SCANNED & CAPTURED FROM CONFORMED COPY
(Page numbers in original are indicated thus: {*i}

3 September 1996

EQUITAS REINSURANCE LIMITED

ADDITIONAL UNDERWRITING AGENCIES (No. 9) LIMITED

THE NAMES

THE CLOSED YEAR NAMES

THE SOCIETY OF LLOYD'S

EQUITAS LIMITED

THE MANAGING AGENT'S TRUSTEES

EQUITAS POLICYHOLDERS TRUSTEE LIMITED

--------------------------------------------------------

REINSURANCE AND
RUN-OFF CONTRACT

-------------------------------------------------------

FRESHFIELDS

{*ii} 
CONTENTS

Clause	Page

1. 	DEFINITIONS AND INTERPRETATION 	3

PART I - REINSURANCE 	3

2. REINSURANCE CONDITIONS 	3
	Conditions 	3
	Termination on failure to satisfy conditions 	5

3. THE REINSURANCE OBLIGATION 	5
	Scope of reinsurance obligation 	5
	No termination for non-payment or non-disclosure 	8
	Underwriting decision 	8

4. POLICYHOLDER PROTECTION 	9
	Assignment to Trustee 	9
	Acknowledgement of Assignment 	10
	Declaration of trust 	10
	Payment to Trustee 	11

5. CALCULATION AND DISCHARGE OF CONSIDERATION 	11
	Interest on unpaid Name's Premiums 	13
	No set-off 	13
	Consideration provided on behalf of Names 	14
	No further liability for Names 	14
	Assignability of right to receive Name's Premiums 	14
	Personal stop loss 	15
	CSU Calculation and Appropriation of Payments 	15

6. ADDITIONAL CONSIDERATION 	15
	Syndicate Reinsurances, Financial Reinsurances and Other Returns 	15

7. SEGREGATED ACCOUNT 	20
	Assumed Liabilities 	20
	Surplus 	20

8. ADJUSTMENT OF PREMIUM 	21

PART II - RUN-OFF OF THE REINSURED ACCOUNTS . 	21

9. RUN-OFF FROM THE EFFECTIVE DATE 	21
	Powers of ERL	21
	Delegation 	24
	ERL's powers exclusive and irrevocable 	24 {*iii}

10. DUTIES AND LIABILITY OF ERL 	24
	ERL's standard of care 	24
	Liability of ERL 	25

PART III - INTERIM PROVISIONS 	26

11. RESPONSIBILITY FOR THE RUN-OFF FROM THE RUN-OFF DATE 	26
	Powers in relation to period from Run-off Date 	26
	Non-interference with powers of ERL 	26
	ERL's duty of care 	26

12. ERL's ACCESS TO BOOKS AND RECORDS FROM THE RUN-OFF DATE 26

13. APH CLAIMS	27
	Suspension of Deed of Authority 	27

PART IV- GENERAL PROVISIONS 	27

14. FURTHER ASSURANCE 	27

15. BOOKS AND RECORDS 	28
	Access to Books and Records 	28
	Return of Books and Records on termination 	28
	ERJJ5 maintenance of Books and Records 	28

16. REPORTS AND ACCOUNTS 	29

17. CONFIDENTIALITY 	29
	Restrictions on use of confidential information 	29

18. CURRENCY OF PAYMENT 	30

19. CONSEQUENCES OF TERMINATION 	31
	Termination 	31
	Termination of powers in relation to Run-off 	31

20. WAIVER 	31

21. INVALIDITY 	31

22. NOTICES 	31

23. VARIATION 	32

24. COSTS 	32

25. GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS 	32
	Governing law and jurisdiction 	32
	Service of Process 	33 {*iv} 

SCHEDULE 1 - THE SYNDICATES 	34

SCHEDULE 2- DEFINITIONS AND INTERPRETATION 	55

SCHEDULE 3- OPERATION OF PROPORTIONATE COVER 	71
	Setting Proportionate Cover Rate 	73

SCHEDULE 4- CONSIDERATION 	79
	Realisation of or Transfer of Cash and Assets in the Segregated Account 	79

SCHEDULE 5- RETURN PREMIUM 	83

SCHEDULE 6 	88
	Relevant Motor and Employer's Liability Syndicates 	88

APPENDIX 1- FORM OF DECLARATION OF TRUST 	92

APPENDIX 2- FORM OF RETROCESSION AGREEMENT 	112 {*1}

THIS AGREEMENT is made on 3 September 1996

Between:

EQUITAS REINSURANCE LIMITED a limited company registered in England and Wales with company number 3136300 whose registered office is at 20-22 Bedford Row, London WClR 4JS (ERL);

ADDITIONAL UNDERWRITING AGENCIES (No. 9) LIMITED a limited company registered in England and Wales with company number 2666937 whose registered office is at Lloyd's of London, One Lime Street, London EC3M 71-IA (the Substitute Agent);

THE UNDERWRITING MEMBERS OF LLOYD'S comprising the syndicates specified in schedule I as constituted for the years of account specifiedin schedule I (the Syndicates and each a Syndicate) in their capacity as members of one or more of the Syndicates (the Names) acting through the Substitute Agent;

THE UNDERWRITING MEMBERS OF LLOYD'S comprising syndicates reinsured to close whether directly or indirectly into the Syndicates or Centrewrite (the Closed Year Syndicates and each a Closed Year Syndicate) in their capacity as members of one or more of the Closed Year Syndicates (the Closed Year Names) acting through the Substitute Agent;

THE SOCIETY incorporated by Lloyd's Act 1871 by the name of LLOYD'S of One Lime Street, London EC3M 71-IA (Lloyd's);

EQUITAS LIMITED a limited company registered in England and Wales with company number 3173352 whose registered office is at 20-22 Bedford Row, London WClR 4JS (Equitas);

ADDITIONAL UNDERWRITING AGENCIES (No. 10) LIMITED a limited company registered in England and Wales with company number 2666936 whose registered office is at Lloyd's of London, One Lime Street, London EC3M 7HA and LLOYD'S, each in their capacity as trustees of the Premiums Trust Funds of the Names and the Closed Year Names (the Managing Agent's Trustees); and

EQUITAS POLICYHOLDERS TRUSTEE LIMITED a limited company registered in England and Wales with company number 3243970 whose registered office is at 20-22 Bedford Row, London WClR 4JS (the Trustee).

Whereas:

(A) 	The Council has power to carry into effect the Equitas Scheme, pursuant to the Reconstruction and Renewal Byelaw, for the reinsurance by ERL of all liabilities under contracts of insurance  underwritten at Lloyd's and allocated to {*2} the 1992 year of account or any prior year of account and has directed that such reinsurance in respect of the Syndicates and the Closed Year Syndicates be effected by and subject to the terms and conditions of this Agreement in respect of all such contracts of insurance other than life business.

(B) 	In contemplation of this Agreement, Managing Agents have entered into Supervisory Management Agreements and Information and Administration Agreements with ERL and Lloyd's in relation to the management of the Syndicate 1992 and Prior Business of the Syndicates.

(C) 	The Substitute Agent was appointed to act as substitute managing agent for the Names and the Closed Year Names on the terms set out in the Substitute Agent's Appointment and in relation to, inter alia, the Syndicate 1992 and Prior Business of each Syndicate and each Closed Year Syndicate by a direction made by the Council pursuant to the Substitute Agents Byelaw (No. 20 of 1983).

(D) 	The Substitute Agent is entering into this Agreement with ERL for itself and as agent for the Names and the Closed Year Names in conformity with directions of the Council to the Substitute Agent and to the Names and the Closed Year Names under paragraph 4 of the Reconstruction and Renewal Byelaw on the basis (inter alia) that the Reinsurance Obligation is conditional upon satisfaction of the conditions in clause 2.

(E) 	The Board of ERL has resolved to enter into this Agreement and, conditionally on the satisfaction of the conditions set out in clause 2, to reinsure the Syndicates and the Closed Year Syndicates in respect of 1992 and Prior Business in consideration, inter alia, in the case of each Syndicate, of the payment of the Syndicate Premium and the transfer of the Segregated Account Assets subject to and in accordance with the terms of this Agreement.

(F) 	The Council has resolved that a reinsurance contract with ERL in the terms of this Agreement (alone or, in the case of any Syndicate which includes business other than 1992 and Prior Business, taken together with another designated contract or contracts of reinsurance) will constitute reinsurance to close as at the Inception Date.

(G) 	ERL will, on even date herewith, enter into the Retrocession Agreement with Equitas for the retrocession by ERL to Equitas of its liabilities hereunder and under the Centrewrite Reinsurance, the E&O Companies Reinsurance, the PSL Companies Reinsurance and the Illinois Collateral Reinsurance and the delegation of the run-off of such liabilities to Equitas, in the form set out in Appendix 2.

(H) 	This Agreement is executed as a deed by ER-L, Lloyd's and the Substitute Agent for the purpose, inter alia, of extending the benefit of the acknowledgements contained in clause 3.11 to the Managing Agents. {*3} 

(I) 	Pursuant to applicable regulatory requirements, ERL and Equitas will enter into the EATD, the ECTD and any other necessary Overseas Deposit Deed to provide security in the United States, Canada and any relevant foreign jurisdictions respectively for the obligations hereunder.

(J) 	This Agreement is to take effect as a contract of reinsurance and shall have no effect on the liability of any Name or Closed Year Name under any original contract of insurance entered into by such Name or Closed Year Name. The liability of the relevant Names or Closed Year Names under all contracts of insurance underwritten by them shall remain several and not joint.

(K) 	The Syndicate Premium for each Syndicate has been calculated by reference to the value of its Syndicate 1992 and Prior Business and the assets held in respect thereof as at the Inception Date.

IT IS HEREBY AGREED AS FOLLOWS:

DEFINITIONS AND INTERPRETATION

1. 	The words and expressions used in this Agreement shall have the meanings set out in paragraph I of schedule 2, and terms and provisions used in this Agreement shall be interpreted in accordance with paragraph 2 of schedule 2.

PART I - REINSURANCE

REINSURANCE CONDITIONS

Conditions

2.1 	The obligations of ERL under clause 3 and the provisions of clause 9 shall in all respects be conditional upon the satisfaction by not later than 28 February 1997 of each of the following conditions:

(a)	the Board of ERL making a determination that it has received or will receive sufficient consideration, or that it has received sufficient undertakings in form and substance satisfactory to it as to discharge of the consideration for the assumption of the Reinsurance Obligations, so as to enable ERL to accept the Reinsurance Obligation unconditionally;

(b)	each of the Council and ERL making a determination that, so far as it is aware, there are no circumstances which would be likely to have a material adverse effect on the business and prospects of ERL, including but not limited to:

(i)	the failure or inability of ERL or Equitas to obtain, or the lapse, invalidation or withdrawal of, or the receipt by ERL or Equitas of any notice of an intention to revoke or not to renew, any {*4} 

authorisation, order, recognition, grant, consent, licence, confirmation, clearance, permission, approval, exemption or determination necessary for or in respect of the Equitas Scheme (the absence of which would be likely to have a material adverse effect on the business or prospects of ERL or Equitas) from any appropriate government, governmental, quasi-governmental, supranational, statutory or regulatory body or court;

(ii)	any action, proceeding, suit, investigation, enquiry or other step having been decided upon, taken, instituted, implemented or threatened by any government, governmental, quasi-governmental, supranational, statutory or regulatory body, any court or any other person or body or any unfavourable order or judgment having been handed down in any existing proceedings (of whatever nature) which would in any material respect render unlawful, void or unenforceable any material aspect of the Equitas Scheme or limit, interfere with or adversely affect to a material extent the ability of ERL or Equitas to conduct its business or materially and adversely affect its liabilities or otherwise materially and adversely affect the business or prospects of ERL or Equitas;

(iii)	any statute, regulation or order having been enacted, made or proposed by any government, governmental, quasi-governmental, supranational, statutory or regulatory body which would in any material respect render unlawful, void or unenforceable any material aspect of the Equitas Scheme or limit, interfere with or adversely affect to a material extent the ability of ERL or Equitas to conduct its business or materially and adversely affect its liabilities or otherwise materially and adversely affect the businessor prospects of ERL or Equitas;

(iv)	any material fact, matter or circumstance having been disclosed to ERL or Equitas by the Substitute Agent or any Managing Agent, or ERL or Equitas having become aware that any disclosure or representation made to ERL or Equitas by the Substitute Agent or any Managing Agent in relation to any material fact, matter or circumstance was materially incomplete or inaccurate when made, which fact, matter or circumstance would adversely affect to a material extent the ability of ERL or Equitas to conduct its business or otherwise materially and adversely affect the business or prospects of ERL or Equitas;

(c)	the Board of ERL making a determination that there has not been any change or deterioration in the 1992 and Prior Business or in the assets held in Premiums Trust Funds, LATFs or LCTFs in respect thereof between the Run-off Date and the first date on which all other conditions in this clause 2.1 are satisfied which would, alone or in {*5} conjunction with other matters, be likely to have a material adverse effect on the ability of ERL to pay its debts as and when they become due if this Agreement were to become unconditional in accordance with its terms, disregarding for this purpose clause 3.5 and schedule 3;

(d)	the Board of ERL resolving that ERL unconditionally accepts the Reinsurance Obligations subject to receipt of consent from the Secretary of State pursuant to the relevant provisions of the relevant Notice of Requirements; and 

(e)	ERL and Equitas each having received consent from the Secretary of State pursuant to the Relevant Notice of Requirements to accept unconditionally the Reinsurance Obligation and the Retrocession Obligation respectively.

Termination on failure to satisfy conditions

2.2 	If the conditions set out in clause 2.1 have not been satisfied by 28 February 1997 or ERL (with the prior written consent of the Council) gives written notice to the Substitute Agent prior to such date that any of such conditions is not capable of being satisfied, this Agreement shall thereupon terminate in accordance with clause 19

THE REINSURANCE OBLIGATION

Scope of reinsurance obligation

3.1	ERL shall, in consideration of 

(a)	the obligation to transfer the Segregated Account Assets held in respect of each and every Syndicate;

(b)	the obligation of the Names to pay their Name's Premiums;

(c)	the obligation of the Names to assign the rights granted to ERL pursuant to clause 6; and

(d)	the obligation of the Names to assign the rights specified in clause 5.1(d),

reinsure and indemnify each and every Syndicate and each Closed Year Syndicate by payment in accordance with clause 3.4 and otherwise upon and subject to the terms and conditions of this Agreement.

3.2 	The reinsurance and indemnity obligation of ERL shall be to indemnify without limitation in time and amount, subject to and in accordance with the remainder of this clause 3, each Syndicate and each Closed Year Syndicate from and including the Effective Date, by way of reinsurance, in respect of all liabilities, losses, claims, returns, reinsurance premiums, costs and other liabilities {*6} including extra-contractual obligations or punitive or penal damages arising inrelation to the Syndicate 1992 and Prior Business of that Syndicate or ClosedYear Syndicate, after deduction of

a)	all amounts recoverable and actually recovered after the Effective Date in respect of the relevant Syndicate Reinsurances; and

(b)	all other income receivable and actually received after the Effective Date, including premiums, return premiums, salvages, claim refunds or other moneys which may be applied in reducing the amount of any liability comprised in the Syndicate 1992 and Prior Business of that Syndicate or Closed Year Syndicate.

In the performance of the Reinsurance Obligation in respect of any Syndicate or Closed Year Syndicate ERL shall have the obligation and responsibility for the collection of the amounts referred to in paragraphs (a) and (b) above and shall bear any risk of failure to collect such amounts. ERL shall pay, or procure payment of, amounts agreed or lawfully due and payable in respect of any Claim or otherwise due under clause 3.2 on behalf of the relevant Syndicate (or Closed Year Syndicate in the circumstances set out in clause 3.3)-

3.3 	The obligation of ERL to indemnify any Closed Year Syndicate in respect of 1992 and Prior Business pursuant to clause 3.1 shall only arise if the reinsurance to close of that Closed Year Syndicate shall have been set aside by a final order, not subject to further appeal, of any court of competent jurisdiction, or shall otherwise have ceased to have effect. In either event and on payment pursuant to such indemnification in respect of any liability comprised in 1992 and Prior Business, ERL shall have no further obligation pursuant to clause 3.1 in respect of such liability to any Syndicate or Closed Year Syndicate.

3.4 	Unless the Trustee has made an election pursuant to clause 4.10, and subject to clause 3.8, ERL shall pay, or procure payment of any amount due under this clause 3, in the following manner:

(a)	in the case of payments from the EATF, in accordance with the terms of the EATD;

(b)	in the case of payments from the ECTF, in accordance with the terms of the ECTD;

(c)	in the case of payments from any Overseas Deposit Fund, in accordance with the terms of the relevant Overseas Deposit Deed;

(d)	in the case of payments in respect of motor and/or employer's liability business of each of the Syndicates listed in schedule 6, to the Premiums Trust Funds of that Syndicate; and {*7} 

(e)	in any other case, direct to the Insurance Creditors of the Syndicate 1992 and Prior Business of that Syndicate or Closed Year Syndicate or such other person as is entitled thereto, provided that nothing in this clause 3.4 or any other provision of this Agreement shall be construed to mean that amounts agreed and lawfully due in respect of any Claim in respect of the Syndicate 1992 and Prior Business of any Syndicate are not payable until the aggregate ultimate net liability in respect of that Claim has been ascertained and ERL shall, where necessary, advance payment of all such amounts.

3.5 	If at any time a Certified Reinsurance Trigger Event or Automatic Reinsurance Trigger Event occurs, the liability of ERL to the Names and the Closed Year Names in respect of the Reinsurance Obligation (whether or not previously adjusted as a result of any prior operation of this clause 3.5) shall be adjusted subject to and in accordance with the provisions of schedule 3 PROVIDED THAT such adjustment shall only be made if an adjustment is or shall be made under and in accordance with the equivalent provisions in any other contract of insurance underwritten by ERL, including the Centrewrite Reinsurance, the E&O Companies Reinsurance and the PSL Companies Reinsurance. ERL undertakes not to underwrite any contract of insurance, other than the Illinois Collateral Reinsurance, which does not contain provisions equivalent to and having the same effect as those contained in this clause 3.5 and schedule 3.

3.6 	ERL, in respect of any decision to adjust the liability of ERL to the Names or the Closed Year Names pursuant to this Agreement, and Equitas, in respect of any decision to adjust the liability of Equitas to ERL pursuant to the Retrocession Agreement, each acknowledges and agrees for the benefit of the Names and the Closed Year Names that such decision shall be taken bona fide and that all reasonable skill, care and diligence will be taken in arriving at any such decision.

3.7 	It is hereby acknowledged by each of the parties to this Agreement that, other than pursuant to clause 3.11, this Agreement is not intended to and does not create any obligations to, or confer any rights upon, Insurance Creditors or any other persons not parties to the Agreement It is hereby further acknowledged by each of the parties to this Agreement that this Agreement isnot intended to and does not create any third party beneficiary status in, or confer third party beneficiary rights upon, Insurance Creditors or any other persons with respect to this Agreement but without prejudice to the terms of the Declaration of Trust.

3.8 	If any overseas government, governmental, quasi-governmental, supranational, statutory or regulatory body seizes or otherwise takes control of the EATF, the ECTF or any Overseas Deposit Fund whether for the purpose of securing obligations to Insurance Creditors or otherwise: {*8} 

(a)	the obligation on ERL to pay that proportion of any Claim which would
have been paid from the relevant find shall be suspended for so long as such circumstances apply; arid

(b)	the Reinsurance Obligation shall be treated as discharged to the extent that cash or assets held in the relevant find are applied by that government, governmental, quasi-governmental, supranational, statutory or regulatory body toward the settlement of any Claim.

No termination for non-payment or non-disclosure

3.9 	The Reserve Groups, Lloyd's and ERL have been provided with or been given access to certain materials and information and received representations and responses to certain questions put to the Managing Agent of each Syndicate or any predecessor managing agent of that Syndicate in relation to the Syndicate 1992 and Prior Business of that Syndicate, assets held in respect thereof and non-insurance liabilities of that Syndicate (such materials, information, representations and responses being collectively referred to as the Disclosure). ERL shall have no right to avoid this Agreement after the Effective Date by reason of any non-disclosure or misrepresentation (whether or not innocent) notwithstanding that some material facts or matters may not have been or may not be disclosed to ERL, any Reserve Group or Lloyd's and/or that some of the Disclosure may not be accurate or complete, but this shall be without prejudice to any rights of ERL under any Supervisory Management Agreement or any Information and Administration Agreement or the Completion Accounts and Co-operation Agreement.

3.10 	ERL expressly acknowledges that it shall have no right to terminate this Agreement, in whole or in part, following the Effective Date, as a result of non-payment of any Name's Premium or any other failure of the consideration to be provided to ERL pursuant to clause 5.

Underwriting decision

3.11	It is expressly acknowledged and agreed:

(a)	by ERL and Lloyd's that, although the Managing Agent of each Syndicate was afforded opportunities to discuss the valuation of the relevant Syndicate 1992 and Prior Business as at the Inception Date, the Substitute Agent and the Names have been directed to enter into this Agreement by the Council and that neither the Substitute Agent nor the relevant Managing Agent has any responsibility or liability to ERL or Lloyd's in relation to the acceptance of the terms set out in this Agreement or the basis for such valuation, PROVIDED THAT this acknowledgement of no liability or responsibility shall be without prejudice to the duties and obligations of that Managing Agent or any predecessor managing agent in respect of that Syndicate under any {*9} Supervisory	Management Agreement, any Information and Administration Agreement or the Completion Accounts and Co-operation Agreement;

(b)	by the Substitute Agent on behalf of each Name that no Managing Agent has any responsibility or liability to that Name in relation to the acceptance of the terms set out in this Agreement or the basis for valuation of the Syndicate 1992 and Prior Business of any Syndicate as at the Inception Date or the amount of his Name's Premium, PROVIDED THAT this acknowledgement of no liability or responsibility shall be without prejudice to the duties and obligations of that Managing Agent or any predecessor managing agent in respect of that Syndicate under any Supervisory Management Agreement, any Information and Administration Agreement or the Completion Accounts and Co-operation Agreement; and

(c)	by Lloyd's and by the Substitute Agent on behalf of each Name and each Closed Year Name that neither ERL nor Equitas has any responsibility or liability to that Name or Closed Year Name in relation to the valuation of the Syndicate 1992 and Prior Business of any Syndicate as at the Inception Date or, in respect of a Name, the amount of his Name's Premium.

POLICYHOLDER PROTECTION

Assignment to Trustee

4.1 	For the purposes of this Agreement, the Assigned Property shall mean in respect of any Name or Closed Year Name, except as provided in clause 4.2, all right, title, benefit and interest which that Name or Closed Year Name has or may have against ERL in relation to:

(a)	the performance of the Reinsurance Obligation by ERL, including, without limitation:

(i)	any right to receive damages for breach of the Reinsurance Obligation; and

(ii)	any rights in relation to the Reinsurance Obligation in a winding-up of ERL or pursuant to any scheme or composition entered into between ERL and its creditors including any scheme of arrangement or compromise made under section 425 of the Companies Act 1985 and any voluntary arrangement made between ERL and its creditors under sections I to 8 of the Insolvency Act 1986; and {*10} 

(b)	any return of premium payable on a winding-up or pursuant to any scheme or composition entered into between ERL and its creditors to the extent that the Secured Obligations have not been satisfied in full.

4.2 	The Assigned Property shall not include any cash, assets or other rights to the extent held subject to the trust of the EATD, the ECTD or any Overseas Deposit Deed for the benefit, directly or indirectly, of the Insurance Creditors.

4.3 	In consideration of an assignment in the same terms by all other Names and Closed Year Names, the Substitute Agent on behalf of each Name and each Closed Year Name hereby assigns the Assigned Property absolutely by way of first fixed mortgage to the Trustee, with effect from the Effective Date, such assignment on behalf of each Name and each Closed Year Name being an assignment of the Assigned Property as security for the discharge and payment of all obligations of all Names arid all Closed Year Names under all contracts of insurance which have been reinsured pursuant to the Equitas Scheme.

4.4 	The Trustee undertakes to reassign to each Name and Closed Year Name the relevant Assigned Property in the circumstances set out in clause 2.13 of the Declaration of Trust.

Acknowledgement of Assignment

4.5 	ERL hereby acknowledges the assignment contained in clause 4.3 and the Trustee hereby directs ERL to pay amounts agreed or lawfully due and payable in respect of any Claim as provided in clause 3.4 but subject to clause 4.10.

Declaration of trust

4.6 	The Trustee hereby agrees that it will, on the date hereof, enter into the Declaration of Trust in the form set out in Appendix 1. The Trustee shall hold the Assigned Property on the terms set out in the Declaration of Trust. Each party to this Agreement shall be bound by the terms of the Declaration of Trust and to the extent that they are stated to have any obligation pursuant to the terms thereof hereby expressly agree to be bound by such obligation.

4.7 	ERL and Equitas each hereby covenants with the Trustee that, so long as any of the Secured Obligations remains outstanding, it will at all times give to the Trustee such information in its possession or under its control as the Trustee may reasonably require for the purpose of the discharge of the trusts, powers, rights, duties, authorities and discretions vested in the Trustee hereunder or under the Declaration of Trust or by operation of law.

4.8 	The Substitute Agent hereby covenants with the Trustee that so long as any of the Secured Obligations remains outstanding and for so long as the Substitute Agent retains authority pursuant to the Substitute Agent's Appointment, it will execute and do all such assurances, acts, deeds and things as (*11} the Trustee may reasonably require for protecting or perfecting the security over the Assigned Property and the exercise of all powers, authorities and discretions vested in it and shall in particular execute all transfers, conveyances, assignments, assurances and registrations of the Assigned Property whether to the Trustee or its nominees or purchasers and give all notices, orders and discretions which the Trustee may think necessary or expedient.

4.9 	The security created hereunder and pursuant to the Declaration of Trust shall be held by the Trustee as a continuing security for the payment in full of the Secured Obligations notwithstanding any settlement of account or any other act, event or matter whatsoever.

Payment to Trustee

4.10 	Following any Insolvency Event, the Trustee may by notice to ERL require that all payments which ERL is to make or procure be made pursuant to clause 3.4(d) and 3.4(e) should instead be made directly to it. Such payment shall be treated as discharging in part or in whole the Reinsurance Obligation in the same way as if it had been paid in accordance with clause 3.4(d) or clause 3.4(e). The Trustee shall have absolute discretion as to whether to serve such notice and shall incur no liability to Insurance Creditors or Names or any other person as a result of its exercise or non-exercise of the power to serve such notice.

