Document:

exv10w1

Exhibit 10.1

 

MASTER TRANSACTION AGREEMENT

by and among

CONTINENTAL CASUALTY COMPANY

THE CONTINENTAL INSURANCE COMPANY

CONTINENTAL REINSURANCE CORPORATION INTERNATIONAL, LTD.

CNA INSURANCE COMPANY LIMITED

NATIONAL INDEMNITY COMPANY

and

BERKSHIRE HATHAWAY INC.

(solely for the purpose of Sections 5.19 and 7.3(b))

Dated as of July 14, 2010

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	ARTICLE I	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	DEFINITIONS	 	 	 	 
	 
	 	 	 	 	 	 
	1.1
	 	Definitions	 	 	2	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE II	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	TRANSACTIONS TO BE EFFECTUATED AT CLOSING	 	 	 	 
	 
	 	 	 	 	 	 
	2.1
	 	Place and Date of Closing	 	 	15	 
	2.2
	 	Loss Portfolio Transfer	 	 	15	 
	2.3
	 	Reconciliation	 	 	16	 
	2.4
	 	Deliveries on Closing	 	 	18	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE III	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	REPRESENTATIONS AND WARRANTIES OF THE CNA PARTIES	 	 	 	 
	 
	 	 	 	 	 	 
	3.1
	 	Organization and Good Standing	 	 	19	 
	3.2
	 	Authority; Enforceability; Non-Contravention	 	 	20	 
	3.3
	 	Consents and Approvals	 	 	21	 
	3.4
	 	Orders	 	 	21	 
	3.5
	 	Compliance with Applicable Law	 	 	21	 
	3.6
	 	Permits	 	 	21	 
	3.7
	 	Financial Statements	 	 	22	 
	3.8
	 	Certain Proceedings	 	 	22	 
	3.9
	 	Brokers or Finders	 	 	22	 
	3.10
	 	Withheld Information	 	 	23	 
	3.11
	 	No Other Representations or Warranties	 	 	23	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE IV	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	REPRESENTATIONS AND WARRANTIES OF NICO	 	 	 	 
	 
	 	 	 	 	 	 
	4.1
	 	Organization and Good Standing	 	 	23	 
	4.2
	 	Authority; Enforceability; Non-Contravention	 	 	24	 
	4.3
	 	Consents and Approvals	 	 	25	 
	4.4
	 	Orders	 	 	25	 
	4.5
	 	Compliance with Applicable Law	 	 	25	 
	4.6
	 	Permits	 	 	25	 
	4.7
	 	Financial Statements	 	 	26	 

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	 	 	 	 	Page	 
	4.8
	 	Certain Proceedings	 	 	26	 
	4.9
	 	Ratings	 	 	26	 
	4.10
	 	Brokers or Finders	 	 	26	 
	4.11
	 	Due Investigation	 	 	26	 
	4.12
	 	No Other Representations or Warranties	 	 	27	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE V	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	ADDITIONAL AGREEMENTS OF THE CNA PARTIES AND NICO	 	 	 	 
	 
	 	 	 	 	 	 
	5.1
	 	Conduct of Business	 	 	27	 
	5.2
	 	Expenses	 	 	29	 
	5.3
	 	Access; Certain Communications	 	 	29	 
	5.4
	 	Reasonable Best Efforts; Third Party Consents	 	 	29	 
	5.5
	 	Further Assurances	 	 	31	 
	5.6
	 	Notification of Certain Matters	 	 	31	 
	5.7
	 	Transfer and Maintenance of Books and Records	 	 	31	 
	5.8
	 	Cooperation after Closing	 	 	32	 
	5.9
	 	Regulatory Compliance	 	 	32	 
	5.10
	 	Exclusions from the Representations and Warranties of CNA Parties	 	 	32	 
	5.11
	 	Confidentiality	 	 	33	 
	5.12
	 	LPT Reinsurance Agreement	 	 	34	 
	5.13
	 	Administrative Services Agreement	 	 	34	 
	5.14
	 	Collateral Trust Agreement	 	 	34	 
	5.15
	 	Security Agreement	 	 	35	 
	5.16
	 	Transition Services Agreement	 	 	35	 
	5.17
	 	Third Party Reinsurance Allocation Agreement	 	 	35	 
	5.18
	 	Retrospective Premium Allocation Agreement	 	 	36	 
	5.19
	 	Parental Guarantee Agreement	 	 	36	 
	5.20
	 	Corporate Changes after Closing	 	 	36	 
	5.21
	 	Waiver of Duty of Utmost Good Faith	 	 	36	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE VI	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	CONDITIONS PRECEDENT TO THE OBLIGATION OF NICO TO CLOSE	 	 	 	 
	 
	 	 	 	 	 	 
	6.1
	 	Representations, Warranties and Covenants	 	 	37	 
	6.2
	 	Ancillary Agreements	 	 	37	 
	6.3
	 	Secretary’s Certificates	 	 	37	 
	6.4
	 	Governmental Approvals and Consents	 	 	37	 
	6.5
	 	Injunction and Litigation	 	 	38	 
	6.6
	 	Frustration of Closing Conditions	 	 	38	 

ii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	ARTICLE VII	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	CONDITIONS PRECEDENT TO THE OBLIGATION OF THE CNA PARTIES TO CLOSE	 	 	 	 
	 
	 	 	 	 	 	 
	7.1
	 	Representations, Warranties and Covenants	 	 	38	 
	7.2
	 	Ancillary Agreements	 	 	39	 
	7.3
	 	Secretary’s Certificates	 	 	39	 
	7.4
	 	Governmental Approvals and Consents	 	 	39	 
	7.5
	 	Injunction and Litigation	 	 	39	 
	7.6
	 	Rating of NICO	 	 	39	 
	7.7
	 	Frustration of Closing Conditions	 	 	40	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE VIII	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	TERMINATION	 	 	 	 
	 
	 	 	 	 	 	 
	8.1
	 	Termination of Agreement	 	 	40	 
	8.2
	 	Effect of Termination	 	 	41	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE IX	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	INDEMNIFICATION	 	 	 	 
	 
	 	 	 	 	 	 
	9.1
	 	CNA Parties’ Indemnification Obligations	 	 	41	 
	9.2
	 	NICO’s Indemnification Obligations	 	 	42	 
	9.3
	 	Indemnification Procedures	 	 	42	 
	9.4
	 	Limitations on Indemnification Obligations	 	 	44	 
	9.5
	 	Other Indemnification Matters	 	 	45	 
	9.6
	 	Exclusive Remedy	 	 	46	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE X	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	DISPUTE RESOLUTION	 	 	 	 
	 
	 	 	 	 	 	 
	10.1
	 	Dispute Resolution	 	 	47	 
	10.2
	 	Negotiation Amongst the Parties	 	 	47	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE XI	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	ARBITRATION	 	 	 	 
	 
	 	 	 	 	 	 
	11.1
	 	Arbitration	 	 	48	 

iii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	ARTICLE XII	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	CONFLICT OF INTEREST	 	 	 	 
	 
	 	 	 	 	 	 
	12.1
	 	Conflict of Interest	 	 	49	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE XIII	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	MISCELLANEOUS PROVISIONS	 	 	 	 
	 
	 	 	 	 	 	 
	13.1
	 	Notices	 	 	49	 
	13.2
	 	Entire Agreement	 	 	50	 
	13.3
	 	Waiver and Amendment	 	 	50	 
	13.4
	 	Successors and Assigns	 	 	51	 
	13.5
	 	Headings	 	 	51	 
	13.6
	 	Construction; Interpretation	 	 	51	 
	13.7
	 	Governing Law and Jurisdiction	 	 	51	 
	13.8
	 	No Third Party Beneficiaries	 	 	52	 
	13.9
	 	Counterparts	 	 	52	 
	13.10
	 	Severability	 	 	52	 
	13.11
	 	Specific Performance	 	 	53	 
	13.12
	 	Waiver of Jury Trial	 	 	53	 
	13.13
	 	Incontestability	 	 	53	 
	13.14
	 	Set-Off	 	 	54	 
	13.15
	 	Currency	 	 	54	 

	 	 	 

	 
	 	LIST OF EXHIBITS
	 
	 	 
	Exhibit A
	 	Form of Administrative Services Agreement
	Exhibit B
	 	Form of Collateral Trust Agreement
	Exhibit C
	 	Form of LPT Reinsurance Agreement
	Exhibit D
	 	Form of Parental Guarantee Agreement
	Exhibit E
	 	Form of Retrospective Premium Allocation Agreement
	Exhibit F
	 	Form of Security Agreement
	Exhibit G
	 	Form of Third Party Reinsurance Allocation Agreement
	Exhibit H
	 	Transition Services Agreement Term Sheet

iv

 

	 	 	 

	 
	 	LIST OF SCHEDULES
	 
	 	 
	Schedule 1.1(a)
	 	Asbestos Accounts
	Schedule 1.1(b)
	 	GRM Direct & Assumed, Syndicates, Pools and Associations
	Schedule 1.1(c)
	 	Knowledge with respect to the CNA Parties
	Schedule 1.1(d)
	 	Knowledge with respect to NICO
	Schedule 1.1(e)
	 	Pollution Accounts
	Schedule 1.1(f)
	 	Pre-Inception Date Receivables
	Schedule 2.3
	 	Reconciliation Statement Calculations
	Schedule 5.4(d)
	 	Third Party Consents
	 
	 	 
	 
	 	LIST OF CNA DISCLOSURE SCHEDULES
	 
	 	 
	Schedule 3.3
	 	CNA Parties’ Consents and Approvals
	Schedule 3.4
	 	CNA Orders
	Schedule 3.5
	 	Compliance with Applicable Law
	 
	 	 
	 
	 	LIST OF NICO DISCLOSURE SCHEDULES
	 
	 	 
	Schedule 4.3
	 	NICO’s Consents and Approvals
	Schedule 4.4
	 	NICO Orders
	Schedule 4.5
	 	Compliance with Applicable Law
	Schedule 4.9
	 	NICO Ratings

v

 

MASTER TRANSACTION AGREEMENT

          THIS MASTER TRANSACTION AGREEMENT, dated as of July 14, 2010 (this “Agreement”), has
been made and entered into by and among Continental Casualty Company, an Illinois property and
casualty insurance company (“CCC”), The Continental Insurance Company, a Pennsylvania
property and casualty insurance company (“CIC”), Continental Reinsurance Corporation
International, Ltd., a Bermuda long-term insurance company (“CRCI”), and CNA Insurance
Company Limited, a United Kingdom property and casualty insurance company (“CICL,” and
collectively with CCC, CIC and CRCI, the “CNA Parties”), and National Indemnity Company, a
Nebraska property and casualty insurance company (“NICO”). In addition, Berkshire Hathaway
Inc., a Delaware corporation (“Berkshire”), which is the ultimate parent company of NICO,
is a party to this Agreement solely for the purpose of Sections 5.19 and
7.3(b).

WITNESSETH:

          WHEREAS, upon the terms and subject to the conditions of this Agreement and the Ancillary
Agreements (all capitalized terms used in these recitals and not otherwise defined having the
respective meanings assigned to them in Section 1.1), the CNA Parties and NICO desire to
enter into a loss portfolio reinsurance transaction, pursuant to which the CNA Parties will cede
all liabilities related to Asbestos Claims and Pollution Claims under the Business Covered to NICO,
and pursuant to which NICO will reinsure the CNA Parties for such liabilities up to an aggregate
limit of four billion dollars ($4,000,000,000), net of any Third Party Reinsurance Recoverables and
Other Recoveries;

          WHEREAS, in order to effectuate the foregoing, it is contemplated that, upon the terms and
subject to the conditions set forth in this Agreement: (i) the CNA Parties and NICO will enter
into the LPT Reinsurance Agreement pursuant to which the CNA Parties will cede to NICO, and NICO
will assume, the Reinsured Liabilities, (ii) the CNA Parties and NICO will enter the Administrative
Services Agreement pursuant to which NICO, and/or its duly appointed Affiliate(s), will provide, in
the name of the CNA Parties, claims handling and other administrative services with respect to the
A&P Business, (iii) the CNA Parties, NICO and the Trustee will enter into the Collateral Trust
Agreement pursuant to which NICO will establish a grantor trust to secure NICO’s obligations under
the LPT Reinsurance Agreement, (iv) CCC, as agent for the CNA Parties, NICO and the Trustee, as
securities intermediary, will enter into the Security Agreement pursuant to which NICO will grant
to CCC, as agent for the benefit of the CNA Parties, a security interest in and continuing lien on,
among other things, all of NICO’s right, title and interest in the Collateral Trust Account or any
replacement or successor thereof or substitution therefor, (v) Berkshire and the CNA Parties will
enter into the Parental Guarantee Agreement, pursuant to which Berkshire shall guarantee to the CNA
Parties the payment or performance of certain obligations of NICO under the Ancillary Agreements
and Berkshire will grant to CCC, as agent for the benefit of the CNA Parties, a security interest
in and continuing lien on all of Berkshire’s right, title and interest in the Collateral Trust
Account or any

 

 

replacement or successor thereof or substitution therefor, (vi) CCC and NICO will enter into
the Transition Services Agreement, which shall substantially conform to the terms and conditions
set forth in the Transition Services Agreement Term Sheet, and pursuant to which CCC and NICO will
provide to the other certain transition services relating to the administration of the A&P
Business, (vii) the CNA Parties and NICO will enter into the Third Party Reinsurance Allocation
Agreement pursuant to which the CNA Parties and NICO will allocate between the Parties the Third
Party Reinsurance Recoverables in accordance with whether such recoverables are allocable to A&P
Claims or Non-A&P Claims, (viii) the CNA Parties and NICO will enter into the Retrospective Premium
Allocation Agreement, and (ix) the CNA Parties and NICO, or their respective Affiliates, will
execute and deliver such other agreements, instruments and documents as are described herein.

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

ARTICLE I

DEFINITIONS

     1.1 Definitions.

          The following terms shall have the respective meanings set forth below throughout this
Agreement:

“A&P Business” means the business of the CNA Parties and the CNA Insurers of insuring,
reinsuring and administering, as applicable, the Reinsured Contracts and the Third Party
Reinsurance Agreements as they relate to the Business Covered.

“A&P Claims” means an Asbestos Claim and/or a Pollution Claim.

“AAA” has the meaning set forth in Section 11.1(a).

“Administrative Services Agreement” means the Administrative Services Agreement by and
among the CNA Parties and NICO, substantially in the form of Exhibit A attached hereto.

“Affiliate” means, with respect to any Person, another Person that, directly or indirectly,
controls, is controlled by, or is under common control with, such first Person, where “control”
means the

2

 

possession, directly or indirectly, of the power to direct or cause the direction of the management
policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Aggregate Net Payment” means the amount set forth on the Initial Reconciliation Statement,
the Preliminary Reconciliation Statement or the Final Reconciliation Statement, as applicable, on
the line item described as “Amount Due to Collateral Trust.”

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

“Allocated Loss Adjustment Expenses” means all court costs, arbitration, mediation or other
dispute resolution costs, attorneys’ fees including staff counsel expressly charged with performing
functions generally performed by outside counsel, expenses, fees and interest accrued prior to or
after any judgment, award, agreement or compromise incurred in connection with or in any way
relating to the adjustment, appraisal, defense, resistance, investigation, audit negotiation,
settlement, payment or appeal of, or the pursuit or collection of any reinsurance on, or the
pursuit or enforcement of any right of subrogation with respect to any Reinsured Liability;
provided, however, in no event shall Allocated Loss Adjustment Expenses include any overhead or
similar internal costs that are attributable to the handling of a claim file arising from the
Business Covered. For the purposes of this Agreement, this definition of “Allocated Loss
Adjustment Expenses” will apply regardless of how the CNA Parties reserve for Allocated Loss
Adjustment Expenses on its annual and quarterly statutory financial statements filed with
Governmental Authorities.

“Ancillary Agreements” means each of the agreements the forms of which are
Exhibits A through H attached hereto and each of the agreements, exhibits, annexes,
schedules and other attachments thereto; provided, however, that for purposes of Sections
9.6(b) and 9.6(c) and Articles X and XI, the Parental Guarantee
Agreement shall not be deemed to be an Ancillary Agreement for all purposes under such Sections and
Articles.

“Applicable Interest Rate” means 4.5% (four point five percent) per annum.

“Applicable Law” means any domestic or foreign, federal, state or local statute, law,
ordinance or code, or any written rules, regulations or administrative interpretations issued by
any Governmental Authority pursuant to any of the foregoing, in each case applicable to any Party,
and any Order, writ, injunction, directive, judgment or decree of a court of competent jurisdiction
applicable to the Parties.

“Asbestos Claim” means the following: (i) for claims shown on the Books and Records of any
CNA Party or CNA Insurer as having been made on or prior to December 31, 2009, all claims coded as
“asbestos claims” on the Books and Records of any CNA Party or CNA Insurer and arising under the
accounts listed on Schedule 1.1(a) attached hereto, (ii) for claims shown in the

3

 

files and records of any GRM Direct & Assumed, Syndicate, Pool or Association as having been made
on or prior to December 31, 2009, all claims coded as “asbestos claims” in the files and records of
any GRM Direct & Assumed, Syndicate, Pool or Association, and (iii) for claims made after December
31, 2009, any claim involving allegations, in whole or in part, of Property Damage, Bodily Injury,
personal injury, mental anguish, medical monitoring, nuisance and trespass, including claims for
equitable relief, arising out of, or relating to, exposure to asbestos. For the avoidance of
doubt, the Parties acknowledge and agree that, claims asserting that any CNA Party or CNA Insurer
(A) failed to warn any Person of potential asbestos exposure, (B) engaged in any unfair trade
practice or failed to handle claims in good faith, (C) negligently conducted loss control
functions, (D) failed to settle or pay claims within the limits of any Reinsured Contract, (E)
otherwise negligently conducted claims handling, (F) misrepresented, or otherwise committed a tort
or fraud in connection with the Business Covered, or (G) failed to properly comply with Medicare or
other liens, in each case, as long as such assertions arise out of, relate to, or are in connection
with, Asbestos Claims, shall be deemed Asbestos Claims. If a claim alleges both an exposure to
asbestos and an exposure to another toxin (e.g., “mixed dust” claims) and the Reinsured Contract
contains an asbestos exclusion, the claim will be an Asbestos Claim to the extent the claim
involves asbestos exposure or injury. While the coding of any CNA Party or CNA Insurer made prior
to the Inception Date shall be conclusive as to whether a claim made on or prior to December 31,
2009 is an Asbestos Claim, for a claim made after December 31, 2009, the past coding of any CNA
Party or CNA Insurer of a similar claim shall not be conclusive as to whether the claim is an
Asbestos Claim. Asbestos Claims shall not include Non A&P Claims.

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

“Berkshire Owned Entity” has the meaning set forth in Section 12.1.

“Bodily Injury” means actual or threatened bodily injury, sickness or disease sustained by
a person, including death, humiliation, shock, mental anguish or mental injury by that person at
any time which results as a consequence of the bodily injury, sickness or disease.

“Books and Records” means originals or copies of all records and all other data and
information (in whatever form maintained) in the possession or control of a Party or its Affiliates
and relating to the Business Covered, including (i) administrative records, (ii) claim records,
(iii) policy files, (iv) sales records, (v) files and records relating to Applicable Law, (vi)
reinsurance records, (vii) underwriting records, (viii) accounting records, and (ix) files and
records (including claims bordereaux) of any GRM Direct & Assumed, Syndicate, Pool or Association,
but excluding any (a) Tax Returns and Tax records and all other data and information with respect
to Tax, (b) files, records, data and information with respect to employees, (c) records, data and
information with respect to any employee benefit plan, (d) files, records, data and information
relating to Retrospective Premiums, (e) any files, records, data and information not reasonably
related to NICO’s administration of the Business Covered, including the monitoring and auditing of
the CNA Parties and their Affiliates of NICO’s performance in administering the Business Covered
and any internal reports related to such monitoring and auditing, (f) any materials prepared for

4

 

the boards of directors of NICO, the CNA Parties or their Affiliates and (g) any materials that are
privileged and/or confidential for which the CNA Parties or their Affiliates do not have a common
interest with NICO; provided, that if any such records or data referred to in the foregoing clauses
(i) through (ix) contain information which does not relate to the Business Covered, such
information shall not constitute “Books and Records” for purposes of this Agreement.

“Burdensome Condition” has the meaning set forth in Section 5.4(e).

“Business Covered” means:

	 	(1)	 	All losses relating to A&P Claims that are unpaid, as reflected on the Books
and Records, either on a direct or assumed basis, as of the Inception Date;
	 
	 	(2)	 	All losses relating to Asbestos Claims arising out of or relating to (A)
policies, certificates, binders, contracts or cover notes of insurance or reinsurance
issued by, or on behalf of, any CNA Party or CNA Insurer, (B) insurance or reinsurance
obligations assumed by any CNA Party or CNA Insurer by means of acquisitions,
assumption reinsurance, loss portfolio transfers (whether affected by reinsurance or
otherwise) or otherwise or (C) any participation by any CNA Party or CNA Insurer in any
insurance or reinsurance pool, syndicate or association, in all instances under (A),
(B) and (C) prior to January 1, 2010; and
	 
	 	(3)	 	All losses relating to Pollution Claims arising out of or relating to (A)
policies, certificates, binders, contracts or cover notes of insurance or reinsurance
issued by, or on behalf of, any CNA Party or CNA Insurer, (B) insurance or reinsurance
obligations assumed by any CNA Party or CNA Insurer by means of acquisitions,
assumption reinsurance, loss portfolio transfers (whether affected by reinsurance or
otherwise) or otherwise or (C) any participation by any CNA Party or CNA Insurer in any
insurance or reinsurance pool, syndicate or association, in all instances under (A),
(B) and (C) prior to January 1, 1989.

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

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

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

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

5

 

“Claim” has the meaning set forth in Section 9.3(a).

“Claims Notice” has the meaning set forth in Section 9.3(a).

“Closing” has the meaning set forth in Section 2.1.

“Closing Date” has the meaning set forth in Section 2.1.

“CNA” means CNA Financial Corporation, a Delaware corporation.

“CNA Disclosure Schedule” has the meaning set forth in Article III.

“CNA Financial Statements” has the meaning set forth in Section 3.7.

“CNA Indemnitees” has the meaning set forth in Section 9.2.

“CNA Insurers” means all property and casualty insurance companies which, as of the
Inception Date, (a) are current or were former Affiliates of the CNA Parties, other than (i) the
CNA Parties, (ii) First Insurance Company of Hawaii, Ltd. and its insurance company Subsidiaries as
of the Inception Date and (iii) CNA Surety Corporation and its Subsidiaries as of the Inception
Date and (b) ceded an A&P Claim to a CNA Party under a reinsurance agreement or cover note or whose
liability for an A&P Claim was transferred to, or otherwise assumed by, a CNA Party by means of an
acquisition, assumption reinsurance, loss portfolio transfer (whether affected by reinsurance or
otherwise) or otherwise, in each case entered into prior to the Inception Date and when such
insurance company was an Affiliate of any CNA Party. The term “CNA Insurers” as used herein shall
include any predecessor or successor of such companies, including by reason of merger,
consolidation or otherwise.

“CNA Parties” has the meaning set forth in the Preamble. The term “CNA Parties” as used
herein shall include any predecessor or successor of such companies, including by reason of merger,
consolidation or otherwise.

“CNA Permits” has the meaning set forth in Section 3.6(a).

“Collateral Trust Account” means the trust account established pursuant to the Collateral
Trust Agreement.

6

 

“Collateral Trust Agreement” means the trust agreement by and among the CNA Parties, NICO
and the Trustee, substantially in the form of Exhibit B attached hereto.

“Collection Expenses” means the reasonable out-of-pocket expenses incurred by any Party in
connection with the negotiation and collection of Third Party Reinsurance Recoverables or
Commutation Payments.

“Commutation Payments” means Gross Commutation Payments, less Collection Expenses.

“Confidential Information” has the meaning set forth in Section 5.11(c).

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

“De Minimis Amount” has the meaning set forth in Section 9.4(c).

“Declaratory Judgment Expense” means all Collection Expenses, attorneys’ fees, expenses and
other costs attributable to coverage analysis, declaratory judgment actions or other coverage
dispute resolution procedures brought to determine defense, indemnification and/or payment
obligations for any Business Covered, whether or not a loss has been paid. For purposes of this
Agreement, this definition of “Declaratory Judgment Expenses” shall apply regardless of how the CNA
Parties reserves for Declaratory Judgment Expenses on its annual and quarterly statutory financial
statements filed with Governmental Authorities.

“Disclosing Party” has the meaning set forth in Section 5.11(a).

“Dispute” has the meaning set forth in Section 10.1.

“Encumbrance” means any pledge, security interest, mortgage, lien, attachment, right of
first refusal, or option, including any restriction on receipt of income or exercise of any other
attribute of ownership, except such restrictions as may be contained in any insurance Applicable
Law.

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

“Enforceability Exceptions” has the meaning set forth in Section 3.2(a).

“Estimated Interest” means interest calculated at the Applicable Interest Rate accrued from
the middle of the calendar quarter during which the amounts in question were collected, paid or
incurred, as applicable, through the Closing Date; provided, however, if the Closing Date occurs

7

 

on a date other than the last day of a calendar quarter, the Estimated Interest for the amounts
collected, paid or incurred, as applicable, during the partial quarterly period including the
Closing Date shall be calculated at the Applicable Interest Rate accrued from the middle of such
partial quarterly period through the Closing Date.

“Extracontractual Damages” means all liabilities arising from the Business Covered for
which any CNA Party and CNA Insurer is liable arising from actual or alleged misconduct,
negligence, fraud or bad faith of any CNA Party, any CNA Insurer or any of their Affiliates, or
their agents, brokers or Representatives (other than NICO acting on behalf of the CNA Parties
pursuant to the Administrative Services Agreement, which liability shall be indemnified pursuant to
such agreement) in their handling of claims or losses, or in any of their dealings with their
insureds or any other Person. Such liabilities shall include punitive, exemplary, compensatory,
and consequential damages. Extracontractual Damages shall also include any and all amounts
otherwise included in the definition of Ultimate Net Loss that any CNA Party pays or is obligated
to pay to ceding companies under Business Covered that are agreements of assumed reinsurance,
whether under the terms of such reinsurance contracts or as a result of agreements between the CNA
Parties and cedents as to the settlement of specific claims.

“Final and Binding” has the meaning set forth in Section 2.3(g).

“Final Net Payment” has the meaning set forth in Section 2.3(h).

“Final Reconciliation Statement” has the meaning set forth in Section 2.3(d).

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

“GRM Direct & Assumed, Syndicates, Pools or Associations” means (a) any counterparty under
any insurance or reinsurance agreement or cover note with a CNA Party, (b) any Person whose
liability for an A&P Claim has been transferred to, or otherwise assumed by, any CNA Party by means
of an acquisition, direct insurance, assumption reinsurance, loss portfolio transfer (whether
affected by reinsurance or otherwise) or otherwise, or (c) any insurance or reinsurance pool,
syndicate or association that, in the case of clauses (a), (b) and (c) is listed on Schedule
1.1(b) attached hereto, in all cases as such assumptions or transfers were in place as of the
Inception Date.

“Gross Commutation Payments” means any amounts payable to the CNA Parties or NICO (acting
on behalf of the CNA Parties) by a reinsurer counterparty under a Third Party Reinsurance Agreement
in connection with the recapture, commutation, termination or reduction

8

 

of any reinsurance under a Third Party Reinsurance Agreement, or pursuant to a scheme of
arrangement in connection with the initiation or commencement of a liquidation, insolvency,
rehabilitation, conservation, supervision or similar proceeding by or against the reinsurer of a
Third Party Reinsurance Agreement, that is consummated on or after the Inception Date, but prior to
the expiration or termination of the LPT Reinsurance Agreement.

“Gross Third Party Reinsurance Recoverables” means any amounts actually collected by the
CNA Parties or NICO (acting on behalf of the CNA Parties) pursuant to the Third Party Reinsurance
Agreements.

“Inception Date” means 12:01 a.m. Central Standard Time on January 1, 2010.

“Indemnified Party” has the meaning set forth in Section 9.3(a).

“Indemnifying Party” has the meaning set forth in Section 9.3(a).

“Indemnity Cap” has the meaning set forth in Section 9.4(c).

“Indemnity Threshold” has the meaning set forth in Section 9.4(c).

“Independent Accountant” has the meaning set forth in Section 2.3(e).

“Initial Net Payment” has the meaning set forth in Section 2.3(b).

“Initial Reconciliation Statement” has the meaning set forth in Section 2.3(b).

“Knowledge” means, (i) with respect to the CNA Parties, the actual knowledge, without
independent investigation, of those individuals listed on Schedule 1.1(c) attached hereto,
and (ii) with respect to NICO, the actual knowledge, without independent investigation, of those
individuals listed on Schedule 1.1(d) attached hereto.

“Loss” as used in Article IX, means all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, and expenses (including but not
limited to reasonable and necessary fees of counsel, investigators, expert witnesses, consultants
and other professionals, court filing fees, court costs, arbitration fees or costs, witness fees
and other similar expenses); provided, however, in no event shall the Parties be liable for loss of
profits, consequential, punitive, incidental, exemplary, multiplied or other special damages
incurred by the other Party or any of its Affiliates and each of their respective directors,
officers, employees

9

 

and agents, it being understood that such Party shall only be liable (subject to the limitations on
liability set forth in Article IX) for loss of profits, consequential, punitive,
incidental, exemplary, multiplied or other special damages that are incurred or suffered by a third
party and that form a part of the Third Party Claim of such third party.

“LPT Limit” has the meaning set forth in Section 2.2(a).

“LPT Reinsurance Agreement” means the reinsurance agreement by and among the CNA Parties
and NICO, substantially in the form of Exhibit C attached hereto.

“NICO” has the meaning set forth in the Preamble. The term “NICO” as used herein shall
include any predecessor or successor of such companies, including by reason of merger,
consolidation or otherwise.

“NICO Disclosure Schedule” has the meaning set forth in Article IV.

“NICO Financial Statements” has the meaning set forth in Section 4.7.

“NICO Indemnitees” has the meaning set forth in Section 9.1.

“NICO Permits” has the meaning set forth in Section 4.6(a).

“Non-A&P Claims” means: (i) all claims that are not defined as an Asbestos Claim or a
Pollution Claim herein or (ii) all claims made after December 31, 2009 alleging Bodily Injury as a
result of exposure to a Pollutant, except for those Bodily Injury claims that otherwise meet the
definition of a “Pollution Claim” as defined and set forth herein. For the avoidance of doubt, the
following types of claims are Non-A&P Claims: silica, breast implants, indoor mold, blood
factorates, repetitive stress injuries, noise induced hearing loss, lead pigment on buildings,
indoor air pollution (unless caused by actual, alleged or threatened pollution of land, the
external atmosphere, or any watercourse or body of water) and firearms.

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

“Other Recoveries” means any and all payments, collections and recoveries relating to A&P
Claims paid on and after the Inception Date, other than (i) Third Party Reinsurance Recoverables
and (ii) Retrospective Premiums, and shall include, among other things, any salvage and subrogation
received as further set forth in Section 13.1 of the LPT Reinsurance Agreement.

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“Parental Guarantee Agreement” means the guarantee agreement by and among Berkshire and the
CNA Parties, substantially in the form of Exhibit D attached hereto.

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

“Permit” means any material license, permit, order, approval, consent, registration,
membership, authorization or qualification under any Applicable Law or with any Governmental
Authority or under any industry or non-governmental self-regulatory organization.

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

“Pollutants” as used in the definition of “Pollution Claim” includes any solid, liquid,
gaseous or thermal substance, irritant or contaminant, including smoke, vapor, soot, fumes, acids,
alkalis, chemicals and waste (including any materials to be recycled, reconditioned or reclaimed).

“Pollution Claim” means the following: (i) for claims shown on the Books and Records of
any CNA Party or CNA Insurer as having been made on or prior to December 31, 2009, all claims coded
as “pollution claims” or “environmental claims” on the Books and Records of any CNA Party or CNA
Insurer and arising under the accounts listed on Schedule 1.1(e) attached hereto, (ii) for
claims shown in the files and records of any GRM Direct & Assumed, Syndicate, Pool or Association
as having been made on or prior to December 31, 2009, all claims coded as “pollution claims” or
“environmental claims” in the files and records of any GRM Direct & Assumed, Syndicate, Pool or
Association, and (iii) for claims made after December 31, 2009, (A) any claim involving
allegations, in whole or in part, of Property Damage arising out of, or relating to, an actual,
alleged or threatened discharge, emission, dispersal, seepage, migration, release or escape of
Pollutants into or upon land, the atmosphere or any watercourse or body of water including claims
for nuisance and trespass and claims for equitable relief and (B) any claim involving allegations
of Bodily Injury, personal injury, mental anguish, medical monitoring, nuisance and trespass,
including claims for equitable relief, associated with, related to or resulting from any actual,
alleged or threatened discharge, emission, dispersal, seepage, migration, release or escape of
Pollutants into or upon land, the atmosphere or any watercourse or body of water which caused or
threatened to cause Property Damage. For the avoidance of doubt, the Parties acknowledge and agree
that claims arising from actual, alleged or threatened pollution of the air inside a building
(e.g., indoor mold claims) are not a “Pollution Claim” unless the pollution was caused by actual,
alleged or threatened pollution of land, the external atmosphere or any watercourse or body of
water. For the further avoidance of doubt, the Parties also acknowledge and agree that claims
asserting that any CNA Party or CNA Insurer (A) failed to warn any Person of potential Pollutants,
(B) engaged in any unfair trade practice or failed to handle claims in good faith, (C) negligently
conducted loss control functions, (D) failed to settle or pay claims within the limits of any
Reinsured Contract, (E) otherwise negligently conducted claims handling, (F) misrepresented, or
otherwise committed a tort or fraud in connection with the Business Covered, or (G) failed to
properly comply with Medicare or other liens, in each case,

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as long as such assertions arise out of, relate to, or are in connection with, Pollution Claims,
shall be deemed Pollution Claims. While the coding of any CNA Party or CNA Insurer shall be
conclusive as to whether a claim made on or prior to December 31, 2009 is a Pollution Claim, for a
claim made after December 31, 2009, the past coding of any CNA Party or CNA Insurer of a similar
claim shall not be conclusive as to whether the claim is a Pollution Claim. Pollution Claims shall
not include Non A&P Claims.

“Pre-Inception Date Receivables” means all receivables that arise out of or relate to the
Business Covered and which are payable under the Third Party Reinsurance Agreements attributable to
Asbestos Claims and Pollution Claims paid by or on behalf of the CNA Parties prior to the Inception
Date, including those set forth on Schedule 1.1(g) hereto.

“Preliminary Reconciliation Statement” has the meaning set forth in Section 2.3(c).

“Property Damage” means actual or threatened or potential: (i) physical injury to tangible
property, including all resulting loss of use of that property; or (ii) loss of use of tangible
property that is not physically injured. For the avoidance of doubt, electronic data shall not be
considered to be tangible property.

“Receiving Party” has the meaning set forth in Section 5.11(a).

“Reinsurance Premium” means cash in the aggregate amount of two billion dollars
($2,000,000,000).

“Reinsured Contracts” means all policies, contracts, certificates, binders and cover notes
of insurance or reinsurance issued by any CNA Party or CNA Insurer, or by any GRM Direct & Assumed,
Syndicate, Pool or Association, covering or pertaining to the Business Covered.

“Reinsured Liabilities” has the meaning set forth in Section 2.2(a).

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

“Requested Third Party Consents” has the meaning set forth in Section 5.4(d).

“Reserves” means, as required by SAP or Applicable Law of the jurisdiction of domicile of
such Person, reserves (including any gross, net and ceded reserves), funds or provisions for
losses, claims, unearned premiums, benefits, costs and expenses (including Allocated Loss
Adjustment Expenses) in respect of the Business Covered.

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“Retrospective Premium Allocation Agreement” means the agreement by and among the CNA
Parties and NICO, substantially in the form of Exhibit E attached hereto.

“Retrospective Premiums” means any amounts due from a policyholder or insured under a
Reinsured Contract as a result of any increase in premiums charged thereunder or additional premium
payable thereunder based upon the claims or loss experience pursuant to the terms and conditions of
such Reinsured Contract.

“Rules” has the meaning set forth in Section 11.1(a).

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

“Security Agreement” means the security agreement by and among CCC, as agent for the CNA
Parties, NICO and the Trustee, as securities intermediary, substantially in the form of Exhibit
F attached hereto.

“Segregation Plan” has the meaning set forth in Section 5.16(b).

“Senior Management of the CNA Parties” means the following individuals who hold senior
management positions at CNA: John Beckman, Lawrence Boysen, Janet Duncan, Larry Haefner, Jonathan
D. Kantor, Peter J. Lies, D. Craig Mense, Michael J. Sehr and Michael P. Warnick.

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

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

“Tax” means any and all federal, state, foreign or local income, gross receipts, premium,
capital stock, franchise, profits, withholding, social security, unemployment, disability, real
property, ad valorem/personal property, stamp, excise, occupation, sales, use, transfer, value
added, alternative minimum, estimated or other tax, fee, duty, levy, custom, tariff, impost,
assessment,

13

 

obligation or charge of the same or of a similar nature to any of the foregoing, including any
interest, penalty or addition thereto.

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

“Third Party Claim” has the meaning set forth in Section 9.3(b).

“Third Party Reinsurance Agreements” means reinsurance agreements, other than the LPT
Reinsurance Agreement and reinsurance agreements solely between or among CNA Affiliates, whereby
any CNA Party or CNA Insurer has ceded the Business Covered, and which agreements have not been
voided or commuted.

“Third Party Reinsurance Allocation Agreement” means the allocation agreement by and among
the CNA Parties and NICO, substantially in the form of Exhibit G attached hereto.

“Third Party Reinsurance Recoverables” means Gross Third Party Reinsurance Recoverables,
less Collection Expenses.

“Transition Services Agreement” has the meaning set forth in Section 5.16(a).

“Transition Services Agreement Term Sheet” means the transition services agreement term
sheet attached hereto as Exhibit H.

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

“Ultimate Net Loss” means the sum of any amount which is paid, required to be paid or due
to be paid by any CNA Party or CNA Insurer on and after the Inception Date, in each case, in
respect of Business Covered for: (i) settlement or satisfaction of the A&P Claims relating to the
Business Covered; plus (ii) Allocated Loss Adjustment Expenses; plus (iii)
Declaratory Judgment Expenses; plus (iv) Extracontractual Damages; minus (v) Third
Party Reinsurance Recoverables and Other Recoveries (but expressly excluding Pre-Inception Date
Receivables), to the extent actually collected and paid to NICO; provided, however, in no event
shall Ultimate Net Loss include any Unallocated Loss Adjustment Expenses.

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“Unallocated Loss Adjustment Expenses” means any loss adjustment expenses which are
not Allocated Loss Adjustment Expenses. For purposes of this Agreement, this definition of
“Unallocated Loss Adjustment Expenses” will apply regardless of how the CNA Parties reserve for
Unallocated Loss Adjustment Expenses on its annual and quarterly statutory financial statements
filed with Governmental Authorities.

ARTICLE II

TRANSACTIONS TO BE EFFECTUATED AT CLOSING

     2.1 Place and Date of Closing.

          Unless otherwise agreed to by the Parties hereto, the closing (the “Closing”) of the
transactions contemplated under this Agreement and the Ancillary Agreements will take place in the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York 10036,
at 10:00 a.m., Eastern Time, on the third Business Day after the date upon which each of the
conditions set forth in Articles VI and VII are satisfied or waived by the Party or
Parties entitled to waive the same (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at such
time). Notwithstanding the foregoing, the Closing may occur at such other place, at such other
time or on such other date as the CNA Parties and NICO may mutually agree. The day on which the
Closing takes place is referred to herein as the “Closing Date.” The Closing shall be
deemed for all purposes to have occurred at 12:01 a.m., Eastern Time, on the Closing Date.

     2.2 Loss Portfolio Transfer.

          (a) Subject to the satisfaction or waiver of all of the conditions to Closing set forth in
Articles VI and VII, and subject to the terms and conditions set forth in this
Agreement and the LPT Reinsurance Agreement, at the Closing, (i) the CNA Parties will cede to NICO,
and NICO shall reinsure, 100% of all losses, liabilities and expenses included within the
definition of Ultimate Net Loss paid by the CNA Parties on or after the Inception Date (as recorded
in the general ledger of the CNA Parties), subject to the LPT Limit (“Reinsured
Liabilities”), (ii) the CNA Parties shall pay to NICO the Reinsurance Premium (as adjusted in
the Initial Reconciliation Statement pursuant to Section 2.3), which will be deposited
directly by the CNA Parties on behalf of NICO into the Collateral Trust Account and (iii) NICO
shall transfer and assign to the Collateral Trust Account, assets consisting of cash in the
aggregate amount of two hundred million dollars ($200,000,000). Notwithstanding any other
provisions in this Agreement or the Ancillary Agreements to the contrary, NICO’s limit of liability
with respect to the Ultimate Net Loss, shall be no greater than four billion dollars
($4,000,000,000) (the “LPT Limit”).

          (b) In addition to the payment of the Reinsurance Premium, the CNA Parties shall transfer the
right to collect the Pre-Inception Date Receivables to NICO. All Pre-Inception

15

 

Date Receivables
actually collected by NICO shall be for the benefit and account of NICO. NICO and the CNA Parties
hereby acknowledge and agree that neither the collection of, nor failure to collect, Pre-Inception
Date Receivables shall affect the LPT Limit.

     2.3 Reconciliation.

          (a) The Parties understand and agree that it is in their mutual interests to agree to a
mechanism for reconciling the following balances due and owing between them as of the Closing Date:

          (i) the CNA Parties shall pay to NICO (A) the Reinsurance Premium (together with
interest accrued from the Inception Date at the Applicable Interest Rate), and (B) any
Pre-Inception Date Receivables that may have been collected since the Inception Date
(together with Estimated Interest), and

          (ii) NICO shall reimburse the CNA Parties for (A) all Ultimate Net Loss paid by the
CNA Parties on or after the Inception Date (as recorded in the general ledger of the CNA
Parties) up to the Closing Date (together with Estimated Interest), and the LPT Limit
shall be reduced dollar for dollar for all such Ultimate Net Loss reimbursed by NICO, and
(B) three million five hundred thousand dollars ($3,500,000), which amount represents
NICO’s share of the Unallocated Loss Adjustment Expenses incurred by the CNA Parties in
connection with the Business Covered on or after the Inception Date up to the Closing
Date.

The Parties shall follow the protocol set forth in Sections 2.3(b) through 2.3(i)
in achieving fully and finally reconciled amounts of these balances.

          (b) The CNA Parties shall, five (5) Business Days prior to the Closing Date, provide to NICO
an estimated reconciliation statement as of the month ending prior to the Closing Date (the
“Initial Reconciliation Statement”), which shall be calculated in the manner set forth on
Schedule 2.3 attached hereto and which shall be broken down by calendar quarter. The
Initial Reconciliation Statement shall set forth the Aggregate Net Payment due to NICO (the
“Initial Net Payment”), which amount will be deposited directly by the CNA Parties on
behalf of NICO into the Collateral Trust Account on the Closing Date.

          (c) The CNA Parties shall, within forty-five (45) calendar days following the Closing Date,
provide to NICO a finalized reconciliation statement (the “Preliminary Reconciliation
Statement”), which shall be calculated as of the Closing Date and in the manner
set forth on Schedule 2.3 attached hereto, setting forth the Aggregate Net Payment as
of the Closing Date.

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          (d) After the receipt by NICO of the Preliminary Reconciliation Statement and until such time
as the Final Reconciliation Statement is completed, NICO and its authorized Representatives shall
have, upon prior written notice, reasonable access during normal business hours to the working
papers of the CNA Parties and their Representatives relating to the Preliminary Reconciliation
Statement and the calculations set forth thereon. NICO shall have the right to review the
Preliminary Reconciliation Statement and comment thereon for a period of thirty (30) Business Days
after receipt thereof. Any changes in the Preliminary Reconciliation Statement that are agreed to
by the Parties within such thirty (30) Business Day review period shall be incorporated into a
final reconciliation statement (the “Final Reconciliation Statement”), as of the Closing
Date. In the event NICO does not dispute the Preliminary Reconciliation Statement within such
thirty (30) Business Day review period, the Preliminary Reconciliation Statement shall be deemed
the Final Reconciliation Statement.

          (e) In the event that the Parties are unable to agree on the manner in which any item or items
should be treated in the Preliminary Reconciliation Statement within such thirty (30) Business Day
review period, each of the Parties shall prepare separate written reports of such item or items
remaining in dispute and refer such reports to Deloitte LLP (or if Deloitte LLP is unavailable, to
another nationally recognized independent accounting or actuarial firm that is neutral and
impartial as may be agreed by the parties) (the “Independent Accountant”) within ten (10)
calendar days after the expiration of such thirty (30) Business Day review period; provided,
however, that NICO shall have the right to dispute the determination of any such item or items only
on the basis of, and to the extent it claims that, in determining such item (i) it was not
calculated in the manner set forth on Schedule 2.3 for the calculation of the Aggregate Net
Payment or (ii) there were mathematical errors in the calculation of such item; provided, further,
that any portion of any amount payable to NICO or to the CNA Parties pursuant to Section
2.3(h) that can be calculated from amounts that are not in dispute will be paid within ten (10)
calendar days after such written reports are required to be submitted to the Independent
Accountant.

          (f) The Independent Accountant shall determine within thirty (30) calendar days the manner in
which such item or items shall be treated in the Final Reconciliation Statement; provided, however,
that the dollar amount of each item in dispute shall be determined within the range of dollar
amounts proposed by NICO, on the one hand, and the CNA Parties, on the other hand. The Parties
acknowledge and agree that (i) the review by and determinations of the Independent Accountant shall
be limited to, and only to, the item or items contained in the reports prepared and submitted to
the Independent Accountant by the Parties, and (ii) the determinations by the Independent
Accountant shall be based solely on the criteria set forth in the proviso in the first sentence of
this Section 2.3(f).

          (g) The determinations by the Independent Accountant as to the items in dispute shall be in
writing and shall be Final and Binding on the parties and shall be reflected in the Final
Reconciliation Statement. For purposes of this Section 2.3(g), “Final and Binding”
shall mean that the determinations made pursuant to this Section 2.3, including the
determinations, if any, made by the Independent Accountant shall have the same preclusive effect
for all purposes as if such determinations had been embodied in a final judgment, no

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longer subject
to appeal, entered by a court of competent jurisdiction, and either party may petition any court
identified pursuant to Article XIII to reduce such decision to judgment. The fees, costs
and expenses of retaining the Independent Accountant shall be allocated by the Independent
Accountant between the Parties in accordance with the Independent Accountant’s judgment as to the
relative merits of the parties’ proposals in respect of the disputed items. Within five (5)
Business Days following the resolution of all disputed items, the CNA Parties shall prepare the
Final Reconciliation Statement and shall deliver copies thereof to NICO.

          (h) In the event that (i) the Aggregate Net Payment as determined in the Final Reconciliation
Statement (the “Final Net Payment”) exceeds the Initial Net Payment, then the CNA Parties
shall pay to NICO cash in United States dollars in an amount equal to such excess, less any portion
of such excess previously paid to NICO pursuant to Section 2.3(e), within ten (10) calendar
days after the Final Reconciliation Statement has been determined, plus interest on such amount
from and including the Closing Date up to but not including the date of payment accrued at the
Applicable Interest Rate, or (ii) the Final Net Payment is less than the Initial Net Payment, then
NICO shall return to the CNA Parties cash in United States dollars in an amount equal to such
shortfall, less any portion of such shortfall previously paid to the CNA Parties pursuant to
Section 2.3(e), within ten (10) calendar days after the Final Reconciliation Statement has
been determined, plus interest on such amount from and including the Closing Date up to but not
including the date of payment accrued at the Applicable Interest Rate.

          (i) All cash required to be transferred from the CNA Parties to NICO pursuant to Section
2.3 shall be by wire transfer of immediately available funds to the Collateral Trust Account
and all cash required to be transferred from NICO to the CNA Parties pursuant to Section
2.3 shall be by wire transfer of immediately available funds withdrawn from the Collateral
Trust Account to one or more bank accounts specified in writing by the CNA Parties.

     2.4 Deliveries on Closing.

          Upon the terms and subject to the conditions set forth in this Agreement,

          (a) the CNA Parties shall pay to NICO the Reinsurance Premium (as adjusted in the Initial
Reconciliation Statement pursuant to Section 2.3), which will be deposited directly by the
CNA Parties on behalf of NICO into the Collateral Trust Account on the Closing Date, and

          (b) the CNA Parties shall, and shall cause their applicable Affiliates to, enter into and
deliver, and NICO shall, and shall cause its applicable Affiliates to, enter into and deliver on or
prior to the Closing Date:

               (i) Administrative Services Agreement;

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               (ii) Collateral Trust Agreement;

               (iii) LPT Reinsurance Agreement;

               (iv) Parental Guarantee Agreement

               (v) Retrospective Premium Allocation Agreement;

               (vi) Security Agreement;

               (vii) Third Party Reinsurance Allocation Agreement;

               (viii) Transition Services Agreement; and

               (ix) such other agreements, instruments and documents as are required under this
Agreement or the Ancillary Agreements to be executed and delivered by the CNA Parties,
NICO and any respective Affiliates of the CNA Parties and NICO.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE CNA PARTIES

          The CNA Parties hereby represent and warrant to NICO that as of the date hereof, and except as
disclosed in the disclosure schedules delivered by the CNA Parties to NICO (the “CNA Disclosure
Schedule”) simultaneously with the execution of this Agreement (it being understood that any
matter disclosed in the CNA Disclosure Schedule shall be deemed disclosed with respect to any
section of this Article III to which the matter relates) and subject to Section
5.10:

     3.1 Organization and Good Standing.

     Each of the CNA Parties and each Affiliate of the CNA Parties executing any Ancillary
Agreement (i) is duly incorporated and validly existing as a corporation or other legal entity
under the laws of its jurisdiction of incorporation or domicile; (ii) has full corporate power and
authority to carry on the A&P Business as it is now being conducted and to own, lease and
operate its properties and assets to the extent relating to the A&P Business; and (iii) is
duly qualified to do business as a foreign or alien corporation, as the case may be, in good
standing in

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each jurisdiction in which the conduct of the A&P Business or the ownership, leasing or
operation of its properties or assets relating to the A&P Business makes such qualification
necessary, except where the failure to so qualify, would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the A&P Business.

     3.2 Authority; Enforceability; Non-Contravention.

          (a) Each of the CNA Parties has full corporate power and authority to execute and to deliver
this Agreement, and to consummate the transactions contemplated herein. Each of the CNA Parties
has taken all necessary corporate action to authorize the execution and performance of this
Agreement. This Agreement has been duly executed and delivered by the CNA Parties and, assuming
due authorization, execution, and delivery of this Agreement by NICO, is the valid and binding
obligation of the CNA Parties, enforceable against the CNA Parties in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency, reorganization, and other
similar laws in effect relating to or affecting the enforcement of the rights and remedies of
creditors of insurance companies or the enforcement of creditors’ rights generally and general
principles of equity, whether considered in a proceeding at law or in equity (the
“Enforceability Exceptions”).

          (b) Except with respect to Third Party Reinsurance Agreements and assuming the regulatory
consents and approvals referred to in Sections 3.3 and 4.3 are obtained and the
filings referred to in Sections 3.3 and 4.3 are made, the execution, delivery and
performance of this Agreement by the CNA Parties will not, with or without the giving of notice or
passage of time or both, (i) violate, result in a default, right to accelerate or loss of rights
under, or result in the creation or imposition of any Encumbrance pursuant to any provision of any
note, bond, mortgage, deed of trust, lease, license, agreement, indenture or other instrument or
obligation to which the any of the CNA Parties are a party or by which their properties or assets
are bound, (ii) violate any provision of the corporate charter, by-laws, operating agreements,
partnership agreements or similar organizational documents of the CNA Parties, or any effective
resolution of the directors or stockholders of the CNA Parties, or (iii) violate in any material
respect any Applicable Law; provided, that in case of the foregoing clause (i), as would not,
individually or in the aggregate, reasonably be expected to have a material adverse effect on the
A&P Business.

          (c) Each of the CNA Parties and each Affiliate of the CNA Parties executing any Ancillary
Agreement has full corporate power and authority, respectively, to execute and to deliver the
Ancillary Agreements to which it is a party, and to consummate the transactions contemplated
therein. Each of the CNA Parties and each such Affiliate of the CNA Parties has taken all
necessary corporate action to authorize the execution and performance of such Ancillary Agreements.
The Ancillary Agreements, if and when executed by the CNA Parties or any such Affiliate of the CNA
Parties pursuant to the terms and conditions of this Agreement, will be duly executed and delivered
by the CNA Parties or such Affiliate of the CNA Parties and, assuming due authorization, execution,
and delivery of the Ancillary Agreements by the other parties thereto, will be the valid and
binding obligation of the CNA Parties or such Affiliate of

20

 

the CNA Parties, as the case may be, enforceable against such party in accordance with their
terms, subject to the Enforceability Exceptions.

          (d) Except with respect to Third Party Reinsurance Agreements and assuming the regulatory
consents and approvals referred to in Sections 3.3 and 4.3 are obtained and the
filings referred to in Sections 3.3 and 4.3 are made, the execution, delivery and
performance of the Ancillary Agreements by the CNA Parties and any such Affiliate of the CNA
Parties will not (i) violate, result in a default, right to accelerate or loss of rights under, or
result in the creation of any Encumbrance pursuant to any provision of any note, bond, mortgage,
deed of trust, lease, license, agreement, indenture or other instrument or obligation to which any
of the CNA Parties or any such Affiliate of the CNA Parties is a party or by which its properties
or assets are bound, (ii) violate any provision of the corporate charter, by-laws, operating
agreements, partnership agreements or similar organizational documents of the CNA Parties or any
such Affiliate of the CNA Parties, or any effective resolution of the directors or stockholders of
the CNA Parties or any such Affiliate of the CNA Parties, or (iii) violate in any material respect
any Applicable Law; provided, that in case of the foregoing clause (i), as would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on the A&P Business.

     3.3
Consents
and Approvals.

          Except as set forth on Schedule 3.3 of the CNA Disclosure Schedule, no consents or
approvals of, or filing with, any Governmental Authority, is required to be made or obtained by the
CNA Parties or their respective Affiliates in connection with the execution, delivery and
performance of this Agreement or the Ancillary Agreements or the consummation of the transactions
contemplated hereby and thereby.

     3.4
Orders.

          Except as set forth in Schedule 3.4 of the CNA Disclosure Schedule, as of the date of
this Agreement, there are no material outstanding Orders relating to the A&P Business against or
involving the CNA Parties by or before any Governmental Authority.

     3.5 Compliance with Applicable Law.

          Except as disclosed in Schedule 3.5 of the CNA Disclosure Schedule, since January 1,
2009, the CNA Parties have not been charged with nor, to the Knowledge of the CNA Parties, are now
under investigation by a Governmental Authority with respect to, a material violation of any
Applicable Law with respect to the A&P Business.

     3.6 Permits.

          (a) Each of the CNA Parties holds (i) all Permits from all Governmental Authorities
responsible for regulating insurance or reinsurance companies that are necessary for

21

 

the current operation and conduct of their business and to own or use their assets and
properties, as such assets and properties are owned and used on the date hereof in each of the
jurisdictions in which such business is operated and conducted, in each case, in connection with
the A&P Business, and (ii) except as otherwise would not have a material adverse effect on the A&P
Business, all other Permits from all Governmental Authorities other than those responsible for
regulating insurance or reinsurance companies that are necessary for the current operation and
conduct of their business and to own or use their assets and properties, as such assets and
properties are owned and used on the date hereof in each of the jurisdictions in which such
business is operated and conducted, in each case, in connection with the A&P Business
(collectively, the “CNA Permits”). All CNA Permits are valid and in full force and effect
in accordance with their terms.

          (b) Since January 1, 2009, none of the CNA Parties (i) have received any written notice or
communication from any Governmental Authority regarding any actual, alleged, or potential violation
of, or failure to comply with, the terms or requirements of any CNA Permits and (ii) is the subject
of any pending or, to the Knowledge of the CNA Parties, threatened action seeking the revocation,
withdrawal, suspension, termination, cancellation, nonrenewal, modification or impairment of any
CNA Permit.

     3.7 Financial Statements.

          The CNA Parties have previously delivered to NICO true and complete copies of the annual
statutory statements of the CNA Parties as of and for the year ended December 31, 2009
(collectively, the “CNA Financial Statements”). The CNA Financial Statements fairly
present in all material respects the financial condition of each CNA Party, as applicable, as of
and for the period ending on the date thereof in accordance with SAP.

     3.8 Certain Proceedings.

          There is no pending action against any of the CNA Parties or their Affiliates in or with any
Governmental Authority that challenges or may reasonably be expected to have the effect of
preventing or making unlawful the consummation of the transactions contemplated by this Agreement
or the Ancillary Agreements. To the Knowledge of the CNA Parties, no such proceeding has been
threatened.

     3.9 Brokers or Finders.

          No broker or finder has acted directly or indirectly for the CNA Parties, nor have the CNA
Parties incurred any obligation or liability for brokerage or finders’ fees or agents’ commissions
or other similar payments, in connection with this Agreement or the Ancillary Agreements and the
transactions contemplated hereby or thereby.

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     3.10 Withheld Information.

          To the Knowledge of the Senior Management of the CNA Parties, no material information related
to any A&P Claims arising from the Business Covered requested by NICO in writing prior to the date
hereof has been intentionally withheld from NICO or intentionally misstated, except for such
information that has been expressly withheld because (a) such information is the subject of a
binding confidentiality agreement between a CNA Party and a third party or (b) such information is
privileged pursuant to the advice of counsel, and, in the case of clauses (a) and (b), the
rationale for withholding such information has been disclosed to NICO.

     3.11 No Other Representations or Warranties.

          Notwithstanding anything contained in this Agreement or any Ancillary Agreements to the
contrary, (a) neither the CNA Parties nor any Person on behalf of the CNA Parties is making any
representations or warranties whatsoever, express or implied, beyond those expressly made by the
CNA Parties in Article III hereof, and (b) NICO and its Affiliates have not been induced
by, or relied upon, any representations, warranties or statements (written or oral), whether
express or implied, made by any Person, that are not expressly set forth in this Article
III. Without limiting the generality of the foregoing, NICO acknowledges, understands and
agrees that no representations or warranties are made (i) with respect to any projections,
forecasts, estimates, budgets or claim information that may have been made available to NICO, its
Affiliates or any of their respective Representatives, or (ii) with respect to any other
information or documents made available to NICO or any of its Affiliates or Representatives except,
in the case of this clause (ii) only, as expressly covered by a representation or warranty
contained in this Article III.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF NICO

          NICO hereby represents and warrants to the CNA Parties that as of the date hereof, and except
as disclosed in the disclosure schedules delivered by NICO to the CNA Parties (the “NICO
Disclosure Schedule”) simultaneously with the execution of this Agreement (it being understood
that any matter disclosed in the NICO Disclosure Schedule shall be deemed disclosed with respect to
any section of this Article IV to which the matter relates):

     4.1 Organization and Good Standing.

          NICO and each Affiliate of NICO executing any Ancillary Agreement is duly incorporated and
validly existing as a corporation or other legal entity under the laws of its jurisdiction of
incorporation or domicile. NICO and each Affiliate of NICO executing any

23

 

Ancillary Agreement has full corporate power and authority to conduct its business as it is
now being conducted.

     4.2 Authority; Enforceability; Non-Contravention.

          (a) NICO has full corporate power and authority to execute and to deliver this Agreement, and
to consummate the transactions contemplated herein. NICO has taken all necessary corporate action
to authorize its execution and performance of this Agreement. This Agreement has been duly
executed and delivered by NICO and, assuming due authorization, execution, and delivery of this
Agreement by the CNA Parties, is the valid and binding obligations of NICO, enforceable against
NICO in accordance with its terms, except as such enforceability may be limited by the
Enforceability Exceptions.

          (b) Assuming the regulatory consents and approvals referred to in Sections 3.3 and
4.3 are obtained and the filings referred to in Sections 3.3 and 4.3 are
made, the execution, delivery and performance of this Agreement by NICO will not, with or without
the giving of notice or passage of time or both, (i) violate, result in a default, right to
accelerate or loss of rights under; or result in the creation or imposition of any Encumbrance
pursuant to any provision of any note, bond, mortgage, deed of trust, lease, license, agreement,
indenture or other instrument or obligation to which NICO is a party or by which its properties or
assets are bound, (ii) violate any provision of the corporate charter, by-laws, operating
agreements, partnership agreements or similar organizational documents of NICO, or any effective
resolution of the directors or stockholders of NICO, or (iii) violate in any material respect any
Applicable Law.

          (c) Each of NICO and any of its Affiliates executing any Ancillary Agreement has full
corporate power and authority, respectively, to execute and to deliver the Ancillary Agreements to
which it is a party, and to consummate the transactions contemplated therein. Each of NICO and any
such Affiliate has taken all necessary corporate action to authorize the execution and performance
of such Ancillary Agreements. The Ancillary Agreements, if and when executed by NICO or any such
Affiliate pursuant to the terms and conditions of this Agreement, will be duly executed and
delivered by NICO or such Affiliate and, assuming due authorization, execution, and delivery of the
Ancillary Agreements by the other parties thereto, will be the valid and binding obligation of NICO
or such Affiliate, as the case may be, enforceable against such party in accordance with their
terms, subject to the Enforceability Exceptions.

          (d) Assuming the regulatory consents and approvals referred to in Sections 3.3 and
4.3 are obtained and the filings referred to in Sections 3.3 and 4.3 are
made, the execution, delivery and performance of the Ancillary Agreements by NICO and any such
Affiliate will not (i) violate, result in a default, right to accelerate or loss of rights under,
or result in the creation of any Encumbrance pursuant to any provision of any note, bond, mortgage,
deed of trust, lease, license, agreement, indenture or other instrument or obligation to which NICO
or any such Affiliate is a party or by which its properties or assets are bound, (ii) violate any
provision of the corporate charter, by-laws, operating agreements, partnership agreements or
similar

24

 

organizational documents of NICO or any such Affiliate, or any effective resolution of the
directors or stockholders of NICO or any such Affiliate, or (iii) violate in any material respect
any Applicable Law.

     4.3 Consents and Approvals.

          Except as set forth on Schedule 4.3 of the NICO Disclosure Schedule, no consents or
approvals of, or filing with, any Governmental Authority, is required to be made or obtained by
NICO or any of its Affiliates in connection with the execution, delivery and performance of this
Agreement or the Ancillary Agreements or the consummation of the transactions contemplated hereby
and thereby.

     4.4 Orders.

          Except as set forth in Schedule 4.4 of the NICO Disclosure Schedule, as of the date of
this Agreement, there are no material outstanding Orders against or involving NICO by or before any
Governmental Authority.

     4.5 Compliance with Applicable Law.

          Except as disclosed in Schedule 4.5 of the NICO Disclosure Schedule, since January 1,
2009, NICO has not been charged with nor, to the Knowledge of NICO, are now under investigation by
a Governmental Authority with respect to, a material violation of any Applicable Law.

     4.6 Permits.

          (a) NICO and its Affiliates that are a party to an Ancillary Agreement hold (i) all Permits
from all Governmental Authorities responsible for regulating insurance or reinsurance companies
that are required for the performance of their respective obligations under this Agreement and each
Ancillary Agreement to which it is a party, as applicable, and (ii) except as otherwise would not
have a material adverse effect on the A&P Business, all other Permits from all Governmental
Authorities other than those responsible for regulating insurance or reinsurance companies that are
required for the performance of their respective obligations under this Agreement and each
Ancillary Agreement to which it is a party, as applicable (collectively, the “NICO
Permits”). All NICO Permits are valid and in full force and effect in accordance with their
terms.

          (b) Since January 1, 2009, neither NICO nor any of its Affiliates that are a party to an
Ancillary Agreement (i) have received any written notice or communication from any Governmental
Authority regarding any actual, alleged, or potential material violation of, or failure to comply
with, the terms or requirements of any NICO Permits and (ii) is the subject of any pending or, to
the Knowledge of NICO, threatened action seeking the revocation, withdrawal,

25

 

suspension, termination, cancellation, nonrenewal, modification or impairment of any NICO
Permit.

     4.7 Financial Statements.

          NICO has previously delivered to the CNA Parties true and complete copies of the annual
statutory statements of NICO as of and for the year ended December 31, 2009, and the quarterly
statutory statements of NICO as of and for the fiscal quarter ended March 31, 2010 (collectively,
the “NICO Financial Statements”). The NICO Financial Statements fairly present in all
material respects the financial condition of NICO, as applicable, as of and for the periods ending
on the dates thereof in accordance with SAP.

     4.8 Certain Proceedings.

          There is no pending action against NICO or its Affiliates in or with any Governmental
Authority that challenges or may reasonably be expected to have the effect of preventing or making
unlawful the consummation of the transactions contemplated by this Agreement or the Ancillary
Agreements. To NICO’s Knowledge, no such proceeding has been threatened.

     4.9 Ratings.

          Except as set forth in Schedule 4.9 of the NICO Disclosure Schedule, since January 1, 2010,
NICO has not received any notice that its financial strength rating by A.M. Best Company, Inc. will
be reduced below “A+” or that its rating by any other applicable rating agency will be adversely
affected by the consummation of the transactions contemplated by this Agreement and the Ancillary
Agreements.

     4.10 Brokers or Finders.

          Neither NICO nor any of its Affiliates has incurred any obligation or liability for brokerage
or finders’ fees or agents’ commissions or other similar payments in connection with this Agreement
or the Ancillary Agreements and the transactions contemplated hereby or thereby.

     4.11 Due Investigation.

          NICO and its Affiliates have such knowledge and experience in financial, business and
insurance matters that it is capable of evaluating the merits and risks of the transactions
contemplated by this Agreement and the Ancillary Agreements. NICO has conducted its own
independent review and analysis of the A&P Business and acknowledges and agrees that the CNA
Parties have provided NICO with access to the personnel, properties, premises and Books and Records
relating to the A&P Business for this purpose. In entering into this Agreement, NICO has relied
solely upon its own investigation and analysis, and NICO

26

 

acknowledges and agrees in respect of the transactions contemplated under this Agreement and
the Ancillary Agreements (a) that, except for the representations and warranties contained in
Article III of this Agreement, none of the CNA Parties, their Affiliates or their
respective Representatives makes or has made any representation or warranty, either express or
implied, with respect to the A&P Business or as to the accuracy or completeness of any of the
information (including any projections, estimates or other forward looking information) provided
(including in any management presentations, information memorandum, ratings agency presentations,
supplemental information or other materials or information with respect to any of the above) or
otherwise made available to NICO, its Affiliates or their respective Representatives and (b) that
subject to Article IX hereof, to the fullest extent permitted by Applicable Law, the CNA
Parties, their Affiliates and their respective Representatives shall not have any liability
whatsoever to NICO, its Affiliates or their respective Representatives on any basis (including in
contract or tort or otherwise) based upon any such information provided or made available, or
statements made (or any omissions therefrom), in each case prior to the Closing, to NICO, its
Affiliates or their respective Representatives, except as and only to the extent expressly set
forth herein with respect to the express representations and warranties contained in Article
III of this Agreement. For the avoidance of doubt, nothing in this Section 4.11 is
intended to alter or impact any express contractual right, agreement or remedy provided for in the
Ancillary Agreements.

     4.12 No Other Representations or Warranties.

          Notwithstanding anything contained in this Agreement or any Ancillary Agreements to the
contrary, (a) neither NICO nor any Person on behalf of NICO is making any representations or
warranties whatsoever, express or implied, beyond those expressly made by NICO in Article
IV hereof, and (b) the CNA Parties and their Affiliates have not been induced by, or relied
upon, any representations, warranties or statements (written or oral), whether express or implied,
made by any Person, that are not expressly set forth in this Article IV.

ARTICLE V

ADDITIONAL AGREEMENTS OF THE CNA PARTIES AND NICO

     5.1 Conduct of Business.

          Except as (a) consented to in writing by NICO (which consent shall not be unreasonably
withheld, delayed or conditioned), (b) contemplated in this Agreement or the Ancillary Agreements
or (c) required by any Order or Applicable Law, during the period from the date hereof through the
earlier of the Closing Date or the termination of this Agreement, the CNA Parties with respect to
the A&P Business:

               (i) shall not commute any Third Party Reinsurance Agreement providing reinsurance
coverage for the Business Covered;

27

 

               (ii) shall not commute any reinsurance contract included within the Business Covered
under which a CNA Party or a CNA Insurer assumed the liabilities of another insurer for a
sum in excess of five million dollars ($5,000,000) (net of any Third Party Reinsurance
Recoverables or Other Recoveries that are reasonably expected by the CNA Parties to be
collectible);

               (iii) shall not settle any claim on the Business Covered for an amount in excess of
five million dollars ($5,000,000) (net of any Third Party Reinsurance Recoverables or
Other Recoveries that are reasonably expected by the CNA Parties to be collectible);

               (iv) shall not compromise any claim for an amount in excess of five million dollars
($5,000,000) on any Third Party Reinsurance Recoverables or Other Recoveries inuring to
the benefit of NICO;

               (v) shall conduct the A&P Business in the ordinary course consistent with past
practice;

               (vi) shall use its commercially reasonable efforts to preserve the A&P Business
intact and maintain its existing relations and goodwill with customers, suppliers,
reinsurers, retrocessionaires, agents, brokers and distributors;

               (vii) shall not make any admission of liability, agreement or compromise with any
Person in relation to any threatened or pending litigation or arbitration proceeding
involving an amount in excess of five million dollars ($5,000,000) (net of any Third Party
Reinsurance Recoverables or Other Recoveries that are reasonably expected by the CNA
Parties to be collectible);

               (viii) shall not (A) adopt a plan of complete or partial liquidation, dissolution or
rehabilitation, (B) undertake any changes to the domicile of CCC or CIC to a jurisdiction
outside of the United States or (C) adopt a plan of merger, consolidation, restructuring,
recapitalization, redomestication or other reorganization or voluntarily undertake any
other changes in the corporate structure of the CNA Parties, other than in connection with
capital raising activities (including in connection with equity or debt offerings or
lending or other credit facilities), that in any manner adversely affects in any material
respect the A&P Business;

               (ix) shall keep the Books and Records accurate in all material respects;

28

 

               (x) shall ensure that the A&P Business complies in all material respects with all
Applicable Law, including by making all filings in relation to the A&P Business with
applicable insurance regulatory authorities in a timely manner; and

               (xi) shall not authorize or enter into an agreement or arrangement of any kind to do
any of the foregoing.

     5.2 Expenses.

          Regardless of whether any or all of the transactions contemplated by this Agreement and the
Ancillary Agreements are consummated, and except as otherwise expressly provided herein, NICO and
the CNA Parties shall each bear their respective direct and indirect fees, costs and expenses
incurred in connection with the negotiation and preparation of this Agreement, the Ancillary
Agreements and the consummation of the transactions contemplated hereby or thereby, including all
fees and expenses of its Representatives.

