EXHIBIT 10.1


 





CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED
FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.


[***] INDICATES THAT INFORMATION HAS BEEN
REDACTED.


 


 


 


 


 


 


QUOTA SHARE REINSURANCE AGREEMENT


 


AMONG


 


UNITED SPECIALTY INSURANCE COMPANY


 


AND


 


CRUSADER INSURANCE COMPANY


 


AND


 


UNIFAX INSURANCE SYSTEMS, INC.


 


 


EFFECTIVE APRIL 1, 2020


 


 




    	 



    	 



    

Table of Contents


 


Article Page


 


Preamble1


 


1Business Reinsured1


 


2Original Conditions
1


 


3Exclusions 2


 


4Commencement, Termination,
Terms & Conditions 3


 


5Loss and Loss Adjustment
Expense5


 


6Reports and Remittances6


 


7Errors and Omissions8


 


8Premium and Commission8


 


9 Access to Records11


 


10Arbitration 11


 


11Assessments, Assignments,
Fines and Penalties 12


 


12Premium Financing
13


 


13Insolvency 13


 


14Alternate Payee 14


 


15Hold Harmless Provisions
14


 


16Loss in Excess of
Policy Limits/ECO16


 


17Regulatory Matters
16


 


18The General Agent
17


 


19Reinsurer or General
Agent or Transfer 18


 


20Miscellaneous 18


 


21Loss and Unearned
Premium Reserve Funding20


 


22Savings Clause21


 


 




    	 



    	 



    

 


QUOTA SHARE REINSURANCE AGREEMENT


 


 


THIS QUOTA SHARE REINSURANCE AGREEMENT (this
"Agreement") is effective April 1, 2020, by and among CRUSADER INSURANCE COMPANY ("Reinsurer"), UNITED SPECIALTY
INSURANCE COMPANY ("Company"), and UNIFAX INSURANCE SYSTEMS, INC. ("General Agent");


 


W I T N E S S E T H:


 


In consideration of the mutual covenants contained
in this Agreement and upon the terms and conditions set forth below, the Parties hereto agree as follows:


 


PREAMBLE


 


It is understood that the Company, the Reinsurer
and the General Agent (hereinafter identified collectively as the "Parties" and each individually a “Party”)
hereto wish to enter into a reinsurance arrangement through which the Company is to bear no business, credit or insurance risk
whatsoever (save the risk of the Reinsurer's insolvency). The Reinsurer shall hold the Company harmless and indemnify it for these
and all risks. The Reinsurer further agrees that it shall make directly to the applicable parties any payments, arising out of
or relating in any way to its obligations and liabilities arising from this Agreement and/or the subject insurance business produced
hereunder, so that the Company shall not be required to make any such payments and then seek reimbursement from the Reinsurer.
The sole consideration provided by the Company, in exchange for the fees as agreed to, is to permit the Policies (as hereinafter
defined), which are reinsured 100% under this Agreement to be issued in the name of the Company. All provisions of this Agreement
shall be interpreted so as to be in accord with this Preamble.


 


ARTICLE I


BUSINESS REINSURED


 


1.01       Effective
as of the effective date of this Agreement, the Company obligates itself to cede to the Reinsurer, and the Reinsurer obligates
itself to accept, 100% of the Company's gross liability under all policies, certificates, contracts, binders, agreements or other
proposals or evidences of insurance, new and renewal policies, binders, and contracts of insurance (hereinafter called "Policies")
issued by and on behalf of the Company, in its sole discretion, as Property, General Liability, CMP Property (burglary and theft;
inland marine), and CMP Liability (burglary and theft, garage, fidelity) and miscellaneous coverages as endorsed during the term
of this Agreement, by or through the General Agent appointed by the Company at the request of the Reinsurer.


 


		1.02	Subject to Section 15.05 hereof, the maximum policy limits for Policies are as follows:



 


	Lines of Business	Maximum Policy Limits
	1.0	Property	
        $[***] total insurable value (greater than $[***]
        shall be facultative)

         

	17.0	General Liability	
        $[***] per occurrence

        $[***] in the aggregate

         





    	 



    	 



    

 


	5.1	CMP Property – burglary and theft; inland marine	
        $[***] total insurable value (greater than $[***]
        shall be facultative)

         

	5.2	CMP Liability – burglary and theft, garage, fidelity	
        $[***] per occurrence

        $[***] in the aggregate

         



 


It is understood that the General Agent shall not bind the Company
to amounts in excess of those stated above.


 


ARTICLE II


ORIGINAL CONDITIONS


 


2.01       Effective
as of the effective date of this Agreement, the Company obligates itself to cede to the Reinsurer, and the Reinsurer obligates
itself to accept, all of the Company's gross liability under all Policies issued by and on behalf of the Company by the General
Agent.


 


2.02       Business
ceded hereunder shall include every original policy, rewrite, renewal or extension (whether before or after the termination of
this Agreement) required by applicable statute, or by rule or regulation of any policy of insurance ceded hereunder by the Company
to the Reinsurer.


 


2.03       The
liability of the Reinsurer shall commence obligatorily and simultaneously with that of the Company as soon as the Company becomes
liable, and the premium on account of such liability shall be credited to the Reinsurer from the original date of the Company's
liability.


 


2.04       All
reinsurance for which the Reinsurer shall be liable, by virtue of this Agreement, shall be subject, in all respects, to the same
rates, terms, conditions, interpretations, waivers, the exact proportion of premiums paid to the Company without any deduction
for brokerage, and to the same modifications, alterations and cancellations, as the respective insurance of the Company to which
such reinsurance relates, the true intent of this Agreement being that the Reinsurer shall, in every case to which this Agreement
applies and in the proportion specified herein, follow the fortunes of the Company.


 


2.05       Nothing
herein shall in any manner create any obligations, establish any rights or create any direct right of action against the Reinsurer
in favor of any third party, or other person not party to this Agreement; or create any privity of contract between the policyholders
and the Reinsurer.


 


ARTICLE III


EXCLUSIONS


 


With respect to the classes
of business which the General Agent may be authorized to produce under this Agreement, the General Agent will not solicit or accept
proposals or bind the Company for insurance coverage on the following risks:


 


(a)All
business not specifically described as business covered under Article I of this Agreement.


 




    	 



    	 



    

ARTICLE
IV


COMMENCEMENT, TERMINATION, TERMS AND CONDITIONS


 


4.01       The
effective date of this Agreement is at 12:01 a.m. Central Time, on April 1, 2020. This Agreement shall remain continuously in force
until terminated according to the provisions set forth herein.