CALCULATION AND DISCHARGE OF CONSIDERATION

5.1	In consideration of the assumption by ERL of the Reinsurance Obligation:

(a)	the Names, the Closed Year Names and Substitute Agent shall comply with the provisions set out in schedule 4;

(b)	each Name covenants with ERL to pay, on the Effective Date (or, in the case of Accepting Names, such later date as may be agreed) and without further demand, his Name's Premium, being the aggregate of

(i)	the proportions payable by him (calculated by reference to that Name's participation in the relevant Syndicate as set out in the relevant Syndicate List) of the Syndicate Premiums, as set out in and (subject to clause 18) in the currencies set out in schedule 1, for each Syndicate of which he is a member LESS an amount equal to any amount called by the relevant Managing Agent in respect of any part of any Syndicate Premium which has been:

(A) 	called since 15 March 1996; and

(B) 	paid by the Name and received into the Segregated Account between 15 March 1996 and the Effective Date or, if later, {*12}

the date on which the Substitute Agent makes the direction to transfer the Segregated Account Assets pursuant to clause 5.1(a);

(ii)	an amount equal to the aggregate of the proportions payable (calculated by reference to that Name's participation in the relevant Syndicate as set out in the relevant Syndicate List) of any losses declared to 31 December 1994 but not called as at 15 March 1996 in respect of any Syndicate of which he is a member LESS an amount equal to any part of such amounts as has been:

(A) 	called since 15 March 1996; and

(B)	paid by that Name and received into the Segregated Account between 15 March 1996 and the Effective Date or, if later, the date on which the Substitute Agent makes the direction to transfer the Segregated Account Assets pursuant to clause 5.1(a);

(iii)	an amount equal to the aggregate of any deferred losses owing by that Name as at 15 March 1996 in respect of Closed Year Syndicates of which he was a member LESS an amount equal to any part of such amounts as has been:

(A) 	called since 15 March 1996; and/or

(B)	 paid by the Name and received into the Segregated Account between 15 March 1996 and the Effective Date or, if later, the date on which the Substitute Agent makes the direction to transfer the Segregated Account Assets pursuant to clause 5.1(a);

(iv)	an amount equal to the aggregate of any called but unpaid losses in respect of Syndicates of which he is a member, and Closed Year Syndicates of which he was a member, owing by that Name as at 15 March 1996 (together with any interest thereon to that date) LESS an amount equal to any part of such amounts which has been paid by that Name and received into the Segregated Account between 15 March 1996 and the Effective Date or, if later, the date on which the Substitute Agent makes the direction to transfer the Segregated Account Assets pursuant to clause 5.1(a); and

(v) 	his Return on Surplus, if any,

(c)	ERL shall, from and including the Effective Date, have the rights specified in clause 6; and {*13} 

(d)	subject to the consent of the Council under paragraph 5(6) of the 	Membership Byelaw (No. 17 of 1993) and to clause 5.2, each Name and each Closed Year Name hereby assigns absolutely to ERL, with effect on and from the Effective Date, all right, title, benefit and interest which he has or may have in his LATF, LCTF or any Premiums Trust Funds but 	only insofar as that right, title benefit or interest arises in respect of 1992 and Prior Business.

5.2	The assignment contained in clause 5.1(d) shall not apply to:

(a)	any amounts payable to the Name under clause 8 of schedule 5 to this Agreement; 

(b)	any amounts payable to the Name under paragraph 13.2 of schedule 3 to 	this Agreement; and

(c)	any amounts payable to the Name from the trusts referred to in that 	clause by way of profit on reinsuring to close 1992 and Prior Business.

Interest on unpaid Name's Premiums

5.3 	Subject to clause 5.4, where any Name's Premium has not been discharged in full by the later of 30 September 1996 and the Effective Date, interest will accrue on any unpaid amount from such date up to the date of actual payment, as well after as before judgment at the rate of 2 per cent. per annum above the base rate of National Westminster Bank plc from time to time.

5.4 	ERTJs rights under clause 5.3 against a Name shall, in relation to any Name who has entered into, or at any time after the date of this Agreement, enters into:

(a)	the Settlement Agreement, be subject to any waivers given by ERL in that agreement; and

(b)	any Structured Payment Plan with ERL, be subject to the terms of that Plan.

No set-off

5.5 	Each Name shall be obliged to and shall pay his Name's Premium in all respects free and clear from any set-off, counterclaim or other deduction on any account whatsoever including in each case, without prejudice to the generality of the foregoing, in respect of any claim against ERL, the Substitute Agent, any Managing Agent, his Members' Agent, Lloyd's or any other person whatsoever, and: {*14} 

(a)	in connection with any proceedings which may be brought to enforce 	the Name's obligation to pay his Name's Premium, the Name hereby 	waives any claim to any stay of execution and consents to the immediate enforcement of any judgment obtained; 

(b)	the Name shall not be entitled to issue proceedings and no cause of 	action shall arise or accrue in connection with his obligation to pay his 	Name's Premium unless the liability for his Name's Premium has been discharged in full; and 

(c)	the Name shall not seek injunctive or any other relief for the purpose, or 	which would have the result, of preventing ERL, or any assignee of 	ER-L, from enforcing the Name's obligation to pay his Name's Premium.

Consideration provided on behalf of Names

5.6	Where any part of any Name's Premium due from:

(a)	any Accepting Name who has complied with his obligations under paragraphs 32 and 33 of the Terms and Conditions; or 

(b)	any Name who is not an Accepting Name but who is a member of an Action Group which is party to an Action Group Settlement Agreement,

is discharged by Lloyd's or a person acting at Lloyd's direction through the application of the Combined Litigation Settlement Funds or any Debt Credits specified on the relevant Name's Finality Statement or otherwise offered to that Name, the Name's obligation in respect of that amount will be deemed to have been satisfied to that extent. Save as aforesaid, no provision of consideration to ERL by any person other than the Name will discharge any liability of any Name under this Agreement unless that consideration is provided to ERL (i) at the specific direction of that Name by a party other than Lloyd's, (ii) from the Premiums Trust Funds, LATF, LCTF or Funds at Lloyd's of that Name, or (iii) by or at the direction of Lloyd's but only, in the case of a Name who is not an Accepting Name, where Lloyd's appropriates any such sum to the Name's account or benefit and expressly for the purposes of discharging the liability.

No further liability for Names

5.7 	The obligation of each Name to pay his Name's Premium shall be several and not joint and no Name shall have any liability to ERL in respect of any Name's Premium of any other Name or any other consideration to be provided to ERL for which any other Name is liable.

Assignability of right to receive Name's Premiums

5.8	Each Name expressly agrees that, in respect of his Name's Premium, ERL shall have power to assign on such terms as it sees fit (including, without {*19} prejudice to the generality of the foregoing the right further to assign) the right to receive payment of such amount and/or to pursue the relevant Name for any undischarged amount and/or the right to, and the right to retain, any sums received in respect of such undischarged amount. ERL or any assignee pursuant to this clause 5.8 shall be entitled to give notice of any such assignment to the Substitute Agent on behalf of the Names.

Personal stop loss

5.9 	ERL shall be entitled to set off, against the Name's Premium of any Name who is not an Accepting Name, any amount which ERL would otherwise be obliged to pay to that Name pursuant to clause 3 as reinsurer of any Syndicate 1992 and Prior Business insofar as it relates to any personal stop loss contract or estate protection plan of that Name.

CSU Calculation and Appropriation of Payments

5.10 	For the purposes of calculating the amount of any Name's Premium as set out in clause 5.1 (b) and the amount of any Name's Premium discharged by the transfer of assets or the amount realised through the liquidation of Funds at Lloyd's for application in or towards any Name's Premium, the records of and calculations performed by the CSU shall be conclusive evidence as between the Name and ERL, in the absence of any manifest error. The amount so applied shall be the value received by ERL, net of any transaction or tax costs, and ERL shall be entitled to appropriate such amount toward the Syndicate Premium of any relevant Syndicate in its absolute discretion.

ADDITIONAL CONSIDERATION

Syndicate Reinsurances, Financial Reinsurances and Other Returns

6.1 	Subject to clause 6.3 and to clause 6.13, each Name and each Closed Year Name, acting through the Substitute Agent, hereby assigns and agrees to assign to the Managing Agent's Trustees of the Name's or the Closed Year Name's relevant Premiums Trust Deed, with effect as and from the Effective Date, all of the right, title and interest of the Name or the Closed Year Name in the Other Returns and in the proceeds and the right to receive proceeds (whether or not accrued) of all Syndicate Reinsurances, other than Financial Reinsurances and Onon/L&O Reinsurances, and including the benefit of any Security Interest for, or other obligation of any third parry in relation to, the performance of any Syndicate Reinsurance or Other Return, whether or not the Name or Closed Year Name has a present entitlement to the Other Returns or the proceeds of the Syndicate Reinsurances, as the case may be, to be held on the terms of such Premium Trust Deed.

6.2	References in this clause 6 to the "relevant Premiums Trust Deed" are to the Premiums Trust Deed of the relevant Name or Closed Year Name to which {*16} the proceeds of the rights in question would, but for this Agreement, have been subject.

6.3 	The assignment contained in clause 6.1 does not extend to Other Returns or to Syndicate Reinsurances to the extent that amounts payable or paid under or in respect of those Other Returns or Syndicate Reinsurances, as the case may be, would constitute assets of the Name's or the Closed Year Name's LATF or LCTF

6.4	Subject to clause 6.13, the Managing Agent's Trustees shall on or after the Effective Date, when directed to do so pursuant to the relevant Premiums Trust Deed by the Substitute Agent acting as Managing Agent of each Name and Closed Year Name, assign to ERL the rights assigned to it under clause 6.1 in accordance with the terms of the relevant Premiums Trust Deed, so as to transfer the benefit of the Other Returns or of the Syndicate Reinsurances (other	than Financial Reinsurances and Onon/L&O Reinsurances) to ER.L or as ERL shall direct in partial satisfaction of the consideration for the assumption of the Reinsurance Obligation by ERL. For the avoidance of doubt, any funds received-by the Name or Closed Year Name or the Managing Agent's Trustees, or by any person on behalf of any of them, in respect of any rights assigned to the Managing Agent's Trustees pursuant to clause 6.1, but not assigned or otherwise transferred by the Managing Agent's Trustees pursuant to this clause 6.4, shall be subject to the provisions of clause 6.12 below as if the Name or Closed Year Name had been under an obligation to assign the rights to ERL. The Substitute Agent undertakes to ERL to give the directions contemplated by this clause 6.4 on the Effective Date.

6.5 	Subject to clause 6.13, each of the Names and the Closed Year Names, acting through the Substitute Agent, hereby assigns and agrees to assign to ERL, with effect as and from the Effective Date, all the right, title and interest of the Name or the Closed Year Name, to the extent not already assigned pursuant to clause 6.1, in the Other Returns and in proceeds and the right to receive proceeds (whether or not accrued) of all Syndicate Reinsurances, other than Financial Reinsurances and Orion/L&O Reinsurances, whether or not the Name or Closed Year Name has a present entitlement to the Other Returns or the proceeds of the Syndicate Reinsurances, as the case may be.

6.6 	Each of the Names and the Closed Year Names, acting through the Substitute Agent, and the Substitute Agent covenant that the Substitute Agent on behalf of each Name and each Closed Year Name and on its own behalf or as managing agent of any Name or Closed Year Name will take all action from time to time directed by ERL to ensure that the benefit of the Financial Reinsurances and of the Orion/L&O reinsurances of each Syndicate and Closed Year Syndicate, including without limitation, rights to rebate or return of premium thereunder, and any credit support, Security Interest or other rights granted in connection therewith (for the purposes of this clause 6 referred to {*17} together as the Relevant Rights) are transferred to and will enure to the benefit of ERL or such other person as ERL may direct.

6.7 	The actions which ERL may direct be taken by a Name or a Closed Year Name or the Substitute Agent pursuant to clause 6.6 include, without limitation:

(a)	assigning any of the Relevant Rights to the Managing Agent's Trustees of 	the relevant Premiums Trust Deed to be held on the terms of such 	Premiums Trust Deed and taking steps to perfect such assignment;

(b)	assigning to ERL, or as ERL may direct, any of the Relevant Rights or 	the right to receive proceeds in respect of any of the Relevant Rights 	and taking steps to perfect such assignment;

(c)	entering into a contract pursuant to which the Name or the Closed Year	-Name agrees to the discharge of his nights in respect of any of the 	Relevant Rights in consideration of corresponding or similar nights being granted to IERL or such other person as ERL may direct;

(d)	entering into a contract varying in any manner the nights of the Name or the Closed Year Name in respect of any of the Relevant Rights;

(e)	exercising any nights conferred on the Name or the Closed Year Name 	(alone, or jointly with other members of the relevant Syndicate or Closed 	Year Syndicate) pursuant to, or as the person entitled to, any of the Relevant Rights in such manner as ERL may from time to time direct; 	and

(f)	declaring a trust, in such terms as may be directed, over any of the nights of the Name or the Closed Year Name in respect of any of the Relevant Rights.

6.8	A direction under clause 6.6 may be given to Names or Closed Year Names generally, by reference to any class or by reference to membership of a Syndicate or of a Closed Year Syndicate, and may be given in relation to particular nights in respect of Relevant Rights or such nights by reference to a description or class. For the avoidance of doubt, a direction may be given under clause 6.6 in respect of Relevant Rights even if a direction has already been given in respect of those rights.

6.9 	Any direction under clause 6.6 may be given by ERL to any Name or Closed Year Name by being given to the Substitute Agent on his behalf. The Substitute Agent shall be under no duty to communicate such directions to the Names and Closed Year Names, provided that it takes all actions required by the direction on behalf of the Names and the Closed Year Names to whom the direction is made. {*18} 

6.10 	A direction under clause 6.6 may require documents to be executed prior to the Effective Date, provided that under the terms of such documents the transfer to be effected of the benefit of Relevant Rights does not take effect until the Effective Date or some later time.

6.11 	Without limiting the effect of any other provision of this clause 6, the benefit of Syndicate Reinsurances (including, without limitation, the Financial Reinsurances) and of the Other Returns will enure to the benefit of ERL, as reinsurer to close of the aggregate ultimate net liability of each Syndicate or Closed Year Syndicate in respect of that Syndicate or Closed Year Syndicate's1992 and Prior Business.

6.12 	Each Name and each Closed Year Name agrees, subject to clause 6.3, that, if, on or after the Effective Date, he receives any funds in respect of Other Returns, Syndicate Reinsurances or any Relevant Rights of which the Name or the Closed Year Name is, as at the date hereof, the legal owner or has or may in the future acquire any other rights (whether because the right to receive such funds has not been effectively assigned or transferred to ERL or otherwise), or if such funds are received by the trustees of the Name's or the Closed Year Name's Premiums Trust Funds, LATF or LCTF, the Name or Closed Year Name will pay to ERL an amount equal to the funds so received, which shall to that extent, constitute due performance of the obligation to transfer the rights in satisfaction of which the payment was made, PROVIDED THAT the amount payable by the Name or the Closed Year Name under this clause 6.12 shall be limited to such amount in respect thereof as can properly be paid from the funds then or at any later time standing to the credit of the Name's or the Closed Year Name's Premiums Trust Funds, LATF or LCTF.

6.13	In respect of any Syndicate Reinsurances under which liabilities other than 1992 and Prior Business are reinsured, clause 6.1 shall only have effect, and shall be construed as being limited to, rights under or in respect of those Syndicate Reinsurances (and including the benefit of any Security Interest for, or other obligation of any third party in relation to, the performance of any Syndicate Reinsurance) insofar as they relate to 1992 and Prior Business, provided that nothing in this clause 6A3 requires express reference to this limitation in an instrument required to be executed pursuant to clause 6.7.

6.14 	ERL is authorised to give notice of any assignment under this clause 6 to any person affected thereby and to the extent that the relevant rights or interests:

(a)	are not capable of assignment;

(b)	have not been assigned; or

(c)	have been assigned to ERL pursuant to a request under this clause 6 but that assignment is not recognised by any relevant court or body, {*19}

ERL is irrevocably authorised to collect the same for its own account (but subject to the obligations in clause 6.17) whether in its own name or that of the relevant Names and/or Closed Year Names and to that end ERL shall be entitled to exercise all such powers as may be necessary or expedient in connection therewith.

6.15 	Each Name, acting through the Substitute Agent, hereby assigns to ERL the rights of that Name to recover any losses or damages from any Managing Agent and its agents or sub-contractors, arising out of any claim, potential claim, counterclaim, claim by way of enforcement of judgment, award or order of any kind (including as to interest or costs), right of appeal, claim by way of contribution, right of set-off, indemnity, cause of action, right or interest of any kind or nature whatsoever, whether known or unknown, suspected or unsuspected, whether arising in contract, tort, equity, fraud, as a consequence of wilful, reckless or negligent conduct, or of any fiduciary, statutory, regulatory or other duty, or otherwise arising from or relating to its conduct of or, the conduct by its agents or sub-contractors of, the relevant Syndicate 1992 and Prior Business, or any part thereof between 2 May 1996 or the date of execution of the relevant Information and Administration Agreement, if later, and the Effective Date.

6.16 	Each Name and each Closed Year Name, acting through the Substitute Agent, hereby assigns to ERL any rights of that Name or Closed Year Name to recover any losses or damages from any Broker or any member of a Broker Group howsoever arising out of any claim, potential claim, counterclaim, claim by way of enforcement of judgment, award or order of any kind (including as to interest or costs), right of appeal, claim by way of contribution, right of set-off, indemnity, cause of action, right or interest of any kind or nature whatsoever, whether known or unknown, suspected or unsuspected, whether arising in contract, tort, equity, fraud, as a consequence of wilful, reckless or negligent conduct, or of any fiduciary, statutory, regulatory or other duty, or otherwise in relation to any Syndicate 1992 and Prior Business (a Brokers Claim) PROVIDED THAT nothing in this clause shall operate as an assignment or transfer by any Name who is not an Accepting Name to ERL of the benefit of

(a)	any Brokers Claim which has been made or asserted prior to the date hereof and which has been fully taken into account by any Reserve Group in the final reserve indications issued to the Managing Agents in June 1996; or

(b)	any Brokers Claim, the circumstances relating to which will have no adverse effect on ERL in its capacity as reinsurer of 1992 and Prior Business, leaving out of account for this purpose, the Retrocession Agreement, or the value of 1992 and Prior Business, including, but without prejudice to the generality of the foregoing, any Brokers Claim as a result of a breach by a Broker of any duty to disclose to any Syndicate, or advise such Syndicate as to the nature of, any risk assumed {*20} by it in relation to excess of loss reinsurance policies entered into between 1987 and 1992 (including those which form part of the phenomenon known as the LMX spiral) or any breach by any Broker of any duty to disclose to any Syndicate the existence or introduction of, or to advise such Syndicate as to the nature or effect of, any policy wording prior to 1992 which introduced the aggregate extension clause or terms of similar effect thereto.

6.17 	Notwithstanding this clause 6, any amount received by ERL pursuant to this clause 6 which is by the terms of any relevant Syndicate Reinsurance (other than any Financial Reinsurance) payable to, or subject to a legally enforceable duty to account to, Insurance Creditors or reinsurers of the relevant 1992 and Prior Business shall upon receipt be applied by ERL in making such payment or rendering such account but subject thereto for ERL absolutely.

SEGREGATED ACCOUNT

7.1 	The Substitute Agent undertakes that, between the date hereof and the date of --realisation or of transfer pursuant to clause 5.1 (a) of the Segregated Account Assets it will not knowingly take any action which will adversely affectthe realisation or transferability of such Segregated Account Assets.

Assumed Liabilities

7.2 	In consideration of the obligation to pay the aggregate of the SyndicatePremiums and the payment to ERL of that part of the Segregated AccountAssets which consists of cash at bank, ERL undertakes to be responsible for thepayment, satisfaction, discharge, performance and fulfilment of the Assumed Liabilities of all Syndicates outstanding as at the Effective Date, as shown in the Completion Accounts. ERL undertakes that, on receipt by ERL from a Name of sufficient consideration for complete discharge of the Name's Premium for which that Name is liable and of the payment to ERL of cash at bank to theextent that such cash forms part of the aggregate of the proportions of theSegregated Accounts attributable to that Name, that Name shall not have any further liability to ERL in respect of the Assumed Liabilities.

Surplus

7.3 	ERL and Equitas acknowledge that in relation to any Syndicate with a Surplus, such Surplus has been, or shall be, transferred to a Surplus Account.ERL undertakes that, to the extent that any such transfer has not been effected prior to the Effective Date or the assets transferred (net of any income earned thereon) have a value as at the Effective Date of less than the Surplus, Equitas shall, as soon as reasonably practicable after the Effective Date, pay an appropriate amount in cash to a Surplus Account under the control or direction of the Substitute Agent. {*21}

ADJUSTMENT OF PREMIUM

8.	Each Name shall be entitled to any return or returns in respect of the aggregate of

(a)	his Name's Premium; and 

(b)	the aggregate of the proportions of the Segregated Accounts attributable to the business of that Name (calculated by reference to that Name's participation in the relevant Syndicate as set out in the relevant Syndicate List), excluding the amount of any losses declared to 31 December 1994 but not called as at 15 March 1996, deferred losses owing as at 15 March 1996 or called but unpaid losses owing as at 15 March 1996 attributable to that Name for each Syndicate of which he is a member and taken into account in the calculation of his Name's Premium,

which may in due course become payable, calculated in accordance with theprovisions of schedule 5, and there shall be no limitation on the total paymentsby way of return premium that may be made.

PART II - RUN-OFF OF THE REINSURED ACCOUNTS

RUN-OFF FROM THE EFFECTIVE DATE

9.1 	In consideration of the Names and Closed Year Names, acting through the Substitute Agent, entering into the reinsurance agreement contained in Part I of this Agreement, ERL shall be entitled to assume, and undertakes and agrees to assume, responsibility for, and the Names and Closed Year Names irrevocably appoint ERL to perform, the Run-off in accordance with the provisions of this Part II of this Agreement and subject to and in accordance with the provisionsof the EATD, the ECTD and any Overseas Trust Deeds.

Powers of ERL

9.2 	With effect from the time and date on which the last condition in clause 2.1 is satisfied, and subject to and in accordance with the provisions of the EATD, the ECTD and any Overseas Trust Deeds, ERL will assume exclusive and irrevocable responsibility for the Run-off of the Syndicate 1992 and Prior Business of each Syndicate and each Closed Year Syndicate ERL shall be entitled and obliged from the time and date on which the last condition in clause 2.1 is satisfied to conduct the Run-off of the Syndicate 1992 and Prior Business of each Syndicate and each Closed Year Syndicate as agent of the Names and Closed Year Names in its absolute discretion without prejudice to the powers of the Substitute Agent under any Premiums Trust Deed, the LATD or the LCTD or otherwise in relation to the discharge of any consideration due under clause 3.1, and, without prejudice to the generality of the foregoing, ERL shall be entitled, in accordance with, and subject to, all applicable laws, to {*22} exercise the following powers together with all such other powers as may be necessary or expedient in relation thereto:

(a)	power to adjust, handle, agree, settle, pay, compromise or repudiate any Claim, return premium, reinsurance premium or any other insurance orreinsurance liability on behalf of the Syndicate or Closed Year Syndicate;

(b)	power to adjust, handle, agree, settle, pay, compromise or repudiate any other liability, outgoing or expense of the Syndicate or Closed Year Syndicate of whatever nature and wherever arising without limitation in time and amount;

(c)	power to agree to any variation or extension of existing contracts of insurance or reinsurance entered into by or on behalf of the Syndicate or Closed Year Syndicate and to set any additional premium payable by the insured or reinsured unless already fixed under the terms of the original-insurance or reinsurance;

(d)	power to commence, conduct, pursue, prosecute, settle, appeal or compromise any Legal Proceedings on behalf of the Syndicate or Closed Year Syndicate or any Name or to defend any such proceedings taken out against the Syndicate or Closed Year Syndicate or any Name or Closed Year Name in which any outcome will by virtue of this Agreement be for the account of ERL including the provision of any security in respect of any such proceedings;

(e)	power to agree, take down and collect premiums, claim refunds, salvages and reinsurance recoveries;

(f)	power to agree to, or exercise any right to, set off any claims against reinsurance recoveries or vice versa, or to settle any balance of account at any time owing to or from the Syndicate or Closed Year Syndicate or any Name or Closed Year Name in relation to the Syndicate 1992 and Prior Business, whether in respect of claims, premiums, reinsurance, insurance or any other amounts whatsoever;

(g)	power to agree on behalf of the Syndicate or Closed Year Syndicate to fund the obligations of any third party in connection with any Claim orany other matter;

(h)	power to agree any ex gratia or goodwill payment or any extra contractual obligation of or on behalf of the Syndicate or Closed YearSyndicate;

i)	power to enter into any arrangements which ERL considers will or may aid or reduce any liability in respect of a Claim; {*23} 

(i)	power to use the names of any or all of the Names or Closed Year Names in exercise of any or all of the powers conferred on ERL by this Agreement;

(k)	power to commute or enter into an agreement for the discharge of any liability or prospective liability under any insurance or reinsurance policy, or for the recovery of any asset;

(1)	power to exercise any rights of subrogation of the Syndicate or Closed Year Syndicate or any of its members or to exercise any other rights of recovery of the Syndicate or Closed Year Syndicate or any of its members (whether by way of contribution, indemnity or otherwise howsoever) in respect of losses sustained or expenses incurred by it or by any of them;

(m)	power to engage in any discussion or negotiation with any insured person, reinsured person, class of insured or reinsured persons, reinsurer, broker, legal or other representative of insureds or any other party in relation to any Claim or any other matter;

(n)	power to enter into, amend or cancel any claims handling arrangement irrespective of whether such arrangement forms part of the original contract;

(o)	power to enter into, amend or cancel any claims collection or reinsurance recovery collection arrangement with any broker, specialist collection agency or any other debt collector;

(p)	power to instruct lawyers, claim adjusters or any other experts or consultants in any matter;

(q)	power to enter into any market arrangement with any insured person or class of persons or their representatives or insurers or reinsurers whereby ERL or the Syndicate or Closed Year Syndicate would be bound to adopt a particular settlement policy in relation to any claim or category of claims,  or which could extend or increase the liability of ERL or the Syndicate or Closed Year Syndicate;

(r)	power to enter into any agreement to indemnify or release any other person, in relation to any of the above matters;

(s)	power to represent the Syndicate or Closed Year Syndicate in any market or industry discussion group (which may also involve post 1992 years of account); and

(t)	power to establish any security in respect of any policy liabilities which are comprised in the relevant Syndicate 1992 and Prior Business. {*24} 

Delegation

9.3 	ERL may from time to time (without affecting its duties, obligations and responsibilities hereunder) during the term of this Agreement, in its absolutediscretion, appoint or employ sub-agents or contractors in any part of the world as it shall determine to be necessary or expedient in connection with the performance of its duties, obligations and responsibilities under this Agreement and may delegate to Equitas or any other sub-agent or contractor any or all ofthe services to be provided by it, any or all of the duties to be performed by itor any or all of the powers, including this power of delegation, to be exercised by it under this Agreement but ERL shall be responsible for the acts and omissions of any such sub-agent or contractor, and the Names and the Closed Year Names acknowledge that it is intended that all the rights, powers, duties and obligations of ERL under this Agreement will be delegated to Equitas under the Retrocession Agreement and may be delegated by Equitas to third partiesand their sub-contractors.

