to request funding.

COMMITMENT FEE:     Non-refundable fee in the amount of $20,000 ($7,287
                    collected previously) which represents 1/2% of the committed
                    line. Commitment fee is payable at loan closing.

AVAILABILITY:       Availability to borrow shall be determined on a formula
                    basis of 80% of current (less than 90 days old and
                    "ineligible receivables" subject to the 25% rule)
                    receivables provided total debt under this line does not
                    exceed $8,000,000 at any time. The 25% rule on receivables
                    shall be defined as follows: Any account debtor with over
                    25% of the total receivable over 90 days old shall not be
                    eligible for the total amount of receivables owed to
                    Borrower.

Post Office Box 30280    New Orleans, Louisiana 70190    Telephone 504-587-1888

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               Borrower shall provide Bank on a monthly basis a properly
               executed Settlement Report certified to by an authorized
               corporate official along with a listing and aging of accounts
               receivable and an inventory listing. These documents shall be due
               within 10 days after each month end. Failure to provide these
               documents may result in the delay of advancement of additional
               funds until such time as the documents are received.

REPAYMENT:     (1)  Upon receipt, Borrower shall deposit all collections of
               accounts receivable in their original form into a Torch
               Offshore, LLC, assignee cash collateral account entitled
               "Regions Bank as Assignee of Accounts Receivable of Torch
               Offshore, LLC". Within two business days following such
               deposits, Bank will debit the account for a like amount and
               apply these funds as a principal reduction of the debt. However,
               if deemed necessary, the Bank reserves the right to hold funds
               in an uncollected status and apply them to the line of credit as
               regulated under the "Expedited Funds Availability Act". Should
               any deposit item be returned for non-payment, it shall be charged
               to Borrower's operating account.

               (2)  Borrower has the option in lieu of (1) above, to notify all
               of its customers to forward payment under any and all invoices
               to the following lock-box controlled by the Bank, "Torch
               Offshore, LLC., P.O. Box 15179, New Orleans, LA 70175". Should
               Borrower receive any payments directly from the customer,
               Borrower will deposit all of these collections in their original
               form into a Torch Offshore, LLC. assignee cash collateral
               account entitled "Regions Bank as Assignee of Accounts
               Receivable of Torch Offshore, LLC". All payments received
               through the lock box will also be deposited into the cash
               collateral account. The Bank will debit the cash collateral
               account and apply 100% of the proceeds to the line of credit as
               a principal reduction. Should any deposit item be returned for
               non-payment it shall be charged to the Borrower's operating
               account.

COLLATERAL:    (1)  First position security interest in all chattel paper,
               accounts, contract and contract rights and inventory as
               evidenced by security agreement of even date.

               (2)  Cross pledge of First Security interest on equipment to be
               purchased with Bank funds (reel equipment loan).

               (3)  Cross pledge of assignment of life insurance for $1,000,000
               on the life of Lyle Stockstill.
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Torch Offshore, LLC                 3
5/11/01

              (4) Pledge of 3 Merrill Lynch brokerage accounts with marketable
              securities in an approximate amount of $900,000; accounts to be
              pledged to the personal guarantee of Lana Hingle Stockstill. This
              collateral will be released by Bank at such time that the total
              debt to tangible net worth of Borrower is 3 to 1 (see pages 7 and
              8) or less for 90 consecutive days, following submission of
              month-end financial statements and assuming no defaults under this
              agreement or the loan documents for this loan or any other
              outstanding loan at Bank.

              In addition, two collateral/documentation exceptions must be
              cured prior to release of collateral securing the personal
              guarantee.

               1. The $1 Million life insurance policy on Lyle Stockstill must
                  be fully in place and properly pledged and acknowledged to
                  Bank.

               2. The First Amendment to InterCreditor Agreement for
                  Subordination of Liens regarding the reel equipment loan must
                  be signed by Transamerica.

GUARANTORS:   Unconditional continuing personal guarantee of Lyle Stockstill and
              Lana Hingle Stockstill equal to the outstanding balances of
              Borrower including principal, interest and any other charges.

              Unconditional corporate guarantee of Torch, Inc. equal to the
              outstanding balances of Borrower, including principal, interest
              and any other charges.

SPECIFIC CONDITIONS OF FUNDING YOUR LINE OF CREDIT:
(Note: These conditions are outlined here to clarify the mechanics of how we
will fund your line of credit. This letter is not intended, however, to
supersede the legal documents associated with this line.)

Lendable equity in collateral is described as:

                80% of eligible accounts receivable of Borrower.

An operating account and a cash collateral account will be established. All
draws will be deposited to the operating account. The Borrower agrees to deposit
all proceeds in their original form from the collection of accounts receivable
into the cash collateral account. Bank will apply funds from the cash collateral
account to the line of credit to pay down the balance. Should the line of credit
be zero, it is understood that funds deposited to the Cash Collateral Account
will be transferred within two business days to the Operating Account. If checks
written on the operating account exceed the balance in the account, or a sweep
account tied to the operating account, Bank will

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fund on the line of credit (to the extent that the advance is covered by
eligible receivables and availability under the line of credit) to cover the
shortfall. Ineligible accounts receivable, which will be placed in "reserve" and
not be included on "eligible" accounts, are described as follows:

           (1)      Accounts over 90 days old
           (2)      Contra Accounts
           (3)      Foreign receivables
           (4)      Government receivables (state, local and federal)
           (5)      Affiliate receivables
           (6)      Credit memos
           (7)      Accounts subject to the 25% rule
           (8)      Consignments
           (9)      Retainages
          (10)      Progress Billings.
          (11)      Bill and Hold
          (12)      Concentrations -- Bank reserves the right to limit its
                    exposure in any one customer of (Borrower) to 25% of the
                    committed balance on the line of credit. All Fortune 500
                    companies in good standing, to be determined by Bank, will
                    be exempted from the concentration rule provided payment
                    history of the Fortune 500 Company has been satisfactory.
          (13)      Accounts receivable from debtors that the Bank believes are
                    in poor financial condition.
          (14)      Receivables relating to billings on bonded contracts or
                    those subject to "super priority" liens under bankruptcy
                    codes.

In addition, the Bank reserves the right to determine which accounts receivable
are eligible. Refusal by Regions Bank to accept any receivables as eligible
accounts for a loan shall not be deemed as a breach of agreement.

Whenever the balance on your line of credit exceeds lendable equity in
collateral as described above, we will notify you. You will then have ten (10)
days to correct this deficiency, either through bringing us additional
collateral or through reducing the balance on your line of credit to a level
sufficient to clear the deficit. This will be considered an event of default.
The Bank reserves the right to withhold future advances until the deficit in
question has been eliminated.

Under no circumstances are invoices to be presented to the undersigned as
collateral unless the service or work has been completed and the original
invoice has been presented to your customer for payment.

The above commitment is subject to a satisfactory audit of Borrower's accounts
receivable and inventory. The Bank will perform an audit of the books and
records of Borrower on a quarterly basis. The Bank has the right to waive an
audit at its sole discretion, however the waiving of any audit or audits will
not be considered a change to the frequency of future audits. Borrower agrees

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to provide Bank with whatever data is necessary for Bank to prepare this audit.
As long as there is no event of default, Bank will normally give at least 48
hours notice of an audit, and Bank will make every effort to arrange a time
that is mutually agreeable. We may also (using the name Louisiana Accounting
Services or some other non-bank name), from time to time, verify your accounts
receivable.

OTHER CONDITIONS:

The foregoing line of credit (herein referred to as "the debt") is approved
with the understanding that, within 120 days after the close of the fiscal
year, Bank will be provided with an audited financial statement of Borrower and
a personal detailed financial statement on the Guarantor. A tax return of
Borrower and Guarantor is to be provided within 180 days after the close of the
fiscal year. A monthly in-house prepared balance sheet and operating statement
on Borrower is to be submitted to Bank as well.

The above commitment is contingent upon the maintenance of a financial
condition of Borrower and Guarantor satisfactory to Bank, and compliance with
the terms and conditions of the loan and collateral documents executed in
connection herewith.

Also, unless Bank otherwise consents in writing and so long as the debt to Bank
remains outstanding, Borrower and Guarantor each agree to:

     (1)  Pay each note in accordance with the terms and conditions thereof;

     (2)  Fully maintain the franchise of Borrower;

     (3)  Provide Bank with certified copies of resolutions from the Borrower
          specifically authorizing execution of this agreement and the loan and
          collateral documents hereinabove referred to;

     (4)  Duly pay and discharge, or cause to be paid and discharged all taxes,
          assessments, and other governmental charges lawfully imposed upon the
          property of Borrower or upon any part thereof, or upon the income or
          profits thereof and comply with all municipal, state and federal laws
          provided that Borrower reserves all of its rights to protest the
          payment of any such taxes, assessment and other governmental charges
          contested in good faith;

     (5)  Duly comply with applicable statutes and pay all obligations which, if
          unpaid, might result in a lien, except those obligations which are
          being contested in good faith;

     (6)  Maintain principal banking relationship of Borrower and Guarantor with
          Bank.
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Torch Offshore, LLC.                   6
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It is also further understood and agreed by Borrower and Guarantor that so long
as all or any part of the debt remains outstanding, Borrower and Guarantor will
not without Bank's prior written consent;

     (1)  Other than the debt, create or suffer to exist any other mortgage or
          pledge, or hypothecate or create any other lien on any part of the
          pledged collateral;

     (2)  Enter into any merger, consolidation, or major expansion, make any
          investment, create any subsidiaries, or sell or lease any significant
          portion of Borrower's assets, whether it be to a related company, or
          any other entity, or effect any change in the ownership of Borrower;

     (3)  Create, incur, assume, or  have outstanding any new indebtedness over
          $500,000 in the aggregate other than indebtedness to Borrower's
          suppliers of material, labor, services as incurred in the ordinary
          course of Borrower's business.

The Borrower agrees to give immediate notice to the Bank of (1) any litigation
or proceeding in which any of them is a party if an adverse decision
therein would require them to pay over more than $50,000 or deliver assets the
value of which exceeds such sum (whether or not the claim is considered to be
covered by insurance); and (2) the institution of any other suit or proceeding
involving any of them that might materially and adversely affect their
operations, financial condition, property or business.

If any one or more of the following events, herein called "Events of Default",
shall occur and be continuing for a period of 10 days without cure, the
principal and the accrued interest on all indebtedness under the agreement
shall become immediately due and payable upon demand of Bank:

     (a)  Borrower shall default in the payment of any principal or interest,
          when due under any notice that evidences any sum payable by Borrower
          under this agreement; or

     (b)  Default by Borrower in the due observance and performance of any other
          covenant, agreement, undertaking or condition expressed or contained
          in this Loan Agreement, or any prior agreement, or in any documents
          provided for herein or in connection herewith, or default by any
          person (authorized corporate officer or appointee) or Guarantor in the
          due observance and performance of any covenant, undertaking, agreement
          or condition contained in any documents executed and delivered to Bank
          in order to induce it to enter into this Loan Agreement or any prior
          agreement; or

     (c)  Any representation or warranty made herein or made on any certificate
          furnished to or to be furnished to Bank hereunder or made in any
          instrument delivered pursuant hereto shall prove to have been
          materially incorrect; or

     (d)  Borrower shall voluntarily suspend transaction of its business for
          more than one
<PAGE>   7

Torch Offshore, LLC.                   7
5/11/01

    month; or become insolvent or be unable to pay its debts as they mature; or
    file a voluntary petition in bankruptcy; or file a voluntary petition
    seeking reorganization; or effect a plan or other arrangement with
    creditors; or file an answer admitting jurisdiction of the court and the
    material allegations of an involuntary petition filed pursuant to any act of
    Congress relating to bankruptcy; or make an assignment for benefit of
    creditors; or apply for consent to the appointment of any receiver or
    trustee for itself or of all or any substantial portion of its property; or

(e) An order shall be entered pursuant to any act of Congress relating to
    Bankruptcy or to any act purporting to be amendatory thereof approving an
    involuntary petition seeking reorganization of Borrower, or an order of any
    court shall be entered appointing any receiver or trustee for Borrower or
    any receiver or trustee of all or any substantial portion of the property of
    Borrower or any receiver or trustee of all or any substantial portion of the
    property of Borrower, or a writ or warrant of attachment or any similar
    process shall be issued by any court against property of Borrower, and such
    order approving petition seeking reorganization or appointing a receiver or
    trustee is not vacated or stayed or such writ, warrant of attachment of any
    similar process is not released or bonded within sixty (60) days after its
    entry or levy; or

(f) The Borrower shall fail to pay any indebtedness due any third persons and
    such failure shall continue beyond any applicable grace period, or the
    Borrower shall suffer to exist any other event of default under any
    agreement binding the Borrower; or

(g) The Borrower shall suffer final judgments for payment of money aggregating
    in excess of $10,000 and shall not discharge the sale within a period of
    thirty (30) days unless, pending further proceedings, execution has not been
    commenced or if commenced, has been effectively stayed; or

(h) A judgment creditor of the Borrower shall obtain possession of any of the
    collateral by any means, including, but without limitation, levy, replevin,
    or self help; or

(i) The validity or enforceability of this Agreement, the Notes, the Guaranties,
    or the collateral documents shall be contested by the Borrower, or the
    Borrower shall deny that it has any or future liability or obligation
    hereunder or thereunder.

(j) Borrower fails to maintain (unless specifically waived in writing by Bank)
    the following financial ratios as compiled in accordance with generally
    accepted accounting principles:

    (i)   Total debt to Tangible Net Worth not to exceed 3 to 1.

    (ii)  Minimum debt service ratio for a trailing 4-quarter period of not less
          than 1.2 computed as of the end of each quarter.

    (iii) Minimum Tangible Net Worth of $10 Million.

The debt service ratio will be computed by taking net income plus depreciation
plus
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Torch Offshore, LLC.                    8
5/11/01

     interest expense plus any other non-cash charges and dividing by current
     maturities of long-term debt plus interest expense.

     Tangible Net Worth is the Borrower's Net Worth as reflected on the
     Borrower's financial statements prepared in accordance with General
     Accepted Accounting Principles (GAAP) but excluding:

     1) Any assets ordinarily classified as intangible in accordance with GAAP.

     2) Any accounts due from Officers, Shareholders or Affiliates.

Upon the occurrence of any event of default hereunder, Bank shall have no
further obligation to continue the line of credit or to make any further
advances hereunder.

In the event of default under any condition of the loan, we have the right to
visit your place of business for the purpose of inspecting the books and records
at a time and frequency at out discretion. In this event, you agree to allow us
access to all financial records, agings, bank statements, invoices, and payment
records generated by Borrower, to allow us to obtain copies of any invoices,
agings or payment records we deem necessary, and agree to allow us to instruct
your customers to remit payment on your behalf to the Bank.

To the extent that any terms and provisions of any promissory notes, security
agreements, guaranty or other documents executed by Borrower or any Guarantor in
connection with the line of credit are inconsistent with the terms and
provisions of this agreement, this agreement shall govern. On the other hand,
if any terms and provisions of the line of credit documents are not specifically
covered by the terms and provisions of this agreement, then the line of credit
documents shall govern.

This commitment may not be assigned or otherwise transferred. If this commitment
is acceptable to you, please sign at the space indicated below and on the
enclosed duplicate attached hereto and return same to us at:

                                        Regions Bank
                                        301 St. Charles Avenue
                                        New Orleans, Louisiana 70130

This offer will expire 30 days from the date hereof, unless we receive your
acceptance on or before that date.

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Torch Offshore, LLC              9
5/11/01

We sincerely appreciate this opportunity to handle Torch Offshore,LLC.'s
banking needs; our relationship with your fine organization will certainly be a
valued one, and we hope that you will continue to call on us whenever we may be
of service.

Sincerely,

REGIONS BANK

/s/ Jorge E. Goris
---------------------------------
Jorge E. Goris
Senior Vice President

JEG:lch

We hereby accept and agree with the terms and conditions as outlined above on
this the 11th day of May, 2001.

TORCH OFFSHORE, LLC.

/s/ Lyle Stockstill
---------------------------------------------------------------
Lyle Stockstill, Manager/Chairman and Chief Executive Officer

/s/ Lana Hingle Stockstill
---------------------------------------------------------------
Lana Hingle Stockstill, Manager
<PAGE>   10
Torch Offshore, LLC.
5/11/01

                                       10

                             CONSENT AND AGREEMENT

The undersigned do/does hereby join in the execution of this loan agreement for
the purpose of (i) manifesting his/their approval of the terms and conditions
hereof and (ii) consenting  and agreeing to the provisions hereof concerning
the guaranty agreement and any representations and warranties, affirmative
covenants and negative covenants herein that expressly relate to any or all of
the undersigned.

/s/ Lyle Stockstill
-------------------------------------------------
Lyle Stockstill

/s/ Lana Hingle Stockstill
-------------------------------------------------
Lana Hingle Stockstill

TORCH, INC.

/s/ Lyle Stockstill
-------------------------------------------------
Lyle Stockstill, Chief Executive Officer

/s/ Lana Hingle Stockstill
-------------------------------------------------
Lana Hingle Stockstill, Secretary
<PAGE>   11
                              [REGIONS BANK LOGO]
                 LIMITED LIABILITY COMPANY BORROWING AGREEMENT

<TABLE>
<CAPTION>
PRINCIPAL     LOAN DATE    MATURITY     LOAN NO.  CALL   COLLATERAL   ACCOUNT  OFFICER   INITIALS
---------     ---- ----    --------     ---- ---  ----   ----------   -------  -------   --------
<S>           <C>          <C>         <C>        <C>    <C>          <C>       <C>      <C>
$8,000,000.00  05-11-2001   11-12-2001  0001301    590    4635         5439329   L32
-------------------------------------------------------------------------------------------------
  References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or item.
-------------------------------------------------------------------------------------------------

Borrower:  TORCH OFFSHORE, L.L.C. (TIN: 7201471586)   Lender: Regions Bank TIN: 63-0371391
           401 WHITNEY AVENUE SUITE 400                       Commercial Lending
           GRETNA, LA 70056-2503                              301 St. Charles Avenue
                                                              3rd Floor
                                                              New Orleans, LA 70130
==================================================================================================
</TABLE>

THIS LIMITED LIABILITY COMPANY BORROWING AGREEMENT between TORCH OFFSHORE,
L.L.C. ("Borrower"), and Borrower's Members signing Below ("Members"), and
Regions Bank ("Lender") and shall apply to any and all present and future loans,
loan advances, extension of credit, financial accommodations and other
agreements and undertakings of every nature and kind that may be entered into by
and between Borrower and Lender now and in the future.

DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Louisiana Commercial Laws (La. R.S. 10:
9-101, et. seq.). All references to dollar amounts shall mean amounts in lawful
money of the United States of America.

     AGREEMENT. The word "Agreement" means this Limited Liability Company
     Borrowing Agreement, as this Limited Liability Company Borrowing Agreement
     may be amended or modified from time to time, together with all exhibits
     and schedules attached or to be attached to this Limited Liability Company
     Borrowing Agreement from time to time.

     ARTICLES. The word "Articles" means and includes Borrower's Articles of
     Organization as presently on file with Office of the Louisiana Secretary
     of state, and as such Articles may subsequently be amended or modified
     from time to time, one or more times.

     AUTHORIZED REPRESENTATIVES. The words "Authorized Representatives" mean and
     include, individually, collectively, interchangeably, any and all persons
     authorized by Borrower's Members or Managers to act for and on behalf of
     Borrower in dealings with Lender.

     COLLATERAL. The word "Collateral" means and includes individually,
     collectively, interchangeably and without limitation all property and
     assets granted as collateral security for a Loan, whether real or personal
     property, whether granted directly or indirectly, whether granted now or
     in the future, and whether granted in the form of a security interest,
     mortgage, collateral mortgage, deed of trust, assignment, pledge, crop
     pledge, chattel mortgage, collateral chattel mortgage, chattel trust,
     factor's lien, equipment trust, conditional sale, trust receipt, lien,
     charge, lien or title retention contract, lease or consignment intended as
     a security device, or any other security or lien interest whatsoever,
     whether created by law, contract or otherwise.

     EVENT OF DEFAULT. The words "Event of Default" mean individually,
     collectively, and interchangeably any of the Events of Default set forth
     below in the section titled "Events of Default."

     GRANTOR. The word "Grantor" means and includes individually, collectively,
     interchangeably and without limitation each and all of the persons or
     entities granting a Security Interest in any Collateral for the
     indebtedness, including without limitation all Borrowers granting such a
     Security interest.

     GUARANTOR. The word "Guarantor" means and includes individually,
     collectively, interchangeably and without limitation each and all of the
     guarantors, sureties, and accommodation parties in connection with the
     indebtedness.

     INDEBTEDNESS. The word "Indebtedness" means and includes individually,
     collectively, interchangeably and without limitation, any and all present
     and future loans, extensions of credit, liabilities and/or obligations of
     every nature and kind whatsoever that Borrower may now and in the future
     owe to or incur in favor of Lender and its successors or assigns,
     including without limitation, Borrower's indebtedness in favor of Lender
     under the Note, whether such loans, extensions of credit, liabilities
     and/or obligations are direct or indirect, or by way of assignment, and
     whether related or unrelated, or whether committed or purely
     discretionary, and whether absolute or contingent, voluntary or
     involuntary, determined or undetermined, liquidated or unliquidated, due
     or to become due, together with interest, costs, expenses, attorneys' fees
     and other fees and charges, whether or not any such Indebtedness may be
     barred under any statute of limitations or may be otherwise unenforceable
     or voidable for any reason.

     LENDER. The word "Lender" means Regions Bank TIN: 63-0371391, its
     successors and assigns, and any subsequent holder or holders of the Note,
     or any interest therein.

