Form 10-Q

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VuV0KU6FHqzB5NyNFgvF4mAxYcXK8GHSNGMwKfKTUzV+7q7aRFnM3ebH4Ir6awQx X1MipZ+2iqdt5MH6qiDFGA== 0001193125-03-072256.txt : 20031104 0001193125-03-072256.hdr.sgml : 20031104 20031104115928 ACCESSION NUMBER: 0001193125-03-072256 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAX RE CAPITAL LTD CENTRAL INDEX KEY: 0001141719 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-33047 FILM NUMBER: 03975116 BUSINESS ADDRESS: STREET 1: MAX RE HOUSE STREET 2: 2 FRONT STREET CITY: HAMILTON HM11 STATE: D0 ZIP: HM 11 BUSINESS PHONE: 4412968800 MAIL ADDRESS: STREET 1: MAX RE HOUSE STREET 2: 2 FRONT STREET CITY: HAMILTON STATE: D0 ZIP: HM 11 10-Q 1 d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-33047

MAX RE CAPITAL LTD.

(Exact name of registrant as specified in its charter)

BERMUDA

Not Applicable

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

Max Re House

2 Front Street

Hamilton, HM 11

Bermuda

(Address of principal executive offices)

(Zip Code)

(441) 296-8800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

The number of the Registrant’s common shares (par value $1.00 per share) outstanding as of October 15, 2003 was 45,181,611.

MAX RE CAPITAL LTD.

INDEX


		PAGE
PART I—FINANCIAL INFORMATION

ITEM 1.	Financial Statements	1

	Consolidated Balance Sheets as of September 30, 2003 (unaudited) and December 31, 2002	1

	Consolidated Statements of Income and Comprehensive Income for the Three and Nine Months Ended September 30, 2003 and 2002 (unaudited)	2

	Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2003 and 2002 (unaudited)	3

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002 (unaudited)	4

	Notes to the Interim Consolidated Financial Statements (unaudited)	5

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

ITEM 3.	Quantitative and Qualitative Disclosure About Market Risk	15

ITEM 4.	Controls and Procedures	15

PART II— OTHER INFORMATION		17

ITEM 1.	Legal Proceedings	17

ITEM 2.	Changes in Securities	17

ITEM 3.	Defaults Upon Senior Securities	17

ITEM 4.	Submission of Matters to a Vote of Security Holders	17

ITEM 5.	Other Information	17

ITEM 6.	Exhibits and Reports on Form 8-K	17

SIGNATURES		S-1

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

MAX RE CAPITAL LTD.

CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of United States Dollars, except share amounts)

	September 30, 2003			December 31, 2002
	(Unaudited)
ASSETS
Cash and cash equivalents	$	141,703		$	92,103
Fixed maturities, available for sale at fair value		1,507,280			1,279,564
Alternative investments, at fair value		848,550			653,165
Accrued interest income		14,163			12,304
Premiums receivable		343,311			190,214
Losses recoverable from reinsurers		235,678			212,241
Funds withheld		61,017			55,276
Deferred acquisition costs		109,764			79,447
Deferred charges		9,152			32,086
Prepaid reinsurance premiums		65,280			25,408
Other assets		18,556			11,633

Total assets	$	3,354,454		$	2,643,441

LIABILITIES
Property and casualty losses and experience refunds	$	927,897		$	778,069
Life and annuity benefits and experience refunds		383,386			405,008
Reinsurance balances payable		262,540			194,436
Deposit liabilities		261,154			115,513
Unearned property and casualty premiums		557,668			323,672
Accounts payable and accrued expenses		22,770			16,019
Bank loan		150,000			100,000

Total liabilities		2,565,415			1,932,717

Minority interest		—			116,565

SHAREHOLDERS’ EQUITY
Preferred shares
par value $1; 20,000,000 shares authorized no shares issued or outstanding		—			—
Common shares
par value $1; 200,000,000 shares authorized 45,181,611 shares issued and outstanding (2002 – 37,998,779)		45,182			37,999
Additional paid-in capital		637,597			526,582
Loans receivable from common share sales		(11,965	)		(12,575	)
Unearned stock grant compensation		(4,643	)		(2,656	)
Accumulated other comprehensive income		45,438			49,108
Retained earnings (deficit)		77,430			(4,299	)

Total shareholders’ equity		789,039			594,159

Total liabilities, minority interest and shareholders’ equity	$	3,354,454		$	2,643,441

See accompanying notes to unaudited interim consolidated financial statements.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)

(Expressed in thousands of United States Dollars, except share and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
REVENUES
Gross premiums written	$	188,608		$	65,664		$	784,921		$	531,096
Reinsurance premiums ceded		(31,581	)		(2,636	)		(102,620	)		(53,414	)

Net premiums written	$	157,027		$	63,028		$	682,301		$	477,682

Earned premiums	$	204,460		$	109,870		$	523,902		$	281,830
Earned premiums ceded		(25,714	)		(12,996	)		(58,123	)		(34,184	)

Net premiums earned		178,746			96,874			465,779			247,646

Net investment income		13,899			13,772			43,467			39,576
Net gains on alternative investments		28,148			1,095			95,162			6,666
Net realized gains on sales of fixed maturities		11,548			663			14,547			3,251
Other income		1,122			1,114			5,337			5,153

Total revenues		233,463			113,518			624,292			302,292

LOSSES AND EXPENSES
Losses, benefits and experience refunds		139,655			95,513			368,489			229,901
Acquisition costs		36,696			22,743			111,124			61,753
Interest expense		5,382			7,449			20,316			15,173
General and administrative expenses		10,896			4,856			29,876			15,453

Total losses and expenses		192,629			130,561			529,805			322,280

INCOME (LOSS) BEFORE MINORITY INTEREST		40,834			(17,043	)		94,487			(19,988	)

Minority interest		(2,083	)		2,705			(10,325	)		3,250

NET INCOME (LOSS)		38,751			(14,338	)		84,162			(16,738	)

Change in net unrealized appreciation of fixed maturities		(18,999	)		37,213			(3,670	)		38,749

COMPREHENSIVE INCOME (LOSS)	$	19,752		$	22,875		$	80,492		$	22,011

Basic earnings (loss) per share	$	0.91		$	(0.37	)	$	2.10		$	(0.43	)

Diluted earnings (loss) per share	$	0.89		$	(0.37	)	$	2.08		$	(0.43	)

Weighted average shares outstanding—basic		42,796,564			38,795,490			39,991,747			39,156,435

Weighted average shares outstanding—diluted		45,701,697			45,914,822			45,369,887			46,320,151

See accompanying notes to unaudited interim consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(Expressed in thousands of United States Dollars)

	Nine Months Ended September 30,
	2003			2002
Preferred Shares
Balance, beginning and end of period	$	—		$	—

Common shares
Balance, beginning of period		37,999			39,582
Issuance of shares		368			262
Issuance of shares on elimination of minority interest		7,120			—
Repurchase of shares		(305	)		(1,449	)

Balance, end of period		45,182			38,395

Additional paid-in capital
Balance, beginning of period		526,582			543,438
Issuance of shares		4,078			3,736
Issuance of shares on elimination of minority interest		110,285			—
Stock option expense		243			—
Repurchase of shares		(3,591	)		(15,340	)
Distribution to shareholders		—			(772	)

Balance, end of period		637,597			531,062

Loans receivable from common share sales
Balance, beginning of period		(12,575	)		(12,575	)
Loans repaid		610			—

Balance, end of period		(11,965	)		(12,575	)

Unearned stock grant compensation
Balance, beginning of period		(2,656	)		(2,894	)
Stock grants awarded		(3,740	)		(971	)
Amortization		1,753			898

Balance, end of period		(4,643	)		(2,967	)

Accumulated other comprehensive income
Balance, beginning of period		49,108			13,475
Holding gains on fixed maturities arising in the period		1,676			48,402
Net realized gains included in net income		(14,547	)		(3,251	)
Allocation to minority interest		6,504			(6,402	)
Holding gains transferred on elimination of minority interest		2,697			—

Balance, end of period		45,438			52,224

Retained earnings (deficit)
Balance, beginning of period		(4,299	)		3,044
Net income (loss)		84,162			(16,738	)
Dividends paid		(2,433	)		(1,590	)

Balance, end of period		77,430			(15,284	)

Total shareholders’ equity	$	789,039		$	590,855

See accompanying notes to unaudited interim consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Expressed in thousands of United States Dollars)

	Nine Months Ended September 30,
	2003			2002
OPERATING ACTIVITIES
Net income (loss)	$	84,162		$	(16,738	)

Adjustments to reconcile net income (loss) to net cash from operating activities:
Minority share of income (loss)		10,325			(3,250	)
Amortization of unearned stock based compensation		1,996			898
Amortization of discount on fixed maturities		4,133			643
Net gains on alternative investments		(95,162	)		(6,666	)
Net realized gains on sale of fixed maturities		(14,547	)		(3,251	)
Accrued interest income		(1,859	)		(1,674	)
Premiums receivable		(153,097	)		(128,543	)
Losses recoverable from reinsurers		(47,537	)		(28,456	)
Funds withheld		(5,741	)		1,376
Deferred acquisition costs		(31,050	)		(44,489	)
Deferred charges		3,505			7,363
Prepaid reinsurance premiums		(43,916	)		(19,230	)
Other assets		(6,923	)		(2,788	)
Property and casualty losses and experience refunds		310,493			124,915
Life and annuity benefits and experience refunds		(21,622	)		(16,300	)
Reinsurance balances payable		68,104			32,476
Unearned property and casualty premiums		260,959			249,266
Accounts payable and accrued expenses		6,751			(1,593	)

Cash from operating activities		328,974			143,959

INVESTING ACTIVITIES
Purchases of fixed maturities		(755,506	)		(608,192	)
Sales (purchases) of alternative investments, net		(100,461	)		27,407
Sales of fixed maturities		468,072			231,817
Redemptions of fixed maturities		57,500			63,630

Cash used in investing activities		(330,395	)		(285,338	)

FINANCING ACTIVITIES
Net proceeds from issuance of common shares		706			3,027
Repurchase of common shares		(3,896	)		(16,789	)
Proceeds from bank loan		50,000			100,000
Dividends and distributions		(2,433	)		(2,362	)
Distributions to / conversion of minority shareholders		(285	)		(3,458	)
Deposit liabilities, net		6,319			41,965
Notes and loans repaid		610			—

Cash from financing activities		51,021			122,383

Net increase (decrease) in cash and cash equivalents		49,600			(18,996	)
Cash and cash equivalents, beginning of period		92,103			98,322

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	141,703		$	79,326

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest paid totaled $2,414 and $1,643 for the nine months ended September 30, 2003 and 2002, respectively.

A non-cash item that was an amendment to a reinsurance contract resulted in the following changes in the nine months ended September 30, 2003: decreased property and casualty losses and experience refunds by $160,665, decreased unearned property and casualty premiums by $26,963, decreased deferred charges by $19,429, decreased losses recoverable from reinsurers by $24,100, decreased prepaid reinsurance premiums by $4,044, decreased deferred acquisition costs by $733 and increased deposit liabilities by $139,322.

Shareholders’ equity reflects the exchange on July 30, 2003 of non-voting common shares of Max Re Ltd. and warrants to acquire non-voting common shares of Max Re Ltd. (which were accounted for as minority interest) for common shares of the Company. The exchange is a non-cash item and has no effect on the Consolidated Statements of Cash Flows.

See accompanying notes to unaudited interim consolidated financial statements.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. GENERAL

The interim consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with Regulation S-X and include the accounts of Max Re Capital Ltd. (“Max Re Capital”), Max Re Ltd. (“Max Re”), Max Re Managers Ltd. (“Max Re Managers”), Max Europe Holdings Limited and its subsidiary companies (“Max Europe”) and Max Re Diversified Strategies Ltd. (“Max Re Diversified”, and, collectively with Max Re Capital, Max Re, Max Re Managers and Max Europe, the “Company”). In the opinion of management, these financial statements reflect all the normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations as of the dates and for the periods presented. The results of operations and cash flows for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2002.

Max Re Capital was incorporated on July 8, 1999 under the laws of Bermuda. The Company’s principal operating subsidiary is Max Re, a Bermuda long-term and Class 4 insurer. The Company’s European activities are conducted from Dublin, Ireland through Max Europe Holdings Limited and its two wholly owned operating subsidiaries, Max Re Europe Limited and Max Insurance Europe Limited.

2. EARNINGS PER SHARE

Basic earnings per share is based on weighted average common shares outstanding and excludes any dilutive effect of warrants, options and convertible securities. Diluted earnings per share assumes the conversion of dilutive convertible securities and the exercise of all dilutive stock warrants and options.

3. BANK LOAN

In March 2002, the Company completed a $100.0 million sale of shares of Max Re Diversified to a third party financial institution. Simultaneous with the sale, the Company entered into a total return swap with the purchaser of these shares whereby the Company received the return earned on the Max Re Diversified shares in exchange for a variable rate of interest based on LIBOR plus a spread. Under GAAP, these transactions were viewed on a combined basis and accounted for as a financing transaction, which resulted in the recording of a $100.0 million bank loan.

On February 18, 2003, the Company and the third party financial institution mutually terminated the swap transaction described above and, immediately following the termination, the Company completed a $150.0 million sale of shares of Max Re Diversified to the same third party financial institution and entered into a total return swap with the purchaser on similar terms as the terminated transaction. Max Re Diversified shares owned by Max Re with a fair value of $83.4 million at September 30, 2003 were pledged as collateral to which the Company is exposed to credit risk. Under GAAP, these transactions are viewed on a combined basis and accounted for as a financing transaction, which resulted in the recording of a $150.0 million bank loan. The swap termination date is February 2005, with provisions for earlier termination at the Company’s option or in the event that the Company fails to comply with certain covenants, including maintaining a minimum financial strength rating and a minimum Max Re Diversified net asset value. At termination, the purchaser has the option to sell the Max Re Diversified shares to the Company at a price equal to the fair value of the Max Re Diversified shares on the date of repurchase.

4. SEGMENT INFORMATION

The Company operates in the reinsurance and insurance business serving two segments: the property and casualty segment and the life and annuity segment, which includes disability products. Within the property and casualty segment, the Company offers four products: structured risk transfer reinsurance, traditional risk transfer reinsurance, alternative risk transfer reinsurance and insurance and traditional risk transfer insurance. The Company differentiates its property and casualty products in several ways, including by the amount of aggregate loss cap and/or occurrence limits incorporated into the underlying contract, with its structured risk transfer products having the lowest aggregate loss cap and occurrence limits and its traditional risk transfer products having the highest relative to premium received. Within the life and annuity segment, the Company currently offers reinsurance products focusing on existing blocks of business, which take the form of co-insurance transactions. In co-insurance transactions, risks are reinsured on the same basis as that of the original policies. The Company also has a corporate segment that includes its investment and financing functions. The Company does not allocate assets by segment.

A summary of operations by segment for the nine months ended September 30, 2003 and 2002 is as follows:

	Nine Months Ended September 30, 2003 (Expressed in thousands of United States Dollars)
	Property & Casualty															Life & Annuity			Corporate		Consolidated
	Structured Reinsurance			Traditional Reinsurance			Alternative Risk			Traditional Insurance			Total			Life & Annuity			Corporate		Consolidated
Gross premiums written	$	235,248		$	262,101		$	180,945		$	106,627		$	784,921		$	—		$	—	$	784,921
Reinsurance premiums ceded		(41,155	)		(17,538	)		(17,100	)		(26,827	)		(102,620	)		—			—		(102,620	)

Net premiums written	$	194,093		$	244,563		$	163,845		$	79,800		$	682,301		$	—		$	—	$	682,301

Earned premiums	$	210,194		$	143,210		$	139,327		$	31,171		$	523,902		$	—		$	—	$	523,902
Earned premiums ceded		(35,836	)		(4,628	)		(9,403	)		(8,256	)		(58,123	)		—			—		(58,123	)

Net premiums earned		174,358			138,582			129,924			22,915			465,779			—			—		465,779
Net investment income		—			—			—			—			—			—			43,467		43,467
Net gains on sales of alternative investments		—			—			—			—			—			—			95,162		95,162
Net realized gains on sales of fixed maturities		—			—			—			—			—			—			14,547		14,547
Other income		2,110			—			—			—			2,110			—			3,227		5,337

Total revenues		176,468			138,582			129,924			22,915			467,889			—			156,403		624,292

Losses, benefits and experience refunds		144,097			90,548			92,899			17,221			344,765			23,724			—		368,489
Acquisition costs		52,933			29,759			26,123			1,608			110,423			701			—		111,124
Interest expense		—			—			—			—			—			—			20,316		20,316
General and admin expenses		2,314			2,578			1,780			5,653			12,325			4,066			13,485		29,876

Total losses and expenses		199,344			122,885			120,802			24,482			467,513			28,491			33,801		529,805

Net income (loss) before minority interest	$	(22,876	)	$	15,697		$	9,122		$	(1,567	)	$	376		$	(28,491	)	$	122,602	$	94,487

Loss Ratio		82.6	%		65.3	%		71.5	%		75.2	%		74.0	%
Combined Ratio		114.3	%		88.7	%		93.0	%		106.8	%		100.4	%

	Nine Months Ended September 30, 2002 (Expressed in thousands of United States Dollars)
	Property & Casualty															Life & Annuity			Corporate		Consolidated
	Structured Reinsurance			Traditional Reinsurance			Alternative Risk			Traditional Insurance			Total			Life & Annuity			Corporate		Consolidated
Gross premiums written	$	270,764		$	59,476		$	186,200		$	—		$	516,440		$	14,656		$	—	$	531,096
Reinsurance premiums ceded		(42,328	)		—			(8,888	)		—			(51,216	)		(2,198	)		—		(53,414	)

Net premiums written	$	228,436		$	59,476		$	177,312		$	—		$	465,224		$	12,458		$	—	$	477,682

Earned premiums	$	185,792		$	16,239		$	65,143		$	—		$	267,174		$	14,656		$	—	$	281,830
Earned premiums ceded		(29,023	)		—			(2,963	)		—			(31,986	)		(2,198	)		—		(34,184	)

Net premiums earned		156,769			16,239			62,180			—			235,188			12,458			—		247,646
Net investment income		—			—			—			—			—			—			39,576		39,576
Net gains on sales of alternative investments		—			—			—			—			—			—			6,666		6,666
Net realized gains on sales of fixed maturities		—			—			—			—			—			—			3,251		3,251
Other income		2,495			—			638			—			3,133			—			2,020		5,153

Total revenues		159,264			16,239			62,818			—			238,321			12,458			51,513		302,292

Losses, benefits and experience refunds		137,741			12,196			45,299			—			195,236			34,665			—		229,901
Acquisition costs		40,236			4,375			15,782			—			60,393			1,360			—		61,753
Interest expense		—			—			—			—			—			—			15,173		15,173
General and admin expenses		2,607			573			1,793			—			4,973			3,991			6,489		15,453

Total losses and expenses		180,584			17,144			62,874			—			260,602			40,016			21,662		322,280

Net income (loss) before minority interest	$	(21,320	)	$	(905	)	$	(56	)	$	—		$	(22,281	)	$	(27,558	)	$	29,851	$	(19,988	)

Loss Ratio		87.9	%		75.1	%		72.9	%		—			83.0	%
Combined Ratio		115.2	%		105.6	%		101.1	%		—			110.8	%

The loss ratio is calculated by dividing losses, benefits and experience refunds by net premiums earned. The combined ratio is calculated by dividing total losses and expenses by net premiums earned.

The Company currently operates in two geographic segments: North America, which represents risks written for North American based customers, and Europe, which represents risks written for European based customers.

Financial information relating to gross premiums written by geographic region for the nine months ended September 30, 2003 and 2002 were as follows:

	Nine Months Ended September 30,
	2003			2002
	(Expressed in thousands of United States Dollars)
North America	$	446,987		$	317,833
Europe		337,934			213,263
Reinsurance Ceded—North America		(44,500	)		(26,900	)
Reinsurance Ceded—Europe		(58,120	)		(26,514	)

	$	682,301		$	477,682

Three customers accounted for 18.7%, 18.6% and 14.7%, respectively, of the Company’s gross premiums written during the nine months ended September 30, 2003. Three customers accounted for 25.2%, 19.9% and 13.2%, respectively, of the Company’s gross premiums written during the nine months ended September 30, 2002.

5. EQUITY CAPITAL

Max Re Capital’s Board of Directors declared quarterly dividends of $0.02 per share on each of January 31, 2003, May 1, 2003 and July 25, 2003, payable to shareholders of record on February 17, 2003, May 12, 2003 and August 8, 2003, respectively.

The Company repurchased 304,600 common shares at an average price of $12.79 per common share for a total amount of approximately $3.9 million, including costs incurred to effect the repurchases, during the nine months ended September 30, 2003. As of September 30, 2003, the remaining authorization under the Company’s share repurchase program was approximately $23.2 million.

On July 30, 2003, the holders of non-voting common shares of Max Re and warrants to acquire non-voting common shares of Max Re exchanged such shares and warrants for common shares of the Company and warrants to acquire common shares of the Company. The effect of this exchange results in the elimination of minority interest and an increase in shareholders’ equity of equal amounts as of the date of the exchange.

6. RELATED PARTIES

Grand Central Re Limited

Pursuant to an insurance management agreement, Max Re Managers provides insurance management services to Grand Central Re Limited, a Bermuda domiciled reinsurance company in which Max Re has a 7.5% equity investment (“Grand Central Re”). Fees for such services for each of the nine months ended September 30, 2003 and 2002 were approximately $3.2 million and $2.0 million, respectively, and are included in other income in the accompanying consolidated statements of income and comprehensive income.

Max Re entered into a quota share retrocession agreement with Grand Central Re, effective as of January 1, 2002, amending the quota share arrangement with Grand Central Re that was effective as of January 1, 2001. The 2002 quota share reinsurance agreement with Grand Central Re requires each of the Company and Grand Central Re to retrocede a portion of their respective gross premiums written from certain transactions to the other party in order to participate on a co-insurance basis. Max Re also entered into an aggregate stop loss contract with Grand Central Re, effective as of January 1, 2003, whereby Grand Central Re provided aggregate reinsurance protection to Max Re on one of its underlying reinsurance contracts.

The accompanying consolidated balance sheets include, or are net of, the following amounts related to the quota share retrocession and aggregate stop loss agreements with Grand Central Re:

	September 30, 2003		December 31, 2002
	(Expressed in thousands of United States Dollars)
Prepaid reinsurance premiums	$	28,515	$	24,045
Deposit recoverable		49,846		22,637
Losses recoverable from reinsurers		142,122		129,308
Reinsurance balances payable		154,710		122,747

The accompanying consolidated statements of income and comprehensive income include, or are net of, the following amounts related to the quota share retrocession and aggregate stop loss agreements with Grand Central Re:

	Nine Months Ended September 30,
	2003		2002
	(Expressed in thousands of United States Dollars)
Reinsurance premiums ceded	$	50,085	$	50,824
Earned premiums ceded		41,571		32,701
Losses, benefits and experience refunds		45,258		25,176
Interest expense		5,326		6,791

Max Re credits Grand Central Re with interest on reinsurance balances payable at a varying negotiated rate based on published bond indices.

The Company believes that the terms of the insurance management, quota share retrocessional and aggregate stop loss agreements with Grand Central Re are comparable to the terms that the Company would expect to negotiate in arms’ length transactions with unrelated parties.

Alternative Investment Managers

For the nine months ended September 30, 2003 and 2002, Moore Capital Management, LLC (“MCM”), which is affiliated with certain shareholders and a director of Max Re Capital, earned aggregate management and incentive fees of $3.0 million and $3.4 million, respectively, in respect of Max Re Diversified’s assets invested in underlying funds managed by MCM. In addition, as the trading manager of Max Re Diversified, MCM earned $4.9 million and $nil in fees for the nine months ended September 30, 2003 and 2002, respectively.

All investment fees incurred on the Company’s alternative investments are included in net gains on alternative investments in the consolidated statements of income and comprehensive income.

7. COMMITMENTS

Letter of Credit Facilities

The Company has three letter of credit facilities as of September 30, 2003. The Company’s primary letter of credit facility is with a syndicate of commercial banks, one of which is affiliated with a director of Max Re Capital. In June 2003, the Company amended the terms of this facility principally to lower the cost of the facility and reduce the capacity of the facility from $375.0 million to $270.0 million. In accordance with the facility agreement, the syndicate will issue letters of credit that may total up to $243.0 million secured by fixed maturities and up to $27.0 million secured by alternative investments. The Company believes that the terms of this letter of credit facility are comparable to the terms that the Company would expect to negotiate with an unrelated party. At September 30, 2003 and December 31, 2002, letters of credit totaling $259.9 million and $284.6 million, respectively, were issued and outstanding under this facility. Fixed maturities and cash equivalents with a fair value of $297.2 million and Max Re Diversified shares with a fair value of $71.9 million at September 30, 2003 were pledged as collateral for these letters of credit.

The Company also has a $100.0 million letter of credit facility with the New York branch of Bayerische Hypo- und Vereinsbank AG (“HVB”), a shareholder of the Company and an affiliate of a director of Max Re Capital. HVB is the majority shareholder of Grand Central Re, which is managed by Max Re Managers and in which the Company has a 7.5% equity interest. The Company believes that the terms of this letter of credit facility are comparable to the terms that the Company would expect to negotiate at arms’ length with an unrelated party. At September 30, 2003 and December 31, 2002, letters of credit totaling $79.6 million and $58.5 million, respectively, were issued by HVB under this facility. All letters of credit issued under this facility are collateralized by a portion of the Company’s invested assets. Fixed maturities and cash equivalents with a fair value of $47.3 million and Max Re Diversified shares with a fair value of $78.4 million at September 30, 2003 were pledged as collateral for these letters of credit.

In September 2003, the Company entered into a $100.0 million letter of credit facility with an independent commercial bank. At September 30, 2003, there were no letters of credit issued under this letter of credit facility. Fixed maturities and cash equivalents with a fair value of $nil were pledged as collateral for these letters of credit.

Each of the letter of credit facilities requires that the Company and/or certain of its subsidiaries comply with certain covenants, including a minimum consolidated tangible net worth and restrictions on the payment of dividends. The Company was in compliance with all the covenants of each of its letter of credit facilities at September 30, 2003.

8. STOCK-BASED COMPENSATION

Effective January 1, 2003, the Company began to account for stock-based employee compensation in accordance with the fair-value method prescribed by FAS No. 123—Accounting for Stock-Based Compensation (“FAS No. 123”), as amended by FAS No. 148—Accounting for Stock-Based Compensation—Transition and Disclosure, using the prospective adoption method. Under the prospective adoption method, compensation expense is recognized over the relevant service period based on the fair value of stock options granted after January 1, 2003.

If the Company were to recognize compensation expense over the relevant service period under the fair-value method of FAS No. 123 with respect to stock options granted for the year ended December 31, 2002 and all prior years, net income would have decreased in each period from the amount reported, resulting in pro forma net income and earnings per share as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
	(Expressed in thousands of United States dollars, except per share amounts)
Net income (loss), as reported	$	38,751		$	(14,338	)	$	84,162		$	(16,738	)
Add: Stock-based employee compensation expense included in reported net income		116			—			243			—
Deduct: Stock-based employee compensation expense determined under fair-value method for all awards		(692	)		(503	)		(1,805	)		(1,495	)

Pro forma net income	$	38,175		$	(14,841	)	$	82,600		$	(18,233	)

Earnings per share, as reported
Basic	$	0.91		$	(0.37	)	$	2.10		$	(0.43	)
Diluted		0.89			(0.37	)		2.08			(0.43	)
Earnings per share, pro forma
Basic	$	0.90		$	(0.38	)	$	2.07		$	(0.47	)
Diluted		0.88			(0.38	)		2.04			(0.47	)

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion and analysis of the Company’s results of operations for the three and nine month periods ended September 30, 2003 compared to the three and nine month periods ended September 30, 2002 and the financial condition of the Company as of September 30, 2003. This discussion and analysis should be read in conjunction with the attached unaudited consolidated financial statements and related notes and the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company intends that the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 apply to these forward-looking statements. Forward-looking statements are not statements of historical fact but rather reflect the Company’s current expectations, estimates and predictions about future results and events. These statements may use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project” and similar expressions as they relate to the Company or the Company’s management. When the Company makes forward-looking statements, it is basing them on management’s beliefs and assumptions, using information currently available to it. These forward-looking statements are subject to risks, uncertainties and assumptions. Factors that could cause such forward-looking statements not to be realized (which are described in more detail included or incorporated by reference herein and in documents filed by the Company with the Securities and Exchange Commission) include, without limitation, acceptance in the market of the Company’s products, general economic conditions and conditions specific to the reinsurance and insurance markets in which the Company operates, pricing competition, the amount of underwriting capacity from time to time in the market, material fluctuations in interest rate levels, tax and regulatory changes and conditions, rating agency policies and practices, claims development and loss of key executives. Other factors such as changes in U.S. and global financial and equity markets resulting from general economic conditions, market disruptions and significant interest rate fluctuations may adversely impact the Company’s investments or impede the Company’s access to, or increase the cost of, financing its operations. The Company cautions that the foregoing list of important factors is not intended to be, and is not, exhaustive. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. If one or more risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may vary materially from what the Company projected. Any forward-looking statements in this Form 10-Q reflect the Company’s current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Company’s operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to the Company or individuals acting on the Company’s behalf are expressly qualified in their entirety by this paragraph.

Overview

The Company is a Bermuda-based provider of reinsurance and insurance products for both the property and casualty and the life and annuity, including disability, markets. In the past two years, the property and casualty market has presented more opportunities to the Company than the life and annuity market due to a shortage of reinsurance capacity in the property and casualty market, resulting in improvement in premium rates. Further, a weak global economy and corrections in the global capital markets over the last several years have resulted in a widening pricing gap between buyers and sellers for the type of life and annuity reinsurance products that the Company offers. The Company anticipates continuing greater demand for its property and casualty products than for its life and annuity products for the foreseeable future.

To manage reinsurance and insurance liability exposure, make investment decisions and assess overall enterprise risk, the Company models its underwriting and investing activities on an integrated basis. The Company’s integrated risk management, as well as features of its products, provides flexibility in making decisions regarding investments. The Company’s investments are currently comprised of a high grade fixed maturities portfolio and an alternative investment portfolio that currently employs ten strategies invested in approximately 45 underlying trading entities designed to provide diversification and to generate positive returns while attempting to reduce the frequency and severity of loss outcomes. The alternative investment portfolio also includes two strategic reinsurance private equity investments. Based on fair value at September 30, 2003, the allocation of invested assets was approximately 66.0% in cash and fixed maturities and 34.0% in alternative investments.

The Company’s principal operating subsidiary is Max Re. At September 30, 2003, Max Re had $778.5 million of shareholders’ equity. The Company conducts its European activities through Max Europe Holdings Limited and its operating subsidiaries, Max Re Europe Limited and Max Insurance Europe Limited. The Company also provides reinsurance underwriting and administrative services on a fee basis through Max Re Managers. The Company holds all of its alternative investments in Max Re Diversified, other than reinsurance private equity investments that are held by Max Re.

Critical Accounting Policies

The Company’s consolidated financial statements are prepared in accordance with GAAP, which require management to make estimates and assumptions. The Company has performed a current assessment of its critical accounting policies in connection with preparing its consolidated financial statements as of and for the three and nine months ended September 30, 2003. The Company believes that the critical accounting policies set forth in its Annual Report on Form 10-K for the year ended December 31, 2002, filed on March 20, 2003, continue to describe the more significant judgments and estimates used in the preparation of its consolidated financial statements. These accounting policies pertain to revenue recognition, loss and loss adjustment expenses and investment valuation. If actual events differ significantly from the underlying judgments or estimates used by management in the application of these accounting policies, there could be a material adverse effect on the Company’s results of operations and financial condition.

Results of Operations

Three months ended September 30, 2003 compared to three months ended September 30, 2002

Gross premiums written. Gross premiums written for the three months ended September 30, 2003 increased 187.2% to $188.6 million compared to $65.7 million for the three months ended September 30, 2002. Gross premiums written for each of the three month periods came entirely from property and casualty underwriting. The increase in gross premiums written for property and casualty is principally attributable to the Company’s expansion of its traditional reinsurance operations, which accounted for $86.0 million of the gross premiums written for the three months ended September 30, 2003 compared to $38.0 million for the same period in 2002. In addition, traditional insurance operations, which commenced in the first quarter of 2003, made a significant contribution to gross premium written, accounting for $54.8 million of the gross premiums written for the three months ended September 30, 2003.

Reinsurance premiums ceded. Reinsurance premiums ceded for the three months ended September 30, 2003 were $31.6 million compared to $2.6 million for the three months ended September 30, 2002. Reinsurance premiums ceded during the three months ended September 30, 2003 were principally related to a quota-share retrocession of the Company’s insurance business. In addition, the Company purchased specific reinsurance on certain lines of business in the current period. As the Company and its reinsurance and insurance exposures grow, the Company is purchasing, and expects to continue to purchase, additional retrocessional coverage consistent with its risk management objectives.

Net premiums written. Net premiums written for the three months ended September 30, 2003 were $157.0 million compared to $63.0 million for the three months ended September 30, 2002 and were entirely related to property and casualty products.

Net premiums earned. Net premiums earned, all pertaining to property and casualty business, for the three months ended September 30, 2003 were $178.7 million, after the deduction of $25.7 million of earned premiums ceded, compared to $96.9 million, after the deduction of $13.0 million of earned premiums ceded, for the three months ended September 30, 2002.

Net investment income. Net investment income was $13.9 million for the three months ended September 30, 2003 compared to $13.8 million for the three months ended September 30, 2002. The increase was principally attributable to the increase in fixed maturities investments resulting from cash received from the collection of premiums written since September 30, 2002, partially offset by a decline in the yield on the fixed maturities investments. The average annualized investment yield on fixed maturities investments for the three months ended September 30, 2003 was 3.54% compared to an average yield of 4.35% for the three months ended September 30, 2002.

Net gains on alternative investments. Net gains on alternative investments were $28.1 million for the three months ended September 30, 2003 compared to $1.1 million for the three months ended September 30, 2002. The increase was attributable to both a 3.35% rate of return on the alternative investments for the three months ended September 30, 2003 compared to a 0.25% rate of return for the three months ended September 30, 2002 and an increase in the amount of the alternative investments resulting from cash flows generated from operating activities during 2003. Every alternative investment strategy employed by the Company was profitable during the three months ended September 30, 2003. Alternative investment strategies principally contributing to the gains in the current period were opportunistic, distressed securities, commodity trading advisers, and long/short equity.

Losses, benefits and experience refunds. Losses, benefits and experience refunds were $139.7 million for the three months ended September 30, 2003 compared to $95.5 million for the three months ended September 30, 2002. Property and casualty losses were $133.9 million for the three months ended September 30, 2003 compared to $84.5 million for the three months ended September 30, 2002. The increase in property and casualty losses resulted from increased net premiums earned in the current year. Life and annuity benefits and experience refunds were $5.8 million for the three months ended September 30, 2003, which principally related to the accretion of liability for future benefits on contracts written in prior years, compared to $11.0 million for the three months ended September 30, 2002.

