Document:

exv10w81

EXHIBIT 10.81

2098 West
Chester Pike

 Suite 101 

Broomall,
PA 19008

December 11,
2009

Re: Resignation

Steven M. Mariano

Chairman, President and Chief Executive Officer

Patriot Risk Management, Inc.

401 East Las Olas Boulevard, Suite 1540

Fort Lauderdale, FL 33301

Dear Steve:

I hereby
resign from the Board of Directors of Patriot Risk Management, Inc. (the “Company”)
effective upon consummation of the Company’s planned initial public offering.

	 	 	 
	
 

John R. Del Pizzoexv10w82

Exhibit 10.82

PROGRAM ADMINISTRATOR AGREEMENT

Traditional Workers Compensation Insurance Program

Patriot Underwriters, Inc.

And

ULLICO Casualty Company

Effective as of April 1, 2009

 

 

Table of Contents

	 	 	 	 	 
	I.

	 	Appointment	 	3 
	 
	 	 
	II.

	 	Program Administrator’s Duties & Responsibilities	 	4 
	 
	 	 
	III.

	 	Limitations on Authority	 	7 
	 
	 	 
	IV.

	 	Premium & Accounting	 	9 
	 
	 	 
	V.

	 	Reporting & Recordkeeping	 	10 
	 
	 	 
	VI.

	 	Compensation	 	10 
	 
	 	 
	VII.

	 	Insurance & Indemnification	 	11 
	 
	 	 
	VIII.

	 	Term & Termination	 	12 
	 
	 	 
	IX.

	 	Continuing Duties of Program Administrator After Termination	 	15 
	 
	 	 
	X.

	 	Ownership of Expirations	 	16 
	 
	 	 
	XI.

	 	Abandonment	 	17 
	 
	 	 
	XII.

	 	Confidentiality	 	17 
	 
	 	 
	XIII.

	 	Arbitration	 	18 
	 
	 	 
	XIV.

	 	General Provisions	 	20 
	 
	 	 
	Exhibit 1:

	 	 Schedule of Business	 	24 
	 
	 	 
	Exhibit 2:

	 	 Commission Schedule	 	27 
	 
	 	 
	Exhibit 3:

	 	 Claims Administration (Procedures & Authority)(with Addendum A – C)	 	28 
	 
	 	 
	Exhibit 4:

	 	 Banking Account Structure	 	40 
	 
	 	 
	Exhibit 5:

	 	 Reporting Requirements	 	41 
	 
	 	 
	Exhibit 6:

	 	 Miscellaneous	 	43 

Page 2

 

PROGRAM ADMINISTRATOR AGREEMENT

(Traditional Business Program)

     This Program Administrator Agreement (the “Agreement”), by and between ULLICO Casualty
Company, a Delaware corporation with principal offices at 1625 Eye Street, NW Washington, DC 20006
(the “Company”) and Patriot Underwriters, Inc. a Delaware corporation with principal offices at 301
East Las Olas Boulevard, 7th Floor, Fort Lauderdale, Florida 33301 (the “Program
Administrator” or “PA”), is entered into this
14th day of April, 2009 (the “Effective Date”).

     In consideration of the mutual covenants and benefits contained in this Agreement, the Company
and the PA hereby agree as follows:

I. APPOINTMENT

	 	1.1	 	The Company hereby appoints the PA as its general agent for the purpose of
underwriting, issuance, and delivery of binders, policies, certificates of insurance or
contracts of insurance and amendments and endorsements thereto (“Policy” or
“Policies”), in accordance with Exhibit 1 — Schedule of Business, as well as
the Company’s underwriting guidelines, procedures and instructions as may be provided
in writing. This appointment shall pertain to the business mutually known between the
PA and the Company as Traditional Workers’ Compensation Insurance Program (“Program”).

	 	1.2	 	The PA shall serve as an exclusive agent on business identified and sourced by
itself and/or its affiliates.

	 	1.3	 	The PA shall, at all times, act as an independent contractor. Nothing
contained in this Agreement is intended to create, nor shall it be construed as
creating, the relationship of employer and employee, nor partners, nor joint-venturers,
between the Company and the PA or between the Company and any sub-producer with whom
the PA might contract.

	 	1.4	 	In entering into this Agreement, the PA warrants and represents that:

	 	a.	 	It is a corporation duly organized under the laws of the State
of Delaware;
	 
	 	b.	 	It is in good standing in the state referenced above and, as an
ongoing obligation throughout the term of this Agreement, shall take all
necessary steps to remain in good standing; and
	 
	 	c.	 	That it or any officer, principal, or employee has the
requisite licenses in its state of domicile, and in the territory defined in
Exhibit 1 to this Agreement, to accept this appointment and to carry out its
duties under this Agreement.

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	 	1.5	 	In entering into this Agreement, the Company warrants and represents that:

	 	a.	 	It is a corporation duly organized under the laws of Delaware;
	 
	 	b.	 	It is in good standing in the state referenced above and, as an
ongoing obligation throughout the term of this Agreement, shall take all
necessary steps to remain in good standing;
	 
	 	c.	 	It has the requisite licenses in its state of domicile, and is
licensed to transact insurance and write the business contemplated under this
Agreement in the District of Columbia and all states except Maine, New
Hampshire and Rhode Island and will take appropriate measures to maintain all
such licenses throughout the term of this Agreement;
	 
	 	d.	 	It has an A.M. Best financial strength rating of “B+” with a
positive outlook and has not received any communication from A.M. Best advising
or threatening any downgrade of the Company’s current financial strength
rating.

II. PROGRAM ADMINISTRATOR’S DUTIES AND RESPONSIBILITIES

	 	2.1	 	The PA shall have no authority to act on behalf of the Company except as
specifically stated in this Agreement. The PA shall not waive any legal right of the
Company nor bind the Company in any way except as specifically stated in this
Agreement.

