Exhibit 10.1

EXECUTION VERSION

MASTER TRANSACTION AGREEMENT

BY AND AMONG

QBE INVESTMENTS (NORTH AMERICA), INC.,

QBE HOLDINGS, INC.

AND

NATIONAL GENERAL HOLDINGS CORP.

DATED AS OF JULY 15, 2015

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TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

  1   

Section 1.01.

Certain Defined Terms

  1   

ARTICLE II PURCHASE AND SALE

  13   

Section 2.01.

Purchase and Sale of the Shares

  13   

Section 2.02.

Excluded Assets and Liabilities; Transferred Assets and Liabilities

  13   

Section 2.03.

Closing

  14   

Section 2.04.

Purchase Price

  14   

Section 2.05.

Payment at Closing

  15   

Section 2.06.

Adjustment to Payment at Closing

  15   

Section 2.07.

Transactions; Closing Deliveries

  19   

Section 2.08.

Payments and Computations

  20   

ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND THE SELLER

  21   

Section 3.01.

Incorporation and Authority of Parent and the Seller

  21   

Section 3.02.

Incorporation, Qualification and Authority of the Company and the Transferred
Subsidiaries

  22   

Section 3.03.

Capital Structure of the Company and the Transferred Subsidiaries; Ownership and
Transfer of the Shares

  22   

Section 3.04.

No Conflict

  23   

Section 3.05.

Consents and Approvals

  23   

Section 3.06.

Financial Information; Absence of Undisclosed Liabilities

  24   

Section 3.07.

Absence of Certain Changes

  24   

Section 3.08.

Absence of Litigation

  24   

Section 3.09.

Compliance with Laws

  24   

Section 3.10.

Governmental Licenses and Permits

  25   

Section 3.11.

Intellectual Property

  25   

Section 3.12.

Environmental Matters

  26   

Section 3.13.

Material Contracts

  26   

Section 3.14.

Affiliate Transactions

  27   

Section 3.15.

Employee Benefits; Employees

  27   

Section 3.16.

Insurance Issued by the LPI Insurance Companies

  30   

Section 3.17.

Reinsurance

  30   

 

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Section 3.18.

Regulatory Filings

  31   

Section 3.19.

Insurance

  31   

Section 3.20.

Property

  31   

Section 3.21.

Taxes

  32   

Section 3.22.

Actuarial Report; Reserves

  34   

Section 3.23.

Brokers

  34   

Section 3.24.

Excluded Assets and Excluded Liabilities

  34   

Section 3.25.

Intercompany LPT Reinsurance Agreement

  34   

Section 3.26.

NO OTHER REPRESENTATIONS OR WARRANTIES

  34   

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR

  35   

Section 4.01.

Incorporation and Authority of the Acquiror

  35   

Section 4.02.

Qualification of the Acquiror

  35   

Section 4.03.

No Conflict

  36   

Section 4.04.

Consents and Approvals

  36   

Section 4.05.

Absence of Litigation

  36   

Section 4.06.

Securities Matters

  36   

Section 4.07.

Financial Ability

  37   

Section 4.08.

Financial Statements

  37   

Section 4.09.

Investigation

  37   

Section 4.10.

Brokers

  38   

ARTICLE V ADDITIONAL AGREEMENTS

  38   

Section 5.01.

Conduct of Business Prior to the Closing

  38   

Section 5.02.

Access to Information

  40   

Section 5.03.

Books and Records

  42   

Section 5.04.

Confidentiality

  42   

Section 5.05.

Regulatory and Other Authorizations; Consents

  43   

Section 5.06.

Insurance

  46   

Section 5.07.

Intercompany Obligations

  47   

Section 5.08.

Intercompany Arrangements

  47   

Section 5.09.

Non-Solicitation

  48   

Section 5.10.

Non-Competition

  48   

Section 5.11.

QBE Intellectual Property; Trade Names and Trademarks

  50   

 

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Section 5.12.

Transaction Agreements

  51   

Section 5.13.

Sublease of Leased Real Property

  52   

Section 5.14.

D&O Liabilities

  52   

Section 5.15.

Further Action

  52   

ARTICLE VI EMPLOYEE MATTERS

  54   

Section 6.01.

Employee Matters

  54   

ARTICLE VII TAX MATTERS

  57   

Section 7.01.

Liability for Taxes

  57   

Section 7.02.

Tax Returns

  59   

Section 7.03.

Contest Provisions

  60   

Section 7.04.

Assistance and Cooperation

  60   

Section 7.05.

Other Tax Matters

  61   

Section 7.06.

Tax Allocation Agreements

  61   

Section 7.07.

Consolidated Return Elections; Section 336(e) Election

  62   

ARTICLE VIII CONDITIONS TO CLOSING AND RELATED MATTERS

  63   

Section 8.01.

Conditions to Obligations of Parent and the Seller

  63   

Section 8.02.

Conditions to Obligations of the Acquiror

  64   

ARTICLE IX TERMINATION AND WAIVER

  65   

Section 9.01.

Termination

  65   

Section 9.02.

Notice of Termination

  65   

Section 9.03.

Effect of Termination

  65   

ARTICLE X INDEMNIFICATION

  66   

Section 10.01.

Indemnification by Parent and the Seller

  66   

Section 10.02.

Indemnification by the Acquiror

  66   

Section 10.03.

Notification of Claims

  67   

Section 10.04.

Payment

  68   

Section 10.05.

Exclusive Remedies

  69   

Section 10.06.

Additional Indemnification Provisions

  69   

Section 10.07.

Mitigation

  70   

Section 10.08.

Reserves

  71   

ARTICLE XI GENERAL PROVISIONS

  71   

Section 11.01.

Survival

  71   

Section 11.02.

Expenses

  71   

 

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Section 11.03.

Notices

  71   

Section 11.04.

Public Announcements

  73   

Section 11.05.

Severability

  73   

Section 11.06.

Entire Agreement

  73   

Section 11.07.

Assignment

  73   

Section 11.08.

No Third-Party Beneficiaries

  74   

Section 11.09.

Amendment; Waiver

  74   

Section 11.10.

Disclosure Schedules

  74   

Section 11.11.

Submission to Jurisdiction

  74   

Section 11.12.

GOVERNING LAW

  75   

Section 11.13.

WAIVER OF JURY TRIAL

  75   

Section 11.14.

Specific Performance

  75   

Section 11.15.

Rules of Construction

  75   

Section 11.16.

Counterparts

  76   

EXHIBITS

 

Exhibit A Form of Administrative Services Agreement Exhibit B-1 Form of External
LPT Reinsurance Agreement Exhibit B-2 Form of Quota Share Reinsurance Agreement
Exhibit C-1 Form of Forward Transition Services Agreement Exhibit C-2 Form of
Reverse Transition Services Agreement

SCHEDULES

 

Schedule 1.01 Agreed Balance Sheet Principles Schedule 1.02 Agreed Reinsurance
Settlement Statement Principles Schedule 1.03 Employees Schedule 1.04 Excluded
Books and Records Schedule 1.05 Parent and Seller Knowledge Parties Schedule
1.06 Acquiror Knowledge Parties Schedule 1.07 LPI Companies Schedule 2.02(a)(i)
Excluded Assets Schedule 2.02(a)(ii) Exceptions to Excluded Assets Schedule
2.02(a)(iii) Excluded Liabilities Schedule 2.02(b)(i) Transferred Assets
Schedule 2.02(b)(ii) Exceptions to Transferred Assets Schedule 2.02(b)(iii)
Transferred Liabilities Schedule 5.05 Conduct of Business Schedule 5.05(d)
Consent Cost Sharing

 

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Schedule 5.05(h) Shared Software Consent Cost Sharing Schedule 5.07 Intercompany
Obligations Schedule 5.08 Surviving Intercompany Agreements Schedule 5.13(a)
Subleases of Leased Real Property Schedule 6.01(b) Excluded Employees Schedule
6.01(f) Severance Benefit Plan

Disclosure Schedule

Acquiror Disclosure Schedule

 

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This MASTER TRANSACTION AGREEMENT, dated as of July 15, 2015, is made by and
among QBE Investments (North America), Inc., a Delaware corporation (“Parent”),
QBE Holdings, Inc., a Delaware corporation (the “Seller”) and National General
Holdings Corp., a Delaware corporation (the “Acquiror”).

RECITALS

WHEREAS, in addition to its other businesses, Parent is engaged, directly and
through certain of its Subsidiaries and their divisions, in the Business (as
defined herein);

WHEREAS, the Seller owns directly all the issued and outstanding Capital Stock
(as defined herein) (the “Shares”) of QBE Financial Institution Risk Services,
Inc., a Delaware corporation (the “Company”);

WHEREAS, the Company owns, directly or indirectly, all the issued and
outstanding Capital Stock of each of the following entities (collectively, the
“Transferred Subsidiaries”): QBE FIRST Insurance Agency, Inc., a California
corporation, Mortgage & Auto Solutions, Inc., a Texas corporation, Seattle
Specialty Insurance Services, Inc., a Washington corporation, and Newport
Management Corporation, a California corporation;

WHEREAS, the Seller desires to sell and assign to the Acquiror, and the Acquiror
desires to purchase and assume from the Seller, the Business, by means of
certain reinsurance and administrative arrangements and a transfer of the Shares
upon the terms and subject to the conditions set forth herein; and

WHEREAS, the parties hereto desire that, among other things, (i) Parent and the
Seller cause their Controlled Affiliates to distribute, assign, convey, deliver
or otherwise transfer to the Company or a Transferred Subsidiary all right,
title and interest in, to or under the Transferred Assets (as defined herein)
and (ii) the Acquiror (or the Company or a Transferred Subsidiary, as the case
may be) assume, pay, perform, discharge and is responsible for the Transferred
Liabilities (as defined herein), in each case, upon the terms and subject to the
conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

ARTICLE I

DEFINITIONS

Section 1.01. Certain Defined Terms. Capitalized terms used in this Agreement
have the meanings specified below, or as specified elsewhere in this Agreement.

“Acquiror” shall have the meaning set forth in the preamble.

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“Acquiror Disclosure Schedule” means the final version of the disclosure
schedule delivered by the Acquiror to Parent and the Seller relating to the
representations and warranties of the Acquiror set forth herein and which forms
a part of this Agreement.

“Acquiror Indemnified Parties” shall have the meaning set forth in
Section 10.01(a).

“Acquiror Transaction Agreements” shall have the meaning set forth in
Section 4.01(b).

“Acquiror Party” means each Affiliate of Acquiror that is, or is contemplated by
this Agreement to become at the Closing, a party to one or more Transaction
Agreements.

“Acquiror Reinsurer” means Integon National Insurance Company.

“Acquiror Reinsurer Annual Statutory Statements” shall have the meaning set
forth in Section 4.08.

“Acquiror Reinsurer Quarterly Statements” shall have the meaning set forth in
Section 4.08.

“Acquiror Reinsurer Statutory Statements” shall have the meaning set forth in
Section 4.08.

“Acquiror’s FSA” shall have the meaning set forth in Section 6.01(h).

“Acquiror’s Retirement Plan” shall have the meaning set forth in
Section 6.01(i).

“Action” means any claim, action, suit, litigation, arbitration or proceeding by
or before any Governmental Authority or arbitrator or arbitration panel or
similar Person or body.

“Actuarial Report” shall have the meaning set forth in Section 3.22(a).

“Administrative Services Agreement” means the Reinsurance Administrative
Services Agreement to be entered into pursuant to Section 5.12 and which shall
be substantially in the form set forth in Exhibit A.

“Affiliate” means, with respect to any specified Person, any other Person that,
at the time of determination, directly or indirectly through one or more
intermediaries, Controls, is Controlled by or is under common Control with such
specified Person; provided, however, that for the purposes of this Agreement,
Parent shall be deemed not to be an Affiliate of (a) the Acquiror or (b) after
the Closing, the Company or any of the Transferred Subsidiaries.

“After-Acquired Business” shall have the meaning set forth in
Section 5.10(b)(vii).

“After-Tax Basis” means that, in determining the amount of the payment necessary
to indemnify any party against, or reimburse any party for, Losses, the amount
of such Losses shall be (a) increased to take account of (i) any Tax cost
incurred by the Indemnified Party, in the taxable year of the indemnity payment
or the following taxable year, arising from the receipt of indemnity payments
hereunder and (ii) to the extent not previously taken into account in

 

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computing the amount of the Loss, all increases in federal, state, local and
other Taxes (including estimated Taxes) payable by the Indemnified Party, in the
taxable year of the Loss or the following taxable year, as a result of the event
that gives rise to the Losses and (b) to the extent not previously taken into
account in computing the amount of the Loss, decreased to take account of any
Tax benefit actually realized by the Indemnified Party (or any Affiliate
thereof), in the taxable year of the Loss or the following taxable year, as the
result of sustaining or paying such Losses (including as the result of facts or
circumstances due to which the Indemnified Party sustained or paid such Losses).

“Aggregate After-Acquired Revenues” shall have the meaning set forth in
Section 5.10(b)(vii).

“Agreed Balance Sheet Principles” shall have the meaning set forth on Schedule
1.01.

“Agreed Reinsurance Settlement Statement Principles” shall have the meaning set
forth on Schedule 1.02.

“Agreement” means this Master Transaction Agreement, dated as of July 15, 2015,
by and among Parent, the Seller and the Acquiror, including the Disclosure
Schedule, the Acquiror Disclosure Schedule, the Schedules and Exhibits.

“Base Purchase Price” shall have the meaning set forth in Section 2.04.

“Benefit Plan” means (i) “employee benefit plans,” as defined in Section 3(3) of
ERISA, and (ii) incentive, profit-sharing, stock option, stock purchase, other
equity-based, employment, consulting, compensation, vacation or other leave,
change in control, retention, supplemental retirement, severance, health,
medical, disability, life insurance, deferred compensation and other employee
compensation and benefit plans, programs, and agreements, in each case
established or maintained by Parent or any of its Affiliates or to which Parent
or any of its Affiliates contributes or is obligated to contribute, for the
benefit of any Employees.

“Books and Records” means the books, records and documents of the Seller, the
Parent, the Company, the Transferred Subsidiaries and the LPI Insurance
Companies, to the extent that they exclusively pertain to or are exclusively
used to administer, reflect, monitor, evidence or record information about the
Business or the business, operations or conduct of the Company or the
Transferred Subsidiaries, including all such records maintained on electronic or
magnetic media, or in any electronic database systems of Parent, the Seller, the
Company, the Transferred Subsidiaries or any of their respective Affiliates and
including litigation and arbitration files and customer lists. “Books and
Records” shall not include Excluded Books and Records.

“Business” means the business activities of the LPI Companies (whether or not
loan tracking services are provided as part of such activities) as a managing
general agent, general agent, producer or broker and insurer of lender-placed
hazard insurance, REO insurance, lender-placed automobile insurance,
lender-placed flood and flood gap insurance, lender-placed wind insurance,
guaranteed asset protection insurance, leased equipment insurance and insurance
recovery services.

 

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“Business Day” means any day that is not a Saturday, a Sunday or other day on
which commercial banks in the City of New York, New York are required or
authorized by Law to be closed.

“Business Intellectual Property” means the Intellectual Property that is used
exclusively in the Business as conducted on the date hereof.

“Capital Stock” means any capital stock, partnership interests, member interests
or any other equity or membership interests in any Person.

“Ceding Commission” shall have the meaning set forth in Section 2.05(a).

“Closing” shall have the meaning set forth in Section 2.03.

“Closing Date” shall have the meaning set forth in Section 2.03.

“Closing Date Net Settlement Amount” shall have the meaning set forth in
Section 2.06(a).

“Closing Date Working Capital” shall have the meaning set forth in
Section 2.06(a).

“Closing Pro Forma Working Capital Statement” shall have the meaning set forth
in Section 2.05(b)(i).

“COBRA” shall have the meaning set forth in Section 6.01(e).

“Code” means the United States Internal Revenue Code of 1986.

“Company” shall have the meaning set forth in the recitals.

“Competing After-Acquired Revenues” shall have the meaning set forth in
Section 5.10(b)(vii).

“Competing Business” means the business of marketing, producing, selling or
administering lender-placed hazard insurance, REO insurance, lender-placed
automobile insurance, lender-placed flood and flood gap insurance, lender-placed
wind insurance, guaranteed asset protection insurance, leased equipment
insurance and insurance recovery services.

“Confidentiality Agreement” shall have the meaning set forth in Section 5.04(a).

“Consent Period” shall have the meaning set forth in Section 5.05(e).

“Consultation Period” shall have the meaning set forth in Section 2.06(e).

“Control” means, as to any Person, the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise.

 

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“Current Assets” means the current assets of the Company and the Transferred
Subsidiaries determined in accordance with the Agreed Balance Sheet Principles.

“Current Liabilities” means the current liabilities of the Company and the
Transferred Subsidiaries determined in accordance with the Agreed Balance Sheet
Principles.

“D&O Indemnified Person” shall have the meaning set forth in Section 5.14.

“Disclosure Schedule” means the final version of the disclosure schedule
delivered by Parent and the Seller to the Acquiror relating to the
representations and warranties of Parent and the Seller set forth herein and
which forms a part of this Agreement.

“Eligible Insurance Proceeds” shall have the meaning set forth in
Section 10.06(f).

“Employee” means each employee of the Seller or any of its Affiliates who is
listed on Schedule 1.03 and is an employee of the Seller or any of its
Affiliates immediately prior to the Closing.

“Environmental Law” means any Law relating to pollution or protection of the
environment, including the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Materials.

“Equator” means Equator Reinsurances Limited, a Bermuda-domiciled insurance
company.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“Estimated Closing Working Capital” means Parent and Seller’s good faith
determination of the Working Capital as of the Closing Date.

“Estimated Closing Working Capital Calculation” shall have the meaning set forth
in Section 2.05(b)(i).

“Estimated Net Settlement Amount” shall have the meaning set forth in
Section 2.05(b)(ii).

“Estimated Purchase Price” shall have the meaning set forth in Section 2.05(a).

“Estimated Reinsurance Settlement Statement” shall have the meaning set forth in
Section 2.05(b)(ii).

“Excluded Assets” shall have the meaning set forth in Section 2.02(a)(ii).

“Excluded Books and Records” means originals and copies of those books and
records, documents, data and information (in whatever form maintained) of the
Parent, the Seller, the Company or the Transferred Subsidiaries that are
identified on Schedule 1.04.

“Excluded Liabilities” shall have the meaning set forth in Section 2.02(a).

 

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“External LPT Reinsurance Agreement” means the Loss Portfolio Transfer
Reinsurance Agreement to be entered into pursuant to Section 5.12 and which
shall be substantially in the form set forth in Exhibit B-1.

“Final Allocation Schedule” shall have the meaning set forth in Section 7.07(b).

“Final Working Capital” shall have the meaning set forth in Section 2.06(f).

“Final Working Capital Statement” shall have the meaning set forth in
Section 2.06(f).

“Final Reinsurance Settlement Statement” shall have the meaning set forth in
Section 2.06(f).

“Forward Transition Services Agreement” means the transition services agreement
to be entered into pursuant to Section 5.12 and which shall be substantially in
the form set forth in Exhibit C-1.

“GAAP” means generally accepted accounting principles used in the United States.

“Governmental Approval” shall have the meaning set forth in Section 3.05.

“Governmental Authority” means any United States federal, state or local or any
supra-national or non-U.S. government, political subdivision, governmental,
regulatory or administrative authority, instrumentality, agency, body or
commission, self-regulatory organization or any court, tribunal, or judicial or
arbitral body.

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

“Hazardous Materials” means (a) petroleum, petroleum derived substances and
products, radioactive materials, friable asbestos or polychlorinated biphenyls,
and (b) any chemical, material or substance defined or regulated as toxic or as
a pollutant, contaminant or waste under any Environmental Law.

“Indemnified Party” shall have the meaning set forth in Section 10.03(a).

“Indemnifying Party” shall have the meaning set forth in Section 10.03(a).

“Independent Accountant” shall have the meaning set forth in Section 2.06(f).

“Initial Reinsurance Settlement Statement” shall have the meaning set forth in
Section 2.06(a).

“Initial Working Capital Statement” shall have the meaning set forth in
Section 2.06(a).

“Insurance Policy” shall have the meaning set forth in Section 10.06(f).

“Intellectual Property” means: (a) patents, patent applications and statutory
invention registrations, including reissues, divisions, continuations,
continuations in part, renewals,

 

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extensions and reexaminations thereof, and all patents which may issue on such
applications, all rights therein provided by international treaties or
conventions, (b) trademarks, service marks, trade dress, logos, and all goodwill
associated with the foregoing, any and all common law rights therein, and
registrations and applications for registration thereof, all rights therein
provided by international treaties or conventions, and all reissues, extensions
and renewals of any of the foregoing, (c) copyrightable works, copyrights and
database rights, whether or not registered, and registrations and applications
for registration thereof, and all rights therein provided by international
treaties or conventions, (d) protectable rights in confidential and proprietary
information, including trade secrets, processes and know-how that arise from not
being publicly known, in each case existing on the Closing Date, (e) Internet
domain names, and registrations pertaining thereto, and (f) rights in Software.

“Intercompany Agreements” shall have the meaning set forth in Section 3.14.

“Intercompany LPT Reinsurance Agreement” shall have the meaning set forth in
Section 3.25.

“Interest Rate” means an interest rate equal to three (3)-month LIBOR for
dollars that appears on page LIBOR 01 (or a successor page) of the Reuters
Telerate Screen as of 11:00 a.m., New York time, on each day during the period
for which interest is to be paid.

“IRS” means the Internal Revenue Service.

“Knowledge” of a Person means: (a) in the case of Parent and the Seller, the
actual knowledge of any Person listed in Schedule 1.05, or (b) in the case of
the Acquiror, the actual knowledge of any Person listed in Schedule 1.06, in
each case as of the date hereof and subject to the subject matter limitations
set forth on such schedule.

“Law” means any U.S. federal, state, local or non-U.S. statute, law, ordinance,
regulation, rule, code, order or other requirement or rule of law.

“Leased Real Property” shall have the meaning set forth in Section 3.20(a).

“Lien” means any mortgage, deed of trust, pledge, hypothecation, security
interest, encumbrance, claim, lien or charge of any kind.

“Losses” means all losses, damages, costs, expenses (including reasonable
attorney’s fees), obligations and claims of any kind.

“LPI Companies” means, collectively, the Company, the Transferred Subsidiaries,
the LPI Insurance Companies and the entities set forth on Schedule 1.07.

“LPI Insurance Companies” means QBE Insurance Corporation, Praetorian Insurance
Company and QBE Specialty Insurance Company.

“LPI Insurance Policy” means any insurance contract issued by an LPI Insurance
Company in connection with its conduct of the Business.

 

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“Material Adverse Effect” means (a) with respect to the Business, a material
adverse effect on the financial condition or results of operations of the
Business, taken as a whole; provided, however, that none of the following shall
constitute or be deemed to contribute to a Material Adverse Effect, and
otherwise shall not be taken into account in determining whether a Material
Adverse Effect has occurred or would be reasonably likely to occur: any adverse
effect arising out of, resulting from or attributable to (i) an event or series
of events or circumstances affecting (A) the United States or global economy
generally or capital or financial markets generally, including changes in
interest or exchange rates, (B) political conditions generally of the United
States or any other country or jurisdiction in which any of the Seller, the
Company or the Transferred Subsidiaries operates or (C) any of the industries
generally in which the Business operates or in which products or services of the
Business are used or distributed, (ii) the negotiation, execution or the
announcement of, the consummation of the transactions contemplated by, or the
performance of obligations under, this Agreement or the other Transaction
Agreements, (iii) the identity of, or the effects of any facts or circumstances
relating to, the Acquiror, (iv) any changes or prospective changes in applicable
Law, GAAP or SAP or the enforcement or interpretation thereof, (v) any
hostilities, acts of war, sabotage, terrorism or military actions, or any
escalation or worsening of any such hostilities, act of war, sabotage, terrorism
or military actions, (vi) the credit, financial strength or other ratings (other
than the facts underlying any such ratings) of the Company or any of the
Transferred Subsidiaries or (vii) any failure by the Parent or its Affiliates
including the Company or the Transferred Subsidiaries or the Business to achieve
any earnings, premiums written, or other financial projections or forecasts
(other than the facts underlying any such failure), except in the case of the
foregoing clauses (a)(i), (a)(iv) and (a)(v) to the extent such effect or change
is materially disproportionately adverse with respect to the Business as
compared to other businesses engaged in the industries in which the Business
operates, and (b) with respect to Parent, the Seller or the Acquiror, a material
impairment or delay of the ability of Parent, the Seller or the Acquiror,
respectively, to perform its material obligations under this Agreement or to
consummate the transactions contemplated hereby.

“Material Contract” means any contract, agreement, instrument or other legally
binding and enforceable commitment (i) of the Parent, Seller or any of the LPI
Companies other than the Company or any Transferred Subsidiary to the extent
exclusively relating to the Business or (ii) to which the Company or any of the
Transferred Subsidiaries is a party or is otherwise subject (other than Excluded
Assets or Real Property Leases or insurance policies and insurance certificates)
or (iii) which comprises any of the Transferred Assets, in each case which
(A) calls for the payment by or on behalf of any LPI Company in excess of
$100,000 per annum or the delivery by any LPI Company of goods or services with
a fair market value in excess of $300,000 per annum, during the remaining term
thereof, (B) provides for any LPI Company to receive any payments in excess of,
or any property with a fair market value in excess of, $300,000 or more during
the remaining term thereof, or (C) restricts or limits the Company’s or any
Transferred Subsidiary’s ability to conduct the Business in any geographic area
(excluding non-exclusive Intellectual Property licenses, sublicenses, hosting,
access or related agreements granted in the ordinary course of business, to the
extent not already listed in clauses (A) or (B) above).

“Material Permits” shall have the meaning set forth in Section 3.10(a).

 

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“Net Settlement Amount” means the amount set forth on the line item “Net
Settlement Amount” reflected on the Estimated Reinsurance Settlement Statement,
the Initial Reinsurance Settlement Statement or the Final Reinsurance Settlement
Statement, as applicable.

“Non-Compete Period” shall have the meaning set forth in Section 5.10(a).

“Notice of Disagreement” shall have the meaning set forth in Section 2.06(d).

“Notice of Insurance” shall have the meaning set forth in Section 10.06(f).

“Owned Business Intellectual Property” means Business Intellectual Property that
is either (a) wholly-owned by the Company or a Transferred Subsidiary
(individually, or collectively with the Company or a Transferred Subsidiary, as
the case may be) and is not included in the Excluded Assets, or (b) wholly-owned
by Parent, the Seller or one of their Controlled Affiliates (individually, or
collectively with Parent, the Seller or one of their Controlled Affiliates, as
the case may be) and included in the Transferred Assets. For the avoidance of
doubt, “Owned Business Intellectual Property” excludes any Business Intellectual
Property that is owned or controlled by a non-affiliated third party.

“Parent” shall have the meaning set forth in the preamble.

“Parent’s FSA” shall have the meaning set forth in Section 6.01(h).

“Permitted Liens” means the following Liens: (a) Liens that secure debt that is
reflected on the Pro Forma Balance Sheets; (b) Liens for Taxes, assessments or
other governmental charges or levies that are not yet due and payable or that
are being contested in good faith by appropriate proceedings; (c) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen,
repairmen and other Liens imposed by Law and on a basis consistent with past
practice for amounts not yet due; (d) Liens incurred or deposits made to a
Governmental Authority in connection with a governmental authorization,
registration, filing, license, permit or approval; (e) Liens incurred or
deposits made in the ordinary course of business and on a basis consistent with
past practice in connection with workers’ compensation, unemployment insurance
or other types of social security; (f) defects of title, easements,
rights-of-way, covenants, restrictions and other similar charges or encumbrances
not materially interfering with the ordinary conduct of business; (g) Liens not
created by the Company or any of the Transferred Subsidiaries that affect the
underlying fee interest of any Leased Real Property; (h) Liens incurred in the
ordinary course of business and on a basis consistent with past practice
securing obligations or liabilities that are not individually or in the
aggregate material to the relevant asset or property, respectively; (i) zoning,
building and other generally applicable land use restrictions; (j) Liens that
have been placed by a third party on the fee title of the real property
constituting the Leased Real Property or real property over which the Company or
the Transferred Subsidiaries have easement rights; (k) Liens resulting from any
facts or circumstances relating to the Acquiror or its Affiliates; (l) any set
of facts an accurate up-to-date survey would show, provided, however, such facts
do not materially interfere with the present use of the relevant Leased Real
Property by the Company or the Transferred Subsidiaries, respectively; and
(m) Liens or other restrictions on transfer imposed by applicable insurance
Laws.

 

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“Person” means any natural person, corporation, general or limited partnership,
limited liability company, limited liability partnership, firm, joint-stock
company, association, trust, joint venture, unincorporated organization,
governmental, judicial or regulatory body, business unit, division or other
entity.

“Post-Closing Adjustment” shall have the meaning set forth in Section 2.06(h).

“Post-Closing Covenant” means any covenant or agreement that by its terms
applies or is to be performed in whole or in part after the Closing Date.

“Post-Closing Reinsurance Settlement Adjustment” shall have the meaning set
forth in Section 2.06(i).

“Post-Closing Taxable Period” means a taxable period that begins after the
Closing Date.

“Pre-Closing Taxable Period” means a taxable period that ends on or before the
Closing Date.

“Pro Forma Balance Sheets” shall have the meaning set forth in Section 3.06(a).

“Purchase Price” shall have the meaning set forth in Section 2.04.

“QBE Names and Marks” shall have the meaning set forth in Section 5.11(a).

“Quota Share Reinsurance Agreement” means the 100% Quota Share Reinsurance
Agreement, to be entered into pursuant to Section 5.12 and which shall be
substantially in the form set forth in Exhibit B-3.

“Real Property Lease” shall have the meaning set forth in Section 3.20(a).

“Registered Intellectual Property” shall have the meaning set forth in
Section 3.11(a).

“Reinsurance Agreements” means the Intercompany LPT Reinsurance Agreement, the
External LPT Reinsurance Agreement and the Quota Share Reinsurance Agreement.

“Reinsured Liabilities” shall have the meaning set forth in the Quota Share
Reinsurance Agreement.

“Representative” of a Person means the directors, officers, employees, advisors,
agents, stockholders, consultants, independent accountants, investment bankers,
counsel or other representatives of such Person and of such Person’s Affiliates.

“Reserves” shall have the meaning set forth in Section 3.22(b).

“Restricted Person” shall have the meaning set forth in Section 5.10(a).

“Retained Insurance Proceeds” shall have the meaning set forth in
Section 10.06(f).

 

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“Reverse Transition Services Agreement” means the transition services agreement
to be entered into pursuant to Section 5.12 which shall be substantially in the
form set forth in Exhibit C-2.

“Review Period” shall have the meaning set forth in Section 2.06(b).

“Revised Allocation Schedule” shall have the meaning set forth in
Section 7.07(b).

“SAP” means, as to any insurance or reinsurance company, the statutory
accounting practices prescribed or permitted by the insurance regulatory
authorities of the jurisdiction in which such company is domiciled.

“Section 338(h)(10) Elections” shall have the meaning set forth in
Section 7.07(a).

“Section 338 Taxes” means Taxes imposed by any taxing jurisdiction with respect
to which a Section 338(h)(10) Election is expressly made in accordance with
paragraph Section 7.07(a), and any elections deemed made as a result of the
Section 338(h)(10) Election, to the extent such Taxes are imposed as a result of
such Section 338(h)(10) Election and any such deemed election.

“Securities Act” means the Securities Act of 1933.

“Security and Control Agreements” means those security and control agreements to
be entered into pursuant to Section 5.12.

“Seller” shall have the meaning set forth in the preamble.

“Seller Indemnified Parties” shall have the meaning set forth in
Section 10.02(a).

“Seller Party” means each Affiliate of the Seller that is, or is contemplated by
this Agreement to become at the Closing, a party to one or more Transaction
Agreements.

“Shared Software” shall have the meaning set forth in Section 5.05(h).

“Shares” shall have the meaning set forth in the recitals.

“Software” means all computer software, including assemblers, applets,
compilers, source code, object code, firmware, binary libraries, development
tools, design tools, user interfaces in any form or format, however fixed and
all associated documentation.

“Straddle Period” means a taxable period that, to the extent it relates to the
Company or any Transferred Subsidiary, includes, but does not end on, the
Closing Date.

“Subsidiary” of any Person means any corporation, general or limited
partnership, joint venture, limited liability company, limited liability
partnership or other Person that is a legal entity, trust or estate of which (or
in which) at the time of determination (a) the issued and outstanding Capital
Stock having ordinary voting power to elect a majority of the board of directors
(or a majority of another body performing similar functions) of such corporation
or

 

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other Person (irrespective of whether at the time Capital Stock of any other
class or classes of such corporation or other Person shall or might have voting
power upon the occurrence of any contingency); (b) more than fifty percent
(50%) of the interest in the capital or profits of such partnership, joint
venture or limited liability company; or (c) more than fifty percent (50%) of
the beneficial interest in such trust or estate, is directly or indirectly
through another Subsidiary owned or Controlled by such Person.

“Target Working Capital” shall have the meaning set forth in Section 2.04.

“Tax” means all income, excise, gross receipts, ad valorem, sales, use,
employment, franchise, profits, gains, property, transfer, use, payroll,
surplus-lines, stamp taxes or other taxes, (whether payable directly or by
withholding) imposed by any Tax Authority, together with any interest and any
penalties thereon or additional amounts with respect thereto.

“Tax Allocation Agreement” means any written or unwritten arrangement for the
allocation or payment of Tax liabilities or payment for Tax benefits with
respect to a consolidated, combined or unitary Tax Return, which Tax Return
includes or has included the Company or any Transferred Subsidiary.

“Tax Authority” means any Governmental Authority having jurisdiction over the
assessment, determination, collection or imposition of any Tax.

“Tax Returns” means all returns, reports and claims for refunds (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be supplied to a Tax Authority relating to Taxes and, in
each case, any amendments thereto.

“Third Party Claim” shall have the meaning set forth in Section 10.03(a).

“Transaction Agreements” means, collectively, this Agreement, each of the
agreements referred to in Section 2.07(b) and the subleases referred to in
Section 2.07(e).

“Transfer” shall have the meaning set forth in Section 2.01.

“Transferred Assets” has the meaning set forth in Section 2.02(b)(ii).

“Transferred Employee” shall have the meaning set forth in Section 6.01(b).

“Transferred Liabilities” has the meaning set forth in Section 2.02(b).

“Transferred Subsidiaries” shall have the meaning set forth in the recitals.

“Transition Services Agreements” means the Forward Transition Services Agreement
and the Reverse Transition Services Agreement.

“Trust Account” shall have the meaning set forth in the Trust Agreements.

“Trust Agreements” means those certain trust agreements to be entered into
pursuant to Section 5.12.

 

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“WARN” shall have the meaning set forth in Section 3.15(d)(iii).

“Working Capital” means (a) Current Assets minus (b) Current Liabilities.

ARTICLE II

PURCHASE AND SALE

Section 2.01. Purchase and Sale of the Shares. On the terms and subject to the
conditions set forth in this Agreement, at the Closing, the Seller shall sell,
distribute, convey, assign, deliver or otherwise transfer (“Transfer”) to the
Acquiror, free and clear of all Liens, and the Acquiror shall, purchase, acquire
and accept from the Seller, all the Seller’s right, title and interest in and to
the Shares.

Section 2.02. Excluded Assets and Liabilities; Transferred Assets and
Liabilities.

(a) As of or prior to the Closing, and subject to Sections 5.05(d), 5.05(f) and
5.05(h), the Seller shall cause the Company and the Transferred Subsidiaries to
Transfer to Parent or one or more of Parent’s Affiliates (other than the Company
and the Transferred Subsidiaries) all right, title and interest in, to or under:

(i) all assets, properties, contracts, rights and licenses of every kind and
description that are owned by the Company or one of the Transferred Subsidiaries
and that are not used exclusively in the operation or conduct of the Business;
and

(ii) assets, properties, contracts, rights and licenses that are set forth in
Schedule 2.02(a)(i) ((i) and (ii), collectively, the “Excluded Assets”);

in each case free and clear of all Liens, except Permitted Liens; provided, that
notwithstanding the foregoing and for the avoidance of doubt, the Seller shall
not cause the Company or the Transferred Subsidiaries to Transfer to Parent or
any of its Affiliates (other than the Company and the Transferred Subsidiaries)
any right, title or interest in, to or under any of the assets, properties,
contracts, rights or licenses set forth in Schedule 2.02(a)(ii). Such Transfers
shall be made without any representations, warranties or other obligations or
duties on the part of the Company or any of the Transferred Subsidiaries. The
Seller shall accept assignment of, assume, pay, perform, discharge and be
responsible for, otherwise indemnify, defend and hold harmless the Acquiror, its
Affiliates, the Company and the Transferred Subsidiaries for, and the Acquiror,
its Affiliates, the Company and the Transferred Subsidiaries shall not retain or
be obligated to pay, perform, discharge or otherwise be responsible for, any
liability or obligation of Parent, the Seller, their Affiliates, the Company and
the Transferred Subsidiaries, whether direct or indirect, known or unknown,
absolute or contingent, to the extent not relating to or arising from the
Transferred Assets or the Business, whether existing prior to, on or after the
Closing Date, as well as any matter set forth in Schedule 2.02(a)(iii)
(collectively, the “Excluded Liabilities”).

 

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(b) As of or prior to the Closing, and subject to Sections 5.05(d), 5.05(e),
5.05(h) and 5.11, Parent and the Seller shall, or shall cause their Controlled
Affiliates (other than the Company and the Transferred Subsidiaries) to,
Transfer to the Company or a Transferred Subsidiary all right, title and
interest in, to or under:

(i) all the assets, properties (including Business Intellectual Property),
contracts, rights and licenses of every kind and description that are
wholly-owned (alone or in combination with one or the other of the following) by
Parent, the Seller or their Controlled Affiliates (other than the Company and
the Transferred Subsidiaries) and that are used exclusively in the operation or
conduct of the Business, as conducted on the date hereof; and

(ii) assets, properties and rights that are set forth in Schedule 2.02(b)(i)
((i) and (ii), collectively, the “Transferred Assets”);

in each case free and clear of all Liens, except Permitted Liens; provided, that
notwithstanding the foregoing and for the avoidance of doubt, neither Parent nor
the Seller shall, nor shall Parent or the Seller cause their Controlled
Affiliates (other than the Company and the Transferred Subsidiaries) to,
Transfer to the Company or any of the Transferred Subsidiaries any right, title,
or interest in, to or under any of the assets, properties, contracts, rights or
licenses set forth in Schedule 2.02(b)(ii). Except as set forth herein, such
Transfer shall be made without any representations, warranties or other
obligations or duties on the part of Parent or any of its Affiliates. The
Acquiror (or the Company or a Transferred Subsidiary, as the case may be) shall
accept assignment of, assume, pay, perform, discharge and be responsible for,
otherwise indemnify, defend and hold harmless Parent and its Affiliates (other
than the Company and the Transferred Subsidiaries) for, and Parent and its
Affiliates (other than the Company and the Transferred Subsidiaries) shall not
retain or be obligated to pay, perform, discharge or otherwise be responsible
for, any liability or obligation, whether direct or indirect, known or unknown,
absolute or contingent, to the extent relating to or arising from the
Transferred Assets or the Business, whether existing prior to, on or after the
Closing Date, including those set forth in Schedule 2.02(b)(iii), provided,
however, that, for the avoidance of doubt, such liabilities and obligations
shall not include any Excluded Liabilities (collectively, the “Transferred
Liabilities”).

Section 2.03. Closing. On the first Business Day of the first month which begins
at least five (5) Business Days following the first day on which the conditions
set forth in Article VIII hereof are satisfied or waived (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or waiver of those conditions at the Closing) or on such
other date as Parent, the Seller and the Acquiror may agree in writing, the
transactions contemplated by this Agreement shall take place at a closing (the
“Closing”) that shall be held at 10:00 a.m., New York City time, at the offices
of Sidley Austin LLP, 787 Seventh Avenue, New York, New York 10019, or such
other place as Parent or the Seller and the Acquiror may agree in writing (the
date on which the Closing takes place being the “Closing Date”). The Closing
shall be deemed effective at 12:00 a.m., New York City time, on the first
calendar day of the month in which the Closing Date occurs.

Section 2.04. Purchase Price. The aggregate purchase price for the Shares (the
“Purchase Price”) shall be an amount in cash equal to $45,000,000 (the “Base
Purchase Price”), as such amount shall be (x) increased, if the Final Working
Capital exceeds negative $31,716,000 (the “Target Working Capital”), on a
dollar-for-dollar basis, subject to the

 

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limitations described in Part III Specific Policy 9 of the Agreed Balance Sheet
Principles, by the amount of such excess or (y) decreased, if the Final Working
Capital is less than the Target Working Capital, on a dollar-for-dollar basis,
subject to the limitations described in Part III Specific Policy 9 of the Agreed
Balance Sheet Principles, by the amount of such difference. The Purchase Price
shall be paid pursuant to the provisions of Sections 2.05 and 2.06.

Section 2.05. Payment at Closing.

(a) At the Closing, the Acquiror shall pay or cause to be paid to the Seller
(i) an amount in cash equal to the Base Purchase Price, which amount shall be
(A) increased, if the Estimated Closing Working Capital exceeds the Target
Working Capital, on a dollar-for-dollar basis by the amount of such excess or
(B) decreased, if the Estimated Closing Working Capital is less than the Target
Working Capital, on a dollar-for-dollar basis by the amount of such difference
(the “Estimated Purchase Price”) and (ii) an amount in cash equal to
$45,000,000, the aggregate ceding commission payable by Acquiror Reinsurer to
the Seller in consideration for the transactions contemplated by the Reinsurance
Agreements (the “Ceding Commission”). At the Closing, the Seller shall cause the
LPI Insurance Companies to transfer cash or cash equivalents in the amount of
the Estimated Net Settlement Amount (as defined below) to the Acquiror Reinsurer
by depositing such assets into the Trust Account on behalf of the Acquiror
Reinsurer into the Trust Account. The Estimated Purchase Price payment and the
Estimated Net Settlement Amount shall be subject to a Post-Closing Adjustment
and Post-Closing Reinsurance Settlement Adjustment, respectively, pursuant to
the provisions of Section 2.06.

(b) Not less than three (3) Business Days prior to the anticipated Closing Date,
the Seller shall prepare and deliver, or cause to be prepared and delivered, to
the Acquiror:

(i) an estimated consolidated pro forma working capital statement for the
Company and the Transferred Subsidiaries as of the Closing Date (the “Closing
Pro Forma Working Capital Statement”) which shall include Seller’s good faith
calculation of the Estimated Closing Working Capital as of the Closing Date (the
“Estimated Closing Working Capital Calculation”). The Closing Pro Forma Working
Capital Statement shall be compiled from the books of account and other
financial records of the Company and the Transferred Subsidiaries, shall be
prepared in accordance with the Agreed Balance Sheet Principles.

(ii) a pro forma estimated reinsurance settlement statement (the “Estimated
Reinsurance Settlement Statement”) substantially in the form set forth in the
Agreed Reinsurance Settlement Statement Principles, which shall set forth
Seller’s good faith estimate of the Net Settlement Amount as of the anticipated
Closing Date (the “Estimated Net Settlement Amount”), determined in accordance
with Agreed Reinsurance Settlement Statement Principles.

Section 2.06. Adjustment to Payment at Closing.

(a) Within ninety (90) days following the Closing Date, the Acquiror shall
prepare and deliver to Parent and the Seller (i) a consolidated working capital
statement of the Company and the Transferred Subsidiaries as of 12:00 a.m. on
the Closing Date (the “Initial

 

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Working Capital Statement”), which shall set forth the amount of the Working
Capital as of the Closing Date (the “Closing Date Working Capital”), and (ii) a
settlement statement as of 12:00 a.m. on the Closing Date (the “Initial
Reinsurance Settlement Statement”), which shall set forth the Net Settlement
Amount as of the Closing Date (the “Closing Date Net Settlement Amount”). The
Initial Working Capital Statement shall be prepared in accordance with the
Agreed Balance Sheet Principles and the Initial Reinsurance Settlement Statement
shall be prepared in accordance with the Agreed Reinsurance Settlement Statement
Principles. If the Acquiror does not deliver either the Initial Working Capital
Statement or the Initial Reinsurance Settlement Statement to Parent and the
Seller within ninety (90) days after the Closing Date, then, at the election of
Parent and the Seller, either (A) Parent and the Seller may prepare and present
the Initial Working Capital Statement and the Initial Reinsurance Settlement
Statement within an additional ninety (90) days thereafter or (B) the Estimated
Closing Working Capital and the Estimated Reinsurance Settlement Statement shall
be deemed to be the Final Working Capital and the Final Reinsurance Settlement
Statement, respectively in accordance with Section 2.06(f). If Parent and the
Seller elect to prepare the Initial Working Capital Statement and the Initial
Reinsurance Settlement Statement in accordance with the immediately preceding
sentence, then all subsequent references in this Section 2.06 (other than those
in Sections 2.06(c), (g), (h) or (i)) to Parent and the Seller and the Acquiror,
respectively, shall be deemed to be references to the Acquiror and Parent and
the Seller, respectively. In connection with the Acquiror’s preparation of the
Initial Working Capital Statement and the Initial Reinsurance Settlement
Statement, to the extent the Acquiror does not have all relevant information in
its possession, the Acquiror and its Representatives shall have reasonable
access to review Parent’s and its Controlled Affiliates’ working papers and any
working papers of Parent’s and its Controlled Affiliates’ independent
accountants relating to the preparation of the Closing Pro Forma Working Capital
Statement, the Estimated Closing Working Capital Calculation and the Estimated
Reinsurance Settlement Statement, and Parent shall, and shall cause its
Controlled Affiliates to, make reasonably available the individuals then in its
employ, if any, responsible for and knowledgeable about the preparation of the
Closing Pro Forma Working Capital Statement, the Estimated Closing Working
Capital Calculation and the Estimated Reinsurance Settlement Statement in order
to respond to the reasonable inquiries of the Acquiror; provided, however, that
the independent accountants of Parent and its Controlled Affiliates shall not be
obligated to make any work papers available to the Acquiror unless and until the
Acquiror has signed a customary agreement relating to such access to work papers
in form and substance reasonably acceptable to such independent accountants.

(b) During the sixty (60) days immediately following Parent and the Seller’s
receipt of the Initial Working Capital Statement and the Initial Reinsurance
Settlement Statement (the “Review Period”), Parent, the Seller and their
Representatives shall be permitted to review the Acquiror’s work papers and the
work papers of the Acquiror’s independent accountants relating to the
preparation of the Initial Working Capital Statement and the Initial Reinsurance
Settlement Statement, as well as all the books, records and other relevant
information relating to the operations and finances of the Company and the
Transferred Subsidiaries with respect to the period up to and including the
Closing Date, and the Acquiror shall make reasonably available the individuals
then in its employ responsible for and knowledgeable about the information used
in, and the preparation of, the Initial Working Capital Statement and the
Initial Reinsurance Settlement Statement in order to respond to the reasonable
inquiries of Parent and the Seller; provided, however, that the independent
accountants of the Acquiror shall not be obligated to

 

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make any work papers available to Parent or the Seller unless and until such
Person has signed a customary agreement relating to such access to work papers
in form and substance reasonably acceptable to such independent accountants.

(c) The Acquiror agrees that, following the Closing through the date that the
Final Working Capital and the Final Reinsurance Settlement Statement become
final and binding, it shall not take any actions with respect to any accounting,
books, records, policies or procedures on which the Pro Forma Balance Sheets,
the Initial Working Capital Statement or the Initial Reinsurance Settlement
Statement are based or, if applicable, on which the Final Working Capital
Statement or the Final Reinsurance Settlement Statement are to be based that
would be reasonably expected to impede or delay in any material respect the
determination of the Closing Date Working Capital or the Net Settlement Amounts
or the preparation of the Notice of Disagreement, the Final Working Capital
Statement or the Final Reinsurance Settlement Statement in the manner and
utilizing the methods contemplated by this Agreement.

(d) Parent and the Seller shall notify the Acquiror in writing (the “Notice of
Disagreement”) prior to the expiration of the Review Period if Parent or the
Seller disagrees with the Initial Working Capital Statement or the Initial
Reinsurance Settlement Statement by virtue of such document not being prepared
in compliance with this Agreement. The Notice of Disagreement shall set forth in
reasonable detail the basis for such dispute, the amounts involved and Parent’s
and the Seller’s determination of the amount of Closing Date Working Capital or
Net Settlement Amounts, as applicable. If no Notice of Disagreement is received
by the Acquiror prior to the expiration of the Review Period, then the Initial
Working Capital Statement or the Initial Reinsurance Settlement Statement, as
applicable, shall be deemed to have been accepted by Parent and the Seller and
shall become final and binding upon the parties in accordance with
Section 2.06(f). If requested by the Acquiror, Parent and the Seller shall
designate one party to represent Parent and the Seller in all matters under this
Section 2.06.

(e) During the thirty (30) days immediately following the delivery of a Notice
of Disagreement (the “Consultation Period”), Parent, the Seller and the Acquiror
shall seek in good faith to resolve any differences that they may have with
respect to the matters specified in the Notice of Disagreement.

(f) If, at the end of the Consultation Period, Parent, the Seller and the
Acquiror have been unable to resolve any differences that they may have with
respect to the matters specified in the Notice of Disagreement, then Parent, the
Seller and the Acquiror shall submit all matters that remain in dispute with
respect to the Notice of Disagreement (along with a copy of the Initial Working
Capital Statement or Initial Reinsurance Settlement Statement, as applicable,
marked to indicate those line items that are in dispute) to Deloitte Touche
Tohmatsu Limited (as determined pursuant to this Section 2.06(f), the
“Independent Accountant”). In the event that a partner of Deloitte Touche
Tohmatsu Limited refuses or is otherwise unable to act as the Independent
Accountant, the parties shall jointly select an independent certified public
accounting firm in the United States of national recognition with significant
experience relating to insurance company audits that is not the independent
auditor for Parent, the Seller or the Acquiror and is otherwise independent and
impartial. The Independent Accountant shall be requested to deliver as promptly
as practicable and in any event within sixty (60) days after its appointment, a
written award setting forth the Independent Accountant’s determination of the

 

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appropriate amount of each of the line items in the Initial Working Capital
Statement or the Initial Reinsurance Settlement Statement, as applicable, as to
which Parent, the Seller and the Acquiror disagree as set out in the Notice of
Disagreement. With respect to each disputed line item, such determination, if
not in accordance with the position of either Parent, the Seller or the
Acquiror, shall not be more favorable to Parent and the Seller than the amounts
advocated by Parent and the Seller in the Notice of Disagreement or more
favorable to the Acquiror than the amounts advocated by the Acquiror in the
Initial Working Capital Statement or the Initial Reinsurance Settlement
Statement, as applicable, with respect to such disputed line item. For the
avoidance of doubt, the Independent Accountant’s review of the Initial Working
Capital Statement or the Initial Reinsurance Settlement Statement shall be
limited to a determination of whether any such document was prepared in
accordance with the Agreed Balance Sheet Principles or the Agreed Reinsurance
Settlement Statement Principles, respectively, and the Independent Accountant
shall not review any line items or make any determination with respect to any
matters not subject to a dispute in the Notice of Disagreement. The consolidated
working capital statement of the Company and the Transferred Subsidiaries
(prepared in accordance with the Agreed Balance Sheet Principles) and the
determination of the Closing Date Working Capital and the statement of Net
Settlement Amounts that are final and binding on the parties, as determined
either through (i) failure to timely deliver a Notice of Disagreement pursuant
to Section 2.06(d), (ii) agreement of the parties pursuant to Section 2.06(a) or
2.06(e) or (iii) through the action of the Independent Accountant pursuant to
this Section 2.06(f), are referred to as the “Final Working Capital Statement”
(if applicable), the “Final Reinsurance Settlement Statement” and the “Final
Working Capital”, respectively.

(g) Each of Parent, the Seller and the Acquiror shall bear the fees and costs
incurred by it in connection with the matters set forth in this Section 2.06,
except that the fees and disbursements of the Independent Accountant shall be
borne by the party providing the Notice of Disagreement in the same proportion
as the aggregate amount of the matters specified in the Notice of Disagreement
that is unsuccessfully disputed by such party (as determined by the Independent
Accountant) bears to the total amount of matters specified in the Notice of
Disagreement submitted to the Independent Accountant and the other party shall
bear the remainder of the fees and disbursements. During the review by the
Independent Accountant, the Acquiror, Parent and the Seller shall each make
available to the Independent Accountant interviews with such individuals
(provided, that a Representative of the other party be allowed to be present at
such interview), and such information, Books and Records and work papers, as may
be reasonably required by the Independent Accountant to fulfill its obligations
under Section 2.06(f); provided, however, that the independent accountants of
Parent or the Acquiror shall not be obligated to make any work papers available
to the Independent Accountant unless and until such firm has signed a customary
agreement relating to such access to work papers in form and substance
reasonably acceptable to such accountants.

(h) The “Post-Closing Adjustment” shall be the amount equal to the Final Working
Capital minus the Estimated Closing Working Capital. If the Post-Closing
Adjustment is a positive number the Acquiror shall pay to the Seller an amount
equal to the Post-Closing Adjustment. If the Post-Closing Adjustment is a
negative number, the Seller shall pay to the Acquiror an amount equal to the
absolute value of the Post-Closing Adjustment. For the avoidance of doubt, the
Final Working Capital and the Estimated Closing Working Capital may be negative.
Any such payment shall be paid by wire transfer of immediately available funds
to

 

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an account designated by the recipient within two (2) Business Days after the
Final Working Capital is determined, together with interest thereon accrued from
the Closing Date at the Interest Rate calculated and payable in accordance with
Section 2.08.

(i) The “Post-Closing Reinsurance Settlement Adjustment” shall be the amount
equal to the Final Net Settlement minus the Estimated Net Settlement Amount. If
the Post-Closing Reinsurance Settlement Adjustment is a positive number the
Seller shall cause the LPI Insurance Companies to pay the Acquiror Reinsurer an
amount equal to the Post-Closing Reinsurance Settlement Adjustment. If the
Post-Closing Adjustment is a negative number, the Acquiror shall cause the
Acquiror Reinsurer to pay the LPI Insurance Companies an amount equal to the
absolute value of the Post-Closing Adjustment. Any such payments shall be paid
by wire transfer of immediately available funds to an account designated by each
recipient within two (2) Business Days after the Final Reinsurance Settlement
Statement is determined, together with interest thereon accrued from the Closing
Date at the Interest Rate calculated and payable in accordance with
Section 2.08.

(j) Each of Parent, the Seller and the Acquiror agree that, for U.S. federal
income tax purposes, the purchase price for the Shares shall be equal to (i) the
Purchase Price, plus or minus (ii) any adjustment to the Purchase Price
described in Section 2.05(a)(i) or Section 2.06(h).

Section 2.07. Transactions; Closing Deliveries.

(a) To document the transactions contemplated by this Agreement, at the Closing:

(i) the Acquiror shall pay to the Seller the Estimated Purchase Price by wire
transfer of immediately available funds to an account designated by the Seller
at least two (2) Business Days prior to the Closing; and

(ii) the Seller shall deliver to the Acquiror (A) one or more stock certificates
evidencing the Shares owned by it, duly endorsed in blank or accompanied by
stock powers duly executed in blank, and (B) written resignations of each of the
directors of the Company and each of the Transferred Subsidiaries other than
those directors with respect to which the Acquiror shall have notified the
Seller in writing at least two (2) Business Days prior to the Closing to not so
resign.

(b) To further document the transactions contemplated by this Agreement, at or
prior to the Closing, Parent and the Seller (or one or more of their Affiliates,
as applicable) shall enter into and deliver to the Acquiror (or its Affiliates,
if applicable), and the Acquiror (or its Affiliates, if applicable) shall enter
into and deliver to Parent and the Seller (or one or more of their Affiliates,
as applicable):

(i) the Administrative Services Agreement;

(ii) the Reinsurance Agreements;

(iii) the Transition Services Agreements;

 

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(iv) the Trust Agreements;

(v) the Security and Control Agreements;

(vi) IRS Form 8023 (and any corresponding state or local forms) as required to
effect the Section 338(h)(10) Elections, completed and properly executed by
Parent and Acquiror; and

(vii) such other agreements, documents, instruments or certificates reasonably
requested by the other party.

(c) Parent and the Seller shall deliver to the Acquiror:

(i) a copy of an assignment and assumption agreement that is reasonably
satisfactory to the Acquiror and its counsel pursuant to which, at or prior to
the Closing, all right, title and interest in, to or under the Transferred
Assets were Transferred to the Company or a Transferred Subsidiary, and that the
Acquiror (or the Company or a Transferred Subsidiary) assumed and agreed to pay,
perform, discharge and be responsible for, otherwise indemnify, defend and hold
harmless Parent, the Seller and their Affiliates (other than the Company and the
Transferred Subsidiaries) for the Transferred Liabilities; and

(ii) a copy of an assignment and assumption agreement that is reasonably
satisfactory to the Acquiror and its counsel pursuant to which, at or prior to
the Closing, all right, title and interest in, to or under the Excluded Assets
were Transferred to Parent or one or more of its Affiliates (other than the
Company and the Transferred Subsidiaries), and that each of Parent and the
Seller assumed and agreed to pay, perform, discharge and be responsible for,
otherwise indemnify, defend and hold harmless the Acquiror, the Company and the
Transferred Subsidiaries for the Excluded Liabilities of the Company and the
Transferred Subsidiaries directly or indirectly owned by the Seller.

(d) Each of Parent and the Seller, on the one hand, and the Acquiror, on the
other hand, shall deliver to the other a certificate of the Secretary or an
Assistant Secretary of each such Person, dated as of the Closing Date, as to the
resolutions duly and validly adopted by the board of directors, or other
governing body, of such party evidencing its authorization of the execution,
delivery and performance of the Transaction Agreements to which such Person is a
party and such other documents as may be reasonably necessary to consummate the
other transactions contemplated by the Transaction Agreements.

(e) Parent and the Seller shall deliver to the Acquiror each of the subleases
contemplated by Section 5.13(a).

(f) The Seller shall deliver, and shall cause each of the LPI Insurance
Companies to deliver, to the Acquiror a certificate of non-foreign status that
complies with the requirements of Section 1445 of the Code, and the Treasury
Regulations promulgated thereunder.

Section 2.08. Payments and Computations. Each party hereto shall make each
payment due to the other parties hereto pursuant to this Article II as early as
practicable on the day when due. All payments shall be paid by wire transfer of
immediately available funds to the account or accounts designated by the party
receiving such payment no later than two (2) Business Days preceding the date of
payment. All computations of interest shall be at the Interest Rate on the basis
of a year of 365 days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest is payable. Whenever any payment under this Agreement shall be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
payment of interest.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PARENT AND THE SELLER

The Seller and Parent, jointly and severally hereby represent and warrant to the
Acquiror, as of the date hereof and the Closing Date, as follows:

Section 3.01. Incorporation and Authority of Parent and the Seller.

(a) Each of Parent, the Seller and each Seller Party is a corporation or other
organization duly incorporated or organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation or
organization.

(b) Each of Parent, the Seller and each Seller Party has all requisite corporate
power to enter into, consummate the transactions contemplated by and carry out
its obligations under, the Transaction Agreements to which it is or will be a
party. The execution and delivery by Parent, the Seller and each Seller Party of
the Transaction Agreements to which it is or will be a party, and the
consummation by Parent, the Seller and each Seller Party of the transactions
contemplated by, and the performance by Parent, the Seller and each Seller Party
of its obligations under, such Transaction Agreements have been duly authorized
by all requisite corporate action on the part of Parent, the Seller and each
Seller Party. This Agreement has been duly and validly authorized, executed and
delivered by each of Parent and the Seller, and (assuming due authorization,
execution and delivery of this Agreement by the Acquiror) is the legal, valid
and binding obligation of Parent and the Seller, enforceable against each of
them in accordance with its terms, and each of the Transaction Agreements to
which Parent, the Seller or any Seller Party is or will be a party has been duly
and validly authorized by Parent, the Seller or such Seller Party and, upon
execution and delivery by Parent, the Seller or such Seller Party, will be
(assuming the valid authorization, execution and delivery by the other party or
parties thereto) a legal, valid and binding obligation of Parent, the Seller or
such Seller Party enforceable in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium,
rehabilitation, liquidation, fraudulent conveyance or similar Laws relating to
or affecting creditors’ rights generally and subject, as to enforceability, to
the effect of general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

 

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Section 3.02. Incorporation, Qualification and Authority of the Company and the
Transferred Subsidiaries.

(a) Each of the Company and the Transferred Subsidiaries is a corporation or
other organization (i) duly incorporated or organized, validly existing and
(ii) in good standing under the Laws of its jurisdiction of incorporation or
organization and has the requisite power and authority to operate its business
as now conducted, except where the failures to be in good standing, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect with respect to the Business.

