MONTPELIER RE HOLDINGS LTD
EX-10.1: LETTER OF CREDIT REIMBURSEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>y04138aexv10w1.htm
<DESCRIPTION>EX-10.1: LETTER OF CREDIT REIMBURSEMENT
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<TITLE>EXHIBIT 10.1</TITLE>
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<P align="center" style="font-size: 10pt"><B>Montpelier Reinsurance Ltd.<BR>
US$50,000,000 Letter of Credit Facility<BR>
Appendix</B>


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    <TD width="30%">&nbsp;</TD>
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    <TD width="65%">&nbsp;</TD>
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<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Account Party:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Montpelier Reinsurance Ltd. (the &#147;Account Party&#148;).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Lender:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">HSBC Bank USA, National Association (the &#147;Bank&#148;)</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Facility Type:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The facility is by way of Letters of Credit (&#147;LOC&#148;).</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Amount:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The aggregate total of issued LOC is not to exceed
US$50,000,000.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Purpose:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">To support obligations of the Account Party under its
reinsurance arrangements with primary insurance and
reinsurance counterparties.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Availability:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">LOC will be issued for periods not exceeding one year
and may have an automatic extension clause subject to
written notice of non-renewal 60&nbsp;days prior to the
expiry date. Each LOC shall contain language, and
otherwise in all respects be, satisfactory to the Bank
in its sole discretion.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subject to the terms and conditions herein and
contained in any related legal documentation, the LOC
facility is available for the period from December&nbsp;20,
2004 to December&nbsp;19, 2005.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Commitment Fee:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Account Party shall pay the Bank a commitment fee
of 7.5 basis points per annum, calculated daily on the unused portion
of the commitment and payable quarterly in arrears.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>LOC Issuance Fee</B>:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A fee equivalent to 27.5 basis points per annum based
on the issued amount of each LOC shall be payable
quarterly in arrears.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>General Indemnity:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Account Party shall reimburse the Bank for any
additional costs or reduction in income arising as a
result of the imposition of or increase in taxes (other
than on the overall net income of the Bank) on amounts
paid by the Account Party to the Bank, an imposition of
or increase in reserve requirements (other than such
imposition or increase that is not also required
generally of other banks in the same general regulatory
jurisdiction and the same general regulatory category),
or the imposition of any other condition affecting the
LOC Facility by any government, governmental agency or
body, tribunal or regulatory authority.</TD>
</TR>

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<P align="center" style="font-size: 10pt">&nbsp;
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Repayment:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Drawings, if any, will be charged to general account of
the Account Party.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Collateral:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Account Party&#146;s obligations to the Bank shall be
secured by first priority security interest in and
charge over the Account Party&#146;s Corporate Account #831154 at
Bank of Bermuda (the &#147;Account&#148;).
The funds in the Account shall be invested in the &#147;USD
Allpoints Corporate Money Fund&#148; or such other
investment as may be acceptable to the Bank. The
Account shall at all times contain securities having a
market value in excess of the aggregate of the total
amount of all LOC&#146;s issued on the Account Party&#146;s
behalf, after applying Bank&#146;s applicable credit
margins.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Conditions to
Initial Issuance:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Prior to the issuance of the initial LOC, the Bank
shall have received the following documentation, duly
executed and otherwise satisfactory in all respects to
Bank&#146;s counsel:</TD>
</TR>

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<P>
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="37%" nowrap align="right">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The facility letter to
which is attached this Appendix.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="37%" nowrap align="right">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Reimbursement Agreement.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="37%" nowrap align="right">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Pledge Agreement.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="37%" nowrap align="right">(iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notice under the Charge Over Accounts.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="37%" nowrap align="right">(v)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Acknowledgment of
Charge by Bank of Bermuda</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="37%" nowrap align="right">(vi)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Resolutions and
evidence of incumbency.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="37%" nowrap align="right">(vii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Opinion of Bermuda
counsel.</TD>
</TR>

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<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Conditions to
Each Issuance:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No default shall have occurred under the Reimbursement Agreement
or any related legal documentation and the Representations and
Warranties contained in the Reimbursement Agreement shall be true
and correct as if made at the time of each such issuance.</TD>
</TR>

</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="bottom">
    <TD valign="top" width="32%"><DIV style="margin-left:0px; text-indent:-0px"><B>Covenants:</B>
    </DIV></TD>
    <TD width="5%" nowrap align="right" valign="top">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD align="left" valign="top">Provision of audited annual financial statements within 120&nbsp;days of
each fiscal year-end.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
<TD valign="top" width="32%"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD width="5%" nowrap align="right">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD align="left" valign="top">Maintenance of the Account Party&#146;s corporate status in
good standing.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
<TD valign="top" width="32%"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD width="5%" nowrap align="right">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD align="left" valign="top">Compliance with all laws.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
<TD valign="top" width="32%"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD width="5%" nowrap align="right">(iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD align="left" valign="top">Payment of all sums when due.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
<TD valign="top" width="32%"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD width="5%" nowrap align="right">(v)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD align="left" valign="top">No change in ownership.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
<TD valign="top" width="32%"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD width="5%" nowrap align="right" valign="top">(vi)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD align="left" valign="top">Provision of notice of any litigation, proceeding or
dispute, threatened or commenced, if the litigation,
proceeding or dispute could, if adversely determined,
have a material adverse effect.</TD>
</TR>

