Document:

exv10w83

Exhibit 10.83

PROGRAM ADMINISTRATOR AGREEMENT

Alternative Market 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
	 	9 
	 
	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
	 	23 
	 
	Exhibit 2: Commission Schedule
	 	26 
	 
	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 

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PROGRAM ADMINISTRATOR AGREEMENT

(Alternative Market 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 14 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 Alternative Market 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

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	 	 	 	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.

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	 	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.

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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.

V. REPORTING AND RECORD KEEPING

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	 	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 and Fees Schedule.
	 
	 	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

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	 	 	 	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.
	 
	 	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

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	 	 	 	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 reorganization, or liquidation proceeding or any such proceeding is
instituted against the PA, its parent corporation or Guarantee Insurance
Company;

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	 	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;
	 
	 	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.,

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	 	 	 	the ultimate parent of the PA, or other affiliated entities; or (ii) The
death, retirement, or resignation of such Key Personnel.
	 
	 	g.	 	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;
	 
	 	h.	 	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
	 
	 	i.	 	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 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

 Page 14

 

	 	 	 	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;
	 
	 	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;

 Page 15

 

	 	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.
	 
	 	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

 Page 16

 

	 	 	 	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 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.

 Page 17

 

	 	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.

	 	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

 Page 18

 

	 	 	 	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.
	 
	 	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

 Page 19

 

	 	 	 	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.
	 
	 	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

 Page 20

 

	 	 	 	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

	 	 	 	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

 Page 21

 

	 	 	 	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.

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/ David Arbawitz	 	 	 	/s/ Charles K. Schuver
	 	 	 
	By:

	 	David Arbawitz	 	By:	 	Charles K. Schuver
	 

	 	 
	 	 	 	 
	Title:

	 	President	 	Title:	 	President
	 

	 	 
	 	 	 	 
	Date:

	 	10/22/09	 	Date:	 	10/26/2009
	 

	 	 
	 	 	 	 

 Page 22exv10w84

Exhibit 10.84

MANAGING GENERAL AGENCY AGREEMENT

This MANAGING GENERAL AGENCY AGREEMENT (“Agreement”) is entered into effective
as of December 15, 2009 (“Effective Date”) by and between ADVANTAGE WORKERS
COMPENSATION INSURANCE COMPANY, an Indiana domiciled insurance company (“Company”),
on the one hand, and PATRIOT UNDERWRITERS INC., a Delaware
corporation (“PUI”),
PATRIOT RISK SERVICES, INC., a Delaware corporation (“PRS”) (PRS and PUI
collectively referred to as “MGA”), and PATRIOT RISK MANAGEMENT, INC., a Delaware
corporation (‘PRM”)(PRM and MGA collectively referred to as “Patriot”), on the
other hand, with reference to the following recitals of fact:

RECITALS

	A.	 	PUI is a licensed producer for workers compensation insurance in certain states.
	 
	B.	 	MGA provides workers compensation insurance support services such as
marketing, policy issuance, loss control, claims management services.
	 
	D.	 	Company is a licensed workers compensation insurer and wishes to appoint
MGA to produce workers compensation insurance and provide certain services in
connection with such insurance.

Company and Patriot therefore agree as follows:

	I.	 	Authority
	 
	1.1	 	Subject to the terms and conditions of this Agreement, including its
attached exhibits, Company hereby appoints and authorizes:

	 	a.	 	PUI to solicit applications and accept submissions for workers compensation
and employers liability insurance in accordance with Exhibit A and applicable
laws and regulations from licensed producers, agents and brokers meeting the
requirements of Section 3.4 below (the “Sub-producers”);
	 
	 	b.	 	PUI to underwrite, quote and rate workers compensation and employers
liability insurance policies (“Policies” or “Policy”) in accordance with
Exhibit A and applicable laws and regulations;
	 
	 	c.	 	PUI to timely issue, sign, as the producer of record, and distribute
Policies, endorsements and other required notices and policy attachments
to policyholders in accordance with Exhibit A and applicable laws and
regulations;
	 
	 	d.	 	PUI to prepare and sign, as the Company’s appointed producer,
certificates of insurance on Policies;
	 
	 	g.	 	PUI to provide loss control services in accordance with
Exhibit A and applicable laws and regulations; and
	 
	 	h.	 	PRS to pay and adjust claims in accordance with the Section VII of this Agreement.

 

 

	1.2	 	PUI shall use the rates, rules and forms filed by Company and state and national
rating bureaus. Nothing herein shall preclude Company from making or changing rate, rules
and forms filed with state insurance departments.
	 
	1.3	 	Nothing contained herein shall create an employer/employee relationship between Company and
Patriot nor shall Patriot be authorized to act on behalf of Company except as expressly
authorized in this Agreement. Patriot shall at all times be an independent contractor and,
except as set forth herein, Company shall have no right of control over Patriot as to time,
means, or manner of Patriot’s performance of its duties under this Agreement other than as
set forth herein. No employees of MGA, its parent or affiliates shall be employees of
Company.
	 
	II.	 	Limitations of Authority
	 
	2.1	 	MGA shall not solicit, transact, quote, underwrite, bind or deliver policies contrary to
the terms and conditions of this Agreement, including but not limited to the following:

	 	a.	 	types of insurance policies other than workers compensation and employers liability;
	 
	 	b.	 	policies on risks which are excluded from Company’s reinsurance treaties or are
otherwise ineligible per the Underwriting Guide, as defined in Exhibit A or as
determined by Company from time to time, unless Company gives prior written approval for
each individual risk;
	 
	 	c.	 	policies on risks which do not comply with the applicable forms, rules, rates, or
filings of Company or state and national rating bureaus, and the laws and regulations of
the state(s) in which the policy applies; and
	 
	 	d.	 	policies which cover risks located in jurisdictions other than those allowed per
Exhibit A of this Agreement and/or jurisdictions where Company is not authorized to
write, or has not filed necessary rates, rules and forms for, workers compensation and
employers liability insurance.

