Document:

Power Purchase and Sale Agreement

 Exhibit 10.42 
 POWER PURCHASE AND SALE AGREEMENT BETWEEN 
 PHELPS DODGE ENERGY SERVICES, LLC AND 
 EL PASO ELECTRIC COMPANY 
 This POWER PURCHASE AND SALE AGREEMENT (“Agreement”) is executed as of December 16, 2005 (the “Execution Date”), by and between PHELPS DODGE ENERGY SERVICES, LLC, a Delaware limited liability company
(“PDES”), and EL PASO ELECTRIC COMPANY, a corporation organized and existing under the Laws of the State of Texas (“EPE”) (collectively referred to as “Parties” and individually referred to as a
“Party”). 
 WITNESSETH: 
 WHEREAS, PDES holds a thirty-three and one third percent undivided ownership interest in the Luna Energy Facility, an approximately 570 megawatt (“MW”) (nominal) combined cycle natural gas-fired
electric generation facility located in Luna County, New Mexico; 
 WHEREAS, EPE is a regulated utility that
generates and distributes electricity through an interconnected system to approximately 330,000 customers in the Rio Grande Valley in west Texas and southern New Mexico; 
 WHEREAS, each Party has obtained from the Federal Energy Regulatory Commission (“FERC”) and currently holds authorization to sell electric capacity and energy at market-based
rates; 
 WHEREAS, PDES desires to sell 100 MW of energy from the Luna Energy Facility and delivered to EPE at the
Luna Delivery Point in exchange for EPE selling 100 MW of energy 

  

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generated by or for EPE and delivered to PDES at the Greenlee Delivery Point, or in each instance at such other agreed delivery points and quantities; and

 WHEREAS, the Parties are willing to perform such energy exchange and provide for the purchase and sale of
additional energy as described herein, subject to the terms and conditions of this Agreement. 
 NOW, THEREFORE, in
consideration of the mutual promises, covenants, and agreements set forth herein, the Parties do hereby agree with each other, for themselves and their successors and assigns, intending to be legally bound, as follows: 
 ARTICLE 1 
 DEFINITIONS AND INTERPRETATIONS

 1.1 Definitions. All capitalized terms used herein and not otherwise defined, whether singular or plural, shall
have the respective meanings set forth in Schedule A attached hereto and incorporated herein. 
 1.2 Interpretation.
In this Agreement, unless the context otherwise requires, the singular shall include the plural and any pronoun shall include the corresponding masculine, feminine, and neuter forms. The words “hereof,” “herein,”
“hereto,” and “hereunder” and words of similar import when used in this Agreement shall, unless otherwise expressly specified, refer to this Agreement as a whole and not to any particular provision of this Agreement. Whenever the
term “including” is used herein in connection with a listing of items included within a prior reference, such listing shall be interpreted to be illustrative only, and shall not be interpreted as a limitation on or exclusive listing of the
items included within the prior reference. Any reference in this Agreement to “Section,” “Article,” “Appendix,” 

  

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“Exhibit,” or “Schedule” shall be references to this Agreement unless otherwise stated, and all such Appendices, Exhibits, and Schedules
shall be incorporated in this Agreement by reference. Unless specified otherwise, a reference to a given agreement or instrument, and all schedules, exhibits, appendices, and attachments thereto, shall be a reference to that agreement or instrument
as modified, amended, supplemented, and restated, and in effect from time to time. Unless otherwise stated, any reference in this Agreement to any entity shall include its permitted successors and assigns, and in the case of any Governmental
Authority, any entity succeeding to its functions and capacities. 
 1.3 Construction. In the event of a conflict
between the text of this Agreement and any Schedule, Appendix, or Exhibit, the terms of this Agreement shall prevail. Each Party acknowledges that it was active in the negotiation and drafting of this Agreement and that no Law or rule of
construction shall be raised or used in which the provisions of this Agreement shall be construed in favor of or against either Party because one is deemed to be the author thereof. 
 ARTICLE 2 
 EFFECTIVE DATE, TERM AND, TERMINATION 
 2.1 Effective Date. This Agreement shall become effective upon execution by the Parties and obtaining from any Governmental
Authorities any necessary approvals, if any. 
 2.2 Initial and Subsequent Terms. The Initial Term of this Agreement
shall commence on the later to occur of (i) the Commercial Operation Date of the Luna Energy Facility, or (ii) the Effective Date. The Initial Term shall terminate at 11:59 p.m. Mountain Standard Time on December 31, 2021.
Thereafter, this Agreement shall automatically extend 

  

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for additional terms of one (1) year each (each a “Subsequent Term”), unless either Party provides written notice of its decision to terminate
the Agreement at the end of the existing Initial Term or Subsequent Term. Such written notice of termination shall be provided to the other Party not less than fifteen (15) calendar months prior to the end of the then effective Initial Term or
Subsequent Term. 
 2.3 Termination. This Agreement may be terminated by either Party in accordance with
Section 7.2 or Section 8.4. No termination shall become effective until the Parties have complied with all Laws applicable to such termination. 
 ARTICLE 3 
 ENERGY EXCHANGE 
 3.1 PDES’ Obligation to Sell and Deliver Energy at the Luna Delivery Point. 
 3.1.1 PDES shall generate or cause to be generated 100 MW from the Luna Energy Facility and shall sell and deliver to EPE (and EPE shall purchase and receive) such energy at the Luna Delivery
Point, or such other point as may be agreed by the Parties. 
 3.1.2 Notwithstanding any other provision of
this Agreement, PDES shall not take, sell, exchange, transfer, or consume energy from the Luna Energy Facility unless and until it has satisfied its sale and delivery obligations prescribed by Article 3; provided, however, that for the period
commencing upon the Effective Date and ending at 12:00 a.m. Mountain Standard Time on May 31, 2008, PDES may first generate or cause to be generated from the Luna Energy Facility not more than 80 MW to serve its current load commitments (the
“Current Load Commitment Sale”) and that during such period PDES shall sell and deliver to EPE all energy 

  

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(not to exceed 100 MW absent the written agreement of the Parties) PDES generates or causes to be generated from the Luna Energy Facility in excess of the
Current Load Commitment Sale. 
 3.2 EPE’s Obligation to Sell and Deliver Energy at the Greenlee Delivery Point.
In exchange for the energy that PDES delivers to EPE in accordance with Section 3.1, EPE concurrently shall sell and deliver to PDES (and PDES shall purchase and receive) at the Greenlee Delivery Point, or such other point as may be agreed by
the Parties, a quantity of energy identical to the quantity of energy sold and delivered by PDES pursuant to Section 3.1. 
 3.3 Obligations in the Event of a Failure to Deliver Energy. 
 3.3.1 If a Party fails to
deliver or receive all or a part of the energy that it is required to deliver or receive under Section 3.1 or Section 3.2, then the other Party shall suspend delivery or receipt of the same amount of energy that the former Party failed to
deliver or receive. Except as provided in Section 3.5 and Section 4.2, a Party’s exclusive remedy for the other Party’s failure to deliver or receive energy under Section 3.1 or Section 3.2 this Agreement shall be the
remedy prescribed by this Section 3.3.1. 
 3.3.2 If a forced or unplanned outage or other event
precludes a Party from fulfilling its sale and delivery obligations under Article 3, its delivery obligation shall be excused and it shall provide immediate Notice of such outage or event to the other Party including, to the extent practicable, a
description of the nature and estimated duration of such outage or event and, when feasible, shall provide further Notice of the time at which it will be able to resume delivery or receipt. 
  

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 3.3.3 If an unforced or planned outage or other event will preclude a
Party from fulfilling its sale and delivery obligations under Article 3, its delivery obligations shall be excused and it shall provide the other Party Notice of the nature and estimated duration of such outage or other event as soon as is
reasonably practicable and, when feasible, shall provide further Notice of the time at which it will be able to resume delivery or receipt. 
 3.4 Mutual Agreement of Different Quantities of Exchange. Subject to the provisions of Section 3.1.2, PDES may offer to sell and deliver to EPE at the Luna Delivery Point (or such other point as the
Parties may agree) energy in quantities of less than 100 MW that PDES generates or causes to be generated from the Luna Energy Facility. In such event, EPE shall sell and deliver to PDES at the Greenlee Delivery Point (or such other point as the
Parties may agree) an identical quantity of energy. Upon agreement, quantities of greater than 100 MW may be sold and exchanged pursuant to the terms of this Agreement. 
 3.5 Equitable Relief. The Parties acknowledge that any breach or violation of Section 3.1.2 by PDES or Section 3.2 by EPE may subject the other Party to irreparable harm and that
the remedies prescribed by Section 3.3.1 and Section 4.2 may be inadequate to compensate the non-breaching Party’s resulting losses and damages. The Parties therefore agree that, in addition to the remedies prescribed by
Section 3.3.1 and Section 4.2, the non-breaching Party shall be entitled to seek specific performance or injunctive relief to compel performance under, or to prevent or curtail any breach or violation of, Section 3.1.2 or
Section 3.2, subject to all applicable requirements for obtaining such equitable relief under Law, but without the necessity of the posting of a bond or other security as a condition precedent to such relief. 
  

