# FACULTATIVE MANAGERS CORP.
FC
FREMONT INDEMNITY COMPANY
(hereinafter called the Reinsurer)

In consideration of payment of the premium, and subject to the terms, conditions and limits of liability set forth herein and in the Declarations made a part hereof, the Reinsurer does hereby reinsure the ceding company named in the Declarations (herein called the Company) in respect of the Company's Policy as follows:

## REINSURING AGREEMENTS AND CONDITIONS

### A. RETENTION AND APPLICATION OF LIABILITY
The Company warrants to retain for its own account or that of its trusty and/or facultative reinsurers the amount of liability specified in ITEM 3 of the Declarations and the liability of the Reinsurer specified in ITEM 4 of said Declarations shall follow that of the Company and except as otherwise specifically provided herein, shall be subject in all respects to all the terms and conditions of the Company's Policy. The Company shall furnish the Reinsurer with a copy of its Policy and all endorsements thereto which in any manner affect this Certificate, and shall make available for inspection and place at the disposal of the Reinsurer at reasonable times any of its records relating to reinsured claims in connection therewith. The terms of this Certificate shall not be varied or changed except by written endorsement issued to form a part hereof, executed by a duly authorized representative of the Reinsurer.

### B. NOTICE OF OCCURRENCE
Prompt notice shall be given the Reinsurer by the Company of any occurrence or accident which appears likely to involve loss to this reinsurance and consideration of the liability of the Company shall not affect the giving of this notice.

### C. DEFENSE OF CLAIMS OR SUITS
While the Reinsurer does not undertake to investigate or defend claims or suits it shall, nevertheless, have the right and be given the opportunity to associate with the Company and its representatives at its own expense in the defense and control of any claim with full cooperation of the Company.

### D. LOSS PAYABLE
All claims involving this reinsurance, when settled by the Company, shall be binding on the Reinsurer who shall be bound to pay its proportion of such settlements, and in addition thereto, in the ratio that the Reinsurer's loss payment bears to the Company's gross loss payment, its proportion of expenses, other than Company salaries and office expenses, incurred by the Company in the investigation and settlement of claims or suits and, with the prior consent of the Reinsurer to trial court proceedings, its proportion of costs, interest or any judgment or award. Payment of its proportion of loss and expenses paid by the Company will be made by the Reinsurer promptly following receipt of proof of loss.

### E. SALVAGE
The Reinsurer will be paid or credited by the Company with its proportion of salvage, i.e., reimbursement obtained or recovery made by the Company, actual cost, excluding Company salaries and office expenses, of obtaining such reimbursement or making such recovery. If the reimbursement afforded by this Certificate is on an excess of loss basis, salvage shall be applied in the inverse order in which liability attaches.

### F. TAXES
The Company will be liable for all taxes, other than income taxes, on premiums ceded to the Reinsurer under this Certificate.

### G. INSOLVENCY
In the event of the insolvency of the Company, the reinsurance provided by this Certificate shall be payable by the Reinsurer on the basis of the liability of the Company under the policy(ies) reinsured, without diminution because of such insolvency, directly to the Company or its receiver, liquidator, or statutory successor. The Reinsurer shall be given written notice of the pendency of each claim against the Company on the policies reinsured hereunder within a reasonable time after such claim filed in the insolvency proceedings. The Reinsurer shall have the right to investigate each such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defenses which it may deem advisable to the Company or its receiver, liquidator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to Court approval, against the insolvent Company as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Company solely as the result of the defense undertaken by the Reinsurer.

### H. NUCLEAR EXCLUSION
This Certificate is subject to the standard Nuclear Incident Exclusion Clause — Liability — Reinsurance.

### I. CANCELLATION
Cancellation of the Policy of the Company shall constitute automatic pro rata cancellation of this Certificate. The Certificate may also be cancelled by either party giving written notice of not less than the number of days specified in ITEM 6 of the Declarations to the other party. If cancelled by the Company, without simultaneous cancellation of the Policy, adjustment of premium shall be on the short rate basis. If cancelled by the Reinsurer, adjustment of premium shall be on the pro rata basis. Short rate and pro rata cancellations shall be based upon final adjusted premiums.

**In Witness Whereof,** Facultative Managers Corp. has caused this Reinsurance Certificate to be signed by its duly authorized officers at Stamford, Conn. The same shall not be binding upon the Reinsurer unless countersigned by an authorized representative of the Reinsurer.

**Berald S. King**  
**Vice President**

**Carl Poulson**  
**President**