(b) Each of the Company and the Transferred Subsidiaries is duly qualified as a
foreign corporation or other organization to do business and, to the extent
legally applicable, is in good standing in each jurisdiction where the character
of its owned, operated or leased properties or the nature of its activities
makes such qualification necessary, except for failures to be so qualified or be
in good standing that, individually or in the aggregate, do not have, and would
not reasonably be expected to have, a Material Adverse Effect with respect to
the Business. Each of the Company and the Transferred Subsidiaries has all
requisite corporate or similar power to enter into, consummate the transactions
contemplated by and carry out its obligations under, the Transaction Agreements
to which it is or will be a party. The execution and delivery by the Company and
each of the Transferred Subsidiaries of the Transaction Agreements to which it
is or will be a party, and the consummation by the Company and each of the
Transferred Subsidiaries of the transactions contemplated by, and the
performance by the Company and each of the Transferred Subsidiaries of its
obligations under, such Transaction Agreements have been duly authorized by all
requisite corporate action on the part of such entity. Upon execution and
delivery of the Transaction Agreements to which the Company and each of the
Transferred Subsidiaries is or will be a party, such Transaction Agreements will
be duly executed and delivered by such entity, and (assuming due authorization,
execution and delivery by each other party to such Transaction Agreements) such
Transaction Agreements will constitute, the legal, valid and binding obligation
of such entity, enforceable against it in accordance with its terms, subject to
the effect of any applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance or similar Laws relating to or affecting creditors’ rights
generally and subject, as to enforceability, to the effect of general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).

Section 3.03. Capital Structure of the Company and the Transferred Subsidiaries;
Ownership and Transfer of the Shares. Section 3.03(a) of the Disclosure Schedule
sets forth (a) all the authorized Capital Stock of the Company and each of the
Transferred Subsidiaries and (b) the number of shares of each class or series of
Capital Stock of the Company and each of the Transferred Subsidiaries that are
issued and outstanding, together with the registered holder thereof. All the
outstanding shares of Capital Stock of the Company and each of the Transferred
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable and were not issued in violation of any preemptive or subscription
rights. There are no options, calls, warrants or convertible or exchangeable
securities, or conversion, preemptive, subscription or other rights, or
agreements, arrangements or commitments, in any such case, obligating or which
may obligate the Company or any of the Transferred Subsidiaries to issue, sell,
purchase, return or redeem any of their respective Capital Stock or securities
convertible into or exchangeable for any of their respective Capital Stock, and
there are no shares of Capital Stock of the Company or

 

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any of the Transferred Subsidiaries reserved for issuance for any purpose. There
are no capital appreciation rights, phantom stock plans, securities with
participation rights or features, or similar obligations and commitments of the
Company or any of the Transferred Subsidiaries. Except as set forth in
Section 3.03(b) of the Disclosure Schedule, the Seller directly or indirectly
owns all the outstanding Capital Stock of the Company and each of the
Transferred Subsidiaries, free and clear of all Liens, other than any Liens
arising as a result of the Transaction Agreements and restrictions on transfer
imposed by applicable Laws. Except for this Agreement or as set forth in
Section 3.03(c) of the Disclosure Schedule, there are no voting trusts,
stockholder agreements, proxies or other rights or agreements in effect with
respect to the voting, transfer or dividend rights of the Shares or of the
Capital Stock of any Transferred Subsidiary. Except as set forth in
Section 3.03(d) of the Disclosure Schedule, the Company does not have
Subsidiaries other than the Transferred Subsidiaries.

Section 3.04. No Conflict. Provided that all consents, approvals, authorizations
and other actions described in Section 3.05 have been obtained or taken, except
as set forth in Section 3.04 of the Disclosure Schedule or as otherwise provided
in this Article III and except as may result from any facts or circumstances
solely relating to the Acquiror or its Affiliates (as opposed to any other third
party), the execution, delivery and performance by the Seller and each Seller
Party of, and the consummation by the Seller and each Seller Party of the
transactions contemplated by, the Transaction Agreements to which it is or will
be a party do not and will not (a) violate or conflict with the organizational
documents of Parent, the Seller or any Seller Party, the Company or any of the
Transferred Subsidiaries, (b) conflict with or violate any Law or other
Governmental Order applicable to Parent, the Seller or any Seller Party, the
Company or any Transferred Subsidiary or by which any of them or any of their
respective properties or assets or the Transferred Assets is bound or affected,
or (c) result in any breach of, or constitute a default (or event which, with
the giving of notice or lapse of time, or both, would constitute a default)
under, or give to any Person any rights of termination, acceleration or
cancellation of, or result in the creation of any Lien (other than Permitted
Liens) on any of the assets or properties of the Company or any of the
Transferred Subsidiaries (other than the Excluded Assets) or the Transferred
Assets pursuant to, any note, bond, loan or credit agreement, mortgage or
indenture to which any of the LPI Companies is a party or by which any of them
or any of their respective properties or assets is bound or subject, except, in
the case of clause (c), any such conflicts, violations, breaches, defaults,
terminations, accelerations, cancellations or creations of Liens that,
individually or in the aggregate, would not reasonably be expected to have, a
Material Adverse Effect with respect to the Business, Parent or the Seller.

Section 3.05. Consents and Approvals. Except as set forth in Section 3.05 of the
Disclosure Schedule, or as may result from any facts or circumstances solely
relating to the Acquiror or its Affiliates (as opposed to any other third
party), the execution and delivery by Parent, the Seller and each Seller Party
of the Transaction Agreements to which any of them is or will be a party does
not, and the performance by the Seller and each Seller Party of, and the
consummation by the Seller and each Seller Party of the transactions
contemplated by, such Transaction Agreements will not, require any consent,
approval, license, permit, order, qualification, authorization of, or
registration or other action by, or any filing with or notification to, any
Governmental Authority (each, a “Governmental Approval”), to be obtained or made
by Parent, the Seller, any Seller Party, the Company or any Transferred
Subsidiary, except for any Governmental Approvals the failure to obtain or make
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect with respect to the Business, Parent or the
Seller.

 

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Section 3.06. Financial Information; Absence of Undisclosed Liabilities.

(a) Section 3.06(a) of the Disclosure Schedule sets forth the unaudited
consolidated balance sheets of the Company and the Transferred Subsidiaries as
of December 31, 2014 and June 30, 2015 (the “Pro Forma Balance Sheets”). Except
as set forth in Section 3.06(a) of the Disclosure Schedule, the Pro Forma
Balance Sheets have been prepared in accordance with the Agreed Balance Sheet
Principles and reasonably present, in all material respects, the assets,
liabilities and financial position of the Business as of such dates.

(b) Assuming the completion of the transactions contemplated by Section 2.02,
none of the Company or the Transferred Subsidiaries have any material
liabilities or obligations of a type that would be required under GAAP to be
reflected on a financial statement, other than liabilities or obligations (i) as
set forth in Section 3.06(b) of the Disclosure Schedule, (ii) as set forth in
the most recent Pro Forma Balance Sheet, (iii) incurred in the ordinary course
of business consistent with past practice since June 30, 2015, (iv) resulting
from the consummation of the transactions contemplated by the Transaction
Agreements or (v) comprising Excluded Liabilities.

Section 3.07. Absence of Certain Changes. Except as set forth in Section 3.07 of
the Disclosure Schedule or as contemplated by this Agreement, from January 1,
2015: (a) the LPI Companies have conducted the Business in the ordinary course
consistent with past practice and (b) there has not occurred any event or events
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect with respect to the Business.

Section 3.08. Absence of Litigation. Except as set forth in Section 3.08 of the
Disclosure Schedule, as of the date hereof, there are no Actions (other than
claims under or in connection with policies and certificates of insurance within
applicable policy limits or otherwise in the ordinary course of business)
pending or, to the Knowledge of Parent and the Seller, threatened in writing
against (a) any of the LPI Companies (other than the Company and the Transferred
Subsidiaries) relating to the Business or the Transferred Assets, or (b) the
Company or any of the Transferred Subsidiaries, in each case that, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect with respect to the Business, Parent or the Seller.

Section 3.09. Compliance with Laws. Except as set forth in Section 3.09 of the
Disclosure Schedule, since January 1, 2013 the Business has been and is being
conducted in compliance with applicable Law and applicable privacy and data
security policies and (a) none of the Company or the Transferred Subsidiaries is
in violation of any Laws or Governmental Orders applicable to it or its assets,
properties or businesses (other than the Excluded Assets) and (b) none of the
LPI Companies is in violation of any Laws or Governmental Orders applicable to
the Business or the Transferred Assets, except for violations that, individually
or in the aggregate, would not reasonably be expected to have, a Material
Adverse Effect with respect to the Business. None of the Company or the
Transferred Subsidiaries is a party to, or bound by, any material Governmental
Order.

 

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Section 3.10. Governmental Licenses and Permits.

(a) The Company, the Transferred Subsidiaries and, to the extent related to the
Business, the other LPI Companies possess all material governmental
qualifications, registrations, filings, licenses, permits, approvals or
authorizations held by the (collectively, the “Material Permits”) that are
necessary to conduct the Business and to own or use their respective assets and
properties, as such Business, assets and properties are conducted, owned and
used on the date hereof.

(b) Except as set forth in Section 3.10(b) of the Disclosure Schedule, (i) all
Material Permits are valid and in full force and effect and (ii) none of the
Company, the Transferred Subsidiaries or, to the extent related to the Business,
the other LPI Companies is the subject of any pending or, to the Knowledge of
Parent and the Seller, threatened Action seeking the revocation, suspension,
termination, modification or impairment of any Material Permit.

Section 3.11. Intellectual Property.

(a) Section 3.11(a) of the Disclosure Schedule sets forth a true and correct
list of all registered Owned Business Intellectual Property (the “Registered
Intellectual Property”) and each owner thereof.

(b) Section 3.11(b) of the Disclosure Schedule sets forth a true and correct
list of all Software (other than any off-the-shelf, commercially available
Software) that is material to and is used in the Business, as conducted on the
date hereof, and, in each case, whether such Software is (i) Owned Business
Intellectual Property, (ii) used exclusively in the Business, or (iii) used in
the Business and another business of Parent, the Seller or any of their
Controlled Affiliates.

(c) Except as set forth in Section 3.11(c) of the Disclosure Schedule, and
subject to Section 5.11, the Company and the Transferred Subsidiaries shall own
all the Owned Business Intellectual Property free and clear of any Liens, other
than Permitted Liens as of the Closing.

(d) Section 3.11(d) of the Disclosure Schedule sets forth a true and correct
list of material written agreements entered into by Parent, the Seller or any of
their Affiliates granting to a third party any right to the Owned Business
Intellectual Property.

(e) Except as set forth in Section 3.11(e) of the Disclosure Schedule, to the
Knowledge of Parent and the Seller, (i) the Business as currently conducted does
not infringe, misappropriate or otherwise violate the Intellectual Property of
any Person; (ii) none of Parent, the Seller or any of their Controlled
Affiliates has received within the three (3) year period prior to the date
hereof any written claim or notice from any Person alleging that the Company or
any of the Transferred Subsidiaries has infringed or misappropriated any
Intellectual Property right of such Person, which has not been resolved; and
(iii) none of the employees, agents, consultants, contractors or others who have
contributed to or participated in the reduction to practice or development of
any Business Intellectual Property on behalf of any of the LPI Companies has any
right, title or interest in or to any Owned Business Intellectual Property.

 

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(f) Except as set forth in Section 3.11(f) of the Disclosure Schedule, with
respect to the Registered Intellectual Property: (i) Parent and the Seller have
transferred, or will, as of the Closing or within a reasonable period of time
thereafter, transfer, to the Company or the appropriate Transferred Subsidiary,
books and records directly relating to any such Registered Intellectual
Property, including registration certificates and file wrappers; (ii) to the
Knowledge of Parent and the Seller, each of such registrations is valid,
enforceable and in full force and effect; and (iii) there is no pending,
existing or, to the Knowledge of Parent and the Seller, threatened opposition,
interference, cancellation proceeding or other legal or governmental proceeding
before any Governmental Authority against or relating thereto, and there is no
valid basis for any such proceeding.

(g) This Section 3.11 contains the sole and exclusive representations and
warranties pertaining to matters relating to Intellectual Property and Software.

Section 3.12. Environmental Matters. Except as set forth in Section 3.12 of the
Disclosure Schedule: (a) to the Knowledge of Parent and the Seller, none of
Parent, the Seller, the Company or the Transferred Subsidiaries has received,
since December 31, 2013, a written notice, request for information, claim or
demand from any Governmental Authority or third party alleging liability in
connection with any release, discharge or disposal of a Hazardous Material into
the environment or the violation of any Environmental Law; (b) to the Knowledge
of Parent and the Seller, there has been no release, discharge or disposal of
Hazardous Materials on, at or under any real property owned or leased by the
Company or any of the Transferred Subsidiaries during the period that it was
owned or leased by the Company or any Transferred Subsidiary or arising out of
the conduct by the Company and the Transferred Subsidiaries of their respective
businesses, that would reasonably be expected to result in the imposition of any
material liability to the Company or any of the Transferred Subsidiaries under
Environmental Laws; (c) to the Knowledge of Parent and the Seller, none of the
Leased Real Properties is subject to any Lien in favor of any Governmental
Authority for (A) material liability under any Environmental Laws or
(B) material costs incurred by a Governmental Authority in response to a release
or threatened release of a Hazardous Material into the environment; (d) to the
Knowledge of Parent and the Seller, with respect to the Leased Real Properties,
or the operation by the Company and the Transferred Subsidiaries of their
respective businesses thereon, there are no material judicial or administrative
proceedings pending or threatened arising under or relating to an Environmental
Law or making any claim based on an Environmental Law for personal injury,
wrongful death or property damage; and (e) the Company and the Transferred
Subsidiaries have operated and are operating their respective businesses in
compliance in all material respects with any applicable Environmental Laws. This
Section 3.12 contains the sole and exclusive representations and warranties
pertaining to environmental matters, Environmental Laws and Hazardous Materials.

Section 3.13. Material Contracts. Section 3.13(a) of the Disclosure Schedule
sets forth a true and correct list of each of the Material Contracts as in
effect on the date hereof. Except as set forth in Section 3.13(b) of the
Disclosure Schedule, each Material Contract is a valid and binding obligation of
an LPI Company, and, to the Knowledge of Parent and the Seller, each other party
to such Material Contract, except for such failures to be valid and binding as
would not reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect. Each Material Contract is enforceable against such LPI
Company, and, to the Knowledge of Parent and the Seller, each such other party,
in accordance with its terms (except in each case

 

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as may be limited by applicable bankruptcy, insolvency, moratorium,
rehabilitation, liquidation, fraudulent conveyance or similar Laws now or
hereafter in effect relating to or affecting creditors’ rights generally,
including the effect of statutory and other Laws regarding fraudulent
conveyances and preferential transfers, and subject to the limitations imposed
by general equitable principles (whether or not such enforceability is
considered in a proceeding at Law or in equity)). None of the LPI Companies or,
to the Knowledge of Parent and the Seller, any other party to a Material
Contract, is in material default or material breach of a Material Contract, and,
to the Knowledge of Parent and the Seller, there does not exist any event,
condition or omission that would constitute such a material breach or material
default (whether by lapse of time or notice or both, and including by reason of
the transactions contemplated by this Agreement and the other Transaction
Agreements).

Section 3.14. Affiliate Transactions. Section 3.14 of the Disclosure Schedule
sets forth a true and correct list, as of the date hereof, of all material
contracts, agreements, leases, licenses and other instruments between the
Company or a Transferred Subsidiary, on the one hand, and Parent or any
Controlled Affiliate of Parent (other than the Company or any Transferred
Subsidiary), on the other hand (collectively, “Intercompany Agreements”).

Section 3.15. Employee Benefits; Employees.

(a) Section 3.15(a)(i) of the Disclosure Schedule sets forth, as of the date
hereof, a list of all material Benefit Plans. With respect to each such material
Benefit Plan in which any Employee participates, Parent has delivered or made
available to the Acquiror a summary of each such Benefit Plan. Neither the
Company nor any Transferred Subsidiaries maintain or sponsor any Benefit Plans.
Except as set forth on Section 3.15(a)(ii) of the Disclosure Schedule or as
otherwise expressly provided in Article VI, neither the Company nor any
Transferred Subsidiaries will have any liability for any Benefit Plans following
the Closing Date that has or would be reasonably expected to have, a Material
Adverse Effect with respect to the Business.

(b) Each Benefit Plan has been operated and administered in compliance with its
terms and with applicable Law including ERISA and the Code, other than any
non-compliance that individually and in the aggregate would not be material.
Except as set forth in Section 3.15(b) of the Disclosure Schedule, no Benefit
Plan is subject to Section 412 of the Code, Section 302 of ERISA or Title IV of
ERISA. None of Parent, the Seller or the Company or any Transferred Subsidiary
has engaged in a transaction with respect to any Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would
reasonably be expected to subject the Company or any Transferred Subsidiary or
any Benefit Plan to a Tax or penalty imposed by either Section 4975 of the Code
or Section 502(i) of ERISA in an amount which could be material. All
contributions required to be made under any Benefit Plan with respect to any
Employee have been made on or before the due date thereof except as would not
reasonably be expected to result in material liability to the Company or any
Transferred Subsidiary. All Benefit Plans intended to be “qualified” under
Section 401(a) of the Code have received a determination letter on which
reliance is currently permitted, and there are no circumstances under which such
qualified status would reasonably be expected to be revoked.

 

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(c) None of the Company or the Transferred Subsidiaries has any obligations for
retiree welfare benefits other than (i) coverage mandated by applicable Law or
(ii) coverage that continues during an applicable severance period.

(d) Except as set forth in Section 3.08 or 3.15(d) of the Disclosure Schedule,
with respect to the Employees:

(i) there is not now in existence, nor has there been within the last twelve
(12) months prior to the Closing, any pending or, to the Knowledge of Parent and
the Seller, threatened: (A) strike, slowdown, stoppage, picketing, interruption
of work, lockout, or any other dispute or controversy with or involving a labor
organization or with respect to unionization or collective bargaining;
(B) labor-related organizational effort, election activities, or request or
demand for negotiations, recognition or representation; or (C) grievance,
arbitration, administrative hearing, claim of unfair labor practice, other
union- or labor-related Action or other claim, workers’ compensation claim,
claim or investigation of wrongful discharge, claim or investigation of
employment discrimination or retaliation, claim or investigation of sexual
harassment, or other employment dispute of any nature, against the Company or
any of the Transferred Subsidiaries that, individually or in the aggregate, has
had, or would be reasonably expected to have, a Material Adverse Effect with
respect to the Business;

(ii) (A) none of the Company and the Transferred Subsidiaries, is, or within the
last twelve (12) months prior to the Closing has been, a party to or bound by
any collective bargaining agreement, other agreement or understanding, work
rules or practice, or arbitration award with any labor union or any other
similar organization; and (B) none of the Employees are subject to or covered by
any such collective bargaining agreement, other agreement or understanding, work
rules or practice, or arbitration award, or are represented by any labor
organization;

(iii) for the twelve (12) months preceding the date hereof, the Company and each
of the Transferred Subsidiaries: (i) is and has been in compliance in all
material respects with all applicable federal, state, local, foreign and other
Laws which relate to employment, equal employment opportunity (including Laws
prohibiting employment discrimination, harassment or retaliation), wages, hours,
leaves, workers’ compensation, disability, occupational health and safety,
immigration, collective bargaining, secondment, contractors and temporary
employees, other employment terms and conditions, and plant closings and layoffs
(including the Worker Adjustment and Retraining Notification Act and comparable
state, local or other Laws) (collectively, “WARN”), except for such
non-compliance as has not resulted in, and would not reasonably be expected to
result in, material liability to the Company and the Transferred Subsidiaries;
and (ii) is not and has not been (individually or collectively in any respect)
liable in any material respect for any arrears of wages, other compensation or
benefits, or any taxes or penalties for failure to comply with any of the
foregoing, except for such liability as has not had and would not reasonably be
expected to have a Material Adverse Effect with respect to the Business;

 

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(iv) Parent has caused the Company and the Transferred Subsidiaries to provide
or make available to the Acquiror true and correct summaries of all layoffs and
other losses of employment experienced at any site of employment of the Company
or any of the Transferred Subsidiaries or one or more facilities or operating
units within any site of employment or facility of the Company or any of the
Transferred Subsidiaries during the ninety (90)-day period preceding the date
hereof;

(v) none of the Company or the Transferred Subsidiaries is a party to or
obligated under any agreement with any Employee with respect to length, duration
or material conditions of employment (or the termination of employment),
salaries, bonuses, percentage compensation, deferred compensation, health
insurance, any other material form of remuneration or benefits that is not
terminable at will by the Company or such Transferred Subsidiary, as applicable,
or any successor employer, without cost, liability, penalty or other monetary or
non-monetary obligation of any kind, including any termination or severance
payments;

(vi) there is not pending or, to the Knowledge of Parent and the Seller,
threatened any Action or other claim or investigation against the Company or any
of the Transferred Subsidiaries for actual or possible violation of any
agreement described in clause (v) above, or for violation of any material right
or obligation under any of the Benefit Plans, nor to the Knowledge of Parent and
the Seller, is there any reasonable basis for any such Action or other claim
(other than routine claims for benefits) or investigation;

(vii) no Employee or other agent is subject to any secrecy or non-competition
agreement or any other agreement or restriction of any kind to which Parent, the
Company or the Transferred Subsidiaries are a party or have Knowledge that would
impede in any way the ability of such Employee or other agent to carry out fully
all of his or her activities and duties;

(viii) the consummation of the transactions contemplated by this Agreement will
not (either alone or together with any other event) (A) entitle any Employee to
severance, change of control or other similar pay or benefits under, or
accelerate the time of payment or vesting or trigger any payment of funding
(through a grantor trust or otherwise) of compensation or benefits under, or
increase the amount payable or trigger any other material obligation pursuant
to, any Benefit Plan, or (B) result in any payment (whether in cash or property)
or the vesting of any property under any Benefit Plan to any “disqualified
individual” (as such term is defined in Treasury Regulation section 1.280G-1)
that would reasonably be construed, individually or in combination with any
other such payment, to constitute an “excess parachute payment” (as defined in
section 280G(b)(1) of the Code);

(ix) no Employee is entitled to receive any additional payment (including any
tax gross-up or other payment) from the Company or any of the Transferred
Subsidiaries as a result of the imposition of the Taxes under section 409A or
4999 of the Code; and

(x) to the Knowledge of Parent and the Seller, all Persons classified or treated
by the Company or any of the Transferred Subsidiaries as independent contractors
or otherwise as non-employees satisfy all applicable laws, rules, regulations
and other requirements of Law to be so classified or treated, and the Company
and each of the Transferred Subsidiaries has fully and accurately reported in
all material respects their compensation of any kind on IRS Forms 1099 or as
otherwise required by Law.

(e) This Section 3.15 contains the sole and exclusive representations and
warranties pertaining to matters relating to the Employees or Benefit Plans.

 

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Section 3.16. Insurance Issued by the LPI Insurance Companies. Except as set
forth in Section 3.16 of the Disclosure Schedule:

(a) since December 31, 2013, all LPI Insurance Policy benefits due and payable
by or on behalf of any of the LPI Insurance Companies have in all material
respects been paid in accordance with the terms of the LPI Insurance Policies
under which they arose, except for such benefits for which an LPI Insurance
Company believes there is a reasonable basis to contest payment;

(b) all policy forms for LPI Insurance Policies currently in use by any of the
LPI Insurance Companies, and all amendments, applications, and certificates
pertaining thereto, where required by applicable Law, have been approved by all
applicable Governmental Authorities or filed with and not objected to by such
Governmental Authorities within the period provided by applicable Law for
objection, in all material respects;

(c) any rates currently in use by the LPI Insurance Companies, solely with
respect to the Business, that are required to be filed with or approved by any
Governmental Authority have been so filed or approved and the rates currently in
use by the LPI Insurance Companies, solely with respect to the Business, conform
thereto, in all material respects; and

(d) as of the date hereof, there are no material unpaid claims or assessments
made against any LPI Insurance Company by any state insurance guaranty
associations or similar organizations in connection with such association’s
insurance guarantee fund relating to the Business.

Section 3.17. Reinsurance. Section 3.17 of the Disclosure Schedule sets forth a
true and correct list as of the date hereof of all reinsurance and
retrocessional treaties and agreements, solely with respect to the Business
(i) with an effective date from January 1, 2015 to the date hereof or (ii) with
respect to which there are any ceded statutory reserves, to which any of the LPI
Insurance Companies is party and to which any such Person has any existing
rights or obligations. Each of such treaties and agreements is in full force and
effect. Solely with respect to the Business, none of the LPI Insurance Companies
or, to the Knowledge of Parent and the Seller, any of the other parties thereto,
is in default under any such reinsurance treaty or agreement where such default
gives rise to any right of termination, acceleration or cancellation to the
other party or parties thereto. Since January 1, 2013 to the date hereof, solely
with respect to the Business, none of the LPI Insurance Companies has received
any written notice from any applicable reinsurer that any amount of reinsurance
ceded by any of the LPI Insurance

 

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Companies, solely with respect to the Business, will be uncollectible or
otherwise defaulted upon. As of the date hereof, except as set forth in
Section 3.17 of the Disclosure Schedule, there are no pending or, to the
Knowledge of Parent and the Seller, threatened, Actions with respect to any
reinsurance or retrocessional treaties or agreements set forth in Section 3.17
of the Disclosure Schedule.

Section 3.18. Regulatory Filings. Parent and the Seller have made available for
inspection by the Acquiror (a) any material reports of examination (including
financial, market conduct and similar examinations, and including any draft
reports) of any LPI Insurance Company (to the extent such report of examination
of any LPI Insurance Company relates to the Business) issued by any insurance
regulatory authority, in any case, since January 1, 2013 and (b) all material
Insurance Holding Company System Act filings or submissions made by any LPI
Insurance Company (to the extent such filing or submission of any LPI Insurance
Company relates to the Business) with any insurance regulatory authority since
January 1, 2013. Except as set forth in Section 3.18(a) of the Disclosure
Schedule, all material deficiencies or violations noted in the examination
reports described in clause (a) above have been resolved to the reasonable
satisfaction of the insurance department that noted such deficiencies or
violations.

Section 3.19. Insurance. Section 3.19 of the Disclosure Schedule sets forth a
true and correct list of all current property and liability insurance policies
(other than life insurance policies, self-insurance programs or excess policies
on self-insurance programs) covering the Company, any of the Transferred
Subsidiaries or the Transferred Assets. All such policies are in full force and
effect (and all premiums due and payable thereon have been paid in full on a
timely basis), and no written notice of cancellation, termination or revocation
or other written notice that any such insurance policy is no longer in full
force or effect or that the issuer of any such insurance policy is not willing
or able to perform its obligations thereunder has been received by the Company,
any of the Transferred Subsidiaries, Parent or the Seller and, to the Knowledge
of Parent and the Seller, none of the Company or the Transferred Subsidiaries is
in default of any provision thereof, except for such defaults that, individually
or in the aggregate, would not be reasonably expected to have a Material Adverse
Effect with respect to the Business, Parent or the Seller.

Section 3.20. Property.

(a) Section 3.20(a) of the Disclosure Schedule sets forth a true and correct
list, as of the date hereof, of all real property leased by the Company or any
Transferred Subsidiary or, solely to the extent used in connection with the
operation of the Business, any LPI Company (other than the Company or any
Transferred Subsidiary), as lessee, including Transferred Assets (each, a “Real
Property Lease”; with the real property specified in such lease being referred
to herein as a “Leased Real Property”). An LPI Company will have a legal,
binding, valid and enforceable leasehold interest or license (as applicable)
under each of the Real Property Leases, subject to Permitted Liens and to
applicable bankruptcy, insolvency, moratorium, rehabilitation, liquidation,
fraudulent conveyance or similar Laws affecting creditors’ rights and remedies
generally and subject, as to enforceability, to general equitable principles
(whether or not enforcement is sought in a proceeding at Law or in equity), and
none of Parent, the Seller or any of the LPI Companies, as of the date hereof,
has received any written notice of any default under any Real Property Lease,
and to the Knowledge of Parent and the Seller, no event has occurred

 

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and no condition exists that, with notice or lapse of time, or both, would
constitute a default by any such LPI Company under any of the Real Property
Leases, except, in each case, for such invalidity, unenforceability or defaults
that, individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect. Parent and the Seller have delivered or otherwise
made available to the Acquiror true and correct copies of the Real Property
Leases as in effect as of the date hereof, together with all material
amendments, modifications or supplements, if any, thereto.

(b) Except as set forth in Section 3.20(b)(i) of the Disclosure Schedule, each
of the LPI Companies, including the Company and the Transferred Subsidiaries, is
in possession of and has title to, or has valid leasehold interests in or valid
rights under contract to use, in each case free and clear of any Liens other
than Permitted Liens, all tangible personal property used in the conduct of the
Business (other than the Excluded Assets and, in the case of the LPI Companies
other than the Company and the Transferred Subsidiaries, other than any asset
that is not a Transferred Asset), including all material tangible personal
property reflected on the Pro Forma Balance Sheets and the Transferred Assets,
other than property disposed of since the date thereof in the ordinary course of
business and tangible personal property acquired since such date. Except as set
forth in Section 3.20(b)(ii) of the Disclosure Schedule, such tangible personal
property is free and clear of all Liens, other than Permitted Liens.

(c) Except as set forth in Section 3.20(c) of the Disclosure Schedule, and
assuming receipt of all approvals, consents and authorizations relating to the
matters set forth in Section 3.04 of the Disclosure Schedule or as contemplated
by Section 3.05, and subject to the consummation of the transactions
contemplated by Section 5.05(h), (i) the assets and properties of the Company
and the Transferred Subsidiaries (excluding the Excluded Assets), (ii) the
Transferred Assets and (iii) the rights, licenses and services to be made
available by Parent, the Seller and their Affiliates pursuant to the Transaction
Agreements will be sufficient for the Company and the Transferred Subsidiaries
to conduct the Business in all material respects in the ordinary course on and
immediately after the Closing Date as it is being conducted on the date hereof;
provided, however, that this Section 3.20(c) shall not be deemed to be breached
as a result of any action for which the Acquiror has provided its consent
(including pursuant to Section 5.01).

(d) This Section 3.20 contains the sole and exclusive representations and
warranties pertaining to matters relating to real property and tangible personal
property.

Section 3.21. Taxes. Except as set forth in Section 3.21 of the Disclosure
Schedule:

(a) (i) All material Tax Returns required to be filed by or on behalf of the
Company and each of the Transferred Subsidiaries (or, to the extent the Company
or a Transferred Subsidiary could reasonably be expected to be liable for Taxes
relating thereto, with respect to the Transferred Assets) have been timely filed
with the appropriate Tax Authority (after giving effect to any valid extensions
of time in which to make such filings) and such Tax Returns are true, correct
and complete in all material respects, (ii) all material Taxes payable with
respect to the Company and the Transferred Subsidiaries (or, to the extent the
Company or a Transferred Subsidiary could reasonably be expected to be liable
for Taxes relating thereto, the

 

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Transferred Assets), have been fully and timely paid; (iii) none of the Company
or the Transferred Subsidiaries is currently the beneficiary of any extension of
time within which to file any income or other material Tax Return and (iv) none
of the Company or the Transferred Subsidiaries has waived in writing or been
requested in writing to waive any statute of limitations in respect of income or
other material Taxes which waiver is currently in effect.

(b) Each of the Company and the Transferred Subsidiaries has, and with respect
to the Transferred Assets, Parent and its Affiliates have, (i) complied in all
material respects with all applicable Laws relating to the payment and
withholding of Taxes and (ii) duly and timely withheld from employee salaries,
wages and other compensation and has paid over to the appropriate Tax Authority
all material amounts required to be so withheld and paid over.

(c) All deficiencies asserted in writing or assessments made in writing as a
result of any examinations by any Tax Authority of Tax Returns related to the
Company and the Transferred Subsidiaries or the Transferred Assets have been
fully paid or otherwise resolved, and no other audits or investigations by any
Tax Authority relating to any such Tax Returns are in progress from a Tax
Authority.

(d) None of the Company or any Transferred Subsidiary is a party to any Tax
Allocation Agreements pursuant to which it will have any liability or obligation
to make any payments after the Closing Date.

(e) There are no Tax rulings, requests for rulings, or closing agreements
relating to the Company or any Transferred Subsidiary or the Transferred Assets,
which will materially affect the Company’s or any Transferred Subsidiary’s
liability for Taxes for any period after the Closing Date.

(f) None of the Company or any Transferred Subsidiary will be required to
include any item of income in, or exclude any item of deduction from, taxable
income for the portion of a Straddle Period beginning after the Closing Date or
any Post-Closing Taxable Period, as a result of (i) a change in accounting
method for any Straddle Period or any Pre-Closing Taxable Period pursuant to
Section 481 of the Code (or any corresponding provision of Law),
(ii) installment sale or open transaction disposition made prior to the Closing
or (iii) prepaid amount received on or prior to the Closing Date. None of the
Company or any Transferred Subsidiary has been a “distributing corporation” or a
“controlled corporation” within the meaning of Section 355 of the Code (x) in
the two years prior to the date of this Agreement or (y) in a distribution that
could otherwise constitute a “plan” or “series of related transactions” in
conjunction with the transaction contemplated by this Agreement.

(g) None of the Company or any Transferred Subsidiary has participated in a
listed transaction within the meaning of Treasury Regulation
Section 1.6011-4(c).

(h) There are no Liens for Taxes upon any assets of the Company or any
Transferred Subsidiary or the Transferred Assets except for Permitted Liens.

(i) Except to the extent other representations and warranties in this
Article III relate expressly to Taxes, the representations and warranties made
in this Section 3.21 are the only representations and warranties made by Parent
or the Seller with respect to matters relating to Taxes (including Tax Returns,
Tax Allocation Agreements, Tax claims and Actions related to Taxes).

 

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Section 3.22. Actuarial Report; Reserves.

(a) The Seller has delivered to the Acquiror a true and correct copy of an
actuarial memorandum entitled “Analysis of Unpaid Loss and Loss Adjustment
Expense as of December 31, 2014,” redacted to exclude portions not related to
the Business (the “Actuarial Report”). The factual information and data provided
by Seller and its Affiliates in connection with the preparation of the Actuarial
Report was complete and accurate in all material respects as of the date so
provided.

(b) The statutory policy reserves required by SAP to be held by the LPI
Insurance Companies in respect of the LPI Insurance Policies as of December 31,
2014, as set forth in the Actuarial Report (the “Reserves”): (i) were determined
in all material respects in accordance with generally accepted actuarial
standards consistently applied (except as otherwise noted in the Actuarial
Report) and (ii) satisfied the requirements of applicable Law in all material
respects as of December 31, 2014.

Section 3.23. Brokers. Except for Willis Capital Markets & Advisory and Morgan
Stanley & Co. LLC, no broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent, the Seller or their Affiliates. Parent and the Seller (but
not the Company or the Transferred Subsidiaries) are solely responsible for any
fees and expenses payable to Willis Capital Markets & Advisory and Morgan
Stanley & Co. LLC.

Section 3.24. Excluded Assets and Excluded Liabilities. None of Parent, the
Seller or any other Person makes any express or implied representation or
warranty with respect to the Excluded Assets or Excluded Liabilities under this
Agreement or under any other Transaction Agreement.

Section 3.25. Intercompany LPT Reinsurance Agreement. Section 3.25 of the
Disclosure Schedule sets forth a true and correct form of the Loss Portfolio
Transfer Reinsurance Agreement to be entered into on or prior to the Closing
Date by and among the LPI Insurance Companies and Equator (the “Intercompany LPT
Reinsurance Agreement”).

Section 3.26. NO OTHER REPRESENTATIONS OR WARRANTIES. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE III (AS MODIFIED BY THE
SCHEDULES, AS SUPPLEMENTED AND AMENDED) AND IN THE OTHER TRANSACTION AGREEMENTS,
NONE OF PARENT, THE SELLER OR ANY OTHER PERSON MAKES ANY OTHER EXPRESS OR
IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO PARENT OR THE SELLER, THE
PROBABLE SUCCESS OR PROFITABILITY OF THE BUSINESS, THE SHARES, THE COMPANY OR
THE TRANSFERRED SUBSIDIARIES, THE ASSETS AND PROPERTIES TO BE TRANSFERRED TO THE
COMPANY OR THE TRANSFERRED SUBSIDIARIES, THE BUSINESS OR THE TRANSACTIONS
CONTEMPLATED BY THIS

 

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AGREEMENT, AND PARENT AND THE SELLER DISCLAIM ANY OTHER REPRESENTATIONS,
WARRANTIES, FORECASTS, PROJECTIONS, STATEMENTS OR INFORMATION, WHETHER MADE BY
PARENT, THE SELLER OR ANY OF THEIR AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS OR REPRESENTATIVES.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR

The Acquiror hereby represents and warrants to Parent and the Seller, as of the
date hereof and the Closing Date, as follows:

Section 4.01. Incorporation and Authority of the Acquiror.

(a) Each of the Acquiror and each Acquiror Party is a corporation or other
organization duly incorporated or organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation or
organization.

(b) Each of the Acquiror and each Acquiror Party has all requisite corporate or
similar power and authority to enter into, consummate the transactions
contemplated by and carry out its obligations under, each of the Transaction
Agreements to which the Acquiror or any Acquiror Party will be a party (the
“Acquiror Transaction Agreements”). The execution and delivery by the Acquiror
and each Acquiror Party of the Acquiror Transaction Agreements, the consummation
by the Acquiror and each Acquiror Party of the transactions contemplated by, and
the performance by the Acquiror and each Acquiror Party of its obligations
under, the Acquiror Transaction Agreements have been duly authorized by all
requisite corporate action on the part of each Acquiror Party. This Agreement
has been duly and validly authorized, executed and delivered by the Acquiror,
and (assuming due authorization, execution and delivery of this Agreement by
Parent and the Seller) is the legal, valid and binding obligation of the
Acquiror, enforceable in accordance with its terms, and each of the Acquiror
Transaction Agreements has been duly and validly authorized by the Acquiror or
such Acquiror Party and, upon execution and delivery by the Acquiror or such
Acquiror Party, will be (assuming the valid authorization, execution and
delivery by the other party or parties thereto) a legal, valid and binding
obligation of the Acquiror or such Acquiror Party enforceable in accordance with
its terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium, rehabilitation, liquidation, fraudulent conveyance or
similar Laws relating to or affecting creditors’ rights generally and subject,
as to enforceability, to the effect of general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).

Section 4.02. Qualification of the Acquiror. Each of the Acquiror and each
Acquiror Party has all requisite corporate or similar power and authority to
operate its business as now conducted and is duly qualified as a foreign
corporation or other organization to do business, to the extent legally
applicable, and is in good standing in each jurisdiction where the character of
its owned, operated or leased properties or the nature of its activities makes
such qualification necessary, except for such failures to so qualify or be in
good standing as would not materially impair or delay the ability of the
Acquiror or any Acquiror Party to consummate the transactions contemplated by,
or perform its obligations under, the Acquiror Transaction Agreements.

 

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Section 4.03. No Conflict. Except as set forth in Section 4.03 of the Acquiror
Disclosure Schedule and provided that all consents, approvals, authorizations
and other actions described in Section 4.04 have been obtained or taken, and
except as may result from any facts or circumstances solely relating to Parent,
the Seller, the Company or the Transferred Subsidiaries (as opposed to any other
third party), the execution, delivery and performance by the Acquiror and the
Acquiror Parties of, and the consummation by the Acquiror and the Acquiror
Parties of the transactions contemplated by, the Acquiror Transaction Agreements
do not and will not (a) violate or conflict with the organizational documents of
the Acquiror or any Acquiror Party, (b) conflict with or violate any Law or
other Governmental Order applicable to the Acquiror or any Acquiror Party or by
which it or its properties or assets is bound or affected or (c) result in any
breach of, or constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, or give to any Person any
rights of termination, acceleration or cancellation of, or result in the
creation of any Lien (other than Permitted Liens) on any of the assets or
properties of the Acquiror or any Acquiror Party pursuant to any note, bond,
mortgage, indenture or contract to which the Acquiror, an Acquiror Party or any
of its Subsidiaries is a party or by which any of them or their respective
assets or properties is bound or subject, except, in the case of clause (c), any
such conflicts, violations, breaches, defaults, terminations, accelerations,
cancellations or creations of Liens as would not materially impair or delay the
ability of the Acquiror or any Acquiror Party to consummate the transactions
contemplated by, or perform its obligations under, the Acquiror Transaction
Agreements.

Section 4.04. Consents and Approvals. Except as set forth in Section 4.04 of the
Acquiror Disclosure Schedule, or as may result from any facts or circumstances
solely relating to Parent, the Seller, the Company or the Transferred
Subsidiaries, the execution and delivery by the Acquiror and each Acquiror Party
of the Acquiror Transaction Agreements do not, and the performance by the
Acquiror and each Acquiror Party of, and the consummation by the Acquiror and
each Acquiror Party of the transactions contemplated by, the Acquiror
Transaction Agreements will not, require any Governmental Approvals to be
obtained or made by the Acquiror or any of its Affiliates, except for any
Governmental Approvals the failure to obtain or make which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect with respect to the Acquiror.

Section 4.05. Absence of Litigation. As of the date hereof, there are no Actions
pending or, to the Knowledge of the Acquiror, threatened against the Acquiror or
any Acquiror Party that question the validity of, or seek injunctive relief with
respect to, any of the Acquiror Transaction Agreements or the right of the
Acquiror or any Acquiror Party to enter into any of the Acquiror Transaction
Agreements.

Section 4.06. Securities Matters. The Shares are being acquired by the Acquiror
for its own account and without a view to the public distribution or sale of the
Shares or any interest in them. The Acquiror has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment in the Shares, and the Acquiror is
capable of bearing the economic risks of such investment, including

 

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a complete loss of its investment in the Shares. The Acquiror understands and
agrees that it may not sell, transfer, assign, pledge or otherwise dispose of
any of the Shares other than pursuant to a registered offering in compliance
with, or in a transaction exempt from, the registration requirements of the
Securities Act and applicable state and foreign securities laws.

Section 4.07. Financial Ability. The Acquiror has, and will have at the Closing,
all funds necessary to pay the Purchase Price and to consummate the transactions
contemplated by this Agreement and the other Acquiror Transaction Agreements and
has furnished to Parent and the Seller evidence thereof.

Section 4.08. Financial Statements. The Acquiror has delivered to the Seller
true and correct copies of the following statutory statements, in each case,
together with the exhibits, schedules and notes thereto and any affirmations and
certifications filed therewith: (i) the annual statutory statement of Acquiror
Reinsurer as of and for the year ended December 31, 2014, as filed with the
North Carolina Department of Insurance; (ii) the audited annual statutory
financial statements of Acquiror Reinsurer as of and for the year ended
December 31, 2014 (the statements referenced in (i) and (ii), the “Acquiror
Reinsurer Annual Statutory Statements”); and (iii) the unaudited quarterly
statutory financial statements of Acquiror Reinsurer as of and for the quarter
ended March 31, 2015 (the “Acquiror Reinsurer Quarterly Statements” and,
collectively with the Acquiror Reinsurer Annual Statutory Statements, the
“Acquiror Reinsurer Statutory Statements”). Each of the Acquiror Reinsurer
Statutory Statements has been prepared in accordance with SAP and in conformity
with the practices consistently applied by the Acquiror Reinsurer and presents
fairly, in all material respects, the financial position and results of
operations of the Acquiror Reinsurer as at the respective dates and for the
respective periods indicated, in accordance with SAP. No material deficiency has
been asserted by any Governmental Authority with respect to any Acquiror
Reinsurer Statutory Statements that remains unresolved prior to the date hereof.

Section 4.09. Investigation. The Acquiror acknowledges and agrees that it
(a) has made its own inquiry and investigation into, and, based thereon, has
formed an independent judgment concerning, the Company, the Transferred
Subsidiaries and the Business and (b) has been furnished with or given adequate
access to such information about the Company, the Transferred Subsidiaries and
the Business as it has requested. The Acquiror further acknowledges and agrees
that (i) the only representations, warranties, covenants and agreements made by
Parent and the Seller are the representations, warranties, covenants and
agreements expressly made in this Agreement by Parent and the Seller,
(ii) except as set forth in Article III, Parent and the Seller do not make any
other representation or warranty of any kind or nature whatsoever, oral or
written, express or implied, with respect to Parent, the Seller, the Company,
the Transferred Subsidiaries, the Business, the Transaction Agreements or the
transactions contemplated by the Transaction Agreements, including any relating
financial condition, results of operations, assets or liabilities of any of the
foregoing, or with respect to any information provided by Parent, the Seller or
their Affiliates or Representatives, whether or not in the electronic “data
room” established by Parent and the Seller for the Acquiror, and (iii) Parent
and the Seller do not make any representation or warranty as to (A) the
operation of the Company and the Transferred Subsidiaries by the Acquiror after
the Closing in any manner or (B) the probable success or profitability of the
Company, the Transferred Subsidiaries or the Business (whether before or after
the Closing). Except for the representations and warranties

 

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contained in Article III, the Acquiror has not relied upon any other
representations or warranties or any other information made or supplied by or on
behalf of Parent and the Seller or by any of their Affiliates.

Section 4.10. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Acquiror.

ARTICLE V

ADDITIONAL AGREEMENTS

Section 5.01. Conduct of Business Prior to the Closing. Except as required by
applicable Law, as otherwise contemplated by or necessary to effectuate this
Agreement or any other Transaction Agreement and for matters identified in
Schedule 5.01, and subject to obligations under agreements or contracts in
existence as of the date hereof, from the date hereof through the Closing,
unless the Acquiror otherwise consents in advance (which consent shall not be
unreasonably withheld, delayed or conditioned), Parent and the Seller shall
cause the LPI Companies to (a) conduct the Business in the ordinary course
consistent with past practice, (b) use commercially reasonable efforts to
preserve intact their business organizations, to maintain their regulatory
relationships in good standing, and to maintain the current significant business
relationships and goodwill with the policyholders, agents, brokers, distributors
and other customers, suppliers and service providers of and to their businesses
and (c) not do any of the following with respect to the Company, the Transferred
Subsidiaries or the Business:

(i) repurchase, redeem, repay or otherwise acquire any outstanding Capital Stock
of the Company or any of the Transferred Subsidiaries;

(ii) transfer, issue, sell, pledge (other than as set forth in
Schedule 5.01(c)(ii)) or dispose of any Capital Stock or other securities of the
Company or any of the Transferred Subsidiaries or grant options, warrants, calls
or other rights to purchase or otherwise acquire Capital Stock or other
securities of the Company or any of the Transferred Subsidiaries;

(iii) effect any recapitalization, reclassification, stock split or like change
in the capitalization of the Company or any of the Transferred Subsidiaries;

(iv) amend the certificate of incorporation or bye-laws (or other comparable
organizational documents) of the Company or any of the Transferred Subsidiaries;

(v) except with respect to changes intended to improve underwriting
profitability (even if such changes have an effect of reducing premium volume),
make any material change in the underwriting, claims administration, reserving,
customer service, selling or financial accounting policies, practices or
principles (other than any change required by applicable Law, GAAP or SAP or in
the ordinary course of business consistent with past practice) of the Business;

 

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(vi) except for the Transfer of Leased Real Property, or the Transfer of the
Excluded Assets and Excluded Liabilities as contemplated by Section 2.02(a) or
the Transferred Assets and Transferred Liabilities as contemplated by
Section 2.02(b), permit the Company or any Transferred Subsidiary to purchase,
sell, lease, exchange or otherwise dispose of or acquire any property or assets,
including the Transferred Assets (other than transactions occurring in the
ordinary course of business consistent with past practice) or make any capital
expenditure for which the aggregate consideration paid or payable in any
individual transaction is in excess of $50,000 or in the aggregate in excess of
$250,000;

(vii) incur any indebtedness for borrowed money from third party lending sources
(other than current trade accounts payable incurred in respect of property or
services purchased in the ordinary course of business consistent with past
practice) or assume, grant, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person, or make any
loans or advances (other than, in each case, in the ordinary course of business
consistent with past practice), for individual amounts in excess of $50,000 or
in the aggregate in excess of $250,000;

(viii) permit the Company or any Transferred Subsidiary to enter into or amend
(in any material respect) or, other than pursuant to its current terms,
terminate, renew or extend any Material Contract or any contract with any
Controlled Affiliate of Parent or the Seller;

(ix) permit the Company or any Transferred Subsidiary to enter into any merger,
consolidation, purchase or sale of material assets or businesses,
recapitalization, restructuring or other similar material transaction or series
of transactions;

(x) grant, increase, or accelerate the vesting or payment of, or announce or
promise to grant, increase or accelerate the vesting or payment of, any wages,
salaries, bonuses, incentives, severance pay, other compensation, pension or
other benefits payable to any Employee, other than (A) normal merit salary
increases for non-executive officers, not to exceed two percent (2%) in the
aggregate or (B) in the ordinary course of business consistent with past
practice;

(xi) (A) enter into, or amend, any employment contracts with executive officers,
except as required by applicable Law or (B) hire any Employee, other than a
non-executive officer Employee hired to replace an Employee whose employment has
terminated;

(xii) make or change any material Tax election, change any annual Tax accounting
period, adopt or change any method of Tax accounting, amend any material Tax
Returns or file any claims for material Tax refunds, enter into any material
closing agreement, settle any material Tax claim, audit or assessment or
surrender any right to claim a material Tax refund, offset or other reduction in
Tax liability, in each case, to the extent such action could reasonably be
expected to result in an increase in the Tax liability of the Company or any
Transferred Subsidiary for any Post-Closing Taxable Period or the portion of a
Straddle Period beginning after the Closing Date;

 

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(xiii) pay, settle or compromise any Action or threatened Action involving the
Business (in each case, except for claims under policies and certificates of
insurance within applicable policy limits), other than any settlement or
compromise that involves solely cash payments not in the aggregate for any and
all such settled or compromised Actions in excess of an amount as set forth in
Schedule 5.01(c)(xiii); or

(xiv) pledge, sell, lease, transfer, license, assign, abandon, dispose of or
otherwise make subject to any encumbrance (other than a Permitted Lien) any
Owned Business Intellectual Property; or

(xv) enter into any legally binding commitment with respect to any of the
foregoing.

Section 5.02. Access to Information.

(a) From the date hereof until the Closing Date, upon reasonable prior notice,
and subject to applicable Law, any applicable privileges (including the
attorney-client privilege) and contractual confidentiality obligations, Parent
and the Seller shall, and shall cause each of the LPI Companies and each such
Person’s respective Representatives, to (i) afford the Representatives of the
Acquiror reasonable access to the offices, properties, books and records of the
LPI Companies relating to the Business, (ii) furnish to the Representatives of
the Acquiror such additional financial and operating data and other information
regarding the Business as the Acquiror may from time to time reasonably request,
and (iii) make available to the Representatives of the Acquiror and its
Affiliates, the employees of LPI Companies in respect of the Company and the
Transferred Subsidiaries and the Business whose assistance and expertise is
necessary to assist the Acquiror in connection with the Acquiror’s preparation
to integrate the Business (including the Company and the Transferred
Subsidiaries and their businesses and personnel) into the Acquiror’s
organization following the Closing; provided, however, that the reasonableness
of such access and requests shall be determined by taking into account, among
other considerations, the competitive positions of the parties and the sensitive
nature of the transactions contemplated hereby, and, provided, further, that
such investigation shall be on a basis and follow procedures that the parties
shall mutually agree, and shall not unreasonably interfere with any of the
businesses or operations of any of the LPI Companies; and provided, further,
that the auditors and independent accountants of Parent or any of its Affiliates
shall not be obligated to make any work papers available to any Person unless
and until such Person has signed a customary confidentiality agreement relating
to such access to work papers in form and substance reasonably acceptable to
such auditors or accountants. If so reasonably requested by Parent or the
Seller, the Acquiror shall enter into a customary joint defense agreement with
any one or more of Parent, the Seller, the Company and the Transferred
Subsidiaries with respect to any information to be provided to the Acquiror
pursuant to this Section 5.02(a). Without limiting the foregoing, any
environmental investigation undertaken by the Acquiror shall not include
invasive sampling of soil or groundwater on any property occupied by or
otherwise affiliated with the Company or any Transferred Subsidiary without the
Seller’s prior written consent and such investigation shall not unreasonably
interfere with any of the businesses or operations of Parent or any of its
Affiliates (and all costs thereof shall be borne by the Acquiror).

 

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(b) In addition to the provisions of Section 5.03, from and after the Closing
Date, subject to any applicable privileges (including the attorney-client
privilege), to the extent required to comply with applicable Law or in
connection with any other reasonable business purpose, including the preparation
of Tax Returns and the determination of any matter relating to the rights or
obligations of Parent, the Seller or any of their Affiliates under any of the
Transaction Agreements, upon reasonable prior notice, the Acquiror shall, and
shall cause the Company and the Transferred Subsidiaries and their respective
Controlled Affiliates and Representatives to (A) afford the Representatives of
Parent and its Affiliates reasonable access, during normal business hours, to
the offices, properties, books and records of the Acquiror and its Affiliates in
respect of the Company and the Transferred Subsidiaries and the businesses
conducted by them, (B) furnish to the Representatives of Parent and its
Affiliates such additional financial and other information regarding the Company
and the Transferred Subsidiaries and the businesses conducted by them as Parent
or its Representatives may from time to time reasonably request and (C) make
available to the Representatives of Parent and its Affiliates the employees of
the Acquiror and its Affiliates in respect of the Company and the Transferred
Subsidiaries and the businesses conducted by them whose assistance, expertise,
testimony, notes and recollections or presence is reasonably necessary to assist
Parent in connection with Parent’s reasonable inquiries for any of the purposes
referred to above, including the presence of such persons as witnesses in
hearings or trials for such purposes; provided, however, that such investigation
shall not unreasonably interfere with the business or operations of the Acquiror
or any of its Affiliates; and provided, further, that the auditors and
independent accountants of the Acquiror or its Affiliates shall not be obligated
to make any work papers available to any Person unless and until such Person has
signed a customary confidentiality agreement relating to such access to work
papers in form and substance reasonably acceptable to such auditors or
accountants. If so reasonably requested by the Acquiror, Parent and the Seller
shall enter into a customary joint defense agreement with the Acquiror and its
Affiliates (including the Company and the Transferred Subsidiaries) with respect
to any information to be provided to Parent and the Seller pursuant to this
Section 5.02(b).

(c) In addition to the provisions of Section 5.03, from and after the Closing
Date, subject to any applicable privileges (including the attorney-client
privilege), to the extent required to comply with applicable Law or in
connection with any other reasonable business purpose, including the preparation
of Tax Returns and the determination of any matter relating to the rights or
obligations of Acquiror or any of its Affiliates under any of the Transaction
Agreements, upon reasonable prior notice, Parent and the Seller shall, and shall
cause each of the LPI Companies and their respective Representatives to
(A) afford the Representatives of Acquiror and its Affiliates reasonable access,
during normal business hours, to the offices, properties, books and records of
Parent, Seller and the LPI Companies in respect of the Business and (B) furnish
to the Representatives of Acquiror and its Affiliates such additional financial
and other information regarding Parent, Seller and the LPI Companies in respect
of the Business as Acquiror or its Representatives may from time to time
reasonably request; provided, however, that such investigation shall not
unreasonably interfere with the business or operations of Parent or any of the
LPI Companies; and provided, further, that the auditors and independent
accountants of Parent or the LPI Companies shall not be obligated to make any
work papers

 

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available to any Person unless and until such Person has signed a customary
confidentiality agreement relating to such access to work papers in form and
substance reasonably acceptable to such auditors or accountants. If so
reasonably requested by Parent, the Acquiror shall enter into a customary joint
defense agreement with Parent and its Controlled Affiliates with respect to any
information to be provided to the Acquiror pursuant to this Section 5.02(c).
Notwithstanding the foregoing, Parent and the Seller shall not be required to
provide access to any Excluded Books and Records.

Section 5.03. Books and Records.

(a) Parent and its Controlled Affiliates shall have the right, at their own
expense, to retain copies of all books and records of each of the Company and
the Transferred Subsidiaries and their respective businesses relating to periods
ending on or prior to the Closing Date subject to compliance with all applicable
privacy Laws regarding the Employees. The Acquiror agrees that, with respect to
all original books and records of each of the Company and the Transferred
Subsidiaries existing as of the Closing Date, it shall (and shall cause each of
the Company and the Transferred Subsidiaries to) (i) comply in all material
respects with all applicable Laws relating to the preservation and retention of
records and (ii) apply preservation and retention policies that are no less
stringent than those generally applied by the Acquiror.

(b) Prior to the Closing Date, the parties hereto shall develop and implement a
plan that shall result in the delivery or transfer, subject to compliance with
applicable Law, of the Books and Records to the Acquiror (or a Person designated
by the Acquiror) at, or as soon as reasonably practicable following, the Closing
in the manner (and in the case of physical books and records at the location(s))
reasonably requested by the Acquiror to the extent not located at an office of
the Company or the Transferred Subsidiaries. Parent and the Seller shall, and
shall cause their Controlled Affiliates to, use their commercially reasonable
efforts to separate any Books and Records from any other books and records of
Parent, the Seller and their Controlled Affiliates (other than the Company or
the Transferred Subsidiaries). To the extent that Parent, the Seller or their
Controlled Affiliates are unable to separate any Books and Records pursuant to
the previous sentence, Parent, the Seller and their Controlled Affiliates shall
not be required to physically deliver Books and Records contained in an archived
computer system of Parent, the Seller or their Controlled Affiliates that
(i) cannot be separated from other books and records of Parent, the Seller or
their Controlled Affiliates (other than the Company or the Transferred
Subsidiaries) or (ii) are stored as a result of automated backup procedures in
the ordinary course of business by Parent, the Seller or their Controlled
Affiliates (other than the Company or the Transferred Subsidiaries), but Parent
and Seller shall cooperate with the Acquiror to develop a means of providing
reasonable access to such Books and Records for Acquiror and its Affiliates.
Parent and the Seller shall not be obligated to perform any data conversion or
migration with respect to the Books and Records or incur any costs or expenses
in connection therewith.

Section 5.04. Confidentiality.

(a) The Acquiror acknowledges and agrees that the confidentiality agreement,
dated March 25, 2015 (the “Confidentiality Agreement”), between the Seller and
the Acquiror, remains in full force and effect and, in addition, covenants and
agrees to keep confidential, in accordance with the provisions of the
Confidentiality Agreement, information provided to the

 

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Acquiror pursuant to this Agreement. If this Agreement is, for any reason,
terminated prior to the Closing, the Confidentiality Agreement and the
provisions of this Section 5.04 shall nonetheless continue in full force and
effect in accordance with its terms.

(b) Parent and the Seller hereby assign to the Acquiror all rights that Parent,
Seller and any of their Affiliates or Representatives may have with respect to
any confidentiality or other similar agreements entered into with any other
prospective purchaser of the Business or any portion thereof, and immediately
following execution of this Agreement will terminate any access that any such
Persons may have to information about the Business, whether through the
electronic “data room” established by Parent and the Seller or otherwise. All
discussions with any such Persons with respect to the Business or any portion
thereof will be formally terminated immediately following execution of this
Agreement.

Section 5.05. Regulatory and Other Authorizations; Consents.

(a) The parties hereto shall promptly make all filings and notifications with,
and shall use their commercially reasonable efforts to promptly obtain all
authorizations, consents, orders and approvals of, all Governmental Authorities
that may be or become necessary for their respective execution and delivery of,
and the performance of their respective obligations pursuant to, and the
consummation of the transactions contemplated by, the Transaction Agreements and
shall take all commercially reasonable actions as may be requested by any such
Governmental Authorities to obtain such authorizations, consents, orders and
approvals. The parties hereto shall cooperate with the reasonable requests of
each other in promptly seeking to obtain all such authorizations, consents,
orders and approvals. None of Parent, the Seller or the Acquiror shall take any
action that they should be reasonably aware would have the effect of delaying,
impairing or impeding the receipt of any required approvals.

(b) Subject to the terms and conditions set forth in this Agreement, without
limiting the generality of the other undertakings pursuant to this Section 5.05,
each of Parent (in the case of clauses (i) and (iii)), the Seller (in the case
of clauses (i) and (iii)) and the Acquiror (in all cases set forth below) agree
to take or cause to be taken the following actions: (i) the prompt provision to
a Governmental Authority of non-privileged information and documents requested
by such Governmental Authority or that are necessary, proper or advisable to
permit consummation of the transactions contemplated by the Transaction
Agreements; (ii) the prompt use of its commercially reasonable efforts to avoid
the entry of, or to effect the dissolution of, any permanent, preliminary or
temporary injunction or other order, decree, decision, determination or judgment
that would delay, restrain, prevent, enjoin or otherwise prohibit consummation
of the transactions contemplated by the Transaction Agreements; and (iii) the
prompt use of its commercially reasonable efforts to take, in the event that any
permanent, preliminary or temporary injunction, decision, order, judgment,
determination or decree is entered or issued, or becomes reasonably foreseeable
to be entered or issued, in any proceeding or inquiry of any kind that would
make consummation of the transactions contemplated by the Transaction Agreements
in accordance with the terms of the Transaction Agreements unlawful or that
would delay, restrain, prevent, enjoin or otherwise prohibit consummation of the
transactions contemplated by the Transaction Agreements, any and all
commercially reasonable steps necessary to resist, vacate, modify, reverse,
suspend, prevent, eliminate or remove such actual, anticipated or threatened
injunction, decision, order, judgment, determination or decree so as to permit
such consummation on a schedule as close as possible to that contemplated by the
Transaction Agreements.

