Exhibit 10.1

Certain confidential material contained in this document has been omitted
pursuant to a request for confidential treatment and has been filed separately
with the Securities and Exchange Commission. Each omission has been marked with
“[Redacted].”

 

 

AGGREGATE EXCESS OF LOSS REINSURANCE AGREEMENT

by and between

AIG ASSURANCE COMPANY

AIG PROPERTY CASUALTY COMPANY

AIG SPECIALTY INSURANCE COMPANY

AIU INSURANCE COMPANY

AMERICAN HOME ASSURANCE COMPANY

COMMERCE AND INDUSTRY INSURANCE COMPANY

GRANITE STATE INSURANCE COMPANY

ILLINOIS NATIONAL INSURANCE CO.

LEXINGTON INSURANCE COMPANY

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.

NEW HAMPSHIRE INSURANCE COMPANY

THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA

(the “Reinsured”)

and

NATIONAL INDEMNITY COMPANY

(the “Reinsurer”)

Dated as of January 20, 2017

 

 

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TABLE OF CONTENTS

 

ARTICLE I

DEFINITIONS

  

  

1.1

 

DEFINITIONS.

     1   

ARTICLE II

REINSURANCE CEDED

  

  

2.1

 

REINSURANCE COVERAGE.

     13   

2.2

 

COMMENCEMENT OF THE REINSURER’S LIABILITY; FOLLOW FORTUNES AND SETTLEMENTS.

     14   

2.3

 

ULTIMATE NET LOSS.

     14   

2.4

 

NET RETENTION.

     15   

2.5

 

EXCLUSIONS.

     15   

2.6

 

SANCTIONS EXCLUSION.

     16   

2.7

 

TRANSFER RIGHTS.

     16   

ARTICLE III

REINSURANCE CONSIDERATION & CLOSING CONDITIONS

  

  

3.1

 

CONSIDERATION; INTEREST.

     17   

3.2

 

FINAL PAYMENT DATE.

     17   

3.3

 

CLOSING.

     17   

3.4

 

ADDITIONAL DELIVERIES ON OR PRIOR TO CLOSING.

     18   

3.5

 

CONDITIONS PRECEDENT TO THE OBLIGATION OF THE REINSURER TO CLOSE.

     18   

3.6

 

CONDITIONS PRECEDENT TO THE OBLIGATION OF THE REINSURED TO CLOSE.

     18   

3.7

 

PRE-CLOSING TERMINATION.

     19   

3.8

 

EFFECT OF TERMINATION.

     19   

ARTICLE IV

REPORTING AND SETTLEMENT

  

  

4.1

 

QUARTERLY REPORTING.

     19   

4.2

 

QUARTERLY SETTLEMENT.

     20   

4.3

 

SETTLEMENT PAYMENTS.

     20   

4.4

 

OFFSET AND RECOUPMENT RIGHTS.

     20   

4.5

 

AIG CLAIM-IN-CONSULTATION.

     20   

ARTICLE V

CLAIM AUTHORITY

  

  

5.1

 

CLAIM AUTHORITY.

     20   

5.2

 

CLAIMS PRACTICES.

     21   

5.3

 

GENERAL RIGHT OF ASSOCIATION.

     21   

5.4

 

REINSURER CONSULTATION RIGHTS.

     22   

5.5

 

OTHER DISPUTES.

     23   

ARTICLE VI

RESERVING REQUIREMENTS

  

  

6.1

 

RESERVES.

     23   

6.2

 

RESERVE INFORMATION.

     23   

 

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ARTICLE VII

DURATION AND TERMINATION

  

  

7.1

 

DURATION AND TERMINATION.

     23   

7.2

 

EFFECT OF TERMINATION.

     24   

7.3

 

SPECIAL TERMINATION OR SETTLEMENT.

     24   

ARTICLE VIII

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE REINSURED

  

  

8.1

 

WARRANTIES.

     27   

8.2

 

DISCLOSED INFORMATION.

     28   

8.3

 

NO OTHER REPRESENTATIONS OR WARRANTIES BY THE REINSUREDS.

     28   

8.4

 

EXCLUSIVE REMEDY FOR REINSURED MISREPRESENTATIONS AND BREACHES.

     29   

8.5

 

NET LOSSES ACTUALLY PAID.

     29   

ARTICLE IX

REPRESENTATIONS AND WARRANTIES OF THE REINSURER

  

  

9.1

 

WARRANTIES.

     29   

ARTICLE X

ACCOUNTING AND TAX TREATMENT

  

  

10.1

 

ACCOUNTING AND TAX TREATMENT.

     30   

ARTICLE XI

INSOLVENCY

  

  

11.1

 

INSOLVENCY OF THE REINSURED.

     31   

ARTICLE XII

COLLATERAL TRUST ACCOUNT

  

  

12.1

 

ESTABLISHMENT OF COLLATERAL TRUST ACCOUNT.

     32   

12.2

 

INITIAL FUNDING OF THE COLLATERAL TRUST ACCOUNT.

     32   

12.3

 

ONGOING FUNDING OF COLLATERAL TRUST ACCOUNT.

     32   

12.4

 

COLLATERAL TRUST ASSETS.

     32   

12.5

 

SETTLEMENTS.

     33   

12.6

 

MODIFICATION UPON OCCURRENCE OF COLLATERAL TRIGGERING EVENT.

     33   

12.7

 

MODIFICATION UPON OCCURRENCE OF A REINSURANCE CREDIT EVENT.

     33   

12.8

 

WITHDRAWAL OF COLLATERAL TRUST ASSETS BY THE REINSURED OTHER THAN DURING THE
PENDENCY OF A REINSURANCE CREDIT EVENT.

     35   

12.9

 

WITHDRAWAL OF COLLATERAL TRUST ASSETS BY REINSURED DURING THE PENDENCY OF A
REINSURANCE CREDIT EVENT.

     36   

12.10

 

REINSURANCE CREDIT.

     37   

ARTICLE XIII

DISPUTE RESOLUTION

  

  

13.1

 

NEGOTIATION.

     37   

13.2

 

ARBITRATION.

     38   

ARTICLE XIV

REGULATORY MATTERS

  

  

14.1

 

REGULATORY MATTERS.

     39   

 

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ARTICLE XV

ACCESS TO RECORDS & CONFIDENTIALITY

  

  

15.1

 

ACCESS TO RECORDS.

     39   

15.2

 

CONFIDENTIALITY.

     40   

ARTICLE XVI

PUBLICITY

  

  

16.1

 

PUBLICITY.

     41   

ARTICLE XVII

ERRORS AND OMISSIONS

  

  

17.1

 

ERRORS AND OMISSIONS.

     42   

ARTICLE XVIII

MISCELLANEOUS PROVISIONS

  

  

18.1

 

NOTICES.

     42   

18.2

 

ENTIRE AGREEMENT.

     43   

18.3

 

WAIVER AND AMENDMENT.

     43   

18.4

 

SUCCESSORS AND ASSIGNS.

     44   

18.5

 

WAIVER OF DUTY OF UTMOST GOOD FAITH.

     44   

18.6

 

CONSTRUCTION; INTERPRETATION.

     44   

18.7

 

GOVERNING LAW AND JURISDICTION.

     45   

18.8

 

NO THIRD PARTY BENEFICIARIES.

     45   

18.9

 

COUNTERPARTS.

     45   

18.10

 

SEVERABILITY.

     45   

18.11

 

AGENT.

     45   

18.12

 

INCONTESTABILITY.

     46   

18.13

 

CURRENCY.

     47   

18.14

 

SPECIFIC PERFORMANCE.

     47   

18.15

 

TAXES.

     47   

18.16

 

EXPENSES.

     47   

18.17

 

SERVICE OF SUIT.

     47   

Attachments:

  

EXHIBIT A

     1   

EXHIBIT B

     1   

EXHIBIT C

     2   

EXHIBIT D

     3   

SCHEDULE 3.1

     1   

SCHEDULE 8.1(A)

     2   

SCHEDULE 8.1(E)

     3   

SCHEDULE 8.2

     4   

LIMITATIONS AND QUALIFICATIONS

     17   

SCHEDULE 8.2-1

     18   

SCHEDULE 8.5

     19   

 

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AGGREGATE EXCESS OF LOSS REINSURANCE AGREEMENT

This AGGREGATE EXCESS OF LOSS REINSURANCE AGREEMENT (this “Reinsurance
Agreement”), dated as of January 20, 2017 (the “Execution Date”) is made and
entered into by and between AIG Assurance Company, AIG Property Casualty
Company, AIG Specialty Insurance Company, AIU Insurance Company, American Home
Assurance Company, Commerce and Industry Insurance Company, Granite State
Insurance Company, Illinois National Insurance Co., Lexington Insurance Company,
National Union Fire Insurance Company of Pittsburgh, Pa., New Hampshire
Insurance Company and The Insurance Company of the State of Pennsylvania
(individually or collectively referred to as the “Reinsured” unless otherwise
specifically set forth herein), and National Indemnity Company, a Nebraska stock
property and casualty insurance company (hereinafter referred to as the
“Reinsurer”, and together with the Reinsured, the “Parties”).

WHEREAS, the Reinsured desires to cede to the Reinsurer Ultimate Net Loss in
excess of the Retention, subject to the Reinsurer’s Share of the Aggregate
Limit, as set forth herein, and the Reinsurer wishes to assume its share of such
Liabilities, as of the Effective Date, under and pursuant to the terms and
conditions of this Reinsurance Agreement;

NOW, THEREFORE, in consideration of the mutual and several promises and
undertakings herein contained, and for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Parties hereby agree
as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. The following terms shall have the respective meanings set
forth below throughout this Reinsurance Agreement:

“2016 Exit” means Liabilities under the following coverage classified by the
Reinsured as legacy run-off business after the Effective Date:

 

  (a) Lexington Buffer Trucking: (i) all Policies issued by the Reinsured to
non-Affiliates and (ii) reinsurance assumed by the Reinsured from AIG Europe
Limited or predecessor entities thereto and, for both (i) and (ii), classified
by the Reinsured as falling within the Lexington buffer trucking facility, all
of which reside in the Reinsured’s Division 92 immediately prior to the
Effective Date (under which other, non-excluded Policies also reside);

 

  (b) Healthcare Product Liability: all Policies issued by the Reinsured to
non-Affiliates and classified by the Reinsured as: (i) primary or excess
occurrence or claims made product liability or product recall coverage issued to
pharmaceutical companies or manufacturers of healthcare equipment, or
(ii) reinsurance issued by the Reinsured to AIG Europe Limited or predecessor
entities thereto to the extent such reinsurance covers primary or excess
occurrence or claims made coverage for product liability or product recall
coverage issued to pharmaceutical companies or manufacturers of healthcare
equipment. Each of (i) and (ii) resides in the Reinsured’s Divisions 9, 29 or 97
immediately prior to the Effective Date (under which other, non-excluded
Policies also reside); and

 

  (c) Pollution Legal Liability: all Policies issued by the Reinsured to
non-Affiliates and reinsurance issued by the Reinsured to Affiliates that are
classified by the Reinsured as pollution legal liability coverage.

 

1

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For the sake of clarity, “2016 Exit” (i) refers to the reserves listed under the
identification entitled “2016 Exit” in Slide 6 of the information memorandum
entitled ADC-IM-2016_August 12.pdf and attached hereto as Exhibit C (Slide 6
referred to herein as “Exhibit C”) and (ii) is as also set forth in the Data
Room Reports and the Materials.

“Accounting Adjustments” means the statutory accounting reserve adjustments
listed under the identification entitled “Acctg Adjustments” in the portion of
Exhibit C entitled “Not Included in ADC”.

“Actually Paid” with respect to an item at a given time, means that liability on
the item has been discharged as of such time, whether by payment or by offset.
For the avoidance of doubt, the amount of liability that is Actually Paid is
measured by the amount of consideration given for discharging the liability, not
by the carrying value of the liability before discharge.

“Actually Received” with respect to an item at a given time, means that
liability on the item has been discharged as of such time by the actual receipt
of payment or by offset. For the avoidance of doubt, the amount of liability
that is Actually Received is measured by the amount of consideration given for
discharging the liability, not by the carrying value of the liability before
discharge.

“Additional Retention” has the meaning set forth in Section 2.1(b)(i).

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly, controls, is controlled by, or is under common control with, such
Person, where “control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.

“Aggregate Limit” has the meaning set forth in Section 2.1(c).

“AIG-in-Consultation” has the meaning set forth in Section 5.4(a).

“Allocated Loss Adjustment Expenses” means:

 

  (i) all obligations of the Reinsured for external defense costs and similar
expenses arising from (a) the terms and conditions of the Covered Business, or
(b) interinsurer obligations arising from equitable contribution or similar
claims to the extent related to the Covered Business, and

 

  (ii) external costs incurred in connection with or in any way relating to the
adjustment, appraisal, defense, resistance, investigation, audit, negotiation,
settlement, payment or appeal of claims under, or the pursuit or enforcement of
any Salvage And Subrogation with respect to, the Covered Business and/or
coverage disputes and/or claims involving actual or alleged Extra-Contractual
Obligations related thereto, including court costs, arbitration, mediation, or
other dispute resolution costs, attorneys’ fees, expenses, and pre- and
post-judgment interest, and salaries, charges and expenses incurred through the
use of Affiliated claims or technical services companies, in all cases, only to
the extent such sums are allocated to the Covered Business, it being understood
that

 

  a. fees of staff counsel expressly charged with performing functions generally
performed by outside counsel are Allocated Loss Adjustment Expenses, and that

 

  b.

the general expense of the Reinsured and/or Affiliated claims or technical
service companies not incurred in connection with any specific claim but
allocated to

 

2

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  claims that are part of the Covered Business in accordance with the
Reinsured’s practice as of the Effective Date (or any other subsequent practice
to the extent such new or modified practice does not materially adversely affect
the Reinsurer) for allocating unallocated loss adjustment expense are Allocated
Loss Adjustment Expenses, but that

 

  c. other personnel costs, overhead, or similar internal costs for the pursuit
of reinsurance or that are not attributable to the handling of a claim file
arising from the Covered Business, including such overhead or internal costs
incurred by Affiliated claims companies or by other subcontractors of the
Reinsured, are not Allocated Loss Adjustment Expenses.

For the purposes of this Reinsurance Agreement, such definition of “Allocated
Loss Adjustment Expenses” shall apply regardless of how the Reinsured or
Reinsurer reserves for Allocated Loss Adjustment Expenses on their annual and
quarterly statutory financial statements filed with Governmental Authorities.
Further, the date on which any such Allocated Loss Adjustment Expenses are
incurred by the Reinsured will be deemed, in all circumstances, to be the Date
of Loss of the claims or alleged claims to which such Allocated Loss Adjustment
Expenses relate. Allocated Loss Adjustment Expenses do not include any expenses
for collection of, or similar activities with respect to, Ceded Reinsurance.

“Attachment” means the point at which Ultimate Net Loss Actually Paid by the
Reinsured equals the Retention; provided, that if such Ultimate Net Loss
thereafter decreases to an amount that is less than the Retention, “Attachment”
shall be deemed to occur at any subsequent time as of which Ultimate Net Loss
Actually Paid by the Reinsured again equals the Retention.

“Balance of Consideration Outstanding with Accrued Interest” shall have the
meaning set forth in Section 3.1(b)(i).

“Bankruptcy Code” shall mean 11 U.S.C. §§ 101 et seq., as amended from time to
time, and any successor statute.

“Beneficiaries’ Agent” has the meaning set forth in the Collateral Trust
Agreement.

“Berkshire” means Berkshire Hathaway Inc.

“Books and Records” means originals or copies of all records and all other data
and information (in whatever form maintained) in the possession or control of a
Reinsured or its Affiliates and relating to the Covered Business, including
(i) administrative records, (ii) claim records, (iii) Policy files, (iv) sales
records, (v) reinsurance records, (vi) underwriting records, and
(vii) accounting records, but excluding any (a) Tax Returns and Tax records and
all other data and information with respect to Tax, (b) files, records, data and
information with respect to the employees, (c) records, data and information
with respect to any employee benefit plan, and (d) any materials prepared for
the boards of directors of the Reinsured or its Affiliates; provided, that if
any such records or data referred to in the foregoing clauses (i) through (vi)
contain information which does not relate to the Covered Business or relates to
Covered Business not included within the Subject Liabilities, such information
shall not constitute “Books and Records” for purposes of this Reinsurance
Agreement; provided that notwithstanding the foregoing, the Reinsured shall have
the right to review books and records related to claims or non-Ceded Reinsurance
that do not relate to Covered Business to the extent that such claims or
non-Ceded Reinsurance relate to a policyholder of a Policy included within the
Covered Business or a ceded reinsurer that provided the Reinsured with Ceded
Reinsurance, but in each case, only to the extent relevant to the Reinsurer’s
exercise of its association, consultation or dispute rights hereunder.

 

3

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“Business Day” means any day other than a Saturday, Sunday or day on which
commercial banks in Omaha, Nebraska or New York, New York are required or
authorized by Law to be closed.

“Ceded Reinsurance” means all reinsurance agreements purchased or acquired by
any company included in the Reinsured from non-Affiliates, excluding this
Reinsurance Agreement, in effect as of December 31, 2015, but only to the extent
of the coverage provided by such agreements to such Reinsured for Losses and/or
Allocated Loss Adjustment Expenses and/or Extra-Contractual Obligations and/or
Salvage And Subrogation in respect of losses with Dates of Loss prior to the
Effective Date. Ceded Reinsurance does not include any cessions that (i) were
voided or commuted prior to the Effective Date, (ii) were made to reinsurers
that the Reinsured had identified as insolvent reinsurers for purposes of its
December 31, 2015 financial statements, (iii) were made to entities that were
Affiliates of the Reinsured, including intercompany pooling agreements, at
inception of such cession, or (iv) were purchased or acquired by the Reinsured
on or after the Effective Date, and the existence of all such cessions in
clauses (i) through (iv) shall be disregarded in determining Ultimate Net Loss
hereunder. For the sake of clarity, Ceded Reinsurance means such reinsurance and
retrocession only to the extent it was placed to cover the Subject Liabilities
(subject to any amendments thereto prior to January 1, 2017), and does not
include coverage provided for Excluded Liabilities. Under no circumstances
(other than corrections of coding or other entirely administrative errors or as
otherwise permitted by the preceding sentence) shall modifications, amendments,
commutations, concessions, insolvencies or litigation/arbitration losses in
respect of Ceded Reinsurance made or taken after the Effective Date affect the
Reinsurer’s exposure to or Liability for Net Losses or Net Allocated Loss
Adjustment Expenses; except that, where agreements that came into place between
the Effective Date and January 1, 2017 modify the amounts recoverable under any
Ceded Reinsurance, such modifications shall be given effect in determining the
amount of Ceded Reinsurance billable but only as respects the first fifteen
million Dollars ($15,000,000) of Ultimate Net Loss from a modification arising
from any single such agreement. In addition, the Reinsured shall use its
commercially reasonable efforts to provide its good faith estimate to the
Reinsurer of the total sum of such modifications that were made or taken during
2016; if such good faith estimate exceeds seventy five million ($75,000,000) of
Ultimate Net Loss, the Reinsured shall provide supporting detail describing the
nature of the modifications.

“Change of Control” shall be deemed to have occurred with respect to any Party
if: (a) any Person, organization or association of Persons or organizations
acting in concert, excluding Affiliates of a Party, acquires twenty percent
(20%) or more of the outstanding voting stock of that Party or any of its
controlling Affiliates; (b) any Person, organization or association of Persons
or organizations acting in concert succeeds in electing a majority of directors
to the boards of a Party in any election in opposition to those directors
proposed by the board of directors of such Party, as applicable; (c) a Party
transfers all or substantially all of its properties and assets to another
Person, organization or association of Persons or organizations, excluding to
any Affiliate of that Party; or (d) a Party consolidates with or merges into any
Person, firm, corporation or other entity unless that Party, as applicable,
shall be the continuing corporation or the successor corporation thereof. A
Change of Control shall not be deemed to occur with respect to either Party if
there is a change of control at either the American International Group, Inc.
level or the Berkshire level.

“Change Notice” has the meaning set forth in Section 5.2(a).

“Closing” has the meaning set forth in Section 3.3.

“Closing Date” has the meaning set forth in Section 3.3.

“Collateral Reduction Event” has the meaning set forth in Section 12.6 hereof.

 

4

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“Collateral Triggering Agreement” has the meaning set forth in the Collateral
Trust Agreement.

“Collateral Triggering Event” has the meaning set forth in the Collateral Trust
Agreement.

“Collateral Trust Account” has the meaning set forth in Section 12.1.

“Collateral Trust Agreement” means any trust agreement entered into by and among
National Union Fire Insurance Company of Pittsburgh, Pa., on its own behalf and
as beneficiaries’ agent, the Reinsurer and the Trustee relating to the
establishment of the Collateral Trust Account, which agreement is attached as
Exhibit A hereto.

“Collateral Trust Assets” means the assets held in the Collateral Trust Account.

“Confidential Information” has the meaning set forth in Section 15.2(c).

“Consideration” means twelve billion two hundred million Dollars
(US$12,200,000,000).

“Covered Business” means, except as otherwise specifically excluded hereunder,
all Policies issued, written or assumed by or on behalf of any Reinsured prior
to the Effective Date, including any endorsement or addendum thereto issued
prior to January 1, 2017, that were classified by the Reinsured as long tail
commercial lines as set forth in Exhibit C and were either (i) subject to review
per the Data Room Reports or (ii) Non-reviewed Segments, in each case, as set
forth in the Data Room Reports and the Materials, it being the express mutual
understanding of the Parties that issues concerning whether any Liabilities are
or are not Covered Business shall be resolved in the first instance by reference
to the Data Room Reports and Materials and the data from which such Data Room
Reports and Materials were derived.

“Cure Period” has the meaning set forth in Section 12.7(e).

“Data Room Reports” means the documents in “Data Room Folder” 1.4 as set forth
on Schedule 8.2 hereof.

“Date of Loss” means, with respect to any claim, the date of loss assigned in
good faith and consistent with the terms and conditions of the applicable
Policies to such claim by the Reinsured (including any good faith changes
thereto) in accordance with its usual claims handling practices.

“DBA War Hazard” means only those Liabilities arising out of Policies issued and
classified by the Reinsured as Defense Base Act coverage that are classified by
the Reinsured as “war risk hazard”, and then only to the extent that such
Liabilities are reimbursable by the United States Government under a final
determination that such Liabilities resulted from a “war-risk hazard” under the
War Hazards Compensation Act, 17 U.S.C § 1704. For the sake of clarity, “DBA War
Hazard” (i) refers to the reserves listed under the identification entitled “DBA
War Hazard” in Exhibit C and (ii) as also set forth in the Data Room Reports and
the Materials.

“Designated Court” has the meaning set forth in Section 13.2(f).

“Disclosing Party” has the meaning set forth in Section 15.2(a).

 

5

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“Dispute” has the meaning set forth in Section 13.1.

“Dispute Notice” has the meaning set forth in Section 13.1.

“Divested Reinsured” means any company included in the Reinsured that
experiences a Change of Control.

“Dollars” or “$” refers to United States dollars.

“Eaglestone Liabilities” means all Liabilities that the Reinsured has reinsured
with Eaglestone Reinsurance Company (“Eaglestone”) including, without
limitation, under the following reinsurance agreements (as each has been amended
and subject to the exclusions contained therein): (a) The Amended and Restated
Loss Portfolio Transfer Reinsurance Agreement, dated as of June 17, 2011 and
effective January 1, 2011; (b) The Excess Workers Compensation Loss Portfolio
Transfer Reinsurance Agreement, dated as of March 31, 2011 and effective
January 1, 2011; (c) The Environmental Liability Loss Portfolio Transfer
Reinsurance Agreement, dated as of December 31, 2012 and effective October 1,
2012 (effective December 10, 2012 as respects Surety as defined therein); (d)
The Public Entity Liability Loss Portfolio Transfer Reinsurance Agreement, dated
as of September 23, 2014 and effective April 1, 2014; (e) The Occupational
Accident Loss Portfolio Transfer Reinsurance Agreement, dated as of
September 23, 2014 and effective April 1, 2014; (f) The 2015 Environmental
Liability Loss Portfolio Transfer Reinsurance Agreement, dated and effective
December 31, 2015; (g) The Revised Run-Off Divisions Liability Loss Portfolio
Transfer Reinsurance Agreement, dated and effective December 31, 2015; (h) The
Legacy Environmental Liability Loss Portfolio Transfer Reinsurance Agreement,
dated and effective December 31, 2015; and (i) The Physicians and Surgeons
Professional Liability [Named Insured] Loss Portfolio Transfer Reinsurance
Agreement, dated and effective December 31, 2015. Copies of the foregoing
reinsurance agreements shall be provided to the Reinsurer upon request. To the
extent that any reinsurance agreement with Eaglestone has any aggregate limit,
caps or any other similar limitation, the Liabilities reinsured with Eaglestone
shall remain deemed Eaglestone Liabilities for purposes hereof even if such
limit, cap or limitation is exceeded or exhausted. Under no circumstances shall
modifications, amendments, commutations, concessions, insolvencies or
litigation/arbitration losses in respect of the reinsurance agreements ceded to
Eaglestone affect the Reinsurer’s exposure to or Liability for Net Losses or Net
Allocated Loss Adjustment Expenses. For the sake of clarity, none of the
Eaglestone Liabilities are reflected or contained in any of the reserves
identified on Exhibit C.

“Effective Date” means January 1, 2016.

“Eligible Investments” has the meaning set forth in the Collateral Trust
Agreement.

“Excluded Liabilities” has the meaning set forth in Section 2.5.

“Execution Date” has the meaning set forth in the Preamble.

“Exposure Value” means, at any time with respect to any claim or set of related
claims, the Reinsured’s reasonable estimate at such time of probable ultimate
gross cost to the Reinsured of such claim or set of related claims, based on
facts known at the time when sufficient information is available.

“Extra-Contractual Obligations” means those Liabilities arising from the
handling of any claim on business covered hereunder, including Liability arising
from wrongful denial of coverage, delayed payment of claims, failure to settle
within the Policy limit, or by reason of alleged or actual negligence, fraud or
bad faith in rejecting an offer of settlement or in the preparation of the
defense or in

 

6

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the trial of any action against its insured or reinsured or in the preparations
or prosecution of an appeal consequent upon such action, and will also include
what is generally understood as “loss in excess of policy limits”; provided
however, any Liability of Reinsured for the fraudulent, intentional and
malicious acts or omissions of their own employees, officers, or directors (as
so determined by final adjudication after all appeals and the expiration of the
time to appeal by any order, writ, injunction, directive, judgment, or decree of
a court of competent jurisdiction) is not within Extra-Contractual Obligations
and shall be paid by Reinsured at their Own Expense. The date on which any such
Extra-Contractual Obligation is incurred by the Reinsured will be deemed, in all
circumstances, to be the original Date of Loss (or, in the absence of coverage,
the Date of Loss the Reinsured would have assigned in good faith had there been
coverage). Nothing herein will be construed to create a separate or distinct
loss apart from the original Loss that gave rise thereto. Subject always to the
proviso above, this Reinsurance Agreement covers Extra-Contractual Obligations
as defined herein to the maximum extent permitted by the Law of the most
permissive jurisdiction that could reasonably be held to apply under New York
choice of law rules.

“FATCA” has the meaning set forth in Section 18.15.

“Final Order” means (a) an order or award of an arbitration panel that is by its
terms final and as to which the time to petition for review has expired or
(b) an order or judgment of a court of competent jurisdiction (including an
order of the Designated Court with respect to an arbitration award) that is by
its terms final and is no longer subject to appeal, either as of right or
discretionary.

“Final Payment Date” means June 30, 2017.

“Foreign Assumed” means that intercompany reinsurance assumed by the Reinsured
from any of its Affiliates, that as of the Effective Date were not domiciled in
the United States. For the sake of clarity, “Foreign Assumed” (i) refers to the
reserves listed under the identification entitled “Foreign Assumed” in Exhibit C
and (ii) as also set forth in the Data Room Reports and the Materials.

“GAAP” means United States generally accepted accounting principles or such
other accounting principles, practices or standards as may succeed United States
generally accepted accounting principles.

“Governmental Authority” means any government, political subdivision, court,
board, commission, regulatory or administrative agency or other instrumentality
thereof, whether federal, state, provincial, local or foreign and including any
regulatory authority which may be partly or wholly autonomous.

“Impacted Reinsured” has the meaning set forth in Section 12.7(h).

“Initial Security Amount” means the positive excess, if any, of (i) the
Reinsurer’s Share of the Consideration plus all interest paid by the Reinsured
thereon minus (ii) Ultimate Net Loss Actually Paid by the Reinsurer.

“Interest Rate” means 4% per annum.

“Law” means any domestic or foreign, federal, state or local statute, law,
ordinance or code, or any written rules, regulations or administrative or
judicial interpretations or policies issued by any Governmental Authority
pursuant to any of the foregoing, and any applicable Order of a court or
tribunal of competent jurisdiction.

 

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“Liability” or “Liabilities” means any and all debts, liabilities, duties,
commitments and obligations of any kind, character or description, whether
direct or indirect, fixed or unfixed, contingent or absolute, matured or
unmatured, liquidated or unliquidated, accrued or not accrued, asserted or
unasserted, known or unknown, disputed or undisputed, joint or several, secured
or unsecured, determined, determinable or otherwise, whenever or however arising
(including whether arising out of any contract or tort based on negligence or
strict liability) and whether or not the same would be required by SAP or by
accepted actuarial practices in the jurisdiction of domicile of the Reinsured to
be reflected in its financial statements or disclosed in the notes thereto.

“Loss” or “Losses” means all obligations of the Reinsured, other than
obligations for Allocated Loss Adjustment Expenses, to make payments to or for
the benefit of their respective insureds or reinsureds under the coverage
provisions of the Covered Business, including obligations arising from direct
actions by claimants and interinsurer obligations arising from Subject
Liabilities for equitable contribution or similar claims.

“Materials” means all documents and information set forth on Schedule 8.2
hereof.

“Mixed Claim” means a claim or set of related claims that includes elements of
both Covered Business and Excluded Liabilities.

“Net Allocated Loss Adjustment Expenses” means Allocated Loss Adjustment
Expenses, net of:

(i) recoverables in respect of Allocated Loss Adjustment Expenses billable under
Ceded Reinsurance, whether or not collected (provided, however, that Allocated
Loss Adjustment Expenses billable shall reflect correction of coding or other
entirely administrative errors);

(ii) recoverables in respect of Allocated Loss Adjustment Expenses for
deductibles, self-insured retentions, retrospectively rated insurance program or
other similar credit related receivables, whether collected or not; and

(iii) expenses directly associated with the handling of failures of annuity
providers within the scope of paragraph (iii) of the definition of Net Losses,

all in respect of the Subject Liabilities arising from Covered Business.

For the avoidance of doubt, any reinsurance recoverables excluded from the
definition of “Ceded Reinsurance” below shall be disregarded in the deductions
from Losses and Allocated Loss Adjustment Expenses.

“Net Cash Settlement Amount” has the meaning set forth in Section 4.2(a).

“Net Cash Settlement Statement” has the meaning set forth in Section 4.2(a).

“Net Losses” shall mean Losses, net of:

(i) recoverables in respect of Losses billable under Ceded Reinsurance, whether
or not collected (provided, however, that Losses so billable shall reflect
correction of coding or other administrative errors);

(ii) recoverables in respect of Losses for deductibles, self-insured retentions,
retrospectively rated insurance program or other similar credit related
receivables, whether collected or not; and

(iii) any structured settlement annuities obligations arising out of the failure
of any annuity provider to meet its obligations thereunder,

all in respect of the Subject Liabilities arising from Covered Business.

 

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For the avoidance of doubt, any reinsurance recoverables excluded from the
definition of “Ceded Reinsurance” shall be disregarded in the deductions from
Losses and Allocated Loss Adjustment Expenses.

“Neutral Panel Rules” has the meaning set forth in Section 13.2(b).

“NICO Change of Control” has the meaning set forth in Section 7.3(a)(i).

“Non-reviewed Segments” means the long tail commercial lines of business
underwritten by the Reinsured that were classified as (i) Div 66 - Programs
Casualty Business Written on US Pool Paper, (ii) Commutes and Insolvents,
(iii) Div 14 Aviation and Aviation Workers’ Compensation; (iv) certain Div 7
(Personal Umbrella, Personal Auto Liability, Yacht and Workers’ Compensation),
(v) Div 47 Compulsory Cessions Acct, (vi) ECO, (vii) Div 48 Internal Reins Acct,
(viii) Fidelity US, (ix) certain Healthcare, and (x) other sub-segments not
reviewed in the Data Room Reports, in each case as set forth in the reserve
numbers identified in Exhibit C and as also set forth in the Data Room Reports
and Materials.

“Obligations” has the meaning set forth in Section 7.3(h).

“Order” means any order, writ, judgment, injunction, decree, stipulation,
directive, determination or award entered by or with any Governmental Authority.

“Original Retention” has the meaning set forth in Section 2.1(b)(i).

“Own Expense” has the meaning set forth in Section 2.3(c).

“Parental Guarantee Agreement” means the parental guarantee agreement, to be
dated as of the date hereof, by and among the Reinsured, the Reinsurer and
Berkshire, which agreement is attached as Exhibit B hereto.

“Partial RCE” has the meaning set forth in Section 12.7(h).

“Parties” has the meaning set forth in the Preamble.

“Payment Date” means each Business Day on which the Reinsured makes a payment of
accrued interest and/or Consideration as contemplated in Section 3.1.

“Permit” has the meaning set forth in Section 8.1(d).

“Permitted Investments” has the meaning set forth in the Collateral Trust
Agreement.

“Person” means any natural person, corporation, partnership, limited liability
company, trust, joint venture or other entity, including any Governmental
Authority.

“Personal Information” shall have the meaning set forth in Section 15.2(d).

“Policy(ies)” means any policy, contract, slip, binder or other evidence of
insurance or reinsurance issued, written or assumed by or on behalf of any
company included within the Reinsured prior to the Effective Date, including any
endorsement or addendum thereto issued, written or assumed by or on behalf of
any company included within the Reinsured prior to January 1, 2017.

 

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“Privacy Laws” shall have the meaning set forth in Section 15.2(d).

“Quarterly Report” has the meaning set forth in Section 4.1(a).

“Quarterly Settlement Period” means each calendar quarterly period beginning on
and including the first day of a calendar quarter and ending on the last day of
such calendar quarter, except that (a) the first Quarterly Settlement Period
shall begin as of Attachment and end on the last day of a calendar quarter
during which Attachment occurs and (b) the final Quarterly Settlement Period
shall end on the date that this Reinsurance Agreement terminates in accordance
with Article VII.

“Quarterly Settlement Report” has the meaning set forth in Section 4.2(a).

“Receiving Party” has the meaning set forth in Section 15.2 (a).

“Reinsurance Agreement” has the meaning set forth in the Preamble.

“Reinsurance Credit Event” has the meaning set forth in Section 12.7(a).

“Reinsurance Credit Event I” has the meaning set forth in Section 12.7(b).

“Reinsurance Credit Event II” has the meaning set forth in Section 12.7(b).

“Reinsurance Credit Event Notice” has the meaning set forth in Section 12.7(c).

“Reinsured” has the meaning set forth in the Preamble. For the sake of clarity,
the term “Reinsured” shall apply individually or collectively to all reinsured
companies included therein unless otherwise specifically set forth herein, and
shall include, subject to the other terms of this Reinsurance Agreement, any
predecessor or successor of such entity, whether by reason of merger,
consolidation or otherwise.

“Reinsurer” has the meaning set forth in the Preamble. For the sake of clarity,
the term “Reinsurer” shall include any predecessor or successor of such entity.

“Reinsurer’s Share” has the meaning set forth in Section 2.1(e).

“Relevant Jurisdictions” means any domiciliary State in the United States that
governs the ability of a legal entity included in the “Reinsured” to take
statutory financial statement credit for reinsurance for the business ceded
under this Reinsurance Agreement.

“Remaining Aggregate Limit” means, as of any date of determination, the
Aggregate Limit less the aggregate amount Actually Paid by the Reinsurer
hereunder in respect of Ultimate Net Loss on or prior to such date.

“Representatives” means, with respect to any Person, such Person’s officers,
directors, employees, managing directors, agents, advisors and other
representatives.

