MASTER TRANSACTION AGREEMENT by and among AMERICAN HOME ASSURANCE COMPANY CHARTIS CASUALTY COMPANY (f/k/a American International South Insurance Company) CHARTIS PROPERTY CASUALTY COMPANY (f/k/a AIG Casualty Company) COMMERCE AND INDUSTRY INSURANCE...

Exhibit 10.6

Execution Copy

MASTER TRANSACTION AGREEMENT

by and among

AMERICAN HOME ASSURANCE COMPANY

CHARTIS CASUALTY COMPANY
(f/k/a American International South Insurance Company)

CHARTIS PROPERTY CASUALTY COMPANY
(f/k/a AIG Casualty Company)

COMMERCE AND INDUSTRY INSURANCE COMPANY

GRANITE STATE INSURANCE COMPANY

ILLINOIS NATIONAL INSURANCE CO.

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.

NEW HAMPSHIRE INSURANCE COMPANY

THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA

CHARTIS SELECT INSURANCE COMPANY
(f/k/a AIG Excess Liability Insurance Company Ltd.)

CHARTIS SPECIALTY INSURANCE COMPANY
(f/k/a American International Specialty Lines Insurance Company)

LANDMARK INSURANCE COMPANY

LEXINGTON INSURANCE COMPANY

AIU INSURANCE COMPANY

AMERICAN INTERNATIONAL REINSURANCE COMPANY, LTD.

and

AMERICAN HOME ASSURANCE COMPANY

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.

NEW HAMPSHIRE INSURANCE COMPANY

CHARTIS OVERSEAS LIMITED

acting as members of the Chartis Overseas
Association as respects business written or
assumed by or from affiliated companies of
Chartis Inc.

(collectively, “Reinsureds,” as further defined herein)

EAGLESTONE REINSURANCE COMPANY

and

NATIONAL INDEMNITY COMPANY

Dated as of April 19, 2011

TABLE OF CONTENTS

		Page

ARTICLE I

DEFINITIONS

1.1	Definitions	2

ARTICLE II

TRANSACTIONS TO BE EFFECTUATED AT CLOSING

2.1	Place and Date of Closing	6
2.2	Loss Portfolio Transfer	7
2.3	Reconciliation	7
2.4	Additional Deliveries on or Prior to Closing	9

ARTICLE III

REPRESENTATIONS, WARRANTIES, AND INVESTIGATION

3.1	Representations and Warranties	9
3.2	No Other Representations or Warranties	10
3.3	Exclusive Remedy	11

ARTICLE IV

ADDITIONAL AGREEMENTS OF REINSUREDS, EAGLESTONE AND NICO

4.1	Conduct of Business	11
4.2	Expenses	12
4.3	Access; Certain Communications	13
4.4	Commercially Reasonable Efforts; Governmental Consents	13
4.5	Further Assurances	14
4.6	Notification of Certain Matters	14
4.7	Transfer and Maintenance of Books and Records	14
4.8	Cooperation after Closing	15
4.9	Confidentiality	15
4.10	Waiver of Duty of Utmost Good Faith	16

ARTICLE V

CONDITIONS PRECEDENT TO THE OBLIGATION OF NICO TO CLOSE

5.1	Covenants	16
5.2	Ancillary Agreements	16
5.3	Secretary’s Certificates	16
5.4	Governmental Approvals and Consents	17
5.5	Injunction and Litigation	17

5.6	Frustration of Closing Conditions	17

ARTICLE VI

CONDITIONS PRECEDENT TO THE OBLIGATION OF REINSUREDS AND EAGLESTONE TO CLOSE

6.1	Covenants	17
6.2	Ancillary Agreements	17
6.3	Secretary’s Certificates	17
6.4	Governmental Approvals and Consents	18
6.5	Certain Facilities	18
6.6	Injunction and Litigation	18
6.7	Rating of NICO	18
6.8	Frustration of Closing Conditions	18

ARTICLE VII

TERMINATION

7.1	Termination of Agreement	19
7.2	Effect of Termination	19

ARTICLE VIII

DISPUTE RESOLUTION

8.1	Framework for Dispute Resolution	20
8.2	Negotiation Amongst the Parties	20
8.3	Obligation to Arbitrate	20
8.4	Arbitration Procedure	21
8.5	Judicial Proceedings	21
8.6	Limitation of Remedy	21

ARTICLE IX

MISCELLANEOUS PROVISIONS

9.1	Notices	22
9.2	Entire Agreement	23
9.3	Waiver and Amendment	23
9.4	Successors and Assigns	24
9.5	Headings	24
9.6	Construction; Interpretation	24
9.7	Governing Law and Jurisdiction	24
9.8	No Third Party Beneficiaries	24
9.9	Counterparts	25
9.10	Severability	25
9.11	Incontestability	25
9.12	Set-Off	25
9.13	Currency	26

9.14	Lead Representative of the Reinsureds	26

ARTICLE X

ASSIGNMENT OF INCLUDED REINSURANCE RECOVERABLES XXXX XXX XXXXXXX

00.0	Xxxxxxxxxx Xxxx XXX Default	26
10.2	Effect of Assignment	26
10.3	Reassignment Upon Exhaustion of Retro Limit	27
10.4	Only Judicial Proceedings to Enforce Capital Maintenance Agreement	27

LIST OF EXHIBITS

Exhibit A	Form of Administrative Services Agreement
Exhibit B	Form of Collateral Trust Agreement
Exhibit C	Form of LPT Reinsurance Agreement
Exhibit D	Form of LPT Retrocession Agreement
Exhibit E	Form of Parental Guarantee Agreement
Exhibit F	Form of Capital Maintenance Agreement
Exhibit G	Form of Reconciliation Statement (Schedule 2.3)
Exhibit H	Form of Transition Services Agreement

LIST OF SCHEDULES

Schedule 2.3		Reconciliation Statement Calculations
Schedule 3.1(b)		Certain Transactions Since Inception
Schedule 3.1(c)		Information Provided
Schedule 3.1(c)-1		Certain Individuals

iii

MASTER TRANSACTION AGREEMENT

THIS MASTER TRANSACTION AGREEMENT, dated as of April 19, 2011 (this “Agreement”), has been made and entered into by and among the Reinsureds, as defined herein, Eaglestone Reinsurance Company, a Pennsylvania property and casualty insurance company (“Eaglestone”), and National Indemnity Company, a Nebraska property and casualty insurance company (“NICO”).

WITNESSETH:

WHEREAS, pursuant the terms and conditions of this Agreement, the Reinsureds party hereto, Eaglestone, and NICO desire to enter into loss portfolio reinsurance transactions, pursuant to which Reinsureds will amend and restate their cession of certain Subject Asbestos Liabilities and certain other liabilities to Eaglestone and Eaglestone will retrocede 100% of the Subject Asbestos Liabilities to NICO;

WHEREAS, the cession by Reinsureds to Eaglestone will be effected by and pursuant to the terms and conditions of an Amended and Restated Loss Portfolio Transfer Reinsurance Agreement (as amended, modified, supplemented and in effect from time to time, the “LPT Reinsurance Agreement”) among Reinsureds and Eaglestone, substantially in the form annexed hereto as Exhibit C;

WHEREAS, the retrocession by Eaglestone to NICO will be effected by and pursuant to the terms and conditions of a Loss Portfolio Transfer Retrocession Agreement (as amended, modified, supplemented and in effect from time to time, the “LPT Retrocession Agreement”) between Eaglestone and NICO, substantially in the form annexed hereto as Exhibit D;

WHEREAS, in connection with entry into the LPT Retrocession Agreement, Reinsureds desire that NICO perform certain administrative functions on their behalf from and after the Closing Date with respect to the Subject Asbestos Liabilities, and the Parties hereto have agreed to enter into an Administrative Services Agreement (as amended, modified, supplemented and in effect from time to time, the “Administrative Services Agreement”), substantially in the form annexed hereto as Exhibit A, and a related Transition Services Agreement (as amended, modified, supplemented and in effect from time to time, the “Transition Services Agreement”), substantially in the form annexed hereto as Exhibit H;

WHEREAS, in connection with entry into the LPT Retrocession Agreement, Eaglestone, National Union, NICO and the Trustee have agreed to enter into a Collateral Trust Agreement (as amended, modified, supplemented and in effect from time to time, the “Collateral Trust Agreement”), substantially in the form annexed hereto as Exhibit B, pursuant to which NICO will establish a grantor trust to secure NICO’s obligations under the LPT Retrocession Agreement;

WHEREAS, Reinsureds, Eaglestone, and Berkshire Hathaway Inc., a Delaware corporation (“Berkshire”) have agreed to enter into a parental guarantee agreement (as amended, modified, supplemented and in effect from time to time, the “Parental Guarantee Agreement”), substantially in the form annexed hereto as Exhibit E, pursuant to which Berkshire shall guarantee to Eaglestone and Reinsureds the payment or performance of certain obligations of NICO under the Ancillary Agreements;

WHEREAS, the Parties hereto intend that National Union, as agent for the Reinsureds and on its own behalf, have the right to receive directly from NICO amounts payable under the LPT Retrocession Agreement in the event of the insolvency of Eaglestone; and

WHEREAS, Reinsureds, Eaglestone and NICO, or their respective Affiliates, shall execute and deliver such other agreements, instruments and documents as are described herein;

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

ARTICLE I

DEFINITIONS

1.1 Definitions.

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

“Actually Paid” shall have the meaning provided in the LPT Retrocession Agreement.

“Administrative Services Agreement” shall have the meaning provided in the recitals to this Agreement.

“Affiliate” means, as to any Person, a Person that controls, is controlled by, or is under common control with such other Person. For the avoidance of doubt, neither the United States Treasury nor the Federal Reserve Bank of New York is an Affiliate of Reinsureds or of Eaglestone.

“Aggregate Net Payments” means (i) the amount set forth on the Initial Reconciliation Statement, the Preliminary Reconciliation Statement or the Final Reconciliation Statement, as applicable, on the line item described as “Amount Due to Collateral Trust” and (ii) the amount set forth on the Initial Reconciliation Statement, the Preliminary Reconciliation Statement or the Final Reconciliation Statement, as applicable, on the line item described as “Amount Due to Eaglestone.”

“Agreement” shall have the meaning provided in preamble to this Agreement.

“AIG” means American International Group, Inc., a Delaware corporation and the ultimate parent of Reinsureds and Eaglestone.

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

“Applicable Interest Rate” shall mean 4.25% per annum

“Applicable Law” means any domestic or foreign, federal, state or local statute, law, ordinance or code, or any written rules, regulations or administrative or judicial interpretations or

policies issued by any Governmental Authority pursuant to any of the foregoing, in each case applicable to any Party, and any Order, writ, injunction, directive, judgment or decree of a court of competent jurisdiction applicable to the Parties as generally applicable.

“Asbestos Claim” shall have the meaning provided in the LPT Retrocession Agreement.

“Berkshire” shall have the meaning provided in recitals to this Agreement and includes successors and permitted assigns.

“Books and Records” shall have the meaning provided in the Administrative Services Agreement.

“Burdensome Condition” shall have the meaning set forth in Section 4.4(d).

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

“Capital Maintenance Agreement” means the Capital Maintenance Agreement between American International Group, Inc. and Eaglestone Reinsurance Company in substantially the form annexed hereto as Exhibit F.

“Chartis Parties” shall have the meaning set forth in Section 9.12(c).

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

“Closing” shall have the meaning set forth in Section 2.1.

“CMA Default” means any failure of AIG to provide the funding required under the Capital Maintenance Agreement that existed throughout, and is continuing following expiration of, the thirty-day period specified in Paragraph 7(b) of the Capital Maintenance Agreement.

“CMA Default Effective Date” means the third Business Day after the occurrence of a CMA Default.

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

“Collateral Trust Agreement” shall have the meaning set forth in the recitals to this Agreement.

“Confidential Information” shall have the meaning set forth in Section 4.9(c).

“Designated Court” shall have the meaning set forth in Section 8.5.

“Disclosing Party” shall have the meaning set forth in Section 4.9(a).

“Dispute” shall have the meaning set forth in Section 8.1.

“Dollars” or “$” means United States dollars.

“Eaglestone” shall have the meaning provided in preamble to this Agreement and includes successors and permitted assigns.

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

“End Date” shall have the meaning set forth in Section 7.1(d).

“Extra-Contractual Obligations” shall have the meaning provided in the LPT Retrocession Agreement.

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

“Final Net Payments” shall have the meaning set forth in Section 2.3(h).

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

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

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

“Inception” means 12:01 A.M. Eastern Standard Time on January 1, 2011.

“Included Reinsurance Recoverables” shall have the meaning provided in the LPT Retrocession Agreement.

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

“Initial Net Payments” shall have the meaning set forth in Section 2.3(b).

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

“IRR Assignment” shall have the meaning set forth in Section 10.1.

“IRR Reassignment” shall have the meaning provided in Section 10.3.

“Lead Representative” of a Party is the Representative of the Party designated from time to time to act as the Party’s coordinator vis-à-vis the other Parties with respect to the transactions contemplated hereby. National Union shall be the Lead Representative of the Reinsureds.

“LPT Reinsurance Agreement” shall have the meaning provided in the recitals to this Agreement.

“LPT Retrocession Agreement” shall have the meaning provided in the recitals to this Agreement.

“National Union” means National Union Fire Insurance Company of Pittsburgh, Pa. and includes successors and permitted assigns.

“NICO Subject Business” shall have the meaning provided in the LPT Retrocession Agreement.

“NICO” shall have the meaning set forth in the preamble to this Agreement. The term “NICO” as used herein shall include any predecessor or successor of such company, including by reason of sale of assets, merger, continuation, consolidation or otherwise.

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

“Other Recoverables” has the meaning provided in the LPT Retrocession Agreement.

“Other Recoveries” shall have the meaning provided in the LPT Reinsurance Agreement.

“Own Expense” has the meaning provided in the LPT Retrocession Agreement.

“Parental Guarantee Agreement” shall have the meaning provided in the recitals to this Agreement.

“Party” or “Parties” shall have the meaning provided in the recitals to this Agreement.

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

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

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

“Receiving Party” shall have the meaning set forth in Section 4.9(a).

“Reinsureds” shall have the meaning provided in the LPT Retrocession Agreement and is subject to supplementation as set forth therein, provided that any Reinsured added by such supplementation shall execute an addendum to this Agreement acknowledging that it is bound hereby.

“Reinsurer” shall have the meaning provided in the LPT Retrocession Agreement.

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

“Retro Limit” shall have the meaning provided in the LPT Retrocession Agreement.

“Subject Asbestos Liabilities” shall have the meaning provided in the LPT Retrocession Agreement.

“Subject Business” shall have the meaning provided in the LPT Reinsurance Agreement.

“Subject Claim” shall have the meaning provided in the Administrative Services Agreement.

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

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

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

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

“Termination Date” shall have the meaning provided in the LPT Retrocession Agreement.

“Third Party Reinsurance Agreements” shall have the meaning provided in the LPT Retrocession Agreement.

“Third Party Reinsurance Recoverables” shall have the meaning provided in the LPT Retrocession Agreement.

“Third Party Reinsurers” shall mean the reinsurers under the Third Party Reinsurance Agreements.

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

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

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

ARTICLE II

TRANSACTIONS TO BE EFFECTUATED AT CLOSING

2.1 Place and Date of Closing.

Unless otherwise agreed to by the Parties hereto, the closing (the “Closing”) of the transactions contemplated under this Agreement and the Ancillary Agreements will take place in the offices of Xxxxxx Xxxxxx & Xxxxxxx LLP, 00 Xxxx Xxxxxx, Xxx Xxxx 00000, at 10:00 a.m., Eastern Time, on the third Business Day after the date upon which each of the conditions set forth in Articles V and VI are satisfied or waived by the Party or Parties entitled to waive the same (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at such time). Notwithstanding the foregoing, the Closing may occur at such other place, at such other time or on such other date as Reinsureds and NICO may mutually agree. The day on which the Closing takes place is referred to herein as the “Closing Date.” The Closing shall be deemed for all purposes to have occurred at 12:01 a.m., Eastern Time, on the Closing Date.

2.2 Loss Portfolio Transfer.

Subject to the satisfaction or waiver of all of the conditions to Closing set forth in Articles V and VI, and subject to the terms and conditions set forth in this Agreement, the LPT Reinsurance Agreement and the LPT Retrocession Agreement, at the Closing:

(a) Reinsureds and Eaglestone shall enter into the LPT Reinsurance Agreement, and Reinsureds shall make, or shall have made, payment to Eaglestone in the amount set forth in Section 3.2(a) thereof and in the manner specified in Section 3.2(c) thereof.

(b) Eaglestone and NICO shall enter into the LPT Retrocession Agreement, and Eaglestone shall cause payment to be made to NICO in the amount set forth in Section 3.3(a) thereof and in the manner specified in Section 3.3(b) thereof.

(c) NICO shall transfer and assign to the Collateral Trust Account, assets in the amount and pursuant to the terms set forth in Section 7.2 of the LPT Retrocession Agreement and in accordance with the terms of the Collateral Trust Agreement.

2.3 Reconciliation.

(a) The Parties understand and agree that it is in their mutual interests to agree to a mechanism for reconciling the balances due and owing between them as of the Closing Date, as set forth in Section 3.2 of the LPT Reinsurance Agreement and Section 3.3 of the LPT Retrocession Agreement. The Parties shall follow the protocol set forth in Sections 2.3(b) through 2.3(i) in fully and finally reconciling amounts of these balances.

(b) Reinsureds shall, at least five (5) Business Days prior to the Closing Date, provide to NICO an estimated reconciliation statement as of the month ending prior to the Closing Date in the form attached hereto as Exhibit G (the “Initial Reconciliation Statement”), which shall be calculated in the manner set forth on Schedule 2.3 attached hereto and which shall be broken down by calendar quarter. The Initial Reconciliation Statement shall set forth the Aggregate Net Payments due to NICO and to Eaglestone (the “Initial Net Payments”), which amount due to Eaglestone shall on or prior to the Closing Date be deposited directly by Reinsureds on behalf of Eaglestone into the account that shall have been specified in writing by Eaglestone at least five (5) Business Days prior to the Closing Date, after which such amount due to NICO shall be deposited directly by Eaglestone on behalf of NICO into the Collateral Trust Account on the Closing Date.

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

(d) After the receipt by NICO of the Preliminary Reconciliation Statement and until such time as the Final Reconciliation Statement is completed, NICO and its authorized Representatives shall have, upon prior written notice, reasonable access during normal business hours to the working papers of Reinsureds relating to the Preliminary Reconciliation Statement and the calculations set forth thereon. NICO shall have the right to review the Preliminary Reconciliation Statement and comment thereon for a period of thirty (30) Business Days after receipt thereof. Any changes in the Preliminary Reconciliation Statement that are agreed to by the Parties within such thirty (30) Business Day review period shall be incorporated into a final reconciliation

statement (the “Final Reconciliation Statement”), as of the Closing Date. In the event NICO does not dispute the Preliminary Reconciliation Statement within such thirty (30) Business Day review period, the Preliminary Reconciliation Statement shall be deemed the Final Reconciliation Statement.