     5.3 Access; Certain Communications.

          Between the date of this Agreement and the Closing Date, the CNA Parties shall afford to NICO
and its Representatives reasonable access, upon reasonable advance notice and during normal
business hours, to contracts, documents and information relating to the assets, liabilities,
business, operations and other aspects of the A&P Business; provided, however, that the CNA Parties
shall not be obligated to provide such access or information if the CNA Parties determine, in their
reasonable judgment, that doing so would violate Applicable Law or a contract, agreement or
obligation of confidentiality owing to a third-party or jeopardize the protection of an
attorney-client privilege. Between the date of this Agreement and the Closing Date, the CNA
Parties shall cause its respective Representatives to cooperate in good faith with NICO and its
Representatives in connection with all such access. Without limiting any of the terms thereof, the
terms of Section 5.11 shall govern NICO’s, its Affiliates’ and their Representatives’
obligations with respect to all Confidential Information with respect to the A&P Business and the
CNA Parties and their Affiliates and other related Persons, which has been provided or made
available to them at any time, including during the period between the date of this Agreement and
the Closing Date.

     5.4 Reasonable Best Efforts; Third Party Consents.

          (a) Upon the terms and subject to the conditions set forth in this Agreement, between the date
of this Agreement and the Closing Date, the CNA Parties and NICO shall each use their reasonable
best efforts to promptly (i) take, or to cause to be taken, all reasonable actions, and to do, or
to cause to be done, and to provide reasonable assistance and cooperation to the other party in
doing all things reasonably necessary, proper or advisable under Applicable Law or otherwise to
consummate and make effective the transactions contemplated by this Agreement (including satisfying
all Closing conditions) and the Ancillary Agreements, in each case as applicable to such Party; and
(ii) obtain from any Governmental Authority any actions,

29

 

non-actions, clearances, waivers, consents, approvals, Permits or Orders required to be
obtained by such Party, or any of their respective Affiliates in connection with the authorization,
execution, delivery and performance of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby, including as set forth on
Schedule 3.3 of the CNA Disclosure Schedule and Schedule 4.3 of the NICO Disclosure
Schedule.

          (b) Between the date of this Agreement and the Closing Date, the CNA Parties and NICO shall
provide each other with a reasonable opportunity to review and comment upon submissions made to any
Governmental Authority (other than a Tax Authority) in connection with the consents and approvals
set forth on Schedule 3.3 of the CNA Disclosure Schedule and Schedule 4.3 of the
NICO Disclosure Schedule, respectively, and shall keep one another reasonably informed of
developments relating to their efforts to obtain such consents and approvals.

          (c) Once all of the closing conditions set forth in Articles VI and VII have
been satisfied, no Party to this Agreement shall consent to any voluntary delay of the Closing at
the behest of any Governmental Authority without the consent of the other Party to this Agreement,
which consent shall not be unreasonably withheld, delayed or conditioned.

          (d) Within thirty (30) days following the date of this Agreement, NICO shall provide a list of
those consents, approvals and agreements of any third Person other than a Governmental Authority
set forth on Schedule 5.4(d) attached hereto that NICO desires to be obtained in connection
with the consummation of the transactions contemplated by this Agreement and the Ancillary
Agreements (the “Requested Third Party Consents”). Except as otherwise agreed by the
Parties, the CNA Parties and NICO shall cooperate and use commercially reasonable efforts to obtain
such Requested Third Party Consents. To the extent that any such Requested Third Party Consents
shall not have been obtained prior to the Closing, the Parties shall continue to use commercially
reasonable efforts to obtain such Requested Third Party Consents as promptly as reasonably
practicable after the Closing. Pending receipt of any such Requested Third Party Consents, the
Parties shall cooperate with each other to effect mutually agreeable, reasonable and lawful
arrangements designed to provide the respective Parties with substantially similar rights and
benefits that would have accrued to the respective Parties had such Requested Third Party Consents
been obtained. The Parties agree that any costs and expenses payable to third parties in
connection with the procurement of any Requested Third Party Consents (whether such costs and
expenses are incurred prior to the Closing or after the Closing pursuant to this Section
5.4(d)) shall be borne by NICO. Notwithstanding anything to the contrary in this Agreement or
the Ancillary Agreements, NICO acknowledges and agrees that the CNA Parties shall not be obligated
under this Agreement or any Ancillary Agreement to obtain any consent, approval or agreement of any
third Person that is set forth on Schedule 5.4(d) and that is not identified as a Requested
Third Party Consent.

          (e) Notwithstanding anything herein to the contrary, between the date of this Agreement and
the Closing Date, neither the CNA Parties nor NICO shall be obligated to take or

30

 

refrain from taking or to agree to it, or its Affiliates taking or refraining from any action
or to suffer to exist any condition, limitation, restriction or requirement which would,
individually or together with all other such actions, conditions, limitations, restrictions or
requirements, reasonably be expected to materially and adversely effect the benefits, taken as a
whole, which such Party could otherwise reasonably expect to derive from the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements had such Party not been
obligated to take or refrain from or to agree to the taking or refraining from such action or
suffer to exist such condition, limitation, restriction or requirement, excluding the effects of
any such condition, limitation, restriction or requirement that (i) is customary for applicable
Governmental Authorities to impose in transactions of the type contemplated by this Agreement or
the Ancillary Agreements, or (ii) is otherwise agreed to by the Parties in terms of an amendment or
change to any of the Ancillary Agreements (a “Burdensome Condition”).

     5.5 Further Assurances.

          Subject to the terms and conditions of this Agreement and the Ancillary Agreements, each such
Party shall, at or prior to the Closing Date, use its reasonable best efforts to fulfill or obtain
the fulfillment of the conditions precedent to the consummation of the transactions contemplated
hereby and by the Ancillary Agreements as applicable to such Party, including the execution and
delivery of any documents, certificates, instruments or other papers and the taking of any other
actions that are reasonably necessary for the consummation of the transactions contemplated hereby
and by the Ancillary Agreements.

     5.6 Notification of Certain Matters.

          Prior to Closing, each Party shall give prompt notice to the other Party of (a) any adverse
event, change or circumstance that (i) would, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of such Party or its Affiliates to
consummate the transactions contemplated by this Agreement and the Ancillary Agreements, or (ii)
would reasonably be expected to cause any condition set forth in Articles VI and
VII to be unsatisfied in any material respect at any time prior to the Closing Date, (b)
any litigation or administrative proceeding pending or, to its Knowledge, threatened in writing
which challenges or seeks to restrain or enjoin the consummation of the transactions contemplated
hereby and by the Ancillary Agreements, (c) any downgrade in the financial strength ratings by any
applicable rating agency of a Party or any of their respective Affiliates that will be a Party to
an Ancillary Agreement, and (d) a change in the current jurisdiction of domicile of such Party;
provided, however, in each case, the delivery of any notice pursuant to this Section 5.6
shall not limit or otherwise affect the remedies available hereunder to the Party receiving such
notice.

     5.7 Transfer and Maintenance of Books and Records.

          Through the Closing Date, the CNA Parties shall maintain the Books and Records in all material
respects in the same manner and with the same care that the Books and Records have been maintained
prior to the execution of this Agreement. Following the Closing, the

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Parties shall maintain the Books and Records consistent with the requirements set forth in the
Administrative Services Agreement. During the period between the date hereof and the Closing Date,
the Parties shall in good faith agree upon a protocol to (a) transfer to NICO the Books and Records
following the Closing and/or (b) provide NICO with reasonable access to the Books and Records
during normal business hours following the Closing, as may be provided for under the Administrative
Services Agreement.

     5.8 Cooperation after Closing.

          After the Closing, the CNA Parties and NICO shall cooperate with each other by furnishing any
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 any transaction
contemplated by this Agreement or the Ancillary Agreements; provided, however, that any such
additional documents must be reasonably satisfactory to each of the Parties and not impose upon
either Party any liability, risk, obligation, loss, or material cost or expense not contemplated by
this Agreement or the Ancillary Agreements.

     5.9 Regulatory Compliance.

          NICO shall ensure that it and each of its Affiliates that will be a subcontractor under an
Ancillary Agreement holds any (i) Permits from Governmental Authorities responsible for regulating
insurance or reinsurance companies required for them to perform their respective obligations under
each Ancillary Agreement to which it is a party or a subcontractor in compliance with Applicable
Law and (ii) except as otherwise would not have a material adverse effect on the A&P Business,
other Permits from Governmental Authorities other than those responsible for regulating insurance
or reinsurance companies required for them to perform their respective obligations under each
Ancillary Agreement to which it is a party or a subcontractor in compliance in all material
respects with Applicable Law.

     5.10 Exclusions from the Representations and Warranties of CNA Parties. 

          Notwithstanding anything to the contrary in this Agreement, the Ancillary Agreements, the
exhibits or the schedules hereto, NICO acknowledges and agrees that the CNA Parties and their
Affiliates make no representations or warranties with respect to, and nothing contained in this
Agreement, the Ancillary Agreements or in any other agreement, document or instrument to be
delivered in connection herewith is intended or shall be construed to be a representation or
warranty, express or implied, of the CNA Parties or any of their Affiliates or of the A&P Business,
for any purposes of this Agreement (including Article IX), the Ancillary Agreements or any
other agreement, document or instrument to be delivered in connection herewith, in respect of (a)
the adequacy or sufficiency of Reserves, (b) the effect of the adequacy or sufficiency of Reserves
on any line item, asset, liability or equity amount on any financial or other document, or (c)
whether or not Reserves were determined in accordance with any actuarial, statutory, regulatory or
other standard. Furthermore, NICO acknowledges, understands and agrees that no fact, condition,
development or issue relating to the adequacy or sufficiency of

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Reserves may be used, directly or indirectly, to demonstrate or support the breach or
violation of any representation, warranty, covenant or agreement of or by the CNA Parties contained
in this Agreement, or any other agreement, document or instrument to be delivered in connection
herewith.

     5.11 Confidentiality.

          (a) The CNA Parties and NICO (each, the “Receiving Party”) hereby covenant and agree,
each on behalf of itself and on behalf of its Affiliates, that from and after the date hereof, the
Receiving Party and its Affiliates will not disclose, give, sell, use or otherwise divulge any
Confidential Information (defined below) of the other Party (the “Disclosing Party”) or
permit their respective Representatives to do the same, except that each Receiving Party may
disclose such Confidential Information or portions thereof (i) if legally compelled to do so or as
required in connection with an examination by an insurance regulatory authority, (ii) to the extent
necessary for the performance of such Receiving Party’s obligations under this Agreement or the
Ancillary Agreements, (iii) the enforcement of the rights of such Receiving Party and its
Affiliates under this Agreement or the Ancillary Agreements, (iv) to those of such Receiving
Party’s Affiliates, and to their respective Representatives in each case who need to know such
information for the foregoing purposes, (v) as required under any Applicable Law, (vi) as required
to a Tax Authority to support a position taken on any Tax Return, or (vii) or as required by the
rules of any stock exchange on which the stock of a Receiving Party’s Affiliate is traded. If the
Receiving Party or its Affiliates, or any of their respective Representatives become legally
compelled to disclose any Confidential Information (other than as required in connection with an
examination by an insurance regulatory authority or as required to a Tax Authority to support a
position taken on any Tax Return), the Receiving Party shall provide Disclosing Party with prompt
written notice of such requirement so that the Disclosing Party may seek a protective order or
other remedy or waive compliance with this Section 5.11. In the event that such protective
order or other remedy is not obtained, or Disclosing Party waives compliance with this Section
5.11, the Receiving Party or its Affiliates, as applicable, shall furnish only that portion of
Confidential Information which is legally required to be provided and exercise its commercially
reasonable efforts to obtain assurances that appropriate confidential treatment will be accorded to
the Confidential Information.

          (b) The Receiving Party, on behalf of itself and on behalf of its Affiliates and their
respective Representatives acknowledges that a breach of its obligations under this Section
5.11 may result in irreparable injury to the Disclosing Party. In the event of the breach by
Receiving Party or any of its Affiliates or their respective Representatives of any of the terms
and conditions of this Section 5.11 to be performed, the Disclosing Party shall be entitled
to the remedies provided in Section 13.11.

          (c) For the purposes of this Agreement, “Confidential Information” means all
confidential information (irrespective of the form of such information) of any kind, including any
analyses, compilations, data, studies, notes, translations, memoranda or other documents,
concerning the Disclosing Party or any of its Affiliates obtained directly or indirectly from the

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Disclosing Party or any of its Affiliates, or Representatives in connection with the
transactions contemplated by this Agreement and the Ancillary Agreements, including any information
regarding the A&P Business, except information (i) which at the time of the disclosure or
thereafter is ascertainable or available to the public (other than as a result of a disclosure
directly or indirectly by the Receiving Party or any of its Affiliates, or Representatives), (ii)
is or becomes available to the Receiving Party on a non-confidential basis from a source other than
the Disclosing Party or any of its Affiliates, or Representatives, provided that, to the knowledge
of such Receiving Party, such source was not prohibited from disclosing such information to the
Receiving Party by a legal, contractual or fiduciary obligation owed to another Person, (iii) the
Receiving Party can establish is already in its possession or the possession of any of its
Affiliates, or Representatives (other than information furnished by or on behalf of the Disclosing
Party), or (iv) which is independently developed by the Receiving Party or its Affiliates without
the use or benefit of any information that would otherwise be Confidential Information.

     5.12 LPT Reinsurance Agreement.

          At the Closing, the CNA Parties and NICO shall execute and deliver to each other the LPT
Reinsurance Agreement which shall be effective as of the Inception Date, pursuant to which the CNA
Parties will cede to NICO, and NICO will assume, the Reinsured Liabilities and the CNA Parties
shall pay to NICO the Reinsurance Premium and transfer the Pre-Inception Date Receivables, as
further described in Section 2.2.

     5.13 Administrative Services Agreement.

          At the Closing, the CNA Parties and NICO shall execute and deliver to each other the
Administrative Services Agreement which shall be effective as of the Closing Date, pursuant to
which the CNA Parties and the CNA Insurers appoint NICO and/or its duly appointed Affiliate(s) to
perform all administrative services with respect to the Reinsured Contracts and Third Party
Reinsurance Agreements as respects the Business Covered until the date of termination of the LPT
Reinsurance Agreement (or the date of termination of the Administrative Services Agreement, if
earlier) and NICO agrees to perform such services on behalf of the CNA Parties as provided in the
Administrative Services Agreement.

     5.14 Collateral Trust Agreement.

          At the Closing, the CNA Parties and NICO shall (a) execute and deliver to each other the
Collateral Trust Agreement which shall be effective as of the Closing Date, and (b) arrange for the
Trustee to execute and deliver the Collateral Trust Agreement. On the Closing Date, and pursuant
to the Collateral Trust Agreement and the LPT Reinsurance Agreement, (x) the CNA Parties will
hereby transfer and assign to the Collateral Trust Account, on behalf of NICO, assets consisting of
the aggregate amount of the Reinsurance Premium, together with interest accrued from the Inception
Date at the Applicable Interest Rate and (y) NICO shall transfer and assign to the Collateral Trust
Account, assets consisting of cash in the aggregate amount of two hundred million dollars
($200,000,000).

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     5.15 Security Agreement.

          At the Closing, CCC, as agent for the CNA Parties and NICO shall (a) execute and deliver to
each other the Security Agreement which shall be effective as of the Closing Date, and (b) arrange
for the Trustee, as securities intermediary, to execute and deliver the Security Agreement.
Pursuant to the Security Agreement, NICO will grant to CCC as agent for the benefit of the CNA
Parties, a security interest in and continuing lien on all of NICO’s right, title and interest in
the Collateral Trust Account or any replacement or successor thereof or substitution therefor, all
security entitlements carried therein and proceeds of the foregoing.

     5.16 Transition Services Agreement.

          (a) During the period between the date hereof and the Closing Date, the Parties shall
negotiate in good faith a transition services agreement (the “Transition Services
Agreement”), which shall substantially conform to the terms and conditions set forth in the
Transition Services Agreement Term Sheet. At the Closing, CCC and NICO shall execute and deliver
to each other the Transition Services Agreement which shall be effective as of the Closing Date,
pursuant to which CCC and NICO will provide to the other certain services relating to the
administration of the Business Covered on a transitional basis.

          (b) In order to enable the CNA Parties to provide certain services pursuant to the Transition
Services Agreement, the CNA Parties and NICO shall cooperate between the date hereof and Closing to
design, develop and implement as of Closing certain system security and connectivity software,
hardware, processes and other segregation tools (including, but not limited to, firewalls and
physical walls) as are necessary to comply with Applicable Law and the relevant policies of the CNA
Parties and NICO (the “Segregation Plan”). The final version of the Segregation Plan
designed and developed by the Parties pursuant to this Section 5.16(b) shall be
memorialized in a writing signed by all Parties prior to implementation. All costs and expenses
incurred by NICO in connection with implementing the Segregation Plan agreed by the Parties shall
be borne by NICO. All reasonable costs and expenses incurred by the CNA Parties in connection with
implementing the Segregation Plan agreed by the Parties shall be calculated on a time and materials
basis and shall be borne by NICO in accordance with a budget to be developed by the CNA Parties and
approved by NICO (which approval shall not be unreasonably withheld, conditioned, delayed or
denied) prior to any implementation of the Segregation Plan.

     5.17 Third Party Reinsurance Allocation Agreement.

          At the Closing, the CNA Parties and NICO shall execute and deliver to each other the Third
Party Reinsurance Allocation Agreement which shall be effective as of the Closing Date, pursuant to
which the CNA Parties and NICO will allocate between the Parties, the Third Party Reinsurance
Recoverables in accordance with whether such recoverables are allocable to A&P Claims reinsured by
NICO or that are allocable to Non-A&P Claims that are not ceded to NICO.

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     5.18 Retrospective Premium Allocation Agreement.

          At the Closing, the CNA Parties and NICO shall execute and deliver to each other the
Retrospective Premium Allocation Agreement which shall be effective as of the Closing Date.

     5.19 Parental Guarantee Agreement.

          At the Closing, the CNA Parties and Berkshire shall execute and deliver to each other the
Parental Guarantee Agreement which shall be effective as of the Closing Date. Pursuant to the
Parental Guarantee Agreement, Berkshire will (a) guarantee to the CNA Parties the payment or
performance of certain obligations of NICO under the Ancillary Agreements and (b) grant to CCC as
agent for the benefit of the CNA Parties, a security interest in and continuing lien on all of
Berkshire’s right, title and interest in the Collateral Trust Account or any replacement or
successor thereof or substitution therefor, all security entitlements carried therein and proceeds
of the foregoing.

     5.20 Corporate Changes after Closing.

          From and after the Closing and until the expiration or termination this Agreement and all of
the Ancillary Agreements, neither Party shall voluntarily undertake any material change in their
corporate structure or domicile which would have a substantially adverse impact upon the other
Party, without the prior written consent of such Party, which consent shall not be unreasonably
withheld, conditioned, delayed or denied.

     5.21 Waiver of Duty of Utmost Good Faith.

          Each Party absolutely and irrevocably waives resort to the duty of “utmost good faith” or any
similar principle in connection with the negotiation and/or execution of this Agreement and the
Ancillary Agreements. Notwithstanding anything in this Agreement or the Ancillary Agreements to
the contrary, each Party agrees that it does not waive the duty of “utmost good faith” or any
similar principle relating to the conduct of the Parties after the Closing Date.

ARTICLE VI

CONDITIONS PRECEDENT TO THE OBLIGATION

OF NICO TO CLOSE

          NICO’s obligation to consummate the transactions contemplated by this Agreement and the
Ancillary Agreements is subject to the satisfaction (or waiver, if permissible under Applicable
Law) on or prior to the Closing Date of the following conditions.

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     6.1 Representations, Warranties and Covenants.

          (a) The representations and warranties of the CNA Parties contained in this Agreement shall be
true and correct in all material respects on the date of this Agreement (except to the extent that
any such representations and warranties are given as of a particular date and relate solely to a
particular date or period, which shall be true and correct as of such date or period).

          (b) The CNA Parties shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied with by the CNA
Parties at or prior to the Closing.

          (c) NICO shall have received a certificate from each of the CNA Parties to the effect set
forth in Sections 6.1(a) and (b).

     6.2 Ancillary Agreements.

          The Ancillary Agreements shall have been duly executed and delivered by the CNA Parties and
the Trustee, as applicable, and such agreements shall be in full force and effect with respect to
the CNA Parties on the Closing Date.

     6.3 Secretary’s Certificates.

          The CNA Parties shall have delivered to NICO a certificate of the secretary or assistant
secretary of each of the CNA Parties and their applicable Affiliates, dated as of the Closing Date,
as to the resolutions of the board of directors of each of the CNA Parties and their applicable
Affiliates authorizing the execution, delivery and performance of this Agreement and the Ancillary
Agreements to which it is a party, as to the status and signature of each of their respective
officers who executed and delivered this Agreement and such Ancillary Agreements.

     6.4 Governmental Approvals and Consents.

          All filings required to be made prior to the Closing with, and all regulatory consents and
approvals required to be obtained prior to the Closing from, any Governmental Authority, listed on
Schedule 3.3 of the CNA Disclosure Schedule and Schedule 4.3 of the NICO Disclosure
Schedule, in connection with the execution and delivery of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and thereby shall have been
made or obtained.

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     6.5 Injunction and Litigation.

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

     6.6 Frustration of Closing Conditions.

          NICO may not rely on the failure of any condition set forth in this Article VI to be
satisfied if such failure was caused by NICO’s failure to use its reasonable best efforts to
consummate the transactions contemplated by this Agreement and the Ancillary Agreements as required
by and subject to Section 5.4.

ARTICLE VII

CONDITIONS PRECEDENT TO THE OBLIGATION

OF THE CNA PARTIES TO CLOSE

          The CNA Parties’ obligation to consummate the transactions contemplated by this Agreement and
the Ancillary Agreements is subject to the satisfaction (or waiver, if permissible under Applicable
Law) on or prior to the Closing Date of the following conditions.

     7.1 Representations, Warranties and Covenants.

          (a) The representations and warranties of NICO contained in this Agreement shall be true and
correct in all material respects on the date of this Agreement (except to the extent that any such
representations and warranties are given as of a particular date and relate solely to a particular
date or period, which shall be true and correct as of such date or period).

          (b) NICO shall have performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by NICO at or prior to the
Closing.

          (c) The CNA Parties shall have received a certificate from NICO to the effect set forth in
Sections 7.1(a) and (b).

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     7.2 Ancillary Agreements.

          The Ancillary Agreements shall have been duly executed and delivered by NICO, or its
Affiliates and the Trustee, as applicable, and such agreements shall be in full force and effect
with respect to NICO or such Affiliate on the Closing Date.

     7.3 Secretary’s Certificates.

          (a) NICO shall have delivered to the CNA Parties a certificate of the secretary or assistant
secretary of NICO, dated as of the Closing Date, as to the resolution of the board of directors of
NICO authorizing the execution, delivery and performance of this Agreement and the Ancillary
Agreements to which it is a party, as to the status and signature of each of its respective
officers who executed and delivered this Agreement and the Ancillary Agreements.

          (b) Berkshire shall have delivered to the CNA Parties a certificate of the secretary or
assistant secretary of Berkshire, dated as of the Closing Date, as to (i) the resolution of the
board of directors of Berkshire authorizing the execution, delivery and performance of guarantees
by Berkshire and certifying that such resolution are still in full force and effect and (ii) the
authority, status and signature of its officer who executed and delivered this Agreement and the
Ancillary Agreements to which it is a party.

     7.4 Governmental Approvals and Consents.

          All filings required to be made prior to the Closing with, and all regulatory consents and
approvals required to be obtained prior to the Closing from, any Governmental Authority, listed on
Schedule 3.3 of the CNA Disclosure Schedule and Schedule 4.3 of the NICO Disclosure
Schedule, in connection with the execution and delivery of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and thereby shall have been
made or obtained.

     7.5 Injunction and Litigation.

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

     7.6 Rating of NICO.

          NICO’s financial strength rating by A.M. Best Company, Inc. has not been reduced below “A+”.

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     7.7 Frustration of Closing Conditions.

          The CNA Parties may not rely on the failure of any condition set forth in this Article
VII to be satisfied if such failure was caused by the CNA Parties’ failure to use their
reasonable best efforts to consummate the transactions contemplated by this Agreement and the
Ancillary Agreements as required by and subject to Section 5.4.

ARTICLE VIII

TERMINATION

     8.1 Termination of Agreement.

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

          (a) By mutual written consent of the CNA Parties and NICO.

          (b) By the CNA Parties in writing if NICO shall fail to perform in any material respect its
agreements contained herein required to be performed by it prior to the date of such termination,
or materially breach any of its representations or warranties contained herein, in each case so as
to cause a condition to Closing set forth in Section 7.1 to be incapable of satisfaction,
which failure or breach is not cured within twenty (20) Business Days after CNA Parties have
notified NICO in writing of its intent to terminate this Agreement pursuant to this Section
8.1(b).

          (c) By NICO in writing if the CNA Parties shall fail to perform in any material respect their
agreements contained herein required to be performed by them prior to the date of such termination,
or materially breach any of their representations or warranties contained herein, in each case so
as to cause a condition to Closing set forth in Section 6.1 to be incapable of
satisfaction, which failure or breach is not cured within twenty (20) Business Days after NICO has
notified the CNA Parties in writing of its intent to terminate this Agreement pursuant to this
Section 8.1(c).

          (d) By either the CNA Parties or NICO if the Closing has not occurred on or before July 1,
2011 (the “End Date”); provided, however, that the right to terminate this Agreement
pursuant to this Section 8.1(d) shall not be available to a Party if the failure of the
transactions contemplated by this Agreement and the Ancillary Agreements to be consummated on or
before the End Date was primarily due to the failure of such Party to perform any of its
obligations under this Agreement.

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          (e) By either the CNA Parties or NICO in the event of the issuance of a final nonappealable
Order restraining, enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and the Ancillary Agreements; provided, however, that the right to terminate this
Agreement under this Section 8.1(e) shall not be available to a Party if the issuance of
such final, nonappealable Order was primarily due to the failure of such Party to perform any of
its obligations under this Agreement.

          (f) By the CNA Parties in the event that A.M. Best Company, Inc. has reduced its rating of
NICO such as would cause the condition set forth in Section 7.6 to fail to be satisfied,
and such reduction has not publicly been reversed within ten (10) calendar days such that the
condition in Section 7.6 would then be satisfied.

     8.2 Effect of Termination.

          In the event of termination of this Agreement pursuant to Section 8.1 hereof, written
notice of termination shall be given pursuant to the notice provisions herein, and this Agreement
shall forthwith become null and void and there shall be no liability by any Party hereto, except
(a) that the provisions of Article X and Sections 5.2, 8.2, 13.1,
13.2, 13.4, 13.5, 13.6, 13.7, 13.8, 13.9,
13.10, 13.11, 13.12, 13.13, 13.14 and 13.15 shall
remain in full force and effect, (b) any confidentiality obligations of the Parties (arising under
this Agreement or under any other confidentiality agreement entered into by the CNA Parties and
NICO) shall survive the termination of this Agreement, and (c) with respect to any liabilities or
damages incurred or suffered by a Party to the extent such liabilities or damages were the result
of fraud or the willful and material breach by another Party of any of its representations,
warranties, covenants or other agreements set forth in this Agreement. For purposes of this
Agreement, “willful and material breach” shall mean a material breach that is a consequence of an
act undertaken by or at the direction of the breaching Party with the knowledge (actual or
constructive) that the taking of such act would, or would be reasonably expected to, cause a breach
of this Agreement. For the avoidance of doubt, any reduction in the financial strength rating of
NICO shall not be construed under this Agreement as a “willful and material breach” of any of
NICO’s representations, warranties, covenants or other agreements set forth in this Agreement
except to the extent that the underlying reasons for any such reduction would itself form the basis
for a breach of any of NICO’s representations, warranties, covenants or other agreements set forth
in this Agreement.

ARTICLE IX

INDEMNIFICATION

     9.1 CNA Parties’ Indemnification Obligations.

          Subject to the limitations set forth in this Article IX, from and after the Closing,
the CNA Parties shall jointly and severally indemnify, reimburse, defend and hold harmless NICO,
each of its Affiliates and each of their respective directors, officers, employees and agents

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(“NICO Indemnitees”) harmless from and against any Loss resulting from, based upon,
arising out of or otherwise relating to:

          (a) any breach or inaccuracy of any representation or warranty made by the CNA Parties
contained in Article III of this Agreement or from any misrepresentation in any certificate
delivered to NICO by the CNA Parties pursuant to Section 6.1(c);

          (b) any breach of or failure to perform any covenant or agreement of the CNA Parties contained
in this Agreement to be performed after the Closing; and

          (c) any successful enforcement of the obligations contained in this Section 9.1
against the CNA Parties.

     9.2 NICO’s Indemnification Obligations.

          Subject to the limitations set forth in this Article IX, and without duplication under
the Ancillary Agreements, from and after the Closing, NICO shall indemnify, reimburse, defend and
hold harmless the CNA Parties, each of their Affiliates and their respective directors, officers,
employees and agents (“CNA Indemnitees”) harmless from and against any Loss resulting from,
based upon, arising out of or otherwise relating to:

          (a) any breach or inaccuracy of any representation or warranty made by NICO contained in
Article IV of this Agreement or from any misrepresentation in any certificate delivered to
the CNA Parties by NICO pursuant to Section 7.1(c);

          (b) any breach of or failure to perform any covenant or agreement of NICO contained in this
Agreement to be performed after the Closing; and

          (c) any successful enforcement of the obligations contained in this Section 9.2
against NICO.

     9.3 Indemnification Procedures.

          (a) In the event that either a NICO Indemnitee or a CNA Indemnitee desires to assert a demand,
claim or circumstance that, immediately or with the lapse of time, could give rise to a claim
(“Claim”) for indemnification hereunder (other than a Third Party Claim pursuant to
Section 9.3(b)), such Party seeking indemnification (the “Indemnified Party”)
shall, as promptly as is reasonably practicable after becoming aware of the claim and entitlement
to assert indemnification therefor, deliver written notice (such notice or the notice described in
Section 9.3(b), a “Claims Notice”) to the Party from whom indemnification is sought
(the “Indemnifying Party”); provided, however, that a failure to give such notice shall not
affect the

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Indemnified Party’s right to indemnification hereunder except to the extent that the
Indemnifying Party is actually prejudiced thereby (except that the Indemnifying Party shall not be
liable for any expenses incurred during the period in which the Indemnified Party failed to provide
such notice). The Claims Notice shall describe the Claim in reasonable detail, and shall indicate
the amount (estimated, if necessary) of the Loss, and method of computation thereof, that has been
or may be suffered by the Indemnified Party and the provisions of this Agreement in respect of
which such right of indemnification is sought or arises.

          (b) Promptly after receipt from any third party by an Indemnified Party of a notice of any
demand, claim or circumstance that, immediately or with the lapse of time, could give rise to a
claim or the commencement (or threatened commencement) of any action, proceeding or investigation
(a “Third Party Claim”) that may result in a Loss for which indemnification may be sought
hereunder, the Indemnified Party shall deliver a Claims Notice to the Indemnifying Party; provided,
however, that a failure to give such notice shall not affect the Indemnified Party’s right to
indemnification hereunder except to the extent that the Indemnifying Party is actually prejudiced
thereby. The Claims Notice shall describe the Third Party Claim in reasonable detail (including
the identity of the third party), and shall indicate, to the extent known, the amount (estimated,
if necessary) of the Loss, and method of computation thereof, and the provisions of this Agreement
in respect of which such right of indemnification is sought or arises. The Indemnified Party shall
deliver to the Indemnifying Party copies of all notices and documents (including court papers)
received by the Indemnified Party relating to such Third Party Claim.

          (c) The Indemnifying Party shall be entitled to settle or assume and control the defense of
any Third Party Claim at its own expense and by its own counsel. If the Indemnifying Party elects
to settle or defend such Third Party Claim, it shall, within forty-five (45) calendar days
following its receipt of the Claims Notice notify the Indemnified Party of its intent to do so, and
the Indemnified Party shall cooperate, at the expense of the Indemnifying Party, in the settlement
of, or defense against, such Third Party Claim, including, if appropriate and related to the Third
Party Claim in question, in making any reasonable counterclaim against such third party, or any
cross complaint against any Person (other than the Indemnified Party or its Affiliates). Should
the Indemnifying Party so elect to assume the defense of a Third-Party Claim, the Indemnifying
Party shall not be liable to the Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereto. The Indemnified Party shall have the
right to employ separate counsel in defense of such Third Party Claim and participate in such
defense thereof, but the fees and expenses of such counsel shall be at the expense of the
Indemnified Party. If the Indemnifying Party elects not to settle or defend the Third Party Claim,
fails to notify the Indemnified Party of its election as herein provided or contests its obligation
to provide indemnification under this Agreement, the Indemnified Party may pay, settle or defend
such Third Party Claim. Notwithstanding the foregoing, neither the Indemnifying Party nor the
Indemnified Party may settle any Third Party Claim without the consent of the other Party;
provided, that such consent to settlement shall not be unreasonably withheld, conditioned or
delayed; further provided, the Indemnifying Party may, without the Indemnified Party’s prior
written consent, settle any Third Party Claim or consent to entry of any judgment with respect to
any Third Party Claim which requires solely money damages paid by

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the Indemnifying Party (without any right of reimbursement or other recourse to the
Indemnified Party), and which includes as an unconditional term thereof the release by the claimant
or the plaintiff of the Indemnified Party from all liability in respect of such Third Party Claim.
If the Indemnifying Party chooses to defend any Third Party Claim, the Indemnified Party shall make
available to the Indemnifying Party any books, records or other documents within its control that
are necessary, appropriate or useful for such defense.

     9.4 Limitations on Indemnification Obligations.

          (a) Required payments by an Indemnifying Party pursuant to this Article IX shall be
limited to the amount of any Loss remaining after deducting therefrom (i) any insurance or
reinsurance proceeds recoverable by the Indemnified Party on account of the Loss (other than with
respect to any insurance or reinsurance coverage provided by an Affiliate of the Indemnified
Party), (ii) any Tax benefit by the Indemnified Party in respect of such Loss determined at the
highest marginal Tax rate, and (iii) any indemnity, contribution, or other similar payment
recoverable by any Indemnified Party from any third party, in each case with respect to such Loss.
The Indemnified Party shall use commercially reasonable efforts to collect all such proceeds,
indemnity, contribution or other similar payments.

          (b) Except for the representations and warranties contained in Sections 3.1,
3.2(a), 3.2(c), 3.9, 3.10, 3.11, 4.1,
4.2(a), 4.2(c), 4.10, 4.11, and 4.12, all representations
and warranties made by the CNA Parties and NICO in Articles III and IV of this
Agreement or in any certificate delivered by the applicable Party pursuant to Sections
6.1(c) or 7.1(c) shall survive the Closing for the period of one (1) year after the
Closing Date, whereupon they shall expire, and all claims for inaccuracy or breach of such
representations and warranties will be deemed waived unless notice of the inaccuracy or breach
thereof shall have been given to the breaching Party prior to the expiration of such one (1) year
period, in which event such representation or warranty shall survive to the extent of the claim
referred to in the notice until such claim has been resolved. The representations and warranties
contained in Sections 3.1, 3.2(a), 3.2(c), 3.9, 3.10,
3.11, 4.1, 4.2(a), 4.2(c), 4.10, 4.11 and
4.12 shall continue in perpetuity. All covenants and agreements contained in this
Agreement made by the Parties that contemplate performance following the Closing shall survive the
Closing. All other covenants and agreements made by the Parties contained in this Agreement shall
not survive the Closing and shall terminate as of the Closing.

          (c) The CNA Parties shall have no obligation to indemnify the NICO Indemnitees under
Section 9.1(a) for breaches or inaccuracies of any representation or warranty made by the
CNA Parties under Article III until Losses arising from such breaches or inaccuracies that
would otherwise be indemnifiable hereunder incurred by such NICO Indemnitees exceed ten million
dollars ($10,000,000) in the aggregate (the “Indemnity Threshold”), and thereafter, the CNA
Parties shall be responsible only for the excess over the Indemnity Threshold; provided, however,
that in no event shall the aggregate of all indemnifiable claims paid by the CNA Parties to the
NICO Indemnitees under Section 9.1(a) exceed one hundred million dollars ($100,000,000) in
the aggregate (the “Indemnity Cap”). For any

44

 

individual items under Section 9.1(a) where the Loss relating thereto is less than
twenty-five thousand dollars ($25,000) (the “De Minimis Amount”), the Losses related to any
such items shall be disregarded for purposes of the Indemnity Threshold. The limitations on
amounts set forth in this Section 9.4(c) shall not apply to limit recovery by the NICO
Indemnitees for indemnification with respect to breaches or inaccuracies of Section 3.9 or
for indemnification under Section 9.1(b) or 9.1(c).

          (d) NICO shall have no obligation to indemnify the CNA Indemnitees under Section
9.2(a) for breaches or inaccuracies of any representation or warranty made by NICO under
Article IV until Losses arising from such breaches or inaccuracies that would otherwise be
indemnifiable hereunder incurred by such CNA Indemnitees exceed the Indemnity Threshold,
and thereafter, NICO shall be responsible only for the excess over the Indemnity Threshold;
provided, however, that in no event shall the aggregate of all indemnifiable claims paid by NICO to
CNA Indemnitees under Section 9.2(a) exceed the Indemnity Cap. For any individual items
under Section 9.2(a) where the Loss relating thereto is less than the De Minimis Amount,
the Losses related to any such items shall be disregarded for purposes of the Indemnity Threshold.
The limitations on amounts set forth in this Section 9.4(d) shall not apply to limit
recovery by CNA Indemnitees for indemnification with respect to breaches or inaccuracies of
Section 4.10 or for indemnification under Section 9.2(b) or 9.2(c).

          (e) The Parties shall cooperate with each other with respect to resolving any claim or
liability with respect to which an Indemnifying Party is obligated to indemnify any Indemnified
Party hereunder, including by making commercially reasonable efforts to mitigate or resolve any
such claim or liability. In the event that an Indemnified Party shall fail to make such
commercially reasonable efforts to mitigate or resolve any claim or liability, then notwithstanding
anything else to the contrary contained herein, the Indemnifying Party shall not be required to
indemnify such Indemnified Party for any Loss that could reasonably be expected to have been
avoided if such Indemnified Party had made such efforts.

     9.5 Other Indemnification Matters.

          (a) In the event that any Party: (i) consolidates with or amalgamates, combines or merges
into any other Person and is not the continuing or surviving corporation or entity of such
consolidation, amalgamation, combination or merger; or (ii) sells, transfers, pledges or otherwise
disposes of all or substantially all (measured as of its most recent available balance sheet) of
its properties or assets (whether in one transaction or a series of related transactions) to one or
more Persons, then, in each such case, proper provision shall be made prior to the consummation of
any such transaction so that each such Person shall assume, by a written instrument entered into
for the benefit of, and enforceable by, the other Parties, the obligations of such Party set forth
in this Article IX. No Party shall enter into or participate in any transaction designed
to evade, or with the purpose of evading, its indemnification obligations under this Article
IX.

45

 

          (b) For all Tax purposes, to the maximum extent permitted by Applicable Law: (i) the transfer
of Pre-Inception Date Receivables and the payment of the Reinsurance Premium shall be treated by
the Parties as consideration due from the CNA Parties to NICO for the transactions contemplated by
this Agreement and the Ancillary Agreements and (ii) the Parties agree to treat all payments made
under Section 2.3 and this Article IX as adjustments to such consideration.

     9.6 Exclusive Remedy.

          (a) If the Closing occurs, this Article IX sets forth the sole and exclusive remedy
for any breach, inaccuracy, violation or nonfulfillment of this Agreement (including any
representation, warranty, covenant, obligation, other agreement or condition contained in this
Agreement or in the certificates delivered at the Closing pursuant to Sections 6.1(c) and
7.1(c)), regardless of whether a claim or counterclaim is based in tort, contract or any
other legal theory, or arises under Applicable Law or in equity, except that the remedies of
injunction and specific performance to the extent available under Section 13.11 of this
Agreement shall remain available to the Parties. In furtherance of the foregoing, each Party
hereby waives, from and after the Closing, to the fullest extent permitted under Applicable Law,
any and all rights, claims, counterclaims and causes of action (other than claims or counterclaims
of, or causes of action arising from, fraud) it may have against the other Party arising under or
based upon this Agreement, or the certificates delivered at the Closing pursuant to Sections
6.1(c) and 7.1(c), any Applicable Law, common law or otherwise, except (i) pursuant to
the indemnification provisions set forth in this Article IX and (ii) the remedies of
injunction and specific performance to the extent available under Section 13.11 of this
Agreement.

          (b) The Parties further acknowledge and agree that the provisions of Sections 3.10,
3.11, 4.11, 4.12, 5.10 and 13.16 of this Agreement shall
apply mutatis mutandis to the interpretation, application and enforcement of the provisions of the
Ancillary Agreements, and the Parties understand and agree that neither Party would have entered
into this Agreement or any Ancillary Agreement without this material provision.

          (c) If the Closing occurs, neither Party nor any of its Affiliates party to any Ancillary
Agreement may assert a claim or counterclaim against the other Party or any of its Affiliates for
any breach, inaccuracy, violation or nonfulfillment of any Ancillary Agreement other than solely
pursuant to the express terms of such Ancillary Agreement, which for the avoidance of doubt shall
foreclose any claim or counterclaim based in tort, contract or any other legal theory, or arises
under Applicable Law or in equity, that is not based solely on a breach, inaccuracy, violation or
nonfulfillment of the express terms of such Ancillary Agreement, except that the remedies of
injunction and specific performance to the extent available under such Ancillary Agreement shall
remain available to the Parties. In furtherance of the foregoing, each Party on behalf of itself
and its Affiliates party to any Ancillary Agreement, hereby waives, from and after the Closing, to
the fullest extent permitted under Applicable Law, any and all rights, claims, counterclaims and
causes of action (other than claims or counterclaims of, or causes of action arising from, fraud)
it may have against the other Party or any of the other Party’s

46

 

Affiliates arising under or based upon any Ancillary Agreement, or any certificate pursuant
thereto, any Applicable Law, common law or otherwise, except pursuant to the express terms of such
Ancillary Agreement.

          (d) Notwithstanding any other provisions in this Section 9.6, this Section 9.6
shall not be construed to alter or impact any express contractual right, remedy, covenant,
obligation, agreement or condition contained in or provided for under the Ancillary Agreements.

ARTICLE X

DISPUTE RESOLUTION

     10.1 Dispute Resolution. 

          Notwithstanding anything contained herein to the contrary, any dispute between the Parties
arising out of or relating to this Agreement or any Ancillary Agreement (other than the Parental
Guarantee Agreement) or the breach, termination or validity hereof or thereof (“Dispute”)
will be first addressed in accordance with the procedures specified in Section 10.2, and
subsequently, if necessary, Article XI, which will be the sole and exclusive procedures for
the resolution of any such Disputes.

     10.2 Negotiation Amongst the Parties. 

          (a) The CNA Parties and NICO agree that they shall first attempt to resolve Disputes by
informal in-person discussions and negotiations of their respective representatives. If the
Parties are unable to resolve any such Dispute through such in-person discussions and negotiations
within thirty (30) calendar days of the day on which a Party receives from the other Party or
Parties written notice of a Dispute, the Dispute shall be submitted for resolution to a designated
executive officer of each of NICO and the CNA Parties with authority to make a decision. If the
designated executive officers are unable to reach a mutually acceptable resolution within ten (10)
calendar days after expiration of such thirty-day period, on the request of any Party, the Dispute
shall be resolved in accordance with subsection (b). All negotiations, discussions, and
communications made or conducted pursuant to the procedures set forth in this Section
10.2(a) are confidential and will be treated as compromise and settlement negotiations for
purposes of the Federal Rules of Evidence and any other applicable rules of evidence.

          (b) Upon completion of the dispute resolution process described in subsection (a) of this
Section 10.2 without resolution of the Dispute, any Party may submit the Dispute for
resolution in accordance with Article XI.

47

 

ARTICLE XI

ARBITRATION

     11.1 Arbitration. 

          (a) Except as provided in Article X, any Dispute shall be finally determined by
arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration
Association (“AAA”) then in effect (the “Rules”), except as modified herein. If
the amount in controversy is five million dollars ($5,000,000) or less (including all claims and
counterclaims) there shall be one arbitrator who shall be agreed upon by the Parties within twenty
(20) calendar days of receipt by respondent(s) of a copy of the demand for arbitration. The single
arbitrator may not award an amount greater than five million dollars ($5,000,000) in value under
any circumstances. If the amount in controversy is more than five million dollars ($5,000,000)
(including all claims and counterclaims) there shall be three neutral and impartial arbitrators,
one of whom shall be appointed by each of (i) the CNA Parties, on the one hand and (ii) NICO, on
the other hand, within thirty (30) calendar days of receipt by respondent(s) of the demand for
arbitration, and the third arbitrator, who shall chair the arbitral tribunal, shall be appointed by
the Party appointed arbitrators within fifteen (15) calendar days of the appointment of the second
arbitrator. If any arbitrator is not appointed within the time limit provided herein, such
arbitrator shall be appointed by the AAA in accordance with the listing, striking and ranking
procedure in the Rules, with each Party being given a limited number of strikes, except for cause.
Any arbitrator appointed by the AAA shall be a retired federal or state appellate court judge or a
current or retired officer of an insurance company with no less than fifteen (15) years of
experience in the property casualty insurance industry. The arbitration hearing on the merits
shall be commenced within ninety (90) calendar days of the appointment of the arbitrator(s) or as
soon thereafter as practicable. In rendering an award, the arbitral tribunal shall be required to
follow the laws of the State of New York. The award shall be in writing and shall briefly state
the findings of fact and conclusions of law on which it is based. The arbitrator(s) shall be
permitted to award any relief permitted under New York law, including damages and any form of
temporary or permanent injunctive relief, but shall not be permitted to award special, indirect,
punitive or incidental damages or damages for lost profits or any other consequential damages or
damages based on multiples or similar valuation techniques. The award shall be final and binding
upon the Parties and shall be the sole and exclusive remedy between the Parties regarding any
claims, counterclaims, issues or accounting presented to the arbitrator(s). Judgment upon the
award may be entered in any court having jurisdiction over any Party or any of its assets. Any
costs or fees (including attorneys’ fees and expenses) incident to enforcing the award shall be
charged against the Party or Parties resisting such enforcement. Arbitrability of any and all
disputes shall be decided by the arbitrator(s). In the event of any inconsistency between the
Rules and the provisions of this Article XI, the provisions of this Article XI
shall control.

          (b) Arbitration hereunder shall be conducted in Chicago, Illinois or New York, New York, as
determined by the Party against whom the arbitration is demanded.

48

 

ARTICLE XII

CONFLICT OF INTEREST

     12.1 Conflict of Interest.

          Whenever any insurer, reinsurer or other company that is a direct or indirect Subsidiary of
Berkshire (a “Berkshire Owned Entity”), is a party to a Third Party Reinsurance Agreement,
NICO agrees that it will, and it will cause any Berkshire Owned Entity to, minimize any conflict of
interest and handle such Third Party Reinsurance Agreement in good faith and with due regard for
the singular interests of the CNA Parties.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

     13.1 Notices.

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

	 	 	 	 	 

	 

	 	To CNA Parties:
	 	CNA Financial Corporation
	 

	 	 	 	333 S. Wabash Avenue
	 

	 	 	 	Chicago, IL 60604
	 

	 	 	 	Attention: Jonathan D. Kantor
	 

	 	 	 	Executive Vice President,
	 

	 	 	 	General Counsel and Secretary
	 

	 	 	 	Fax: (312) 817-0511
	 
	 	 	 	 
	 

	 	With copies to:
	 	CNA Financial Corporation
	 

	 	 	 	333 S. Wabash Avenue
	 

	 	 	 	Chicago, IL 60604
	 

	 	 	 	Attention: Michael P. Warnick
	 

	 	 	 	Senior Vice President and Deputy General Counsel
	 

	 	 	 	Fax: (312) 755-2479

49

 

	 	 	 	 	 

	 

	 	and	 	 
	 
	 	 	 	 
	 

	 	 	 	Robert J. Sullivan
	 

	 	 	 	Skadden, Arps, Slate, Meagher & Flom LLP
	 

	 	 	 	Four Times Square
	 

	 	 	 	New York, NY 10036
	 

	 	 	 	Fax: (212) 735-2000
	 
	 	 	 	 
	 

	 	To NICO:
	 	National Indemnity Company
	 

	 	 	 	100 First Stamford Place
	 

	 	 	 	Stamford, CT 06902
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	Fax: (203) 363-5221
	 
	 	 	 	 
	 

	 	With a copy to:
	 	National Indemnity Company
	 

	 	 	 	3024 Harney Street
	 

	 	 	 	Omaha, NE 68131
	 

	 	 	 	Attention: Treasurer
	 

	 	 	 	Fax: (402) 916-3030

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

     13.2 Entire Agreement.

          This Agreement (including the exhibits and schedules hereto), the Ancillary Agreements and any
other documents delivered pursuant hereto or thereto, constitute the entire agreement among the
Parties and their respective Affiliates with respect to the subject matter hereof and supersede all
prior negotiations, discussions, writings, agreements and understandings, oral and written, among
the Parties with respect to the subject matter hereof and thereof.

     13.3 Waiver and Amendment.

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

50

 

     13.4 Successors and Assigns.

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

     13.5 Headings.

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

     13.6 Construction; Interpretation.

          The CNA Parties and NICO have participated jointly in the negotiation and drafting of this
Agreement. In the event of an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring or disfavoring either Party by virtue of the authorship of any of the
provisions of this Agreement. When a reference is made to an Article, Section, Schedule or Exhibit
such reference shall be to an Article, Section, Schedule or Exhibit of or to this Agreement unless
otherwise indicated. Whenever the words “include”, “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without limitation.” The word
“Agreement,” means this Agreement as amended or supplemented, together with all Exhibits and
Schedules attached hereto or incorporated by reference, and the words “hereof,” “herein,” “hereto,”
“hereunder” and other words of similar import shall refer to this Agreement in its entirety and not
to any particular Article, Section or provision of this Agreement, provided, however, for the
avoidance of doubt, the word “Agreement” shall not include the Ancillary Agreements unless, in
each case, specifically incorporated therein by reference. The references to “$” shall be to
United States dollars. Reference to any Applicable Law means such Applicable Law as amended,
modified, codified, replaced or reenacted, and all rules and regulations promulgated thereunder.
References to a Person are also to its successors and permitted assigns.

     13.7 Governing Law and Jurisdiction.

          This Agreement shall be governed by and construed in accordance with the laws of the State of
New York without regard to such state’s principles of conflict of laws that could compel the
application of the laws of another jurisdiction. SUBJECT TO ARTICLE XI, ANY SUIT, ACTION
OR PROCEEDING TO COMPEL ARBITRATION OR FOR TEMPORARY
INJUNCTIVE RELIEF IN AID OF ARBITRATION OR TO PRESERVE THE STATUS QUO PENDING THE APPOINTMENT
OF THE ARBITRATOR(S) SHALL BE BROUGHT BY THE PARTIES SOLELY IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK, PROVIDED THAT IF SAID COURT

51

 

DETERMINES THAT IT DOES NOT HAVE SUBJECT MATTER JURISDICTION THEN SAID ACTIONS MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF
NEW YORK FOR NEW YORK COUNTY; AND THE CNA PARTIES AND NICO EACH HEREBY IRREVOCABLY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE AND ANY APPELLATE COURTS THEREOF, EXCEPT
THAT ANY FINAL ARBITRAL AWARD RENDERED IN ACCORDANCE WITH ARTICLE XI MAY BE ENTERED AND
ENFORCED IN ANY COURT HAVING JURISDICTION OVER ANY PARTY OR ANY OF ITS ASSETS.

     13.8 No Third Party Beneficiaries.

          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, any legal
or equitable right, remedy or claim under or in respect of this Agreement or any provision
contained herein.

     13.9 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 binding upon all of the Parties notwithstanding the fact that all
Parties are not signatory to the original or the same counterpart. Each counterpart may consist of
a number of copies hereof each signed by less than all, but together signed by all of the Parties.
Each counterpart may be delivered by facsimile transmission, which transmission shall be deemed
delivery of an originally executed document.

     13.10 Severability.

          Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable the remaining terms and provisions of this 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 so broad as to be unenforceable, that provision shall be interpreted to be only so
broad as is enforceable. In the event of such invalidity or unenforceability of any term or
provision of this Agreement, the Parties shall use their commercially reasonable efforts to reform
such terms or provisions to carry out the commercial intent of the Parties as reflected herein,
while curing the circumstance giving rise to the invalidity or unenforceability of such term or
provision.

52

 

     13.11 Specific Performance.

          Each of the Parties acknowledges and agrees that the other Party would be irreparably damaged
in the event that any of the provisions of this Agreement were not performed or complied with in
accordance with their specific terms or were otherwise breached, violated or unfulfilled.
Accordingly, each of the Parties agrees that the other Party shall be entitled to an injunction or
injunctions to prevent noncompliance with, or breaches or violations of, the provisions of this
Agreement by the other Party and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in accordance with Section 13.7, in addition to
any other remedy to which such Party may be entitled, at law or in equity. The Parties further
agree that (i) by seeking the remedies provided for in this Section 13.11, a Party shall
not in any respect waive its right to seek any other form of relief that may be available to a
Party under this Agreement, including monetary damages in the event that this Agreement has been
terminated or in the event that the remedies provided for in this Section 13.11 are not
available or otherwise are not granted and (ii) nothing contained in this Section 13.11
shall require any Party to institute any action for (or limit any Party’s right to institute any
action for) specific performance under this Section 13.11 before exercising any termination
right under Article VIII nor shall the commencement of any action pursuant to this
Section 13.11 or anything contained in this Section 13.11 restrict or limit any
Party’s right to terminate this Agreement in accordance with the terms of Article VIII or
pursue any other remedies under this Agreement that may be available then or thereafter.

     13.12 Waiver of Jury Trial.

          EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER
PARTIES HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTIES WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.12.

     13.13 Incontestability. 

          In consideration of the mutual covenants and agreements contained herein, each Party does
hereby agree 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 in any respect the validity or enforceability hereof.

53

 

     13.14 Set-Off. 

          Any debts or credits, matured or unmatured, liquidated or unliquidated, regardless of when
they arose or were incurred, in favor of or against either of the CNA Parties or NICO with respect
to this Agreement are deemed mutual debts or credits, as the case may be, and shall be set off, and
only the net balance shall be allowed or paid.

     13.15 Currency.

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

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

54

 

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

	 	 	 	 	 
	 	CONTINENTAL CASUALTY COMPANY

 	 
	 	By:  	/s/ Lawrence J. Boysen	 
	 	 	Name:  	Lawrence J. Boysen 	 
	 	 	Title:  	Senior Vice President and Corporate Controller 	 
	 
	 	THE CONTINENTAL INSURANCE COMPANY

 	 
	 	By:  	/s/ Lawrence J. Boysen	 
	 	 	Name:  	Lawrence J. Boysen 	 
	 	 	Title:  	Senior Vice President and Corporate Controller 	 
	 
	 	CONTINENTAL REINSURANCE

CORPORATION INTERNATIONAL, LTD.

 	 
	 	By:  	/s/ Lawrence J. Boysen	 
	 	 	Name:  	Lawrence J. Boysen 	 
	 	 	Title:  	Chairman of the Board and President 	 
	 
	 	CNA INSURANCE COMPANY LIMITED

 	 
	 	By:  	/s/ Lawrence J. Boysen	 
	 	 	Name:  	Lawrence J. Boysen 	 
	 	 	Title:  	Authorized Representative 	 
	 
	 	NATIONAL INDEMNITY COMPANY

 	 
	 	By:  	/s/ Brian Snover	 
	 	 	Name:  	Brian Snover 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to Master Transaction Agreement]

 

 

          The undersigned is a party to this Agreement as of the day and year first set forth above
solely for the purpose of Sections 5.19 and 7.3(b).

	 	 	 	 	 
	 	BERKSHIRE HATHAWAY INC.

 	 
	 	By:  	/s/ Marc D. Hamburg 	 
	 	 	Name:  	Marc D. Hamburg 	 
	 	 	Title:  	Senior Vice President — CFO 	 
	 

[Signature Page to Master Transaction Agreement]

 

 

Exhibit A

Form of Administrative Services Agreement

 

 

CONFIDENTIAL

 
 

ADMINISTRATIVE SERVICES AGREEMENT

BY AND AMONG

CONTINENTAL CASUALTY COMPANY

THE CONTINENTAL INSURANCE COMPANY

CONTINENTAL REINSURANCE CORPORATION INTERNATIONAL, LTD.

CNA INSURANCE COMPANY LIMITED

AND

NATIONAL INDEMNITY COMPANY

DATED ___, 2010

 
 

 

 

ADMINISTRATIVE SERVICES AGREEMENT

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 

	 	ARTICLE I	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	DEFINITIONS	 	 	 	 
	 
	 	 	 	 	 	 
	1.1

	 	Definitions
	 	 	2	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE II	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	AUTHORITY; SERVICE STANDARDS	 	 	 	 
	 
	 	 	 	 	 	 
	2.1

	 	Appointment
	 	 	4	 
	2.2

	 	Services Standards
	 	 	5	 
	2.3

	 	Compliance; Licensure
	 	 	5	 
	2.4

	 	Independent Contractor
	 	 	6	 
	2.5

	 	Subcontracting
	 	 	6	 
	2.6

	 	Monitoring
	 	 	6	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE III	 	 	 	 
	 

	 	COMPENSATION	 	 	 	 
	3.1

	 	Compensation
	 	 	7	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE IV	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	ADMINISTRATIVE SERVICES	 	 	 	 
	 
	 	 	 	 	 	 
	4.1

	 	Administrative Services
	 	 	7	 
	4.2

	 	Mixed Accounts
	 	 	9	 
	4.3

	 	GRM Book of Business
	 	 	10	 
	4.4

	 	Extracontractual Damages
	 	 	11	 
	4.5

	 	Conflict of Interest
	 	 	11	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE V	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	CLAIMS HANDLING SERVICES	 	 	 	 
	 
	 	 	 	 	 	 
	5.1

	 	Claims Handling Services
	 	 	12	 

i

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 

	 	ARTICLE VI	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	ADMINISTRATION OF THIRD PARTY REINSURANCE AGREEMENTS	 	 	 	 
	 
	 	 	 	 	 	 
	6.1

	 	Third Party Reinsurance Administration
	 	 	13	 
	6.2

	 	Collateral
	 	 	14	 
	6.3

	 	Commutations
	 	 	14	 
	6.4

	 	Collection of Third Party Reinsurance Recoverables
	 	 	14	 
	6.5

	 	Third Party Reinsurance Allocation Agreement
	 	 	14	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE VII	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	REGULATORY COMPLIANCE AND REPORTING	 	 	 	 
	 
	 	 	 	 	 	 
	7.1

	 	Regulatory Filings and Examinations
	 	 	14	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE VIII	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	OTHER REPORTING OBLIGATIONS	 	 	 	 
	8.1

	 	Financial Reporting Obligations
	 	 	15	 
	8.2

	 	Change in Status
	 	 	16	 
	8.3

	 	Administrator Controls
	 	 	17	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE IX	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	BOOKS AND RECORDS	 	 	 	 
	 
	 	 	 	 	 	 
	9.1

	 	Transfer and Ownership of Books and Records
	 	 	17	 
	9.2

	 	Maintenance of Books and Records
	 	 	17	 
	9.3

	 	Access to Books Records
	 	 	17	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE X	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	INABILITY TO PERFORM SERVICES; ERRORS	 	 	 	 
	 
	 	 	 	 	 	 
	10.1

	 	Capacity
	 	 	19	 
	10.2

	 	Inability to Perform Services
	 	 	19	 
	10.3

	 	Errors
	 	 	19	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE XI	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	LEGAL ACTIONS	 	 	 	 
	 
	 	 	 	 	 	 
	11.1

	 	Regulatory Proceedings
	 	 	20	 
	11.2

	 	Notification Requirements
	 	 	20	 
	11.3

	 	Right to Associate
	 	 	21	 

ii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 

	 	ARTICLE XII	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	BANK ACCOUNTS	 	 	 	 
	 
	 	 	 	 	 	 
	12.1

	 	Bank Accounts
	 	 	21	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE XIII	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	COOPERATION	 	 	 	 
	 
	 	 	 	 	 	 
	13.1

	 	Cooperation
	 	 	21	 
	13.2

	 	Relationship Management
	 	 	22	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE XIV	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	DURATION; TERMINATION	 	 	 	 
	 
	 	 	 	 	 	 
	14.1

	 	Duration
	 	 	22	 
	14.2

	 	Termination
	 	 	22	 
	14.3

	 	Certain Actions Related to Termination
	 	 	23	 
	14.4

	 	Survival
	 	 	24	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE XV	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	CONFIDENTIALITY; PRIVACY REQUIREMENTS	 	 	 	 
	15.1

	 	Definitions
	 	 	25	 
	15.2

	 	Obligations
	 	 	25	 
	15.3

	 	Exceptions to Confidential Treatment
	 	 	26	 
	15.4

	 	Privacy
	 	 	27	 
	15.5

	 	Regulatory and Legal Communication
	 	 	29	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE XVI	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	FORCE MAJEURE	 	 	 	 
	 
	 	 	 	 	 	 
	16.1

	 	Force Majeure Event
	 	 	30	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE XVII	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	INDEMNIFICATION	 	 	 	 
	 
	 	 	 	 	 	 
	17.1

	 	Indemnification Obligation of Administrator
	 	 	30	 
	17.2

	 	Indemnification Obligation of Reinsureds
	 	 	31	 
	17.3

	 	Notice of Indemnification Request
	 	 	31	 
	17.4

	 	Notice of an Asserted Liability
	 	 	31	 
	17.5

	 	Procedures
	 	 	32	 
	17.6

	 	Survival
	 	 	32	 

iii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 

	 	ARTICLE XVIII	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	DISPUTE RESOLUTION; ARBITRATION	 	 	 	 
	 
	 	 	 	 	 	 
	18.1

	 	Dispute Resolution; Arbitration
	 	 	32	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE XIX	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	MISCELLANEOUS	 	 	 	 
	 
	 	 	 	 	 	 
	19.1

	 	Notices
	 	 	33	 
	19.2

	 	Entire Agreement
	 	 	34	 
	19.3

	 	Waiver and Amendment
	 	 	34	 
	19.4

	 	Successors and Assigns
	 	 	34	 
	19.5

	 	Headings
	 	 	34	 
	19.6

	 	Construction; Interpretation
	 	 	34	 
	19.7

	 	Governing Law and Jurisdiction
	 	 	35	 
	19.8

	 	No Third Party Beneficiaries
	 	 	35	 
	19.9

	 	Counterparts
	 	 	35	 
	19.10

	 	Severability
	 	 	36	 
	19.11

	 	Specific Performance
	 	 	36	 
	19.12

	 	Waiver of Jury Trial
	 	 	37	 
	19.13

	 	Incontestability
	 	 	37	 
	19.14

	 	Set-Off
	 	 	37	 
	19.15

	 	Currency
	 	 	37	 

LIST OF EXHIBITS

	 	 	 

	Exhibit A

	 	Business Associate Agreement

LIST OF SCHEDULES

	 	 	 

	Schedule A-1

	 	Claims Administration System
	Schedule A-2

	 	Items and services associated in supplying Administrator with access to CAS
	Schedule B

	 	GRM Book of Business
	Schedule C

	 	Designations of Primary Handlers to administer existing Mixed Accounts
	Schedule D

	 	Form of Quarterly Data File

iv

 

ADMINISTRATIVE SERVICES AGREEMENT

          THIS ADMINISTRATIVE SERVICES AGREEMENT (hereinafter referred to as this “Administrative
Services Agreement”), dated as of ___, 2010 (the “Effective Date”), is made and entered
into by and among Continental Casualty Company, an Illinois property and casualty insurance company
(“CCC”), The Continental Insurance Company, a Pennsylvania property and casualty insurance
company (“CIC”), Continental Reinsurance Corporation International, Ltd., a Bermuda
long-term insurance company (“CRCI”), and CNA Insurance Company Limited, a United Kingdom
property and casualty insurance company (“CICL” and together with CCC, CIC and CRCI,
“Reinsureds”), and National Indemnity Company, a Nebraska property and casualty company
(“Administrator” and the Administrator taken together with the Reinsureds, each a
“Party” and, collectively, the “Parties”).

WITNESSETH:

          WHEREAS, pursuant to a Master Transaction Agreement (the “Master Transaction
Agreement”), dated as of July                     , 2010, among the Parties and Berkshire Hathaway Inc., a
Delaware corporation and the ultimate parent company of the Reinsurer (“Berkshire”),
Reinsureds and Administrator have agreed to enter into a loss portfolio reinsurance transaction,
pursuant to which Reinsureds will cede all liabilities related to Asbestos Claims and Pollution
Claims under the Business Covered to Administrator, and pursuant to which Administrator will
indemnify Reinsureds for such liabilities up to an aggregate limit of four billion dollars
($4,000,000,000), net of any Third Party Reinsurance Recoverables and Other Recoveries;

          WHEREAS, pursuant to a Loss Portfolio Transfer Reinsurance Agreement among Reinsureds and
Administrator dated as of the date hereof, and referenced in the Master Transaction Agreement as
the “LPT Reinsurance Agreement,” Administrator shall indemnify Reinsureds for 100% of the
Ultimate Net Loss, subject to the LPT Limit; and

          WHEREAS, Reinsureds desire that Administrator perform certain administrative functions on
behalf of Reinsureds from and after the date hereof with respect to the Reinsured Contracts and
Third Party Reinsurance Agreements as they relate to the Business Covered, and the Parties hereto
have agreed to enter into this Administrative Services Agreement as a condition of Administrator
entering into the LPT Reinsurance Agreement.

          NOW, THEREFORE, for and in consideration of these premises and the promises and the mutual
agreements hereinafter set forth and set forth in the Master Transaction Agreement and LPT
Reinsurance Agreement, the Parties agree as follows:

 

 

ARTICLE I

DEFINITIONS

     1.1 Definitions.

          In this Administrative Services Agreement, unless the context requires otherwise, words and
expressions used in the Master Transaction Agreement and the LPT Reinsurance Agreement shall bear
the same meaning when used in this Administrative Services Agreement. All capitalized terms not
otherwise defined in this Administrative Services Agreement shall have the meaning given them under
the Master Transaction Agreement or LPT Reinsurance Agreement, as applicable.

          The following terms shall have the respective meanings set forth below throughout this
Administrative Services Agreement:

“Administrator’s Actuarial Report” shall have the meaning set forth in Section
8.1(a) hereof.

“Administrative Accounts” shall have the meaning set forth in Section 12.1(a)
hereof.

“Administrative Services” shall have the meaning set forth in Section 2.1(a)
hereof.

“Administrative Services Agreement” shall have the meaning set forth in the preamble.

“Administrator” shall have the meaning set forth in the preamble.

“Administrator Losses” shall have the meaning set forth in Section 17.2 hereof.

“Allocated Bill” shall have the meaning set forth in Section 4.3(a) hereof.

“Asserted Liability” shall have the meaning set forth in Section 17.4 hereof.

“Berkshire” shall have the meaning set forth in the preamble hereof.

“Berkshire Controlled Entity” shall have the meaning set forth in Section 4.5(a)
hereof.

“Berkshire Owned Entity” shall have the meaning set forth in Section 4.5(a) hereof.

“Business Associate Agreement” means the business associate agreement attached hereto as
Exhibit A.

“Claims Administration System” or “CAS” shall have the meaning set forth in
Section 3.1(b) hereof.

“CCC” shall have the meaning set forth in the preamble hereof.

“CIC” shall have the meaning set forth in the preamble hereof.

“CICL” shall have the meaning set forth in the preamble hereof.

2

 

“Collection Expenses” means the reasonable out-of-pocket expenses incurred by any Party in
connection with the negotiation and collection of Third Party Reinsurance Recoverables or
Commutation Payments.

“Confidential Information” shall have the meaning set forth in Section 15.1(a)
hereof.

“CRCI” shall have the meaning set forth in the preamble hereof.

“Direct Costs” shall have the meaning set forth in Section 4.2(c) hereof.

“Effective Date” shall have the meaning set forth in the preamble hereof.

“Force Majeure Event” shall have the meaning set forth in Section 16.1 hereof.

“GRM Book of Business” shall have the meaning set forth in Section 4.1(a)(xiii)
hereof.

“Gross Third Party Reinsurance Recoverables” means any amounts actually collected by the
Reinsureds or the Reinsurer (acting on behalf of the Reinsureds) in connection with Third Party
Reinsurance Agreements.

“Indemnified Party” shall have the meaning set forth in Section 17.3 hereof.

“Indemnifying Party” shall have the meaning set forth in Section 17.3 hereof.

“Legal Proceeding” means any litigation, arbitration, mediation or other legal action.

“LPT Reinsurance Agreement” shall have the meaning set forth in the recitals.

“Master Transaction Agreement” shall have the meaning set forth in the recitals.

“Mixed Account” shall have the meaning set forth in Section 4.2(a) hereof.

“Nonpublic Personal Information” shall have the meaning set forth in Section
15.1(b) hereof.

“Party” or “Parties” shall have the meaning set forth in the recitals.

“Personal Information” shall have the meaning set forth in Section 15.1(c) hereof.

“Primary Handler” shall have the meaning set forth is Section 4.2(a)(i) hereof.

“Quarterly Data File” shall have the meaning set forth in Section 8.1(d).

“Reinsureds” shall have the meaning set forth in the preamble.

“Reinsureds’ Actuarial Report” shall have the meaning set forth in Section 8.1(c).

“Reinsureds Losses” shall have the meaning set forth in Section 17.1 hereof.

3

 

“Reverse Transition Services Agreement” shall have the meaning set forth in Section
14.3(a)(i) hereof.

“Security Incident” shall have the meaning set forth in Section 15.5(c) hereof.

“Subcontractor” shall have the meaning set forth in Section 2.5 hereof.

“Third Party Claimant” shall have the meaning set forth in Section 17.4 hereof.

“Third Party Reinsurance Recoverables” means Gross Third Party Reinsurance Recoverables,
less Collection Expenses.

ARTICLE II

AUTHORITY; SERVICE STANDARDS

     2.1 Appointment.

     (a) Reinsureds hereby appoint Administrator, for the period specified in Article
XIV hereof, and Administrator hereby accepts appointment, to provide as an independent
contractor of Reinsureds all such administrative and other services with respect to the LPT
Reinsurance Agreement and with respect to the Reinsured Contracts and the Third Party
Reinsurance Agreements with respect to the Business Covered, including those services set
forth in this Administrative Services Agreement (the “Administrative Services”), all
on the terms, and subject to the limitations, as set forth in this Administrative Services
Agreement.

     (b) The Parties shall cooperate fully in the transfer of responsibility for the
performance of the Administrative Services from Reinsureds to Administrator in accordance with
the terms of this Administrative Services Agreement and the Transition Services Agreement.

     (c) In order to assist Administrator in the performance of the Administrative Services
hereunder, Reinsureds shall deliver to Administrator and, if requested by Administrator, to
Resolute Management Inc., an appropriate power of attorney which shall nominate, constitute
and appoint Administrator as their attorney-in-fact with respect to the rights, duties, and
privileges and obligations of Administrator in and to the Reinsured Contracts and Third Party
Reinsurance Agreements as respects the Business Covered, with full power and authority to act
in the name, place and stead of Reinsureds with respect thereto, including the power, without
reservation, to service the Reinsured Contracts and Third Party Reinsurance Agreements as
respects the Business Covered, to adjust, to defend, to settle and to pay A&P Claims, and to
take such other and further action as may be necessary or desirable to effect the transactions
contemplated by the Master Transaction Agreement and this Administrative Services Agreement,
but in all cases only to the extent of the rights and authority granted to Administrator
pursuant to this Administrative Services Agreement and in accordance with the terms of this
Administrative Services Agreement.