	2.2	 	If MGA solicits, transacts, quotes, underwrites or binds policies which are not acceptable
per Section 2.1, MGA shall promptly take any and all necessary actions permitted by applicable
law to remove Company as the insurer.
	 
	2.3	 	MGA shall not waive any conditions or make any changes to Company’s insurance policies,
endorsements, applications, or certificates of insurance without Company’s prior written
approval.
	 
	2.4	 	MGA shall not cancel or nonrenew any policies unless otherwise instructed by Company.
All requests for policy cancellations or nonrenewals shall be promptly sent to Company.
	 
	2.5	 	MGA does not have any binding authority except as specified in this Agreement and
the Underwriting Guide.
	 
	2.6	 	MGA has no authority to arrange, purchase, or enter into any negotiations or agreements on
behalf of Company to obtain reinsurance or retrocessions with respect to Company business; or
commit Company to participate in insurance or reinsurance syndicates, pools, or joint ventures
of any nature.

2

 

	2.7	 	MGA shall not use or authorize the use of Company’s name, logo or service mark in any
advertising or promotional material, including electronic material(s), without Company’s
prior written consent.
	 
	III.	 	General Obligations of MGA
	 
	3.1	 	MGA represents and warrants that it is, and its officers, employees and Sub-producers are
and will continue to be during the term of this Agreement and thereafter while providing any
continuing services hereunder, authorized, licensed and qualified to perform any act set out
in this Agreement, to the extent MGA or such officers, employees or Sub-producers are
required to be authorized, licensed or qualified under applicable laws and regulations. MGA
shall notify Company promptly if MGA becomes aware that any of MGA’s officers, directors,
owners, employees, or Sub-producers (i) has made, makes or is required to make a filing with
any governmental authority seeking an exemption or consent under 18 U.S.C. § 1033(e)(2), (ii)
have been or are convicted of any federal or state felony or any crime involving dishonesty,
fraud or breach of trust, (iii) have been or are assessed any administrative penalties or
fines involving dishonesty, fraud or breach of trust, or (iv) have had any licenses
suspended, revoked or non-renewed.
	 
	3.2	 	MGA shall provide Company, as requested, a copy of resident and non-resident producer
licenses, claims adjuster licenses and business entity licenses, as applicable, of MGA and its
key employees identified on Schedule 3.2 hereto (“Key Employees”) and others who perform
services under this Agreement which require licensure. MGA shall ensure it has producer,
adjuster, business entity and other licenses required in any state MGA produces applications,
adjusts claims or undertakes any activity under this Agreement that requires licensing prior
to commencing such activity and at the request of Company, provide copies of such licenses to
Company. MGA shall immediately notify Company if any such license is suspended, terminated or
expires, and MGA agrees that its authority under this Agreement will terminate immediately in
those jurisdictions until MGA provides satisfactory evidence of re-licensure.
	 
	3.3	 	MGA shall be responsible for full compliance with all applicable laws, regulations, and other
requirements relating to the performance of its obligations under this Agreement, including
managing general agency laws and regulations, and all written instructions, including without
limitation, the Underwriting Guide, and Claims Service Instructions, provided from time to
time by Company. If the performance of any duty or obligations hereunder constitutes the
unauthorized practice of insurance by Company in an applicable jurisdiction, MGA shall
immediately notify Company and this Agreement shall be immediately suspended in such
jurisdiction.
	 
	3.4	 	PUI may contract with Sub-producers for the sole purpose of accepting applications for
underwriting and quoting and shall appropriately supervise Sub-producers. Except as permitted
hereunder, MGA shall not appoint or assign any authority or responsibilities under this
Agreement to Sub-producers, or another managing general agency or sub-managing general agency.
Prior to accepting applications from any Sub-producer, PUI shall verify that such Sub-producer
is properly licensed in accordance with applicable state laws and regulations and has errors
and omissions (E & O) insurance of not less than $1,000,000. PUI shall maintain a listing and
current copies of Sub- producers licenses and copies of current E & O coverage from which PUI
accepts an application. At the request of Company, PUI shall provide, or allow Company to
review, copies of licenses, E & O coverage, and agreements with Sub-producers. PUI warrants
that an appropriate investigation of a Sub-producer’s background and qualifications has been
made in accordance with applicable laws and regulations and acknowledges its continuing
obligation to monitor the licensure and qualifications of Sub-producers. PUI will provide
Company with the information needed for

3

 

	 	 	Company to appoint any Sub-producer, as needed, in accordance with applicable laws and
regulations.
	 
	3.5	 	PUI will be the producer of record for all policies and will be responsible for all costs
incurred by it in connection with the production of business herein, including without
limitation, commissions paid to Sub-producers. All commissions paid to Sub-producers shall be
paid in accordance with applicable laws and regulations.
	 
	3.6	 	MGA shall keep true and complete records of all transactions and correspondence (including
but not limited to proof of mailing for all notices required by law or regulation) with
policyholders, Sub-producers, claimants, state insurance departments or other regulatory
agencies pertaining to business produced or administered pursuant to
this Agreement.
	 
	3.7	 	All records and documents required to be maintained by MGA related to business produced and
administered pursuant to this Agreement, including, but not limited to, policyholder
information, underwriting files, claim files and financial documents and records, shall be
maintained during the term of this Agreement and for a period or five years thereafter (or
such longer period as required under applicable law), in electronic or other form in a format
mutually agreed upon or as required by Company to be compatible with Company’s internal
systems and in accordance with insurance regulatory practices. MGA shall not destroy any such
records or documents without Company’s prior written consent. MGA shall provide Company with
originals or copies of such documents and records within 30 days of Company’s request for
such documents and records at MGA’s expense. MGA shall not disclose any such records and
documents to any third parties without prior written consent of Company unless necessary for
MGA to perform the services contemplated under this Agreement or as otherwise required under
applicable laws and regulations.
	 