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

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

(g) The determinations by the Independent Accountant as to the items in dispute shall be in writing and shall be Final and Binding on the parties and shall be reflected in the Final Reconciliation Statement. For purposes of this Section 2.3(g), “Final and Binding” means that the determinations made pursuant to this Section 2.3, including the determinations, if any, made by the Independent Accountant shall have the same preclusive effect for all purposes as if such determinations had been embodied in a final judgment, no longer subject to appeal, entered by a court of competent jurisdiction, and each Party may petition the Designated Court to reduce such decision to judgment. The fees, costs and expenses of retaining the Independent Accountant shall be allocated by the Independent Accountant between the Parties in accordance with the Independent Accountant’s judgment as to the relative merits of the respective Parties’ proposals in respect of the disputed items. Within five (5) Business Days following the resolution of all disputed items, Reinsureds shall prepare the Final Reconciliation Statement and shall deliver copies thereof to NICO.

(h) In the event that (i) the Aggregate Net Payment due to NICO or to Eaglestone, as the case may be, as determined in the Final Reconciliation Statement (the “Final Net Payments”) exceeds the Initial Net Payment to NICO or to Eaglestone, then Reinsureds shall pay to NICO or to Eaglestone, as applicable, cash in Dollars in an amount equal to such difference, less

any portion of such difference previously paid to NICO or to Eaglestone, as applicable, pursuant to Section 2.3(e), within ten (10) calendar days after the Final Reconciliation Statement has been determined, plus interest on such amount from and including the Closing Date up to but not including the date of payment accrued at the Applicable Interest Rate, or (ii) the Final Net Payments to NICO or to Eaglestone, as applicable, is less than the Initial Net Payments to NICO or to Eaglestone, as applicable, then NICO or Eaglestone, as applicable, shall return to Reinsureds cash in Dollars in an amount equal to such difference, less any portion of such difference previously paid to Reinsureds pursuant to Section 2.3(e), within ten (10) calendar days after the Final Reconciliation Statement has been determined, plus interest on such amount from and including the Closing Date up to but not including the date of payment accrued at the Applicable Interest Rate.

(i) All cash required to be transferred from Reinsureds to NICO pursuant to Section 2.3 shall be by wire transfer of immediately available funds to the Collateral Trust Account and all cash required to be transferred from NICO to Reinsureds pursuant to Section 2.3 shall be by wire transfer of immediately available funds withdrawn from the Collateral Trust Account to one or more bank accounts specified in writing by Reinsureds, in each case free and clear of all Encumbrances. All transfers of funds pursuant to this Section 2.3 shall be accounted for consistently with Section 13.1 of the Administrative Services Agreement.

2.4 Additional Deliveries on or Prior to Closing.

Reinsureds, Eaglestone and NICO shall, and shall cause their applicable Affiliates to, enter into and deliver to each other Party, on or prior to the Closing Date:

(i) LPT Reinsurance Agreement;

(ii) LPT Retrocession Agreement;

(iii) Administrative Services Agreement;

(iv) Collateral Trust Agreement;

(v) Parental Guarantee Agreement;

(vi) Capital Maintenance Agreement;

(vii) Transition Services Agreement;

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

ARTICLE III

REPRESENTATIONS, WARRANTIES, AND INVESTIGATION

3.1 Representations and Warranties.

Reinsureds and Eaglestone hereby represent and warrant to NICO that as of the date hereof:

(a) Redomestication of Eaglestone.

Eaglestone has been redomesticated to Pennsylvania.

(b) Transactions Since Inception.

(i) Except as set forth in Schedule 3.1(b) hereto, Reinsureds have not since January 1, 2011, to and including the date hereof, entered into (a) any settlements of claims within the Subject Asbestos Liabilities for an amount in excess of $1 million as against any one claimant, exclusive of loss adjustment expenses, or (b) any commutation of any ceded reinsurance contract affecting the Subject Asbestos Liabilities.

(ii) Reinsureds warrant that between the date hereof and the Closing Date they will provide notice to Eaglestone and NICO in writing in advance of finalizing any commutation of any ceded reinsurance contract affecting the Subject Asbestos Liabilities and that they will not effect any such commutation without the prior consent of Eaglestone and NICO in their sole discretion;

(iii) Reinsureds warrant that between the date hereof and the Closing Date they will provide notice to Eaglestone and NICO in writing in advance of finalizing any settlement of claims within the Subject Asbestos Liabilities for an amount in excess of $1 million as against any one claimant, exclusive of loss adjustment expenses and that they will not effect any such settlement without the prior consent of Eaglestone and NICO, which consent shall not be unreasonably withheld, conditioned, or delayed, provided, however, that each of Eaglestone and NICO shall be deemed to have consented unless it provides written objections the Reinsureds no later than seven days after its receipt of the notice provided for herein;

Reinsureds and Eaglestone have provided to NICO the information listed on Schedule 3.1(c). Reinsureds and Eaglestone acknowledge that such information was material to NICO in agreeing to enter into this Agreement and the Ancillary Agreements. Except as set forth in Schedule 3.1(c), to the knowledge of the Persons identified on Schedule 3.1(c)-1 hereto, after reasonable inquiry, no item so provided is inaccurate or incomplete in any material respect as to the matters set forth therein.

3.2 No Other Representations or Warranties.

(a) Notwithstanding anything contained in this Agreement or any Ancillary Agreement to the contrary,

(i) none of any Reinsured, any Person on behalf of any Reinsured or Eaglestone has made or is making any representation or warranty whatsoever, express or implied, beyond those expressly made by Reinsureds or Eaglestone in Section 3.1 hereof;

(ii) NICO has not been induced by, or relied upon, any representations, warranties, or statements (written or oral), whether express or implied,

made by any Person, that are not expressly set forth in Section 3.1; and

(iii) except with respect to the express representation in Section 3.1(c), NICO acknowledges that it is entering into the transactions contemplated hereby notwithstanding the existence and/or substance of any information not disclosed to it by Reinsureds and/or Eaglestone.

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

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

(ii) no representations or warranties are made with respect to any other information or documents made available to NICO or any of its Affiliates or Representatives except, in the case of this clause (ii) only, as expressly covered by a representation or warranty contained in Section 3.1; and

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

3.3 Exclusive Remedy.

The exclusive remedy for misrepresentation (including without limitation knowing and intentional misrepresentation) or breach of warranty with respect to Section 3.1 hereof is a claim for damages to be brought in an arbitration proceeding pursuant to Article VIII hereof. Any such proceeding shall be commenced no later than three years following the Closing Date. In any such proceeding the arbitrators may not award rescission or damages or reformation in lieu thereof but shall be limited to awarding damages proximately caused by the misrepresentation or breach of warranty, as measured by the economic difference, as to the specific item referenced, between the value to the transaction of the item as represented and the value to the transaction of the item under the actual facts.

ARTICLE IV

ADDITIONAL AGREEMENTS OF REINSUREDS, EAGLESTONE AND NICO

4.1 Conduct of Business.

Except as (a) consented to in writing by NICO (which consent shall not be unreasonably withheld, delayed or conditioned), (b) contemplated in this Agreement or the Ancillary Agreements or (c) required by any Order or Applicable Law, during the period from the date hereof through the earlier of the Closing Date or the termination of this Agreement, each of Reinsureds and Eaglestone:

(i) shall not commute any Third Party Reinsurance Agreement providing reinsurance coverage for the Subject Asbestos Liabilities;

(ii) shall not settle any Subject Claim for an amount in excess of five million dollars ($5,000,000) (net of any Third Party Reinsurance Recoverables or Other Recoveries that are reasonably expected by Reinsureds to be collectible);

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

(iv) shall conduct the NICO Subject Business insofar as it relates to the Subject Asbestos Liabilities in the ordinary course consistent with past practice;

(v) shall use commercially reasonable efforts to maintain its existing relations and goodwill with customers, suppliers, reinsurers, retrocessionaires, agents, brokers and distributors;

(vi) shall not make any admission of liability, agreement or compromise with any Person in relation to any Subject Claim involving an amount in excess of five million dollars ($5,000,000) (net of any Third Party Reinsurance Recoverables or Other Recoveries that are reasonably expected by Reinsureds to be collectible);

(vii) shall not (A) adopt a plan of complete or partial liquidation, dissolution or rehabilitation, (B) undertake any action by a Reinsured or Eaglestone that results in redomestication of that entity to a jurisdiction outside of the United States or (C) adopt a plan of merger, consolidation, restructuring, recapitalization, redomestication or other reorganization or voluntarily undertake any other changes in the corporate structure of Reinsureds or Eaglestone that adversely affects in any material respect the Subject Asbestos Liabilities;

(viii) shall keep its Books and Records accurate in all material respects;

(ix) shall comply with all regulatory requirements with respect to the NICO Subject Business, except where the failure to do so would not individually or in the aggregate have a material adverse effect on the Subject Asbestos Liabilities, it being understood that this paragraph (ix) does not relate to matters included within the definition of “Extra Contractual Obligations”; and

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

4.2 Expenses.

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

4.3 Access; Certain Communications.

(a) Between the date of this Agreement and the Closing Date, Reinsureds and Eaglestone shall afford to NICO and its Representatives reasonable access, upon reasonable advance notice and during normal business hours, to contracts, documents and information relating to the assets, liabilities, business, operations and other aspects of the NICO Subject Business insofar as they relate to the Subject Asbestos Liabilities; provided, however, that Reinsureds and Eaglestone shall not be obligated to provide such access or information if Reinsureds or Eaglestone determine, in their reasonable judgment, that doing so would violate Applicable Law or a contract, agreement or obligation of confidentiality owing to a third-party or jeopardize the protection of an attorney-client privilege. Nevertheless, if either Reinsureds or Eaglestone proposes to withhold any access or information, such Party shall notify NICO of such proposal and specify the reason therefore. Such Party and NICO shall work together in good faith to determine a manner in which such access or information can be provided without such a violation.

(b) Between the date of this Agreement and the Closing Date, Reinsureds and Eaglestone shall cause their respective Representatives to cooperate in good faith with NICO and its Representatives in connection with all such access. Without limiting any of the terms thereof, the terms of Section 4.9 shall govern NICO’s, its Affiliates’ and their Representatives’ obligations with respect to all Confidential Information with respect to the NICO Subject Business and Reinsureds, Eaglestone and their Affiliates and other related Persons, which has been provided or made available to them at any time, including during the period between the date of this Agreement and the Closing Date.

4.4 Commercially Reasonable Efforts; Governmental Consents.

(a) Upon the terms and subject to the conditions set forth in this Agreement, between the date of this Agreement and the Closing Date, Reinsureds, Eaglestone and NICO shall each use their commercially reasonable efforts to promptly (i) take, or to cause to be taken, all reasonable actions, and to do, or to cause to be done, and to provide reasonable assistance and cooperation to the other party in doing all things reasonably necessary, proper or advisable under Applicable Law or otherwise to consummate and make effective the transactions contemplated by this Agreement (including satisfying all Closing conditions) and the Ancillary Agreements, in each case as applicable to such Party; and (ii) obtain from any Governmental Authority any actions, non-actions, clearances, waivers, consents, approvals, Permits or Orders required to be obtained by such Party, or any of their respective Affiliates in connection with the authorization, execution, delivery and performance of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby.

(b) Between the date of this Agreement and the Closing Date, Reinsureds, Eaglestone and NICO shall use their reasonable best efforts to provide each other with a reasonable opportunity to review and comment on any substantive submissions to any Governmental Authority (other than a Tax Authority) in connection with the consents and approvals contemplated in Section 4.4(a) and shall keep one another reasonably informed of developments relating to their efforts to obtain such consents and approvals.

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

(d) Notwithstanding anything herein to the contrary, between the date of this Agreement and the Closing Date, none of Reinsureds, Eaglestone or NICO shall be obligated to take or refrain from taking or to agree to it, or its Affiliates taking or refraining from any action or to suffer to exist any condition, limitation, restriction or requirement which would, individually or together with all other such actions, conditions, limitations, restrictions or requirements, reasonably be expected to materially and adversely affect the benefits, taken as a whole, which such Party could otherwise reasonably expect to derive from the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements had such Party not been obligated to take or refrain from or to agree to the taking or refraining from such action or suffer to exist such condition, limitation, restriction or requirement, excluding the effects of any such condition, limitation, restriction or requirement that (i) is customary for applicable Governmental Authorities to impose in transactions of the type contemplated by this Agreement or the Ancillary Agreements, or (ii) is otherwise agreed to by the Parties in terms of an amendment or change to any of the Ancillary Agreements (a “Burdensome Condition”).

4.5 Further Assurances.

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

4.6 Notification of Certain Matters.

Prior to Closing, each Party shall give prompt notice to each other Party of (a) any adverse event, change or circumstance that (i) would, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of such Party or its Affiliates to consummate the transactions contemplated by this Agreement and the Ancillary Agreements, or (ii) would reasonably be expected to cause any condition set forth in Articles V and VI to be unsatisfied in any material respect at any time prior to the Closing Date, (b) any litigation or administrative proceeding pending or, to its knowledge, threatened in writing which challenges or seeks to restrain or enjoin the consummation of the transactions contemplated hereby and by the Ancillary Agreements, (c) any downgrade in the financial strength ratings by any applicable rating agency of a Party or any of their respective Affiliates that will be a Party to an Ancillary Agreement or of Berkshire, and (d) a change in the current jurisdiction of domicile of such Party; provided, however, in each case, the delivery of any notice pursuant to this Section 4.6 shall not limit or otherwise affect the remedies available hereunder to the Party receiving such notice.

4.7 Transfer and Maintenance of Books and Records.

Through the Closing Date, Reinsureds and Eaglestone shall maintain the Books and Records in all material respects in the same manner and with the same care that the Books and Records have been maintained prior to the execution of this Agreement. Following the Closing, the Parties shall maintain the Books and Records consistent with the requirements set forth in the Administrative Services Agreement. During the period between the date hereof and the Closing Date, the Parties shall in good faith agree upon a protocol to (a) transfer to NICO the Books and Records following the Closing and/or (b) provide NICO with reasonable access to the Books and

Records during normal business hours following the Closing, as may be provided for under the Administrative Services Agreement or the Transition Services Agreement.

4.8 Cooperation after Closing.

After the Closing, Reinsureds, Eaglestone and NICO shall cooperate with each other by furnishing any additional information and executing and delivering any additional documents as may be reasonably requested by the other to further perfect or evidence the consummation of any transaction contemplated by this Agreement or any Ancillary Agreement; provided, however, that any such additional documents must be reasonably satisfactory to each of the Parties and not impose upon either Party any liability, risk, obligation, loss, or material cost or expense not contemplated by this Agreement or the Ancillary Agreements.

4.9 Confidentiality.

(a) Reinsureds, Eaglestone and NICO (each, the “Receiving Party”) hereby covenant and agree, each on behalf of itself and on behalf of its Affiliates, that from and after the date hereof, the Receiving Party and its Affiliates will not disclose, give, sell, use or otherwise divulge any Confidential Information (defined below) of another Party (the “Disclosing Party”) or permit their respective Representatives to do the same, except that each Receiving Party may disclose such Confidential Information or portions thereof (i) if legally compelled to do so or as required in connection with an examination by an insurance regulatory authority, (ii) to the extent necessary for the performance of such Receiving Party’s obligations under this Agreement or the Ancillary Agreements, (iii) to the extent necessary for the enforcement of the rights of such Receiving Party and its Affiliates under this Agreement or the Ancillary Agreements, (iv) to those of such Receiving Party’s Affiliates, and to their respective Representatives in each case who need to know such information for the foregoing purposes, (v) as required under any Applicable Law, (vi) as required to a Tax Authority to support a position taken on any Tax Return, or (vii) or as required by the rules of any stock exchange on which the stock of a Receiving Party’s Affiliate is traded. If the Receiving Party or its Affiliates, or any of their respective Representatives become legally compelled to disclose any Confidential Information (other than as required in connection with an examination by an insurance regulatory authority or as required to a Tax Authority to support a position taken on any Tax Return), the Receiving Party shall provide Disclosing Party with prompt written notice of such requirement so that the Disclosing Party may seek a protective order or other remedy or waive compliance with this Section 4.9. In the event that such protective order or other remedy is not obtained, or Disclosing Party waives compliance with this Section 4.9, the Receiving Party or its Affiliates, as applicable, shall furnish only that portion of Confidential Information which is legally required to be provided and exercise its commercially reasonable efforts to obtain assurances that appropriate confidential treatment will be accorded to the Confidential Information.

(b) The Receiving Party, on behalf of itself and on behalf of its Affiliates and their respective Representatives acknowledges that a breach of its obligations under this Section 4.9 may result in irreparable injury to the Disclosing Party. In the event of the breach by Receiving Party or any of its Affiliates or their respective Representatives of any of the terms and conditions of this Section 4.9 to be performed, the Disclosing Party shall be entitled to the remedies provided in Article VIII.

(c) For the purposes of this Agreement, “Confidential Information” means all confidential information (irrespective of the form of such information) of any kind, including any

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

4.10 Waiver of Duty of Utmost Good Faith.

Each Party absolutely and irrevocably waives resort to the duty of “utmost good faith” or any similar principle in connection with the negotiation and/or execution of this Agreement and the Ancillary Agreements; provided, however, that this waiver shall not apply to any such duty as may exist with respect to matters arising, and actions taken, on or after the Closing Date.

ARTICLE V

CONDITIONS PRECEDENT TO THE OBLIGATION OF NICO TO CLOSE

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

5.1 Covenants.

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

(b) NICO shall have received a certificate from each of the Reinsureds and Eaglestone to the effect set forth in Section 5.1(a).

5.2 Ancillary Agreements.

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

5.3 Secretary’s Certificates.

Reinsureds and Eaglestone shall have delivered to NICO a certificate of the secretary or assistant secretary of each of Reinsureds and Eaglestone, dated as of the Closing Date, as to the resolutions of the board of directors of each of Reinsureds and Eaglestone and their applicable

Affiliates authorizing the execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is a party, as to the status and signature of each of their respective officers who executed and delivered this Agreement and such Ancillary Agreements.

5.4 Governmental Approvals and Consents.

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

5.5 Injunction and Litigation.

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

5.6 Frustration of Closing Conditions.

NICO may not rely on the failure of any condition set forth in this Article V to be satisfied if such failure was caused by NICO’s failure to use its commercially reasonable efforts to consummate the transactions contemplated by this Agreement and the Ancillary Agreements as required by and subject to Section 4.4.

ARTICLE VI

CONDITIONS PRECEDENT TO THE OBLIGATION
OF REINSUREDS AND EAGLESTONE TO CLOSE

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

6.1 Covenants.

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

(b) Reinsureds and Eaglestone shall have received a certificate from NICO to the effect set forth in Section 6.1(a).

6.2 Ancillary Agreements.

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

6.3 Secretary’s Certificates.

(a) NICO shall have delivered to Reinsureds and Eaglestone a certificate of the secretary or assistant secretary of NICO, dated as of the Closing Date, as to the resolution of the board of directors of NICO authorizing the execution, delivery and performance of this Agreement and

the Ancillary Agreements to which it is a party, as to the status and signature of each of its respective officers who executed and delivered this Agreement and the Ancillary Agreements.