4

 

     2.2 Services Standards.

          Administrator agrees to perform all Administrative Services and is hereby authorized to do so
on behalf of Reinsureds. Administrator shall perform the Administrative Services in a professional
and competent manner and in accordance with (i) the terms of the Reinsured Contracts and the Third
Party Reinsurance Agreements, (ii) to the extent not in conflict with any other provision of this
Section 2.2, standards of service that conform with Administrator’s service standards for
administering similar insurance contracts issued by Administrator in its own name, and (iii)
Applicable Law, including maintenance by Administrator of all licenses, authorizations, permits and
qualifications from Governmental Authorities necessary to perform the Administrative Services
required by this Administrative Services Agreement. Administrator shall use its reasonable best
efforts to avoid doing anything which might reasonably be expected to prejudice or bring into
disrepute the reputation of Reinsureds or their respective directors and officers as professional
claims managers. Administrator acknowledges that the performance of all Administrative Services
required by this Administrative Services Agreement in a professional and competent manner is of
critical importance to Reinsureds.

     2.3 Compliance; Licensure.

     (a) Administrator shall comply with all Applicable Laws in connection with the
performance of its duties hereunder and shall act consistently in all material respects with,
and not cause Reinsureds to be out of compliance with, the terms of the Reinsured Contracts
and Third Party Reinsurance Agreements. Should Administrator, or any Subcontractor permitted
under Section 2.5 of this Administrative Services Agreement, violate any Applicable
Law relating to its performance under this Administrative Services Agreement that results in a
regulatory fine, penalty, monetary payment or settlement (including expense reimbursement)
imposed on Reinsureds or its Affiliates, Administrator shall reimburse the Reinsureds or its
Affiliates for such regulatory fine, penalty, monetary payment or settlement. Administrator
shall communicate promptly to Reinsureds upon knowledge of the non-renewal, lapse, suspension
or termination of any licenses required by Applicable Law in connection with the
administration of the Reinsured Contracts and Third Party Reinsurance Agreements. If, in the
ordinary course of operations, Administrator determines that there exists any material
operational concerns or failures with respect to any of the Reinsured Contracts or Third Party
Reinsurance Agreements, Administrator shall notify Reinsureds and, in consultation with
Reinsureds, take all reasonable actions necessary to bring such Reinsured Contracts and/or
Third Party Reinsurance Agreements into operational compliance.

     (b) Administrator shall use commercially reasonable efforts to ensure that it or any of
its Affiliates that is subcontracted to provide any Administrative Service continue to be, and
their respective employees, agents and representatives are, or shall become and remain,
licensed, in whatever capacity is required, including without limitation third-party
administrator licenses, by the Governmental Authorities of all jurisdictions in which
Reinsureds are licensed as of the Effective Date. Administrator shall bear all costs and
expenses relating to its own licensing and the licensing of its employees, agents and
representatives.

5

 

     2.4 Independent Contractor.

          For all purposes hereof, Administrator shall at all times act as an independent contractor and
Administrator and its Affiliates, on the one hand, and Reinsureds and their Affiliates, on the
other hand, shall not be deemed an employee, representative, joint venture or fiduciary of one
another, nor shall this Administrative Services Agreement or the Administrative Services or any
activity or any transaction contemplated hereby be deemed to create any partnership or joint
venture between the Parties or among their Affiliates. Administrator and its Representatives are
not eligible for, nor may they participate in, any employee benefit plans of Reinsureds or any of
their Affiliates. Reinsureds and their Representatives are not eligible for, nor may they
participate in, any employee benefit plans of Administrator or any of its Affiliates.

     2.5 Subcontracting.

          Administrator shall not subcontract the performance of any services that Administrator is to
provide hereunder to another Person (the “Subcontractor”) without the prior written consent
of Reinsureds (which consent shall not be unreasonably withheld); provided, however, that such
consent will not be required if the applicable Subcontractor is Resolute Management Inc. for such
time as it is an Affiliate of Administrator and; provided further, however, that in the case of
Administrative Services relating to other than claims handling, Reinsureds’ consent will not be
required if (i) the applicable Subcontractor is an Affiliate of Administrator or (ii) the
applicable Subcontractor is to provide those services that it provides to any Reinsureds as of the
date hereof with respect to the Business Covered. Notwithstanding the foregoing, Administrator
shall not permit a Subcontractor (other than Resolute Management Inc. for such time as it is an
Affiliate of Administrator) to access or use the CAS without Reinsureds’ prior written consent. In
the event of such subcontracting, Administrator shall not be relieved from any of its obligations
or liabilities hereunder, including compliance with Applicable Law and maintenance of proper
licensure, and Administrator shall remain responsible for all obligations or liabilities of such
Subcontractor with respect to the providing of such service or services as if provided by
Administrator; provided that if employees of the Subcontractor providing a service meet applicable
licensing requirements, Administrator shall be deemed to be in compliance with said licensure
requirements.

     2.6 Monitoring.

          At any time during the term of this Administrative Services Agreement, Reinsureds shall have
the right to appoint a representative to monitor the A&P Business at the facilities maintained for
such A&P Business by the Administrator or its permitted Subcontractors; provided, however, that any
representative appointed by the Reinsureds pursuant to this Section 2.6 who is not an
officer, director or employee of the Reinsureds shall not have any conflict of interest with
Administrator; provided, however, that any such monitoring shall be conducted at the sole expense
of the Reinsureds.

6

 

ARTICLE III

COMPENSATION

     3.1 Compensation.

     (a) Except as otherwise provided in Section 4.2, Administrator agrees to perform
the Administrative Services with respect to the Business Covered at its own expense and
without any rights of reimbursement from Reinsureds, in consideration of Reinsureds having
entered into the Master Transaction Agreement, the LPT Reinsurance Agreement and for other
good and valuable consideration, the receipt of which is hereby acknowledged.

     (b) At the reasonable request of Administrator, Reinsureds agree to provide the
technology and required databases listed on Schedule A-1 (the “Claims
Administration System” or “CAS”) to Administrator for a period of one year from
the Effective Date pursuant to the Transition Services Agreement. Administrator agrees to
reimburse the Reinsureds for their actual costs for items or services associated in supplying
Administrator with access to the CAS as provided in Schedule A-2.

     (c) At the reasonable request of Administrator, Reinsureds shall perform searches for
policy, reinsurance and underwriting files of Reinsureds and shall provide copies and if
necessary testimony with respect to, such policy, reinsurance and underwriting files, to
Administrator. Administrator shall pay (i) Reinsureds’ reasonable hourly rates for the
performance of such searches for policy, reinsurance and underwriting files, (ii) for all of
the copies made pursuant to this Section 3.1(c) and (iii) Reinsureds’ reasonable
hourly rates for time spent in connection with providing testimony as to these matters.

     (d) Reinsureds shall store and maintain closed claim files at their own expense and in
accordance with the Reinsureds’ then current policy for storing and maintaining such closed
claim files.

ARTICLE IV

ADMINISTRATIVE SERVICES 

     4.1 Administrative Services.

     (a) In accordance with the terms of this Administrative Services Agreement, Administrator
shall provide and perform all Administrative Services with respect to the Business Covered,
including:

          (i) to adjust, handle, agree, settle, pay, compromise or repudiate any claims or any
other liability, outgoing or expense;

          (ii) to commence, conduct, pursue, settle, appeal or compromise any legal arbitration or
other proceedings whatsoever;

7

 

          (iii) to collect claim refunds, salvages and reinsurance recoveries;

          (iv) to agree to, or exercise any right to, set-off any claims against reinsurance
recoveries or vice versa or to settle any balance of account owing to or from Reinsureds
solely in relation to the Business Covered;

          (v) to agree, on behalf of Reinsureds, to fund the obligations of any third party in
connection with any A&P Claim;

          (vi) to agree to any without prejudice payment or any other extra-contractual obligation
of or on behalf of Reinsureds;

          (vii) to enter into any arrangements which Administrator considers will or may avoid or
reduce any liability;

          (viii) to use the name of any Reinsureds in connection with the exercise of any or all of
the powers conferred by this Administrative Services Agreement;

          (ix) to exercise any rights of subrogation or other rights of recovery, excluding any
such rights to recover billed Retrospective Premiums;

          (x) to enter into discussions or negotiations with any insured or reinsured Person or
their Representatives in connection with the Business Covered;

          (xi) to enter into, amend or cancel any arrangements or agreements with third parties,
including in relation to the handling or collection of claims, debts or reinsurance
recoveries;

          (xii) to retain and instruct lawyers, claims adjusters or other consultants or experts;

          (xiii) to administer the Business Covered that arises from those pool, syndicate,
association or other sources set forth on Schedule B hereto (the “GRM Book of
Business”) in accordance with the protocol set forth in Section 4.3;

          (xiv) to coordinate with Reinsureds on the handling of escheat claims; and

          (xv) to share information received from Reinsureds, including any information in their
files and records, with other insurers, reinsurers, claimants and other Persons as may be
necessary in the judgment of Administrator to carry out the Administrative Services.

     (b) The Administrative Services which will be undertaken by Administrator will include
all matters relating to the administration, settlement and payment of claims arising under the
Business Covered, together with all other matters required to give full effect to the terms of
the LPT Reinsurance Agreement. Reinsureds shall have no authority to settle, commute or
compromise any direct A&P Claim or any reinsurance

8

 

claim arising from an A&P Claim, except with the consent of Administrator (which consent
shall not be unreasonably withheld) and except with respect to claims brought by or against a
Berkshire Owned Entity.

     4.2 Mixed Accounts.

     (a) The Parties acknowledge that an account with Reinsured Contracts may involve a claim
or related claims that are in part or in whole not an Asbestos Claim or a Pollution Claim. An
account with Reinsured Contracts which includes both A&P Claims and Non-A&P Claims is referred
to in this Administrative Services Agreement as a “Mixed Account.” As used in this
Section 4.2(a), “account” shall mean an insured or cedent under a Reinsured
Contract.

          (i) For Mixed Accounts, the Parties shall meet as promptly as practicable and determine
whether the administration of a Mixed Account shall be done by a single claim handler (the
“Primary Handler”). In the event that the Parties fail to mutually agree to an
account being administered by a Primary Handler, then such Mixed Account shall be administered
pursuant to Section 4.2(a)(ii). The Parties agree that the accounts set forth on
Schedule C hereto shall be handled by the designated Primary Handler.

          (ii) Subject to Section 4.2(a)(i), in the administration of Mixed Accounts, (A)
Reinsureds shall administer such portions of the Mixed Account that relate to Non-A&P Claims,
and (B) Administrator shall administer such portions of the Mixed Account that relate to A&P
Claims. Administrator and Reinsureds shall establish and maintain an open channel of
communication with each other with respect to the claims contained within each Mixed Account.

     (b) For Mixed Accounts administered by a Primary Handler, the Primary Handler shall
review, analyze, process and collect all associated inward and outward reinsurance as well as
perform all other Administrative Services necessary to adjust the claim and/or receive Third
Party Reinsurance Recoverables or Other Recoveries, including distributions from any insolvent
estate and any reinsurer for all agreed A&P Claims and Non-A&P Claims on the Mixed Account.
Administrator and Reinsureds shall establish and maintain an open channel of communication
with each other with respect to the claims contained within each Mixed Account, and shall
cooperate with each other to resolve all such claims in a timely and efficient manner. The
Primary Handler shall not have the authority to enter into any agreement to pay, in the
aggregate, more than $1,000,000 in any Ultimate Net Loss allocable to the other Party without
the prior consent of the other Party, which consent shall not be unreasonably delayed or
withheld.

     (c) With respect to costs associated with administering a Mixed Account, the Primary
Handler shall be reimbursed by the other Party for Direct Costs. All such Direct Costs shall
be billed by the Primary Handler, to the other Party, on a quarterly basis. Upon receipt of a
billing statement from the Primary Handler, which sets forth the Direct Costs, the other Party
shall reimburse the Primary Handler within thirty (30) calendar

9

 

days. “Direct Costs” as referenced herein refers to the salary and benefits of
the claims handler (which benefits will be calculated at thirty percent (30%) of salary) for
the actual hours devoted by that claims handler to the Mixed Account.

     (d) To the extent practicable, all payments, in a Mixed Account claim, for indemnity for
bodily injury or property damage for an individual plaintiff shall be allocated among the
Parties based upon the actual cause of the injury or damage for such plaintiff, identified at
the time of settlement or judgment. If information as to the actual cause of injury or damage
is unclear or unavailable, then indemnity payments shall be allocated among the Parties based
upon the best available information within one year after the settlement or judgment as to any
claims in such account. Such indemnity payments will be billed as they are incurred. Upon
receipt of a billing statement from the Primary Handler for such indemnity payments, the other
Party shall reimburse the Primary Handler within thirty (30) calendar days without prejudice
to either Party’s right to adjust any allocation within one year of the settlement or
judgment.

     (e) In the event that Allocated Loss Adjustment Expenses or Declaratory Judgment Expenses
are incurred for Mixed Accounts, and allocation to specific claims is not practicable, then
such expense payments shall be provisionally allocated among the Parties, on an equitable
basis, in accordance with each Party’s respective financial exposure to the claims in
question. Such expense payments will be billed as they are incurred and shall be without
prejudice to either Party’s right to adjust any allocation in accordance with the manner
indemnity payments have been allocated up to one year after settlement or judgment as to any
claims in the account. Upon receipt of a billing statement from the Primary Handler for such
expense payments, the other Party shall reimburse the Primary Handler within thirty (30)
calendar days.

     (f) In the event that a claim arises subject to Section 4.2(d) and Section
4.2(e), above, the Parties shall use reasonable best efforts to obtain the data and
information required to establish accurate allocations among the Parties. Notwithstanding the
foregoing, prior the Closing Date, the Parties may establish mutually agreed upon protocols
for certain accounts and such protocols may set forth alternative allocations arrangements
with respect to each such account.

     4.3 GRM Book of Business.

          In the administration of the GRM Book of Business, the Parties shall allocate indemnity
payments, Allocated Loss Adjustment Expenses and Declaratory Judgment Expenses as follows:

     (a) In the event that the manager of a GRM Book of Business delivers a bill that
allocates as between A&P Claims and Non-A&P Claims (an “Allocated Bill”), the Parties
shall defer to the allocations set forth in the Allocated Bill.

     (b) In the event that no Allocated Bill pursuant to Section 4.3(a), above, is
received, the Administrator shall use reasonable best efforts to obtain, from the manager

10

 

of a GRM Book of Business, data and information required to establish an equitable
allocation between A&P Claims and Non-A&P Claims among the Parties.

     (c) In the event that (i) no Allocated Bill pursuant to Section 4.3(a), above, is
received, and (ii) reasonably satisfactory data cannot be obtained pursuant to Section
4.3(b), above, the allocation between A&P Claims and Non-A&P Claims shall be in proportion
to the manner in which the GRM Book of Business actuarial report has estimated its ultimate
liability for A&P Claims and Non-A&P Claims.

     (d) In the event that information required to make an allocation pursuant to this
Section 4.3 is not forthcoming within ninety (90) calendar days of receipt of a bill,
such allocation shall be made on an interim and without prejudice basis in proportion to the
prior allocation for such GRM Book of Business exposure.

     4.4 Extracontractual Damages.

     (a) Extracontractual Damages covered under the LPT Reinsurance Agreement shall be paid by
Administrator and any such payments shall be applied against the LPT Limit.

     (b) For the avoidance of doubt, notwithstanding anything to the contrary in this
Administrative Services Agreement, any liability of Reinsureds or a CNA Insurer for the
intentional and malicious acts or omissions of its employees, officers or directors (as so
determined by final adjudication by any Order, writ, injunction, directive, judgment or decree
of a court of competent jurisdiction applicable to the Parties) shall be paid by such
Reinsureds or CNA Insurer and any such payment shall not affect the LPT Limit.

     (c) For the avoidance of doubt, notwithstanding anything to the contrary in this
Administrative Services Agreement, any liability of Administrator as a result of its
intentional and malicious acts or omissions of its employees, officers or directors (as so
determined by final adjudication by any Order, writ, injunction, directive, judgment or decree
of a court of competent jurisdiction applicable to the Parties) shall be paid by
Administrator; provided, however, any such payment shall not affect the LPT Limit.

     4.5 Conflict of Interest.

     (a) Subject to Section 4.5(b) below, whenever a claim arises: (i) by, or from,
Reinsureds against (A) Berkshire or any insurer, reinsurer or other company that is a direct
or indirect Subsidiary of Berkshire (each, a “Berkshire Owned Entity”), or (B) a
Berkshire Owned Entity or any insurer, reinsurer or other company that is one hundred percent
reinsured by a direct or indirect Subsidiary of Berkshire (each, a “Berkshire Controlled
Entity”), or (C) that involve Administrator or another Berkshire Controlled Entity as an
administrator for a third party, or (ii) against Reinsureds by, or from, (A) a Berkshire Owned
Entity, or (B) a Berkshire Controlled Entity, or (C) that involve Administrator or another
Berkshire Controlled Entity as an administrator for a third party, Administrator agrees that
it will handle such claims under this Administrative Services Agreement in good faith and with
due regard for the singular interests of Reinsureds. At Reinsureds’ discretion, Reinsureds
may direct Administrator in the administration of any

11

 

claim (i) by, or from, a Berkshire Owned Entity against Reinsureds or (ii) against a
Berkshire Owned Entity by, or from, Reinsureds.

     (b) In the event of the occurrence of a conflict of interest, pursuant to this
Section 4.5, involving (i) a Berkshire Controlled Entity, (ii) any claim by, or from,
a Berkshire Owned Entity against Reinsureds, or (iii) any claim against a Berkshire Owned
Entity by, or from, Reinsureds, Administrator shall obtain the Reinsureds’ prior approval
before committing to a resolution of such conflicted matter, which such approval shall not be
unreasonably delayed or withheld. For the avoidance of doubt, all liabilities, fees, costs
and expenses associated with the administration of such Third Party Reinsurance Agreements and
any payments and recovery under such Third Party Reinsurance Agreements shall be covered by
the LPT Reinsurance Agreement.

ARTICLE V

CLAIMS HANDLING SERVICES 

     5.1 Claims Handling Services.

          The Administrative Services shall include, as necessary and appropriate, all functions
relating to the handling of A&P Claims, including those functions set forth in this Section
5.1.

     (a) Administrator shall acknowledge, consider, review, investigate, deny, settle, pay or
otherwise dispose of each A&P Claim. Administrator shall pay, using its own funds, A&P Claims
and associated expenses as Ultimate Net Loss under the LPT Reinsurance Agreement and subject
to the terms of the LPT Reinsurance Agreement.

     (b) Without limiting paragraph (a) of this Section 5.1, Administrator shall:

          (i) establish, maintain and organize A&P Claim files and maintain and organize other A&P
Claims-related records;

          (ii) review all A&P Claims and determine whether the claimant is eligible for payment and
if so, the nature and extent of such payment;

          (iii) maintain trained claims personnel;

          (iv) maintain a complaint log with respect to the Reinsured Contracts in accordance with
applicable requirements of Governmental Authorities and provide a copy of such log upon
Reinsureds’ request;

          (v) gather all information necessary for Reinsureds to comply with regulatory reporting
requirements related to A&P Claims detail, including Medicare Set Aside reporting;

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          (vi) respond promptly to all written or oral A&P Claims-related communications that
Administrator reasonably believes to require a response; and

          (vii) in accordance with Articles VII and XI hereof, respond to, or
assist Reinsureds’ in responding to, regulatory and legal matters to the extent such matters
relate to A&P Claims.

ARTICLE VI

ADMINISTRATION OF THIRD PARTY REINSURANCE AGREEMENTS

     6.1 Third Party Reinsurance Administration.

          The Administrative Services provided by Administrator with respect to the Third Party
Reinsurance Agreements with respect to the Business Covered shall include the following:

     (a) administer and collect, on behalf of and in the name of the applicable Reinsureds,
Third Party Reinsurance Recoverables and Other Recoveries due in respect of the Reinsured
Liabilities in accordance with the contractual terms of the applicable Third Party Reinsurance
Agreements and Reinsured Contracts in a commercially reasonable manner consistent;

     (b) cede all A&P Claims in the first instance to the applicable Third Party Reinsurance
Agreements before ceding such claims to the LPT Reinsurance Agreement; provided, however, that
Administrator may not cede any such claims to Third Party Reinsurance Agreements whose
aggregate limits have been exhausted;

     (c) provide all necessary litigation functions with respect to the Third Party
Reinsurance Agreements;

     (d) initiate Legal Proceedings in the name of the applicable Reinsureds in those
instances where such action is necessary in order for the applicable Reinsureds to enforce or
protect its rights under the Third Party Reinsurance Agreements in respect of the Business
Covered;

     (e) consult with Reinsureds in the filing of proofs of claim in any insolvent estate or
scheme of arrangement;

     (f) comply with any applicable notice requirements under the Third Party Reinsurance
Agreements; and

     (g) perform other certain administrative functions relating to the Third Party
Reinsurance Agreements with respect to the Business Covered as agreed to the Parties from time
to time.

          In determining the amount of the Third Party Reinsurance Recoverables, there shall first be
deducted from any amount recovered the out-of-pocket expenses incurred in effectuating the recovery
(including, without limitation, all court, arbitration, mediation or other

13

 

dispute resolution costs, attorneys’ fees and expenses, but excluding overhead, salaries and
expenses of officers and employees of Reinsureds and similar internal costs), except to the extent
otherwise paid or reimbursed by Reinsurers hereunder.

     6.2 Collateral.

          With prior notice to the applicable Reinsureds, Administrator shall have the authority to
secure any letter of credit or other funds held as appropriate under third party contracts and draw
upon any letter of credit, trust, funds withheld, offset or take any action in the name of
Reinsureds in relation to any collateral security maintained in the name, or on behalf, of such
Reinsureds under the Third Party Reinsurance Agreements.

     6.3 Commutations.

          Notwithstanding any other provision of this Administrative Services Agreement to the contrary,
no Party shall have authority to commute any Third Party Reinsurance Agreements which relates to
the Business Covered without the written consent of the other Party.

     6.4 Collection of Third Party Reinsurance Recoverables.

          Administrator shall have the authority to decide not to collect Third Party Reinsurance
Recoverables solely related to the Business Covered that Administrator deems uncollectible;
provided, however, that Administrator shall not decide to forego the collection of any Third Party
Reinsurance Recoverable that involves a Mixed Account claim that it is administering without the
prior written consent of Reinsureds. Reinsureds shall not decide to forgo the collection of any
Third Party Reinsurance Recoverable that involves a Mixed Account claim that it is administering
without the prior written consent of the Administrator.

     6.5 Third Party Reinsurance Allocation Agreement.

          The Parties acknowledge that amounts recoverable under the Third Party Reinsurance Agreements
will be allocable to Administrator for the Business Covered and to the Reinsureds for all other
claims in accordance with the terms of the Third Party Reinsurance Allocation Agreement.

ARTICLE VII

REGULATORY COMPLIANCE AND REPORTING

     7.1 Regulatory Filings and Examinations.

     (a) Commencing on the Effective Date, Administrator shall take all necessary action
within its control so that Reinsureds, solely with respect to the Business Covered, satisfy
all current and future informational reporting and any other requirements imposed by any
Governmental Authority. Without limiting the foregoing, Administrator shall timely prepare
such reports and summaries, including statistical summaries, as are necessary to satisfy any
requirements imposed by a Governmental Authority upon Reinsureds with respect to the Business
Covered. In addition, Administrator, upon

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Reinsureds’ reasonable request, shall promptly provide to such Reinsureds copies of all
existing records relating to the Reinsured Contracts and Third Party Reinsurance Agreements
(including, with respect to records maintained in machine readable form, hard copies) that are
necessary to satisfy such requirements.

     (b) Administrator shall reasonably assist Reinsureds and cooperate with Reinsureds in
doing all things necessary, proper or advisable in connection with any and all market conduct
or other examinations by Governmental Authorities relating to the Business Covered.

     (c) Any reports or other materials required to be prepared by Administrator under this
Section 7.1 shall be prepared on a timely basis in order for Reinsureds to comply with
any filing deadlines required by contract or by Reinsureds’ internal procedures and policies,
in each case to the extent previously provided to Administrator with sufficient advance notice
thereof and reasonably consistent with Administrator’s own internal systems and procedures, or
by Applicable Law. All such reports shall include such information as may reasonably be
required by Reinsureds, as applicable, and shall be provided in a form, electronic or
otherwise, as is reasonably requested by Reinsureds, as applicable.

ARTICLE VIII

OTHER REPORTING OBLIGATIONS 

     8.1 Financial Reporting Obligations.

          Administrator shall assume the reporting and accounting obligations set forth in this
Section 8.1.

     (a) On an annual basis, Administrator shall prepare, or have prepared, an actuarial
analysis of the Reserves related to the Business Covered on a gross, ceded and net basis prior
to the application of the LPT Reinsurance Agreement (“Administrator’s Actuarial
Report”). The Administrator’s Actuarial Report shall include both (i) an analysis of
gross, ceded and net Reserves prior to the application of the LPT Reinsurance Agreement,
prepared by a qualified actuary with a Fellow of the Casualty Actuarial Society designation in
accordance with all applicable actuarial standards, and (ii) the Administrator’s documentation
and rationale supporting how the actuary’s analysis was used in making decisions pertaining to
estimates of Ultimate Net Losses for Business Covered. Administrator shall provide to
Reinsureds a copy of the Administrator’s Actuarial Report no later than November 1st of each
year.

     (b) On an annual basis, Administrator shall provide to Reinsureds a current estimate of
the ultimate exposure for Loss and expenses (which estimate shall include paid loss, paid
Allocated Loss Adjustment Expenses, paid Declaratory Judgment Expense, loss reserves,
Allocated Loss Adjustment Expenses reserves and Declaratory Judgment Expense reserves) related
to the Business Covered, by account, on a gross, ceded and net basis prior to the application
of the LPT Reinsurance Agreement.

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     (c) Administrator shall allow Reinsureds and their Representatives access to
Administrator’s actuarial and claims personnel, documentation, systems and records to the
extent required by Reinsureds in order to complete their review of the Administrator’s
Actuarial Report and complete the Reinsureds’ actuarial report (the “Reinsureds’ Actuarial
Report”) and statutory actuarial opinion.

     (d) Subject to an early processing systems cut-off date that is mutually agreed upon by
the Parties, within two (2) Business Days after the end of each quarter, Administrator shall
deliver to Reinsureds a quarterly data file (each a “Quarterly Data File”),
substantially in the form set forth in Schedule D hereto, as required for financial
reporting and other purposes, including requisite coding necessary for all statutory reporting
obligations; it being understood that the initial Quarterly Data File shall be for the period
from the Effective Date to the last day of the quarter in which this Administrative Services
Agreement is executed.

     (e) In addition to the reports described in paragraphs (a) through (d) of this
Section 8.1, the Parties agree that Administrator shall provide Reinsureds information
related to the Business Covered under the Reinsured Contracts and/or Third Party Reinsurance
Agreements and copies of any other reports that are produced by Administrator.

     (f) Solely for the purposes of determining (i) the Required Amount in a Reinsurance
Credit Event, (ii) the Security Amount in a Collateral Triggering Event or (iii) if the
Administrator may exercise its withdrawal rights pursuant to Section 6.2(c) of the Collateral
Trust Agreement, Administrator may request, from time to time during the term of this
Administrative Services Agreement, a copy of the Reinsureds’ Actuarial Report for the purpose
of reviewing the Reinsureds’ calculation of Reserves. Upon receipt of such request,
Reinsureds shall provide a copy of the most recent available Reinsureds’ Actuarial Report as
promptly as possible to Administrator. If Administrator objects to the Reinsured’s
calculation of Reserves for the purposes set forth in this Section 8.1(f)(i)-(iii),
above, the Parties shall retain either Milliman Inc. or Towers Watson or, if both firms refuse
to act in such capacity, such other nationally recognized independent actuarial firm as may be
agreed by the Parties, to conduct a review of the calculation of the Reserves set forth in
such Reinsureds’ Actuarial report, and to prepare a report setting forth its findings and
conclusions on such matter. The fees, costs and expenses of retaining such an actuarial firm
shall be allocated by the actuarial firm between the Parties in accordance with the actuarial
firm’s judgment as to the relative merits of the Parties’ proposals in respect of the disputed
items.

     8.2 Change in Status.

     (a) Administrator shall (a) notify Reinsureds in writing promptly following (i) the
public announcement of entry into any agreement that would result in a majority of the capital
stock of Administrator no longer being owned or controlled, directly or indirectly, by
Berkshire (or its successor) or (ii) the adoption of any plan to liquidate, merge or dissolve
Administrator and (b) obtain the prior written consent of Reinsureds prior to the sale or
transfer of assets of Administrator or any of its Affiliates that would

16

 

render Administrator unable to perform its obligations under this Administrative Services
Agreement. Twenty (20) calendar days prior to the closing of any transaction contemplated by
sub-clause (a) in the preceding sentence, the successor or survivor of the transaction shall
reaffirm in writing its obligations under this Administrative Services Agreement in writing to
Reinsureds.

     (b) Administrator shall notify Reinsureds in writing prior to any material change to its
claims handling personnel or operations.

     8.3 Administrator Controls.

          Administrator represents that during the term of this Administrative Services Agreement it
will continue to maintain its accounting and oversight controls with respect to its operations
consistent with the requirements under the Sarbanes-Oxley Act of 2002 (as that statute may be
amended from time to time) and with past practice, to the extent consistent with Applicable Law and
taking into consideration the wind-down of the Business Covered. Administrator shall provide
Reinsureds with documentation supporting such compliance upon the request of Reinsureds.

ARTICLE IX

BOOKS AND RECORDS

     9.1 Transfer and Ownership of Books and Records.

          In accordance with Section 5.7 of the Master Transaction Agreement, prior to Closing, the
Parties shall in good faith agree upon a protocol to (a) transfer to Administrator the Books and
Records following the Closing and/or (b) provide Administrator with reasonable access to the Books
and Records during normal business hours following the Closing. Notwithstanding the foregoing,
Reinsureds shall retain legal ownership of such Books and Records and shall be entitled to retain
one or more copies and/or originals of such Books and Records. With respect to any Books and
Records which are archived, the Parties agree that Reinsureds shall not be required to transfer
such archived Books and Records to Administrator at the Closing, but instead shall provide
Administrator with reasonable access to such archived Books and Records. At any time following the
Closing, Reinsureds shall transfer all or a portion of the archived Books and Records to
Administrator upon Administrator’s reasonable request.

     9.2 Maintenance of Books and Records.

          Administrator shall maintain (including, backing up its computer files, and maintaining
facilities and procedures for safekeeping and retaining documents) Books and Records (which term,
for purposes of this Administrative Services Agreement if the context requires, shall include (i)
any such material developed after the date hereof by a Party or its Affiliates and (ii) any
archived Books and Records) of all transactions pertaining to the Business Covered in accordance
with the record retention requirements in effect from time to time for Administrator’s business not
covered by this Administrative Services Agreement.

     9.3 Access to Books Records.

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     (a) Administrator and Reinsureds shall each make the Books and Records (which term, for
purposes of this Administrative Services Agreement if the context requires, shall include (i)
any such material developed after the date hereof by a Party or its Affiliates and (ii) any
archived Books and Records) in its possession or under its control reasonably available to
Reinsureds or Administrator, as applicable, or their Representatives during normal office
hours for such auditing or any other purposes related to the LPT Reinsurance Agreement or this
Administrative Services Agreement as Reinsureds or Administrator, as applicable, may require.
Reinsureds or Administrator, as applicable, shall, at their own expense, be entitled to make
copies of the Books and Records for these purposes. Administrator will provide all needed
information, including access to claim files and personnel, for the purpose of periodically
updating actuarial studies of gross liabilities of the Business Covered. This obligation
shall survive the expiration of this Administrative Services Agreement and shall continue for
so long as Administrator may have any liability arising under this Administrative Services
Agreement or the LPT Reinsurance Agreement.

     (b) Administrator shall make the Books and Records and its personnel reasonably available
at any such location and manner as may be required by the terms of any Third Party Reinsurance
Agreement.

     (c) The Books and Records shall at all reasonable times be open for inspection by
Administrator (where such Books and Records are being kept by Reinsureds) and by Reinsureds
(where such Books and Records are being kept by Administrator) and (in each case) their
respective Representatives during normal business hours and on reasonable notice, for such
auditing or other purposes as Administrator or Reinsureds may require. Administrator shall
permit Reinsureds and their Representatives, and Reinsureds shall permit Administrator and its
Representatives, to make copies of such Books and Records. This obligation shall survive the
expiration of this Administrative Services Agreement and continue for so long as Administrator
may have any liability arising under this Administrative Services Agreement or the LPT
Reinsurance Agreement.

     (d) Upon Administrator’s reasonable request, Reinsureds shall transfer to Administrator
any archived Books and Records that Administrator requests pertaining to the Business Covered.

     (e) Administrator shall not, and shall cause its Affiliates to not, dispose of, alter or
destroy any Books and Records related to A&P Claims or other relevant materials other than in
accordance with Administrator’s books and records retention policies as may be in effect from
time to time, but in no event will Administrator dispose of, alter or destroy, or cause or
permit any of its Affiliates to dispose of, alter or destroy, any such Books and Records or
other relevant materials (i) prior to the seventh anniversary of the Closing and (ii) without
providing Reinsureds with advance written notice and the opportunity to take possession of
such Books and Records.

     (f) Notwithstanding any other provision of this Section 9.3, a Party shall not be
obligated to provide such access to any Books and Records, employees or information

18

 

if such Party determines, in its reasonable judgment, that doing so would violate
Applicable Law or a contract, agreement or obligation of confidentiality owing to a third
party; provided, however, that the Parties requesting access shall have the right to require
such other Party to use its commercially reasonable efforts to take steps in order to provide
such access without causing such violations.

ARTICLE X

INABILITY TO PERFORM SERVICES; ERRORS 

     10.1 Capacity.

     (a) Administrator shall at all times maintain all necessary licenses, authorizations,
permits and qualifications from Governmental Authorities under Applicable Laws that
Administrator is required to maintain in order to perform the Administrative Services in the
manner required by this Administrative Services Agreement.

     (b) Subject to Section 2.5 of this Administrative Services Agreement and to the
terms of the Transition Services Agreement, Administrator shall at all times maintain
sufficient facilities and trained personnel of the kind necessary to perform its obligations
under this Administrative Services Agreement in accordance with the performance standards set
forth herein.

     (c) Administrator may carry out its obligations under this Article X through
Resolute Management Inc.

     10.2 Inability to Perform Services.

          In the event that Administrator shall be unable to perform normal and routine services as
required by this Administrative Services Agreement for any reason for a period that can reasonably
be expected to exceed thirty (30) calendar days, Administrator shall provide notice to Reinsureds
of its inability to perform the services and shall cooperate with Reinsureds in obtaining an
alternative means of providing such services. Administrator will be responsible for all costs
incurred in restoring services except in cases where such inability to provide services results
solely from Reinsureds failure to provide the Claims Administration System in accordance with the
terms of the Transition Services Agreement, in which case Reinsureds shall be responsible for all
costs reasonably incurred by Administrator in restoring services.

     10.3 Errors.

          Administrator shall, at its own expense, use commercially reasonable efforts to correct any
errors in Administrative Services caused by it as soon as practicable after discovering such error
or receiving notice thereof from Reinsureds or other Person.

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ARTICLE XI

LEGAL ACTIONS 

     11.1 Regulatory Proceedings.

     (a) If Reinsureds or Administrator receives notice of, or otherwise becomes aware of, any
regulatory investigation, examination or proceeding or other significant inquiry relating to
the Reinsured Contracts and Third Party Reinsurance Agreements, Reinsureds (to the extent
pertaining to the Business Covered) or Administrator, as applicable, shall promptly notify the
other Party. Unless Reinsureds choose to delegate responsibility to Administrator with
respect to a specific matter, Reinsureds shall respond to and resolve all regulatory matters
and regulatory investigations, examinations, inquiries and proceedings relating to the
Business Covered with the full assistance and cooperation of Administrator.

     (b) Notwithstanding anything to the contrary contained in this Administrative Services
Agreement, neither Reinsureds nor Administrator shall have the authority to institute,
prosecute or maintain any regulatory proceedings on behalf of the other Party without the
prior written consent of such other Party.

     11.2 Notification Requirements.

     (a) If Reinsureds or Administrator receives notice of any litigation, arbitration,
declaratory judgment or other legal proceeding against a Party to this Administrative Services
Agreement that has been instituted either under, arising out of, or relating to any Reinsured
Contract or Third Party Reinsurance Agreement in respect to the Business Covered, Reinsureds
or Administrator, as applicable, shall promptly notify the other Party.

     (b) Administrator shall promptly notify Reinsureds in writing of any potential loss from
an A&P Claim, set of interrelated A&P Claims, or a single account, which is reasonably likely
to involve a loss, on a gross of third party ceded reinsurance basis, in the amount of
$10,000,000 or greater. Administrator shall provide Reinsureds with quarterly progress
reports regarding such A&P Claims or accounts.

     (c) At least ten (10) calendar days prior to making any third-party reinsurance cession
of over $10,000,000, Administrator shall provide a draft copy of the billing to Reinsureds.

     (d) Administrator shall promptly notify Reinsureds in writing whenever a Berkshire
Controlled Entity is an opposing party in any litigation, arbitration, declaratory judgment or
other legal proceeding against Reinsureds that has been instituted either under, arising out
of, or relating to any Reinsured Contract or Third Party Reinsurance Agreement in respect to
the Business Covered.

     (e) Administrator shall promptly notify Reinsureds in writing of any events that
constitute a Reinsurance Credit Event.

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     11.3 Right to Associate.

          Administrator shall prosecute or defend, at its own expense pursuant to the terms of this
Administrative Services Agreement and the LPT Reinsurance Agreement and in the name of the
applicable Reinsureds when necessary, any litigation, arbitration or other legal proceeding brought
on any Reinsured Contract or Third Party Reinsurance Agreement with respect to the Business
Covered. Administrator, when so requested, shall afford Reinsureds an opportunity to be associated
with Administrator, at the expense of Reinsureds, in the defense of any claim, suit or proceeding
involving the Business Covered and the Parties shall cooperate in every respect in the prosecution
or defense of such claim, suit or proceeding. Any recovery for the benefit of Reinsureds shall be
first used to reimburse Administrator for its expenses in connection with the proceedings and the
remainder used as a recovery under the terms of the LPT Reinsurance Agreement.

ARTICLE XII

BANK ACCOUNTS

     12.1 Bank Accounts.

     (a) As soon as reasonably practicable after the Effective Date, Administrator shall open
and maintain accounts into and out of which all payments due from Administrator under the LPT
Reinsurance Agreement shall be paid and all recoverables due Administrator under the LPT
Reinsurance Agreement shall be received (the “Administrative Accounts”).

     (b) Administrator may open and maintain such bank accounts in its own name as it may
require in relation to the provision of the Administrative Services, and Reinsureds hereby
authorize all payments to be made from and all recoveries paid to such accounts in connection
with the provision of the Administrative Services.

     (c) Reinsureds and Administrator shall cooperate in procuring that, as soon as reasonably
practicable, following the Effective Date, changes to the instruction and finance systems are
made so as to enable payments and recoveries to be paid into and from the Administrative
Accounts. All costs of changes will be paid by Administrator. To the extent that payments and
recoveries are made after the Effective Date from accounts held by Reinsureds, Reinsureds and
Administrator shall cooperate in setting up reimbursement procedures for payment of amounts
due between the Administrator and Reinsureds.

ARTICLE XIII

COOPERATION

     13.1 Cooperation.

          The Parties shall cooperate in a commercially reasonable manner in order that the duties
assumed by Administrator will be effectively, efficiently and promptly discharged, and

21

 

will not take any actions which would frustrate the intent of the transactions contemplated by this
Administrative Services Agreement, the Master Transition Agreement, the LPT Reinsurance Agreement
or any other Ancillary Agreements. Each Party shall, at all reasonable times under the
circumstances, make available to the other Party properly authorized personnel for the purpose of
consultation and decision.

     13.2 Relationship Management.

          In the interest of effective effectuation of this Administrative Services Agreement, the
Parties will seek in good faith to have primary communications regarding documents, records, and
request for information under this Administrative Services Agreement be made through the following
authorized Representatives:

For Administrator:

Brian G. Snover

Vice President and General Counsel

Berkshire Hathaway Reinsurance Division

100 First Stamford Place

Stamford, CT 06902

Fax: (203) 363-5221

For Reinsureds:

Michael P. Warnick

Senior Vice President and Deputy General Counsel

CNA Financial Corporation

333 S. Wabash Avenue

Chicago, IL 60604

Fax: (312) 755-2479

          Any Party may change its Representative pursuant to this Section 13.2 on fifteen (15)
calendar days’ advance notice in writing to the other Parties.

ARTICLE XIV

DURATION; TERMINATION

     14.1 Duration.

          This Administrative Services Agreement shall commence on the date of its execution and shall
continue until it is terminated under Section 14.2.

     14.2 Termination.

     (a) Subject to the provisions regarding survivability set forth in Section 14.4
hereof, this Administrative Services Agreement shall terminate:

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          (i) at any time upon the mutual written consent of the Parties, which writing shall state
the effective date of termination, and consistent with Section 14.3 hereof, shall set
forth in reasonable detail the procedure for transferring the Administrative Services to
Reinsureds or their designee;

          (ii) automatically upon termination of Administrator’s liability under the LPT
Reinsurance Agreement. Under all circumstances Administrator’s liability under this
Administrative Services Agreement shall cease at the close of the Business Day on which
Administrator has paid an Ultimate Net Loss equal to the LPT Limit;

          (iii) at the option of Reinsureds, upon written notice to Administrator, if Administrator
becomes subject to dissolution, liquidation, conservation, rehabilitation, bankruptcy,
statutory reorganization, receivership, compulsory composition, or similar proceedings in any
jurisdiction, or if creditors of Administrator take over its management, or if Administrator
otherwise enters into any arrangement with creditors, or makes an assignment for the benefit
of creditors, or if any significant part of Administrator’s undertakings or property is
impounded or confiscated by action of any Governmental Authority.

     (b) In the event that this Administrative Services Agreement is terminated pursuant to
Section 14.2(a)(iii), Reinsureds shall promptly select a third-party administrator
reasonably acceptable to Administrator to perform the Administrative Services.

     (c) Following any termination of this Administrative Services Agreement by Reinsureds
pursuant to Section 14.2(a)(iii), Administrator shall reimburse Reinsureds for any
reasonable out-of-pocket costs arising as a result of such termination, including, without
limitation, (i) the cost of transitioning the Administrative Services to a substitute provider
of Reinsureds, (ii) any fees paid to any such substitute provider and (iii) any reasonable
costs incurred by Reinsureds with respect to the Administrative Services after termination of
this Administrative Services Agreement subject to the LPT Reinsurance Agreement continuing to
be unexhausted.

     14.3 Certain Actions Related to Termination.

     (a) In the event that (x) either of the Parties reasonably determines that the aggregate
Ultimate Net Loss incurred by Administrator under the LPT Reinsurance Agreement on a paid
basis is reduced to one billion dollars ($1,000,000,000) or (y) any notice of termination is
given under either the LPT Reinsurance Agreement or this Administrative Services Agreement,
then, upon the request of Reinsureds:

          (i) Reinsureds and Administrator shall negotiate in good faith a services agreement (the
“Reverse Transition Services Agreement”) containing terms and conditions mutually
acceptable to the Parties, whereby Administrator and its Affiliates will provide, at actual
cost (exclusive of any overhead allocation), all transition or administrative services
reasonably necessary or appropriate in order to transition the administration of the A&P
Business to Reinsureds, which services will be provided for a

23

 

period of not less than one (1) year following the termination or expiration of this
Administrative Services Agreement.

          (ii) Administrator shall provide to Reinsureds a true and complete list of each employee
of Administrator or its Affiliates who is primarily dedicated to the administration of the A&P
Business, including each such employee’s classification, hire date, department function,
office location, current annual salary and most recent annual bonus target. Administrator
shall provide updates to such list from time to time upon the reasonable request of
Reinsureds, and shall reasonably cooperate with and assist Reinsureds in connection with
making offers of employment to any such employees for employment commencing on or after the
termination or expiration of this Administrative Services Agreement.

          (iii) To ensure an effective transition and transfer of the administration of the A&P
Business, Administrator shall, and shall cause its Affiliates and their respective
Representatives to, fully cooperate and work with Reinsureds in transition planning and
implementation. Reinsureds shall reimburse Administrator for any out of pocket expenses
incurred by Administrator or its Affiliates in connection with any actions undertaken by
Administrator at the request of Reinsureds in transitioning the administration of the A&P
Business to Reinsureds.

     (b) Unless otherwise agreed to by the Parties, upon the termination or expiration of this
Administrative Services Agreement, Administrator shall, and shall cause each of its
Affiliates, to, promptly transfer to Reinsureds, or their designee, originals or copies of all
Books and Records in the possession or control of such Persons.

     (c) Unless otherwise agreed to in writing by the Parties, from and after the termination
or expiration of this Administrative Services Agreement, Administrator shall, and shall cause
its Affiliates and their respective Representatives to, fully cooperate with Reinsureds in
connection with transitioning the administration of the A&P Business to Reinsureds or their
designee, including in connection with any regulatory or tax audits or proceedings relating to
any period during which Administrator was providing services pursuant to this Administrative
Services Agreement.

     (d) If requested by Reinsureds pursuant to Section 14.3(b), upon the termination
or expiration of this Administrative Services Agreement, Administrator and Reinsureds shall
execute and deliver the Reverse Transition Services Agreement.

     14.4 Survival.

          The provisions of Section 9.3, paragraphs (b) and (c) of Section 14.2,
Section 14.3, Section 14.4, Article XV, Article XVII, and
Sections 19.1, 19.7, 19.10 and 19.12 shall survive the termination
of this Administrative Services Agreement.

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ARTICLE XV

CONFIDENTIALITY; PRIVACY REQUIREMENTS

     15.1 Definitions.

          The following terms, when used in this Administrative Services Agreement, shall have the
meanings set forth in this Section:

     (a) As used herein, “Confidential Information” means any information of
Administrator or Reinsureds that is not generally known to the public and at the time of
disclosure is identified, or would reasonably be understood by the receiving Party to be
proprietary or confidential, whether or not so marked and whether disclosed in oral, written,
visual, electronic or other form, and to which the receiving Party (or its contractors or
agents) has access to in connection with this Administrative Services Agreement. For purposes
of clarification, Confidential Information includes: (i) business plans, strategies,
forecasts, projects and analyses; (ii) financial information and fee structures; (iii)
business processes, methods and models; (iv) employee and supplier information; (v) product
and service specifications; (vi) manufacturing, purchasing, logistics, sales and marketing
information; (vii) methods and training materials; and (viii) the terms and conditions of this
Administrative Services Agreement, and in the case of Reinsureds, also includes (A)
information about or owned by Reinsureds’ customers, insureds, or claimants; (B) information
treated or defined as confidential under the Reinsureds’ standards; (C) Reinsureds’ data and
Personal Information; and (D) the CAS.

     (b) “Nonpublic Personal Information” is as defined in Title V of the Financial
Modernization Act (the Gramm-Leach-Bliley Act) (15 U.S.C.6801 et seq.) and related Applicable
Law. Nonpublic Personal Information is individually identifiable financial and medical or
health-related information, including application, policy, or claim information; social
security numbers, personal financial information, health information; medical records; and
names or lists of individuals derived from nonpublic personally identifiable information
becoming known by Administrator through the performance of its obligations under this
Administrative Services Agreement.

     (c) “Personal Information” shall mean any information about an individual, in
whatever form received or created, whether prepared by Administrator, Reinsureds or otherwise,
that contains or otherwise reflects information that identifies or about which there is a
reasonable basis to believe can be used to identify the individual. Personal Information
includes Nonpublic Personal Information.

     15.2 Obligations.

          The receiving Party will use the same care and discretion to avoid disclosure, publication or
dissemination of any Confidential Information received from the disclosing Party as the receiving
Party uses with its own similar information that it does not wish to disclose, publish or
disseminate (but in no event less than a reasonable degree of care). The receiving Party will: (a)
use the disclosing Party’s Confidential Information only for the purpose for which

25

 

it is disclosed in connection with the performance of its obligations under this Administrative
Services Agreement or the full enjoyment of its rights hereunder; and (b) not disclose the
disclosing Party’s Confidential Information except to: (i) its employees, agents and contractors,
who have a need to know such Confidential Information in connection with the performance of its
obligations under this Administrative Services Agreement or the full enjoyment of its rights
hereunder who have executed agreements obligating them to keep the Confidential Information
confidential, (ii) its legal, financial or other professional advisors as reasonably necessary to
provide or benefit from the Administrative Services, (iii) an Affiliate of Reinsureds in connection
with the use or receipt of Administrative Services by such Affiliate pursuant to this
Administrative Services Agreement, or (iv) an Administrator Affiliate, Subcontractor and/or
employees of approved Subcontractor, in each case, solely in connection with and as required by
their performance of Administrative Services. The receiving Party shall ensure that any
Affiliates, Subcontractors, advisors and any other third parties to whom Confidential Information
is disclosed hereunder have signed an agreement with the same or similar confidentiality
obligations as set forth herein. The receiving Party is liable for any unauthorized disclosure or
misappropriation of Confidential Information by any of its personnel, agents, Subcontractors or
advisors. The receiving Party will promptly report to the disclosing Party any breaches in
confidentiality of which it is aware that may materially affect the disclosing Party and specify
the corrective action taken. Administrator will not commingle the Confidential Information or
Personal Information of Reinsureds with any other personal or confidential information.

     15.3 Exceptions to Confidential Treatment.

     (a) General. Except with respect to Personal Information of Reinsureds, this
Administrative Services Agreement imposes no obligation upon either Party with respect to
information that: (i) the receiving Party possessed prior to disclosure by the disclosing
Party, without an obligation of confidentiality; (ii) is or becomes publicly available without
breach of this Administrative Services Agreement by the receiving Party; (iii) is or was
independently developed by the receiving Party without the use of any Confidential Information
of the disclosing Party other than in connection with the Administrative Services; (iv) is or
was disclosed by the disclosing Party without imposing any obligation of confidentiality on
the receiving Party; or (v) is or was received by the receiving party from a third party that
does not have an obligation of confidentiality to the disclosing party or its Affiliates.

     (b) Required Disclosure. If either party is requested or required to disclose
Confidential Information of the other pursuant to any judicial or administrative process, then
such receiving party shall, to the extent it may legally do so, promptly notify the other
party in writing of such request or requirement. The party whose Confidential Information is
requested or required to be disclosed shall either: (i) promptly seek protective relief from
such disclosure obligation, or (ii) direct the receiving party to comply with such request or
requirement. The receiving party shall cooperate with efforts of the disclosing party to
maintain the confidentiality of such information or to resist compulsory disclosure thereof,
to the extent it may legally do so, but any costs incurred by the receiving party shall be
reimbursed by the disclosing party. If, after a reasonable opportunity to seek protective
relief, such relief is not obtained by disclosing party, or if such party fails to obtain such
relief, the receiving party may disclose such

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portion of such Confidential Information that the receiving party reasonably believes, on
the basis of advice of such party’s counsel, such party is legally obligated to disclose.
Either Party may disclose Confidential Information to a state insurance regulator or to a tax
authority as required under Applicable Law or as required to support that Party’s position on
any tax return.

     (c) Return or Destruction. At Reinsureds’ request and upon the termination of
this Administrative Services Agreement, Administrator will return or certify or cause the
return or certification of destruction by its Subcontractors of all of Reinsureds’
Confidential Information in Administrator’s possession or control. Reinsureds will have the
same obligations with respect to Administrator’s Confidential Information as Administrator has
with respect to Reinsureds’ Confidential Information under this section. The Parties shall be
entitled to retain an archival copy of any Confidential Information (excluding Personal
Information) to the extent required to enforce the terms of this Administrative Services
Agreement or to comply with Applicable Law or to support its position on any tax return;
provided, that such Confidential Information will be returned or destroyed in accordance with
this provision upon the expiration of the period specified in the Applicable Law, the
expiration of the applicable statute of limitations and the final resolution of any pending
dispute.

     15.4 Privacy.

          To the extent of any conflict between the requirements of Section 15.2 and this
Section 15.4, this Section 15.4 shall govern and control with respect to Personal
Information.

     (a) Acknowledgement. Administrator acknowledges that it may have access to
Personal Information in order to perform its duties under this Administrative Services
Agreement and that Personal Information is protected under Applicable Law.

     (b) Use and Disclosure. Administrator agrees to use and disclose the Personal
Information only: (i) as required for it to perform its duties and obligations under this
Administrative Services Agreement; (ii) for any lawful purpose related to this Administrative
Services Agreement; and (iii) as permitted by Applicable Law.

     (c) Privacy Protection Protocol. Administrator shall at all times maintain a
privacy protection protocol, which is sufficient to assure compliance with nondisclosure,
privacy, security and other provisions of this Administrative Services Agreement that relate
to Personal Information and Confidential Information and with all Applicable Law to the extent
of Administrator’s obligations under Section 2.4.

     (d) Security Precautions. Administrator shall take all reasonable security
precautions to maintain the confidentiality and security of all Personal Information, take all
steps necessary to protect against unauthorized access to Personal Information, and to protect
against any anticipated threats or hazards to the security of such information. Among other
things, Administrator shall: (i) limit access to Personal Information to those actually
performing Administrative Services for Reinsureds; (ii) limit access of personnel performing
Administrative Services for Reinsureds to that Personal Information actually

27

 

required for the performance of Administrative Services for Reinsureds; (iii) take all
reasonable and necessary steps to ensure that Personal Information is transmitted only in a
secure manner including by encryption or equivalent means; and (iv) take all reasonable and
necessary steps to ensure that Personal Information is minimally disclosed, combined, amended,
deleted, or otherwise altered by Administrator personnel so as to maintain its integrity and
accuracy.

     (e) Protected Health Information. If Administrator or Administrator personnel
will have access to “protected health information” (as such term is defined by the HIPAA
Privacy Rule), Administrator shall execute the Business Associate Agreement substantially in
the form attached hereto as Exhibit A. Administrator and Administrator personnel
shall comply with the terms of the Business Associate Agreement in performing the applicable
Administrative Services. Administrator shall be responsible under this Administrative
Services Agreement for any failure of Administrator or Administrator personnel to comply with
the terms of the Business Associate Agreement or the Applicable Laws referenced in the
Business Associate Agreement applicable to Administrator in the same manner and to the same
extent it would be responsible for any failure to comply with its other obligations under this
Administrative Services Agreement.

     (f) Privacy Breach. If Administrator breaches the provisions of this Section
15.4, Administrator agrees to immediately notify Reinsureds and cooperate with Reinsureds
in mitigating any potential damages by, at Administrator’s expense:

          (i) immediately endeavoring to recover all Personal Information from the unauthorized
recipient, if known, and instructing the unauthorized recipient to cease and desist from any
use of the improperly disclosed Personal Information;

          (ii) at the request of Reinsureds, returning within ten (10) Business Days all Personal
Information provided by Reinsureds to Administrator pursuant to this Section 15.4;

          (iii) at the request of Reinsureds, deleting from Administrator electronic systems and
physical records within ten (10) Business Days all Personal Information provided by Reinsureds
and providing certification that such deletion has occurred;

          (iv) assisting and cooperating with any demand forwarded by Reinsureds to Administrator
as a result of a court order imposed on Reinsureds or from a Governmental Authority having
jurisdiction over Reinsureds; and

          (v) assisting with taking any other remedial steps reasonably required by Reinsureds.

     (g) No Limitation. The inclusion of this Section 15.4 relating primarily
to Personal Information shall not, in any way, limit the obligations of Administrator under
other sections of this Administrative Services Agreement that relate to the protection of
Confidential Information generally.

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     15.5 Regulatory and Legal Communication.

     To the extent Administrator may legally do so:

     (a) Government Requests. Administrator agrees that, should any Governmental
Authority request Administrator to submit any information or provide any communication related
to the Administrative Services provided pursuant to this Administrative Services Agreement,
Administrator will notify Reinsureds immediately upon receipt of such request. In no case
shall said notice be received by Reinsureds later than five (5) calendar days after receipt by
Administrator. Administrator must contact Reinsureds prior to any response Administrator
would make to any Governmental Authority that involves Reinsureds, Reinsureds’ clients, or any
Reinsureds relationship with such Governmental Authority. This provision does not apply to
reviews by tax authorities or to state insurance departments in connection with financial
examinations.

     (b) Notice. Without limiting anything in subsection (a) above, Administrator
shall provide Reinsureds with prompt notice of any Governmental Authority review, audit or
inspection of Administrator’s facilities, processes, or products under the FCPA or any
anti-bribery Applicable Law that relates to the Administrative Services furnished to
Reinsureds under this Administrative Services Agreement. Even if Reinsureds are not otherwise
identified as involved in the review, audit, or inspection, Administrator shall provide
Reinsureds with the summary results of any such review, audit or inspection. If not legally
prohibited, Administrator shall provide Reinsureds a reasonable opportunity to provide
assistance to Administrator in responding to any such review, audit or inspection.

     (c) Security Incident. In the event of an incident that does, or is reasonably
likely to, result in an unauthorized disclosure of, or access to, Personal Information (a
“Security Incident”), Administrator shall immediately notify Reinsureds of the
Security Incident, and Administrator shall promptly (and in any event as soon as reasonably
practical) (i) perform a root cause analysis and prepare a corrective action plan, (ii)
provide Reinsureds with written reports and detailed information regarding any such Security
Incident, including how and when such Security Incident occurred and what actions
Administrator is taking to remedy such Security Incident, (iii) cooperate in the investigation
of the Security Incident at Reinsureds’ request, (iv) reimburse Reinsureds for their costs of
notifying any individuals and/or authorities of the Security Incident if Reinsureds, in their
good faith judgment, consider notification necessary, (v) remediate such Security Incident or
potential Security Incident and take commercially reasonable actions to prevent its
recurrence; provided, however, to the extent such Security Incident or potential Security
Incident is not caused by Administrator’s or its Subcontractors’ failure to comply with this
Administrative Services Agreement, Reinsureds shall reimburse Administrator for
Administrator’s reasonable expenses incurred in such remediation, and (vi) promptly restore
any lost Reinsureds data to the last available back-up.

     (d) Material Breach. A breach of this Article XV may be a material
breach of this Administrative Services Agreement. Each Party acknowledges that monetary

29

 

damages may not be a sufficient remedy for unauthorized disclosure of Confidential
Information or Personal Information and that each Party shall be entitled, in addition to any
other rights or remedies available at law or in equity, to seek such injunctive or equitable
relief as may be deemed proper by a court of competent jurisdiction.

ARTICLE XVI

FORCE MAJEURE

     16.1 Force Majeure Event.

          Except for any failure of either Party to comply with the provisions of the Disaster Recovery
Plans, neither Party shall have any liability or responsibility, and shall be excused from
performance for, any interruption, delay, impairment or other failure to fulfill any obligation
under this Administrative Services Agreement to the extent and so long as the fulfillment of such
obligation is interrupted, delayed, impaired, prevented or frustrated as a result of or by natural
disaster, hurricane, earthquake, floods, fire, catastrophic weather conditions, diseases or other
elements of nature or acts of God, acts of war (declared or undeclared), insurrection, riot, civil
disturbance or disorders, rebellion, sabotage, government regulations or directives, embargoes,
terrorist acts, or explosions, strikes, failure of or damage to public utility (“Force Majeure
Event”); provided that such Party uses best efforts promptly to overcome or mitigate the cause
of such delay or failure to perform, including the implementation of the Disaster Recovery Plans.
Any Party so delayed in its performance shall immediately notify the other thereof by telephone and
confirm promptly thereafter in writing, describing in reasonable detail the circumstances causing
such delay, and shall resume the performance of its obligations as promptly as reasonably
practicable after the Force Majeure Event has ceased to exist.

ARTICLE XVII

INDEMNIFICATION 

     17.1 Indemnification Obligation of Administrator.

          Administrator agrees to indemnify and hold harmless Reinsureds and each of their directors,
officers, employees, agents or Affiliates (and the directors, officers, employees and agents of
such Affiliates) from any and all losses, liabilities, costs, claims, demands, compensatory, extra
contractual and/or punitive damages, fines, penalties and expenses (including reasonable attorneys’
fees and expenses) (collectively, “Reinsureds Losses”) resulting in damages not included
within the definition of Ultimate Net Loss arising out of or caused by: (i) any actual or alleged
fraud, theft or embezzlement by officers, employees or agents of Administrator or its
Subcontractors during the term of this Administrative Services Agreement; (ii) the failure, either
intentional or unintentional, of Administrator or its Subcontractors to properly perform the
services or take the actions required by this Administrative Services Agreement, including, without
limitation, the failure to properly process, evaluate and pay disbursement requests in accordance
with the terms of this Administrative Services Agreement; (iii) any other act of negligence or
willful misconduct committed by officers, agents or employees of Administrator or its
Subcontractors during the term of this

30

 

Administrative Services Agreement; or (iv) any failure of Administrator or its Subcontractors
to comply with Applicable Laws during the term of this Administrative Services Agreement. Nothing
herein shall be construed to require Administrator to indemnify Reinsureds with respect to any act
or omission where the decision to take or omit such action was with the agreement of Reinsureds.

     17.2 Indemnification Obligation of Reinsureds.

          Reinsureds agree to indemnify and hold harmless Administrator and any of its directors,
officers, employees, agents or Affiliates (and the directors, officers, employees and agents of
such Affiliates) from any and all losses, liabilities, costs, claims, demands, compensatory, extra
contractual and/or punitive damages, fines, penalties and expenses (including reasonable attorneys’
fees and expenses) (collectively, “Administrator Losses”) arising out of or caused by: (i)
fraud, theft or embezzlement by officers, employees or agents of Reinsureds during the term of this
Administrative Services Agreement; (ii) any other act of negligence or willful misconduct committed
by officers, agents or employees of Reinsureds during the term of this Administrative Services
Agreement; or (iii) any failure of Reinsureds to comply with Applicable Laws during the term of
this Administrative Services Agreement other than any failure on the part of Reinsureds or
Administrator caused by the action or inaction of Administrator, including when acting in the name
or on behalf of Reinsureds, whether or not in compliance with the terms of this Administrative
Services Agreement. Nothing herein shall be construed to require Reinsureds to indemnify
Administrator with respect to any act or omission where the decision to take or omit such action
was with the agreement of Administrator.

     17.3 Notice of Indemnification Request.

          In the event that either Party asserts a claim for indemnification hereunder, such Party
seeking indemnification (the “Indemnified Party”) shall give written notice to the other
Party (the “Indemnifying Party”) specifying the facts constituting the basis for, and the
amount (if known) of, the claim asserted within one year of the date the claim is asserted against
or should be known by the Indemnified Party.

     17.4 Notice of an Asserted Liability.

          If an Indemnified Party asserts, or may in the future seek to assert, a claim for
indemnification hereunder because of a claim or demand made, or an action, proceeding or
investigation instituted, by any person not a party to this Administrative Services Agreement (a
“Third Party Claimant”) that may result in an Administrator Loss with respect to which
Administrator is entitled to indemnification pursuant to Section 17.2 hereof or Reinsureds
Loss with respect to which Reinsureds are entitled to indemnification pursuant to Section
17.1 hereof (an “Asserted Liability”), the Indemnified Party shall so notify the
Indemnifying Party as promptly as practicable, but in no event later than ten (10) Business Days
after such Asserted Liability is actually known to the Indemnified Party. Failure to deliver
notice with respect to an Asserted Liability in a timely manner shall not be deemed a waiver of the
Indemnified Party’s right to indemnification for Losses in connection with such Asserted Liability
but the amount of reimbursement to which the Indemnified Party is entitled shall be reduced by the
amount, if any,

31

 

by which the Indemnified Party’s Losses would have been less had such notice been timely
delivered.

     17.5 Procedures.

     (a) The Indemnifying Party shall have the right, upon written notice to the Indemnified
Party, to investigate, contest, defend or settle the Asserted Liability; provided that the
Indemnified Party may, at its option and at its own expense, participate in the
investigation, contesting, defense or settlement of any such Asserted Liability through
representatives and counsel of its own choosing. The failure of the Indemnifying Party to
respond in writing to proper notice of an Asserted Liability within ten (10) calendar days
after receipt thereof shall be deemed an election not to defend the same. Unless and until
the Indemnifying Party elects to defend the Asserted Liability, the Indemnified Party shall
have the right, at its option and at the Indemnifying Party’s expense, to do so in such
manner as it deems appropriate, including, but not limited to, settling such Asserted
Liability (after giving notice of the settlement to the Indemnifying Party) on such terms as
the Indemnified Party deems appropriate.

     (b) Except as provided in the immediately preceding sentence, the Indemnified Party
shall not settle or compromise any Asserted Liability for which it seeks indemnification
hereunder without the prior written consent of the Indemnifying Party (which shall not be
unreasonably withheld) during the ten (10) calendar day period specified above.

     (c) The Indemnifying Party shall be entitled to participate in (but not to control) the
defense of any Asserted Liability which it has elected, or is deemed to have elected, not to
defend, with its own counsel and at its own expense.

     (d) Except as provided in the first sentence of paragraph (a) of this Section
17.5, the Indemnifying Party shall bear all reasonable costs of defending any Asserted
Liability and shall indemnify and hold the Indemnified Party harmless against and from all
costs, fees and expenses incurred in connection with defending such Asserted Liability.

     (e) Administrator and Reinsureds shall make mutually available to each other all
relevant information in their possession relating to any Asserted Liability (except to the
extent that such action would result in a loss of attorney-client privilege) and shall
cooperate with each other in the defense thereof.

     17.6 Survival.

          The provisions of this Article XVII shall survive the termination of this
Administrative Services Agreement for a period of one year.

ARTICLE XVIII

DISPUTE RESOLUTION; ARBITRATION 

     18.1 Dispute Resolution; Arbitration.

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          If Reinsureds and Administrator are unable to resolve any dispute arising from this
Administrative Services Agreement, the matter will be handled in accordance with the dispute
resolution and arbitration procedures set forth in Article X and Article XI of the
Master Transaction Agreement.

ARTICLE XIX

MISCELLANEOUS 

     19.1 Notices.

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

          To CNA Parties:

CNA Financial Corporation

333 S. Wabash Avenue

Chicago, IL 60604

Attention: Jonathan D. Kantor

Executive Vice President,

General Counsel and Secretary

Fax: (312) 817-0511

          With a copy to:

CNA Financial Corporation

333 S. Wabash Avenue

Chicago, IL 60604

Attention: Michael P. Warnick

Senior Vice President and Deputy General Counsel

Fax: (312) 755-2479

          To Administrator:

National Indemnity Company

100 First Stamford Place

Stamford, CT 06902

Attention: General Counsel

Fax: (203) 363-5221

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          With a copy to:

National Indemnity Company

3024 Harney Street

Omaha, NE 68131

Attention: Treasurer

Fax: (402) 916-3030

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

     19.2 Entire Agreement.

          This Administrative Services Agreement (including the exhibits and schedules hereto), the
Master Transaction Agreement and the other Ancillary Agreements and any other documents delivered
pursuant hereto and thereto, constitute the entire agreement among the Parties and their respective
Affiliates with respect to the subject matter hereof and supersede all prior negotiations,
discussions, writings, agreements and understandings, oral and written, among the Parties with
respect to the subject matter hereof and thereof.

     19.3 Waiver and Amendment.

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

     19.4 Successors and Assigns.

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

     19.5 Headings.

          The headings of this Administrative Services Agreement are for convenience of reference only
and shall not define or limit any of the terms or provisions hereof.

     19.6 Construction; Interpretation.

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          Reinsureds and Administrator have participated jointly in the negotiation and drafting of this
Administrative Services Agreement. In the event of an ambiguity or question of intent or
interpretation arises, this Administrative Services Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring
either Party by virtue of the authorship of any of the provisions of this Administrative Services
Agreement. When a reference is made to an Article, Section, Schedule or Exhibit such reference
shall be to an Article, Section, Schedule or Exhibit of or to this Administrative Services
Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are
used in this Administrative Services Agreement, they shall be deemed to be followed by the words
“without limitation.” The word “Agreement,” means this Administrative Services Agreement as
amended or supplemented, together with all Exhibits and Schedules attached hereto or incorporated
by reference, and the words “hereof,” “herein,” “hereto,” “hereunder” and other words of similar
import shall refer to this Administrative Services Agreement in its entirety and not to any
particular Article, Section or provision of this Administrative Services Agreement. The references
to “$” shall be to United States dollars. Reference to any Applicable Law means such Applicable
Law as amended, modified, codified, replaced or reenacted, and all rules and regulations
promulgated thereunder. References to a Person are also to its successors and permitted assigns.

     19.7 Governing Law and Jurisdiction.

          This Administrative Services Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to such state’s principles of conflict of laws
that could compel the application of the laws of another jurisdiction. SUBJECT TO ARTICLE
XVIII, ANY SUIT, ACTION OR PROCEEDING TO COMPEL ARBITRATION OR FOR TEMPORARY INJUNCTIVE RELIEF
IN AID OF ARBITRATION OR TO PRESERVE THE STATUS QUO PENDING THE APPOINTMENT OF THE ARBITRATOR(S)
SHALL BE BROUGHT BY THE PARTIES SOLELY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, PROVIDED THAT IF SAID COURT DETERMINES THAT IT DOES NOT HAVE SUBJECT MATTER
JURISDICTION THEN SAID ACTIONS MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK FOR NEW
YORK COUNTY; AND EACH REINSUREDS AND ADMINISTRATOR EACH HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE AND ANY APPELLATE COURTS THEREOF, EXCEPT THAT ANY
FINAL ARBITRAL AWARD RENDERED IN ACCORDANCE WITH ARTICLE XVIII MAY BE ENTERED AND ENFORCED
IN ANY COURT HAVING JURISDICTION OVER ANY PARTY OR ANY OF ITS ASSETS.

     19.8 No Third Party Beneficiaries.

          Except as otherwise expressly set forth in any provision of this Administrative Services
Agreement, nothing in this Administrative Services Agreement is intended or shall be construed to
give any Person, other than the Parties, any legal or equitable right, remedy or claim under or in
respect of this Administrative Services Agreement or any provision contained herein.

     19.9 Counterparts.

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

     19.10 Severability.

          Any term or provision of this Administrative Services Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Administrative Services Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Administrative Services 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
Administrative Services Agreement is so broad as to be unenforceable, that provision shall be
interpreted to be only so broad as is enforceable. In the event of such invalidity or
unenforceability of any term or provision of this Administrative Services Agreement, such term or
provision shall be reformed and the Parties shall use their commercially reasonable efforts to
reform such terms or provisions to carry out the commercial intent of the Parties as reflected
herein, while curing the circumstance giving rise to the invalidity or unenforceability of such
term or provision.