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 3.6 Purchase and Sale of Additional Energy. Notwithstanding PDES’ failure to
deliver all or any part of the energy referenced in Section 3.1:1, if, in the sole opinion of PDES, the Luna Energy Facility is operational and available to serve load, EPE shall have the right to dispatch PDES’ interest of the Luna Energy
Facility and purchase, for an agreed price, up to 100 MW of firm energy per hour (or such additional energy as is necessary to satisfy the minimum operating characteristics of the Luna Energy Facility) at the Luna Delivery Point (or such other point
as the Parties may agree), less the quantity of energy, if any, delivered by PDES under Section 3.1.1 subject to the following: 
 3.6.1 the price for such energy shall not exceed the greater of: (i) the market price for such energy at the Palo Verde hub or Four Comers hub, whichever is greater, or (ii) the sum of (a) PDES’
incremental cost of providing such energy, inclusive of start-up costs, fuel and fuel transportation costs, variable operations and maintenance costs, environmental credit costs, and all other direct operating costs of producing such energy, plus
(b) an adder of 5% of PDES’ non-fuel incremental costs referenced in clause (a); 
 3.6.2 EPE’s
right to purchase energy under Section 3.6 shall be subject to PDES’ obligations under the Current Load Commitment Sale; and 
 3.6.3 all energy purchased and sold pursuant to Section 3.6 shall be separate and distinct from energy sold and exchanged under Section 3.1 and Section 3.2 and shall not affect, alter, or modify the
Parties’ respective obligations to exchange energy under Section 3.1 through Section 3.4 or the computation and assessment of the energy purchase and sale exchange fee under Section 4.1 or the minimum annual bill under
Section 4.2. 
  

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 ARTICLE 4 
 ENERGY PURCHASE AND SALE FEE 
 4.1 Energy Purchase and Sale Exchange Fee. In
consideration for their mutual obligations to sell and deliver electric energy, PDES shall pay to EPE an energy purchase and sale exchange fee of $2.05 per megawatt hour (“MWh”) for each MWh of energy delivered by EPE under
Section 3.2 or Section 3.4 up to a maximum of 700,000 MWh per calendar year. PDES shall have no obligation to pay any fee or charge to EPE for energy deliveries by EPE in excess of 700,000 MWh. EPE shall invoice PDES monthly for amounts
due under this Section 4.1. 
 4.2 Minimum Annual Bill. Within ten (10) Days following the end of each
calendar year during the Initial Term and any Subsequent Term of this Agreement, EPE shall calculate the total amount of energy delivered to PDES under Section 3.2 (the “Total MWh Delivered”). EPE shall also calculate the total number
of hours that it failed to make deliveries under Section 3.3 (the “Total Hours of Nondelivery”); provided that the Total Hours of Nondelivery shall not include any period during which EPE suspended delivery of energy pursuant to
Section 3.3.1. EPE shall then determine the Total Adjusted MWh Delivered by adding to the Total MWh Delivered the product of 45.662 and the Total Hours of Nondelivery. In the event the Total Adjusted MWh Delivered is less than 400,000 MWh (the
“Base Amount”), PDES shall pay EPE a lump sum amount equal to $2.05 multiplied by the difference between the Base Amount and the Total Adjusted MWh Delivered. Notwithstanding the foregoing, PDES shall not be obligated to pay EPE any amount
under this Section 4.2 for the calendar year 2006. 
  

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 4.3 Billing and Payment. Within twenty (20) Days following the end of each
month, each Party shall render to the other Party an invoice setting forth all charges and amounts due hereunder. On or before the tenth (10th) Day after the invoice date, or if such tenth (10th) Day is not a Business Day, the immediately
following Business Day (the “Due Date”), a Party owing money shall pay the amount due stated on the invoice. Overdue payments shall accrue interest at the Interest Rate from and including the Due Date to, but excluding, the date payment is
received by EPE. 
 4.4 Payment Disputes and Billing Audits. If a Party disputes amounts shown on the invoice or the
methodology for deriving such amounts, such Party shall on or before the Due Date (i) pay to the other Party the greater of the undisputed amount or the amount of the most recent prior month’s undisputed invoice, but not in excess of the
invoice subject to dispute, and (ii) furnish such other Party a written explanation specifying the amount of and the basis for the dispute. Within ten (10) Business Days of dispute resolution, the Party owing money shall pay the other
Party the amount owed and interest thereon at the Interest Rate from the date such amount was originally paid or due through and including the Day immediately preceding the date such amount is paid or refunded to the other Party. Each Party has the
right, at its sole expense, during normal working hours, and upon ten (10) Business Days Notice, to audit books and records of the other Party that relate to the foregoing information. Such audit rights shall extend for a period of one
(1) year beyond the date of the applicable invoice, and no adjustment for any invoice or payment will be made unless objection to the accuracy thereof was made prior to the expiration of such one-year period. The Party subject to the audit will
be entitled to review the audit report and supporting materials. 
  

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 ARTICLE 5 
 SCHEDULING OF ENERGY 
 5.1 Scheduling. PDES and EPE shall coordinate and schedule
energy for delivery pursuant to Article 3 on a day-ahead basis in accordance with all applicable WECC scheduling practices or the applicable scheduling practices of any successor independent system operator (“ISO”) or regional transmission
organization (“RTO”) or other organization with authority to administer scheduling and use of the applicable transmission system (jointly with ISOs and RTOs, an “Independent Transmission Operator”). In addition, subject to
Sections 3.3.2 and 3.3.3 and the operating capabilities of the Facility (including applicable ramp rates), EPE may dispatch and schedule the Luna Energy Facility pursuant to Section 3.6 on other than a day ahead basis provided it does so in
accordance with all applicable WECC scheduling practices or the applicable scheduling practices of any successor Independent Transmission Operator. 
 ARTICLE 6 
 INADVERTENT ENERGY 
 6.1 Inadvertent Energy. The Parties shall exercise reasonable commercial efforts to minimize any difference between the amount of energy provided by PDES pursuant to Section 3.1 and the amount of energy
provided by EPE pursuant to Section 3.2. In the event a Party receives more energy than it provides under Section 3.1 or Section 3.2, the Party receiving the energy shall repay such energy in kind at a mutually agreeable time and in a
manner that is consistent with all applicable NERC, WECC, and Independent Transmission Operator rules regarding the payback of inadvertent energy. Not later than five (5) Business Days after the last day of each month, the Parties shall
communicate with each other to confirm the amount, if 

  

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any, of energy provided by each Party to the other Party for such month and to establish a schedule for the repayment of any energy imbalance. 
 6.2 Energy Imbalance Audits. Each Party shall, upon ten (10) Business Days Notice, make available to the other Party books of
account and other records relating to this Agreement, including those that support the amount energy provided to the other and documentation of payment of any energy imbalances pursuant to Section 6.1. Either Party may, at is sole discretion
and expense, audit or examine such books and records. Each Party shall furnish the other Party with such summaries or counterparts of such records as may be necessary to satisfy applicable regulatory requirements. Notwithstanding any other provision
of this Agreement, any documents concerning energy exchanges or sales pursuant to this Agreement shall be final, and shall not be subject to adjustment for any reason, unless a Party has provided Notice to the other Party that it believes such
documents are in error not later than one (1) year from the date of the invoice corresponding to the applicable energy exchange or sale. 
 6.3 Modification of Energy Imbalance Settlement Practices. In the event that WECC or any successor Independent Transmission Operator should adopt energy imbalance settlement practices that differ materially
from the practices described in Section 6.1 including, without limitation, the payment of energy imbalance penalties or fees, the Parties shall, through their duly authorized representatives, convene to discuss and assess in good faith
appropriate modifications to Section 6.1 that address and fairly apportion responsibilities for the financial or other settlement of energy imbalances. 
  

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 ARTICLE 7 
 REGULATORY APPROVALS 
 7.1 FERC Approval. In the event that a Party elects or is
required to file the Agreement with FERC (for acceptance or for informational purposes), the Parties shall use good faith efforts to agree on the form and substance of the filing; provided that either Party may file the Agreement with FERC five
(5) days after providing a draft of the filing to the other Party for its review. An affected Party shall have the rights and remedies prescribed by Section 7.2 if FERC or any other Governmental Authority (i) rejects this Agreement
or, as a condition precedent to its acceptance, requires, or in the reasonable estimation of such Party may require, any amendment(s) or modification(s) to this Agreement or other condition(s) to such acceptance that will or may result in a material
adverse consequence(s) to such Party, (ii) denies or revokes the market based rate authority of either Party, and such denial or revocation applies ab initio or retroactively to include this Agreement, or (iii) takes other action
that makes performance of this Agreement impossible for such Party or otherwise results in a material adverse effect on such Party. 
 7.2 Obligation to Meet to Reform Agreement. If any of the events set out in Section 7.1 occurs, the Parties shall meet within five (5) Business Days of such event and shall use commercially reasonable efforts to reform this
Agreement in an agreed manner, or to take other agreed actions which provide each Party with economic or other benefits which are substantially equivalent to those set forth in this Agreement. If such negotiations do not result in an agreed solution
within thirty (30) Days (or such longer period as the Parties may agree in writing), then this Agreement shall be terminated without liability to either Party other than for payment of amounts accrued or due through the date of termination.