	3.8	 	MGA shall be responsible for maintaining the security and integrity of any computer systems
and software provided by Company (“Systems”) for quoting and issuing policies or any other
obligation under this Agreement. MGA shall restrict its use of Systems and any other software
supplied by Company for underwriting, rating, and issuing Policies or other services as
specified in this Agreement. MGA shall not copy, deconstruct or reverse engineer Systems or
any software supplied by Company and agrees not to access, view, change, use or disclose
information except as needed to perform its responsibilities under
this Agreement. In addition,
by accessing Company online services, through Company’s website, MGA agrees to be bound by the
Terms of Use and Electronic Services Agreement for advantage Online.
	 
	3.9	 	MGA will ensure that its employees are aware of the confidential and proprietary nature of
the non-public information related to Policies and claims filed under the Policies. MGA will
not disclose any confidential or proprietary information except as required to perform its
duties under this Agreement, and, in the case of nonpublic health or financial information of
employees of employers covered by Policies, as allowed or required by state and federal
privacy laws and regulations. MGA will protect and safeguard nonpublic health and financial
information in accordance with applicable laws and regulations.
	 
	3.10	 	MGA shall promptly notify Company of any lawsuits, regulatory actions, complaints from
insurance departments or other regulatory agencies, complaints from policyholders and
claimants, and material notices or requests from state insurance departments or other
regulatory bodies, in each case relating to Policies, and shall cooperate, and assist Company
as requested by Company, in the investigation and response thereto. Except as otherwise
provided in Section 7.2.n., MGA shall take no action or make any reply on behalf of Company
with respect to such matters unless requested by Company.

4

 

	3.11	 	Since MGA and its employees are independent contractors and not employees of Company,
all of
MGA’s overhead expenses, including but not limited to, office rent, transportation, salaries,
utilities, furniture, fixtures, equipment, attorney or other legal fees, postage, delivery
expenses,
promotional advertising and public relations expenses, printing costs of proposals, premium
notices, posters, records, reports, inspection fees, retail credit reports and any other
documents
required to fulfill the obligations of MGA under this Agreement are the sole responsibility
of MGA.
	 
	3.12	 	MGA shall not charge or commit Company to any expense, agreement, payment, debt, settlement
or obligation other than as expressly provided for in this Agreement. MGA has no authority to
litigate, arbitrate or settle any disputes or suits on behalf of Company unless Company has given its
prior written consent.
	 
	3.13	 	Patriot will provide prompt written notice to Company of any proposed or completed (i) sale,
transfer, merger, consolidation or reorganization involving Patriot or any affiliate; (ii)
change of
30% or more interest in, or ownership of, Patriot or any affiliate; (iii) change involving
30% or
more of the assets of PRM, PUI or PRS; (iv) change of officers of Patriot; or (v) insolvency
or
bankruptcy filing of Patriot or any affiliate.
	 
	3.14	 	MGA shall maintain a sufficient number of competent employees as necessary to adequately
service Policies and otherwise carry out its duties and responsibilities under this
Agreement.
	 
	3.15	 	PRM shall provide Company its balance sheet and statement of income each quarter which shall
be completed in accordance with generally accepted accounting principles. PRM shall provide
Company with annual consolidated audited financial statements of PRM and its affiliates and
annual and quarterly statutory statements of Guarantee Insurance Company.
	 
	3.16	 	PRM shall be responsible for any and all amounts due to Aon Benfield for services
provided in connection with this Agreement.
	 
	IV.	 	General Obligations of Company
	 
	4.1	 	Subject to applicable laws and regulations, and notwithstanding anything in this Agreement to
the contrary, Company shall have the right to reject any individual application or risk submitted by
PUI, or to modify, cancel, or refuse to renew any Policy written hereunder, provided that Company
may not use this Section 4.1 as the basis for rejecting, modifying, cancelling, or nonrenewing all or
substantially all of the applications, risks or business submitted or
produced by PUI.
	 
	4.2	 	Except as provided in Section 6.2, policyholder names, customer lists and renewal rights on
Policies produced by PUI under this Agreement shall remain the property of PUI, and Company
shall not use its knowledge or possession of this information to solicit insurance on a direct
basis or through any other producer.
	 
	4.3	 	Company shall not use or authorize the use of Patriot’s name, logo or service mark
in any advertising or promotional materials without Patriot’s prior written approval.
	 
	4.4	 	Company shall file for approval with state insurance departments all policy forms, rates, and
rules as may be required by such regulatory authorities for business subject to this Agreement.
	 
	4.5	 	Company will provide prompt written notice to PUI of any proposed or completed (i) sale,
transfer, merger, consolidation or reorganization involving Company; or (ii) change of 30% or more
interest

5

 

	 	 	in, or ownership of, Company; (iii) change involving 30% or more of its assets; or (iv)
downgrade by A.M. Best below a financial strength rating of
“A-”.

	4.6	 	Company represents and warrants that it is authorized and licensed to perform all of its
obligations under this Agreement.
	 
	4.7	 	Company will provide written notice to Patriot at least fourteen days prior to entering
into any general agency or managing general agency arrangement involving workers compensation and
employers liability insurance in any of the following states: Kansas, Nebraska, Oklahoma,
Arkansas, Missouri, or Indiana.
	 
	V.	 	Premium Billing
	 
	5.1	 	Company will direct bill policyholders and be responsible for mailing invoices and collecting
premium from policyholders. All premiums shall be remitted directly to Company. PUI shall not
make or promise, nor allow any Sub-producer to make or promise any payment method other than
as allowed by Company.
	 
	5.2	 	If an applicant or policyholder remits a premium payment to PUI or Sub-producer, such
premiums
received by PUI or Sub-producer shall be held in a fiduciary capacity as trustee for Company
until
delivered to Company, however, neither PUI or Sub-producer have the authority to deposit such
premiums in their own bank account. PUI shall promptly remit, and shall cause Sub-producers
to
promptly remit, such premium payment to Company in full, without any deduction for any
commission due.
	 