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

6.4 Governmental Approvals and Consents.

6.5 Certain Facilities

All consents and waivers, if any, required to be obtained prior to the Closing from the lenders under (i) the Letter of Credit and Reimbursement Agreement dated as of December 23, 2010 by and among Chartis Inc., JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto, (ii) the 364-Day Credit Agreement dated as of December 23, 2010 by and among American International Group, Inc., JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto and (iii) the Three Year Credit Agreement dated as of December 23, 2010 by and among Chartis Inc., JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto, shall have been obtained and are in effect.

6.6 Injunction and Litigation.

6.7 Rating of NICO.

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

6.8 Frustration of Closing Conditions.

Reinsureds and Eaglestone may not rely on the failure of any condition set forth in this Article VI to be satisfied if such failure was caused by Reinsureds’ or Eaglestone’s failure to use their commercially reasonable efforts to consummate the transactions contemplated by this Agreement and the Ancillary Agreements as required by and subject to Section 4.4.

ARTICLE VII

TERMINATION

7.1 Termination of Agreement.

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

(a) By mutual written consent of Reinsureds, Eaglestone and NICO.

(b) By Reinsureds and Eaglestone in writing if NICO shall fail to perform in any material respect its agreements contained herein required to be performed by it prior to the Closing Date, in each case so as to cause a condition to Closing set forth in Section 6.1 to be incapable of satisfaction, which failure or breach is not cured within twenty (20) Business Days after Reinsureds and Eaglestone have notified NICO in writing of its intent to terminate this Agreement pursuant to this Section 7.1(b).

(c) By NICO in writing if Reinsureds or Eaglestone shall fail to perform in any material respect their agreements contained herein required to be performed by them prior to the date of such termination, in each case so as to cause a condition to Closing set forth in Section 5.1 to be incapable of satisfaction, which failure or breach is not cured within twenty (20) Business Days after NICO has notified Reinsureds and Eaglestone in writing of its intent to terminate this Agreement pursuant to this Section 7.1(c).

(d) By any of Reinsureds, Eaglestone or NICO if the Closing has not occurred on or before July 31, 2011 (the “End Date”); provided, however, that the right to terminate this Agreement pursuant to this Section 7.1(d) shall not be available to a Party if the failure of the transactions contemplated by this Agreement and the Ancillary Agreements to be consummated on or before the End Date was primarily due to the failure of such Party to perform any of its obligations under this Agreement.

(e) By either Reinsureds, Eaglestone or NICO in the event of the issuance of a final nonappealable Order restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and the Ancillary Agreements; provided, however, that the right to terminate this Agreement under this Section 7.1(e) shall not be available to a Party if the issuance of such final, nonappealable Order was primarily due to the failure of such Party to perform any of its obligations under this Agreement.

(f) By Reinsureds or Eaglestone in the event that A.M. Best Company, Inc. has reduced its rating of NICO such as would cause the condition set forth in Section 6.6 to fail to be satisfied, and such reduction has not publicly been reversed within ten (10) calendar days such that the condition in Section 6.6 would then be satisfied.

7.2 Effect of Termination.

In the event of termination of this Agreement pursuant to Section 7.1 hereof, written notice of termination shall be given pursuant to the notice provisions herein, and this Agreement shall forthwith become null and void and there shall be no liability by any Party hereto, except (a) that the provisions of Article VIII, Article IX and Sections 3.3, 4.2 and 7.2 shall remain in full force and effect and (b) any confidentiality obligations of the Parties (arising under this Agreement or under any other confidentiality agreement entered into by Reinsureds, Eaglestone and NICO) shall survive the termination of this Agreement.

ARTICLE VIII

DISPUTE RESOLUTION

8.1 Framework for Dispute Resolution.

(a) Any dispute arising under or in any way related to this Master Transaction Agreement, to the LPT Reinsurance Agreement, to the LPT Retrocession Agreement, to the Administrative Services Agreement, or to any of the Ancillary Agreements (“Dispute”), specifically including without limitation disputes concerning breach, termination, validity, or alleged fraud in the inducement of any of the foregoing agreements, or any other wrongful pre-Closing conduct, shall be first addressed in accordance with the procedures specified in Section 8.2, and subsequently, if necessary, Section 8.3 and Section 8.4.

(b) The procedures specified in Section 8.1(a) are the sole and exclusive procedures for the resolution of any Disputes, provided, however, that a Party that believes it will suffer irreparable injury in the period before such procedures can produce a final and binding result may apply to the Designated Court specified in Section 8.5 for relief, subject to the standards of Applicable Law relating to interim relief in aid of arbitration.

8.2 Negotiation Amongst the Parties

(a) The Parties shall first attempt to resolve Disputes by informal in-person discussions and negotiations between the Representatives of Reinsureds and NICO and, to the extent Eaglestone has a separate and distinct interest not already accounted for in the discussions, of Eaglestone as well. If the Parties are unable to resolve any such Dispute through such in-person discussions and negotiations within thirty (30) calendar days of the day on which a Party receives from the other Party or Parties written notice of a Dispute, the Dispute shall be submitted for resolution to a designated executive officer of each of NICO and the Reinsureds (and, as applicable, Eaglestone) with authority to make a decision. If the designated executive officers are unable to reach a mutually acceptable resolution within ten (10) calendar days after expiration of such thirty-day period, on the request of any Party, the Dispute shall be resolved in accordance with subsection (b). All negotiations, discussions, and communications made or conducted pursuant to the procedures set forth in this Section 8.2(a) are confidential and will be treated as compromise and settlement negotiations for purposes of the Federal Rules of Evidence and any other applicable rules of evidence.

(b) Upon completion of the dispute resolution process described in subsection (a) of this Section 8.2 without resolution of the Dispute, any Party may submit the Dispute for resolution in accordance with Section 8.3.

8.3 Obligation to Arbitrate.

All Disputes, to the extent not resolved by negotiation between the Parties, shall be resolved by arbitration in a consolidated arbitration involving all agreements and Parties relevant to the Dispute. Any Person that is a Party to any of the foregoing agreements shall have an absolute right to intervene in any such arbitration.

8.4 Arbitration Procedure.

The procedure for the arbitration shall be the Neutral Panel Version of the September 2009 Procedures for the Resolution of U.S. Insurance and Reinsurance Disputes, with the following modifications:

(a) The Reinsureds as a group, together with Eaglestone, shall be treated as a single party to the arbitration unless Eaglestone is at the time of the arbitration under the control of a Department of Insurance or otherwise has a separate and distinct interest not adequately represented by Reinsureds, in which event Eaglestone shall be treated as a separate party.

(b) The Panel shall be selected via the XXXXX-US Neutral Selection Procedure as in effect on the date hereof with the following parameters:

(i) The number of prospective panel members to be furnished by XXXXX in step 2 shall be 30.

(ii) The number of panelists to remain after the deletions and strikes in step 4 shall be 12.

(iii) If Eaglestone is being treated as a separate party pursuant to paragraph (a) above, it shall have one strike for every two of the Reinsured and NICO.

(c) The seat of the arbitration shall be Philadelphia, Pennsylvania. This location is not subject to change except on written consent of all parties to the arbitration.

8.5 Judicial Proceedings.

The only suits, actions, or proceedings relating to a Dispute permitted to be brought in a judicial forum are those (i) to compel arbitration, (ii) for temporary injunctive relief in aid of arbitration or to preserve the status quo pending the appointment of the arbitrator(s), (iii) to enforce or vacate an arbitral award, or (iv) to obtain relief in connection with arbitration pursuant to the Federal Arbitration Act. Any such proceeding shall be brought exclusively in the United States District Court for the Eastern District of Pennsylvania (the “Designated Court”), provided that if said court does not have subject matter jurisdiction then such proceeding shall be brought exclusively the Court of Common Pleas of Pennsylvania in and for Philadelphia County, which shall then be the Designated Court. Reinsurer, NICO, and each Reinsured each hereby irrevocably submits to the exclusive jurisdiction of the Designated Court for such purpose and any appellate courts thereof, except that any judgment confirming a final arbitral award hereunder may be entered and enforced in any court having jurisdiction over any party or any of its assets.

8.6 Limitation of Remedy.

Each Party acknowledges the sophistication of the other Parties and the extensive due diligence conducted prior to entry into this Master Transaction Agreement and the Ancillary Agreements. Accordingly, in no event and under no circumstances, including allegations of actual fraud, may the arbitrators award the remedy of rescission, nor may they award rescissory damages or reformation in lieu of rescission. This Section 8.6 is a limitation on the remedial powers of the arbitrators and not on the scope of the obligation to arbitrate.

ARTICLE IX

MISCELLANEOUS PROVISIONS

9.1 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 Reinsurer:	Xxxxx Xxxxxx
		President
		Eaglestone Reinsurance Company
		000 Xxxxxx Xxxx
		Xxx Xxxx, XX 00000
		Fax: (000) 000-0000

	With a copy to:	Xxxx X. Xxxxxxx
		Deputy General Counsel and
		Chief Reinsurance Legal Officer
		American International Group, Inc.
		000 Xxxxxx Xxxx
		Xxx Xxxx, XX 00000
		Fax: (000) 000-0000

	To Reinsureds:	Xxxx Xxxxxxx
		Senior Vice President &
		Chief Financial Officer
		Chartis U.S.
		000 Xxxxxx Xxxx
		Xxx Xxxx, XX 00000
		Fax: (000) 000-0000

	With a copy to:	Xxxxxxxxxxx Xxxx
		Senior Vice President &
		General Counsel
		Chartis U.S.
		000 Xxxxxx Xxxx
		Xxx Xxxx, XX 00000
		Fax: (000) 000-0000

		-and-

		Xxxx X. Xxxxxxx
		Deputy General Counsel and
		Chief Reinsurance Legal Officer
		American International Group, Inc.
		000 Xxxxxx Xxxx
		Xxx Xxxx, XX 00000
		Fax: (000) 000-0000

	To National Union:	Xxxxxxxxxxx Xxxx
		Senior Vice President &
		General Counsel
		Chartis U.S.
		000 Xxxxxx Xxxx
		Xxx Xxxx, XX 00000
		Fax: (000) 000-0000

	With a copy to:	Xxxx X. Xxxxxxx
		Deputy General Counsel and
		Chief Reinsurance Legal Officer
		American International Group, Inc.
		000 Xxxxxx Xxxx
		Xxx Xxxx, XX 00000
		Fax: (000) 000-0000

	To NICO:	National Indemnity Company
		000 Xxxxx Xxxxxxxx Xxxxx
		Xxxxxxxx, XX 00000
		Attention: General Counsel
		Fax: (000) 000-0000

	With a copy to:	National Indemnity Company
		0000 Xxxxxx Xxxxxx
		Xxxxx, XX 00000
		Attention: Treasurer
		Fax: (000) 000-0000

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

9.2 Entire Agreement.

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

9.3 Waiver and Amendment.

This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by an instrument in writing signed by the Parties hereto, or, in the case of a waiver, by the Party waiving compliance which specifically states it is being executed

and delivered pursuant to this Section 9.3. No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other such right, power or privilege. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.

9.4 Successors and Assigns.

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

9.5 Headings.

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

9.6 Construction; Interpretation.

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

9.7 Governing Law and Jurisdiction.

This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to such state’s principles of conflict of laws that could compel the application of the laws of another jurisdiction.

9.8 No Third Party Beneficiaries.

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

9.9 Counterparts.

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

9.10 Severability.

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

9.11 Incontestability.

Each Party hereby acknowledges that this Agreement, and each and every provision hereof, is and shall be enforceable according to its terms. Each Party hereby irrevocably waives any right to contest in any respect the validity or enforceability hereof. This Agreement shall not be subject to rescission, or to an award of damages, restitution, or reformation in lieu of rescission, on any basis whatsoever, including intentional fraud but shall be subject to the remedy set forth in Section 3.3. Nothing in this Section 9.11 relieves a Party of liability, whether for damages or for specific performance, for breach of this Agreement.

9.12 Set-Off.

(a) 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 and/or Eaglestone, on the one hand, and NICO, on the other hand, with respect to this Agreement, the Administrative Services Agreement, the LPT Retrocession Agreement, and/or the LPT Reinsurance Agreement are deemed mutual debts or credits, as the case may be, and shall be set off, and only the net balance shall be allowed or paid.

(b) Notwithstanding the foregoing subsection (a), no Party may offset an item includable within a calculation of Ultimate Net Loss on the Subject Asbestos Liabilities against an item not so includable. For the avoidance of doubt, no amounts due under Coverage A of the LPT Reinsurance Agreement may be offset against amounts due under Coverage B of the LPT Reinsurance Agreement.

(c) For purposes of this Section 9.12, Reinsureds and Eaglestone (the “Chartis Parties”), on the one hand, and NICO, on the other hand, shall each be considered a single party,

and setoff shall be allowed between the NICO and Chartis Parties as a group, without regard to which Chartis Party may be the debtor or creditor on any particular item.

(d) The rights of setoff established in this Section 9.12 shall be the exclusive rights of setoff, whether by contract, at common law, in equity, or otherwise, that the Parties have with respect to any debts or obligations arising under or in connection with this Agreement and the transactions contemplated hereby. With respect to such debts and/or obligations, whether now existing or arising in the future, the Parties hereby irrevocably waive any other rights of setoff. Nothing in this Section 9.12(d), however, affects the existence of any rights of setoff among debts and obligations none of which arise under or in connection with this Agreement or the transactions contemplated thereby.

9.13 Currency.

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

9.14 Lead Representative of the Reinsureds.

All notices or other writings required to be given to the Reinsureds under this Agreement or any Ancillary Agreement may be given solely to the Lead Representative of the Reinsureds.

ARTICLE X

ASSIGNMENT OF INCLUDED REINSURANCE
RECOVERABLES UPON CMA DEFAULT

10.1 Assignment Upon CMA Default

Upon, but only upon, the occurrence of a CMA Default, on the CMA Default Effective Date corresponding thereto, Reinsureds hereby absolutely and irrevocably sell, transfer, assign, and convey to NICO all of their right, title, and interest to and in the Included Reinsurance Recoverables (the “IRR Assignment”). The IRR Assignment is absolute and unconditional and not merely for security. It shall take place automatically on such CMA Default Effective Date, without the need for any further act by any Person.

10.2 Effect of Assignment

(a) The authority and responsibility of NICO and Reinsureds with respect to Third Party Reinsurance Recoverables, as set forth principally in Article VI of the Administrative Services Agreement, shall remain unchanged by an IRR Assignment.

(b) Eaglestone hereby acknowledges that an IRR Assignment is not a violation of any right of Eaglestone under the LPT Reinsurance Agreement, including without limitation its rights as secured party under Section 3.6 thereof, and NICO hereby acknowledges that neither the foregoing acknowledgment by Eaglestone nor any other provision of this Agreement relating to IRR Assignment is a violation of any of NICO’s rights under the LPT Retrocession Agreement, including without limitation its rights as assignee under Section 3.5 thereof. Upon an XXX Xxxxxxxxxx,

(i) Eaglestone hereby releases the security interest granted in Section 3.6 of the LPT Retrocession Agreement insofar as it relates to Included Reinsurance Recoverables, and

(ii) NICO hereby releases the assignment granted in Section 3.5 of the LPT Retrocession Agreement insofar as it relates to Included Reinsurance Recoverables.

(c) The payment mechanism set forth in Section 13.1 of the Administrative Services Agreement shall remain unchanged by an IRR Assignment, it being understood however that

(i) Eaglestone and Reinsureds acknowledge NICO’s absolute ownership of the Included Reinsurance Recoverables following the IRR Assignment;

(ii) “Actually Paid” with respect to Included Reinsurance Recoverables for all purposes of the LPT Reinsurance Agreement and the LPT Retrocession Agreement shall, following an IRR Assignment, be interpreted to refer only to recovery of such Included Reinsurance Recoverables by NICO, whether by payment, by offset, or otherwise; and

(iii) Included Reinsurance Recoverables that are Actually Paid shall continue to be tracked and accounted for following an IRR Assignment, but solely as a notional account for measuring the amount of Ultimate Net Loss for which Eaglestone is liable under Coverage A of the LPT Reinsurance Agreement and for which NICO is liable under the retrocession thereof.

(d) Except as expressly set forth in this Article X, no rights or obligations of any of the Parties are changed by an IRR Assignment.

10.3 Reassignment Upon Exhaustion of Retro Limit

(a) In the event that, following an IRR Assignment, the Retro Limit is exhausted and the LPT Retrocession Agreement terminates pursuant to Section 5.1(ii) thereof, then effective on the Termination Date NICO hereby absolutely sells, transfers, assigns, and conveys to Reinsureds all of NICO’s right, title, and interest to and in the Included Reinsurance Recoverables to the extent not Actually Paid prior to such date (the “IRR Reassignment”). The IRR Reassignment shall take place automatically upon such termination and on the Termination Date, without the need for any further act by any Person.

(b) Upon the IRR Reassignment, the provisions of Section 10.2(a) and (c) hereof shall no longer be effective, but the releases and acknowledgements of Section 10.2(b) shall still be effective.

10.4 Only Judicial Proceedings to Enforce Capital Maintenance Agreement

Notwithstanding any provision of this Agreement to the contrary, specifically including Article VIII hereof, and notwithstanding any provision of any other agreement to the contrary, NICO’s rights under Section 7 of the Capital Maintenance Agreement are not subject to arbitration, are enforceable only judicially, and are enforceable solely in the United States District Court for the Southern District of New York or, if such court does not have subject matter jurisdiction, the Supreme Court of the State of New York, County of New York.

[The remainder of this page has been intentionally left blank.]

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

AMERICAN HOME ASSURANCE COMPANY


By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President


CHARTIS CASUALTY COMPANY
(f/k/a American International South Insurance Company)


By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President


CHARTIS PROPERTY CASUALTY COMPANY
(f/k/a AIG Casualty Company)


By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President


COMMERCE AND INDUSTRY INSURANCE COMPANY


By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President


GRANITE STATE INSURANCE COMPANY


By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President

[Signature Page to Master Transaction Agreement]

S-1

ILLINOIS NATIONAL INSURANCE CO.


By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President


NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
(as Reinsured and as Agent for Reinsureds pursuant to Section 10.14 of the LPT Reinsurance Agreement)


By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President


NEW HAMPSHIRE INSURANCE COMPANY


By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President


THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA


By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President


CHARTIS SELECT INSURANCE COMPANY
(f/k/a AIG Excess Liability Insurance Company Ltd.)


By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President

[Signature Page to Master Transaction Agreement]

S-2

CHARTIS SPECIALTY INSURANCE COMPANY
(f/k/a American International Specialty Lines Insurance Company)


By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President


LANDMARK INSURANCE COMPANY

By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President


LEXINGTON INSURANCE COMPANY


By:	/s/ Xxxx Xxxxxxx
	Name:	Xxxx Xxxxxxx
	Title:	Senior Vice President


AIU INSURANCE COMPANY


By:	/s/ Xxxxx Xxxxxxx
	Name:	Xxxxx Xxxxxxx
	Title:	Senior Vice President


AMERICAN INTERNATIONAL REINSURANCE COMPANY, LTD.


By:	/s/ S. Xxxxxx Xxxxxx
	Name:	S. Xxxxxx Xxxxxx
	Title:	President

[Signature Page to Master Transaction Agreement]

S-3

AMERICAN HOME ASSURANCE COMPANY
(acting as a member of the Chartis Overseas Association as respects business written or assumed by or from affiliated companies of Chartis Inc.)


