Restructuring Agreement

RESTRUCTURING AGREEMENT


(hereinafter referred to as "Agreement")


by and among


THE AETNA CASUALTY AND SURETY COMPANY,


AETNA CASUALTY & SURETY COMPANY OF CANADA


EXECUTIVE RISK INC.


EXECUTIVE RE INC.,


EXECUTIVE RISK INDEMNITY INC.,


EXECUTIVE RISK SPECIALTY INSURANCE COMPANY


and


EXECUTIVE RISK MANAGEMENT ASSOCIATES


Dated February 13, 1997


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


2
RESTRUCTURING AGREEMENT


THIS RESTRUCTURING AGREEMENT (the "Agreement") is made and entered into this 13th day of February, 1997 by and among THE AETNA CASUALTY AND SURETY COMPANY, a Connecticut corporation ("Aetna"), AETNA CASUALTY & SURETY COMPANY OF CANADA ("Aetna Canada"), EXECUTIVE RISK INC., a Delaware corporation ("ERI"), EXECUTIVE RE INC., a Delaware corporation ("Executive Re"), EXECUTIVE RISK INDEMNITY INC., a Delaware corporation ("ERII"), EXECUTIVE RISK SPECIALTY INSURANCE COMPANY ("ERSIC"), a Connecticut corporation, and EXECUTIVE RISK MANAGEMENT ASSOCIATES, a Connecticut general partnership ("ERMA").


In consideration of the premises and the mutual covenants, obligations and agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


2


3 I


RESTRUCTURING OF AGENCY RELATIONSHIP


2 4
.1 Termination of 1994 Amended and Restated Agency Agreement. By their execution hereof, ERI, ERMA, Aetna and Aetna Canada mutually agree that the Insurance Services Agreement, dated December 24, 1986 between Aetna and ERMA, as amended by an Amended and Restated Insurance Services Agreement, dated as of May 1, 1991, between Aetna and ERMA, as further amended by an Amended and Restated Agency and Insurance Services Agreement, dated January 1, 1994, among Aetna, ERI and ERMA, as further amended by the First Amendment thereto, dated as of January 1, 1995, and as further supplemented by the Letter Agreement (the "1994 Canadian Letter Agreement"), dated May 26, 1995, among ERI, ERII, ERMA, Aetna and Aetna Canada (collectively, the "1994 Agency Agreement"), is hereby terminated as to all parties effective as of December 31, 1996, except that business with an effective date on or after January 1, 1997 written consistent with the terms of the 1997 Agency Agreement (as defined in Section 1.2 hereof), including, without limitation, Schedule A thereto (as the same may be updated in accordance with the terms of the 1997 Agency Agreement), shall be serviced and administered under the 1997 Agency Agreement and reinsured by ERII pursuant to the 1997 Quota Share Reinsurance Agreement (as defined in Section 2.3 hereof). The parties agree that the only obligations of the parties remaining under the 1994 Agency Agreement shall be as set forth in this Agreement and in the 1997 Agency Agreement including all Exhibits and Schedules thereto,


3 5 except that the 1994 Agency Agreement shall continue in force for the purpose of governing the parties' rights and obligations with respect to the business written by ERMA pursuant to the terms of such Agreement with policy effective dates prior to January 1, 1997, until all such policies expire and all liabilities with respect to such policies have been settled, and ERMA's obligations to render reports and make payments to Aetna shall be as provided in the Reporting and Accounting Convention attached hereto as Exhibit C.


.2 1997 Agency Agreement. Upon the execution hereof, Aetna and ERMA shall enter into an Agency and Insurance Services Agreement (the "1997 Agency Agreement") in the form of Exhibit A hereto.


.3 1997 Canadian Letter Agreement. Upon the execution hereof, ERMA and Aetna Canada shall enter into a letter agreement in the form of Exhibit B hereto (the "1997 Canadian Letter Agreement").


.4 Memorandum of Understanding. By their execution hereof, the parties agree that the Memorandum of Understanding attached as Schedule C to the 1994 Quota Share Reinsurance Agreement (as defined in Section 2.1 hereof) is hereby terminated as to all parties effective as of December 31, 1996, except that all business with an effective date on or after January 1, 1997 written consistent with the terms of such Memorandum of Understanding during the period January 1, 1997 to the date


4 6 hereof shall be serviced and administered under the 1997 Agency Agreement and reinsured by ERII pursuant to the 1997 Quota Share Reinsurance Agreement (as defined in Section 2.3 hereof).


