Document:

exv10w1

Exhibit 10.1

EXECUTION VERSION

 

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 AUGUST 31, 2010

 

 

ADMINISTRATIVE SERVICES AGREEMENT

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I

	 
	 	 	 	 	 	 
	DEFINITIONS

	 
	 	 	 	 	 	 
	1.1	 	Definitions
	 	 	2	 
	 	 	 
	 	 	 	 
	ARTICLE II

	 
	 	 	 	 	 	 
	AUTHORITY; SERVICE STANDARDS

	 
	 	 	 	 	 	 
	2.1	 	Appointment
	 	 	5	 
	2.2	 	Services Standards
	 	 	5	 
	2.3	 	Compliance; Licensure
	 	 	6	 
	2.4	 	Independent Contractor
	 	 	6	 
	2.5	 	Subcontracting
	 	 	7	 
	2.6	 	Monitoring
	 	 	7	 
	 	 	 
	 	 	 	 
	ARTICLE III

	 
	 	 	 	 	 	 
	COMPENSATION

	 
	 	 	 	 	 	 
	3.1	 	Compensation
	 	 	8	 
	 	 	 
	 	 	 	 
	ARTICLE IV

	 
	 	 	 	 	 	 
	ADMINISTRATIVE SERVICES

	 
	 	 	 	 	 	 
	4.1	 	Administrative Services
	 	 	8	 
	4.2	 	Mixed Accounts
	 	 	10	 
	4.3	 	GRM Book of Business
	 	 	12	 
	4.4	 	Extracontractual Damages
	 	 	13	 
	4.5	 	Conflict of Interest
	 	 	13	 
	 
	 	 	 	 	 	 
	ARTICLE V

	 
	 	 	 	 	 	 
	CLAIMS HANDLING SERVICES

	 
	 	 	 	 	 	 
	5.1	 	Claims Handling Services
	 	 	14	 

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	 	 	 	 	Page	 
	ARTICLE VI

	 
	 	 	 	 	 	 
	ADMINISTRATION OF THIRD PARTY REINSURANCE AGREEMENTS

	 
	 	 	 	 	 	 
	6.1	 	Third Party Reinsurance Administration
	 	 	15	 
	6.2	 	Collateral
	 	 	16	 
	6.3	 	Commutations
	 	 	16	 
	6.4	 	Collection of Third Party Reinsurance Recoverables
	 	 	16	 
	6.5	 	Third Party Reinsurance Allocation Agreement
	 	 	16	 
	 
	 	 	 	 	 	 
	ARTICLE VII

	 
	 	 	 	 	 	 
	REGULATORY COMPLIANCE AND REPORTING

	 
	 	 	 	 	 	 
	7.1	 	Regulatory Filings and Examinations
	 	 	17	 
	 
	 	 	 	 	 	 
	ARTICLE VIII

	 
	 	 	 	 	 	 
	OTHER REPORTING OBLIGATIONS

	 
	 	 	 	 	 	 
	8.1	 	Financial Reporting Obligations
	 	 	17	 
	8.2	 	Change in Status
	 	 	19	 
	8.3	 	Administrator Controls
	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE IX

	 
	 	 	 	 	 	 
	BOOKS AND RECORDS
	 
	 	 	 	 	 	 
	9.1	 	Transfer and Ownership of Books and Records
	 	 	20	 
	9.2	 	Maintenance of Books and Records
	 	 	20	 
	9.3	 	Access to Books Records
	 	 	20	 
	 
	 	 	 	 	 	 
	ARTICLE X

	 
	 	 	 	 	 	 
	INABILITY TO PERFORM SERVICES; ERRORS

	 
	 	 	 	 	 	 
	10.1	 	Capacity
	 	 	22	 
	10.2	 	Inability to Perform Services
	 	 	22	 
	10.3	 	Errors
	 	 	22	 
	 
	 	 	 	 	 	 
	ARTICLE XI

	 
	 	 	 	 	 	 
	LEGAL ACTIONS

	 
	 	 	 	 	 	 
	11.1	 	Regulatory Proceedings
	 	 	23	 
	11.2	 	Notification Requirements
	 	 	23	 
	11.3	 	Right to Associate
	 	 	24	 

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	 	 	 	 	Page	 
	ARTICLE XII

	 
	 	 	 	 	 	 
	BANK ACCOUNTS

	 
	 	 	 	 	 	 