By:	/s/ Xxxxx Xxxxxxx
	Name:	Xxxxx Xxxxxxx
	Title:	Vice President


NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
(acting as a member of the Chartis Overseas Association as respects business written or assumed by or from affiliated companies of Chartis Inc.)


By:	/s/ Xxxxx Xxxxxxx
	Name:	Xxxxx Xxxxxxx
	Title:	Vice President


NEW HAMPSHIRE INSURANCE COMPANY
(acting as a member of the Chartis Overseas Association as respects business written or assumed by or from affiliated companies of Chartis Inc.)


By:	/s/ Xxxxx Xxxxxxx
	Name:	Xxxxx Xxxxxxx
	Title:	Vice President


CHARTIS OVERSEAS LIMITED
(acting as a member of the Chartis Overseas Association as respects business written or assumed by or from affiliated companies of Chartis Inc.)


By:	/s/ S. Xxxxxx Xxxxxx
	Name:	S. Xxxxxx Xxxxxx
	Title:	President

[Signature Page to Master Transaction Agreement]

S-4

EAGLESTONE REINSURANCE COMPANY


By:	/s/ Xxxxx Xxxxxx
	Name:	Xxxxx Xxxxxx
	Title:	President


NATIONAL INDEMNITY COMPANY


By:	/s/ Xxxxx Xxxxxx
	Name:	Xxxxx Xxxxxx
	Title:	Vice President

[Signature Page to Master Transaction Agreement]

S-5

Exhibit A to the
Master Transaction Agreement

ADMINISTRATIVE SERVICES AGREEMENT

by and between

AMERICAN HOME ASSURANCE COMPANY

CHARTIS CASUALTY COMPANY
(f/k/a American International South Insurance Company)

CHARTIS PROPERTY CASUALTY COMPANY
(f/k/a AIG Casualty Company)

COMMERCE AND INDUSTRY INSURANCE COMPANY

GRANITE STATE INSURANCE COMPANY

ILLINOIS NATIONAL INSURANCE CO.

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.

NEW HAMPSHIRE INSURANCE COMPANY

THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA

CHARTIS SELECT INSURANCE COMPANY
(f/k/a AIG Excess Liability Insurance Company Ltd.)

CHARTIS SPECIALTY INSURANCE COMPANY
(f/k/a American International Specialty Lines Insurance Company)

LANDMARK INSURANCE COMPANY

LEXINGTON INSURANCE COMPANY

AIU INSURANCE COMPANY

AMERICAN INTERNATIONAL REINSURANCE COMPANY, LTD.

and

AMERICAN HOME ASSURANCE COMPANY

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.

NEW HAMPSHIRE INSURANCE COMPANY

CHARTIS OVERSEAS LIMITED

acting as members of the Chartis Overseas
Association as respects business written or
assumed by or from affiliated companies of
Chartis Inc.

(collectively, “Reinsureds,” as further defined herein)

and

NATIONAL INDEMNITY COMPANY
(“NICO”)

Dated as of [ ] 2011

TABLE OF CONTENTS

		Page

ARTICLE I
DEFINITIONS

1.1	Definitions	2

ARTICLE II
AUTHORITY; SERVICE STANDARDS

2.1	Appointment	8
2.2	Services Standards	8
2.3	Compliance; Licensure	9
2.4	Independent Contractor	9
2.5	Subcontracting	9

ARTICLE III
COMPENSATION

3.1	Compensation	10

ARTICLE IV
ADMINISTRATIVE SERVICES

4.1	Administrative Services	11
4.2	Levels of Authority	12
4.3	Mixed Accounts and Mixed Claims	13
4.4	Conflict of Interest	14

ARTICLE V
CLAIMS HANDLING SERVICES

5.1	Claims Handling Services	15
5.2	Direct Claims Authority	16

ARTICLE VI
ADMINISTRATION OF THIRD PARTY REINSURANCE AGREEMENTS

6.1	Third Party Reinsurance Administration	16
6.2	Expense of Reinsurance Recovery Efforts	17
6.3	Responsibility and Authority With Respect to Reinsurance Activities	18
6.4	Forgoing Collection of Third Party Reinsurance Recoverables	19
6.5	Allocation of Reinsurance Recoveries	19

		Page

ARTICLE VII
ADMINISTRATION OF LPT REINSURANCE AGREEMENT

7.1	Role of NICO on Behalf of Reinsureds	20
7.2	No Role of NICO on Behalf of Eaglestone	20

ARTICLE VIII
REPORTING AND REGULATORY COMPLIANCE

8.1	Regulatory Filings and Examinations	20
8.2	Financial Reporting Obligations	21
8.3	Change in Status	22
8.4	NICO Controls	22

ARTICLE IX
REMEDY FOR ACTIONS IN EXCESS OF AUTHORITY

9.1	Materiality of Authority Limitations	23
9.2	Remedy	23

ARTICLE X
BOOKS AND RECORDS

10.1	Transfer and Ownership of Books and Records	24
10.2	Maintenance of Books and Records	25
10.3	Access to Books and Records and Personnel	25

ARTICLE XI
INABILITY TO PERFORM SERVICES; ERRORS

11.1	Inability to Perform Services	26
11.2	Errors	26

ARTICLE XII
LEGAL ACTIONS

12.1	Regulatory Proceedings	26
12.2	Notification Requirements	27
12.3	Right to Associate	27

ARTICLE XIII
BANK ACCOUNTS AND PAYMENTS

13.1	Payment and Receipt of Funds	27
13.2	Post-Closing Adjustments	28

		Page

ARTICLE XIV
COOPERATION

14.1	Cooperation	28
14.2	Relationship Management	29

ARTICLE XV
DURATION; TERMINATION

15.1	Duration	29
15.2	Termination	29
15.3	Change in Settlement Authority on Reduction of Remaining Limit	30
15.4	Certain Actions Related to Termination	30
15.5	Survival	31

ARTICLE XVI
CONFIDENTIALITY; PRIVACY REQUIREMENTS

16.1	Definitions	31
16.2	Obligations	32
16.3	Exceptions to Confidential Treatment	32
16.4	Privacy	33
16.5	Regulatory and Legal Communication	35
16.6	Systems Security	36

ARTICLE XVII
FORCE MAJEURE

17.1	Force Majeure Event	37

ARTICLE XVIII
INDEMNIFICATION

18.1	Extra Contractual Obligations	38
18.2	Indemnification Obligation of NICO	38
18.3	Indemnification Obligation of Reinsureds	38
18.4	Exclusion from Indemnification Obligations	39
18.5	Notice of Indemnification Request	39
18.6	Notice of an Asserted Liability	39
18.7	Procedures	40
18.8	Survival	40

ARTICLE XIX
DISPUTE RESOLUTION; ARBITRATION

19.1	Arbitration of Disputes Not Resolved by Negotiation	41
19.2	Procedure for Arbitration and Mandatory Pre-Arbitration Negotiation	41

iii

		Page

19.3	Permitted Judicial Proceedings	41

ARTICLE XX
MISCELLANEOUS

20.1	Notices	41
20.2	Entire Agreement	43
20.3	Waiver and Amendment	43
20.4	Successors and Assigns	43
20.5	Headings	43
20.6	Construction; Interpretation	43
20.7	Governing Law and Jurisdiction	44
20.8	No Third Party Beneficiaries	44
20.9	Counterparts	44
20.10	Severability	44
20.11	Incontestability	44
20.12	Set-Off	45
20.13	Currency	45

LIST OF EXHIBITS

Exhibit A	Business Associate Agreement
Exhibit B	Transition Services Agreement

LIST OF SCHEDULES

Schedule 3.1(c)	Hourly Rates for Certain Personnel as of the Closing Date
Schedule 5.2	Relationship Insureds
Schedule 6.3(a)	Business Relationship Reinsurers
Schedule 6.3(e)	Permissible Discounts

ADMINISTRATIVE SERVICES AGREEMENT

THIS ADMINISTRATIVE SERVICES AGREEMENT (hereinafter referred to as this “Administrative Services Agreement”), dated as of , 2011, is made and entered into by and between American Home Assurance Company; Chartis Casualty Company (f/k/a American International South Insurance Company); Chartis Property Casualty Company (f/k/a AIG Casualty Company); Commerce and Industry Insurance Company; Granite State Insurance Company; Illinois National Insurance Co.; National Union Fire Insurance Company of Pittsburgh, Pa.; New Hampshire Insurance Company; The Insurance Company of the State of Pennsylvania; Chartis Select Insurance Company (f/k/a AIG Excess Liability Insurance Company Ltd.); Chartis Specialty Insurance Company (f/k/a American International Specialty Lines Insurance Company); Landmark Insurance Company; Lexington Insurance Company; AIU Insurance Company; American International Reinsurance Company Ltd.; and American Home Assurance Company, National Union Fire Insurance Company of Pittsburgh, Pa., New Hampshire Insurance Company, and Chartis Overseas Limited, acting as members of the Chartis Overseas Association as respects business written or assumed by or from affiliated companies of Chartis Inc. (collectively, “Reinsureds”), and National Indemnity Company, a Nebraska property and casualty insurance company (with its successors and permitted assigns, “NICO”), NICO and the Reinsureds each being a “Party” and collectively the “Parties.”

WITNESSETH:

WHEREAS, pursuant to a Master Transaction Agreement (as amended, modified, and supplemented and in effect from time to time, the “Master Transaction Agreement”), dated as of , 2011 among the Parties, and Eaglestone Reinsurance Company, a Pennsylvania property and casualty insurance company and an Affiliate of Reinsureds (with its successors and permitted assigns, “Eaglestone”), Reinsureds and Eaglestone agreed to enter into a loss portfolio reinsurance transaction, pursuant to which Reinsureds will cede, and Eaglestone will assume and reinsure, certain Subject Asbestos Liabilities and certain other liabilities to Eaglestone; and

WHEREAS, pursuant to the Master Transaction Agreement, Eaglestone and NICO agreed to enter into a loss portfolio transfer retrocession transaction, pursuant to which Eaglestone will retrocede to NICO, and NICO will assume and reinsure, 100% of the Subject Asbestos Liabilities ceded to Eaglestone by Reinsureds; and

WHEREAS, the cession by Reinsureds to Eaglestone has been effected by and pursuant to the terms and conditions of an Amended and Restated Loss Portfolio Transfer Reinsurance Agreement among Reinsureds and Eaglestone, dated as of the date hereof and referenced in the Master Transaction Agreement as the “LPT Reinsurance Agreement”; and

WHEREAS, the retrocession by Eaglestone to NICO has been effected by and pursuant to the terms and conditions of a Loss Portfolio Transfer Retrocession Agreement between Eaglestone and NICO, dated as of the date hereof and referenced in the Master Transaction Agreement as the “LPT Retrocession Agreement”; and

WHEREAS, Reinsureds desire that NICO perform certain administrative functions on behalf of Reinsureds from and after the date hereof with respect to the Subject Asbestos Liabilities, and the Parties have agreed to enter into this Administrative Services Agreement as a condition of Eaglestone and NICO’s entering into the LPT Retrocession 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 LPT Retrocession Agreement, the Parties agree as follows:

ARTICLE I
DEFINITIONS

1.1 Definitions

All capitalized terms not otherwise defined in this Administrative Services Agreement shall have the meaning given them under the Master Transaction Agreement, the LPT Reinsurance Agreement or the LPT Retrocession Agreement, as applicable. The following terms shall have the respective meanings set forth below throughout this Administrative Services Agreement:

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

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

“Administrative Services Agreement” shall have the meaning provided in the Preamble hereof.

“Affiliate” shall have the meaning provided in the LPT Reinsurance Agreement.

“Allocated Loss Adjustment Expenses” shall have the meaning provided in the LPT Retrocession Agreement.

“Ancillary Agreements” shall have the meaning provided in the Master Transaction Agreement.

“Applicable Law” shall have the meaning provided in the Master Transaction Agreement.

“Asbestos Claim” shall have the meaning provided in the LPT Reinsurance Agreement.

“Asserted Liability” shall have the meaning set forth in Section 18.6 hereof.

“Berkshire” means Berkshire Hathaway Inc., a Delaware corporation and the ultimate parent company of NICO.

“Berkshire Administered Entity” shall have the meaning set forth in Section 4.4(a) hereof.

“Berkshire Owned Entity” shall have the meaning set forth in Section 4.4(a) hereof.

“Books and Records” means originals or copies of all records and all other data and information, whether created before or after Closing, and in whatever form maintained, in the possession or control of a Party or its Affiliates and relating to the Scope of Service, including (i) administrative records, (ii) claim records, (iii) policy files, (iv) sales records, (v) files and records relating to Applicable Law, (vi) reinsurance records, (vii) underwriting records,

(viii) accounting records, and (ix) files, records, data and information relating to Retrospective Premiums, but excluding any (a) Tax Returns and Tax records and all other data and information with respect to Tax, (b) files, records, data, and information with respect to employees, (c) records, data and information with respect to any employee benefit plan, (d) any files, records, data and information not reasonably related to NICO’s or its Subcontractors’ administration of the Scope of Service, (e) any files, records, data and information relating to the monitoring and auditing by Reinsureds and their Affiliates of NICO’s performance in administering the Scope of Service and any internal reports related to such monitoring and auditing, (f) any materials prepared for the boards of directors of NICO, the Reinsured, or any Affiliate of any of them, and (g) any materials that are privileged and/or confidential for which the Reinsureds or their Affiliates do not have a common interest with NICO; provided, that if any such records or data referred to in the foregoing clauses (i) through (viii) contain information that does not relate to the Scope of Service, such information shall not constitute “Books and Records” for purposes of this Administrative Services Agreement.

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

“Business Day” shall have the meaning provided in the Master Transaction Agreement.

“Business Relationship Reinsurer” means a reinsurer listed on Schedule 6.3(a).

“Chartis” shall have the meaning provided in the LPT Reinsurance Agreement.

“Chartis-in-Consultation” shall have the meaning provided in Section 4.2(a)(iv) hereof.

“Chartis-Only” shall have the meaning provided in Section 4.2(a)(v) hereof.

“Closing” means the completion of the transactions contemplated in the Master Transaction Agreement to take place on the Closing Date.

“Closing Date” shall have the meaning provided in the Master Transaction Agreement.

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

“Collateral Trust Agreement” shall have the meaning in the LPT Retrocession Agreement.

“Confidential Information” shall have the meaning set forth in Section 16.1(a) hereof.

“Designated Court” shall have the meaning provided in the Master Transaction Agreement.

“Direct Costs” shall have the meaning set forth in Section 4.3(b) hereof.

“Dispute” shall have the meaning provided in the Master Transaction Agreement.

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

“Eaglestone” shall have the meaning provided in the recitals hereof.

“Extra Contractual Obligations” shall have the meaning provided in the LPT Retrocession Agreement.

“Force Majeure Event” shall have the meaning set forth in Section 17.1 hereof.

“Governmental Authority” shall have the meaning provided in the Master Transaction Agreement.

“Group I Claim” means an Asbestos Claim tendered by an account identified on Schedule 1.1(a) to the LPT Reinsurance Agreement.

“Guest User” shall have the meaning set forth in Section 16.6(a)(i).

“Host” shall have the meaning set forth in Section 16.6(a)(i).

“Hourly Rates” means, at any time, the reasonable hourly rates for personnel of the Reinsureds, or NICO, as the case may be, as of such time, including database, systems, benefits, facilities, and other overhead loads, and computed on a basis consistent with the Reinsureds’ hourly rates at the Closing Date set forth on Schedule 3.1(c).

“Included Reinsurance Recoverables” shall have the meaning provided in the LPT Retrocession Agreement.

“Indemnified Party” shall have the meaning set forth in Section 18.5 hereof.

“Indemnifying Party” shall have the meaning set forth in Section 18.5 hereof.

“Joint Authority” shall have the meaning set forth in Section 4.2(a)(iii) hereof.

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

“Losses” shall have the meaning provided in the LPT Retrocession Agreement.

“LPT Reinsurance Agreement” shall have the meaning provided in the recitals hereof.

“LPT Retrocession Agreement” shall have the meaning provided in the recitals hereof.

“Master Transaction Agreement” shall have the meaning provided in the recitals hereof.

“Medicare Set Aside” shall have the meaning provided in 42 U.S.C. § 1395y and the regulations thereunder.

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

“Mixed Claim” shall have the meaning provided in the LPT Retrocession Agreement.

“NICO” shall have the meaning provided in the Preamble hereof.

“NICO Client Entity” shall mean any Berkshire Owned Entity, any Berkshire Administered Entity, or any insurance company as to which NICO or any NICO Affiliate is an assignee, or is otherwise the beneficiary, of reinsurance receivables or recoverables and/or salvage, subrogation, or other similar receivables or recoverables originally the property of such insurance company.

“NICO-in-Consultation” shall have the meaning provided in Section 4.2(a)(ii) hereof.

“NICO-Only” shall have the meaning provided in Section 4.2(a)(i) hereof.

“NICO’s Indemnity Items” shall have the meaning provided in Section 18.3 hereof.

“Non-Asbestos Claims” shall have the meaning provided in the LPT Reinsurance Agreement.

“Non-Included Recoverables” shall have the meaning provided in the LPT Reinsurance Agreement.

“Non-Subject Claims” means claims that are not Subject Claims.

“Nonpublic Personal Information” shall have the meaning provided in Section 16.1(b) hereof.

“Other Asbestos Claim” means an Asbestos Claim that is not a Subject Claim or a Group I Claim.

“Other Recoverables” shall have the meaning provided in the LPT Reinsurance Agreement.

“Own Expense” shall have the meaning provided in the LPT Retrocession Agreement.

“Party” or “Parties” shall have the meaning provided in the Preamble hereof.

“Person” shall have the meaning provided in the Master Transaction Agreement.

“Personal Information” shall have the meaning set forth in Section 16.1(c) hereof.

“Prior Reinsurance Recoverables” means Third Party Reinsurance Recoverables in respect of, but only in respect of, Losses, Allocated Loss Adjustment Expenses, and Extra-Contractual Obligations that were Actually Paid before Inception.

“Quarterly Data File” shall have the meaning set forth in Section 8.2(c) hereof.

“Reinsureds” shall have the meaning provided in the Preamble hereof, subject to supplementation as set forth in Section 2.1(e) hereof.

“Reinsureds’ Actuarial Report” shall have the meaning provided in Section 8.2(b) hereof.

“Reinsureds’ Indemnity Items” shall have the meaning provided in Section 18.2 hereof.

“Remaining Incurred Limit” means, at any time, the greater of (a) zero and (b) the Retro Limit minus Ultimate Net Loss paid by NICO at such time minus Reserves at such time in respect of NICO’s liability for Ultimate Net Loss under the LPT Retrocession Agreement. For purposes of calculating the Remaining Incurred Limit, Reserves shall be determined on an undiscounted basis.

“Remaining Paid Limit” means, at any time, the Retro Limit minus Ultimate Net Loss paid by NICO at such time.

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

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

“Reserves” shall have the meaning provided in the LPT Reinsurance Agreement.

“Resolute” shall mean Resolute Management, Inc, a Delaware corporation.