	5.3	 	Company will be responsible for cancelling policies for nonpayment when payment is not
received when due.
	 
	5.4	 	PUI shall assist Company in collecting premiums, as requested by Company
	 
	VI.	 	Commissions/Ownership of Expirations
	 
	6.1	 	Company will pay to PUI a commission on premiums received by
Company per Exhibit B. Such
commissions shall be adjusted by any premiums refunded by Company at a like rate. This
commission is compensation for all duties and obligations performed by MGA under this
Agreement, including, but not limited to, fees for PRS’s claims adjusting services and commissions
owed to Sub-producers and countersignature agents, if any. If Company revokes or terminates
PRS’s authority to adjust claims, the rate of commission as set forth in Exhibit B shall be reduced
by four percentage points for all commissions earned on or after the date of such revocation or
termination.
	 
	6.2	 	Except as otherwise provided in the immediately following sentence, upon termination of this
Agreement, PUI’s expirations, renewals and related records shall remain the property of PUI,
and Company will use such records only to the extent necessary to fulfill its obligations under
the Policies pursuant to applicable laws and regulations, Notwithstanding the forgoing, if, upon
termination, this Agreement is cancelled by Company for cause pursuant to Sections 10.3(b),
(d), and (g), and 10.5, or if Patriot is in default of any undisputed amounts due under this
Agreement, and such default is not cured within 30 days of Patriot’s receipt of notice of such default,
then the expirations, renewals and related records shall be vested in Company for the sale, use or
disposal as Company deems fit, and PUI shall forfeit any right or claims to the subsequent expirations and
renewals.

6

 

	VII.	 	PRS’s Claims Servicing Obligations
	 
	7.1	 	PRS may subcontract for claims adjusting services in certain states with a licensed entity that is
approved by Company in writing, however PRS shall be solely responsible to Company for
ensuring such services are provided in accordance with this Agreement. Notwithstanding any other
provision of this Agreement, Company, at its sole discretion may terminate the use of PRS’s claims
adjusting services, if PRS does not obtain required individual and/or business entity licenses in the
authorized states listed in Exhibit A by April 1, 2010.
	 
	7.2	 	PRS shall provide claims adjusting services in connection with claims or losses relating to Policies
in accordance with this Agreement including the following.

	 	a.	 	Receive and examine, on behalf of Company all reports of work-related injury to or
disease
of employees of employers insured by Policies and initiate procedures for the proper
servicing of each claim.
	 
	 	b.	 	Provide written notice to injured employees of PRS’s (or such other business entity
adjusting
claims) identity and relationship with Company as required by applicable laws and
regulations. Company must approve the form of such notice in writing before notice is
distributed.
	 
	 	c.	 	Subject to the ultimate authority of Company, investigate and adjust, settle or deny
all claims
in accordance with, applicable workers compensation and
employer’s liability laws and
regulations, this Agreement and the Claims Service Instructions found in Exhibit C, which
may be changed from time to time  by Company after written notice to PRS.
	 
	 	d.	 	Provide cost containment services, including nurse case management, medical bill
review and
utilization review services in accordance with applicable laws and regulations. Fees for
such
services will be as specified in Schedule 7.2.d. or as separately negotiated for a
specific claim
with prior written approval by Company. Cost containment services fees will be billed to
the
claim files as allocated loss adjustment expenses. PRS may, upon written approval of
Company, engage the services of persons or firms (hereafter referred to as “independent
vendors”) to perform in accordance with applicable laws and regulations, such cost
containment services, and fraud or other investigations beyond the scope of the adjusting
services provided by PRS. All independent vendors used by PRS shall be approved in
writing by Company.
	 
	 	e.	 	Assist attorneys in preparing for litigation, settlement or subrogation or as
otherwise
requested. Both the selection and compensation of attorneys to represent Company shall be
approved in writing by Company, which shall have the right to terminate the employment of
any attorney considered unsatisfactory by Company.
	 
	 	f.	 	Establish a claim file for each claim for which there is injury and/or anticipated
liability
and/or a formal claim has been made and code such claim in accordance with Company’s
statistical data requirements which are incorporated herein by reference and made a
part
hereof. PRS shall promptly correct any data errors as requested by Company and will
indemnify Company in accordance with Section 9.2 for any fines or penalties Company
incurs because of incorrect data provided by PRS.

7

 

	 	g.	 	Assist Company as requested with ISO Claim Search reports including OFAC
reports and request follow-up reports as needed.
	 
	 	h.	 	Make timely payments of valid claims for compensation, medical expenses,
rehabilitation expenses, and other required benefits payable under applicable workers
compensation laws and the Policies, together with Defense and Cost Containment Expenses,
solely from the Loss Payment Account as defined in Section 7.5, subject to the limitations
and requirements of this Agreement and the Claims Service Instructions. If Company directs
that any payment not be made, and if PRS nevertheless makes such payment, PRS shall
reimburse Company for such payment. As used in this Agreement “Defense and Cost Containment
Expenses” shall be defined as and include all out-of-pocket expense items such as fees for
attorneys retained on behalf of Company; expert witness fees; fees for independent medical
examinations, case management, utilization review, rehabilitation and fraud investigation;
witnesses’ travel expense; expenses for outside field work for the handling of serious
bodily injury claims; extraordinary travel expense incurred by PRS at the request of
Company; court reporters’ fees; transcript fees; the cost of obtaining public records and
other similar fees; prejudgment interest and other interest penalties; and the costs or
expenses associated with the investigation, negotiation, settlement or defense of any
subrogation claim or as required for investigation and pursuit of subrogation on behalf of
Company. Except as provided for in Schedule 7.2.d, Defense and Cost Containment Expenses
shall not include any part of the salaries of employees of PRS, its overhead, ordinary
travel expenses, or other normal or ordinary costs incurred in connection with the services
provided under this Agreement or its business as a whole except where indicated as
exceptions.
	 