	 	2.2	 	The PA shall have authority and responsibility to solicit, review, reject,
accept, bind and underwrite applications for, and to issue Policies on such forms as
are approved by the Company, according to the authority granted and limitations set
forth in Exhibit 1 and the Underwriting Guidelines for the Program established by
ULLICO Casualty Company, and to bill, collect, receive and account for premium on
Policies.

	 	2.3	 	The PA shall solicit business on behalf of the Company through licensed agents
and/or brokers and other means in accordance with law. Although PA may accept
submissions from sub-producers, the PA shall have no authority to appoint, terminate or
otherwise process sub-producers with state insurance departments on behalf of the
Company, unless the PA receives prior written approval of the Company, which approval
shall not be withheld unreasonably. The PA may, however, contract with sub-producers
solely for the production of business. Any sub-producer not appointed as an agent by
the Company shall be deemed a broker for the insured and not a representative of the
Company.

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	 	2.4	 	The PA shall issue and deliver to qualified insureds the Policy, any
Certificates of Insurance and any endorsements, as soon as possible following the
receipt of the requisite premium and duly completed application, or such other shorter
period of time as may be dictated by applicable law or regulation. The PA shall assure
the timely and proper issuance, delivery, execution or countersignature of all Policies
pursuant to the appropriate regulatory authority for business produced under the
Program. The PA shall notify the Company immediately if the Policies are not issued in
the timeframe above. Should the PA fail to meet this processing requirement for two (2)
consecutive months, the PA must cease writing new business until the backlog is cleared
unless such backlog is attributable to the acts or omissions of the Company.

	 	2.5	 	The PA shall have the authority to cancel, non-renew or change coverage for any
Policy or Certificate of Insurance provided hereunder for proper business purposes,
subject to the requirements imposed by law or regulation and in compliance with the
provisions of this Agreement. Although the Company has delegated authority in this
paragraph, the PA acknowledges the Company retains its authority to cancel and
non-renew business for reasonable and customary business purposes commensurate with
standard industry practices, provided that if the Company attempts to terminate, cancel
or non-renew more than twenty percent (20%) of the Policies during any one-year term of
this Agreement, such action or attempted action shall give the PA the right to
terminate this contract. The parties further recognize the Company shall not cancel
and/or non-renew business unreasonably. Should the Company take such action to
terminate, cancel or non-renew any business covered by this Agreement, the Company
shall provide contemporaneous written notice to the PA of the specific action taken and
the reason therefore. The PA shall abide by any such action taken by the Company and
shall not further process the effected business without the prior written consent of
the Company or as otherwise required by law.

	 	2.6	 	The PA shall process and administer any involuntary business (e.g., assigned
risk plans) arising from business produced herein in accordance with the provisions of
this Agreement. The Company at all times retains its authority to process and
administer all involuntary business and the PA shall comply with any instructions of
the Company in this regard.

	 	2.7	 	The PA shall maintain sufficient supplies, equipment and competent and
qualified staff to service the Policies and to maintain the quality of services and
obligations necessary to operate within this Agreement.

	 	2.8	 	The PA shall maintain and account for all Policies, forms, manuals, equipment,
supplies or anything else furnished by the Company, all of which shall remain the
property of the Company with the exception of any proprietary information or systems
developed jointly between the PA and Company, which proprietary information and systems
shall be owned jointly by the parties. The PA will return all property to the Company
promptly upon termination of this Agreement.

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	 	2.9	 	The PA shall be responsible for full compliance with (a) all applicable laws,
regulations, rules, and requirements relating to the performance of its obligations
hereunder and (b) all written instructions provided to the PA from time to time by the
Company.

	 	2.10	 	The duties and obligations of the PA as respects the administration of claims
are more fully set forth in Exhibit 3.

	 	2.11	 	The PA shall furnish the Company with Patriot Underwriters, Inc. and Guarantee
Insurance Company’s audited financial statements as soon as such statements are
completed but no later than June 1st of the following calendar year. The
Company shall furnish its audited financial statements to PA as soon as such statements
are completed but no later than June 1st of the following calendar year.
The audited financial statements to be produced by both PA and the Company shall
include a balance sheet, net income statement and statement of cash flows, which
statements shall accurately reflect the financial condition of the aforementioned
entities. The PA shall also provide the Company with Patriot Underwriters, Inc. and
Guarantee Insurance Company’s quarterly statutory financial statements as soon as they
are available. The Company shall provide its quarterly statutory financial statements
to PA as soon as they are available. The Company and PA may also request additional
information from the other party relative to the financial condition of such entities
and the Company and PA shall comply with such requests.

	 	2.12	 	The PA or the Company shall notify the other immediately of any complaint with
any state insurance department or other regulatory authority relating to the Policies,
whether against the Company, the PA, or a sub-producer. The PA and the Company will
work together to promptly and adequately respond to any such complaint in accordance
with applicable insurance department requirements and laws. However, the PA shall not
correspond directly with an insurance department in this regard unless authorized to do
so in writing by the Company or otherwise required under applicable law.

	 	2.13	 	The PA agrees that it will comply with the Company’s Privacy Policy under the
Gramm-Leach-Bliley Act of 1999 (“GLB”), as set forth below:

ULLICO Casualty Company does not disclose any nonpublic personal information
about individual policyholders or claimants to any affiliate or any
non-affiliate third party other than those permitted by law and only for the
purpose of transacting the business of the policyholder’s insurance coverage
or claim.

	 	 	 	The PA shall fulfill its obligations to provide policyholders with a copy of the
Privacy Policy of the Company as may be required by law. Notwithstanding the
foregoing, the PA acting on behalf of itself and its affiliates shall be permitted,
at

Page 6

 

	 	 	 	its discretion, to share and disclose nonpublic personal information for marketing
or other purposes permitted by law provided that the PA provides proper notice and
opt-out rights to affected policyholders or claimants in accordance with GLB and
applicable state insurance laws implementing the same.