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<P align="center" style="font-size: 10pt">&nbsp;
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<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(vii)&nbsp;Provision of notice of material adverse change.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Expenses:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">All out of pocket expenses and all
other costs whatsoever in relation to the facility, this Appendix or
any other facility document incurred by the Bank, including without
limitation any legal fees, or expenses related to the realisation of
assets or the preservation or enforcement of any of the Bank&#146;s
rights hereunder are for the Borrower&#146;s account.</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Account Party hereby authorizes
the Bank to debit the Account with the full amount of any amount due
or payable to the Bank pursuant to this section, without prejudice to
the provisions of the Bank&#146;s rights following demand for
repayment.</TD>
</TR>

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<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="center" style="font-size: 10pt">REIMBURSEMENT AGREEMENT



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U>Definitions</U>. As used herein, the following terms shall have the
following meanings:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&#147;Agreement&#148; shall mean, collectively, each Application for Standby
Letter of Credit submitted by Applicant to Bank, in the form required by Bank,
and this Reimbursement Agreement, as the same may be amended and supplemented
from time to time.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&#147;Applicant&#148; shall mean the person or entity executing this Agreement
as Applicant; provided that if two or more persons or entities shall have
executed this Agreement as Applicant and the term &#147;Applicant&#148; is preceded by
the word &#147;any&#148; or &#147;each&#148; or a word or words of similar import, in which case
such term shall be deemed to refer to each of such persons or entities,
individually.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&#147;Bank&#148; shall mean HSBC Bank USA, National Association, its
successors, transferees and assigns.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&#147;Credit&#148; shall mean each irrevocable standby letter of credit issued
by the Bank pursuant to this Agreement upon Applicant&#146;s request, as the same
may be amended and supplemented from time to time, and any and all renewals,
increases, extensions and replacements thereof and therefor.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&#147;Dollar Equivalent&#148; shall mean (i)&nbsp;the number of Dollars that is
equivalent to an amount of a currency other than Dollars, determined by
applying the Bank&#146;s selling rate for the relevant currency against Dollars
applicable to cable transfers to the place where and in the currency in which
the relevant amount is payable, or (ii)&nbsp;in the event that the Bank shall not at
the time be offering such a rate, the amount of Dollars that the Bank, in its
sole judgment, specifies as sufficient to reimburse or provide funds to the
Bank in respect of amounts drawn or drawable under the relevant Credit; in
either case as and when determined by the Bank.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&#147;Dollars&#148; shall mean lawful currency of the United States of America.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&#147;Obligations&#148; shall mean and include all indebtedness, obligations
and liabilities of Applicant to the Bank, present or future, due or to become
due, absolute or contingent, arising hereunder or in connection with the
Credits or any financing or refinancing thereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U>Payment
Terms</U>. Applicant agrees to pay to the Bank on demand, at the
Bank&#146;s office located at 452 Fifth Avenue, New York, New York 10018, in
Dollars, in immediately available funds and without set-off, counterclaim or
withholding of any type: (i)&nbsp;each amount drawn under each Credit, in Dollars
or, in the event that drafts under any Credit are payable in a currency other
than Dollars, the Dollar Equivalent of each amount so drawn; (ii)&nbsp;interest on
each amount (or the Dollar Equivalent thereof) so drawn for each day from the
date of payment of the relevant draft to and including the date of payment in
full of such amount by Applicant to the Bank, at a rate per annum equal to the
rate per annum announced from time to time by the Bank as its U.S. Dollar prime
rate for loans made in the United States as in effect on each such day, the
rate of interest hereunder to change as of the opening of business on the
effective date of each change in said prime rate; and (iii)&nbsp;any and all
commissions and charges of the Bank and each of its correspondents in relation
to the