“Reserves” means, with respect to a Party, as required by SAP or applicable Law,
reserves (including any gross, net and ceded reserves, reinsurance loss
recoverables, case reserves and incurred-but-not reported reserves), funds or
provisions for losses, claims, unearned premiums, benefits, costs and expenses
(including Allocated Loss Adjustment Expenses), and Extra-Contractual
Obligations in respect of the Ultimate Net Loss reinsured by the Reinsurer under
this Reinsurance Agreement.

 

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“Residual Balance” has the meaning set forth in Section 3.1(b)(ii).

“Residual Market” means Liabilities arising out of the Reinsured’s participation
in any residual marketplace plan (i.e., insurance or reinsurance coverage that
the Reinsured is statutorily required to provide as a voluntary market
participant). For the sake of clarity, “Residual Market” refers (i) to the
reserves listed under the identification entitled “Residual Market” in Exhibit C
and (ii) is as also set forth in the Data Room Reports and the Materials.

“Retention” has the meaning set forth in Section 2.1(b)(i).

“Retro/Bulk” means the following Liabilities arising out of loss sensitive
insurance Policies underwritten by the Reinsured’s Risk Management Group and
residing immediately prior to the Effective Date in Reinsured Divisions 21, 54,
55, 59, 82 or 89 (under which other, non-excluded Liabilities also reside): (a)
full cover retention (i.e., Liabilities from such Policies with Retrospective
Premium rated to match actual loss experience); (b) close-out (i.e., Liabilities
the Reinsured has reassumed from the policyholder through voluntary payment,
modification of the insurance contract or the policyholder’s bankruptcy); and
(c) aggregate excess (i.e., Liabilities to the Reinsured arising from the
exhaustion of any aggregate retention contained in such loss sensitive insurance
Policies). It is further understood and agreed that the term “Retro/Bulk” does
not include: (x) “guaranteed cost” insurance coverage (i.e., where the Reinsured
provides “first dollar” coverage for a fixed premium) or; (y) “specific excess”
(i.e., the Liability the Reinsured insures for a single occurrence or claim in
excess of a per-claim or per-occurrence self-insured retention). For the sake of
clarity, “Retro/Bulk” (i) refers to the reserves listed under the identification
entitled “Retro/Bulk” in Exhibit C and (ii) is as also set forth in the Data
Room Reports and the Materials.

“Retrospective Premiums” means any amounts due to or from a policyholder or
insured or reinsured under a Policy, other than Losses or Allocated Loss
Adjustment Expenses, based upon the claims or loss experience thereunder. For
purposes of clarity, Retrospective Premiums includes amounts due from
policyholders or others under “indemnity agreements” or similar documents
previously used by AIG Risk Management, Inc. in its loss sensitive programs.

“Run-off Segment” means Liabilities arising out of discontinued segments of
business associated with the reserves listed under the identification entitled
“Run-off Segment” in Exhibit C and as also set forth in the Data Room Reports
and the Materials.

“Salvage And Subrogation” means salvage, subrogation and similar recoveries in
respect of the Covered Business but does not include any reinsurance
recoverables. All references to amounts of Salvage And Subrogation in this
Reinsurance Agreement, including Ceded Reinsurance with respect thereto, are
only to amounts Actually Received by the Reinsured and/or Actually Paid to
reinsurers on Ceded Reinsurance.

“SAP” means, as to any Person, the statutory accounting principles prescribed or
permitted by the Governmental Authority of the U.S. State responsible for the
regulation of insurance companies in the jurisdiction in which such Person is
domiciled; provided, that if the Reinsurer is not domiciled in any U.S. State,
SAP shall refer to the Governmental Authority responsible for the regulation of
insurance companies in the jurisdiction in which the Reinsurer is then
domiciled.

 

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“Scheduled Segments” means the Liabilities arising from the segments and
sub-segments included within the Data Room Reports and Materials that were
identified as not being included within the Subject Liabilities as set forth in
Exhibit D hereto.

“Security Amount” has the meaning set forth in the Collateral Trust Agreement.

“Short-Tail” means Liabilities arising out of coverage issued by the Reinsured
and classified by the Reinsured as providing coverage, either in whole or in
part, for the following: (a) commercial property; (b) “stand alone” accident and
health insurance; (c) Homeowners (real and personal property coverage portion of
package Policies); (d) Marine Cargo; (e) commercial auto physical damage;
(f) warranty; (g) Inland Marine; and (h) Automobile physical damage (both
personal and commercial). For the sake of clarity, “Short Tail” (i) refers to
the reserves listed under the identification entitled “Short-tail” in Exhibit C
and (ii) as also set forth in the Data Room Reports and the Materials.

“Streamlined Rules” has the meaning set forth in Section 13.2(c).

“Subject Liabilities” means any Liabilities or obligations of any Reinsured that
(i) arise out of claims on the Covered Business (including obligations arising
from direct actions by claimants against the Reinsured) having a Date of Loss
prior to the Effective Date or (ii) are incurred by any Reinsured in the
settlement of or in protection against the making of future such claims (i.e.,
for the sake of clarity, future claims that would have a Date of Loss prior to
the Effective Date).

“Substitute Agent” has the meaning set forth in Section 18.11(a).

“Tax” means any and all federal, state, foreign or local income, gross receipts,
premium, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, ad valorem, personal property, stamp,
excise, occupation, sales, use, transfer, value added, alternative minimum,
estimated or other tax, fee, duty, levy, custom, tariff, impost, assessment,
obligation or charge of the same or of a similar nature to any of the foregoing,
including any interest, penalty or addition thereto.

“Tax Authority” means, with respect to any Tax, any government or political
subdivision thereof that imposes such Tax, and any agency charged with the
collection, assessment, determination or administration of such Tax for such
government or subdivision.

“Tax Return” means any return, report, declaration, claim for refund,
certificate, bill, or other return or statement, including any schedule or
attachment thereto, and any amendment thereof, filed or required to be filed
with any Tax Authority in connection with the determination, assessment or
collection of any Tax.

“Transaction Documents” means this Reinsurance Agreement, the Collateral Trust
Agreement, the Parental Guarantee Agreement and each of the agreements,
exhibits, annexes, schedules and other attachments thereto.

“Trustee” means any trustee named in the Collateral Trust Agreement and any
successor trustee appointed as such pursuant to the terms of such Collateral
Trust Agreement.

“Unallocated Loss Adjustment Expenses” means any loss adjustment expenses that
are not Allocated Loss Adjustment Expenses. For purposes of this Reinsurance
Agreement, this definition of “Unallocated Loss Adjustment Expenses” will apply
regardless of how the Reinsureds or Reinsurer reserves for Unallocated Loss
Adjustment Expenses on their annual and quarterly statutory financial statements
filed with Governmental Authorities.

“Ultimate Net Loss” has the meaning set forth in Section 2.3(a).

 

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ARTICLE II

REINSURANCE CEDED

2.1 Reinsurance Coverage.

(a) Cession: Subject to the Closing and effective as of the Effective Date, the
Reinsured hereby cedes to Reinsurer, and Reinsurer accepts as indemnity
reinsurance, the Reinsurer’s Share of the Reinsured’s Ultimate Net Loss in
excess of the Retention.

(b) Retention.

(i) The Reinsured shall retain an amount of Ultimate Net Loss (the “Retention”)
equal to the sum of (x) the amount of such Ultimate Net Loss that was Actually
Paid or accounted for as paid by the Reinsured prior to the Effective Date (the
“Original Retention”) plus (y) Twenty-Five Billion Dollars ($25,000,000,000.00)
(the “Additional Retention”), and Reinsurer shall have no Liability whatsoever
for any Ultimate Net Loss within the Retention.

(ii) The Retention is a single aggregate retention applicable to the group of
reinsured companies included in the Reinsured.

(iii) Further to, and in implementation of, Section 2.2(b), the amount of Ceded
Reinsurance included in the Original Retention shall be fixed as of the
Effective Date, and not thereafter subject to adjustment, as the sum of
(x) Ceded Reinsurance that was Actually Received by the Reinsured prior to the
Effective Date, plus (y) the recoverables and receivables the Reinsured had
booked as of the Effective Date in respect of amounts the Reinsured had Actually
Paid prior to the Effective Date.

(c) Limit of Liability. The “Aggregate Limit” is Twenty-Five Billion Dollars
($25,000,000,000.00) and is a single aggregate limit applicable for the group of
reinsured companies included in the Reinsured. Notwithstanding any other
provision in this Reinsurance Agreement to the contrary, in no event and under
no circumstances, howsoever arising with respect to this Reinsurance Agreement,
shall the Reinsurer be liable by reason of entering into this Reinsurance
Agreement for an amount of Ultimate Net Loss in excess of the Reinsurer’s Share
of the Aggregate Limit, which Share shall be equal to Twenty Billion Dollars
($20,000,000,000.00).

(d) Territory. The territorial limits provided under this Reinsurance Agreement
shall be identical to the territory of the Policies in the Covered Business.

(e) Reinsurer’s Share. The “Reinsurer’s Share” is 80%.

 

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2.2 Commencement of the Reinsurer’s Liability; Follow Fortunes and Settlements.

(a) Reinsurer’s Liability shall attach simultaneously with that of the Reinsured
on the Covered Business and the attachment of Reinsured’s Liability thereto, and
all reinsurance with respect to which Reinsurer shall be liable shall be subject
in all respects to the same risks, terms, rates, conditions, interpretations,
and waivers, and to the same good faith modifications, alterations, and
cancellations, as are the Covered Business and the Subject Liabilities to which
Liability under this Reinsurance Agreement attaches, the true intent of this
Reinsurance Agreement being that Reinsurer shall follow the fortunes and the
settlements of the Reinsured and shall, subject to the terms, conditions, and
provisions of this Reinsurance Agreement, be bound by all good faith payments
and settlements entered into by or on behalf of the Reinsured. All of the
Reinsured’s Liability as determined by a court or arbitration panel or arising
from a judgment, settlement, compromise, adjustment, or commutation of claims or
losses under Covered Business, including payments involving coverage issues
involving Policies included within Covered Business, and/or the resolution of
whether such claims or losses are required by Law, regulation, or regulatory
authority to be covered (or not to be excluded), shall be binding on the
Reinsurer regardless of whether such court or arbitration determination,
judgment, settlement, compromise, adjustment, or commutation is in respect of a
Liability recognized by or contrary to the governing Law of this Reinsurance
Agreement. Such court or arbitration determination, judgment, settlement,
compromise, or adjustment shall be considered a satisfactory proof of loss. The
Reinsured’s good faith allocation of Ultimate Net Loss, including allocation in
the case of claims involving Covered Business and Excluded Liabilities and
allocations of reinsurance recoveries between Ceded Reinsurance and any other
reinsurance (including allocations at variance from court or arbitration
decisions relating to claims under the Policies), shall be binding on the
Reinsurer. Except as set forth in Section 5.4(d)(i), the burden is on the
Reinsurer to establish that a given settlement or allocation by the Reinsured
was not in good faith in light of the relative economic risk of the Parties
under, and within the scope of, this Reinsurance Agreement.

(b) Notwithstanding anything herein to the contrary, solely with respect to the
Reinsured’s actions prior to, and only prior to, January 1, 2017, the Reinsurer
is absolutely bound to follow the Reinsured’s fortunes, settlements (including
ex gratia), and allocations. For the sake of clarity, the immediately preceding
sentence does not apply to Reinsured’s actions on or after January 1, 2017,
including any actions taken after January 1, 2017 that revise, modify or
otherwise affect the consequences of actions taken prior January 1, 2017.

(c) Special rules and procedures for certain settlement and allocation decisions
are set forth in Article V below.

2.3 Ultimate Net Loss.

(a) “Ultimate Net Loss” means:

Net Losses with respect to Subject Liabilities, plus

Net Allocated Loss Adjustment Expenses with respect to Subject Liabilities, plus

Extra-Contractual Obligations with respect to Subject Liabilities, net of Ceded
Reinsurance billable thereon, less

Salvage And Subrogation with respect to Subject Liabilities, but only to the
extent Actually Received by the Reinsured and net of corresponding amounts
Actually Paid in respect of Ceded Reinsurance.

(b) Nothing in the foregoing definition shall be construed as implying that
amounts are not recoverable hereunder until a final determination of Ultimate
Net Loss.

(c) Where this Reinsurance Agreement refers to an act or obligation as being “at
the expense of” a Party or at the Party’s “own expense” (“Own Expense”), the
cost of performing such act or discharging such obligation is not included
within Ultimate Net Loss, notwithstanding that such cost might otherwise be so
includable.

 

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2.4 Net Retention.

In recognition of its retention of responsibility for claims handling and
reinsurance on the Covered Business as set forth herein, the Reinsured hereby
covenants and agrees that the Reinsured and its Affiliates shall not reinsure
and shall retain net for its own account both the twenty percent (20%) share of
the Ultimate Net Loss excess of the Retention, up to the Aggregate Limit, that
is not being assumed by the Reinsurer under this Reinsurance Agreement and a
twenty percent (20%) share of the Ultimate Net Loss of the Additional Retention.
In the event of any claim for breach hereof, the panel shall only be authorized
to award economic damages to put the prevailing Party in substantially the same
economic position it would have been but for the other Party’s disputed action
or inaction.

2.5 Exclusions.

The Reinsurer shall not be liable under this Reinsurance Agreement for any of
the following Liabilities (collectively, the “Excluded Liabilities”). However,
notwithstanding anything to the contrary herein, items Sections 2.5(a) through
2.5(g) are Excluded Liabilities only to the extent such Liabilities are
reflected in the Data Room Reports and Materials as excluded segments. To the
extent not so identified, such items (Sections 2.5(a) through 2.5(g)) are part
of Covered Business:

(a) Foreign Assumed;

(b) Retro/Bulk;

(c) Short-Tail;

(d) 2016 Exit;

(e) Run-off Segment;

(f) Residual Market;

(g) DBA War Hazard;

(h) Accounting Adjustments;

(i) Eaglestone Liabilities;

(j) Any Liability of the Reinsured to pay Taxes or assessments, whether paid
directly by the Reinsured or billed to the Reinsured or by or through a
policyholder, other insured or reinsured, regardless of whether such Tax is
denominated as income tax, excise tax, premium tax, surplus lines tax, or any
other Tax assessment;

(k) Any Liability of the Reinsured for Retrospective Premium;

(l) Any Liability of any Divested Reinsured from and after the first date of a
Change of Control, and all of the Reinsurer’s Liability therefor shall
automatically cease with respect to the Covered Business ceded by such Divested
Reinsured upon the Change of Control except to

 

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the extent the remaining entities included within the “Reinsured” that have not
experienced a Change of Control assumed from the Divested Reinsured the
responsibility for the Subject Liabilities, including maintaining the same
economic interest as the Divested Reinsured had in any and all such Subject
Liabilities constituting Covered Business (whether by reinsurance, by
indemnification or otherwise) and the same control of claims arising from such
Subject Liabilities as the Divested Reinsured had therefor; provided, that the
insolvency of such Divested Reinsured shall not in any way accelerate or enlarge
the Reinsurer’s liability hereunder;

(m) Any Liability arising from any policy written, issued or assumed by the
Reinsured that incepted or renewed on or after January 1, 2016 (other than
Subject Liabilities arising from endorsements or addenda written, issued or
assumed by or on behalf the Reinsured prior to January 1, 2017 that are
otherwise included within the definition of “Policy” herein);

(n) Any Liability of the Reinsured arising from a claim with a Date of Loss on
or after the Effective Date; and

(o) Without duplication of any of Section 2.5(a) through (n), Scheduled
Segments.

2.6 Sanctions Exclusion.

The Reinsurer will not be liable to provide any coverage or make any payment
hereunder if to do so would be in violation of any sanctions Law or regulation
that would expose the Reinsurer to any sanctions, prohibition, restriction or
penalty under applicable sanctions Law or regulation.

2.7 Transfer Rights.

Any reinsured company included in the Reinsured may novate, reinsure or
otherwise transfer all or a portion of the Covered Business, whether within or
outside its Retention, to a direct or indirect wholly-owned subsidiary of
American International Group, Inc. with the prior written consent of Reinsurer,
such consent not to be unreasonably withheld, delayed or conditioned, with such
novated, reinsured or otherwise transferred business and assuming company
continuing to be reinsured hereby. Consent shall not be required for novations,
reinsurance or other transfers among reinsured companies included in the
Reinsured. If any novation, reinsurance or other transfer of all or a portion of
the Covered Business occurs, or a Reinsured is redomesticated, with or without
the Reinsurer’s consent, such novation, reinsurance, redomestication or other
transfer shall not create any credit for reinsurance obligations beyond the
statutory credit for reinsurance requirements that were applicable to the
transferee/cedent prior to such transfer for all purposes under this Reinsurance
Agreement and the Reinsured shall bear all risk of any change in credit for
reinsurance requirements as a result of such novation, reinsurance,
redomestication or transfer and any such change shall be disregarded for all
purposes under this Reinsurance Agreement. The Reinsured shall not be permitted
to subject any Covered Business to any statutory scheme of arrangement or any
similar mechanism which would have the effect of accelerating or resolving by
statutory scheme or similar mechanism any of the Covered Business.

 

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ARTICLE III

REINSURANCE CONSIDERATION & CLOSING CONDITIONS

3.1 Consideration; Interest.

(a) As consideration for the reinsurance provided hereunder, the Reinsured shall
pay to the Reinsurer the Reinsurer’s Share of the Consideration (i.e. nine
billion, seven hundred sixty million Dollars ($9,760,000,000)). From and after
the Effective Date, the Reinsured shall also pay the Reinsurer interest at the
Interest Rate as set forth below. All such Consideration and interest shall be
paid in cash and shall be paid directly by the Reinsured into the Collateral
Trust Account, such direct payments into the Collateral Trust Account to satisfy
Reinsured’s payment obligation to Reinsurer in the amount thereof.

(b) Such Consideration and interest shall be paid as follows:

(i) The Parties shall monitor the Balance of Consideration Outstanding with
Accrued Interest. Prior to the first payment hereunder, the “Balance of
Consideration Outstanding with Accrued Interest” shall equal the Reinsurer’s
Share of Consideration plus the Reinsurer’s Share of interest accrued thereon at
the Interest Rate for each day in the period from the Effective Date to, but
excluding, the first Payment Date.

(ii) Following the first payment, the “Residual Balance” owed shall equal the
Balance Outstanding with Accrued Interest to, but excluding, the first Payment
Date minus the amount of the payment Actually Paid by Reinsured at that first
Payment Date.

(iii) On each subsequent Payment Date, the Balance of Consideration Outstanding
with Accrued Interest shall equal the Residual Balance outstanding as of the
immediately preceding Payment Date plus interest accrued thereon at the Interest
Rate for each day in the period from the prior Payment Date to, but excluding,
such current Payment Date.

(c) An illustrative example of a payment schedule and relevant calculations is
attached as Schedule 3.1. Day-counts shall be treated on the basis of the actual
number of days over 365 or 366, as applicable. Such Schedule shall control in
the event of any conflicts between this Section 3.1 and Schedule 3.1.

3.2 Final Payment Date.

The Reinsured shall ensure that the Residual Balance equals zero Dollars ($0) on
or prior to the Final Payment Date. However, the Reinsured may in its sole
discretion make interim payments of such amounts from time to time.

3.3 Closing.

Unless otherwise agreed by the Parties, subject to the satisfaction or waiver of
the conditions set forth in this Article III, the closing (the “Closing”) of
this transaction shall take place on the Business Day after all of the
conditions set forth in Section 3.5 and 3.6 are satisfied or waived by the Party
or Parties entitled to waive the same (other than those conditions that by their
nature are to be satisfied at Closing, but subject to the satisfaction or waiver
of those conditions at Closing) at the Stamford, Connecticut offices of the
Reinsurer, unless another date, time or place is agreed in writing by the
Parties. If and when the Closing is effected, the Parties’ rights and
obligations under this Reinsurance Agreement shall commence on the Closing Date
but shall be effective as of the Effective Date, as set forth herein.
Notwithstanding the foregoing, the Closing may occur at such other place, at
such other time or on such other date as the Reinsured and the Reinsurer may
mutually agree. The date on which the Closing takes place is referred to herein
as the “Closing Date”. The Closing shall be deemed to have occurred at 12:01
a.m., Eastern Time, on the Closing Date.

 

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3.4 Additional Deliveries on or prior to Closing.

The Reinsured and the Reinsurer shall, and shall cause their applicable
Affiliates to, enter into and deliver to each other Party, on or prior to the
Closing Date, each Transaction Document and such other agreements, instruments
and documents as are required hereunder or thereunder to be executed and
delivered by the Reinsured, the Reinsurer and any respective Affiliates thereof.

3.5 Conditions Precedent to the Obligation of the Reinsurer to Close.

The Reinsurer’s obligation to consummate the transactions contemplated hereby
and by the other Transaction Documents is subject to the satisfaction (or
waiver, if permissible under applicable Law) on or prior to the Closing Date of
the following conditions:

(a) Each Transaction Document shall have been duly executed and delivered by the
Reinsured and the Trustee, as applicable, and such agreements shall be in full
force and effect with respect to the Reinsured on the Closing.

(b) No Order issued by any court or other Governmental Authority of competent
jurisdiction with valid enforcement authority restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Reinsurance Agreement or the other Transaction Documents shall be in effect.

The Reinsurer may not rely on the failure of any condition set forth in this
Section 3.5 to be satisfied if such failure was caused by the Reinsurer’s
failure to use its commercially reasonable efforts to consummate the
transactions contemplated by this Reinsurance Agreement and the other
Transaction Documents.

3.6 Conditions Precedent to the Obligation of the Reinsured to Close.

The Reinsured’s obligation to consummate the transactions contemplated hereby
and by the other Transaction Documents is subject to the satisfaction (or
waiver, if permissible under applicable Law) on or prior to the Closing Date of
the following conditions:

(a) The Transaction Documents, including the Parental Guarantee Agreement, shall
have been duly executed and delivered by the Reinsurer, Berkshire and/or the
Trustee, as applicable, and such agreements shall be in full force and effect
with respect to the Reinsurer and Berkshire on the Closing.

(b) The Reinsurer’s financial strength rating by A.M. Best Company, Inc. has not
been reduced below “A++”.

(c) The insurance regulators of the Relevant Jurisdictions shall have provided
to the Reinsured all requisite regulatory consents and approvals for the
transactions contemplated hereby, in each case, without the imposition of a
materially burdensome condition on the Reinsured or the Reinsurer, or terms
materially inconsistent with those outlined herein.

(d) No Order issued by any court or other Governmental Authority of competent
jurisdiction with valid enforcement authority restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Reinsurance Agreement or the other Transaction Documents shall be in effect.

 

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The Reinsured may not rely on the failure of any condition set forth in this
Section 3.6 to be satisfied if such failure was caused by the Reinsured’s
failure to use its commercially reasonable efforts to consummate the
transactions contemplated by this Reinsurance Agreement and the other
Transaction Documents.

3.7 Pre-Closing Termination.

This Reinsurance Agreement may be terminated at any time prior to the Closing:

(a) By mutual written consent of the Reinsured and the Reinsurer.

(b) By either the Reinsured or the Reinsurer in the event of the issuance of a
final nonappealable Order restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Reinsurance Agreement and the other
Transaction Documents; provided, however, that the right to terminate this
Reinsurance Agreement under this Section 3.7(b) shall not be available to a
Party if the issuance of such final, nonappealable Order was primarily due to
the failure of such Party to perform any of its obligations under this
Reinsurance Agreement.

(c) By the Reinsured in the event that A.M. Best Company, Inc. has reduced its
rating of the Reinsurer such as would cause the condition set forth in Section
3.6(b) to fail to be satisfied, and such reduction has not publicly been
reversed within ten (10) calendar days such that the condition in Section 3.6(b)
would then be satisfied.

(d) By either Party on or after February 21, 2017 if the condition set forth in
Section 3.6(c) has not been satisfied in full or waived by the Reinsured on or
prior to such date; provided, that such date may be extended by the Parties upon
mutual agreement thereto; provided further, that the Parties agree to cooperate
in good faith and seek such consents and approvals as promptly as practicable
from and after the date hereof until the later of February 20, 2017 or such
mutually agreed extension date contemplated in this clause (d).

3.8 Effect of Termination. In the event of termination of this Reinsurance
Agreement pursuant to Section 3.7 hereof, written notice of termination shall be
given pursuant to the notice provisions herein, and this Reinsurance Agreement
shall forthwith become null and void and there shall be no Liability by any
Party hereto, except (a) that the provisions of Article XIII and Articles XVI
and XVIII shall remain in full force and effect and (b) any confidentiality
obligations of the Parties (arising under this Reinsurance Agreement or under
any other confidentiality agreement entered into by the Reinsured, or its
Affiliates, and the Reinsurer) shall survive such termination.

ARTICLE IV

REPORTING AND SETTLEMENT

4.1 Quarterly Reporting.

From and after the calendar quarter ending December 31, 2016 and prior to
Attachment, the Reinsured shall deliver to the Reinsurer, within sixty
(60) calendar days after the end of each calendar quarter, a report (each a
“Quarterly Report”), the specific format and contents of which the Parties shall
reasonably agree upon within sixty (60) calendar days of the date hereof;
provided, however, that the reports for the calendar quarters ending on
December 31, 2016 (which shall be an annual report), March 31, 2017 and June 30,
2017 shall be delivered by August 31, 2017.

 

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4.2 Quarterly Settlement.

(a) Following Attachment, within sixty (60) calendar days after the end of each
Quarterly Settlement Period, the Reinsured shall deliver to the Reinsurer a
report (the “Quarterly Settlement Report”), the form and contents of which the
Parties shall reasonably agree upon within one hundred twenty (120) calendar
days of the date hereof, which Quarterly Settlement Report shall include a
statement (the “Net Cash Settlement Statement”) which shall set out a
calculation of the net amount due to the Reinsured from the Reinsurer, or the
Reinsurer from the Reinsured, under this Reinsurance Agreement for the relevant
Quarterly Settlement Period (the “Net Cash Settlement Amount”).

4.3 Settlement Payments.

(a) If the Net Cash Settlement Amount reflects a payment owed to the Reinsured
or the Reinsurer, any such payment shall be made by the applicable Party within
ten (10) Business Days following the date of delivery of the applicable
Quarterly Settlement Report.

(b) All payments between the Parties made pursuant to this Reinsurance Agreement
shall be made either (i) by wire transfer of United States dollars in cash to
such bank account or accounts as designated by the recipient or (ii) by direct
deposit or direct debit through the Automated Clearing House (ACH) system, in
each case, as elected by the Party entitled to receipt of payment.

(c) For the sake of clarity, all payments by the Reinsurer to the Reinsured
shall be made directly to the Reinsured or to its liquidator, receiver or its
statutory successor, as applicable.

4.4 Offset and Recoupment Rights.

Any debits or credits incurred in favor of or against either the Reinsured or
the Reinsurer with respect to this Reinsurance Agreement are deemed mutual
debits or credits, as the case may be, and shall be set off and recouped, and
only the net balance shall be allowed or paid. This Section 4.4 shall apply
notwithstanding the initiation or commencement of a liquidation, insolvency,
rehabilitation, conservation, supervision or similar proceeding by or against
the Reinsured or the Reinsurer.

4.5 AIG Claim-in-Consultation.

Between January 30, 2017 and the Closing Date, Reinsured will provide notice to
the Reinsurer in writing of the settlement of any AIG Claim in Consultation or
any action that would materially impact the terms of such settlement, in each
case, as promptly as reasonably practicable.

ARTICLE V

CLAIM AUTHORITY

5.1 Claim Authority.

The Reinsured shall retain sole responsibility for its claims handling and
reinsurance on the Covered Business, including Ceded Reinsurance, and for the
pursuit and collection of any Salvage And Subrogation with respect thereto. The
Reinsured shall administer and manage such claims, reinsurance and Salvage And
Subrogation, both within and in excess of the Retention, in good faith, and in a
prudent manner consistent with its practices and to the same service levels as
of the Effective Date, as though this Reinsurance Agreement had not been issued.
The protocols set forth in the remainder of this Article V shall also be
followed after the Closing Date.

 

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5.2 Claims Practices.

(a) The Reinsured shall notify Reinsurer of any material changes that the
Reinsured makes to its claims handling practices after January 1, 2017,
including claims staffing models, which impact the Covered Business, which
notice shall include an explanation of the rationale for such changes (the
“Change Notice”). If the Reinsured changes its claims practices or, without a
formal change, engages in a pattern of claims practices having, in the
aggregate, the effect of such a change, in a manner that Reinsurer determines
has had a material adverse effect on Reinsurer’s Liability or the attachment of
Reinsurer’s Liability, including, without limitation, because of a material
difference in the claims operation for the Covered Business as compared to the
long-tail commercial business not covered (i.e., accident years 2016 and later),
the Reinsurer must raise any such determination promptly after its discovery
thereof. If the Reinsured agrees, the Parties will work together in good faith
to modify such change to the practices.

(b) If the Parties, acting in good faith, are unable to agree with respect to
whether there has been a material adverse change in claims practices or whether
and how a corrective change shall be implemented or to the impact of such
changes, then the Reinsurer must notice a Dispute pursuant to Article XIII
hereof, and the procedures set forth in Section 5.4(d) regarding burden of proof
and specificity of findings shall apply to any ensuing arbitration. Any such
arbitration must be commenced within thirty-six (36) months following the
Reinsurer’s receipt of the Change Notice relating to the disputed claims
practice.

(c) To the extent that the panel determines that there was a material change to
the claims handling practices and that the change did cause a material adverse
effect to Reinsurer’s Liability or the attachment thereof, then the panel shall
be authorized to adjust the calculation of Ultimate Net Loss under this
Reinsurance Agreement, with the Reinsured bearing the difference at its Own
Expense, to put the Reinsurer in substantially the same economic position it
would have been in had the Reinsured not made the adverse change to its claims
practices, and the Reinsured at its Own Expense shall implement in a reasonable
time frame and in good faith steps to cure the cause of the material adverse
effect that the panel determined the Reinsurer suffered or incurred as a result
of such practice, action or inaction.

5.3 General Right of Association.

(a) At all times, Reinsurer will have the right to associate in any claim
subject to this Reinsurance Agreement at its Own Expense and in a manner to be
mutually agreed to by the Parties in good faith, but the Reinsurer’s general
right to associate shall not trigger any additional claim reporting obligations
for the Reinsured beyond those agreed in this Reinsurance Agreement.

(b) In addition to Reinsurer’s audit and access rights, the Reinsured will make
its claims and related managerial personnel available at the reasonable request
of Reinsurer to review and discuss strategy and management of the Reinsured’s
claims operation.

(c) In addition to the Reinsured’s reporting obligations under Article IV, the
Reinsured will agree to provide such other information and reports related to
the Reinsured’s claims operation to the Reinsurer as reasonably requested.

 

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5.4 Reinsurer Consultation Rights.

(a) “AIG-in-Consultation”. The following claims shall be treated as
“AIG-in-Consultation”:

(i) any claim or set of related claims in the Covered Business that has an
Exposure Value of $100 million or more before the Retention has been exceeded,
or $50 million or more after the Retention has been exceeded; and

(ii) any Mixed Claim that has an Exposure Value of the Covered Business
component of such Mixed Claim of $75 million or more before the Retention has
been exceeded, or $50 Million or more after the Retention has been exceeded.

(b) For claims that are “AIG-in-Consultation”, the Reinsured retains ultimate
decision making authority for the handling of the claim and any disposition
thereof, but the Reinsured is obligated to consult with Reinsurer in good faith
as soon as reasonably practicable after a triggering estimation of Exposure
Value under Section 5.4(a) is made and before any settlement of such claim or
set of related claims.

(c) Reinsurer shall honor the Reinsured’s calculations of Ultimate Net Loss
related to settlement of AIG-in-Consultation claims and, following Attachment,
shall settle in the ordinary course Ultimate Net Loss as so calculated,
provided, however, that Reinsurer shall then have the right to notice a Dispute
subject to Article XIII, which shall be resolved in accordance with such Article
and the following additional framework:

(i) When determining the reasonableness of the Reinsured’s settlements or
allocations in any such arbitration, the panel shall consider whether such
settlement or allocation would have been different had this Reinsurance
Agreement not been entered into.

(ii) If the panel determines that the Reinsured’s settlement or allocation
decisions would have been different had this Reinsurance Agreement not been
entered into, the panel shall, to the extent Ultimate Net Loss Actually Paid by
Reinsured has exceeded Attachment, award the Reinsurer all monetary damages
(including interest, legal fees, and costs), if any, sufficient to put Reinsurer
in substantially the same position had Reinsured’s settlements or allocation
decisions been made without regard to the existence of this Reinsurance
Agreement. The panel shall determine the corresponding adjustments to the
calculation of Ultimate Net Loss in this regard. Prior to Ultimate Net Loss
exceeding the Attachment, no such monetary damages, other than legal fees and
costs, shall be awarded, and the adjustment to the calculation of Ultimate Net
Loss shall be the sole remedy in this regard.

(iii) Under no circumstance shall the panel award any damages (other than legal
fees and costs) to compensate the Reinsurer for the failure of the Reinsured to
act in good faith.

(iv) For the avoidance of doubt, the remedies set forth in subsections (ii) and
(iii) above are the Reinsurer’s exclusive monetary remedies in respect of
AIG-in-Consultation claims.

 

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(d) In addition to the procedures set forth in Article XIII, the following
additional procedures apply to arbitration of “AIG-in-Consultation” claims:

(i) The burden of proof is on the Reinsurer except that where both (x) the issue
is one of allocation and (y) the Reinsured’s allocation was at variance with a
judgment or award in the underlying claim, the burden shall be on the Reinsured
to prove that allocation was nevertheless reasonable.

(ii) If any Party’s position in the arbitration is determined not to have been
taken or maintained in good faith and not consistent with the mutual intent of
the Parties as expressed in this Reinsurance Agreement, the panel shall have the
power to award attorneys’ fees and costs to the other Party, which shall be at
the losing Party’s Own Expense.

5.5 Other Disputes.

Any Dispute involving this Reinsurance Agreement for which a dispute resolution
mechanism is not otherwise provided herein shall be referred to arbitration in
accordance with Article XIII and shall be resolved, subject to the terms of this
Reinsurance Agreement, in accordance with the standards applicable in ordinary
course of business to disputes between a reinsurer and reinsured under a
reinsurance agreement; provided, however, in the absence of a specific remedy
therefor otherwise set forth herein or in another Transaction Document, the
panel shall only be authorized to award economic damages to put the prevailing
Party in substantially the same economic position it would have been in but for
the other Party’s disputed action or inaction, including legal fees, costs and
interest.

ARTICLE VI

RESERVING REQUIREMENTS

6.1 Reserves.

On and after the Closing Date, the Reinsurer shall establish and at all times
maintain a reserve liability on its statutory financial statements with respect
to the Reserves for the Liabilities reinsured hereunder, which shall be
determined by the Reinsurer in accordance with SAP, including applicable
actuarial principles.

6.2 Reserve Information.

The Reinsured shall promptly provide the Reinsurer with such actuarial data as
the Reinsurer may reasonably request in order to establish and maintain a
reserve Liability on its statutory financial statements with respect to the
Subject Liabilities reinsured hereunder, which data shall be segmented in a
manner similar to that used for the Data Room Report and Materials and shall
include loss triangles for the Non-reviewed Segments to the extent such loss
triangles were provided in the Data Room Report and Materials. Actuaries from
each of the Reinsured and the Reinsurer will meet annually to discuss
modifications to the level of granularity of such data as may be mutually agreed
by the Parties throughout the term of the Reinsurance Agreement.

ARTICLE VII

DURATION AND TERMINATION

7.1 Duration and Termination.

If and when the Closing is effected, the Parties’ rights and obligations under
this Reinsurance Agreement shall commence on the Closing Date but shall be
effective as of the Effective Date as set forth herein, and continue in force
until: (a) such time as the Reinsurer’s Liability with respect

 

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to all Liabilities reinsured hereunder terminates, which will be the earlier of
(i) the date that the Reinsured’s liability with respect to the Liabilities
reinsured hereunder is terminated and all amounts due to the Reinsured under
this Reinsurance Agreement with respect to the Liabilities reinsured hereunder
have been Actually Paid and (ii) the date that the Reinsurer has Actually Paid
an aggregate net amount in respect of Ultimate Net Loss equal to the Reinsurer’s
Share of the Aggregate Limit; (b) a termination pursuant to Section 7.3, or
(c) this Reinsurance Agreement is terminated by the mutual written consent of
the Parties. Subject to the fulfillment of the Reinsured’s obligations under
Article III and other than as set forth in the following sentence or in
Section 7.3, the Reinsured and the Reinsurer agree that this Reinsurance
Agreement cannot be cancelled unilaterally by either Party following Closing.
Further, following Closing and to the extent required by applicable Law, other
than a termination pursuant to Section 7.1, this Reinsurance Agreement shall not
be terminated, cancelled or rescinded without the prior written consent of the
insurance commissioners of the Relevant Jurisdictions, if necessary.