 

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(c) Subject to applicable Laws relating to the sharing of information and
Section 5.02(a), each of Parent, the Seller and the Acquiror shall promptly
notify one another of any communication it receives from any Governmental
Authority relating to the matters that are the subject of this Agreement and
permit the other party to review in advance any proposed communication by such
party to any Governmental Authority and shall promptly provide each other with
copies of all correspondence, filings or communications between such party or
any of its Representatives, on the one hand, and any Governmental Authority or
members of its staff, on the other hand, relating to such matters. None of
Parent, the Seller or the Acquiror shall agree to participate in any meeting
with any Governmental Authority in respect of any such filings, investigation or
other inquiry relating to matters that are the subject of this Agreement unless
it consults with the other parties in advance and, to the extent permitted by
such Governmental Authority, gives the other parties the opportunity to attend
and participate at such meeting. Subject to the Confidentiality Agreement and
Section 5.02(a), Parent, the Seller and the Acquiror shall coordinate and
cooperate fully with each other in exchanging such information and providing
such assistance as the other party may reasonably request in connection with the
foregoing; provided, however, that the foregoing shall not require Parent, the
Seller or the Acquiror (i) to disclose any information that in the reasonable
judgment of Parent, the Seller or the Acquiror, as the case may be, would result
in the disclosure of any trade secrets of third parties or violate any of its
obligations with respect to confidentiality or (ii) to disclose any privileged
information or confidential competitive information of Parent, the Seller or the
Acquiror or their respective Affiliates, as the case may be; and provided,
further, that the Acquiror’s obligation to notify Parent with respect to
communications received by a Tax Authority, and the rights and obligations of
the parties hereto with respect to any Tax audit or administrative or court
proceeding relating to Taxes, shall be governed solely by Section 7.03. None of
the parties hereto shall be required to comply with any provision of this
Section 5.05(c) to the extent that such compliance would be prohibited by
applicable Law.

(d) Parent, the Seller and the Acquiror shall use their commercially reasonable
efforts to obtain any other consents and approvals (other than those addressed
under Sections 5.05(a), 5.05(h) and 5.13) and make any other notifications that
may be required in connection with the transactions contemplated by the
Transaction Agreements. The parties shall allocate the costs associated with
obtaining any such consents and approvals in accordance with the terms set forth
on Schedule 5.05(d).

(e) If, on the Closing Date, any consent required to effect the Transfer of the
Transferred Assets and the assumption of the Transferred Liabilities is not
obtained, or if an attempted Transfer thereof would be ineffective or a
violation of applicable Law or would in the reasonable judgment of the Acquiror
adversely affect the material rights of the Company and the Transferred
Subsidiaries (as assignees of the applicable LPI Companies or otherwise) thereto
or thereunder so that the Company and the Transferred Subsidiaries would not in
fact receive all such rights, such Transferred Assets and Transferred
Liabilities shall not be Transferred, and Parent, the Seller and the Acquiror
shall cooperate in a mutually agreeable arrangement under which the Company and
the Transferred Subsidiaries would, in compliance with applicable Law, obtain
the material benefits and assume the obligations and bear the economic burdens

 

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associated with such Transferred Assets and Transferred Liabilities in
accordance with this Agreement, including subcontracting, sublicensing or
subleasing to the Company and the Transferred Subsidiaries or under which the
LPI Companies (other than the Company and the Transferred Subsidiaries) would
enforce for the benefit (and at the expense) of the Company and the Transferred
Subsidiaries any and all of their rights against a third party (including any
Governmental Authority) associated with such Transferred Assets and Transferred
Liabilities, and Parent or the Seller would, or would cause the LPI Companies
(other than the Company and the Transferred Subsidiaries) to, promptly pay to
the Company and the Transferred Subsidiaries when received all monies received
by them under any such Transferred Assets, and the Acquiror would, or would
cause the Company and the Transferred Subsidiaries to, promptly pay to Parent or
the Seller or the LPI Companies (other than the Company and the Transferred
Subsidiaries) all amounts due by them under any such Transferred Liabilities
following the Closing, and the parties hereto shall continue to use their
commercially reasonable efforts, and shall cooperate fully with each other to
obtain promptly such consents or waivers for a period of eighteen (18) months
(the “Consent Period”). Pending receipt of such consent or waiver, the parties
hereto shall cooperate with each other to effect mutually agreeable, reasonable
and lawful arrangements to provide to the Acquiror and its Affiliates the
benefits of any such Transferred Asset. In the event that a consent or waiver
for the Transfer of any such Transferred Asset not Transferred at the Closing is
obtained, the Seller shall Transfer such Transferred Asset to the Acquiror at no
additional cost.

(f) If, on the Closing Date, any consent required to effect the Transfer of the
Excluded Assets and Excluded Liabilities is not obtained, or if an attempted
Transfer thereof would be ineffective or a violation of Law or would in the
reasonable judgment of Parent adversely affect the material rights of the LPI
Companies (other than the Company and the Transferred Subsidiaries) (as
assignees of the Company and the Transferred Subsidiaries) thereto or thereunder
so that the LPI Companies (other than the Company and the Transferred
Subsidiaries) would not in fact receive all such rights, such Excluded Assets
and Excluded Liabilities shall not be Transferred, and Parent, the Seller and
the Acquiror shall cooperate in a mutually agreeable arrangement under which the
LPI Companies (other than the Company and the Transferred Subsidiaries) would,
in compliance with Law, obtain the benefits and assume the obligations and bear
the economic burdens associated with such Excluded Assets and Excluded
Liabilities in accordance with this Agreement, including subcontracting,
sublicensing or subleasing to the LPI Companies (other than the Company and the
Transferred Subsidiaries) or under which the Company and the Transferred
Subsidiaries would enforce for the benefit (and at the expense) of the LPI
Companies (other than the Company and the Transferred Subsidiaries) any and all
of their rights against a third party (including any Governmental Authority)
associated with such Excluded Assets and Excluded Liabilities, and the Acquiror
would, or would cause the Company and the Transferred Subsidiaries to, promptly
pay to the LPI Companies (other than the Company and the Transferred
Subsidiaries) when received all monies received by them under any such Excluded
Assets, and Parent and the Seller would, or would cause the LPI Companies (other
than the Company and the Transferred Subsidiaries) to, promptly pay to the
Acquiror, the Company or the Transferred Subsidiaries all amounts due by them
under any such Excluded Liabilities, and the parties hereto shall continue to
use their commercially reasonable efforts, and shall cooperate fully with each
other, to obtain promptly such consents or waivers during the Consent Period.
Pending receipt of such consent or waiver, the parties hereto shall cooperate
with each other to effect mutually agreeable, reasonable and

 

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lawful arrangements pursuant to the Transition Services Agreements or otherwise
designed to provide to Parent and its Controlled Affiliates the benefits of any
such Excluded Asset. Once consent or waiver for the Transfer of any such
Excluded Asset not Transferred at the Closing is obtained, the Acquiror shall
Transfer such Excluded Asset to Parent or its Controlled Affiliates at no
additional cost.

(g) Notwithstanding the foregoing, in no event shall the expiration of the
Consent Period terminate, limit or otherwise affect the Acquiror’s obligations
under Section 10.02(a)(ii) or Parent’s and the Seller’s obligations under
Section 10.01(a)(ii) with respect to any Transferred Liability or Excluded
Liability, respectively.

(h) The Software identified in Section 3.11(b) of the Disclosure Schedule as
being used in the Business and another business of Parent, the Seller or any of
their Controlled Affiliates (“Shared Software”) shall, subject to Sections
5.05(e) and 5.05(f), be made available to the Company and the Transferred
Subsidiaries in accordance with this Section 5.05(h). To the extent necessary to
effectuate the transactions contemplated by this Agreement, Parent and the
Seller shall use commercially reasonable efforts to obtain any consent required
from any licensor of Shared Software and the Acquiror shall cooperate with such
efforts. If any Shared Software was acquired by or for the benefit of the
Business by Parent, the Seller or any of their Controlled Affiliates (other than
the Company or the Transferred Subsidiaries) pursuant to an enterprise license,
the parties hereto shall use commercially reasonable efforts to Transfer to the
Acquiror, the Company or a Transferred Subsidiary: (i) the rights to the Shared
Software under the applicable statement of work or other procurement document;
or (ii) in the case of Shared Software licensed on a seat-by-seat basis, the
number of seats agreed upon by the parties hereto; provided, that nothing herein
shall be construed as requiring Parent, the Seller or any of their Controlled
Affiliates to Transfer an enterprise license to the Acquiror, the Company or a
Transferred Subsidiary. To the extent reasonably necessary to effectuate the
transactions contemplated by this Agreement, and to the extent permitted by any
Shared Software license, Parent, the Seller or one of their Affiliates (as
applicable) shall: (x) grant to the Acquiror a sublicense to the Shared
Software; (y) use the Shared Software to provide services to the Acquiror, the
Company or the Transferred Subsidiaries under the Forward Transition Services
Agreement; or (z) otherwise obtain the continuing right for the Acquiror, the
Company or the Transferred Subsidiaries to use the Shared Software. Under no
circumstances shall Parent, the Seller or their Controlled Affiliates be
required to take any action that shall cause Parent, the Seller or any of their
Controlled Affiliates to be in breach of any obligation to the licensor of
Shared Software. The parties shall allocate any costs associated with obtaining
any such consents required from any licensor of such Shared Software in
accordance with the terms set forth on Schedule 5.05(h).

Section 5.06. Insurance.

(a) From and after the Closing Date, the Company and the Transferred
Subsidiaries shall cease to be insured by Parent’s or its Affiliates’ (other
than the Company or any Transferred Subsidiary, as the case may be) insurance
policies or by any of their self-insured programs to the extent such insurance
policies or programs cover the Company or the Transferred Subsidiaries. With
respect to events or circumstances relating to the Company or the Transferred
Subsidiaries that occurred or existed prior to the Closing Date that are covered
by

 

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occurrence-based third party liability insurance policies and any workers’
compensation insurance policies or comparable workers’ compensation
self-insurance programs sponsored by Parent or its Controlled Affiliates and
that apply to the locations at which the businesses of the Company and the
Transferred Subsidiaries operate, the Acquiror, the Company and the Transferred
Subsidiaries may make claims under such policies and programs; provided,
however, that by making any such claims, the Acquiror agrees to reimburse Parent
for any increased costs incurred by Parent as a result of such claims, including
any retroactive or prospective premium adjustments associated with such
coverage, as such amounts are determined in accordance with those policies and
programs generally applicable from time to time to Parent and its Affiliates;
provided, further, that none of the Acquiror or any of its Affiliates shall make
any such claims if, and to the extent that, such claims are covered by insurance
policies sponsored by the Acquiror or its Affiliates (including, after the
Closing, the Company and the Transferred Subsidiaries). As of the second
anniversary of this Agreement, the Acquiror shall no longer have access to such
occurrence-based third party liability insurance policies of Parent and its
Affiliates (other than the Company and the Transferred Subsidiaries) or to such
workers’ compensation insurance policies or comparable workers’ compensation
self-insurance programs that apply to the locations at which the businesses of
the Company and the Transferred Subsidiaries operate and the Acquiror shall
assume full responsibility for, and release Parent and its Affiliates (other
than the Company and the Transferred Subsidiaries) from, all liability for
claims, known or unknown, resulting from occurrences prior to the Closing Date.

(b) With respect to any open claims against the insurance policies of Parent or
any of its Controlled Affiliates (other than the Company and the Transferred
Subsidiaries) issued by third parties relating to claims made prior to the
Closing Date, Parent and the Seller agree to remit to the Acquiror any net
proceeds realized from such claims.

Section 5.07. Intercompany Obligations. Except for the intercompany obligations
set forth in Schedule 5.07, Parent and the Seller shall, and shall cause their
Controlled Affiliates to, take such action and make such payments as may be
necessary so that, no later than immediately prior to the Closing, each of the
Company and the Transferred Subsidiaries, on the one hand, and Parent and its
Controlled Affiliates (other than the Company and the Transferred Subsidiaries),
on the other hand, shall settle, discharge, offset, pay or repay in full all
intercompany loans, notes, and advances, to the extent actually owed by such
entity, regardless of their maturity and all intercompany receivables and
payables for the amount due (including any accrued and unpaid interest to but
excluding the date of payment); provided, however, that if each such item is not
paid in full in cash, the method of discharge must be reasonably satisfactory to
the Acquiror.

Section 5.08. Intercompany Arrangements. Except (a) as otherwise contemplated by
the Transaction Agreements, (b) as set forth in Schedule 5.08 or (c) as
otherwise agreed by Parent and the Acquiror, no later than immediately prior to
the Closing, Parent and the Seller shall, and shall cause their Controlled
Affiliates to, take such actions as may be necessary to terminate, all
Intercompany Agreements, after giving effect to Section 5.07.

 

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Section 5.09. Non-Solicitation.

(a) For a period of two (2) years from the Closing Date, Parent and the Seller
shall not, and shall cause their Controlled Affiliates not to, without the prior
written consent of the Acquiror, directly or indirectly, solicit for employment
or knowingly hire any Employee; provided, however, that Parent and its
Controlled Affiliates may employ or hire any such Person who is terminated or
otherwise discharged by the Company, any of the Transferred Subsidiaries or
their respective Affiliates; and provided, further, that nothing in this
Section 5.09(a) shall prohibit Parent or any of its Controlled Affiliates from
employing or hiring any Person who contacts Parent or any of its Controlled
Affiliates on his or her own initiative without direct solicitation or as a
result of a general solicitation to the public or general advertising.

(b) For a period of two (2) years from the Closing Date, the Acquiror shall not,
and shall cause its Controlled Affiliates (including the Company and the
Transferred Subsidiaries) not to, without the prior written consent of the
Seller, directly or indirectly, solicit for employment or knowingly hire any
Person who is an employee, agent, broker, sales representative or distributor of
Parent or any of its Affiliates (other than the Company and the Transferred
Subsidiaries) as of the date hereof with whom the Acquiror or its Affiliates
came into contact, or became aware of, in connection with the transactions
contemplated by this Agreement or the Transaction Agreements; provided, however,
that the Acquiror and its Controlled Affiliates (including the Company and the
Transferred Subsidiaries) may employ or hire any such Person who is terminated
or otherwise discharged by Parent or any of its Affiliates; and provided,
further, that nothing in this Section 5.09(b) shall prohibit the Acquiror or any
of its Controlled Affiliates (including the Company and the Transferred
Subsidiaries) from employing or hiring any Person who contacts the Acquiror or
any of its Controlled Affiliates (including the Company and the Transferred
Subsidiaries) on his or her own initiative without direct solicitation or as a
result of a general solicitation to the public or general advertising.

Section 5.10. Non-Competition.

(a) Except as contemplated by the Transaction Agreements, from the Closing until
the second anniversary of the Closing Date (the “Non-Compete Period”), Parent
agrees not to, and shall cause each Person (a “Restricted Person”) that is a
Controlled Affiliate of Parent not to, engage, as a principal or jointly with
others, in the Competing Business in the United States; provided, however, that
Parent and its Controlled Affiliates shall continue to administer certain
policies pursuant to the Reinsurance Administrative Services Agreement, dated as
of June 1, 2011, by and between Balboa Insurance Company, Meritplan Insurance
Company, Newport Insurance Company and QBE Insurance Corporation. Parent shall
not have any obligation under this Section 5.10 with respect to any Restricted
Person from and after such time as such Restricted Person ceases to be a
Controlled Affiliate of Parent. A Restricted Person shall not include any Person
that purchases or receives assets, operations or a business from Parent or one
of its Subsidiaries, if such Person is not a Controlled Affiliate of Parent
after such transaction is consummated.

 

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(b) Notwithstanding anything to the contrary set forth in Section 5.10(a), and
without implication that the following activities otherwise would be subject to
the provisions of this Section 5.10, nothing in this Agreement shall preclude,
prohibit or restrict Parent from engaging, or require Parent to cause any
Restricted Person not to engage, in any manner in any of the following:

(i) making investments in the ordinary course of business, including in a
general or separate account of an insurance company, in Persons engaging in a
Competing Business, provided that each such investment is a passive investment
where Parent or such Restricted Person: (A) does not have the right to designate
a majority of the members of the board of directors or other governing body of
such entity or to otherwise influence or direct the operation or management of
any such entity, (B) is not a participant with any other Person in any group (as
such term is used in Regulation 13D of the Securities Exchange Act of 1934) with
such intention or right, and (C) owns less than fifteen percent (15%) of the
outstanding voting securities (including convertible securities) of such entity;

(ii) making investments in the Acquiror or its Affiliates;

(iii) selling any of its assets or businesses to a Person engaged in lines of
business that compete with the Competing Business;

(iv) managing or controlling investment funds that make investments in Persons
engaging in a Competing Business, so long as such investments are in the
ordinary course of business;

(v) providing investment management and similar services to any Person;

(vi) providing reinsurance; or

(vii) acquiring, merging or combining with any business that would otherwise
violate this Section 5.10 that is acquired from any Person after the Closing
Date (an “After-Acquired Business”); provided that either (A) at the time of
such acquisition, merger or combination, the revenues derived from the Competing
Business by the After-Acquired Business (the “Competing After-Acquired
Revenues”) constitute no more than fifteen percent (15%) of the gross revenues
of the After-Acquired Business in the most recently completed fiscal year
immediately prior to the date of such acquisition, merger or combination (the
“Aggregate After-Acquired Revenues”), or (B) if at the time of such acquisition,
merger or combination, the Competing After-Acquired Revenues constitute more
than fifteen percent (15%) of the Aggregate After-Acquired Revenues then, within
twelve (12) months after such acquisition, merger or combination, (x) Parent or
such Restricted Person signs a definitive agreement to dispose, and subsequently
disposes of, the relevant portion of the business or securities of such
After-Acquired Business, (y) Parent or such Restricted Person otherwise modifies
the After-Acquired Business such that the Competing After-Acquired Revenues
constitute not more than fifteen percent (15%) of the Aggregate After-Acquired
Revenues or (z) the business of such After-Acquired Business otherwise complies
with this Section 5.10.

(c) Notwithstanding anything herein to the contrary, no provision of this
Agreement shall prohibit Parent or any Restricted Person from engaging in any
activities set forth in Schedule 5.10(c).

 

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Section 5.11. QBE Intellectual Property; Trade Names and Trademarks. Except as
provided in the other Transaction Agreements:

(a) The Acquiror, for itself and its Affiliates, acknowledges and agrees that
the Acquiror is not purchasing, acquiring or otherwise obtaining any right,
title or interest in and to any Intellectual Property of Parent, the Seller or
its Controlled Affiliates (other than the Company and the Transferred
Subsidiaries), including the names and trademarks set forth in Schedule 5.11 and
any visual representations thereof, monograms, tag-lines, designs, symbols,
images, colors and characters, and any variation of the foregoing and any word
or design that contains, incorporates or is confusingly similar in sound or
appearance to any of the foregoing (including all registrations and applications
relating thereto) (collectively, the “QBE Names and Marks”), and, except as
otherwise expressly provided in this Section 5.11, neither the Acquiror nor any
of its Affiliates (including, after the Closing, the Company and the Transferred
Subsidiaries) shall have any rights in or to the QBE Names and Marks and neither
the Acquiror nor any of its Affiliates (including, after the Closing, the
Company and the Transferred Subsidiaries) shall (i) seek to register in any
jurisdiction any trade, corporate or business name, trademark, tag-line,
identifying logo, trade dress, monogram, slogan, service mark, domain name,
brand name or other name or source identifier that is a derivation, translation,
adaptation, combination or confusingly similar variation of the QBE Names and
Marks; or (ii) contest the ownership or validity of any rights of Parent, the
Seller or any of its Controlled Affiliates in or to any of the QBE Names and
Marks.

(b) The Acquiror agrees that, except as otherwise provided in this Section 5.11,
or in connection with historical references to the Business, following the
Closing, the Acquiror and its Controlled Affiliates (including the Company and
the Transferred Subsidiaries) shall cease and discontinue all uses of the QBE
Names and Marks, either alone or in combination with other words and all marks,
trade dress, logos, monograms and other source identifiers similar to any of the
foregoing or embodying any of the foregoing alone or in combination with other
words, including other words in compliance with Section 5.11(c). The Acquiror,
for itself and its Controlled Affiliates (including, following the Closing, the
Company and the Transferred Subsidiaries), agrees that the rights of the Company
and the Transferred Subsidiaries to the QBE Names and Marks pursuant to the
terms of any pre-existing agreements shall terminate on the Closing Date without
recourse by Acquiror, the Company or the Transferred Subsidiaries.

(c) Following the Closing Date, Acquiror shall: (i) as soon as commercially
practicable, effect the removal of the QBE Names and Marks from all materials
bearing the QBE Names and Marks, including signage, advertising, promotional
materials, Software, Shared Software, packaging, inventory, electronic
materials, collateral goods, stationery, business cards, web sites, and other
materials; and (ii) shall promptly discontinue all marketing and promotional
campaigns (and shall not initiate or renew any marketing campaigns) using the
QBE Names and Marks. To give effect to the preceding sentence, beginning as soon
as commercially practicable after the Closing Date, and in no event later than
any period the Acquiror and its Controlled

 

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Affiliates have any rights to use the QBE Names and Marks for administrative
services and transition services under the Administrative Services Agreement and
the Forward Transition Services Agreement, respectively, or such additional
period as mutually agreed by the parties hereto in writing, the Acquiror and its
Controlled Affiliates (including the Company and the Transferred Subsidiaries)
shall re-label, destroy or exhaust all materials bearing the QBE Names and Marks
and make all filings with any office, agency or body to effect the elimination
of any use of the QBE Names and Marks from the businesses of the Company and the
Transferred Subsidiaries, so as to bring the Acquiror and its Controlled
Affiliates into compliance with this Section 5.11, and Acquiror and its
Controlled Affiliates further are permitted to use the aforementioned
pre-existing materials containing the QBE Marks and Names in connection with
such administrative services and during such transition period in a manner that
is consistent with their use to date in connection with the Business and subject
further to the restrictions set forth in this Section 5.11 (e.g. no use in
marketing or promotional campaigns). The Acquiror, for itself and its Controlled
Affiliates, agrees that during the period authorized by this Section 5.11, the
QBE Names and Marks shall only be used with respect to goods and services that
are of a quality equal to or greater than the quality of the goods and services
of the Company and the Transferred Subsidiaries that used the QBE Names and
Marks prior to the Closing. The Acquiror shall take all necessary action to
ensure that the users of the QBE Names and Marks, whose rights terminate upon
the Closing pursuant to this Section 5.11, shall cease use of the QBE Names and
Marks, except as expressly authorized thereafter by Parent or for archival and
record-keeping purposes. The Acquiror, for itself and its Controlled Affiliates,
agrees that the Acquiror and its Controlled Affiliates (including the Company
and the Transferred Subsidiaries) shall not expressly, or by implication, do
business as or represent themselves as Parent or its Affiliates after the
Closing Date.

(d) In the event the Acquiror or any of its Controlled Affiliates (including,
after the Closing, the Company and the Transferred Subsidiaries) violate any of
such party’s obligations under this Section 5.11, Parent and its Controlled
Affiliates may proceed against it in law or in equity for such damages or other
relief as a court may deem appropriate. The Acquiror acknowledges that a
violation of this Section 5.11 may cause Parent and its Controlled Affiliates
irreparable harm which may not be adequately compensated for by money damages.
The Acquiror therefore agrees that in the event of any actual or threatened
violation of this Section 5.11, Parent and its Controlled Affiliates shall be
entitled, in addition to other remedies that they may have, to a temporary
restraining order and to preliminary and final injunctive relief against the
Acquiror or such Controlled Affiliate of the Acquiror to prevent any violations
of this Section 5.11, without the necessity of posting a bond.

(e) At the Closing, the Acquiror shall execute such amended organizational
documents with respect to the Company and the Transferred Subsidiaries such that
each of the Company and the Transferred Subsidiaries can effect a change in its
name to a name not containing any of the QBE Names and Marks. Promptly after the
Closing, the Acquiror shall cause the Company and the Transferred Subsidiaries
to file the amended organizational documents with the applicable Governmental
Authority and take all other necessary action to fulfill its obligations set
forth in this Section 5.11 as soon as reasonably practicable.

Section 5.12. Transaction Agreements. The parties have agreed to the forms of
agreements attached as Exhibits A through C in relation to the Administrative
Services

 

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Agreement, the Reinsurance Agreements and the Transition Services Agreements,
respectively, with such changes as may be requested by any Governmental
Authority reviewing such agreements. Promptly after the execution of this
Agreement, the parties hereto shall use their commercially reasonable efforts to
negotiate in good faith and cooperate (i) in preparing Trust Agreements and
Security and Control Agreements with respect to each of the LPI Insurance
Companies and Equator, as ceding companies under the applicable Reinsurance
Agreements, for the establishment and the maintenance of the Trust Accounts
contemplated in such Reinsurance Agreements and (ii) in preparing and
supplementing any omitted schedules, exhibits or other terms and conditions that
are required for the proper performance and delivery of the services, functions,
responsibilities and obligations set forth in such agreements consistent with
the terms set forth in the applicable Exhibits.

Section 5.13. Sublease of Leased Real Property.

(a) As soon as practicable following the assignment of the Real Property Lease
set forth on Schedule 5.13(a) and subject to Section 5.13(b), Parent and the
Seller shall cause, effective as of or prior to the Closing, the Company or a
Transferred Subsidiary to sublease to a Controlled Affiliate of Parent a portion
of the Real Property Lease set forth in Schedule 5.13(a).

(b) Parent and the Seller shall use their commercially reasonable efforts to
obtain, or cause to be obtained, any consents and approvals and make any
notifications that may be required in connection with the sublease contemplated
by Section 5.13(a); provided, however, that neither Parent nor the Seller shall
be required to make any payment of any fee or other consideration to any third
party or offer or grant any accommodation (financial or otherwise) to any third
party to obtain any such consent or approval.

Section 5.14. D&O Liabilities. From and after the Closing Date, the Acquiror
shall not amend the by-laws or other governing documents of the Company or any
of the Transferred Subsidiaries in such a way as to affect adversely the rights
of any individual who served as a director or officer of the Company or any of
the Transferred Subsidiaries at any time prior to the Closing Date (each, a “D&O
Indemnified Person”) to be indemnified, under applicable Law or the
organizational documents of the Company or the applicable Transferred Subsidiary
as they existed prior to the Closing Date, against any Losses, whether civil,
criminal, administrative or investigative, arising out of or pertaining to
matters existing or occurring at or prior to the Closing Date and relating to
the fact that such D&O Indemnified Person was a director or officer of the
Company or a Transferred Subsidiary, whether asserted or claimed prior to, at or
after the Closing Date.

Section 5.15. Further Action.

(a) Parent, the Seller and the Acquiror (i) shall execute and deliver, or shall
cause to be executed and delivered, such documents or other papers and shall
take, or shall cause to be taken, such further actions as may be reasonably
required to carry out the provisions of the Transaction Agreements and give
effect to the transactions contemplated by the Transaction Agreements,
(ii) shall refrain from taking any actions that could reasonably be expected to
impair, delay or impede the Closing, (iii) without limiting the foregoing, shall
use their

 

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respective commercially reasonable efforts to cause all the conditions to the
obligations of the other party to consummate the transactions contemplated by
this Agreement to be met as soon as reasonably practicable, (iv) prior to and
after the Closing, shall cooperate in good faith in connection with meetings and
communications with policyholders, customers, distribution channels and
employees of the Company and the Transferred Subsidiaries and (v) shall
cooperate in good faith prior to, at and after the Closing to facilitate an
orderly Closing and transition consistent with the terms of this Agreement.

(b) Each of Parent, the Seller and the Acquiror shall keep each other reasonably
apprised of the status of the matters relating to the completion of the
transactions contemplated hereby, including with respect to the satisfaction of
the conditions set forth in Article VIII. From time to time following the
Closing, subject to the terms and conditions of this Agreement, Parent, the
Seller and the Acquiror shall, and shall cause their respective Controlled
Affiliates to, execute, acknowledge and deliver all reasonable further
conveyances, notices, assumptions, releases and acquittances and such
instruments, and shall take such reasonable actions as may be necessary or
appropriate to make effective the transactions contemplated hereby as may be
reasonably requested by the other party, including (i) Transferring to Parent or
its designated Affiliate any Excluded Asset or Excluded Liability, which asset
or liability was held by the Company or the Transferred Subsidiaries at the
Closing and (ii) Transferring to the Acquiror or its designee any Transferred
Asset or Transferred Liability, which asset or liability was not Transferred to
the Company or a Transferred Subsidiary at the Closing.

(c) If, after the Closing Date, the Company or one of the Transferred
Subsidiaries is not listed as the record and beneficial owner of the Registered
Intellectual Property, Parent and the Seller shall, as soon as reasonably
practicable, file or cause to be filed, and thereafter use commercially
reasonable efforts to pursue in the United States Patent and Trademark Office
assignment documents to record the Company or one of the Transferred
Subsidiaries as the record and beneficial owner of such Registered Intellectual
Property.

(d) If, after the Closing Date, Parent, the Seller, the Acquiror, the Company or
a Transferred Subsidiary identifies any item of Business Intellectual Property
that should have been transferred, licensed or otherwise made available to the
Acquiror, the Company or a Transferred Subsidiary pursuant to the terms of this
Agreement, and that inadvertently was not previously transferred, licensed or
made available, then, to the extent that it has a right to do so, and subject to
the other terms of this Agreement with respect to Business Intellectual
Property, Parent, the Seller or one of their Affiliates shall promptly assign,
license or otherwise make available such Business Intellectual Property to the
Acquiror, the Company or a Transferred Subsidiary for no additional
consideration.

(e) If, after the Closing Date, Parent, the Seller, the Acquiror, the Company or
a Transferred Subsidiary identifies any item of Intellectual Property that was
inadvertently included in the Transferred Assets, not included in the Excluded
Assets or otherwise transferred in error by Parent, the Seller or one of their
Affiliates to the Acquiror, the Company or a Transferred Subsidiary, such
Intellectual Property shall promptly be transferred by the Acquiror, the Company
or a Transferred Subsidiary, to the extent that it has a right to so, to an
entity designated by Parent for no additional consideration.

 

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ARTICLE VI

EMPLOYEE MATTERS

Section 6.01. Employee Matters.

(a) Except as otherwise expressly provided in this Section 6.01, as of the
Closing Date, the Company and the Transferred Subsidiaries shall terminate their
participation in each Benefit Plan, and in no event shall any Employee be
entitled to accrue any benefits under such Benefit Plans with respect to
services rendered or compensation paid on or after the Closing Date.

(b) Subject to Schedule 6.01(b), the Acquiror shall extend, or cause one of its
Affiliates to extend, an offer of employment to each of the Employees, which
offers shall be subject to and effective as of the Closing. Each such offer of
employment shall provide for a position located within a fifty (50)-mile radius
of the place of each such Employee’s employment immediately prior to the Closing
Date. Each Employee who accepts an offer of employment extended by the Acquiror
or one of its Affiliates pursuant to this Section 6.01(b) is referred to herein
as a “Transferred Employee”. For a period of at least twelve (12) months after
the Closing Date, the Acquiror shall take all action necessary to provide that
during each Transferred Employee’s period of employment with the Acquiror or any
of its Affiliates (including the Company and the Transferred Subsidiaries),
(i) such Transferred Employee shall receive base compensation at a rate not less
than such Transferred Employee’s base compensation as in effect immediately
prior to the Closing Date, (ii) such Transferred Employee shall be eligible for
total incentive compensation opportunities (including long-term incentive
compensation) that are no less favorable than the total incentive compensation
opportunities provided to similarly situated employees of the Acquiror and its
Affiliates and (iii) such Transferred Employee shall be eligible for employee
benefits, including retiree medical and retiree life insurance benefits, that
are, in the aggregate, no less favorable than the value of the employee benefits
provided to similarly situated employees of the Acquiror and its Affiliates;
provided, however, that, subject to the foregoing, nothing herein is intended to
limit the right of the Acquiror, the Company or the Transferred Subsidiaries
(A) to terminate the employment of any Transferred Employee at any time, (B) to
change or modify any incentive compensation or employee benefit plan or
arrangement at any time and in any manner, or (C) to change or modify the terms
or conditions of employment for any of their employees.

(c) Effective as of the Closing Date, each Transferred Employee shall be
eligible to participate in the employee benefit plans, programs and arrangements
maintained by the Acquiror or its Affiliates on the same basis as other
similarly-situated employees of the Acquiror and its Affiliates. For purposes of
determining eligibility, vesting and benefit accruals under all benefit plans,
programs and arrangements maintained by the Acquiror or its Affiliates, the
Acquiror shall give each Transferred Employee full credit for such Transferred
Employee’s service with Parent and its Affiliates to the same extent recognized
by Parent and its Affiliates immediately prior to the Closing Date.

(d) Parent and the Seller shall retain the responsibility for payment of all
covered medical, dental, life insurance and long-term disability claims or
expenses incurred by

 

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any Employee (including all Transferred Employees) prior to the Closing Date,
and the Acquiror shall not assume nor shall the Company nor any of the
Transferred Subsidiaries be responsible for any liability with respect to such
claims. The Acquiror shall remit to Parent all Transferred Employee premiums due
for medical, dental, life insurance and long-term disability coverage
attributable to the period prior to the Closing Date, but which, as of the
Closing Date, had not been collected and remitted to Parent. With respect to the
Transferred Employees, on and after the Closing Date, the Acquiror, the Company
and the Transferred Subsidiaries shall have the liability and obligation for,
and none of Parent, the Seller or any of their Affiliates shall have any
liability or obligation for: (l) any short-term disability, sick pay or salary
continuation benefits payable to Transferred Employees whose leave commences on
or after the Closing Date; or (2) any medical, dental, life insurance, long-term
disability or other welfare benefit claims incurred by Transferred Employees or
their eligible dependents on or after the Closing Date; provided that such
liability and obligation of the Acquiror, the Company and the Transferred
Subsidiaries shall not include any long-term disability benefits that are
provided under Parent’s long-term disability plan with respect to any disability
that commenced prior to the Closing Date. Any preexisting condition clause in
any of the welfare plans (including medical, dental and disability coverage)
included in the Acquiror’s benefit programs shall be waived for the Transferred
Employees. The Acquiror shall credit the Transferred Employees with any amounts
paid under the Benefit Plans prior to the Closing Date toward satisfaction of
the applicable deductible amounts and copayment obligations under the
corresponding welfare plans of the Acquiror for the plan year in which the
Transferred Employees become eligible to participate in the welfare plans of the
Acquiror.

(e) Parent and the Seller shall be responsible for providing the continuation of
group health coverage required by Section 4980B(f) of the Code (“COBRA”) to any
former employees of the Company or any Transferred Subsidiaries whose
“qualifying event,” within the meaning of Section 4980B(f) of the Code, occurred
prior to the Closing Date (and such former employees’ “qualified beneficiaries,”
within the meaning of Section 4980B(f) of the Code). The Acquiror shall be
responsible for providing the continuation of group health coverage required
under COBRA to any Employees whose qualifying event occurs on or after the
Closing Date (and such Employees’ qualified beneficiaries).

(f) The Acquiror, the Company and the Transferred Subsidiaries shall, and hereby
do, assume all liability and obligation for, and none of Parent, the Seller or
any of their Affiliates shall retain any liability or obligation for, severance
pay and obligations payable to any Transferred Employee who is terminated by the
Acquiror, the Company or any Transferred Subsidiary on or after the Closing
Date. With respect to any Transferred Employee whose employment is terminated by
the Acquiror or any of its Controlled Affiliates during the twelve (12)-month
period immediately following the Closing Date, the Acquiror shall provide, or
cause its Affiliates to provide, severance benefits to such Transferred
Employee, which shall be determined and payable in accordance with either
(i) the severance benefit plan or agreement maintained by Parent, the Seller or
any of their Affiliates for the benefit of such Transferred Employee immediately
prior to the Closing Date as set forth on Schedule 6.01(f) or (ii) the severance
benefit plan maintained for similarly situated employees of the Acquiror and its
Affiliates at the time of such Transferred Employee’s termination of employment,
whichever is more favorable to the Transferred Employee, in each case taking
into account all service recognized by Parent, the Acquiror and their respective
Affiliates in determining the amount of

 

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severance benefits payable. As soon as practicable following the Closing Date,
Parent will pay, or will cause its Affiliates to pay, to each Transferred
Employee an amount in satisfaction of the balance of that Transferred Employees’
accrued and unused vacation days (as determined as of the date that the
Transferred Employee separates from employment with the Parent and its
Affiliates), less all applicable withholdings.

(g) Parent and the Seller shall retain the obligation and liability for any
workers’ compensation or similar workers’ protection claims of any Employee or
former employee incurred prior to the Closing Date. The Acquiror, the Company
and the Transferred Subsidiaries shall, and hereby do, assume the obligation and
liability for any workers’ compensation or similar workers’ protection claims of
any Employee incurred on or after the Closing Date.

(h) The Acquiror shall establish flexible spending accounts for medical and
dependent care expenses under a new or existing plan established or maintained
by Acquiror or an Affiliate under Section 125 and Section 129 of the Code
(“Acquiror’s FSA”), effective as of the Closing Date, for each Transferred
Employee who, on or prior to such date, is a participant in, and maintains a
flexible spending account for medical or dependent care expenses under, a
Benefit Plan pursuant to Section 125 and Section 129 of the Code (“Parent’s
FSA”). As of the Closing Date, the Acquiror shall credit the applicable account
of each such Transferred Employee under Acquiror’s FSA with an amount equal to
the balance of such Transferred Employee’s account under Parent’s FSA
immediately prior to such date, and, not less than thirty (30) days following
the Closing Date, Seller shall transfer to Acquiror cash equal to the excess of
the aggregate accumulated contributions to the flexible spending accounts of
Transferred Employees under the Parent’s FSA made during the year in which the
Closing Date occurs over the aggregate reimbursement payouts made for such year
from such accounts to such Transferred Employee. The Acquiror and Parent intend
that the actions to be taken pursuant to this subsection be treated as an
assumption by the Acquiror of the portion of Parent’s FSA and the elections made
thereunder attributable to such Transferred Employees.

(i) As soon as administratively practicable following the Closing Date, Acquiror
shall have, or shall cause one of its Affiliates (including the Company and the
Transferred Subsidiaries) to have, in effect a defined contribution plan that is
intended to be qualified under Section 401(a) of the Code and that includes a
cash or deferred arrangement within the meaning of Section 401(k) of the Code
(the “Acquiror’s Retirement Plan”) in which Transferred Employees who meet the
eligibility criteria thereof shall be eligible to participate. Acquiror agrees
to cause the Acquiror’s Retirement Plan to accept eligible rollovers by
Transferred Employees from a Benefit Plan, including promissory notes evidencing
outstanding loans. Acquiror agrees that it will use commercially reasonable
efforts to cause the third-party administrators of the Acquiror’s Retirement
Plan to accept any rollover no later than thirty days following the date that
such third-party administrator receives the documentation necessary to process
such rollover or transfer.

(j) Nothing in this Agreement, whether express or implied, shall: (i) confer
upon any Employee any rights or remedies, including any right to employment or
continued employment for any period or on any terms of employment, (ii) be
interpreted to prevent or restrict Acquiror or any of its Affiliates from
modifying or terminating the employment or terms

 

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of employment of any Transfer Employee, including the amendment or termination
of any employee benefit or compensation program or arrangement, after the
Closing Date, subject to the provisions of this Article VI; or (iii) be treated
as an amendment or other modification of any employee benefit plan or
arrangement.

ARTICLE VII

TAX MATTERS

Section 7.01. Liability for Taxes.

(a) Parent and the Seller shall be liable for and pay, and shall indemnify,
defend, and hold harmless the Acquiror Indemnified Parties from and against, and
reimburse any Acquiror Indemnified Party for, any Losses with respect to
(i) Taxes imposed on the Company or any Transferred Subsidiary pursuant to
Treasury Regulation Section 1.1502-6 or similar provision of state, local or
foreign Law as a result of filing Tax Returns on a combined, consolidated or
unitary basis with Parent or the Seller or any of their Affiliates prior to the
Closing, (ii) Taxes imposed by reason of the Company or any Transferred
Subsidiary having liability for Taxes of another Person arising under principles
of transferee or successor liability or by contract (other than contracts which
(a) are ordinary course commercial agreements and (b) the primary subject matter
of which is not Taxes), as a result of activities or transactions taking place
at or prior to the Closing, (iii) Taxes imposed on the Company or any
Transferred Subsidiary, or for which the Company or any Transferred Subsidiary
may otherwise be liable or Taxes with respect to the Business, in each case for
any Pre-Closing Taxable Periods and, with respect to any Straddle Period, the
portion of such Straddle Period ending on and including the Closing Date,
(iv) Taxes that arise from or are attributable to any inaccuracy in or breach of
any representation or warranty made in Section 3.21(e), (f) or (h) or to any
breach of any Tax covenant under this Agreement, and (v) Section 338 Taxes;
provided, however, that Parent and the Seller shall not be liable for or pay,
and shall not indemnify the Acquiror from and against, (A) any Taxes (other than
any Section 338 Taxes) that result from any actual election (other than the
Section 338(h)(10) Elections, and any elections deemed made as a result of the
Section 338(h)(10) Elections) under Section 338 of the Code or any similar
provisions of state, local or foreign Law as a result of the purchase of the
Shares or the deemed purchase of the Capital Stock of any Transferred Subsidiary
or that result from the Acquiror, any Affiliate of the Acquiror, the Company or
any Transferred Subsidiary engaging in any activity or transaction that would
cause the transactions contemplated by this Agreement to be treated as a
purchase or sale of assets of any Transferred Subsidiary for federal, state,
local or other Tax purposes, (B) any Taxes imposed on the Company or any
Transferred Subsidiary or for which the Company or any Transferred Subsidiary
may otherwise be liable as a result of transactions occurring on the Closing
Date after the Closing, (C) any Taxes for which the Acquiror is liable under
Section 7.01(b), and (D) any Taxes taken into account in the calculation of the
Final Working Capital.

(b) The Acquiror shall be liable for and pay, and shall indemnify, defend, and
hold harmless the Seller Indemnified Parties from and against, and reimburse the
Seller Indemnified Party for any Taxes imposed on the Company or any Transferred
Subsidiary, or for which the Company or any Transferred Subsidiary may otherwise
be liable, that are not subject to indemnification pursuant to Section 7.01(a).

 

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(c) For purposes of Sections 7.01(a) and 7.01(b), whenever it is necessary to
determine the liability for Taxes of the Company or a Transferred Subsidiary for
a Straddle Period, the determination of the Taxes of the Company or such
Transferred Subsidiary for the portion of the Straddle Period ending on and
including, and the portion of the Straddle Period beginning after, the Closing
Date shall be determined by assuming that the Straddle Period consisted of two
(2) taxable years or periods, one which ended at the close of the Closing Date
and the other which began at the beginning of the day following the Closing
Date, and items of income, gain, deduction, loss or credit of the Company or
such Transferred Subsidiary for the Straddle Period shall be allocated between
such two (2) taxable years or periods on a “closing of the books basis” by
assuming that the books of the Company or such Transferred Subsidiary were
closed at the close of the Closing Date, provided, however, that
(I) transactions occurring on the Closing Date that are properly allocable
(based on, among other relevant factors, factors set forth in Treasury
Regulation Section 1.1502-76(b)(1)(ii)(B)) to the portion of the Closing Date
after the Closing shall be allocated to the taxable year or period that is
deemed to begin at the beginning of the day following the Closing Date, and (II)
in the case of Taxes imposed on a periodic basis (e.g., property Taxes) and
exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation, shall be apportioned between such two
(2) taxable years or periods on a daily basis. For purposes of Section 7.01(d),
where it is necessary to apportion any refund or credit between Parent or the
Seller and the Acquiror for a Straddle Period, such refund or credit shall be
apportioned in the same manner that Tax liabilities are apportioned pursuant to
this Section 7.01(c). Notwithstanding the foregoing provisions of this
Section 7.01(c), if the transactions contemplated by this Agreement result in
the reassessment of the value of any property owned by the Company or any
Subsidiary for property Tax purposes, or the imposition of any property Taxes at
a rate which is different than the rate that would have been imposed if such
transactions had not occurred, then (y) the portion of such property Taxes for
the portion of the Straddle Period ending on and including the Closing Date
shall be determined on a daily basis, using the assessed value and Tax rate that
would have applied had such transactions not occurred, and (z) the portion of
such property Taxes for the portion of such Straddle Period beginning after the
Closing Date shall be the total property Taxes for the Straddle Period minus the
amount described in clause (y) of this sentence.

(d) All refunds of Taxes (including interest actually received thereon from a
relevant Tax Authority) for which Parent and Seller are responsible pursuant to
Section 7.01(a) (other than (i) to the extent such refund results from the
carryback of a Tax attribute of the Company or any Transferred Subsidiary
relating to a Post-Closing Taxable Period or (ii) any such refunds reflected on
the Final Working Capital Statement) shall be for the account of Seller, and
Acquiror shall pay such amounts (less Acquiror’s out-of-pocket expenses incurred
in connection with obtaining such refund and less any Taxes incurred by
Acquiror, its Affiliates, the Company or any Transferred Subsidiary in
connection with the receipt of such refund or interest) within thirty (30) days
to Seller if such refunds are received by Acquiror, the Company or any
Transferred Subsidiary. Acquiror shall be entitled to all other refunds of Taxes
(including interest received thereon from a relevant Tax Authority) in respect
of any Taxes of the Company or any Transferred Subsidiary (including to the
extent such refund results from the carryback of a Tax attribute of the Company
or any Transferred Subsidiary relating to a Post-Closing Taxable Period), and
Seller shall pay such amounts (less Seller’s out-of-pocket costs incurred in
connection with obtaining such refund and less any Taxes incurred by Seller,
Parent or its Affiliates in connection with the receipt of such refund or
interest) within thirty (30) days to Acquiror if such amounts are received by
Seller, Parent or any Affiliate thereof.

(e) Notwithstanding anything herein to the contrary, the Acquiror shall pay, and
shall indemnify the Seller against, any real property transfer or gains Tax,
sales Tax, use Tax, stamp Tax, stock transfer Tax, or other similar Tax imposed
on the transactions contemplated by this Agreement. The Acquiror shall prepare
and timely file all Tax Returns required to be filed in respect of any Taxes for
which it is liable pursuant to this Section 7.01(e) (including any and all
notices required to be given with respect to bulk sales taxes).

 

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Section 7.02. Tax Returns.

(a) Parent and the Seller shall timely file or cause to be timely filed when due
(taking into account all extensions properly obtained) all Tax Returns that are
required to be filed by or with respect to the Company and the Transferred
Subsidiaries for Pre-Closing Taxable Periods (in the case of Tax Returns
required to be filed by or with respect to the Company or any Transferred
Subsidiary on a combined, consolidated or unitary basis with Parent and the
Seller or any of their Controlled Affiliates other than solely the Company or
any Transferred Subsidiary) or due on or prior to the Closing (in the case of
other Tax Returns) and in each case the Seller shall remit or cause to be
remitted any Taxes due in respect of such Tax Returns. The Acquiror shall timely
file or cause to be timely filed when due (taking into account all extensions
properly obtained) all other Tax Returns that are required to be filed by or
with respect to the Company and each Transferred Subsidiary and the Acquiror
shall remit or cause to be remitted any Taxes due in respect of such Tax
Returns. With respect to Tax Returns to be filed by the Acquiror pursuant to the
immediately preceding sentence that relate to Pre-Closing Taxable Periods or any
Straddle Period (x) except to the extent otherwise required by applicable Law,
such Tax Returns shall be filed in a manner consistent with past practice and no
position shall be taken, election made or method adopted that is inconsistent
with positions taken, elections made or methods used in prior periods in filing
such Tax Returns (including any position which would have the effect of
accelerating income to periods for which Parent and the Seller are liable or
deferring deductions to periods for which the Acquiror is liable) and (y) such
Tax Returns shall be submitted to Parent not later than thirty (30) days prior
to the due date for filing such Tax Returns (or, if such due date is within
forty-five (45) days following the Closing Date, as promptly as practicable
following the Closing Date) for review and approval by Parent, which approval
may not be unreasonably withheld, conditioned or delayed, but may in all cases
be withheld, conditioned or delayed if such Tax Returns were not prepared in
accordance with clause (x) of this sentence.

(b) Parent, the Seller or the Acquiror, shall pay the other party for the Taxes
for which Parent, the Seller or the Acquiror, respectively, is liable pursuant
to Section 7.01 but which are payable with any Tax Return to be filed by the
other party pursuant to Section 7.02(a) upon the written request of the party
entitled to payment, setting forth in detail the computation of the amount owed
by Parent, the Seller or the Acquiror, as the case may be, but in no event later
than five (5) days prior to the due date for paying such Taxes.

(c) The Acquiror shall notify the Seller before the Acquiror, any Affiliate of
the Acquiror, the Company or any Transferred Subsidiary amends, files for the
first time in any

 

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jurisdiction, refiles or otherwise modifies (or grants an extension of any
statute of limitation with respect to) any Tax Return of the Company or any
Transferred Subsidiary with respect to any Pre-Closing Taxable Periods (or with
respect to any Straddle Period). None of the Acquiror or any Affiliate of the
Acquiror shall (or shall cause or permit the Company or any Transferred
Subsidiary to) amend, file for the first time in any jurisdiction, refile or
otherwise modify (or grant an extension of any statute of limitation with
respect to) any such Tax Return without the prior written consent of the Seller,
which consent may be withheld in the sole discretion of the Seller, except such
consent is not required when the Seller and the Acquiror agree (or the
Independent Accountant, or other party selected by the Seller and the Acquiror,
determines) that such amendment or initial filing is required by applicable Law.
If the Seller and the Acquiror shall not have agreed on whether the proposed
amendment or initial filing is required by applicable Law within thirty
(30) days of when the Acquiror provided the notice described in the first
sentence of this Section 7.02(c), the Seller and the Acquiror shall submit the
amendment to the Independent Accountant (or in the event that a partner of
Deloitte Touche Tohmatsu Limited refuses or is otherwise unable to act as the
Independent Accountant, any independent certified public accounting firm in the
United States of national recognition that the Seller and the Acquiror jointly
select) to determine whether such amendment is required by applicable Law. The
Independent Accountant shall be requested to deliver as promptly as practicable
and in any event within sixty (60) days after its appointment, such
determination. The fees of the Independent Accountant incurred in making such
determination shall be shared equally by the Seller and the Acquiror.

Section 7.03. Contest Provisions.

(a) Each party shall promptly notify the other party in writing upon receipt of
notice of any pending or threatened federal, state, local or foreign Tax audits,
examinations or assessments which are reasonably expected to affect the Tax
liabilities for which such other party may be liable pursuant to Section 7.01(a)
or Section 7.01(b).

(b) Parent shall have the sole right to represent the Company’s and each
Transferred Subsidiary’s interests in any Tax audit or administrative or court
proceeding relating to Pre-Closing Taxable Periods or otherwise relating to
Taxes for which Parent, the Seller or any Affiliate thereof may be liable
pursuant to Section 7.01(a), and to employ counsel of its choice at its expense.
Acquiror shall have the right to represent the Company’s and each Transferred
Subsidiary’s interests in any other Tax audit or administrative or court
proceeding. In the case of a Straddle Period, Parent shall be entitled to
participate at its expense in any Tax audit or administrative or court
proceeding relating (in whole or in part) to Taxes attributable to the portion
of such Straddle Period ending on and including the Closing Date and, with the
written consent of the Acquiror, and at Parent’s sole expense, may assume the
entire control of such audit or proceeding. The party controlling any Tax audit
or administrative or court proceeding shall not settle any Tax claim for any
Taxes for which the other party may be liable pursuant to Sections 7.01(a) or
7.01(b), without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed.

Section 7.04. Assistance and Cooperation. After the Closing Date, each of
Parent, the Seller and the Acquiror shall (and cause their respective Controlled
Affiliates to):

(a) assist the other party in preparing any Tax Returns which such other party
is responsible for preparing and filing in accordance with Section 7.02;

 

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(b) cooperate fully in preparing for any audits of, or disputes with Tax
Authorities regarding, any Tax Returns of the Company and each Transferred
Subsidiary;

(c) make available to the other and to any Tax Authority as reasonably requested
all information, records, and documents relating to Taxes of the Company and
each Transferred Subsidiary;

(d) provide timely notice to the other in writing of any pending or threatened
Tax audits or assessments of the Company and each Transferred Subsidiary for
taxable periods for which the other may have a liability under Section 7.01;

(e) furnish the other with copies of all correspondence received from any Tax
Authority in connection with any Tax audit or information request with respect
to any such taxable period for which the other may be liable under Section 7.01;

(f) timely sign and deliver such certificates or forms as may be necessary or
appropriate to establish an exemption from (or otherwise reduce), or file Tax
Returns or other reports with respect to, Taxes described in Section 7.01(e)
(relating to sales, transfer and similar Taxes); and

(g) timely provide to the other powers of attorney or similar authorizations
necessary to carry out the purposes of this Article VII.

Section 7.05. Other Tax Matters.

(a) The indemnification provided for in this Article VII shall be the sole
remedy for any claim in respect of matters relating to Taxes (including Tax
Returns, Tax Allocation Agreements, Tax claims and Actions related to Taxes) and
the provisions of Article X shall not apply to such claims, except as expressly
provided. For the avoidance of doubt, the limitations contained in
Sections 10.01(b) and 10.02(b) shall not apply with respect to Taxes.

(b) Any claim for indemnity under this Article VII may only be made at a time
prior to sixty (60) days after the expiration of the applicable Tax statute of
limitations with respect to the relevant taxable period (including all periods
of extension, whether automatic or permissive).

(c) The parties hereto shall treat any indemnification payment made under this
Agreement as an adjustment to the Purchase Price.

Section 7.06. Tax Allocation Agreements. All Tax Allocation Agreements between
Parent, the Seller or any of their Controlled Affiliates, on the one hand, and
the Company and the Transferred Subsidiaries, on the other hand, shall be
terminated with respect to the Company and the Transferred Subsidiaries on or
prior to the Closing Date, effective as of the Closing Date, and, after the
Closing, none of the Company or the Transferred Subsidiaries shall be bound
thereby or have any further liability or obligation thereunder.

 

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Section 7.07. Election Under Section 338(h)(10).

(a) Parent and Acquiror shall make a joint election for the Company and for each
of the Transferred Subsidiaries under Section 338(h)(10) of the Code and under
similar provisions of state or local law with respect to the purchase of the
Shares or any deemed purchase of shares of Transferred Subsidiaries
(collectively, the “Section 338(h)(10) Elections”). Parent and Acquiror shall
each deliver completed and executed copies of IRS Form 8023, required schedules
thereto, and any similar state or local forms at the Closing in accordance with
Section 2.07(b)(vi) (relating to Closing Date deliveries). If any changes are
required in these forms as a result of information which is first available
after these forms are prepared, the parties will promptly make such changes.
Each of Parent and Acquiror agrees that neither it nor any of its Affiliates
shall take, or fail to take, any action to the extent such action or failure to
act, as the case may be, is inconsistent with or would otherwise prejudice any
Section 338(h)(10) Elections.

(b) Within sixty (60) days following the completion of the Final Working Capital
Statement, Acquiror shall deliver to Parent a schedule (the “Preliminary
Allocation Schedule”) allocating the ADSP (as such term is defined in Treasury
Regulation § 1.338-4) for the assets of the Company and each Transferred
Subsidiary for which an election under Section 338(h)(10) of the Code will be
made, among the assets of the Company and each such Transferred Subsidiary
(which for the avoidance of doubt shall include the Transferred Assets). The
Preliminary Allocation Schedule shall be reasonable and shall be prepared in
accordance with Section 338(h)(10) of the Code and the Treasury Regulations
thereunder. If, within thirty (30) days following delivery of the Preliminary
Allocation Schedule, Parent notifies Acquiror in writing of its disagreement
with any item in the Preliminary Allocation Schedule, Parent and Acquiror shall
endeavor to resolve the disagreement with respect to such item, and if they are
able to do so shall make such revisions to the Preliminary Allocation Schedule
to reflect such resolution, which shall be final and binding. Any item in the
Preliminary Allocation Schedule not specifically disputed by Parent as described
in the preceding sentence shall be final and binding (other than revisions
necessary to reflect the resolution of such disagreement).

If, within thirty (30) days following such notification by Parent to Acquiror,
Parent and Acquiror are unable to resolve any disagreement, Parent shall submit
all matters that remain in dispute to the Independent Accountant. As promptly as
practicable (but in no event later than sixty (60) days following the submission
to the Independent Accountant), the Independent Accountant shall deliver a
written award setting forth the Independent Accountant’s determination of the
disputed item, provided that if the Independent Accountant determines that there
is a reasonable basis for Acquiror’s position with respect to any disputed item,
the Independent Accountant shall resolve such dispute in the Acquiror’s
position. The cost of the Independent Accountant shall be paid one-half by
Parent or Seller and one-half by Acquiror.

Within thirty (30) days following receipt of the award, Acquiror shall deliver
to Parent a revised allocation schedule (the “Revised Allocation Schedule”)
allocating the ADSP (as such term is defined in Treasury Regulation § 1.338-4)
for the assets of the Company and each Transferred Subsidiary for which an
election under Section 338(h)(10) of the Code will be made, among the assets of
the Company and each such Transferred Subsidiary, which revised schedule shall
be final and binding. The Revised Allocation Schedule shall be reasonable and
shall be prepared in accordance with Section 338(h)(10) of the Code and the
Treasury

 

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Regulations thereunder and in accordance with the award. The Preliminary
Allocation Schedule or Revised Allocation Schedule, upon becoming final and
binding in accordance with the foregoing, shall constitute the “Final Allocation
Schedule.” Each of Parent and Acquiror agrees that neither it nor any of its
Affiliates shall file any Tax Returns in a manner that is inconsistent with the
Final Allocation Schedule.

ARTICLE VIII

CONDITIONS TO CLOSING AND RELATED MATTERS

Section 8.01. Conditions to Obligations of Parent and the Seller. The obligation
of Parent and the Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver by Parent and the
Seller, as applicable, at or prior to the Closing, of each of the following
conditions:

(a) Representations and Warranties. The representations and warranties contained
in Article IV shall be true and correct (without giving effect to any
limitations as to materiality or “Material Adverse Effect” set forth therein) as
of the Closing as if made on the Closing Date (other than any representation or
warranty expressly made as of another date, which representation or warranty
shall have been true and correct as of such date), except to the extent that any
failure of such representations and warranties, individually or in the
aggregate, to be so true and correct would not reasonably be expected to have a
Material Adverse Effect with respect to the Acquiror.

(b) Performance of Obligations of the Acquiror. The Acquiror shall have
performed and complied in all material respects with all agreements, obligations
and covenants required to be performed or complied with by it under this
Agreement on or prior to the Closing Date.

(c) Approvals of Governmental Authorities. The approvals of the Governmental
Authorities listed in Section 8.01(c) of the Disclosure Schedule shall have been
received (or any waiting period shall have expired or shall have been
terminated).

(d) No Governmental Order. There shall be no Governmental Order in existence
that prohibits, and no Action shall have been commenced by any Governmental
Authority that seeks to enjoin or prohibit, the Closing as contemplated by this
Agreement.

(e) Other Agreements. The Acquiror or its Affiliates, as applicable, shall
(i) have executed and delivered, or caused to be executed and delivered, to
Parent and the Seller the Administrative Services Agreement, the Reinsurance
Agreements and the Transition Services Agreements, each in the form attached
hereto together with any changes reasonably satisfactory to Parent and the
Seller and such changes as may be requested by any Governmental Authority
reviewing such agreements, (ii) have executed and delivered, or caused to be
executed and delivered, to Parent and the Seller the Security and Control
Agreements and the Trust Agreements, pursuant to Section 5.12, and (iii) the
transactions contemplated by the agreements listed in clauses (i) and (ii) which
are contemplated for consummation at the Closing shall have been consummated.

 

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Section 8.02. Conditions to Obligations of the Acquiror. The obligations of the
Acquiror to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment or waiver by the Acquiror, at or prior to the
Closing, of each of the following conditions:

(a) Representations and Warranties. The representations and warranties contained
in Article III shall be true and correct (without giving effect to any
limitations as to materiality or “Material Adverse Effect” set forth therein) as
of the Closing as if made on the Closing Date (other than any representation or
warranty expressly made as of another date, which representation or warranty
shall have been true and correct as of such date), except to the extent that any
failure of such representations and warranties, individually or in the
aggregate, to be so true and correct would not reasonably be expected to have a
Material Adverse Effect with respect to the Business, Parent or the Seller.

(b) Performance of Obligations of the Seller. The Seller shall have performed
and complied in all material respects with all agreements, obligations and
covenants required to be performed or complied with by it under this Agreement
on or prior to the Closing Date.

