Document:

exv10w35

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Exhibit 10.35

NON-NEGOTIABLE

FULLY SUBORDINATED SURPLUS NOTE

			
	 	 	 
	US$500,000
	 	August 13, 2004

     FOR VALUE RECEIVED, subject to the terms and conditions hereinafter set forth in this
promissory note (the “Note”), GUARANTEE INSURANCE COMPANY, an insurance company organized under the
laws of the State of South Carolina and having its principal offices in South Carolina (the
“Borrower”), hereby unconditionally promises (subject to the applicable provisions of the South
Carolina Insurance Code and the Rules and Regulations of the South Carolina Insurance Department)
to pay to WESTWIND HOLDING COMPANY, LLC (the “Lender”), by wire transfer to such account in the
United States as the holder of this Note may specify to the Borrower in writing, in lawful money of
the United States of America (“US Dollars” or “US$”), the principal sum of FIVE HUNDRED THOUSAND US
DOLLARS (US$500,000), payable on the Principal Payment Date (as defined below). The Borrower
further promises to pay interest on the unpaid principal balance hereof outstanding from time to
time from the date hereof until payment in full hereof at the rates and on the dates determined in
accordance with this Note. The Lender is authorized to record the interest rate applicable to the
loan evidenced hereby (the “Loan”) and each payment or prepayment of principal hereof in its
internal records, and any such notation shall constitute prima facie evidence of the accuracy of
the information so recorded.

     Defined Terms. In this Note the following terms have the following meanings:

     “Business
Day” means any day other than a Saturday or Sunday or any other day on which
commercial banks in Columbia, South Carolina, or New York, New York, are authorized or obligated by
law or by local proclamation to close.

     “Interest Payment Date” means, with respect to an Interest Period, the Business Day that
immediately follows the last day of such Interest Period and, as applicable, the date of payment or
prepayment in full of the Loan.

     “Interest Period” means the period commencing on the date hereof or on the last day of the
preceding Interest Period, as the case may be, and ending on the last day of each calendar quarter;
provided that no Interest Period shall extend beyond the last Principal Payment Date.

     “Principal Payment Date” means the date which is sixty (60) months from the date hereof.

 

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     Restrictions on Payment. Notwithstanding anything to the contrary in this Note:

     (a) No part of the principal hereof or interest hereon shall be paid without the prior
authorization of such payment by the Director of Insurance of the State of South Carolina unless,
after such payment, the total adjusted capital and surplus of the Borrower, as calculated under the
rules and regulation prescribed by the National Association of Insurance Commissioners, will exceed
400% of the Authorized Control Level Risk Based Capital stated in the most recently filed Annual
Statement of the Borrower.

     (b) No part of the principal hereof or interest hereon shall be paid except out of surplus,
excluding capital, and only if the Borrower maintains its reserves and its minimum capital and
surplus as required by the South Carolina Insurance Department.

     (c) No part of the principal hereof or interest hereon shall be paid or payable on demand of
the holder of this Note or be carried, considered or reported as a legal liability of the Borrower.
The entire principal amount hereof and the accrued interest hereon remaining unpaid from time to
time shall be carried, considered and reported as a special surplus account in all financial
statements published by the Borrower or filed with the Director of Insurance of the State of South
Carolina or any other state in which the Borrower shall be qualified to do business.

     Subordination. Repayment of the principal hereof and payment of the interest hereon
shall be and is hereby subordinated to the prior payment of, or provision for, all general
liabilities of the Borrower and the claims of policyholders and creditors of the Borrower, but
shall rank superior to the claim, interest and equity of the shares or shareholders of the
Borrower, and such subordination shall be equally applicable in the case of any merger,
consolidation, liquidation, rehabilitation, reorganization, dissolution, sale or other disposal of
all, or substantially all, of the assets (including the assumption, whether by reinsurance or
otherwise, of the major portion of the business of the Borrower in force pursuant to reinsurance
agreement or agreements approved by the Director of Insurance of the State of South Carolina) of
the Borrower.

     Optional Prepayment. Subject to the Restrictions on Payment and
Subordination provisions set forth above, the Borrower may, at any time and from time to
time, prepay the Loan, in whole or in part, without premium or penalty but subject to breakage
costs as provided in clause (c) of the paragraph entitled Indemnity below, on at least
three Business Days’ irrevocable notice to the Lender (effective on receipt), specifying the date
and amount of prepayment. If such notice is given, the Borrower shall make such prepayment, and the
amount specified in such notice shall be due and payable on the date specified therein, together
with accrued interest to such date on the amount prepaid and any breakage costs.

 

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     Interest Rates and Payment Dates.

     (a) The Loan shall bear interest on the unpaid principal amount thereof at a fixed rate per
annum equal to three percent (3.0%), compounded annually, payable in arrears for each Interest
Period on the Interest Payment Date for each such Interest Period.

     (b) Any overdue principal of the Loan and (to the extent permitted by applicable law) any
overdue interest on the Loan and any other overdue amount payable hereunder shall bear interest
from the date of such non-payment until paid in full (after as well as before judgment) at a fixed
rate per annum equal to three percent (3.0%), compounded annually, payable in arrears on the last
Business Day of each calendar month.

     (c) Interest under any provision of this Note shall be calculated on the basis of a 360-day
year for the actual days elapsed.

     Indemnity. The Borrower agrees to indemnify the Lender and to hold the Lender harmless
from any loss or expense that the Lender may sustain or incur as a consequence of (a) default by
the Borrower in payment of the principal amount of or interest on the Loan, including (but not
limited to) any such loss or expense arising from interest or fees payable by the Lender to lenders
of funds obtained by it in order to maintain the Loan or (b) default by the Borrower in making any
prepayment after the Borrower has given notice thereof in accordance herewith or a prepayment of
the Loan on a day that is not the last day of its Interest Period. This covenant shall survive
payment of the Loan.

     Payments. All payments of principal of, interest on and all other amounts due under
this Note shall be made prior to 12:00 noon (New York time) on the due date and shall be made in US
Dollars by wire transfer to such account as the Lender may specify to the Borrower in writing. If
any payment hereunder (other than payments of principal of or interest on Loan) becomes due and
payable on a day other than a Business Day, such payment shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest thereon shall be payable at the
applicable rate during such extension. If any payment of principal of or interest on the Loan
becomes due and payable on a day other than a Business Day, such payment shall be extended to the
next succeeding Business Day unless the result of such extension would be to extend such payment
into another calendar month in which event such payment shall be made on the immediately preceding
Business Day. All payments on this Note shall be applied first to interest and then to principal.