     LOAN. The words "Loan" and "Loans" mean and include any and all loans and
     financial accommodations from Lender to Borrower [or any of them] whether
     now or hereafter existing, and however evidenced, including without
     limitation those loans and financial accommodations described herein or
     described on any exhibit or schedule attached to this Agreement from time
     to time, and further including any and all subsequent amendments,
     additions, substitutions, renewals and refinancings of Borrower's Loan.

     MEMBER. The words "Member" or "Members" mean and include, individually,
     collectively, interchangeably, any and all present and future member
     owners of Borrower.

     MEMBERSHIP INTEREST. The words "Membership Interest" mean and include a
     Member's ownership rights and interest in Borrower, including without
     limitation, a Member's share of the profits and losses of Borrower, right
     to receive distributions of Borrower's assets, and any right to vote or
     participate in the management and affairs of Borrower.

     NOTE. The word "Note" means Borrower's promissory note or notes
     evidencing Borrower's Loan obligations in favor of Lender, as well as any
     substitute, replacement or refinancing note or notes therefor.

     OPERATING AGREEMENT. The words "Operating Agreement" mean any agreement
     between Borrower's Members governing the affairs of Borrower and the
     conduct of its business.

     RELATED DOCUMENTS. The words "Related Documents" mean and include
     individually, collectively, interchangeably and without limitation all
     promissory notes, credit agreements, loan agreements, environmental
     agreements, guarantees, security agreements, mortgages, collateral
     mortgages, deeds of trust, and all other instruments, agreements and
     documents, whether now or hereafter existing, executed in connection with
     the indebtedness.

     SECURITY AGREEMENT. The words "Security Agreement" mean and include
     individually, collectively, interchangeably and without limitation

<PAGE>   12
05-11-2001       LIMITED LIABILITY COMPANY BORROWING AGREEMENT            Page 2
Loan No 0001301                    (Continued)
================================================================================

     any agreements, promises, covenants, arrangements, understandings or other
     agreements, whether created by law, contract, or otherwise, evidencing,
     governing, representing, or creating a Security Interest.

     SECURITY INTEREST.  The words "Security Interest" mean and include
     individually, collectively, interchangeably and without limitation any and
     all present and future mortgages, pledges, crop pledges, assignments and
     other security agreements directly or indirectly securing the repayment of
     Borrower's Loan and Note, whether created by law, contract, or otherwise.

EFFECT OF AGREEMENT.  THE FOLLOWING PROVISIONS PERTAIN TO THE EFFECT OF THIS
AGREEMENT.

     APPLICABILITY.  This Agreement shall apply to any and all present and
     future indebtedness, contracts, agreements and undertakings by and between
     Borrower and Lender for any purpose whatsoever.

     AMENDMENT TO OPERATING AGREEMENT.  This Agreement shall for all purposes be
     considered and shall have the same effect as an amendment to, and shall
     comprise a part of Borrower's Operating Agreement, and shall be binding
     upon Borrower and all of Borrower's present and future Members. To this
     end, all persons subsequently acquiring Membership Interests in Borrower
     for all purposes shall be deemed to be bound and obligated under the terms
     and conditions of this Agreement just as if said subsequently added Members
     had signed this Agreement along with the Members signing below, with the
     consent and agreement of such subsequently added Members to be so bound and
     obligated hereunder being an absolute condition precedent to such persons
     acquiring Membership Interests in Borrower.

TERM AND TERMINATION.  This Agreement shall remain in effect until such time as
(a) all indebtedness has been fully paid and satisfied and there is no further
commitment or obligation on the part of Lender to extend any additional
indebtedness and (b) Lender agrees to cancel and terminate this Agreement after
being requested by Borrower in writing to do so.

AUTHORIZED REPRESENTATIVES.  THE FOLLOWING PROVISIONS PERTAIN TO, AMONG OTHER
THINGS, THE AUTHORIZATION OF PERSONS UNDER THIS AGREEMENT.

     RESOLUTIONS.  The Members of Borrower have met and have properly authorized
     certain designated persons ("Authorized Representatives") to represent
     Borrower and to act for and on behalf of Borrower in dealings with Lender.
     To the extent applicable, such Authorized Representatives are listed in a
     separate form of Resolution or other communication delivered to Lender.

     MANAGERS.  Borrower's present and future Managers (to the extent that
     Borrower has Managers) shall always have the full and unrestricted
     authority to deal with Lender and shall be considered Authorized
     Representatives of Borrower without the additional necessity of being
     specifically designated as such by Borrower's Members under a formal
     resolution.

     UNRESTRICTED AUTHORITY.  Notwithstanding any provision of Borrower's
     Operating Agreement to the contrary, or any resolution of Borrower's
     Members not previously communicated to Lender in writing. Borrower's
     Authorized Representatives (including without limitation Borrower's
     Managers) shall have the full and unrestricted right, power and authority
     to deal and to contract with Lender and to otherwise bind and unrestricted
     right, power and authority, from time to time, one or more times, and
     without the necessity of obtaining the further approval of all or a
     majority of Borrower's Members: (a) to obtain loans, loan advances, and to
     incur other indebtedness and obligations in favor of Lender in any amount
     and for any purpose, and whether or not deemed to be in the ordinary course
     of Borrower's business; and (b) to sell, exchange, lease, mortgage, pledge,
     or otherwise transfer or encumber or grant Security Interests in favor of
     Lender as affecting any or all or substantially all of the assets and
     movable (personal) and immovable (real) properties of Borrower, including
     without limitation, entering into mortgages and security agreements that
     contain confessions of judgment and consents to foreclosure remedies under
     Louisiana executory process procedures; and (c) otherwise to enter into
     such agreements and to incur such obligations in favor of Lender as such
     Authorized Representatives may deem to be necessary and proper.

     SUBSTITUTE AUTHORIZED REPRESENTATIVES.  Lender may continue to deal and
     contract with such Authorized Representatives on an unrestricted basis
     until such time as: (a) their authority to act for and on behalf of
     Borrower is formally revoked and substitute Authorized Representatives are
     properly appointed by Borrower's Members, and (b) Lender is properly
     notified in writing and accepts and acknowledges the same.

REPRESENTATIONS AND WARRANTIES.  Borrower represents and warrants to Lender as
of the date of this Agreement and continuously thereafter so long as this
Agreement remains in effect:

     ORGANIZATION.  Borrower is a limited liability company that is duly
     organized, validly existing, and in good standing under the laws of the
     State of Louisiana. Borrower has further qualified to do business in each
     jurisdiction where the extent and nature of Borrower's business activities
     require such qualification.

     AUTHORIZATION.  Borrower's execution, delivery and performance of this
     Agreement and of the Related Documents have been duly authorized, and do
     not conflict with, and will not result in a violation of, or constitute or
     give rise to an Event of Default under Borrower's Articles, or under
     Borrower's Operating Agreement, or any agreement or other instrument which
     may be binding upon Borrower, or under any law or governmental regulation
     or court decree or order applicable to Borrower and/or its properties.
     Borrower has the further power and authority to own and to hold all of its
     assets and properties and to carry on its business as presently conducted.

     MEMBERS.  The following is a complete list of all of Borrower's present
     Members, all of whom have signed this Agreement have agreed to be bound and
     obligated under this Agreement. There are no other present Members of
     Borrower.

<TABLE>
<CAPTION>
               NAMES                              COMPANY MANAGER
               -----                              ---------------
               <S>                                <C>
               LYLE STOCKSTILL, CHAIRMAN, GEO     Yes
               (SSN-438-58-8059)
               LANA HINGLE STOCKSTILL             Yes
               (SSN-437-54-7343)
</TABLE>

     FINANCIAL INFORMATION.  Borrower's financial statements previously
     furnished to Lender are and were complete and correct, and were prepared in
     accordance with generally accepted accounting principles, and fairly
     represent Borrower's financial condition as of the date or date thereof. To
     the best of Borrower's knowledge, Borrower has no contingent obligations or
     liabilities that were not disclosed or reserved against in Borrower's
     financial statements or in the notes thereto. Since the dates of such
     financial statements, there has been no material adverse change in
     Borrower's financial condition or business.

     PROPERTIES.  Except as contemplated by this Agreement or as previously
     disclosed in Borrower's financial statements or in writing to Lender and as
     accepted by Lender, and except for property tax liens for taxes not
     presently due and payable. Borrower owns and has good title to all of
     Borrower's properties free and clear of all Security Interests, and has not
     executed any security documents or financing statements relating to such
     properties. All of Borrower's properties are titled in Borrower's legal
     name, and Borrower has not used, or filed a financing statement under, any
     other name for at least the last five (5) years.

     LITIGATION.  There are no suits or proceedings pending, or to the knowledge
     of Borrower, threatened against or affecting Borrower or its assets, before
     any court or by any governmental agency, other than those previously
     disclosed to Lender in writing, which, if adversely determined, may have a
     material adverse effect on Borrower's financial condition or business.
<PAGE>   13
05-11-2001          LIMITED LIABILITY COMPANY BORROWING AGREEMENT           Page
Loan No 0001301                   (Continued)
===============================================================================

     LOCATION OF BORROWER'S OFFICES AND RECORDS. The chief place of business of
     Borrower and the office or offices where Borrower keeps its records
     concerning the Collateral is located at 401 WHITNEY AVENUE SUITE 400,
     GRETNA, LA 70056-2503.

     TAXES. To the best of Borrower's knowledge, all tax returns and reports of
     Borrower that are or were required to be filed, have been filed, and all
     taxes, assessments and other governmental charges have been paid in full,
     except those presently being or to be contested by Borrower in good faith
     in the ordinary course of business and for which adequate reserves have
     been provided.

     INFORMATION. All information heretofore or contemporaneously herewith
     furnished by Borrower to Lender for the purposes of or in connection with
     this Agreement or any transaction contemplated hereby is, and all
     information hereafter furnished by or on behalf of Borrower to Lender will
     be, true and accurate in every material respect on the date as of which
     such information is dated or certified; and none of such information is or
     will be incomplete by omitting to state any material fact necessary to make
     such information not misleading.

     SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees
     that Lender is and will continue to rely upon the above representations and
     warranties in the course of its dealings with Borrower. Borrower further
     agrees that the foregoing representations and warranties shall be
     continuing in nature and shall remain in full force and effect until such
     time as this Agreement is canceled or terminated.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees that, so long as this
Agreement remains in effect, Borrower will:

     GOOD STANDING. Maintain its good standing status as a Louisiana limited
     liability company and remain qualified in each additional jurisdiction
     where the conduct of Borrower's business requires such qualification.

     OPERATIONS. Conduct its applicable federal, state and municipal laws,
     ordinances, rules and regulations respecting its properties, businesses and
     operations.

     TITLE OF ASSETS AND PROPERTY. Maintain good and marketable title to all of
     its assets and properties.

     INSPECTION. Permit employees or agents of Lender at any reasonable time to
     inspect its properties and to examine its books, accounts, records and to
     make copies and memoranda thereof.

     LITIGATION. Promptly inform Lender in writing of (a) any material adverse
     change in its financial condition, and (b) all litigation and claims and
     all threatened litigation and claims affecting Borrower or of such
     Guarantor.

     OTHER EVENTS. Promptly notify Lender in writing of (a) the addition of any
     new Members of Borrower, (b) the death, interdiction, withdrawal,
     expulsion, bankruptcy, or dissolution of any Member or the occurrence of
     any other event which may terminate the continued membership of any Member,
     (c) the expression of any intent or desire on the part of any Member or
     Members to dissolve or liquidate Borrower, and (d) the occurrence of any
     event specified in Borrower's Articles or in Borrower's Operating Agreement
     that may result in Borrower's dissolution or liquidation.

     FINANCIAL INFORMATION. Furnish Lender with, such financial statements,
     reports and other pertinent information as Lender may reasonably request
     from time to time. All such financial statements and reports required to be
     furnished under this Agreement shall be prepared in accordance with
     generally accepted accounting principles.

     INSURANCE. Maintain fire and other risk insurance, public liability
     insurance, and such other insurance as Lender may require with respect to
     Borrower's properties and operations. In form, amounts, coverages and with
     insurance companies reasonably acceptable to Lender, Borrower, upon request
     of Lender, will deliver to Lender from time to time the policies or
     certificates of insurance in form satisfactory to Lender, including
     stipulations that coverages will not be canceled or diminished without at
     least thirty (30) days' prior written notice to Lender. In connection with
     all policies covering assets in which Lender holds or is offered a Security
     Interest, Borrower will provide Lender with such lender's loss payable or
     other endorsements as Lender may require.

     TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
     indebtedness and obligations, including without limitation all assessments,
     taxes, governmental charges, levies and liens, of every kind and nature,
     imposed upon Borrower or its properties, income, or profits, prior to the
     date on which penalties would attach, and all lawful claims that, if
     unpaid, might become a lien or charge upon any of Borrower's properties,
     income, or profits. Provided however, Borrower will not be required to pay
     and discharge any such assessment, tax, charge, levy, lien or claim so long
     as (a) the legality of the same shall be contested in good faith by
     appropriate proceedings, and (b) Borrower shall have established on its
     books adequate reserves with respect to such contested assessment, tax,
     charge, levy, lien, or claim in accordance with generally accepted
     accounting practices. Borrower, upon demand of Lender, will furnish to
     Lender evidence of payment of the assessments, taxes, charges, levies,
     liens and claims and will authorize the appropriate governmental official
     to deliver against Borrower's properties, income, or profits.

     PERFORMANCE. Perform and comply with all terms, conditions, and provisions
     set forth in this Agreement and in all other instruments and agreements
     between Borrower and Lender in a timely manner, and promptly notify Lender
     if Borrower learns of the occurrence of any event which constitutes an
     Event of Default under this Agreement.

     ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
     notes, mortgages, deeds of trust, security agreements, financing
     statements, instruments, documents and other agreements as Lender and its
     attorneys may reasonably request to evidence and secure indebtedness and to
     perfect all Security Interests.

     COMPLIANCE CERTIFICATE. Upon request by Lender and from time to time,
     Borrower will provide Lender with a certificate executed by an affirmative
     and negative covenants set forth in this Agreement are true and correct as
     of the date of the certificate, and further certifying that as of the date
     of the certificate no Event of Default exists under this Agreement or under
     any Related Document.

NEGATIVE COVENANTS. Borrower covenants and agrees that, so long as this
Agreement remains in effect, Borrower will not without prior written notice to
and without having first having obtained the prior written consent of Lender:

     AMENDMENTS TO ARTICLES OR OPERATING AGREEMENT. Amend its Articles or
     Operating Agreement (a) to limit or restrict the permissible activities in
     which Borrower may engage, or (b) to withdraw the authority of or to limit
     or restrict the authority of Borrower's Authorized Representatives
     (including Borrower's Managers) to deal and contract with Lender and to
     bind and obligate Borrower.

     CONTINUITY OF OPERATIONS. (a) Engage in any business activities
     substantially different from those in which Borrower is presently engaged,
     or (b) merge or consolidate with any other entity.

     ACQUISITIONS AND GUARANTEES. (a) Purchase or acquire any interest in any
     other enterprise or entity, or (b) incur any obligation as a surety or
     guarantor other than in the ordinary course of business.

     SALE OR ENCUMBRANCE OF ASSETS. (a) Sell, assign and transfer all or
     substantially all of Borrower's properties and assets, or (b) sell with
     recourse any of Borrower's accounts, except to Lender.

     WITHDRAWAL OF MEMBERS. Permit any Member to withdraw from the Borrower and
     to receive any type of withdraw distribution.

     DISTRIBUTIONS. Pay any interim distribution in cash or other assets to a
     Member or Members of Borrower.

<PAGE>   14

05-11-2001       LIMITED LIABILITY COMPANY BORROWING AGREEMENT            PAGE 4
Loan No 0001301                   (Continued)

    WAIVER OR COMPROMISE OF RIGHTS AGAINST MEMBERS. Waive, compromise or forgo
    any rights that Borrower may have against any Member for unpaid capital
    contributions or any other obligation owed to Borrower.

    NON-COMPLIANCE. None of the above actions on the part of Borrower (including
    without limitation, any amendment to Borrower's Articles or Operating
    Agreement) shall be effective as against Lender unless and until: (a)
    Borrower shall have notified Lender in writing, and (b) Lender shall have
    expressly agreed to such actions in writing. Specifically, any distribution
    by Borrower in violation of this Agreement shall be considered as a
    "wrongful distribution" for purposes of applicable law.

OBLIGATIONS OF MEMBERS. So long as this Agreement remains in effect, each and
every present and future Member of Borrower agrees and covenants as follows:

NO WITHDRAWAL. Not to withdraw as a Member of Borrower and to obtain a
withdrawal distribution without first notifying Lender in writing and obtaining
Lender's prior written consent (which Lender shall have the unrestricted right
to refuse).

COMPLIANCE. To take whatever steps may be necessary and proper to insure that
Borrower and each other Member complies with the terms, conditions and covenants
of this Agreement.

SECURITY INTEREST GRANTED BY MEMBERS. Borrower and each Member additionally
agree as follows:

    MEMBERSHIP INTERESTS. Notwithstanding any provision of Borrower's Articles
    or Operating Agreement to the contrary, each member shall have the
    unrestricted right, power and authority to grant a Security Interest in
    favor of Lender as affecting his Membership Interest in Borrower.

    REDEMPTIVE RIGHTS. Should Lender acquire the Membership Interest of any
    Member as a result of a default under a loan, then Lender shall have the
    right, without the necessity of first obtaining any type of judgment against
    such a Member, to redeem the defaulting Member's Membership Interest for the
    then value thereof, which sum shall be paid by Borrower immediately on
    demand by Lender to be applied against the Member's loan obligation.

EVENTS OF DEFAULT. The following actions or inactions or both shall constitute
Events of Default under this Agreement:

    DEFAULT UNDER THE INDEBTEDNESS. Should Borrower default in the payment of
    principal or interest under any of the Indebtedness.

    DEFAULT UNDER THIS AGREEMENT. Should Grantor violate, or fail to comply
    fully with any of the terms and conditions of, or default under this
    Agreement.

    OTHER DEFAULTS IN FAVOR OF LENDER. Should Borrower or any Guarantor default
    under any other loan, extension of credit, security agreement, or obligation
    in favor of Lender.

    DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Guarantor default
    under any loan, extension of credit, security agreement, purchase or sales
    agreement, or any other agreement, in favor of any other creditor or person
    that may materially affect any of Grantor's property, or Grantor's or any
    Guarantor's ability to perform their respective obligations under this
    Agreement, or any Related Document, or pertaining to the Indebtedness.

    INSOLVENCY. Should the suspension, failure or insolvency, however evidenced,
    of Borrower or any Guarantor occur or exist.

    READJUSTMENT OF INDEBTEDNESS. Should proceedings for readjustment of
    indebtedness, reorganization, composition or extension under any insolvency
    law be brought by or against Borrower or any Guarantor.

    ASSIGNMENT FOR BENEFIT OF CREDITORS. Should Borrower or any Guarantor file
    proceedings for a respite or make a general assignment for the benefit of
    creditors.

    RECEIVERSHIP. Should a receiver of all or any part of Borrower's property,
    or the property of any Guarantor, be applied for or appointed.

    DISSOLUTION PROCEEDINGS. Should proceedings for the dissolution or
    appointment of a liquidator of Borrower or any Guarantor be commenced.

    FALSE STATEMENTS. Should any representation or warranty of Borrower or any
    Guarantor made in connection with the Indebtedness prove to be incorrect or
    misleading in any respect.

    INSECURITY. Should Lender deem itself to be insecure with regard to
    repayment of the indebtedness.

DEPOSIT ACCOUNTS. As collateral security for repayment of Borrower's Note and
all renewals and extensions, as well as to secure any and all other loans,
notes, indebtedness and obligations that Borrower (or any of them) may now and
in the future owe to Lender or incur in Lender's favor, whether direct or
indirect, absolute or contingent, due or to become due, of any nature and kind
whatsoever (with the exception of any Borrower may now and in the future have on
deposit with Lender or in certificates of deposit or other deposit accounts as
to which Borrower is an account holder (with the exception of IRA, pension, and
other tax-deferred deposits). Borrower further agrees that Lender may at any
time apply any funds that Borrower may have on deposit with Lender or in
certificates of deposit or other deposit accounts as to which Borrower is an
account holder against the unpaid balance of Borrower's Note and any and all
other present and future indebtedness and obligations that Borrower (or any of
them) may then owe to Lender, in principal, interest, fees, costs, expenses, and
attorneys' fees.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

    AMENDMENTS. This Agreement, together with any Related Documents, constitutes
    the entire understanding and agreement of the parties as to the matters set
    forth in this Agreement. No alteration of or amendment to this Agreement
    shall be effective unless given in writing and signed by the party or
    parties sought to be charged or bound by the alteration or amendment.

    APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
    Lender in the State of Louisiana. Lender and Borrower hereby waive the right
    to any jury trial in any action, proceeding, or counterclaim brought by
    either Lender or Borrower against the other. Subject to the provisions on
    arbitration, this Agreement shall be governed by and construed in accordance
    with the laws of the State of Louisiana.