  

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 ARTICLE 8 
 DEFAULT 
 8.1 Events of Default. “Event of Default” shall mean the
occurrence of any of the following events with respect to a Party (the “Defaulting Party,” the other Party being the “Non-Defaulting Party”): 
 8.1.1 the failure by the Defaulting Party to make, when due, payment of any amount required under this Agreement if such failure is not remedied within five (5) Business Days after written
Notice of such failure is given to the Defaulting Party by the Non-Defaulting Party (the “Notice of Default”); provided however, that (i) a Party shall not be in default of its payment obligations under Article 4 if it timely complies
with the provisions of Section 4.4, and (ii) neither Party shall be in default of any other payment obligation under this Agreement if on or before the applicable Due Date it (a) pays the undisputed amount, and (b) furnishes the
other Party a written explanation specifying the disputed amount and basis for such dispute; 
 8.1.2 any
representation or warranty of the Defaulting Party pursuant to this Agreement that is false or misleading in any material respect when made or deemed made and was known by the Defaulting Party to have been so at the time made or deemed made unless
(a) the fact, circumstance, or condition that is the subject of such representation or warranty has been remedied by the Defaulting Party such that the representation and warranty is correct within twenty (20) Days after the Notice of
Default has been given to the Defaulting Party, and (b) such cure removes any adverse effect on the Non-Defaulting Party of such fact, circumstance, or condition being otherwise than as first represented; and 
  

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 8.1.3 the failure by the Defaulting Party to perform or observe any
material obligation or covenant set forth in this Agreement (other than obligations that are otherwise specifically covered in this Section 8.1 as a separate Event of Default), and such failure is not cured within thirty (30) Days after
the Notice of Default is given to the Defaulting Party. 
 8.2 Cumulative Remedies. All rights, options, and remedies
of the Parties contained in this Agreement shall be construed and held to be cumulative, and no one of them shall be exclusive of the other. Unless otherwise limited by the terms of this Agreement, the Parties shall have the right to pursue any and
one or all remedies, including but not limited to, (a) the Non-Defaulting Party may terminate this Agreement in accordance with Section 8.4, or (b) the Non-Defaulting Party may exercise any other remedy available at Law or in equity.

 8.3 No Waiver in Event of Default. Pursuit by either Party of any remedy to an Event of Default shall not
constitute a forfeiture or waiver of any amount due from the Defaulting Party or of any damages occurring by reason of the violation of any terms, provisions, or conditions of this Agreement. No waiver of any Event of Default shall be deemed or
construed to constitute a waiver of any other violation or breach of any of the terms, provisions, or conditions of this Agreement. Failure to enforce one or more of the remedies available upon the occurrence of an Event of Default shall not
constitute a waiver of that Event of Default or any subsequent Event of Default. 
 8.4 Early Termination. In the
event an Event of Default occurs during the Initial Term or any Subsequent Term, the Non-Defaulting Party may (a) terminate this Agreement by providing Notice to the Defaulting Party establishing a termination date at least one (1) Day

  

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after the opportunity to cure the Event of Default has expired without the Defaulting Party having cured the Default. 
 ARTICLE 9 
 TITLE, RISK OF LOSS,
INDEMNIFICATION, 
 LIMITATION OF LIABILITY, AND 
 MITIGATION OF DAMAGES 
 9.1 Title, Risk of Loss, and Indemnification. Each party
warrants that the energy it will deliver under this Agreement is free and clear of all liens, Claims, and encumbrances arising prior to its respective delivery point specified in Article 3. Title and risk of loss to the energy to be delivered by
PDES under this Agreement shall transfer from PDES to EPE at the Luna Delivery Point or such other point as may be agreed by the Parties. Title and risk of loss to the energy to be delivered by EPE under this Agreement shall transfer from EPE to
PDES at the Greenlee Delivery Point or such other point as may be agreed by the Parties. Notwithstanding any limitation or exclusion prescribed by Section 9.2 or any other provision of this Agreement, each Party shall indemnify and hold
harmless the other Party, its directors, officers, employees, agents, and contractors for, against, and from any and all Claims for personal injury (including mental anguish), death, or damage to the property of any third party(s) arising from or
out of (i) the negligence (including strict liability in tort), gross negligence, or willful misconduct of the indemnitor, its Affiliates, or their respective directors, officers, employees, agents, contractors, or (ii) any event,
circumstance, act, or incident first occurring or existing during the period when title to the energy is vested in the indemnitor; provided, however, the obligations prescribed by this sentence shall not apply to the proportionate extent such Claims
are determined to be attributable to the negligence (including 

  

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strict liability in tort), gross negligence, or willful misconduct of the indemnitee, its Affiliates, or their respective directors, officers, employees,
agents, or contractors. 
 9.2 Limitation of Remedies, Liability, and Damages. The Parties confirm that the express
remedies and measures of damages provided in this Agreement satisfy the essential purposes hereof. For breach of any provision for which an express remedy or measure of damages is prescribed, (i) such express remedy or measure of damages shall
be the sole and exclusive remedy, (ii) the obligor’s liability shall be limited as set forth in such provision, and (iii) all other remedies or damages at law or in equity are waived. If no remedy or measure of damages is expressly
provided herein, the obligor’s liability for any breach of this Agreement shall be limited to direct actual damages only, such direct actual damages shall be the sole and exclusive remedy, and all other remedies or damages at law or in equity
are waived. Except for Claims for indemnification for third party Claims under Section 9.1, each to which the provisions of this Section 9.2 shall not apply, neither Party shall be liable to the other Party or its Affiliates for
consequential, incidental, punitive, exemplary, or indirect damages, lost profits or other business interruption damages, by statute, in tort or contract, or otherwise. It is the intent of the Parties that the limitations herein imposed on remedies
and the measure of damages be without regard to the cause or causes related thereto, including the negligence of any party, whether such negligence be sole, joint or concurrent, or active or passive. To the extent any damages required to be paid
hereunder are liquidated, the Parties acknowledge that the damages are difficult or impossible to determine, otherwise obtaining an adequate remedy is inconvenient, and the liquidated damages constitute a reasonable approximation of the harm or
loss. 
  

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 9.3 Duty to Mitigate. Each Party agrees that it has a duty to mitigate damages and
covenants that it will use commercially reasonable efforts to minimize any damages it may incur as a result of the other Party’s performance or non-performance of this Agreement. 
 ARTICLE 10 
 DISCLAIMER OF WARRANTIES 
 10.1 DISCLAIMERS. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, EACH PARTY ON BEHALF OF ITSELF, ITS AFFILIATES, AND
EACH OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, AND CONTRACTORS HEREBY NEGATES AND DISCLAIMS ANY AND ALL EXPRESS, IMPLIED, OR STATUTORY WARRANTIES, WHETHER WRITTEN OR ORAL, WITH RESPECT TO THE ENERGY TO BE DELIVERED UNDER THIS
AGREEMENT INCLUDING, WITHOUT LIMITATION, ANY AND ALL WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO MODELS OR SAMPLES, COURSE OF DEALING OR USAGE OF TRADE, OR OTHERWISE. 
 ARTICLE 11 
 FORCE MAJEURE 
 11.1 Force Majeure. If a Party is rendered unable by Force Majeure to carry out, in whole or part, its obligations hereunder and
such Party gives Notice and full details of the event to the other Party as soon as practicable after its occurrence, then during the pendency of such Force Majeure, but for no longer period, the obligations of the Claiming Party (other than
obligations to make payments then due or becoming due with respect to prior performance) shall be suspended; provided, however, a suspension shall (i) be of no greater scope and of no 

  

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longer duration than is required by the Force Majeure, and (ii) shall not suspend or otherwise affect PDES’ obligation to pay the minimum annual
bill prescribed by Section 4.2. The Claiming Party shall provide immediate Notice of such Force Majeure event or circumstance and, if such Notice in made orally, the Claiming Party shall further provide written Notice within two
(2) Business Days thereafter. Such Notice(s) to the other Party shall include, to the extent practicable, a description of the nature and estimated duration of such Force Majeure event or circumstance. The Party affected by the Force Majeure
shall remedy the Force Majeure with all reasonable dispatch; provided, nothing herein shall require PDES and EPE to exchange energy at points other than the Luna Delivery Point and Greenlee Delivery Point, respectively, in accordance with their
respective obligations in Article 3, unless otherwise agreed by the Parties. 
 ARTICLE 12 
 TAXES 
 12.1 Taxes. A
Party delivering energy under this Agreement shall pay or cause to be paid all taxes imposed by any Governmental Authority (“Taxes”) on or with respect to such energy prior to the applicable delivery point. A Party receiving energy under
this Agreement shall pay or cause to be paid all Taxes on or with respect to such energy at and from such delivery point (other than ad valorem, franchise, or income Taxes that are related to the sale of energy and are, therefore, the responsibility
of the delivering Party). In the event a Party is required by Law to pay or remit Taxes that are the other Party’s responsibility hereunder, the Party responsible for such Taxes shall promptly reimburse the paying or remitting Party for such
Taxes. Notwithstanding the provisions of Article 12 or any other provision of this 

  

