Exhibit 10.7.2


 


TRUST AGREEMENT


Dated as of November 14, 2006


between


FUND AMERICAN ENTERPRISES HOLDINGS, INC.


and


WHITE MOUNTAINS CAPITAL, INC., as Trustee


 


 
















 


TABLE OF CONTENTS


	
  

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  DEFINITIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 1.01. 

  	
  Definitions

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TRUST

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.01. 

  	
  Establishment

  	
   

  	
  5

  
	
  SECTION 2.02. 

  	
  Revocation

  	
   

  	
  5

  
	
  SECTION 2.03. 

  	
  Grantor Trust

  	
   

  	
  5

  
	
  SECTION 2.04. 

  	
  Trust Assets

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  DISBURSEMENTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.01. 

  	
  Disbursements to Zenith

  	
   

  	
  6

  
	
  SECTION 3.02. 

  	
  Limitations

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  INSOLVENCY OF
  THE COMPANY

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4.01. 

  	
  Insolvency

  	
   

  	
  6

  
	
  SECTION 4.02. 

  	
  Procedures

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PAYMENTS TO THE
  COMPANY

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.01. 

  	
  Payments to the Company

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  INVESTMENT OF
  TRUST

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.01. 

  	
  Limitations on Rights of Zenith

  	
   

  	
  7

  
	
  SECTION 6.02. 

  	
  Contributed Assets.

  	
   

  	
  7

  



 



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  ARTICLE VII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  RECORDKEEPING
  AND ADMINISTRATIVE SERVICES TO BE PERFORMED

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7.01. 

  	
  General

  	
   

  	
  8

  
	
  SECTION 7.02. 

  	
  Accounts

  	
   

  	
  8

  
	
  SECTION 7.03. 

  	
  Inspection and Audit

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TRUSTEE POWERS

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.01. 

  	
  Trustee Powers

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  COMPENSATION AND
  EXPENSES OF THE TRUSTEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9.01. 

  	
  Compensation and Expenses of the Trustee

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  RESIGNATION OR
  REMOVAL OF THE TRUSTEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10.01. 

  	
  Resignation

  	
   

  	
  10

  
	
  SECTION 10.02. 

  	
  Removal

  	
   

  	
  10

  
	
  SECTION 10.03. 

  	
  Successor

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SUCCESSOR
  TRUSTEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.01. 

  	
  Appointment

  	
   

  	
  10

  
	
  SECTION 11.02. 

  	
  Acceptance

  	
   

  	
  10

  
	
  SECTION 11.03. 

  	
  Corporate Action

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  CONFIDENTIALITY

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12.01. 

  	
  Confidentiality

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  AMENDMENT,
  REVOCATION OR TERMINATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13.01 

  	
  Amendment

  	
   

  	
  11

  
	
  SECTION 13.02. 

  	
  Revocation or Termination.

  	
   

  	
  11

  



 



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  ARTICLE XIV

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  LIMITATION OF
  LIABILITY; INDEMNIFICATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 14.01. 

  	
  Limitation of Liability

  	
   

  	
  12

  
	
  SECTION 14.02. 

  	
  Indemnification

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  RESIGNATION,
  REMOVAL AND TERMINATION NOTICES

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 15.01. 

  	
  Resignation, Removal and Termination Notices

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVI

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  DURATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 16.01. 

  	
  Duration

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  GENERAL

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 17.01. 

  	
  Performance by the Trustee, its Agents or Affiliates

  	
   

  	
  13

  
	
  SECTION 17.02. 

  	
  Entire Agreement

  	
   

  	
  13

  
	
  SECTION 17.03. 

  	
  Waiver

  	
   

  	
  13

  
	
  SECTION 17.04. 

  	
  Non-Assignment

  	
   

  	
  13

  
	
  SECTION 17.05. 

  	
  Successors and Assigns

  	
   

  	
  13

  
	
  SECTION 17.06. 

  	
  Partial Invalidity

  	
   

  	
  13

  
	
  SECTION 17.07. 

  	
  Section Headings

  	
   

  	
  13

  
	
  SECTION 17.08. 

  	
  Counterparts

  	
   

  	
  14

  
	
  SECTION 17.09. 

  	
  Facsimile and Electronic Communications Permitted

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVIII

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  GOVERNING LAW

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 18.01. 

  	
  Delaware Law Controls

  	
   

  	
  14

  
	
  SECTION 18.02. 