     19.11 Specific Performance.

          Each of the Parties acknowledges and agrees that the other Party would be irreparably damaged
in the event that any of the provisions of this Administrative Services Agreement were not
performed or complied with in accordance with their specific terms or were otherwise breached,
violated or unfulfilled. Accordingly, each of the Parties agrees that the other Party shall be
entitled to an injunction or injunctions to prevent noncompliance with, or breaches or violations
of, the provisions of this Administrative Services Agreement by the other Party and to enforce
specifically this Administrative Services Agreement and the terms and provisions hereof in any
action instituted in accordance with Section 19.7, in addition to any other remedy to which
such Party may be entitled, at law or in equity. In the event that any action is brought in equity
to enforce the provisions of this Administrative Services Agreement, no Party will allege, and each
Party hereby waives the defense or counterclaim, that there is an adequate remedy at law. The
Parties further agree that (i) by seeking the remedies provided for in this Section 19.11,
a Party shall not in any respect waive its right to seek any other form of relief that
may be available to a Party under this Administrative Services Agreement, including monetary
damages in the event that this Administrative Services Agreement has been terminated or in the
event that the remedies provided for in this Section 19.11 are not available or otherwise
are not granted and (ii) nothing contained in this Section 19.11 shall require any Party to
institute any action (or limit any Party’s right to institute any action for) specific performance
under this Section 19.11 before exercising any termination right under Article XIV
nor shall the commencement of any action pursuant to this Section 19.11 or anything
contained in this Section 19.11

36

 

restrict or limit any Party’s right to terminate this
Administrative Services Agreement in accordance with the terms of Article XIV or pursue any
other remedies under this Administrative Services Agreement that may be available then or
thereafter.

     19.12 Waiver of Jury Trial.

          EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS ADMINISTRATIVE SERVICES AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS ADMINISTRATIVE SERVICES AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTIES HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTIES WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS ADMINISTRATIVE
SERVICES AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS ADMINISTRATIVE SERVICES AGREEMENT, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
19.12.

     19.13 Incontestability.

          In consideration of the mutual covenants and agreements contained herein, each Party does
hereby agree that this Administrative Services 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 in any respect the validity or enforceability hereof.

     19.14 Set-Off.

          Any debts or credits, matured or unmatured, liquidated or unliquidated, regardless of when
they arose or were incurred, in favor of or against either of the Reinsureds or Administrator with
respect to this Administrative Services Agreement are deemed mutual debts or credits, as the case
may be, and shall be set off, and only the net balance shall be allowed or paid.

     19.15 Currency.

          All financial data required to be provided pursuant to the terms of this Administrative
Services Agreement shall be expressed in United States dollars. All payments
and all settlements of account between the Parties shall be in United States currency unless
otherwise agreed by the Parties.

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

37

 

          IN WITNESS WHEREOF, this Administrative Services Agreement has been duly executed by a duly
authorized officer of each Party hereto as of the date first above written.

	 	 	 	 	 
	 	CONTINENTAL CASUALTY COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	THE CONTINENTAL INSURANCE COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CONTINENTAL REINSURANCE CORPORATION INTERNATIONAL,
LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CNA INSURANCE COMPANY LIMITED

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	NATIONAL INDEMNITY COMPANY 

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

			
	[Form of Business Associate Agreement]
	 	EXHIBIT A

BUSINESS ASSOCIATE AGREEMENT 

          This Business Associate Agreement (the “Business Associate Agreement”), dated as of
___, 2010 (the “Effective Date”), is made and entered into by and among Continental
Casualty Company, an Illinois property and casualty insurance company (“CCC”), The
Continental Insurance Company, a Pennsylvania property and casualty insurance company
(“CIC”), Continental Reinsurance Corporation International, Ltd., a Bermuda long-term
insurance company (“CRCI”), and CNA Insurance Company Limited, a United Kingdom property
and casualty insurance company (“CICL” and together with CCC, CIC and CRCI,
“Reinsureds”), and National Indemnity Company, a Nebraska property and casualty company
(“Administrator”).

          WHEREAS, pursuant to a Master Transaction Agreement (the “Master Transaction
Agreement”), dated as of July ___, 2010, among Reinsureds and Administrator, Reinsureds and
Administrator have agreed to enter into a loss portfolio reinsurance transaction, pursuant to which
Reinsureds will cede all liabilities related to asbestos and pollution claims under the Business
Covered to Administrator, and pursuant to which Administrator will indemnify Reinsureds for such
liabilities up to an aggregate limit of four billion dollars ($4,000,000,000), net of any Third
Party Reinsurance Recoverables and Other Recoveries;

          WHEREAS, pursuant to a Loss Portfolio Transfer Reinsurance Agreement among Reinsureds and
Administrator dated as of ___, 2010, and referenced in the Master Transaction Agreement as the
“LPT Reinsurance Agreement,” Administrator shall indemnify Reinsureds for 100% of the
Ultimate Net Loss, subject to the LPT Limit;

          WHEREAS, pursuant to an Administrative Services Agreement (the “Administrative Services
Agreement,” dated as of ___, 2010, Administrator shall perform certain administrative functions
on behalf of Reinsureds with respect to the Reinsured Contracts and Third Party Reinsurance
Agreements as they relate to the Business Covered; and

          WHEREAS, Reinsureds and Administrator are entering into this Business Associate Agreement to
comply with the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”)
Privacy Rule and Security Standards as those terms are defined in this Business Associate
Agreement.

          NOW, THEREFORE, for and in consideration of these premises and the promises and the mutual
agreements hereinafter set forth and set forth in the Master Transaction Agreement, the LPT
Reinsurance Agreement and the Administrative Services Agreement, Reinsureds and Administrator
(individually, a “Party” and collectively, the “Parties”) agree as follows:

 

 

I. DEFINITIONS

          All capitalized terms not otherwise defined in this Business Associate Agreement shall have
the meaning given them under the Master Transaction Agreement, LPT Reinsurance Agreement, or
Administrative Services Agreement, as applicable. The following terms used in this Business
Associate Agreement shall have the same meaning as those terms in the HIPAA Privacy Rule and
Security Standards, currently defined, in relevant part:

“Protected Health Information” shall mean Individually Identifiable Health Information
transmitted or maintained in any form or medium that Administrator creates or receives from or on
behalf of Reinsureds in the course of fulfilling its obligations under this Business Associate
Agreement. “Protected Health Information” shall not include (i) education records covered by the
Family Educational Rights and Privacy Act, as amended, 20 U.S.C. §1232g, (ii) records described in
20 U.S.C. §1232g(a)(4)(B)(iv), and (iii) employment records held by Reinsureds in their role as
employers.

“Designated Record Set” shall mean a group of records maintained by or for Reinsureds that
is (i) the medical records and billing records about individuals maintained by or for Reinsureds,
(ii) the enrollment, payment, claims adjudication, and case or medical management record systems
maintained by or for a health plan; or (iii) used, in whole or in part, by or for Reinsureds to
make decisions about individuals. As used herein, the term “Record” means any item,
collection, or grouping of information that includes Protected Health Information and is
maintained, collected, used, or disseminated by or for Reinsureds.

“Electronic Media” shall mean (i) electronic storage media including memory devices in
computers (hard drives) and any removable/transportable digital memory medium, such as magnetic
tape or disk, optical disk, or digital memory card; or (ii) transmission media used to exchange
information already in electronic storage media. Transmission media include, for example, the
internet (wide-open), extranet (using internet technology to link a business with information
accessible only to collaborating parties), leased lines, dial-up lines, private networks, and the
physical movement of removable/transportable electronic storage media. Certain transmissions,
including paper, via facsimile, and of voice, via telephone, are not considered to be transmissions
via electronic media, because the information being exchanged did not exist in electronic form
before transmission.

“Electronic Protected Health Information” shall mean Protected Health Information that is
transmitted by or maintained in Electronic Media.

“Individually Identifiable Health Information” shall mean information that is a subset of
health information, including demographic information collected from an individual, and

	 	(i)	 	is created or received by a health care provider, health plan, employer, or
health care clearinghouse; and
	 
	 	(ii)	 	relates to the past, present, or future physical or mental health or condition
of an individual; the provision of health care to an individual; or the past, present
or future payment for the provision of health care to an individual; and (a) identifies

 

 

	 	 	 	the individual, or (b) with respect to which there is a reasonable basis to believe
the information can be used to identify the individual; and
	 
	 	(iii)	 	relates to identifiable non-health information including but not limited to an
individual’s address, phone number and/or Social Security number.

“Privacy Rule” shall mean the Standards for Privacy of Individually Identifiable Health
Information at 45 CFR Part 160 and Part 164, Subparts A and E.

“Secretary” shall mean the Secretary of the Department of Health and Human Services.

“Security Incident” means the attempted or successful unauthorized access, use, disclosure,
modification, or destruction of information or interference with system operations in an
information system.

“Security Standards” shall mean the HIPAA Security Standards, 45 C.F.R. Parts 160 and 164

II. OBLIGATIONS OF ADMINISTRATOR

Section 1. Use and Disclosure of Protected Health Information.

Administrator may use and disclose Protected Health Information only to carry out the obligations
of Administrator set forth in this Business Associate Agreement, the Administrative Services
Agreement or as required by law, subject to the provisions set forth in this Business Associate
Agreement. Administrator shall neither use nor disclose Protected Health Information for the
purpose of creating de-identified information that will be used for any purpose other than as
directed by Reinsureds to carry out the obligations of Administrator set forth in this Business
Associate Agreement or the Administrative Services Agreement, or as required by law.

Section 2. Safeguards Against Misuse of Information.

Administrator agrees that it will implement appropriate safeguards to prevent the use or disclosure
of Protected Health Information in any manner other than pursuant to the terms and conditions of
this Business Associate Agreement. Administrator shall implement administrative, physical and
technical safeguards that reasonably and appropriately protect the confidentiality, integrity, and
availability of the Electronic Protected Health Information that it creates, receives, maintains,
or transmits on behalf of Reinsureds, as required by the Security Standards.

Section 3. Reporting of Uses and Disclosures of Protected Health Information and Security
Incidents. 

Upon becoming aware of a use or disclosure of Protected Health Information in violation of this
Business Associate Agreement, Administrator shall promptly report such use or disclosure to
Reinsureds. Administrator shall promptly report to Reinsureds any Security Incident of which it
becomes aware.

 

 

Section 4. Agreements with Third Parties.

Administrator shall ensure that any agent or subcontractor of Administrator to whom Administrator
provides Protected Health Information that is received from Reinsureds, or created or received by
Administrator on behalf of Reinsureds, agrees to be bound by the same restrictions and conditions
that apply to Administrator pursuant to this Business Associate Agreement with respect to such
Protected Health Information. Administrator warrants and represents that in the event of a
disclosure of Protected Health Information to any third party, the information disclosed shall be
no more than the minimum necessary for the intended purpose. Administrator shall ensure that any
agent or subcontractor of Administrator to whom Administrator provides Electronic Protected Health
Information agrees to implement reasonable and appropriate safeguards to protect such information.

Section 5. Access to Information.

In the event Administrator maintains Protected Health Information in a Designated Record Set,
Administrator shall, within thirty (30) days of receipt of a request from Reinsureds, provide to
Reinsureds Protected Health Information in Administrator’s possession that is required for
Reinsureds to respond to an individual’s request for access to Protected Health Information made
pursuant to 45 C.F.R. § 164.524 or other applicable law. In the event any individual requests
access to Protected Health Information directly from Administrator, whether or not Administrator is
in possession of Protected Health Information, Administrator may not approve or deny access to the
Protected Health Information requested. Rather, Administrator shall, within five (5) Business Days,
forward such request to Reinsureds.

Section 6. Availability of Protected Health Information for Amendment.

In the event Administrator maintains Protected Health Information in a Designated Record Set,
Administrator shall, within thirty (30) days of receipt of a request from Reinsureds, provide to
Reinsureds Protected Health Information in Administrator’s possession that is required for
Reinsureds to respond to an individual’s request to amend Protected Health Information made
pursuant to 45 C.F.R. § 164.526 or other applicable law. If the request is approved, Administrator
shall incorporate any such amendments to the Protected Health Information as required by 45 C.F.R.
§164.526 or other applicable law. In the event that the request for the amendment of Protected
Health Information is made directly to the Administrator, whether or not Administrator is in
possession of Protected Health Information, Administrator may not approve or deny the requested
amendment. Rather, Administrator shall, within five (5) Business Days forward such request to
Reinsureds.

Section 7. Accounting of Disclosures.

Administrator agrees to document such disclosures of Protected Health Information and information
related to such disclosures as would be required for Reinsureds to respond to a request by an
individual for an accounting of disclosures of Protected Health Information in accordance with 45
CFR § 164.528 or other applicable law. Administrator shall, within sixty (60) Business Days of
receipt of a request from Reinsureds, provide to Reinsureds such information as is in
Administrator’s possession and is required for Reinsureds to respond to a request for an

 

 

accounting made in accordance with 45 C.F.R. 164.528 or other applicable law. In the event the
request for an accounting is delivered directly to Administrator, Administrator shall, within five
(5) Business Days, forward such request to Reinsureds. It shall be Reinsureds’ responsibility to
prepare and deliver any such accounting requested.

Section 8. Availability of Books and Records.

Administrator hereby agrees to make its applicable internal practices, books and records, including
policies and procedure, available to the Secretary for purposes of determining Reinsureds’ and
Administrator’s compliance with the Privacy Rule and Security Standards. The practices, books and
records subject to this Section are those practices, books and records that relate to the use and
disclosure of Protected Health Information that is created by Administrator on behalf of
Reinsureds, received by Administrator from Reinsureds, or received by Administrator from a third
party on behalf of Reinsureds.

III. Term and Termination

Section 1. Term.

The Term of this Business Associate Agreement shall be effective as of the Effective Date, and
shall terminate when all of the Protected Health Information provided by Reinsureds to
Administrator, or created or received by Administrator on behalf of Reinsureds, is destroyed or
returned to Reinsureds, or, if it is infeasible to return or destroy Protected Health Information,
protections are extended to such information, in accordance with the termination provisions in this
Article III.

Section 2. Effect of Termination.

(a) Except as provided in paragraph (b) of this Section, upon termination of this Business
Associate Agreement, for any reason, Administrator shall return or destroy all Protected Health
Information received from Reinsureds, or created or received by Administrator on behalf of
Reinsureds. This provision shall apply to Protected Health Information that is in the possession of
subcontractors or agents of Administrator. Administrator shall retain no copies of the Protected
Health Information.

(b) In the event that Administrator determines that returning or destroying the Protected Health
Information is infeasible, Administrator shall provide to Reinsureds notification of the conditions
that make return or destruction infeasible. Upon Reinsureds’ determination that return or
destruction of Protected Health Information is infeasible, Administrator shall extend the
protections of this Business Associate Agreement to such Protected Health Information and limit
further uses and disclosures of such Protected Health Information to those purposes that make the
return or destruction infeasible, for so long as Administrator maintains such Protected Health
Information.

 

 

IV. MISCELLANEOUS

Section 1. Limitation of Liability. No exculpation or limitation on Administrator’s
liability set forth in the Administrative Services Agreement shall apply to damages suffered by
Reinsureds as a result of Administrator’s breach of this Business Associate Agreement.

Section 2. Indemnification. Each Party acknowledges and agrees that the provisions of
Article IX of the Master Transaction Agreement apply to the indemnification rights and
obligations of each Party pursuant to this Agreement.

Section 3. Regulatory References. A reference in this Business Associate Agreement to a
section in the HIPAA Privacy Rule or Security Standards means the section as in effect or as
amended.

Section 4. Amendment. In the event that state or federal law or regulation, or an
arbitration or judicial interpretation of same, or any regulatory or enforcement action should
explicitly or otherwise require that this Business Associate Agreement be changed, altered or
modified, then the Reinsureds shall notify Administrator and provide such required amendment, and
the Reinsureds and Administrator shall continue to perform services under this Business Associate
Agreement as modified.

Section 5. Survival. The respective rights and obligations of Administrator under
Section III(2)(b) (Effect of Termination), Section IV(1) (Limitation of Liability),
Section IV(2) (Indemnification), Section IV(3) (Regulatory References) and
Section IV(5) (Survival) of this Business Associate Agreement shall survive the termination
of this Business Associate Agreement.

V. EFFECT OF BUSINESS ASSOCIATE AGREEMENT

To the extent that this Business Associate Agreement conflicts with the terms of the Administrative
Services Agreement or any other agreement between Reinsureds and Administrator relating to
Protected Health Information, the terms of this Business Associate Agreement shall take precedence.

[Remainder of page left intentionally blank]

 

 

          IN WITNESS WHEREOF, this Business Associate Agreement has been duly executed by a duly
authorized officer of each Party hereto as of the date first above written.

	 	 	 	 	 
	 	CONTINENTAL CASUALTY COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	THE CONTINENTAL INSURANCE COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CONTINENTAL REINSURANCE CORPORATION INTERNATIONAL,
LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CNA INSURANCE COMPANY LIMITED

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	NATIONAL INDEMNITY COMPANY 

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

Exhibit B

Form of Collateral Trust Agreement

 

 

CONFIDENTIAL

 
 

TRUST AGREEMENT

by and among

CONTINENTAL CASUALTY COMPANY,

THE CONTINENTAL INSURANCE COMPANY,

CONTINENTAL REINSURANCE CORPORATION INTERNATIONAL, LTD.

CNA INSURANCE COMPANY LIMITED

(hereinafter referred to individually as the “Beneficiary” and collectively as the
“Beneficiaries”),

NATIONAL INDEMNITY COMPANY

(hereinafter referred to as the “Grantor”)

and

WELLS FARGO BANK, NATIONAL ASSOCIATION

(hereinafter referred to as the “Trustee”)

[•], 2010

 
 

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I

DEFINED TERMS
	 	 	 	 
	 
	 	 	 	 
	Section 1.1 Definitions
	 	 	1	 
	Section 1.2 Interpretation
	 	 	5	 
	 
	 	 	 	 
	ARTICLE II

MODIFICATION UPON A COLLATERAL TRIGGERING EVENT
	 	 	 	 
	 
	 	 	 	 
	Section 2.1 Collateral Triggering Event
	 	 	5	 
	 
	 	 	 	 
	ARTICLE III

MODIFICATION UPON A REINSURANCE CREDIT EVENT
	 	 	 	 
	 
	 	 	 	 
	Section 3.1 Reinsurance Credit Event
	 	 	6	 
	 
	 	 	 	 
	ARTICLE IV

CREATION OF TRUST ACCOUNT
	 	 	 	 
	 
	 	 	 	 
	Section 4.1 Obligations of the Beneficiaries and the Grantor
	 	 	8	 
	Section 4.2 Purpose of the Trust
	 	 	9	 
	Section 4.3 Grantor Trust for United States Federal Income Tax Purposes
	 	 	9	 
	Section 4.4 Designation of Agents
	 	 	9	 
	Section 4.5 Title to Assets
	 	 	9	 
	 
	 	 	 	 
	ARTICLE V

MAINTENANCE OF THE TRUST
	 	 	 	 
	 
	 	 	 	 
	Section 5.1 Substitution of Trust Account Assets
	 	 	10	 
	Section 5.2 Valuation of Assets
	 	 	10	 
	Section 5.3 Quarterly Certification
	 	 	10	 
	 
	 	 	 	 
	ARTICLE VI

RELEASE AND ADJUSTMENT OF TRUST ACCOUNT ASSETS
	 	 	 	 
	 
	 	 	 	 
	Section 6.1 Adjustment of Trust Account Assets
	 	 	11	 
	Section 6.2 Release of Trust Account Assets to the Beneficiaries
	 	 	11	 

i 

 

	 	 	 	 	 
	 	 	Page	 
	Section 6.3 Release of Trust Account Assets to the Grantor
	 	 	11	 
	 
	 	 	 	 
	ARTICLE VII

DUTIES OF THE TRUSTEE
	 	 	 	 
	 
	 	 	 	 
	Section 7.1 Acceptance of Assets by the Trustee
	 	 	12	 
	Section 7.2 Collection of Interest and Dividends; Voting Rights
	 	 	13	 
	Section 7.3 Obligations of the Trustee
	 	 	13	 
	Section 7.4 Responsibilities of the Trustee
	 	 	13	 
	Section 7.5 Books and Records
	 	 	14	 
	Section 7.6 Activity Reports
	 	 	14	 
	Section 7.7 Resignation or Removal of the Trustee; Appointment of Successor Trustee
	 	 	14	 
	Section 7.8 Release of Information
	 	 	15	 
	Section 7.9 Indemnification of the Trustee
	 	 	15	 
	Section 7.10 Charges of the Trustee
	 	 	15	 
	Section 7.11 Limitations of the Trustee
	 	 	15	 
	Section 7.12 Concerning the Trustee
	 	 	16	 
	 
	 	 	 	 
	ARTICLE VIII

TERMINATION
	 	 	 	 
	 
	 	 	 	 
	Section 8.1 Termination
	 	 	17	 
	Section 8.2 Disposition of Assets Upon Termination
	 	 	17	 
	 
	 	 	 	 
	ARTICLE IX

GENERAL PROVISIONS
	 	 	 	 
	 
	 	 	 	 
	Section 9.1 Notices
	 	 	17	 
	Section 9.2 Entire Agreement
	 	 	18	 
	Section 9.3 Waiver and Amendment
	 	 	18	 
	Section 9.4 Successors and Assigns
	 	 	18	 
	Section 9.5 Headings
	 	 	19	 
	Section 9.6 Governing Law and Jurisdiction
	 	 	19	 
	Section 9.7 No Third Party Beneficiaries
	 	 	19	 
	Section 9.8 Counterparts
	 	 	19	 
	Section 9.9 Severability
	 	 	19	 
	Section 9.10 Specific Performance
	 	 	20	 
	Section 9.11 Waiver of Jury Trial
	 	 	20	 
	Section 9.12 Incontestability
	 	 	20	 
	Section 9.13 Set-Off
	 	 	21	 
	Section 9.14 Currency
	 	 	21	 

ii 

 

	 	 	 	 	 
	 	 	Page	 
	ARTICLE X

DISPUTE RESOLUTION
	 	 	 	 
	 
	 	 	 	 
	Section 10.1 Dispute Resolution
	 	 	21	 
	Section 10.2 Negotiation Amongst the Parties
	 	 	21	 
	Section 10.3 Arbitration
	 	 	21	 
	 
	 	 	 	 
	ARTICLE XI

EFFECTIVE DATE AND EXECUTION
	 	 	 	 
	 
	 	 	 	 
	Appendix A Trust Provisions Following a Reinsurance Credit Event
	 	 	 	 

iii 

 

TRUST AGREEMENT

          THIS TRUST AGREEMENT (this “Trust Agreement”) is made and entered into as of [     ], 2010, by
and among Continental Casualty Company, an Illinois property and casualty insurance company
(“CCC”), The Continental Insurance Company, a Pennsylvania property and casualty insurance company
(“CIC”), Continental Reinsurance Corporation International, Ltd., a Bermuda long-term insurance
company (“CRCI”), and CNA Insurance Company Limited, a United Kingdom property and casualty
insurance company (“CICL”) (each of CCC, CIC, CRCI
and CICL, a “Beneficiary” and collectively, the “Beneficiaries”), National Indemnity Company, a Nebraska property and casualty insurance company
(the “Grantor”) and Wells Fargo Bank, National Association, a national banking association, as
trustee (hereinafter referred to as “Trustee”).

          WHEREAS, in accordance with that certain Master Transaction Agreement, dated July [    ], 2010,
by and among the Beneficiaries, the Grantor and Berkshire Hathaway Inc., a Delaware corporation and
the ultimate parent company of the Grantor, the Beneficiaries and the Grantor have entered into
that certain Loss Portfolio Transfer Reinsurance Agreement of even date herewith (the “LPT
Reinsurance Agreement”), whereby, subject to the terms and conditions thereof, they have agreed
that the Beneficiaries will cede to the Grantor, and the Grantor will reinsure, all liabilities
related to asbestos and pollution claims under the Business Covered;

          WHEREAS, the LPT Reinsurance Agreement contemplates that the Grantor and the Beneficiaries
enter into this Trust Agreement whereby the Grantor creates a trust to hold assets as security for
the satisfaction of the obligations of the Grantor to the Beneficiaries under this Trust Agreement
with respect to the Business Covered; and

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

          NOW THEREFORE, the Grantor, the Beneficiaries and the Trustee, in consideration of the mutual
covenants contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and upon the terms and conditions hereinafter set
forth, agree as follows:

ARTICLE I

DEFINED TERMS

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

               (a)  “AAA” shall have the meaning ascribed to such term in Section 10.3(a).

 

 

               (b)  “Applicable Interest Rate” shall have the meaning ascribed to such term in the LPT
Reinsurance Agreement.

               (c)  “Applicable Law” means any domestic or foreign, federal, state or local statute, law,
ordinance or code, or any written rules, regulations or administrative interpretations issued by
any Governmental Authority pursuant to any of the foregoing, in each case applicable to any party
hereto, and any Order, writ, injunction, directive, judgment or decree of a court of competent
jurisdiction applicable to the parties hereto.

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

               (e)  “Beneficiary” and “Beneficiaries” shall have the meaning ascribed to such term in the
Preamble.

               (f)  “Business Covered” shall have the meaning ascribed to such term in the LPT Reinsurance
Agreement.

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

               (h)  “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

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

               (j)  “Collateral Reduction Event” shall have the meaning ascribed to such term in Section
2.1(c).

               (k)  “Collateral Triggering Event” shall have the meaning ascribed to such term in Section
2.1(a).

               (l)  “Dispute” shall have the meaning ascribed to such term in Section 10.1.

               (m)  “Eligible Investments” shall mean, with respect to Assets conforming to the provisions of
this Trust Agreement prior to the occurrence of a Reinsurance Credit Event, cash and any
investments of the types permitted under the laws and regulations of Grantor’s domiciliary state
for property and casualty insurance companies; provided, however, that no Eligible Investments may
be issued by an institution that is the parent, subsidiary or

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affiliate of the Grantor; and provided, further, no single Eligible Investment (except cash)
shall comprise more than twenty-five percent (25%) of the Assets in the Trust Account. All
Eligible Investments deposited in the Trust Account shall be free of all liens, charges or
encumbrances at the time so deposited.

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

               (o)  “Grantor” shall have the meaning ascribed to such term in the Preamble.

               (p)  “Inception Date” shall have the meaning ascribed to such term in the LPT Reinsurance
Agreement.

               (q)  “Initial Reconciliation Statement” shall have the meaning ascribed to such term in the LPT
Reinsurance Agreement.

               (r)  “Initial Security Amount” shall have the meaning ascribed to such term in Section 4.1.

               (s)  “Insurance Commissioner” shall mean the Governmental Authority responsible for the
regulation of insurance companies in the jurisdiction in which the Beneficiary is domiciled.

               (t)  “LPT Limit” shall have the meaning ascribed to such term in the LPT Reinsurance Agreement.

               (u)  “LPT Reinsurance Agreement” shall have the meaning ascribed to such term in the Recitals.

               (v)  “Permitted Investments” shall mean, with respect to Assets conforming to the provisions of
this Trust Agreement upon the occurrence of a Reinsurance Credit Event, cash and any investments of
the types permitted under the laws and regulations of the Beneficiary’s domiciliary state or
country for trusts providing full statutory financial statement credit for reinsurance ceded by
property and casualty insurance companies, provided, however, that no Permitted Investments may be
issued by an institution that is the parent, subsidiary or affiliate of the Grantor. All Permitted
Investments deposited in the Trust Account shall be free of all liens, charges or encumbrances at
the time so deposited.

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

               (x)  “Quarterly Certification” shall have the meaning ascribed to such term in Section 5.3.

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               (y)  “Reinsurance Credit Event” shall mean any financial impairment of the Grantor that results
in any Beneficiary being unable to obtain full statutory financial statement credit for the
reinsurance provided by the LPT Reinsurance Agreement in any applicable United States jurisdiction
at any point in time during the term of the LPT Reinsurance Agreement.

               (z)  “Reinsurance Credit Event Certification” shall have the meaning ascribed to such term in
Section 3.1(a).

               (aa)  “Reinsurance Credit Event Trust Accounts” shall have the meaning ascribed to such term in
Section 3.1(d).

               (bb)  “Reinsurance Credit Event Trust Agreements” shall have the meaning ascribed to such term
in Section 3.1(c).

               (cc)  “Reinsurance Premium” shall have the meaning ascribed to such term in the LPT Reinsurance
Agreement.

               (dd)  “Reinsured Contracts” shall have the meaning ascribed to such term in the LPT Reinsurance
Agreement.

               (ee)  “Reinsured Liabilities” shall have the meaning ascribed to such term in the LPT
Reinsurance Agreement.

               (ff)  “Required Amount” shall mean an amount equal to the least of (i) the aggregate
gross Reserves of the applicable Beneficiary (including reserves for losses incurred but not
reported) calculated in accordance with SAP with respect to the Business Covered; (ii) the LPT
Limit less the Ultimate Net Loss paid in respect of the applicable Beneficiary; and (iii) the LPT
Limit less the Ultimate Net Loss paid.

               (gg)  “Reserves” shall mean, as required by SAP or Applicable Law of the jurisdiction of
domicile of any entity, reserves, funds or provisions for losses, claims, unearned premiums,
benefits, costs and expenses (including allocated loss adjustment expenses) in respect of the
Business Covered.

               (hh)  “Rules” shall have the meaning ascribed to such term in Section 10.3(a).

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

               (jj)  “Security Amount” shall mean, (i) prior to the occurrence of a Collateral Triggering
Event, an amount equal to the Initial Security Amount minus any Ultimate Net Loss paid by
the Grantor under the LPT Reinsurance Agreement as of the date of calculation of the Security
Amount; and (ii) on and after the occurrence of a Collateral Triggering Event, an amount equal to
the lesser of (A) the aggregate gross Reserves of the Beneficiaries (including

4

 

reserves for losses incurred but not reported) calculated in accordance with SAP with respect
to the Business Covered, and (B) the LPT Limit less the Ultimate Net Loss paid.

               (kk)  “Third Party Appraiser” shall mean an independent appraisal firm which is mutually
acceptable to the Grantor and the Beneficiaries, or, if Grantor and Beneficiaries cannot agree on
such an appraisal firm, an independent appraisal firm selected by the parties’ respective
accountants.

               (ll)  “Trust” shall mean the trust formed hereunder, including such trust following a
Reinsurance Credit Event.

               (mm)  “Trust Account” shall have the meaning ascribed to such term in Section 4.1(a).

               (nn)  “Trust Agreement” shall have the meaning ascribed to such term in the Preamble.

               (oo)  “Trustee” shall have the meaning ascribed to such term in the Preamble.

               (pp)  “Ultimate Net Loss” shall have the meaning ascribed to such term in the LPT Reinsurance
Agreement.

          Section 1.2 Interpretation. When a reference is made in this Trust Agreement to a Section or Article,
such reference shall be to a section or article of this Trust Agreement unless otherwise clearly
indicated to the contrary. The Article and Section headings contained in this Trust Agreement are
solely for the purpose of reference, are not part of the agreement of the parties and shall not
affect in any way the meaning or interpretation of this Trust Agreement. Whenever the words
“include,” “includes” or “including” are used in this Trust Agreement, they shall be deemed to be
followed by the words “without limitation.” The words “hereof,” “herein” and “herewith” and words
of similar import shall, unless otherwise stated, be construed to refer to this Trust Agreement as
a whole and not to any particular provision of this Trust Agreement. The meaning assigned to each
term used in this Trust Agreement shall be equally applicable to both the singular and the plural
forms of such term and to both the masculine as well as the feminine and neuter genders of such
term. Any agreement, instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or instruments) by
waiver or consent and (in the case of statutes) by succession of comparable successor statutes.
Where a word or phrase is defined herein, each of its other grammatical forms shall have a
corresponding meaning. References to a person are also to its successors and permitted assigns.

ARTICLE II

MODIFICATION UPON A COLLATERAL TRIGGERING EVENT

          Section 2.1 Collateral Triggering Event.

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

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

               (c) Until such time as (i) the events, changes or conditions that gave rise to the collateral
requirement under one or more of the Collateral Triggering Agreements cease to exist or apply and
(ii) the Grantor has withdrawn or reduced the aggregate amount of collateral posted under
Collateral Triggering Agreements ((i) and (ii) together, the “Collateral Reduction Event”), the
Grantor shall ensure that the Trust Account shall hold Eligible Investments at all times with a
fair market value of no less than 100% of the Security Amount (as defined in clause (ii) of
Section 1.1(jj)); provided, however, if a Collateral Reduction Event has occurred, the
Security Amount shall be reduced by a percentage which is proportionate to each percentage
reduction of all collateral posted under the Collateral Triggering Agreements; provided, further,
however, in no event shall the Security Amount be reduced to an amount less than 100% of the
Security Amount (as defined in clause (i) of Section 1.1(jj)).

ARTICLE III

MODIFICATION UPON A REINSURANCE CREDIT EVENT

          Section 3.1 Reinsurance Credit Event.

               (a) Notwithstanding anything in this Trust Agreement to the contrary, in the event the
Beneficiaries provide a written notice to the Trustee (and contemporaneous notice to the Grantor)
certifying that a Reinsurance Credit Event has occurred (such notice, the “Reinsurance Credit Event
Certification”), upon receipt of such certification by the Trustee, the provisions set forth in
Sections 4.1, 4.2, 5.1(a), 5.3, 6.1, 6.2, 6.3, 7.4, 7.5, 7.8, 7.11 and 9.2 hereof shall
automatically be replaced by the provisions set forth in Appendix A hereof for the
equivalent Sections and thereafter not be effective, and the provisions set forth in Appendix
A shall automatically become effective without further action by any party. In addition, any
other provisions required under Applicable Law and regulations governing trusts providing full
statutory financial statement credit for reinsurance ceded by property and casualty insurance
companies in the United States to the extent applicable to CCC and CIC, shall be incorporated

6

 

herein. Notwithstanding the foregoing, the Trust created hereunder shall continue in
existence. Furthermore, the Reinsurance Credit Event Certification may, but shall not be required
to, name either CCC or CIC as the sole Beneficiary of the Trust following a Reinsurance Credit
Event. If the Reinsurance Credit Event Certification names either CCC or CIC as the sole
Beneficiary of the Trust, then for purposes of the Trust following a Reinsurance Credit Event, all
references to the term “Beneficiary” or “Beneficiaries” shall mean either CCC or CIC, as set forth
in the Reinsurance Credit Event Certification. The choice as to which of CCC or CIC shall be named
as the sole Beneficiary of the Trust following a Reinsurance Credit Event shall be made by the
Beneficiaries in their sole discretion at the time the Beneficiaries become aware that a
Reinsurance Credit Event has occurred.

               (b) Following a Reinsurance Credit Event, the Grantor shall be required to replace the Assets
held in the Trust Account which are not Permitted Investments for Assets which are Permitted
Investments within five (5) Business Days following the receipt by the Grantor of the Reinsurance
Credit Event Certification. Simultaneously with such replacement of the Assets, the Grantor shall
either: (i) deposit into the Trust Account sufficient additional Assets so that the aggregate fair
market value of the Permitted Investments in the Trust Account equals the Required Amount or (ii)
withdraw from the Trust Account, to the extent the aggregate fair market value of the Permitted
Investments in the Trust Account exceeds 100% of the Required Amount, Assets equal to such excess
amount; provided, however, with respect to the withdrawal referenced in clause (ii), all such
withdrawn Assets shall be deposited promptly into one or more of the new trust accounts established
pursuant to the Reinsurance Credit Event Trust Agreements referenced in subparagraph (c) of this
Section 3.1.

               (c) If the Reinsurance Credit Event Certification names either CCC or CIC as the sole
Beneficiary of the Trust following a Reinsurance Credit Event, then within five (5) Business Days
following the receipt by the Grantor of the Reinsurance Credit Event Certification, the Grantor and
the Trustee shall enter into separate trust agreements with each of the remaining Beneficiaries not
named as the sole Beneficiary in the Reinsurance Credit Event Certification (such trust agreements,
the “Reinsurance Credit Event Trust Agreements”). The Reinsurance Credit Event Trust Agreements
shall contain provisions substantially similar to the provisions set forth in this Trust Agreement
(after incorporation of the provisions set forth in Appendix A hereof), as well as any
other provisions and modifications required under the laws and regulations of the applicable
domiciliary state or country of the remaining Beneficiaries for trusts providing full statutory
financial statement credit for reinsurance ceded by property and casualty insurance companies.

               (d) The trust account or accounts established pursuant to the Reinsurance Credit Event Trust
Agreements (“Reinsurance Credit Event Trust Accounts”) shall initially be funded by such Permitted
Investments from the Trust Account that represent the percentage of the remaining value of Assets
reflecting the portion of the Reinsurance Premium that was contributed by the applicable
Beneficiary, less Ultimate Net Loss paid in respect of such Beneficiary. In addition to such
assets, the Grantor shall deposit into the Reinsurance Credit Event Trust Accounts sufficient
additional assets so that the aggregate fair market value of each Reinsurance Credit Event Trust
Account equals the applicable Required Amount, provided that the aggregate fair market value of all
Reinsurance Credit Event Trust Account(s) and this Trust

7

 

Account shall not exceed an amount equal to the LPT Limit less Ultimate Net Loss paid. The
Reinsurance Credit Event Trust Accounts shall be funded with Permitted Investments only.

               (e) The provisions set forth in Appendix A shall remain effective, and the Reinsurance
Credit Event Trust Accounts shall remain in place only for the time, and only to the extent,
required to address the event, change or condition giving rise to the Reinsurance Credit Event.
Each Beneficiary agrees that in the event that the Reinsurance Credit Event ceases to exist or
apply, each Beneficiary shall promptly provide its approval for the termination of the respective
Reinsurance Credit Event Trust Accounts and for the return of all assets to the Grantor; provided
however, the fair market value of the Permitted Investments transferred from the Trust Account to
the Reinsurance Credit Event Trust Accounts less Ultimate Net Loss paid on behalf of the
Beneficiaries since such transfer shall be transferred to the Trust Account. In addition, to the
extent that the obligations of the Grantor to provide security diminish, each Beneficiary shall
provide its approval for the reduction of the Trust Account and the respective Reinsurance Credit
Event Trust Accounts.

ARTICLE IV

CREATION OF TRUST ACCOUNT

          Section 4.1 Obligations of the Beneficiaries and the Grantor.

               (a) Prior to the execution of this Trust Agreement, the Grantor shall have procured with the
Trustee, in the name of the Trustee, to be held for the sole benefit of the Beneficiaries pursuant
to the provisions of this Trust Agreement, a segregated trust account maintained by the Trustee
with account number 80460400 (which shall be hereinafter referred to as the “Trust Account”).
Simultaneously with the execution of this Trust Agreement, (i) the Beneficiaries shall transfer and
assign to such Trust Account, on behalf of the Grantor, Assets consisting of cash in the aggregate
amount of the Reinsurance Premium, together with interest accrued from the Inception Date at the
Applicable Interest Rate, and (ii) the Grantor shall transfer and assign to such Trust Account,
Assets consisting of cash in the aggregate amount of two hundred million dollars ($200,000,000).
The sum of the amounts referenced in (i) and (ii) in the foregoing sentence shall be referred to
herein as the “Initial Security Amount”.

               (b) If the Beneficiaries owe any amount to the Grantor resulting from the adjustment of the
Reinsurance Premium as reflected in the Initial Reconciliation Statement delivered pursuant to
Section 2.3 of the Master Transaction Agreement, the Beneficiaries shall transfer and assign to the
Trust Account, on behalf of the Grantor, assets consisting of cash in the amount owed. If the
Grantor owes any amount to the Beneficiaries resulting from the adjustment of the Reinsurance
Premium as reflected in the Initial Reconciliation Statement delivered pursuant to Section 2.3 of
the Master Transaction Agreement, the Grantor shall instruct the Trustee to promptly withdraw from
the Trust Account assets consisting of cash in the amount owed and transfer such amount to an
account of the Beneficiaries in accordance with written instructions provided by the Beneficiaries
at the time of such withdrawal. The Trustee shall promptly comply with such instruction.

8

 

               (c) Unless there is a Collateral Triggering Event, the Grantor shall not be required to
transfer and assign additional assets into the Trust Account after the date hereof. Upon the
occurrence of a Collateral Triggering Event, however, the Grantor shall transfer and assign such
additional assets into the Trust Account in accordance with Section 2.1(b). Until such time the
condition giving rise to the Collateral Triggering Event ceases to exist or apply, the Grantor
shall ensure that the Trust Account shall hold Eligible Investments at all times with a fair market
value of no less than 100% of the Security Amount.

          Section 4.2 Purpose of the Trust.

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

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

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

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

          Section 4.5 Title to Assets. Title to any Assets transferred by the Grantor to the Trustee for deposit
to the Trust Account will be recorded in the name of the Trustee. The out-of-pocket costs of
transfers of title between the Grantor and the Trustee shall be shared equally by the Grantor and
the Beneficiaries, and the Grantor shall use reasonable efforts to limit such costs. The
Beneficiaries shall not have legal title to any part of the Assets, but shall have an undivided
beneficial interest in all Assets.

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ARTICLE V

MAINTENANCE OF THE TRUST

          Section 5.1 Substitution of Trust Account Assets.

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

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

          Section 5.2 Valuation of Assets. The Grantor shall determine the fair market value of any Assets in
the Trust Account. In making this determination, the Grantor shall use prices published by a
nationally recognized pricing service for Assets for which such prices are available, and for
Assets for which such prices are not available, the Grantor shall use methodologies consistent with
those which it uses for determining the fair market value of assets held in its own general account
(other than the Assets) in the ordinary course of business.

          Section 5.3 Quarterly Certification. Within fourteen (14) calendar days following the end of each
calendar quarter, the Grantor shall provide the Beneficiaries (with a copy to the Trustee) a
written certification (the “Quarterly Certification”) stating the Security Amount as of the
calendar quarter end and the aggregate fair market value of the Eligible Investments held in the
Trust Account as of the calendar quarter end (both on an asset-by-asset basis and a cumulative
basis). Such certification shall separately state the effect on the fair market value of the
Assets of withdrawals by the Grantor from the Trust Account effected during such calendar quarter.
As soon as is practicable, but in no event more than ten (10) Business Days following its receipt
of the Quarterly Certification, CCC, on behalf of the Beneficiaries, shall either (i) countersign
such certification and forward it to the Trustee or (ii) notify the Grantor that it objects to the
Grantor’s calculation of the Security Amount or the Grantor’s valuation of any Asset. If the
parties are able to resolve such dispute within ten (10) Business Days of CCC’s transmittal to the
Grantor of its notice of objection, they shall promptly forward to the Trustee a jointly signed
certification of the Security Amount. If the parties are unable to resolve such dispute within ten
(10) Business Days of CCC’s transmittal to the Grantor of its notice of objection, and the dispute
relates to the valuation of an Asset, the value of such Asset

10

 

shall be determined by a Third Party Appraiser and the parties shall be bound by such valuation.
All other disputes shall be resolved in accordance with Section 10.1. Upon resolution of such
dispute, the parties shall forward to the Trustee a copy of the corrected Quarterly Certification
setting forth the Security Amount as resolved through such Third Party Appraiser or arbitration.
The Grantor shall, to the extent reasonably necessary or required in order to verify Grantor’s
certification, permit CCC to audit its records in order to determine its compliance with this
Section 5.3. The Grantor shall cooperate fully with such audit. Access to the Grantor and its
employees by CCC in connection with such audit shall be at reasonable times during regular business
hours upon reasonable prior written notice (including by e-mail) in a manner which does not
unreasonably interfere with the business or operations of the Grantor.

ARTICLE VI

RELEASE AND ADJUSTMENT OF TRUST ACCOUNT ASSETS

          Section 6.1 Adjustment of Trust Account Assets.

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

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

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

          Section 6.2 Release of Trust Account Assets to the Beneficiaries. By transmittal of prior written
notice to the Trustee (with a copy to Grantor), together with a final order of an arbitration panel
or court of competent jurisdiction, any of the Beneficiaries may withdraw Assets from the Trust
Account to make payment of, or reimburse itself for, any amount which it may be required to pay
under or arising out of the Reinsured Contracts to the extent relating to the Business Covered;
provided that notice of such withdrawal is provided not less than five (5) Business Days in advance
of the requested withdrawal. The Trustee shall promptly comply with such notice. The Security
Amount shall be reduced by any amount so withdrawn.

          Section 6.3 Release of Trust Account Assets to the Grantor.

               (a) The Grantor agrees that all proceeds from the sale or substitution of the Assets in the
Trust Account and the collection of interest, dividends and other income in respect to the Assets
in the Trust Account shall be retained in the Trust Account and shall not be

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released to the Grantor, except in accordance with the provisions set forth in subparagraphs
(b) and (c) in this Section 6.3.

               (b) At each calendar quarter end, by transmittal of prior written notice to the Trustee and
contemporaneous notice to the Beneficiaries, the Grantor may withdraw Assets from the Trust Account
in the amount of the Ultimate Net Loss it has actually paid under the LPT Reinsurance Agreement
during such quarter; provided, however, that in connection with any such withdrawal, the Grantor
shall provide a written certification to the Trustee stating the fair market value of each non-cash
Asset withdrawn. The Trustee shall promptly comply with such notice.

               (c) Commencing at the fifth anniversary of the date hereof, at any calendar quarter end
following the delivery of the Quarterly Certification as to which there is no dispute outstanding
between the Grantor and the Beneficiaries, in the event the aggregate fair market value of the
Eligible Investments maintained in the Trust Account exceeds 150% of the gross Reserves of the
Beneficiaries (including reserves for losses incurred but not reported) calculated in accordance
with SAP with respect to the Business Covered as of such calendar end, then by transmittal of
fourteen (14) calendar days’ prior written notice to the Trustee and the Beneficiaries, the Grantor
may direct the Trustee to withdraw from the Trust Account and transfer to the Grantor Assets having
a fair market value equal to the amount of such excess; provided, however, following a Collateral
Triggering Event, the Grantor shall be permitted to withdraw Assets from the Trust Account pursuant
to this Section 6.3(c) only to the extent that the aggregate fair market value of the Eligible
Investments remaining in the Trust Account after such withdrawal is not less than 100% of the
Security Amount. The Trustee shall promptly comply with such notice.

ARTICLE VII

DUTIES OF THE TRUSTEE

          Section 7.1 Acceptance of Assets by the Trustee.

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

               (b) The Trustee and its lawfully appointed successors is and are authorized and shall have the
power to receive such Assets as the Grantor (or the Beneficiaries on behalf of the Grantor) from
time to time may transfer or remit to the Trust Account and to hold and dispose of the same for the
uses and purposes and in the manner and according to the provisions herein set forth. All such
Assets at all times shall be maintained as a trust account,

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separate and distinct from all other assets on the books and records of the Trustee, and shall
be continuously kept in a safe place within the United States.

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

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

          Section 7.4 Responsibilities of the Trustee.

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

               (b) Subject to the other provisions of this Trust Agreement, including the requirement that
only Eligible Investments may be held in the Trust Account, and provisions relating to the
substitution of Assets, (i) the Grantor shall have the irrevocable authority and sole power to
direct the Trustee, in the Grantor’s sole discretion, with respect to all aspects of the management
or investment of the Assets contained in the Trust Account, including, but not limited to,
directing the Trustee to enter into one or more investment management, advisory, custodial,
depository or other agreements of form and substance specified by the Grantor, with any other
person, including any affiliate of the Grantor, selected by the Grantor and (ii) the Trustee and
the Beneficiaries each acknowledges that it has no authority with respect to such management or
investment activities, the Trustee agrees it will not exercise any discretion or take any action
with respect to the matters in clause (i) above and the Trustee will take any actions related
thereto as directed by the Grantor in accordance therewith.

13

 

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

          Section 7.6 Activity Reports. The Trustee agrees to provide an activity report to the Beneficiary and
the Grantor upon creation of the Trust Account and within five (5) days following receipt of the
report from the Grantor, which report shall, in reasonable detail, show (i) all deposits,
withdrawals and substitutions during such quarter; (ii) a listing of securities and other assets
held and cash balances in the Trust Account as of the last day of such quarter and (iii) the fair
market value (determined in accordance with Section 5.2) of each Asset held in the Trust Account
(other than cash) and the amount of cash held in the Trust Account as of the last day of such
quarter. The Trustee agrees to provide written notification to the Grantor and the Beneficiaries
within five (5) days of any deposits to or withdrawals from the Trust Account.

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

               (a) The Trustee may at any time resign as Trustee and terminate its capacity hereunder by
delivery of written notice of resignation, effective not less than ninety (90) days after receipt
by both the Beneficiaries and the Grantor. The Trustee may be removed by the Grantor by (i)
delivery to the Trustee and the Beneficiaries of a written notice of removal, effective not less
than ninety (90) days after receipt by the Trustee and the Beneficiaries of the notice and (ii)
receipt of the Beneficiaries’ consent to such action, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, no such resignation by the Trustee or removal by the
Grantor shall be effective until a successor to the Trustee shall have been duly appointed by the
Grantor and approved by the Beneficiaries and all the securities and other Assets in the Trust
Account have been duly transferred to such successor. The Grantor, upon receipt of such notice of
resignation, shall undertake to obtain the agreement of a qualified, successor depository,
agreeable to the Beneficiaries, to act as a successor Trustee in accordance with all agreements of
the Trustee herein and upon duly qualifying to act as such pursuant to Section 7.7(b). The
Beneficiaries agree not to withhold unreasonably approval of such Trustee. Upon the Trustee’s
delivery of the Assets to the qualified, successor depository, along with a closing statement
showing all activities from the last quarterly report, the Trustee shall be discharged of further
responsibilities hereunder, subject to any remaining obligations under Sections 7.4 and 7.7(b).

               (b) Any successor Trustee appointed hereunder shall execute an instrument accepting such
appointment hereunder and shall deliver the same to the Grantor and to the then acting Trustee.
Thereupon such successor Trustee shall, without any further act, become vested with all the
estates, properties, rights, powers, trusts and duties of its predecessor in the Trust with like
effect as if originally named herein; but the predecessor Trustee shall nevertheless, when
requested in writing by the successor Trustee, execute an instrument or instruments conveying and
transferring to the Trustee upon the Trust herein all the estates, properties, rights, powers and
trusts of such predecessor Trustee, and shall duly assign, transfer and deliver to the Trustee all
property and money held by such predecessor hereunder. The

14

 

predecessor Trustee shall be entitled to reimbursement in accordance with Section 7.10 for all
expenses it incurs in connection with the settlement of its accounts and the transfer and delivery
of the Trust assets to its successor. The predecessor Trustee shall continue to be indemnified by
reason of such entity being or having been a Trustee in accordance with Section 7.9.

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

          Section 7.9 Indemnification of the Trustee. In consideration of the Trustee’s acceptance of this Trust
Agreement, if the Trustee renders any service not provided for in this Trust Agreement, the Grantor
and the Beneficiary shall, severally and not jointly, reasonably compensate the Trustee for such
extraordinary services, reimburse the Trustee for all reasonable costs, attorneys’ fees and
expenses occasioned thereby, and indemnify, defend and hold the Trustee (and its directors,
officers and employees) harmless from and against any loss, liability, damage, cost and expense of
any nature arising out of or in connection with this Trust Agreement or with the performance of its
duties hereunder, including, among other things, reasonable attorneys’ fees and court costs, except
to the extent such loss, liability, damage, cost and expense shall be caused by the Trustee’s own
negligence, willful misconduct or lack of good faith. Whenever an action by the Trustee is
authorized by written signed direction pursuant to the provisions of this Trust Agreement and such
action is taken strictly in accordance with such written and signed direction by the appropriate
party or parties, the party or parties authorizing such action hereby agree to indemnify the
Trustee against all losses, damages, costs and expenses, including reasonable attorneys’ fee,
resulting from any action so taken by the Trustee. The provisions of this paragraph shall survive
the termination of this Trust Agreement and the resignation or removal of the Trustee for any
reason.

          Section 7.10 Charges of the Trustee. The Grantor agrees to pay all reasonable costs or fees charged by
the Trustee for acting as the Trustee pursuant to this Trust Agreement, as agreed between the
Grantor and the Trustee, including fees incurred by the Trustee for legal services deemed
reasonably necessary by the Trustee as a result of the Trustee’s so acting; provided, however, that
no such costs, fees or expenses shall be paid out of the Assets held in or credited to the Trust
Account.

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

15

 

          Section 7.12 Concerning the Trustee.

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

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

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

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

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

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

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

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

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

               (j) The Trustee shall not be considered in breach of or in default in its obligations
hereunder in the event of delay in the performance of such obligations due to unforeseeable causes
beyond its control (including, but not limited to, any act or provision of any

16

 

present or future law or regulation or governmental authority, any act of God or war, civil
unrest, local or national disturbance or disaster, any act of terrorism, or the unavailability of
the Federal Reserve Bank wire or other wire or communication facility) or without its willful
misconduct, negligence or lack of good faith.

ARTICLE VIII

TERMINATION

          Section 8.1 Termination. This Trust Agreement may not be terminated by the Grantor unless the Grantor
has obtained, and the Trustee has received, a written consent signed by the General Counsel of CCC
to terminate this Trust Agreement. The Beneficiaries shall provide their consent to the
termination of this Trust Agreement if the Grantor seeks to terminate this Trust Agreement as a
result of the exhaustion of the LPT Limit.

          Section 8.2 Disposition of Assets Upon Termination. Upon a termination pursuant to this Article VIII,
the Trustee shall distribute all Assets held and deposited under this Trust Agreement, subject to
the written approval of the Beneficiaries, to the Grantor and shall take any and all steps
necessary to transfer absolutely and unequivocally all right, title and interest in such Assets and
to deliver physical custody, if applicable, in such Assets to the Grantor or as otherwise directed
by the Grantor.

ARTICLE IX

GENERAL PROVISIONS

          Section 9.1 Notices. Any notice, request, demand, waiver, consent, approval or other communication
required or permitted to be given by any party under this Trust Agreement shall be in writing and
shall be delivered personally, sent by facsimile transmission, sent by registered or certified
mail, postage prepaid, or sent by a standard overnight courier of national reputation with written
confirmation of delivery. Any such notice shall be deemed given when so delivered personally, or
if sent by facsimile transmission, on written confirmation of receipt, or if mailed, on the date
shown on the receipt therefor, or if sent by overnight courier, on the date shown on the written
confirmation of delivery. Such notices shall be given to the following addresses:

	 	 	 	 	 

	 
	 	If to the Trustee:	 	Wells Fargo Bank, National Association
	 
	 	 	 	5 Broadway, 14th floor
	 
	 	 	 	New York, New York 10006
	 
	 	 	 	Attention:  Stephen Bruce
	 
	 	 	 	Facsimile: (212) 509-1716
	 
	 	 	 	 
	 
	 	If to the Grantor:	 	National Indemnity Company
	 
	 	 	 	100 First Stamford Place
	 
	 	 	 	Stamford, CT 06902
	 
	 	 	 	Attention:  General Counsel
	 
	 	 	 	Fax:  203-363-5221

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	 	With a copy to:	 	National Indemnity Company
	 
	 	 	 	3024 Harney Street
	 
	 	 	 	Omaha, NE 68131
	 
	 	 	 	Attention:  Treasurer
	 
	 	 	 	Fax:  402-916-3030
	 
	 	 	 	 
	 
	 	If to the Beneficiaries:	 	CNA Financial Corporation
	 
	 	 	 	333 S. Wabash Avenue
	 
	 	 	 	Chicago, IL 60604
	 
	 	 	 	Attention: Jonathan D. Kantor
	 
	 	 	 	Executive Vice President,
	 
	 	 	 	General Counsel and Secretary
	 
	 	 	 	Fax:  312-817-0511
	 
	 	 	 	 
	 
	 	With a copy to:	 	CNA Financial Corporation
	 
	 	 	 	333 S. Wabash Avenue
	 
	 	 	 	Chicago, IL 60604
	 
	 	 	 	Attention: Michael P. Warnick
	 
	 	 	 	Senior Vice President and
	 
	 	 	 	Deputy General Counsel
	 
	 	 	 	Fax:  312-755-2479

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

          Section 9.2 Entire Agreement. Subject to the provisions of Section 7.4(a), this Trust Agreement,
including Appendix A hereto, the LPT Reinsurance Agreement and any other documents
delivered pursuant hereto or thereto, constitute the entire agreement among the parties hereto and
their respective affiliates with respect to the subject matter hereof and supersede all prior
negotiations, discussions, writings, agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof and thereof.

          Section 9.3 Waiver and Amendment. This Trust Agreement and the Trust created hereunder shall be
irrevocable, subject solely to the termination provisions set forth herein. The Grantor shall have
no right or power in any capacity to revoke, terminate or, except as provided in Section 3.1, alter
or amend any terms of this Trust Agreement, in whole or in part, without the prior written consent
of the Beneficiaries and the Trustee. Notwithstanding the foregoing, this Trust Agreement may be
altered, amended or terminated at any time by written agreement executed by each party hereto. The
Beneficiaries’ failure at any time to exercise any of the rights or powers conferred upon them
herein shall constitute neither a waiver of their right to exercise, nor stop them from exercising,
any rights at any subsequent time, nor shall such failure reduce in any degree any liability or
obligation for which the Grantor is bound hereunder.

          Section 9.4 Successors and Assigns. The rights and obligations of a party under this Trust Agreement
shall not be subject to assignment without the prior written consent of the other parties hereto,
and any attempted assignment without the prior written consent of the other parties hereto shall be
invalid ab initio. The terms of this Trust Agreement shall be binding upon, inure to the benefit
of and be enforceable by and against the successors and permitted assigns of the parties hereto.
Notwithstanding the foregoing, any corporation or association into which the

18

 

Trustee may be merged or converted, or with which it may be consolidated, or to which it may sell
or transfer all or substantially all of its corporate trust business shall be the successor to the
Trustee without the execution or filing of any paper or further act.

          Section 9.5 Headings. The headings of this Trust Agreement are for convenience of reference only and
shall not define or limit any of the terms or provisions hereof.

          Section 9.6 Governing Law and Jurisdiction. This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to such state’s principles of
conflict of laws that could compel the application of the laws of another jurisdiction. SUBJECT TO
ARTICLE X, ANY SUIT, ACTION OR PROCEEDING TO COMPEL ARBITRATION OR FOR TEMPORARY INJUNCTIVE RELIEF
IN AID OF ARBITRATION OR TO PRESERVE THE STATUS QUO PENDING THE APPOINTMENT OF THE ARBITRATOR(S)
SHALL BE BROUGHT BY THE PARTIES HERETO SOLELY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, PROVIDED THAT IF SAID COURT DETERMINES THAT IT DOES NOT HAVE SUBJECT MATTER
JURISDICTION THEN SAID ACTIONS MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK FOR NEW
YORK COUNTY; AND EACH OF THE BENEFICIARIES, THE GRANTOR AND THE TRUSTEE EACH HEREBY IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE AND ANY APPELLATE COURTS
THEREOF, EXCEPT THAT ANY FINAL ARBITRAL AWARD RENDERED IN ACCORDANCE WITH ARTICLE XIV MAY BE
ENTERED AND ENFORCED IN ANY COURT HAVING JURISDICTION OVER ANY PARTY HERETO OR ANY OF ITS ASSETS.

          Section 9.7 No Third Party Beneficiaries. Nothing in this Trust Agreement is intended or shall be
construed to give any person, other than the parties hereto, any legal or equitable right, remedy
or claim under or in respect of this Trust Agreement or any provision contained herein.

          Section 9.8 Counterparts. This Trust 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 binding upon all of the parties
hereto notwithstanding the fact that all parties hereto are not signatory to the original or the
same counterpart. Each counterpart may consist of a number of copies hereof each signed by less
than all, but together signed by all of the parties hereto. Each counterpart may be delivered by
facsimile transmission, which transmission shall be deemed delivery of an originally executed
document.

          Section 9.9 Severability. Any term or provision of this Trust Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Trust Agreement or affecting the validity or enforceability of any of the
terms or provisions of this Trust Agreement in any other jurisdiction, so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any manner materially
adverse to any party hereto. If any provision of this Trust Agreement is so broad as to be
unenforceable, that provision shall be interpreted to be only so

19

 

broad as is enforceable. In the event of such invalidity or unenforceability of any term or
provision of this Trust Agreement, the parties hereto shall use their commercially reasonable
efforts to reform such terms or provisions to carry out the commercial intent of the parties hereto
as reflected herein, while curing the circumstance giving rise to the invalidity or
unenforceability of such term or provision.

          Section 9.10 Specific Performance. Each of the parties hereto acknowledges and agrees that the other
parties hereto would be irreparably damaged in the event that any of the provisions of this Trust
Agreement were not performed or complied with in accordance with their specific terms or were
otherwise breached, violated or unfulfilled. Accordingly, each of the parties hereto agrees that
the other parties hereto shall be entitled to an injunction or injunctions to prevent noncompliance
with, or breaches or violations of, the provisions of this Trust Agreement by the other parties
hereto and to enforce specifically this Trust Agreement and the terms and provisions hereof in any
action instituted in accordance with Section 9.6, in addition to any other remedy to which such
party may be entitled, at law or in equity. In the event that any action is brought in equity to
enforce the provisions of this Trust Agreement, no party hereto will allege, and each party hereto
hereby waives the defense or counterclaim, that there is an adequate remedy at law. The parties
hereto further agree that (i) by seeking the remedies provided for in this Section 9.10, a party
hereto shall not in any respect waive its right to seek any other form of relief that may be
available to a party under this Trust Agreement, including monetary damages in the event that this
Trust Agreement has been terminated or in the event that the remedies provided for in this Section
9.10 are not available or otherwise are not granted and (ii) nothing contained in this Section 9.10
shall require any party hereto to institute any action for (or limit any party’s right to institute
any action for) specific performance under this Section 9.10 before exercising any termination
right under Article VIII, nor shall the commencement of any action pursuant to this Section 9.10 or
anything contained in this Section 9.10 restrict or limit any party’s right to terminate this Trust
Agreement in accordance with the terms of Article VIII or pursue any other remedies under this
Trust Agreement that may be available then or thereafter.

          Section 9.11 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS TRUST AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS TRUST AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTIES HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTIES WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS TRUST AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED BY THIS TRUST AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

          Section 9.12 Incontestability. In consideration of the mutual covenants and agreements contained
herein, each party hereto does hereby agree that this Trust Agreement, and each and every provision
hereof, is and shall be enforceable by and between them according to

20

 

its terms, and each party hereto does hereby agree that it shall not contest in any respect the
validity or enforceability hereof.

          Section 9.13
Set-Off. Any debts or credits, matured or unmatured, liquidated or unliquidated,
regardless of when they arose or were incurred, in favor of or against any of the Beneficiaries or
the Grantor with respect to this Trust Agreement are deemed mutual debts or credits, as the case
may be, and shall be set off, and only the net balance shall be allowed or paid.

          Section 9.14 Currency. All financial data required to be provided pursuant to the terms of this Trust
Agreement shall be expressed in United States dollars. All payments and all settlements of account
between the parties hereto shall be in United States currency unless otherwise agreed by the
parties hereto.

ARTICLE X

DISPUTE RESOLUTION

          Section 10.1 Dispute Resolution. Notwithstanding anything contained herein to the contrary, any dispute
between the Beneficiary and the Grantor arising out of or relating to this Trust Agreement or the
breach, termination or validity hereof (“Dispute”) will be first addressed in accordance with the
procedures specified in Section 10.2, and subsequently, if necessary, Section 10.3, which will be
the sole and exclusive procedures for the resolution of any such Disputes.

          Section 10.2
Negotiation Amongst the Parties.

               (a) The Beneficiaries and the Grantor agree that they shall first attempt to resolve Disputes
by informal in-person discussions and negotiations of their respective representatives. If a
Beneficiary and the Grantor are unable to resolve any such Dispute through such in-person
discussions and negotiations within thirty (30) calendar days of the day on which either the
Beneficiary and the Grantor receives from the other party or parties written notice of a Dispute,
the Dispute shall be submitted for resolution to a designated executive officer of each of the
Beneficiary and the Grantor with authority to make a decision. If the designated executive
officers are unable to reach a mutually acceptable resolution within ten (10) calendar days after
expiration of such thirty-day period, on the request of either the Beneficiary or the Grantor, the
Dispute shall be resolved in accordance with subsection (b). All negotiations, discussions, and
communications made or conducted pursuant to the procedures set forth in this Section 10.2(a) are
confidential and will be treated as compromise and settlement negotiations for purposes of the
Federal Rules of Evidence and any other applicable rules of evidence.

               (b) Upon completion of the dispute resolution process described in subsection (a) of this
Section 10.2 without resolution of the Dispute, either the Beneficiary or the Grantor may submit
the Dispute for resolution in accordance with Section 10.3.

          Section 10.3 Arbitration.

               (a) Except as provided in Sections 10.1 and 10.2, any Dispute shall be finally determined by
arbitration in accordance with the Commercial Arbitration Rules of the

21

 

American Arbitration Association (“AAA”) then in effect (the “Rules”), except as modified
herein. If the amount in controversy is five million dollars ($5,000,000) or less (including all
claims and counterclaims) there shall be one arbitrator who shall be agreed upon by the Beneficiary
and the Grantor within twenty (20) calendar days of receipt by respondent(s) of a copy of the
demand for arbitration. The single arbitrator may not award an amount greater than five million
dollars ($5,000,000) in value under any circumstances. If the amount in controversy is more than
five million dollars ($5,000,000) (including all claims and counterclaims) there shall be three
neutral and impartial arbitrators, one of whom shall be appointed by each of (i) the Beneficiary,
on the one hand and (ii) the Grantor, on the other hand, within thirty (30) calendar days of
receipt by respondent(s) of the demand for arbitration, and the third arbitrator, who shall chair
the arbitral tribunal, shall be appointed by the party appointed arbitrators within fifteen (15)
calendar days of the appointment of the second arbitrator. If any arbitrator is not appointed
within the time limit provided herein, such arbitrator shall be appointed by the AAA in accordance
with the listing, striking and ranking procedure in the Rules, with each of the Beneficiary and the
Grantor being given a limited number of strikes, except for cause. Any arbitrator appointed by the
AAA shall be a retired federal or state appellate court judge or a current or retired officer of an
insurance company with no less than fifteen (15) years of experience in the property casualty
insurance industry. The arbitration hearing on the merits shall be commenced within ninety (90)
calendar days of the appointment of the arbitrator(s) or as soon thereafter as practicable. In
rendering an award, the arbitral tribunal shall be required to follow the laws of the State of New
York. The award shall be in writing and shall briefly state the findings of fact and conclusions
of law on which it is based. The arbitrator(s) shall be permitted to award any relief permitted
under New York law, including damages and any form of temporary or permanent injunctive relief, but
shall not be permitted to award special, indirect, punitive or incidental damages or damages for
lost profits or any other consequential damages or damages based on multiples or similar valuation
techniques. The award shall be final and binding upon the Beneficiary and the Grantor and shall be
the sole and exclusive remedy between the Beneficiary and the Grantor regarding any claims,
counterclaims, issues or accounting presented to the arbitrator(s). Judgment upon the award may be
entered in any court having jurisdiction over the Beneficiary and the Grantor or any of their
respective assets. Any costs or fees (including attorneys’ fees and expenses) incident to
enforcing the award shall be charged against the Beneficiary and the Grantor resisting such
enforcement. Arbitrability of any and all disputes shall be decided by the arbitrator(s). In the
event of any inconsistency between the Rules and the provisions of this Article X, the provisions
of this Article X shall control.

               (b) Arbitration hereunder shall be conducted in Chicago, Illinois or New York, New York, as
determined by the party against whom the arbitration is demanded.

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ARTICLE XI

EFFECTIVE DATE AND EXECUTION

     IN WITNESS OF THE ABOVE, this Trust Agreement is executed in triplicate by the parties’ duly
authorized officers on the dates indicated below with an effective date
of:
                      
..

CONTINENTAL CASUALTY COMPANY, as Beneficiary

	 	 	 	 	 	 	 	 	 

	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Attest:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	THE CONTINENTAL INSURANCE COMPANY, as Beneficiary
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Attest:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	CONTINENTAL REINSURANCE CORPORATION INTERNATIONAL, LTD., as Beneficiary
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Title

	 	:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Attest:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

23

 

	 	 	 	 	 	 	 	 	 

	CNA INSURANCE COMPANY LIMITED, as Beneficiary
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Attest:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	NATIONAL INDEMNITY COMPANY, as Grantor
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Attest:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
	 
	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Title

	 	:	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Attest:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

24

 

APPENDIX A

TRUST PROVISIONS FOLLOWING A REINSURANCE CREDIT EVENT

          In accordance with Article III of this Trust Agreement, upon the occurrence of a Reinsurance
Credit Event, the provisions set forth in this Appendix A shall automatically replace the
provisions of the equivalent Sections in this Trust Agreement and become effective.

          Section 4.1 Continuing Obligation of the Grantor.

               (a) The segregated trust account maintained by the Trustee with account number 80460400 (which
shall be hereinafter referred to, including all successor accounts thereto, as the “Trust Account”)
shall continue in existence upon the occurrence of a Reinsurance Credit Event with a single
Beneficiary and the substitution of Assets as required under Section 3.1 of this Trust Agreement.

               (b) The Grantor shall ensure that the Trust Account shall hold Permitted Investments at all
times with a fair market value of no less than 100% of the Required Amount, as determined in
accordance with Section 7.6 of this Trust Agreement.

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

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

          Section 5.3 Quarterly Certification. Within fourteen (14) calendar days following the
end of each calendar quarter, the Grantor shall provide the Beneficiary (with a copy to the
Trustee) a written certification (the “Quarterly Certification”) stating the Required Amount as of
the calendar quarter end and the aggregate fair market value of the Permitted Investments held in
the Trust Account as of the calendar quarter end (both on an asset-by-asset basis and a cumulative
basis). Such certification shall separately state the effect on the fair market value of the
Assets of withdrawals by the Grantor from the Trust Account effected during such calendar quarter.
As soon as is practicable, but in no event more than ten (10) Business Days following its receipt
of the Quarterly Certification, the Beneficiary shall either (i) countersign such certification and
forward it to the Trustee or (ii) notify the Grantor that it

25

 

objects to the Grantor’s calculation of the Required Amount or the Grantor’s valuation of any
Asset. If the parties are able to resolve such dispute within ten (10) Business Days of the
Beneficiary’s transmittal to the Grantor of its notice of objection, they shall promptly forward to
the Trustee a jointly signed certification of the Required Amount. If the parties are unable to
resolve such dispute within ten (10) Business Days of the Beneficiary’s transmittal to the Grantor
of its notice of objection, and the dispute relates to the valuation of an Asset, the value of such
Asset shall be determined by a Third Party Appraiser and the parties shall be bound by such
valuation. All other disputes shall be resolved in accordance with Section 10.1 of this Trust
Agreement. Upon resolution of such dispute, the parties shall forward to the Trustee a copy of the
corrected Quarterly Certification setting forth the Required Amount as resolved through such Third
Party Appraiser or arbitration. The Grantor shall, to the extent reasonably necessary or required
in order to verify Grantor’s certification, permit the Beneficiary to audit its records in order to
determine its compliance with this Section 5.3. The Grantor shall cooperate fully with such audit.
Access to the Grantor and its employees by the Beneficiary in connection with such audit shall be
at reasonable times during regular business hours upon reasonable prior written notice (including
by e-mail) in a manner which does not unreasonably interfere with the business or operations of the
Grantor.

          Section 6.1 Adjustment of Trust Account Assets.

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

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

          Section 6.2 Release of Trust Account Assets to the Beneficiary.