ERL's powers exclusive and irrevocable

9.4 	It is expressly agreed that ERL and its delegates and sub-delegates will have irrevocable and exclusive power to manage each Run-off in accordancewith the provisions of this Agreement and, subject to the provisions of the EATD, the ECTD and any Overseas Trust Deeds and to the fullest extent possible, shall manage each Run-off as if it were principal and, without prejudice to the generality of the foregoing, it is expressly agreed that:

(a)	ERL and its delegates and sub-delegates are not bound to comply with any instructions or requests of any Name or Closed Year Name;

(b)	in no circumstances will any Name or any Closed Year Name interfere with the exercise of the management or control of any Run-off, and

(c)	in no circumstances will any Name or any Closed Year Name be entitled to receive directly payment of any amount payable by ERL in theperformance of the Reinsurance Obligation in respect of any Claim,return premium or other amount in relation to the Syndicate 1992 and Prior Business of any Syndicate or Closed Year Syndicate of which thatName or Closed Year Name is a member (other than under clause 8 ofthis Agreement and schedule 5 or paragraph 13 of schedule 3 to this Agreement).

DUTIES AND LIABILITY OF ERL

ERL's standard of care

10.1 	In performing its duties and exercising its powers under this Part Il of this Agreement, ERL shall operate its business and conduct its affairs in a bona fide and businesslike manner and use all reasonable skill, care and diligence for the {*25} proper provision of services, performance of duties and exercise of powers by it under this Agreement but, without prejudice to its obligations under this Agreement, ERL shall not have any fiduciary obligations to the Names or theClosed Year Names.

Liability of ERL

10.2	ERL shall keep each Name and each Closed Year Name fully indemnified and held harmless at all times against all costs, losses, claims,damages or expenses including extra-contractual obligations or punitive or penal damages arising out of or relating to any acts and omissions (including without limitation any errors, omissions, breaches of contract and breaches of fiduciary duty) of ERL or any delegate or sub-delegate of ERL in relation to the Syndicate 1992 and Prior Business of any Syndicate or Closed Year Syndicate of which that Name or Closed Year Name was a member, whether in its own name or on behalf of and in the name of the Name or Closed Year Name PROVIDED THAT the indemnity in this clause 10.2 shall not apply in relation toany liability in respect of the Reinsurance Obligation.

10.3 	In the event of any claim being made against any Name or Closed Year Name in respect of which ERL may be required to indemnify the Name or Closed Year Name pursuant to clause 10.2 above, (subject to being filly indemnified to the reasonable satisfaction of the Substitute Agent against all reasonable out-of-pocket costs and expenses incurred by any Name or Closed Year Name) the Name or Closed Year Name or in each case the Substitute Agent on its or his behalf -

(a)	shall procure that notice of such claim is given to ERL as soon as reasonably practicable;

(b)	shall not make any admission of liability, agreement or compromise with any person, body or authority in relation to any such claim without prior consultation with and the prior agreement of ERL which agreement shall not be unreasonably withheld or delayed;

(c)	shall take such action as ERL may reasonably request to avoid, dispute, resist, appeal, compromise or defend such claim or any adjudication in respect of that claim; and

(d)	if so required by ERL in writing, shall use all reasonable endeavours to ensure that ERL is placed in a position to take on or take over the conduct of all proceedings and/or negotiations of whatsoever nature arising in connection with the claim in question and provide such information and assistance as ERL may reasonably require in connectionwith the preparation for and conduct of such proceedings and/or negotiations. {*26} 

PART III - INTERIM PROVISIONS

RESPONSIBILITY FOR THE RUN-OFF FROM THE RUN-OFF DATE

Powers in relation to period from Run-off Date

11.1 	The Substitute Agent hereby appoints ERL as sub-agent of the SubstituteAgent in relation to each Syndicate, to have the frill and exclusive managementof the Run-off of that Syndicate from the Run-off Date until the time and dateon which the last condition in clause 2.1 is satisfied, with all such powers andauthorities as the Substitute Agent may itself have in relation to each Syndicate, including without limitation the power to act on behalf of that Syndicate in therespects described in clause 9.2 but excluding any powers and authorities under any Premiums Trust Deed, the LATD or the LCTD.

Non-interference with powers of ERL

11.2 	ERL may exercise its powers under this clause Il without reference tothe Substitute Agent which undertakes for its part first to exercise as required its powers, rights and discretions under the Substitute Agent's Appointment to giveeffect to the decisions made by ERL within the scope of the authority delegated to ERL by this clause Il and the Substitute Agent agrees not to exercise any power, right or discretion under the Substitute Agent's Appointment which is delegated to ERL pursuant to this Agreement or the exercise of which may interfere with or be inconsistent with the powers, rights and discretions delegated to ERL pursuant to this clause.

11.3 	The Substitute Agent agrees to give such directions to the Managing Agent's Trustees and the Trustees of the LATF and the LCTF as may be required and as may be permitted under the LATD and the LCTD for payment out of any Segregated Account of moneys to meet any Claim, liability, loss, return premium, reinsurance premium or other outgoing relating to the relevant Syndicate 1992 and Prior Business agreed, settled or incurred by ERL.

ERL's duty of care

11.4 	In the conduct of each Run-off as sub-agent of the Substitute Agent from the Run-off Date to the date on which the last of the conditions in clause 2.1 is satisfied, ERL shall be subject to the same duties and obligations to the relevant Syndicate, including those of care and to act in the interests of its principals, as the Substitute Agent itself has to the Syndicate, and ERL shall be responsible for all acts and omissions of its employees, agents, sub-contractorsand representatives.

ERL's ACCESS TO BOOKS AND RECORDS FROM THE RUN-OFF DATE

12.	The Substitute Agent agrees that it shall, and authorises and instructs its sub-agents (including any sub-agent which is an insurance broker) and every {*27} past, present and future director, officer or employee of the Substitute Agent, at any time during normal office hours and without charge, to:

(a)	use its best endeavours to make available to ERL or any sub-agent of ERL and, to the extent required for the further implementation of the Reconstruction and Renewal Byelaw, to Lloyd's, the Books and Recordsof each Syndicate; and

(b)	permit ERL and, to the extent required for the further implementation of the Reconstruction and Renewal Byelaw, Lloyd's, to take copies of the Books and Records of each Syndicate (including such Books and Records as do not exclusively relate to the Syndicate 1992 and Prior Business), including reproducing, transforming or storing any information on its own computer or information retrieval system.

APH CLAIMS

Suspension of Deed of Authority

13. 	Any Deed of Authority between Lloyd's and any Syndicate and conferring authority on the Specialist Claims Unit shall be suspended, insofar as it relates to APH Claims in respect of 1992 and Prior Business, for so long as the delegation in clause 11.1 continues in force and shall be terminated, insofar as it relates to APH Claims in respect of 1992 and Prior Business, from the time and date on which the last condition in clause 2.1 is satisfied.

PART 1V- GENERAL PROVISIONS

FURTHER ASSURANCE

14.1 	The Substitute Agent undertakes, if so requested by ERL or any delegate or sub-delegate of ERL, to ratify and confirm any act or thing lawfully done or caused to be done by ERL or any delegate or sub-delegate of ERL in good faith in the performance of its duties under this Agreement and to procure and do all such other acts and things as may be necessary to enable the provisions of this Agreement to be carried out and given full force and effect and fully to co-operate with ERL to enable ERL or any delegate or sub-delegate of ERL to perform the obligations of ERL under this Agreement.

14.2 	The Substitute Agent hereby undertakes at the reasonable request of ERL or any delegate of ERL to exercise any power of attorney to execute anydeed or sign any document where it is necessary or expedient to do so in the exercise by ERL or any delegate of ERL of the authority delegated to ERL under clause 11.1. {*28} 

BOOKS AND RECORDS

Access to Books and Records

15.1 	The Substitute Agent agrees, upon or after the date on which the last of the conditions in clause 2.1 is satisfied, to transfer or procure the transfer of such Books and Records of each Syndicate and Closed Year Syndicate as are in thecustody, possession or control of the Substitute Agent which relate exclusively to the Syndicate 1992 and Prior Business of that Syndicate or Closed Year Syndicate to ERL or as ERL may direct, which ERL shall then hold as agent on behalf of that Syndicate.

Return of Books and Records on termination

15.2 	If this Agreement is terminated in accordance with its terms, ERL shall, at the end of the period referred to in clause 19.2, return to the Substitute Agent or, at the request of the Substitute Agent, the relevant Managing Agent or anysuccessor, such Books and Records as have been transferred to it and agrees to maintain the confidentiality of the Books and Records in accordance with clause 17.

ERL's maintenance of Books and Records

15.3 	ERL shall, until the Syndicate 1992 and Prior Business of each Syndicate and Closed Year Syndicate has been discharged in full:

(a)	use all reasonable endeavours to keep safe all Books and Records relating to that Syndicate or Closed Year Syndicate delivered to it by the Substitute Agent or the relevant Managing Agent in accordance with such reasonable data and document retention policy as may be issued by ERL from time to time;

(b)	maintain records of its conduct of the Run-off of each Syndicate and, where relevant Closed Year Syndicate, showing the same separately from its conduct of the business of the other Syndicates, but only insofar as ERL determines that such separate books and records are necessary for the proper carrying on of its business;

(c)	at a charge which, in the reasonable opinion of ERL, represents the cost of making the information available, make available to any Name or Closed Year Name and to the Substitute Agent on behalf of that Name or Closed Year Name at the request of that Name or Closed Year Name, in connection with any Legal Proceedings brought and conducted by that Name or Closed Year Name in respect of the Syndicate 1992 and Prior Business of any Syndicate or Closed Year Syndicate of which that Name or Closed Year Name was a member is a party, all such books and records as are referred to in sub-clauses (a) and (b), and shall permit that Name or Closed Year Name or the Substitute Agent to take copies {*29} thereof, at his own expense, whether in person or by their duly authorised agents; and

(d)	following any adjustment of liabilities pursuant to clause 3.5 and schedule 	3 to this Agreement and at a charge which, in the reasonable opinion of 	ERL, represents the cost of making the information available, make available to any Name or Closed Year Name and to the Substitute Agent 	on behalf of that Name or Closed Year Name at the request of that 	Name or Closed Year Name in connection with any Legal Proceedings brought against that Name or Closed Year Name in respect of the Syndicate 1992 and Prior Business of any Syndicate or Closed Year 	Syndicate of which that Name or Closed Year Name was a member, all 	such books and records as are referred to in sub-clauses (a) and (b), and shall permit that Name or Closed Year Name or the Substitute Agent to	take copies thereof, at his own expense, whether in person or by their-duly authorised agent,

PROVIDED THAT the obligation in sub-clauses (c) and (d) above shall not apply in any circumstance where, in the reasonable opinion of ERL, making such information available or permitting such copies to be taken would breach privilege or otherwise be prejudicial to the interests of ERL or any other Name or Closed Year Name in relation to any 1992 and Prior Business.

15.4 	All information and data made available in accordance with clauses 15.3(c) and (d) will be provided at the risk of the relevant Name or Closed Year Name. ERL and Equitas shall accept no responsibility therefor nor shall they make or be deemed to make any representation, warranty or undertaking as to the accuracy or fitness of such information and data for the purpose of whichthey are used by any person.

REPORTS AND ACCOUNTS

16. 	ERL shall, until the Syndicate 1992 and Prior Business of each Syndicate has been discharged in full, provide to the Names and to the Substitute Agent copies of the annual report and consolidated accounts of the Equitas Group and/or such other documents as may be agreed between ERL and the Substitute Agent on behalf of the Names from time to time.

CONFIDENTIALITY

Restrictions on use of confidential information

17. 	Each of ERL, the Substitute Agent and Lloyd's shall use all reasonable endeavours to ensure that it and its respective employees, agents, subcontractors and representatives shall:

(a)	keep the Confidential Information strictly private and confidential and not disclose any Confidential Information to any person other than: {*30} 

(i)	in the case of the Substitute Agent, to discharge the duties of the Substitute Agent to Names and Closed Year Names;

(ii)	as is necessary in the ordinary course of business, including to its auditors, legal advisers or other consultants;

(iii)	as may be required (including under standard procedures or rules of court) by a court of competent jurisdiction in the exercise of such jurisdiction;

(iv)	any government department or governmental agency having jurisdiction over the party disclosing, in the exercise of such jurisdiction, but only to the extent that disclosure is required by applicable laws, regulations or rules relating thereto;

(v)	any regulatory agency or professional body of which a party may be a member (including Lloyd's) but only to the extent required by rules (including, without limitation, professional or ethical rules or regulations applicable to the party disclosing); or

(vi)	in the case of ERL, under the Retrocession Agreement, any Information and Administration Agreement, any Run-off Administration Agreement entered into in respect of any Syndicate or Syndicates or the Completion Accounts and Co-operation Agreement, or to the Trustee, provided that any recipient of such Confidential Information under such agreement shall have entered into a confidentiality undertaking in respect of such Confidential Information;

(b)	in the case of ERL and Lloyd's, use all Confidential Information solely for the purpose of performing its rights and obligations under this Agreement or, in the case of ERL, in the proper performance of its business in relation to 1992 and Prior Business and, in the case of Lloyd's, for the implementation of the Reconstruction arid Renewal Byelaw and in the discharge of its regulatory functions and not permit any other person to use it for any other purpose but without prejudice to the power of the Council under the Information and Confidentiality Byelaw (No. 21 of 1993); and

(c)	in the case of the Substitute Agent, use all Confidential Information solely in the discharge of its obligations to Names and Closed Year Names.

CURRENCY OF PAYMENT

18. 	Where any amount payable by a Name hereunder in respect of his Name's Premium is an amount denominated in US Dollars or Canadian Dollars, then, unless the amount is paid out of the LATF (in respect of a US Dollar {*31} liability) or out of the LCTF (in respect of a Canadian Dollar liability), the Name shall instead pay an amount in sterling being one pound sterling for each US$1.51 and one pound sterling for each Can$2.05.

CONSEQUENCES OF TERMINATION

Termination

19.1 	Upon termination of this Agreement pursuant to clause 2.2 all provisions of this Agreement (other than clauses 15.2, 17, 20, 22, 23, 24 and 25 in each case to the extent capable of application after termination of the other provisions) shall cease and terminate forthwith and no party to this Agreement  shall have any claim of any nature whatsoever against any other party to this Agreement except for any claim that may have accrued prior to the date of termination.

Termination of powers in relation to Run-off

19.2 	In the event that this Agreement terminates for any reason in accordance with its terms, ERL shall continue to be entitled for a period of 6 months, or such lesser period as is necessary to enable the Substitute Agent to resume responsibility for the Run-off, to exercise the powers conferred on it as agent of the Names and the Closed Year Names by virtue of clause 9.

WAIVER

20. 	Any delay by any party in exercising, or failure to exercise, any right or remedy under this Agreement shall not constitute a waiver of the right or remedy or a waiver of any other right or remedy and no single or partial exercise of any right or remedy under this Agreement or otherwise shall prevent any further exercise of the right or remedy or the exercise of any other right orremedy. The rights and remedies of each party under this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

INVALIDITY

21. 	If any provision of this Agreement other than the Reinsurance Obligation is held to be invalid or unenforceable, then such provision shall (so far as it is invalid or unenforceable) be given no effect and shall be deemed not to be included in this Agreement but without invalidating any of the remaining provisions of this Agreement.

NOTICES

22.1 	Any notice or notification to be given hereunder shall be in writing and may be given either by personal delivery, first class post or facsimile in the caseof the Names and the Closed Year Names to the Substitute Agent and in the case of the Substitute Agent and any other signatory to this Agreement to the {*32} address of such signatory set out in this Agreement or to such other address asany such signatory may have notified as being its address for service for the purposes of this Agreement.

22.2 	ERL shall annually make a written request to each Name at his last notified address for, and each Name agrees to provide within 21 business days of such request, written confirmation of, or notification of any amendment to, the address of that Name.

VARIATION

23.	No variation, supplement, deletion or replacement of this Agreement (orof any of the documents referred to herein) shall be valid unless it is in writing and signed by or on behalf of each of the signatories hereto.

COSTS

24. 	Each of ERL, Lloyd's, the Substitute Agent, Equitas, the ManagingAgent's Trustees, the Trustee shall, except as otherwise agreed in writing, pay its own costs incurred in connection with the preparation and implementation of this Agreement.

GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS

Governing law and jurisdiction

25.1 	All rights and obligations, of whatever sort, of any person, arising out of, or in any way related to or connected with, this Agreement and all the terms and provisions hereof and all questions of construction, validity and performancehereunder and all appointments and authorities granted pursuant hereto shall be governed by and construed in accordance with the laws of England. In relationto any proceeding to enforce the rights and/or obligations of any person arising out of, or in any way related to or connected with this Agreement and all appointments and authorities granted pursuant to this Agreement each of the parties hereto, including for the avoidance of doubt each Name and each Closed Year Name for his own part, irrevocably and unconditionally agree that theHigh Court of England and Wales shall have exclusive jurisdiction to settle any dispute and/or controversy of whatsoever nature which may arise out of or in connection with this Agreement and all appointments and authorities granted pursuant hereto or any Name's or Closed Year Name's membership of Lloyd's or underwriting of 1992 and Prior Business and that accordingly, any suit, action or proceeding arising out of such matters shall be brought in such court and, to this end, each party hereto irrevocably agrees to submit to the jurisdiction of the High Court of England and Wales and irrevocably waives (a) any objection which it or he may have now or hereafter to any such suit, action or proceeding being brought in such court and (b) any claim that any such suit, action or proceeding has been brought in an inconvenient forum, and further irrevocably {*33} agrees that a judgment in any suit, action or proceeding brought in the High Court of England and Wales shall be conclusive and binding upon such partyand may be enforced in the courts of any other jurisdiction.

Service of Process

25.2 	Each Name and Closed Year Name not domiciled in the United Kingdom hereby irrevocably appoints the Substitute Agent as agent to accept service of any proceedings in the English courts on his behalf. If for any reason such agent shall cease to act as agent for service of process of any Name, that Name or Closed Year Name shall forthwith appoint a replacement agent, approved by ERL, in London. Failing such appointment within IS days after demand by ERL, ERL shall be entitled to appoint another agent on behalf of the Name or Closed Year Name. Nothing herein shall affect the right to serve process in any other manner permitted by law.

As witness the hands of the duly authorised representatives of the parties hereto the date and year first above written. 

{Pages 34-54 - Schedule 1: see Adobe Acrobat PDF file}

{*55} 
SCHEDULE 2 - DEFINITIONS AND INTERPRETATION

1.	In this Agreement of which this schedule 2 forms part the following expressions shall have the following meanings:

1992 and Prior Business means all liabilities under contracts of insurance underwritten at Lloyd's (other than life business) and originally allocated to the 1992 year of account or any earlier year of account including, without limitation, any such liabilities reinsured to close into the 1993 or any later year of account but excluding any liabilities re-signed, or re-allocated pursuant to a premium transfer, into the 1993 or any later year;

Accepting Name means a Naine who has accepted or accepts the Settlement Offer in accordance with the terms set out in the Settlement Offer Document;

Actual Insurance Creditor means any Insurance Creditor in respect of whom any Claim is outstanding;

Adjustment Entitlement means the right of a Reinsured Name, if there is a Trigger Event leading to an upward adjustment of a Retrocession Rate, to receive compensation in accordance with paragraph 13 of schedule 3;

American Business shall have the meaning given in the EATD;

APH Claims means any Claim occasioned by asbestos, onshore pollution or any health hazard;

Assigned Property has the meaning ascribed to it in clause 4.1;

Assumed Liability means in relation to a Segregated Account any creditor or liability at the Effective Date properly included or which ought properly to have been included in the Segregated Account and all personal expenses arising between 31 December 1995 and the Effective Date and unpaid at the Effective Date in respect of Syndicate 1992 and Prior Business in each case, as shown in the relevant Completion Accounts;

Auditor Settlement Fund means the find of approximately £152 million offered to Names in accordance with the terms of the Settlement Offer Document;

Australian Business shall have the equivalent meaning to the term Australian Liabilities proposed to be given in the EAusCA;

Australian Custody Assets means the aggregate of the assets in the EAusCA;

Australian Rate means the rate at which the Australian Business may be discharged from the Australian Custody Assets alone; {*56} 

Automatic Reinsurance Trigger Event has the meaning set out in paragraph 2.3 of schedule 3;

Available Assets means the assets of ERL (including ERL's rights under the Retrocession Agreement) as at the Record Date less the amount of the General Creditors as at the Record Date;

Board of ERE means the board of directors of ERL;

Books and Records means, in respect of each Syndicate and Closed Year Syndicate, all such information concerning the Syndicate 1992 and Prior Business of that Syndicate or Closed Year Syndicate and assets held in respect thereof including (without prejudice to the generality of the foregoing) policy slips, policy wordings, underwriting cards, certificates of insurance, policy renewal or cancellation documents, claims information (including print-outs of recorded claims provided by that Syndicate or Closed Year Syndicate or by Lloyd's- Claims Office), reserving documentation, reinsurance information, facultative and treaty outwards reinsurance wordings, and all correspondence relating thereto and all books of account, financial information, investment records, accounting records and other records (however stored) prepared or maintained by or on behalf of that Syndicate or Closed Year Syndicate;

Broker means any body corporate or partnership which as at the date hereof is permitted to broke insurance business at Lloyd's by virtue of its registration under the Lloyd's Brokers Byelaw or by virtue of being a party to an umbrella arrangement registered under the Umbrella Arrangements Byelaw (No. 6 of 1988) and any partners, directors, officers and/or employees of such body corporate or partnership;

Broker's Claim has the meaning set out in clause 6.16;

Broker's Group means a Broker and any subsidiary or holding company (whether direct or indirect), or any other subsidiary of any such holding company, of a Broker from time to time, including any former holding company or subsidiary, and all past or present partners, directors, officers and/or employees from time to time of any of such companies or partnerships, but shall not include any current or former member of such group which is an insurance company which has issued policies or contracts of reinsurance or retrocession in favour of a Syndicate or Closed Year Syndicate;

Business Day means any day other than a Saturday or Sunday on which banks are open for business in London;

Can$ or Canadian Dollar means the lawful currency of Canada;

Canadian Business shall have the meaning given in the ECTD; {*57}

Central Fund means the fund constituted by the Central Fund Byelaw (No. 4 of 1986);

Centrewrite Reinsurance means the agreement between ERL and Centrewrite Limited for the reinsurance of Centrewrite Limited in respect of its liabilities to syndicate 553 for the 1985 and 1987 years of account;

Certified Reinsurance Trigger Event has the meaning set out in paragraph 2.1 of schedule 3;

Claim means any claim, potential claim, counterclaim, claim by way of enforcement of judgment, award or order of any kind (including as to interest and cost), right of appeal, claim by way of contribution, right to set off, indemnity, cause of action, right or interest, of any kind, whether known or unknown, suspected or unsuspected, arising out of, or in any way related to or connected with any contract of insurance, liabilities under which are comprised within the definition of 1992 and Prior Business;

Closed Year Names means, in respect of any Closed Year Syndicate, those members of Lloyd's who were members of that Closed Year Syndicate acting in their capacity as members of the Closed Year Syndicate;

Closed Year Syndicate means any syndicate constituted for the 1992 or any prior year of account which has been reinsured to close either directly or indirectly into any Syndicate or Centrewrite;

Combined Litigation Settlement Funds means the sum of the Litigation Settlement Fund and the Auditor Settlement Fund;

Completion Accounts means, in respect of each Syndicate, the accounts prepared in respect thereof pursuant to the Completion Accounts and Co-operation Agreement;

Completion Accounts and Co-operation Agreement means the completion accounts and co-operation agreement entered into or to be entered into between ERL, Equitas and each Managing Agent pursuant to a direction of the Council;

Confidential Information means all information of whatever nature in whatever form (including, for the avoidance of doubt, professional advice) relating to the business affairs of any Syndicate or Closed Year Syndicate other than information which (a) at the time when it is disclosed or obtained is in the public domain; or (b) subsequently comes into the public domain otherwise than as a result of the breach by any party (or its employees, agents, subcontractors or representatives) of the terms of this Agreement;

Contingent Insurance Creditor means any Insurance Creditor in respect of whom a liability has been incurred but not reported; {*58} 

Contract of Insurance means any contract of insurance (whether direct or otherwise) or reinsurance;

Council means the Council of Lloyd's and includes its delegates and any persons by whom it acts;

CSU means Lloyd's Centrai Services Unit;

Debt Credits means, in respect of each Name, any amount offered to that Name as set out in his Finality Statement (including any State Credits) or otherwise offered in accordance with the terms of the Settlement Offer and which shall be applied towards the payment of his Name's Premium (which may include the waiver of certain amounts owing to Lloyd's arising out of the application of assets of the Central Fund on his behalf);

Declaration of Trust means the declaration of trust in relation to the Assigned Property in the form set out in Appendix I to this Agreement to be declared by the Trustee on the date hereof

Dedicated Assets means the aggregate of the US Trust assets, the ECTE Assets and the Australian Custody Assets, or any of them, as the context may require;

DTI means the Department of Trade and Industry or such other governmental or other authority as from time to time carries out the functions in relation to insurance business carried on in the United Kingdom as are at the date of this Agreement carried out by that Department;

E&O Companies Reinsurance means the contract of insurance between ERL and various company underwriters in respect of all errors & omissions insurance liabilities in respect of 1992 and Prior Business under various policies as set out therein;

RATD means the deed of trust to be entered into by Equitas and ERL with Citibank, N.A. as trustee, in favour of the trustee of the LATD, as may be amended from time to time;

RA TF means the trust find from time to time held under the terms of the EATD;

RA us CA means the custodian agreement proposed to be entered into by Equitas with the responsible authorities in Australia in connection with the revised trading arrangements proposed to be established there;

ECTD means the deed of trust to be entered into by Equitas and ERL with the Royal Trust Corporation of Canada as trustee, in favour of the trustee of the LCTD, as may be amended from time to time; {*59} 

ECTF means the trust fund from time to time held under the terms of the ECTD (together with, for the purposes of schedule 3 only, such amounts, if any, as are held in the LCTF and are available only for the discharge of 1992 and Prior Business);

ECTF Assets means the aggregate of the assets in the ECTF;

ECTF Rate means the rate at which liabilities applicable to Canadian Business may be discharged from ECTF Assets alone;

Effective Date means 12.00 BST (midday) on the business day immediately following the date on which the last of the conditions set out in clause 2.1 is satisfied;

Equitas Group means ERL and any subsidiary or holding company (whether direct or indirect) or any other subsidiary of any such holding company;

Equitas Scheme means the scheme for the reinsurance by ERL of all 1992 and Prior Business as described in the Reconstruction and Renewal Byelaw;

Estate Protection Plan has the meaning ascribed to estate reinsurance contract in the Personal Stop Loss Regulation (No. 2 of 1990);

Finality Statement means, in respect of any Name, the statement of that Name's Lloyd's affairs in respect of his 1992 and Prior Business sent to him with the Settlement Offer Document or otherwise, together with the supporting data sent in August 1996;

Financial Reinsurance means each contract identified as and which should be treated as a financial reinsurance, as set out in the list entitled "List of Financial Reinsurances" in the agreed form, together with such other contracts as may be agreed between ERL and the Substitute Agent from time to time;