(c) Approvals of Governmental Authorities. The approvals of the Governmental
Authorities listed in Section 3.05 of the Disclosure Schedule and Section 4.04
of the Acquiror Disclosure Schedule shall have been received (or any waiting
period shall have expired or shall have been terminated).

(d) No Governmental Order. There shall be no Governmental Order in existence
that prohibits, and no Action shall have been commenced by any Governmental
Authority that seeks to enjoin or prohibit, the consummation of the Closing as
contemplated by this Agreement.

(e) Other Agreements. Parent, the Seller or their Affiliates, as applicable,
shall (i) have executed and delivered, or caused to be executed and delivered,
to the Acquiror the Administrative Services Agreement, the Reinsurance
Agreements and the Transition Services Agreements, each in the form attached
hereto together with any changes reasonably satisfactory to the Acquiror and
such changes as may be requested by any Governmental Authority reviewing such
agreements, (ii) have executed and delivered, or caused to be executed and
delivered, to the Acquiror the Security and Control Agreements and the Trust
Agreements, pursuant to Section 5.12, and (iii) the transactions contemplated by
the agreements listed in clauses (i) and (ii) which are contemplated for
consummation at the Closing shall have been consummated.

(f) Commutation. The LPI Insurance Companies and Equator shall have commuted all
Reinsured Liabilities previously ceded from the LPI Insurance Companies to
Equator on a quota share basis.

 

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ARTICLE IX

TERMINATION AND WAIVER

Section 9.01. Termination. This Agreement may be terminated prior to the
Closing:

(a) by the mutual written consent of Parent, the Seller and the Acquiror;

(b) by Parent, the Seller or the Acquiror if the Closing shall not have occurred
prior to twelve (12) months after the date hereof or such later date as the
parties hereto may mutually agree; provided, however, that the right to
terminate this Agreement under this Section 9.01(b) shall not be available to
any party whose failure to take any action required to fulfill any of such
party’s obligations under this Agreement shall have been the cause of, or shall
have resulted in, the failure of the Closing to occur prior to such date;

(c) by Parent, the Seller or the Acquiror in the event of the issuance of a
final, non-appealable Governmental Order restraining or prohibiting the
consummation of the Closing as contemplated by this Agreement or if any Law
shall have been enacted or enforced that renders the consummation of the Closing
unlawful;

(d) by the Acquiror if there shall have been a material breach of any
representation, warranty, covenant or agreement of Parent or the Seller such
that one or more of the conditions to the Closing set forth in Section 8.02 are
not capable of being fulfilled as of the date that is twelve (12) months after
the date hereof (subject to extension pursuant to Section 9.01(b)); or

(e) by Parent or the Seller if there shall have been a material breach of any
representation, warranty, covenant or agreement of the Acquiror such that one or
more of the conditions to the Closing set forth in Section 8.01 are not capable
of being fulfilled as of the date that is twelve (12) months after the date
hereof (subject to extension pursuant to Section 9.01(b)).

Section 9.02. Notice of Termination. Any party hereto permitted to and desiring
to terminate this Agreement pursuant to Section 9.01 shall give written notice
of such termination to the other party or parties, as the case may be, to this
Agreement.

Section 9.03. Effect of Termination. If this Agreement is terminated in
accordance with Section 9.01, this Agreement shall thereafter become void as to
all parties and have no effect, and no party hereto shall have any liability to
any other party hereto or their respective Affiliates, directors, officers,
shareholders, partners, agents or employees in connection with this Agreement,
except that (a) the obligations of the parties hereto contained in Section 5.04,
this Section 9.03 and Article XI (other than Section 11.01) shall survive such
termination and (b) termination shall not relieve any party from liability for
any willful misconduct, willful failure to perform its obligations under this
Agreement or fraud prior to such termination.

 

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ARTICLE X

INDEMNIFICATION

Section 10.01. Indemnification by Parent and the Seller.

(a) After the Closing and except as provided in Article VII, the other
provisions of this Article X and Section 11.01, Parent and Seller shall jointly
indemnify, defend and hold harmless the Acquiror and its Affiliates (including
the Company and the Transferred Subsidiaries) and Representatives (collectively,
the “Acquiror Indemnified Parties”) against, and reimburse any Acquiror
Indemnified Party for, all Losses that such Acquiror Indemnified Party may at
any time suffer or incur, or become subject to, as a result of or in connection
with:

(i) the inaccuracy or breach of any representation or warranty made by Parent or
the Seller in this Agreement;

(ii) any Excluded Asset or Excluded Liability; or

(iii) any breach or failure by Parent or the Seller to perform any of its
covenants or obligations contained in this Agreement.

(b) Notwithstanding any other provision to the contrary, neither Parent nor the
Seller shall be required to indemnify, defend or hold harmless any Acquiror
Indemnified Party against, or reimburse any Acquiror Indemnified Party for, any
Losses pursuant to Section 10.01(a)(i) (other than Losses arising solely as a
result of the inaccuracy or breach of any representation or warranty in Sections
3.01, 3.02, 3.03 and 3.23, as to which this Section 10.01(b) shall not apply)
(i) with respect to any claim (or series of related claims arising from the same
underlying facts, events or circumstances) unless such claim (or series of
related claims arising from the same underlying facts, events or circumstances)
involves Losses in excess of $25,000 (nor shall any such item that does not meet
the $25,000 threshold be applied to or considered for purposes of calculating
the aggregate amount of the Acquiror Indemnified Parties’ Losses for which
Parent and the Seller have responsibility under clause (ii) below) and
(ii) until the aggregate amount of the Acquiror Indemnified Parties’ Losses
exceeds one and a half percent (1.5%) of the Purchase Price plus the Ceding
Commission, after which Parent and the Seller shall be obligated for all Losses
of the Acquiror Indemnified Parties that are in excess of such amount. The
cumulative aggregate indemnification obligation of Parent and the Seller under
Section 10.01(a)(i) shall in no event exceed fifteen percent (15%) of the
Purchase Price plus the Ceding Commission (other than in respect of Losses
arising solely as a result of the inaccuracy or breach of any representation or
warranty in Sections 3.01, 3.02, 3.03 and 3.23, for which such indemnification
obligation shall in no event exceed one hundred percent (100%) of the Purchase
Price plus the Ceding Commission in the aggregate).

Section 10.02. Indemnification by the Acquiror.

(a) After the Closing and except as provided in Article VII, the other
provisions of this Article X and Section 11.01, the Acquiror shall indemnify,
defend and hold harmless Parent, the Seller and their Affiliates (but not the
Company or the Transferred Subsidiaries) and Representatives (collectively, the
“Seller Indemnified Parties”) against, and reimburse any Seller Indemnified
Party for, all Losses that the Seller Indemnified Party may at any time suffer
or incur, or become subject to, as a result of or in connection with:

(i) the inaccuracy or breach of any representation or warranty made by the
Acquiror in this Agreement;

 

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(ii) any Transferred Asset or Transferred Liability; or

(iii) any breach or failure by the Acquiror to perform any of its covenants or
obligations contained in this Agreement.

(b) Notwithstanding any other provision to the contrary, the Acquiror shall not
be required to indemnify, defend or hold harmless any Seller Indemnified Party
against, or reimburse any Seller Indemnified Party for, any Losses pursuant to
Section 10.02(a)(i) (other than Losses arising solely as a result of the
inaccuracy or breach of any representation or warranty in Section 4.01, 4.02, or
4.10, as to which this Section 10.02(b) shall not apply) (i) with respect to any
claim (or series of related claims arising from the same underlying facts,
events or circumstances), unless such claim (or series of related claims arising
from the same underlying facts, events or circumstances) involves Losses in
excess of $25,000 (nor shall any such item that does not meet the $25,000
threshold be applied to or considered for purposes of calculating the aggregate
amount of the Seller Indemnified Parties’ Losses for which the Acquiror has
responsibility under clause (ii) below) and (ii) until the aggregate amount of
the Seller Indemnified Parties’ Losses exceeds one and a half percent (1.5%) of
the Purchase Price plus the Ceding Commission, after which the Acquiror shall be
obligated for all Losses of the Seller Indemnified Parties that are in excess of
such amount. The cumulative aggregate indemnification obligation of the Acquiror
under Section 10.02(a)(i) shall in no event exceed fifteen percent (15%) of the
Purchase Price plus the Ceding Commission (other than in respect of Losses
arising solely as a result of the inaccuracy or breach of any representation or
warranty in Section 4.01, 4.02, or 4.10, for which such indemnification
obligation shall in no event exceed one hundred percent (100%) of the Purchase
Price plus the Ceding Commission in the aggregate).

Section 10.03. Notification of Claims.

(a) A Person that may be entitled to be indemnified under this Agreement (the
“Indemnified Party”), shall promptly notify the party or parties liable for such
indemnification (the “Indemnifying Party”) in writing of any pending or
threatened claim or demand by a third party that the Indemnified Party has
determined has given or could reasonably give rise to a right of indemnification
under this Agreement (including a pending or threatened claim or demand asserted
by a third party against the Indemnified Party, such claim being a “Third Party
Claim”), describing in reasonable detail the facts and circumstances with
respect to the subject matter of such claim or demand; provided, however, that
the failure to provide such notice shall not release the Indemnifying Party from
any of its obligations under this Article X except to the extent the
Indemnifying Party is prejudiced by such failure, it being understood that
notices for claims in respect of a breach of a representation, warranty,
covenant or agreement (other than a Post-Closing Covenant) must be delivered
prior to the expiration of any applicable survival period specified in
Section 11.01 for such representation, warranty, covenant or agreement.

 

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(b) Upon receipt of a notice of a Third Party Claim from an Indemnified Party
pursuant to Section 10.03(a), (i) with respect to any Third Party Claim in
respect of which indemnification may be sought under Section 10.01(a)(ii) or
Section 10.02(a)(ii), the Indemnifying Party, by notice to the Indemnified Party
delivered within ten (10) Business Days of the receipt of notice of such claim,
shall assume, or (ii) with respect to any other Third Party Claim, the
Indemnifying Party, by notice to the Indemnified Party delivered within ten
(10) Business Days of the receipt of notice of such claim, may assume, the
defense and control of such Third Party Claim; provided, however, that any
Indemnified Party shall be entitled to participate in any such defense with
counsel of its own choice at its own expense. The Indemnified Party may take any
actions reasonably necessary to defend such Third Party Claim prior to the time
that it receives a notice from the Indemnifying Party as contemplated by the
preceding sentence. The Indemnified Party and the Indemnifying Party shall make
reasonably available to each other and their respective agents and
representatives all relevant business records and other documents available to
them that are necessary or appropriate for the defense of any Third Party Claim,
subject to any bona fide claims of attorney-client privilege and each of the
Indemnifying Party and the Indemnified Party shall use its commercially
reasonable efforts to assist, and to cause the employees and counsel of such
party to assist, in the defense of such Third Party Claim. The Indemnifying
Party shall be authorized to consent to a settlement of, or the entry of any
judgment arising from, any Third Party Claim, without the consent of any
Indemnified Party; provided that such settlement (A) to the extent that an
Indemnified Party may have any liability with respect to such action or claim
for which it is entitled to indemnification hereunder, includes as an
unconditional term thereof the delivery by the claimant or plaintiff to the
Indemnified Party of a written release from all liability in respect of such
Third Party Claim, (B) does not impose any liabilities or obligations on the
Indemnified Party (other than as contemplated by Section 10.01(b) or 10.02(b))
or (C) does not involve any injunctive relief against the Indemnified Party with
respect to such action or claim. The Indemnified Party shall not settle,
compromise or consent to the entry of any judgment with respect to any claim or
demand for which it is seeking indemnification from the Indemnifying Party or
admit to any liability with respect to such claim or demand without the prior
written consent of the Indemnifying Party.

(c) Notwithstanding anything to the contrary in this Article X, no Indemnifying
Party shall have any liability under this Article X for any Losses arising out
of or in connection with any Third Party Claim that is settled or compromised by
an Indemnified Party without the prior consent of such Indemnifying Party.

Section 10.04. Payment. In the event an Action for indemnification under this
Article X shall have been finally determined, the amount of such final
determination shall be paid to the Indemnified Party, on demand in immediately
available funds. An Action, and the liability for and amount of damages
therefor, shall be deemed to be “finally determined” for purposes of this
Article X when the parties to such Action have so determined by mutual agreement
or, if disputed, when a final non-appealable Governmental Order shall have been
entered.

 

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Section 10.05. Exclusive Remedies. Each of Parent, the Seller and the Acquiror
acknowledge and agree that:

(a) prior to the Closing, other than in the case of willful misconduct, willful
failure to perform its obligations under this Agreement or actual fraud by
Parent, the Seller or any of their respective Controlled Affiliates or
Representatives, the sole and exclusive remedy of the Acquiror for any breach or
inaccuracy of any representation, warranty or covenant contained in this
Agreement shall be refusal to close the purchase and sale of the Shares
hereunder; and

(b) following the Closing, other than in the case of actual fraud by Parent, the
Seller, the Acquiror or any of their respective Controlled Affiliates or
Representatives, and except for breaches or non-performance of provisions in
this Agreement for which the remedy of specific performance is available, the
indemnification provisions of Article VII and Article X, shall be the sole and
exclusive remedies of Parent, the Seller and the Acquiror, respectively, for any
breach of the representations or warranties in this Agreement and for any
failure to perform or comply with any covenants or agreements contained in this
Agreement.

Section 10.06. Additional Indemnification Provisions.

(a) Parent, the Seller and the Acquiror agree that for all purposes of this
Article X (including both determining whether there has been a breach of
representation, warranty and covenant and determining the amount of
indemnifiable Losses relating to any such breach), each representation,
warranty, covenant and other agreement set forth in this Agreement shall be read
and construed without giving effect to any limitations as to materiality or
“Material Adverse Effect” set forth therein. The parties agree that the
foregoing allocation of risk is equitable in light of the agreed amount
limitations set forth in Sections 10.01(b) and 10.02(b), above.

(b) Parent, the Seller and the Acquiror agree, for themselves and on behalf of
their respective Controlled Affiliates, that with respect to each
indemnification obligation in this Agreement, any other Transaction Agreement or
any other document executed or delivered in connection with the Closing (i) each
such obligation shall be calculated on an After-Tax Basis, (ii) all Losses shall
be net of any Eligible Insurance Proceeds, (iii) in no event shall the
Indemnifying Party have liability to the Indemnified Party (other than in
connection with Section 10.02(a)(ii); provided, however, that the limitation in
Section 10.06(b)(iii)(A) with respect to punitive damages shall apply to
Section 10.02(a)(ii)) for: (A) any consequential, special, incidental or
punitive damages, or any Losses calculated by using multiples or any valuation
methodologies or similar measures used in arriving at or that may be reflective
of the Purchase Price (other than any such damages or similar items actually
paid to any unaffiliated third party in a Third Party Claim), (B) Losses to the
extent based on reputational harm (other than any such damages or similar items
that are paid to any unaffiliated third party in a Third Party Claim) or (C) any
costs and expenses of investigation, assertion, dispute, enforcement, defense or
resolution, including attorneys’, actuaries’, accountants’ and other
professionals’ fees, disbursements and expenses, to the extent incurred in
connection with any claim or dispute among the parties hereto as to whether a
Seller Indemnified Party, on the one hand, or an Acquiror Indemnified Party, on
the other hand, is entitled to indemnification under Article VII or this Article
X for any particular Loss or Losses or to specific enforcement under
Section 11.14 (for the avoidance of doubt, the limitations in the subsection
(C) shall not apply with respect to costs and expenses relating to the
investigation, assertion, dispute, enforcement, defense or resolution in respect
of any Third Party Claim, including reasonable attorneys’, actuaries’,

 

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accountants’ and other professionals’ fees, disbursements and expenses in
respect of any Third Party Claim) and (iv) in no event shall the Indemnifying
Party have liability to the Indemnified Party for any Loss, or portion thereof,
as applicable to the extent reflected or reserved for or otherwise taken into
account in determining the Final Working Capital.

(c) To the extent that an Indemnified Party has a right to seek indemnification
from a third Person (other than an Indemnifying Party) for any Loss covered
under this Article X, such Indemnified Party shall use its commercially
reasonable efforts to obtain a recovery from such third Person; provided, that
the foregoing shall not limit such Indemnified Party’s rights under this Article
X. In any case where an Indemnified Party recovers from a third Person any
amount in respect of any Loss for which an Indemnifying Party has actually
reimbursed it pursuant to this Article X (other than Retained Insurance
Proceeds), such Indemnified Party shall promptly pay over to the Indemnifying
Party the amount so recovered (after deducting therefrom the amount of expenses
incurred by it in procuring such recovery), but not in excess of the sum of
(i) any amount previously paid by the Indemnifying Party to or on behalf of the
Indemnified Party in respect of such claim and (ii) any amount expended by the
Indemnifying Party in pursuing or defending any claim arising out of such
matter.

(d) The parties hereto shall treat any indemnification payment made under this
Agreement including any indemnity payments made pursuant to Article VII, as an
adjustment to the Purchase Price.

(e) The parties hereto acknowledge and agree that the same Loss may be subject
to indemnification under more than one subsection of Section 10.01(a) or
Section 10.02(a), respectively; provided, however, that in no event shall any
Indemnified Party be entitled to duplicative recoveries for the same underlying
Loss; and provided, further, that there shall be no indemnification pursuant to
Section 10.01 or Section 10.02 with respect to any Losses which are expressly
subject to indemnification under any of the other Transaction Agreements, the
sole remedy for which shall be as set forth in such other Transaction Agreement.

(f) If any portion of Losses to be reimbursed by the Indemnifying Party may be
covered, in whole or in part, by third-party insurance coverage (each, an
“Insurance Policy”), the Indemnified Party shall promptly give notice thereof to
the Indemnifying Party (a “Notice of Insurance”). If the Indemnifying Party so
requests within sixty (60) days after receipt of a Notice of Insurance, the
Indemnified Party shall use its commercially reasonable efforts to collect the
maximum amount of insurance proceeds thereunder, in which event (i) all such
proceeds actually received, net of costs reasonably incurred by the Indemnified
Party in seeking such collection, shall be considered “Eligible Insurance
Proceeds” and (ii) the Indemnifying Party shall reimburse the Indemnified Party
for all reasonable costs incurred in connection with such collection. If the
Indemnifying Party does not request that the Indemnified Party seek coverage of
any portion of such Loss under the Insurance Policy within sixty (60) days after
receipt of a Notice of Insurance, any proceeds that the Indemnified Party may
receive thereunder shall be considered “Retained Insurance Proceeds.”

Section 10.07. Mitigation. In addition, each of the parties hereto agrees to
take all reasonable steps to mitigate their respective Losses upon and after
becoming aware of any event or condition which would reasonably be expected to
give rise to any Losses that are indemnifiable hereunder.

 

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Section 10.08. Reserves. Except as set forth in Section 3.22, notwithstanding
anything to the contrary in this Agreement or the other Transaction Agreements,
the Acquiror acknowledges and agrees that Parent and the Seller make no
representation or warranty with respect to, and nothing contained in this
Agreement, any other Transaction Agreement, or in any other agreement, document
or instrument to be delivered in connection with the transactions contemplated
hereby or thereby is intended or shall be construed to be a representation or
warranty (express or implied) of Parent or the Seller, for any purpose of this
Agreement, the other Transaction Agreements, or any other agreement, document or
instrument to be delivered in connection with the transactions contemplated
hereby or thereby, with respect to (a) the adequacy or sufficiency of the
reserves of any of the LPI Insurance Companies, (b) whether or not the reserves
of any of the LPI Insurance Companies were determined in accordance with any
actuarial, statutory or other standard, (c) the effect of the adequacy or
sufficiency of the reserves of any of the LPI Insurance Companies on any “line
item” or asset, liability or equity amount or (d) the future experience or
profitability arising from the Business or that the reserves held by the LPI
Insurance Companies or the assets supporting such reserves have been or will be
adequate or sufficient for the purposes for which they were established or that
the reinsurance recoverables taken into account in determining the amount of
such reserves will be collectible.

ARTICLE XI

GENERAL PROVISIONS

Section 11.01. Survival. The representations and warranties of Parent, the
Seller and the Acquiror contained in or made pursuant to this Agreement or in
any certificate furnished pursuant to this Agreement (other than representations
and warranties made in (i) Sections 3.01, 3.02, 3.03 and 3.23, which shall
survive the Closing indefinitely, (ii) Section 3.15, which shall survive until
the date that is thirty-six (36) months after the Closing Date, and
(iii) Section 3.21, which shall survive until the date that is sixty (60) days
after the expiration of the applicable statute of limitations), shall survive in
full force and effect until the date that is eighteen (18) months after the
Closing Date, at which time they shall terminate (and no claims shall be made
for indemnification with respect thereto under Section 10.01 or 10.02
thereafter). The Post-Closing Covenants of the parties hereto shall survive for
the period provided in such covenants and agreements, if any, or if later, until
fully performed.

Section 11.02. Expenses. Except as may be otherwise specified in the Transaction
Agreements, all costs and expenses, including fees and disbursements of counsel,
financial advisors and independent accountants, incurred in connection with the
Transaction Agreements and the transactions contemplated by the Transaction
Agreements shall be paid by the Person incurring such costs and expenses,
whether or not the Closing shall have occurred.

Section 11.03. Notices. All notices, requests, consents, claims, demands and
other communications under the Transaction Agreements shall be in writing and
shall be given or made (and shall be deemed to have been duly given or made upon
receipt) by delivery in person, by overnight courier service, by electronic mail
(followed by delivery of an original via

 

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overnight courier service) or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following respective
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 11.03):

 

  (i) if to Parent or the Seller:

QBE Holdings, Inc.

Attention: Jose Ramon Gonzalez, Chief Legal Officer

Wall Street Plaza

88 Pine Street

New York, NY 10005

Phone: 212.422.1212

Facsimile: 212.422.1313

With a concurrent copy (which shall not constitute notice) to:

Sidley Austin LLP

Attention: Sean M. Keyvan

One South Dearborn

Chicago, IL 60603

Phone: (312) 853-4660

Facsimile: (312) 853-7036

e-mail: skeyvan@sidley.com

 

  (ii) if to the Acquiror:

National General Insurance Company

Attention: Jeffrey Weissmann, General Counsel

59 Maiden Lane

38th Floor

New York, NY 10038

Phone: (212) 380-9479

Facsimile: (212) 380-9498

e-mail: jeffrey.weissmann@ngic.com

With a concurrent copy (which shall not constitute notice) to:

Debevoise & Plimpton LLP

Attention: Nicholas F. Potter

919 Third Avenue

New York, NY 10022

Phone: (212) 909-6459

Facsimile: (212) 521-7459

e-mail: nfpotter@debevoise.com

 

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Any party hereto may, by notice given in accordance with this Section 11.03 to
the other party, designate another address or Person for receipt of notices
hereunder; provided that notice of such a change shall be effective upon
receipt.

Section 11.04. Public Announcements. No party hereto or any Affiliate or
Representative of such party shall issue or cause the publication of any press
release or public announcement or otherwise communicate with any news media in
respect of the Transaction Agreements or the transactions contemplated by the
Transaction Agreements without the prior written consent of the other party
(which consent shall not be unreasonably withheld or delayed), except as may be
required by Law or applicable securities exchange rules, in which the case the
party required to publish such press release or public announcement shall allow
the other party hereto a reasonable opportunity to comment on such press release
or public announcement in advance of such publication. Prior to the Closing,
none of the parties hereto, nor any of their respective Affiliates or
Representatives, shall make any disclosure concerning plans or intentions
relating to the customers, agents or employees of, or other Persons with
significant business relationships with, the Company or any of the Transferred
Subsidiaries without first obtaining the prior written approval of the other
party hereto, which approval shall not be unreasonably withheld.

Section 11.05. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced under any Law or as a matter of
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party hereto. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties hereto as closely as possible in a
mutually acceptable manner in order that the transactions contemplated by this
Agreement be consummated as originally contemplated to the greatest extent
possible.

Section 11.06. Entire Agreement. Except as otherwise expressly provided in the
Transaction Agreements, the Transaction Agreements constitute the entire
agreement of the parties hereto with respect to the subject matter of the
Transaction Agreements and supersede all prior agreements and undertakings, both
written and oral, other than the Confidentiality Agreement to the extent not in
conflict with this Agreement, between or on behalf of Parent, the Seller or
their Affiliates, on the one hand, and the Acquiror or its Affiliates, on the
other hand, with respect to the subject matter of the Transaction Agreements.

Section 11.07. Assignment. This Agreement shall not be assigned by operation of
law or otherwise by any party hereto without the prior written consent of the
other parties hereto; provided, however, that the Acquiror may assign its rights
hereunder to any of its Affiliates, but no such assignment shall release the
Acquiror from any liability or obligation under this Agreement. Any attempted
assignment in violation of this Section 11.07 shall be void. This Agreement
shall be binding upon, shall inure to the benefit of, and shall be enforceable
by the parties hereto and their permitted successors and assigns.

 

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Section 11.08. No Third-Party Beneficiaries. Except as provided in Section 5.14
with respect to D&O Indemnified Persons and Article X with respect to the Seller
Indemnified Parties and the Acquiror Indemnified Parties, this Agreement is for
the sole benefit of the parties hereto, the Indemnified Parties (to the extent
they are entitled to indemnity herein), and their permitted successors and
assigns and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 11.09. Amendment; Waiver. No provision of this Agreement or any other
Transaction Agreement may be amended, supplemented or modified except by a
written instrument signed by all the parties to such agreement. No provision of
this Agreement or any other Transaction Agreement may be waived except by a
written instrument signed by the party against whom the waiver is to be
effective. No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by Law.

Section 11.10. Disclosure Schedules. Any disclosure with respect to a Section or
Schedule of the Disclosure Schedule shall be deemed to be disclosed for purposes
of other Sections and Schedules of the Disclosure Schedule to the extent that
such disclosure sets forth facts in sufficient detail so that the relevance of
such disclosure would be reasonably apparent to a reader of such disclosure.
Matters reflected in any Section of the Disclosure Schedule or the Acquiror
Disclosure Schedule, are not necessarily limited to matters required by this
Agreement to be so reflected. Such additional matters are set forth for
informational purposes and do not necessarily include other matters of a similar
nature. No reference to or disclosure of any item or other matter in any Section
or Schedule of the Disclosure Schedule or the Acquiror Disclosure Schedule shall
be construed as an admission or indication that such item or other matter is
material or that such item or other matter is required to be referred to or
disclosed in this Agreement. Without limiting the foregoing, no such reference
to or disclosure of a possible breach or violation of any contract, Law or
Governmental Order shall be construed as an admission or indication that breach
or violation exists or has actually occurred.

Section 11.11. Submission to Jurisdiction. Each of the Seller and the Acquiror
irrevocably and unconditionally:

(a) submits for itself and its property in any Action relating to the
Transaction Agreements (including the transactions contemplated by the
Transaction Agreements, the formation, breach, termination or validity of the
Transaction Agreements), or for recognition and enforcement of any judgment in
respect thereof, to the exclusive jurisdiction of the courts of the State of New
York sitting in the County of New York, the court of the United States of
America for the Southern District of New York, and appellate courts having
jurisdiction of appeals from any of the foregoing, and agrees that all claims in
respect of any such Action shall be heard and determined in such state courts
or, to the extent permitted by Law, in such federal court;

(b) consents that any such Action may and shall be brought in such courts and
waives any objection that it may now or hereafter have to the venue or
jurisdiction of any such Action in any such court or that such Action was
brought in an inconvenient court and agrees not to plead or claim the same;

 

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(c) agrees that service of process in any such Action may be effected by mailing
a copy of such process by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to such party at its address as provided
in Section 11.03; and

(d) agrees that nothing in this Agreement or any other Transaction Agreement
shall affect the right to effect service of process in any other manner
permitted by the Laws of the State of New York.

Section 11.12. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE
WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW PRINCIPLES OF SUCH STATE THAT
MIGHT REFER THE GOVERNANCE, CONSTRUCTION OR INTERPRETATION OF SUCH AGREEMENTS TO
THE LAWS OF ANOTHER JURISDICTION.

Section 11.13. WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER TRANSACTION AGREEMENT, OR ITS
PERFORMANCE UNDER OR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER TRANSACTION
AGREEMENT.

Section 11.14. Specific Performance. Subject to Section 10.05, the parties
hereto agree that irreparable damage would occur in the event that any of the
terms or provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. Subject to Section 10.05, it is
accordingly agreed that, notwithstanding anything to the contrary contained in
this Agreement, each of the parties hereto shall be entitled to injunctive or
other equitable relief to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court referenced in
Section 11.11(a) having jurisdiction, such remedy being in addition to any other
remedy to which any party may be entitled at law or in equity. In the event that
any Action is brought in equity to enforce the provisions of this Agreement, no
party will allege, and each party hereby waives the defense or counterclaim,
that there is an adequate remedy at law.

Section 11.15. Rules of Construction. Interpretation of this Agreement and the
other Transaction Agreements (except as specifically provided in any such
agreement, in which case such specified rules of construction shall govern with
respect to such agreement) shall be governed by the following rules of
construction: (a) words in the singular shall be held to include the plural and
vice versa, and words of one gender shall be held to include the other gender as
the context requires; (b) references to preamble, recitals, Articles, Sections,
Exhibits and Schedules are references to the preamble, recitals, Articles,
Sections, Exhibits and Schedules to this Agreement unless otherwise specified;
(c) references to “$” shall mean U.S. dollars; (d)

 

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the word “including” and words of similar import when used in the Transaction
Agreements shall mean “including without limiting the generality of the
foregoing,” unless otherwise specified; (e) the word “or” shall not be
exclusive; (f) the words “herein,” “hereof,” “hereunder,” “hereby” and similar
terms shall be deemed to refer to this Agreement as a whole and not to any
specific section; (g) the headings contained in the Transaction Agreements are
for reference purposes only and shall not affect in any way the meaning or
interpretation of the Transaction Agreements; (h) the Transaction Agreements
shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting or causing any
instrument to be drafted; (i) if a word or phrase is defined, the other
grammatical forms of such word or phrase shall have a corresponding meaning;
(j) references to any statute, listing rule, rule, standard, regulation or other
law (i) include a reference to the corresponding rules and regulations and
(ii) include a reference to each of them as amended, modified, supplemented,
consolidated, replaced or rewritten from time to time; (k) references to any
section of any statute, listing rule, rule, standard, regulation or other law
include any successor to such section; (l) any reference to “days” means
calendar days unless Business Days are expressly specified; and (m) references
to any contract (including the Transaction Agreements) or organizational
document are to the contract or organizational document as amended, modified,
supplemented or replaced from time to time, unless otherwise stated.

Section 11.16. Counterparts. This Agreement and each of the other Transaction
Agreements may be executed in one or more counterparts, and by the different
parties to each such agreement in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to any Transaction Agreement by facsimile or electronic mail
shall be as effective as delivery of a manually executed counterpart of any such
agreement.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the date first written above by their respective duly authorized officers.

 

QBE INVESTMENTS (NORTH AMERICA), INC. By:

/s/ David B. Duclos

Name: David B. Duclos Title: Chief Executive Officer, President QBE HOLDINGS,
INC. By:

/s/ David B. Duclos

Name: David B. Duclos Title: Chief Executive Officer, President NATIONAL GENERAL
HOLDINGS CORP. By:

/s/ Michael Karfunkel

Name: Michael Karfunkel Title: Chairman and Chief Executive Officer

Signature Page

Master Transaction Agreement

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

EXHIBIT A

FORM OF ADMINISTRATIVE SERVICES AGREEMENT

See attached.

 

A-1

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EXHIBIT A

FORM OF ADMINISTRATIVE SERVICES AGREEMENT

REINSURANCE ADMINISTRATIVE SERVICES AGREEMENT

BY AND AMONG

QBE INSURANCE CORPORATION,

PRAETORIAN INSURANCE COMPANY,

QBE SPECIALTY INSURANCE COMPANY,

EQUATOR REINSURANCES LIMITED

AND

INTEGON NATIONAL INSURANCE COMPANY

DATED AS OF [●], 2015

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

Table of Contents

 

         Page  

Section 1.

 

Definitions

     2   

Section 2.

 

Appointment; Designation of Agreement Managers

     4   

Section 3.

 

Services

     5   

Section 4.

 

Service Standards; Inability to Perform Services; Errors

     8   

Section 5.

 

Compliance With Applicable Laws and Policies; Cooperation

     9   

Section 6.

 

Administrative Fees

     12   

Section 7.

 

Access to Books and Records; Audits

     12   

Section 8.

 

Confidential Information

     14   

Section 9.

 

Computer Systems Access; Security and Integrity

     15   

Section 10.

 

Disaster Recovery Plan

     17   

Section 11.

 

Force Majeure

     17   

Section 12.

 

Term; Termination

     17   

Section 13.

 

Indemnification

     19   

Section 14.

 

New Insurance Policies

     20   

Section 15.

 

Insurance and Fidelity Bond

     22   

Section 16.

 

Dispute Resolution

     22   

Section 17.

 

Miscellaneous

     23   

 

Exhibit A   Service Levels and Reports Exhibit B   Security Requirements Exhibit
C   Disaster Recovery Plan Exhibit D   Insurance and Fidelity Bond Security
Requirements

 

i

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REINSURANCE ADMINISTRATIVE SERVICES AGREEMENT

THIS REINSURANCE ADMINISTRATIVE SERVICES AGREEMENT (this “Agreement”) is made
and entered into as of [●], 2015 (the “Closing Date”) by and among QBE INSURANCE
CORPORATION, a Pennsylvania-domiciled property and casualty insurance company,
PRAETORIAN INSURANCE COMPANY, a Pennsylvania-domiciled property and casualty
insurance company, QBE SPECIALTY INSURANCE COMPANY, a North Dakota-domiciled
property and casualty insurance company, and EQUATOR REINSURANCES LIMITED, a
Bermuda-domiciled insurance company (each, a “Service Recipient” and
collectively, the “Service Recipients”), and INTEGON NATIONAL INSURANCE COMPANY,
a North Carolina-domiciled property and casualty insurance company (the
“Administrator”). For convenience, the Service Recipients, on the one hand, and
the Administrator, on the other hand, may each be referred to as a “Party” and
collectively as the “Parties.”

WHEREAS, pursuant to that certain Master Transaction Agreement entered into as
of July 15, 2015 (the “Master Transaction Agreement”), the Service Recipients
and the Administrator are simultaneously entering into a 100% Quota Share
Reinsurance Agreement (the “Quota Share Reinsurance Agreement”), under which the
Service Recipients, as the ceding companies, shall cede to the Administrator, as
the reinsurer, the Reinsured Liabilities (as defined herein) pursuant to the
Quota Share Reinsurance Agreement;

WHEREAS, concurrently with the execution of this Agreement, the Service
Recipients and Equator Reinsurances Limited (“Equator”), an Affiliate (as
defined in the Master Transaction Agreement) of the Service Recipients, are
entering into a Loss Portfolio Transfer Reinsurance Agreement (the “Internal
Reinsurance Agreement”), under which the Service Recipients, as the ceding
companies, shall cede to Equator, as the reinsurer, the Reinsured Liabilities
pursuant to the Internal Reinsurance Agreement;

WHEREAS, concurrently with the execution of this Agreement, Equator and the
Administrator are entering into a Loss Portfolio Transfer Reinsurance Agreement
(the “External Reinsurance Agreement” and, together with the Quota Share
Reinsurance Agreement and the Internal Reinsurance Agreement, the “Reinsurance
Agreements”), under which Equator, as the ceding company, shall cede to the
Administrator, as the reinsurer, the Reinsured Liabilities pursuant to the
External Reinsurance Agreement; and

WHEREAS, each Service Recipient desires to retain the Administrator, as an
independent contractor of each Service Recipient, to provide certain
administrative services relating to the Policies (as defined in the Reinsurance
Agreements) and the Reinsured Liabilities and to make any payments due to the
insureds under the Policies, in each case on the terms and subject to the
conditions set forth herein, and the Administrator desires to provide such
services, in consideration for the Service Recipients entering into the
Reinsurance Agreements and the other Transaction Agreements (as defined herein).

 

1

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NOW, THEREFORE, in consideration of the mutual and several promises and
undertakings herein contained, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Parties agree as
follows:

Section 1. Definitions.

Any capitalized term used but not defined herein shall have the meaning set
forth in the Reinsurance Agreements. The following terms have the respective
meanings set forth below throughout this Agreement:

“Administrator” shall have the meaning set forth in the preamble.

“Administrator Indemnitees” shall have the meaning set forth in Section 13(a).

“Agreement” shall have the meaning set forth in the preamble.

“Agreement Manager” shall have the meaning set forth in Section 2(d).

“Alternative Administrator” shall have the meaning set forth in Section 4(b).

“Books and Records” means all records and all other data and other information
(in whatever form maintained) in the possession or control of and available to,
either Party and its Affiliates (including computer generated, recorded or
stored records) relating primarily to the Policies, including customer lists,
policy information, insurance policy forms, rate filing information, rating
plans, claim records, sales records, advertising and promotional materials,
other files and records relating to regulatory matters, reinsurance records,
underwriting records, records related to producers, financial and accounting
records (but excluding any Tax returns, Tax records and all other work papers,
data and information with respect to Taxes).

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

“Confidential Information” shall have the meaning set forth in Section 8(c).

“Defaulted Administrative Service” shall have the meaning set forth in
Section 4(b).

“Disaster Recovery Plan” shall have the meaning set forth in Section 10.

“Discloser” shall have the meaning set forth in Section 8(a).

“Dispute” shall have the meaning set forth in Section 16(a).

“Equator” shall have the meaning set forth in the recitals.

“Excluded Services” shall have the meaning set forth in Section 3(a).

“External Reinsurance Agreement” shall have the meaning set forth in the
recitals.

“Force Majeure Event” shall have the meaning set forth in Section 11(a).

“Guest” shall have the meaning set forth in Section 9(a).

“Guest User” shall have the meaning set forth in Section 9(a).

 

2

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“Host” shall have the meaning set forth in Section 9(a).

“Internal Reinsurance Agreement” shall have the meaning set forth in the
recitals.

“Master Transaction Agreement” shall have the meaning set forth in the recitals.

“New Business Period” shall have the meaning set forth in Section 14(a)(i).

“New Insurance Policies” shall have the meaning set forth in Section 14(a)(i).

“Party” shall have the meaning set forth in the preamble.

“Quota Share Reinsurance Agreement” shall have the meaning set forth in the
recitals.

“Recipient” shall have the meaning set forth in Section 8(a).

“Reinsurance Agreements” shall have the meaning set forth in the recitals.

“Reinsured Liabilities” shall have the meaning set forth in the applicable
Reinsurance Agreement.

“Related Administrative Services” shall have the meaning set forth in
Section 4(b).

“Security Requirements” shall have the meaning set forth in Section 9(a).

“Service Levels” shall have the meaning set forth in Section 4(a).

“Service Recipient(s)” shall have the meaning set forth in the preamble.

“Service Recipient Indemnitees” shall have the meaning set forth in
Section 13(b).

“Services” shall have the meaning set forth in Section 2(a).

“Software” means all computer software, including assemblers, applets,
compilers, source code, object code, firmware, binary libraries, development
tools, design tools, user interfaces in any form or format, however fixed and
all associated documentation.

“Systems” shall have the meaning set forth in Section 9(a).

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

“Term” shall have the meaning set forth in Section 12(a).

 

3

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“Transaction Agreement” shall have the meaning set forth in the Master
Transaction Agreement.

“Virus” means any “back door,” “drop dead device,” “time bomb,” “kill switch,”
“Trojan horse,” “virus,” or “worm” (as such terms are commonly understood in the
software industry) or any other code designed or intended to perform any of the
following functions: (a) disrupting, disabling, harming or otherwise impeding in
any manner the operation of, or providing unauthorized access to, a computer
system or network or other device on which such code is stored or installed; or
(b) damaging or destroying any data or file without the user’s consent.

Section 2. Appointment; Designation of Agreement Managers.

 

  (a) Appointment and Acceptance. Each Service Recipient appoints the
Administrator as its administrator to perform (or cause to be performed) in
accordance with the terms hereof for and on behalf of such Service Recipient, at
the Administrator’s sole expense, all required, necessary and appropriate
administrative and other services, including the services set forth in
Section 3, with respect to the Business and the Policies (other than those
services to be provided by the Seller and its Affiliates pursuant to the terms
of the Transition Services Agreement for so long as such services are required
to be provided by the Seller and its Affiliates under the Transition Services
Agreement), all on the terms and subject to the limitations and conditions set
forth herein (collectively, the “Services”). The Administrator hereby accepts
such appointment and shall perform such Services in accordance with the terms
set forth herein. The Administrator shall provide the Services in a manner that
minimizes the involvement of personnel of each Service Recipient with respect to
the administration of the Policies, subject only to any requirements of
applicable Law that require specific actions be taken by the applicable Service
Recipient without the Administrator acting on its behalf. The Administrator
shall give the Service Recipients timely notice of any actions that are legally
required to be taken by the Service Recipients or their Affiliates with respect
to the Business or the Policies and, to the extent reasonably practicable, shall
prepare in a timely manner the forms of any documentation required for Service
Recipients or their Affiliates to comply therewith.

 

  (b) Transfer of Responsibility. The Parties shall cooperate fully in the
transfer of responsibility for the performance of the Services from the Service
Recipients to the Administrator. Except as otherwise provided in this Agreement,
the Administrator shall bear all costs and expenses relating to such transfer.
The Administrator agrees to send to all policyholders and such other Persons as
determined by the Service Recipients and the Administrator, a written notice,
prepared by the Administrator and acceptable to the Service Recipients, as
applicable, advising such policyholders and other Persons that the Administrator
has been appointed by the Service Recipients, as applicable, to provide the
Services. The Administrator shall send such notice, by first class mail,
facsimile or any other form of notice duly recognized as valid under the terms
of any of the respective Policies, at its own expense, no more than thirty
(30) days after the Closing Date.

 

4

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  (c) Independent Contractor. The Administrator shall perform its obligations
under this Agreement as an independent contractor of each Service Recipient.
Nothing herein shall be deemed to constitute the Administrator and any Service
Recipient as partners, joint venturers, or principal and agent. The
Administrator has no authority to represent any Service Recipient as to any
matters, except as expressly authorized in this Agreement or in any of the
Transaction Agreements. No Service Recipient shall have any Liability for the
acts or omissions of the Administrator personnel or permitted subcontractors.
The Administrator and its Affiliates and their respective employees are not
eligible for, nor may they participate in, any employee benefit plans of any of
the Service Recipients or any of their Affiliates. None of the Service
Recipients or their Affiliates shall insure the Administrator or any of its
Affiliates for workers’ compensation coverage or for unemployment insurance.

 

  (d) Designation of Agreement Managers. The Service Recipients, on the one
hand, and the Administrator, on the other, shall each appoint an agreement
manager, each of whom shall serve as the primary contact points for the Parties
with respect to issues that may arise out of the performance of this Agreement
(each such Person, an “Agreement Manager”). Each Party may replace its
respective Agreement Manager by giving notice to the other Party’s Agreement
Manager stating the name, title and contact information for such Party’s new
Agreement Manager. The Parties shall cause the Agreement Managers to meet,
either in person or telephonically, at least once monthly during the first year
of this Agreement and quarterly thereafter, or more frequently if mutually
agreed upon, to discuss items including the following: (i) the status of the
Services, and to manage open issues related to this Agreement and performance
hereunder, (ii) any planned termination dates for particular Services, and
(iii) review service levels achieved and missed in the previous month or
quarter, as applicable, as well as non-achievement of targets and corrective
actions taken or planned. In addition, either Agreement Manager may call a
meeting with the other Agreement Manager upon three (3) Business Days prior
notice to address time critical issues related to the Services. Within thirty
(30) days of the end of each calendar year, the Administrator shall cause its
Agreement Manager to provide to the Service Recipients’ Agreement Manager a
written report summarizing all available current information on compliance with
and deviation from the applicable services levels.

Section 3. Services.

 

  (a)

Services. During the term of this Agreement and except as otherwise provided in
the Transition Services Agreement, the Services to be provided by the
Administrator hereunder shall include all services that are required, necessary
or appropriate for the administration, handling and performance of the Business
and the Policies, including all administrative and other services currently
provided by

 

5

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  the Service Recipients or their Affiliates with respect to the Business and
the Policies, and any other services that are reasonably required, necessary or
appropriate under applicable Law, the terms of the Policies or otherwise in
connection with, or incidental to, the administration of the Business. Without
limiting the generality of the foregoing, the Services to be provided by the
Administrator hereunder shall include all Services except for those Services
that each Service Recipient is required to provide without the Administrator
acting on its behalf by applicable Law or Governmental Authorities (the
“Excluded Services”). If required by applicable Law, the Service Recipients may
at any time upon at least thirty (30) days’ prior written notice to the
Administrator redesignate any Service as an Excluded Service.

 

  (b) Resources. Except as otherwise expressly provided in this Agreement, and
subject to the requirements of applicable Law, the Administrator shall provide
all of the facilities, personnel, equipment, Software, services and other
resources necessary to provide the Services.

 

  (c) Subcontracting. The Administrator may delegate or subcontract any of its
obligations under this Agreement to any third party so long as the Administrator
provides notice of such delegation or subcontracting to the Service Recipients
prior to commencement of performance by such third party; provided, that the
Administrator shall use the same degree of care in selecting any such
subcontractor as it would if such subcontractor was being retained to provide
similar services directly to the Administrator; provided, further, that, except
for those subcontractors that have performed Services outside of the United
States prior to the date hereof, such subcontractor shall perform all Services
in the United States. The Administrator shall remain fully responsible for the
performance of the Services by each subcontractor, for each subcontractor’s
compliance with the terms of this Agreement, and for the acts and omissions of
such subcontractor and subcontractor’s employees or agents. The Administrator
shall be responsible for all payments to its subcontractors.

 

  (d) Authorization. Each Service Recipient hereby authorizes the Administrator
on its behalf to (i) endorse for payment all checks, drafts and money orders
payable to any of the Service Recipients as payment of premiums or other amounts
payable to or chargeable by such Service Recipient with respect to the Policies
and (ii) to draft or debit accounts of any owner of a Policy (who or which has
given the applicable Service Recipient such right and privilege) for premiums or
other amounts payable with respect to the Policies and to remit each of such
amounts in (i) and (ii) to the Administrator for deposit into an account in such
Service Recipient’s name. Each Service Recipient hereby delegates to the
Administrator all of its rights and privileges to draft or debit the accounts of
any policyholders for premiums or other amounts due under the Policies pursuant
to existing pre-authorized bank draft or electronic fund transfer arrangements
between such Service Recipient and such policyholders.

 

6

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  (e) Reports. As of and following the Effective Time, subject to the last
sentence of this Section 3(e), the Administrator shall prepare any reports
reasonably requested by the Service Recipients in connection with the Business
and the Policies (i) to enable the Service Recipients to comply with any and all
applicable Laws, including all statutory insurance reporting, tax reporting and
SAP and GAAP financial reporting requirements and any current or future
informational reporting, prior approval or other requirements imposed by any
Governmental Authority or (ii) for any other reasonable business purpose. Any
reports required to be prepared by the Administrator shall be prepared and
delivered on a timely basis in order for the Service Recipients to comply with
any filing deadlines required by applicable Law, by contract or by the Service
Recipients’ internal procedures and policies. All such reports shall include
such information as may reasonably be requested by the Service Recipients. The
initial list of such reports is set forth on Exhibit A hereto, and additional
reports may be added to Exhibit A as reasonably required by the Service
Recipients during the term of this Agreement with the consent of the
Administrator, such consent not to be unreasonably withheld or delayed.

 

  (f)

Attorney-in-fact. In order to assist and to more fully evidence the authority
granted pursuant to Section 2(a), subject to the limits and restrictions set
forth in other provisions of this Agreement, each Service Recipient hereby
nominates, constitutes and appoints the Administrator as its attorney-in-fact
with a limited power of attorney to act in such Service Recipient’s name with
respect to the following matters: (i) to do any and all lawful acts with respect
to the Policies or Reinsurance Arrangements that such Service Recipient could do
under the Policies or Reinsurance Arrangements, (ii) to issue, in the name of
such Service Recipient, New Insurance Policies pursuant to Section 14, and
(iii) to proceed by all lawful means (A) to perform any and all obligations of
such Service Recipient under the Policies or the Reinsurance Arrangements,
(B) to enforce any right, defend against any Liability and pay any amounts
arising under the Policies or the Reinsurance Arrangements, (C) to sue or defend
(in the name of such Service Recipient, when necessary) any action arising under
the Policies or the Reinsurance Arrangements, (D) to collect any and all sums
due or payable to such Service Recipient under the Policies or the Reinsurance
Arrangements, including through any automatic charge authorizations of Persons
who own or hold Policies, and (E) to sign (in the name of such Service
Recipient, when necessary) vouchers, receipts, releases and other papers in
connection with any of the foregoing matters. All of the Services shall be
performed by the Administrator in the name of and on behalf of each Service
Recipient. Any and all correspondence with policyholders or other documents
signed by the Administrator on behalf of the Service Recipients shall disclose
that the Administrator is acting as administrative agent or, where appropriate,
attorney-in-fact, of the Service Recipients. Notwithstanding the foregoing, if
(I) any Service Recipient determines in good faith with reasonable basis that
the Administrator has used, is continuing to use, or has threatened to use the
foregoing limited power of attorney for purposes not necessary for the provision
of the Services under this Agreement, (II) any Service Recipient determines in
good faith with reasonable basis that the grant of the

 

7

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  foregoing limited power of attorney violates, or may violate, applicable Law
or (III) any Service Recipient or any of its Affiliates is requested or required
by a Governmental Authority, or determines in good faith with reasonable basis
that it may be requested or required by a Governmental Authority, to modify or
revoke the foregoing limited power of attorney, then such Service Recipient may
revoke its foregoing limited power of attorney or place additional conditions or
limitations on the foregoing power of attorney.

Section 4. Service Standards; Inability to Perform Services; Errors.

 

  (a) Service Standards. The Administrator acknowledges that the performance of
the Services in an accurate and timely manner is of paramount importance to the
Service Recipients. The Administrator shall perform the Services (i) in good
faith and with the care, competence, skill, prudence and diligence of a person
experienced in administering the Business and the Policies and in accordance
with applicable Law, applicable industry standards and the terms of the
Policies, or as otherwise in accordance with the service levels set forth in
Exhibit A (the “Service Levels”), and (ii) in accordance with the general
service standards maintained by the Administrator and its Affiliates in
administering policies similar to the Policies, including those relating to
completeness, diligence, accuracy, quality, timeliness, frequency, volume,
amount, priority, care, responsiveness and detail. The Administrator
acknowledges that the performance of all Services required by this Agreement in
compliance with the standards in the foregoing sentence is of critical
importance to the Service Providers. For the duration of this Agreement, the
Administrator hereby covenants that it shall, at its sole cost and expense, as
an independent contractor:

 

  (i) employ and retain staff with the requisite experience, skill and expertise
to perform the Services it is obligated to perform hereunder, in a manner
consistent with the standards set forth herein and using the Administrator’s
facilities, systems and equipment; and

 

  (ii) own, hold, possess and maintain (either directly or through a
sub-contractor) all licenses, franchises, permits, privileges, immunities,
approvals and other authorizations from any Governmental Authority that are
necessary for the provision by the Administrator of the Services.

 

  (b)

Inability to Perform Services. Subject to Section 11, in the event that the
Administrator is unable to perform any Service (including as a result of a Force
Majeure Event) for a period that would reasonably be expected to exceed thirty
(30) days or such shorter period as may be required by applicable Law (the
“Defaulted Administrative Service”), the Administrator and the Service
Recipients, as applicable, shall mutually agree on alternative means of
providing the Defaulted Administrative Service and any other Service(s) so
connected to such Defaulted Administrative Service as to make separation of such
services impossible (the “Related Administrative Services”). If alternative
means for the

 

8

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  provision of the Defaulted Administrative Service and any Related
Administrative Service cannot be agreed upon by the Parties, the Service
Recipients may procure the Defaulted Administrative Service and any Related
Administrative Service for the Policies by commercially reasonable means but
only until such time as the Administrator is in a position to provide such
Service. The Administrator shall deliver copies of applicable Books and Records
to the Person selected to perform the Defaulted Administrative Service and any
Related Administrative Service (the “Alternative Administrator”) and shall be
solely responsible for all reasonable costs incurred in restoring the Services
which have not been provided due to its failure to adhere to its obligations
under this Agreement, including all reasonable costs for the Defaulted
Administrative Service and any Related Administrative Service provided by any
Alternative Administrator selected pursuant to this Section 4(b).

 

  (c) Errors. The Administrator shall, at its own expense, correct any errors in
Services caused by it as soon as practicable after discovering such error or
receiving notice thereof from any Service Recipient or other Person.

Section 5. Compliance With Applicable Laws and Policies; Cooperation.

 

  (a) General. The Administrator, and all subcontractors to whom the
Administrator has delegated any of its duties hereunder, shall perform all the
Services hereunder in compliance with all applicable Law and with the Policies.

 

  (b) Regulatory Proceedings. If a Party receives notice of, or otherwise
becomes aware of, any regulatory inquiry, investigation or proceeding relating
to the Policies, to the extent permitted by applicable Law, such Party shall
promptly notify the other Party thereof, whereupon the Parties shall cooperate
in good faith and use their respective commercially reasonable efforts to
resolve such matter, and the Administrator shall have the right to direct the
handling of such inquiry, investigation or proceeding and the Service Recipients
shall cooperate in resolving the matter as directed by the Administrator. The
Administrator shall prepare and send responses to any regulatory inquiry to the
applicable Governmental Authority, with a copy to the Service Recipients, in the
name of the Service Recipients and at the Administrator’s sole cost and expense
within the earlier of (i) the Governmental Authority’s requested time frame for
response or (ii) the time frame as permitted by applicable Law; provided,
however, that the Administrator shall provide all proposed responses to the
Service Recipients as soon as reasonably practicable prior to submission of any
such response and provide the Service Recipients with sufficient opportunity to
comment on the proposed response. The Administrator shall act reasonably in
incorporating any comments to the response provided by any Service Recipient.
Notwithstanding the foregoing, the Service Recipients, as applicable, shall have
the ultimate right to direct, supervise and control the handling of such
inquiry, investigation or proceeding and the Administrator shall cooperate in
resolving the matter as directed in writing referencing this Section 5(b) by
such Service Recipient.

 

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  (c) Litigation Proceedings. The Administrator shall promptly notify the
Service Recipients of any litigation, arbitration or other legal proceeding that
has been instituted or threatened in writing arising out of or relating to any
Policy, in all cases no more than ten (10) Business Days after receipt of notice
thereof. The Service Recipients shall give prompt notice to the Administrator of
any litigation, arbitration or other legal proceeding made or brought against
any Service Recipient in writing after the Closing Date arising out of or
relating to any Policy to the extent known to it and not made against or served
on the Administrator as administrator hereunder, and in no event more than ten
(10) Business Days after receipt or notice thereof, and shall promptly furnish
to the Administrator copies of all pleadings in connection therewith. The
Administrator shall assume the defense of the Service Recipients with respect to
any such legal proceedings. The Administrator shall defend and hold harmless, at
its own expense and in the name of the Service Recipients when necessary, any
litigation, arbitration or other legal proceeding arising out of or relating to
any Policy. The Administrator shall keep the Service Recipients fully informed
of the progress of any such litigation, arbitration or other legal proceeding
and provide to the Service Recipients a report summarizing the nature of such
proceedings, the alleged actions or omissions giving rise to such proceedings
and copies of any files or other documents that any of the Service Recipients
may reasonably request in connection with its review of these matters, in each
case other than such files, documents and other information as would, in the
judgment of counsel to the Administrator, lead to the loss or waiver of legal
privilege. A Service Recipient shall have the right, at its own expense, to
engage its own separate legal representation and to participate fully in the
defense of any litigation with respect to the Policies, in which such Service
Recipient is named as a party without waiving any rights to indemnification it
may have under Section 13. The Administrator and the Service Recipients shall
cooperate with each other with respect to the administration of any such legal
proceeding with respect to the Policies. The Administrator shall not settle any
legal proceeding without the Service Recipients’ prior written consent unless
(i) there is no finding or admission of any violation of applicable Law or any
violation of the rights of any Person by any Service Recipient or any of their
Affiliates, (ii) the sole relief provided is monetary damages that are paid in
full by the Administrator and no culpability is found on the part of, and a full
and complete release is provided to, any Service Recipient and its Affiliates,
(iii) the settlement does not encumber any of the assets of any Service
Recipient or its Affiliates or contain any restriction or condition that would
apply to or adversely affect any Service Recipient or its Affiliates or the
conduct of business by any Service Recipient and its Affiliates and (iv) such
legal proceeding neither is certified, nor seeks certification, as a class
action.

 

  (d)

Defense of Actions. Notwithstanding anything to the contrary in this Section 5,
the Service Recipients, upon written notice to the Administrator, shall have the
right at any time to assume sole and exclusive control over the response,
defense, settlement or other resolution of any legal proceeding (other than
legal proceedings brought by any Governmental Authority, which are the subject
of Section 5(b)) (i) that seeks an order, injunction or other equitable relief
against

 

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  any Service Recipient or its Affiliates; (ii) that has been certified, or
seeks certification, as a class action; (iii) if the Administrator does not
accept material comments made by the Service Recipients as to its handling of
such legal proceeding; or (iv) that, if successful, could, in the Service
Recipients’ reasonable opinion, materially interfere with the business, assets,
liabilities, obligations, financial condition, results of operations or
reputation of any Service Recipient or any of its Affiliates; provided, that if
any Service Recipient assumes control over the resolution of any legal
proceeding pursuant to this Section 5, (A) the Service Recipient shall be
responsible for reasonable costs and expenses associated with such Action (other
than judgments and amounts paid in settlement that constitute Reinsured
Liabilities under the Reinsurance Agreements) and (B) such Service Recipient
shall not settle any legal proceeding without the Administrator’s prior written
consent unless (I) there is no finding or admission of any violation of
applicable Law or any violation of the rights of any Person by the Administrator
or any of its Affiliates, (II) the sole relief provided is monetary damages that
are paid in full by the Service Recipient and no culpability is found on the
part of, and a full and complete release is provided to, the Administrator and
its Affiliates and (III) the settlement does not encumber any of the assets of
the Administrator or any of its Affiliates or contain any restriction or
condition that would apply to or adversely affect the Administrator or any of
its Affiliates or the conduct of business by the Administrator or any of its
Affiliates.

 

  (e) Customer Inquiries. Each Party shall promptly notify the other Party
regarding any inquiries or complaints from customers with respect to the
administration of the Policies and cooperate in good faith and use its
commercially reasonable efforts to resolve such complaint; provided, however,
that the Administrator shall in the first instance have the right to direct the
handling of such complaint and the Service Recipients shall cooperate in
resolving the complaint as directed by the Administrator. Notwithstanding the
foregoing, the applicable Service Recipient shall have the ultimate right to
direct the handling of such complaint and the Administrator shall cooperate in
resolving the matter.

 

  (f) Cooperation. Each Party shall cooperate fully with the other in all
reasonable respects in order to accomplish the objectives of this Agreement. At
the Administrator’s request and expense, each Service Recipient shall cooperate
with the Administrator in identifying and making available to the Administrator
the form-filing files and related regulatory approvals of the Service Recipients
with respect to the Policies and all other information with respect to the
Policies in the possession of the Service Recipient that may be reasonably
required for the Administrator to prepare and file all necessary policy, rate,
other regulatory and any other similar filings with any applicable Governmental
Authority with respect to the Policies (which filings may be made by the
Administrator on its own behalf or on behalf of the Service Recipient).

 

  (g)

Ultimate Authority. Notwithstanding any other provision contained in this
Agreement to the contrary, each Service Recipient shall, to the full extent
required by applicable Law (i) retain the ultimate authority to make all final
decisions with

 

11

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  respect to the administration of the Business and the Policies and (ii) have
the right to direct the Administrator in its capacity as administrator to
perform any action necessary for the Policies to comply with applicable Law, to
cease performing any action that constitutes a violation of applicable Law or to
take any action, or to refrain from taking any action, to prevent material
irreparable harm to the Service Recipients or their Affiliates; provided, that
in exercising such right, the Service Recipients shall act in good faith, taking
into account the intent of the parties to, and the stated purposes of, this
Agreement and the Transaction Agreements.

Section 6. Administrative Fees.

 

  (a) Services Fee. The Administrator agrees (i) to perform the Services at its
own expense and without any rights of reimbursement from any of the Service
Recipients, in consideration of the Service Recipients having entered into the
Reinsurance Agreements and the other Transaction Agreements and for other good
and valuable consideration, the receipt of which is hereby acknowledged and
(ii) that no other compensation or reimbursement shall be payable to the
Administrator in respect of the Services provided hereunder. The Administrator
shall reimburse each Service Recipient for any and all costs (which shall be
deemed to include, in addition to all out-of-pocket costs, all corporate
overhead and other costs reasonably allocated to the performance of the Excluded
Services in a manner consistent with past practice) incurred in connection with
the performance of the Excluded Services to the extent relating to the Policies
of such Service Recipient.