  	
  Trust Agreement Controls

  	
   

  	
  14

  



 



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TRUST AGREEMENT dated as
of November 14, 2006, between FUND AMERICAN ENTERPRISES HOLDINGS, INC., a
Delaware corporation (the “Company”) and WHITE MOUNTAINS CAPITAL, INC., a
Delaware corporation (the “Trustee”).


W I
T N E S S E T H:


WHEREAS Zenith Insurance Company (“Zenith”) owns $20
million liquidation preference of preferred stock of the Company (“the Zenith
Preferred Stock”);


WHEREAS the Company wishes to establish a trust and to
contribute to the trust assets (the “Contributed Assets”) that shall be held
therein, subject to the claims of the Company’s creditors in the event of the
Company’s Insolvency (as herein defined), until paid to Zenith in such manner
and at such times as specified under the terms of the Zenith Preferred Stock;


WHEREAS it is the intention of the parties that the
Contributed Assets be sufficient to pay when due all amounts required under the
terms of the Zenith Preferred Stock; and


WHEREAS the Trustee is willing to hold the aforesaid
Contributed Assets in trust.


NOW, THEREFORE, the parties
do hereby establish the Trust and agree that the Trust shall be composed, held
and disposed of as follows:


ARTICLE I



DEFINITIONS


SECTION 1.01.  Definitions.  The following terms as used in this Agreement
have the meaning indicated unless the context clearly requires otherwise:


 “Agreement”
shall mean this Trust Agreement, as the same may be amended and in effect from
time to time.


“Code” shall mean the Internal Revenue Code of 1986,
as it has been or may be amended from time to time.


“Company” shall mean Fund American Enterprises
Holdings, Inc., a Delaware corporation, or any successor to all or
substantially all its businesses that, by agreement, operation of law or
otherwise, assumes the responsibility of the Company under this Agreement.



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“Contributed Assets” shall mean the cash contributed
to the Trust by the Company, which cash will be used to acquire a portfolio of
fixed maturity securities issued by the U.S. government or government-sponsored
enterprises, the scheduled interest and principal payments of which are
intended to be sufficient to pay when due all amounts required under the terms
of the Zenith Preferred Stock.


“Reporting Date” shall mean the last day of each
calendar quarter and the date as of which the Trustee resigns or is removed
pursuant to this Agreement.


“Trust” shall mean this Fund American Enterprises
Holdings, Inc. Trust established by the Company and the Trustee pursuant to the
provisions of this Agreement.


“Trustee” shall mean White Mountains Capital, Inc., a
Delaware corporation, or any successor trustee appointed pursuant to
Article XI to the extent such successor agrees to serve as Trustee under
this Agreement.


“Zenith” shall mean Zenith Insurance Company, a
California Corporation.


“Zenith Preferred Stock” shall mean the $20 million
liquidation preference of preferred stock of the Company owned by Zenith.


ARTICLE II



TRUST


SECTION 2.01.  Establishment.  The Company hereby deposits with the Trustee
in trust the Contributed Assets, which shall become the principal of the Trust
to be held, administered and disposed of by the Trustee as provided in this
Agreement.  The Company may from time to
time deposit additional assets with the Trustee in trust that shall thereupon
be added to the principal of the Trust.


SECTION 2.02.  Revocation.  The Trust hereby established shall not be
revocable by the Company.


SECTION 2.03.  Grantor Trust.  The Trust is intended to be a grantor trust,
of which the Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Code, and shall be construed
accordingly.


SECTION 2.04.  Trust Assets.  The principal of the Trust and any earnings
thereon shall be held separate and apart from funds of the Company and shall be
used exclusively for the uses and purposes described herein and for the general
creditors of the Company as herein set forth. 
Zenith shall have no preferred claim on, or any beneficial ownership
interest in, any assets of the Trust. 
Any assets held by the Trust will be subject to the claims of the
Company’s general creditors under Federal and state law in the event of
Insolvency.



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ARTICLE III



DISBURSEMENTS


SECTION 3.01.  Disbursements
to Zenith.  The Company shall deliver
to the Trustee a schedule (the “Payment Schedule”) that indicates the amounts
payable by the Company in respect of the Zenith Preferred Stock and the dates
for payments of such amounts.  The
Trustee shall, on behalf of the Company, disburse moneys from the Trust to
Zenith in accordance with the Payment Schedule. 
The Trustee shall have no responsibility to ascertain whether the
Payment Schedule complies with the terms of the Zenith Preferred Stock or of
any applicable law.  The Company shall be
responsible for any Federal or state income tax reporting or withholding
arising out of any transactions relating to the Trust.