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Agreement, a Party shall not be liable for or obligated to pay any Taxes for which it is exempt under Law. 
 12.2 Cooperation. Each Party shall use reasonable efforts to implement the provisions of and to administer this Agreement in
accordance with the intent of the Parties to minimize all Taxes, so long as neither Party is affected by such efforts. 
 ARTICLE 13

 ANCILLARY FEES 
 13.1 Ancillary Service Fees and Charges. As of the Execution Date, neither Party is cognizant of any ancillary service fees or charges applicable in connection with the energy to be delivered under Article 3. Notwithstanding the
preceding sentence, each Party shall be solely responsible for payment of any and all ancillary service fees and charges that may be assessed in connection with its obligation to deliver energy to the applicable delivery point referenced in
Article 3. 
 ARTICLE 14 
 MISCELLANEOUS 
 14.1 Representations and Warranties. Each Party represents and warrants to the other Party
that: (a) such Party has the full power and authority to execute, deliver, and perform this Agreement and to carry out the obligations contemplated hereby; (b) the execution and delivery of this Agreement by such Party and the carrying out
by such Party of the obligations contemplated hereby have been duly authorized by all requisite corporate (or, if applicable, partnership) action, and this Agreement has been duly executed and delivered by such Party and constitutes the legal,
valid, and binding obligation of such Party, enforceable 

  

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against it in accordance with the terms hereof, subject as to enforceability of remedies to limitations imposed by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws relating to or affecting the enforcement of creditor’s rights generally and general principles of equity; (c) other than the authorization provided for under Section 14.1(f), there is no authorization,
consent, approval or order, or notice to or registration, qualification, declaration, or filing with any Governmental Authority, is required as of the Execution Date for the execution, delivery, and performance by such Party of this Agreement or the
carrying out by such Party of the obligations contemplated hereby, other than regulatory and similar approvals needed pursuant to Article 7; (d) none of the execution, delivery, and performance by such Party of this Agreement, the
compliance with the terms and provisions hereof, and the carrying out of the obligations contemplated hereby, conflicts or shall conflict with or result in a breach or violation of any of the terms, conditions, or provisions of any Law in effect as
of the Execution Date or the charter document (or partnership agreement, if applicable), as amended or by-laws, as amended, of such Party or any applicable order, writ, injunction, judgment, or decree of any Governmental Authority against such Party
or by which it or any of its properties is bound, or any loan agreement, indenture, mortgage, bond, note, resolution, contract or other agreement, or instrument to which such Party is a party or by which it or any of its property is bound, or
constitutes or shall constitute a default thereunder or shall result in the imposition of any lien upon any of its property; (e) there are no legal or arbitral proceedings, or any proceedings by or before any Governmental Authority, now pending
or (to the knowledge of such Party) threatened against such Party or any of its subsidiaries that if adversely determined, could reasonably be expected to have a material adverse effect on such Party’s ability to perform its obligations under
this Agreement, and (f) each Party currently 

  

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holds and will exercise reasonable diligence to continue to maintain throughout the term of this Agreement, authorization from FERC to sell capacity and
energy at market-based rates. 
 14.2 Governing Law. The validity, interpretation, and performance of this Agreement
and each of its provisions shall be governed by the Laws of the State of New York, excluding its conflicts of law rules. 
 14.3 Relationship of the Parties. Nothing in this Agreement shall be deemed to constitute either Party a partner, agent, or legal representative of the other Party or to create any fiduciary relationship between the Parties.

 14.4 Not for Benefit of Third-Parties. Except as otherwise expressly provided herein, this Agreement and each and
every provision thereof is for the exclusive benefit of the Parties hereto and is not for the benefit of or enforceable by any third-party. 
 14.5 Notice. Except as otherwise provided in this Agreement, all Notices under this Agreement shall be in writing and be effective upon delivery if delivered by (i) hand, (ii) certified or registered
United States Mail postage prepaid, or (iii) facsimile, provided that service by facsimile after 5:00 p.m. local time of the recipient shall be deemed delivered on the following Business Day, as follows: 
  

	 	 (i)
	 if Notice is to PDES: 

 Phelps Dodge Energy Services, LLC 
 c/o Phelps Dodge Corporation 
 One North Central Avenue, l7/F 
 Phoenix, Arizona 85004-2306 
 Attention: Choi Lee 
 Facsimile: 602-366-7315 
  

	 	 (ii)
	 if Notice is to EPE 

  

 21 

 El Paso Electric Company 
 Attention Steven T. Buraczyk 
 123 W. Mills Avenue 
 El Paso, Texas 79901 
 Facsimile (915) 521-4751; and 
 if the Notice is sent for the purpose described in Article 8, Section 2.2, Section 11.1 or this Section 14.5, with a copy to: 
 El Paso Electric Company 
 Office of the General Counsel 
 123 W. Mills Avenue 
 El Paso, Texas 79901 
 Facsimile (915) 521-4747. 
 Each party may change its address for purposes of Notice under this Agreement by Notice complying with this Section 14.5. 
 14.6 Waiver. The failure of either Party to insist upon strict performance of any of the terms and conditions of this Agreement,
or to exercise or delay the exercise of any rights or remedies provided by this Agreement or by Law, or the acceptance of all or part of the energy delivered under this Agreement shall not release the other Party from any of the responsibilities or
obligations imposed by Law or by this Agreement and shall not be deemed a waiver of any right of the other Party to insist upon strict performance of this Agreement. 
 14.7 Cooperation. PDES and EPE shall each assist the other in fulfilling and discharging the responsibilities assumed under this Agreement. This general undertaking of mutual assistance
shall not be deemed to replace or modify in any respect the specific responsibilities and obligations of PDES and EPE as described in this Agreement. 
 14.8 Amendments. This Agreement may be amended only by a written instrument duly executed by each of the Parties. 
  

 22 

 14.9 Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon any respective successors and assigns (as may be permitted by Section 14.10) of the Parties. 
 14.10
Assignment. Except as provided in this Section 14.10, this Agreement shall not be assigned by either Party without the prior written consent of the other Party hereto, which consent shall not be unreasonably withheld or delayed. No
consent shall be required in connection with the assignment or transfer to any financing institution or investor (and their collateral assignees), in each instance solely as security for loans. Further, no consent shall be required in connection
with the assignment or transfer of this Agreement (i) between PDES and any commonly controlled subsidiary or Affiliate of PDES, or (ii) between EPE and any commonly controlled subsidiary or Affiliate of EPE, so long as (a) such
assignment or transfer is consistent with applicable Law, (b) the assignment or transfer is of all rights and obligations under the Agreement, and (c) the assignee or transferee has the same or better creditworthiness as the assigning
Party in the reasonable opinion of the non-assigning Party. Any assignee or transferee of the rights of any Party shall agree in writing to be bound by and subject to all the provisions and conditions of this Agreement to the same extent as though
such assignee or transferee were the original Party under this Agreement. The assignment or transfer of any rights under this Agreement shall be effective when the assignee or transferee agrees in writing to assume all of the obligations of the
assignor or transferor and to be bound by all of the provisions and conditions of this Agreement. Any assignment which does not comply with the provisions of this Section 14.10 shall be null and void. Each Party agrees to execute any consent to
assignment and such other documents in connection with any assignment to lenders (or its assignee) as such lenders may request; provided, however, that neither Party shall be 

  

 23 

 
obligated to consent to any assignment or other related documentation that materially increases its obligations hereunder or materially decreases its rights
and benefits hereunder. 
 14.11 Counterparts. This Agreement may be executed in two (2) or more counterparts,
each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 
 14.12
Further Assurances. From time to time during the term of this Agreement, PDES and EPE shall execute such instruments and other documents, upon the request of the other Party, as may be necessary or appropriate to carry out the intent of this
Agreement. 
 14.13 Designation of Contacts. EPE shall designate in writing to PDES, from time to time, the person or
persons to be contacted at EPE concerning the implementation of this Agreement. PDES shall designate in writing to EPE, from time to time, the person or persons representing PDES to be contacted concerning the implementation of this Agreement.

 14.14 Severability. Any provision declared or rendered unlawful by any Governmental Authority or deemed unlawful
because of a change in Law will not, to the extent reasonable and practicable, affect the remaining lawful obligations under this Agreement, and the Parties shall use reasonable efforts to reform this Agreement in order to give effect to the
original intent of the Parties. 
 14.15 Headings Not to Affect Meaning. The descriptive headings of the various
Articles and Sections of this Agreement have been inserted for convenience of reference only and shall in no way modify or restrict any of the terms or provisions hereof. 
  

 24 

 14.16 Integration. This Agreement prevails over prior communications between the
Parties or their representatives concerning these matters. This Agreement is integrated and contains the entire agreement between the Parties, and no representations, warranties, or promises have been made or relied on by any Party other than those
set forth in this Agreement. 
 14.17 Standard of Review. The Parties agree that the Agreement does not contain a rate
change or substitution provision. Absent the agreement of all Parties to any proposed change, the Parties agree that the standard of review for changes to any provision of this Agreement specifying the rate(s) or other material economic terms and
conditions agreed to by the Parties herein, whether proposed by a Party, a non-Party, or FERC acting sua sponte, shall be the “public interest” standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp.,
350 U.S. 332 (1956) and Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956)(the “Mobile-Sierra” doctrine). 
 14.18 Survival. The provisions of Articles 1,4,9, 10, 12, 13, and 14 and Sections 6.2, 8.2, and 8.3 shall survive the termination of this Agreement. 
 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 
  

 25 

 The Parties have executed and delivered this POWER PURCHASE AND SALE AGREEMENT on the
Execution Date, in multiple counterparts to be construed as one contract, intending to be legally bound as of the Execution Date and effective as of the Effective Date. 
  