     Expenses. The Borrower agrees to indemnify and hold harmless the holder of this Note
from and against any and all liability, claims, costs and expenses in connection with the execution
and delivery of this Note and/or the due and proper exercise by the holder hereof of any rights,
remedies, powers or privileges authorized hereunder, including (but not limited to) all costs and
reasonable attorneys’ fees and disbursements (including allocated costs and expenses of attorneys
and paralegals who are employees of the Lender) incurred in any action or

 

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proceeding to collect this Note, provided that such indemnity does not apply to any losses, claims,
liabilities or expenses to the extent they arise from the Lender’s gross negligence or willful
misconduct.

     Taxes. The Borrower shall make all payments of interest, principal and other amounts
due under this Note free and clear of and without deduction for or on account of any taxes. The
Borrower shall pay all taxes for its own account prior to the date on which penalties would be
incurred and, if compelled by law to make any deduction, the Borrower shall pay to the Lender such
additional amounts as may be necessary to ensure that the Lender receives the full amount that
would be due to it if there had not been such deduction. In addition, the Borrower will pay any
stamp or other taxes, registration fees or other duties by whomsoever imposed with respect to the
preparation, execution, delivery, registration, performance and enforcement of this Note. The
Borrower will supply to the Lender evidence satisfactory to the Lender of the Borrower’s payment of
each of the aforesaid amounts, and, if any such amount is paid by the Lender, the Borrower hereby
indemnifies the Lender therefor, together with any interest, penalties and expenses paid or payable
in connection therewith.

     Information. The Borrower shall provide the Lender with such financial and other
information concerning its business and operations as the Lender may reasonably request from time
to time.

     Representations and Warranties. The Borrower hereby represents and warrants to the
Lender that (a) it is a corporation duly organized, validly existing and in good standing under the
laws of the State of South Carolina, is duly qualified to do business and in good standing in each
jurisdiction in which the character of its properties or the transaction of its business makes such
qualification necessary and has full corporate power to own its properties, to carry on its
business as now being conducted and to execute and deliver this Note; (b) its execution and
delivery of this Note and the borrowing evidenced hereby (i) have been duly authorized by all
requisite corporate action on its part, (ii) do not require the approval of its stockholders, (iii)
will not (A) violate any law or its Certificate of Incorporation or By-Laws, (B) violate any
governmental or agency rule or regulation applicable to the Borrower or any order of any court,
tribunal or governmental agency binding on it or any of its properties, (C) violate, be in conflict
with, result in a breach of or constitute (with due notice or lapse of time or both) a default
under any indenture, agreement, license or other instrument or contract to which it is a party or
by which it or any of its properties is bound or (D) result in the creation or imposition of any
lien of any nature whatsoever on any of its assets and (iv) do not require any license, consent or
approval of any governmental agency or regulatory authority, except the South Carolina Insurance
Department; and (c) this Note has been duly executed and delivered by the Borrower and is a legal,
valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforceability of creditors’ rights
generally.

 

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     Events of
Default. If any of the following events (each, an “Event of Default”) occurs
for any reason whatsoever:

     (a) the Borrower fails to pay any of its obligations hereunder when due;

     (b) the Borrower otherwise defaults in the due performance or observance of any covenant,
undertaking, representation or warranty set out in this Note or in any other agreement with the
Lender or any of its affiliates and such default continues for fifteen (15) days after the Lender
gives written notice to the Borrower;

     (c) any representation, warranty or other statement made in this Note or otherwise in writing
by or on behalf of the Borrower in connection with the Loan proves to be or to have been incorrect
or misleading in any material respect as of the date at which it was made or deemed to be made;

     (d) the Borrower (i) applies for or consents to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its assets, (ii) admits in writing its inability to pay its debts as they become due, (iii)
makes a general assignment for the benefit of creditors, (iv) files a petition seeking to take
advantage of any laws relating to bankruptcy, insolvency, reorganization, winding up, composition
or adjustment of debts or (v) acquiesces in writing to any petition filed against it in an
involuntary case under any such laws; or

     (e) a case or other proceeding is commenced, without the application or consent of the
Borrower, in any court of competent jurisdiction seeking the liquidation, reorganization,
dissolution, winding up or composition or readjustment of debts of the Borrower, the appointment of
a trustee, receiver, custodian, liquidator or the like of the Borrower or of all or any substantial
part of its assets, or any similar action with respect to the Borrower under any laws relating to
bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such
case or proceeding continues undismissed, or unstayed and in effect, for a period of sixty (60)
consecutive days; or an order for relief in respect of the Borrower is entered in an involuntary
case under any such laws;

then, subject to the Restrictions on Payment and Subordination provisions set forth
above, (i) upon the occurrence of any Event of Default specified in paragraph (d) or (e) above, all
amounts owing under this Note shall immediately become due and payable without any election or
action on the Lender’s part, and (ii) upon the occurrence of any other Event of Default, the Lender
may, by notice to the Borrower, declare all amounts owing under this Note to be immediately become
due and payable, whereupon they shall immediately become due and payable, in each case without
presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived.
If an Event of Default has occurred and is continuing, the Lender may set-off and apply, at any
time in its sole discretion, any amount then owing by the Lender or any

 

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affiliate of the Lender against any amount then due to the Lender from the Borrower, the details of
any such application to be promptly notified to the Borrower.

     Miscellaneous. No failure on the part of the Lender to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by the Lender of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy of the Lender.

     No modification or waiver of any provision of this Note or consent to any departure from any
such provision shall in any event be effective unless it is in writing and signed by the Borrower
and the Lender with the prior written approval of the Director of Insurance of the State of South
Carolina, and then such modification, waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on the Borrower in any case
shall, of itself, entitle the Borrower to any other or further notice or demand in similar or
other circumstances.

     Any provision of this Note that is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
No provision of this Note shall require the payment, or permit the collection, of interest in
excess of the highest rate permitted by applicable law.

     Except as otherwise expressly provided herein, all notices or other communications to the
Borrower or the Lender related to this Note shall be in writing (including facsimile transmissions)
and shall be delivered or transmitted by facsimile to the other party at its address set forth
below, or at such other address as may hereafter be specified to the other party in writing:

	 	 	 
	If to the Borrower:

	 	Guarantee Insurance Company
	 

	 	1061 521 Corporate Center, Suite 140
	 

	 	Fort Mill, SC 29715
	 

	 	Attn: Lucia A. Tompkins, President
	 

	 	Facsimile No.: (803) 396-5221
	 
	 	 
	If to the Lender:

	 	Westwind Holding Company LLC
	 

	 	7560 Commerce Court
	 

	 	Sarasota, FL 34243

 

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     The Borrower hereby waives any presentment, notice of dishonor, protest or other notice of any
kind that is not expressly required by the terms of this Note.