    ARBITRATION. Lender and Borrower agree that all disputes, claims and
    controversies between them, whether individual, joint, or class in nature,
    arising from this Agreement or otherwise, including without limitation
    contract and tort disputes, shall be arbitrated pursuant to the Rules of the
    American Arbitration Association, upon request of either party. No act to
    take or dispose of or foreclose upon any Collateral shall constitute a
    waiver of this arbitration agreement or be prohibited by this arbitration
    agreement. This includes, without limitation, obtaining injunctive relief or
    a temporary restraining order; invoking a power of sale under any deed of
    trust or mortgage; obtaining a writ of attachment or imposition of a
    receiver; or exercising any rights relating to personal property, including
    taking or disposing of such property with or without judicial process
    pursuant to Louisiana Commercial Laws (Ls. R.S. 10: 9-101, et seq.). Any
    disputes, claims, or controversies concerning the lawfulness or
    reasonableness of any act, or exercise of any right, concerning any
    Collateral, including any claim to rescind, reform, or otherwise modify any
    agreement relating to the Collateral, shall also be arbitrated, provided
    however that no
<PAGE>   15
05-11-2001       LIMITED LIABILITY COMPANY BORROWING AGREEMENT              PAGE
LOAN NO 0001301                   (CONTINUED)

================================================================================

     arbitrator shall have the right or the power to enjoin or restrain any act
     of any party. Judgment upon any award rendered by any arbitrator may be
     entered in any court having jurisdiction. Nothing in this Agreement shall
     prelude any party from seeking equitable relief from a court of competent
     jurisdiction. The statute of limitations, estoppel, waiver, laches, and
     similar doctrines which may otherwise be applicable in an action brought by
     a party shall be applicable in any arbitration proceeding, and the
     commencement of an arbitration proceeding shall be deemed the commencement
     of an action for these purposes. The Federal Arbitration Act shall apply to
     the construction, interpretation, and enforcement of this arbitration
     provision.

     CAPTION HEADINGS. Caption headings in this Agreement are for convenience
     purposes only and are not to be used to interpret or define the provisions
     of this Agreement.

     CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
     sale or transfer, whether now or later, of one or more participation
     interests in the Loans to one or more purchasers, whether related or
     unrelated to Lender. Lender may provide, without any limitation whatsoever,
     to any one or more purchasers, or potential purchasers, any information or
     knowledge Lender may have about Borrower or about any other matter relating
     to the Loan, and Borrower hereby waives any rights to privacy it may have
     with respect to such matters. Borrower additionally waives any and all
     notices of sale of participation interests, as well as all notices of any
     repurchase of such participation interests. Borrower also agrees that the
     purchasers of any such participation interests will be considered as the
     absolute owners of such interests in the Loans and will have all the rights
     granted under the participation agreement or agreements governing the sale
     of such participation interests. Borrower further waives all rights of
     offset or counterclaim that it may have now or later against Lender or
     against any purchaser of such a participation interest and unconditionally
     agrees that either Lender or such purchaser may enforce Borrower's
     obligation under the Loans irrespective of the failure or insolvency of any
     holder of any interest in the Loans. Borrower further agrees that the
     purchaser of any such participation interests may enforce its interests
     irrespective of any personal claims or defenses that Borrower may have
     against Lender.

     COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
     expenses, including without limitation attorneys' fees, incurred in
     connection with the preparation, execution, enforcement, modification and
     collection of this Agreement or in connection with the Loans made pursuant
     to this Agreement. Lender may pay someone else to help collect the Loans
     and to enforce this Agreement, and Borrower will pay that amount. This
     includes, subject to any limits under applicable law, Lender's attorneys'
     fees and Lender's legal expenses whether or not there is a lawsuit,
     including attorneys' fees for bankruptcy proceedings (including efforts to
     modify or vacate any automatic stay or injunction), appeals, and any
     anticipated post-judgment collection services. Borrower also will pay any
     court costs, in addition to any other sums provided by law.

     NOTICES. To give Borrower or a Member any notice required under this
     Agreement, Lender may hand deliver or mail such notice to Borrower or such
     Member. Lender will deliver or mail any notice to Borrower or Member at any
     address which Borrower or Member may have given Lender by written notice as
     provided in this paragraph. In the event that there is more than one
     Borrower under this Agreement, notice to a single Borrower or Member shall
     be considered as notice to all Borrowers or Members. To give Lender any
     notice under this Agreement, notice to a single Borrower or Member shall be
     considered as notice to all Borrowers or Members. To give Lender any notice
     under this Agreement. Borrower or Member shall mail the notice to Lender by
     registered or certified mail at the address specified in this Agreement, or
     at any other address that Lender may have given to Borrower or Member by
     written notice as provided in this paragraph. All notices required or
     permitted under this Agreement must be in writing and will be considered as
     given on the day it is delivered by hand or deposited in the U.S. Mail, by
     registered or certified mail to the address specified in this Agreement.

     SEVERABILITY. If a court of competent jurisdiction finds any provision of
     this Agreement to be invalid or unenforceable as to any person or
     circumstance, such finding shall not render that provision invalid or
     unenforceable as to any other persons or circumstances. If feasible, any
     such offending provision shall be deemed to be modified to be within the
     limits of enforceability or validity; however, if the offending provision
     cannot be so modified, it shall be stricken and all other provisions of
     this Agreement in all other respects shall remain valid and enforceable.

     SOLE DISCRETION OF LENDER. Whenever Lender's consent or approval is
     required under this Agreement, the decision as to whether or not to consent
     or approve shall be in the sole and exclusive discretion of Lender and
     Lender's decision shall be final and conclusive.

     SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
     behalf of Borrower shall bind its successors and assigns and shall inure to
     the benefit of Lender, its successors and assigns. Borrower shall not,
     however, have the right to assign its rights under this Agreement or any
     interest therein, without the prior written consent of Lender.

     SURVIVAL. All warranties, representations, and covenants made by Borrower
     in this Agreement or in any certificate or other instrument delivered by
     Borrower to Lender under this Agreement shall be considered to have been
     relied upon by Lender and will survive the making of the Loan and delivery
     to Lender of the Related Documents, regardless of any investigation made by
     Lender or on Lender's behalf.

     WAIVER. Lender shall not be deemed to have waived any rights under this
     Agreement unless such waiver is given in writing and signed by Lender. No
     delay or omission on the part of Lender in exercising any right shall
     operate as a waiver of such right or any other right. A waiver by Lender of
     a provision of this Agreement shall not prejudice or constitute a waiver of
     Lender's right otherwise to demand strict compliance with that provision or
     any other provision of this Agreement. No prior waiver by Lender, nor any
     course of dealing between Lender and Borrower, or between Lender and any
     Grantor, shall constitute a waiver of any of Lender's rights or of any
     obligations of Borrower or of any Grantor as to any future transactions.
     Whenever the consent of Lender is required under this Agreement, the
     granting of such consent by Lender in any instance shall not constitute
     continuing consent in subsequent instances where such consent is required,
     and in all cases such consent may be granted or withheld in the sole
     discretion of Lender.

<PAGE>   16
05-11-2001        LIMITED LIABILITY COMPANY BORROWING AGREEMENT           Page 6
Loan No 0001301                  (Continued)
================================================================================

BORROWER AND EACH MEMBER SIGNING BELOW ACKNOWLEDGE HAVING READ ALL THE
PROVISIONS OF THIS AGREEMENT, AND BORROWER AND EACH MEMBER AGREE TO ITS TERMS.
THIS AGREEMENT IS DATED AS OF MAY 11, 2001.

BORROWER:

TORCH OFFSHORE, L.L.C.

By: /s/ Lyle Stockstill
   ----------------------------------------------------------------------
   LYLE STOCKSTILL, CHAIRMAN, CEO (SSN:###-##-####), Manager

By: /s/ Lana Hingle Stockstill
   ----------------------------------------------------------------------
   LANA HINGLE STOCKSTILL (SSN:###-##-####), Manager

MEMBERS:

By: /s/ Lyle Stockstill
   ----------------------------------------------------------------------
   LYLE STOCKSTILL, CHAIRMAN, CEO (SSN:###-##-####), Managing Member

By: /s/ Lana Hingle Stockstill
   ----------------------------------------------------------------------
   LANA HINGLE STOCKSTILL (SSN:###-##-####), Managing Member

LENDER:

Regions Bank

By:
   ----------------------------------------------------------------------
   Authorized Officer

================================================================================

<PAGE>   17
                              [REGIONS BANK LOGO]

                     DISBURSEMENT REQUEST AND AUTHORIZATION

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
  PRINCIPAL        LOAN DATE      MATURITY      LOAN NO     CALL    COLLATERAL     ACCOUNT     OFFICER     INITIALS
<S>               <C>            <C>            <C>         <C>     <C>            <C>         <C>         <C>
$8,000,000.00     05-11-2001     11-12-2001     0001301     590        4635        5439329       L32
--------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
--------------------------------------------------------------------------------------------------------------------

BORROWER:     TORCH OFFSHORE, L.L.C. (TIN: 72-1471586)           LENDER:     REGIONS BANK TIN: 63-0371391
              401 WHITNEY AVENUE SUITE 400                                   COMMERCIAL LENDING
              GRETNA, LA 70056-2503                                          301 ST. CHARLES AVENUE
                                                                             3RD FLOOR
                                                                             NEW ORLEANS, LA 70130
====================================================================================================================
</TABLE>

LOAN TYPE. This is a Variable Rate (3.000% over London Interbank Offered Rate
(LIBOR) for one (1) month contracts as published in the "Money Rates" column of
The Wall Street Journal on the last business day of each month, with an
effective date of the first calendar day of the following month (such effective
date for the initial index for this loan to further serve as the commencement
date of the initial rate change period identified below), making an initial
rate of 7.434%), Revolving Line of Credit Loan to a Limited Liability Company
for $8,000,000.00 due on November 12, 2001. This is a secured renewal of the
following described indebtedness: Renewal or refinance of the Promissory Note
to us dated September 12, 2000. This does not satisfy or in any way discharge
the existing debt under that note, nor does it release any security identified
in that note.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:

     [ ]  Personal, Family, or Household Purposes or Personal Investment.
     [X]  Business (Including Real Estate Investment).

SPECIFIC PURPOSE. The specific purpose of this loan is: renew working capital
line of credit.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $8,000,000.00 as follows:

<TABLE>
<S>                                                                   <C>
          AMOUNT PAID TO BORROWER DIRECTLY:                                   $0.00
          UNDISBURSED FUNDS:                                          $2,694,951.07
          AMOUNT PAID TO OTHERS ON BORROWER'S BEHALF:                 $5,305,048.93
          Lender may retain a portion of certain of these amounts.
          $5,305,048.93 to Regions Bank Shaw Loan #543929-0002
                                                                      -------------
          NOTE PRINCIPAL:                                             $8,000,000.00
</TABLE>

CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:

<TABLE>
<S>                                                                   <S>
          PREPAID FINANCE CHARGES PAID IN CASH:                          $12,813.00
               $100.00 Documentation Fee
               $12,713.00 Commitment Fee
                                                                      -------------
          TOTAL CHARGES PAID IN CASH:                                    $12,813.00
</TABLE>

AUTOMATIC PAYMENTS. Borrower hereby authorizes Lender automatically to deduct
from Borrower's account numbered 4105081239 the amount of any loan payment. If
the funds in the account are insufficient to cover any payment, Lender shall
not be obligated to advance funds to cover the payment. At any time and for any
reason, Borrower or Lender may voluntarily terminate Automatic Payments.

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL
CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER.
THIS AUTHORIZATION IS DATED MAY 11, 2001.

BORROWER:

TORCH OFFSHORE, L.L.C.

By: /s/ Lyle Stockstill
    ---------------------------------------------------
    LYLE STOCKSTILL, CHAIRMAN, CEO (SSN:###-##-####), Manager

By: /s/ Lana Hingle Stockstill
    ---------------------------------------------------
    Lana Hingle Stockstill (SSN:###-##-####), Manager

================================================================================
Simple, Variable Rate, Line of Credit.               LASER PRO, Reg. U.S. Pat. &
                                                     T.M. Off., Ver. 329a (C)
                                                     Concentrex 2001 All rights
                                                     reserved. ILA-120 E3.29
                                                     0001001.LNC2OVLI

<PAGE>   18
                              COMMERCIAL GUARANTY

<TABLE>
<CAPTION>
PRINCIPAL      LOAN DATE      MATURITY       LOAN NO        CALL      COLLATERAL     ACCOUNT      OFFICER        INITIALS
                                                            590       4635           5439329      L32
<S>            <C>            <C>            <C>            <C>       <C>            <C>          <C>            <C>
-------------------------------------------------------------------------------------------------------------------------
References in the shaded areas are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

BORROWER: TORCH OFFSHORE, L.L.C.                LENDER: REGIONS BANK
(TIN: 72-1471586)                               TIN: 63-0371391
401 WHITNEY AVENUE SUITE 400                    COMMERCIAL LENDING
GRETNA, LA 70056-2503                           301 ST. CHARLES AVENUE
                                                3RD FLOOR
                                                NEW ORLEANS, LA 70130

GUARANTOR: LYLE STOCKSTILL, (SSN: ###-##-####)
401 WHITNEY AVENUE SUITE 400
GRETNA, LA 70056
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited.

DEFINITIONS. The following terms shall have the following meanings when used in
this Agreement:

     AGREEMENT. The word "Agreement" means this Guaranty Agreement as this
     Agreement may be amended or modified from time to time.

     BORROWER. The word "Borrower" means individually, collectively and
     interchangeably TORCH OFFSHORE, L.L.C.

     GUARANTOR. The word "Guarantor" means individually, collectively and
     interchangeably LYLE STOCKSTILL, CHAIRMAN, CEO (SSN: ###-##-####) and all
     other persons guaranteeing payment and satisfaction of Borrower's
     Indebtedness as hereinafter defined.

     INDEBTEDNESS. The word "Indebtedness" means individually, collectively,
     interchangeably and without limitation any and all present and future
     loans, loan advances, extensions of credit, obligations and/or liabilities
     that Borrower may now and/or in the future owe to and/or incur in favor of
     Lender, whether direct or indirect, or by way of assignment or purchase of
     a participation interest, and whether absolute or contingent, voluntary or
     involuntary, determined or undetermined, liquidated or unliquidated, due or
     to become due, secured or unsecured, and whether Borrower may be liable
     individually, jointly or solidarily with others, whether primarily or
     secondarily, or as a guarantor or otherwise, and whether now existing or
     hereafter arising, of every nature and kind whatsoever, in principal,
     interest, costs, expenses and attorneys' fees and other fees and charges,
     including without limitation Borrower's indebtedness and obligations under
     a certain promissory note in favor of Lender dated May 11, 2001 in the
     fixed principal amount of U.S. $8,000,000.00. In addition, all interest
     thereon, costs, expenses, attorneys' fees and other fees and charges
     related thereto under Borrower's Indebtedness shall be fully guaranteed
     hereunder.

     LENDER. The word "Lender" means Regions Bank. Commercial Lending TIN:
     63-0371391, its successors and assigns, and any subsequent holder or
     holders of Borrower's Indebtedness.

GUARANTEE OF BORROWER'S INDEBTEDNESS. Guarantor hereby absolutely and
unconditionally agrees to, and by these presents does hereby, guarantee the
prompt and punctual payment, performance and satisfaction of any and all of
Borrower's present and future indebtedness in favor of Lender.

CONTINUING GUARANTY. THIS IS A CONTINUING GUARANTY AGREEMENT UNDER WHICH
GUARANTOR AGREES TO GUARANTEE PAYMENT OF BORROWER'S PRESENT AND FUTURE
INDEBTEDNESS IN FAVOR OF LENDER ON A CONTINUING BASIS. Guarantor's obligations
and liability under this Agreement shall be open and continuous in effect.
Guarantor intends to and does hereby guarantee at all times the prompt and
punctual payment, performance and satisfaction of all of Borrower's present and
future indebtedness in favor of Lender. Accordingly, any payments made on
Borrower's Indebtedness will not discharge or diminish the obligations and
liability of Guarantor under this Agreement for any remaining and succeeding
Indebtedness of Borrower in favor of Lender. To the extent that Guarantor is or
may become a Member/Owner of Borrower, Guarantor agrees that, notwithstanding
the provisions of La. R.S. 12:1320, Guarantor shall be liable under this
Agreement for Borrower's Indebtedness in favor of Lender.

JOINT, SEVERAL AND SOLIDARY LIABILITY. Guarantor's obligations and liability
under this Agreement shall be on a "solidary" or "joint and several" basis along
with Borrower to the same degree and extent as if Guarantor had been and/or will
be a co-borrower, co-principal obligor and/or co-maker of Borrower's
Indebtedness. In the event that there is more than one Guarantor under this
Agreement, or in the event that there are other guarantors, endorsers or
sureties of all or any portion of Borrower's Indebtedness, Guarantor's
obligations and liability hereunder shall further be on a "solidary" or "joint
and several" basis along with such other guarantors, endorsers and/or sureties.

DURATION OF GUARANTY. This Agreement and Guarantor's obligations and liability
hereunder shall remain in full force and effect until such time as this
Agreement may be cancelled or otherwise terminated by Lender under a written
cancellation instrument in favor of Guarantor (subject to the automatic
reinstatement provisions hereinbelow). It is anticipated that fluctuations may
occur in the aggregate amount of Borrower's Indebtedness guaranteed under this
Agreement and it is specifically acknowledged and agreed to by Guarantor that
reductions in the amount of Borrower's Indebtedness, even to zero ($0.00)
dollars, prior to Lender's written cancellation of this Agreement, shall not
constitute or give rise to a termination of this Agreement.

CANCELLATION OF AGREEMENT; EFFECT. Unless otherwise indicated under such a
written cancellation instrument, Lender's agreement to terminate or otherwise
cancel this Agreement shall effect only, and shall be expressly limited to,
Guarantor's continuing obligations and liability to guarantee Borrower's
Indebtedness incurred, originated and/or extended (without prior commitment)
after the date of such a written cancellation instrument: with Guarantor
remaining fully obligated and liable under this Agreement for any and all of
Borrower's Indebtedness incurred, originated, extended, or committed to prior to
the date of such a written cancellation instrument. Nothing under this Agreement
or under any other agreement or understanding by and between Guarantor and
Lender, shall in any way obligate, or be construed to obligate, Lender to agree
to the subsequent termination or cancellation of Guarantor's obligations and
liability hereunder; it being fully understood and agreed to by Guarantor that
Lender has and intends to continue to rely on Guarantor's assets, income and
financial resources in extending credit and other Indebtedness to and in favor
of Borrower, and that to release Guarantor from Guarantor's continuing
obligations and liabilities under this Agreement would so prejudice Lender that
Lender may, within its sole and uncontrolled discretion and judgment, refuse to
release Guarantor from any of its continuing obligations and liability under
this Agreement for any reason whatsoever as long as any of Borrower's
Indebtedness remains unpaid and outstanding, or otherwise.

DEFAULT. Should any event of default occur or exist under any of Borrower's
Indebtedness in favor of Lender, Guarantor unconditionally and absolutely agrees
to pay Lender the then unpaid amount of Borrower's Indebtedness, in principal,
interest, costs, expenses, attorneys' fees and other fees and charges. Such
payment or payments shall be made at Lender's offices indicated above,
immediately following demand by Lender.

GUARANTOR'S WAIVERS. Guarantor hereby waives:

     (a) Notice of Lender's acceptance of this Agreement.

     (b) Presentment for payment of Borrower's Indebtedness, notice of dishonor
     and of nonpayment, notice of intention to accelerate, notice of
     acceleration, protest and notice of protest, collection or institution of
     any suit or other action by Lender in collection thereof, including any
     notice of default in payment thereof, or other notice to, or demand for
     payment thereof, on any party.

     (c) Any right to require Lender to notify Guarantor of any nonpayment
     relating to any collateral directly or indirectly securing Borrower's
     Indebtedness, or notice of any action or nonaction on the part of Borrower,
     Lender, or any other guarantor, surety or endorser of Borrower's
     Indebtedness, or notice of the creation of any new or additional
     Indebtedness subject to this Agreement.

     (d) Any rights to demand or require collateral security from the Borrower
     or any other person as provided under applicable Louisiana law or
     otherwise.

     (e) Any right to require Lender to notify Guarantor of the terms, time and
     place of any public or private sale of any collateral directly or
     indirectly securing Borrower's Indebtedness.

     (f) Any "one action" or "anti-deficiency" law or any other law which may
     prevent Lender from bringing any action, including a claim for deficiency,
     against Guarantor, before or after Lender's commencement or completion of
     any foreclosure action, or any action in lieu of foreclosure.

     (g) Any election of remedies by Lender that may destroy or impair
     Guarantor's subrogation rights or Guarantor's right to proceed for
     reimbursement against Borrower or any other guarantor, surety or endorser
     of Borrower's Indebtedness, including without limitation, any loss of
     rights Guarantor may suffer by reason of any law limiting, qualifying, or
     discharging Borrower's Indebtedness.

     (h) Any disability or other defense of Borrower, or any other guarantor,
     surety or endorser, or any other person, or by reason of the cessation from
     any cause whatsoever, other than payment in full of Borrower's
     Indebtedness.

     (i) Any statute of limitations or prescriptive period, if at the time an
     action or suit brought by Lender against Guarantor is commenced, there is
     any outstanding Indebtedness of Borrower to Lender which is barred by any
     applicable statute of limitations or prescriptive period.

<PAGE>   19
05-11-2001                    COMMERCIAL GUARANTY                         Page 2

Loan No 0001301                   (Continued)
================================================================================

Guarantor warrants and agrees that each of the waivers set forth above is made
with Guarantor's full knowledge of its significance and consequences, and that,
under the circumstances, such waivers are reasonable and not contrary to public
policy or law. If any such waiver is determined to be contrary to any applicable
law or public policy, such waiver shall be effective only to the extent
permitted by law.