7.2 Effect of Termination.

In the event of a termination of this Reinsurance Agreement pursuant to
Section 7.1, written notice of termination shall be given pursuant to the notice
provisions hereof (unless otherwise set forth in Section 7.3 for a termination
pursuant thereto), and this Reinsurance Agreement shall forthwith become null
and void and there shall be no further Liability by any Party hereto. However,
notwithstanding the other provisions of this Article VII, the terms and
conditions of Article I, Article XIII, Section 15.2, Article XV XVI, XVII and
XVIII shall remain in full force and effect after the termination of this
Reinsurance Agreement.

7.3 Special Termination or Settlement.

Without regard to any master reinsurance security agreement between the
Reinsured or any of its Affiliates and the Reinsurer or any of its Affiliates
hereunder, the terms of this Article shall apply as follows:

(a) Termination. The Reinsured may terminate this Reinsurance Agreement
forthwith in the event that any of (i), (ii) or (iii) occurs:

(i) There is a Change of Control of the Reinsurer, but only if Berkshire or one
of its Affiliates has not assumed from the Reinsurer the responsibility for the
Subject Liabilities, including maintaining the same economic interest as the
Reinsurer had in any and all such Subject Liabilities constituting Covered
Business (whether by reinsurance, by indemnification or otherwise) and the
control over the exercise of the Reinsurer’s rights hereunder (“NICO Change of
Control”); or

(ii) The Reinsurer makes an application for any insurance business transfer of
substantially all of its business pursuant to Part VII of the Financial Services
and Markets Act 2000 or a scheme of arrangement pursuant to 895-899 of the
Companies Act 2006, or any provision which replaces the foregoing, or has a
similar effect as the foregoing in any jurisdiction; or

(iii) Both (a) and (b) of this clause (iii) occur:

(a) The Reinsurer should at any time (whether voluntarily or otherwise) become
insolvent or the subject of any liquidation, administration, rehabilitation,
receivership, supervision, conservation, or bankruptcy action or proceeding
(whether judicial or otherwise), provided however that this Reinsurance
Agreement shall terminate automatically in the event that the Reinsurer becomes
subject to an order of liquidation, administration or rehabilitation or similar
order of a non-

 

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United States jurisdiction (in the event of such an order, termination of this
Reinsurance Agreement shall be on a clean-cut basis, with the Reinsurer liable
on and as of the termination date for all Obligations under this Reinsurance
Agreement, as set forth in clause (h) below); and

(b) (1) Berkshire should at any time file a voluntary petition or commence a
voluntary case seeking liquidation, winding-up, reorganization, dissolution,
arrangement, readjustment of debts or any other relief under the Bankruptcy Code
or under any other applicable bankruptcy, insolvency or similar Law now or
hereafter in effect, or (2) any involuntary petition or case shall be filed or
commenced against Berkshire seeking liquidation, winding-up, reorganization,
dissolution, arrangement, readjustment of debts, the appointment of a custodian,
trustee, receiver or similar official for it or all or a substantial part of its
properties or any other relief under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, and
such petition or case shall continue undismissed and unstayed for a period of
sixty (60) days; or an order, judgment or decree approving or ordering any of
the foregoing shall be entered in any such proceeding.

(b) Termination under Section 7.3(a) shall be effected by written notice. Unless
otherwise stated the Reinsured will elect whether the termination shall be on a
run-off basis or a clean-cut basis with an immediate settlement of all
Obligations under this Reinsurance Agreement. Even if the Reinsured initially
elects termination on a run-off basis, it is agreed that the Reinsured shall
retain the right to require an immediate settlement of all Obligations at any
subsequent date. Notwithstanding the foregoing, the Reinsured must elect to
exercise its rights under Section 7.3(a)(i) within ninety (90) days of the
occurrence of a NICO Change of Control and shall remain bound by its initial
election therefor.

(c) If the Reinsured elects termination on a clean-cut basis with an immediate
settlement of all Obligations (i.e., commutation), then the Reinsured shall
provide the Reinsurer with a final billing setting forth the amount of the
Reinsurer’s Obligations, along with a copy of the Reinsured’s most recent
quarter-end reserve statement relative to the Reinsurer. If the Reinsurer agrees
with the final billing, it shall pay the full amount set forth therein within
ten (10) Business Days of its receipt thereof or within thirty (30) Business
Days in the case of NICO Change of Control. Solely to the extent the Parties
disagree as to the amount of IBNR or case reserves included within the
Obligations set forth in the final billing, or if the Reinsured does not provide
the Reinsurer with a copy of the Reinsured’s most recent quarter-end reserve
statement relative to the Reinsurer, the Parties shall submit to expedited
arbitration as set forth immediately below solely with respect to the disputed
amount, with the Reinsurer paying any undisputed amounts within the
aforementioned ten (10) Business Day period or within the aforementioned thirty
(30) Business Days in the case of NICO Change of Control.

(d) Within thirty (30) days of the Reinsurer alerting the Reinsured to a
disputed IBNR or case reserve amount, the Reinsured and the Reinsurer shall
appoint a mutually agreed actuarial firm to determine the amount of IBNR or case
reserves in dispute; if the Parties are unable to agree upon the appointment
within such time period, the procedure in (e) below shall control.

(e) In the event it shall become necessary to select and appoint a disinterested
actuary under this Article, the following process shall be utilized by the
Reinsured and the Reinsurer. Within seven (7) days, each Party shall submit the
names of three (3) candidates

 

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whom it shall consider to be disinterested. Unless otherwise agreed by the
Parties, each candidate must be a current Fellow of the Casualty Actuarial
Society in good standing and neither presently retained by, nor presently or
formerly employed by, or Affiliated with either the Reinsured or the Reinsurer
or any company Affiliated with either the Reinsured or the Reinsurer. Moreover,
in contacting possible candidates to serve as disinterested actuaries, neither
Party shall disclose the nature of the dispute or its own position to such
candidates, but may only describe the identities of the Reinsured and the
Reinsurer, the type of business reinsured and the fact that an issue exists as
to the value of the reserves and/or the present value of future obligations
under a reinsurance agreement. From the list of six (6) candidates thus
produced, within five (5) Business Days, each of the Reinsured and the Reinsurer
shall strike two names so that among the remaining names a disinterested actuary
shall be chosen by drawing lots. The candidate selected from this method shall
be the disinterested actuary who shall resolve the difference as described
above. The cost of the actuarial review shall be shared equally between the
Reinsured and Reinsurer; provided, however, that if the review is conducted in
connection with a dispute otherwise existing and arising out of this Reinsurance
Agreement, a panel established pursuant to Article XIII shall have the
discretion to allocate such costs between the Parties. The actuary shall
evaluate which of the Parties’ two results is the more reasonable calculation in
light of the evidence provided by both Parties in support of their calculations.
Thirty (30) days after the commencement of this evaluation process, the actuary
shall pick one and only one of the results from the two parties and advise the
Parties in writing thereof. The Parties agree to be bound by the written
response of the actuary in this regard.

(f) The Reinsurer shall have five (5) Business Days (or thirty (30) Business
Days in the case of NICO Change of Control) from the receipt of the appointed
actuarial firm’s written valuation of the disputed IBNR or case reserve amount
to pay it to the Reinsured via wire transfer (wire transfer instructions to be
provided within one (1) Business Day of the date the Reinsured receives such
amount) or to post the applicable collateral amount under Article XII above, as
applicable. For the sake of clarity, the dispute resolution mechanism set forth
in this subparagraph shall be the exclusive remedy for the resolution of any
such IBNR or case reserve dispute under this Section 7.3 and Article XIII shall
not be applicable in this regard.

(g) For purposes of this Reinsurance Agreement, “termination” means that the
term of this Reinsurance Agreement ends on the date of termination.
“Termination” does not necessarily mean that all Liabilities of the Parties
become fixed as of the date of termination; the consequences of termination are
set forth in this Article and elsewhere in this Reinsurance Agreement.

(h) The term “Obligations” shall mean the Reinsurer’s Share of 100%, or any
higher percentage required by any applicable Law, regulation, or regulatory
authority, of: (i) losses and expenses due from but not recovered from the
Reinsurer; (ii) reserves for losses and expenses reported and outstanding (case
reserves); (iii) reserves for losses and expenses incurred but not reported
(IBNR); and (iv) unearned premium, inclusive, in each case, of Extra-Contractual
Obligations. For the sake of clarity, the Reinsured will offset any ceded
balances payable by it to the Reinsurer from the Obligations under this
Reinsurance Agreement.

(i) In no event shall this Section 7.3 be construed to limit the amount of, or
the rights and obligations of the Parties with respect to, any security required
pursuant to Article XII, if applicable.

(j) Settlements under this Section 7.3 shall be adjusted for net present value.

(k) In the event of an immediate settlement of all Obligations, upon receipt of
final payment, the Reinsured and the Reinsurer shall execute a full and final
commutation and mutual release of their respective Liabilities under this
Reinsurance Agreement.

 

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ARTICLE VIII

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE REINSURED

8.1 Warranties.

As of the date hereof, each reinsured company included in the Reinsured hereby
represents and warrants as to itself to the Reinsurer the following:

(a) Organization, Standing and Authority. It is an insurance company duly
organized, validly existing and in good standing under the laws of its
domiciliary state and has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on the operations of
its business as they are now being conducted. Except as set forth in Schedule
8.1(a), it has obtained all authorizations and approvals required under
applicable Law to enter into and perform its obligations under this Reinsurance
Agreement and the other Transaction Documents and it shall maintain throughout
the term of this Reinsurance Agreement and the other Transaction Documents all
licenses, permits or permissions of any Governmental Authority that shall be
required in order to perform its obligations under this Reinsurance Agreement
and the other Transaction Documents;

(b) Authorization. It has all requisite corporate power and authority to enter
into this Reinsurance Agreement and the other Transaction Documents and to
perform its obligations hereunder and thereunder. Its execution and delivery of
this Reinsurance Agreement and the other Transaction Documents, and its
performance of its obligations hereunder and thereunder, have been duly
authorized by all necessary corporate action. This Reinsurance Agreement and the
other Transaction Documents, when duly executed and delivered by the other
Parties hereto and thereto, will be a valid and binding obligation, enforceable
against it in accordance with its terms except as enforceability may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
other similar Laws affecting creditors’ rights generally, by applicable
insurance insolvency and liquidation statutes and regulations and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

(c) No Conflict or Violation. The execution, delivery and performance of this
Reinsurance Agreement and the other Transaction Documents and its consummation
of the transactions contemplated hereby and thereby will not (a) violate any
provision of its Articles of Incorporation, Bylaws or other charter or
organizational document applicable to it, (b) violate any order, judgment,
injunction, award or decree of any court, arbitrator or Governmental Authority
against, or binding upon it, or any agreement with, or condition imposed by, any
Governmental Authority binding upon it, or (c) conflict with, result in a breach
of or a default (with or without notice or lapse of time or both) under, give
rise to, or result in a right of, acceleration, amendment or termination under,
or, except for the Collateral Trust Agreement, result in the creation of any
lien on any of its property or assets under, any contract or agreement to which
it is a party or by which it or its property or assets is bound or subject
except to the extent that such conflict, breach or default would not,
individually or in the aggregate, reasonably be expected to result in a material
adverse effect on the Reinsured hereunder, including in its ability to perform
its obligations hereunder and thereunder;

 

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(d) Governmental Licenses. It has all licenses, certificates of authority or
other similar certificates, registrations, franchises, permits, approvals or
other similar authorizations issued by Governmental Authorities (collectively,
“Permits”) necessary to conduct its business as currently conducted, except in
such cases where the failure to have a Permit has not had and would not
reasonably be expected to have a material adverse effect on its business. All
Permits that are material to the conduct of its business are valid and in full
force and effect. It is not subject to any pending action or, to its knowledge,
any threatened action that seeks the revocation, suspension, termination,
modification or impairment of any Permit that, if successful, would reasonably
be expected to have, or with the passage of time become, a material adverse
effect on its business.

(e) Domicile and Reserves Ceded. The Reinsured, after due inquiry, is not aware
of any circumstance that would constitute a Reinsurance Credit Event under the
Transaction Documents. Set forth on Schedule 8.1(e) hereto with respect to each
reinsured company included in the Reinsured are (i) such reinsured company’s
state of domicile as of the date hereof, and (ii) each reinsured company’s pool
share of the AIG Property Casualty’s Combined Pool as of January 1, 2017.

8.2 Disclosed Information.

The Reinsured has provided to the Reinsurer the information listed in Schedule
8.2 to this Reinsurance Agreement. The Reinsured acknowledges that such
information was material to the Reinsurer in agreeing to enter this Reinsurance
Agreement and the other Transaction Documents. Except as set forth in Schedule
8.2, to the knowledge of the individual Persons identified on Schedule 8.2-1,
after reasonable inquiry, no item so provided is inaccurate or incomplete in any
material respect as to the matters set forth therein.

8.3 No Other Representations or Warranties by the Reinsureds.

(a) Notwithstanding anything contained in this Reinsurance Agreement or the
other Transaction Documents to the contrary,

(i) neither the Reinsureds nor any other Person acting on behalf of the
Reinsureds has made or is making any representation or warranty whatsoever,
express or implied, beyond those expressly made in Sections 8.1 and 8.2.

(ii) Reinsurer has not been induced by, or relied upon, any representations,
warranties, or statements (written or oral), whether express or implied, made by
any Person that are not expressly set forth in Sections 8.1 and 8.2.

(iii) except with respect to the express representations listed in Section 8.2,
the Reinsurer acknowledges that it is entering into the transactions
contemplated hereby notwithstanding the existence and/or substance of any
information not disclosed to it by the Reinsureds.

 

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(b) Without limiting the generality of the foregoing, the Reinsurer acknowledges
that:

(i) no representations or warranties are made with respect to any projections,
forecasts, estimates, budgets or claim or reserve information that has or may
have been made available to the Reinsurer, its Affiliates or any of their
respective Representatives;

(ii) no representations or warranties are made with respect to any other
information or documents made available to the Reinsurer or any of its
Affiliates or Representatives except, in the case of this clause (ii) only, as
expressly covered by a representation or warranty contained in Section 8.1 or
8.2, and

(iii) the Reinsurer has conducted its own independent review and analysis of the
Subject Liabilities.

8.4 Exclusive Remedy for Reinsured Misrepresentations and Breaches.

The exclusive remedy for misrepresentation (including knowing and intentional
misrepresentation) or breach of warranty with respect to Section 8.1 or 8.2 is a
claim for damages to be brought in an arbitration pursuant to Article XIII. Any
such proceeding shall be commenced no later than three (3) years following the
Closing Date. In any such proceeding the arbitrators may not award rescission or
damages or reformation in lieu thereof but shall be limited to awarding damages
proximately caused by the misrepresentation or breach of warranty, as measured
by the economic difference, as to the specific item referenced, between the
value to the transaction of the item as represented and the value to the
transaction of the item under the actual facts.

8.5 Net Losses Actually Paid.

The Reinsured provided the Reinsurer with the document listed on Schedule 8.5
representing the Reinsured’s good faith estimate, as of January 13, 2017 based
on unaudited data, of Net Losses Actually Paid by the Reinsured during calendar
year 2016. The Reinsurer acknowledges that such estimate was not audited prior
to its receipt thereof. The Reinsured will provide an update of such document
for material changes thereto, if any, after its audited financial statements for
2016 are complete, but the Reinsured acknowledges that any such change to the
estimate shall not constitute an action taken prior to January 1, 2017.

ARTICLE IX

REPRESENTATIONS AND WARRANTIES OF THE REINSURER

9.1 Warranties.

As of the date hereof, the Reinsurer hereby represents and warrants to the
Reinsured the following:

(a) Organization, Standing and Authority. It is an insurance company duly
organized, validly existing and in good standing under the laws of its
domiciliary state and has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on the operations of
its business as they are now being conducted. It has obtained all authorizations
and approvals required under applicable law to enter into and perform its
obligations under this Reinsurance Agreement and the other Transaction Documents
and it shall maintain throughout the term of this Reinsurance Agreement and
other Transaction Documents all licenses, permits or permissions of any
Governmental Authority that shall be required in order to perform its
obligations under this Reinsurance Agreement and the other Transaction
Documents;

 

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(b) Authorization. It has all requisite corporate power and authority to enter
into this Reinsurance Agreement and the other Transaction Documents to which it
is party and to perform its obligations hereunder and thereunder. Its execution
and delivery hereof and thereof, and its performance of its obligations
hereunder and thereunder, have been duly authorized by all necessary corporate
action. This Reinsurance Agreement and the other Transaction Documents, when
duly executed and delivered by the other Parties hereto, will be a valid and
binding obligation, enforceable against it in accordance with its terms except
as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws affecting creditors’ rights
generally, by applicable insurance insolvency and liquidation statutes and
regulations and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at Law);

(c) No Conflict or Violation. The execution, delivery and performance of this
Reinsurance Agreement and the other Transaction Documents and its consummation
of the transactions contemplated hereby and thereby will not (a) violate any
provision of its Articles of Incorporation, Bylaws or other charter or
organizational document applicable to it, (b) violate any order, judgment,
injunction, award or decree of any court, arbitrator or Governmental Authority
against, or binding upon it, or any agreement with, or condition imposed by, any
Governmental Authority binding upon it, or (c) conflict with, result in a breach
of or a default (with or without notice or lapse of time or both) under, give
rise to, or result in a right of, acceleration, amendment or termination under,
or result in the creation of any lien on any of its property or assets under,
any contract or agreement to which it is a party or by which it or its property
or assets is bound or subject except to the extent that such conflict, breach or
default would not, individually or in the aggregate, reasonably be expected to
result in a material adverse effect on the Reinsurer, including in its ability
to perform its obligations hereunder and thereunder; and

(d) Governmental Licenses. It has all Permits necessary to conduct its business
as currently conducted, except in such cases where the failure to have a Permit
has not had and would not reasonably be expected to have a material adverse
effect on its business. All Permits that are material to the conduct of its
business are valid and in full force and effect. It is not subject to any
pending action or, to its knowledge, any threatened action that seeks the
revocation, suspension, termination, modification or impairment of any Permit
that, if successful, would reasonably be expected to have, or with the passage
of time become, a material adverse effect on its business.

ARTICLE X

ACCOUNTING AND TAX TREATMENT

10.1 Accounting and Tax Treatment.

(a) Each Party to the transactions provided for in this Reinsurance Agreement
represents to the other Party that it has conducted, prior to execution of this
Reinsurance Agreement, such risk transfer testing analysis as that Party deems
appropriate, in its independent judgment in order to report properly such
transaction for applicable financial reporting and federal income Tax purposes.
Based on such analysis, each Party has independently determined that the
transactions provided for in this Reinsurance Agreement are properly accounted
for on its financial reports as reinsurance for financial reporting and federal
income tax purposes and

 

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hereby covenants and agrees that, except as may otherwise be required by SAP,
GAAP or applicable Law following the date hereof, it shall account for, and
report for tax purposes, such transaction accordingly.

(b) Without limitation of Section 10.1(a), (i) neither Party has made, hereby
makes or shall make any representation or warranty to the other Party as to
(A) the proper accounting or tax treatment by such other Party of the
transactions provided for in this Reinsurance Agreement or (B) the proper future
accounting or tax treatment of the transactions provided for in this Reinsurance
Agreement and (ii) each Party acknowledges and agrees that, in making its
independent determination that the transactions provided for in this Reinsurance
Agreement are properly accounted for as reinsurance for SAP, GAAP and federal
income tax purposes, it did not rely, in any respect, upon any representation or
determination made by the other Parties.

ARTICLE XI

INSOLVENCY

11.1 Insolvency of the Reinsured.

(a) The Reinsurer hereby agrees that in the event of the insolvency of the
Reinsured and the appointment of a conservator, liquidator, receiver,
administrator or statutory successor of the Reinsured, all amounts due to the
Reinsured under this Reinsurance Agreement shall be payable by the Reinsurer
directly to the Reinsured or to any conservator, liquidator, receiver or
statutory successor of the Reinsured on the basis of the Liability of the
Reinsured without diminution because of such insolvency, or because the
conservator, liquidator, receiver, administrator or statutory successor of the
Reinsured has failed to pay all or a portion of any claims. Payments by the
Reinsurer as set forth in this Section 11.1 shall be made directly to the
Reinsured or to its conservator, liquidator, receiver, or statutory successor,
except (i) where this Reinsurance Agreement specifically provides for another
payee of such reinsurance in the event of the insolvency of the Reinsured,
(ii) as provided by Section 4118(a)(1)(A) and 1114(c) of the New York Insurance
Law, (iii) where the Reinsurer, with the consent of the direct insured(s) has
voluntarily assumed such Policy obligations of the Reinsured as direct
obligations of the Reinsurer to payees under such Policies in substitution for
obligations of the Reinsured to the payees, or (iv) where provided otherwise
under applicable Law. Unless otherwise required by applicable Law, under no
circumstances shall the Reinsurer’s Liability hereunder be accelerated,
diminished or enlarged by the insolvency of the Reinsured or any of its
Affiliates.

(b) It is agreed and understood, however, that in the event of the insolvency of
the Reinsured, the liquidator, conservator, receiver, administrator or statutory
successor of the Reinsured shall give written notice of the pendency of a claim
against the Reinsured on any Subject Liability that in either case would involve
a possible Liability on the part of the Reinsurer, indicating the Policy(ies)
reinsured, within a reasonable period of time after such claim is filed in the
conservation or liquidation proceeding or in the receivership and that during
the pendency of such claim the Reinsurer may investigate such claim and
interpose, at its own expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses that it may deem available to the Reinsured
or its liquidator, receiver, conservator, administrator or statutory successor.
It is further understood that the expense thus incurred by the Reinsurer shall
be chargeable, subject to court approval, against the Reinsured as part of the
expense of administrator or liquidation to the extent of a proportionate share
of the benefit which may accrue to the Reinsured solely as a result of the
defense undertaken by Reinsurer.

(c) This Article shall apply severally to each reinsured company referenced
within the definition of “Reinsured” in this Reinsurance Agreement.

 

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ARTICLE XII

COLLATERAL TRUST ACCOUNT

12.1 Establishment of Collateral Trust Account.

In accordance with the terms of the Collateral Trust Agreement to be entered
into among the Parties and the Trustee as of the Closing Date, Reinsurer shall
have procured, on or prior to the date hereof, with and in the name of the
Trustee a segregated trust account maintained by the Trustee (the “Collateral
Trust Account”), to be held for the benefit of the Reinsured pursuant to the
provisions of the Collateral Trust Agreement.

12.2 Initial Funding of the Collateral Trust Account.

The Initial Security Amount shall be deposited directly into the Collateral
Trust Account as contemplated in Sections 3.1 and 3.2.

12.3 Ongoing Funding of Collateral Trust Account.

In accordance with the requirements of the Collateral Trust Agreement and
notwithstanding any amendments to “Security Articles” as contemplated in any
master reinsurance security agreement between the Reinsured or its Affiliates
and the Reinsurer or its Affiliates (or any amendment thereto), unless there is
a Collateral Triggering Event or a Reinsurance Credit Event, the Reinsurer shall
not be required to deposit additional assets into the Collateral Trust Account
after deposit of all amounts therein pursuant to Sections 3.1 and 3.2. All
transfers to and withdrawals from the Collateral Trust Account shall be in
accordance with the terms set forth herein and subject to the requirements set
forth in the Collateral Trust Agreement.

12.4 Collateral Trust Assets

(a) Prior to the occurrence of a Reinsurance Credit Event, the assets that may
be held in the Collateral Trust Account shall consist solely of Eligible
Investments. Upon and after the occurrence of a Reinsurance Credit Event that is
not a Partial RCE, however, in accordance with the requirements of the
Collateral Trust Agreement and Section 12.7, hereof, the assets in the
Collateral Trust Account shall consist solely of Permitted Investments. Upon and
after the occurrence of a Partial RCE, in accordance with the requirements of
the Collateral Trust Agreement and Section 12.7 hereof, the assets in the
Collateral Trust Account shall contain sufficient Eligible Investments as
detailed in the Trust Agreement.

(b) Reinsurer shall, prior to depositing any Eligible Investments or Permitted
Investments, as applicable, into the Collateral Trust Account, and from time to
time as required, execute all assignments and endorsements in blank, or transfer
legal title to the Trustee of all shares, obligations or any other assets
requiring assignment in order that the Trustee, upon direction of the Reinsured,
may whenever necessary negotiate any such assets without consent or signature
from the Reinsurer or any other entity.

(c) The Reinsured may, at its discretion, require payment of any sum in default
instead of resorting to any security held, and it shall be no defense to any
such claim that the Reinsured might have had recourse to any such security.

 

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12.5 Settlements.

Unless otherwise agreed by the Parties, all withdrawals from or deposits into
the Collateral Trust Account under the Collateral Trust Agreement shall be made
in Dollars in cash or its equivalent.

12.6 Modification Upon Occurrence of Collateral Triggering Event.

Subject to Section 12.7, which controls when it applies, upon the occurrence of
a Collateral Triggering Event, all references to “Security Amount” in the
Collateral Trust Agreement shall be deemed modified in accordance with its
definition to give effect to such Collateral Triggering Event. In addition, as
soon as is practicable, but no later than contemporaneously with the posting of
the collateral under any Collateral Triggering Agreement that results in
Reinsurer posting one billion dollars ($1,000,000,000) or more of collateral
either on an individual or aggregate basis, Reinsurer shall deposit such
additional assets into the Collateral Trust Account so that the aggregate fair
market value of the Eligible Investments in the Collateral Trust Account equals
the newly computed Security Amount. Until such time as (i) all events, changes
or conditions that gave rise to the collateral requirement under any Collateral
Triggering Agreements cease to exist or apply and (ii) Reinsurer has withdrawn
or reduced the aggregate amount of collateral posted under Collateral Triggering
Agreements ((i) and (ii) together, the “Collateral Reduction Event”), Reinsurer
shall ensure that the Collateral Trust Account shall hold at all times Eligible
Investments with a fair market value of no less than 100% of the Security Amount
(as defined in clause (ii) of the definition thereof); provided, however, if a
Collateral Reduction Event has occurred, the Security Amount shall be reduced by
a percentage which is proportionate to each percentage reduction of all
collateral posted under the Collateral Triggering Agreements; provided further,
however, in no event shall the Security Amount be reduced to an amount less than
100% of the Security Amount (as defined in clause (i) of the definition
thereof); and provided further, in no event shall the Security Amount be reduced
by reason of a withdrawal or reduction of the aggregate amount of collateral
posted under any Collateral Triggering Agreement(s) to the extent that the
withdrawn collateral was applied to satisfy the obligations secured thereby.
Nothing herein shall interfere with the Reinsurer’s obligations during the
continuance of a Reinsurance Credit Event.

12.7 Modification Upon Occurrence of a Reinsurance Credit Event.

(a) The references in this Reinsurance Agreement and the Collateral Trust
Agreement to changes in rights, obligations, and procedures upon the occurrence
of a Reinsurance Credit Event are intended, and shall be interpreted, to conform
fully to the requirements of the laws and regulations governing credit for
reinsurance of the Relevant Jurisdictions, so that Reinsured shall continue to
receive full credit for reinsurance in the Relevant Jurisdictions for the
coverage provided by this Reinsurance Agreement for the period of time during
which the Reinsurance Credit Event continues to apply. Any event, other than a
change or modification of the Inter-Company Pooling Agreement by and among the
companies included in the Reinsured or any other voluntary action taken by the
Reinsured that results in a change in the permitted practices related to such
pooling arrangement that occurs at the request of the Reinsured, that results in
Reinsured being unable to obtain full statutory financial statement credit for
the reinsurance provided under this Reinsurance Agreement in any Relevant
Jurisdiction at any point in time during the term of this Reinsurance Agreement
shall be referenced herein as a “Reinsurance Credit Event.” Reinsurer shall
promptly notify Reinsured and the Trustee of any event or change or condition
that will reasonably likely result in a Reinsurance Credit Event.

(b) The Parties acknowledge that a Reinsurance Credit Event may occur as a
result of the financial impairment of Reinsurer, or it may occur as a result of
other causes, some of which may be cured by Reinsurer within a reasonable period
of time. For purposes of this Article XII, a Reinsurance Credit Event resulting
from or likely to result from any financial impairment

 

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of Reinsurer shall be referred to as a “Reinsurance Credit Event I” and a
Reinsurance Credit Event resulting from or likely to result from causes other
than the financial impairment of Reinsurer shall be referred to as a
“Reinsurance Credit Event II.” A Reinsurance Credit Event resulting or likely to
result both from financial impairment and other causes shall be a Reinsurance
Credit Event I.

(c) Should either Party become aware of a Reinsurance Credit Event or the
likelihood of the occurrence of a Reinsurance Credit Event, such Party shall
provide prompt written notice (a “Reinsurance Credit Event Notice”) to the other
either (x) certifying that a Reinsurance Credit Event has occurred or is likely
to occur or (y) describing the circumstances and cause for such notice. Such
notice shall indicate whether the Reinsurance Credit Event is (or is expected to
be) a Reinsurance Credit Event I or a Reinsurance Credit Event II and shall
state the date, if known, on which the Reinsurance Credit Event occurred or is
expected to occur. Such notice shall also state the identity of the specific
Reinsureds to whom the Reinsurance Credit Event Notice is applicable. Such
notice shall also be delivered to the Trustee by the Reinsured or the Reinsurer.

(d) Upon the occurrence of a Reinsurance Credit Event I, as noted in
Section 12.7(a) above, certain provisions of the Collateral Trust Agreement
shall cease to be effective immediately, and other provisions shall
automatically become effective thereafter, all as described in the Collateral
Trust Agreement. In addition, any other provisions required under the law and
regulations of the Relevant Jurisdictions governing trusts providing full
statutory financial statement credit for reinsurance ceded by property and
casualty insurance companies shall be automatically deemed incorporated into the
Collateral Trust Agreement.

(e) Upon the occurrence of a Reinsurance Credit Event II, Reinsurer shall have a
period of ninety (90) calendar days (the “Cure Period,” which shall, however,
not extend past December 31 of the year in which the Reinsurance Credit Event II
occurs) to seek to cure or address to the satisfaction of the Reinsured the
circumstances giving rise to the Reinsurance Credit Event II. Unless otherwise
agreed or an arbitration panel or court otherwise determines in accordance with
the dispute resolution procedures of this Reinsurance Agreement, the Cure Period
shall run from the date the Reinsurance Credit Event Notice is received or
given, as applicable, by Reinsurer.

 

  (i) Should Reinsurer be able to cure the situation or address it to the
reasonable satisfaction of Reinsured during the Cure Period, no further action
shall be required with respect to the Collateral Trust Agreement

 

  (ii) Should Reinsurer be unable to cure or address the situation, then upon
expiration of the Cure Period, or at such earlier time as Reinsurer acknowledges
or it is determined pursuant to the dispute resolution procedures hereof that
cure will not be practicable, the provisions of the Collateral Trust Agreement
in respect of Reinsurance Credit Events shall become effective as set forth in
Section 12.7(d) above.

(f) The provisions of the Collateral Trust Agreement that take effect during the
pendency of a Reinsurance Credit Event shall remain in effect only so long as
the Reinsured could not, absent such provisions, take full financial statement
credit in the Relevant Jurisdictions for the coverage provided by this
Reinsurance Agreement. If the Reinsured may once again take such full credit
absent such provisions, then the Reinsured shall promptly provide a Reinsurance
Credit Event Termination Notice to the Trustee. If Reinsurer contends and the
Reinsured disputes that the Reinsured can once again take such full credit, then
Reinsurer shall bear the

 

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burden of establishing that such credit is available. From and after the time
that it is determined that such full credit is in fact available, then the
provisions of Section 3.1 of the Collateral Trust Agreement shall be
implemented.

(g) The injury caused by a failure by Reinsurer, upon or during the pendency of
a Reinsurance Credit Event, to comply with the provisions hereof and of the
Trust Agreement regarding maintenance of the value of the Collateral Trust
Assets at or equal to the Required Amount is hereby agreed to be irreparable
within the meaning of any applicable Law relating to the issuance of preliminary
injunctions.

(h) Any provisions of this Reinsurance Agreement or the Trust Agreement or any
other agreement notwithstanding, if a Reinsurance Credit Event results from one
or more, but not all, Reinsureds being unable to take applicable statutory
financial statement credit (a “Partial RCE”), the Reinsurance Credit Event shall
exist only as to the Reinsured(s) unable to take credit (the “Impacted
Reinsureds”). Any obligations of the Reinsurer or limitations on the Reinsurer’s
ability to act following a Partial RCE shall be strictly construed to apply only
to the Impacted Reinsureds, and any limitations on the assets in the Trust
Account shall be construed to apply only to the relevant portion of such assets.
For the avoidance of doubt, following a Partial RCE, the Reinsurer shall not be
required to take any steps as to Reinsureds not subject to the Partial RCE. For
the further avoidance of doubt, following a Partial RCE, all provisions of this
Reinsurance Agreement or the Trust Agreement (including those in Appendix A
thereto) that involve calculation of an amount certain during the pendency of a
Reinsurance Credit Event, including but without limitation any provisions
referencing the Required Amount, shall be calculated by looking solely to the
Impacted Reinsureds,

12.8 Withdrawal of Collateral Trust Assets by the Reinsured Other than During
the Pendency of a Reinsurance Credit Event.

Except during the pendency of a Reinsurance Credit Event:

(a) Collateral Trust Assets may be withdrawn by, and utilized and applied by,
the Reinsured only for one or more of the following purposes:

 

  (i) to pay or reimburse the Reinsured for Reinsurer’s Share of claims, losses,
or other amounts due and payable under the terms and conditions of this
Reinsurance Agreement, or

 

  (ii) to pay to Reinsurer amounts held in the Collateral Trust Account in
excess of the Security Amount to the extent permitted in the Collateral Trust
Agreement.

(b) Notwithstanding the foregoing, Reinsured shall only withdraw Collateral
Trust Assets under Sections 12.8(a)(i) and (ii) pursuant to the terms of a Final
Order of an arbitration panel with which Reinsurer has failed to comply,
provided that notice of such withdrawal is provided not less than five
(5) Business Days in advance of the requested withdrawal. If Reinsurer contests
the validity of the arbitration order by notice to Reinsurer, Reinsurer may
challenge the validity of the withdrawal order in the Designated Court, subject
however in all respects to the standards of review of such awards under
applicable Law. During the pendency of such litigation, notice of withdrawal
shall not be effective except as ordered by the court in which the litigation is
pending.

(c) The Reinsured shall return to the Collateral Trust Account assets withdrawn
in excess of all amounts due under Section 12.8(a)(i), within five (5) Business
Days from determining that such excess amount has been withdrawn. Any such
excess amount shall at all

 

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times be held by the Reinsured in trust for the benefit of Reinsurer and shall,
to the extent known to be excess, be maintained in a segregated account,
separate and apart from any other assets of the Reinsured for the sole purpose
of funding the payments and reimbursements described in Section 12.8(a).

12.9 Withdrawal of Collateral Trust Assets by Reinsured During the Pendency of a
Reinsurance Credit Event.

During the pendency of a Reinsurance Credit Event:

(a) The Collateral Trust Assets may be withdrawn by the Reinsured, and utilized
and applied by the Reinsured, for (but only for) one or more of the following
purposes:

 

  (i) to pay or reimburse the Reinsured for Reinsurer’s Share of claims, losses,
or other amounts due and payable under the terms and conditions of this
Reinsurance Agreement;

 

  (ii) to fund an account with the Reinsured in an amount at least equal to the
amount that would be deductible from the Reinsured’s Liabilities on account of
Reinsurer’s obligations under this Reinsurance Agreement if full credit for such
obligations were to be given to the Reinsured. The account must include amounts
for Reserves; and

 

  (iii) to pay any other amounts Reinsurer claims are due under this Reinsurance
Agreement.