	12.1	 	Bank Accounts
	 	 	24	 
	 
	 	 	 	 	 	 
	ARTICLE XIII
	 
	 	 	 	 	 	 
	COOPERATION
	 
	 	 	 	 	 	 
	13.1	 	Cooperation
	 	 	25	 
	13.2	 	Relationship Management
	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE XIV

	 
	 	 	 	 	 	 
	DURATION; TERMINATION

	 
	 	 	 	 	 	 
	14.1	 	Duration
	 	 	26	 
	14.2	 	Termination
	 	 	26	 
	14.3	 	Certain Actions Related to Termination
	 	 	27	 
	14.4	 	Survival
	 	 	28	 
	 	 	 
	 	 	 	 
	ARTICLE XV

	 
	 	 	 	 	 	 
	CONFIDENTIALITY; PRIVACY REQUIREMENTS

	 
	 	 	 	 	 	 
	15.1	 	Definitions
	 	 	28	 
	15.2	 	Obligations
	 	 	29	 
	15.3	 	Exceptions to Confidential Treatment
	 	 	30	 
	15.4	 	Privacy
	 	 	31	 
	15.5	 	Regulatory and Legal Communication
	 	 	33	 
	 
	 	 	 	 	 	 
	ARTICLE XVI

	 
	 	 	 	 	 	 
	FORCE MAJEURE

	 
	 	 	 	 	 	 
	16.1	 	Force Majeure Event
	 	 	34	 
	 
	 	 	 	 	 	 
	ARTICLE XVII
	 
	 	 	 	 	 	 
	INDEMNIFICATION
	 
	 	 	 	 	 	 
	17.1	 	Indemnification Obligation of Administrator
	 	 	34	 
	17.2	 	Indemnification Obligation of Reinsureds
	 	 	35	 
	17.3	 	Notice of Indemnification Request
	 	 	35	 
	17.4	 	Notice of an Asserted Liability
	 	 	35	 
	17.5	 	Procedures
	 	 	36	 
	17.6	 	Survival
	 	 	37	 

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	 	 	 	 	Page	 
	ARTICLE XVIII

	 
	 	 	 	 	 	 
	DISPUTE RESOLUTION; ARBITRATION

	 
	 	 	 	 	 	 
	18.1	 	Dispute Resolution; Arbitration
	 	 	37	 
	 
	 	 	 	 	 	 
	ARTICLE XIX

	 
	 	 	 	 	 	 
	MISCELLANEOUS

	 
	 	 	 	 	 	 
	19.1	 	Notices
	 	 	37	 
	19.2	 	Entire Agreement
	 	 	38	 
	19.3	 	Waiver and Amendment
	 	 	38	 
	19.4	 	Successors and Assigns
	 	 	39	 
	19.5	 	Headings
	 	 	39	 
	19.6	 	Construction; Interpretation
	 	 	39	 
	19.7	 	Governing Law and Jurisdiction
	 	 	39	 
	19.8	 	No Third Party Beneficiaries
	 	 	40	 
	19.9	 	Counterparts
	 	 	40	 
	19.10	 	Severability
	 	 	40	 
	19.11	 	Specific Performance
	 	 	41	 
	19.12	 	Waiver of Jury Trial
	 	 	41	 
	19.13	 	Incontestability
	 	 	42	 
	19.14	 	Set-Off
	 	 	42	 
	19.15	 	Currency
	 	 	42	 

	 	 	 

	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 August 31, 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 14, 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.

2

 

“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.

“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.

3

 

“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.

“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.

4

 

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.

     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

5

 

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.

     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

6

 

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.

7

 

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;

8

 

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

          (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;

9

 

          (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 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.

10

 

     (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 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

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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 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.

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     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
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.

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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;

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

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          (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

15

 

     (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 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.

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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 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.

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     (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.

     (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

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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 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.

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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.

     (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

20

 

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 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.

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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

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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.

     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.

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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 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

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          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:

          (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

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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 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

27

 

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.

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

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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 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

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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 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

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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
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.

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     (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.

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

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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 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

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(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, 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.

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	 	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.

          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

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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

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

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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.

          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

39

 

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.

          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

40

 

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 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,

41

 

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.)