 

  (b) Taxes. The Service Recipient shall pay and be liable for any applicable
sales, value added, harmonized sales, goods and services, use, consumption, or
similar Taxes imposed on it by applicable Law in connection with the Services.
The Administrator shall, to the extent practicable, separately state such sales,
use, excise, services and other similar taxes on the relevant invoice for any
Services. The Administrator shall deliver to the Service Recipient correct,
complete and executed originals of Internal Revenue Service Form W 9 (i) on or
before the date hereof and (ii) promptly upon learning that any such previously
provided form has become obsolete, incorrect or ineffective.

Section 7. Access to Books and Records; Audits.

 

  (a)

Access to the Administrator’s Books and Records. For so long as any Service
Recipient is required to maintain its own Books and Records under applicable Law
(and at a minimum for the length of the Term), the Administrator shall maintain
(including backing up its computer files, and maintaining facilities and
procedures for safekeeping and retaining documents) Books and Records on behalf
of such Service Recipient in accordance with prudent standards of insurance
recordkeeping, in accordance with all applicable Laws, in accordance with
Administrator’s internal record retention procedures and policies and in a
format reasonably accessible by each Service Recipient and its Representatives.

 

12

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  The Administrator shall permit its Books and Records to be inspected and
audited by such Service Recipient and its representatives and advisors, at
reasonable times during the business hours of the Administrator. In addition,
the Service Recipients and their Representatives shall be allowed to make copies
of such Books and Records. The Administrator shall allow the Service Recipients
and their Representatives to interview the Administrator’s and its Affiliates’
Representatives for any reasonable purpose relating to the Services, including
in connection with the Service Recipients’ preparation or examination of
regulatory and statutory filings and financial statements and the conduct of any
litigation relating to the Policies (other than any litigation or dispute
between any Service Recipient or its Affiliates, on the one hand, and the
Administrator or its Affiliates, on the other hand), or the conduct of any
Governmental Authority, contract holder, reinsurer or other dispute resolution
whether pending or threatened. The foregoing audit rights may include audits
(i) of practices and procedures, (ii) of Systems, (iii) of general controls and
security practices and procedures, (iv) of disaster recovery and backup
procedures, (v) necessary to enable such Service Recipient to meet applicable
requirements imposed by any Governmental Authority, and (vi) for any other
reasonable purpose as determined by the Service Recipient. This Agreement shall
not be construed as to restrict such representatives and advisors from
requesting further documentation in accordance with this Section 7(a) and in
addition to the audit rights above. To that effect, upon reasonable advance
notice (unless a shorter notice is mandated by an order of a Governmental
Authority), the Administrator shall provide any Service Recipient with access to
its Books and Records as is reasonably requested by such Service Recipient in
connection with the Services provided under this Agreement or otherwise in
connection with this Agreement or the Reinsurance Agreements. The Administrator
shall fully cooperate with any review or audit required by applicable Law or
otherwise mandated or ordered by a Government Authority, stock exchange,
accreditation body or court order or otherwise required by such Service
Recipient to meet regulatory, discovery or other requirements of applicable Law.
The Administrator shall provide full cooperation to such Governmental
Authorities, advisors and representatives as are contemplated by this Section 7.

 

  (b) Privileged Information. Notwithstanding any other provision of this
Agreement to the contrary, the Administrator shall not be obligated to provide
such access to any Books and Records or information if such Administrator
determines, in its reasonable judgment, that doing so would violate applicable
Law or a contract, agreement or obligation of confidentiality owing to a third
party, jeopardize the protection of an attorney-client privilege, or expose such
Party to Liability for disclosure of sensitive or personal information (it being
understood that the Administrator shall use commercially reasonable efforts to
enable such information to be furnished or made available to the Service
Recipients or their Representatives without so jeopardizing privilege or
contravening such applicable Law or contract, including by entering into a
customary joint defense agreement or common interest agreement).

 

  (c) Ownership of Books and Records. For the avoidance of doubt, each Service
Recipient shall own and have custody of its Books and Records (including those
maintained by the Administrator on such Service Recipient’s behalf), and the
Administrator shall own and have custody of its Books and Records.

 

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Section 8. Confidential Information.

 

  (a) Confidentiality. All Confidential Information of a Party (the “Discloser”)
disclosed to or received by the other Party, its Affiliates or their directors,
officers, employees, agents or subcontractors (the “Recipient”) in connection
with the activities contemplated by this Agreement shall not be used by the
Recipient except in connection with the activities contemplated by this
Agreement, shall be maintained in confidence by the Recipient under reasonable
measures no less protective than those measures used by the Recipient to protect
its own Confidential Information, and shall not otherwise be disclosed by the
Recipient to any other person. Confidential Information of a Party includes,
with respect to each Party, Confidential Information of such Party’s Affiliate.

 

  (b) Permitted Disclosures. Notwithstanding Section 8(a), a Recipient may
disclose the relevant aspects of the Discloser’s Confidential Information to its
officers, agents, employees and subcontractors to the extent that such
disclosure is reasonably necessary for the performance of the Recipient’s duties
and obligations under this Agreement; provided, that such Recipient takes all
reasonable measures to ensure that such Confidential Information is not
disclosed or duplicated in contravention of the terms and conditions of this
Agreement by such officers, agents, employees or subcontractors, including
obtaining a customary confidentiality agreement from any such officer, agent,
employee or subcontractor. Notwithstanding anything to the contrary herein, the
obligations in this Section 8 do not restrict any disclosure required by any
applicable Law, or by order of any Governmental Authority; provided, that the
Recipient, to the extent permissible under applicable Law, provides prior notice
of such disclosure to the Discloser, and assists the Discloser in its
commercially reasonable efforts to obtain a protective order or other remedy or
minimize the degree of such disclosure. In the event that such protective order
or other remedy is not obtained, or the Discloser waives compliance with this
Section 8(b), the Recipient or its Affiliates, as applicable, shall furnish only
that portion of the Confidential Information which is legally required to be
provided and exercise its commercially reasonable efforts to obtain assurances
that appropriate confidential treatment shall be accorded the Confidential
Information.

 

  (c)

Definition. As used herein, “Confidential Information” means all information of
any kind concerning the Discloser or any of its Affiliates obtained directly or
indirectly from the Discloser or any of its Affiliates, or Representatives in
connection with the transactions contemplated by this Agreement and the other
Transaction Agreements, except information (i) ascertainable or obtained from
public or published sources, (ii) which is lawfully disclosed to the Recipient
by sources other than the Discloser who are not known by the Recipient to be
bound

 

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  by a confidentiality obligation or otherwise prohibited from transmitting the
information to Recipient by a contractual, legal or fiduciary obligation,
(iii) which is or becomes known to the public (other than through a breach of
this Agreement or any other confidentiality or non-disclosure obligation of any
Person), (iv) which was in the Recipient’s possession prior to disclosure
thereof to the Recipient and which was not subject to any obligation to keep
such information confidential; or (v) which is independently developed by the
Recipient or its Affiliates without the use or benefit of any information that
would otherwise be Confidential Information.

 

  (d) Ownership of Confidential Information. As between the Parties, each
Discloser’s Confidential Information is and shall remain the sole and exclusive
property of such Discloser.

 

  (e) Violations. Each Party shall promptly advise the other Party if it learns
or has reason to believe that any Person that has had access to Confidential
Information has violated or intends to violate any of the confidentiality
provisions of this Agreement.

 

  (f) Return of Confidential Information. Upon the request of a Discloser, the
Recipient shall promptly return to the Discloser or destroy (and certify in a
letter to the Discloser that such destruction has occurred) any written,
electronic or other Confidential Information of the Discloser, except to the
extent that such Confidential Information must be preserved pursuant to
applicable Law or to the extent that such Confidential Information is retained
in an electronic archival or backup system and destruction is not reasonably
practicable; provided, that such Confidential Information shall remain subject
to the requirements of this Section 8 for so long as the Recipient retains such
information.

 

  (g) Injunctive Relief. Each Party hereby acknowledges that it shall be
impossible to measure the damages that would be suffered by the other Party if
such Party failed to comply with this Section 8 and that in the event of any
such failure, there may not be adequate remedy at applicable Law for such other
Party. Therefore, each Party shall be entitled, in addition to any other rights
and remedies it may have, to the remedies provided in Section 17(g).

Section 9. Computer Systems Access; Security and Integrity.

 

  (a)

System Access. If, in connection with the Administrator’s performance of the
Services hereunder, a Party (the “Host”) grants another Party (the “Guest”)
access to the Host’s computer system(s), Software, data, information or other
materials (collectively, “Systems”), the Guest shall comply with the Host’s
security policies, procedures and requirements (“Security Requirements”) which
the Host shall provide to the Guest in writing. The Guest shall use commercially
reasonable efforts to ensure that only the members of the Guest’s personnel
(each, a “Guest User”) specifically authorized to access the Host’s Systems on
behalf of the Guest are permitted access to the Host’s Systems. The Host has the
right, in

 

15

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  its sole discretion, to require any Guest User to enter into a Systems access
agreement (the form of which shall be approved in advance by the Guest) prior to
granting such Guest User access to the Host’s Systems. In addition, neither the
Guest nor any Guest User shall tamper with, compromise or circumvent any
security or audit measures employed by the Host. Unless authorized by the Host
in writing, no Guest User shall engage in the destruction or alteration of the
Host’s Systems or of any information contained therein, including the
introduction of any Virus into the Host’s Systems. If a Guest User or any other
Person who is an employee of the Guest (i) seeks to circumvent or circumvents
the Host’s Security Requirements, (ii) obtains unauthorized access to the Host’s
Systems, or (iii) engages in activities that are reasonably likely to lead to
the unauthorized access, destruction, alteration or loss of the Host’s Systems
or of data or information contained therein, the Guest shall immediately
(A) terminate or block such Guest User’s or other such Person’s access to the
Host’s Systems and (B) notify the Host thereof. In addition, the Host has the
right to take measures reasonably necessary to protect the Host’s Systems from
such Guest User or other such Person. During the Term, the Host shall be
provided reasonably sufficient access to the Guest’s facilities, at reasonable
times and upon reasonable notice, to audit the Guest’s use of the Host’s Systems
and compliance with the Host’s Security Requirements. Upon the termination or
expiration of the applicable services, the Guest and the Host shall use
commercially reasonable efforts to terminate all Guest User’s access to the
Host’s Systems.

 

  (b) Maintenance of Security Requirements. The Security Requirements currently
implemented by the Administrator are attached hereto as Exhibit B.1 The
Administrator agrees to comply with all of the Security Requirements (or
requirements substantially similar thereto and in no case less protective) and
with all applicable Laws for so long as the Services are provided pursuant to
this Agreement.

 

  (c) Virus Protection. In connection with the Administrator’s performance of
the Services hereunder, the Administrator agrees to take all reasonable steps to
prevent the introduction of any Virus into any Party’s Systems, including the
implementation, maintenance and regular use of anti-Virus Software which meets
the industry standards (but that is in no event less protective than the
Software that the Host uses to protect its Systems). If, in connection with the
Administrator’s performance of the Services hereunder, a Virus is introduced
into a Party’s Systems, the Administrator shall (i) provide written notice to
the Service Recipients within twenty-four (24) hours of Administrator’s
discovery thereof, and (ii) use commercially reasonable efforts, or reasonably
cooperate with the other Party’s efforts, as applicable, to eradicate such Virus
and mitigate any effects thereof. If a Virus causes a loss of data, upon a
Service Recipient’s request, the Administrator shall use commercially reasonable
efforts to restore such lost data. Each Party shall bear its own costs and
expenses associated with the remediation of a Virus; provided that, if it is
determined that such Virus was introduced by a specific Party, such Party shall
reimburse the other Parties for all reasonable costs and expenses actually
incurred in connection therewith.

 

1  Note to Seller: Subject to review of Exhibit B.

 

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Section 10. Disaster Recovery Plan. To the extent not already part of the
Administrator’s current business practice, the Administrator shall develop
disaster recovery and business recovery plans with respect to the Services,
consistent with requirements set forth in Exhibit C (the “Disaster Recovery
Plan”).2 As part of the Services, the Administrator shall implement the Disaster
Recovery Plan(s) for the continuation of the Services, including recovery of the
Service Recipients’ data and replacement or recovery of the Administrator
personnel, the Administrator’s operating environment, and telecommunications
infrastructure as necessary to provide the Services with limited interruption of
the Services or material degradation of the quality of the Services.

Section 11. Force Majeure.

 

  (a) Definition. Neither Party is liable for any failure or delay in the
performance of its obligations under this Agreement: (i) to the extent such
failure or delay is caused, without fault of the non-performing Party, by
natural disaster, hurricane, earthquake, floods, fire, catastrophic weather
conditions, diseases or other elements of nature or acts of God, acts of war
(declared or undeclared), insurrection, riot, civil disturbance or disorders,
rebellion, sabotage, embargoes, terrorist acts, or explosions, strikes, failure
of or damage to public utility; and (ii) cannot reasonably be circumvented by
the non-performing Party by enacting the Disaster Recovery Plan (an event
meeting the criteria of both items (i) and (ii), a “Force Majeure Event”).

 

  (b) Excused Performance. Upon the occurrence of a Force Majeure Event, the
non-performing Party shall be excused from its non-performance or observance of
the affected obligation(s) for as long as such circumstances prevail and such
Party continues to attempt to recommence performance whenever and to whatever
extent possible without delay. Any Party so delayed in its performance shall
promptly notify the other by telephone or by the most timely means otherwise
available (to be confirmed in writing within two (2) Business Days or upon
resumption of commercially accepted forms of written communication, whichever
occurs later) and describe in reasonable detail the circumstances causing such
delay. Notwithstanding anything to the contrary herein, the occurrence of a
Force Majeure Event shall not relieve the Administrator of its obligation to
perform all applicable steps pursuant to the Disaster Recovery Plan.

Section 12. Term; Termination.

 

  (a) Term. The term of this Agreement begins as of the Closing Date and ends on
the earlier of (i) the last day of the calendar quarter during which the Service
Recipients have notified the Administrator in writing that no Service is
required to be provided under the terms of the Policies and all Reinsured
Liabilities under the

 

2 

Note to Seller: Subject to discussion of Exhibit C.

 

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  Policies have expired or been extinguished, (ii) any time upon the mutual
consent of the Parties, or (iii) the date upon which this Agreement is
terminated pursuant to Section 12(b) or (c) (any of (i), (ii) or (iii), the
“Term”).

 

  (b) Earlier Termination by the Service Recipients. The Service Recipients may
terminate this Agreement (i) if the Reinsurance Agreements are terminated
pursuant to their terms, or (ii) immediately, in the event that the
Administrator becomes insolvent or is placed into liquidation, rehabilitation,
conservation, supervision, receivership or similar proceedings (whether
voluntary or involuntary), or there is instituted against it proceedings for the
appointment of a receiver, liquidator, rehabilitator, conservator or trustee in
bankruptcy, or other agent known by whatever name, to take possession of its
assets or assume control of its operations. Upon exercise of their termination
right, the Service Recipients shall deliver to the Administrator notice
identifying a termination date for this Agreement that is not earlier than the
termination date of the Reinsurance Agreements. Upon receipt of such notice, the
Service Recipients and the Administrator shall cooperate fully to transfer as
promptly as practicable the Services (including any Systems and Software used in
the provision of the Services) and Books and Records (or where appropriate,
copies thereof) to the Service Recipients or such Service Recipients’ designee
so that the Service Recipient or its designee shall be able to perform the
Services without interruption following termination of this Agreement and this
Agreement shall not be terminated with respect to the Service Recipients unless
and until such transfer occurs.

 

  (c) Earlier Termination by the Administrator. The Administrator may terminate
this Agreement if the Reinsurance Agreements are terminated pursuant to their
terms. Upon exercise of its termination right, the Administrator shall deliver
to the Service Recipients notice identifying a termination date for this
Agreement that is not earlier than the termination date of the Reinsurance
Agreements. Upon termination of this Agreement, the Service Recipients and the
Administrator shall cooperate fully to transfer as promptly as practicable the
Services (including any Systems and Software used in the provision of the
Services) and Books and Records (or where appropriate, copies thereof) to the
Service Recipients or the Service Recipients’ designee so that the Service
Recipients or their designees shall be able to perform the Services without
interruption following termination of this Agreement and this Agreement shall
not be terminated unless and until such transfer occurs.

 

  (d) Post-Termination Transition and Administration.

 

  (i) In the event of termination of this Agreement for any reason, the
Administrator shall continue to provide incidental services for as long as is
reasonably needed by any Service Recipient, on a time and materials basis,
including services related to document retention, information needed for Tax
reporting, litigation support and other incidental services that may be agreed
upon by the Parties.

 

  (ii) Termination Costs. In the event that this Agreement is terminated in
accordance with Section 12(b) or (c), all costs arising out of the termination
shall be the responsibility of the Administrator and its Affiliates including
(i) the cost of transitioning the Services to a substitute provider, (ii) any
fees paid to any such substitute provider and (iii) any costs incurred by the
Service Recipients with respect to the Services after termination of this
Agreement

 

  (e) Survival. Notwithstanding the other provisions of this Section 12,
Sections, 1, 7, 8, 9, 13, 16 and 17 shall remain in full force and effect after
the expiration or termination of this Agreement.

 

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Section 13. Indemnification.

 

  (a) Indemnification by the Service Recipients. Each Service Recipient shall
indemnify, defend and hold harmless the Administrator and its Affiliates and
their respective officers, directors and employees (collectively the
“Administrator Indemnitees”) from and against any and all Damages actually
sustained, incurred or suffered by the Administrator Indemnitees to the extent
arising out of or related to (i) the breach of any covenant or agreement of such
Service Recipient set forth herein, without duplication of indemnification under
any other Transaction Agreement or (ii) any successful enforcement of this
indemnity.

 

  (b) Indemnification by the Administrator. The Administrator shall indemnify,
defend and hold harmless each Service Recipient and its Affiliates and their
respective officers, directors and employees (collectively the “Service
Recipient Indemnitees”) from and against any and all Damages actually sustained,
incurred or suffered by the Service Recipient Indemnitees to the extent arising
out of or related to (i) the breach of any covenant or agreement of the
Administrator set forth herein, without duplication of indemnification under any
other Transaction Agreement, (ii) any violation of applicable Law by the
Administrator or its Affiliates, (iii) the provision of the Services by the
Administrator or its Affiliates or (iv) any successful enforcement of this
indemnity.

 

  (c) Procedures for Indemnification. Any proceedings related to indemnification
under Sections 13(a) and (b) shall be conducted in accordance with the
procedures set forth in Section 10.03 of the Master Transaction Agreement,
mutatis mutandis.

 

  (d) Exclusive Remedy. The indemnification provisions of this Section 13 shall
be the exclusive remedy for any breach of this Agreement, except (i) for the
termination provisions set forth herein, (ii) for actual fraud relating to entry
into this Agreement, or (iii) with respect to matters for which the remedy of
specific performance, injunctive relief or other non-monetary equitable remedies
are available

 

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Section 14. New Insurance Policies

 

  (a) Authority to Write New Insurance Policies.

 

  (i) Subject to Sections 14(b) and 14(c), each Service Recipient hereby
authorizes and grants the Administrator the authority, from the Effective Time
until the 18 month anniversary of the Effective Time (such period, the “New
Business Period”), to quote, market, sell, underwrite, issue and renew
(including renewals of Policies in force as of the date hereof), in the name of
the Service Recipients, as applicable, policies with respect to the Business
(“New Insurance Policies”) in states where the Service Recipients were actively
issuing Policies immediately prior to the Effective Time.

 

  (ii) The Administrator shall have the sole and exclusive right to make
decisions with respect to the issuance and renewal of New Insurance Policies in
accordance with Section 14(a)(i) and the non-renewal, cancellation or
termination of Policies, in each case, subject to compliance with applicable
Law, Section 14(d) and the terms and conditions set forth in the applicable
Policies, the Quota Share Reinsurance Agreement and this Agreement.

 

  (iii) Subject to the Quota Share Reinsurance Agreement and in accordance with
the terms thereof, all New Insurance Policies shall be automatically ceded
(effective immediately upon issuance thereof) by the Service Recipients to the
Administrator, as reinsurer thereunder, and reinsured by the Administrator on a
one hundred percent (100%) indemnity reinsurance basis.

 

  (iv) All costs and expenses associated with the quotation, marketing, sale,
underwriting, issuance and renewal of New Insurance Policies, including taxes,
surcharges and assessments imposed on the basis of Premiums or otherwise with
respect to the New Issuance Policies, shall be borne by the Administrator

 

  (v) During the term of this Agreement, the Administrator shall use its
commercially reasonable efforts in accordance with applicable Law, including
seeking applicable regulatory approvals, permits, licenses or consents and
making all necessary regulatory filings (including any required rate and form
filings), to have New Insurance Policies issued by the Administrator or another
entity selected by the Administrator that is not affiliated with the Service
Recipients by the end of the New Business Period, such that the number of New
Insurance Policies issued by the Service Recipients is minimized. The Service
Recipients shall cooperate with the Administrator, at the Administrator’s
request and expense, in connection with seeking all such regulatory approvals,
permits, licenses and consents and making such regulatory filings.

 

  (vi) During the term of this Agreement, the Service Recipients shall maintain
all necessary regulatory approvals, permits, licenses or consents to issue New
Insurance Policies on behalf of the Administrator.

 

20

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  (b) Guidelines. Any and all New Insurance Policies shall be (i) quoted,
marketed, sold, underwritten, issued and renewed in accordance with the Service
Recipients’ standards, guidelines, procedures and practices as may be provided
to the Administrator by the Service Recipients from time to time and in
accordance with applicable Laws and (ii) written on policy forms and using any
applicable rating plans in effect for Service Recipients for such type of
business at the Effective Time, except for changes required by applicable Law or
changes that have been approved in advance and in writing by the Service
Recipients.

 

  (c) Termination of Authority. The authority granted to the Administrator under
Section 14(a) (i) shall terminate immediately without further action by any
Person: (A) in the event that the Administrator assigns or delegates, or seeks
to assign or delegate, its underwriting authority with respect to such New
Insurance Policies to any Person without the prior written consent of the
Service Recipients (which consent may be withheld in the Service Recipients’
sole discretion); (B) in the event that the Administrator issues, or seeks to
issue, any New Insurance Policies outside of any jurisdiction in which any
Service Recipient is appropriately licensed to issue any such New Insurance
Policy; (C) upon termination of the Quota Share Reinsurance Agreement or the
inability of the Administrator, as reinsurer under the Quota Share Reinsurance
Agreement, to reinsure New Insurance Policies under the Quota Share Reinsurance
Agreement; or (D) in the event that the Administrator becomes insolvent or is
placed into liquidation, rehabilitation, conservation, supervision, receivership
or similar proceedings (whether voluntary or involuntary), or there is
instituted against it proceedings for the appointment of a receiver, liquidator,
rehabilitator, conservator or trustee in bankruptcy, or other agent known by
whatever name, to take possession of its assets or assume control of its
operations; and (ii) may be terminated by the Service Recipients upon written
notice to the Administrator upon the occurrence of a Triggering Event, subject
to any cure period. The authority granted to the Administrator hereunder to
issue New Insurance Policies shall terminate with respect to any state where the
Administrator or its Affiliate has obtained the required licenses, permits and
authorizations to issue such policies. Upon termination of the Administrator’s
authority under Section 14(a), whether pursuant to this Section 14(b) or
expiration of the New Business Period, the Service Recipients shall have the
right to effect the non-renewal, cancellation or termination, at the
Administrator’s expense, of any Policy, subject to applicable Law. The
Administrator shall cooperate with the Service Recipients if the Service
Recipients are required, by applicable Law or a Governmental Authority, to
withdraw from any lines, kinds or classes of insurance business in connection
with the transition of the Business to the Administrator.

 

  (d)

Non-Renewals/Replacements. In connection with each renewal date of each Policy
that occurs on or after the New Business Period, the Administrator shall, or
shall cause one of its Affiliates to, send on behalf of the Service Recipients
(i) to

 

21

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  each policyholder of a Policy that can be non-renewed as of such renewal date
under applicable Law, a written notice in a form reasonably acceptable to the
applicable Service Provider and containing all information required by
applicable Law, notifying such policyholder that its Policy will not be renewed
and (ii) to each policyholder of a Policy that cannot be renewed as of such
renewal date under applicable Law, a written notice in a form reasonably
acceptable to the applicable Service Provider offering a new insurance policy
issued by the Administrator or one of its Affiliates that has terms and rates
that are comparable to or more favorable to the policyholder than the terms and
rates that shall be offered to the relevant policyholder by the relevant Service
Provider, as a replacement for the expiring Policy.

 

  (e) Marketing Activities.

 

  (i) The Administrator may develop and use new marketing and sales materials
for the New Insurance Policies, only with the prior written consent of the
Service Recipients. The Administrator shall provide the Service Recipients with
copies of all such materials prior to use thereof.

 

  (ii) The Administrator shall have responsibility for, and shall bear all
costs, expenses and liabilities associated with, all activities relating to the
marketing and sale of the New Insurance Policies by the Administrator, including
developing, printing and distributing marketing materials, and training agents,
brokers and producers.

Section 15. Insurance and Fidelity Bond.

The Administrator shall maintain insurance and fidelity bond coverages in
accordance with the specifications set forth in Exhibit D.

Section 16. Dispute Resolution.

 

  (a) General. Prior to taking any legal action related to this Agreement
(excepting any legal action for immediate injunctive relief or equitable
relief), any dispute, claim or controversy between the Parties arising out of or
relating to this Agreement, including with respect to the validity, performance,
interpretation or application of any provision of this Agreement or the
performance by the Administrator or any Service Recipient of their respective
obligations hereunder (a “Dispute”) shall be attempted to be resolved as
provided in this Section 16. A Dispute is deemed to commence as of the date a
Party informs the other Party in writing of the existence of a Dispute.

 

  (b) Informal Dispute Resolution. The Parties shall first attempt to resolve
their Dispute informally in the following manner:

 

  (i)

Either Party may submit the Dispute to the Agreement Managers, who shall meet as
often as the Parties reasonably deem necessary to gather

 

22

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  and analyze any information relevant to the resolution of the Dispute. The
Agreement Managers shall negotiate in good faith in an effort to resolve the
Dispute; and

 

  (ii) If the Agreement Managers are unable to resolve the Dispute within
fifteen (15) days, or otherwise determine in good faith that resolution through
continued discussions by the Agreement Managers does not appear likely, then the
Parties may seek whatever remedies are available under applicable Law.

 

  (c) Continuity of Services. The Administrator acknowledges that the
performance of its obligations, including the Services, pursuant to this
Agreement is critical to the business and operations of the Service Recipients.
Accordingly, in the event of a Dispute between any of the Service Recipients, on
the one hand, and the Administrator, on the other hand, the Administrator shall
continue to perform the Services in good faith during the resolution of such
Dispute unless and until this Agreement is terminated in accordance with the
provisions hereof.

Section 17. Miscellaneous.

 

  (a) Entire Agreement. This Agreement constitutes the entire agreement between
the Service Recipients and the Administrator with respect to the Services and
supersedes all prior agreements and undertakings, both written and oral.

 

  (b) Notices. All notices, requests, consents, claims, demands and other
communications under this Agreement shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by overnight courier service, by electronic mail (followed
by delivery of an original via overnight courier service) or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
Parties at the following respective addresses (or at such other address for a
Party as shall be specified in a notice given in accordance with this
Section 17(b)):

 

  (i) To the Administrator:

Integon National Insurance Company

c/o National General Insurance Company

Attention: Jeffrey Weissmann, General Counsel

59 Maiden Lane

38th Floor

New York, NY 10038

Phone: (212) 380-9479

Facsimile: (212) 380-9498

e-mail: jeffrey.weissmann@ngic.com

 

23

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With a concurrent copy (which shall not constitute notice) to:

Debevoise & Plimpton LLP

Attention: Nicholas F. Potter

919 Third Avenue

New York, NY 10022

Phone: (212) 909-6459

Facsimile: (212) 521-7459

e-mail: nfpotter@debevoise.com

 

  (ii) To the Service Recipients:

QBE Holdings, Inc.

Attention: Jose Ramon Gonzalez, Chief Legal Officer

Wall Street Plaza

88 Pine Street

New York, NY 10005

Phone: (212) 422-1212

Facsimile: (212) 422-1313

e-mail: Jose.Gonzalez@us.qbe.com

With a concurrent copy (which shall not constitute notice) to:

Sidley Austin LLP

Attention: Sean M. Keyvan

One South Dearborn

Chicago, IL 60603

Phone: (312) 853-4660

Facsimile: (312) 853-7036

e-mail: skeyvan@sidley.com

Any Party may, by notice given in accordance with this Section 17(b) to the
other Party, designate another address or Person for receipt of notices
hereunder; provided that notice of such a change shall be effective upon
receipt.

 

  (c) No Third-Party Beneficiaries. Except as provided in Section 13 with
respect to Administrator Indemnitees and Service Recipient Indemnitees, this
Agreement is for the sole benefit of the Parties and their permitted successors
and assigns and nothing in this Agreement, express or implied, is intended to,
or shall confer upon any other Person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

  (d) Successors and Assigns. This Agreement shall not be assigned by operation
of law or otherwise by any Party without the prior written consent of the other
Parties. Any attempted assignment in violation of this Section 11.07 shall be
void. This Agreement shall be binding upon, shall inure to the benefit of, and
shall be enforceable by the Parties and their permitted successors and assigns.

 

24

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  (e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which is deemed an original, and all of which collectively
constitute one and the same instrument. Counterparts may be executed and
delivered in original, faxed or emailed in PDF form.

 

  (f) Governing Law and Jurisdiction. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE
WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW PRINCIPLES OF SUCH STATE THAT
MIGHT REFER THE GOVERNANCE, CONSTRUCTION OR INTERPRETATION OF SUCH AGREEMENTS TO
THE LAWS OF ANOTHER JURISDICTION. Any action for specific performance as
contemplated by Section 17(g) or any action, suit or proceeding directly or
indirectly arising out of, under or in connection with this Agreement or the
transactions contemplated by this Agreement shall be brought in a New York
Court. The Parties hereby waive any objection they may now or hereafter have to
the venue of any such action or proceeding in any such court and any claim that
such action or proceeding has been brought in an inconvenient forum. Any service
of any process, summons, notice, document or other paper does, if delivered,
sent or mailed in accordance with Section 17(b), constitute good, proper and
sufficient service thereof. Each Party agrees that any final, nonappealable
judgment in any such action, suit or proceeding brought in any such court shall
be conclusive and binding upon such Party and may be enforced in any other
courts to whose jurisdiction such Party may be subject, by suit upon such
judgment.

EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER
TRANSACTION AGREEMENT, OR ITS PERFORMANCE UNDER OR THE ENFORCEMENT OF THIS
AGREEMENT OR ANY OTHER TRANSACTION AGREEMENT.

 

  (g) Specific Performance. The Parties agree that irreparable damage would
occur in the event that any of the terms or provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that, notwithstanding anything to the
contrary contained in this Agreement, each of the Parties shall be entitled to
injunctive or other equitable relief to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof in any court referenced
in Section 17(f) having jurisdiction, such remedy being in addition to any other
remedy to which any party may be entitled at law or in equity. In the event that
any Action is brought in equity to enforce the provisions of this Agreement, no
party shall allege, and each party hereby waives the defense or counterclaim,
that there is an adequate remedy at law.

 

25

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  (h) Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced under any Law or as a matter of public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any Party hereto. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the Parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the Parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the greatest extent possible.

 

  (i) Amendments and Waivers. No provision of this Agreement may be amended,
supplemented or modified except by a written instrument signed by all of the
Parties. No provision of this Agreement may be waived except by a written
instrument signed by the Party against whom the waiver is to be effective. No
failure or delay by any Party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
applicable Law.

 

  (j) Interpretation. Interpretation of this Agreement shall be governed by the
following rules of construction: (i) words in the singular shall be held to
include the plural and vice versa, and words of one gender shall be held to
include the other gender as the context requires; (ii) references to the terms
preamble, recitals, Section, and Exhibit are references to the preamble,
recitals, Sections and Exhibits to this Agreement unless otherwise specified;
(iii) references to “$” shall mean U.S. dollars; (iv) the word “including” and
words of similar import shall mean “including without limiting the generality of
the foregoing,” unless otherwise specified; (v) the word “or” shall not be
exclusive; (vi) the words “herein,” “hereof,” “hereunder” “hereby” and similar
terms shall be deemed to refer to this Agreement as a whole and not to any
specific Section; (vii) the headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement; (viii) this Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the Party drafting or causing any instrument to be
drafted; (ix) if a word or phrase is defined, the other grammatical forms of
such word or phrase have a corresponding meaning; (x) references to any statute,
listing rule, rule, standard, regulation or other law (A) include a reference to
the corresponding rules and regulations and (B) include a reference to each of
them as amended, modified, supplemented, consolidated, replaced or rewritten
from time to time; (xi) references to any section of any statute, listing rule,
rule, standard, regulation or other law include any successor to such section;
(xii) any reference to “days” means calendar days unless Business Days are
expressly specified; and (xiii) references to any contract (including this
Agreement) or organizational document are to the contract or organizational
document as amended, modified, supplemented or replaced from time to time,
unless otherwise stated.

 

26

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[Signature page follows]

 

27

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
by their duly authorized officers effective as of the date first set forth
above.

 

QBE INSURANCE CORPORATION INTEGON NATIONAL INSURANCE COMPANY By:

 

By:

 

Name:

 

Name:

 

Title:

 

Title:

 

PRAETORIAN INSURANCE COMPANY By:

 

Name:

 

Title:

 

QBE SPECIALTY INSURANCE COMPANY By:

 

Name:

 

Title:

 

EQUATOR REINSURANCES LIMITED By:

 

Name:

 

Title:

 

[Signature Page to Reinsurance Administrative Services Agreement]

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

EXHIBIT B-1

FORM OF EXTERNAL LPT REINSURANCE AGREEMENT

See attached.

 

B-1

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

EXHIBIT B-1

FORM OF EXTERNAL LPT REINSURANCE AGREEMENT

LOSS PORTFOLIO TRANSFER

REINSURANCE AGREEMENT

BY AND AMONG

EQUATOR REINSURANCES LIMITED

AND

INTEGON NATIONAL INSURANCE COMPANY

DATED AS OF [●], 2015

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

TABLE OF CONTENTS

 

Article I DEFINITIONS

  2   

Article II COVERED BUSINESS AND EFFECTIVE TIME

  6   

Article III TERRITORY

  6   

Article IV REINSURING CLAUSE

  6   

Article V CONSIDERATION

  7   

Article VI ADMINISTRATION OF THE REINSURED LIABILITIES

  10   

Article VII EXCLUSIONS

  11   

Article VIII SEVERABILITY

  11   

Article IX ERRORS AND OMISSIONS; COOPERATION

  11   

Article X EXISTING REINSURANCE CONTRACTS AND POLICIES

  12   

Article XI INSOLVENCY

  13   

Article XII TRUST ACCOUNT

  14   

Article XIII LOSS SETTLEMENTS

  16   

Article XIV RESERVES

  16   

Article XV CURRENCY

  16   

Article XVI OFFSET

  17   

Article XVII SALVAGE AND SUBROGATION

  17   

Article XVIII TERMINATION

  17   

Article XIX INDEMNIFICATION

  18   

Article XX NO OTHER REPRESENTATIONS OR WARRANTIES

  18   

Article XXI MISCELLANEOUS

  19   

 

i

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

Schedule A – Reinsurance Arrangements

Schedule B – Quarterly Financial Report

Schedule C – Annual Reports

 

ii

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

LOSS PORTFOLIO TRANSFER REINSURANCE AGREEMENT

THIS LOSS PORTFOLIO TRANSFER REINSURANCE AGREEMENT (this “Agreement”), is made
and entered into as of [●], 2015 (the “Closing Date”) by and between EQUATOR
REINSURANCES LIMITED, a Bermuda-domiciled insurance company (the “Ceding
Company”), and INTEGON NATIONAL INSURANCE COMPANY, a North Carolina-domiciled
property and casualty insurance company (the “Reinsurer”). The Ceding Company
and the Reinsurer are each a “Party” and are collectively, the “Parties.”

WHEREAS, QBE Financial Institution Risk Services, Inc. (the “Seller”), an
Affiliate (as defined in the Master Transaction Agreement (as defined herein))
of the Ceding Company, along with its Affiliate QBE Investments (North America),
Inc., and National General Holdings Corp. (the “Acquiror”), an Affiliate of the
Reinsurer, have entered into that certain Master Transaction Agreement, dated as
of July 15, 2015 (the “Master Transaction Agreement”), pursuant to which the
Seller has agreed to sell, and the Acquiror has agreed to purchase, the Business
(as defined herein);

WHEREAS, as a condition to the Closing (as defined in the Master Transaction
Agreement), certain insurance company Affiliates of the Ceding Company shall
have ceded to the Ceding Company, and the Ceding Company shall have reinsured
all Reinsured Liabilities (as defined herein) in accordance with the terms and
conditions of certain reinsurance agreements among such parties including the
Internal Reinsurance Agreement (as defined herein) (collectively, the
“Intercompany Reinsurance Agreements”);

WHEREAS, as a further condition to the Closing, the Ceding Company shall
retrocede to the Reinsurer, and the Reinsurer shall reinsure all Reinsured
Liabilities (including Reinsured Liabilities assumed pursuant to the
Intercompany Reinsurance Agreements);

WHEREAS, simultaneous with the execution of this Agreement, the Reinsurer, as
grantor, the Ceding Company, as the beneficiary, and the Trustee (as defined
herein), as trustee, have entered into that certain Trust Agreement (the “Trust
Agreement”), which is intended for the credit protection of the Ceding Company
and pursuant to which the Reinsurer has agreed to establish and maintain a trust
account to secure the Reinsurer’s obligations to the Ceding Company under this
Agreement;

WHEREAS, simultaneous with the execution of this Agreement, the Reinsurer, as
grantor, the Ceding Company, as the secured party, and the Trustee, as
securities intermediary, have entered into that certain Security and Control
Agreement (the “Security and Control Agreement”), pursuant to which the
Reinsurer has granted a first priority security interest in favor of the Ceding
Company in and continuing lien on all of its right, title and interest in, to
and under the Trust Account (as defined herein) on the terms and subject to the
conditions set forth therein; and

WHEREAS, simultaneous with the execution of this Agreement, the Ceding Company
and certain of its insurance company Affiliates and the Reinsurer have entered
into that certain Reinsurance Administrative Services Agreement (the
“Administrative Services Agreement”), pursuant to which the Reinsurer shall
provide certain administrative services on behalf of the QBE Insurance Companies
(as defined herein) with respect to the Policies (as defined herein).

 

1

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NOW, THEREFORE, in consideration of the mutual and several promises and
undertakings herein contained, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Parties agree as
follows:

ARTICLE I

DEFINITIONS

Any capitalized term used but not defined herein shall have the meaning set
forth in the Master Transaction Agreement. The following terms have the
respective meanings set forth below throughout this Agreement:

“Acquiror” shall have the meaning set forth in the recitals.

“Actuarial Report” shall have the meaning set forth in Article V(D)(i).

“Administrative Services Agreement” shall have the meaning set forth in the
recitals.

“Agreement” shall have the meaning set forth in the preamble.

“Annual Reports” shall have the meaning set forth in Article V(D)(iv).

“Business” means the business activities of the LPI Companies (whether or not
loan tracking services are provided as part of such activities) as a managing
general agent, general agent, producer or broker and insurer of lender-placed
hazard insurance, REO insurance, lender-placed automobile insurance,
lender-placed flood and flood gap insurance, lender-placed wind insurance,
guaranteed asset protection insurance and leased equipment insurance.

“Ceding Company” shall have the meaning set forth in the preamble.

“Ceding Company Indemnitees” shall have the meaning set forth in Article XIX(B).

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

“Damages” means any and all damages, losses, Liabilities, judgments,
settlements, costs and expenses (including reasonable attorneys’ fees and other
expenses of investigation and reasonable attorneys’ fees and other expenses in
connection with any action, suit or proceeding).

“Effective Date” means [●].1

“Effective Time” means 12:00 a.m., Eastern Time on the Effective Date.

 

1  Note to Draft: Effective Date will be the Closing Date under the Master
Transaction Agreement.

 

2

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“Eligible Investment” means any security or other asset, as set forth in the
applicable Laws of the Commonwealth of Pennsylvania, that would allow a
Pennsylvania domiciled insurance company to obtain a reduction from liability
for the reinsurance ceded to a reinsurer that is neither an authorized or a
certified reinsurer in the Commonwealth of Pennsylvania.

“Extra Contractual Obligations” means all Liabilities and obligations to any
Person arising out of or relating to the Policies (other than Liabilities or
obligations arising under the express terms and conditions, and within the
limits, of the Policies), including any Liability for fines, penalties, taxes,
fees, forfeitures, compensatory, punitive, exemplary, special, treble, bad
faith, tort or any other form of extra contractual damages, and all legal fees
and expenses relating thereto, including Liabilities or obligations arising from
any act, error or omission, whether intentional, negligent or in bad faith,
arising out of (i) the form, sale, marketing, underwriting, production,
issuance, cancellation or administration of the Policies, (ii) the
investigation, defense, trial, settlement or handling of claims, benefits or
payments under the Policies, or (iii) the failure to pay or the delay in payment
or errors in calculating or administering the payment of benefits, claims or any
other amounts due or alleged to be due under or in connection with the Policies.
Extra Contractual Obligations shall not include Excluded Liabilities (as defined
in the Master Transaction Agreement).

“GAAP” means U.S. Generally Accepted Accounting Principles in effect at the time
any applicable financial statements were or are prepared.

“Initial Rate” means an interest rate equal to three (3)-month LIBOR for dollars
that appears on page LIBOR 01 (or a successor page) of the Reuters Telerate
Screen as of 11:00 a.m., New York time, on each day during the period for which
interest is to be paid.

“Intercompany Reinsurance Agreements” shall have the meaning set forth in the
recitals.

“Internal Reinsurance Agreement” means that certain Reinsurance Agreement, dated
as of even date hereof, between the QBE Insurance Companies and the Ceding
Company.

“Liabilities” means any and all liabilities, obligations, debts and binding
commitments of any kind, character or description, whether known or unknown,
asserted or not asserted, absolute or contingent, fixed or unfixed, disputed or
undisputed, liquidated or unliquidated, secured or unsecured, joint or several,
vested or unvested, executory, determined, determinable or otherwise, whenever
or however incurred or arising (including whether arising out of any contract or
tort based on negligence or strict liability) and whether or not the same would
be required by GAAP or SAP to be reflected in financial statements or disclosed
in the notes thereto.

“Master Transaction Agreement” shall have the meaning set forth in the recitals.

“Net Cash Settlement Amount” shall have the meaning set forth in Article
V(D)(ii).

“Net Loss Reserves” means, as of any date of determination, gross statutory
reserves for Policy Liabilities, including billed but unpaid losses, case and
other loss reserves, reserves for losses incurred but not yet reported and
future development on known claims, and reserves for loss adjustment expenses
(whether allocated or unallocated), reopened claims reserves and claims in
transit, in each case in respect of Policy Liabilities and net of ceded loss
reserves under the Reinsurance Arrangements.

 

3

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“New York Courts” shall have the meaning set forth in Article XXI(F).

“Party” shall have the meaning set forth in the preamble.

“Policies” means any and all binders, endorsements, riders, policies,
certificates, slips, covers, supplements and other contracts of insurance
contracts issued, renewed, assumed or reinsured (including Policies reinsured
pursuant to the Intercompany Reinsurance Agreements), on or prior to the
Effective Time, by or on behalf of the QBE Insurance Companies in connection
with the Business.

“Policy Liabilities” means all Liabilities of the Ceding Company, including
losses and loss settlements, arising under or with respect to the Policies with
respect to events and occurrences prior to the Effective Time.

“QBE Insurance Companies” means QBE Insurance Corporation, Praetorian Insurance
Company and QBE Specialty Insurance Company.

“Quarterly Financial Report” shall have the meaning set forth in Article
V(D)(ii).

“Quarterly Settlement Period” means each quarterly period beginning on and
including the first day of a calendar quarter and ending on the last day of such
calendar quarter, except that (i) the first Quarterly Settlement Period shall
begin on the Effective Date, and (ii) the final Quarterly Settlement Period
shall end on the date of termination of this Agreement.

“RBC Calculation” shall have the meaning set forth in Article VI(B).

“Recoverables” shall have the meaning set forth in Article V(B).

“Reinsurance Arrangements” means reinsurance and other risk transfer or risk
mitigation mechanisms or arrangements set forth in Schedule A relating to the
Policies that are (i) in force or are treated as being in force as of the
Closing Date or (ii) terminated but under which there remains any outstanding
Liability from the reinsurer with respect to which reserves are carried or
required to be carried as of the Closing Date.

“Reinsured Liabilities” means (i) all Policy Liabilities (net of actual
recoveries received by the Ceding Company under the Reinsurance Arrangements),
(ii) all loss adjustment expenses related to the Policy Liabilities, (iii) all
Extra Contractual Obligations (to the extent not recovered under the Quota Share
Reinsurance Agreement (as defined in the Master Transaction Agreement)) arising
before, at or after the Effective Time, to the extent permitted by applicable
Law and (iv) all guaranty fund or other residual market assessments incurred by
the Ceding Company with respect to premiums relating to Policy Liabilities, less
the portion, if any, of premium tax credits, deductions and offsets associated
with such assessments.

“Reinsurer” shall have the meaning set forth in the preamble.

 

4

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“Reinsurer Indemnitees” shall have the meaning set forth in Article XIX(A).

“SAP” means, with respect to a Party, statutory accounting practices as
prescribed or permitted by the applicable Governmental Authorities having
jurisdiction over such Party.

“Security Amount” means (i) at any time prior to a Triggering Event, an amount
equal to 102% of the Net Loss Reserves and (ii) at any time after a Triggering
Event, an amount equal to 105% of the Net Loss Reserves.

“Security and Control Agreement” shall have the meaning set forth in the
recitals.

“Seller” shall have the meaning set forth in the recitals.

“Settlement Date” shall have the meaning set forth in Article V(E)(iii).

“Termination Account” shall have the meaning set forth in Article XII(I)(i)(c).

“Third Party Accountant” means Deloitte Touche Tohmatsu Limited; provided, that
if Deloitte Touche Tohmatsu Limited is unable to act as Third Party Accountant,
the Third Party Account shall be an independent accounting firm of international
recognition which is mutually acceptable to the Ceding Company and the Reinsurer
or, if the Ceding Company and the Reinsurer are unable to agree on such an
accounting firm, an independent accounting firm selected by mutual agreement of
the Ceding Company’s and the Reinsurer’s independent accountants.

“Triggering Event” means the occurrence of any one or more of the following:
(i) the Reinsurer’s financial strength rating or claims paying rating, as
applicable, by A.M. Best Company is reduced below A- (Excellent) or the
Reinsurer ceases to be assigned a financial strength rating or claims paying
rating, as applicable, by A.M. Best Company; (ii) the Reinsurer’s statutory
policyholder surplus falls below $325 million and has not been cured by the
Reinsurer within thirty (30) days of such occurrence; (iii) the Reinsurer’s
“total adjusted capital” (as reflected in the RBC Calculation delivered by the
Reinsurer to the Ceding Company pursuant to Article VI(B)) falls below two
hundred percent (200%) of the Reinsurer’s “company action level risk-based
capital” (as reflected in such RBC Calculation) and has not been cured by the
Reinsurer within thirty (30) days of such occurrence; (iv) the initiation or
commencement of a liquidation, insolvency, rehabilitation, conservation,
supervision or similar proceeding by or against the Reinsurer and such
liquidation, insolvency, rehabilitation, conservation, supervision or similar
proceeding and has not been cured by the Reinsurer within sixty (60) days of
such initiation or commencement; (v) the Reinsurer fails to fund the Trust
Account in accordance with the terms of this Agreement and the Trust Agreement
and has not cured such failure within thirty (30) days or (vi) the Reinsurer is
no longer a Subsidiary (as defined in the Master Transaction Agreement) of the
Acquiror.

“Trust Account” shall have the meaning set forth in the Trust Agreement.

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

“Trust Assets” shall have the meaning set forth in Article XII(D).

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

 

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ARTICLE II

COVERED BUSINESS AND EFFECTIVE TIME

A. This Agreement shall apply to all Policies.

B. This Agreement is effective as of the Effective Time and shall remain in
force until such time as (i) all Reinsured Liabilities ceded hereunder have been
terminated and extinguished in accordance with the terms of the Policies and all
amounts owing under this Agreement have been paid, or (ii) this Agreement is
terminated in accordance with Article XVIII.

C. The provisions of Articles I, II(C), II(D), XIX and XXI shall survive the
termination of this Agreement. In the event of a termination of this Agreement,
each Party shall remain liable for any willful and material breach of this
Agreement prior to such termination.

D. In the event that this Agreement is terminated under Article XVIII, unless
otherwise agreed in writing by the Parties, (i) the Parties shall settle amounts
based on a report in the same form as the Quarterly Financial Report as of the
effective date of termination and delivered not later than thirty (30) days
following the effective date of termination, (ii) the Reinsurer shall return
contemporaneously with delivery of said report by wire transfer of immediately
available funds to an account designated by the Ceding Company in writing, an
amount in cash or other Eligible Investments with a fair market value in the
aggregate equal to the value of the Net Loss Reserves as of the effective date
of termination, determined in accordance with SAP, (iii) the Parties shall
cooperate to effect a further unwinding of the transactions contemplated by this
Agreement as of the effective date of termination, including assigning back to
the Ceding Company all rights and payments assigned by the Ceding Company to the
Reinsurer pursuant to this Agreement effective as of the date of termination;
provided, that the Administrative Services Agreement shall remain in place until
such time as it is terminated pursuant to its terms and (iv) the Parties shall
true up the payment made under the preceding clause (ii) using the procedures
set forth in Article V(D) mutatis mutandis.

ARTICLE III

TERRITORY

The reinsurance provided under this Agreement shall be coextensive with the
territory of the Policies.

ARTICLE IV

REINSURING CLAUSE

A. Subject to the terms and conditions of this Agreement, as of the Effective
Time, the Ceding Company hereby cedes to the Reinsurer, and the Reinsurer hereby
accepts and agrees

 

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to assume and reinsure one hundred percent (100%) of all Reinsured Liabilities
under Policies issued, renewed, reinsured or assumed prior to the Effective
Time, whether or not such Policies are still in force as of the Effective Time,
excluding, for the avoidance of doubt.

B. Pursuant to the Administrative Services Agreement, on and after the Closing
Date, the Reinsurer, in its capacity as administrator under the Administrative
Services Agreement, shall have responsibility for discharging and paying to or
on behalf of the Ceding Company for the account of the party to whom they are
owed, as and when due, the Reinsured Liabilities.

C. The Reinsurer’s liability under this Agreement shall be subject in all
respects to the same risks, terms, rates, conditions, interpretations,
assessments, waivers, and to the same modifications, alterations and
cancellations, as the respective Policies to which liability under this
Agreement attaches, the true intent of this Agreement being that the Reinsurer
shall, subject to the terms, conditions, and limits of this Agreement, follow
the fortunes of the Ceding Company under the Policies, and the Reinsurer shall
be bound, without limitation, by all payments and settlements under the Policies
made or entered into by or on behalf of the Ceding Company.

D. The Reinsurer accepts, reinsures and assumes, as applicable and to the extent
set forth herein, the Reinsured Liabilities subject to any and all defenses,
setoffs and counterclaims to which the Ceding Company would be entitled with
respect to the Reinsured Liabilities, it being expressly understood and agreed
by the Parties that no such defenses, setoffs or counterclaims are or shall be
waived by the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby and that the Reinsurer is and shall be
fully subrogated in and to all such defenses, setoffs and counterclaims.

ARTICLE V

CONSIDERATION

A. As consideration for the reinsurance provided pursuant to this Agreement, the
Ceding Company shall transfer, on the Closing Date in accordance with the Master
Transaction Agreement, to the Trust Account, cash or other Eligible Investments
equal to the Estimated Net Settlement Amount determined by reference to the
Estimated Reinsurance Settlement Statement. Such payment shall be adjusted
following the date hereof in accordance with the mechanics set forth in the
Master Transaction Agreement.

B. As additional consideration for the reinsurance provided herein, and subject
in any event to the Reinsurer’s compliance with and performance of the terms and
conditions of this Agreement and each other Transaction Agreement to which the
Reinsurer is a party, the Ceding Company hereby irrevocably sells, transfers and
conveys to the Reinsurer, and Reinsurer shall be entitled to receive, one
hundred percent (100%) of all of the following amounts actually received by the
QBE Insurance Companies, the Ceding Company or the Reinsurer, whether in its
role as reinsurer hereunder or as administrator under the Administrative
Services Agreement, with respect to the Policies after the Effective Time that
are either due and unpaid as of the Effective Time or that arise on any date
after the Effective Time (items (i) through (ii) below, collectively, the
“Recoverables”):

(i) litigation recoveries pursuant to litigation to the extent liability for
such litigation constitutes a Reinsured Liability; and

(ii) any and all other collections and recoveries of any sort whatsoever to the
extent related to the Reinsured Liabilities (other than recoveries under the
Reinsurance Arrangements).

 

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provided, however, that following the occurrence of a Triggering Event, the
Ceding Company shall be entitled to retain all such amounts as security for, and
the Ceding Company shall have the right to use and apply such amounts solely to
satisfy, the Reinsurer’s obligations under this Agreement.

C. Subject in any event to the Reinsurer’s compliance with and performance of
the terms and conditions of this Agreement and any other Transaction Agreement
to which the Reinsurer is a party, the Ceding Company hereby appoints the
Reinsurer as its agent and attorney in fact to collect all Recoverables in the
Ceding Company’s name. The Ceding Company agrees and acknowledges that the
Reinsurer and its permitted assigns and delegatees are entitled to enforce, in
the name of the Ceding Company, all rights at law or in equity or good faith
claims of the Ceding Company with respect to such Recoverables. If necessary for
such collection, the Ceding Company shall reasonably cooperate, at the
Reinsurer’s expense, in any litigation or other dispute resolution mechanism
relating to such collection. The Parties acknowledge and agree that the
Reinsurer shall be responsible for and has hereby assumed the financial risk of
any uncollected or uncollectible Recoverables. To the extent that the Ceding
Company recovers any Recoverables from any third party attributable to the
Reinsured Liabilities, the Ceding Company shall, in accordance with this Article
V, transfer such amounts to the Reinsurer, together with any pertinent
information that the Ceding Company may have relating thereto.

D. Reports and Remittance.

(i) On an annual basis, the Reinsurer shall prepare, or have prepared, in
accordance with all applicable actuarial standards and statutory actuarial
opinion disclosure requirements, an actuarial review of the statutory reserves
on a gross, ceded and net basis prior to the application of the reinsurance
provided under this Agreement (“Actuarial Report”). The Actuarial Report shall
contain (a) a distribution release for regulators, tax authorities and rating
agencies, (b) an actuarial point estimate, and (c) a data reconciliation between
data underlying the actuarial analysis and data provided in the Quarterly
Financial Reports to the Ceding Company. The Reinsurer shall provide a copy of
the Actuarial Report in final form to the Ceding Company no later than ninety
(90) days following the end of each calendar year. With each Actuarial Report,
the Reinsurer shall cause the Ceding Company’s and the QBE Insurance Companies’
opining actuaries to be granted permission in writing from the actuary signing
the Actuarial Report to rely on the Actuarial Report.

(ii) As soon as practicable (but in no event later than ten (10) Business Days)
after the end of each quarter ending on February 28, May 31, August 31 and
November 30, the Reinsurer shall deliver to the Ceding Company a quarterly
financial report (each a “Quarterly

 

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Financial Report”), substantially in the form set forth in Schedule B, which
shall report on the financial activity hereunder for the relevant Quarterly
Settlement Period and shall calculate the amount, if any, due from the Reinsurer
to the Ceding Company or due from the Ceding Company to the Reinsurer, as
applicable, under this Agreement for the relevant Quarterly Settlement Period to
the extent not already paid or settled (the “Net Cash Settlement Amount”).

(iii) If the Ceding Company has any objection to the Net Cash Settlement Amount
on the basis of (a) manifest arithmetic error, or (b) such Net Cash Settlement
Amount not being calculated in accordance with the terms of this Agreement, the
Ceding Company shall deliver to the Reinsurer written notice thereof together
with reasonable supporting detail concerning its objection. If the Ceding
Company does not deliver a notice of objection within thirty (30) days after
receipt of the calculation of the Net Cash Settlement Amount from the Reinsurer,
the Parties shall be bound by such calculation. If a notice of objection in
respect of the calculation of the Net Cash Settlement Amount is provided by the
Ceding Company to the Reinsurer, the Ceding Company and the Reinsurer shall
attempt in good faith to resolve the objection between themselves. If such
objection is resolved between the Ceding Company and the Reinsurer, the
calculation of the Net Cash Settlement Amount shall be as so agreed in writing
between the Ceding Company and the Reinsurer and the Parties shall be bound by
such calculation. If the Ceding Company and the Reinsurer are unable to reach a
resolution on the calculation of the Net Cash Settlement Amount within thirty
(30) days after receipt by the Reinsurer of the Ceding Company’s notice of
objection, the dispute shall be submitted to a Third Party Accountant for
resolution as soon as practicable (but in no event later than thirty (30) days)
whose decision shall be final and binding on the Parties.

(iv) Within fifteen (15) Business Days following the end of each calendar year,
the Reinsurer shall deliver to the Ceding Company the information and reports
listed on Schedule C (collectively, the “Annual Reports”).

(v) Without limiting the foregoing, each of the Reinsurer and the Ceding Company
shall provide to the other Party such reports as are reasonably required in
order that such other Party may prepare its financial statements, regulatory
filings and any other filings that must be made by such other Party or any other
Person to which such other Party has ceded, or otherwise transferred the risk
related to, the Policies.

E. Remittance. If the Net Cash Settlement Amount as shown on the Quarterly
Financial Report finally determined pursuant to Article V(D)(ii) is a positive
amount, the Ceding Company shall pay such amount to the Reinsurer, and if the
Net Cash Settlement Amount as shown on such Quarterly Financial Report is a
negative amount, then the Reinsurer shall pay the absolute value of such
negative amount to the Ceding Company.

(i) All Net Cash Settlement Amounts (including any interest on any of the
foregoing) due to the Reinsurer from the Ceding Company shall be remitted by
wire transfer in immediately available funds to an account or accounts
designated by the Reinsurer.

(ii) All Net Cash Settlement Amounts (including any interest on the foregoing)
due to the Ceding Company from the Reinsurer shall be remitted by wire transfer
in immediately available funds to an account or accounts designated by the
Ceding Company.

 

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(iii) Any payment required under this Article V(E) with respect to any Quarterly
Settlement Period shall be made within seven (7) days following final
determination of the Net Cash Settlement Amount pursuant to Article (D)(ii) by
the party required to make payment (the “Settlement Date”).

(iv) Notwithstanding the foregoing, during any period of time when the Reinsurer
is in breach of the Trust Agreement, (a) any amount payable by the Ceding
Company to the Reinsurer hereunder shall be deposited into the Trust Account and
(b) any Recoverables collected by the Reinsurer during any Quarterly Settlement
Period shall be deposited by the Reinsurer into the Trust Account.

F. Delayed Payments. If there is a delayed settlement of any payment due
hereunder between the Ceding Company and the Reinsurer, interest shall accrue on
such payment at the Initial Rate then in effect until settlement is made. For
purposes of this Article V(F), a payment shall be considered overdue, and such
interest shall begin to accrue, on the first day immediately following the date
such payment is due.

G. Books and Records. The Reinsurer shall, and shall cause its Affiliates to,
preserve, until such date as may be required by the Reinsurer’s standard
document retention policies (or such other later date as may be required by
applicable Law), all books and records related to the Business. During such
period, upon any reasonable request from the Ceding Company or its
Representatives, the Reinsurer shall (i) provide to the Ceding Company and its
Representatives reasonable access to such books and records during normal
business hours; provided that such access shall not unreasonably interfere with
the conduct of the business of the Reinsurer, and (ii) permit the Ceding Company
and Representatives to make copies of such records, in each case, at no cost to
the Ceding Company or its Representatives (other than for reasonable
out-of-pocket expenses). Such books and records may be sought under this
Article V(G) by the Ceding Company for any reasonable purpose, including to the
extent reasonably required in connection with accounting, litigation, federal
securities disclosure or other similar purpose. Notwithstanding the foregoing,
any and all such books and records may be destroyed by the Reinsurer if the
Reinsurer sends to the Ceding Company written notice of its intent to destroy
such records, specifying in reasonable detail the contents of the records to be
destroyed; such records may then be destroyed after the sixtieth (60th) day
following such notice unless the Ceding Company notifies the Reinsurer that it
desires to obtain possession of such records, in which event the Reinsurer shall
transfer the records to the Ceding Company and the Ceding Company shall pay all
reasonable expenses of the Reinsurer in connection therewith.