If the principal of the Trust, and any earnings
thereon, are not sufficient to make payments to Zenith in accordance with the
Payment Schedule, the Trustee shall notify the Company.


SECTION 3.02.  Limitations.  The Trustee shall not be required to make any
disbursement in excess of the net realizable value of the assets of the Trust
at the time of the disbursement.


ARTICLE IV



INSOLVENCY OF THE COMPANY


SECTION 4.01.  Insolvency.  The Trustee shall cease disbursement of funds
to Zenith if the Trustee has become aware of the Company’s Insolvency in
accordance with the procedures described in Section 4.02.  The Company shall be considered “Insolvent”
for purposes of this Agreement if (a) the Company is unable to pay its debts as
they become due or (b) the Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.


SECTION 4.02.  Procedures.  At all times during the continuance of the
Trust, the principal and income of the Trust shall be subject to claims of
general creditors of the Company under Federal and state law as set forth
below.


(a)  The Board of Directors and
the President of the Company shall have the duty to inform the Trustee in
writing of the Company’s Insolvency.  If
a person claiming to be a creditor of the Company alleges in writing to the
Trustee that the Company has become Insolvent, the Trustee shall determine
whether the Company is Insolvent and, pending such determination, the Trustee
shall discontinue disbursements of funds to Zenith.


(b)  Unless the Trustee has
actual knowledge of the Company’s Insolvency, or has received notice from the
Company or a person claiming to be a creditor alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire 



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whether the
Company is Insolvent.  The Trustee may in
all events rely on such evidence concerning the Company’s solvency as may be
furnished to the Trustee and that provides the Trustee with a reasonable basis
for making a determination concerning the Company’s solvency; provided,
however, that the Trustee may in all events rely conclusively on the assertion
of the Company as to whether it is or is not Insolvent.


(c)  If at any time the Trustee
has determined that the Company is Insolvent, the Trustee shall discontinue
disbursements of funds to Zenith and shall hold the assets of the Trust for the
benefit of the Company’s general creditors.


(d)  The Trustee shall resume
disbursement of funds to Zenith in accordance with Article III only after
the Trustee has determined that the Company is not Insolvent (or is no longer
Insolvent).


ARTICLE V



PAYMENTS TO THE COMPANY


SECTION 5.01.  Payments to the
Company.  Except as provided under
Articles III and IV and Section 13.02(b) the Company shall have no right to retain
or divert to others any of the Trust assets.


ARTICLE VI



INVESTMENT OF TRUST


SECTION 6.01. Limitations on Rights of Zenith.  As provided in Section 2.04, Zenith will not
have any preferential claim to or beneficial ownership interest in any asset or
investment of the Trust, and the rights of Zenith under the Trust are solely
those rights afforded to Zenith with respect to the assets of the Company as
the holder of the Zenith Preferred Stock. 
Subject to the other provisions of this Article VI, all rights
associated with assets of the Trust shall be exercised by the Trustee or the
person designated by the Trustee, and shall in no event be exercisable by or
rest with any person, including Zenith and the Company.


SECTION 6.02.  Contributed
Assets.


(a)  Investments.  The Trustee shall not invest the principal
and income of the Trust and shall hold the Contributed Assets and the scheduled
interest and principal payments thereon solely for the purpose of making
disbursements to Zenith in accordance with the terms of the Zenith Preferred
Stock; provided, that, the Trustee shall use the Contributed Assets to
acquire fixed maturity securities issued by the U.S. government or
government-sponsored enterprises as the Trustee is instructed in writing by the
Company from time to time.



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ARTICLE VII



RECORDKEEPING AND ADMINISTRATIVE SERVICES TO BE PERFORMED


SECTION 7.01.  General.  The Trustee shall perform such recordkeeping
and administrative functions as are agreed to in writing between the Company
and the Trustee.


SECTION 7.02.  Accounts.  The Trustee shall keep accurate accounts of
all investments, receipts, disbursements and other transactions hereunder, and
shall report the value of the assets held in the Trust as of the last day of
each fiscal quarter of the Company and, if not on the last day of a fiscal
quarter or the date on which the Trustee resigns or is removed as provided in
Article X or this Agreement is terminated as provided in Article
XIII.  Within 30 days following each
Reporting Date or within 60 days in the case of a Reporting Date caused by the
resignation or removal of the Trustee or the termination of this Agreement, the
Trustee shall provide to the Company a written account setting forth all
investments, receipts, disbursements and other transactions effected by the
Trustee between the Reporting Date and the prior Reporting Date, and setting
forth the value of the Trust as of the Reporting Date.