     This Note shall be binding on the Borrower and its successors and assigns and shall inure to
the benefit of the Lender and its successors and assigns; provided, however, that the Borrower may
not assign its rights and obligations hereunder without the prior written consent of the Lender.
This Note may be transferred only by noting the transfer on the books of the Borrower upon
surrender of this Note properly assigned in exchange for a reissued Surplus Note. The reissued Note
must be submitted to the Director of Insurance of the State of South Carolina prior to delivery to
the transferee and shall include all the terms, conditions, limitations and provisions contained
herein.

     No recourse under or upon any obligation, covenant or agreement contained in this Note, or
for any claim based thereon or otherwise in respect thereof, shall be had against any shareholder,
officer or director, as such, past, present or future, of the Borrower or any successor
corporation, either directly or through any trustee, receiver, or any other person; it being
expressly understood that this Note is solely a corporate obligation of the Borrower and that any
and all personal liability, and any and all rights and claims against every such shareholder,
officer or director, as such, are hereby expressly waived and released by the holder hereof by
acceptance of this Note and as a part of the consideration for the issuance hereof.

     This Note is issued and delivered in the State of South Carolina, and it shall be governed by,
and construed in accordance with, the laws of the State of South Carolina.

     EACH OF THE BORROWER AND, BY ITS ACCEPTANCE OF THIS NOTE, THE HOLDER OF THIS NOTE HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW)
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS NOTE AND
AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

	 	 	 	 	 
	 	GUARANTEE INSURANCE COMPANY

 	 
	 	By  	
 	 
	 	 	Lucia A. Tompkins 	 
	 	 	President 	 
	 

	 	 	 	 	 
	ATTEST:

	 		 	 
	 

	 	 

Lisa Leachman Hirsch

Secretary
	 	 

8exv10w36

Exhibit 10.36

WORKERS COMPENSATION REINSURANGE AGREEMENT

QUOTA SHARE AGREEMENT and

AGGREGATE EXCESS OF LOSS

BETWEEN

GUARANTEE INSURANCE COMPANY,

(hereinafter referred to as the “Company”)

AND

SEGREGATED PORTFOLIO 110,

A SEGREGATED PORTFOLIO OF

CALEDONIAN REINSURANCE SPC

(hereinafter referred to as the “Reinsurer”)

RIAg
GURANTEE Ins Co

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INDEX

	 	 	 	 	 	 	 
	ARTICLE	 	 	 	PAGE
	 
	 	 	 	 	 	 
	1

	 	Business Reinsured
	 	 	3	 
	2

	 	Term and Cancellation
	 	 	3	 
	3

	 	Territory
	 	 	4	 
	4

	 	Definitions
	 	 	4	 
	5

	 	Liability of Reinsurer
	 	 	5	 
	6

	 	Funds Withheld
	 	 	5	 
	7

	 	Accounts, Reports and Remittances
	 	 	7	 
	8

	 	Salvage and Subrogation
	 	 	7	 
	9

	 	Offset
	 	 	8	 
	10

	 	Taxes
	 	 	8	 
	11

	 	Statistics
	 	 	8	 
	12

	 	Errors and Omissions
	 	 	8	 
	13

	 	Amendments
	 	 	8	 
	14

	 	Access to Records
	 	 	8	 
	15

	 	Loss Adjustment Expenses
	 	 	9	 
	16

	 	Loss Reserves
	 	 	9	 
	17

	 	Commutation
	 	 	9	 
	18

	 	Arbitration
	 	 	10	 
	19

	 	Insolvency
	 	 	10	 
	20

	 	Currency
	 	 	11	 
	21

	 	Follow the Terms and Conditions
	 	 	11	 
	22

	 	Service of Suit
	 	 	11	 
	23

	 	Exclusions
	 	 	12	 
	24

	 	Insolvency Funds Exclusion
	 	 	12	 
	25

	 	Loss in Excess of Policy Limits and Extra Contractual Obligations
	 	 	13	 
	26

	 	Termination
	 	 	13	 
	27

	 	Cell Limitation and Indemnification
	 	 	14	 
	28

	 	Assignment
	 	 	15	 
	29

	 	Entire Agreement
	 	 	15	 
	 
	 	 	 	 	 	 
	Interest and Liabilities Contract	 	 	16	 
	Schedule 1, Program Expenses	 	 	17	 

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ARTICLE 1 — BUSINESS REINSURED

By this Agreement, GUARANTEE INSURANCE COMPANY (the “Company”) obligates itself to cede to
Segregated Portfolio 110 (the “Segregated Portfolio”) a segregated portfolio of CALEDONIAN
REINSURANCE SPC (hereinafter called “Reinsurer”), and Reinsurer obligates itself to accept, quota
share reinsurance of the Company’s net liability under policies, contracts and binders of insurance
(as hereinafter defined) attaching during the term of this Agreement on Workers’ Compensation and
Employers’ Liability coverage produced by and on behalf of the Company for staffing entities and
their clients.

Business which is beyond the terms, conditions or limitations of this Agreement or which is outside
the underwriting guidelines as agreed between the Company and Reinsurer may be submitted for
special acceptance hereunder, and are subject to being accepted by the parties to this Agreement.
Special acceptances will be subject to all the terms, conditions and limitations of this Agreement
except as may be modified by the Company when negotiating the special acceptance.

ARTICLE 2 — TERM AND CANCELLATION

	A.	 	This Agreement shall be effective as of August 16, 2005 at 12:01 a.m. local time where
Reinsurer is located (the “Effective Date”) and shall be a continuous contract in respect of
all new and renewal policies, as defined herein as being subject to this Agreement, written on
a risk attaching basis by the Company and effective on or after the Effective Date, and may be
cancelled by the Company with ninety (90) days prior written notice by certified or registered
mail, return receipt requested, or by overnight courier service, and may be cancelled by
Reinsurer as of any anniversary date of the Effective Date with ninety (90) days prior written
notice by certified or registered mail, return receipt requested, or by overnight courier
service. The date of such cancellation shall hereinafter be referred to as the “Termination
Date.”
	 
	B.	 	Upon cancellation of this Agreement, at the Company’s option:

	 	(i)	 	Reinsurer shall continue to be liable under this Agreement with respect to all loss
occurrences on policies in force prior to the Termination Date until the date of the next
scheduled anniversary of each policy, its natural expiration, cancellation or non-renewal,
whichever shall first occur; provided, however, that in no event shall Reinsurer be liable
under this Agreement for any loss with a date of loss occurrence more than twelve (12)
months plus odd time after the Termination Date. The Company shall not issue policies for
a period longer than twelve months plus odd time, for a total policy period not to exceed
(18) months and any period permitted for discovery under the policies reinsured hereunder;
or
	 
	 	(ii)	 	Except for policies with run-off liabilities after the Termination Date, Reinsurer
shall have no liability for loss occurrences arising upon or after the Termination Date.
Reinsurer shall not receive any reinsurance premiums for any period after the Termination
Date.

