Document:

Exhibit

Exhibit 10.1

Execution Version

    

COINSURANCE AGREEMENT
Between
Bankers Life and Casualty Company 
(referred to as the Ceding Company)
and
Wilton Reassurance Company

(referred to as the Reinsurer)

TABLE OF CONTENTS
	
				
	 
	ARTICLE I.
	 

	 
	 
	 

	 
	DEFINITIONS
	 

	 
	 
	 

	Section 1.1.
	Definitions
	1
	

	 
	 
	 

	 
	ARTICLE II.
	 

	 
	 
	 

	 
	BASIS OF REINSURANCE AND BUSINESS REINSURED
	 

	 
	 
	 

	Section 2.1.
	Coverage
	16
	

	Section 2.2.
	Insurance Contract Changes
	17
	

	Section 2.3.
	Liability
	17
	

	Section 2.4.
	Indemnity Reinsurance
	17
	

	Section 2.5.
	Territory
	17
	

	Section 2.6.
	Reinstatements
	17
	

	Section 2.7.
	Discovered In-Force Policies and Lapsed Policies
	17
	

	Section 2.8.
	Affiliate Retrocessions and Transfers
	18
	

	Section 2.9.
	Third Party Retrocessions and Transfers
	19
	

	 
	 
	 

	 
	ARTICLE III.
	 

	 
	 
	 

	 
	PAYMENTS; ADDITIONAL CONSIDERATION; ADMINISTRATION
	 

	 
	 
	 

	Section 3.1.
	Payments by the Parties
	20
	

	Section 3.2.
	Additional Consideration
	20
	

	Section 3.3.
	Delayed Payments
	21
	

	Section 3.4.
	Defenses
	21
	

	Section 3.5.
	Offset
	21
	

	Section 3.6.
	Policy Administration
	21
	

	Section 3.7.
	Bank Accounts
	21
	

	Section 3.8.
	Reports from the Reinsurer
	22
	

	Section 3.9.
	Producers
	22
	

	Section 3.10.
	Premium Rate Management During the Measurement Period
	23
	

	Section 3.11.
	Premium Rate Management After the Measurement Period
	23
	

	Section 3.12.
	General Premium Rate Management
	25
	

	Section 3.13.
	Experience Refunds
	25
	

	Section 3.14.
	Expense Reimbursements
	25
	

	Section 3.15.
	No Third Party Reinsurance
	26
	

	 
	 
	 

	 
	 
	 

- i -

	
				
	 
	ARTICLE IV.
	 

	 
	 
	 

	 
	LICENSES; RESERVE CREDIT; SECURITY
	 

	 
	 
	 

	Section 4.1.
	Licenses; Reserve Credit
	26
	

	Section 4.2.
	Security
	27
	

	Section 4.3.
	Trust Account and Settlements
	28
	

	Section 4.4.
	Eligible Assets
	28
	

	Section 4.5.
	Deposit of Assets
	28
	

	Section 4.6.
	Modification During a FMV Triggering Event
	28
	

	Section 4.7.
	Ceding Company Draws or Withdrawals
	29
	

	Section 4.8.
	Designated Administrative Account
	31
	

	Section 4.9.
	Adjustment of Security and Withdrawals
	31
	

	 
	 
	 

	 
	ARTICLE V.
	 

	 
	 
	 

	 
	OVERSIGHTS; COOPERATION
	 

	 
	 
	 

	Section 5.1.
	Oversights
	34
	

	Section 5.2.
	Cooperation
	34
	

	 
	 
	 

	 
	ARTICLE VI.
	 

	 
	 
	 

	 
	INSOLVENCY
	 

	 
	 
	 

	Section 6.1.
	Insolvency of the Ceding Company
	34
	

	 
	 
	 

	 
	ARTICLE VII.
	 

	 
	 
	 

	 
	DURATION; RECAPTURE
	 

	 
	 
	 

	Section 7.1.
	Duration
	35
	

	Section 7.2.
	Survival
	35
	

	Section 7.3.
	Recapture
	35
	

	Section 7.4.
	Recapture Payments
	36
	

	 
	 
	 

	 
	ARTICLE VIII.
	 

	 
	 
	 

	 
	INDEMNIFICATION
	 

	 
	 
	 

	Section 8.1.
	Reinsurer’s Obligation to Indemnify
	37
	

	Section 8.2.
	Ceding Company’s Obligation to Indemnify
	37
	

	Section 8.3.
	Applicability of Master Transaction Agreement
	38
	

	Section 8.4.
	Waiver of the Duty of Utmost Good Faith
	38
	

- ii -

	
				
	 
	ARTICLE IX.
	 

	 
	 
	 

	 
	DAC TAX
	 

	 
	 
	 

	Section 9.1.
	DAC Tax
	38
	

	 
	 
	 

	 
	ARTICLE X.
	 

	 
	 
	 

	 
	MANAGEMENT OF ACTIONS
	 

	 
	 
	 

	Section 10.1.
	Certain Notifications
	38
	

	Section 10.2.
	Control of Actions
	39
	

	Section 10.3.
	Obligations of Controlling Parties
	40
	

	Section 10.4.
	Further Cooperation and Control Rights
	41
	

	 
	 
	 

	 
	ARTICLE XI.
	 

	 
	 
	 

	 
	MISCELLANEOUS
	 

	 
	 
	 

	Section 11.1.
	Notices
	42
	

	Section 11.2.
	Entire Agreement
	43
	

	Section 11.3.
	Waivers and Amendments
	44
	

	Section 11.4.
	Governing Law
	44
	

	Section 11.5.
	Dispute Resolution
	44
	

	Section 11.6.
	Expedited Dispute Resolution for Special Matters
	45
	

	Section 11.7.
	No Third Party Beneficiaries
	47
	

	Section 11.8.
	Expenses
	47
	

	Section 11.9.
	Counterparts
	47
	

	Section 11.10.
	Severability
	47
	

	Section 11.11.
	Treatment of Confidential Information
	47
	

	Section 11.12.
	Assignment    
	47
	

	Section 11.13.
	Further Assurances
	48
	

	Section 11.14.
	Rules of Construction
	48
	

	Section 11.15.
	Incontestability
	48
	

	Section 11.16.
	Negotiated Agreement
	48
	

	Section 11.17.
	Dollar References
	48
	

	 
	 
	 

- iii -

	
			
	 
	INDEX OF SCHEDULES AND EXHIBITS
	 

	 
	 
	 

	Schedules
	 
	 

	 
	 
	 

	Schedule A
	Investment Guidelines
	 

	Schedule B
	Terminal Settlement
	 

	Schedule C
	Specified Actions
	 

	Schedule D
	Expected Morbidity
	 

	Schedule E
	Form of Certificate
	 

	Schedule F
	Experience Refund
	 

	Schedule G
	Specified Litigation
	 

	Schedule H
	Policy Form Numbers
	 

	Schedule I
	Designated Administrative Account
	 

	Schedule J
	Fair Market Value Methodologies
	 

	Schedule K
	Permitted Practices
	 

	 
	 
	 

	Exhibits
	 
	 

	 
	 
	 

	Exhibit A
	Form of Notice of Failure to Pay Undisputed Amount
	 

	Exhibit B
	Form of Second Notice of Failure to Pay Undisputed Amount
	 

	 
	 
	 

	 
	 
	 

- iv -

COINSURANCE AGREEMENT 
THIS COINSURANCE AGREEMENT (this “Agreement”) is made and entered into on September 27, 2018 (the “Closing Date”) and effective as of the Effective Time by and between Bankers Life and Casualty Company, an Illinois-domiciled insurance company (the “Ceding Company”) and Wilton Reassurance Company, a Minnesota-domiciled insurance company (the “Reinsurer”).  For purposes of this Agreement, the Ceding Company and the Reinsurer shall each be deemed a “Party.”  
WHEREAS, the Ceding Company and the Reinsurer have entered into that certain Master Transaction Agreement dated as of August 1, 2018 (the “Master Transaction Agreement”); 
WHEREAS, the Master Transaction Agreement provides, among other things, for the Ceding Company and the Reinsurer to enter into this Agreement;
WHEREAS, the Ceding Company wishes to appoint the Reinsurer to provide administrative and other services with respect to the Reinsured Policies (as defined below), and the Reinsurer, as administrator, desires to provide such administrative services and other services pursuant to the Administrative Services Agreement (as defined below); and
WHEREAS, simultaneously with the execution and delivery of this Agreement on the date hereof, the Ceding Company, the Reinsurer and the Trustee (as defined below) will enter into the Trust Agreement (as defined below) pursuant to which the Trustee will hold assets as security for the satisfaction of the obligations of the Reinsurer to the Ceding Company under this Agreement.
NOW, THEREFORE, in consideration of the mutual and several promises and undertakings herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Ceding Company and the Reinsurer agree as follows:
ARTICLE I.

DEFINITIONS

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

“Accounting Period” means each calendar quarter during the term of this Agreement or any fraction thereof, beginning at the Effective Time and ending on the Recapture Date or the date this Agreement is otherwise terminated in accordance with Article VII, as applicable.  
“Action” shall have the meaning set forth in the Master Transaction Agreement.
“Accrued Interest” means the accrued but unpaid interest on the Eligible Assets being held in the Trust Account.

- 1 -

“Additional Consideration” has the meaning set forth in Section 3.2(a).
“Additional Rate Increase” means those certain New Reinsurer Rate Increase Requests made pursuant to Section 3.10(b)(ii) which, prior to the Measurement Date, are approved by each applicable Governmental Authority the consent or approval of which is required for full implementation.
“Adjusted Statutory Reserves” means the aggregate statutory reserves (including unearned premium reserves and other premium accruals) amount that would be required to be reflected on the 2017 NAIC Annual Statement Blank as (a) Exhibit 6, lines 1, 2 and 10 plus (b) Exhibit 8, Part 1, lines 2.24 and 3.4 plus (c) Exhibit 1, Part 1, lines 4 and 14 less (d) Exhibit 1, Part 1, lines 1 and 11 (or the equivalent line or lines in the event of changes to the NAIC Annual Statement Blank subsequent to December 31, 2017), to the extent directly related to Premiums or Reinsured Liabilities), each as calculated as of such date of determination with respect to the Reinsured Liabilities in accordance with SAP as in effect at the Effective Time applicable to the Ceding Company and otherwise in accordance with the Specified Accounting Principles; provided, however, that, if an event described in subsection (c) of the definition of FMV Triggering Event has occurred and is continuing, then the Adjusted Statutory Reserves shall be determined in accordance with SAP as in effect as of the date of such determination and otherwise in accordance with the Specified Accounting Principles.
“Administrative Services Agreement” means the Administrative Services Agreement entered into between the Ceding Company and the Reinsurer as of the date hereof.
“Affiliate” has the meaning set forth in the Master Transaction Agreement.
“Agreement” has the meaning set forth in the preamble.
“Applicable Law” has the meaning set forth in the Master Transaction Agreement.
“Applicable Percentage” means, with respect to any date of determination, the percentage listed under the column “Applicable Percentage” in the table below that corresponds to the period in which such date of determination falls.
	
		
	Period
	Applicable Percentage

	Effective Time through June 30, 2023
	100.0%

	July 1, 2023 through  June 30, 2028
	87.5%

	July 1, 2028 through  June 30, 2033
	75.0%

	July 1, 2033 through  June 30, 2038
	62.5%

	July 1, 2038 through  June 30, 2043
	50.0%

	July 1, 2043 through  June 30, 2048
	37.5%

	July 1, 2048 through  June 30, 2053
	25.0%

	July 1, 2053 through  June 30, 2058
	12.5%

	After  July 1, 2058
	0.0%

“Applicable Reserve Credit Laws” means Sections 173.1(1)(A), (1)(B) and (2) of the Illinois Insurance Code and Sections 1104.20, 1104.30, 1104.30, 1104.60, 1104.70, 1104.80, 

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1104.90 and 1104.100(a) of Title 50 of the Illinois Administrative Code or any successor to such provisions and the equivalent provisions with respect to licensure, accreditation and collateral of the credit for reinsurance law and regulation in any Applicable State.
“Applicable State” means the Ceding Company Domiciliary State; provided, however, that, (a) if there is a repeal of or amendment or other modification to the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R. 4173) that would authorize a Governmental Authority in any jurisdiction of the United States as to which the Ceding Company is licensed to transact business (other than New York) to apply the applicable rules for credit for reinsurance in such jurisdiction to the Ceding Company and (b) the Ceding Company reasonably determines that it is obligated under Applicable Law to comply with such rules in order to receive statutory financial statement credit in such jurisdiction, then “Applicable State” shall mean, collectively, the Ceding Company Domiciliary State and any such other jurisdiction; provided that in no circumstance shall “Applicable State” include New York.
“Arbitrators” has the meaning set forth in Section 11.6(b).
“Bank Accounts” has the meaning set forth in Section 3.7.
“Business” has the meaning set forth in the Master Transaction Agreement.
“Business Day” has the meaning set forth in the Master Transaction Agreement.
“Capital Reporting Deadline” means, with respect to a calendar quarter other than the last quarter of a calendar year, the date that is forty-five (45) calendar days after the end of such calendar quarter, and with respect to the last calendar quarter of a calendar year, the date that is sixty (60) calendar days after the end of such calendar quarter.
“Cash Flow Amount” has the meaning set forth in the Master Transaction Agreement.
“Ceding Commission” has the meaning set forth in the Master Transaction Agreement.
“Ceding Company” has the meaning set forth in the preamble.
“Ceding Company Domiciliary State” means the State of Illinois, or, if the Ceding Company changes its state of domicile to another state within the United States, such other state; provided, however, that if the Ceding Company changes its state of domicile to the State of New York, for all purposes hereunder the Ceding Company Domiciliary State shall be the State of Illinois.
“Ceding Company Extra-Contractual Obligations” means
(a)    all Extra-Contractual Obligations to the extent arising out of or resulting from any act, error or omission, whether or not intentional, negligent, fraudulent, in bad faith or otherwise:
		
	(i)
	occurring prior to the Closing Date;

- 3 -

		
	(ii)
	occurring on or after the Closing Date, by the Ceding Company or any of its Affiliates while the Ceding Company is acting as a Controlling Party for the related matter, unless such act, error or omission either (x) was undertaken at the written direction or with the prior written consent of the Reinsurer or (y) would not give rise to a breach under the terms of the Transition Services Agreement;

		
	(iii)
	occurring on or after the Closing Date, by or on behalf of the Ceding Company or any of its Affiliates that constitutes a breach of the Ceding Company’s obligations under the terms of the Transition Services Agreement, unless such act, error or omission was undertaken at the written direction or with the prior written consent of the Reinsurer;

		
	(iv)
	occurring during the Interim Period, by or on behalf of the Ceding Company or any of its Affiliates with respect to the implementation or administration of (A) any premium rate change, including a Reinsurer Rate Increase Request, a Reinsurer Initiated Rate Increase, a New Reinsurer Rate Increase Request or an Additional Rate Increase and (B) any alternative policy or benefit option offered to policyholders in connection with or in lieu of any such premium rate change, including a Reinsurer Rate Increase Request, a Reinsurer Initiated Rate Increase, a New Reinsurer Rate Increase Request or an Additional Rate Increase, in each case unless such act, error or omission was undertaken at the written request or direction of, or with the prior written consent of, the Reinsurer;

		
	(v)
	occurring with respect to any Discovered Policy prior to the date that such Discovered Policy becomes a Reinsured Policy pursuant to Section 2.7;

(b)    all Extra-Contractual Obligations to the extent arising out of or resulting from any act, whether or not intentional, negligent, fraudulent, in bad faith or otherwise, occurring on or after the Conversion Date by the Ceding Company or any of its Affiliates or any of their respective Representatives unless such act or error was undertaken at the written direction or with the prior written consent of the Reinsurer; and
(c)    all Extra-Contractual Obligations arising out of or resulting from any of the Specified Actions, other than Extra-Contractual Obligations arising in connection with the implementation or administration of Specified Actions by the Reinsurer under the terms of the Administrative Services Agreement following the Conversion Date;
provided, however, that, any Extra-Contractual Obligation (i) arising out of or resulting from acts, errors or omissions which occur or are deemed to occur both before the Closing Date and on or after the Closing Date and (ii) which does not otherwise constitute a Ceding Company Extra-Contractual Obligation, shall be deemed to constitute a Ceding Company Extra-Contractual Obligation to the extent that any of the First Material Acts associated therewith occurred prior to the Closing Date.
“Ceding Company Indemnified Parties” has the meaning set forth in Section 8.1.

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“Ceding Company Required Balance Report” has the meaning set forth in Section 4.9(c).
“Claim” has the meaning set forth in the Administrative Services Agreement.
“Closing” has the meaning set forth in the Master Transaction Agreement.
“Closing Date” has the meaning set forth in the preamble.
“Code” means the United States Internal Revenue Code of 1986, as amended, and the United States Treasury Regulations promulgated thereunder.
“Company Action Level RBC” means as of any date of determination, company action level RBC as calculated in accordance with the Applicable Laws of the Reinsurer Domiciliary State.
“Conclusion” means (a) settlement of a dispute or Action in accordance with the terms of this Agreement or (b) a final and binding determination by a court of competent jurisdiction or arbitrator.
“Controlling Party” means the Party designated as such in Section 10.2.
“Conversion Date” means the date that is thirty-six (36) months following the Closing Date or such earlier date designated pursuant to the terms of the Transition Services Agreement.
“CPR Institute” has the meaning set forth in Section 11.6(b).
“Current Overcollateralization Amount” means (a) as of any date of determination during the continuation of a Reserve Credit Event, the RCE Overcollateralization Amount as of such date of determination and (b) otherwise, an amount equal to the product of the Overcollateralization Amount multiplied by the Applicable Percentage as of such date of determination.
“Designated Administrative Account” means the Bank Account at the bank and with the account number listed in Schedule I, as such Schedule I may be amended by the Ceding Company and the Reinsurer from time to time.
“Determination” has the meaning set forth in Section 11.6(d).
“Discovered Policy” has the meaning specified in Section 2.7(a).
“Effective Time” means 12:01 a.m. (New York time) on April 1, 2018.
“Effective Time Adjusted Statutory Reserves” has the meaning set forth in the Master Transaction Agreement.
“Eligible Assets” has the meaning set forth in Section 4.4.
“Estimated Statement of Net Settlement” has the meaning set forth in the Master Transaction Agreement.

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“Excess Reserve” means (a), as of any date of determination during the continuation of a Reserve Credit Event, (i) the Adjusted Statutory Reserve, less (ii) the Adjusted Statutory Reserve calculated without regard to the proviso contained in the definition of Adjusted Statutory Reserves, each as of such date, but in any event not less than zero and (b) otherwise zero (0).
“Excluded Liabilities” means (i) any claim, loss or liability under or incurred in connection with or with respect to the Reinsured Policies which arises out of or results from (a) the Ceding Company’s income Taxes, premium Taxes and guaranty fund assessments; (b) any amounts due under any of the Producer Agreements or otherwise payable to Producers; (c) modifications or amendments to the terms of the Reinsured Policies made by the Ceding Company following the Effective Time without the Reinsurer’s prior written consent or direction and which are not required under Applicable Law; (d) all Ceding Company Extra-Contractual Obligations; (e) any unearned premiums that were not returned to policyholders associated with policies terminated prior to the Effective Time and which no unearned premium was maintained in the Effective Time Adjusted Statutory Reserves; or (f) any reinsurance ceded with respect to any of the Reinsured Policies, other than cessions implemented with the prior consent or direction of the Reinsurer made pursuant to Section 3.15; or (ii) any Extra-Contractual Obligations, including litigation expenses, which arise out of or result from any of the Specified Litigations.
“Existing IMR Amount” means, with respect to any date of determination, the amount listed under the column “Existing IMR Amount” in the table below that corresponds to the period in which such date of determination falls.
	
		
	Period
	Existing IMR Amount

	At Effective Time
	$44,800,000

	April 2, 2018 through June 30, 2018
	$43,600,000

	July 1, 2018 through September 30, 2018
	$42,500,000

	October 1, 2018 through December 31, 2018
	$41,300,000

	January 1, 2019 through March 31, 2019
	$40,200,000

	April 1, 2019 through June 30, 2019
	$39,000,000

	July 1, 2019 through September 30, 2019
	$37,900,000

	October 1, 2019 through December 31, 2019
	$36,700,000

	January 1, 2020 through March 31, 2020
	$35,600,000

	April 1, 2020 through June 30, 2020
	$34,400,000

	July 1, 2020 through September 30, 2020
	$33,300,000

	October 1, 2020 through December 31, 2020
	$32,100,000

	January 1, 2021 through March 31, 2021
	$31,000,000

	April 1, 2021 through June 30, 2021
	$29,800,000

	July 1, 2021 through September 30, 2021
	$28,700,000

	October 1, 2021 through December 31, 2021
	$27,500,000

	January 1, 2022 through March 31, 2022
	$26,400,000

	April 1, 2022 through June 30, 2022
	$25,200,000

	July 1, 2022 through September 30, 2022
	$24,100,000

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	October 1, 2022 through December 31, 2022
	$23,000,000

	January 1, 2023 through March 31, 2023
	$21,800,000

	April 1, 2023 through June 30, 2023
	$20,700,000

	July 1, 2023 through September 30, 2023
	$19,500,000

	October 1, 2023 through December 31, 2023
	$18,400,000

	January 1, 2024 through March 31, 2024
	$17,200,000

	April 1, 2024 through June 30, 2024
	$16,100,000

	July 1, 2024 through September 30, 2024
	$14,900,000

	October 1, 2024 through December 31, 2024
	$13,800,000

	January 1, 2025 through March 31, 2025
	$12,600,000

	April 1, 2025 through June 30, 2025
	$11,500,000

	July 1, 2025 through September 30, 2025
	$10,300,000

	October 1, 2025 through December 31, 2025
	$9,200,000

	January 1, 2026 through March 31, 2026
	$8,000,000

	April 1, 2026 through June 30, 2026
	$6,900,000

	July 1, 2026 through September 30, 2026
	$5,700,000

	October 1, 2026 through December 31, 2026
	$4,600,000

	January 1, 2027 through March 31, 2027
	$3,400,000

	April 1, 2027 through June 30, 2027
	$2,300,000

	July 1, 2027 through September 30, 2027
	$1,100,000

	October 1, 2027 and thereafter
	$0

“Experience Refund” has the meaning set forth in Schedule F.
“Extra-Contractual Obligations” means all Liabilities to any Person or Persons arising out of or resulting from the Reinsured Policies (other than Liabilities arising under the express terms and conditions and within the policy limits of the Reinsured Policies), including, without limitation, any loss in excess of the limits arising under or covered by any Reinsured Policy, any Liability for fines, penalties, Taxes, fees, forfeitures, compensatory, consequential, punitive, exemplary, special, treble, bad faith, tort, statutory or any other form of extra-contractual damages, as well as, subject to the other provisions of this Agreement, all legal fees and expenses relating thereto, which Liabilities arise out of or result from any act, error or omission, whether or not intentional, negligent, fraudulent, in bad faith or otherwise (actual or alleged), arising out of or resulting from the Reinsured Policies, including, without limitation, (i) the form, sale, marketing, distribution, underwriting, production, issuance, cancellation or administration of the Reinsured Policies, (ii) the investigation, defense, prosecution, trial, settlement (including the failure to settle) or handling of claims, benefits, or payments under the Reinsured Policies, (iii) the failure to pay or the delay in payment or errors in calculating or administering the payment of benefits, claims or any other amounts due or alleged to be due under or in connection with the Reinsured Policies or (iv) the failure of any Reinsured Policy to provide the purchaser, policyholder, account holder or other holder or intended beneficiaries thereof with Tax treatment that is the same as or more favorable than the Tax treatment (A) that was purported to apply in materials provided at the time of issuance, assumption, exchange, modification or sale of the applicable Policy or (B) for which policies or contracts of that type are intended to qualify, including under section 7702B of the Code.

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“Fair Market Value” means the fair market value of an asset determined in accordance with the Fair Market Value Methods.
“Fair Market Value Methods” means the methodologies, procedures and policies that the Reinsurer uses to determine the fair market value of an asset in its general account for financial reporting purposes, which methodologies, procedures and policies that are so utilized by the Reinsurer as of the date hereof are described in Schedule J; provided, however, that if the Reinsurer adopts and implements changes to such methodologies, procedures and policies for valuing assets in its general account for financial reporting purposes after the date hereof, then (i) the Reinsurer shall promptly provide an updated Schedule J to the Ceding Company together with a certificate executed by the Chief Investment Officer of the Reinsurer to the effect that any such changes do not constitute materials changes to the methodologies, procedures and policies set forth and described in Schedule J as of the date hereof and (ii) such changes shall be deemed incorporated by reference into the Fair Market Value Methods.
“Final Statement of Net Settlement” has the meaning set forth in the Master Transaction Agreement.
“First Material Act” means, with respect to any Extra-Contractual Obligation or series of related Extra-Contractual Obligations other than any Extra-Contractual Obligations arising solely out of or resulting solely from any Action by a Governmental Authority:
(a)    which arises out of or results from a denial of a claim for benefits under a Reinsured Policy prior to the Closing Date (which amount of such benefits, for the avoidance of doubt, shall constitute a Reinsured Liability), such denial; provided that if, following the Closing Date, the Ceding Company determines to pay such claim or allow such benefit (which amount of such claim or benefit, for the avoidance of doubt, shall constitute a Reinsured Liability) and is otherwise directed by the Reinsurer in writing not to make such payment or allow such benefit, such direction shall be deemed to constitute the “First Material Act” with respect to the related Extra-Contractual Obligation or series of related Extra-Contractual Obligations; or
(b)    otherwise, which arises out of or results from, or is alleged to arise out of or result from, one of the following acts, errors or omissions, the earliest to occur of any such act, error or omission: (A) reduction of care, (B) removal of care, (C) denial of restoration of benefits, (D) declaration, imposition, implementation, or administration of premium rate changes announced or implemented prior to the Closing Date, (E) misrepresentation of the nature or the terms, or the implications of the terms, of the Reinsured Policies at or after placement of such Reinsured Policies or (F) similar causal event with respect to the alleged Extra-Contractual Obligations or series of related Extra-Contractual Obligations; provided, however, that in the case of this clause (b), any act, error or omission shall be deemed to constitute the First Material Act with respect to an Extra-Contractual Obligation or series of related Extra-Contractual Obligations only if such act, error or omission constitutes the predominant cause of such Extra-Contractual Obligation or series of related Extra-Contractual Obligations.
Notwithstanding the foregoing, the “First Material Act” with respect to matters set forth in subclause (iv) of the definition of the term Extra-Contractual Obligations shall be deemed to have occurred prior to the Closing Date except to the extent that such Extra-Contractual Obligation or series of related Extra-Contractual

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Obligations is principally attributable to one or more actions taken by the Reinsurer on or after the Closing Date.
“FMV Triggering Event” means any of the following occurrences:
(a)    the Reinsurer’s RBC Ratio as of any calendar quarter-end is below 200% and the Reinsurer has not cured such shortfall as of thirty (30) calendar days after the applicable Capital Reporting Deadline;
(b)    there has been a failure by the Reinsurer (i) to timely pay any undisputed Reinsured Liabilities within ten (10) calendar days after receipt of a notice from the Ceding Company in the form attached hereto as Exhibit A, the aggregate unpaid amount of which exceeds $25 million or (ii) to timely make any required and undisputed additional deposit to the Trust Account, the aggregate unfunded amount of which exceeds $25 million, and in the case of (i) and (ii), such failure has not been cured within thirty (30) calendar days after notice thereof from the Ceding Company in the form attached hereto as Exhibit B;
(c)    a Reserve Credit Event (i) has occurred and has continued for a period of thirty (30) days or, if earlier, the date on which the statutory financial statements for the period during which such Reserve Credit Event occurs is required to be filed with the Ceding Company Domiciliary State and (ii) is continuing; or
(d)    (i) the Reinsurer has been placed into liquidation, rehabilitation, conservation, supervision, receivership or similar proceedings (whether voluntary or involuntary), or (ii) there has been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or assume control of its operations that is not dismissed or terminated within sixty (60) days of the commencement thereof.
“Governmental Authority” has the meaning set forth in the Master Transaction Agreement.
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended, and its implementing regulations, including, without limitation, the amendments and associated regulations enacted and implemented pursuant to the Health Information Technology for Economic and Clinical Health Act.
“Implemented Specified Action” means a Specified Action as to which prior to the Measurement Date (a) each related Insurance Regulator or Governmental Authority approval required for prompt implementation shall have been received and be in effect in accordance with Schedule C, other than as waived by the Reinsurer in its reasonable discretion, without any condition, restriction or requirement as would (i) materially adversely affect the value of such premium rate change to the Reinsurer or (ii) impose upon the Reinsurer any material incremental liability, obligation, risk, cost or expense and (b) such applicable premium rate change has been fully implemented.
“Indemnifiable Losses” has the meaning set forth in the Master Transaction Agreement.

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“Independent Accountant” has the meaning set forth in the Master Transaction Agreement.
“Initial Arbitrator” has the meaning set forth in Section 11.6(b).
“Initial Reinsurance Premium” has the meaning set forth in the Master Transaction Agreement.
“Insolvency” has the meaning set forth in Section 4.7(a).
“Insurance Regulator” means the insurance regulator of the Ceding Company Domiciliary State or the Reinsurer Domiciliary State, as applicable.
“Interest Rate” means the average of the daily “prime rate” (expressed as a rate per annum) published in The Wall Street Journal for each of the days in the applicable period.
“Interim Period” means the period beginning on the Closing Date and ending on the Conversion Date.
“Investment Guidelines” means the Investment Guidelines set forth in Schedule A.
“Legally Required Actions” means actions with respect to or concerning the Business that under Applicable Law are required to be taken or made, as the case may be, directly by the Ceding Company without delegation thereby.  
“Liabilities” has the meaning set forth in the Master Transaction Agreement.
“Master Transaction Agreement” has the meaning set forth in the recitals.
“Material Reserve Credit Event” means a Reserve Credit Event as to which the amount of the unrecognized or impaired credit for the reinsurance provided hereunder exceeds $25 million. 
“Measurement Date” means February 25, 2023.
“Measurement Period” means the Effective Time through the Measurement Date.
“Monthly Funding Limit” means (a) for the period commencing on the Closing Date and ending on December 31, 2018, $13 million per month and (b) for each calendar year thereafter, the excess (if any) for the immediately preceding calendar year of (i) the average amount of monthly benefit payments made with respect to the Reinsured Policies over (ii) the average amount of monthly premium payments received under the Reinsured Policies, provided that in each case the Reinsurer may propose to the Ceding Company to increase the Monthly Funding Limit for one or more months specified to accommodate reasonable seasonal experience or other factors, and the Ceding Company’s consent to any such proposal shall not be unreasonably withheld, conditioned or delayed.
“New Reinsurer Rate Increase Request” has the meaning set forth in Section 3.10(b)(ii).
“Non-Controlling Party” means the Person designated as such in Section 10.2.

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“Overcollateralization Amount” means $500,000,000.
“Party” has the meaning set forth in the preamble. 
“Person” has the meaning set forth in the Master Transaction Agreement.
“Policyholder” means the holder of any Reinsured Policy.
“Premium Rate Filings” has the meaning set forth in Section 3.11(b).
“Premium Rate Increase Standard” means, for the purposes of seeking premium rate increases pursuant to Section 3.10 and Section 3.11, that the proposed rate increases (i) are in accordance with the terms of the Reinsured Policies, (ii) do not violate any Applicable Law (other than any Applicable Law requiring filing of premium rate increases prior to implementation thereof) and (iii) are actuarially justified.
“Premiums” means premiums, considerations, payments, policy fees and other amounts received by or on behalf of the Ceding Company in respect of the Reinsured Policies, to the extent allocable to the period commencing on the Effective Time.
“Privacy and Security Laws” means any applicable data privacy, data security, or data protection law or regulation in the United States of America, including, without limitation, HIPAA.
“Producer” means any agent, broker, producer, distributer, or Representative as respects the Reinsured Policies.
“Producer Agreements” means any agreement, contract, understanding or arrangement between the Ceding Company or any Affiliate thereof and any Producer relating to the solicitation, sale, marketing, and production or servicing of any of the Reinsured Policies Business, including any assignment of commissions or compensation thereunder.
“Qualifying Letters of Credit” means one or more clean, irrevocable, unconditional letters of credit that (a) are issued by a Qualified United States Financial Institution under the credit for reinsurance laws of the Applicable States, (b) have terms that comply with the requirements of the credit for reinsurance laws and regulations of the Applicable States and (c) are delivered to and held directly by the Ceding Company; provided, that as of any date of determination, the aggregate available amount under all such Qualifying Letters of Credit may not exceed an amount equal to (A) the excess of the applicable Excess Reserve as of such date over (B) the amount of decrease as of such date in the RCE Overcollateralization Amount due to any Reserve Credit Event that is continuing as of such date, and any such excess amount shall not be considered an available amount under Qualifying Letters of Credit.
“Qualifying Reserve Credit Event” means a Reserve Credit Event arising prior to the fifth anniversary of the Closing Date and as to which performance of the Reinsurer’s obligations under Section 4.1(a) and Section 4.1(b), as such required performance may be modified pursuant to Section 4.1(c) hereof, shall not be adequate to ensure the Ceding Company’s continuing and unimpaired Reserve Credit. 