GUARANTOR'S SUBORDINATION OF RIGHTS. In the event that Guarantor should for any
reason (a) advance or lend monies to Borrower, whether or not such funds are
used by Borrower to make payment(s) under Borrower's Indebtedness, and/or (b)
make any payment(s) to Lender or others for and on behalf of Borrower under
Borrower's Indebtedness, and/or (c) make any payment to Lender in total or
partial satisfaction of Guarantor's obligations and liabilities under this
Agreement, and/or (d) if any of Guarantor's property is used to pay or satisfy
any of Borrower's Indebtedness. Guarantor hereby agrees that any and all rights
that Guarantor may have or acquire to collect from or to be reimbursed by
Borrower (or from or by any other guarantor, endorser or surety of Borrower's
Indebtedness), whether Guarantor's rights of collection or reimbursement arise
by way of subrogation to the rights of Lender or otherwise, shall in all
respects, whether or not Borrower is presently or subsequently becomes
insolvent, be subordinate, inferior and junior to the rights of Lender to
collect and enforce payment, performance and satisfaction of Borrower's then
remaining Indebtedness, until such time as Borrower's Indebtedness is fully paid
and satisfied. In the event of Borrower's insolvency or consequent liquidation
of Borrower's assets, through bankruptcy, by an assignment for the benefit of
creditors, by voluntary liquidation, or otherwise, the assets of Borrower
applicable to the payment of claims of both Lender and Guarantor shall be paid
to Lender and shall be first applied by Lender to Borrower's then remaining
Indebtedness. Guarantor hereby assigns to Lender all claims which it may have or
acquire against Borrower or any assignee or trustee of Borrower in bankruptcy;
provided that, such assignment shall be effective only for the purpose of
assuring to Lender full payment of Borrower's Indebtedness guaranteed under this
Agreement.

If now or hereafter (a) Borrower shall be or become insolvent, and (b)
Borrower's Indebtedness shall not at all times until paid be fully secured by
collateral pledged by Borrower, Guarantor hereby forever waives and relinquishes
in favor of Lender and Borrower, and their respective successors, any claim or
right to payment Guarantor may now have or hereafter have or acquire against
Borrower, by subrogation or otherwise, so that at no time shall Guarantor be or
become a "creditor" of Borrower within the meaning of 11 U.S.C. section 547(b),
or any successor provision of the Federal bankruptcy laws.

GUARANTOR'S RECEIPT OF PAYMENTS. Guarantor further agrees to refrain from
attempting to collect and/or enforce any of Guarantor's collection and/or
reimbursement rights against Borrower for against any other guarantor, surety or
endorser of Borrower's Indebtedness), arising by way of subrogation or
otherwise, until such time as all of Borrower's then remaining Indebtedness in
favor of Lender is fully paid and satisfied. In the event that Guarantor should
for any reason whatsoever receive any payment(s) from Borrower (or any other
guarantor, surety or endorser of Borrower's Indebtedness) that Borrower (or such
a third party) may owe to Guarantor for any of the reasons stated above,
Guarantor agrees to accept such payment(s) in trust for and on behalf of Lender,
advising Borrower (or the third party payee) of such fact. Guarantor further
unconditionally agrees to immediately deliver such funds to Lender, with such
funds being held by Guarantor over any interim period, in trust for Lender. In
the event that Guarantor should for any reason whatsoever receive any such funds
from Borrower (or any third party), and Guarantor should deposit such funds in
one or more of Guarantor's deposit accounts, no matter where located, Lender
shall have the right to attach any and all of Guarantor's deposit accounts in
which such funds were deposited, whether or not such funds were commingled with
other monies of Guarantor, and whether or not such funds then remain on deposit
in such an account or accounts. To this end and to secure Guarantor's
obligations under this Agreement, Guarantor collaterally assigns and pledges to
Lender, and grants to Lender a continuing security interest in, any and all of
Guarantor's present and future rights, title and interest in and to all monies
that Guarantor may now and/or in the future maintain on deposit with banks,
savings and loan associations and other entities (other than tax deferred
accounts with Lender), in which Guarantor may at any time deposit any such funds
that may be received from Borrower (or any other guarantor, endorser or surety
of Borrower's Indebtedness) in favor of Lender.

DEPOSIT ACCOUNTS. As collateral security for repayment of Guarantor's
obligations hereunder and under any additional guaranties previously granted or
to be granted by Guarantor in the future, and additionally as collateral
security for any present and future indebtedness of Guarantor in favor of Lender
(with the exception of any indebtedness under a consumer credit card account),
Guarantor is granting Lender a continuing security interest in any and all funds
that Guarantor may now and in the future have on deposit with Lender or in
certificates of deposit or other deposit accounts as to which Guarantor is an
account holder (with the exception of IRA, pension, and other tax-deferred
deposits). Guarantor further agrees that Lender may at any time apply any funds
that Guarantor may have on deposit with Lender or in certificates of deposit or
other deposit accounts as to which Guarantor is an account holder against the
unpaid balance of any and all other present and future obligations and
indebtedness of Guarantor to Lender, in principal, interest, fees, costs,
expenses, and attorneys' fees.

ADDITIONAL COVENANTS. Guarantor agrees that Lender may, at its sole option, at
any time, and from time to time, without the consent of or notice to Guarantor,
or any of them, or to any other party, and without incurring any responsibility
to Guarantor or to any other party, and without impairing or releasing any of
Guarantor's obligations or liabilities under this Agreement:

     (a) Make additional secured and/or unsecured loans to Borrower.

     (b) Discharge, release or agree not to sue any party (including, but not
     limited to, Borrower or any other guarantor, surety, or endorser of
     Borrower's Indebtedness), who is or may be liable to Lender for any of
     Borrower's Indebtedness.

     (c) Sell, exchange, release, surrender, realize upon, or otherwise deal
     with, in any manner and in any order, any collateral directly or indirectly
     securing repayment of any of Borrower's Indebtedness.

     (d) Alter, renew, extend, accelerate, or otherwise change the manner,
     place, terms and/or times of payment or other terms of Borrower's
     Indebtedness, or any part thereof, including any increase or decrease in
     the rate or rates of interest on any of Borrower's Indebtedness.

     (e) Settle or compromise any of Borrower's Indebtedness.

     (f) Subordinate and/or agree to subordinate the payment of all or any part
     of Borrower's Indebtedness, or Lender's security rights in any collateral
     directly or indirectly securing any such Indebtedness, to the payment
     and/or security rights of any other present and/or future creditors of
     Borrower.

     (g) Apply any payments and/or proceeds to any of Borrower's Indebtedness in
     such priority or with such preferences as Lender may determine in its sole
     discretion, regardless of which of Borrower's Indebtedness then remains
     unpaid.

     (h) Take or accept any other collateral security or guaranty for any or all
     of Borrower's Indebtedness.

     (i) Enter into, deliver, modify, amend, or waive compliance with, any
     instrument or arrangement evidencing, securing or otherwise affecting, all
     or any part of Borrower's Indebtedness.

NO IMPAIRMENT OF GUARANTOR'S OBLIGATIONS. No course of dealing between Lender
and Borrower (or any other guarantor, surety or endorser of Borrower's
Indebtedness), nor any failure or delay on the part of Lender to exercise any of
Lender's rights and remedies under this Agreement or any other agreement or
agreements by and between Lender and Borrower (or any other guarantor, surety or
endorser), shall have the effect of impairing or releasing Guarantor's
obligations and liabilities to Lender, or of waiving any of Lender's rights and
remedies under this Agreement or otherwise. Any partial exercise of any rights
and remedies granted to Lender shall furthermore not constitute a waiver of any
of Lender's other rights and remedies; it being Guarantor's intent and agreement
that Lender's rights and remedies shall be cumulative in nature. Guarantor
further agrees that, should Borrower default under any of its Indebtedness, any
waiver or forbearance on the part of Lender to pursue Lender's available rights
and remedies shall be binding upon Lender only to the extent that Lender
specifically agrees to such waiver or forbearance in writing. A waiver or
forbearance on the part of Lender as to one event of default shall not
constitute a waiver or forbearance as to any other default.

NO RELEASE OF GUARANTOR. Guarantor's obligations and liabilities under this
Agreement shall not be released, impaired, reduced, or otherwise affected by,
and shall continue in full force and effect notwithstanding the occurrence of
any event, including without limitation any one or more of the following events:

     (a) The death, insolvency, bankruptcy, arrangement, adjustment,
     composition, liquidation, disability, dissolution, or lack of authority
     (whether corporate, partnership or trust) of Borrower (or any person
     acting on Borrower's behalf), or of any other guarantor, surety or
     endorser of Borrower's Indebtedness.

     (b) Any payment by Borrower, or any other party, to Lender that is held to
     constitute a preferential transfer or a fraudulent conveyance under any
     applicable law, or any such amounts or payment which, for any reason,
     Lender is required to refund or repay to Borrower or to any other person.

     (c) Any dissolution of Borrower, or any sale, lease or transfer of all or
     any part of Borrowers assets.

     (d) Any failure of Lender to notify Guarantor of the making of additional
     loans or other extensions of credit in reliance on this Agreement.

AUTOMATIC REINSTATEMENT. This Agreement and Guarantor's obligations and
liabilities hereunder shall continue to be effective, and/or shall automatically
and retroactively be reinstated, if a release or discharge has occurred, or if
at any time, any payment or part thereof to Lender with respect to any of
Borrower's Indebtedness, is rescinded or must otherwise be restored by Lender
pursuant to any insolvency, bankruptcy, reorganization, receivership, or any
other debt relief granted to Borrower or to any other party to Borrower's
Indebtedness or any such security therefor. In the event that Lender must
rescind or restore any payment received in total or partial satisfaction of
Borrower's Indebtedness, any prior release or discharge from the terms of this
Agreement given to Guarantor shall be without effect, and this Agreement and
Guarantor's

<PAGE>   20
05-11-2001                      COMMERCIAL GUARANTY                       Page 3
Loan No 0001301                     (Continued)
================================================================================
obligations and liabilities hereunder shall automatically and retroactively be
renewed and/or reinstated and shall remain in full force and effect to the same
degree and extent as if such a release or discharge had never been granted. It
is the intention of Lender and Guarantor that Guarantor's obligations and
liabilities hereunder shall not be discharged except by Guarantor's full and
complete performance and satisfaction of such obligations and liabilities; and
then only to the extent of such performance.

REPRESENTATIONS AND WARRANTIES BY GUARANTOR. Guarantor represents and warrants
that:

     (a) Guarantor has the lawful power to own its properties and to engage in
     its business as presently conducted.

     (b) Guarantor's guaranty of Borrower's Indebtedness and Guarantor's
     execution, delivery and performance of this Agreement are not in violation
     of any laws and will not result in a default under any contract, agreement,
     or instrument to which Guarantor is a party, or by which Guarantor or its
     property may be bound.

     (c) Guarantor has agreed and consented to execute this Agreement and to
     guarantee Borrower's Indebtedness in favor of Lender, at Borrower's request
     and not at the request of Lender.

     (d) Guarantor will receive and/or has received a direct or indirect
     material benefit from the transactions contemplated herein and/or arising
     out of Borrower's Indebtedness.

     (e) This Agreement, when executed and delivered to Lender, will constitute
     a valid, legal and binding obligation of Guarantor, enforceable in
     accordance with its terms.

     (f) Guarantor has established adequate means of obtaining information from
     Borrower on a continuing basis regarding Borrower's financial condition.

     (g) Lender has made no representations to Guarantor as to the
     creditworthiness of Borrower.

ADDITIONAL OBLIGATIONS OF GUARANTOR. So long as this Agreement remains in
effect, Guarantor has not and will not, without Lender's prior written consent,
sell, lease, assign, pledge, hypothecate, encumber, transfer, or otherwise
dispose of all or substantially all of Guarantor's assets. Guarantor agrees to
keep adequately informed of any facts, events or circumstances which might in
any way affect Guarantor's risks under this Agreement. Guarantor further agrees
that Lender shall have no obligation to disclose to Guarantor any information or
material relating to Borrower or Borrower's Indebtedness.

ADDITIONAL DOCUMENTS: FINANCIAL STATEMENTS. Upon the reasonable request of
Lender, Guarantor will, at any time, and from time to time, execute and deliver
to Lender any and all such financial instruments and documents, and supply such
additional information, as may be necessary or advisable in the opinion of
Lender to obtain the full benefits of this Agreement. Guarantor further agrees
to provide Lender with such financial statements and other related information
at such frequencies and in such detail as Lender may reasonably request.

TRANSFER OF INDEBTEDNESS. This Agreement is for the benefit of Lender and for
such other person or persons as may from time to time become or be the holders
of all or any part of Borrower's Indebtedness. This Agreement shall be
transferrable and negotiable with the same force and effect and to the same
extent as Borrower's Indebtedness may be transferrable; it being understood and
agreed to by Guarantor that, upon any transfer or assignment of all or any part
of Borrower's Indebtedness; the holder of such Indebtedness shall have all of
the rights and remedies granted to Lender under this Agreement. Guarantor
further agrees that, upon any transfer of all or any portion of Borrower's
Indebtedness, Lender may transfer and deliver any and all collateral securing
repayment of such Indebtedness (including, but not limited to, any collateral
provided by Guarantor) to the transferee of such Indebtedness, and such
collateral shall secure any and all of Borrower's Indebtedness in favor of such
a transferee. Guarantor additionally agrees that, after any such transfer or
assignment has taken place, Lender shall be fully discharged from any and all
liability and responsibility to Borrower and Guarantor with respect to such
collateral, and the transferee thereafter shall be vested with all the powers
and rights with respect to such collateral.

CONSENT TO PARTICIPATION. Guarantor recognizes and agrees that Lender may, from
time to time, one or more times, transfer all or any part of Borrower's
Indebtedness through sales of participation interests in such Indebtedness to
one or more third party lenders. Guarantor specifically agrees and consents to
all such transfers and assignments, and Guarantor further waives any subsequent
notice of such transfers and assignments as may be provided under Louisiana law.
Guarantor additionally agrees that the purchaser of a participation interest in
Borrower's Indebtedness will be considered as the absolute owner of a percentage
interest of such Indebtedness and that such a purchaser will have all of the
rights granted under any participation agreement governing the sale of such a
participation interest. Guarantor waives any rights of offset that Guarantor may
have against Lender and/or any purchaser of such a participation interest, and
Guarantor unconditionally agrees that either Lender or such a purchaser may
enforce Guarantor's obligations and liabilities under this Agreement,
irrespective of the failure or insolvency of Lender or any such purchaser.

NOTICES. Any notice provided in this Agreement must be in writing and will be
considered as given on the day it is delivered by hand or deposited in the U.S.
mail, postage prepaid, addressed to the person to whom the notice is to be given
at the address shown above or at such other addresses as any party may designate
to the other in writing. If there is more than one Guarantor under this
Agreement, notice to any Guarantor shall constitute notice to all Guarantors.

ADDITIONAL GUARANTIES. Guarantor recognizes and agrees that Guarantor may have
previously granted, and may in the future grant, one or more additional
guaranties of Borrower's Indebtedness in favor of Lender. Should this occur, the
execution of this Agreement and any additional guaranties on the part of
Guarantor will not be construed as a cancellation of this Agreement or any of
Guarantor's additional guaranties; it being Guarantor's full intent and
agreement that all such guaranties of Borrower's Indebtedness in favor of Lender
shall remain in full force and effect and shall be cumulative in nature and
effect.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:

     AMENDMENT. No amendment, modification, consent or waiver of any provision
     of this Agreement, and no consent to any departure by Guarantor therefrom,
     shall be effective unless the same shall be in writing signed by a duly
     authorized officer of Lender, and then shall be effective only as to the
     specific instance and for the specific purpose for which given.

     APPLICABLE LAW. This Guaranty has been delivered to Lender and accepted by
     Lender in the State of Louisiana. This Guaranty shall be governed by and
     construed in accordance with the laws of the State of Louisiana.

     CAPTION HEADINGS. Caption headings of the sections of this Agreement are
     for convenience purposes only and are not to be used to interpret or to
     define their provisions. In this Agreement, whenever the context so
     requires, the singular includes the plural and the plural also includes the
     singular.

     SEVERABILITY. If any provision of this Agreement is held to be illegal,
     invalid or unenforceable under present or future laws effective during the
     term hereof, such provision shall be fully severable. This Agreement shall
     be construed and enforceable as if the illegal, invalid or unenforceable
     provision had never comprised a part of it, and the remaining provisions of
     this Agreement shall remain in full force and effect and shall not be
     affected by the illegal, invalid or unenforceable provision or by its
     severance herefrom. Furthermore, in lieu of such illegal, invalid or
     unenforceable provision, there shall be added automatically as a part of
     this Agreement, a provision as similar in terms to such illegal, invalid or
     unenforceable provision as may be possible and legal, valid and
     enforceable.

     SUCCESSORS AND ASSIGNS BOUND. Guarantor's obligations and liabilities under
     this Agreement shall be binding upon Guarantor's successors, heirs,
     legatees, devisees, administrators, executors and assigns.

     WAIVE JURY. Guarantor and Lender hereby waive the right to any jury trial
     in any action, proceeding, or counterclaim brought by either against the
     other.

EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED. NO
FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS
GUARANTY IS DATED MAY 11, 2001.

GUARANTOR:

X /s/ Lyle Stockstill
 --------------------------------------------
 LYLE STOCKSTILL             SSN:###-##-####)
================================================================================
<PAGE>   21
                              COMMERCIAL GUARANTY

<TABLE>
PRINCIPAL     LOAN DATE     MATURITY      LOAN NO      CALL      COLLATERAL      ACCOUNT      OFFICER      INITIALS
<S>           <C>           <C>           <C>          <C>       <C>             <C>           <C>         <C>
                                                       590         4635          5439329        L32

</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.

BORROWER:   TORCH OFFSHORE, L.L.C. (TIN: 72-1471586)
            401 WHITNEY AVENUE SUITE 400
            GRETNA, LA 70056-2503

GUARANTOR:  LANA HINGLE STOCKSTILL (SSN:###-##-####)
            401 WHITNEY AVENUE SUITE 400
            GRETNA, LA 70056

LENDER:     REGIONS BANK TIN: 63-0371391
            COMMERCIAL LENDING
            301 ST. CHARLES AVENUE
            3RD FLOOR
            NEW ORLEANS, LA 70130

------------------------------------------------------------------------------

AMOUNT OF GUARANTY. THE AMOUNT OF THIS GUARANTY IS UNLIMITED.

DEFINITIONS. The following terms shall have the following meanings when used in
this Agreement:

     AGREEMENT. The word "Agreement" means this Guaranty Agreement as this
     Agreement may be amended or modified from time to time.

     BORROWER. The word "Borrower" means individually, collectively and
     interchangeably TORCH OFFSHORE, L.L.C.

     GUARANTOR. The word "Guarantor" means individually, collectively and
     interchangeably LANA HINGLE STOCKSTILL (SSN: ###-##-####) and all other
     persons quaranteeing payment and satisfaction of Borrower's Indebtedness as
     hereinafter defined.

     INDEBTEDNESS. The word "Indebtedness" means individually, collectively,
     interchangeably and without limitation any and all present and future
     loans, loan advances, extensions of credit, obligations and/or liabilities
     that Borrower may now and/or in the future owe to and/or incur in favor of
     Lender, whether direct or indirect, or by way of assignment or purchase
     of a participation interest, and whether absolute or contingent, voluntary
     or involuntary, determined or undetermined, liquidated or unliquidated, due
     or to become due, secured or unsecured, and whether Borrower may be liable
     individually, jointly or solidarily with others, whether primarily or
     secondarily, or as a guarantor or otherwise, and whether now existing or
     hereafter arising, of every nature and kind whatsoever, in principal,
     interest, costs, expenses and attorneys' fees and other fees and charges,
     including without limitation Borrower's Indebtedness and obligations under
     a certain promissory note in favor of Lender dated MAY 11, 2001 IN THE
     FIXED PRINCIPAL AMOUNT OF U.S. $8,000,000.00. IN ADDITION, ALL INTEREST
     THEREON, COSTS, EXPENSES, ATTORNEY'S FEES AND OTHER FEES AND CHARGES
     RELATED THERETO UNDER BORROWER'S INDEBTEDNESS SHALL BE FULLY GUARANTEED
     HEREUNDER.

     LENDER. The word "Lender" means Regions Bank, Commercial Lending TIN:
     63-0371391, its successors and assigns, and any subsequent holder or
     holders of Borrower's Indebtedness.

GUARANTEE OF BORROWER'S INDEBTEDNESS. GUARANTOR HEREBY ABSOLUTELY AND
UNCONDITIONALLY AGREES TO, AND BY THESE PRESENTS DOES HEREBY, GUARANTEE THE
PROMPT AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF ANY AND ALL OF
BORROWER'S PRESENT AND FUTURE INDEBTEDNESS IN FAVOR OF LENDER.

CONTINUING GUARANTY. THIS IS A CONTINUING GUARANTY AGREEMENT UNDER WHICH
GUARANTOR AGREES TO GUARANTEE PAYMENT OF BORROWER'S PRESENT AND FUTURE
INDEBTEDNESS IN FAVOR OF LENDER ON A CONTINUING BASIS. Guarantor's obligations
and liability under this Agreement shall be open and continuous in effect.
Guarantor intends to and does hereby guarantee at all times the prompt and
punctual payment, performance and satisfaction of all of Borrower's present and
future Indebtedness in favor of Lender. Accordingly, any payments made on
Borrower's Indebtedness will not discharge or diminish the obligations and
liability of Guarantor under this Agreement for any remaining and succeeding
Indebtedness of Borrower in favor of Lender. To the extent that Guarantor is or
may become a Member/Owner of Borrower, Guarantor agrees that, notwithstanding
the provision of La. R.S. 12:1320, Guarantor shall be liable under this
Agreement for Borrower's Indebtedness in favor of Lender.