Funds at Lloyd's means, inter alia, Lloyd's deposits, special reserve funds(whether held under an old special reserve fund trust deed or a new special reserve fund trust deed), guarantees, premium limit excess deposits and personal reserve fttnds;

General Creditors means, at any time, all persons who are creditors (actual, prospective or contingent) of ERL other than the Reinsured Parties in their capacity as such and, where the context requires, references to General Creditors shall include references to the amount of the claims (actual, prospective or contingent) of General Creditors. For the avoidance of doubt, references to Claims of General Creditors include the estimated costs, at any time, of the future business of ERL carried out pursuant to this Agreement; {*60}

Illinois Advance means the sums currently held in trust in respect of Names and Closed Year Names in respect of certain classes of business underwritten in Illinois;

Illinois Collateral Reinsurance means the contract for the reinsurance of the Illinois Retained Business of Names and Closed Year Names authorised by a certificate of authority to write certain classes of insurance business in the State of Illinois made or to be made between ERL, such Names and Closed Year Names and the Substitute Agent;

Illinois Retained Business shall have the meaning given in the Illinois Collateral Reinsurance;

Illinois Surplus Trust means the surplus trust to be established in respect of theIllinois Collateral Reinsurance by ERL;

Illinois Trust Fund means the trust to be established in respect of the IllinoisCollateral Reinsurance by ERL in accordance with Section 173.1 of the Illinois Insurance .Code and § 1104.70 of the Illinois Insurance Department Regulations;

Inception Date means 23.59 GMT on 31 December 1995;

Information and Administration Agreement means each agreement entered into between ERL, Lloyd's and the Managing Agent (or any predecessor) of each Syndicate in relation to all Syndicates for which that Managing Agent (or any predecessor) acted as managing agent prior to the Substitute Agent's Appointment, in relation to the provision of information and the administration of the Run-off prior to the date hereof,

Insolvency Event means any of the events specified in paragraph 2.15 of the Declaration of Trust;

Insurance Creditor means any policyholder under any contract of insurance underwritten by a Syndicate or Closed Year Syndicate liabilities under which are comprised in 1992 and Prior Business other than a member or former member of Lloyd's who is such a policyholder in his capacity as an underwriter of insurance business at Lloyd's;

Interim Proportionate Cover Declaration means a notice or advertisement issued by or under the direction of the Board of ERL stating that a Certified Reinsurance Trigger Event has occurred and the date of such event and whether suspension of payments in respect of Reinsurance Indemnities will come into effect;

LATF means any trust fund from time to time held in respect of a Name under the terms of the Lloyd's American Trust Deed; {*61}

LCTF means any trust fund from time to time held in respect of a Name under the terms of the Lloyd's Canadian Trust Deed;

Legal Proceedings means any legal, arbitral, administrative, regulatory or other action or proceeding (including to enforce, or any appeal from, any judgment, award or order) of any nature whatsoever;

Life Business has the meaning ascribed to "long term business" in the Insurance Companies Act 1982;

Lioncover means Lioncover Insurance Company Limited;

Lioncover Reinsurance means any agreement between either ERL or Equitas andLioncover for the reinsurance of Lioncover in respect of its liabilities in respectof 1992 and Prior Business;

Litigation Settlement Fund means the find of approximately £980 millionoffered to Names in accordance with the terms of the Settlement OfferDocument;

Lloyd's means the Society incorporated by Lloyd's Act 1871 by the name ofLloyd's;

Lloyd's American Trust Deed or LATD means the instrument dated 21 December 1995 constituting the amended and restated Lloyd's American Trust Deed, as amended from time to time,

Lloyd's Canadian Trust Deed or LCTD means the instrument dated 26 September 1995 constituting the amended and restated Lloyd's Canadian Trust Deed, as amended from time to time;

Managing Agent means, in relation to each Syndicate, the managing agent of that Syndicate immediately prior to the Substitute Agent's Appointment;

Managing Agent's Agreement means, in respect of any Name, the agreement under which the relevant Managing Agent was carrying out the Run-off of any Syndicate of which that Name was a member prior to the Substitute Agent's Appointment whether in the terms of the standard managing agent's agreement (general) (as defined in the Agency Agreement Byelaw (No. 8 of 1988)), the Standard Agency Agreement (as defined in the Agency Agreements Byelaw (No. I of 1985)), the Standard Sub-Agency Agreement (as defined in the Agency Agreements Byelaw (No. I of 1985)) or any other terms, including where the Managing Agent was a substitute agent appointed to carry on the duties of a managing agent pursuant to an exercise of the powers of the Council under the Substitute Agent's Byelaw (No. 20 of 1983), the terms of that appointment (including such terms as are referred to therein); {*62}

Managing Agent's Trustees means Additional Underwriting Agencies (No. 10) Limited and Lloyd's, in their capacity as trustees of the Premiums Trust Funds;

Members' Agent means a person who is listed as a members' agent in the register of underwriting agents maintained under the Underwriting Agents Byelaw (No. 4 of 1984) or any substitute agent appointed to carry on any of the functions of a members' agent and who acts as a members' agent on behalf of one or more of the Names;

Names means, in respect of each Syndicate, the members of Lloyd's as set out in the relevant Syndicate List acting in their capacity as members of the Syndicate;

Names Debts means, in relation to a Segregated Account, those amounts payable by Names in respect of losses declared to 31 December 1994 but uncalled as at 15 March 1996, deferred losses owing as at 15 March 1996 and called but unpaid losses as at 1996, together, where relevant with interest thereon as taken into account in the calculation of Name's Premiums relating to Syndicate 1992 and Prior Business;

Name's Premium, in respect of any Name, has the meaning ascribed thereto in clause 5.1 (b) of this Agreement;

Non Dedicated Available Assets means the Available Assets of ERL less the aggregate of (i) the Dedicated Assets (but adding back so much of the Dedicated Assets as ERL determines are available to it to meet Original Liabilities in respect of Residual Business, because of a surplus of assets in the relevant trust fund, or otherwise, as the case may be) and (ii) so much of the Available Assets of ERL as ERL determines are required to discharge those specific liabilities identified in clause 6.17;

Notice of Requirements means the notice of requirements issued to ERL or Equitas (as the context may require) by the Secretary of State on 29 March 1996, in each case as amended from time to time;

Original Liability means the net present value, discounted at the prevailing discount rate, of the amount of the unsatisfied liability (actual, prospective or contingent) which ERL. would have had to Reinsured Parties at the Record Date in respect of the Reinsurance Indemnities if no Proportionate Cover Plan had ever been implemented but leaving out of account all or part of any liability in respect of which a dedicated asset is available as referred to in sub-paragraph (ii) in the definition of Non-Dedicated Available Assets;

Orion /L&O Reinsurances means Syndicate Reinsurances which were taken out by any Syndicate or Closed Year Syndicate with The Onion Insurance Company PLC (in provisional liquidation) or The London & Overseas Company PLC (in provisional liquidation) including, for the avoidance of doubt, any rights to participate in a distribution, whether arising under a liquidation, scheme of {*63} arrangement or otherwise, arising in respect of any rights under such Syndicate Reinsurances;

Other Returns means, in respect of any Syndicate or Closed Year Syndicate, all rights (howsoever arising) in respect of income receivable (other than in respect of the relevant Syndicate Reinsurances), including premiums, return premiums,salvages, claim refunds and any other moneys which may be applied in reducing the amount of any liability comprised in the Syndicate 1992 and Prior Business of that Syndicate or Closed Year Syndicate but excluding any Segregated Amount Receivable;

Overseas Deposit Fund means any deposit from time to time held in respect of a Name or Names under the terms of any Overseas Deposit Deed;

Overseas Deposit Deed means any trust deed, security or custody agreement or other agreement required to be established by ERL and/or Equitas by any regulatory authority in any jurisdiction other than Canada, the United Kingdom or the United States of America (excluding for the State of Illinois) for the purpose of protecting the tights of Insurance Creditors;

Personal Reserve Fund means that part of the trust fund held under a Premiums Trust Deed or the Lloyd's American Trust Deed under the control or direction of a Members' Agent;

Personal Stop Loss or PSL has the meaning given in the Personal Stop Loss Reinsurance Regulation (No. 2 of 1990);

Premiums Trust Deed means a trust deed (as amended from time to time in accordance with its terms) the parties to which include a Name and Lloyd's in one of the relevant forms for general business approved for the time being by the Council and (under section 83 of the Insurance Companies Act 1982) the Secretary of State;

Premiums Trust Fund means the fund of premiums and other moneys and assets from time to time held by or under the control of the Substitute Agent upon the terms of a Premiums Trust Deed;

Proportionate Cover Declaration means a notice or advertisement issued by ERL stating that a Proportionate Cover Plan has been implemented or adjusted and stating: the effective date of coming into effect of the Proportionate Cover Plan or, as the case may be, the effective date of the adjustment to such Proportionate Cover Plan; the Proportionate Cover Rate or Rates; and whether any Reinsured Names may be entitled to payments under paragraph 13 of schedule 3;

Proportionate Cover Plan means an adjustment of the liabilities of ERL in respect of the Reinsurance Indemnities to Reinsured Names in accordance with clause 3.5 and schedule 3; {*64}

Proportionate Cover Rate means the percentage rate by which the Original Liabilities, or a relevant part of them, must be multiplied in order for ERL to be able to discharge the Original Liabilities from the Available Assets, and as the same may be calculated separately for American Business, Canadian Business, Australian Business and Residual Business (where applicable) in accordance with paragraph 6.1 of schedule 3;

PSL Companies Reinsurance means the contract of insurance between ERI and certain company underwriters in respect of personal stop loss liabilities in respectof 1992 and Prior Business under various policies as set out therein;

Reconstruction and Renewal Byelaw means the Reconstruction and Renewal Byelaw (No 22 of 1995);

Record Date means the date on which a valuation of Available Assets, Original Liabilities and General Creditors takes place for the purposes of paragraph 5.1 of schedule 3;

Reinsurance includes, except where the context requires otherwise, retrocession;

Reinsurance Indemnities means the indemnity contained in clause 3 of this Agreement and the indemnities contained in any other contract of reinsuranceunderwritten by ERL other than, for the purposes of schedule 3 only, the Illinois Collateral Reinsurance;

Reinsurance Obligation means the obligation of ERL to reinsure the 1992 and Prior Business subject to and in accordance with clause 3;

Reinsurance to Close has the meaning given to it in the Syndicate Accounting Byelaw (No. 18 of 1994) and reinsured to close and similar terms shall be construed accordingly;

Reinsurance Trigger Event means a Certified Reinsurance Trigger Event or an Automatic Reinsurance Trigger Event as the case may be,

Reinsured Parties means the Names, the Closed Year Names, Centrewrite Limited, the E&O Companies, the PSL Companies and all other underwriting members of Lloyd's or other persons reinsured by ERL under the terms of any reinsurance contract entered into by ERL in their respective capacities as persons entitled to the benefit of the Reinsurance Indemnities but not in any other capacity and includes any permitted assignee and any person deriving title from any such person or any permitted assignee of any such person;

Relevant Available Assets means so much of the Available Assets as are available to discharge liabilities applicable to American Business, Canadian Business Australian Business and Residual Business, as the case may be; {*65}

Relevant Original Liability means so much of the Original Liability as relates to the Relevant Reinsurance Indemnities applicable to the American Business, Canadian Business, Australian Business and Residual Business, as the case may be;

Relevant Reinsurance Indemnities means the portion of the Reinsurance Indemnities applicable to the American Business, Canadian Business, AustralianBusiness and Residual Business, as the case may be;

Relevant Rights has the meaning set out in clause 6.6;

Reserve Group means any of the groups established in connection with the computation of reserves in connection with the Equitas Scheme for 1985 and prior years, 1986 to 1992 and 1992 and prior years pursuant to agency agreements entered into with Syndicates;

Residual Business means the underwriting business of a Name other than his American Business, Canadian Business and Australian Business;

Residual Business Rate means the rate at which ERL can discharge its Relevant Original Liabilities in respect of Residual Business from its Non-Dedicated Available Assets;

Retrocession Agreement means the agreement of even date herewith between ERL and Equitas for the retrocession of, inter alia, 1992 and Prior Business and the delegation of the Run-off in the form set out in Appendix 2;

Retrocession Obligation means the obligation of Equitas to indemnify ERL pursuant to the Retrocession Agreement;

Retrocession Plan has the meaning set out in the Retrocession Agreement;

Retrocession Rate has the meaning set out in the Retrocession Agreement;

Return on Surplus means, in relation to a Name, return (whether income or capital) earned on assets comprised in any Surplus Account and allocable to that Name prior to the date on which those assets are transferred by the Substitute Agent to Equitas in payment (or part payment) of the Name's Premium of the Name or, if not so transferred, the date on which those assets are transferred by the Substitute Agent to a personal reserve find of the Name;

Run-off means the administration and run-off of the Syndicate 1992 and Prior Business of any Syndicate or any part thereof;

Run-off Administration Agreement means any agreement entered into by Equitas with any third party for the provision of services to Equitas in relation to the administration of any Run-off; {*66} 

Run-off Date means the date hereof,

Secretary of State means the Secretary of State for Trade and Industry or any other person exercising the relevant powers of the Secretary of State for Trade and Industry or the secretary of state having responsibility for such other governmental or other authority as from time to time carries out the functionsin relation to insurance business carried on in the United Kingdom as are at the date of this Agreement carried out by the DTI;

Secured Obligations means all moneys and liabilities (including contingent liabilities) whatsoever which may be due, owing or payable by any Name or any Closed Year Name under any contract of insurance or reinsurance which has been reinsured by ERL under the terms of this Agreement;

Security Interest means any mortgage, charge, pledge, lien, right of possession or detention, right of set-off or any encumbrance or security interest whatsoever, howsoever created or arising or ranking in point of priority;

Segregated Account means, in respect of any Syndicate, the segregated account established pursuant to a Supervisory Management Agreement in respect of the Syndicate 1992 and Prior Business of that Syndicate or where, with the approval of ERL no Segregated Account was established, that part of such Syndicate's assets which relates to Syndicate 1992 and Prior Business of that Syndicate;

Segregated Account Assets means (i) in relation to a Segregated Account those assets at the Effective Date which in accordance with the Supervisory Management Agreement and the Information and Administration Agreement are held in or treated as assets in or which ought to be held in or treated as assets in the Segregated Account, including cash, securities, bills, bonds, certificates of deposit, bills of exchange, Financial Reinsurances, Segregated Account Receivables, Syndicate Loans, book debts and all rights and claims in relation thereto, but excluding Names Debts, and (ii) where no Segregated Account has been established in relation to Syndicate 1992 and Prior Business, those assets relating to Syndicate 1992 and Prior Business which have been designated as Segregated Account Assets by the Managing Agent with the concurrence of Equitas and/or ERL;

Segregated Account Receivables means assets which, in relation to a Segregated Account, consist of a right of a Name or a Closed Year Name to receive money or other asset, whether that right is actual or contingent and whether or not, as at the date hereof, it is presently existing property or a mere expectancy excluding rights in respect of the proceeds of Syndicate Reinsurances, but including, without limitation, the rights of the Name or the Closed Year Name in respect of amounts receivable in relation to a Segregated Account, including payments due from Managing Agents or Lloyd's Central Accounting, premiums, premium returns (other than premium returns in respect of Financial Reinsurances) and salvages to the extent that the same are Segregated Account, {*67} Assets, and the benefit of any mortgage, pledge, lien, assignment by way or security or any Security Interest whatsoever or any letter of credit or other form of credit support held in respect thereof,

Segregated Account Return means the agreed Preliminary Balance Sheet and Equitas Segregated Account Return as at 31 December 1995 as defined in the Information and Administration Agreement and the paper entitled "Principles for Preparation" dated 12 February 1996 prepared in respect of each Syndicate;

Settlement Agreement means the agreement entered into between, inter alia, Lloyd's, ERL and Accepting Names in the form set out in Appendix I to the Settlement Offer Document;

Settlement Fund means the sum of the Combined Litigation Settlement Funds and the Debt Credits;

Settlement Offer means the offer, the terms of which are contained in the Settlement Offer Document, and any revision or amendment thereof,

Settlement Offer Document means the document dated 30 July 1996 by which Lloyd's made an offer to Names, inter alla, to settle the litigation in the Lloyd's market arising out of 1992 and Prior Business;

Structured Payment Plan means a collateralised, interest bearing plan which may be offered to a Name by ERL to allow for payment by instalments of part of his Name's Premium subject to the Name agreeing to pay interest on the deferred amount and to put in place a guarantee;

Subscription Agreement means the agreement between ERL and Equitas under which ERL agrees to subscribe and Equitas agrees to issue to ERL, ordinary shares in Equitas;

Substitute Agent's Appointment means the direction made by the Council under the Substitute Agents Byelaw (No. 20 of 1983) for the appointment of the Substitute Agent as substitute managing agent of each of the Syndicates and the Closed Year Syndicates as referred to in Recital (C);

Supervisory Management Agreement means each supervisory managemen agreement entered into between ERL, Lloyd's and a Managing Agent pursuant to a direction of the Council made on 18 December 1995;

Surplus means, in respect of any Syndicate, the amount, if any, of any surplus as shown as a release in the line entitled "shortfall/release" in the final reserve indication sent to that Syndicate inJune 1996;

Surplus Account mean in relation to a Syndicate, assets standing to the credit of a Premiums Trust Fund, LATF or LCTF representing a surplus; {*68}

syndicate means a group of underwriting members of Lloyd's, to which a particular number is assigned by or under the authority of the Council, for whose account an active underwriter accepted or accepts insurance business at Lloyd's;

Syndicate means each of the syndicate years of account listed in schedule 1 to this Agreement;

Syndicate 1992 and Prior Business means, in respect of any Syndicate or Closed Year Syndicate, all 1992 and Prior Business underwritten at Lloyd's by Names or Closed Year Names as members of the Syndicate or Closed Year Syndicate (including as reinsurers under any contract of reinsurance to close of any syndicate year of account reinsured to close either directly or indirectly by the Syndicate) and/or where the Syndicate is a 1993 or later year of account syndicate any liabilities under contracts of insurance relating to 1992 and Prior Business reinsured to close into the 1993 or any later year of account;

Syndicate List means, in respect of each Syndicate and Closed Year Syndicate, (a) the last schedule prepared in respect of that Syndicate or Closed Year Syndicate specifying the Names who were members of that Syndicate or Closed Year Syndicate, the members syndicate premium limit of each such member of that Syndicate or Closed Year Syndicate, the basis and level of the managing agent's remuneration and containing such other particulars as may for the time being be required by the Council, and (b) for any purpose other than the calculation or allocation of consideration or rights under clause 8 of this Agreement, any other such schedule or document certified by Lloyd's and showing any other member as having participated on that Syndicate or Closed Year Syndicate;

Syndicate Loan means the benefit of any loan made from finds held in a Premiums Trust Fund, LATF or LCTF in respect of 1992 and Prior Business attributable to a Segregated Account;

Syndicate Premium means, in respect of any Syndicate, any positive amount shown in the column headed Syndicate Premium in schedule 1;

Syndicate Reinsurances means, in respect of any Syndicate or Closed Year Syndicate, those reinsurance contracts (excluding this Agreement and the reinsurance to close of any Closed Year Syndicate) taken out by the Syndicate or Closed Year Syndicate and those which enure to the benefit of the Syndicate taken out by any other syndicates or any Closed Year Syndicate reinsured to close, either directly or indirectly, by the Syndicate (or otherwise in respect of 1992 and Prior Business) but excluding any claim, right, title, benefit or interest under personal stop loss, estate protection reinsurance and individual run-off policies purchased on behalf of any Name for his own account;  {*69}

Terms and Conditions means the terms and conditions of the Settlement Offer as set out in Appendix 2 to the Settlement Offer Document, and any revision or amendment thereof

Transferred Rights has the meaning set out in paragraph l.3(g) of schedule 4;

Trigger Event has the meaning set out in the Retrocession Agreement;

US$ or US Dollars means the lawful currency of the United States of America.

US Trust Assets means the aggregate of the assets in the EATF and such amounts, if any, as are held in the LATF and are available only for the discharge of 1992 and Prior Business (excluding, for the avoidance of doubt, the Illinois Trust Fund); and

US Trust Rate means the rate at which liabilities applicable to American Business (excluding for this purpose Illinois Retained Business) may be discharged from US Trust Assets alone.

2.	In this Agreement of which this schedule 2 forms part, save where the context requires otherwise:

(a)	references to any part, clause, sub-clause, schedule or paragraph without further designation shall be construed as a reference to the part, clause, sub-clause, schedule or paragraph to or of this Agreement so numbered and the schedules form part of and are deemed to be incorporated in this Agreement;

(b)	part, clause, sub-clause and schedule headings are for convenience only and shall not be taken into account in the interpretation of this Agreement;

(c)	reference to any Act, statute, statutory provision or byelaw (including any Lloyd's byelaw) shall include a reference to that provision as amended, re-enacted or replaced from time to time whether before or after the date of this Agreement and any former statutory provision replaced (with or without modification) by the provision referred to;

(d)	words incorporating the masculine gender only include the feminine and neuter genders and words including the singular number only include theplural and vice versa;

(e)	reference to any party hereto or any person shall include a reference to
any successor or assignee of such party or other person;

(f)	reference to:

(i) 	a member of Lloyd's includes a former member of Lloyd's-; {*70}

(ii)	a former member of Lloyd's includes a member who has died or, as the context may require, the estate or personal representatives of such a member; arid

(iii)	a member of Lloyd's includes reference to any administrator, administrative receiver, committee, curator bonis, executor, liquidator, manager, personal representative, supervisor or trustee in bankruptcy, or any other person entitled or bound to administer the affairs of the member concerned;

(g)	reference to:

(i)	a managing agent includes a substitute agent appointed to perform any of the functions of a managing agent; and

(ii)	a members' agent includes a substitute agent appointed to carry out any of the functions of a members' agent;

(h)	references to documents include any agreement (including this Agreement), negotiable instrument, certificates, notice or other document of any kind and references to any document (or a provision thereof) shall be construed as a reference to that document (or provision) as from time to time amended, supplemented, varied or replaced (in whole or in part) ; and

(i)	the agreed form in relation to any document means the form agreed between ERL and the Substitute Agent and for the purposes of identification only initialled by or on behalf of the signatories to this Agreement. {*71}

SCHEDULE 3 - OPERATION OF PROPORTIONATE COVER

Proportionate Cover Plans

1. The introduction of a Proportionate Cover Plan and the administration of any such plan, introduced pursuant to the provisions of clause 3.5 of theAgreement, shall be governed by the following provisions of this schedule.

Reinsurance Trigger Events

2.1	The circumstances described in clause 3.5 of the Agreement as Certified Reinsurance Trigger Events are:

(a)	at any time when a Proportionate Cover Plan is not in force, the making of a determination by the Board of ERL that, if the provisions of this part of this schedule were not invoked, the Relevant Original Liabilities of ERL (taking into account, for the avoidance of doubt, its prospective and contingent liabilities and having made provision for the discharge of the General Creditors of ERL in full in making such determination) would exceed the value of its Relevant Available Assets;

(b)	at any time when a Proportionate Cover Plan is in effect, the making of a determination by the Board of ERL that, based on a current Proportionate Cover Rate, the Relevant Original Liabilities of ERL taking into account, for the avoidance of doubt, its prospective and contingent liabilities and the Proportionate Cover Rate then in force and having made provision for the discharge of the General Creditors of ERL	in full in making such determination) would exceed the value of its Relevant Available Assets; or

(c)	receipt by ERL of a notice from Equitas that a Trigger Event (as defined in the Retrocession Agreement) has occurred.

2.2	For the purposes of paragraph 2.1, the Board of ERL shall be entitled to assume that the Relevant Available Assets shall be valued on the assumption thatERL remains a going concern.

2.3	The circumstances described in clause 3.5 of the Agreement as Automatic Reinsurance Trigger Events are:

(a)	the passing of a resolution for the voluntary winding up of ERL;

(b)	the making of an order for the compulsory winding up of ER-L; or

(c)	the appointment of a provisional liquidator in respect of ERL.

2.4	On the occurrence of a Certified Reinsurance Trigger Event, or upon the Board of ERL becoming aware of facts or circumstances which it considers {*72} 

makes the occurrence of a Certified Reinsurance Trigger Event likely, the Board of ERL shall be entitled, but not obliged, to consult with Insurance Creditors, or any part of them, or representatives of such Insurance Creditors, or any part of them, as the Board of ERL may see fit, in connection with the setting of a Proportionate Cover Rate, the suspension of payments, or such other matters as the Board of ERL may in its sole discretion determine.

Effect of Proportionate Cover

3.1 On the occurrence of a Reinsurance Trigger Event, the liabilities of ERL to the Reinsured Parties (or their successors in title) in respect of the Reinsurance Indemnities shall be adjusted in such a manner that they are equal to the aggregate of

(i)	the Original Liability multiplied by the Proportionate Cover Rate, as calculated in accordance with paragraph 6 of this schedule; and

(ii)	the relevant Adjustment Entitlement (if any).

3.2 Any adjustment pursuant to the occurrence of a Certified Reinsurance Trigger Event shall take effect on and with effect from the date specified in the relevant Interim Proportionate Cover Declaration which shall be issued by ERL promptly following the occurrence of a Certified Reinsurance Trigger Event.

3.3	Any adjustment pursuant to the occurrence of an Automatic Reinsurance Trigger Event shall take effect on and with effect from, as the case may be;

(i) 	the date of the resolution for the voluntary winding up of ERL;

(ii)	the date of the order for the compulsory winding up of ERL; or

(iii)	the date of the appointment of a provisional liquidator in respect of ERL.

Plan may be invoked more than once

4.	The provisions of clause 3.5 of the Agreement and this schedule 3 may be invoked more than once and appropriate adjustments (upwards or downwards) to any Proportionate Cover Plan then in effect made on each occasion provided (for the avoidance of doubt) that no Proportionate Cover Plan shall provide for the payment of any liability of ERL at a rate in excess of 100%.

Implementation of Proportionate Cover Plan

5.1 	If a Certified Reinsurance Trigger Event occurs ERL shall, subject to paragraph 8, implement a Proportionate Cover Plan or, as the case may be, adjust a Proportionate Cover Rate of a Proportionate Cover Plan then in effect. {*73} 

For this purpose, ERL shall without undue delay determine as of the Record Date:

(a)	the value of the Available Assets and, separately, the value of the US
Trust Assets, the ECTF Assets and the Australian Custody Assets, respectively;

(b)	the amount of the Original Liabilities and, separately, the amount of the
Relevant Original Liabilities applicable to American Business, Canadian Business, Australian Business and Residual Business, respectively (adjusted to reflect any Proportionate Cover Rate already in force, if relevant); and

(c)	the amount owing to General Creditors,

together with such other determinations as ERL shall consider appropriate.

5.2 	ERL shall, in the absence of manifest error, be entitled to rely upon anycertificate or other evidence supplied by Equitas, for the purpose of making anyvaluation or determination referred to in paragraph 5.1.

5.3 	For the avoidance of doubt, ERL shall only be entitled to implement oradjust, as the case may be, a Proportionate Cover Plan in respect of all, and notpart only, of the Reinsurance Indemnities in force at the relevant time.

