Document:

Transition Services Agreement

EXHIBIT 10.5 
TRANSITION SERVICES AGREEMENT
KINGSWAY FINANCIAL SERVICES INC. and AMERICAN INSURANCE ACQUISITION INC.
December 31, 2010
 
THIS Transition Services Agreement dated December 31, 2010 and effective as of the Closing Date (as defined herein below).
BETWEEN:
KINGSWAY FINANCIAL SERVICES INC., a corporation existing under the laws of the State of Delaware
(the “KFS”)
‐ and ‐
AMERICAN INSURANCE ACQUISITION INC., a corporation existing under the laws of the State of Delaware
("AIAI") 
(each a “Party” and collectively, the “Parties”)
RECITALS:
		
	A.
	JJR VI Acquisition Corp., Atlas Acquisition Corp., KFS and  AIAI have entered into an agreement and plan of merger dated December 14, 2010 (the “Merger Agreement”), upon the completion of which AIAI, American Country Insurance Company ("ACIC") and American Service Insurance Company, Inc. ("ASI" and collectively with ACIC and AIAI, the "Companies") will become wholly-owned subsidiaries of the Atlas, on and subject to the terms and conditions set out in the Merger Agreement.

		
	B.
	As a condition to Closing (as defined in the Merger Agreement), KFS and AIAI have agreed to enter into this Agreement, pursuant to which KFS and its Affiliates (as defined in the Merger Agreement) shall provide certain transition services to AIAI and its Affiliates and/or AIAI and its Affiliates shall provide certain transition services to KFS and its Affiliates, after Closing.

NOW THEREFORE in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration (the receipt and sufficiency of which are acknowledged), the Parties agree as follows:
ARTICLE I INTERPRETATION

		
	1.
	Definitions.

In this Agreement, the following terms have the following meanings:
“Agreement” means this Transition Services Agreement and all Schedules attached hereto.
“AIAI Information Systems” shall mean all AIAI Software, domain names, hardware, telecommunications, network connections, peripherals and other communication and technology infrastructure of the Companies used by Kingsway, or on behalf of Kingsway, in the Ordinary Course prior to Closing.

“AIAI Intellectual Property” means all Intellectual Property rights used by, or on behalf of Kingsway, in the Ordinary Course prior to Closing, that is owned or licensed by any of the Companies.
“AIAI Services” has the meaning specified in Section 4.2.
“AIAI Software” means all software owned or used by the Companies in the Ordinary Course, including all computer programs, operating systems, applications, websites, website content, interfaces, applets, scripts, macros, firmware, middleware, development tools and other software code, whether in object code, source code or other format or in SQL, HyperText Markup Language, XML or other language.
“Business” means the property and casualty insurance business carried on by the Companies as of the date hereof.
“Claims” has the meaning specified in Section 13.2.
“Closing” has the meaning specified in the Merger Agreement.
“Closing Date” has the meaning specified in the Merger Agreement.
“Change Request” has the meaning specified in Section 5.1(a).
“Confidential Information” has the meaning specified in Section 10.1(a).
“Consent Fee” has the meaning specified in Section 7.2(b).
“Developed Company IP” has the meaning specified in Section 11.2(b).
“Developed Kingway IP” has the meaning specified in Section 11.2(b).
“Force Majeure Event” has the meaning specified in Section 7.3.
“Kingsway” shall mean KFS and its Affiliates, excluding the Companies.
“Kingsway Insurance Information Systems” shall mean all Kingsway Software, domain names, hardware, telecommunications, network connections, peripherals and other communication and technology infrastructure of Kingsway used by the Companies, or on behalf of the Companies, in the Ordinary Course prior to Closing.
“Kingsway Intellectual Property” means all Intellectual Property rights used by, or on behalf of the Companies, in the Ordinary Course prior to Closing, that is owned or licensed by Kingsway.
“Kingsway Services” has the meaning specified in Section 3.2.
“Kingsway Software” means all software owned or used by Kingsway in the Ordinary Course, including all computer programs, operating systems, applications, websites, website content, interfaces, applets, scripts, macros, firmware, middleware, development tools and other software code, whether in object code, source code or other format or in SQL, HyperText Markup Language, XML or other language.
“Merger Agreement” has the meaning specified in the Recitals to this Agreement.
“Ordinary Course” means, with respect to an action taken by a Person, that such action is consistent with the past practices of the Person or its business, as the case may be, and is taken in the ordinary course of the normal day-to-day operations of the Person or its business, as the case may be.
“Performing Party” has the meaning specified in Section 5.1(a).
“Performing Party Systems” has the meaning specified in Section 9.3(a).
“Recipient Party” has the meaning specified in Section 5.1(a).

“Recipient Party Personnel” has the meaning specified in Section 9.3(a).
“Representatives” has the meaning specified in Section 10.1(b).
“Service Fees” has the meaning specified in Section 8.1(a).
“Services” means the AIAI Services or the Kingsway Services, as applicable.
“Term” has the meaning specified in Section 2.1.
“Termination Fee” has the meaning specified in Section 5.2(c).
“Termination Fee Approval” has the meaning specified in Section 5.2(c).
“Third Party Consent” means a license, consent, approval or waiver from a third party (including the Department of Insurance for the State of Illinois) that is required in order to perform a Service.
Defined terms used but not otherwise defined in this Agreement have the meanings ascribed to such terms in the Merger Agreement.
		
	2.
	Gender and Number.

Any reference in this Agreement to gender includes all genders and words importing the singular include the plural and vice versa.
		