	 	i.	 	Maintain an accurate and complete claim file on each reported claim. Claims files
shall be maintained in accordance with the relevant state laws and regulations governing
claims files and Company’s claim file requirements in the Claims Service Instructions.
Company shall have the right to copy any and all claims files or any documents related to any
claim. PRS shall maintain and store closed claim files and otherwise handle closed claim
files in accordance with Section 3.7 above.
	 
	 	j.	 	Make all required filings with respect to claims with the appropriate regulatory
agencies, including filings (electronic or otherwise) related to individual claims and
cumulative quarterly and annual reports and filings required by Section 6041 of the Internal
Revenue Code. Provide all information in PRS’s possession or control which is necessary for
Company to prepare and timely file all forms and reports and financial statements Company
needs to file with the appropriate regulatory agencies.
	 
	 	k.	 	In connection with the performance of its obligations under this Agreement, provide
trained, competent, claims adjusters who are licensed, as required, in accordance with
applicable state law, and perform the services to be rendered hereunder in a manner
commensurate with the highest professional standards, and in accordance with all applicable
laws and regulations.
	 
	 	l.	 	Use reasonable efforts to investigate and protect any subrogation rights available to
Company which may arise upon payment of claims and notify Company of any subrogation rights
which may be available to Company. At the direction of Company, PRS shall pursue subrogation
rights through litigation or otherwise in accordance with Section 7.2(e).
	 
	 	m.	 	Perform all administrative and clerical work in connection with claims reported
under the  Policies, including without limitation, the preparation of checks and/or
drafts drawn on the Loss Payment Account.

8

 

	 	n.	 	Respond promptly to any inquiry, request or complaint from an insurance
department, other regulatory agency, policyholder or claimant. A copy of both the
original inquiry and PRS’s response shall be promptly provided to Company. PRS shall
promptly forward to Company all complaints received from the insurance department,
workers compensation administration or other regulatory entity for review prior to
responding in accordance with Section 3.10.
	 
	 	o.	 	Establish and periodically review claims handling procedures and upon
request, provide such procedures to Company.

	7.3	 	PRS shall have authority to set reserves and settle claims in amounts not exceeding
$25,000 per claim in accordance with the Claims Service Instructions. PRS shall not make any
single claim payment over $25,000 without the prior written authorization of Company. Unless
otherwise advised by Company, PRS shall continue to handle claims over PRS’s reserve payment
and settlement authority but shall not settle such claims without first obtaining the written
approval of Company in accordance with the Claims Service Instructions. Notwithstanding any
other authority given PRS in this Agreement, in no event shall PRS pay or commit Company to
pay a claim over an amount, net of reinsurance, of one percent of Company’s surplus as of
December 31 of the last completed calendar year before the payment or commitment without prior
written approval of Company.

	7.4	 	Company shall retain ultimate adjusting and settlement authority for all claims.
Notwithstanding the authority delegated to PRS under this Agreement, Company shall have the
option of taking over the adjusting and settlement of any or all claims at any time upon
written notice to PRS. MGA has no authority to collect any payment from a reinsurer or commit
Company to any claim settlement with a reinsurer.

	7.5	 	PRS shall establish a bank account in the name of PRS on behalf of Company (the “Loss Payment
Account”) which shall be used by authorized representatives of PRS listed in the Claims
Service Instructions to pay losses and designated expenses, including Defense and Cost
Containment Expenses, related to claims covered by the Policies in accordance with the
following.

	 	a.	 	Company shall fund the Loss Payment Account in an amount necessary for the purpose
of paying losses, claims and Defense and Cost Containment Expenses under or related to
the Policies, however this amount shall not be more than estimated payments for losses,
claims and Defense and Cost Containment Expenses for three months. Patriot shall not be
required to deposit any of its own funds in the Loss Payment Account.
	 
	 	b.	 	PRS is authorized to prepare and issue checks or drafts in payment of losses,
claims and expenses on behalf of Company from the Loss Payment Account in accordance with
this Agreement and the Claims Service Instructions. Such authority may be revoked at any
time by Company and any remaining funds in the Loss Payment Account shall be promptly
returned to Company and Company shall pay all losses, claims and expenses related to the
Policies directly.
	 
	 	c.	 	PRS and Company shall initially agree on an amount needed to fund the Loss Payment
Account. By the 10th day of each month PRS shall notify Company of the amount
needed to reimburse the Loss Payment Account to the agreed upon
amount. Company shall fund
the Loss Payment Account within 48 hours of the request. PRS shall monitor the Loss
Payment Account to assure that sufficient funds are available to cover all pending
payments. At the request of PRS, Company shall deposit additional amounts in the Loss
Payment Account to

9

 

	 	 	 	cover pending payment(s) in excess of the amount held in the Loss Payment Account. PRS
and Company shall periodically review adequacy of the amount maintained in the Loss
Payment Account.
	 
	 	d.	 	PRS shall administer and maintain the Loss Payment Account and handle all
correspondence, transactions and instruments of payment in a manner that complies with
all regulations concerning the use of bank accounts. All claim payments will be made in
the name of PRS on behalf of Company.
	 
	 	e.	 	PRS shall provide a monthly reconciliation of the Loss Payment Account in a
format agreed to by the parties by the 10th day of each month. The
reconciliation shall include:

	 	(i)	 	the previous closing account balance of the Loss Payment Account;
	 
	 	(ii)	 	deposits made to the Loss Payment Account during the month;
	 
	 	(iii)	 	the month’s disbursements by check number, date of disbursement,
the person/entity to which disbursement was made, claim number and payment amount;
	 
	 	(iv)	 	a list of outstanding checks at the end of the months; and
	 
	 	(v)	 	the Loss Payment Account balance at the end of the month.

	 	f.	 	PRS shall maintain internal controls, acceptable to Company, to protect the
Loss Payment Account from unauthorized use of funds, including without limitation,
fraud, theft and embezzlement. PRS will provide Company a SAS 70, Internal Control
Review, of its claims systems. If SAS 70 is not available, Company, its independent
auditors or other representatives may conduct reviews of PRS’s claims systems and
processes. PRS will cooperate with such a review and provide any documentation of its
claim systems and processes as requested by Company’s independent auditors and will
reimburse Company for reasonable expenses incurred by Company to have its independent
auditors review PRS’s claims systems and processes. Notwithstanding the above, and in
accordance with Part VIII of the Agreement, Company may conduct reviews of PRS’s
claims records, systems and processes as needed.