Acquisition costs. Acquisition costs were $36.7 million for the three months ended September 30, 2003 compared to $22.7 million for the three months ended September 30, 2002. The increase in acquisition costs was principally a result of the Company’s increase in property and casualty gross premiums

written. Acquisition costs are customarily associated with the type of premium written by the Company. Generally, acquisition costs fluctuate with business volume and changes in product mix. A significant component of deferred policy acquisition costs are ceding commissions paid to the buyer of the Company’s reinsurance products.

Interest expense. Interest expense was $5.4 million for the three months ended September 30, 2003 compared to $7.4 million for the three months ended September 30, 2002. The decrease resulted principally from lower interest expense on funds withheld from reinsurers of the Company and on deposit liabilities, partially offset by a higher principal balance on the swap transaction accounted for as a bank loan for the three months ended September 30, 2003 compared to the same period in 2002.

General and administrative expenses. General and administrative expenses were $10.9 million for the three months ended September 30, 2003 compared to $4.9 million for the three months ended September 30, 2002. The increase resulted principally from expenses associated with expanding the Company’s traditional reinsurance and insurance operations capabilities through the hiring of additional staff.

Net income (loss). Net income for the three months ended September 30, 2003 was $38.8 million compared to a net loss of $14.3 million for the three months ended September 30, 2002. The results for the three months ended September 30, 2003 are principally attributable to underwriting profits from the Company’s traditional risk transfer reinsurance products and improved rate of return on the Company’s alternative investments compared to the same period in 2002.

Nine months ended September 30, 2003 compared to nine months ended September 30, 2002

Gross premiums written. Property and casualty gross premiums written for the nine months ended September 30, 2003 were $784.9 million compared to gross premiums written of $531.1 million, comprised of $516.4 million from property and casualty and $14.7 million from life and annuity, for the nine months ended September 30, 2002. Gross premiums written for property and casualty increased principally due to increased production of traditional reinsurance business and the commencement of the Company’s traditional insurance operations in the first quarter of 2003.

Reinsurance premiums ceded. Reinsurance premiums ceded for the nine months ended September 30, 2003 were $102.6 million compared to $53.4 million for the nine months ended September 30, 2002. Reinsurance premiums ceded were principally related to the Company’s quota-share retrocessional and aggregate stop loss agreements with Grand Central Re. In addition during 2003, the Company has purchased specific reinsurance. As the Company’s reinsurance and insurance business grows, the Company is purchasing, and expects to continue to purchase, additional retrocessional coverage consistent with its risk management objectives.

Net premiums earned. Net premiums earned for the nine months ended September 30, 2003 were $465.8 million compared to $247.6 million for the nine months ended September 30, 2002. Property and casualty accounted for all of the $465.8 million of net premiums earned, after the deduction of $58.1 million of earned premiums ceded, for the nine months ended September 30, 2003 compared to property and casualty net premiums earned of $235.1 million, after the deduction of $32.0 million of earned premiums ceded, and life and annuity net premiums earned of $12.5 million, after the deduction of $2.2 million of earned premiums ceded, for the nine months ended September 30, 2002.

Net investment income. Net investment income was $43.5 million for the nine months ended September 30, 2003 compared to $39.6 million for the nine months ended September 30, 2002. The increase was principally attributable to the increase in fixed maturities investments resulting from cash provided by the Company’s operating and financing activities since September 30, 2002, partially offset by a decline in the yield on the fixed maturities investments.

Net gains on alternative investments. Net gains on alternative investments were $95.2 million for the nine months ended September 30, 2003 compared to $6.7 million for the nine months ended September 30, 2002. The increase was attributable to both a 12.77% rate of return on the alternative investments for the nine months ended September 30, 2003 compared to a 1.11% rate of return for the nine months ended September 30, 2002 and an increase in the amount of the alternative investments resulting from cash flows generated from operating activities during 2003. Every alternative investment strategy employed by the Company was profitable during the nine months ended September 30, 2003. Alternative investment strategies principally contributing to income during the nine months ended September 30, 2003 were distressed securities, commodity trading advisers, emerging markets, global macro and event driven arbitrage.

Losses, benefits and experience refunds. Losses, benefits and experience refunds were $368.5 million for the nine months ended September 30, 2003 compared to $229.9 million for the nine months ended September 30, 2002. Property and casualty losses were $344.8 million for the nine months ended September 30, 2003 compared to $195.2 million for the nine months ended September 30, 2002. The increase in property and casualty losses was related to the increase in property and casualty premiums written and earned during the nine months ended September 30, 2003 compared to the same period in 2002. The loss ratio for property and casualty business for the nine months ended September 30, 2003 was 74% compared to 83% for the nine months ended September 30, 2002. The decrease is reflective of the increased traditional reinsurance and insurance underwriting production which is currently producing lower loss ratios. Life and annuity benefits were $23.7 million for the nine months ended September 30, 2003 which principally related to the accretion of liability for future benefits on contracts written in prior years, compared to $34.7 million for the nine months ended September 30, 2002. The decrease was principally attributable to no premiums written and earned during the nine months ended September 30, 2003 compared to $14.7 million of premiums written and $12.5 million of premiums earned during the same period in 2002.

Acquisition costs. Acquisition costs were $111.1 million for the nine months ended September 30, 2003 compared to $61.8 million for the nine months ended September 30, 2002. The increase in acquisition costs was principally a result of the Company’s increase in property and casualty gross premiums written.

Interest expense. Interest expense was $20.3 million for the nine months ended September 30, 2003 compared to $15.2 million for the nine months ended September 30, 2002. The increase resulted principally from interest expense on additional funds withheld from reinsurers of the Company and on increased deposit liabilities and increased interest expense on the swap transaction resulting from a higher principal balance for the nine months ended September 30, 2003 compared to the same period in 2002.

General and administrative expenses. General and administrative expenses were $29.9 million for the nine months ended September 30, 2003 compared to $15.5 million for the nine months ended September 30, 2002. The increase resulted principally from expenses associated with establishing the Company’s insurance operations and expanding the Company’s traditional reinsurance capabilities through the hiring of additional staff. The Company’s general and administrative expense ratio to net premiums earned was 6.41% for the nine months ended September 30, 2003, compared to 6.24% for the same period in 2002.

Net income (loss). Net income for the nine months ended September 30, 2003 was $84.2 million compared to a net loss of $16.7 million for the nine months ended September 30, 2002. The results for the nine months ended September 30, 2003 are principally attributable to underwriting profits from the Company’s traditional risk transfer and alternative risk transfer reinsurance products and increased income from the Company’s alternative investments compared to the same period in 2002.

Financial Condition

Cash and invested assets. Aggregate invested assets, comprising cash, fixed maturities and alternative investments were $2,497.5 million at September 30, 2003 compared to $2,024.8 million at December 31, 2002. The increase in cash and invested assets resulted principally from cash flows from operations of $329.0 million and a $50.0 million increase in the swap transaction accounted for as a bank loan.

Property and casualty losses and experience refunds. Property and casualty losses and experience refunds totaled $927.9 million at September 30, 2003 compared to $778.1 million at December 31, 2002. The increase in property and casualty losses and experience refunds is from losses and experience refunds related to increased premiums earned during the nine months ended September 30, 2003. The increase is partially offset by a decrease in these liabilities, resulting from an amendment, effective January 1, 2003, to the terms of a property and casualty contract written in a prior year. The amendment was a material change to the contract, causing the Company to record the amended contract as a deposit arrangement, thereby reducing the liabilities for property and casualty losses and experience refunds by $160.7 million and increasing the deposit liabilities by a corresponding amount.

Life and annuity benefits and experience refunds. Gross life and annuity benefits and experience refunds totaled $383.4 million at September 30, 2003 compared to $405.0 million at December 31, 2002. The decrease in the nine months ended September 30, 2003 was principally attributable to benefit payments on existing contracts in force.

Losses recoverable from reinsurers. Losses recoverable from reinsurers totaled $235.7 million at September 30, 2003 compared to $212.2 million at December 31, 2002, principally reflecting losses ceded under the Company’s retrocessional agreements. At September 30, 2003, two retrocessionaires accounted for 60.3% and 33.4% of the Company’s losses recoverable from reinsurers. Both retrocessionaires have a financial strength rating of “A” by A.M. Best Company.

Bank loan. In March 2002, Max Re completed a $100.0 million sale of shares of Max Re Diversified to a third party financial institution. Simultaneous with the sale, Max Re entered into a total return swap with the purchaser of these shares whereby Max Re received the return earned on the Max Re Diversified shares in exchange for a variable rate of interest based on LIBOR plus a spread. Under GAAP, these transactions were viewed on a combined basis and accounted for as a financing transaction, which resulted in the recording of a $100.0 million bank loan.

Shareholders’ equity. The Company’s shareholders’ equity increased to $789.0 million at September 30, 2003 from $710.7 million of shareholders’ equity and minority interest at December 31, 2002 principally reflecting income of $84.2 million for the nine months ended September 30, 2003, partially offset by holding losses on fixed maturities arising during the period of $3.7 million and dividends paid and minority interest distributions in the amount of $2.4 million.

Liquidity and capital resources. As a holding company, Max Re Capital’s principal assets are its investments in the voting common shares of its principal subsidiary, Max Re, and the common shares of its other subsidiaries. The Company’s principal source of funds is from interest income on cash balances and cash dividends from its subsidiaries, including Max Re. The payment of dividends is limited under Bermuda insurance laws. In particular, Max Re may not declare or pay any dividends if it is in breach of its minimum solvency or liquidity levels under Bermuda law or if the declaration or payment of the dividends would cause it to fail to meet the minimum solvency or liquidity levels under Bermuda laws. At September 30, 2003, Max Re, which is required to have $341.4 million in statutory capital and surplus in order to pay dividends, had $660.7 million in statutory capital and surplus.

Capital resources. At September 30, 2003, the Company’s capital structure consisted of equity. Total capitalization after deducting loans to management and including retained earnings and accumulated other comprehensive income amounted to $789.0 million as compared with $710.7 million at December 31, 2002. The Company has flexibility with respect to capitalization as the result of its access to the debt and equity markets. The Company regularly reviews its capital adequacy and believes its current level of capital is sufficient to support the Company’s reinsurance and insurance operations. The Company will consider issuing debt, raising additional equity or entering into retrocessional reinsurance contracts if it concludes that additional capital resources are necessary to continue growing its business.

In the ordinary course of business, the Company is required to provide letters of credit or other regulatorily approved security to certain of its ceding reinsurance companies to meet contractual and regulatory requirements.

The Company has three letter of credit facilities as of September 30, 2003. The Company’s primary letter of credit facility is with a syndicate of commercial banks, one of which is affiliated with a director of Max Re Capital. In June 2003, the Company amended the terms of this facility principally to lower the cost of the facility and reduced the capacity of the facility from $375.0 million to $270.0 million. In accordance with the facility agreement, the syndicate will issue letters of credit that may total up to $243.0 million secured by fixed maturities and up to $27.0 million secured by alternative investments. The Company believes that the terms of this letter of credit facility are comparable to the terms that the Company would expect to negotiate with an unrelated party. At September 30, 2003 and December 31, 2002, letters of credit totaling $259.9 million and $284.6 million, respectively, were issued and outstanding under this facility. Fixed maturities and cash equivalents with a fair value of $297.2 million and Max Re Diversified shares with a fair value of $71.9 million at September 30, 2003 were pledged as collateral for these letters of credit.

The Company also has a $100.0 million letter of credit facility with HVB, a shareholder of the Company and an affiliate of a director of Max Re Capital. HVB is the majority shareholder of Grand Central Re, which is managed by Max Re Managers and in which the Company has a 7.5% equity interest. The Company believes that the terms of this letter of credit facility are comparable to the terms that the Company would expect to negotiate at arms’ length with an unrelated party. At September 30, 2003 and December 31, 2002, letters of credit totaling $79.6 million and $58.5 million, respectively, were issued by HVB under this facility. All letters of credit issued under this facility are collateralized by a portion of the Company’s invested assets. Fixed maturities and cash equivalents with a fair value of $47.3 million and Max Re Diversified shares with a fair value of $78.4 million at September 30, 2003 were pledged as collateral for these letters of credit.

On each of January 31, 2003, May 1, 2003 and July 25, 2003, Max Re Capital’s Board of Directors declared a quarterly shareholder dividend of $0.02 per share payable to shareholders of record on February 17, 2003, May 12, 2003 and August 8, 2003, respectively. Continuation of cash dividends in the future will be at the discretion of the Board of Directors and will be dependent upon the Company’s results of operations and cash flows, and its financial position and capital requirements, general business conditions, legal, tax, regulatory and any contractual restrictions on the payment of dividends and other factors the Board of Directors deems relevant. On October 31, 2003, the Board of Directors declared a dividend of $0.03 per share to be paid on November 24, 2003 to shareholders of record on November 14, 2003.

The Company’s insurer financial strength ratings were unchanged during the nine months ended September 30, 2003. The Company’s ratings are “A- (Excellent)” by A.M. Best Company, Inc. and “A (Strong)” by Fitch, Inc. These ratings reflect each rating agency’s opinion of the Company’s financial strength, operating performance and ability to meet obligations. They are not evaluations directed toward the protection of investors.

New Accounting Pronouncements

FAS Interpretation No. 46—Consolidation of Variable Interest Entities

In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46—Consolidation of Variable Interest Entities. This interpretation establishes complex consolidation criteria based on an analysis of risks and rewards, not control, and is a significant modification to previous accounting principles. The interpretation became effective for all new transactions after January 31, 2003 and is expected to become effective in the Company’s fourth quarter of 2003 for all other existing transactions. The Company believes, based on the authoritative literature currently available, that the adoption of this interpretation will not have a material impact on the Company’s financial position, results of operations or cash flows.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

The Company engages in an investment strategy that combines a fixed maturities investment portfolio and an alternative investment portfolio that employ strategies to manage investment risk. The Company attempts to maintain adequate liquidity in its fixed maturities investment portfolio to fund operations, pay reinsurance and insurance liabilities and claims and provide funding for unexpected events. The Company seeks to manage its credit risk through industry and issuer diversification, and interest rate risk by monitoring the duration and structure of the Company’s investment portfolio relative to the duration and structure of its liability portfolio. The Company is exposed to potential loss from various market risks, primarily changes in interest rates and equity prices. Accordingly, earnings would be affected by these changes, which could be material. The Company manages its market risk based on Board-approved investment policies. With respect to its fixed maturities investment portfolio, the Company’s risk management strategy and investment policy is to invest in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to particular ratings categories and any one issuer. The Company selects investments with characteristics such as duration, yield, currency and liquidity that are tailored to the cash outflow characteristics of the Company’s property and casualty and life and annuity liabilities.

As of September 30, 2003, the Company did not hold any high-yield investments in its fixed maturities investment portfolio. Currently, the Company’s policy is not to hold securities rated lower than BBB-/BAA- in its fixed maturities investment portfolio. At September 30, 2003, the estimated impact on the fixed maturities investment portfolio from an immediate 100 basis point increase in market interest rates would have resulted in an estimated decrease in market value of 3.81%, or approximately $62.1 million, and the impact on the fixed maturities investment portfolio from an immediate 100 basis point decrease in market interest rates would have resulted in an estimated increase in market value of 3.94%, or approximately $64.2 million.

With respect to the Company’s alternative investment portfolio, the Company does not directly control the allocation of its assets to strategies or underlying funds, nor does the Company control the manner in which they are invested by the Company’s fund managers. However, the Company consistently and systematically monitors the strategies and funds in which it is invested, and the Company believes its overall risk is limited as a result of its selected strategies’ low volatility and low correlation to the bond market, the stock market and each other. At September 30, 2003, the estimated impact on the alternative investment portfolio from an immediate 100 basis point increase in market interest rates would have resulted in an estimated decrease in market value of 2.2%, or approximately $17.3 million, and the impact on the alternative investment portfolio from an immediate 100 basis point decrease in market interest rates would have resulted in an estimated increase in market value of 2.2%, or approximately $17.3 million.

ITEM 4. Controls and Procedures

Disclosure Controls and Internal Controls. The Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, the “Exchange Act”) (“Disclosure Controls”) are controls and other procedures that are designed with the objective of ensuring that information required to be disclosed in the Company’s reports filed under the Exchange Act, such as this quarterly report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Internal control over financial reporting (“Internal Controls”) is a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer,

and effected by the Board, management and other personnel, with the objective of providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal Controls also include policies and procedures that:

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Limitations on the effectiveness of controls. Although the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, believes that the Company’s Disclosure Controls and Internal Controls currently provide reasonable assurance that the Company’s desired control objectives have been met, management does not expect that the Company’s Disclosure Controls or Internal Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Quarterly evaluation of the Company’s Disclosure Controls. As of September 30, 2003, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s Disclosure Controls. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded, subject to the limitations noted above, that the design and operation of these Disclosure Controls were effective to ensure that material information relating to the Company is made known to management, including the Chief Executive Officer and Chief Financial Officer, particularly during the period when the Company’s periodic reports are being prepared.

PART II OTHER INFORMATION

ITEM 1. Legal Proceedings

At September 30, 2003, the Company was not a party to any material litigation or arbitration. The Company anticipates that it will be subject to litigation and arbitration from time to time in the ordinary course of business.

ITEM 2. Changes in Securities and Use of Proceeds

At a Special Meeting of Shareholders of Max Re Capital on July 30, 2003, the shareholders voted to approve amendments to the Company’s bye-laws. Certain of the approved amendments modified the rights of the holders of the Company’s common shares by (a) providing that the Board of Directors of the Company shall, with respect to any matter required to be submitted to a vote of the shareholders of Max Re, be required to submit a proposal relating to such matters to the shareholders of the Company and shall vote all the shares of Max Re owned by the Company in accordance with and proportional to such vote of the Company’s shareholders; (b) reducing from less than 9.9% to less than 9.5% the limitation on voting rights of the Company’s common shares and making certain technical changes to clarify this limitation; (c) reducing from less than 9.9% to less than 9.5% the maximum percentage of the Company’s common shares that may be owned by any person; (d) reducing from 60% to 50% the total issued and outstanding common shares that are required for a quorum at a general meeting of the Company; and (e) making future amendments of the bye-laws subject to the approval of a majority of the votes cast instead of the majority of the shares entitled to vote.

For more information on the amendments set forth above or the other amendments approved on July 30, 2003, see Max Re Capital’s proxy statement dated June 27, 2003.

ITEM 3. Defaults Upon Senior Securities

Not applicable.

ITEM 4. Submission of Matters to a Vote of Security Holders

The description of the Company’s Special Meeting of Shareholders held on July 30, 2003 contained in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 is incorporated by reference herein.

ITEM 5. Other Information

Not applicable.

ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit		Description

3.1		Amended and Restated Bye-laws of Max Re Capital Ltd.

10.1		Letter of Credit Reimbursement Agreement dated as of September 19, 2003 between Max Re Ltd. and Fleet National Bank.

31.1		Certification of the Chief Executive Officer filed herewith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer filed herewith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of the Chief Executive Officer furnished herewith pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of the Chief Financial Officer furnished herewith pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1		Factors Affecting Future Financial Results (incorporated by reference to Exhibit 99.1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission on March 20, 2003).

(b) Reports on Form 8-K

On August 5, 2003, Max Re Capital filed a Current Report on Form 8-K reporting (i) that its shareholders, at a Special General Meeting of Shareholders held on July 30, 2003, approved certain amendments to the Company’s Bye-Laws, (ii) its earnings for its second quarter ended June 30, 2003 and (iii) the declaration on July 25, 2003 of a dividend payable to shareholders of record on August 8, 2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MAX RE CAPITAL LTD.

/s/ ROBERT J. COONEY

Name: Robert J. Cooney

Title: President and Chief Executive Officer

Date November 3, 2003

/s/ KEITH S. HYNES
Name: Keith S. Hynes
Title: Executive Vice President and Chief Financial Officer

Date: November 3, 2003

S-1

EX-3.1 3 dex31.htm AMENDED AND RESTATED BYE-LAWS OF MAX RE CAPITAL LTD. Amended and Restated Bye-laws of Max Re Capital Ltd.

Exhibit 3.1

AMENDED AND RESTATED BYE-LAWS

Max Re Capital Ltd.

TABLE OF CONTENTS

		Page No.
INTERPRETATION		1

1.	Interpretation	1

BOARD OF DIRECTORS		5

2.	Board of Directors	5
3.	Management of the Company	5
4.	Power to appoint managing director or chief executive officer	5
5.	Power to appoint manager	5
6.	Power to authorise specific actions	5
7.	Power to appoint attorney	5
8.	Power to delegate to a committee	6
9.	Power to appoint and dismiss employees	7
10.	Power to borrow and charge property	7
11.	Exercise of power to purchase shares of or discontinue the Company	7
12.	Election of Directors	8
13.	Defects in appointment of Directors	10
14.	Alternate Directors/Observer	10
15.	Removal of Directors	10
16.	Other Vacancies on the Board	10
17.	Notice of meetings of the Board	11
18.	Quorum at meetings of the Board	11
19.	Meetings of the Board	11
20.	Unanimous written resolutions	12
21.	Contracts and disclosure of Directors’ interests	12
22.	Remuneration of Directors	12
23.	Other interests of Directors	13

OFFICERS		13

24.	Officers of the Company	13
25.	Appointment of Officers	13
26.	Remuneration of Officers	13
27.	Duties of Officers	14
28.	Chairman of meetings	14
29.	Register of Directors and Officers	14

MINUTES		14

30.	Obligations of Board to keep minutes	14

		Page No.
INDEMNITY		15

31.	Indemnification of Directors and Officers of the Company	15
32.	Waiver of claim by Member	16

MEETINGS		16

33.	Notice of annual general meeting	16
34.	Notice of special general meeting	16
35.	Accidental omission of notice of general meeting; Business to be conducted	17
36.	Meeting called on requisition of Members	17
37.	Short notice	17
38.	Postponement of meetings	17
39.	Quorum for general meeting	18
40.	Adjournment of meetings	18
41.	Attendance at meetings	18
42.	Written resolutions	18
43.	Attendance of Directors	19
44.	Voting at meetings	19
45.	Voting on show of hands	19
46.	Decision of chairman	20
47.	Demand for a poll	20
48.	Seniority of joint holders voting	21
49.	Instrument of proxy	21
50.	Representation of corporations at meetings	22

SHARE CAPITAL AND SHARES		23

51.	Rights of shares	23
52.	Limitation on voting rights of Controlled Shares.	25
53.	Power to issue shares	27
54.	Variation of rights and alteration of share capital	28
55.	Registered holder of shares	29
56.	Death of a joint holder	29
57.	Share certificates	29
58.	Calls on shares	29
59.	Forfeiture of shares	30

REGISTER OF MEMBERS		30

60.	Contents of Register of Members	30
61.	Inspection of Register of Members	30
62.	Determination of record dates	30

TRANSFER OF SHARES		31

63.	Instrument of transfer	31

		Page No.
64.	Restriction on transfer	31
65.	Transfers by joint holders	32
66.	Lien on shares	32

TRANSMISSION OF SHARES		33

67.	Representative of deceased Member	33
68.	Registration on death or bankruptcy	33

DIVIDENDS AND OTHER DISTRIBUTIONS		34

69.	Declaration of dividends by the Board	34
70.	Other distributions	34
71.	Reserve fund	34
72.	Deduction of amounts due to the Company	34
73.	Unclaimed dividends	34
74.	Interest on dividend	34

CAPITALIZATION		34

75.	Issue of bonus shares	34

ACCOUNTS AND FINANCIAL STATEMENTS		35

76.	Records of account	35
77.	Financial year end	35
78.	Financial statements	35

AUDIT		35

79.	Appointment of Auditor	35
80.	Remuneration of Auditor	36
81.	Vacation of office of Auditor	36
82.	Access to books of the Company	36
83.	Report of the Auditor	36

NOTICES		36

84.	Notices to Members of the Company	36
85.	Notices to joint Members	37
86.	Service and delivery of notice	37

SEAL OF THE COMPANY		37

87.	The seal	37
88.	Manner in which seal is to be affixed	37

BENEFITS, PENSIONS AND INSURANCE		37

iii

		Page No.
89.	Benefits	37
90.	Insurance	38
91.	Limitation on Accountability	38

UNTRACED MEMBERS		38

92.	Sale of Shares	38
93.	Instrument of Transfer	39
94.	Proceeds of Sale	39

WINDING UP		39

95.	Determination to liquidate	39
96.	Winding up/distribution by liquidator	39

ALTERATION OF BYE-LAWS		40

97.	Alteration of Bye-laws	40

CERTAIN SUBSIDIARIES		40

98.	Voting of subsidiary shares	40
99.	Bye-Laws or Articles of Association of certain subsidiaries	40

Schedule – Form A (Bye-law 59)
Schedule – Form B (Bye-law 63)
Schedule – Form C (Bye-law 68)

INTERPRETATION

1.	Interpretation

(1) In these Bye-laws the following words and expressions shall, where not inconsistent with the context, have the following meanings respectively:-

(a) “Act” means the Companies Act 1981 as amended and replaced from time to time;

(b) “Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person, provided that no Member of the Company shall be deemed an Affiliate of another Member solely by reason of an investment in the Company. For purposes of this definition, the term “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities, by contract or otherwise.

(d) “Board” means the Board of Directors appointed or elected pursuant to these Bye-laws and acting by resolution in accordance with the Act and these Bye-laws or the Directors present at a meeting of Directors at which there is a quorum;

(e) “Business Day” means any day, other than a Saturday, a Sunday or any day on which banks in Hamilton, Bermuda or The City of New York, United States, are authorised or obligated by law or executive or other order to close;

(f) “Cause” means shall mean (i) habitual drug or alcohol use which impairs the ability of the Director to perform his/her duties hereunder; (ii) Director’s conviction by a court of competent jurisdiction, or a pleading of “no contest” or guilty to a felony or the equivalent if outside the United States; (iii) Director’s engaging in fraud, embezzlement or any other illegal conduct with respect to the Company which acts are materially harmful to, either financially, or to the business reputation of, the Company; (iv) Director’s wilful failure or refusal to perform his duties as a director, or (vi) the Director otherwise breaches any material written Company policy regarding the conduct of its directors and such breach results in material economic or reputational harm to the Company.

(g) “Code” means the United States Internal Revenue Code of 1986, as amended from time to time, or any federal statute from time to time in effect that has replaced such statute, and any reference in these Bye-laws to a provision of the Code or a rule or regulation promulgated thereunder means such provision, rule or regulation as amended from time to time or any provision of a federal law, or any federal rule or regulation, from time to time in effect that has replaced such provision, rule or regulation;

(h) “Common Shares” means the common shares of the Company, initially having a par value of US$1.00 per share, and includes a fraction of a Common Share;

(i) “Company” means the company for which these Bye-laws are approved and confirmed;

(j) “Director” means a director of the Company;

(k) “Dividend” includes a bonus or capitalisation issue of shares;

(l) “Exchange Act” means the United States Securities Exchange Act of 1934, as amended from time to time, or any federal statute from time to time in effect that has replaced such statute, and any reference in these Bye-laws to a provision of the Exchange Act or a rule or regulation promulgated thereunder means such provision, rule or regulation as amended from time to time or any provision of a federal law, or any federal rule or regulation, from time to time in effect that has replaced such provision, rule or regulation;

(m) “Fair Market Value” means, with respect to a repurchase of any shares of the Company in accordance with these Bye-laws, (i) if such shares are listed on a securities exchange (or quoted in a securities quotation system), the average closing sale price of such shares on such exchange (or in such quotation system), or, if such shares are listed on (or quoted in) more than one exchange (or quotation system), the average closing sale price of the shares on the principal securities exchange (or quotation system) on which such shares are then traded, or, if such shares are not then listed on a securities exchange (or quotation system) but are traded in the over-the-counter market, the average of the latest bid and asked quotations for such shares in such market, in each case for the last five trading days immediately preceding the day on which notice of the repurchase of such shares is sent pursuant to these Bye-laws or (ii) if no such closing sales prices or quotations are available because such shares are not publicly traded or otherwise, the fair value of such shares as determined by one independent nationally recognised investment banking firm chosen by the Board and reasonably satisfactory to the Member whose shares are to be so repurchased by the Company, provided that the calculation of the Fair Market Value of the shares made by such appointed investment banking firm (i) shall not include any discount relating to the absence of a public trading market for, or any transfer restrictions on, such shares, and (ii) such calculation shall be final and the fees and expenses stemming from such calculation shall be borne by the Company or its assignee, as the case may be;

(n) “general meeting,” “general meeting of the Company,” “Special general meeting” and “special general meeting of the Company” each means a meeting of the Members of the Company having the right to attend and vote thereat;

(o) “Member” means the Person registered in the Register of Members as the holder of shares in the Company and, when two or more Persons are so registered as joint holders of shares, means the Person whose name stands first in the Register of Members as one of such joint holders or all of such Persons as the context so requires;

(p) “Notice” means written notice as further defined in these Bye-laws unless otherwise specifically stated;

(q) “Officer” means any Person appointed by the Board to hold an office in the Company;

(r) “Person” means any individual, company, corporation, firm, partnership, trust or any other business, enterprise, entity or person, whether or not recognised as constituting a separate legal entity;

(s) “Preferred Shares” means the preferred shares of the Company and includes a fraction of a Preferred Share;

(t) “Register of Directors and Officers” means the Register of Directors and Officers referred to in these Bye-laws;

(u) “Register of Members” means the Register of Members referred to in these Bye-laws;

(v) “Resident Representative” means any Person appointed to act as resident representative and includes any deputy or assistant resident representative;

(w) “Secretary” means the person appointed to perform any or all the duties of secretary of the Company and includes any deputy or assistant secretary;

(x) “Securities Act” means the United States Securities Act of 1933, as amended from time to time, or any federal statute from time to time in effect which has replaced such statute, and any reference in these Bye-laws to a provision of the Securities Act or a rule or regulation promulgated thereunder means such provision, rule or regulation as amended from time to time or any provision of a federal law, or any federal rule or regulation, from time to time in effect that has replaced such provision, rule or regulation;

(y) “share” means any share or any class or series of shares in the share capital of the Company, whether issued and outstanding or not, and includes a fraction of a share;

(z) “Subsidiary”, with respect to any Person, means a company, more than fifty percent (50%) (or, in the case of a wholly owned subsidiary, one hundred percent (100%)) of the outstanding Voting Shares of which are owned, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person, or any such Person and one or more other Subsidiaries;

(aa) “Unadjusted Basis”, when used with respect to the aggregate voting rights held by any Member, refers to the determination of such rights without reference to the provisions relating to the adjustment of voting rights contained in Bye-law 52;

(bb) “United States” and “U.S.” each means the United States of America and any territory and political subdivision thereof;

(cc) “U.S. Person” means a “United States Person” as defined in Section 7701(a)(30) of the Code;

(dd) “Voting Share” of any Person means any share in such Person conferring voting rights on the holder thereof (other than such voting rights as would exist solely in relation to a proposal to alter or vary the rights attaching to such shares solely upon the future occurrence of a contingency or voting rights attaching solely by virtue of the provisions of the Act).

(2) In these Bye-laws, where not inconsistent with the context:

(a) words denoting the plural number include the singular number and vice versa;

(b) words denoting the masculine gender include the feminine gender;

(d) the word:

(i) “may” shall be construed as permissive;

(ii) “shall” shall be construed as imperative; and

(e) unless otherwise provided herein words or expressions defined in the Act shall bear the same meaning in these Bye-laws.

(3) Expressions referring to writing or written shall, unless the contrary intention appears, include facsimile, printing, lithography, photography, electronic mail and other modes of representing words in a visible form.

(4) Headings used in these Bye-laws are for convenience only and are not to be used or relied upon in the construction hereof.

(5) In these Bye-laws, (i) powers of delegation shall not be restrictively construed but the widest interpretation shall be given thereto, (ii) the word “Board” in the context of the exercise of any power contained in these Bye-laws includes any committee consisting of one or more individuals appointed by the Board, any Director holding executive office and any local or divisional Board, manager or agent of the Company to which or, as the case may be, to whom the power in question has been delegated in accordance with these Bye-laws, (iii) no power of delegation shall be limited by the existence of any other power of delegation and (iv) except where expressly provided by the terms of delegation, the delegation of a power shall not exclude the concurrent exercise of that power by any Person who is for the time being authorised to exercise it under Bye-laws or under another delegation of the powers.

BOARD OF DIRECTORS

2.	Board of Directors

The business of the Company shall be managed and conducted by the Board.

3.	Management of the Company

(1) In managing the business of the Company, the Board may exercise all such powers of the Company as are not, by statute or by these Bye-laws, required to be exercised by the Company in general meeting and the business and affairs of the Company shall be so controlled by the Board. The Board also may present any petition and make any application in connection with the winding up or liquidation of the Company.

(2) No regulation or alteration to these Bye-laws made by the Company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation or alteration had not been made.

(3) The Board may procure that the Company pays all expenses incurred in promoting and incorporating the Company.

4.	Power to appoint managing director or chief executive officer

The Board may from time to time appoint one or more Directors to the office of managing director or chief executive officer of the Company who shall, subject to the control of the Board, supervise and administer all of the general business and affairs of the Company.

5.	Power to appoint manager

The Board may appoint a Person or a body of Persons to act as manager of the Company’s day to day business and may entrust to and confer upon such manager such powers and duties as it deems appropriate for the transaction or conduct of such business.

6.	Power to authorise specific actions

The Board may from time to time and at any time authorise any company, firm, person or body of persons to act on behalf of the Company for any specific purpose and in connection therewith to execute any agreement, document or instrument in the name and on behalf of the Company.

7.	Power to appoint attorney

The Board may from time to time and at any time by power of attorney appoint any Person or body of Persons, whether nominated directly or indirectly by the Board, to be an

attorney of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board) and for such period (or for unspecified length of time) and subject to such conditions as it may think fit and any such power of attorney may contain such provisions for the protection and convenience of Persons dealing with any such attorney as the Board may think fit and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions so vested in the attorney. Such attorney may, if so authorised under the seal of the Company, execute any deed or instrument under such attorney’s personal seal with the same effect as the affixation of the seal of the Company.

8.	Power to delegate to a committee

The Board may delegate any of its powers to a committee appointed by the Board (and the Board may appoint alternative committee members or authorise the committee members to appoint their own alternates), which may consist partly or entirely of non-Directors. Without limiting the foregoing, such committees may include:

(a) an Executive Committee, which shall have all of the powers of the Board between meetings of the Board;

(b) a Finance Committee, which shall, among other things, establish, review and monitor the investment policies of the Company and the Company’s Subsidiaries or other companies associated with the Company, review investment decisions and review and monitor any provider of investment services;

(c) an Audit and Risk Management Committee, which shall, among other things, have direct authority to: (i) appoint the independent Auditors of the Company and the Company’s subsidiaries on behalf of the Board, subject to the powers of the Members; (ii) set compensation for, subject to Bye-law 80, and oversee the work of independent Auditors of the Company and the Company’s subsidiaries; (iii) adopt procedures for receiving accounting complaints and anonymous submissions from the employees of the Company or the Company’s subsidiaries regarding questionable accounting practices; (iv) establish pre-approval procedures for all audit and non-audit services provided by the independent Auditors, or any of their Affiliates, to the Company or the Company’s subsidiaries; and (v) establish an internal audit function of the Company and the Company’s subsidiaries;

(d) a Compensation Committee, which shall, among other things, establish and review the compensation policies and procedures of the Company and the Company’s Subsidiaries or other companies associated with the Company and make recommendations to the Board with respect to compensation of Officers;

(e) a Nominating Committee, which shall, among other things, propose to the Members or to continuing Directors, before any election of Directors by Members or the filling of any vacancy by the Board, a slate of director candidates equal in number to the vacancies to be filled;

(f) an Investment Committee, which shall, among other things, review the opening of bank accounts for the Company, agree investment funding agreements and enter into any loan or borrowing arrangements with certain financial institutions as they see fit; and

(g) an Underwriting Committee, which shall, among other things, establish, review and monitor the underwriting policies of the Company’s Subsidiaries or other companies associated with the Company, review underwriting decisions, monitor any appointed underwriting services provider, advise the Board with respect to actuarial services, review actuarial decisions, monitor any provider of actuarial services and otherwise monitor the risks insured or reinsured by the Company’s Subsidiaries or other companies associated with the Company.