JOINT, SEVERAL AND SOLIDARY LIABILITY. Guarantor's obligations and liability
under this Agreement shall be on a "solidary" or "joint and several" basis along
with Borrower to the same degree and extent as if Guarantor had been and/or will
be a co-borrower, co-principal obligor and/or co-maker of Borrower's
Indebtedness. In the event that there is more than one Guarantor under this
Agreement, or in the event that there are other guarantors, endorsers or
sureties of all or any portion of Borrower's Indebtedness, Guarantor's
obligations and liability hereunder shall further be on a "solidary" or "joint
and several" basis along with such other guarantors, endorsers and/or sureties.

DURATION OF GUARANTY. This Agreement and Guarantor's obligations and liability
hereunder shall remain in full force and effect until such time as this
Agreement may be cancelled or otherwise terminated by Lender under a written
cancellation instrument in favor of Guarantor (subject to the automatic
reinstatement provisions hereinbelow). It is anticipated that fluctuations may
occur in the aggregate amount of Borrower's Indebtedness guaranteed under this
Agreement and it is specifically acknowledged and agreed to by Guarantor that
reductions in the amount of Borrower's Indebtedness, even to zero ($0.00)
dollars, prior to Lender's written cancellation of this Agreement, shall not
constitute or give rise to a termination of this Agreement.

CANCELLATION OF AGREEMENT; EFFECT. Unless otherwise indicated under such a
written cancellation instrument, Lender's agreement to terminate or otherwise
cancel this Agreement shall affect only, and shall be expressly limited to,
Guarantor's continuing obligations and liability to guarantee Borrower's
Indebtedness incurred, originated and/or extended (without prior commitment)
after the date of such a written cancellation instrument; with Guarantor
remaining fully obligated and liable under this Agreement for any and all of
Borrower's Indebtedness incurred, originated, extended, or committed to prior to
the date of such a written cancellation instrument. Nothing under this Agreement
or under any other agreement or understanding by and between Guarantor and
Lender, shall in any way obligate, or be construed to obligate, Lender to agree
to the subsequent termination or cancellation of Guarantor's obligations and
liability hereunder; it being fully understood and agreed to by Guarantor that
Lender has and intends to continue to rely on Guarantor's assets, income and
financial resources in extending credit and other indebtedness to and in favor
of Borrower, and that to release Guarantor from Guarantor's continuing
obligations and liabilities under this Agreement would so prejudice Lender that
Lender may, within its sole and uncontrolled discretion and judgment, refuse to
release Guarantor from any of its continuing obligations and liability under
this Agreement for any reason whatsoever as long as any of Borrower's
Indebtedness remains unpaid and outstanding, or otherwise.

DEFAULT. Should any event of default occur or exist under any of Borrower's
Indebtedness in favor of Lender, Guarantor unconditionally and absolutely agrees
to play Lender the then unpaid amount of Borrower's Indebtedness, in principal,
interest, costs, expenses, attorney's fees and other fees and charges. Such
payment or payments shall be made at Lender's offices indicated above,
immediately following demand by Lender.

GUARANTOR'S WAIVERS. Guarantor hereby waives:

     (a) Notice of Lender's acceptance of this Agreement.

     (b) Presentment for payment of Borrower's Indebtedness, notice of dishonor
     and of nonpayment, notice of intention to accelerate, notice of
     acceleration, protest and notice of protest, collection or instruction of
     any suit or other action by Lender in collection thereof, including any
     notice of default in payment thereof, or other notice to, or demand for
     payment thereof, on any party.

     (c) Any right to require Lender to notify Guarantor of any nonpayment
     relating to any collateral directly or indirectly securing Borrower's
     indebtedness, or notice of any action or nonaction on the part of Borrower,
     Lender, or any other guarantor, surety or endorser of Borrower's
     Indebtedness, or notice of the creation of any new or additional
     Indebtedness subject to this Agreement.

     (d) Any rights to demand or require collateral security from the Borrower
     or any other person as provided under applicable Louisiana law or
     otherwise.

     (e) Any right to require Lender to notify Guarantor of the terms, time and
     place of any public or private sale of any collateral directly or
     indirectly securing Borrower's Indebtedness.

     (f) Any "one action" or "anti-deficiency" law or any other law which may
     prevent Lender from bringing any action, including a claim for deficiency,
     against Guarantor, before or after Lender's commencement or completion of
     any foreclosure action or any action in lieu of foreclosure.

     (g) Any election of remedies by Lender that may destroy or impair
     Guarantor's subrogation rights or Guarantor's right to proceed for
     reimbursement against Borrower or any other guarantor, surety or endorser
     of Borrower's Indebtedness, including without limitation, any loss of
     rights Guarantor may suffer by reason of any law limiting, qualifying, or
     discharging Borrower's Indebtedness.

     (h) Any disability or other defense of Borrower, or any other guarantor,
     surety or endorser, or any other person, or by reason of the cessation from
     any cause whatsoever, other than payment in full of Borrower's
     Indebtedness.

     (i) Any statute of limitations or prescriptive period, if at the time an
     action or suite brought by Lender against Guarantor is commenced, there
<PAGE>   22
05-11-2001                      COMMERCIAL GUARANTY                       PAGE 2
LOAN NO 0001301                    (Continued)
================================================================================

Guarantor warrants and agrees that each of the waivers set forth above is made
with Guarantor's full knowledge of its significance and consequences, and that,
under the circumstances, such waivers are reasonable and not contrary to public
policy or law. If any such waiver is determined to be contrary to any applicable
law or public policy, such waiver shall be effective only to the extent
permitted by law.

GUARANTOR'S SUBORDINATION OF RIGHTS. In the event that Guarantor should for any
reason (a) advance or lend monies to Borrower, whether or not such funds are
used by Borrower to make payment(s) under Borrower's Indebtedness, and/or (b)
make any payment(s) to Lender or others for and on behalf of Borrower under
Borrower's Indebtedness, and/or (c) make any payment to Lender in total or
partial satisfaction of Guarantor's obligations and liabilities under this
Agreement, and/or (d) if any of Guarantor's property is used to pay or satisfy
any of Borrower's Indebtedness, Guarantor hereby agrees that any and all rights
that Guarantor may have or acquire to collect from or to be reimbursed by
Borrower (or from or by any other guarantor, endorser or surety of Borrower's
Indebtedness), whether Guarantor's rights of collection or reimbursement arise
by way of subrogation to the rights of Lender or otherwise, shall in all
respects, whether or not Borrower is presently or subsequently becomes
insolvent, be subordinate, inferior and junior to the rights of Lender to
collect and enforce payment, performance and satisfaction of Borrower's then
remaining Indebtedness, until such time as Borrower's Indebtedness is fully paid
and satisfied. In the event of Borrower's insolvency or consequent liquidation
of Borrower's assets, through bankruptcy, by an assignment for the benefit of
creditors, by voluntary liquidation, or otherwise, the assets of Borrower
applicable to the payment of claims of both Lender and Guarantor shall be paid
to Lender and shall be first applied by Lender to Borrower's then remaining
indebtedness. Guarantor hereby assigns to Lender all claims which it may have or
acquire against Borrower or any assignee or trustee of Borrower in bankruptcy;
provided that, such assignment shall be effective only for the purpose of
assuring to Lender full payment of Borrower's Indebtedness guaranteed under this
Agreement.

If now or hereafter (a) Borrower shall be or become insolvent, and (b)
Borrower's Indebtedness shall not at all times until paid be fully secured by
collateral pledged by Borrower, Guarantor hereby forever waives and relinquishes
in favor of Lender and Borrower, and their respective successors, any claim or
right to payment Guarantor may now have or hereafter have or acquire against
Borrower, by subrogation or otherwise, so that at no time shall Guarantor be or
become a "creditor" of Borrower within the meaning of 11 U.S.C. section 547(b),
or any successor provision of the Federal bankruptcy laws.

GUARANTOR'S RECEIPT OF PAYMENTS. Guarantor further agrees to refrain from
attempting to collect and/or enforce any of Guarantor's collection and/or
reimbursement rights against Borrower (or against any other guarantor, surety or
endorser of Borrower's Indebtedness), arising by way of subrogation or
otherwise, until such time as all of Borrower's then remaining Indebtedness in
favor of Lender is fully paid and satisfied. In the event that Guarantor should
for any reason whatsoever receive any payment(s) from  Borrower (or any other
guarantor, surety or endorser of Borrower's Indebtedness) that Borrower (or
such a third party) may owe to Guarantor for any of the reasons stated above,
Guarantor agrees to accept such payment(s) in trust for and on behalf of Lender,
advising Borrower (or the third party payee) of such fact. Guarantor further
unconditionally agrees to immediately deliver such funds to Lender, with such
funds being held by Guarantor over any interim period, in trust for Lender. In
the event that Guarantor should for any reason whatsoever receive any such funds
from Borrower (or any third party), and Guarantor should deposit such funds in
one or more of Guarantor's deposit accounts, no matter where located, Lender
shall have the right to attach any and all of Guarantor's deposit accounts in
which such funds were deposited, whether or not such funds were commingled with
other monies of Guarantor, and whether or not such funds then remain on deposit
in such an account or accounts. To this end and to secure Guarantor's
obligations under this Agreement, Guarantor collaterally assigns and pledges to
Lender, and grants to Lender a continuing security interest in, any and all of
Guarantor's present and future rights, title and interest in and to all monies
that Guarantor may now and/or in the future maintain on deposit with banks,
savings and loan associations and other entities (other than tax deferred
accounts with Lender), in which Guarantor may at any time deposit any such funds
that may be received from Borrower (or any other guarantor, endorser or surety
of Borrower's Indebtedness) in favor of Lender.

DEPOSIT ACCOUNTS. As collateral security for repayment of Guarantor's
obligations hereunder and under any additional guaranties previously granted or
to be granted by Guarantor in the future, and additionally as collateral
security for any present and future indebtedness of Guarantor in favor of Lender
with the exception of any indebtedness under a consumer credit card account).
Guarantor is granting Lender a continuing security interest in any and all funds
that Guarantor may now and in the future have on deposit with Lender or in
certificates of deposit or other deposit accounts as to which Guarantor is an
account holder (with the exception of IRA, pension and other tax-deferred
deposits). Guarantor further agrees that Lender may at any time apply any funds
that Guarantor may have on deposit with Lender or in certificates of deposit or
other deposit accounts as to which Guarantor is an account holder against the
unpaid balance of any and all other presents and future obligations and
indebtedness of Guarantor to Lender, in principal, interest, fees, costs,
expenses and attorneys' fees.

ADDITIONAL COVENANTS. Guarantor agrees that Lender may, at its sole option, at
any time, and from time to time, without the consent of or notice to Guarantor,
or any of them, or to any other party, and without incurring any responsibility
to Guarantor or to any other party, and without impairing or releasing any of
Guarantor's obligations or liabilities under this Agreement:

     (a) Make additional secured and/or unsecured loans to Borrower.

     (b) Discharge, release or agree not to sue any party (including, but not
     limited to, Borrower or any other guarantor, surety, or endorser of
     Borrower's Indebtedness), who is or may be liable to Lender for any of
     Borrower's Indebtedness.

     (c) Sell, exchange, release, surrender, realize upon, or otherwise deal
     with, in any manner and in any order, any collateral directly or indirectly
     securing repayment of any of Borrower's Indebtedness.

     (d) Alter, renew, extend, accelerate, or otherwise change the manner,
     place, terms and/or times of payment or other terms of Borrower's
     Indebtedness, or any part thereof, including any increase or decrease in
     the rate or rates of interest on any of Borrower's Indebtedness.

     (e) Settle or compromise any of Borrower's Indebtedness.

     (f) Subordinate and/or agree to subordinate the payment of all or any part
     of Borrower's Indebtedness, or Lender's security rights in any collateral
     directly or indirectly securing any such Indebtedness, to the payment
     and/or security rights of any other present and/or future creditors of
     Borrower.

     (g) Apply any payments and/or proceeds to any of Borrower's Indebtedness in
     such priority or with such preferences as Lender may determine in its sole
     discretion, regardless of which of Borrower's Indebtedness then remains
     unpaid.

     (h) Take or accept any other collateral security or guaranty for any or all
     of Borrower's Indebtedness.

     (i) Enter into, deliver modify, amend or waive compliance with, any
     instrument or arrangement evidencing, securing or otherwise affecting, all
     or any part of Borrower's Indebtedness.

NO IMPAIRMENT OF GUARANTOR'S OBLIGATIONS. No course of dealing between Lender
and Borrower (or any other guarantor, surety or endorser of Borrower's
Indebtedness), nor any failure or delay on the part of Lender to exercise any of
Lender's rights and remedies under this Agreement or any other agreement or
agreements by and between Lender and Borrower (or any other guarantor, surety or
endorser), shall have the effect of impairing or releasing Guarantor's
obligations and liabilities to Lender, or of waiving any of Lender's rights and
remedies under this Agreement or otherwise. Any partial exercise of any rights
and remedies granted to Lender shall furthermore not constitute a waiver of any
of Lender's other rights and remedies; it being Guarantor's intent and agreement
that Lender's rights and remedies shall be cumulative in nature. Guarantor
further agrees that, should Borrower default under any of its Indebtedness, any
waiver or forbearance on the part of Lender to pursue Lender's available rights
and remedies shall be binding upon Lender only to the extent that Lender
specifically agrees to such waiver or forbearance in writing. A waiver or
forbearance on the part of Lender as to one event of default shall not
constitute a waiver or forbearance as to any other default.

NO RELEASE OF GUARANTOR. Guarantor's obligations and liabilities under this
Agreement shall not be released, impaired, reduced, or otherwise affected by,
and shall continue in full force and effect notwithstanding the occurrence of
any event, including without limitation any one or more of the following events:

     (a) The death, insolvency, bankruptcy, arrangement, adjustment,
     composition, liquidation, disability, dissolution, or lack of authority
     (whether corporate, partnership or trust) of Borrower (or any person acting
     on Borrower's behalf), or of any other guarantor, surety to endorser of
     Borrower's Indebtedness.

     (b) Any payment by Borrower, or any other party, to Lender that is held to
     constitute a preferential transfer or a fraudulent conveyance under any
     applicable law, or any such amounts or payment which, for any reason,
     Lender is required to refund or repay to Borrower or to any other person.

     (c) Any dissolution of Borrower, or any sale, lease or transfer of all or
     any part of Borrower's assets.

     (d) Any failure of Lender to notify Guarantor of the making of additional
     loans or other extensions of credit in reliance on this Agreement.

AUTOMATIC REINSTATEMENT. This Agreement and Guarantor's obligations and
liabilities hereunder shall continue to be effective, and/or shall automatically
and retroactively be reinstated, if a release or discharge has occurred, or if
at any time, any payment or part thereof to Lender with respect to any of
Borrower's Indebtedness, is rescinded or must otherwise be restored by Lender
pursuant to any insolvency, bankruptcy, reorganization, receivership, or any
other debt relief granted to Borrower or to any other party to Borrower's
Indebtedness or any such security therefor. In the event that Lender must
rescind or restore any payment received in total or partial satisfaction of
Borrower's Indebtedness, any prior release or discharge from the terms of this
Agreement given to Guarantor shall be without effect, and this Agreement and
Guarantor's
<PAGE>   23
05-11-2001                    COMMERCIAL GUARANTY                         Page 3
Loan No 0001301                   (Continued)
================================================================================

obligations and liabilities hereunder shall automatically and retroactively be
renewed and/or reinstated and shall remain in full force and effect to the same
degree and extent as if such a release or discharge had never been granted. It
is the intention of Lender and Guarantor that Guarantor's obligations and
liabilities hereunder shall not be discharged except by Guarantor's full and
complete performance and satisfaction of such obligations and liabilities; and
then only to the extent of such performance.

REPRESENTATIONS AND WARRANTIES BY GUARANTOR. Guarantor represents and warrants
that:

     (a) Guarantor is the lawful power to own its properties and to engage in
     its business as presently conducted.

     (b) Guarantor's guaranty of Borrower's Indebtedness and the Guarantor's
     execution, delivery and performance of this Agreement are not in violation
     of any laws and will not result in a default under any contract, agreement,
     or instrument to which Guarantor is a party, or by which Guarantor or its
     property may be bound.

     (c) Guarantor has agreed and consented to execute this Agreement and to
     guarantee Borrower's Indebtedness in favor of Lender, at Borrower's request
     and not at the request of Lender.

     (d) Guarantor will receive and/or has received a direct or indirect
     material benefit from the transactions contemplated herein and/or arising
     out of Borrower's Indebtedness.

     (e) This Agreement, when executed and delivered to Lender, will constitute
     a valid, legal and binding obligation of Guarantor, enforceable in
     accordance with its terms.

     (f) Guarantor has established adequate means of obtaining information from
     Borrower on a continuing basis regarding Borrower's financial condition.

     (g) Lender has made no representations to Guarantor as to the
     creditworthiness of Borrower.

ADDITIONAL OBLIGATIONS OF GUARANTOR. So long as this Agreement remains in
effect, Guarantor has not and will not, without Lender's prior written consent,
sell, lease, assign, pledge, hypothecate, encumber, transfer, or otherwise
dispose of all or substantially all of Guarantor's assets. Guarantor agrees to
keep adequately informed of any facts, events of circumstances which might in
any way affect Guarantor's risks under this Agreement. Guarantor further agrees
that Lender shall no obligation to disclose to Guarantor any information or
material relating to Borrower or Borrower's Indebtedness.

ADDITIONAL DOCUMENTS; FINANCIAL STATEMENTS. Upon the reasonable request of
Lender, Guarantor will, at any time, and from time to time, execute and deliver
to Lender any and all such financial instruments and documents, and supply such
additional information, as may be necessary or advisable in the opinion of
Lender to obtain the full benefits of this Agreement. Guarantor further agrees
to provide Lender with such financial statements and other related information
at such frequencies and in such detail as Lender may reasonably request.

TRANSFER OF INDEBTEDNESS. This Agreement is for the benefit of Lender and for
such other person or persons as may from time to time become or be the holders
of all or any part of Borrower's Indebtedness. This Agreement shall be
transferrable and negotiable with the same force and effect and to the same
extent as Borrower's Indebtedness may be transferrable; it being understood and
agreed to by Guarantor that, upon any transfer or assignment of all or any part
of Borrower's Indebtedness, the holder of such Indebtedness shall have all of
the rights and remedies granted to Lender under this Agreement. Guarantor
further agrees that, upon any transfer of all or any portion of Borrower's
Indebtedness, Lender may transfer and deliver any and all collateral securing
repayment of such Indebtedness (including, but not limited to, any collateral
provided by Guarantor) to the transferee of such Indebtedness, and such
collateral shall secure any all of Borrower's Indebtedness in favor of such a
transferee. Guarantor additionally agrees that, after any such transfer or
assignment has taken place, Lender shall be fully discharged from any and all
liability and responsibility to Borrower and Guarantor with respect to such
collateral, and the transferee thereafter shall be vested with all the powers
and rights with respect to such collateral.

CONSENT TO PARTICIPATION. Guarantor recognizes and agrees that Lender may, from
time to time, one or more times, transfer all or any part of Borrower's
Indebtedness through sales of participation interests in such Indebtedness to
one or more third party lenders. Guarantor specifically agrees and consents to
all such transfers and assignments, and Guarantor further waives any subsequent
notice of such transfers and assignments as may be provided under Louisiana
law. Guarantor additionally agrees that the purchaser of a participation
interest in Borrower's Indebtedness will be considered as the absolute owner of
a percentage interest of such Indebtedness and that such a purchaser will have
all of the rights granted under any participation agreement governing the sale
of such a participation interest. Guarantor waives any rights of offset that
Guarantor may have against Lender and/or any purchaser of such a participation
interest, and Guarantor unconditionally agrees that either Lender or such a
purchaser may enforce Guarantor's obligations and liabilities under this
Agreement, irrespective of the failure or insolvency of Lender or any such
purchaser.

NOTICES. Any notice provided in this Agreement must be in writing and will be
considered as given on the day it is delivered by hand or deposited in the U.S.
mail, postage prepaid, addressed to the person to whom the notice is to be
given at the address shown above or at such other addresses as any party may
designate to the other in writing. If there is more than one Guarantor under
this Agreement, notice to any Guarantor shall constitute notice of all
Guarantors.

ADDITIONAL GUARANTIES. Guarantor recognizes and agrees that Guarantor may have
previously granted, and may be in the future grant, one or more additional
guaranties of Borrower's Indebtedness in favor of Lender. Should this occur,
the execution of this Agreement and any additional guaranties on the part of
Guarantor will not be construed as a cancellation of this Agreement or any of
Guarantor's additional guaranties; it being Guarantor's full intent and
agreement that all such guaranties of Borrower's Indebtedness in favor of
Lender shall remain in full force and effect and shall be cumulative in nature
and effect.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:

     AMENDMENT. No amendment, modification, consent or waiver of any provision
     of this Agreement, and no consent to any departure by Guarantor therefrom,
     shall be effective unless the same shall be writing signed by a duly
     authorized officer of Lender, and then shall be effective only as to the
     specific instance and for the specific purpose for which given.

     APPLICABLE LAW. This Guaranty has been delivered to Lender and accepted by
     Lender in the State of Louisiana. This Guaranty shall be governed by and
     construed in accordance with the laws of the State of Louisiana.

     CAPTION HEADINGS. Caption headings of the sections of this Agreement are
     for convenience purposes only and are not to be used to interpret or to
     define their provisions. In this Agreement, whenever the context so
     requires, the singular includes the plural and the plural also includes the
     singular.

     SEVERABILITY. If any provision of this Agreement is held to be illegal,
     invalid or unenforceable under present or future laws effective during the
     term hereof, such provision shall be full severable. This Agreement shall
     be construed and enforceable as if the illegal, invalid or unenforceable
     provision had never comprised a part of it, and the remaining provisions of
     this Agreement shall remain in full force and effect and shall not be
     affected by the illegal, invalid or unenforceable provision or by its
     severance herefrom. Furthermore, in lieu of such illegal, invalid or
     unenforceable provision, there shall be added automatically as part of this
     Agreement, a provision as similar in terms to such illegal, invalid or
     unenforceable provision as may be possible and legal, valid and
     enforceable.