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“Quarterly Report” has the meaning set forth in Section 4.9(b).
“Quota Share” means 100%.
“RBC Ratio” means the percentage equal to (i) the quotient of the Total Adjusted Capital of the Reinsurer divided by the Company Action Level RBC, multiplied by (ii) 100; provided, however, that in the event there is a material change in the factors and formulae prescribed by the insurance regulatory authority in the Reinsurer Domiciliary State with respect to the components of and methodologies contained in such calculation, the Parties shall amend this Agreement to incorporate an alternate calculation that is reasonably equivalent to the components of and methodologies contained in the calculation of the Reinsurer’s RBC Ratio in effect as of the Effective Time within thirty (30) calendar days after the implementation of such change, and if the Parties cannot agree on any such alternative, the Reinsurer shall continue to calculate its RBC Ratio as if such material change had not occurred; provided, further, that any calculation of the RBC Ratio as of a date other than the last day of a calendar year shall be based on the Reinsurer’s good faith estimate using, to the extent any factors are not reasonably available, amounts based on reasonable estimation and annualization.
“RCE Overcollateralization Amount” means, as of any date of determination during the continuation of a Reserve Credit Event, an amount equal to the excess (if any) of (a) the product of the Overcollateralization Amount multiplied by the Applicable Percentage as of such date of determination, over (b) the lesser of (i) the Excess Reserves as of such date of determination and (ii) the product of (A) the Overcollateralization Amount multiplied by (B) the Applicable Percentage as of such date of determination multiplied by (C) 0.5.
“Recapture Date” has the meaning set forth in Section 7.3(a). 
“Recapture Triggering Event” means any of the following occurrences:
(a)    the Reinsurer’s RBC Ratio as of any calendar quarter-end is below 200% and the Reinsurer has not cured such shortfall as of thirty (30) calendar days after the applicable Capital Reporting Deadline;
(b)    there has been a failure by the Reinsurer (i) to timely pay any undisputed Reinsured Liabilities within ten (10) calendar days after receipt of a notice from the Ceding Company in the form attached hereto as Exhibit A, the aggregate unpaid amount of which exceeds $50 million or (ii) to timely make any required and undisputed additional deposit to the Trust Account, the aggregate unfunded amount of which exceeds $25 million, and in the case of (i) and (ii), such failure has not been cured within thirty (30) calendar days after notice thereof from the Ceding Company in the form attached hereto as Exhibit B, as applicable;
(c)    a Material Reserve Credit Event (i) has occurred and is continuing and (ii) the Reinsurer has not remedied such event on or prior to the date that is seventy-five (75) days after the Reinsurer receives notice in writing from the Ceding Company of such loss of Reserve Credit;
(d)    (i) the Reinsurer has been placed into liquidation, rehabilitation, conservation, supervision, receivership or similar proceedings (whether voluntary or involuntary), or (ii) there has been instituted against it proceedings for the appointment of a receiver, liquidator, 

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rehabilitator, conservator, or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or assume control of its operations, that is not dismissed or terminated within sixty (60) days of the commencement thereof; or
(e)    the Ceding Company has delivered notice of termination to the Reinsurer pursuant to Section 7.2(b), 7.2(c) or 7.2(e) of the Administrative Services Agreement and such notice has not been revoked by the Ceding Company.
“Reinsured Liabilities” means, other than Excluded Liabilities, all Liabilities of the Ceding Company arising out of or resulting from the Reinsured Policies, including but not limited to:  (a) all Liabilities for claims incurred before, at or after the Effective Time, (b) all Liabilities for benefits, claim expenses, including litigation expenses related to a determination of benefits arising under the Reinsured Policies, interest on claims or unearned premiums, amounts payable for returns or refunds of premium amounts and any other amounts payable under the terms of the Reinsured Policies, in each case whether incurred, at or after the Effective Time; (c) all Liabilities arising out of or resulting from changes to the terms and conditions of the Reinsured Policies at or after the Effective Time, initiated by the applicable Policyholder in accordance with the terms of the Reinsured Policy or mandated by Applicable Law; (d) all escheat and unclaimed property Liabilities arising under the Reinsured Policies, to the extent incurred, at or after the Effective Time for mortality events occurring at or after the Effective Time and (e) without duplication, all Reinsurer Extra-Contractual Obligations.
“Reinsured Policies” has the meaning set forth in the Master Transaction Agreement.
“Reinsured Risks” has the meaning set forth in Section 2.1.
“Reinsurer” has the meaning set forth in the preamble.
“Reinsurer Domiciliary State” means the State of Minnesota, or, if the Reinsurer changes its domiciliary state, such other state.
“Reinsurer Extra-Contractual Obligations” means all Extra-Contractual Obligations that are not Ceding Company Extra-Contractual Obligations, including without limitation Extra-Contractual Obligations arising out of or resulting from any act, error or omission on and after the Closing Date, whether or not intentional, negligent, in bad faith or otherwise, taken or made, as the case may be, by the Reinsurer, any of its Affiliates, or any of their respective officers, directors, employees or agents, or any Third Party Administrator, Reinsurer Service Providers, or other Person engaged or compensated by the Reinsurer or its Affiliates; provided, however, that, if any Extra-Contractual Obligation arises from acts, errors or omissions occurring both before the Closing Date and on or after the Closing Date and such Extra-Contractual Obligation is not otherwise a Reinsurer Extra-Contractual Obligation, such Extra-Contractual Obligation shall be deemed to constitute a Reinsurer Extra-Contractual Obligation if the First Material Act(s) associated therewith occurred after the Closing Date.
“Reinsurer Indemnified Parties” has the meaning set forth in Section 8.2.

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“Reinsurer Initiated Rate Increase” means an Implemented Specified Action at a rate in excess of the amount specified on Schedule C in accordance with a Reinsurer Rate Increase Request made pursuant to Section 3.10(b)(i).
“Reinsurer Rate Increase Request” has the meaning set forth in Section 3.10(b)(ii).
“Reinsurer Service Providers” means any service providers or Producers engaged or compensated by the Reinsurer or any of its Affiliates or otherwise subject to the supervision of the Reinsurer pursuant to the Administrative Services Agreement.
“Representatives” means, with respect to a Person, the officers, directors, employees or agents of such Person.
“Required Balance” means, with respect to any date of determination, an amount equal to: (a) the Adjusted Statutory Reserves as of such date of determination, plus (b) the Existing IMR Amount as of such date of determination, plus (c) the Unamortized Transaction IMR Amount as of such date of determination, plus (d) the Current Overcollateralization Amount as of such date of determination, minus (e) any amounts then-maintained in the Designated Administrative Account; provided that, in the event of a Reserve Credit Event, the Required Balance shall not be less than the amount required to permit the Ceding Company to obtain full Reserve Credit. 
“Reserve Credit” means full statutory financial statement credit for the reinsurance ceded to the Reinsurer under this Agreement in the Ceding Company’s Statutory Financial Statements required to be filed by the Ceding Company with the Governmental Authority charged with supervision of insurance companies in the Applicable State.
“Reserve Credit Event” means the failure of the Ceding Company to receive Reserve Credit.
“SAP” means, as to the Ceding Company or the Reinsurer, the statutory accounting practices prescribed or, to the extent specified on Schedule K, permitted by the Governmental Authority responsible for the regulation of insurance companies in the Ceding Company Applicable State with the respect to the Ceding Company or the Reinsurer Domiciliary State with respect to the Reinsurer.
“Security Funding Reporting Date” has the meaning set forth in Section 4.9(b).
“SERFF” has the meaning set forth in Section 3.11(b).
“Special Matter” means, with respect to any claim, dispute, inquiry, examination or Action relating to the Business or the Reinsured Policies: (a) if such claim, dispute, inquiry, examination or Action constitutes or involves the assertion of an Extra-Contractual Obligation, a determination as to whether such Extra-Contractual Obligation constitutes or, if realized, would constitute a Reinsurer Extra-Contractual Obligation or a Ceding Company Extra-Contractual Obligation for purposes of determining the extent, if any, of the Reinsurer’s economic responsibility therefor under the terms of this Agreement, including, without limitation, as appropriate, a designation of the First Material Act with respect thereto, and (b) a determination of which Party is the Controlling Party pursuant to Section 10.2.

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“Specified Accounting Principles” has the meaning set forth in the Master Transaction Agreement.
“Specified Actions” means the actions set forth on Schedule C as the same may be modified at the request of the Reinsurer pursuant to Section 3.10(b) or otherwise by the Ceding Company with the prior written consent of the Reinsurer.
“Specified Litigation” means each dispute or Action listed in Schedule G, including any follow-on or successor disputes or Actions.
“Statutory Book Value” means, with respect to any asset held in the Trust Account, the amount permitted to be carried by the Reinsurer as an admitted asset consistent with SAP applicable to the Reinsurer, without regards to any permitted practice applicable to the Reinsurer, consistently applied. 
“Statutory Financial Statements” means, with respect to either Party, the annual and quarterly statutory financial statements of such Party filed with the Insurance Regulator for the jurisdiction of domicile of such Party to the extent such Party is required by Applicable Law to prepare and file such financial statements.
“Surplus Note” means a promissory note issued by Ceding Company having (a) terms and conditions as required to ensure that the Ceding Company Domiciliary State will permit such note to be recorded in or reflected in the Ceding Company’s capital and surplus in accordance with SAP, (b) a maturity date that is thirty (30) years from the issue date, (c) other market terms and conditions (including, without limitation, as to the applicable interest rate) and (d) being (i) pari passu with any surplus notes or similar instruments issued by the Ceding Company and held solely by persons other than Affiliates of the Ceding Company and (ii) senior to any such instruments held by Affiliates of the Ceding Company and (e) having other market terms and provisions (including, without limitation, interest rate).
“Surplus Note Funding Amount” means, as respects an exercise by the Ceding Company of its recapture rights under Section 7.3, an amount as would be required to ensure that, on a stand-alone basis pro forma for the subject recapture and the issuance of the Surplus Notes, a company having (a) only the assets transferred to the Ceding Company by the Reinsurer in connection with the recapture and the liabilities recaptured by the Ceding Company and (b) investment policies and practices consistent with the Investment Guidelines would have a stand-alone basis pro forma RBC Ratio of 350%.  For purposes of the foregoing, the stand-alone pro forma determination of the subject RBC Ratio will be calculated based on SAP and Applicable Laws in effect in the Ceding Company Domiciliary State as of the date of recapture.
“Tax” has the meaning set forth in the Master Transaction Agreement.
“Terminal Settlement” has the meaning set forth in Section 7.4(a).
“Terminal Settlement Statement” has the meaning set forth in Section 7.4(a).
“Terminated Policy” has the meaning set forth in Section 2.7(a).

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“Third Party Administrator” means a duly authorized and licensed third-party administrator or service provider (including, as required, any duly authorized and licensed sub-contractor to such third-party administrator or service provider) that performs on behalf of the Ceding Company or the Reinsurer administrative services with respect to the Reinsured Policies, including any technology support related thereto.
“Total Adjusted Capital” means, as of any date of determination, total adjusted capital as calculated in accordance with the Applicable Laws of the Reinsurer Domiciliary State.
“Transaction Agreements” has the meaning set forth in the Master Transaction Agreement.
“Transaction IMR Amount” means the greater of (a) amount of the interest maintenance reserve, calculated on a basis consistent with SAP (which for the avoidance of doubt is calculated on an after-tax basis), that is created on the Closing Date as a direct result of the transactions contemplated by this Agreement determined in accordance with SAP applicable to the Ceding Company as in effect at the Effective Time, provided, however, that it will reflect amounts of realized gain or loss associated with securities for which such amounts would otherwise be capitalized as part of the Ceding Company’s asset valuation reserve pursuant to the requirements of the Statement of Statutory Accounting Principles No. 7 and the instructions for the Interest Maintenance Reserve set forth in the National Association of Insurance Commissioners Annual Statement Instructions and (b) zero (0).
“Transferred Assets” has the meaning set forth in the Master Transaction Agreement.
“Transition Services Agreement” has the meaning set forth in the Master Transaction Agreement.
“Trust Account” means the trust account established by the Reinsurer for the benefit of the Ceding Company under the Trust Agreement.  
“Trust Agreement” means that certain Trust Agreement dated as of the date hereof by and among the Reinsurer, the Ceding Company and Citibank N.A.
“Trustee” means the trustee under the Trust Agreement.
“Unamortized Transaction IMR Amount” means, with respect to any date of determination, an amount equal to the portion of the Transaction IMR Amount which remains unamortized as of such date, determined in accordance with SAP applicable to the Reinsurer.
ARTICLE II.

BASIS OF REINSURANCE AND BUSINESS REINSURED

Section 2.1.Coverage.  Upon the terms and subject to the conditions and other provisions of this Agreement, as of the Effective Time, the Ceding Company hereby cedes to the Reinsurer, and the Reinsurer hereby agrees to indemnify the Ceding Company for, the Quota Share of the Reinsured Liabilities payable by the Ceding Company after the Effective Time 

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(the “Reinsured Risks”).  The reinsurance effective under this Agreement shall be maintained in force, without reduction, unless such reinsurance is terminated or recaptured as provided herein.  

Section 2.2.Insurance Contract Changes.  Except (a) as directed or agreed by the Reinsurer in advance in writing, (b) for any changes initiated by the holder of any Reinsured Policy pursuant to the terms of such Reinsured Policy, (c) for any changes mandated by Applicable Law, in which case the Ceding Company shall consult with the Reinsurer as to any such change, or (d) for policyholder elections in lieu of rate actions to reduce benefits or accept a non-forfeiture option, the Ceding Company shall not, on its own initiative, change the terms of any Reinsured Policy.

Section 2.3.Liability.  The Reinsurer’s Liability under this Agreement shall attach as of the Effective Time and, subject to Section 2.2, the Reinsurer’s Liability under this Agreement shall be subject in all respects to the same terms, rates, conditions and Premiums payable to the Ceding Company, and to the same modifications, alterations and cancellations of the Reinsured Policies as the Ceding Company, except that, if the Ceding Company’s liability under the Reinsured Policies is changed because of changes made on or after the Effective Time in the terms and conditions of the Reinsured Policies in violation of the covenant set forth in Section 2.2, the Reinsurer will only share in the change if such change is made in accordance with Section 2.2.

Section 2.4.Indemnity Reinsurance.  This Agreement is an indemnity coinsurance agreement solely between the Ceding Company and the Reinsurer, and the performance of the obligations of each Party under this Agreement shall be rendered solely to the other Party.  The Ceding Company shall be and shall remain the only party hereunder that is liable to any insured, Policyholder, claimant or beneficiary under any policy reinsured hereunder.

Section 2.5.Territory.  The territorial limits of this Agreement shall be identical with those of the Reinsured Policies.

Section 2.6.Reinstatements.  If any Reinsured Policy that has lapsed is subsequently reinstated in accordance with its terms or as required by Applicable Law prior to the termination of this Agreement, the reinsurance for such Reinsured Policy under this Agreement shall be reinstated automatically.  The Ceding Company shall pay the Reinsurer an amount equal to (a) the Adjusted Statutory Reserves attributable to such Reinsured Policy determined as of the date of reinstatement to the extent the calculation of the Effective Time Adjusted Statutory Reserves as finally determined and transferred to the Reinsurer did not reflect inclusion of the lapsed policy, plus (b) the Quota Share of all amounts received by the Ceding Company in connection with the reinstatement of such Reinsured Policy.

Section 2.7.Discovered In-Force Policies and Lapsed Policies.

(a)In the event that either the Ceding Company or the Reinsurer discovers one or more policies or contracts that such Party reasonably believes should have been included as a Reinsured Policy on Schedule VI of the Master Transaction Agreement but was not so included (a “Discovered Policy”), or, within the Interim Period, finds that a Reinsured Policy listed on Schedule VI of the Master Transaction Agreement had terminated as of the Effective Time 

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(a “Terminated Policy”), such Party shall promptly notify the other Party in writing of the existence of such Discovered Policy or Terminated Policy.  Upon notice of the existence of a Discovered Policy, the Parties shall amend Schedule VI of the Master Transaction Agreement to include such Discovered Policy as a Reinsured Policy and such Discovered Policy shall be reinsured hereunder effective as of the Effective Time; provided, however, that the Reinsurer’s consent shall be required for the inclusion of any such Discovered Policy as a Reinsured Policy if (A) such Discovered Policy was not issued on a policy form set forth in Schedule H hereto or (B) the excess of (i) the aggregate Effective Time Adjusted Statutory Reserves with respect to all Discovered Policies previously added to Schedule VI of the Master Transaction Agreement on or after the Closing Date over (ii) the aggregate Effective Time Adjusted Statutory Reserves with respect to all Terminated Policies has exceeded $25,0000,000.  In connection with the addition of any Discovered Policy pursuant to this Section 2.7(a), the Ceding Company shall transfer to the Reinsurer an amount equal to (x)(A) the Effective Time Adjusted Statutory Reserves attributable to such Discovered Policy to the extent that the calculation of the Effective Time Adjusted Statutory Reserves as finally determined did not reflect inclusion of the Discovered Policy, plus (B) the Quota Share of Premiums actually received by the Ceding Company in respect of such Discovered Policy at or after the Effective Time, minus (C) the Quota Share of the Reinsured Liabilities payable by the Reinsurer in respect of such Discovered Policy at or after the Effective Time, in the case of (B) and (C) until the date of inclusion of such Discovered Policy on Schedule VI of the Master Transaction Agreement and to the extent not otherwise reflected in the Cash Flow Amount as finally determined, each of (A), (B) and (C) as reasonably determined by the Ceding Company and (y) an amount equal to interest at an annual rate equal to five and three-quarters percent (5.75%) earned from the Effective Time until the date that such Discovered Policy is added to Schedule VI of the Master Transaction Agreement on an amount equal to the amount transferred pursuant to subclause (x) of this Section 2.7(a).

(b)With respect to any Discovered Policy that does not become a Reinsured Policy pursuant to Section 2.7(a) without the Reinsurer’s consent, the Parties shall cooperate and negotiate in good faith to consider adding such Discovered Policy as a Reinsured Policy and, if applicable, to determine the amount payable to the Reinsurer in respect of the inclusion of such Discovered Policy as a Reinsured Policy.

(c)Any Terminated Policy shall be removed from Schedule VI of the Master Transaction Agreement and the Reinsurer shall reasonably calculate the Effective Time Adjusted Statutory Reserves for such Terminated Policy and transfer to the Ceding Company (i) an amount equal to such Effective Time Adjusted Statutory Reserves to the extent that the calculation of Effective Time Adjusted Statutory Reserves, as finally determined and transferred to the Reinsurer, reflected such Terminated Policies, and (ii) an amount equal to interest at an annual rate equal to five and three-quarters percent (5.75%) earned from the Effective Time until the date that such Terminated Policy is removed from Schedule VI of the Master Transaction Agreement on an amount equal to the amount transferred pursuant to clause (i) of this Section 2.7(c).

Section 2.8.Affiliate Retrocessions and Transfers.  Without the prior written consent of the Ceding Company (such consent not to be unreasonably withheld, conditioned or delayed), the Reinsurer agrees to not retrocede or otherwise transfer all or any portion of the risks and liabilities assumed by the Reinsurer with respect to the Reinsured Policies to an Affiliate of the 

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Reinsurer other than retrocessions or transfers as are or would be effected on or after the fifth (5th) anniversary of the Closing Date, provided, however, as to any retrocession or transfer involving risks ceded with respect to the Reinsured Policies as is made to an Affiliate of the Reinsurer, such Affiliate reinsurer shall (a) undertake and assume an obligation to the Ceding Company to comply with the requirements of (i) Section 2.9 as respects further retrocessions thereby of risks associated with the Reinsured Policies, and (ii) Section 4.4 hereof concerning the management of any investments supporting liabilities and obligations associated with the Reinsured Policies ceded thereto and (b) agree any instance of recapture of risks ceded pursuant to this Agreement shall constitute an equivalent and automatic recapture of risks ceded under any such retrocessional coverage.  For the avoidance of doubt, on or after the fifth (5th) anniversary of the Closing Date, the Reinsurer shall be permitted to retrocede or otherwise transfer all or any portion of the risks and liabilities assumed by the Reinsurer with respect to the Reinsured Policies to an Affiliate of the Reinsurer without regard to the limitations set forth in (a)(i) above.  Notwithstanding the foregoing, the Reinsurer shall not retrocede or otherwise transfer all or any portion of the risks and liabilities assumed by the Reinsurer with respect to the Reinsured Policies on a basis that the Reinsurer is not directly obligated to the Ceding Company or that reduces in any way the liability of the Reinsurer to the Ceding Company.

Section 2.9.Third Party Retrocessions and Transfers.
  
(a)The Reinsurer agrees not to retrocede or otherwise transfer all or any portion of the risks and liabilities assumed by the Reinsurer with respect to the Reinsured Policies to any unaffiliated third party prior to the fifth (5th) anniversary of the Closing Date. 

(b)On or after the fifth (5th) anniversary of the Closing Date, in connection with any third party, unaffiliated retrocession or transfer, the Reinsurer agrees to not retrocede or otherwise transfer all or any portion of the risks and liabilities assumed by the Reinsurer with respect to the Reinsured Policies which, when taken together with all other third party transfers or retrocessions effected by the Reinsurer and its Affiliates, would retrocede or transfer more than eighty percent (80%) of the aggregate risks and liabilities assumed by the Reinsurer with respect to the Reinsured Policies taken as a whole. 
 
(c)In each case of (a) and (b) above, the foregoing shall apply to the sale of any Affiliate as to which a retrocession of Reinsured Risks has occurred.  For the avoidance of doubt, prior to the sale of any Affiliate to which Reinsured Liabilities have been retroceded as permitted hereunder, such retrocession shall be recaptured to the extent that the sale would result in the Reinsurer and its Affiliate retaining in the aggregate no less than 20% of the Reinsurer Liabilities hereunder.

(d)As to any third party, unaffiliated retrocession or transfer involving risks ceded with respect to the Reinsured Policies: (i) the Reinsurer will exercise reasonable diligence in evaluating the financial and operational reliability of its counterparty with respect to any such cession, and (ii) at the Ceding Company’s request, the Reinsurer will meet and confer with the Ceding Company concerning its views and perspectives on any such counterparty. 
 
(e)Notwithstanding the foregoing, the Reinsurer shall not retrocede or otherwise transfer all or any portion of the risks and liabilities assumed by the Reinsurer with respect to the 

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Reinsured Policies on a basis that the Reinsurer is not directly obligated to the Ceding Company or that reduces in any way the liability of the Reinsurer to the Ceding Company.

ARTICLE III.

PAYMENTS; ADDITIONAL CONSIDERATION; ADMINISTRATION

Section 3.1.Payments by the Parties.

(a)On the Closing Date, the Ceding Company and the Reinsurer shall transfer amounts as set forth in Section 2.04 of the Master Transaction Agreement.
  
(b)Following the Closing Date, in accordance with Section 2.05 and Section 2.06 of the Master Transaction Agreement, the Parties will finalize the Initial Reinsurance Premium, interest on the Transferred Assets and Cash Flow Amount and make any adjustment payments or Trust Account deposits necessary to reflect the difference between the amounts reflected on the Final Statement of Net Settlement and the Estimated Statement of Net Settlement.  

(c)The Ceding Company and the Reinsurer agree that in connection with the initial transfers to be made at Closing, Existing IMR Amount and the Transaction IMR Amount shall be calculated by the Ceding Company in accordance with the definitions of such terms set forth herein and ceded to the Reinsurer.

Section 3.2.Additional Consideration.  
 
(a)As additional consideration for the Reinsurer entering into this Agreement, the Reinsurer shall be entitled to the Quota Share of Premiums actually received at or after the Effective Time by the Ceding Company (the “Additional Consideration”), but without duplication of the payment of the Cash Flow Amount paid pursuant to the Master Transaction Agreement, as finally determined.

(b)The Reinsurer shall have the right in accordance with the terms thereof to collect all Additional Consideration on behalf of the Ceding Company.  The Parties acknowledge and agree that the Reinsurer shall be responsible for and has hereby assumed the financial risk of any uncollected or uncollectible Additional Consideration.  The Parties intend the Ceding Company’s assignment pursuant to Section 3.2(a) to be a present assignment of all of the Ceding Company’s rights, title and interest in the Additional Consideration and not an assignment as collateral.  To the extent that the Ceding Company recovers any Additional Consideration from any third party attributable to the Reinsured Policies, the Ceding Company shall hold such amounts in trust for the benefit of the Reinsurer and shall promptly transfer and deliver such amounts to the Reinsurer, together with any endorsements to effect the transfer and any pertinent information that the Ceding Company may have relating thereto.  The Reinsurer is hereby authorized to endorse for payment to the Reinsurer any checks, drafts, money orders and other instruments pertaining to the Additional Consideration that are payable to, or to the order of, the Ceding Company and received by the Reinsurer pursuant to the terms of the Administrative Services Agreement, whether they are delivered to the Bank Accounts or otherwise transferred and delivered by the Ceding Company to the Reinsurer.  Direct receipt by the Reinsurer or any of its Affiliates of any such amounts shall satisfy the Ceding Company’s obligations to transfer any 

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such amount to the Reinsurer hereunder.  Upon any recapture of the reinsurance ceded under this Agreement, the Additional Consideration shall be automatically re-assigned to the Ceding Company, without the need for any action on the part of the Parties.

Section 3.3.Delayed Payments.  If there is a delayed settlement of any payment due hereunder, interest will accrue on such overdue payment at the Interest Rate until settlement is made.  For purposes of this Section 3.3 a payment will be considered overdue, and such interest will begin to accrue, on the first day immediately following the date such payment is due.  For greater clarity, a payment shall be deemed to be due hereunder on the last date on which such payment may be timely made under the applicable provision.

Section 3.4.Defenses.  The Reinsurer accepts, reinsures and assumes the Reinsured Risks subject to any and all defenses, set-offs and counterclaims to which the Ceding Company would be entitled with respect to the Reinsured Risks, it being expressly understood and agreed to by the Parties hereto that no such defenses, set-offs, or counterclaims are or shall be waived by the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby and that the Reinsurer is and shall be fully subrogated in and to all such defenses, set-offs and counterclaims.

Section 3.5.Offset.  Except as otherwise provided under Applicable Law, or as to Claim amounts due to Policyholders or other Persons under the Reinsured Policies that are payable by the Reinsurer as administrator pursuant to the Administrative Services Agreement,  any debits or credits incurred in favor of or against either the Ceding Company or the Reinsurer under or with respect to this Agreement are deemed mutual debits or credits and may be set off, and only the net balance shall be allowed or paid, regardless of any insolvency, rehabilitation, conservatorship or comparable proceeding by or against the Ceding Company or the Reinsurer.  Such right shall apply to the full extent permitted under the laws of the state of domicile of the insolvent party.

Section 3.6.Policy Administration.  Subject to the Transition Services Agreement, the Reinsurer shall administer the Reinsured Policies on behalf of the Ceding Company, in each instance in accordance with the terms of the Administrative Services Agreement. 
  
Section 3.7.Bank Accounts.  The Reinsurer may open and maintain lockboxes or bank accounts in the name of the Ceding Company with banking institutions for use by the Reinsurer in providing the administrative services thereunder (the “Bank Accounts”).  The Reinsurer shall have the exclusive authority over the Bank Accounts including, without limitation, the exclusive authority to (a) designate the authorized signatories on the Bank Accounts, (b) issue drafts on and make deposits in the Bank Accounts in the name of the Ceding Company, (c) make withdrawals from the Bank Accounts and (d) enter into agreements with respect to the Bank Accounts on behalf of the Ceding Company; provided that in no event shall the Ceding Company be responsible for any fees, overdraft charges or other payments, liabilities or obligations with respect to any such Bank Accounts or be obligated to provide funding for the Bank Accounts.  The Ceding Company shall do all things reasonably necessary at the Reinsurer’s expense to enable the Reinsurer to open and maintain the Bank Accounts including, without limitation, executing and delivering such depository resolutions and other documents as may be requested from time to time by the banking institutions.  The Ceding Company agrees 

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that it shall not be entitled to (i) have any authorized signatories to the Bank Accounts or (ii) have any access to the funds in the Bank Accounts.  The Ceding Company further agrees that, without the Reinsurer’s prior written consent, it shall not make any changes to the authorized signatories on the Bank Accounts nor attempt to withdraw any funds therefrom.

Section 3.8.Reports from the Reinsurer. 
 
(a)The Reinsurer shall provide to the Ceding Company periodic accounting and other reports with respect to the Reinsured Policies as specified in the Administrative Services Agreement.  Except as otherwise set forth herein or in the Administrative Services Agreement, settlement with respect to amounts owed hereunder by the Reinsurer to the Ceding Company and by the Ceding Company to the Reinsurer shall be performed through the direct payment by the Reinsurer of Reinsured Liabilities and direct receipt by the Reinsurer of Additional Consideration on an ongoing basis in its capacity under the Administrative Services Agreement.

(b)Each calendar quarter, the Reinsurer shall provide to the Ceding Company, by the relevant Capital Reporting Deadline, a calculation of the RBC Ratio of the Reinsurer as of the last day of the immediately preceding calendar quarter, (x) with respect to quarters other than the last quarter of a calendar year, based on the Reinsurer’s good faith estimate using, to the extent any factors are not reasonably available, amounts based on reasonable estimation and annualization or (y) with respect to the last quarter of a calendar year, as calculated by the Reinsurer.  In addition, if the RBC Ratio of the Reinsurer as of any quarter-end is below the amount described in clause (a) of the definition of “FMV Triggering Event” herein, the Reinsurer shall provide to the Ceding Company evidence that such shortfall has been cured by the thirtieth (30th) calendar day following the applicable Capital Reporting Deadline, if applicable.  Each such calculation shall include reasonable supporting detail with respect to such calculation.

(c)Each Party shall provide written notice to the other Party of the occurrence of any FMV Triggering Event within five (5) Business Days after it becomes aware of such occurrence.  In addition, each Party shall promptly respond to the other Party’s reasonable inquiries from time to time concerning the determination of whether a FMV Triggering Event has occurred and is continuing.

(d)At the Ceding Company’s request, the Reinsurer shall provide to the Ceding Company (i) a copy of its annual and quarterly NAIC statement blank and a copy of its annual audited statutory financial statements along with the audit report thereon and (ii) for each Affiliate to which the Reinsurer retrocedes any portion of the Reinsured Risks in accordance with Section 2.8, a copy of the annual and quarterly NAIC statement blank and a copy of the annual audited statutory financial statements of such retrocessionaire along with the audit report thereon (or comparable financial statements if the retrocessionaire is a non-U.S. insurer) and a calculation of the retrocessionaire’s quarterly and annual risk-based capital ratio (or comparable capital adequacy calculation if the retrocessionaire is a non-U.S. insurer).

Section 3.9.Producers.  As regards the Reinsured Policies, the Ceding Company shall not modify or amend, or waive any of its rights under, any agreement between it or any of its Affiliates, on the one hand, and any Producer, on the other hand, who has solicited, marketed or 

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sold any of the Reinsured Policies, except (a) to the extent not related to the Reinsured Policies or (b) with the Reinsurer’s prior written consent, which shall not be unreasonably withheld, delayed or conditioned. 

Section 3.10.Premium Rate Management During the Measurement Period.

(a)The Parties agree that, prior to the end of the Measurement Period, the Ceding Company shall submit for approval by the applicable Insurance Regulator or other Governmental Authority each of the Specified Actions.  Any change to a Specified Action, including amount of requested rate increase, shall only be made at the direction of the Reinsurer pursuant to Section 3.10(b) or with the Reinsurer’s prior written consent, which shall not be unreasonably withheld, delayed or conditioned.  The Ceding Company shall use its commercially reasonable efforts during the Interim Period to implement any Specified Action for which approval has been received as promptly as practical following approval thereof.  Following the Conversion Date, the Reinsurer shall use its commercially reasonable efforts to implement any Specified Action for which approval has been received as promptly as practical following approval thereof.

(b)During the Measurement Period, the Reinsurer may request that the Ceding Company (i) increase the requested rate increase (and, in connection therewith, may also identify specified benefit alternatives to be offered to policyholders in lieu of any approved premium rate increase) on its then-pending (or scheduled to be filed) Specified Actions (“Reinsurer Rate Increase Request”), or (ii) submit new premium rate increase requests (and, in connection therewith, may also identify specified benefit alternatives to be offered to policyholders in lieu of any approved premium rate increase) for any of the Reinsured Policies not scheduled for an increase pursuant to any Specified Action (“New Reinsurer Rate Increase Request”), in each case, if, in the good faith reasonable judgment of the Reinsurer, the ratio of actual to expected morbidity for the policy forms affected by such rate increase taken as a whole, determined by the Reinsurer in good faith by comparing actual experience with respect to the Reinsured Policies to the projected incurred claims as set forth on Schedule D, is in excess of 107% based on incurred claims measured on an annual basis for any full calendar year period commencing after the Effective Time and concluding prior to any date of calculation prior to the end of the Measurement Period.  The Ceding Company shall cooperate in the making of such filings and consent to such requests provided that they meet the requirements set forth above and the rate increases would comply with the Premium Rate Increase Standard.  Each Reinsurer Rate Increase Request or New Reinsurer Rate Increase Request shall include a certificate executed by the chief financial officer or chief actuarial officer of the Reinsurer in the form of Schedule E certifying the required adverse experience.

(c)The Ceding Company agrees to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the Reinsurer in doing, all things necessary, proper or advisable to obtain any Specified Action, any Reinsurer Initiated Rate Increase or any New Reinsurer Rate Increase Request.

Section 3.11.Premium Rate Management After the Measurement Period.