(b) In the event of a withdrawal under Section 12.9(a)(ii):

 

  (i) such amount shall at all times be held by the Reinsured in trust for the
benefit of Reinsurer pending return of such amount and shall be maintained in a
segregated account, separate and apart from any other assets of the Reinsured
for the sole purpose of funding the payments and reimbursements described in
Section 12.9(a)(i) or (iii);

 

  (ii) The Reinsured shall return to Reinsurer the actual amount of interest,
dividends, and other income earned on the assets in such segregated account, net
of expenses of maintaining the account, so long as the fair market value of the
assets in such segregated account and the fair market value of any remaining
Permitted Investments equals, in the aggregate, at least 102% of the Required
Amount and so long as such amount of interest, dividends and other income would
otherwise be permitted to be returned to the Reinsurer at such time if such
amounts were in the Collateral Trust Account, and shall otherwise credit to such
segregated account all such income earned and received on the assets in such
segregated account; and

 

  (iii) The Reinsured shall return to Reinsurer and/or the Collateral Trust
Account, as applicable, assets withdrawn in excess of the amounts ultimately
determined to be due within five (5) Business Days from the Reinsured’s
concluding, or from an arbitration panel’s determining, that such excess amount
has been withdrawn.

(c) In the event that the Reinsured concludes, or an arbitration panel
determines, that Reinsured has withdrawn assets under Section 12.9(a)(i) or
(iii) in excess of the aggregate amount

 

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permitted to be withdrawn thereunder, then the Reinsured shall, within five
(5) Business Days of making such determination, return to the Collateral Trust
Account the amount of such excess, and such amount shall, until its return, be
deemed to have been held in constructive trust by the Reinsured for the benefit
of Reinsurer.

(d) In the event of a Partial RCE, a Reinsured who is not an Impacted Reinsured
shall have no rights under this Section 12.9 unless and until it becomes an
Impacted Reinsured.

12.10 Reinsurance Credit.

(a) Except as otherwise set forth in Section 12.7, if and to the extent that
Reinsurer’s full performance of its obligations hereunder and under the
Collateral Trust Agreement does not result in the Reinsured’s being able to
obtain full credit on its statutory financial statements for the reinsurance
provided hereunder in the Relevant Jurisdictions, Reinsurer shall, at its Own
Expense, be required to take all steps (including the posting of letters of
credit or other acceptable security) necessary to comply with all applicable
Laws in the Relevant Jurisdictions so as to permit such Reinsured to obtain such
full credit.

(b) It is understood and agreed that any term or condition required by such
applicable Law in a Relevant Jurisdiction to be included in this Reinsurance
Agreement for such Reinsured to receive financial statement credit for the
reinsurance provided by this Reinsurance Agreement shall be deemed to be
incorporated in this Reinsurance Agreement by reference. The Parties shall amend
this Reinsurance Agreement or enter into one or more other agreements or execute
such additional documents as are needed to comply with the credit for
reinsurance laws and regulations and/or the requirements of the applicable
Governmental Authorities in all Relevant Jurisdictions. To the extent that any
other agreements or additional documents are deemed by Reinsurer to increase or
accelerate its Liabilities hereunder or otherwise adversely impact the economics
of this Reinsurance Agreement as respects Reinsurer, Reinsurer shall be afforded
the opportunity at its Own Expense to investigate alternatives for accomplishing
the financial statement credit objectives set forth herein; provided, however,
any such investigation of alternatives shall not cause the Reinsured to incur a
Schedule F penalty or otherwise fail to receive financial statement credit in a
timely manner.

(c) Notwithstanding anything else contained herein, under no circumstances shall
Reinsurer be required at any time to deposit funds into any trust(s) and/or
account(s) in an aggregate amount greater than 102% (or such greater percentage
as is then provided by applicable Law) of the Remaining Aggregate Limit.

ARTICLE XIII

DISPUTE RESOLUTION

13.1 Negotiation.

A Party shall, in the first instance, send written notice (“Dispute Notice”) to
the other Party to the Dispute of any dispute, controversy or claim arising out
of or relating to this Reinsurance Agreement or the breach, formation,
termination, validity, interpretation, performance, or enforceability hereof,
whether sounding in contract or tort and whether arising during or after this
Reinsurance Agreement’s formation, or after its termination, including any
Dispute as to the existence of an agreement to arbitrate or other conditions
imposed by this Section 13.1 or Section 13.2 below (a “Dispute”), which Dispute
Notice shall set forth in reasonable detail in the matters in Dispute.
Thereafter, the Parties agree that they shall first attempt to resolve Disputes
by informal discussions and negotiations, conducted in-

 

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person or telephonically, between their duly appointed Representatives. If, for
any reason, the Parties to the Dispute are unable to resolve any such Dispute
through such discussions and negotiations within thirty (30) calendar days of
the date of delivery of the Dispute Notice, then the Dispute shall be submitted
for amicable written resolution by negotiations between designated executive
officers of each Party, each with authority to resolve the Dispute. If, for any
reason, the designated executive officers are unable to reach a mutually
acceptable written resolution within forty (40) calendar days of the date of
delivery of the Dispute Notice, the Dispute shall be submitted for binding
arbitration in accordance with Section 13.2 below. All negotiations,
discussions, and communications made or conducted pursuant to the procedures set
forth in this Section 13.1 are confidential and will be treated as compromise
and settlement negotiations for purposes of the Federal Rules of Evidence and
any other applicable rules of evidence and inadmissible in the arbitration
provided for in Section 13.2 below.

13.2 Arbitration.

(a) Any and all disputes arising out of or in any way related to this Agreement
or any other Transaction Document, specifically including disputes concerning
breach, termination, validity, or alleged fraud in the inducement of this
Agreement, or any other wrongful pre-Closing conduct, shall be resolved by
arbitration in accordance with the provisions of this Article.

(b) Subject only to the provisions of (d) below and, where applicable,
Section 5.2 and Section 5.4, the procedure for the arbitration shall be the
ARIAS•U.S. Neutral Panel Rules for the Resolution of U.S. Insurance and
Reinsurance Disputes (Neutral Prov 2016) without regard to any subsequent
amendments thereto (the “Neutral Panel Rules”), with all panel members meeting
the neutral criteria set forth in Section 6.3 thereof, and with the following
modifications:

(i) the number of candidates each Party shall propose under Section 6.4 of the
Neutral Panel Rules shall be 10, and    

(ii) each Party shall strike 4 candidates from the other Party’s list of 10
prior to the ranking procedure outlined in Section 6.8 of the Neutral Panel
Rules.

(c) In the event that either Party demands arbitration of a Dispute, such
Dispute does not relate to the formation and/or validity of this Agreement or
arise under Section 5.2 or Section 5.4, and the total amount in dispute in such
arbitration is less than U.S.$1,000,000, such Dispute shall be resolved in
accordance with the ARIAS U.S. Streamlined Rules for Small Claim Disputes
(Streaml Prov 2014) (the “Streamlined Rules”).

(d) The panel shall not be obligated to follow the strict rules of evidence but
shall strictly apply the intent of the Parties as reflected in the language of
the Agreement.

(e) Any arbitration under this Article shall take place in New York, New York.

(f) The only suits, actions, or proceedings relating to a Dispute permitted to
be brought in a judicial forum are those (i) to compel arbitration, (ii) for
temporary injunctive relief in aid of arbitration or to preserve the status quo
pending the appointment of the arbitrator(s), (iii) to enforce or vacate an
arbitral award, (iv) to seek a temporary restraining order or preliminary
injunction in relation to any withdrawal from the Collateral Trust Account, or
(v) to obtain relief in connection with arbitration pursuant to the Federal
Arbitration Act. Any such proceeding shall be brought exclusively in the United
States District Court for the Southern District of New York (the “Designated
Court”), provided that if said court does not have subject matter jurisdiction

 

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then such proceeding shall be brought exclusively the Supreme Court of the State
of New York, New York County, which shall then be the Designated Court. The
Reinsured and Reinsurer each hereby irrevocably submits to the exclusive
jurisdiction of the Designated Court for such purpose and any appellate courts
thereof, except that any judgment confirming a final arbitral award hereunder
may be entered and enforced in any court having jurisdiction over any Party or
any of its assets.

(g) Each of the Reinsured and the Reinsurer acknowledges the sophistication of
the other and the extensive due diligence conducted prior to entry into this
Agreement. Accordingly, in no event and under no circumstances, including
allegations of actual fraud, may the arbitrators award the remedy of rescission,
nor may they award rescissory damages or reformation in lieu of rescission. The
provisions of this clause (g) are a limitation on the remedial powers of the
arbitrators and not on the scope of the obligation to arbitrate.

(h) In the event of any conflict between this Article and the Neutral Rules or
the Streamlined Rules, as applicable, this Article, and not the Neutral Rules or
the Streamlined Rules, as applicable, will control.

ARTICLE XIV

REGULATORY MATTERS

14.1 Regulatory Matters.

(a) If the Reinsured or the Reinsurer receives notice of, or otherwise becomes
aware of any inquiry, investigation, examination, audit or proceeding by a
Governmental Authority (other than a Tax Authority) relating to the Covered
Business, the Reinsured or the Reinsurer, as applicable, shall promptly notify
the other Party thereof, whereupon the Parties shall cooperate to resolve such
matter in accordance with the terms of this Reinsurance Agreement, as
applicable.

(b) If the Reinsured or the Reinsurer receives notice of, or otherwise becomes
aware of any enforcement action by a Governmental Authority (other than a Tax
Authority) arising out of any inquiry, investigation, examination, audit or
proceeding by such Governmental Authority, the Reinsured or the Reinsurer, as
applicable, shall promptly notify the other Party thereof, and the Parties shall
cooperate to resolve such matter.

(c) Notwithstanding any other provision of this Reinsurance Agreement to the
contrary, the Reinsured shall retain ultimate authority with respect to the
handling of all regulatory matters in respect of the Covered Business.

ARTICLE XV

ACCESS TO RECORDS & CONFIDENTIALITY

15.1 Access to Records.

The Reinsurer shall have the right to review, at the Reinsurer’s own expense and
subject to the confidentiality provision, the Reinsured’s Books and Records,
including reviewing Ceded Reinsurance cessions as respects Covered Business. The
Reinsurer’s right to review shall be ongoing and continuous until termination of
this Reinsurance Agreement. The Reinsurer’s exercise of such right shall not
significantly disrupt the Reinsured’s ordinary course operations and shall
otherwise be effectuated in a

 

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reasonable manner, giving effect to the size and scope of this transaction. The
Reinsured shall make its claims, Ceded Reinsurance and related managerial
personnel available at the reasonable request of Reinsurer to review and discuss
strategy and management of the Reinsured’s claims, claims operation and Ceded
Reinsurance allocations and collections. In addition to the Reinsured’s
reporting obligations under this Reinsurance Agreement, the Reinsured will agree
to provide such other information and reports related to the Reinsured’s claims
operation to the Reinsurer as reasonably requested. The Parties will work in
good faith to develop protocols. The Reinsurer’s access to records rights shall
not include the right to access privileged materials in which such underlying
matter is open, except to the extent that the Reinsurer can demonstrate need for
access to such privileged materials and can establish that privilege will be
protected with such reasonable cooperation of the Reinsured as may be requested
by the Reinsurer. In addition, the preparation of actuarial reports and analyses
involves consultation with internal and external counsel, such that
determinations of individual reserve levels including incurred-but-not reported
reserves may disclose the Reinsured’s privileged determinations about the
strengths of legal coverage defenses in individual matters. To protect such
privilege, information on reserves and incurred-but-not reported reserves shall
be provided in aggregate and rolled up views. The Parties will cooperate fully
to protect such legal privilege to the greatest extent possible while providing
reporting and substantiation for the reinsurance provided hereunder.

15.2 Confidentiality.

(a) The Parties (each, the “Receiving Party”) hereby covenant and agree, each on
behalf of itself and on behalf of its Affiliates, that from and after the date
hereof, the Receiving Party and its Affiliates will not disclose, give, sell,
use or otherwise divulge any Confidential Information (as defined below) of the
other Party (the “Disclosing Party”) or permit their respective Representatives
to do the same, except that each Receiving Party may disclose such Confidential
Information or portions thereof (i) if legally compelled to do so or as required
in connection with an examination by an insurance regulatory authority, (ii) to
the extent necessary for the performance of such Receiving Party’s obligations
under this Reinsurance Agreement or under any other Transaction Document,
(iii) to enforce the rights of such Receiving Party or its Affiliates under this
Reinsurance Agreement or under any other Transaction Document, (iv) to those of
such Receiving Party’s Affiliates, and to their respective Representatives in
each case who need to know such information for the foregoing purposes, (v) as
required under any applicable Law, (vi) as required by a Tax Authority to
support a position taken on any Tax Return or (vii) as required by the rules of
any stock exchange on which the stock of a Receiving Party’s Affiliate is
traded, as applicable. If the Receiving Party or its Affiliates, or any of their
respective Representatives become legally compelled to disclose any Confidential
Information (other than as required in connection with an examination by an
insurance regulatory authority or as required to a Tax Authority to support a
position taken on any Tax Return), the Receiving Party shall provide the
Disclosing Party with prompt written notice of such requirement so that the
Disclosing Party may seek a protective order or other remedy or waive compliance
with this Section 15.2(a) In the event that such protective order or other
remedy is not obtained, or the Disclosing Party waives compliance with this
Section 15.2(a), the Receiving Party or its Affiliates, as applicable, shall
furnish only that portion of Confidential Information which is legally required
to be provided and exercise its commercially reasonable efforts to obtain
assurances that appropriate confidential treatment will be accorded to the
Confidential Information.

(b) The Receiving Party, on behalf of itself and on behalf of its Affiliates and
their respective Representatives, acknowledges that a breach of its obligations
under this Section 15.2 may result in irreparable injury to the Disclosing
Party. In the event of the breach by Receiving Party or any of its Affiliates or
their respective Representatives of any of the terms and conditions of this
Section 15.2, the Disclosing Party shall be entitled to seek equitable relief,
including injunctive relief and specific performance, in addition to any other
remedies available under this Reinsurance Agreement or otherwise available in
equity or at law.

 

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(c) For the purposes of this Reinsurance Agreement, “Confidential Information”
means all confidential information (irrespective of the form of such
information) of any kind, including any analyses, compilations, data, studies,
notes, translations, memoranda or other documents, concerning the Disclosing
Party or any of its Affiliates obtained directly or indirectly from the
Disclosing Party or any of its Affiliates or Representatives in connection with
the transactions contemplated by this Reinsurance Agreement and the other
Transaction Documents, including any information regarding the Covered Business
or provisions or terms of this Reinsurance Agreement or the other Transaction
Documents to the extent confidential treatment is sought from any securities
regulator for such information (provided that, notwithstanding the foregoing,
each Party may make such disclosures in its filings with the U.S. Securities and
Exchange Commission as it believes are required), except information (i) which,
at the time of the disclosure, was ascertainable or available to the public
(other than as a result of a disclosure directly or indirectly by the Receiving
Party or any of its Affiliates, or Representatives), (ii) that is or becomes
available to the Receiving Party on a non-confidential basis from a source other
than the Disclosing Party or any of its Affiliates, or Representatives; provided
that, to the knowledge of such Receiving Party, such source was not prohibited
from disclosing such information to the Receiving Party by a legal, contractual
or fiduciary obligation owed to another Person, (iii) that the Receiving Party
can establish is already in its possession or the possession of any of its
Affiliates or Representatives (other than information furnished by or on behalf
of the Disclosing Party) or (iv) that is independently developed by the
Receiving Party or its Affiliates without the use or benefit of any information
that would otherwise be Confidential Information.

(d) In addition, the Reinsurer hereby acknowledges and agrees that any personal
information about individuals protected from disclosure (“Personal Information”)
under any applicable state and federal privacy laws (including statutes and
regulations enacted pursuant to the Gramm-Leach-Bliley Act, Public Law 106-102)
(“Privacy Laws”) will not be used or disclosed by the Reinsurer if prohibited by
Privacy Laws. The Reinsurer confirms that it has in place written and up-to-date
administrative, technical and physical safeguards to protect the security,
integrity and confidentiality of Personal Information in accordance with all
Privacy Laws to the extent relevant to this Reinsurance Agreement. Should the
Reinsurer learn or have reason to believe that Personal Information has been
disclosed in a manner contrary to Privacy Laws, the Reinsurer, upon learning of
such disclosure, shall give the Reinsured immediate written notice of such
disclosure to allow the Reinsured to evaluate its potential rights, and the
Reinsurer, at its Own Expense, shall take immediate action to remedy any such
disclosure as required by Law.

ARTICLE XVI

PUBLICITY

16.1 Publicity.

Except as required by applicable Law or stock exchange rules or regulations,
none of the Parties shall issue any press release concerning this Reinsurance
Agreement, or the transactions contemplated hereby, without obtaining the
advanced notice and consent of the other Party, which approval shall not be
unreasonably withheld, conditioned or delayed. The Parties shall cooperate with
each other in making any release or announcement.

 

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ARTICLE XVII

ERRORS AND OMISSIONS

17.1 Errors and Omissions.

Inadvertent delays, errors or omissions made in connection with this Reinsurance
Agreement or any transaction hereunder shall not relieve either Party from any
Liability which would have attached had such delay, error or omission not
occurred, provided that such error or omission is rectified promptly after
discovery; provided further, that the Party making such error or omission or
responsible for such delay shall be responsible for any additional Liability
which attaches as a result. If (a) the failure of either Party to comply with
any provision of this Reinsurance Agreement is unintentional or the result of a
misunderstanding or oversight and (b) such failure to comply is promptly
rectified, both Parties shall be restored as closely as possible to the
positions they would have occupied if no error or oversight had occurred.

ARTICLE XVIII

MISCELLANEOUS PROVISIONS

18.1 Notices.

Any notice, request, demand, waiver, consent, approval or other communication
required or permitted to be given by any Party hereunder shall be in writing and
shall be delivered personally, sent by facsimile transmission, sent by
registered or certified mail, postage prepaid, or sent by a standard overnight
courier of national reputation with written confirmation of delivery. Any such
notice shall be deemed given when so delivered personally, or if sent by
facsimile transmission, on the date received (provided that any notice received
after 5:00 p.m. (addressee’s local time) shall be deemed given at 9:00 a.m.
(addressee’s local time) on the next Business Day), or if mailed, on the date
shown on the receipt therefor, or if sent by overnight courier, on the date
shown on the written confirmation of delivery. Such notices shall be given to
the following address:

If to the Reinsurer:

National Indemnity Company

1314 Douglas Street, Suite 1400

Omaha, NE 68102-1944

Attn: Treasurer

With copies to (for information purposes only):

Berkshire Hathaway Reinsurance Division

100 First Stamford Place

Stamford, CT 06902

Attn: General Counsel

 

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If to the Reinsured:

National Union Fire Insurance Company of Pittsburgh, Pa.

175 Water Street

New York, NY 10038

Attn: Chief Ceded Reinsurance Officer

With copies to:

National Union Fire Insurance Company of Pittsburgh, Pa.

175 Water Street

New York, NY 10038

Attn: General Counsel

Any Party may change its notice provisions on fifteen (15) calendar days’
advance notice in writing to the other Party.

18.2 Entire Agreement.

This Reinsurance Agreement (including the exhibits and schedules hereto) and any
other documents delivered pursuant hereto or thereto, including the other
Transaction Documents, constitute the entire agreement among the Parties and
their respective Affiliates with respect to the subject matter hereof and
thereof and supersede all prior negotiations, discussions, writings, agreements
and understandings, oral and written, among the Parties with respect to the
subject matter hereof and thereof. The terms and conditions of the term sheet,
dated January 14, 2017 by and between the Parties hereto, are superseded and
replaced in all respects by the Transaction Documents and shall have no further
force and effect.

18.3 Waiver and Amendment.

This Reinsurance Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by an instrument in writing
signed by the Parties hereto, or, in the case of a waiver, by the Party waiving
compliance. No other security agreement between the Parties or any of their
Affiliates entered in prior to the date hereof or in the future shall in any way
modify or amend the terms of this Reinsurance Agreement. No delay on the part of
any Party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other such right, power
or privilege. No waiver of any breach of this Reinsurance Agreement shall be
held to constitute a waiver of any other or subsequent breach.

 

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18.4 Successors and Assigns.

The rights and obligations of a Party under this Reinsurance Agreement shall not
be subject to assignment (other than, subject to the other terms of this
Reinsurance Agreement, among the companies included in the Reinsured) without
the prior written consent of the other Party, and any attempted assignment
without the prior written consent of the other Party shall be invalid ab initio.
The terms of this Reinsurance Agreement shall be binding upon, inure to the
benefit of and be enforceable by and against the successors and permitted
assigns of the Parties.

18.5 Waiver of Duty of Utmost Good Faith.

Each Party absolutely and irrevocably waives resort to the duty of “utmost good
faith” or any similar principle in connection with the negotiation or execution
of this Reinsurance Agreement. The Reinsurer acknowledges and agrees that it is
entering into this Reinsurance Agreement notwithstanding the existence or
substance of any information not disclosed to it by the Reinsured and that,
except to the extent covered by an express representation or warranty contained
in this Reinsurance Agreement, the Reinsurer is assuming the risk of the
existence and substance of any such information. This waiver shall not apply to
any such duty as may exist with respect to matters arising, and actions taken,
on or after the date hereof.

18.6 Construction; Interpretation.

The Reinsured and the Reinsurer have participated jointly in the negotiation and
drafting of this Reinsurance Agreement. In the event any ambiguity or question
of intent or interpretation arises, this Reinsurance Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring or disfavoring either Party by virtue of the
authorship of any of the provisions of this Reinsurance Agreement.
Interpretation of this Reinsurance Agreement shall be governed by the following
rules of construction: (a) words in the singular shall be held to include the
plural and vice versa, and words of one gender shall be held to include the
other gender as the context requires; (b) references to the terms Preamble,
Recitals, Article, Section, paragraph, Annex and Exhibit are references to the
Preamble, Recitals, Articles, Sections, paragraphs, Annexes and Exhibits to this
Reinsurance Agreement unless otherwise specified; (c) references to “$” shall
mean U.S. dollars; (d) the word “including” and words of similar import shall
mean “including without limitation,” unless otherwise specified; (e) the word
“or” shall not be exclusive; (f) the words “herein,” “hereof,” “hereunder” or
“hereby” and similar terms are to be deemed to refer to this Reinsurance
Agreement as a whole and not to any specific Section; (g) the headings and table
of contents are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Reinsurance Agreement; (h) whenever the last
day for the exercise of any right or the discharge of any duty under this
Reinsurance Agreement falls on other than a Business Day, the Party hereto
having such right or duty shall have until the next Business Day to exercise
such right or discharge such duty; (i) if a word or phrase is defined, the other
grammatical forms of such word or phrase have a corresponding meaning;
(j) references to any statute, listing rule, rule, standard, regulation or other
Law include a reference to (i) the corresponding rules and regulations and
(ii) each of them as amended, modified, supplemented, consolidated, replaced or
rewritten from time to time; (k) references to any section of any statute,
listing rule, rule, standard, regulation or other Law include any successor to
such section; (l) references to any Person include such Person’s predecessors or
successors, whether by merger, consolidation, amalgamation, reorganization or
otherwise; (m) references to any contract or agreement (including this
Reinsurance Agreement) are to such contract or agreement as amended, modified,
supplemented or replaced from time to time, unless otherwise stated; and
(n) references to writing shall include any modes of reproducing words in any
legible form and shall include email and facsimile.

 

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18.7 Governing Law and Jurisdiction.

Except as contemplated in the definition of “Extra-Contractual Obligations”,
this Reinsurance Agreement shall be governed by and construed in accordance with
the Laws of the State of New York without regard to such state’s principles of
conflict of laws that could compel the application of the Laws of another
jurisdiction.

18.8 No Third Party Beneficiaries.

Except as contemplated in Article XI, nothing in this Reinsurance Agreement is
intended or shall be construed to give any Person, other than the Parties, any
legal or equitable right, remedy or claim under or in respect of this
Reinsurance Agreement or any provision contained herein.

18.9 Counterparts.

This Reinsurance Agreement may be executed by the Parties in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument
binding upon all of the Parties notwithstanding the fact that all Parties are
not signatories to the original or the same counterpart. Each counterpart may
consist of a number of copies hereof each signed by one, but together signed by
both of the Parties. Each counterpart may be delivered by facsimile transmission
or email, which transmission shall be deemed delivery of an originally executed
document. This Reinsurance Agreement may also be executed by electronic
signature technology employing computer software and a digital signature or
digitizer pen pad to capture a person’s handwritten signature in such a manner
that the signature is unique to the person signing and is capable of
verification to authenticate the signature

18.10 Severability.

Any term or provision of this Reinsurance Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Reinsurance
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Reinsurance Agreement in any other jurisdiction, so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any Party. If any provision of this
Reinsurance Agreement is so broad as to be unenforceable, that provision shall
be interpreted to be only so broad as is enforceable. In the event of such
invalidity or unenforceability of any term or provision of this Reinsurance
Agreement, the Parties shall use their commercially reasonable efforts to reform
such terms or provisions to carry out the commercial intent of the Parties as
reflected herein, while curing the circumstance giving rise to the invalidity or
unenforceability of such term or provision.

18.11 Agent.

(a) National Union Fire Insurance Company of Pittsburgh, Pa. (together with any
of its successors) shall be deemed to be and is hereby designated and appointed
as the agent of the Reinsured for purposes of sending or receiving notices and
all communications required under this Reinsurance Agreement and for remitting
and/or receiving any amounts due any Party to this Reinsurance Agreement. The
Reinsurer and Reinsured hereby agree that the Reinsured shall be entitled to
appoint an alternative Party to act as agent on behalf of the Reinsureds in
substitution for National Union Fire Insurance Company of Pittsburgh, Pa. (the
“Substitute Agent”) at any time upon giving 30 days’ written notice to the
Reinsurer (and the Reinsurer shall have no right to object to such appointment)
provided always that the Substitute Agent (i) is a wholly-owned subsidiary of
American International Group, Inc., and (ii) undertakes in writing to the
Reinsurer

 

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to be bound by the above terms (as if references to National Union Fire
Insurance Company of Pittsburgh, Pa. were references to the Substitute Agent).
Following expiry of the 30 day notice period, and subject to the Reinsurer
having received the Substitute Agent’s written undertaking to be bound by the
above terms, the Substitute Agent shall act as the agent of the Reinsureds in
place of National Union Fire Insurance Company of Pittsburgh, Pa. It is
understood, however, that, such 30-day notice period shall not apply in the
event of an insolvency of National Union Fire Insurance Company of Pittsburgh,
Pa. or any Substitute Agent. All payments to National Union Fire Insurance
Company of Pittsburgh, Pa. or the Substitute Agent by the Reinsurer are deemed
paid to and received by the Reinsureds.

(b) Further, each Reinsured, as a beneficiary of the Collateral Trust Agreement,
hereby appoints National Union Fire Insurance Company of Pittsburgh, Pa. as the
Beneficiaries’ Agent thereunder to act as its sole and exclusive agent in
connection therewith and authorizes the Beneficiaries’ Agent to exercise such
rights, powers and discretion as are required to enable the Beneficiaries’ Agent
to discharge such agency on the terms hereof together with all such rights,
powers and discretions as are reasonably incidental thereto. Each Reinsured
agrees that any communications issued or action taken by the Beneficiaries’
Agent on its behalf under the Collateral Trust Agreement shall be effective as a
communication made or action taken by that Reinsured thereunder, and neither the
Grantor nor the Trustee shall in any circumstances be required to confirm with
each or any individual Reinsured that any such communication has been given or
action taken by the Beneficiaries’ Agent and shall in no circumstances be deemed
to be liable to any Reinsured if the Beneficiaries’ Agent shall have failed to
inform that Reinsured of any matter or if the Beneficiaries’ Agent shall not
have obtained any requisite approval or consent from a Reinsured for any such
communication issued or action taken by it hereunder. The Reinsurer and
Reinsured hereby agree that the Reinsured shall be entitled to appoint an
alternative Party to act as beneficiaries’ agent on behalf of the Reinsureds in
substitution for National Union Fire Insurance Company of Pittsburgh, Pa.,
provided always that such substitute is a wholly-owned, direct or indirect
subsidiary of American International Group, Inc. and undertakes in writing to
the Reinsurer to be bound by the above terms as if the references to National
Union Fire Insurance Company of Pittsburgh, Pa. were references to such
substitute. The Reinsurer shall cooperate with the Reinsured to make any
necessary changes to the Collateral Trust Agreement to implement such change so
long as such change would not result in a Reinsurance Credit Event or Partial
RCE or otherwise constitute an undue burden.

18.12 Incontestability.

Each Party hereby acknowledges that this Reinsurance Agreement, and each and
every provision hereof, is and shall be enforceable according to its terms. Each
Party hereby irrevocably waives any right to contest in any respect the validity
or enforceability of this Reinsurance Agreement or any of the provisions hereof.
Each Party hereby acknowledges that this Reinsurance Agreement, and each and
every provision hereof, is and shall be enforceable according to its terms. Each
Party hereby irrevocably waives any right to contest in any respect the validity
or enforceability hereof. This Reinsurance Agreement shall not be subject to
rescission, or to an award of damages, restitution, or reformation in lieu of
rescission, on any basis whatsoever, including intentional fraud. Nothing in
this Section 18.12 relieves a Party of Liability, whether for damages or for
specific performance, for breach of this Reinsurance Agreement. Nothing herein
shall be construed to prevent a claim for damages for intentional fraud in the
inducement of this Reinsurance Agreement or any of the Transaction Documents, or
any of the transactions contemplated hereby or thereby, by either Reinsurer
against the Reinsured or by Reinsured against Reinsurer, provided, however, that
(i) no such claim shall be brought against any individual but only against the
entity or entities on whose behalf such individual acted, (ii) any such claim
shall be brought in an arbitration pursuant to Article XIII hereof, and
(iii) the measure of damages with respect to any such claim is that set forth in
Section 8.4.

 

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18.13 Currency.

All financial data required to be provided pursuant to the terms of this
Reinsurance Agreement shall be expressed in Dollars. All payments and all
settlements of account between the Parties shall be in United States currency
unless otherwise agreed by the Parties. Where a transaction is originally
recorded in a currency other than Dollars, it shall be converted to Dollars at
the time and at the conversion rate used on the books of the Reinsured in the
ordinary course of business.

18.14 Specific Performance.

The only equitable remedies set forth in this Reinsurance Agreement are as
specifically set forth in Sections 5.2(c) and 15.2. For the sake of clarity,
this limitation shall not be applicable to any other Transaction Document.

18.15 Taxes.

The Reinsurer will allow for the purpose of paying the Federal Excise Tax, only
to the extent applicable, the applicable percentage of the premium payable
hereon to the extent such premium is subject to the Federal Excise Tax. Upon
prior written request therefor, the Reinsurer shall provide or otherwise make
available updated documentation on forms approved by the United States Internal
Revenue Service that establish an exemption from withholding of premium payable
hereunder. If the Reinsurer fails to do so or ceases to be exempt from
withholding in accordance with the Foreign Account Tax Compliance Act (“FATCA”),
the Reinsured shall withhold the applicable percentage of premium payable
hereunder and the Reinsurer shall allow such withholding. Interest shall not be
payable on any amounts withheld in accordance herewith, nor shall any such
amounts be subject to offset. In the event any return of premium is due to the
Reinsured, the Reinsurer will return the premium paid hereunder and the
Reinsured or its agent will recover Taxes paid to the United States Government
in accordance herewith. Notwithstanding the foregoing, in the event that the
Reinsured’s attempt to recover such Taxes is denied, contested or disputed by
the United States Government, then the Reinsurer shall reimburse the Reinsured
for such Taxes within thirty (30) days of receipt of written notice of such
denial, contest or dispute. The Reinsurer agrees to indemnify the Reinsured for
any Tax liability, or interest or penalty related to such tax liability, that
the Reinsured may incur by reason of (i) any inaccurate or invalid documentation
provided to establish an exemption from FATCA withholding, or (ii) a violation
by the Reinsurer of FATCA (or any modification thereof) or Internal Revenue Code
Section 4371 (or any amendments or supplements thereto), or (iii) a violation by
the Reinsurer of any other applicable withholding tax requirement.

18.16 Expenses.

Regardless of whether any or all of the transactions contemplated by this
Reinsurance Agreement and the other Transaction Documents are consummated, and
except as otherwise expressly provided herein or therein, the Reinsurer and the
Reinsured shall each bear their respective direct and indirect fees, costs and
expenses incurred in connection with the negotiation, preparation and execution
of this Reinsurance Agreement, the other Transaction Documents and the
consummation of the transactions contemplated hereby or thereby, including all
fees and expenses of its Representatives.

18.17 Service of Suit.

(a) This Section 18.17 shall only be applicable if the Reinsurer becomes
domiciled outside of the United States or is neither licensed nor accredited by
the state(s) in which any company included in the Reinsured is domiciled.

 

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(b) At the request of the Reinsured and notwithstanding the provisions of
Article XIII or Section 18.1, the Reinsurer agrees to submit to the jurisdiction
of any court of competent jurisdiction within the United States and agrees to
comply with the requirements necessary to give the court jurisdiction with
respect to any and all court proceedings that the Reinsured may initiate in
connection with an arbitration, including proceedings to compel, stay or enjoin
arbitration or to confirm, vacate, modify or correct an arbitration award. The
Reinsurer agrees to abide by the final decision of that court or of an appellate
court in the event of an appeal, and consents to any effort to enforce the final
decision of that court within its home jurisdiction, including the granting of
full faith and credit or comity in the Reinsurer’s home jurisdiction or any
other jurisdiction where the Reinsurer is subject to jurisdiction. Nothing
herein constitutes or should be understood to constitute a waiver of the rights
of the Reinsurer to remove such an action to a United States District Court, or
to seek a transfer of such a case to another court as permitted by the laws of
the United States or of any state in the United States, or to commence an action
in connection with the arbitration in the Designated Court. It is further agreed
that service of process on the Reinsurer in such suit may be made upon Clyde &
Co., The Chrysler Building, 405 Lexington Avenue, New York, New York 10174, or
such other entity at its New York address as is specifically designated by the
Reinsurer in writing to the Reinsured, and that, in any suit instituted against
the Reinsurer under this Reinsurance Agreement, the Reinsurer will abide by the
final decision of such court or of any appellate court in the event of an
appeal.

(c) Clyde & Co., or such other designated entity, is authorized and directed to
accept service of process on behalf of the Reinsurer in any such suit and/or
upon the request of the Reinsured to give a written undertaking to the Reinsured
that it will enter a general appearance on the Reinsurer’s behalf in the event
such a suit shall be instituted.

(d) Further, pursuant to any statute of any state, territory or district of the
United States that makes provision therefor, the Reinsurer also hereby
designates the Superintendent, Commissioner or Director of Insurance or other
officer specified for that purpose in the statute, or his or her successor or
successors in office, as its true and lawful attorney upon whom may be served
any lawful process in any action, suit or proceeding instituted by or on behalf
of the Reinsured or any beneficiary hereunder arising out of this Reinsurance
Agreement, and hereby designates Clyde & Co., or such other entity as
designated, as the entity to whom such officer is authorized to mail such
process or a true copy thereof.

(e) Nothing in this Section 18.17 shall be read to conflict with or override the
obligation of the Parties to arbitrate any and all disputes or differences
arising out of this Reinsurance Agreement.

(The remainder of this page has been intentionally left blank.)

 

48

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IN WITNESS WHEREOF, the Parties hereby execute this Reinsurance Agreement as of
the day and year first set forth above.