     SUCCESSORS AND ASSIGNS BOUND. Guarantor's obligations and liabilities under
     this Agreement shall be binding upon Guarantor's successors, heirs,
     legatees, devisees, administrators, executors and assigns.

     WAIVE JURY. Guarantor and Lender hereby waive the right to any jury trial
     in any action, proceeding, or counterclaim brought by either against the
     other.

EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED. NO
FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS
GUARANTY IS DATED MAY 11, 2001.

GUARANTOR:

[X] /s/ Lana Hingle Stockstill
----------------------------------------------
    LANA HINGLE STOCKSTILL (SSN: ###-##-####)

================================================================================
<PAGE>   24
         [REGIONS BANK LOGO]

May 11, 2001

William J. Blackwell
Torch Offshore, L.L.C.
401 Whitney Avenue, Suite 400
Gretna, LA 70056

Dear Mr. Blackwell:

Regions Bank grants a waiver on both the Eagle Reel Loan and the Working
Capital Line (applicable to the renewal dated 5-11-01 through 11-12-01) for the
following loan covenants through January 1, 2002:

(1) Maximum debt to Tangible Net Worth of 2 to 1 (Reel) and 3 to 1 (Line).

(2) Minimum debt service ratio for a trailing 4 quarter period of not less than
    1.2 computed as of the end of each quarter.

For the purpose of complying with the requirement that Torch maintain a minimum
tangible net worth of $10 million, Regions Bank does include in the definition
of net worth the preferred stock issuance of $5.3 million.

If you need any further assistance, please call me at 584-1357.

Sincerely,

/s/ Jorge E. Goris

Jorge E. Goris
Senior Vice President

  Post Office Box 30280  New Orleans, Louisiana 70190  Telephone 504 587-1888<PAGE>

                                                                    EXHIBIT 10.1

                             SHAREHOLDERS' AGREEMENT

                  This SHAREHOLDERS'  AGREEMENT (this "Agreement") is made as of
December 22, 1999, by and among Max Re Capital Ltd., a company  organized  under
the laws of Bermuda (the "Company"), Max Re Ltd., an insurance company organized
under the laws of Bermuda ("Max Re"), and each of the other  signatories to this
Agreement.  Each of the  shareholders  of the  Company  that  is,  or  hereafter
becomes,  bound by this  Agreement  and each of their  respective  successors or
assignees of their rights  hereunder,  are  sometimes  collectively  referred to
herein as the "Shareholders" and each individually as a "Shareholder."

1.       Certain Definitions.
         -------------------

         "Affiliate"   of  any  Person  means  any  other  Person   controlling,
controlled by or under common control with such particular  Person.  In the case
of a natural Person,  his Affiliates  include members of such Person's immediate
family,  natural lineal  descendants of such Person or a trust for the exclusive
benefit of such Person and his immediate family and natural lineal  descendants.
For the purposes of Section 2(c) herein and with respect to Moore Holdings,  the
term  Affiliate  includes  the  members of Moore  Holdings,  including  upon the
withdrawal  of any such member from Moore  Holdings,  and with respect to Cap Z,
the term Affiliate includes its limited partners or any partners, principals, or
other professionals of Cap Z or its Affiliates.

         "Bermuda Monetary Authority" means that quasi-governmental authority of
similar name in Bermuda and, where applicable, includes any Bermuda governmental
authority, department or agency that performs similar functions.

         "Business Day" means a day on which banks are open for ordinary banking
business in both New York City and Hamilton, Bermuda.

         "Cap Z" means  Capital  Z  Investments,  L.P.,  a  limited  partnership
organized under the laws of Bermuda.

         "Commission" means the U.S.  Securities and Exchange  Commission or any
other federal agency at the time administering the Securities Act.

         "Common  Shares" means the shares of the Company issued and outstanding
or to be issued as common shares,  initially having a par value $1.00 per share,
and includes a fraction of a common share.

         "Exchange  Act"  means the U.S.  Securities  Exchange  Act of 1934,  as
amended,  or any similar  federal  statute and the rules and  regulations of the
Commission thereunder, all as the same shall be in effect at the time.

         "Founding  Investors"  means Moore  Holdings and Cap Z and any of their
respective transferees under Section 2(c) hereof.
<PAGE>

         "Management  Warrants"  means the  warrants to purchase  Common  Shares
issued to Officers from time to time.

         "Management  Warrant Shares" means the Common Shares issued or issuable
pursuant to the exercise of the Management Warrants.

         "Max Re Non-Voting Common Shares" means the shares of Max Re issued and
outstanding or to be issued as non-voting common shares,  initially having a par
value $1.00 per share,  and  includes a fraction of a non-voting  common  share,
which shares may be  exchanged  for Common  Shares on a  one-to-one  basis under
certain  circumstances and subject to compliance with the Company's Bye-Laws and
the laws of Bermuda.

         "Moore  Holdings" means Moore  Holdings,  L.L.C.,  a limited  liability
company organized under the laws of the State of Delaware.

         "Officer"  means an officer of the  Company or Max Re from time to time
during the term of this Agreement.

         "Person" means an individual, a partnership,  a company, a corporation,
a limited liability company,  an association,  a joint stock company, a trust, a
joint  venture,   an   unincorporated   organization   or  a   governmental   or
quasi-governmental  entity or any  department,  agency or political  subdivision
thereof.

         "Qualified IPO" means the initial  registered public offering of Common
Shares in the United States.

         "Registrable  Securities"  means  (i) the  Common  Shares  held by each
Shareholder,  (ii) the Management Warrant Shares, (iii) the Warrant Shares, (iv)
any Common  Shares  issued or issuable  upon  exchange of the Max Re  Non-Voting
Common  Shares  and  (v)  any  Common  Shares  issued,  issuable,  exchanged  or
exchangeable  in respect of the  securities  referred to in clauses  (i),  (ii),
(iii) and (iv) above upon any stock split, stock dividend,  recapitalization  or
similar event; provided,  however, that Registrable Securities shall not include
               --------   -------
any securities referred to in clauses (i), (ii), (iii), (iv) or (v) above if (x)
the holder of such securities,  with the exception of the Founding Investors and
Western General, may resell such Registrable  Securities pursuant to Rule 144(k)
under the Securities  Act, (y) the sale of such  securities has been  registered
pursuant  to the  Securities  Act or (z) the  Registrable  Securities  have been
transferred in a transaction in which  registration  rights are not  transferred
pursuant to Section 2 hereof.

         "Register,"  "registered"  and  "registration"  refer to a registration
effected by preparing and filing a Registration Statement in compliance with the
Securities  Act, and the  declaration or ordering of the  effectiveness  of such
Registration Statement.

         "Registration  Expenses"  shall have the meaning set forth in Section 8
hereof.

         "Securities Act" means the U.S.  Securities Act of 1933, as amended, or
any similar  federal  statute and the rules and  regulations  of the  Commission
thereunder, all as the same shall be in effect at the time.

                                       2
<PAGE>

         "Selling Expenses" means all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Shareholders and the costs of any accountants, counsel or other experts
retained by the Shareholders.

         "Transfer"  means to offer,  sell,  assign  or  otherwise  transfer  an
interest,  in whole or in  part,  whether  voluntarily  or  involuntarily  or by
operation of law or at a judicial sale or  otherwise;  provided,  however,  that
                                                       --------   -------
Transfer  shall  not  include  the bona fide  pledge of Common  Shares or Max Re
Non-Voting Common Shares in connection with a loan by a financial institution or
any transfer  back to the pledgor by the pledgee of such Common Shares or Max Re
Non-Voting Common Shares following the termination of any such bona fide pledge.

         "Warrants"  means the warrants issued to the Founding  Investors on the
date hereof or at any time hereafter.

         "Warrant  Shares"  means the number of Common Shares into which the Max
Re Non-Voting Common Shares issued or issuable upon exercise of the Warrants may
be exchanged.

         "Western  General"  means  Western  General  Insurance  Ltd., a Bermuda
insurance company, and any of its transferees under Section 2(c) hereof.

         "Western General Warrants" means the warrants issued to Western General
for the purchase of Common Shares on the date hereof or at any time hereafter.

         "$" means the legal tender of the United States of America.

2.       Transfer Restrictions.
         ---------------------

     (a)    General Restrictions.   A   Shareholder   shall  not   Transfer  its
            --------------------
Registrable  Securities,  Max Re Non-Voting Common Shares,  Management Warrants,
Western  General  Warrants or Warrants  except in compliance with the Securities
Act or an  exemption  therefrom  and  except  in  compliance  with any  required
approval of the Bermuda Monetary  Authority and in accordance with the following
terms and conditions:

            (i)    At least 30  calendar  days prior to making any  Transfer  of
Registrable  Securities,  Max Re Non-Voting Common Shares,  Management Warrants,
Western  General  Warrants  or  Warrants  such  transferring   Shareholder  (the
"Transferring Shareholder") shall deliver a written notice (each such notice, an
"Offer  Notice") to the Company and each  Founding  Investor.  The Offer  Notice
shall  disclose  in  reasonable   detail  the  proposed  number  of  Registrable
Securities,  Max Re  Non-Voting  Common  Shares,  Management  Warrants,  Western
General Warrants or Warrants to be transferred  (the "Transfer  Securities") and
the proposed terms and conditions of the Transfer  (including the proposed price
at which the  Transfer  Securities  are to be  transferred);  provided  that the
                                                              --------
purchase  price  specified  in any Offer  Notice shall be payable in cash at the
closing of the transaction.

            (ii)   Prior to any Transfer, the Company together with the Founding
Investors and any Persons  designated by a Founding  Investor  shall be entitled
(without  obligation to exercise such entitlement) to purchase all, but not less
than all, of the Transfer Securities, at the price and on the terms specified in

                                       3
<PAGE>

the Offer Notice by  delivering  written  notice of such  election (an "Election
Notice") to the Transferring  Shareholder as soon as practicable but in no event
later than ten (10)  Business Days after  delivery of the Offer  Notice.  If the
Company,  the Founding Investors or any Person designated by a Founding Investor
elect  to  purchase  the  Transfer  Securities,  the  Transfer  of any  Transfer
Securities  shall be consummated  as soon as  practicable  after delivery of the
Election  Notice,  but in no event later than ten (10)  Business  Days after the
delivery of the Election Notice.  If more than one of the Founding  Investors or
their  respective   designees  make  a  firm  offer  to  purchase  the  Transfer
Securities,  each such Founding Investor or their respective  designees shall be
permitted to purchase  the  Founder's  Pro Rata Share (as defined  below) of the
Transfer  Securities  that the Company has indicated  that it will not purchase.
Each  Founding  Investor's  "Founder's  Pro Rata Share" shall be based upon such
Founding Investor's  proportionate  beneficial  ownership of Common Shares, on a
fully  diluted and  converted  basis,  in relation to the total number of Common
Shares,  on a fully  diluted  and  converted  basis,  beneficially  owned by the
Founding Investors.

            (iii)  Unless  all  of  the  Transfer   Securities  proposed  to  be
transferred  in the Offer  Notice are to be acquired  by the Company  and/or the
Founding Investors,  the Transferring Shareholder may, no later than 90 calendar
days  after the  expiration  of the  election  period,  Transfer  such  Transfer
Securities  to one or more  third  parties at a price no less than the price per
share  specified  in the  Offer  Notice  and on other  terms no more  materially
favorable  to the  transferees  thereof  than  offered  to the  Company  and the
Founding Investors in the Offer Notice. It shall be a condition precedent to the
consummation  of any Transfer of Transfer  Securities to a Person not a party to
this  Agreement  that such  third  party  execute  and be bound by the terms and
conditions of this Agreement.  Any Transfer  Securities not  Transferred  within
such 90-day period shall be re-offered  (without  obligation to purchase) to the
Company and the Founding  Investors under this Section 2 prior to any subsequent
Transfer pursuant to the terms of this Section 2.

     (b)      Other Restrictions.
              ------------------

              (i)   In   connection   with  the  Transfer  of  any   Registrable
Securities,  Max Re  Non-Voting  Common  Shares,  Management  Warrants,  Western
General  Warrants or Warrants  (other than a Transfer  described in Section 2(c)
below),  such Shareholder shall deliver written notice to the Company and, where
concerning  any share or warrant of Max Re, to Max Re  describing  in reasonable
detail the Transfer or proposed Transfer, together with, at the Company's or Max
Re's  request,  an  opinion  of  counsel  which  (to the  Company's  or Max Re's
reasonable  satisfaction)  is  knowledgeable  in  securities  law matters to the
effect that such Transfer of Registrable  Securities,  Max Re Non-Voting  Common
Shares,  Management  Warrants,  Western  General  Warrants  or  Warrants  may be
effected without registration of such Registrable Securities,  Max Re Non-Voting
Common Shares,  Management Warrants or Warrants,  Western General Warrants under
the  Securities  Act  and a  list  of  affiliates  or  related  parties  of  the
transferee.

              (ii)  The Company or Max Re, as the case may be, shall deliver new
certificates  for  Registrable  Securities,  Max Re  Non-Voting  Common  Shares,
Management Warrants,  Western General Warrants or Warrants which do not bear the
Securities  Act legend  set forth in Section  2(d)  hereof  promptly  upon their
Transfer if such Transfer is exempt from  registration  under the Securities Act

                                       4
<PAGE>

pursuant  to Rule 144 under such act and, if  requested,  the Company and Max Re
shall have received an opinion of counsel to that effect.

              (iii) Any Transfer of  Registrable  Securities,  Max Re Non-Voting
Common Shares,  Management  Warrants,  Western General Warrants or Warrants that
violates the  provisions  of this Section 2 shall not be recorded by the Company
or Max Re, as the case may be, or any of their  agents and shall be deemed  void
ab initio.
-- ------

     (c)      Permitted Transfers.      The   restrictions  set  forth  in  this
              -------------------
Section 2 shall not apply to any  Transfer  of  Registrable  Securities,  Max Re
Non-Voting  Common Shares,  Management  Warrants,  Western  General  Warrants or
Warrants  by  a  Shareholder  to  its  Affiliates  (a  "Permitted  Transferee");
provided, assuming compliance with any required approval of the Bermuda Monetary
--------
Authority, that the provisions of this Agreement shall continue to be applicable
to the  Registrable  Securities,  Max Re Non-Voting  Common  Shares,  Management
Warrants,  Western General Warrants or Warrants after any Transfer above and the
transferees of such  Registrable  Securities,  Max Re Non-Voting  Common Shares,
Management Warrants, Western General Warrants or Warrants shall agree in writing
to be  bound  by the  provisions  of  this  Agreement  and  shall  be  deemed  a
"Shareholder"  for  purposes  of this  Agreement;  provided,  further  that if a
                                                   --------   -------
Permitted Transferee ceases to be an Affiliate of the Transferring  Shareholder,
the  Registrable  Securities,   Max  Re  Non-Voting  Common  Shares,  Management
Warrants,  Western  General  Warrants or Warrants  held by such Person  shall be
deemed to have been Transferred and shall be subject to the provision of Section
2(a) upon  discovery by the Company of such change in status.  Upon the Transfer
of Registrable Securities, Max Re Non-Voting Common Shares, Management Warrants,
Western  General  Warrants  or  Warrants  pursuant  to this  Section  2(c)  each
transferee will deliver a written notice to the Company or, where concerning any
share or warrant of Max Re, Max Re,  which  notice will  disclose in  reasonable
detail the  identity of such  transferee.

     (d)      Legend.   Certificates evidencing Registrable  Securities,  Max Re
              ------
Non-Voting  Common Shares,  Management  Warrants,  Western General  Warrants and
Warrants shall bear the following legend:

                  "THE SECURITIES  EVIDENCED BY THIS  CERTIFICATE  HAVE NOT BEEN
                  REGISTERED UNDER THE UNITED STATES  SECURITIES ACT OF 1933, AS
                  AMENDED,  AND  MAY  NOT  BE  SOLD,  TRANSFERRED,  ASSIGNED  OR
                  HYPOTHECATED   UNLESS  THERE  IS  AN  EFFECTIVE   REGISTRATION
                  STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS
                  MADE IN ACCORDANCE  WITH RULE 144 UNDER THE  SECURITIES ACT OF
                  1933,  AS AMENDED,  OR THE  COMPANY AT ITS OPTION  RECEIVES AN
                  OPINION  OF   COUNSEL  TO  THE  HOLDER  OF  THESE   SECURITIES
                  REASONABLY  SATISFACTORY  TO THE  COMPANY,  STATING  THAT SUCH
                  SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
                  REGISTRATION AND PROSPECTUS DELIVERY  REQUIREMENTS OF SUCH ACT
                  AND UNLESS, WHERE APPLICABLE,  HAS RECEIVED THE PRIOR APPROVAL
                  OF THE BERMUDA MONETARY AUTHORITY.

                                       5
<PAGE>

                  IN ADDITION,  THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE
                  SUBJECT  TO CERTAIN  TRANSFER  RESTRICTIONS  IN THE  COMPANY'S
                  BYE-LAWS AND PURSUANT TO A SHAREHOLDERS' AGREEMENT DATED AS OF
                  DECEMBER 22, 1999 AMONG THE  COMPANY,  MAX RE LTD. AND CERTAIN
                  OF THE  COMPANY'S  SHAREHOLDERS.  A COPY OF SUCH  BYE-LAWS AND
                  SHAREHOLDERS'  AGREEMENT  WILL BE FURNISHED  WITHOUT CHARGE BY
                  THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."

If any  Registrable  Securities,  Max Re Non-Voting  Common  Shares,  Management
Warrants, Western General Warrants or Warrants become eligible for sale pursuant
to Rule 144(k) under the Securities  Act, the Company or Max Re, as the case may
be, shall, upon the request of a holder of such Registrable  Securities,  Max Re
Non-Voting  Common Shares,  Management  Warrants,  Western  General  Warrants or
Warrants and delivery of an opinion of counsel  reasonably  satisfactory  to the
Company or Max Re, issue new certificates for such Registrable  Securities,  Max
Re  Non-Voting  Common  Shares (if  applicable),  Management  Warrants,  Western
General  Warrants or Warrants  not bearing the  Securities  Act legend set forth
above.

3.       Drag-Along Rights.
         -----------------

         (a) Right to Require Sale. Notwithstanding  any other provision hereof,
             ---------------------
if one or more Shareholders (such Shareholders,  together with their Affiliates,
the  "Selling  Shareholder(s)")  proposes to enter into an  agreement to sell or
otherwise  dispose of for value Common Shares held by such Selling  Shareholders
representing eighty percent (80%) of the issued and outstanding Common Shares to
a third person who is not an affiliate  (any such party,  a "Third  Party") in a
bona fide transaction pursuant to which the Third Party will purchase all of the
Common Shares on a fully diluted and converted  basis (any such  transaction,  a
"Drag-Along Sale"), then each other Shareholder (the "Drag-Along  Shareholders")
hereby  agrees to sell to such  Third  Party,  upon the  demand of such  Selling
Shareholders,  all of the Common Shares and securities exercisable,  convertible
into or exchangeable  for Common Shares held by such Drag-Along  Shareholders on
the date of the Drag-Along  Notice (as defined in Section 3(b) below) and on the
same  terms and  conditions  as has  agreed  with such  Third  Party;  provided,
                                                                       --------
however,  that in negotiating  such  Drag-Along  Sale, the Selling  Shareholders
-------
shall  provide (i) that the only  representations  and  warranties  or covenants
which any Drag-Along  Shareholder  shall be required to make in connection  with
the Drag-Along Sale are  representations  and warranties with respect to its own
ownership of the shares to be sold by it and its ability to convey title thereto
free and clear of liens,  encumbrances or adverse claims,  its due organization,
its  due  authorization,  execution  and  delivery  of the  definitive  purchase
agreement (if applicable),  enforceability of such purchase agreement against it
and no conflict of it with such purchase  agreement,  (ii) that the liability of
any Drag-Along  Shareholder  with respect to any  representations  or warranties
made in connection  with the  Drag-Along  Sale is the several  liability of such
Drag-Along  Sharholder  (and not any other  person) and that such  liability  is
limited  to  the  amount  of  proceeds  actually  received  by  such  Drag-Along

                                       6
<PAGE>

Shareholder in the Drag-Along Sale, and (iii) no Drag-Along Shareholder shall be
required  to  provide  any  indemnification  to  anyone in  connection  with the
Drag-Along Sale (other than an  indemnification  for damages  resulting from the
breach  of  any   representations   or  warranties   made  by  such   Drag-Along
Shareholder);  provided,  however,  that  the  foregoing  shall  not  limit  the
               --------   -------
obligations of such  Drag-Along  Shareholder,  and such  Drag-Along  Shareholder
hereby  expressly  agrees to be bound by and be subject  to, any escrow or other
holdback  arrangement (on a pro rata basis based on the amount of shares sold by
such  Drag-Along  Shareholder in proportion to all shares of the Company sold in
such Drag-Along  Sale) provided for in the agreement  relating to the Drag-Along
Sale.

         (b)  Drag-Along Notice.  Prior to making any  Drag-Along  Sale,  if the
              -----------------
Selling Shareholder(s) elects to exercise the rights afforded under this Section
3, the Selling  Shareholder(s)  shall provide the Drag-Along  Shareholders  with
written  notice (the  "Drag-Along  Notice") not less than ten (10) days prior to
the proposed  date of the  Drag-Along  Sale (the  "Drag-Along  Sale Date").  The
Drag-Along  Notice shall set forth: (i) the name and address of the Third Party;
(ii) the proposed amount and form of  consideration to be paid per share and the
terms and conditions of payment offered by the Third Party; (iii) the Drag-Along
Sale Date; and (iv) confirmation that the Third Party has agreed to purchase the
Drag-Along Shareholder's shares in accordance with the terms hereof.