42

 

          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:  	/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 	 

 

 

EXHIBIT A

[Form of Business Associate Agreement]

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 14, 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 August 31, 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 August 31, 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:exv10w2

Exhibit 10.2

EXECUTION VERSION

 

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”)

AUGUST 31, 2010

 

 

 

Table of Contents

	 	 	 	 	 	 	 
	 	 	 	Page	 
	ARTICLE I

	 
	 	 	 	 	 
	DEFINED TERMS

	 
	 		 	 	 
	Section 1.1	 	 Definitions
	 	2	 
	Section 1.2	 	 Interpretation
	 	6	 
	 
	 		 	 	 
	ARTICLE II

	 
	 		 	 	 
	MODIFICATION UPON A COLLATERAL TRIGGERING EVENT
	
	 
	 		 	 	 
	Section 2.1	 	Collateral Triggering Event
	 	7	 
	 
	 		 	 	 
	ARTICLE III
	
	 
	 	 	 	 
	MODIFICATION UPON A REINSURANCE CREDIT EVENT

	 
	 		 	 	 
	Section 3.1	 	Reinsurance Credit Event
	 	7	 
	 
	 		 	 	 
	ARTICLE IV
	
	 
	 		 	 	 
	CREATION OF TRUST ACCOUNT

	 
	 		 	 	 
	Section 4.1 	 	Obligations of the Beneficiaries and the Grantor
	 	9	 
	Section 4.2	 	 Purpose of the Trust
	 	10	 
	Section 4.3 	 	Grantor Trust for United States Federal Income Tax Purposes
	 	10	 
	Section 4.4	 	Designation of Agents
	 	10	 
	Section 4.5 	 	Title to Assets
	 	11	 
	 
	 		 	 	 
	ARTICLE V

	 
	 		 	 	 
	MAINTENANCE OF THE TRUST

	 
	 		 	 	 
	Section 5.1	 	Substitution of Trust Account Assets
	 	11	 
	Section 5.2	 	Valuation of Assets
	 	11	 
	Section 5.3	 	Quarterly Certification
	 	11	 
	 
	 		 	 	 
	ARTICLE VI

	 
	 		 	 	 
	RELEASE AND ADJUSTMENT OF TRUST ACCOUNT ASSETS

	 
	 		 	 	 
	Section 6.1 	 	 Adjustment of Trust Account Assets
	 	12	 

i

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 6.2	 	Release of Trust Account Assets to the Beneficiaries
	 	 	13	 
	Section 6.3	 	Release of Trust Account Assets to the Grantor
	 	 	13	 
	 
	 	 	 	 	 	 
	ARTICLE VII

	 
	 	 	 	 	 	 
	DUTIES OF THE TRUSTEE

	 
	 	 	 	 	 	 
	Section 7.1 	 	 Acceptance of Assets by the Trustee
	 	 	14	 
	Section 7.2 	 	Collection of Interest and Dividends; Voting Rights
	 	 	14	 
	Section 7.3	 	Obligations of the Trustee
	 	 	14	 
	Section 7.4	 	Responsibilities of the Trustee
	 	 	14	 
	Section 7.5 	 	Books and Records
	 	 	15	 
	Section 7.6 	 	Activity Reports
	 	 	15	 
	Section 7.7 	 	Resignation or Removal of the Trustee; Appointment of Successor Trustee
	 	 	15	 
	Section 7.8	 	Release of Information
	 	 	16	 
	Section 7.9	 	Indemnification of the Trustee
	 	 	16	 
	Section 7.10	 	Charges of the Trustee
	 	 	17	 
	Section 7.11	 	Limitations of the Trustee
	 	 	17	 
	Section 7.12	 	Concerning the Trustee
	 	 	17	 
	 
	 	 	 	 	 	 
	ARTICLE VIII

	 
	 	 	 	 	 	 
	TERMINATION

	 
	 	 	 	 	 	 
	Section 8.1	 	Termination
	 	 	18	 
	Section 8.2	 	Disposition of Assets Upon Termination
	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE IX

	 
	 	 	 	 	 	 
	GENERAL PROVISIONS

	 
	 	 	 	 	 	 
	Section 9.1	 	Notices
	 	 	19	 
	Section 9.2	 	Entire Agreement
	 	 	20	 
	Section 9.3	 	Waiver and Amendment
	 	 	20	 
	Section 9.4	 	Successors and Assigns
	 	 	20	 
	Section 9.5	 	Headings
	 	 	20	 
	Section 9.6	 	Governing Law and Jurisdiction
	 	 	20	 
	Section 9.7	 	No Third Party Beneficiaries
	 	 	21	 
	Section 9.8	 	Counterparts
	 	 	21	 
	Section 9.9	 	Severability
	 	 	21	 
	Section 9.10	 	Specific
Performance
	 	 	21	 
	Section 9.11 	 	Waiver of Jury Trial
	 	 	22	 
	Section 9.12 	 	Incontestability
	 	 	22	 
	Section 9.13 	 	Set-Off
	 	 	22	 
	Section 9.14 	 	Currency
	 	 	23	 

ii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE X

	 
	 	 	 	 	 	 