	 	2.14	 	The PA shall cooperate with requests of the Company to achieve compliance with
the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) relative to the
Company’s obligation to assure that transactions involving target countries and
Specifically Designated Nationals are not processed.

III. LIMITATIONS ON AUTHORITY

	 	3.1	 	Neither party shall publish, issue, distribute or circulate any printed, video
or audio material using the name or the logo of the other party, or of any affiliate of
the other party, or referencing the other party or the Program in any manner, without
the prior written consent of the other party, such consent not to be withheld
unreasonably. Any such consent may be withdrawn by the other party on thirty (30)
calendar days notice or shorter time period if demanded by any regulatory agency,
provided that the party withdrawing such consent has a commercially reasonable basis
for doing so.

	 	3.2	 	The PA shall make no representations or statements to any person inconsistent
with the provisions of this Agreement and the Policies of the Company.

	 	3.3	 	All Policies and/or Certificates of Insurance subject to this Agreement shall
have an inception date on or after the Effective Date of this Agreement.

	 	3.4	 	The PA shall not take legal proceedings against any third party in the name of
the Company in connection with any matter pertaining to the business of the Company
without the prior written consent of the Company. Nor shall the PA incur any
indebtedness for any purpose whatsoever on behalf of the Company without the prior
written consent of the Company.

	 	3.5	 	The PA shall have no reinsurance underwriting authority, neither ceded nor
assumed, neither treaty nor facultative. The PA may neither bind nor commit the
Company to participation in any insurance or reinsurance syndicates, associations or
pools nor may the PA collect payment from any reinsurer of the Company or commit the
Company to any reinsurance settlement, commutation or claims

	 	3.6	 	The PA shall have no authority to delegate any of its authority,
responsibilities or obligations under this Agreement to any non-affiliated third party
without the prior written consent of the Company.

	 	3.7	 	The PA shall not appoint any sub-general agents.

	 	3.8	 	The PA shall not jointly employ an individual who is employed by the Company.

Page 7

 

	 	3.9	 	The PA shall not solicit, transact, quote, underwrite, rate or bind Policies on
the following:

	 	a.	 	Risks that are not in compliance with this Agreement or the
underwriting guidelines, procedures, instructions or memoranda provided to the
PA by the Company from time to time, or in excess of the authority limits, or
in violation of any other limitations set out in Exhibit 1;
	 
	 	b.	 	Risks that are not in compliance with the applicable forms,
rules, rates or filings of the Company according to their exact terms and to
the laws and regulations in effect in the Territory;
	 
	 	c.	 	Risks, coverages or classes of business outside the scope and
coverage of reinsurance secured by the Company for the protection of the
Program.; or
	 
	 	d.	 	Risks in any territory where the PA’s license(s) or certificate
of authority is canceled, suspended, or is declined renewal by any regulatory
body.

	 	3.10	 	In the event the PA solicits, transacts, quotes, underwrites, rates, or binds
Policies as prohibited above, without the written approval of the Company, whether
intentional or not, the PA will immediately take such actions as are necessary to
remove or to minimize the Company’s exposure as an insurer on such unacceptable
Policies. Nothing in this paragraph will serve to alleviate PA’s obligations, or
diminish the Company’s rights, provided for elsewhere in this Agreement.

	 	3.11	 	The PA may, from time to time, benefit from the recommendations, suggestions,
answers to questions or work product of the Company’s staff services, including, but
not limited to, legal, actuarial, consulting, systems and financial support services.
The PA agrees that any such benefit shall be gratuitous, and neither the Company nor
any of its employees shall have any liability or professional responsibility to, or
create any professional relationship with, the PA other than as specifically set forth
in this Agreement.

	 	3.12	 	With the exception of the standard practice of remitting premium net of
commission and net of return premiums and except as otherwise permitted under Article
20 of that certain Workers’ Compensation Quota Share Reinsurance Contract, dated April
1, 2009, between the Company and Guarantee Insurance Company (the “Reinsurance
Agreement”), the PA may not offset any balance due from the Company to the PA against
any amounts due from the PA to the Company under this Agreement, or under any other
contract with the Company or any other party unless provided otherwise herein.

Page 8

 

	IV.	 	PREMIUM AND ACCOUNTING

	 	4.1	 	The PA is responsible for collecting all Program Premium attributable to the
Policies produced hereunder and shall deposit the Company’s portion of such collected
and received Program Premium, as determined in accordance with Article 11 of the
Reinsurance Agreement, into the Segregated Account (as such term is defined in the
Reinsurance Agreement) net of all commissions and claims administration fees payable to
the PA under this Agreement. “Program Premium” is defined as direct written premium
and additional audit premium, policy and/or service fees and any adjustments thereto
charged on all new and renewal policies produced by the PA hereunder on behalf of the
Company, less return or refund premiums.

	 	4.2	 	The PA shall hold all funds collected and received by it in connection with
this Agreement as a fiduciary of the Company to the extent such funds are payable. The
PA shall, under no circumstances, make any personal or corporate use of such funds not
authorized by this Agreement.

	 	4.3	 	All Program Premium collected by the PA including policy and/or service fees as
agreed upon with the Company, shall be handled in accordance with the requirements set
forth in Exhibit 4 — Banking Account Structure. In accordance with the terms
of Exhibit 2 — Commission Schedule, each party shall receive their respective
share of the premiums and fees on the collected Program Premium.

	 	4.4	 	The PA may, in its own name and on its own behalf, take all reasonable actions
as it deems appropriate to collect premiums, including additional audit premium, on the
business written pursuant to this Agreement, provided that the PA shall promptly notify
the Company of any such action taken.

	 	4.5	 	If the Company is required to refund premiums under any Policy by reason of any
cancellation, reduction in coverage, statute, regulation, order of an insurance
department (e.g., via “rate rollbacks” or any similar mechanism) or otherwise, either
during or after the term of this Agreement, the PA shall refund return premiums, upon
receipt from the Company, to the policyholder or its designated representative on
behalf of the Company as required.