All Board committees shall conform to such directions as the Board shall impose on them; provided, that each member shall have one vote, and each committee shall have the right as it deems appropriate to retain outside advisors and experts. Each committee may adopt rules for the conduct of its affairs, including rules governing the adoption of resolutions by unanimous written consent, and the place, time, and notice of meetings, as shall be advisable and as shall not be inconsistent with these Bye-laws regarding Board meetings or with any applicable resolution adopted by the Board. Notwithstanding the foregoing, no committee may hold a meeting within the United States. Each committee shall cause minutes to be made of all meetings of such committee and of the attendance thereat and shall cause such minutes and copies of resolutions adopted by unanimous consent to be promptly inscribed or incorporated by the Secretary in the minute book.

9.	Power to appoint and dismiss employees

The Board may appoint, suspend or remove any officer, manager, secretary, clerk, agent or employee of the Company and may fix their remuneration and determine their duties.

10.	Power to borrow and charge property

The Board may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and may issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the Company or any third party.

11.	Exercise of power to purchase shares of or discontinue the Company

(1) Purchase of Common Shares

(a) The Company shall have the power to purchase its shares. The Board may exercise all the powers of the Company to purchase all or any part of its own shares pursuant to Section 42A of the Act. Subject to Section 42A of the Act, if the Board in its absolute and unfettered discretion, on behalf of the Company, determines that ownership of shares of the Company by any Person may result in adverse tax, regulatory or legal consequences to the Company, any of its Subsidiaries or any of the Members, the Company will have the option, but not the obligation, to purchase all or part of the shares of the Company held by such Person (to the extent the Board, in the reasonable exercise of its discretion, determines it is necessary to

avoid or cure such adverse consequences) for immediately available funds in an amount equal to the Fair Market Value of such shares on the date the Company sends the Repurchase Notice referred to below (the “Repurchase Price”); provided, that the Board will use reasonable efforts to exercise this option equally among similarly situated Persons (to the extent possible under the circumstances). In that event, the Company will also be entitled to assign its purchase right to a third party or parties including one or more of the other Persons, with the consent of such assignee. Each Person shall be bound by the determination by the Company to purchase or assign its right to purchase such Person’s shares and, if so required by the Company, shall sell the number of shares of the Company that the Company requires it to sell.

(b) In the event that the Company or its assignee(s) determines to purchase any such shares, the Company shall provide each Person concerned with written notice of such determination (a “Repurchase Notice”) at least seven (7) calendar days prior to such purchase or such shorter period as each such Person may authorise, specifying the date on which any such shares are to be purchased and the Repurchase Price. The Company may revoke the Repurchase Notice at any time before it (or its assignee(s)) pays for the shares. Neither the Company nor its assignee(s) shall be obliged to give general notice to the Members of any intention to purchase or the conclusion of any purchase of shares of the Company. Payment of the Repurchase Price by the Company or its assignee(s) shall be by wire transfer or certified check and made at a closing to be held no less than seven (7) calendar days, unless such Person agrees to a shorter period, after receipt of the Repurchase Notice by the Member.

(2) Power to discontinue the Company

The Board may exercise all the powers of the Company to discontinue the Company to a named country or jurisdiction outside Bermuda pursuant to Section 132G of the Act.

(3) Restrictions on repurchases and exchanges

If the Company redeems, purchases or exchanges shares pursuant to this Bye-law 11, it shall do so only in a manner that the Board believes would not result, upon consummation of such redemption or purchase, in the number of total Common Shares of any Person, as a percentage of the shares of the Company, increasing to 9.5% or more on an Unadjusted Basis. Notwithstanding the foregoing, the Board, in its sole discretion and by unanimous consent of all of the Directors then in office, may waive the applicability of subparagraph (3) of this Bye-law.

12.	Election of Directors

(1) The Board shall consist of at least six (6) and no more than twenty-one (21) Directors, the exact number to be determined from time to time by resolution adopted by the affirmative vote of at least sixty-six and two-thirds percent (66-²/3%) of the Directors then in office; provided, however, that if no such resolution shall be in effect the number of Directors shall be eleven (11) Directors. Any increase in the size of the Board pursuant to this Bye-law 12(1) shall be deemed to be a vacancy and may be filled in accordance with Bye-law 16 hereof. Directors shall be elected, except in the case of a vacancy (as provided for in Bye-law 15 or 16, as the case may be), by the Members in the manner set forth in paragraph (2) of this Bye-law 12 at an annual general meeting or any special general meeting called for the purpose and who shall hold office for the term set forth in paragraph (3) of this Bye-law 12.

(2) Subject to the terms of any class or series of shares issued by the Company, no Person other than a Director retiring at the meeting shall, unless recommended by the Board or a committee thereof for election, be eligible for election as a Director at any general meeting unless not less than 120 days before the date appointed for the meeting there shall have been lodged at the Company notice in writing signed by Members holding at least 70% of the issued and outstanding shares entitled to vote at the meeting for which such notice is given of their intention to propose such person for election and also notice in writing signed by the person to be proposed of his or her willingness to be elected. Each such notice shall also include (i) the names and addresses, as they appear in the Register of Members, of the Members who intend to make the nomination and of the person or persons to be nominated, (ii) a representation that the Members are holders of record of shares entitled to vote at such meeting and intend to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (iii) the class and number of shares which are beneficially owned by the Members, (iv) a description of all arrangements or understandings between the Members and each nominee and any other person or persons nominations are to be made by the Members and (v) such other information regarding each nominee proposed by such Members as would be required to be included in a proxy statement filed pursuant to Regulation 14A under the Exchange Act, whether or not the Company is then subject to such regulation.

(3) At the first annual general meeting following the adoption of these Bye-laws, the Board shall be divided into three classes of Directors, namely Class 1, Class 2 and Class 3, each class to have approximately the same number of Directors as determined by the Board or any Nominating Committee of the Board. The initial term of the Class 1 Directors shall expire at the second annual general meeting following the adoption of these Bye-laws. The initial term of the Class 2 Directors shall expire at the third annual general meeting following the adoption of these Bye-laws. The initial term of the Class 3 Directors shall expire at the fourth annual general meeting following adoption of these Bye-laws. Following their initial terms, all classes of Directors shall be elected to three-year terms. Each Director shall serve until the expiration of such Director’s term or until such Director’s successor shall have been duly elected or appointed or until such Director’s office is otherwise vacated.

(4) No Member of the Company shall be permitted to vote any shares for or against Directors of the Company or directors of any subsidiary of the Company that is treated as a corporation for U.S. federal tax purposes if the vote of such shares would cause any Person to be a 9.5% U.S. Shareholder (as defined in Bye-law 52) of the Company or such subsidiary. All votes referred to the Company’s Members pursuant to Bye-law 98 shall be subject to this Bye-law 12(4).

(5) Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Shares issued by the Company shall have the right, voting separately by class or series, to elect Directors at an annual or special general meeting, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Board resolution creating such classes or series of Preferred Shares, and such Directors so elected shall not be divided into classes pursuant to this Bye-law 12 unless expressly provided by such terms.

13.	Defects in appointment of Directors

All acts done bona fide by any meeting of the Board or by a committee of the Board or by any person acting as a Director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director.

14.	Alternate Directors/Observer

There shall be no Alternate Directors and no Member or Director shall have the right to designate any person to attend meetings of the Board or Board Committees as a non-voting observer.

15.	Removal of Directors

(1) Subject to any provision to the contrary in these Bye-laws, Members holding a majority of the issued and outstanding shares entitled to vote at a general meeting or special meeting or conferring the right to vote on a resolution to remove a or such Director may, at any special general meeting convened and held in accordance with these Bye-laws, remove a Director provided that the notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention so to do and be served on such Director not less than 14 days before the meeting and at such meeting such Director shall be entitled to be heard on the motion for such Director’s removal. A Director may only be removed pursuant to this Bye-law 15 for Cause.

(2) A vacancy on the Board created by the removal of a Director under the provisions of subparagraph (1) of this Bye-law may be filled by the Members holding at least 70% of the issued and outstanding shares entitled to vote at a general meeting or special meeting or conferring the right to vote on such resolution and, in the absence of such election or appointment, the Board may fill the vacancy in accordance with Bye-law 16. A Director so appointed shall hold office for the balance of the term of such vacant Board position, or until such Director’s successor is elected or appointed or such Director’s office is otherwise vacated.

16.	Other Vacancies on the Board

(1) The Board shall have the power from time to time and at any time to appoint any person as a Director to fill a vacancy on the Board occurring as the result of an increase in the size of the Board pursuant to Bye-law 12(1), the death, disability, disqualification, resignation or removal of any Director or if such Director’s office is otherwise vacated. A Director so appointed shall hold office for the balance of the term of such vacant Board position, or until such Director’s successor is elected or appointed or such Director’s office is otherwise vacated.

(2) The Board may act notwithstanding any vacancy in its number but, if and so long as its number is reduced below the number fixed by these Bye-laws as the quorum necessary for the transaction of business at meetings of the Board, the continuing Directors or Director may, notwithstanding that the number of Directors is below the number fixed by or in accordance with these Bye-laws as the quorum or that there is only one continuing Director, act for the purpose of (i) filling vacancies on the Board, (ii) summoning a general meeting of the Company or circulating a proposed written resolution of the Members or (iii) preserving the assets of the Company.

(3) The office of Director shall be deemed to be vacated if the Director:

(a) is removed from office pursuant to these Bye-laws or is prohibited from being a Director by law;

(b) is or becomes bankrupt or makes any arrangement or composition with his creditors generally;

(d) resigns his or her office by notice in writing to the Company.

17.	Notice of meetings of the Board

(1) A Director may, and the Secretary on the requisition of a Director shall, at any time summon a meeting of the Board. Notice of a meeting of the Board must be provided at least five (5) days in advance of such meeting, and must state the date, time, place (which shall not be in the United States) and the general nature of the business to be considered at the meeting unless the Directors unanimously agree to waive notice of such meeting. Notwithstanding the foregoing, shorter notice shall be valid if it is reasonable under the circumstances.

(2) Notice of a meeting of the Board shall be deemed to be duly given to a Director if it is given to such Director verbally in person or by telephone or otherwise communicated or sent to such Director by post, cable, telex, telecopier, electronic mail, facsimile or other mode of representing words in a visible form at such Director’s last known address or any other address given by such Director to the Company for this purpose.

18.	Quorum at meetings of the Board

The quorum necessary for the transaction of business at a meeting of the Board shall be a majority of the Directors then in office, present in person.

19.	Meetings of the Board

(1) The Board may meet for the transaction of business, adjourn and otherwise regulate its meetings as it sees fit.

(2) Directors may participate in any meeting of the Board by means of such telephone, electronic or other communication facilities as permit all persons participating in the

meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting; provided, however, that no Director may participate in any meeting of the Board while physically present in the United States.

(3) A resolution put to the vote at a meeting of the Board shall be carried by the affirmative votes of a majority of the votes cast and in the case of an equality of votes the resolution shall fail.

20.	Unanimous written resolutions

A resolution in writing signed by all the Directors which may be in counterparts, shall be as valid as if it had been passed at a meeting of the Board duly called and constituted, such resolution to be effective on the date on which the last Director signs the resolution, provided that no such resolution shall be valid unless the last signature of a Director is affixed outside the United States (but, notwithstanding Bye-law 19(2) hereof, a Director who is not the last Director to sign may sign a resolution in writing even though he or she is in the United States). Such resolution shall be deemed to be adopted as an act of the Board, at the place where, and at the time when, the last signature of a Director is affixed thereto.

21.	Contracts and disclosure of Directors’ interests

(1) Any Director, or any Person associated, related or affiliated with whom any Director is associated, may act in a professional capacity for the Company and such Director or such Person shall be entitled to remuneration for professional services as if such Director were not a Director, provided that nothing herein contained shall authorise a Director or Director’s firm, partner or such company to act as Auditor of the Company.

(2) A Director who is directly or indirectly interested in a contract or proposed contract or arrangement with the Company shall declare the nature of such interest as required by the Act.

(3) Following a declaration being made pursuant to this Bye-law, and unless disqualified by the chairman of the relevant Board meeting, a Director may vote in respect of any contract or proposed contract or arrangement in which such Director is interested and may be counted in the quorum at such meeting.

22.	Remuneration of Directors

(1) The remuneration and benefits (if any) of the Directors, including without limitation, participation in any share option or incentive plan and loans (with the general or specific consent required by Section 96 of the Act) in connection therewith, shall be determined by the Board and shall be deemed to accrue from day to day. The Directors may also be paid all travel, hotel and other expenses properly incurred by them in attending and returning from meetings of the Board, any committee appointed by the Board, general meetings of the Company, or in connection with the business of the Company or their duties as Directors generally.

(2) A Director may hold any other office or place of profit under the Company (other than the office of Auditor) in conjunction with his or her office of Director for such period on such terms as to remuneration and otherwise as the Board may determine.

(3) The Board may award special remuneration and benefits to any Director undertaking any special work or services for, or undertaking any special mission on behalf of, the Company other than his or her ordinary routine work as a Director. Any fees paid to a Director who is also counsel or attorney to the Company, or otherwise serves it in a professional capacity, shall be in addition to his or her remuneration as a Director.

23.	Other interests of Directors

A Director may be or become a director or other officer of or otherwise interested in any company or Person promoted by the Company or in which the Company may be interested as member or otherwise, and no such Director shall be accountable to the Company for any remuneration or other benefits received by him or her as a director or officer of, or from his or her interest in, such other company or Person. The Board may also cause the voting power conferred by the shares in any other company or Person held or owned by the Company to be exercised in such manner in all respects as the Board thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company or Person, or voting or providing for the payment of remuneration to the directors or officers of such other company or Person.

OFFICERS

24.	Officers of the Company

The Officers of the Company shall consist of a President and a Vice President or a Chairman and a Deputy Chairman, a Secretary and such additional Officers, as the Board may from time to time determine all of whom shall be deemed to be Officers for the purposes of these Bye-laws. Subject to compliance with any requirement of the Act, the same individual may hold two (2) or more offices in the Company.

25.	Appointment of Officers

(1) The Board shall, as soon as possible after the statutory meeting of Members and after each annual general meeting, appoint a President and a Vice President or a Chairman and a Deputy Chairman who shall be Directors.

(2) The Secretary and additional Officers, if any, shall be appointed by the Board from time to time.

26.	Remuneration of Officers

The Officers shall receive such remuneration and benefits, including, without limitation, participation in any share option or incentive plan and loans (with the general or specific consent required by Section 96 of the Act) in connection therewith as the Board may from time to time determine.

27.	Duties of Officers

The Officers shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Board from time to time.

28.	Chairman of meetings

Unless otherwise agreed by a majority of those attending and entitled to attend and vote thereat, the Chairman, if there be one, and, if not, the President shall act as chairman at all meetings of the Members and of the Board at which such person is present. In their absence the Deputy Chairman or Vice President, if present, shall act as chairman and in the absence of all of them a chairman shall be appointed or elected by those present at the meeting and entitled to vote.

29.	Register of Directors and Officers

The Board shall cause to be kept in one or more books at the registered office of the Company a Register of Directors and Officers and shall enter therein the particulars required by the Act.

MINUTES

30.	Obligations of Board to keep minutes

(1) The Board shall cause minutes to be duly entered in books provided for the purpose:

(a) of all elections and appointments of Officers;

(b) of the names of the Directors present at each meeting of the Board and of any committee appointed by the Board; and

(c) of all resolutions and proceedings of general meetings of the Members, meetings of the Board, and meetings of committees appointed by the Board.

(2) Minutes prepared in accordance with the Act and these Bye-laws shall be kept by the Secretary at the registered office of the Company.

INDEMNITY

31.	Indemnification of Directors and Officers of the Company

(1) The Directors, Secretary and other Officers (such term to include, for the purposes of Bye-laws 31 and 32, any person appointed to any committee by the Board) and employees and agents of the Company who has acted or is acting in relation to any of the affairs of the Company and the liquidator or trustees (if any) who has acted or is acting in relation to any of the affairs of the Company, and every one of them, and their heirs, executors and administrators, shall be indemnified and secured harmless out of the assets of the Company from and against all actions, costs, charges, losses, damages and expenses which they or any of them, their heirs, executors or administrators, shall or may incur or sustain by or by reason of any act done, concurred in or omitted (actual or alleged) in or about the execution of their duty, or supposed duty, or in their respective offices or trusts, and none of them shall be answerable for the acts, receipts, neglects or defaults of the others of them or for joining in any receipts for the sake of conformity, or for any bankers or other persons with whom any moneys or effects belonging to the Company shall or may be lodged or deposited for safe custody, or for insufficiency or deficiency of any security upon which any moneys of or belonging to the Company shall be placed out on or invested, or for any other loss, misfortune or damage which may happen in the execution of their respective offices or trusts, or in relation thereto, provided, that, this indemnity shall not extend to any matter prohibited by the Act.

(2) Any indemnification under this Bye-law 31, unless ordered by a court, shall be made by the Company only as authorised in the specific case upon a determination that indemnification of such Person is proper in the circumstances because such Person has met the applicable standard of conduct set forth in paragraph (1) of this Bye-law 31. Such determination shall be made (i) by the Board by a majority vote of disinterested Directors or (ii) if a majority of the disinterested Directors so directs, by independent legal counsel in a written opinion or (iii) by the Members. The Company may purchase and maintain insurance to protect itself and any Director, Officer or other Person entitled to indemnification pursuant to this Bye-law 31, to the fullest extent permitted by law.

(3) Expenses (including, without limitation, attorneys’ fees) actually and reasonably incurred by any Director, Secretary, other Officer or employee of the Company in defending any civil, criminal, administrative or investigative action, suit or proceeding or threat thereof for which indemnification is sought pursuant to paragraph (a) of this Bye-law 31 shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Person to repay such amount if it shall be ultimately determined that such Person is not entitled to be indemnified by the Company as authorised in these Bye-laws or otherwise pursuant to applicable law; provided, that if it is determined by either (i) a majority vote of Directors who were not parties to such action, suit or proceeding or (ii) if a majority of the disinterested Directors so directs, by independent legal counsel in a written opinion, that there is no reasonable basis to believe that such Person is entitled to be indemnified by the Company as authorised in these Bye-laws or otherwise pursuant to applicable law, then no expense shall be advanced in accordance with this paragraph (c) of this Bye-law 31. Such expenses (including attorneys’ fees) incurred by agents of the Company may be paid upon the receipt of the aforesaid undertaking and such terms and conditions, if any, as the Board deems appropriate.

(4) The indemnification and advancement of expenses provided in these Bye-laws shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may now or hereafter be entitled under any statute, agreement, vote of Members or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office.

(5) The indemnification and advancement of expenses provided by, or granted pursuant to, this Bye-law 31 shall, unless otherwise provided when authorised or ratified, continue as to a Person who has ceased to hold the position for which such Person is entitled to be indemnified or advanced expenses and shall inure to the benefit of the heirs, executors and administrators of such a Person.

(6) No amendment or repeal of any provision of this Bye-law 31 shall alter, to the detriment of any Person, the right of such Person to the indemnification or advancement of expenses related to a claim based on an act or failure to act which took place prior to such amendment, repeal or termination.

32.	Waiver of claim by Member

The Company and each Member agrees to waive any claim or right of action it might have, whether individually or by or in the right of the Company, against any Director or Officer on account of any action taken by such Director or Officer, or the failure of such Director or Officer to take any action in the performance of his duties with or for the Company, provided, that, such waiver shall not extend to any matter in respect of any fraud or dishonesty which may attach to such Director or Officer.

MEETINGS

33.	Notice of annual general meeting

The annual general meeting of the Company shall be held in each year (including within the first year of incorporation) at such time and place (which shall not be in the United States) as the President or the Chairman or any two Directors or any Director and the Secretary or the Board shall appoint. At least five (5) days’ notice of such meeting shall be given to each Member entitled to vote thereat as at the relevant record date determined pursuant to Bye-law 62 stating the date, place (which shall not be in the United States) and time at which the meeting is to be held, that the election of Directors will take place thereat, and as far as practicable, the other business to be conducted at the meeting.

34.	Notice of special general meeting

The President or the Chairman or any two Directors or any Director and the Secretary or the Board may convene a special general meeting of the Company whenever in their judgment such a meeting is necessary, upon not less than five (5) days’ notice to each Member entitled to

vote thereat as at the relevant record date determined pursuant to Bye-law 62 which shall state the date, time, place (which shall not be in the United States) and the general nature of the business to be considered at the meeting.

35.	Accidental omission of notice of general meeting; Business to be conducted

(1) The accidental omission to give notice of a general meeting to, or the non-receipt of notice of a general meeting by, any Person entitled to receive notice shall not invalidate the proceedings at that meeting.

(2) Subject to the Act, business to be brought before a general meeting of the Company must be specified in the notice of the meeting. Only business that the Board has determined can be properly brought before a general meeting in accordance with these Bye-laws and applicable law shall be conducted at any general meeting, and the chairman of the general meeting may refuse to permit any business to be brought before such meeting that has not been properly brought before it in accordance with these Bye-laws and applicable law.

36.	Meeting called on requisition of Members

Subject to the terms of any class or series of shares issued by the Company and notwithstanding anything herein, the Board shall, on the requisition of Members holding at the date of the deposit of the requisition not less than one-tenth of such of the paid-up share capital of the Company as at the date of the deposit carries the right to vote at general meetings of the Company, forthwith proceed to convene a special general meeting of the Company and the provisions of Section 74 of the Act shall apply.

37.	Short notice

Subject to the terms of any class or series of shares issued by the Company, a general meeting of the Company shall, notwithstanding that it is called by shorter notice than that specified in these Bye-laws, be deemed to have been properly called if it is so agreed by (i) all the Members entitled to attend and vote thereat in the case of an annual general meeting; and (ii) by a majority in number of the Members having the right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the shares giving a right to attend and vote thereat in the case of a special general meeting.

38.	Postponement of meetings

The Secretary or any Director may postpone any general meeting called in accordance with the provisions of these Bye-laws (other than a meeting requisitioned under these Bye-laws) provided that notice of postponement is given to each Member entitled to vote thereat as at the relevant record date determined pursuant to Bye-law 62 before the time for such meeting. Fresh notice of the date, time and place for the postponed meeting shall be given to each Member entitled to vote thereat as at the relevant record date determined pursuant to Bye-law 62 in accordance with the provisions of these Bye-laws.

39.	Quorum for general meeting

At any general meeting of the Company two or more persons present in person and representing in person or by proxy in excess of 50% of the total issued and outstanding voting shares in the Company as at the relevant record date determined pursuant to Bye-law 62 throughout the meeting shall form a quorum for the transaction of business, provided, however, that if the Company shall at any time have only one Member, one Member present in person or by proxy shall form a quorum for the transaction of business at any general meeting of the Company held during such time. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting shall stand adjourned to the same day one week later, at the same time and place or to such other day, time or place as the Secretary may determine. Unless the meeting is so adjourned to a specific date and time, fresh notice of the date, time and place for the resumption of the adjourned meeting shall be given to each Member in accordance with the provisions of these Bye-laws. No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business and continues throughout the meeting, but the absence of a quorum shall not preclude the appointment, choice or election of a chairman of the meeting which shall not be treated as part of the business of the meeting.

40.	Adjournment of meetings

The chairman of a general meeting may, with the consent of 50% of the Members present in person or by proxy at any general meeting whether or not a quorum is present (and shall if so directed), adjourn the meeting. Unless the meeting is adjourned to a specific date and time, fresh notice of the date, time and place for the resumption of the adjourned meeting shall be given to each Member in accordance with the provisions of these Bye-laws with respect to a special general meeting of the Company.

41.	Attendance at meetings

Members may participate in any general meeting by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting, provided, however, that no Member may participate in any general meeting while that Member (or, if any Member is an entity, its representative) is physically present in the United States.

42.	Written resolutions

(1) Subject to subparagraph (6), anything which may be done by resolution of the Company in general meeting or by resolution of a meeting of any class of the Members of the Company, may, without a meeting and without any previous notice being required, be done by resolution in writing signed by, or, in the case of a Member that is a corporation whether or not a company within the meaning of the Act, on behalf of, all the Members who at the date of the resolution or the record date determined pursuant to Bye-law 62 (if earlier) would be entitled to attend the meeting and vote on the resolution.

(2) A resolution in writing may be signed by, or, in the case of a Member that is a corporation whether or not a company within the meaning of the Act, on behalf of, all the Members, or any class thereof, in as many counterparts as may be necessary.

(3) For the purposes of this Bye-law, the date of the resolution is the date when the resolution is signed by, or, in the case of a Member that is a corporation whether or not a company within the meaning of the Act, on behalf of, the last Member to sign and any reference in any Bye-law to the date of passing of a resolution is, in relation to a resolution made in accordance with this Bye-law, a reference to such date. Any resolution in writing may be signed within or outside the United States; provided, that the last Member to sign the resolution must sign such resolution outside of the United States.

(4) A resolution in writing made in accordance with this Bye-law is as valid as if it had been passed by the Company in general meeting or by a meeting of the relevant class of Members, as the case may be, provided that no such resolution shall be valid unless the last signature of a Member is offered outside the United States, and any reference in any Bye-law to a meeting at which a resolution is passed or to Members voting in favour of a resolution shall be construed accordingly.

(5) A resolution in writing made in accordance with this Bye-law shall constitute minutes for the purposes of Sections 81 and 82 of the Act.

(6) This Bye-law shall not apply to:-

(a) a resolution passed pursuant to Section 89(5) of the Act; or

(b) a resolution passed for the purpose of removing a Director before the expiration of his term of office under these Bye-laws.

43.	Attendance of Directors

The Directors of the Company shall be entitled to receive notice of and to attend and be heard at any general meeting.

44.	Voting at meetings

(1) Subject to the provisions of the Act and these Bye-laws, any question proposed for the consideration of the Members at any general meeting shall be decided by the affirmative votes of a majority of the votes cast in accordance with the provisions of these Bye-laws and in the case of an equality of votes the resolution shall fail.

(2) No Member shall be entitled to vote at any general meeting unless such Member has paid all the calls on all shares held by such Member.

45.	Voting on show of hands

At any general meeting a resolution put to the vote of the meeting shall, in the first instance, be voted upon by a show of hands and, subject to any rights or restrictions for the time being lawfully attached to any class of shares and subject to the provisions of these Bye-laws, every Member present in person and every person holding a valid proxy at such meeting shall be entitled to one vote and shall cast such vote by raising his or her hand.

46.	Decision of chairman

At any general meeting a declaration by the chairman of the meeting that a question proposed for consideration has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in a book containing the minutes of the proceedings of the Company shall, subject to the provisions of these Bye-laws, be conclusive evidence of that fact.

47.	Demand for a poll

(1) Notwithstanding the provisions of the immediately preceding two Bye-laws, at any general meeting of the Company, in respect of any question proposed for the consideration of the Members (whether before or on the declaration of the result of a show of hands as provided for in these Bye-laws), a poll may be demanded by any of the following persons:-

(a) the chairman of such meeting; or

(b) at least three Members present in person or represented by proxy; or

(c) any Member or Members present in person or represented by proxy and holding between them not less than one-tenth of the total voting rights of all the Members having the right to vote at such meeting; or

(d) any Member or Members present in person or represented by proxy holding shares in the Company conferring the right to vote at such meeting, being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all such shares conferring such right.

(2) Where, in accordance with the provisions of subparagraph (1) of this Bye-law, a poll is demanded, subject to any rights or restrictions for the time being lawfully attached to any class of shares, every person present at such meeting shall have one vote for each share of which such person is the holder or for which such person holds a proxy and such vote shall be counted in the manner set out in subparagraph (4) of this Bye-law or in the case of a general meeting at which one or more Members are present by telephone in such manner as the chairman of the meeting may direct and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded and shall replace any previous resolution upon the same matter which has been the subject of a show of hands.

(3) A poll demanded in accordance with the provisions of subparagraph (1) of this Bye-law, for the purpose of electing a chairman of the meeting or on a question of adjournment, shall be taken forthwith and a poll demanded on any other question shall be taken in such manner and at such time and place as the Chairman (or acting chairman) may direct and any business other than that upon which a poll has been demanded may be proceeded with pending the taking of the poll.

(4) Where a vote is taken by poll, each Person present and entitled to vote shall be furnished with a ballot paper on which such person shall record his or her vote in such manner as shall be determined at the meeting having regard to the nature of the question on which the vote is taken, and each ballot paper shall be signed or initialled or otherwise marked so as to identify the voter and the registered holder in the case of a proxy. The Board may appoint one or more inspectors to act at any general meeting where a vote is taken by a poll. Each inspector shall take and sign an oath faithfully to exercise the duties of inspector at such meeting with strict impartiality and according to the best of his, her or its ability. The inspectors shall determine the number of shares issued and outstanding and the voting power of each, by reference to the Register of Members as at the relevant record date determined pursuant to Bye-law 62, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies and examine and count all ballots and determine the results of any vote. The inspector shall also hear and determine challenges and questions arising in connection with the right to vote. No Director or candidate for the office of Director shall act as an inspector. The determination and decision of the inspectors shall be final and binding.

48.	Seniority of joint holders voting

In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members.

49.	Instrument of proxy

(1) Every Member entitled to vote has the right to do so either in person or by one or more Persons authorised by a written proxy executed and delivered in accordance with these Bye-laws. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his or her attorney authorised by him or her in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same.

(2) Any Member may appoint one or more Persons a standing proxy or (if a corporation) a standing representative by depositing at the registered office, or at such place or places as the Board may otherwise specify for the purpose, a proxy or (if a corporation) a written authorisation. Such proxy or authorisation shall be valid for all general meetings and adjournments thereof or, resolutions in writing, as the case may be, until notice of revocation is received at the registered office, or at such place or places as the Board may otherwise specify for the purpose. Where a standing proxy or authorisation exists, its operation shall be deemed to have been suspended at any general meeting or adjournment thereof at which the Member is present or in respect to which the Member has specially appointed a proxy or representative. The Board may from time to time require such evidence as it shall deem necessary as to the due execution and continuing validity of any such standing proxy or authorisation and the operation of any such standing proxy or authorisation shall be deemed to be suspended until such time as the Board determines that it has received the requested evidence or other evidence satisfactory to it. A Person so authorised as a representative of a corporation shall be entitled to exercise the same power on behalf of the grantor of the authority as the grantor could exercise if it were an individual Member and the grantor shall for the purposes of these Bye-laws be deemed to be present in person at any such meeting if the Person so authorised is present at the meeting.

(3) Subject to paragraph (2) of this Bye-law 49, the instrument appointing a proxy together with such other evidence as to its due execution as the Board may from time to time require shall be delivered at the registered office (or at such place or places as may be specified in the notice convening the meeting or in any notice of any adjournment or, in either case or the case of a written resolution, in any document sent therewith) not less than 24 hours or such other period as the Board may determine, prior to the holding of the relevant meeting or adjourned meeting at which the individual named in the instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, before the time appointed for the taking of the poll, or, in the case of a written resolution, prior to the effective date of the written resolution and in default the instrument of proxy shall not be treated as valid.

(4) Instruments of proxy shall be in any common form or other form as the Board may approve and the Board may, if it thinks fit, send out with the notice of any meeting or any written resolution forms of instruments of proxy for use at that meeting or in connection with that written resolution. The instrument of proxy shall be deemed to confer authority to demand or join in demanding a poll and to vote on any amendment of a written resolution or amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall unless the contrary is stated therein be valid as well for any adjournment of the meeting as for the meeting to which it relates.

(5) A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or unsoundness of mind of the principal, or revocation of the instrument of proxy or of the authority under which it was executed, provided, that no intimation in writing of such death, insanity or revocation shall have been received by the Company at the registered office (or such other place as may be specified for the delivery of instruments of proxy in the notice convening the meeting or other documents sent therewith) at least one hour before the commencement of the meeting or adjourned meeting, or the taking of the poll, or the day before the effective date of any written resolution at which the instrument of proxy is used.

(6) Subject to the Act, the Board may, or the chairman of the relevant meeting may at his or her discretion (with respect to such meeting only) waive any of the provisions of these Bye-laws related to proxies or authorisations and, in particular, may accept such verbal or other assurances as it thinks fit as to the right of any person to attend and vote on behalf of any Member at general meetings or to sign written resolutions.

50.	Representation of corporations at meetings

A corporation which is a Member may, by written instrument, authorise one or more Persons as it thinks fit to act as its representative at any meeting of the Members and the Person or Persons so authorised shall be entitled to exercise the same powers on behalf of the corporation which such Person or Persons represent as that corporation could exercise if it were an individual Member. Such corporation shall for the purposes of these Bye-laws be deemed to be present in person at any such meeting if a Person so authorised is present at the meeting. Notwithstanding the foregoing, the chairman of the meeting may accept such assurances as he or she thinks fit as to the right of any Person to attend and vote at general meetings on behalf of a corporation which is a Member.

SHARE CAPITAL AND SHARES

51.	Rights of shares

(1) Upon adoption of these Bye-laws, the share capital of the Company shall initially be divided into two classes of shares consisting of (i) 200,000,000 Common Shares, and (ii) 20,000,000 Preferred Shares. The Board may create classes and series of shares and may increase or decrease the number of shares of any class or series as it sees fit. The Board also may, subject to the Act and to any rights attaching to the issued and outstanding shares, cancel, redeem or purchase any shares and shares of any class or series and further terminate any class or series of shares.

(2) The holders of Common Shares shall be entitled to one vote per Common Share, or in the case of Controlled Shares, if applicable, a fraction of a vote per Controlled Share as determined pursuant to Bye-Law 52. However, the Board may issue non-voting Common Shares which will not entitle the holders thereof to such voting rights. The Common Shares shall entitle the holders thereof, subject to the provisions of these Bye-laws:

(a) to share equally share for share in dividends (whether payable in cash, property or securities of the Company) as the Board may from time to time declare;

(b) in the event of a liquidation, winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of an amalgamation, reorganisation or otherwise or upon any distribution of share capital and surplus, be entitled to share equally and ratably in the assets of the Company, if any, remaining after the payment of all debts and liabilities of the Company and the liquidation preference of any issued and outstanding Preferred Shares; and

(3) The Board is authorised, subject to limitations prescribed by law, to issue the Preferred Shares in classes or series, to establish from time to time the number of Preferred Shares to be included in each such class or series, and to fix the designation, powers, preferences redemption provisions, restrictions and rights to the Preferred Shares of each such class or series and the qualifications, limitations or restrictions thereof. The terms of any class or series of Preferred Shares shall be set forth in a Certificate of Designation in the minutes of the Board authorising the issuance of such Preferred Shares and such Certificate of Designations shall be attached as an exhibit to these Bye-laws, but shall not form part of these Bye-laws, and may be examined by any Member on request. The rights attaching to any Common Share or other share shall be deemed not to be altered by the allotment of any Preferred Share even if such Preferred Share does or will rank in priority for payment of a dividend or in respect of capital or surplus or which confer on the holder thereof voting rights more favourable than those conferred by such Common Share and shall not otherwise be deemed to be altered by the creation or issue of further shares ranking pari passu therewith.