 

AIG ASSURANCE COMPANY AIG PROPERTY CASUALTY COMPANY AIG SPECIALTY INSURANCE
COMPANY AIU INSURANCE COMPANY AMERICAN HOME ASSURANCE COMPANY COMMERCE AND
INDUSTRY INSURANCE COMPANY GRANITE STATE INSURANCE COMPANY ILLINOIS NATIONAL
INSURANCE CO. LEXINGTON INSURANCE COMPANY NATIONAL UNION FIRE INSURANCE COMPANY
OF PITTSBURGH, PA NEW HAMPSHIRE INSURANCE COMPANY THE INSURANCE COMPANY OF THE
STATE OF PENNSYLVANIA By:  

/s/ Jeremy D. Edgecliffe-Johnson

  Name:   Jeremy D. Edgecliffe-Johnson   Title:   President and Chief Executive
Officer NATIONAL INDEMNITY COMPANY By:  

/s/ Brian G. Snover

Name:   Brian G. Snover Title:   Senior Vice President

[Signature Page – Aggregate Excess of Loss Reinsurance Agreement]

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Exhibit A

Collateral Trust Agreement

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TRUST AGREEMENT

by and among

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.

and

NATIONAL INDEMNITY COMPANY

and

WELLS FARGO BANK, NATIONAL ASSOCIATION

Dated as of January 20, 2017

 

 

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Table of Contents

 

         Page  

ARTICLE I

DEFINED TERMS

  

  

Section 1.1  

Definitions

     1    Section 1.2  

Interpretation

     5   

ARTICLE II

MODIFICATION UPON A COLLATERAL TRIGGERING EVENT

  

  

Section 2.1  

Collateral Triggering Event

     6   

ARTICLE III

MODIFICATION UPON A REINSURANCE CREDIT EVENT

  

  

Section 3.1  

Reinsurance Credit Event

     6   

ARTICLE IV

CREATION OF TRUST ACCOUNT

  

  

Section 4.1  

Obligations of the Beneficiaries’ Agent and the Grantor

     7    Section 4.2  

Purpose of the Trust

     7    Section 4.3  

Grantor Trust for United States Federal Income Tax Purposes

     8    Section 4.4  

Designation of Agents

     8    Section 4.5  

Title to Assets

     8   

ARTICLE V

MAINTENANCE OF THE TRUST

  

  

Section 5.1  

Substitution of Trust Account Assets

     8    Section 5.2  

Valuation of Assets

     8    Section 5.3  

Quarterly Certification

     9   

ARTICLE VI

RELEASE AND ADJUSTMENT OF TRUST ACCOUNT ASSETS

  

  

Section 6.1  

Adjustment of Trust Account Assets

     9    Section 6.2  

Release of Trust Account Assets to the Beneficiaries’ Agent

     10    Section 6.3  

Release of Trust Account Assets to the Grantor

     10   

ARTICLE VII

DUTIES OF THE TRUSTEE

  

  

Section 7.1  

Acceptance of Assets by the Trustee

     11   

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Section 7.2  

Collection of Interest and Dividends; Voting Rights; Investment by the Trustee

     11    Section 7.3  

Obligations of the Trustee

     11    Section 7.4  

Responsibilities of the Trustee

     12    Section 7.5  

Books and Records

     13    Section 7.6  

Activity Reports

     13    Section 7.7  

Resignation or Removal of the Trustee; Appointment of Successor Trustee

     13    Section 7.8  

Release of Information

     13    Section 7.9  

Indemnification of the Trustee

     14    Section 7.10  

Charges of the Trustee

     14    Section 7.11  

Limitations of the Trustee

     14    Section 7.12  

Concerning the Trustee

     14   

ARTICLE VIII

GRANT OF SECURITY INTEREST

  

  

Section 8.1   Establishment and Maintenance of the Trust Account      15   
Section 8.2   Grant of Security Interest      15    Section 8.3   Limitation on
Exercise of Remedies      16    Section 8.4   Other Matters      16   

ARTICLE IX

TERMINATION

  

  

Section 9.1   Termination      16    Section 9.2   Disposition of Assets Upon
Termination      16    Section 9.3   No Termination Due to Insolvency of
Beneficiaries or Beneficiaries’ Agent      16   

ARTICLE X

GENERAL PROVISIONS

  

  

Section 10.1   Notices      17    Section 10.2   Entire Agreement      18   
Section 10.3   Waiver and Amendment      18    Section 10.4   Successors and
Assigns      18    Section 10.5   Headings      19    Section 10.6   Governing
Law and Jurisdiction      19    Section 10.7   No Third Party Beneficiaries     
19    Section 10.8   Counterparts      19    Section 10.9   Severability      19
   Section 10.10   Incontestability      19    Section 10.11   Set-Off      19
   Section 10.12   Currency      19   

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ARTICLE XI

DISPUTE RESOLUTION; ARBITRATION

Section 11.1   Arbitration of Disputes Not Resolved by Negotiation    20
Section 11.2   Procedure for Arbitration and Mandatory Pre-Arbitration
Negotiation    20 Section 11.3   Permitted Judicial Proceedings    20
Section 11.4   Disputes to Which the Trustee is a Required Party    20

ARTICLE XII

EFFECTIVE DATE AND EXECUTION

Appendix A   Trust Provisions Following a Reinsurance Credit Event   

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TRUST AGREEMENT

THIS TRUST AGREEMENT (this “Trust Agreement”) is made and entered into as of
January 20, 2017, by and among National Union Fire Insurance Company of
Pittsburgh, Pa., a Pennsylvania property and casualty insurance company acting
on its own behalf and as agent for all Beneficiaries named herein
(“Beneficiaries’ Agent”), National Indemnity Company, a Nebraska property and
casualty insurance company (the “Grantor”) and Wells Fargo Bank, National
Association, a national banking association, as trustee (“Trustee”).

WHEREAS, the Beneficiaries and the Grantor have entered into an Aggregate Excess
of Loss Reinsurance Agreement, dated as of January 20, 2017 (the “Reinsurance
Agreement”);

WHEREAS, the Reinsurance Agreement contemplates that the Grantor and
Beneficiaries’ Agent enter into this Trust Agreement whereby the Grantor creates
a trust to hold assets as security for the satisfaction of the obligations of
the Grantor to Beneficiary under the Reinsurance Agreement; and

WHEREAS, the parties intend that, in the event of a Reinsurance Credit Event,
certain provisions of this Trust Agreement shall cease to be effective, and
other provisions shall be effective thereafter, as described in Article III.

NOW THEREFORE, the Grantor, the Beneficiaries’ Agent and the Trustee (each
individually, a “Party” and collectively, the “Parties”), in consideration of
the mutual covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
upon the terms and conditions hereinafter set forth, agree as follows:

ARTICLE I

DEFINED TERMS

Section 1.1 Definitions. The following terms, when used in this Trust Agreement,
shall have the meanings set forth in this Section 1.1. The terms defined below
shall be deemed to refer to the singular or plural, as the context requires.

(a) “Actually Paid” shall have the meaning provided in the Reinsurance
Agreement.

(b) “Affiliate” means, with respect to any Person, any other Person that,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person, where “control” means the possession, directly or indirectly,
of the power to direct or cause the direction of the management policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.

(c) “Aggregate Limit” shall have the meaning set forth in the Reinsurance
Agreement.

(d) “Assets” means the assets held in the Trust Account, including, as
applicable, Eligible Investments and Permitted Investments.

(e) “Beneficiaries’ Agent” shall have the meaning set forth in the preamble
hereof.

(f) “Beneficiary” means each of AIG Assurance Company, AIG Property Casualty
Company, AIG Specialty Insurance Company, AIU Insurance Company, American Home
Assurance Company, Commerce and Industry Insurance Company, Granite State
Insurance Company, Illinois National Insurance Company, Lexington Insurance
Company, National Union Fire Insurance Company of Pittsburgh, Pa., New Hampshire
Insurance Company, and The Insurance Company of the State of Pennsylvania,
individually or collectively, unless otherwise stated herein,

(g) “Business Day” means any day other than a Saturday, Sunday or a day on which
commercial banks in New York are required or authorized by law to be closed.

 

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(h) “Code” has the meaning set forth in Section 7.4(c).

(i) “Collateral” has the meaning set forth in Section 8.2.

(j) “Collateral Triggering Agreement” means any agreement entered into by the
Grantor at any time since August 31, 2010 with any Person and with an effective
date after the date hereof, that contains a provision requiring the Grantor to
post collateral (whether by the procurement of a letter of credit, the
establishment of a collateral trust or any other means) for the benefit of the
counterparty to such agreement upon the occurrence of certain specified events,
changes or conditions. For the avoidance of doubt, any agreement that requires
the establishment of collateral at the time such agreement becomes effective
absent any other triggering events shall not be considered a Collateral
Triggering Agreement.

(k) “Collateral Reduction Event” shall have the meaning set forth in Section
2.1(c).

(l) “Collateral Triggering Event” shall have the meaning set forth in Section
2.1(a).

(m) “Consideration” shall have the meaning set forth in the Reinsurance
Agreement.

(n) “Covered Business” shall have the meaning set forth in the Reinsurance
Agreement.

(o) “Designated Court” shall have the meaning set forth in the Reinsurance
Agreement.

(p) “Dispute” shall have the meaning set forth in the Reinsurance Agreement.

(q) “Eligible Investments” means, with respect to Assets conforming to the
provisions of this Trust Agreement prior to the occurrence of a Reinsurance
Credit Event, cash and any investments of the types permitted under the laws and
regulations of Grantor’s domiciliary state for property and casualty insurance
companies; provided, however, that no Eligible Investments may be issued or
guaranteed by an institution that is the parent, a Subsidiary or an Affiliate of
Grantor; and provided, further, no single Eligible Investment (except cash and
the Wells Fargo Government Money Market Fund) shall at any time constitute more
than twenty-five percent (25%) of the fair market value of the Assets in the
Trust Account. All Eligible Investments deposited in the Trust Account shall be
free and clear of all liens, charges or encumbrances at all times.

(r) “Final Order” means (a) an order or award of an arbitration panel that is by
its terms final and as to which the time to petition for review has expired or
(b) an order or judgment of a court of competent jurisdiction (including without
limitation an order of the Designated Court with respect to an arbitration
award) that is by its terms final and is no longer subject to appeal, either as
of right or discretionary.

(s) “Governmental Authority” means any government, political subdivision, court,
board, commission, regulatory or administrative agency or other instrumentality
thereof, whether federal, state, provincial, local or foreign and including any
regulatory authority which may be partly or wholly autonomous.

(t) “Grantor” shall have the meaning set forth in the preamble hereof.

(u) “Impacted Reinsureds” shall have the meaning set forth in the Reinsurance
Agreement.

(v) “Initial Security Amount” shall have the meaning set forth in Section 4.1.

(w) “Insurance Commissioner” means the Governmental Authority responsible for
the regulation of insurance companies in the jurisdictions in which each company
included in the Beneficiary is domiciled.

(x) “Law” shall have the meaning set forth in the Reinsurance Agreement.

(y) “LPT Beneficiary” means the “Beneficiary” as defined in the LPT Trust
Agreement.

 

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(z) “LPT Eligible Investments” shall mean “Eligible Investments” as defined in
the LPT Trust Agreement.

(aa) “LPT Permitted Investments” shall mean “Permitted Investments” as defined
in the LPT Trust Agreement.

(bb) “LPT Required Amount” shall mean “Required Amount”, as defined in the LPT
Trust Agreement.

(cc) “LPT Trust Account” shall mean the “Trust Account”, as defined in the LPT
Trust Agreement.

(dd) “LPT Trust Agreement” means the Trust Agreement, by and among Eaglestone
Reinsurance Company, National Union Fire Insurance Company of Pittsburgh, Pa.,
National Indemnity Company and Wells Fargo Bank, National Association, dated as
of June 17, 2011.

(ee) “Partial RCE” shall have the meaning set forth in the Reinsurance
Agreement.

(ff) “Party” shall have the meaning set forth in the recitals hereof.

(gg) “Permitted Investments” means, with respect to Assets conforming to the
provisions of this Trust Agreement, upon the occurrence and during the pendency
of a Reinsurance Credit Event, cash and any investments of the types permitted
under the laws and regulations of the domiciliary states or countries of each
company included in the Beneficiary for trusts providing full statutory
financial statement credit for reinsurance ceded by property and casualty
insurance companies, provided, however, that no Permitted Investments may be
issued or guaranteed by an institution that is the parent, a Subsidiary or an
Affiliate of Grantor. All Permitted Investments deposited in the Trust Account
shall be free and clear of all liens, charges or encumbrances at all times.

(hh) “Person” means any natural person, corporation, partnership, limited
liability company, trust, joint venture or other entity, including any
Governmental Authority.

(ii) “Proceeds” shall have the meaning set forth in the UCC.

(jj) “Quarterly Certification” shall have the meaning set forth in Section 5.3.

(kk) “Reinsurance Agreement” shall have the meaning set forth in the recitals.

(ll) “Reinsurance Credit Event” shall have the meaning set forth in the
Reinsurance Agreement.

(mm) “Reinsurance Credit Event Condition” shall mean with respect to any
particular Reinsurance Credit Event Notice, the occurrence of one or more of the
following events:

(i) five (5) Business Days shall have elapsed from the date on which the Trustee
received the Reinsurance Credit Event Notice and the Trustee shall not have
received any letter or other instrument in writing from the Grantor evidencing
the intent of the Grantor to dispute that a Reinsurance Credit Event has
occurred; or

(ii) the Grantor and the Beneficiaries’ Agent shall have mutually agreed in
writing that a Reinsurance Credit Event has occurred; or

(iii) ten (10) Business Days shall have elapsed from the date on which the
Trustee received the Reinsurance Credit Event Notice and the Trustee shall not
have been served with a temporary restraining order or preliminary injunction
from the Designated Court suspending the effectiveness of the Reinsurance Credit
Event Notice.

 

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(nn) “Reinsurance Credit Event Notice” shall have the meaning set forth in the
Reinsurance Agreement.

(oo) “Reinsurance Credit Event Termination Condition” shall mean with respect to
any particular Reinsurance Credit Event Termination Notice, the occurrence of
one of the following events:

(i) five (5) Business Days shall have elapsed between the date on which the
Trustee received the Reinsurance Credit Event Termination Notice (along with
written evidence of delivery of a copy of such notice to the Beneficiaries’
Agent) and the Trustee shall not have received any letter or other instrument in
writing from the Beneficiaries’ Agent evidencing the intent of the
Beneficiaries’ Agent to dispute that a Reinsurance Credit Termination Event has
occurred; or

(ii) The Grantor and the Beneficiaries’ Agent shall have mutually agreed in
writing that a Reinsurance Credit Termination Event has occurred; or

(iii) The Trustee shall have received a certificate from the Grantor (along with
written evidence of delivery of a copy of such notice to the Beneficiaries’
Agent) certifying that an order from an arbitration panel has been entered
specifying that a Reinsurance Credit Termination Event has occurred, with a copy
of such order attached.

(pp) “Reinsurance Credit Event Termination Notice” means a notice that a
Reinsurance Credit Event has terminated.

(qq) “Reinsurance Credit Termination Event” means the termination of a
Reinsurance Credit Event.

(rr) “Reinsurer” shall have the meaning provided in the Reinsurance Agreement.

(ss) “Relevant Jurisdictions” shall have the meaning set forth in the
Reinsurance Agreement.

(tt) “Required Amount” means, at any time, an amount equal to the lesser of
(i) net Reserves reinsured under the Reinsurance Agreement and (ii) the
Aggregate Limit less the amount of Ultimate Net Loss Actually Paid by Grantor
under the Reinsurance Agreement at such time.

(uu) “Reserves” has the meaning set forth in the Reinsurance Agreement.

(vv) “SAP” means, as to any entity, the statutory accounting principles
prescribed or permitted by the Governmental Authority responsible for the
regulation of insurance companies in the jurisdiction in which such entity is
domiciled.

(ww) “Security Amount” means, at any time, (i) prior to the occurrence of a
Collateral Triggering Event, an amount at such time equal to the Initial
Security Amount minus any Ultimate Net Loss Actually Paid by the Grantor under
the Reinsurance Agreement; and (ii) on and after the occurrence of a Collateral
Triggering Event, an amount equal to the greater of (x) the amount reflected in
clause (i) of this “Security Amount” definition, disregarding the reference to
Collateral Triggering Event therein, and (y) the Required Amount, in each case
as calculated at such time.

(xx) “Security Entitlement” means “security entitlement” as defined in the UCC.

(yy) “Subject Liabilities” has the meaning set forth in the Reinsurance
Agreement.

(zz) “Subsidiary” means, when used with respect to any Person, any corporation,
limited liability company, partnership, association, trust or other entity of
which securities or other ownership interests representing more than 50% of the
equity or more than 50% of the ordinary voting power (or, in the case of a
partnership, more than 50% of the general partnership interests) are, as of such
date, owned by such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person.

 

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(aaa) “Third Party Appraiser” means an independent appraisal firm which is
mutually acceptable to the Grantor and the Beneficiaries’ Agent, or, if Grantor
and Beneficiaries’ Agent cannot agree on such an appraisal firm, then the amount
or other matter to be determined by such an appraisal firm shall be treated as
an amount or matter subject to dispute that shall be resolved in accordance with
Section 11.1 of this Trust Agreement.

(bbb) “Transaction Documents” has the meaning set forth in the Reinsurance
Agreement.

(ccc) “Trust” means the trust formed hereunder, including such trust following a
Reinsurance Credit Event.

(ddd) “Trust Account” shall have the meaning set forth in Section 4.1(a).

(eee) “Trust Agreement” shall have the meaning set forth in the preamble hereof.

(fff) “Trustee” shall have the meaning set forth in the preamble hereof.

(ggg) “UCC” means the Uniform Commercial Code as in effect from time to time in
the State of New York.

(hhh) “Ultimate Net Loss” shall have the meaning provided in the Reinsurance
Agreement.

Section 1.2 Interpretation. When a reference is made in this Trust Agreement to
a Section or Article, such reference shall be to a section or article of this
Trust Agreement unless otherwise clearly indicated to the contrary. The Article
and Section headings contained in this Trust Agreement are solely for the
purpose of reference, are not part of the agreement of the parties and shall not
affect in any way the meaning or interpretation of this Trust Agreement.
Whenever the words “include,” “includes” or “including” are used in this Trust
Agreement, they shall be deemed to be followed by the words “without
limitation.” The words “hereof,” “herein” and “herewith” and words of similar
import shall, unless otherwise stated, be construed to refer to this Trust
Agreement as a whole and not to any particular provision of this Trust
Agreement. The meaning assigned to each term used in this Trust Agreement shall
be equally applicable to both the singular and the plural forms of such term and
to both the masculine as well as the feminine and neuter genders of such term.
Any agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
then in effect and (in the case of statutes) by succession of comparable
successor statutes. Where a word or phrase is defined herein, each of its other
grammatical forms shall have a corresponding meaning. Whenever the last day for
the exercise of any right or the discharge of any duty under this Trust
Agreement falls on other than a Business Day, the Party hereto having such right
or duty shall have until the next Business Day to exercise such right or
discharge such duty. References to a Person are also to its predecessors,
successors, whether by merger, consolidation, amalgamation, reorganization or
otherwise, and permitted assigns. References to writing shall include all modes
of reproducing words in any legible form and shall include email and facsimile.
The words “paid” and “received” with respect to any item shall mean that the
liability on the items has been discharged as of such time, whether by payment,
by offset or otherwise and the amount of the liability that is “paid” or
“received”, as applicable, shall be measured by the amount of the consideration
given for discharging the liability, not by the carrying value of the liability
prior to discharge.

 

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ARTICLE II

MODIFICATION UPON A COLLATERAL TRIGGERING EVENT

Section 2.1 Collateral Triggering Event.

(a) If, at any time after the date hereof, the Grantor is required to post
collateral pursuant to the terms of one or more Collateral Triggering Agreements
as a result of the occurrence of one or more events, changes or conditions
specified in any such Collateral Triggering Agreement, and the amount of
collateral required to be posted by the Grantor pursuant to such Collateral
Triggering Agreement(s) is reasonably expected by the Grantor to equal, either
on an individual or aggregate basis, one billion dollars ($1,000,000,000) or
more (such event, the “Collateral Triggering Event”), then the Grantor shall
promptly notify the Beneficiaries’ Agent of the Collateral Triggering Event and
take the following additional actions as set forth in this Section 2.1.

(b) Upon the occurrence of a Collateral Triggering Event, all references in this
Trust Agreement to “Security Amount” shall be modified in accordance with its
definition to give effect to such Collateral Triggering Event. In addition, as
soon as is practicable, but no later than contemporaneously with the first
posting of the collateral under any Collateral Triggering Agreement that results
in the Grantor posting one billion dollars ($1,000,000,000) or more of
collateral either on an individual or aggregate basis, the Grantor shall deposit
additional assets into the Trust Account so that the aggregate fair market value
of the Eligible Investments or Permitted Investments, as applicable, in the
Trust Account equals the newly computed Security Amount.

(c) Until such time as (i) all events, changes or conditions that gave rise to
the collateral requirement under any Collateral Triggering Agreements cease to
exist or apply and (ii) the Grantor has withdrawn or reduced the aggregate
amount of collateral posted under Collateral Triggering Agreements ((i) and
(ii) together, the “Collateral Reduction Event”), the Grantor shall ensure that
the Trust Account shall hold at all times Eligible Investments or Permitted
Investments, as applicable, with a fair market value of no less than 100% of the
Security Amount computed per clause (ii) of the definition of “Security Amount”;
provided, however, if a Collateral Reduction Event has occurred, the Security
Amount shall be reduced by a percentage which is proportionate to each
percentage reduction of all collateral posted under the Collateral Triggering
Agreements; provided, further, however, in no event shall the Security Amount be
reduced to an amount less than 100% of the Security Amount computed per clause
(i) of the definition of “Security Amount”; and provided, further, in no event
shall the Security Amount be reduced by reason of a withdrawal or reduction of
the aggregate amount of collateral posted under any Collateral Triggering
Agreement(s) to the extent that the withdrawn collateral was applied to satisfy
the obligations secured thereby. Nothing herein shall interfere with the
Grantor’s obligations hereunder during the continuance of a Reinsurance Credit
Event.

ARTICLE III

MODIFICATION UPON A REINSURANCE CREDIT EVENT

Section 3.1 Reinsurance Credit Event.

(a) Notwithstanding anything in this Trust Agreement to the contrary, in the
event the Beneficiaries’ Agent provides a Reinsurance Credit Event Notice to the
Trustee pursuant to the Reinsurance Agreement, along with written evidence of
delivery of a copy of such notice to the Grantor, certifying that a Reinsurance
Credit Event has occurred, upon the fulfillment of a Reinsurance Credit Event
Condition, the provisions set forth in Sections 4.1, 4.2, 5.1(a), 5.3, 6.1, 6.2,
6.3, 7.4, 7.5, 7.8, 7.11 and 10.2 hereof shall automatically be replaced by the
provisions set forth in Appendix A hereof for the equivalent Sections and
thereafter not be effective, and the provisions set forth in Appendix A,
including Section 9.4, shall automatically become effective without further
action by any Party, but only as respects

 

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the Beneficiaries specified in the Reinsurance Credit Event Notice. In addition,
any other provisions required under Law and regulations governing trusts
providing full statutory financial statement credit for reinsurance ceded by
property and casualty insurance companies in the Relevant Jurisdictions to the
extent applicable to the companies included in the Beneficiary, and specified in
the Reinsurance Credit Event Notice, shall be automatically incorporated herein.
Notwithstanding the foregoing, the Trust created hereunder shall continue in
existence.

(b) Following a Reinsurance Credit Event that is not a Partial RCE, the Grantor
shall be required to replace the Assets held in the Trust Account that are not
Permitted Investments with Assets that are Permitted Investments within five
(5) Business Days following the fulfillment of a Reinsurance Credit Event
Condition. Simultaneously with such replacement of the Assets, the Grantor shall
deposit into the Trust Account sufficient additional Assets so that the
aggregate fair market value of the Permitted Investments in the Trust Account
equals the Required Amount. Following a Partial RCE, the Grantor shall, within
five (5) Business Days, be required to replace or deposit sufficient Assets so
that the aggregate fair market value of Permitted Investments in the Trust
Account equals the Required Amount for the Impacted Reinsureds.

(c) The provisions set forth in Appendix A shall remain effective only for the
time during which the event, change or condition giving rise to the Reinsurance
Credit Event continues to apply. In the event the Beneficiaries’ Agent provides
a Reinsurance Credit Event Termination Notice to the Trustee pursuant to the
Reinsurance Agreement, along with written evidence of delivery of a copy of such
notice to the Grantor, certifying that a Reinsurance Credit Termination Event
has occurred, then upon the subsequent fulfillment of a Reinsurance Credit Event
Termination Condition, (i) the provisions set forth in Sections 4.1, 4.2,
5.1(a), 5.3, 6.1, 6.2, 6.3, 7.4, 7.5, 7.8, 7.11 and 10.2 hereof shall
automatically again be effective and replace the provisions set forth in
Appendix A without further action by any party and (ii) Beneficiaries’ Agent
shall promptly provide its approval for the return and/or substitution of assets
to or by the Grantor so that the aggregate value of Eligible Investments in the
Trust Account equals or exceeds the Security Amount.

ARTICLE IV

CREATION OF TRUST ACCOUNT

Section 4.1 Obligations of the Beneficiaries’ Agent and the Grantor.

(a) Prior to the execution of this Trust Agreement, the Grantor shall have
procured with the Trustee, in the name of the Trustee, to be held for the sole
benefit of the Beneficiaries’ Agent, acting on its own behalf and as agent for
one or more Beneficiaries, pursuant to the provisions of this Trust Agreement, a
segregated trust account maintained by the Trustee with account number
[Redacted] under account name [Redacted] (which shall be hereinafter referred to
as the “Trust Account”). Following payment by the Beneficiary of each
installment of Consideration and interest thereon under Section 3.1 of the
Reinsurance Agreement, the Grantor shall be permitted as and when it deems
appropriate to substitute and replace the cash Consideration Actually Paid by
Beneficiary with Eligible Investments having a fair market value equal to the
amount Actually Paid by the Beneficiary. The sum of the amounts so deposited by
Beneficiary as set forth herein shall be referred to as the “Initial Security
Amount.”

(b) Except as set forth in Sections 2.1, 3.1, 4.1(a) and 6.1, the Grantor shall
not be required to transfer and assign additional assets into the Trust Account
after the date hereof.

Section 4.2 Purpose of the Trust.

(a) The Assets in the Trust Account shall be held by the Trustee for the sole
purpose of satisfying any obligations of the Grantor to the Beneficiary with
respect to the Subject Liabilities under the Reinsurance Agreement.

 

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(b) The Grantor grants to the Trustee all trust powers necessary and reasonable
in the performance of its duties hereunder except as otherwise expressly
provided herein.

Section 4.3 Grantor Trust for United States Federal Income Tax Purposes. The
Trust Account shall be treated as a grantor trust (pursuant to sections 671
through 677 of the Code) for United States federal income tax purposes. The
Grantor shall constitute the grantor (within the meaning of sections 671 and 677
of the Code) and, thus, any and all income derived from the Assets held in the
Trust shall constitute income or gain of the Grantor as the owner of such
Assets.

Section 4.4 Designation of Agents. Except as otherwise expressly provided in
this Trust Agreement, any statement, certificate, notice, request, consent,
approval, or other instrument to be delivered or furnished by the Grantor or the
Beneficiaries’ Agent shall be sufficiently executed if executed in the name of
the Grantor or the Beneficiaries’ Agent by such officer or officers of Grantor
or Beneficiaries’ Agent or by such other agent or agents of the Grantor or the
Beneficiaries’ Agent as may be designated in a resolution of the Board of
Directors of the Grantor or the Beneficiaries’ Agent or Committee thereof or a
letter of advice issued by the President, Secretary or Treasurer of the Grantor
or the Beneficiaries’ Agent, as applicable. Written notice of such designation
by the Grantor or the Beneficiaries’ Agent shall be filed with the Trustee. The
Trustee shall be protected in acting upon any written statement or other
instrument made by such officers or agents of the Grantor or the Beneficiaries’
Agent with respect to the authority conferred on it.

Section 4.5 Title to Assets . Title to any Assets transferred by the Grantor to
the Trustee for deposit to the Trust Account or otherwise held in the Trust
Account shall be recorded in the name of the Trustee. The out-of-pocket costs of
transfers of title between the Grantor and the Trustee shall be shared equally
by the Grantor and the Beneficiaries’ Agent, and the Grantor shall use
reasonable efforts to limit such costs.

ARTICLE V

MAINTENANCE OF THE TRUST

Section 5.1 Substitution of Trust Account Assets.

(a) The Grantor may, from time to time, substitute or exchange Assets contained
in the Trust Account, provided, however, (i) the Assets so substituted or
exchanged must be Eligible Investments or, if then required, Permitted
Investments, (ii) after giving effect to such substitution, the fair market
value of the newly deposited Assets are at least equal to the fair market value
of the substituted Assets and (iii) the replacement Assets to be deposited in
the Trust Account in such substitution or exchange are deposited therein on the
day of, and concurrently with, withdrawal of the substituted or exchanged
Assets. Upon any substitution or exchange as provided for herein, the Grantor
shall certify to the Trustee and Beneficiaries’ Agent that such substitution or
exchange meets the requirements of this Section 5.1. The Trustee shall act on
the instruction and certification of the Grantor and shall give the
Beneficiaries’ Agent prompt written notice of any substitution made pursuant
hereto.

(b) The Grantor shall, prior to depositing any Assets into the Trust Account,
and from time to time as required, execute all assignments and endorsements in
blank, or transfer legal title to the Trustee of all shares, obligations or any
other assets requiring assignment in order that the Trustee, upon direction of
the Beneficiaries’ Agent, may whenever necessary negotiate any such assets
without consent or signature from the Grantor or any other entity.

Section 5.2 Valuation of Assets. The Grantor shall determine, in good faith and
with due care and diligence, the fair market value of any Assets in the Trust
Account. In making this determination, the Grantor shall use prices published by
a nationally recognized pricing service for Assets for which such prices are
then available, and for Assets for which such prices are not then available, the

 

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Grantor shall use methodologies consistent with those which it uses for
determining the fair market value of similar assets held in its own general
account (other than the Assets) in the ordinary course of business. The
Beneficiaries’ Agent shall have the right to object to any determination of the
fair market value of any Asset in the Trust Account, and any resulting dispute
shall be resolved pursuant to the provisions of Section 5.3 hereof, including
provisions for the Beneficiaries’ Agent to audit the Grantor’s records, as if
such determination of fair market value were contained in a Quarterly
Certification.

Section 5.3 Quarterly Certification. Within fourteen (14) calendar days
following the end of each calendar quarter, the Grantor shall provide the
Beneficiaries’ Agent (with a copy to the Trustee) a written certification (the
“Quarterly Certification”) stating the Security Amount as of the calendar
quarter end and the aggregate fair market value of the Eligible Investments, or
Permitted Investments, as the case may be, held in the Trust Account as of the
calendar quarter end (both on an asset-by-asset basis and a cumulative basis).
Such certification shall separately state the Asset withdrawals by the Grantor
from the Trust Account effected during such calendar quarter. As soon as is
practicable, but in no event more than ten (10) Business Days following its
receipt of the Quarterly Certification, the Beneficiaries’ Agent shall either
(i) countersign such certification and forward it to the Trustee or (ii) notify
the Grantor that it objects to the Grantor’s calculation of the Security Amount
or the Grantor’s valuation of any Asset. If the Grantor and Beneficiaries’ Agent
are able to resolve such dispute within ten (10) Business Days of the
Beneficiaries’ Agent’s transmittal to the Grantor of its notice of objection,
they shall promptly forward to the Trustee a jointly signed certification of the
Security Amount or Asset valuation, as applicable. If the parties are unable to
resolve such dispute within ten (10) Business Days of the Beneficiaries’ Agent’s
transmittal to the Grantor of its notice of objection, and the dispute relates
to the valuation of an Asset, the value of such Asset shall be determined by a
Third Party Appraiser and the Grantor and Beneficiaries’ Agent shall be bound by
such valuation. All other disputes shall be resolved in accordance with
Section 11.1. Upon resolution of such dispute, the Parties shall forward to the
Trustee a copy of the corrected Quarterly Certification setting forth the
Security Amount or Asset value, as applicable, as resolved through such Third
Party Appraiser or arbitration. The Grantor shall, to the extent reasonably
necessary or required in order to verify Grantor’s certification, permit the
Beneficiaries’ Agent to audit its records in order to determine its compliance
with Section 5.2 and this Section 5.3. The Grantor shall cooperate fully with
such audit. Access to the Grantor and its employees by the Beneficiaries’ Agent
in connection with such audit shall be at reasonable times during regular
business hours upon reasonable prior written notice (including by e-mail) in a
manner which does not unreasonably interfere with the business or operations of
the Grantor.

Section 5.4 Modification of Beneficiaries’ Reserves Subject to Trust.
Notwithstanding anything else contained herein, should (i) the Covered Business
of any Beneficiary cease to be within the coverage of the Reinsurance Agreement
pursuant to Section 2.5(l) of the Reinsurance Agreement, then the definition of
Reserves and all obligations of Grantor hereunder in respect of Subject
Liabilities shall be revised for all purposes hereunder to account for such
change, and Grantor and the Beneficiaries’ Agent shall so certify such revision
to the Trustee; and (ii) the Grantor cease to be obligated to assure that any
Beneficiary receives statutory credit in respect of the Reinsurance Agreement by
operation of Section 2.7 of the Reinsurance Agreement, the Grantor’s obligations
hereunder in respect of a Reinsurance Credit Event for such Beneficiary shall be
revised for all purposes hereunder to account for such change.

ARTICLE VI

RELEASE AND ADJUSTMENT OF TRUST ACCOUNT ASSETS

Section 6.1 Adjustment of Trust Account Assets.

(a) The Security Amount as of the end of each calendar quarter shall be
certified to the Trustee by the Grantor in the manner set forth in Section 5.3
hereof.

 

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(b) Following the occurrence of a Collateral Triggering Event, if the aggregate
fair market value of the Eligible Investments, or Permitted Investments if then
required, maintained in the Trust Account as of any calendar quarter end is less
than the Security Amount (computed taking into account the occurrence of the
Collateral Triggering Event) as of such calendar quarter end, then within five
(5) Business Days Grantor shall deposit into the Trust Account such additional
Assets with an aggregate fair market value as are necessary to ensure that the
aggregate fair market value of the Eligible Investments, or Permitted
Investments if then required, held in the Trust Account is no less than 100% of
the Security Amount as of the immediately prior calendar quarter end.

(c) If, following a Collateral Triggering Event, the event, change or condition
which gave rise to the collateralization requirement ceases to exist or apply,
then the Security Amount shall thereafter (until the occurrence of a further
Collateral Triggering Event) be computed without regard to such Collateral
Triggering Event.

Section 6.2 Release of Trust Account Assets to the Beneficiaries’ Agent. By
transmittal of contemporaneous prior written notice to the Trustee and the
Grantor, together with a Final Order of an arbitration panel if required
pursuant to Section 12.8 of the Reinsurance Agreement, the Beneficiaries’ Agent,
acting on its own behalf and as agent for all Beneficiaries, may withdraw Assets
from the Trust Account pursuant to the provisions of Sections 12.8 and 12.9 of
the Reinsurance Agreement; provided that notice of such withdrawal is received
not less than five (5) Business Days in advance of the requested withdrawal. The
Trustee shall promptly comply with such notice. The Security Amount shall be
adjusted, if necessary, to reflect the application of the funds so withdrawn.

Section 6.3 Release of Trust Account Assets to the Grantor.

(a) All proceeds from the sale or substitution of the Assets in the Trust
Account and the collection of interest, dividends and other income in respect to
the Assets in the Trust Account shall be retained in the Trust Account and shall
not be released to the Grantor, except in accordance with the provisions set
forth in subparagraphs (b) and (c) in this Section 6.3.

(b) Following each calendar quarter end, by transmittal of written notice to the
Trustee and contemporaneous notice to the Beneficiaries’ Agent stating a
withdrawal date that shall not be less than five Business Days following the
date of the notice, the Grantor may withdraw Assets from the Trust Account in an
amount equal to the positive difference, if any, between (i) the aggregate
amount of Ultimate Net Loss Actually Paid by Grantor under the Reinsurance
Agreement (excluding amounts withdrawn by the Beneficiaries’ Agent pursuant to
Section 6.2) minus (ii) the aggregate amount previously withdrawn by Grantor
under this Section 6.3(b); provided, however, that in connection with any such
withdrawal, the Grantor shall provide a written certification to the Trustee
stating the fair market value of each non-cash Asset withdrawn; and provided,
further, following a Collateral Triggering Event, the Grantor shall be permitted
to withdraw Assets from the Trust Account pursuant to this Section 6.3(b) only
to the extent that the aggregate fair market value of the Eligible Investments
remaining in the Trust Account after such withdrawal is not less than 100% of
the Security Amount. The Trustee shall comply with such notice on the withdrawal
date specified therein.