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ARTICLE 3 — TERRITORY

This Agreement shall cover losses wherever occurring in respect of risks domiciled in the United
States of America and is limited to policies issued in jurisdictions in which the Company has
authority to write the subject business.

ARTICLE 4 — DEFINITIONS

	A.	 	The term “loss occurrence” shall mean any one disaster, casualty, accident or loss, or series
of disasters or casualties or accidents or losses arising out of or caused by one event.
	 
	B.	 	The term “policy” shall mean any binder, policy, bond or contract of insurance issued,
accepted or bound by or on behalf of the Company. The term “policies” shall be the plural
thereof.
	 
	C.	 	The term “Loss Adjustment Expense” shall mean all costs and expenses allocable to a specific
claim that are incurred by the Company in the investigation, appraisal, adjustment,
settlement, litigation, defense or appeal of a specific claim, including court costs and costs
of supersedes and appeal bonds, and including (i) pre-judgment interest, unless included as
part of the award or judgement; (ii) post-judgment interest; and (iii) legal expenses and
costs incurred by the Company in connection with coverage questions and legal actions
connected thereto. Loss Adjustment Expense does not include unallocated loss adjustment
expense. Unallocated loss adjustment expense includes, but is not limited to, salaries and
expenses of employees and office and other overhead expenses.
	 
	D.	 	The term “AGP” shall mean adjustable gross premium, which shall be comprised of the original
gross premium (defined as premiums applicable to (i) primary policies with statutory limits
for Workers’ Compensation coverage and (ii) Employers’ Liability coverage calculated on a
365th basis), which shall be adjustable from time to time concurrently with changes
in (i) (a) the insured’s payroll, or (b) the number of the insured’s employees who are
eligible for Workers’ Compensation and Employers’ Liability coverages and are listed, by name
and Social Security number, on the insured’s payroll; (ii) hazards; (iii) the states or other
domestic jurisdictions which are other than those in which the insured conducted operations
immediately prior to such changes; or (iv) experience modifications. While the AGP shall be
adjustable, the minimum premium payable under this Agreement is US$8,332,960.00.
	 
	E.	 	The term “Original Conditions” shall mean that all reinsurance under this Agreement shall be
subject to the same rates, terms, conditions and waivers, and to the same modifications and
alterations, as the respective policies of the Company. The Reinsurer shall be credited with
its exact proportion of the original premiums received by the Company, prior to its
disbursement of any dividends, but after deduction of premiums, if any, ceded by the Company
for inuring reinsurance, it being understood that premiums ceded by the Company for other
inuring excess of loss reinsurance shall be deducted at the adjusted rate on a written premium
basis.

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ARTICLE 5 — LIABILITY OF REINSURER

The Company shall cede to Reinsurer, and Reinsurer shall accept, the following:

	A.	 	As quota share reinsurance, ninety percent (90%) of the ultimate net loss in all policies
written under this Agreement after all inuring reinsurance, subject to a maximum limit of
ninety percent (90%) of $1,000,000 any one loss occurrence. Notwithstanding anything to the
contrary in this Agreement, the maximum aggregate liability of Reinsurer under this subsection
shall not exceed ninety percent (90%) eighty-seven and one-half percent (87.5%) of AGP.
	 
	B.	 	As an aggregate excess of loss cover, the ultimate net loss excess of sixty-seven and
one-half percent (67.5%) of AGP with respect to the Company’s retention of ten percent (10%)
of the primary limits up to $1,000,000 any one loss occurrence. The maximum aggregate
liability of Reinsurer under this subparagraph (B) shall not exceed ten percent (10%) of
twenty percent (20%) of AGP.

The above notwithstanding, the Company shall maintain a minimum amount of collateral which will not
be allowed to be less than US$1,666,592.00.

In the event a loss settlement, verdict, judgment or award is reduced by any process other than by
the trial court, resulting in an ultimate saving to Reinsurer, or judgment is reversed outright,
the expenses incurred in securing such reduction or reversal shall be prorated between the Company
and Reinsurer in the proportion that each benefits from such reduction or reversal, and the
expenses incurred up to the time of the original loss settlement, verdict, judgment, or award shall
be prorated in proportion to each party’s interest in such original loss settlement, verdict,
judgment or award.

ARTICLE 6 — FUNDS WITHHELD

To secure Reinsurer’s obligations to the Company, the Company shall retain exclusive control of the
net ceded premium. The net ceded premium collected by the Company and retained hereunder plus any
additional cash collateral provided to the Company shall be known as the “Funds Withheld” and shall
be held in the “Funds Withheld Account” (as such terms are hereinafter defined).

As used herein, the following terms shall have the following meanings:

	A.	 	The Funds Withheld Account shall be comprised of funds that may, depending on loss
experience, become due to Reinsurer, to be held by the Company subject to the terms and
conditions of this Agreement.

	 	(i)	 	The average monthly balance of the Funds Withheld Account shall be equal to the sum
of the beginning balance and the ending balance of the Funds Withheld Account for such
month, divided by two.
	 
	 	(ii)	 	Monthly interest shall be calculated by the Company on the average monthly balance of
the Funds Withheld Account for a particular month. The monthly interest so calculated
shall equal the interest rate for a three-month U.S. Treasury Note, as said

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	 	 	 	interest shall appear on the first calendar day of the quarter. However, in the event the
insured’s losses exceed the aggregate coverage provided herein, the Company shall not owe
or pay any such interest.

	B.	 	Reinsurer hereby agrees to provide additional cash collateral, letters of credit or other
financial instruments acceptable to the Company (the “Assets”) and to maintain such Assets in
the Funds Withheld Account in sums at least equal to the reserves the Company has determined
to be required on the business which is the subject of this Agreement on a monthly basis,
hereby called the “Required Account Balance.” For purposes of this Agreement, the Required
Account Balance shall be ninety percent (90%) of eighty-seven and one-half percent (87.5%) of
AGP plus ten percent (10%) of twenty percent (20%) of AGP. At no time shall the Required
Account Balance be allowed to be less than said ninety percent (90%) of eighty-seven and
one-half percent (87.5%) of AGP plus ten percent (10%) of twenty percent (20%) of AGP.
	 
	C.	 	Reinsurer authorizes the Company to deposit and maintain in the Funds Withheld Account any
funds ceded by the Company to Reinsurer under this Reinsurance Agreement, plus all collateral
funds received by the Company from Reinsurer. Reinsurer authorizes the Company to withdraw
from the Funds Withheld Account any amounts owed by Reinsurer to the Company under this
Agreement.
	 