“Retro Limit” shall have the meaning provided in the LPT Retrocession Agreement.

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

“Retrospective Premium” shall have the meaning provided in the LPT Retrocession Agreement.

“Reverse Transition Services Agreement” shall have the meaning set forth in Section 15.4(a)(i) hereof.

“Reverse Transition Trigger” shall have the meaning set forth in Section 15.4(a) hereof.

“Scope of Service” shall mean the Subject Business and the Third Party Reinsurance Agreements, but only as and to the extent they relate to (i) Subject Asbestos Liabilities, (ii) Included Reinsurance Recoverables, and (iii) to the extent set forth in Section 4.3 hereof, to Mixed Accounts and/or Mixed Claims. Scope of Service also includes, to the extent arising out of the Subject Asbestos Liabilities, any claim assertions that any Reinsured:

(a) failed to warn any Person of potential asbestos exposure,

(b) engaged in any unfair trade practice or failed to handle claims in good faith,

(d) failed to settle or pay claims within policy limits,

(e) otherwise negligently or improperly conducted claims handling,

(f) misrepresented, or otherwise committed a tort or fraud in connection with the Subject Business, or

(g) failed to properly comply with Medicare or other laws.

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

“Security Incident” shall have the meaning set forth in Section 16.5(c) hereof.

“Security Requirements” shall have the meaning set forth in Section 16.6(a)(i).

“Special Event Trigger” shall mean the occurrence of any of the following: (i) NICO’s A.M. Best Financial Strength Rating falls below A-, or (ii) NICO becomes subject to dissolution, liquidation, conservation, rehabilitation, bankruptcy, statutory reorganization, receivership, compulsory composition, or similar proceedings in any jurisdiction, or if one or more creditors of NICO take over its management, or if NICO otherwise enters into any arrangement with creditors, or makes an assignment in whole or in part for the benefit of creditors, or if any significant part of NICO’s undertakings or property is impounded or confiscated by action of any Governmental Authority, or if NICO consents to or its shareholder(s), Board, or management authorizes or consents to any of the foregoing.

“Steady State” means the period following the Transition Period, in which Administrative Services will be performed on an ongoing basis by the entity whose responsibility it is to perform them under this Administrative Services Agreement.

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

“Subject Asbestos Liabilities” shall have the meaning provided in the LPT Reinsurance Agreement.

“Subject Business” shall have the meaning provided in the LPT Reinsurance Agreement.

“Subject Claim” means an Asbestos Claim within the Subject Asbestos Liabilities.

“Subject Contract” means any Underlying Policy or any Third Party Reinsurance Agreement.

“Systems” shall have the meaning set forth in Section 16.6(a)(i) hereof.

“Tax” shall have the meaning provided in the Master Transaction Agreement.

“Tax Return” shall have the meaning provided in the Master Transaction Agreement.

“Third Party Reinsurance Agreements” shall have the meaning provided in the LPT Retrocession Agreement.

“Third Party Reinsurance Recoverables” shall have the meaning provided in the LPT Retrocession Agreement.

“Third Party Reinsurers” shall have the meaning provided in the Master Transaction Agreement.

“Transaction Documents” shall have the meaning provided in the LPT Reinsurance Agreement.

“Transition” shall mean the transfer of systems, data, and functional capability from Reinsureds to NICO so that NICO may exercise its responsibilities under this Administrative Services Agreement.

“Transition Period” shall mean the period commencing with the Closing Date and ending at such time as the Parties agree that the Transition has been substantially completed. As of the date hereof, the Parties estimate that the Transition Period will be approximately twelve months.

“Transition Services Agreement” means the document annexed as Exhibit B hereto, which is incorporated into this Administrative Services Agreement and describes the services to be provided during the Transition Period by Reinsureds to NICO, and by NICO to Reinsureds, and the compensation therefor.

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

“Underlying Policy” means any policy, contract, slip, binder, or other evidence of insurance or reinsurance that has given rise to, or may in the future give rise to, Subject Asbestos Liabilities.

“Virus” means any “back door,” “time bomb,” “Trojan horse,” “worm,” “drop dead device,” “virus,” “malicious logic,” or other similar software routines, devices, computer codes, programs or hardware components or other undisclosed feature or file that (i) is designed to permit unauthorized access to software, hardware or data or other systems elements or (ii) intentionally may disrupt, disable, harm, erase or otherwise impede in any manner the operation of the foregoing features or files, any portion thereof or any other software, firmware, hardware, network or other systems element.

ARTICLE II
AUTHORITY; SERVICE STANDARDS

2.1 Appointment

(a) Each of the Reinsureds hereby appoints NICO, for the period specified in Article XV hereof, as an independent contractor of such Reinsured to perform the administrative and other services identified herein as to be performed by NICO (the “Administrative Services”), solely within the Scope of Service and all on the terms, and subject to the limitations, as set forth in this Administrative Services Agreement.

(b) NICO accepts such appointment and agrees to perform the Administrative Services on behalf of Reinsureds on such terms and subject to such limitations.

(c) Each Party shall cooperate to the full extent reasonably possible with the other Parties in the transfer of responsibility for the performance of the Administrative Services from Reinsureds to NICO in accordance with the terms of this Administrative Services Agreement and the Transition Services Agreement.

(d) In order to assist NICO in the performance of the Administrative Services hereunder, Reinsureds shall deliver to NICO and, if requested by NICO, to Resolute so long as it remains an Affiliate of NICO and is acting as a Subcontractor, an appropriate power of attorney that shall nominate, constitute, and appoint NICO and/or Resolute, as the case may be, as their attorney-in-fact with respect to the rights, duties, and privileges and obligations of Reinsureds in and to matters within the Scope of Service, 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 and enforce Subject Contracts within the Scope of Service, to adjust, to defend, to settle, and to pay Subject Claims, and to take such other and further action as may be necessary or desirable to effect the transactions contemplated by the LPT Reinsurance Agreement, the LPT Retrocession Agreement, the Master Transaction Agreement, this Administrative Services Agreement and the Transition Services Agreement, but in all cases only to the extent of the rights and authority granted to NICO pursuant to this Administrative Services Agreement and the Transition Services Agreement and in accordance with the terms of this Administrative Services Agreement and the Transition Services Agreement.

(e) At such time as an entity identified in paragraph (ii) or (iii) of the definition of Reinsured in the LPT Retrocession Agreement executes the addendum to the LPT Reinsurance Agreement specified in such definition, it shall likewise execute an addendum to this Administrative Services Agreement acknowledging that it is bound by the terms and conditions hereof, and it shall thereupon become a Reinsured for all purposes hereunder.

2.2 Services Standards

NICO shall perform the Administrative Services provided for hereunder (including under the Transition Services Agreement) on behalf of Reinsureds in a professional and competent manner and in accordance with (i) the terms of the Subject Contracts within the Scope of Service, (ii) to the extent not in conflict with any other provision of this Section 2.2, standards of service that conform with NICO’s service standards for administering similar insurance contracts issued by NICO in its own name, and (iii) Applicable Law and, subject to the foregoing and the purposes of this transaction, shall act in such a manner as not to materially prejudice Reinsureds and with due regard for their reputation, or trust of their respective employees, directors and

officers, as insurers and as professional claims managers. NICO shall at all times maintain, or ensure that its Subcontractors maintain for it, 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. NICO acknowledges that the due and timely performance of all Administrative Services required by this Administrative Services Agreement and the Transition Services Agreement in a professional and competent manner is of critical importance to the Reinsureds.

2.3 Compliance; Licensure

(a) NICO shall comply with all Applicable Law including all licenses, consents, authorizations, permits, orders and qualifications from and filings with Governmental Authorities necessary to perform the Administrative Services required by this Administrative Services Agreement and the Transition Services Agreement in connection with the performance of its duties hereunder and shall act consistently in all material respects with, and not knowingly cause Reinsureds to be out of compliance with, the terms of the Subject Contracts. NICO shall communicate promptly to the Reinsureds in writing upon having knowledge of the non-renewal, lapse, suspension, or termination of any license, consent, authorization, permit, order, qualification or filing required by Applicable Law in connection with the Scope of Service.

(b) NICO shall execute data protection agreements, such as the Standard Contractual Clauses issued by the European Commission, to the extent required by Applicable Law in connection with its performance of the Administrative Services and the Transition.

(c) NICO warrants that it is, and it shall use its commercially reasonable efforts to insure that its Subcontractors are, and shall 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 licensed as a third-party administrator by the Governmental Authorities of all jurisdictions in which Reinsureds are licensed as of the Closing Date. NICO shall bear at its Own Expense all costs and expenses relating to its own licensing and that of its Subcontractors and that of the employees, agents, and representatives of any of them.

2.4 Independent Contractor

For all purposes hereof (including the Transition Services Agreement), NICO shall at all times act as an independent contractor. NICO and its Affiliates, on the one hand, and Reinsureds and their Affiliates, on the other hand, shall not be deemed employees, representatives, partners, joint venturers, or fiduciaries of one another, nor shall this Administrative Services Agreement, the Transition 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. NICO 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 NICO or any of its Affiliates.

2.5 Subcontracting

(a) NICO shall not subcontract the performance of any services that NICO is to provide hereunder (including under the Transition Services Agreement) to another Person (a “Subcontractor”) without the prior written consent of Reinsureds (which consent shall not be unreasonably withheld, conditioned or delayed); provided, however, that such consent will not be required

if the applicable Subcontractor is Resolute for such time as it is an Affiliate of NICO and provided further that in the case of Administrative Services relating to other than claims handling, Reinsureds’ consent will not be required if the applicable Subcontractor is an Affiliate of NICO.

(b) Notwithstanding the foregoing, NICO shall not permit a Subcontractor other than Resolute to participate in Transition activities at Reinsureds’ Jersey City Asbestos Claims Unit without Reinsureds’ prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed).

(c) In the event of any such subcontracting, NICO shall not be relieved from any of its obligations or liabilities hereunder, including compliance with Applicable Law and maintenance of proper licensure, and NICO 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 NICO; provided to that the extent that a service is provided by one or more Subcontractors and employees of the Subcontractor(s) providing a service meet applicable licensing requirements, NICO shall be deemed to be in compliance with said licensure requirements.

ARTICLE III
COMPENSATION

3.1 Compensation

(a) Except as otherwise provided in Section 4.3, NICO shall perform the Administrative Services within the Scope of Service at its Own Expense and without any rights of reimbursement from Reinsureds, in consideration of Reinsureds having entered into the LPT Reinsurance Agreement and the Master Transaction Agreement and the transactions contemplated thereby, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged.

(b) Except as not otherwise permitted by Applicable Law or the Master Transaction Agreement or the Ancillary Agreements, and in accordance with the provisions of the Transition Services Agreement, the Reinsureds shall make available during the Transition Period the matters identified in the Transition Services Agreement. NICO shall at its Own Expense reimburse the Reinsureds for their Transition expenses in accordance with the Transition Services Agreement.

(c) At the reasonable request of NICO, Reinsureds shall perform searches for policy, reinsurance, claims, payment and underwriting files of the Reinsureds and shall provide copies and if necessary testimony with respect to, such policy, reinsurance, claims, payment and underwriting files, to NICO. NICO shall, at its Own Expense and upon demand therefor but without duplication of amounts paid under the Transition Services Agreement, pay (i) the Reinsureds’ Hourly Rates for the performance of such searches for policy, reinsurance, claims and underwriting files, (ii) for all of the copies made pursuant to this Section 3.1(c) and (iii) the Reinsureds’ Hourly Rates for time spent in connection with preparing to provide and providing testimony as to these matters. NICO shall likewise pay Reinsureds’ Hourly Rates for significant reinsurance-related activities requested by NICO that are outside the scope of the Steady State activities listed in the Transition Services Agreement. NICO acknowledges that the hourly rates set forth in Schedule 3.1(c) are reasonable as of the Closing Date.

(d) Reinsureds shall store and maintain closed claim files at their Own Expense and in accordance with the Reinsureds’ closed claim file policy as in effect from time to time for storing and maintaining such closed claim files. Prior to destruction of any policy, reinsurance, claims, payment or underwriting files of the Reinsureds relating to the Subject Asbestos Liabilities, Reinsureds shall advise NICO and NICO, at its Own Expense, may retain such files.

(e) Reinsureds shall maintain existing arrangements for ceded broker fee-for-service contracts, or reasonable replacement thereof, and will be responsible for the payment of ceded broker fees.

ARTICLE IV
ADMINISTRATIVE SERVICES

4.1 Administrative Services

(a) Administrative Services to be performed by NICO with the respect to matters within the Scope of Service shall include the right and obligation to perform each of the following:

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

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

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

(iv) to agree to, or exercise any right to, set off any claims on behalf of Reinsureds against reinsurance recoveries or vice versa or to settle any balance of account owing to or from the Reinsureds;

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

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

(vii) to enter into any arrangements that NICO considers will or may avoid or reduce any liability for Losses, Allocated Loss Adjustment Expenses, or Extra Contractual Obligations;

(viii) to use the name of any Reinsured 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;

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

(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 coordinate with Reinsureds on the handling of escheat claims with respect to the Subject Asbestos Liabilities;

(xiii) 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 NICO to perform the Administrative Services to be performed by it pursuant to this Administrative Services Agreement;

(xiv) to retain and instruct lawyers, claims adjusters, or other consultants or experts in connection with the foregoing;

(xv) collect, pursue, settle or compromise Retrospective Premiums; and

(xvi) all matters relating to the administration, settlement, and payment of claims and Extra Contractual Obligations with respect to Subject Asbestos Liabilities, all matters relating to administration of and pursuit of recovery of Included Reinsurance Recoverables and Other Recoverables, and all other matters reasonably ancillary to these enumerated matters.

For the avoidance of doubt, NICO’s right to perform and performance of such Administrative Services is subject to all the terms and conditions of this Administrative Services Agreement, so that (by way of example only) services with respect to reinsurance recoveries are subject to Article VI hereof.

(b) The authority granted NICO in this Administrative Services Agreement, including without limitation Articles IV, V, and VI, relates solely to matters within the Scope of Service. NICO has no authority to act for or on behalf of Reinsureds for matters outside the Scope of Service except as expressly set forth within this Administrative Service Agreement and the Transition Services Agreement.

(c) From and after the Closing Date, Reinsureds shall not settle, commute, or compromise any direct Subject Claim, or any reinsurance claim arising from the Subject Asbestos Liabilities, or amend, alter or endorse any Underlying Policy insofar as it relates to the Subject Asbestos Liabilities except:

(i) with the prior written consent of NICO (which consent shall not be unreasonably withheld, conditioned or delayed), or

(ii) as expressly set forth in Articles IV, V and VI.

4.2 Levels of Authority

(a) Subject at all times to the other terms and conditions hereof, authority with respect to given actions or groups of actions is given in this Administrative Services Agreement, at five levels, as follows:

(i) “NICO-Only” means that NICO retains all authority with respect to the action or group of actions and need not consult with Reinsureds before proceeding.

(ii) “NICO-in-Consultation” means that NICO retains ultimate responsibility with respect to the action or group of actions but must consult in good faith with Reinsureds before proceeding.

(iii) “Joint Authority” means that neither NICO nor Reinsureds may act without the other Party’s consent, which may be given, conditioned, or withheld in such other Party’s sole discretion.

(iv) “Chartis-in-Consultation” means that Reinsureds retain ultimate responsibility with respect to the action or group of actions but must consult in good faith with NICO before proceeding.

(v) “Chartis-Only” means that Reinsureds retain all authority with respect to the action or group of actions and need not consult with NICO before proceeding.

(b) The Parties may, by mutual agreement, establish written protocols for how, when, and how often consultation shall take place with respect to any actions or groups of actions as to which authority is NICO-in-Consultation or Chartis-in-Consultation.

4.3 Mixed Accounts and Mixed Claims

(a) The Parties acknowledge that there will be insureds within the Subject Business, or collections of related such insureds whose claims are normally processed in conjunction with one another, that have or may potentially have claims from more than one of the categories Subject Claims, Group I Claims, Other Asbestos Claims, Non-Asbestos Claims, and Mixed Claims. Each such insured or collection of related insureds is referred to in this Administrative Services Agreement as a “Mixed Account.”

(i) It is the Parties’ general expectation that, in the administration of Mixed Accounts, (A) the Reinsureds shall administer such portions of the Mixed Account as relate to Non-Subject Claims, and (B) NICO shall administer such portions of the Mixed Account that relate to Subject Claims. NICO and the Reinsureds shall establish and maintain an open channel of communication with each other with respect to the claims contained within each Mixed Account.

(ii) The Parties shall create during Transition and thereafter maintain and amend as necessary a list of the accounts that are currently being treated as Mixed Accounts.

(b) Where NICO provides services for a claim or related claims that are partially or in whole Non-Subject Claims, due either to lack of information or to the indivisibility of the claim or related claims, the Reinsureds shall reimburse NICO for the Direct Costs of providing such services, with the allocation of the Direct Costs between NICO and the Reinsureds to be on the basis of exposure each had on the claim (in the case of NICO, the exposure is in its capacity as retrocessionaire under the LPT Retrocession Agreement). If NICO has reason to believe that a claim it is handling is partially not within the Subject Asbestos Liabilities and NICO has reason to believe that the Reinsureds’ exposure on the claim or related claims is in excess of $100,000, NICO shall promptly notify the Representative of the Reinsureds or his designee, and the parties shall reach a good faith agreement on the handling of the claim or related claims. “Direct Costs” as referenced herein refers to the Hourly Rates of the individual(s) handling the account multiplied by the actual hours devoted by such individual(s) to the Mixed Account. To the extent practicable, allocation of Direct Costs will be by actual hours worked and otherwise in accordance with the principles set forth in subparagraphs (c) and (d) below.

(c) If an individual claim on a Mixed Account is a Subject Claim, inward or outward payments in connection with such claim shall be allocated to the Subject Asbestos Liabilities. If an individual claim on a Mixed Account is a Non-Subject Claim, then no inward or outward payment in connection with such claim shall be allocated to the Subject Asbestos Liabilities.

(d) To the extent practicable, inward and outward payments on any Mixed Claim whether or not arising from a Mixed Account, shall be allocated to, or not to, Ultimate Net Loss on the Subject Asbestos Liabilities based upon the actual cause of the injury or damage the claimant, 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 made, without prejudice to either Party’s right to adjust any allocation within one year of the settlement or judgment.

(e) To the extent that Allocated Loss Adjustment Expenses incurred for a Mixed Account or for a tranche of claims within a Mixed Account cannot practicably be allocated as incurred on specific claims within such account or tranche, then such expense payments shall be provisionally allocated on an equitable basis to, or not to, Ultimate Net Loss on the Subject Asbestos Liabilities in accordance with the allocation of the gross indemnity exposure on the claims in question. Such expense payments will be billed as they are made and shall be without prejudice to either Party’s right to adjust any allocation, no later than one year after settlement or judgment of all claims in the account or tranche, in accordance with the manner indemnity payments, if any, on such account or tranche have been allocated.

(f) In the event that a claim arises subject to Section 4.3(c) and Section 4.3(d), 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, 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.