	7.6	 	PRS shall provide Company with electronic claims data for all claims in an acceptable data
format as outlined in Exhibit D, which may be changed from time to time by Company after
written notice to PRS. At no additional cost to Company, PRS shall provide Company with access
to its claims system so that Company can view the electronic claims file for the claims under
the Policies. Any licensing requirements or restrictions related to PRS’s claims system are
the sole responsibility of PRS.

	7.7	 	PRS shall provide reports to Company as described in the
Claims Service Instructions. In
addition, Company may from time to time reasonably request additional reporting or claims
information from PRS, and PRS will cooperate with Company to furnish
the same.

	7.8	 	All claim files will be the joint property of Company and PRS. However, upon an order of
liquidation of Company, these files shall become the sole property of Company or its estate.
PRS shall have reasonable access to and the right to copy the files on a timely basis.
Notwithstanding the forgoing, PRS will ensure that its employees are aware of the confidential
and proprietary nature of such claim files, and any information and materials related to such
claims. PRS will not

10

 

	 	 	disclose any files, information and materials, except to perform their responsibilities per
the terms of this Agreement and, in the case of nonpublic health and financial information,
except as allowed by state and federal privacy laws and regulations.

	VIII.	 	Right to Audit

	8.1	 	During the term of this Agreement and notwithstanding its termination, Company, its
authorized representatives, reinsurers and state insurance departments upon reasonable notice
to MGA, shall have the right to audit, examine and copy the books and records of MGA relating
to Policies and claims under such Policies and MGA’s performance of its obligations under
this Agreement. Such books and records shall be in a form usable by Company and state
insurance departments. In addition, such books and records shall be made available for
examination by Company’s reinsurers and or any regulatory agency promptly upon demand.

	8.2	 	Upon reasonable notice, MGA shall permit Company or its authorized representatives to
review the operations, including internal controls, of MGA and subcontractors as per Section
7.1 in order to evaluate the quality of MGA’s and subcontractors’ employees and operations.
Company will conduct such review during normal business hours and at Company’s expense.

	IX.	 	Insurance and Indemnity

	9.1	 	MGA shall maintain in full force and effect the following policies issued by an insurer
rated no less than “A-” (VII) by A.M. Best Company during the term of this Agreement and
thereafter while MGA has any obligations hereunder:

	 	a.	 	errors and omissions insurance covering MGA and its employees in the minimum amount
of $5,000,000 or the amount required by state laws and regulations, whichever is greater;
	 
	 	b.	 	fidelity insurance covering MGA’s employees and agents in the minimum amount of
$1,000,000 or the amount required by state laws and regulations, whichever is greater;
	 
	 	c.	 	workers compensation insurance in at least the minimum amounts as required by applicable law or regulation;
	 
	 	d.	 	comprehensive general liability insurance (including personal injury) covering MGA
and its employees in the minimum amount of $2,000,000 single limit per occurrence; and
	 
	 	e.	 	owned and non-owned automobile liability insurance covering MGA’s employees in the
minimum amount of $1,000,000.

	 	 	Such insurance shall be maintained by MGA at its sole cost and expense and shall be primary
and noncontributing coverage with regard to any valid and collectable insurance available to
Company. MGA agrees to notify Company when it receives notice of lapse of coverage, reduction
in coverage below the minimum required amounts, or termination of coverage. Upon request of
Company, MGA shall provide Company with proof of such coverage. MGA further agrees to notify
Company of any claim brought under the errors and omissions or fidelity coverage.

	9.2	 	Patriot, jointly and severally, agrees to defend, indemnify and hold Company and its
affiliates and their respective directors, officers, employees and agents, harmless from and
against any and all claims, causes of action, liabilities and losses arising or resulting from
the performance of or breach of duties under this Agreement and/or from any acts (negligent,
willful or otherwise), errors or

11

 

	 	 	omissions of Patriot, its affiliates and/or their respective directors, officers, employees,
Sub-producers, third party claims adjusters, third party vendors (including without
limitation loss control vendors), countersignature agents or other representatives. As used
in this paragraph, “losses” shall include, but not be limited to, all damages (direct and
consequential), costs, expenses, reasonable attorney fees and other legal fees, penalties,
fines, assessments, verdicts (including punitive damages as permitted by law) and any other
expenses or expenditures incurred by Company but shall exclude losses and loss adjustment
expenses arising under, or attributable to, any Policy and any other expenses for which
Company is responsible for if paid by PRS in accordance with this Agreement.

	 	 	This Section 9.2 shall survive the expiration or other termination of this Agreement.

	9.3	 	Company agrees to defend, indemnify and hold Patriot and its affiliates and their
respective directors, officers, employees and agents, harmless from and against all claims, causes of
action, liabilities and losses arising or resulting from the performance of or breach of
duties under this Agreement and/or from any acts, (negligent, willful or otherwise), errors
or omissions of Company, its affiliates and/or their respective directors, officers,
employees or other representatives thereof. As used in this paragraph, “losses” shall
include, but not be limited to, all damages (direct and consequential), costs, expenses,
reasonable attorney fees and other legal fees, penalties, fines, assessments, verdicts
(including punitive damages as permitted by law) and any other expenses or expenditures
incurred by Patriot but shall exclude any expenses for which Patriot is responsible for
pursuant to this Agreement.

	 	 	This Section 9.3 shall survive the expiration or other termination of this Agreement.

	9.4	 	For any claim against a parry indemnified (“Indemnitee”) that may give rise to liability
of a party providing indemnification (“Indemnitor”), the Indemnitee shall promptly notify
Indemnitor of the claim; provided, however, that failure to give timely notice shall not be
deemed a waiver of the claim provided that the Indemnitor is not prejudiced by the lack of
timely notice and only then to the extent of such prejudice.