Setting Proportionate Cover Rate

6.1 	The Proportionate Cover Rates applicable to American Business, Canadian Business, Australian Business and Residual Business as the case may be, shall be calculated in accordance with the following principles:

(a)	The following rates shall be calculated:-

(i) 	Residual Business Rate;

(ii) 	US Trust Rate;

(iii) 	ECTF Rate; and

(iv) 	(if applicable) the Australian Rate.

(b)	where all of the US Trust Rate, ECTF Trust Rate and Australian Rate are higher than the Residual Business Rate, then the rates calculated in accordance with paragraph 6.1(a) shall be the Proportionate Cover Rate applicable to the Residual Business, American Business, Canadian Business and Australian Business respectively;

(c)	where some, but not all, of the US Trust Rate, ECTF Trust Rate and Australian Rate are higher than the Residual Business Rate, then the relevant higher rate or rates shall be the Proportionate Cover Rate {*74}

applicable to the American Business, Canadian Business or Australian Business, as the case may be;

(d)	subject always to sub-paragraph (c) above, where all or any of the US Trust Rate, ECTF Trust Rate and Australian Rate is lower than the Residual Business Rate, then the rate or rates which is lower shall be adjusted upwards and the Residual Business Rate will be adjusted downwards (by calculating the weighted average of the Residual Business Rate and such lower rate or rates) until such lower rate or rates and the Residual Business Rate have been equalised into a single rate which rate shall be the Proportionate Cover Rate applicable to those classes of business only.

6.2	Where ERL is satisfied that, in any particular jurisdiction, insurance creditors will be paid from a find of assets only available to pay such creditors (whether held on trust or otherwise), ERL shall be entitled to take this into account in calculating the Residual Business Rate including, where necessary, calculating an additional specific rate or rates applicable to such jurisdictions consistent-with the principles set out in paragraph 6.1 above

6.3 	For the avoidance of doubt, the Board of ERL shall be entitled to consult with such regulatory authorities as it considers appropriate with a view to implementing a Proportionate Cover Plan and any revision thereto and, inparticular, ensuring that Dedicated Assets are applied in the mariner and at the rate contemplated by the Proportionate Cover Plan and not otherwise.

Declaration of Proportionate Cover Rates

7. 	Following the determination by ERL of the Proportionate Cover Rate or Rates in accordance with paragraph 6, ERL shall promptly issue a Proportionate Cover Declaration.

Alternative Remedies

8.1	If ERL is put on notice that Equitas is:

(a)	to take any action with a view to promoting a scheme of arrangement under section 425 of the Companies Act 1985 or a voluntary arrangement under Part I of the Insolvency Act 1986;

(b)	to take any action with a view to the winding up of Equitas; or 

(c)	to exercise any rights it may have to take advantage of any other insolvency, moratorium, reorganisation or reconstruction procedure (or any variation of any existing procedure) which may be available to authorised insurance companies at the time, {*75} 

or, in connection with any of the above, to apply to the court for the appointment of a provisional liquidator of Equitas or to take any equivalent protective measures in any other jurisdiction or junsdictions, ERL shall also be entitled to take any such course of action.

8.2 	Nothing in schedule 3 shall be construed as limiting the right of the Board of ERL to take such action (including implementing any of the procedures specified in paragraph 8.1) as the Board of ERL may consider appropriate in any circumstances.

Suspension of payments

9. 	Following the occurrence of a Certified Reinsurance Trigger Event, ERL shall be entitled, for the minimum period reasonably necessary, to reduce or to suspend payments in respect of the Reinsurance Indemnities under this Agreement, provided that ERL may only exercise such power if it also exercises at or bout the same time the equivalent power granted pursuant to all other Reinsurance Indemnities. ERL shall have no power to reduce or suspend payments in respect of any liabilities of ERL other than in respect of Reinsurance Indemnities, and liabilities which are not in respect of Reinsurance Indemnities shall continue to be payable in the ordinary course of business as and when they fall due. Each Name and each Closed Year Name (for himself and for his successors in title) agrees that if ERL exercises the power conferred on it by this paragraph 9, such Name or Closed Year Name shall not (by himself or in conjunction with others) but without prejudice to clause 3.6 of this Agreement:

(a)	take any step or proceeding against ERL or its property (whether by way of demand, set-off, legal proceedings, execution of judgment, enforcement of security, arbitration proceedings or otherwise howsoever) in any jurisdiction whatsoever for the purpose of enforcing his tights under this Agreement or otherwise procuring the payment of any amount in respect of a Reinsurance Indemnity or any part thereof; or

(b)	apply to the court under section 53 of the Insurance Companies Act 1982 for leave to petition for the winding up of ERL in accordance with the Insolvency Act 1986 or take or seek to take any action in accordance with any other statutory or common law powers available to such Name including, without limitation, section 122 of the Insolvency Act 1986.

Entitlement upon liquidation

10.1 	Upon the occurrence of an Automatic Reinsurance Trigger Event the amount of the liability of ERL to Names and Closed Year Names in respect of the Reinsurance Indemnities shall be calculated in accordance with the provisions of paragraph 6 of this schedule, and may be recalculated to the extent considered appropriate by any liquidator of ERL. The amount for which any {*76}

Name or Closed Year Name or the Trustee on his behalf may prove in the liquidation of ERL shall, accordingly, be limited by reference to the calculation and/or recalculation of the liabilities of ERL following the application of this schedule.

10.2 	Nothing in this paragraph 10 shall require a liquidator to act in a manner inconsistent with any applicable rule of law

Entitlement upon Section 425 plan being proposed

11. 	If ERL proposes a compromise or arrangement within the terms of section 425 of the Companies Act 1985, or any successor thereto, at any time after a Certified Reinsurance Trigger Event has occurred, the amount of the liability of ERL to the Names and Closed Year Names in respect of the Relevant Reinsurance Indemnities (and accordingly the amount for which claims can be made in respect of such liability) shall be calculated in accordance with the provisions of this schedule unless and until the extent of such liability is varied by the terms of any such compromise or arrangement that may be approved.

Subordination to General Creditors

12. 	Each Reinsured Name acknowledges and agrees that its right to receive any payment from ERL shall be subordinated to (i) payment of the General Creditors in full; and (ii) payment of (or the making of appropriate provision for payment of) the expenses of a liquidation, a section 425 plan or other insolvency, moratorium reorganisation or reconstruction procedure (or any variation of any existing procedure), as the case may be, in full.

Upwards adjustment of payments

13.1 	If, at any time when a Retrocession Plan is in force, there is an upwards adjustment in a Retrocession Rate, ERL shall, for each payment that has been made on the basis of a Retrocession Rate lower than the new adjusted Retrocession Rate, be entitled to compensation from Equitas. The compensation shall be such amount as is required to increase the level of payments already made to the same level as it is proposed to pay in respect of payments subject to the new adjusted Retrocession Rate.

13.2 ERL and Equitas acknowledge that compensation payments made will be identifiable by reference to specific Names and/or Closed Year Names, on an individual basis, in respect of whom payments to Insurance Creditors have been made at a rate lower than 100% following the implementation of a Proportionate Cover Plan. In the event that ERL receives a compensation payment from Equitas, pursuant to paragraph 13.1 of this schedule, it shall hold such payment on trust for the following purposes: {*77}

(a)	to the extent that the Actual Insurance Creditors of a Name in respect of which a compensation payment is received have not been paid in full, such payment will be applied to increase or, where possible, discharge in full any remaining amounts due in respect of such Actual Insurance Creditors. Where it is not possible to make payment in full to such Actual Insurance Creditors, payment will be made pro rata;

(b)	where the Actual Insurance Creditors of a Name have been paid in full but the Name in question has Contingent Insurance Creditors then any compensation payment applicable to such Name shall be retained on trust for the payment of any amounts due in respect of such Contingent Insurance Creditors;

(c)	where a compensation payment has been received for the benefit of aName in respect of whom all Actual Insurance Creditors and Contingent Insurance Creditors (in circumstances where the full discharge of Contingent Insurance Creditors can, to the reasonable satisfaction of ERL, be conclusively proved) have been discharged in full then, subject to sub-paragraph (d) below, any such payment, or the remaining balance of any such payment, will be paid to the Name; and

(d)	where the Actual Insurance Creditors and Contingent Insurance Creditors of a Name have been discharged in frill but all or part of such payment has been made directly or indirectly by a third party source other than ERL (including, without limitation, Lloyd's, members of Lloyd's or any subsidiary of Lloyd's or from a regulatory deposit which Lloyd's, members of Lloyd's or any subsidiary of Lloyds is obliged to or chooses to replenish) then, to the extent of the amount of any payment made by that third party, ERL shall make an equivalent payment to such third party source.

13.3 	The reference in paragraph 13.2(d) to the making of a payment by a third party source includes payments incurred in replenishing regulatory deposits out of which payments have been made in discharging the liability in question or, in the case of a regulatory deposit which consists of or includes a guarantee, letter of credit or other arrangement, in reimbursing sums paid under that guarantee, letter of credit or other arrangement in or towards the discharge of that liability.

Professional advice

14. 	In making any determination under this schedule, the Board or ERL shall be entitled to rely on such professional advice as it considers appropriate and the determination of the Board of ERL in respect of any matter in relation to clause 3.5, this schedule or a Proportionate Cover Plan shall be conclusive and binding on all the Names and the Closed Year Names. Without prejudice to clause 3.6 of the Agreement, no person shall have any claim against ERL or Equitas (or any officer, director or employee of ERL or Equitas) arising directly or {*78} indirectly out of any decision taken or omitted to be taken in relation to the application of this schedule.

Notices

15.	Any notice to be given under this schedule shall be given in accordance with the provisions of clause 22 of this Agreement. {*79}

SCHEDULE 4- CONSIDERATION

Realisation of or Transfer of Cash and Assets in the Segregated Account

1.1	The Substitute Agent undertakes to direct the Managing Agent's Trustees in respect of each Syndicate and to give all necessary directions and instructions:

(a)	to deliver to ERL or as it directs, on or prior to the Effective Date or as soon as reasonably practicable thereafter, duly executed stock transfer forms or other appropriate documents of transfer or assignment and the relative stock or share certificates or other documents of title in relation to all stocks, shares, bonds, bills, options and other Segregated Account Assets held as investments in the Segregated Account for that Syndicate at the Effective Date or, as appropriate, to give all necessary instructions to effect the realisation of such assets on behalf of the relevant Name and the payment of the proceeds of realisation to ERL or as it directs or the transfer of such assets to the account of ERL or as it directs; and

(b)	to pay to ERL or as it directs all cash held in the Segregated Account at the Effective Date.

The provisions of this paragraph 1.1 do not extend to Segregated Account Assets to the extent that they constitute assets of a Name's or a Closed Year Name'sLATF or LCTF or form part of the Illinois Advance.

1.2 The Substitute Agent undertakes to direct Citibank, N.A. in relation tothe LATF and the Royal Trust Corporation of Canada in relation to the LCTFin respect of each Syndicate and to give all necessary directions and instructions:

(a)	to deliver to Citibank, N.A., as trustee of the EATF, or the Royal Trust Corporation of Canada, as trustee of the ECTF, as appropriate, on ERL's behalf on or prior to the Effective Date or as soon as reasonably practicable thereafter, duly executed stock transfer forms or other appropriate documents of transfer or assignment and the relative stock or share certificates or other documents of title in relation to all stocks, shares, bonds, bills, options and other Segregated Account Assets held as investments in the Segregated Account by Citibank, N.A. and the Royal Trust Corporation of Canada, as appropriate, for that Syndicate at the Effective Date or, as appropriate, to give all necessary instructions to effect the realisation of such assets on behalf of the relevant Name and the payment of the proceeds of realisation to ERL or as it directs or the transfer of such assets to Citibank, N.A. as trustee of the EATF or the Royal Trust Corporation of Canada as trustee of the ECTF on ERL's behalf, and {*80} 

(b)	to pay to Citibank, N.A. as trustee of the EATF or the Royal Trust Corporation of Canada as trustee of the ECTF on ERL's behalf all cash held by Citibank, N.A. and the Royal Trust Corporation of Canada, as appropriate, in the Segregated Account at the Effective Date.

The provisions of this paragraph 1.2 shall only apply to Segregated Account Assets to the extent that they constitute assets of a Name's or Closed Year Name's LATF or LCTF.

1.3 The Substitute Agent undertakes to direct Lloyd's attorney-in-fact in thestate of Illinois in respect of each Syndicate and to give all necessary directions and instructions:

(a)	to deliver to Bankers Trust Company, as trustee of the Illinois Trust Fund and of the Illinois Surplus Trust, on ERL's behalf; on or prior to the Effective Date or as soon as reasonably practicable thereafter, duly executed stock transfer forms or other appropriate documents of transfer or assignment and the relative stock or share certificates or other documents of title in relation to stocks, shares, bonds, bills, options andother Segregated Account Assets held in the Illinois Advance for that Syndicate at the Effective Date; and

(b)	to pay to Bankers Trust Company, as trustee of the Illinois Trust Fund and of the Illinois Surplus Trust, on ERL's behalf; cash held in the Illinois Advance at the Effective Date,

such Segregated Account Assets and cash having an aggregate value of US$286,300,797. The provisions of this paragraph 1.3 shall only apply to Segregated Account Assets to the extent that they form part of the Illinois Advance.

1.4	Each Name and each Closed Year Name, acting through the Substitute Agent, hereby agrees that, in respect of each Syndicate:

(a)	subject to paragraph (c), each Name and each Closed Year Name, acting through the Substitute Agent, hereby assigns and agrees to assign to the Managing Agent's Trustees of the Name's or Closed Year Name's relevant Premiums Trust Deed, with effect as and from the Effective Date, all of the right, title and interest of the Name or the Closed Year Name in all Segregated Account Receivables, including the benefit of any Security Interest for, or other obligation of any third party in relation to, any Segregated Account Receivable to be held on the terms of such Premiums Trust Deed, except to the extent that they are not capable of being assigned without the prior consent of some other person, which consent has not been obtained whether or not the Name or the Closed Year Name has a present entitlement to the Segregated Account Receivable; {*81}

(b)	references in this paragraph 1.4 to the "relevant Premiums Trust Deed" are to the Premiums Trust Deed of the relevant Name or Closed Year Name to which the proceeds of the Segregated Account Receivables in question would, but for this Agreement, have been subject;

(c)	the assignment contained in paragraph 1.4(a) does not extend to Segregated Account Receivables to the extent that amounts payable or paid under or in respect of those Segregated Account Receivables would constitute assets of the Name's or the Closed Year Name's LATF or LCTF;

(d)	the Managing Agent's Trustees shall on or after the Effective Date, when directed to do so pursuant to the relevant Premiums Trust Deed by the Substitute Agent acting as Managing Agent of each Name and Closed Year Name, realise on behalf of that Name or Closed Year Name and apply the proceeds of such realisation in transfer to ERL or as ERL may direct or assign to ERL the rights assigned to it under paragraph 1.4(a), in accordance with the terms of the relevant Premiums Trust Deeds, so as to transfer the benefit of the Segregated Account Receivables (except to the extent that they are not capable of being assigned without the prior consent of some other person, which consent has not been obtained) to ERL or as ERL shall direct in partial satisfaction of the consideration for the assumption of the Reinsurance Obligation by ER-L. For the avoidance of doubt, any funds received by the Name or Closed Year Name or the Managing Agent's Trustees or by any person on behalf of any of them, in respect of rights assigned to the Managing Agent's Trustees pursuant to paragraph 1.4(a), but not assigned or otherwise transferred by the Managing Agent's Trustees pursuant to this paragraph 1.4(d), shall be subject to the provisions of paragraph 1.4(k) below as if the Name or Closed Year Name had been under an obligation to assign the rights to ERL. The Substitute Agent undertakes to ERL to give the directions contemplated by this paragraph 1.4(d) on the Effective Date;

(e)	each of the Names and the Closed Year Names, acting through the
Substitute Agent, hereby agrees to realise and apply the proceeds ofrealisation or assigns and agrees to assign to ERL or as ERL directs, witheffect as and from the Effective Date, all the right, title and interest of theName or the Closed Year Name, to the extent not already realised or assigned pursuant to paragraph 1.4(a), in the Segregated Account Receivables (except to the extent that they are not capable of being assigned without the prior consent of some other person, which consent has not been obtained), whether or not the name or Closed Year Name has a present entitlement to the Segregated Account Receivable;

(f)	each of the Names and the Closed Year Names, acting through the Substitute Agent, and the Substitute Agent covenant that the Substitute Agent on behalf of each Name and Closed Year Name and on its own {*82}

behalf or as managing agent of any Name or Closed Year Name take allaction from time to time directed by ERL to ensure that the benefit ofthe Segregated Account Receivables or any other contract, right or assetwhich is a Segregated Account Asset and any credit support, SecurityInterest or other rights granted in connection therewith, to the extent that they are not capable of being assigned (where ERL has requested assignment) without the prior consent of some other person, which consent has not been obtained (for the purposes of this paragraph 1.4 referred to together as the Transferred Rights), are transferred to and will enure to the benefit of ERL or such other person as ERL may direct;

(g)	the actions which ERL may direct be taken by a Name or a Closed Year Name or the Substitute Agent on behalf of a Name or a Closed Year Name pursuant to paragraph 1.4(f) include, without limitation:

(i) 	assigning any of the Transferred Rights to the Managing Agent's Trustees of the relevant Premiums Trust Deed to be held on the terms of such Premiums Trust Deed and taking steps to perfect such assignment;

(ii) 	assigning to ERL, or as ERL may direct, any of the Transferred Rights or the right to receive proceeds in respect of any of the Transferred Rights and taking steps to perfect such assignment;

(iii) 	entering into a contract pursuant to which the Name or the Closed Year Name agrees to the discharge of his rights in respect of any of the Transferred Rights in consideration of corresponding or similar rights being granted to ERL or to such other person as ERL may direct;

(iv) 	entering into a contract varying in any manner the rights of the Name or Closed Year Name in respect of any of the Transferred Rights;

(v) exercising any rights conferred on the Name or the Closed Year Name (alone, or jointly with other members of the relevant Syndicate or Closed Year Syndicate) pursuant to or as the person entitled to any of the Transferred Rights in such manner as ERL may from time to time direct; and

(vi) declaring a trust, in such terms as may be directed, over any of the rights of the Name or the Closed Year Name in respect of any of the Transferred Rights;

(h)	a direction under paragraph 1.4(f) may be given to Names or Closed Year Names generally, by reference to any class or by reference to membership of a Syndicate or of a Closed Year Syndicate, and may be {*83}

given in relation to particular rights in respect of Transferred Rights or such rights by reference to a description or class. For the avoidance of doubt, a direction may be given under paragraph 1.4(f) in respect of Transferred Rights even if a direction has already been given in respect of those rights;

(i)	any direction under paragraph 1.4(1) may be given by ERL to any Name or Closed Year Name by being given to the Substitute Agent on his behalf The Substitute Agent shall be under no duty to communicate such direction to the Names and Closed Year Names, provided that it takes all actions required by the direction on behalf of the Names and the Closed Year Names to whom the direction is made;

(i)	a direction under paragraph 1.4(f) may require documents to be entered into prior to the Effective Date, provided that under the terms of such documents the transfer to be effected of the benefit of Transferred Rights does not take effect until the Effective Date or some later time, and

(k)	each Name and each Closed Year Name agrees that if, on or after the Effective Date, he receives any funds in respect of Segregated Account Receivables or any Transferred Rights of which the Name or the Closed Year Name is, as at the date hereof; the legal owner or has or may in the future acquire any other rights (whether because the right to receive such funds has not been effectively realised for or assigned or transferred to ERL or otherwise), or if such funds are received by the trustees of the Name's or the Closed Year Name's Premiums Trust Funds, LATF or LCTF, the Name or Closed Year Name will pay to ERL an amount equal to the funds so received, which shall to that extent constitute due performance of the obligation to transfer the rights in satisfaction of which the payment was made, PROVIDED THAT the amount payable by the Name or the Closed Year Name under this paragraph (k) shall be limited to such amount in respect thereof as can properly be paid from the funds then or at any later time standing to the credit of the Name's or the Closed Year Name's Premiums Trust Funds, LATF or LCTF.

1.5	The Managing Agent's Trustees shall on or after the Effective Date, when directed to do so by the Substitute Agent acting as Managing Agent of each Name and Closed Year Name, assign, subject to and in accordance with the terms of the relevant Premiums Trust Deeds, the benefit of the Syndicate Loans (except to the extent that they are not capable of being assigned without the prior consent of some other person, which consent has not been obtained) to ERL or as ERL shall direct in partial satisfaction of the obligations of each Name and each Closed Year Name under clause 5.1(a) of this Agreement. The Substitute Agent undertakes to ERL to give the directions contemplated by this paragraph 1.5 on the Effective Date. To the extent that the benefit of Syndicate Loans is not capable of being assigned without the prior consent of some other {*84} person, which consent has not been obtained, the provisions of paragraph 1.4(f) to (k) shall apply to such benefit, mutatis mutandis

1.6 Where any claim is made by a third party against any of the Names, the Closed Year Names or the Substitute Agent in respect of an Assumed Liability, the Substitute Agent agrees, on behalf of itself, the Names and the Closed Year Names, that it shall not settle or compromise such claim but shall immediately notify ERL that a claim has been made in relation to the Assumed Liability and ERL shall have full control of the conduct and settlement of such claim. {*85} 

SCHEDULE 5 - RETURN PREMIUM

1.	The premium adjustment referred to in clause 8 of this Agreement shall be calculated and paid in accordance with the provisions of this schedule 5.

Definitions

2.	In this schedule 5, in addition to those expressions defined in schedule 2, the following expressions shall have the following meanings:

Annual Adjustment means, in respect of any year, the amount representing such percentage of the Available Surplus for that year as the Board of ERL resolves, in accordance with paragraph 3.2, should be returned to Names;

Available Surplus means, in respect of any year, the aggregate of the amount received by ERL from Equitas pursuant to clause 4 of the Retrocession Agreement and any Retained Amount from the previous year;

Name's--RP Share means, in respect of any Name, the proportion of the Annual Adjustment payable to that Name in any year calculated in accordance with the formula:

(X+9-Z ((A+B)-C)-D

Where:

X = the aggregate amount payable by the Name pursuant to clause 5.1 (b) of this Agreement; 

Y = the aggregate amount held as at the Effective Date in the Segregated Accounts in respect of all Syndicates of which the Name was a member and which were attributable to the business of that Name less the aggregate of Assumed Liabilities in respect of that Name, and plus or minus any amount payable to or by ERL (as the case may be) by way of adjustment in respect of that Name pursuant to the Completion Accounts and Co-operation Agreement;

Z = the amount of Debt Credits (if any) applied by Lloyd's for the benefit of  the Name under clause 3.1 of the Settlement Agreement against his Name's Premium; 

A = the aggregate of (i) the total amounts payable by all Names pursuant to clause 5.1(b) of this Agreement; {*86} 

(ii)	the amount payable by Centrewrite Limited as consideration for the reinsurance provided by ERL to Centrewrite Limited pursuant to the Centrewrite Reinsurance; and

(iii)	if the Lioncover Reinsurance is entered into by ERL and becomes unconditional, the amount payable by Lioncover by way of consideration for reinsurance under the Lioncover Reinsurance;

B = the aggregate amount (less the aggregate of all Assumed Liabilities) transferred to or for the account of ERL or to or for the account of the trustees of the EATF or the ECTF pursuant to clause 5.1(a) of this Agreement and plus or minus any amount payable to or by ERL (as the case may be) by way of adjustment to the Completion Accounts pursuant to the Completion Accounts and Co-operation Agreement;

C = the aggregate amount of Debt Credits applied by Lloyd's for the benefit of all. Names under clause 3.1 of the Settlement Agreement against their Names' Premiums; and

D = the aggregate of the amounts calculated by reference to X, Y and 

Z =above in respect of all Names (if any) who have waived their entitlements to premium adjustment.

Retained Amount means the amount of such Available Surplus not distributed to Names as an Annual Adjustment in any year.

Return of surplus

3.1 	Subject to paragraph 3.2 and to any consent required from the Secretary of State pursuant to the Notice of Requirements or any amendment thereto or successor thereof, any Available Surplus in respect of any year shall be available for distribution to Names in accordance with their respective Name's RP Shares, to Centrewrite Limited in accordance with the Centrewrite Reinsurance and, if the Lioncover Reinsurance is entered into by ERL and becomes unconditional, to Lioncover in accordance with the Lioncover Reinsurance.

3.2 	Within four weeks of receipt of notification from Equitas of the amount to be paid to ERL pursuant to clause 4 of the Retrocession Agreement for any year, the Board of ERL shall meet to consider the percentage of the Available Surplus for that year which should be distributed as the Annual Adjustment. The Annual Adjustment shall be such proportion of the Available Surplus as the Board of ERL determines, taking account of advice from the auditors of ERL, to be prudent having regard to the liabilities of ERL and to the need to maintain an appropriate margin of solvency. In making such determination the Board of ERL shall have regard to all circumstances which appear to them to be relevant to the determination except that the Board of ERL shall not take account of the ability of ERL to reduce its liabilities pursuant to clause 3.5 and schedule 3 to {*87} this Agreement or the equivalent provision of any other reinsurance contract to which it is a party as reinsurer.

3.3	The premiums payable by Names to ERL pursuant to clause 5.1(b)(1) shall be adjusted in each relevant year by the distribution to the Names, Centrewrite Limited and, if applicable, Lioncover of the Annual Adjustment for that year, and, in the case of the Names, in accordance with their respective Name's RP Shares Subject to paragraph 4 of this schedule 5, each Name shall have a right to prove for his pro rata share of the last preceding Retained Amount, if any, in the event of an insolvency of EP-L, such right to be subordinated to the costs and expenses of the winding-up and to all rights to distribution other than those attaching to the ordinary share capital of ERL.

3.4 	If any part of a Name's Premium remains outstanding and undischarged at the time of any distribution of an Annual Adjustment, the relevant Name's RPShare shall be applied first in or towards settlement of that outstanding obligation.

3.5 	Any Name may renounce his entire rights under clause 8 of this Agreement and this schedule 5 (but not part only and not at all otherwise than in accordance with this paragraph) to receive any return of premiums provided that such renunciation is served on ERL in a form which ERL shall specify during a period commencing on 1 October 1996 and ending on 31 March 1997. A renunciation by a Name in accordance with this paragraph 3.5 shall be effective on 31 March 1997.

Waiver of rights of subrogation

4. ERLhereby agrees to waive any right of subrogation which it may have in respect of any Annual Adjustment due to any Name arising as a result of the reinsurance by ERL of any Syndicate pursuant to this Agreement.

Contributions

5.	The Board of ERL have resolved that the amount of £710,000,000 being mutual surplus of ERL of its initial period of underwriting shall be applied in making a contribution, in the form of a subscription for shares on the terms specified in the Subscription Agreement, to the capital of Equitas, the Board of ERL being satisfied that such a contribution is necessary to secure or maintain the authorisation of Equitas by the DTI and that the reinsurance to be provided by Equitas under the Retrocession Agreement is on terms which confer rights on ERL which secure benefits for ERL suitable for the protection of the rights of Names under this schedule. Accordingly, such surplus of £710,000,000 shall not be subject to the operation of the other provisions of this schedule.
 