               (a) Notwithstanding anything in this Trust Agreement to the contrary, the Beneficiary shall
have the right to withdraw Assets from the Trust Account at any time, without notice to the
Grantor, subject only to written notice to the Trustee from the Beneficiary given in accordance
with Section 9.1 of this Trust Agreement. Other than such notice, no other statement or document
need be presented by the Beneficiary to withdraw such Assets except that the Beneficiary shall
acknowledge to the Trustee receipt of such withdrawn Assets. Upon such written notice of demand of
the Beneficiary, the Trustee shall immediately take any and all steps necessary to transfer
absolutely and unequivocally all right, title and interest in the Assets to the Beneficiary and, to
the extent applicable, deliver physical custody of such Assets to the Beneficiary. Upon such
transfer, Trustee shall promptly forward a copy of such notice to the Grantor. The Trustee shall
not be subject to any liability for any payment made by it to the Beneficiary pursuant to such
written demand by the Beneficiary.

26

 

               (b) The Grantor and the Beneficiary agree that the Assets from the Trust Account may only be
withdrawn by the Beneficiary, and utilized and applied by the Beneficiary, or any successor by
operation of law of the Beneficiary including any liquidator or rehabilitator, receiver or
conservator of the Beneficiary, without diminution because of insolvency on the part of the
Beneficiary or the Grantor, for one or more of the following purposes:

                    (i) to pay or reimburse the Beneficiary for the Grantor’s share of premiums
returned to policyholders or ceding companies of the Reinsured Contracts because of
cancellations of such contracts to the extent same constitute Ultimate Net Loss;

                    (ii) to reimburse the Beneficiary for the Grantor’s share of surrenders and
benefits or losses paid by the Beneficiary pursuant to the provisions of the
Reinsured Contracts to the extent same constitute Ultimate Net Loss;

                    (iii) to fund an account with the Beneficiary in an amount at least equal to
the deduction, for reinsurance ceded, from the Beneficiary’s liabilities for the
Reinsured Liabilities. The account must include, but not be limited to, amounts for
policy reserves, claims and losses incurred, including losses incurred but not
reported, allocated loss adjustment expenses, and unearned premium reserves; and

                    (iv) to pay any other amounts the Beneficiary claims are due under the LPT
Reinsurance Agreement.

          Section 6.3 Release of Trust Account Assets to the Grantor. Subject to receipt of the
Beneficiary’s prior written instructions, the Trustee may, from time to time, release to the
Grantor Assets with an aggregate fair market value equal to the excess over 102% of the Required
Amount as of the prior calendar quarter end. In connection with any such release of Assets, the
Trustee shall take any and all necessary steps to transfer absolutely and unequivocally all right,
title and interest in such released Assets to the Grantor or its designee. The Trustee shall not
be subject to any liability for any payment made by it to the Grantor pursuant to such written
instructions received by it from the Beneficiary.

          Section 7.4 Responsibilities of the Trustee.

               (a) The Trustee, in the administration of the Trust Account, is to be bound solely by the
express provisions herein, and such further written and signed directions as the appropriate party
or parties may, under the conditions herein provided, deliver to the Trustee. The Trustee shall be
under no obligation to enforce the Grantor’s obligations under this Trust Agreement, except as
otherwise expressly provided or directed pursuant hereto. The Trustee shall be restricted to
holding title to, operating and collecting the Assets comprising the Trust Account and the payment
and distribution thereof for the purposes set forth in this Trust Agreement and to the conservation
and protection of such Assets and the administration thereof in accordance with the provisions of
this Trust Agreement, and the Trustee shall be liable only

27

 

for its own negligence, willful misconduct or lack of good faith. The Trustee further agrees
to forward upon request of the Beneficiary, the Grantor or any Insurance Commissioner a statement
and valuation of all Assets held under this Trust Agreement.

               (b) Subject to the other provisions of this Trust Agreement, including the requirements that
only Permitted Investments may be held in the Trust Account and provisions relating to the
substitution of Assets, (i) the Grantor shall have the irrevocable authority and sole power to
direct the Trustee, in the Grantor’s sole discretion, with respect to all aspects of the management
or investment of the Assets contained in the Trust Account, including, but not limited to,
directing the Trustee to enter into one or more investment management, advisory, custodial,
depository or other agreements of form and substance specified by the Grantor, with any other
person, including any affiliate of the Grantor, selected by the Grantor and (ii) the Trustee and
the Beneficiary each acknowledges that it has no authority with respect to such management or
investment activities, the Trustee agrees it will not exercise any discretion or take any action
with respect to the matters in clause (i) above and will take any actions related thereto as
directed by the Grantor in accordance therewith.

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

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

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

          Section 9.2 Construction and Effect. This Trust Agreement and the enforceability
hereof shall not be subject to the satisfaction of any conditions or qualifications not expressly
included herein.

28

 

Exhibit C

Form of LPT Reinsurance Agreement

 

CONFIDENTIAL

 
 

LOSS PORTFOLIO TRANSFER REINSURANCE AGREEMENT

by and among

CONTINENTAL CASUALTY COMPANY,

THE CONTINENTAL INSURANCE COMPANY,

CONTINENTAL REINSURANCE CORPORATION INTERNATIONAL, LTD.,

CNA INSURANCE COMPANY LIMITED

and

NATIONAL INDEMNITY COMPANY

Dated as of                     , 2010

 
 

 

 

TABLE OF CONTENTS

ARTICLE I

DEFINITIONS

	 	 	 	 	 	 	 	 	 

	 	1.1	 	 	Definitions

	 	 	1	 

ARTICLE II

REINSURANCE CEDED

	 	 	 	 	 	 	 	 	 

	 	2.1	 	 	Reinsurance Coverage

	 	 	10	 
	 	2.2	 	 	Commencement of the Reinsurer’s Liability

	 	 	10	 
	 	2.3	 	 	Ultimate Net Loss

	 	 	11	 
	 	2.4	 	 	Exclusions

	 	 	11	 
	 	2.5	 	 	Unallocated Loss Adjustment Expenses

	 	 	12	 
	 	2.6	 	 	Notice Regarding LPT Limit

	 	 	12	 
	 	2.7	 	 	Territory

	 	 	12	 
	 	2.8	 	 	Change of Control

	 	 	12	 
	 	2.9	 	 	Redomestication

	 	 	13	 
	 	2.10	 	 	CNA Insurers Bound

	 	 	13	 

ARTICLE III

REINSURANCE CONSIDERATION

	 	 	 	 	 	 	 	 	 

	 	3.1	 	 	Reinsurance Premium

	 	 	13	 
	 	3.2	 	 	Transfer of Pre-Inception Date Receivables

	 	 	13	 
	 	3.3	 	 	Payments

	 	 	13	 

ARTICLE IV

ADMINISTRATION

	 	 	 	 	 	 	 	 	 

	 	4.1	 	 	Administration

	 	 	14	 

ARTICLE V

RESERVING REQUIREMENTS

	 	 	 	 	 	 	 	 	 

	 	5.1	 	 	Reserve Assumption Changes

	 	 	14	 

i

 

ARTICLE VI

DURATION AND TERMINATION

	 	 	 	 	 	 	 	 	 

	 	6.1	 	 	Duration and Termination

	 	 	14	 
	 	6.2	 	 	Effect of Termination

	 	 	15	 

ARTICLE VII

ACCOUNTING AND SETTLEMENT REPORTS

	 	 	 	 	 	 	 	 	 

	 	7.1	 	 	Accounting and Settlement Reports

	 	 	15	 
	 	7.2	 	 	Tax Reporting

	 	 	15	 

ARTICLE VIII

INSOLVENCY

	 	 	 	 	 	 	 	 	 

	 	8.1	 	 	Insolvency of Reinsured

	 	 	15	 

ARTICLE IX

COLLATERAL TRUST ACCOUNT

	 	 	 	 	 	 	 	 	 

	 	9.1	 	 	Establishment of Collateral Trust Account

	 	 	16	 
	 	9.2	 	 	Ongoing Funding of Collateral Trust Account

	 	 	16	 
	 	9.3	 	 	Collateral Trust Assets

	 	 	16	 
	 	9.4	 	 	Settlements

	 	 	17	 
	 	9.5	 	 	Modification Upon Occurrence of Collateral Triggering Event

	 	 	17	 
	 	9.6	 	 	Modification Upon Occurrence of a Reinsurance Credit Event

	 	 	17	 
	 	9.7	 	 	Withdrawal of Collateral Trust Assets by Reinsured Prior to the Occurrence of a Reinsurance Credit Event

	 	 	19	 
	 	9.8	 	 	Withdrawal of Collateral Trust Assets by Reinsured After the Occurrence of a Reinsurance Credit Event

	 	 	20	 

ARTICLE X

DISPUTE RESOLUTION

	 	 	 	 	 	 	 	 	 

	 	10.1	 	 	Dispute Resolution
	 	 	21	 
	 	10.2	 	 	Negotiation Amongst the Parties
	 	 	21	 

ARTICLE XI

ARBITRATION

	 	 	 	 	 	 	 	 	 

	 	11.1	 	 	Arbitration

	 	 	21	 

ii

 

ARTICLE XII

EXTRACONTRACTUAL DAMAGES

	 	 	 	 	 	 	 	 	 

	 	12.1	 	 	Extracontractual Damages

	 	 	22	 

ARTICLE XIII

SALVAGE AND SUBROGATION

	 	 	 	 	 	 	 	 	 

	 	13.1	 	 	Salvage and Subrogation

	 	 	23	 
	 	13.2	 	 	Expenses

	 	 	24	 

ARTICLE XIV

THIRD PARTY REINSURANCE AGREEMENTS

	 	 	 	 	 	 	 	 	 

	 	14.1	 	 	Third Party Reinsurance Agreements

	 	 	24	 
	 	14.2	 	 	Collection Responsibility

	 	 	24	 

ARTICLE XV

REINSURANCE CREDIT

	 	 	 	 	 	 	 	 	 

	 	15.1	 	 	Reinsurance Credit

	 	 	25	 

ARTICLE XVI

REGULATORY MATTERS

	 	 	 	 	 	 	 	 	 

	 	16.1	 	 	Regulatory Matters

	 	 	26	 

ARTICLE XVII

CONFIDENTIALITY

	 	 	 	 	 	 	 	 	 

	 	17.1	 	 	Confidentiality

	 	 	26	 

ARTICLE XVIII

ERRORS AND OMISSIONS

	 	 	 	 	 	 	 	 	 

	 	18.1	 	 	Errors and Omissions

	 	 	27	 

iii

 

ARTICLE XIX

MATERIAL CHANGES

	 	 	 	 	 	 	 	 	 

	 	19.1	 	 	Material Changes to Reinsured Contracts and Third Party Reinsurance Agreements

	 	 	28	 

ARTICLE XX

RIGHT TO ASSOCIATE

	 	 	 	 	 	 	 	 	 

	 	20.1	 	 	Right to Associate

	 	 	29	 

ARTICLE XXI

MULTIPLE PARTIES

	 	 	 	 	 	 	 	 	 

	 	21.1	 	 	Multiple Parties

	 	 	29	 

ARTICLE XXII

MISCELLANEOUS PROVISIONS

	 	 	 	 	 	 	 	 	 

	 	22.1	 	 	Notices

	 	 	30	 
	 	22.2	 	 	Entire Agreement

	 	 	31	 
	 	22.3	 	 	Waiver and Amendment

	 	 	31	 
	 	22.4	 	 	Successors and Assigns

	 	 	31	 
	 	22.5	 	 	Headings

	 	 	31	 
	 	22.6	 	 	Construction; Interpretation

	 	 	31	 
	 	22.7	 	 	Governing Law and Jurisdiction

	 	 	32	 
	 	22.8	 	 	No Third Party Beneficiaries

	 	 	32	 
	 	22.9	 	 	Counterparts

	 	 	32	 
	 	22.10	 	 	Severability

	 	 	33	 
	 	22.11	 	 	Specific Performance

	 	 	33	 
	 	22.12	 	 	Waiver of Jury Trial

	 	 	34	 
	 	22.13	 	 	Incontestability

	 	 	34	 
	 	22.14	 	 	Set—Off

	 	 	34	 
	 	22.15	 	 	Currency

	 	 	34	 

EXHIBITS

	 	 	 	 	 

	Exhibit A

	 	—
	 	Form of Administrative Services Agreement
	Exhibit B

	 	—
	 	Form of Collateral Trust Agreement
	Exhibit C

	 	—
	 	Form of Third Party Reinsurance Allocation Agreement
	Exhibit D

	 	—
	 	Form of Reinsurance Credit Event II Trust Agreement

iv

 

SCHEDULES

	 	 	 	 	 

	Schedule 1.1(a)

	 	—
	 	Asbestos Accounts
	Schedule 1.1(b)

	 	—
	 	GRM Direct & Assumed, Syndicates, Pools and
Associations
	Schedule 1.1(c)

	 	—
	 	Pollution Accounts
	Schedule 1.1(d)

	 	—
	 	Pre-Inception Date Receivables
	Schedule 2.4(h)

	 	—
	 	Exclusions

v

 

LOSS PORTFOLIO TRANSFER REINSURANCE AGREEMENT

          THIS LOSS PORTFOLIO TRANSFER REINSURANCE AGREEMENT, dated as of ___, 2010 (this
“Reinsurance Agreement”), is made and entered into by and among Continental Casualty
Company, an Illinois property and casualty insurance company (“CCC”), The Continental
Insurance Company, a Pennsylvania property and casualty insurance company (“CIC”),
Continental Reinsurance Corporation International, Ltd., a Bermuda long-term insurance company
(“CRCI”), and CNA Insurance Company Limited, a United Kingdom property and casualty
insurance company (“CICL” and each of CCC, CIC, and CRCI is individually and all of CCC,
CIC, CRCI and CICL are collectively hereinafter referred to as the “Reinsured”), and
National Indemnity Company, a Nebraska property and casualty insurance company (hereinafter
referred to as the “Reinsurer”).

          WHEREAS, the Parties are entering into this Reinsurance Agreement pursuant to that certain
Master Transaction Agreement, dated as of July ___, 2010 (the “Master Transaction
Agreement”), by and among the Parties (as defined below) and Berkshire Hathaway Inc., a
Delaware corporation and the ultimate parent company of the Reinsurer (“Berkshire”);

          NOW, THEREFORE, in consideration of the mutual and several promises and undertakings herein
contained, and for good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Reinsured and the Reinsurer (individually, a “Party” and collectively,
the “Parties”) hereby agree as follows:

ARTICLE I

DEFINITIONS

          1.1
Definitions. The following terms shall have the respective meanings set forth below
throughout this Reinsurance Agreement (definitions are applicable to both the singular and the
plural forms of each term defined in this Article I):

          “A&P Business” means the business of the Reinsured and the CNA Insurers of insuring,
reinsuring and administering, as applicable, the Reinsured Contracts and the Third Party
Reinsurance Agreements as respects the Business Covered.

          “A&P Claims” means an Asbestos Claim and/or a Pollution Claim.

          “AAA” has the meaning set forth in Section 11.1(a).

          “Administrative Services Agreement” means the Administrative Services Agreement by and
among the Reinsured and the Reinsurer, substantially in the form of Exhibit A attached
hereto.

          “Affiliate” means, with respect to any Person, another Person that, directly or
indirectly, controls, is controlled by, or is under common control with, such first Person, where
“control” means the possession, directly or indirectly, of the power to direct or cause the

 

 

direction of the management policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.

          “Allocated Loss Adjustment Expenses” means all court costs, arbitration, mediation or
other dispute resolution costs, attorneys’ fees including staff counsel expressly charged with
performing functions generally performed by outside counsel, expenses, fees and interest accrued
prior to or after any judgment, award, agreement or compromise incurred in connection with or in
any way relating to the adjustment, appraisal, defense, resistance, investigation, audit
negotiation, settlement, payment or appeal of, or the pursuit or collection of any reinsurance on,
or the pursuit or enforcement of any right of subrogation with respect to any Reinsured Liability;
provided, however, in no event shall Allocated Loss Adjustment Expenses include any overhead or
similar internal costs that are attributable to the handling of a claim file arising from the
Business Covered. For the purposes of this Reinsurance Agreement, this definition of “Allocated
Loss Adjustment Expenses” will apply regardless of how the Reinsured reserves for Allocated Loss
Adjustment Expenses on its annual and quarterly statutory financial statements filed with
Governmental Authorities.

          “Applicable Interest Rate” means 4.5% (four point five percent) per annum.

          “Applicable Law” means any domestic or foreign, federal, state or local statute, law,
ordinance or code, or any written rules, regulations or administrative interpretations issued by
any Governmental Authority pursuant to any of the foregoing, in each case applicable to any Party,
and any Order, writ, injunction, directive, judgment or decree of a court of competent jurisdiction
applicable to the Parties.

          “Asbestos Claim” means the following: (i) for claims shown on the Books and Records
of any Reinsured or CNA Insurer as having been made on or prior to December 31, 2009, all claims
coded as “asbestos claims” on the Books and Records of any Reinsured or CNA Insurer and arising
under the accounts listed on Schedule 1.1(a) attached hereto, (ii) for claims shown in the
files and records of any GRM Direct & Assumed, Syndicate, Pool or Association as having been made
on or prior to December 31, 2009, all claims coded as “asbestos claims” in the files and records of
any GRM Direct & Assumed, Syndicate, Pool or Association, and (iii) for claims made after December
31, 2009, any claim involving allegations, in whole or in part, of Property Damage, Bodily Injury,
personal injury, mental anguish, medical monitoring, nuisance and trespass, including claims for
equitable relief, arising out of, or relating to, exposure to asbestos. For the avoidance of
doubt, the Parties acknowledge and agree that, claims asserting that any Reinsured or CNA Insurer
(A) failed to warn any Person of potential asbestos exposure, (B) engaged in any unfair trade
practice or failed to handle claims in good faith, (C) negligently conducted loss control
functions, (D) failed to settle or pay claims within the limits of any Reinsured Contract, (E)
otherwise negligently conducted claims handling, (F) misrepresented, or otherwise committed a tort
or fraud in connection with the Business Covered, or (G) failed to properly comply with Medicare or
other liens, in each case, as long as such assertions arise out of, relate to, or are in connection
with, Asbestos Claims, shall be deemed Asbestos Claims. If a claim alleges both an exposure to
asbestos and an exposure to another toxin (e.g., “mixed dust” claims) and the Reinsured Contract
contains an asbestos exclusion, the claim will be an Asbestos Claim to the extent the claim
involves asbestos exposure or injury. While the coding of any Reinsured or CNA Insurer made prior
to the Inception Date shall be conclusive as to whether a

2

 

claim made on or prior to December 31, 2009 is an Asbestos Claim, for a claim made after
December 31, 2009, the past coding of any Reinsured or CNA Insurer of a similar claim shall not be
conclusive as to whether the claim is an Asbestos Claim. Asbestos Claims shall not include Non A&P
Claims.

          “Berkshire” has the meaning set forth in the Recitals.

          “Bodily Injury” means actual or threatened bodily injury, sickness or disease
sustained by a person, including death, humiliation, shock, mental anguish or mental injury by that
person at any time which results as a consequence of the bodily injury, sickness or disease.

          “Books and Records” means originals or copies of all records and all other data and
information (in whatever form maintained) in the possession or control of a Party or its Affiliates
and relating to the Business Covered, including (i) administrative records, (ii) claim records,
(iii) policy files, (iv) sales records, (v) files and records relating to Applicable Law, (vi)
reinsurance records, (vii) underwriting records, (viii) accounting records, and (ix) files and
records (including claims bordereaux) of any GRM Direct & Assumed, Syndicate, Pool or Association,
but excluding any (a) Tax Returns and Tax records and all other data and information with respect
to Tax, (b) files, records, data and information with respect to the employees, (c) records, data
and information with respect to any employee benefit plan, (d) files, records, data and information
relating to Retrospective Premiums, (e) any files, records, data and information not reasonably
related to the Reinsurer’s administration of the Business Covered, including the monitoring and
auditing of the Reinsured and their Affiliates of the Reinsurer’s performance in administering the
Business Covered and any internal reports related to such monitoring and auditing, (f) any
materials prepared for the boards of directors of the Reinsured or their Affiliates and (g) any
materials that are privileged and/or confidential for which the Reinsured or their Affiliates do
not have a common interest with the Reinsurer; provided, that if any such records or data referred
to in the foregoing clauses (i) through (ix) contain information which does not relate to the
Business Covered, such information shall not constitute “Books and Records” for purposes of this
Reinsurance Agreement.

          “Business Covered” means:

	 	(1)	 	All losses relating to A&P Claims that are unpaid, as reflected on the Books
and Records, either on a direct or assumed basis, as of the Inception Date;
	 
	 	(2)	 	All losses relating to Asbestos Claims arising out of or relating to (A)
policies, certificates, binders, contracts or cover notes of insurance or reinsurance
issued by, or on behalf of, any Reinsured or CNA Insurer, (B) insurance or reinsurance
obligations assumed by any Reinsured or CNA Insurer by means of acquisitions,
assumption reinsurance, loss portfolio transfers (whether affected by reinsurance or
otherwise) or otherwise or (C) any participation by any Reinsured or CNA Insurer in any
insurance or reinsurance pool, syndicate or association, in all instances under (A),
(B) and (C) prior to January 1, 2010; and
	 
	 	(3)	 	All losses relating to Pollution Claims arising out of or relating to (A)
policies, certificates, binders, contracts or cover notes of insurance or reinsurance
issued by,

3

 

	 	 	 	or on behalf of, any Reinsured or CNA Insurer, (B) insurance or reinsurance
obligations assumed by any Reinsured or CNA Insurer by means of acquisitions,
assumption reinsurance, loss portfolio transfers (whether affected by reinsurance or
otherwise) or otherwise or (C) any participation by any Reinsured or CNA Insurer in
any insurance or reinsurance pool, syndicate or association, in all instances under
(A), (B) and (C) prior to January 1, 1989.

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

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

          “Change of Control” shall be deemed to have occurred if: (i) any Person, organization
or association of persons or organizations acting in concert, excluding Affiliates of the Parties,
as applicable, shall acquire more than twenty percent (20%) of the outstanding voting stock of any
of the Parties, CNA, any CNA Insurer or Berkshire; (ii) any Person, organization or association of
persons or organizations acting in concert shall succeed in electing two or more directors to the
boards of directors of any of the Parties, CNA or Berkshire, in any one election in opposition to
those proposed by the Board of Directors of such Party, CNA or Berkshire, as applicable; (iii) any
of the Parties, CNA or Berkshire, as applicable, transfers all or substantially all of its or any
of its Affiliates’ operating properties and assets to another Person, organization or association
of persons or organizations, excluding Affiliates of the Parties, as applicable or (iv) any of the
Parties, CNA or Berkshire, as applicable, shall consolidate with or merge into any Person, firm,
corporation or other entity unless such entity or any one of its Affiliates shall be the continuing
corporation or the successor corporation.

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

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

          “Closing Date” means the day on which the closing of the transactions contemplated by
this Reinsurance Agreement and the Transaction Documents takes place.

          “CNA” means CNA Financial Corporation, a Delaware corporation.

          “CNA Insurers” means all property and casualty insurance companies which, as of the
Inception Date, (a) are current or were former Affiliates of the Reinsured, other than (i) the
Reinsured, (ii) First Insurance Company of Hawaii, Ltd. and its insurance company Subsidiaries as
of the Inception Date and (iii) CNA Surety Corporation and its Subsidiaries as of the Inception
Date and (b) ceded an A&P Claim to any Reinsured under a reinsurance agreement or cover note or
whose liability for an A&P Claim was transferred to, or otherwise assumed by, any Reinsured by
means of an acquisition, assumption reinsurance, loss portfolio transfer (whether affected by
reinsurance or otherwise) or otherwise, in each case entered into prior to the Inception Date, and
when such company was an Affiliate of any Reinsured. The term “CNA Insurers” as used herein shall
include any predecessor or successor of such companies, including by reason of merger,
consolidation or otherwise.

          “Collateral Reduction Event” has the meaning set forth in Section 9.5.

4

 

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

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

          “Collateral Trust Account” has the meaning set forth in Section 9.1(a).

          “Collateral Trust Agreement” means the trust agreement by and among the Reinsured,
Reinsurer and Trustee, substantially in the form of Exhibit B attached hereto.

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

          “Collection Expenses” means the reasonable out-of-pocket expenses incurred by any
Party in connection with the negotiation and collection of Third Party Reinsurance Recoverables or
Commutation Payments.

          “Commutation Payments” means Gross Commutation Payments, less Collection Expenses.

          “Confidential Information” has the meaning set forth in Section 17.1(c).

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

          “Declaratory Judgment Expense” means all Collection Expenses, attorneys’ fees,
expenses and other costs attributable to coverage analysis, declaratory judgment actions or other
coverage dispute resolution procedures brought to determine defense, indemnification and/or payment
obligations for any Business Covered, whether or not a loss has been paid. For purposes of this
Reinsurance Agreement, this definition of “Declaratory Judgment Expenses” shall apply regardless of
how the Reinsured reserves for Declaratory Judgment Expenses on its annual and quarterly statutory
financial statements filed with Governmental Authorities.

          “Disclosing Party” has the meaning set forth in Section 17.1(a).

          “Dispute” has the meaning set forth in Section 10.1.

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

          “Excluded Liabilities” has the meaning set forth in Section 2.4(g).

          “Extracontractual Damages” has the meaning set forth in Section 12.1(a).

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

5

 

          “GRM Direct & Assumed, Syndicate, Pool or Association” means (a) any counterparty
under any insurance or reinsurance agreement or cover note with any Reinsured, (b) any Person whose
liability for an A&P Claim has been transferred to, or otherwise assumed by, any Reinsured by means
of an acquisition, direct insurance, assumption reinsurance, loss portfolio transfer (whether
affected by reinsurance or otherwise) or otherwise, or (c) any insurance or reinsurance pool,
syndicate or association that, in the case of clauses (a), (b) and (c) is listed on Schedule
1.1(b) attached hereto, in all cases as such assumptions or transfers were in place as of the
Inception Date.

          “Gross Commutation Payments” means any payments received by the Reinsured or the
Reinsurer (acting on behalf of the Reinsured) from a reinsurer counterparty under a Third Party
Reinsurance Agreement in connection with the recapture, commutation, termination or reduction of
any reinsurance under a Third Party Reinsurance Agreement that is effectuated on or after the
Inception Date, but prior to the expiration or termination of this Reinsurance Agreement.

          “Gross Third Party Reinsurance Recoverables” means any amounts actually collected by
the Reinsured or the Reinsurer (acting on behalf of the Reinsured) in connection with Third Party
Reinsurance Agreements.

          “Inception Date” means 12:01 a.m. Central Standard Time on January 1, 2010.

          “Initial Reconciliation Statement” means the estimated reconciliation statement as of
the month ending prior to the Closing Date provided by the Reinsured to the Reinsurer five (5)
Business Days prior to the Closing Date pursuant to Schedule 2.3 of the Master Transaction
Agreement.

          “LPT Limit” has the meaning set forth in Section 2.1.

          “Master Transaction Agreement” has the meaning set forth in the Recitals.

          “Non-A&P Claims” means: (i) all claims that are not defined as an Asbestos Claim or a
Pollution Claim herein or (ii) all claims made after December 31, 2009 alleging Bodily Injury as a
result of exposure to a Pollutant, except for those Bodily Injury claims that otherwise meet the
definition of a “Pollution Claim” as defined and set forth herein. For the avoidance of doubt, the
following types of claims are Non-A&P Claims: silica, breast implants, indoor mold, blood
factorates, repetitive stress injuries, noise induced hearing loss, lead pigment on buildings,
indoor air pollution (unless caused by actual, alleged or threatened pollution of land, the
external atmosphere, or any watercourse or body of water) and firearms.

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

          “Other Recoveries” means any and all payments, collections and recoveries relating to
A&P Claims paid on and after the Inception Date, other than (i) Third Party Reinsurance
Recoverables and (ii) Retrospective Premiums, and shall include, among other things, any salvage
and subrogation received as further set forth in Section 13.1.

6

 

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

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

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

          “Pollutants” as used in the definition of “Pollution Claim” includes any solid,
liquid, gaseous or thermal substance, irritant or contaminant, including smoke, vapor, soot, fumes,
acids, alkalis, chemicals and waste (including any materials to be recycled, reconditioned or
reclaimed).

          “Pollution Claim” means the following: (i) for claims shown on the Books and Records
of any Reinsured or CNA Insurer as having been made on or prior to December 31, 2009, all claims
coded as “pollution claims” or “environmental claims” on the Books and Records of any Reinsured or
CNA Insurer and arising under the accounts listed on Schedule 1.1(c) attached hereto, (ii)
for claims shown in the files and records of any GRM Direct & Assumed, Syndicate, Pool or
Association as having been made on or prior to December 31, 2009, all claims coded as “pollution
claims” or “environmental claims” in the files and records of any GRM Direct & Assumed, Syndicate,
Pool or Association, and (iii) for claims made after December 31, 2009, (A) any claim involving
allegations, in whole or in part, of Property Damage arising out of, or relating to, an actual,
alleged or threatened discharge, emission, dispersal, seepage, migration, release or escape of
Pollutants into or upon land, the atmosphere or any watercourse or body of water including claims
for nuisance and trespass and claims for equitable relief and (B) any claim involving allegations
of Bodily Injury, personal injury, mental anguish, medical monitoring, nuisance and trespass,
including claims for equitable relief, associated with, related to or resulting from any actual,
alleged or threatened discharge, emission, dispersal, seepage, migration, release or escape of
Pollutants into or upon land, the atmosphere or any watercourse or body of water which caused or
threatened to cause Property Damage. For the avoidance of doubt, the Parties acknowledge and agree
that claims arising from actual, alleged or threatened pollution of the air inside a building
(e.g., indoor mold claims) are not a “Pollution Claim” unless the pollution was caused by actual,
alleged or threatened pollution of land, the external atmosphere or any watercourse or body of
water. For the further avoidance of doubt, the Parties also acknowledge and agree that claims
asserting that any Reinsured or CNA Insurer (A) failed to warn any Person of potential Pollutants,
(B) engaged in any unfair trade practice or failed to handle claims in good faith, (C) negligently
conducted loss control functions, (D) failed to settle or pay claims within the limits of any
Reinsured Contract, (E) otherwise negligently conducted claims handling, (F) misrepresented, or
otherwise committed a tort or fraud in connection with the Business Covered, or (G) failed to
properly comply with Medicare or other liens, in each case, as long as such assertions arise out
of, relate to, or are in connection with, Pollution Claims, shall be deemed Pollution Claims.
While the coding of any Reinsured or CNA Insurer shall be conclusive as to whether a claim made on
or prior to December 31, 2009 is a Pollution Claim, for a claim made after December 31, 2009, the
past coding of any Reinsured or CNA Insurer of a similar claim shall not be conclusive as to
whether the claim is a Pollution Claim. Pollution Claims shall not include Non A&P Claims.

7

 

          “Pre-Inception Date Receivables” means all receivables that arise out of or relate to
the Business Covered and which are payable under the Third Party Reinsurance Agreements
attributable to Asbestos Claims and Pollution Claims paid by or on behalf of the Reinsured prior to
the Inception Date, including those set forth on Schedule 1.1(d) hereto.

          “Property Damage” means actual or threatened or potential: (i) physical injury to
tangible property, including all resulting loss of use of that property; or (ii) loss of use of
tangible property that is not physically injured. For the avoidance of doubt, electronic data
shall not be considered to be tangible property.

          “Receiving Party” has the meaning set forth in Section 17.1(a).

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

          “Reinsurance Credit Event” has the meaning set forth in Section 15.1(a).

          “Reinsurance Credit Event I” has the meaning set forth in Section 9.6(a)(i).

          “Reinsurance Credit Event II” has the meaning set forth in Section 9.6(a)(i).

          “Reinsurance Credit Event II Trust Accounts” has the meaning set forth in Section
9.6(a)(iv).

          “Reinsurance Credit Event II Trust Agreement” has the meaning set forth in Section
9.6(a)(iii).

          “Reinsured” has the meaning set forth in the Preamble. The term “Reinsured”
as used herein shall include any predecessor or successor of such companies, including by reason of
merger, consolidation or otherwise.

          “Reinsured Contracts” means all policies, contracts, certificates, binders and cover
notes of insurance or reinsurance issued by any Reinsured or CNA Insurer, or by any GRM Direct &
Assumed, Syndicate, Pool or Association, covering or pertaining to the Business Covered.

          “Reinsured Liabilities” has the meaning set forth in Section 2.1.

          “Reinsurance Premium” has the meaning set forth in Section 3.1.

          “Reinsurer” has the meaning set forth in the Preamble. The term “Reinsurer”
as used herein shall include any predecessor or successor of such company, including by reason of
merger, consolidation or otherwise.

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

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

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          “Reserves” means, as required by SAP or Applicable Law of the jurisdiction of domicile
of such Person, reserves (including any gross, net and ceded reserves), funds or provisions for
losses, claims, unearned premiums, benefits, costs and expenses (including Allocated Loss
Adjustment Expenses) in respect of the Business Covered.

          “Retrospective Premiums” means any amounts due from a policyholder or insured under a
Reinsured Contract as a result of any increase in premiums charged thereunder or additional premium
payable thereunder based upon the claims or loss experience pursuant to the terms and conditions of
such Reinsured Contract.

          “Rules” has the meaning set forth in Section 11.1(a).

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

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

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

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

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

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

          “Third Party Reinsurance Agreements” means reinsurance agreements, other than this
Reinsurance Agreement and reinsurance agreements solely between or among CNA Affiliates, whereby
any Reinsured or CNA Insurer has ceded the Business Covered, and which agreements have not been
voided or commuted.

9

 

          “Third Party Reinsurance Allocation Agreement” means the Third Party Reinsurance
Allocation Agreement by and among the Parties, substantially in the form of Exhibit C
attached hereto.

          “Third Party Reinsurance Recoverables” means Gross Third Party Reinsurance
Recoverables, less Collection Expenses.

          “Transaction Documents” means the Master Transaction Agreement and the Ancillary
Agreements (as such term is defined in the Master Transaction Agreement), other than this
Reinsurance Agreement.

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

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

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

ARTICLE II

REINSURANCE CEDED

          2.1 Reinsurance Coverage.

          Effective as of the Inception Date, the Reinsured shall cede to the Reinsurer, and the
Reinsurer shall reinsure 100% of all losses, liabilities and expenses included within the
definition of Ultimate Net Loss paid by the Reinsured (as recorded on the general ledger of the
Reinsured) on or after the Inception Date, subject to the LPT Limit (the “Reinsured
Liabilities”). Notwithstanding any other provision in this Reinsurance Agreement or the
Transaction Documents to the contrary, the Reinsurer’s aggregate limit of liability for Ultimate
Net Loss shall be no greater than Four Billion Dollars ($4,000,000,000) (the “LPT Limit”).

          2.2 Commencement of the Reinsurer’s Liability.

          The Reinsurer’s liability under this Reinsurance Agreement shall attach simultaneously with
that of the Reinsured, and all reinsurance with respect to which the Reinsurer shall be liable by
virtue of this Reinsurance Agreement shall be subject in all respects to the same risks, terms,
rates, conditions, interpretations, assessments and waivers and to the same modifications,
alterations and cancellations, as the respective Reinsured Contracts and Business Covered to which
liability under this Reinsurance Agreement attaches, the true intent of this Reinsurance Agreement
being that the Reinsurer shall, in every case to which liability under this Reinsurance Agreement
attaches, follow the fortunes of the Reinsured, and the Reinsurer shall be bound, without
limitation, by all payments and settlements entered into by or on behalf

10

 

of the Reinsured, subject to the terms, conditions, provisions and the LPT Limit set forth
herein, and the Administrative Services Agreement.

          2.3 Ultimate Net Loss.

          “Ultimate Net Loss” means the sum of any amount which is paid, required to be paid or
due to be paid by any Reinsured or CNA Insurer on and after the Inception Date in respect of
Business Covered for: (i) settlement or satisfaction of the A&P Claims relating to the Business
Covered; plus (ii) Allocated Loss Adjustment Expenses; plus (iii) Declaratory
Judgment Expenses; plus (iv) Extracontractual Damages; minus (v) Third Party
Reinsurance Recoverables and Other Recoveries (but expressly excluding Pre-Inception Date
Receivables), to the extent actually collected and paid to the Reinsurer; provided, however, in no
event shall Ultimate Net Loss include any Unallocated Loss Adjustment Expenses.

          2.4 Exclusions.

          Notwithstanding any provision of this Reinsurance Agreement to the contrary, the Reinsurer
shall not be liable for any liabilities or obligations of the Reinsured that are not Reinsured
Liabilities, including:

     (a) Any sum paid or booked as paid prior to the Inception Date in settlement or payment
of any obligation arising from Business Covered, including any such sums for Allocated Loss
Adjustment Expenses, Declaratory Judgment Expenses or Extracontractual Damages which, in
each case, were paid or booked as paid prior to the Inception Date;

     (b) Any liability of any Reinsured or CNA Insurer for the intentional and malicious
acts or omissions of their employees, officers or directors (as so determined by final
adjudication by any Order, writ, injunction, directive, judgment or decree of a court of
competent jurisdiction applicable to the Parties), except to the extent that any loss would
otherwise constitute an Extracontractual Damage;

     (c) Any liability with respect to any Tax or assessment, whether paid directly by the
Reinsured or billed to the Reinsured by or through a cedent or insured, regardless of
whether the Tax is denominated as an income tax, excise tax, premium tax, surplus lines tax
or any other Tax or assessment;

     (d) Any claims under workers’ compensation policies (except for coverage for (1B)
employer’s liability claims that involve asbestos or pollution) or under first party
insurance policies;

     (e) Any liability arising from Reinsured’s role as a managing general agent or pool
manager;

     (f) Any liability assumed by any Reinsured under a reinsurance agreement or cover note
entered into on or after the Inception Date, including with any CNA Insurer who was not
an Affiliate of CNA on the date such reinsurance agreement or cover note

11

 

was entered into, or any additional liability arising from an amendment to a
reinsurance agreement, which amendment was entered into on or after the Inception Date;

     (g) Any additional liability arising from an amendment to a Reinsured Contract by a
Reinsured pursuant to Section 19.1(b); or

     (h) Any claim or liability set forth on Schedule 2.4(h) attached hereto
(collectively, (a)-(h) constitute the “Excluded Liabilities”).

          2.5 Unallocated Loss Adjustment Expenses.

          For the avoidance of doubt, notwithstanding any provision of this Reinsurance Agreement to the
contrary, the Reinsurer shall be responsible for reimbursing the Reinsured for three million five
hundred thousand dollars ($3,500,000), which amount represents the Reinsurer’s share of the
Unallocated Loss Adjustment Expenses incurred by the Reinsured in connection with the Business
Covered on or after the Inception Date up to the Closing Date, and such payment shall not affect
the LPT Limit or the reinsurance provided hereunder. The amount of the payment referenced in the
foregoing sentence shall be deposited into the Collateral Trust Account in accordance with
Section 2.3 of the Master Transaction Agreement. The Reinsurer shall be liable for
Unallocated Loss Adjustment Expenses that (i) Reinsurer has incurred in connection with its
administration of the Business Covered pursuant to the Administrative Services Agreement, or (ii)
have been expressly approved for payment in writing by Reinsurer or otherwise provided for in this
Reinsurance Agreement, and such payments shall not affect the LPT Limit.

          2.6 Notice Regarding LPT Limit.

          In the event that the remaining LPT Limit is, through the Reinsurer’s payment of Ultimate Net
Loss under this Reinsurance Agreement, reduced to one billion dollars ($1,000,000,000) on a paid
basis, the Reinsurer shall promptly provide written notice to the Reinsured and, to the extent that
the Reinsurer has concluded that the remaining LPT Limit will be exhausted on a paid basis, a good
faith estimate of the date when the LPT Limit is expected to be exhausted.

          2.7 Territory.

          The reinsurance provided under this Reinsurance Agreement shall be coextensive with the
territory of the Reinsured Contracts.

          2.8 Change of Control.

          For the avoidance of doubt, the reinsurance provided under this Reinsurance Agreement shall
continue unchanged regardless of any Change of Control.

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          2.9 Redomestication.

          The Reinsurer’s consent shall be obtained prior to any action by a Reinsured or a CNA Insurer
(including a Change of Control) that results in redomestication of that entity outside the United
States.

          2.10 CNA Insurers Bound.

          The Reinsured shall cause the CNA Insurers to abide by and be bound by the terms and
conditions of this Reinsurance Agreement and the Administrative Services Agreement.

ARTICLE III

REINSURANCE CONSIDERATION

          3.1 Reinsurance Premium.

          On the Closing Date, the Reinsured shall pay to the Reinsurer cash in the aggregate amount of
two billion dollars ($2,000,000,000) (the “Reinsurance Premium”), as adjusted in the
Initial Reconciliation Statement pursuant to Section 2.3 of the Master Transaction
Agreement, to be deposited directly by the Reinsured on behalf of the Reinsurer into the Collateral
Trust Account.

          3.2 Transfer of Pre-Inception Date Receivables.

          In addition to the payment of the Reinsurance Premium, the Reinsured shall transfer the right
to collect the Pre-Inception Date Receivables to the Reinsurer. All Pre-Inception Date Receivables
actually collected by the Reinsurer shall be for the benefit and account of the Reinsurer. The
Parties hereby acknowledge and agree that neither the collection of, or failure to collect,
Pre-Inception Date Receivables shall affect the LPT Limit. The Reinsured shall, if reasonably
requested by the Reinsurer, aid the Reinsurer at the Reinsurer’s expense in the collection of
Pre-Inception Date Receivables, and the Reinsurer is authorized to undertake such efforts as it
deems reasonably necessary, including on behalf of and in the name of a CNA Insurer, in order to
collect such Pre-Inception Date Receivables.

          3.3 Payments.

     (a) Except with respect to payments of Ultimate Net Loss made by Reinsurer to third
parties on behalf of Reinsured, and except as otherwise set forth in Section 2.3 of the
Master Transaction Agreement with respect to the accounting reconciliation, all payments
between the Parties made pursuant to this Reinsurance Agreement shall be made either (i) by
wire transfer of United States dollars in cash to such bank account or accounts as
designated by the recipient or (ii) by direct deposit or direct debit through the Automated
Clearing House (ACH) system.

     (b) Except with respect to payments of Ultimate Net Loss made by Reinsurer to third
parties on behalf of Reinsured, and except as otherwise set forth in Section 2.3 of the
Master Transaction Agreement with respect to the accounting reconciliation, all

13

 

payments by the Reinsurer to the Reinsured shall be made directly to the Reinsured or
to its liquidator, receiver, or its statutory successor.

ARTICLE IV

ADMINISTRATION

          4.1 Administration.

          Pursuant to the Administrative Services Agreement, the Reinsured and the CNA Insurers appoint
the Reinsurer and/or its duly appointed Affiliate(s) to perform all administrative services with
respect to the Reinsured Contracts and Third Party Reinsurance Agreements as respects the Business
Covered until the date of termination of this Reinsurance Agreement (or the date of termination of
the Administrative Services Agreement, if earlier) and the Reinsurer agrees to perform such
services on behalf of the Reinsured as provided in the Administrative Services Agreement.

ARTICLE V

RESERVING REQUIREMENTS

          5.1 Reserve Assumption Changes.

          On and after the Inception Date, the Reinsurer shall establish and at all times maintain a
reserve liability on the Reinsurer’s statutory financial statements with respect to the Reserves on
the Business Covered, which shall be determined by the Reinsurer in accordance with SAP, including
applicable actuarial principles. The Reinsured shall determine its Reserves on the Business
Covered in accordance with SAP, including applicable actuarial principles.

ARTICLE VI

DURATION AND TERMINATION

          6.1 Duration and Termination.

          Without limiting any provision of the Master Transaction Agreement, this Reinsurance Agreement
shall commence on the Closing Date and continue in force until (i) such time as the Reinsurer’s
liability with respect to Ultimate Net Loss terminates, which will be the earlier of: (a) the date
the Reinsured’s liability with respect to the Business Covered is terminated and all amounts due
the Reinsured under this Reinsurance Agreement with respect to the Business Covered is paid or (b)
the date on which the Reinsurer has paid an amount of Ultimate Net Loss equal to the LPT Limit or
(ii) the date on which this Reinsurance Agreement is terminated by the mutual written consent of
the Parties.

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          6.2 Effect of Termination.

          Notwithstanding the other provisions of this Article VI, the terms and conditions of
Articles I and X and the provisions of Sections 21.1, 22.1,
22.7, 22.12, and 22.13 shall remain in full force and effect after the
termination of this Reinsurance Agreement.

ARTICLE VII

ACCOUNTING AND SETTLEMENT REPORTS

          7.1 Accounting and Settlement Reports.

          Pursuant to and in accordance with the terms of the Administrative Services Agreement, the
Reinsurer will provide to the Reinsured accounting and settlement reports as to the Reinsured
Contracts and Third Party Reinsurance Agreements as respects the Business Covered.

          7.2 Tax Reporting.

          Each Party to the transaction provided for in this Reinsurance Agreement has conducted prior
to execution of this Reinsurance Agreement such risk transfer testing analysis as that Party deems
appropriate in its independent judgment in order to report properly the transaction for SAP and
federal income tax purposes. Based on such analysis each Party has independently determined that
the transaction provided for in this Reinsurance Agreement is properly accounted for as reinsurance
for SAP and federal income tax purposes.

ARTICLE VIII

INSOLVENCY

          8.1 Insolvency of Reinsured.

     (a) The Reinsurer hereby agrees that in the event of the insolvency of any Reinsured
and the appointment of a conservator, liquidator, receiver or statutory successor of the
Reinsured, all amounts due the Reinsured under this Reinsurance Agreement shall be payable
by the Reinsurer to any conservator, liquidator, receiver or statutory successor of the
Reinsured on the basis of the claims allowed against the Reinsured by any court of competent
jurisdiction or by any conservator, liquidator, receiver or statutory successor of the
Reinsured having authority to allow such claims, without diminution because of that
insolvency, or because the conservator, liquidator, receiver or statutory successor has
failed to pay all or a portion of any claims. Payments by the Reinsurer as set forth in
this Section shall be made directly to the Reinsured or to its conservator, liquidator,
receiver, or statutory successor, except where the Reinsurance Agreement specifically
provides another payee of such reinsurance in the event of the insolvency of the Reinsured.
Under no circumstances shall Reinsurer’s liability hereunder be accelerated or enlarged by
the insolvency of any Reinsured.

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     (b) It is agreed and understood, however, that in the event of the insolvency of any
Reinsured the liquidator, receiver or statutory successor of such Reinsured shall give
written notice of the pendency of a claim against such Reinsured on a Reinsured Contract
within a reasonable period of time after such claim is filed in the insolvency proceedings
and that during the pendency of such claim 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 such Reinsured or its liquidator,
receiver or statutory successor. It is further understood that the expense thus incurred by
Reinsurer shall be chargeable, subject to court approval, against such Reinsured as part of
the expense of liquidation to the extent of a proportionate share of the benefit which may
accrue to such Reinsured solely as a result of the defense undertaken by Reinsurer.

ARTICLE IX

COLLATERAL TRUST ACCOUNT

          9.1 Establishment of Collateral Trust Account.

     (a) In accordance with the Collateral Trust Agreement to be entered into between the
Parties and the Trustee as of the date hereof, the Reinsurer shall have procured, on or
prior to the date hereof, with and in the name of the Trustee, a segregated trust account
maintained by the Trustee with account number 80460400 (the “Collateral Trust
Account”), to be held for the benefit of each of the Reinsured pursuant to the
provisions of the Collateral Trust Agreement.

     (b) On the Closing Date, (i) the Reinsured shall transfer and assign to the Collateral
Trust Account, on behalf of the Reinsurer, assets consisting of cash in the aggregate amount
of the Reinsurance Premium, as adjusted in the Initial Reconciliation Statement pursuant to
Section 2.3 of the Master Transaction Agreement and (ii) the Reinsurer shall
transfer and assign to the Collateral Trust Account assets consisting of cash in the
aggregate amount of two hundred million dollars ($200,000,000).

          9.2 Ongoing Funding of Collateral Trust Account.

          In accordance with the requirements of the Collateral Trust Agreement, unless there is a
Collateral Triggering Event or a Reinsurance Credit Event, the Reinsurer shall not be required to
deposit additional assets into the Collateral Trust Account after the Closing Date. All transfers
to and withdrawals from the Collateral Trust Account shall be in accordance with the terms set
forth herein and subject to the requirements set forth in the Collateral Trust Agreement.

          9.3 Collateral Trust Assets.

     (a) Prior to the occurrence of a Reinsurance Credit Event, the assets that may be held
in the Collateral Trust Account shall consist of Eligible Investments. Upon the occurrence
of a Reinsurance Credit Event, however, in accordance with the requirements of the
Collateral Trust Agreement and Section 9.6 herewith, the assets in the Collateral
Trust Account shall consist of Permitted Investments.

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

     (c) Pursuant to the terms of the Collateral Trust Agreement, the Collateral Trust
Assets shall be held by the Trustee for the sole purpose of satisfying any obligations of
the Reinsurer to the Reinsured with respect to the Business Covered under this Reinsurance
Agreement.

          9.4 Settlements.

          All settlements of account under the Collateral Trust Agreement between the Reinsurer and the
Reinsured shall be made in United States dollars in cash or its equivalent.

          9.5 Modification Upon Occurrence of Collateral Triggering Event.

          The Parties acknowledge and agree that, upon the occurrence of a Collateral Triggering Event,
all references to “Security Amount” in the Collateral Trust Agreement shall be modified in
accordance with its definition to give effect to the Collateral Triggering Event. In addition, as
soon as is practicable, but no later than contemporaneously with the posting of the collateral
under any Collateral Triggering Agreement that results in the Reinsurer posting one billion dollars
or more of collateral either on an individual or aggregate basis, the Reinsurer shall deposit such
additional assets into the Collateral Trust Account so that the aggregate fair market value of the
Eligible Investments in the Collateral Trust Account equals the newly computed Security Amount.
Until such time as (i) the events, changes or conditions that gave rise to the collateral
requirement under one or more of the Collateral Triggering Agreements cease to exist or apply and
(ii) the Reinsurer has withdrawn or reduced the aggregate amount of collateral posted under
Collateral Triggering Agreements ((i) and (ii) together, the “Collateral Reduction Event”),
the Reinsurer shall ensure that the Collateral Trust Account shall hold Eligible Investments at all
times with a fair market value of no less than 100% of the Security Amount (as defined in clause
(ii) of Section 1.1(jj) of the Collateral Trust Agreement); provided, however, if a
Collateral Reduction Event has occurred, the Security Amount shall be reduced by a percentage which
is proportionate to each percentage reduction of all collateral posted under the Collateral
Triggering Agreements; provided, further, however, in no event shall the Security Amount be reduced
to an amount less than 100% of the Security Amount (as defined in clause (i) of Section
1.1(jj) of the Collateral Trust Agreement).

          9.6 Modification Upon Occurrence of a Reinsurance Credit Event.

     (a) The Parties acknowledge and agree that, upon the occurrence of a Reinsurance Credit
Event, this Reinsurance Agreement, the Collateral Trust Agreement and the Collateral Trust
Account shall be modified for that period of time for which the Reinsurance Credit Event
continues to apply, to fully conform to the requirements of the laws and regulations
governing credit for reinsurance of the domiciliary state of the

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Reinsured that that is the subject of the Reinsurance Credit Event. Furthermore, the
Parties acknowledge and agree that a Reinsurance Credit Event may occur as a result of the
financial impairment of the Reinsurer or it may occur as a result of other causes, some of
which may be cured by the Reinsurer within a reasonable period of time. Consequently, the
Parties hereto agree that:

     (i) Should either Party become aware of a Reinsurance Credit Event or the
likelihood of the occurrence of a Reinsurance Credit Event, such Party shall provide
prompt written notice to the other either (i) certifying that a Reinsurance Credit
Event has occurred or (ii) describing the circumstances and cause for such notice.
Such notice shall indicate whether the Reinsurance Credit Event resulted or is likely
to result from any financial impairment of the Reinsurer or from other causes. For
purposes of this Article IX, a Reinsurance Credit Event resulting from or
likely to result from any financial impairment of the Reinsurer shall be referred to
as a “Reinsurance Credit Event I” and a Reinsurance Credit Event resulting
from or likely to result from causes other than the financial impairment of the
Reinsurer shall be referred to as a “Reinsurance Credit Event II.”

     (ii) Upon the occurrence of a Reinsurance Credit Event I, the Parties acknowledge
and agree that certain provisions of the Collateral Trust Agreement shall cease to be
effective, and other provisions shall automatically become effective thereafter, as
described in the Collateral Trust Agreement. In addition, any other provisions
required under applicable law and regulations governing trusts providing full
statutory financial statement credit for reinsurance ceded by property and casualty
insurance companies shall be incorporated into the Collateral Trust Agreement.

     (iii) Upon the occurrence of a Reinsurance Credit Event II, then the Reinsurer
shall have a period of ninety (90) calendar days to seek to cure or address to the
satisfaction of the Reinsured the circumstances giving rise to the Reinsurance Credit
Event II. Should the Reinsurer be unable to cure the situation or address it to the
satisfaction of the Reinsured during such period, Reinsurer shall establish a new
trust account for each Reinsured that is the subject of the Reinsurance Credit Event
II, pursuant to a trust agreement substantially in the form attached hereto as
Exhibit D (“Reinsurance Credit Event II Trust Agreement”).
Notwithstanding anything to the contrary stated herein, the Reinsurer shall be
required to establish a new trust account solely for the benefit of CCC and/or CIC,
respectively, and only to the extent CCC and/or CIC is the subject of the Reinsurance
Credit Event II.

     (iv) The trust account or accounts established pursuant to the Reinsurance Credit
Event II Trust Agreements (“Reinsurance Credit Event II Trust Accounts”) shall
initially be funded by such Permitted Investments from the Collateral Trust Account
that represents the percentage of the remaining value of Collateral Trust Assets
reflecting the portion of the Reinsurance Premium that was contributed by the
applicable Reinsured, less Ultimate Net Loss paid in respect of such Reinsured. In
addition to such assets, the Reinsurer shall deposit into the Reinsurance Credit Event
II Trust Accounts sufficient additional assets so that the

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aggregate fair market value of the Reinsurance Credit Event II Trust Accounts
equals the applicable Required Amount. The Reinsurance Credit Event II Trust Accounts
shall be funded with Permitted Investments only.

     (v) The Reinsurance Credit Event II Trust Accounts shall remain in place only for
so long, and only to the extent, required to address the event, change or condition
giving rise to the establishment of such trust accounts. The Reinsured agrees that in
the event that the Reinsurance Credit Event ceases to exist or apply, the Reinsured
will provide its approval for the termination of the Reinsurance Credit Event II Trust
Accounts and for the return of all assets to the Reinsurer; provided, however, the
fair market value of the Permitted Investments transferred from the Collateral Trust
Account to the Reinsurance Credit Event II Trust Account less Ultimate Net Loss paid
on behalf of the Reinsured since such transfer shall be transferred to the Collateral
Trust Account. In addition, to the extent that the obligations of the Reinsurer to
provide security diminish, the Reinsured shall provide its approval for the reduction
of the Reinsurance Credit Event II Trust Account.

          9.7 Withdrawal of Collateral Trust Assets by Reinsured Prior to the Occurrence of a Reinsurance
Credit Event.

     (a) The Parties agree that Collateral Trust Assets may be withdrawn by the Reinsured,
and utilized and applied by the Reinsured, or any successor by operation of law of the
Reinsured including, any liquidator or rehabilitator, receiver or conservator of the
Reinsured, without diminution because of insolvency on the part of the Reinsured or the
Reinsurer, only for one or both of the following purposes:

     (i) to pay or reimburse the Reinsured for the Reinsurer’s share of claims, losses
or other amounts due and payable to the Reinsured under the terms and conditions of
this Reinsurance Agreement or to pay or reimburse the Reinsured for amounts to which
it is entitled under the terms and conditions of the Administrative Services Agreement
not yet recovered from the Reinsurer or the Collateral Trust Account; and

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

     (b) Notwithstanding the foregoing, the Reinsured shall only withdraw Collateral Trust
Assets under Section 9.7(a)(i) pursuant to the terms of a final order of an
arbitration panel or court of competent jurisdiction with which the Reinsurer has failed to
comply, provided that notice of such withdrawal is provided not less than five (5) Business
Days in advance of the requested withdrawal. If the Reinsurer contests the validity of the
arbitration order by notice to the Reinsured, the Reinsurer may challenge the validity of
the withdrawal order in a court of competent jurisdiction. During the pendency of such
litigation, notice of withdrawal shall not be effective except as ordered by the court in
which the litigation is pending;

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     (c) The Reinsured shall return to the Collateral Trust Account, within five (5)
Business Days, assets withdrawn in excess of all amounts due under Sections
9.7(a)(i) and (ii). Any such excess amount shall at all times be held by the
Reinsured (or any successor by operation of law of the Reinsured, including any liquidator,
rehabilitator, receiver or conservator of Reinsured) in trust for the benefit of the
Reinsurer and be maintained in a segregated account, separate and apart from any assets of
the Reinsured for the sole purpose of funding the payments and reimbursements described in
Section 9.7(a).

          9.8 Withdrawal of Collateral Trust Assets by Reinsured After the Occurrence of a Reinsurance Credit
Event.

     (a) The Parties agree that the Collateral Trust Assets may only be withdrawn by the
Reinsured, and utilized and applied by the Reinsured, or any successor by operation of law
of the Reinsured including any liquidator or rehabilitator, receiver or conservator of the
Reinsured, without diminution because of insolvency on the part of the Reinsured or the
Reinsurer, for one or more of the following purposes:

     (i) to pay or reimburse the Reinsured for the Reinsurer’s share of premiums
returned to policyholders or ceding companies of the Reinsured Contracts because of
cancellations of such contracts to the extent same constitute Ultimate Net Loss
hereunder;

     (ii) to reimburse the Reinsured for the Reinsurer’s share of surrenders and
benefits or losses paid by the Reinsured pursuant to the provisions of the Reinsured
Contracts to the extent same constitute Ultimate Net Loss hereunder;

     (iii) to fund an account with the Reinsured in an amount at least equal to the
deduction, for reinsurance ceded, from the Reinsured’s liabilities for the Reinsured
Liabilities. The account must include, but not be limited to, amounts for policy
reserves, claims and losses incurred, including losses incurred but not reported,
Allocated Loss Adjustment Expenses, and unearned premium reserves; and

     (iv) to pay any other amounts the Reinsured claims are due under this Reinsurance
Agreement.

     (b) The Reinsured shall return to the Collateral Trust Account, within five (5)
Business Days, assets withdrawn in excess of all amounts due under Sections
9.8(a)(i), (ii) and (iv), or, in the case of Section
9.8(a)(iii), assets that are subsequently determined not to be due. Any such excess
amount shall at all times be held by the Reinsured (or any successor by operation of law of
the Reinsured, including any liquidator, rehabilitator, receiver or conservator of
Reinsured) in trust for the benefit of the Reinsurer and be maintained in a segregated
account, separate and apart from any assets of Reinsured for the sole purpose of funding the
payments and reimbursements described in paragraphs (i), (ii) and (iv) of Section
9.8(a). The Reinsured shall pay interest in cash to the Reinsurer on the amount
withdrawn, equal to the actual amount of interest, dividends, and other

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income earned on the assets in such segregated account so long as the fair market value
of the assets in such segregated account and the fair market value of any remaining
Collateral Trust Assets equals, in the aggregate, 102% of the Required Amount, and shall
otherwise credit to such segregated account all such income earned on the assets in such
segregated account.

ARTICLE X

DISPUTE RESOLUTION

          10.1 Dispute Resolution.

          Notwithstanding anything contained herein to the contrary, any dispute between the Parties
arising out of or relating to this Reinsurance Agreement or the breach, termination or validity
hereof (“Dispute”) will be first addressed in accordance with the procedures specified in
Section 10.2, and subsequently, if necessary, Article XI, which will be the sole
and exclusive procedures for the resolution of any such Disputes.

          10.2 Negotiation Amongst the Parties.

     (a) The Parties agree that they shall first attempt to resolve Disputes by informal
in-person discussions and negotiations of their respective representatives. If the Parties
are unable to resolve any such Dispute through such in-person discussions and negotiations
within thirty (30) calendar days of the day on which a Party receives from the other Party
or Parties written notice of a Dispute, the Dispute shall be submitted for resolution to a
designated executive officer of each Party, with authority to make a decision. If the
designated executive officers are unable to reach a mutually acceptable resolution within
ten (10) calendar days after expiration of such thirty-day period, on the request of any
Party, the Dispute shall be resolved in accordance with subsection (b) of this Section
10.2. All negotiations, discussions, and communications made or conducted pursuant to
the procedures set forth in this Section 10.2(a) are confidential and will be
treated as compromise and settlement negotiations for purposes of the Federal Rules of
Evidence and any other applicable rules of evidence.

     (b) Upon completion of the dispute resolution process described in subsection (a) of
this Section 10.2 without resolution of the Dispute, any Party may submit the
Dispute for resolution in accordance with Article XI.

ARTICLE XI

ARBITRATION

          11.1 Arbitration.

     (a) Except as provided in Article X, any Dispute shall be finally determined by
arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration
Association (“AAA”) then in effect (the “Rules”), except as modified herein.
If the amount in controversy is five million dollars ($5,000,000) or less (including all

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claims and counterclaims) there shall be one arbitrator who shall be agreed upon by the
Parties within twenty (20) calendar days of receipt by respondent(s) of a copy of the demand
for arbitration. The single arbitrator may not award an amount greater than five million
dollars ($5,000,000) in value under any circumstances. If the amount in controversy is more
than five million dollars ($5,000,000) (including all claims and counterclaims) there shall
be three neutral and impartial arbitrators, one of whom shall be appointed by each of (i)
the Reinsured, on the one hand and (ii) the Reinsurer, on the other hand, within thirty (30)
calendar days of receipt by respondent(s) of the demand for arbitration, and the third
arbitrator, who shall chair the arbitral tribunal, shall be appointed by the Party appointed
arbitrators within fifteen (15) calendar days of the appointment of the second arbitrator.
If any arbitrator is not appointed within the time limit provided herein, such arbitrator
shall be appointed by the AAA in accordance with the listing, striking and ranking procedure
in the Rules, with each Party being given a limited number of strikes, except for cause.
Any arbitrator appointed by the AAA shall be a retired federal or state appellate court
judge or a current or retired officer of an insurance company with no less than fifteen (15)
years of experience in the property casualty insurance industry. The arbitration hearing on
the merits shall be commenced within ninety (90) calendar days of the appointment of the
arbitrator(s) or as soon thereafter as practicable. In rendering an award, the arbitral
tribunal shall be required to follow the laws of the State of New York. The award shall be
in writing and shall briefly state the findings of fact and conclusions of law on which it
is based. The arbitrator(s) shall be permitted to award any relief permitted under New York
law, including damages and any form of temporary or permanent injunctive relief, but shall
not be permitted to award special, indirect, punitive or incidental damages or damages for
lost profits or any other consequential damages or damages based on multiples or similar
valuation techniques. The award shall be final and binding upon the Parties and shall be
the sole and exclusive remedy between the Parties regarding any claims, counterclaims,
issues or accounting presented to the arbitrator(s). Judgment upon the award may be entered
in any court having jurisdiction over any Party or any of its assets. Any costs or fees
(including attorneys’ fees and expenses) incident to enforcing the award shall be charged
against the Party or Parties resisting such enforcement. Arbitrability of any and all
disputes shall be decided by the arbitrator(s). In the event of any inconsistency between
the Rules and the provisions of this Article XI, the provisions of this Article
XI shall control.

     (b) Arbitration hereunder shall be conducted in Chicago, Illinois or New York, New
York, as determined by the Party against whom the arbitration is demanded.

ARTICLE XII

EXTRACONTRACTUAL DAMAGES

          12.1 Extracontractual Damages.

     (a) To the maximum extent permitted by Applicable Law, this Reinsurance Agreement shall
cover Extracontractual Damages. “Extracontractual Damages” as used in this
Reinsurance Agreement means all liabilities arising from the Business

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Covered for which any Reinsured and CNA Insurer is liable arising from actual or
alleged misconduct, negligence, fraud or bad faith of any Reinsured, any CNA Insurer or any
of their Affiliates, or their agents, brokers or Representatives (other than the Reinsurer
acting on behalf of the Reinsured pursuant to the Administrative Services Agreement, which
liability shall be indemnified pursuant to such agreement) in their handling of claims or
losses, or in any of their dealings with their insureds or any other Person. Such
liabilities shall include punitive, exemplary, compensatory, and consequential damages.
Extracontractual Damages shall also include any and all amounts otherwise included in the
definition of Ultimate Net Loss that any Reinsured pays or is obligated to pay to ceding
companies under Business Covered that are agreements of assumed reinsurance, whether under
the terms of such reinsurance contracts or as a result of agreements between the Reinsured
and cedents as to the settlement of specific claims.

     (b) For the avoidance of doubt, notwithstanding anything to the contrary in this
Reinsurance Agreement, any liability of the Reinsured or the CNA Insurers for the
intentional and malicious acts or omissions of their employees, officers or directors (as so
determined by final adjudication by any Order, writ, injunction, directive, judgment or
decree of a court of competent jurisdiction applicable to the Parties) shall be paid by the
Reinsured or the CNA Insurers and any such payment shall not affect the LPT Limit.

     (c) For the avoidance of doubt, notwithstanding anything to the contrary in this
Reinsurance Agreement, any liability of the Reinsurer for the intentional and malicious acts
or omissions of their employees, officers or directors (as so determined by final
adjudication by any Order, writ, injunction, directive, judgment or decree of a court of
competent jurisdiction applicable to the Parties) shall be paid by the Reinsurer; provided,
however, any such payment shall not affect the LPT Limit.

ARTICLE XIII

SALVAGE AND SUBROGATION

          13.1 Salvage and Subrogation.

          The Reinsurer shall be subrogated to all rights of any Reinsured or CNA Insurer against any
Person or other entity who may be legally responsible in damages constituting Ultimate Net Loss for
which the Reinsurer shall actually pay, or become liable to pay, on or after the Inception Date
(but only to the extent of the amount of payment by, or the amount of liability of, the Reinsurer).
The Reinsured and the CNA Insurers hereby assign, transfer and convey to the Reinsurer any and all
rights of the Reinsured and the CNA Insurers to salvage and subrogation on the Business Covered
which was paid prior to the Inception Date. The rights of the Reinsurer and the obligations of the
Reinsured under this Section 13.1 shall terminate at such time as the Reinsurer shall have
paid to the Reinsured under this Reinsurance Agreement an amount of Ultimate Net Loss equal to the
LPT Limit.

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          13.2 Expenses.

          In determining the amount of salvage or subrogation, there shall first be deducted from any
amount recovered the out-of-pocket expenses incurred in effecting the recovery (including, without
limitation, all court, arbitration, mediation or other dispute resolution costs, attorneys’ fees
and expenses but excluding overhead, salaries and expenses of officers and employees of the
Reinsured and similar internal costs), except to the extent otherwise paid or reimbursed by the
Reinsurer hereunder.

ARTICLE XIV

THIRD PARTY REINSURANCE AGREEMENTS

          14.1 Third Party Reinsurance Agreements.

     (a) The Third Party Reinsurance Agreements shall be administered in accordance with the
Administrative Services Agreement. Any Third Party Reinsurance Recoverables will be
allocated in accordance with the terms and conditions of the Third Party Reinsurance
Allocation Agreement. Third Party Reinsurance Recoverables relating to A&P Claims paid by
Reinsurer shall be paid to Reinsurer. The Parties acknowledge and agree that amounts
recoverable under the Third Party Reinsurance Agreements are available both to the Reinsurer
for the Business Covered and to the Reinsured for all other claims in accordance with the
terms of the Third Party Reinsurance Allocation Agreement.

     (b) The Reinsured shall not, without the Reinsurer’s prior approval (which approval
shall not be unreasonably or arbitrarily withheld, conditioned or delayed), terminate or
materially modify any existing Third Party Reinsurance Agreement providing protection to the
Business Covered.

          14.2 Collection Responsibility.

          The Reinsured and the CNA Insurers shall, if reasonably requested by the Reinsurer, cooperate
with the Reinsurer, at the Reinsurer’s expense, in collection of all amounts due in respect of the
Reinsured Liabilities under the Third Party Reinsurance Agreements. The collection of such
reinsurance shall be the responsibility of the Reinsurer as provided in the Administrative Services
Agreement. To the extent such collections are not in fact made, the amounts uncollected shall not
serve to reinstate remaining Ultimate Net Loss as provided in Section 2.3. The Reinsured
shall not have any responsibility to the Reinsurer for any uncollectible amounts under Third Party
Reinsurance Agreements.

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ARTICLE XV

REINSURANCE CREDIT

          15.1 Reinsurance Credit.

     (a) Reinsurer shall, at its own expense, be required to take all steps (including the
posting of letters of credit or other acceptable security) necessary to comply with all
Applicable Laws in United States jurisdictions so as to permit all Reinsureds to obtain full
credit on their statutory financial statements (including those financial statements or
portions thereof required in connection with maintaining each Reinsured’s status as an
accredited reinsurer or eligible surplus lines insurer) for the reinsurance provided by this
Reinsurance Agreement in all applicable United States jurisdictions throughout the entire
term of this Reinsurance Agreement to the extent credit is not otherwise available under
such Applicable Law. Any event that results in any Reinsured being unable to obtain full
statutory financial statement credit for the reinsurance provided under this Reinsurance
Agreement in any applicable United States jurisdiction at any point in time during the term
of this Reinsurance Agreement shall be referenced herein as a “Reinsurance Credit
Event.” Reinsurer shall promptly notify Reinsured of any event or change or condition
that will reasonably likely result in a Reinsurance Credit Event.

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

     (c) Notwithstanding anything else contained herein, under no circumstances shall
Reinsurer be required at any time to fund any trust(s) and/or account(s) in excess of the
amount equal to the LPT Limit less Ultimate Net Loss paid.

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ARTICLE XVI

REGULATORY MATTERS

          16.1 Regulatory Matters.

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

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

     (c) The Reinsured and the Reinsurer agree that this Reinsurance Agreement shall not be
cancelled or rescinded without the prior consent of the domiciliary state insurance
commissioners of CCC and CIC to the extent such prior consent is required.

ARTICLE XVII

CONFIDENTIALITY

          17.1 Confidentiality.

     (a) The Parties (each, the “Receiving Party”) hereby covenant and agree, each
on behalf of itself and on behalf of its Affiliates, that from and after the date hereof,
the Receiving Party and its Affiliates will not disclose, give, sell, use or otherwise
divulge any Confidential Information (defined below) of the other Party (the “Disclosing
Party”) or permit their respective Representatives to do the same, except that each
Receiving Party may disclose such Confidential Information or portions thereof (i) if
legally compelled to do so or as required in connection with an examination by an insurance
regulatory authority, (ii) to the extent necessary for the performance of such Receiving
Party’s obligations under this Reinsurance Agreement or the Transaction Documents, (iii) the
enforcement of the rights of such Receiving Party and its Affiliates under this Reinsurance
Agreement or the Transaction Documents, (iv) to those of such Receiving Party’s Affiliates,
and to their respective Representatives in each case who need to know such information for
the foregoing purposes, (v) as required under any Applicable Law, (vi) as required to a Tax
Authority to support a position taken on any Tax Return or (vii) as required by the rules of
any stock exchange on which the stock of a Receiving Party’s Affiliate is traded. If the
Receiving Party or its Affiliates, or any of

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their respective Representatives become legally compelled to disclose any Confidential
Information (other than as required in connection with an examination by an insurance
regulatory authority or as required to a Tax Authority to support a position taken on any
Tax Return), the Receiving Party shall provide Disclosing Party with prompt written notice
of such requirement so that the Disclosing Party may seek a protective order or other remedy
or waive compliance with this Section 17.1. In the event that such protective order
or other remedy is not obtained, or the Disclosing Party waives compliance with this
Section 17.1, the Receiving Party or its Affiliates, as applicable, shall furnish
only that portion of Confidential Information which is legally required to be provided and
exercise its commercially reasonable efforts to obtain assurances that appropriate
confidential treatment will be accorded to the Confidential Information.