4.4 Conflict of Interest

(a) Whenever a claim otherwise within the Scope of Service arises: (i) by, or from, any Reinsured against Berkshire or any insurer, reinsurer or other company that is a direct or indirect Subsidiary of Berkshire or is otherwise an Affiliate of Berkshire (each, a “Berkshire Owned Entity”), or that involve NICO or Resolute or another Berkshire Owned Entity as an administrator for a third party (a “Berkshire Administered Entity”), or (ii) against any Reinsured by, or from, a Berkshire Owned Entity, or that involve a Berkshire Administered Entity as such, NICO shall provide prompt written notice of such claim to the Reinsureds upon becoming aware thereof, including such details as may be appropriate. NICO shall use commercially reasonable efforts to keep itself informed as to the identity of Berkshire Owned Entities and Berkshire Administered Entities. If NICO and Reinsureds agree that NICO should handle the claim notwithstanding the conflict of interest, NICO shall do so in good faith and in pursuit of the singular interests of Reinsureds. Otherwise, Reinsureds shall handle all discretionary aspects of the claim in accordance with the standards set forth in Section 2.2, and NICO shall perform such ministerial tasks (such as making accounting entries or moving funds) as may be required under the direction of Reinsureds.

(b) Reinsureds and NICO acknowledge that Berkshire Owned Entities manage claims on behalf of entities in addition to Reinsureds. In recognition thereof:

(i) If Berkshire Owned Entities are engaged in substantive settlement discussions (including without limitation discussions aimed at buyout agreements or coverage-in-place agreements) with an insured or a group of insureds both on behalf of Reinsureds and on behalf of one or more Berkshire Administered Entities not Affiliates of Reinsureds (regardless of whether the discussions are conducted together or are ostensibly or actually separate), or if it is contemplated that such discussions might take place either simultaneously or in near proximity in time, NICO shall consult with the Reinsureds as to how best to protect Reinsureds from the potential conflicts of interest inherent in such joint or nearly proximate negotiations while preserving to all parties such efficiencies as such joint negotiations may engender.

(ii) NICO shall initiate similar consultations with Reinsureds in the event there are, or are contemplated to be, joint, simultaneous, or nearly proximate negotiations with one or more entities that reinsure both Reinsureds and at least one Berkshire Administered Entity.

(iii) In the circumstances described in clauses (i) and (ii) above, claims and reinsurance authority that would otherwise be NICO-Only or NICO-in-Consultation shall be Joint Authority.

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 Subject Claims, including those functions set forth in this Section 5.1.

(a) NICO shall acknowledge, consider, review, investigate, deny, settle, pay or otherwise dispose of each Subject Claim. All payments of Losses, Allocated Loss Adjustment Expenses, and Extra Contractual Obligations in respect of Subject Asbestos Liabilities shall be made in accordance with Section 13.1 hereof.

(b) Without limiting paragraph (a) of this Section 5.1, and subject to Reinsureds providing the services set forth in the Transition Services Agreement, as necessary and appropriate, NICO shall:

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

(ii) review all Subject 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 Underlying Policies in accordance with applicable requirements of Governmental Authorities and provide a copy of such log upon the Reinsureds’ request;

(v) subject to Section 8.1 and paragraph (vi) below, provide Reinsureds with such information as is necessary for them to comply with regulatory requirements related to the Subject Asbestos Liabilities;

(vi) provide necessary Medicare Set Aside information as directed by Reinsureds and, subject to receipt of necessary information from Reinsureds, comply on behalf of Reinsureds with Medicare lien requirements, it being understood that NICO shall not be required to report directly to Centers for Medicare and Medicaid Services;

(vii) subject to Section 8.1, respond promptly to all written or oral Subject Claims-related communications that NICO reasonably believes to require a response; and

(viii) in accordance with Articles VIII and XII hereof, respond to, or assist Reinsureds in responding to, regulatory and legal matters to the extent such matters relate to Subject Claims.

5.2 Direct Claims Authority

Subject to Sections 4.3 and 4.4 hereof, NICO’s authority with respect to direct claims handling within the Scope of Service is NICO-Only except as follows:

(a) Claims of relationship insureds scheduled on Schedule 5.2 hereof, as such may be reasonably amended from time to time, are NICO-in-Consultation.

(b) Claims involving coverage issues affecting multiple lines of business, as reasonably identified from time to time by Reinsureds to NICO, are NICO-in-Consultation.

(d) Settlements of more than $100 million or involving more than 10% of the Remaining Paid Limit are NICO-in-Consultation.

(e) New or amended policy buybacks or coverage-in-place agreements, or amendments to Underlying Policies involving material amounts of exposure to both Subject Asbestos Liabilities and Non-Subject Liabilities are Joint Authority. Similar transactions for Mixed Accounts that are Subject-Asbestos-only or non-asbestos-only are NICO-in-Consultation or Chartis-in-Consultation, respectively. For the avoidance of doubt NICO does not have authority to amend, alter, or endorse any Underlying Policy,

(f) Allocation of settlement amounts among affected policies is NICO-in- Consultation, if the amount being allocated exceeds $10,000,000, unless another provision of this Administrative Services Agreement provides for greater control by Chartis, in which event such other provision shall control.

ARTICLE VI
ADMINISTRATION OF THIRD PARTY REINSURANCE AGREEMENTS

6.1 Third Party Reinsurance Administration

(a) In performing the Administrative Services with respect to the Third Party Reinsurance Agreements within the Scope of Service, NICO shall have the right and obligation to,

subject to the authority levels granted herein and the other terms and conditions hereof and pursuant to mutually agreed upon procedures:

(i) administer and collect, on behalf of and in the name of the applicable Reinsureds, Included Reinsurance Recoverables and Other Recoverables due in respect of the Subject Asbestos Liabilities in accordance with the contractual terms of the applicable Third Party Reinsurance Agreements and Underlying Policies in a commercially reasonable manner;

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

(iii) initiate Legal Proceedings in the name of the applicable Reinsured in those instances where such action is necessary in order for the applicable Reinsured to enforce or protect its rights under the Third Party Reinsurance Agreements in respect of the Subject Asbestos Liabilities;

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

(v) secure and draw upon any letter of credit or other funds held as appropriate under any Third Party Reinsurance Agreement; and

(vi) perform other certain administrative functions relating to the Third Party Reinsurance Agreements within the Scope of Service as agreed to by the Parties from time to time.

(b) In general terms, and subject to precise procedures to be agreed in the course of the Transition, NICO will provide on a monthly basis (bi-weekly in quarterly close months), or as agreed by the Parties data feeds to Reinsureds, with content and in formats specified by Reinsureds, concerning NICO’s direct claims handling, and Reinsureds will process those feeds through Reinsureds’ existing systems to generate reinsurance proofs, advices, and notices.

(c) NICO shall pay Reinsureds, at NICO’s Own Expense, a fee to be determined during the course of Transition for the use of Reinsureds’ reinsurance systems and personnel as provided in Section 6.1(b) above. The fee may include fixed monthly amounts and/or time charges at Hourly Rates, as the parties shall determine, and shall be based upon the principle that Reinsureds are entitled to be compensated for any activities that they would not be performing if NICO were performing all work in connection with collection of Included Reinsurance Recoverables and were simply reporting financial results to Reinsureds. Thus, by way of example only, Reinsureds are not entitled to compensation for Schedule F reporting activities, but they are entitled to compensation for use of their reinsurance systems to generate proofs, advices, and notices.

6.2 Expense of Reinsurance Recovery Efforts

For the avoidance of doubt, it is agreed that except in unusual circumstances the only reinsurance recovery costs chargeable as Allocated Loss Adjustment Expenses are the costs of the Services identified in Section 6.1(a)(iii) above. The cost of the remaining services set forth in Section 6.1(a) is, in general, at NICO’s Own Expense.

6.3 Responsibility and Authority With Respect to Reinsurance Activities

Authority with respect to reinsurance activities within the Scope of Service is NICO-Only except as otherwise set forth herein and as follows:

(a) Authority to draw upon reinsurance security posted by Business Relationship Reinsurers is Chartis-Only.

(b) Authority to demand and/or draw upon reinsurance security posted by reinsurers that are not Business Relationship Reinsurers is NICO-in-Consultation, provided that such authority is Joint Authority if there is a material amount of Non-Included Recoverables under the Third Party Reinsurance Agreement pursuant to which the security is to be demanded or posted.

(c) Authority to commute any Third Party Reinsurance Agreement that has a greater-than-de minimis amount of Included Reinsurance Recoverables is Joint Authority. Authority to commute other Third Party Reinsurance Contracts is Chartis-Only. Authority to effect a partial commutation of a Third-Party Reinsurance Agreement containing a greater-than-de minimis amount of Included Reinsurance Recoverables on a basis that excludes asbestos from the commutation is Chartis-in-Consultation.

(d) Authority to initiate Legal Proceedings against a reinsurer on a Third Party Reinsurance Agreement is NICO-in-Consultation, provided, however, that if Reinsureds decline to consent to commencement of Legal Proceedings, then NICO may not commence such proceedings for 60 days to enable Reinsureds to resolve the issues that led to their declining to consent. Thereafter, NICO may proceed, provided, however, that it shall, in doing so, endeavor to take into account the reasons for Reinsureds’ declining to consent. If waiting 60 days would create a risk of a time bar, NICO may commence the Legal Proceedings at such time as is necessary to prevent application of the time bar but shall seek to stay the proceedings for the remainder of the 60-day period.

(e) Authority to settle claims or tranches of claims vis-à-vis reinsurer(s) on one or more Third Party Reinsurance Agreements, to the extent solely within the Subject Asbestos Liabilities, is NICO-Only, provided that NICO shall not accept a discount in percentage or dollar terms greater than the amounts set forth in Schedule 6.3(e) without Reinsureds’ consent, which shall not be unreasonably withheld or delayed.

(f) Authority and responsibility for Third Party Reinsurance Recoverables arising out of Mixed Claims or Mixed Accounts follows the authority and responsibility for the underlying direct claim(s).

(g) NICO and Reinsureds shall meet periodically to discuss issues of treaty reinsurance coverage that have application and/or implications beyond Included Reinsurance Recoverables, and NICO shall not take coverage positions with respect to specific treaties contrary to those taken on those treaties as a matter of policy without the consent of Reinsureds, which shall be withheld only on an articulable basis of likely harm to Reinsureds with respect to recovery efforts for Non-Included Recoverables.

(h) Authority with respect to the following arbitration matters is as follows:

(i) Selection of arbitrators and umpires is NICO-in-Consultation, and NICO shall in good faith make every reasonable effort to comply with Chartis’s requests in this area.

(ii) Selection of outside counsel and expert witnesses is NICO-in-Consultation, which selection to be taken from lists to be mutually agreed from time to time.

(i) Authority to xxxx and engage in routine collection activities vis-à-vis proportional treaty reinsurers and retrocessionaires of Chartis internal facilities is Chartis-Only. Handling asbestos-related audits with respect to such reinsurers and retrocessionaires shall be the mutual responsibilities of the Parties in accordance with their respective functions.

(j) Authority to take an offset against a Third-Party Reinsurer not in rehabilitation or insolvency is Joint Authority, provided, however, that authority shall be NICO-in-Consultation if Reinsureds have informed NICO that the Non-Included Recoverables from the Third-Party Reinsurer are de minimis, and provided further that authority is Chartis-Only if the Included Reinsurance Recoverables from the Third-Party Reinsurer are de minimis.

(k) Authority with respect to insolvent Third-Party Reinsurers is as follows:

(i) Submission of proofs of claim is NICO-Only for Subject Asbestos Liabilities, but is to be coordinated with the overall Chartis submission as needed.

(ii) Authority to settle claim amounts for individual claims or tranches of claims is as provided for solvent reinsurers.

(iii) Taking an offset against an insolvent is Joint Authority, provided, however, that authority shall be NICO-in-Consultation after the bar date set in the insolvency proceedings if the aggregate claims of Reinsureds for Non-Included Recoverables are de minimis and Chartis-in-Consultation if the aggregate claims of Reinsureds for Included Recoverables are de minimis.

6.4 Forgoing Collection of Third Party Reinsurance Recoverables

NICO shall have the authority to decide not to collect or attempt to collect Third Party Reinsurance Recoverables solely related to the Subject Asbestos Liabilities that NICO deems are uncollectible; provided, however, that neither NICO nor Reinsureds may decide to forgo the collection or attempted collection of any Third Party Reinsurance Recoverable that involves a Mixed Account claim that such Party is administering without the prior written consent of the other Party.

6.5 Allocation of Reinsurance Recoveries

Recoverables and recoveries from a given Third-Party Reinsurer will be allocated as follows between, on the one hand, Included Reinsurance Recoverables and, on the other hand, Prior Reinsurance Recoverables or other Non-Included Recoverables:

(a) To the extent feasible, allocation of reinsurance recoverables on account of Mixed Claims will follow the allocation of the direct liability.

(b) To the extent the Third-Party Reinsurer’s remittance identifies the items being settled, and such items are either all Included Reinsurance Recoverables or all Non-Included Recoverables, the Third-Party Reinsurer’s designation shall control.

(c) To the extent the Third-Party Reinsurer’s remittance identifies the items being settled, and the portion of each item being settled is determinable from the face of the remittance, the Third-Party Reinsurer’s designation shall control.

(d) If the Third-Party Reinsurer’s remittance does not identify the portion of each item being settled, the Party receiving the remittance (i.e., either NICO on behalf of Reinsureds or Reinsureds on their own behalf) may, following consultation with the other Party, inquire of the Third-Party Reinsurer as to what was intended to be settled, and if the response brings the remittance within paragraph (b) and/or (c) above, the Third-Party Reinsurer’s designation shall control.

(e) Otherwise, recoveries from a given Third-Party Reinsurer with respect to Subject Asbestos Liabilities will be allocated pro rata to outstanding billed amounts.

(f) In all events, the allocation will follow wherever possible any designation the Third-Party Reinsurer makes on the remittance (except a designation that is clearly incorrect on its face), so that, by way of example only, a remittance identified to a particular treaty, but not identified further to specific xxxxxxxx, will be allocated by the foregoing rules only among outstanding invoices with respect to that treaty.

(g) Absent agreement of the Reinsureds and NICO in each instance, remittances will not be allocated to a billed amount that the Third-Party Reinsurer has made clear it is disputing unless and until all other billed amounts have been satisfied. This paragraph (g) controls over all other decision rules except (X) paragraph (f), to the extent applicable, and (Y) an express designation of the remittance by the Third-Party Reinsurer as being applicable to the disputed xxxx(s).

(h) Allocation of amounts recovered via offset or draws on reinsurance security shall follow the allocation methodology set forth in paragraphs (a)-(g) of this Section 6.5.

ARTICLE VII
ADMINISTRATION OF LPT REINSURANCE AGREEMENT

7.1 Role of NICO on Behalf of Reinsureds

(a) NICO, as administrator on behalf of Reinsureds, shall provide such accounts and other information to Reinsureds and Eaglestone as is necessary to prepare cession and cash accounts for the LPT Reinsurance Agreement.

(b) NICO has no authority to settle LPT Reinsurance Agreement accounts on behalf of Reinsureds other than by the mechanism set forth in Section 13.1 hereof.

7.2 No Role of NICO on Behalf of Eaglestone

Except for specific authority granted in the LPT Retrocession Agreement, NICO has no authority whatsoever to act on behalf of Eaglestone.

ARTICLE VIII
REPORTING AND REGULATORY COMPLIANCE

8.1 Regulatory Filings and Examinations

(a) Commencing to the extent possible on the Closing Date, and in any event no later than the completion of the Transition, and at all times thereafter, NICO shall at its Own Expense take all necessary action within its control so that Reinsureds, solely with respect to matters within

the Scope of Service, satisfy all current and future informational reporting and any other requirements imposed by any Governmental Authority. Without limiting the foregoing, NICO shall timely transmit to Reinsureds the information necessary for Reinsureds to prepare such reports and summaries, including statistical summaries, as are necessary for Reinsureds to satisfy any requirements imposed by a Governmental Authority upon any Reinsured with respect to matters within the Scope of Service. In addition, NICO, upon any Reinsured’s reasonable request, shall promptly provide to such Reinsured copies of all existing records relating to the Scope of Service (including, with respect to records maintained in machine readable form, hard copies) that are necessary to satisfy such requirements.

(b) NICO shall reasonably assist Reinsureds and cooperate with the 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 matters within the Scope of Service.

(c) Any reports or other materials required to be prepared by NICO under this Section 8.1 shall be prepared on a timely basis in order for Reinsureds to be able to comply with any filing deadlines required by contract or by Reinsureds’ internal procedures and policies, in each case to the extent Reinsureds previously provided to NICO with sufficient advance notice thereof and reasonably consistent with NICO’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.

8.2 Financial Reporting Obligations

NICO shall report and account to Reinsureds as set forth in this Section 8.2.

(a) On an annual basis, starting one year from the end of the Transition Period, NICO shall provide to the Reinsureds a current estimate of the ultimate exposure for Loss, Extra-Contractual Obligations, Included Reinsurance Recoverables, and Other Recoverables related to the Subject Asbestos Liabilities, by account, on a gross, ceded and net basis prior to the application of the LPT Reinsurance Agreement.

(b) In addition to and not in limitation of Reinsureds’ rights under Section 10.3, NICO shall allow the Reinsureds and their Representatives reasonable access to NICO’s actuarial and claims personnel, documentation, systems and records to the extent required by Reinsureds in order to complete Reinsureds’ actuarial report (insofar as such report relates to the Subject Asbestos Liabilities, the “Reinsureds’ Actuarial Report”) and statutory actuarial opinion.

(c) Subject to an early processing systems cut-off date that will be agreed during Transition, within two (2) Business Days after the end of each quarter, NICO shall deliver to Reinsureds a quarterly data file (each a “Quarterly Data File”), in a form to be agreed during Transition, 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 Closing Date to the last day of the quarter in which this Administrative Services Agreement is executed. For claims and other transactions within the Scope of Service emanating from Chartis International, NICO shall supply such similar reports and information as Reinsureds shall reasonably require on a schedule that accommodates the non-calendar-quarter closings of Chartis International.

(d) In addition to the reports described in paragraphs (a) through (c) of this Section 8.2, NICO shall provide the Reinsureds such information related to the Scope of Service as Reinsureds may reasonably request, provided that such information is compiled by NICO in the ordinary course of business.

(e) Solely for the purposes of determining (i) the Required Amount in a Retrocession Credit Event, (ii) the Security Amount in the event of a Collateral Triggering Event or (iii) if NICO may exercise its withdrawal rights pursuant to Section 6.3 of the Collateral Trust Agreement, NICO 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’ determination of Reserves. Upon receipt of such request, the Reinsureds shall provide a copy of the most recent available Reinsureds’ Actuarial Report as promptly as possible to NICO. If NICO objects to the Reinsureds’ determination of Reserves for the purposes set forth in this Section 8.2(e)(i)-(iii), above, the Parties shall retain either Xxxxxxxx Inc. or Towers Xxxxxx 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. To the extent the issue is determination of the Required Amount, the reporting actuarial firm shall adopt Reinsureds’ determination of Reserves unless it determines that such determination was manifestly unreasonable. 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.