(a)Following the Measurement Period, if there has been adverse experience on the Reinsured Policies relative to the Reinsurer’s pricing expectations, the Reinsurer may request 

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that the Ceding Company file (or permit the Reinsurer to file on its behalf as contemplated by the last sentence of Section 3.11(b) if permitted by Applicable Law) premium rate increases (and in connection therewith may also identify specified benefit alternatives to be offered to policyholders in lieu of any approved premium rate increase) with any applicable Insurance Regulators or any other Governmental Authority. Such filings shall (i) be prepared by the Reinsurer for submission to the applicable Insurance Regulators or other Governmental Authority, (ii) be in the name of the Ceding Company, (iii) indicate the Reinsurer’s support for the requested rate or other policy actions and (iv) request increases in the premium rates or other alternative policy changes (in amounts or types, as the case may be, requested by the Reinsurer) that may be charged or implemented with respect to the Reinsured Policies from time to time.  The Ceding Company shall consent to such requests provided that the requirements set forth above are met and the rate increases would comply with the Premium Rate Increase Standard.  In connection with any premium rate request following the Measurement Period, the Reinsurer shall (y) be responsible for providing any underlying analyses required by the Insurance Regulator or Governmental Authority, subject to the full cooperation and assistance of the Ceding Company as necessary and (z) provide a certificate executed by its chief financial officer or chief actuarial officer in the form of Schedule E certifying the required adverse experience.  

(b)The Ceding Company shall cooperate with and provide reasonable assistance to the Reinsurer, each with respect to the making of any premium rates filings (“Premium Rate Filings”) pursuant to Section 3.11(a) with any Insurance Regulator or any other Governmental Authority; provided that, if the Reinsurer is not reasonably able to make such Premium Rate Filings itself, the Ceding Company shall make such Premium Rate Filings.  The Ceding Company shall provide copies of all written communications, and a summary of all oral communications, with any Insurance Regulator or any other Governmental Authority with respect to any Premium Rate Filing with respect to the Reinsured Policies as soon as practicable (and, in any event, within five (5) Business Days after the date of such communication).  The Reinsurer shall prepare and provide to the Ceding Company for filing a proposed response to such communication as soon as practical and, in any event, with adequate time for the filing of a response within the time period specified by such Insurance Regulator or any other Governmental Authority.  Notwithstanding the foregoing, the Ceding Company may, as an alternative to making Premium Rate Filings, arrange for the Reinsurer to be designated as a party authorized to make such filings itself through the National Association of Insurance Commissioners System for Electronic Rates & Form Filing (“SERFF”), in which event the Ceding Company shall have view rights as to such filings and the Reinsurer shall promptly (and in any event within five (5) Business Days) notify the Ceding Company in writing of each written communication, and a summary of any oral communication, with any Insurance Regulator or other Governmental Authority with respect to any Premium Rate Filing and, if not available for viewing on SERFF, provide a copy thereto to the Ceding Company.

(c)The Ceding Company shall not submit any documentation to any Insurance Regulator or any other Governmental Authority with respect to any Premium Rate Filing without the prior written consent of the Reinsurer.  The Ceding Company shall provide the Reinsurer the opportunity to participate in all communications initiated by the Ceding Company or with respect to which the Ceding Company has reasonable notice, whether in person, by phone or electronically, between the Ceding Company and any Insurance Regulator or any other Governmental Authority with respect to any Premium Rate Filing.

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Section 3.12.General Premium Rate Management.

(a)Except for filings made pursuant to Section 3.10 or Section 3.11, the Ceding Company shall not seek any premium rate increases or other policy modifications or adjustments, including waiver of rights, effective as to any of the Reinsured Policies without the prior written consent of the Reinsurer.

(b)Without the prior written consent of the Reinsurer, the Ceding Company shall not enter into any settlement or arrangement with respect to any Premium Rate Filing with any Insurance Regulator or any other Governmental Authority, or make any changes to Premium Rate Filings.
 
(c)The Ceding Company shall notify the Reinsurer of its intention to seek premium rate increases on any of its long term care business not included in the Business.  In connection with any submission for premium rate increases on any of its long term care business not included in the Business, the Ceding Company shall refrain from requesting or agreeing to new or additional requirements, restrictions or other limitations on the Ceding Company, or the Reinsurer or otherwise pertaining to the ability to seek premium rate increases on the Reinsured Policies, and the Ceding Company shall not enter into any settlement or arrangement with any Insurance Regulator or any other Governmental Authority that would impose any such new or additional requirements, restrictions or limitations on premium rate increases on the Reinsured Policies, in each case without the prior written consent of the Reinsurer, such consent not to be unreasonably withheld, delayed or conditioned.

(d)In connection with Premium Rate Filings, the Reinsurer shall refrain from requesting or agreeing to new or additional requirements, restrictions or other limitations on the Ceding Company or otherwise pertaining to the ability of the Ceding Company to seek premium rate increases on any of the long term care business of the Ceding Company not included in the Business, and the Reinsurer shall not enter into any settlement or arrangement with any Insurance Regulator or any other Governmental Authority that would impose any such new or additional requirements, restrictions or limitations on premium rate increases by the Ceding Company, in each case without the prior written consent of the Ceding Company, such consent not to be unreasonably withheld, delayed or conditioned.

Section 3.13.Experience Refunds.  In accordance with the provision and requirements of Schedule F hereto, the Reinsurer shall pay to the Ceding Company an experience refund with respect to the Implemented Specified Actions.  In the event the Ceding Company submits a Reinsurer Rate Increase Request in lieu of submission of a Specified Action, the Ceding Company shall be entitled to payment of the Experience Refund in accordance with Schedule F as if such Specified Action qualified as an Implemented Specified Action.

Section 3.14.Expense Reimbursements.  The Reinsurer shall owe to the Ceding Company for each calendar month during the term of this Agreement an amount equal to the sum of (a) one and six tenth percent (1.6%) of the net Premiums received after the Effective Time by the Ceding Company, or the Reinsurer on behalf of the Ceding Company, with respect to the Reinsured Policies during such month, which shall be in lieu of reimbursing the Ceding Company for premium tax and guaranty fund assessment amounts incurred by the Ceding 

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Company allocable to such Premiums, plus (b) seven tenths percent (0.7%) of the net Premiums received after the Effective Time by the Ceding Company, or the Reinsurer on behalf of the Ceding Company, with respect to the Reinsured Policies during such month, which shall be in lieu of reimbursing the Ceding Company for any amounts due under any of the Producer Agreements or otherwise payable to Producers, but in the case of each of clause (a) and clause (b), without duplication of the Cash Flow Amount paid pursuant to the Master Transaction Agreement, as finally determined.  The Reinsurer shall pay such amounts to the Ceding Company pursuant to the terms of the Administrative Services Agreement.

Section 3.15.No Third Party Reinsurance.  The Ceding Company shall not enter into any agreement to reinsure or otherwise transfer the Business with any Person other than the Reinsurer without the prior consent of the Reinsurer. 

ARTICLE IV.

LICENSES; RESERVE CREDIT; SECURITY

Section 4.1.Licenses; Reserve Credit.  

(a)At all times during the term of this Agreement, the Reinsurer shall hold and maintain its license or accreditation in the Applicable State so that the Ceding Company may receive Reserve Credit.  The Reinsurer shall promptly notify the Ceding Company of any event or change in its licensing or accreditation in an Applicable State or other condition that would be reasonably likely to result or has resulted in any loss of, or impairment to, Reserve Credit.  In addition, in furtherance of the performance of the Reinsurer’s obligations under Section 4.1(a), Section 4.1(b) and Section 4.1(d), the Ceding Company and the Reinsurer agree to amend this Agreement, the Trust Agreement or any other Transaction Agreement or execute such additional documents as may be required to ensure continued Reserve Credit on the basis of the licensure or accreditation of the Reinsurer in the Applicable State or the Reinsurer’s provision of collateral, including pursuant to Applicable Reserve Credit Laws.

(b)If the Ceding Company shall be determined to be not entitled to Reserve Credit for the reinsurance provided hereby in any Applicable State, the Ceding Company shall forward to the Reinsurer a statement of the Reinsurer’s share of such ceded obligations and the amounts of additional collateral as are then required to establish the basis for such Reserve Credit and, as promptly as commercially practicable under the circumstances (but in all events within thirty (30) days following the occurrence of such event or, if earlier, the last day provided under Applicable Law for providing such collateral to avoid a loss of Reserve Credit), the Reinsurer shall, at its option and at its expense, take all steps with respect to (i) the deposit by the Reinsurer of additional assets into the Trust Account or (ii) posting one or more Qualifying Letters of Credit as are necessary to permit the Ceding Company to obtain Reserve Credit.

(c)Upon the occurrence and continuation of a Reserve Credit Event, in the event that the Adjusted Statutory Reserves according to SAP as applicable to the Reinsured Policies at such time are materially higher than they would have been under SAP in effect at the Effective Time due to changes in statutory accounting principles, the Ceding Company will cooperate with the Reinsurer in good faith during the thirty (30) day period following the occurrence of such 

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Reserve Credit Event to seek a permitted practice or other regulatory relief such that the Reinsurer is not required to provide full collateral with respect to such increased reserves in order for the Ceding Company to receive full credit for reinsurance. Notwithstanding the foregoing, the Ceding Company shall not be required to (i) delay compliance with any such change in accounting principles or (ii) adopt any such permitted practice or other regulatory relief if such delay in compliance or the adoption of such permitted practice or regulatory relief is reasonably likely to result in a material adverse effect on the business, results of operations, financial condition, prospects or ratings of the Ceding Company.

(d)Notwithstanding any of the foregoing provisions of Section 4.1(a) or Section 4.1(b), upon the occurrence and continuation of a Qualifying Reserve Credit Event, (i) at the Ceding Company’s request made in writing in conjunction with an exercise of rights under Section 7.3 hereof as respects a Recapture Triggering Event described in clause (c) of the definition of such term which is then continuing and in connection with the completion of the subject recapture, the Reinsurer shall purchase Surplus Notes in an amount requested by the Ceding Company but not in excess of the Surplus Note Funding Amount or (ii) in lieu of such funding commitment and at the Reinsurer’s option in its sole discretion, the Reinsurer shall take, and the Ceding Company shall cooperate in good faith with the Reinsurer in taking, any action required to ensure that the Ceding Company shall continue to receive Reserve Credit. 

(e)In the event of a Reserve Credit Event not attributable to the failure of the Reinsurer to be licensed or accredited in the Applicable State or to provide collateral, the Parties shall cooperate in good faith during the seventy-five (75) day period following the occurrence of such Reserve Credit Event to (i) provide information (subject to the other terms and conditions of this Agreement relating to cooperation and sharing of information) reasonably requested by the other to enable the requesting Party to analyze the causes and potential implications of such Reserve Credit Event and (ii) meet in order to: (A) exchange and review their respective views as to such Reserve Credit Event; (B) discuss potential approaches that would avoid such Reserve Credit Event or mitigate its impact; and (C) negotiate in good faith to attempt to agree to modify the terms of this Agreement, on mutually acceptable terms and on an equitable basis, in a way that would eliminate such Reserve Credit Event.

Section 4.2.Security.

(a)On or prior to the Closing Date, the Reinsurer, as grantor, shall establish and thereafter shall maintain, at its sole cost and expense, the Trust Account with the Trustee, naming the Ceding Company as sole beneficiary thereof to secure the Reinsurer’s obligations hereunder.  The Reinsurer shall maintain the Trust Account in accordance with the terms of this Agreement.  Concurrently with the execution of this Agreement, the Trust Account is being funded with Eligible Assets in accordance with Section 2.04(b) of the Master Transaction Agreement and Section 3.1.

(b)In accordance with the terms set forth herein and in the Trust Agreement, and subject to the provisions of Section 4.6 and Section 4.7 hereof, the Reinsurer shall ensure that the Trust Account holds Eligible Assets in accordance with the terms hereof with a Statutory Book Value equal to the excess of the Required Balance over the stated amount of Qualifying Letters of Credit if permitted by Section 4.1(b).  All transfers to and withdrawals from the Trust Account 

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shall be in accordance with and subject to the requirements set forth herein and in the Trust Agreement.

(c)The Reinsurer shall calculate the Required Balance and shall determine the Adjusted Statutory Reserves in accordance with SAP as in effect at the Effective Time applicable to the Ceding Company and otherwise in accordance with the Specified Accounting Principles; provided that, if a FMV Triggering Event has occurred and is continuing as a result of clause (c) of the definition of “FMV Triggering Event”, the Ceding Company shall calculate the Required Balance and shall determine the Adjusted Statutory Reserves in accordance with SAP as in effect as of the date of such determination and otherwise in accordance with the Specified Accounting Principles.

(d)During the term of the Trust Agreement, the Reinsurer shall not, and shall direct that the Trustee shall not, grant or cause or permit to be created or granted in favor of any third person any security interest whatsoever in any of the assets in the Trust Account.

Section 4.3.Trust Account and Settlements.  The Trustee shall hold assets in the Trust Account pursuant to the terms of the Trust Agreement.  All settlements of account under this Agreement between the Ceding Company and the Reinsurer shall be made in United States dollars in cash or its equivalent.

Section 4.4.Eligible Assets.  The assets that may be held in the Trust Account shall consist of cash or investments of the type consistent with the requirements for authorized investments and admitted assets under the insurance laws of the Reinsurer Domiciliary State; provided that (a) each such investment that is a security is issued by an institution that is not the Reinsurer, the Ceding Company or an Affiliate of either Party and (b) such investments comply with the Investment Guidelines; provided, further, that during the continuance of a Reserve Credit Event, such assets shall also meet all requirements under the insurance laws of the Applicable State with respect to providing Reserve Credit to the Ceding Company (the assets meeting the requirements of this sentence being the “Eligible Assets”).  Notwithstanding anything else in this Agreement to the contrary, if at any time there are assets in the Trust Account that were Eligible Assets at the time of deposit into the Trust Account but subsequently became assets that are not Eligible Assets, the Reinsurer will not be deemed to have breached the requirements of this Article IV if such assets are replaced with Eligible Assets within the earlier of (i) fifteen (15) Business Days after such assets become non-Eligible Assets or (ii) the last day of the calendar quarter in which such assets fail to be Eligible Assets.

Section 4.5.Deposit of Assets.  Prior to depositing assets in the Trust Account, the Reinsurer will execute assignments or endorsements in blank, or transfer legal title to the Trustee of all shares, obligations or any other assets requiring assignments, in order that the Ceding Company, or the Trustee upon the direction of the Ceding Company, may whenever necessary and consistent with the terms of this Agreement and the Trust Agreement negotiate these assets without the consent or signature from the Reinsurer or any other entity.

Section 4.6.Modification During a FMV Triggering Event.  The Parties acknowledge and agree that, upon the occurrence of a FMV Triggering Event, certain provisions of this Agreement and the Trust Agreement shall cease to be effective, and other provisions shall 

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automatically be effective, so long as such FMV Triggering Event continues, as described herein and in the Trust Agreement.  Provisions that will automatically become modified upon the occurrence and during the continuation of a FMV Triggering Event are as follows: (a) the assets constituting Eligible Assets shall be modified as set forth in Section 4.4 (if a Reserve Credit Event has occurred); (b) the valuation of Eligible Assets in the Trust Account under Section 4.2(b) hereof and all other applicable sections of this Agreement shall be modified from Statutory Book Value to Fair Market Value; (c) Section 4.7(a) governing the use and application of assets in the Trust Account by the Ceding Company prior to a FMV Triggering Event shall not apply, and (d) Section 4.7(b) governing the use and application of assets in the Trust Account during the continuance of a FMV Triggering Event by the Ceding Company shall apply.  In addition, as soon as is practicable, but not more than ten (10) Business Days following the date on which the Reinsurer becomes aware of the occurrence of a FMV Triggering Event the Reinsurer shall (i) substitute any assets in the Trust Account that are not Eligible Assets for assets which are Eligible Assets, and (ii) deposit additional assets consisting of Eligible Assets in the Trust Account and/or provide Qualifying Letters of Credit sufficient to ensure that the aggregate Fair Market Value of the Eligible Assets in the Trust Account, together with the available amount under Qualifying Letters of Credit (if any), is not less than the Required Balance as of the last day of the immediately prior calendar quarter end, computed taking into account the occurrence of a FMV Triggering Event, and, in the case of a Reserve Credit Event, complying with the provisions of Section 4.1(b) taking into consideration any modifications of obligations in accordance with Section 4.1(c), if applicable.  Upon the termination of any FMV Triggering Event, the above-described modifications to the provisions hereof shall cease to apply, and this Agreement shall be interpreted and applied as though no FMV Triggering Event had occurred. The Ceding Company agrees to deliver a cure notice to the Trustee promptly upon becoming aware that an FMV Triggering Event that has occurred is no longer continuing. 

Section 4.7.Ceding Company Draws or Withdrawals.

(a)Outside a FMV Triggering Event.  So long as no FMV Triggering Event has occurred and is continuing, the Ceding Company and the Reinsurer agree that the assets maintained in the Trust Account may be withdrawn by the Ceding Company (or any successor by operation of law of the Ceding Company, including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Ceding Company) without diminution because of any insolvency, rehabilitation, conservatorship or comparable proceeding (an “Insolvency”) on the part of the Ceding Company or the Reinsurer, in accordance with the terms of the Trust Agreement, in order to (i) pay or reimburse the Ceding Company for any undisputed amounts due from the Reinsurer under this Agreement and not yet recovered from the Reinsurer, (A) which amounts have not been paid by the Reinsurer within ten (10) days following its receipt of a specific written notice thereof or (B) otherwise with the consent of the Reinsurer or (ii) to pay to the Ceding Company the Terminal Settlement.  The amount of any such withdrawal in excess of amounts then due to the Ceding Company hereunder shall be deemed maintained in trust for the benefit of the Reinsurer and promptly returned to the Trust Account, along with interest on such amounts at the Interest Rate for the period that such amounts are held by the Ceding Company.

(b)During a FMV Triggering Event.  During the continuation of a FMV Triggering Event, the Ceding Company and the Reinsurer agree that the assets maintained in the Trust 

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Account may be withdrawn, and any Qualifying Letters of Credit may be drawn, by the Ceding Company, or any successor by operation of law of the Ceding Company, including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Ceding Company, without diminution because of Insolvency on the part of the Ceding Company or the Reinsurer, at any time without notice or consent from the Reinsurer but only for one or more of the following purposes:  

		
	(i)
	to reimburse the Ceding Company for the Reinsurer’s share of premiums returned to the owners of the Reinsured Policies reinsured hereunder because of cancellations of the Reinsured Policies;  

		
	(ii)
	to reimburse the Ceding Company for the Reinsurer’s share of benefits or losses payable by the Ceding Company pursuant to the provisions of the Reinsured Policies reinsured hereunder; 

 
		
	(iii)
	to fund a segregated account with the Ceding Company in an amount at least equal to the deduction, for reinsurance ceded, from the Ceding Company liabilities for Reinsured Policies ceded hereunder.  The account must include, but not be limited to, amounts for policy reserves, claims and losses incurred, including losses incurred but not reported, loss adjustment expenses, and unearned premium reserves; or 

		
	(iv)
	to pay any other amounts the Ceding Company claims are due hereunder.

The Ceding Company shall return to the Trust Account (x) within five (5) Business Days after withdrawal, assets withdrawn in excess of all amounts due under Sections 4.7(b)(i), (ii) and (iv), or (y), in the case of Section 4.7(b)(iii), assets that are subsequently determined not to be due, within five (5) Business Days of such determination.  The Ceding Company shall pay to the Reinsurer interest on such excess withdrawn amounts under Sections 4.7(b)(i), (ii) or (iv) at the Interest Rate for the period that such assets are held by the Ceding Company.  Any such excess amount shall at all times be held by the Ceding Company (or any successor by operation of law of the Ceding Company, including any liquidator, rehabilitator, receiver or conservator of the Ceding Company) in trust for the benefit of the Reinsurer and be maintained in a segregated account, separate and apart from any assets of the Ceding Company for the sole purpose of funding the payments and reimbursements described in paragraphs (i), (ii) and (iv) of Section 4.7(b).  The Ceding Company shall pay interest in cash to the Reinsurer on the amount withdrawn or drawn upon under Section 4.7(b)(iii), equal to the actual amount of interest, dividends, and other income earned on the assets in such segregated account so long as after payment of such interest the sum of the Fair Market Value of the assets in such segregated account, the Fair Market Value of any remaining assets in the Trust Account and the stated amount of Qualifying Letters of Credit, equals at least, in the aggregate, the Required Balance, and shall otherwise credit to such segregated account all such income earned on the assets in such segregated account.  The Ceding Company may at any time substitute or exchange any assets held in such account and invest or reinvest such assets; provided that the assets so substituted or exchanged and all reinvestment assets are Eligible Assets.

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Section 4.8.Designated Administrative Account.

(a)So long as no Reserve Credit Event has occurred and is continuing, the Ceding Company and the Reinsurer agree that cash and cash equivalents maintained in the Trust Account may be withdrawn by the Reinsurer on a monthly basis in an amount up to the Monthly Funding Limit, or such larger amount to which the Ceding Company may consent (such consent to relate solely to this Section 4.8(a) and not to be unreasonably withheld, conditioned or delayed), and transferred to the Designated Administrative Account and any such withdrawals shall not be subject to the limitations contained in Section 4.9 with regard to the ratio of Statutory Book Value to Fair Market Value of Eligible Assets held in the Trust Account.  Such amounts shall be withdrawn in accordance with the terms of the Trust Agreement.  The Ceding Company and the Reinsurer agree to promptly notify the Trustee of each change to the Monthly Funding Limit.

(b)The Ceding Company agrees that, during the continuation of a Reserve Credit Event, it will withdraw cash and cash equivalents maintained in the Trust Account on a monthly basis in an amount determined by the Reinsurer up to the Monthly Funding Limit, or such larger amount to which the Ceding Company may consent (such consent to relate solely to this Section 4.8(b) and not to be unreasonably withheld, conditioned or delayed), and transfer such cash and cash equivalents to the Designated Administrative Account, and such withdrawals shall not be subject to the limitations contained in Section 4.9 with regard to the ratio of Statutory Book Value to Fair Market Value of Eligible Assets held in the Trust Account; provided that, following such withdrawal, (i) the aggregate Fair Market Value of the Eligible Assets plus (B) the face amount of any Qualifying Letters of Credit is no less than 102% of the amount that would be required to be held in the Trust Account as of end of the prior calendar month, calculated based on the most recent report delivered by the Reinsurer under Section 4.9, in order to provide the Ceding Company with Reserve Credit as of the end of such calendar month.  Such amounts shall be withdrawn in accordance with the terms of the Trust Agreement.  The Ceding Company and the Reinsurer agree to promptly notify the Trustee of each change to the Monthly Funding Limit. The Ceding Company agrees to deliver a cure notice to the Trustee promptly upon becoming aware that a Reserve Credit Event that has occurred is no longer continuing.

Section 4.9.Adjustment of Security and Withdrawals.

(a)The amount of security required to be provided by the Reinsurer hereunder shall be adjusted following the end of each calendar quarter after the Effective Time based on (1) the Required Balance as of the end of such calendar quarter and (2) the Statutory Book Value or, during the continuation of a FMV Triggering Event, the Fair Market Value, of Eligible Assets and the stated amount of any Qualifying Letters of Credit as of the end of such calendar quarter.  For the avoidance of doubt, the Reinsurer is not required to provide security in excess of the Required Balance and is entitled to withdraw amounts held in the Trust Account to the extent in excess of the Required Balance, in accordance with the procedures set forth in the Trust Agreement.  The amount of security held in the Trust Account shall be adjusted as follows:
		
	(i)
	So long as no FMV Triggering Event has occurred and is continuing:

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	(1)
	If the aggregate Statutory Book Value of the Eligible Assets held in the Trust Account as of the end of such calendar quarter is less than the Required Balance, calculated based on the most recent report delivered by the Reinsurer under Section 4.9(b), then the Reinsurer shall, no later than ten (10) Business Days following the Security Funding Reporting Date, transfer additional Eligible Assets to the Trust Account so that the aggregate Statutory Book Value of the Eligible Assets held in the Trust Account is not less than the Required Balance.

 
		
	(2)
	If the aggregate Statutory Book Value of the Eligible Assets in the Trust Account as of the end of such calendar quarter exceeds the Required Balance, then, in addition to the withdrawal rights set forth in Section 4.9(a), the Reinsurer shall have the right to withdraw such excess in accordance with Section 2(b) of the Trust Agreement, provided that the ratio of the aggregate Statutory Book Value of the Eligible Assets held in the Trust Account to the aggregate Fair Market Value of such assets will not increase as a result of such withdrawal other than de minimis increases associated with the removal of cash or cash equivalents.

		
	(ii)
	During the continuation of a FMV Triggering Event:

		
	(1)
	If the aggregate Fair Market Value of the Eligible Assets held in the Trust Account as of the end of such calendar quarter plus the stated amount of any Qualifying Letters of Credit as of the end of such calendar quarter is less than the Required Balance, calculated based on the most recent report delivered by the Reinsurer under Section 4.9(b), then the Reinsurer shall, no later than ten (10) Business Days following the Security Funding Reporting Date, transfer additional Eligible Assets to the Trust Account and/or increase the stated amount of any Qualifying Letters of Credit so that the aggregate Fair Market Value of the Eligible Assets held in the Trust Account plus the face amount of any Qualifying Letters of Credit is not less than the Required Balance. 

		
	(2)
	If the aggregate Fair Market Value of the Eligible Assets held in the Trust Account plus the stated amount of any Qualifying Letters of Credit as of the end of such calendar quarter exceeds the Required Balance, then the Reinsurer shall have the right to withdraw such excess in accordance with Section 2(b) of the Trust Agreement or reduce the stated amount of any Qualifying Letters of Credit.

(b)Subject to Section 4.9(c) below, the Reinsurer shall furnish a report (each, a “Quarterly Report”) to the Ceding Company no later than ten (10) Business Days following the end of each calendar quarter (the “Security Funding Reporting Date”); provided that, 

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notwithstanding the foregoing, with respect to the first calendar quarter beginning after the Closing Date, the Security Funding Reporting Date shall be a date no later than thirty (30) calendar days following the end of such calendar quarter.  Each Quarterly Report shall include working papers supporting the determination of the Required Balance and a listing of each asset in the Trust Account setting forth the Statutory Book Value and Fair Market Value, as applicable, of each such asset as of the end of the relevant Accounting Period and indicating if any such asset is not an Eligible Asset.  In the event that the Ceding Company disagrees in good faith with the Reinsurer’s calculation of Required Balance or of the Statutory Book Value or Fair Market Value, as applicable, of any Eligible Asset or whether any asset is an Eligible Asset as set forth in such report, the Ceding Company may, within ten (10) Business Days after its receipt of the Quarterly Report, deliver written notice to the Reinsurer of such disagreement and the Parties shall attempt in good faith to resolve such disagreement.

(c)In the event that the Ceding Company is responsible for calculating the Required Balance pursuant to Section 4.2(c), in lieu of the corresponding element in the Reinsurer’s Quarterly Report, the Ceding Company shall deliver to the Reinsurer no later than ten (10) Business Days following the end of each calendar quarter for any such quarter in which the Ceding Company shall calculate the Required Balance, a report setting forth its calculation of the Required Balance (the “Ceding Company Required Balance Report”).  For any quarter in which the Ceding Company shall deliver a Ceding Company Required Balance Report, the Security Funding Reporting Date shall be a date that is ten (10) Business Days following receipt of the Ceding Company Required Balance Report.  In the event that the Reinsurer disagrees in good faith with the Ceding Company’s calculation of Required Balance, the Reinsurer may, within ten (10) Business Days after its receipt of the Ceding Company Required Balance Report, deliver written notice to the Ceding Company of such disagreement and the Parties shall attempt in good faith to resolve such disagreement.

(d)Any resolution as to disagreements arising under Section 4.9(b) or Section 4.9(c) agreed to in writing by the Parties shall be final and binding upon the Parties.  If the Parties are unable to resolve any disagreement as to the calculation of Required Balance or of the Statutory Book Value or Fair Market Value, as applicable, of any Eligible Asset or whether any asset is an Eligible Asset within ten (10) Business Days after the Ceding Company delivers written notice of any such disagreement to the Reinsurer, or the Reinsurer delivers written notice of such disagreement to the Ceding Company, as the case may be, the Parties shall jointly request the Independent Accountant to determine the Required Balance or the Statutory Book Value or Fair Market Value, as applicable, of the disputed Eligible Asset or whether the disputed asset is an Eligible Asset as of the relevant date.  The Independent Accountant’s determination of the Required Balance or of the Statutory Book Value or Fair Market Value, as applicable, of the disputed Eligible Asset or whether the disputed asset is an Eligible Asset shall be final and binding upon the Parties.  Each Party shall pay one-half of the Independent Accountant’s fees, costs and expenses associated with the Independent Accountant’s determination.  After a final and binding resolution of any dispute described in this Section 4.9(d) is reached, the Parties agree to make any necessary adjustments under Section 4.9(a) so that (i) absent the occurrence and continuation of a FMV Triggering Event, the aggregate Statutory Book Value of the Eligible Assets held in the Trust Account is not less than the Required Balance, or (ii) during the continuation of a FMV Triggering Event, the sum of the aggregate Fair Market Value of the Eligible Assets held in the Trust Account plus the stated amount of Qualifying Letters of Credit 

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is not less than the Required Balance.  In connection with any such disagreement regarding the Fair Market Value of an asset in the Trust Account that does not have a readily observable market price, the Reinsurer shall, upon reasonable request, promptly provide the Ceding Company with a third party valuation analysis prepared by a nationally reputable valuation firm, the reasonable out-of-pocket costs of which will be borne equally by the parties.

ARTICLE V.

OVERSIGHTS; COOPERATION

Section 5.1.Oversights.  Inadvertent delays, oversights, errors or omissions made in connection with this Agreement or any transaction hereunder shall not relieve either Party from any liability that would have attached had such delay, oversight, error or omission not occurred.  The Parties shall nevertheless cooperate in good faith to rectify such delay, oversight, error or omission as soon as possible after discovery so that both Parties shall be restored as closely as possible to the positions they would have occupied if no delay, oversight, error or omission had occurred.

Section 5.2.Cooperation.  The Ceding Company and the Reinsurer shall cooperate with each other in order to accomplish the objectives of this Agreement by furnishing additional information and executing and delivering any additional documents as may be reasonably requested by the other to further perfect or evidence the consummation of, or otherwise implement, any transaction contemplated by this Agreement or the other Transaction Agreements, or to aid in the preparation of any required regulatory filing or financial statement; provided, however, that any such additional documents must be reasonably satisfactory to each Party and not impose upon either Party any material liability, risk, obligation, loss, cost or expense not contemplated by this Agreement or the other Transaction Agreements.

ARTICLE VI.

INSOLVENCY

Section 6.1.Insolvency of the Ceding Company.
  
(a)In the event of the insolvency of the Ceding Company, all reinsurance made, ceded, renewed or otherwise becoming effective under this Agreement shall be payable by the Reinsurer directly to the Policyholders or other payees under the Reinsured Policies on the basis of the liability of the Ceding Company under the Reinsured Policies without diminution because of the insolvency of the Ceding Company.

(b)It is understood, however, that in the event of  such an insolvency of the Ceding Company, the liquidator, receiver or statutory successor of the Ceding Company shall give written notice of the pendency of a claim against the Ceding Company on a Reinsured Policy within a reasonable period of time after such claim is filed in the applicable insolvency proceedings 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 which it may deem available to the Ceding Company or its liquidator, 

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receiver or statutory successor.  It is further understood that the expense thus incurred by the Reinsurer will be chargeable, subject to Applicable Law and court approval, against the Ceding Company as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Ceding Company solely as a result of the defense undertaken by the Reinsurer.  To the extent the Reinsurer makes a payment directly to a Policyholder or other beneficiary pursuant to this Section 6.1, (i) the Reinsurer’s corresponding obligation to make such payment under this Agreement shall be deemed satisfied and (ii) the Reinsurer shall be subrogated to all rights of the Ceding Company to the extent of such payment.

ARTICLE VII.

DURATION; RECAPTURE

Section 7.1.Duration.  This Agreement shall continue in force until such time as (a) the Ceding Company’s Liability arising out of or resulting from all Reinsured Policies is terminated in accordance with their respective terms and each Party has received payments which discharge the other Party’s Liabilities incurred hereunder prior to such termination, or (b) in accordance with Section 7.3, the Ceding Company has elected to recapture the reinsurance of Reinsured Policies in full, and the Terminal Settlement has been completed in accordance with Section 7.3.

Section 7.2.Survival.  Notwithstanding the other provisions of this Article VII, the terms and conditions of Articles I, VII and VIII and the provisions of Sections 11.1, 11.4, 11.5, 11.11 and 11.13 shall remain in full force and effect after the termination of this Agreement.

Section 7.3.Recapture.

(a)Except with respect to a Recapture Triggering Event described in clause (e) of the definition of “Recapture Triggering Event”), following the initial occurrence of a Recapture Triggering Event but only if such Recapture Triggering Event is still continuing, the Ceding Company shall have the right (but not the obligation), within one hundred eighty (180) days after such initial occurrence, to recapture all, and not less than all, of the reinsurance ceded under this Agreement, by providing the Reinsurer with written notice of its intent to effect recapture; provided that, with respect to a Recapture Triggering Event described in clause (e) of the definition of “Recapture Triggering Event”, the Ceding Company shall have the obligation to provide such written notice simultaneously with the occurrence of such event.  Recapture of the Reinsured Policies shall be effective on the thirtieth (30th) day following the day on which the Ceding Company has provided the Reinsurer with such notice or such later day as set forth in the Ceding Company recapture notice (the “Recapture Date”).  Without prejudice as to any obligations, rights or remedies of any Party under any other Transaction Agreement, upon a recapture by the Ceding Company, the Ceding Company shall recapture all Liabilities arising under or resulting from the Reinsured Policies, other than the Reinsurer Extra-Contractual Obligations.

(b)Following a recapture pursuant to Section 7.3(a), subject to the satisfaction of payment obligations described in Section 7.3, both the Ceding Company and the Reinsurer will be fully and finally released from all rights and obligations under this Agreement in respect of

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the Reinsured Policies other than the obligations under the provisions that expressly survive termination as provided in Section 7.2.  Following the consummation of the recapture, the Reinsurer shall be relieved of ongoing responsibilities for servicing the Reinsured Policies in accordance with the Administrative Services Agreement.  Notwithstanding the foregoing, a recapture pursuant to this Section 7.3 will not affect unpaid obligations or Liabilities due and owing under any of the Transaction Agreements.