(c) Commencing at the fifth anniversary of the date hereof, at any calendar
quarter end following the delivery of the Quarterly Certification as to which
there is no dispute outstanding between the Grantor and the Beneficiaries’ Agent
and following any withdrawal pursuant to clause (b) above, in the event the
aggregate fair market value of the Eligible Investments maintained in the Trust
Account exceeds 150% of net Reserves of the Beneficiary (including reserves for
losses incurred but not reported) calculated in accordance with SAP with respect
to Subject Liabilities reinsured with the Grantor as of such calendar quarter
end, then by transmittal of fourteen (14) calendar days’ prior written notice to
the Trustee and the Beneficiaries’ Agent, and absent receipt by the Trustee of a
written objection thereto by

 

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the Beneficiaries’ Agent prior to the end of such time period (which such
objection the Beneficiaries’ Agent shall not unreasonably provide), the Grantor
may direct the Trustee to withdraw from the Trust Account and transfer to the
Grantor Assets having a fair market value equal to the amount of such excess;
provided, however, in connection with any such withdrawal, the Grantor must
provide a written certification to the Trustee stating the fair market value of
each non-cash Asset withdrawn; and provided, further, that following a
Collateral Triggering Event, the Grantor shall be permitted to withdraw Assets
from the Trust Account pursuant to this Section 6.3(c) only to the extent that
the aggregate fair market value of the Eligible Investments remaining in the
Trust Account after such withdrawal is not less than 100% of the Security
Amount; and provided, further, that the Grantor shall be permitted to withdraw
Assets from the Trust Account pursuant to this Section 6.3(c) only to the extent
that, in addition to the other requirements set forth herein, (1) the aggregate
fair market value of the Eligible Investments remaining in the Trust Account
after such withdrawal plus the aggregate fair market value of LPT Eligible
Investments remaining in the LPT Trust Account after such withdrawal will exceed
(2) the net Reserves of the Beneficiary (including reserves for losses incurred
but not reported) calculated in accordance with SAP with respect to Subject
Liabilities reinsured with the Grantor as of such calendar quarter end plus the
“LPT Required Amount” as of such quarter end. In any such event, the Trustee
shall promptly comply with such notice.

ARTICLE VII

DUTIES OF THE TRUSTEE

Section 7.1 Acceptance of Assets by the Trustee.

(a) The Trustee shall not accept any Assets (other than cash) for deposit into
the Trust Account unless the Trustee determines that it is or will be the
registered owner of and holder of legal title to the Assets or that such Assets
are in such form that the Trustee may, if applicable to such asset class,
negotiate any such Assets, without consent or signature from the Grantor or any
other person or entity. Any Assets received by the Trustee which, if applicable
to such asset class, are not in such proper negotiable form or for which title
has not been transferred to the Trustee shall not be accepted by the Trustee and
shall be returned to the Grantor as unacceptable.

(b) The Trustee and its lawfully appointed successors is and are authorized and
shall have the power to receive such Assets as the Grantor (or the
Beneficiaries’ Agent on behalf of the Grantor) from time to time may transfer or
remit to the Trust Account and to hold and dispose of the same for the uses and
purposes and in the manner and according to the provisions herein set forth. All
such Assets at all times shall be maintained as a trust account, separate and
distinct from all other assets on the books and records of the Trustee, and
shall be continuously kept in a safe place within the United States.

Section 7.2 Collection of Interest and Dividends; Voting Rights; Investment by
the Trustee. The Trustee is hereby authorized, without prior notice to the
Grantor or the Beneficiaries’ Agent, to demand payment of and collect all
interest or dividends on the Assets comprising the Trust Account if any. All
payments of interest, dividends and other income in respect to Assets in the
Trust Account shall be deposited promptly upon receipt by the Trustee into the
Trust Account. Subject to the other provisions of this Trust Agreement, the
Grantor shall have the full and unqualified right to direct the Trustee to vote,
and to execute consents, bond powers, stock powers, mortgage and title
instruments and other instruments of transfer, pledge and release with respect
to any Assets comprising the Trust Account.

Section 7.3 Obligations of the Trustee. The Trustee agrees to hold and disburse
the various Assets of the Trust Account in accordance with the provisions
expressed herein.

 

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Section 7.4 Responsibilities of the Trustee.

(a) The Trustee, in the administration of the Trust Account, is to be bound
solely by the express provisions herein, and such further written and signed
directions as the appropriate party or parties may, under the conditions herein
provided, deliver to the Trustee. The Trustee shall be under no obligation to
enforce the Grantor’s obligations under this Trust Agreement, except as
otherwise expressly provided or directed pursuant hereto. The Trustee shall be
restricted to holding title to, operating and collecting the Assets comprising
the Trust Account and the payment and distribution thereof for the purposes set
forth in this Trust Agreement and to the conservation and protection of such
Assets and the administration thereof in accordance with the provisions of this
Trust Agreement, and the Trustee shall be liable only for its own negligence,
willful misconduct or lack of good faith and for the breach of the Trustee’s
obligations under this Trust Agreement; provided, however, that any actions
taken in strict accordance with written instructions provided to the Trustee
from the parties hereto will not constitute a breach of the Trustee’s
obligations under this Trust Agreement. Upon request of the Grantor or the
Beneficiaries’ Agent, the Trustee further agrees promptly to forward to such
party a statement of all Assets held in the Trust Account.

(b) Subject to the other provisions of this Trust Agreement, including the
requirement that only Eligible Investments may be held in the Trust Account, and
provisions relating to the substitution of Assets, (i) the Grantor or an asset
manager appointed by Grantor shall have the irrevocable authority and sole power
to direct the Trustee, in the Grantor’s sole discretion, with respect to all
aspects of the management or investment of the Assets contained in the Trust
Account and (ii) the Trustee and the Beneficiaries’ Agent each acknowledges that
it has no authority with respect to such management or investment activities,
the Trustee agrees it will not exercise any discretion or take any action with
respect to the matters in clause (i) above and the Trustee will take any actions
related thereto as directed by the Grantor in writing in accordance therewith.
Any deposit or investment directed by the Grantor or its investment advisor
shall constitute a certification to the Trustee that the assets deposited or to
be purchased pursuant to such directions are Eligible Investments. The Trustee
shall be under no duty or responsibility to confirm that such investments
constitute or continue to be Eligible Investments. Wells Fargo Government Money
Market Fund is deemed to be an Eligible Investment.

(c) For certain payments made pursuant to this Trust Agreement, the Trustee may
be required to make a “reportable payment” or “withholding payment” and in such
cases the Trustee shall have the duty to act as a payor or withholding agent,
respectively, that is responsible for any tax withholding and reporting required
under Chapters 3, 4 and 61 of the United States Internal Revenue Code of 1986,
as amended (the “Code”). The Trustee shall have the sole right to make the
determination as to which payments are “reportable payments” or “withholdable
payments.” All Parties to this Trust Agreement shall provide an executed IRS
Form W-9 or appropriate IRS Form W-8 (or, in each case, any successor form) to
the Trustee prior to closing, and shall promptly update any such form to the
extent such form becomes obsolete or inaccurate in any respect. The Trustee
shall have the right to request from any party to this Trust Agreement, or any
other Person entitled to payment hereunder, any additional forms, documentation
or other information as may be reasonably necessary for the Trustee to satisfy
its reporting and withholding obligations under the Code. To the extent any such
forms to be delivered under this Section 7.4(c) are not provided prior to or by
the time the related payment is required to be made or are determined by the
Trustee to be incomplete and/or inaccurate in any respect the Trustee shall be
entitled to withhold on any such payments hereunder to the extent withholding is
required under Chapters 3, 4 or 61 of the Code, and shall have no obligation to
gross up any such payment. As of the date hereof, the Grantor is the owner for
U.S. federal income tax purposes of funds in the Trust Account until such funds
are released in accordance with the terms hereof.

 

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Section 7.5 Books and Records. The Trustee shall keep full and complete records
of the administration of the Trust Account. The Grantor and the Beneficiaries’
Agent may examine such records, upon reasonable notice to the Trustee, at any
time during business hours through any person or persons duly authorized in
writing by Grantor or the Beneficiaries’ Agent, at the requesting party’s
expense.

Section 7.6 Activity Reports. The Trustee agrees to provide an activity report
to the Beneficiaries’ Agent and the Grantor upon creation of the Trust Account
and within five (5) Business Days following the end of each calendar quarter,
which report shall, in reasonable detail, show (i) all deposits, withdrawals
exchanges and substitutions during such quarter and (ii) a listing of securities
and other assets held and cash balances in the Trust Account as of the last day
of such quarter. The Trustee agrees to provide written notification to the
Grantor and the Beneficiaries’ Agent within five (5) days of any deposits to or
withdrawals from the Trust Account.

Section 7.7 Resignation or Removal of the Trustee; Appointment of Successor
Trustee.

(a) The Trustee may at any time resign as Trustee and terminate its capacity
hereunder by delivery of written notice of resignation, effective not less than
ninety (90) days after receipt by both the Beneficiaries’ Agent and the Grantor.
The Trustee may be removed by the Grantor by delivery to the Trustee and the
Beneficiaries’ Agent of a written notice of removal, effective not less than
ninety (90) days after receipt by the Trustee and the Beneficiaries’ Agent of
the notice. Notwithstanding the foregoing, no such resignation by the Trustee or
removal by the Grantor shall be effective until a successor to the Trustee shall
have been duly appointed by the Grantor and approved by the Beneficiaries’
Agent, which approval shall not be unreasonably withheld, and all the securities
and other Assets in the Trust Account have been duly transferred to such
successor. The Grantor, upon receipt of such notice of resignation, shall
undertake to obtain the agreement of a qualified, successor depository,
agreeable to the Beneficiaries’ Agent, to act as a successor Trustee in
accordance with all agreements of the Trustee herein and upon duly qualifying to
act as such pursuant to Section 7.7(b). The Beneficiaries’ Agent agrees not to
withhold unreasonably approval of such Trustee. Upon the Trustee’s delivery of
the Assets to the qualified, successor depository, along with a closing
statement showing all activities from the last quarterly report, the Trustee
shall be discharged of further responsibilities hereunder, subject to any
remaining obligations under Sections 7.4 and 7.7(b). In the event that the
Grantor and the Beneficiaries’ Agent fail to appoint a successor trustee within
ninety (90) days following receipt of the Trustee’s notice of resignation or a
notice of removal, the Trustee may, in its sole discretion and at the expense of
the Grantor, petition any court of competent jurisdiction for the appointment of
a successor trustee or for other appropriate relief, and any such resulting
appointment shall be binding upon all the parties.

(b) Any successor Trustee appointed hereunder shall execute an instrument
accepting such appointment hereunder and shall deliver the same to the Grantor,
the Beneficiaries’ Agent and to the then acting Trustee. Thereupon such
successor Trustee shall, without any further act, become vested with all the
estates, properties, rights, powers, trusts and duties of its predecessor in the
Trust with like effect as if originally named herein; but the predecessor
Trustee shall nevertheless, when requested in writing by the successor Trustee,
execute an instrument or instruments conveying and transferring to the Trustee
upon the Trust herein all the estates, properties, rights, powers and trusts of
such predecessor Trustee, and shall duly assign, transfer and deliver to the
Trustee all property and money held by such predecessor hereunder. The
predecessor Trustee shall be entitled to reimbursement in accordance with
Section 7.10 for all expenses it incurs in connection with the settlement of its
accounts and the transfer and delivery of the Trust assets to its successor. The
predecessor Trustee shall continue to be indemnified by reason of such entity
being or having been a Trustee in accordance with Section 7.9.

Section 7.8 Release of Information. The Trustee shall promptly respond to any
and all reasonable requests for information concerning the Trust Account or the
Assets held therein by any of the

 

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parties to this Trust Agreement. Furthermore, the Trustee shall fully and
completely respond to any direct inquiries of any applicable regulatory
authority with jurisdiction over the Grantor or the Beneficiary concerning the
Trust Account or the Assets held hereunder, including detailed inventories of
securities or funds, and the Trustee shall permit such regulatory authority to
examine and audit all securities or funds held hereunder. The Trustee shall
promptly provide notice to the Beneficiaries’ Agent and the Grantor concerning
all such inquiries, and shall provide seven (7) days’ prior notice to the
Beneficiaries’ Agent and the Grantor of all such examinations and audits.

Section 7.9 Indemnification of the Trustee. The Grantor shall indemnify, defend
and hold the Trustee (and its directors, officers and employees) harmless from
and against any loss, liability, damage, cost and expense of any nature arising
out of or in connection with this Trust Agreement or with the performance of its
duties hereunder, including, among other things, reasonable attorneys’ fees and
court costs, except to the extent such loss, liability, damage, cost and expense
shall be caused by the Trustee’s negligence, willful misconduct or lack of good
faith. Whenever an action by the Trustee is authorized by written signed
direction pursuant to the provisions of this Trust Agreement and such action is
taken strictly in accordance with such written and signed direction by the
appropriate party or parties, the party or parties authorizing such action
hereby agree to indemnify the Trustee against all losses, damages, costs and
expenses, including reasonable attorneys’ fee, resulting from any action so
taken by the Trustee. The provisions of this paragraph shall survive the
termination of this Trust Agreement and the resignation or removal of the
Trustee for any reason.

Section 7.10 Charges of the Trustee. The Grantor agrees to pay all reasonable
costs or fees charged by the Trustee for acting as the Trustee pursuant to this
Trust Agreement, as agreed between the Grantor and the Trustee; provided,
however, that no such costs, fees or expenses shall be paid out of the Assets
held in or credited to the Trust Account.

Section 7.11 Limitations of the Trustee. The Trustee shall in no way be
responsible for determining the amount of Assets required to be deposited, or
monitoring whether or not the Assets held within the Trust Account are Eligible
Investments. The Trustee shall be under no liability for any release of Assets
made by it to the Grantor in accordance with Article VI.

Section 7.12 Concerning the Trustee.

(a) No provision in this Trust Agreement shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers.

(b) The Trustee shall be entitled to rely on advice of or on an opinion of
counsel concerning all matters of trust and its duty hereunder and shall not be
liable for any action taken or not taken by it in reliance on such advice or on
such opinion of counsel.

(c) The Trustee may conclusively rely and shall be fully protected in acting or
refraining from acting upon any resolution notice, request, consent,
certificate, order, entitlement order, affidavit, letter, telegram, facsimile
transmission, electronic mail or other paper or document believed by it to be
genuine and to have been signed or sent by the proper person or persons. The
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, notice, consent, request, certificate, order,
entitlement order, affidavit, letter, telegram, facsimile transmission,
electronic mail or other paper or document.

(d) The permissive right of the Trustee to take action enumerated in this Trust
Agreement shall not be construed as a duty and it shall not be answerable for
other than its negligence, willful misconduct or lack of good faith. In no event
shall the Trustee be liable for indirect, special, incidental, punitive or
consequential losses or damages, including but not limited to lost profits,
whether or not foreseeable, even if the Trustee has been advised of the
possibility thereof.

 

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(e) The Trustee shall not be required to give any bond or surety in respect of
the execution of the said trusts and powers or otherwise in respect of the
Assets.

(f) The Trustee shall not be accountable for the use or application by the
Grantor or any Beneficiary or any other party of Assets which the Trustee has
released in accordance with the terms of this Trust Agreement.

(g) The Trustee makes no representations as to the validity or sufficiency of
the Assets and the Trust Account for any particular purpose and shall incur no
responsibility in respect thereof, other than in connection with the duties or
obligations assigned to or imposed upon it as provided herein.

(h) The Trustee shall not be responsible for the perfection, priority or
enforceability of any lien or security interest in any of the Assets or in the
Trust Account.

(i) In accepting the trust hereby created, the Trustee acts solely as trustee
and not in its individual capacity, and all persons having any claim against the
Trustee arising from this Trust Agreement, shall look only to the Assets held by
the Trustee hereunder for payment except as otherwise provided herein.

(j) The Trustee shall not be considered in breach of or in default in its
obligations hereunder in the event of delay in the performance of such
obligations due to unforeseeable causes beyond its control (including, but not
limited to, any act or provision of any present or future law or regulation or
governmental authority, any act of God or war, civil unrest, local or national
disturbance or disaster, any act of terrorism, or the unavailability of the
Federal Reserve Bank wire or other wire or communication facility) or without
its willful misconduct, negligence or lack of good faith.

ARTICLE VIII

GRANT OF SECURITY INTEREST

Section 8.1 Establishment and Maintenance of the Trust Account. The Trustee
hereby confirms and agrees that:

(a) (i) it has established the Trust Account in the name of the Trustee and
(ii) the Trust Account is a “securities account” (as defined in the UCC) in
respect of which the Trustee is a “securities intermediary” (as defined in the
UCC);

(b) it shall not change the entitlement holder or account number of the Trust
Account without prior written consent of the Beneficiaries’ Agent; and

(c) each item of property (whether cash, a security, an instrument or any other
property whatsoever) credited to the Trust Account shall be treated as a
“financial asset” under Article 8 of the UCC.

Section 8.2 Grant of Security Interest. As security for the prompt and complete
payment, reimbursement and performance when due in full of all the Grantor’s
obligations under the Reinsurance Agreement, the Grantor hereby grants to the
Beneficiaries’ Agent, acting on its own behalf and as agent for all
Beneficiaries, a security interest in and continuing lien on all of the
Grantor’s right, title and interest in, to and under the following, in each
case, whether now owned or existing or hereafter acquired or arising, and
wherever located (all of which being hereinafter collectively called the
“Collateral”):

(a) the Trust Account;

(b) all Security Entitlements carried in the Trust Account; and

(c) all Proceeds of any or all of the foregoing; provided, however, that the
security interest granted hereunder shall terminate as to the Proceeds of a
withdrawal by the Grantor that, at the time of such withdrawal, was rightful in
amount.

 

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Section 8.3 Limitation on Exercise of Remedies. The Beneficiaries’ Agent, acting
on its own behalf and as agent for the Beneficiaries, may exercise the remedies
of a “secured party” (as defined in the UCC) only at such times as it would be
entitled to withdraw assets from the Trust pursuant to Article VI hereof.

Section 8.4 Other Matters.

(a) The Grantor hereby authorizes the Beneficiaries’ Agent, acting on its own
behalf and as agent for the Beneficiaries, to file UCC-1 financing statements
naming the Grantor as debtor and describing the Collateral pledged hereunder.
The Grantor shall not change its name or jurisdiction of organization, unless it
has given the Beneficiaries’ Agent, acting on its own behalf and as agent for
the Beneficiaries, a notice of such change within 30 days of such change and all
filings have been made by the Grantor under the UCC or otherwise that are
required in order for the Beneficiaries’ Agent, acting on its own behalf and as
agent for the Beneficiaries, to continue at all times following such change to
have a valid, legal and perfected security interest in all the Collateral.

(b) The Trustee hereby subordinates to the Beneficiaries’ Agent’s security
interest in the Collateral any statutory or contractual right or claim of offset
or lien resulting from any transaction which involves the Trust Account, other
than with respect to fees and expenses related to the Trust Account.

(c) Nothing in this Article VIII shall be construed as a qualification or
limitation on the creation of the Trust Account and/or the transfer of legal
title in the Assets to the Trustee pursuant to Article III. The security
interest granted pursuant to this Article VIII is intended to be effective
solely to the extent that the trust created hereunder is not valid, the transfer
of Assets to the Trust Account is not effective, or the transfer of such Assets
may be characterized as a pledge rather than a lawful conveyance to the Trustee.

ARTICLE IX

TERMINATION

Section 9.1 Termination. This Trust Agreement may be terminated by the Grantor
and the Beneficiaries’ Agent by delivery to the Trustee of written notice of
termination signed by both the Grantor and the Beneficiaries’ Agent. The
Beneficiaries’ Agent shall provide its consent to the termination of this Trust
Agreement if (i) the Grantor seeks to terminate this Trust Agreement as a result
of the exhaustion of the Reinsurance Limit or (ii) the Aggregate Limit less
those amounts Actually Paid in respect of Subject Liabilities by the Grantor is
$50,000,000 or lower.

Section 9.2 Disposition of Assets Upon Termination. Upon a termination pursuant
to this Article IX, the Trustee shall distribute all Assets held and deposited
under this Trust Agreement, to the Grantor and shall take any and all steps
necessary to transfer absolutely and unequivocally all right, title and interest
in such Assets and to deliver physical custody, if applicable, in such Assets to
the Grantor or as otherwise directed by the Grantor.

Section 9.3 No Termination Due to Insolvency of Beneficiaries or Beneficiaries’
Agent.

The Grantor shall not terminate the Trust Account or this Agreement on the basis
of the insolvency of the Beneficiaries’ Agent or the Beneficiaries.

 

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ARTICLE X

GENERAL PROVISIONS

Section 10.1 Notices. Any notice, request, demand, waiver, consent, approval or
other communication required or permitted to be given by any party under this
Trust Agreement shall be in writing and shall be delivered personally, sent by
facsimile transmission, sent by registered or certified mail, postage prepaid,
or sent by a standard overnight courier of national reputation with written
confirmation of delivery. Any such notice shall be deemed given when so
delivered personally, or if sent by facsimile transmission, on written
confirmation of receipt, or if mailed, on the date shown on the receipt
therefor, or if sent by overnight courier, on the date shown on the written
confirmation of delivery. Such notices shall be given to the following
addresses:

If to the Trustee:

Wells Fargo Bank, N.A.

CMES, Insurance Trust Group

150 East 42nd Street, 40th Floor

New York, New York 10017

Attention: Sami Limanovski, Assistant Vice President – Relationship Manager

Office: (917) 260-1674

Facsimile: (917) 260-1590

Email: Sami.Limanovski@wellsfargo.com

If to the Grantor:

National Indemnity Company

1314 Douglas Street, Suite 1400

Omaha, NE 68102-1944

Attn: Treasurer

Email: bsnover@berkre.com

With copies to (for information purposes only):

Berkshire Hathaway Reinsurance Division

100 First Stamford Place

Stamford, CT 06902

Attn: General Counsel

Email: bsnover@berkre.com

If to the Beneficiaries’ Agent:

National Union Fire Insurance Company of Pittsburgh, Pa.

175 Water Street

New York, NY 10038

Attention: Chief Ceded Reinsurance Officer

Telephone: (212) 458-7524

Email: wcavanagh@aig.com

 

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With copies to:

National Union Fire Insurance Company of Pittsburgh, Pa.

c/o AIG PC Inc.

175 Water Street, 15th Floor

New York, New York 10038

Attention: General Counsel

Telephone: (212) 458-2261

Facsimile: (212) 458-7080

AIG Property Casualty Inc.

Reinsurance Security Unit

175 Water Street

New York, NY 10038

Attention: Bill Cavanagh

Telephone: (212) 458-7675

Email: william.cavanagh@aig.com

American International Group, Inc.

12 Metrotech Center – 30th Fl.

Brooklyn, NY 11201

Attention: Comptrollers Security Dept.

Telephone: (718) 250-1709

Facsimile: (718) 250-1709

Email: donato.diluzio@aig.com

Each party to this Trust Agreement may change its notice provisions on fifteen
(15) calendar days’ advance notice in writing to the other parties to this Trust
Agreement.

Section 10.2 Entire Agreement. This Trust Agreement, including Appendix A hereto
and any other documents delivered pursuant hereto or thereto (as well as the
defined terms from the LPT Trust Agreement referenced herein), constitutes the
entire agreement among the parties hereto with respect to the subject matter
hereof insofar as such agreements affect the Trustee, and supersede all prior
negotiations, discussions, writings, agreements and understandings, oral and
written, among the parties hereto with respect to the subject matter hereof and
thereof.

Section 10.3 Waiver and Amendment. This Trust Agreement and the Trust created
hereunder shall be irrevocable, subject solely to the termination provisions set
forth herein. This Trust Agreement may be altered, amended or terminated at any
time by written agreement executed by each party hereto. The failure of either
party at any time to exercise any of the rights or powers conferred upon it
herein shall constitute neither a waiver of its right to exercise, nor stop it
from exercising, any rights at any subsequent time, nor shall such failure
reduce in any degree any liability or obligation for which the other party is
bound hereunder.

Section 10.4 Successors and Assigns. The rights and obligations of a Party under
this Trust Agreement shall not be subject to assignment without the prior
written consent of the other Parties hereto, and any attempted assignment
without the prior written consent of the other Parties hereto shall be invalid
ab initio. The terms of this Trust Agreement shall be binding upon, inure to the
benefit of and be enforceable by and against the successors and permitted
assigns of the Parties. Notwithstanding the foregoing, any corporation or
association into which the Trustee may be merged or converted, or with which it
may be consolidated, or to which it may sell or transfer all or substantially
all of its corporate trust business shall be the successor to the Trustee
without the execution or filing of any paper or further act.

 

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Section 10.5 Headings. The headings of this Trust Agreement are for convenience
of reference only and shall not define or limit any of the terms or provisions
hereof.

Section 10.6 Governing Law and Jurisdiction. This Trust Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to such state’s principles of conflict of laws that could compel
the application of the laws of another jurisdiction.

Section 10.7 No Third Party Beneficiaries. Except for the Beneficiaries, each of
which shall be an express third party beneficiary hereof, nothing in this Trust
Agreement is intended or shall be construed to give any person, other than the
parties hereto, any legal or equitable right, remedy or claim under or in
respect of this Trust Agreement or any provision contained herein. To the extent
National Union Fire Insurance Company of Pittsburgh, Pa. elects to appoint a
successor Beneficiaries’ Agent hereunder, the Grantor and Trustee will not
unreasonably withhold their consent thereto and shall cooperate to execute the
necessary amendments hereto to effectuate such substitution as promptly as
practicable.

Section 10.8 Counterparts. This Trust Agreement may be executed by the Parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument binding upon all of the parties hereto notwithstanding the fact
that all parties hereto are not signatory to the original or the same
counterpart. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the Parties. Each
counterpart may be delivered by facsimile transmission, which transmission shall
be deemed delivery of an originally executed document.

Section 10.9 Severability. Any term or provision of this Trust Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Trust Agreement or affecting the validity or enforceability of any of the terms
or provisions of this Trust Agreement in any other jurisdiction, so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any Party. If any provision of this
Trust Agreement is so broad as to be unenforceable, that provision shall be
interpreted to be only so broad as is enforceable. In the event of such
invalidity or unenforceability of any term or provision of this Trust Agreement,
the Parties shall use their commercially reasonable efforts to reform such terms
or provisions to carry out the commercial intent of the Parties as reflected
herein, while curing the circumstance giving rise to the invalidity or
unenforceability of such term or provision.

Section 10.10 Incontestability. Each Party hereby acknowledges that this Trust
Agreement, and each and every provision hereof, is and shall be enforceable
according to its terms. Each Party hereby irrevocably waives any right to
contest in any respect the validity or enforceability hereof. This Trust
Agreement shall not be subject to rescission, or to an award of damages,
restitution, or reformation in lieu thereof, on any basis whatsoever, including
intentional fraud.

Section 10.11 Set-Off. Notwithstanding Section 4.4 of the Reinsurance Agreement,
there are no rights of set-off whatsoever, whether contractual, at common law,
or otherwise, with respect to the Trust and the Trust Assets.

Section 10.12 Currency. All financial data required to be provided pursuant to
the terms of this Trust Agreement shall be expressed in United States dollars.
All payments and all settlements of account between the parties hereto shall be
in United States currency unless otherwise expressly agreed by the Parties in
writing.

 

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ARTICLE XI

DISPUTE RESOLUTION; ARBITRATION

Section 11.1 Arbitration of Disputes Not Resolved by Negotiation. Any Dispute
arising under or in any way related to this Trust Agreement, specifically
including without limitation disputes concerning alleged fraud in the inducement
of any of the Transaction Documents or other wrongful pre-Closing conduct, but
not including a Dispute as to which the Trustee would be a required party within
the meaning of Rule 19(a)(1) of the Federal Rules of Civil Procedure, shall, to
the extent not resolved by negotiation between the Parties, be resolved by
arbitration in a consolidated arbitration involving all agreements and Parties
relevant to the Dispute. Any Person that is a Party to any of the Transaction
Documents shall have an absolute right to intervene in any such arbitration.

Section 11.2 Procedure for Arbitration and Mandatory Pre-Arbitration
Negotiation.

(a) The procedures for the arbitration and for the mandatory pre-arbitration
negotiation are set forth in Article XIII of the Reinsurance Agreement, which is
hereby incorporated herein. Arbitration hereunder shall be conducted in New
York, New York.

(b) In considering any relief to be awarded, the arbitrators (and the Designated
Court, as appropriate) shall take into account the Parties’ view that the nature
and uniqueness of the relationships created under the Transaction Documents as a
whole render specific performance the remedy of choice for Disputes under this
Trust Agreement where it is possible to implement that remedy.

Section 11.3 Permitted Judicial Proceedings. Subject to Section 11.4 hereof, the
only permitted judicial proceedings relating to any Dispute are those set forth
in, and are subject to the exclusive jurisdiction provisions of, Section 13.2(f)
of the Reinsurance Agreement. Each Party finally and irrevocably waives any
right to trial by jury of any matter or issue in such a permitted judicial
proceeding.

Section 11.4 Disputes to Which the Trustee is a Required Party. In the event of
a Dispute to which the Trustee is a required party within the meaning of Rule
19(a)(1) of the Federal Rules of Civil Procedure, then:

(a) To the extent any portion of the Dispute can be resolved without the
participation of the Trustee, it shall be resolved pursuant to Sections 11.1 to
11.3 above.

(b) The remainder of the Dispute shall be resolved by litigation in the
Designated Court, which shall be the sole and exclusive forum for such
litigation.

 

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ARTICLE XII

EFFECTIVE DATE AND EXECUTION

NATIONAL UNION FIRE INSURANCE COMPANY

OF PITTSBURGH, PA., as Beneficiaries’ Agent

acting on its own behalf and on behalf of the Beneficiaries

 

By:  

 

  Title:   Executive Vice President   Date:   January 20, 2017

 

Attest:  

 

  Title:   Secretary   Date:   January 20, 2017

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NATIONAL INDEMNITY COMPANY,

as Grantor

By:  

 

  Title:   President   Date:   January 20, 2017 By:  

 

  Title:   Treasurer   Date:   January 20, 2017

 

Attest:  

 

  Title:   Senior Finance Manager   Date:   January 20, 2017

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By:  

 

  Title:   Vice President   Date:   January 20, 2017

 

Attest:  

 

  Title:   Vice President   Date:   January 20, 2017

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APPENDIX A

TRUST PROVISIONS FOLLOWING A REINSURANCE CREDIT EVENT

Section 4.1 Continuing Obligation of the Grantor.

(a) The segregated trust account maintained by the Trustee with account number
[Redacted] under account name [Redacted] (which shall be hereinafter referred
to, including all successor accounts thereto, as the “Trust Account”) shall
continue in existence upon the occurrence of a Reinsurance Credit Event and the
substitution of Assets as required under Section 3.1 of this Trust Agreement.

(b) The Grantor shall ensure that the Trust Account shall hold Permitted
Investments at all times with a fair market value of no less than 100% of the
Required Amount, calculated with respect to the Beneficiaries specified in the
Reinsurance Credit Event Notice, as determined in accordance with Section 5.2 of
this Trust Agreement.

Section 4.2 Purpose of the Trust. The Assets in the Trust Account shall be held
by the Trustee for the sole benefit of the Beneficiary. The Grantor grants to
the Trustee all trust powers necessary and reasonable in the performance of its
duties hereunder except as otherwise expressly provided herein.

Section 5.1 (a) Substitution of Trust Account Assets. Upon receipt of the prior
written consent of the Beneficiaries’ Agent, the Grantor may, from time to time,
substitute or exchange Assets contained in the Trust Account, provided, however,
(i) the Assets so substituted or exchanged must be Permitted Investments,
(ii) after giving effect to such substitution, the fair market value of the
newly deposited Assets are at least equal to the fair market value of the
substituted Assets and (iii) the replacement Assets to be deposited in the Trust
Account in such substitution or exchange are deposited therein on the day of
withdrawal of the substituted or exchanged Assets. Upon any substitution or
exchange as provided for herein, the Grantor shall certify to the Trustee and
Beneficiaries’ Agent that such substitution or exchange meets the requirements
of this Section 5.1. The Trustee shall act on the instruction and certification
of the Grantor and shall give the Beneficiaries’ Agent prompt written notice of
any substitution made pursuant hereto.

Section 5.3 Quarterly Certification. Within fourteen (14) calendar days
following the end of each calendar quarter, the Grantor shall provide the
Beneficiaries’ Agent (with a copy to the Trustee) a written certification (the
“Quarterly Certification”) stating the Required Amount and the Security Amount
as of the calendar quarter end and the aggregate fair market value of the
Permitted Investments, as determined by a nationally recognized valuation
service retained by the Trustee at the Grantor’s expense, held in the Trust
Account as of the calendar quarter end (both on an asset-by-asset basis and a
cumulative basis). Such certification shall separately state the effect on the
fair market value of the Assets of withdrawals by the Grantor from the Trust
Account effected during such calendar quarter. As soon as is practicable, but in
no event more than ten (10) Business Days following its receipt of the Quarterly
Certification, the Beneficiaries’ Agent shall either (i) countersign such
certification and forward it to the Trustee or (ii) notify the Grantor that it
objects to the Grantor’s calculation of the Required Amount or the Security
Amount or the Grantor’s valuation of any Asset. If the parties are able to
resolve such dispute within ten (10) Business Days of the Beneficiaries Agent’s
transmittal to the Grantor of its notice of objection, they shall promptly
forward to the Trustee a jointly signed certification of the Required Amount,
the Security Amount or Asset valuation, as applicable. If the Parties are unable
to resolve such dispute within ten (10) Business Days of the Beneficiaries
Agent’s transmittal to the Grantor of its notice of objection, and the dispute
relates to the valuation of an Asset, the value of such Asset shall be
determined by a Third Party Appraiser and the parties shall be bound by such
valuation. All other disputes shall be resolved in accordance with Section 11.1
of this Trust Agreement. Upon resolution of such dispute, the Parties shall
forward to the Trustee a copy of the corrected Quarterly Certification setting
forth the Required Amount, the Security Amount or Asset value, as applicable, as
resolved

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through such Third Party Appraiser or arbitration. The Grantor shall, to the
extent reasonably necessary or required in order to verify Grantor’s
certification, permit the Beneficiaries’ Agent to audit its records in order to
determine its compliance with this Section 5.3. The Grantor shall cooperate
fully with such audit. Access to the Grantor and its employees by the
Beneficiaries’ Agent in connection with such audit shall be at reasonable times
during regular business hours upon reasonable prior written notice (including by
e-mail) in a manner which does not unreasonably interfere with the business or
operations of the Grantor.

Section 6.1 Adjustment of Trust Account Assets.

(a) The Required Amount and the Security Amount as of the end of each calendar
quarter shall be certified to the Trustee by the Grantor in the manner set forth
in Section 5.3 hereof.

(b) If the aggregate fair market value of the Permitted Investments maintained
in the Trust Account as of any calendar quarter end is less than the Required
Amount as of such calendar quarter end, then within five (5) Business Days of
its receipt of the certification set forth in Section 5.3, the Grantor shall
deposit into the Trust Account such additional Assets with an aggregate fair
market value as are necessary to ensure that the aggregate fair market value of
the Permitted Investments held in the Trust Account is no less than 100% of the
Required Amount as of the immediately prior calendar quarter end.

Section 6.2 Release of Trust Account Assets to the Beneficiaries’ Agent.

(a) Notwithstanding anything in this Trust Agreement to the contrary, the
Beneficiaries’ Agent, acting on its own behalf and as agent for one or more
Beneficiaries, shall have the right to withdraw Assets from the Trust Account at
any time, without notice to the Grantor, subject only to written notice to the
Trustee from the Beneficiaries’ Agent given in accordance with Section 10.1 of
this Trust Agreement. Other than such notice, no other statement or document
need be presented by the Beneficiaries’ Agent to withdraw such Assets except
that the Beneficiaries’ Agent shall acknowledge to the Trustee receipt of such
withdrawn Assets. Upon such written notice of demand of the Beneficiaries’
Agent, the Trustee shall immediately take any and all steps necessary to
transfer absolutely and unequivocally all right, title and interest in the
Assets to the Beneficiaries’ Agent and, to the extent applicable, deliver
physical custody of such Assets to the Beneficiaries’ Agent. Upon such transfer,
Trustee shall promptly forward a copy of such notice to the Grantor. The Trustee
shall not be subject to any liability for any payment made by it to the
Beneficiaries’ Agent pursuant to such written demand by the Beneficiaries’
Agent.