 


4.02       This
Agreement may be terminated as follows:


 


(a)       By
any Party hereto at any time, by providing at least ninety (90) days written notice to the other Parties, such notice to be sent
by certified mail, return receipt requested, postage prepaid;


 


(b)       Immediately
by mutual consent of the Company and Reinsurer;


 


(c)       Immediately
upon written notice by the Reinsurer or the Company in the event of the cancellation or non-renewal of the General Agent's license
by the California Department of Insurance;


 


(d)       By
the Reinsurer after thirty (30) days written notice to the General Agent and Company of the General Agent's failure to pay to the
Reinsurer all payments of premiums due hereunder, provided, however, that in the event such payment is received by the Reinsurer
prior to the date of cancellation stated in the Reinsurer's written notice this Agreement shall not be so terminated and said written
notice shall be of no further force or effect. If the Reinsurer receives such late premium within a ten (10) day period following
receipt of such notice, the Reinsurer shall inform the Company and the General Agent of such receipt as soon as the premium is
received and the termination of the Agreement for reason of default shall be rescinded;


 


(e)       Immediately,
upon written notice by the Company, if the Reinsurer or General Agent is found to be insolvent by a State Insurance Department
or court of competent jurisdiction, or is placed in supervision, conservation, rehabilitation, or liquidation, or has a receiver
or supervisor appointed. By the Reinsurer, upon thirty (30) days written notice, if the Company or General Agent is found to be
insolvent by a State Insurance Department or court of competent jurisdiction, or is placed in supervision, conservation, rehabilitation
or liquidation, or has a receiver or supervisor appointed;


 


(f)       By
the Company immediately and automatically without prior written notice should the Texas Department of Insurance or other regulatory
agency of competent jurisdiction, require cancellation or disallow credit for this reinsurance;


 


(g)       After
thirty (30) days written notice by any party in the event that the Company, the Reinsurer or the General Agent amalgamates with
or passes under the control of any other company or corporation or changes a majority of its officers or board of directors during
the term of this Agreement;


 


(h)       As
provided in Section 22.02 of this Agreement;


 


(i)           
Immediately by the Company if after the effective date of this Agreement: (i) the Reinsurer is required to secure its obligations
under this Agreement and the General Agency Agreement pursuant to Article XXI of this Agreement; or (ii) the Reinsurer is required
to increase the amount of collateral posted pursuant to Article XXI of this Agreement; or (iii) the Reinsurer fails to secure its
obligations as required under this Agreement; or


 


(j)       Automatically
and immediately, without notice upon cancellation or termination of the General Agency Agreement, as hereinafter defined.


 


4.03       When
this Agreement terminates for any reason, reinsurance hereunder shall continue to apply to the business in force at the time and
date of termination until expiration or cancellation of such business. It is understood that any Policies with effective dates
prior to the termination date but issued after the termination date are covered under this Agreement. Additionally, the reinsurance
hereunder shall continue to apply as to Policies, which must be issued or renewed, as a matter of state law or regulation or because
a producing agent has not been timely canceled, until the expiration dates on said Policies. The General Agent agrees that, notwithstanding
anything to the contrary, its appointment by the Company to produce business terminates when this Agreement terminates unless the
General Agent's authority has been terminated earlier; except that the Company shall provide the General Agent with the limited
agency authority needed to service the run-off of the business, e.g., issue, cancel, offer renewal where required by law.


 


4.04       Upon
termination of this Agreement, the Reinsurer and General Agent shall not be relieved of or released from any obligation created
by or under this Agreement in relation to payment, expenses, reports, accounting or handling, which relate to insurance business
reinsured under this Agreement. The Parties hereto expressly covenant and agree that they will cooperate with each other in the
handling of all such run-off insurance business until all Policies have expired either by cancellation or by terms of such Policies
and all outstanding losses and loss adjustment expenses have been settled. While by law and regulation, the Company recognizes
its primary obligations to its policyholders, the Reinsurer and General Agent recognize that to the extent possible there shall
be no cost to or involvement by the Company in servicing this run-off. Upon termination of this Agreement, the General Agent shall
service the run-off of the business, and its duties for such run-off shall include, but not be limited to, handling all claims,
and handling and servicing all policies through their natural expiration, together with any policy renewals, required to be made
by provisions of applicable law, whether or not the effective date of such renewal is subsequent to the effective date of cancellation
of this Agreement. All costs and expenses associated with the handling of such run-off business following the cancellation or termination
of this Agreement shall be borne solely by the General Agent; however, the Reinsurer shall be ultimately responsible for the run-off
and shall pay any such costs and/or expenses if the General Agent does not for any reason pay or cause to be paid such costs and
expenses. If for any reason the General Agent fails or is unable to service any such run-off business (or any business while the
Agreement is still in effect), including the payment of claims, then consistent with this Agreement, the Reinsurer's obligation
with respect to such run-off business shall continue and the Reinsurer shall appoint a successor to the General Agent, subject
to the approval of the Company, to administer and otherwise handle the run-off as provided herein. Such successor shall perform
all of the duties and obligations of the General Agent with respect to servicing such run-off business, including the payment of
claims. In addition, the Company in its sole discretion may terminate the authority of the General Agent or a successor thereto
to handle such run-off business and the Reinsurer shall then appoint a successor to handle the run-off, subject to the Company's
approval, at no cost to the Company.


 




    	 



    	 



    

4.05       In
the event this Agreement is terminated, the Reinsurer shall remain liable to and shall, immediately upon request, reimburse the
Company for any assessment made upon the Company. The Company shall likewise remain liable for, and account to the Reinsurer for
any recovery of such assessment, or any credit allowed to it against its premium tax, applicable to the risks reinsured hereunder.


 


4.06       The
title and ownership of all undelivered Policies, books, supplies or other property related to the reinsured business is in the
name of the Company, and upon termination these shall be delivered immediately by the Reinsurer and/or General Agent to the Company,
without compelling the Company to resort to any legal proceedings to secure the aforesaid described property of the Company.


 


4.07       This
Agreement provides for termination on a run-off basis. The relevant provisions of the Agreement shall apply to the business being
run-off and shall survive the termination of this Agreement.


 


4.08       At
the option of the Company, this Agreement may be terminated on a cut-off basis. If the Company so elects, (i) the Reinsurer shall
pay to the Company (or its designee) an amount equal to the sum of the ceded outstanding unearned premium as of the date of termination,
and (ii) the Reinsurer shall incur no liability for losses occurring subsequent to the date of termination.


 


4.09       Upon
termination of this Agreement, the Reinsurer shall ensure the General Agent takes those actions necessary, including, but not limited
to, sending statutorily prescribed non-renewal notices to insureds in a timely manner to effectuate the intent that there be no
renewals or new policies (but for those required by applicable law or regulation) after the termination of this Agreement.


 


ARTICLE V


LOSS AND LOSS ADJUSTMENT EXPENSE


 


5.01       All
loss settlements made by the Company or the General Agent under the terms of this Agreement, whether under strict policy conditions
or by way of compromise, shall be unconditionally binding upon the Reinsurer in proportion to its participation, and the Reinsurer
shall benefit proportionately in all salvage and recoveries. The Reinsurer shall assume and be liable for and pay on behalf of
the Company, 100% of all losses incurred in connection with the risks covered by this Agreement, including, but not limited to,
judgments (including interest thereon) and settlements in connection therewith. The Reinsurer shall also be liable for 100% of
and pay on behalf of the Company all costs, expenses, and fees (including, but not limited to, attorney's fees) incurred by the
Company in connection with the investigation or settlement or contesting the validity of claims or losses covered under this Agreement
(this shall include but, of course, is not limited to, costs, expenses and fees resulting from a declaratory judgment or injunctive
action brought by an insured or other person).


 


5.02       The
Reinsurer's 100% share of losses, expense and loss recovery shall be carried into the monthly accounting for which provision is
hereinafter made.


 


5.03       The
Company hereby empowers the Reinsurer, and the Reinsurer may, in its discretion, and under its supervision appoint the General
Agent, to accept notice of and investigate any claim arising under any of the Policies, to pay, adjust, settle, resist or compromise
any such claim, unless the Company specifically directs to the contrary with respect to any individual




    	 



    	 



    

claim. In the latter event, the Reinsurer and/or General Agent shall
follow the instructions of the Company as respects such claim. All such loss settlements, whether under strict policy conditions
or by the way of compromise, shall be unconditionally binding upon the Reinsurer. However, should the Company be ordered or instructed
by an applicable Department of Insurance or any other regulatory agency of competent jurisdiction to take any action or refrain
from taking any action with regard to any claim, the Reinsurer shall be bound by and shall follow the order or instructions of
such regulatory agency as though Reinsurer were the object of such order or instruction. The Reinsurer will exercise the authority
granted hereunder in good faith and toward the end of paying any and all valid claims.