         (c)  Delivery of Certificates.  On  the  Drag-Along   Sale  Date,  each
              ------------------------
Drag-Along Shareholder shall deliver all of the certificates for such Drag-Along
Shareholder's shares, duly endorsed for transfer with signatures guaranteed,  to
such Third Party in the manner and at the address  indicated  in the  Drag-Along
Notice  against  delivery of  immediately  available  funds in the amount of the
purchase price for such shares.

         (d)  Costs and Fees.   The  Selling  Shareholders  shall bear all costs
              --------------
and fees incurred in connection with a Drag-Along  Sale except each  Shareholder
shall bear the costs and fees of its own independent  advisors.  The Company and
Max Re  shall  have no  obligation  to bear  any  costs  and  fees  incurred  in
connection with a Drag-Along Sale or otherwise under this Section 3.

4.       Compliance with Bermuda Law.
         ---------------------------

        (a)     The  Company  and Max Re  shall  have no  obligation  under  the
provisions  of  Sections  5, 6, 7,  8, 9 and 10  hereof  unless  and  until  all
approvals  required  from the Bermuda  Monetary  Authority  are received and the
requirements of any of the exclusions or exemptions applicable to the provisions
of Section 39 of the Bermuda  Companies  Act 1981,  as  amended,  are able to be
satisfied and are satisfied so as to permit  compliance with such Section 39. At
appropriate  times  each of the  Company  and Max Re shall use its  commercially
reasonable  efforts to obtain any such  approvals.  With respect to such Section
39, each Shareholder shall use its commercially  reasonable efforts where formal
meetings  or written  resolutions  of the  shareholders  or other  action may be
appropriate  to waive or approve the  financial  assistance as described in such
Section 39 and related provisions.

        (b)     The  provisions  of  Section  5, 6, 7, 8, 9 and 10 shall be read
subject to the provisions of Section 4(a) hereinabove.

                                       7
<PAGE>

5.       Demand Registrations.
         --------------------

        (a)      Requests for Registration.

                (i)     Each of the Founding  Investors and Western  General may
request, at any time after the earlier to occur of (i) the second anniversary of
this  Agreement  or (ii) the date that is one hundred  eighty (180) days after a
Qualified IPO, to have all or part of its Registrable  Securities  registered on
Form  S-1,  or  any  similar  long-form   registration   statement   ("Long-Form
Registration")  or, if available,  on Form S-2 or S-3, or any similar short-form
registration statement ("Short-Form Registration"). Each request for a Long-Form
Demand Registration (as defined below) shall have an aggregate offering price of
at least $50  million,  inclusive  of  Registrable  Securities  included in such
Long-Form Demand  Registration  pursuant to Section 6 hereof,  and shall specify
the approximate number of Registrable Securities requested to be registered, the
proposed manner of disposition and the proposed underwriter,  if any. Within ten
(10) Business  Days after  receipt of any such  request,  the Company shall give
written notice of such requested  registration  to the other  Shareholders  and,
subject  to  Section  5(b)  below,   shall  include  in  such  registration  all
Registrable  Securities  with respect to which the Company has received  written
requests for inclusion  therein within 15 calendar days after the receipt of the
Company's  notice.   All  registrations   requested   pursuant  to  a  Long-Form
Registration are referred to herein as "Long-Form Demand Registrations"; and all
other  registrations  requested  pursuant to this paragraph 5(a) are referred to
herein as a "Short-Form Demand  Registrations";  Long-Form Demand  Registrations
and Short-Form Demand  Registrations are sometimes  collectively  referred to as
"Demand Registrations." Each of the Founding Investors and Western General shall
each be entitled to request  three (3)  Long-Form  Demand  Registrations  and an
unlimited number of Short-Form  Demand  Registrations for which the Company will
pay all  Registration  Expenses as set forth in Section 9 hereof;  provided that
                                                                   --------
the  Company  shall  not be  obligated  to  register  more  than two (2)  Demand
Registrations in any 12-month period. A registration  will not count as a Demand
Registration until it has been declared effective by the Commission.

                (ii)    Holders of at least 20% of the total Common  Shares on a
fully diluted and converted  basis shall,  as a group, at any time and from time
to time  after  the  earlier  to occur  of (i) the  second  anniversary  of this
Agreement  or (ii)  the date  that is one  hundred  eighty  (180)  days  after a
Qualified IPO have the right to request a Demand Registration. The request for a
Demand  Registration  pursuant to this Section  5(a)(ii) shall have an aggregate
offering price of at least $50 million and shall specify the approximate  number
of  Registrable  Securities  requested  to  be  registered,   and  the  proposed
underwriter. Within ten (10) days after receipt of any such request, the Company
shall give written notice of such  requested  registration  to all  Shareholders
and,  subject to Section  5(b) below,  shall  include in such  registration  all
Registrable  Securities  with respect to which the Company has received  written
requests for inclusion  therein  within 15 days after the receipt of the Company
notice.

                (iii)   Upon receipt of a request for a Demand  Registration  (a
"Demand Request")  pursuant to Sections 5(a)(i) or 5(a)(ii),  the Company shall,
to the extent requested,  cause to be filed, within the later of (x) 90 days (or
45 days with respect to any Short-Form  Registration) of the date of delivery to
the Company of the Demand Request,  or (y) 180 days after the  effectiveness  of
the most recently filed  Registration  Statement by the Company,  a Registration
Statement  covering such  Registrable  Securities  which the Company has been so

                                       8
<PAGE>

requested to register,  providing for the registration  under the Securities Act
of such Registrable Securities to the extent necessary to permit the disposition
of such  Registrable  Securities  so to be  registered  in  accordance  with the
intended method of distribution specified in such Demand Request.

(b)      Priority on Demand Registrations.
         --------------------------------

         The Company shall not include in any Demand Registration any securities
that are not  Registrable  Securities  without the prior written  consent of the
demanding Shareholders. If a Demand Registration is an underwritten offering and
the managing  underwriters  advise the Company in writing that in their  opinion
the  number  of  Registrable  Securities  and,  if  permitted  hereunder,  other
securities  requested  to be  included  in such  offering  exceeds the number of
Registrable  Securities and other securities,  if any, which can be sold therein
without  adversely  affecting the  marketability  of the offering (the "Offering
Quantity"),  the Company  shall include in such  registration  securities in the
following priority:

        (i)     first, before including any securities which are not Registrable
Securities,  the  Company  shall  include  all  of  the  Registrable  Securities
requested  to be included by the  demanding  Shareholders,  each of the Founding
Investors  (if other than a demanding  Shareholder),  Western  General (if other
than a demanding  Shareholder)  and  Officers,  and if such  number  exceeds the
Offering  Quantity,  then the Company shall include only each of such  demanding
Shareholder's,  Founding  Investor's  (if other than a  demanding  Shareholder),
Western General's (if other than a demanding Shareholder) and Officer's pro rata
share of the Offering  Quantity,  based on the number of Registrable  Securities
then  beneficially  owned on a fully  converted  basis by each of the  demanding
Shareholders, Founding Investors, Western General and Officers, respectively;

        (ii)    second, to the extent (and only to the extent) that the Offering
Quantity  exceeds  the  aggregate  amount of  Registrable  Securities  which are
requested to be included in such registration, the Company shall include in such
registration  Registrable  Securities  requested  to be  included  by the  other
Shareholders,  and if such number  exceeds the  Offering  Quantity,  the Company
shall  include  only such other  Shareholders'  pro rata  share of the  Offering
Quantity,  based on the amount of Registrable  Securities  beneficially owned by
such other Shareholders; and

        (iii)   third,  to the extent (and only to the extent) that the Offering
Quantity  exceeds  the  aggregate  amount of  Registrable  Securities  which are
requested to be included in such registration, the Company shall include in such
registration any other securities requested to be included in the offering.

        (c)     Restrictions on Demand Registrations.
                ------------------------------------

                The  Company  may  postpone  upon one (1)  occasion  during  any
365-day  period  for  up to 120  days  the  filing  or  the  effectiveness  of a
Registration  Statement  for a Demand  Registration  if the  Company's  board of
directors  determines in its sole discretion that such Demand Registration would
reasonably be expected to have a material adverse effect on any proposal or plan
by the Company or any of its subsidiaries to engage in any acquisition of assets

                                       9
<PAGE>

(other than in the ordinary  course of  business) or any merger,  consolidation,
tender offer or similar transaction;  provided, however, that in such event, the
                                      --------  -------
party  requesting  such Demand  Registration  shall be entitled to withdraw such
request at any time during the 90-day  period and, if such request is withdrawn,
such  Demand  Registration  shall  not  count  as one of  the  permitted  Demand
Registrations  hereunder and the Company shall pay all Registration Expenses (as
set forth in Section 8) in connection with such  registration.

        (d)     Selection of Underwriters.
                -------------------------

                (i)     The  Founding  Investors  shall have the right to select
the investment  banker(s) and managing  underwriters for any Demand Registration
to administer an offering pursuant to Section 5(a)(i),  subject to the Company's
approval, which approval shall not be unreasonably withheld or delayed.

                (ii)    The  Shareholders  initiating  any  Demand  Registration
pursuant to Section 5(a)(ii) hereof that hold a majority of the Common Shares to
be so  registered  shall have the right to select the  investment  banker(s) and
managing  underwriter(s)  to administer  the offering,  subject to the Company's
approval,  which approval  shall not be  unreasonably  withheld or delayed.

        (e)     Other Registration Rights.
                -------------------------

                Except as provided  in this  Agreement,  the  Company  shall not
grant to any persons  the right to request  the  Company to register  any equity
securities of the Company, or any securities convertible or exchangeable into or
exercisable  for such  securities,  without  the prior  written  consent of both
Founding Investors.

6.      Piggyback Registrations.
        -----------------------

        (a)     Right to Piggyback.
                ------------------

                After  the  consummation  of a  Qualified  IPO,  if the  Company
proposes to  register  any of its equity  securities  under the  Securities  Act
(other than  pursuant to a  registration  on Form S-4 or S-8 or any successor or
similar  forms)  and  the  registration  form to be  used  may be  used  for the
registration of Registrable Securities (a "Piggyback Registration"),  whether or
not for sale for its own account, the Company will give prompt written notice to
all the  Shareholders of its intention to effect such a registration  and shall,
subject to 6(b),  include in such  registration all Registrable  Securities with
respect to which the Company has received written requests for inclusion therein
within 30 days after the receipt of the Company's notice.

        (b)     Priority on Primary Registrations.
                ---------------------------------

                If  a  Piggyback   Registration  is  an   underwritten   primary
registration on behalf of the Company,  and the managing underwriter advises the
Company in writing (with a copy to each party hereto requesting  registration of
Registrable  Securities) that in its opinion the number of securities  requested
to be included in such registration exceeds the number which can be sold in such
offering  without  adversely  affecting the  marketability of such offering (the

                                       10
<PAGE>

"Company  Offering  Quantity"),  the Company will  include in such  registration
securities in the following priority:

                (i)     first, the securities the Company proposes to sell;

                (ii)    second,  before  including any securities  which are not
Registrable  Securities,  the Company shall  include (x) all of the  Registrable
Securities  requested to be included by the Founding Investors,  Western General
and Officers and (y) to the extent that after the  application of clause (x) the
number of  Registrable  Securities  exceeds the Offering  Quantity,  the Company
shall include only such Founding  Investor's,  Western General's and each of the
Officer's  pro rata  share of the  Offering  Quantity,  based on the  number  of
Registrable  Securities  then  beneficially  owned on a fully converted basis by
each of the Founding Investors, Western General and Officers, respectively;

                (iii)   third,  to the extent (and only to the extent)  that the
Offering  Quantity exceeds the aggregate amount of Registrable  Securities which
are requested to be included in such registration,  the Company shall include in
such registration  Registrable  Securities requested to be included by the other
Shareholders,  and if such number  exceeds the  Offering  Quantity,  the Company
shall  include  only such other  Shareholders'  pro rata  share of the  Offering
Quantity based on the amount of Registrable  Securities  beneficially owned on a
fully converted basis by such other Shareholders; and

                (iv)    fourth,  to the extent (and only to the extent) that the
Company Offering Quantity exceeds the aggregate amount of Registrable Securities
which are  requested  to be included  in such  registration,  the Company  shall
include in such  registration any other  securities  requested to be included in
the offering.

        (c)     Other Registrations.
                -------------------

                If the Company has  previously  filed a  Registration  Statement
with respect to Registrable Securities pursuant to Section 5 or pursuant to this
Section  6,  and if  such  previous  registration  has  not  been  withdrawn  or
abandoned,  the  Company  shall  not  file or  cause to be  effected  any  other
registration  of any of its  equity  securities  or  securities  convertible  or
exchangeable  into or exercisable for its equity securities under the Securities
Act (except on Form S-4 or S-8 or any successor form), whether on its own behalf
or at the request of any Shareholder or Shareholders of such securities, until a
period of at least 90 days has elapsed from the effective  date of such previous
registration.

7.       Holdback Agreements.
         -------------------

        (a)     To  the  extent  not  inconsistent  with  applicable  law,  each
Shareholder  agrees  not to effect any public  sale or  distribution  (including
sales pursuant to Rule 144 under the Securities Act) of equity securities of the
Company,  or any securities,  options or rights convertible into or exchangeable
or  exercisable  for such  securities,  during  the seven  days prior to and the
180-day period  beginning on the effective date of an initial public offering of
the Company's securities or the 90-day period beginning on the effective date of
a public offering of the Company's  Common Shares effected  pursuant to a Demand
Request,  unless  the  underwriters  managing  the  registered  public  offering
otherwise agree;  provided that such restrictions  shall not be more restrictive
                  --------
                                       11
<PAGE>

in duration or scope than restrictions  imposed on (i) any Person which has been
granted registration rights by the Company,  (ii) any officer or director of the
Company,  or (iii) any 5% Shareholder of Common Shares;  and provided,  further,
                                                             --------
that nothing herein shall restrict, directly or indirectly,

        (i)     any bona fide pledge of Common Shares or the subsequent Transfer
upon default in connection with any such pledge,

        (ii)    subject to obtaining  any required  Bermuda  Monetary  Authority
approval, any charitable contribution; or

        (iii)   the  disposition of freely tradable Common Shares that have been
acquired by the Shareholder in open market transactions.

     (b)    In addition,  each Shareholder may Transfer Registrable  Securities,
Max  Re  Non-Voting  Common  Shares,  Management  Warrants  or  Warrants  to its
Affiliates  so long as such  Person  agrees  to be  bound  by the  terms of this
Agreement and such is in compliance with any required Bermuda Monetary Authority
approval.

     (c)    The Company agrees (i) not to effect any public sale or distribution
of its equity securities,  or any securities convertible into or exchangeable or
exercisable for such  securities,  during the seven days prior to and during the
180-day  period  beginning  on the  effective  date of any  underwritten  Demand
Registration or any underwritten  Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-4 or S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise  agree,  and (ii) to cause each  holder of its Common  Shares,  or any
securities  convertible  into or  exchangeable or exercisable for Common Shares,
that  were  purchased  from  the  Company  at any  time  after  the date of this
Agreement  (other than in a registered  public  offering) to agree not to effect
any public sale or  distribution  (including  sales pursuant to Rule 144) of any
such  securities  during  such  period  (except  as part  of  such  underwritten
registration,  if otherwise  permitted),  unless the  underwriters  managing the
registered public offering otherwise agree.

8.       Registration Procedures.
         -----------------------

         In connection with any Registration Statement filed pursuant to Section
5(a) or Section 6(a) herein (a "Registrant Statement"), the following provisions
shall apply:

        (a)     The Company shall furnish to each selling Shareholder,  prior to
the filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement,  if any, to the prospectus  included
therein  and shall use its  reasonable  best  efforts  to  reflect  in each such
document,  when so filed with the Commission,  such comments as the Shareholders
reasonably may propose.

        (b)     The  Company  shall  prepare and within 90 days (or 45 days with
respect to any Short-Form Registration) after the end of the period within which
requests for registration may be given to the Company file with the Commission a
Registration   Statement  with  respect  to  such  Registrable   Securities  and
thereafter use its commercially  reasonable  efforts to cause such  Registration
Statement to become effective.

                                       12
<PAGE>

        (c)     The  Company  shall  prepare and file with the  Commission  such
amendments  and  supplements to such  Registration  Statement and the prospectus
used in  connection  therewith  as may be  necessary  to keep such  Registration
Statement  effective  for a period of either (i) not less than 180 days (subject
to  extension  pursuant  to  Section  8(p)) or, if such  Registration  Statement
relates to an  underwritten  offering,  such longer  period as in the opinion of
counsel for the  underwriters a prospectus is required by law to be delivered in
connection  with sales of Registrable  Securities by an underwriter or dealer or
(ii) such shorter period as will terminate when all of the securities covered by
such  Registration  Statement  have  been  disposed  of in  accordance  with the
intended  methods of disposition  by the seller or sellers  thereof set forth in
such  Registration  Statement (but in any event not before the expiration of any
longer  period  required  under the  Securities  Act),  and to  comply  with the
provisions  of  the  Securities  Act  with  respect  to the  disposition  of all
securities covered by such Registration Statement until such time as all of such
securities  have been  disposed of in  accordance  with the intended  methods of
disposition  by the seller or  sellers  thereof  set forth in such  Registration
Statement.

        (d)     The  Company  shall  advise the  selling  Shareholders,  and, if
requested by such  Shareholders,  confirm such advice in writing  (which  advice
pursuant to clauses (ii) - (v) hereof shall be  accompanied by an instruction to
suspend the use of the prospectus until the requisite changes have been made):

                (i)     when  the  Registration   Statement  and  any  amendment
thereto has been filed with the Commission and when the  Registration  Statement
or any post effective amendment thereto has become effective;

                (ii)    of any  request  by the  Commission  for  amendments  or
supplements to the Registration  Statement or the prospectus included therein or
for additional information;

                (iii)   of the  issuance  by the  Commission  of any stop  order
suspending the effectiveness of the Registration  Statement or the initiation of
any proceedings for that purpose;

                (iv)    of the receipt by the Company of any  notification  with
respect to the suspension of the  qualification of the Common Shares for sale in
any  jurisdiction  or the  initiation or  threatening of any proceeding for such
purpose; and

                (v)     of the  happening of any event that  requires the making
of any changes in the Registration  Statement or the prospectus or the filing of
any reports  under the Exchange  Act so that,  as of such date,  the  statements
therein are not  misleading and do not omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.

        (e)     Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section  8(d)  hereof  during the period for which the Company is
required to maintain an effective Registration Statement,  the Company shall (A)
use its commercially reasonable efforts to promptly obtain the withdrawal of any
stop order or order suspending the  effectiveness of the Registration  Statement
and (B) prepare a post-effective  amendment to the  Registration  Statement or a
supplement to the related prospectus or file any other required document as soon
as possible so that, as thereafter delivered to purchasers of the Common Shares,

                                       13
<PAGE>

the prospectus  will not include an untrue  statement of a material fact or omit
to state any material  fact  necessary to make the  statements  therein,  in the
light of the circumstances under which they were made, not misleading,  and will
comply with the Securities Act and the rules promulgated thereunder.

        (f)     The Company will furnish to each Shareholder included within the
coverage  of  the  Registration   Statement,   without  charge,  copies  of  the
Registration Statement and any amendment thereto, including financial statements
and  schedules,  and, if the  Shareholder  so requests in writing,  all exhibits
(including  those  incorporated by reference) in such number as such Shareholder
may reasonably request from time to time.

        (g)     The Company will deliver to each Shareholder included within the
coverage of the Registration  Statement,  without charge,  as many copies of the
prospectus (including each preliminary  prospectus) included in the Registration
Statement  and any  amendment  or  supplement  thereto as such  Shareholder  may
reasonably request; and the Company consents to the use of the prospectus or any
amendment or  supplement  thereto by each  Shareholder  in  connection  with the
offering  and  sale  of the  Common  Shares  covered  by the  prospectus  or any
amendment or supplement thereto.

        (h)     Prior to any public  offering of Common  Shares  pursuant to the
Registration  Statement,  the  Company  shall  use its  commercially  reasonable
efforts to register or qualify or cooperate with each Shareholder selling Common
Shares pursuant to such Registration  Statement and their respective  counsel in
connection with the  registration or  qualification of such securities for offer
and  sale  under  the  securities  laws of such  jurisdictions  as such  counsel
reasonably  requests in writing on behalf of such Shareholder and do any and all
other acts or things necessary or advisable to enable the offer and sale in such
jurisdictions  of the  Common  Shares  covered  by the  Registration  Statement;
provided, however, that the Company will not be required to qualify generally to
--------  -------
do business in any jurisdiction where it is not then so qualified or to take any
action  which would  subject it to general  service of process or to taxation in
any such jurisdiction where it is not then so subject.

        (i)     The Company shall cooperate with each  Shareholder to facilitate
the timely preparation and delivery of certificates  representing  Common Shares
to be sold  pursuant  to such  Registration  Statement  free of any  restrictive
legends and registered in such names as such  Shareholder may request in writing
prior to sales of Common Shares pursuant to the Registration Statement.

        (j)     The Company shall upon request, provide each Shareholder selling
Common Shares pursuant to such Registration  Statement with printed certificates
for its Common Shares in a form acceptable to such Shareholder.