	 	4.6	 	The PA shall submit an accounting to the Company on a monthly basis detailing
all transactions in electronic file format for or on behalf of the Company. Such
monthly accounting shall be received by the Company no later than ten (10) calendar
days following the close of the month being accounted for and shall contain all data
requested by the Company and detailed in Exhibit 5 – Reporting Requirements.

Page 9

 

V. REPORTING AND RECORD KEEPING

	 	5.1	 	The PA shall keep separate records of Policies and accounting and financial
documents of the business written or transacted for or on behalf of the Company, and
shall submit copies of such records and any supporting documentation to the Company
upon request at the Company’s expense. The PA shall maintain all such records for (a)
a period of not less than six (6) years from the expiration of the business in
question, (b) the minimum time limits required by law or regulation, or (c) until the
completion of a financial examination of the Company by the regulatory agency having
jurisdiction over the Company, whichever is longest and shall be maintained during the
Term of this Agreement and thereafter while providing any continuing services
hereunder, in a manner and form as reasonably required by the Company.

	 	5.2	 	The PA shall cooperate with the Company’s information technology personnel
and/or the Company’s computer system vendors. The PA shall submit an accounting to the
Company on a monthly basis detailing all transactions in electronic file format for or
on behalf of the Company. Such monthly accounting shall be received by the Company no
later than ten (10) calendar days following the close of the month being accounted for
and shall contain all data requested by the Company and detailed in Exhibit 5 –
Reporting Requirements.

	 	5.3	 	The Company, its reinsurer(s), its designated representative(s) and all
regulators shall be afforded full and complete access to the PA’s records related to
business produced under this Agreement for the purpose of auditing the PA with respect
to all transactions arising out of or in connection with any business written by the PA
under this Agreement, including any underwriting, financial and accounting files of the
PA, upon reasonable notice and during the regular business hours of the PA provided
that the Company shall be allowed to conduct no more than three (3) audits of the
Company during any twelve (12) month period. The Company shall have the right to copy
all accounts and records related to its business in a form useable by the Company.

	 	5.4	 	Any expenses incurred by the Company for audits conducted by the Company or by
a regulatory agency, as it specifically relates to the business conducted under the
authority of this Agreement, shall be borne by the Company. Any incidental expenses
(e.g., pens, pencils, papers, etc.) requested by a regulatory agency in conjunction
with an audit performed in the office of the PA, as it specifically relates to the
business of this Agreement, shall be the responsibility of the PA.

VI. COMPENSATION

	 	6.1	 	The PA’s compensation by the Company under this Agreement shall be as set forth
in Exhibit 2 – Commission Schedule.

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	 	6.2	 	During and after the term of this Agreement, the PA shall be liable for the
return of commission, including policy and service fees, where applicable, to the
Company on refunded return premiums as set forth in Section 4.5 of this Agreement.
Returned commissions will be calculated using the same rates allowed in connection with
the coverage for which the return of premiums is being made. However, if such return
premium is the result of a statute, regulation, or order of an insurance department
(e.g., via “rate rollbacks” or any similar mechanism), under which producers are not
required to return commissions, then the PA shall not return to the Company its
commission or fees.

	 	6.3	 	The PA shall be solely responsible and solely liable for the payment of any
compensation due any sub-producer, through which business is produced under this
Agreement. Payment by the Company to the PA of any commissions due in connection with
any business accepted by the Company under this Agreement shall fully and conclusively
satisfy any obligation or liability whatsoever on the part of the Company, whether in
law or equity, to make such payment to any sub-producer or other person or party.

	 	6.4	 	The PA shall be responsible for all expenses incurred by the PA relating to the
business produced under this Agreement, as set forth in Exhibit 1, and in the
performance of its obligations under this Agreement.

VII. INSURANCE AND INDEMNIFICATION

	 	7.1	 	The PA shall maintain in full force and effect policies of insurance,
reasonably acceptable to the Company, in the amounts set forth in Exhibit 1 –
Schedule of Business covering the PA and its employees. Such insurance shall
be maintained by the PA at its sole cost and expense. The PA shall furnish proof of
such insurance, including copies of the E&O and fidelity policies, to the Company prior
to the Effective Date of this Agreement and thirty (30) calendar days prior to each
anniversary of the Effective Date. The PA shall immediately provide notice to the
Company in the event of notice of nonrenewal or cancellation, lapse, termination or any
reduction in coverage.

	 	7.2	 	The PA hereby agrees to, at all times hereafter, defend, indemnify and hold the
Company harmless from and against all claims, demands, causes of action, liability, or
loss that result from any real or alleged negligent or willful acts, or errors or
omissions of the PA, or the employees, officers, directors, servants, representatives
or sub producers of the PA in the performance or breach of duties under this Agreement.
This indemnification includes all direct or consequential damages, costs, expenses,
attorney and other legal fees, penalties, fines, assessments, verdicts, judgments, all
liability for punitive or exemplary damages, and any other expense or expenditure
incurred by the Company as a result of the PA’s performance or lack of performance
under the terms of this Agreement.

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	 	7.3	 	The PA agrees that, in the event the Company is in violation of any law,
regulation or bulletin due to the acts or omissions of the PA, or the employees,
officers, directors, servants, or representatives of the PA, the PA shall assume the
responsibility and liability for such acts or omissions and shall indemnify and hold
the Company harmless for any such liability. If the Company, because of the violation
of any law, regulation, or bulletin, due to the acts or omissions of the PA, is
reprimanded, fined, or otherwise involved in any action caused by the PA, or the
employees, officers, directors, servants, or representatives of the PA, then the PA
agrees to reimburse and indemnify the Company for all expenses, fines, or other fees
incurred by the Company, except to the extent that the Company has caused, contributed
to or compounded such liability. This indemnification specifically includes any costs,
fees, fines and/or penalties assessed against the Company as a result of noncompliance
or allegations of noncompliance with New York State laws or regulations applicable to
the Free Trade Zone.