			
	 PHELPS DODGE ENERGY SERVICES, LLC

		
	 By:
	 	 /s/ CHOI LEE

			
		 	 Signature

	 Name:
	 	 Choi Lee

	 Title:
	 	 Vice President

			
	 Date:
	 	  

			
	
	 EL PASO ELECTRIC COMPANY

		
	 By:
	 	 /s/ FERNANDO GIREUD

			
		 	 Signature

	 Name:
	 	 Fernando Gireud

	 Title:
	 	 Vice President

	 Date:
	 	 December 15, 2005

		
	 By:
	 	 /s/ GARY HEDRICK

			
		 	 Signature

	 Name:
	 	 Gary Hedrick 

	 Title:
	 	 CEO & President 

			
	 Date:
	 	 December 15, 2005

  

 26 

 SCHEDULE A 
 DEFINITIONS 
 “Affiliate” - shall mean, for any specified entity,
any other entity directly or indirectly controlling or controlled by or under direct or indirect common control with such specified entity. For purposes of this definition, “control” when used with respect to any entity shall mean the
power to direct the management and policies of such entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings
correlative to the foregoing. 
 “Business Day” - shall mean any Day other than (i) Saturday,
(ii) Sunday, (iii) any Day that is a legal holiday, or (iv) a Day on which banking institutions in New York City, New York are authorized by Law or other governmental action to close. 
 “Claim” or “Claims” - shall mean any and all claims, demands, and actions arising from, in connection with, or
in any way related to this Agreement (including the performance or non-performance thereof) and any and all resulting losses, damages, costs, expenses (including reasonable attorneys’ fees), whether incurred by settlement, judgment, decree, or
otherwise, and whether such claims, demands, or actions are threatened, asserted, or filed prior or subsequent to the termination of this Agreement. 
 “Claiming Party” - shall have the meaning given to it in the definition of Force Majeure. 
 “Commercial Operation Date” - shall mean March 1, 2006. 
 “Day” - shall mean a twenty-four (24) hour period, commencing at one (1) minute prior to 12:01 a.m. (Mountain Standard Time) of each calendar day and ending at one (1) minute after 11:59 p.m.
(Mountain Standard Time) of such calendar day. 
 “Defaulting Party” - shall have the meaning set forth in
Section 8.1. 
  

 Schedule A 
 Page 1 

 “Due Date” - shall have the meaning set forth in Section 4.3.

 “Effective Date” - shall have the meaning set forth in Section 2.1. 
 “Event of Default” or “Default” - shall have the meaning set forth in Section 8.1. 
 “Execution Date” - shall mean the date on which the Parties executed this Agreement, which also appears on page one of
the Agreement. 
 “FERC” - means the Federal Energy Regulatory Commission. 
 “Force Majeure” - shall mean an event not anticipated as of the Effective Date, which is not within the reasonable
control of the Party (or in the case of third party obligations or facilities, the third party) claiming suspension (the “Claiming Party”), which is not the result of negligence of the Claiming Party, and which by the exercise of due
diligence the Claiming Party, or such third party, is unable to prevent, overcome, or obtain or cause to be obtained a commercially reasonable substitute therefor. Force Majeure may include, but is not restricted to: acts of God; fire; civil
disturbance; labor dispute; labor or material shortage (unless caused by the Claiming Party’s failure to exercise reasonable diligence to secure such materials); sabotage; action or restraint by court order or public or Governmental Authority
(so long as the Claiming Party has not applied for or assisted in the application for, and has opposed where and to the extent reasonable, such government action); provided, that the following shall not constitute Force Majeure: (i) the loss of
a Party’s markets or a Party’s inability economically to use or resell the energy purchased, sold, or exchanged hereunder; or (ii) a Party’s ability to sell energy to a market at a more advantageous price. Notwithstanding
anything herein to the contrary, nothing in this Agreement shall obligate either Party to settle any strike or other labor dispute. 
 “Governmental Authority” - shall mean any federal, state, or local governmental or regulatory authority, administrative agency, commission, department, board, or court that has 

  

 Schedule A 
 Page 2 

 
jurisdiction over either of the Parties to the Agreement, the Luna Energy Facility, or the subject matter of the Agreement. 
 “Greenlee Delivery Point” (also known as the “Phil Young substation”) - means that certain 345 kilovolt
(“kV”) substation located in Greenlee County, Arizona. 
 “Initial Term” - shall have the meaning
set forth in Section 2.2. 
 “Interest Rate” - shall mean the rate per annum equal to the lesser of
(i) the highest interest rate allowed by Law, or (ii) two percent (2%) plus the prime rate, as stated in the Wall Street Journal on the date payment is due. 
 “kV” - means kilovolt. 
 “Law” - shall mean any applicable constitutional provision, statute, act, code, or law (including, but not limited to, any environmental law, regulation, rule, ordinance, order, decree, ruling,
proclamation, resolution, judgment, decision, declaration, or interpretive or advisory opinion or letter) of a Governmental Authority. 
 “Luna Delivery Point” - means that certain 345 kilovolt (“kV”) substation located approximately 1.5 miles north of Deming, New Mexico. 
 “Luna Energy Facility” - shall means the approximately 570 MW (nominal) combined cycle natural gas-fired electric
generation facility located in Luna County, New Mexico that as of the Execution Date is owned jointly by PDES, Tucson Electric Power Company, and PNMR Development and Management Corporation. 
 “MW” - means megawatt. 
 “MWh” - means megawatt hour. 
 “NERC” - means the North
American Electric Reliability Council, and any successor organization. 
  

 Schedule A 
 Page 3 

 “Non-Defaulting Party” - shall have the meaning set forth in
Section 8.1. 
 “Notice” - shall mean any notice, request, consent or other communication provided by
one Party to the other Party in accordance with Section 14.5. 
 “Notice of Default” - shall have the
meaning set forth in Section 8.1.1. 
 “Subsequent Term” - shall have the meaning set forth in
Section 2.2. 
 “Taxes” - means all federal, state, and local taxes, fees, governmental charges, and
assessments, presently or hereafter imposed on the energy exchanged hereunder, but excluding taxes imposed on net income. 
 “Total Adjusted MWh Delivered” - shall have the meaning set forth in Section 4.2. 
 “Total Hours of Nondelivery” - shall have the meaning set forth in Section 4.2. 
 “Total MWh Delivered” - shall have the meaning set forth in Section 4.2. 
 “WECC” - means the Western Electricity Coordinating Council, a regional organization within NERC. 
  

 Schedule A 
 Page 4Employment Agreement between USI Insurance and Philip E. Larson

 EXHIBIT 10.21 
 EMPLOYMENT AGREEMENT 
 EMPLOYMENT AGREEMENT, effective as of January 26, 2004 by and between USI
SERVICES CORPORATION, a Delaware corporation (“Company”) and Philip E. Larson, III (“Executive”). Company and Executive are referred to hereinafter as the “Parties”. 
 R E C I T A L S : 
 WHEREAS, the Company is a wholly owned subsidiary of U.S.I. Holdings Corporation, a Delaware corporation (“USI”) and; 
 WHEREAS, the Company desires to employ the Executive on the terms and subject to the conditions set forth herein, and Executive is willing to accept such employment on such terms and conditions; and 
 WHEREAS, by virtue of such employment, Executive will have access to Confidential Information of the USI Companies; and 
 WHEREAS, Executive acknowledges and agrees that the Company (on behalf of itself and the USI Companies) has a reasonable, necessary and legitimate
business interest in protecting its own and the USI Companies’ Confidential Information, Client Accounts, relationships with Active Prospective Clients, Goodwill and ongoing business, and that the terms and conditions set forth below are
reasonable and necessary in order to protect these legitimate business interests. 
 NOW THEREFORE, in consideration of the representations,
warranties, covenants, and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are conclusively acknowledged, the Parties, intending to become legally bound, agree as follows: 
 A G R E E M E N T : 
 1. DEFINITIONS 
 1.1 Specific Definitions. Capitalized terms not defined elsewhere
herein shall have the following meanings ascribed to them: 
 “Active Prospective Acquisition” means any business or
enterprise engaged in providing USI Business, (i) with which a specified Person (or any of its agents) had engaged in negotiations (whether or not successfully) within the 24 months preceding a specified date, regarding the acquisition of, sale
of assets by, or merger or joint venture with, such business or enterprise or (ii) which had been identified by a specified Person (or any of its agents) in the business records of such specified Person within the 24 months preceding a
specified date, and actively considered as a candidate, for possible acquisition, merger, sale of assets or joint venture. 
  