        (k)     The  Company  shall  comply  with  all   applicable   rules  and
regulations  of  the  Commission  and  shall  make  generally  available  to its
Shareholders  as soon as  practicable  but in any event not later than  eighteen
(18) months after the effective date of the applicable Registration Statement an
earnings statement  satisfying the provisions of Section 11(a) of the Securities
Act or Rule 158 promulgated thereunder.

                                       14
<PAGE>

        (l)     The  Company  shall be  permitted  to require  each  Shareholder
selling Common Shares pursuant to the  Registration  Statement to furnish to the
Company  such  information   regarding  the   Shareholder,   the  Common  Shares
beneficially  owned by such  Shareholder and the intended method of distribution
of such Common  Shares as the Company may from time to time  reasonably  require
for inclusion in the  Registration  Statement,  and the Company may exclude from
such  registration  the Common Shares of any  Shareholder  that fails to furnish
such information within a reasonable time after receiving such request.

        (m)     The  Company   shall  enter  into  such   customary   agreements
(including,  if requested, an underwriting agreement in customary form) and take
all such other action,  if any, as  Shareholders  of a majority of Common Shares
being sold or the managing  underwriters  (if any) shall  reasonably  request in
order  to  facilitate  the   disposition  of  Common  Shares   pursuant  to  the
Registration  Statement;  provided,  however,  that the  Company  shall  have no
                          --------   -------
obligation to pay any discounts or underwriting commissions.

        (n)     The Company,  if requested by those  Shareholders  that together
hold a majority in interest of the Common  Shares  being sold,  or the  managing
underwriters (if any) in connection with the Registration  Statement,  shall use
its  commercially  reasonable  efforts  to cause (i) its  counsel  to deliver an
opinion  relating  to the  Registration  Statement  and the  Common  Shares,  in
customary  form (and  covering such matters of the type  customarily  covered by
legal opinions of such nature)  addressed to such  Shareholders and the managing
underwriters,  if any, thereof and dated the effective date of such Registration
Statement;  (ii) its officers to execute and deliver all customary documents and
certificates  requested by Shareholders of a majority of the Common Shares being
sold or the managing  underwriters  (if any); and (iii) its  independent  public
accountants  to provide a comfort  letter in customary  form (and  covering such
matters of the type customarily covered by comfort letter).

        (o)     The Company shall use its  reasonable  best efforts to cause the
Common  Shares  covered  by the  Registration  Statement  to be  listed  on each
securities exchange, if any, or NASDAQ on which similar securities issued by the
Company  are then  listed,  if so  requested  by  Shareholders  of a majority in
interest  of Common  Shares  covered by the  Registration  Statement,  or by the
managing underwriters, if any.

        (p)     The  Company  shall  make   available  for   inspection  by  any
Shareholder,  any underwriter  participating in any disposition pursuant to such
Registration  Statement and any attorney,  accountant or other agent retained by
any such Shareholder or underwriter,  all financial and other records, pertinent
corporate  documents  and  properties  of the Company,  and cause the  Company's
officers,  directors,  employees  and  independent  accountants  to  supply  all
information reasonably requested by any such Shareholder, underwriter, attorney,
accountant or agent in connection with such Registration Statement.

        (q)     No Shareholder  may  participate in any  registration  hereunder
which  is  underwritten   unless  such  Shareholder  (i)  agrees  to  sell  such
Shareholder's  Registrable  Securities on the basis provided in any underwriting
arrangements  approved by the  Shareholder  entitled  hereunder  to approve such
arrangements  (including,  without  limitation,  pursuant  to the  terms  of any
over-allotment or "green shoe" option requested by the managing  underwriter(s);
provided  that no  Shareholder  will be required to sell more than the number of
--------

                                       15
<PAGE>

Registrable  Securities that such holder has requested the Company to include in
any registration) and (ii) completes and executes all questionnaires,  powers of
attorney,  indemnities,  underwriting  agreement and other documents  reasonably
required under the terms of such underwriting arrangements.

        (r)     It shall be a  condition  precedent  to the  obligations  of the
Company to take any action  pursuant to Sections 5 and 6 herein with  respect to
the  Registrable  Securities  of any  Shareholder  that such  Shareholder  shall
furnish to the  Company  such  information  regarding  itself,  the  Registrable
Securities held by it, and the intended method of disposition of such securities
as  shall  be  required  to  effect  the  registration  of  such   Shareholder's
Registrable Securities.

        (s)     Each Shareholder  agrees that upon receipt of any written notice
of the Company  pursuant to paragraphs  (ii) through (v) of Section 8(d) hereof,
such Shareholder shall  discontinue  offering such Common Shares pursuant to the
Registration  Statement  until  such  Shareholder's  receipt  of  copies  of the
supplemental or amended prospectus contemplated by Section 8(c) hereof, or until
advised in writing (the  "Advice") by the Company that the use of the applicable
prospectus  may be resumed.  If the Company  shall give any notice under Section
8(d)(ii) - (v) during the registration period, such registration period shall be
extended by the number of days during such period from and including the date of
the giving of such notice to and  including  the date when each seller of Common
Shares covered by the Registration  Statement shall have received (x) the copies
of the  supplemental or amended  prospectus  contemplated by Section 8(c) (if an
amended or supplemental prospectus is required) or (y) the Advice (if no amended
or supplemental prospectus is required).

9.       Registration Expenses.
         ---------------------

         The Company  shall bear all expenses  incurred in  connection  with the
performance  of its  obligations  under  this  Agreement  (except  as  otherwise
provided in the proviso to Section 8(m) hereof) and the Company shall  reimburse
the  Shareholders for the fees,  disbursements  and expenses of one counsel (and
one local  counsel  as  reasonably  required)  chosen by the  Shareholders  of a
majority in interest of the Common Shares to be sold pursuant to a  Registration
Statement acting for the Shareholders in connection therewith.

10.      Indemnification.
         ---------------

        (a)     The  Company  shall  indemnify  and hold  harmless,  to the full
extent  permitted by applicable law, each of the Shareholders to be named in any
Registration Statement filed pursuant to Sections 5(a) or 6(a) and the officers,
directors,  members and control  shareholders of such  Shareholders  against any
losses,  claims,  damages  or  liabilities,  joint or  several,  to  which  such
Shareholder or such other Person may become  subject under the  Securities  Act,
the  Exchange  Act or  otherwise,  insofar as such  losses,  claims,  damages or
liabilities  (or actions in respect  thereof)  arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Registration  Statement under which such Registrable  Securities were registered
under the  Securities  Act,  or any  preliminary,  final or  summary  prospectus
contained  therein or furnished by the Company to any such  Shareholder,  or any
amendment or supplement  thereto, or arise out of or are based upon the omission
or alleged  omission  to state  therein a material  fact  required  to be stated

                                       16
<PAGE>

therein or  necessary to make the  statements  therein not  misleading,  and the
Company  shall  reimburse  such  Shareholder  for any  legal or  other  expenses
reasonably  incurred by them in connection with  investigating  or defending any
such action or claim as such expenses are incurred;  provided, however, that the
                                                     --------  -------
Company  shall not be required  to  indemnify  any such person  pursuant to this
Section 10(a) to the extent that (i) any such loss,  claim,  damage or liability
(or  actions  in  respect  thereof)  arises  out of or is  based  upon  fraud or
dishonesty  or an untrue  statement or alleged  untrue  statement or omission or
alleged omission made in the Registration  Statement,  or preliminary,  final or
summary prospectus,  or amendment or supplement thereto, in reliance upon and in
strict  conformity with written  information  furnished to the Company by, or on
behalf of, such person  expressly  for use in  connection  therewith or (ii) the
Company  subsequently  corrects the untrue statement or alleged untrue statement
or  omission  or  alleged  omission  made in the  preliminary,  final or summary
prospectus, or amendment or supplement thereto by delivering to such Shareholder
an amended  prospectus or prospectus  supplement  that makes such correction and
the  Shareholder  fails timely to deliver such amended  prospectus or prospectus
supplement to the party or parties making the claim.

        (b)     The Company  shall  require,  as a condition  to  including  any
Registrable  Securities in any  Registration  Statement  filed  pursuant to this
Agreement and to entering into any underwriting  agreement with respect thereto,
that the Company shall have received an undertaking  reasonably  satisfactory to
it from each Shareholder of Registrable  Securities included in any Registration
Statement  filed pursuant to this Agreement and from each  underwriter  named in
any such underwriting agreement, severally and not jointly, to (i) indemnify and
hold harmless the Company and all other Shareholders against any losses, claims,
damages or  liabilities  to which the  Company or such  other  Shareholders  may
become subject under the Securities Act, the Exchange Act, or otherwise, insofar
as such losses,  claims,  damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue  statement or alleged untrue  statement
of a material fact contained in the Registration  Statement, or any preliminary,
final or summary prospectus contained therein or furnished by the Company to any
such Shareholder, or any amendment or supplement thereto, or arise out of or are
based upon the  omission or alleged  omission to state  therein a material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue  statement or omission or alleged  omission was made
in reliance upon and in strict conformity with written information  furnished to
the Company by such  Shareholder or underwriter  expressly for use in connection
therewith  and (ii)  reimburse  the  Company  for any  legal  or other  expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred;  provided, however, that
                                                         --------  -------
no such Shareholder shall be required to undertake liability to any Person under
this  Section  10(b) for any  amounts in excess of the dollar  amount of the net
proceeds to be received by such Shareholder from the sale of such  Shareholder's
Registrable  Securities pursuant to such registration and such undertaking shall
be several, not joint and several, among such Shareholders;  provided,  further,
                                                             --------   -------
that no such  Shareholder  shall be liable in any such case to the  extent  that
prior  to the  filing  of any  such  Registration  Statement  or  prospectus  or
amendment thereof or supplement thereto,  such Shareholder  furnished in writing
to the Company information  expressly for use in such Registration  Statement or
prospectus or any amendment  thereof or  supplement  thereto which  corrected or
made not misleading information previously furnished to the Company.

        (c)     Promptly  after  receipt by an  indemnified  party under Section
10(a) or 10(b) hereof of written notice of the commencement of any action,  such
indemnified  party shall, if a claim in respect thereof is to be made against an
indemnifying party pursuant to the indemnification provisions of or contemplated
by  this  Section  10,  notify  such  indemnifying   party  in  writing  of  the
commencement  of such  action;  but the  omission so to notify the  indemnifying
party  shall  not  relieve  it  from  any  liability  which  it may  have to any
indemnified  party  other  than  under  the  indemnification  provisions  of  or
contemplated by Section 10(a) or 10(b) hereof.  In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying  party
of the  commencement  thereof,  such  indemnifying  party  shall be  entitled to
participate  therein  and, to the extent that it shall  wish,  jointly  with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel  reasonably  satisfactory to such indemnified  party,  and, after notice
from the  indemnifying  party to such  indemnified  party of its  election so to
assume the defense thereof,  such indemnifying party shall not be liable to such
indemnified party for any legal expenses of other counsel or any other expenses,
in each case subsequently incurred by such indemnified party, in connection with
the  defense  thereof  other  than  reasonable  costs  of  investigation.   Such
indemnifying  party  shall not enter into any  settlement  with a party  without
obtaining an unconditional release of each indemnified party with respect to any
and all claims against each  indemnified  party. An indemnified  party shall not
enter into any settlement  without the consent of the indemnifying  party, which
consent shall not be unreasonably withheld.

        (d)     Each  party  hereto   agrees   that,   if  for  any  reason  the
indemnification  provisions  contemplated  by Section  10(a) or 10(b) hereof are
unavailable to or insufficient to hold harmless an indemnified  party in respect
of any losses,  claims,  damages or liabilities (or actions in respect  thereof)
referred to therein, then each indemnifying party shall contribute to the amount
paid or payable by such  indemnified  party as a result of such losses,  claims,
damages or liabilities (or actions in respect  thereof) in such proportion as is
appropriate  to reflect the  relative  fault of the  indemnifying  party and the
indemnified  party in connection with the statements or omissions which resulted
in such losses,  claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant  equitable  considerations.  The relative fault of
such  indemnifying  party and indemnified party shall be determined by reference
to,  among other  things,  whether the untrue or alleged  untrue  statement of a
material  fact or omission or alleged  omission to state a material fact relates
to information supplied by such indemnifying party or by such indemnified party,
and  the  parties'  relative  intent,  knowledge,   access  to  information  and
opportunity to correct or prevent such statement or omission. The parties hereto
agree that it would not be just and equitable if contributions  pursuant to this
Section 10(d) were determined by pro rata allocation  (even if the  Shareholders
or any agents or underwriters or all of them were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable  considerations  referred to in this Section 10(d). The amount paid or
payable by an indemnified party as a result of the losses,  claims,  damages, or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include  any  legal  or  other  fees or  expenses  reasonably  incurred  by such
indemnified party in connection with  investigating or defending any such action
or claim.  Notwithstanding  the provisions of this Section 10(d), no Shareholder
shall be required to contribute  any amount in excess of the amount by which the
dollar amount of the proceeds  received by such Shareholder from the sale of any
Registrable  Securities  (after  deducting any fees,  discounts and  commissions
applicable thereto) exceeds the amount of any damages which such Shareholder has
otherwise  been  required  to pay by reason of such  untrue  or  alleged  untrue

                                       18
<PAGE>

statement or omission or alleged omission,  and no underwriter shall be required
to  contribute  any amount in excess of the  amount by which the total  price at
which the  Registrable  Securities  underwritten  by it and  distributed  to the
public were offered to the public  exceeds the amount of any damages  which such
underwriter  has  otherwise  been  required  to pay by reason of such  untrue or
alleged untrue  statement or omission or alleged  omission.  No person guilty of
fraudulent  misrepresentation  (within  the  meaning  of  Section  11(f)  of the
Securities  Act) shall be entitled to  contribution  from any person who was not
guilty  of  such  fraudulent   misrepresentation.   The  Shareholders'  and  any
underwriters'  obligations in this Section 10(d) to contribute  shall be several
in  proportion  to  the  principal   amount  of  Common  Shares   registered  or
underwritten, as the case may be, by them severally and not jointly.

        (e)     The obligations of the Company under this Section 10 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and  conditions,  to each  officer,  director and partner of
each  Shareholder,  agent and underwriter and each person,  if any, who controls
any Shareholder,  agent or underwriter within the meaning of the Securities Act;
and the obligations of the  Shareholders  and any  underwriters  contemplated by
this  Section 10 shall be in  addition  to any  liability  which the  respective
Shareholder  or underwriter  may otherwise have and shall extend,  upon the same
terms and  conditions,  to each  officer and director of the Company and to each
person,  if any, who controls the Company  within the meaning of the  Securities
Act.

11.      Periodic Information Reporting Requirements.
         -------------------------------------------

(a)      Quarterly Financial Statement.
         -----------------------------

         The Company shall prepare condensed,  consolidated financial statements
for each of the first three  fiscal  quarters of each fiscal year in  accordance
with United  States  generally  accepted  accounting  principles  ("U.S.  GAAP")
consistently  applied.  The  Company  shall  provide  such  quarterly  financial
statements  to each  Shareholder  not later  than 45 days  after the end of each
fiscal quarter.

(b)      Annual Financial Statements.
         ---------------------------

         The Company shall prepare  consolidated  financial  statements for each
fiscal year in accordance  with U.S. GAAP  consistently  applied and shall cause
such financial  statements to be audited. The Company shall provide such audited
financial  statements and the auditor's  report thereon to the  Shareholders not
later than 90 days after the end of each fiscal year.

(c)      Additional Information.
         ----------------------

         If a Shareholder  requests in writing  information about the Company or
its subsidiaries in addition to the financial statements made available pursuant
to  Section  11(a)  and 11(b) in order  to,  among  other  things,  comply  with
disclosure   requirements   under  laws  and  regulations   applicable  to  such
Shareholder or to meet the tax reporting  requirements of such Shareholder,  the

                                       19
<PAGE>

Company shall use its commercially reasonable efforts to provide such additional
information  to such  Shareholder  as soon as  practicable  after  such  written
request has been  received;  provided,  however,  that the Company  shall not be
                             --------   -------
required to provide any such  additional  information if the Company  reasonably
believes that the disclosure of such information could have a materially adverse
impact on the  financial  condition,  business or  prospects of the Company on a
consolidated basis or is of a confidential nature.

(d)      Confidentiality.
         ---------------

         Except  as  authorized   in  writing  by  the  Company,   each  of  the
Shareholders  shall  not  disclose  any  of the  information  provided  to  such
Shareholder  pursuant  to this  Section 11 to any Person that is not a director,
officer, partner, employee,  representative (including any accountant,  attorney
or other  professional)  or  Affiliate  of such  Shareholder  or a party to this
Agreement, and each Shareholder shall use its commercially reasonable efforts to
cause  its  directors,   officers,  partners,  employees,   representatives  and
Affiliates not to disclose such information to any Person that is not a party to
this Agreement; provided, however, that such Shareholder shall not be prohibited
                --------  -------
from  disclosing  any such  information  if such  information  becomes  publicly
available  through  no  fault of the  Shareholder  or its  directors,  officers,
partners,  employees,  representatives  or  Affiliates  or  the  information  is
required to be furnished to a governmental  agency in connection  with any legal
or  administrative  proceeding or the  information is requested by a prospective
transferee or purchaser of Common Shares so long as such third party enters into
a  confidentiality  agreement with the Company  reasonably  satisfactory  to the
Company.

12.      Miscellaneous.
         -------------

        (a)      Amendments and Waivers.
                 ----------------------

                 The provisions of this  Agreement may not be amended,  modified
or  supplemented,  and  waivers or consents to  departures  from the  provisions
hereof may not be given,  unless the Company has obtained the written consent of
the  Founding  Investors  and  Shareholders  of a majority of the Common  Shares
(other than the Founding Investors).  Notwithstanding the foregoing, a waiver or
consent to depart  from the  provisions  hereof  with  respect to a matter  that
relates  exclusively to the rights of the  Shareholders  whose Common Shares are
being sold pursuant to the Registration  Statement and that does not directly or
indirectly affect the rights of other  Shareholders may be given by Shareholders
of a majority of the Common Shares being sold by such  Shareholders  pursuant to
the Registration Statement.

        (b)      Term and Termination.
                 --------------------

                 This  Agreement  may be terminated at any time by an instrument
in writing signed by all of the parties  hereto.  This Agreement shall terminate
automatically as to any Shareholder that Transfers all of its equity  securities
of the Company and Max Re. The provisions of Section 2 to this Agreement,  other
than  Section  2(b)(i)  and  2(b)(ii),  and  Section 3 to this  Agreement  shall
terminate  automatically  as to all parties  hereto upon the  consummation  of a
Qualified IPO. Unless sooner terminated, this Agreement shall terminate ten (10)

                                       20
<PAGE>

years after the date of the Qualified  IPO,  unless,  at any time within one (1)
year prior to such date,  all of the  parties  extend its  duration  for as many
additional periods, each not to exceed ten (10) years, as they may desire.

        (c)      Notices.
                 -------

                 All notices and other communications  provided for or permitted
hereunder  shall  be  made  in  writing  by  hand-delivery,   first-class  mail,
telecopier,  or  air  courier  guaranteeing  overnight  delivery:  (i)  if  to a
Shareholder  then to the  address  set  forth on the  signature  page or to such
address that such Shareholder may subsequently  notify the Company in writing or
(ii) if to the Company or Max Re as set forth below:

                               Max Re Capital Ltd.
                               P.O. Box HM 2565
                               Hamilton, HM KX
                               Bermuda
                               Attention: Robert J. Cooney
                               Facsimile Number: (441) 296-8811

         with a copy to:       Akin, Gump, Strauss, Hauer & Feld, L.L.P.
                               590 Madison Avenue
                               New York, New York 10022
                               Attention:  James E. Kaye, Esq.
                               Facsimile Number: (212) 872-1002

         with a copy to:       Conyers Dill & Pearman
                               Clarendon House
                               2 Church Street
                               P.O. Box HM666
                               Hamilton HM CX
                               Bermuda
                               Attention:  Lisa J. Marshall
                               Facsimile Number:  (441) 292-4720

All such notices and communications shall be deemed to have been duly given when
delivered by hand, if personally  delivered;  five (5) Business Days after being
deposited in the United States mails, if being mailed by first class mail, three
(3) Business  Days after being  delivered  to a next-day  air courier;  and when
receipt is acknowledged by the recipient's telecopier machine, if telecopied.

(d)      Successors and Assigns.
         ----------------------

         This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and assigns.

                                       21
<PAGE>

(e)      Counterparts.
         ------------

         This  Agreement  may be executed in two or more  counterparts,  each of
which shall be deemed an original,  but all of which together  shall  constitute
one and the same instrument.

(f)      Governing Law.
         -------------

         This Agreement  shall be governed by the laws of the State of New York,
without  giving effect to any choice of law or conflict of law provision or rule
that would cause the application of the law of any  jurisdiction  other than the
State of New York.

(g)      Headings.
         --------

         The headings in this  Agreement are for  convenience  of reference only
and shall not limit or otherwise affect the meaning hereof.

(h)      Severability.
         ------------

         The remedies  provided  herein are  cumulative and not exclusive of any
remedies  provided by law. If any term,  provision,  covenant or  restriction of
this  Agreement  is held by a court of  competent  jurisdiction  to be  invalid,
illegal,  void  or  unenforceable,  the  remainder  of  the  terms,  provisions,
covenants  and  restrictions  set forth  herein  shall  remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto  shall use their  reasonable  efforts to find and  employ an  alternative
means to achieve the same or substantially  the same result as that contemplated
by such term,  provision,  covenant or restriction.  It is hereby stipulated and
declared to be the  intention of the parties  that they would have  executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.

                     [REST OF PAGE DELIBERATELY LEFT BLANK]

                                       22
<PAGE>

                                 Signature Page

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