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">issuance and maintenance of each Credit and all drafts thereunder.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<U>Administration
of Credit</U>. (a)&nbsp;Applicant will, promptly, but in any
event within 2 business days, examine the copy of each Credit (and any
amendments thereof) sent to Applicant by the Bank, as well as all other
instruments and documents delivered to Applicant from time to time, and, in the
event Applicant has any claim of non-compliance with the instructions or of any
discrepancy or other irregularity, Applicant will, promptly notify the Bank
thereof in writing, and Applicant will conclusively be deemed to have waived
any such claim against the Bank and its correspondents unless such immediate
notice is given as aforesaid.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Bank may (but need not) pay any drafts otherwise in order which
are signed or issued by, or accompanied by required statements or other
documents otherwise in order which are signed or issued by, the custodian,
executor, administrator, trustee in bankruptcy, debtor in possession, assignees
for the benefit of creditors, liquidator, receiver or other agent or legal
representative of the beneficiary of any Credit or other party who is
authorized under such Credit to draw or issue any drafts, required statements
or other documents.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Neither the Bank nor any of its correspondents shall be responsible
for, and neither the Bank&#146;s powers and rights hereunder nor Applicant&#146;s
Obligations shall be affected by, (i)&nbsp;any act or omission pursuant to
Applicant&#146;s instructions, (ii)&nbsp;any other act or omission of the Bank or its
correspondents or their respective agents or employees for which the Bank is
not responsible under the provisions of the ICC Uniform Customs and Practice
for Documentary Credits, the ICC International Standby Practices or Article&nbsp;5
of the Uniform Commercial Code, each as in effect from time to time and as
applicable to the relevant Credit, other than any such act or omission arising
from its or their gross negligence or willful misconduct, (iii)&nbsp;the form,
validity, accuracy or genuineness of drafts, documents (including documents of
assignment or transfer) or required statements, even if such drafts, documents
or statements should in fact prove to be in any or all respects invalid,
inaccurate, fraudulent or forged (and notwithstanding that Applicant shall have
notified Bank thereof), (iv)&nbsp;failure of any draft to bear any reference or
adequate reference to the relevant Credit, (v)&nbsp;errors, omissions, interruptions
or delays in transmission or delivery of any messages however sent and whether
or not in code or cipher, (vi)&nbsp;any act, default, omission, insolvency or
failure in business of any other person (including any correspondent) or any
consequences arising from causes beyond the Bank&#146;s control, (vii)&nbsp;errors in
translation or for errors in interpretation of technical terms, (viii)&nbsp;any loss
or delay, in the transmission or otherwise, of any such document or draft or
the proceeds thereof, or (ix)&nbsp;any acts or omissions of any beneficiary of any
Credit or any transferee of any Credit, if transferrable.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;In furtherance and extension and not in limitation of the specific
provisions hereinabove
set forth, any action taken or omitted by the Bank or by any of its
correspondents, under or in connection with any of the Credits or the related
drafts or document(s), if taken or omitted in good faith, shall be binding upon
the Applicant and shall not put the Bank or its correspondents under any
resulting liability to the Applicant. The Bank shall in no event be liable for
consequential damages.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<U>Extensions,
Increases and Modifications of Credits</U>. Each Applicant
agrees that the Bank may at any time and from time to time, in its discretion,
by agreement with one or more other Applicants, (a)&nbsp;further finance or
refinance any transaction under any Credit, (b)&nbsp;renew, extend or change the
time of payment or the manner, place or terms of payment of any of the
Obligations, (c)&nbsp;settle or compromise any of the Obligations or subordinate the
payment thereof to the payment of any other debts of or claims against any
Applicant which may at the time be due or owing to Bank, or (d)&nbsp;release any
Applicant or forgo any right of setoff, or modify or amend in any way this
Agreement or any Credit, or give any waiver or consent under this Agreement;
all in such manner and on such terms as Bank may deem proper and without notice
or further assent from such Applicant. In any such event, such Applicant shall
remain bound by such event and this Agreement after