{*88}

SCHEDULE 6

Relevant Motor and Employer's Liability Syndicates

Managing Agent/Run-off Company	Syndicate Number (for all relevant years of account)

	Active	350;892;962
	Archer	657;866
	Bankside	1156; 980; 45
	Bates Cunningham	877; 1144
	Brockbank	253
	Christopherson Heath/ CHCML	218
	Crowe	963
	Duncanson & Hoit	55
	Eversure/ Octavian	554
	Janson Green	386
	KGM	260
	Marchant & Kett	234
	Murray Lawrence	820; 887; 913
	Octavian	508
	R.J. Kiln	603
	Service	979
	Stewart	587, 15; 396
	Sturge Motor	37; 293-330; 897
	SUM	254, 992; 1152
	SUM/ CHCML	560
	Wellington	1184; 439
	Wren	93; 388 

{*89}

EXECUTED as a DEED by:	)
EQUITAS REINSURANCE
LIMITED acting by two	)	M. CRALL
Directors/a Director and 
Secretary	)	J. TEFF
By:
(Director)

By:
(Director)

EXECUTED as a DEED by	)
ADDITIONAL	)
UNDERWRITING	)
AGENCIES (No. 9)	) 	A. DUGUID 
LIMITED acting by two	)
Directors/a Director and	)	DEBORAH WILKS
Secretary	)

By:
Duly authorised representative of Lloyd's
(Director)

By:
Duly authorised representative of
Additional Underwriting Agencies (No. 10) Limited
(Director)

THE COMMON SEAL of	)
LLOYD'S was hereunto	)
affixed in the presence of	)	H. WALSH

Authorised Signatory

{*90} 
SIGNED BY:

duly authorised representative of	)
THE SOCIETY OF	)
LLOYD'S for and on behalf of
ADDITIONAL	)	A. DUGUID
UNDER WRITING
AGENCIES (No. 9)	)
LIMITED acting as Substitute	)
Agent for and on behalf of the	)
NAMES	)

SIGNED BY:	)
	)
duly authorised representative of	)
THE SOCIETY OF	)
LLOYD'S for and on behalf of	)
ADDITIONAL	)	A. DUGUID
UNDERWRITING	)
AGENCIES (No. 9)	)
LIMITED acting as Substitute	)
Agent for and on behalf of the	)
CLOSED YEAR NAMES	)

EXECUTED as a DEED by	)
EQUITAS LIMITED	)
acting by two	)	M. CRALL
Directors/a Director and	)
Secretary	)	J TEFF

Director

Director/Secretary

SIGNED by:	)
duly authorised representative of
THE SOCIETY OF LLOYD'S 	)	DEBORAH WILKS
for and on behalf of
ADDITIONAL	)
UNDERWRITING
AGENCIES (No. 10)	)
LIMITED	)

{*91}

SIGNED by:	)
for and on behalf of	)	M. CRALL
EQUITAS	)
POLICYHOLDERS
TRUSTEE LIMITED

{*92}
APPENDIX 1 - FORM OF DECLARATION OF TRUST

THIS DECLARATION OF TRUST is made on 2 September 1996

By:

EQUITAS POLICYHOLDERS TRUSTEE LIMITED of 20-22 Bedford Row, London WCIR 4JS (the Trustee, which expression shall include such company and any other person or persons acting as trustee for the time being of this Declaration of Trust).

WHEREAS:

(A) This Declaration of Trust is made pursuant to the Reinsurance Contract (as defined below) pursuant to which ERL has agreed to reinsure and indemnify the Reinsured Names in relation to 1992 and Prior Business on the terms and conditions set out in the Reinsurance Contract.

(B) Under the Reinsurance Contract, each Reinsured Name has assigned absolutely by way of first fixed mortgage to the Trustee all right, title, benefit and interest which he has or may have against ERL in relation to:

(a)	the performance of the Reinsurance Obligation (as defined in the Reinsurance Contract) of ERL in accordance with clause 3 of the Reinsurance Contract including, without limitation:

(i)	any right to receive damages from any person in respect of such rights; and

(ii)	any rights in a winding-up of ERL or pursuant to any scheme or composition entered into between ERL and its creditors including any scheme of arrangement or compromise made under section 425 of the Companies Act 1985 and any voluntary arrangement made between ERL and its creditors under sections 1 to 8 of the Insolvency Act 1986; and

(b)	any return of premium payable on a winding-up pursuant to any scheme
or composition entered into between ERL and its creditors to the extent that the Secured Obligations have not been satisfied in full,

but not including such rights, title, benefit and interest in the Reinsurance Obligation which are excluded from the assignment under the terms of the Reinsurance Contract, as security for the discharge and payment of the Secured Obligations, on the terms that the Trustee should hold such property assigned to it pursuant to a Declaration of Trust on the terms set out herein. {*93} 

(c) 	The Trustee has agreed to act as trustee for the purposes of this Declaration of Trust upon the terms and subject to the conditions set out herein.

Now IT IS HEREBY DECLARED as follows:

INTERPRETATION

1.1 	Definitions: In this Declaration of Trust and the Recitals hereto the following words and expressions have, except where the context otherwise requires, the meanings respectively shown opposite them:

1992 and Prior Business means all liabilities under contracts of insurance underwritten at Lloyd's (other than life business) and originally allocated to the 1992 year of account or any earlier year of account including, without limitation, any such liabilities reinsured to close into the 1993 or any later year of account but excluding any liabilities re-signed, or re-allocated pursuant to a premium transfer, into 1993 or any later year;

Authorised Investments means any investment authorised by English law for the investment by trustees of trust moneys or in any other investment which may be selected by the Trustee as if the Trustee were an absolute beneficial owner of the Trust Property;

Closed Year Names means in respect of any Closed Year Syndicate, those members of Lloyd's who were members of that Closed Year Syndicate acting in their capacity as members of the Closed Year Syndicate;

Closed Year Syndicate means any Syndicate constituted for any 1992 or prior year of account which has been reinsured to close either directly or indirectly into any Syndicate or Centrewrite;

this Declaration of Trust means this Declaration of Trust as amended or modified from time to time, including any other declaration, deed or instrument expressed to be supplemental hereto;

Equitas means Equitas Limited, a limited company registered in England and Wales with company number 3173352 whose registered office is at 20-22 Bedford Row, London WCIR 4JS;

Equitas Holdings Limited means Equitas Holdings Limited, a limited company registered in England and Wales with company number 3136296 whose registered office is at 20-22 Bedford Row, London WCIR 4JS;

ERL means Equitas Reinsurance Limited, a limited company registered in England and Wales with company number 3136300 whose registered office is at 20-22 Bedford Row, London WCIR 4JS; {*94} 

Insolvency Event means any of the events specified in clause 2.15 of this Declaration of Trust;

Insurance Creditor means any policyholder under any contract of insurance underwritten by a Syndicate or Closed Year Syndicate liabilities under which are comprised in 1992 and Prior Business other than a member or former member of Lloyd's who is such a policyholder in his capacity as an underwriter of insurance business at Lloyds;

life business has the meaning ascribed to long term business in the Insurance Companies Act 1982;

Lloyd's means the Society incorporated by Lloyd's Act 1871 by the name of Lloyd's;

Names means the members of a Syndicate for the underwriting year as set out in the Syndicate List acting in their capacity as members of such Syndicate;

Proportionate Cover Plan means a plan of such name introduced pursuant to clause 3.5 and schedule 3 to the Reinsurance Contract;

Reinsurance Contract means the contract dated on or about the date hereof entered into between inter alia ERL, the Names, the Closed Year Names, theSubstitute Agent, Lloyd's, Equitas Limited and the Trustee pursuant to which ERL agrees to reinsure and indemnify the Syndicates in relation to the Syndicate 1992 and Prior Business of each Syndicate;

Reinsured Names means the Names and the Closed Year Names;

Secured Obligations means all moneys and liabilities (including contingent liabilities) whatsoever which may be due, owing or payable by any Name or any Closed Year Name under any contract of insurance or reinsurance which has been reinsured by ERL under the terms of the Reinsurance Contract;

Substitute Agent means, in respect of the Reinsurance Contract, the person who has entered into such contract as substitute managing agent on behalf of the Syndicates, being the person appointed as substitute managing agent of such Syndicates pursuant to a direction of the Council under the Substitute Agents Byelaw (No. 20 of 1983) and any successor managing agent or substitute managing agent;

syndicate means a group of underwriting members of Lloyd's, to which a particular number is assigned by or under the authority of the Council, for whose account an active underwriter accepted or accepts insurance business at Lloyd's;

Syndicate means each of the syndicate years of account listed in schedule I to the Reinsurance Contract; {*95}

Trust Corporation means a corporation entitled by rules made under the Public Trustee Act 1906 to act as a custodian trustee; and

Trust Property means all the property, assets and rights (whether present, future, prospective or contingent) of Reinsured Names assigned to the Trustee pursuant to clause 4.1 of the Reinsurance Contract.

1.2	Construction: In this Declaration of Trust, except where the context otherwise requires:

(a)	clause headings are for ease of reference only;

(b)	references to clauses, sub-clauses or paragraphs are, unless otherwise specified, to be construed as references to clauses, sub-clauses and paragraphs of this Declaration of Trust;

(c)	references to any statute or other legislative provision shall include any statutory or legislative modification or re-enactment thereof, or any substitution therefor;

(d)	references to documents include any deed (including this Declaration of Trust), negotiable instrument, certificate, notice or other document of any kind and references to any document (or a provision thereof) shall be construed as a reference to that document or provision as from time to time amended, supplemented, varied or replaced (in whole or in part);

(e)	references to the word "person" or "persons" include, without limitation, individuals, firms, corporations, government agencies, authorities and other bodies, incorporated or unincorporated and whether having distinct legal personality or not;

(f)	references to any party hereto or any person include references to any successor or assignee of such party or other person;

(g)	reference to:

(i)	a member of Lloyd's includes a former member of Lloyd's;

(ii)	a former member of Lloyd's includes a member who has died or, as the context may require, the estate or personal representatives of such a member; and

(iii)	a member of Lloyd's includes reference to any administrator, administrative receiver, committee, curator bonis, executor, liquidator, manager, personal representative, supervisor or trustee in bankruptcy, or any other person entitled or bound to administer the affairs of the member concerned; {*96}

(h)	reference to:

(i)	a managing agent includes a substitute agent appointed to performany of the functions of a managing agent; and

(ii)	a members' agent include a substitute agent appointed to carry out any of the functions of a members' agent; and

(i)	unless the context otherwise requires, words denoting the singular
number shall include the plural and vice versa.

DECLARATION OF TRUST

2.1 	The Trustee shall stand possessed of the Trust Property upon trust to hold or apply all or any of it in the manner and order of priority set out in paragraphs 2.2 to 2.17 below.

2.2 	in the event of being notified by any Reinsured Name or the Substitute Agent that ERL has failed to discharge its obligation to the Reinsured Name and/or the Trustee to make any payment to an Insurance Creditor in accordance with the Reinsurance Contract, the Trustee shall take such steps as it shall in its absolute discretion deem appropriate to seek to enforce the obligation of ERL to make such payment or to seek to obtain damages from ERL for failure so to do provided that the Insurance Creditor and/or the Reinsured Name shall have provided the Trustee with such evidence as it may, acting in good faith, in its absolute discretion require as to the non performance by ERL of its obligation under the Reinsurance Contract and that the relevant Reinsured Name shall have taken such steps as the Trustee may reasonably require to seek to enforce performance by ERL of such obligation. The Trustee shall have power to determine, upon such advice as it, acting in good faith, in its absolute discretion thinks fit as to the merits of any such claim against ERL and having regard to all the circumstances, the most appropriate action (if any) which it should take against ERL to enforce such obligation. Any sums received by the Trustee in respect of such judgment shall, unless an Insolvency Event has occurred, be distributed in the following manner:

(a)	subject to paragraph (b) below, upon receiving such evidence as it may in its absolute discretion deem appropriate as to the identity of the Insurance Creditor to be paid such sums under the terms of the Reinsurance Contract, the Trustee shall pay such sums to the relevant Insurance Creditor. As a precondition to making such payment, the Trustee may require written confirmation from such Insurance Creditor that such sums will be applied to reduce or extinguish pro tanto the amounts owed to him under the policy of insurance or reinsurance which has been reinsured by ERL under the terms of the Reinsurance Contract and/or any judgment he has obtained in respect of such contract; {*97} 

(b)	if the Insurance Creditor referred to in paragraph (a) above has already received payment in whole or in part of the sums due to him under the policy of insurance or reinsurance which has been insured under the terms of the Reinsurance Contract (including by reason of the exercise of any rights of set-off which such Insurance Creditor may have), the Trustee shall only make payment to such Insurance Creditor up to the balance of the amounts owing to such Insurance Creditor under the relevant policies of insurance or reinsurance as determined by the Trustee upon receipt of such evidence as it, acting in good faith, in its absolute discretion determines necessary to be able to determine such amounts. Any balance shall be paid by the Trustee to the Substitute Agent for distribution pro rata to their respective contributions to those persons who have contributed to such payments made to the relevant Insurance Creditor, including any contribution by way of set-off. In determining whether such Insurance Creditor has already received payment in respect of the relevant policy of insurance or reinsurance as described above, the Trustee is entitled to assume without enquiry that no such payment has been received by such Insurance Creditor, in the absence of receiving such evidence from the Reinsured Name or Substitute Agent as it may in its absolute discretion require, establishing that such payment has been made.

2.3	If prior to the occurrence of an Insolvency Event the Trustee receives any sums in respect of the Trust Property other than in the circumstances described in clause 2.2 above it shall either distribute such sums to the Insurance Creditors and/or the Substitute Agent for distribution to the relevant Reinsured Name (in the case of a Syndicate or Closed Year Syndicate to the Names on that Syndicate or Closed Year Syndicate pro rata to their interests in that Syndicate or Closed Year Syndicate) in the manner described in paragraphs (a) and (b) of clause 2.2 or, to the extent that the sums received represent sums that should have been paid to an Insurance Creditor by ERL in accordance with clause 3.4 of the Reinsurance Contract, the Trustee may alternatively return such sums to ERL and require ERL to distribute such sums in accordance with the terms of the Reinsurance Contract.

2.4 	Upon the occurrence of an Insolvency Event, the Trustee may serve a notice pursuant to clause 4.10 of the Reinsurance Contract requiring paymentswhich would otherwise be paid to Insurance Creditors by ERL under the terms of the Reinsurance Contract to be paid to it and shall take such steps against ERL as it shall deem necessary to realise and protect the Trust Property, including, without limitation, petitioning for the winding-up, of EKL or petitioning for an administration in respect of ERL or consenting or objecting to any scheme or composition proposed to be entered into between ERL and its creditors. Unless and until the Trustee receives notice in writing from any Insurance Creditor or ERL that an Insolvency Event has occurred, together with such supporting evidence of the occurrence of such Insolvency Event as {*98} the Trustee may acting in good faith in its absolute discretion require, the Trustee is entitled to assume (and it is hereby declared to be the intention of the Trustee that it will assume) without enquiry that no Insolvency Event has occurred.

2.5 	Following the occurrence of an Insolvency Event, any sums received by the Trustee in respect of the Trust Property including, without limitation, on a winding-up of ERL or pursuant to any scheme or composition entered into between ERL and its creditors including any scheme of arrangement or compromise made under section 425 of the Companies Act 1985 and any voluntary arrangements made between ERL and its creditors under sections I to 8 of the Insolvency Act shall be distributed by the Trustee to the Insurance Creditors in accordance with clause 2.7.

2.6 	In proving in a winding-up of ERL or in making a claim pursuant to a scheme or composition entered into between ERL and its creditors, the Trustee shall from the information available to it seek to establish the amount owing by ERL under the terms of the Reinsurance Contract and the amount of the Secured Obligations that is due to each Insurance Creditor. In doing so, the Trustee shall be entitled to consider all information provided to it by the Insurance Creditors or any broker or by ERL or any other information as it, in its absolute discretion, deems relevant. In the absence of obtaining sufficient evidence from each Insurance Creditor satisfactory to the Trustee to enable it to determine the amount that is due to such creditor in respect of the Secured Obligations, it shall be entitled to assume that any figures produced by a liquidator, administrator or supervisor or as determined pursuant to any scheme of arrangement pursuant to section 425 of the Companies Act 1985, which enables it to calculate directly or indirectly the amount so owing to such Insurance Creditor, are correct without further enquiry.

2.7 	All moneys received or recovered by the Trustee in respect of the Secured Obligations following an Insolvency Event shall be held by it on trust to be applied as follows in the following order of priority (and in each case only if and to the extent that payments or provisions of a higher priority have been made in full):

(a)	first, in or towards satisfaction of the fees or other remuneration payable to the Trustee and any costs, charges, liabilities and expenses incurred by the Trustee under or in connection with this Declaration of Trust;

(b)	second, in or towards satisfaction of the Secured Obligations owing to each Insurance Creditor (or any person to whom an Insurance Creditor has assigned all or any part of the Secured Obligations) rateably in proportion to the Secured Obligations, as determined by the Trustee in establishing a proof or claim in a liquidation of ERL or in any composition or scheme made between it and its creditors (or if no proof or claim has been made, in accordance with the Trustee's determination {*99} of the Secured Obligations owing (whether actually, prospectively or contingently) to each Insurance Creditor (or an assignee as aforesaid));

(c)	third, to each Reinsured Name who had, prior to any payment by the Trustee under paragraph (b) above, made any payment to an Insurance Creditor (or any person to whom such Insurance Creditor had assigned the whole or any part of the Secured Obligations) including any payment made by way of set-off in respect of the Secured Obligations, to the extent of such payment, or, if there are insufficient moneys to make such payment in full, rateably in accordance with the amounts of such payments; and 

(d) 	fourth, to each Reinsured Name pro rata to the value of the Trust Property assigned by each Reinsured Name (the value to be defined by reference to the amount the Trustee established in respect of the Trust Property assigned by each Reinsured Name in making a proof or claim in a-liquidation of ERL or in any composition or scheme made between it and its creditors (or if no proof or claim has been made, in accordance with the Trustee's determination of the amount received by it in respect of the Trust Property assigned by such Reinsured Name)). 

2.8	Provided the Trustee distributes any proceeds referred to in clause 2.7 to Insurance Creditors (or an assignee thereof in accordance with clause 2.7) or Reinsured Names as set out therein, in the absence of the wilful default of the Trustee in establishing the amount of the Secured Obligations owing to each Insurance Creditor (or an assignee thereof) or the value of the Trust Property assigned by each Reinsured Name in accordance with clause 2.7, no Insurance Creditor, Reinsured Name nor the Substitute Agent shall be entitled to make any claim against the Trustee in respect of the distribution of such proceeds by the Trustee.

2.9 	In determining whether an Insurance Creditor has received payment from any Reinsured Name in respect of a policy of insurance or reinsurance as set out in clause 2.7(c), the Trustee is entitled to assume without enquiry that no such payment has been received by such Insurance Creditor, in the absence of receiving such evidence from the Reinsured Name or Substitute Agent as it may, acting in good faith, in its absolute discretion require establishing that such payment has been made.

2.10 	If the amount payable to the Trustee in respect of any winding-up or scheme or composition entered into between ERL and its creditors is adjusted as a result of the introduction of any Proportionate Cover Plan or due to the adjustment of the value attributed to any future or contingent liability or claim, in accordance with the terms of such winding-up or scheme or composition, the amount payable to the Insurance Creditors and Reinsured Names pursuant to clause 2.7 shall be varied in accordance with such adjustment provided that such adjustment shall not affect any amounts previously paid to any Insurance {*100} Creditor or Reinsured Name by the Trustee. If the Trustee is of the view (considering such information as it in its absolute discretion deems necessary) that such adjustment of the amount payable in such winding-up or scheme or composition impacts upon the Trustees' previous determination of the Secured Obligations owing to each Insurance Creditor, the Trustee shall adjust the future amounts payable to each Insurance Creditor under this Declaration of Trust in accordance with the amount of the Secured Obligations it determines is owing to each Insurance Creditor following such adjustment. In determining such adjustment, the Trustee shall be entitled to assume that any figures prepared by a liquidator, administrator or supervisor which enable it to calculate directly or indirectly the adjusted amount owing to such Insurance Creditor are correct.

2.11 	The Trustee may refrain from distributing any amounts received in respect of a proof or claim in accordance with clause 2.7 to any Insurance Creditor until receipt of a written confirmation from such Insurance Creditor that such sums will be applied to reduce or extinguish pro tanto the amounts owed to him under the policy of insurance or reinsurance which has been reinsured by ERL under the terms of the Reinsurance Contract.

2.12 	The Trustee shall not be required to take any steps to enforce the Secured Obligations other than provided pursuant to clauses 2.1 to 2.11 above.

2.13 	Upon the receipt of such evidence as the Trustee may in its absolute discretion require that the Secured Obligations have been paid and discharged in frill and that all sums which are or may become payable to it pursuant to the Declaration of Trust have been satisfied in full, the Trustee will release the security constituted by the Reinsurance Contract and this Declaration of Trust and reassign to each Reinsured Name or such other person as each Reinsured Name may direct or such other person as may be entitled thereto, all of the Trust Property.

2.14 	The Trustee shall not be required to take any action under this clause 2 or any other provision of this Declaration of Trust, unless it is satisfied that it will be indemnified in respect of all costs, charges, expenses and liabilities to be properly incurred by it in respect of such action. To the extent that the Trustee is not able to recover any such costs, charges, expenses or liabilities from Equitas under clause 7 of this Declaration of Trust the Trustee is entitled, without prejudice to its right to indemnify itself from the Trust Property as a matter of law, to utilise the proceeds of any sums received in respect of the Trust Property in meeting such costs, charges, expenses or liabilities and to deduct such amounts from the amount payable by it to Insurance Creditors and to the Substitute Agent or Names under the terms of this Declaration of Trust.

2.15 	For the purpose of this Declaration of Trust, the following shall constitute an Insolvency Event: {*101} 

(a)	ERL shall fail to comply with any obligation to make any payment under the terms of the Reinsurance Contract and, final judgment not being subject to further appeal having been obtained in the court of anyrelevant jurisdiction against ERL in respect of such breach, ERL shall fail to satisfy the terms of such judgment within 7 days;

(b)	any order shall be made by any competent court or resolution passed for the winding-up of ERL or a liquidator or provisional liquidator is appointed in respect of ERL;

(c)	ERL is unable or deemed unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986 or becomes unable to pay its debts as they fail due or suspends or threatens to suspend making payments (whether of principal or interest) with respect to all or any class of its debts. Provided that in determining whether ERL is unable to pay its debts as aforesaid, account shall be taken of the extent to which any debt which ERL would otherwise be obliged to pay in full can be paid at less than that amount under:

(i)	any Proportionate Cover Plan then in effect; or

(ii)	any Proportionate Cover Plan which ERL has power to introduce unless ERL has stated that no Proportionate Cover Plan will be introduced to enable it to pay its debts; or

(iii)	any suspension of payments introduced pursuant to paragraph 9 of schedule 3 to the Reinsurance Contract; and

(d)	an administrator, administrative receiver or manager, receiver, trustee or similar officer is appointed or an administration order made with respect to ERL or the whole or any substantial part of its assets.

2.16	Notwithstanding any other provision of this Declaration of Trust, if the Trustee receives any sums in respect of the Trust Property in respect of which it is unable to determine how such sums should be distributed in accordance with the terms of this Declaration of Trust or if it is aware of any dispute or proceedings by any person in respect of his entitlement under this Declaration of Trust or in respect of the Trustee's determination of such entitlement, it shall be entitled to withhold distribution of such sums until it has been possible to establish to its satisfaction how they should be distributed, and the Trustee shall be entitled to take such advice pursuant to clause 5(a) as it thinks necessary to assist it in making such determination. Any determination of the persons entitled to any sums received by the Trustee in respect of the Trust Property shall be conclusive and, in the absence of wilful default on the part of the Trustee in making such determination, no Insurance Creditor, or Reinsured Name nor the Substitute Agent shall be entitled to make any claim against the Trustee under this Declaration of Trust in respect of the distribution of such {*102} proceeds by the Trustee. Pending such determination, the Trustee shall be entitled to invest such sums in Authorised Investments and to accumulate any income arising thereon.

2.17 	Notwithstanding any provision hereof, the Trustee shall not seek to prevent the implementation of any scheme or composition proposed to be entered into between ERL and its creditors in respect of any return of premium payable under clause 8 of the Reinsurance Contract unless the Trustee, acting in good faith, is of the opinion that following the implementation of such scheme or composition ERL would be unable or deemed unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986, and, for these purposes, on the assumption that ERL has no power to introduce a Proportionate Cover Plan.

THE SECURITY

3.1	(a)	The security created by the Reinsurance Contract and the Declaration of Trust shall not be satisfied by any intermediate payment or satisfaction of any amount hereby or thereby secured and the security so created shall be in addition to and shall not be prejudiced by any other security or guarantee now or hereafter held by the Trustee or any other person for all or any part of the Secured Obligations hereby and thereby secured or the liability of any person for the whole or any part of the Secured Obligations;

	(b)	Every power and remedy given to the Trustee herein shall be in addition to and not a limitation of any other power or remedy vested in the Trustee under the Reinsurance Contract, or by statute, rule or law or otherwise, and all such powers may be exercised from time to time and as often as the Trustee deems expedient.

3.2	The trusts constituted by the Reinsurance Contract and this Declaration of Trust shall (subject to sub-clause 3.3) remain in full force and effect for so long as any amounts remain due to the Trustee or delegate of the Trustee pursuant to the Reinsurance Contract and this Declaration of Trust and any of the Secured Obligations remain due to any of the Insurance Creditors.

3.3 	The perpetuity period applicable hereto under the rule against perpetuities shall be the period of eighty years less one day from the date of these presents and every power, authority or discretion to which the said rule applies which is conferred upon the Trustee or any other person by these presents shall only be exercisable during that period.

SUSPENSE ACCOUNT, INVESTMENT AND ACCUMULATIONS

4.1	Pending appropriation and distribution in accordance with clause 2 of any sums received by the Trustee in respect of the Trust Property, the Trustee may {*103} place such sums on a suspense account which it may maintain for as long as it thinks fit.

4.2 	The Trustee may invest in the name or under the control of the Trustee an amount equal to the balance from time to time standing to the credit of any suspense account in any Authorised Investment or by placing the same on deposit in the name or under the control of the Trustee and in such currency as the Trustee may think fit. The Trustee may at any time vary or transfer any of such investments for or into any other such Authorised Investment or convert any other moneys so deposited into any other currency and shall not be responsible for any loss occasioned thereby (whether by depreciation in value, fluctuation in exchange rates or otherwise) unless such loss is occasioned by the wilfi.il misconduct or fraud of the Trustee. The Trustee shall not be under any obligation to diversify any investment or investments made by it pursuant to this sub-clause.

4.3	The resulting income arising on any investments made pursuant to clause 4.2 above may, at the discretion of the Trustee, be accumulated.