	D.	 	Within forty-five (45) days after the end of each month, the Company shall furnish to
Reinsurer a statement for such month that sets forth the actual balance of the Funds Withheld
Account and the amount of the Required Account Balance for such month. Thirty (30) days after
the delivery of such statement, Reinsurer may request in writing that the Company release that
portion of the Funds Withheld Account that exceeds the Required Account Balance set forth in
such statement, if any. Such request shall state the amount to be released from the Funds
Withheld Account and the recipient of such payment. Reinsurer may reduce any claims payments
due the Company by an offset against the excess funds, if any, in the Funds Withheld Account
and Reinsurer authorizes the withdrawal of such amounts from the Funds Withheld Account. The
Company shall have no obligation to release or allow the withdrawal of any funds from the
Funds Withheld Account if such release or withdrawal would result in the amount in the Funds
Withheld Account falling below the Required Account Balance.
	 
	E.	 	The Company will credit to the balance of the Funds Withheld Account any and all Assets
deposited by Reinsurer with the Company under the terms of this Agreement. If upon written
notice by the Company the amount of the Funds Withheld Account is less than the Required
Account Balance, Reinsurer agrees, within fifteen (15) days of receiving notice, to increase
the Assets deposited in the Funds Withheld Account to equal or exceed the Required Account
Balance, as otherwise required in Subsection (B) of this Section 6. Reinsurer authorizes the
Company to commingle any cash with its own funds, provided suitable account balance
identification is maintained, and to invest the funds in any investment allowed under South
Carolina insurance regulations, subject to the provisions of Article 7 below.
	 
	F.	 	The Company shall be under no duty or responsibility with respect to the Funds Withheld
Account, except to hold the Assets in the Funds Withheld Account, to accurately report and

6

 

	 	 	provide notice as required hereunder, to release funds from the Funds Withheld Account only to
extent allowed or required by the Funds Withheld Account provisions of this Agreement, and to
otherwise fulfill its obligations under this Agreement.

	G.	 	The Company shall credit Reinsurer with interest based on the interest rate for three-month
U.S. Treasury Notes calculated on the average monthly balance of the Funds Withheld Account.
Interest will accrue and will be credited to the Funds Withheld Account on a monthly basis,
commencing on the first day of the first calendar month following the date that this Agreement
is entered into and continuing on the first day of every calendar month thereafter while the
Agreement is in effect. All of the Assets in the Funds Withheld Account shall be available to
be used towards the satisfaction of all claims and losses up to the amount of the aggregate
hereunder. In no event shall investment income be earned by or accredited to the Reinsurer if
losses are equal to or exceed the aggregate.

Nothing contained herein shall be construed as other than requiring payment in full of collateral
into the Funds Withheld Account, promptly upon the execution of this Agreement, as stated above, in
the form of Assets acceptable to the Company.

ARTICLE
7- ACCOUNTS, REPORTS AND REMITTANCES

	A.	 	The Company will provide Reinsurer with all
requisite information respecting premiums and
losses, including reserves, to enable it to
properly prepare its balances and accounts, as of
dates and on forms mutually acceptable to the
Company and Reinsurer.
	 
	B.	 	Within forty-five (45) days of the close of each month, the Company shall render a premium
and loss bordereau to Reinsurer for all business written. The bordereau shall include a
summary of gross policy premiums written and earned, losses incurred, reserves for such
losses, and all payments of losses net of salvage and subrogation; all other written and
earned inuring excess of loss reinsurance, and an account current summarizing premiums earned,
commissions, losses and loss expenses paid net of salvage and subrogation. Detailed
information supporting the bordereau amounts will be made reasonably available to Reinsurer as
required.
	 
	C.	 	It is further agreed that loss bordereaux will continue to be furnished to Reinsurer after
expiration of this Agreement until all loss activity has ceased or the Company and Reinsurer
mutually agree to discontinue reports. In addition, the Company shall furnish the Reinsurer
with additional information as requested and mutually agreed by the Company and Reinsurer.

ARTICLE 8 — SALVAGE AND SUBROGATION

Reinsurer shall be credited with its share of salvage and subrogation (i.e., reimbursement
obtained or recoveries made by the Company, less actual cost, excluding office expenses of the
Company, salaries and other remuneration of Company employees and officers and sums paid to
attorneys as retainers, incurred in obtaining such reimbursement or making such recoveries)
pertaining to any claims or settlements under policies reinsured hereunder. The Company shall
reasonably enforce its rights to salvage or subrogation relating to any loss within the scope of
this Agreement and shall reasonably prosecute all claims arising out of those rights. In the event
the Company refuses or neglects to enforce its rights to salvage or

7

 

subrogation, the Company shall immediately inform Reinsurer and Reinsurer is thereby empowered and
authorised to bring any appropriate action in the name of the Company or its policyholders, or
otherwise to enforce such rights, and the Company shall cooperate fully with Reinsurer in enforcing
those rights.

ARTICLE 9 — OFFSET

The Company may offset any balance, whether on account of premium, losses, recoveries, salvage, or
any other amount due under this Agreement. However, in the event of the insolvency of either party
hereto, offset shall only be allowed in accordance with applicable law.

ARTICLE 10 — TAXES

(Applicable to those reinsurers, except Underwriters at Lloyd’s of London and other reinsurers
exempt from Federal Excise Tax, who are domiciled outside the United States of America).

The Company shall pay on behalf of Reinsurer all taxes on premiums reported to Reinsurer on this
Agreement. Reinsurer agrees to allow the Company to retain, for the purpose of paying Federal
Excise Tax thereon, the applicable percentage of the reinsurance premium payable hereunder to the
extent such reinsurance premium is subject to the Federal Excise Tax.

In the event of any return premium becoming due hereunder, Reinsurer shall deduct the aforesaid
percentage from such return premium, and the Company or its agent shall be responsible for
recovering such tax from the United States Government.

ARTICLE 11 — STATISTICS

The Company shall furnish such other statistics as may be required by Reinsurer for the completion
of Reinsurer’s statutory requirements and internal records.

ARTICLE 12 — ERRORS AND OMISSIONS

Reinsurer shall not be relieved of liability because of an error or accidental omission by the
Company in reporting any claim, loss, or any business reinsured under this Agreement, provided that
the error or omission is rectified promptly after discovery. Reinsurer shall be obligated only for
the return of the premium paid for business reported but not reinsured under this Agreement.

ARTICLE 13 — AMENDMENTS

The terms and conditions contained in this Agreement may be changed, altered or amended as the
parties may agree, provided such change, alteration or amendment is evidenced by a written Addendum
to this Agreement executed by the Company and Reinsurer.