     (b) The Receiving Party, on behalf of itself and on behalf of its Affiliates and their
respective Representatives acknowledges that a breach of its obligations under this
Section 17.1 may result in irreparable injury to the Disclosing Party. In the event
of the breach by Receiving Party or any of its Affiliates or their respective
Representatives of any of the terms and conditions of this Section 17.1 to be
performed, the Disclosing Party shall be entitled to the remedies provided in Section
10.1.

     (c) For the purposes of this Reinsurance Agreement, “Confidential Information”
means all confidential information (irrespective of the form of such information) of any
kind, including any analyses, compilations, data, studies, notes, translations, memoranda or
other documents, concerning the Disclosing Party or any of its Affiliates obtained directly
or indirectly from the Disclosing Party or any of its Affiliates, or Representatives in
connection with the transactions contemplated by this Reinsurance Agreement and the
Transaction Documents, including any information regarding the A&P Business, except
information (i) which at the time of the disclosure or thereafter is ascertainable or
available to the public (other than as a result of a disclosure directly or indirectly by
the Receiving Party or any of its Affiliates, or Representatives), (ii) is or becomes
available to the Receiving Party on a non-confidential basis from a source other than the
Disclosing Party or any of its Affiliates, or Representatives, provided that, to the
knowledge of such Receiving Party, such source was not prohibited from disclosing such
information to the Receiving Party by a legal, contractual or fiduciary obligation owed to
another Person, (iii) the Receiving Party can establish is already in its possession or the
possession of any of its Affiliates, or Representatives (other than information furnished by
or on behalf of the Disclosing Party) or (iv) which is independently developed by the
Receiving Party or its Affiliates without the use or benefit of any information that would
otherwise be Confidential Information.

ARTICLE XVIII

ERRORS AND OMISSIONS

          18.1 Errors and Omissions.

          Inadvertent delays, errors or omissions made in connection with this Reinsurance Agreement or
any transaction hereunder shall not relieve either Party from any liability which

27

 

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

ARTICLE XIX

MATERIAL CHANGES

          19.1 Material Changes to Reinsured Contracts and Third Party Reinsurance Agreements.

     (a) Neither Party shall voluntarily make or agree to any material changes in the terms
and conditions of any Reinsured Contract or Third Party Reinsurance Agreement without the
prior approval of such changes by the other Party, which shall not be unreasonably withheld
or delayed.

     (b) In the event any material changes are made by the Reinsured to any Reinsured
Contracts without the prior approval of the Reinsurer and such changes result in any
additional Ultimate Net Loss, the Reinsured shall not be reinsured for the amount of any
additional Ultimate Net Loss resulting from such amendment to a Reinsured Contract in
accordance with the terms of Section 2.4(g). In the event any material changes are
made by the Reinsured to any Third Party Reinsurance Agreements without the prior approval
of the Reinsurer, and such changes result in a reduction in the amount of Third Party
Reinsurance Recoverables that would have been recoverable had such changes not been made,
the LPT Limit shall be reduced by the amount of Third Party Reinsurance Recoverables that
would have been recoverable had such amendment to a Third Party Reinsurance Agreement not
been made.

     (c) In the event any material changes are made by the Reinsurer to any Reinsured
Contracts without the prior approval of the Reinsured and such changes result in any
additional Ultimate Net Loss, the Reinsurer shall be responsible for paying the entire
amount of additional Ultimate Net Loss arising from such Reinsured Contract, provided,
however, the additional amount of Ultimate Net Loss paid by the Reinsurer attributable to
such amendment shall not reduce the LPT Limit. In the event any material changes are made
by the Reinsurer to any Third Party Reinsurance Agreements without the prior approval of the
Reinsured, and such changes result in a reduction in the amount of Third Party Reinsurance
Recoverables that would have been recoverable had such changes not been made, the remaining
LPT Limit shall be increased by the entire amount of such reduction in Third Party
Reinsurance Recoverables attributable to such amendment to the Third Party Reinsurance
Agreement.

28

 

ARTICLE XX

RIGHT TO ASSOCIATE

          20.1 Right to Associate.

          The Reinsurer shall defend, at its own expense pursuant to the terms hereof and the
Administrative Services Agreement, and in the name of the applicable Reinsured when necessary, any
litigation, arbitration or other legal proceeding brought on any Reinsured Contract or Third Party
Reinsurance Agreement with respect to the Business Covered. The Reinsurer, when so requested,
shall afford the applicable Reinsured an opportunity to be associated with the Reinsurer, at the
expense of the Reinsured, in the defense or control of any claim, suit or proceeding involving the
Business Covered and the Parties shall cooperate in every respect in the defense of such claim,
suit or proceeding.

ARTICLE XXI

MULTIPLE PARTIES

          21.1 Multiple Parties.

     (a) The retention of the Reinsured and the liability of the Reinsurer and all other
benefits accruing to the Reinsured as provided in this Reinsurance Agreement or any
amendments hereto, shall apply to the Reinsured as a group and not separately to each
Reinsured. Nevertheless, the Reinsurer and each Reinsured agree to honor the terms set
forth herein as if this Reinsurance Agreement were a separate agreement between the
Reinsurer and each Reinsured; however, this shall not operate so as to increase either the
Reinsurer’s or the Reinsured’s liability under this Reinsurance Agreement. In the event
that the Reinsurer asserts that any one Reinsured has by any act or omission entitled the
Reinsurer to avoid this Reinsurance Agreement and/or discharged the Reinsurer from any
liability hereunder, the alleged act or omission shall not entitle the Reinsurer to seek to
avoid this Reinsurance Agreement and/or discharge the Reinsurer from any liability hereunder
against any other Reinsured. The Reinsurer agrees that so far as any other Reinsured is
concerned, the Reinsurance Agreement shall continue in full force and effect as if the act
or omission had not occurred. Nothing in this Section 21.1(a) shall be interpreted
or construed in any manner to alter the LPT Limit, which is a single aggregate limit for all
Reinsureds combined.

     (b) Loss notices, reports and premium payments made to the Reinsurer are to be in
sufficient detail to identify what portion of any premium or loss relates to each Reinsured,
and shall be accordance with the terms set forth in the Third Party Reinsurance Allocation
Agreement and the Administrative Services Agreement.

     (c) As among the Reinsured, CCC shall be designated as an agent of the Reinsured with
the full authority to act on behalf of the Reinsured under this Reinsurance Agreement.

29

 

ARTICLE XXII

MISCELLANEOUS PROVISIONS

          22.1 Notices.

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

          If to the Reinsured:

CNA Financial Corporation

333 S. Wabash Avenue

Chicago, IL 60604

Attention: Jonathan D. Kantor

Executive Vice President,

General Counsel and Secretary

Fax: 312-817-0511

          With a copy to:

CNA Financial Corporation

333 S. Wabash Avenue

Chicago, IL 60604

Attention: Michael P. Warnick

Senior Vice President and Deputy General Counsel

Fax: 312-755-2479

          If to the Reinsurer:

National Indemnity Company

100 First Stamford Place

Stamford, CT 06902

Attention: General Counsel

Fax: 203-363-5221

30

 

          With a copy to:

National Indemnity Company

3024 Harney Street

Omaha, NE 68131

Attention: Treasurer

Fax: 402-916-3030

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

          22.2 Entire Agreement.

          This Reinsurance Agreement (including the exhibits and schedules hereto), the Transaction
Documents and any other documents delivered pursuant hereto or thereto, constitute the entire
agreement among the Parties and their respective Affiliates with respect to the subject matter
hereof and supersede all prior negotiations, discussions, writings, agreements and understandings,
oral and written, among the Parties with respect to the subject matter hereof and thereof.

          22.3 Waiver and Amendment.

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

          22.4 Successors and Assigns.

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

          22.5 Headings.

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

          22.6 Construction; Interpretation.

          The Reinsured and the Reinsurer have participated jointly in the negotiation and drafting of
this Reinsurance Agreement. In the event of an ambiguity or question of intent or

31

 

interpretation arises, this Reinsurance Agreement shall be construed as if drafted jointly by
the Parties and no presumption or burden of proof shall arise favoring or disfavoring either Party
by virtue of the authorship of any of the provisions of this Reinsurance Agreement. When a
reference is made to an Article, Section, Schedule or Exhibit, such reference shall be to an
Article, Section, Schedule or Exhibit of or to this Reinsurance Agreement unless otherwise
indicated. Whenever the words “include”, “includes” or “including” are used in this Reinsurance
Agreement, they shall be deemed to be followed by the words “without limitation.” The word
“Reinsurance Agreement,” means this Reinsurance Agreement as amended or supplemented, together with
all Exhibits and Schedules attached hereto or incorporated by reference, and the words “hereof,”
“herein,” “hereto,” “hereunder” and other words of similar import shall refer to this Reinsurance
Agreement in its entirety and not to any particular Article, Section or provision of this
Reinsurance Agreement. The references to “$” shall be to United States dollars. Reference to any
Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, and
all rules and regulations promulgated thereunder. References to a Person are also to its
successors and permitted assigns.

          22.7 Governing Law and Jurisdiction.

          This Reinsurance Agreement shall be governed by and construed in accordance with the laws of
the State of New York without regard to such state’s principles of conflict of laws that could
compel the application of the laws of another jurisdiction. SUBJECT TO ARTICLE X, ANY
SUIT, ACTION OR PROCEEDING TO COMPEL ARBITRATION OR FOR TEMPORARY INJUNCTIVE RELIEF IN AID OF
ARBITRATION OR TO PRESERVE THE STATUS QUO PENDING THE APPOINTMENT OF THE ARBITRATOR(S) SHALL BE
BROUGHT BY THE PARTIES SOLELY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, PROVIDED THAT IF SAID COURT DETERMINES THAT IT DOES NOT HAVE SUBJECT MATTER JURISDICTION THEN
SAID ACTIONS MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK FOR NEW YORK COUNTY; AND
EACH REINSURED AND THE REINSURER EACH HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF
SUCH COURTS FOR SUCH PURPOSE AND ANY APPELLATE COURTS THEREOF, EXCEPT THAT ANY FINAL ARBITRAL AWARD
RENDERED IN ACCORDANCE WITH ARTICLE XI MAY BE ENTERED AND ENFORCED IN ANY COURT HAVING
JURISDICTION OVER ANY PARTY OR ANY OF ITS ASSETS.

          22.8 No Third Party Beneficiaries.

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

          22.9 Counterparts.

          This Reinsurance Agreement may be executed by the Parties in separate counterparts, each of
which when so executed and delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument binding upon all of the Parties notwithstanding the fact
that all Parties are not signatory to the original or the same counterpart.

32

 

Each counterpart may consist of a number of copies hereof each signed by less than all, but
together signed by all of the Parties. Each counterpart may be delivered by facsimile
transmission, which transmission shall be deemed delivery of an originally executed document.

          22.10 Severability.

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

          22.11 Specific Performance.

          Each of the Parties acknowledges and agrees that the other Party would be irreparably damaged
in the event that any of the provisions of this Reinsurance Agreement were not performed or
complied with in accordance with their specific terms or were otherwise breached, violated or
unfulfilled. Accordingly, each of the Parties agrees that the other Party shall be entitled to an
injunction or injunctions to prevent noncompliance with, or breaches or violations of, the
provisions of this Reinsurance Agreement by the other Party and to enforce specifically this
Reinsurance Agreement and the terms and provisions hereof in any action instituted in accordance
with Section 22.7, in addition to any other remedy to which such Party may be entitled, at
law or in equity. In the event that any action is brought in equity to enforce the provisions of
this Reinsurance Agreement, no Party will allege, and each Party hereby waives the defense or
counterclaim, that there is an adequate remedy at law. The Parties further agree that (i) by
seeking the remedies provided for in this Section 22.11, a Party shall not in any respect
waive its right to seek any other form of relief that may be available to a Party under this
Reinsurance Agreement, including monetary damages in the event that this Reinsurance Agreement has
been terminated or in the event that the remedies provided for in this Section 22.11 are
not available or otherwise are not granted and (ii) nothing contained in this Section 22.11
shall require any Party to institute any action for (or limit any Party’s right to institute any
action for) specific performance under this Section 22.11 before exercising any termination
right under Article VI nor shall the commencement of any action pursuant to this
Section 22.11 or anything contained in this Section 22.11 restrict or limit any
Party’s right to terminate this Reinsurance Agreement in accordance with the terms of Article
VI or pursue any other remedies under this Reinsurance Agreement that may be available then or
thereafter.

33

 

          22.12 Waiver of Jury Trial.

          EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS REINSURANCE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
REINSURANCE AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF THE OTHER PARTIES HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTIES
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES
THAT IT HAS BEEN INDUCED TO ENTER INTO THIS REINSURANCE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
BY THIS REINSURANCE AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 22.12.

          22.13 Incontestability.

          In consideration of the mutual covenants and agreements contained herein, each Party does
hereby agree that this Reinsurance 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 in any respect the validity or enforceability hereof.

          22.14 Set-Off.

          Any debts or credits, matured or unmatured, liquidated or unliquidated, regardless of when
they arose or were incurred, in favor of or against either of the Reinsured or the Reinsurer with
respect to this Reinsurance Agreement are deemed mutual debts or credits, as the case may be, and
shall be set off, and only the net balance shall be allowed or paid.

          22.15 Currency.

          All financial data required to be provided pursuant to the terms of this Reinsurance Agreement
shall be expressed in United States dollars. All payments and all settlements of account between
the Parties shall be in United States currency unless otherwise agreed by the Parties.

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

34

 

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

	 	 	 	 	 
	 	CONTINENTAL CASUALTY COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	THE CONTINENTAL INSURANCE COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CONTINENTAL REINSURANCE CORPORATION

INTERNATIONAL, LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CNA INSURANCE COMPANY LIMITED

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	NATIONAL INDEMNITY COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

35

 

	 	 	 	 	 

Exhibit A

Form of Administrative Services Agreement

SEE ATTACHED.

A-1

 

Exhibit B

Form of Collateral Trust Agreement

SEE ATTACHED.

B-1

 

Exhibit C

Form of Third Party Reinsurance Allocation Agreement

SEE ATTACHED.

C-1

 

Exhibit D

Form of Reinsurance Credit Event II Trust Agreement

SEE ATTACHED.

 

 

CONFIDENTIAL

 

TRUST AGREEMENT

by and among

[CNA BENEFICIARY]

(hereinafter referred as the “Beneficiary”),

NATIONAL INDEMNITY COMPANY

(hereinafter referred to as the “Grantor”)

and

[TRUSTEE]

(hereinafter referred to as the “Trustee”)

[•], 2010

 

 

 

Table of Contents

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I	 	DEFINED TERMS
	 	 	D-1	 
	 	 	 
	 	 	 	 
	Section 1.1	 	Definitions
	 	 	D-1	 
	Section 1.2	 	Interpretation
	 	 	D-3	 
	 	 	 
	 	 	 	 
	ARTICLE II	 	CREATION OF TRUST ACCOUNT
	 	 	D-3	 
	 	 	 
	 	 	 	 
	Section 2.1	 	Obligations of the Beneficiary and the Grantor
	 	 	D-3	 
	Section 2.2	 	Purpose of the Trust
	 	 	D-4	 
	Section 2.3	 	Grantor Trust for United States Federal Income Tax Purposes
	 	 	D-4	 
	Section 2.4	 	Designation of Agents
	 	 	D-4	 
	Section 2.5	 	Title to Assets
	 	 	D-4	 
	 	 	 
	 	 	 	 
	ARTICLE III	 	MAINTENANCE OF THE TRUST
	 	 	D-4	 
	 	 	 
	 	 	 	 
	Section 3.1	 	Substitution of Trust Account Assets
	 	 	D-4	 
	Section 3.2	 	Valuation of Assets
	 	 	D-5	 
	Section 3.3	 	Quarterly Certification
	 	 	D-5	 
	 	 	 
	 	 	 	 
	ARTICLE IV	 	RELEASE AND ADJUSTMENT OF TRUST ACCOUNT ASSETS
	 	 	D-6	 
	 	 	 
	 	 	 	 
	Section 4.1	 	Adjustment of Trust Account Assets
	 	 	D-6	 
	Section 4.2	 	Release of Trust Account Assets to the Beneficiary
	 	 	D-6	 
	Section 4.3	 	Release of Trust Account Assets to the Grantor
	 	 	D-7	 
	 	 	 
	 	 	 	 
	ARTICLE V	 	DUTIES OF THE TRUSTEE
	 	 	D-7	 
	 	 	 
	 	 	 	 
	Section 5.1	 	Acceptance of Assets by the Trustee
	 	 	D-7	 
	Section 5.2	 	Collection of Interest and Dividends; Voting Rights
	 	 	D-7	 
	Section 5.3	 	Obligations of the Trustee
	 	 	D-8	 
	Section 5.4	 	Responsibilities of the Trustee
	 	 	D-8	 
	Section 5.5	 	Books and Records
	 	 	D-8	 
	Section 5.6	 	Activity Reports
	 	 	D-8	 
	Section 5.7	 	Resignation or Removal of the Trustee; Appointment of Successor Trustee
	 	 	D-9	 
	Section 5.8	 	Release of Information
	 	 	D-9	 
	Section 5.9	 	Indemnification of the Trustee
	 	 	D-10	 
	Section 5.10	 	Charges of the Trustee
	 	 	D-10	 
	Section 5.11	 	Limitations of the Trustee
	 	 	D-10	 
	 	 	 
	 	 	 	 
	ARTICLE VI	 	TERMINATION
	 	 	D-10	 
	 	 	 
	 	 	 	 
	Section 6.1	 	Termination
	 	 	D-10	 

D-i

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 6.2	 	Disposition of Assets Upon Termination
	 	 	D-10	 
	 	 	 
	 	 	 	 
	ARTICLE VII	 	GENERAL PROVISIONS
	 	 	D-11	 
	 	 	 
	 	 	 	 
	Section 7.1	 	Notices
	 	 	D-11	 
	Section 7.2	 	Construction and Effect
	 	 	D-12	 
	Section 7.3	 	Waiver and Amendment
	 	 	D-12	 
	Section 7.4	 	Successors and Assigns
	 	 	D-12	 
	Section 7.5	 	Headings
	 	 	D-12	 
	Section 7.6	 	Governing Law and Jurisdiction
	 	 	D-12	 
	Section 7.7	 	No Third Party Beneficiaries
	 	 	D-13	 
	Section 7.8	 	Counterparts
	 	 	D-13	 
	Section 7.9	 	Severability
	 	 	D-13	 
	Section 7.10	 	Specific Performance
	 	 	D-13	 
	Section 7.11	 	Waiver of Jury Trial
	 	 	D-14	 
	Section 7.12	 	Incontestability
	 	 	D-14	 
	Section 7.13	 	Set-Off
	 	 	D-14	 
	Section 7.14	 	Currency
	 	 	D-14	 
	 	 	 
	 	 	 	 
	ARTICLE VIII	 	DISPUTE RESOLUTION
	 	 	D-15	 
	 	 	 
	 	 	 	 
	Section 8.1	 	Dispute Resolution
	 	 	D-15	 
	Section 8.2	 	Negotiation Amongst the Parties
	 	 	D-15	 
	Section 8.3	 	Arbitration
	 	 	D-15	 
	 	 	 
	 	 	 	 
	ARTICLE IX	 	EFFECTIVE DATE AND EXECUTION
	 	 	D-16	 

D-ii

 

TRUST AGREEMENT

          THIS TRUST AGREEMENT (this “Trust Agreement”) is made and entered into as of [•],
2010, by and among [•] (the “Beneficiary”), National Indemnity Company, a Nebraska property and
casualty insurance company (the “Grantor”) and [•], a banking association organized under the laws
of [•] (hereinafter referred to as “Trustee”).

          WHEREAS, in accordance with Section 9.6(a) of that certain Loss Portfolio Transfer
Reinsurance Agreement, dated [•], by and among the Beneficiary, [•] and the Grantor (the “LPT
Reinsurance Agreement”), the Grantor and the Beneficiary have agreed to enter into this Trust
Agreement upon the occurrence of a Reinsurance Credit Event, if the Grantor has not been able to
cure or address to the satisfaction of the Beneficiary and [•] the circumstances giving rise to the
Reinsurance Credit Event within [90] calendar days.

          NOW THEREFORE, the Grantor, the Beneficiary and the Trustee, in consideration of the mutual
covenants contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and upon the terms and conditions hereinafter set
forth, agree as follows:

ARTICLE I

DEFINED TERMS

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

               “AAA” shall have the meaning ascribed to such term in Section 8.3(a).

               “Assets” shall have the meaning ascribed to such term in Section 2.1(b).

               “Beneficiary” shall have the meaning ascribed to such term in the Preamble.

               “Business Covered” shall have the meaning ascribed to such term in the LPT Reinsurance
Agreement.

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

               “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

               “Dispute” shall have the meaning ascribed to such term in Section 8.1.

Schedule 2.4(h)-1

 

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

               “Grantor” shall have the meaning ascribed to such term in the Preamble.

               “Insurance Commissioner” shall mean the Governmental Authority responsible for the regulation
of insurance companies in the jurisdiction in which the Beneficiary is domiciled.

               “LPT Limit” shall have the meaning ascribed to such term in the LPT Reinsurance Agreement.

               “Permitted Investments” shall mean cash and any investments of the types permitted under the
laws and regulations of the Beneficiary’s domiciliary state for trusts providing full statutory
financial statement credit for reinsurance ceded by property and casualty insurance companies,
provided, however, that no Permitted Investments may be issued by an institution that is the
parent, subsidiary or affiliate of the Grantor. All Permitted Investments deposited in the Trust
Account shall be free of all liens, charges or encumbrances at the time so deposited.

               “Quarterly Certification” shall have the meaning ascribed to such term in Section
3.3.

               “Reinsurance Credit Event” shall mean any event, other than the financial impairment of the
Grantor, that results in the Beneficiary being unable to obtain full statutory financial statement
credit for the reinsurance provided by the LPT Reinsurance Agreement in any applicable jurisdiction
at any point in time during the term of the LPT Reinsurance Agreement.

               “Required Amount” shall mean an amount equal to the lesser of (A) the aggregate gross
Reserves of the Beneficiary (including reserves for losses incurred but not reported) calculated in
accordance with SAP with respect to the Business Covered and (B) the LPT Limit less the Ultimate
Net Loss paid by the Grantor.

               “Reserves” shall mean, as required by SAP or applicable law of the jurisdiction of domicile of
any entity, reserves, funds or provisions for losses, claims, unearned premiums, benefits, costs
and expenses (including allocated loss adjustment expenses) in respect of the Business Covered.

               “Rules” shall have the meaning ascribed to such term in Section 8.3(a).

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

Schedule 2.4(h)-2

 

               “Third Party Appraiser” shall mean an independent appraisal firm which is mutually acceptable
to the Grantor and the Beneficiaries, or, if Grantor and Beneficiaries cannot agree on such an
appraisal firm, an independent appraisal firm selected by the parties’ respective accountants.

               “Trust” shall mean the trust formed hereunder.

               “Trust Account” shall have the meaning ascribed to such term in Section 2.1(a).

               “Trust Agreement” shall have the meaning ascribed to such term in the Preamble.

               “Trustee” shall have the meaning ascribed to such term in the Preamble.

               “Ultimate Net Loss” shall have the meaning ascribed to such term in the LPT Reinsurance
Agreement.

          Section 1.2 Interpretation. When a reference is made in this Trust Agreement to a Section
or Article, such reference shall be to a section or article of this Trust Agreement unless
otherwise clearly indicated to the contrary. The Article and Section headings contained in this
Trust Agreement are solely for the purpose of reference, are not part of the agreement of the
parties and shall not affect in any way the meaning or interpretation of this Trust Agreement.
Whenever the words “include,” “includes” or “including” are used in this Trust Agreement, they
shall be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and
“herewith” and words of similar import shall, unless otherwise stated, be construed to refer to
this Trust Agreement as a whole and not to any particular provision of this Trust Agreement. The
meaning assigned to each term used in this Trust Agreement shall be equally applicable to both the
singular and the plural forms of such term and to both the masculine as well as the feminine and
neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or
in any agreement or instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in the case of
agreements or instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes. Where a word or phrase is defined herein, each of its other
grammatical forms shall have a corresponding meaning. References to a person are also to its
successors and permitted assigns.

ARTICLE II

CREATION OF TRUST ACCOUNT

          Section 2.1 Obligations of the Beneficiary and the Grantor. (a) Prior to the execution of
this Trust Agreement, the Grantor shall have procured with the Trustee, in the name of the Trustee,
to be held for the sole benefit of the Beneficiary pursuant to the provisions of this Trust
Agreement, a segregated trust account maintained by the Trustee with account number [ACCOUNT
NUMBER] (which shall be hereinafter referred to, including all successor accounts thereto, as the
“Trust Account”).

Schedule 2.4(h)-3

 

               (b) The Grantor shall transfer and assign to the Trustee, for deposit to the Trust Account,
such assets as it may from time to time desire (all such assets actually received in the Trust
Account are herein referred to individually as an “Asset” and collectively as the “Assets”). The
Assets shall consist only of Permitted Investments.

               (c) The Grantor shall ensure that the Trust Account shall hold Permitted Investments at all
times with a fair market value of no less than 100% of the Required Amount, as determined in
accordance with Section 5.6 of this Trust Agreement.

          Section 2.2 Purpose of the Trust. The Assets in the Trust Account shall be held by the
Trustee for the sole benefit of the Beneficiary. The Grantor grants to the Trustee all trust
powers necessary and reasonable in the performance of its duties hereunder except as otherwise
expressly provided herein.

          Section 2.3 Grantor Trust for United States Federal Income Tax Purposes. The Trust Account
shall be treated as a grantor trust (pursuant to sections 671 through 677 of the Code) for United
States federal income tax purposes. The Grantor shall constitute the grantor (within the meaning
of sections 671 and 677 of the Code) and, thus, any and all income derived from the Assets held in
the Trust shall constitute income or gain of the Grantor as the owner of such Assets.

          Section 2.4 Designation of Agents. Except as otherwise expressly provided in this Trust
Agreement, any statement, certificate, notice, request, consent, approval, or other instrument to
be delivered or furnished by the Grantor or the Beneficiary shall be sufficiently executed if
executed in the name of the Grantor or the Beneficiary by such officer or officers of Grantor or
Beneficiary or by such other agent or agents of the Grantor or the Beneficiary as may be designated
in a resolution of the Board of Directors of the Grantor or the Beneficiary or Committee thereof or
a letter of advice issued by the President, Secretary or Treasurer of the Grantor or the
Beneficiary, as applicable. Written notice of such designation by the Grantor or the Beneficiary
shall be filed with the Trustee. The Trustee shall be protected in acting upon any written
statement or other instrument made by such officers or agents of the Grantor or the Beneficiary
with respect to the authority conferred on it.

          Section 2.5 Title to Assets. Title to any Assets transferred by the Grantor to the Trustee
for deposit to the Trust Account will be recorded in the name of the Trustee. The out-of-pocket
costs of transfers of title between the Grantor and the Trustee shall be shared equally by the
Grantor and the Beneficiary, and the Grantor shall use reasonable efforts to limit such costs. The
Beneficiary shall not have legal title to any part of the Assets, but shall have an undivided
beneficial interest in all Assets.

ARTICLE III

MAINTENANCE OF THE TRUST

          Section 3.1 Substitution of Trust Account Assets. (a) Upon receipt of the prior written
consent of the Beneficiary, the Grantor may, from time to time, substitute or exchange Assets
contained in the Trust Account, provided, however, (i) the Assets so substituted

Schedule 2.4(h)-4

 

or exchanged must be Permitted Investments, (ii) after giving effect to such substitution, the fair
market value of the newly deposited Assets are at least equal to the fair market value of the
substituted Assets and (iii) the replacement Assets to be deposited in the Trust Account in such
substitution or exchange are deposited therein on the day of withdrawal of the substituted or
exchanged Assets. Upon any substitution or exchange as provided for herein, the Grantor shall
certify to the Trustee and Beneficiary that such substitution or exchange meets the requirements of
this Section 3.1. The Trustee shall give the Beneficiary prompt written notice of any
substitution made pursuant hereto.

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

          Section 3.2 Valuation of Assets. The Grantor shall determine the fair market value of any
Assets in the Trust Account. In making this determination, the Grantor shall use prices published
by a nationally recognized pricing service for Assets for which such prices are available, and for
Assets for which such prices are not available, the Grantor shall use methodologies consistent with
those which it uses for determining the fair market value of assets held in its own general account
(other than the Assets) in the ordinary course of business.

          Section 3.3 Quarterly Certification. Within fourteen (14) calendar days following the end
of each calendar quarter, the Grantor shall provide the Beneficiary a written certification (the
“Quarterly Certification”) stating the Required Amount as of the calendar quarter end and the
aggregate fair market value of the Permitted Investments held in the Trust Account as of the
calendar quarter end (both on an asset-by-asset basis and a cumulative basis). Such certification
shall separately state the effect on the fair market value of the Assets of withdrawals by the
Grantor from the Trust Account effected during such calendar quarter. As soon as is practicable,
but in no event more than ten (10) Business Days following its receipt of the Quarterly
Certification, the Beneficiary shall either (i) countersign such certification and forward it to
the Trustee or (ii) notify the Grantor that it objects to the Grantor’s calculation of the Required
Amount or the Grantor’s valuation of any Asset. If the parties are able to resolve such dispute
within ten (10) Business Days of the Beneficiary’s transmittal to the Grantor of its notice of
objection, they shall promptly forward to the Trustee a jointly signed certification of the
Required Amount. If the parties are unable to resolve such dispute within ten (10) Business Days
of the Beneficiary’s transmittal to the Grantor of its notice of objection, and the dispute relates
to the valuation of an Asset, the value of such Asset shall be determined by a Third Party
Appraiser and the parties shall be bound by such valuation. All other disputes shall be resolved
in accordance with Section 8.1 of this Trust Agreement. Upon resolution of such dispute,
the parties shall forward to the Trustee a copy of the corrected Quarterly Certification setting
forth the Required Amount as resolved through such Third Party Appraiser or arbitration. The
Grantor shall, to the extent reasonably necessary or required in order to verify Grantor’s
certification, permit the Beneficiary to audit its records in order to determine its compliance
with this Section 3.3. The Grantor shall cooperate fully with such audit. Access to the
Grantor and its employees by the Beneficiary in connection with such audit shall be at reasonable
times during

Schedule 2.4(h)-5

 

regular business hours upon reasonable prior written notice (including by e-mail) in a manner which
does not unreasonably interfere with the business or operations of the Grantor.

ARTICLE IV

RELEASE AND ADJUSTMENT OF TRUST ACCOUNT ASSETS

          Section 4.1 Adjustment of Trust Account Assets. (a) The Required Amount as of the end of
each calendar quarter shall be certified to the Trustee by the Grantor in the manner set forth in
Section 3.3 hereof.

               (b) If the aggregate fair market value of the Permitted Investments maintained in the Trust
Account as of any calendar quarter end is less than the Required Amount as of such calendar quarter
end, then within five (5) Business Days of its receipt of the certification set forth in
Section 3.3, the Grantor shall deposit into the Trust Account such additional Assets with
an aggregate fair market value as are necessary to ensure that the aggregate fair market value of
the Permitted Investments held in the Trust Account is no less than 100% of the Required Amount as
of the immediately prior calendar quarter end.

          Section 4.2 Release of Trust Account Assets to the Beneficiary. (a) Notwithstanding
anything in this Trust Agreement to the contrary, the Beneficiary shall have the right to withdraw
Assets from the Trust Account at any time, without notice to the Grantor, subject only to written
notice to the Trustee from the Beneficiary given in accordance with Section 7.1 of this Trust
Agreement. Other than such notice, no other statement or document need be presented by the
Beneficiary to withdraw such Assets except that the Beneficiary shall acknowledge to the Trustee
receipt of such withdrawn Assets. Upon such written notice of demand of the Beneficiary, the
Trustee shall immediately take any and all steps necessary to transfer absolutely and unequivocally
all right, title and interest in the Assets to the Beneficiary and, to the extent applicable,
deliver physical custody of such Assets to the Beneficiary. Upon such transfer, Trustee shall
promptly forward a copy of such notice to the Grantor. The Trustee shall not be subject to any
liability for any payment made by it to the Beneficiary pursuant to such written demand by the
Beneficiary.

               (b) The Grantor and the Beneficiary agree that the Assets from the Trust Account may only be
withdrawn by the Beneficiary, and utilized and applied by the Beneficiary, or any successor by
operation of law of the Beneficiary including any liquidator or rehabilitator, receiver or
conservator of the Beneficiary, without diminution because of insolvency on the part of the
Beneficiary or the Grantor, for one or more of the following purposes:

               (i) to pay or reimburse the Beneficiary for the Grantor’s share of premiums
returned to policyholders or ceding companies of the Reinsured Contracts because of
cancellations of such contracts to the extent same constitute Ultimate Net Loss;

               (ii) to reimburse the Beneficiary for the Grantor’s share of surrenders and
benefits or losses paid by the Beneficiary pursuant to the

Schedule 2.4(h)-6

 

provisions of the Reinsured Contracts to the extent same constitute Ultimate
Net Loss;

               (iii) to fund an account with the Beneficiary in an amount at least equal to
the deduction, for reinsurance ceded, from the Beneficiary’s liabilities for the
Reinsured Liabilities. The account must include, but not be limited to, amounts for
policy reserves, claims and losses incurred, including losses incurred but not
reported, allocated loss adjustment expenses, and unearned premium reserves; and

               (iv) to pay any other amounts the Beneficiary claims are due under the LPT
Reinsurance Agreement.

          Section 4.3 Release of Trust Account Assets to the Grantor. Subject to receipt of the
Beneficiary’s prior written instructions, the Trustee may, from time to time, release to the
Grantor Assets with an aggregate fair market value equal to the excess over 102% of the Required
Amount as of the prior calendar quarter end. In connection with any such release of Assets, the
Trustee shall take any and all necessary steps to transfer absolutely and unequivocally all right,
title and interest in such released Assets to the Grantor or its designee. The Trustee shall not
be subject to any liability for any payment made by it to the Grantor pursuant to such written
instructions received by it from the Beneficiary.

ARTICLE V

DUTIES OF THE TRUSTEE

          Section 5.1 Acceptance of Assets by the Trustee. (a) The Trustee shall not accept any
Assets (other than cash) for deposit into the Trust Account unless the Trustee determines that it
is or will be the registered owner of and holder of legal title to the Assets or that such Assets
are in such form that the Trustee may, if applicable to such asset class, negotiate any such
Assets, without consent or signature from the Grantor or any other person or entity. Any Assets
received by the Trustee which, if applicable to such asset class, are not in such proper negotiable
form or for which title has not been transferred to the Trustee shall not be accepted by the
Trustee and shall be returned to the Grantor as unacceptable.

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

          Section 5.2 Collection of Interest and Dividends; Voting Rights. The Trustee is hereby
authorized, without prior notice to the Grantor or the Beneficiary, to demand payment of and
collect all interest or dividends on the Assets comprising the Trust Account if any. All payments
of interest, dividends and other income in respect to Assets in the Trust Account shall

Schedule 2.4(h)-7

 

be deposited promptly upon receipt by the Trustee into the Trust Account. Subject to the other
provisions of this Trust Agreement, the Grantor shall have the full and unqualified right to direct
the Trustee to vote, and to execute consents, bond powers, stock powers, mortgage and title
instruments and other instruments of transfer, pledge and release with respect to any Assets
comprising the Trust Account.

          Section 5.3 Obligations of the Trustee. The Trustee agrees to hold and disburse the
various Assets of the Trust Account in accordance with the provisions expressed herein.

          Section 5.4 Responsibilities of the Trustee. (a) The Trustee, in the administration of
the Trust Account, is to be bound solely by the express provisions herein, and such further written
and signed directions as the appropriate party or parties may, under the conditions herein
provided, deliver to the Trustee. The Trustee shall be under no obligation to enforce the
Grantor’s obligations under this Trust Agreement, except as otherwise expressly provided or
directed pursuant hereto. The Trustee shall be restricted to holding title to, operating and
collecting the Assets comprising the Trust Account and the payment and distribution thereof for the
purposes set forth in this Trust Agreement and to the conservation and protection of such Assets
and the administration thereof in accordance with the provisions of this Trust Agreement, and the
Trustee shall be liable only for its own negligence, willful misconduct, lack of good faith or
breach of fiduciary duty and for the breach of the Trustee’s obligations under this Trust
Agreement. The Trustee further agrees to forward upon request of the Beneficiary, the Grantor or
any Insurance Commissioner a certified list and valuation of all Assets held under this Trust
Agreement.

               (b) Subject to the other provisions of this Trust Agreement, including the requirements that
only Permitted Investments may be held in the Trust Account and provisions relating to the
substitution of Assets, (i) the Grantor shall have the irrevocable authority and sole power to
direct the Trustee, in the Grantor’s sole discretion, with respect to all aspects of the management
or investment of the Assets contained in the Trust Account, including, but not limited to,
directing the Trustee to enter into one or more investment management, advisory, custodial,
depository or other agreements of form and substance specified by the Grantor, with any other
person, including any affiliate of the Grantor, selected by the Grantor and (ii) the Trustee and
the Beneficiary each acknowledges that it has no authority with respect to such management or
investment activities, the Trustee agrees it will not exercise any discretion or take any action
with respect to the matters in clause (i) above and will take any actions related thereto as
directed by the Grantor in accordance therewith.

          Section 5.5 Books and Records. The Trustee shall keep full and complete records of the
administration of the Trust Account. The Grantor, the Beneficiary and/or the Insurance
Commissioner may examine such records, upon reasonable notice to the Trustee, at any time during
business hours through any person or persons duly authorized in writing by Grantor, the Beneficiary
and/or the Insurance Commissioner.

          Section 5.6 Activity Reports. The Trustee agrees to provide an activity report to the
Beneficiary and the Grantor upon creation of the Trust Account and within five (5) days following
receipt of the report from the Grantor, which report shall, in reasonable detail, show (i)

Schedule 2.4(h)-8

 

all deposits, withdrawals and substitutions during such quarter; (ii) a listing of securities and
other assets held and cash balances in the Trust Account as of the last day of such quarter and
(iii) the fair market value (determined in accordance with Section 2.1(b) on such day) of
each Asset held in the Trust Account (other than cash) and the amount of cash held in the Trust
Account as of the last day of such quarter. The Trustee agrees to provide written notification to
the Grantor and the Beneficiary within five (5) days of any deposits to or withdrawals from the
Trust Account.

          Section 5.7 Resignation or Removal of the Trustee; Appointment of Successor Trustee. (a)
The Trustee may at any time resign as Trustee and terminate its capacity hereunder by delivery of
written notice of resignation, effective not less than ninety (90) days after receipt by both the
Beneficiary and the Grantor. The Trustee may be removed by the Grantor by (i) delivery to the
Trustee and the Beneficiary of a written notice of removal, effective not less than ninety (90)
days after receipt by the Trustee and the Beneficiary of the notice and (ii) receipt of
Beneficiary’s consent to such action, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, no such resignation by the Trustee or removal by the Grantor shall
be effective until a successor to the Trustee shall have been duly appointed by the Grantor and
approved by the Beneficiary and all the securities and other Assets in the Trust Account have been
duly transferred to such successor. The Grantor, upon receipt of such notice of resignation, shall
undertake to obtain the agreement of a qualified, successor depository, agreeable to the
Beneficiary, to act as a successor Trustee in accordance with all agreements of the Trustee herein
and upon duly qualifying to act as such pursuant to Section 5.7(b). The Beneficiary agrees
not to withhold unreasonably approval of such Trustee. Upon the Trustee’s delivery of the Assets
to the qualified, successor depository, along with a closing statement showing all activities from
the last quarterly report, the Trustee shall be discharged of further responsibilities hereunder,
subject to any remaining obligations under Section 5.4 and 5.7(b).

               (b) Any successor Trustee appointed hereunder shall execute an instrument accepting such
appointment hereunder and shall deliver the same to the Grantor and to the then acting Trustee.
Thereupon such successor Trustee shall, without any further act, become vested with all the
estates, properties, rights, powers, trusts and duties of its predecessor in the Trust with like
effect as if originally named herein; but the predecessor Trustee shall nevertheless, when
requested in writing by the successor Trustee, execute an instrument or instruments conveying and
transferring to the Trustee upon the Trust herein all the estates, properties, rights, powers and
trusts of such predecessor Trustee, and shall duly assign, transfer and deliver to the Trustee all
property and money held by such predecessor hereunder. The predecessor Trustee shall be entitled
to reimbursement in accordance with Section 5.10 for all expenses it incurs in connection
with the settlement of its accounts and the transfer and delivery of the Trust Assets to its
successor. The predecessor Trustee shall continue to be indemnified by reason of such entity being
or having been a Trustee in accordance with Section 5.9 hereof.

          Section 5.8 Release of Information. The Trustee shall promptly respond to any and all
reasonable requests for information concerning the Trust Account or the Assets held therein by
either of the parties to this Trust Agreement. Furthermore, the Trustee shall fully and completely
respond to any direct inquiries of the Insurance Commissioner, or any of its representatives,
concerning the Trust Account or the Assets held hereunder, including, detailed inventories of
securities or funds, and the Trustee shall permit the Insurance Commissioner, or its

Schedule 2.4(h)-9

 

representatives, to examine and audit all securities or funds held hereunder. The Trustee shall
promptly provide notice to the Beneficiary and the Grantor concerning all such inquiries, and shall
provide seven (7) days prior notice to the Beneficiary and the Grantor of all such examinations and
audits.

          Section 5.9 Indemnification of the Trustee. Subject to Section 5.4, whenever an
action by the Trustee is authorized by written signed direction pursuant to the provisions of this
Trust Agreement and such action is taken strictly in accordance with such written and signed
direction by the appropriate party or parties, the party or parties authorizing such action hereby
agree to indemnify the Trustee against all losses, damages, costs and expenses, including
reasonable attorneys’ fee, resulting from any action so taken by the Trustee.

          Section 5.10 Charges of the Trustee. The Grantor agrees to pay all reasonable costs or
fees charged by the Trustee for acting as the Trustee pursuant to this Trust Agreement, as agreed
between the Grantor and the Trustee, including fees incurred by the Trustee for legal services
deemed reasonably necessary by the Trustee as a result of the Trustee’s so acting; provided,
however, that no such costs, fees or expenses shall be paid out of the Assets held in or credited
to the Trust Account.

          Section 5.11 Limitations of the Trustee. The Trustee shall in no way be responsible for
determining the amount of Assets required to be deposited, or monitoring whether or not the Assets
held within the Trust Account are Permitted Investments. The Trustee shall be under no liability
for any release of Assets made by it to the Grantor in accordance with this Article V.

ARTICLE VI

TERMINATION

          Section 6.1 Termination. This Trust Agreement may not be terminated by
the Grantor unless the Grantor has obtained and the Trustee has received, a written consent
signed by the General Counsel of the Beneficiary to terminate this Trust Agreement. The
Beneficiary shall provide its consent to the termination of this Trust Agreement if the
Grantor seeks to terminate this Trust Agreement as a result of the exhaustion of the LPT
Limit.

          Section 6.2 Disposition of Assets Upon Termination. Upon a termination pursuant to this
Article VI, the Trustee shall distribute all Assets held and deposited under this Trust
Agreement, subject to the written approval of the Beneficiary, to the Grantor and shall take any
and all steps necessary to transfer absolutely and unequivocally all right, title and interest in
such Assets and to deliver physical custody, if applicable, in such Assets to the Grantor or as
otherwise directed by the Grantor.

Schedule 2.4(h)-10

 

ARTICLE VII

GENERAL PROVISIONS

          Section 7.1 Notices. Any notice, request, demand, waiver, consent, approval or other
communication required or permitted to be given by any party under this Trust Agreement shall be in
writing and shall be delivered personally, sent by facsimile transmission, sent by registered or
certified mail, postage prepaid, or sent by a standard overnight courier of national reputation
with written confirmation of delivery. Any such notice shall be deemed given when so delivered
personally, or if sent by facsimile transmission, on the date received (provided that any notice
received after 5:00 p.m. (addressee’s local time) shall be deemed given at 9:00 a.m. (addressee’s
local time) on the next Business Day), or if mailed, on the date shown on the receipt therefor, or
if sent by overnight courier, on the date shown on the written confirmation of delivery. Such
notices shall be given to the following addresses:

	 	 	 

	If to the Trustee:

	 	[•]
	 

	 	[•]
	 

	 	[•]
	 

	 	Attention: [•]
	 
	 	 
	With a copy to:

	 	[•]
	 

	 	[•]
	 

	 	[•]
	 

	 	Attention: [•]
	 
	 	 
	If to the Grantor:

	 	National Indemnity Company
	 

	 	100 First Stamford Place
	 

	 	Stamford, CT 06902
	 

	 	Attention: General Counsel
	 

	 	Fax: 203-363-5221
	 
	 	 
	With a copy to:

	 	National Indemnity Company
	 

	 	3024 Harney Street
	 

	 	Omaha, NE 68131
	 

	 	Attention: Treasurer
	 

	 	Fax: 402-916-3030
	 
	 	 
	If to the Beneficiary:

	 	CNA Financial Corporation
	 

	 	333 S. Wabash Avenue
	 

	 	Chicago, IL 60604
	 

	 	Attention: Jonathan D. Kantor
	 

	 	Executive Vice President,
	 

	 	General Counsel and Secretary
	 

	 	Fax: 312-817-0511

Schedule 2.4(h)-11

 

	 	 	 

	With a copy to:

	 	CNA Financial Corporation
	 

	 	333 S. Wabash Avenue
	 

	 	Chicago, IL 60604
	 

	 	Attention: Michael P. Warnick
	 

	 	Senior Vice President and
	 

	 	Deputy General Counsel
	 

	 	Fax: 312-755-2479

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

          Section 7.2 Construction and Effect. This Trust Agreement and the enforceability hereof
shall not be subject to the satisfaction of any conditions or qualifications not expressly included
herein.

          Section 7.3 Waiver and Amendment. This Trust Agreement and the Trust created hereunder
shall be irrevocable, subject solely to the termination provisions set forth herein. The Grantor
shall have no right or power in any capacity to revoke, terminate or alter or amend any terms of
this Trust Agreement, in whole or in part, without the prior written consent of the Beneficiary and
the Grantor. Notwithstanding the foregoing, this Trust Agreement may be altered, amended or
terminated at any time by written agreement executed by each party hereto and, in the case of
Grantor’s and the Beneficiary’s written agreement, delivered to the Trustee. The Beneficiary’s
failure at any time to exercise any of the rights or powers conferred upon it herein shall
constitute neither a waiver of its right to exercise, nor stop it from exercising, any rights at
any subsequent time, nor shall such failure reduce in any degree any liability or obligation for
which the Grantor is bound hereunder.

          Section 7.4 Successors and Assigns. The rights and obligations of a party under this Trust
Agreement shall not be subject to assignment without the prior written consent of the other parties
hereto, and any attempted assignment without the prior written consent of the other parties hereto
shall be invalid ab initio. The terms of this Trust Agreement shall be binding upon, inure to the
benefit of and be enforceable by and against the successors and permitted assigns of the parties
hereto.

          Section 7.5 Headings. The headings of this Trust Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions hereof.

          Section 7.6 Governing Law and Jurisdiction. This Trust Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to such state’s
principles of conflict of laws that could compel the application of the laws of another
jurisdiction. SUBJECT TO ARTICLE VIII, ANY SUIT, ACTION OR PROCEEDING TO COMPEL
ARBITRATION OR FOR TEMPORARY INJUNCTIVE RELIEF IN AID OF ARBITRATION OR TO PRESERVE THE STATUS QUO
PENDING THE APPOINTMENT OF THE ARBITRATOR(S) SHALL BE BROUGHT BY THE PARTIES HERETO SOLELY IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, PROVIDED THAT IF SAID COURT
DETERMINES THAT IT DOES NOT HAVE SUBJECT MATTER JURISDICTION THEN SAID ACTIONS MAY BE BROUGHT IN
THE

Schedule 2.4(h)-12

 

SUPREME COURT OF THE STATE OF NEW YORK FOR NEW YORK COUNTY; AND THE BENEFICIARY, THE GRANTOR AND
THE TRUSTEE EACH HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH
PURPOSE AND ANY APPELLATE COURTS THEREOF, EXCEPT THAT ANY FINAL ARBITRAL AWARD RENDERED IN
ACCORDANCE WITH ARTICLE VIII MAY BE ENTERED AND ENFORCED IN ANY COURT HAVING JURISDICTION OVER ANY
PARTY HERETO OR ANY OF ITS ASSETS.

          Section 7.7 No Third Party Beneficiaries. Nothing in this Trust Agreement is intended or
shall be construed to give any person, other than the parties hereto, any legal or equitable right,
remedy or claim under or in respect of this Trust Agreement or any provision contained herein.

          Section 7.8 Counterparts. This Trust 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 binding upon all of the
parties hereto notwithstanding the fact that all parties hereto are not signatory to the original
or the same counterpart. Each counterpart may consist of a number of copies hereof each signed by
less than all, but together signed by all of the parties hereto. Each counterpart may be delivered
by facsimile transmission, which transmission shall be deemed delivery of an originally executed
document.

          Section 7.9 Severability. Any term or provision of this Trust Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Trust Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Trust Agreement in any other jurisdiction, so long as the economic
or legal substance of the transactions contemplated hereby is not affected in any manner materially
adverse to any party hereto. If any provision of this Trust Agreement is so broad as to be
unenforceable, that provision shall be interpreted to be only so broad as is enforceable. In the
event of such invalidity or unenforceability of any term or provision of this Trust Agreement, the
parties hereto shall use their commercially reasonable efforts to reform such terms or provisions
to carry out the commercial intent of the parties hereto as reflected herein, while curing the
circumstance giving rise to the invalidity or unenforceability of such term or provision.

          Section 7.10 Specific Performance. Each of the parties hereto acknowledges and agrees that
the other parties hereto would be irreparably damaged in the event that any of the provisions of
this Trust Agreement were not performed or complied with in accordance with their specific terms or
were otherwise breached, violated or unfulfilled. Accordingly, each of the parties hereto agrees
that the other parties hereto shall be entitled to an injunction or injunctions to prevent
noncompliance with, or breaches or violations of, the provisions of this Trust Agreement by the
other parties hereto and to enforce specifically this Trust Agreement and the terms and provisions
hereof in any action instituted in accordance with Section 7.6, in addition to any other
remedy to which such party may be entitled, at law or in equity. In the event that any action is
brought in equity to enforce the provisions of this Trust Agreement, no party hereto will allege,
and each party hereto hereby waives the defense or counterclaim, that there is an adequate

Schedule 2.4(h)-13

 

remedy at law. The parties hereto further agree that (i) by seeking the remedies provided for in
this Section 7.10, a party hereto shall not in any respect waive its right to seek any
other form of relief that may be available to a party under this Trust Agreement, including
monetary damages in the event that this Trust Agreement has been terminated or in the event that
the remedies provided for in this Section 7.10 are not available or otherwise are not
granted and (ii) nothing contained in this Section 7.10 shall require any party hereto to
institute any action for (or limit any party’s right to institute any action for) specific
performance under this Section 7.10 before exercising any termination right under
Article VI, nor shall the commencement of any action pursuant to this Section 7.10
or anything contained in this Section 7.10 restrict or limit any party’s right to terminate
this Trust Agreement in accordance with the terms of Article VI, or pursue any other
remedies under this Trust Agreement that may be available then or thereafter.

          Section 7.11 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS TRUST AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THIS TRUST AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTIES HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTIES WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS TRUST AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED BY THIS TRUST AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.11.

          Section 7.12 Incontestability. In consideration of the mutual covenants and agreements
contained herein, each party hereto does hereby agree that this Trust Agreement, and each and every
provision hereof, is and shall be enforceable by and between them according to its terms, and each
party hereto does hereby agree that it shall not contest in any respect the validity or
enforceability hereof.

          Section 7.13 Set-Off. Any debts or credits, matured or unmatured, liquidated or
unliquidated, regardless of when they arose or were incurred, in favor of or against any of the
Beneficiaries or the Grantor with respect to this Trust Agreement are deemed mutual debts or
credits, as the case may be, and shall be set off, and only the net balance shall be allowed or
paid.

          Section 7.14 Currency. All financial data required to be provided pursuant to the terms of
this Trust Agreement shall be expressed in United States dollars. All payments and all settlements
of account between the parties hereto shall be in United States currency unless otherwise agreed by
the parties hereto.

Schedule 2.4(h)-14

 

ARTICLE VIII

DISPUTE RESOLUTION

          Section 8.1 Dispute Resolution. Notwithstanding anything contained herein to the contrary,
any dispute between the Beneficiary and the Grantor arising out of or relating to this Trust
Agreement or the breach, termination or validity hereof (“Dispute”) will be first addressed
in accordance with the procedures specified in Section 8.2, and subsequently, if necessary,
Section 8.3, which will be the sole and exclusive procedures for the resolution of any such
Disputes.

          Section 8.2 Negotiation Amongst the Parties. (a) The Beneficiary and the Grantor agree
that they shall first attempt to resolve Disputes by informal in-person discussions and
negotiations of their respective representatives. If a Beneficiary and the Grantor are unable to
resolve any such Dispute through such in-person discussions and negotiations within thirty (30)
calendar days of the day on which either the Beneficiary and the Grantor receives from the other
party or parties written notice of a Dispute, the Dispute shall be submitted for resolution to a
designated executive officer of each of the Beneficiary and the Grantor with authority to make a
decision. If the designated executive officers are unable to reach a mutually acceptable
resolution within ten (10) calendar days after expiration of such thirty-day period, on the request
of either the Beneficiary or the Grantor, the Dispute shall be resolved in accordance with
subsection (b). All negotiations, discussions, and communications made or conducted pursuant to
the procedures set forth in this Section 8.2(a) are confidential and will be treated as
compromise and settlement negotiations for purposes of the Federal Rules of Evidence and any other
applicable rules of evidence.

               (b) Upon completion of the dispute resolution process described in subsection (a) of this
Section 8.2 without resolution of the Dispute, either the Beneficiary or the Grantor may
submit the Dispute for resolution in accordance with Section 8.3.

          Section 8.3 Arbitration. (a) Except as provided in Sections 8.1 and 8.2,
any Dispute shall be finally determined by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (“AAA”) then in effect (the “Rules”),
except as modified herein. If the amount in controversy is five million dollars ($5,000,000) or
less (including all claims and counterclaims) there shall be one arbitrator who shall be agreed
upon by the Beneficiary and the Grantor within twenty (20) calendar days of receipt by
respondent(s) of a copy of the demand for arbitration. The single arbitrator may not award an
amount greater than five million dollars ($5,000,000) in value under any circumstances. If the
amount in controversy is more than five million dollars ($5,000,000) (including all claims and
counterclaims) there shall be three neutral and impartial arbitrators, one of whom shall be
appointed by each of (i) the Beneficiary, on the one hand and (ii) the Grantor, on the other hand,
within thirty (30) calendar days of receipt by respondent(s) of the demand for arbitration, and the
third arbitrator, who shall chair the arbitral tribunal, shall be appointed by the party appointed
arbitrators within fifteen (15) calendar days of the appointment of the second arbitrator. If any
arbitrator is not appointed within the time limit provided herein, such arbitrator shall be
appointed by the AAA in accordance with the listing, striking and ranking procedure in the Rules,
with each of the Beneficiary and the Grantor being given a limited number of strikes, except for

Schedule 2.4(h)-15

 

cause. Any arbitrator appointed by the AAA shall be a retired federal or state appellate court
judge or a current or retired officer of an insurance company with no less than fifteen (15) years
of experience in the property casualty insurance industry. The arbitration hearing on the merits
shall be commenced within ninety (90) calendar days of the appointment of the arbitrator(s) or as
soon thereafter as practicable. In rendering an award, the arbitral tribunal shall be required to
follow the laws of the State of New York. The award shall be in writing and shall briefly state
the findings of fact and conclusions of law on which it is based. The arbitrator(s) shall be
permitted to award any relief permitted under New York law, including damages and any form of
temporary or permanent injunctive relief, but shall not be permitted to award special, indirect,
punitive or incidental damages or damages for lost profits or any other consequential damages or
damages based on multiples or similar valuation techniques. The award shall be final and binding
upon the Beneficiary and the Grantor and shall be the sole and exclusive remedy between the
Beneficiary and the Grantor regarding any claims, counterclaims, issues or accounting presented to
the arbitrator(s). Judgment upon the award may be entered in any court having jurisdiction over
the Beneficiary and the Grantor or any of their respective assets. Any costs or fees (including
attorneys’ fees and expenses) incident to enforcing the award shall be charged against the
Beneficiary and the Grantor resisting such enforcement. Arbitrability of any and all disputes
shall be decided by the arbitrator(s). In the event of any inconsistency between the Rules and the
provisions of this Article VIII, the provisions of this Article VIII shall control.

               (b) Arbitration hereunder shall be conducted in Chicago, Illinois or New York, New York, as
determined by the party against whom the arbitration is demanded.

ARTICLE IX

EFFECTIVE DATE AND EXECUTION

          IN WITNESS OF THE ABOVE, this Trust Agreement is executed in triplicate by the parties’ duly
authorized officers on the dates indicated below with an effective date
of:                                         .

[CNA BENEFICIARY], as Beneficiary

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	Title: 
	 
	 	Date: 
	 
	 

	 	 	 	 	 
	 	 	 
	 	Attest:  	 	 
	 	Title: 
	 
	 	Date: 
	 

Schedule 2.4(h)-16

 

NATIONAL INDEMNITY COMPANY, as Grantor

	 	 	 	 	 
	 	 	 
	 	By:  	 	 
	 	Title: 
	 
	 	Date: 
	 
	 

	 	 	 	 	 
	 	 	 
	 	Attest:  	 	 
	 	Title: 
	 
	 	Date: 
	 
	 

[TRUSTEE], as Trustee

	 	 	 	 	 
	 	 	 
	 	By:  	 	 
	 	Title: 
	 
	 	Date: 
	 
	 

	 	 	 	 	 
	 	 	 
	 	Attest:  	 	 
	 	Title: 
	 
	 	Date: 
	 

Schedule 2.4(h)-17

 

	 	 	 	 	 

Exhibit D

Form of Parental Guarantee Agreement

 

CONFIDENTIAL

          THIS PARENTAL GUARANTEE AGREEMENT, dated as of [•],[•] (this “Parental Guarantee
Agreement”), is made by Berkshire Hathaway Inc., a Delaware corporation (“Berkshire”)
in favor of Continental Casualty Company, an Illinois property and casualty insurance company
(“CCC”), The Continental Insurance Company, a Pennsylvania property and casualty insurance
company (“CIC”), Continental Reinsurance Corporation International, Ltd., a Bermuda
long-term insurance company (“CRCI”), and CNA Insurance Company Limited, a United Kingdom
property and casualty insurance company (“CICL,” and each of CCC, CIC, CRCI and CICL is
individually hereinafter referred to as a “CNA Party” and all of CCC, CIC, CRCI and CICL
are collectively hereinafter referred to as the “CNA Parties”), with respect to certain
obligations of National Indemnity Company, a Nebraska property and casualty insurance company
(“NICO”).

WITNESSETH:

          WHEREAS, the CNA Parties, NICO and Berkshire have entered into that certain Master Transaction
Agreement, dated as of July [•], 2010 (as amended, restated, supplemented or otherwise modified,
the “Master Transaction Agreement”);

          WHEREAS, as contemplated by the Master Transaction Agreement, NICO and the CNA Parties have
entered into the Loss Portfolio Transfer Reinsurance Agreement, dated as of [•], 2010 (as amended,
restated, supplemented and/or modified from time to time) (the “LPT Reinsurance
Agreement”), which provides that the CNA Parties will cede to NICO, and NICO will reinsure, all
liabilities related to asbestos and pollution claims under the Business Covered (as defined in the
LPT Reinsurance Agreement);

          WHEREAS, as contemplated by the LPT Reinsurance Agreement, NICO, the CNA Parties and Wells
Fargo Bank, National Association, as trustee (the “Trustee”), have entered into the Trust
Agreement, dated as of [•], 2010 (as amended, restated, supplemented and/or modified from time to
time) (the “Trust Agreement”), which provides that NICO is obligated to establish the Trust
Account (as defined below) for the purpose of satisfying its obligations under the LPT Reinsurance
Agreement; and

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

          WHEREAS, to induce the CNA Parties to enter into the transactions contemplated by the Master
Transaction Agreement, the LPT Reinsurance Agreement and the Transaction Documents, Berkshire has
executed and delivered this Parental Guarantee Agreement; and

 

 

          WHEREAS, the parties hereto desire that the Agent, as representative for the CNA Parties, have
a security interest and continuing lien on Berkshire’s right, title and interest in the Collateral
(as defined below).

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

ARTICLE I

DEFINITIONS; CONSTRUCTION

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

          “Acceleration Event” means the occurrence or continuance of both of the following
events, acts, occurrences or conditions, whether either such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to or as a result of
compliance by any Person with any judgment, decree, order, rule or regulation of any court or
administrative or governmental body: any (i) Insolvency Event of NICO and (ii) Insolvency
Event of Berkshire, whether such Insolvency Event occurs prior to, concurrently with or subsequent
to the Insolvency Event of NICO referred to in (i).

          “Agent” means CCC, in its capacity as agent for the benefit of the CNA Parties,
together with its successors and assigns.

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

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

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

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

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

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

          “Collateral” has the meaning set forth in Section 3.1.

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

2

 

          “Event of Default” means the occurrence or continuance of all of the following: (i)
any NICO Event of Default, (ii) the failure of Berkshire to perform or pay under the Parental
Guarantee and (iii) any of the following events, acts, occurrences or conditions, whether
such event, act, occurrence or condition is voluntary or involuntary or results from the operation
of law or pursuant to or as a result of compliance by any Person with any judgment, decree, order,
rule or regulation of any court or administrative or governmental body:

               (a) any Insolvency Event of NICO;

               (b) a final arbitration award, court order, decision or judgment with no appeal or
stay pending (1) has been issued against NICO in favor of a CNA Party under the LPT
Reinsurance Agreement or the Trust Agreement and remains unpaid or unperformed by NICO or
(2) has been issued against a CNA Party with respect to an A&P Claim in respect of Business
Covered that NICO has acknowledged in writing its obligation to pay and such claim remains
unpaid by NICO; or

               (c) NICO has acknowledged in writing its obligation to pay or perform an obligation
guaranteed under the Parental Guarantee, and such obligation remains due and unpaid or
unperformed by NICO.

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

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

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

3

 

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

          “Master Transaction Agreement” has the meaning set forth in the Recitals.

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

          “NICO Event of Default” means the occurrence or continuance of any of the following
events, acts, occurrences or conditions, whether such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to or as a result of
compliance by any Person with any judgment, decree, order, rule or regulation of any court or
administrative or governmental body:

          (a) NICO’s failure to pay all Ultimate Net Loss due and owing by NICO, pursuant to and
in accordance with the applicable provisions of the LPT Reinsurance Agreement, subject
always to the LPT Limit;

          (b) NICO’s failure to transfer and assign assets into the Trust Account when required,
including upon the occurrence of a Collateral Triggering Event or a Reinsurance Credit
Event, pursuant to and in accordance with the applicable provisions of the LPT Reinsurance
Agreement and the Trust Agreement;

          (c) NICO’s failure to establish, fund and maintain additional trust accounts and/or
other collateral when required upon the occurrence of a Reinsurance Credit Event, pursuant
to and in accordance with the applicable provisions of the LPT Reinsurance Agreement and
the Trust Agreement.

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

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

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

          “Person” means and includes any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or political subdivision or
agency, department or instrumentality thereof.

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

          “Secured Obligations” means (i) all of NICO’s payment and performance obligations
(whether absolute or contingent, matured or unmatured) arising under or in connection with the LPT
Reinsurance Agreement and the Trust Agreement, (ii) all of Berkshire’s payment and performance
obligations (whether absolute or contingent, matured or unmatured) arising under the Parental
Guarantee with respect to NICO’s obligations under the LPT Reinsurance Agreement and the Trust
Agreement and (iii) reimbursement for all expenses incurred to enforce and exercise any and all
remedies under (A) the LPT Reinsurance Agreement and the Trust Agreement or (B) this Parental
Guarantee Agreement (solely with respect to Berkshire’s payment and performance obligations
(whether absolute or contingent, matured or unmatured) arising under the Parental Guarantee with
respect to NICO’s obligations under the

4

 

LPT Reinsurance Agreement and the Trust Agreement), including, without limitation, all
reasonable attorney’s fees and legal expenses and including, without limitation, any of the
foregoing amounts payable after the commencement of any Insolvency Proceeding, whether or not any
such amounts are allowed in any such proceeding.

          “Securities Intermediary” means Wells Fargo Bank, National Association, acting as
securities intermediary with respect to the Trust Account.

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

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

          “Trust Account” means the trust account established by the Securities Intermediary
with account number 80460400 in the name of the Trustee, together with any replacements thereof or
substitutions therefor.

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

          “Trustee” has the meaning set forth in the Recitals.

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

ARTICLE II

PARENTAL GUARANTEE

          Section 2.1 Parental Guarantee.

          (a) Berkshire hereby unconditionally and irrevocably guarantees (the “Parental
Guarantee”) NICO’s full and prompt payment and, in the case of the obligations set forth in
(ii) and (iii) below (the “Collateral Obligations”), performance when due of NICO’s
obligations for: (i) the payment of all Ultimate Net Loss due and owing by NICO, pursuant to and
in accordance with the applicable provisions of the LPT Reinsurance Agreement, subject always to
the LPT Limit; (ii) the transfer and assignment of assets into the Trust Account when required,
including upon the occurrence of a Collateral Triggering Event or a Reinsurance Credit Event,
pursuant to and in accordance with the applicable provisions of the LPT Reinsurance Agreement and
the Trust Agreement; (iii) the establishment, funding and maintenance of additional trust accounts
and/or other collateral when required upon the occurrence of a Reinsurance Credit Event, pursuant
to and in accordance with the applicable provisions of the LPT Reinsurance Agreement and the Trust
Agreement; and (iv) the payment of any amounts due and payable to the CNA Parties pursuant to
Section 14.2(c) of the Administrative Services Agreement if the Administrative Services Agreement
is terminated in accordance with Section 14.2(a)(iii) thereof (such obligations, collectively, the
“Guaranteed Obligations”).

5

 

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

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

          (ii) a final arbitration award, court order, decision or judgment with no appeal or
stay pending (A) has been issued against NICO in favor of a CNA Party under the LPT
Reinsurance Agreement, the Trust Agreement or the Administrative Services Agreement and
remains unpaid (or, in the case of Collateral Obligations, unperformed) by NICO, or (B) has
been issued against a CNA Party with respect to an A&P Claim in respect of Business Covered
that NICO has acknowledged in writing its obligation to pay and such claim remains unpaid by
NICO; or

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

          (c) The Parental Guarantee is a guarantee of payment (or, in the case of Collateral
Obligations, performance) and not of collection merely, and upon the occurrence of a Trigger Event
and any failure of NICO to pay (or, in the case of Collateral Obligations, perform) a Guaranteed
Obligation as set forth above any CNA Party, may, at its option, proceed directly and at once, with
written notice, against Berkshire to collect and recover the full amount of NICO’s liability to pay
(or, in the case of Collateral Obligations, perform) such Guaranteed Obligation (or any portion
thereof) then due and owing, together with any applicable Interest, and otherwise enforce the
Collateral Obligations. The Parental Guarantee is a continuing guaranty and the obligations of
Berkshire hereunder are and shall be absolute under any and all circumstances, irrespective of, and
Berkshire hereby waives, any defense it may have relating to: (i) any lack of validity, regularity
or enforceability of this Parental Guarantee Agreement, the

6

 

LPT Reinsurance Agreement, the Trust Agreement or the Administrative Services Agreement, (ii)
any change in time or place of payment of or other term of the Guaranteed Obligation, or any other
amendment or waiver of or consent to departure from this Parental Guarantee Agreement, the LPT
Reinsurance Agreement, the Trust Agreement or the Administrative Services Agreement, (iii) except
with respect to whether a Trigger Event has occurred, any change, restructuring or termination of
the corporate structure or existence of NICO, or any dissolution, liquidation, conservation,
rehabilitation, bankruptcy, statutory reorganization, receivership, compulsory composition, or
similar statutory or delinquency proceeding affecting NICO or any of its assets or any resulting
release or discharge of any obligation of NICO under the LPT Reinsurance Agreement, the Trust
Agreement or the Administrative Services Agreement or (iv) in the case of a Trigger Event of the
type described in Section 2.1(b)(ii) or Section 2.1(b)(iii), any defense, set-off
or other circumstance which might otherwise constitute a defense available to Berkshire or NICO.
Notwithstanding anything contained herein to the contrary, nothing in this Parental Guarantee
Agreement shall preclude Berkshire from asserting a valid claim or valid defense to the effect that
the Guaranteed Obligation has been paid, discharged or satisfied in full in accordance with the
terms of the LPT Reinsurance Agreement, the Trust Agreement or the Administrative Services
Agreement, as applicable. Except as otherwise expressly set forth in this Parental Guarantee
Agreement, Berkshire hereby expressly waives promptness, diligence, demand, notice of dishonor,
non-payment, non-performance or other default with respect to the Guaranteed Obligations, or any
requirements that any right or power be exhausted or any action taken against NICO. To the extent
that Berkshire shall have made any payments under this Parental Guarantee Agreement, any rights to
subrogation which Berkshire may have as a result of any such payment shall be deferred, postponed
and subordinated to the prior indefeasible payment in full of the Guaranteed Obligations. If all
or any part payment applied to the Guaranteed Obligation is or must be recovered, rescinded or
returned to NICO, Berkshire or any other Person because of a dissolution, liquidation,
conservation, rehabilitation, bankruptcy, statutory reorganization, receivership, compulsory
composition, or similar proceeding affecting any Party, such Guaranteed Obligation shall be deemed
to have continued in existence and this Parental Guarantee Agreement shall continue in effect as to
such Guaranteed Obligation, all as though such payment had not been made.

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

          (e) For the avoidance of doubt, but subject to Section 2.1(d), the payment (or, in the
case of Collateral Obligations, performance) of a Guaranteed Obligation by Berkshire pursuant to
this Parental Guarantee Agreement shall be deemed to satisfy NICO’s obligation to perform or pay
such Guaranteed Obligation for any purpose, including under the LPT

7

 

Reinsurance Agreement, the Trust Agreement or the Administrative Services Agreement, as
applicable. None of the CNA Parties shall be entitled to obtain payment (or, in the case of
Collateral Obligations, performance) of a Guaranteed Obligation from NICO under the LPT Reinsurance
Agreement, the Trust Agreement or the Administrative Services Agreement or withdraw funds from the
Trust Account or any replacement or successor thereof or substitution therefor to satisfy a
Guaranteed Obligation to the extent that such Guaranteed Obligation has theretofore been paid or
performed in full by Berkshire under this Parental Guarantee Agreement. In furtherance of the
foregoing, the CNA Parties hereby agree that any amounts paid by Berkshire under this Parental
Guarantee Agreement shall be in satisfaction of any amounts due and payable (but unpaid) by NICO
under the LPT Reinsurance Agreement, the Trust Agreement or the Administrative Services Agreement,
as applicable.