8.3 Change in Status

(a) NICO shall (i) notify Reinsureds in writing promptly following (A) the public announcement of entry into any agreement that would result in a majority of the capital stock or a majority of the voting control of NICO no longer being owned or controlled, directly or indirectly, by Berkshire (or its successor) or (B) the adoption of any plan to liquidate, merge or dissolve NICO and (ii) obtain the prior written consent of Reinsureds prior to the sale or transfer of assets of NICO that could reasonably be expected to render NICO unable to perform its obligations under this Administrative Services Agreement.

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

8.4 NICO Controls

During the term of this Administrative Services Agreement, NICO shall maintain its accounting and oversight controls with respect to its operations consistent with the requirements under the Xxxxxxxx-Xxxxx 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 any wind-down of the Subject Asbestos Liabilities. NICO shall provide Reinsureds with documentation supporting such compliance upon the request of Reinsureds.

ARTICLE IX
REMEDY FOR ACTIONS IN EXCESS OF AUTHORITY

9.1 Materiality of Authority Limitations

The Parties acknowledge that, among other things:

(a) There are Underlying Policies against which there are claims both within and without the Subject Asbestos Liabilities. Accordingly:

(i) Actions taken by Reinsureds on matters ostensibly apart from the Subject Asbestos Liabilities can affect NICO’s overall economic position vis-à-vis the Subject Asbestos Liabilities.

(ii) Actions taken by NICO on matters ostensibly relating to the Subject Asbestos Liabilities can affect Reinsureds’ overall economic position vis-à-vis matters apart from the Subject Asbestos Liabilities.

(b) Many of the Third-Party Reinsurance Agreements providing coverage to Reinsureds for Subject Asbestos Liabilities also provide coverage for matters not within the Subject Asbestos Liabilities. Accordingly:

(i) Actions taken by NICO with respect to reinsurance coverage relating to the Subject Asbestos Liabilities can affect Reinsureds’ overall economic position vis-à-vis their reinsurers on matters apart from the Subject Asbestos Liabilities.

(ii) Actions taken by Reinsureds with respect to reinsurance coverage on claims not arising from the Subject Asbestos Liabilities can affect NICO’s overall economic position vis-à-vis reinsurance recovery on Included Reinsurance Recoverables.

(c) Actions taken either by NICO or by Reinsureds vis-à-vis third parties, whether policyholders or reinsurers, can have consequences that are impossible to undo vis-à-vis such third parties.

(d) Accordingly, compliance with the authority limitations herein, both on NICO and on Reinsureds, is a material economic element of the overall transaction for both Parties. The Parties shall maintain an open channel of communication in an effort to identify as early as possible, and address in good faith, any disputes or differences as to how such authority limitations apply in specific circumstances.

9.2 Remedy

(a) If NICO takes action with respect to an underlying insured in excess of its authority to do so, and such action increases Reinsureds’ exposure to that insured on matters apart from the Subject Asbestos Liabilities, then:

(i) NICO shall be deemed to reinsure Reinsureds directly (i.e., not via retrocession from Eaglestone), and at NICO’s Own Expense, for the increase in exposure, such deemed reinsurance to be paid as and to the extent such increase manifests itself on a paid basis.

(ii) The burden of proof shall be on Reinsureds to establish that NICO acted in excess of its authority, that its action increased Reinsureds’ economic exposure, and the amount, from time to time, by which such increase has manifested itself and thus is recoverable from NICO.

(b) If Reinsureds take action with respect to an underlying insured in excess of their authority to do so, and such action increases NICO’s exposure to Ultimate Net Loss on the Subject Asbestos Liabilities, then:

(i) The amount of such increase shall be at Reinsureds’ Own Expense as and to the extent it manifests itself on a paid basis.

(ii) The burden of proof shall be on NICO to establish that Reinsureds acted in excess of their authority, that their action increased NICO’s economic exposure, and the amount, from time to time, by which such increase has manifested itself and thus is at Reinsureds’ Own Expense.

(c) If NICO takes action vis-à-vis a reinsurer on a Third Party Reinsurance Agreement in excess of its authority to do so, and such action reduces the amount recoverable by Reinsureds on matters apart from the Subject Asbestos Liabilities, then

(i) NICO shall be deemed to reinsure Reinsureds directly, and at NICO’s Own Expense, for the increase in Reinsureds’ net caused by the reduction in the recoverable, such deemed reinsurance to be paid as and to the extent such increase manifests itself on a paid basis.

(ii) The burden of proof shall be on Reinsureds to establish that NICO acted in excess of its authority, that its action reduced Reinsureds’ recoverables, and the amount, from time to time, by which such reduction has manifested itself and thus is recoverable from NICO.

(d) If Reinsureds take action vis-à-vis a reinsurer on a Third Party Reinsurance Agreement in excess of their authority to do so, and such action reduces the amount recoverable by Reinsureds in respect of the Subject Asbestos Liabilities, then

(i) The calculation of Ultimate Net Loss at any time thereafter shall include as an Included Reinsurance Recovery the amount that would have been so included had Reinsureds not taken the action in excess of authority as and to the extent it manifests itself on a paid basis.

(ii) The burden of proof shall be on NICO to establish that Reinsureds acted in excess of their authority, that their action reduced the amount recoverable, and the amount, from time to time, by which such reduction has manifested itself and thus the deemed amount of Included Reinsurance Recoveries to be included in the calculation of Ultimate Net Loss.

ARTICLE X
BOOKS AND RECORDS

10.1 Transfer and Ownership of Books and Records

In accordance with Section 4.7 of the Master Transaction Agreement, prior to Closing, the Parties shall have in good faith agreed upon a protocol to (a) transfer to NICO the Books and

Records following the Closing and/or (b) provide NICO with reasonable access to the Books and Records during normal business hours following the Closing. 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 that are archived, Reinsureds shall not be required to transfer such archived Books and Records to NICO at the Closing, but instead shall provide NICO with reasonable access to such archived Books and Records. At any time following the Closing, Reinsureds shall at NICO’s Own Expense transfer all or a portion of the archived Books and Records to NICO upon NICO’s reasonable request.

10.2 Maintenance of Books and Records

Subject to compliance with the provisions of Section 10.3, NICO shall maintain (including backing up its computer files and maintaining facilities and procedures for safekeeping and retaining documents) Books and Records of all transactions pertaining to the Subject Business in accordance with Reinsureds’ record retention requirements in effect from time to time.

10.3 Access to Books and Records and Personnel

(a) NICO and Reinsureds shall each make the Books and Records in its or their possession or under its or their control reasonably available to Reinsureds or NICO, as applicable, or their Representatives, during normal office hours, for such auditing or any other purposes related to the LPT Reinsurance Agreement, the LPT Retrocession Agreement, or this Administrative Services Agreement as Reinsureds or NICO, as applicable, may require. Reinsureds or NICO, as applicable, shall further, at their Own Expense, be entitled to make copies of the Books and Records for these purposes.

(b) NICO shall, from time to time at the reasonable request of Reinsureds, make its managerial personnel available for review and discussion with Reinsureds of any and all matters pertaining to the Scope of Service.

(c) NICO shall provide all reasonably needed information, including access to claim files and personnel, for the purpose of periodically updating actuarial studies of gross liabilities with respect to the gross, net and ceded Subject Asbestos Liabilities. This obligation shall survive the expiration of this Administrative Services Agreement and shall continue for so long as NICO may have any liability or obligations arising under this Administrative Services Agreement or the LPT Retrocession Agreement.

(d) To the extent that NICO may be required under the provisions of paragraphs (a), (b) or (c) above to provide information that it does not compile or have readily available in the ordinary course of business or to provide access to its personnel for other than routine meetings, Reinsureds shall reimburse NICO for its fully loaded cost of such compliance. For the avoidance of doubt, any access to personnel in connection with the fulfillment of the obligations of the Reinsureds or its Affiliates under SAS 70 (or related or successor requirement) shall not be considered routine.

(e) NICO and/or Reinsureds, as applicable, shall make the Books and Records and its personnel reasonably available at any such location and manner as may be required by any Third Party Reinsurance Agreement.

(f) NICO shall not, and shall cause its Affiliates and Subcontractors to not, dispose of, alter or destroy any material Books and Records related to Subject Claims or other relevant

materials other than in accordance with NICO’s books and records retention policies as may be in effect from time to time, but in no event will NICO 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.

(g) Notwithstanding any other provision of this Section 10.3, 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 but subject to de novo review in an arbitration commenced pursuant to Article XIX hereof, that doing so would violate Applicable Law or a contract, agreement or obligation of confidentiality owing to a third party; provided, however, that the Party requesting access shall have the right to require such other Party to use its commercially reasonable efforts to take steps in order to provide such access without causing such violations.

ARTICLE XI
INABILITY TO PERFORM SERVICES; ERRORS

11.1 Inability to Perform Services

In the event that NICO 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) consecutive calendar days, NICO 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. NICO will be responsible at its Own Expense for all costs incurred by Reinsureds in obtaining such alternative means and/or restoring services except and to the extent that such inability to provide services results from Reinsureds’ failure to comply with their obligations under the Transition Services Agreement, the consequences of which are dealt with in that agreement.

11.2 Errors

NICO 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.

ARTICLE XII
LEGAL ACTIONS

12.1 Regulatory Proceedings

(a) If Reinsureds or NICO receives notice of, or otherwise becomes aware of, any regulatory investigation, examination or proceeding or other significant inquiry relating to matters within the Scope of Service, Reinsureds or NICO, as applicable, shall promptly notify the other Party. Unless Reinsureds choose to delegate responsibility to NICO with respect to a specific matter, Reinsureds shall respond to and resolve all regulatory matters and regulatory investigations, examinations, inquiries and proceedings relating to matters within Scope of Service with the full assistance and cooperation of NICO.

(b) Notwithstanding anything to the contrary contained in this Administrative Services Agreement, neither Reinsureds nor NICO 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.

12.2 Notification Requirements

The following notification requirements are in addition to, and not in limitation of, notification requirements set forth elsewhere in this Administrative Service Agreement or in the other Ancillary Agreements or the Master Transaction Agreement.

(a) If Reinsureds or NICO receive 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 matter within the Scope of Service, Reinsureds or NICO, as applicable, shall promptly notify the other Party.

(b) NICO shall promptly notify Reinsureds in writing of any potential loss from an Subject Claim, set of interrelated Subject Claims, or a single account, that is reasonably likely to involve a loss, on a gross of third party ceded reinsurance basis, in the amount of $15,000,000 or greater. Notice is deemed to have been given for any claim reserved at $15,000,000 or more as of the Closing Date.

(c) NICO shall promptly notify Reinsureds in writing whenever a Berkshire Owned Entity or a Berkshire Administered Entity is an opposing party in any litigation, arbitration, declaratory judgment or other legal proceeding against Reinsureds that has been instituted either under, arising out of, or relating to any Underlying Policy or Third Party Reinsurance Agreement in respect to the Subject Asbestos Liabilities.

(d) NICO shall promptly, and in any event within thirty (30) calendar days of such event, notify Reinsureds in writing of any events that constitute a Retrocession Credit Event.

12.3 Right to Associate

NICO shall prosecute or defend, pursuant to the terms of this Administrative Services Agreement and in the name of and on behalf of the applicable Reinsureds when necessary, any litigation, arbitration or other legal proceeding brought on any contract, policy, or other matter within the Scope of Service. NICO, when so requested, shall afford Reinsureds an opportunity to be associated with NICO, at Reinsureds’ Own Expense, in the defense of any claim, suit or proceeding involving Subject Asbestos Liabilities, and the Parties shall cooperate in every respect in preparing to prosecute or defend or in the prosecution or defense of such claim, suit or proceeding.

ARTICLE XIII
BANK ACCOUNTS AND PAYMENTS

13.1 Payment and Receipt of Funds

(a) Subject to Sections 13.1(b), (c), (d) and (e) below, NICO is authorized on transactions subject to this Administrative Services Agreement to pay funds from, and receive funds into, NICO’s own proprietary accounts.

(b) NICO’s payment of funds for Losses, Allocated Loss Adjustment Expenses, and/or Extra Contractual Obligations in respect of the Subject Asbestos Liabilities shall be

accounted for as (i) payment of the item by Reinsureds, (ii) payment by Eaglestone of Ultimate Net Loss ceded to it by Reinsureds, and (iii) payment by NICO of Ultimate Net Loss retroceded to it by Eaglestone.

(c) NICO’s receipt of funds on account of Included Reinsurance Recoverables or Other Recoverables in respect of the Subject Asbestos Liabilities shall be accounted for as (i) receipt of the item by Reinsureds, (ii) payment by Reinsureds to Eaglestone of a credit against Ultimate Net Loss ceded to Eaglestone by Reinsureds, and (iii) payment by Eaglestone to NICO of a credit against Ultimate Net Loss retroceded to it by Eaglestone.

(d) In billing Third Party Reinsurers and in follow-up collection activity, NICO shall adopt procedures reasonably calculated to ensure that any remittance from a Third-Party Reinsurer is identifiable as pertaining to a specific NICO Client Entity.

(e) NICO shall maintain sufficient records and controls with respect to payments and receipts so that:

(i) Payments made on behalf of Reinsureds are vouchered as such prior to the time of payment and are identifiable, from the moment payment is made, to the specific liability being discharged.

(ii) To the extent funds received by NICO are not specifically identified to one or more NICO Client Entities, such funds shall be held in suspense by NICO until identification and/or allocation of such funds is made. Such identification and/or allocation, and the basis therefor, shall be documented in NICO’s files prior to release of the item from suspense.

13.2 Post-Closing Adjustments

To the extent that payments and recoveries are made during Transition or otherwise after the Closing Date by or to Reinsureds in their own behalf that are accountable as part of Ultimate Net Loss, or to the extent NICO has paid or received amounts on behalf of or to Reinsureds that are not accountable as part of Ultimate Net Loss, Reinsureds and NICO shall cooperate in setting up reimbursement procedures for payment and receipt of amounts due between NICO and Reinsureds.

ARTICLE XIV
COOPERATION

14.1 Cooperation

The Parties shall cooperate in a commercially reasonable manner in order that the duties assumed by NICO pursuant to this Administrative Services Agreement 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, the LPT Retrocession Agreement or any other Ancillary Agreements. Each Party shall, at all reasonable times under the circumstances and upon reasonable notice, make available to the other Party properly authorized personnel for the purpose of consultation and decision. The remedies of Article IX shall apply to this Section 14.1.

14.2 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 NICO:

Xxxxx X. Xxxxxx
Vice President and General Counsel
Berkshire Hathaway Reinsurance Division
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000

For Reinsureds:

Xxxx X. Xxxxxxx
Deputy General Counsel and
Chief Reinsurance Legal Officer
American International Group, Inc.
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000

Any Party may change its Representative or add additional designated Representatives pursuant to this Section 14.2 on the date hereof or on five Business Days’ advance notice in writing to the other Parties.

ARTICLE XV
DURATION; TERMINATION

15.1 Duration

This Administrative Services Agreement shall commence on the Closing Date and shall continue until it is terminated under Section 15.2.

15.2 Termination

(a) Subject to the provisions regarding survivability set forth in Section 15.4 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 15.3 hereof, shall set forth in reasonable detail the procedure for transferring the Administrative Services to Reinsureds or their designee;

(ii) automatically when the Remaining Paid Limit first becomes zero;

(iii) at the option of Reinsureds, upon written notice to NICO, upon the occurrence of a Special Event Trigger;

(iv) at the option of Reinsureds, upon the entry of a final determination by an arbitration panel in accordance with Article XIX that NICO has persistently breached this Administrative Services Agreement in such manner as to materially affect the overall allocation of risk between the Parties to the Transaction Documents as a whole; and

(v) at the option of Reinsureds, upon any event or occurrence subject to any change in status specified in Section 8.3(a)(ii) hereof without the prior written consent of Reinsureds.

(b) In the event that this Administrative Services Agreement is terminated pursuant to Section 15.2(a)(iii), (iv), or (v) Reinsureds shall promptly select a third-party administrator reasonably acceptable to NICO to perform the Administrative Services.

(c) Following any termination of this Administrative Services Agreement by Reinsureds pursuant to Section 15.2(a)(iii), (iv) or (v), NICO shall at its Own Expense 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 and (ii) any fees paid to any such substitute provider.

15.3 Change in Settlement Authority on Reduction of Remaining Limit

If the Remaining Paid Limit drops below $500 million, then NICO shall not thereafter enter into any settlement or coverage-in-place agreement requiring aggregate cash payments of $30 million or more without the consent of Reinsureds, which shall not be unreasonably withheld or delayed. If Reinsureds decline to consent, they shall thereafter be responsible at their Own Expense for any Extra Contractual Obligations arising from the failure to settle.

15.4 Certain Actions Related to Termination

(a) If (x) the Remaining Incurred Limit drops to zero or (y) any notice of termination is given under either the LPT Retrocession Agreement or this Administrative Services Agreement (each of (x) and (y) a “Reverse Transition Trigger”), then, upon the request of Reinsureds:

(i) Reinsureds and NICO shall negotiate in good faith a services agreement (the “Reverse Transition Services Agreement”) containing terms and conditions mutually acceptable to the Parties, whereby NICO and its Affiliates will provide, at NICO’s fully allocated cost, which shall be at Reinsureds’ Own Expense except as provided in Section 15.2(c), all transition or administrative services reasonably necessary or appropriate in order to transition to Reinsureds of the administration of the Subject Asbestos Liabilities.

(ii) To ensure an effective transition and transfer of the administration of the matters within the Scope of Service, NICO shall, and shall cause its Affiliates and their respective Representatives to, reasonably cooperate and work with Reinsureds in transition planning and implementation. Reinsureds shall at their Own Expense reimburse NICO for the fully allocated costs incurred by NICO or its Affiliates in connection with any actions undertaken by NICO at the request of Reinsureds in transitioning the administration to Reinsureds.

(b) Unless otherwise agreed to in writing by the Parties, upon the termination or expiration of this Administrative Services Agreement, NICO 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.

15.5 Survival

The provisions of Section 10.2, Section 10.3, paragraphs (b) and (c) of Section 15.2, Section 15.3, Section 15.4, Article XVI, Article XVIII, and Sections 20.1, 20.7, 20.10 and 20.12 shall survive the termination of this Administrative Services Agreement.

ARTICLE XVI
CONFIDENTIALITY; PRIVACY REQUIREMENTS

16.1 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 NICO or Reinsureds that is not generally known to the public and at the time of disclosure is identified, or would reasonably be understood by the receiving Party to be proprietary or confidential, whether or not so marked and whether disclosed in oral, written, visual, electronic or other form, and to which the receiving Party (or its contractors or agents) has access to in connection with this Administrative Services Agreement. For purposes of clarification, Confidential Information includes: (i) business plans, strategies, forecasts, projects and analyses; (ii) financial information and fee structures; (iii) business processes, methods and models; (iv) employee and supplier information; (v) product and service specifications; (vi) manufacturing, purchasing, logistics, sales and marketing information; (vii) methods and training materials; and (viii) the computer systems, architecture, software, datasets, and databases used by a Party; and (ix) 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’ policies and standards (to the extent such policies and standards are made known to NICO); and (C) Reinsureds’ data and Personal Information.

(b) “Nonpublic Personal Information” is as defined in Title V of the Financial Modernization Act (the Xxxxx-Xxxxx-Xxxxxx Act) (15 U.S.C. § 6801 et seq.) and related Applicable Law. Nonpublic Personal Information includes 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 NICO through the performance of its obligations under this Administrative Services Agreement.