(c)Notwithstanding the remedies contemplated by this Article VII or the other Transaction Agreements, the Ceding Company may, in its sole discretion, require direct payment by the Reinsurer of any sum in default under this Agreement or any other Transaction Agreement in lieu of exercising the remedies in Article VII, and it shall be no defense to any such claim that such Party might have had other recourse.

(d)Following a recapture of this Agreement pursuant to this Article VII, the Reinsurer shall have the right to engage its own legal representation, at its own cost and expense, and control the defense of any Action, claim or demand with respect to Reinsurer Extra-Contractual Obligations; provided that the Ceding Company shall cooperate with the Reinsurer in good faith with respect to any such Action, claim or demand.  In addition, in connection with the Reinsurer’s defense of such Action, claim or demand, subject to compliance with Applicable Law, the Ceding Company shall provide the Reinsurer with access to its books and records and personnel, including, to the extent the Ceding Company has rights thereto, such Representatives, Third Party Administrators and Producers of the Ceding Company and its Affiliates as shall have relevant information concerning such Reinsurer Extra-Contractual Liabilities unless providing such access would (i) jeopardize any attorney-client privilege, work product immunity or any other legal privilege or similar doctrine or (ii) contravene any Applicable Law, court order, regulatory agreement or agreement (including any confidentiality agreement to which the Ceding Company or any its Affiliates is a party), it being understood that the Ceding Company shall use commercially reasonable efforts to obtain waivers or make other arrangements (including redacting information or entering into joint defense agreements) that would otherwise enable access to the Reinsurer to such materials without so jeopardizing its privilege or contravening such Applicable Law, court order, contractual duty or agreement.  Notwithstanding anything to the contrary herein, the failure by the Ceding Company to provide such access shall release the Reinsurer from its continuing obligations with respect to Reinsurer Extra-Contractual Obligations to the extent the Reinsurer is actually prejudiced by such failure.

Section 7.4.Recapture Payments.

(a)In connection with a recapture pursuant to Section 7.3, the Ceding Company shall prepare a settlement statement within fifteen (15) calendar days after the Recapture Date (the “Terminal Settlement Statement”) setting forth the terminal settlement calculated in accordance with Schedule B (the “Terminal Settlement”).  If the undisputed amount of the Terminal Settlement is positive, then within ten (10) Business Days following the date on which the Ceding Company delivers the Terminal Settlement Statement to the Reinsurer (i) the Reinsurer and the Ceding Company shall instruct the Trustee pursuant to the Trust Agreement to transfer to the Ceding Company assets with a Fair Market Value equal to such undisputed amount to the extent not otherwise paid by the Reinsurer in cash prior to such date (or if the assets in the Trust Account are insufficient for such payment, instruct the Trustee to transfer all assets remaining in 

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the Trust Account to the Ceding Company) and (ii) if the assets in the Trust Account are insufficient for payment of such undisputed amount, the Reinsurer shall pay any shortfall to the Ceding Company in cash.  If the undisputed amount of the Terminal Settlement is negative, then within ten (10) Business Days following the date on which the Ceding Company delivers the Terminal Settlement Statement to the Reinsurer, the Ceding Company shall pay to the Reinsurer the amount of the Terminal Settlement in cash.  In addition, following the Terminal Settlement, the Trust Account shall be terminated and any remaining amounts or amount held in trust pursuant to Article IV shall be released to the Reinsurer after the full satisfaction of the Terminal Settlement pursuant to the Terminal Settlement Statement.  The Ceding Company shall promptly take all actions, including providing written consent to the Trustee, to permit such termination of the Trust Account and release of such assets to the Reinsurer.

(b)In the event that the Reinsurer disagrees with the calculation of the Terminal Settlement, the Reinsurer shall within ten (10) Business Days after its receipt of such report deliver written notice to the Ceding Company of such disagreement and the Parties shall attempt in good faith to resolve such disagreement.  Any resolution agreed to in writing by the Parties shall be final and binding upon the Parties.  If the Parties are unable to resolve any disagreement within ten (10) Business Days after the Reinsurer delivers written notice of any such disagreement to the Reinsurer, either Party may request the Independent Accountant to determine the Terminal Settlement.  The Independent Accountant’s determination of the Terminal Settlement shall be final and binding upon the Parties.  The fees, costs and expenses associated with the Independent Accountant’s determination shall be allocated between the Ceding Company and the Reinsurer in accordance with the Independent Accountant’s judgment as to the relative merits of the Parties’ proposals in respect of the dispute.  Within ten (10) Business Days after a final and binding resolution of any dispute described in this Section 7.4(b) is reached, the Parties agree to make any necessary adjustments under Section 7.4(a).
ARTICLE VIII.

INDEMNIFICATION

Section 8.1.Reinsurer’s Obligation to Indemnify.  The Reinsurer hereby agrees to indemnify, defend and hold harmless the Ceding Company and its Affiliates and their respective officers, directors, stockholders, employees, Representatives, successors and assigns (collectively, the “Ceding Company Indemnified Parties”) from and against any and all Indemnifiable Losses incurred by the Ceding Company Indemnified Parties to the extent arising from any breach by the Reinsurer of the covenants and agreements of the Reinsurer contained in this Agreement.

Section 8.2.Ceding Company’s Obligation to Indemnify.  The Ceding Company hereby agrees to indemnify, defend and hold harmless the Reinsurer and its Affiliates and their respective officers, directors, stockholders, employees, Representatives, successors and assigns (collectively, the “Reinsurer Indemnified Parties”) from and against any and all Indemnifiable Losses incurred by the Reinsurer Indemnified Parties to the extent arising from (i) any breach by the Ceding Company of the covenants and agreements of the Ceding Company contained in this Agreement or (ii) any Excluded Liability.

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Section 8.3.Applicability of Master Transaction Agreement.  The procedures, but not the limitations, set forth in Sections 8.05, 8.06 and 8.08 of the Master Transaction Agreement shall apply to Indemnifiable Losses under this Article VIII.

Section 8.4.Waiver of the Duty of Utmost Good Faith.  The Ceding Company and the Reinsurer each hereby absolutely and irrevocably waives resort to the duty of “utmost good faith” or any similar principle in connection with this Agreement, the Master Transaction Agreement or any other Transaction Agreement.

ARTICLE IX.

DAC TAX 

Section 9.1.DAC Tax. 
 
(a)The Ceding Company and the Reinsurer hereby agree that the joint election provided for in Regulation 1.848-2(g)(8) will not be made.

(b)Both parties to this Agreement agree to exchange information pertaining to the amount of the net consideration (as defined in Treasury Regulations section 1.848-2(f)) under this Agreement each year to ensure consistency or as otherwise required by the U.S. Internal Revenue Service.  If requested, either party will provide supporting information reasonably requested by the other party with appropriate certification as to completeness, accuracy and consistency with the providing party’s books and records.

ARTICLE X.

MANAGEMENT OF ACTIONS

Section 10.1.Certain Notifications.  Each Party shall as promptly as reasonably practicable (and in no event later than five (5) Business Days after such Party becomes aware of such matter) notify the other Party of the occurrence of any of the following: (x) the commencement, or, to its knowledge, threatened commencement (provided that the Ceding Company shall not be required to provide notice of such threatened commencement prior to the Conversion Date), by any Person other than a Governmental Authority of an Action that relates to the Business or any of the Reinsured Policies, (y) the commencement, or, to its knowledge, threatened commencement (provided that the Ceding Company shall not be required to provide notice of such threatened commencement prior to the Conversion Date), by a Governmental Authority of a claim, examination, inquiry, dispute or other Action that relates to the administration of the Transaction Agreements or relates to the Business or the Reinsured Policies and (z) without duplication of the foregoing, any other matter, fact or circumstances involving the assertion or, to its knowledge, threatened assertion (provided that the Ceding Company shall not be required to provide notice of such threatened assertion prior to the Conversion Date) by any Person of any claim or assertion which, if resolved adversely to the Ceding Company or the Reinsurer, as applicable, would reasonably be expected to have an adverse effect on the financial or operating interests of the Ceding Company or the Reinsurer with respect to the Reinsured Policies.  Any such notification shall include a reasonably detailed synopsis of the underlying 

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matter, including (i) a summary of the nature and status of any such dispute, Action, examination or inquiry, as the case may be, (ii) a description of the alleged acts, errors or omissions giving rise to such matter, (iii) a statement as to whether, in the view of such Party based on the facts and circumstances as then known or apparent, such matter constitutes in whole or in part, or may reasonably be expected to give rise to, an assertion of (A) an Excluded Liability, including, without limitation, a Ceding Company Extra-Contractual Obligation, or (B) a Reinsured Liability, including, without limitation, a Reinsurer Extra-Contractual Obligation and (iv) as commercially practicable, copies of any files or other documents that such other Party may reasonably request in connection with its review of such matters.

Section 10.2.Control of Actions.  Subject to the requirements of Section 10.3 hereof, with respect to any claim, examination, inquiry, dispute or Action that relates to the Business or any of the Reinsured Policies:
(a)As respects the Specified Litigation, the Ceding Company shall be the Controlling Party.

(b)If such Action is, or involves the assertion of, an Excluded Liability, including, without limitation, a Ceding Company Extra-Contractual Obligation, by a Person other than a Governmental Authority, then the Ceding Company shall be and remain the Controlling Party.

(c)If such Action is, or involves solely the assertion of, a Reinsured Liability by a Person other than a Governmental Authority, then the Reinsurer shall be the Controlling Party with respect to such matter.

(d)If such claim, examination, inquiry, dispute or Action is, or involves assertions or claims made by or on behalf of a Governmental Authority, then, as respects such assertions or claims (i) as are (y) unrelated to the Business or (z) related to but not predominantly related to the Business (in each case including as determined pursuant to Section 11.6 hereof), the Ceding Company shall be the Controlling Party and (ii) as are predominantly related to the Business (including as determined pursuant to Section 11.6 hereof), the Reinsurer shall be the Controlling Party; provided that, with respect to any such claim, examination, inquiry, dispute or Action that is predominantly related to the Business, after the Conversion Date, the Reinsurer shall prepare, with a copy to the Ceding Company, such response to the Governmental Authority as required within the Governmental Authority’s requested time frame for response or if no such time frame is provided, within the time frame as allowed by Applicable Law; provided that, if the Reinsurer prepares the proposed response, it shall, to the extent practicable, provide such proposed response to the Ceding Company for its prior review and shall take into account any recommendations of the Ceding Company that are provided to the Reinsurer in a timely manner with respect to such response and shall not unreasonably reject such recommendation or settle or compromise any such claim, examination, inquiry, dispute or Action without the Ceding Company’s prior written consent (such consent not to be unreasonably withheld, conditioned or delayed).

(e)Except as to Actions relating solely to Reinsured Liabilities (with respect to which the Reinsurer shall be the Controlling Party), not more than once during the pendency of any matter described in one or more of clauses (b) or (d)(ii) of this Section 10.2, provided that the 

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Non-Controlling Party has an RBC Ratio (or, with respect to the Ceding Company, calculated in the same manner as RBC Ratio) of at least 200% at such time, the Non-Controlling Party shall have the right to irrevocably assume control of the defense and management of the subject matter and thereafter to be and remain the Controlling Party with respect thereto; provided, however, that any such undertaking shall be made in writing and will result in a waiver of such Party’s rights under Section 11.6(e) with respect to the underlying matter; provided, further, that such assuming Controlling Party shall be liable for all damages, losses, liabilities, obligations, costs and expenses arising out of such matter after the date that it assumes the role of Controlling Party.

(f)Notwithstanding anything in this Agreement to the contrary, the Ceding Company, upon written notice to the Reinsurer and at its own cost and expense, without waiving any right to indemnification or payment that it may have under the terms of any Transaction Agreement, shall have the right, but not the obligation, to supervise and control the defense and or settlement of any examination or Action initiated by a Governmental Authority that relate predominantly to the Business that (i) seeks an order, injunction or other equitable relief against the Ceding Company or any of its Affiliates or the conduct of business by the Ceding Company and its Affiliates or (ii) if successful, would reasonably be expected to materially interfere with the business, financial condition, or reputation of the Ceding Company or any of its Affiliates.  In such event, the Ceding Company shall become the Controlling Party; provided that the Ceding Company shall (A) ensure that the Reinsurer has an opportunity to consult with the Ceding Company with respect to such examination or Action and shall ensure that any recommendations of the Reinsurer with respect thereto are considered by the Ceding Company, (B) act reasonably and in good faith in determining the course of action with respect to such examination or Action, (C) give to the Reinsurer a copy of any proposed written response or other material written communications to the Governmental Authority with respect to such examination or Action and a reasonable opportunity to provide comments thereon, which comments shall be considered in good faith by the Ceding Company and (D) give to the Reinsurer reasonable prior written notice of the time and place when any meetings or telephone calls are scheduled with the Governmental Authority with respect to such examination or Action and, if permitted by such Governmental Authority, provide the Reinsurer the opportunity to attend and participate in any such meeting or telephone call.

Section 10.3.Obligations of Controlling Parties.

(a)At its own cost and expense, the Controlling Party shall adequately supervise, manage and control the investigation, contest, defense and/or settlement of the underlying claim, examination, inquiry, dispute or Action and shall have the authority hereunder as required to effect such supervision, management and control; provided, however, that, to the extent reasonably practicable, the Controlling Party shall provide the Non-Controlling Party with an adequate opportunity to comment in advance on the management and control of any such matter and shall give due regard to, and not unduly reject, any recommendations of the Non-Controlling Party made with respect to such matter, including, with respect to class actions, recommendations as to litigation strategy during the pre-certification stage or related to any appeal of class certification.

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(b)The Controlling Party shall keep the Non-Controlling Party reasonably informed of the progress of all such examinations, inquiries, disputes or Actions as to which it serves as Controlling Party and, at the request of the Non-Controlling Party, will provide thereto periodic reports as to the nature and status of any such examinations, inquiries, disputes or Action as the same relate to the Business, the alleged acts, errors or omissions giving rise to such matters and copies of any files or other documents related to such matter that the Non-Controlling Party may reasonably request in connection with its review of such matters.

(c)Absent the prior written consent of the Non-Controlling Party, which consent may not be unreasonably withheld, conditioned or delayed, the Controlling Party shall not settle any examination, inquiry, dispute or Action unless (i) such settlement does not include admission of fault, culpability or failure to act by the Non-Controlling Party, (ii) a full and complete release is provided to the named defendant in connection with the settlement, (iii) the sole relief for such examination or Action is monetary damages paid by the Controlling Party and such settlement of any examination, inquiry, dispute or Action by a Person other than a Governmental Authority does not subject the Non-Controlling Party to injunctive relief or any other equitable remedy, (iv) such settlement does not contain any restriction or condition that would materially adversely affect the Non-Controlling Party or the conduct of the Business by the Reinsurer, (v) the Action is not certified as a class action, (vi) such settlement does not include a policy buy-out offer which, to the extent to be claimed as a Reinsured Liability hereunder, involves payment of amounts in the aggregate more than $25,000, or (vii) such settlement does not require a material change in administrative practices with respect to the Business unless required to comply with the Applicable Law.  

Section 10.4.Further Cooperation and Control Rights.

(a)Notwithstanding anything in this Agreement to the contrary, the Ceding Company shall have the right to engage in its own separate legal representation, at its own expense, and to participate fully in, but not control, the defense of any Action that relates predominantly to the Business with respect to which the Ceding Company is a named party, without waiving any right to indemnification or payment that it may have under the terms of any Transaction Agreement.

(b)Any Legally Required Actions reasonably required in support of the rights and obligations undertaken in this Article X shall be taken by the Ceding Company promptly (and, in any event, within the time frame prescribed by Applicable Law) and without any condition or limitation not specifically provided herein other than as required under Applicable Law, at the expense of the Reinsurer, but subject to the rights of the Controlling Party set forth in Section 10.2.

(c)Each Party hereto shall cooperate with and assist the Controlling Party in responding to, defending, prosecuting and settling any claim, examination, inquiry, dispute or Action under this Article X; provided that no Party shall be required to waive any applicable attorney-client, attorney work product or other evidentiary privileges and provided, further, that each Party shall, and shall cause its Affiliates to, use reasonable best efforts to assist and enable information to be furnished or made available to the other Party without so jeopardizing privilege, including by entering into a customary joint defense agreement or common interest agreement with the requesting Party to the extent such an agreement would preserve the applicable privilege or protection.  Neither the Ceding Company nor the Reinsurer shall have the 

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authority to institute, prosecute, or maintain any legal or regulatory proceeding on behalf of the other Party without the prior written consent of such other Party.

(d)If there is a change in the identity of the Controlling Party as respects any claim, examination, inquiry, dispute or Action concerning a Reinsured Policy, the previous Controlling Party shall, at the request of the new Controlling Party, cooperate with and assist the new Controlling Party in responding to, defending, prosecuting or settling the related dispute or Action, including transferring all relevant information and records as promptly as practicable to the new Controlling Party; provided that no Party shall be required to waive any applicable attorney-client, attorney work product or other evidentiary privileges; provided, further, that each Party shall, and shall cause its Affiliates to, use reasonable best efforts to assist and enable information to be furnished or made available to the other Party without so jeopardizing privilege, including by entering into a customary joint defense agreement or common interest agreement with the requesting Party to the extent such an agreement would preserve the applicable privilege or protection.

ARTICLE XI.

MISCELLANEOUS

Section 11.1.Notices.  All notices, requests, consents, claims, demands and other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by electronic mail (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties hereto at the following respective addresses (or at such other address for a party hereto as shall be specified in a notice given in accordance with this Section 11.1):

(a)if to the Ceding Company:

Bankers Life and Casualty Company
111 E. Wacker Drive, Suite 2100
Chicago, IL 60601
Attention: General Counsel
Email address: matt.zimpfer@cnoinc.com

with a copy (which shall not constitute notice) to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Attention:    John M. Schwolsky
Donald B. Henderson, Jr.
Email address: jschwolsky@willkie.com
                         dhenderson@willkie.com

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(b)if to the Reinsurer:

Wilton Reassurance Company
20 Glover Avenue, 4th Floor
Norwalk, Connecticut 06850
Attention: Chief Executive Officer 
Facsimile: 203 762 4411
Email address:  mfleitz@wiltonre.com

with copies (which shall not constitute notice) to:
Wilton Reassurance Company
20 Glover Avenue, 4th Floor
Norwalk, Connecticut 06850
Attention: General Counsel
Facsimile: 203 762 4431
Email address:  msarlitto@wiltonre.com

Wilton Reassurance Company
20 Glover Avenue, 4th Floor
Norwalk, Connecticut 06850
Attention: Vice President, Associate General Counsel, Transactions
Facsimile: 203 762 4431
Email address:  sdoran@wiltonre.com

Debevoise & Plimpton
919 Third Avenue
New York, NY 10022
Attention:  Marilyn Lion
Facsimile:  212 521 7108
Email address:  malion@debevoise.com 

or at such other address for a party hereto as such party may hereafter specify for the purpose by notice to the other Party hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.
Section 11.2.Entire Agreement.  This Agreement, together with the Schedules referred to herein, the Master Transaction Agreement, the Trust Agreement, and the other Transaction Agreements delivered pursuant hereto and thereto contain the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior agreements, written or oral, with respect thereto.

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Section 11.3.Waivers and Amendments.  This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Parties, or, in the case of a waiver, by the Party waiving compliance.  No delay on the part of any Party on exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege.  The rights and remedies herein provided are cumulative and, unless provided otherwise in this Agreement or in the other Transaction Agreements, are not exclusive of any rights or remedies that any party may otherwise have at law or in equity.

Section 11.4.Governing Law.

EXCEPT AS OTHERWISE SET FORTH HEREIN AS TO THE APPLICATION OF THE INSURANCE LAWS OF THE CEDING COMPANY DOMICILIARY STATE OR THE REINSURER DOMICILIARY STATE, THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS, TO THE EXTENT SUCH PRINCIPLES OR RULES ARE NOT MANDATORILY APPLICABLE BY STATUTE AND WOULD PERMIT OR REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.  
Section 11.5.Dispute Resolution.

(a)The Parties hereby irrevocably submit to the jurisdiction of the courts of the State of New York and the federal courts of the United States of America located in the State, City and County of New York in any action arising out of or relating to this Agreement or the transactions contemplated hereby.  The Parties irrevocably agree that all claims in respect of the interpretation and enforcement of the provisions of this Agreement, and in respect of the transactions contemplated hereby, shall be heard and determined in such courts, and that, subject to the Parties’ agreement and obligation to arbitrate certain matters pursuant to Section 11.6,  such jurisdiction of such courts with respect thereto shall be exclusive, except solely to the extent that all such courts shall lawfully decline to exercise such jurisdiction.  Subject to the Parties’ agreement and obligation to arbitrate certain matters pursuant to Section 11.6, the Parties hereby waive, and agree not to assert, to the maximum extent permitted by law, as a defense in any Action for the interpretation or enforcement hereof or in respect of any such transaction, that it is not subject to such jurisdiction or that such Action may not be brought or is not maintainable in such courts or that the venue thereof may not be appropriate or that this Agreement may not be enforced in or by such courts.  The Parties hereby consent to and grant any such court jurisdiction over the person of such parties and agrees that mailing of process or other papers in connection with any such Action in the manner provided in Section 11.1 or in such other manner as may be permitted by law, shall be valid and sufficient service thereof.  The Parties agree that final judgment in any such Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b)EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT 

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OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 11.6.Expedited Dispute Resolution for Special Matters.

(a)Scope. Any dispute or other matter in question between the Parties arising out of, relating to or in connection with (i) the determination of whether an Extra-Contractual Obligation constitutes or, if realized, would constitute a Reinsurer Extra-Contractual Obligation or a Ceding Company Extra-Contractual Obligation, (ii) the determination of which Party is the Controlling Party pursuant to Section 10.2 and (iii) the arbitrability of any such dispute or other matter in question, shall be resolved by arbitration as set forth in this Section 11.6.

(b)Initial Appointment and Qualifications.  Within ten (10) Business Days after the Closing Date, (i) the Parties shall agree on a panel of three (3) dis-interested arbitrators (the “Arbitrators”) and shall provide such arbitrators with copies of the Transaction Agreements.  If the Parties cannot agree on all three (3) arbitrators within ten (10) Business Days after the Closing Date, the Parties shall jointly request the International Institute for Conflict Prevention and Resolution (the “CPR Institute”) to submit to the Parties a list of ten (10) candidates to serve as Arbitrators.  Each candidate shall have experience in the long-term care industry; provided that, if a Party fails to object to the experience or qualifications of an Arbitrator within five (5) Business Days after his or her appointment, such Party shall be deemed to have conclusively accepted the experience and qualifications of such Arbitrator. If the Parties do not within ten (10) Business Days after the receipt of such list from the CPR Institute agree on the remaining Arbitrators, the CPR Institute shall choose the remaining Arbitrators.  Any challenge to an Arbitrator shall be decided by the CPR Institute.  If, at any time during the term of this Agreement following the initial appointment of Arbitrators, the total number of Arbitrators is less than three (3), either Party may request that the CPR Institute appoint additional Arbitrators to bring the total number of Arbitrators to three (3).  At all times, one of the Arbitrators must be designated as the arbitrator responsible for making initial determinations under this Section 11.6 (the “Initial Arbitrator”).  If the Parties do not agree on the selection of the Initial Arbitrator within ten (10) Business Days after the appointment of the third Arbitrator, the CPR Institute shall designate one of the Arbitrators as the Initial Arbitrator.  If the Initial Arbitrator is unavailable to make an initial determination under this Section 11.6, the CPR Institute shall designate one of the remaining Arbitrators to serve as the Initial Arbitrator for purposes of that proceeding alone.

(c)Notice of Special Matters and Good Faith Efforts to Resolve.  The Parties shall provide each other with prompt written notice of the assertion, threatened assertion or occurrence of a Special Matter.  The Parties shall work together diligently and in good faith to make jointly any and all determinations as may be required hereunder to be made in order to timely apportion responsibility for the management and control of, and ultimate economic responsibility for, any such matter on a basis consistent with the terms of this Agreement.  Once a Party notifies the other of a subject claim, dispute, inquiry, examination or Action and invokes this Section 11.6, the Parties shall have three (3) Business Days (or such longer period as they may agree) within which to negotiate a resolution to each Special Matter related thereto.  At the end of such three (3) Business Day period, if the Parties have not agreed on the resolution of the specified Special 

- 45 -

Matter(s), either Party may initiate arbitration pursuant to the expedited dispute resolution process described in Section 11.6(d).

(d)Process.  Within two (2) Business Days after the initiation of arbitration pursuant to the final sentence of Section 11.6(c), each Party shall make a written submission to the Initial Arbitrator of no more than five (5) pages (exclusive of any exhibits or affidavits), outlining the issues in dispute and the reasons for their respective positions.  The written submissions shall be exchanged between the Parties at the same time they are submitted to the Initial Arbitrator.  The sole function and power of the Initial Arbitrator shall be to (i) if applicable, decide whether an Extra-Contractual Obligation constitutes or, if realized, would constitute a Reinsurer Extra-Contractual Obligation or a Ceding Company Extra-Contractual Obligation and (ii) determine which Party is the Controlling Party pursuant to Section 10.2, in each case in accordance with the terms and provisions of this Agreement (each, a “Determination”).  In making the Determination or Determination, the Initial Arbitrator shall be guided by the definitions of the terms “Ceding Company Extra-Contractual Obligations”, “First Material Act”, “Excluded Liabilities” and “Reinsurer Extra-Contractual Obligations” and the provisions of Section 10.2 and while honoring the provisions of the Transaction Agreements, implement the apparent intentions of the Parties hereto.  The Parties shall instruct the Initial Arbitrator to make the applicable Determination or Determinations as soon as possible following the Parties’ submissions and, in any event, within two (2) Business Days after receipt of the Parties’ submissions.  The Parties shall share equally the costs of any arbitration brought pursuant to this Section 11.6; provided that each Party in such proceeding shall bear its own attorneys’ fees and litigation costs.

(e)Reconsideration for Purposes of Final Liability Allocations.  No more than once during the pendency of any subject claim, dispute, inquiry, examination or Action with respect to an actual or alleged Extra-Contractual Obligation, each Party shall have the right, upon written notice to the other Party and the Arbitrators, to initiate arbitration before the full panel of Arbitrators to challenge the initial Determination by the Initial Arbitrator in respect of the assignment of economic responsibility for such Extra-Contractual Obligation; provided that such written notice must be provided (i) generally, including as respects any putative class action as to which class certification is denied, within thirty (30) days following the earliest of (A) the initial entry of judgment in a trial court proceeding or arbitration proceeding or (B) the decision on a motion or any other determination at trial or arbitration proceeding by a finder of fact and (ii) as to any putative class action as to which class certification is granted, within thirty (30) days after such class is certified.  Within thirty (30) days after the initiation of arbitration pursuant to this Section 11.6, each Party shall submit presentations to the panel of the Arbitrators outlining the issues in dispute and the reasons for their respective positions.  The written submissions shall be exchanged between the Parties at the same time they are submitted to the Arbitrators.  The Arbitrators shall schedule such hearings as they deem necessary to hear evidence and argument.  The Parties shall direct the Arbitrators to render a Determination within thirty (30) days after the date that the Arbitrators receive the materials submitted by the Parties for disposition or the conclusion of the hearing, whichever is later.  The Party initiating the arbitration pursuant to this Section 11.6 shall bear the costs of any such arbitration; provided that each Party in such proceeding shall bear its own attorneys’ fees and litigation costs.

(f)Federal Arbitration Act Governs.  Notwithstanding that this Agreement shall be governed by the laws of the State of New York in accordance with Section 11.4, the rights and 

- 46 -

procedures applicable to any arbitration commenced under this Section 11.6 shall be governed by the Federal Arbitration Act.

(g)Location of Proceedings.  The location of all arbitration proceedings shall be New York, New York or shall be such other location as may be mutually agreed upon by the Parties.

Section 11.7.No Third Party Beneficiaries.  Except as otherwise expressly set forth in any provision of this Agreement, including with respect to the Ceding Company Indemnified Parties and the Reinsurer Indemnified Parties, nothing in this Agreement is intended or shall be construed to give any Person, other than the Parties, their successors and permitted assigns, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.

Section 11.8.Expenses.  Except as otherwise provided herein or in the other Transaction Agreements, the Parties hereto shall each bear their respective expenses incurred in connection with the negotiation, preparation, execution, and performance of this Agreement and the transactions contemplated hereby, including all fees and expenses of counsel, actuaries and other Representatives.

Section 11.9.Counterparts.  This Agreement may be executed by the Parties hereto 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.  Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, of the Parties hereto.  Each counterpart may be delivered by facsimile or electronic mail transmission, which transmission shall be deemed delivery of an originally executed document.

Section 11.10.Severability.  Any term or provision of this Agreement that is determined by a court of competent jurisdiction to be inoperative or unenforceable for any reason shall, as to that jurisdiction, be ineffective solely to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this 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 Agreement is determined by a court of competent jurisdiction to be so broad as to be unenforceable, that provision shall be interpreted to be only so broad as is enforceable.

Section 11.11.Treatment of Confidential Information.  The Ceding Company agrees to comply with Section 5.04 of the Master Transaction Agreement and all Privacy and Security Laws in connection with this Agreement.  Such requirement shall survive the termination of this Agreement.

Section 11.12.Assignment.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, permitted assigns and legal representatives.  Unless otherwise provided herein, neither this Agreement nor any right or obligation hereunder may be assigned by any Party (in whole or in part) by operation of law, including through a division statute, or otherwise, without the prior written consent of the other Party hereto.

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Section 11.13.Further Assurances.  Following the Closing Date, each of the Parties shall cooperate and consult with each other in order to accomplish the objectives of this Agreement and the other Transaction Agreements and to keep the other Party informed of material developments with respect to their respective long term care businesses.

Section 11.14.Rules of Construction.  Interpretation of this 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, Schedule and Exhibit are references to the Preamble, Recitals, Articles, Sections, paragraphs, Schedules and Exhibits to this 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 Agreement as a whole and not to any specific Section; (g) the headings are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (h) this Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted; (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 (A) the corresponding rules and regulations and (B) 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; and (l) references to any Person include such Person’s predecessors or successors, whether by merger, consolidation, amalgamation, reorganization or otherwise.

Section 11.15.Incontestability.  In consideration of the mutual covenants and agreements contained herein, each Party agrees that this Agreement, and each and every provision hereof, is and shall be enforceable by and between them according to its terms, and each Party does hereby agree that it shall not contest the validity or enforceability hereof.

Section 11.16.Negotiated Agreement.  This Agreement has been negotiated by the Parties and the fact that the initial and final draft will have been prepared by either Party or an intermediary will not give rise to any presumption for or against any Party to this Agreement or be used in any respect or forum in the construction or interpretation of this Agreement or any of its provisions.

Section 11.17.Dollar References.  All dollar references in this Agreement are to the currency of the United States.

[The rest of this page intentionally left blank.]

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed on the day and year first above written.
	
		
	BANKERS LIFE AND CASUALTY COMPANY

	 
	 

	By:
	/s/ Erik M. Helding

	Name:
	Erik M. Helding

	Title:
	Executive Vice President and Chief Financial Officer

	 
	 

	 
	 

	 
	 

	
		
	WILTON REASSURANCE COMPANY

	 
	 

	By:
	/s/ Michael Fleitz

	Name:
	Michael Fleitz

	Title:
	Chief Executive Officer

	 
	 

	 
	 

	 
	 

[Signature Page to Coinsurance Agreement]

SCHEDULE A
Investment Guidelines
	
				
	The Portfolios ......................................................... 
	These investment guidelines will apply to the Bankers Life and Casualty LTC Trust portfolio (the “Portfolio”).  100% of the assets in the Portfolio will be invested in eligible investments, as set forth below.  The limitations set forth below will be applied to the entire Portfolio and not to sub-portfolios.

	Asset Guidelines .................................................... 
	The Portfolio may be invested in the following eligible investments.  No security in an asset class may be purchased if such purchase would cause the percentage of assets invested in the applicable asset class at the time of purchase to exceed the following percentage of total assets or if at the time of purchase the percentage of assets invested in the applicable asset class already exceeds the following percentage of total assets. 

	 
	 
	(i) 
	U.S. Treasury and agency securities (100%); 

	 
	 
	(ii) 
	Agency and non-agency mortgage-backed securities (MBS) backed by loans secured by residential, multi-family and commercial properties including, but not limited to passthroughs, CMOs, REMICs, SMBS, project loans, and adjustable rate mortgages (50%), with no more than 20% invested in non-agency residential MBS; 

	 
	 
	(iii) 
	Obligations of domestic U.S. Corporate issuers (85%) and together with obligations of foreign corporations based on ultimate parent country of risk (90%);

	 
	 
	(iv)
	Taxable and tax exempt municipal securities (20%);

	 
	 
	(v) 
	Bank loans (10%);

	 
	 
	(vi) 
	Convertible preferred stocks and convertible bonds (5%);

	
				
	 
	 
	(vii) 
	Obligations of foreign corporations based on ultimate parent country of risk (20%), with no more than 10% invested in obligations of foreign corporations based in countries identified in the MSCI Emerging Markets Index and the MSCI Frontier Markets Index;

	 
	 
	(viii) 
	Asset-backed securities, including collateralized loan obligations (30%);

	 
	 
	(ix) 
	Securities senior to common equity as to which dividends may not be declared or coupon payments may be deferred without penalty (10%);

	 
	 
	(x) 
	Money market instruments (100%);

	 
	 
	(xi) 
	Obligations of foreign governments and supra-national organizations (8%);

	 
	 
	(xii)
	Exchange traded funds (5%);

	 
	 
	(xiii) 
	Equity participations in business entities (including limited partnership interests) (10%); and 

	 
	 
	(xiv) 
	Commercial mortgage loans (15%). 