 


5.04       All
records pertaining to claims arising under insurance policies issued on behalf of the Company through or by the General Agent subject
to this Agreement shall be deemed to be jointly owned records of the Company and the Reinsurer, and shall be made available to
the Company or the Reinsurer or their respective representatives or any duly appointed examiner for any state within the United
States; and these records shall be kept in the State of California or such other jurisdiction as may be required by applicable
state law or regulation. Notwithstanding the foregoing, the Reinsurer is authorized to maintain duplicate working files of all
such records outside the State of California. The Company, the Reinsurer and the General Agent each agree that it will not destroy
any such records in its possession without the prior written approval of the other parties except that the Company shall not be
required to retain files longer than required by the guidelines set forth by any applicable state department of insurance.


 


5.05       The
Reinsurer shall, or shall cause the General Agent to, establish a separate claim register or method of recording claims arising
under the Policies covered by this Agreement so that all claims may be segregated and identified separate and apart from other
records of the Reinsurer or General Agent, with such claims register to identify each claim on an individual case basis both as
to identify the insured(s) and the claimant, the reserve for loss and adjusting expense. Such claim register shall be kept in a
manner whereby the Company can, at any time, determine the status of any claim arising under Policies covered by this Agreement.
Such records shall reflect the amount of reserves established for the individual claim and the date when such reserve was established,
and if closed, whether such claim was closed with or without payment, and if with payment, the amount paid thereon.


 


ARTICLE VI


REPORTS AND REMITTANCES


 


6.01       In
lieu of the Company furnishing the Reinsurer with bordereaux showing the particulars of all reinsurances ceded hereunder, the Reinsurer
shall furnish or cause to be furnished to the Company, within thirty (30) days after the close of each of the respective periods
indicated below (on forms agreeable to the Parties), with monthly, quarterly and annual reports showing the following statistical
data in respect to the business reinsured hereunder:


 


(a) Monthly, with the
data segregated by major classes.


 


(i)       Ceded
premiums written.


(ii)       Ceded
unearned premiums.


(iii)       Ceded
losses paid.


(iv)       Ceded
adjustment expenses paid during this month.


(v)       Losses
outstanding.


(vi)       Ceding
fee due the Company.


(vii)       Commission
due the General Agent.


 


 




    	 



    	 



    

(b)       Annually, with the data
segregated by major classes.


 


		(i)	Annual summaries of net premiums written, net losses paid, net adjusting expenses paid during the
year in such form so as to enable the Company to record such data in its annual convention statement. Such information is to be
furnished not later than December 15th of the year being reported. In force and unearned premium segregated as to advance premiums,
premiums running twelve (12) months or less from inception date of policy, and premiums running more than twelve (12) months from
inception date of policy in such form as to enable the Company to record such data in its convention annual statement.



 


		(ii)	Annual summaries of net premiums written by geographical location in such form as to enable the
Company to record such premiums in its annual report to the applicable Catastrophe Property Insurance Association.



 


(c)       Periodic,
with data segregated by major lines.


 


Statistical or other
data as may be requested from time to time by regulatory authorities.


 


6.02       In
order to facilitate the handling of the business reinsured under this Agreement, the Reinsurer agrees to furnish the Company with
any additional reports necessary to provide the information needed by the Company to prepare its monthly, quarterly and annual
statements to regulatory authorities.


6.03       Within
thirty (30) days after the end of each month, the General Agent shall remit to the Reinsurer the following:


 


(a)       Ceded
net written premium during the month, less;


 


(b)       General
Agent's commission thereon, less;


 


		(c)	Paid losses and loss adjustment expenses paid, provided such losses and loss adjustment expenses
have not been deducted on behalf of the Company in any previous monthly report.



 


The positive balance of (a) less (b) less (c)
shall be remitted by the General Agent with its report. Any balance shown to be due the Company shall be remitted by the Reinsurer
as promptly as possible after receipt and verification of the General Agent's report.


 


ARTICLE VII


ERRORS AND OMISSIONS


 


7.01       The
Company shall not be prejudiced in any way by any omission through clerical error, accident or oversight to cede to the Reinsurer
any reinsurance rightly falling under the terms of this Agreement, or by erroneous cancellation, either partial or total, or any
cession, or by omission to report, or by erroneously reporting any losses, or by any other error or omission, but any such error
or omission shall be corrected immediately upon discovery.


 




    	 



    	 



    

7.02       Should
the Company suffer any loss whatsoever arising out of, relating to or in connection with this Agreement, the Reinsurer shall assume
loss for its own account and save and hold the Company harmless therefor.


 


ARTICLE VIII


PREMIUM AND COMMISSION


 


8.01       In
consideration of the acceptance by the Reinsurer of one hundred percent (100%) of the Company's liability on insurance business
reinsured hereunder, the Reinsurer is entitled to one hundred percent (100%) of the Net Premiums (as hereinafter defined) received
by the General Agent or the Reinsurer on Policies reinsured less (i) the ceding fee allowed the Company pursuant to Section 8.02
hereof, (ii) the commission paid to the General Agent and (iii) premium taxes on Policies subject to reinsurance hereunder. "Net
Premiums" shall mean the gross premiums charged on all original and renewal Policies written on behalf of the Company, less
return premiums (excluding policy fees). Such amounts as provided in Section 5.09 of the General Agency Agreement (as hereinafter
defined) shall be paid to the Reinsurer or received from the Reinsurer by the General Agent on behalf of the Company. “Net
Policy Fees” shall mean gross policy fees, if any, charged on all original and renewal Policies written on behalf of the
Company, less return policy fees.


 


8.02       It
is understood that the General Agent shall pay, and the Reinsurer shall guarantee, the Company directly a fee within thirty (30)
days following the end of each month, [***] percent ([***]%) of Net Premiums and Net Policy Fees, plus the amount of assessments
and state premium taxes as provided in this Article VIII. Notwithstanding anything else contained herein to the contrary, regardless
of the amount of Net Premiums, the minimum ceding fee due the Company shall be (i) $500,000 for the first twenty-four month period
after the effective date of the Agreement, plus the aforementioned assessments and state premium taxes and (ii) $250,000 for each
twelve-month period thereafter during which the Agreement is in effect, plus the aforementioned assessments and state premium taxes.
This minimum ceding fee shall not be affected by the amounts of Net Premiums written in other twelve-month or twenty-four month,
as applicable, and shall not be reduced by reason of payments in excess of the minimum in other periods. Upon termination of this
Agreement, the minimum fee shall be prorated to the effective date of such termination unless there are Policies issued after the
termination of this Agreement. In such cases, the minimum fee shall continue past the termination of this Agreement until such
time as no further Policies are issued. The minimum ceding fee for each period shall be paid within sixty (60) days of the end
of each period. For these purposes, a policy's entire premium shall be applied to the period in which the policy is written. During
the term of this Agreement, the General Agent shall be allowed to pay the ceding fee payable to the Company under this Section
8.02 on the basis of premiums written; provided, however, that the General Agent shall remain liable for the full amount of the
ceding fee (i.e., based on premiums written) as specified above.