	 	7.4	 	With respect to the business produced hereunder, to the extent any premiums are
financed, the PA shall have sole responsibility to accept, receive and/or to
appropriately respond to all notices required by law or contract applicable to premium
financing arrangements, including but not limited to cancellation notices or notices
regarding the existence of premium finance arrangements. No producing or other agent
shall have any authority to receive, accept or respond to any such notices. The PA
shall indemnify and hold the Company harmless from and against all liabilities, losses,
claims, suits, damages and expenses arising out of any action or omission with respect
to such notices.

VIII. TERM AND TERMINATION

	 	8.1	 	This Agreement shall become effective at 12:01 a.m. local time at the principle
office of the PA as of the Effective Date and shall remain in full force and effect
until terminated as provided below. On the giving of notice of termination by either
party, the duties of each party to the other shall continue in full force and effect
until the expiration of the applicable notice period, if any, unless otherwise mutually
agreed. At any time subsequent to the giving of notice of termination, including any
period of run-off, the Company may, at its sole discretion, institute a referral
underwriting procedure, as set forth in Exhibit 6, for new business, renewal business
or both.

	 	8.2	 	This Agreement may be terminated for any reason, with or without cause, by one
party giving no less than one hundred eighty (180) calendar days written notice to the
other party of the canceling party’s intent to cancel.

	 	8.3	 	The Company may immediately, upon written notice to the PA, terminate this
Agreement in whole or in part, in the event of the following:

	 	a.	 	The PA, its parent or Guarantee Insurance Company becomes
insolvent, institutes or acquiesces in the institution of any bankruptcy,
financial

Page 12

 

	 	 	 	reorganization, or liquidation proceeding or any such proceeding is
instituted against the PA, its parent corporation or Guarantee Insurance
Company;
	 
	 	b.	 	Funds due the Company from the PA, or funds due premium finance
company(s), policyholders, sub-producers or other third parties from the PA,
are misdirected or misappropriated by the PA;
	 
	 	c.	 	The PA systematically binds risks not in compliance with the
applicable underwriting guidelines, procedures, instructions or memoranda,
including but not limited to, rates, classes, territories, limits, Policy
forms, endorsements and exclusions;
	 
	 	d.	 	Upon the notice of termination of the Reinsurance Agreement; or
	 
	 	e.	 	The PA, any of its directors, principals, or officers (i) is
the subject of an indictment or criminal investigation; (ii) is formally
charged, indicted or convicted on any fraudulent act or criminal conduct or
(iii) is alleged by a regulatory agency in writing to have violated any
regulatory authority to which the PA, its directors, principals or officers are
subject, which the Company in its reasonable and sole discretion determines
adversely reflects on the integrity or trustworthiness of such entity or
person.

	 	8.4	 	The occurrence of any one of the situations listed below in this subsection
will constitute a breach of this Agreement. In the event of such a breach, the
non-breaching party may notify the breaching party of such breach and provide thirty
(30) calendar days notice to cure such breach. If the breach is not cured within the
thirty-day notice period, the non-breaching party may terminate this Agreement, within
ten calendar days thereafter, immediately upon written notice to the breaching party.
If the non-breaching party does not elect to provide thirty (30) calendar days notice
to cure such breach, the time frame set forth under section 8.2 above will govern the
termination:

	 	a.	 	The PA fails to promptly remit all monies when due the Company,
premium finance company(s), policyholders, sub producers or other third parties
as required pursuant to this Agreement;
	 
	 	b.	 	The PA fails to render timely and accurate reports in the
format agreed to and detailed in Exhibit 5 to this Agreement;
	 
	 	c.	 	The PA fails to provide the Company with evidence of insurance
as required by Exhibit 1 to this Agreement;
	 
	 	d.	 	The PA fails to permit the Company, or such other parties
authorized pursuant to this Agreement, to inspect or audit any records or files
relating to the Policies;

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	 	e.	 	(i) Key Personnel, as identified in Exhibit 6 to this
Agreement, is no longer the largest single shareholder of stock in Patriot Risk
Management, Inc., the ultimate parent of the PA, or other affiliated entities;
or (ii) The death, retirement, or resignation of such Key Personnel.
	 
	 	f.	 	The number of complaints received by the Company relating to
the PA’s performance and service to insureds, policyholders, or members of the
public is excessive, as may be determined by the Company in its sole discretion
based on standard industry practices;
	 
	 	g.	 	Enactment of any judicial, legislative, or regulatory action,
which in the opinion of the Company, in its sole discretion , would materially
adversely affect the Company’s rights under this Agreement or liabilities under
the Policies; or
	 
	 	h.	 	Either party is in default of any material term of this
Agreement not otherwise addressed in this Section 8.

	 	8.5	 	The PA may immediately, unless otherwise indicated, terminate this Agreement in
whole or in part, in the event of the following:

	 	a.	 	The Company, or its parent or subsidiary or affiliated
companies institute or acquiesce in the institution of any bankruptcy,
financial reorganization or liquidation proceeding, or any such proceeding is
instituted against the Company and remains undismissed for thirty (30) calendar
days;
	 
	 	b.	 	The Company’s license(s) or certificate of authority is
canceled, suspended or declined renewal by any regulatory body within the
Territory where the Company is issuing Policies hereunder, if after ninety (90)
calendar days the Company fails to remedy such loss of license or certificate
of authority in which case the PA may terminate this Agreement in its entirety
or only for those affected states where the Company’s license or certificate of
authority has been cancelled or suspended; or
	 
	 	c.	 	The Company’s AM Best rating falls below B+.

	 	8.6	 	The Company shall have the unilateral right, subject only to a reasonable
showing of cause, to suspend any part or all of the authority of the PA to act for or
on behalf of the Company during any notice of termination period.