(4) The authority of the Board with respect to each class or series of Preferred Shares shall include, but not be limited to, determination of the following:

(a) the number of Preferred Shares constituting that class or series and the distinctive designation of that class or series;

(b) the rate of dividend, and whether (and if so, on what terms and conditions) dividends shall be cumulative (and if so, whether unpaid dividends shall compound or accrue interest) or shall be payable in preference or in any other relation to the dividends payable on any other class or classes of shares or any other class or series of the Preferred Shares;

(c) whether that class or series shall have voting rights in addition to the voting rights provided by law and, if so, the terms and extent of such voting rights, provided that if the Preferred Shares shall have voting rights, such Preferred Shares shall be included in the number of Voting Shares of the Company held by any Person for the purposes of Bye-law 52(2) hereof;

(d) the par value of such Preferred Shares;

(e) whether such Preferred Shares may be redeemed and, if so, the terms and conditions on which they may be redeemed (including, without limitation, the dates upon or after which they may be redeemed and the price or prices at which they may be redeemed, which price or prices may be different in different circumstances or at different redemption dates);

(f) whether such Preferred Shares shall be issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange (including, without limitation the price or prices or the rate or rates of conversion or exchange or any terms for adjustment thereof);

(g) the amounts, if any, payable upon such Preferred Shares in the event of voluntary liquidation, dissolution or winding up of the Company in preference of shares of any other class or series and whether such Preferred Shares shall be entitled to participate generally in distributions on the Common Shares under such circumstances;

(h) the amounts, if any, payable upon such Preferred Shares in the event of involuntary liquidation, dissolution or winding up of the Company in preference of shares of any other class or series and whether the Preferred Shares shall be entitled to participate generally in distributions on the Common Shares under such circumstances;

(i) sinking and fund provisions, if any, for the redemption or purchase of the Preferred Shares (the term “sinking fund” being understood to include any similar fund, however designated); and

(j) any other relative rights, preferences, limitations and powers of that class or series.

(5) The rights attaching to any Preferred Shares, or any class or series of Preferred Shares, shall be deemed not to be altered by the allotment of any other class or series of Preferred Shares even if such class or series does or will rank in priority for payment of a dividend or in respect of capital or surplus or which confer on the holder thereof voting rights more favorable than those conferred by such existing Preferred Shares or class or series of Preferred Shares and shall not otherwise be deemed to be altered by the creation or issue of further shares ranking pari passu therewith.

52.	Limitation on voting rights of Controlled Shares.

(1) General. Subject to the provisions of Bye-laws 12(4) and 52(2)-(4) below, and subject to any rights and restrictions for the time being attached to any class or classes of shares, every Member and every person representing a Member by proxy shall have one vote for each share carrying the right to vote on the matter in question of which he or the person represented by proxy is the holder. Notwithstanding any other provisions of these Bye-laws, all determinations in these Bye-laws that are made by or subject to a vote or approval of Members shall be based upon the voting power of such Members’ shares as determined pursuant to Bye-laws 12(4) and 52(2)-(4).

(2) Adjustment of Voting Power. The voting power of all shares is hereby adjusted (and shall be automatically adjusted in the future) to the extent necessary so that there is no 9.5% U.S. Shareholder. This Bye-law 52(2) shall be applied prior to the application of Bye-law 12(4). The Board of Directors shall implement the foregoing in the manner provided herein.

The Board shall from time to time, including prior to any time at which a vote of Members is taken, take all reasonable steps necessary to ascertain through communications with Members or otherwise, whether there exists, or will exist at the time any vote of Members is taken, a Tentative 9.5% U.S. Shareholder.

In the event that a Tentative 9.5% U.S. Shareholder exists, the aggregate votes conferred by shares held by a Member and treated as Controlled Shares of that Tentative 9.5% U.S. Shareholder shall be reduced to the extent necessary such that the Controlled Shares of the Tentative 9.5% U.S. Shareholder will constitute less than 9.5% of the voting power of all shares. In applying the previous sentence where shares held by more than one Member are treated as Controlled Shares of such Tentative 9.5% U.S. Shareholder, the reduction in votes shall apply to such Members in descending order according to their respective Attribution Percentages, provided that, in the event of a tie, the reduction shall apply first to the Member whose shares are Controlled Shares of the Tentative 9.5% U.S. Shareholder by virtue of the Tentative 9.5% U.S. Shareholder’s economic interest in (as opposed to voting control with respect to) such shares. The votes of Members owning no shares treated as Controlled Shares of any Tentative 9.5% U.S. Shareholder shall, in the aggregate, be increased by the same number of votes subject to reduction as described above. Such increase shall apply to all such Members in proportion to their voting power at that time, provided that such increase shall be limited to the extent necessary to avoid causing any person to be a 9.5% U.S. Shareholder. The adjustments of voting power described in this Bye-law shall apply repeatedly until there would be no 9.5% U.S. Shareholder. The Board of Directors may deviate from any of the principles described in this Bye-law and determine that shares held by a Member shall carry different voting rights as it determines appropriate (1) to avoid the existence of any 9.5% U.S. Shareholder or (2) to avoid

adverse tax, legal or regulatory consequences to the Company, any subsidiary of the Company, or any other Member or its affiliates. For the avoidance of doubt, in applying the provisions of Bye-laws 12(4) and 52(2)-(4), a share may carry a fraction of a vote.

“Controlled Shares” in reference to any Person means all Common Shares of the Company directly, indirectly or constructively owned by such Person as determined pursuant to Section 958 of the Code. Solely for purposes of this Bye-law 52, when determining the number of Controlled Shares of a Person who is a member of a Group (as defined below), all of the Controlled Shares of each other member of such Group (other than any Controlled Shares otherwise owned by such Person pursuant to Section 958 of the Code), shall be treated as Controlled Shares of such Person. For purposes of these Bye-laws, the Groups shall be: (x) any group of Members who are U.S. Persons if the members of such group notify the Company in writing at least 10 days prior to a vote or approval of the Members that such group irrevocably elects to be treated as a Group; and (y) Moore Holdings, LLC, Moore Global Investments, Ltd. and Remington Investment Strategies L.P.; it being understood that the designation of a Group under the foregoing clauses (x) or (y) shall not prohibit the Company or the Board of Directors from taking any action required or permitted under these Bye-laws.

“9.5% U.S. Shareholder” means a “United States person” as defined in the Code (a “U.S. Person”) whose Controlled Shares constitute nine and one-half percent (9.5%) or more of the voting power of all shares of the Company and who would be generally required to recognize income with respect to the Company under Section 951(a)(1) of the Code, if the Company were a controlled foreign corporation as defined in Section 957 of the Code and if the ownership threshold under Section 951(b) of the Code were 9.5%.

“Tentative 9.5% U.S. Shareholder” means a Person that, but for adjustments to the voting rights of shares pursuant to Bye-law 52(2)-(4), would be a 9.5% U.S. Shareholder.

“Attribution Percentage” shall mean, with respect to a Member and a Tentative 9.5% Shareholder, the percentage of the Member’s shares that are treated as Controlled Shares of such Tentative 9.5% Shareholder.

(3) Other Adjustments of Voting Power. In addition to the provisions of Bye-law 52(2), any shares shall not carry any right to vote to the extent that the Board of Directors determines, in its sole discretion, that it is necessary that such shares should not carry the right to vote in order to avoid adverse tax, legal or regulatory consequences to the Company, any subsidiary of the Company, or any other Member or its affiliates, provided that no adjustment pursuant to this sentence shall cause any person to become a 9.5% U.S. Shareholder.

(4) Requirement to Provide Information and Notice.

(a) The Directors shall have the authority to request from any holder of shares, and such holder of shares shall provide, such information as the Directors may reasonably request for the purpose of determining whether any holder’s voting rights are to be adjusted. If such holder fails to respond to such a request, or submits incomplete or inaccurate information in response to such a request, the Directors may in their sole discretion determine that such holder’s shares shall carry no voting rights in which case such shares shall not carry any voting rights until otherwise determined by the Directors in their absolute discretion.

(b) Any holder of shares shall give notice to the Company within ten days following the date that such holder acquires actual knowledge that it is a Tentative 9.5% U.S. Shareholder.

(c) Notwithstanding the foregoing, no Member shall be liable to any other Member or the Company for any losses or damages resulting from such Member’s failure to respond to, or submission of incomplete or inaccurate information in response to, a request under paragraph (4)(a) or from such Member’s failure to give notice under paragraph (4)(b) of this Bye-law.

(d) The Board may rely on the information provided by a Member under this Bye-law 52(4) in the satisfaction of its obligations under Bye-law 12(4) and this Bye-law 52.

(e) The Company shall have no obligation to provide notice to any Member of any adjustment to its voting power that may result from the application of Bye-law 12(4) and/or this Bye-law 52.

53.	Power to issue shares

(1) Subject to the provisions of these Bye-laws and to any rights attaching to issued and outstanding shares, the unissued shares (whether forming part of the original share capital or any increased share capital) shall be at the disposal of the Board, which may issue, offer, allot, exchange or otherwise dispose of shares or options, warrants or other rights to purchase shares or securities convertible into or exchangeable for shares (including any employee benefit plan providing for the issuance of shares or options, warrants or other rights in respect thereof), at such times, for such consideration and on such terms and conditions as it may determine (including, without limitation, such preferred or other special rights or restrictions with respect to dividend, voting, liquidation or other rights of the shares as may be determined by the Board). The Board may issue shares as a new or existing class or series of shares.

(2) At the discretion of the Board, the Company shall not issue any shares in a manner that the Board believes would cause, by reason of such issuance, the total Common Shares of any Person to equal or exceed nine and five tenths percent (9.5%) of the total shares of Common Shares of the Company then issued and outstanding. Notwithstanding the foregoing, the Board in its sole discretion by unanimous consent of all Directors then in office, may waive the applicability of subparagraph (2) of this Bye-law.

Notwithstanding the foregoing provisions of this Bye-law, the restrictions of this Bye-law 53(2) shall not apply to any issuance of shares to a person acting as an underwriter in the ordinary course of its business, purchasing such shares pursuant to a purchase agreement to which the Company is a party, for resale.

(3) The Board shall, in connection with the issue of any share, have the power to pay such commission and brokerage as may be permitted by law.

(4) The Company shall not give, whether directly or indirectly, whether by means of loan, guarantee, provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any Person of or for any shares in the Company, but nothing in this Bye-law shall prohibit transactions permitted pursuant to Sections 39A, 39B, and 39C of the Act.

(5) The Company may from time to time do any one or more of the following things:

(i) make arrangements on the issue of shares for a difference between the Members in the amounts and times of payments of calls on their shares;

(ii) accept from any Member the whole or a part of the amount remaining unpaid on any shares held by such Member, although no part of that amount has been called up;

(iii) pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others; and

(iv) issue its shares in fractional denominations and deal with such fractions to the same extent as its whole shares and shares in fractional denominations shall have in proportion to the respective fractions represented thereby all of the rights of whole shares including (but without limiting the generality of the foregoing) the right to vote, to receive dividends and distributions and to participate in a winding up.

54.	Variation of rights and alteration of share capital

(1) While the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the Company is being wound-up, be varied with the consent in writing of the holders of three-fourths of the issued and outstanding shares of that class or with the sanction of a resolution passed by a majority of the votes cast at a separate general meeting of the holders of the shares of the class in accordance with Section 47(7) of the Act. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

(2) The Company may from time to time by resolution of the Company in general meeting alter the conditions of its Memorandum of Association by all or any of those actions listed in Section 45(1) of the Act and accordingly may change the currency denomination of, increase, alter or reduce its share capital in accordance with the provisions of Sections 45 and 46 of the Act. Where, on any alteration of share capital, fractions of shares or some other difficulty would arise, the Board may deal with or resolve the same in such manner as it thinks fit including, without limiting the generality of the foregoing, the issue to Members, as appropriate, of fractions of shares and/or arranging for the sale or transfer of the fractions of shares of Members.

55.	Registered holder of shares

(1) The Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not be bound to recognise any equitable or other claim to, or interest in, such share on the part of any other person.

(2) Any dividend, interest or other moneys payable in cash in respect of shares may be paid by cheque or draft sent through the post directed to the Member at such Member’s address in the Register of Members or, in the case of joint holders, to such address of the holder first named in the Register of Members, or to such person and to such address as the holder or joint holders may in writing direct. If two or more persons are registered as joint holders of any shares any one can give an effectual receipt for any dividend paid in respect of such shares.

56.	Death of a joint holder

Where two or more persons are registered as joint holders of a share or shares then in the event of the death of any joint holder or holders the remaining joint holder or holders shall be absolutely entitled to the said share or shares and the Company shall recognise no claim in respect of the estate of any joint holder except in the case of the last survivor of such joint holders.

57.	Share certificates

(1) Every Member shall be entitled to a share certificate under the seal of the Company (or a facsimile or representation thereof as the Board may determine) specifying the number and, where appropriate, the class of shares held by such Member and whether the same are fully paid up and, if not, how much has been paid thereon. The Board may by resolution determine, either generally or in a particular case, that any or all signatures on certificates may be printed thereon or affixed by mechanical means. Notwithstanding the foregoing and the provisions of Bye-law 88 (Manner in which seal is affixed), the Board may determine that a share certificate need not be signed on behalf of the Company.

(2) The Company shall be under no obligation to complete and deliver a share certificate unless specifically called upon to do so by the person to whom such shares have been allotted.

(3) If any such certificate shall be proved to the satisfaction of the Board to have been worn out, lost, mislaid or destroyed the Board may cause a new certificate to be issued and request an indemnity for the lost certificate it sees fit.

58.	Calls on shares

The Board may from time to time make such calls as it thinks fit upon the Members in respect of any monies unpaid on the shares allotted to or held by such Members.

59.	Forfeiture of shares

(1) If any Member fails to pay, on the day appointed for payment thereof, any call in respect of any share allotted to or held by such Member, the Board may, at any time thereafter during such time as the call remains unpaid, direct the Secretary to forward to such Member a notice in the form, or as near thereto as circumstances admit, of Form “A” in the Schedule hereto.

(2) If the requirements of such notice are not complied with, any such share may at any time thereafter before the payment of such call and the interest due in respect thereof be forfeited by a resolution of the Board to that effect, and such share shall thereupon become the property of the Company and may be disposed of as the Board shall determine.

(3) A Member whose share or shares have been forfeited as aforesaid shall, notwithstanding such forfeiture, be liable to pay to the Company all calls owing on such share or shares at the time of the forfeiture and all interest due thereon.

REGISTER OF MEMBERS

60.	Contents of Register of Members

The Board shall cause to be kept in one or more books a Register of Members and shall enter therein the particulars required by the Act.

61.	Inspection of Register of Members

(1) The Register of Members shall be open to inspection at the registered office of the Company on every business day, subject to such reasonable restrictions as the Board may impose, so that not less than two hours in each business day be allowed for inspection. The Register of Members may, after notice has been given by advertisement in an appointed newspaper to that effect, be closed for any time or times not exceeding in the whole thirty days in each year.

(2) Subject to the provisions of the Act, the Company may keep one or more overseas or branch registers in any place, and the Board may make, amend and revoke any such regulations as it may think fit respecting the keeping of such registers and the contents thereof.

62.	Determination of record dates

Notwithstanding any other provision of these Bye-laws, the Board may fix any date as the record date for:-

(a) determining the Members entitled to receive any dividend;

(b) determining the Members entitled to receive notice of and to vote at any general meeting of the Company (and the Board may determine a different record date for any adjournment or postponement thereof) ;

(d) determining the number of issued and outstanding shares for or in connection with any purpose.

TRANSFER OF SHARES

63.	Instrument of transfer

(1) An instrument of transfer shall be in the form or as near thereto as circumstances admit of Form “B” in the Schedule hereto or in such other common form as the Board may accept. Such instrument of transfer shall be signed by or on behalf of the transferor and transferee provided that, in the case of a fully paid share, the Board may accept the instrument signed by or on behalf of the transferor alone. The transferor shall be deemed to remain the holder of such share until the same has been transferred to the transferee in the Register of Members.

(2) The Board may refuse to recognise any instrument of transfer unless it is accompanied by the certificate in respect of the shares to which it relates and by such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer.

64.	Restriction on transfer

(1) Subject to the Act, this Bye-law 64 and such other of the restrictions contained in these Bye-laws and elsewhere as may be applicable, and except, in the case of any shares other than the Common Shares, as may otherwise be provided by the terms of issuance thereof, any Member may sell, assign, transfer or otherwise dispose of shares of the Company at the time owned by it and, upon receipt of a duly executed form of transfer in writing, the Directors shall procure the timely registration of the same. If the Directors refuse to register a transfer for any reason they shall notify the proposed transferor and transferee within thirty days of such refusal.

(2) At the sole discretion of the Board, the Company may decline to register a transfer of shares if the Board has reason to believe that the effect of such transfer would be to increase the number of total Controlled Shares of any Person to nine and five-tenths percent (9.5%) or any higher percentage of the shares of the Company on an Unadjusted Basis.

(3) The Board may, in its absolute and unfettered discretion, decline to register the transfer of any shares if the Board has reason to believe (i) that such transfer may expose the Company, any subsidiary thereof, any Member or any Person ceding insurance to the Company or any such Subsidiary to adverse tax or regulatory treatment in any jurisdiction or (ii) that registration of such transfer under the Securities Act or under any blue sky or other United States state securities laws or under the laws of any other jurisdiction is required and such registration has not been duly effected (provided, however, that in this case (ii) the Board shall be entitled to request and rely on an opinion of counsel to the transferor or the transferee, in form and substance satisfactory to the Board, that no such approval or consent is required and no such violation would occur, and the Board shall not be obligated to register any transfer absent the receipt of such an opinion).

(4) Without limiting the foregoing, the Board shall decline to approve or register a transfer of shares unless all applicable consents, authorisations, permissions or approvals of any governmental body or agency in Bermuda, the United States or any other applicable jurisdiction required to be obtained prior to such transfer shall have been obtained.

(5) The registration of transfers may be suspended at such time and for such periods as the Board may from time to time determine; provided, however, that such registration shall not be suspended for more than forty-five (45) days in any period of three hundred and sixty five (365) consecutive days.

(6) The Board may require any Member, or any Person proposing to acquire shares, to certify or otherwise provide information in writing as to such matters as the Board may request for the purpose of giving effect to Bye-laws 11(2), 11(3), 52(2), 64(2) and 64(3), including as to such Person’s status, its Controlled Shares and other matters of the kind contemplated by Bye-law 52. Such request shall be made by written notice and the certification or other information requested shall be provided to such place and within such period (not less than ten (10) Business Days after such notice is given unless the Board and such Member or proposed acquiror otherwise agree) as the Board may designate in such request. If any Member or proposed acquiror does not respond to any such request by the Board as requested, or if the Board has reason to believe that any certification or other information provided pursuant to any such request is inaccurate or incomplete, the Board may decline to register any transfer or to effect any issuance or purchase of shares to which such request relates.

65.	Transfers by joint holders

The joint holders of any share or shares may transfer such share or shares to one or more of such joint holders, and the surviving holder or holders of any share or shares previously held by them jointly with a deceased Member may transfer any such share to the executors or administrators of such deceased Member.

66.	Lien on shares

(1) The Company shall have a first and paramount lien and charge on all shares (whether fully paid-up or not or whether subject to a condition or contingency) registered in the name of a Member (whether solely or jointly with others) for all debts, liabilities or engagements to or with the Company (whether presently payable or not or whether subject to a condition or contingency) by such Member or his or her estate, either alone or jointly with any other Person, whether a Member or not, but the Board may at any time declare any share to be wholly or in part exempt from the provisions of this Bye-law. The registration of a transfer of any such share shall operate as a waiver of the Company’s lien (if any) thereon. The Company’s lien (if any) on a share shall extend to all dividends or other monies payable in respect thereof.

(2) The Company may sell or purchase, in such manner and on such terms (including price) as the Board think fit, any shares on which the Company has a lien, but no sale or purchase shall be made unless a sum in respect of which the lien exists is then presently payable,

nor until the expiration of fourteen days after a notice in writing stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the relevant Member, or the Person, of which the Company has notice, entitled thereto by reason of such Member’s death or bankruptcy. Effective upon such sale or purchase, any certificate representing such shares prior to such sale shall become null and void, whether or not it was actually delivered to the Company.

(3) To give effect to any such sale the Board may authorise some Person to transfer the shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the shares comprised in any such transfer, and he shall not be bound to see to the application of the purchase money, nor shall his or her title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

(4) The proceeds of such sale or purchase shall be received by the Company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the shares before the sale) be paid to the relevant Member or the Person entitled to the shares at the date of the sale.

TRANSMISSION OF SHARES

67.	Representative of deceased Member

In the case of the death of a Member, the survivor or survivors where the deceased Member was a joint holder, and the legal personal representatives of the deceased Member where the deceased Member was a sole holder, shall be the only persons recognised by the Company as having any title to the deceased Member’s interest in the shares. Nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by such deceased Member with other persons. Subject to the provisions of Section 52 of the Act, for the purpose of this Bye-law, legal personal representative means the executor or administrator of a deceased Member or such other person as the Board may in its absolute discretion decide as being properly authorised to deal with the shares of a deceased Member.

68.	Registration on death or bankruptcy

Any person becoming entitled to a share in consequence of the death or bankruptcy of any Member may be registered as a Member upon such evidence as the Board may deem sufficient or may elect to nominate some person to be registered as a transferee of such share, and in such case the person becoming entitled shall execute in favour of such nominee an instrument of transfer in the form, or as near thereto as circumstances admit, of Form “D” in the Schedule hereto. On the presentation thereof to the Board, accompanied by such evidence as the Board may require to prove the title of the transferor, the transferee shall be registered as a Member but the Board shall, in either case, have the same right to decline or suspend registration as it would have had in the case of a transfer of the share by that Member before such Member’s death or bankruptcy, as the case may be.

DIVIDENDS AND OTHER DISTRIBUTIONS

69.	Declaration of dividends by the Board

The Board may, subject to any rights or restrictions at the time lawfully attached to any class or series of shares and subject to these Bye-laws and in accordance with Section 54 of the Act, declare a dividend to be paid to the Members, in proportion to the number of shares held by them, and such dividend may be paid in cash or wholly or partly in specie in which case the Board may fix the value for distribution in specie of any assets.

70.	Other distributions

The Board may declare and make such other distributions (in cash or in specie) to the Members as may be lawfully made out of the assets of the Company.

71.	Reserve fund

The Board may from time to time before declaring a dividend set aside, out of the surplus or profits of the Company, such sum as it thinks proper as a reserve to be used to meet contingencies or for equalising dividends or for any other special or general purpose.

72.	Deduction of amounts due to the Company

The Board may deduct from the dividends or distributions payable to any Member all monies due from such Member to the Company on account of calls or otherwise.

73.	Unclaimed dividends

Any dividend or distribution unclaimed for a period of six years from the date of declaration of such dividend or distribution shall be forfeited and shall revert and belong to the Company and the payment by the Board of any unclaimed dividend or distribution, interest or other sum payable on or in respect of the share into a separate account shall not constitute the Company a trustee in respect thereof.

74.	Interest on dividend

No dividend or distribution shall bear interest against the Company.

CAPITALIZATION

75.	Issue of bonus shares

(1) The Board may resolve to capitalise any part of the amount for the time being standing to the credit of any of the Company’s share premium or other reserve accounts or funds or to the credit of the profit and loss account or otherwise available for distribution by applying such sum in paying up unissued shares to be allotted as fully paid bonus shares pro rata to the Members.

(2) The Company may capitalise any sum standing to the credit of a reserve account or fund or sums otherwise available for dividend or distribution by applying such amounts in paying up in full partly paid shares of those Members who would have been entitled to such sums if they were distributed by way of dividend or distribution.

ACCOUNTS AND FINANCIAL STATEMENTS

76.	Records of account

The Board shall cause to be kept proper records of account with respect to all transactions of the Company and in particular with respect to:-

(a) all sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure relates;

(b) all sales and purchases of goods by the Company; and

Such records of account shall be kept at the registered office of the Company or, subject to Section 83 (2) of the Act, at such other place as the Board thinks fit and shall be available for inspection by the Directors during normal business hours. No Member in its capacity as a Member shall have any right to inspect any accounting record or book or document of the Company except as conferred by the Act or as authorised by the Board.

77.	Financial year end

The financial year end of the Company may be determined by the Board and failing such resolution shall be 31st December in each year.

78.	Financial statements

Subject to any rights to waive laying of accounts pursuant to Section 88 of the Act, financial statements as required by the Act shall be laid before the Members in general meeting.

AUDIT

79.	Appointment of Auditor

Subject to Section 88 of the Act, at the annual general meeting or at a subsequent special general meeting in each year, an independent representative of the Members shall be appointed by them as Auditor of the accounts of the Company. Such Auditor may be a Member but no Director, Officer or employee of the Company shall, during his or her continuance in office, be eligible to act as an Auditor of the Company.

80.	Remuneration of Auditor

The remuneration of the Auditor shall be fixed by the Company in general meeting or in such manner as the Members may determine.

81.	Vacation of office of Auditor

If the office of Auditor becomes vacant by the resignation or death of the Auditor, or by the Auditor becoming incapable of acting by reason of illness or other disability at a time when the Auditor’s services are required, the Board may fill the vacancy thereby created.

82.	Access to books of the Company

The Auditor shall at all reasonable times have access to all books kept by the Company and to all accounts and vouchers relating thereto, and the Auditor may call on the Directors or Officers of the Company for any information in their possession relating to the books or affairs of the Company.

83.	Report of the Auditor

(1) Subject to any rights to waive laying of accounts or appointment of an Auditor pursuant to Section 88 of the Act, the accounts of the Company shall be audited at least once in every year.

(2) The financial statements provided for by these Bye-laws shall be audited by the Auditor in accordance with generally accepted auditing standards. The Auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the Auditor shall be submitted to the Members in general meeting.

(3) The generally accepted auditing standards referred to in subparagraph (2) of this Bye-law may be those of a country or jurisdiction other than Bermuda. If so, the financial statements and the report of the Auditor must disclose this fact and name such country or jurisdiction.

NOTICES

84.	Notices to Members of the Company

A notice may be given by the Company to any Member either by delivering it to such Member in person or by sending it to such Member’s address in the Register of Members or to such other address given for the purpose. For the purposes of this Bye-law, a notice may be sent by mail, courier service, cable, telex, telecopier, facsimile, electronic mail or other mode of representing words in a legible and non-transitory form. If such notice is sent by next-day courier, cable, telex, telecopier, facsimile or electronic-mail, it shall be deemed to have been given the Business Day following the sending thereof and, if by registered mail, three Business Days following the sending thereof.

85.	Notices to joint Members

Any notice required to be given to a Member shall, with respect to any shares held jointly by two or more persons, be given to whichever of such persons is named first in the Register of Members and notice so given shall be sufficient notice to all the holders of such shares.

86.	Service and delivery of notice

Subject to Bye-law 85 any notice shall be deemed to have been served at the time when the same would be delivered in the ordinary course of transmission and, in proving such service, it shall be sufficient to prove that the notice was properly addressed and prepaid, if posted, and the time when it was posted, delivered to the courier or to the cable company or transmitted by telex, facsimile or other method as the case may be.

SEAL OF THE COMPANY

87.

The seal

The seal of the Company shall be in such form as the Board may from time to time determine. The Board may adopt one or more duplicate seals for use outside Bermuda.

88.	Manner in which seal is to be affixed

Subject to Bye-law 57 (Share certificates), the seal of the Company shall not be affixed to any instrument except attested by the signature of a Director and the Secretary or any two Directors, or any person appointed by the Board for the purpose, provided that any Director, Officer or Resident Representative, may affix the seal of the Company attested by such Director, Officer or Resident Representative’s signature to any authenticated copies of these Bye-laws, the incorporating documents of the Company, the minutes of any meetings or any other documents required to be authenticated by such Director, Officer or Resident Representative. Any such signature may be printed or affixed by mechanical means on any share certificate, debenture, stock certificate or other security certificate.

BENEFITS, PENSIONS AND INSURANCE

89.

Benefits

The Board may (by establishment of or maintenance of schemes or otherwise) provide benefits, whether by share options or incentive plans and loans to acquire shares (subject to obtaining any general or specific consent under the provision of Section 96 of the Act), the payment of gratuities or pensions or by insurance or otherwise, for any past or present Director, Officer or employee of the Company or any of its Subsidiaries or Affiliates and for any member of his or her family (including a spouse and a former spouse) or any individual who is or was dependent on him or her, and may (as well before as after he ceases to hold such office or employment) contribute to any fund and pay premiums for the purchase or provision of any such benefit.

90.

Insurance

Without prejudice to the provisions of Bye-laws 31 and 32, the Board shall have the power to purchase and maintain insurance for or for the benefit of any individuals who are or were at any time Directors, Officers or employees of the Company, or of any of its Subsidiaries or Affiliates, or who are or were at any time trustees of any pension fund in which Directors, Officers or employees of the Company or any such Subsidiary or Affiliate are interested, including (without prejudice to the generality of the foregoing) insurance against any liability incurred by such individuals in respect of any act or omission in the actual or purported execution or discharge of their duties or in the exercise or purported exercise of their powers or otherwise in relation to their duties, powers or offices in relation to the Company or any such other company, Subsidiary, Affiliate or pension fund.

91.	Limitation on Accountability

No Director or former Director shall be accountable to the Company or the Members for any remuneration or benefit provided pursuant to Bye-laws 22, 89 or 90 and the receipt of any such benefit shall not disqualify any individual from being or becoming a Director of the Company.

UNTRACED MEMBERS

92.	Sale of Shares

The Company shall be entitled to sell at the best price reasonably obtainable, or if the shares are listed on a stock exchange to purchase at the trading price on the date of purchase, the shares of a Member or the shares to which a Person is entitled by virtue of transmission on death, bankruptcy or otherwise by operation of law; provided, that:

i. during the period of 12 years prior to the date of the publication of the advertisements referred to in paragraph (b) of this Bye-law 92 (or, if published on different dates, the first thereof) at least three dividends in respect of the shares in question have been declared and all dividends, warrants and checks (cheques) that have been sent in the manner authorised by these Bye-laws in respect of the shares in question have remained uncashed;

ii. the Company shall as soon as practicable after expiry of the said period of 12 years have inserted advertisements both in a national daily newspaper and in a newspaper circulating in the area of the last known address of such Member or other Person giving notice of its intention to sell or purchase the shares;

iii. during the said period of 12 years and the period of three months following the publication of the said advertisements the Company shall have received no indication either of the whereabouts or of the existence of such Member or Person; and

iv. if the shares are listed on a stock exchange, notice shall have been given to the relevant department of such stock exchange of the Company’s intention to make such sale or purchase prior to the publication of advertisements.

If during any 12-year period referred to above, further shares have been issued in right of those held at the beginning of such period or of any previously issued during such period and all the other requirements of this Bye-law 92 (other than the requirement that they be in issue for 12 years) have been satisfied in regard to the further shares, the Company may also sell or purchase the further shares.

93.	Instrument of Transfer

To give effect to any such sale or purchase under Bye-law 92, the Board may authorise some person to execute an instrument of transfer of the shares sold or purchased to, or in accordance with the directions of, the purchaser and an instrument of transfer executed by that person shall be as effective as if it had been executed by the holder of, or person entitled by transmission to, the shares. The transferee of any shares sold shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity in, or invalidity of, the proceedings relating to the sale.

94.	Proceeds of Sale

The net proceeds of sale or purchase of shares pursuant to Bye-law 92 shall belong to the Company which, for the period of six years after the transfer or purchase, shall be obliged to account to the former Member or other Person previously entitled as aforesaid for an amount equal to such proceeds and shall enter the name of such former Member or other Person in the books of the Company as a creditor for such amount. No trust shall be created in respect of the debt, no interest shall be payable in respect of the same and the Company shall not be required to account for any money earned on the net proceeds, which may be employed in the business of the Company or invested in such investments as the Board from time to time thinks fit. After the said six-year period has passed, the net proceeds of share shall become the property of the Company, absolutely, and any rights of the former Member or other Person previously entitled as aforesaid shall terminate completely.

WINDING UP

95.	Determination to liquidate

Subject to the Act, the Company may be wound up voluntarily by resolution of the Members. However, the Board shall have the power to present any petition and make any application in connection with the winding up or liquidation of the Company.

96.	Winding up/distribution by liquidator

If the Company shall be wound up the liquidator may, with the sanction of a resolution of the Members, divide amongst the Members in specie or in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may,

for such purpose, set such value as he or she deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Members as the liquidator shall think fit, but so that no Member shall be compelled to accept any shares or other securities or assets whereon there is any liability.

ALTERATION OF BYE-LAWS

97.	Alteration of Bye-laws

No Bye-law shall be rescinded, altered or amended and no new Bye-law shall be made until the same has been approved by a resolution of the Board and by a resolution of the Members.

CERTAIN SUBSIDIARIES

98.	Voting of subsidiary shares

Notwithstanding any other provision of these Bye-laws to the contrary, if the Company is required or entitled to vote at a general or special meeting of (i) Max Re Ltd., a Bermuda reinsurance company and a subsidiary of the Company, or (ii) any Designated Subsidiary (as defined in Bye-law 99), the Directors shall refer the subject matter of the vote to the Members on a poll and seek authority from the Members for the Company’s corporate representative or proxy to vote in favour of the resolution proposed by Max Re and/or such Designated Subsidiary. The Directors shall cause the Company’s corporate representative or proxy to vote the Company’s shares in Max Re Ltd. and/or such Designated Subsidiary pro rata to the votes received at the general meeting of the Company, with votes for or against the directing resolution being taken, respectively, as an instruction for the Company’s corporate representative or proxy to vote the appropriate proportion of its shares for and the appropriate proportion of its shares against the resolution proposed by Max Re Ltd. and/or such Designated Subsidiary. All votes referred to the Company’s Members pursuant to this Bye-law 98 shall be subject to the voting power restrictions of Bye-laws 12(4) and 52.

99.	Bye-laws or Articles of Association of certain subsidiaries

The Board shall require that the Bye-laws of Max Re Ltd., and may require that the Bye-laws or Articles of Association of each other subsidiary of the Company organized under the laws of a jurisdiction outside the United States of America that is treated as a corporation for U.S. federal tax purposes and designated by the Board, contain provisions substantially similar to Bye-law 98, herein (any such subsidiary so designated by the Board is referred to herein as a “Designated Subsidiary”). If the Board designates any indirect subsidiary of the Company as a Designated Subsidiary, the Board shall also designate each intermediate subsidiary between such Designated Subsidiary and the Company (other than Max Re) as a Designated Subsidiary hereunder. The Company in its discretion may enter into agreements with each Designated Subsidiary, as reasonably necessary, to effectuate or implement this Bye-law.