Section 6.3 Release of Trust Account Assets to the Grantor.

(a) All proceeds from the sale or substitution of the Assets in the Trust
Account and the collection of interest, dividends and other income in respect to
the Assets in the Trust Account shall be retained in the Trust Account and shall
not be released to the Grantor, except in accordance with the provisions set
forth in subparagraph (b) in this Section 6.3.

(b) Commencing from and after the fifth anniversary of the date hereof, and
subject to receipt of the Beneficiaries’ Agent’s prior written consent, which
shall not be unreasonably withheld, delayed or conditioned, the Grantor shall
have the right to withdraw Assets from the Trust Account with an aggregate fair
market value equal to the excess over 102% of the Required Amount as of the
prior calendar quarter end, so long as, following such withdrawal, the aggregate
fair market value of the Permitted Investments remaining in the Trust Account
plus the aggregate fair market value of Assets remaining in the LPT Trust
Account will exceed the net Reserves of the Beneficiary (including reserves for
losses incurred but not reported) calculated in accordance with SAP with respect
to Subject Liabilities reinsured with the Grantor as of such calendar quarter
end plus the “LPT Required Amount” as of such quarter end; and provided,
further, that in connection with any such withdrawal, the Grantor must provide a
written certification to the Trustee stating the fair market value of each
non-cash Asset withdrawn. In

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connection with any such release of Assets, the Trustee shall take any and all
necessary steps to transfer absolutely and unequivocally all right, title and
interest in such released Assets to the Grantor or its designee. The Trustee
shall not be subject to any liability for any payment made by it to the Grantor
pursuant to such written instructions received by it from the Beneficiaries’
Agent.

Section 7.4 Responsibilities of the Trustee.

(a) The Trustee, in the administration of the Trust Account, is to be bound
solely by the express provisions herein, and such further written and signed
directions as the appropriate party or parties may, under the conditions herein
provided, deliver to the Trustee. The Trustee shall be under no obligation to
enforce the Grantor’s obligations under this Trust Agreement, except as
otherwise expressly provided or directed pursuant hereto. The Trustee shall be
restricted to holding title to, operating and collecting the Assets comprising
the Trust Account and the payment and distribution thereof for the purposes set
forth in this Trust Agreement and to the conservation and protection of such
Assets and the administration thereof in accordance with the provisions of this
Trust Agreement, and the Trustee shall be liable only for its own negligence,
willful misconduct or lack of good faith. The Trustee further agrees to forward
upon request of the Beneficiaries’ Agent, the Grantor or any Insurance
Commissioner a statement and valuation of all Assets held under this Trust
Agreement.

(b) Subject to the other provisions of this Trust Agreement, including the
requirements that only Permitted Investments may be held in the Trust Account
and provisions relating to the substitution of Assets, (i) the Grantor or an
asset manager appointed by the Grantor shall have the irrevocable authority and
sole power to direct the Trustee, in the Grantor’s sole discretion, with respect
to all aspects of the management or investment of the Assets contained in the
Trust Account and (ii) the Trustee and the Beneficiaries’ Agent each
acknowledges that it has no authority with respect to such management or
investment activities, the Trustee agrees it will not exercise any discretion or
take any action with respect to the matters in clause (i) above and will take
any actions related thereto as directed by the Grantor in accordance therewith.

Section 7.5 Books and Records. The Trustee shall keep full and complete records
of the administration of the Trust Account. The Grantor, any Beneficiary, the
Beneficiaries’ Agent and/or the Insurance Commissioner may examine such records,
upon reasonable notice to the Trustee, at any time during business hours through
any person or persons duly authorized in writing by Grantor, the Beneficiary,
the Beneficiaries’ Agent and/or the Insurance Commissioner, at the requesting
party’s expense.

Section 7.8 Release of Information. The Trustee shall promptly respond to any
and all reasonable requests for information concerning the Trust Account or the
Assets held therein by any of the parties to this Trust Agreement. Furthermore,
the Trustee shall fully and completely respond to any direct inquiries of the
Insurance Commissioner, or any of its representatives, concerning the Trust
Account or the Assets held hereunder, including, detailed inventories of
securities or funds, and the Trustee shall permit the Insurance Commissioner, or
its representatives, to examine and audit all securities or funds held
hereunder. The Trustee shall promptly provide notice to the Beneficiaries’ Agent
and the Grantor concerning all such inquiries, and shall provide seven (7) days
prior notice to the Beneficiaries’ Agent and the Grantor of all such
examinations and audits.

Section 7.11 Limitations of the Trustee. The Trustee shall in no way be
responsible for determining the amount of Assets required to be deposited, or
monitoring whether or not the Assets held within the Trust Account are Permitted
Investments. The Trustee shall be under no liability for any release of Assets
made by it to the Grantor in accordance with Article VI.

Section 9.4 Termination of Trust Account. At least 30 days, but not more than 45
days, prior to the termination of the Trust Account, written notice of
termination shall be delivered by the Trustee to the Beneficiaries’ Agent

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Section 10.2 Construction and Effect. This Trust Agreement and the
enforceability hereof shall not be subject to the satisfaction of any conditions
or qualifications not expressly included herein.

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Exhibit B

Parental Guarantee Agreement

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THIS PARENTAL GUARANTEE AGREEMENT, dated as of January 20, 2017 (this “Parental
Guarantee Agreement”), is made by Berkshire Hathaway Inc., a Delaware
corporation (“Berkshire”) in favor of National Union Fire Insurance Company of
Pittsburgh, Pa., for itself and as appointed agent for the Reinsureds under the
Reinsurance Agreement and as beneficiaries’ agent for the beneficiaries under
the Trust Agreement (“NUFIC”, and NUFIC and the Reinsureds, including NUFIC,
under the Reinsurance Agreement individually or collectively, as the context may
require, referred to as “Reinsured”), and with respect to certain obligations of
National Indemnity Company, a Nebraska property and casualty insurance company
(“NICO”).

WITNESSETH:

WHEREAS, pursuant to the Aggregate Excess of Loss Reinsurance Agreement, dated
as of January 20, 2017, by and between the Reinsured and NICO (the “Reinsurance
Agreement”), the Reinsured ceded to NICO Ultimate Net Loss in excess of the
Retention, subject to the Reinsurer’s Aggregate Limit.

WHEREAS, NICO is a wholly-owned subsidiary of Berkshire and Berkshire shall
derive direct or indirect benefit from the transactions contemplated by the
Reinsurance Agreement;

WHEREAS, in connection with entry into the Reinsurance Agreement, NICO, and
NUFIC, as beneficiaries’ agent (“Trust Beneficiaries’ Agent”) for the Reinsureds
(the “Trust Beneficiaries”), have agreed to enter into a Trust Agreement (the
“Trust Agreement”) with Wells Fargo Bank, National Association, pursuant to
which NICO shall create a trust to hold assets as security for the satisfaction
of the obligations of NICO to the beneficiaries thereunder; and

WHEREAS, to induce the Reinsureds to enter into the transactions contemplated by
the Reinsurance Agreement, Berkshire has executed and delivered this Parental
Guarantee Agreement;

NOW, THEREFORE, in consideration of the foregoing, the covenants and agreements
set forth herein, and other good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged, and intending to be legally bound
hereby, Berkshire and NUFIC (each individually, a “Party” and collectively, the
“Parties”) hereby agree as follows:

ARTICLE I

DEFINITIONS; CONSTRUCTION

Section 1.1 Definitions. Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to such terms in the Reinsurance Agreement or
Trust Agreement as applicable. The following terms shall have the following
meanings when used in this Parental Guarantee Agreement:

“Beneficiary” means NUFIC, acting for itself and as appointed agent on behalf of
the Reinsureds under the Reinsurance Agreement and/or Trust Beneficiaries under
the Trust Agreement.

“Berkshire” has the meaning set forth in the Preamble and includes successors
and permitted assigns.

“Collateral” shall have the meaning provided in the Trust Agreement.

 

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“Collateral Obligations” has the meaning set forth in Section 2.1(a).

“Collateral Triggering Event” shall have the meaning provided in the Trust
Agreement.

“Dispute” shall have the meaning provided in the Reinsurance Agreement.

“Guaranteed Obligations” has the meaning set forth in Section 2.1(a).

“Insolvency Event” means, in respect of any Person, the occurrence or
continuance of any of the following events, acts, occurrences or conditions,
whether such event, act, occurrence or condition is voluntary or involuntary or
results from the operation of law or pursuant to or as a result of compliance by
that Person with any judgment, decree, order, rule or regulation of any court or
administrative or governmental body: (i) that Person shall commence a voluntary
case concerning itself under any insolvency laws or otherwise commence any other
proceeding under any bankruptcy, rehabilitation, liquidation, conservation,
dissolution, reorganization, arrangement, adjustment of debt, relief of debtors,
insolvency or similar law of any jurisdiction whether now or hereafter in effect
relating to such Person (any of the foregoing, an “Insolvency Proceeding”); (ii)
an involuntary Insolvency Proceeding is commenced against that Person and such
Insolvency Proceeding is not controverted within ten (10) calendar days, or is
not dismissed within thirty (30) calendar days, after commencement of the case;
(iii) a receiver, rehabilitator, custodian or liquidator is appointed for, or
takes charge of, all or substantially all of the property of that Person;
(iv) any order for relief or other order approving any such case or proceeding
is entered; (v) that Person is adjudicated insolvent or bankrupt; (vi) that
Person suffers any appointment of any custodian or the like for it or any
substantial part of its property, which appointment continues undischarged or
unstayed for a period of thirty (30) calendar days; (vii) that Person makes a
general assignment for the benefit of creditors; (viii) that Person shall fail
to pay, or shall state that it is unable to pay, or shall be unable to pay, its
debts generally as they become due; (ix) that Person shall call a meeting of its
creditors with a view of arranging a composition or adjustment of its debts;
(x) that Person shall by any act or failure to act consent to, approve of or
acquiesce in any of the foregoing; or (xi) any corporate action is taken by such
Person for the purpose of effecting any of the foregoing items (i)–(x).

“Interest” has the meaning set forth in Section 2.1(b).

“Interest Rate” shall have the meaning provided in the Reinsurance Agreement.

“NICO” has the meaning set forth in the Preamble and includes successors and
permitted assigns.

“NUFIC” has the meaning set forth in the Preamble and includes successors and
permitted assigns.

“Parental Guarantee” has the meaning set forth in Section 2.1(a).

“Parental Guarantee Agreement” has the meaning set forth in the Preamble.

“Party” or “Parties” has the meaning set forth in the Recitals.

“Proceeds” means “proceeds” as such term is defined in the UCC.

“Reinsurance Agreement” has the meaning set forth in the Recitals.

“Reinsurance Credit Event” shall have the meaning provided in the Reinsurance
Agreement.

 

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“Required Amount” shall have the meaning set forth in the Trust Agreement.

“Security Amount” shall have the meaning set forth in the Trust Agreement.

“Trigger Events” shall have the meaning set forth in Section 2.1(b).

“Trust Account” shall have the meaning set forth in the Trust Agreement.

“Trust Agreement” shall have the meaning set forth in the Recitals.

“Trustee” shall have the meaning set forth in the Trust Agreement.

“Ultimate Net Loss” shall have the meaning provided in the Reinsurance
Agreement.

ARTICLE II

PARENTAL GUARANTEE

Section 2.1 Parental Guarantee.

(a) Berkshire hereby unconditionally and irrevocably guarantees (the “Parental
Guarantee”) NICO’s full and prompt payment and, in the case of the obligations
set forth in (ii) below (the “Collateral Obligations”), performance when due of
NICO’s obligations for: (i) the payment of all Ultimate Net Loss due and owing
by NICO, pursuant to and in accordance with the applicable provisions of the
Reinsurance Agreement, subject always to the Aggregate Limit; and (ii) the
transfer and assignment of assets into the Trust Account when required,
including upon the occurrence of a Collateral Triggering Event or a Reinsurance
Credit Event, pursuant to and in accordance with the applicable provisions of
the Reinsurance Agreement and the Trust Agreement (such obligations,
collectively, the “Guaranteed Obligations”).

(b) Except as set forth in Article III, the Beneficiary shall be entitled to
proceed against Berkshire under this Parental Guarantee Agreement only following
the occurrence of a Trigger Event. If NICO, after any of the events listed under
(i), (ii) or (iii) below (the “Trigger Events”) has occurred, has not timely
paid (or, in the case of Collateral Obligations, performed) a Guaranteed
Obligation within thirty (30) days after the due date of such Guaranteed
Obligation, the Beneficiary may proceed directly and at once, upon written
notice to NICO and Berkshire, against Berkshire to obtain payment (or, in the
case of Collateral Obligations, performance) of the full amount or any portion
of the Guaranteed Obligation that is then due and payable and has not been paid
(or, in the case of Collateral Obligations, performed) by NICO, together with
interest on any such payments at the Interest Rate accrued from the applicable
due date until the date of such payment (“Interest”). Following the occurrence
of a Trigger Event, the Beneficiary shall be entitled to so proceed directly
against Berkshire without first proceeding against or joining NICO or any other
Person. The Trigger Events are as follows:

(i) any dissolution, liquidation, conservation, rehabilitation, bankruptcy,
statutory reorganization, receivership, compulsory composition or similar
statutory or delinquency proceeding involving NICO;

(ii) a final arbitration award, court order, decision or judgment with no appeal
or stay pending (A) has been issued against NICO in favor of a Reinsured under
the Reinsurance Agreement or the Trust Beneficiaries or the Trust Beneficiaries’
Agent under the Trust Agreement and remains unpaid (or, in the case of
Collateral Obligations, unperformed) by NICO, or (B) has been issued against a
Reinsured with respect to a claim in respect of Subject Liabilities that NICO
has acknowledged in writing its obligation to pay and such claim remains unpaid
by NICO; or

 

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(iii) NICO has acknowledged in writing its obligation to pay (or, in the case of
Collateral Obligations, perform) a Guaranteed Obligation and such Guaranteed
Obligation remains due and unpaid (or, in the case of Collateral Obligations,
unperformed) by NICO.

(c) This Parental Guarantee Agreement is a guarantee of payment (or, in the case
of Collateral Obligations, performance) and not of collection merely, and upon
the occurrence of a Trigger Event and any failure of NICO to pay (or, in the
case of Collateral Obligations, perform) a Guaranteed Obligation as set forth
above the Beneficiary, may, at its option, proceed directly and at once, with
written notice, against Berkshire to collect and recover the full amount of
NICO’s liability to pay (or, in the case of Collateral Obligations, perform)
such Guaranteed Obligation (or any portion thereof) then due and owing, together
with any applicable Interest, and otherwise enforce the Collateral Obligations.
The Parental Guarantee is a continuing guaranty and the obligations of Berkshire
hereunder are and shall be absolute under any and all circumstances,
irrespective of, and Berkshire hereby waives, any defense it may have relating
to: (i) any lack of validity, regularity or enforceability of this Parental
Guarantee Agreement, the Reinsurance Agreement or the Trust Agreement, (ii) any
change in time or place of payment of or other term of the Guaranteed
Obligation, or any other amendment or waiver of or consent to departure from
this Parental Guarantee Agreement, the Reinsurance Agreement, or the Trust
Agreement, (iii) except with respect to whether a Trigger Event has occurred,
any change, restructuring or termination of the corporate structure or
existence, including a Change of Control, of NICO or Berkshire, or any
dissolution, liquidation, conservation, rehabilitation, bankruptcy, statutory
reorganization, receivership, compulsory composition, or similar statutory or
delinquency proceeding affecting NICO or Berkshire or any of its assets or any
resulting release or discharge of any obligation of NICO under the Reinsurance
Agreement or the Trust Agreement or (iv) in the case of a Trigger Event of the
type described in Section 2.1(b)(ii) or Section 2.1(b)(iii), any defense,
set-off or other circumstance which might otherwise constitute a defense
available to Berkshire or, except as to set-offs, to NICO. Notwithstanding
anything contained herein to the contrary, nothing in this Parental Guarantee
Agreement shall preclude Berkshire from asserting a valid claim or valid defense
to the effect that the Guaranteed Obligation has been paid, discharged or
satisfied in full in accordance with the terms of the Reinsurance Agreement or
the Trust Agreement, as applicable. Except as otherwise expressly set forth in
this Parental Guarantee Agreement, Berkshire hereby expressly waives promptness,
diligence, demand, notice of dishonor, non-payment, non-performance or other
default with respect to the Guaranteed Obligations, or any requirements that any
right or power be exhausted or any action taken against NICO. To the extent that
Berkshire shall have made any payments under this Parental Guarantee Agreement,
any rights to subrogation which Berkshire may have as a result of any such
payment shall be deferred, postponed and subordinated to the prior indefeasible
payment in full of the Guaranteed Obligations. If all or any part payment
applied to the Guaranteed Obligation is or must be recovered, rescinded or
returned to NICO, Berkshire or any other Person because of a dissolution,
liquidation, conservation, rehabilitation, bankruptcy, statutory reorganization,
receivership, compulsory composition, or similar proceeding affecting any Party,
such Guaranteed Obligation shall be deemed to have continued in existence, and
this Parental Guarantee Agreement shall continue in effect as to such Guaranteed
Obligation, all as though such payment had not been made.

 

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(d) Berkshire shall pay on demand all fees and out-of-pocket expenses (including
reasonable attorneys’ fees and expenses) incurred by the Beneficiary in any way
relating to the successful enforcement of the rights of the Beneficiary
hereunder. The Beneficiary shall pay on demand all fees and out-of-pocket
expenses (including reasonable attorneys’ fees and expenses) incurred by
Berkshire in any way relating to its defense of an unsuccessful action by the
Beneficiary hereunder. Notwithstanding anything to the contrary in this Section
2.1(d), the Beneficiary shall not be entitled to be reimbursed hereunder for the
costs or out-of-pocket expenses incurred in connection with any notice or demand
required under Section 2.1(b) to the extent that such demand is not disputed or
objected to by Berkshire.

(e) For the avoidance of doubt, but subject to Section 2.1(d), the payment (or,
in the case of Collateral Obligations, performance) of a Guaranteed Obligation
by Berkshire pursuant to this Parental Guarantee Agreement shall be deemed to
satisfy NICO’s obligation to perform or pay such Guaranteed Obligation for any
purpose, including under the Reinsurance Agreement, or the Trust Agreement, as
applicable. The Beneficiary shall not be entitled to obtain payment (or, in the
case of Collateral Obligations, performance) of a Guaranteed Obligation from
NICO under the Reinsurance Agreement or the Trust Agreement or withdraw funds
from the Trust Account or any replacement or successor thereof or substitution
therefor to satisfy a Guaranteed Obligation to the extent that such Guaranteed
Obligation has theretofore been paid or performed in full by Berkshire under
this Parental Guarantee Agreement. In furtherance of the foregoing, the
Beneficiary hereby agrees that any amounts paid by Berkshire under this Parental
Guarantee Agreement shall be in satisfaction of any such amounts due and payable
(but unpaid) by NICO under the Reinsurance Agreement, or the Trust Agreement, as
applicable.

(f) Berkshire waives any and all rights of subrogation to NICO’s rights with
respect to the Trust Account and any claims it may have with respect thereto now
or in the future and whether by reason of any payment made by it of a Guaranteed
Obligation or otherwise.

ARTICLE III

REMEDIES; RIGHTS UPON DEFAULT, INSOLVENCY, ETC.

Section 3.1 Insolvency Event. Upon the occurrence and continuance of an
Insolvency Event of Berkshire, Beneficiary may proceed directly against
Berkshire, independent of the existence or non-existence of a Trigger Event at
such time. For the avoidance of doubt, for purposes of this Section 3.1, the
Guaranteed Obligations with respect to the Trust Account shall include the
obligation to contribute to the Trust Account the amounts necessary to satisfy
the payment and performance obligations under the Trust Agreement with respect
to the Security Amount or the Required Amount applicable to the Trust Account in
effect at the time of the Insolvency Event of Berkshire and thereafter.

ARTICLE IV

DISPUTE RESOLUTION; ARBITRATION

Section 4.1 Arbitration of Disputes Not Resolved by Negotiation.

All Disputes arising under or in any way related to this Parental Guarantee
Agreement, specifically including without limitation Disputes concerning alleged
fraud in the inducement of any Transaction Document or other wrongful
pre-Closing conduct shall, to the extent not resolved by negotiation between the
Parties, be resolved by arbitration in a consolidated arbitration involving all
agreements and Parties relevant to the dispute. Any Person that is a Party to
any Transaction Document shall have an absolute right to intervene in any such
arbitration.

 

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Section 4.2 Procedure for Arbitration and Mandatory Pre-Arbitration Negotiation.

(a) The procedures for the arbitration and for the mandatory pre-arbitration
negotiation are set forth in Article XIII of the Reinsurance Agreement, which is
hereby incorporated herein. Arbitration hereunder shall be conducted in New York
City, New York.

(b) In considering any relief to be awarded, the arbitrators (and the Designated
Court, as appropriate) shall take into account the Parties’ view that the nature
and uniqueness of the relationships created under the Transaction Documents as a
whole render specific performance the remedy of choice hereunder where it is
possible to implement that remedy.

Section 4.3 Permitted Judicial Proceedings.

The only permitted judicial proceedings relating to any Dispute are those set
forth in, and are subject to the exclusive jurisdiction provisions of, Section
13.2(f) of the Reinsurance Agreement. Each Party finally and irrevocably waives
any right to trial by jury of any matter or issue in such a permitted judicial
proceeding.

ARTICLE V

MISCELLANEOUS PROVISIONS

Section 5.1 Entire Agreement. This Parental Guarantee Agreement, the Reinsurance
Agreement, the Trust Agreement and any other documents delivered pursuant hereto
or thereto, constitute the entire agreement among the Parties and their
respective Affiliates with respect to the subject matter hereof and supersede
all prior negotiations, discussions, writings, agreements and understandings,
oral and written, among the Parties with respect to the subject matter hereof
and thereof.

Section 5.2 Waiver and Amendment. This Parental Guarantee Agreement may be
amended, superseded, canceled, renewed or extended, and the terms hereof may be
waived, only by an instrument in writing signed by the Parties hereto, or, in
the case of a waiver, by the Party waiving compliance. No delay on the part of
any Party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other such right, power
or privilege. No waiver of any breach of this Parental Guarantee Agreement shall
be held to constitute a waiver of any other or subsequent breach.

Section 5.3 Successors and Assigns. The rights and obligations of the Parties
under this Parental Guarantee Agreement shall not be subject to assignment
without the prior written consent of the other Parties, and any attempted
assignment without the prior written consent of the other Parties shall be
invalid ab initio. The terms of this Parental Guarantee Agreement shall be
binding upon, inure to the benefit of and be enforceable by and against the
successors and permitted assigns of the Parties.

Section 5.4 Construction; Interpretation. The Parties have participated jointly
in the negotiation and drafting of this Parental Guarantee Agreement. In the
event of an ambiguity or question of intent or interpretation arises, this
Parental Guarantee Agreement shall be construed as if drafted jointly by the
Parties and no presumption or burden of proof shall arise favoring or
disfavoring either Party by virtue of the authorship of any of the provisions of
this Parental

 

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Guarantee Agreement. When a reference is made to a Section such reference shall
be to a Section of this Parental Guarantee Agreement unless otherwise indicated.
Whenever the words “include”, “includes” or “including” are used in this
Parental Guarantee Agreement, they shall be deemed to be followed by the words
“without limitation.” The term “Parental Guarantee Agreement,” means this
Parental Guarantee Agreement as amended or supplemented, and the words “hereof,”
“herein,” “hereto,” “hereunder” and other words of similar import shall refer to
this Parental Guarantee Agreement in its entirety and not to any particular
Section or provision of this Parental Guarantee Agreement. Reference to any
applicable Law means such applicable Law as amended, modified, codified,
replaced or reenacted, and all rules and regulations promulgated thereunder.
References to a Person are also to its successors and permitted assigns.

Section 5.5 Governing Law and Jurisdiction. This Parental Guarantee Agreement
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts entered into therein, without reference to
principles of choice of law or conflicts of laws that would require the
application of the law of another jurisdiction.

Section 5.6 No Third Party Beneficiaries. Except for the Reinsureds and Trust
Beneficiaries, each of which shall be an express third party beneficiary hereof,
nothing in this Parental Guarantee Agreement is intended or shall be construed
to give any Person, other than the Parties hereto, any legal or equitable right,
remedy or claim under or in respect of this Parental Guarantee Agreement or any
provision contained herein.

Section 5.7 Counterparts. This Parental Guarantee Agreement may be executed by
the Parties in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument binding upon all of the Parties
notwithstanding the fact that all Parties are not signatory to the original or
the same counterpart. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all of the Parties. Each
counterpart may be delivered by facsimile transmission, which transmission shall
be deemed delivery of an originally executed document.

Section 5.8 Severability. Any term or provision of this Parental Guarantee
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Parental Guarantee Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Parental Guarantee
Agreement in any other jurisdiction, so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner materially
adverse to any Party. If any provision of this Parental Guarantee Agreement is
so broad as to be unenforceable, that provision shall be interpreted to be only
so broad as is enforceable. In the event of such invalidity or unenforceability
of any term or provision of this Parental Guarantee Agreement, the Parties shall
use their commercially reasonable efforts to reform such terms or provisions to
carry out the commercial intent of the Parties as reflected herein, while curing
the circumstance giving rise to the invalidity or unenforceability of such term
or provision.

Section 5.9 Specific Performance. Each of the Parties acknowledges and agrees
that the other Party would be irreparably damaged in the event that any of the
provisions of this Parental Guarantee Agreement were not performed or complied
with in accordance with their specific terms or were otherwise breached,
violated or unfulfilled. Accordingly, each of the Parties

 

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agrees that the other Party shall be entitled to an injunction or injunctions to
prevent noncompliance with, or breaches or violations of, the provisions of this
Parental Guarantee Agreement by the other Party and to enforce specifically this
Parental Guarantee Agreement and the terms and provisions hereof in any action
instituted in accordance with Section 5.5, in addition to any other remedy to
which such Party may be entitled, at law or in equity. In the event that any
action is brought in equity to enforce the provisions of this Parental Guarantee
Agreement, no Party will allege, and each Party hereby waives the defense or
counterclaim, that there is an adequate remedy at law. The Parties further agree
that (i) by seeking the remedies provided for in this Section 5.9, a Party shall
not in any respect waive its right to seek any other form of relief that may be
available to a Party under this Parental Guarantee Agreement, including monetary
damages in the event that this Parental Guarantee Agreement has been terminated
or in the event that the remedies provided for in this Section 5.9 are not
available or otherwise are not granted and (ii) nothing contained in this
Section 5.9 shall require any Party to institute any action for (or limit any
Party’s right to institute any action for) specific performance under this
Section 5.9 before exercising any other remedies under this Parental Guarantee
Agreement that may be available then or thereafter nor shall the commencement of
any action pursuant to this Section 5.9 or anything contained in this
Section 5.9 restrict or limit any Party’s right to pursue any other remedies
under this Parental Guarantee Agreement that may be available then or
thereafter.

Section 5.10 Incontestability. Each Party hereby acknowledges that this Parental
Guarantee Agreement, and each and every provision hereof, is and shall be
enforceable according to its terms. Each Party hereby irrevocably waives any
right to contest in any respect the validity or enforceability hereof. This
Parental Guarantee Agreement shall not be subject to rescission, or to an award
of damages, restitution, or reformation in lieu thereof, on any basis
whatsoever, including intentional fraud.

Section 5.11 Notice. Any notice, request, demand, waiver, consent, approval or
other communication required or permitted to be given by any Party hereunder
shall be in writing and shall be delivered personally, sent by facsimile
transmission, sent by registered or certified mail, postage prepaid, or sent by
a standard overnight courier of national reputation with written confirmation of
delivery. Any such notice shall be deemed given when so delivered personally, or
if sent by facsimile transmission, on the date received (provided that any
notice received after 5:00 p.m. (addressee’s local time) shall be deemed given
at 9:00 a.m. (addressee’s local time) on the next Business Day), or if mailed,
on the date shown on the receipt therefor, or if sent by overnight courier, on
the date shown on the written confirmation of delivery. Such notices shall be
given to the following address:

If to Beneficiary, to:

National Union Fire Insurance Company of Pittsburgh, Pa.

175 Water Street

New York, NY 10038

Attn: Chief Ceded Reinsurance Officer

 

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With copies to:

National Union Fire Insurance Company of Pittsburgh, Pa.

175 Water Street

New York, NY 10038

Attn: General Counsel

If to Grantor, to:

National Indemnity Company

1314 Douglas Street, Suite 1400

Omaha, NE 68102-1944

Attn: General Counsel

With a copy to:

Berkshire Hathaway Group

100 First Stamford Place

Stamford, CT 06903

Attn: General Counsel

If to Berkshire, to:

Berkshire Hathaway Inc.

3555 Farnam Street

Omaha, NE 68131

Attn: Chief Financial Officer

Beneficiary, Berkshire or NICO may change its notice provisions hereunder on
fifteen (15) calendar days’ advance notice in writing to each of such other
Persons.

Section 5.12 Representations and Warranties. As of the date hereof, Berkshire
hereby represents and warrants that (i) it has obtained all authorizations and
approvals required under applicable Law to enter into and perform its
obligations hereunder; (ii) it has all requisite corporate power and authority
to enter into this Parental Guarantee Agreement and to perform its obligations
hereunder; (iii) its execution and delivery of this Parental Guarantee
Agreement, and its performance of its obligations hereunder, have been duly
authorized by all necessary corporate action; and (iv) this Parental Guarantee
Agreement, when duly executed and delivered

 

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by the other Parties hereto, will be a valid and binding obligation, enforceable
against it in accordance with its terms except as enforceability may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
other similar Laws affecting creditors’ rights generally, by applicable
insurance insolvency and liquidation statutes and regulations and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

(The remainder of this page has been intentionally left blank.)

 

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IN WITNESS WHEREOF, the Parties hereby execute this Parental Guarantee Agreement
as of the day and year first set forth above.

 

BERKSHIRE HATHAWAY INC. By:  

 

  Name:   Marc D. Hamburg   Title:   Senior Vice President NATIONAL UNION FIRE
INSURANCE COMPANY OF PITTSBURGH, PA., for itself and as appointed agent for the
Reinsureds and Trust Beneficiaries By:  

 

  Name:   Jeremy D. Edgecliffe-Johnson   Title:   President and Chief Executive
Officer NATIONAL INDEMNITY COMPANY By:  

 

  Name:   Brian G. Snover   Title:   Senior Vice President

[Signature Page to Parental Guarantee Agreement]

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Exhibit C

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LOGO [g290381ex10_1pg117.jpg]

NUFIC Pool Indicated Reserves: Notes By Proposed ADC Subjectivity, Line of
Business, and Reserve Type, As of Q4/2015 Discount and ULAE Not Included in ADC
Included in ADC Grand Total
Line of Business
Bulk ULAE
Acctg Adjus tments
Foreign Assumed
Retro/Bulk
Short-tailed
2016 Exit
Residual Market
Runoff Segment
DBA War Hazard
Acctg Adjus tments
Included Workers_Comp [Redacted] [Redacted] [Redacted]
[Redacted] [Redacted] [Redacted]
[Redacted]
Excess_Umbrella [Redacted] [Redacted] [Redacted]
[Redacted]
Commercial_Genl_Liab
[Redacted] [Redacted] [Redacted] [Redacted] [Redacted] Assmd_Re [Redacted]
[Redacted] [Redacted]
[Redacted] DNO [Redacted] [Redacted]
[Redacted] EO_PI [Redacted] [Redacted]
[Redacted]
Commercial_Prop [Redacted] [Redacted] [Redacted]
Commercial_Auto_Liab [Redacted]
[Redacted]
[Redacted]
Med_Mal [Redacted]
[Redacted] [Redacted]
[Redacted]
EIL [Redacted] [Redacted] [Redacted]
[Redacted] Other_Casualty [Redacted] [Redacted]
[Redacted]
[Redacted]
EPLI
[Redacted]
[Redacted]
AH [Redacted]
[Redacted]
[Redacted] Homeowners [Redacted] [Redacted]
ULAE
[Redacted] [Redacted]
Aviation [Redacted] [Redacted] [Redacted]
[Redacted]
Fidelity
[Redacted]
[Redacted]
Marine [Redacted]
[Redacted] [Redacted] Personal_Auto_Liab [Redacted]
[Redacted]
[Redacted] Surety [Redacted]
[Redacted]
Trade_Credit [Redacted]
[Redacted]
Commercial_Auto_PD [Redacted] [Redacted] Warranty [Redacted] [Redacted]
Inland_Marine [Redacted] [Redacted] Other_FinlLines [Redacted]
[Redacted]
KRE [Redacted]
[Redacted]
Crisis_Mgmt [Redacted]
[Redacted]
Cyber [Redacted]
[Redacted]
Political_Risk [Redacted]
[Redacted]
Personal_Auto_PD [Redacted]
[Redacted]
Legacy Ceded Adjustment [Redacted]
[Redacted]
[Redacted]
Grand Total
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted] AIG
Source: Internal. The booked workers’ compensation discount is represented by
Workers’ Compensation Accounting Adjustments. The segmentation by Line of
Business is based on AIG categories and generally ties to Annual Statement
Lines. Regarding the 2016 Exits: (1) amounts shown represent only the NUFIC Pool
portion (AEL and Canada make up the complement), (2) Healthcare is split between
Excess_Umbrella and Comm Genl Liab, (3) Trucking resides in Excess_Umbrella,
(4) PLL resides in EIL. Adjuster includes internally allocated internal adjuster
expenses. “Legacy Ceded Adjustment” estimates are amounts booked as Net on the
NUFIC Pool but are related to Legacy exposures Confidential 6

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

Exhibit D

Scheduled Segments1

(All $ in Millions USD)

 

1. Full Segments identified as Excluded in “AIG Executive Summary Final Report
2015 (02-26-2016).pdf” dated Feb 26, 2016 (Table 2, Page 7) (Data Room at
1.4.2):

 

  a. AIG Europe ($[Redacted])

 

  b. Excess Workers’ Compensation ($[Redacted])

 

2. Sub-Segments identified as Excluded in “Environmental – Final Report – 1Q2015
021516.pdf“ dated Feb 15, 2016 (Table 2, Page 4) (Data Room at 1.4.2.2).

 

  a. PROPAC NYGL ($[Redacted])

 

  b. PROPAC NY Pollution ($[Redacted])

 

  c. PROPAC ex NY GL ($[Redacted])

 

  d. PROPAC ex NY Pollution ($[Redacted])

 

3. Sub-Segments identified as Excluded in “Environmental – Other Pollution
Products – Final Report.pdf“ dated Feb 15, 2016 (Table 1, Page 7) (Data Room at
1.4.2.2)

 

  a. PLL-ES ($[Redacted])

 

  b. PLL-US ($[Redacted])

 

  c. CPL-ES ($[Redacted])

 

  d. E&O-ES ($[Redacted])

 

  e. E&O-US ($[Redacted])

 

  f. UST-ES ($[Redacted])

 

4. Sub-Segments identified as Excluded in “Healthcare Final Report – 2015Q1
(02-15-2016).pdf“ dated Feb 15, 2016 (Table 1, Page 3) (Data Room at 1.4.2.5)

 

  a. Physicians and Surgeons ($[Redacted])

 

  b. Primary Products ($[Redacted])

 

  c. Excess Products ($[Redacted])

 

5. Sub-Segments identified as Excluded in:

 

  a. “Lexington Casualty Div 92 XS 1Q2015 Final Report (2016_02_15).pdf“ dated
Feb 15, 2016 (Table 1, Page 5) (Data Room at 1.4.2.6) and/or

 

  b. “Lexington Casualty D92 1Q2015 FINAL Report (2016_02_15).pdf“ dated Feb 15,
2016 (Table 1, Page 5) (Data Room at 1.4.2.6)

 

  c. Excess Trucking ($[Redacted]), as identified in (a) or (b) above

 

  d. Excess Workers Comp ($[Redacted]), as identified in (a) or (b) above

 

  e. AEL ($[Redacted]), as identified in (b) above

 

  f. Canada ($[Redacted], as identified in (a) or (b) above

 

  g. Other (-$[Redacted]), as identified in (a) or (b) above

 

  h. Prior Reviewed AIG Europe ($[Redacted]), as identified in (a) above

 

1  Data Room Reports identified above define “Greyed Out” 1 as follows:
“[t]hroughout this report, certain items are highlighted in grey. These items
are not relevant for the purpose of the potential reinsurance transaction, as
they pertain to either items excluded from the scope of the transaction or to
totals including items excluded from the scope.”