ARTICLE 14 — ACCESS TO RECORDS

The Company shall comply with Reinsurer’s reasonable requests for information or records relating
to this Agreement. Additionally, Reinsurer, or their authorised representatives, shall have the
right to inspect, at any reasonable time at the office of the Company and upon

8

 

reasonable notice, all papers, books, accounts, documents, claims files, underwriting guidelines,
sample policies, auditing procedures and other records of the Company relating to this Agreement.
The Company shall, at any reasonable time at the office of the Company and upon reasonable notice,
allow Reinsurer to conduct a review of the underwriting being done by the Company relating to this
Agreement. Reinsurer shall have the right to be consulted if any material changes are made to the
underwriting guidelines or procedures relating to this Agreement. Reinsurer’s rights under this
clause shall survive the termination of this Agreement.

In the event records relating to the business which is the subject of this Agreement are maintained
by service providers to the Company, the Company shall request, upon Reinsurer’s request, that all
such records be made available at a convenient time and place to Reinsurer. However, the Company
shall not be liable for any refusal by any such service provider to cooperate.

ARTICLE 15 — LOSS ADJUSTMENT EXPENSES

Reinsurer shall bear its share of all Loss Adjustment Expenses incurred by the Company and shall
receive its proportionate share of any recoveries of such expenses. It is understood and agreed
that all loss expenses incurred are subject to the maximum liability of Reinsurer as provided in
Article 5 of this Agreement.

ARTICLE 16 — LOSS RESERVES

Reinsurer agrees to abide by the loss settlements and claims payments made by the Company. However,
if requested by Reinsurer, the Company shall afford Reinsurer an opportunity to be associated with
the Company, at the expense of Reinsurer, in the defence of any claim, suit or proceeding involving
this reinsurance, and the Company will cooperate with Reinsurer in every respect in the defence or
control of such claim, suit or proceeding. All settlements by the Company of claims involving this
reinsurance, including voluntary compromise and release, shall be unconditionally binding on
Reinsurer when made by the Company.

ARTICLE 17 — COMMUTATION

At any time after three (3) months following the expiration of the last policy reinsured hereunder
(the “Commutation Date”), the parties may agree to commute, as of the Commutation Date, any risk or
risks reinsured hereunder in accordance with the following terms and conditions. The Company shall
designate an independent actuary to determine Reinsurer’s share of outstanding loss reserves,
allocated loss adjustment expense reserves, IBNR reserves, and reserves for any future adjustments
of the expenses identified in Schedule 1 attached to and hereby made a part of this Agreement by
this reference (collectively called the “Outstanding Reserves”) with respect to the risk or risks
agreed to be commuted as of the Commutation Date. An amount equal to the Outstanding Reserves shall
be deducted from the Funds Withheld Account, and Reinsurer shall be released from any further
liability with respect to the risk or risks commuted. If all risks under this Agreement are
commuted, any monies remaining in the Funds Withheld Account after deducting all Outstanding
Reserves shall be paid to Reinsurer. Schedule 2 attached hereto and made a part hereof by the
references sets out IBNR loss development factors to be used in commuting this Agreement.

9

 

ARTICLE 18 — ARBITRATION

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

Each party shall choose one individual as an arbitrator and the two arbitrators shall then choose a
third arbitrator who shall preside at the hearing. If either party fails to appoint an arbitrator
within thirty (30) days after being requested to do so by the other party, the latter, after ten
(10) days’ notice by certified or registered mail or by overnight courier service of its intention
to do so, may appoint the third arbitrator. If the two individuals are unable to agree upon the
third arbitrator within thirty (30) days of their appointment, the third arbitrator shall be
selected as follows: each arbitrator shall select three individuals and submit their names to the
other arbitrator. In the event a name appears on both lists, that person shall be the third
arbitrator. Otherwise, or in the event that more than one name appears on both lists, each
arbitrator shall strike two from the other arbitrator’s list. Of the two persons remaining, one
shall be chosen as the third arbitrator by drawing lots. All arbitrators shall be impartial and
disinterested active or former officers of insurance or reinsurance companies or Underwriters at
Lloyd’s.

Within thirty (30) days after the appointment of the third arbitrator, the arbitrators shall
jointly determine timely periods for the filing of briefs with the panel, discovery procedures and
schedules for hearings. The arbitrators shall be relieved of all judicial formalities and shall not
be bound by the strict rules of law, but, rather, shall view this Agreement as an honourable
engagement between the parties. The arbitration shall take place in the State of South Carolina or
such other place as the panel may select as being in the best interests of the arbitration
proceeding. The decision of the majority of the arbitrators, when rendered in writing, shall be
final and binding. The arbitrators are empowered to grant interim relief, as they may deem
appropriate.

The arbitrators shall make their decision considering the customs and practices of the applicable
insurance and reinsurance business and as promptly as possible following the termination of
hearings. It is specifically agreed that, in the event the issue or issues before the arbitrators
involve matters of valuation including, but not limited to, claims payments, segregated portfolio
collateralisation, adjusted premiums, so-called IBNR claims, reserves and all such similar matters,
the panel of arbitrators shall retain an independent actuary of their choosing, whose determination
as to the accuracy, correctness or propriety of such amounts shall be binding upon the parties.
Said actuary shall submit a written report of his or her findings to the panel of arbitrators as
soon as reasonably possible following his or her determinations in this regard. The costs and
expense of said actuary and of said report shall be borne jointly and equally between the parties
hereto. Judgment upon the award may be entered in any court of competent jurisdiction.

Each party shall severally bear the costs of its chosen arbitrator and, unless the panel awards
otherwise, its own attorneys’ fees, and jointly and equally bear, with the other party, the costs
of the third arbitrator and of the arbitration, including, but not limited to, arbitrator travel
and lodging, court reporters, room rental fees, et, al. The arbitrators may, in their discretion,
award

10

 

such further costs and expenses as they may consider appropriate, including but not limited to,
attorneys’ fees to the extent permitted by law.

ARTICLE 19 — INSOLVENCY

In the event of the insolvency of the Company, this reinsurance shall be payable directly to the
Company or to its liquidator, receiver, conservator, statutory successor, trustee or other legal
successor in interest on the basis of the liability of the Company without diminution because of
the insolvency of the Company or because the liquidator, receiver, conservator or statutory
successor of the Company has failed to pay all or a portion of any claim. It is agreed, however,
that the liquidator, receiver, conservator or statutory successor of the Company shall give written
notice to Reinsurer of the pendency of a claim against the Company indicating the policy or bond
reinsured, which claim would involve a possible liability on the part of Reinsurer, within a
reasonable time after such claim is filed in the conservation, liquidation or receivership
proceeding, and that during the pendency of such claim, Reinsurer may investigate such claim and
interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defence
or defences that it may deem available to the Company or its liquidator, receiver, conservator,
statutory successor, trustee or other legal successor in interest. The expense thus incurred by
Reinsurer shall be chargeable, subject to the approval of the court, against the Company as part of
the expense of conservation or liquidation to the extent of a pro rata share of the benefit which
may accrue to the Company solely as a result of the defence undertaken by Reinsurer.