******

***

SCHEDULE – FORM A (Bye-law 59)

NOTICE OF LIABILITY TO FORFEITURE FOR NON PAYMENT OF CALL

You have failed to pay the call of [amount of call] made on the day of , 20 last, in respect of the [number] share(s) [numbers in figures] standing in your name in the Register of Members of the Company, on the day of , 20 last, the day appointed for payment of such call. You are hereby notified that unless you pay such call together with interest thereon at the rate of per annum computed from the said day of , 20 last, on or before the day of , 20 next at the place of business of the Company the share(s) will be liable to be forfeited.

Dated this day of , 20

[Signature of Secretary]

By order of the Board

SCHEDULE – FORM B (BYE-LAW 63)

TRANSFER OF A SHARE OR SHARES

FOR VALUE RECEIVED [amount]

[transferor]

hereby sell assign and transfer unto [transferee]

of [address]

[number of

shares]

shares of [name of

Company]

Dated


				(Transferor)

In the presence of:


(Witness)


				(Transferee)

In the presence of:


(Witness)

SCHEDULE – FORM C (Bye-law 68)

TRANSFER BY A PERSON BECOMING ENTITLED ON DEATH/BANKRUPTCY

OF A MEMBER

I/We having become entitled in consequence of the [death/bankruptcy] of [name of the deceased Member] to [number] share(s) standing in the register of members of [Company] in the name of the said [name of deceased Member] instead of being registered myself/ourselves elect to have [name of transferee] (the “Transferee”) registered as a transferee of such share(s) and I/we do hereby accordingly transfer the said share(s) to the Transferee to hold the same unto the Transferee his or her executors administrators and assigns subject to the conditions on which the same were held at the time of the execution thereof; and the Transferee does hereby agree to take the said share(s) subject to the same conditions.

WITNESS our hands this day of , 20

Signed by the above-named		)
[person or persons entitled]		)
in the presence of:		)

Signed by the above-named		)
[transferee]		)
in the presence of:		)

EX-10.1 4 dex101.htm LETTER OF CREDIT REIMBURSEMENT AGREEMENT DATED AS OF SEPTEMBER 19, 2003 Letter of Credit Reimbursement Agreement dated as of September 19, 2003

Exhibit 10.1

LETTER OF CREDIT REIMBURSEMENT AGREEMENT

dated as of September 19, 2003

among

MAX RE LTD.

as the Borrower,

VARIOUS FINANCIAL INSTITUTIONS,

as the Lenders,

and

FLEET NATIONAL BANK,

as Fronting Bank, Administrative Agent,

and LC Administrator for the Lenders

ARTICLE I. DEFINITIONS			1

	SECTION 1.1	Definitions	1

	SECTION 1.2	Other Interpretive Provisions	15

	SECTION 1.3	Accounting Principles	15

ARTICLE II. AMOUNT AND TERMS OF COMMITMENT			16

	SECTION 2.1	Letter of Credit Commitment	16

	SECTION 2.2	Issuance, Amendment and Renewal of Letters of Credit	17

	SECTION 2.3	Drawings and Reimbursements	19

	SECTION 2.4	Repayment of LC Advances	22

	SECTION 2.5	Role of the Lenders	22

	SECTION 2.6	Obligations Absolute	23

	SECTION 2.7	Applicability of ISP98	24

	SECTION 2.8	Interest	24

	SECTION 2.9	Payments by the Borrower	24

	SECTION 2.10	Warranty	25

	SECTION 2.11	Termination or Reduction of Commitments	25

	SECTION 2.12	Mandatory Reduction/Cash Collateralization of Letters of Credit	25

	SECTION 2.13	Fees	26

	SECTION 2.14	Computation of Fees and Interest	27

	SECTION 2.15	Sharing of Payments, Etc	27

	SECTION 2.16	Commitment Termination Date Extension	28

ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY			29

	SECTION 3.1	Taxes	29

	SECTION 3.2	Illegality	30

	SECTION 3.3	Increased Costs and Reduction of Return	31

	SECTION 3.4	Certificates of Lenders	32

	SECTION 3.5	Substitution of Lenders	32

	SECTION 3.6	Survival	32

ARTICLE IV. REPRESENTATIONS AND WARRANTIES			32

	SECTION 4.1	Due Organization, Authorization, etc	32

	SECTION 4.2	Litigation and Contingent Liabilities	33

	SECTION 4.3	Employee Benefit Plans	33


	SECTION 4.4	Regulated Entities	33

	SECTION 4.5	Regulations U and X	33

	SECTION 4.6	Proceeds	33

	SECTION 4.7	Business Locations	33

	SECTION 4.8	Accuracy of Information	34

	SECTION 4.9	Subsidiaries	34

	SECTION 4.10	Insurance Licenses	34

	SECTION 4.11	Taxes	34

	SECTION 4.12	Securities Laws	34

	SECTION 4.13	Compliance with Laws	35

	SECTION 4.14	Financial Condition	35

	SECTION 4.15	Insurance Act	35

	SECTION 4.16	First Priority Security Interest	35

	SECTION 4.17	Tax Shelter Regulations	35

ARTICLE V. AFFIRMATIVE COVENANTS			36

	SECTION 5.1	Reports, Certificates and Other Information	36

	SECTION 5.2	Corporate Existence; Foreign Qualification	39

	SECTION 5.3	Books, Records and Inspections	39

	SECTION 5.4	Insurance	39

	SECTION 5.5	Taxes and Liabilities	40

	SECTION 5.6	Compliance with Laws	40

	SECTION 5.7	Maintenance of Permits	40

	SECTION 5.8	Conduct of Business	40

	SECTION 5.9	Use of Letters of Credit	40

	SECTION 5.10	Further Assurances	40

ARTICLE VI. NEGATIVE COVENANTS			40

	SECTION 6.1	Net Worth	40

	SECTION 6.2	Unencumbered Asset Reserve Requirement	40

	SECTION 6.3	Debt	41

	SECTION 6.4	Mergers, Consolidations and Sales	41

	SECTION 6.5	Other Agreements	41

	SECTION 6.6	Transactions with Affiliates	41

	SECTION 6.7	Liens	41


	SECTION 6.8	Restrictions On Negative Pledge Agreements	42

	SECTION 6.9	Dividends, Etc	42

	SECTION 6.10	Eligible Investments	42

ARTICLE VII. EVENTS OF DEFAULT AND THEIR EFFECT			43

	SECTION 7.1	Events of Default	43

	SECTION 7.2	Effect of Event of Default	45

	SECTION 7.3	LC Collateral Account	45

ARTICLE VIII. CONDITIONS			46

	SECTION 8.1	Conditions to Occurrence of the Effective Date	46

	SECTION 8.2	Conditions to All Credit Extensions	47

ARTICLE IX. THE ADMINISTRATIVE AGENT			48

	SECTION 9.1	Appointment and Authorization	48

	SECTION 9.2	Delegation of Duties	48

	SECTION 9.3	Liability of Administrative Agent	48

	SECTION 9.4	Reliance by Administrative Agent	49

	SECTION 9.5	Notice of Default	49

	SECTION 9.6	Credit Decision	49

	SECTION 9.7	Indemnification	50

	SECTION 9.8	Administrative Agent in Individual Capacity	50

	SECTION 9.9	Successor Administrative Agent	50

	SECTION 9.10	Withholding Tax	51

ARTICLE X. MISCELLANEOUS			52

	SECTION 10.1	Amendments and Waivers	52

	SECTION 10.2	Notices	53

	SECTION 10.3	No Waiver; Cumulative Remedies	54

	SECTION 10.4	Costs and Expenses	54

	SECTION 10.5	Indemnity	54

	SECTION 10.6	Payments Set Aside	55

	SECTION 10.7	Successors and Assigns	55

	SECTION 10.8	Assignments, Participations, etc.	55

	SECTION 10.9	Confidentiality	56

	SECTION 10.10	Set-off	57

	SECTION 10.11	Notification of Addresses, Lending Offices, Etc	58

iii


SECTION 10.12	Counterparts; Facsimile	58

SECTION 10.13	Severability	58

SECTION 10.14	No Third Parties Benefitted	58

SECTION 10.15	Governing Law and Jurisdiction	58

SECTION 10.16	Waiver of Jury Trial	59

SECTION 10.17	Currency Indemnity	59

SECTION 10.18	Service of Process	60

SECTION 10.19	Entire Agreement	60

SCHEDULE 1.1		Concentration Limits
SCHEDULE 2.1		Commitments
SCHEDULE 4.1		Jurisdictions
SCHEDULE 4.2		Litigation
SCHEDULE 4.7		Locations
SCHEDULE 4.9		Subsidiaries
SCHEDULE 4.10		Insurance Licenses
SCHEDULE 6.6		Transaction with Affiliates
SCHEDULE 6.7		Liens
SCHEDULE 10.2		Addresses
EXHIBIT A		Form of Compliance Certificate
EXHIBIT B		Form of Borrowing Base Certificate
EXHIBIT C		Form of Assignment and Acceptance
EXHIBIT D		Form of Security Agreement
EXHIBIT E		Forms of Letter of Credit

LETTER OF CREDIT REIMBURSEMENT AGREEMENT

THIS LETTER OF CREDIT REIMBURSEMENT AGREEMENT, dated as of September 19, 2003, is entered into by and among Max Re Ltd., a Bermuda company (the “Borrower”), various financial institutions which are parties hereto (the “Lenders”), Fleet National Bank, as fronting bank (in such capacity, the “Fronting Bank”), Fleet National Bank, as letter of credit administrator (in such capacity, the “LC Administrator”) and Fleet National Bank, as administrative agent for the Lenders (in such capacity, the “Administrative Agent”).

W I T N E S S E T H:

WHEREAS, the Borrower desires to obtain commitments from the Fronting Bank and the Lenders whereby the Lenders would severally issue letters of credit and/or the Fronting Bank would issue (and the Lenders would participate in) letters of credit to counterparties to support the Borrower’s obligations under Reinsurance Agreements;

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

ARTICLE I.

DEFINITIONS

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

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

Administrative Agent means (a) Fleet, in its capacity as administrative agent for the Lenders, and (b) each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to Section 9.9.

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

Affected Lender is defined in Section 3.5.

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

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

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

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

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

Agent-Related Persons means the Fronting Bank, the Administrative Agent, the LC Administrator (and any successor administrative agent or letter of credit administrator arising under Section 9.9), together with its Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Person and Affiliates.

Agent’s Payment Office means the address for payments set forth on Schedule 10.2 in relation to the Administrative Agent, or such other address as the Administrative Agent may from time to time specify.

Agreement means this Letter of Credit Reimbursement Agreement.

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

Assignee is defined in Section 10.8(a).

Assignment and Acceptance is defined in Section 10.8(a).

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

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

Base Rate means, for any day, a fluctuating rate per annum equal to the higher of (a) Federal Funds Rate plus ¹/2 of 1%; and (b) the rate of interest in effect for such day as publicly announced from time to time by Fleet as its reference rate for Dollar loans made in the United States. The “reference rate” is a rate set by Fleet based upon various factors including Fleet’s costs and desired return, general economic conditions and other factors, and is used as a

reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in the “reference rate” announced by Fleet shall take effect at the opening of business on the day specified in the public announcement of such change.

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

Borrower is defined in the Preamble.

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

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

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

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

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

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

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

Cash Equivalents means, at any time:

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

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

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

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

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

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

(ii) any Lender; or

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

(i) is entered into with

(A) any Lender, or

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

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

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

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

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

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

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

Commitment means, as to any Lender, the commitment of such Lender to issue and/or participate in Letters of Credit for the account of the Company pursuant to Section 2.1. The initial amount of the Commitment of each Lender is set forth on Schedule 2.1.

Commitment Termination Date means the earliest to occur of (a) September 17, 2004 as such date may be extended pursuant to Section 2.16 or (b) the date on which any Commitment Termination Event occurs.

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

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

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

Consent Period is defined in Section 2.16(a).

Consenting Lender is defined in Section 2.16(a).

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

The amount of any Person’s obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum permitted principal amount, if larger) of the Debt, obligation or other liability guaranteed or supported thereby.

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

Control Agreement means a control agreement in form and substance satisfactory to the Administrative Agent among the Borrower, the Administrative Agent, and Mellon Bank N.A.

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

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

Credit Extension means the issuance of any Letter of Credit or the amendment or extension of the stated expiry date of any existing Letter of Credit.

Currency Date is defined in Section 10.17.

Custody Account means account no. MRLF0110932 at Mellon Bank N.A. as to which Mellon Bank N.A. and the Administrative Agent have entered into a Control Agreement.

Debt means, with respect to any Person, at any date, without duplication, (a) all obligations of such Person for borrowed money or in respect of loans or advances; (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations in respect of letters of credit which have been drawn but not reimbursed by the Person for whose account such letter of credit was issued, and bankers’ acceptances issued for the account of such Person; (d) all obligations in respect of Capitalized Leases of such Person; (e) all net Hedging Obligations of such Person; (f) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services; (g) Debt of such Person secured by a Lien on property owned or being purchased by such Person (including Debt arising under conditional sales or other title retention agreements) whether or not such Debt is limited in recourse; (h) any Debt of another Person secured by a Lien on any assets of such first Person, whether or not such Debt is assumed by such first Person (it being understood that if such Person has not assumed or otherwise become personally liable for any such Debt, the amount of the Debt of such person in connection therewith shall be limited to the lesser of the face amount of such Debt and the fair market value of all property of such Person securing such Debt); (i) any Debt of a partnership in which such Person is a general partner unless such Debt is nonrecourse to such Person; and (j) all Contingent Liabilities of such Person whether or not in connection with the foregoing; provided that,

notwithstanding anything to contrary contained herein, Debt shall not include (x) contingent liabilities arising out of endorsements of checks and other negotiable instruments for deposit or collection in the ordinary course of business or, (y) unsecured current liabilities incurred in the ordinary course of business and paid within 90 days after the due date (unless contested diligently in good faith by appropriate proceedings and, if requested by the Administrative Agent, reserved against in conformity with GAAP) other than liabilities that are for money borrowed or are evidenced by bonds, debentures, notes or other similar instruments (except as described in clause (x) above) or (z) any obligations of such Person under any Reinsurance Agreement.

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

Department is defined in Section 4.2.

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

Drawing Request is defined in Section 2.3(a).

Drawing Request Date is defined in Section 2.3(a).

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

Eligible Assignee means a Person who is (a) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $250,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the “OECD”), or a political subdivision of any such country, and having a combined capital and surplus of at least $250,000,000, provided that such bank is acting through a branch or agency located in the United States; (c) a Person that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary; or (d) mutual funds, pension funds and other institutional investors (except an Affiliate of the Borrower) regularly engaged in the making of commercial loans.

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

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

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

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

Extension Request Date is defined in Section 2.16(a).

Fair Market Value shall mean (a) with respect to any publicly-traded security (other than those set forth in clause (b)) the closing price for such security on the largest exchange on which such security is traded (or if not traded on an exchange, then the average of the closing bid and ask prices quoted over-the-counter) on the date of the determination (as such prices are reported in The Wall Street Journal (Midwest Edition) or if not so reported, in any nationally recognized financial journal or newspaper), (b) with respect to Cash and Cash Equivalents, the amounts thereof, and (c) with respect to any Investment (other than those set forth in clauses (a), and (b)), the price for such Investment on the date of calculation obtained from a generally recognized source approved by the Administrative Agent or the most recent bid quotation from such approved source (or, if no generally recognized source exists as to a particular Investment, any other source specified by the Borrower to which the Administrative Agent does not reasonably object).

Federal Funds Rate means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, “H.15(519)”) on the preceding Business Day opposite the caption “Federal Funds (Effective)”; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Administrative Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent.

Fee Letter is defined in Section 2.13(c).

Final Maturity Date means the first anniversary of the Commitment Termination Date set forth in clause (a) of the definition thereof as extended from time to time pursuant to Section 2.16.

Fiscal Quarter means any quarter of a Fiscal Year.

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

Fleet means Fleet National Bank, a national banking association.

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

Fronting Bank means Fleet in its capacity as an issuer of Letters of Credit in which the Lenders have a Risk Participation.

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

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

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

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

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

Indemnified Liabilities is defined in Section 10.5.

Indemnified Person is defined in Section 10.5.

Information is defined in Section 10.9.

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

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

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

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

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

Issue means, with respect to any Letter of Credit, to issue, to amend or to extend the expiry of, or to renew or increase the amount of, such Letter of Credit; and the terms “Issued”, “Issuing” and “Issuance” have corresponding meanings.

Issuer means, with respect to any Letter of Credit, the Person or Persons who have issued such Letter of Credit.

Judgment Currency is defined in Section 10.17.

LC Administrator means Fleet’s Letter of Credit Operations located at Financial Institutions, Fleet National Bank, Attn: George Urban, Financial Institutions, Mail Stop: CTEH40225C, 777 Main Street, Hartford, CT 06115, as letter of credit administrator for the Lenders, together with any replacement LC Administrator arising under Section 9.9.

LC Advance means each Lender’s participation in any LC Borrowing in accordance with its Percentage.

LC Advance Date is defined in Section 2.3(c).

LC Amendment Application means an application form for amendment of an outstanding letter of credit as shall at any time be in use by the LC Administrator.

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

LC Borrowing means an extension of credit resulting from a drawing under any Letter of Credit which shall not have been reimbursed by the Borrower on the date when made.

LC Collateral Account is defined in Section 2.12(b).

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

LC Related Documents means the Letters of Credit, the LC Applications and any other document relating to any Letter of Credit, including any of the LC Administrator’s standard form documents for Letter of Credit issuances or amendments.

Lenders is defined in the Preamble.

Lending Office means, as to any Lender, the office or offices of such Lender specified as its “Lending Office” on Schedule 10.2, or such other office or offices as such Lender may from time to time notify the Borrower and the Administrative Agent.

Letter of Credit means a standby letter of credit issued pursuant to Section 2.2 having terms and provisions which are permitted by this Agreement and which otherwise are reasonably satisfactory to the LC Administrator.

License(s) is defined in Section 4.10.

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

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

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

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

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

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

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

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

MBS Investments means MBS (Agency CMOs) and MBS (Non-Agency CMOs) which constitute TACs, PACs and Sequentials (as such terms are defined by Bloomberg Inc.) and shall not include Support Tranches (as such term is defined by Bloomberg Inc.) and MBS (Agency Pass-Throughs). The weighted average duration of such MBS Investments shall be less than or equal to seven years. The maximum weighted average life of any single MBS Investment shall

not exceed 12 years. To the extent MBS Investments included within Eligible Investments violate the restrictions set forth herein, the Fair Market Value of such MBS Investments shall be excluded from the Borrowing Base; provided, however, that only those MBS Investments having the lowest aggregate Fair Market Value whose exclusions will result in compliance shall be excluded from the Borrowing Base.

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

MDS means Max Re Diversified Strategies Ltd.

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

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

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

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

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

Ordinary Course Litigation is defined in Section 4.2.

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

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

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

Participating Bank means, from time to time, with respect to Letters of Credit Issued by the Issuers severally based on their respective Percentages, each Lender for whose Percentage the Fronting Bank has agreed to be liable.

Participants is defined in Section 10.8(d).

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

Percentage means as to any Lender at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Lender’s Commitment divided by the combined Commitments of all Lenders.

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

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

Process Agent is defined in Section 10.18.

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

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

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

Replacement Lender is defined in Section 2.16(c).

Required Lenders means, at any time, Lenders then having at least 60% of the aggregate amount of the Commitments or, if the Commitments have been terminated, Lenders then holding at least 60% of the then aggregate outstanding Credit Extensions.

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

Risk Participation is defined in Section 2.5.

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

Security Agreement means a security agreement substantially in the form of Exhibit D.

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

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

Substitute Lender is defined in Section 3.5.

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

Total Commitments means the aggregate Commitments of the Lenders as such amount may be decreased pursuant to Section 2.11. The initial Total Commitments are $100,000,000.

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

Unencumbered Asset Reserve Requirement is defined in Section 6.2.

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

Withdrawal Notice is defined in Section 2.16(b).

Withdrawing Lender is defined in Section 2.16(b).

SECTION 1.2 Other Interpretive Provisions.

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

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

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

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

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

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

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

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

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

SECTION 1.3 Accounting Principles. Unless otherwise defined or the context otherwise requires, all financial and accounting terms used herein or in any of the Credit Documents or any certificate or other document made or delivered pursuant hereto shall be defined in accordance with GAAP or SAP, as the context may require. When used in this Agreement, the term “financial statements” shall include the notes and schedules thereto. In addition, when used

herein, the terms “best knowledge of” or “to the best knowledge of” any Person shall mean matters within the actual knowledge of such Person (or an Executive Officer of such Person) or which should have been known by such Person after reasonable inquiry.

ARTICLE II.

AMOUNT AND TERMS OF COMMITMENT

SECTION 2.1 Letter of Credit Commitment.

(a) Upon and subject to the terms and conditions hereof, (i) the Fronting Bank hereby agrees to issue Letters of Credit at the request of and for the account of the Borrower from time to time before the Commitment Termination Date, (ii) each Issuer hereby agrees to issue Letters of Credit at the request of and for the account of the Borrower from time to time before the Commitment Termination Date in such Issuer’s Percentage of such aggregate stated amounts of Letters of Credit as the Borrower may from time to time request, (iii) each Lender hereby agrees to purchase Risk Participations in the obligations of the Fronting Bank under Letters of Credit Issued by the Fronting Bank, and (iv) with respect to Letters of Credit Issued by the Issuers severally based on their respective Percentages, the Fronting Bank shall be severally (and not jointly) liable for an amount equal to its Percentage plus each Participating Bank’s Percentage and each Participating Bank hereby agrees to purchase Risk Participations in the obligations of the Fronting Bank under any such Letter of Credit in an amount equal to such Participating Bank’s Percentage; provided that no Issuer shall be obligated to issue (and no Participating Bank shall be obligated to participate in) any Letter of Credit if as of the date of issuance of such Letter of Credit (A) the LC Obligations outstanding shall exceed the lesser of (x) the Total Commitments and (y) the Borrowing Base or (B) the conditions in Section 2.1(b) are not met.

(b) No Issuer shall be under any obligation to Issue any Letter of Credit and no Participating Bank shall have any obligation to participate in any Letter of Credit if:

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

(ii) the Administrative Agent or LC Administrator has received written notice from the Fronting Bank or the Required Lenders, as the case may be, or the Borrower, on or prior to the Business Day prior to the requested date of Issuance of such Letter of Credit, that one or more of the applicable conditions contained in Section 8.2 is not then satisfied;

(iii) the expiry date of such Letter of Credit is less than five Business Days prior to the Final Maturity Date, unless all of the Lenders have approved such expiry date in writing;

(iv) in the case of Letters of Credit issued by the Lenders (other than a Participating Bank), such Letter of Credit is not substantially in the form of Exhibit E hereto, or is not otherwise in form and substance reasonably acceptable to the Administrative Agent, the LC Administrator and the Fronting Bank; provided that the Administrative Agent and the LC Administrator can and will agree to reasonable changes to such form, not adverse to the interests of the Lenders, requested by applicable insurance regulators; or

(v) such Letter of Credit is denominated in a currency other than Dollars; or

(vi) after giving effect to issuance of such Letter of Credit, any Lender’s LC Obligations would exceed such Lender’s Commitment; or

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

(c) The Letters of Credit Issued by and the Risk Participations of each Lender and the reimbursement obligations with respect thereto shall be evidenced by one or more accounts or records maintained by such Lender in the ordinary course of business. The accounts or records maintained by the Administrative Agent shall be conclusive (absent manifest error) as to the amount of the LC Advances made to the Borrower and the Letters of Credit Issued for the account of the Borrower, and the amounts of principal, interest and fees owing hereunder. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to any LC Advance or any Letter of Credit.

SECTION 2.2 Issuance, Amendment and Renewal of Letters of Credit.

(a) Each Letter of Credit shall be Issued upon the irrevocable written request of the Borrower received by the LC Administrator at least 5 Business Days (or such shorter time as the Administrative Agent, the LC Administrator and the Issuer may agree in a particular instance in their sole discretion) prior to the proposed date of issuance. The LC Administrator shall promptly advise the Administrative Agent of any such request. Each such request for issuance of a Letter of Credit shall be in the form of an LC Application, shall be given in such manner as is satisfactory to the LC Administrator and shall specify in form and detail satisfactory to the LC Administrator: (i) the proposed date of issuance of the Letter of Credit (which shall be a Business Day); (ii) the face amount of the Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv) the name and address of the Beneficiary thereof; (v) the documents to be presented by the Beneficiary of the Letter of Credit in case of any drawing thereunder; (vi) the full text of any certificate to be presented by the Beneficiary in case of any drawing thereunder; (vii) whether such Letter of Credit is to be issued by the Fronting Bank or by the Issuers (it being agreed that in the event an Issuer advises the LC Administrator that such Issuer is unable (due to regulatory restrictions or other legal impediments) to Issue a Letter of Credit because of its relationship to the Beneficiary, such Letter of Credit will be issued by the Fronting Bank); and (viii) such other matters as the LC Administrator may require. The LC Administrator is hereby authorized to execute and deliver each Letter of Credit to be Issued by the Issuers on behalf of the Issuers provided, that at the request of the Borrower, such Letter of Credit will be executed by each of the Issuers. In the event of a conflict between the provisions of this Agreement and the provisions of an LC Application, this Agreement shall govern. The LC Administrator shall use each Issuer’s Percentage as its “Commitment Share” under each Letter of Credit Issued by the Issuers provided that the Fronting Bank shall be severally (and not jointly) liable for an amount equal to its Percentage plus the Percentage of each Participating Bank. The LC Administrator shall not amend any Letter of Credit Issued by the Issuers to change the “Commitment Shares” or add or delete an Issuer liable thereunder unless such amendment is done in connection with an assignment pursuant to Section 10.8.

(b) From time to time while a Letter of Credit is outstanding and prior to the Commitment Termination Date, the Issuer will, upon the written request of the Borrower received by the LC Administrator at least 5 Business Days (or such shorter time as the Administrative Agent, the LC Administrator and the Issuer may agree in a particular instance in their sole discretion) prior to the proposed date of amendment, amend any Letter of Credit Issued by them. The LC Administrator shall promptly advise the Administrative Agent of any such request. Each such request for amendment of a Letter of Credit shall be made by facsimile, confirmed immediately in an original writing, made in the form of an LC Amendment Application and shall specify in form and detail satisfactory to the LC Administrator: (i) the Letter of Credit to be amended; (ii) the proposed date of amendment of such Letter of Credit (which shall be a Business Day); (iii) the nature of the proposed amendment; and (iv) such other matters as the LC Administrator may require. No Issuer shall have any obligation to amend any Letter of Credit if: (A) such Issuer would have not been obligated at such time to Issue or participate in such Letter of Credit in its amended form under the terms of this Agreement; or (B) the Beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit. The Issuers and the Fronting Bank agree, upon the request of the Borrower and as long as no Event of Default or Default shall have occurred and be continuing, to amend any Letter of Credit to extend the expiry date thereof to a date not later than 5 Business Days prior to the Final Maturity Date. The LC Administrator is hereby authorized to execute and deliver each amendment to a Letter of Credit Issued by the Issuers on behalf of the Issuers provided that, upon request of the Borrower, such amendment will be executed by each Issuers.

(c) The Administrative Agent shall promptly notify each Lender of the receipt of a written request from the Borrower for the issuance of or an amendment to a Letter of Credit and, with respect to the issuance of or Risk Participation in a Letter of Credit, the amount of such Lender’s share of such Letter of Credit which shall equal its Percentage thereof. In addition, at least two Business Days prior to the issuance or amendment of any Letter of Credit, the Administrative Agent will confirm to the Lenders (by telephone or in writing) that the Administrative Agent has received a copy of the LC Application or LC Amendment Application from the Borrower.

(d) With respect to a request to Issue a Letter of Credit, unless the Administrative Agent has received, on or before the Business Day immediately preceding the date on which such Letter of Credit will be Issued, (A) notice from the Fronting Bank or the Required Lenders, as the case may be, or the Borrower directing the Administrative Agent not to permit the issuance of such Letter of Credit because such issuance is not then permitted under Section 2.1(a) as a result of the limitations set forth therein or (B) a notice described in Section 2.1(b)(ii), then, subject to the terms and conditions hereof, the LC Administrator shall, on the requested date, cause a Letter of Credit to be Issued by the Fronting Bank or by the Issuers in accordance with their Percentages (provided that the Fronting Bank shall be severally (and not jointly) liable for an amount equal to its Percentage plus the Percentage of each Participating Bank), as the case may be, for the account of the Borrower in accordance with the LC Administrator’s usual and customary business practices.

(e) The LC Administrator may, at its election (or at the direction of the Administrative Agent, the Fronting Bank or the Required Lenders, as the case may be), deliver any notices of termination or other communications to any Beneficiary or transferee, and take any other action as necessary or appropriate, at any time and from time to time, in order to cause the expiry date of such Letter of Credit to be a date not later than the five Business Days prior to the Final Maturity Date.

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

(g) The LC Administrator, concurrently or promptly following the delivery of a Letter of Credit, or amendment to or renewal of a Letter of Credit, to a Beneficiary, shall send to the Administrative Agent and the Lenders a true and complete copy of each such Letter of Credit or amendment to or renewal of a Letter of Credit. After giving effect to the Issuance of any Letter of Credit, there shall be no more than 25 Letters of Credit outstanding.

(h) The status of a Lender as a Participating Bank at any time shall be determined solely by the Fronting Bank and such Lender. In the event a Lender becomes a Participating Bank or ceases to be a Participating Bank, the LC Administrator is authorized to amend each Letter of Credit to reflect such change in status and fees owed by any Participating Bank pursuant to Section 2.13(c)(i) shall accrue only during such period as such Lender is a Participating Bank with respect to any such Letter of Credit.

SECTION 2.3 Drawings and Reimbursements.

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

(b) With respect to any Drawing Request, if immediately available funds are not received by the LC Administrator from the Borrower prior to 3:00 p.m. (Hartford time) on the first Business Day after the Drawing Request Date in the amount of such Drawing Request, the LC Administrator shall promptly notify the Administrative Agent and the Administrative Agent

shall notify each Lender on the first Business Day after the Drawing Request Date of such Drawing Request and such Lender’s share of such Drawing Request (which shall be an amount equal to (i) such Lender’s Percentage multiplied by the lesser of (ii)(A) the maximum amount available to be drawn under such Letter of Credit and (B) the amount of such drawing which was not reimbursed by the Borrower pursuant to Section 2.3(a)) and the Borrower shall be deemed to have requested an LC Borrowing in an amount equal to the amount of such drawing which was not reimbursed by the Borrower pursuant to Section.3(a). Any notice given by the Administrative Agent to the Lenders pursuant to this Section 2.3(b) may be oral if immediately confirmed in writing (including by facsimile); provided that (i) the failure of the Administrative Agent to give any such notice in sufficient time to enable any Lender to effect such payment at the time required under Section 2.3(c) or (ii) the failure of the Administrative Agent to deliver an immediate confirmation of such notice shall not affect the conclusiveness or binding effect of such notice or relieve any Lender from its obligations under this Section 2.3.

(c) Upon receiving a Drawing Request, each Lender shall make available to the Administrative Agent for the account of LC Administrator at the Administrative Agent’s Payment Office by 3:00 p.m. (Hartford time) in immediately available funds on the second Business Day after the Drawing Request Date (such date, an “LC Advance Date”) its share of such request; provided that in the case of a Letter of Credit issued by the Fronting Bank, if a Lender shall fail to make such funds so available, the Fronting Bank shall make such funds available and provided further that if a Participating Bank shall fail to make such funds so available, the Fronting Bank shall make such funds available. Upon delivering such funds to the Administrative Agent pursuant to this Section 2.3(c), such Lender (or the Fronting Bank, if the Fronting Bank has made such funds available after the failure of such Lender to do so) shall be deemed to have made an LC Advance to the Borrower in such amount. To the extent that immediately available funds are received by the Administrative Agent from the Lenders prior to 3:00 p.m. (Hartford time) on any LC Advance Date, the Administrative Agent shall notify the LC Administrator and the LC Administrator shall promptly make such funds available to the Beneficiary of the related Letter of Credit on such date. To the extent that the LC Administrator has not delivered funds to any Beneficiary on behalf of a Lender pursuant to the first sentence of Section 2.3(d) and that immediately available funds are received by the Administrative Agent from such Lender: (i) after 3:00 p.m. on any LC Advance Date, the LC Administrator shall make such funds available to such Beneficiary on the next Business Day following such LC Advance Date; (ii) prior to 3:00 p.m. on any Business Day after the LC Advance Date, the LC Administrator shall make those funds available to such Beneficiary on such Business Day; and (iii) after 3:00 p.m. on any Business Day after the LC Advance Date, the LC Administrator shall make those funds available to such Beneficiary on the next Business Day following such Business Day.

(d) Unless the Administrative Agent or LC Administrator receives notice from a Lender prior to any LC Advance Date that such Lender will not make available as and when required hereunder to the Administrative Agent for the account of the Borrower the amount of such Lender’s LC Advance on such LC Advance Date, the Administrative Agent and the LC Administrator may assume that such Lender has made such amount available to the Administrative Agent in immediately available funds on the LC Advance Date and the LC Administrator may (but shall not be required), in reliance upon such assumption, make available to the Beneficiary of the related Letter of Credit on such date such Lender’s LC Advance. If and

to the extent (i) any Lender shall not have made its full amount available to the Administrative Agent in immediately available funds and (ii) the LC Administrator in such circumstances has made available to the Beneficiary such amount, then such Lender shall, on the Business Day following such LC Advance Date, make such amount available to the Administrative Agent, together with interest thereon until the date made available (i) at the Federal Funds Rate for the period ending two Business Days after such LC Advance Date and (ii) at the Base Rate plus 2.00% thereafter; provided, however, that if a Lender has failed to make such an amount available with respect to a Letter of Credit issued by the Fronting Bank, the Fronting Bank shall make such amount available and provided further that if a Participating Bank has failed to make such an amount available with respect to a Letter of Credit, the Fronting Bank shall make such amount available. If a Participating Bank fails to make such amount available, it shall pay interest to the Fronting Bank. If the Fronting Bank shall fail to make such amount available, it shall pay such interest to the LC Administrator and if a Lender fails to make such amount available, it shall pay such interest to the Fronting Bank. A notice of the Administrative Agent submitted to a Lender with respect to amounts owing under Section 2.3(b) shall be conclusive, absent manifest error. If such amount is so made available, together with interest thereon, such payment to the Administrative Agent shall constitute such Lender’s LC Advance on the LC Advance Date for all purposes of this Agreement. If such amount, together with interest thereon, is not made available to the Administrative Agent on the Business Day following the LC Advance Date, the Administrative Agent will notify the Borrower of such failure to fund and, upon demand by the Administrative Agent, the Borrower shall pay such amount to the Administrative Agent for the LC Administrator’s account, together with interest thereon for each day elapsed since the date of such LC Borrowing, at a rate per annum equal the Base Rate plus 2.00%.