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

SCHEDULE 3.1

Illustrative Payment Schedule

 

Date    No. of Days since
Effective Date     

Total Amount

Due

     Balance Outstanding With
Accrued Interest      Payments Made
Illustration      Residual Balance
Owed  

1/1/2016

     Effective Date       $ 9,760,000,000.00            

2/3/2017

     400          $ 10,188,646,416.13       $ 3,000,000,000.00       $
7,188,646,416.13   

3/3/2017

     428          $ 7,210,307,554.33       $ 2,000,000,000.00       $
5,210,307,554.33   

4/3/2017

     459          $ 5,227,692,414.81       $ 1,000,000,000.00       $
4,227,692,414.81   

5/3/2017

     489          $ 4,241,342,879.86       $ 1,000,000,000.00       $
3,241,342,879.86   

6/30/2017

     547          $ 3,261,607,087.49       $ 3,261,607,087.49       $ 0.00   

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

SCHEDULE 8.1(a)

Approval under Section 1308 of the New York Insurance Law

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

SCHEDULE 8.1(e)

 

Reinsured Company

  

Domicile**

  

Pool Share of
the Grand Total
Reflected in the
“Included in
ADC” column of
Exhibit C

National Union Fire Insurance Company of Pittsburgh, Pa.    Pennsylvania    35%
American Home Assurance Company    New York    35% Lexington Insurance Company
   Delaware    30% AIG Assurance Company    Illinois    0% AIG Property Casualty
Company    Pennsylvania    0% AIG Specialty Insurance Company    Illinois   

0%

AIU Insurance Company    New York   

0%

Commerce and Industry Insurance Company    New York   

0%

Granite State Insurance Company    Illinois   

0%

Illinois National Insurance Co.    Illinois   

0%

New Hampshire Insurance Company    Illinois   

0%

The Insurance Company of the State of Pennsylvania    Illinois   

0%

**[Redacted]. Under no circumstance, shall a change or modification in the
Inter-Company Pooling Agreement by and among the companies included in the
Reinsured trigger a Reinsurance Credit Event.

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

SCHEDULE 8.2

Information Provided to Reinsurer

 

DATA ROOM

FOLDER

 

FOLDER AND DOCUMENT NAMES

1   Berkshire Hathaway 1.1   Legal Documentation   AIGPC_Nico.pdf  
Berkshire_ReleaseLetter.pdf 1.2   Q&A   AIG_2012_YellowBook.pdf   DBA WHR 2q14
to [Redacted].xlsx   DBA WHR 2q15 to [Redacted].xlsx   DBA_Questions.pdf  
DBA_Warhazard_Transition.xlsx   Financial Lines US Business Mix 2012 - 2015.xls
  [Redacted] POLICY LIST.docx   [Redacted] Policies.docx   Policies with Limits
([Redacted]).xls   Project Zenith - Berkshire Questions_asof_2017.01.13.xlsx  
Project Zenith - Berkshire Questions_asof_2017.01.13_v2.xlsx 1.3   Transaction
Overview   ADC_Reserves_by_AY_LOB_and_DIV.xlsx   ADC-IM-2016_August_12.pdf  
Discount Split for Markets.xlsx   Information Phasing Process.pdf  
Reconciliation_Summary.xlsx   rough reconciliation 8-26-2016.xlsx   rough
reconciliation 9-6-2016.xlsx   rough reconciliation DRAFT 8-25-2016.pdf  
Timeline 8-10-16.pdf   Transaction Overview 8-10-16.pdf 1.3.1   Documentation on
Exclusions   Excluded Segments.pdf   Risk Sharing Memo 20160701.pdf 1.4  
[Redacted] Reports 1.4.1   ADC Specific   AIG ADC Payout Report (07-14-2016)
Range-Valued Exhibits.xlsx   AIG ADC Payout Report (07-14-2016).pdf 1.4.2  
Standard 2015 Analysis   AIG Executive Summary Final Report 2015
(02-26-2016).pdf 1.4.2.1   DBA (Division 17)

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

  DBA 2Q2015 Final Report 2016-02-15.pdf   DBA 2Q2015 Final Technical Appendix
2016-02-15.pdf 1.4.2.2   Environmental (Div 57 73 77)   Environmental - Final
Report - 1Q2015 021516.pdf   Environmental - Final TA - 1Q2015 021516.pdf  
Environmental - Other Pollution Products - Final Report.pdf   Environmental -
Other Pollution Products Technical Appendix FINAL 2016-02-15.pdf 1.4.2.3  
Excess Casualty (Divisions 08 30 32 68 75 81)   Excess Casualty Final Report -
1Q2015 (2016-02-15).pdf   Excess Casualty Final Technical Appendix - 1Q2015
(2-15-2016).pdf 1.4.2.4   Financial Services (Div 4,35,36,37,39,62,69&88)  
Financial Services - 3Q2015 - FINAL Report (2016_02_15).pdf   Financial Services
- 3Q2015 - Technical Appendix FINAL (2016_02_15).pdf 1.4.2.5   Healthcare (Divs
09,29,66,97)   Healthcare Final Report - 2015Q1 (02-15-2016).pdf   Healthcare
Final Technical Appendix - 2015Q1 (02-15-2016).pdf 1.4.2.6   Lexington Casualty
(Division 92)   Lexington Casualty D92 1Q2015 FINAL Report (2016_02_15).pdf  
Lexington Casualty D92 1Q2015 Technical Appendix FINAL (2016_02_15).pdf  
Lexington Casualty Div92 XS 1Q2015 Final Report (2016-02-15).pdf   Lexington
Casualty Div92 XS 1Q2015 Final Technical Appendix (2016-02-15).pdf 1.4.2.7  
Lexington Cat Excess Casualty (Division 91)   Div 91 CAT XS - Final Report -
1Q2015 021516.pdf   Div 91 CAT XS - Final TA - 1Q2015 021516.pdf 1.4.2.8  
Lexington Cat Excess Financial (Division 63)   Cat Excess Financial Div 63 -
Final Report - 2Q2015 021516.pdf   Cat Excess Financial Div 63 - Final TA -
2Q2015 021516.pdf 1.4.2.9   Lexington Financial Lines (Division 38)   Lexington
Financial - Final Report 2Q2015 (2016-02-15).pdf   Lexington Financial - Final
Technical Appendix 2Q2015 (2-15-2016).pdf 1.4.2.10   Primary AL GL WC (Division
13 21 26 27 54 55 58 59 82 89)   Construction Div 82 FINAL Report - 4Q2014
(02-15-2016).pdf   Construction Div 82 FINAL Technical Appendix - 4Q2014
(02-15-2016).pdf   Primary AL FINAL Report - 4Q2014 (02-15-2016).pdf   Primary
AL FINAL Technical Appendix - 4Q2014 (02-15-2016).pdf   Primary GL - Final
Report - 4Q2014 021516.pdf   Primary GL - Final Tech Appendix - 4Q2014
021516.pdf   Primary WC Report 4Q2014 FINAL (2015_02_15).pdf   Primary WC
Technical Appendix #1 - Specialty FINAL (2016_02_15).pdf   Primary WC Technical
Appendix #2 - Energy FINAL (2016_02_15).pdf

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

  Primary WC Technical Appendix #3 - National Accounts FINAL (2016_02_15).pdf  
Primary WC Technical Appendix #4 - Commercial Risk FINAL (2016_02_15).pdf  
Primary WC Technical Appendix #5 - Transportation FINAL (2016_02_15).pdf  
Primary WC Technical Appendix #6 - Construction FINAL (2016_02_15).pdf   Primary
WC Technical Appendix #7 - Worldsource FINAL (2016_02_15).pdf   Primary WC
Technical Appendix #8 - Truck FINAL (2016_02_15).pdf   Primary WC Technical
Appendix #9 - Savings FINAL (2016_02_15).pdf 1.4.2.11   Professional Liab
(Division 5 & 65)   Prof Liability - Final Report - (02-15-2016).pdf   Prof
Liability - Tech Appendix - (02-15-16) Final.pdf 1.5   Tiger Extraction from
[Redacted] Reports 1.5.1   Primary WC & DBA   01_WCprimary_SubmissionSumry.xlsb
  01_WCprimary_SubmissionSumry_All_0_Tri_Years_Removed.xlsb  
09_DBA_SubmissionSumry.xlsb  
09_DBA_SubmissionSumry_All_0_Tri_Years_Removed.xlsb  
WC_CaseReserves_Tri_NatAccts_Spec_Energy_CommRisk_Construc_Transp.xlsx 1.5.2  
Excess Casualty & Lex Casualty & Lex Cat Excess Casualty  
02_ExcessCasualty_SubmissionSumry.xlsb  
02_ExcessCasualty_SubmissionSumry_All_0_Tri_Years_Removed_V2.Updated_8.19.2016.xlsb
  03_LexingtonCasualty_SubmissionSumry.xlsb  
04_LexingtonCAT_ExcessCasualty_SubmissionSumry.xlsb  
Additional_ExcessCasualty_UnpaidLossLegal_LossTables.xlsx  
Additional_ExcessCasualty_UnpaidLossLegal_LossTables_V2_Updated_8.25.2016.xlsx
1.5.3   Financial Services & Lex Financial & Lex Cat Excess Financial  
05_LexingtonFinancial_CAT_ExcessCasualty_SubmissionSumry.xlsb  
06_LexingtonFinancial_SubmissionSumry.xlsb  
06_LexingtonFinancial_SubmissionSumry_V2.Updated_8.19.2016.xlsb  
07_FinancialServices_SubmissionSumry.xlsb 1.5.4   General Liability  
11_GL_Excess_SubmissionSumry.xlsb   14_GL_Primary_SubmissionSumry.xlsb  
15_GL_Primary_Construction_SubmissionSumry.xlsb 1.5.5   Auto Liability  
10_AL_Excess_SubmissionSumry.xlsb   16_AL_Primary_SubmissionSumry.xlsb 1.5.6  
Healthcare   08_Healthcare_SubmissionSumry.xlsb  
08_Healthcare_SubmissionSumry_V2.Updated_8.19.2016.xlsb    

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

1.5.7   Professional Liability   12_ProfLiab_SubmissionSumry.xlsb 1.5.8  
Environmental   13_Enviromental_SubmissionSumry.xlsb 1.6   AIG Materials 1.6.1  
SupportForNon[Redacted]ReviewedSegments  
Index_Non[Redacted]ReviewedSupplemental.xlsx 1.6.1.1   AIG Re (Div 49) and Risk
Solutions (Div 78 83)   AIG RE (49.78.83) 2015 DVR Summary and Memo_v2.pdf
1.6.1.1.1   4Q Rollforward   AIG RE Reinsurance Solutions 4Q15 Rollforward
DVR.pdf 1.6.1.2   Aviation and Aviation WC (Div 14)   Div 14 Aerospace Year End
2015 Aviation Gross (includes DVR).pdf   Div 14 Aerospace Year End 2015 Aviation
Net (includes DVR).pdf   Div 14 Aerospace Year End 2015 WC Gross (includes
DVR).pdf   Div 14 Aerospace Year End 2015 WC Net (includes DVR).pdf 1.6.1.3  
Commutes and Insovents (Div 4C)   Breakout.xlsx   Div 4C 2015 National Union
Memo.pdf   Div 4C Dublin Segment.pdf   Div 4C Lexington Excess Casualty.pdf  
Div 4C Loss Development Factors.pdf   Div 4C National Union Segment Part 1.pdf  
Div 4C National Union Segment Part 2.pdf   Div 4C Sunset Commutation Report at
3Q15 DRAFT ( 9-15-15).pdf 1.6.1.4   Compulsory Cessions Acct (Div 47)  
CompCessionDiv47 GROSS Pool2015.pdf   CompCessionDiv47 NET Pool2015.pdf  
Division47GrossPoolMemo2015.pdf   Division47NetPoolMemo2015.pdf 1.6.1.5   ECO  
ECO DVR_123115_Memo.pdf   ECO DVR_Net_123115_Exhibits.pdf 1.6.1.6   Fidelity  
Fidelity US Carried Reserve 4Q15.pdf   Fidelity US Gross 2015 Study.pdf  
Fidelity US Net 2015 Study.pdf 1.6.1.7   Internal Reins Acct (Div 48)   Div 48
2015 DVR Summary & Memo.pdf 1.6.1.8   Marine (Div 41)   Div 41 Marine Year End
2015 Grs (includes DVR).pdf   Div 41 Marine Year End 2015 Net (includes DVR).pdf

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

1.6.1.9   Personal Umbrella and Personal Auto Liab (Div 7)   PCG IBNR Review YE
2015.pdf 1.6.1.10   Programs-Casualty (Div 66)   Div66 &78 2015 DVR - Gross.pdf
  Div66 &78 2015 DVR - Net.pdf 1.6.1.10.1   4Q2015_Data   __Div66_Unpaid Rsvs by
Segment_4q15.xlsx   [Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx  
[Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx  
[Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx  
[Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx  
[Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx  
[Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx  
[Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx  
[Redacted].xlsx   [Redacted].xlsx   [Redacted].xlsx 1.6.1.10.1.1  
NonMachineAdjustments   D66 Non Machine & Indexing Adj_4q15.xlsx

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

1.6.1.11   Surety 1.6.1.11.1   Div 03   Div 03 Runoff Surety 2015 Year End
Study.pdf 1.6.1.11.2   Div 60   Div 60 Domestic Surety 2015 Year-End Gross
Study.pdf   Div 60 Domestic Surety 2015 Year-End Net Study.pdf 1.6.2  
SupplementalSupportForSelect[Redacted]ReviewedSegments 1.6.2.1   Healthcare  
Healthcare (Divs 09,29,66,97) 2015 DVR US Pool eval 4q15 Net Memo.pdf  
Healthecare Net US Pool 2015 Exhibits (1).pdf   Healthecare Net US Pool 2015
Exhibits (2).pdf   Healthecare Net US Pool 2015 Exhibits (3).pdf   Healthecare
Net US Pool 2015 Exhibits (4).pdf   Healthecare Net US Pool 2015 Exhibits
(5).pdf   Index_Healthcare US Pool Carried Reserves As of 4Q15.xlsx   Nursing
Homes Diagnostics (Exh 3 Appendix 1 - 4).pdf   Primary Hospitals Diagnostics
(Exh 1 Appendix 1 - 4).pdf   XS Hospitals Diagnostics (Exh 2 Appendix 1 - 4).pdf
1.6.2.2   PrimaryWorkersCompensation   PrimaryWorkComp_Index.xlsx 1.6.2.2.1  
Worldsource (Div21)   Div 21 YE 2015 Net DVR - (WC Only).pdf 1.6.2.2.2  
Commercial Risk (Div59)   Div 59 WC YE 2015 Net DVR (all files).pdf 1.6.2.2.3  
Energy (Div26 & Div54)   FINAL - Div 26 YE Package_WC.PDF   FINAL - Div
54_US_Net YE Package_WC.PDF 1.6.2.2.4   National Accounts (Div55)   4q15 Div 55
GC WC AOS - Net.pdf   4q15 Div 55 GC WC CA - Net.pdf   Div 55 Appendix D -
Primary XS WC Appendix Exhibits.pdf   Div 55 Appendix D - Primary XS WC LDF
Memo.pdf   Div 55 Appendix E – Primary XS WC Tail Memo.pdf   Exhibit I – 2015
Div 55 GC WC Memo.pdf   Exhibit M – 2015 Div 55 XS WC Memo.pdf   Exhibit N - Div
55 2015 XS WC DVR.pdf 1.6.2.2.5   SWC (Div58 & Div13)   SWC Net Study.pdf
1.6.2.2.6   Transportation (Div89)   Div 89 Appendix A1 - Excess AY 2015 ELR.pdf
  Div 89 Appendix A2 - Guaranteed Cost AY 2015 ELR.pdf   Div 89 Appendix D -
Primary XS WC Appendix Exhibits.pdf

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

  Div 89 Appendix D - Primary XS WC LDF Memo.pdf   Div 89 Exhibit I - 2015 GC WC
AOS Memo.pdf   Div 89 Exhibit J - 2015 GC WC AOS DVR.pdf   Div 89 Exhibit K -
2015 GC WC CA Memo.pdf   Div 89 Exhibit L - 2015 GC WC CA DVR.pdf   DIv 89
Exhibit M - 2015 XS WC Memo.pdf   Div 89 Exhibit N - 2015 XS WC DVR.pdf   Div 89
Year_End_Memo.pdf 1.6.2.3   ExcessCasualty  
XSCas_Net_Memo_4Q2015_Update_02112016_with_1Q15_Memo.pdf 1.6.2.4  
FinancialServices   Index_FinancialServices.xlsx   US Financial Services 2015
Net DVR Package.pdf 1.6.2.5   LexingtonCatExcessCasualty   Div91 2015 Net
DVR.pdf   Index_LexingtonCatExcessCasualty.xlsx 1.6.2.6   Professional Liab
(Division 5 & 65)   Div 5&65 Prof Liab Gross YE 2015 DVR.pdf   Div 5&65 Prof
Liab Net YE 2015 DVR.pdf 1.6.2.7   Primary AL GL WC 1.6.2.7.1   Division 59  
Div 59 YE 2015 Gross DVR (all files).pdf   Div 59 YE 2015 Net DVR (all
files).pdf 1.6.2.7.2   Division 55 1.6.2.7.2.1   Gross Canada   2015 Gross Div
55 GC AL Canada CAD DVR.pdf   2015 Gross Div 55 GC AL Canada USD DVR.pdf   2015
Gross Div 55 GC GL Canada CAD DVR.pdf   2015 Gross Div 55 GC GL Canada USD
DVR.pdf   2015 Gross Div 55 XS AL Canada CAD DVR.pdf   2015 Gross Div 55 XS AL
Canada USD DVR.pdf   2015 Gross Div 55 XS GL Canada CAD DVR.pdf   2015 Gross Div
55 XS GL Canada USD DVR.pdf   Appendix A1 - Excess AY 2015 ELR Canada.pdf  
Appendix A2- Guaranteed Cost AY 2015 ELR Canada.pdf   Appendix B.pdf   Div 55 YE
Memo (Gross Canada).pdf   Exhibit A - Paid-to-paid Adjuster Ratio Selection.pdf
1.6.2.7.2.2   Gross US 1   Bulk   2015 Div 55 Bulk-Inactive DVR.pdf   2015 Div
55 Gross Bulk-Active DVR.pdf

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

2   GC   2015 Div 55 GC Ceded Memo.pdf   Div 55 85 Non-Excess Ceded Unpaid Claim
Estimate 4q15.pdf 3   XS   2015 Div 55 XS AL US DVR Gross.pdf   2015 Div 55 XS
GL US DVR Gross.pdf   2015 Div 55 XS WC US DVR Gross.pdf   2015 Grs XS AL
Memo.pdf   2015 Grs XS GL Memo.pdf   2015 Grs XS WC Memo.pdf 1.6.2.7.2.3   Net
Canada   Appendix A1 - Excess AY 2015 ELR Canada.pdf   Appendix A2- Guaranteed
Cost AY 2015 ELR Canada.pdf   Div 55 YE Memo (Net Canada).pdf   Exhibit A - 2015
Div 55 Net AL Canada Memo.pdf   Exhibit B - 2015 Div 55 XS AL Canada CAD DVR.pdf
  Exhibit C - 2015 Div 55 XS AL Canada USD DVR.pdf   Exhibit D - 2015 Div 55 GC
AL Canada CAD DVR.pdf   Exhibit E - 2015 Div 55 GC AL Canada USD DVR.pdf  
Exhibit F - 2015 Div 55 Net GL Canada Memo.pdf   Exhibit G - 2015 Div 55 XS GL
Canada CAD DVR.pdf   Exhibit H - 2015 Div 55 XS GL Canada USD DVR.pdf   Exhibit
I - 2015 Div 55 GC GL Canada CAD DVR.pdf   Exhibit J - 2015 Div 55 GC GL Canada
USD DVR.pdf 1.6.2.7.2.4   Net US   Appendix A1 Excess AY 2015 ELR.pdf   Appendix
A2 Guaranteed Cost AY 2015 ELR US.pdf   Appendix B SCI, Aggregate, Deductible
Corrections PYD.pdf   Appendix C Service Fees PYD.pdf   Appendix D Primary XS AL
Appendix Exhibits.pdf   Appendix D Primary XS AL LDF Memo.pdf   Appendix D
Primary XS GL Appendix Exhibits.pdf   Appendix D Primary XS GL LDF Memo.pdf  
Appendix D Primary XS WC LDF Memo.pdf   Appendix D Primary XS WC Appendix
Exhibits.pdf   Appendix E Primary XS WC Tail Memo.pdf   Appendix F1 Bulk AL
Diagnostics.pdf   Appendix F2 Bulk GL Diagnostics.pdf   Appendix F3 Bulk WC
Diagnostics.pdf   Appendix G Bulk WC LDF Inflation Relativities.pdf

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

   Appendix H Aggregate Excess Reserves.pdf    Div 55 YE Memo (Net US).pdf   
Exhibit A 2015 Div 55 GC AL Memo.pdf    Exhibit B 2015 Div 55 GC AL DVR.pdf   
Exhibit C 2015 Div 55 XS AL Memo.pdf    Exhibit D 2015 XS AL DVR.pdf    Exhibit
E 2015 Div 55 GC GL Memo.pdf    Exhibit F 2015 Div 55 GC GL DVR.pdf    Exhibit G
2015 Div 55 XS GL Memo.pdf    Exhibit H 2015 XS GL DVR.pdf    Exhibit I 2015 Div
55 GC WC Memo.pdf    Exhibit J 2015 Div 55 GC WC AOS DVR.pdf    Exhibit L 2015
Div 55 GC WC CA DVR.pdf    Exhibit M 2015 Div 55 XS WC Memo.pdf    Exhibit N
2015 XS WC DVR.pdf    Exhibit O 2015 Div 55 Bulk Memo.pdf    Exhibit P 2015 Div
55 Net Bulk-Active DVR.pdf    Exhibit Q 2015 Div 55 Bulk-Inactive DVR.pdf
1.6.2.7.3    Division 27    Division 27 Gross Reserve Study.pdf    Division 27
Net Reserve Study.pdf 1.6.2.7.4    Division 26 & 54 - Energy    FINAL - Div 26
YE Package.pdf    FINAL - Div 54_CAN_Grs YE Package.pdf    FINAL - Div
54_CAN_Net YE Package.pdf    FINAL - Div 54_US_Grs YE Package.pdf    FINAL - Div
54_US_Net YE Package.pdf 1.6.2.7.5    Division 21    Div 21 YE 2015 Gross DVR
(all files).pdf    Div 21 YE 2015 Net DVR (all files).pdf 1.6.2.7.6    Division
13 & 58 - Specialty WC    SWC Gross Study signed.pdf    SWC Net Study signed.pdf
1.6.2.7.7    Division 89 1.6.2.7.7.1    PDF 1    Gross    Appendix H1 GC AY 2015
LR.pdf    Appendix H2 XS AY 2015 LR.pdf    Appendix I Legal PTP.pdf    Appendix
J GC Deal Sheet and Adj Summary.pdf    Div 89 2015 Gross Study Memo.pdf    Div
89 2015 Gross Study.pdf

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

2    Net    Appendix A1 Excess AY 2015 ELR.pdf    Appendix A2 Guaranteed Cost AY
2015 ELR.pdf    Appendix B SCI, Aggregate, Deductible Corrections PYD.pdf   
Appendix C Service Fees PYD.pdf    Appendix D Primary XS Exhibits.pdf   
Appendix E Primary XS WC Tail Memo.pdf    Appendix F1 Bulk AL Diagnostics.pdf   
Appendix F2 Bulk GL Diagnostics.pdf    Appendix F3 Bulk WC Diagnostics.pdf   
Appendix G Bulk WC LDF Inflation Relativities.pdf    Div 89 Year_End_Memo.pdf   
Exhibit A 2015 GC AL Memo.pdf    Exhibit B 2015 GC AL DVR.pdf    Exhibit C 2015
XS AL Memo.pdf    Exhibit D 2015 XS AL DVR.pdf    Exhibit E 2015 GC GL Memo.pdf
   Exhibit F 2015 GC GL DVR.pdf    Exhibit G 2015 XS GL Memo.pdf    Exhibit H
2015 XS GL DVR.pdf    Exhibit I 2015 GC WC AOS Memo.pdf    Exhibit J 2015 GC WC
AOS DVR.pdf    Exhibit K 2015 GC WC CA Memo.pdf    Exhibit L 2015 GC WC CA
DVR.pdf    Exhibit M 2015 XS WC Memo.pdf    Exhibit N 2015 XS WC DVR.pdf   
Exhibit O 2015 Bulk Memo.pdf    Exhibit P 2015 Bulk-Active DVR.pdf    Exhibit Q
2015 Bulk-Inactive DVR.pdf    Exhibit R Agg XS Exhibit.pdf 1.6.2.7.8    Division
82 1.6.2.7.8.1    Gross    Exhibit A1 — 2015 Gross Div 82 Year_End_Memo -
signed.pdf    Exhibit A1 — 2015 Gross Div 82 Year_End_Memo.pdf    Exhibit A2 —
2015 Gross Reserve Study.pdf    Exhibit B1 — Div 82 2015 Gross Reserve Study
Standard Report WC AOS.pdf    Exhibit B2 — Div 82 2015 Gross Reserve Study
Standard Report WC CA.pdf    Exhibit B3 — Div 82 2015 Gross Reserve Study
Standard Report WC NY.pdf    Exhibit C1 — Div 82 2015 Gross Reserve Study
Standard Report GL CD CA.pdf    Exhibit C2 — Div 82 2015 Gross Reserve Study
Standard Report GL CD xCA.pdf

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   Exhibit C3 — Div 82 2015 Gross Reserve Study Standard Report GL xCD AOS.pdf
   Exhibit C4 — Div 82 2015 Gross Reserve Study Standard Report GL xCD CA.pdf   
Exhibit C5 — Div 82 2015 Gross Reserve Study Standard Report GL xCD NY.pdf   
Exhibit C7 — Primary GL Div 82 2015 DVR Revised Method Weights Supplement.pdf   
Exhibit D1 — Div 82 2015 Gross Reserve Study Standard Report AL.pdf    Exhibit
D2 — Div 82 2015 Gross Reserve Study Standard Report APD.pdf    Exhibit E1 — Div
82 2015 Gross Reserve Study CAT NYSCA and NM.pdf    Exhibit F1 — 4Q15 Ad Hoc
Analysis_SCI Fusion Deductible Memo.pdf    Exhibit F2 — Exh Pack SCI_K5 list for
MD Correction_bpd 20151220 DRAFT v2.pdf    Exhibit F3 — Deductible
Aggregate&Closeout Exposure From [Redacted] @2Q15.pdf    Exhibit F4 — Appx
1_Deductible Correction - AIG Claims ppt.pdf    Exhibit G1 — 2015 Canada Gross
Study 4q14.pdf    zAppendicies — Div 82 Gross Reserve Study.pdf 1.6.2.7.8.2   
Net    Exhibit A1 — 2015 Div 82 Year_End_Memo - signed.pdf    Exhibit A1 — 2015
Div 82 Year_End_Memo.pdf    Exhibit A2 — 2015 Net Reserve Study.pdf    Exhibit
B1 — Div 82 WC DVR 2015 Memo.pdf    Exhibit B2 — Div 82 2015 Reserve Study
Standard Report WC AOS.pdf    Exhibit B3 — Div 82 2015 Reserve Study Standard
Report WC CA.pdf    Exhibit B4 — Div 82 2015 Reserve Study Standard Report WC
NY.pdf    Exhibit C1 — Primary GL Div 82 2015 DVR @ 4Q14_Memo.pdf    Exhibit C2
— Primary GL Div 82 2015 DVR @ 4Q14_CD CA_Exhibits.pdf    Exhibit C3 — Primary
GL Div 82 2015 DVR @ 4Q14_CD xCA_Exhibits.pdf    Exhibit C4 — Primary GL Div 82
2015 DVR @ 4Q14_xCD AOS_Exhibits.pdf    Exhibit C5 — Primary GL Div 82 2015 DVR
@ 4Q14_xCD CA_Exhibits.pdf    Exhibit C6 — Primary GL Div 82 2015 DVR @ 4Q14_xCD
NY_Exhibits.pdf    Exhibit C8 — Primary GL Div 82 2015 DVR Revised Method
Weights Supplement.pdf    Exhibit D1 — Primary AL 2015 DVR @ 4Q14_Div
82_Memo.pdf    Exhibit D2 — Primary AL 2015 DVR @ 4Q14_Div 82 AL_Exhibits.pdf   
Exhibit D3 — Primary AL 2015 DVR @ 4Q14_Div 82 APD_Exhibits.pdf    Exhibit E1 —
Div 82 NM CAT & NYSCA DVR Model Validation Memo.pdf    Exhibit E2 — Div 82 2015
Reserve Study CAT NYSCA and NM.pdf    Exhibit F1 — 4Q15 Ad Hoc Analysis_SCI
Fusion Deductible Memo.pdf    Exhibit F2 — Exh Pack SCI_K5 list for MD
Correction_bpd 20151220 DRAFT v2.pdf    Exhibit F3 — Deductible
Aggregate&Closeout Exposure From [Redacted] @2Q15.pdf    Exhibit F4 — Appx
1_Deductible Correction - AIG Claims ppt.pdf

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   Exhibit G1 — 2015 Canada Study 4q14.pdf    zAppendicies — Div 82 Net Reserve
Study.pdf 1.6.2.8    DBA (Division 17)    2015 Div 17 Gross Memo (with DvR).pdf
   2015 Div 17 Net Memo (with DvR).pdf 1.6.2.9    Environmental (Div 57 73 77)
   Gross Environmental US reserve analysis as of 4Q15 print v3.pdf    Net
Environmental US reserve analysis as of 4Q15 print v8.pdf 1.6.2.10    Lexington
Cat Excess Financial (Division 63)    D63_2015q4_DVR_Net_and_Gross.pdf 1.6.2.11
   Lexington Casualty (Division 92)    D92 2015 DVR - US Pool - 4q15 - GROSS.pdf
   D92 2015 DVR - US Pool - 4q15 - NET.pdf 1.6.2.12    WorkCompSavings   
Settlement Strategy Savings Update Extract.pdf   
Settlement_Rates_Primary_WC.pdf    WC supporting package (KPI + credit walk) -
v1.pdf 1.6.2.13    Lexington Financial Lines (Division 38)   
D38_2015q4_DVR_Net_and_Gross_LessLargeClaimLists.pdf 1.6.3   
ProfitabilityStudyExtracts    MixShift_Extracts_6Sep2016.pdf 1.7    Tiger
Extraction from AIG Reports    AL_NET_DVR_Extracts_Loss_LAE_Legal.xlsx   
ExcessCasualty_NET_DVR_Extracts_Loss_LAE_Legal.xlsx   
Financial_Services_Net_DVR_Extracts_Loss_LAE_Legal.xlsx   
GL_NET_DVR_Extracts_Loss_LAE_Legal.xlsx    Lexington_Financial_NET_DVR
Extracts_Loss_LAE_Legal.xlsx    WC_Net_DVR_Extracts_Loss_LAE_Legal.xlsx 1.8   
CY 2016 Info    10Jan2017_CY2016_Incurred Data_Schedule_Summary.xlsx   
13Jan2017_CY2016_Paid Data_Schedule_Summary.xlsx    9Jan2017_CY2016_Incurred
Data_Schedule_Summary.xlsx.xlsx    9Jan2017_CY2016_Paid
Data_Schedule_Summary.xlsx    AdmD91CY2016.xlsx    Admitted Large Events.xlsx   
Div92 16q4 - XS CY 2016 Large Claims.xlsx   
GC_WC_settlement_payments_exhibit.xlsx    Top 35 Excess Casualty Paid Claims in
CY 2016.xlsx    Top 35 Excess Casualty Paid Claims in CY 2016_v2.xlsx

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Limitations and Qualifications

Certain of the documents Reinsureds have provided to the Reinsurer are derived
from data and information (collectively, the “Data”): (i) maintained in or
compiled by certain automated systems and/or manual processes of the Reinsureds
or their Affiliates that exist in their normal course of business (and the
Reinsured is not aware, as of the Execution Date of this Reinsurance Agreement,
of any significant deficiencies in the controls covering such systems or
processes) and/or (ii) received by the Reinsureds directly or indirectly from
third parties. For purposes of the representation in Section 8.2 of this
Reinsurance Agreement, the term “reasonable inquiry” is not intended to be
construed, and shall not be construed, to include an independent verification by
Reinsureds of the accuracy, completeness or integrity of the Data.

The representations and warranties given by Reinsureds herein with respect to
any document supplied to the Reinsurer are limited by the actual knowledge of
the individual who prepared it as of the time it was prepared and for the
purposes of which it was prepared, and, subject to Section 8.1 of this
Reinsurance Agreement, no additional representations or warranties are made as
to the subject matter of such documents. As to documents created and maintained
in the ordinary course of business and supplied to the Reinsurer, as opposed to
documents created expressly for the Reinsurer, Reinsureds represent only that
the individuals supplying such documents did not have reason to believe that the
documents so supplied were materially inaccurate. Any limitations,
qualifications or conditions that form part of any of the documents included in
this Schedule 8.2 are expressly incorporated herein.

When information set forth in materials listed on this Schedule 8.2 has been
amended, modified or supplemented by other information listed on this Schedule
8.2, the representation in Section 8.2 of this Reinsurance Agreement is made
solely as to such information as so amended, modified or supplemented. In
implementation of this paragraph, the following documents supersede other
documents supplied to Reinsurer, as indicated:

 

  •   “Project Zenith - Berkshire Questions_asof_2017.01.13_v2.xlsx” supersedes
“Project Zenith - Berkshire Questions_asof_2017.01.13.xlsx” (Folder 1.2)

 

  •   “rough reconciliation 9-6-2016.xlsx” supersedes “rough reconciliation
8-26-2016.xlsx” and “rough reconciliation DRAFT 8-25-2016.xlsx” (Folder 1.3)

 

  •   “13Jan2017_CY2016_Paid Data_Schedule_Summary.xlsx” supersedes
“9Jan2017_CY2016_Paid Data_Schedule_Summary.xlsx” (Folder 1.8)

 

  •   “10Jan2017_CY2016_Incurred Data_Schedule_Summary.xlsx” supersedes
“9Jan2017_CY2016_Incurred Data_Schedule_Summary.xlsx.xlsx” (Folder 1.8)

 

  •   “Top 35 Excess Casualty Paid Claims in CY 2016_v2.xlsx” supersedes “Top 35
Excess Casualty Paid Claims in CY 2016.xlsx” (Folder 1.8)

The representation set forth in Section 8.2 of this Reinsurance Agreement does
not apply to materials provided to the Reinsurer prior to August 11, 2016
except, and only to the extent that, such materials are expressly incorporated
into and adopted by materials supplied to the Reinsurer on or after such date.

Except to the extent setting forth qualifications or limitations, the
description of the documents set forth in this Schedule 8.2 are for
identification purposes only, form no part of the representations or warranties
made in this Reinsurance Agreement, and shall not be referred to in any dispute
resolution proceedings thereunder except as, and only to the extent, necessary
to determine the identity of a document or documents at issue in such
proceeding.

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SCHEDULE 8.2-1

Knowledgeable Individuals

Chris Laws

Nathan Lord

Nicholas Pastor

Frank Schmid

Megan Watt*

 

* only with respect to the following documents in Data Room Folder 1.2:
“[Redacted] POLICY LIST.docx, [Redacted] Policies.docx, Policies with Limits
([Redacted]).xls and the fourth question/request in Project Zenith - Berkshire
Questions_as_of_2017.01.12_v3.xlsx.

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SCHEDULE 8.5

Paid Loss Data

13Jan2017_CY2016_Paid Data_Schedule_Summary.xlsx