SECTION 7.03.  Inspection and
Audit.  All records generated by the
Trustee in accordance with Sections 7.01 and 7.02 shall be open to
inspection and audit, during the Trustee’s regular business hours prior to the
termination of this Agreement, by the Company or any person designated by the
Company.


ARTICLE VIII



TRUSTEE POWERS


SECTION 8.01.  Trustee Powers.  The Trustee shall have the following powers
and authority:


(a)  to sell, exchange, convey, transfer or
otherwise dispose of any property held in the Trust, by private contract or at
public auction; no person dealing with the Trustee shall be bound to see to the
application of the purchase money or other property delivered to the Trustee or
to inquire into the validity, expediency or propriety of any such sale or other
disposition;


(b)  to cause any securities or other property
held as part of the Trust to be registered in the Trustee’s own name, in the
name of one or more of its nominees and to hold any investments in bearer form,
but the books and records of the Trustee shall at all times show that all such
investments are part of the Trust;


(c)  to keep that portion of the Trust in cash or
cash balances as the Trustee may, from time to time, deem to be in the best
interest of the Trust;



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(d)  to make, execute, acknowledge and deliver any
and all documents of transfer or conveyance and to carry out the powers herein
granted;


(e)  to borrow funds from a bank not affiliated
with the Trustee in order to provide sufficient liquidity to make disbursements
to Zenith in accordance with the Zenith Preferred Stock in a timely fashion;


(f)  to settle, compromise or submit to
arbitration any claims (other than claims of creditors of the Company in the
event of the Company’s Insolvency), debts or damages due to or arising from the
Trust; to commence or defend suits or legal or administrative proceedings; to
represent the Trust in all suits and legal and administrative hearings; and to
pay all reasonable expenses arising from any such action from the Trust if not
paid by the Company;


(g)  to employ legal, accounting, clerical and
other assistance as may be required in carrying out the provisions of this
Agreement and to pay their reasonable expenses and compensation from the Trust
if not paid by the Company; and


(h)  to do all other acts, although not
specifically mentioned herein, as the Trustee may deem necessary to carry out
any of the foregoing powers and the purposes of the Trust.


Notwithstanding any powers granted to the Trustee
pursuant to this Agreement or to applicable law, the Trustee shall not have any
power that could give the Trust the objective of carrying on a business and
dividing the gains therefrom, within the meaning of Section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to the Code.  The Company may provide the Trustee with an
opinion of counsel whether an annual fiduciary tax return should be filed for
the Trust; in the absence of such opinion, the Trustee may consult with counsel
to the extent it deems appropriate on such issue, and any resulting counsel
fees shall be charged to the Trust to the extent not paid by the Company.


ARTICLE IX



COMPENSATION AND EXPENSES OF THE TRUSTEE


SECTION 9.01.  Compensation
and Expenses of the Trustee.  The
Company shall not be required to pay a fee to the Trustee in connection with
the services provided by the Trustee in accordance with this Agreement.


All expenses of the Trustee relating directly to the
management of the assets of the Trust and disbursement of funds to Zenith shall
be paid by the Company.



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The Company shall, from time to time, pay taxes of any
and all kinds whatsoever that at any time are lawfully levied or assessed upon
or become payable in respect of the assets of the Trust.


ARTICLE X



RESIGNATION OR REMOVAL OF THE TRUSTEE


SECTION 10.01.  Resignation.  The Trustee may resign at any time upon 90
days’ notice in writing to the Company, unless a shorter period of notice is
agreed upon by the Company.


SECTION 10.02.  Removal.  The Company may not remove the Trustee except
in the event of gross negligence or willful misconduct by the Trustee in
connection with the performance of its obligations under this Agreement and
upon 90 days’ notice in writing to the Trustee, unless a shorter period of
notice is agreed upon by the Trustee.


SECTION 10.03.  Successor.  If the Trustee resigns or is removed, a
successor shall be appointed, in accordance with Article XI, by the effective
date of resignation or removal under Section 10.01 or 10.02.  If no such appointment has been made, the
Trustee may apply to a court of competent jurisdiction for appointment of a
successor or for instructions.  All
expenses of the Trustee in connection with any such proceeding shall be paid by
the Company.