(e) The failure of any Lender to make any LC Advance on any LC Advance Date shall not relieve any other Lender of any obligation hereunder to make an LC Advance on such LC Advance Date, and neither the Administrative Agent, the LC Administrator nor any Lender shall be responsible for the failure of any other Lender to make any LC Advance on any LC Advance Date. Each Lender’s obligation in accordance with this Agreement to make LC Advances, as contemplated by this Section 2.3, as a result of a drawing under a Letter of Credit, shall be absolute and unconditional and without recourse to the Administrative Agent, the Fronting Bank or the LC Administrator and shall not be affected by any circumstance, including (i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Administrative Agent, the LC Administrator, the Fronting Bank, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of an Event of Default, a Default or a Material Adverse Effect; or (iii) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided the LC Administrator shall exercise the same care in examining documents and determining whether or not to honor a Drawing Request as it would exercise if the LC Administrator had Issued such Letter of Credit for its own account. Nothing contained in this Agreement, and no actions taken by the Lenders, the LC Administrator, the Fronting Bank or the Administrative Agent pursuant hereto or in connection with a Letter of Credit shall be deemed to constitute the Lenders, together or with the Administrative Agent, the Fronting Bank and the LC Administrator, a partnership, association, joint venture or other entity.

SECTION 2.4 Repayment of LC Advances. Upon (and only upon) receipt by the Administrative Agent of immediately available funds from the Borrower in repayment of any LC Advances, the Administrative Agent (i) shall deduct and retain from such repayment an amount not to exceed the aggregate unreimbursed payments, if any, which were made by the LC Administrator pursuant to the first sentence of Section 2.3(d), and then (ii) shall pay to each Lender, in the same funds as those received by the Administrative Agent, such Lender’s Percentage of any funds remaining after giving effect to clause (i) above; provided, that if the Fronting Bank has advanced funds on behalf of a Lender, the Fronting Bank shall be repaid out of such funds in full before any payment shall be made to such Lender. The Borrower shall repay any LC Advances on the date such LC Advances are made together with interest thereon as provided in Section 2.8.

SECTION 2.5 Role of the Lenders. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, neither the LC Administrator nor any Issuer shall have any responsibility to obtain any document (other than any sight draft and certificate expressly required by such Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document; provided that the LC Administrator and the Issuers shall exercise that standard of care customarily exercised by them in the review and processing of drawings under letters of credit issued by them.

(a) No Agent-Related Person nor any of their respective correspondents, participants or assignees shall be liable to any Lender for: (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders (including the Required Lenders, as applicable); (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any LC Related Document.

(b) The Borrower hereby assumes all risks of the acts or omissions of any Beneficiary or transferee with respect to its use of any Letter of Credit; provided that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the Beneficiary or transferee at law or under any other agreement. Neither any Agent-Related Person, any Issuer nor any of their respective correspondents, participants or assignees shall be liable or responsible for any of the matters described in clauses (i) through (vii) of Section 2.6; provided that, anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the Administrative Agent, the LC Administrator or any Lender, and the Administrative Agent, the LC Administrator or any Lender may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower, in a final judgment of a court of competent jurisdiction, proves were caused primarily by the Administrative Agent’s or LC Administrator’s or such Lender’s willful misconduct or gross negligence or the LC Administrator’s or such Lender’s willful failure to pay under any Letter of Credit after the presentation to it by the Beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing: (i) the LC Administrator may accept documents that appear on their face to be in order, without responsibility for further investigation; and (ii) neither the LC Administrator nor any Issuer shall be responsible for the validity or sufficiency of any instrument transferring or

assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

(c) Concurrently with the issuance by the Fronting Bank of any Letter of Credit and any amendment thereto, the Fronting Bank shall be deemed to have sold and transferred to each other Lender, and each other Lender shall be deemed irrevocably and unconditionally to have purchased and received from the Fronting Bank, without recourse or warranty, an undivided interest and participation (a “Risk Participation”), to the extent of such Lender’s Percentage, in such Letter of Credit and the Borrower’s reimbursement obligations with respect thereto.

SECTION 2.6 Obligations Absolute. The obligations of the Borrower under this Agreement and any LC Related Document to reimburse the Administrative Agent, the LC Administrator, the Fronting Bank and the Lenders for a drawing under a Letter of Credit and to repay any LC Borrowing shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement and each such other L/C-Related Document under all circumstances, including the following:

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

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

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

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

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

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

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

SECTION 2.7 Applicability of ISP98. Unless otherwise agreed by the Issuer and the Borrower when a Letter of Credit is issued and subject to applicable laws, the rules of the “International Standby Practices 1998” (ISP98) (ICC Publication 590) or such later revision as may be published by the International Chamber of Commerce shall apply to each Letter of Credit.

SECTION 2.8 Interest. LC Advances shall bear interest (after as well as before entry of judgment thereon to the extent permitted by law) on the outstanding principal amount thereof from the applicable LC Advance Date at a rate per annum equal to the Base Rate plus 2.00% and shall be immediately due and payable. To the extent that any LC Advances are made on an LC Advance Date pursuant to Section 2.3(c) and such LC Advances are repaid with immediately available funds by the Borrower on the LC Advance Date prior to 1:00 p.m. (Hartford time), no interest shall be payable on such LC Advances.

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

SECTION 2.9 Payments by the Borrower.

(a) All payments to be made by the Borrower shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Borrower shall be made to the Administrative Agent for the account of the Lenders at the Administrative Agent’s Payment Office, and shall be made in Dollars and in immediately available funds, no later than 1:00 p.m. (Hartford time) on the date specified herein. Except as otherwise expressly provided herein, the Administrative Agent will promptly distribute, in like funds as received, to each Lender its Percentage of any portion of such payment. Any payment received by the Administrative Agent later than 1:00 p.m. (Hartford time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue.

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

(c) Unless the Administrative Agent receives notice from the Borrower prior to the date on which any payment is due to the Lenders that the Borrower will not make such payment in full as and when required, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower has not made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent on demand such amount distributed to such Lender, together with interest thereon until the date repaid (i) at the Federal Funds Rate for period commencing on the date such amount is distributed to such Lender and ending two days after demand by the Administrative Agent for such amount and (ii) at the Base Rate plus 2.00% thereafter.

(d) All payments (unless expressly identified as to application) shall be applied first to the payment of all fees, expenses and other amounts due to the Administrative Agent, the Fronting Bank and the Lenders (excluding LC Advance and interest), then to accrued interest and the balance to the LC Advances; provided however, that the proceeds of Collateral shall be applied to the obligations of the Borrower as the Administrative Agent determines from time to time in its sole discretion.

SECTION 2.10 Warranty. The delivery of each Letter of Credit Application pursuant to Section 2.3 and each request for amendment or extension of an existing Letter of Credit shall automatically constitute a warranty by the Borrower to the Administrative Agent and each Lender to the effect that on the date of such requested Credit Extension that the conditions of Section 8.2 have been satisfied.

SECTION 2.11 Termination or Reduction of Commitments. The Borrower may, upon not less than five Business Days’ prior notice to the Administrative Agent, terminate the Commitments, or permanently reduce the Commitments by an aggregate minimum amount of $5,000,000 or any multiple of $500,000 in excess thereof; unless, after giving effect thereto and to any prepayments or cash collateralization of LC Obligations to be made on the effective date thereof, the then-outstanding LC Obligations would exceed the amount of the Total Commitments then in effect. Once reduced in accordance with this Section, the Commitments may not be increased. Any reduction of the Commitments shall be applied to each Lender according to its Percentage.

SECTION 2.12 Mandatory Reduction/Cash Collateralization of Letters of Credit.

(a) If on any day (i) the LC Obligations exceed the Total Commitments on such day or the LC Obligations exceed the Borrowing Base on such day, the Borrower shall immediately deposit into the Custody Account Eligible Investments or reduce the LC Obligations in an amount sufficient to eliminate such excess.

(b) On the Final Maturity Date or, if earlier, the date the Obligations are accelerated pursuant to Section 7.2, and until the final expiration date of any Letter of Credit and thereafter so long as any Obligations are payable hereunder, the Borrower shall immediately cash collateralize such Letters of Credit with Cash and Cash Equivalents in an amount equal to 102%

of the outstanding LC Obligations and such collateral shall be placed in a special collateral account pursuant to arrangements satisfactory to the Administrative Agent (the “LC Collateral Account”) at the Administrative Agent’s office in the name of the Borrower but under the sole dominion and control of the Administrative Agent, for the benefit of the LC Administrator and the Lenders and the Borrower shall have no interest therein except as set forth in Section 7.3. The Borrower hereby pledges, assigns and grants to the Administrative Agent, for the benefit of the LC Administrator and the Lenders, a security interest in all of the Borrower’s right, title and interest in and to the LC Collateral Account, all funds and Cash Equivalents which may from time to time be on deposit in the LC Collateral Account to secure the prompt and complete payment and performance of the Obligations. The Administrative Agent may invest any funds on deposit from time to time in the LC Collateral Account in Cash Equivalents having a maturity not exceeding 30 days. Funds earned on such Cash Equivalents shall be deposited into the LC Collateral Account.

SECTION 2.13 Fees.

(a) Non-Use Fees. The Borrower shall pay to the Administrative Agent for the account of each Lender a non-use fee on the actual daily unused portion of such Lender’s Commitment, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon the daily utilization for that quarter as calculated by the Administrative Agent, equal to (i) 0.10% per annum on an amount equal to (x) the Total Commitments minus (y) the LC Obligations. Such non-use fee shall accrue from the date of this Agreement to the Commitment Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December commencing on September 30, 2003 through the Commitment Termination Date, with the final payment to be made on the Commitment Termination Date. The non-use fees provided in this Section shall accrue at all times after the above-mentioned commencement date, including at any time during which one or more conditions in Article VIII are not met.

(b) Letter of Credit Fees.

(i) The Borrower shall pay to the Administrative Agent for the account of each Lender a letter of credit fee for each Letter of Credit requested by the Borrower in an amount per annum of the average maximum stated amount of such Letter of Credit during such period (less any LC Advance with respect thereto) equal to 0.35% per annum; provided that a portion of the letter of credit fee equal to 0.125% per annum otherwise payable to each Participating Bank shall be payable to the Fronting Bank with respect to Letters of Credit for which a fee is not paid to the Fronting Bank pursuant to Section 2.13(b)(ii). Such letter of credit fees shall be computed on a quarterly basis in arrears on the last Business Day of each calendar quarter, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December commencing on September 30, 2003 through the Final Maturity Date with the final payment to be made on the Final Maturity Date.

(ii) In addition, with respect to each Letter of Credit issued by the Fronting Bank, the Borrower shall pay to the Fronting Bank a fronting fee in an amount per annum on the average maximum stated amount of such Letter of Credit during such period (less any

LC Advance with respect thereto) equal to 0.125% per annum. Such fronting fees shall be computed on a quarterly basis in arrears on the last Business Day of each calendar quarter and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December commencing on September 30, 2003 through the Final Maturity Date with the final payment to be made on the Final Maturity Date. No fronting fee shall be payable so long as Fleet is the only Lender.

(iii) In addition, with respect to each Letter of Credit requested by the Borrower, the Borrower shall pay the LC Administrator the amount set forth in the Fee Letter and for any amendment or extension thereof, the Borrower agrees to pay to the LC Administrator such fees and expenses as the LC Administrator customarily requires in connection with the issuance, amendment, transfer, negotiation, processing and/or administration of letters of credit.

(c) Upfront Fees. On the Effective Date, the Borrower shall pay the upfront fees as required by the letter agreement (“Fee Letter”) between the Borrower and Fleet National Bank dated September 17, 2003.

SECTION 2.14 Computation of Fees and Interest.

(a) All computations of fees shall be made on the basis of a 360-day year and actual days elapsed. Interest on LC Advances shall be computed on the basis of a 365/366-day year and actual days elapsed. Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof.

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

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

SECTION 2.15 Sharing of Payments, Etc. If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the LC Obligations any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Percentage, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Obligations held by them as shall be necessary to cause such purchasing Lender to share the excess payment pro rata with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender, such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from

the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.10) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Lenders following any such purchases or repayments.

SECTION 2.16 Commitment Termination Date Extension.

(a) The Borrower may, by notice to the Administrative Agent given not more than 60 days and not less than 45 days prior to the then scheduled Commitment Termination Date, request that the Lenders extend the Commitment Termination Date for 364 days after the then scheduled Commitment Termination Date and extend the Final Maturity Date for one year after the then scheduled Final Maturity Date. The Administrative Agent shall notify the Lenders of its receipt of any notice (the “Extension Request Date”)given pursuant to this Section 2.16(a) within two Business Days after the Administrative Agent’s receipt thereof. Each Lender (a “Consenting Lender”) may, by irrevocable notice to the Borrower and the Administrative Agent delivered to the Borrower and the Administrative Agent not later than 45 days after the Extension Request Date (the “Consent Period”), consent to such extension of the Commitment Termination Date and the Final Maturity Date, which consent may be given or withheld by each Lender in its absolute and sole discretion. Subject to Section 2.16(c), any such extensions shall take effect on and as of the then scheduled Commitment Termination Date.

(b) Withdrawing Lenders. No extension pursuant to Section 2.16(a) shall be effective with respect to a Lender that either (i) by a notice (a “Withdrawal Notice”) delivered to the Borrower and the Administrative Agent, declines to consent to such extension or (ii) has failed to respond to the Borrower and the Administrative Agent within the Consent Period (each such Lender giving a Withdrawal Notice or failing to respond in a timely manner being “Withdrawing Lender”).

(c) Replacement of Withdrawing Lender. The Borrower shall have the right during the 60 day period following the end of the Consent Period to replace the Withdrawing Lender with an existing Lender or a new Lender who consents to the extension of the Commitment Termination Date (a “Replacement Lender”). In the event the Borrower has not replaced the Withdrawing Lender within said 60 day period, the Borrower may request the Consenting Lenders to reduce the Commitments by the amount of the Withdrawing Lender’s Commitment and extend the Commitment Termination Date and the Final Maturity Date which consent may be given or withheld by each Consenting Lender in its sole discretion. In the event all of the Consenting Lenders agree to such reduction and extension then, subject to compliance with Section 2.2, on and as of the then scheduled Commitment Termination Date (x) the Commitment shall be reduced by an amount equal to the Commitment of the unreplaced Withdrawing Lender, (y) such Withdrawing Lender shall cease to be a Lender under this Agreement and (z) the Commitment Termination Date and the Final Maturity Date shall be extended. In the event the Withdrawing Lender has not been replaced or all of the Consenting Lenders have not consented to reduction of the Commitment pursuant to this Section 2.16(c), the Commitment Termination Date and the Final Maturity Date shall not be extended.

(d) Assignment by Withdrawing Lender. A Withdrawing Lender shall be obliged, at the request of the Borrower and subject to the Withdrawing Lender receiving payment in full of all amounts owing to it under this Agreement concurrently with the effectiveness of an assignment, to assign, without recourse or warranty and by an Assignment and Acceptance, all of its rights and obligations hereunder to any Replacement Lender nominated by the Borrower and willing to accept such assignment; provided that such assignee satisfies all the requirements of this Agreement and such assignment is consented to by the Administrative Agent, which consent shall not be withheld or delayed unreasonably.

(e) Scheduled Commitment Termination Date. If the scheduled Commitment Termination Date and the Final Maturity Date shall have been extended in respect of Consenting Lenders and any Replacement Lender in accordance with Section 2.16(a), all references herein to the “Commitment Termination Date” and the “Final Maturity Date” shall refer to the Commitment Termination Date or the Final Maturity Date as so extended.

ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY

SECTION 3.1 Taxes.

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

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

(c) If the Borrower shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Lender, the Fronting Bank or the Administrative Agent, provided that such Person has provided the forms required in Section 9.10, then:

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

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

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

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

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

(e) If the Borrower is required to pay additional amounts to any Lender, the Fronting Bank or the Administrative Agent pursuant to Section 3.1(c), then such Person shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by the Borrower which may thereafter accrue, if such change in the judgment of such Person is not otherwise disadvantageous to such Person or inconsistent with such Person’s internal policies.

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

SECTION 3.2 Illegality.

(a) If the Fronting Bank or any Lender determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, in each case after the date hereof, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for the Fronting Bank or any Lender or its applicable Lending Office to make or participate in any Credit Extensions, then, on notice thereof by the Fronting Bank or such Lender to the Borrower through the Administrative Agent, the obligation of all Lenders to make or participate in Credit Extensions shall be suspended until the Fronting Bank or such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist.

(b) Before giving any notice to the Administrative Agent under this Section, the Fronting Bank or the affected Lender shall designate a different Lending Office with respect to its Credit Extensions if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of such Person, be illegal or otherwise disadvantageous to such Person or inconsistent with such Person’s internal policies.

SECTION 3.3 Increased Costs and Reduction of Return.

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

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

SECTION 3.4 Certificates of Lenders. Any Person claiming reimbursement or compensation under this Article III shall deliver to the Borrower (with a copy to the Administrative Agent) a certificate setting forth in reasonable detail the amount payable to such Person hereunder and such certificate shall be conclusive and binding on the Borrower in the absence of manifest error.

SECTION 3.5 Substitution of Lenders. Upon the receipt by the Borrower from the Fronting Bank or any Lender (an “Affected Lender”) of a claim for compensation under Section 3.1, 3.2 or 3.3 the Borrower may: (a) request the Affected Lender to use its reasonable efforts to obtain a replacement bank or financial institution satisfactory to the Borrower to acquire and assume all or a ratable part of all of such Affected Lender’s Credit Extensions and Commitment (a “Substitute Lender”); (b) request one more of the other Lenders to acquire and assume all or part of such Affected Lender’s Credit Extensions and Commitment; or (c) designate a Substitute Lender. Any such designation of a Substitute Lender under clause (a) or (b) shall be subject to the prior written consent of the Administrative Agent (which consent shall not be unreasonably withheld).

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

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

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

SECTION 4.1 Due Organization, Authorization, etc. The Borrower and each of its Subsidiaries (a) is a company duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, (b) is duly qualified to do business and in good standing in each jurisdiction where, because of the nature of its activities or properties, such qualification is required except where the failure to qualify would not have a Material Adverse Effect, which jurisdictions are set forth with respect to the Borrower and each of its Subsidiaries on Schedule 4.1 as revised from time to time by the Borrower pursuant to Section 5.1(m), (c) has the requisite company power and authority and the right to own and operate its properties, to lease the property it operates under lease, and to conduct its business as now and proposed to be conducted, and (d) has obtained all material licenses, permits, consents or approvals from or by, and has made all filings with, and given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct (including, without limitation, the consummation of the transactions contemplated by this Agreement) as to each of the foregoing, except where the failure to do so would not have a Material Adverse Effect. The execution, delivery and performance by the Borrower of this Agreement and the consummation of the transactions contemplated hereby and thereby are within its corporate powers and have been duly authorized by all necessary corporate action (including, without limitation, shareholder approval, if required). The Borrower has received all other material consents and approvals (if any shall be required) necessary for such execution, delivery and performance, and such execution, delivery and performance do not and will not contravene or conflict with, or create a

Lien (other than pursuant to the Loan Documents) or right of termination or acceleration under, any Requirement of Law or Contractual Obligation binding upon the Borrower. This Agreement and each of the Credit Documents is (or when executed and delivered will be) the legal, valid, and binding obligation of the Borrower enforceable against the Borrower in accordance with its respective terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and general equity principles.

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

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

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

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

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

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

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

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

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

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

SECTION 4.12 Securities Laws. Neither the Borrower nor any Affiliate, nor to the Borrower’s knowledge anyone acting on behalf of any such Person, has directly or indirectly

offered any interest in the Credit Extensions or any other Obligation for sale to, or solicited any offer to acquire any such interest from, or has sold any such interest to any Person that would cause the issuance or sale of the Credit Extensions to be required to be registered under the Securities Act of 1933, as amended.

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

SECTION 4.14 Financial Condition. The audited consolidated financial statements of the Borrower as at December 31, 2002 and the unaudited consolidated financial statements of the Borrower as at June 30, 2003, copies of which have been delivered to the Lenders, are true and correct in all material respects, have been prepared in accordance with GAAP consistently applied throughout the periods involved (except as disclosed therein) and present fairly the consolidated financial condition of the Borrower and its Subsidiaries at such date and the result of its operations for the periods then ended.

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

SECTION 4.16 First Priority Security Interest. The Administrative Agent, for the benefit of the Lenders, has a first priority perfected security interest in the collateral pledged by the Borrower pursuant to the Security Agreement.

SECTION 4.17 Tax Shelter Regulations. The Borrower does not intend to treat the Letters of Credit as being a “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4). In the event the Borrower determines to take any action inconsistent with such intention, it will promptly notify the Administrative Agent thereof. If the Borrower so notifies the Administrative Agent, the Borrower acknowledges that one or more of the Lenders may treat its Letters of Credit as part of a transaction that is subject to Treasury Regulation Section 301.6112-1, and such Lender or Lenders, as applicable, will maintain the list and other records required by such Treasury Regulation.

ARTICLE V.

AFFIRMATIVE COVENANTS

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

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

(a) GAAP Financial Statements:

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

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

Required Lenders that all such financial statements are complete and correct and present fairly in accordance with GAAP the financial position and the results of operations and cash flows of the Parent as at the end of such year and for the period then ended.

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

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

(d) Monthly Report and Borrowing Base Certificate. As soon as available, but in any event within 10 days after the end of each calendar month of each Fiscal Year, (i) a report listing each of the Borrower’s Eligible Investments and Private Fund Investments, (ii) a report listing each of Borrower’s Unencumbered Assets and calculating the Unencumbered Asset Reserve Requirement and (iii) a Borrowing Base Certificate executed by an Executive Officer. For purposes of such report and of completing the Borrowing Base Certificate, each Eligible Investment and Private Fund Investment shall be valued based on its Fair Market Value as at the last Business Day of the calendar month for which such report or Borrowing Base Certificate is being delivered.

(e) Projections. As soon as available, but not later than March 31 of each year, commencing with the year 2004, a three-year projection of the Borrower’s results covering the then-current Fiscal Year and each of the next two Fiscal Years.

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

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

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

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

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

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

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

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

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

(vi) Promptly after the Borrower has notified the Administrative Agent of any intention by the Borrower to treat the Letters of Credit as being a “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4), a duly completed copy of IRS Form 8886 or any successor forms.

(vii) Promptly, such additional financial and other information as the Administrative Agent may from time to time reasonably request.

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

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

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

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

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

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

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

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

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

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

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

SECTION 5.8 Conduct of Business. Engage, and cause each Subsidiary to engage, primarily in the same business or businesses described in the Borrower’s 2000 Annual Report.

SECTION 5.9 Use of Letters of Credit. The Borrower shall request letters of credit only to support its obligations under Reinsurance Agreements.

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

ARTICLE VI.

NEGATIVE COVENANTS

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

SECTION 6.1 Net Worth. Not permit the Net Worth of (a) the Borrower to be less than $561,110,400 and (b) the Parent to be less than $475,327,200.

SECTION 6.2 Unencumbered Asset Reserve Requirement. Not permit the Fair Market Value of the Unencumbered Assets to be less than the greater of (x) $35,000,000 and (y) an amount equal to the amount which would represent the impact of a 100 basis point increase in the interest rates on the Borrower’s Investments; provided, however that in calculating the Fair Market Value of Unencumbered Assets, no more than 50% of the Fair Market Value of Unencumbered Assets shall be attributable to MDS Shares (“Unencumbered Asset Reserve Requirement”).

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

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

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

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

SECTION 6.7 Liens. Not create or permit to exist, nor allow any of its Subsidiaries to create or permit to exist, any Lien with respect to any assets now or hereafter existing or acquired, except the following: (i) Liens for current taxes not delinquent or for taxes being contested in good faith and by appropriate proceedings and with respect to which adequate reserves have been established, and are being maintained, in accordance with GAAP, (ii) easements, party wall agreements, rights of way, restrictions, minor defects or irregularities in

title and other similar Liens not interfering in any material respect with the ordinary course of the business of such Person; (iii) Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other forms of governmental insurance or benefits and Liens pursuant to letters of credit or other security arrangements in connection with such insurance or benefits, (iv) mechanics’, workers’, materialmen’s, landlord liens and other like Liens arising in the ordinary course of business in respect of obligations which are not delinquent or which are being contested in good faith and by appropriate proceedings and with respect to which adequate reserves have been established, and are being maintained, in accordance with GAAP, (v) Liens listed on Schedule 6.7 in effect on the date hereof; (vi) attachments, judgments and other similar Liens for sums not exceeding $5,000,000 (excluding any portion thereof which is covered by insurance so long as the insurer is reasonably likely to be able to pay and has accepted a tender of defense and indemnification without reservation of rights); (vii) attachments, judgments and other similar Liens for sums of $5,000,000 or more (excluding any portion thereof which is covered by insurance so long as the insurer is reasonably likely to be able to pay and has accepted a tender of defense and indemnification without reservation of rights) provided the execution or other enforcement of such Liens is effectively stayed and claims secured thereby are being actively contested in good faith and by appropriate proceedings and have been bonded off; (viii) Liens on cash and Investments (other than Collateral) pursuant to trusts or other security arrangements in connection with Reinsurance Agreements and Liens securing Debt permitted under Section 6.3(e); (ix) Liens in connection with Debt permitted under Section 6.3(f); (x) Liens in favor of the Administrative Agent for the benefit of the Lenders; (xi) Purchase Money Liens securing Purchase Money Debt permitted under Section 6.3(b); (xii) any interest or title of a lessor in assets subject to any Capitalized Lease or operating lease which is permitted under this Agreement; and (xiii) Liens not permitted by any other clause of this Section 6.7 securing Debt in an aggregate amount not to exceed $250,000, provided any Liens granted (other than Liens pursuant to Section 6.7(x)) do not extend to any Collateral and after giving effect to all Liens under clauses (viii) through (xiii), there are Unencumbered Assets sufficient to ensure compliance with Section 6.2.

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

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

SECTION 6.10 Eligible Investments. The Borrower shall not permit:

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

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

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

ARTICLE VII.

EVENTS OF DEFAULT AND THEIR EFFECT

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

(a) Non-Payment of Credit Extension. Default in the payment when due of any LC Borrowing.

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

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

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

(e) Bankruptcy, Insolvency, etc. (i) Parent or the Borrower becomes insolvent or generally fails to pay, or admits in writing its inability to pay, debts as they become due; (ii) there shall be commenced by or against any of such Persons any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to

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

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

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

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

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

(j) Employee Benefit Plans. The Borrower establishes any Plan.

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

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

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

SECTION 7.2 Effect of Event of Default. If any Event of Default described in Section 7.1(e) shall occur, all Obligations shall become immediately due and payable, and the Borrower shall become immediately obligated to deliver to the Administrative Agent cash collateral in an amount equal to the outstanding LC Obligations all without notice of any kind; and, in the case of any other Event of Default, the Administrative Agent may, and upon the written request of the Required Lenders shall, terminate the Commitments hereunder and declare all or any portion of the Obligations to be due and payable, and/or demand that the Borrower immediately deliver to the Administrative Agent Cash and Cash Equivalents in an amount equal to 102% of the outstanding LC Obligations whereupon the Commitments shall terminate and all or such portion of the Obligations shall become immediately due and payable, and/or demand that the Borrower immediately deliver to the Administrative Agent Cash and Cash Equivalents in an amount equal to the outstanding LC Obligations all without further notice of any kind. The Administrative Agent shall promptly advise the Borrower of any such declaration but failure to do so shall not impair the effect of such declaration. Notwithstanding the foregoing, the effect as an Event of Default of any event described in Section 7.1(a) may not be waived except by consent of all of the Lenders and acknowledged by the Administrative Agent in writing.

SECTION 7.3 LC Collateral Account.

(a) If at any time after the Borrower has been required to deposit amounts in the LC Collateral Account pursuant to Section 2.12, the Administrative Agent determines that the amount on deposit in the LC Collateral Account is less than the amount of the outstanding LC Obligations at such time, the Administrative Agent may demand the Borrower to deposit, and the Borrower shall, upon such demand and without any further notice, pay to the Administrative Agent for deposit in the LC Collateral Account, funds necessary to cure any shortfall.

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

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

ARTICLE VIII.

CONDITIONS

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

(a) This Agreement. This Agreement executed by each party thereto.

(b) Credit Documents. The Security Agreement executed by the parties thereto, together with such financing statements, control agreements (with respect to the Custody Account) or other acknowledgment forms as are necessary to perfect the Administrative Agent’s Lien on any collateral granted under the Security Agreement.

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

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

(e) Opinion of Counsel. An opinion of counsel of the Borrower, addressed to the Administrative Agent, the LC Issuer and the Lenders from each of (i) Akin Gump Strauss Hauer & Feld LLP, New York counsel to the Borrower and (ii) Conyers, Dill and Pearman, Bermuda counsel to the Borrower, each in form and substance satisfactory to the Administrative Agent.

(f) Certificate. Certificate of an Executive Officer dated as of the Effective Date stating that: (i) that there are no material insurance regulatory proceedings pending or threatened against the Borrower in any jurisdiction; (ii) no Default or Event of Default exists or will result from the initial Credit Extension; and (iii) there has occurred since December 31, 2002, no event or circumstance that has resulted or in the judgment of such Executive Officer could reasonably be expected to result in a Material Adverse Effect.

(g) Process Agent. Evidence that the Borrower has appointed CT Corporation as its agent for service of process pursuant to Section 10.18.

(h) Fees. The Borrower shall have paid to the Administrative Agent any amounts due pursuant to the Fee Letter.

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

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

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

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

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

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

(e) Fees. The fees referred to in Section 2.13 which are due and payable on or prior to the Effective Date or the date of any Credit Extension shall have been paid to the Administrative Agent, where applicable, for the benefit of the Lenders.

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

ARTICLE IX.

THE ADMINISTRATIVE AGENT

SECTION 9.1 Appointment and Authorization.

(a) Each Lender hereby irrevocably (subject to Section 9.9) appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Credit Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Credit Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Credit Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against the Administrative Agent.

(b) The LC Administrator shall act on behalf of the Lenders with respect to any Letters of Credit issued by the Lenders and the documents associated therewith and shall have all of the benefit and immunities provided to the Agent in this Article IX with respect to any acts taken or omissions suffered by such LC Administrator in connection with Letters of Credit issued by the Lenders or proposed to be issued by the Lenders and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term “Administrative Agent”, as used in this Article IX, included the LC Administrator with respect to such acts or omissions.

SECTION 9.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement or any other Credit Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.

SECTION 9.3 Liability of Administrative Agent. None of the Agent-Related Persons shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Credit Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (b) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by the Borrower or Affiliate of the Borrower, or any officer thereof, contained in this Agreement or in any other Credit Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Credit Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document, or for any failure of the Borrower or any other party to any Credit Document to perform its obligations hereunder or thereunder. No Administrative Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Credit Document, or to inspect the properties, books or records of the Borrower or any of the Borrower’s Affiliates.

SECTION 9.4 Reliance by Administrative Agent.

(a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Lenders (and all the Lenders if required pursuant to Section 10.1) as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Credit Document in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders.

(b) For purposes of determining compliance with the conditions specified in Section 8.1, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender.

SECTION 9.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of LC Advances, interest and fees required to be paid to the Administrative Agent for the account of the LC Administrator, the Fronting Bank or the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. The Administrative Agent will notify the Lenders of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Article VII; provided, however, that unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders.

SECTION 9.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower, and all applicable bank regulatory laws relating to the transactions contemplated

hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Administrative Agent, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Borrower which may come into the possession of any of the Agent-Related Persons.

SECTION 9.7 Indemnification. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Borrower and without limiting the obligation of the Borrower to do so), pro rata, from and against any and all Indemnified Liabilities; provided, however, that no Lender shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Credit Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Borrower. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Administrative Agent.

SECTION 9.8 Administrative Agent in Individual Capacity. Fleet and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Borrower and its Affiliates as though Fleet were not the Administrative Agent or the LC Administrator hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Fleet or its Affiliates may receive information regarding the Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Borrower) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. With respect to its Credit Extensions, Fleet shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent or the LC Administrator, and the terms “Lender” and “Lenders” include Fleet in its individual capacity.

SECTION 9.9 Successor Administrative Agent. The Administrative Agent may, and at the request of the Required Lenders shall, resign as Administrative Agent upon 30 days’ notice to the Lenders. If the Administrative Agent resigns under this Agreement, the Required Lenders

shall appoint from among the Lenders a successor agent for the Lenders which successor agent shall be approved by the Borrower. If no successor agent is appointed prior to the Effective Date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Borrower, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term “Administrative Agent” shall mean such successor agent and the retiring Administrative Agent’s appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article IX and Sections 10.4 and 10.5 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. Notwithstanding the foregoing, however, Fleet may not be removed as the Administrative Agent unless Fleet shall also simultaneously be replaced as “LC Administrator” hereunder pursuant to documentation in form and substance reasonably satisfactory to Fleet.

SECTION 9.10 Withholding Tax. Each of the Lenders and the Administrative Agent (i) represents and warrants that on the date hereof (or, if later, the date it becomes a party to this Agreement) that under applicable law and treaties no U.S. withholding tax will be required to be withheld with respect to any payments to be made by the Borrower hereunder, (ii) agrees to furnish to the Administrative Agent and the Borrower on or before the first scheduled payment date after the Effective Date, a United States Internal Revenue Service Form W-8BEN and W-9 or Form W-8ECI and W-8, as appropriate (or successor forms) properly completed and executed and (iii) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption.

(a) If any Lender claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form W-8BEN and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Borrower to such Lender, such Lender agrees to notify the Administrative Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Borrower to such Lender. To the extent of such percentage amount, the Administrative Agent will treat such Lender’s IRS Form 1001 as no longer valid.

(b) If any Lender claiming exemption from United States withholding tax by filing IRS Form W-8EC1 with the Administrative Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Borrower to such Lender, such Lender agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code.

(c) If any Lender is entitled to a reduction in the applicable withholding tax, the Administrative Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the

forms or other documentation required by Section 9.10 (a) are not delivered to the Administrative Agent, then the Administrative Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax.

(d) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Lenders under this Section shall survive the payment of all Obligations and the resignation or replacement of the Administrative Agent.

ARTICLE X.

MISCELLANEOUS

SECTION 10.1 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Credit Document, and no consent with respect to any departure by the Borrower therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by the Administrative Agent at the written request of the Required Lenders) and the Borrower and acknowledged by the Administrative Agent, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Lenders and the Borrower and acknowledged by the Administrative Agent, do any of the following:

(a) increase or extend the Commitment to issue Letters of Credit or the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 7.2) or extend the expiry date of any Letter of Credit to a date after the Final Maturity Date;

(b) postpone or delay any date fixed by this Agreement or any other Credit Document for any payment of LC Advances, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Credit Document;

(c) reduce the amount of, or the rate of interest specified herein on, any LC Borrowing, or any fees or other amounts payable hereunder or under any other Credit Document;

(d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the LC Obligations which is required for the Lenders or any of them to take any action hereunder;

(e) release the Security Agreement or release all or a substantial part of the Collateral granted thereunder except in accordance with the terms thereof; or

(f) amend this Section, or any provision herein providing for consent or other action by all Lenders;

and, provided further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Required Lenders or all the Lenders, as the case may be, affect the rights or duties of the Administrative Agent under this Agreement or any other Credit Document and no amendment of any provision relating to the LC Administrator shall be effective without the written consent of the LC Administrator. Notwithstanding the foregoing the Fee Letter may be amended, or rights of privileges thereunder waived, in writing, executed by the parties thereto.