TRUSTEE'S RIGHTS, DUTIES AND SUPPLEMENTAL POWERS

5.	By way of supplement to the Trustee Act 1925 it is expressly declared as follows:

(a)	The Trustee may in relation to the Reinsurance Contract or this Declaration of Trust act on the  opinion or advice of, or a certificate or any information obtained from, any lawyer, banker, valuer, surveyor, securities company, broker, auctioneer, accountant or other expert in the United Kingdom or elsewhere and shall not if acting in good faith be responsible for any loss occasioned by so acting.

(b)	Any such opinion, advice, certificate or information may be sent or obtained by letter, telegram, telex, facsimile reproduction or in any other form and the Trustee shall not if acting in good faith be liable for acting on any opinion, advice, certificate or information purporting to be so conveyed although the same shall contain some error or shall not be authentic PROVIDED THAT such error or lack of authenticity is not manifest.

(c)	The Trustee shall as regards all rights, powers, authorities and discretions vested in it by the Reinsurance Contract or this Declaration of Trust, or by operation of law, have complete discretion as to the exercise or non-exercise thereof.

(d)	Any investment made by or on behalf of the Trustee pursuant to clause 4 may, at its discretion, be made or retained in the name or names of a nominee or nominees. {*104} 

(e)	The Trustee shall be at liberty to place this Declaration of Trust and all deeds and other documents relating to the Reinsurance Contract or this Declaration of Trust with any bank or banking company, or lawyer or firm of lawyers, believed by it to be of good repute, in any part of the world, and the Trustee shall not be responsible for or be required to insure against any loss incurred in connection with any such deposit.

(f)	The Trustee may, in the conduct of the trust business, instead of acting
personally, employ and pay an agent to transact or conduct, or concur in transacting or conducting, any business and to do or concur in doing all acts required to be done by the Trustee (including the receipt and payment of money). The Trustee shall not, provided that the Trustee has exercised reasonable care in the selection of any person appointed by it in good faith hereunder, be responsible for any misconduct on the part of any such person or be bound to suspend the proceedings or acts of any such persons.

(g)	The Trustee may refrain from doing anything which would or might in its opinion be contrary to any law of any jurisdiction or any directive or regulation of any agency of any state or which would or might otherwise render it liable to any person and may do anything which it reasonably believes to be necessary to comply with any such law, directive or regulation.

(h)	(i)	The Trustee shall not be bound to give notice to any person of either the execution of the Reinsurance Contract or this Declaration of Trust nor shall it be liable for any failure, omission or defect in perfecting the security intended to be constituted by the Reinsurance Contract or this Declaration of Trust including, without prejudice to the generality of the foregoing, (a) failure to obtain any licence, consent or other authority for the execution of the same, and (b) failure to effect or procure registration of or otherwise protect any of the Reinsurance Contract or this Declaration of Trust by registering the same under any registration laws in any territory, or by registering any notice, caution or other entry prescribed by or pursuant to the provisions of the said laws;

	(ii)	The Trustee shall not be responsible for the genuineness, validity or effectiveness of either the Reinsurance Contract or this Declaration of Trust or any obligations or rights created or purported to be created thereby or any security constituted or purported to be constituted by or pursuant to either the Reinsurance Contract or this Declaration of Trust, nor shall it be responsible or liable to any person because of any invalidity of any provision of such documents, whether arising from statute, law or decision of any court; {*105} 

	(iii)	The Trustee shall not be liable or responsible for any loss, cost, damage, expense or inconvenience which may result from anything done or omitted to be done by it under the Reinsurance Contract or this Declaration of Trust, except such as arise as a result of the wilful misconduct or fraud of the Trustee.

SUPPLEMENTAL PROVISIONS REGARDING THE TRUSTEE

6.1 	Except as herein otherwise expressly provided, the Trustee shall be and is hereby authorised to assume without enquiry, and it is hereby declared to be the intention of the Trustee that it shall assume without enquiry, that ERL is duly performing and observing all the covenants and provisions contained in the Reinsurance Contract and that Reinsured Names are duly performing and observing their duties and obligations owed by them in respect of the Secured Obligations. The Trustee shall only be required to take any action against ERL in respect of the Trust Property in the circumstances set out in clause 2 of this Declaration of Trust and shall incur no liability to Insurance Creditors, Reinsured Names or any other person for failing to take any action against ERL in any other circumstances. The Trustee shall not be required to take any action in respect of the failure by any Reinsured Name to perform its duties or obligations in respect of the Secured Obligations except as expressly provided herein.

6.2  	The Trustee may, in the execution of all or any of the trusts, powers, authorities and discretions vested in it by the Reinsurance Contract and this Declaration of Trust, act by responsible officers or a responsible officer for the time being of the Trustee. The Trustee may also, whenever it thinks expedient, whether by power of attorney or otherwise, for a period not exceeding 12 months delegate to any person or persons all or any of the trusts, rights, powers, duties, authorities and discretions vested in it by the Reinsurance Contract and this Declaration of Trust. Any such delegation may be made upon such terms and conditions and subject to such regulations (including power to sub-delegate) as the Trustee may think fit and, PROVIDED THAT the Trustee shall have exercised reasonable care in the selection of such delegate and, where a power to sub-delegate has been given, has obliged the delegate to exercise reasonable care in the selection of any sub-delegate, the Trustee shall not be responsible for any loss incurred by any misconduct or default on the part of such delegate or sub-delegate.

6.3  	The Trustee shall not, and no director or officer of the Trustee shall, by reason of the fiduciary position of the Trustee, be in any way precluded from making any contracts or entering into any transactions in the ordinary course of business with ERL or any Insurance Creditor or any Reinsured Naine or from accepting the trusteeship of any stock, shares, debenture stock, debentures or securities of ERL or any of its subsidiaries or company connected with it. Neither the Trustee nor any such director or officer shall be accountable to any Insurance Creditor or any Reinsured Name for any profit, fees, commissions, {*106} interest, discounts or share of brokerage earned, arising or resulting from any such contracts or transactions. The Trustee and any such director or officer shall be at liberty to retain the same for its or his own benefit.

6.4 	The powers conferred by the Reinsurance Contract and this Declaration of Trust upon the Trustee shall be in addition to any powers which may from time to time be vested in it by general law.

6.5	Sections 93 and 103 of the Law of Property Act 1925 shall not apply to this Declaration of Trust.

TRUSTEE'S REMUNERATION AND INDEMNITIES

7.1	(a)	Equitas shall pay or shall arrange for payment to the Trustee remuneration for its services upon the terms and conditions contained in letters from time to time entered into between Equitas and the Trustee.

	(b)	If the Trustee finds it expedient or is required to undertake any additional or exceptional duties in the course of its trusteeship under this Déclaration of Trust, Equitas shall pay such additional remuneration as shall be agreed between the Trustee and Equitas. If the Trustee and Equitas fail to agree an alteration in the annual remuneration or the amount of any additional remuneration as aforesaid, it shall be determined by a chartered accountant selected by the Trustee and approved by Equitas, or, failing such approval, nominated by the President for the time being of the Institute of Chartered Accountants in England and Wales. The expenses involved in such nomination and the fees of such chartered accountant shall be paid by Equitas. The determination of such chartered accountant (who shall be deemed to be acting as an expert and not as an arbitrator) shall be conclusive and binding upon the Trustee and Equitas.

	(c)	Equitas shall pay to the Trustee an amount equal to the amount of any value added tax or similar tax chargeable in respect of its remuneration hereunder.

7.2	In addition to remuneration hereunder, Equitas shall, on written request, pay all other reasonable costs, charges and expenses (including travelling expenses and any value added tax or similar tax) which the Trustee may incur in relation to the preparation and execution of the Reinsurance Contract and this Declaration of Trust and the exercise of the rights, powers, duties, authorities and discretions or the execution of the trusts vested in it by or pursuant thereto. Reference in this sub-clause to costs, charges and expenses shall include value added tax or similar tax charged in respect thereof.

7.3	Equitas shall indemnify the Trustee and keep it indemnified: {*107} 

(a)	in respect of all liabilities and expenses properly incurred by it or by any person appointed by it to whom any trust, power, authority or discretion may be delegated by it in the execution or purported execution of the trusts, powers, authorities or discretions vested in it by the Reinsurance Contract and this Declaration of Trust; and 

(b)	against all losses, liabilities, actions, proceedings, costs, claims and demands in respect of any matter or thing done or omitted in any way relating to the Reinsurance Contract and this Declaration of Trust, except to the extent that they are sustained or incurred as a result of the wilful misconduct or fraud of the Trustee.

7.4	All sums payable under sub-clauses 7.2 and 7.3 of this clause shall be payable on demand. All sums payable by Equitas under this clause shall, in the case of any payment actually made by the Trustee prior to the demand, (if the Trustee so requires) carry interest at the rate of one per cent per annum above the normal lending rate of a leading bank in London, and (in all other cases) shall carry interest at such rate from the date fifteen days after the date of the same being demanded or being due or (where the demand specified that payment will be made on an earlier date) from such earlier date.

7.5 	Unless otherwise specifically stated in any discharge of these presents the provisions of this clause 7 shall continue in full force and effect notwithstanding such discharge.

7.6 	The Trustee may also make any arrangement for payment of remuneration for its acting as Trustee hereunder or for the indemnification of it in respect of any liabilities and expenses incurred by it in so acting as Trustee with any person whatsoever in addition to any remuneration or indemnity it is entitled to hereunder and shall not be required to account to any Insurance Creditor, Reinsured Name or any other person in respect of such remuneration or indemnity.

ACTION OF TRUSTEES

8. 	Whenever there shall be more than two trustees hereof the majority of such trustees shall (provided such majority includes a trust corporation) be competent to execute and exercise all the trusts, rights, powers, duties, authorities and discretions vested by this Declaration of Trust in the Trustee generally.

APPOINTMENT OF NEW OR FURTHER TRUSTEES

9.1 	The power of appointing new Trustees shall be vested in Equitas Holdings Limited. Equitas Holdings Limited may at any time by notice in writing to ERL and the Trustee remove any Trustee or Trustees for the time being hereof. The removal of a Trustee shall not become effective unless there {*108} remains at least one Trustee or Trustees in office after such removal. The provisions of section 37(1)(c) of the Trustee Act 1925 shall not apply to the extent that they are inconsistent with the provisions of this Declaration of Trust.

9.2 	Notwithstanding the provisions of clause 9.1, the Trustee may, upon giving prior notice to ERL and EHL, appoint any person (whether a trust corporation or not) to act either as a separate trustee or as a co-trustee jointly with the Trustee:

(a)	if the Trustee considers such appointment to be in the interests of the Insurance Creditors or the Reinsured Names; or

(b)	for the purposes of conforming to any legal requirement or restriction.

Such person shall (subject always to the provisions of the Reinsurance Contract and this Declaration of Trust) have such trusts, rights, powers, duties, authorities and discretions (not exceeding those conferred on the Trustee by the Reinsurance Contract and this Declaration of Trust) and such duties and obligations as shall be conferred or imposed by the instrument of appointment. The Trustee shall have power in like manner to remove any such person. Such reasonable remuneration as the Trustee may pay to any such person, together with any attributable costs, charges and expenses incurred by it in performing its function as such separate trustee or co-trustee, shall, for the purposes of this Declaration of Trust, be treated as costs, charges and expenses incurred by the Trustee.

RETIREMENT OF TRUSTEE

10. 	Any Trustee for the time being of these presents may retire at any time upon giving not less than three months' notice in writing to ERL and EHL without assigning any reason therefor and without being responsible for any costs occasioned by such retirement. The retirement of a sole Trustee shall not take effect until the appointment of a new Trustee has been effected.

MODIFICATIONS

11. 	The Trustee may from time to time and at any time make any modification of this Declaration of Trust, if in the opinion of the Trustee such modification:

(a)	is of a formal, minor or technical nature; or

(b)	is made to correct a manifest error; or

(c)	is not prejudicial in the opinion of the Trustee to the interests of the Insurance Creditors or any Reinsured Name; or {*109} 

(d)	is made to perfect or give effect to any charge or security created or intended to be created by the Reinsurance Contract or this Declaration of Trust or to facilitate the exercise, or the proposed exercise, of any of the Trustee's powers or the protection, management or realisation of any of the Trust Property.

NOTICES

12.1 	Each notice, request, demand, approval, certificate or other communication to be given or made by one person to another under this Declaration of Trust shall be given, made or served by telex, facsimile or letter to the following address, telex or facsimile number:

(a)	if to the Substitute Agent, to the address, telex or facsimile number or other address for service specified in or pursuant to the Reinsurance Contract;

(b)	if to the Trustee, to its registered office from time to time, and

(c)	if to ERL to the address, telex or facsimile number or other address for service specified in or pursuant to the Reinsurance Contract,

or to such other address, telex or facsimile number in the United Kingdom as such person may have notified to the Trustee by not less than 15 days notice in writing as the address, telex or facsimile number for the time being of such person.

12.2 	Any communication to any person shall be deemed to be received by that person (if sent by telex or facsimile) when such communication has been despatched and the appropriate answerback or confirmation received or (if sent by letter) when left at the appropriate address or (as the case may be) three days after being deposited in the post (first class postage prepaid) in an envelope addressed to such person at that address.

WAIVER

13. 	No course of dealing by the Trustee with any person and no failure or delay on the part of the Trustee to execute or exercise any trust, tight, power, duty, discretion or authority under the Reinsurance Contract or this Declaration of Trust or provided by statute or by law or in equity or otherwise shall impair or operate as a waiver of any such trust, tight, power, duty, discretion orauthority or be construed as a waiver of any default or as an acquiescence therein. Any single or partial execution or exercise of any such trust, right, power, duty, discretion or authority shall not preclude any other or further execution or exercise thereof or the execution or exercise of any other rights, privilege or remedies. The rights and remedies contained in the Reinsurance Contract and this Declaration of Trust are cumulative and not exclusive of any other right and remedy which the Trustee would have for the effective {*110} enforcement of the rights accorded in the Reinsurance Contract and this Declaration of Trust.

TAXES

14.	Notwithstanding anything herein contained, to the extent required by any applicable law, if the Trustee shall be required to deduct or withhold from any distribution or payment made by it hereunder or if the Trustee shall otherwise be charged to tax as a consequence of performing its duties hereunder, any amount for which the Trustee may be liable, whether as principal or agent, by reason of any assessment or prospective assessment to taxation of whatsoever nature and whensoever made upon the Trustee in connection with or arising from any sums received by it or to which it may be entitled under the Trust Property (other than in connection with its remuneration specified in clause 7) or any investments from time to time representing the same, including any income or gains arising therefrom or any action of the Trustee in or about the administration of the trusts of this Declaration of Trust (other than the remuneration specified in clause 7), the Trustee shall be entitled to make such deduction or withholding or, as the case may be, retention in respect of taxation. If the Trustee incurs any loss, cost, liability or expense by reason of any such assessment for which no such deduction or withholding or retention has been made by the Trustee or if any such deduction or withholding or retention is insufficient, Equitas will indemnify the Trustee therefor and the Trustee shall be entitled to reimbursement of such amounts from the Trust Property.

PARTIAL INVALIDITY

15. 	If any of the provisions of this Declaration of Trust becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired.

GOVERNING LAW AND JURISDICTION

16. 	This Declaration of Trust and all the terms and provisions hereof and all questions of construction, validity and performance hereunder shall be governed by and construed in accordance with the laws of England. The courts of England shall have exclusive jurisdiction to settle any dispute and/or controversy of whatsoever nature which may arise out of or in connection with this Declaration of Trust and any suit, action or proceeding arising out of such matters shall be brought in such courts. {*111}

IN WITNESS WHEREOF this Declaration of Trust has been executed as a deed by the parties hereof the day and year first above written.

EXECUTED as a DEED and	)
DELIVERED by	)
EQUITAS POLICYHOLDERS	
TRUSTEE LIMITED	)
acting by two Directors/a Director and 	)
a Secretary	)

Director

Director/Secretary

{*112}

APPENDIX 2- FORM OF RETROCESSION AGREEMENT

THIS RETROCESSION AGREEMENT is made on September 1996

BETWEEN:

EQUITAS REINSURANCE LIMITED a limited company registered in England and Wales with company number 3136300 whose registered office is at 20-22 Bedford Row, London WC 1R 4JS (ERL); and

EQUITAS LIMITED a limited company registered in England and Wales with company number 3173352 whose registered office is at 20-22 Bedford Row, London WCIR 4JS (Equitas).

WHEREAS:

(A) 	ERL has entered into reinsurance contracts under which it has agreed to reinsure and indemnify the Names and the Closed Year Names in respect of 1992 and Prior Business (the Equitas Reinsurance Contract), Centrewrite in respect of its liabilities to the Warrilow Syndicates in respect of 1992 and Prior Business (the Centrewrite Reinsurance), the E&O Companies in respect of all liabilities in respect of 1992 and Prior Business under the E&O Policies (the E&O Companies Reinsurance) and the PSL Companies in respect of certain personal stop loss liabilities (the PSL Companies Reinsurance) (the Initial Reinsurance Contracts) and to administer the run-off of such business.

(B) 	Equitas is willing to accept the retrocession of the liabilities of ERL under the Reinsurance Contracts and the delegation of the run-off of such business.

(C) 	Equitas is in principle willing to accept the retrocession of liabilities of ERL under any other contract of reinsurance underwritten by ERL and any such future retrocession will be entered into pursuant to this Agreement.

IT IS HEREBY AGREED AS FOLLOWS:

RETROCESSION CONDITIONS

Conditions

1.	The obligations of Equitas to reinsure ERL in accordance with clause 2 shall be conditional upon:

(a)	the Board of Equitas resolving that ERL unconditionally accepts the Retrocession Obligation subject only to receipt of consent from the Secretary of State pursuant to the relevant provisions of the Notice of Requirements; and {*113} 

(b)	Equitas having received consent from the Secretary of State pursuant to
the relevant provisions of the Notice of Requirements to acceptunconditionally the Retrocession Obligation,

and shall take effect upon the Equitas Reinsurance Contract becoming unconditional in all respects.

THE RETROCESSION OBLIGATION

Scope of retrocession obligation

2.1 	Subject to the conditions in clause I having been satisfied, in consideration of the Retrocession Consideration, Equitas shall reinsure and indemnify ERL in respect of the aggregate ultimate liability of ERL under the Initial Reinsurance Contracts upon and subject to the terms of this Agreement.

2.2 	In consideration of the relevant Additional Retrocession Consideration, Equitas shall further reinsure and indemnify ERL in respect of the aggregate ultimate liability of ERL under the relevant Additional Reinsurance Contractupon and subject to the terms of this Agreement.

2.3 	The reinsurance and indemnity obligations of Equitas pursuant to clause  2.1 and clause 2.2 shall be to indemnify ERL from the Effective Date and any relevant Additional Effective Date respectively, by way of reinsurance, for all liabilities, losses, claims, returns, reinsurance premiums, costs and other liabilities, outgoings and expenses, including extra-contractual obligations or punitive or penal damages arising, other than Assumed Liabilities, without limitation in time and amount, in respect of the reinsurance obligations contained in the Reinsurance Contracts, after deduction of:

(a)	all amounts recoverable and actually recovered after the Effective Date in respect of any relevant contract of outward reinsurance (including any Syndicate Reinsurances); and

(b)	all other income receivable and actually received after the Effective Date, including salvages or other moneys, which may be applied in reducing the amount of any liability comprised in the Reinsured business.

In the performance of the Retrocession Obligation in respect of liabilities under the Reinsurance Contracts Equitas shall have the obligation and responsibility for the collection of the amounts referred to in (a) and (b) above and any risk for failure to collect such amounts and shall, subject to and in accordance with the remainder of this clause 2, discharge the Retrocession Obligation in respect of liabilities under any Reinsurance Contract by payment of amounts agreed or lawfully due under that Reinsurance Contract. This reinsurance shall have effect as if incepting as at the Inception Date and the Retrocession Consideration is calculated accordingly. {*114} 2.4 If at any time a Certified Retrocession Trigger Event or Automatic Retrocession Trigger Event, as the case may be, occurs, the liability of Equitas to ERL in respect of the Retrocession Obligation (whether or not previously adjusted as a result of any prior operation of this clause 2.4) shall be adjusted subject to and in accordance with the provisions of schedule 3.

2.5 	Equitas, in respect of any decision to adjust the liability of Equitas to ERL pursuant to this Agreement acknowledges and agrees that such decision shall be taken bona fide and that all reasonable skill, care and diligence will be taken in arriving at any such decision.

2.6 	It is hereby acknowledged by each of the parties to this Agreement that this Agreement is not intended to and does not create any obligations to, or confer any rights upon, Insurance Creditors or any other persons not parties to the Agreement. It is hereby further acknowledged by each of the parties to this Agreement that this Agreement is not intended to and does not create any third party beneficiary status in or confer third party beneficiary rights upon, Insurance Creditors or any other person with respect to the Retrocession Obligation.

ELEMENTS AND DISCHARGE OF CONSIDERATION

Retrocession Consideration

3.1	The Retrocession Consideration shall be:

(a)	all consideration realised by ERL pursuant to clauses 5 1(a) and 5.1(d) of
the Equitas Reinsurance Contract;

(b)	all Syndicate Premiums paid to ERL pursuant to clause 5.1(b) of the
Equitas Reinsurance Contract; and

(c)	otherwise all premiums payable under the Initial Reinsurance Contracts,

less an amount of cash in aggregate equal to £710,000,000.

3.2 	From the Effective Date, ERL shall as further consideration for the Retrocession Obligation assign to Equitas all such rights as ERL has or shall have, including without prejudice to the generality of the foregoing the benefit of any undertaking to assign the same and the right to collect the same, in or to moneys and other assets receivable or becoming payable under the Syndicate Reinsurances or of premiums, premium returns, salvages or other assets receivable from any other person (and, in each case, any security therefor) after the Effective Date.

3.3 	Any amount received by Equitas pursuant to clause 3.2 which is by the terms of the relevant Syndicate Reinsurance (other than any Financial Reinsurance) payable to or subject to a legally enforceable duty to account to {*115} 

Insurance Creditors or reinsurers of the relevant 1992 and Prior Business shall upon receipt be applied by Equitas in making such payment or rendering such account but subject thereto for Equitas absolutely.

3.4 	In consideration of the amount paid under clause 3.1(b) and of the receipt by Equitas of that part of the consideration within clause 3.1(a) which consists of cash at bank, Equitas undertakes to be responsible for the payment, satisfaction, discharge, performance and fulfilment of the Assumed Liabilities of all Syndicates outstanding as at the Effective Date, as shown in the Completion Accounts to be prepared in accordance with the Completion Accounts and Co-operation Agreement except to the extent that consideration so realised by ERL is applied in discharge of ERL's obligations to Equitas under the Subscription Agreement.

3.5 	In respect of any Additional Reinsurance Contract, the provisions of clauses 3.1 and 3.2 shall apply as if references to the Retrocession Consideration were references to the relevant Additional Retrocession Consideration and references to the Effective Date were references to the relevant Additional Effective-Date.

Discharge

3.6 	In consideration of the Retrocession Obligation ERL will discharge the Retrocession Consideration through the payment or other transfer to Equitas of the consideration realised by ERL pursuant to the Equitas Reinsurance Contract and all consideration otherwise received under the Initial Reinsurance Contracts as soon as reasonably practicable after so realised or received by ERL except tothe extent that consideration so realised by ERL is applied in discharge of ERL's obligations to Equitas under the Subscription Agreement.

No termination for non-disclosure

3.7 	Equitas acknowledges that, the Reserve Groups, Lloyd's and ERL have been provided with or been given access to certain materials and informationand received representations and responses to certain questions put to the Managing Agent of each Syndicate or any predecessor managing agent of that Syndicate in relation to the Syndicate 1992 and Prior Business of that Syndicate, assets held in respect thereof and non-insurance liabilities of that Syndicate (such materials, information, representations and responses being collectively referred to as the Disclosure). Equitas shall have no right to avoid this Agreement after the Effective Date by reason of any non-disclosure or misrepresentation (whether or not innocent) notwithstanding that some material facts or matters may not have been or may not be disclosed to ERL, any Reserve Group or Lloyd's and/or that some of the Disclosure may not be accurate or complete. {*116} 

PROFIT PARTICIPATION

4. 	The Retrocession Consideration shall be the entire consideration due in consideration of the Retrocession Obligation. ERL will be entitled to a profit participation in relation to that part of Equitas' liabilities which consists of the performance of the Retrocession Obligation, the terms of which participation are contained in schedule 2.

DELEGATION OF RUN-OFF TO EQUITAS

5. 	ERL hereby delegates to Equitas, and Equitas assumes the fill management of, the Run-off and all the rights, powers, duties and obligations ofERL in relation to the Run-off assumed by ERL under the Initial Reinsurance Contracts and ERL undertakes to delegate to Equitas, and Equitas undertakes to assume the fill management of, the run-off of any business and all the rights, powers, duties and obligations of ERL in relation to the run-off of that business assuméd by ERL under any Additional Reinsurance Contracts (including, without prejudice to the generality of the foregoing, the power of delegation contained in each of those agreements) and Equitas shall be entitled to exercise all rights ERL has or may have under any Reinsurance Contract and shall comply with all duties and obligations ERL has or may have under any Reinsurance Contract, as if the terms of that Reinsurance Contract were set out herein and references to ERL were references to Equitas.

DUTIES AND LIABILITY OF EQUITAS

Standard of care

6.1 	In performing its duties and exercising its powers under this Agreement, Equitas shall operate its business and conduct its affairs in a bona fide and businesslike manner and use all reasonable skill, care and diligence for the proper provision of services, performance of duties and exercise of powers by it under this Agreement

Liability of Equitas

6.2 	Equitas shall be responsible and liable for its own acts and omissions (including without limitation any errors, omissions, breaches of contract and breaches of fiduciary duty) and for those of its employees, agents, sub-contractors and representatives in the conduct of the Run-off.

Indemnity

6.3 	Equitas shall indemnify and hold ERL harmless against all losses, costs, expenses, claims, demands and liabilities whatsoever which may be incurred by ERL as a result of or arising in connection with the negligence or deliberate default on the part of Equitas or its employees, agents, or sub-contractors and representatives in the performance of the duties and functions of Equitas under {*117} this Agreement.

BOOKS AND RECORDS

Access to Books and Records

7.1 	ERL shall, on or after the Effective Date or relevant Additional EffectiveDate transfer or procure the transfer of such Books and Records of eachSyndicate and each other Reinsured Party as are in its custody, possession orcontrol which relate exclusively to the liabilities reinsured under theReinsurance Contracts to Equitas, as required by Equitas, which Equitas shallthen hold as sub-agent on behalf of the relevant Reinsured Party.

Return of Books and Records on termination

7.2 	If this Agreement is terminated in accordance with its terms, Equitas shallreturn-to ERL or as ERL may direct such Books and Records as have beentransferred to it and such copies of the Books and Records as have been takenby it.