ARTICLE II


RESTRUCTURING OF REINSURANCE RELATIONSHIP


.1 Termination of 1994 Quota Share Reinsurance Agreement. By their execution hereof, ERII and Aetna agree that the Amended and Restated Quota Share Reinsurance Agreement, dated as of January 1, 1994, between Aetna and ERII, as amended by the Amendment thereto, dated as of August 5, 1994, as further amended by the Second Amendment thereto, dated as of January 1, 1995, and as further supplemented by the 1994 Canadian Letter Agreement (the "1994 Quota Share Reinsurance Agreement"), is hereby terminated effective December 31, 1996.


.2 Run-off of Reinsurance Business. ERII and Aetna hereby agree that all applicable terms of the 1994 Quota Share Reinsurance Agreement shall continue in force solely for the purpose of governing the parties' rights and obligations with respect to the business ceded by Aetna to ERII pursuant to the terms of such agreement with effective dates prior to January 1, 1997, until all liabilities with respect to such business have been settled except that (i) ERII's only obligation to provide security to Aetna in connection therewith shall be as provided in the 1997 Quota Share Reinsurance Agreement (as defined in Section 2.3


5 7 hereof) and (ii) ERII's only obligation to render reports and make payments to Aetna shall be as provided in the Reporting and Accounting Convention attached hereto as Exhibit C.


.3 1997 Quota Share Reinsurance Agreement. Upon the execution hereof, ERII and Aetna shall enter into a Quota Share Reinsurance Agreement, in the form attached hereto as Exhibit D (the "1997 Quota Share Reinsurance Agreement"), with respect to the cession by Aetna to ERII of business written with effective dates on and after January 1, 1997 pursuant to the 1997 Agency Agreement.


.4 ERII Quota Share Reinsurance Agreement. By their execution hereof, ERII and Aetna agree that the Quota Share Reinsurance Agreement, dated as of January 1, 1994, between ERII and Aetna, as amended by the Amendment thereto, dated as of August 5, 1994, as further amended by the Second Amendment thereto, dated as of January 1, 1995, and as further amended by the Third Amendment thereto, dated as of November 1, 1995 (the "ERII Reinsurance Agreement"), is hereby terminated effective as of December 31, 1996. All applicable terms of the ERII Reinsurance Agreement shall continue in force solely for the purpose of governing the parties' rights and obligations with respect to business ceded by ERII to Aetna pursuant to the terms thereof with effective dates prior to January 1, 1997, until all liabilities with respect to such business have been settled, except that all reports and payments with respect to such


6 8 business shall be made in accordance with the Reporting and Accounting Convention attached hereto as Exhibit C.


.5 ERSIC Quota Share Reinsurance Agreement. By their execution hereof, ERSIC and Aetna agree that the Quota Share Reinsurance Agreement, dated as of January 1, 1994, between ERSIC and Aetna, as amended by the Amendment thereto, dated as of August 5, 1994, as further amended by the Second Amendment thereto, dated as of January 1, 1995, and as further amended by the Third Amendment thereto, dated as of November 1, 1995 (the "ERSIC Reinsurance Agreement"), is hereby terminated effective December 31, 1996. All applicable terms of the ERSIC Reinsurance Agreement shall continue in force solely for the purpose of governing the parties' rights and obligations with respect to business ceded by ERSIC to Aetna pursuant to the terms thereof with effective dates prior to January 1, 1997, until all liabilities with respect to such business have been settled, except that all reports and payments with respect to such business shall be made in accordance with the Reporting and Accounting Convention attached hereto as Exhibit C.


7 9 ARTICLE III


CERTAIN AGREEMENTS AND RIGHTS


.1 Exchange Agreement. By their execution hereof, Aetna, Executive Re and ERI agree that all of the terms of the Exchange Agreement shall be void and of no further effect on and after the date hereof with no liability of any such party except that ERI shall cause ERII to make the profit-sharing distribution payable to Aetna under Section 6.8 of the Exchange Agreement on or before May 30, 1997.


.2 Securityholders Agreement. By their execution hereof, ERI and Aetna agree that the Securityholders Agreement, dated as of January 1, 1994, among ERI, Aetna and the securityholders listed therein (the "Securityholders Agreement"), as amended by the Amendment thereto, dated as of August 5, 1994, as further amended by the Amended and Restated Stock Repurchase Agreement (the "Stock Repurchase Agreement"), dated as of March 22, 1996, among Aetna Life and Casualty Company ("Aetna Life"), Aetna, and ERI, is hereby amended by terminating all rights of Aetna thereunder, and all obligations of ERI with respect to Aetna, including, without limitation, the provisions of Articles 2 and 5 of the Securityholders Agreement, which shall be void and shall have no further effect on and after the date hereof.


.3 Board Representation. Aetna shall cause Joseph P. Kiernan, who has been serving as Aetna's designee


8 10 on the Boards of Directors of ERI, ...