	 	8.7	 	The parties acknowledge there are or may be laws or regulations in the various
jurisdictions serviced by the PA, which may be interpreted to provide the PA with
certain rights of notice, “run-off,” continuation of business written through the PA,
or other regulation regarding the termination of this Agreement. Because this
Agreement has been mutually entered into for a special purpose, and places
responsibilities, duties and obligations upon the PA, both beyond those and

Page 14

 

	 	 	 	different from those of a normal soliciting agent, the PA acknowledges that this
Agreement, therefore, involves and necessitates a different relationship. The PA
hereby specifically waives any and all rights with respect to termination of this
Agreement that may now or hereafter be provided to the PA by any such statute or
regulation in recognition of that different relationship, and the PA agrees not to
impose upon or require compliance by the Company with any obligation relating to
termination of the Agreement other that those specifically set forth in this
Agreement.

	 	8.8	 	The Company hereby agrees to indemnify and hold PA, as well as its
subsidiaries, employees and agents (each an “Indemnified Party”) harmless from any and
all damages suffered or obligation, liability or cost incurred as a result of any
action, claim, complaint, or lawsuit of any policyholder, claimant or other third
party, or any such matter asserted, instituted or otherwise administered by a
regulating department of insurance pursuant to a consent order or otherwise related in
whole or part to acts or omissions of the Company (“Indemnification Event”). If an
Indemnification Event occurs, the Company agrees to reimburse any Indemnified Party for
any and all payments the Indemnified party is required to make as a result of the
Indemnification Event and to reimburse the Indemnified Party for all costs and
expenses, including legal fees and costs, incurred with respect to such Indemnification
Event.

IX. CONTINUING DUTIES OF PA AFTER TERMINATION

	 	9.1	 	The PA shall, at its sole expense, “run-off” the in-force business to normal
expiration, in accordance with the terms of this Section, which will survive the
termination of this Agreement. The Company shall pay the PA its commission until the
in-force Policies in effect at the effective date of termination of this Agreement have
expired.

	 	9.2	 	The PA agrees that, in the event this Agreement is terminated, the PA shall
continue to perform all customary and necessary services regarding all Policies
previously issued by the PA on behalf of the Company in accordance with the provisions
of this Agreement until all such Policies have naturally expired or been completely
canceled, non-renewed, or otherwise terminated. The PA’s continuing service
obligations after termination of the Agreement shall include, but are not be limited
to:

	 	a.	 	Confirming coverage under the Policies to claims adjusters,
administering the in-force Policies and any required renewals thereof;
	 
	 	b.	 	Providing all reports as required by this Agreement, paying
premium to the Company and return premium to the policyholders, collecting all
sums due, including return commissions from sub-producers;

Page 15

 

	 	c.	 	The issuance and countersignature of appropriate endorsements
to Policies, provided that, such endorsements shall not increase the Company’s
liability, except as required by law, or extend the term of any Policy without
the prior written approval of the Company;
	 
	 	d.	 	The issuance of all applicable cancellation and/or non-renewal
notices in full and complete compliance with the insurance code(s) or
regulations within the Territory where the PA was authorized to write for the
Company and in accordance with any written instructions that may be issued by
the Company;
	 
	 	e.	 	The full compliance with all applicable laws, regulations,
rules, and requirements, regarding any and all continuing service obligations
the PA performs;
	 
	 	f.	 	The continued renewal of policies where such renewals and/or
offers of renewals to insureds are mandated by law; and
	 
	 	g.	 	The reporting of sufficient information to satisfy any
reporting requirements as addressed in this Agreement.

	 	9.3	 	The PA shall promptly return to the Company any Policies, forms or other
supplies imprinted with the Company’s name, regardless of who incurred the cost for it.
The PA may retain any Policy forms or supplies necessary or required by the PA to
run-off the in-force Policies.

	 	9.4	 	If the PA fails in any respect to fulfill this continuing service obligation,
then the PA shall reimburse the Company any additional expense incurred by the Company
to service or arrange for the servicing of the Policies issued by or through the PA
hereunder or such amounts may be offset by the Company.

	 	9.5	 	Notwithstanding any of the forgoing, the Company may elect to “run-off” the in
force business itself or through its designee in the event that the Company , in its
good faith discretion and based upon reasonable considerations, determines, the PA is
unable to “run-off” the in-force business, in which case the Company will bear the
costs of run-off and will cease paying the PA commissions.

X. OWNERSHIP OF EXPIRATIONS

	 	10.1	 	So long as this business under this Agreement is not abandoned pursuant to
Section XI of this Agreement, the records of insureds and Policies and their use and
control for the solicitation of business written or bound by or through the PA
(“expirations”), as between the PA and the Company shall be the sole and exclusive
property of the PA.

Page 16

 

	 	10.2	 	The Policies, underwriting files, claim files and accounting records reflecting
the business of the Program are the joint property of the Company and the PA. Although
these materials shall be maintained by the PA as provided for in this Agreement, the
Company shall at all times maintain its right to review or copy, at its own expense,
all such files for its own purposes. However, upon a final judicial order of
liquidation of the Company, such files shall become the sole property of the Company or
its estate. The PA shall have reasonable access to and the right to copy the claim
files on a timely basis.

XI. ABANDONMENT

	 	11.1	 	If the PA abandons the business of this Agreement, the ownership of expirations
will vest in and become the sole and exclusive property of the Company. Abandonment can
only be established by the Company providing written notice to the PA via registered
mail, return receipt requested, that it believes the business has been abandoned and
how it has been abandoned. If the PA fails to respond to such notice in writing within
twenty (20) calendar days the business will be deemed to have been abandoned by the
PA.

	 	11.2	 	Upon abandonment the Company may take immediate possession of all records
relating to those expirations and the PA shall upon request immediately gather such
records together at the PA’s principal place of business and allow the Company access
to take possession of those records. The Company may service those expirations
directly or dispose of them in any commercially reasonable manner. The Company may
collect premiums directly from any insured or policyholder who has not made payment to
the PA.