 


8.03       The
General Agent shall allow and pay within thirty (30) days of the end of each month to the Company an amount equal to the state
premium tax on the Net Premiums and Net Policy Fees reinsured hereunder for the past month. Should any additional premium tax be
assessed at any time on the Net Premiums and Net Policy Fees reinsured hereunder, the Reinsurer shall pay the Company such additional
premium tax within thirty (30) days of being informed by the Company of such additional premium tax. The Parties acknowledge that
at the effective date of this Agreement, the applicable Departments of Insurance (or other state agency responsible for collecting
premium taxes) may require the payment of estimated premium taxes in advance on




    	 



    	 



    

a semi-annual basis. The Reinsurer shall, therefore, pay to the Company
within five days prior to the due date of any such estimated premium tax payment, the amount that would be due based upon the business
produced hereunder. The General Agent shall also be responsible for the filing and payment of any and all other applicable taxes
including, but not limited to, federal excise taxes. All such filings shall be made in the name of the party chosen by the Company.
Should the General Agent fail to file for or pay any taxes due under this Section 8.03, the Reinsurer shall make such filings and/or
payments as required hereunder.


 


8.04       The
Reinsurer hereby guarantees that the Company will receive the ceding fee provided hereunder irrespective of any events, losses
or developments for the term of this Agreement. Such payment is not dependent upon the performance of the General Agent, underwriting
experience, loss experience, whether premium is collected or not, or any other event foreseen or unforeseen by the parties at the
inception of this Agreement. The Reinsurer shall guarantee payment to the Company of its ceding fee on all premiums reinsured hereunder
(prior to deduction of premiums, if any, ceded by the Company for inuring reinsurance), and in addition guarantees those amounts
described in Section 8.06 of this Agreement and is directly responsible for payment of the amount described in Article XI. The
Company shall allow return ceding fees on return premiums at the same rates.


 


8.05       The
Reinsurer shall allow the General Agent a provisional commission of [***]% on all premiums ceded to the Reinsurer hereunder. The
General Agent shall allow the Reinsurer return commission on return premiums at the same rate. This is an obligation owing directly
from the Reinsurer to the General Agent. The General Agent shall not seek to recover from the Company, any commissions due and
the Reinsurer shall not seek to recover from the Company, any return commissions due. No funds are due the General Agent from the
Company.


 


8.06       It
is expressly agreed that the commission allowed the General Agent includes provision for premium taxes, bureau fees and ceding
fees. General Agent shall pay to the Company all premium taxes and ceding fees payable for policies subject to reinsurance hereunder.
In the event that the ceding fee and premium taxes are not so paid by the General Agent within 60 days following the end of the
month, the unpaid balance shall be paid directly to the Company by the Reinsurer.


 


ARTICLE IX


ACCESS TO RECORDS


 


The Reinsurer or its duly
appointed representatives shall have free access at any and all reasonable times to such books and records of the Company or General
Agent, its departmental or branch offices, as shall reflect premium and loss transactions of the Company and/or the business produced
hereunder, for the purpose of obtaining any and all information concerning this Agreement or the subject matter thereof. Likewise,
the Company or its duly appointed representatives shall have free access at any and all reasonable times to such books and records
of the Reinsurer and/or General Agent, its departmental or branch offices as shall reflect premium and loss transactions of the
Company and/or the business produced hereunder, for the purpose of obtaining any and all information concerning this Agreement
or the subject matter hereof.


 


ARTICLE X


ARBITRATION


 




    	 



    	 



    

10.01       As
a condition precedent to any right of action hereunder, in the event of any dispute or difference of opinion hereafter arising
between the Company and the Reinsurer with respect to this Agreement, or with respect to these Parties' obligations hereunder,
it is hereby mutually agreed that such dispute or difference of opinion shall be submitted to arbitration.


 


10.02       One
arbiter (an "Arbiter") shall be chosen by the Company and one Arbiter shall be chosen by the Reinsurer and an umpire
(an "Umpire") shall be chosen by the Arbiters, all of whom shall be active or retired disinterested executive officers
of property and casualty insurance or reinsurance companies.


 


10.03       In
the event that a party fails to choose an Arbiter within thirty (30) days following a written request by either party to the other
to name an Arbiter, the party who has chosen its Arbiter may choose the unchosen Arbiter. Thereafter, the Arbiters shall choose
an Umpire before entering upon arbitration. If the Arbiters fail to agree upon the selection for the Umpire within thirty (30)
days following their appointment, each Arbiter shall name three nominees, of whom the other shall decline two, and the decision
shall be made by drawing lots.


 


10.04       Each
party shall present its case to the Arbiters and Umpire within a reasonable amount of time after selection of the Umpire, unless
the period is extended by the Arbiters and the Umpire in writing and/or at a hearing in Dallas, Texas. The Arbiters and Umpire
shall consider this Agreement as an honorable engagement, as well as a legal obligation, and they are relieved of all judicial
formalities and may abstain from following the strict rules of law regarding entering of evidence. The decision in writing by a
majority of the Arbiters and Umpire when filed with the Parties shall be final and binding on the parties. Judgment upon the final
decision of the Arbiters and Umpire may be entered in any court of competent jurisdiction.


 


10.05       In
the event of a dispute between the Company and the Reinsurer concerning this Agreement and the General Agency Agreement (regardless
of whether either party has claims against the General Agent), the entire dispute between the Company and the Reinsurer shall be
subject to arbitration as provided in this Article X.


 


10.06       The
costs of the arbitration, including the fees of the arbitrators and the umpire, shall be borne equally unless the Arbiters and
Umpire shall decide otherwise.


 


10.07       This
Agreement shall be interpreted under the laws of Texas and the arbitration shall be governed and conducted according to the Texas
General Arbitration Act.


 


ARTICLE XI


ASSESSMENTS, ASSIGNMENTS, FINES AND PENALTIES


 


11.01       The
Reinsurer hereby assumes liability for any and all assessments and assignments imposed as a result of Policies reinsured hereunder
(whether before or after the termination of this Agreement). The Reinsurer shall immediately reimburse the Company for any assessments
made against the Company pursuant to those laws and regulations creating obligatory funds (including, but not limited to, insurance
guaranty and insolvency funds), pools, joint underwriting associations, FAIR plans and similar plans. Amounts owed by the Reinsurer
under this Section shall be payable directly by the Reinsurer to the Company. The Reinsurer shall be entitled to receive from the
Company on or prior to June 30 of each year thereafter (or such date on which such premium taxes are paid) a sum equal to the premium
tax credit that is allowed to the Company with respect to such assessments. The premium tax credit allowed the Reinsurer hereunder
is to be on a pro-rata and first-in, first-out basis. The Company shall




    	 



    	 



    

promptly return to the Reinsurer any amount of assessment refunded
to or credited to the Company.


 


11.02       This
Agreement shall apply to risks assigned to the Company under any assigned risk plan if, in the reasonable judgment of the Company,
such risks were assigned to the Company because of the business written and reinsured hereunder. Should it be determined, in the
Company’s sole discretion, that the General Agent, or any agent with whom assigned risks are also allocated under a specific
assigned risk plan with the General Agent, is unwilling or unable to fulfill policyholder obligations under such assigned risk
plan, the Company may elect alternative means to fulfill the policyholder obligations under the assigned risk plan. Any cost or
expense arising out of or related to the administration of the assigned risks shall be paid by the Reinsurer under this Agreement.