ARTICLE XI



SUCCESSOR TRUSTEE


SECTION 11.01.  Appointment.  If the office of Trustee becomes vacant for
any reason, the Company may in writing appoint a successor trustee under this
Agreement.  The successor trustee shall
have all the rights, powers, privileges, obligations, duties, liabilities and
immunities granted to the Trustee under this Agreement.  The successor trustee and predecessor trustee
shall not be liable for the acts or omissions of the other with respect to the
Trust.


SECTION 11.02.  Acceptance.  When the successor trustee accepts its
appointment under this Agreement, title to and possession of the Trust assets
shall immediately vest in the successor trustee without any further action on
the part of the predecessor trustee.  The
predecessor trustee shall execute all instruments and do all acts that
reasonably may be necessary or reasonably may be requested in writing by the
Company or the successor trustee to vest title to all Trust assets in the
successor trustee or to deliver all Trust assets to the successor trustee.


SECTION 11.03.  Corporate
Action.  Any successor of the Trustee
or successor trustee, through sale or transfer of the business or trust
department of the Trustee 



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or successor
trustee, or through reorganization, consolidation or merger, or any similar
transaction, shall, upon consummation of the transaction, become the successor
trustee under this Agreement.


ARTICLE XII



CONFIDENTIALITY


SECTION 12.01.  Confidentiality.  The parties to this Agreement recognize that,
in the course of implementing and providing the services defined herein, each
party may disclose to the other confidential information.  All such confidential information and other
proprietary information disclosed by any party shall remain the sole property
of the party disclosing the same, and any receiving party shall have no
interest or rights with respect thereto if so designated by the disclosing
party to the receiving party.  Each party
agrees to maintain all such confidential information in trust and confidence to
the same extent that it protects its own proprietary information, and not to
disclose such confidential information to any third party without the written
consent of the party that originally disclosed such proprietary
information.  Each party further agrees
to take all reasonable precautions to prevent any unauthorized disclosure of
such confidential information.  In
addition, each party agrees not to disclose or make public to anyone, in any
manner, the terms of this Agreement, except to its legal and accounting
advisers, or as required by law, or in connection with a potential corporate
transaction, without the prior written consent of the other parties.


All information received and all records prepared and
maintained by the Trustee shall be held in confidence by the Trustee, except as
required by applicable law.  Except to
the extent expressly authorized under this Agreement, the Trustee shall not hold
itself out as a representative or agent of the Company.


ARTICLE XIII



AMENDMENT, REVOCATION OR TERMINATION


SECTION 13.01.  Amendment.  This Agreement may not be amended.


SECTION 13.02.  Revocation or
Termination.


(a)  Except as set forth in
paragraph (b) of this Section 13.02, the Trust may not be revoked and this
Agreement may not be terminated.


(b)  On the date when the Zenith
Preferred Stock is redeemed in full and the Company has no further obligations
with respect to such stock, the Trust shall automatically be revoked and this
Agreement shall terminate.  At such time,
the Trustee shall forthwith transfer and deliver to such individual or entity
as the Company shall designate in writing all cash and assets then constituting
the Trust.  If by the termination 



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date, the
Company has not notified the Trustee in writing as to whom the assets and cash
are to be transferred and delivered, the Trustee may bring an appropriate
action or proceeding for leave to deposit the assets and cash in a court of
competent jurisdiction.  The Trustee
shall be reimbursed by the Company for all costs and expenses of the action or
proceeding including, without limitation, reasonable attorneys’ fees and
disbursements.


ARTICLE XIV



LIMITATION OF LIABILITY; INDEMNIFICATION


SECTION 14.01. Limitation of Liability.  Trustee shall not be liable for any claims,
losses, liabilities, damages or expenses (including attorneys’ fees and
expenses) (collectively referred to herein as “Losses”) or action taken or
omitted or for any loss or injury resulting from its actions or its performance
or lack of performance of its duties hereunder in the absence of its gross
negligence or willful misconduct.  In no
event shall Trustee be liable (i) for special, consequential or punitive
damages, or (ii) any Losses due to forces beyond the control of Trustee,
including without limitation strikes, work stoppages, acts of war or terrorism,
insurrection, revolution, nuclear or natural catastrophes or acts of God, and
interruptions, loss or malfunctions of utilities, communications or computer
(software and hardware) services.


SECTION 14.02. Indemnification. 
The Company shall be liable for, and shall indemnify Trustee and hold
Trustee harmless from and against, any and all Losses howsoever arising from or
in connection with this Agreement or the performance of Trustee’s duties
hereunder, the enforcement of this Agreement and disputes between the parties
hereto, provided, however, that nothing contained herein shall require that
Trustee be indemnified for its gross negligence or willful misconduct.