<P align="center" style="font-size: 10pt">2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">giving effect to such event, and the Obligations under this Agreement
shall be continuing Obligations in respect of any transaction so financed or
refinanced.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<U>Reserve
Requirements, etc.</U> If the Bank now is or hereafter becomes
subject to (a)&nbsp;any reserve, special deposit or similar requirement against the
Bank&#146;s assets, deposits maintained with the Bank or for the Bank&#146;s account, or
credit extended by the Bank, or any other acquisition of funds for extension of
credit, (b)&nbsp;any reserve, special deposit or similar requirement against or with
respect to or measured by reference to any Credit, (c)&nbsp;any change in the basis
of taxation of any payments due to the Bank hereunder (other than a change in
taxation of the Bank&#146;s overall net income), (d)&nbsp;any requirement relating to
capital adequacy, or (e)&nbsp;any other condition imposed upon the Bank which
imposes a cost upon the Bank, and the result, in the Bank&#146;s determination, of
any requirement or condition specified in clauses (a)-(e) above is to increase
the cost to the Bank of maintaining the Credits or paying or funding the
payment of any draft or demand thereunder, or to reduce the amount of any sum
received or receivable by the Bank hereunder, or (in the case of clause (d)
above) to reduce the Bank&#146;s rate of return on the Bank&#146;s capital to a level
below which the Bank could have otherwise achieved (using any reasonable
averaging and attribution methods), Applicant will pay to the Bank upon demand
such amount in respect of such increased cost or reduction as the Bank may
determine to be the additional amount or amounts required to compensate the
Bank for such increased cost or reduction, provided, however, that Applicant
shall not be obligated to compensate the Bank for any such costs which arise
from any required increase in the Bank&#146;s level of capital that is not also
required generally of other banks in the same general regulatory jurisdiction
and the same general regulatory category as the Bank. The Bank&#146;s determination
of such increased cost or reduction shall be conclusive absent manifest error.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;<U>Events
of Default; Remedies; Pre-funding.</U> (a)&nbsp;It shall be an Event of
Default if: (i)&nbsp;Applicant defaults in the payment when due of any of the
Obligations; (ii)&nbsp;Applicant otherwise defaults in the performance of any of the
Obligations; (iii)&nbsp;an event of default occurs under the Amended
and Restated Letter of Credit Reimbursement and Pledge Agreement
dated May&nbsp;27, 2004 and amended October&nbsp;28, 2004 (the
&#147;Credit Agreement&#148;), among Montpelier Reinsurance Ltd.,
Montpelier Re Holdings Ltd., the various financial institutions
parties thereto and Bank of America, N.A., as administrative agent
for the Lenders, or under any other agreement or instrument
relating to indebtedness of Applicant in an amount in excess of
$25,000,000;
(iv)&nbsp;any representation or warranty made by any Applicant to the Bank in
connection with the Credits or otherwise for the purpose of obtaining credit
proves to have been incorrect or misleading in any material respect when made;
(v)&nbsp;any Applicant challenges, or institutes any proceedings or any proceedings
are instituted, to challenge the validity, binding effect or enforceability of
this Agreement; (vi)&nbsp;any Applicant is dissolved or is a party to any merger or
consolidation or sells or otherwise disposes of all or substantially all of its
assets without the written consent of the Bank; (vii)&nbsp;any Applicant or any
partnership of which any Applicant is a member is expelled from or suspended by
any stock or securities exchange or other exchange; (viii)&nbsp;any Applicant
becomes insolvent or unable to meet its debts as they mature, or is generally
not paying its debts as they become due, or suspends or ceases its present
business, or a custodian, as defined in Title 11 of the United States Code, of
substantially all of its property, or a receiver or other person or entity
serving a similar function, shall have been appointed or taken possession;
(ix)&nbsp;a case under such Title 11, or any proceeding under any other federal,
state or foreign bankruptcy, insolvency or other law relating to the relief of
debtors, the readjustment, composition or extension of indebtedness or
reorganization, is commenced by or against any Applicant; or (x)&nbsp;there occurs
any material adverse change in the business, financial condition or prospects
of Applicant.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;If any Event of Default shall have occurred and be continuing, other
than an Event of Default specified in Section&nbsp;6(a)(viii) or 6(a)(ix), the Bank
may terminate any commitment to issue Credits and may declare all Obligations
(including any such which may be contingent and not matured) to be immediately
due and payable, and in the case of any Event of Default specified in Section
6(a)(viii) or 6(a)(ix), any commitment of the Bank to issue Credits shall
automatically and immediately terminate and all such Obligations shall
automatically be immediately due and payable, in each case without presentment,
demand, protest or other notice of any kind, all of which are expressly waived.