 1 

 “Active Prospective Client” means any Person, or a group of Persons, (i) who or
which had been identified with reasonable particularity by a specified Person (or any of its agents) in the business records of such specified Person within the 24 months preceding a specified date, with reasonable particularity as a possible client
or customer of such specified Person, or (ii) to whom or which a specified Person (or any of its agents) had communicated in the business records of such specified Person within the 24 months preceding a specified date, in writing or otherwise,
with respect to the provision of any services that such specified Person provides in the conduct of its business. 
 “Client
Account” means the account of any client (including, without limitation, any retail insurance agent or broker, individual insured, association and any member thereof, and any insurance carrier or other entity to the extent third party
administration claims processing or underwriting is performed by such specified Person for such carrier or other entity) who or which is serviced, as of a specified date, by a specified Person in connection with such specified Person’s
business, regardless of whether such services are provided by, or through the licenses of, such specified Person or any shareholder, employee or agent of such specified Person. 
 “Change of Control” means the occurrence of any of the following: 
 (i) any transaction, or series of related transactions (including any merger or consolidation), the result of which is that any “person” or
“group” (as such terms are defined for purposes of the Securities Exchange Act of 1934, as amended), becomes the “beneficial owner” (as so defined, except that a Person shall be deemed to have “beneficial ownership” of
all securities that such Person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of 50% or more of USI’s aggregate outstanding
voting stock (measured by voting power rather than number of shares); 
 (ii) USI consolidates with, or merges with or into, any Person, or
any Person consolidates with or merges with or into USI, in any such event pursuant to a transaction in which any of the outstanding voting stock of USI is converted into or exchanged for cash, securities or other property, other than any such
transaction where the voting stock of USI outstanding immediately prior to such transaction is converted into or exchanged for voting stock of the surviving or transferee Person constituting more than 50% of the aggregate outstanding shares of such
voting stock of such surviving or transferee Person (immediately after giving effect to such conversion or exchange); or 
 (iii)
substantially all of USI’s assets or earnings power is sold in any transaction or series of related transactions 
  

 2 

 “Confidential Information” means any information of a specified Person, determined as of
a specified date, that is not already generally available to the public (unless such information has entered the public domain and become available to the public through fault on the part of the Party to be charged hereunder), all of which the
Parties agree constitute trade secrets under the governing trade secrets law, including but not limited to: 
  

	 	(i)	the identity of any client (including, without limitation, any retail insurance agent or broker, individual insured, association and any member thereof, and any insurance carrier or
other entity to the extent third party administration claims processing or underwriting is performed by such specified Person for such carrier or other entity) whose account constituted a Client Account of such specified Person at any time within
the 24 months preceding such specified date, as well as the identity of any Active Prospective Client of such specified Person as of such date; 

  

	 	(ii)	the identity, authority and responsibilities of key contacts at each such client and Active Prospective Client; 

  

	 	(iii)	the service cost burden with respect to each such client and Active Prospective Client; 

  

	 	(iv)	the identities of markets or companies (including, but not limited to, managed care programs, physician networks and the surgical review board) from which insurance coverages or
other commitments, benefits or services for clients are obtained, the surgical review boards of such companies and the commission rates and/or fees with respect thereto; 

  

	 	(v)	the types of consulting, third-party administration, employee communication, investment management, managed care, human resource and other services, and insurance coverages,
provided or to be provided specifically to any such client or Active Prospective Client, and the internal corporate policies relating thereto; 

  

	 	(vi)	the specific insurance policies purchased by or for such clients or Active Prospective Clients; 

  

	 	(vii)	the expiration dates, commission rates, fees, premiums and other terms and conditions of such policies; 

  

	 	(viii)	the risk specifications and other characteristics, and claims loss histories of such clients or Active Prospective Clients; 

  

	 	(ix)	the nature of programs and plans, including their design, funding and administration, demographic characteristics and any other information supplied by, or developed for, such
clients or Active Prospective Clients; 

  

	 	(x)	operations manuals, prospecting manuals and guidelines, pricing policies and related information, marketing manuals and plans, and business strategies, techniques and methodologies;

  

	 	(xi)	financial information, including information set forth in internal records, files and ledgers, or incorporated in profit and loss statements, fiscal reports and business plans;

  

	 	(xii)	Active Prospective Acquisitions of such specified Person as of such date, and all financial data, pricing terms, information memoranda and due diligence reports relating thereto;

  

 3 

	 	(xiii)	Technology and e-commerce strategies, business plans and implementations, inventions, algorithms, computer hardware, software and applications (including but not limited to any
source code, object code, documentation, diagrams, flow charts, associated with the development or use of the foregoing computer software); 

  

	 	(xiv)	all internal memoranda and other office records, including electronic and data processing files and records; and 

  

	 	(xv)	any other information constituting a trade secret under the governing trade secrets law. 

 “Goodwill” means the expectation of continued patronage from Client Accounts and new patronage from prospective clients. 
 “Person” means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, a limited liability company, or a
governmental entity (or any department, agency, or political subdivision thereof). 
 “USI Company” means any USI Company to
which Executive provides services on behalf of the Company during the term of this Agreement. 
 “USI Business” means the
businesses provided by any of the USI Companies (including, without limitation, the providing of (i) insurance agency and brokerage, and related insurance services, including, without limitation, risk management and loss control, cost
containment, analysis of loss exposures and designs, catastrophic case management, loss reserves and rate reviews, performance of cash flow studies, administration of risk funding and transfer techniques, captive company formation, self-insurance
consulting, reinsurance and excess stop loss (both specific and aggregate) placement, management of insurance programs (including programs with respect to membership associations and congregations), third party administration, actuarial and
administrative services for pension and health plans, compensation programs and employee communications; (ii) managed care consulting services and related legal assistance; (iii) human resource and employee compensation consulting services
and related legal assistance; and (iv) any insurance or financial services relating to any of the foregoing). 
 “USI
Companies” means USI, its subsidiaries (including the Company), its “affiliates” and “associates” (as defined in Rule 12b-2 of the regulations promulgated under the Exchange Act, without regard to whether any party is a
“registrant” under such Act), and any of their successors or assigns. 
 2. POSITION, RESPONSIBILITIES AND TERM

 2.1. Executive’s Position. On the terms and subject to the conditions set forth in this Agreement, the Company shall
employ Executive to serve as Vice President, Operations of the Company and USI. Executive shall report to the Chief Operating Officer of USI (the “USI COO”). 
  

 4 

 2.2 Executive’s Responsibilities. The Executive shall perform all duties customarily
attendant to the position and shall perform such services and duties commensurate with such positions as may from time to time be reasonably prescribed by the USI COO. 
 2.3 No Conflicts of Interest. Executive further agrees that throughout the period of his employment hereunder, he will not perform any activities or services, or accept such other employment which would
be inconsistent with this Agreement, the employment relationship between the Parties, or would interfere with or present a conflict of interest concerning Executive’s employment with USI or the Company; provided, that Executive shall be
permitted to serve on the boards of directors of such other companies as the USI Chief Executive Officer (“USI CEO”) shall approve, such approval not to be unreasonably withheld, and that Executive may make personal investments and may act
as a director and engage in other activities for any charitable, educational, or other nonprofit institution, as long as such investments and activities do not materially interfere with the performance of Executive’s duties hereunder. Executive
agrees to adhere to and comply with any and all business practices and requirements of ethical conduct set forth in writing from time to time by the Company in its employee manual or similar publication. 
 2.4. Term. Executive shall be employed commencing on January 26, 2004 and ending on the date on which employment is terminated in
accordance with the provisions of Section 8 of this Agreement. The foregoing term of employment shall be referred to hereinafter as the “Term”. 
 3. ACCEPTANCE 
 3.1 Executive hereby accepts such employment and agrees that throughout the
period of employment hereunder, Executive will devote his full business time, attention, knowledge and skills faithfully, diligently and to the best of his ability, in the furtherance of the business of the USI Companies. 
 4. COMPENSATION 
 4.1. Base Salary.
As compensation for the services to be rendered by Executive hereunder, the Company agrees to pay Executive, and Executive agrees to accept, a base salary (“Base Salary”) during employment hereunder at the annual rate of not
less than $ 200,000; provided, however, that the USI CEO may determine to increase but not decrease the Executive’s Base Salary in such amount as the USI CEO may determine. The Base Salary shall be payable in equal installments by
the Company according to its normal payroll practices. 
 4.2 Performance Bonus. As additional compensation for the services to
be rendered by Executive hereunder, Executive shall be eligible to receive from time to time during the term hereof, a bonus under the USI Management Incentive Plan, as may be amended from time to time at the sole discretion of the Board or
Compensation Committee of the Board (the “USI Plan”). As Vice President, Operations, Executive is entitled to a percentage of Base Salary award which is in turn based upon the USI and Executive performance criteria set forth in the
USI Plan. At no time during the Term hereof will Executive’s “target” award opportunity be any 
  