 


11.03       The
Reinsurer shall also pay promptly and directly to the Company any fines, penalties and/or any other charge incurred by the Company
as respects the business reinsured hereunder arising out of the actions or inactions of the General Agent unless such fines, penalties
and/or any other charge was a direct result of any willful misconduct on the part of the Company, which has been finally determined
by a court of competent jurisdiction after the exhaustion of all appeals.


 


ARTICLE
XII


PREMIUM FINANCING


 


With respect to Policies
covered under the provisions of this Agreement, if any premiums are financed, the General Agent shall receive and accept on behalf
of the Company all notices required by statute, contract or otherwise to be given to the Company, including, without limitation,
notices of the existence of premium finance agreements or of cancellation of policies the premiums of which are financed ("financed
policies"). No producing agent or any other agent shall be entitled to receive or accept any notice on behalf of the Company,
and the General Agent shall be responsible for and will indemnify and hold the Company harmless from and against any and all liabilities,
losses, claims, damages and expenses incurred by reason of or arising out of any action taken or inaction suffered as a result
of receipt of any notice by any person, firm or entity other than the General Agent or the Company. Notwithstanding any other term
or provision of this Agreement, the General Agent agrees to return and pay over to any premium finance company (whether affiliated
with the Company or not) which has sent notice of cancellation of a financed policy to the General Agent, on behalf of the Company,
within thirty (30) days of receipt of such notice of cancellation, any and all unearned commissions as of the date of cancellation,
together with any and all unearned premiums due any premium finance company. The General Agent agrees to and does hereby relinquish
any and all rights to any unearned commissions for any such financed policy as of the date of cancellation. The obligation of the
General Agent to refund unearned commissions and unearned premiums on a canceled financed policy shall survive the termination
or cancellation of this Agreement for so long as any policy written under the terms of this Agreement remains in force. If the
General Agent does not fulfill its obligations to refund unearned commissions and unearned premiums as provided in this Article
XII and/or to indemnify the Company as provided in this Article XII, then the Reinsurer shall pay the amount of the refund owed
and/or shall indemnify the Company even if the premium finance company is an affiliate of the Company.


 


ARTICLE XIII


INSOLVENCY


 




    	 



    	 



    

13.01       In
the event of insolvency of the Company, this reinsurance shall be payable directly to the Company or to its liquidator, receiver,
conservator or statutory successor on the basis of the liability of the Company without diminution because of the insolvency of
the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion
of any claims.


 


13.02       It
is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Company shall give written notice
to the Reinsurer of the pendency of a claim against the Company indicating the policy or bond reinsured which claim would involve
a possible liability on the part of the Reinsurer within thirty (30) days after such claim is filed in the insolvency, conservation
or liquidated proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such
claims 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 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 Company as part of the expense of conservation
or liquidation to the extent of a pro rata share of the benefit which may accrue to the Company solely as a result of the defense
undertaken by the Reinsurer.


 


13.03       Where
two 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 Company.


 


13.04       It
is further understood and agreed that, in the event of the insolvency of the Company, the reinsurance under this Agreement shall
be payable directly by the Reinsurer to the Company or to its liquidator, receiver or statutory successor, except (i) as provided
by applicable law, (ii) where the Agreement specifically provides another payee of such reinsurance in the event of the insolvency
of the Company and (iii) where the Reinsurer with the consent of the direct insured or insureds has assumed such policy obligations
of the Company as direct obligations of the Reinsurer to the payees under such policies and in substitution for the obligation
of the Company to such payees.


 


ARTICLE XIV


ALTERNATE PAYEE


 


14.01       As
respects subject business assumed as reinsurance under this Agreement, it is agreed that if the Company has a conservator, liquidator
or receiver appointed for it, or becomes the subject of any conservation, liquidation or insolvency proceeding, and the General
Agent exercises its option to require the Company to permit all its liabilities under the Policies reinsured hereunder to be assumed
by another licensed insurer as is permitted pursuant to the General Agency Agreement, such assuming insurer shall be substituted
for the Company as payee of any reinsurance recoverable hereunder in respect of losses under Policies subject hereto, and the Reinsurer,
shall make payment thereof directly to the substituted insurer. In the event of assumption, the Company shall, however, be entitled
to any ceding fees and other sums owing hereunder with respect to Policies originally issued on its behalf.


 


14.02       In
the event that an assuming insurer is substituted for the Company under Section 14.01, all the other provisions of this Agreement
shall apply to the substituted insurer in the same manner as if said insurer were substituted for the Company as the reinsured
party hereunder, and to the extent this Agreement reinsures such substituted insurer, coverage hereunder shall be excluded as respects
the Company.


 




    	 



    	 



    

ARTICLE
XV


HOLD HARMLESS PROVISIONS


 


15.01       Notwithstanding
anything else contained herein to the contrary, as respects all matters related to this Agreement, in addition to those specific
provisions insulating the Company from specific risks hereunder, the Reinsurer hereby covenants and agrees to reimburse and hold
the Company harmless from and against every claim, demand, liability, loss, damage, cost, charge, attorneys' fees, expense, suit,
order, judgment and adjudication of whatever kind or character regarding (i) this Agreement and/or (ii) the business reinsured
hereunder (including, but not limited to, underwriting loss, credit loss, and/or run-off expense and/or all legal fees and expenses
incurred by the Company in asserting its rights under this Agreement) whether or not such claim, demand, loss, damage, cost, charge,
attorneys' fees, expense, suit, order, judgment or liability is within the terms of Policies written and reinsured hereunder. The
Reinsurer's obligation hereto relates to, but is not limited to the following: all liability for agents' balances; return premiums
and commissions; deceptive trade practice liability; premiums, policy fees or other charges (whether collected or not); costs,
liability, damages, fees and/or expenses incurred by the Company due to a lawsuit between the Reinsurer and/or the General Agent
(any dispute involving the Company and the Reinsurer is subject to arbitration); all actions or inactions by General Agent relating
to this Agreement, any agreement with a premium finance company or claims administrator; and/or all fees and/or commissions owing
to the General Agent under this and the aforementioned related agreements.


 


15.02       The
Company shall not be liable to the Reinsurer for premiums unless the Company itself has actually received those premiums and wrongfully
not remitted them to the Reinsurer. The Reinsurer may not offset any balances on account of losses, loss adjustment expenses or
any other amounts due except as to premiums actually received by the Company itself (as distinct from premiums not collected, or
premiums collected by the General Agent, or premium placed in the premium trust account pursuant to the General Agency Agreement)
which have wrongfully not been transmitted to the Reinsurer.


 


15.03       If
for any reason the General Agent fails or is unable to administer the policies reinsured hereunder (whether the Agreement is still
in effect or the business is being run-off), (i) the Reinsurer shall appoint a party (acceptable and approved by the Company) to
administer the business and the Reinsurer shall be responsible for 100% of the cost of said administration and (ii) the General
Agent will fully cooperate with the Company (or its designated representative) in providing access to such of the General Agent’s
personnel, computer systems or other assets or procedures as the Company may deem necessary to provide for an orderly transition
of the administration of the Policies reinsured hereunder. If return premiums or other funds need to be returned to premium finance
companies, policyholders or sub-agents, the Reinsurer shall pay these amounts if the successor or administrator does not.