SECTION 10.2 Notices. All notices, requests and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Borrower by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on Schedule 10.2, and (ii) shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices on Schedule 10.2; or, as directed to the Borrower or the Administrative Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Administrative Agent.

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

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

SECTION 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent, the LC Administrator or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

SECTION 10.4 Costs and Expenses. The Borrower shall:

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

(b) pay or reimburse the Administrative Agent, the Lenders and the LC Administrator within ten Business Days after demand for all costs and expenses (including Attorney Costs) incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Credit Document during the existence of an Event of Default or after acceleration of the Obligations (including in connection with any “workout” or restructuring regarding the Obligations, and including in any insolvency proceeding or appellate proceeding) provided that the parties shall to the extent of common interests use a single counsel.

SECTION 10.5 Indemnity. Whether or not the transactions contemplated hereby are consummated, the Borrower shall indemnify and hold the Agent-Related Persons and each Lender and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an “Indemnified Person”) harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Obligations and the termination, resignation or replacement of the Administrative Agent or replacement of any Lender) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Credit Extensions or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”); provided, that the Borrower shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities resulting solely from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations.

SECTION 10.6 Payments Set Aside. To the extent that the Borrower makes a payment to the Administrative Agent, the Fronting Bank or the Lenders, or the Administrative Agent, the Fronting Bank or the Lenders exercise their right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent, the Fronting Bank or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its Percentage of any amount so recovered from or repaid by the Administrative Agent.

SECTION 10.7 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent, the Fronting Bank and each Lender.

SECTION 10.8 Assignments, Participations, etc.

(a) Any Lender may, with the written consent of the Borrower (at all times other than during the existence of an Event of Default) and the Administrative Agent, which consents shall not be unreasonably withheld, and the Fronting Bank, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Borrower or the Administrative Agent shall be required in connection with any assignment and delegation by a Lender to an Eligible Assignee that is an Affiliate of such Lender) (each an “Assignee”) all, or any ratable part of all, of the LC Obligations, the Commitments and the other rights and obligations of such Lender hereunder, provided, however, that (w) the aggregate principal amount of the Commitment assigned by any Lender to someone other than another Lender shall be in a minimum amount of $5,000,000 (or if less, the entire Commitment then held by such Lender), (x) after giving effect to any such assignment by a Lender, the aggregate amount of the Commitments and/or LC Obligations held by such assigning Lender is at least $5,000,000 (unless such Lender has assigned the entire Commitment and LC Obligations then held by it), and (y) the Assignee provides the Administrative Agent and the Borrower with the form specified in Section 9.10. The Borrower and the Administrative Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Borrower and the Administrative Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall have delivered to the Borrower and the Administrative Agent an Assignment and Acceptance in the form of Exhibit C (“Assignment and Acceptance”) and (iii) the assignor Lender or Assignee has paid to the Administrative Agent a processing fee in the amount of $3,500.

(b) From and after the date that the Administrative Agent notifies the assignor Lender that it has received (and provided its consent with respect to) an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder

shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Lender under the Credit Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder and under the other Credit Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Documents.

(c) Immediately upon each Assignee’s making its processing fee payment under the Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender pro tanto.

(d) Any Lender may at any time sell to one or more commercial banks or other Persons not Affiliates of the Borrower (a “Participant”) participating interests in any LC Obligations, the Commitment of that Lender and the other interests of that Lender (the “originating Lender”) hereunder and under the other Credit Documents; provided, however, that (i) the originating Lender’s obligations under this Agreement shall remain unchanged, (ii) the originating Lender shall remain solely responsible for the performance of such obligations, (iii) the Borrower and the Administrative Agent shall continue to deal solely and directly with the originating Lender in connection with the originating Lender’s rights and obligations under this Agreement and the other Credit Documents, and (iv) no Lender shall transfer or grant any participating interest under which the Participant has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Credit Document, except to the extent such amendment, consent or waiver would require unanimous consent of the Lenders as described in the first proviso to Section 10.1. In the case of any such participation, the Participant shall be entitled to the benefit of Sections 3.1, 3.3 and 10.5 to the extent the Lender selling such participation would be so entitled as though it were also a Lender hereunder, and if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement.

(e) Notwithstanding any other provision in this Agreement, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and any LC Obligation held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR §203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law.

SECTION 10.9 Confidentiality. Each Lender agrees to take and to cause its Affiliates to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as “confidential” or “secret” by the Borrower and provided to it by the Borrower, or by the Administrative Agent on such Borrower’s behalf, under this Agreement or any other Credit Document (“Information”), and neither it nor any of its Affiliates shall use any Information other than in connection with or in enforcement of this Agreement and the other

Credit Documents or in connection with other business now or hereafter existing or contemplated with the Borrower; except to the extent Information (a) was or becomes generally available to the public other than as a result of disclosure by the Lender, or (b) was or becomes available on a non-confidential basis from a source other than the Borrower, provided that such source is not bound by a confidentiality agreement with the Borrower known to the Lender; provided, however, that any Lender may disclose Information (i) at the request or pursuant to any requirement of any Governmental Authority to which the Lender is subject or in connection with an examination of such Lender by any such authority; (ii) pursuant to subpoena or other court process; (iii) when required to do so in accordance with the provisions of any applicable Requirement of Law; (iv) to the extent reasonably required in connection with any litigation or proceeding to which the Administrative Agent, any Lender or their respective Affiliates may be party; (v) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Credit Document; (vi) to such Lender’s independent auditors and other professional advisors; (vii) to any Participant or Assignee, actual or potential, provided that such Person agrees in writing to keep Information confidential to the same extent required of the Lenders hereunder; (viii) as to any Lender or its Affiliate, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Borrower is party or is deemed party with such Lender or such Affiliate; and (ix) to its Affiliates which are either such Lender’s parent or it or its parent’s wholly owned Subsidiary or, with the prior written consent of the Borrower which shall not be unreasonably withheld, its other Affiliates. Notwithstanding anything herein to the contrary, “Information” shall not include, and the Administrative Agent and each Lender may disclose without limitation of any kind, any information with respect to the “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to the Administrative Agent or such Lender relating to such tax treatment and tax structure; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transaction as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the Letters of Credit contemplated hereby.

SECTION 10.10 Set-off. In addition to any rights and remedies of the Lenders provided by law, if an Event of Default exists or the Obligations have been accelerated, the Fronting Bank and each Lender is authorized at any time and from time to time, without prior notice to the Borrower, any such notice being waived by the Borrower to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, the Fronting Bank and such Lender to or for the credit or the account of the Borrower against any and all Obligations owing to the Fronting Bank and such Lender, now or hereafter existing, irrespective of whether or not the Administrative Agent the Fronting Bank and such Lender shall have made demand under this Agreement or any Credit Document and although such Obligations may be contingent or unmatured. The Fronting Bank and each Lender agree promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Person; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application.

SECTION 10.11 Notification of Addresses, Lending Offices, Etc. Each Lender shall notify the Administrative Agent in writing of any changes in the address to which notices to the Lender should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Administrative Agent shall reasonably request.

SECTION 10.12 Counterparts; Facsimile. This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. Credit Documents may be transmitted and/or signed by facsimile. The effectiveness of any such documents and signatures shall, subject to any Requirement of Law, have the same force and effect as manually-signed originals and shall be binding on the Borrower, the Lenders, the Fronting Bank, the Administrative Agent and the LC Administrator. The Administrative Agent, the Fronting Bank and the LC Administrator may also require that any such documents and signatures be confirmed by a manually-signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature.

SECTION 10.13 Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.

SECTION 10.14 No Third Parties Benefitted. This Agreement is made and entered into for the sole protection and legal benefit of the Borrower, the LC Administrator, the Fronting Bank, the Lenders, the Administrative Agent and the Agent-Related Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Credit Documents.

SECTION 10.15 Governing Law and Jurisdiction.

(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK PROVIDED THAT THE ADMINISTRATIVE AGENT, THE LC ADMINISTRATOR AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT, THE FRONTING BANK, THE LC ADMINISTRATOR AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT, THE FRONTING BANK, THE LC ADMINISTRATOR AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY

OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE BORROWER, THE ADMINISTRATIVE AGENT, THE FRONTING BANK, THE LC ADMINISTRATOR AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID OR BY ANY OTHER MEANS PERMITTED BY NEW YORK OR FEDERAL LAW.

SECTION 10.16 Waiver of Jury Trial. THE BORROWER, THE LC ADMINISTRATOR, THE FRONTING BANK, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER, THE LC ADMINISTRATOR, THE FRONTING BANK, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS.

SECTION 10.17 Currency Indemnity. If, for the purposes of obtaining judgment in any court in any jurisdiction with respect to any Credit Document, it becomes necessary to convert into the currency of such jurisdiction (the “Judgment Currency”) any amount due under any Credit Document in any currency other than the Judgment Currency (the “Currency Due”), then conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which judgment is given. For this purpose, “rate of exchange” means the rate at which the Administrative Agent is able, on the relevant date, to purchase the Currency Due with the Judgment Currency in accordance with its normal practice at its main branch in San Francisco, California. In the event that there is a change in the rate of exchange prevailing between the Business Day before the day on which the judgment is given and the date of payment of the amount due, the Borrower will, on the day of payment, pay such additional amount, if any, or be entitled to receive reimbursement of such amount, if any, as may be necessary to ensure that the amount paid on such date is the amount in the Judgment Currency which when converted at the rate of exchange prevailing on the date of payment is the amount then due under any Credit Document in the Currency Due. If the amount of the Currency Due which the Administrative Agent is so able to purchase is less than the amount of the Currency Due originally due to it, the

Borrower shall indemnify and save the Administrative Agent harmless from and against loss or damage arising as a result of such deficiency. This indemnity shall constitute an obligation separate and independent from the other obligations contained in any Credit Document, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by the Administrative Agent from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due under any Credit Document or under any judgment or order.

SECTION 10.18 Service of Process. On or prior to the Effective Date, the Borrower shall appoint CT Corporation System (the “Process Agent”), with an office on the date hereof at 111 8th Avenue, New York, New York 10011, United States, as its agent to receive on its behalf and its property service of copies of the summons and complaints and any other process which may be served in any such action or proceeding, provided that a copy of such process is also mailed by registered or certified mail, postage prepaid, to the Borrower at its address specified pursuant to Section 10.2. Such service may be made by mailing or delivering a copy of such process to the Borrower in care of the Process Agent at the Process Agent’s above address, and the Borrower hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. The Borrower agrees to indemnify the Process Agent in connection with all matters relating to its appointment as agent of the Borrower for such purposes, to enter into any agreement relating to such appointment which such Process Agent may customarily require, and to pay such Process Agent’s customary fees upon demand. As an alternative method of service, the Borrower also irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to the Borrower at its address specified pursuant to Section 10.2. Nothing in this Section 10.18 shall affect the right of the Administrative Agent or any Lender to serve legal process in any other manner permitted by law or affect the right of the Administrative Agent or any Lender to bring any action or proceeding against the Borrower, or any of its properties in the courts of any other jurisdiction.

SECTION 10.19 Entire Agreement. This Agreement, together with the other Credit Documents, embodies the entire agreement and understanding among the Borrower, the LC Administrator, the Fronting Bank, the Lenders and the Administrative Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof.

MAX RE LTD.

By:
Title:

S-1

FLEET NATIONAL BANK, as Administrative Agent, LC Administrator, Fronting Bank and Lender

By:
Title:

S-2

SCHEDULE 1.1

CONCENTRATION LIMITS

Eligible Investments)	Limitation per Issuer (as Percentage of all such Eligible Investments	Limitation per Issue (as Percentage of all such Eligible Investments)
ABS	7.5%	N/A

Corporate/Municipal Securities	N/A	7.5%

MBS (Non Agency CMOs)	5%	7.5%

G7 Securities	N/A	7.5%

Sch. 1.1-1

SCHEDULE 1.2

BORROWING BASE CALCULATION

Eligible Investments		Applicable Percentage of Fair Market Value
Cash and Cash Equivalents		98%

A1/P1 Commercial Paper		98%

Government Debt with maturities of more than one year but less than five year		98%

Government Debt with maturities of five years or more		95%

MBS (Agency Pass-Throughs) rated AA- by S&P or Aa3 by Moody’s or better		90%

MBS (Agency CMOs) rated AA- by S&P or Aa3 by Moody’s or better		90%

MBS (Non-Agency CMOs) rated AAA by S&P or Aaa by Moody’s		90%

MBS (Non-Agency CMOs) rated AA- by S&P or Aa3 by Moody’s or better		87.5%

ABS		95%

G7 Securities issued by the Governments of Germany or the United Kingdom		95%

G7 Securities issued by the Governments of France, Japan or Canada		93%

G7 Securities issued by the Government of Italy		92%

Corporate/Municipal Securities rated AAA by S&P or Aaa by Moody’s		94%

Corporate/Municipal Securities rated at least AA- by S&P or Aa3 by Moody’s		93%

Corporate/Municipal Securities rated at A- by S&P or A3 by Moody’s		92%

S-1.2-1

SCHEDULE 2.1

Lender	Commitment		Percentage
Fleet National Bank	$	100,000,000.00	100.000000000	%
TOTAL	$	100,000,000.00	100.000000000	%

S-2.1-1

SCHEDULE 4.1

JURISDICTIONS

Max Re Ltd.

Bermuda

Max Re Diversified Strategies Ltd.

Bermuda

Max Europe Holdings Limited

Ireland

Max Insurance Europe Limited

Ireland

Max Re Europe Limited

Ireland

S-4.1-1

SCHEDULE 4.2

LITIGATION

None

Sch. 4.2-1

SCHEDULE 4.7

LOCATIONS

Max Re Ltd.

Max Re House

2 Front Street

P.O. Box HM 2565

Hamilton HM KX, Bermuda

Max Re Diversified Strategies Ltd.

Max Re House

2 Front Street

P.O. Box HM 2565

Hamilton HM KX, Bermuda

Max Europe Holdings Limited

Commerzbank House

Guild St 1 FFC

Dublin, 1

Ireland

Max Insurance Europe Limited

Commerzbank House

Guild St 1 FFC

Dublin, 1

Ireland

Max Re Europe Limited

Commerzbank House

Guild St 1 FFC

Dublin, 1

Ireland

Sch. 4.7-1

SCHEDULE 4.9

SUBSIDIARIES

Max Re Europe Limited

Max Re Diversified Strategies Ltd.

Max Europe Holdings Limited

Max Insurance Europe Limited

Ma Re Europe Limited

Sch. 4.9-1

SCHEDULE 4.10

INSURANCE LICENSES

Bermuda licence for General Business Insurance

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

Max Insurance Europe Limited is authorized to conduct non-life insurance business in Ireland.

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

Sch. 4.10-1

SCHEDULE 6.6

TRANSACTIONS WITH AFFILIATES

MaxRe Diversified Strategies Ltd. (“MDS”), a wholly-owned subsidiary of the Borrower has issued a limited recourse guarantee in favor of Hypo-Und Vereinsbank, AG, New York Branch (“HVB”), as administrative agent, under a letter of credit facility between HVB and the Borrower, pursuant to which MDS guarantees the Borrower’s obligations under the HVB letter of credit facility, with maximum liability capped at the value of assets charged pursuant to a custodian account charge with the Borrower and HVB, pursuant to which each of the Borrower and MDS pledged certain assets to secure the HVB letter of credit facility.

Sch. 6.6-1

SCHEDULE 6.7

LIENS

None

Sch. 6.7-1

SCHEDULE 10.2

ADDRESSES

LENDING OFFICES,

ADDRESSES FOR NOTICES

FLEET NATIONAL BANK

As Administrative Agent, Fronting Bank,

LC Administrator and Lender.

Letter of Credit Office:

Fleet National Bank

Mail Code CTEH40225C

777 Main Street

Hartford, CT 06115

Attention: George Urban

Telephone: (860) 952-7565

Facsimile: (860) 952-7604

Notices (other than notice of Credit

Extensions):

Fleet National Bank

Mail Code CTEH40225C

777 Main Street

Hartford, CT 06115

Attention: George Urban

Telephone: (860) 952-7565

Facsimile: (860) 952-7604

MAX RE LTD.

Notices:

Max Re Ltd.

P.O. Box HM 2565

Max Re House

2 Front Street

Hamilton HM 11, Bermuda

Attention: Keith Hynes, Chief Financial Officer

Telephone: (441) 296-8800

Facsimile: (441) 296-8811

Sch. 10.2-1

Schedule I

Security Agreement

ACCOUNT CONTROL AGREEMENT

September 19, 2003

PARTIES

Fleet National Bank, as Administrative Agent (“Secured Party”)

Max Re Ltd. (“Customer”)

Mellon Bank, N.A. (“Securities Intermediary”)

II.	BACKGROUND

Pursuant to a Security Agreement, dated as of September 19, 2003 (the “Security Agreement”), Customer has granted Secured Party a security interest in certain securities accounts maintained by Securities Intermediary for Customer. The parties are entering into this Agreement to perfect Secured Party’s security interest in such accounts.

III.

AGREEMENT

1. The Account. Securities Intermediary represents and warrants to Secured Party that:

(a) Securities Intermediary maintains securities account number MRLF0110932 (the “Account”) for Customer under and pursuant to that certain Custody Agreement dated December 9, 1999, by and between Customer and Securities Intermediary, as Custodian (the “Custody Agreement”). Such account shall be maintained as a “securities account” (within the meaning of Section 8-501(a) of the Uniform Commercial Code), the assets therein (including cash) shall be treated as “financial assets” (within the meaning of Section 8-102(a)(8) of the Uniform Commercial Code) and the Securities Intermediary will comply with its duties under Article 8 of the Uniform Commercial Code, including, without limitation, Section 8-504.

(b) The Securities Intermediary is a “securities intermediary” (within the meaning of Section 8-102(a)(14) of the Uniform Commercial Code) and its “jurisdiction” (within the meaning of Section 8-110(e) of the Uniform Commercial Code) is the State of Pennsylvania.

(c) Attached as Exhibit A is a statement produced by Securities Intermediary in the ordinary course of its business regarding the property credited to the Account at the statement date. Securities Intermediary does not know of any inaccuracy in the statement.

(d) Securities Intermediary does not know of any claim to or interest in the Account, except for claims and interests of the parties referred to in this Agreement.

2. Control by Secured Party. Securities Intermediary will comply with all notifications it receives directing it to transfer or redeem any property in the Account (each, an “Entitlement Order”) originated by Secured Party without further consent by Customer.

3. Customer’s Rights in the Accounts. Except as otherwise provided in this Section 3, Securities Intermediary will comply with Entitlement Orders originated by Customer without further consent by Secured Party. If Secured Party notifies Securities Intermediary that Secured Party will exercise exclusive control over the Account (a “Notice of Exclusive Control”), Securities Intermediary will:

(a) cease to comply with Entitlement Orders or other directions concerning the Account originated by Customer for the Account; and

(b) distribute to Secured Party interest and dividend payments on property in the Account.

Until Securities Intermediary receives a Notice of Exclusive Control, Securities Intermediary may distribute to Customer all interest and regular cash dividends on property in the Account; provided that Securities Intermediary will not comply with any Entitlement Order originated by Customer that would require Securities Intermediary to make a delivery to Customer or any other person or entity directed by Customer of assets or property from the Account without the concurrent receipt by the Securities Intermediary of other assets or property for the Account having a market value, as of the time of such transfer, at least equal to any assets or property delivered from the Account without the prior written consent of the Secured Party. Securities Intermediary may rely on market value information provided by Customer for purposes of such determination.

4. Priority of Secured Party’s Security Interest. Securities Intermediary subordinates in favor of Secured Party any security interest, lien or right of setoff it may have, now or in the future, against the Account or property in the Account, provided that Securities Intermediary will retain its prior lien on property in the Account pursuant to, and to the full extent provided in, the Custody Account to secure payment and/or reimbursement including, without limitation, for property purchased for the Account commissions, and Custodian’s fees for the Account and reimbursement for advances of funds or securities to the Account. Securities Intermediary will not agree with any third party that Securities Intermediary will comply with Entitlement Orders originated by such third party.

5. Statements, Confirmations and Notices of Adverse Claims. Securities Intermediary will send copies of all statements and confirmations for the Account simultaneously to Customer and Secured Party. Securities Intermediary will use reasonable efforts promptly to notify Secured Party and Customer if any other person or entity claims that it has a property interest in property in the Account and that it is a violation of such person’s or entity’s rights for anyone else to hold, transfer or deal with such property.

6. Securities Intermediary’s Responsibility. Except for permitting a withdrawal, delivery or payment in violation of Section 3, Securities Intermediary will not be liable to Secured Party for complying with Entitlement Orders from Customer that are received by Securities Intermediary before Securities Intermediary receives and has a reasonable opportunity to act on a Notice of Exclusive Control or for otherwise conducting and maintaining the Account in accordance with the Custody Agreement provided, however that in no event shall the Securities Intermediary lend any assets or other property in the Account pursuant to Section 5.c. of the Custody Agreement.

Securities Intermediary will not be liable to Customer for complying with a Notice of Exclusive Control or with Entitlement Orders originated by Secured Party, even if Customer notifies Securities Intermediary that Secured Party is not legally entitled to issue the Entitlement Order or Notice of Exclusive Control, unless Securities Intermediary takes the action after it is served with an injunction, restraining order or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and has a reasonable opportunity to act on the injunction, restraining order or other legal process.

This Agreement does not create any obligation of Securities Intermediary except for those expressly set forth in this Agreement. In particular, Securities Intermediary need not investigate whether Secured Party is entitled under Secured Party’s agreements with Customer to give an Entitlement Order or a Notice of Exclusive Control. Securities Intermediary may rely on notices and communications it reasonably believes given by the appropriate party.

7. Indemnity. Customer will indemnify Securities Intermediary and its officers, directors, employees and agents against all claims, liabilities and expenses arising out of this Agreement (including reasonable attorneys’ fees and charges), except to the extent such claims, liabilities or expenses are caused by Securities Intermediary’s gross negligence or willful misconduct.

8. Termination; Survival. Secured Party may terminate this Agreement by notice to Securities Intermediary and Customer. Securities Intermediary may terminate this Agreement on 30 days’ notice to Secured Party and Customer. If Secured Party notifies Securities Intermediary that Secured Party’s security interest in the Account is terminated, this Agreement will immediately terminate. Notwithstanding any such termination, the provisions of Sections 6 and 7 will survive termination of this Agreement.

9. Governing Law. This Agreement and the Account will be governed by the laws of the State of New York. Securities Intermediary and Customer may not change the law governing the Account without Secured Party’s express written agreement.

10. Entire Agreement. This Agreement is the entire agreement, and supersedes any prior agreements and contemporaneous oral agreements, of the parties concerning the subject matter hereof.

11. Amendments. No amendment of, or waiver of a right under, this Agreement will be binding unless it is in writing and signed by the party to be charged.

12. Severability. To the extent a provision of this Agreement is unenforceable, this Agreement will be construed as if the unenforceable provision were omitted.

13. Financial Assets. All property credited to the Accounts will be treated as financial assets under Article 8 of the Uniform Commercial Code as in effect in the State of New York on the date hereof.

14. Successors and Assigns. A successor to or assignee of Secured Party’s rights and obligations under the security agreement between Secured Party and Customer will succeed to Secured Party’s rights and obligations under this Agreement.

15. Notices. A notice or other communication to a party under this Agreement will be in writing (except that Entitlement Orders may be given orally), will be sent to the party’s address set forth below its signature hereto or to such other address as such party may specify by notice the other parties and will be effective on receipt.

SIGNATURES

MAX RE LTD.


By:
Title:

Address:		P.O. Box HM2565 Hamilton HMKX Bermuda

Facsimile:		(441) 296-8811

Attn:		Keith Hynes

FLEET NATIONAL BANK,

as Administrative Agent


By:
Title:

Address:		Mail Code CT MO 0250 777 Main Street Hartford, CT 06115

Facsimile:		(860) 952-7604

Attention:		George Urban

MELLON BANK, N.A.


By
Title

Address:		One Mellon Bank Center Room 1570 Pittsburgh, PA 15258

Facsimile:		412-234-8725

Attn:		Mary Gallagher

SCHEDULE I

TO ACCOUNT CONTROL AGREEMENT

Accounts

Account Number		Account

MRLF0110932		Fleet Collateral

EXHIBIT A

Max Re Ltd.

COMPLIANCE CERTIFICATE

Financial Statement Date: ,

Reference is made to that certain Letter of Credit Reimbursement Agreement dated as of September 17, 2003 (as extended, renewed, amended or restated from time to time, the “LC Agreement”) among Max Re Ltd., a Bermuda company (the “Borrower”), the several financial institutions from time to time parties to this LC Agreement (the “Lenders”), Fleet National Bank, as letter of credit administrator (in such capacity, the “LC Administrator”), Fleet National Bank, as fronting bank (in such capacity, the “Fronting Bank”), and Fleet National Bank, as agent for the Lenders (in such capacity, the “Administrative Agent”). Unless otherwise defined herein, capitalized terms used herein have the respective meanings assigned to them in the LC Agreement.

The undersigned hereby certifies as of the date hereof that he/she is the [chief executive officer] [chief financial officer] [treasurer] [senior vice president] of the Borrower, and that, as such, he/she is authorized to execute and deliver this Certificate to the Lenders and the Administrative Agent on the behalf of the Borrower and its consolidated Subsidiaries, and that:

[Use the following paragraph if this Certificate is delivered in connection with the financial statements required by Section 5.1(a)(ii) of the LC Agreement.]

1. Attached as Schedule 1 hereto are (a) a true and correct copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of the Fiscal Year ended , and (b) the related consolidated statements of income and retained earnings and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of which report states that such consolidated financial statements are complete and correct and have been prepared in accordance with GAAP, and fairly present, in all material respects, the financial position of the Borrower and its consolidated Subsidiaries for the periods indicated and on a basis consistent with prior periods.

[Use the following paragraph if this Certificate is delivered in connection with the financial statements required by subsection [5.1(a)(i)] of the LC Agreement.]

1. Attached as Schedule 1 hereto are (a) a true and correct copy of the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of the end of the Fiscal Quarter ended , , and (b) the related unaudited consolidated statements of

income, shareholders’ equity, and cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by [the chief financial officer] [treasurer] that such financial statements were prepared in accordance with GAAP (subject only to ordinary, good faith year-end audit adjustments and the absence of footnotes) and fairly present, in all material respects, the financial position and the results of operations of the Borrower and its consolidated Subsidiaries.

2. The undersigned has reviewed and is familiar with the terms of the LC Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and conditions (financial or otherwise) of the Borrower during the accounting period covered by the attached financial statements.

3. To the best of the undersigned’s knowledge, the Borrower, during such period, has observed, performed or satisfied all of its covenants and other agreements, and satisfied every condition in the LC Agreement to be observed, performed or satisfied by the Borrower, and the undersigned has no knowledge of any Default or Event of Default.

4. The financial covenant calculations set forth on Schedule 2 attached hereto are true and correct on and as of the date of this Certificate.

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of , .

Max Re Ltd.

By:
Title:

Date: ,

For the Fiscal Quarter/

Year ended ,

Schedule 2

of the Compliance Certificate

($ in 000’s)

Section 6.1 Net Worth

A.	Net Worth of Borrower	$

B.	Borrower Net Worth Requirement	$540,000,000

C.	Parent Net Worth	$

D.	Required Net Worth	$470,000,000

Section 6.2 Unencumbered Asset Reserves

A.	Fair Market Value of Unencumbered Assets	$

B.	Percentage of Unencumbered Assets which are MDS Shares [Can’t exceed 50%]	%

C.	Amount equal to impact on Borrower’s Investments from 100 basis point increase in interest rates	$

D.	Higher of $35,000,000 or Item C	$

EXHIBIT B

FORM OF BORROWING BASE CERTIFICATE

To:	Fleet National Bank,

as Administrative Agent

Mail Code CT MO 0250

777 Main Street

Hartford, CT 06115

Re: Max Re Ltd.

Ladies and Gentlemen:

We refer to the Letter of Credit Reimbursement Agreement dated as of September 17, 2003 (as amended or otherwise modified from time to time, the “LC Agreement”) among Max Re Ltd. (the “Borrower”), various financial institutions from time to time party thereto (the “Lenders”), Fleet National Bank, as letter of credit administrator (the “LC Administrator”), Fleet National Bank, as fronting bank (the “Fronting Bank”) and Fleet National Bank, as administrative agent for the Lender (the “Administrative Agent”). This Certificate, together with supporting calculations attached hereto set forth in reasonable detail, is delivered to you pursuant to the terms of the LC Agreement. Capitalized terms used but not otherwise defined herein shall have the same meanings herein as in the LC Agreement.

We hereby certify and warrant to the Administrative Agent, the LC Administrator, the Fronting Bank and the Lenders that at the close of business on , (the “Borrowing Base Calculation Date”), the Borrowing Base was $ computed as set forth on the Schedule I attached hereto and the Eligible Investments and MDS Shares were as set forth on Schedule II attached hereto.

We hereby further certify and warrant to the Administrative Agent, the LC Administrator and the Lenders that the information and computations contained herein are true and correct in all material respects as of the Borrowing Base Calculation Date.

IN WITNESS WHEREOF, the Borrower has caused this Certificate to be executed and delivered by an authorized office this day of , .

MAX RE LTD.

By:
Title:

SCHEDULE I TO BORROWING BASE CERTIFICATE

DATED AS OF:

BORROWING BASE CALCULATION				Fair Market Value	Applicable Percentage		Adjusted Fair Market Value
A.	Cash			$	98	%	$

B.	Cash Equivalents

	1.	any evidence of Debt, maturing not more than one year after such time, issued or guaranteed by the United States Government or any agency thereof;			98	%	$

	2.	commercial paper, maturing not more than one year from the date of issue, which is issued by		$	98	%	$

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

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

	3.	any certificate of deposit or bankers’ acceptance or eurodollar time deposit, maturing not more than one year after the date of issue, which is issued by either		$	98	%	$

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

	(ii)	any Lender; or

4.	any repurchase agreement with a term of one year or less which is entered into with any Lender, or any other commercial banking institution of the stature referred to in clause (3), and is secured by a fully perfected Lien in any obligation of the type described in any of clauses (1) through (3) that has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Lender (or other commercial banking institution) thereunder;		$	98	%	$

5.	investments in money market funds that invest solely in Cash Equivalents described in clauses (1) through (4); and		$	98	%	$

	6.	investments in short-term asset management accounts offered by any Lender for the purpose of investing in loans to any corporation (other than an Affiliate of the Borrower) organized under the laws of any state of the United States or of the District of Columbia and rated at least A-1 by S&P or P-1 by Moody’s.	$	98	%	$

C.	Government Debt with maturities of more than one year but less than five years		$	98	%	$

D.	Government Debt with maturities of five years or more		$	95	%	$

E.	MBS (Agency Pass-Throughs) rated AA-by S&P or Aa3 by Moody’s or better		$	90	%	$

F.	MBS (Agency CMOs) rated AA-by S&P or Aaa3 by Moody’s		$	90	%	$

G.	MBS (Non-Agency CMOs) rated AAA by S&P or Aaa by Moody’s or better		$	90	%	$

H.	MBS (Non-Agency CMOs) rated AA-by S&P or Aa3 by Moody’s or better		$	87.5	%	$

I.	ABS		$	95	%	$

J.	G7 Securities issued by the Governments of Germany or the United Kingdom		$	95	%	$

	K.	G7 Securities issued by the Governments of France, Japan or Canada	$	93%	$

	L.	G7 Securities issued by the Government of Italy	$	92%	$

	M.	Corporate/Municipal Securities rated AAA by S&P or Aaa by Moody’s	$	94%	$

	N.	Corporate/Municipal Securities rated at least AA-by S&P or Aa3 by Moody’s	$	93%	$

	O.	Corporate/Municipal Securities rated at A-by S&P or A3 by Moody’s	$	92%	$

	P.	Borrowing Base: (Sum of Adjusted Fair Market Values of items I.A through I.O)			$

	Q.	LC Obligations: (including requested Letters of Credit)			$

CREDIT QUALITY

	A.	Average credit rating of all Eligible Investments and MDS Shares	$

IV.	UNENCUMBERED ASSET RESERVES

	A.	Fair Market Value of Unencumbered Assets	$

	B.	Amount equal to impact on Borrower’s Investments from 100 basis point increase in interest rates	$

	C.	Higher of $35,000,000 or Item B	$

SCHEDULE II TO BORROWING BASE

CERTIFICATE DATED AS OF ,

[Attach list of Eligible Investments by Category

(including Rating) and Concentration Limit]

[Attach list of (including rating)

the investments of MDS]

EXHIBIT C

[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this “Assignment and Acceptance”) dated as of , is made between (the “Assignor”) and (the “Assignee”).

RECITALS

WHEREAS, the Assignor is party to that certain Letter of Credit Reimbursement Agreement dated as of September 17, 2003 (as amended, amended and restated, modified, supplemented or renewed, the “LC Agreement”) among Max Re Ltd., a Bermuda company (the “Borrower”), the several financial institutions from time to time party thereto (including the Assignor, the “Lenders”), Fleet National Bank as letter of credit administrator (the “LC Administrator”), Fleet National Bank, as fronting bank (the “Fronting Bank”), and Fleet National Bank, as agent for the Lenders (the “Administrative Agent”). Any terms defined in the LC Agreement and not defined in this Assignment and Acceptance are used herein as defined in the LC Agreement;

WHEREAS, as provided under the LC Agreement, the Assignor has committed to participate in Credit Extensions to the Borrower in an aggregate amount not to exceed $ (the “Commitment”);

WHEREAS, [the Assignor has made Credit Extensions under its Commitment in the aggregate amount of $ to the Borrower] [no Credit Extensions are outstanding under the LC Agreement]; and

WHEREAS, the Assignor wishes to assign to the Assignee [part of the] [all] rights and obligations of the Assignor under the LC Agreement in respect of its Commitment, [together with a corresponding portion of each of its outstanding Credit Extensions,] in an amount equal to $ (the “Assigned Amount”) on the terms and subject to the conditions set forth herein and the Assignee wishes to accept assignment of such rights and to assume such obligations from the Assignor on such terms and subject to such conditions;

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

1. Assignment and Acceptance.

(a) Subject to the terms and conditions of this Assignment and Acceptance, (i) the Assignor hereby sells, transfers and assigns to the Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from the Assignor, without recourse and without representation or warranty (except as provided in this Assignment and Acceptance) % (the

“Assignee’s Percentage Share”) of (A) the Commitment and the Credit Extensions of the Assignor and (B) all related rights, benefits, obligations, liabilities and indemnities of the Assignor under and in connection with the LC Agreement and the Credit Documents.

(b) With effect on and after the Effective Date (as defined in Section 5 hereof), the Assignee shall be a party to the LC Agreement and succeed to all of the rights and be obligated to perform all of the obligations of a Lender under the LC Agreement, including the requirements concerning confidentiality and the payment of indemnification, with a Commitment in an amount equal to the Assigned Amount. The Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the LC Agreement are required to be performed by it as a Lender. It is the intent of the parties hereto that the Commitment of the Assignor shall, as of the Effective Date, be reduced by an amount equal to the Assigned Amount and the Assignor shall relinquish its rights and be released from its obligations under the LC Agreement to the extent such obligations have been assumed by the Assignee; provided, however, the Assignor shall not relinquish its rights under Sections 10.4 and 10.5 of the LC Agreement to the extent such rights relate to the time prior to the Effective Date.