	 	11.3	 	If, in disposing of the PA’s records and expirations as provided above upon an
abandonment of the business, the Company does not realize sufficient money to discharge
in full any and all of the PA’s indebtedness to the Company (including reasonable costs
incurred by the Company in connection with its recovery and disposal of the records and
expirations), the PA will remain liable to the Company for the balance of the PA’s
indebtedness to the Company. The PA shall have no right to or interest in any
commission that may be generated as a result of the Company servicing those
expirations.

	 	11.4	 	If there are any excess proceeds after satisfaction of the PA’s indebtedness to
the Company, (including any costs incurred by the Company in connection with its
recovery and disposal of the records and expirations), realized by the Company, such
proceeds shall be remitted to the PA.

XII. CONFIDENTIALITY

	 	12.1	 	Both parties shall hold and cause their respective affiliates, directors,
officers, employees, sub-producers and other representatives to hold, in strict
confidence, Confidential Information concerning the other party, unless compelled to
disclose

Page 17

 

	 	 	 	such Confidential Information by judicial or administrative process or by other
requirements of law. In the event either party is compelled to disclose
Confidential Information, written notice shall be provided immediately to the other
party to enable such party to pursue appropriate legal remedies to preclude such
disclosure.

	 	12.2	 	For purposes of this Agreement, “Confidential Information” shall mean all
information of a proprietary or confidential nature, including, but not limited to,
financial information related to the parties, their respective affiliates, employees,
officers, directors, sub-producers or other representatives, or information otherwise
prohibited from transmission by contractual, legal or fiduciary obligations, including
any information clearly marked as confidential. Confidential Information shall not
include information (a) generally available to the public, other than a result of
disclosure by the party receiving such information; or (b) available to the party
receiving such information on a non-confidential basis or from a source other than the
parties hereto.

XIII. ARBITRATION

	 	13.1	 	Any dispute arising out of the interpretation, performance or breach of this
Agreement, including the formation or validity thereof, shall be submitted for decision
to a panel of three arbitrators. Notice requesting arbitration will be in writing and
sent certified registered mail, return receipt requested.

	 	13.2	 	It shall be a condition precedent to any arbitration that the parties submit
the dispute to mediation by an unrelated and disinterested third-party mediator. The
parties shall agree upon the mediator as well as the location where the mediation shall
be held. The parties agree to mediate in good faith and shall spend no less than four
(4) hours attempting to resolve the dispute with the selected mediator. Each party
shall bear their own costs and expenses, including attorneys fees, for the mediation.
The costs of the mediator shall be borne equally by each party. If mediation does not
result in the resolution of the case the parties may submit the dispute to arbitration
as set forth in this Section XIII of the Agreement.

	 	13.3	 	If the amount in dispute is less than $100,000, unless the arbitration notice
includes a demand for rescission of this Agreement, the dispute shall be resolved by a
sole arbitrator and the following procedures shall apply:

	 	a.	 	The sole arbitrator shall be chosen by mutual agreement of the
parties within 15 business days after the demand for arbitration. If the
parties have not chosen an arbitrator within the 15 business days after the
receipt of the arbitration notice, the arbitrator shall be chosen in accordance
with the Neutral Arbitrator Selection Procedure modified for a single
arbitrator, established by the AIDA Reinsurance and Insurance Arbitration
Society – U.S. (ARIAS) and in force on the date the arbitration is demanded.
The nominated arbitrator must be available to read any written submissions and
hear testimony within 60 calendar days of being chosen.

Page 18

 

	 	b.	 	Within 10 business days after the arbitrator has been
appointed, the parties shall be notified of deadlines for the submission of
briefs and documentary evidence, as determined by the arbitrator. Discovery
shall be permitted as agreed upon by the parties or, if no such agreement is
obtained, as permitted y the arbitrator.
	 
	 	c.	 	The arbitrator shall render a decision no later than 10
business days from the later of the date on which the briefs are submitted or
the close of the hearing, if any. The decision of the arbitrator shall be in
writing and shall be final and binding.

	 	13.4	 	If the amount in dispute is equal to or greater than $100,000, or if the
arbitration notice includes a demand for rescission of this Contract, the following
procedures shall apply:

	 	a.	 	One arbitrator shall be chosen by each party and the two
arbitrators shall, before instituting the hearing, choose an impartial third
arbitrator who shall preside at the hearing. If either party fails to appoint
its arbitrator within 30 days after being requested to do so by the other
party, the latter, after 10 days’ notice by certified or registered mail of its
intention to do so, may appoint the second arbitrator.
	 
	 	b.	 	If the two arbitrators are unable to agree upon the third
arbitrator within 30 days of their appointment, the third arbitrator shall be
selected by the ARIAS.
	 
	 	c.	 	Within 45 days after notice of appointment of all arbitrators,
the panel shall meet and determine timely periods for briefs, discovery
procedures and schedules for hearings. Unless the panel agrees otherwise,
arbitration shall take place in Fort Lauderdale, Florida, but the venue may be
changed when deemed by the panel to be in the best interest of the arbitration
proceeding.
	 
	 	d.	 	The panel shall make its decision within 60 days following the
termination of the hearings. The decision of any two arbitrators when rendered
in writing shall be final and binding.
	 
	 	e.	 	Each party shall bear the expense of its own arbitrator and
shall jointly and equally bear with the other party the cost of the third
arbitrator.

	 	13.5	 	All arbitrators shall be disinterested active or former executives of insurance
or reinsurance companies or Underwriters at Lloyd’s, London, with expertise or
experience in the area being arbitrated. If a member of the panel dies, becomes
disabled or is otherwise unwilling or unable to serve, a substitute shall be selected
in the same manner as the departing member was chosen and the arbitration shall
continue.

Page 19

 

	 	13.6	 	The panel shall be relieved of all judicial formality and shall not be bound by
the strict rules of procedure and evidence. Notwithstanding anything to the contrary
in this Agreement, the arbitrators may at their discretion, consider underwriting and
placement information and correspondence exchanged by the parties that is related to
this Agreement. The panel is empowered to grant interim relief, as it may deem
appropriate.