	 
	The Portfolio may purchase private placements and Rule 144A securities in accordance with the above limitations.  Securities with a Delaware co-issuer will be considered to be domestic securities.
Investments not specifically permitted are prohibited.  Investments outside of the eligible investments above require approval from Bankers Life and Casualty Company or its designated representatives.  No investments shall be made in issuers who are, or whose country of domicile is, prohibited by the Office of Foreign Assets Control of the United States Department of Treasury.  Related party transactions (including cross trades) are prohibited, except to the extent utilized to remedy over funding or under funding of the Portfolio relative to the required trust balance. 

	
				
	Asset Allocation .................................................... 
	Except for Treasury securities, Agency debentures, Agency pass-throughs and Agency REMICS, no security may be purchased if such purchase would cause the securities of a single issuer to exceed the following percentages of assets at the time of purchase and no security may be purchased if the percentage of assets invested in the securities of such issuer at the time of purchase already exceeds the following percentages of total assets:   

	 
	Issuers rated Aa3/AA- and higher                                 2.0% 

	 
	Issuers rated A1/A+ to A3/A-                          1.5%  

	 
	Issuers rated Baa1/BBB+ to Baa3/BBB-           1.0%

	 
	Issuers rated Ba1/BB+ and lower                          0.5% 

	 
	The maximum amount invested in a single money market fund is limited to 10% of total assets per fund.

	Credit Criteria ..........................................................
	Each security in the Portfolio (other than those identified under (xiii) and (xiv) of the Asset Guidelines) must (i) have a credit rating from a nationally recognized statistical rating organization (“NRSRO”) included by the Securities Valuation Office (“SVO”) of the NAIC in the list of Credit Rating Providers whose ratings are accepted for the determination of equivalent NAIC SVO designations under the FE rule or (ii) be listed with the SVO of the NAIC.  The Portfolio will have a target minimum credit rating of Baa1/BBB+.  No security may be purchased if such purchase would cause more than 10% of the assets to be invested in securities that are rated below Baa3/BBB- and no security rated below Baa3/BBB- may be purchased if the percentage of assets invested in securities rated below Baa3/BBB- at the time of purchase already exceeds 10%. 

	 
	Money market instruments must be rated A-2 or P-2 or better at the time of purchase. 

	 
	Commercial mortgage loans must be rated CM-2 or better and have a maximum loan-to-value ratio of 80% at the time of purchase.

 
 

 

	
		
	Rating Methodology ................................................ 
	For purposes of these investment guidelines, ratings are as determined by NRSROs which have been included by the NAIC SVO in the list of Credit Rating Providers whose ratings are accepted for the determination of equivalent NAIC SVO designations under the FE rule.  Securities with two NRSRO ratings will be deemed to have the lower rating; securities with three NRSRO ratings will be deemed to have the middle rating.  Securities with more than three NRSRO ratings will be deemed to have the rating assigned by the lower of the highest two rank- ordered ratings.  Structured securities subject to the financial modeling methodology with NAIC designation assigned pursuant to SSAP 43R will be deemed to have a rating equivalent to the next to lowest NRSRO rating associated with such NAIC designation under the FE Rule. If a security (other than those identified under (xiii) and (xiv) of the Asset Guidelines) is not rated by an NRSRO on the list of Credit Rating Providers or listed with the NAIC SVO at the time of purchase, Wilton Reassurance Company or its designee will apply to have such security listed with the NAIC SVO prior to the end of the quarter in which such security is purchased.  Securities not rated by an NRSRO but filed and pending with the SVO will be assigned a rating equivalent to the next to lowest NRSRO rating associated with such NAIC designation under the FE Rule.

	Other Investment Practices ...................................... 
	Temporary Cash balances may be invested by the Investment Managers in a money market instrument (A2/P2 or better, less than 390 days), in a client and NAIC approved commingled 2A-7 Money Market Fund or in a commingled Stable Dollar NAV Fund.  

	  
	The Portfolio may purchase securities on a when-issued basis or for forward delivery. The Portfolio must take physical delivery of these securities. 

	   
	The Portfolio may enter into repurchase agreements collateralized 102% with securities identified under (i) of the Asset Guidelines. The maximum term of these agreements will be 90 days, and the collateral must be marked to market daily. 

	   
	 

	
		
	 
	The Portfolio may enter into securities lending and reverse repurchase agreements subject to the following conditions:  1) All transactions shall be evidenced by a written PSA Global Master Repurchase Agreement or Bond Market Association Master Repurchase Agreement, and a printed confirmation of each trade must be received from the counterparty to each trade.  2) Transactions must be collateralized by cash or eligible securities and the collateral must be marked to market each business day and adjusted as needed during the term of the loan to maintain collateralization. Transactions are required to maintain minimum collateralization levels of no less than 95%  3) Any transaction entered into pursuant to this section may be terminated at a specified time or upon the earlier demand of Wilton Reassurance Company.  4) Any cash received by the Portfolio in a transaction may be invested in any eligible investment and in a manner that recognizes the liquidity needs of the transaction or used by the Portfolio for its general corporate purposes.  5) Securities lending and reverse repurchase agreements are limited to a maximum exposure of 25% of market value. 

	 
	Counterparty exposure to repurchase agreements, securities lending or reverse repurchase agreements may not be increased if, when aggregated with all other investment exposures to the same counterparty, such exposure exceeds the following percentages:
Issuers rated Aa3/AA- and higher                                  3.0%   
Issuers rated A1/A+ to A3/A-                                         2.5% 
Issuers rated Baa1/BBB+ to Baa3/BBB-                        2.0%
Issuers rated Ba1/BB+ and lower                                   1.0% 

	
		
	   
	Specific authority is required for use of any derivatives other than those used solely for credit hedging or duration management purposes.  The term “derivatives” for this purpose will include any item appropriately reported in schedule DB, derivative instruments, or schedule DC, insurance futures and insurance futures options, of an insurer's statutory financial statement, or successor schedules, as provided under applicable annual statement instructions or statutory accounting guidelines.  Derivative instruments include, among other things, options, warrants used in hedging transactions and not attached to another financial instrument, caps, floors, collars, swaps, swaptions, forwards, futures and any other agreements (in the nature of bilateral contracts, options, or otherwise) or substantially similar instruments, or any series or combination thereof, and any agreements (in the nature of bilateral contracts, options, or otherwise). 

	Custodian ............................................................ 
	As selected by the Wilton Reassurance Company.  Custodian shall have and maintain reasonable and customary standards of business practice including but not limited to: controls, reconciliations of daily activity and cash, valuation and automation. 

	Statutory Guidelines ............................................................ 
	Only investments permitted by the applicable insurance regulations (in effect at the time of measurement) of the statutory domicile of the ceding company shall be permitted.  If there is a discrepancy between the above referenced guidelines and such regulations, the more restrictive limits will apply.  

	Reporting Guidelines    ................................................
 
	Wilton Reassurance Company or its designated representatives will provide Bankers Life and Casualty Company or its designated representatives with reports and analyses by the 15th of each month demonstrating that the Portfolio complies with these guidelines as of the end of the prior month.  Such reports should include current balances and detailed asset listings, including fair market value and credit rating.  Compliance with these guidelines will be determined by statutory book value.

	
		
	Changes to Guidelines ............................................................
	Wilton Reassurance Company shall have the right to revise these guidelines with the prior written consent of Bankers Life and Casualty Company.

SCHEDULE B
Terminal Settlement
(Omitted)

SCHEDULE C

Specified Actions
(Omitted)

SCHEDULE D
Expected Morbidity
(Omitted)

SCHEDULE E
Form of Certificate
(Omitted)

SCHEDULE F
Experience Refund
(Omitted)

SCHEDULE G
Specified Litigation
(Omitted)

SCHEDULE H
Policy Form Numbers
(Omitted)

SCHEDULE I
Designated Administrative Account
(Omitted)

SCHEDULE J
Fair Market Value Methodologies
Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.
Wilton Re will value any asset in Wilton Re’s portfolio supporting the CNO LTC in force block (the “Portfolio”) using the then-current pricing methodology utilized by Wilton Re’s investment accounting provider or by an appointed asset manager for the Portfolio.  The current methodologies applied to Wilton Re’s U.S. domiciled life insurance company investment portfolios are set forth below and shall apply to the Portfolio. Wilton Re may revise such methodologies from time to time (i) if consistent with revisions made with respect to Wilton Re’s U.S. domiciled life insurance companies’ investment portfolios and (ii) with CNO’s consent, not to be unreasonably withheld, conditioned or delayed for any changes that are broadly industry accepted or industry best practices.
Valuation methodology for securities not listed on an exchange, in an over-the-counter market or considered cash or cash equivalents: 
Other than private placements which are addressed separately below, any asset is valued according to the following waterfall of closing market pricing sources as of the relevant valuation date (“Valuation Methodology”):
		
	1)
	Interactive Data Corporation pricing if applicable; 

		
	2)
	If (1) is not applicable, then Securities Evaluations pricing if applicable; 

		
	3)
	If (1) and (2) are not applicable, then Thomson Reuters Pricing Service prices if applicable; 

		
	4)
	If (1) through (3) are not applicable, then market maker/broker pricing if applicable;

		
	5)
	If (1) through (4) are not applicable or if the price received from such pricing source does not reflect the best estimation of the accurate value of that security at the valuation date, then Fair Value Pricing will be applied (as defined below). 

Fair Value Pricing will be defined as the best estimate of an exit level price for an asset at the valuation date. Depending on the asset type this fair value price derivation could include but is not limited to discounted cash flow models, option adjusted spread prices, recent trade prices, and comparable credit spreads.  Except for (i) commercial mortgage loans and (ii) private placements (including bank loans) with a credit rating recognized by the SVO, no more than 15% of the Portfolio, based on statutory book value, may be valued using Fair Value Pricing. 
Private Placements: 
The fair value for private fixed income securities is primarily determined using a matrix pricing model (the “Private Debt Pricing Matrix Model”).  The Private Debt Pricing Matrix Model’s inputs are derived from a public bond spread matrix using ratings and average life parameters.  An additional spread premium is then added to the public matrix spread to adjust for illiquidity and other features of private debt investments, such as structure, covenants and collateral, as appropriate.  An internal rating of each security and its average life are used to determine the respective public and illiquidity spreads that will be used in the valuation.

As Wilton Re is responsible for the determination of fair value, CNO will have the right, not to be unreasonably exercised, to periodically review Wilton Re’s control processes designed to ensure that the fair values are reasonable, that the valuation techniques and assumptions appear reasonable and consistent with prevailing market conditions, and that, to the extent inputs are provided by third party pricing sources, Wilton Re has sufficient controls in place to review those inputs for reasonableness.

SCHEDULE K
Permitted Practices
(Omitted)

Exhibit A
FORM OF NOTICE OF FAILURE TO PAY UNDISPUTED AMOUNT

(Omitted)

Exhibit B
[FORM OF SECOND NOTICE OF FAILURE TO PAY UNDISPUTED AMOUNT] [FORM OF FAILURE TO MAKE UNDISPUTED ADDITIONAL DEPOSIT TO THE TRUST ACCOUNT]
(Omitted)Exhibit

Exhibit 10.2

Execution Version

TRUST AGREEMENT

BY AND AMONG

WILTON REASSURANCE COMPANY,

BANKERS LIFE AND CASUALTY COMPANY

AND

CITIBANK, N.A.

Dated as of:  September 27, 2018

TABLE OF CONTENTS	
			
	 
	 
	Page

	

	 
	 

	Section 1.
	Establishment of Trust Account; Initial Deposit
	2

	Section 2.
	Withdrawal of Trust Assets
	8

	Section 3.
	Redemption, Investment and Substitution of Trust Assets
	14

	Section 4.
	The Income Account
	19

	Section 5.
	Taxes; Right to Vote Trust Assets
	19

	Section 6.
	Additional Rights and Duties of the Trustee
	20

	Section 7.
	The Trustee’s Compensation, Expenses and Indemnification
	24

	Section 8.
	Resignation of the Trustee
	25

	Section 9.
	FMV Triggering Event and Reserve Credit Event
	25

	Section 10.
	Termination of the Trust Account
	28

	Section 11.
	Definitions
	29

	Section 12.
	Governing Law
	35

	Section 13.
	Jury Waiver
	35

	Section 14.
	Notices
	36

	Section 15.
	Successors and Assigns; No Third-Party Beneficiaries
	37

	Section 16.
	Entire Agreement
	38

	Section 17.
	Interpretation
	38

	Section 18.
	Waivers and Amendments
	38

	Section 19.
	Severability
	39

	Section 20.
	Execution in Counterparts
	39

	 
	 
	 

	 
	 
	 

	 
	EXHIBITS
	 

	 
	 
	 

	Exhibit A-1
	Initial Transferred Assets
	 

	Exhibit A-2
	Loan Assignment Documents
	 

	Exhibit B
	Designated Administrative Account
	 

	Exhibit C-1
	Form of Beneficiary Withdrawal Notice
	 

	Exhibit C-2
	Form of Grantor Withdrawal Notice
	 

	Exhibit C-3
	Form of Document Release Letter
	 

	Exhibit C-4
	Form of FMV Grantor Withdrawal Notice
	 

	Exhibit D-1
	Form of FMV Triggering Event Certification
	 

	Exhibit D-2
	Form of Notice of Cure of FMV Triggering Event
	 

	Exhibit D-3
	Form of Reserve Credit Event Certification
	 

	Exhibit D-4
	Form of Notice of Cure of Reserve Credit Event
	 

	Exhibit E-1
	Form of Designated Administrative Account Transfer Notice
	 

	Exhibit E-2
	Form of RCE Designated Administrative Account Transfer Notice
	 

	Exhibit E-3
	Form of Grantor Servicing Notice
	 

	Exhibit F
	Investment Guidelines
	 

	Exhibit G-1
	Eligible Derivative Checklist
	 

	Exhibit G-2
	Equity Investment Checklist
	 

	Exhibit G-3
	Mortgage Loan Checklist
	 

	Exhibit G-4
	Private Placement Checklist
	 

1

TRUST AGREEMENT
THIS TRUST AGREEMENT, dated as of September 27, 2018 (this “Agreement”), is by and among Wilton Reassurance Company, an insurance company domiciled in the State of Minnesota (the “Grantor”), Bankers Life and Casualty Company, an insurance company domiciled in the State of Illinois (the “Beneficiary”), and Citibank, N.A., as trustee (such bank, in its capacity as trustee, being referred to as the “Trustee”).  The Grantor, the Beneficiary and the Trustee shall each be deemed a “Party”.
RECITALS
WHEREAS, pursuant to a Coinsurance Agreement by and between the Beneficiary and the Grantor dated as of the date hereof, (the “Coinsurance Agreement”), the Beneficiary is ceding to the Grantor, and the Grantor is reinsuring, the Reinsured Risks (as defined in the Coinsurance Agreement) pursuant to the terms and conditions of the Coinsurance Agreement;
WHEREAS, pursuant to the Coinsurance Agreement, the Grantor desires to establish with the Trustee a trust account, in the name of the Grantor (the “Trust Account”);
WHEREAS, pursuant to the Coinsurance Agreement, on the date hereof the Grantor or the Beneficiary on behalf of the Grantor shall transfer, or cause to be transferred, to the Trustee, for deposit in the Trust Account, Trust Assets (as hereinafter defined) to be made subject to this Agreement in order to secure payment of amounts at any time and from time to time owing by the Grantor to the Beneficiary under the Coinsurance Agreement;
WHEREAS, pursuant to the Coinsurance Agreement, from time to time the Grantor shall transfer, or cause to be transferred, to the Trustee, for deposit in the Trust Account, Trust Assets to be made subject to this Agreement in order to secure payments of amounts at any time and from time to time owing by the Grantor to the Beneficiary under the Coinsurance Agreement;
WHEREAS, the Trustee has agreed to act as Trustee hereunder and, in accordance with the terms hereof, to hold Trust Assets in trust in the Trust Account on the terms herein set forth; and 
WHEREAS, this Agreement is made for the benefit of the Beneficiary and for the purpose of setting forth the duties and powers of the Trustee with respect to the Trust Account;
NOW, THEREFORE, for and in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties hereby agree as follows:

1

		
	Section 1.
	Establishment of Trust Account; Initial Deposit.

(a)Concurrently with the execution and delivery of this Agreement, the Trustee shall establish a Trust Account in the Grantor’s name, and shall administer the Trust Account as Trustee for the sole benefit, security and protection of the Beneficiary in accordance with the terms of this Agreement.  Trust Assets credited to the Trust Account shall be subject to withdrawal by the Beneficiary and the Grantor as set forth herein.  The Trustee and its lawfully appointed successors are authorized and shall have power to receive Eligible Assets (as hereinafter defined) as the Grantor (or the Beneficiary on behalf of the Grantor) transfers to or vests in the Trustee or places under the Trustee’s possession and control, and to hold, invest, reinvest, manage and dispose of the same for the uses and purposes and in the manner and according to the provisions hereinafter set forth.  All such Eligible Assets at all times shall be maintained in the Trust Account, separate and distinct from all other assets of the Trustee, and shall be continuously maintained by the Trustee.

(b)On the date hereof, the Grantor (or the Beneficiary on behalf of the Grantor) is transferring (or causing to be transferred) to the Trustee, for deposit to the Trust Account, the Eligible Assets listed on Exhibit A-1 hereto, and, after the date hereof, the Grantor may transfer to the Trustee, for deposit to the Trust Account, additional Eligible Assets as it may from time to time be required to deposit by this Agreement or the Coinsurance Agreement (all such Eligible Assets in the Trust Account and proceeds thereof are collectively “Trust Assets”).  The Grantor, prior to depositing Eligible Assets (other than Equity Investments or Eligible Derivatives) with the Trustee, shall execute or cause to be executed assignments, endorsements in blank or other documents necessary to transfer legal title to the Trustee of all shares, obligations or any other assets requiring assignment, in order that the Beneficiary or the Trustee, upon the direction of the Beneficiary, may whenever necessary negotiate any such Eligible Assets without the consent or signature from the Grantor or any other Person.  

(c)The Grantor, prior to depositing Equity Investments with the Trustee, shall execute or cause to be executed assignments, endorsements in blank, or other documents necessary to transfer legal title to the Trustee (or, in the event that the issuer of such Equity Investment, the Trustee or a Governmental Authority having jurisdiction over the Grantor objects to having such Equity Investment registered in the name of the Trustee or its nominee following commercially reasonable efforts by the Grantor to arrange for such registration, to the Beneficiary upon any withdrawal of such Equity Investment by the Beneficiary from the Trust Account) of all certificates, shares, obligations or any other assets requiring assignment (it being understood that the Grantor shall not be responsible for such documentation (or any information in such documentation) required to be provided by the Beneficiary, and the Grantor shall be excused herein to the limited extent any such information or documentation is not timely provided by the Beneficiary) in order that the Trustee, upon the direction of the Beneficiary, may whenever necessary transfer and assign to the Beneficiary any such Equity Investment without the consent or signature from the Grantor or any other Person.  In the event that any Equity Investment is not at the time of deposit with the Trustee a certificated security under Article 8 of the Uniform Commercial Code of the State of New York (“UCC”) or any other State (as defined in the UCC) and later becomes certificated, the Grantor shall promptly deposit with the Trustee all certificates issued by the issuer of the Equity Investments that represent such Equity Investments.

2

(d)The Grantor, prior to depositing with the Trustee (i) any Equity Investment that is not to be registered in the name of the Trustee or its nominee or (ii) any Eligible Derivative, shall enter into, and provide to the Trustee, an assignment agreement with the issuer of such Equity Investment or counterparty of such Eligible Derivative directing such issuer or counterparty to transfer to the Trust Account any and all amounts otherwise payable to the Grantor under, and subject to all terms and conditions of, such Equity Investment or Eligible Derivative and evidencing the acknowledgement and consent of such issuer or counterparty to such direction.  Neither (i) the Trustee nor (ii), other than as arising upon and following any withdrawal of such Equity Investment or Eligible Derivative by the Beneficiary from the Trust Account, the Beneficiary, shall assume any obligations or liability under any Equity Investments or Eligible Derivative.  The form of such assignment agreement shall be subject to the prior written consent of the Beneficiary, such consent not to be unreasonably withheld, conditioned or delayed.

(e)The Grantor hereby represents, warrants and covenants (i) that any assets (other than Equity Investments or Eligible Derivatives) transferred by the Grantor to the Trustee for deposit to the Trust Account will be in such form that the Beneficiary whenever necessary may, and the Trustee upon direction by the Beneficiary may, negotiate any such assets without consent or signature from the Grantor or any Person in accordance with the terms of this Agreement; (ii) that any Equity Investments or Eligible Derivatives transferred by the Grantor to the Trustee for deposit to the Trust Account will be in such form (it being understood that the Grantor shall not be responsible for such documentation (or any information in such documentation) required to be provided by the Beneficiary, and the Grantor shall be excused herein to the limited extent any such information or documentation is not timely provided by the Beneficiary) that the Trustee, upon direction by the Beneficiary, may transfer and assign to the Beneficiary any such assets without consent or signature from the Grantor or any Person in accordance with the terms of this Agreement; and (iii) that all assets transferred by the Grantor to the Trustee for deposit to the Trust Account will consist only of Eligible Assets at the time of such transfer.  The Trustee shall have no responsibility whatsoever to determine at any time whether any Trust Assets are or continue to be Eligible Assets.  

(f)The Grantor does hereby pledge, assign, convey and transfer to the Beneficiary and does hereby grant to the Beneficiary a first priority continuing security interest in, lien on and right of set-off against, all of the Grantor’s right, title and interest (legal, equitable or otherwise) in and to and power to transfer, all Equity Investments that are deposited with the Trustee but not registered in the name of the Trustee or its nominee, including all investment property, general intangibles, accounts and certificates, constituting, relating to or arising from the Equity Investments, whether derived from the applicable certificate of formation (or similar document), operating agreement (or similar document), statute or otherwise, including all economic rights, membership status, management rights constituting, relating to or arising therefrom, and all proceeds of the foregoing (the “Collateral”), in each case, wherever located, whether now owned or hereafter acquired or arising and whether governed by Article 9 of the UCC or other law, to secure the Grantor’s obligations to the Beneficiary under the Coinsurance Agreement.  The Grantor will reimburse the Beneficiary for the amount of reasonable third party costs and expenses incurred thereby in connection with the filing or maintenance of required financing statements and similar actions as may be necessary or appropriate to establish or maintain the subject perfected security interests.  It is hereby agreed that all such Collateral shall 

3

be deemed to be held by the Trustee for the Beneficiary’s benefit in accordance with the terms of this Agreement.

(g)The Grantor shall execute and deliver and the Beneficiary is authorized to execute and deliver any and all financing statements reasonably requested by the Beneficiary to the extent that it may appear appropriate to the Beneficiary to file such financing statements in order to perfect the Beneficiary’s title and security interest under Article 9 of the Uniform Commercial Code in all applicable states to any and all Collateral, and the Grantor shall do such further acts and things as the Beneficiary may reasonably request in order that the security interest granted hereunder may be maintained as a first priority continuing perfected security interest.

(h)The Trustee hereby confirms and agrees that:

(i)the Trustee shall not change the name or account number of the Trust Account without the prior written consent of the Grantor and the Beneficiary; and

(ii)all securities or other property that take the form of an instrument or certificated security underlying any Trust Assets credited to the Trust Account shall be registered in the name of the Trustee or its nominee, endorsed to the Trustee or in blank (either on the related instrument, on the certificated security or on a stock power), with any powers and resolutions to the Trustee as necessary for the Trustee to freely negotiate such securities.  

(i)The Grantor hereby represents, warrants and covenants to the Beneficiary

(i)    that the Grantor will own its interest in the assets deposited by it into the Trust Account (other than any assets deposited by the Beneficiary on behalf of the Grantor, as to which the Grantor makes no representations or warranties) free and clear of any security interest in, or lien or adverse claim on, such assets, other than the beneficial interests in favor of the Beneficiary created hereunder.
(ii)    As regards each Equity Investments deposited with the Trustee:
(A)    At the time of deposit there shall be no outstanding capital calls or other payment obligations then due and owing of the Grantor under or with respect to such Equity Investment; and 
(B)    The Grantor shall timely satisfy, at no cost to the Trustee or the Beneficiary, all capital calls or other obligations of the Grantor or of the Trustee arising under or with respect to such Equity Investment during the time that such Equity Investment is held in or allocated to the Trust Account.
(j)

(i)The Grantor may retain a professional servicer to service the Mortgage Loans and Participation Assets (each as hereinafter defined) on its 

4

behalf, in furtherance of the Grantor’s exclusive right, power and authority to service, manage and administer the Mortgage Loans and Participation Assets in the Trust Account, upon reasonable advance written notice to, but without the approval or consent of, the Trustee or Beneficiary, provided that the retention of such servicer shall not relieve the Grantor from any of its obligations or liabilities hereunder, and the Grantor shall remain responsible for all obligations or liabilities of such servicer with respect to the provision of such service or services as if provided by the Grantor. The Grantor may remove any servicer under any Servicing Agreement (as hereinafter defined) and appoint a successor servicer pursuant to the terms of the applicable Servicing Agreement or such other servicing agreements, without the consent or approval of, but only upon written notice of such removal and appointment to the Trustee and to the Beneficiary.

(ii)Upon any withdrawal by the Beneficiary of a Mortgage Loan from the Trust Account in accordance with the provisions of Section 2, if so directed by the Beneficiary and to the extent Grantor has such rights under the applicable Servicing Agreement with respect to such Mortgage Loan, Grantor shall exercise its termination rights under such Servicing Agreement with respect to such Mortgage Loan as promptly as possible in accordance with the terms of such Servicing Agreement, at the sole expense of the Grantor, and without the need for any further action by the Trustee, and upon such termination, the Beneficiary shall have the right to appoint a successor servicer without the consent or approval of the Trustee or the Grantor.  Upon a termination of the applicable Servicing Agreement with respect to a Mortgage Loan as contemplated above, the Grantor agrees to, and shall use commercially reasonable efforts to cause the servicer to, reasonably cooperate with the Beneficiary to assist with the transfer of servicing responsibilities to the successor servicer appointed by the Beneficiary and to cause any such servicer to transfer to the Beneficiary or its servicer all funds held by the servicer with respect to such Mortgage Loan, including without limitation all collections, reserves and escrows relating to such Mortgage Loan.  In connection with any such withdrawal by the Beneficiary, the Grantor shall transfer to the Beneficiary all funds held by the Grantor with respect to such Mortgage Loan, including without limitation all collections, reserves and escrows relating to such Mortgage Loan.
  
(k)In addition to the provisions of Section 1(b), with respect to Mortgage Loans and Participation Assets:  
(i)prior to the deposit by the Grantor of any Mortgage Loan or Participation Asset into the Trust Account, the Grantor shall deliver to the Trustee a complete and accurate set of Loan Assignment Documents; provided, that, as to Mortgage Loans, (x) Grantor shall submit any Recordable Loan Assignment Documents to the appropriate office for recordation or filing, as applicable, and (y) for the initial deposit of a Mortgage Loan in the Trust Account, Grantor shall only be required to provide copies of the Recordable Loan Assignment Documents that have been sent for recordation or filing.  The Grantor covenants that, upon its receipt of a Trailing Document (as hereinafter defined), it shall 

5

promptly provide such Trailing Document to the Trustee.  In the event that the Trailing Documents with respect to any Mortgage Loan are not so provided within sixty (60) days following such initial deposit, such Mortgage Loan shall cease to be a “Trust Asset” in the Trust Account for the purposes of determining the balance of the Trust Account, in each case until all Trailing Documents are delivered to the Trustee.

(ii)Upon Trustee’s receipt of Loan Assignment Documents with respect to any Mortgage Loan or Participation Asset, the Trustee shall verify that it has received fully executed (and with respect to the Recordable Loan Assignment Documents, copies indicating they have been recorded) versions of each of the Loan Assignment Documents set forth on the Mortgage Loan Checklist or Participation Asset Checklist, as applicable, and shall send a completed copy of the Mortgage Loan Checklist or Participation Asset Checklist, as applicable, to Grantor and Beneficiary within one (1) Business Day following Trustee’s receipt of the Loan Assignment Documents.  The Grantor shall be solely responsible for delivering to the Trustee in a timely manner each and every Loan Assignment Document required for each Mortgage Loan and Participation Asset deposited into the Trust Account, and for completing or correcting any missing, incomplete or inconsistent documents.  Upon Trustee’s receipt of additional Loan Assignment Documents or Trailing Documents, the Trustee shall update the applicable Mortgage Loan Checklist or Participation Asset Checklist and shall send such updated Mortgage Loan Checklist or Participation Asset Checklist within one (1) Business Day following Trustee’s receipt of the additional Loan Assignment Documents or Trailing Documents, as applicable.  Except as otherwise specified in paragraph (i) above, a Mortgage Loan or Participation Asset shall be deemed a Trust Asset in the Trust Account only after all Loan Assignment Documents have been received by the Trustee and the Trustee has delivered a Mortgage Loan Checklist or Participation Asset Checklist, as applicable, to Beneficiary confirming the same. 
 
(iii)The Grantor shall take such actions as shall become necessary or appropriate to maintain the assignability of Mortgage Loans and Participation Assets held in the Trust Account during the term of this Agreement, including, but not limited to, obtaining any consents necessary to transfer any Mortgage Loans and Participation Assets.  The Grantor hereby represents, warrants and covenants with the Beneficiary and the Trustee that any consents required to effect any sale, transfer or assignment with respect to any Mortgage Loan or Participation Asset have been or will have been obtained prior to the deposit of such Mortgage Loan into the Trust Account.  The Beneficiary and the Trustee acknowledge and agree that the right to sell, transfer or assign a Participation Asset may be qualified under any applicable Participation Agreement by requirement to sell to certain qualified purchasers or subject to a right of first refusal or other similar restrictions.

(l)In addition to the provisions of Section 1(b) with respect to Equity Investments, Eligible Derivatives and Private Placements: 

6

(i)prior to the deposit by the Grantor of any Equity Investment Eligible Derivative or Private Placement into the Trust Account, the Grantor shall deliver to the Trustee a complete and accurate set of Other Assignment Documents.

(ii)Upon Trustee’s receipt of Other Assignment Documents with respect to any Equity Investment, Eligible Derivative or Private Placement, the Trustee shall verify that it has received fully executed versions of each of the Other Assignment Documents set forth on the Equity Investment Checklist, Eligible Derivative Checklist or Private Placement Checklist, as applicable, and shall send a completed copy of the Equity Investment Checklist, Eligible Derivative Checklist, or Private Placement Checklist as applicable, to Grantor and Beneficiary within one (1) Business Day following Trustee’s receipt of the Other Assignment Documents.  The Grantor shall be solely responsible for delivering to the Trustee in a timely manner each and every Other Assignment Documents required for each Equity Investment, Eligible Derivative or Private Placement deposited into the Trust Account by the Grantor, and for completing or correcting any missing, incomplete or inconsistent documents.  Upon Trustee’s receipt of additional Other Assignment Documents, the Trustee shall update the applicable Equity Investment Checklist, Eligible Derivative Checklist or Private Placement Checklist, and shall send such updated Equity Investment Checklist, Eligible Derivative Checklist or Private Placement Checklist within one (1) Business Day following Trustee’s receipt of the additional Other Assignment Documents.  An Equity Investment, Eligible Derivative or Private Placement shall be deemed a Trust Asset in the Trust Account only after all Other Assignment Documents have been received by the Trustee and the Trustee has delivered an Equity Investment Checklist, Eligible Derivative Checklist or Private Placement Checklist as applicable, to Beneficiary confirming the same; provided that any Equity Investment, Eligible Derivative or Private Placement deposited by the Beneficiary shall be deemed a Trust Asset in the Trust Account upon deposit.

(iii)The Grantor shall be solely responsible for delivering to the Trustee in a timely manner each and every Other Assignment Document required for each Equity Investment, Eligible Derivative or Private Placement deposited into the Trust Account, and for completing or correcting any missing, incomplete or inconsistent documents. 

(iv)Subject to the terms and conditions of the agreement evidencing or affecting the Equity Investments, Eligible Derivatives or Private Placements, as applicable, the Grantor shall take such actions as shall become necessary or appropriate to maintain the assignability to the Beneficiary of Equity Investments, Eligible Derivatives and Private Placements held in the Trust Account during the term of this Agreement.  The Grantor hereby represents, warrants and covenants with the Beneficiary and the Trustee that any consents required to effect any sale, transfer or assignment to the Beneficiary with respect to any Equity Investment, Eligible Derivative or Private Placement have been or will have been obtained prior to the deposit of such Equity Investment, Eligible Derivative or Private 

7

Placement into the Trust Account.  The Beneficiary and the Trustee acknowledge and agree that the right to sell, transfer or assign an Equity Investment, Eligible Derivative or Private Placement may be qualified under the agreement evidencing or affecting the Equity Investment, Eligible Derivative or Private Placement such as requiring the consent of the General Partner or derivative counterparty, as applicable.

Section 2.    Withdrawal of Trust Assets.

(a)Beneficiary Withdrawal.  