ARTICLE III

TRUST ACCOUNT; GRANT OF SECURITY INTEREST

          Section 3.1 Grant of Security Interest. As security for the prompt and complete payment,
reimbursement and performance when due in full of all the Secured Obligations, Berkshire hereby
grants to the Agent for the benefit of the CNA Parties, a security interest in and continuing lien
on all of Berkshire’s right, title and interest in, to and under the following, in each case,
whether now owned or existing or hereafter acquired or arising, and wherever located (all of which
being hereinafter collectively called the “Collateral”):

               (a) the Trust Account;

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

               (c) all Proceeds of any or all of the foregoing.

          Section 3.2 Registration of Securities, Etc. All securities and other financial assets
credited to the Trust Account that are in registered form or that are payable to or to the order of
Berkshire shall be (i) registered in the name of, or payable to or to the order of, the Trustee or
(ii) endorsed to or to the order of the Trustee or in blank; and in no case will any financial
asset credited to the Trust Account be registered in the name of, or payable to or to the order of,
Berkshire or endorsed to or to the order of Berkshire, except to the extent the foregoing have been
specially endorsed to or to the order of the Trustee or in blank.

          Section 3.3 Successor Trust Account. Except as otherwise set forth in Section 3.4,
in the event a successor trust account is established, (i) such account shall be established with
either the Securities Intermediary or another “securities intermediary” (as defined in the UCC)
reasonably acceptable to Berkshire and the Agent, (ii) the Parties shall amend this Parental
Guarantee Agreement to include such successor trust account and securities intermediary with whom
such successor trust account is established, and such securities intermediary shall enter into this
Parental Guarantee Agreement, as amended (solely for the purposes of Articles III-VII), or
a form of agreement reasonably acceptable to Berkshire and the

8

 

Agent prior to or contemporaneously with the establishment of the successor trust account and (iii)
financing statements shall be amended to identify the successor trust account, all in a manner
reasonably satisfactory to the Agent.

          Section 3.4 Reinsurance Credit Event Trust Accounts. Concurrently with the modification of
the Trust Account and/or the creation of new trust accounts as a result of a Reinsurance Credit
Event, Berkshire and the Securities Intermediary will enter into agreements substantially in the
form of this Parental Guarantee Agreement with each of the respective CNA Parties, granting to such
CNA Party a security interest in and continuing lien on all of Berkshire’s right, title and
interest in, to and under the following, in each case, whether now owned or existing or hereafter
acquired or arising, and wherever located: (i) the modified Trust Account or the new trust account
created as a result of the Reinsurance Credit Event for which such CNA Party is the sole
beneficiary; (ii) all Security Entitlements carried in such trust account and (iii) all Proceeds of
any or all of the foregoing.

ARTICLE IV

DUTIES OF THE SECURITIES INTERMEDIARY

          Section 4.1 No Other Entitlement Orders. Without the prior written consent of the Agent,
Berkshire shall not enter into any agreement under which it (i) grants a security interest or lien
on any or all of the Collateral and/or (ii) agrees to cause the Securities Intermediary to comply
with “entitlement orders” (as defined in the UCC) originated by any Person other than the Agent or
the entitlement holder with respect to any property credited to the Trust Account. Berkshire shall
promptly notify the Agent if any Person requests Berkshire to enter into any such agreement as
described in this Section 4.1 or otherwise asserts or seeks to assert a lien, encumbrance
or adverse claim against any portion or all of the property credited to the Trust Account (and in
that connection, Berkshire represents and warrants to the Agent that it has not heretofore received
any such request or assertion with respect to the Trust Account) and that it will promptly notify
the Agent of the occurrence of any such events.

          Section 4.2 Removal of the Securities Intermediary by the Agent.

     (a) If Berkshire and/or its Affiliates, either individually or in the aggregate, shall
acquire more than ten percent (10%) of the outstanding voting stock of the Securities
Intermediary, the Securities Intermediary may be removed by the Agent by delivery to the
Securities Intermediary and Berkshire of a written notice of removal, effective upon
receipt by the Securities Intermediary and Berkshire of such notice. Notwithstanding the
foregoing, no such removal by the Agent shall be effective until (i) another “securities
intermediary” (as defined in the UCC) reasonably acceptable to Berkshire and the Agent
shall have been duly appointed by the Agent, (ii) such securities intermediary has entered
into an agreement substantially in the form of this Parental Guarantee Agreement or a form
reasonably acceptable to Berkshire and the Agent prior to or contemporaneously with the
appointment of the new securities intermediary and (iii)

9

 

financing statements shall be amended to identify such securities intermediary, all in
a manner reasonably satisfactory to the Agent.

          (b) If the Securities Intermediary is removed by the Agent pursuant to Section
4.2(a), the CNA Parties shall pay any amounts charged by the new securities
intermediary for its services as contemplated by this Parental Guarantee Agreement that are
greater than the total amount of fees charged by the Securities Intermediary under this
Parental Guarantee Agreement.

ARTICLE V

REMEDIES; RIGHTS UPON DEFAULT, ETC.

          Section 5.1 Rights and Remedies Generally. If an Event of Default has occurred and is
continuing, then and in every such case, the Agent may exercise, in addition to all other rights
and remedies granted to them in this Parental Guarantee Agreement and in any other instrument or
agreement securing, evidencing or relating to the Secured Obligations, all rights and remedies of a
secured party under the UCC or any other applicable law.

          Section 5.2 Acceleration. Upon the occurrence and continuance of an Acceleration Event,
the Secured Obligations shall be automatically due and payable with all additional interest from
time to time accrued thereon, without further action by the Agent or any other person. For the
avoidance of doubt, for purposes of this Section 5.2, the amount of Secured Obligations
with respect to the Trust Account shall be the Security Amount or the Required Amount applicable to
the Trust Account in effect at the time of the Acceleration Event.

ARTICLE VI

BERKSHIRE WARRANTIES; POWER OF ATTORNEY

          Section 6.1 Berkshire Warranties. Berkshire’s exact legal name (as indicated in the public
record of Berkshire’s jurisdiction of organization) is as set forth on the signature block to this
Parental Guarantee Agreement. Berkshire’s jurisdiction of organization is the State of Delaware and
the organizational identification number assigned by the State of Delaware to Berkshire is 2908471.
The location of Berkshire’s chief executive office is the address provided in Section 7.12
as the address for notice to Berkshire. Berkshire will not, except upon 30 days prior written
notice to the Agent and delivery to the Agent of all additional financing statements and other
documents reasonably requested by the Agent to maintain the validity, perfection and priority of
the security interest provided for herein, (i) change its jurisdiction of organization or (ii)
change its name. If Berkshire changes the address of its chief executive office, it shall promptly
provide written notice to the Agent of such new address.

          Section 6.2 The Agent’s Appointment as Attorney-in-Fact. Berkshire hereby irrevocably
constitutes and appoints the Agent and any officers or agents thereof, with full power of
substitution, as its true and lawful attorneys-in-fact with full irrevocable power and authority in
the place and stead of Berkshire and in the name of Berkshire or in their own names,

10

 

from time to time in the Agent’s discretion, for the purpose of carrying out the terms of this
Parental Guarantee Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the purposes of this
Parental Guarantee Agreement. Notwithstanding the foregoing, the Agent agrees that the power of
attorney provided for in this Section 6.2 shall only become effective upon the occurrence
and continuance of an Event of Default.

ARTICLE VII

MISCELLANEOUS PROVISIONS

     Section 7.1 Entire Agreement.

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

     Section 7.2 Waiver and Amendment.

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

     Section 7.3 Successors and Assigns.

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

     Section 7.4 Construction; Interpretation.

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

11

 

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

     Section 7.5 Governing Law and Jurisdiction.

          This Parental Guarantee Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts entered into therein, without reference to
principles of choice of law or conflicts of laws (other than Section 5-1401 of the New York General
Obligations Law). Any action, suit or proceeding arising out of or relating to this Parental
Guarantee Agreement shall be brought by the Parties solely in the United States District Court for
the Southern District of New York, provided that if said court determines that it does not have
subject matter jurisdiction then said action, suit or proceeding may be brought in the supreme
court of the State of New York for New York County; and the Parties each hereby irrevocably submit
to the exclusive jurisdiction of such courts for such purpose and any appellate courts thereof.
Each Party hereto agrees that service of any process, summons, notice or document by U.S.
registered mail addressed to such party shall be effective service of process for any action, suit
or proceeding brought against such party in such court. Each Party hereto irrevocably and
unconditionally waives any objection to the laying of venue of any such action, suit or proceeding
brought in any such court and any claim that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum. Each Party hereto agrees that final judgment
in any such action, suit or proceeding brought in any such court shall be conclusive and binding
upon such Party and may be enforced in any other courts to whose jurisdiction such Party may be
subject, by suit upon such judgment.

     Section 7.6 No Third Party Beneficiaries.

          Nothing in this Parental Guarantee Agreement is intended or shall be construed to give any
Person, other than the Parties hereto, any legal or equitable right, remedy or claim under or in
respect of this Parental Guarantee Agreement or any provision contained herein.

     Section 7.7 Counterparts.

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

12

 

     Section 7.8 Severability.

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

     Section 7.9 Specific Performance.

          Each of the Parties acknowledges and agrees that the other Party would be irreparably damaged
in the event that any of the provisions of this Parental Guarantee Agreement were not performed or
complied with in accordance with their specific terms or were otherwise breached, violated or
unfulfilled. Accordingly, each of the Parties agrees that the other Party shall be entitled to an
injunction or injunctions to prevent noncompliance with, or breaches or violations of, the
provisions of this Parental Guarantee Agreement by the other Party and to enforce specifically this
Parental Guarantee Agreement and the terms and provisions hereof in any action instituted in
accordance with Section 7.5, in addition to any other remedy to which such Party may be
entitled, at law or in equity. In the event that any action is brought in equity to enforce the
provisions of this Parental Guarantee Agreement, no Party will allege, and each Party hereby waives
the defense or counterclaim, that there is an adequate remedy at law. The Parties further agree
that (i) by seeking the remedies provided for in this Section 7.9, a Party shall not in any
respect waive its right to seek any other form of relief that may be available to a Party under
this Parental Guarantee Agreement, including monetary damages in the event that this Parental
Guarantee Agreement has been terminated or in the event that the remedies provided for in this
Section 7.9 are not available or otherwise are not granted and (ii) nothing contained in
this Section 7.9 shall require any Party to institute any action for (or limit any Party’s
right to institute any action for) specific performance under this Section 7.9 before
exercising any other remedies under this Parental Guarantee Agreement that may be available then or
thereafter nor shall the commencement of any action pursuant to this Section 7.9 or
anything contained in this Section 7.9 restrict or limit any Party’s right to pursue any
other remedies under this Parental Guarantee Agreement that may be available then or thereafter.

     Section 7.10 Waiver of Jury Trial.

          EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS PARENTAL GUARANTEE AGREEMENT OR

13

 

THE TRANSACTIONS CONTEMPLATED BY THIS PARENTAL GUARANTEE AGREEMENT. EACH OF THE PARTIES
HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTIES HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTIES WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS PARENTAL GUARANTEE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS PARENTAL GUARANTEE
AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 7.10.

     Section 7.11 Incontestability.

          In consideration of the mutual covenants and agreements contained herein, each Party does
hereby agree that this Parental Guarantee 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 in any respect the validity or enforceability hereof.

     Section 7.12 Notice.

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

	 	 	 

	To CNA Parties:

	 	CNA Financial Corporation
	 

	 	333 S. Wabash Avenue
	 

	 	Chicago, IL 60604
	 

	 	Attention: Jonathan D. Kantor
	 

	 	Executive Vice President,
	 

	 	General Counsel and Secretary
	 

	 	Fax: (312) 817-0511
	 
	 	 
	With a copy to:

	 	CNA Financial Corporation
	 

	 	333 S. Wabash Avenue
	 

	 	Chicago, IL 60604
	 

	 	Attention: Michael P. Warnick
	 

	 	Senior Vice President and Deputy General Counsel
	 

	 	Fax: (312) 755-2479

14

 

	 	 	 

	To Berkshire:

	 	Berkshire Hathaway Inc.
	 

	 	3555 Farnam Street
	 

	 	Suite 1440
	 

	 	Omaha, NE 68131
	 

	 	Attention: Chief Financial Officer
	 

	 	Fax: (402) 346-3375
	 
	 	 
	To NICO:

	 	National Indemnity Company
	 

	 	100 First Stamford Place
	 

	 	Stamford, Connecticut 06902
	 

	 	Attention: General Counsel
	 

	 	Fax: (203) 363-5221
	 
	 	 
	With a copy to:

	 	National Indemnity Company
	 

	 	3024 Harney Street
	 

	 	Omaha, NE 68131
	 

	 	Attention: Treasurer
	 

	 	Fax: (402) 916-3030

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

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

15

 

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

	 	 	 	 	 
	 	BERKSHIRE HATHAWAY INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CONTINENTAL CASUALTY COMPANY, as Agent for the CNA Parties (as defined herein)

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	THE CONTINENTAL INSURANCE COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CONTINENTAL REINSURANCE CORPORATION

INTERNATIONAL, LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CNA INSURANCE COMPANY LIMITED

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	CONTINENTAL CASUALTY COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

Exhibit E

Form of Retrospective Premium Allocation Agreement

 

 

CONFIDENTIAL

RETROSPECTIVE PREMIUM ALLOCATION AGREEMENT

          THIS RETROSPECTIVE PREMIUM ALLOCATION AGREEMENT, dated as of [•], 2010 (this “RP
Allocation Agreement”), is made and entered into by and among Continental Casualty Company, an
Illinois property and casualty insurance company (“CCC”), The Continental Insurance
Company, a Pennsylvania property and casualty insurance company (“CIC”), Continental
Reinsurance Corporation International, Ltd., a Bermuda long-term insurance company
(“CRCI”), and CNA Insurance Company Limited, a United Kingdom property and casualty
insurance company (“CICL,” and each of CCC, CIC, CRCI and CICL is individually and all of
CCC, CIC, CRCI and CICL are collectively hereinafter referred to as the “Reinsured”), and
National Indemnity Company, a Nebraska property and casualty insurance company (hereinafter
referred to as the “Reinsurer”). All capitalized terms used in this RP Allocation
Agreement and not otherwise defined herein shall have the respective meanings assigned to them in
LPT Reinsurance Agreement (as defined below).

WITNESSETH:

          WHEREAS, in accordance with that certain Master Transaction Agreement (the “Master
Transaction Agreement”), dated July [•], 2010, by and among the Reinsured, the Reinsurer and
Berkshire Hathaway Inc., a Delaware corporation and the ultimate parent company of the Reinsurer,
the Reinsured and the Reinsurer entered into that certain Loss Portfolio Transfer Reinsurance
Agreement, dated [•], 2010 (the “LPT Reinsurance Agreement”);

          WHEREAS, concurrently with the execution of the LPT Reinsurance Agreement and in accordance
with the Master Transaction Agreement, the Reinsured and the Reinsurer entered into that certain
Administrative Services Agreement (the “Administrative Services Agreement”), pursuant to
which the Reinsurer has agreed to provide claims handling and other administrative services with
respect to the Reinsured Contracts and the Third Party Reinsurance Agreements;

          WHEREAS, certain Reinsured Contracts contain terms and conditions permitting that the premiums
charged thereunder may be increased based upon the claims or loss experience under such Reinsured
Contract (the “Retrospective Premium Adjustments”);

          WHEREAS, the Reinsured and the Reinsurer desire that the Reinsured will continue to provide
certain administrative services with respect to such Retrospective Premium Adjustments; and

 

 

          WHEREAS, the Reinsured and the Reinsurer desire to set forth how the obligations and proceeds
relating to such Retrospective Premium Adjustments are to be allocated among the Reinsured and the
Reinsurer.

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

ARTICLE I

DEFINITIONS

     1.1 Definitions.

          The following terms shall have the respective meanings set forth below throughout this RP
Allocation Agreement:

“Administrative Services Agreement” has the meaning set forth in the Recitals.

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

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

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

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

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

“Master Transaction Agreement” has the meaning set forth in the Recitals.

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

2

 

“Post-Inception Date Retrospective Premiums” means all Retrospective Premiums that are
attributable to claims paid under Reinsured Contracts on or after the Inception Date (as such
claims payments are recorded in the general ledger of any Reinsured), but prior to the expiration
or termination of the LPT Reinsurance Agreement.

“Pre-Inception Date Retrospective Premiums” means all Retrospective Premiums that are
attributable to claims paid under Reinsured Contracts prior to the Inception Date (as such claims
payments are recorded in the general ledger of any Reinsured).

“Reinsured” shall have the meaning specified in the Preamble. The term “Reinsured” as used
herein shall include any predecessor or successor of such companies, including by reason of merger,
consolidation or otherwise.

“Reinsurer” shall have the meaning specified in the Preamble. The term “Reinsurer” as used
herein shall include any predecessor or successor of such companies, including by reason of merger,
consolidation or otherwise.

“Retrospective Premium Adjustments” has the meaning set forth in the Recitals.

“Retrospective Premium Adjustment Services” has the meaning set forth in Section
3.1.

“RP Allocation Agreement” has the meaning set forth in the Preamble.

“Retrospective Premiums” means (a) any amounts, including interest thereon, due to or from
a counterparty, policyholder or insured under a Reinsured Contract as a result of a Retrospective
Premium Adjustment, less (b) any reasonable out-of-pocket expenses incurred by the
Reinsured in connection with the provision of the Retrospective Premium Adjustment Services, and
less (c) any liability with respect to any premium tax or similar tax or any guaranty fund
assessment arising from such Retrospective Premium. For the avoidance of doubt, Retrospective
Premiums may be negative, including as a result of (x) the amounts specified in subsection
(b) and/or (c) above exceeding the amounts specified in subsection (a)
above, (y) the inability of the Reinsured to collect the amounts specified in subsection
(a) above or (z) favorable loss experience pursuant to the terms of the Reinsured Contract.

“Transaction Documents” means the Master Transaction Agreement and the Ancillary
Agreements, other than this RP Allocation Agreement.

3

 

ARTICLE II

ALLOCATION OF RETROSPECTIVE PREMIUMS

     2.1 Pre-Inception Date Retrospective Premiums.

          All payable or receivable Pre-Inception Date Retrospective Premiums shall be the obligation
of, or for the benefit and account of, the Reinsured. The Reinsurer shall, if reasonably requested
by the Reinsured, cooperate with the Reinsured at the Reinsured’s expense in the collection of
Pre-Inception Date Retrospective Premiums.

     2.2 Post-Inception Date Retrospective Premiums.

          (a) All payable or receivable Post-Inception Date Retrospective Premiums shall be allocated
among the Reinsured and the Reinsurer as follows: (i) the amount of such Post-Inception Date
Retrospective Premiums allocated to the Reinsured shall be equal to (A) the amount of such
Post-Inception Date Retrospective Premiums under the Reinsured Contract multiplied by (B) (1) the
total amount of losses subject to a Retrospective Premium Adjustment under such Reinsured Contract
attributable to Non A&P Claims paid on or after the Inception Date but prior to the expiration or
termination of the LPT Reinsurance Agreement, divided by (2) the total amount of losses subject to
a Retrospective Premium Adjustment under such Reinsured Contract attributable to any claims paid on
or after the Inception Date but prior to the expiration or termination of the LPT Reinsurance
Agreement, and (ii) the amount of such Post-Inception Date Retrospective Premiums allocated to the
Reinsurer shall be equal to (A) the amount of such Post-Inception Date Retrospective Premiums under
the Reinsured Contract multiplied by (B) (1) the total amount of losses subject to a Retrospective
Premium Adjustment under such Reinsured Contract attributable A&P Claims paid on or after the
Inception Date but prior to the expiration or termination of the LPT Reinsurance Agreement, divided
by (2) the total amount of losses subject to a Retrospective Premium Adjustment under such
Reinsured Contract attributable to any claims paid on or after the Inception Date but prior to the
expiration or termination of the LPT Reinsurance Agreement.

          (b) The Reinsurer, on behalf of the Reinsured, shall utilize its commercially reasonable
efforts to reach agreement in the Reinsurer’s A&P Claims settlement negotiations with policyholders
or insureds under the Reinsured Contracts to offset any Post-Inception Date Retrospective Premiums
that would arise from such contemplated A&P Claims settlement.

          (c) To the extent an offset of the portion of Post-Inception Date Retrospective Premiums
attributable to the A&P Claims against any A&P Claims payments due under a Reinsured Contract
pursuant to Section 2.2(b) is not attainable for whatever reason, then the Reinsured shall
use its commercially reasonable efforts to collect, on behalf of the Reinsurer, the portion of
Post-Inception Date Retrospective Premiums attributable to the A&P Claims under

4

 

such Reinsured Contract, and forward such portion of Post-Inception Date Retrospective
Premiums collected by the Reinsured to the Reinsurer. The Reinsured’s efforts to collect shall,
when commercially reasonable, include the drawing upon any available security or the commencement
of any formal recovery process (such as litigation or arbitration). To the extent that the
Reinsured does not use commercially reasonable efforts to collect such Post-Inception Date
Retrospective Premiums, the Reinsurer shall have the right to assume the management and control of
the collection efforts of such Post-Inception Date Retrospective Premiums attributable to A&P
Claims.

     2.3 Appointment of CCC as Agent for the Reinsured.

          CCC is hereby authorized to perform the Retrospective Premium Adjustment Services on behalf of
the Reinsured, and is authorized to act on behalf of the Reinsured for all matters relating to this
RP Allocation Agreement. CCC is hereby authorized to pay, collect and/or remit, as applicable, on
behalf the Reinsured, any Retrospective Premiums allocable under this RP Allocation Agreement to be
paid or received, as applicable, by the Reinsured.

     2.4 Reports.

          CCC shall prepare and deliver to Reinsurer a quarterly settlement report calculating the
amount of Retrospective Premiums to be allocated among the Parties pursuant to Section 2.2
within twenty (20) calendar days of the end of each calendar quarter. The Reinsurer will pay to
CCC any amount shown due to the Reinsured, and CCC will pay to the Reinsurer any amount shown due
to the Reinsurer, as the case may be, within five (5) Business Days following transmittal of such
quarterly settlement report. All such payments shall be made by wire transfer in immediately
available funds to an account specified in writing by the other Party from time to time.

          On a quarterly basis, Reinsurer shall deliver to CCC sufficient information to enable
Reinsured to perform all Retrospective Premium Adjustment Services. In addition, on a quarterly
basis, Reinsured shall deliver to Reinsurer a report reflecting Post-Inception Date Retrospective
Premium billed but not collected.

5

 

ARTICLE III

ADMINISTRATIVE SERVICES

     3.1 Administrative Services.

          Notwithstanding anything to the contrary contained in the Administrative Services Agreement,
the Parties acknowledge and agree that the Reinsured, or their respective subcontractors, shall
continue to be responsible for the provision of all administrative services necessary or
appropriate in connection with administering the Retrospective Premium Adjustments under the
Reinsured Contracts, collecting all Retrospective Premiums that may be due thereunder and
administering all matters relating thereto (e.g., posting of collateral) (collectively, the
“Retrospective Premium Adjustment Services”). In no event shall Reinsured make any
outgoing payment or return of Post-Inception Date Retrospective Premiums attributable to A&P Claims
without first consulting with the Reinsurer.

     3.2 Service Standards.

          The Reinsured covenant and agree that the Retrospective Premium Adjustment Services shall be
performed, in all material respects, in accordance with (a) the standards of service that, taken as
a whole, are at least comparable to those utilized by the Reinsured in providing such services
immediately prior to the date of this RP Allocation Agreement, (b) the terms of the Reinsured
Contracts, and (c) Applicable Law. The Reinsured shall use substantially the same level of
diligence and care in collecting Post-Inception Date Retrospective Premiums that are attributable
to A&P Claims as the Reinsured exercises in collecting similar retrospective premiums in connection
with its other insurance and reinsurance businesses.

ARTICLE IV

COVENANTS OF THE PARTIES

     4.1 Cooperation.

          The Parties hereto shall cooperate in a commercially reasonable manner in order to accomplish
the objectives of this RP Allocation Agreement, including making available to each other their
respective officers and employees for interviews and meetings with Governmental Authorities and
furnishing any additional assistance, information and documentation as may be reasonably requested
by the other Party from time to time.

6

 

     4.2 Pre-Inception Date Payables.

          For the avoidance of doubt, the Reinsurer shall not be liable for any Pre-Inception Date
Retrospective Premiums that are payable by the Reinsured.

     4.3 Delayed Payments and Interest.

          In the event that there is a delay in the payment of an amount due to the Reinsured or the
Reinsurer, as applicable, under Article II, interest will accrue on such payment at the
Applicable Interest Rate. Interest will be calculated on the basis of actual days for a 360-day
year based on the actual number of calendar days elapsed.

ARTICLE V

TERM AND TERMINATION

     5.1 Termination of Agreement.

          This RP Allocation Agreement shall automatically terminate upon the expiration or termination
of the LPT Reinsurance Agreement.

     5.2 Effect of Termination.

          The termination of this RP Allocation Agreement shall not affect any rights or obligations of
any of the Parties applicable to the period prior to the effective date of termination.
Article IV, Article VI and Article VII shall survive the termination of
this RP Allocation Agreement.

ARTICLE VI

DISPUTE RESOLUTION

     6.1 Dispute Resolution.

          Notwithstanding anything contained herein to the contrary, any dispute between the Parties
arising out of or relating to this RP Allocation Agreement or the breach, termination or validity
thereof will be addressed in accordance with Article X and Article XI of the Master Transaction
Agreement.

7

 

ARTICLE VII

MISCELLANEOUS PROVISIONS

     7.1 Notices.

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

     If to the Reinsured:

CNA Financial Corporation

333 S. Wabash Avenue

Chicago, IL 60604

Attention: Jonathan D. Kantor

Executive Vice President,

General Counsel and Secretary

Fax: (312) 817-0511

     With a copy to:

CNA Financial Corporation

333 S. Wabash Avenue

Chicago, IL 60604

Attention: Michael P. Warnick

Senior Vice President and Deputy General Counsel

Fax: (312) 755-2479

     If to the Reinsurer:

National Indemnity Company

100 First Stamford Place

Stamford, CT 06902

Attention: General Counsel

Fax: (203) 363-5221

8

 

     With a copy to:

National Indemnity Company

3024 Harney Street

Omaha, NE 68131

Attention: Treasurer

Fax: (402) 916-3030

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

     7.2 Entire Agreement.

          This RP Allocation Agreement, the Transaction Documents and any other documents delivered
pursuant hereto or thereto, constitute the entire agreement among the Parties and their respective
Affiliates with respect to the subject matter hereof and supersede all prior negotiations,
discussions, writings, agreements and understandings, oral and written, among the Parties with
respect to the subject matter hereof and thereof.

     7.3 Waiver and Amendment.

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

     7.4 Successors and Assigns.

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

     7.5 Headings.

          The headings of this RP Allocation Agreement are for convenience of reference only and shall
not define or limit any of the terms or provisions hereof.

9

 

     7.6 Construction; Interpretation.

          The Reinsured and the Reinsurer have participated jointly in the negotiation and drafting of
this RP Allocation Agreement. In the event of an ambiguity or question of intent or interpretation
arises, this RP Allocation Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring either Party by virtue of the
authorship of any of the provisions of this RP Allocation Agreement. When a reference is made to
an Article, Section, Schedule or Exhibit such reference shall be to an Article, Section, Schedule
or Exhibit of or to this RP Allocation Agreement unless otherwise indicated. Whenever the words
“include”, “includes” or “including” are used in this RP Allocation Agreement, they shall be deemed
to be followed by the words “without limitation.” The word “Agreement,” means this RP Allocation
Agreement as amended or supplemented, together with all Exhibits and Schedules attached hereto or
incorporated by reference, and the words “hereof,” “herein,” “hereto,” “hereunder” and other words
of similar import shall refer to this RP Allocation Agreement in its entirety and not to any
particular Article, Section or provision of this RP Allocation Agreement. The references to “$”
shall be to United States dollars. Reference to any Applicable Law means such Applicable Law as
amended, modified, codified, replaced or reenacted, and all rules and regulations promulgated
thereunder. References to a Person are also to its successors and permitted assigns.

     7.7 Governing Law and Jurisdiction.

          This RP Allocation Agreement shall be governed by and construed in accordance with the laws of
the State of New York without regard to such state’s principles of conflict of laws that could
compel the application of the laws of another jurisdiction. SUBJECT TO ARTICLE VI, ANY
SUIT, ACTION OR PROCEEDING TO COMPEL ARBITRATION OR FOR TEMPORARY INJUNCTIVE RELIEF IN AID OF
ARBITRATION OR TO PRESERVE THE STATUS QUO PENDING THE APPOINTMENT OF THE ARBITRATOR(S) SHALL BE
BROUGHT BY THE PARTIES SOLELY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, PROVIDED THAT IF SAID COURT DETERMINES THAT IT DOES NOT HAVE SUBJECT MATTER JURISDICTION THEN
SAID ACTIONS MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK FOR NEW YORK COUNTY; AND
EACH REINSURED AND THE REINSURER EACH HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF
SUCH COURTS FOR SUCH PURPOSE AND ANY APPELLATE COURTS THEREOF, EXCEPT THAT ANY FINAL ARBITRAL AWARD
RENDERED IN ACCORDANCE WITH ARTICLE VI MAY BE ENTERED AND ENFORCED IN ANY COURT HAVING
JURISDICTION OVER ANY PARTY OR ANY OF ITS ASSETS.

     7.8 No Third Party Beneficiaries.

          Nothing in this RP Allocation Agreement is intended or shall be construed to give any Person,
other than the Parties, any legal or equitable right, remedy or claim under or in respect of this
RP Allocation Agreement or any provision contained herein.

10

 

     7.9 Counterparts.

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

     7.10 Severability.

          Any term or provision of this RP Allocation Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms and provisions of
this RP Allocation Agreement or affecting the validity or enforceability of any of the terms or
provisions of this RP Allocation 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 RP Allocation Agreement is so broad as to be
unenforceable, that provision shall be interpreted to be only so broad as is enforceable. In the
event of such invalidity or unenforceability of any term or provision of this RP Allocation
Agreement, the Parties shall use their commercially reasonable efforts to reform such terms or
provisions to carry out the commercial intent of the Parties as reflected herein, while curing the
circumstance giving rise to the invalidity or unenforceability of such term or provision.

     7.11 Specific Performance.

          Each of the Parties acknowledges and agrees that the other Party would be irreparably damaged
in the event that any of the provisions of this RP Allocation Agreement were not performed or
complied with in accordance with their specific terms or were otherwise breached, violated or
unfulfilled. Accordingly, each of the Parties agrees that the other Party shall be entitled to an
injunction or injunctions to prevent noncompliance with, or breaches or violations of, the
provisions of this RP Allocation Agreement by the other Party and to enforce specifically this RP
Allocation Agreement and the terms and provisions hereof in any action instituted in accordance
with Section 7.7, in addition to any other remedy to which such Party may be entitled, at
law or in equity. In the event that any action is brought in equity to enforce the provisions of
this RP Allocation Agreement, no Party will allege, and each Party hereby waives the defense or
counterclaim, that there is an adequate remedy at law. The Parties further agree that (i) by
seeking the remedies provided for in this Section 7.11, a Party shall not in any respect
waive its right to seek any other form of relief that may be available to a Party under this RP
Allocation Agreement, including monetary damages in the event that this RP Allocation Agreement has
been terminated or in the event that the remedies provided for in this Section 7.11 are not
available or otherwise are not granted and (ii) nothing contained in this Section 7.11
shall require any Party to institute any action for (or limit any Party’s right to institute any
action for)

11

 

specific performance under this Section 7.11 before exercising any termination right
under Article V nor shall the commencement of any action pursuant to this Section
7.11 or anything contained in this Section 7.11 restrict or limit any Party’s right to
terminate this RP Allocation Agreement in accordance with the terms of Article V or pursue
any other remedies under this RP Allocation Agreement that may be available then or thereafter.

     7.12 Waiver of Jury Trial.

          EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS RP ALLOCATION AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY
THIS RP ALLOCATION AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE OTHER PARTIES HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTIES WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS RP ALLOCATION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THIS RP ALLOCATION AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.12.

     7.13 Incontestability.

          In consideration of the mutual covenants and agreements contained herein, each Party does
hereby agree that this RP Allocation 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 in any respect the validity or enforceability hereof.

     7.14 Set-Off.

          Any debts or credits, matured or unmatured, liquidated or unliquidated, regardless of when
they arose or were incurred, in favor of or against either of the Reinsured or the Reinsurer with
respect to this RP Allocation Agreement are deemed mutual debts or credits, as the case may be, and
shall be set off, and only the net balance shall be allowed or paid.

     7.15 Currency

          All financial data required to be provided pursuant to the terms of this RP Allocation
Agreement shall be expressed in United States dollars. All payments and all settlements of account
between the Parties shall be in United States currency unless otherwise agreed by the Parties.

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

13

 

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

	 	 	 	 	 
	 	CONTINENTAL CASUALTY COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	THE CONTINENTAL INSURANCE COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	CONTINENTAL REINSURANCE CORPORATION

INTERNATIONAL, LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	CNA INSURANCE COMPANY LIMITED

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	NATIONAL INDEMNITY COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

Exhibit F

Form of Security Agreement

 

 

CONFIDENTIAL

          THIS SECURITY AGREEMENT (as amended, modified, supplemented and/or restated from time to time,
the “Security Agreement”) is made and entered into as of [•], 2010, by and among National
Indemnity Company, a Nebraska property and casualty insurance company (together with any successors
or assigns, the “Grantor”), Continental Casualty Company, an Illinois property and casualty
insurance company (“CCC”), as agent for the benefit of the Secured Parties (as defined
herein) (in such capacity, together with its successors and assigns, the “Agent”) and Wells
Fargo Bank, National Association, a national banking association, as securities intermediary
(together with any successors or assigns, the “Securities Intermediary”).

WITNESSETH:

          WHEREAS, the Grantor, the Secured Parties (as defined below) and Berkshire Hathaway Inc., a
Delaware corporation and the ultimate parent of the Grantor (“Berkshire”), have entered
into the Master Transaction Agreement, dated as of July [•], 2010 (as amended, restated,
supplemented and/or modified from time to time) (the “Master Transaction Agreement”);

          WHEREAS, as contemplated by the Master Transaction Agreement, the Grantor and the Secured
Parties have entered into the Loss Portfolio Transfer Reinsurance Agreement, dated as of [•], 2010
(as amended, restated, supplemented and/or modified from time to time) (the “LPT Reinsurance
Agreement”), which provides that the Secured Parties will cede to the Grantor, and the Grantor
will reinsure, all liabilities related to asbestos and pollution claims under the Business Covered
(as defined in the LPT Reinsurance Agreement);

          WHEREAS, as contemplated by the LPT Reinsurance Agreement, the Grantor, the Secured Parties
and Wells Fargo Bank, National Association, as trustee (the “Trustee”), have entered into
the Trust Agreement, dated as of [•], 2010 (as amended, restated, supplemented and/or modified from
time to time) (the “Trust Agreement”), which provides that the Grantor is obligated to
establish the Trust Account (as defined below) for the purpose of satisfying its obligations under
the LPT Reinsurance Agreement; and

          WHEREAS, in connection with the foregoing, the Secured Parties and Berkshire have entered into
the Parental Guarantee Agreement, dated as of [•], 2010 (as amended, restated, supplemented and/or
modified from time to time) (the “Parental Guarantee Agreement”), which provides that
Berkshire unconditionally and irrevocably guarantees the Grantor’s full and prompt performance and
payment when due of certain obligations of the Grantor under the LPT Reinsurance Agreement and the
Trust Agreement, as set forth therein (the “Parental Guarantee”);

          WHEREAS, the parties hereto desire that the Agent, as representative for the Secured Parties,
have a security interest and continuing lien on the Grantor’s right, title and interest in the
Collateral (as defined below).

 

 

          NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS; CONSTRUCTION

          Section 1.1 Definitions. Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to such terms in the LPT Reinsurance Agreement. The following terms
shall have the following meanings when used in this Security Agreement:

          “Acceleration Event” means the occurrence or continuance of both of the following
events, acts, occurrences or conditions, whether either such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to or as a result of
compliance by any Person with any judgment, decree, order, rule or regulation of any court or
administrative or governmental body: any (i) Insolvency Event of the Grantor and (ii)
Insolvency Event of Berkshire, whether such Insolvency Event occurs prior to, concurrently with or
subsequent to the Insolvency Event of the Grantor referred to in (i).

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

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

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

          “Collateral” has the meaning set forth in Section 2.2.

          “Event of Default” means the occurrence or continuance of all of the following: (i)
any Grantor Event of Default, (ii) the failure of Berkshire to perform or pay under the Parental
Guarantee and (iii) any of the following events, acts, occurrences or conditions, whether
such event, act, occurrence or condition is voluntary or involuntary or results from the operation
of law or pursuant to or as a result of compliance by any Person with any judgment, decree, order,
rule or regulation of any court or administrative or governmental body:

          (a) any Insolvency Event of the Grantor;

          (b) a final arbitration award, court order, decision or judgment with no appeal or
stay pending (1) has been issued against the Grantor in favor of a Secured Party under the
LPT Reinsurance Agreement or the Trust Agreement and remains unpaid or unperformed by the
Grantor or (2) has been issued against a Secured Party with respect to an A&P Claim in
respect of Business Covered that the Grantor has acknowledged in writing its obligation to
pay and such claim remains unpaid by the Grantor; or

          (c) the Grantor has acknowledged in writing its obligation to pay or perform an
obligation guaranteed under the Parental Guarantee, and such obligation remains due and
unpaid or unperformed by the Grantor.

2

 

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

          “Grantor Event of Default” means the occurrence or continuance of any of the following
events, acts, occurrences or conditions, whether such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to or as a result of
compliance by any Person with any judgment, decree, order, rule or regulation of any court or
administrative or governmental body:

          (a) the Grantor’s failure to pay all Ultimate Net Loss due and owing by the Grantor,
pursuant to and in accordance with the applicable provisions of the LPT Reinsurance
Agreement, subject always to the LPT Limit;

          (b) the Grantor’s failure to transfer and assign assets into the Trust Account when
required, including upon the occurrence of a Collateral Triggering Event or a Reinsurance
Credit Event, pursuant to and in accordance with the applicable provisions of the LPT
Reinsurance Agreement and the Trust Agreement;

          (c) the Grantor’s failure to establish, fund and maintain additional trust accounts
and/or other collateral when required upon the occurrence of a Reinsurance Credit Event,
pursuant to and in accordance with the applicable provisions of the LPT Reinsurance
Agreement and the Trust Agreement.

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

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

3

 

          “Master Transaction Agreement” has the meaning set forth in the Recitals.

          “Parental Guarantee” has the meaning set forth in the Recitals.

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

          “Person” means and includes any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or political subdivision or
agency, department or instrumentality thereof.

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

          “Secured Obligations” means (i) all of the Grantor’s payment and performance
obligations (whether absolute or contingent, matured or unmatured) arising under or in connection
with the LPT Reinsurance Agreement and the Trust Agreement, (ii) all of Berkshire’s payment and
performance obligations (whether absolute or contingent, matured or unmatured) arising under the
Parental Guarantee with respect to the Grantor’s obligations under the LPT Reinsurance Agreement
and the Trust Agreement and (iii) reimbursement for all expenses incurred to enforce and exercise
any and all remedies under (A) the LPT Reinsurance Agreement and the Trust Agreement or (B) the
Parental Guarantee Agreement (solely with respect to Berkshire’s payment and performance
obligations (whether absolute or contingent, matured or unmatured) arising under the Parental
Guarantee with respect to the Grantor’s obligations under the LPT Reinsurance Agreement and the
Trust Agreement), including, without limitation, all reasonable attorney’s fees and legal expenses
and including, without limitation, any of the foregoing amounts payable after the commencement of
any Insolvency Proceeding, whether or not any such amounts are allowed in any such proceeding.

          “Secured Parties” means, collectively, (i) CCC, (ii) The Continental Insurance
Company, a Pennsylvania property and casualty insurance company, (iii) Continental Reinsurance
Corporation International, Ltd. a Bermuda long-term insurance company, and (iv) CNA Insurance
Company Limited, a United Kingdom property and casualty insurance company (in each case, together
with respective successors or assigns), and each is a “Secured Party”.

          “Securities Intermediary” has the meaning set forth in the Preamble.

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

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

          “Termination Date” has the meaning set forth in Section 6.8.

          “Trust Account” has the meaning set forth in Section 2.1.

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

          “Trustee” has the meaning set forth in the Recitals.

4

 

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

ARTICLE II

TRUST ACCOUNT; GRANT OF SECURITY INTEREST

          Section 2.1 Establishment and Maintenance of the Trust Account. The
Securities Intermediary hereby confirms and agrees that:

               (a) (i) it has established the account number 80460400 in the name of the Trustee (said
account, together with any replacements thereof or substitutions therefor, the “Trust
Account”) and (ii) the Trust Account is a “securities account” (as defined in the UCC) in
respect of which the Securities Intermediary is a “securities intermediary” (as defined in the UCC)
and the Grantor is the “entitlement holder” (as defined in the UCC);

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

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

          Section 2.2 Grant of Security Interest. As security for the prompt and complete payment,
reimbursement and performance when due in full of all the Secured Obligations, the Grantor hereby
grants to the Agent for the benefit of the Secured Parties, a security interest in and continuing
lien on all of the Grantor’s right, title and interest in, to and under the following, in each
case, whether now owned or existing or hereafter acquired or arising, and wherever located (all of
which being hereinafter collectively called the “Collateral”):

          (a) the Trust Account;

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

          (c) all Proceeds of any or all of the foregoing.

          Section 2.3 Registration of Securities, Etc. All securities and other financial assets
credited to the Trust Account that are in registered form or that are payable to or to the order of
the Grantor shall be (i) registered in the name of, or payable to or to the order of, the Trustee
or (ii) endorsed to or to the order of the Trustee or in blank; and in no case will any financial
asset credited to the Trust Account be registered in the name of, or payable to or to the order of,
the Grantor or endorsed to or to the order of the Grantor, except to the extent the foregoing have
been specially endorsed to or to the order of the Trustee or in blank.

5

 

          Section 2.4 Conflict Between Agreements. The parties hereto agree that if the Securities
Intermediary’s obligations hereunder conflict with any other agreement to which the Securities
Intermediary is party, the provisions of this Security Agreement shall control.

          Section 2.5 Successor Trust Account. Except as otherwise set forth in Section 2.6,
in the event a successor trust account is established, (i) such account shall be established with
either the Securities Intermediary or another “securities intermediary” (as defined in the UCC)
reasonably acceptable to the Grantor and the Agent, (ii) such securities intermediary with whom
such account is established shall enter into an agreement substantially in the form of this
Security Agreement or a form reasonably acceptable to the Grantor and the Agent prior to or
contemporaneously with the establishment of the successor trust account and (iii) financing
statements shall be amended to identify the successor trust account, all in a manner reasonably
satisfactory to the Agent.

          Section 2.6 Reinsurance Credit Event Trust Accounts. Concurrently with the modification of
the Trust Account and/or the creation of new trust accounts as a result of a Reinsurance Credit
Event, the Grantor and the Securities Intermediary will enter into agreements substantially in the
form of this Security Agreement with each of the respective Secured Parties, granting to such
Secured Party a security interest in and continuing lien on all of the Grantor’s right, title and
interest in, to and under the following, in each case, whether now owned or existing or hereafter
acquired or arising, and wherever located: (i) the modified Trust Account or the new trust account
created as a result of the Reinsurance Credit Event for which such Secured Party is the sole
beneficiary; (ii) all Security Entitlements carried in such trust account and (iii) all Proceeds of
any or all of the foregoing.

ARTICLE III

DUTIES OF THE SECURITIES INTERMEDIARY

          Section 3.1 Subordination of Liens in Favor of the Securities Intermediary, Etc. The
Securities Intermediary hereby subordinates to all security interests in favor of the Agent in the
Collateral any and all statutory, regulatory, contractual or other rights now or hereafter existing
in each case in its favor over or with respect to the Collateral, including, but not limited to (i)
any and all contractual rights of set-off, lien or compensation, (ii) any and all statutory or
regulatory rights of pledge, lien, set-off or compensation, (iii) any and all statutory,
regulatory, contractual or other rights to put on hold, block transfers from or fail to honor
instructions of the Agent with respect to the Trust Account or (iv) any and all statutory or other
rights to prohibit or otherwise limit the pledge, assignment, collateral assignment or granting of
any type of security interest in the Trust Account.

          Section 3.2 No Other Entitlement Orders. Without the prior written consent of the Agent
and the Grantor, the Securities Intermediary shall not (i) change the name, account number or
designation of the Trust Account or (ii) enter into any agreement under which the Securities
Intermediary agrees to comply with “entitlement orders” (as defined in the UCC) originated by any
Person other than the Agent or the entitlement holder with respect to any

6

 

property credited to the Trust Account. Without the prior written consent of the Agent, the
Grantor shall not enter into any agreement under which it (i) grants a security interest or lien on
any or all of the Collateral and/or (ii) agrees to cause the Securities Intermediary to comply with
“entitlement orders” (as defined in the UCC) originated by any Person other than the Agent or the
entitlement holder with respect to any property credited to the Trust Account. The Securities
Intermediary or the Grantor, as applicable, shall promptly notify the Agent if any Person requests
the Securities Intermediary or the Grantor, as applicable, to enter into any such agreement as
described in this Section 3.2 or otherwise asserts or seeks to assert a lien, encumbrance
or adverse claim against any portion or all of the property credited to the Trust Account (and in
that connection, the Securities Intermediary and the Grantor represents and warrants to the Agent
that it has not heretofore received any such request or assertion with respect to the Trust
Account) and that it will promptly notify the Agent of the occurrence of any such events.

          Section 3.3 Removal of the Securities Intermediary by the Agent.

          (a) If the Grantor and/or its Affiliates, either individually or in the aggregate,
shall acquire more than ten percent (10%) of the outstanding voting stock of the Securities
Intermediary, the Securities Intermediary may be removed by the Agent by delivery to the
Securities Intermediary and the Grantor of a written notice of removal, effective upon
receipt by the Securities Intermediary and the Grantor of such notice. Notwithstanding the
foregoing, no such removal by the Agent shall be effective until (i) another “securities
intermediary” (as defined in the UCC) reasonably acceptable to the Grantor and the Agent
shall have been duly appointed by the Agent, (ii) such securities intermediary has entered
into an agreement substantially in the form of this Security Agreement or a form reasonably
acceptable to the Grantor and the Agent prior to or contemporaneously with the appointment
of the new securities intermediary and (iii) financing statements shall be amended to
identify such securities intermediary, all in a manner reasonably satisfactory to the
Agent.

          (b) If the Securities Intermediary is removed by the Agent pursuant to Section
3.3(a), the Secured Parties shall pay any amounts charged by the new securities
intermediary for its services as contemplated by this Security Agreement that are greater
than the total amount of fees charged by the Securities Intermediary under this Security
Agreement.

ARTICLE IV

REMEDIES; RIGHTS UPON DEFAULT, ETC.

          Section 4.1 Rights and Remedies Generally. If an Event of Default has occurred and is
continuing, then and in every such case, the Agent may exercise, in addition to all other rights
and remedies granted to them in this Security Agreement and in any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and remedies of a secured
party under the UCC or any other applicable law.

7

 

          Section 4.2 Acceleration. Upon the occurrence and continuance of an Acceleration Event,
the Secured Obligations shall be automatically due and payable with all additional interest from
time to time accrued thereon, without further action by the Agent or any other person. For the
avoidance of doubt, for purposes of this Section 4.2, the amount of Secured Obligations
with respect to the Trust Account shall be the Security Amount or the Required Amount applicable to
the Trust Account in effect at the time of the Acceleration Event.

ARTICLE V

GRANTOR WARRANTIES; POWER OF ATTORNEY

          Section 5.1 Grantor Warranties. The Grantor’s exact legal name (as indicated in the public
record of the Grantor’s jurisdiction of organization) is as set forth on the signature block to
this Security Agreement. The Grantor’s jurisdiction of organization is the State of Nebraska and
the State of Nebraska has not assigned an organizational identification number to the Grantor. The
location of the Grantor’s chief executive office is the address provided in the Trust Agreement as
the address for notice to the Grantor. The Grantor will not, except upon 30 days prior written
notice to the Agent and delivery to the Agent of all additional financing statements and other
documents reasonably requested by the Agent to maintain the validity, perfection and priority of
the security interest provided for herein, (i) change its jurisdiction of organization or (ii)
change its name. If the Grantor changes the address of its chief executive office, it shall
promptly provide written notice to the Agent of such new address.

          Section 5.2 The Agent’s Appointment as Attorney-in-Fact. The Grantor hereby irrevocably
constitutes and appoints the Agent and any officers or agents thereof, with full power of
substitution, as its true and lawful attorneys-in-fact with full irrevocable power and authority in
the place and stead of the Grantor and in the name of the Grantor or in their own names, from time
to time in the Agent’s discretion, for the purpose of carrying out the terms of this Security
Agreement, to take any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of this Security
Agreement. Notwithstanding the foregoing, the Agent agrees that the power of attorney provided for
in this Section 5.2 shall only become effective upon the occurrence and continuance of an
Event of Default.

ARTICLE VI

MISCELLANEOUS PROVISIONS

          Section 6.1 Binding on Successors; Transferees and Assigns; Assignment. This Security
Agreement shall be binding upon the parties hereto, their successors, transferees and permitted
assigns and shall inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns; provided, however, that the Grantor may not assign or delegate
any of its obligations hereunder without the prior written consent of the Agent.

8

 

          Section 6.2 Notices. Except as otherwise specified herein, all notices, requests,
demands or other communications to or upon the respective parties hereto shall be sent or delivered
in the same manner as provided for in the Trust Agreement; provided, however, that any
communications to the Securities Intermediary shall be sent to the address provided for the Trustee
in the Trust Agreement.

          Section 6.3 Waivers; Amendments.

          (a) No Deemed Waivers; Remedies Cumulative. No failure or delay by the Agent
in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, preclude any other or further exercise
thereof or the exercise of any other right or power. The remedies of the Agent hereunder
are cumulative and are not exclusive of any remedies provided by law. No waiver of any
provision of this Security Agreement or consent to any departure by the Grantor therefrom
shall in any event be effective unless the same shall be permitted by Section
6.3(b), and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given.

          (b) Amendments. Neither this Security Agreement nor any provision hereof may
be waived, amended or modified except pursuant to an agreement or agreements in writing
entered into by the parties hereto.

          Section 6.4 Severability. Any provision of this Security Agreement which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or legality of such provision
in any other jurisdiction.

          Section 6.5 Counterparts; Integration. This Security Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract.

          Section 6.6 Governing Law; Jurisdiction; Venue; Service of Process.

          (a) Governing Law. This Security Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York. Regardless
of any provision in any agreement governing the Trust Account, the Securities Intermediary
agrees that its “securities intermediary’s jurisdiction” (as defined in the UCC) is the
State of New York.

          (b) Submission to Jurisdiction. Each of the parties hereto agrees that any
suit, action or proceeding with respect to this Security Agreement or any judgment in
respect thereof may be brought in the United States District Court for the Southern
District of New York, in the Supreme Court of the State of New York sitting in New York
County (including its Appellate Division), or in any other appellate court in the

9

 

State of New York, and each party hereto hereby expressly and irrevocably submits to
the non-exclusive jurisdiction of such courts for the purpose of any such suit, action,
proceeding or judgment and expressly and irrevocably waives its right to any other
jurisdiction that may apply by virtue of its present or future domicile or by any other
reason.

          (c) Waiver of Venue. Each party hereto hereby irrevocably waives any
objection that it may now or hereafter have to the laying of the venue of any suit, action
or proceeding arising out of or relating to this Security Agreement brought in the Supreme
Court of the State of New York, County of New York or in the United States District Court
for the Southern District of New York, and hereby further irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.

          Section 6.7 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).

          Section 6.8 Termination. The obligations of the Grantor pursuant to this Security
Agreement shall remain in full force and effect until the earliest to occur of (a) the date on
which all the Secured Obligations shall have been paid in full and the LPT Reinsurance Agreement
and the Trust Agreement have been terminated, (b) the date on which the Trust Account shall be
transferred to a different securities intermediary as mutually agreed between the Grantor and the
Agent or (c) the date on which, pursuant to the terms of the LPT Reinsurance Agreement, the
requirement to maintain a Trust Account ceases to exist (each a “Termination Date”). Upon
the occurrence of the Termination Date, this Security Agreement and the obligations of the Grantor
hereunder (other than those expressly stated to survive such termination) shall terminate and,
except in the case of a Termination Date described in clause (b) above, the Collateral shall be
released from the security interests created hereby, all without delivery of any instrument or
performance of any act by any party.

          Section 6.9 Appointment and Authority of Agent. Each of the Secured Parties hereby
irrevocably appoints CCC as its agent to act on its behalf as the Agent hereunder and authorizes
the Agent to take such actions on their behalf (including without limitation the execution and
delivery of this Security Agreement and acceptance of its delivery from the other parties hereto)
and to exercise all rights, powers and remedies and perform the duties as are delegated to the
Agent by the terms hereof and arising hereunder, together with such actions, rights, powers and
remedies as are reasonably incidental thereto.

          Section 6.10 Resignation of Agent. The Agent may at any time give notice of its
resignation to the Secured Parties. Upon the receipt of any such notice of its resignation, the
Secured Parties, acting jointly, shall have the right to appoint a successor agent (i) without the
prior consent of the Grantor, if such successor agent is another Secured Party or (ii) with the

10

 

prior written consent of the Grantor if such successor agent is not a Secured Party, which
consent shall not be unreasonably withheld. The resignation of the Agent shall become effective
upon the acceptance of a successor’s appointment as Agent, hereunder. Upon the acceptance of a
successor’s appointment as Agent hereunder, such successor shall succeed to and become vested with
the rights, powers, privileges and duties of the retiring Agent and the retiring Agent shall be
discharged from all of its duties and obligations hereunder.

          Section 6.11 Regarding the Securities Intermediary. The protections enumerated for
the Trustee in Article VII of the Trust Agreement shall apply equally hereunder to the Securities
Intermediary.

[Remainder of Page Intentionally Left Blank]

11

 

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

	 	 	 	 	 
	 	NATIONAL INDEMNITY COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CONTINENTAL CASUALTY COMPANY, as Agent for the
Secured Parties (as defined herein)

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	[SECURITIES INTERMEDIARY]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	AGREED AND ACKNOWLEDGED SOLELY FOR PURPOSES OF
SECTION 6.9 AND 6.10:

THE CONTINENTAL INSURANCE COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

12

 

	 	 	 	 	 

	 	 	 	 	 
	 	CONTINENTAL REINSURANCE CORPORATION

INTERNATIONAL, LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CNA INSURANCE COMPANY LIMITED

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CONTINENTAL CASUALTY COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

13

 

Exhibit G

Form of Third Party Reinsurance Allocation Agreement

 

 

CONFIDENTIAL

THIRD PARTY REINSURANCE ALLOCATION AGREEMENT

          THIS
THIRD PARTY REINSURANCE ALLOCATION AGREEMENT, dated as of
[•], 2010 (this “TPR
Allocation Agreement”), is made and entered into by and among Continental Casualty Company, an
Illinois property and casualty insurance company (“CCC”), The Continental Insurance
Company, a Pennsylvania property and casualty insurance company (“CIC”), Continental
Reinsurance Corporation International, Ltd., a Bermuda long-term insurance company
(“CRCI”), and CNA Insurance Company Limited, a United Kingdom property and casualty
insurance company (“CICL,” and each of CCC, CIC, CRCI and CICL is individually and all of
CCC, CIC, CRCI and CICL are collectively hereinafter referred to as the “Reinsured”), and
National Indemnity Company, a Nebraska property and casualty insurance company (hereinafter
referred to as the “Reinsurer”). All capitalized terms used in this TPR Allocation
Agreement and not otherwise defined herein shall have the respective meanings assigned to them in
the LPT Reinsurance Agreement (as defined below).

WITNESSETH:

          WHEREAS, in accordance with that certain Master Transaction Agreement (the “Master
Transaction Agreement”), dated June [•], 2010, by and among the Reinsured, the Reinsurer and
Berkshire Hathaway Inc., a Delaware corporation and the ultimate parent company of the Reinsurer,
the Reinsured and the Reinsurer entered into that certain Loss Portfolio Transfer Reinsurance
Agreement, dated [•], 2010 (the “LPT Reinsurance Agreement”);

          WHEREAS, concurrently with the execution of the LPT Reinsurance Agreement and in accordance
with the Master Transaction Agreement, the Reinsured and the Reinsurer entered into that certain
Administrative Services Agreement (the “Administrative Services Agreement”), pursuant to
which the Reinsurer has agreed to provide claims handling and other administrative services with
respect to the Reinsured Contracts and the Third Party Reinsurance Agreements;

          WHEREAS, certain Third Party Reinsurance Agreements that will be administered by the Reinsurer
pursuant to the Administrative Services Agreement may result in recoveries that are allocable to
the A&P Claims reinsured by the Reinsurer under the LPT Reinsurance Agreement and/or that are
allocable to Non-A&P Claims that are not ceded to the Reinsurer; and

          WHEREAS, the Reinsured and the Reinsurer desire to set forth how the rights, obligations and
proceeds with respect to the Third Party Reinsurance Agreements are to be allocated among the
Reinsured and the Reinsurer.

 

 

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

ARTICLE I

DEFINITIONS

     1.1 Definitions.

          The following terms shall have the respective meanings set forth below throughout this TPR
Allocation Agreement:

“A&P Recoverables” means all Recoverables that arise out of or relate to A&P Claims and
which are attributable to reinsurance billings issued on or after the Inception Date, but prior to
the expiration or termination of the LPT Reinsurance Agreement.

“Administrative Services Agreement” has the meaning set forth in the Recitals.

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

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

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

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

“Collection Expenses” means the reasonable out-of-pocket expenses incurred by any Party in
connection with the negotiation and collection of Recoverables or Commutation Payments.

“Commutation Payments” means Gross Commutation Payments, less Collection Expenses.

“Gross Commutation Payments” means any amounts either (a) payable to the Reinsured or the
Reinsurer (acting on behalf of the Reinsured) by a reinsurer counterparty under a Third Party
Reinsurance Agreement, or (b) payable by the Reinsured or the Reinsurer (acting on behalf of

2

 

the Reinsured) to a reinsurer counterparty under a Third Party Reinsurance Agreement in connection with
the recapture, commutation, termination or reduction of any reinsurance under a Third Party
Reinsurance Agreement, or pursuant to a scheme of arrangement or any similar domestic or foreign
proceeding in connection with the initiation or commencement of a liquidation, insolvency,
rehabilitation, conservation, supervision or similar proceeding by or against the reinsurer of a
Third Party Reinsurance Agreement, that is consummated on or after the Inception Date, but prior to
the expiration or termination of the LPT Reinsurance Agreement.

“Gross Recoverables” means any amounts actually collected by the Reinsured or the Reinsurer
(acting on behalf of the Reinsured) pursuant to the Third Party Reinsurance Agreements.

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

“Master Transaction Agreement” has the meaning set forth in the Recitals.

“Non-A&P Claims” has the meaning set forth in the Definitions section of the LPT
Reinsurance Agreement.

“Non-A&P Recoverables” means all Recoverables that arise out of or relate to Non-A&P Claims
and which are attributable to reinsurance billings issued on or after the Inception Date, but prior
to the expiration or termination of the LPT Reinsurance Agreement.

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

“Pre-Inception Date Receivables” has the meaning set forth in the Definitions section of
the LPT Reinsurance Agreement.

“Recoverables” means Gross Recoverables, less Collection Expenses.

“Reinsured” shall have the meaning specified in the Preamble. The term “Reinsured” as used
herein shall include any predecessor or successor of such companies, including by reason of merger,
consolidation or otherwise.

“Reinsurer” shall have the meaning specified in the Preamble. The term “Reinsurer” as used
herein shall include any predecessor or successor of such companies, including by reason of merger,
consolidation or otherwise.

3

 

“Third Party Reinsurance Payables” means those amounts payable by the Reinsured or the
Reinsurer (acting on behalf of the Reinsured) under the terms and conditions of any Third Party
Reinsurance Agreement.

“TPR Allocation Agreement” has the meaning set forth in the Preamble.

“Transaction Documents” means the Master Transaction Agreement and the Ancillary
Agreements, other than this TPR Allocation Agreement.

ARTICLE II

ALLOCATION OF RECOVERABLES AND PAYABLES

     2.1 Pre-Inception Date Receivables.

          Pursuant to the LPT Reinsurance Agreement, the Reinsured shall transfer the right to collect
the Pre-Inception Date Receivables to the Reinsurer. All Pre-Inception Date Receivables actually
collected by the Reinsurer shall be for the benefit and account of the Reinsurer. The Parties
hereby acknowledge and agree that neither the collection of, or failure to collect, Pre-Inception
Date Receivables shall affect the LPT Limit. The Reinsured shall, if reasonably requested by the
Reinsurer, aid the Reinsurer in the collection of Pre-Inception Date Receivables, and the Reinsurer
is authorized to undertake such efforts as it deems reasonably necessary, including on behalf of
and in the name of a CNA Insurer, in order to collect such Pre-Inception Date Receivables. Costs
reasonably incurred by the Reinsured in aiding the Reinsurer’s collection efforts, excluding any
overhead or similar internal costs of the Reinsured, shall be paid by the Reinsurer.

     2.2 Post-Inception Date Recoverables.

          (a) On or after the Inception Date, A&P Recoverables under currently effective Third
Party Reinsurance Agreements shall be administered and collected by the Reinsurer in
accordance with the Administrative Services Agreement, and Non-A&P Recoverables under
currently effective Third Party Reinsurance Agreements shall continue to be administered and
collected by the Reinsured. Each Party will be responsible for any Collection Expenses
associated with A&P Recoverables or Non-A&P Recoverables, as applicable.

          (b) A resolution or settlement of an A&P Recoverable by way of cash payment or set-off
shall remain the property of the Reinsurer, and a resolution or settlement of a Non-A&P
Recoverable by way of cash payment or set-off shall remain

4

 

the property of the Reinsured; provided, however, that any recoveries or set-offs
arising out of an account with Reinsured Contracts that includes both A&P Claims and Non-A&P
Claims shall be allocated among the Parties in accordance with Section 4.2 of the
Administrative Services Agreement. In no event will the Reinsurer set-off Non-A&P
Recoverables, or will the Reinsured set-off A&P Recoverables, without the prior consent of
the other Party.

     2.3 Third Party Reinsurance Reinstatements.

	 	(a)	 	 In the event that a Third Party Reinsurance Agreement contains an automatic
reinstatement provision,

	 
	 	(i)	 	the Third Party Reinsurance Payables shall be
for the account of (A) the Reinsurer, if the reinsured losses
attributable to A&P Claims paid on or after the Inception Date
triggered the automatic reinstatement or (B) the Reinsured, if the
reinsured losses attributable to Non-A&P Claims paid on or after the
Inception Date triggered the automatic reinstatement, and
	 
	 	(ii)	 	the coverage under such reinstated Third Party
Reinsurance Agreement shall only be available to (A) the Reinsurer, if
the reinsured losses attributable to A&P Claims paid on or after the
Inception Date triggered the automatic reinstatement or (B) the
Reinsured, if the reinsured losses attributable to Non-A&P Claims paid
on or after the Inception Date triggered the automatic reinstatement,
provided, however, that if the other Party desires to share in the
coverage of such reinstated Third Party Reinsurance Agreement, the A&P
Recoverables and Non-A&P Recoverables shall be collected in accordance
with Section 2.2.
	 
	 	(b)	 	 In the event that a Third Party Reinsurance Agreement contains an elective
reinstatement provision,

	 	(i)	 	the Third Party Reinsurance Payables shall be
for the account of the Party that elected the reinstatement, provided,
however, that if the other Party desires to share in the coverage of
such reinstated Third Party Reinsurance Agreement, the Parties shall
negotiate an equitable allocation of the Third Party Reinsurance
Payables among the Parties, and

5

 

	 	(ii)	 	the coverage under such reinstated Third Party
Reinsurance Agreement shall only be available to the Party that elected
the reinstatement, provided, however, that if the other Party desires
to share in the coverage of such reinstated Third Party Reinsurance
Agreement, the A&P Recoverables and Non-A&P Recoverables shall be
collected in accordance with Section 2.2.

     2.4 Maximum Recoverables Under Third Party Reinsurance Contracts.

          (a) Either Party shall be able to present claims for Recoverables under Third Party
Reinsurance Agreements; provided, however, Recoverables which exhaust or substantially
impair, on or after the Inception Date, the maximum remaining recoverable amount under an
individual Third Party Reinsurance Agreement (due to an aggregate limit of liability or
similar feature designed to limit total Recoverables from an individual Third Party
Reinsurance Agreement), will be divided between the Reinsurer and the Reinsured based on an
allocation methodology agreed upon by the Parties. For purposes of this Section
2.4, the maximum remaining recoverable amount under an individual Third Party
Reinsurance Agreement will be substantially impaired to the extent that either Party paid a
loss that entitles such Party to present a claim for Recoverables in an amount equal to
fifty percent (50%) or more of the maximum remaining recoverable amount under such Third
Party Reinsurance Agreement. To accommodate the negotiation of an appropriate allocation
methodology, a Party shall be obligated to provide written notice to the other Party once it
reasonably expects to pay a loss that would substantially impair the maximum remaining
recoverable amount under such Third Party Reinsurance Agreement.

          (b) In the event there is a dispute among the Parties with respect to the allocation
methodology to be agreed upon by the Parties as set forth in Section 2.4(a), such
dispute will be addressed in accordance with Section 5.1; provided, however, that if
such dispute is submitted for resolution in accordance with Article XI of the Master
Transaction Agreement, the designated arbitrator or arbitral tribunal shall, in resolving
such dispute, make its decision based on what is fair and equitable to the Parties and
giving particular attention to the known claim exposures of the Parties at such time.

     2.5 Commutation of Third Party Reinsurance Agreement.

          During the period beginning on the Inception Date and ending upon the expiration or
termination of the LPT Reinsurance Agreement, if the Parties mutually agree to (i) recapture,
commute, terminate or reduce any reinsurance under a Third Party Reinsurance Agreement, or (ii)
approve of a scheme of arrangement or any similar domestic or foreign proceeding in connection with
the initiation or commencement of a liquidation, insolvency, rehabilitation, conservation,
supervision or similar proceeding by or against the reinsurer of a Third Party Reinsurance
Agreement, then the Parties shall agree upon an allocation of the applicable Commutation

6

 

Payment as part of such recapture, commutation, termination or reduction of reinsurance or
scheme of arrangement or any similar domestic or foreign proceeding. For the avoidance of doubt,
(x) there will be no future adjustment to the agreed upon Commutation Payment regardless of any
reinsured loss development or other future development with respect to the losses under such Third
Party Reinsurance Agreement, and (y) each individual Third Party Reinsurance Agreement that is
subject to recapture, commutation, termination or reduction of reinsurance or scheme of arrangement
or any similar domestic or foreign proceeding, shall each have a separately negotiated Commutation
Payment allocated among the Parties. In agreeing upon such allocation, the Parties shall take into
consideration all relevant factors, including the credit quality of the reinsurer of such Third
Party Reinsurance Agreement and, the net present value of future Recoverables under such Third
Party Reinsurance Agreement net of other costs and premium adjustments, and the remaining future
Recoverables under such Third Party Reinsurance Agreement.

ARTICLE III

COVENANTS OF THE PARTIES

     3.1 Cooperation.

          The Parties hereto shall cooperate in a commercially reasonable manner in order to accomplish
the objectives of this TPR Allocation Agreement, including making available to each other their
respective officers and employees for interviews and meetings with Governmental Authorities and
furnishing any additional assistance, information and documentation as may be reasonably requested
by the other Party from time to time.

ARTICLE IV

TERM AND TERMINATION

     4.1 Termination of Agreement.

          This TPR Allocation Agreement shall automatically terminate upon the expiration or termination
of the LPT Reinsurance Agreement.

     4.2 Effect of Termination.

          The termination of this TPR Allocation Agreement shall not affect any rights or obligations of
any of the Parties applicable to the period prior to the effective date of termination.

7

 

Article III, Article V and Article VI shall survive the termination of
this TPR Allocation Agreement. Notwithstanding anything in this TPR Allocation Agreement or the
Transaction Documents to the contrary, all Gross Recoverables attributable to Asbestos Claims and
Pollution Claims paid following the termination of this TPR Allocation Agreement and the LPT
Reinsurance Agreement shall be for the account of, and be administered by, the Reinsured.

ARTICLE V

DISPUTE RESOLUTION

     5.1 Dispute Resolution.

          Notwithstanding anything contained herein to the contrary, any dispute between the Parties
arising out of or relating to this TPR Allocation Agreement or the breach, termination or validity
thereof will be addressed in accordance with Article X and Article XI of the Master Transaction
Agreement.

ARTICLE VI

MISCELLANEOUS PROVISIONS

     6.1 Notices.

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

     If to the Reinsured:

CNA Financial Corporation

333 S. Wabash Avenue

Chicago, IL 60604

Attention: Jonathan D. Kantor

Executive Vice President,

General Counsel and Secretary

Fax: (312) 817-0511

8

 

     With a copy to:

CNA Financial Corporation

333 S. Wabash Avenue

Chicago, IL 60604

Attention: Michael P. Warnick

Senior Vice President and Deputy General Counsel

Fax: (312) 755-2479

     If to the Reinsurer:

National Indemnity Company

100 First Stamford Place

Stamford, CT 06902

Attention: General Counsel

Fax: (203) 363-5221

     With a copy to:

National Indemnity Company

3024 Harney Street

Omaha, NE 68131

Attention: Treasurer

Fax: (402) 916-3030

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

     6.2 Entire Agreement.

          This TPR Allocation Agreement, the Transaction Documents and any other documents delivered
pursuant hereto or thereto, constitute the entire agreement among the Parties and their respective
Affiliates with respect to the subject matter hereof and supersede all prior negotiations,
discussions, writings, agreements and understandings, oral and written, among the Parties with
respect to the subject matter hereof and thereof.

     6.3 Waiver and Amendment.

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

9

 

this TPR Allocation Agreement shall be held to constitute a waiver of any other or subsequent
breach.

     6.4 Successors and Assigns.

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

     6.5 Headings.

          The headings of this TPR Allocation Agreement are for convenience of reference only and shall
not define or limit any of the terms or provisions hereof.