<P align="center" style="font-size: 10pt">3
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Without limiting the generality of the foregoing, Applicant agrees
that if (i)&nbsp;any Event of Default shall have occurred and be continuing or (ii)
the transactions contemplated by this Agreement are unlawful or contrary to any
regulations to which Bank may be subject or (iii)&nbsp;any Credit is denominated in
a currency other than Dollars and the Bank determines that such currency is
unavailable or that due to currency fluctuations the Dollar Equivalent of the
amount of such Credit exceeds the amount of Dollars that Bank in its sole
judgment expected to be its maximum exposure under such Credit, then, Applicant
will upon demand pay to Bank an amount equal to the undisbursed portion, if
any, of all outstanding Credits if pertaining to (i)&nbsp;or (ii)&nbsp;above, or any such
Credit if pertaining to (iii)&nbsp;above, and such amount shall be held as
additional collateral for the payment of all Obligations hereunder, and after
the expiration of the related Credit or Credits, to the extent not applied to
the Obligations, shall be returned to Applicant.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;<U>Representations
and Warranties</U>. Applicant hereby represents and
warrants to the Bank that (a)&nbsp;Applicant has duly executed and delivered this
Agreement; (b)&nbsp;this Agreement constitutes Applicant&#146;s legal, valid and binding
obligation, enforceable against it in accordance with its terms; (c)&nbsp;the
execution, delivery and performance of this Agreement (i)&nbsp;are within
Applicant&#146;s authority and have been duly authorized by all proper corporate
action, (ii)&nbsp;will not violate or conflict with any provision of law or with
Applicant&#146;s charter or by-laws and (iii)&nbsp;will not conflict with, or constitute
a default under, or result in a violation of, any agreement, instrument,
judgment, decree, statute, rule or regulation to which Applicant or any of such
Applicant&#146;s assets is subject; (d)&nbsp;the transactions covered by the Credits are
not prohibited under the Foreign Assets Control Regulations of the United
States Treasury Department or Tax Reform Act of 1976 as amended or the Export
Administration Act of 1977 as amended or related laws and regulations and that
any transfer of moneys covered by the Credits conforms in every respect with
all existing United States laws and Government regulations; and (e)&nbsp;the
financial statements of Applicant heretofore furnished to the Bank fairly
present its financial condition as of the dates of, and for the periods covered
by, such statements, and there have been no material adverse changes in
Applicant&#146;s business or financial condition since the date of the last such
audited statements, except as disclosed in material change reports.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;<U>Expenses,
Indemnification</U>. Applicant agrees to reimburse the Bank
upon demand for and to indemnify and hold the Bank harmless from and against
all claims, liabilities, losses, costs and expenses, attorneys&#146; fees and
disbursements (including allocated costs and expenses of counsel who are
employees of the Bank), incurred or suffered by the Bank in connection with the
Credits; such claims, liabilities, losses, costs and expenses shall include but
not be limited to all such incurred or suffered by the Bank in connection with
(a)&nbsp;the Bank&#146;s exercise of any right or remedy granted to it hereunder, (b)&nbsp;any
claim and the prosecution or defense thereof arising out of or in any way
connected with this Agreement, (c)&nbsp;the collection or enforcement of the
Obligations, and (d)&nbsp;any of the events or circumstances referred to in Section
3(c) hereof.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;<U>No
Waivers of Rights hereunder; Rights Cumulative</U>. No failure to
exercise or delay in exercising, on the part of the Bank, any of its options,
powers or rights,or partial or single exercise thereof, shall constitute a
waiver thereof. No waiver of any of its rights hereunder, and no modification
or amendment of this Agreement, shall be deemed to be made by the Bank unless
the same shall be in writing, duly signed on behalf of the Bank, and each such
waiver, if any, shall apply only with respect to the specific instance
involved, and shall in no way impair the rights of the Bank or the Obligations
of Applicant to the Bank in any other respect or at any other time. This
Agreement is in addition to and not in substitution for any other obligations
or security held by the Bank for satisfaction of the Obligations. The remedies
herein provided are cumulative and are not exclusive of any other right or
remedy provided by law, in equity, or under any agreement or instrument.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;<U>Financial
Statements, etc</U>. Applicant agrees to furnish to the Bank
copies of its annual consolidated financial statements within 120&nbsp;days of each
fiscal year-end, and such other information relating


<P align="center" style="font-size: 10pt">4
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">to its business and finances as the Bank may from time to time reasonably
request. Applicant agrees to furnish, immediately after such reports are
filed with any securities or other governmental regulator, all material change
reports that disclose a material adverse change.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;<U>Other
Agreements</U>. The Bank shall not be bound by any
representations, collateral agreements or conditions with respect to the
subject matter of this Agreement or Applicant&#146;s liability hereunder other than
as contained or referred to herein, provided that the Bank and Applicant may
make provision for the terms and conditions governing electronic transmission
of requests for the issuance of Credits by separate agreement.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;<U>Continuing
Agreement; Termination</U>. This Agreement shall continue in
full force and effect until the expiration of the Credits, but notwithstanding
any such expiration, this Agreement shall continue in full force and effect
until all Obligations then outstanding (whether absolute or contingent) shall
have been paid in full and all rights of Bank hereunder shall have been
satisfied or other arrangements for the securing of such rights satisfactory to
Bank shall have been made.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;<U>Governing
Law; Jurisdiction; Waiver of Trial by Jury</U>. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, and the Bank shall have the rights and remedies of a secured party
under applicable law, including but not limited to the Uniform Commercial Code
of New York. For the purpose of any proceeding, action or suit involving this
Agreement, the Applicant hereby expressly submits to the jurisdiction of any
court of record of New York State or the United States located in the City of
New York and agrees that any order, process or other paper may be served upon
the Applicant within or without such court&#146;s jurisdiction by mailing a copy
thereof to the Applicant at its address shown below. The Applicant waives any
claim that such proceeding, action or suit has been brought in an inconvenient
forum. THE PARTIES HERETO MUTUALLY AGREE TO WAIVE TRIAL BY JURY.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;<U>Notices</U>. Any notice to Bank shall be effective only if in writing or
by authenticated teletransmission acceptable to the Bank, directed to the
attention of and received by the Bank&#146;s Trade Services Department at the
address appearing below the Bank&#146;s signature or at such other address as may
hereafter be specified in a notice designated as a notice of change of address
under this Section.. Any notice to or demand on Applicant shall be effective
when made to Applicant, by mail, telegraph, cable, telephone or otherwise, in
the case of mailed, telegraphed or cabled notices, to the address appearing
below such Applicant&#146;s signature or at such other address as may hereafter be
specified in a notice designated as a notice of change of address under this
Section, and in the case of telephonic notices, to the last telephone number of
such Applicant appearing on the Bank&#146;s records. Any requirement under
applicable law of reasonable notice by the Bank to Applicant of any event shall
be met if notice is given to Applicant in the manner prescribed above at least
seven days before (a)&nbsp;the date of such event or (b)&nbsp;the date after which such
event will occur.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bank is authorized (but not obligated) to accept and rely on
instructions received by telefax or telephone which it believes in good faith
to have been given by a person authorized to give instructions hereunder on
Applicant&#146;s behalf. The Bank shall incur no liability to Applicant or any
other person as a result of any act or omission on the Bank&#146;s part in
accordance with instructions on which the Bank is authorized to rely nor for
any failure or refusal on the Bank&#146;s part to accept instructions by telephone
or telefax that are not confirmed or authenticated to its satisfaction. Any
instructions delivered to the Bank by telephone shall be confirmed in writing
or by telefax on the same day, but the Bank will incur no liability for
Applicant&#146;s failure to send such confirmation, the failure of any such
confirmation to conform to the telephone instructions the Bank received or the
Bank&#146;s failure to produce such confirmation at any subsequent time. The Bank
may record any telephone discussion with respect to the Credits.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;<U>Miscellaneous</U>. (a)&nbsp;If this Agreement is executed by two or more
Applicants, they shall be jointly