ARTICLE VI

ADMINISTRATION OF THE REINSURED LIABILITIES

A. The Reinsurer shall administer all matters related to the Reinsured
Liabilities pursuant to the terms and conditions of the Administrative Services
Agreement. Notwithstanding any other provision to the contrary, the Reinsurer
acknowledges that (i) in no event shall the Ceding Company have any Liability to
the Reinsurer hereunder for any default of its obligations under this Agreement
caused by the failure of the Reinsurer to perform its obligations under the
Administrative Services Agreement and (ii) in no event shall the failure of the
Reinsurer to perform its obligations under the Administrative Services Agreement
give the Reinsurer any grounds for not performing its obligations under this
Agreement.

B. Not later than sixty (60) days after the end of each calendar year, the
Reinsurer shall provide to the Ceding Company a calculation (an “RBC
Calculation”) of the Reinsurer’s “total adjusted capital” and “company action
level risk-based capital,” in each case, determined by the Reinsurer in
accordance with the risk-based capital instructions prescribed by the
domiciliary jurisdiction of the Reinsurer.

 

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ARTICLE VII

EXCLUSIONS

The exclusions with respect to the Reinsured Liabilities payable under this
Agreement under the terms of the Policies shall be identical with those
contained in the Policies.

ARTICLE VIII

SEVERABILITY

Any term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction; provided that the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to either Party; provided further that if the economic or legal
substance is so affected, the Parties shall negotiate in good faith in an effort
to agree upon a suitable and equitable substitute provision to effect the
original intent of the Parties. If any provision of this Agreement is so broad
as to be unenforceable, that provision shall be interpreted to be only so broad
as is enforceable.

ARTICLE IX

ERRORS AND OMISSIONS; COOPERATION

A. Inadvertent delays, errors or omissions made in connection with this
Agreement or any transaction hereunder shall not relieve either Party from any
Liability that would have attached had such delay, error or omission not
occurred; provided that such delay, error or omission is rectified as soon as
possible after discovery; provided, further, that the Party making such error or
omission or responsible for such delay shall be responsible for any additional
Liability which attaches to either Party as a result of such error, omission or
delay. Subject to the foregoing, if (i) the failure of any Party to comply with
any provision of this Agreement is unintentional or the result of a
misunderstanding or oversight and (ii) such failure to comply is promptly
rectified, the Parties shall be restored as closely as possible to the positions
they would have occupied if no error or oversight had occurred.

B. On or after the Closing Date, the Ceding Company and the Reinsurer shall
cooperate with each other in order to accomplish the objectives of this
Agreement by furnishing

 

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any additional information and executing and delivering any additional documents
as may be reasonably requested by the other to further perfect or evidence the
consummation of, or otherwise implement, any transaction contemplated by this
Agreement, the Master Transaction Agreement or any other Transaction Agreement;
provided, however, that any such additional documents must be reasonably
satisfactory to each of the Parties and not impose upon either Party any
material liability, risk, obligation, loss, cost or expense not contemplated by
this Agreement, the Master Transaction Agreement or any other Transaction
Agreement.

ARTICLE X

EXISTING REINSURANCE CONTRACTS AND POLICIES

A. The Parties hereby agree that the collectability of reinsurance with respect
to the Policies under the Reinsurance Arrangements shall be at the risk of and
for the account of the Reinsurer, and shall be reduced only by the actual amount
of recoveries received by the Ceding Company under the Reinsurance Arrangements.

B. Liabilities with respect to the Policies under any Reinsurance Arrangement
that are terminated or recaptured, to the extent such Liabilities constitute
Reinsured Liabilities hereunder, shall be automatically ceded hereunder to the
Reinsurer without further action, subject to receipt by the Reinsurer of any
reserve transfer or similar transfers or settlement amount, if any, received by
the Ceding Company from the applicable reinsurer and, in such event, the
Reinsurer shall pay any special transfer or recapture fee or any other amount
payable by the Ceding Company in respect of the Reinsured Liabilities in
connection therewith as may be required under such Reinsurance Arrangement.

C. The Ceding Company shall not amend or change any term of any Reinsurance
Arrangement, to the extent that such amendment or change relates to the
Policies, without the prior written consent of the Reinsurer, which consent
shall not be unreasonably withheld; provided that the Ceding Company shall have
no obligation to renew any Reinsurance Arrangement at the end of its term.

D. On and after the Closing Date, the Ceding Company and the Reinsurer shall
cooperate and use their commercially reasonable efforts to enforce the Ceding
Company’s rights at the sole cost of the Reinsurer with respect to any
Reinsurance Arrangement (to the extent relating to the Policies), Policy, any
agreement with any producer with respect to the Policies except that the Ceding
Company shall have the right to retain ultimate control of such agreement,
arrangement or Policy.

 

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ARTICLE XI

INSOLVENCY

A. If more than one reinsured company is referenced within the definition of
“Ceding Company” in the preamble, this Article XI shall apply severally to each
such company. Further, this Article XI and the Laws of the jurisdiction of
domicile shall apply in the event of the insolvency of any company covered
hereunder. In the event of a conflict between any provision of this Article XI
and the Laws of the jurisdiction of domicile of any company covered hereunder,
that jurisdiction’s Laws shall prevail.

B. In the event of the insolvency of the Ceding Company, reinsurance hereunder
(or the portion of any risk or obligation assumed by the Reinsurer, if required
by applicable Law) shall be payable directly to the Ceding Company, or to its
liquidator, receiver, conservator or statutory successor, either: (i) on the
basis of the Liability of the Ceding Company, or (ii) on the basis of claims
filed and allowed in the liquidation proceeding, whichever may be required by
applicable Law, without diminution because of the insolvency of the Ceding
Company or because the liquidator, receiver, conservator or statutory successor
of the Ceding Company has failed to pay all or a portion of any claim. It is
agreed, however, that the liquidator, receiver, conservator or statutory
successor of the Ceding Company shall give written notice to the Reinsurer of
the pendency of a claim against the Ceding Company indicating the Policy
reinsured, which claim would involve a possible Liability on the part of the
Reinsurer within a reasonable time after such claim is filed in the conservation
or liquidation proceeding or in the receivership, and that during the pendency
of such claim, the Reinsurer may investigate such claim and interpose, at its
own expense, in the proceeding where such claim is to be adjudicated, any
defense or defenses that it may deem available to the Ceding Company or its
liquidator, receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to the approval of the
court, against the Ceding Company as part of the expense of conservation or
liquidation to the extent of a pro rata share of the benefit that may accrue to
the Ceding Company solely as a result of the defense undertaken by the
Reinsurer.

C. Where two (2) or more reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to such claim, the expense shall
be apportioned in accordance with the terms of this Agreement as though such
expense had been incurred by the Ceding Company.

D. As to all reinsurance made, ceded, renewed or otherwise becoming effective
under this Agreement, the reinsurance shall be payable as set forth herein by
the Reinsurer to the Ceding Company or to its liquidator, receiver, conservator
or statutory successor, (except as provided by Section 4118(a)(1)(A) of the New
York Insurance Law, provided the conditions of 1114(c) of such law have been
met, if New York law applies) or except (i) where the contract specifically
provides another payee in the event of the insolvency of the Ceding Company, or
(ii) where the Reinsurer, with the consent of the direct insured or insureds,
has assumed such Policy obligations of the Ceding Company as direct obligations
of the Reinsurer to the payees under such Policies and in substitution for the
obligations of the Ceding Company to such payees. Then, and in that event only,
the Ceding Company, with the prior approval of the certificate of assumption on
New York risks by the Superintendent of Financial Services of the State of New

 

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York, or with the prior approval of such other regulatory authority as may be
applicable, is entirely released from its obligation and the Reinsurer shall pay
any loss directly to payees under such Policy.

ARTICLE XII

TRUST ACCOUNT

A. If more than one reinsured company is referenced within the definition of
“Ceding Company” in the preamble, this Article XII shall apply severally to each
such company. Each such company shall have a separate Trust Agreement. Further,
this Article XII and the Laws of the Commonwealth of Pennsylvania shall apply.
In the event of a conflict between any provision of this Article XII and the
Laws of the Commonwealth of Pennsylvania, the Laws of the Commonwealth of
Pennsylvania shall prevail.

B. In accordance with the Trust Agreement, the Reinsurer, as grantor, has
created the Trust Account with the Trustee, naming the Ceding Company as sole
beneficiary thereof. On the Closing Date, the Reinsurer shall fund the Trust
Account with Trust Assets with a fair market value equal to the Security Amount.
Pursuant to the terms of the Trust Agreement, the assets in the Trust Account,
including the residual interest therein, shall be held in trust by the Trustee
for the sole and exclusive benefit of the Ceding Company as security for the
payment of the Reinsurer’s obligations to the Ceding Company hereunder. Pursuant
to the terms of the Security and Control Agreement, a first priority security
interest in favor of the Ceding Company in the assets in the Trust Account,
including the residual interest therein, shall be granted and perfected. During
the term of the Trust Agreement, the Reinsurer shall not, and shall direct that
the Trustee shall not, grant or cause to be created in favor of any third person
any security interest whatsoever in any of the assets in the Trust Accounts or
in the residual interest therein.

C. In accordance with the requirements of the Trust Agreement, the Reinsurer
shall ensure that at each calendar quarter end, in accordance with the terms set
forth herein, the Trust Account holds assets with a fair market value equal to
the Security Amount. All transfers to and withdrawals from the Trust Account
shall be in accordance with and subject to the requirements set forth in the
Trust Agreement.

D. The assets held in the Trust Account shall be valued at their fair market
value by the Trustee in accordance with the terms of the Trust Agreement as of
the date as of which such assets are required to be valued. The assets that may
be held in the Trust Account (the “Trust Assets”) shall consist of any
combination of cash and other Eligible Investments.

E. Prior to depositing Trust Assets in the Trust Account, the Reinsurer shall
execute assignments or endorsements in blank, or transfer legal title to the
Trustee of all shares, obligations or any other assets requiring assignments, in
order that the Ceding Company, or the Trustee upon the direction of the Ceding
Company, may whenever necessary negotiate such assets without the consent or
signature from the Reinsurer or any other Person.

F. All settlements of account under the Trust Agreement between the Ceding
Company and the Reinsurer shall be made in United States dollars in cash or its
cash equivalent.

 

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G. At the Ceding Company’s request, the Reinsurer shall provide the Ceding
Company with its annual and quarterly statutory financial statements filed with
Governmental Authorities and a copy of its audited statutory financial
statements along with the audit report thereon.

H. The Trust Account shall be established and maintained in compliance with all
requirements of the relevant provisions of the Laws of the Commonwealth of
Pennsylvania at a given time that would govern a Pennsylvania domiciled ceding
company’s right to take reserve credit if the Reinsurer were not licensed,
certified or otherwise accredited under the Laws of the Commonwealth of
Pennsylvania.

I. Withdrawal of Assets by Ceding Company.

(i) The Ceding Company may withdraw the assets held in the Trust Account at any
time and from time to time, notwithstanding any other provisions of this
Agreement, and assets withdrawn from such Trust Account shall be utilized and
applied by the Ceding Company (or any successor by operation of law of the
Ceding Company, including any liquidator, receiver, conservator or statutory
successor of the Ceding Company), without diminution because of insolvency on
the part of the Ceding Company or the Reinsurer; provided, however, that the
Ceding Company (or any successor by operation of law of the Ceding Company,
including any liquidator, receiver, conservator or statutory successor of the
Ceding Company) may only withdraw such assets for one or more of the following
purposes:

(a) to pay or reimburse the Ceding Company for the Reinsurer’s share of any
losses and unallocated loss expenses paid by the Ceding Company, but not
recovered from the Reinsurer;

(b) to pay to the Reinsurer amounts held in the Trust Account in excess of the
Security Amount; or

(c) upon the termination of the Trust Account or receipt by the Ceding Company
of notification of termination of the Trust Account and where the Reinsurer’s
obligations under this Agreement remain unliquidated and undischarged five
(5) Business Days prior to the termination date, to withdraw an amount of assets
which, in the aggregate, equals the Reinsurer’s share of the obligations assumed
under this Agreement, and deposit those assets in a separate account (the
“Termination Account”) in the name of the Ceding Company in a qualified United
States financial institution apart from its general assets, in trust for only
the uses and purposes specified in paragraphs (a) and (b) of this Article
XII(I)(i) as may remain executory after such withdrawal and for any period after
the termination date. The Ceding Company shall pay interest in cash to the
Reinsurer on the amount withdrawn, equal to the actual amount of interest,
dividends and other income earned on the assets in the Termination Account. The
Ceding Company may at any time substitute or exchange any assets held in the
Termination Account and invest or reinvest such assets.

(ii) The Ceding Company shall return to the Trust Account, within five
(5) Business Days, assets withdrawn in excess of all amounts due under Article
XII(I)(i)(a) and (b),

 

15

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or, in the case of Article XII(I)(i)(c), assets that are subsequently determined
not to be due. Any such excess amounts shall at all times be held, until the
return of such amounts to the Trust Account in accordance with the immediately
preceding sentence, by the Ceding Company (or any successor by operation of law
of the Ceding Company, including any liquidator, receiver, conservator or
statutory successor of the Ceding Company) in trust for the benefit of the
Reinsurer and be maintained in a segregated account, separate and apart from any
assets of the Ceding Company for the sole purpose of funding the payments and
reimbursements described in Article XII(I)(i)(a) and (b).

ARTICLE XIII

LOSS SETTLEMENTS

A. All loss settlements made by the Reinsurer or its Affiliates, on behalf of
the Ceding Company, whether under Policy terms and conditions or by way of
compromise, shall be binding upon the Ceding Company and the Reinsurer, and the
Ceding Company and the Reinsurer agree to pay or allow, as the case may be, its
share of each such settlement in accordance with this Agreement; provided, that
loss settlements shall require the consent of the Ceding Company if they
(i) impose any injunctive or other non-monetary equitable relief against the
Ceding Company or its Affiliates or (ii) would create a precedent for future
actions against the Ceding Company or its Affiliates that are not fully
reinsured or indemnified by the Reinsurer hereunder.

B. The date of loss as defined in the Ceding Company’s Policies shall apply as
respects any losses reported under this Agreement.

ARTICLE XIV

RESERVES

The Reinsurer shall maintain the loss and loss adjustment expense reserves
(including reserves for incurred but not reported losses) with respect to the
Policies in an amount not less than the reserves required by SAP, the terms of
the Policies and conforming to United States Actuarial Standards of Practice.

ARTICLE XV

CURRENCY

Whenever the word “dollars” or the “$” sign appears in this Agreement, such word
or sign shall be construed to mean United States dollars and all transactions
under this Agreement shall be in United States dollars.

 

16

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ARTICLE XVI

OFFSET

Notwithstanding anything to the contrary in this Agreement, each of the Parties
acknowledges and agrees that it shall have no right hereunder or pursuant to
applicable Law to offset any amounts due or owing (or to become due or owing)
following the Closing Date to any other Party against any amounts due or owing
by such other Party or any of its Affiliates under any other agreement
(including the Master Transaction Agreement), contract or understanding.

ARTICLE XVII

SALVAGE AND SUBROGATION

A. The Ceding Company empowers and authorizes the Reinsurer to enforce its right
to salvage or subrogation and other rights to indemnity, contribution or other
recovery rights (other than rights provided by the Reinsurer or its Affiliates
to the Ceding Company) with respect to the Reinsured Liabilities under the
Policies. The Ceding Company shall cooperate with the Reinsurer in this regard
and shall provide any written documentation if reasonably necessary to any third
party to support the Reinsurer’s authority to pursue any recovery.

B. Amounts recovered from salvage or subrogation with respect to the Policies
shall be used to reimburse the excess reinsurers (and the Reinsurer (as the
Ceding Company’s designee), should it carry a portion of excess coverage net) in
the reverse order of their participation in the loss before being used in any
way to reimburse the Reinsurer (as the Ceding Company’s designee) for its
primary loss. The expense incurred by the Reinsurer (as the Ceding Company’s
designee) in pursuing any such recovery shall be borne by each Party in
proportion to its benefit (if any) from the recovery. If the recovery expense
exceeds the amount recovered, the amount recovered (if any) shall be applied to
the reimbursement of recovery expense incurred by the Reinsurer (as the Ceding
Company’s designee) and the remaining expense as well as any originally incurred
loss expense shall be borne by the Reinsurer.

C. Notwithstanding anything to the contrary in this Agreement, if the Reinsurer
initiates an action to secure salvage or subrogation in its name or the name of
the Ceding Company, and there is no such recovery, or if the amount recovered is
insufficient to cover the expenses incurred in pursuing salvage or subrogation,
the Reinsurer shall be liable for one hundred percent (100%) of such excess
expense. Further, the Reinsurer shall be liable for one hundred percent
(100%) of any damages to the Ceding Company, including reimbursement of any
compensatory or punitive damages resulting from the action.

ARTICLE XVIII

TERMINATION

This Agreement may only be terminated by the mutual written agreement of the
Parties. Following the termination of this Agreement, any Policies ceded
hereunder shall be administered pursuant to Section 12(d) of the Administrative
Services Agreement.

 

17

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ARTICLE XIX

INDEMNIFICATION

A. Indemnification by the Ceding Company. The Ceding Company shall indemnify,
defend and hold harmless the Reinsurer and its Affiliates and their respective
officers, directors and employees (collectively, the “Reinsurer Indemnitees”)
from and against any and all Damages actually sustained, incurred or suffered by
the Reinsurer Indemnitees to the extent arising out of or related to (i) any
breach or nonfulfillment by the Ceding Company, or any failure by the Ceding
Company to perform, any of the covenants, terms or conditions of, or any duties
or obligations under, this Agreement and (ii) any successful enforcement of this
indemnity.

B. Indemnification by the Reinsurer. The Reinsurer shall indemnify, defend and
hold harmless the Ceding Company and its Affiliates and their respective
officers, directors and employees (collectively, the “Ceding Company
Indemnitees”) from and against any and all Damages actually sustained, incurred
or suffered by the Ceding Company Indemnitees to the extent arising out of or
related to (i) any breach or nonfulfillment by the Reinsurer, or any failure by
the Reinsurer to perform, any of the covenants, terms or conditions of, or any
duties or obligations under, this Agreement, (ii) the Reinsured Liabilities,
(iii) Extra Contractual Obligations and (iv) any successful enforcement of this
indemnity.

C. Any proceedings related to indemnification under Article XIX(A)-(B) shall be
conducted in accordance with the procedures set forth in Section 10.03 of the
Master Transaction Agreement, mutatis mutandis.

D. The indemnification provisions of this Article XIX shall be the exclusive
remedy for any breach of this Agreement, except (i) for the termination
provisions set forth herein, (ii) for actual fraud relating to entry into this
Agreement, or (iii) with respect to matters for which the remedy of specific
performance, injunctive relief or other non-monetary equitable remedies are
available.

ARTICLE XX

NO OTHER REPRESENTATIONS OR WARRANTIES

A. No Other Representations or Warranties. The Ceding Company acknowledges,
understands and agrees that no representations or warranties are made by the
Reinsurer or any of its Affiliates in connection with the Master Transaction
Agreement, this Agreement or the other Transaction Agreements and the
transactions contemplated hereby or thereby, except as and to the extent
expressly covered by a representation or warranty made by the Reinsurer to the
Ceding Company contained in Article IV of the Master Transaction Agreement. The
Reinsurer acknowledges, understands and agrees that no representations or
warranties are made by the Ceding Company or any of its Affiliates in connection
with the Master Transaction Agreement, this Agreement or the other Transaction
Agreements and the transactions contemplated hereby or thereby, except as and to
the extent expressly covered by a representation or warranty made by the Ceding
Company to the Reinsurer contained in Article III of the Master Transaction
Agreement. Each of the Reinsurer and the Ceding Company acknowledges,
understands and agrees that the exclusive remedies available to any Person for
any breach or inaccuracy of any representation or warranty contained in Article
III or IV of the Master Transaction Agreement are pursuant to Article X of the
Master Transaction Agreement.

B. Waiver of Duty of Utmost Good Faith. In recognition that each Party has
consummated the transactions contemplated by this Agreement and the other
Transaction Agreements to which it is a party, based on mutually negotiated
representations, warranties, covenants, remedies and other terms and conditions
as are fully set forth herein and therein, the Ceding Company and the Reinsurer
absolutely and irrevocably waive resort to the duty of “utmost good faith” or
any similar principle in connection with the formation or performance of this
Agreement.

 

18

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ARTICLE XXI

MISCELLANEOUS

A. This Agreement constitutes the entire agreement between the Ceding Company
and the Reinsurer with respect to the business being reinsured hereunder and
supersedes all prior agreements and undertakings, both written and oral, other
than the Confidentiality Agreement to the extent not in conflict with this
Agreement.

B. All notices, requests, consents, claims, demands and other communications
under this Agreement shall be in writing and shall be given or made (and shall
be deemed to have been duly given or made upon receipt) by delivery in person,
by overnight courier service, by electronic mail (followed by delivery of an
original via overnight courier service) or by registered or certified mail
(postage prepaid, return receipt requested) to the respective Parties at the
following respective addresses (or at such other address for a Party as shall be
specified in a notice given in accordance with this Article XXI(B)):

To the Ceding Company:

Equator Reinsurances Limited

Attention: Gavin P. Collery, Chief Financial Officer

19 Par-La-Ville Road

Pembroke HM11

Bermuda

Phone: (441) 294-4818

e-mail: gavin.collery@bm.qbe.com

To the Reinsurer:

Integon National Insurance Company

c/o National General Insurance Company

Attention: Jeffrey Weissmann, General Counsel

59 Maiden Lane

38th Floor

New York, NY 10038

Phone: (212) 380-9479

Facsimile: (212) 380-9498

e-mail: jeffrey.weissmann@ngic.com

 

19

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With a copy (which shall not constitute notice) to:

Debevoise & Plimpton LLP

Attention: Nicholas F. Potter

919 Third Avenue

New York, NY 10022

Phone: (212) 909-6459

Facsimile: (212) 521-7459

e-mail: nfpotter@debevoise.com

Any Party may, by notice given in accordance with this Article XXI(B) to the
other Party, designate another address or Person for receipt of notices
hereunder; provided that notice of such a change shall be effective upon
receipt.

C. Except as set forth in Article XIX, nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.

D. No Party may assign its rights or delegate its obligations hereunder without
the prior written consent of the other Parties. Any attempted assignment in
violation of this Article XXI(D) shall be void. This Agreement shall be binding
upon, shall inure to the benefit of, and shall be enforceable by the Parties and
their permitted successors and assigns.

E. This Agreement may be executed in one or more counterparts, and by the
different parties to this Agreement in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile or electronic mail shall be as
effective as delivery of a manually executed counterpart of any such agreement.

F. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE WITHOUT GIVING EFFECT TO ANY
CONFLICTS OF LAW PRINCIPLES OF SUCH STATE THAT MIGHT REFER THE GOVERNANCE,
CONSTRUCTION OR INTERPRETATION OF SUCH AGREEMENTS TO THE LAWS OF ANOTHER
JURISDICTION. Any action, suit or proceeding directly or indirectly arising out
of, under or in connection with this Agreement or the transactions contemplated
by this Agreement, shall be brought in the United States District Court for the
Southern District of New York or, if such court does not have subject matter
jurisdiction over such suit, action or proceeding, in state court in New York,
NY (collectively, the “New York Courts”). The Parties hereby waive any objection
they may now or hereafter have to the venue of any such action or proceeding in
any such court and any claim that such action or proceeding has been brought in
an inconvenient forum. Any service of any process, summons, notice, document or
other paper does, if delivered, sent or mailed in accordance with
Article XXI(B), constitute good, proper and sufficient service thereof. Each
Party agrees that any final, nonappealable judgment in any such action, suit or
proceeding brought in any such court shall be conclusive and binding upon such
Party and may be enforced in any other courts to whose jurisdiction such Party
may be subject, by suit upon such judgment.

 

20

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EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ITS
PERFORMANCE UNDER OR THE ENFORCEMENT OF THIS AGREEMENT.

G. The Parties agree that irreparable damage would occur in the event that any
of the terms or provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that, notwithstanding anything to the contrary contained in this Agreement, each
of the Parties shall be entitled to injunctive or other equitable relief to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court referenced in Article XXI(F) having jurisdiction,
such remedy being in addition to any other remedy to which any Party may be
entitled at law or in equity. In the event that any Action is brought in equity
to enforce the provisions of this Agreement, no Party shall allege, and each
Party hereby waives the defense or counterclaim, that there is an adequate
remedy at law.

H. No provision of this Agreement may be amended, supplemented or modified
except by a written instrument signed by all of the Parties. No provision of
this Agreement may be waived except by a written instrument signed by the Party
against whom the waiver is to be effective. No failure or delay by any Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by applicable Law.

I. The provisions of Section 8 (Confidential Information) of the Administrative
Services Agreement are incorporated by reference herein mutatis mutandis.

J. Interpretation of this Agreement shall be governed by the following rules of
construction: (i) words in the singular shall be held to include the plural and
vice versa, and words of one gender shall be held to include the other gender as
the context requires; (ii) references to the terms preamble, recitals, Article,
paragraph and Schedule are references to the preamble, recitals, Articles,
paragraphs and Schedules to this Agreement unless otherwise specified; (iii) the
word “including” and words of similar import shall mean “including without
limitation,” unless otherwise specified; (iv) the word “or” shall not be
exclusive; (v) the words “herein,” “hereof,” “hereunder” or “hereby” and similar
terms are to be deemed to refer to this Agreement as a whole and not to any
specific Article; (vi) the headings are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement;
(vii) this Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the Party drafting or
causing any instrument to be drafted; (viii) if a word or phrase is defined, the
other grammatical forms of such word or phrase have a corresponding meaning;
(ix) references to any statute, listing rule, rule, standard, regulation or
other law include a reference to (a) the corresponding rules and regulations and
(b) each of them as amended, modified, supplemented, consolidated, replaced or
rewritten from time to time; (x) references to any section of any statute,
listing rule, rule, standard, regulation or other law include any successor to
such section; (xi) references to any Person include such Person’s

 

21

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predecessors or successors, whether by merger, consolidation, amalgamation,
reorganization or otherwise; (xii) any reference to “days” means calendar days
unless Business Days are expressly specified; and (xiii) references to any
contract (including this Agreement) or organizational document are to the
contract or organizational document as amended, modified, supplemented or
replaced from time to time, unless otherwise stated.

[Signature page follows]

 

22

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the date first above written.

 

EQUATOR REINSURANCES LIMITED INTEGON NATIONAL INSURANCE COMPANY By:

 

By:

 

Title:

 

Title:

 

[Signature Page to Reinsurance Agreement]

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

EXHIBIT B-2

FORM OF QUOTA SHARE REINSURANCE AGREEMENT

See attached.

 

B-2

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

EXHIBIT B-2

FORM OF QUOTA SHARE REINSURANCE AGREEMENT

100% QUOTA SHARE REINSURANCE AGREEMENT

BY AND AMONG

QBE INSURANCE CORPORATION,

PRAETORIAN INSURANCE COMPANY,

QBE SPECIALTY INSURANCE COMPANY

AND

INTEGON NATIONAL INSURANCE COMPANY

DATED AS OF [●], 2015

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

TABLE OF CONTENTS

 

Article I DEFINITIONS

  2   

Article II COVERED BUSINESS AND EFFECTIVE TIME

  6   

Article III TERRITORY

  7   

Article IV REINSURING CLAUSE

  7   

Article V CONSIDERATION AND PREMIUMS

  8   

Article VI ADMINISTRATION OF THE POLICIES

  11   

Article VII EXCLUSIONS

  12   

Article VIII SEVERABILITY

  12   

Article IX ERRORS AND OMISSIONS; COOPERATION

  12   

Article X EXISTING REINSURANCE CONTRACTS AND POLICIES

  13   

Article XI INSOLVENCY

  14   

Article XII TRUST ACCOUNT

  15   

Article XIII LOSS SETTLEMENTS

  17   

Article XIV RESERVES

  17   

Article XV CURRENCY

  17   

Article XVI OFFSET

  18   

Article XVII SALVAGE AND SUBROGATION

  18   

Article XVIII TERMINATION AND TRIGGERING EVENT

  18   

Article XIX INDEMNIFICATION

  19   

Article XX NO OTHER REPRESENTATIONS OR WARRANTIES

  19   

Article XXI CREDIT FOR REINSURANCE

  20   

Article XXII MISCELLANEOUS

  21   

 

i

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Schedule A – Reinsurance Arrangements

Schedule B – Quarterly Financial Report

Schedule C – Annual Reports

 

ii

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100% QUOTA SHARE REINSURANCE AGREEMENT

THIS 100% QUOTA SHARE REINSURANCE AGREEMENT (this “Agreement”), is made and
entered into as of [●], 2015 (the “Closing Date”) by and among QBE INSURANCE
CORPORATION, a Pennsylvania-domiciled property and casualty insurance company,
PRAETORIAN INSURANCE COMPANY, a Pennsylvania-domiciled property and casualty
insurance company, and QBE SPECIALTY INSURANCE COMPANY, a North Dakota-domiciled
property and casualty insurance company (collectively, the “Ceding Company”),
and INTEGON NATIONAL INSURANCE COMPANY, a North Carolina-domiciled property and
casualty insurance company (the “Reinsurer”). The Ceding Company and the
Reinsurer are each a “Party” and are collectively, the “Parties.”

WHEREAS, QBE Financial Institution Risk Services, Inc. (the “Seller”), an
Affiliate (as defined in the Master Transaction Agreement (as defined herein))
of the Ceding Company, along with its Affiliate QBE Investments (North America),
Inc., and National General Holdings Corp. (the “Acquiror”), an Affiliate of the
Reinsurer, have entered into that certain Master Transaction Agreement, dated as
of July 15, 2015 (the “Master Transaction Agreement”), pursuant to which the
Seller has agreed to sell, and the Acquiror has agreed to purchase, the Business
(as defined herein);

WHEREAS, immediately prior to the execution of this Agreement, the Ceding
Company and Equator Reinsurances Limited (“Equator”), an Affiliate of the Ceding
Company, commuted all Reinsured Liabilities (as defined herein) previously ceded
from the Ceding Company to Equator on a quota share basis;

WHEREAS, as a condition to the Closing (as defined in the Master Transaction
Agreement), the Ceding Company shall cede to the Reinsurer, and the Reinsurer
shall reinsure, on a one hundred percent (100%) quota share basis, all Reinsured
Liabilities in accordance with the terms and conditions of this Agreement;

WHEREAS, simultaneous with the execution of this Agreement, the Reinsurer, as
grantor, the Ceding Company, as the beneficiary, and the Trustee (as defined
herein), as trustee, have entered into certain Trust Agreements (each, a “Trust
Agreement”), which are intended for the credit protection of the Ceding Company
and, in the event that the Reinsurer ceases to be licensed or accredited as an
insurer or reinsurer in the jurisdiction of domicile of the Ceding Company, to
enable the Ceding Company to take statutory credit for the reinsurance provided
hereunder, and pursuant to which the Reinsurer has agreed to establish and
maintain trust accounts to secure the Reinsurer’s obligations to the Ceding
Company under this Agreement;

WHEREAS, simultaneous with the execution of this Agreement, the Reinsurer, as
grantor, the Ceding Company, as the secured party, and the Trustee, as
securities intermediary, have entered into certain Security and Control
Agreements (each, a “Security and Control Agreement”), pursuant to which the
Reinsurer has granted a first priority security interest in favor of the Ceding
Company in and continuing lien on all of its right, title and interest in, to
and under each Trust Account (as defined herein) on the terms and subject to the
conditions set forth therein; and

 

1

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WHEREAS, simultaneous with the execution of this Agreement, the Ceding Company
and the Reinsurer have entered into that certain Reinsurance Administrative
Services Agreement (the “Administrative Services Agreement”), pursuant to which
the Reinsurer shall provide certain administrative services on behalf of the
Ceding Company with respect to the Policies (as defined herein).

NOW, THEREFORE, in consideration of the mutual and several promises and
undertakings herein contained, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Parties agree as
follows:

ARTICLE I

DEFINITIONS

Any capitalized term used but not defined herein shall have the meaning set
forth in the Master Transaction Agreement. The following terms have the
respective meanings set forth below throughout this Agreement:

“Acquiror” shall have the meaning set forth in the recitals.

“Actuarial Report” shall have the meaning set forth in Article V(D)(i).

“Administrative Services Agreement” shall have the meaning set forth in the
recitals.

“Agreement” shall have the meaning set forth in the preamble.

“Annual Reports” shall have the meaning set forth in Article V(D)(iv).

“Business” means the business activities of the LPI Companies (whether or not
loan tracking services are provided as part of such activities) as a managing
general agent, general agent, producer or broker and insurer of lender-placed
hazard insurance, REO insurance, lender-placed automobile insurance,
lender-placed flood and flood gap insurance, lender-placed wind insurance,
guaranteed asset protection insurance and leased equipment insurance.

“Ceded Expenses” means costs incurred or paid by or on behalf of the Ceding
Company in connection with the acquisition, servicing and maintenance of the
Policies, including ceding commissions and profit sharing amounts paid to
cedents, brokerage fees and commissions paid to reinsurance intermediaries,
commissions (including advance and contingent commissions) and profit sharing
payments paid to agents, brokers or producers, fronting fees, other similar
acquisition expenses, operating expenses, any and all state and local premium or
other similar taxes imposed on premiums written, collected or received, as
applicable under the Law of the applicable jurisdiction relating to the
Policies, and any and all guaranty fund or other residual market assessments
incurred by the Ceding Company with respect to premiums relating to the
Reinsured Liabilities, less the portion, if any, of premium tax credits,
deductions and offsets associated with such assessments, in respect of all such
costs, to the extent (i) incurred after Closing (as defined in the Master
Transaction Agreement) or (ii) incurred prior to Closing and reflected in the
Final Reinsurance Settlement Statement. Ceded Expenses does not include any such
costs that were paid by or on behalf of the Ceding Company prior to the
Effective Time.

 

2

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“Ceding Company” shall have the meaning set forth in the preamble.

“Ceding Company Indemnitees” shall have the meaning set forth in Article XIX(B).

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

“Damages” means any and all damages, losses, Liabilities, judgments,
settlements, costs and expenses (including reasonable attorneys’ fees and other
expenses of investigation and reasonable attorneys’ fees and other expenses in
connection with any action, suit or proceeding).

“Effective Date” means [●].1

“Effective Time” means 12:00 a.m., Eastern Time on the Effective Date.

“Eligible Investment” means with respect to each Ceding Company any security or
other asset, as set forth in the applicable Laws of such Ceding Company’s
jurisdiction of domicile, that is of the type which is permitted to be held in a
trust account which would allow such Ceding Company to obtain a reduction from
liability for the reinsurance ceded to the Reinsurer.

“Equator” shall have the meaning set forth in the recitals.

“Extra Contractual Obligations” means all Liabilities and obligations to any
Person arising out of or relating to the Policies (other than Liabilities or
obligations arising under the express terms and conditions, and within the
limits, of the Policies), including any Liability for fines, penalties, taxes,
fees, forfeitures, compensatory, punitive, exemplary, special, treble, bad
faith, tort or any other form of extra contractual damages, and all legal fees
and expenses relating thereto, including Liabilities or obligations arising from
any act, error or omission, whether intentional, negligent or in bad faith,
arising out of (i) the form, sale, marketing, underwriting, production,
issuance, cancellation or administration of the Policies, (ii) the
investigation, defense, trial, settlement or handling of claims, benefits or
payments under the Policies, or (iii) the failure to pay or the delay in payment
or errors in calculating or administering the payment of benefits, claims or any
other amounts due or alleged to be due under or in connection with the Policies.
Extra Contractual Obligations shall not include Excluded Liabilities (as defined
in the Master Transaction Agreement).

“GAAP” means U.S. Generally Accepted Accounting Principles in effect at the time
any applicable financial statements were or are prepared.

“Initial Rate” means an interest rate equal to three (3)-month LIBOR for dollars
that appears on page LIBOR 01 (or a successor page) of the Reuters Telerate
Screen as of 11:00 a.m., New York time, on each day during the period for which
interest is to be paid.

“Liabilities” means any and all liabilities, obligations, debts and binding
commitments of any kind, character or description, whether known or unknown,
asserted or not asserted, absolute or contingent, fixed or unfixed, disputed or
undisputed, liquidated or unliquidated, secured or unsecured, joint or several,
vested or unvested, executory, determined, determinable or

 

1  Note to Draft: Effective Date will be the Closing Date under the Master
Transaction Agreement.

 

3

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otherwise, whenever or however incurred or arising (including whether arising
out of any contract or tort based on negligence or strict liability) and whether
or not the same would be required by GAAP or SAP to be reflected in financial
statements or disclosed in the notes thereto.

“Master Transaction Agreement” shall have the meaning set forth in the recitals.

“Net Cash Settlement Amount” shall have the meaning set forth in Article
V(D)(ii).

“Net Loss Reserves” means, as of any date of determination, gross statutory
reserves for Policy Liabilities, including billed but unpaid losses, case and
other loss reserves, reserves for losses incurred but not yet reported and
future development on known claims, and reserves for loss adjustment expenses
(whether allocated or unallocated), reopened claims reserves and claims in
transit, in each case in respect of Policy Liabilities and net of ceded loss
reserves under the Reinsurance Arrangements.

“New Insurance Policies” shall have the meaning set forth in the Administrative
Services Agreement.

“New York Courts” shall have the meaning set forth in Article XXII(G).

“Party” shall have the meaning set forth in the preamble.

“Policies” means (i) any and all binders, endorsements, riders, policies,
certificates, slips, covers, supplements and other contracts of in force
insurance contracts issued, renewed, assumed or reinsured, on or prior to the
Effective Time, by or on behalf of the Ceding Company in connection with the
Business, and (ii) the New Insurance Policies, including all renewals of
contracts in (i) or (ii) after the Effective Time and any contracts that were
lapsed and terminated with unpaid claims or subsequently reinstated.

“Policy Liabilities” means all Liabilities of the Ceding Company, including
losses and loss settlements, arising under or with respect to the Policies with
respect to events and occurrences on or after the Effective Time.

“Premium” means premiums, considerations, deposits and similar receipts with
respect to the Policies.

“Quarterly Financial Report” shall have the meaning set forth in Article
V(D)(ii).

“Quarterly Settlement Period” means each quarterly period beginning on and
including the first day of a calendar quarter and ending on the last day of such
calendar quarter, except that (i) the first Quarterly Settlement Period shall
begin on the Effective Date, and (ii) the final Quarterly Settlement Period
shall end on the date of termination of this Agreement.

“RBC Calculation” shall have the meaning set forth in Article VI(B).

“Recoverables” shall have the meaning set forth in Article V(B).

 

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“Reinsurance Arrangements” means reinsurance and other risk transfer or risk
mitigation mechanisms or arrangements set forth in Schedule A relating to the
Policies that are (i) in force or are treated as being in force as of the
Closing Date or (ii) terminated but under which there remains any outstanding
Liability from the reinsurer with respect to which reserves are carried or
required to be carried as of the Closing Date.

“Reinsurance Credit Event” means an event that results in the Ceding Company
being unable to obtain full statutory financial statement credit for the
reinsurance provided by this Agreement in the jurisdiction of domicile of the
Ceding Company during the term of this Agreement.

“Reinsured Liabilities” means (i) all Policy Liabilities (net of actual
recoveries received by a Ceding Company under the Reinsurance Arrangements),
(ii) all Ceded Expenses paid or payable by a Ceding Company after the Effective
Time, (iii) all loss adjustment expenses related to the Policy Liabilities and
(iv) all Extra Contractual Obligations (to the extent not recovered under the
External LPT Reinsurance Agreement (as defined in the Master Transaction
Agreement)) arising before, at or after the Effective Time, to the extent
permitted by applicable Law.

“Reinsurer” shall have the meaning set forth in the preamble.

“Reinsurer Indemnitees” shall have the meaning set forth in Article XIX(A).

“SAP” means, with respect to a Party, statutory accounting practices as
prescribed or permitted by the applicable Governmental Authorities having
jurisdiction over such Party.

“Security Amount” means (i) at any time prior to a Triggering Event, an amount
equal to 102% of the Net Loss Reserves and (ii) at any time after a Triggering
Event, an amount equal to 105% of the Net Loss Reserves.

“Security and Control Agreement” shall have the meaning set forth in the
recitals.

“Seller” shall have the meaning set forth in the recitals.

“Settlement Date” shall have the meaning set forth in Article V(E)(iii).

“Termination Account” shall have the meaning set forth in Article XII(I)(i)(d).

“Third Party Accountant” means Deloitte Touche Tohmatsu Limited; provided, that
if Deloitte Touche Tohmatsu Limited is unable to act as Third Party Accountant,
the Third Party Account shall be an independent accounting firm of international
recognition which is mutually acceptable to the Ceding Company and the Reinsurer
or, if the Ceding Company and the Reinsurer are unable to agree on such an
accounting firm, an independent accounting firm selected by mutual agreement of
the Ceding Company’s and the Reinsurer’s independent accountants.

“Triggering Event” means the occurrence of any one or more of the following:
(i) the Reinsurer’s financial strength rating or claims paying rating, as
applicable, by A.M. Best

 

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Company is reduced below A- (Excellent) or the Reinsurer ceases to be assigned a
financial strength rating or claims paying rating, as applicable, by A.M. Best
Company; (ii) the Reinsurer’s statutory policyholder surplus falls below $325
million and has not been cured by the Reinsurer within thirty (30) days of such
occurrence; (iii) the Reinsurer’s “total adjusted capital” (as reflected in the
RBC Calculation delivered by the Reinsurer to the Ceding Company pursuant to
Article VI(B)) falls below two hundred percent (200%) of the Reinsurer’s
“company action level risk-based capital” (as reflected in such RBC Calculation)
and has not been cured by the Reinsurer within thirty (30) days of such
occurrence; (iv) the initiation or commencement of a liquidation, insolvency,
rehabilitation, conservation, supervision or similar proceeding by or against
the Reinsurer and such liquidation, insolvency, rehabilitation, conservation,
supervision or similar proceeding and has not been cured by the Reinsurer within
sixty (60) days of such initiation or commencement; (v) the Reinsurer fails to
fund a Trust Account in accordance with the terms of this Agreement and the
applicable Trust Agreement and has not cured such failure within thirty
(30) days; (vi) a Reinsurance Credit Event that has not been cured within thirty
(30) days notice from the Ceding Company or the Reinsurer’s breach of its
covenants set forth in Article XXI; or (vii) the Reinsurer is no longer a
Subsidiary (as defined in the Master Transaction Agreement) of the Acquiror.

“Trust Account” shall have the meaning set forth in the applicable Trust
Agreement.

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

“Trust Assets” shall have the meaning set forth in Article XII(D).

“Trustee” means the trustee or custodian named under the applicable Trust
Agreement and any successor trustee or custodian appointed as such pursuant to
the terms of such Trust Agreement.

ARTICLE II

COVERED BUSINESS AND EFFECTIVE TIME

A. This Agreement shall apply to all Policies, including, for the avoidance of
doubt, the New Insurance Policies issued or renewed in accordance with
Section 14 of the Administrative Services Agreement.

B. This Agreement is effective as of the Effective Time and shall remain in
force until such time as (i) all Reinsured Liabilities ceded hereunder have been
terminated and extinguished in accordance with the terms of the Policies and all
amounts owing under this Agreement have been paid, or (ii) this Agreement is
terminated in accordance with Article XVIII(A).

C. The provisions of Articles I, II(C), II(D), XIX and XXII shall survive the
termination of this Agreement. In the event of a termination of this Agreement,
each Party shall remain liable for any willful and material breach of this
Agreement prior to such termination.

D. In the event that this Agreement is terminated under Article XVIII(A), unless
otherwise agreed in writing by the Parties, (i) the Parties shall settle amounts
based on a report in

 

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the same form as the Quarterly Financial Report as of the effective date of
termination and delivered not later than thirty (30) days following the
effective date of termination, (ii) the Reinsurer shall return contemporaneously
with delivery of said report by wire transfer of immediately available funds to
an account designated by the Ceding Company in writing, an amount in cash or
other Eligible Investments with a fair market value in the aggregate equal to
the value of the unearned premium reserves and Net Loss Reserves as of the
effective date of termination, determined in accordance with SAP, (iii) the
Parties shall cooperate to effect a further unwinding of the transactions
contemplated by this Agreement as of the effective date of termination,
including assigning back to the Ceding Company all rights and payments assigned
by the Ceding Company to the Reinsurer pursuant to this Agreement effective as
of the date of termination; provided, that the Administrative Services Agreement
shall remain in place until such time as it is terminated pursuant to its terms
and (iv) the Parties shall true up the payment made under the preceding
clause (ii) using the procedures set forth in Article V(D) mutatis mutandis.

ARTICLE III

TERRITORY

The reinsurance provided under this Agreement shall be coextensive with the
territory of the Policies.

ARTICLE IV

REINSURING CLAUSE

A. Subject to the terms and conditions of this Agreement, as of the Effective
Time, the Ceding Company hereby cedes on a quota share basis to the Reinsurer,
and the Reinsurer hereby accepts and agrees to assume and reinsure on a quota
share basis, one hundred percent (100%) of all Reinsured Liabilities under all
the Policies, including for the avoidance of doubt, the New Insurance Policies
issued or renewed in accordance with Section 14 of the Administrative Services
Agreement.

B. Pursuant to the Administrative Services Agreement, on and after the Closing
Date, the Reinsurer, in its capacity as administrator under the Administrative
Services Agreement, shall have responsibility for discharging and paying to or
on behalf of the Ceding Company for the account of the party to whom they are
owed, as and when due, the Reinsured Liabilities.

C. The Reinsurer’s liability under this Agreement shall attach simultaneously
with that of the Ceding Company under the Policies, and the Reinsurer’s
liability under this Agreement shall be subject in all respects to the same
risks, terms, rates, conditions, interpretations, assessments, waivers,
proportion of premiums paid to the Ceding Company without any deductions for
brokerage, and to the same modifications, alterations and cancellations, as the
respective Policies to which liability under this Agreement attaches, the true
intent of this Agreement being that the Reinsurer shall, subject to the terms,
conditions, and limits of this Agreement, follow the fortunes of the Ceding
Company under the Policies, and the Reinsurer shall be bound, without
limitation, by all payments and settlements under the Policies made or entered
into by or on behalf of the Ceding Company.

D. The Reinsurer accepts, reinsures and assumes, as applicable and to the extent
set forth herein, the Reinsured Liabilities subject to any and all defenses,
setoffs and counterclaims to which the Ceding Company would be entitled with
respect to the Reinsured Liabilities, it being expressly understood and agreed
by the Parties that no such defenses, setoffs or counterclaims are or shall be
waived by the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby and that the Reinsurer is and shall be
fully subrogated in and to all such defenses, setoffs and counterclaims.

 

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ARTICLE V

CONSIDERATION AND PREMIUMS

A. As consideration for the reinsurance provided pursuant to this Agreement, the
Ceding Company shall transfer, on the Closing Date in accordance with the Master
Transaction Agreement, to the applicable Trust Account, cash or other Eligible
Investments equal to the Estimated Net Settlement Amount determined by reference
to the Estimated Reinsurance Settlement Statement. Such payment shall be
adjusted following the date hereof in accordance with the mechanics set forth in
the Master Transaction Agreement, and the Reinsurer shall pay to the Ceding
Company, the Ceding Commission pursuant to the Master Transaction Agreement,
which shall be fully earned and nonrefundable upon receipt.

B. As additional consideration for the reinsurance provided herein, and subject
in any event to the Reinsurer’s compliance with and performance of the terms and
conditions of this Agreement and each other Transaction Agreement to which the
Reinsurer is a party, the Ceding Company hereby irrevocably sells, transfers and
conveys to the Reinsurer, and Reinsurer shall be entitled to receive, one
hundred percent (100%) of all of the following amounts actually received by the
Ceding Company or the Reinsurer, whether in its role as reinsurer hereunder or
as administrator under the Administrative Services Agreement, with respect to
the Policies after the Effective Time that are either due and unpaid as of the
Effective Time or that arise on any date after the Effective Time (items
(i) through (iv) below, collectively, the “Recoverables”):

(i) Premiums (net of premiums with respect to the Reinsurance Arrangements as
set forth in Schedule A);

(ii) litigation recoveries pursuant to litigation to the extent liability for
such litigation constitutes a Reinsured Liability;

(iii) any premium tax refunds relating to Premiums paid on or after the
Effective Time; and

(iv) any and all other collections and recoveries of any sort whatsoever to the
extent related to the Reinsured Liabilities (other than recoveries under the
Reinsurance Arrangements).

provided, however, that following the occurrence of a Triggering Event, the
Ceding Company shall be entitled to retain all such amounts as security for, and
the Ceding Company shall have the right to use and apply such amounts solely to
satisfy, the Reinsurer’s obligations under this Agreement.

 

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C. Subject in any event to the Reinsurer’s compliance with and performance of
the terms and conditions of this Agreement and any other Transaction Agreement
to which the Reinsurer is a party, the Ceding Company hereby appoints the
Reinsurer as its agent and attorney in fact to collect all Recoverables in the
Ceding Company’s name. The Ceding Company agrees and acknowledges that the
Reinsurer and its permitted assigns and delegatees are entitled to enforce, in
the name of the Ceding Company, all rights at law or in equity or good faith
claims of the Ceding Company with respect to such Recoverables. If necessary for
such collection, the Ceding Company shall reasonably cooperate, at the
Reinsurer’s expense, in any litigation or other dispute resolution mechanism
relating to such collection. The Parties acknowledge and agree that the
Reinsurer shall be responsible for and has hereby assumed the financial risk of
any uncollected or uncollectible Recoverables. To the extent that the Ceding
Company recovers any Recoverables from any third party attributable to the
Reinsured Liabilities, the Ceding Company shall, in accordance with this
Article V, transfer such amounts to the Reinsurer, together with any pertinent
information that the Ceding Company may have relating thereto.

D. Reports and Remittance.

(i) On an annual basis, the Reinsurer shall prepare, or have prepared, in
accordance with all applicable actuarial standards and statutory actuarial
opinion disclosure requirements, an actuarial review of the statutory reserves
on a gross, ceded and net basis prior to the application of the reinsurance
provided under this Agreement (“Actuarial Report”). The Actuarial Report shall
contain (a) a distribution release for regulators, tax authorities and rating
agencies, (b) an actuarial point estimate, and (c) a data reconciliation between
data underlying the actuarial analysis and data provided in the Quarterly
Financial Reports to the Ceding Company. The Reinsurer shall provide a copy of
the Actuarial Report in final form to the Ceding Company no later than ninety
(90) days following the end of each calendar year. With each Actuarial Report,
the Reinsurer shall cause the Ceding Company’s opining actuaries to be granted
permission in writing from the actuary signing the Actuarial Report to rely on
the Actuarial Report.

(ii) As soon as practicable (but in no event later than ten (10) Business Days)
after the end of each quarter ending on February 28, May 31, August 31 and
November 30, the Reinsurer shall deliver to the Ceding Company a quarterly
financial report (each a “Quarterly Financial Report”), substantially in the
form set forth in Schedule B, which shall report on the financial activity
hereunder for the relevant Quarterly Settlement Period and shall calculate the
amount, if any, due from the Reinsurer to the Ceding Company or due from the
Ceding Company to the Reinsurer, as applicable, under this Agreement for the
relevant Quarterly Settlement Period to the extent not already paid or settled
(the “Net Cash Settlement Amount”).

(iii) If the Ceding Company has any objection to the Net Cash Settlement Amount
on the basis of (a) manifest arithmetic error, or (b) such Net Cash Settlement
Amount not being calculated in accordance with the terms of this Agreement, the
Ceding Company shall deliver to the Reinsurer written notice thereof together
with reasonable supporting detail concerning its objection. If the Ceding
Company does not deliver a notice of objection within

 

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thirty (30) days after receipt of the calculation of the Net Cash Settlement
Amount from the Reinsurer, the Parties shall be bound by such calculation. If a
notice of objection in respect of the calculation of the Net Cash Settlement
Amount is provided by the Ceding Company to the Reinsurer, the Ceding Company
and the Reinsurer shall attempt in good faith to resolve the objection between
themselves. If such objection is resolved between the Ceding Company and the
Reinsurer, the calculation of the Net Cash Settlement Amount shall be as so
agreed in writing between the Ceding Company and the Reinsurer and the Parties
shall be bound by such calculation. If the Ceding Company and the Reinsurer are
unable to reach a resolution on the calculation of the Net Cash Settlement
Amount within thirty (30) days after receipt by the Reinsurer of the Ceding
Company’s notice of objection, the dispute shall be submitted to a Third Party
Accountant for resolution as soon as practicable (but in no event later than
thirty (30) days) whose decision shall be final and binding on the Parties.

(iv) Within fifteen (15) Business Days following the end of each calendar year,
the Reinsurer shall deliver to the Ceding Company the information and reports
listed on Schedule C (collectively, the “Annual Reports”).

(v) Without limiting the foregoing, each of the Reinsurer and the Ceding Company
shall provide to the other Party such reports as are reasonably required in
order that such other Party may prepare its financial statements, regulatory
filings and any other filings that must be made by such other Party or any other
Person to which such other Party has ceded, or otherwise transferred the risk
related to, the Policies.

E. Remittance. If the Net Cash Settlement Amount as shown on the Quarterly
Financial Report finally determined pursuant to Article V(D)(ii) is a positive
amount, the Ceding Company shall pay such amount to the Reinsurer, and if the
Net Cash Settlement Amount as shown on such Quarterly Financial Report is a
negative amount, then the Reinsurer shall pay the absolute value of such
negative amount to the Ceding Company.

(i) All Net Cash Settlement Amounts (including any interest on any of the
foregoing) due to the Reinsurer from the Ceding Company shall be remitted by
wire transfer in immediately available funds to an account or accounts
designated by the Reinsurer.

(ii) All Net Cash Settlement Amounts (including any interest on the foregoing)
due to the Ceding Company from the Reinsurer shall be remitted by wire transfer
in immediately available funds to an account or accounts designated by the
Ceding Company.

(iii) Any payment required under this Article V(E) with respect to any Quarterly
Settlement Period shall be made within seven (7) days following final
determination of the Net Cash Settlement Amount pursuant to Article (D)(ii) by
the party required to make payment (the “Settlement Date”).

(iv) Notwithstanding the foregoing, during any period of time when the Reinsurer
is in breach of any Trust Agreement, (a) any amount payable by the Ceding
Company to the Reinsurer hereunder shall be deposited into the applicable Trust
Account and (b) any Recoverables collected by the Reinsurer during any Quarterly
Settlement Period shall be deposited by the Reinsurer into the applicable Trust
Account.

 

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F. Delayed Payments. If there is a delayed settlement of any payment due
hereunder between the Ceding Company and the Reinsurer, interest shall accrue on
such payment at the Initial Rate then in effect until settlement is made. For
purposes of this Article V(F), a payment shall be considered overdue, and such
interest shall begin to accrue, on the first day immediately following the date
such payment is due.

G. Books and Records. The Reinsurer shall, and shall cause its Affiliates to,
preserve, until such date as may be required by the Reinsurer’s standard
document retention policies (or such other later date as may be required by
applicable Law), all books and records related to the Business. During such
period, upon any reasonable request from the Ceding Company or its
Representatives, the Reinsurer shall (i) provide to the Ceding Company and its
Representatives reasonable access to such books and records during normal
business hours; provided that such access shall not unreasonably interfere with
the conduct of the business of the Reinsurer, and (ii) permit the Ceding Company
and Representatives to make copies of such records, in each case, at no cost to
the Ceding Company or its Representatives (other than for reasonable
out-of-pocket expenses). Such books and records may be sought under this
Article V(G) by the Ceding Company for any reasonable purpose, including to the
extent reasonably required in connection with accounting, litigation, federal
securities disclosure or other similar purpose. Notwithstanding the foregoing,
any and all such books and records may be destroyed by the Reinsurer if the
Reinsurer sends to the Ceding Company written notice of its intent to destroy
such records, specifying in reasonable detail the contents of the records to be
destroyed; such records may then be destroyed after the sixtieth (60th) day
following such notice unless the Ceding Company notifies the Reinsurer that it
desires to obtain possession of such records, in which event the Reinsurer shall
transfer the records to the Ceding Company and the Ceding Company shall pay all
reasonable expenses of the Reinsurer in connection therewith.

ARTICLE VI

ADMINISTRATION OF THE POLICIES

A. The Reinsurer shall administer all matters related to the Policies pursuant
to the terms and conditions of the Administrative Services Agreement.
Notwithstanding any other provision to the contrary, the Reinsurer acknowledges
that (i) in no event shall the Ceding Company have any Liability to the
Reinsurer hereunder for any default of its obligations under this Agreement
caused by the failure of the Reinsurer to perform its obligations under the
Administrative Services Agreement and (ii) in no event shall the failure of the
Reinsurer to perform its obligations under the Administrative Services Agreement
give the Reinsurer any grounds for not performing its obligations under this
Agreement.

B. Not later than sixty (60) days after the end of each calendar year, the
Reinsurer shall provide to the Ceding Company a calculation (an “RBC
Calculation”) of the Reinsurer’s “total adjusted capital” and “company action
level risk-based capital,” in each case, determined by the Reinsurer in
accordance with the risk-based capital instructions prescribed by the
domiciliary jurisdiction of the Reinsurer.

 

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ARTICLE VII

EXCLUSIONS

The exclusions with respect to the Reinsured Liabilities payable under this
Agreement under the terms of the Policies shall be identical with those
contained in the Policies.

ARTICLE VIII

SEVERABILITY

Any term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction; provided that the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to either Party; provided further that if the economic or legal
substance is so affected, the Parties shall negotiate in good faith in an effort
to agree upon a suitable and equitable substitute provision to effect the
original intent of the Parties. If any provision of this Agreement is so broad
as to be unenforceable, that provision shall be interpreted to be only so broad
as is enforceable.

ARTICLE IX

ERRORS AND OMISSIONS; COOPERATION

A. Inadvertent delays, errors or omissions made in connection with this
Agreement or any transaction hereunder shall not relieve either Party from any
Liability that would have attached had such delay, error or omission not
occurred; provided that such delay, error or omission is rectified as soon as
possible after discovery; provided, further, that the Party making such error or
omission or responsible for such delay shall be responsible for any additional
Liability which attaches to either Party as a result of such error, omission or
delay. Subject to the foregoing, if (i) the failure of any Party to comply with
any provision of this Agreement is unintentional or the result of a
misunderstanding or oversight and (ii) such failure to comply is promptly
rectified, the Parties shall be restored as closely as possible to the positions
they would have occupied if no error or oversight had occurred.

B. On or after the Closing Date, the Ceding Company and the Reinsurer shall
cooperate with each other in order to accomplish the objectives of this
Agreement by furnishing any additional information and executing and delivering
any additional documents as may be reasonably requested by the other to further
perfect or evidence the consummation of, or otherwise implement, any transaction
contemplated by this Agreement, the Master Transaction Agreement or any other
Transaction Agreement; provided, however, that any such additional documents
must be reasonably satisfactory to each of the Parties and not impose upon
either Party any material liability, risk, obligation, loss, cost or expense not
contemplated by this Agreement, the Master Transaction Agreement or any other
Transaction Agreement.

 

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ARTICLE X

EXISTING REINSURANCE CONTRACTS AND POLICIES

A. The Parties hereby agree that the collectability of reinsurance with respect
to the Policies under the Reinsurance Arrangements shall be at the risk of and
for the account of the Reinsurer, and shall be reduced only by the actual amount
of recoveries received by the Ceding Company under the Reinsurance Arrangements.

B. Liabilities with respect to the Policies under any Reinsurance Arrangement
that are terminated or recaptured, to the extent such Liabilities constitute
Reinsured Liabilities, shall be automatically ceded hereunder to the Reinsurer
without further action, subject to receipt by the Reinsurer of any reserve
transfer or similar transfers or settlement amount, if any, received by the
Ceding Company from the applicable reinsurer and, in such event, the Reinsurer
shall pay any special transfer or recapture fee or any other amount payable by
the Ceding Company in respect of the Reinsured Liabilities in connection
therewith as may be required under such Reinsurance Arrangement.

C. The Ceding Company shall not amend or change any term of any Reinsurance
Arrangement, to the extent that such amendment or change relates to the
Policies, without the prior written consent of the Reinsurer, which consent
shall not be unreasonably withheld; provided that the Ceding Company shall have
no obligation to renew any Reinsurance Arrangement at the end of its term. To
the extent that the Ceding Company is required to purchase any compulsory
reinsurance with respect to the Policies, the Reinsurer shall reimburse the
Ceding Company for the cost of any such reinsurance.

D. On and after the Closing Date, the Ceding Company and the Reinsurer shall
cooperate and use their commercially reasonable efforts to enforce the Ceding
Company’s rights at the sole cost of the Reinsurer with respect to any
Reinsurance Arrangement (to the extent relating to the Policies), Policy, any
agreement with any producer with respect to the Policies or any agreement of the
Ceding Company relating to any Ceded Expenses except that the Ceding Company
shall have the right to retain ultimate control of such agreement, arrangement
or Policy.