Where two or more reinsurers are involved in the same claim and a majority in interest elects to
interpose a defence to such claim, Reinsurer shall agree that the expense shall be apportioned in
accordance with the terms of this Agreement as though the insolvent Company had incurred such
expense.

ARTICLE 20 — CURRENCY

All transactions under this Agreement shall be in United States dollars. Amounts paid or received
by the Company in any other currency shall be converted to United States dollars at the rate of
exchange at the date such transaction is entered on the books of the Company.

ARTICLE 21 — FOLLOW THE TERMS AND CONDITIONS

Reinsurer’s liability shall attach simultaneously with that of the Company, and all cessions to
Reinsurer by virtue of this Agreement shall be subject in all respects to the same risks, terms,
conditions, interpretations, assessments, waivers, modifications, alternations, and cancellations
as the policies of the Company reinsured hereunder to which such cessions relate, the true intent
of this Agreement being that Reinsurer shall, in every case to which this Agreement applies and in
the proportions specified herein, follow the fortunes and terms and conditions of the Company in
respect of the risk the Company has accepted under insurance or reinsurance policies, binders or
contracts including declaratory judgment expenses, settlements of extra contractual obligations and
losses in excess of policy limits.

ARTICLE 22 — SERVICE OF SUIT

In the event of the failure of Reinsurer to pay any amount claimed to be due hereunder or as

11

 

ordered by a panel of arbitrators pursuant to Article 18, Reinsurer, at the request of the Company,
shall submit to the jurisdiction of a court of competent jurisdiction within the United States. In
such event, Reinsurer shall have the right to remove an action to an appropriate United States
District Court or to seek a transfer or remand of a case to another court as permitted by the laws
of the United States or of any State of the United States.

The Company may serve process upon Reinsurer by serving its agent:

Caledonian Insurance Services Limited

Attention: Conor Jennings, Managing Director

P.O. Box 1043

GT, Grand Cayman

Cayman Islands

and in any suit instituted against Reinsurer upon this Agreement, Reinsurer will abide by the final
decision of the court or, in the event of an appeal, of any appellate court of competent
jurisdiction in the United States.

The right of the Company to bring suit as provided herein shall be limited to a suit brought in its
own name and for its own account.

The above-named agent is authorised and directed to accept service of process on behalf of
Reinsurer in any such suit and/or upon the request of the Company to give a written undertaking to
the Company that, subject to the right to seek removal, remand or transfer of such suit to any
other court of competent jurisdiction, it will enter a general appearance upon Reinsurer’s behalf
in the event such a suit shall be instituted.

Further, pursuant to any statute of any state, territory or district of the United States which
makes provision therefor, Reinsurer hereby designates the Superintendent, Commissioner or Director
of Insurance or other officer specified for that purpose in the statute, or the successor or
successors in office (the “Officer”), as its true and lawful attorney upon whom may be served any
lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any
beneficiary hereunder arising out of this Agreement, and hereby designates the above named as the
person to whom the said Officer is authorised to mail such process or a true copy thereof.

In the event of any proceedings under this Article, this Agreement shall be governed and construed
in accordance with the laws of the State of South Carolina, except as otherwise provided in Article
26 below.

ARTICLE 23 — EXCLUSIONS

This Agreement is subject to and limited by any exclusions in the original policies reinsured by
this Agreement.

ARTICLE 24 — INSOLVENCY FUNDS EXCLUSION

This Agreement excludes all liability of the Company arising by contract, operation of law, or
otherwise, from its participation or membership, whether voluntary or involuntary, in any

12

 

insolvency fund. The term “insolvency fund” includes any guaranty fund, plan, insolvency fund,
pool, association, fund, or other arrangement, howsoever denominated, established, or governed by
the laws or regulations of any state which provides for any assessment of or payment or assumption
by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer or
its successors or assigns, which has been declared by any competent authority to be insolvent, or
which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole
or in part.

ARTICLE 25 — LOSS IN EXCESS OF ORIGINAL POLICY LIMITS AND EXTRA CONTRACTUAL OBLIGATIONS

Subject to compliance with its terms, this Agreement shall protect the Company to the limits of
liability provided hereunder, when the ultimate net loss includes any loss for which the Company
may be legally liable to pay in excess of the limit of the original policy reinsured hereunder,
where the loss in excess of the limit of the original policy has been incurred because of the
Company’s failure to settle within the policy limits or by reason of alleged or actual negligence,
fraud or bad faith in rejecting an offer of settlement, or in the preparation of the defence or in
the trial of any action against its insured or reinsured, or in the preparation or prosecution of
an appeal consequent upon such action. For the purposes of this paragraph, “loss” shall mean any
amounts for which the Company would have been contractually liable to pay had it not been for the
limit of the original policy reinsured hereunder as determined by a court of competent
jurisdiction.

This Agreement shall protect the Company when ultimate net loss includes any Extra Contractual
Obligations, defined as those liabilities not covered under any other provision of this Agreement
and which arise from the handling of any claim on business reinsured hereunder, such liabilities
arising because of, but not limited to, failure by the Company to settle within policy limits, or
by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement
or in the preparation of the defence or in the trial or any action against its insured or reinsured
or in the preparation or prosecution of an appeal consequent upon such action.

The date on which the Company incurs any Extra Contractual Obligation or Loss in Excess of Policy
Limits shall be deemed in all circumstances, to be the date the loss attached to the policy
reinsured hereunder.

However, this Article shall not apply where: (1) the loss has been incurred due to fraud by a
member of the Board of Directors, an officer or supervisory employee of the Company acting
individually or collectively or in collusion with any individual or corporation or any other
organisation or party involved in the presentation, defence or settlement or any claim covered
hereunder; or (2) the liability of the Company arises from the handling of any claim under
self-insurance or under policies issued to itself or other insurance or reinsurance companies.

ARTICLE 26 — TERMINATION

	A.	 	If a state insurance department or other competent authority has ordered either party to
cease writing business, the other party may declare this Agreement as no longer valid or
operative as to that state as of the date of the order to cease writing business;

13

 

	B.	 	If either party has become insolvent, or has been put into conservation, liquidation or
receivership (whether voluntary or involuntary), or there have been instituted against it
proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or
trustee in bankruptcy or other agent known by whatever name, to take possession of its assets
or control of its operations, the other party may terminate this Agreement;
	 
	C.	 	If either party has reinsured its entire liability under this Agreement without the other
party’s prior written consent, the other party may terminate this Agreement.