 


15.04       The
Reinsurer shall not sue, or seek arbitration, against the Company for any acts of the General Agent for any monies which the General
Agent owes unless the Company has actually received those monies and has wrongfully not remitted them to the Reinsurer; and the
Reinsurer shall indemnify the Company for any damages, liabilities and expenses incurred by reason of the General Agent's acts
or failure to act. The Company is not responsible for any commissions or other monies payable to the General Agent in connection
with this Agreement and the General Agent shall not sue, or seek arbitration against, the Company for any actions by, or debts
owing from, the Reinsurer. The Reinsurer shall not seek to recover from, or offset against, the Company any sums, whether premiums
or other monies, which the General Agent




    	 



    	 



    

was unable or unwilling to remit to the Company or the Reinsurer.


 


15.05       In
the event the Reinsurer, or any agent appointed pursuant to this Agreement, binds the Company for insurance coverage on insurance
risks which are in excess of the policy limits set forth in Article I, and/or are not within the terms of business specified in
Article I, and/or are not within the territory specified in Article I, and/or are excluded under Article III, whether intentional
or not, the Reinsurer and General Agent will do such things and take such actions as may be necessary to reduce the Company's exposure
to such risks and to hold the Company harmless against any liability or loss which may be incurred by the Company in excess hereof.
At the Company's request, the General Agent in accordance with applicable law, and policy terms, shall cancel or not renew any
risk bound which is not in conformance with this Agreement. Any such insurance coverage on insurance risks bound contrary to the
limitations which are in excess of the policy limits set forth in Article I, and/or are not within the classes of business specified
in Article I, and/or are not within the territory specified in Article I, and/or are excluded under Article III, whether intentional
or not, shall be 100% reinsured and subject to this Agreement.


 


15.06       In
furtherance of the protections afforded to the Company under this Agreement, the Reinsurer expressly acknowledges that certain
circumstances may come to exist with respect to the Policies reinsured hereunder that require adjustment to the timing of Reinsurer
remittances. If, in the sole discretion of the Company, an advance payment or payments of the Reinsurer’s obligations under
this Agreement is necessary to avoid irreparable harm to the Company (as, for example, in the circumstance where the funds available
in the premium trust account established pursuant to Section 2.01 of the General Agency Agreement are insufficient to provide for
timely payment of claims), the Reinsurer shall make such payment or payments promptly upon the Reinsurer’s receipt of the
Company’s good faith estimate or calculation of the necessity thereof.


 


15.07       When
a claim is asserted or action commenced, including class actions regardless of whether the class has been certified, relating in
any way to the Policies produced under this Agreement, the General Agent shall assume the defense and associated costs and expenses
thereof. The Company may elect, however, at its sole discretion, on a case-by-case basis, to engage counsel directly on its own
behalf, and the expenses and costs related to such defense shall be passed on to and paid by the General Agent within 60 days written
notice from the Company. In such cases where the claim or action relates to business written by more than one agent of the Company,
costs and expenses shall be proportioned among applicable agents at the Company’s sole discretion. Should the General Agent
fail to remit any amounts due to Company under this Section 15.07, then the Reinsurer shall pay such amounts within 60 days written
notice from the Company.


 


ARTICLE XVI


LOSS IN EXCESS OF POLICY LIMITS/EXTRA CONTRACTUAL
OBLIGATIONS


 


16.01       In
the event the Company pays or is held liable to pay an amount of loss in excess of its policy limit, but otherwise within the terms
of its policy (hereinafter called "loss in excess of policy limits") or any punitive, exemplary, compensatory or consequential
damages (hereinafter called "extra contractual obligations") because of alleged or actual bad faith or negligence on
its part in rejecting a settlement within policy limits, or in discharging its duty to defend or prepare the defense in the trial
of an action against its policyholder, or in discharging its duty to prepare or prosecute an appeal consequent upon such an action,
or in otherwise handling a claim under a policy subject to this Agreement, 100% of the loss in excess of policy limits and/or 100%
of




    	 



    	 



    

the extra contractual obligations shall be added to the Company's
loss, if any, under the Policy involved, and the sum thereof shall be reinsured 100% under this Agreement.


 


16.02       An
extra contractual obligation shall be deemed to have occurred on the same date as the loss covered or alleged to be covered under
the Policy.


 


16.03       Notwithstanding
anything stated herein, this Agreement shall not apply to any loss incurred by the Company as a result of any fraudulent and/or
criminal act which has been finally determined by a court of competent jurisdiction, after the exhaustion of all appeals, by any
officer or director of the Company acting individually or collectively or in collusion with any individual, corporation or any
other organization or party involved in the presentation, defense or settlement of any claim covered hereunder.


 


ARTICLE XVII


REGULATORY MATTERS


 


17.01       It
is the Parties' understanding that any premiums which are overdue from the General Agent to the Company may be deemed non-admitted
assets. In confirmation of the liabilities assumed by the Reinsurer under this Agreement, the Reinsurer hereby assumes 100% of
all liability and responsibility for all premiums in the course of collection.


 


17.02       The
Reinsurer shall agree, at no cost to the Company, to take those actions (including, but not limited to, modifications in how funds
are handled and how accounts are cleared, settled and the manner in which incurred losses are accounted for) and agree to those
arrangements necessary to ensure that the Company suffers no adverse impact because of this reinsurance program and is in compliance
with any applicable laws of a state insurance department, insofar as this reinsurance program is concerned.


 


ARTICLE XVIII


THE GENERAL AGENT


 


18.01       The
Company, the Reinsurer and the General Agent have entered into a General Agency Agreement effective April 1, 2020 (the "General
Agency Agreement"), which is incorporated herein by this reference. The Reinsurer has selected the General Agent to administer
the business reinsured hereunder. While for regulatory purposes, the General Agent may need to be appointed as the Company's agent,
it is recognized that the General Agent is acting on behalf of the Reinsurer. The Company is making no evaluation of the General
Agent's qualification, has no obligation to furnish reports or statistics to the Reinsurer, or to monitor the performance of the
General Agent. The Company shall file with the State all reports requested by the State based upon information received from the
General Agent and Reinsurer.


 


18.02       The
Company will, at the request of the General Agent and the Reinsurer, appoint producing agents to produce business through the General
Agent. The Company, in its sole discretion, may refuse to appoint any such agent; provided, however, that such appointment shall
not be unreasonably withheld. The General Agent will not establish any sub-general agencies or any agencies with the authority
of a general agency. The Reinsurer shall hold the Company harmless from and indemnify it for any damage, liability, claim, expense,
cost or fees (including attorneys' fees and expenses) of whatever kind or character caused directly or indirectly by any action
of or failure to act, by any such producing agent.


 


18.03       The
General Agent shall be responsible for the control of the producing agents




    	 



    	 



    

appointed by the Company at the request of and on behalf of the Reinsurer,
including compliance with state licensing laws and the financial condition of such agents.


 


18.04       The
Reinsurer shall guarantee payment to the Company of any amounts due the Company from business produced by and/or policies issued
by or through the producing agents appointed by the Company at the request of and on behalf of the General Agent and the Reinsurer.
The Reinsurer and the General Agent shall be solely responsible for notifying such agents of this Agreement and of any termination
hereof, and the Reinsurer shall be responsible for the consequences of any failure to provide such notification.


 


18.05       The
General Agent shall not sue, or seek arbitration, against the Company for any acts of the Reinsurer and shall indemnify and hold
the Company harmless from and against any damages, liabilities and expenses incurred by reason of the Reinsurer's acts or failures
to act.