	 	13.7	 	The arbitrator(s) shall interpret this Agreement as an honorable engagement
rather than as merely a legal obligation considering the custom and practice of the
applicable insurance and reinsurance business.

	 	13.8	 	Judgment upon the award may be entered, and enforcement sought, in any court or
tribunal having jurisdiction over the party against whom enforcement of the judgment is
sought.

	 	13.9	 	The costs of the arbitration shall be allocated by the panel (or by the
individual arbitrator if a sole arbitrator decided the matter). The panel (or single
arbitrator) may, at its discretion, award such further costs, expenses, or fees as it
considers appropriate including, but not limited to, attorneys’ fees to the extent
permitted by the relevant law.

	 	13.10	 	Punitive damages, if any, assessed under this Agreement and the Reinsurance
Agreement together, shall not exceed $250,000 in the aggregate.

XIV. GENERAL PROVISIONS

	 	14.1	 	Entire Agreement
	 
	 	 	 	This Agreement and all other agreements, exhibits, and schedules referred to in this
Agreement constitute(s) the final, complete, and exclusive statement of the terms of
the agreement between the parties pertaining to the subject matter of this Agreement
and supersedes all prior and contemporaneous understandings or agreement of the
parties.

	 	a.	 	Except as otherwise provided for in this Agreement, this
Agreement may be amended, supplemented, altered or modified only in writing
signed by both parties.
	 
	 	b.	 	All manuals, rules, regulations, guidelines, instructions and
directions issued in writing by the Company from time to time as provided in
this Agreement, shall bind the parties as though a part of this Agreement.

	 	14.2	 	Third Party Beneficiary
	 
	 	 	 	Nothing in this Agreement, except as expressly stated herein, is intended to create
any benefit for any third party.

Page 20

 

	 	14.3	 	Severability
	 
	 	 	 	If any clause, paragraph, term, or provision of this Agreement shall be held or
declared void or otherwise unenforceable by any arbitrator, court or other tribunal
of competent jurisdiction, the same shall be deemed severed, and such holding or
declaration shall have no effect upon this Agreement which shall otherwise continue
in and be given full force and effect.

	 	14.4	 	Survival
	 
	 	 	 	The obligations and duties of the parties to this Agreement shall survive the
termination of this Agreement, except as may be specifically described in this
Agreement.

	 	14.5	 	Non-Waiver
	 
	 	 	 	Forbearance, neglect or failure by any party to this Agreement to enforce any
provision of this Agreement shall not be construed as a waiver of any rights or
privileges hereunder. Irrespective of the fact that past behavior did not
precipitate strict adherence to the terms and conditions of this Agreement, the
terms and conditions of this Agreement may be strictly enforced at any time.

	 	14.6	 	Assignment
	 
	 	 	 	Neither this Agreement nor any rights, duties or obligations under this Agreement
may be assigned or delegated by either party without the prior written consent of
the other party.

	 	14.7	 	Notification
	 
	 	 	 	All notices hereunder must be in writing, unless specified otherwise, and shall be
deemed to have been duly given if delivered by hand or overnight mail or if mailed
first class or certified mail, return receipt requested, postage and registry fees
prepaid, and addressed as follows:

	 	 	 
	If to the Company:
	 	ULLICO Casualty Company
	 
	 	1625 Eye Street, NW
	 
	 	Washington, DC  20006
	 
	 	Attention: Daniel Aronowitz
	 
	 	 
	If to the PA:
	 	Patriot Underwriters, Inc.
	 
	 	401 East Las Olas Boulevard, Suite 1540
	 
	 	Fort Lauderdale, Florida  33301
	 
	 	Attention:  Steven M. Mariano

Page 21

 

	 	 	 	Addresses may be changed by written notice to the other party signed by the
addressee. Written notice provided via first class or certified mail shall be
deemed received five (5) calendar days after the date it was sent, overnight mail
shall be deemed received the day after it was sent, and hand-delivered notice shall
be deemed received the date it was delivered. In the event original service of
process is sought to be given, notice may only be accomplished by personal service
upon the registered agent for service of process for the party.
	 
	 	14.8	 	Negotiated Agreement
	 
	 	 	 	This Agreement has been negotiated by the parties and the fact that the initial and
final draft shall have been prepared by the Company shall not be used in any form in
the construction or interpretation of this Agreement or any of its provisions.
	 
	 	14.9	 	Headings
	 
	 	 	 	The headings used in this Agreement have been inserted for convenience and do not
constitute matters to be construed or interpreted in connection with this Agreement.
Unless the context of this Agreement otherwise requires, (a) words of any gender
will be deemed to include each other gender, (b) words using singular or plural
number will also include the plural or singular number, respectively, (c) the terms
“hereof”, “herein”, “hereby”, and derivative or similar words will refer to this
entire Agreement, and (d) the conjunction “or” will denote any one or more, of any
combination of all, of the specified items or matters involved in the respective
list.
	 
	 	14.10	 	Governing Law
	 
	 	 	 	This Agreement shall be governed exclusively by and construed solely in accordance
with the laws of the State of New York applicable to agreements made and to be
entirely performed within the State of New York without giving effect to its
conflict of laws, principles or rules.
	 
	 	14.11	 	Counterparts
	 
	 	 	 	This Agreement may be executed simultaneously in a number of counterparts, each of
which will be deemed an original, but all of which will constitute one and the same
instrument.

[Signatures on Following Page]

Page 22

 

	 	 	IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
duly authorized representatives recorded below.

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	ULLICO CASUALTY COMPANY	 	 	 	PATRIOT UNDERWRITERS, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/
(Illegible)	 	 	 	/s/
Charles K. Schuver	 	 
	By:

	 	 
	 	 	 	By:	 	Charles
K. Schuver	 	 
	Title:

	 	President
	 	 	 	Title:	 	President	 	 
	Date:

	 	9/23/09
	 	 	 	Date:	 	October 26,
2009	 	 

Page 23

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