<P align="center" style="font-size: 10pt">5
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="left" style="font-size: 10pt">and severally liable for all Obligations hereunder including, without
limitation, Obligations relating to all Credits, regardless of whether a Credit
was issued at the request of a single Applicant or at the request of both
Applicants. The happening of any Event of Default as specified in Section&nbsp;6 of
this Agreement with respect to any Applicant shall mature the Obligations of
all Applicants.



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;This Agreement shall be binding upon the assigns or successors of
each of the Applicants and shall inure to the benefit of and be enforceable by
Bank, its successors, transferees and assigns.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof in that jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;The Credits shall be subject to the Uniform Customs and Practice for
Documentary Credits of the International Chamber of Commerce, as adopted from
time to time.


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="4%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">MONTPELIER REINSURANCE LTD.,<BR>as Applicant</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD valign="bottom">Date:&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">December&nbsp;16, 2004</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">Neil
McConachie</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Title:&nbsp;Treasurer and Chief Accounting Officer</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Address:<BR>


Fax No.:&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="4%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD>&nbsp;</TD>
    <TD >&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3">HSBC BANK USA, NATIONAL ASSOCIATION, as<BR>
Bank</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD>Date:&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">December&nbsp;13, 2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000">Daniel Serrao</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Title:&nbsp;Senior Vice President</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">Address:<BR>
Fax No.:&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">6
</DIV>

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<P align="center" style="font-size: 10pt">P L E D G
E&nbsp;&nbsp;&nbsp;&nbsp;A G R E E M E N T


<P align="left" style="font-size: 10pt">In consideration of HSBC Bank USA, National Association (the &#147;Bank&#148;)
making or continuing advances and/or granting or continuing banking
accommodation or facilities to the undersigned (the &#147;Customer&#148;), the
Customer hereby charges by way of a first fixed charge in favour of,
and pledges and assigns to, the Bank all of the securities, accounts
and interest listed in the Schedule hereto together with any renewals
thereof, substitutions therefor and proceeds thereof and all interest,
dividends, income and revenue therefrom (hereinafter collectively
called the &#147;Collateral&#148;) all as continuing security for the prompt
payment to the Bank of all the present and future, actual and
contingent indebtedness and liability (the &#147;Indebtedness&#148;) of the
Customer to the Bank, subject to the following terms and conditions.