(i)Notwithstanding any other provision of this Agreement, the Beneficiary shall have the unconditional right to withdraw Trust Assets valued at Fair Market Value from the Trust Account at any time and from time to time, upon the delivery of (x) a written notice from the Beneficiary Authorized Officers to the Trustee (with respect to a withdrawal pursuant to Section 4.7(a) of the Coinsurance Agreement, with a simultaneous copy to the Grantor), substantially in the form attached hereto as Exhibit C-1 (a “Beneficiary Withdrawal Notice”) specifying the Trust Assets to be withdrawn, and (y) all applicable Loan Assignment Documents or Other Assignment Documents, in each case, for any of the purposes set forth in Section 4.7(a) or Section 4.7(b) of the Coinsurance Agreement (as applicable), and assets withdrawn from the Trust Account may be utilized and applied by the Beneficiary (or any successor by operation of law of the Beneficiary, including any liquidator, rehabilitator, receiver or conservator of the Company), without diminution because of insolvency on the part of the Beneficiary or Grantor.  Each withdrawal from the Trust Account by the Beneficiary shall constitute a representation and certification of the Beneficiary to the Grantor that such withdrawal is being made in accordance with the terms of the Coinsurance Agreement and this Agreement.  The Beneficiary shall not deliver a Beneficiary Withdrawal Notice except as expressly permitted by this Section 2(a).

(ii)Other than a Beneficiary Withdrawal Notice and the applicable Loan Assignment Documents or Other Assignment Documents, no other statement or document need be presented by the Beneficiary in order to withdraw Trust Assets.  Upon receipt of a Beneficiary Withdrawal Notice, the Trustee shall immediately take any and all steps necessary to transfer absolutely and unequivocally all right, title and interest in the Trust Assets being withdrawn to or for the account of Beneficiary or its designee as set forth in the Beneficiary Withdrawal Notice, including executing the applicable Loan Assignment Documents or Other Assignment Documents provided by Beneficiary.  The Trustee shall be protected and indemnified for any loss, liability or damage incurred by it in relying upon and following any Beneficiary Withdrawal Notice for such withdrawal that on its face conforms to the requirements of this Agreement.

8

(iii)The Grantor hereby authorizes the Trustee and Beneficiary to (i) prepare and file, on behalf of itself or either of them, any UCC-3 assignment, and (ii) record any assignments delivered as a Loan Assignment Document in the related real property records, in each case in connection with the withdrawal of any Mortgage Loan pursuant to a Beneficiary Withdrawal Notice or in connection with the sale, assignment or transfer of any Mortgage Loan. Such filings and recordings shall be the responsibility of Beneficiary acting directly or through one or more designated agents.

(iv)In connection with the withdrawal of any Mortgage Loan or Participation Asset by the Beneficiary, the Beneficiary may direct the Trustee in writing to, and the Trustee shall, in its capacity as Trustee and not in its individual capacity, transfer the applicable Loan Assignment Documents and any other transfer documents provided to the Trustee for execution in appropriate form, necessary to endorse and transfer the Mortgage Loan or Participation Asset to the Beneficiary, and the Trustee shall reasonably cooperate with Beneficiary in providing any information or documentation necessary to effect such assignment (to the extent such information or documentation exists and is in the possession or control of the Trustee). The Grantor hereby grants the Beneficiary a limited power of attorney to act on behalf of the Grantor to the extent necessary to obtain the consents or approvals required to effect the transfer of any Mortgage Loan or Participation Asset in connection with any withdrawal by the Beneficiary permitted hereunder, and the Grantor shall reasonably cooperate with the Beneficiary in providing any information or documentation necessary to effect such sale, transfer or assignment.  In the event that the Beneficiary withdraws a Mortgage Loan or Participation Asset from the Trust Account pursuant to this Agreement, then, unless otherwise agreed by the Grantor and the Beneficiary in writing with notice to the Trustee, only the entire Mortgage Loan or Participation Asset (and not a portion thereof) then in the Trust Account may be assigned or transferred to the Beneficiary.  The Grantor acknowledges and agrees that, promptly following its receipt of notice of the withdrawal of a Mortgage Loan from the Trust Account, the Grantor will provide written notice to the applicable servicer of such withdrawal. 

(v)In connection with the withdrawal of any Equity Investment, Eligible Derivative or Private Placement by the Beneficiary, the Trustees shall deliver the applicable Other Assignment Documents to the Beneficiary, duly endorsed as necessary to transfer and assign such asset to the Beneficiary. 

(vi)During the continuation of a FMV Triggering Event the provisions set forth in this Section 2(a) shall be modified as set forth in Section 9.

(b)Grantor Withdrawal.  

(i)If the aggregate Statutory Book Value of the Eligible Assets held in the Trust Account at the end of any Accounting Period exceeds the Required Balance at the end of such Accounting Period, the Grantor shall have the right to 

9

withdraw Trust Assets from the Trust Account in accordance with the provisions of this Section 2(b) in an amount not to exceed such excess; provided that the ratio of the aggregate Statutory Book Value of the Eligible Assets held in the Trust Account to the Fair Market Value of such Eligible Assets will not increase as a result of such withdrawal other than de minimis increases associated with the removal of cash or cash equivalents.  The Grantor shall have a right to withdraw Trust Assets from the Trust Account pursuant to the preceding sentence by delivering (x) a written notice from the Grantor Authorized Officers, substantially in the form attached hereto as Exhibit C-2 (a “Grantor Withdrawal Notice”), and (y) all applicable Loan Assignment Documents or Other Assignment Documents, in each case, to the Trustee with a copy to the Beneficiary.  The Grantor Withdrawal Notice shall specify the invested Trust Assets or cash amount to be withdrawn.  Each withdrawal from the Trust Account by the Grantor shall constitute a representation and certification of the Grantor to the Beneficiary that such withdrawal is being made in accordance with the terms of the Coinsurance Agreement and this Agreement.  The Grantor shall not deliver a Grantor Withdrawal Notice except as expressly permitted by this Section 2(b).

(ii)The Trustee shall, within two (2) Business Days following receipt of a Grantor Withdrawal Notice, send to the Beneficiary a copy of such Grantor Withdrawal Notice in the manner specified in Section 14.  The occurrence of any one of the following four (4) events subsequent to the Grantor giving a Grantor Withdrawal Notice to the Trustee and the Beneficiary under Section 2(b)(i) shall be a condition precedent to the withdrawal of Trust Assets by the Grantor in accordance with such Grantor Withdrawal Notice:

		
	(1)
	Fifteen (15) days shall have elapsed from and including the date on which the Trustee and the Beneficiary shall both have received a copy of the applicable Grantor Withdrawal Notice, and the Trustee shall not have received any notice, given as provided in Section 14, from the Beneficiary disputing the amount of Trust Assets requested for withdrawal by the Grantor in such Grantor Withdrawal Notice; 

		
	(2)
	The Trustee shall have received a certificate signed by the Beneficiary and the Grantor fixing and determining the amount of Trust Assets, if any, the Grantor may withdraw from the Trust Account; 

		
	(3)
	The Trustee shall have received a certificate from the Grantor certifying that a non-appealable award from an arbitration panel or judgment from a court of competent jurisdiction has been entered specifying the amount of Trust Assets which the Grantor may withdraw from the Trust Account, with a copy of such arbitration award or judgment attached; or

		
	(4)
	The Trustee shall have received, in the manner provided in Section 

10

14, written confirmation from the Beneficiary consenting to the withdrawal requested in the Grantor Withdrawal Notice.
The satisfaction of such condition precedent shall be the sole condition to the withdrawal of such Trust Assets by Grantor.
(iii)In the event that the Grantor makes a demand to the Trustee to withdraw a Mortgage Loan or Participation Asset held in the Trust Account pursuant to Section 2(b)(i) above, then only the entire Mortgage Loan or Participation Asset (and not a portion thereof) may be withdrawn by the Grantor; provided, further, that in connection with any withdrawal of any Mortgage Loan or Participation Asset under this Section 2(b)(iii), the Grantor or the applicable Investment Manager (as hereinafter defined) shall obtain any consents required to effect such sale, transfer or assignment, and the Trustee shall reasonably cooperate with the Grantor in providing any information or documentation necessary to effect such withdrawal (to the extent such information or documentation exists and is in the possession or control of the Trustee).

(iv)In the event that the Grantor makes a demand to the Trustee to withdraw an Equity Investment, Eligible Derivative or Private Placement held in the Trust Account pursuant to Section 2(b)(i) above, then the Grantor or the applicable Investment Manager (as hereinafter defined) shall obtain any consents required to effect such sale, transfer or assignment, and the Trustee shall reasonably cooperate with the Grantor in providing any information or documentation necessary to effect such withdrawal (to the extent such information or documentation exists and is in the possession or control of the Trustee).

(v)Upon receipt of a Grantor Withdrawal Notice and the satisfaction of any of the conditions precedent set forth in Section 2(b)(ii), the Trustee shall immediately take any and all necessary steps to transfer the Trust Assets being withdrawn to or for the account of the Grantor or its designee as set forth in the Grantor Withdrawal Notice, including executing the Loan Assignment Documents or Other Assignment Documents provided by Grantor.  The Trustee shall be protected and indemnified for any loss, liability or damage incurred by it in relying upon and following any Grantor Withdrawal Notice for such withdrawal that on its face conforms to the requirements of this Agreement.

(vi)The Grantor shall also have the right, at any time and from time to time, to request from the Trustee, whereupon the Trustee shall deliver to the Grantor within five Business Days following receipt of request therefor, subject only to written notice from the Grantor to the Trustee in the form as attached hereto as Exhibit E (a “Grantor Servicing Notice”), documentation previously delivered to the Trustee that relates to the Mortgage Loan(s) and Participation Asset(s) specified in such Grantor Servicing Notice, (A) as required in connection with (I) the payoff of such Mortgage Loan or Participation Asset, (II) the sale of such Mortgage Loan or Participation Asset by the Grantor, or (III) the 

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modification, restructuring, foreclosure, deed-in-lieu or other liquidation of the property serving as collateral for such Mortgage Loan or Participation Asset, or (B) as otherwise reasonably requested by the Grantor.  The Grantor Servicing Notice shall also specify an instruction to the Trustee as to where such Mortgage Loan documentation shall be delivered.  

(vii)For Mortgage Loans or Underlying Assets of a Participation Asset being repaid in full, the Trustee shall deliver all related documentation in its possession to the Grantor for handling in accordance with the Grantor’s or the applicable servicer’s procedures for paid-off mortgages, upon written notice from the Grantor to the Trustee that such Mortgage Loan or Underlying Asset of a Participation Asset has been paid off in full.

(viii)During the continuation of a FMV Triggering Event the provisions set forth in this Section 2(b) shall be modified as set forth in Section 9.

(c)Designated Administrative Account Withdrawals.  Notwithstanding anything to the contrary herein, in addition to rights of the Grantor to withdraw Trust Assets set forth in Sections 2(b)(i)-(v), the Grantor shall have the right once per calendar month during the term of this Agreement to direct the Trustee to withdraw Trust Assets consisting of cash and cash equivalents from the Trust Account and to transfer such Trust Assets to the Designated Administrative Account in an amount up to the applicable Monthly Funding Limit upon written notice to the Trustee, with a simultaneous copy to the Beneficiary, substantially in the form attached hereto as Exhibit E-1 (the “Designated Administrative Account Transfer Notice”) specifying the amount and specific Trust Assets to be withdrawn and certifying the satisfaction of the conditions noted in this Section 2(c) with respect to such amounts.  Each withdrawal from the Trust Account by the Grantor pursuant to this Section 2(c) shall constitute a representation and certification of the Grantor to the Beneficiary that such withdrawal is being made in accordance with the terms of the Coinsurance Agreement and this Agreement, including the terms of this Section 2(c).  The Grantor shall not deliver a Designated Administrative Account Transfer Notice except as expressly permitted by this Section 2(c).  Other than a Designated Administrative Account Transfer Notice, no other statement or document need be presented by the Grantor in order to transfer Trust Assets consisting of cash and cash equivalents pursuant to this Section 2(c) to the Designated Administrative Account.

(d)The Party withdrawing Trust Assets as permitted pursuant to Sections 2(a) or 2(b) or 2(c) shall be referred to herein as the “Withdrawing Party” and the Beneficiary Withdrawal Notice, the Grantor Withdrawal Notice, the FMV Grantor Withdrawal Notice, the Designated Administrative Account Transfer Notice or the RCE Designated Administrative Account Transfer Notice, as applicable, shall be referred to herein as a “Withdrawal Notice”. 

(e)Following receipt of a Withdrawal Notice and, in the case of a Grantor Withdrawal Notice, upon satisfaction of any of the conditions precedent set forth in Section 2(b)(ii), the Trustee shall promptly take any and all steps necessary to transfer, absolutely and unequivocally, all right, title and interest to the invested Trust Assets or cash amount specified in such Withdrawal Notice, including executing the Loan Assignment Documents or Other Assignment Documents provided by Grantor, and shall deliver such invested Trust Assets or 

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cash amount as specified in such notice to the appropriate Party.  The Beneficiary or the Grantor (as applicable) shall acknowledge receipt of any such Trust Assets withdrawn upon request by the Trustee.

(f)The Trustee shall be fully protected in relying conclusively upon any Withdrawal Notice or any other written demand, instruction, direction, acknowledgment, statement, notice, resolution, request, consent, order, certificate, report, appraisal, opinion, electronic mail, letter, or other communication (collectively, “Communications”) of the Beneficiary or the Grantor, as applicable, for any such withdrawal that on its face conforms to the requirements of this Agreement.

(g)Subject to Section 3 of this Agreement, in the absence of a Withdrawal Notice, the Trustee shall allow no substitutions or withdrawals of any Trust Asset from the Trust Account.  The Parties agree that the Trustee shall have no responsibility whatsoever to determine that any Trust Assets withdrawn from the Trust Account pursuant to this Section 2(g) will be used and applied in the manner contemplated therein. 
 
(h)The Trustee may neither take, nor consent to the taking of, any action which would or could result in the placement of any lien on any Trust Assets.  In addition, the Trustee shall have no authority to assign, transfer, pledge, or set off any of the Trust Assets except as expressly permitted herein.  Neither the Grantor, nor the Trustee, nor their respective successors and assigns, shall alienate, sell, transfer, assign, encumber or otherwise impair any of the Trust Assets except as stated under this Agreement. 

(i)In addition to the provisions of Section 1(f), the Grantor may retain (and pay the service fees of) one or more investment managers (which may be (or include) the Beneficiary or an Affiliate of the Beneficiary) (each, an “Investment Manager”) to manage and make investment decisions with regard to any of the Trust Assets; provided that, unless an Investment Manager is the Beneficiary or an Affiliate of the Beneficiary, the Grantor shall remain responsible for all its obligations or liabilities under this Agreement despite delegation of any such obligations or liabilities to such Investment Manager and the Grantor shall be liable with respect to the services to be provided by such Investment Manager as if provided by the Grantor.  The Grantor shall select each Investment Manager with a commercially reasonable degree of prudence and with due regard for any views with respect thereto as may be provided by the Beneficiary from time to time, and, in connection therewith, the Grantor will assess the nature and extent of the assets considered for management by such Investment Manager relative to its history and extent of comparable portfolio management engagements.  The appointment of each Investment Manager shall be approved in advance by the Investment Committee of the Board of Directors of Wilton Re Ltd.  Upon request, the Grantor shall make available to the Beneficiary copies of any materials prepared by or provided to the Grantor in connection with its diligence evaluation of each Investment Manager and its appointment subject to commercially customary protections for confidential materials related thereto.  The Grantor shall provide to the Beneficiary at least ten (10) Business Days prior written notice of its intention to appoint any Investment Manager.  In the event that the Trust Assets become at any time materially out of compliance with the requirements of the Investment Guidelines as a result of the acts or omissions of one or more Investment Managers retained by or on behalf of the Grantor with respect thereto, and such conditions are not rectified such that the Trust Assets are not brought 

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into compliance therewith by the Grantor within thirty (30) days after receipt of written notice from the Beneficiary of such non-compliance, then, after consultation with the Beneficiary with respect thereto and giving due regard to the views of the Beneficiary with respect thereto, (i) if such non-compliance is due to acts or omissions by or of one or more Investment Managers retained by the Grantor with respect to the Trust Assets, the Grantor shall use commercially reasonable efforts to replace as promptly as practicable such Investment Manager(s) with one or more replacement Investment Managers on a basis consistent with this Section 2(i) or (ii) the Grantor shall take such other actions as are necessary or appropriate in the Grantor’s reasonable view to ensure the non-recurrence of such instances of non-compliance and shall document implementation of any such corrective actions to the Beneficiary’s reasonable satisfaction.  For the sake of clarity, conditions causing Trust Assets to become noncompliant with the Investment Guidelines arising as a result of market conditions or dislocations, rather than acts or omissions of the Investment Manager, will not give rise to the replacement requirements outlined in this Section 2(i).

		
	Section 3.
	Redemption, Investment and Substitution of Trust Assets.

(a)The Trustee shall surrender for payment all maturing Trust Assets and all Trust Assets called for redemption, deposit the principal amount of the proceeds of any such payment to the Trust Account and provide notice of such payment to the Beneficiary and the Grantor.

(b)From time to time, at the written order and direction of the Grantor or its designated Investment Manager, and without consent of, or prior notice to, the Beneficiary (but subject to Section 3(c) below), the Trustee shall invest and reinvest the Trust Assets in the Trust Account in Eligible Assets.  The Trustee shall have no responsibility whatsoever to determine that such designated investments constitute Eligible Assets, and may rely on the direction of the Grantor or its designated Investment Manager.
  
(c)From time to time, the Grantor or its designated Investment Manager may direct the Trustee to substitute Trust Assets in the Trust Account, provided that, at the time of such substitution and after giving effect to such substitution, (i) the withdrawn Trust Assets are replaced with Eligible Assets with a Statutory Book Value at least equal to the Statutory Book Value of the substituted Trust Asset immediately prior to such substitution, provided that the ratio of the aggregate Statutory Book Value of the Eligible Assets held in the Trust Account to the aggregate Fair Market Value of such assets will not increase as a result of such substitution other than de minimis increases associated with the substitution for cash or cash equivalents, and (ii) the Statutory Book Value of the Eligible Assets in the Trust Account are at least equal to the Required Balance at the end of the immediately preceding Accounting Period.  The Trustee shall have no responsibility whatsoever to determine the value of such substituted Trust Assets or that such substituted Trust Assets constitute Eligible Assets.  During the continuation of a FMV Triggering Event, the provisions set forth in this Section 3(c) shall be modified as set forth in Section 9.

(d)All investments and substitutions of Trust Assets referred to in paragraphs (b) and (c) of this Section shall be in compliance with the definition of “Eligible Assets” in Section 11.  Any instruction or order concerning such investments or substitutions of Trust 

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Assets shall be referred to herein as an “Investment Order.”  The Trustee shall execute Investment Orders and settle securities transactions by itself or may utilize agents or brokers, including Affiliates, and shall not be responsible for any act or omission, or for the solvency, of any such agent or broker. The Grantor shall reimburse the Trustee such fees and charges of such agent.

(e)When the Trustee is directed to deliver Trust Assets against payment, delivery will be made in accordance with generally-accepted market practice. 

(f)Any loss incurred from any investment pursuant to the terms of this Section 3 shall be borne exclusively by the Trust Account.  The Trustee shall not be liable for any loss due to changes in market rates or penalties for early redemption.

(g)The applicable servicer, on behalf of the Grantor, shall be responsible for collecting net payments of principal and interest due from borrowers under the Mortgage Loans and the Participation Assets, in each case after retention by the related servicer of required fees, escrows and reserves for such Mortgage Loans and Participation Assets pursuant to the terms of the applicable loan documents, Servicing Agreements, and Participation Agreements.  Any such amounts actually collected shall be paid by such servicer, on behalf of the Grantor, to the Trustee for deposit to the Trust Account as promptly as reasonably practicable.  If such amounts actually collected are improperly paid to the Grantor, the Grantor shall pay such amounts to the Trustee for deposit to the Trust Account as promptly as reasonably practicable, and in any case no later than five (5) Business Days following the Grantor’s obtaining knowledge of such improper payment thereof.  Notwithstanding anything to the contrary herein, Trustee shall reverse and transfer to the Grantor or the applicable servicer payment of any amounts due under a Participation Agreement or Servicing Agreement upon written notice to the Trustee.

(h)The applicable servicer, on behalf of the Grantor, as administrator of the Mortgage Loans or the Underlying Asset (as hereinafter defined) of a Participation Asset, shall deliver to Trustee, for deposit into the Trust Account (i) the principal payments received in conjunction with the scheduled maturity of a Mortgage Loan or the Underlying Asset of a Participation Asset or the pre-payment of a Mortgage Loan or the Underlying Asset of a Participation Asset, (ii) the net proceeds from the sale of a Mortgage Loan or the Underlying Asset of a Participation Asset, (iii) the net proceeds received from the liquidation of the property serving as collateral for a Mortgage Loan or the Underlying Asset of a Participation Asset, and (iv) all net payments received with respect to a Mortgage Loan or Participation Asset not described in clauses (i) through (iii) above or in subsection (h) above.

(i)With respect to the Mortgage Loans and Participation Assets, in the substitution notice to the Trustee, the Grantor or the applicable Investment Manager shall (1) deliver applicable Loan Assignment Documents for any Mortgage Loan being replaced, and (2) obtain any consents required to effect such substitution, and the Trustee shall reasonably cooperate with the Grantor or the Investment Manager in providing any information or documentation necessary to effect such substitution (to the extent such information or documentation exists and is in the possession or control of the Trustee). The Grantor may from time to time designate a third party in the substitution notice to whom the applicable Loan Assignment Documents, including the original promissory note, shall be delivered.

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(j)With respect to the Equity Investments, Eligible Derivatives and Private Placements, in the substitution notice to the Trustee, the Grantor or the applicable Investment Manager shall (1) deliver applicable Other Assignment Documents for the Equity Investment, Eligible Derivative or Private Placement being replaced, and (2) obtain any consents required to effect such substitution, and the Trustee shall reasonably cooperate with the Grantor or the Investment Manager in providing any information or documentation necessary to effect such substitution (to the extent such information or documentation exists and is in the possession or control of the Trustee).  The Grantor may from time to time designate a third party in the substitution notice to whom the applicable Other Assignment Documents, including the original promissory note, shall be delivered.

(k)

(i)Except with respect to any Mortgage Loan and Participation Assets withdrawn by the Beneficiary in accordance with the terms hereof, the Grantor shall have the sole and exclusive right, power and authority to service, administer, manage, liquidate, deal with, issue or withhold any consents or waivers, amend, modify, extend, or make any other decisions in respect of any Mortgage Loans and Participation Assets in any manner that it shall choose, subject only to any limitations set forth in this Agreement, any applicable Participation Agreement, any applicable Servicing Agreement or in any other related agreement affecting the Mortgage Loans and Participation Assets, as applicable.  Except with respect to any Mortgage Loan and Participation Assets withdrawn by the Beneficiary in accordance with the terms hereof, the Grantor shall have the sole and exclusive right, power and authority to make decisions and take other actions in respect of any Mortgage Loans, Participation Assets and any related Underlying Assets under any servicing agreement, loan document and any other related agreement affecting the Mortgage Loans, Participation Assets or the related Underlying Assets, subject only to any limitations set forth in this Agreement, any applicable Participation Agreement, any applicable Servicing Agreement or in any other related agreement affecting the Mortgage Loans and Participation Assets, as applicable; provided, however, that the sale, transfer or assignment of any such Mortgage Loan or Participation Asset shall only be effectuated by substitution, exchange or withdrawal pursuant to the terms of this Agreement.  With respect to any Mortgage Loan or Participation Asset withdrawn by the Beneficiary in accordance with the terms hereof, during any period from the date of such withdrawal to the date of assignment of the applicable Servicing Agreement to the Beneficiary, as regards to such Mortgage Loan or Participation Asset, the Grantor shall exercise the foregoing authority as directed by the Beneficiary. The Grantor shall have the exclusive power and authority, acting alone or through servicers, to do any and all things in connection with such servicing (with respect to Mortgage Loans only), administration, management and liquidation of the Mortgage Loans and Participation Assets which it may deem necessary or desirable to maximize recoveries with respect thereto, subject to the limitations contained in this Agreement, any applicable Participation Agreement, any applicable Servicing Agreement, or in any other related agreement affecting the Mortgage Loans and Participation Assets, as applicable.  Without limiting the generality of the 

16

foregoing, Grantor shall continue, and is hereby authorized and empowered hereunder, to prepare and file any and all financing statements, continuation statements and other documents or instruments necessary to maintain the lien on any Underlying Assets. 

(ii)The Trustee (not in its individual capacity but solely as Trustee hereunder), upon receipt of a written request from the Grantor, shall execute and deliver, within five (5) Business Days following receipt of request therefor, any powers of attorney and other documents provided to it which the Grantor determines, in the exercise of its reasonable judgment, are necessary in order to enable any servicer to carry out its duties under any applicable Servicing Agreement or any other servicing agreement, or to enable the Grantor to take appropriate action in respect of the ownership, assignment, transfer and liquidation of the Mortgage Loans and Participation Assets and any related Underlying Assets, as applicable; provided that the Grantor shall not deliver any such request to the Trustee that would be inconsistent with the terms of this Agreement.  The Trustee and the Beneficiary acknowledge that the Grantor may (in its reasonable discretion), from time to time, execute and deliver a limited power of attorney in order to enable a servicer to carry out its duties under any applicable Servicing Agreement relating to any Mortgage Loan, any Participation Asset or any related Underlying Assets.  The authority of the Grantor or any servicer shall include the power to (i) enforce, modify, amend, renew or extend the Mortgage Loans, Participation Assets or the Underlying Assets, (ii) grant or withhold any consents or waivers under or in respect of the Mortgage Loans, Participation Assets or the Underlying Assets, (iii) file and collect insurance claims, (iv) release any Underlying Asset or any other collateral or any party from any liability on or with respect to any of the Mortgage Loans or Participation Assets, (v) compromise or settle any claims of any kind or character with respect to any of the Mortgage Loans or Participation Assets, subject to any limitations provided herein, (vi) initiate, complete or otherwise take any action with respect to a foreclosure or deed in lieu of foreclosure, on any of the Underlying Assets, (vii) repair, replace, renovate, restore and improve the Underlying Assets, (viii) negotiate and contract to sell and sell any Mortgage Loan (including through receipt of a discounted payoff on such Mortgage Loan) or Participation Asset, (ix) commence, continue, negotiate, or settle litigation relating to a Mortgage Loan, Participation Asset or the Underlying Assets, (x) make any servicing or other advances, (xi) act as a mortgagee in possession or receiver or in any other capacity with respect to the Underlying Assets, (xii) exercise any and all rights in respect of the Mortgage Loans, Participation Assets and the Underlying Assets, or (xiii) take any action with respect to any security document securing a Mortgage Loan or Participation Asset, effectuate foreclosure or other conversion of the ownership of any Underlying Asset, including the employment of attorneys, the institution of legal proceedings, the acceptance of compromise proposals, the filing of claims for mortgage insurance, the collection of liquidation proceeds, seeking a receiver, appointing a new property manager and any other matter pertaining to a Mortgage Loan, a Participation Asset or an Underlying Asset. The Grantor may exercise all of the powers set forth herein in its own name.  Upon 

17

written request of the Grantor, the Trustee shall execute and deliver any documents provided to it and reasonably requested by the Grantor in furtherance of or incidental to any of the foregoing actions.

(iii)With the exception of the Loan Assignment Documents to be delivered to the Trustee in accordance with the terms of this Agreement, the servicer shall retain and be charged with maintaining possession of documentation and files relating to the Mortgage Loans and the Participation Assets (the “Servicing File”).  Upon the deposit of any Mortgage Loan or Participation Asset to the Trust Account, the Grantor shall deliver to the Trustee a letter in the form attached hereto as Exhibit C-3, executed in blank by an authorized signatory and addressed to the applicable servicer, instructing such servicer to release the Servicing File to the Trustee or to the Beneficiary in accordance with the terms hereof, whenever requested by the Trustee (the “Document Release Letter”).  The delivery of the Document Release Letter by the Grantor to the Trustee shall constitute a representation and certification by the Grantor to the Trustee and the Beneficiary that such Document Release Letter is sufficient under the terms of the applicable Servicing Agreement to require the servicer to release the Servicing File to the Trustee without the further consent of the Grantor or any other person.  The Servicing Agreements shall not be amended, modified or supplemented in any way that adversely impacts the ability of the Trustee to obtain the Servicing File without the prior written consent of the Beneficiary.  The Trustee acknowledges that the Beneficiary may instruct the Trustee to withdraw any documents in the Servicing File in accordance with a Beneficiary Withdrawal Notice. 
 
(iv)Each of the Trustee and the Beneficiary hereby acknowledges that the rights and obligations of the Grantor under any Servicing Agreement have not been transferred to or accepted or assumed by the Trustee and are otherwise expressly reserved by and to the Grantor to act on its own behalf and in any manner that it so chooses, without any consent or approval rights on the part of the Trustee or the Beneficiary hereunder, subject to the terms of this Agreement and any related agreement.

(v)In the event that the rights and obligations of the Grantor and the Beneficiary under this Agreement with respect to the Mortgage Loans, Participation Assets and any related Underlying Asset conflict with the rights and obligations of the Grantor with respect to the Mortgage Loans, Participation Assets and any related Underlying Asset under any applicable Participation Agreement, any applicable Servicing Agreement, or in any other related agreement affecting the Mortgage Loans and Participation Assets, as applicable, then the rights and obligations under this Agreement shall control as between the Grantor and the Beneficiary. The Grantor agrees that it will not enter into any Servicing Agreement with a controlled (or under common control) affiliate of Grantor, without the prior written consent of the Beneficiary, which shall not be unreasonably withheld, conditioned, or delayed.

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	Section 4.
	The Income Account.

All payments of interest, dividends and other income in respect of Trust Assets (the “Income”) shall be posted and credited by the Trustee in the separate income column of the custody ledger (the “Income Account”) within the Trust Account established and maintained by the Grantor at any office of the Trustee in the United States.  Any Income automatically posted and credited on the payment date to the Income Account which is not subsequently received by the Trustee shall be reimbursed by the Grantor to the Trustee and the Trustee may debit the Income Account for this purpose.  The Grantor may withdraw amounts from the Income Account upon notice to the Trustee.  The Grantor may direct the Trustee to transfer amounts in the Income Account to the Trust Account.
		
	Section 5.
	Taxes; Right to Vote Trust Assets.

(a)The Grantor shall pay, prior to delinquency, all taxes, assessments and other charges levied upon the Trust Assets or the Trust Account and shall discharge all liens against the Trust Assets and the Trust Account; provided, however, that unless and until foreclosure, levy, sale or similar proceedings shall have been commenced, the Grantor need not pay any such tax, assessment or other charge so long as the validity thereof is contested in good faith and by appropriate proceedings and so long as security sufficient to pay such tax, assessment or other charge (and any interest and penalties which may be applicable thereon) has been provided to the Trustee to protect the Beneficiary and the Trustee.  In the event that the Grantor shall fail to pay any such tax, assessment or other charge (and shall not be so contesting it) or to discharge any such lien, the Beneficiary may, at its option, but shall not be required to, make any payments necessary to pay such tax, assessment or other charge or to discharge such lien, and the Grantor shall, upon demand, reimburse the Beneficiary for the full amount of such payments (together with interest from the date paid to but not including the date reimbursed at a fluctuating rate per annum equal to the prime rate as announced by the Trustee from time to time).  The Trustee shall not be responsible for paying any taxes, assessments or other charges or discharging liens on the Trust Account or any of the Trust Assets thereof.

(b)The Parties intend that the Trust Account be classified for United States federal income tax purposes as a grantor trust (pursuant to sections 671 through 677 of the Internal Revenue Code of 1986, as amended).  Each Party agrees to treat the Trust Account as a grantor trust and the Grantor as the owner of the Trust Assets for all United States federal, state and local tax purposes and, thus, any and all income derived from the Trust Assets held in the Trust Account shall constitute income or gain of the Grantor as owner of such Trust Assets.  The Trustee shall not be authorized or empowered to do anything that would cause the Trust Account to fail to qualify as a grantor trust or the Grantor to fail to be treated as the owner of the Trust Assets for such tax purposes.  The Trustee shall be responsible for any tax reporting, tax withholding or other tax compliance required to be performed by the Trustee on behalf of the Trust Account pursuant to Applicable Law.  The Grantor shall be responsible for any other tax reporting, tax withholding or other tax compliance required on behalf of the Trust Account and shall notify the Trustee of the tax identification number of the Trust Account.

(c)The Trustee will transmit to the Grantor or its Investment Manager upon receipt, and will instruct any entities authorized to hold Trust Assets in accordance with the 

19

terms hereof to transmit to the Grantor upon receipt, all financial reports, stockholder communications, notices, proxies and proxy soliciting materials received from issuers of Trust Assets, and all information relating to exchange or tender offers received from offerors with respect to such Trust Assets.  The Grantor or its Investment Manager shall have the full unqualified right to vote and execute consents and to exercise any and all proprietary rights not inconsistent with this Agreement with respect to any securities or other property forming a part of the Trust Account.

		
	Section 6.
	Additional Rights and Duties of the Trustee.

(a)The Trustee shall furnish to the Grantor and the Beneficiary a statement of all Trust Assets in the Trust Account upon the inception of the Trust Account and at the end of each calendar quarter thereafter (the “Quarterly Statement”).  The Quarterly Statement shall list (i) all of the Trust Assets with CUSIP number (if applicable) and other specific identifying information with respect to any Trust Asset that has no CUSIP number and (ii) any transfers of Trust Assets to or from the Trust Account during such calendar quarter, including all purchases and sales of Trust Assets during such calendar quarter.  The Quarterly Statement shall be given as soon as practicable, but in no event later than ten (10) days after the end of each calendar quarter.  In addition, the Trustee shall provide daily reporting to the Beneficiary, the Grantor or its designated Investment Manager of the Trust Assets in the Trust Account by granting access to the Trustee’s automated data system affording on-line access to trust account information.  The Trustee will be deemed to have delivered the accountings of all Trust Assets in the Trust Account if such accounting is available on one or more of the Trustee’s automated systems affording on-line access to trust account information.