ARTICLE XV



RESIGNATION, REMOVAL AND TERMINATION NOTICES


SECTION 15.01.  Resignation,
Removal and Termination Notices.  All
notices of resignation, removal or termination under this Agreement must be in
writing and mailed to the party to which the notice is being given by certified
or registered mail, return receipt requested, to the Company c/o Thomas L.
Forsyth, Esq., OneBeacon Insurance Group LLC, One Beacon Street, Boston, MA
02108, and to the Trustee c/o White Mountains Capital, Inc., 80 South Main St.,
Hanover, NH 03755, or to such other addresses as the parties have notified each
other of in the foregoing manner.



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ARTICLE
XVI


DURATION


SECTION 16.01.  Duration.  The Trust shall continue in effect until the
Zenith Preferred Stock is redeemed in full and the Company has no further
obligations with respect to such stock subject, however, to the provisions of
this Agreement relating to amendment or termination.


ARTICLE
XVII


GENERAL


SECTION 17.01.  Performance by the Trustee, its Agents or
Affiliates.  The Company acknowledges
and authorizes that the services to be provided under this Agreement shall be
provided by the Trustee, its agents or affiliates, and that certain of such
services may be provided pursuant to one or more other contractual agreements
or relationships.


SECTION 17.02.  Entire Agreement.  This Agreement contains all the terms agreed
upon between the parties with respect to the subject matter hereof.


SECTION 17.03.  Waiver.  No waiver by either party of any failure or
refusal to comply with an obligation hereunder shall be deemed a waiver of any
other or subsequent failure or refusal to so comply.


SECTION 17.04.  Non-Assignment.  Payments to Zenith under the Trust, if any,
may not be anticipated, assigned (either at law or in equity), alienated,
pledged, encumbered or subjected to attachment, garnishment, levy, execution or
other legal or equitable process.


SECTION 17.05.  Successors and Assigns.  The stipulations in this Agreement shall
inure to the benefit of, and shall bind, the successors and assigns of the
respective parties.


SECTION 17.06.  Partial Invalidity.  If any term or provision of this Agreement or
the application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application
of such term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.


SECTION 17.07.  Section Headings.  The headings of the various sections and
subsections of this Agreement have been inserted only for the purposes of
convenience and are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement.



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SECTION 17.08.  Counterparts.  This Agreement may be executed in one or more
counterparts (including via facsimile), each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument and shall become effective when one or more counterparts have been
signed by each party and delivered to the other party.  The signature of any of the parties to any
counterpart or copy of this Agreement shall be sufficient evidence of its
joining in the creation of the Trust and of its designation of the Trustee
named herein.


SECTION 17.09.  Facsimile and Electronic Communications
Permitted.  All requirements in this
Agreement that notifications, directions or other communications be in writing
may be satisfied by facsimile and/or electronic delivery to the facsimile
number, e-mail or other electronic address as shall have been provided by one
party to the other in writing, except for (a) the requirement relating to
notices of resignation, removal or termination as described in Section 15.01
and (b) the initial notice by one party to the other of an acceptable facsimile
number, e-mail or other address.  Any
changes by one party to any facsimile number, e-mail or other address
previously provided to the other party pursuant to this Section 17.09 shall
also be transmitted in writing.


ARTICLE
XVIII


GOVERNING
LAW


SECTION 18.01.  Delaware Law Controls.  This Agreement is being made in the State of
Delaware, and the Trust shall be administered as a Delaware trust.  The validity, construction, effect and administration
of this Agreement shall be governed by and interpreted in accordance with the
laws of the State of Delaware.


SECTION 18.02.  Trust Agreement Controls.  The Trustee is not subject to the terms of
the Zenith Preferred Stock and, in the event of any conflict between the terms
of the Zenith Preferred Stock and the provisions of this Agreement, the
provisions of this Agreement shall control.



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IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their duly authorized officers as of the day
and year first above written.


	
  

  	
  FUND AMERICAN ENTERPRISES HOLDINGS, INC.,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Frederick J. Turcotte

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Frederick J. Turcotte

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President and Treasurer

  
						



 


	
  

  	
  WHITE MOUNTAINS CAPITAL, INC. (solely in its
  capacity as Trustee of the Trust),

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Reid T. Campbell

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Reid T. Campbell

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing Director and President

  
						



 


 



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