<P align="left" style="font-size: 10pt">1. The security hereby constituted shall forthwith become enforceable
upon the happening of any of the following events:-




<P align="left" style="margin-left:3%; font-size: 10pt">(i)&nbsp;if the Customer fails to make payment to the Bank when
due of any part of the Indebtedness for any reason
whatsoever; or



<P align="left" style="margin-left:3%; font-size: 10pt">(ii)&nbsp;if the Customer gives notice that the Customer is
about to or does default on any of the Customer&#146;s
obligations under this Agreement or under any other
agreement between the Customer and the Bank, or any
representation made to the Bank by the Customer hereunder
or otherwise proves to have been false or incorrect; or



<P align="left" style="margin-left:3%; font-size: 10pt">(iii)&nbsp;if distress or execution is levied or issued against
any of the property of the Customer and is not paid out
within seven days, or if (if the Customer is a body
corporate) an order is made or an effective resolution is
passed for winding up the Customer or if the Customer
ceases or threatens to cease to carry on the Customer&#146;s
business or substantially the whole of the Customer&#146;s
business, or if an encumbrancer takes possession or a
receiver is appointed of any part of the assets of the
Customer; or



<P align="left" style="margin-left:3%; font-size: 10pt">(iv)&nbsp;if the Bank reasonably believes that the security it
holds hereunder is likely to be endangered whether by the
existence or possible creation of any claim or interest
which ranks prior to or pari passu with the Bank&#146;s claim or
interest in the assets which are subject to the security
hereby constituted or otherwise; or



<P align="left" style="margin-left:3%; font-size: 10pt">(v)&nbsp;if the Customer is unable to pay the Customer&#146;s debts
as they become due or the Customer otherwise is considered
insolvent by the Bank.


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="center" style="font-size: 10pt">&#091;2&#093;


<P align="left" style="font-size: 10pt">2. In the event the security hereby constituted becomes enforceable
then all of the Indebtedness, at the option of the Bank, shall become
immediately due and payable and the Bank, without notice,
advertisement, demand for payment or observance of any other formality
(all of which are hereby waived by the Customer), may sell by public
or private sale or otherwise deal with any part of the Collateral in
such manner as the Bank thinks fit and may hold the proceeds in lieu
of any part of the Collateral realized and appropriate the same on
account of such part of the Indebtedness as the Bank thinks fit, and
all costs and expenses incurred by the Bank in respect of the
Collateral and the realization thereof shall be added to the
Indebtedness and shall be a first charge upon the proceeds of the
Collateral.


<P align="left" style="font-size: 10pt">3. Without prejudice to the Bank&#146;s other rights and remedies
hereunder, the Bank shall be entitled at any time without notice,
advertisement, demand for payment or observance of any other
formality, to set-off against the Indebtedness or any part thereof any
and all monies held to the credit of the Customer in any account with
Bank, and such right of set-off may be exercised notwithstanding that
all or part of the monies held to the credit of the Customer are
denominated in a currency other than the currency of the Indebtedness
or are held as a time deposit which has not matured (and the amount
applied by the Bank in set-off shall be net of the Bank&#146;s usual charge
for early withdrawal), and any such set-off may be in respect of any
part of the Indebtedness notwithstanding that it constitutes a present
or future, actual or contingent liability.


<P align="left" style="font-size: 10pt">4. The Customer shall not be entitled to transfer, sell, assign,
encumber or otherwise deal with any of the Collateral whether or not
it is in the Bank&#146;s possession, nor shall the Customer be entitled to
withdraw or to provide substitutions for any of the Collateral, except
with the Bank&#146;s prior written consent which consent may or may not be
given at the Bank&#146;s uncontrolled discretion.


<P align="left" style="font-size: 10pt">5. The Bank shall be entitled but not bound to vote in respect of any
of the Collateral at any meeting at which the holder thereof is
entitled to vote and generally to exercise any of the rights which the
holder of any of the Collateral may at any time have, and the Customer
hereby assigns to the Bank as additional continuing security all
present and future rights and claims which it may acquire in
connection with any of the Collateral.


<P align="left" style="font-size: 10pt">6. The Bank shall not be responsible for any loss, damage, or costs
incurred by the Customer arising from the Bank&#146;s failure to exercise
its rights hereunder including, without limitation, the right to sell
or otherwise deal in any part of the Collateral, to exercise any of
the voting or other rights attached to any of the Collateral or to
collect any interest, dividends or other income or any principal or
redemption proceeds in respect of any of the Collateral or for any
failure to advise the Customer of the expiry of any rights or warrants
in connection with any of the Collateral.



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<P align="center" style="font-size: 10pt">&#091;3&#093;


<P align="left" style="font-size: 10pt">7. The Bank may grant extensions, take and give up any part of the
Collateral accept compositions, grant releases and discharges and
otherwise deal with any of the Collateral and all parties thereto as
the Bank thinks fit without affecting the Indebtedness of the Customer
to the Bank and without prejudice to the rights of the Bank in respect
of the Collateral.


<P align="left" style="font-size: 10pt">8. The Customer agrees that any deposit slip, bank advice, security
receipt or other document in relation to cash, securities or other
property deposited with or received by the Bank after the date hereof
in any account assigned or agreed to be assigned hereby shall be
evidence of such deposit and shall be deemed to constitute an absolute
assignment of such cash, securities or other property on the terms
hereof.