(b)Before accepting any asset (other than an Equity Investment or Eligible Derivative) for deposit to the Trust Account, the Trustee shall determine that such asset is in such form that the Beneficiary whenever necessary may, or the Trustee upon written direction by the Beneficiary may, negotiate such asset without consent or signature from the Grantor or any other Person other than the Trustee, in accordance with the terms of this Agreement.  Before accepting any Equity Investment or Eligible Derivative for deposit to the Trust Account, the Trustee shall determine that such asset is in such form that the Trustee upon written direction by the Beneficiary may transfer and assign to the Beneficiary such asset without consent or signature from the Grantor or any other Person other than the Trustee, in accordance with the terms of this Agreement.

(c)The Trustee shall notify the Grantor and the Beneficiary, within three (3) Business Days, of any deposits to or withdrawals from the Trust Account.

(d)All Trust Assets shall be held in a safe place by the Trustee in its office in the United States, except that the Trustee may hold any Trust Asset that is in book-entry form as of the date it is credited to the Trust Account (a “Book-Entry Asset”) through the book-entry account maintained by the Trustee with the related depository for such Book-Entry Asset (such a depository being referred to herein as a “Depository”).  A Book-Entry Asset may be held in the name of a nominee maintained by the Depository.

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(e)The Trustee shall accept and may open all mail directed to the Grantor or the Beneficiary in care of the Trustee.  The Trustee shall promptly forward all mail to the addressee whether or not opened.

(f)The Trustee shall keep full and complete records of the administration of the Trust Account.  Upon the reasonable written request of the Grantor or the Beneficiary, the Trustee shall promptly permit the Grantor or the Beneficiary, their respective agents, employees or independent auditors to examine, audit, excerpt, transcribe and copy, at their own expense, during the Trustee’s normal business hours any books, documents, papers and records relating to the Trust Account or the Trust Assets.

(g)The duties and obligations of the Trustee shall only be such as are specifically set forth in this Agreement, as it may from time to time be amended in accordance with the terms hereof, and no implied duties or obligations shall be read into this Agreement against the Trustee.  The Trustee shall be liable only for its own fraud, negligence, willful misconduct or lack of good faith.  Subject to the preceding sentence, the Trustee is not liable for any consequential, punitive or special damages.

(h)The Trustee shall be protected and held harmless and indemnified by the other parties hereto for any loss, liability or damage for following any statement, notice, resolution, request, consent, order, certificate, report, appraisal, opinion, letter or other paper or document reasonably believed by the Trustee to be genuine (including that it conforms on its face to the requirements of this Agreement) and to have been signed, sent or presented by Grantor and/or Beneficiary.  All notices to the Trustee (unless otherwise provided therein) shall be deemed to be effective when received by the Trustee.

(i)No provision of this Agreement shall require the Trustee to take any action which, in the Trustee’s reasonable judgment, would result in any violation of this Agreement or any provision of law.  The Trustee shall exercise the same due care that is expected of a fiduciary with the responsibility for the safeguarding of the Trust Assets in the Trust Account and for compliance with all provisions of this Agreement, whether or not the Trust Assets are in the Trustee’s possession.

(j)The Trustee may confer with a nationally recognized outside law firm of its selection in relation to matters arising under this Agreement.  The written opinion of such law firm shall be full and complete authority and protection for the Trustee with respect to any action taken, omitted or suffered by it in good faith and in accordance with the opinion of such law firm.

(k)The Parties acknowledge that nothing in this Agreement shall require the Trustee to risk or expend its own funds in performing its obligations under this Agreement or obligate the Trustee to extend credit, grant financial accommodation or otherwise advance moneys for the purpose of making any payments or part thereof or otherwise carrying out any instructions, including, without limitation, any Investment Order provided, however, that if the Trustee chooses to make such advance, such advance shall be deemed an extension of credit by the Trustee to Grantor, which extension of credit shall be payable on demand and shall bear interest at the Trustee’s customary rate for similar extensions of credit. Grantor will be solely 

21

responsible for repayment of such extension of credit and any interest thereon. The Trustee shall not permit any overdrafts in the Trust Account.

(l)The Trustee hereby waives any right of counterclaim, banker’s lien, liens or perfection rights as securities intermediary with respect to the Trust Assets and the Trust Account.

(m)It is herein acknowledged that, in accepting a deposit of any Mortgage Loan or Participation Asset into the Trust Account, the Trustee shall be under no duty or obligation to inspect, review or examine the actual content or substance of any related Loan Assignment Documents, any other loan document, security document or any other related document, instrument or agreement or to determine that they are genuine, enforceable, or appropriate for the represented purpose or that they are other than what they purport to be on their face.  In no event shall the Trustee be responsible for the preparation of any Loan Assignment Documents, any other loan document, security document or any other instruments, agreements or documents relating to the Mortgage Loan or Participation Asset or required for the deposit of the Mortgage Loan or Participation Asset into the Trust Account or for the expenses of such preparation or any other costs related thereto, including any filing fees therefor.  

(n)It is herein acknowledged that, in accepting a deposit of any Equity Investment, Eligible Derivative or Private Placement into the Trust Account, the Trustee shall be under no duty or obligation to inspect, review or examine the actual content or substance of any related Other Assignment Documents or to determine that they are genuine, enforceable or appropriate for the represented purpose or that they are other than what they purport to be on their face.  In no event shall the Trustee be responsible for the preparation of any Other Assignment Documents or any other instruments, agreements or documents relating to the Equity Investment, Eligible Derivative or Private Placement or required for the deposit of the Equity Investment, Eligible Derivative or Private Placement into the Trust Account or for the expenses of such preparation or any other costs related thereto, including any filing fees therefor. 
 
(o)The Trustee’s administrative obligations hereunder in respect of the Mortgage Loans, Participation Assets shall be limited to (a) the review of the Loan Assignment Documents as provided in Section 1(g)(ii), (b) the preparation and delivery of Quarterly Statement as provided in Section 6(a), and (c) the execution of instruments or other documents provided to it, and the Trustee shall not be required to take any action with respect to any Mortgage Loan, Participation Asset or any Underlying Asset, except at the written direction of the Grantor or the Beneficiary, as applicable, or as otherwise permitted pursuant to this Agreement. 
 
(p)With respect to any assignment and assumption agreement relating to a Mortgage Loan or Participation Asset, the Trustee is hereby authorized and directed, not in its individual capacity but solely in its capacity as Trustee, to execute and deliver such assignment and assumption agreements presented to the Trustee for execution from time to time.  To the extent that, under the assignment and assumption agreements, the Trustee as assignee has undertaken or assumed any obligations or made any representations, warranties or covenants under the Mortgage Loans or Participation Assets, such obligations, representations, warranties or covenants shall not be those of the Trustee, but shall instead be those of the Grantor and the 

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Grantor shall perform or cause to be performed all such obligations, representations, warranties or covenants.

(q)The Trustee shall have no responsibility to the extent that there is a failure in the withdrawal of a Mortgage Loan or Participation Asset specified in a Beneficiary Withdrawal Notice by Beneficiary as a result of the Grantor’s or applicable Investment Manager’s or the Beneficiary’s sale or transfer of such Mortgage Loan or Participation Assets.

(r)The Grantor and the Beneficiary hereby acknowledge and agree that the Trustee shall not have any obligations relating to any future funding commitments in respect of the Trust Assets (including, for the avoidance of doubt, the Mortgage Loans and Participation Assets).

(s)The Grantor and the Beneficiary acknowledge and agree that (i) the Trustee shall have no liability for any action or omission of any of the parties to any Servicing Agreement or any other agreement (related to the Mortgage Loans or Participation Assets) taken pursuant to such agreements, including with respect to any Mortgage Loan or Participation Asset at any time during which such Mortgage Loan or Participation Asset is under the care, custody, possession or control of any of the parties to any Servicing Agreement or any other agreement (related to the Mortgage Loans or Participation Assets) or any of their respective other depositories, subcustodians, other agents or nominees (and none of such other entities or persons shall be considered to be the depositories, subcustodians, agents or nominees of the Trustee), (ii) the performance by the Trustee of any of its obligations under this Agreement may be delayed, limited or otherwise affected by the actions or omissions of any of the parties to any Servicing Agreement or any other agreement (related to the Mortgage Loans or Participation Assets) or as a result of such Mortgage Loan or Participation Asset being subject to any Servicing Agreement, and (iii) the Trustee shall have no liability under this Agreement as a result of the Trustee’s failure to perform any of its obligations under this Agreement as a result of the actions or omissions of any of the parties to any Servicing Agreement or any other agreement (related to the Mortgage Loans or Participation Assets) that cause such failure or as a result of obligations under any Servicing Agreement or any other agreement (related to the Mortgage Loans or Participation Assets).  In no event will the Trustee be required to perform or assume any duties of any party under any Servicing Agreement.

(t)The Trustee shall, at the written direction of the Grantor, settle trades for Private Placements with Trust Assets held in the Trust Account pending receipt of the original evidence of indebtedness of such Private Placements in accordance with the directions from the Grantor (which original evidence of indebtedness may not be delivered for a period following the Trustee’s withdrawal of such Trust Assets); provided that the foregoing shall not relieve the Grantor of its obligations to comply with Section 1(b). Any investment directed by the Grantor or its Investment Manager will constitute a certification by the Grantor to the Trustee that the settlement procedures set forth in the applicable investment documentation is acceptable to the Grantor and directed hereunder, upon which direction the Grantor and the Beneficiary agree Trustee may conclusively rely.

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	Section 7.
	The Trustee’s Compensation, Expenses and Indemnification.

(a)The Grantor shall pay the Trustee, as compensation for its services under this Agreement, a fee computed at its usual and customary rates for services of this sort, as determined in good faith by the Trustee from time to time and communicated to and agreed to in writing by the Grantor.  The Grantor shall also pay or reimburse the Trustee for all of the Trustee’s expenses and disbursements in connection with its duties under this Agreement (including reasonable attorneys’ fees and expenses and reasonable accounting and consulting fees and expenses), except any such expense or disbursement as may arise from the Trustee’s negligence, willful misconduct or lack of good faith.  

(b)The Grantor hereby indemnifies the Trustee for, and holds it harmless against, any losses (including reasonable attorneys’ fees and expenses and reasonable consulting and accountants’ fees and expenses) incurred or paid (other than as a result of the Trustee’s negligence, willful misconduct or lack of good faith), arising out of or in connection with the performance of its duties and obligations under this Agreement, including without limitation any loss arising out of or in connection with the status of the Trustee in connection with the performance of its duties and any nominee as the holder of record of any or all of the Trust Assets.  The Grantor hereby acknowledges that the foregoing indemnities shall survive the resignation of the Trustee or the termination of this Agreement.

(c)In addition, (A) solely for occurrences relating to a Mortgage Loan or Participation Asset prior to the date hereof or during the time such asset is held in the Trust Account, Grantor, and (B) solely for occurrences relating to a Mortgage Loan or Participation Asset after Beneficiary withdraws such asset from the Trust Account,  Beneficiary, shall, defend, indemnify, and hold harmless the Trustee and its employees, officers, directors and agents from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs, or expenses of whatever kind or nature, known or unknown, contingent or otherwise, arising out of, or in any way related to, (i) the presence, disposal, release, or threatened release of any Hazardous Materials which are on, from, or affecting soil, water, vegetation, buildings, personal property, persons, animals, or otherwise; (ii) any personal injury (including wrongful death), property damage (real or personal) or natural resource damage arising out of or related to such Hazardous Materials; (iii) any third party claim brought or threatened, settlement reached, or government order, or any legal policies or legal requirements having the force of law imposed on the Trustee, which are based upon or in any way related to such Hazardous Materials, including, without limitation, attorney and consultant fees and expenses, investigation and laboratory fees, court costs, and litigation expenses; and (iv) any violations of Environmental Law, in the case of each of clause (i), (ii) , (iii) and (iv), except to the extent arising from an affirmative act or omission of the Trustee or its employees, officers, directors or specifically authorized agents that constitutes negligence, willful misconduct or lack of good faith.  Grantor and Beneficiary hereby acknowledges that the foregoing indemnities shall survive the resignation of the Trustee or the termination of this Agreement.

(d)No Trust Assets shall be withdrawn from the Trust Account or used in any manner for paying compensation to, or reimbursement or indemnification of, the Trustee.

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(e)The Trustee hereby waives any and all rights of offset, counterclaim and recoupment against the Beneficiary and Trust Account, and waives any lien (statutory or otherwise) that it may assert against the Trust Account.

(f)The Trustee hereby indemnifies each of the Grantor and the Beneficiary for, and holds each of them harmless against, any losses (including reasonable attorneys’ fees and expenses) directly arising out of the performance of the Trustee’s obligations under this Agreement with respect to such Party to the extent resulting from the Trustee’s fraud, negligence, willful misconduct or lack of good faith in the performance of responsibilities specifically allocated to the Trustee by the terms of this Agreement.  The Trustee hereby acknowledges that the foregoing indemnities shall survive the resignation of the Trustee or the termination of this Agreement.

		
	Section 8.
	Resignation of the Trustee.

(a)The Trustee may resign at any time by giving not less than ninety (90) days’ written notice thereof to the Beneficiary and to the Grantor. The Grantor and the Beneficiary jointly also may remove the Trustee at any time, without assigning any reason therefor, on ninety (90) days’ prior written notice thereof to the Trustee. Such resignation or removal shall become effective on the acceptance of appointment by a successor Trustee and the transfer to such successor Trustee of all Trust Assets in the Trust Account in accordance with paragraph (b) of this Section 8.

(b)Upon receipt of the Trustee’s notice of resignation or notice to the Trustee of removal, the Grantor and the Beneficiary shall promptly appoint a successor trustee.  Any successor trustee shall be a bank that is a member of the Federal Reserve System and shall not be a parent, a subsidiary or an Affiliate of the Grantor or the Beneficiary.  If a successor trustee has not accepted such appointment within thirty (30) days after the notice of resignation or removal, the Trustee may, in its sole discretion, apply at the expense of the Grantor to a court of competent jurisdiction for the appointment of a successor trustee or for other appropriate relief.  The costs and expenses (including reasonable attorneys’ fees and expenses) incurred by the Trustee in connection with such proceeding shall be paid by, and be deemed an obligation of, the Grantor.  Upon the acceptance of the appointment as trustee hereunder by a successor trustee, such successor trustee shall succeed to and become vested with all the rights, powers, privileges and duties of the Trustee, and the Trustee shall be discharged from any future duties and obligations under this Agreement, but the Trustee shall continue after its resignation to be entitled to the benefits of the indemnities provided herein for a Trustee for any actions taken as a Trustee from the date of this Agreement until the date of discharge.

		
	Section 9.
	FMV Triggering Event and Reserve Credit Event.

(a)Notwithstanding anything in this Agreement to the contrary, in the event that the Beneficiary delivers a written certification substantially in the form attached hereto as Exhibit D-1 (a “FMV Triggering Event Certification”) to the Grantor and the Trustee of the occurrence of a FMV Triggering Event under the Coinsurance Agreement, upon receipt of such certification by the Trustee, the provisions of Sections 2(b)(i), 2(b)(ii), 2(b)(v) and 3(c) hereof shall no longer be effective and shall be replaced with the below provisions, effective 

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immediately without any further action by any Party, until such time as the Beneficiary notifies the Trustee that such FMV Triggering Event is no longer occurring in accordance with the terms of the Coinsurance Agreement in substantially the form attached hereto as Exhibit D-2 (a “Notice of Cure of FMV Triggering Event”), at which time the provisions below shall no longer be effective until such time as the Beneficiary provides the Trustee another FMV Triggering Event Certification and shall be replaced with the provisions of Sections 2(b) and 3(c) as in effect immediately prior to receipt of the FMV Triggering Event Certification, effective immediately without any further action by any Party:

(i)Section 2(b)(i) shall be replaced with the following:
If the aggregate Fair Market Value of the Eligible Assets at the end of any Accounting Period plus the stated amount of any Qualifying Letters of Credit at the end of such Accounting Period exceeds the Required Balance at the end of such Accounting Period, the Grantor may, with the written consent of the Beneficiary (which shall not be unreasonably withheld, delayed or conditioned), withdraw Trust Assets from the Trust Account in an amount not to exceed such excess, by delivering (x) a written notice from the Grantor Authorized Officers substantially in the form attached hereto as Exhibit C-4 (a “FMV Grantor Withdrawal Notice”), and (y) all applicable Loan Assignment Documents or Other Assignment Documents, in each case, to the Trustee with a copy to the Beneficiary.  The FMV Grantor Withdrawal Notice shall specify the invested Trust Assets or cash amount to be withdrawn.  Each withdrawal from the Trust Account by the Grantor shall constitute a representation and certification of the Grantor to the Beneficiary that such withdrawal is being made in accordance with the terms of the Coinsurance Agreement and this Agreement.
(ii)Section (b)(ii) shall be replaced with the following:  “[Intentionally Omitted]”

(iii)Section (b)(v) shall be replaced with the following:
Upon receipt of a FMV Grantor Withdrawal Notice duly endorsed by the Beneficiary to evidence its consent, the Trustee shall immediately take any and all necessary steps to transfer the Trust Assets being withdrawn to or for the account of the Grantor or its designee as set forth in the FMV Grantor Withdrawal Notice, including executing the Loan Assignment Documents or Other Assignment Documents provided by Grantor. The Trustee shall be protected and indemnified for any loss, liability or damage incurred by it in relying upon and following any Grantor Withdrawal Notice for such withdrawal that on its face conforms to the requirements of this Agreement.
(iv)Section 3(c) shall be replaced with the following:
From time to time, and with the written consent of the Beneficiary (which shall not be unreasonably withheld, conditioned or delayed), the Grantor or its designated Investment Manager may direct the Trustee to substitute Trust 

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Assets, provided, that at the time of such substitution, the withdrawn Trust Assets are replaced with Eligible Assets having a Fair Market Value at least equal to the Fair Market Value of the Trust Assets withdrawn.  The Trustee shall have no responsibility whatsoever to determine the value of such substituted Trust Assets or that such substituted Trust Assets constitute Eligible Assets.
Beneficiary shall deliver a Notice of Cure of FMV Triggering Event to the Trustee promptly upon becoming aware that a FMV Triggering Event that has occurred is no longer continuing.
(b)Notwithstanding the foregoing, the Trust Account created hereunder shall continue in existence following the occurrence of a FMV Triggering Event.  Following the occurrence of a FMV Triggering Event, the Grantor shall ensure that the Eligible Assets in the Trust Account have an aggregate Fair Market Value at least equal to the Required Balance within 10 (ten) Business Days following the FMV Triggering Event.

(c)Notwithstanding anything in this Agreement to the contrary, in the event that the Beneficiary delivers a written certification substantially in the form attached hereto as Exhibit D-3 (a “Reserve Credit Event Certification”) to the Grantor and the Trustee of the occurrence of a Reserve Credit Event under the Coinsurance Agreement, upon receipt of such certification by the Trustee, the provisions of Section 2(c) hereof shall no longer be effective and shall be replaced with the below provisions, effective immediately without any further action by any Party, until such time as the Beneficiary notifies the Trustee that such Reserve Credit Event is no longer occurring in accordance with the terms of the Coinsurance Agreement in substantially the form attached hereto as Exhibit D-4 (a “Notice of Cure of Reserve Credit Event”), at which time the provisions below shall no longer be effective until such time as the Beneficiary provides the Trustee another Reserve Credit Event Certification and shall be replaced with the provisions of Section 2(c) as in effect immediately prior to receipt of the Reserve Credit Event Certification, effective immediately without any further action by any Party Section 2(c) shall be replaced with the following:
Notwithstanding anything to the contrary herein, in addition to rights of the Beneficiary to withdraw Trust Assets set forth in Sections 2(a)(i)-(ii), the Beneficiary shall have the right once per calendar month during the term of this Agreement to direct the Trustee to withdraw Trust Assets consisting of cash and cash equivalents from the Trust Account and to transfer such Trust Assets to the Designated Administrative Account in an amount determined by the Grantor up to the applicable Monthly Funding Limit; provided that, following such withdrawal, (i) the aggregate Fair Market Value of the Eligible Assets plus (B) the face amount of any Qualifying Letters of Credit is no less than 102% of the amount that would be required to be held in the Trust Account as of end of the prior calendar month, calculated based on the most recent report delivered by the Grantor under Section 4.9 of the Coinsurance Agreement, in order to provide the Ceding Company with Reserve Credit as of the end of such calendar month. The Beneficiary shall have a right to withdraw Trust Assets from the Trust Account pursuant to the preceding sentence by delivering written notice to the Trustee, with a simultaneous copy to the Grantor, substantially in the form attached hereto 

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as Exhibit E-2 (the “RCE Designated Administrative Account Transfer Notice”) specifying the amount and specific Trust Assets to be withdrawn and certifying the satisfaction of the conditions noted in this Section 2(c) with respect to such amounts.  Each withdrawal from the Trust Account by the Beneficiary pursuant to this Section 2(c) shall constitute a representation and certification of the Beneficiary to the Grantor that such withdrawal is being made in accordance with the terms of the Coinsurance Agreement and this Agreement, including the terms of this Section 2(c).  The Beneficiary shall not deliver a RCE Designated Administrative Account Transfer Notice except as expressly permitted by this Section 2(c).  Other than a RCE Designated Administrative Account Transfer Notice, no other statement or document need be presented by the Beneficiary in order to transfer Trust Assets consisting of cash and cash equivalents pursuant to this Section 2(c) to the Designated Administrative Account.
Beneficiary shall deliver a Notice of Cure of Reserve Credit Event to the Trustee promptly upon becoming aware that a Reserve Credit Event that has occurred is no longer continuing.
		
	Section 10.
	Termination of the Trust Account.

(a)The Trust Account and this Agreement, except for the indemnities provided herein, which shall survive termination, may be terminated, other than pursuant to an order of a court having jurisdiction, only after (i) the Grantor and the Beneficiary have given the Trustee joint written notice of their intention to terminate the Trust Account (the “Notice of Intention”), and (ii) the Trustee has given the Grantor and the Beneficiary the written notice specified in paragraph (b) of this Section 10.  The Notice of Intention shall specify the date on which the Grantor and the Beneficiary intend the Trust Account and this Agreement to terminate (the “Proposed Date”).

(b)Within three (3) days following receipt by the Trustee of the Notice of Intention, the Trustee shall give at least thirty (30) days written notice (the “Termination Notice”) to the Beneficiary and the Grantor of the date (the “Termination Date”) on which the Trust Account shall terminate.  The Termination Date shall be (a) the Proposed Date (or if not a Business Day, the next Business Day thereafter), if the Proposed Date is at least thirty (30) days but no more than forty-five (45) days subsequent to the date the Termination Notice is given, (b) thirty (30) days subsequent to the date the Termination Notice is given (or if not a Business Day, the next Business Day thereafter), if the Proposed Date is less than thirty (30) days subsequent to the date the Termination Notice is given; or (c) forty-five (45) days subsequent to the date the Termination Notice is given (or if not a Business Day, the next Business Day thereafter), if the Proposed Date is more than forty-five (45) days subsequent to the date the Termination Notice is given.

(c)On the Termination Date, after satisfaction of any outstanding Beneficiary Withdrawal Notices, the Trustee shall transfer any Trust Assets remaining in the Trust Account to the Grantor, at which time all duties and obligations of the Trustee with respect to such Trust Assets shall cease.

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	Section 11.
	Definitions.

Except as the context shall otherwise require, the following terms shall have the following meanings for all purposes of this Agreement (the definitions to be applicable to both the singular and the plural forms of each term defined if both such forms of such term are used in this Agreement):
The term “Accounting Period” shall mean each calendar quarter during the term of this Agreement or any fraction thereof ending on the Termination Date.
The term “Action” shall mean any civil, criminal, administrative or other claim, action, suit, litigation, arbitration, charge, complaint, demand, notice or other similar proceeding, in each case by or before any Governmental Authority or arbitral body.
The term “Affiliate” shall mean, with respect to any Person at the time in question, any other Person controlling, controlled by or under common control with such Person; provided that, with respect to the Grantor, “Affiliate” shall mean Wilton Re Ltd. and its direct and indirect Subsidiaries.  For purposes of the foregoing, “control,” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
The term “Agreement” shall have the meaning specified in the preamble.
The term “Applicable Law” shall mean all laws, common law, rules, regulations, ordinances, codes, statutes, judgments, injunctions, Governmental Orders and decrees of all Governmental Authorities applicable to the Person, place and situation in question.
The term “Applicable State” shall have the meaning specified in the Coinsurance Agreement.
The term “Beneficiary” shall have the meaning specified in the preamble. 
The term “Beneficiary Authorized Officers” shall mean any two of the following officers: the President, Chief Financial Officer, Treasurer, Assistant Treasurer, Secretary or any Assistant Secretary of the Beneficiary.
The term “Beneficiary Withdrawal Notice” shall have the meaning specified in Section 2(a) of this Agreement.
The term “Book-Entry Asset” shall have the meaning specified in Section 6(d) of this Agreement.
The term “Business Day” shall mean any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York, Chicago, Illinois, or Minneapolis, Minnesota are permitted or obligated by Applicable Law to be closed.

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The term “Coinsurance Agreement” shall have the meaning specified in the recitals.
The term “Communications” shall have the meaning specified in Section 2(e) of this Agreement.
The term “Depository” shall have the meaning specified in Section 6(d) of this Agreement.
The term “Designated Administrative Account” shall mean the Bank Account at the bank and with the account number listed in Exhibit B, as such Exhibit B may be amended by the Ceding Company and the Reinsurer from time to time.
The term “Designated Administrative Account Transfer Notice” shall have the meaning specified in Section 2(c) of this Agreement.
The term “Eligible Assets” shall mean cash and or investments of the type consistent with the requirements for authorized investments and admitted assets under the insurance laws in the Reinsurer Domiciliary State; provided, that (a) each such investment that is a security is issued by an institution that is not the Grantor, the Beneficiary or an Affiliate of either the Grantor or the Beneficiary and (b) such investments comply with the Investment Guidelines; provided, further, that during the continuation of a Reserve Credit Event, such assets shall also meet all requirements under the insurance laws of the Applicable State with respect to providing reserve credit to the Beneficiary; provided, further, that, if an asset in the Trust Account ceases to meet the criteria to be an “Eligible Asset”, such asset shall be deemed an “Eligible Asset” for an additional period commencing on the date such asset ceases to meet such criteria and ending on the earlier of (i) the fifteenth (15th) Business Day thereafter and (ii) the last day of the calendar quarter on which such asset ceased to meet such criteria.
The term “Eligible Derivative Checklist” shall mean a checklist in the form attached hereto as Exhibit G-1.
The term “Eligible Derivatives” shall mean derivatives for hedging and duration maintenance purposes as contemplated in the Investment Guidelines.
The term “Environmental Law” shall mean the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Resource Conservation and Recovery Act of 1976, as amended, and any other applicable federal, state, local, or foreign statute, rule, regulation, order, judgment, directive, decree, permit, license or common law as in effect now, previously, or at any time during the term of this Agreement, and regulating, relating to, or imposing liability or standards of conduct concerning air emissions, water discharges, noise emissions, the release or threatened release or discharge of any Hazardous Material into the environment, the use, manufacture, production, refinement, generation, handling, treatment, storage, transport or disposal of any Hazardous Material or otherwise concerning pollution or the protection of the outdoor or indoor environment, or human health or safety in relation to exposure to Hazardous Materials.

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The term “Equity Investment Checklist” shall mean a checklist in the form attached hereto as Exhibit G-2.
The term “Equity Investments” shall mean private placement eligible investments of the types listed under clause (xiii) of the Investment Guidelines.
The term “Fair Market Value” shall have the meaning specified in the Coinsurance Agreement.
The term “FMV Grantor Withdrawal Notice” shall have the meaning specified in Section 9(a)(i) of this Agreement.
The term “FMV Triggering Event” shall have the meaning specified in the Coinsurance Agreement. 
The term “FMV Triggering Event Certification” shall have the meaning specified in Section 9(a) of this Agreement.
The term “Governmental Authority” shall mean any governmental, legislative, judicial, administrative or regulatory authority, agency, commission, board, body, court, self-regulatory body or entity or any instrumentality thereof, whether United States federal, state, local or non-U.S.
The term “Governmental Order” shall mean any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
The term “Grantor” shall have the meaning specified in the preamble.
The term “Grantor Authorized Officers” shall mean any two of the following officers: the Chief Executive Officer, Chief Financial Officer, Chief Investment Officer, Assistant Treasurer or any Senior Vice President of the Grantor.
The term “Grantor Withdrawal Notice” shall have the meaning specified in Section 2(b) of this Agreement.
The term “Hazardous Materials” shall mean, without limitation, any pollutant, contaminant or hazardous, toxic, medical, biohazardous, or dangerous waste, substance, constituent or material, defined or regulated as such in, or for the purpose of, any applicable Environmental Law, including any asbestos, any petroleum, oil (including crude oil or any fraction thereof), any radioactive substance, any polychlorinated biphenyls, any toxin, chemical, disease-causing agent or pathogen, and any other substance that gives rise to liability under any applicable Environmental Law.
The term “Income” shall have the meaning specified in Section 4 of this Agreement.
The term “Income Account” shall have the meaning specified in Section 4 of this Agreement.

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The term “Investment Guidelines” shall mean the investment guidelines attached hereto as Exhibit F.
The term “Investment Manager” shall have the meaning specified in Section 2(i) of this Agreement.
The term “Investment Order” shall have the meaning specified in Section 3(c) of this Agreement.
The term “Loan Assignment Documents” shall mean, (i) with respect to any Mortgage Loan, such documentation as may be required to fully effect an assignment of such Mortgage Loan, including (as applicable) (a) in the event or to the extent that a promissory note has been executed in favor of and delivered to the Grantor under the terms of the related credit or loan agreement (including any mortgage, security or other related document or instrument), (1) the original promissory note or notes (collectively and severally, the “Note”) evidencing such Mortgage Loan and (2) an original allonge in a form sufficient to properly assign and transfer each Note evidencing such Mortgage Loan, (b) one or more original assignment agreements executed in recordable form and otherwise in a form sufficient to transfer and assign of record each of the mortgages, deeds of trust, deeds to secure debt or similar instruments securing such Mortgage Loan (the “Security Instruments”) and each of the separate assignments of rents and leases and similar agreements securing such Mortgage Loan (the “Lease Assignments”), (c) UCC-3 assignments in form sufficient to assign each of the related UCC-1 financing statements filed with respect to such Mortgage Loan (“Financing Statements”), (d) an original executed omnibus assignment in form and substance sufficient to transfer all of Grantor’s other right, title and interest in and to the Mortgage Loan, including specifically, without limitation, all of Grantor’s rights and interests in and to the other instruments or documents evidencing, securing or otherwise relating to such Mortgage Loan and (e) any original guaranties or indemnity agreements related to such Mortgage Loan (the “Guaranties”), and (ii) with respect to any Participation Asset the Participation Certificate evidencing such Participation Asset in the name of the Trustee.  The Loan Assignment Documents in respect of Mortgage Loans (other than the Note and the Guaranties) shall be in substantially the forms attached hereto as Exhibit A-2, with such changes therein and additional documentation and information as may be required under applicable law to (A) fully effect an assignment of the applicable Mortgage Loan, and (B) with respect to Recordable Loan Assignment Documents, permit such documents to be recorded or filed, as appropriate.
The term “Monthly Funding Limit” shall have the meaning specified in the Coinsurance Agreement.
The term “Mortgage Loan” shall mean any commercial mortgage loans deposited to the Trust Account after the date hereof as provided in this Agreement.
The term “Mortgage Loan Checklist” shall mean a checklist in the form attached hereto as Exhibit G-3.
The term “Notice of Cure of FMV Trigger Event” shall have the meaning specified in Section 10(a) of this Agreement.

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The term “Notice of Cure of Reserve Credit Event” shall have the meaning specified in Section 10(a) of this Agreement.
The term “Notice of Intention” shall have the meaning specified in Section 10(a) of this Agreement.
The term “Other Assignment Documents” shall mean, with respect to any Equity Investment, Eligible Derivative or Private Placement, (a) such documentation evidencing such Equity Investment, Eligible Derivative or Private Placement and (b) such documentation (it being understood that the Grantor shall not be responsible for such documentation (or any information in such documentation) required to be provided by the Beneficiary, and the Grantor shall be excused herein to the limited extent any such information or documentation is not timely provided by the Beneficiary) as may be required to fully effect a transfer and an assignment of such Equity Investment, Eligible Derivative or Private Placement, including a pre-approved consent of such assignment, if required.
The term “Participation Agreement” shall mean any participation agreement entered into by the holder of the Underlying Asset and any participants establishing participation interests in the Underlying Asset. 
The term “Participation Assets” shall mean the assets transferred to the Trust Account by the Grantor constituting participation interests established pursuant to a Participation Agreement in commercial mortgage loans.
The term “Party” shall have the meaning specified in the preamble.
The term “Person” shall mean any individual, corporation, partnership, firm, joint venture, association, limited liability company, limited liability partnership, joint-stock company, trust, unincorporated organization, governmental, judicial or regulatory body, business unit, division or other entity.
The term “Private Placement” shall have the meaning specified in the Investment Guidelines limited, however to debt obligations.
The term “Private Placement Checklist” shall mean a checklist in the form attached hereto as Exhibit G-4.
The term “Proposed Date” shall have the meaning specified in Section 10(a) of this Agreement. 
The term “Qualifying Letters of Credit” shall have the meaning specified in the Coinsurance Agreement.
The term “Quarterly Statement” shall have the meaning specified in Section 6(a) of this Agreement.
The term “RCE Designated Administrative Account Transfer Notice” shall have the meaning specified in Section 9(c) of this Agreement.