(c) “Personal Information” shall mean information that identifies an individual, personally, including, but not limited to (i) an individual’s first and last name; (ii) a home or other physical address; (iii) an email address; (iv) a credit card number; (v) a driver’s license number; (vi) a social security number; (vii) information on an individual’s financial status; (viii) an individual’s past, present or future physical, mental or behavioral health or condition; (ix) the provision of health care to any individual; (x) payment for the provision of health care to any individual;

(xi) any information concerning an individual that would be considered “nonpublic personal information” within the meaning of Title V of the Xxxxx-Xxxxx Bliley Act of 1999 (Public Law 106-102, 113 Stat. 1338) and its implementing regulations, as the same may be amended from time to time and related Applicable Law; (xii) any information that is considered personal information as defined by Applicable Law; or (xiii) any information regarding Insurer’s clients or prospective clients received by NICO in connection with the performance of its obligations under this Administrative Services Agreement, including, but not limited to (a) the fact that an individual has a relationship with the Insurer and/or its parent, affiliated or subsidiary companies, (b) an individual’s account information, and (c) any other information of or relating to an individual that is protected from disclosure by the Standards for Privacy of Individually Identifiable Health Information at 45 CFR Part 160 and Part 164, Subparts A, D, and E or any other Applicable Law of similar import. Personal Information includes Nonpublic Personal Information.

16.2 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, Affiliates, agents, contractors, and Subcontractors (and their employees) who both (X) have a need to know such Confidential Information in connection with the performance of the receiving Party’s obligations under this Administrative Services Agreement or the full enjoyment of its rights hereunder and (Y) will take the necessary steps and measures to keep the Confidential Information confidential or (ii) its legal, financial, or other professional advisors, in each case subject to an obligation of confidentiality. The receiving Party shall ensure that any Affiliates, Subcontractors, agents, advisors and any other third parties to whom Confidential Information is disclosed hereunder have signed an agreement with the same or similar confidentiality obligations as set forth herein or are otherwise bound by similar confidentiality obligations. The receiving Party is liable for any unauthorized disclosure or misappropriation of Confidential Information by any of its Affiliates, Subcontractors, agents 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. NICO will not commingle the Confidential Information or Personal Information of Reinsureds with any other personal or confidential information.

16.3 Exceptions to Confidential Treatment

(a) General. Except with respect to Personal Information of Reinsureds, this Administrative Services Agreement imposes no obligation upon any 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, NICO will return or certify or cause the return or certification of destruction by itself, its Affiliates and its Subcontractors of all of Reinsureds’ Confidential Information in NICO’s possession or control. Reinsureds will have the same obligations with respect to NICO’s Confidential Information as NICO 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 and Reinsureds’ document retention policy 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. Notwithstanding the foregoing, neither Party shall be obligated to return or destroy the Confidential Information of the other Party to the extent it is maintained in such Party’s disaster recovery or other back-up media; provided that such Confidential Information shall only be accessed in connection with disaster recovery or back-up restoration and that such Confidential Information shall be securely destroyed in accordance with that Party’s record retention policies, practices and procedures.

16.4 Privacy

To the extent of any conflict between the requirements of Section 16.2 and this Section 16.4, this Section 16.4 shall govern and control with respect to Personal Information.

(a) Acknowledgement. NICO 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. NICO 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. NICO 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 NICO’s obligations under Section 2.3.

(d) Security Precautions. NICO shall take all reasonable security precautions to maintain the confidentiality and security of all Personal Information, take all steps necessary to: (i) protect against unauthorized access to Personal Information, (ii) protect against any anticipated threats or hazards to the security of such information and (iii) protect Personal Information as required by Applicable Law. Among other things, NICO 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 reasonably 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 when reasonable and necessary and when required by Applicable Law; and (iv) take all reasonable and necessary steps to ensure that Personal Information is minimally disclosed, combined, amended, or otherwise altered by NICO personnel so as to maintain its integrity and accuracy.

(e) Protected Health Information. If NICO or NICO personnel will have access to “protected health information” (as such term is defined by the HIPAA Privacy Rule), NICO shall execute the Business Associate Agreement substantially in the form attached hereto as Exhibit A. NICO and NICO personnel shall comply with the terms of the Business Associate Agreement in performing the applicable Administrative Services. NICO shall be responsible under this Administrative Services Agreement for any failure of NICO or NICO personnel to comply with the terms of the Business Associate Agreement or the Applicable Law referenced in the Business Associate Agreement applicable to NICO 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 NICO breaches the provisions of this Section 16.4, NICO shall immediately notify Reinsureds and shall, at NICO’s Own Expense, cooperate with Reinsureds in mitigating any potential damages by:

(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 NICO pursuant to this Section 16.4;

(iii) at the request of Reinsureds, deleting from NICO 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 NICO 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 requested by Reinsureds.

(g) No Limitation. The inclusion of this Section 16.4 relating primarily to Personal Information shall not, in any way, limit the obligations of NICO under other sections of this Administrative Services Agreement that relate to the protection of Confidential Information generally.

16.5 Regulatory and Legal Communication

To the extent NICO may legally do so:

(a) Government Requests. NICO agrees that, should any Governmental Authority request NICO to submit any information or provide any communication related specifically to the Administrative Services provided by it or any of its Subcontractors or on its or their behalf pursuant to this Administrative Services Agreement, NICO will, to the extent permitted by Applicable Law, notify Reinsureds promptly in writing upon receipt of such request. In no case shall said notice be received by Reinsureds later than five (5) Business Days after receipt by NICO. NICO shall contact Reinsureds prior to any response NICO would make to any Governmental Authority that involves any Reinsured, any client of any Reinsured, 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, NICO shall, to the extent permitted by Applicable Law, provide Reinsureds with prompt written notice of any Governmental Authority review, audit or inspection of, or request to review, audit or inspect, any of NICO’s facilities, processes, or products under the FCPA or any anti-bribery Applicable Law that relates specifically 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, NICO shall, to the extent permitted by Applicable Law, provide Reinsureds with the summary results of any such review, audit or inspection. If not legally prohibited, NICO shall provide Reinsureds a reasonable opportunity to provide assistance to NICO 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”), NICO shall promptly notify Reinsureds of the Security Incident, and NICO 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 NICO is taking to remedy such Security Incident, (iii) cooperate in the investigation of the Security Incident at Reinsureds’ request, (iv) reimburse Reinsureds for their reasonable out-of-pocket 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 and assist Reinsureds with any steps required by Applicable Law;

provided, however, to the extent such Security Incident or potential Security Incident is not caused by NICO’s or its Subcontractors’ failure to comply with this Administrative Services Agreement, Reinsureds shall at their Own Expense reimburse NICO for NICO’s reasonable expenses incurred in such remediation, and (vi) promptly restore any lost Reinsureds data to the last available back-up.

(d) Material Breach. A breach of this Article XVI 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 may therefore be entitled to pre-arbitration injunctive relief pursuant to Section 8.5 of the Master Transaction Agreement.

16.6 Systems Security

(a) System Access.

(i) If any Party is given access (each in such capacity, a “Guest User”) to the other Party’s computer system(s), software, datasets and databases (collectively, “Systems”) in connection with its performance or receipt of Administrative Services or its obligations or rights under this Administrative Services Agreement, such Guest User shall comply with the other Party’s (each in such capacity, a “Host”) generally applicable Systems security policies, procedures and requirements (“Security Requirements”), a copy of which will be provided to the Guest User prior to the Guest User’s being given access. Any changes to the Security Requirements that the Host desires to make shall be provided to the Guest User prior to the date such Security Requirements will go into effect and with sufficient notice to the Guest User to implement the changes to the Security Requirements.

(ii) The Guest User will not tamper with, intentionally compromise or circumvent any security or audit measures employed by the Host. The Guest User shall ensure that only those personnel specifically authorized to access the Host’s Systems on behalf of Guest User do so. The Guest User shall make commercially reasonable efforts to prevent unauthorized destruction, alteration or loss of information contained on the Host’s Systems.

(iii) If at any time the Guest User determines, or the Host notifies the Guest User, that any Guest User personnel has sought to circumvent or has circumvented the Host’s Security Requirements, or that any unauthorized Guest User personnel has accessed or may access the Host’s Systems, or that any Guest User personnel has engaged in activities that may lead to the unauthorized access, destruction or alteration or loss of data, information or software, the Guest User shall immediately terminate and/or take other reasonable measures to block any such personnel’s access to the Host’s Systems and immediately notify the Host thereof. Without limiting the Guest User’s obligations stated in the foregoing sentence, the Host may revoke such Guest User’s personnel’s Systems credentials

and privileges or otherwise take measures to protect the Systems from such personnel. Each Host shall be provided reasonably sufficient access to monitor the Guest User’s use of the Host’s Systems and full compliance with the Host’s Security Requirements. The Guest User and Host shall use good faith efforts at the termination or expiration of the applicable services to ensure that all applicable user IDs and passwords assigned to the Guest User are cancelled.

(b) Maintenance of Security Requirements. Each Party agrees to maintain its Security Requirements (or other requirements which are no less protective) for so long as this Administrative Services Agreement is in force. Each Party shall provide the other Party with reasonable access to copies of its Security Requirements upon reasonable prior written notice by the other Party during the term of this Administrative Services Agreement.

(c) Virus Protection. Each Party agrees to implement and maintain the regular use of Virus protection software programs which meet the industry standards that it uses for itself, but in no event less than reasonable measures to prevent Viruses from being coded or introduced into the Systems used in connection with this Administrative Services Agreement. If a Virus is found to have been introduced into the Systems used in connection with this Administrative Services Agreement, the Parties shall reasonably cooperate to eradicate and reduce the effects of such Virus and, if the Virus causes a loss of operational efficiency or loss of data, provide written notice in no event later than 48 hours after discovery thereof to the other Party and reasonably cooperate to mitigate any losses of operational efficiency or data caused by the Virus.

ARTICLE XVII
FORCE MAJEURE

17.1 Force Majeure Event

Except for any failure of either Party to comply with the provisions of its then-existing 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 such Party’s then-existing disaster recovery plan. 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 XVIII
INDEMNIFICATION

18.1 Extra Contractual Obligations

This Article XVIII does not address Extra Contractual Obligations as defined in the LPT Reinsurance Agreement and/or the LPT Retrocession Agreement nor does it cover matters subject to Article IX hereof, which shall be treated solely as provided in such Agreement(s) and/or such Article and not as subjects of indemnification hereunder.

18.2 Indemnification Obligation of NICO

NICO shall, at its Own Expense, 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) and representatives thereof at any time and from time to time, 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’ Indemnity Items,” but only to the extent resulting in damages not included within the definition of Extra Contractual Obligations) arising out of or caused by: (i) fraud, theft or embezzlement by directors, officers, employees or agents of NICO, its Affiliates or its Subcontractors in connection with the provision of services under this Administrative Services Agreement during the term of this Administrative Services Agreement; (ii) the failure, either intentional or unintentional, of NICO, its Affiliates or its Subcontractors to properly perform the services or take the actions required by this Administrative Services Agreement, including, without limitation, the failure to provide requisite Medicare information or 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 directors, officers, employees or agents of NICO, its Affiliates or its Subcontractors in connection with the provision of services under this Administrative Services Agreement during the term of this Administrative Services Agreement; (iv) any breach of an express warranty hereunder; or (v) any failure of NICO or its Subcontractors to comply with Applicable Law in connection with the provision of services under this Administrative Services Agreement during the term of this Administrative Services Agreement, except to the extent that, in the case of (ii), (iii), (iv), or (v), the harm was caused by the action or inaction of Reinsureds, their Affiliates, or their Subcontractors, whether or not in compliance with the terms of this Administrative Services Agreement or the Transition Services Agreement. Nothing herein shall be construed to require NICO 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.

18.3 Indemnification Obligation of Reinsureds

Reinsureds shall, at their Own Expense, indemnify and hold harmless NICO and any of its directors, officers, employees, agents or Affiliates (and the directors, officers, employees and agents of such Affiliates) and representatives thereof at any time and from time to time, 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, “NICO’s Indemnity Items,” but only to the extent resulting in damages not included within the definition of Extra Contractual Obligations) arising out of or caused by: (i) fraud, theft or embezzlement by directors, officers, employees or agents of Reinsureds or their Affiliates in connection with the provision of services under this Administrative Services Agreement

during the term of this Administrative Services Agreement; (ii) the failure, either intentional or unintentional, of Reinsureds or their Affiliates to properly perform the services, if any, or take the actions required by this Administrative Services Agreement; (iii) any other act of negligence or willful misconduct committed by directors, officers, employees and agents of Reinsureds or their Affiliates in connection with the Scope of Service during the term of this Administrative Services Agreement; (iv) any failure of Reinsureds or their Affiliates to comply with Applicable Law in connection with the Scope of Service during the term of this Administrative Services Agreement other than any failure on the part of Reinsureds or NICO or their respective Affiliates caused by the action or inaction of NICO, its Affiliates or its Subcontractors, including when acting in the name or on behalf of Reinsureds, whether or not in compliance with the terms of this Administrative Services Agreement or (v) any failure of Reinsureds or their Subcontractors to comply with Applicable Law in connection with the provision of services, if any, under this Administrative Services Agreement during the term of this Administrative Services Agreement, except to the extent that, in the case of (ii), (iii), (iv), or (v), the harm was caused by the action or inaction of NICO, its Affiliates or its Subcontractors, whether or not in compliance with the terms of this Administrative Services Agreement or the Transition Services Agreement. Nothing herein shall be construed to require Reinsureds to indemnify NICO with respect to any act or omission where the decision to take or omit such action was with the agreement of NICO.

18.4 Exclusion from Indemnification Obligations

Neither Party shall be obligated to indemnify the other under this Article XVIII for or against any liability for the intentional and malicious acts or omissions of the other Party’s employees, officers, or directors, as so determined by a final adjudication of a court of competent jurisdiction in a proceeding in which such other Party was, or had the opportunity to be, a party.

18.5 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.

18.6 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 NICO Indemnity Items with respect to which NICO is entitled to indemnification pursuant to Section 18.2 hereof or Reinsureds Indemnity Items with respect to which Reinsureds are entitled to indemnification pursuant to Section 18.1 hereof (an “Asserted Liability”), the Indemnified Party shall so notify the Indemnifying Party as promptly as practicable, but in no event later than ten (10) Business Days after such Asserted Liability is actually known to the Indemnified Party. Failure to deliver notice with respect to an Asserted Liability in a timely manner shall not be deemed a waiver of the Indemnified Party’s right to indemnification for its Indemnity Items 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 Indemnity Items would have been less had such notice been timely delivered.

18.7 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) Business 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 Own 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 consent shall not be unreasonably withheld, conditioned or delayed) during the ten (10) Business 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 18.7, the Indemnifying Party shall at its Own Expense bear all reasonable costs of defending any Asserted Liability and shall at its Own Expense indemnify and hold the Indemnified Party harmless against and from all costs, fees and expenses incurred in connection with defending such Asserted Liability.

(e) NICO 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.

(f) Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnified Party may settle any Asserted Liability without the consent of the other Party (which consent shall not be unreasonably withheld, conditioned or delayed); provided, the Indemnifying Party may, without the Indemnified Party’s prior written consent, settle any Asserted Liability or consent to entry of any judgment with respect to any Asserted Liability which requires solely money damages paid by the Indemnifying Party and without any admission of wrongdoing (without any right of reimbursement or other recourse to the Indemnified Party), and which includes as an unconditional term thereof the release by the claimant or the plaintiff of the Indemnified Party from all liability in respect of such Asserted Liability.

18.8 Survival

The provisions of this Article XVIII shall survive the termination of this Administrative Services Agreement for a period of three (3) years.

ARTICLE XIX
DISPUTE RESOLUTION; ARBITRATION

19.1 Arbitration of Disputes Not Resolved by Negotiation.

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

19.2 Procedure for Arbitration and Mandatory Pre-Arbitration Negotiation.

(a) The procedures for the arbitration and for the mandatory pre-arbitration negotiation are set forth in Article VIII of the Master Transaction Agreement, which is hereby incorporated herein. Arbitration hereunder shall be conducted in Philadelphia, Pennsylvania.

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

19.3 Permitted Judicial Proceedings.

The only permitted judicial proceedings relating to any Dispute are those set forth in, and are subject to the exclusive jurisdiction provisions of, Section 8.5 of the Master Transaction Agreement. Each Party finally and irrevocably waives any right to trial by jury of any matter or issue in such a permitted judicial proceeding.

ARTICLE XX
MISCELLANEOUS

20.1 Notices

To Reinsureds:

Xxxxx Xxxxxx
Chief Underwriting Officer and
Chief Reinsurance Officer
Chartis Inc.
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000

- and -

Xxxx Xxxxxxx
Senior Vice President &
Chief Financial Officer
Chartis U.S.
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000

With a copy to:

Xxxx X. Xxxxxxx
Deputy General Counsel and
Chief Reinsurance Legal Officer
American International Group, Inc.
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000

To NICO:

National Indemnity Company
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000

With a copy to:

National Indemnity Company
0000 Xxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Treasurer
Fax: (000) 000-0000

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

20.2 Entire Agreement

This Administrative Services Agreement (including the exhibits and schedules hereto), the Master Transaction Agreement, the LPT Reinsurance Agreement, the LPT Retrocession 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.

20.3 Waiver and Amendment

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

20.4 Successors and Assigns

The rights and obligations of the Parties under this Administrative Services Agreement are personal to the Parties and no Party shall be relieved of any liability or responsibility hereunder by any assignment. They shall not be subject to assignment without the prior written consent of the other Parties in their sole discretion, 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.

20.5 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.

20.6 Construction; Interpretation

Reinsureds and NICO 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. 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.

20.7 Governing Law and Jurisdiction

This Administrative Services Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to such state’s principles of conflict of laws that could compel the application of the laws of another jurisdiction.

20.8 No Third Party Beneficiaries

Except with respect to rights expressly granted to Eaglestone hereunder (including the right to receive the reports specified in Section 7.1 and Article VIII hereof, to enforce the accounting provisions of Section 13.1 hereof, and to effect setoff in accordance with Section 20.12 hereof, 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.

20.9 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.

20.10 Severability

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

20.11 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.

20.12 Set-Off

There are no common law or other non-contractual rights of set-off available to the Parties with respect to transactions under or relating to this Administrative Services Agreement. The sole and exclusive rights of set-off are those set forth in Section 9.12 of the Master Transaction Agreement.

20.13 Currency

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

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

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.

	AMERICAN HOME ASSURANCE COMPANY


	By:
		Name:
		Title:


	CHARTIS CASUALTY COMPANY
	(f/k/a American International South Insurance Company)


	By:
		Name:
		Title:


	CHARTIS PROPERTY CASUALTY COMPANY

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MASTER TRANSACTION AGREEMENT by and among AMERICAN HOME ASSURANCE COMPANY CHARTIS CASUALTY COMPANY (f/k/a American International South Insurance Company) CHARTIS PROPERTY CASUALTY COMPANY (f/k/a AIG Casualty Company) COMMERCE AND INDUSTRY INSURANCE...