     6.6 Construction; Interpretation.

          The Reinsured and the Reinsurer have participated jointly in the negotiation and drafting of
this TPR Allocation Agreement. In the event of an ambiguity or question of intent or
interpretation arises, this TPR Allocation Agreement shall be construed as if drafted jointly by
the Parties and no presumption or burden of proof shall arise favoring or disfavoring either Party
by virtue of the authorship of any of the provisions of this TPR Allocation Agreement. When a
reference is made to an Article, Section, Schedule or Exhibit such reference shall be to an
Article, Section, Schedule or Exhibit of or to this TPR Allocation Agreement unless otherwise
indicated. Whenever the words “include”, “includes” or “including” are used in this TPR Allocation
Agreement, they shall be deemed to be followed by the words “without limitation.” The word
“Agreement,” means this TPR Allocation Agreement as amended or supplemented, together with all
Exhibits and Schedules attached hereto or incorporated by reference, and the words “hereof,”
“herein,” “hereto,” “hereunder” and other words of similar import shall refer to this TPR
Allocation Agreement in its entirety and not to any particular Article, Section or provision of
this TPR Allocation Agreement. The references to “$” shall be to United States dollars. Reference
to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or
reenacted, and all rules and regulations promulgated thereunder. References to a Person are also
to its successors and permitted assigns.

     6.7 Governing Law and Jurisdiction.

          This TPR Allocation Agreement shall be governed by and construed in accordance with the laws
of the State of New York without regard to such state’s principles of conflict of laws that could
compel the application of the laws of another jurisdiction. SUBJECT TO ARTICLE V, ANY
SUIT, ACTION OR PROCEEDING TO COMPEL ARBITRATION OR FOR TEMPORARY INJUNCTIVE RELIEF IN AID OF
ARBITRATION OR TO PRESERVE THE STATUS QUO PENDING THE APPOINTMENT OF THE ARBITRATOR(S) SHALL

10

 

BE BROUGHT BY THE PARTIES SOLELY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK, PROVIDED THAT IF SAID COURT DETERMINES THAT IT DOES NOT HAVE SUBJECT MATTER
JURISDICTION THEN SAID ACTIONS MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK FOR NEW
YORK COUNTY; AND EACH REINSURED AND THE REINSURER EACH HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE AND ANY APPELLATE COURTS THEREOF, EXCEPT THAT ANY
FINAL ARBITRAL AWARD RENDERED IN ACCORDANCE WITH ARTICLE V MAY BE ENTERED AND ENFORCED IN
ANY COURT HAVING JURISDICTION OVER ANY PARTY OR ANY OF ITS ASSETS.

     6.8 No Third Party Beneficiaries.

          Nothing in this TPR Allocation Agreement is intended or shall be construed to give any Person,
other than the Parties, any legal or equitable right, remedy or claim under or in respect of this
TPR Allocation Agreement or any provision contained herein.

     6.9 Counterparts.

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

     6.10 Severability.

          Any term or provision of this TPR Allocation Agreement which is invalid or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms and provisions of
this TPR Allocation Agreement or affecting the validity or enforceability of any of the terms or
provisions of this TPR Allocation 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 TPR Allocation Agreement is so broad as to be
unenforceable, that provision shall be interpreted to be only so broad as is enforceable. In the
event of such invalidity or unenforceability of any term or provision of this TPR Allocation
Agreement, the Parties shall use their commercially reasonable efforts to reform such terms or
provisions to carry out the commercial intent of the Parties as reflected herein, while curing the
circumstance giving rise to the invalidity or unenforceability of such term or provision.

11

 

     6.11 Specific Performance.

          Each of the Parties acknowledges and agrees that the other Party would be irreparably damaged
in the event that any of the provisions of this TPR Allocation Agreement were not performed or
complied with in accordance with their specific terms or were otherwise breached, violated or
unfulfilled. Accordingly, each of the Parties agrees that the other Party shall be entitled to an
injunction or injunctions to prevent noncompliance with, or breaches or violations of, the
provisions of this TPR Allocation Agreement by the other Party and to enforce specifically this TPR
Allocation Agreement and the terms and provisions hereof in any action instituted in accordance
with Section 6.7, in addition to any other remedy to which such Party may be entitled, at
law or in equity. In the event that any action is brought in equity to enforce the provisions of
this TPR Allocation Agreement, no Party will allege, and each Party hereby waives the defense or
counterclaim, that there is an adequate remedy at law. The Parties further agree that (i) by
seeking the remedies provided for in this Section 6.11, a Party shall not in any respect
waive its right to seek any other form of relief that may be available to a Party under this TPR
Allocation Agreement, including monetary damages in the event that this TPR Allocation Agreement
has been terminated or in the event that the remedies provided for in this Section 6.11 are
not available or otherwise are not granted and (ii) nothing contained in this Section 6.11
shall require any Party to institute any action for (or limit any Party’s right to institute any
action for) specific performance under this Section 6.11 before exercising any termination
right under Article IV nor shall the commencement of any action pursuant to this
Section 6.11 or anything contained in this Section 6.11 restrict or limit any
Party’s right to terminate this TPR Allocation Agreement in accordance with the terms of
Article IV or pursue any other remedies under this TPR Allocation Agreement that may be
available then or thereafter.

     6.12 Waiver of Jury Trial.

          EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS TPR ALLOCATION AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY
THIS TPR ALLOCATION AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE OTHER PARTIES HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTIES WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS TPR ALLOCATION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THIS TPR ALLOCATION AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.12.

     6.13 Incontestability.

          In consideration of the mutual covenants and agreements contained herein, each Party does
hereby agree that this TPR Allocation Agreement, and each and every provision

12

 

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 in any respect the validity or enforceability hereof.

     6.14 Set-Off.

          Any debts or credits, matured or unmatured, liquidated or unliquidated, regardless of when
they arose or were incurred, in favor of or against either of the Reinsured or the Reinsurer with
respect to this TPR Allocation Agreement are deemed mutual debts or credits, as the case may be,
and shall be set off, and only the net balance shall be allowed or paid.

     6.15 Currency. 

          All financial data required to be provided pursuant to the terms of this TPR Allocation
Agreement shall be expressed in United States dollars. All payments and all settlements of account
between the Parties shall be in United States currency unless otherwise agreed by the Parties.

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

13

 

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

	 	 	 	 	 
	 	CONTINENTAL CASUALTY COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	THE CONTINENTAL INSURANCE COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CONTINENTAL REINSURANCE
 CORPORATION
INTERNATIONAL, LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CNA INSURANCE COMPANY LIMITED

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	NATIONAL INDEMNITY COMPANY

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

Exhibit H

Transition Services Agreement Term Sheet

 

 

CONFIDENTIAL

TRANSITION SERVICES AGREEMENT TERM SHEET

	 	 	 

	Parties:

	 	CCC and Reinsurer
	 
	 	 
	Services Provided:

	 	CCC and its Affiliates shall provide to Reinsurer
and its Affiliates the services set forth on
Exhibit A. A preliminary draft of Exhibit A is
attached hereto and shall be finalized between
signing and Closing.
	 
	 	 
	 

	 	All such services are referred to herein as the
“Services.” CNA and its Affiliates are referred
to herein as the “Service Provider,” and
Reinsurer and its Affiliates are referred to
herein as the “Service Recipient.”
	 
	 	 
	Service Standard:

	 	The Services will be provided in a timely and
workmanlike manner, consistent with recent past
practice prior to Closing.
	 
	 	 
	Migration and
Integration:

	 	The Service Provider shall cooperate with the
Service Recipient, as reasonably requested by the
Service Recipient, to migrate the Services from
the Service Provider’s facilities, systems and
technology to Service Recipient’s own facilities,
systems and technology. In connection therewith,
within a reasonable time prior to any such
migration of a Service, the Service Recipient
shall provide the Service Provider with a
migration plan for the Service Provider’s
approval, such approval not to be unreasonably
withheld.
	 
	 	 
	 

	 	The Service Recipient shall bear its own costs
incurred in migrating the Services to, and
integrating the Services with, the Service
Recipient’s own facilities, systems and
technology. In addition, the Service Recipient
shall reimburse the Service Provider for: (1)
time spent by the Service Provider’s employees,
to be charged at a rate of sixty-eight dollars
($68) per hour, and (2) all out-of-pocket
expenses incurred by the Service Provider, in
each case in providing migration assistance in
accordance with the approved migration plan.
	 
	 	 
	Term:

	 	The Services shall be provided for a period of
twelve (12) months following Closing (the
“Term”).
	 
	 	 
	Termination:

	 	Either party may terminate the Transition Services Agreement if:
	 
	 

	 	(1) the other party materially breaches the
Transition Services Agreement and such breach is
not cured within thirty (30) days of written
notice;
	 
	 

	 	(2) the other party becomes bankrupt or insolvent;
	 
	 

	 	(3) a force majeure event continues for sixty
(60) days or more; or

 

 

	 	 	 

	 

	 	(4) required by a governmental authority,
provided that the parties mutually agree that the
Transition Services Agreement cannot be amended
in a manner that will satisfy the governmental
authority without materially changing the
Transition Services Agreement.
	 
	 	 
	Partial Termination:

	 	The Service Recipient may terminate a Service
prior to the expiration of the Term upon sixty
(60) days’ prior written notice to the Service
Provider.
	 
	 	 
	Effect of Termination:

	 	Upon the earlier of (i) termination of an IT
Service and (ii) termination or expiration of the
Transition Services Agreement, the Service
Recipient shall return to the Service Provider
all hardware and software provided by the Service
Provider, including telephones, copiers, desktop
computers and Blackberries, in the same condition
as such items were provided to the Service
Recipient, subject to reasonable wear and tear.
Upon the earlier of (i) termination of a Real
Estate Service and (ii) termination or expiration
of the Transition Services Agreement, the Service
Recipient shall return to the Service Provider
all facilities, fixtures and furniture provided
by the Service Provider, including desks, chairs,
vertical files and work stations, in the same
condition as such items were provided to the
Service Recipient, subject to reasonable wear and
tear.
	 
	 	 
	Fees:

	 	The Service Recipient shall pay to the Service
Provider all actual costs incurred by the Service
Provider in providing the Services (the “Fees”).
The Fees for each Service are set forth on
Exhibit A.1
	 
	 	 
	 

	 	The Service Provider shall invoice the Service
Recipient for the Fees within thirty (30) days of
the end of a calendar month. Each such invoice
shall be payable within thirty (30) days after
the Service Recipient receives such invoice.
	 
	 	 
	Consents:

	 	The Service Provider shall use commercially
reasonable efforts to: (1) obtain any necessary
third party consents, or (2) if such consent is
not obtained, provide acceptable alternative
arrangements, to be charged to Service Recipient
at actual cost. All out-of-pocket fees payable
to third parties in connection with such consents
shall be borne in accordance with the Master
Transaction Agreement.

 

			
	1	 	Such fees reflect the costs for the provision
of the Services in a steady state. Costs associated with segregation and third
party consents are addressed separately in the Master Transaction Agreement,
and costs associated with migration assistance are addressed above.

2

 

	 	 	 

	Intellectual Property:

	 	Each party shall be the sole and exclusive owner
of all intellectual property it creates in
connection with its performance of the Services,
and shall grant the other party and its
Affiliates a license to use the foregoing in
connection with the Transition Services
Agreement.
	 
	 	 
	Indemnification:

	 	Each party will defend, indemnify, and hold the
other party harmless from and against any and all
third party claims arising out of or resulting
from such party’s material breach of the
Transition Services Agreement.
The Service Recipient will defend, indemnify, and
hold the Service Provider harmless from and
against any and all damages and claims arising
out of or resulting from: (1) property damage or
personal injury arising out of or resulting from
the Service Recipient’s use of the Services; (2)
Service Recipient’s breach of the Confidentiality
and Privacy provisions; or (3) Service
Recipient’s use of the Services in a manner that
violates the intellectual property rights of any
third party.
	 
	 	 
	Disclaimer of
Consequential Damages:

	 	Except for claims subject to indemnification and
claims arising out of a party’s gross negligence
or willful misconduct, or with respect to
breaches of confidentiality obligations, neither
party shall be liable to the other for
consequential, incidental, indirect or special
damages arising in any way out of the Transition
Services Agreement.
	 
	 	 
	Limitation of Liability:

	 	Except for claims subject to indemnification and
claims arising out of a party’s gross negligence
or willful misconduct, or with respect to
breaches of confidentiality obligations, each
party’s liability arising out of or related to
the Transition Services Agreement shall in no
event exceed the aggregate amount of Fees payable
by the Service Recipient during the Term.
	 
	 	 
	Network Access:

	 	Each party may provide the other with access to
such party’s network. Each party shall use the
other party’s network only for the purposes of
providing or receiving the Services and shall
comply with the other party’s policies and
procedures relating to such access. Each party
shall notify the other of any unauthorized access
to the other’s systems of which such party is
aware, and shall cooperate with the other party
to mitigate the effects of such unauthorized
access.
	 
	 	 
	Confidentiality and
Privacy:

	 	The Transition Services Agreement shall contain
Confidentiality and Privacy provisions
substantially similar to those of the
Administrative Services Agreement, including with
respect to the treatment of Nonpublic Personal
Information.

3

 

	 	 	 

	Assignment:

	 	Neither party may assign its rights or
obligations under the Transition Services
Agreement without the other party’s prior written
consent.
	 
	 	 
	Dispute Resolution:

	 	In the event of any dispute arising out of or
related to the Transition Services Agreement, the
dispute will be handled in accordance with the
procedures set forth in the Master Transaction
Agreement.
	 
	 	 
	Miscellaneous:

	 	The Transition Services Agreement shall contain
other miscellaneous terms and provisions that are
typically included in an agreement of this nature
for this type of transaction. Where applicable,
such provisions shall conform to the
corresponding provisions in the Master
Transaction Agreement.

4

 

Exhibit A

Services to be Provided by Service Provider to Service Recipient

     1. Real Estate Services

Service Description:

Shared and Facility Services for Chicago shall include office and related space, furniture use,
security system, access to cafeteria, and utilities usage (electrical, water, heating and cooling)
but shall not including health club use, conference and learning center use, parking garage use
mailroom use, or any moving services (whether internal or external).

Shared and Facility Services for Cranbury, New York City, Los Angeles, San Francisco, Dallas and
Farmington Hills shall include office and related leased space, furniture use, security system,
breakroom, utilities (electrical, water, heating and cooling) but shall not include any external
moving services. Mailroom use in Cranbury and New York City is not included. Internal moving
costs in Cranbury are not included.

Fees:

	 	 	 	 	 	 	 
	Location	 	Location Code	 	Monthly Fee
	CNA S. Bldg.
	 	ILOO	 	$	15647.92	 
	Cranbury
	 	NJ21	 	$	14546.92	 
	40 Wall
	 	NY04	 	$	4528.17	 
	LA
	 	CA70	 	$	2531.25	 
	San Fran
	 	CA76	 	$	4387.50	 
	Dallas
	 	TXX1	 	$	1162.50	 
	Farmington
	 	MI16	 	$	421.92	 
	 
	 	Total	 	$	43,226.18	2

 

			
	2	 	The monthly total is based on the assumption
that a specific number of individuals will be at each location, totaling 134
individuals across all the locations.

5

 

2. Information Technology Services

Service Description and Fees:

	 	 	 
	Services Charged at Monthly Rate	 	Monthly Fee
	Email Accounts 

Voice Mail 

IP Telephony Ports 

Standard LAN Port 

Standard Desktop 

Service Desk Support 

Remote Access

	 	$55/person3
	 
	 	 
	Blackberry Device & Sprint

	 	$115/person
	 
	 	 
	Total

	 	$170/person
	 
	 	 
	Services Charged Other Than at Monthly Rate

	 	Fee
	 
	 	 
	Long Distance Charges

	 	Based on usage
	 
	 	 
	Print Services

	 	Charge for additional
Printers, Usage (Click),
Paper
	 
	 	 
	Access to Claims Administration System

	 	No charge

 

			
	3	 	This monthly fee is based on the assumption
that the same individuals who are currently using these Services will continue
to use these Services post-Closing. In the event that different or additional
individuals will use these Services, the fees for provision of such Services to
such individuals will be $275/month for use of such Services on a desktop, and
$350/month for use of such Services on a laptop.

6exv10w42

Exhibit 10.42

CONFIDENTIAL TREATMENT REQUESTED — REDACTED COPY

 

*** Confidential Treatment has been requested for portions of this Exhibit. Confidential
portions of this Exhibit are designated by [****]. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.

 

INTELLECTUAL PROPERTY TRANSFER AND LICENSE AGREEMENT

BETWEEN

NXP B.V.

AND

NXP HOLDING 1 B.V.

DATED AS OF

FEBRUARY 7, 2010

 

 

 

CONFIDENTIAL TREATMENT REQUESTED — REDACTED COPY

Table of Contents

(cont’d)

	 	 	 	 	 
	 	 	Page(s)	 
	ARTICLE I TERM AND TERMINATION
	 	 	2	 
	1.1 Term
	 	 	2	 
	1.2 No Termination of Agreement
	 	 	2	 
	ARTICLE II TRANSFERS AND LICENSES
	 	 	3	 
	2.1 Transfer and Assignment of Transferred IP
	 	 	3	 
	2.2 Patent Licenses
	 	 	3	 
	2.3 Licenses to Non-Patent Intellectual Property
	 	 	5	 
	2.4 No Sublicensing
	 	 	6	 
	2.5 Delivery.
	 	 	6	 
	2.6 Assumed IP Contracts
	 	 	7	 
	2.7 [****]
	 	 	7	 
	2.8 Subsidiaries
	 	 	7	 
	2.9 [****]
	 	 	7	 
	2.10 Unidentified Contracts
	 	 	8	 
	ARTICLE III INTELLECTUAL PROPERTY RIGHTS
	 	 	8	 
	3.1 Transferred IP
	 	 	8	 
	3.2 Patents
	 	 	8	 
	3.3 Retained IP
	 	 	9	 
	3.4 Acquired [****] Technology
	 	 	9	 
	3.5 Prior Obligations
	 	 	9	 
	3.6 Maintenance
	 	 	9	 
	3.7 Trademarks
	 	 	9	 
	3.8 Reasonable Assistance in Connection with Third Party Claims
	 	 	10	 
	3.9 Other Limitations and Restrictions
	 	 	10	 
	3.10 Composite and Component IP Blocks
	 	 	10	 
	3.11 Covenants with Respect to Sublicenses
	 	 	10	 
	3.12 Shared Masks
	 	 	10	 
	ARTICLE IV CONFIDENTIALITY
	 	 	11	 
	4.1 Trade Secrets and Confidential Information
	 	 	11	 

i

 

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(cont’d)

	 	 	 	 	 
	 	 	Page(s)	 
	4.2 Exceptions
	 	 	11	 
	4.3 Source Code
	 	 	12	 
	4.4 Terms of the Agreement
	 	 	12	 
	ARTICLE V DEFINITIONS AND CONSTRUCTION
	 	 	12	 
	5.1 Definitions
	 	 	12	 
	5.2 Other Terms
	 	 	19	 
	5.3 Interpretation
	 	 	19	 
	ARTICLE VI MISCELLANEOUS
	 	 	19	 
	6.1 No Implied Licenses
	 	 	19	 
	6.2 Amendments and Waivers
	 	 	19	 
	6.3 Entire Agreement
	 	 	19	 
	6.4 Governing Law
	 	 	20	 
	6.5 Submission to Jurisdiction; Selection of Forum; Waiver of Trial By Jury
	 	 	20	 
	6.6 Notices
	 	 	20	 
	6.7 Counterparts
	 	 	21	 
	6.8 Severability
	 	 	21	 
	6.9 Remedies
	 	 	22	 
	6.10 Assignment
	 	 	22	 
	6.11 [****]
	 	 	22	 
	6.12 Independent Contractors
	 	 	22	 
	6.13 Power and Authority
	 	 	22	 
	6.14 Disclaimer
	 	 	22	 
	6.15 Third Party Beneficiary Rights
	 	 	23	 
	6.16 Section 365(n)
	 	 	23	 
	6.17 Export Control
	 	 	23	 

	 	 	 	 	 
	Exhibits	 	 	 	 
	Exhibit A: Form of Patent Assignment

	Exhibit B: Form of Trademark Assignment

	Exhibit C: NXP Logo and Trademark

	Exhibit D: [****]

ii

 

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Table of Contents

(cont’d)

	 	 	 	 	 
	Schedules	 	 	 	 
	Schedule 2.1(b): Chain of Title

	Schedule 3.8: Pending Litigation

	Schedule 5.1(a): Assumed IP Contracts

	Schedule 5.1(b): Exclusive IP Contracts

	Schedule 5.1(c): Identified Exclusive IP Contracts

	Schedule 5.1(d): Specified Exclusive IP Contracts

	Schedule 5.1(e): Licensed NXP IP

	Schedule 5.1(f) ME/MC Transferred Patents

	Schedule 5.1(g): Retained ME/MC and Demod Patents

	Schedule 5.1(h): Third Party IP

	Schedule 5.1(i): Transferred Patents

	Schedule 5.1(j): Transferred Technology

	Schedule 5.1(k): Transferred Trademarks

	Schedule 5.1(l): Trimedia Core

	Schedule 5.1(m): Acquired [****] Technology

	Schedule 5.1(n): Demod Transferred Patents

	Schedule 5.1(o): Demod Transferred Technology

	Schedule 5.1(p): Current NXP Car Products

	Schedule 5.1(q): Video Decoding Transferred Patents

	Schedule 5.1(r): CA Security Transferred Patents

	Schedule 5.1(s): ME/MC Transferred Technology

	Schedule 5.1(t): CA Security Transferred Technology

	Schedule 5.1(u): Video Decoding Transferred Technology

	Schedule 5.1(v): Retained Reliable Motion ME/MC Patents

iii

 

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INTELLECTUAL PROPERTY TRANSFER AND LICENSE AGREEMENT

     This Intellectual Property Transfer and License Agreement (“Agreement”) is made and
entered into, as of February 7, 2010 (the “Closing Date”), by and between NXP B.V., a
Dutch besloten venootshap (“NXP”), and NXP Holding 1 B.V., a Dutch besloten venootshap
(“Dutch Newco”).

RECITALS

     WHEREAS, NXP and Trident Microsystems, Inc., a corporation organized under the laws of the
State of Delaware (“Trident”), have entered into that certain Share Exchange Agreement,
dated as of October 4, 2009 (the “Share Exchange Agreement”), pursuant to which NXP will
exchange all of the shares of the Transferred Newcos (as defined in the Share Exchange Agreement),
including Dutch Newco, as well as certain other assets and rights, for certain shares of common
stock, par value $0.001 per share, of Trident;

     WHEREAS, pursuant to the terms and conditions of this Agreement, NXP shall transfer and
license certain Intellectual Property relating to the Business to Dutch Newco and Dutch Newco will
license certain of such Intellectual Property back to NXP;

     WHEREAS, pursuant to the terms and conditions of this Agreement, NXP shall transfer certain
Trademarks relating to the Business to Dutch Newco without any right or license being granted back
to NXP pursuant to this Agreement;

     WHEREAS, in consideration for the grants, transfers and assignments made by NXP to Dutch Newco
under this Agreement, Dutch Newco shall issue a promissory note to NXP for the fair market value of
the rights, transfers and assignments made by NXP to Dutch Newco pursuant to the terms set forth in
such promissory note; and

     WHEREAS, the parties hereto desire to set forth the terms and conditions of such transfer and
license of Intellectual Property.

     NOW THEREFORE, in consideration of the promises and mutual covenants and agreements contained
herein, the parties hereby agree as follows:

ARTICLE I

TERM AND TERMINATION

     1.1 Term. The term of this License Agreement is perpetual, with the licenses
continuing for as long as the applicable Intellectual Property licensed hereunder exist. This
Agreement may only be terminated by mutual written agreement of the parties.

     1.2 No Termination of Agreement. Each party acknowledges and agrees that its remedy
for breach by the other party or exceeding the scope of the licenses granted to it under this
Agreement, or of any other provision hereof, is to bring a claim to recover damages or to bring a
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grants or both, but in no event is this Agreement terminable. A party may, in its discretion
as Licensee, terminate one or more of the licenses granted to it by written notice to the Licensor.

ARTICLE II

TRANSFERS AND LICENSES

     2.1 Transfer and Assignment of Transferred IP.

     NXP hereby sells, transfers, conveys, and assigns to Dutch Newco all right, title and interest
in and to the Transferred IP.

     NXP hereby agrees to execute such documents of sale, transfer and assignment, including the
assignments substantially in the form attached hereto as Exhibits A (Form of Patent
Assignment) and B (Form of Trademark Assignment), and, at NXP’s expense, take such other
actions, in each case as may be reasonably requested by Dutch Newco to effect the sale, transfer
and assignment in and to the Transferred IP. Dutch Newco is responsible for registration and/or
recordation of the transfers and assignments hereunder, and the out-of-pocket fees paid to the US
Patent and Trademark Office or any other government intellectual property office in connection
therewith shall be shared equally by NXP and Dutch Newco, except that NXP shall bear 100% of the
out-of-pocket fees and reasonable expenses incurred in connection with addressing the chain of
title, recordation and other issues previously identified by Dutch Newco’s counsel, which issues
are generally identified on Schedule 2.1(b). NXP shall pay or reimburse Dutch Newco for
its portion of the fees within 30 days of the date of invoice.

     It is understood and agreed that the only Patents being sold, transferred, conveyed and
assigned to Dutch Newco hereunder are the Transferred Patents.

     2.2 Patent Licenses.

          (a) Licenses to Dutch Newco.

     (i) Retained Patents – Business Field. Subject to the terms and
conditions of this Agreement, NXP hereby grants to the Dutch Newco Group an
irrevocable, non-terminable, non-transferable (except as set forth in
Section 6.10 below), non-exclusive, fully-paid, royalty-free license, under
the Retained Patents and solely with respect to the Business Fields, to make (solely
for any member of the Dutch Newco Group), have made (solely for any member of the
Dutch Newco Group), use, sell, offer for sale, and import any products and to
practice any method or process in connection with the exercise of the foregoing
license, except that the license granted under this Section 2.2(a)(i) does
not extend to any [****].

     (ii) Retained ME/MC and Demod Patents – All Fields. Subject to the
terms and conditions of this Agreement, NXP hereby grants to the Dutch Newco Group a
non-exclusive, irrevocable, non-terminable, non-transferable (except as set forth in
Section 6.10 below), fully-paid, royalty-free license, under the Retained
ME/MC and Demod Patents, to make, have made, use, sell, offer for

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sale, and import
any products and to practice any method or process in connection with the exercise
of the foregoing license.

     (iii) Retained Reliable Motion ME/MC Patents – All Fields and Exclusive
within Business Fields. Subject to the terms and conditions of this Agreement,
NXP hereby grants to the Dutch Newco Group an irrevocable, non-terminable,
non-transferable (except as set forth in Section 6.10 below), fully-paid,
royalty-free license, under the Retained Reliable Motion ME/MC Patents and with full
rights to sublicense with respect to the practice of the Retained Reliable Motion
ME/MC Patents in the Business Fields, to make, have made, use, sell, offer for sale,
and import any products and to practice any method or process in connection with the
exercise of the foregoing license. This license is exclusive with respect to the
Business Fields (even as to NXP and its Affiliates) and non-exclusive with respect
to all other fields.

          (b) License to NXP.

     (i) Demod Transferred Patents. Subject to the terms and conditions of
this Agreement and Section 7.10 of the Share Exchange Agreement, Dutch Newco hereby
grants to NXP and its Subsidiaries a non-exclusive, irrevocable, non-terminable,
non-transferable (except as set forth in Section 6.10 below), fully-paid,
royalty-free license, under the Demod Transferred Patents and solely with respect to
the NXP Fields, to make (solely for NXP or a NXP Subsidiary), have made (solely for
NXP or a NXP Subsidiary), use, sell, offer for sale, and import any TV Front End
Products and to practice any method or process in connection with the exercise of
the foregoing license.

     (ii) ME/MC Transferred Patents. Subject to the terms and conditions of
this Agreement and Section 7.10 of the Share Exchange Agreement, Dutch Newco hereby
grants to NXP and its Subsidiaries, for use by the NXP Software business, a
non-exclusive, irrevocable, non-terminable, non-transferable (except as set forth in
Section 6.10 below), fully-paid, royalty-free license, under the ME/MC
Transferred Patents and solely with respect to the NXP Fields, to make (solely for
NXP or a NXP Subsidiary), have made (solely for NXP or a NXP Subsidiary), use, sell,
offer for sale, and import only software implementations that satisfy both of the
following requirements: (i) they are used solely in mobile phones and handsets and
(ii) they are NXP Software branded.

     (iii) Current NXP Car Products. Subject to the terms and conditions of
this Agreement and Section 7.10 of the Share Exchange Agreement, Dutch Newco hereby
grants to NXP and its Subsidiaries a non-exclusive, irrevocable, non-terminable,
non-transferable (except as set forth in Section 6.10 below), fully-paid,
royalty-free license, under the Video Decoding Transferred Patents and ME/MC
Transferred Patents and solely with respect to the NXP Fields, to make (solely for
NXP or a NXP Subsidiary), have made (solely for NXP or a NXP Subsidiary), use, sell,
offer for sale, and import each Current NXP Car

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Product and to practice any method
or process in connection with the exercise of the foregoing license.

     (iv) NXP Patent Licensed Products. Subject to the terms and conditions
of this Agreement and Section 7.10 of the Share Exchange Agreement, Dutch Newco
hereby grants to NXP and its Subsidiaries a non-exclusive, irrevocable,
non-terminable, non-transferable (except as set forth in Section 6.10
below), fully-paid, royalty-free license, under the Other Transferred Patents and
solely with respect to the NXP Fields, to make (solely for NXP or a NXP Subsidiary),
have made (solely for NXP or a NXP Subsidiary), use, sell, offer for sale, and
import the NXP Patent Licensed Products and to practice any method or process in
connection with the exercise of the foregoing license.

     2.3 Licenses to Non-Patent Intellectual Property.

     (a) License to Dutch Newco. Subject to the terms and conditions of this
Agreement, NXP hereby grants to the Dutch Newco Group an irrevocable, non-terminable,
non-transferable (except as set forth in Section 6.10 below), non-exclusive,
perpetual, fully-paid, royalty-free license, solely with respect to the Business Fields, to
use, reproduce, display, perform, distribute, modify, prepare derivative works of and
otherwise exploit the Retained Technology as part of or in connection with the design,
development, manufacture, support and sale of products of any member of the Dutch Newco
Group.

          (b) License to NXP.

     (i) TV Front End Products. Subject to the terms and conditions of this
Agreement and Section 7.10 of the Share Exchange Agreement, Dutch Newco hereby
grants to NXP and its Subsidiaries, on a quitclaim basis, a non-exclusive,
irrevocable, non-terminable, non-transferable (except as set forth in Section
6.10 below), perpetual, fully-paid, royalty-free license, solely with respect to
the NXP Fields, to use, reproduce, display, perform, distribute, modify, prepare
derivative works of and otherwise exploit the Demod Transferred Technology as part
of or in connection with the design, development, manufacture, support and sale of
TV Front End Products.

     (ii) Current NXP Car Products. Subject to the terms and conditions of
this Agreement and Section 7.10 of the Share Exchange Agreement, Dutch Newco hereby
grants to NXP and its Subsidiaries, on a quitclaim basis, a non-exclusive,
irrevocable, non-terminable, non-transferable (except as set forth in Section
6.10 below), perpetual, fully-paid, royalty-free license, solely with respect to
the NXP Fields, to use, reproduce, display, perform, distribute, modify, prepare
derivative works of and otherwise exploit the Video Decoding Technology, the ME/MC
Transferred Technology and the Shared Masks as part of or in connection with the
design, development, manufacture, support and sale of Current NXP Car Products.

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     (iii) NXP Technology Licensed Products. Subject to the terms and
conditions of this Agreement and Section 7.10 of the Share Exchange Agreement, Dutch
Newco hereby grants to NXP and its Subsidiaries, on a quitclaim basis, a
non-exclusive, irrevocable, non-terminable, non-transferable (except as set forth in
Section 6.10 below), perpetual, fully-paid, royalty-free license, solely
with respect to the NXP Fields, to use, reproduce, display, perform, distribute,
modify, prepare derivative works of and otherwise exploit the Other Transferred
Technology as part of or in connection with the design, development, manufacture,
support and sale of the NXP Technology Licensed Products.

     2.4 No Sublicensing. Except as authorized by Section 2.2(a)(iii) of this
Agreement, each party hereby (a) agrees that it shall not sublicense any of the other party’s
Patents or Licensed Materials that are licensed hereunder, and (b) acknowledges that it receives no
right to grant any sublicenses.

     2.5 Delivery.

          (a) Obligations.

     (i) At or as promptly as practicable after the Closing, NXP will deliver to
Dutch Newco any tangible or electronic copies of the Intellectual Property assigned
or licensed under this Agreement that are in the physical possession, custody or
control of NXP or its Subsidiaries at the Closing and not otherwise delivered in
connection with the transactions contemplated by the Share Exchange Agreement or
that Dutch Newco cannot locate following a reasonable search.

     (ii) Upon request from time to time by NXP, a member of the Dutch Newco Group
will deliver any tangible or electronic copies of the Intellectual Property licensed
by Dutch Newco to NXP and its Subsidiaries under this Agreement that were, prior to
the Closing Date, owned or possessed by NXP and are assigned to Dutch Newco under
Section 2.1 of this Agreement, but only if and
to the extent that they were not retained by NXP or NXP cannot locate them
after a reasonable search and they are in the physical possession, custody or
control of Dutch Newco Group at the time of the request.

     (iii) Dutch Newco is only obligated to deliver items in the form that they
exist as of the Closing Date. Without limitation, NXP is not entitled to receive
any modifications, derivative works or improvements to any such Intellectual
Property made by or for any member of Dutch Newco after the Closing Date.

     (iv) Notwithstanding subparts (i) and (ii) above, NXP is not required to take
any action under Section 2.5(a)(i) on a request first made more than
twenty-four (24) months following the Closing Date, and Dutch Newco is not required
to take any action under Section 2.5(a)(ii) on a request first made more
than six (6) months following the Closing Date.

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     (v) The delivery in each case will be made by electronic or other means
mutually acceptable to NXP and Dutch Newco.

     (vi) Dutch Newco is not entitled to receive any source code or related
documentation with respect to the Trimedia Core instruction set architecture that is
licensed to the Dutch Newco Group under Section 2.3.

     (b) Relationship to R&D Services Agreement. This Section 2.5 does not apply to
any deliveries to be made under the R&D Services Agreement.

     2.6 Assumed IP Contracts. Subject to Section 2.10, NXP hereby transfers and
assigns its and its Subsidiaries’ right in and to the Assumed IP Contracts. Dutch Newco hereby
accepts the assignment of the Assumed IP Contracts and assumes all Liabilities in respect thereof
arising after the Closing.

     2.7 [****]

     2.8 Subsidiaries. Any reference in this Agreement to a liability or obligation of a
party’s Subsidiary (or, in the case of Dutch Newco, any member of the Dutch Newco Group) shall be
deemed to incorporate a reference to an obligation on the part of that party to ensure that the
relevant liability is discharged or obligation is performed by the relevant Subsidiary or member of
the Dutch Newco Group, as the case may be. Any breach by the other party’s Subsidiary (or, in the
case of Dutch Newco, any member of the Dutch Newco Group) will be deemed a breach by the other
party. Any license granted to a party’s Subsidiary hereunder will terminate on the date that
Person ceases to be a Subsidiary of such party, and any license granted to any member of the Dutch
Newco Group hereunder will terminate on the date that Person ceases to be a member of the Dutch
Newco Group, except that, without limiting a
Licensor’s obligations under Section 6.11, during the period up to the ninetieth
(90th) day following the date on which a Person ceases to be a Subsidiary, upon that Person’s
request, Licensor shall use commercially reasonable efforts to negotiate a successor license with
that Person on commercial terms that are satisfactory to Licensor.

     2.9 [****]

     2.10 Unidentified Contracts. Notwithstanding anything in Section 2.6 or
2.7, Trident is not required to assume (and if Trident so elects, NXP shall retain and bear
the costs and expenses of) any IP Contract that was not identified to Trident and considered by
Trident and NXP by October 1, 2009, in generating the final financial model developed immediately
prior to the Agreement Date for the operation of Trident following the Closing (“Unidentified
Contracts”), provided that if such model reflected a basket or expense for such contracts, Trident
shall accept an aggregate liability for Unidentified Contracts up to the amount of such basket or
expense, and NXP shall retain and pay such liabilities in excess of such basket or expense.

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ARTICLE III

INTELLECTUAL PROPERTY RIGHTS

     3.1 Transferred IP. NXP agrees that, as between NXP and Dutch Newco, as of the
Closing, Dutch Newco is the sole and exclusive owner of all right, title and interest in and to the
Transferred IP, and that, under this Agreement, NXP acquires no right, title or interest in or to
any of the foregoing, other than the rights expressly granted hereunder.

     3.2 Patents. To the extent that a license granted hereunder by a Licensor includes
the right to practice under one or more Patents that are part of the Transferred IP or Retained IP,
each such license includes not only Patents in existence as of the Closing Date that are part of
the Transferred IP or Retained IP, as the case may be, but also: (i) all subsequent divisions,
continuations, continuations-in-part (but these only to the extent based on inventions existing as
of the Closing Date), re-examinations, re-issues, provisionals, extensions and counterparts
relating thereto; (ii) all Patents issuing after the Closing Date that arise from inventions first
made, conceived or reduced to practice prior to the Closing Date that are part of the Transferred
IP or Retained IP, as the case may be; and (iii) all Patent claims entitled to the benefit of a
priority date from any of the foregoing Patents.

     3.3 Retained IP. Dutch Newco agrees that, as between Dutch Newco and NXP, NXP is the
sole and exclusive owner of all right, title and interest in and to the Retained IP, and that under
this Agreement, Dutch Newco acquires no right, title or interest in or to any of the foregoing,
other than the rights expressly granted hereunder.

     3.4 Acquired [****] Technology. Dutch Newco agrees, on behalf of itself and the Dutch
Newco Group, not to use any of the Acquired [****] Technology in connection
with the [****] and [****] markets until[****], and NXP, on behalf of itself and its
Affiliates, hereby covenants to the same.

     3.5 Prior Obligations. Each party, as Licensee, acknowledges that all rights in or to
Intellectual Property and Trademarks granted by assignment, license or otherwise hereunder are
subject to (x) any rights granted to or retained by, and any restrictions validly imposed by, any
third party with respect to such Intellectual Property or Trademarks as of the Closing Date and (y)
any rights required to be granted to or retained by, and any restrictions to be validly imposed by,
any third party with respect to such Intellectual Property or Trademarks pursuant to obligations in
existence as of the Closing Date. This includes, without limitation, [****].

     3.6 Maintenance. Licensor, in its sole discretion, shall have the sole right to
protect the Intellectual Property being licensed by it hereunder and nothing contained herein shall
be construed as obligating Licensor to file any patent or other intellectual property rights
application or to prosecute, maintain or enforce Intellectual Property licensed hereunder. Except
as set forth in Section 2.4 with respect to the delivery of the Intellectual Property
licensed or assigned under this Agreement, nothing contained in this Agreement shall be construed
as obligating Licensor to provide any maintenance, support or other services, materials or
information to Licensee.

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     3.7 Trademarks. Dutch Newco shall not use, including as or as part of any of its
trademarks, service marks, trade names, domain names or other commercial or corporate indicia,
after the Closing Date, any NXP Trademarks, including the element “NXP” or any derivate or
combination Trademark containing the element “NXP.” Notwithstanding the foregoing, each member of
the Dutch Newco Group shall have the right: (i) until the end of the Finished Goods Period (as
defined in the Manufacturing Services Agreement) to use the NXP Logo and Trademark (defined as the
trademark rights listed in Exhibit C hereto) on all product packing material with respect to the
Products (as defined in the Manufacturing Services Agreement), including labels, boxes, invoices,
and customs documents, and all related documentation, including manuals, brochures, data sheets,
collateral and other product related materials; (ii) to sell, transfer, import, export and/or ship
products bearing a NXP Trademark, which products were included in the Finished Goods and WIP (as
those terms are defined in the Share Exchange Agreement) or were sold under the Manufacturing
Services Agreement to Dutch Newco Group bearing an NXP Trademark, and without deleting, altering or
obscuring such Trademark; and (iii) on its and their websites, in marketing collateral, datasheets
and elsewhere to advise their actual and potential customers that the Business was acquired from
NXP. The foregoing rights granted under subparts (i) and (iii) are subject to NXP’s standard
Trademark usage guidelines, as they may be amended or modified from time to time, and NXP reserves
the right to practice quality control with regard to its marks.

     3.8 Reasonable Assistance in Connection with Third Party Claims. In the event that,
as of the Closing Date, NXP or any of its Subsidiaries is contractually obligated to or
otherwise is under a legally binding obligation to indemnify or undertake the defense of any
third party in any action in which it is alleged that any of the Transferred IP infringes any third
party’s intellectual property rights and a third party makes a claim against NXP or any of its
Subsidiaries after the Closing Date or any such claim is pending as of the Closing Date (which
pending claims are listed on Schedule 3.8), then, at NXP’s request and expense, Dutch Newco
shall provide NXP with assistance as reasonably requested by NXP in connection with such
proceedings. In the event that Trident or Dutch Newco is contractually obligated to or otherwise is
under a legally binding obligation to indemnify or undertake the defense of any third party in any
action in which it is alleged that any of the Transferred IP infringes any third party’s
intellectual property rights and a third party makes a claim against Trident or Dutch Newco, then,
at Trident or Dutch Newco’s request and expense, NXP shall provide Trident or Dutch Newco with
assistance as reasonably requested by Trident or Dutch Newco in connection with such proceedings.

     3.9 Other Limitations and Restrictions. Notwithstanding anything in this Agreement to
the contrary, no member of the Dutch Newco Group shall modify or create derivative works of the
Trimedia Core instruction set architecture that is licensed to the Dutch Newco Group under
Section 2.3.

     3.10 Composite and Component IP Blocks. Trident acknowledges that the Intellectual
Property identified on Schedule 5.1(e) (the “Composite IP Blocks”) may be comprised
of sub-blocks and components, some of which may be Retained Technology or Third Party IP (those
sub-blocks and components, the “Component IP Blocks”). Trident acknowledges that, as of
the Closing, it owns all right, title and interest in and to the Composite IP Blocks, subject to
any rights that NXP or third parties may have in the underlying Component IP Blocks.

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Likewise, NXP
acknowledges that it receives the license from Dutch Newco to Dutch Newco’s applicable Licensed
Materials subject to any rights third parties may have in the underlying Component IP Blocks, and
NXP alone is responsible for obtaining all rights and licenses from third parties necessary to use
any of Dutch Newco’s Licensed Materials.

     3.11 Covenants with Respect to Sublicenses. Dutch Newco agrees that it and all
members of the Dutch Newco Group will comply with all of the applicable terms of any license
agreement with respect to which it is granted a sublicense hereunder or to which it may have rights
because of an affiliated relationship with NXP. Likewise, NXP, on behalf of itself and its
Affiliates, hereby covenants to the same with respect to any Assumed Contract under which it may
have rights because of an affiliated relationship with the Dutch Newco Group.

     3.12 Shared Masks. Dutch Newco Group shall make and keep available to NXP and its
Subsidiaries the physical embodiments of the Shared Masks at Taiwan Semiconductor Manufacturing
Company (“TSMC”). Dutch Newco Group shall inform TSMC that NXP and its Subsidiaries have limited
license rights with respect to the Shared Masks and, at NXP’s expense, take such other actions as
NXP may reasonably request to provide NXP access
to such Shared Masks, which access is subject to the rules, limitations, policies and
requirements of TSMC.

ARTICLE IV

CONFIDENTIALITY

     4.1 Trade Secrets and Confidential Information. Each party agrees that it and its
Subsidiaries shall (i) maintain in confidence the other party’s Confidential Information, (ii) not
use the other party’s Confidential Information (a) except as may be reasonably required in
connection with the performance of this Agreement by Dutch Newco or NXP, as the case may be, and
(b) except as may be reasonably required after the Closing Date (i) by Dutch Newco in connection
with the licensed use of any Retained Technology, or (ii) by NXP in connection with the licensed
use of any Transferred Technology, and (iii) disclose such Confidential Information only to those
Subsidiaries, agents, contractors, employees and potential or actual manufacturers, customers,
licensees and sublicensees who have a need to know the same for the receiving party to exploit the
benefits of the licenses granted to it hereunder and who agree in writing not to disclose such
Confidential Information to any unauthorized person, consistent with the confidentiality
obligations herein. Notwithstanding these restrictions, either party and its Subsidiaries may
produce products contemplated under this Agreement that inherently disclose the other party’s
Confidential Information, on condition that such party and its Subsidiaries has made commercially
reasonable efforts to avoid disclosing the other party’s Confidential Information in the products.
The receiving party will protect the disclosing party’s Confidential Information from unauthorized
use, access, or disclosure in the same manner as the receiving party protects its own confidential
or proprietary information of a similar nature and with no less than reasonable care. Each party
agrees and acknowledges that violation of these provisions by the receiving party (or third parties
receiving Confidential Information from any of them) will cause irreparable harm to the disclosing
party and that the disclosing party shall be entitled to seek an injunction or other temporary
relief in addition to the disclosing party’s other rights at law or in equity.

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     4.2 Exceptions. The obligations in Section 4.1 do not apply to any
information that (i) is already or, through no fault of the receiving party, becomes publicly
available; (ii) rightfully and lawfully comes into the possession of the receiving party from a
third party without the imposition of any duty of confidentiality by that third party and who was
authorized to make such disclosure; (iii) was independently developed by a party without reference
to or use of the Confidential Information of the other party; or (iv) was already lawfully known to
the receiving party at the time of disclosure by the disclosing party, except with respect to
Confidential Information of a disclosing party that was known to the receiving party prior to the
Closing Date due to (i) the ownership of the specific Confidential Information by the receiving
party prior to the Closing Date or (ii) the fact the employees of the receiving party were
employees of the disclosing party prior to the Closing Date. A party is allowed to disclose
Confidential Information if it is required to be disclosed as a matter of Law or pursuant to a
legal
proceeding or the rules of a recognized stock exchange, on condition that the receiving party
promptly notifies the disclosing party of any such requirement, discloses no more information than
it believes in good faith based on the advice of counsel is required and cooperates, at the
disclosing party’s request and expense, with all reasonable attempts by the disclosing party to
contest or limit the scope of the required disclosure and to obtain a protective order or similar
confidential treatment.

     4.3 Source Code. Each Licensee will use the same degree of care and employ the same
procedural safeguards to protect the Licensor’s source code that it uses to protect its own most
valuable source code, but in no event less than reasonable care.

     4.4 Terms of the Agreement. The parties agree that the terms of this Agreement are
considered Confidential Information of both parties. Notwithstanding the foregoing, each party
shall have the right to provide a copy of this Agreement in confidence to its Affiliates, advisors,
accountants, counsel, any bona fide potential investor, financing source, investment banker,
acquirer, merger partner or other potential financial or strategic partner, on condition that the
disclosure is (a) on a strictly limited, need-to-know basis, (b) when the disclosing party believes
that the transaction is reasonably likely to take place, and (c) on terms applicable to other
highly confidential or sensitive information disclosed by that party in connection with the
transaction and those terms prohibit disclosure, prohibit use for any purpose other than as
required for due diligence in connection with the potential transaction and provide for reasonable
care. A party may also disclose this Agreement under seal or equivalent non-public treatment in
connection with any litigation or other legal action concerning this Agreement.

ARTICLE V

DEFINITIONS AND CONSTRUCTION

     5.1 Definitions. As used in this Agreement, the following capitalized terms shall
have the following meanings:

     “Acquired [****] Technology” means the non-Patent Intellectual Property identified on
Schedule 5.1(m), [****]

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     “Affiliate” of any Person means any other Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with such Person, except that, for
purposes of this Agreement, NXP will not be considered an Affiliate of any member of Dutch Newco
Group, and no member of Dutch Newco Group will be considered an Affiliate of NXP. A Person is
considered an Affiliate of another Person only for so long as that control exists. For purposes of
this definition, the term “control” (including the correlative meanings of the terms “controlled
by” and “under common control with”), as used with respect to any Person, means the possession,
direct or indirect, of the power to direct or cause the direction of the policies,
operations or activities of that Person, directly or indirectly, whether through the ownership
of, or right to vote, or to direct the manner of voting of, voting securities, by Law or agreement,
or otherwise.

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

     “Agreement Date” has the meaning set forth in the Share Exchange Agreement.

     “Ancillary Agreements” has the meaning set forth in the Share Exchange Agreement.

     “Assumed IP Contracts” means the Contracts identified on Schedule 5.1(a).

     “Bankruptcy Code” has the meaning set forth in Section 6.16.

     “Business” has the meaning set forth in the Share Exchange Agreement.

     “Business Day” has the meaning set forth in the Share Exchange Agreement.

     “Business Fields” means any and all of the following markets worldwide:

               (1) [****]

               (2) [****]

               (3) [****]

               (4) [****]

          [****]

     “CA Security Transferred Patents” means the Patents listed on Schedule 5.1(r).

     “CA Security Transferred Technology” means the Intellectual Property listed on
Schedule 5.1(t).

     “Chosen Courts” has the meaning set forth in the Share Exchange Agreement.

     “Closing” has the meaning set forth in the Share Exchange Agreement.

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

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     [****]

     “Company Products” has the meaning set forth in the Share Exchange Agreement.

     “Component IP Blocks” has the meaning set forth in Section 3.10.

     “Composite IP Blocks” has the meaning set forth in Section 3.10.

     “Confidential Information” means any and all technical and non-technical information
either party provides the other hereunder that the receiving party knows or reasonably should know
is confidential to the disclosing party, including, without limitation, trade secrets, know-how,
firmware, designs, schematics, techniques, software code, technical documentation, specifications
and plans, whether in written, oral, graphic or electronic form. Notwithstanding the foregoing,
after the Closing Date, (i) all Transferred Technology (to the extent included within the
definition of “Confidential Information”) will be deemed the Confidential Information of Dutch
Newco, not NXP, and (ii) all Retained Technology (to the extent included within the definition of
“Confidential Information”) will be deemed the Confidential Information of NXP, not Dutch Newco.

     “Contracts” has the meaning set forth in the Share Exchange Agreement.

     “Copyrights” means the copyrights in works of authorship (including rights in
databases and other compilations of information, mask works and semiconductor device rights,
computer and electronic data processing programs, operating programs and software, flow charts,
diagrams, descriptive texts and programs and computer print-outs), registrations and applications
therefor, and all similar rights throughout the world, and all renewals, extensions, restorations
and reversions thereof.

     “Current NXP Car Products” means the three NXP integrated circuit products listed on
Schedule 5.1(p), as such products exist on the Closing Date and their Natural Successors
and Derivatives.

     “Demod Transferred Patents” means the Patents listed on Schedule 5.1(n).

     “Demod Transferred Technology” means the Intellectual Property listed on
Schedule 5.1(o), including all associated copyrights and trade secrets.

     “Digital
Video Recorder” means a device that records video in a digital format
to a disk drive or other medium.

     “Divested Entity” means any former Subsidiary of a Licensee as and from the moment it
no longer qualifies as a Subsidiary hereunder because of a sale, conveyance or other transfer of
such Subsidiary, and any former unincorporated business or division of the Licensee as and from the
moment it is divested by the Licensee to a transferee that is not a Subsidiary of the Licensee.

     “Dutch Newco” has the meaning set forth in the Preamble.

     “Dutch Newco Group” means Dutch Newco and at and following the Closing, Trident and
its Subsidiaries.

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     [****]

     “Exclusive IP Contracts” means the Contracts identified in Schedule 5.1(b).

     “Governmental Authority” has the meaning set forth in the Share Exchange Agreement.

     “Identified Exclusive IP Contracts” means those Contracts identified in
Schedule 5.1(c).

     “Industry
Standard” means a standard adopted by a Standards Setting
Organization. Industry Standard excludes any proprietary standards developed by one or more entities that is not sponsored or adopted by
 a Standards Setting Organization as an industry standard.

     “Intellectual Property” means Patents, Copyrights, Trade Secrets and all other
intellectual property rights (other than Trademarks).

     “Licensed NXP IP” means the Intellectual Property identified on Schedule
5.1(e).

     “Licensed Materials” means either the Retained Technology or the Transferred
Technology, as the case may be.

     “Licensee” shall mean NXP or Dutch Newco, or NXP’s Subsidiaries or any member of the
Dutch Newco Group, as the case may be, in its or any of their capacity as licensee hereunder.

     “Licensor” shall mean NXP or Dutch Newco, or their respective Subsidiaries, as the
case may be, in its or any of their capacity as licensor hereunder.

     “Manufacturing Services Agreement” has the meaning set forth in the Share Exchange
Agreement.

     “ME/MC Transferred Patents” means the Patents listed on Schedule 5.1(f).

     “ME/MC Transferred Technology” means the Intellectual Property listed on
Schedule 5.1(s).

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

     “NXP Fields” means [****]

     “NXP Patent Licensed Products” means (a) for the automotive, software and TV front-end
fields, any products of NXP and its Subsidiaries (other than the Company Products), and (b) for all
other fields, the products of NXP and its Subsidiaries as of the Closing Date (other than the
Company Products), and products on the then-existing roadmap of NXP and its Subsidiaries as of the
Closing Date, the making, use, importing, offering for sale, sale or supply of which would, in the
absence of the license granted by this Agreement, infringe a patent of the Other Transferred
Patents, and Natural Successors and Derivatives of any of the foregoing.

     “NXP Technology Licensed Products” means (a) TV Front-end Products, (b) software for
mobile phones and handsets, (c) any products of NXP and its Subsidiaries (other than the Company
Products) in the automotive field, and (d) the products of NXP and its Subsidiaries as of the
Closing Date (other than the Company Products), and products on the then-existing

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roadmap of NXP
and its Subsidiaries as of the Closing Date, and Natural Successors and Derivatives of any of the
foregoing.

     “NXP Trademarks” means all Trademarks of NXP or its Affiliates as of the Closing Date,
excluding any Trademarks acquired by Dutch Newco in connection with the Transaction.

     [****]

     “Natural Successors and Derivatives” means (a) for a software product, any subsequent
release of that product which constitutes a bug fix or error correction or contains other minor
variations, enhancements or improvements for which the licensor does not generally charge a
separate fee to its customers, and (b) for an integrated circuit product, any new versions of that
product which fixes bugs, shrinks geometry, improves yield, reduces power or improves device
performance, but does not contain new features or functionality.

     “Networked
Video Recorder”
means a device that records video in a digital format in conjunction with networked cameras that capture images and simultaneously provides recording and remote access of live video streams over an IP network.

     “Other Transferred Patents” means all Transferred Patents other than the following
Patents: (i) the Demod Transferred Patents; (ii) the ME/MC Transferred Patents; (iii) the CA
Security Transferred Patents; and (iv) the Video Decoding Transferred Patents.

     “Other Transferred Technology” means all Transferred Technology other than the
following: (i) Demod Transferred Technology; (ii) ME/MC Transferred Technology; (iii) CA Security
Transferred Technology; (iv) Video Decoding Transferred Technology, (v) the reference designs and
masks relevant to each of the Company Products, and (vi) all copyright and trade secret rights
associated with the items described in subparts (i) – (v) of this definition.

     “Patents” means all patents (including utility and design patents, industrial designs
and utility models), rights in inventions, and the registrations, invention disclosures and
applications therefor, including divisions, supplementary protection certificates, continuations,
continuations-in-part, provisional and renewal applications, and any renewals, extensions, reissues
and re-examinations thereof.

     [****]

     “Person” has the meaning set forth in the Share Exchange Agreement.

     [****]

     [****]

     “R&D Services Agreement” has the meaning set forth in the Share Exchange Agreement.

     “Retained Reliable Motion ME/MC Patents” means the Patents listed on Schedule
5.1(v).

     “Retained IP” means the Retained Technology and the Retained Patents.

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     “Retained Patents” means all Patents directly or indirectly owned or controlled (in
the sense of having the right to grant licenses or sublicenses thereunder of or within the scope
granted herein and without requiring payment of royalties or other consideration by NXP or any of
its Subsidiaries to an unaffiliated third party, unless Dutch Newco agrees to and satisfies such
payment obligations) by NXP or any of its Subsidiaries as of the Closing Date, other than
Transferred Patents.

     “Retained ME/MC and Demod Patents” means the Patents listed on Schedule
5.1(g).

     “Retained Technology” means all NXP Intellectual Property (other than Patents) that
(a) NXP or any of its Affiliates owns (after the assignment of the Transferred IP to Dutch Newco)
or controls (in the sense of having the right to grant licenses or sublicenses thereunder of or
within the scope granted herein and without requiring payment of royalties or other consideration
by NXP or any of its Subsidiaries to an unaffiliated third party, unless Dutch Newco agrees to and
satisfies such payments obligations) as of the Closing Date, and (b) is used in connection with the
development, manufacture, test, packaging, process architecture and know-how, reproduction,
distribution, modification, adaptation, display, performance, use, offer for sale or sale of the
Company Products prior to or as of the Closing Date. Retained Technology includes, without
limitation, the Licensed NXP IP.

     “Shared Masks” means the mask works for the Current NXP Car Products and all
Intellectual Property rights thereto.

     “Share Exchange Agreement” has the meaning set forth in the Recitals.

     “SoC” has the meaning set forth in the Share Exchange Agreement.

     “Standards
Setting  Organization”  means (i) an ANSI-approved Standard Setting
Organization (e.g. IEEE) or its foreign equivalent or (ii) a government sponsored organization (where sponsorship is not  based solely on
financial contributions by the government), a multi-member  consortia or industry recognized organization that meets the
following minimum criteria: (a) the organization or consortia is a not-for-profit entity; (b) the charter for the entity is
primarily for defining industry standards specifications; and (c) no single company has control over the organization or consortia.

     “Subsidiary” of any Person shall mean any legal entity (a) the majority of whose
shares or other securities entitled to vote for election of directors (or other managing authority)
is now or hereafter owned or controlled by such Person either directly or indirectly or (b) that
does not have outstanding shares or securities, but the majority of the equity interest of which is
now or hereafter owned or controlled by such Person either directly or indirectly; except that, in
the case of both (a) and (b) above, the entity is a Subsidiary of that Person only for so long as
that ownership or control exists. For purposes of this Agreement, following the Closing, Dutch
Newco will be considered a Subsidiary of Trident and not of NXP and no member of Dutch Newco Group
will be considered a Subsidiary of NXP.

     “Third Party IP” means the Intellectual Property licensed to NXP or its Subsidiaries
from third parties, the agreements for which are identified on Schedule 5.1(h). Third
Party IP includes all Exclusive IP Contracts.

     “Trademarks” means trademarks, service marks, Internet domain names, logos, product
names and slogans, symbols, trade dress, assumed names, fictitious names, trade names, brand names,
business names, and any other form of trade identity and other indicia of origin, all applications
and registrations for the foregoing and any renewals thereof, and the goodwill associated therewith
and symbolized thereby.

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     “Trade Secrets” means trade secrets, including confidential business and technical
information, ideas, research and development, know-how, formulae, drawings, prototypes, models,
designs, schematics, technical data, engineering, production and other designs, drawings,
engineering notebooks, industrial models, specifications, business methods, customer lists and
supplier lists, and any information meeting the definition of a trade secret under the Uniform
Trade Secrets Act or other similar legislation governing protection of trade secrets anywhere in
the world.

     “Transferred IP” means the Transferred Technology, the Transferred Patents and the
Transferred Trademarks.

     “Transferred Patents” means the Patents listed on Schedule 5.1(i).

     “Transferred Technology” means the Intellectual Property identified on Schedule
5.1(j), including all associated copyright and trade secret rights. The Transferred Technology
includes, for each entry in Schedule 5.1(j), all software (including RTL), firmware,
libraries, IP cores, functional blocks, GDS, netlists, timing specifications, specifications,
tools, test plans, test programs, characterization reports, validation reports, schematics,
designs, database tapes, algorithms and documentation. The Transferred Technology also includes
reference designs and masks relevant to each of the Company Products.

     “Transferred Trademarks” means the Trademarks identified on Schedule 5.1(k).

     “Trident” has the meaning set forth in the Recitals.

     “Trimedia Core” means the IP core listed on Schedule 5.1(l).

     “TV Front End Product” means an integrated circuit that receives a broadcast signal
via a tuner and demodulates that signal for purposes of display on a TV screen.

     “Unassumed Exclusive IP Contracts” means those Exclusive IP Contracts that are not
Identified Exclusive IP Contracts.

     “Unidentified Contracts” has the meaning set forth in the Share Exchange Agreement.

     “Video Decoding Transferred Patents” means the Patents listed on Schedule
5.1(q).

     “Video Decoding Transferred Technology” means the Intellectual Property listed on
Schedule 5.1(u).

     [****]

     5.2 Other Terms. Other terms may be defined elsewhere in the text of this Agreement
and, unless otherwise indicated, shall have such meaning throughout this Agreement.

     5.3 Interpretation. When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated. When a reference is
made in this Agreement to Sections, such reference shall be to a Section of this Agreement

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unless otherwise indicated. When a reference is made in this Agreement to Articles, such
reference shall be to an Article of this Agreement unless otherwise indicated. The words
“include”, “include” and “including” when used herein shall be deemed in each case to be followed
by the words “without limitation.” The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The
parties hereto agree that they have been represented by legal counsel during the negotiation and
execution of this Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other document shall be
construed against the party drafting such agreement or document.

ARTICLE VI

MISCELLANEOUS

     6.1 No Implied Licenses. Nothing contained in this Agreement shall be construed as
conferring any rights by implication, estoppel or otherwise, under any Intellectual Property or
Trademarks other than the rights expressly granted in this Agreement.

     6.2 Amendments and Waivers. Any term or provision of this Agreement may be amended,
and the observance of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only by a writing signed by the party hereto
to be bound thereby. The waiver by a party of any breach hereof or default in the performance
hereof shall not be deemed to constitute a waiver of any other default or any succeeding breach or
default. The failure of any party to enforce any of the provisions hereof shall not be construed
to be a waiver of the right of such party thereafter to enforce such provisions.

     6.3 Entire Agreement. This Agreement, the exhibits and schedules hereto, the Share
Exchange Agreement and the other Ancillary Agreements constitute the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede
all prior and contemporaneous agreements or understandings, inducements or conditions, express or
implied, written or oral, between the parties with respect hereto. The express terms hereof
control and supersede any course of performance or usage of the trade inconsistent with any of the
terms hereof.

     6.4 Governing Law. The internal law, without regard for conflicts of laws principles,
of the State of New York shall govern the validity of this Agreement, the construction of its
terms, and the interpretation and enforcement of the rights and duties of the parties hereto. The rights and obligations of the parties under this Agreement will not be governed by the
provisions of the 1980 United Nations Convention on Contracts for the International Sale of Goods
or the United Nations Convention on the Limitation Period in the International Sale of Goods, as
amended.

     6.5 Submission to Jurisdiction; Selection of Forum; Waiver of Trial By Jury. Each
party hereto agrees that it shall bring any action or proceeding in respect of any claim arising
out of or related to this Agreement or the transactions contained in or contemplated by this
Agreement exclusively in the Chosen Courts, and solely in connection with claims arising

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under this Agreement (i) irrevocably submits to the exclusive jurisdiction of the Chosen
Courts, (ii) waives any objection to laying venue in any such action or proceeding in the Chosen
Courts, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have
jurisdiction over any party hereto and (iv) agrees that service of process upon such party in any
such action or proceeding shall be effective if notice is given in accordance with Section
6.6 of this Agreement. Each party hereto irrevocably waives any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.

     6.6 Notices. All notices and other communications required or permitted under this
Agreement shall be in writing and shall be either hand delivered in person, sent by facsimile, sent
by certified or registered first-class mail, postage pre-paid, or sent by internationally
recognized express courier service. Such notices and other communications shall be effective upon
receipt if hand delivered or sent by facsimile, three (3) days after mailing if sent by mail, and
one (1) day after dispatch if sent by express courier, to the following addresses, or such other
addresses as any party may notify the other party in accordance with this Section 6.6:

If to NXP:

NXP

High Tech Campus 60

5656 AG Eindhoven

The Netherlands

Fax: + 31 40 27 29655

Attention: Guido R.C. Dierick

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

NXP

1109 McKay Drive

San Jose, California 95131

Fax: +1 (408) 474-7100

Attention: James N. Casey

and

Sullivan & Cromwell LLP

1870 Embarcadero Road

Palo Alto, California 94303

Fax: +1 (650) 461-5777

Attention: Scott D. Miller

If to Dutch Newco:

NXP Holding 1 B.V.

3408 Garrett Drive

Santa Clara, CA 95054

Fax: +1 (408) 988-9176

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Attention: David Teichmann

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

Trident Microsystems, Inc.

3408 Garrett Drive

Santa Clara, CA 95054

Fax: +1 (408) 988-9176

Attention: David Teichmann

and

DLA Piper US LLP

2000 University Avenue

East Palo Alto, CA 94303-2215

Fax: +1(650) 687-1189

Attention: Sally Rau

     6.7 Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be an original as regards any party whose signature appears thereon and all of which
together shall constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the signatures of all
parties reflected hereon as signatories.

     6.8 Severability. If any provision of this Agreement, or the application thereof,
shall for any reason and to any extent be invalid or unenforceable, then the remainder of this
Agreement and the application of such provision to other persons or circumstances shall be
interpreted so as reasonably to effect the intent of the parties hereto. The parties hereto
further agree to replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that shall achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.

     6.9 Remedies. Except as otherwise expressly provided herein, any and all remedies
herein expressly conferred upon a party hereunder shall be deemed cumulative with and not exclusive
of any other remedy conferred hereby or by law on such party, and the exercise of any one remedy
shall not preclude the exercise of any other. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court having jurisdiction.

     6.10 Assignment. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, legal representatives and permitted assigns.
Neither party may assign any of its rights or delegate any performance under this Agreement, by
operation of Law or otherwise, without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed, except that either party may transfer or assign its
rights under this Agreement without the consent of the other party: (a) to one or more

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of its current Subsidiaries or an Affiliate created due to an internal reorganization; and/or
(b) to a third party merger partner or the purchaser in connection with a merger, consolidation or
sale of all or substantially all of its stock or assets or of any portions of its business to which
this Agreement relates. Any purported assignment made without the consent provided for in this
Section 6.10 is null and void.

     6.11 [****]

     6.12 Independent Contractors. Nothing contained in this Agreement shall be deemed or
construed as creating a joint venture or partnership between any of the parties hereto. No party
is by virtue of this Agreement authorized as an agent, employee or legal representative of any
other party. No party shall have the power to control the activities and operations of any other
and their status is, and at all times shall continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or commit any other
party. No party shall hold itself out as having any authority or relationship in contravention of
this Section 6.12.

     6.13 Power and Authority. Each party hereby represents and warrants to the other
party that it has full power and authority to enter into this Agreement and to grant the rights and
licenses set forth herein and has not executed, and will not execute, any agreement or other
instrument in conflict herewith.

     6.14 Disclaimer. THE PARTIES ACKNOWLEDGE AND AGREE THAT, EXCEPT FOR THE EXPLICIT
REPRESENTATIONS CONTAINED IN SECTION 6.13 ABOVE AND FOR ANY REPRESENTATION OR WARRANTY
EXPRESSLY MADE BY NXP IN THE SHARE EXCHANGE AGREEMENT, THE ASSIGNMENTS AND TRANSFERS MADE AND LICENSES GRANTED
HEREUNDER ARE ON AN “AS IS” BASIS, NEITHER NXP NOR DUTCH NEWCO MAKES ANY REPRESENTATIONS OR
WARRANTIES OF ANY KIND IN CONNECTION WITH THIS AGREEMENT, AND NXP AND DUTCH NEWCO EACH HEREBY
EXPRESSLY DISCLAIM AND EXCLUDE ALL WARRANTIES, WHETHER STATUTORY, EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
TITLE, AND NON-INFRINGEMENT. WITHOUT LIMITING THE FOREGOING, NEITHER PARTY MAKES ANY WARRANTY OR
REPRESENTATION THAT ANY MANUFACTURE, USE, IMPORTATION, OFFER FOR SALE OR SALE OF ANY PRODUCT OR
SERVICE WILL BE FREE FROM INFRINGEMENT OF ANY PATENT OR OTHER INTELLECTUAL PROPERTY RIGHT OF ANY
THIRD PARTY OR AS TO THE VALIDITY AND/OR SCOPE OF ANY PATENT LICENSED BY SUCH PARTY TO THE OTHER
PARTY UNDER THIS AGREEMENT OR A WARRANTY OR REPRESENTATION THAT A PARTY WILL ENFORCE ANY PATENT
AGAINST A THIRD PARTY OR THAT A PATENT WILL ISSUE OR ANY PATENT WILL BE PROSECUTED OR MAINTAINED.
THIS SECTION 6.14 DOES NOT SUPERSEDE, MODIFY OR NEGATE ANY REPRESENTATION OR WARRANTY
EXPRESSLY MADE BY NXP IN THE SHARE EXCHANGE AGREEMENT.

     6.15 Third Party Beneficiary Rights. Other than Subsidiaries and members of the Dutch
Newco Group, no provisions of this Agreement are intended, nor shall be interpreted, to

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provide or create any third party beneficiary rights or any other rights of any kind in any
client, customer, employee, affiliate, stockholder, partner of any party hereto or any other Person
unless specifically provided otherwise herein and, except as so provided, all provisions hereof
shall be personal solely between the parties to this Agreement, except that Section 6.11 is
intended to benefit the Divested Entities.

     6.16 Section 365(n). All rights and licenses granted under or pursuant to this
Agreement are, and will otherwise be, for purposes of Section 365(n) of Title 11, U.S. Code (the
“Bankruptcy Code”), licenses of rights to “intellectual property” as defined in the
Bankruptcy Code. The parties agree that Licensee and its Affiliates will retain and may fully
exercise all of its and their rights and elections under the Bankruptcy Code. All rights, powers
and remedies of Licensee and its Affiliates provided under this Section 6.16 are in
addition to, and not in substitution for, any and all other rights, powers and remedies now or
hereafter existing at law or in equity in the event of any commencement of a bankruptcy proceeding
by or against the Licensor.

     6.17 Export Control. A Licensee shall comply with all applicable export control Laws
in its use of the Licensor’s software and technology, and, in particular, a Licensee shall not
export or re-export the Licensor’s software and technology without all required United States and
foreign government licenses. A Licensor shall reasonably cooperate with any written requests from a Licensee to provide information solely in the Licensor’s possession to assist
a Licensee in determining where any licenses are required with respect to the Licensor’s software
and technology.

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     IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of the parties hereto as
of the date first written above.

	 	 	 	 	 
	 	NXP

 	 
	 
	 	By  	/s/ Guido Diereck	 
	 	 	Name: Guido Diereck	 	 
	 	 	Title: Authorized Signatory	 	 
	 
	 	NXP HOLDING 1 B.V.

 	 
	 
	 	By  	/s/ Guido Diereck, Jean Schreurs	 
	 	 	Name: Guido Diereck, Jean Schreurs	 	 
	 	 	Title: Authorized Signatory	 	 
	 

Signature Page for IPTLA

 

 

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GUARANTEE

     Trident Microsystems, Inc., a corporation organized under the laws of the State of Delaware,
hereby irrevocably and unconditionally guarantees to NXP B.V. the full and timely performance by
NXP Holding 1 B.V. of its obligations under the foregoing Intellectual Property Transfer and
License Agreement, and agrees to take all actions, and cause its direct and indirect subsidiaries
to take all actions which NXP Holding 1 B.V. is obligated to take under the Intellectual Property
Transfer and License Agreement. This Guarantee shall take effect as of the Closing.

	 	 	 	 	 
	 	Trident Microsystems, Inc.

 	 
	 
	 	By  	/s/ Sylvia Summers Couder	 
	 	 	Name: Sylvia Summers Couder	 	 
	 	 	Title: CEO Trident Microsystems

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