	 	 	If any claim is brought by a third parry against Indemnitee for which Indemnitor would be
required to indemnify Indemnitee hereunder, Indemnitor shall be entitled to assume the
defense of such claim if (i) Indemnitor provides written notice to Indemnitee that it intends
to undertake such defense, and (ii) Indemnitor conducts the defense of the claim diligently.
If Indemnitor undertakes the defense of such claim in accordance with the foregoing sentence,
Indemnitor shall defend such claim at its own expense and with counsel selected by Indemnitor
with the approval of Indemnitee, which approval may not be unreasonably withheld. Indemnitee
shall have the right to participate in such defense at its own expense. If Indemnitor, after
reasonable time after notice, fails to defend such claim in accordance with this Section 9.4,
Indemnitee has the right, but not the obligation, to undertake the defense or settlement of
such claim on behalf of, and at the risk of, Indemnitor. If the claim is one that by its
nature cannot be solely defended by one party, the other party shall make available all
information and provide all assistance as may reasonably be requested by the defending party.
	 
	 	 	This Section 9.4 shall survive the expiration or other termination of this Agreement.
	 
	X.	 	Term of this Agreement

	10.1	 	The initial term of this Agreement shall be from December 15, 2009 through December 14,
2010. This Agreement shall automatically renew for successive additional term(s) of one year
each unless

12

 

	 	 	terminated or non-renewed earlier as set forth in this Section X.
The initial term and any successive term(s) shall collectively be
referred to as “Term(s)”.

	10.2	 	At any time during the Term hereof, either party may cancel or
non-renew this Agreement without cause by giving 90 days prior written
notice. This Agreement may be terminated at any time by mutual consent
of the parties.

	10.3	 	Upon written notice to Patriot, Company may immediately terminate this Agreement if:

	 	a.	 	an event described in Section 3.13 occurs or is
expected to occur unless Company gives written consent to the
proposed transaction or change, which consent shall not be
unreasonably withheld by Company;

	 	b.	 	Patriot, an officer or employee thereof (including the
Key Employees) or- a Sub-producer, engages in acts or
omissions which constitute abandonment, fraud, misappropriation of
funds, material misrepresentation, or gross and willful misconduct;

	 	c.	 	Patriot or any affiliate becomes insolvent,
institutes or acquiesces in the institution of bankruptcy
proceedings or financial reorganization, or any
rehabilitation or liquidation proceeding is instituted
against Patriot or any affiliate;

	  d.	(i)	 	The financial condition of Patriot declines materially as evidenced by:

	 	1)	 	the Number of Days Working Capital is at or below 35;

	 	2)	 	the Tangible Net Worth is below 10%; or

	 	3)	 	the Current Ratio is less than six tenths (.6).

	 	(ii)	 	For purposes of this paragraph the following definitions apply:

	 	1)	 	“Number of Days Working Capital” means
(“Working Capital”) divided by Total Expenses divided by
365.

	 	2)	 	“Working Capital” means Current Assets minus Current Liabilities.

	 	3)	 	“Tangible Net Worth” means (Total
Assets minus Intangible Assets and Total Liabilities)
divided by Net Revenues.

	 	4)	 	“Net Revenues” mean Total
Revenues minus commissions paid to Sub-producers.

	 	5)	 	“Total Revenues” mean revenues from all
sources including commissions, fees, contingents, investment
income and miscellaneous income.

	 	6)	 	“Current Ratio” means Current Assets divided by Current Liabilities

	 	e.	 	MGA’s or a Key Employees’ license in any jurisdiction
is cancelled, suspended, nonrenewed or has any restriction
whatsoever;

13

 

	 	f.	 	MGA fails to provide sufficient errors and omissions or fidelity coverage
as required by this Agreement or state laws or regulations;

	 	g.	 	Patriot fails to timely report and pay Company undisputed
amounts due under this Agreement; or

	 	h.	 	MGA engages in a pattern of conduct which violates the terms of
this Agreement, including but not limited to binding or underwriting risks that
are not allowed under the Underwriting Guide or other written instructions of
Company, or which use rates, rules or forms that are not in compliance with
Company’s approved rate, form or other filings, or adjusts or pays claims contrary
to the provisions of Section VII.

	10.4	 	Upon written notice to Company, Patriot may immediately terminate this Agreement if:

	 	a.	 	Company becomes insolvent, institutes or acquiesces in the
institution of insolvency proceedings, or financial reorganization, or any
rehabilitation, liquidation or similar proceeding is instituted against
Company;

	 	b.	 	Company’s license or certificate of authority to do business in any
authorized jurisdictions listed in Exhibit A, is suspended or nonrenewed, in which
case this Agreement shall terminate solely with respect to the affected
jurisdiction;

	 	c.	 	Company fails to timely pay PUI any undisputed amounts due under this
Agreement and such payment is not made within 10 days of being due hereunder; or

	 	d.	 	Company’s financial strength rating issued by A.M. Best falls below “A-”.

	10.5	 	Notwithstanding, and in addition to, the foregoing, this Agreement may be
terminated by either party upon 30 days written notice of any material breach, provided
that the breaching party shall have 30 days to cure such breach, which if cured to the
reasonable satisfaction of the party giving notice, will render such notice null and
void.

	10.6	 	If this Agreement is terminated or non-renewed, MGA shall continue to perform all
customary and necessary services regarding Policies on behalf of Company in accordance
with this Agreement until all such Policies have been cancelled, non-renewed or
otherwise terminated, however, Company may, at its sole discretion, immediately suspend
or terminate any or all of MGA’s continuing service obligations. MGA’s continuing
service obligations include, but are not limited to:

	 	a.	 	issuing and countersignature of endorsements, however if endorsement
would result in a change in premium, increase the Company’s liability, or extend
the term of the Policy, prior written consent from Company is required;

	 	b.	 	adjusting and paying claims in accordance with
Section VII.