E. Until December 31, 2015, the Reinsurer shall present to the Ceding Company
any request for reinsurance coverage in connection with the Policies. The Ceding
Company shall have the sole and exclusive right to underwrite such reinsurance
coverage. Notwithstanding the foregoing, if (i) the Ceding Company declines to
underwrite the coverage or (ii) the Ceding Company and the Reinsurer are unable
to reach an agreement on terms within ten (10) Business Days of the Reinsurer’s
request, then the Reinsurer can obtain coverage from another insurance company.

 

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ARTICLE XI

INSOLVENCY

A. If more than one reinsured company is referenced within the definition of
“Ceding Company” in the preamble, this Article XI shall apply severally to each
such company. Further, this Article XI and the Laws of the jurisdiction of
domicile shall apply in the event of the insolvency of any company covered
hereunder. In the event of a conflict between any provision of this Article XI
and the Laws of the jurisdiction of domicile of any company covered hereunder,
that jurisdiction’s Laws shall prevail.

B. In the event of the insolvency of the Ceding Company, reinsurance hereunder
(or the portion of any risk or obligation assumed by the Reinsurer, if required
by applicable Law) shall be payable directly to the Ceding Company, or to its
liquidator, receiver, conservator or statutory successor, either: (i) on the
basis of the Liability of the Ceding Company, or (ii) on the basis of claims
filed and allowed in the liquidation proceeding, whichever may be required by
applicable Law, without diminution because of the insolvency of the Ceding
Company or because the liquidator, receiver, conservator or statutory successor
of the Ceding Company has failed to pay all or a portion of any claim. It is
agreed, however, that the liquidator, receiver, conservator or statutory
successor of the Ceding Company shall give written notice to the Reinsurer of
the pendency of a claim against the Ceding Company indicating the Policy
reinsured, which claim would involve a possible Liability on the part of the
Reinsurer within a reasonable time after such claim is filed in the conservation
or liquidation proceeding or in the receivership, and that during the pendency
of such claim, the Reinsurer may investigate such claim and interpose, at its
own expense, in the proceeding where such claim is to be adjudicated, any
defense or defenses that it may deem available to the Ceding Company or its
liquidator, receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to the approval of the
court, against the Ceding Company as part of the expense of conservation or
liquidation to the extent of a pro rata share of the benefit that may accrue to
the Ceding Company solely as a result of the defense undertaken by the
Reinsurer.

C. Where two (2) or more reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to such claim, the expense shall
be apportioned in accordance with the terms of this Agreement as though such
expense had been incurred by the Ceding Company.

D. As to all reinsurance made, ceded, renewed or otherwise becoming effective
under this Agreement, the reinsurance shall be payable as set forth herein by
the Reinsurer to the Ceding Company or to its liquidator, receiver, conservator
or statutory successor, (except as provided by Section 4118(a)(1)(A) of the New
York Insurance Law, provided the conditions of 1114(c) of such law have been
met, if New York law applies) or except (i) where the contract specifically
provides another payee in the event of the insolvency of the Ceding Company, or
(ii) where the Reinsurer, with the consent of the direct insured or insureds,
has assumed such Policy obligations of the Ceding Company as direct obligations
of the Reinsurer to the payees under such Policies and in substitution for the
obligations of the Ceding Company to such payees. Then, and in that event only,
the Ceding Company, with the prior approval of the certificate of assumption on
New York risks by the Superintendent of Financial Services of the State of New

 

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York, or with the prior approval of such other regulatory authority as may be
applicable, is entirely released from its obligation and the Reinsurer shall pay
any loss directly to payees under such Policy.

ARTICLE XII

TRUST ACCOUNT

A. If more than one reinsured company is referenced within the definition of
“Ceding Company” in the preamble, this Article XII shall apply severally to each
such company. Each such company shall have a separate Trust Agreement. Further,
this Article XII and the Laws of the jurisdiction of domicile of such Ceding
Company shall apply. In the event of a conflict between any provision of this
Article XII and the Laws of the jurisdiction of domicile of any Ceding Company
covered hereunder, that jurisdiction’s Laws shall prevail.

B. In accordance with the Trust Agreement, the Reinsurer, as grantor, has
created the Trust Account with the Trustee, naming the Ceding Company as sole
beneficiary thereof. On the Closing Date, the Reinsurer shall fund the Trust
Account with Trust Assets with a fair market value equal to the Security Amount.
Pursuant to the terms of the Trust Agreement, the assets in the Trust Account,
including the residual interest therein, shall be held in trust by the Trustee
for the sole and exclusive benefit of the Ceding Company as security for the
payment of the Reinsurer’s obligations to the Ceding Company hereunder. Pursuant
to the terms of the Security and Control Agreement, a first priority security
interest in favor of the Ceding Company in the assets in the Trust Account,
including the residual interest therein, shall be granted and perfected. During
the term of the Trust Agreement, the Reinsurer shall not, and shall direct that
the Trustee shall not, grant or cause to be created in favor of any third person
any security interest whatsoever in any of the assets in the Trust Accounts or
in the residual interest therein.

C. In accordance with the requirements of the Trust Agreement, the Reinsurer
shall ensure that at each calendar quarter end, in accordance with the terms set
forth herein, the Trust Account holds assets with a fair market value equal to
the Security Amount. All transfers to and withdrawals from the Trust Account
shall be in accordance with and subject to the requirements set forth in the
Trust Agreement.

D. The assets held in the Trust Account shall be valued at their fair market
value by the Trustee in accordance with the terms of the Trust Agreement as of
the date as of which such assets are required to be valued. The assets that may
be held in the Trust Account (the “Trust Assets”) shall consist of any
combination of cash and other Eligible Investments.

E. Prior to depositing Trust Assets in the Trust Account, the Reinsurer shall
execute assignments or endorsements in blank, or transfer legal title to the
Trustee of all shares, obligations or any other assets requiring assignments, in
order that the Ceding Company, or the Trustee upon the direction of the Ceding
Company, may whenever necessary negotiate such assets without the consent or
signature from the Reinsurer or any other Person.

F. All settlements of account under the Trust Agreement between the Ceding
Company and the Reinsurer shall be made in United States dollars in cash or its
cash equivalent.

 

15

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G. At the Ceding Company’s request, the Reinsurer shall provide the Ceding
Company with its annual and quarterly statutory financial statements filed with
Governmental Authorities and a copy of its audited statutory financial
statements along with the audit report thereon.

H. The Trust Account shall be established and maintained in compliance with all
requirements of the relevant provisions of the applicable Laws of the
jurisdiction in which the Ceding Company is domiciled at a given time that would
govern the Ceding Company’s right to take reserve credit if the Reinsurer were
not licensed, certified or otherwise accredited in the Ceding Company’s
jurisdiction of domicile.

I. Withdrawal of Assets by Ceding Company.

(i) The Ceding Company may withdraw the assets held in the Trust Account at any
time and from time to time, notwithstanding any other provisions of this
Agreement, and assets withdrawn from such Trust Account shall be utilized and
applied by the Ceding Company (or any successor by operation of law of the
Ceding Company, including any liquidator, receiver, conservator or statutory
successor of the Ceding Company), without diminution because of insolvency on
the part of the Ceding Company or the Reinsurer; provided, however, that the
Ceding Company (or any successor by operation of law of the Ceding Company,
including any liquidator, receiver, conservator or statutory successor of the
Ceding Company) may only withdraw such assets for one or more of the following
purposes:

(a) to pay or reimburse the Ceding Company for the Reinsurer’s share of any
losses and unallocated loss expenses paid by the Ceding Company, but not
recovered from the Reinsurer;

(b) to pay to the Reinsurer amounts held in the Trust Account in excess of the
Security Amount;

(c) to pay any other amounts necessary to secure the credit for reinsurance
taken by the Ceding Company hereunder; or

(d) upon the termination of the Trust Account or receipt by the Ceding Company
of notification of termination of the Trust Account and where the Reinsurer’s
obligations under this Agreement remain unliquidated and undischarged five
(5) Business Days prior to the termination date, to withdraw an amount of assets
which, in the aggregate, equals the Reinsurer’s share of the obligations assumed
under this Agreement, and deposit those assets in a separate account (the
“Termination Account”) in the name of the Ceding Company in a qualified United
States financial institution apart from its general assets, in trust for only
the uses and purposes specified in paragraphs (a) and (b) of this Article
XII(I)(i) as may remain executory after such withdrawal and for any period after
the termination date. The Ceding Company shall pay interest in cash to the
Reinsurer on the amount withdrawn, equal to the actual amount of interest,
dividends and other income earned on the assets in the Termination Account. The
Ceding Company may at any time substitute or exchange any assets held in the
Termination Account and invest or reinvest such assets.

(ii) The Ceding Company shall return to the Trust Account, within five
(5) Business Days, assets withdrawn in excess of all amounts due under Article
XII(I)(i)(a), (b) and (c), or, in the case of Article XII(I)(i)(d), assets that
are subsequently determined not to be due. Any such excess amounts shall at all
times be held, until the return of such amounts to the Trust Account in
accordance with the immediately preceding sentence, by the Ceding Company (or
any successor by operation of law of the Ceding Company, including any
liquidator, receiver, conservator or statutory successor of the Ceding Company)
in trust for the benefit of the Reinsurer and be maintained in a segregated
account, separate and apart from any assets of the Ceding Company for the sole
purpose of funding the payments and reimbursements described in Article
XII(I)(i)(a), (b) and (c).

 

16

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ARTICLE XIII

LOSS SETTLEMENTS

A. All loss settlements made by the Reinsurer or its Affiliates, on behalf of
the Ceding Company, whether under Policy terms and conditions or by way of
compromise, shall be binding upon the Ceding Company and the Reinsurer, and the
Ceding Company and the Reinsurer agree to pay or allow, as the case may be, its
share of each such settlement in accordance with this Agreement; provided, that
loss settlements shall require the consent of the Ceding Company if they
(i) impose any injunctive or other non-monetary equitable relief against the
Ceding Company or its Affiliates or (ii) would create a precedent for future
actions against the Ceding Company or its Affiliates that are not fully
reinsured or indemnified by the Reinsurer hereunder.

B. The date of loss as defined in the Ceding Company’s Policies shall apply as
respects any losses reported under this Agreement.

ARTICLE XIV

RESERVES

The Reinsurer shall maintain the premium, loss and loss adjustment expense
reserves (including reserves for incurred but not reported losses) with respect
to the Policies in an amount not less than the reserves required by SAP, the
terms of the Policies and conforming to United States Actuarial Standards of
Practice.

ARTICLE XV

CURRENCY

Whenever the word “dollars” or the “$” sign appears in this Agreement, such word
or sign shall be construed to mean United States dollars and all transactions
under this Agreement shall be in United States dollars.

 

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ARTICLE XVI

OFFSET

Notwithstanding anything to the contrary in this Agreement, each of the Parties
acknowledges and agrees that it shall have no right hereunder or pursuant to
applicable Law to offset any amounts due or owing (or to become due or owing)
following the Closing Date to any other Party against any amounts due or owing
by such other Party or any of its Affiliates under any other agreement
(including the Master Transaction Agreement), contract or understanding.

ARTICLE XVII

SALVAGE AND SUBROGATION

A. The Ceding Company empowers and authorizes the Reinsurer to enforce its right
to salvage or subrogation and other rights to indemnity, contribution or other
recovery rights (other than rights provided by the Reinsurer or its Affiliates
to the Ceding Company) with respect to the Reinsured Liabilities under the
Policies. The Ceding Company shall cooperate with the Reinsurer in this regard
and shall provide any written documentation if reasonably necessary to any third
party to support the Reinsurer’s authority to pursue any recovery.

B. Amounts recovered from salvage or subrogation with respect to the Policies
shall be used to reimburse the excess reinsurers (and the Reinsurer (as the
Ceding Company’s designee), should it carry a portion of excess coverage net) in
the reverse order of their participation in the loss before being used in any
way to reimburse the Reinsurer (as the Ceding Company’s designee) for its
primary loss. The expense incurred by the Reinsurer (as the Ceding Company’s
designee) in pursuing any such recovery shall be borne by each Party in
proportion to its benefit (if any) from the recovery. If the recovery expense
exceeds the amount recovered, the amount recovered (if any) shall be applied to
the reimbursement of recovery expense incurred by the Reinsurer (as the Ceding
Company’s designee) and the remaining expense as well as any originally incurred
loss expense shall be borne by the Reinsurer.

C. Notwithstanding anything to the contrary in this Agreement, if the Reinsurer
initiates an action to secure salvage or subrogation in its name or the name of
the Ceding Company, and there is no such recovery, or if the amount recovered is
insufficient to cover the expenses incurred in pursuing salvage or subrogation,
the Reinsurer shall be liable for one hundred percent (100%) of such excess
expense. Further, the Reinsurer shall be liable for one hundred percent
(100%) of any damages to the Ceding Company, including reimbursement of any
compensatory or punitive damages resulting from the action.

ARTICLE XVIII

TERMINATION AND TRIGGERING EVENT

A. Termination. This Agreement may only be terminated by the mutual written
agreement of the Parties. Following the termination of this Agreement, any
Policies ceded hereunder shall be administered pursuant to Section 12(d) of the
Administrative Services Agreement.

B. Triggering Event. Upon the occurrence of a Triggering Event, subject to any
cure period, and during the pendency of a Triggering Event, the Ceding Company
shall have the right (but not the obligation) to cease underwriting any business
that would constitute Reinsured Liabilities hereunder.

 

18

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ARTICLE XIX

INDEMNIFICATION

A. Indemnification by the Ceding Company. The Ceding Company shall indemnify,
defend and hold harmless the Reinsurer and its Affiliates and their respective
officers, directors and employees (collectively, the “Reinsurer Indemnitees”)
from and against any and all Damages actually sustained, incurred or suffered by
the Reinsurer Indemnitees to the extent arising out of or related to (i) any
breach or nonfulfillment by the Ceding Company, or any failure by the Ceding
Company to perform, any of the covenants, terms or conditions of, or any duties
or obligations under, this Agreement and (ii) any successful enforcement of this
indemnity.

B. Indemnification by the Reinsurer. The Reinsurer shall indemnify, defend and
hold harmless the Ceding Company and its Affiliates and their respective
officers, directors and employees (collectively, the “Ceding Company
Indemnitees”) from and against any and all Damages actually sustained, incurred
or suffered by the Ceding Company Indemnitees to the extent arising out of or
related to (i) any breach or nonfulfillment by the Reinsurer, or any failure by
the Reinsurer to perform, any of the covenants, terms or conditions of, or any
duties or obligations under, this Agreement, (ii) the Reinsured Liabilities,
(iii) Extra Contractual Obligations and (iv) any successful enforcement of this
indemnity.

C. Any proceedings related to indemnification under Article XIX(A)-(B) shall be
conducted in accordance with the procedures set forth in Section 10.03 of the
Master Transaction Agreement, mutatis mutandis.

D. The indemnification provisions of this Article XIX shall be the exclusive
remedy for any breach of this Agreement, except (i) for the termination
provisions set forth herein, (ii) for actual fraud relating to entry into this
Agreement, or (iii) with respect to matters for which the remedy of specific
performance, injunctive relief or other non-monetary equitable remedies are
available.

 

ARTICLE XX

NO OTHER REPRESENTATIONS OR WARRANTIES

A. No Other Representations or Warranties. The Ceding Company acknowledges,
understands and agrees that no representations or warranties are made by the
Reinsurer or any of its Affiliates in connection with the Master Transaction
Agreement, this Agreement or the other Transaction Agreements and the
transactions contemplated hereby or thereby, except as and to the extent
expressly covered by a representation or warranty made by the Reinsurer to the
Ceding Company contained in Article IV of the Master Transaction Agreement. The
Reinsurer acknowledges, understands and agrees that no representations or
warranties are made by the Ceding Company or any of its Affiliates in connection
with the Master Transaction Agreement,

 

19

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this Agreement or the other Transaction Agreements and the transactions
contemplated hereby or thereby, except as and to the extent expressly covered by
a representation or warranty made by the Ceding Company to the Reinsurer
contained in Article III of the Master Transaction Agreement. Each of the
Reinsurer and the Ceding Company acknowledges, understands and agrees that the
exclusive remedies available to any Person for any breach or inaccuracy of any
representation or warranty contained in Article III or IV of the Master
Transaction Agreement are pursuant to Article X of the Master Transaction
Agreement.

B. Waiver of Duty of Utmost Good Faith. In recognition that each Party has
consummated the transactions contemplated by this Agreement and the other
Transaction Agreements to which it is a party, based on mutually negotiated
representations, warranties, covenants, remedies and other terms and conditions
as are fully set forth herein and therein, the Ceding Company and the Reinsurer
absolutely and irrevocably waive resort to the duty of “utmost good faith” or
any similar principle in connection with the formation or performance of this
Agreement.

ARTICLE XXI

CREDIT FOR REINSURANCE

A. The Reinsurer shall hold and maintain all licenses and authorizations
required by applicable Law and the Reinsurer shall take all actions (including
the posting of letters of credit or other acceptable security) necessary under
applicable Law of the jurisdiction of domicile of the Ceding Company to permit
the Ceding Company to obtain full financial statement credit in such
jurisdiction for the reinsurance provided by this Agreement. The form of any
collateral, if required to be provided by the Reinsurer to obtain such credit,
shall be at the sole cost and expense of the Reinsurer or its Affiliates. The
Reinsurer shall notify the Ceding Company as soon as practicable but in any
event within five (5) Business Days of any loss of license or authorization or
other matter that may affect the ability of the Ceding Company to obtain full
credit for the reinsurance being provided under this Agreement. In such event,
the Reinsurer shall have fifteen (15) days to cure any such insufficiency;
provided, however, that if the end of a calendar quarter would fall in such
fifteen (15)-day period, such fifteen (15)-day period shall be shortened to the
extent necessary to end on the Business Day prior to such quarter end. The
Reinsurer shall take all actions necessary under applicable Law to permit the
Ceding Company to maintain (or reobtain in the case of any loss) full financial
statement credit in all applicable jurisdictions for the reinsurance provided by
this Agreement.

B. It is understood and agreed that any term or condition required by such
applicable Law to be included in this Agreement for the Ceding Company to
receive financial statement credit for the reinsurance provided by this
Agreement shall be deemed to be incorporated in this Agreement by reference.
Furthermore, the Reinsurer and the Ceding Company agree to amend this Agreement
or the applicable Trust Agreement, or enter into other agreements or execute
additional documents as needed to comply with the credit for reinsurance laws
and regulations or the requirements of the applicable Governmental Authorities
in the jurisdiction of domicile of the Ceding Company.

C. Notwithstanding anything contained in this Article XXI to the contrary, in
the event that (i) there is a repeal of or amendment to the provisions of the
Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R.
4173) that would authorize a Governmental Authority in any jurisdiction of the
United States where the Ceding Company is licensed to transact business to apply
the applicable rules for credit for reinsurance in such jurisdiction to the
Ceding Company, and (ii) the Ceding Company reasonably determines that it is
obligated under applicable Law to comply with such rules in order to receive
financial statement credit in any such jurisdiction, then Articles XXI(A) and
(B) shall automatically be deemed to be amended without any action by the
Parties to require that the Reinsurer shall take all steps necessary so as to
enable the Ceding Company to obtain full financial statement credit for the
reinsurance provided by this Agreement in any such jurisdiction in addition to
its jurisdiction of domicile.

 

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ARTICLE XXII

MISCELLANEOUS

A. This Agreement constitutes the entire agreement between the Ceding Company
and the Reinsurer with respect to the business being reinsured hereunder and
supersedes all prior agreements and undertakings, both written and oral, other
than the Confidentiality Agreement to the extent not in conflict with this
Agreement.

B. All notices, requests, consents, claims, demands and other communications
under this Agreement shall be in writing and shall be given or made (and shall
be deemed to have been duly given or made upon receipt) by delivery in person,
by overnight courier service, by electronic mail (followed by delivery of an
original via overnight courier service) or by registered or certified mail
(postage prepaid, return receipt requested) to the respective Parties at the
following respective addresses (or at such other address for a Party as shall be
specified in a notice given in accordance with this Article XXII(B)):

To the Ceding Company:

QBE Holdings, Inc.

Attention: Jose Ramon Gonzalez, Chief Legal Officer

Wall Street Plaza

88 Pine Street

New York, NY 10005

Phone: (212) 422-1212

Facsimile: (212) 422-1313

e-mail: Jose.Gonzalez@us.qbe.com

With a copy (which shall not constitute notice) to:

Sidley Austin LLP

Attention: Sean M. Keyvan

One South Dearborn

Chicago, IL 60603

Phone: (312) 853-4660

Facsimile: (312) 853-7036

e-mail: skeyvan@sidley.com

 

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To the Reinsurer:

Integon National Insurance Company

c/o National General Insurance Company

Attention: Jeffrey Weissmann, General Counsel

59 Maiden Lane

38th Floor

New York, NY 10038

Phone: (212) 380-9479

Facsimile: (212) 380-9498

e-mail: jeffrey.weissmann@ngic.com

With a copy (which shall not constitute notice) to:

Debevoise & Plimpton LLP

Attention: Nicholas F. Potter

919 Third Avenue

New York, NY 10022

Phone: (212) 909-6459

Facsimile: (212) 521-7459

e-mail: nfpotter@debevoise.com

Any Party may, by notice given in accordance with this Article XXII(B) to the
other Party, designate another address or Person for receipt of notices
hereunder; provided that notice of such a change shall be effective upon
receipt.

C. For purposes of sending and receiving notices and payments required by this
Agreement, QBE Holdings, Inc. shall be deemed to be the agent of all other
Affiliates of QBE Holdings, Inc. that are reinsured companies under contracts
with the Reinsurer or its Affiliates. In no event, however, shall any reinsured
company be deemed the agent of another with respect to the terms of Article XI.

D. Except as set forth in Article XIX, nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.

E. No Party may assign its rights or delegate its obligations hereunder without
the prior written consent of the other Parties. Any attempted assignment in
violation of this Article XXII(E) shall be void. This Agreement shall be binding
upon, shall inure to the benefit of, and shall be enforceable by the Parties and
their permitted successors and assigns.

F. This Agreement may be executed in one or more counterparts, and by the
different parties to this Agreement in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same

 

22

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agreement. Delivery of an executed counterpart of a signature page to this
Agreement by facsimile or electronic mail shall be as effective as delivery of a
manually executed counterpart of any such agreement.

G. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE WITHOUT GIVING EFFECT TO ANY
CONFLICTS OF LAW PRINCIPLES OF SUCH STATE THAT MIGHT REFER THE GOVERNANCE,
CONSTRUCTION OR INTERPRETATION OF SUCH AGREEMENTS TO THE LAWS OF ANOTHER
JURISDICTION. Any action, suit or proceeding directly or indirectly arising out
of, under or in connection with this Agreement or the transactions contemplated
by this Agreement, shall be brought in the United States District Court for the
Southern District of New York or, if such court does not have subject matter
jurisdiction over such suit, action or proceeding, in state court in New York,
NY (collectively, the “New York Courts”). The Parties hereby waive any objection
they may now or hereafter have to the venue of any such action or proceeding in
any such court and any claim that such action or proceeding has been brought in
an inconvenient forum. Any service of any process, summons, notice, document or
other paper does, if delivered, sent or mailed in accordance with
Article XXII(B), constitute good, proper and sufficient service thereof. Each
Party agrees that any final, nonappealable judgment in any such action, suit or
proceeding brought in any such court shall be conclusive and binding upon such
Party and may be enforced in any other courts to whose jurisdiction such Party
may be subject, by suit upon such judgment.

EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ITS
PERFORMANCE UNDER OR THE ENFORCEMENT OF THIS AGREEMENT.

H. The Parties agree that irreparable damage would occur in the event that any
of the terms or provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that, notwithstanding anything to the contrary contained in this Agreement, each
of the Parties shall be entitled to injunctive or other equitable relief to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court referenced in Article XXII(G) having
jurisdiction, such remedy being in addition to any other remedy to which any
Party may be entitled at law or in equity. In the event that any Action is
brought in equity to enforce the provisions of this Agreement, no Party shall
allege, and each Party hereby waives the defense or counterclaim, that there is
an adequate remedy at law.

I. No provision of this Agreement may be amended, supplemented or modified
except by a written instrument signed by all of the Parties. No provision of
this Agreement may be waived except by a written instrument signed by the Party
against whom the waiver is to be effective. No failure or delay by any Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by applicable Law.

 

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J. The provisions of Section 8 (Confidential Information) of the Administrative
Services Agreement are incorporated by reference herein mutatis mutandis.

K. Interpretation of this Agreement shall be governed by the following rules of
construction: (i) words in the singular shall be held to include the plural and
vice versa, and words of one gender shall be held to include the other gender as
the context requires; (ii) references to the terms preamble, recitals, Article,
paragraph and Schedule are references to the preamble, recitals, Articles,
paragraphs and Schedules to this Agreement unless otherwise specified; (iii) the
word “including” and words of similar import shall mean “including without
limitation,” unless otherwise specified; (iv) the word “or” shall not be
exclusive; (v) the words “herein,” “hereof,” “hereunder” or “hereby” and similar
terms are to be deemed to refer to this Agreement as a whole and not to any
specific Article; (vi) the headings are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement;
(vii) this Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the Party drafting or
causing any instrument to be drafted; (viii) if a word or phrase is defined, the
other grammatical forms of such word or phrase have a corresponding meaning;
(ix) references to any statute, listing rule, rule, standard, regulation or
other law include a reference to (a) the corresponding rules and regulations and
(b) each of them as amended, modified, supplemented, consolidated, replaced or
rewritten from time to time; (x) references to any section of any statute,
listing rule, rule, standard, regulation or other law include any successor to
such section; (xi) references to any Person include such Person’s predecessors
or successors, whether by merger, consolidation, amalgamation, reorganization or
otherwise; (xii) any reference to “days” means calendar days unless Business
Days are expressly specified; and (xiii) references to any contract (including
this Agreement) or organizational document are to the contract or organizational
document as amended, modified, supplemented or replaced from time to time,
unless otherwise stated.

[Signature page follows]

 

24

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the date first above written.

 

QBE INSURANCE CORPORATION INTEGON NATIONAL INSURANCE COMPANY By:

 

By:

 

Title:

 

Title:

 

PRAETORIAN INSURANCE COMPANY By:

 

Title:

 

QBE SPECIALTY INSURANCE COMPANY By:

 

Title:

 

[Signature Page to 100% Quota Share Reinsurance Agreement]

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EXHIBIT C-1

FORM OF FORWARD TRANSITION SERVICES AGREEMENT

See attached.

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EXHIBIT C-1

FORM OF FORWARD TRANSITION SERVICES AGREEMENT

TRANSITION SERVICES AGREEMENT

BY AND BETWEEN

QBE HOLDINGS, INC.

AND

NATIONAL GENERAL HOLDINGS CORP.

DATED AS OF [●], 2015

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TABLE OF CONTENTS

 

Section 1.

Certain Defined Terms

  2    Section 2.

Services in General; Transition Services Schedules

  4    Section 3.

Intellectual Property Matters

  6    Section 4.

Administration of Services

  7    Section 5.

Term, Extension and Termination of Services

  8    Section 6.

Standard of Performance; Limitations on Providing Services

  9    Section 7.

Payment of Fees and Charges

  10    Section 8.

Taxes on Services

  11    Section 9.

Independent Contractor

  11    Section 10.

Warranties

  11    Section 11.

Termination of Agreement

  11    Section 12.

Limitation on Scope

  12    Section 13.

Assignment; Subcontractors; No Third-Party Beneficiaries

  12    Section 14.

Force Majeure

  12    Section 15.

Governing Law; Dispute Resolution; Jurisdiction; Service of Process

  13    Section 16.

Waiver of Jury Trial

  14    Section 17.

Entire Agreement

  14    Section 18.

Notices

  14    Section 19.

Severability

  15    Section 20.

Amendment; Waiver

  15    Section 21.

Confidentiality

  16    Section 22.

Counterparts

  16    Section 23.

Good-Faith Cooperation

  16    Section 24.

Master Transaction Agreement

  17    Section 25.

Books and Records

  17    Section 26.

Limitation of Liability

  18    Section 27.

Indemnification of Service Provider by Service Recipient

  18    Section 28.

Indemnification of Service Recipient by Service Provider

  19    Section 29.

Indemnification as Exclusive Remedy

  19    Section 30.

Conduct of Proceedings

  19    Section 31.

No Limitation

  19    Section 32.

Order of Precedence

  19    Section 33.

Rules of Construction

  19    Section 34.

Fulfillment of Obligations

  20   

 

Schedule 2(a)(i) Transition Services Schedule 2(a)(iii) Excluded Services
Schedule 3(a) Intellectual Property License Exemptions Schedule 3(b) Email
Language Schedule 4(a) Representatives Schedule 7 Fees and Charges

 

1

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TRANSITION SERVICES AGREEMENT

This Transition Services Agreement (this “Agreement”), dated as of [●], 2015, is
by and between QBE Holdings, Inc., a Delaware corporation (“QBE”), and National
General Holdings Corp., a Delaware corporation (the “Acquiror”).

WHEREAS, pursuant to that certain Master Transaction Agreement by and among QBE
Investments (North America), Inc., a Delaware corporation (“Parent”), QBE, and
the Acquiror, dated as of July 15, 2015 (the “Master Transaction Agreement”),
the Acquiror is acquiring, directly or indirectly, all the outstanding common
stock of QBE Financial Institution Risk Services, Inc., a Delaware corporation
(the “Company”) and the following subsidiaries of the Company (collectively, the
“Transferred Subsidiaries”): (i) QBE FIRST Insurance Agency, Inc., a California
corporation, (ii) Seattle Specialty Insurance Services, Inc., a Washington
corporation, (iii) Newport Management Corporation, a California corporation and
(iv) Mortgage & Auto Solutions, Inc., a Texas corporation. The Master
Transaction Agreement contemplates that the parties shall, at the closing of the
transactions contemplated by the Master Transaction Agreement, enter into this
Agreement for the provision of certain services to the Company and the
Transferred Subsidiaries, on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:

Section 1. Certain Defined Terms. Any capitalized term used but not defined
herein shall have the meaning set forth in the Master Transaction Agreement. The
following terms have the respective meanings set forth below throughout this
Agreement:

“Acquiror” shall have the meaning set forth in the preamble.

“Additional Services” shall have the meaning set forth in Section 2(a)(ii).

“Agreement” shall have the meaning set forth in the preamble.

“Authorization Expenses” shall have the meaning set forth in Section 2(d).

“Authorizations” shall have the meaning set forth in Section 2(d).

“Books and Records” shall have the meaning set forth in Section 25.

“Business” shall have the meaning set forth in the Master Transaction Agreement.

“Charges” shall have the meaning set forth in Section 2(b).

“Closing” shall have the meaning set forth in the Master Transaction Agreement.

“Company” shall have the meaning set forth in the recitals.

“Confidential Information” shall have the meaning set forth in Section 21.

 

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“Dispute” shall have the meaning set forth in Section 15(b).

“End Date” shall have the meaning set forth in Section 5(a).

“Excluded Services” shall have the meaning set forth in Section 2(a)(iii).

“Expiration Date” shall have the meaning set forth in Section 5(a).

“Extension” shall have the meaning set forth in Section 5(a).

“Group” shall have the meaning set forth in Section 21.

“Intellectual Property” means: (a) patents, patent applications and statutory
invention registrations, including reissues, divisions, continuations,
continuations in part, renewals, extensions and reexaminations thereof, and all
patents which may issue on such applications, all rights therein provided by
international treaties or conventions, (b) trademarks, service marks, trade
dress, logos, and all goodwill associated with the foregoing, any and all common
law rights therein, and registrations and applications for registration thereof,
all rights therein provided by international treaties or conventions, and all
reissues, extensions and renewals of any of the foregoing, (c) copyrightable
works, copyrights and database rights, whether or not registered, and
registrations and applications for registration thereof, and all rights therein
provided by international treaties or conventions, (d) protectable rights in
confidential and proprietary information, including trade secrets, processes and
know-how that arise from not being publicly known, in each case existing on the
Closing Date, (e) Internet domain names, and registrations pertaining thereto,
and (f) rights in Software and Shared Software.

“Licensed IP” shall have the meaning set forth in Section 3(a).

“Losses” shall have the meaning set forth in Section 27.

“Master Transaction Agreement” shall have the meaning set forth in the recitals.

“Meeting” shall have the meaning set forth in Section 4(a).

“Parent” shall have the meaning set forth in the recitals.

“Policies” shall have the meaning set forth in the Reinsurance Agreements.

“Provider Indemnified Person” shall have the meaning set forth in Section 26(a).

“QBE” shall have the meaning set forth in the preamble.

“Recipient Indemnified Person” shall have the meaning set forth in Section 28.

“Reinsurance Agreements” shall have the meaning set forth in the Master
Transaction Agreement

“Representative” shall have the meaning set forth in Section 4(a).

 

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“Scheduled Final Service Date” shall have the meaning set forth in Section 2(c).

“Service” shall have the meaning set forth in Section 2(a).

“Service Data” shall have the meaning set forth in Section 3(c).

“Service Provider” means QBE and its Affiliates.

“Service Recipient” means the Company and the Transferred Subsidiaries.

“Term” shall have the meaning set forth in Section 5(a).

“Terminated Service Log” shall have the meaning set forth in Section 5(b).

“Third Party Contracts” shall have the meaning set forth in Section 2(d).

“Transferred Subsidiaries” shall have the meaning set forth in the recitals.

“Transition Plan” shall have the meaning set forth in Section 4(c).

“Transition Services” shall have the meaning set forth in Section 2(a)(i).

“Transition Services Schedule” shall have the meaning set forth in Section 2(a).

“Transition Services Team” shall have the meaning set forth in Section 4(a).

Section 2. Services in General; Transition Services Schedules.

(a) Upon the terms contained in this Agreement and the Transition Services
Schedules attached hereto (each such schedule, a “Transition Services
Schedule”), during the Term, Service Provider shall provide to Service Recipient
all the services listed in the Transition Services Schedules (each such service,
a “Service”), and Service Recipient shall pay for such Services in accordance
with the terms of this Agreement, as follows:

(i) Transition Services. The Services that were historically provided by Service
Provider to Service Recipient prior to the date hereof, which are identified as
Transition Services in Schedule 2(a)(i) (the “Transition Services”). The
Transition Services shall also include, for the Charges to be mutually agreed by
the parties, any Service(s) (other than the Excluded Services) that were
historically provided by QBE to the Business prior to the date hereof that were
inadvertently omitted from Schedule 2(a)(i). The parties shall cooperate in good
faith to amend Schedule 2(a)(i) to include any such omitted Service(s) that are
identified by one of the parties after the date hereof. The Service Recipient
shall not be responsible for any Charges applicable to any individual Service
included in the Terminated Service Log following Service Recipient’s provision
of (A) sixty (60) days written notice to the Service Provider terminating such
Service to the extent such Service constitutes a service related to information
technology or communications in accordance with Section 5(b)(i) or (B) thirty
(30) days written notice to the Service Provider terminating such Service for
any other Service in accordance with Section 5(b)(ii).

 

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(ii) Additional Services. During the Term, Service Recipient may request that
Service Provider provide such reasonably necessary additional services other
than the Transition Services set forth on Schedule 2(a)(i) (the “Additional
Services”) that are not Excluded Services, and Service Provider shall consider
all such requests in good faith. If Service Provider provides any such
Additional Services, the parties shall negotiate in good faith the terms on
which such Additional Services shall be provided and, if those terms are
mutually agreed upon, Schedule 2(a)(i) shall be amended pursuant to Section 20
to reflect such addition and the Additional Service(s) shall be deemed to form a
part of the Services.

(iii) Excluded Services. Schedule 2(a)(iii) sets forth a list and description of
certain services that Service Provider shall not provide to Service Recipient
pursuant to this Agreement (the “Excluded Services”).

(b) For each Service, the applicable Transition Services Schedule sets forth,
among other things: (i) a description of the Service; (ii) the method for
determining the Charge for the Service, which shall be the actual cost (which
shall be deemed to include, in addition to all third party and other
out-of-pocket costs, all corporate overhead and other costs reasonably allocated
to the Company and the Transferred Subsidiaries for employees, occupancy and
other matters) of the provision of such Service to Service Recipient (the
“Charges”) as further determined using the principles for determining the
Charges under Section 7; and (iii) the estimated monthly cost of the Charges.

(c) Subject to Section 5, the parties shall agree that the date each such
Service is to be terminated shall be the earlier of (i) the date (if any) set
forth in the applicable Transition Services Schedule (each, a “Scheduled Final
Service Date”) and (ii) the Expiration Date. Service Recipient agrees to use
commercially reasonable efforts to end its need to use each and every Service as
soon as reasonably practicable and in all events prior to the earlier of the
Scheduled Final Service Date with respect to each Service and the Expiration
Date.

(d) Third Party Consents. Service Recipient understands, acknowledges and agrees
that certain Services to be provided by Service Provider may be provided by or
through the use of the services, Software or other products of unaffiliated
third parties on behalf of Service Provider pursuant to contracts to which
Service Recipient is not a party (collectively, the “Third Party Contracts”).
Service Provider shall be responsible for obtaining any additional consents,
approvals, permissions or licenses (collectively, “Authorizations”) required for
the continued participation in such Third Party Contracts by such third parties.
Service Provider and Service Recipient shall each be responsible for fifty
percent (50%) of any additional costs, expenses, fees, charges, commissions or
right-to-use fees (“Authorization Expenses”) that obtaining such Authorizations
may involve. Service Provider agrees to use its commercially reasonable efforts
to seek and obtain any Authorizations necessary pursuant to such Third Party
Contracts to provide Services to Service Recipient; provided, however, that
Service Provider shall not be required to obtain any Authorizations if such
Authorizations would require Service Provider to modify, amend or otherwise
alter a Third Party Contract in a manner that, in Service

 

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Provider’s reasonable opinion, is materially detrimental to Service Provider or
any of its Affiliates. If, as of the date hereof, there are Third Party
Contracts where Authorizations have not been received by Service Provider, then
Service Provider shall (i) continue to use commercially reasonable efforts to
obtain such Authorizations or (ii) at Service Recipient’s request, use
commercially reasonable efforts to cooperate with Service Recipient and
reasonably assist it to enter into its own agreements with third parties
(including identifying and approaching the applicable vendor (or another third
party vendor) with whom Service Recipient shall enter into its own third party
contract at a price and upon terms that are mutually agreeable to Service
Recipient and such vendor relating to such Service). On termination or
expiration of any Third Party Contract during the Term, Service Provider shall
not be obligated to continue to provide, or cause the provision of the Services
to which the relevant Third Party Contract relates, but at Service Recipient’s
request, shall use commercially reasonable efforts to cooperate with Service
Recipient and reasonably assist it to enter into its own agreements with third
parties (including identifying and approaching the applicable vendor (or another
third party vendor) with whom Service Recipient shall enter into its own third
party contract at a price and upon terms that are mutually agreeable to Service
Recipient and such vendor relating to such Service). Service Provider
acknowledges and agrees that with respect to any termination fees for any Third
Party Contract or other third party arrangement that are incurred by Service
Provider as a result of the transition of Services to Service Recipient, Service
Recipient shall be responsible for fifty percent (50%) of the termination fees
associated with such contract or arrangement.

Section 3. Intellectual Property Matters.

(a) Except as set forth on Schedule 3(a), Service Provider hereby grants, or has
caused each relevant Affiliate to grant, to Service Recipient a royalty-free,
non-exclusive, non-transferable, non-assignable, non-sublicenseable license to
access or use the Intellectual Property, including Software or Shared Software,
owned by the applicable Service Provider (collectively, the “Licensed IP”)
during the Term to the extent necessary to, and for the sole purpose of, Service
Recipient’s receipt of Services during the Term but only to the extent (i) such
Licensed IP is currently used in or necessary for the conduct of the Business,
(ii) accessed or used by Service Recipient prior to the Closing, (iii) such
access or use is not in violation of applicable Law or any internal
privacy-related policies of Service Provider and (iv) Service Provider has or
can obtain the right to grant such license in connection with providing the
Services. In furtherance and not in limitation of the foregoing, unless
otherwise agreed in writing by Service Provider, any such Licensed IP that is
Software or Shared Software may only be installed or used on Service Recipient
systems on which the Software or Shared Software was installed or used prior to
the Closing. For the avoidance of doubt, any Licensed IP licensed pursuant to
this Section 3(a) shall be deemed Confidential Information of Service Provider.

(b) During any period in which any employees, consultants, agents or independent
contractors of Service Recipient or its Affiliates are sending e-mails from an
e-mail address or e-mail platform containing the name “QBE,” Service Recipient
agrees that it shall, and shall cause its Affiliates to, include the language
set forth in Schedule 3(b), attached hereto, in all such e-mail messages that
are sent from such email address or platform.

(c) “Service Data” means all the data provided by a Service Recipient or created
by or for Service Provider on behalf of a Service Recipient in connection with
the

 

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provision of the Services, including employee information, customer information,
product details and pricing information. The Service Data and any Intellectual
Property rights therein shall be and shall remain the property of the applicable
Service Recipient and shall be provided by Service Provider to Service
Recipients pursuant to reports created by Service Provider. Except as set forth
herein, all data, information, Intellectual Property and Software created by
Service Provider in connection with the provision of the Services shall be owned
by Service Provider. Unless otherwise specifically provided herein, this
Agreement shall not transfer ownership of, or license any rights to any
Intellectual Property from any Person to another Person.

Section 4. Administration of Services.

(a) Service Recipient and Service Provider shall each designate a group of
individuals (each, a “Transition Services Team”), which shall work cooperatively
with their counterparts to facilitate and administer this Agreement. Each
Service Recipient and Service Provider shall designate (and reflect on Schedule
4(a)) two (2) or more persons (each, a “Representative”), who shall make
reasonable efforts to meet, in person or telephonically during normal business
hours and with reasonable notice (each such meeting, a “Meeting”), from time to
time as reasonably requested by the other party’s Representatives to discuss the
Services generally and any issues relating thereto; provided that any
Representative’s failure to attend one or more Meetings shall not be deemed to
constitute a breach under this Agreement. Each party shall have the right at any
time and from time to time to replace its Representatives by giving notice in
writing to the other party setting forth the name of (i) the Representative to
be replaced and (ii) the replacement Representative.

(b) Service Recipient acknowledges and agrees that Service Provider may need to
provide some of the Services from or otherwise may need access to and use of
locations owned or controlled by Service Recipient or its Affiliates. In order
for Service Provider to perform its obligations under this Agreement, Service
Recipient agrees to, and to cause its Affiliates to: (i) provide and maintain a
safe location and environment for the representatives providing the Services;
(ii) provide a secure area reasonably located for Service Provider’s and its
Affiliates’ property and materials; (iii) provide Service Provider and its
Affiliates reasonable access to its property, materials, information and data
(including, upon reasonable advance notice, after normal business hours and
during weekends and holidays) to the extent reasonably necessary in order for
such other party to perform its obligations under this Agreement; and
(iv) permit any signage to be displayed at such locations or on such property as
may be required under applicable Law (including for regulatory purposes). In the
event Service Recipient fails to provide access required hereunder to Service
Provider’s employees and subcontractors as contemplated hereunder, Service
Provider shall not be liable for any failure to perform under this Agreement
occasioned by the lack of access. In the event that either party shall require
(A) physical separation of its employees, property or Services (or any signage
at or on another party’s location or property), (B) employee relocation or
(C) technology firewalls (including such actions as may be required to effect
the confidentiality obligations set forth in Section 21 or to comply with
applicable Law), the resulting cost of such signage, physical separation,
relocation and firewalls shall be borne by Service Recipient (and if any
authorization from a Governmental Authority is required by a party in connection
with the matters contemplated by the foregoing, then the other party shall
cooperate with such party to obtain any such authorization). Service Recipient
and Service Provider each agree to comply in all material

 

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respects with all Laws applicable to its activities under this Agreement and to
use, and cause their respective Affiliates to use, commercially reasonable
efforts to protect such property and materials of the other party or its
Affiliates against damage, destruction, loss or unauthorized use. To the extent
that any property or materials of Service Provider or its Affiliates used to
provide any terminated Service is located on premises owned or controlled by
Service Recipient, Service Provider shall have a reasonable period of time
following the effective date of such termination to remove such property or
materials.

(c) By the 6-month anniversary of the date hereof, Service Recipient agrees to
jointly develop with Service Provider a plan of transition (the “Transition
Plan”) explaining how Service Recipient intends to cease access to or its use of
the Licensed IP, systems, operations, processes and platforms set forth on the
Transition Services Schedules by the Expiration Date. The Transition Plan shall
contain a timeline of Service Recipient’s plan to exit or cease use of such
Licensed IP, systems, operations, processes and platforms and identify the roles
and responsibilities of both parties to complete the transition. Service
Provider shall cooperate with Service Recipient in providing such information
and other data for the development of the Transition Plan contemplated above.
The Transition Plan must be approved in writing by both parties in order to take
effect. Both parties acknowledge that the Transition Plan shall evolve and shall
be subject to change. Changes shall be discussed and mutually agreed to by the
Transition Services Team in its Meetings pursuant to Section 4(a), and the
Transition Plan updated accordingly.

Section 5. Term, Extension and Termination of Services.

(a) The term of this Agreement shall commence on the date hereof and shall
remain in effect until the twelve (12)-month anniversary of the date hereof (the
“End Date”); provided, however, that the End Date may be extended for up to two
(2) additional six (6) month periods (each such extension period, an
“Extension”) upon Service Recipient’s request by written notice to Seller at
least thirty (30) days before the last day of the End Date or, in the event that
Service Recipient requests an Extension prior to the End Date, thirty (30) days
before the last day of such Extension (collectively, the “Term”). The last day
of the Term is referred to herein as the “Expiration Date.”

(b) With respect to (i) any individual Service provided hereunder that
constitutes a service related to information technology or communications, the
Service Recipient may, upon sixty (60) days written notice to the Service
Provider or (ii) any other individual Service provided hereunder, the Service
Recipient may, upon thirty (30) days written notice to the Service Provider,
terminate the individual Service, which shall be one or more line items in the
Transition Services Schedules. The Service Provider shall maintain a spreadsheet
of individual Services terminated pursuant to this Section 5(b) (the “Terminated
Service Log”) and the Service Provider shall promptly update the Terminated
Service Log reflecting the termination of any individual Service. At the Service
Recipient’s request, the Service Provider shall provide the Service Recipient
with a current version of the Terminated Service Log.

 

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Section 6. Standard of Performance; Limitations on Providing Services.

(a) Service Provider shall perform the Services, including maintaining the
systems, platforms and equipment used to provide the Services, in accordance
with applicable Law. The nature, quality, standard of care and the service
levels at which such Services are performed shall be materially consistent with
the nature, quality, standard of care and service levels at which the
substantially same services were performed by or on behalf of Service Provider
to Service Recipient immediately prior to the date hereof; provided that
appropriate modifications may be made for security, confidentiality and data
integrity so long as such modifications do not adversely affect the manner or
quality of the Services delivered hereunder in any material respect; provided,
further, that the level or volume of any specific Service required to be
provided to a Service Recipient hereunder shall not exceed the level or volume
of such Service as historically utilized by such Service Recipient during the
twelve (12)-month period ending immediately prior to the date hereof; and
provided, further, that in providing any Service, Service Provider shall have no
obligation to allocate human, equipment or other resources in excess of the
level of resources historically allocated to the provision to Service Recipient
of such Service by Service Provider during the twelve (12)-month period ending
immediately prior to the date hereof.

(b) Service Recipient acknowledges that Service Provider is not in the business
of providing Services (or services of a like nature) to third parties, and the
Services are being provided to Service Recipient by Service Provider solely to
facilitate the transactions contemplated by the Master Transaction Agreement;
and Service Provider acknowledges that the receipt of the Services as provided
herein in an accurate and timely manner is of paramount importance to the
Service Recipient.

(c) Service Provider shall not be required to provide any Service to the extent
performance of such Service by Service Provider is prohibited by, or would
require Service Provider to violate, any applicable Laws.

(d) If Service Recipient, the Acquiror or any of their Affiliates shall
purchase, lease or otherwise acquire any business, assets or properties or
rights in respect thereof, Service Provider shall have no obligation to provide
any Services hereunder in respect of such acquired business, assets or
properties; provided, however, that Service Recipient may request that Service
Provider service such acquired business, assets or properties as Additional
Services pursuant to Section 2(a)(ii). Service Provider shall have no obligation
to provide any Services hereunder in respect of any business, asset or property
owned by the Acquiror or any of its Affiliates prior to the date hereof.

(e) It is understood and agreed that Service Provider may from time to time
modify, change or enhance the manner, nature, quality or standard of care of any
Service provided to Service Recipient to the extent Service Provider is making a
similar change in the performance of such Services for Service Provider and its
Affiliates; provided that any such modification, change or enhancement shall not
reasonably be expected to adversely effect such Service in a material manner.
Service Provider shall furnish to Service Recipient substantially the same
notice (in content and timing), if any, as Service Provider furnishes to its own
organization with respect to such modifications, changes or enhancements.

 

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(f) Except as may otherwise be expressly provided in this Agreement, the
management of and control over the provision of the Services by Service Provider
shall reside solely with Service Provider and notwithstanding anything to the
contrary, Service Provider shall be permitted to choose the methodology, systems
and applications it utilizes in the provision of such Services. The provision,
use of and access to the Services shall be subject to (i) any technical and
operational changes that may be required to manage any restrictions imposed by
Service Provider in respect of data access; (ii) Service Provider’s business,
operational and technical environment, standards, policies and procedures as may
be modified from time to time; (iii) any other third party services, resources
or dependencies; and (iv) the terms of this Agreement. Service Provider may
suspend Service Recipient’s access (if any) to the information technology
(including Software, Shared Software or other relevant Intellectual Property) or
communications systems of Service Provider used by Service Recipient following
advance notice to the extent practicable if, in Service Provider’s reasonable
opinion (A) the integrity, security or performance of its systems, or any data
stored on them, is being or is likely to be jeopardized by the activities of
Service Recipient; or (B) continued access to such information technology or
communications systems by Service Recipient would expose Service Provider to
liability.

Section 7. Payment of Fees and Charges.

(a) In consideration for the Services provided hereunder, Service Recipient
shall pay the applicable Charges hereunder in accordance with this Section 7.

(b) Payment of the Charges shall be made in the manner specified in Schedule 7.
If payment terms are not specified in Schedule 7, payment shall be made within
thirty (30) days of receipt of invoice for the Charges.

(c) If any costs charged by unaffiliated third parties for goods, Software,
services, technology or proprietary rights associated with the provision of
Services increase, Service Provider shall be entitled to increase the Charges to
reflect that increase on a basis proportionate to the relative use by Service
Recipient of the applicable goods, Software, services, technology or proprietary
rights.

(d) The Charges are exclusive of value added tax and other sales duties and
taxes to be paid in relation to the provision of the Services which shall be
added to invoices at the appropriate rate.

(e) Interest shall be payable on any amounts which are not paid by the due date
for payment. Interest shall accrue and be calculated on a daily basis (both
before and after any judgment) at an annual rate equal to the prime rate (which
shall mean the “prime rate” published in the “Money Rates” section of The Wall
Street Journal) plus [●]% or, if less, the maximum rate allowed by law.

(f) Service Recipient shall not be entitled to set off or reduce payments of the
Charges by any amounts that it claims are owed to it by Service Provider under
this Agreement or any other agreement.

(g) The parties agree that the Charges determined in accordance with this
Section 7 are intended as cost reimbursement only and not intended to result in
a profit or loss.

 

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Section 8. Taxes on Services.

(a) Service Recipient shall be responsible for all sales, use, excise, services
and other similar taxes, levies and charges not otherwise included in the
Charges (other than taxes based, in whole or in part, on net income or profits
or employees of Service Provider) imposed by applicable taxing authorities on
the provision of Services to Service Recipient and its Affiliates hereunder. If
Service Provider or any of its Affiliates is required to pay such taxes, levies
or charges, Service Recipient shall promptly reimburse Service Provider
therefor. Service Provider shall, to the extent practicable, separately state
such sales, use, excise, services and other similar taxes on the relevant
invoice for any Charges.

(b) Service Provider shall deliver to Service Recipient correct, complete and
executed originals of Internal Revenue Service Form W-9 (i) on or before the
date hereof and (ii) promptly upon learning that any such previously provided
form has become obsolete, incorrect or ineffective.

Section 9. Independent Contractor. In providing Services hereunder, Service
Provider and its Affiliates and any third parties acting on behalf of Service
Provider shall act solely as independent contractors. Nothing herein shall
constitute or be construed to be or create in any way or for any purpose a
partnership, joint venture or principal-agent relationship between the parties.
No party shall have any power to control the activities or operations of the
other party. No party shall have any power or authority to bind or commit any
other party. In providing the Services hereunder, Service Provider’s employees
and agents shall not be considered employees or agents of Service Recipient, nor
shall Service Provider’s employees or agents be eligible or entitled to any
compensation, benefits, or perquisites (including severance) given or extended
to any of Service Recipient’s employees.

Section 10. Warranties. EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THE SERVICES ARE
PROVIDED “AS-IS” AND THERE ARE NO WARRANTIES OR REPRESENTATIONS WITH RESPECT TO
THE PROVISION OF SERVICES HEREUNDER, WHETHER EXPRESS OR IMPLIED, INCLUDING
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, QUIET
ENJOYMENT, QUALITY OF INFORMATION OR TITLE/NONINFRINGEMENT, WHICH ARE
SPECIFICALLY DISCLAIMED.

Section 11. Termination of Agreement.

(a) Either party may terminate this Agreement if (i) the other party makes a
general assignment for the benefit of creditors, or petitions or applies to any
tribunal for the appointment of a custodian, receiver or trustee for all or a
substantial part of its assets, (ii) the other party commences any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction whether now or
hereafter in effect or the other party has had any such petition or application
filed or any such proceeding commenced against it in which an order for relief
is entered or an adjudication or

 

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appointment is made and which remains undismissed for a period of sixty
(60) days or more or (iii) the other party materially breaches this Agreement
and does not cure such breach within sixty (60) days after being given written
notice of the breach describing the nature of such breach.

(b) The following Sections shall survive any termination, cancellation or
expiration of this Agreement or a Service: Sections 7 and 8 (in each case, to
the extent of the Charges and taxes accrued prior to termination, cancellation
or expiration) and Section 4(b) (last sentence only), 9, 10, 11, 12, 15, 16, 17,
18, 21, 24, 25, 26, 27, 28, 29, 30, 31, 32 and 33. Notwithstanding the
foregoing, in the event of any termination with respect to one or more, but less
than all, Services, this Agreement shall continue in full force and effect with
respect to any Services not terminated thereby.

Section 12. Limitation on Scope. NEITHER PARTY ASSUMES ANY RESPONSIBILITY OR
OBLIGATION WHATSOEVER IN CONNECTION HEREWITH, OTHER THAN THE RESPONSIBILITIES
AND OBLIGATIONS EXPRESSLY SET FORTH IN THIS AGREEMENT.

Section 13. Assignment; Subcontractors; No Third-Party Beneficiaries.

(a) This Agreement shall not be assigned by operation of law or otherwise by any
party, except as otherwise expressly set forth in this Agreement, without the
prior written consent of the other party. QBE may delegate any of its
obligations as Service Provider under this Agreement to any of its Affiliates,
in lieu of performing such obligations directly, in which case the entity to
which such obligation has been delegated shall be deemed a Service Provider for
such purposes; provided that QBE shall in all such instances remain liable for
the due and punctual performance of such obligations. Any attempted assignment
in violation of this Section 13(a) shall be void. This Agreement shall be
binding upon, shall inure to the benefit of, and shall be enforceable by the
parties and their permitted successors and assigns.

(b) Service Provider may hire or engage one or more third-party service
providers to perform any or all of its obligations under this Agreement;
provided, that such Service Provider shall use the same degree of care in
selecting any such third-party service providers as it would if such third-party
service providers was being retained to provide similar services to such Service
Provider.

(c) Except as otherwise expressly set forth in Section 26, 27, 28, 29, 30 or 31,
this Agreement is for the sole benefit of the parties, the Provider Indemnified
Person or the Recipient Indemnified Person (to the extent they are entitled to
indemnity herein), and their permitted successors and assigns and nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other Person or entity any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.

Section 14. Force Majeure. No party shall be liable for any failure or delay in
performing any of its obligations under this Agreement so long as and to the
extent such failure or delay is due to any cause beyond its reasonable control,
including any natural disaster, hurricane, earthquake, flood, fire, catastrophic
weather conditions, disease or any other element of nature or

 

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act of God, act of war (declared or undeclared), insurrection, riot, civil
disturbance or disorder, rebellion, sabotage, embargo, terrorist act, or
explosion, strike, failure of or damage to public utility.

Section 15. Governing Law; Dispute Resolution; Jurisdiction; Service of Process.

(a) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE WITHOUT GIVING EFFECT TO ANY
CONFLICTS OF LAW PRINCIPLES OF SUCH STATE THAT MIGHT REFER THE GOVERNANCE,
CONSTRUCTION OR INTERPRETATION OF SUCH AGREEMENTS TO THE LAWS OF ANOTHER
JURISDICTION.

(b) Prior to taking any legal action related to this Agreement (excepting any
legal action for immediate injunctive relief or equitable relief), any dispute,
claim or controversy between the parties arising out of or relating to this
Agreement, including with respect to the validity, performance, interpretation
or application of any provision of this Agreement or the performance by Service
Provider or Service Recipient of their respective obligations hereunder (a
“Dispute”) shall be attempted to be resolved as provided in this Section 15(b).
A Dispute is deemed to commence as of the date a party informs the other party
in writing of the existence of a Dispute.

(i) The parties shall first attempt to resolve their Dispute informally in the
following manner:

(A) Either party may submit the Dispute to the Representatives, who shall meet
as often as the Representatives of both parties reasonably deem necessary to
gather and analyze any information relevant to the resolution of the Dispute.
The Representatives shall negotiate in good faith in an effort to resolve the
Dispute; and

(B) If the Representatives are unable to resolve the Dispute within fifteen
(15) days, or otherwise determine in good faith that resolution through
continued discussions by the Representatives does not appear likely, then the
Parties may seek whatever remedies are available under applicable Law.

(ii) Service Provider acknowledges that the performance of its obligations,
including the Services, pursuant to this Agreement is critical to the business
and operations of Service Recipient. Accordingly, in the event of a Dispute
between Service Recipient, on the one hand, and Service Provider, on the other
hand, Service Provider shall continue to perform the Services in good faith
during the resolution of such Dispute unless and until this Agreement is
terminated in accordance with the provisions hereof.

(c) The parties irrevocably and unconditionally submit to the exclusive
jurisdiction of the courts of the State of New York sitting in the County of New
York, the United States of America for the Southern District of New York, and
appellate courts having jurisdiction of appeals from any of the foregoing over
any Action arising out of or relating to this Agreement. Each party agrees that
all claims in respect of any Action arising out of or relating to this

 

13

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Agreement shall be heard and determined in such state courts or, to the extent
permitted by Law, in such federal court. The parties irrevocably and
unconditionally consent that any such Action may and shall be brought in such
courts and waives any objection that it may now or hereafter have to the venue
or jurisdiction of any such Action in any such court or that such Action was
brought in an inconvenient court and agrees not to plead or claim the same.

(d) Each party irrevocably and unconditionally agrees that service of process in
any such Action may be effected by mailing a copy of such process by registered
or certified mail (or any substantially similar form of mail), postage prepaid,
to such party at its address as provided in Section 18. Nothing in this
Agreement shall affect the right to effect service of process in any other
manner permitted by the Laws of the State of New York.

Section 16. Waiver of Jury Trial. Each party irrevocably and unconditionally
waives all right to trial by jury in any Action (whether based on contract, tort
or otherwise) arising out of or relating to the transactions contemplated by
this Agreement, or its performance under or the enforcement of this Agreement.

Section 17. Entire Agreement. This Agreement (including the Schedules hereto)
together with the Master Transaction Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, between the parties with
respect to the subject matter hereof.

Section 18. Notices. Unless otherwise provided herein, all notices, requests,
consents, claims, demands and other communications hereunder shall be in writing
and shall be given or made (and shall be deemed to have been duly given or made
upon receipt) by delivery in person, by overnight courier service, by electronic
mail (followed by delivery of an original via overnight courier service) or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following respective addresses (or at such other
address for a party as shall be specified in a notice given in accordance with
this Section 18):

To QBE:

QBE Holdings, Inc.

Attention: Jose Ramon Gonzalez, Chief Legal Officer

Wall Street Plaza

88 Pine Street

New York, NY 10005

Phone: (212) 422-1212

Facsimile: (212) 422-1313

e-mail: Jose.Gonzalez@us.qbe.com

With a copy (which shall not constitute notice) to:

Sidley Austin LLP

Attention: Sean M. Keyvan

One South Dearborn

Chicago, IL 60603

Phone: (312) 853-4660

Facsimile: (312) 853-7036

e-mail: skeyvan@sidley.com

 

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To the Acquiror:

National General Insurance Company

Attention: Jeffrey Weissmann, General Counsel

59 Maiden Lane

38th Floor

New York, NY 10038

Phone: (212) 380-9479

Facsimile: (212) 380-9498

e-mail: jeffrey.weissmann@ngic.com

With a copy (which shall not constitute notice) to:

Debevoise & Plimpton LLP

Attention: Nicholas F. Potter

919 Third Avenue

New York, NY 10022

Phone: (212) 909-6459

Facsimile: (212) 521-7459

e-mail: nfpotter@debevoise.com

Any party may, by notice given in accordance with this Section 18 to the other
party, designate another address or Person for receipt of notices hereunder;
provided that notice of such a change shall be effective upon receipt.