	DISPUTE RESOLUTION

	 
	 	 	 	 	 	 
	Section 10.1	 	Dispute Resolution
	 	 	23	 
	Section 10.2	 	Negotiation Amongst the Parties
	 	 	23	 
	Section 10.3	 	Arbitration
	 	 	23	 
	 
	 	 	 	 	 	 
	ARTICLE XI

	 
	 	 	 	 	 	 
	EFFECTIVE DATE AND EXECUTION

	 
	 	 	 	 	 	 
	Appendix A	 	Trust Provisions Following a Reinsurance Credit Event
	 	 	 	 

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TRUST AGREEMENT

          THIS TRUST AGREEMENT (this “Trust Agreement”) is made and entered into as of August 31, 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 14, 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:

[Signature Page to the Trust Agreement]

 

 

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)

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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 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.

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               (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.

               (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).

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               (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 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.

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               (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.

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ARTICLE II

MODIFICATION UPON A COLLATERAL TRIGGERING EVENT

          Section 2.1 Collateral Triggering Event.

               (a) If, at any time after the date hereof, the Grantor is required to post collateral pursuant
to the terms of one or more Collateral Triggering Agreements as a result of the occurrence of one
or more events, changes or conditions specified in 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

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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
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

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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
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

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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.

               (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.

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          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.

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

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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 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.

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          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 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.

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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, 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

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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.

          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)

15

 

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 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

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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.

          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.

17

 

               (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 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

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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
	 
	 	 
	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

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	 	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 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

20

 

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 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

21

 

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 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.

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          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 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

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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.

24

 

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: August 31, 2010.

					
	 	

CONTINENTAL CASUALTY COMPANY, as Beneficiary

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

         Date: August 25, 2010

	 	 	 	 	 
	 	 	 
	 	Attest: 	/s/ Mary A. Ribikawskis
 	 
	 	 	Title:                  Assistant Vice President and Assistant Secretary 	 
		 	Date: August 25, 2010 	 
	 

					
	 	

THE CONTINENTAL INSURANCE COMPANY, as Beneficiary

 	 
	 	By:  	/s/ Lawrence J. Boysen
 	 
	 	 	Title: Senior Vice President and Corporate Controller 
	 	 	Date: August 25, 2010 	 
	 

	 	 	 	 	 
	 	 	 
	 	Attest: 	/s/ Mary A. Ribikawskis
 	 
	 	 	Title:                  Assistant Vice President and Assistant Secretary 	 
	 	 	Date: August 25, 2010 	 
	 

					
	 	

CONTINENTAL REINSURANCE CORPORATION INTERNATIONAL, LTD., as Beneficiary

 
	 	By:  	/s/ Lawrence J. Boysen
 	 
	 	 	Title:      Chairman of the Board and President 	 
	 	 	Date: August 25, 2010 	 
	 

[Signature Page to the Trust Agreement]

 

 

	 	 	 	 	 
	 	 	 
	 	Attest: 	 /s/ Mary A. Ribikawskis
 	 
	 	 	Title:                Assistant Vice President and Assistant Secretary 	 
		 	Date: August 25, 2010 	 
	 

					
	 	

CNA INSURANCE COMPANY LIMITED, as Beneficiary

 
	 	By:  	/s/ Lawrence J. Boysen
 	 
	 	 	Title:               Authorized Representative 	 
	 	 	Date: August 25, 2010 	 
	 

	 	 	 	 	 
	 	 	 
	 	Attest: 	                       /s/ Stephen Baker
 	 
	 	 	Title:       Company Secretary 	 
	 		Date: August 27, 2010 	 
	 

					
	 	

NATIONAL INDEMNITY COMPANY, as Grantor

 
	 	By:  	/s/ Brian Snover
 	 
	 	 	Title:               VP 	 
	 	 	Date: August 26, 2010 	 
	 

	 	 	 	 	 
	 	Attest: 	 Kara Raiguel 	 
	 	 	Title: 	 Vice President 
	 	 	Date: 	August 26, 2010  
	 

					
	 	

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee

 
	 	By:  	/s/ Stephen M. Bruce
 	 
	 	 	Title:             Vice President, Wells Fargo Bank, N.A., Insurance Trust 	 
	 	 	Date: 	 
	 

	 	 	 	 	 
	 	 	 
	 	Attest: 	/s/ Donny Tong
 	 
	 	 	Title:                   Vice President 	 
		 	Date: August 25, 2010 	 
	 

[Signature Page to the Trust Agreement]

 

 

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 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.

               (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 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.

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