 


18.06       The
Company shall conduct or have conducted the examinations of the General Agent as provided in Section 5.13 of the General Agency
Agreement. The examinations provided for herein shall be at no cost to the Company, and the Reinsurer shall indemnify and hold
the Company completely harmless as respects any liability, damage, charge, cost, fine, or penalty, the Company may incur as a result
of such examinations.


 


ARTICLE XIX


REINSURER OR GENERAL AGENT SALE OR TRANSFER


 


The Reinsurer or the General
Agent agree to give the Company, 90 days advance written notice of any sale or transfer of such party's business, or such party's
consolidation with a successor firm, in order that the Company may, in its sole discretion:


 


		(a)	Assign this Agreement to the successor; or



 


		(b)	Enter into a new reinsurance agreement with the successor; or



 


		(c)	Terminate this Agreement as provided in Section 4.02(g) of this Agreement.



 


ARTICLE XX


MISCELLANEOUS


 


20.01       This
Agreement has been made and entered into in the State of Texas and the Agreement shall be subject to and construed under the laws
of the State of Texas. This Agreement shall be deemed performable at the Company's administrative office in Bedford, Texas, and
it is agreed that the venue of any controversy arising out of this Agreement, or any breach thereof, shall be in Tarrant County,
Texas.


 


20.02       All
notices required to be given hereunder shall be deemed to have been duly given by personally delivering such notice in writing
or by mailing it, Certified Mail, return receipt requested, with postage prepaid. Any Party may change the address to which notices
and other communications hereunder are to be sent to such Party by giving the other Party prior written notice thereof in accordance
with this provision.


 


20.03       This
Agreement shall be binding upon the Parties hereto, together with their respective successors. None of the Parties hereto may assign
any of their rights or obligations under this Agreement.


 




    	 



    	 



    

20.04       This
Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.


 


20.05       This
Agreement is the entire agreement between the parties and supersedes any and all previous agreements, written or oral, and amendments
thereto with respect to the subject matter hereof.


 


20.06       This
Agreement may only be modified or changed by a written amendment to this Agreement executed by all Parties hereto.


 


20.07       A
waiver by the Company, Reinsurer or General Agent of any breach or default by the other party under this Agreement shall not constitute
a continuing waiver or a waiver by the Company or the Reinsurer of any subsequent act in breach or of default hereunder.


 


20.08       Headings
used in this Agreement are for reference purposes only and shall not be deemed a part of this Agreement.


 


20.09       The
Parties hereto intend all provisions of this Agreement to be enforced to the fullest extent permitted. Accordingly, should a court
of competent jurisdiction or arbitration panel determine that the scope of any provision is too broad to be enforced as written,
the Parties intend that the court or arbitration panel should reform the provision to such narrower scope as it determines to be
enforceable under present or future law; such provision shall be fully severable; this Agreement shall be construed and enforced
as if such illegal, invalid, or unenforceable provision were never a part hereof; and the remaining provisions of this Agreement
shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance.


 


20.10       This
Agreement is not exclusive and the Company reserves the right to appoint or contract with other reinsurers, agents and/or managing
agents in the territory covered by this Agreement.


 


20.11       The
Reinsurer or General Agent shall not insert any advertisement respecting the Company or the business to be written under this Agreement
in any publication or issue any circular or paper referring to the Company or such business without first obtaining the written
consent of the Company. The Reinsurer and/or General Agent shall establish and maintain records of any such advertising as required
by applicable statutes and regulations.


 


20.12       Policy
cancellations at the Company's request will be made strictly subject to requirements imposed by the Company's underwriting rules
and practices or the Reinsurer's underwriting rules and practices, as approved by the Company, and in compliance with applicable
statutes and regulations and the applicable provisions contained in this Agreement and the pertinent policy. Such cancellation
authority shall be exercised only for causes inherent in the particular risk and shall not be construed as authority to make general
or indiscriminate cancellations or replacement of the Policies with those of another Company, except upon specific written instructions
from the Company. When directed by the Company, the Reinsurer will cancel any and all Policies produced by it for any reason the
Company deems necessary.


 


20.13       This
Agreement shall be interpreted in conformance with applicable Texas law and regulation. If it is found or ordered by a court or
regulatory body that a term or provision of this Agreement does not conform to such law or regulation then this Agreement shall
be deemed to




    	 



    	 



    

be amended and modified in accordance with such law. However, where
this Agreement is found not to comply with applicable law or regulation, the Company may in its sole discretion terminate this
Agreement immediately and without prior notice.


 


20.14       The
Company agrees that the Reinsurer shall have the right, with the approval of the Company, to determine the rates and prepare the
rate filing for the Company to file during the term of this Agreement and during the term of the run-off. The Reinsurer and General
Agent understand and agree that no business shall be produced, until a written approval of the applicable rate rules and forms
is received from the regulatory authority of competent jurisdiction, if applicable or required by statute.


 


20.15       It
is agreed that in the event the Reinsurer fails to pay any amount claimed to be due hereunder, the Reinsurer, at the request of
the Company, will submit to the jurisdiction of any court of competent jurisdiction within the United States. Nothing in this Article
constitutes or should be understood to constitute a waiver of the Reinsurer's rights to commence an action in any court of competent
jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another
court as permitted by the laws of the United States or of any state in the United States. Further, pursuant to any statute of any
state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the Superintendent,
Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or successors
in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted
by or on behalf of the Company or any beneficiary hereunder arising out of this Agreement.


 


ARTICLE XXI


LOSS AND UNEARNED PREMIUM RESERVE FUNDING


 


21.01       Within
10 business days of the effective date of this Agreement, the Reinsurer will secure [***]% of its obligations under this Agreement
(“Obligations Under the Reinsurance Agreement”), which include but are not limited to [***]% of the obligations for
unearned premiums reserves, if any, and reserves for losses incurred but not reported and losses reported but unpaid, via a security
fund or trust agreement or letter of credit to be obtained by the Reinsurer in favor of the Company, which shall be in all respects
acceptable to the Company and allow the Company to receive credit for the reinsurance hereunder from the Department of Insurance
or applicable regulator of the state of domicile of the Company.


 


		(a)	At a minimum, the security fund or trust or letter of credit must:



 


		(i)	comply with the applicable laws and regulations; and



		(ii)	be issued by or held with a Qualified United States Financial Institution
acceptable to the Company (as defined by the applicable statute and regulation).



 


		(b)	The Company may draw the full amount of the security fund or trust
or letter of credit to satisfy, in whole or in part the obligations of the Reinsurer hereunder or, if:



 


		(i)	The Reinsurer fails to comply with the provisions of this Agreement;
or



		(ii)	the issuer of the security fund or trust or letter of credit gives
the Company notice of cancellation or non-renewal of the security fund or 





    	 



    	 



    

letter of credit.