Termination for any of the above events A through C shall take place by the terminating party
sending to the other party, by registered or certified mail or by overnight courier service, to the
principal office of the other party, notice stating the time and date when, not less than thirty
(30) days after the mailing of such notice, termination shall be effective. Further, Reinsurer may
terminate this Agreement on thirty (30) days notice.

At the Company’s option, (i) all reinsurance hereunder shall remain in force until the expiration
date, anniversary date, or prior termination date of policies reinsured hereunder, but in no event
longer than twelve (12) months after the Termination Date; or (ii) Reinsurer shall not be liable
for any losses occurring under the Company’s policies becoming effective on and after the
Termination Date.

ARTICLE 27 — CELL LIMITATION AND INDEMNIFICATION

Reinsurer is a segregated portfolio company duly incorporated and in good standing under, and as
defined in, the Companies Law (2004 Revision) of the Cayman Islands. Notwithstanding any other
provision of this Agreement, the parties hereto acknowledge and agree that the liability of
Reinsurer to pay any amount due hereunder to any relevant party hereof whether in respect of
performance or for loss arising from any breach of its obligations or otherwise, shall be limited
to the net proceeds of the realisation of all the assets of the Segregated Portfolio, which assets
shall include without limitation the right to receive collateral and other payments from any
shareholder of, owner of beneficial interest, or other investor in Reinsurer pursuant to
participation or other similar agreements between Reinsurer and any such shareholder, owner or
investor (“Payment Obligations”).

If the net proceeds of the realisation of all the assets is insufficient to pay all Reinsurer’s
obligations hereunder in full for any reason, Reinsurer shall have no obligation to make up the
insufficiency and following exhaustion of such amount any liability to pay such insufficiency shall
thereafter be extinguished. Accordingly, the rights and entitlement of any relevant party hereof is
restricted to the net proceeds of the realisation of all the assets of the Segregated Portfolio and
not to the assets of any other segregated portfolio or to the general assets of Reinsurer.
Reinsurer agrees to use all reasonable efforts to collect any and all Payment Obligations due to
Reinsurer. Upon written notice by the Company to the Reinsurer, the Company shall have the right to
assume control of all such collection efforts on behalf of the Reinsurer, and to the extent
permitted by applicable law, the Reinsurer shall assign all of its right, title and interest in,
and the right to collect, the Payment Obligations to the Company; provided, however, that, for the
avoidance of doubt, all monies recovered shall remain the property of Reinsurer.

14

 

The parties hereto covenant and agree that, absent fraud, dishonesty, gross negligence or willful
malfeasance, they shall not take or seek to take any recourse (including but not limited to action
before any court or governmental agency), directly or indirectly, with respect to the actions or
inactions of Reinsurer or any obligations of Reinsurer under this Agreement against:

	 	•	 	Reinsurer (other than in respect of the Segregated Portfolio as limited above);
	 
	 	•	 	Caledonian Insurance Services Ltd;
	 
	 	•	 	any owner of a beneficial interest in Caledonian Insurance Services Ltd, Caledonian
Reinsurance SPC; or
	 
	 	•	 	any partner, owner, beneficiary, director, officer, shareholder, employee or agent of
Caledonian Insurance Services Ltd, Reinsurer in its individual, capacity, or any of their
respective legal advisers.

The parties hereto further covenant and agree that absent fraud, dishonesty, gross negligence or
willful malfeasance, they respectively shall not take any corporate action, other steps, or legal
proceedings for the winding-up, dissolution or re-organisation, or for the appointment of a
receiver, administrator, administrative receiver, trustee, liquidator, sequestrator or similar
officer of the Caledonian Insurance Services Ltd., Reinsurer, or the Segregated Portfolio or of any
or all of Reinsurer’s revenues and assets or analogous proceedings in any jurisdiction.

The Company agrees to indemnify and hold harmless (a) the Segregated Portfolio and its officers,
directors, employees, attorneys, affiliates and agents (but expressly excluding its shareholders,
beneficial owners or other investors); and (b) Reinsurer and its officers, directors, shareholders,
employees, attorneys, affiliates and agents (individually, an “Indemnified Person”), and hold each
of them harmless from and against any error of judgment, and any and all loss, damage, claims,
demands, or proceedings, or liability or expense, including costs and reasonable attorneys’ fees
and expenses (together “Losses”), to which any Indemnified Person may be put or may incur by reason
of or in connection with any misrepresentation made by the Company, any breach of the Company’s
representations and warranties, the Company’s failure to fulfill any of its covenants or agreements
under this Agreement or any Losses suffered or sustained by an Indemnified Person by reason of such
person’s status as an Indemnified Person other than Losses which arise out of or relate to fraud,
negligence or willful default of such Indemnified Person.

ARTICLE 28 — ASSIGNMENT

Neither party may assign this Agreement unless the prior written approval of the other party is
first obtained, which approval shall not be unreasonably withheld or delayed.

15

 

ARTICLE 29 — ENTIRE AGREEMENT

This Agreement forms the entire agreement and understanding between the parties relating to the
subject matter hereof, supersedes and extinguishes any previous agreement or understanding between
the parties in relation to all or any such matters.

IN WITNESS WHEREOF, this Agreement has been signed as of this ___day of August, 2005.

	 	 	 	 	 	 	 	 	 	 	 
	FOR THE COMPANY:	 	 	 	FOR THE REINSURER:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	
 

	 	 
	 	By:
	 	
 

	 	 
	 

	 	Title: Chairman
	 	 	 	 	 	Title: Manager	 	 

16

 

INTERESTS AND LIABILITIES CONTRACT TO THE

QUOTA SHARE REINSURANCE AGREEMENT

BETWEEN

GUARANTEE INSURANCE COMPANY,

(hereinafter referred to as the “Company”)

AND

SEGREGATED PORTFOLIO 110, A SEGREGATED PORTFOLIO OF

CALEDONIAN REINSURANCE SPC

(hereinafter referred to as the “Reinsurer”)

It is agreed that Reinsurer shall have the Interests and Liabilities specified in the attached
Agreement effective as of the Effective Date. This Agreement shall be continuous and in force until
terminated subject to the terms and conditions for termination stipulated in the Article 2 thereof
entitled Term and Cancellation.

	 	 	 	 	 	 	 	 	 	 	 
	FOR THE COMPANY:	 	 	 	FOR THE REINSURER:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	
 

	 	 
	 	By:
	 	
 

	 	 
	 

	 	Title: Chairman
	 	 	 	 	 	Title: Manager	 	 
	 

	 	Date: August 17 2005
	 	 	 	 	 	Date: 10 Jan 2006	 	 

17

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