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The term “Recordable Loan Assignment Documents” shall mean any Loan Assignment Document that is customarily recorded or filed in connection with the assignment of a Mortgage Loan, including Security Instruments, Lease Assignments, and Financing Statements.  
The term “Reinsurer Domiciliary State” shall have the meaning specified in the Coinsurance Agreement.
The term “Required Balance” shall have the meaning specified in the Coinsurance Agreement.
The term “Reserve Credit” shall have the meaning specified in the Coinsurance Agreement.
The term “Reserve Credit Event” shall have the meaning specified in the Coinsurance Agreement.
The term “Reserve Credit Event Certification” shall have the meaning specified in Section 9(c) of this Agreement.
The term “Servicing Agreement” shall mean any servicing agreement entered into by the Grantor (or the holder of the Underlying Asset with respect to Participation Assets) and any third party with respect to any Mortgage Loan or Participation Asset.
The term “Statutory Book Value” shall have the meaning specified in the Coinsurance Agreement. 
The term “Subsidiary” shall mean, of any Person at the time in question, another Person more than fifty percent (50%) of the total combined voting power of all classes of capital stock or other voting interests of which, or more than fifty percent (50%) of the equity securities of which, is at such time owned directly or indirectly by such first Person.
The term “Termination Date” shall have the meaning specified in Section 10(b) of this Agreement.
The term “Termination Notice” shall have the meaning specified in Section 10(b) of this Agreement.
The term “Trailing Document” shall mean stamped copy of any recorded Recordable Loan Assignment Document that is not delivered to the Trustee at the time of the initial deposit due to the fact that such document has been delivered for recording and has not been returned to the Grantor prior to the deposit of the related Mortgage Loan into the Trust Account.
The term “Trust Account” shall have the meaning specified in the recitals.
The term “Trust Assets” shall have the meaning specified in Section 1(b) of this Agreement.

34

The term “Trustee” shall have the meaning specified in the preamble.
The term “Underlying Asset” shall mean (a) with respect to a Mortgage Loan, any property or other asset serving as collateral for any Mortgage Loan or (b) with respect to any Participation Asset, the commercial mortgage loan participated pursuant to the related Participation Agreement.
The term “Withdrawal Notice” shall have the meaning specified in Section 2(d) of this Agreement.  
The term “Withdrawing Party” shall have the meaning specified in Section 2(d) of this Agreement.
		
	Section 12.
	Governing Law.

THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS, TO THE EXTENT SUCH PRINCIPLES OR RULES ARE NOT MANDATORILY APPLICABLE BY STATUE AND WOULD PERMIT OR REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JUISDICTION.  The Parties hereby irrevocably submit to the jurisdiction of the courts of the State of New York and the federal courts of the United States of America located in the State, City or County of New York in any action arising out of or relating to this Agreement or the transactions contemplated hereby.  The Parties irrevocably agree that all claims in respect of the interpretation and enforcement of the provisions of this Agreement, and in respect of the transactions contemplated hereby, shall be heard and determined in such courts, and that such jurisdiction of such courts with respect thereto shall be exclusive, except solely to the extent that all such courts shall lawfully decline to exercise such jurisdiction.  The Parties hereby waive, and agree not to assert, to the maximum extent permitted by law, as a defense in any Action for the interpretation or enforcement hereof or in respect of any such transaction, that it is no subject to such jurisdiction or that such Action may not be brought or is not maintainable in such courts or that the venue thereof may not be appropriate or that this Agreement may not be enforced in or by such courts.  The Parties hereby consent to and grant any such court jurisdiction over the person of such Parties and agree that mailing of process or other papers in connection with any such Action in the manner provided in Section 14 or in such other manner as may be permitted by law, shall be valid and sufficient service thereof.  The Parties agree that final judgment in any such Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
		
	Section 13.
	Jury Waiver.

EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

35

		
	Section 14.
	Notices.

All notices, requests, consents, claims, demands and other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by electronic mail (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following respective addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 14.)
(a)if to the Beneficiary:

Bankers Life and Casualty Company
111 E. Wacker Drive, Suite 2100
Chicago, IL 60601
Attention: General Counsel
Email address: matt.zimpfer@cnoinc.com

with a copy (which shall not constitute notice) to:

Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Attention: John M. Schwolsky
      Donald B. Henderson, Jr.
Email Address: jschwolsky@willkie.com
             dhenderson@willkie.com

(b)if to the Grantor:

Wilton Reassurance Company
20 Glover Avenue, 4th Floor
Norwalk, CT 06850
Attention: Chief Executive Officer
Email address: mfleitz@wiltonre.com

with copies  (which shall not constitute notice) to:
Wilton Reassurance Company
20 Glover Avenue, 4th Floor
Norwalk, CT 06850
Attention: General Counsel
Email address: msarlitto@wiltonre.com

36

Wilton Reassurance Company
20 Glover Avenue, 4th Floor
Norwalk, Connecticut 06850
Attention: Vice President, Associate General Counsel, Transactions
Email address:  sdoran@wiltonre.com

Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
Attention: Marilyn A. Lion
Email address: malion@debevoise.com

(c)if to the Trustee:

Citibank, N.A.
Insurance Trust Product Management
390 Greenwich Street
New York, NY 10013
Attention: Deborah Mercer-Miller
Telephone: (212) 816-6861
Email: Deborah.mercermiller@citi.com

With a copy (which shall not constitute notice) to:

Citibank, N.A.
Trust and Custody Operations
480 Washington Boulevard, 30th Floor
Jersey City, NJ 07310
Attention: William Mulrenin
Telephone: 973-461-7017
Facsimile: 973-461-7193
Email: william.mulrenin@citi.com

or at such other address for a Party as such Party may hereafter specify for the purpose by notice to the other Parties.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.
		
	Section 15.
	Successors and Assigns; No Third-Party Beneficiaries.

(a)This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, permitted assigns and legal representatives.  Unless otherwise provided herein, neither this Agreement nor any right or obligation hereunder may be 

37

assigned by any Party (in whole or in part) by operation of law, including through a division statute, or otherwise, without the prior written consent of the other Parties.

(b)Except as otherwise expressly set forth in any provision of this Agreement, nothing in this Agreement is intended or shall be construed to give any Person, other than the Parties, their successors and permitted assigns, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.

		
	Section 16.
	Entire Agreement.

This Agreement, together with the Exhibits referred to herein and the agreements referenced herein, contain the entire agreement among the Parties with respect to the subject matter hereof and supersede all prior agreements, written or oral, with respect thereto.  
		
	Section 17.
	Interpretation.

Interpretation of this 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, Schedule and Exhibit are references to the Preamble, Recitals, Articles, Sections, paragraphs, Schedules and Exhibits to this 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 Agreement as a whole and not to any specific Section; (g) the headings are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (h) this Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted; (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 (A) the corresponding rules and regulations and (B) 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; and (l) references to any Person include such Person’s predecessors or successors, whether by merger, consolidation, amalgamation, reorganization or otherwise.  The Parties intend that the terms of this Agreement shall, to the fullest extent possible, be interpreted and applied consistently with the terms of the Coinsurance Agreement.
		
	Section 18.
	Waivers and Amendments.

This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Parties, or, in the case of a waiver, by the Party waiving compliance.  No delay on the part of any Party on exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any right, power or privilege, nor any single or partial exercise of any other

38

such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege.  The rights and remedies herein provided are cumulative and, unless provided otherwise in this Agreement or the Coinsurance Agreement, are not exclusive of any rights or remedies that any Party may otherwise have at law or in equity.
		
	Section 19.
	Severability.

Any term or provision of this Agreement that is determined by a court of competent jurisdiction to be inoperative or unenforceable for any reason shall, as to that jurisdiction, be ineffective solely to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this 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 Agreement is determined by a court of competent jurisdiction to be so broad as to be unenforceable, that provision shall be interpreted to be only so broad as is enforceable.
		
	Section 20.
	Execution in Counterparts.

This 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.  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 or electronic mail transmission, which transmission shall be deemed delivery of an originally executed document.
[Remainder of page intentionally left blank.  Signature pages follow.]

39

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on the day and year first above written.
	
		
	WILTON REASSURANCE COMPANY

	 
	 

	By:
	/s/ Michael Fleitz

	Name:
	Michael Fleitz

	Title:
	Chief Executive Officer

	 
	 

	 
	 

	 
	 

	
		
	BANKERS LIFE AND CASUALTY COMPANY

	 
	 

	By:
	/s/ Erik M. Helding

	Name:
	Erik M. Helding

	Title:
	Executive Vice President and Chief Financial Officer

	 
	 

	 
	 

	 
	 

	
		
	CITIBANK, N.A., as trustee

	 
	 

	By:
	/s/ Marc Fryburg

	Name:
	Marc Fryburg

	Title:
	Vice President

	 
	Investor Services

	 
	390 Greenwich St./3rd Fl.

	 
	New York, NY  10013

[Signature Page to Trust Agreement]

EXHIBIT A-1
INITIAL TRANSFERRED ASSETS
(Omitted)

EXHIBIT A-2

FORM OF LOAN ASSIGNMENT DOCUMENTS

(Omitted)

EXHIBIT  B
DESIGNATED ADMINISTRATIVE ACCOUNT
(Omitted)

EXHIBIT C-1
FORM OF
BENEFICIARY WITHDRAWAL NOTICE

From:    Bankers Life and Casualty Company (“Beneficiary”)
To:    [Trustee] (the “Trustee”)
[Wilton Reassurance Company (“Grantor”)]1 
Date:    [  ]
		
	Re:
	Trust Agreement dated as of [      ], among Wilton Reassurance Company (“Grantor”), the Beneficiary, and the Trustee (as amended, modified or supplemented from time to time, the “Trust Agreement”)

Ladies and Gentlemen:
We hereby give you notice pursuant to Section 2(a) of the Trust Agreement that the Beneficiary is entitled to withdraw the [sum of $_________] [following Trust Assets] from the Trust Account for the purposes permitted under Section 2(a) of the Trust Agreement and Section 4.7([a][b]) of the Coinsurance Agreement.  Capitalized terms used in this letter but not defined herein shall have their respective meanings in the Trust Agreement.   
[Specify list of Trust Assets to be withdrawn].

Payment or delivery should be made to [Insert account information] by the following method:  [Describe method of cash transfer or Trust Assets to be withdrawn and delivery instructions]. 
Yours faithfully,

Bankers Life and Casualty Company
By: _________________________
Name:
Title:

________________________
1 Notice to Grantor required in connection with a Beneficiary withdrawal in accordance with Coinsurance Agreement Section 4.7(a).

EXHIBIT C-2
FORM OF
GRANTOR WITHDRAWAL NOTICE
		
	From:
	Wilton Reassurance Company (“Grantor”)

To:    [Trustee] (the “Trustee”)
Bankers Life and Casualty Company (the “Beneficiary”)
Date:    [  ]
		
	Re:
	Trust Agreement dated as of [      ], among the Grantor, the Beneficiary and the Trustee (as amended, modified or supplemented from time to time, the “Trust Agreement”)

Ladies and Gentlemen:
We hereby give you notice pursuant to Section 2(b) of the Trust Agreement that the Grantor is entitled to withdraw the [sum of $_________] [following Trust Assets] from the Trust Account for the purposes permitted under Section 2(b) of the Trust Agreement:
[Specify list of Trust Assets to be withdrawn].
The Grantor hereby certifies to the Trustee and Beneficiary that (i) the aggregate Statutory Book Value of the Eligible Assets in the Trust Account following such withdrawal will be at least equal to the Required Balance as of the most recent Accounting Period end and (ii) the ratio of the aggregate Statutory Book Value of the Eligible Assets held in the Trust Account to the aggregate Fair Market Value of such assets will not increase as a result of such withdrawal, other than de minimis increases associated with the removal of cash or cash equivalents.   
Following delivery by the Trustee to the Beneficiary of a copy of this notice, payment or delivery should be made to [Insert account information] by the following method:  [Describe method of cash transfer and/or delivery instructions for withdrawn Trust Assets], upon the first to occur of the following events, unless this notice shall have been earlier revoked by the undersigned:
		
	(1)
	the expiration of fifteen (15) days from and including the date of your receipt of this Grantor Withdrawal Notice without your having received any notice, given as provided in Section 14 of the Trust Agreement, from the Beneficiary disputing the amount requested for withdrawal by the undersigned in this Grantor Withdrawal Notice; 

		
	(2)
	your receipt of a certificate signed by the undersigned and the Beneficiary fixing and determining the amount of Trust Assets, if any, the undersigned may withdraw from the Trust Account; 

		
	(3)
	your receipt of a certificate from the undersigned certifying that a non-appealable award from an arbitration panel or judgment from a court of competent jurisdiction has been entered specifying the amount of Trust Assets which the undersigned may withdraw from the Trust Account, with a copy of such arbitration award or judgment attached; or

		
	(4)
	your receipt, in the manner provided in Section 14 of the Trust Agreement, of written confirmation from the Beneficiary consenting to the withdrawal requested in this Grantor Withdrawal Notice.

Yours faithfully,
Wilton Reassurance Company
		
	By:
	________________________________    

Name:
Title:

EXHIBIT C-3

FORM OF DOCUMENT RELEASE LETTER

		
	[Servicer]
	Date: ___________

            
		
	Re:
	Servicing Agreement dated as of [______], between [Servicer] and []

In connection with the administration of the below [mortgage loan(s)/participations] serviced by you and the servicing file related thereto held by you as the Servicer, we request and authorize the release of the servicing file for the [loan/participation] described below to Citibank N.A., as Trustee (the “Trustee”) under the Trust Agreement dated as of [   ] among Bankers Life and Casualty Company (the “Beneficiary”), Wilton Reassurance Company (the “Grantor”) and the Trustee, or to the Beneficiary, in each case upon request of the Trustee.  

Borrower’s Name:    
    
Property Name & Address:    

Loan Number:                

Note Amount:            

Mortgage Dated:        

[Participation Interest:]        

[___]

By:__________________                    
Name:________________                    
Title:_________________                    

By:__________________                    
Name:________________                    
Title:_________________                    
    

The undersigned Servicer hereby acknowledges its agreement to deliver the Servicing File to ____________ .

[Servicer]

By:                    

EXHIBIT C-4
FORM OF
FMV GRANTOR WITHDRAWAL NOTICE
		
	From:
	Wilton Reassurance Company (“Grantor”)

To:    [Trustee] (the “Trustee”)
Bankers Life and Casualty Company (the “Beneficiary”)
Date:    [  ]
		
	Re:
	Trust Agreement dated as of [      ], among the Grantor, the Beneficiary and the Trustee (as amended, modified or supplemented from time to time, the “Trust Agreement”)

Ladies and Gentlemen:
We hereby give you notice pursuant to Section 2(b) of the Trust Agreement that the Grantor is entitled to withdraw the [sum of $_________] [following Trust Assets] from the Trust Account for the purposes permitted under Section 2(b) of the Trust Agreement:
[Specify list of Trust Assets to be withdrawn].
The Grantor hereby certifies to the Trustee and the Beneficiary that the aggregate Fair Market Value of all Eligible Assets in the Trust Account plus the stated amount of any Qualifying Letters of Credit following such withdrawal will be at least equal to the Required Balance as of the most recent Accounting Period end.     
Yours faithfully,
Wilton Reassurance Company
		
	By:
	_____________________    

Name:
Title:

Consented to by:
Bankers Life and Casualty Company
		
	By:
	_____________________    

Name:
Title:

EXHIBIT D-1
FORM OF
FMV TRIGGERING EVENT CERTIFICATION
From:    Bankers Life and Casualty Company (“Beneficiary”)
		
	To:
	[•] (“Grantor”)

[Trustee] (“Trustee”)
Date:    [  ]
		
	Re:
	FMV Triggering Event under the Trust Agreement dated as of [      ], among the Grantor, the Beneficiary and the Trustee (as amended, modified or supplemented from time to time, the “Trust Agreement”)

Ladies and Gentlemen:
We are writing in connection with the Trust Agreement dated as of [      ], among the Grantor, the Beneficiary and the Trustee (as amended, modified or supplemented from time to time, the “Trust Agreement”).  Capitalized terms used in this letter but not defined herein shall have their respective meanings in the Trust Agreement.   
We hereby certify to you pursuant to Section 9(a) of the Trust Agreement that a FMV Triggering Event is occurring and continuing as of the date hereof as follows:
[Describe applicable FMV Triggering Event]
This letter shall constitute a “FMV Triggering Event Certification” for purposes of Section 9(a) of the Trust Agreement.  
Yours faithfully,

Bankers Life and Casualty Company

By:________________________
Name:
Title:  

EXHIBIT D-2
FORM OF
NOTICE OF CURE OF FMV TRIGGERING EVENT
From:    Bankers Life and Casualty Company (“Beneficiary”)
		
	To:
	[•] (“Grantor”)

[Trustee] (“Trustee”)
Date:    [  ]
		
	Re:
	FMV Triggering Event under the Trust Agreement dated as of [      ], among the Grantor, the Beneficiary and the Trustee (as amended, modified or supplemented from time to time, the “Trust Agreement”)

Ladies and Gentlemen:
We make reference to our FMV Triggering Event Certification (as defined in the Trust Agreement) provided to the Trustee on [    ].  We hereby give you notice pursuant to Section 9(a) of the Trust Agreement that the FMV Triggering Event (as defined in the Trust Agreement) with respect to which such FMV Triggering Event Certification related is no longer continuing.  From and after the date of this notice, without any further action on the part of the Beneficiary, the Grantor or the Trustee, the terms of Sections 2(b) and 3(c) of the Trust Agreement shall again become effective and the terms of Section 9(a) of the Trust Agreement shall be no longer effective until such time as you receive another FMV Triggering Event Certification.
Yours faithfully,

Bankers Life and Casualty Company

By:________________________
Name:
Title:  

EXHIBIT D-3
FORM OF
RESERVE CREDIT EVENT CERTIFICATION
From:    Bankers Life and Casualty Company (“Beneficiary”)
		
	To:
	[•] (“Grantor”)

[Trustee] (“Trustee”)
Date:    [  ]
		
	Re:
	Reserve Credit Event under the Trust Agreement dated as of [      ], among the Grantor, the Beneficiary and the Trustee (as amended, modified or supplemented from time to time, the “Trust Agreement”)

Ladies and Gentlemen:
We are writing in connection with the Trust Agreement dated as of [      ], among the Grantor, the Beneficiary and the Trustee (as amended, modified or supplemented from time to time, the “Trust Agreement”).  Capitalized terms used in this letter but not defined herein shall have their respective meanings in the Trust Agreement.   
We hereby certify to you pursuant to Section 9(c) of the Trust Agreement that a Reserve Credit Event is occurring and continuing as of the date hereof as follows:
[Describe applicable Reserve Credit Event]
This letter shall constitute a “Reserve Credit Event Certification” for purposes of Section 9(c) of the Trust Agreement.  
Yours faithfully,

Bankers Life and Casualty Company

By:________________________
Name:
Title:  

EXHIBIT D-4
FORM OF
NOTICE OF CURE OF RESERVE CREDIT EVENT
From:    Bankers Life and Casualty Company (“Beneficiary”)
		
	To:
	[•] (“Grantor”)

[Trustee] (“Trustee”)
Date:    [  ]
		
	Re:
	Reserve Credit Event under the Trust Agreement dated as of [      ], among the Grantor, the Beneficiary and the Trustee (as amended, modified or supplemented from time to time, the “Trust Agreement”)

Ladies and Gentlemen:
We make reference to our Reserve Credit Event Certification (as defined in the Trust Agreement) provided to the Trustee on [    ].  We hereby give you notice pursuant to Section 9(c) of the Trust Agreement that the Reserve Credit Event (as defined in the Trust Agreement) with respect to which such Reserve Credit Event Certification related is no longer continuing.  From and after the date of this notice, without any further action on the part of the Beneficiary, the Grantor or the Trustee, the terms of Section 2(c) of the Trust Agreement shall again become effective and the terms of Section 9(c) of the Trust Agreement shall be no longer effective until such time as you receive another Reserve Credit Event Certification.
Yours faithfully,

Bankers Life and Casualty Company

By:________________________
Name:
Title:  

EXHIBIT E-1
FORM OF
DESIGNATED ADMINISTRATIVE ACCOUNT TRANSFER NOTICE
From:    Wilton Reassurance Company (“Grantor”)
To:    [Trustee] (the “Trustee”)
Cc:    Bankers Life and Casualty Company (“Beneficiary”)
Date:    [  ]
		
	Re:
	Trust Agreement dated as of [      ], among the Grantor, the Beneficiary and the Trustee (as amended, modified or supplemented from time to time, the “Trust Agreement”)

Ladies and Gentlemen:
We hereby give you notice pursuant to Section 2(c) of the Trust Agreement that the Grantor is entitled to withdraw the sum of $[_________] in cash and cash equivalents from the Trust Account.
Payment or delivery should be made to [Insert account information] by the following method:  [Describe method of cash transfer]. 
The Grantor hereby certifies that all conditions in Section 2(c) of the Trust Agreement with respect to the Grantor’s right to withdraw the amount specified herein have been satisfied.
Yours faithfully,
Wilton Reassurance Company

By: _________________________
Name:
Title:

EXHIBIT E-2
FORM OF
RCE DESIGNATED ADMINISTRATIVE ACCOUNT TRANSFER NOTICE
From:    Bankers Life and Casualty Company (“Beneficiary”)
To:    [Trustee] (the “Trustee”)
Cc:    Wilton Reassurance Company (“Grantor”)
Date:    [  ]
		
	Re:
	Trust Agreement dated as of [      ], among the Grantor, the Beneficiary and the Trustee (as amended, modified or supplemented from time to time, the “Trust Agreement”)

Ladies and Gentlemen:
We hereby give you notice pursuant to Section 2(c) of the Trust Agreement that the Beneficiary is entitled to withdraw the sum of $[_________] in cash and cash equivalents from the Trust Account.
Payment or delivery should be made to [Insert account information] by the following method:  [Describe method of cash transfer]. 
The Beneficiary hereby certifies that all conditions in Section 2(c) of the Trust Agreement with respect to the Beneficiary’s right to withdraw the amount specified herein have been satisfied.
Yours faithfully,
Bankers Life and Casualty Company

By: _________________________
Name:
Title:

Title:

EXHIBIT E-3

FORM OF GRANTOR SERVICING NOTICE

Wilton Reassurance Company (the “Grantor”), as grantor under the Trust Agreement dated as of [•] by and among Bankers Life and Casualty Company (the “Beneficiary”), the Grantor and Citibank N.A., as Trustee (the “Trustee”), hereby authorizes and directs the Trustee to deliver the following documentation for the [Mortgage Loan][Participation Asset] described below, in accordance with the directions set forth below:

Documentation for Mortgage Loan: 

Loan Number:_____________
Loan Name:_______________
Original Principal Amount:  $_______________
Collateral for Loan:____________________
Requested Documents:_______________________________________________

Delivery Directions:

Name:        _____________________
Address:    ______________________

This Notice is a “Grantor Servicing Notice” within the meaning of Section 2(b)(iv)  of the Trust Agreement.  Capitalized terms used herein but not otherwise defined shall have the respective meanings ascribed to them in the Trust Agreement. The Grantor hereby certifies to the Trustee that the withdrawal of the documentation for the Mortgage Loan specified herein (a) is required in connection with (i) the payoff of the [Mortgage Loan][Participation Asset], (ii) the sale of the [Mortgage Loan][Participation Asset] by the Grantor, or (iii) the modification, restructuring, foreclosure, deed-in-lieu or other liquidation of the property serving as collateral for the [Mortgage Loan][Participation Asset], or (b) has otherwise been reasonably requested by the Grantor.  
Yours faithfully,
WILTON REASSURANCE COMPANY

	
	
	

By: _________________________
Name:
Title:

	

By: _________________________
Name:
Title: 

EXHIBIT F
INVESTMENT GUIDELINES
	
				
	The Portfolios ......................................................... 
	These investment guidelines will apply to the Bankers Life and Casualty LTC Trust portfolio (the “Portfolio”).  100% of the assets in the Portfolio will be invested in eligible investments, as set forth below.  The limitations set forth below will be applied to the entire Portfolio and not to sub-portfolios.

	Asset Guidelines .................................................... 
	The Portfolio may be invested in the following eligible investments.  No security in an asset class may be purchased if such purchase would cause the percentage of assets invested in the applicable asset class at the time of purchase to exceed the following percentage of total assets or if at the time of purchase the percentage of assets invested in the applicable asset class already exceeds the following percentage of total assets. 

	 
	 
	(i) 
	U.S. Treasury and agency securities (100%); 

	 
	 
	(ii) 
	Agency and non-agency mortgage-backed securities (MBS) backed by loans secured by residential, multi-family and commercial properties including, but not limited to passthroughs, CMOs, REMICs, SMBS, project loans, and adjustable rate mortgages (50%), with no more than 20% invested in non-agency residential MBS; 

	 
	 
	(iii) 
	Obligations of domestic U.S. Corporate issuers (85%) and together with obligations of foreign corporations based on ultimate parent country of risk (90%);

	 
	 
	(iv)
	Taxable and tax exempt municipal securities (20%);

	 
	 
	(v) 
	Bank loans (10%);

	 
	 
	(vi) 
	Convertible preferred stocks and convertible bonds (5%);

	 
	 
	(vii) 
	Obligations of foreign corporations based on ultimate parent country of risk (20%), with no more than 10% invested in obligations of foreign corporations based in countries identified in the MSCI Emerging Markets Index and the MSCI Frontier Markets Index;

	
				
	 
	 
	(viii) 
	Asset-backed securities, including collateralized loan obligations (30%);

	 
	 
	(ix) 
	Securities senior to common equity as to which dividends may not be declared or coupon payments may be deferred without penalty (10%);

	 
	 
	(x) 
	Money market instruments (100%);

	 
	 
	(xi) 
	Obligations of foreign governments and supra-national organizations (8%);

	 
	 
	(xii)
	Exchange traded funds (5%);

	 
	 
	(xiii) 
	Equity participations in business entities (including limited partnership interests) (10%); and 

	 
	 
	(xiv) 
	Commercial mortgage loans (15%). 

	 
	The Portfolio may purchase private placements and Rule 144A securities in accordance with the above limitations.  Securities with a Delaware co-issuer will be considered to be domestic securities.

	 
	Investments not specifically permitted are prohibited.  Investments outside of the eligible investments above require approval from Bankers Life and Casualty Company or its designated representatives.  No investments shall be made in issuers who are, or whose country of domicile is, prohibited by the Office of Foreign Assets Control of the United States Department of Treasury.  Related party transactions (including cross trades) are prohibited, except to the extent utilized to remedy over funding or under funding of the Portfolio relative to the required trust balance.

	
		
	Asset Allocation .................................................... 
	Except for Treasury securities, Agency debentures, Agency pass-throughs and Agency REMICS, no security may be purchased if such purchase would cause the securities of a single issuer to exceed the following percentages of assets at the time of purchase and no security may be purchased if the percentage of assets invested in the securities of such issuer at the time of purchase already exceeds the following percentages of total assets:   

	 
	Issuers rated Aa3/AA- and higher                                          2.0% 
Issuers rated A1/A+ to A3/A-                                   1.5%   
Issuers rated Baa1/BBB+ to Baa3/BBB-                     1.0% 
Issuers rated Ba1/BB+ and lower                                    0.5% 
The maximum amount invested in a single money market fund is limited to 10% of total assets per fund. 

	Credit Criteria .......................................................... 
  
	Each security in the Portfolio (other than those identified under (xiii) and (xiv) of the Asset Guidelines) must (i) have a credit rating from a nationally recognized statistical rating organization (“NRSRO”) included by the Securities Valuation Office (“SVO”) of the NAIC in the list of Credit Rating Providers whose ratings are accepted for the determination of equivalent NAIC SVO designations under the FE rule or (ii) be listed with the SVO of the NAIC.  The Portfolio will have a target minimum credit rating of Baa1/BBB+.  No security may be purchased if such purchase would cause more than 10% of the assets to be invested in securities that are rated below Baa3/BBB- and no security rated below Baa3/BBB- may be purchased if the percentage of assets invested in securities rated below Baa3/BBB- at the time of purchase already exceeds 10%. 

	   
	Money market instruments must be rated A-2 or P-2 or better at the time of purchase. 
Commercial mortgage loans must be rated CM-2 or better and have a maximum loan-to-value ratio of 80% at the time of purchase.

	
		
	Rating Methodology ................................................ 
	For purposes of these investment guidelines, ratings are as determined by NRSROs which have been included by the NAIC SVO in the list of Credit Rating Providers whose ratings are accepted for the determination of equivalent NAIC SVO designations under the FE rule.  Securities with two NRSRO ratings will be deemed to have the lower rating; securities with three NRSRO ratings will be deemed to have the middle rating.  Securities with more than three NRSRO ratings will be deemed to have the rating assigned by the lower of the highest two rank- ordered ratings.  Structured securities subject to the financial modeling methodology with NAIC designation assigned pursuant to SSAP 43R will be deemed to have a rating equivalent to the next to lowest NRSRO rating associated with such NAIC designation under the FE Rule. If a security (other than those identified under (xiii) and (xiv) of the Asset Guidelines) is not rated by an NRSRO on the list of Credit Rating Providers or listed with the NAIC SVO at the time of purchase, Wilton Reassurance Company or its designee will apply to have such security listed with the NAIC SVO prior to the end of the quarter in which such security is purchased.  Securities not rated by an NRSRO but filed and pending with the SVO will be assigned a rating equivalent to the next to lowest NRSRO rating associated with such NAIC designation under the FE Rule.

	Other Investment Practices ...................................... 
	Temporary Cash balances may be invested by the Investment Managers in a money market instrument (A2/P2 or better, less than 390 days), in a client and NAIC approved commingled 2A-7 Money Market Fund or in a commingled Stable Dollar NAV Fund.  

	  
	The Portfolio may purchase securities on a when-issued basis or for forward delivery. The Portfolio must take physical delivery of these securities. 

	   
	The Portfolio may enter into repurchase agreements collateralized 102% with securities identified under (i) of the Asset Guidelines. The maximum term of these agreements will be 90 days, and the collateral must be marked to market daily. 

	
		
	 
	The Portfolio may enter into securities lending and reverse repurchase agreements subject to the following conditions:  1) All transactions shall be evidenced by a written PSA Global Master Repurchase Agreement or Bond Market Association Master Repurchase Agreement, and a printed confirmation of each trade must be received from the counterparty to each trade.  2) Transactions must be collateralized by cash or eligible securities and the collateral must be marked to market each business day and adjusted as needed during the term of the loan to maintain collateralization. Transactions are required to maintain minimum collateralization levels of no less than 95%.  3) Any transaction entered into pursuant to this section may be terminated at a specified time or upon the earlier demand of Wilton Reassurance Company.  4) Any cash received by the Portfolio in a transaction may be invested in any eligible investment and in a manner that recognizes the liquidity needs of the transaction or used by the Portfolio for its general corporate purposes.  5) Securities lending and reverse repurchase agreements are limited to a maximum exposure of 25% of market value. 

	 
	Counterparty exposure to repurchase agreements, securities lending or reverse repurchase agreements may not be increased if, when aggregated with all other investment exposures to the same counterparty, such exposure exceeds the following percentages:
Issuers rated Aa3/AA- and higher                                  3.0%   
Issuers rated A1/A+ to A3/A-                                         2.5% 
Issuers rated Baa1/BBB+ to Baa3/BBB-                        2.0%
Issuers rated Ba1/BB+ and lower                                   1.0% 

	
		
	   
	Specific authority is required for use of any derivatives other than those used solely for credit hedging or duration management purposes.  The term “derivatives” for this purpose will include any item appropriately reported in schedule DB, derivative instruments, or schedule DC, insurance futures and insurance futures options, of an insurer’s statutory financial statement, or successor schedules, as provided under applicable annual statement instructions or statutory accounting guidelines.  Derivative instruments include, among other things, options, warrants used in hedging transactions and not attached to another financial instrument, caps, floors, collars, swaps, swaptions, forwards, futures and any other agreements (in the nature of bilateral contracts, options, or otherwise) or substantially similar instruments, or any series or combination thereof, and any agreements (in the nature of bilateral contracts, options, or otherwise). 

	Custodian ............................................................ 
	As selected by the Wilton Reassurance Company.  Custodian shall have and maintain reasonable and customary standards of business practice including but not limited to: controls, reconciliations of daily activity and cash, valuation and automation. 

	Statutory Guidelines............................................................ 
 
	Only investments permitted by the applicable insurance regulations (in effect at the time of measurement) of the statutory domicile of the ceding company shall be permitted.  If there is a discrepancy between the above referenced guidelines and such regulations, the more restrictive limits will apply.  

	Reporting Guidelines............................................................ 
	Wilton Reassurance Company or its designated representatives will provide Bankers Life and Casualty Company or its designated representatives with reports and analyses by the 15th of each month demonstrating that the Portfolio complies with these guidelines as of the end of the prior month.  Such reports should include current balances and detailed asset listings, including fair market value and credit rating.  Compliance with these guidelines will be determined by statutory book value.

	
		
	Changes to Guidelines............................................................
	Wilton Reassurance Company shall have the right to revise these guidelines with the prior written consent of Bankers Life and Casualty Company.

EXHIBIT G-1

CHECKLIST FOR TRANSFERS OF ELIGIBLE DERIVATIVES TO CITIBANK, N.A. (“TRUSTEE”)
(Omitted)

EXHIBIT G-2

CHECKLIST FOR TRANSFERS OF EQUITY INVESTMENTS TO CITIBANK, N.A. (“TRUSTEE”)
(Omitted)

EXHIBIT G-3

CHECKLIST FOR TRANSFERS OF MORTGAGE LOANS TO CITIBANK, N.A. (“TRUSTEE”)

(Omitted)

EXHIBIT G-4

CHECKLIST FOR TRANSFERS OF PRIVATE PLACEMENTS TO CITIBANK, N.A. (“TRUSTEE”)
(Omitted)

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