 


21.02       
Within 10 business days of the effective date of this Agreement, and within 10 business days prior to the end of each calendar
quarter thereafter, the Company shall provide the Reinsurer with a good faith estimate of the expected sum of [***]% of the Company’s
ceded Unearned Premium and Loss Reserves as of the end of the forthcoming calendar quarter (the “Estimate”). The Reinsurer
shall, within 2 business days of first receiving the Estimate, and within 2 business days prior to the commencement of such forthcoming
calendar quarter thereafter, fund/obtain a security fund or letter of credit in an amount equivalent to [***]% of the Estimate.
Additionally, each time thereafter that: (i) the Reinsurer’s A.M. Best rating or outlook is at any time reduced; or (ii)
the Reinsurer’s A.M. Best rating or outlook is at any time removed or withdrawn such that the Reinsurer is not rated or unrated
by A.M. Best; or (iii) the Reinsurer’s capital and policyholder surplus (or its equivalent) reduces [***] percent ([***]%)
or more during any rolling twelve (12) month period measured quarterly; or (iv) the Reinsurer fails to maintain its CAT XOL reinsurance
with coverage up to [***] dollars ($[***]) with a [***]
($[***]) retention and its multiline XOL reinsurance with coverage
up to [***] dollars ($[***]) with a [***] dollar
($[***]) retention, each provided by the Reinsurer’s reinsurers existing as of the effective
date of this Agreement, provided that the Reinsurer may add reinsurers with a minimum surplus of at least [***] dollars
($[***]) and an “A” rating by A.M. Best, the components of the Estimate shall
increase by [***]% (i.e. the first time the Estimate shall increase to [***]% of the Company’s ceded outstanding Unearned
Premium and Loss Reserves as of the end of the forthcoming calendar quarter, the second time the Estimate shall increase to [***]%
of the Company’s ceded outstanding Unearned Premium and Loss Reserves as of the end of the forthcoming calendar quarter,
etc.). 


 


21.03       If
at any time, based upon the monthly reporting provided to Company under this Agreement, it shall be determined by the Company or
Reinsurer that the amount of the security fund or letter of credit may not be equivalent to the greater of: (i) [***]% of Company’s
ceded Unearned Premium and Loss Reserves; (ii) [***]% of Company’s ceded Unearned Premium and Loss Reserves as of the end
of the current calendar quarter (the “Revised Estimate”); or (iii) the amounts required under Section 21.02 of this
Agreement, then upon written notice from Company, the Reinsurer shall immediately increase the amount of the security fund or letter
of credit to an amount equivalent to the greater of (i), (ii) or (iii) and the Company shall at all times be in possession of a
security fund or letter of credit equivalent to the greater of (i), (ii) or (iii) as of the end of the current calendar quarter.


 


21.04       Should
the amount of the security fund or letter of credit at the end of any calendar quarter be greater than the amount required in this
Article XXI, the Reinsurer shall be entitled to reduce the amount of the security fund or letter of credit to an amount not less
than the amount required in this Article XXI. The Qualified United States Financial Institution shall permit such reduction upon
receipt by it of the Company’s written statement that Reinsurer is entitled to such reduction, which written statement shall
not be unreasonably withheld by Company.


 


21.05       For
the purpose of this Article XXI, Unearned Premiums means, as of any given date, the aggregate premium attributable to the unexpired
coverage period of all insurance policies produced under the Agreement, as determined in accordance with generally accepted statutory
accounting principles consistently applied. For this purpose, premium shall be the written premium charged on the insurance policy
for the period such policy is in force irrespective of the subsequent billing and collection of such premium.


 




    	 



    	 



    

21.06       For
the purpose of this Article XXI, Loss Reserves means, as of any given date, the reserve attributable to losses incurred but not
reported and losses reported but not paid with respect to the insurance policies produced under this Agreement, and shall include
provision for both allocated and unallocated loss adjustment expense, in each instance as determined in accordance with generally
accepted accounting principles consistently applied.


 


21.07       The
Reinsurer hereby agrees that the actuarial opinion of the Company’s internal actuary shall be controlling, in its sole discretion,
as to the timing and determination of the adequacy of loss reserves established for losses incurred and outstanding on business
produced under this Agreement and the General Agency Agreement for the purposes of posting collateral hereunder. However, the Reinsurer
shall have the right to have the Company engage on a semi-annual basis, at the expense of the Reinsurer an independent actuarial
opinion, performed by MILLIMAN USA’s Dallas office, attesting to the adequacy of loss reserves established for losses incurred
and outstanding on business produced under this Agreement and the General Agency Agreement. If the Reinsurer requests hereunder
the actuarial opinion of MILLIMAN USA’s Dallas office, the Reinsurer hereby agrees to post the collateral required hereunder
in accordance with the actuarial analysis of the Company’s internal actuary until an analysis is completed by MILLIMAN USA’s
Dallas office.  At such time, the Reinsurer shall post the collateral required hereunder in accordance with the actuarial
analysis of MILLIMAN USA’s Dallas office. If MILLIMAN USA’s Dallas office is unable to perform the actuarial analysis,
the analysis of the Company’s internal actuary shall be controlling for the purpose of determining the ultimate loss ratio
and loss adjustment expense ratio picks required for posting collateral under the Agreements.  If subsequent to the receipt
of the applicable independent actuarial opinion, the Company determines in its sole discretion that there has been a significant
change in the loss reserves as compared to the applicable independent actuarial opinion, the Company’s internal actuary shall
again be controlling, in its sole discretion, as to the timing and determination of the adequacy of loss reserves established for
losses incurred and outstanding on business produced under this Agreement and the General Agency Agreement until the Company again
engages, at the expense of the Reinsurer, an independent actuarial opinion, performed by MILLIMAN USA’s Dallas office, attesting
to the adequacy of loss reserves established for losses incurred and outstanding on business produced under this Agreement and
the General Agency Agreement. Additionally, if the actuarial opinion of the Company’s internal actuary is not available,
for any reason, the Company shall engage semi-annually, at the expense of the Reinsurer, an independent actuarial opinion, performed
by MILLIMAN USA’s Dallas office, attesting to the adequacy of loss reserves established for losses incurred and outstanding
on business produced under this Agreement and the General Agency Agreement.


 


ARTICLE XXII


SAVINGS CLAUSE


 


22.01       If
any law or regulation of any Federal, State or local government of the United States of America, or the ruling of officials having
supervision over insurance companies, should prohibit or render illegal this Agreement, or any portion thereof, as to risks or
properties located in the jurisdiction of such authority, either the Company or the Reinsurer may upon written notice to the other
suspend or abrogate this Agreement insofar as it relates to risks or properties located within such jurisdiction to such extent
as may be necessary to comply with such law, regulations or ruling. Such illegality shall in no way affect any other portion thereof;
provided, however, that the Reinsurer or the Company may terminate or suspend this Agreement insofar as it relates to the business
to which such law or regulation may apply.


 


22.02       This
Agreement shall be interpreted in accordance with the laws of the State of Texas.




    	 



    	 



    

All provisions of this Agreement are intended to be enforced to the
fullest extent permitted. Accordingly, should a court of competent jurisdiction or arbitration panel determine that the scope of
any provision is too broad to be enforced as written, the Parties intend that the court or arbitration panel should reform the
provision to such narrower scope as it determines to be enforceable under present or future law; such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision were never a
part hereof; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid, or unenforceable provision or by its severance; provided, however, that where this Agreement is so found
not to comply with applicable law or regulation, the Company may in it sole discretion terminate this Agreement immediately without
prior notice.


 


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SIGNATURES APPEAR ON THE FOLLOWING PAGE.]




    	 



    	 



    

 


IN WITNESS WHEREOF, the Parties hereto by their
respective duly authorized representatives have executed this Agreement as of the date first above written.


 


UNITED SPECIALTY INSURANCE COMPANY


 


 


BY: /s/ David Cleff


 


ITS: EVP


 


DATE:4-3-2020


 


 


CRUSADER INSURANCE COMPANY


 


 


BY: /s/ Cary L. Cheldin


 


ITS: President


 


DATE:4-1-20


 


 


UNIFAX INSURANCE SYSTEMS, INC.


 


 


BY: /s/ Cary L. Cheldin


 


ITS: President


 


DATE:4-1-20