	 	 	If MGA fails in any material respect to fulfill this continuing service obligation, then
Company may suspend MGA’s obligations and arrange for alternative servicing of the
Policies. MGA will reimburse Company for any reasonable expenses incurred by Company to
arrange for and provide these services.

14

 

	10.7	 	Notwithstanding any other provision of this Agreement, Company has the right to
immediate
possession of all claim files (hard copy and computer) and other records
relating to such claims, and Company shall have the option of taking over the
adjusting and settlement of any or all claims at any time upon written notice
to PRS as provided in Section 7.4, Company may exercise this
right at any time.
In the event Company takes over handling of any or all claims, PRS agrees to
cooperate with and instruct its employees to cooperate with Company in
connection with Company’s handling of such claims. Except for PRS’s internal
costs associated with readying closed and open claim files for shipment to
Company or Company’s designee, Company will be responsible for the costs
associated with taking over the handling of any or all claims unless such
action is taken for cause, and will reduce the rate of commission as specified
in Section 6.1 accordingly. If PRS claims adjusting services are terminated or
non-renewed by Company for cause, including without limitation termination per
Section 7.1, PRS shall also be responsible for all costs associated with the
transfer of open and closed claims to Company or Company’s designee and for any
additional claims handling fees incurred by Company to adjust and service such
claims.

	 	 	Company may, at its sole and absolute discretion, withhold commissions and
other amounts due PUI to cover any incurred or anticipated costs of performing
MGA’s service obligations which are suspended or terminated.

	10.8	 	All manuals, forms, documents, software, equipment and other Company
supplies used by MGA, (and any copies thereof), to the extent provided or
prepared by Company, are the property of Company and shall be returned by MGA
to Company when this Agreement is terminated or as otherwise requested by
Company.

	10.9	 	Notwithstanding any other provision of this Agreement, Company may
immediately suspend MGA’s authority, including but not limited to
underwriting authority and claims settlement authority, under this
Agreement 1) if reinsurance covering all or any part of the Policies is
terminated or is no longer in full force and effect; 2) after notice of
cancellation is given per the terms of this Section X; or 3) during the
pendency of any dispute regarding the cause for termination.

	XI.	 	General Provisions

	11.1	 	Notice. Except as otherwise provided herein, any notice, requests, consents
and other
communication required under this Agreement, must be in writing and sent by
facsimile, or certified mail, overnight mail or personally delivered.
Notice is effective upon receipt or 5 days after mailing to the other
party, whichever comes first. Notices should be sent to:
	 
	 	 	Patriot:

Patriot Risk Management, Inc.

401E. Las Olas Blvd.

Suite 1540

Ft. Lauderdale, FL 33301

Attention: Theodore G. Bryant

15

 

	 	 	Company:

Advantage Workers Compensation Insurance Company

1100 East 6600 South, Suite 280 (84121)

P.O. Box 571918

Salt Lake City, Utah 84157-1918

Attention: Thomas E. Callanan, President

	11.2	 	Entire Agreement. This Agreement and the Exhibits and Schedules
attached hereto set forth the entire understanding of the parties and supersedes
any prior agreement or understanding, oral or written, relating to the subject
matter hereof.

	11.4	 	Waiver. No waiver of any provision of this Agreement shall be
deemed or shall constitute a waiver of any other provisions, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing signed and dated by an authorized representative of the party
making the waiver. Failure of a party to enforce any of the provisions of this
Agreement does not constitute a waiver of that provision or affect any part of this
Agreement, or the right of the party to later enforce that provision.

	11.5.	 	Modifications. This Agreement may only be revised and/or modified in
a writing signed and dated by authorized representatives of the parties.

	11.6	 	Severability/Construction. If any provision of this Agreement is held
to be unenforceable or void by a court of competent jurisdiction, the other provisions
of this Agreement shall remain in full force and effect. Whenever possible, each
provision shall be construed to be enforceable and valid under
applicable law. Both
parties agree they have had the opportunity to fully review and understand this
Agreement, and one party shall not be entitled to claim that any provision should be
construed against the other party because of the fact that it was drafted by the other
party.

	11.7	 	Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of Utah without regard to the principles of conflicts of
law.

	11.8	 	Non-Assignability. Except as otherwise provided herein, Patriot may not
delegate its duties or assign its rights in whole or in part without prior written
approval of Company and as allowed by applicable laws and regulations. Company may not
delegate its duties or assign its rights under this Agreement without prior written
approval of Patriot.

	11.9	 	Headings. The section and paragraph headings are for reference only and
will not limit or otherwise affect the meaning thereof.

	11.10	 	Company Board of Directors. No officer, director, controlling
shareholder or agent, or Sub-producer of MGA, its parent or affiliates, shall serve as
a director of Company at any time during the term of this Agreement.

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

16

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the date in
the introductory clause.

	 	 	 	 	 
	PATRIOT UNDERWRITERS, INC.	 	 
	 
	 	 	 	 
	By: 

Name:

	 	/s/ Charles K Schuver
 

Charles K Schuver
	 	 
	Title:

	 	President	 	 
	 
	 	 	 	 
	PATRIOT RISK SERVICES,
INC.	 	 
	 
	 	 	 	 
	By: 

Name:

	 	/s/ Timothy J. Ermatinger
 

Timothy J. Ermatinger
	 	 
	Title:

	 	CEO	 	 
	 
	 	 	 	 
	PATRIOT RISK MANAGEMENT, INC.	 	 
	 
	 	 	 	 
	By: 

Name:

	 	/s/ Dean Watters
 

Dean Watters
	 	 
	Title:

	 	Senior Vice President	 	 
	 
	 	 	 	 
	ADVANTAGE WORKERS COMPENSATION INSURANCE COMPANY
	 
	 	 	 	 
	By:

	 	/s/ Thomas E. Callanan
 

Thomas E. Callanan
	 	 
	 

	 	President	 	 

17

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