 5 

 less than 60 % of Executive’s then Base Salary. Any awards under the USI Plan which exceed target performance
will be in such amount as the USI CEO may determine, and any decision of USI CEO shall be in his sole and unreviewable discretion. Any award under the USI Plan will be paid to the Executive no later than 90 days following the end of the performance
year. 
 4.3 2002 Equity Incentive Plan. As additional compensation for the services to be rendered by Executive hereunder,
Executive shall be eligible to receive from time to time during the Term hereof, stock based compensation awards under the 2002 Equity Incentive Plan, as may be amended from time to time at the sole discretion of the Board or Compensation Committee
of the Board. Moreover, as additional specific consideration to the Executive for entering into this Agreement, USI’s CEO agrees to recommend to the USI Compensation Committee of the Board for approval an award of 75,000 options to purchase USI
stock. 
 4.4 Benefits. In addition to such compensation, Executive shall be entitled to the benefits which are afforded
generally, from time to time to USI executive employees. Notwithstanding the foregoing, nothing contained in this Agreement shall require the USI Companies to establish, maintain or continue any of the group benefits plans already in existence or
hereafter adopted for the employees of the USI Companies, or restrict the right of the USI Companies to amend, modify or terminate such group benefit plans in a manner which does not discriminate against Executive as compared to other executive
employees of USI Companies. 
 4.5 Vacation. Executive shall be entitled to vacation time and holidays as are provided in
general to executive employees of the USI Companies, in accordance with usual practices and procedures, but shall in any event, be entitled to no less than 18 vacation and personal days per year. Without limiting the foregoing, Executive shall not
be entitled to any additional compensation for any unused vacation time. 
 5. EXPENSES 
 5.1 The Company shall reimburse Executive, in accordance with Company policy, for all expenses reasonably and properly incurred by Executive in
connection with the performance of Executive’s duties hereunder and the conduct of the business of the Company, upon the submission to the Company (or its designee) of appropriate vouchers therefor. Additionally, in connection with initial
employment, the Company shall reimburse Executive for his eligible moving expenses up to an amount not to exceed $10,000.  
 6. CONFIDENTIAL
INFORMATION AND PROPERTY 
 6.1. Property of the Company. Executive acknowledges and agrees that all premiums, commissions,
fees and other forms of compensation, and all Confidential Information of the USI Companies relating thereto, which Executive generates in the course of providing, directly or indirectly, any USI Business during the Term hereof (including such items
resulting from or relating to services provided by Executive to the USI Companies), shall be the sole property of the USI Companies, as the case may be. 
  

 6 

 6.2. Confidentiality during Term. During the Term hereof, Executive will not use, or
disclose to any Person, any Confidential Information (determined as of any date during the Term hereof) of any USI Company, except (a) in the normal course of business on behalf of such USI Company (b) with the prior written consent of
such USI Company or (c) to the extent necessary to comply with law or the valid order of a court of competent jurisdiction, in which event Executive shall notify such USI Company as promptly as practicable (and, if possible, prior to the making
of such disclosure). In addition, Executive will use reasonable efforts to prevent any such prohibited use or disclosure by any other person. 
 6.3. Confidentiality following Term. Following the Term hereof, Executive will not use, or disclose to any Person, any Confidential Information (determined as of the date of termination of Executive’s employment with the
Company) of any USI Company, except (a) with the prior written consent of such USI Company or (b) to the extent necessary to comply with law or the valid order of a court of competent jurisdiction, in which event Executive shall notify
such USI Company as promptly as practicable (and, if possible, prior to the making of such disclosure). In addition, Executive will use reasonable efforts to prevent any such prohibited use or disclosure by any other person. 
 7. NON-SOLICITATION, NON-COMPETITION AND CONFLICTS OF INTEREST 
 7.1. Non-Solicitation. Except in the normal course of business on behalf of any USI Company, Executive agrees that he will not, directly or indirectly, (a) solicit, sell, provide or accept any
request to provide, or induce the termination, cancellation or non-renewal of, any USI Business from or by any person, corporation, firm or other entity whose account constituted a Client Account of such USI Company, at any time within the 24
months preceding the earlier of the date of such act or the date of termination of Executive’s employment with USI and the Company or (b) solicit, offer, negotiate or otherwise seek to acquire any interest in any Active Prospective
Acquisition of such USI Company, determined as of the earlier of the date of such act or the effective date of termination of Executive’s employment with USI and the Company. The restrictions contained in this Section 7.1 shall apply
throughout the Term hereof and thereafter until two (2) years after the effective date on which Executive’s employment with USI and the Company, or there respective successors in interest, terminates. 
 7.2. Non-Competition. In consideration of the payments and benefits to be received by Executive under this Agreement and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Executive, Executive agrees that, during the Non-Competition Period (as hereinafter defined), Executive will refrain from carrying on any business, directly or
indirectly, which provides any USI Business, except (i) in the normal course of business on behalf of any USI Company during the term of Executive’s employment under this Agreement or (ii) with the Company’s prior written
consent. The term “carrying on any business” shall mean to act as a sole proprietor, partner, member of a limited liability company, stockholder, officer, director, employee, manager, trustee, agent, advisor, joint venturer, or consultant
of, with or to, any business, or otherwise to own, manage, operate, control or participate in the ownership, management, operation or control of, or engage in, any business. The Non-Competition Period shall mean the period beginning on the effective
date of this Agreement and ending on the first anniversary of the date of Executive’s termination of employment. It is expressly agreed that this Section 7.2 is not intended to restrict or prohibit either (i) the ownership by
Executive of stock or other securities of a publicly-held corporation in which Executive does not (a) possess beneficial ownership of more than 5% of the voting capital stock of such corporation or (b) participate in any management or
advisory capacity, or (ii) Executive’s acts as a shareholder and director of a business in the context of private equity group investments. In addition, it is also agreed that this Section 7.2 shall not prohibit Executive from serving
as a director pursuant to the terms of Section 2.3 during the term of his employment under this Agreement. It is the desire and intent of the parties that the provisions of this Section 7.2 shall be enforced under the laws and public
polices applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Section 7.2 is adjudicated to be invalid or unenforceable or shall for any reason be held to be excessively broad as to
duration, geographic scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with applicable laws and such provision shall be deemed modified and amended to the extent necessary
to render such provision enforceable in such jurisdiction. If Executive challenges the enforceability of the provisions of this Section 7.2 in whole or in part, Executive shall, immediately upon such challenge, forfeit any right to any payments
and benefits under this Agreement that he has not already received. 
  

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 7.3. No Hiring. Executive further agrees that he will not, directly or indirectly, solicit
the employment, consulting or other services of any other employee or independent producer of any USI Company or otherwise induce any of such employees to leave such USI Company’s employment or to breach an employment or independent producer
agreement therewith. The restrictions contained in this Section 7.3 shall apply throughout the Term hereof and thereafter until two (2) years following the date on which Executive’s employment with USI and the Company or their
respective successors in interest terminates. 
 7.4 Non-disparagement. Subject to obligations under applicable laws and
regulations, in the event of a termination of this Agreement, neither the Executive nor any of the USI Companies or their senior officers or directors, shall publicly make any statements or comments that disparage the reputation of the Executive, or
any of the USI Companies or their senior officers or directors. 
 7.5. Miscellaneous. Without limiting the provisions
of Section 16, in the event of any assignment by the Company permitted under such section, the restrictive periods contained in this Section 7 shall be determined by reference to the termination of Executive’s employment with any
permitted assignee of the Company. 
 8. TERMINATION 
 8.1 Termination by the Company Without Cause. Company shall have the right to terminate Executive’s employment hereunder “without cause” by giving Executive written notice to that
effect. Any such termination of employment shall be effective on the date specified in such notice. In the event of such termination, the Company shall (i) pay Executive his unpaid Base Salary through the effective date of termination and any
business expenses remaining unpaid on the effective date of the termination for which Executive is entitled to be reimbursed under Section 5 of this Agreement, (ii) pay Executive an amount per month equal to one-twelfth of his then
adjusted Base Salary for the period commencing on the date following the date of termination and ending on the date which is twelve (12) months following the effective date of termination; and (iii) either continue to provide Executive
with healthcare coverage under the plan in which Executive participates immediately prior to the effective date of such termination (where Executive remains eligible to participate, and in accordance with the terms thereof) or in the event Executive
no longer remains eligible to participate under such healthcare plan, to reimburse Executive for the amount of the premium Company would have paid for Executive’s healthcare coverage had Executive remained employed hereunder, in each case until
(A) the date which is twelve (12) months following the effective date of termination or (B) the commencement of Executive’s coverage under another employer’s healthcare plan; provided, however, that without
limiting any other remedy available hereunder, all payments described in the Section 8.1 shall immediately terminate upon an arbitrator’s or judge’s determination that Executive has breached the provisions of Section 6 or 7
hereof. 
  