(c) After giving effect to the assignment and assumption set forth herein, on the Effective Date the Assignee’s Commitment will be $ .

(d) After giving effect to the assignment and assumption set forth herein, on the Effective Date the Assignor’s Individual Commitment will be $ .

2. Payments.

(a) [As consideration for the sale, assignment and transfer contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the Effective Date in immediately available funds an amount equal to $ , representing the Assignee’s Percentage of the principal amount of all Credit Extensions.

(b)] The [Assignor] [Assignee] further agrees to pay to the Administrative Agent a processing fee in the amount specified in Section 10.8(a) of the LC Agreement.

3. Reallocation of Payments.

Any interest, fees and other payments accrued to the Effective Date with respect to the Commitment, and Credit Extensions shall be for the account of the Assignor. Any interest, fees and other payments accrued on and after the Effective Date with respect to the Assigned Amount shall be for the account of the Assignee. Each of the Assignor and the Assignee agrees that it will hold in trust for the other party any interest, fees and other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and pay to the other party any such amounts which it may receive promptly upon receipt.

4. Independent Credit Decision.

The Assignee (a) acknowledges that it has received a copy of the LC Agreement and the Schedules and Exhibits thereto, together with copies of the most recent financial statements referred to in Section 5.1 of the LC Agreement, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Assignment and Acceptance; and (b) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent, the LC Administrator, the Fronting Bank or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and legal decisions in taking or not taking action under the LC Agreement.

5. Effective Date; Notices.

(a) As between the Assignor and the Assignee, the effective date for this Assignment and Acceptance shall be , (the “Effective Date”); provided that the following conditions precedent have been satisfied on or before the Effective Date:

(i) this Assignment and Acceptance shall be executed and delivered by the Assignor and the Assignee;

(ii) the consent of the Borrower, the Fronting Bank and the Administrative Agent required for an effective assignment of the Assigned Amount by the Assignor to the Assignee under Section 10.8(a) of the LC Agreement shall have been duly obtained and shall be in full force and effect as of the Effective Date;

(iii) the Assignee shall pay to the Assignor all amounts due to the Assignor under this Assignment and Acceptance;

(iv) the processing fee referred to in Section 2(b) hereof and in Section 10.8(a) of the LC Agreement shall have been paid to the Administrative Agent; and

(v) the Assignor shall have assigned and the Assignee shall have assumed a percentage equal to the Assignee’s Percentage of the rights and obligations of the Assignor under the LC Agreement (if such agreement exists).

(b) Promptly following the execution of this Assignment and Acceptance, the Assignor shall deliver to the Borrower and the Administrative Agent for acknowledgment by the Administrative Agent, a Notice of Assignment in the form attached hereto as Schedule 1.

[6. Administrative Agent. [INCLUDE ONLY IF ASSIGNOR IS ADMINISTRATIVE AGENT]

(a) The Assignee hereby appoints and authorizes the Assignor to take such action as administrative agent and letter of credit administrator on its behalf and to exercise such powers under the LC Agreement as are delegated to the Administrative Agent and the LC Administrator by the Lenders pursuant to the terms of the LC Agreement.

(b) The Assignee shall assume no duties or obligations held by the Assignor in its capacity as Administrative Agent or LC Administrator under the LC Agreement.]

7. Withholding Tax.

The Assignee (a) represents and warrants to the Assignor, the Administrative Agent and the Borrower that under applicable law and treaties no tax will be required to be withheld with respect to any payments to be made to the Assignee hereunder, (b) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to the Administrative Agent and the Borrower prior to the time that the Administrative Agent or Borrower is required to make any payment of principal, interest or fees hereunder, duplicate executed originals of either U.S. Internal Revenue Service Forms W-8ECI and W-9 or U.S. Internal Revenue Service Forms W-8BEN and W-8 (wherein the Assignee claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on all payments hereunder) and agrees to provide new Forms W-8ECI or W-8BEN upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by the Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption.

8. Representations and Warranties.

(a) The Assignor represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any Lien or other adverse claim; (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance and to fulfill its obligations hereunder; (iii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the LC Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; and (iv) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignor, enforceable against the Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors’ rights and to general equitable principles.

(b) The Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the LC Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the LC Agreement or any other instrument or document furnished pursuant thereto. The Assignor makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of the Borrower, or the performance or observance by the Borrower, of any of its respective obligations under the LC Agreement or any other instrument or document furnished in connection therewith.

(c) The Assignee represents and warrants that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance, and to fulfill its obligations hereunder; (ii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance; and apart from any agreements or undertakings or filings required by the LC Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; (iii) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignee, enforceable against the Assignee in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors’ rights and to general equitable principles; and (iv) it is an Eligible Assignee.

9. Further Assurances.

The Assignor and the Assignee each hereby agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment and Acceptance, including the delivery of any notices or other documents or instruments to the Borrower or the Administrative Agent, which may be required in connection with the assignment and assumption contemplated hereby.

10. Miscellaneous.

(a) Any amendment or waiver of any provision of this Assignment and Acceptance shall be in writing and signed by the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions of this Assignment and Acceptance shall be without prejudice to any rights with respect to any other or further breach thereof.

(b) All payments made hereunder shall be made without any set-off or counterclaim.

(c) The Assignor and the Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Assignment and Acceptance.

(d) This Assignment and Acceptance may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. The

Assignor and the Assignee each irrevocably submits to the non-exclusive jurisdiction of any State or Federal court sitting in New York over any suit, action or proceeding arising out of or relating to this Assignment and Acceptance and irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State or Federal court. Each party to this Assignment and Acceptance hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding.

(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE LC Agreement, ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN).

[Other provisions to be added as may be negotiated between the Assignor and the Assignee, provided that such provisions are not inconsistent with the LC Agreement.]

IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Acceptance to be executed and delivered by their duly authorized officers as of the date first above written.

[ASSIGNOR]

By:
Title:

Address: [ASSIGNEE]

By:
Title:

SCHEDULE 1

NOTICE OF ASSIGNMENT AND ACCEPTANCE

Fleet National Bank,

as Administrative Agent

Mail Code CT MO 0250

777 Main Street

Hartford, CT 06115

Max Re Ltd.

Max Re House

2 Front Street

Hamilton, HM 11 Bermuda

Ladies and Gentlemen:

We refer to the Letter of Credit Reimbursement Agreement dated as of September 17, 2003 (as amended, amended and restated, modified, supplemented or renewed from time to time the “LC Agreement”) among Max Re Ltd. (the “Borrower”), the Lenders referred to therein, Fleet National Bank, as letter of credit administrator (the “LC Administrator”), Fleet National Bank as fronting bank (the “Fronting Bank”) and Fleet National Bank as agent for the Lenders (the “Administrative Agent”). Terms defined in the LC Agreement are used herein as therein defined.

1. We hereby give you notice of, and request your consent to, the assignment by (the “Assignor”) to (the “Assignee”) of % of the right, title and interest of the Assignor in and to the LC Agreement (including, without limitation, the right, title and interest of the Assignor in and to the Commitments of the Assignor[,][and] all outstanding Credit Extensions made by the Assignor) pursuant to the Assignment and Acceptance Agreement attached hereto (the “Assignment and Acceptance”). Before giving effect to such assignment the Assignor’s Commitment is $ .

2. The Assignee agrees that, upon receiving the consent of the Administrative Agent, the Fronting Bank and, if applicable, Max Re Ltd. to such assignment, the Assignee will be bound by the terms of the LC Agreement as fully and to the same extent as if the Assignee were the Lender originally holding such interest in the LC Agreement.

3. The following administrative details apply to the Assignee:

(A) Notice Address:

Assignee name:

Address:

Attention:

Telephone: ( )

Facsimile: ( )

Telex (Answerback):

(B) Payment Instructions:

Account No.:

At:

Reference:

Attention:

4. You are entitled to rely upon the representations, warranties and covenants of each of the Assignor and Assignee contained in the Assignment and Acceptance.

IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned.

Very truly yours,

[NAME OF ASSIGNOR]

By:
Title:

[NAME OF ASSIGNEE]

By:
Title:

ACKNOWLEDGED AND ASSIGNMENT CONSENTED TO:

MAX RE LTD.

By:
Title:

FLEET NATIONAL BANK,
as Administrative Agent and Fronting Bank

By:
Its:

EXHIBIT E-1

FORM OF LETTER OF CREDIT

(SEVERAL ISSUERS)

Date:

[IRREVOCABLE DOCUMENTARY CREDIT NO. ]

[Beneficiary]

[Address]

Ladies and Gentlemen:

We, the issuing banks listed below (hereinafter referred to individually as a “Letter of Credit Bank,” and collectively, the “Letter of Credit Banks”), hereby establish in your favor for the account of Max Re, Ltd. this clean Irrevocable Letter of Credit No. in the amount up to but not exceeding the Letter of Credit Commitment (as defined below). Except when the amount of this Letter of Credit is increased, this Letter of Credit cannot be modified or revoked without your consent.

This Letter of Credit is not subject to any condition or qualifications not set forth herein.

The maximum liability of each Letter of Credit Bank with respect to any demand for payment made hereunder shall be its Commitment Share of the amount of such demand for payment, as follows:

LETTER OF CREDIT BANK	COMMITMENT SHARE	MAXIMUM SHARE OF LETTER OF CREDIT COMMITMENT
Fleet National Bank	%	U.S.$
[OTHER LENDERS]	%	U.S.$

TOTAL	100%	U.S.$

The obligations of the Letter of Credit Banks hereunder are several and not joint, and no Letter of Credit Bank shall be responsible or otherwise liable for the failure of any other Letter of Credit Bank to perform its obligations hereunder, nor shall the failure of any Letter of Credit Bank to perform its obligations under this Letter of Credit relieve any other Letter of Credit Bank of its obligations hereunder.

Each drawing honored by the Letter of Credit Banks shall reduce the Letter of Credit Amount pro tanto.

Subject to the further provisions of this Letter of Credit, demands for payment may be made by you on or prior to the Expiration Date (as defined below) from time to time hereunder by presentation to Fleet National Bank, as agent (in such capacity, the “Letter of Credit Agent”) of a draft signed by a person purporting to be your authorized officer. Such draft may be in the form of a writing or in the form of a telex or other writing transmitted by any telecommunication facility (in which case a signed copy shall thereafter be promptly sent to the Letter of Credit Agent). Such draft shall be dated the date of presentation and shall be presented at the Letter of Credit Agent’s office located at [ ], Attention: Letter of Credit Department, or [ ]via facsimile in accordance herewith.

We the Letter of Credit Banks listed herein hereby agree that all demands for payment hereunder made in compliance with the terms of this Letter of Credit will be duly honored by us upon delivery of the draft as specified above and if presented at the Letter of Credit Agent’s aforesaid office on or before the Expiration Date hereof. Demand for payment may be made by you under this Letter of Credit at any time during the Letter of Credit Agent’s business hours at its aforesaid address at [ ], Attention: Letter of Credit Department, [ ]on a Business Day (as hereinafter defined). Each drawing under this Letter of Credit shall be remitted to you in accordance with your instructions. The obligation of the Letter of Credit Banks to honor demands for payment is not contingent upon reimbursement with respect thereto.

As used in this Letter of Credit:

(a) “Business Day” means any day other than a Saturday, a Sunday, a day on which banking institutions in Hartford, Connecticut are authorized by law to close.

(b) “Letter of Credit Commitment” means $ .

Only you may make a drawing under this Letter of Credit. Upon payment to you of its Commitment Share of the Letter of Credit Commitment specified in a demand presented hereunder, a Letter of Credit Bank shall be fully discharged of its obligation under this Letter of Credit to the extent of its Commitment Share of such demand and such Letter of Credit Bank shall not thereafter be obligated to make any further payments under this Letter of Credit in respect of such demand.

The term “you” as used herein includes any successor to you by operation of law. If a court of law appoints a successor in interest to you, then the term “you” includes, and, if the Letter of Credit Agent has written notice thereof, is limited to, the court-appointed domiciliary receiver (including conservator, rehabilitator or liquidator).

least 30 days prior to such date (or such extended date) the Letter of Credit Agent has given you prior written notice of such expiration at your address above or at such address as you may have provided us with prior notice thereof] (such date, as so extended, shall be called the “Expiration Date”). No drawing may be made by you after the Expiration Date. Provided that we are not in default with respect to our obligations under this Letter of Credit, you shall surrender this Letter of Credit to the Letter of Credit Agent promptly following our request therefor on or after the Expiration Date.

This Letter of Credit is not assignable or transferable. This Letter of Credit is subject to and governed by the law(s) of the State of New York, and the International Standby Practices 98 (ISP98) (International Chamber of Commerce Publication No. 590), except that, if the Letter of Credit Agent is closed for reasons described in Article 3.14, thereof, the Letter of Credit Agent hereby agrees to effect payment, if this Letter of Credit is drawn against otherwise in compliance with the terms and conditions hereof, within thirty (30) days after the resumption of business. In the event of any conflict, the laws of the State of New York will control.

All drafts presented to us in connection with any demand for payment hereunder, as well as all notices and other communications to us in respect of this Letter of Credit, shall be in writing and addressed and presented to the Letter of Credit Agent at [ ], Attention: Letter of Credit Department, [ ], and shall make specific reference to the Letter of Credit Agent’s Letter of Credit number for this Letter of Credit. Such documents, notices and other communications shall be personally delivered to the Letter of Credit Agent, or may be sent to us by facsimile transmission, promptly confirmed by delivery of the written document, notice or other communication, as the case may be, at [ ].

This Letter of Credit may be amended to delete a Letter of Credit Bank or add a Letter of Credit Bank, or change Commitment Shares, provided that such amendment does not decrease the Letter of Credit Commitment, and need only be signed by the Letter of Credit Agent; so long as any Letter of Credit Bank added shall be approved by the Securities Valuation Office of the National Association of Insurance Commissioners and shall have a rating of “A3” or better from Moody’s and/or “A” or better from Standard and Poor’s, and/or “A-” or better from Fitch.

If you require any assistance or have any questions regarding this transaction, please call [ ].

Very truly yours,

FLEET NATIONAL BANK, Letter of Credit Agent

By:
Name:
Title:

EXHIBIT E-2

FORM OF LETTER OF CREDIT

(FRONTING BANK)

Date:

[IRREVOCABLE DOCUMENTARY CREDIT NO. ]

[Beneficiary]

[Address]

Ladies and Gentlemen:

Fleet National Bank hereby establishs in your favor for the account of Max Re, Ltd. this clean Irrevocable Letter of Credit No. in the amount up to but not exceeding $ (the “Letter of Credit Amount”). Except when the amount of this Letter of Credit is increased, this Letter of Credit cannot be modified or revoked without your consent.

This Letter of Credit is not subject to any condition or qualifications not set forth herein.

Each drawing honored by us shall reduce the Letter of Credit Amount pro tanto.

Subject to the further provisions of this Letter of Credit, demands for payment may be made by you on or prior to the Expiration Date (as defined below) from time to time hereunder by presentation to Fleet National Bank of a draft signed by a person purporting to be your authorized officer. Such draft may be in the form of a writing or in the form of a telex or other writing transmitted by any telecommunication facility (in which case a signed copy shall thereafter be promptly sent to us). Such draft shall be dated the date of presentation and shall be presented at our office located at [ ], Attention: Letter of Credit Department, or [ ]via facsimile in accordance herewith.

We hereby agree that all demands for payment hereunder made in compliance with the terms of this Letter of Credit will be duly honored by us upon delivery of the draft as specified above and if presented to us at the aforesaid office on or before the Expiration Date hereof. Demand for payment may be made by you under this Letter of Credit at any time during our business hours at its aforesaid address at [ ], Attention: Letter of Credit Department, [ ]on a Business Day (as hereinafter defined). Each drawing under this Letter of Credit shall be remitted to you in accordance with your instructions. Our obligation to honor demands for payment is not contingent upon reimbursement with respect thereto.

As used in this Letter of Credit “Business Day” means any day other than a Saturday, a Sunday, a day on which banking institutions in Hartford, Connecticut are authorized by law to close.

Only you may make a drawing under this Letter of Credit. Upon payment to you of the amount specified in a demand presented hereunder, we shall be fully discharged of our obligation under this Letter of Credit to the extent of such demand and we shall not thereafter be obligated to make any further payments under this Letter of Credit in respect of such demand.

This Letter of Credit shall expire on the earlier of (i) 5:00 p.m. (Chicago time) on , 200_ (or if such day shall not be a Business Day, the preceding Business Day)[; provided, however, that such date (or any extended date) shall be extended for one year unless at least 30 days prior to such date (or such extended date) we have given you prior written notice of such expiration at your address above or at such address as you may have provided us with prior notice thereof] (such date, as so extended, shall be called the “Expiration Date”). No drawing may be made by you after the Expiration Date. Provided that we are not in default with respect to our obligations under this Letter of Credit, you shall surrender this Letter of Credit to us promptly following our request therefor on or after the Expiration Date.

This Letter of Credit is not assignable or transferable. This Letter of Credit is subject to and governed by the law(s) of the State of New York, and the International Standby Practices 98 (ISP98) (International Chamber of Commerce Publication No. 590), except that, if we are closed for reasons described in Article 3.14, thereof, we hereby agree to effect payment, if this Letter of Credit is drawn against otherwise in compliance with the terms and conditions hereof, within thirty (30) days after the resumption of business. In the event of any conflict, the laws of the State of New York will control.

All drafts presented to us in connection with any demand for payment hereunder, as well as all notices and other communications to us in respect of this Letter of Credit, shall be in writing and addressed and presented to us at [ ], Attention: Letter of Credit Department, [ ], and shall make specific reference to our Letter of Credit number for this Letter of Credit. Such documents, notices and other communications shall be personally delivered to us, or may be sent to us by facsimile transmission, promptly confirmed by delivery of the written document, notice or other communication, as the case may be, at [ ].

If you require any assistance or have any questions regarding this transaction, please call [ ].

Very truly yours,

FLEET NATIONAL BANK

By:
Name:
Title:

EXHIBIT D

[FORM OF] SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Agreement”) dated as of September 19, 2003 is among MAX RE LTD., a Bermuda company (the “Borrower”) and FLEET NATIONAL BANK, in its capacity as Administrative Agent for the Lenders referred to below (in such capacity, the “Administrative Agent”).

W I T N E S S E T H

WHEREAS, the Borrower, certain financial institutions (the “Lenders”), Fleet National Bank, as fronting bank (in such capacity the “Fronting Bank”), Fleet National Bank as LC Administrator (in such capacity “LC Administrator”) and the Administrative Agent entered into that certain Letter of Credit Reimbursement Agreement dated as of September 19, 2003, (as amended or modified from time to time, the “Reimbursement Agreement”) whereunder the Lenders severally agree to issue Letters of Credit for the account of the Borrower and the Fronting Bank agrees to issue Letters of Credit for the account of the Borrower and the Lenders agree to purchase risk participations therein; and

WHEREAS, as a condition precedent to the effectiveness of the Reimbursement Agreement, the Borrower is required to execute and deliver this Agreement; and

WHEREAS, the obligations of the Borrower under the Reimbursement Agreement are to be secured pursuant to this Agreement;

NOW, THEREFORE, for and in consideration of any Letter of Credit, LC Borrowing, advance or other financial accommodation heretofore or hereafter made to the Borrower by the Fronting Bank, the Lenders, the Administrative Agent or any of them, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Definitions. When used herein, (a) the terms Certificated Security, Chattel Paper, Commodities Contract, Control, Financial Assets, General Intangibles, Instrument, Investment Property, Securities Account, Securities Intermediary, Security, Security Certificate, Security Entitlement and Uncertificated Security shall have the respective meanings assigned to such terms in Article 8 or Article 9, as applicable, of the Uniform Commercial Code (as defined below), (b) the following terms have the following meanings (such definitions to be applicable to both the singular and plural forms of such terms) and (c) other capitalized terms not defined under clause (a) or (b) above shall have the respective meanings assigned to such terms in the Reimbursement Agreement:

Administrative Agent - see the Preamble.

Agreement - see the Preamble.

Borrower - see the Preamble.

Collateral means all property and rights of the Borrower in which a security interest is granted hereunder.

Control Agreement — see Section 5.

Default means the occurrence of any of the following events: (a) any Event of Default or (b) any warranty of the Borrower herein is untrue or misleading in any material respect and, as a result thereof, the Administrative Agent’s security interest in, or rights and remedies with respect to, any material portion of the Collateral of the Borrower is impaired or otherwise adversely affected.

Lender - see the Recitals.

Liabilities means, as to the Borrower, all obligations (monetary or otherwise) of the Borrower under or in connection with the Reimbursement Agreement or any other Loan Document or any other document or instrument executed in connection therewith, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due including, without limitation, any post-petition interest accruing during any bankruptcy reorganization of the Borrower or other similar proceeding.

Permitted Liens - see clause (a) of Section 3.

Reimbursement Agreement - see the Recitals.

Securities Account means Account No.MRLF0110932 maintained by the Borrower at the Securities Intermediary.

Security Intermediary means Mellon Bank, N.A.

Uniform Commercial Code means the Uniform Commercial Code as in effect in the State of New York on the date of this Agreement; provided, however, as used in Section 7 hereof, “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in the applicable jurisdiction.

Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Reimbursement Agreement.

2. Grant of Security Interest. As security for the payment of all Liabilities, the Borrower hereby assigns to the Administrative Agent for the benefit of the Lenders, and grants to the Administrative Agent for the benefit of the Lenders, a continuing security interest in all of the Borrower’s right, title and interest in, the following, whether now or hereafter existing or acquired:

(i) (A) the Securities Account, (B)all Financial Assets at any time credited to or carried in the Securities Account (including without limitation (i) Securities (whether constituting Certificated Securities or Uncertificated Securities), (ii) Security Entitlements, (iii) Commodities Contracts and other Investment Property, (iv) General Intangibles, (v) Instruments or (iv) Chattel Paper), and (C) all products and Proceeds (including without limitation all dividends, distributions and payments received thereon or in exchange or substitution thereof) with respect to any of the foregoing; and

(ii) the LC Collateral Account and all Securities (whether constituting Certificated Securities or Uncertificated Securities), all Security Entitlements, all Commodities Contracts, all General Intangibles, Instruments and Chattel Papers, all other Investment Property held therein, and all dividends, distributions and payments received thereon or in exchange or substitution thereof;

together with all books, records, writings, databases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to any of the foregoing, and all proceeds, products, offspring, rents, issues, profits and returns of and from any of the foregoing

3. Warranties. The Borrower warrants that:

(a) no financing statement or other filing or registration evidencing a Lien (other than any which may have been filed on behalf of the Administrative Agent or in connection with security interests or liens expressly permitted by the Reimbursement Agreement (“Permitted Liens”)) covering any of the Collateral is on file in any public office;

(b) the Borrower is and will be the lawful owner of all Collateral, free of all liens and claims whatsoever, other than the security interest created hereunder and Permitted Liens, with full power and authority to execute this Agreement and perform the Borrower’s obligations hereunder, and to subject the Collateral to the security interest hereunder;

(c) all written information with respect to Collateral set forth in any schedule, certificate or other writing at any time heretofore or hereafter furnished by the Borrower to the Administrative Agent or any Lender, and all other written information heretofore or hereafter furnished by the Borrower to the Administrative Agent or any Lender, is and will be true and correct in all material respects as of the date furnished;

(d) the Borrower’s chief executive office and principal place of business and the office where the Borrower keeps its records concerning the Collateral are located at Max Re House, Hamilton, Bermuda.

(e) the Borrower has not been known by any legal name different from the one set forth on the signature page of this Agreement;

(f) the execution and delivery of this Agreement and the performance by the Borrower of its obligations hereunder are within the Borrower’s corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with any provision of law or of the Organizational Documents of the Borrower or of any agreement, indenture, instrument or other document, or any judgment, order or decree, which is binding upon the Borrower; and

(g) this Agreement is a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, except that the enforceability of this Agreement may be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and creates a valid and, except for Permitted Liens, after all appropriate financing statements are filed and Control Agreements executed, first priority security interest in the Collateral and such security interest is entitled to all rights, priorities and benefits afforded by the Uniform Commercial Code and the applicable laws of Bermuda.

4. Agreements of the Borrower. The Borrower (a) will, upon request of the Administrative Agent, execute such financing statements and other documents (and pay the cost of filing or recording the same in all public offices reasonably deemed appropriate by the Administrative Agent) and do such other acts and things, as the Administrative Agent may reasonably request in connection with the perfection and enforcement of the security interest granted hereunder; (b) will cause the Administrative Agent’s security interest in Investment Property to be and remain continuously perfected by Control (free of all other liens, claims and rights of third parties whatsoever, other than Permitted Liens) to secure the payment of the Liabilities; (c) will keep its records concerning the Collateral in such a manner as will enable the Administrative Agent or its designees to determine at any time the status of the Collateral; (d) will furnish the Administrative Agent such information concerning the Borrower, the Collateral and the Securities Intermediary as the Administrative Agent may from time to time reasonably request; (e) will, upon request of the Administrative Agent, stamp on its records concerning the Collateral, and add on all Chattel Paper constituting a portion of the Collateral, a notation, in form satisfactory to the Administrative Agent, of the security interest of the Administrative Agent hereunder; and (f) will reimburse the Administrative Agent for all expenses, including reasonable attorneys’ fees and legal expenses, incurred by the Administrative Agent in seeking to collect or enforce any rights in respect of the Collateral.

Any reasonable expenses incurred by the Administrative Agent in protecting, preserving and maintaining any Collateral shall be borne by the Borrower. Whenever a Default shall be existing, the Borrower shall at the request of the Administrative Agent do any and all lawful acts and execute any and all proper documents required by the Administrative Agent in aid of such enforcement and the Borrower shall promptly, upon demand, reimburse and indemnify the Administrative Agent for all reasonable costs and expenses incurred by the Administrative Agent in the exercise of its rights under this Section 4. Notwithstanding the foregoing, the Administrative Agent shall have no obligations or liabilities regarding any of the Collateral by reason of, or arising out of, this Agreement.

5. Investments.

(a) The Borrower hereby agrees that funds contained in the Securities Account shall be invested in Eligible Investments and only as permitted pursuant to Section 6.9 of the Reimbursement Agreement.

(b) With respect to the Securities Account, the Borrower shall cause the Securities Intermediary to execute and deliver to the Administrative Agent on the date hereof a Control Agreement in the form of Schedule I hereto (the “Control Agreement”).

(c) The Borrower will, no later than the date hereof, cause the Securities Intermediary to add the Administrative Agent as a joint account holder of the Securities Account.

(d) The Borrower will inform the Administrative Agent of any change in the Security Intermediary’s jurisdiction (as determined under Section 8-110(e) of the Uniform Commercial Code) within five (5) days of such change.

(e) As long as no Default exists, the Borrower shall be the sole party entitled to exercise for any purpose any and all (i) voting rights and (ii) powers, in either case arising from or relating to the Borrower’s interest in respect of any Investment Property (including the power to direct the Securities Intermediary with respect to the investment of funds or sale of Investment Property); provided, however, the Borrower shall not exercise such rights or powers in a manner, or consent to any action that would in any manner impair the enforceability of the Administrative Agent’s lien on any of the Collateral. At any time a Default exists, all rights of the Borrower provided in this Section 5(e) shall cease, and all voting rights and powers described herein shall thereupon be vested in the Administrative Agent who shall have the sole and exclusive right and authority to exercise such voting rights and powers.

6. Default. Whenever a Default shall be existing, the Administrative Agent may exercise from time to time any rights and remedies available to it under applicable law and in addition may sell or otherwise dispose of the Collateral or any part thereof. In connection therewith, the Collateral may be sold in one or more sales, at public or private sale, conducted by an officer or agent of, or auctioneer or attorney for, the Administrative Agent, at the Administrative Agent’s place of business or elsewhere, for cash, upon credit or for other property, for immediate or future delivery, on such terms as the Administrative Agent shall deem appropriate and at such price or prices as the Administrative Agent shall deem best. The Administrative Agent or any Lender may be the purchaser of any or all of the Collateral so sold at a public sale. The Administrative Agent may, in its sole discretion, at any such sale, restrict the prospective bidders or purchasers who will provide assurances satisfactory to the Administrative Agent that the Collateral may be offered and sold to them without registration under the Securities Act of 1933, as amended, and without registration or qualification under any other applicable state or federal law. Any notification of intended disposition of any of the Collateral required by law shall be deemed reasonably and properly given if given at least five days before such disposition. Any proceeds of any disposition by the Administrative Agent of any of the Collateral may be applied to payment of expenses in connection with the Collateral, including reasonable attorneys’ fees and legal expenses, and any balance of such proceeds may be applied by the Administrative Agent toward the payment of such of the Liabilities, and in such order of application, as the Administrative Agent may from time to time elect.

7. Administrative Agent Rights and Powers.

(a) The Borrower hereby irrevocably appoints the Administrative Agent as the Borrower’s attorney-in-fact (which appointment as attorney-in-fact is coupled with an interest), with full authority in the place and stead of the Borrower and in the name of the Borrower, effective from time to time in the Administrative Agent’s discretion to take any action and to execute any instrument which the Administrative Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including to ask, demand, collect, sue for, recover and receive moneys due and to become due under or in connection with the Collateral, to receive, indorse and collect any drafts or other Instruments, Documents and Chattel Paper in connection therewith and to file any claims or take any action or institute any proceedings which the Administrative Agent may reasonably deem necessary or desirable for the collection thereof or to enforce compliance with the terms and conditions of the Assigned Agreements or this Agreement. Notwithstanding the foregoing, the Administrative Agent shall not be obligated to exercise any right or duty as attorney-in-fact or have any duty to the Borrower in connection therewith.

(b) The powers conferred on the Administrative Agent hereunder shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Administrative Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve any rights pertaining to any Collateral.

(c) The Borrower hereby authorizes the Administrative Agent to file at any time appropriate Uniform Commercial Code Financing Statements in such jurisdictions and offices as the Administrative Agent deems necessary in connection with the perfection of a security interest in the Collateral granted hereunder. The Borrower acknowledges that a copy of this Agreement will be filed with the Registrar of Companies in Bermuda.

8. Rights and Remedies. All payments received by the Borrower in respect of the Collateral shall be received in trust for the benefit of the Lenders, shall be segregated from other funds of the Borrower, and shall be forthwith paid over to the Administrative Agent in the same form as so received (with any necessary endorsement) for application to the Liabilities as provided in this Agreement.

9. General. The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral in its possession if it takes such action for that purpose as the Borrower requests in writing, but failure of the Administrative Agent to comply with any such request shall not of itself be deemed a failure to exercise reasonable care, and no failure of the Administrative Agent to preserve or protect any rights with respect to such Collateral against prior parties, or to do any act with respect to the preservation of such Collateral not so requested by the Borrower, shall be deemed of itself a failure to exercise reasonable care in the custody or preservation of such Collateral.

All notices hereunder shall be in writing either by facsimile transmission or overnight courier and shall be sent to the applicable party at its address set forth in the Reimbursement Agreement or at such other address as such party may, by notice to the other party as provided herein, have designated as its address for such purpose. Notices by facsimile transmission shall be deemed to have been given when sent; notices sent by overnight courier shall be deemed to have been given when delivered for overnight delivery; and notices sent by hand delivery shall be deemed to have been given when received.

The Borrower agrees to pay all reasonable expenses (including reasonable attorneys’ fees and legal expenses) paid or incurred by the Administrative Agent in endeavoring to collect the Liabilities, or any part thereof, and in enforcing this Agreement, and such obligations will themselves be Liabilities.

No delay on the part of the Administrative Agent in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Administrative Agent of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy.

This Agreement shall remain in full force and effect until all Liabilities have been paid in full and all Commitments have terminated whereupon the remaining Collateral shall be returned to the Borrower. If at any time all or any part of any payment theretofore applied by the Administrative Agent or any Lender to any of the Liabilities is or must be rescinded or returned by the Administrative Agent or any Lender for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Borrower), such Liabilities shall, for the purposes of this Agreement, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Administrative Agent or such Lender, and this Agreement shall continue to be effective or be reinstated, as the case may be, as to such Liabilities, all as though such application by the Administrative Agent or such Lender had not been made.

This Agreement shall be construed in accordance with and governed by the laws of the State of New York. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

The rights and privileges of the Administrative Agent hereunder shall inure to the benefit of its successors and assigns.

This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.

ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF

THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE BORROWER AND THE ADMINISTRATIVE AGENT HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, TO THE ADDRESS SET FORTH IN THE REIMBURSEMENT AGREEMENT (OR SUCH OTHER ADDRESS AS IT SHALL HAVE SPECIFIED IN WRITING TO THE ADMINISTRATIVE AGENT AS ITS ADDRESS FOR NOTICES HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND (BY ACCEPTING THE BENEFITS HEREOF) EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

All payments to be made by the Borrower to any person hereunder shall be made free and clear of, and without deduction for or on account of, tax unless the Borrower is required by law to make such a payment subject to the deduction or withholding of tax, in which case the sum payable by the Borrower in respect of which such deduction or withholding is required to be made shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, such person receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made.

IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first above written.

MAX RE LTD.

By:
Name:
Title:

FLEET NATIONAL BANK, as Administrative Agent

By:
Name:
Title:

EX-31.1 5 dex311.htm CERTIFICATION OF THE CEO PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT Certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley Act

EXHIBIT 31.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

OF MAX RE CAPITAL LTD.

I, Robert J. Cooney, the Chief Executive Officer of Max Re Capital Ltd., certify that:

I have reviewed this quarterly report on Form 10-Q of Max Re Capital Ltd.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: November 3, 2003

/s/ ROBERT J. COONEY

Name: Robert J. Cooney

EX-31.2 6 dex312.htm CERTIFICATION OF THE CFO PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT Certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley Act

EXHIBIT 31.2

CERTIFICATION OF

CHIEF FINANCIAL OFFICER

OF MAX RE CAPITAL LTD.

I, Keith S. Hynes, the Chief Financial Officer of Max Re Capital Ltd., certify that:

I have reviewed this quarterly report on Form 10-Q of Max Re Capital Ltd.;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: November 3, 2003

/s/ KEITH S. HYNES

Name: Keith S. Hynes

EX-32.1 7 dex321.htm CERTIFICATION OF THE CEO PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT Certification of the CEO pursuant to Section 906 of the Sarbanes-Oxley Act

EXHIBIT 32.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

OF MAX RE CAPITAL LTD.

This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the quarterly report on Form 10-Q (the “Form 10-Q”) for the quarter ended September 30, 2003 of Max Re Capital Ltd. (the “Issuer”).

I, Robert J. Cooney, the Chief Executive Officer of Issuer certify that:

(i)

the Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(ii)

the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Issuer and will be retained by the Issuer and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: November 3, 2003

/s/ Robert J. Cooney

Name: Robert J. Cooney

EX-32.2 8 dex322.htm CERTIFICATION OF THE CFO PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT Certification of the CFO pursuant to Section 906 of the Sarbanes-Oxley Act

EXHIBIT 32.2

CERTIFICATION OF

CHIEF FINANCIAL OFFICER

OF MAX RE CAPITAL LTD.

I, Keith S. Hynes, the Chief Financial Officer of Issuer certify that:

(i)

the Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(ii)

the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Dated: November 3, 2003

/s/ Keith S. Hynes

Name: Keith S. Hynes

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