INVESTMENT AGREEMENT

Investment Management Trust Agreement

ODYSSEY RE HOLDINGS CORP | HAMBLIN WATSA INVESTMENT COUNSEL LTD | NEWLINE UNDERWRITING MANAGEMENT LIMITED

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Title: INVESTMENT AGREEMENT
Date: 3/31/2006
Industry: INSPPY

CLEARWATER INSURANCE COMPANY

/s/ CHARLES D. TROIANO

AUTHORIZED SIGNATURE

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INVESTMENT AGREEMENT

THIS INVESTMENT AGREEMENT (this “Agreement”), dated as of January 1, 2003, is made by and between HAMBLIN WATSA INVESTMENT COUNSEL LTD. (“HW”), FAIRFAX FINANCIAL HOLDINGS LIMITED (“FFH”) and NEWLINE UNDERWRITING MANAGEMENT LIMITED (“Newline”). As used in this Agreement, “we”, “us” and “our” shall refer to Newline, and “you” and “your” shall refer to HW and FFH jointly. This Agreement supersedes and replaces the Investment Management Agreements between Clearwater and HW dated May 11, 2001 and the Investment Administration Agreement between Clearwater and FFH dated February 16, 2001.

In consideration of the mutual promises contained herein, the parties agree as follows:

Investment Management

1.		We authorize HW to manage on a continuous basis an investment account (the “Account”) on our behalf on the terms and conditions set out in this Agreement.

2.		HW shall manage the Account in accordance with the investment objectives from time to time communicated in writing by us to HW, subject at all times to the investment guidelines. Until mutually agreed otherwise, the investment guidelines shall be as set out in the investment guidelines attached hereto as Schedule A.

3.		Subject to Section 2 above, HW shall manage the Account in our name and HW is hereby authorized to take such action for the Account as HW, in your sole discretion, may consider appropriate for the operation of the Account including, without limitation, the power to buy, sell and exchange and otherwise deal in all securities which may at any time form part of the Account and to invest, in securities selected by HW, all funds contained in, paid to or derived from the operation of, the Account, except to the extent that HW is otherwise instructed in writing by us.

		The services to be performed by HW shall be performed only by officers and employees who have appropriate qualifications. HW agrees to provide to us such information as we may reasonably request concerning the education and experience of any individuals HW proposes to assign to the performance of such services. Also, upon our request, HW agrees to provide a list of individual names and a brief description of their responsibilities. HW

agrees to promptly notify us of any changes in HW’s staff involving individuals that perform material functions on our Account.

4.		The securities and funds of the Account have been deposited with and shall be held by CITIBANK (or with such other custodian as is chosen by you from time to time) (the “Custodian”) pursuant to an agreement, which we have entered into with the Custodian. We have instructed the Custodian to promptly follow your directions at all times and to provide HW with all such information concerning the Account as HW may from time to time require in connection with your management of the Account, including without limitation, copies of relevant monthly statements.

5.		Provided HW has used reasonable care and diligence, HW shall not be liable for any damage, loss, cost or other expense sustained in the operation of the Account or relating in any manner to the carrying out of your duties under this Agreement. Notwithstanding the foregoing, any losses suffered as a result of an error in implementing investment decisions caused by HW’s negligence or dishonesty are to be fully reimbursed by HW. To the extent any errors occur in implementing investment decisions, HW shall immediately notify us in writing of all relevant facts. HW shall bear full responsibility for any such errors to the extent such errors result from HW’s negligence or dishonesty and shall be liable for all financial injury to us resulting therefrom. We agree that HW shall be entitled to assume that any information communicated by us or the Custodian to HW is accurate and complete, and that in making investment decisions HW shall be entitled to rely on publicly available information or on information which HW believes to have been provided to you in good faith, in both cases barring actual knowledge by HW to the contrary.

6.		HW will provide us with a monthly statement and a quarterly presentation respecting the securities held in the Account.

7.		HW shall deliver in writing to us, as soon as practicable after implementation of an investment decision, HW’s confirmation of such implementation to enable us to ascertain that such implementation has been effected pursuant to the guidelines and procedures of our Board of Directors or a duly authorized committee thereof. Otherwise, the nature and timing of HW’s reporting to us on the status of the Account shall be at least quarterly, within 45 days after the end of each quarter.

8.		We acknowledge receipt of a copy of policies that HW has established to ensure that investment opportunities are

allocated fairly among HW’s discretionary investment accounts and we confirm that these policies, until revised by HW, will apply to the account.

Investment Administration

We authorize FFH to provide, and by signing below FFH agrees to provide, the investment administration services set forth in Schedule B attached hereto, on our behalf and on the terms and conditions set out in this Agreement, subject to such guidelines, procedures and limitations as may be duly established and approved by our Board of Directors or a duly authorized committee of said Board.

General

10.		You shall be entitled to such fees for the services provided hereunder as FFH may specify from time to time. Attached hereto as Schedule C is a copy of the current fee schedule and FFH agrees to give us thirty (30) days prior written notice of any change in such schedule. Such fees shall be the exclusive fees and charges payable (excluding third party disbursements reasonably incurred) for the services provided hereunder. As regards third party services, you will charge us only the amount of your actual disbursements paid to arm’s length third parties for such services, and HW will select as agents, brokers or dealers executing orders or acting on the purchase or sale of portfolio securities only duly licensed agents, brokers or dealers. Such disbursements to third parties shall be reported to us quarterly, provided, that we shall pay third parties such disbursements directly if requested to do so by you. We will pay you all fees and disbursements hereunder not later than 20 days after receiving your quarterly report.