Equitas' maintenance of Books and Records

7.3	Equitas shall, until the Business of each Reinsured Party has beendischarged in full:

(a)	use all reasonable endeavours to keep safe all Books and Records relatingto any Reinsured Party delivered to it by ERL in accordance with such reasonable data and document retention policy as may be issued by Equitas from time to time;

(b)	maintain records of its conduct of the run-off of the business of each Reinsured Party showing the same separately from its conduct of the business of the other Reinsured Parties but only insofar as it determines that such separate books and records are necessary for the proper carrying on of its business.

CONFIDENTIALITY

8. 	Equitas hereby undertakes to use all reasonable endeavours to ensure that it and its respective employees, agents and contractors shall keep any Confidential Information strictly private and confidential and to comply with the provisions of clause 17 of the Equitas Reinsurance Contract as if the terms thereof were set out herein and references to ERL were, where the context so permits, references to Equitas. {*118} 

BENEFIT OF ERL's RIGHTS AGAINST THE SUBSTITUTE AGENT AND THE REINSURED PARTIES

9.	ERL agrees at the request of Equitas to enforce for the benefit of Equitas all or any of its rights under the Reinsurance Contracts.

INVALIDITY

10. If any provision of this Agreement other than the obligations of Equitas under clause 2 is held to be invalid or unenforceable, then such provision shall (so far as it is invalid or unenforceable) be given no effect and shall be deemed not to be included in this Agreement but without invalidating any of the remaining provisions of this Agreement.

NOTICES

11. -Any notice or notification to be given hereunder shall be in writing and may be given either by personal delivery, first class post or facsimile to the address of the other party set out in this Agreement or to such other address as any such party may have notified as being its service address for the purposes of this Agreement.

VARIATION

12. 	No variation, supplement, deletion or replacement of this Agreement (or of any of the documents referred to herein) shall be valid unless it is in writing and signed by or on behalf of each of the parties hereto.

GOVERNING LAW, JURISDICTION I) SERVICE OF PROCESS

Governing law and jurisdiction

13. 	This Agreement and all the terms and provisions hereof and all questions of construction, validity and performance hereunder shall be governed by and construed in accordance with the laws of England. Each party irrevocably and unconditionally agrees that the courts of England shall have exclusive jurisdiction to settle any dispute and/or controversy of whatsoever nature which may arise out of or in connection with this Agreement.

AS WITNESS the hands of the duly authorised representatives of the parties hereto the date and year first above written. {*119} 

SCHEDULE 1 - DEFINITIONS AND INTERPRETATION

1. 	Expressions defined in the Equitas Reinsurance Contract shall have the same meaning in this Agreement. In addition, the following expressions shall have the following meanings:

Additional Effective Date means, in respect of any Additional Reinsurance Contract, the date on which such contract becomes wholly unconditional;

Additional Retrocession Consideration means, in respect of any Additional Reinsurance Contract, the consideration agreed between ERL and Equitas for the retrocession of liabilities under such Additional Reinsurance Contract to Equitas;

Additional Reinsurance Contracts means any contract of reinsurance underwritten by ERL other than the Initial Reinsurance Contracts;

E&O Companies shall have the meaning ascribed thereto in the E&O Companies Reinsurance;

E&O Policy shall have the meaning ascribed thereto in the E&O Companies Reinsurance;

External Capital means any debtor relationship of Equitas entered into, or share capital issued by Equitas, for the purpose of financing its insurance business to the extent that that business is the performance of the Retrocession Obligation and in this definition debtor relationship has the meaning it has for the purposes of corporation tax;

PSL Companies shall have the meaning ascribed thereto in the PSL Companies Reinsurance;

Reinsurance Contracts means the Initial Reinsurance Contracts and the Additional Reinsurance Contracts;

Reinsured Parties means each of the Syndicates, the Closed Year Syndicates, Centrewrite, each of the E&O Companies, each of the PSL Companies and each reinsured under any Additional Reinsurance Contract;

Relevant Retrocession Rate has the meaning given in schedule 3;

Retrocession Consideration means the consideration to be discharged under clause 3.1 by ERL in consideration for the Retrocession Obligation;

Retrocession Obligation means the obligation of Equitas to reinsure ERL in accordance with clause 2;

Retrocession Plan has the meaning given in schedule 3; {*120} Substitute Agent means the substitute agent appointed by the Council under the Substitute Agents Byelaw (No. 20 of 1983) as managing agent of each of the Syndicates and the Closed Year Syndicates; and

Trigger Event has the meaning given in paragraph 2 of schedule 3. {*121}

SCHEDULE 2 - PROFIT PARTICIPATION

1.	The profit participation specified in clause 4 of this Agreement shall be calculated in accordance with the provisions of this schedule 2.

Definitions

1.	In this schedule 2 in addition to those expressions defined in schedule 1, the following expressions shall have the following meanings:

Available Surplus means the amount by which the aggregate value of the assets, including non-insurance accruals and other debtors, held by Equitas in respect of the 1992 and Prior Business valued on any date exceeds on such date the aggregate value of the sum of (i) the outstanding liabilities in relation to the 1992 and Prior Business as so valued, (ii) any margin of solve icy Equitas is required by the DTI to maintain in respect of the 1992 and Prior Business, (iii) the net present-value of the anticipated expenses of the Run-off for the period up to the date on which it is anticipated that Equitas will have no further liability in respect of the 1992 and Prior Business, (iv) any additional reserves or other amounts Equitas is obliged to maintain, whether for regulatory reasons or otherwise, from time to time, and (v) any transfer to reserves which the Board of Equitas resolves is necessary to be made to maintain reserves for the discharge of the reasonable expectations and rights of the holders of any External Capital;

Deficit means the amount by which the aggregate value of the assets, including non-insurance accruals and other creditors, held by Equitas in respect of the 1992 and Prior Business valued on any date is less than the aggregate value on such date of the sum of (i) the outstanding liabilities in relation to the 1992 and Prior Business as so valued, (ii) any margin of solvency Equitas is required by the DTI to maintain in respect of the 1992 and Prior Business, (iii) the net present value of the anticipated expenses of the Run-off for the period up to the date on which it is anticipated that Equitas will have no further liability in respect of the 1992 and Prior Business, (iv) any additional reserves or other amounts Equitas is obliged to maintain, whether for regulatory reasons or otherwise, from time to time, and (v) any transfer to reserves which the Board of Equitas resolves is necessary to be made to maintain reserves for the discharge of the reasonable expectations and rights of the holders of any External Capital;

Retained Profit means, in respect of any Distributable Surplus, the amount of such Distributable Surplus not paid to ERL as profit participation;

Distributable Surplus means, in respect of any 31 December, the lower of (i) the Available Surplus as at that date and (ii) the average of the Available Surplus as at that date and the Available Surplus (if any) as at 31 December in the two immediately preceding years. {*122} 

Calculation of Available Surplus or Deficit

2. 	Equitas shall procure that by 30 June 1999 and by 30 June, or such other date as the parties may agree, in each year thereafter a valuation of the outstanding liabilities of Equitas in relation to the 1992 and Prior Business as at the preceding 31 December and of the assets held at that date in respect thereof shall be made and the Available Surplus as at the preceding 31 December calculated. The amount of Available Surplus or Deficit shall be reported on by Equitas' auditors, acting as an expert and not as an arbitrator and the report of Equitas' auditors will be conclusive in each case.

3.	Profit Distribution

3.1 	On 30 June 2001 or such other date as the parties may agree and on 30 June or such other date as the parties may agree in each year thereafter any Distributable Surplus as at the preceding 31 December shall be paid as a distribution of profit to ERL, provided that, where necessary, the DTI's consent to any such a distribution of profit has been obtained and in each case the Board of Equitas does not resolve, taking account of advice from the auditors of Equitas, that such a distribution of profit would have a material adverse effect on the ability of Equitas to continue to be authorised by the DTI and/or to pay itsinsurance creditors as they fall due.

3.2 	ERL shall have a right to prove for the last preceding Retained Profit in the event of an insolvency of Equitas, such right to be subordinated to the costs and expenses of the winding-up and to all rights of distribution other than those attaching to the ordinary share capital of Equitas.

3.3 	In the event that there is a Deficit as at 31 December 2000 or as at 31 December in any year thereafter, Equitas shall notify to ER-1- the amount of such Deficit promptly on receipt of a report from Equitas' auditors identifying such Deficit. {*123}

SCHEDULE 3 - OPERATION OF RETROCESSION PLAN

Retrocession Plans

1. 	The introduction of a Retrocession Plan and the administration of any such plan, introduced pursuant to the provisions of clause 2.4 of the Agreement, shall be governed by the following provisions of this schedule.

Trigger Events

2.1	The circumstances described in clause 2.4 of the Agreement as Certified Trigger Events are:

(a)	at any time when a R.etrocession Plan is not in force, the making of  determination by the Board of Equitas that, if the provisions of this part  of this schedule were not invoked, the Relevant Original Liabilities of Equitas (taking into account, for the avoidance of doubt, its prospective and contingent liabilities and having made provision for the discharge of its General Creditors in full, in making such determination) would exceed the value of its Relevant Available Assets

(b)	at any time when a Retrocession Plan is in effect, the making of a determination by the Board of Equitas that, based on a current Retrocession Rate, the Relevant Original Liabilities of Equitas (taking into account, for the avoidance of doubt, its prospective and contingent liabilities and the Retrocession Rate then in force and having made provision for the discharge of its General Creditors in full, in making such determination) would exceed the value of its Relevant Available Assets.

2.2	For the purposes of paragraph 2.1, the Board of Equitas shall be entitled
to assume that the Relevant Available Assets shall be valued on the assumptionthat Equitas remains a going concern.

2.3	The circumstances described in clause 2.4 of the Agreement as AutomaticTrigger Events are:

(a)	the passing of a resolution for the voluntary winding-up of Equitas;

(b)	the making of an order for the compulsory winding-up of Equitas;

(c)	the appointment of a provisional liquidator in respect of Equitas.

2.4 	On the occurrence of a Certified Trigger Event, or upon the Board of Equitas becoming aware of facts or circumstances which it considers makes the occurrence of a Certified Trigger Event likely, the Board of Equitas shall be entitled, but not obliged, to consult with Insurance Creditors, or any part of them, or representatives of such Insurance Creditors, or any part of them as the {*124} Board of Equitas may see fit, in connection with the setting of a Retrocession Rate, the suspension of payments, or such other matters as the Board of Equitas may in its sole discretion determine.

Effect of Retrocession Plan

3.1 	On the occurrence of a Trigger Event, the liabilities of Equitas to ERL in respect of the Retrocession Indemnities shall be adjusted in such a manner that they are equal to the aggregate of.

(i)	the Original Liability multiplied by the Retrocession Rate, as calculated in accordance with paragraph 6 of this schedule; and

(ii)	the relevant Adjustment Entitlement (if any).

3.2 Any adjustment pursuant to the occurrence of a Certified Trigger Event shall take effect on and with effect from the date specified in the relevant Interim Retrocession Declaration which shall be issued by Equitas promptly following the occurrence of a Certified Trigger Event.

3.3	Any adjustment pursuant to the occurrence of an Automatic Trigger Event shall take effect on and with effect from, as the case may be:

(i)	the date of the resolution for the voluntary winding-up of Equitas;

(ii)	the date of the order for the compulsory winding-up of Equitas;

(iii)	the date of the appointment of a provisional liquidator in respect of Equitas.

Plan may be invoked more than once

4. 	The provisions of clause 2.4 of the Agreement and this schedule 3 may be invoked more than once and appropriate adjustments (upwards or downwards) to any Retrocession Plan then in effect made on each occasion provided (for the avoidance of doubt) that no Retrocession Plan shall provide for the payment of any liability of Equitas (whether an Original Liability or an amount due to General Creditors) at a rate in excess of 100%.

Implementation of Retrocession Plan

5.1 	If a Certified Trigger Event occurs Equitas shall, subject to paragraph 8, implement a Retrocession Plan or, as the case may be, adjust a Retrocession Rate of a Retrocession Plan then in effect. For this purpose, Equitas shall determine as of the Record Date:

(a)	the value of the Available Assets and, separately, the value of the US Trust Assets, the ECTF Assets and the Australian Assets, respectively; {*125} 

(b)	the amount of the Original Liabilities and, separately, the amount of the Relevant Original Liabilities applicable to American Business, Canadian Business, Australian Business and Residual Business, respectively (adjusted to reflect any Retrocession Rate already in force, if relevant);

(c)	the amount owing to General Creditors,

together with such other determinations as Equitas shall consider appropriate.

5.2 	Equitas undertakes to supply to ERL promptly, at the request of ERL, details of any valuations and other determinations it has made under paragraph 5.1, together with such reasonable supporting evidence and data as ERL may require.

5.3 	For the avoidance of doubt, Equitas shall only be entitled to implementor adjust, as the case may be, a Retrocession Plan in respect of all, and not part only, f the Retrocession Indemnities, in force at the relevant time.

Setting Retrocession Rate

6.1 	The Retrocession Rates applicable to the American Business, the Canadian Business, the Australian Business and the Residual Business (or any of them) as the case may be, shall be calculated in accordance with the following principles:

(a)	The following rates shall be calculated:

(i) 	Residual Business Rate;

(ii) 	US Trust Rate;

(iii) 	ECTF Rate; and

(iv) 	(if applicable) the Australian Rate;

(b)	where all of the US Trust Rate, ECTF Trust Rate and Australian Trust Rate are higher than the Residual Business Rate, then the rates calculated in accordance with paragraph 6.1(a) shall be the Retrocession Rate applicable to the Residual, American, Canadian and Australian Business respectively;

(c)	where some, but not all, of the US Trust Rate, ECTF Trust Rate and Australian Rate are higher than the Residual Business Rate, then the relevant higher rate or rates shall be the Retrocession Rate applicable to the American, Canadian or Australian Business, as the case may be;

(d)	subject, always to paragraph (c) above, where all or any of the US Trust Rate, ECTF Trust Rate and Australian Rate is lower than the Residual {*126} Business Rate, then the rate or rates which is lower shall be adjusted upwards and the Residual Business Rate will be adjusted downwards (by calculating the weighted average of the Residual Business and such lower rate or rates) until such lower rate or rates and the Residual Business Rate have been equalised into a single rate which rate shall be the Retrocession Rate applicable to those classes of business only.

6.2 	Where Equitas is satisfied that, in any particular jurisdiction, insurance creditors will be paid from a fund of assets only available to pay such creditors (whether held on trust or otherwise), Equitas shall be entitled to take this into account in calculating the Residual Business Rate including, where necessary, calculating an additional specific rate or rates applicable to such jurisdictions consistent with the principles set out in paragraph 6.1 above.

6.3 	For the avoidance of doubt, the Board of Equitas shall be entitled to consult with such regulatory authorities as it considers appropriate with a view to implementing a Retrocession Plan and any revision thereto and, in particular, ensuring that Dedicated Assets are applied in the manner and at the rate contemplated by the Retrocession Plan and not otherwise.

Declaration of Retrocession Rates

7. 	Following the determination by Equitas of the Retrocession Rate or Rates in accordance with paragraph 6, Equitas shall promptly issue a Retrocession Declaration.

Alternative Remedies

8.1 	If the Board considers that they are unable, for whatever reason, to make any determination required for the purposes of paragraphs 5 and 6, Equitas shall be entitled:

(a)	to take any action with a view to promoting a scheme of arrangement
under Section 425 of the Companies Act 1985 or a voluntary arrangement under Part I of the Insolvency Act 1986;

(b)	to take any action with a view to the winding-up of Equitas; or 

(c)	to exercise any rights it may have to take advantage of any other insolvency, moratorium, reorganisation or reconstruction procedure (or any variation of any existing procedure) which may be available to authorised insurance companies at the time,

or, in connection with any of the above, to apply to the court for the appointment of a provisional liquidator of Equitas or to take any equivalent protective measures in any other jurisdiction or jurisdictions. {*127} 

8.2 	Nothing in this schedule 3 shall be construed as limiting the right of the Board to take such action (including implementing any of the procedures specified in paragraph 8.1) as the Board may consider appropriate in any circumstances.

Suspension of payments

9. 	Promptly following the occurrence of a Certified Trigger Event, Equitas shall be entitled to reduce or suspend payments in respect of the Retrocession Indemnity pending any decision under paragraph 5, 6 or 8 provided that Equitas shall have no power to reduce or suspend payments in respect of any liabilities of Equitas other than in respect of the Retrocession Indemnity and such other liabilities shall continue to be payable in the ordinary course of business as and when they fall due. ERL agrees that if Equitas exercises the power conferred on it by this paragraph 9, it shall not, pending the implementation of any decision under-paragraph 5, 6 or 8:

(a)	take any step or proceeding against Equitas or its property (whether by
way of demand, set-off, legal proceedings, execution of judgment, enforcement of security, arbitration proceedings or otherwise howsoever) in any jurisdiction whatsoever for the purpose of enforcing its rights under this Agreement or otherwise procuring the payment of any amount in respect of a Retrocession Indemnity or any part thereof or

(b)	apply to the court under section 53 of the Insurance Companies Act 1982 for leave to petition for the winding-up of Equitas in accordance with the Insolvency Act 1986 or take or seek to take any action in accordance with any other statutory or common law powers available to such Name including, without limitation, section 122 of the Insolvency Act 1986.

Entitlement upon liquidation

10.1 	Upon the occurrence of an Automatic Trigger Event the amount of the liability of Equitas to ERL in respect of the Relevant Retrocession Indemnity shall be calculated in accordance with the provisions of paragraph 6 of this schedule, and may be recalculated to the extent considered appropriate by any liquidator of Equitas. The amount for which ERL may prove in the liquidation of Equitas shall, accordingly, be limited by reference to the calculation and/or recalculation of the liabilities of Equitas following the application of this schedule.

10.2 	Nothing in this paragraph 10 shall require a liquidator to act in a mannerinconsistent with any applicable rule of law.

Entitlement upon Section 425 plan being proposed

11	If Equitas proposes a compromise or arrangement within the terms of section 425 of the Companies Act 1985, or any successor thereto, at any time {*128} after a Certified Trigger Event has occurred, the amount of the liability of Equitas to ERL in respect of the Relevant Retrocession Indemnity (and accordingly the amount for which claims can be made in respect of such liability) shall be calculated in accordance with the provisions of this schedule unless and until the extent of such liability is varied by the terms of any such compromise or arrangement that may be approved.

Subordination to General Creditors

12. 	ERL acknowledges and agrees that its right to receive any payment from Equitas shall be subordinated to (i) payment of the General Creditors in full; and (ii) payment of (or the making of appropriate provision for payment of) the expenses of a liquidation, a section 425 plan or such other insolvency, moratorium, reorganisation or reconstruction procedure (or any variation of any existing procedure) which may be available from time to time, as the case may be, in full.

Upwards adjustment of payments

13. 	This paragraph applies where, at any time when a Retrocession Plan is in force, there is an upward adjustment in any Relevant Retrocession Rate. In such circumstances, where ERL has made payment under a Reinsurance Indemnity on the basis of a Relevant Retrocession Rate lower than the adjusted Relevant Retrocession Rate, Equitas shall be obliged to pay compensation to ERL. The compensation shall be such amount as is required to increase the level of payments already made to the same level as it is proposed to pay in respect of payments subject to the new adjusted Relevant Retrocession Rate.

Professional advice

14.	 In making any determination under this schedule, the Board of Equitas shall be entitled to rely on such professional advice as it considers appropriate and the determination of the Board of Equitas in respect of any matter in relation to clause 2.4, this schedule or a Retrocession Plan shall be conclusive and binding on all the Names. Without prejudice to clause 2.6 of this Agreement, no person shall have any claim against Equitas (or any officer, director or employee of Equitas) arising directly or indirectly out of any decision taken or omitted to be taken in relation to the application of this schedule.

Notices

15.	Any notice to be given under this schedule shall be given in accordancewith the provisions of clause 10 of this Agreement. {*129} 

Indemnity to ERL

16. l	Equitas undertakes to indemnify ERL on demand and from time to time in respect of any liability of ERL to its General Creditors (as the term General Creditors is defined in the Equitas Reinsurance Contract), provided that:

(a)	ERL shall supply to Equitas such evidence as to the nature and amount of the liability in question as Equitas may reasonably require; and

(b)	Equitas shall have no liability under this indemnity at any time where a Proportionate Cover Plan is not in force or under consideration by the Board of ERL.

Definitions

17.	For the purposes of this schedule, the following words and expressions have the following meanings:

Adjustment Entitlement means the right of ERL, if there is a Trigger Event leading to an upward adjustment of a Retrocession Rate, to receive (i) compensation in accordance with paragraph 13 of this schedule; and (ii) any entitlement to an increased Retrocession Rate in accordance with paragraph 2.1(b);

American Business shall have the meaning given in the EATD;

Australian Business shall have the equivalent meaning to that proposed to be given to the then "Australian Liabilities" in the EAusCA;

Australian Custody Assets means the aggregate of the assets administered pursuant to the EAusCA;

Australian Rate means the rate at which the Australian Liabilities may be discharged from the Australian Trust Assets alone;

Automatic Trigger Event has the meaning set out in paragraph 2.3 of this schedule;

Available Assets means the assets of Equitas as at the Record Date less the amount of the General Creditors as at the Record date;

Board of Equitas means the board of directors of Equitas;

Canadian Business shall have the meaning given in the ECTD;

Cert!fied Trigger Event has the meaning set out in paragraph 2.1 of this schedule; {*130} 

Dedicated Assets means the aggregate of the US Trust assets, the ECTF Assets and the Australian Assets, or any of them, as the context may require;

EATD means the deed of trust to be entered into by Equitas and ERL with Citibank N.A. as trustee, in favour of the trustee of the LATD, as may be amended from time to time;

EATF means the trust fund from time to time held under the terms of the EATD;

EAusCA means the custodian agreement proposed to be entered into by Equitas with the responsible authorities in Australia in connection with the revised trading arrangements proposed to be established there;

EAusTF means the trust fund proposed to be established pursuant to the EAusTA;

ECTD means the deed of trust to be entered into by Equitas and ERL with the Royal Trust Corporation of Canada as trustee, in favour of the trustee of the LCTD, as may be amended from time to time;

ECTF means the trust fund from time to time held under the terms of the ECTD (together with such amounts, if any, as are held in the LCTF and are available only for the discharge of 1992 and Prior Business);

ECTF Assets means the aggregate of the assets in the ECTF;

ECTF Rate means the rate at which liabilities applicable to Canadian Business may be discharged from ECTF Assets alone;

General Creditors means all persons who are creditors (actual, prospective or contingent) of Equitas, ERL or any other member of the Equitas Group (other than ERL under the Retrocession Indemnities) and where the context requires, references to General Creditors shall include references to the amount of the claims (actual, prospective or contingent) of General Creditors. For the avoidance of doubt, references to claims of General Creditors include the estimated costs, at any time, of the future business of Equitas, ERL or any other member of the Equitas Group carried out pursuant to this Agreement or the Equitas Reinsurance Contract;

Illinois Collateral Reinsurance means the contract for the reinsurance of the Illinois Retained Business of Names and Closed Year Names authorised by a Certificate of Authority to write certain classes of insurance business in the State of Illinois made between ERL, such Names and Closed Year Names, and the Substitute Agent;

Illinois Retained Business shall have the meaning given in the Illinois Collateral Reinsurance; {*131} 

Illinois Trust Fund means the trust to be established in respect of the Illinois Collateral Reinsurance by ERL in accordance with Section 173.1 of the Illinois Insurance Code and §1104.70 of the Illinois Insurance Department Regulations;

Interim Retrocession Declaration means a notice or advertisement issued by or under the direction of the Board stating that a Certified Trigger Event has occurred and the date of such event and whether suspension of payments in respect of Retrocession Indemnities will come into effect;

LATF means any trust fund from time to time held in respect of a Name under the terms of the Lloyd's American Trust Deed;

LATD or Lloyd's American Trust Deed means the instrument dated 21 December 1995 constituting the amended and restated Lloyd's American Trust Deed, as amended from time to time;

LCTD means the instrument dated 26 September 1995 constituting the amended and restated Lloyd's Canadian Trust Deed, as amended from time to time;

Non-Dedicated Available Assets means the Available Assets of Equitas less the aggregate of (i) the Dedicated Assets (but adding back so much of the Dedicated Assets as Equitas determines are available to it to meet Original Liabilities in respect of Residual Business, because of a surplus of assets in the relevant trust fund, or otherwise, as the case may be), and (ii) so much of the Available Assets of Equitas as Equitas determines are required to discharge the specific liabilitiesidentified in clause 3.3;

Original Liability means the net present value, discounted at the prevailing discount rate, of the amount of the unsatisfied liability (actual, prospective or contingent) which Equitas would have had to ERL at the Record Date in respect of the Retrocession Indemnities if no Retrocession Plan had ever been implemented, but leaving out of account all or part or any liability in respect of which a dedicated asset is available as referred to in sub-paragraph (ii) of the definition of Non-Dedicated Available Assets;

Retrocession Declaration means a notice or advertisement issued by Equitas stating that a Retrocession Plan has been implemented or adjusted and stating: the effective date of coming into effect of the Retrocession Plan or, as the case may be, the effective date of the adjustment to such Retrocession Plan; the Retrocession Rate or Rates; whether ERL will be entitled to payments under paragraph 13;

Retrocession Plan means an adjustment of the liabilities of Equitas in respect of the Retrocession Indemnities to ERL in accordance with clause 2.4 and this schedule; {*132}

Retrocession Rate means the percentage rate by which the Original Liabilities, or a relevant part of them, must be multiplied in order for Equitas to be able to discharge the Original Liabilities from the Available Assets, and as the same may be calculated separately for American, Canadian, Australian and Residual Business (where applicable) in accordance with paragraph 6.1 of this schedule;

Record Date means the date on which a valuation of Available Assets and Original Liabilities takes place for the purposes of paragraph 5.1;

Retrocession Indemnities means the indemnity to ERL contained in clause 2.3;

Relevant Available Assets means so much of the Available Assets as are available to discharge liabilities applicable to American Business, Canadian Business, Australian Business and Residual Business, as the case may be;

Relevant Original Liability means so much of the Original Liability as relates to the Relevant Retrocession Indemnities applicable to the American Business, Canadian Business, Australian Business and Residual Business, as the case may be;

Relevant Retrocession Indemnities means the portion of the Retrocession Indemnity applicable to the American Business, Canadian Business, Australian Business and Residual Business, as the case may be;

Residual Business means the underwriting business of Equitas other than its American Business, Canadian Business and Australian Business;

Residual Business Rate means the rate at which Equitas can discharge its Relevant Original Liabilities in respect of Residual Business from its Non-Dedicated Available Assets;

US Trust Assets means the aggregate of the assets in the EATF and such amounts, if any, as are held in the LATF and are available only for the discharge of 1992 and Prior Business (excluding, for the avoidance of doubt, the Illinois Trust Fund); and

US Trust Rate means the rate at which liabilities applicable to American Business (excluding for this purpose, Illinois Retained Business) may be discharged from US Trust Assets alone. {*133} 

SIGNED by: 	)

for and on behalf of 	)
EQUITAS REINSURANCE 	)
LIMITED 	)

SIGNED by: 	)
for and on behalf of 	)
EQUITAS LIMITED 	)