 8 

 8.2 Termination by the Company for Cause. The Company shall have the right to terminate
this Agreement and Executive’s employment hereunder “for cause” by giving Executive written notice to that effect. Any such termination of employment shall be effective on the date specified in such notice. In the event of such
termination, the Company shall pay to Executive (a) his unpaid Base Salary through the effective date of the termination, and (b) any business expenses remaining unpaid on the effective date of the termination for which Executive is
entitled to be reimbursed under Section 5 of this Agreement. For the purpose of this Agreement, “for cause” shall mean (i) commission of a willful and material act of dishonesty in the course of Executive’s duties hereunder,
(ii) conviction by a court of competent jurisdiction of a crime constituting a felony or conviction in respect of any act involving fraud, dishonesty or moral turpitude, (iii) Executive’s performance under the influence of controlled
substances, or continued habitual intoxication, during working hours, after the Company shall have provided written notice to Executive and given Executive 30 days within which to commence rehabilitation with respect thereto, and Executive shall
have failed to commence such rehabilitation or continued to perform under the influence after such rehabilitation, (iv) frequent or extended, and unjustifiable (not as a result of incapacity or disability) absenteeism which shall not have been
cured within 30 days after the Company shall have advised Executive in writing of its intention to terminate Executive’s employment in accordance with the provisions of this Section 8.2, in the event such condition shall not have been
cured, (v) Executive’s personal, willful and continuing misconduct or refusal to perform duties and responsibilities described in Section 1 above, or to carry out directives of the USI COO, which, if capable of being cured, shall not
have been cured within 90 days after the Company shall have advised Executive in writing of its intention to terminate Executive’s employment in accordance with the provision of this Section 8.2 or (iv) material non-compliance with
the terms of this Agreement, including but not limited to any breach of Section 6 or Section 7 of this Agreement. 
 8.3
Termination by Executive for Good Reason. Executive shall have the right to terminate this Agreement and his employment hereunder for “good reason,” if (i) there is a Change of Control, and within one year
following such Change of Control, there is a substantial diminution of Executive’s duties and responsibilities as set forth herein; or (ii) there is a default by the Company in the payment of or otherwise failure by the Company to pay in a
timely fashion after demand therefor any material sum due to the Executive pursuant to this Agreement; provided that in either case, Executive shall give the Company prior written notice of the “good reason” for termination and a period of
30 days following receipt by the Company of such notice shall have lapsed and the matters which constitute or give rise to such “good reason” shall not have been cured or eliminated by the Company. In the event of such termination under
subsection (ii) of this section, Executive shall be entitled to receive the same payments and benefits as would be provided under Section 8.1 in the event of a termination without cause. In the event of such termination under subsection
(i) of this section, Executive shall be entitled to receive the same payments and benefits as would be provided under Section 8.1 in the event of a termination without cause; provided however, that severance amount referenced therein shall
include an additional amount equal to 60% of Executive’s then adjusted Base Salary. 
  

 9 

 8.4 Termination by Executive Without Good Reason. Executive shall have the right to
terminate this Agreement and his employment hereunder by giving the Company not less than ninety (90) days prior written notice to that effect. The termination of employment shall be effective on the date specified in such notice. In the event
that such notice is given, the Company may require Executive to leave immediately, in which event, Executive must be compensated under this Agreement for the notice period in a manner commensurate to the compensation Executive would have received
during the notice period had his employment not been terminated by him. In the event of such termination, Executive shall be entitled to receive the same payments as would be provided under Section 8.2 in the event of termination for cause.

 8.5 Death, Incapacitation or Disability.  
 a. Death. If Executive dies during his employment hereunder, this Agreement shall terminate upon the date of Executive’s death. In the event of any such termination, the Company shall pay to
Executive’s representative or his estate any unpaid Base Salary through the effective date of termination and any business expenses remaining unpaid on the effective date of the termination for which Executive is entitled to be reimbursed under
Section 5 of this Agreement. 
 b. Incapacitation or Disability. In the event that Executive is incapacitated or disabled
by reason of illness or physical or mental disability from performing Executive’s duties hereunder (which shall be deemed to have occurred (i) when Executive has receive total disability benefits under the Company’s long-term group
disability policy for a continuous period of six (6) months or, if no policy is then in effect, (ii) when such incapacity or disability shall have existed for either (A) one continuous period of six months or (B) a total of seven
months out of any twelve consecutive months), the Company shall have the right to terminate Executive’s employment hereunder by giving Executive 30 days prior written notice to that effect. In the event of any such termination, the Company
shall pay to Executive any unpaid Base Salary through the effective date of termination and any business expenses remaining unpaid on the effective date of the termination for which Executive is entitled to be reimbursed under Section 5 of this
Agreement. 
  

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 9. REMEDIES 
 9.1. Equitable Relief. Executive acknowledges that the services to be rendered by him are of a special, unique and extraordinary character and that it would be extremely difficult or impracticable to replace such services,
that the material provisions of this Agreement are of crucial importance to the Company and that any damage caused by the breach of Sections 6 or 7 of this Agreement would result in irreparable harm to the business of the Company for which money
damages alone would not be adequate compensation. Accordingly, Executive agrees that if he violates Sections 6 or 7 of this Agreement, the Company shall, in addition to any other rights or remedies of the Company available at law, be entitled to
equitable relief in any court of competent jurisdiction, including, without limitation, temporary injunction and permanent injunction. 
 9.2
Arbitration. The Parties agree that any controversy, claim or dispute arising out of or relating to Executive’s employment hereunder, or the termination of such employment, shall be settled by arbitration before a mutually
selected arbitrator to be held in the State of New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The Parties agree that Executive’s sole remedy for a breach of this Agreement
shall be monetary damages. Judgment may be entered on the arbitrator’s award in any court having jurisdiction, and the Parties consent to the jurisdiction of the courts of the State of New York for this purpose. The arbitrator shall determine
which Party or Parties shall be entitled to costs and expenses (including reasonable attorneys’ fees) resulting from such dispute or controversy. If such controversy, claim or dispute involves a claim (including, without limitation, claims,
arising under Section 6 or 7) for injunctive or other equitable relief, and suit or cross-claim for such relief is filed in a court of competent jurisdiction, the litigation shall be bifurcated to the extent feasible, to the end that all issues
other than those injunctive or equitable issues required to be determined by the court shall be determined by arbitration as hereinabove required. 
 10.
WITHHOLDING 
 10.1 Each payment to Executive under this Agreement shall be reduced by any amounts required to be withheld by the Company
from time to time under applicable laws and regulations then in effect. 
 11. ENTIRE AGREEMENT; NO AMENDMENT 
 11.1 No agreements or representations, oral or otherwise, express or implied, have been made by either Party, with respect to Executive’s employment
by any USI Company, that are not set forth expressly in this Employment Agreement. Except as provided for hereinafter, this Agreement supersedes and cancels any prior agreement entered into between Executive and the Company or its predecessors
relating to Executive’s employment by any USI Company. No amendment or modification of this Agreement shall be valid or binding unless made in writing and signed by the Party against whom enforcement thereof is sought. 
  

 11 

 12. NOTICES 
 12.1 All notices, demands and requests of any kind which either Party may be required or may desire to serve upon the other Party hereto in connection with this Agreement shall be delivered only by courier or other means of personal
service, which provides written verification of receipt, or by registered or certified mail return receipt requested, or by telecopy, provided that the telecopy is promptly followed by delivery of hard copy of such notice which provides written
verification of receipt (each, a “Notice”). Any such Notice delivered by registered or certified mail shall be deposited in the United States mail with postage thereon fully prepaid, or if by courier then deposited with the courier. All
Notices shall be addressed to the Parties to be served as follows: 
  

	(a)	If to the Company, at 

 USI Holdings Corporation.

 555 Pleasantville Road 
 Briarcliff Manor, NY 10510 
 Attn: Chief Executive Officer 
 Telephone: (914) 749-8500 
 Facsimile:

 Copy to: 
 USI Holdings
Corporation. 
 555 Pleasantville Road 
 Briarcliff Manor, NY 10510 
 Attn: General Counsel 
 Telephone: (914) 749-8500 
 Facsimile: 
  

	(b)	If to Executive, at 

 Philip E. Larson III 
 333 River Street, Apt 942 
 Hoboken NJ 07030

 Either of the Parties hereto may at any time and from time to time change the address to which notice shall be sent hereunder by notice to
the other Party given under this Section. All such notices, requests, demands, and other communications shall be effective when received at the respective address set forth above or as then in effect pursuant to any such change. 
 13. WAIVERS 
 13.1 No waiver of any default or breach
of this Agreement shall be deemed a continuing waiver or a waiver of any other breach or default. 
  

 12 

 14. GOVERNING LAW 
 14.1 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 
 15. SEVERABILITY 
 15.1 The provisions of this
Agreement are intended to be interpreted in a manner which makes them valid, legal, and enforceable. In the event any provision of this Agreement is found to be partially or wholly invalid, illegal or unenforceable, such provision shall be modified
or restricted to the extent and in the manner necessary to render it valid, legal, and enforceable. It is expressly understood and agreed between Executive and the Company that such modification or restriction may be accomplished by mutual accord
between the Parties or, alternatively, by disposition of an arbitrator or a court of law. If such provision cannot under any circumstances be so modified or restricted, it shall be excised from this Agreement without affecting the validity, legality
or enforceability of any of the remaining provisions. 
 16. ASSIGNMENT 
 16.1 Executive may not assign any rights (other than the right to receive income hereunder) under this Agreement without the prior written consent of the Company. This Agreement may be assigned without the consent of
Executive, and the provisions of this Agreement shall be binding upon and shall inure to the benefit of the assignee hereof. 
 IN WITNESS
WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of the day and year first above written. 
  

					
	USI SERVICES CORPORATION.
		
	By:	 	 /s/ David L. Eslick

		 	 
		 	Name:	 	David L. Eslick
		 	Title:	 	Chairman, President and CEO
		
		 	 /s/ Philip E. Larson III

		 	 
		 	Name:	 	Philip E. Larson III

  

 13

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