		All fees will be paid to FFH and FFH shall reimburse HW for its investment management services. HW acknowledges that it has no right under this agreement to receive fees directly from us.

11.		Either you or FFH and HW may terminate this Agreement without penalty by giving the other party at least thirty (30) days advance written notice of its desire to terminate the same. In the event that the day upon which this Agreement is so terminated is a day other than the first day of a calendar quarter, the fees payable in accordance with paragraph 6 for such quarter shall be pro-rated and shall be determined having regard to the market value of the Account based upon the most recent financial report which has been delivered to you by the Custodian.

12.		All notices and communications to each party to this Agreement shall be in writing and shall be deemed to have been sufficiently given if signed by or on behalf of the party giving the notice and either delivered personally or sent by prepaid registered mail addressed to such party at the address of such party indicated herein. Any such notice or communication shall be deemed to have been received by any such party if delivered, on the date of delivery, or if sent by prepaid registered mail on the fourth business day following mailing thereof to the party to whom addressed. For such purpose, no day during which there shall be a strike or other occurrence interfering with normal mail service shall be considered a business day.

13.		This Agreement shall be effective for a period of twelve (12) months from the date hereof, and will be automatically renewed at each such anniversary date unless otherwise terminated in accordance with paragraph 11 herein. The parties may renegotiate the terms of the Agreement sixty (60) days prior to each anniversary date. This Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors. This Agreement may not be assigned by any party.

14.		We acknowledge that we have read and understood this Agreement and that we have received a copy of the same. You and we each acknowledge that the terms of this Agreement are the exclusive and conclusive terms of our mutual agreement with regard to the subject matter hereof.

15.		This Agreement shall be governed by English law.

16.		Additional terms and conditions applicable to this Agreement are set forth in Schedule D. The provisions in Schedule A, Schedule B, Schedule C and Schedule D attached hereto are hereby incorporated into, and form part of, this Agreement.

17.		This Agreement, including the schedules attached hereto and made a part hereof, may only be amended by written agreement signed by the parties.

IN WITNESS WHEREOF, this Agreement is hereby executed by duly authorized officers of the parties hereto as of the date first written above.


		CHARLES D. TROIANO

		NAME OF AUTHORIZED SIGNATORY

HAMBLIN WATSA INVESTMENT COUNSEL LTD.

	BY:	/s/ F. BRIAN BRADSTREET

		AUTHORIZED SIGNATURE

		F. BRIAN BRADSTREET

		NAME OF AUTHORIZED SIGNATORY

FAIRFAX FINANCIAL HOLDINGS LIMITED

	BY:	/s/ BRADLEY P. MARTIN

		AUTHORIZED SIGNATURE

		BRADLEY P. MARTIN

		NAME OF AUTHORIZED SIGNATORY

SCHEDULE A

INVESTMENT OBJECTIVES

1.		Investment for the long term always providing sufficient liquidity for the payment of claims and other policy obligations.

2.		Ensure preservation of invested capital for policyholder protection.

3.		Invest in accordance with insurance regulatory guidelines.

INVESTMENT GUIDELINES

Approach

All investments are to be made using the value approach by investing in companies at prices below their underlying long-term values to protect capital from loss and earn income over time and provide operating income as needed.

With regard to equities, no attempt is made to forecast the economy or the stock market. The manager will attempt to identify financially sound companies with good potential profitability which are selling at large discounts to their intrinsic value. Appropriate measures of low prices may consist of some or all of the following characteristics: low price earnings ratios, high dividend yields, significant discounts to book value and free cash flow. Downside protection is obtained by seeking a margin of safety in terms of a sound financial position and a low price in relation to intrinsic value. Appropriate measures of financial integrity which are regularly monitored, include debt/equity ratios, financial leverage, asset turnover, profit margin, return on equity, and interest coverage.

As a result of this bargain-hunting approach, it is anticipated that purchases will be made when economic and issue-specific conditions are less than ideal and sentiment is uncertain or negative. Conversely, it is expected that gains will be realized when issue-specific factors are positive and sentiment is buoyant. The investment time horizon is one business cycle (approximately 3-5 years).

As regards bonds, the approach is similar. No attempt is made to forecast the economy or interest rates. The manager will attempt to purchase attractively priced bonds offering yields better than Treasury bonds with maturities of 10 years or less that are of sound quality, i.e. whose obligations are expected to be fully met as they come due.

We do not regard rating services as being an unimpeachable source for assessing credit quality any more than we would regard a broker’s recommendation on a stock as being necessarily correct. In any form of investment research and evaluation, there is no substitute for the reasoned judgment of the investment committee and its managers.

Liquidity

An adequate cash flow should be maintained to ensure that claims and operating expenses are paid on a timely basis. An operating cash position is to be maintained at appropriate levels and will be managed by the insurance operating company in accordance with the approved list for investments as determined from time to time by the Investment Committee. These securities will be managed by Newline Underwriting Management Limited as part of the Treasury function and currently are restricted primarily to Treasury and Agenc

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