<P align="left" style="font-size: 10pt">9. The Customer hereby irrevocably constitutes and appoints each
officer of the Bank a true and lawful attorney of the Customer, each
such attorney being authorized in the name and on behalf of the
Customer from time to time to endorse and transfer to the Bank or its
nominee any of the Collateral in order that full title to the same may
be vested in the Bank or its nominee and to sign and deliver on behalf
of the Customer such instruments as may be necessary in order to allow
the bank to exercise its rights hereunder.


<P align="left" style="font-size: 10pt">10. The Customer authorizes the Bank to take such steps, including the
completion of registrations and filings with Government offices, as it
deems necessary to perfect its interest in the Collateral.


<P align="left" style="font-size: 10pt">11. The Customer hereby covenants with the Bank: (i)&nbsp;to sign and
deliver all such further documents and assurances in writing as the
Bank may request from time to time in order to give effect to the
terms of this Agreement; (ii)&nbsp;to pay all reasonable legal fees,
registration fees, stamp duties and other disbursements as may be
incurred by the Bank in perfecting the security hereby constituted or
realizing the same; (iii)&nbsp;to deposit with the Bank such part of the
Collateral as the Bank may from time to time request and/or to have
title of such of the Collateral as the Bank thinks fit registered in
the Bank&#146;s name or in the name of the Bank&#146;s nominee; (iv)&nbsp;upon demand
by the Bank to deliver to the Bank immediately after receipt all
interest, dividend or other income payable in respect of any of the
Collateral which is paid after the date of such demand, which the Bank
shall hold as part of the Collateral; (v)&nbsp;to deliver to the Bank all
payments of principal or redemption proceeds payable in respect of any
of the Collateral immediately upon receipt of the same, which the Bank
shall hold as part of the Collateral; and (vi)&nbsp;upon notice from the
Bank that the value of the Collateral in the opinion of the Bank is
not sufficient to secure the Bank in respect of the Indebtedness, to
lodge with the Bank further collateral of a value satisfactory to the
Bank.



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<P align="center" style="font-size: 10pt">&#091;4&#093;


<P align="left" style="font-size: 10pt">12. The Customer, and if the Customer is more than one person each
such person independently, represents and warrants to the Bank that:




<P align="left" style="margin-left:3%; font-size: 10pt">(i)&nbsp;the Customer has the necessary power and capacity to
enter into this Agreement and to perform its obligations
hereunder, that if necessary the execution and delivery of
this Agreement by the Customer has been properly
authorized, and that this Agreement constitutes valid and
legally binding obligations of the Customer; and



<P align="left" style="margin-left:3%; font-size: 10pt">(ii)&nbsp;the Customer is, and shall at all times be, the sole
beneficial owner of the Collateral from time to time,
subject to no liens, encumbrances or other interest of any
kind whatsoever, and the Customer hereby agrees to
indemnify the Bank for all liability arising from the Bank
dealing with Collateral which is subject to an interest of
a third party, and none of the Collateral is subject to any
assessment rights on the part of the issuer, but is fully
paid up.

<P align="left" style="font-size: 10pt">13. This Agreement may be terminated by either the Customer or the
Bank upon thirty days prior written notice to the other provided that
the Customer may so terminate this Agreement only if no part of the
Indebtedness, whether actual or contingent, remains outstanding as of
the date of termination.


<P align="left" style="font-size: 10pt">14. Any notice to be given under this Agreement shall be deemed to
have been sufficiently given if in writing and sent by pre-paid post
to the addressee at the most recent address the sender has for the
addressee, and it shall be deemed to have reached the addressee in the
normal course of the post.


<P align="left" style="font-size: 10pt">15. This Agreement shall be governed by and construed in accordance
with the Laws of Bermuda. The Customer and the Bank submit to the
jurisdiction of the Courts of Bermuda but without prejudice to the
right of the Bank to pursue its remedies in any other jurisdiction it
thinks fit.


<P align="left" style="font-size: 10pt">IN WITNESS WHEREOF this
Agreement has been signed this 16th&nbsp;day of
December two thousand and four.


<P align="left" style="font-size: 10pt">MONTPELIER REINSURANCE LTD.


<DIV align="center">
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<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Neil
McConachie<HR size="1" noshade>
</DIV></TD>
    <TD>&nbsp;</TD>
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<TD colspan="3" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Signature&nbsp;&nbsp;Treasurer and Chief Accounting Officer<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Senior Vice President<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Montpelier Reinsurance Ltd.</DIV></TD>
    <TD align="left" valign="top">&nbsp;</TD>
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<P align="center" style="font-size: 10pt">SCHEDULE


<P align="left" style="font-size: 10pt">All cash and securities held
from time to time in Account No.&nbsp;831154 in name of Montpelier
Reinsurance Ltd. held
in account
with The Bank of Bermuda Limited.




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