Section 19. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced under any Law or as a matter of
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
be consummated as originally contemplated to the greatest extent possible.

Section 20. Amendment; Waiver. No provision of this Agreement may be amended,
supplemented or modified except by a written instrument signed by the parties.
No provision of this Agreement may be waived except by a written instrument
signed by the party against whom the waiver is to be effective. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by Law.

 

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Section 21. Confidentiality. The parties agree that any confidential or
proprietary information of either party or its Affiliates or any of their
subcontractors or vendors, whether relating to customer information, trade data,
trade secrets, or business practices of the other party or its Affiliates, that
either party or its Affiliates, or their respective employees, agents or
subcontractors (each, a “Group”), obtain on or after the date hereof from the
other party or its Group relating to, arising out of or in connection with the
Services rendered hereunder (the “Confidential Information”), shall not be
disclosed by any member of such Group to any third party unless (and then only
to the extent that) (i) the party or its Group is legally required, by order of
any court or otherwise, to disclose such Confidential Information, or is
requested by any applicable Governmental Authority to disclose Confidential
Information to it or (ii) the nondisclosing party gives prior written consent.
In the event of (i) in the previous sentence, the party that is, or whose Group
member is, required to disclose such Confidential Information shall, if legally
permitted to do so, provide the other party with prior written notice of such
legal requirement or request to disclose and shall use commercially reasonable
efforts to afford the nondisclosing party an opportunity to contest such
disclosure at the sole cost of the nondisclosing party. Each party shall use
commercially reasonable efforts to restrict access to the other party’s and its
Affiliates’ Confidential Information to any other member of such party’s Group
who needs such Confidential Information in connection with performing or
receiving Services or any other obligations under this Agreement, provided such
member is bound by confidentiality obligations to its party that are at least as
protective as the obligations under this Section 21. Each party agrees to use
the other party’s and its Affiliates’ Confidential Information only in
connection with the performance of its obligations hereunder. It is expressly
understood that no information shall be subject to these confidentiality
provisions, or otherwise deemed as Confidential Information, to the extent:
(a) the party or Group receiving such information legally learned of such
information from a third party, such third party’s disclosure not violating a
duty of non-disclosure owed to another party, (b) a party or Group independently
had knowledge of such information prior to the date hereof and without a duty of
confidentiality, (c) such information becomes available through the public
domain other than through disclosure by the recipient or its Group in violation
of this Section 21 or any other confidentiality agreement with the other party
or its Affiliates or (d) information acquired or developed independently by a
party or its Group without violating this Section 21 or any other
confidentiality agreement with the other party or its Affiliates. Without
limiting the generality of the foregoing, each party shall cause its employees
and agents to exercise the same level of care with respect to Confidential
Information relating to the other party or any of its Affiliates as it would
with respect to its own Confidential Information.

Section 22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
facsimile or electronic mail shall be as effective as delivery of a manually
executed counterpart of any such agreement.

Section 23. Good-Faith Cooperation. Each party shall, and shall cause its
respective Affiliates to, cooperate with each other in good faith in all matters
relating to the provision and receipt of Services. The Representatives of each
party shall consult with each other regularly and the parties shall cooperate
with each other in all reasonable respects in order to effect an efficient
transition and to minimize the expense thereof and the disruption therefrom to
the

 

16

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business of the parties and their Affiliates. Each party further agrees to
reasonably cooperate in any security arrangements which the other party
reasonably deems necessary to prevent or redress unauthorized access to its
systems and data. Each party shall perform all obligations hereunder in good
faith and in accordance with principles of fair dealing and shall not engage in
any willful or intentional misconduct, gross negligence or common law fraud or
otherwise violate any applicable Law in connection with the performance of its
obligations hereunder. Without limiting the foregoing, such cooperation shall
include the execution and delivery of such further instruments or documents as
may be reasonably requested by the other party (at the requesting party’s cost)
to enable the full performance of each party’s obligations hereunder.

Section 24. Master Transaction Agreement. Nothing contained in this Agreement is
intended or shall be construed to amend, modify, augment or decrease in any
respect, or constitute a waiver of, any of the rights and obligations of the
parties under the Master Transaction Agreement.

Section 25. Books and Records.

(a) During the Term, and for so long as Service Provider is required to maintain
its own Books and Records under applicable Laws, (i) Service Provider shall
maintain records, books, systems, internal or external audit reports or
regulatory examination reports, including tax records (the “Books and Records”),
relating to the Services and Service Provider’s control environment used to
provide the Services; (ii) such Books and Records shall be maintained by Service
Provider in any format that may be required by applicable Laws; and (iii) to the
extent Service Provider is legally permitted to provide Service Recipient with
access to such Books and Records, Service Provider shall provide to Service
Recipient, within ten (10) Business Days of receipt of Service Recipient’s
reasonable request (or such shorter period as may be required by applicable
Law), access to all such Books and Records (A) as may be required by Service
Recipient in order for it and its Affiliates to comply with all applicable Laws,
(B) in connection with a Dispute arising out of or relating to this Agreement or
Services provided under this Agreement or (C) as may be required in connection
with any inspection by any Governmental Authority with jurisdiction or authority
over Service Recipient.

(b) During the Term, and for so long as Service Recipient is required to
maintain its own Books and Records under applicable Laws, (i) Service Recipient
shall maintain its Books and Records relating to the Services and Service
Recipient’s control environment used to receive the Services; (ii) such Books
and Records shall be maintained by Service Recipient in any format that may be
required by applicable Laws; and (iii) to the extent Service Recipient is
legally permitted to provide Service Provider with access to such Books and
Records to Service Provider, Service Recipient shall provide to Service
Provider, within ten (10) Business Days of receipt of Service Provider’s
reasonable request (or such shorter period as may be required by applicable
Law), access to all such Books and Records (A) as may be required by Service
Provider in order for it and its Affiliates to comply with all applicable Laws,
(B) in connection with a Dispute arising out of or relating to this Agreement or
Services provided under this Agreement or (C) as may be required in connection
with any inspection by any Governmental Authority with jurisdiction or authority
over Service Provider.

 

17

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(c) All access rights under this Section 25 shall be conducted during normal
business hours in a manner that does not unreasonably interfere with the other
party’s business operations. The parties agree that all information and records
exchanged hereunder shall be treated as Confidential Information of the
disclosing party.

(d) During the Term, Service Recipient shall cooperate in good faith with
Service Provider in the completion by Service Provider of its quarterly
financial statements; provided that such cooperation shall not unreasonably
interfere with performance by Service Recipient’s personnel of their duties,
including the Services.

Section 26. Limitation of Liability.

(a) The Acquiror agrees that none of Service Provider, its Affiliates or any of
its or their respective directors, officers, agents, consultants,
representatives or employees (each, a “Provider Indemnified Person”) shall have
any liability, whether direct or indirect, in contract or tort or otherwise, to
the Acquiror or its Affiliates or any other Person for or in connection with the
Services rendered or to be rendered by or on behalf of any Provider Indemnified
Person pursuant to this Agreement, the transactions contemplated hereby or any
actions or inactions by or on behalf of Provider Indemnified Person in
connection with any such Services or transactions, except to the extent any
Losses have resulted from such Provider Indemnified Person’s gross negligence or
willful misconduct in connection with any such Services, actions or inactions.

(b) No Provider Indemnified Person or Recipient Indemnified Person shall be
liable for any special, incidental, consequential or punitive damages of any
kind whatsoever in any way due to, resulting from or arising in connection with
any of the Services or the performance of or failure to perform Service
Provider’s or Service Recipient’s obligations under this Agreement, as
applicable. This disclaimer applies, without limitation, (i) to claims arising
from the provision of the Services or any failure or delay in connection
therewith, (ii) to claims for lost profits and (iii) regardless of the form of
action, whether in contract, tort, strict liability, or otherwise.

(c) In addition to the foregoing, each party agrees that it shall, in all
circumstances, use commercially reasonable efforts to mitigate and otherwise
minimize its damages and those of its Affiliates, whether direct or indirect,
due to, resulting from or arising in connection with any failure by the other
party to comply fully with its obligations under this Agreement.

Section 27. Indemnification of Service Provider by Service Recipient. Service
Recipient agrees to indemnify and hold harmless each Provider Indemnified Person
from and against any damages, and to reimburse each Provider Indemnified Person
for all costs, damages, liabilities and fees and expenses (including reasonable
attorneys’ fees and expenses and any other expenses reasonably incurred in
connection with investigating, prosecuting or defending any Action)
(collectively, “Losses”) incurred in investigating, preparing, pursuing, or
defending any Actions, whether or not in connection with pending or threatened
litigation and whether or not any Provider Indemnified Person is a party,
arising out of or in connection with Services rendered or to be rendered by or
on behalf of any Provider Indemnified Person pursuant to this Agreement,

 

18

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the transactions contemplated hereby or any actions or inactions by or on behalf
of any Provider Indemnified Person in connection with any such Services or
transactions; provided that Service Recipient shall not be responsible for any
Losses of any Provider Indemnified Person to the extent such Losses have
resulted from such Provider Indemnified Person’s gross negligence or willful
misconduct in connection with any of such Services, actions or inactions (it
being understood and agreed that the provision by Service Provider or any of its
Affiliates of any of the Services without obtaining the consent of any party to
any contract or agreement to which Service Provider or any of its Affiliates is
a party as of the date hereof shall not constitute gross negligence or willful
misconduct by Service Provider or any of its Affiliates; provided that Service
Provider or its Affiliate, as applicable, has used commercially reasonable
efforts to obtain the relevant consent, without any guarantee of success in
respect thereof).

Section 28. Indemnification of Service Recipient by Service Provider. Service
Provider agrees to indemnify and hold harmless Service Recipient, each of its
Affiliates and its and their respective directors, officers, agents,
consultants, representatives or employees (each, a “Recipient Indemnified
Person”) from and against any Losses incurred in investigating, preparing, or
defending any Action, to the extent such Losses have arisen out of the gross
negligence or willful misconduct of any Provider Indemnified Person in
connection with the Services rendered or to be rendered pursuant to this
Agreement.

Section 29. Indemnification as Exclusive Remedy. Except for the termination
rights provided for under the terms of this Agreement, the indemnification
provisions of this Section 29 shall be the exclusive remedy for breach of this
Agreement and any matters relating to this Agreement.

Section 30. Conduct of Proceedings. Any proceedings relating to indemnification
under Section 27 or 28 shall be conducted in accordance with the procedures set
forth in Section 10.3 of the Master Transaction Agreement, mutatis mutandis.

Section 31. No Limitation. Nothing contained in Sections 26 to 30 shall limit or
alter the obligation of any party to indemnify any other party pursuant to the
Master Transaction Agreement; provided that no party shall obtain duplicative
recoveries.

Section 32. Order of Precedence.

(a) If there is any material conflict between the terms in the body of this
Agreement and any Schedules attached hereto, the terms in the body of this
Agreement shall prevail.

(b) If there is any material conflict between the terms in the body of this
Agreement and the Master Transaction Agreement, the terms of the Master
Transaction Agreement shall prevail.

Section 33. Rules of Construction. Interpretation of this Agreement shall be
governed by the following rules of construction: (a) words in the singular shall
be held to include the plural and vice versa, and words of one gender shall be
held to include the other gender as the context requires; (b) references to
preamble, recitals, Sections, Transition Services Schedules and Schedules are
references to the preamble, recitals, Sections, Transition Services Schedules
and

 

19

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Schedules to this Agreement unless otherwise specified; (c) references to “$”
shall mean U.S. dollars; (d) the word “including” and words of similar import
when used in this Agreement shall mean “including without limiting the
generality of the foregoing,” unless otherwise specified; (e) the word “or”
shall not be exclusive; (f) the words “herein,” “hereof,” “hereunder,” “hereby”
and similar terms shall be deemed to refer to this Agreement as a whole and not
to any specific section; (g) the headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement; (h) this Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted; (i) if a
word or phrase is defined, the other grammatical forms of such word or phrase
shall have a corresponding meaning; (j) references to any statute, listing rule,
rule, standard, regulation or other law (i) include a reference to the
corresponding rules and regulations and (ii) include a reference to each of them
as amended, modified, supplemented, consolidated, replaced or rewritten from
time to time; (k) references to any section of any statute, listing rule, rule,
standard, regulation or other law include any successor to such section;
(l) each of the Acquiror, on the one hand, and QBE, on the other hand, shall be
referred to as a “party” and collectively as the “parties;” (m) all references
to any period of days shall be deemed to be to the relevant number of calendar
days unless Business Days are expressly specified; and (n) references to any
contract (including this Agreement) or organizational document are to the
contract or organizational document as amended, modified, supplemented or
replaced from time to time, unless otherwise stated.

Section 34. Fulfillment of Obligations. Any obligation of any party to any other
party under this Agreement, which obligation is performed, satisfied or
fulfilled by an Affiliate of such party or by any third party in accordance with
the terms of this Agreement, shall be deemed to have been performed, satisfied
or fulfilled by such party.

[Signature page follows]

 

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IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first
set forth above.

 

QBE HOLDINGS, INC. By:

 

Name: Title NATIONAL GENERAL HOLDINGS CORP. By:

 

Name: Title

Signature Page to Transition Services Agreement

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EXHIBIT C-2

FORM OF REVERSE TRANSITION SERVICES AGREEMENT

See attached.

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EXHIBIT C-2

FORM OF REVERSE TRANSITION SERVICES AGREEMENT

TRANSITION SERVICES AGREEMENT

BY AND BETWEEN

NATIONAL GENERAL HOLDINGS CORP.

AND

QBE HOLDINGS, INC.

DATED AS OF [●], 2015

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TABLE OF CONTENTS

 

Section 1. Certain Defined Terms   2    Section 2. Services in General;
Transition Services Schedules   4    Section 3. Intellectual Property Matters  
6    Section 4. Administration of Services   7    Section 5. Term, Extension and
Termination of Services   8    Section 6. Standard of Performance; Limitations
on Providing Services   8    Section 7. Payment of Fees and Charges   10   
Section 8. Taxes on Services   10    Section 9. Independent Contractor   11   
Section 10. Warranties   11    Section 11. Termination of Agreement   11   
Section 12. Limitation on Scope   12    Section 13. Assignment; Subcontractors;
No Third-Party Beneficiaries   12    Section 14. Force Majeure   12    Section
15. Governing Law; Dispute Resolution; Jurisdiction; Service of Process   12   
Section 16. Waiver of Jury Trial   14    Section 17. Entire Agreement   14   
Section 18. Notices   14    Section 19. Severability   15    Section 20.
Amendment; Waiver   15    Section 21. Confidentiality   15    Section 22.
Counterparts   16    Section 23. Good-Faith Cooperation   16    Section 24.
Master Transaction Agreement   17    Section 25. Books and Records   17   
Section 26. Limitation of Liability   18    Section 27. Indemnification of
Service Provider by Service Recipient   18    Section 28. Indemnification of
Service Recipient by Service Provider   19    Section 29. Indemnification as
Exclusive Remedy   19    Section 30. Conduct of Proceedings   19    Section 31.
No Limitation   19    Section 32. Order of Precedence   19    Section 33. Rules
of Construction   19    Section 34. Fulfillment of Obligations   20   

 

Schedule 2(a)(i) Transition Services Schedule 2(a)(iii) Excluded Services
Schedule 3(a) Intellectual Property License Exemptions Schedule 4(a)
Representatives Schedule 7 Fees and Charges

 

1

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TRANSITION SERVICES AGREEMENT

This Transition Services Agreement (this “Agreement”), dated as of [●], 2015, is
by and between National General Holdings Corp., a Delaware corporation (the
“Acquiror”), and QBE Holdings, Inc., a Delaware corporation (“QBE”).

WHEREAS, pursuant to that certain Master Transaction Agreement by and among QBE
Investments (North America), Inc., a Delaware corporation (“Parent”), QBE, and
the Acquiror, dated as of July 15, 2015 (the “Master Transaction Agreement”),
the Acquiror is acquiring, directly or indirectly, all the outstanding common
stock of QBE Financial Institution Risk Services, Inc., a Delaware corporation
(the “Company”) and the following subsidiaries of the Company (collectively, the
“Transferred Subsidiaries”): (i) QBE FIRST Insurance Agency, Inc., a California
corporation, (ii) Seattle Specialty Insurance Services, Inc., a Washington
corporation, (iii) Newport Management Corporation, a California corporation and
(iv) Mortgage & Auto Solutions, Inc., a Texas corporation. The Master
Transaction Agreement contemplates that the parties shall, at the closing of the
transactions contemplated by the Master Transaction Agreement, enter into this
Agreement for the provision of certain services to QBE and its Affiliates (as
defined in the Master Transaction Agreement), on the terms and conditions set
forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:

Section 1. Certain Defined Terms. Any capitalized term used but not defined
herein shall have the meaning set forth in the Master Transaction Agreement. The
following terms have the respective meanings set forth below throughout this
Agreement:

“Acquiror” shall have the meaning set forth in the preamble.

“Additional Services” shall have the meaning set forth in Section 2(a)(ii).

“Agreement” shall have the meaning set forth in the preamble.

“Authorization Expenses” shall have the meaning set forth in Section 2(d).

“Authorizations” shall have the meaning set forth in Section 2(d).

“Books and Records” shall have the meaning set forth in Section 25.

“Business” shall have the meaning set forth in the Master Transaction Agreement.

“Charges” shall have the meaning set forth in Section 2(b).

“Closing” shall have the meaning set forth in the Master Transaction Agreement.

“Company” shall have the meaning set forth in the recitals.

 

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“Confidential Information” shall have the meaning set forth in Section 21.

“Dispute” shall have the meaning set forth in Section 15(b).

“End Date” shall have the meaning set forth in Section 5(a).

“Excluded Services” shall have the meaning set forth in Section 2(a)(iii).

“Expiration Date” shall have the meaning set forth in Section 5(a).

“Extension” shall have the meaning set forth in Section 5(a).

“Group” shall have the meaning set forth in Section 21.

“Intellectual Property” means: (a) patents, patent applications and statutory
invention registrations, including reissues, divisions, continuations,
continuations in part, renewals, extensions and reexaminations thereof, and all
patents which may issue on such applications, all rights therein provided by
international treaties or conventions, (b) trademarks, service marks, trade
dress, logos, and all goodwill associated with the foregoing, any and all common
law rights therein, and registrations and applications for registration thereof,
all rights therein provided by international treaties or conventions, and all
reissues, extensions and renewals of any of the foregoing, (c) copyrightable
works, copyrights and database rights, whether or not registered, and
registrations and applications for registration thereof, and all rights therein
provided by international treaties or conventions, (d) protectable rights in
confidential and proprietary information, including trade secrets, processes and
know-how that arise from not being publicly known, in each case existing on the
Closing Date, (e) Internet domain names, and registrations pertaining thereto,
and (f) rights in Software and Shared Software.

“Licensed IP” shall have the meaning set forth in Section 3(a).

“Losses” shall have the meaning set forth in Section 27.

“Master Transaction Agreement” shall have the meaning set forth in the recitals.

“Meeting” shall have the meaning set forth in Section 4(a).

“Parent” shall have the meaning set forth in the recitals.

“Policies” shall have the meaning set forth in the Reinsurance Agreements.

“Provider Indemnified Person” shall have the meaning set forth in Section 26(a).

“QBE” shall have the meaning set forth in the preamble.

“Recipient Indemnified Person” shall have the meaning set forth in Section 28.

“Reinsurance Agreements” shall have the meaning set forth in the Master
Transaction Agreement

 

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“Representative” shall have the meaning set forth in Section 4(a).

“Scheduled Final Service Date” shall have the meaning set forth in Section 2(c).

“Service” shall have the meaning set forth in Section 2(a).

“Service Data” shall have the meaning set forth in Section 3(b).

“Service Provider” means the Company and the Transferred Subsidiaries.

“Service Recipient” means QBE and its Affiliates.

“Term” shall have the meaning set forth in Section 5(a).

“Terminated Service Log” shall have the meaning set forth in Section 5(b).

“Third Party Contracts” shall have the meaning set forth in Section 2(d).

“Transferred Subsidiaries” shall have the meaning set forth in the recitals.

“Transition Plan” shall have the meaning set forth in Section 4(c).

“Transition Services” shall have the meaning set forth in Section 2(a)(i).

“Transition Services Schedule” shall have the meaning set forth in Section 2(a).

“Transition Services Team” shall have the meaning set forth in Section 4(a).

Section 2. Services in General; Transition Services Schedules.

(a) Upon the terms contained in this Agreement and the Transition Services
Schedules attached hereto (each such schedule, a “Transition Services
Schedule”), during the Term, Service Provider shall provide to Service Recipient
all the services listed in the Transition Services Schedules (each such service,
a “Service”), and Service Recipient shall pay for such Services in accordance
with the terms of this Agreement, as follows:

(i) Transition Services. The Services that were historically provided by Service
Provider to Service Recipient prior to the date hereof, which are identified as
Transition Services in Schedule 2(a)(i) (the “Transition Services”). The
Transition Services shall also include, for the Charges to be mutually agreed by
the parties, any Service(s) (other than the Excluded Services) that were
historically provided by the Company and the Transferred Subsidiaries to any of
the other businesses of QBE prior to the date hereof that were inadvertently
omitted from Schedule 2(a)(i). The parties shall cooperate in good faith to
amend Schedule 2(a)(i) to include any such omitted Service(s) that are
identified by one of the parties after the date hereof. The Service Recipient
shall not be responsible for any Charges applicable to any individual Service
included in the Terminated Service Log following Service Recipient’s provision
of (A) sixty (60) days written notice to the Service Provider terminating such
Service to the extent such Service constitutes a service related to information
technology or communications in accordance with Section 5(b)(i) or (B) thirty
(30) days written notice to the Service Provider terminating such Service for
any other Service in accordance with Section 5(b)(ii).

 

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(ii) Additional Services. During the Term, Service Recipient may request that
Service Provider provide such reasonably necessary additional services other
than the Transition Services set forth on Schedule 2(a)(i) (the “Additional
Services”) that are not Excluded Services and Service Provider shall consider
all such requests in good faith. If Service Provider provides any such
Additional Services the parties shall negotiate in good faith the terms on which
such Additional Services shall be provided and, if those terms are mutually
agreed upon, Schedule 2(a)(i) shall be amended pursuant to Section 20 to reflect
such addition and the Additional Service(s) shall be deemed to form a part of
the Services.

(iii) Excluded Services. Schedule 2(a)(iii) sets forth a list and description of
certain services that Service Provider shall not provide to Service Recipient
pursuant to this Agreement (the “Excluded Services”).

(b) For each Service, the applicable Transition Services Schedule sets forth,
among other things: (i) a description of the Service; and (ii) the method for
determining the Charge for the Service, which shall be the actual cost (which
shall be deemed to include, in addition to all third party and other
out-of-pocket costs, all corporate overhead and other costs reasonably allocated
to QBE and its Affiliates for employees, occupancy and other matters) of the
provision of such Service to Service Recipient (the “Charges”) as further
determined using the principles for determining the Charges under Section 7.

(c) Subject to Section 5, the parties shall agree that the date each such
Service is to be terminated shall be the earlier of (i) the date (if any) set
forth in the applicable Transition Services Schedule (each, a “Scheduled Final
Service Date”) and (ii) the Expiration Date. Service Recipient agrees to use
commercially reasonable efforts to end its need to use each and every Service as
soon as reasonably practicable and in all events prior to the earlier of the
Scheduled Final Service Date with respect to each Service and the Expiration
Date.

(d) Third Party Consents. Service Recipient understands, acknowledges and agrees
that certain Services to be provided by Service Provider may be provided by or
through the use of the services, Software or other products of unaffiliated
third parties on behalf of Service Provider pursuant to contracts to which
Service Recipient is not a party (collectively, the “Third Party Contracts”).
Service Provider shall be responsible for obtaining any additional consents,
approvals, permissions or licenses (collectively, “Authorizations”) required for
the continued participation in such Third Party Contracts by such third parties.
Service Provider and Service Recipient shall each be responsible for fifty
percent (50%) of any additional costs, expenses, fees, charges, commissions or
right-to-use fees (“Authorization Expenses”) that obtaining such Authorizations
may involve. Service Provider agrees to use its commercially reasonable efforts
to seek and obtain any Authorizations necessary pursuant to such Third Party
Contracts to provide Services to Service Recipient; provided, however, that
Service Provider shall not be required to obtain any Authorizations if such
Authorizations would require Service Provider to modify, amend or otherwise
alter a Third Party Contract in a manner that, in Service Provider’s reasonable
opinion, is materially detrimental to Service Provider or any of its

 

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Affiliates. If, as of the date hereof, there are Third Party Contracts where
Authorizations have not been received by Service Provider, then Service Provider
shall (i) continue to use commercially reasonable efforts to obtain such
Authorizations or (ii) at Service Recipient’s request, use commercially
reasonable efforts to cooperate with Service Recipient and reasonably assist it
to enter into its own agreements with third parties (including identifying and
approaching the applicable vendor (or another third party vendor) with whom
Service Recipient shall enter into its own third party contract at a price and
upon terms that are mutually agreeable to Service Recipient and such vendor
relating to such Service). On termination or expiration of any Third Party
Contract during the Term, Service Provider shall not be obligated to continue to
provide, or cause the provision of the Services to which the relevant Third
Party Contract relates, but at Service Recipient’s request, shall use
commercially reasonable efforts to cooperate with Service Recipient and
reasonably assist it to enter into its own agreements with third parties
(including identifying and approaching the applicable vendor (or another third
party vendor) with whom Service Recipient shall enter into its own third party
contract at a price and upon terms that are mutually agreeable to Service
Recipient and such vendor relating to such Service). Service Provider
acknowledges and agrees that with respect to any termination fees for any Third
Party Contract or other third party arrangement that are incurred by Service
Provider as a result of the transition of Services to Service Recipient, Service
Recipient shall be responsible for fifty percent (50%) of the termination fees
associated with such contract or arrangement.

Section 3. Intellectual Property Matters.

(a) Except as set forth on Schedule 3(a), Service Provider hereby grants, or has
caused each relevant Affiliate to grant, to Service Recipient a royalty-free,
non-exclusive, non-transferable, non-assignable, non-sublicenseable license to
access or use the Intellectual Property, including Software or Shared Software,
owned by the applicable Service Provider (collectively, the “Licensed IP”)
during the Term to the extent necessary to, and for the sole purpose of, Service
Recipient’s receipt of Services during the Term but only to the extent
(i) currently accessed or used by Service Recipient prior to the Closing,
(iii) such access or use is not in violation of applicable Law or any internal
privacy-related policies of Service Provider and (iv) Service Provider has or
can obtain the right to grant such license in connection with providing the
Services. In furtherance and not in limitation of the foregoing, unless
otherwise agreed in writing by Service Provider, any such Licensed IP that is
Software or Shared Software may only be installed or used on Service Recipient
systems on which the Software or Shared Software was installed or used prior to
the Closing. For the avoidance of doubt, any Licensed IP licensed pursuant to
this Section 3(a) shall be deemed Confidential Information of Service Provider.

(b) “Service Data” means all the data provided by a Service Recipient or created
by or for Service Provider on behalf of a Service Recipient in connection with
the provision of the Services, including employee information, customer
information, product details and pricing information. The Service Data and any
Intellectual Property rights therein shall be and shall remain the property of
the applicable Service Recipient and shall be provided by Service Provider to
Service Recipients pursuant to reports created by Service Provider. Except as
set forth herein, all data, information, Intellectual Property and Software
created by Service Provider in connection with the provision of the Services
shall be owned by Service Provider. Unless otherwise specifically provided
herein, this Agreement shall not transfer ownership of, or license any rights to
any Intellectual Property from any Person to another Person.

 

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Section 4. Administration of Services.

(a) Service Recipient and Service Provider shall each designate a group of
individuals (each, a “Transition Services Team”), which shall work cooperatively
with their counterparts to facilitate and administer this Agreement. Each
Service Recipient and Service Provider shall designate (and reflect on Schedule
4(a)) two (2) or more persons (each, a “Representative”), who shall make
reasonable efforts to meet, in person or telephonically during normal business
hours and with reasonable notice (each such meeting, a “Meeting”), from time to
time as reasonably requested by the other party’s Representatives to discuss the
Services generally and any issues relating thereto; provided that any
Representative’s failure to attend one or more Meetings shall not be deemed to
constitute a breach under this Agreement. Each party shall have the right at any
time and from time to time to replace its Representatives by giving notice in
writing to the other party setting forth the name of (i) the Representative to
be replaced and (ii) the replacement Representative.

(b) Service Recipient acknowledges and agrees that Service Provider may need to
provide some of the Services from or otherwise may need access to and use of
locations owned or controlled by Service Recipient or its Affiliates. In order
for Service Provider to perform its obligations under this Agreement, Service
Recipient agrees to, and to cause its Affiliates to: (i) provide and maintain a
safe location and environment for the representatives providing the Services;
(ii) provide a secure area reasonably located for Service Provider’s and its
Affiliates’ property and materials; (iii) provide Service Provider and its
Affiliates reasonable access to its property, materials, information and data
(including, upon reasonable advance notice, after normal business hours and
during weekends and holidays) to the extent reasonably necessary in order for
such other party to perform its obligations under this Agreement; and
(iv) permit any signage to be displayed at such locations or on such property as
may be required under applicable Law (including for regulatory purposes). In the
event Service Recipient fails to provide access required hereunder to Service
Provider’s employees and subcontractors as contemplated hereunder, Service
Provider shall not be liable for any failure to perform under this Agreement
occasioned by the lack of access. In the event that either party shall require
(A) physical separation of its employees, property or Services (or any signage
at or on another party’s location or property), (B) employee relocation or
(C) technology firewalls (including such actions as may be required to effect
the confidentiality obligations set forth in Section 21 or to comply with
applicable Law), the resulting cost of such signage, physical separation,
relocation and firewalls shall be borne by Service Recipient (and if any
authorization from a Governmental Authority is required by a party in connection
with the matters contemplated by the foregoing, then the other party shall
cooperate with such party to obtain any such authorization). Service Recipient
and Service Provider each agree to comply in all material respects with all Laws
applicable to its activities under this Agreement and to use, and cause their
respective Affiliates to use, commercially reasonable efforts to protect such
property and materials of the other party or its Affiliates against damage,
destruction, loss or unauthorized use. To the extent that any property or
materials of Service Provider or its Affiliates used to provide any terminated
Service is located on premises owned or controlled by Service Recipient, Service
Provider shall have a reasonable period of time following the effective date of
such termination to remove such property or materials.

 

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(c) By the 6-month anniversary of the date hereof, Service Recipient agrees to
jointly develop with Service Provider a plan of transition (the “Transition
Plan”) explaining how Service Recipient intends to cease access to or its use of
the Licensed IP, systems, operations, processes and platforms set forth on the
Transition Services Schedules by the Expiration Date. The Transition Plan shall
contain a timeline of Service Recipient’s plan to exit or cease use of such
Licensed IP, systems, operations, processes and platforms and identify the roles
and responsibilities of both parties to complete the transition. Service
Provider shall cooperate with Service Recipient in providing such information
and other data for the development of the Transition Plan contemplated above.
The Transition Plan must be approved in writing by both parties in order to take
effect. Both parties acknowledge that the Transition Plan shall evolve and shall
be subject to change. Changes shall be discussed and mutually agreed to by the
Transition Services Team in its Meetings pursuant to Section 4(a), and the
Transition Plan updated accordingly.

Section 5. Term, Extension and Termination of Services.

(a) The term of this Agreement shall commence on the date hereof and shall
remain in effect until the twelve (12)-month anniversary of the date hereof (the
“End Date”); provided, however, that the End Date may be extended for up to two
(2) additional six (6) month periods (each such extension period, an
“Extension”) upon Service Recipient’s request by written notice to Seller at
least thirty (30) days before the last day of the End Date or, in the event that
Service Recipient requests an Extension prior to the End Date, thirty (30) days
before the last day of such Extension (collectively, the “Term”). The last day
of the Term is referred to herein as the “Expiration Date.”

(b) With respect to (i) any individual Service provided hereunder that
constitutes a service related to information technology or communications, the
Service Recipient may, upon sixty (60) days written notice to the Service
Provider or (ii) any other individual Service provided hereunder, the Service
Recipient may, upon thirty (30) days written notice to the Service Provider,
terminate the individual Service, which shall be one or more line items in the
Transition Services Schedules. The Service Provider shall maintain a spreadsheet
of individual Services terminated pursuant to this Section 5(b) (the “Terminated
Service Log”) and the Service Provider shall promptly update the Terminated
Service Log reflecting the termination of any individual Service. At the Service
Recipient’s request, the Service Provider shall provide the Service Recipient
with a current version of the Terminated Service Log.

Section 6. Standard of Performance; Limitations on Providing Services.

(a) Service Provider shall perform the Services, including maintaining the
systems, platforms and equipment used to provide the Services, in accordance
with applicable Law. The nature, quality, standard of care and the service
levels at which such Services are performed shall be materially consistent with
the nature, quality, standard of care and service levels at which the
substantially same services were performed by or on behalf of Service Provider
to Service Recipient immediately prior to the date hereof; provided that
appropriate

 

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modifications may be made for security, confidentiality and data integrity so
long as such modifications do not adversely affect the manner or quality of the
Services delivered hereunder in any material respect; provided, further, that
the level or volume of any specific Service required to be provided to a Service
Recipient hereunder shall not exceed the level or volume of such Service as
historically utilized by such Service Recipient during the twelve (12)-month
period ending immediately prior to the date hereof; and provided, further, that
in providing any Service, Service Provider shall have no obligation to allocate
human, equipment or other resources in excess of the level of resources
historically allocated to the provision to Service Recipient of such Service by
Service Provider during the twelve (12)-month period ending immediately prior to
the date hereof.

(b) Service Recipient acknowledges that Service Provider is not in the business
of providing Services (or services of a like nature) to third parties, and the
Services are being provided to Service Recipient by Service Provider solely to
facilitate the transactions contemplated by the Master Transaction Agreement;
and Service Provider acknowledges that the receipt of the Services as provided
herein in an accurate and timely manner is of paramount importance to the
Service Recipient.

(c) Service Provider shall not be required to provide any Service to the extent
performance of such Service by Service Provider is prohibited by, or would
require Service Provider to violate, any applicable Laws.

(d) If Service Recipient, QBE or any of their Affiliates shall purchase, lease
or otherwise acquire any business, assets or properties or rights in respect
thereof, Service Provider shall have no obligation to provide any Services
hereunder in respect of such acquired business, assets or properties; provided,
however, that Service Recipient may request that Service Provider service such
acquired business, assets or properties as Additional Services pursuant to
Section 2(a)(ii). Service Provider shall have no obligation to provide any
Services hereunder in respect of any business, asset or property owned by QBE or
any of its Affiliates prior to the date hereof.

(e) It is understood and agreed that Service Provider may from time to time
modify, change or enhance the manner, nature, quality or standard of care of any
Service provided to Service Recipient to the extent Service Provider is making a
similar change in the performance of such Services for Service Provider and its
Affiliates; provided that any such modification, change or enhancement shall not
reasonably be expected to adversely effect such Service in a material manner.
Service Provider shall furnish to Service Recipient substantially the same
notice (in content and timing), if any, as Service Provider furnishes to its own
organization with respect to such modifications, changes or enhancements.

(f) Except as may otherwise be expressly provided in this Agreement, the
management of and control over the provision of the Services by Service Provider
shall reside solely with Service Provider and notwithstanding anything to the
contrary, Service Provider shall be permitted to choose the methodology, systems
and applications it utilizes in the provision of such Services. The provision,
use of and access to the Services shall be subject to (i) any technical and
operational changes that may be required to manage any restrictions imposed by
Service Provider in respect of data access; (ii) Service Provider’s business,
operational and technical environment, standards, policies and procedures as may
be modified from time to time;

 

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(iii) any other third party services, resources or dependencies; and (iv) the
terms of this Agreement. Service Provider may suspend Service Recipient’s access
(if any) to the information technology (including Software, Shared Software or
other relevant Intellectual Property) or communications systems of Service
Provider used by Service Recipient following advance notice to the extent
practicable if, in Service Provider’s reasonable opinion (A) the integrity,
security or performance of its systems, or any data stored on them, is being or
is likely to be jeopardized by the activities of Service Recipient; or
(B) continued access to such information technology or communications systems by
Service Recipient would expose Service Provider to liability.

Section 7. Payment of Fees and Charges.

(a) In consideration for the Services provided hereunder, Service Recipient
shall pay the applicable Charges hereunder in accordance with this Section 7.

(b) Payment of the Charges shall be made in the manner specified in Schedule 7.
If payment terms are not specified in Schedule 7, payment shall be made within
thirty (30) days of receipt of invoice for the Charges.

(c) If any costs charged by unaffiliated third parties for goods, Software,
services, technology or proprietary rights associated with the provision of
Services increase, Service Provider shall be entitled to increase the Charges to
reflect that increase on a basis proportionate to the relative use by Service
Recipient of the applicable goods, Software, services, technology or proprietary
rights.

(d) The Charges are exclusive of value added tax and other sales duties and
taxes to be paid in relation to the provision of the Services which shall be
added to invoices at the appropriate rate.

(e) Interest shall be payable on any amounts which are not paid by the due date
for payment. Interest shall accrue and be calculated on a daily basis (both
before and after any judgment) at an annual rate equal to the prime rate (which
shall mean the “prime rate” published in the “Money Rates” section of The Wall
Street Journal) plus [●]% or, if less, the maximum rate allowed by law.

(f) Service Recipient shall not be entitled to set off or reduce payments of the
Charges by any amounts that it claims are owed to it by Service Provider under
this Agreement or any other agreement.

(g) The parties agree that the Charges determined in accordance with this
Section 7 are intended as cost reimbursement only and not intended to result in
a profit or loss.

Section 8. Taxes on Services.

(a) Service Recipient shall be responsible for all sales, use, excise, services
and other similar taxes, levies and charges not otherwise included in the
Charges (other than taxes based, in whole or in part, on net income or profits
or employees of Service Provider) imposed by applicable taxing authorities on
the provision of Services to Service Recipient and its

 

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Affiliates hereunder. If Service Provider or any of its Affiliates is required
to pay such taxes, levies or charges, Service Recipient shall promptly reimburse
Service Provider therefor. Service Provider shall, to the extent practicable,
separately state such sales, use, excise, services and other similar taxes on
the relevant invoice for any Charges.

(b) Service Provider shall deliver to Service Recipient correct, complete and
executed originals of Internal Revenue Service Form W-9 (i) on or before the
date hereof and (ii) promptly upon learning that any such previously provided
form has become obsolete, incorrect or ineffective.

Section 9. Independent Contractor. In providing Services hereunder, Service
Provider and its Affiliates and any third parties acting on behalf of Service
Provider shall act solely as independent contractors. Nothing herein shall
constitute or be construed to be or create in any way or for any purpose a
partnership, joint venture or principal-agent relationship between the parties.
No party shall have any power to control the activities or operations of the
other party. No party shall have any power or authority to bind or commit any
other party. In providing the Services hereunder, Service Provider’s employees
and agents shall not be considered employees or agents of Service Recipient, nor
shall Service Provider’s employees or agents be eligible or entitled to any
compensation, benefits, or perquisites (including severance) given or extended
to any of Service Recipient’s employees.

Section 10. Warranties. EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THE SERVICES ARE
PROVIDED “AS-IS” AND THERE ARE NO WARRANTIES OR REPRESENTATIONS WITH RESPECT TO
THE PROVISION OF SERVICES HEREUNDER, WHETHER EXPRESS OR IMPLIED, INCLUDING
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, QUIET
ENJOYMENT, QUALITY OF INFORMATION OR TITLE/NONINFRINGEMENT, WHICH ARE
SPECIFICALLY DISCLAIMED.

Section 11. Termination of Agreement.

(a) Either party may terminate this Agreement if (i) the other party makes a
general assignment for the benefit of creditors, or petitions or applies to any
tribunal for the appointment of a custodian, receiver or trustee for all or a
substantial part of its assets, (ii) the other party commences any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction whether now or
hereafter in effect or the other party has had any such petition or application
filed or any such proceeding commenced against it in which an order for relief
is entered or an adjudication or appointment is made and which remains
undismissed for a period of sixty (60) days or more or (iii) the other party
materially breaches this Agreement and does not cure such breach within sixty
(60) days after being given written notice of the breach describing the nature
of such breach.

(b) The following Sections shall survive any termination, cancellation or
expiration of this Agreement or a Service: Sections 7 and 8 (in each case, to
the extent of the Charges and taxes accrued prior to termination, cancellation
or expiration) and Section 4(b) (last sentence only), 9, 10, 11, 12, 15, 16, 17,
18, 21, 24, 25, 26, 27, 28, 29, 30, 31, 32 and 33.

 

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Notwithstanding the foregoing, in the event of any termination with respect to
one or more, but less than all, Services, this Agreement shall continue in full
force and effect with respect to any Services not terminated thereby.

Section 12. Limitation on Scope. NEITHER PARTY ASSUMES ANY RESPONSIBILITY OR
OBLIGATION WHATSOEVER IN CONNECTION HEREWITH, OTHER THAN THE RESPONSIBILITIES
AND OBLIGATIONS EXPRESSLY SET FORTH IN THIS AGREEMENT.

Section 13. Assignment; Subcontractors; No Third-Party Beneficiaries.

(a) This Agreement shall not be assigned by operation of law or otherwise by any
party, except as otherwise expressly set forth in this Agreement, without the
prior written consent of the other party. Service Provider may delegate any of
its obligations as Service Provider under this Agreement to any of its
Affiliates, in lieu of performing such obligations directly, in which case the
entity to which such obligation has been delegated shall be deemed a Service
Provider for such purposes; provided that Service Provider shall in all such
instances remain liable for the due and punctual performance of such
obligations. Any attempted assignment in violation of this Section 13(a) shall
be void. This Agreement shall be binding upon, shall inure to the benefit of,
and shall be enforceable by the parties and their permitted successors and
assigns.

(b) Service Provider may hire or engage one or more third-party service
providers to perform any or all of its obligations under this Agreement;
provided, that such Service Provider shall use the same degree of care in
selecting any such third-party service providers as it would if such third-party
service providers was being retained to provide similar services to such Service
Provider.

(c) Except as otherwise expressly set forth in Section 26, 27, 28, 29, 30 or 31,
this Agreement is for the sole benefit of the parties, the Provider Indemnified
Person or the Recipient Indemnified Person (to the extent they are entitled to
indemnity herein), and their permitted successors and assigns and nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other Person or entity any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.

Section 14. Force Majeure. No party shall be liable for any failure or delay in
performing any of its obligations under this Agreement so long as and to the
extent such failure or delay is due to any cause beyond its reasonable control,
including any natural disaster, hurricane, earthquake, flood, fire, catastrophic
weather conditions, disease or any other element of nature or act of God, act of
war (declared or undeclared), insurrection, riot, civil disturbance or disorder,
rebellion, sabotage, embargo, terrorist act, or explosion, strike, failure of or
damage to public utility.

Section 15. Governing Law; Dispute Resolution; Jurisdiction; Service of Process.

(a) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY

 

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WITHIN SUCH STATE WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW PRINCIPLES OF
SUCH STATE THAT MIGHT REFER THE GOVERNANCE, CONSTRUCTION OR INTERPRETATION OF
SUCH AGREEMENTS TO THE LAWS OF ANOTHER JURISDICTION.

(b) Prior to taking any legal action related to this Agreement (excepting any
legal action for immediate injunctive relief or equitable relief), any dispute,
claim or controversy between the parties arising out of or relating to this
Agreement, including with respect to the validity, performance, interpretation
or application of any provision of this Agreement or the performance by Service
Provider or Service Recipient of their respective obligations hereunder (a
“Dispute”) shall be attempted to be resolved as provided in this Section 15(b).
A Dispute is deemed to commence as of the date a party informs the other party
in writing of the existence of a Dispute.

(i) The parties shall first attempt to resolve their Dispute informally in the
following manner:

(A) Either party may submit the Dispute to the Representatives, who shall meet
as often as the Representatives of both parties reasonably deem necessary to
gather and analyze any information relevant to the resolution of the Dispute.
The Representatives shall negotiate in good faith in an effort to resolve the
Dispute; and

(B) If the Representatives are unable to resolve the Dispute within fifteen
(15) days, or otherwise determine in good faith that resolution through
continued discussions by the Representatives does not appear likely, then the
Parties may seek whatever remedies are available under applicable Law.

(ii) Service Provider acknowledges that the performance of its obligations,
including the Services, pursuant to this Agreement is critical to the business
and operations of Service Recipient. Accordingly, in the event of a Dispute
between Service Recipient, on the one hand, and Service Provider, on the other
hand, Service Provider shall continue to perform the Services in good faith
during the resolution of such Dispute unless and until this Agreement is
terminated in accordance with the provisions hereof.

(c) The parties irrevocably and unconditionally submit to the exclusive
jurisdiction of the courts of the State of New York sitting in the County of New
York, the United States of America for the Southern District of New York, and
appellate courts having jurisdiction of appeals from any of the foregoing over
any Action arising out of or relating to this Agreement. Each party agrees that
all claims in respect of any Action arising out of or relating to this Agreement
shall be heard and determined in such state courts or, to the extent permitted
by Law, in such federal court. The parties irrevocably and unconditionally
consent that any such Action may and shall be brought in such courts and waives
any objection that it may now or hereafter have to the venue or jurisdiction of
any such Action in any such court or that such Action was brought in an
inconvenient court and agrees not to plead or claim the same.

(d) Each party irrevocably and unconditionally agrees that service of process in
any such Action may be effected by mailing a copy of such process by registered
or certified

 

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mail (or any substantially similar form of mail), postage prepaid, to such party
at its address as provided in Section 18. Nothing in this Agreement shall affect
the right to effect service of process in any other manner permitted by the Laws
of the State of New York.

Section 16. Waiver of Jury Trial. Each party irrevocably and unconditionally
waives all right to trial by jury in any Action (whether based on contract, tort
or otherwise) arising out of or relating to the transactions contemplated by
this Agreement, or its performance under or the enforcement of this Agreement.

Section 17. Entire Agreement. This Agreement (including the Schedules hereto)
together with the Master Transaction Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, between the parties with
respect to the subject matter hereof.

Section 18. Notices. Unless otherwise provided herein, all notices, requests,
consents, claims, demands and other communications hereunder shall be in writing
and shall be given or made (and shall be deemed to have been duly given or made
upon receipt) by delivery in person, by overnight courier service, by electronic
mail (followed by delivery of an original via overnight courier service) or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following respective addresses (or at such other
address for a party as shall be specified in a notice given in accordance with
this Section 18):

To QBE:

QBE Holdings, Inc.

Attention: Jose Ramon Gonzalez, Chief Legal Officer

Wall Street Plaza

88 Pine Street

New York, NY 10005

Phone: (212) 422-1212

Facsimile: (212) 422-1313

e-mail: Jose.Gonzalez@us.qbe.com

With a copy (which shall not constitute notice) to:

Sidley Austin LLP

Attention: Sean M. Keyvan

One South Dearborn

Chicago, IL 60603

Phone: (312) 853-4660

Facsimile: (312) 853-7036

e-mail: skeyvan@sidley.com

To the Acquiror:

National General Insurance Company

Attention: Jeffrey Weissmann, General Counsel

59 Maiden Lane

 

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38th Floor

New York, NY 10038

Phone: (212) 380-9479

Facsimile: (212) 380-9498

e-mail: jeffrey.weissmann@ngic.com

With a copy (which shall not constitute notice) to:

Debevoise & Plimpton LLP

Attention: Nicholas F. Potter

919 Third Avenue

New York, NY 10022

Phone: (212) 909-6459

Facsimile: (212) 521-7459

e-mail: nfpotter@debevoise.com

Any party may, by notice given in accordance with this Section 18 to the other
party, designate another address or Person for receipt of notices hereunder;
provided that notice of such a change shall be effective upon receipt.

Section 19. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced under any Law or as a matter of
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
be consummated as originally contemplated to the greatest extent possible.

Section 20. Amendment; Waiver. No provision of this Agreement may be amended,
supplemented or modified except by a written instrument signed by the parties.
No provision of this Agreement may be waived except by a written instrument
signed by the party against whom the waiver is to be effective. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by Law.

Section 21. Confidentiality. The parties agree that any confidential or
proprietary information of either party or its Affiliates or any of their
subcontractors or vendors, whether relating to customer information, trade data,
trade secrets, or business practices of the other party or its Affiliates, that
either party or its Affiliates, or their respective employees, agents or
subcontractors (each, a “Group”), obtain on or after the date hereof from the
other party or its Group relating to, arising out of or in connection with the
Services rendered hereunder (the “Confidential Information”), shall not be
disclosed by any member of such Group to any third party unless (and then only
to the extent that) (i) the party or its Group is legally required, by

 

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order of any court or otherwise, to disclose such Confidential Information, or
is requested by any applicable Governmental Authority to disclose Confidential
Information to it or (ii) the nondisclosing party gives prior written consent.
In the event of (i) in the previous sentence, the party that is, or whose Group
member is, required to disclose such Confidential Information shall, if legally
permitted to do so, provide the other party with prior written notice of such
legal requirement or request to disclose and shall use commercially reasonable
efforts to afford the nondisclosing party an opportunity to contest such
disclosure at the sole cost of the nondisclosing party. Each party shall use
commercially reasonable efforts to restrict access to the other party’s and its
Affiliates’ Confidential Information to any other member of such party’s Group
who needs such Confidential Information in connection with performing or
receiving Services or any other obligations under this Agreement, provided such
member is bound by confidentiality obligations to its party that are at least as
protective as the obligations under this Section 21. Each party agrees to use
the other party’s and its Affiliates’ Confidential Information only in
connection with the performance of its obligations hereunder. It is expressly
understood that no information shall be subject to these confidentiality
provisions, or otherwise deemed as Confidential Information, to the extent:
(a) the party or Group receiving such information legally learned of such
information from a third party, such third party’s disclosure not violating a
duty of non-disclosure owed to another party, (b) a party or Group independently
had knowledge of such information prior to the date hereof and without a duty of
confidentiality, (c) such information becomes available through the public
domain other than through disclosure by the recipient or its Group in violation
of this Section 21 or any other confidentiality agreement with the other party
or its Affiliates or (d) information acquired or developed independently by a
party or its Group without violating this Section 21 or any other
confidentiality agreement with the other party or its Affiliates. Without
limiting the generality of the foregoing, each party shall cause its employees
and agents to exercise the same level of care with respect to Confidential
Information relating to the other party or any of its Affiliates as it would
with respect to its own Confidential Information.

Section 22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
facsimile or electronic mail shall be as effective as delivery of a manually
executed counterpart of any such agreement.

Section 23. Good-Faith Cooperation. Each party shall, and shall cause its
respective Affiliates to, cooperate with each other in good faith in all matters
relating to the provision and receipt of Services. The Representatives of each
party shall consult with each other regularly and the parties shall cooperate
with each other in all reasonable respects in order to effect an efficient
transition and to minimize the expense thereof and the disruption therefrom to
the business of the parties and their Affiliates. Each party further agrees to
reasonably cooperate in any security arrangements which the other party
reasonably deems necessary to prevent or redress unauthorized access to its
systems and data. Each party shall perform all obligations hereunder in good
faith and in accordance with principles of fair dealing and shall not engage in
any willful or intentional misconduct, gross negligence or common law fraud or
otherwise violate any applicable Law in connection with the performance of its
obligations hereunder. Without limiting the foregoing, such cooperation shall
include the execution and delivery of such further instruments or documents as
may be reasonably requested by the other party (at the requesting party’s cost)
to enable the full performance of each party’s obligations hereunder.

 

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Section 24. Master Transaction Agreement. Nothing contained in this Agreement is
intended or shall be construed to amend, modify, augment or decrease in any
respect, or constitute a waiver of, any of the rights and obligations of the
parties under the Master Transaction Agreement.

Section 25. Books and Records.

(a) During the Term, and for so long as Service Provider is required to maintain
its own Books and Records under applicable Laws, (i) Service Provider shall
maintain records, books, systems, internal or external audit reports or
regulatory examination reports, including tax records (the “Books and Records”),
relating to the Services and Service Provider’s control environment used to
provide the Services; (ii) such Books and Records shall be maintained by Service
Provider in any format that may be required by applicable Laws; and (iii) to the
extent Service Provider is legally permitted to provide Service Recipient with
access to such Books and Records, Service Provider shall provide to Service
Recipient, within ten (10) Business Days of receipt of Service Recipient’s
reasonable request (or such shorter period as may be required by applicable
Law), access to all such Books and Records (A) as may be required by Service
Recipient in order for it and its Affiliates to comply with all applicable Laws,
(B) in connection with a Dispute arising out of or relating to this Agreement or
Services provided under this Agreement or (C) as may be required in connection
with any inspection by any Governmental Authority with jurisdiction or authority
over Service Recipient.

(b) During the Term, and for so long as Service Recipient is required to
maintain its own Books and Records under applicable Laws, (i) Service Recipient
shall maintain its Books and Records relating to the Services and Service
Recipient’s control environment used to receive the Services; (ii) such Books
and Records shall be maintained by Service Recipient in any format that may be
required by applicable Laws; and (iii) to the extent Service Recipient is
legally permitted to provide Service Provider with access to such Books and
Records to Service Provider, Service Recipient shall provide to Service
Provider, within ten (10) Business Days of receipt of Service Provider’s
reasonable request (or such shorter period as may be required by applicable
Law), access to all such Books and Records (A) as may be required by Service
Provider in order for it and its Affiliates to comply with all applicable Laws,
(B) in connection with a Dispute arising out of or relating to this Agreement or
Services provided under this Agreement or (C) as may be required in connection
with any inspection by any Governmental Authority with jurisdiction or authority
over Service Provider.

(c) All access rights under this Section 25 shall be conducted during normal
business hours in a manner that does not unreasonably interfere with the other
party’s business operations. The parties agree that all information and records
exchanged hereunder shall be treated as Confidential Information of the
disclosing party.

(d) During the Term, Service Recipient shall cooperate in good faith with
Service Provider in the completion by Service Provider of its quarterly
financial statements; provided that such cooperation shall not unreasonably
interfere with performance by Service Recipient’s personnel of their duties,
including the Services.

 

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Section 26. Limitation of Liability.

(a) Service Recipient agrees that none of Service Provider, its Affiliates or
any of its or their respective directors, officers, agents, consultants,
representatives or employees (each, a “Provider Indemnified Person”) shall have
any liability, whether direct or indirect, in contract or tort or otherwise, to
Service Recipient or its Affiliates or any other Person for or in connection
with the Services rendered or to be rendered by or on behalf of any Provider
Indemnified Person pursuant to this Agreement, the transactions contemplated
hereby or any actions or inactions by or on behalf of Provider Indemnified
Person in connection with any such Services or transactions, except to the
extent any Losses have resulted from such Provider Indemnified Person’s gross
negligence or willful misconduct in connection with any such Services, actions
or inactions.

(b) No Provider Indemnified Person or Recipient Indemnified Person shall be
liable for any special, incidental, consequential or punitive damages of any
kind whatsoever in any way due to, resulting from or arising in connection with
any of the Services or the performance of or failure to perform Service
Provider’s or Service Recipient’s obligations under this Agreement, as
applicable. This disclaimer applies, without limitation, (i) to claims arising
from the provision of the Services or any failure or delay in connection
therewith, (ii) to claims for lost profits and (iii) regardless of the form of
action, whether in contract, tort, strict liability, or otherwise.

(c) In addition to the foregoing, each party agrees that it shall, in all
circumstances, use commercially reasonable efforts to mitigate and otherwise
minimize its damages and those of its Affiliates, whether direct or indirect,
due to, resulting from or arising in connection with any failure by the other
party to comply fully with its obligations under this Agreement.

Section 27. Indemnification of Service Provider by Service Recipient. Service
Recipient agrees to indemnify and hold harmless each Provider Indemnified Person
from and against any damages, and to reimburse each Provider Indemnified Person
for all costs, damages, liabilities and fees and expenses (including reasonable
attorneys’ fees and expenses and any other expenses reasonably incurred in
connection with investigating, prosecuting or defending any Action)
(collectively, “Losses”) incurred in investigating, preparing, pursuing, or
defending any Actions, whether or not in connection with pending or threatened
litigation and whether or not any Provider Indemnified Person is a party,
arising out of or in connection with Services rendered or to be rendered by or
on behalf of any Provider Indemnified Person pursuant to this Agreement, the
transactions contemplated hereby or any actions or inactions by or on behalf of
any Provider Indemnified Person in connection with any such Services or
transactions; provided that Service Recipient shall not be responsible for any
Losses of any Provider Indemnified Person to the extent such Losses have
resulted from such Provider Indemnified Person’s gross negligence or willful
misconduct in connection with any of such Services, actions or inactions (it
being understood and agreed that the provision by Service Provider or any of its
Affiliates of any of the Services without obtaining the consent of any party to
any contract or agreement to which

 

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Service Provider or any of its Affiliates is a party as of the date hereof shall
not constitute gross negligence or willful misconduct by Service Provider or any
of its Affiliates; provided that Service Provider or its Affiliate, as
applicable, has used commercially reasonable efforts to obtain the relevant
consent, without any guarantee of success in respect thereof).

Section 28. Indemnification of Service Recipient by Service Provider. Service
Provider agrees to indemnify and hold harmless Service Recipient, each of its
Affiliates and its and their respective directors, officers, agents,
consultants, representatives or employees (each, a “Recipient Indemnified
Person”) from and against any Losses incurred in investigating, preparing, or
defending any Action, to the extent such Losses have arisen out of the gross
negligence or willful misconduct of any Provider Indemnified Person in
connection with the Services rendered or to be rendered pursuant to this
Agreement.

Section 29. Indemnification as Exclusive Remedy. Except for the termination
rights provided for under the terms of this Agreement, the indemnification
provisions of this Section 29 shall be the exclusive remedy for breach of this
Agreement and any matters relating to this Agreement.

Section 30. Conduct of Proceedings. Any proceedings relating to indemnification
under Section 27 or 28 shall be conducted in accordance with the procedures set
forth in Section 10.3 of the Master Transaction Agreement, mutatis mutandis.

Section 31. No Limitation. Nothing contained in Sections 26 to 30 shall limit or
alter the obligation of any party to indemnify any other party pursuant to the
Master Transaction Agreement; provided that no party shall obtain duplicative
recoveries.

Section 32. Order of Precedence.

(a) If there is any material conflict between the terms in the body of this
Agreement and any Schedules attached hereto, the terms in the body of this
Agreement shall prevail.

(b) If there is any material conflict between the terms in the body of this
Agreement and the Master Transaction Agreement, the terms of the Master
Transaction Agreement shall prevail.

Section 33. Rules of Construction. Interpretation of this Agreement shall be
governed by the following rules of construction: (a) words in the singular shall
be held to include the plural and vice versa, and words of one gender shall be
held to include the other gender as the context requires; (b) references to
preamble, recitals, Sections, Transition Services Schedules and Schedules are
references to the preamble, recitals, Sections, Transition Services Schedules
and Schedules to this Agreement unless otherwise specified; (c) references to
“$” shall mean U.S. dollars; (d) the word “including” and words of similar
import when used in this Agreement shall mean “including without limiting the
generality of the foregoing,” unless otherwise specified; (e) the word “or”
shall not be exclusive; (f) the words “herein,” “hereof,” “hereunder,” “hereby”
and similar terms shall be deemed to refer to this Agreement as a whole and not
to any specific section; (g) the headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement; (h) this Agreement shall

 

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be construed without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted; (i) if a word or phrase is defined, the other grammatical forms of such
word or phrase shall have a corresponding meaning; (j) references to any
statute, listing rule, rule, standard, regulation or other law (i) include a
reference to the corresponding rules and regulations and (ii) include a
reference to each of them as amended, modified, supplemented, consolidated,
replaced or rewritten from time to time; (k) references to any section of any
statute, listing rule, rule, standard, regulation or other law include any
successor to such section; (l) each of the Acquiror, on the one hand, and QBE,
on the other hand, shall be referred to as a “party” and collectively as the
“parties;” (m) all references to any period of days shall be deemed to be to the
relevant number of calendar days unless Business Days are expressly specified;
and (n) references to any contract (including this Agreement) or organizational
document are to the contract or organizational document as amended, modified,
supplemented or replaced from time to time, unless otherwise stated.

Section 34. Fulfillment of Obligations. Any obligation of any party to any other
party under this Agreement, which obligation is performed, satisfied or
fulfilled by an Affiliate of such party or by any third party in accordance with
the terms of this Agreement, shall be deemed to have been performed, satisfied
or fulfilled by such party.

[Signature page follows]

 

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IN WITNESS WHEREOF, the parties have signed this Agreement as of the date first
set forth above.

 

NATIONAL GENERAL HOLDINGS CORP. By:

 

Name: Title QBE HOLDINGS, INC. By:

 

Name: Title

Signature Page to Transition Services Agreement