	3.
	Certain Phrases and Calculation of Time.

In this Agreement: (i) the words “including” and “includes” mean “including (or includes) without limitation”; and (ii) in the computation of periods of time from a specified date to a later specified date, unless otherwise expressly stated, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding” and if the last day of any such period is not a Business Day, such period will end on the next Business Day.
When calculating the period of time “within” which or “following” which any act or event is required or permitted to be done, notice given or steps taken, the date which is the reference date in calculating such period is excluded from the calculation.  If the last day of any such period is not a Business Day, such period will end on the next Business Day.
		
	4.
	Headings, etc.

The division of this Agreement into Articles and Sections and the insertion of headings are for convenient reference only and are not to affect or be used in the construction or interpretation of this Agreement.

		
	5.
	References to the Schedules and Exhibits.

The Schedules and the Exhibits set out below form an integral part of this Agreement:

Schedule 3.2        -    Kingsway Services
Schedule 4.2        -    AIAI Services
Schedule 11.1        -    Personal Information

		
	6.
	Currency.

All monetary amounts in this Agreement, unless otherwise specifically indicated, are stated in United States currency.

		
	7.
	Statutory References.

Unless otherwise specifically indicated, any reference to a statute in this Agreement refers to that statute and to the regulations made under that statute.

		
	8.
	No Presumption.

The Parties and their counsel have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement is to be construed as if drafted jointly by the 

Parties.  No presumption or burden of proof will arise in favour of any Party by virtue of the authorship of any provision of this Agreement.

		
	9.
	Governing Law.

		
	(a)
	This Agreement is governed by and is to be interpreted, construed and enforced in accordance with the laws of the State of Illinois, without regard to conflict of law principles.

		
	(b)
	Each of the Parties irrevocably attorns and submits to the non‐exclusive jurisdiction of the courts of the State of Illinois and waives objection to the venue of any proceeding in such court.

ARTICLE II TERM

1.    Term
This Agreement shall commence on the Closing Date and shall continue until December 31, 2013 (the “Term”), unless extended or terminated earlier in accordance with the terms of this Agreement.
2.    Extension of Term 
Prior to the expiration of the Term any Party may, on written notice to other Parties, elect to extend the Term on the same terms and conditions for further twelve (12) month periods, provided that unless otherwise agreed to in writing by the Parties the Term may not be renewed more than three (3) times in total.
ARTICLE III SERVICES TO BE PROVIDED BY KFS
1.     Provision of Services.
KFS agrees to provide certain transition services to AIAI to: (i) enable the uninterrupted operation of the Business following Closing; (ii) assist in an orderly transfer of the Companies as a result of the change of their ownership; and (iii) permit the Companies to obtain alternate sources of supply of services within a reasonable time after Closing. AIAI acknowledges that certain Kingsway Services are provided for a limited period of time, notwithstanding Section 2.1 or Section 2.2, as more particularly set forth and described in the Schedules hereto. 

2.    Services to be Provided by KFS to AIAI.
Subject to the terms and conditions of this Agreement, KFS shall provide or shall an Affiliate to provide AIAI with the following transition services (collectively, the “Kingsway Services”):
(a)    accounting support services, as more particularly described in Schedule 3.2 (the “Kingsway Accounting Support Services”); 
(b)     auto claims handling services and private passenger auto policy administration and underwriting support services as more particularly described in Schedule 3.2 (the “Kingsway Auto Policy Administration and Underwriting Support Services”); 
(c)     those services and the use of Kingsway Insurance Information Systems in support of the Business as set forth on Schedule 3.2 attached hereto (the “Kingsway IT Services”);
(d)     tax return services as more particularly described in Schedule 3.2 (the "Kingsway Tax Return Services").

The Parties acknowledge that Schedule 3.2 contemplates that certain of the Kingsway Services will be set out and described in certain additional agreements or amendments to this Agreement (collectively the “Kingsway Service Amendments”). The Parties agree to use commercially reasonable efforts in good faith to expeditiously negotiate and enter into all Kingsway Service Amendments, subject to the terms of Section 7.2. 
3.    License of Kingsway Intellectual Property.
(a)     Kingsway hereby grants to AIAI, until such time as all personal lines business written by the Companies prior to Closing has expired and not been renewed and any retention period for records relating to such business has expired under applicable law, a royalty-free, non-transferable and non-exclusive licence to use in the operation of the Business any Kingsway Intellectual Property that is, and Kingsway Insurance Information Systems that are: (i) used by the Companies prior to Closing; and (ii) necessary to the receive the Kingsway Services; provided, however, that AIAI hereby agrees to be bound and to cause the Companies to be bound by all existing restrictions, obligations and conditions that currently exist or relate to the Kingsway Intellectual Property and Kingsway Insurance Information Systems and such restrictions, obligations and conditions will apply to AIAI and/or the Companies, mutatis mutandis.

until such time as the minimum retention period for such records has expired under applicable law
(b)     For greater certainty, but subject to its obligations to provide the Kingsway Services hereunder, such license of Kingsway Intellectual Property and/or Kingsway Insurance Information Systems shall not, and shall not be deemed to: (i) prohibit KFS or its Affiliates from freely using or licensing (on a non-exclusive basis) any of the Kingsway Intellectual Property or Kingsway Insurance Information Systems; or (ii) prohibit KFS or its Affiliates from transferring any of the Kingsway Intellectual Property or Kingsway Insurance Information Systems provided that the transferee assumes KFS's obligations under this Agreement in respect of the transferred asset.

ARTICLE IV SERVICES TO BE PROVIDED BY AIAI TO KFS

1.    Provision of Services.
AIAI agrees to provide certain transition services to KFS to: (i) enable the uninterrupted operation of KFS' business following Closing; and (ii) permit KFS to obtain alternate sources of supply of services within a reasonable time after Closing.

2.    Services to be Provided by AIAI to KFS.
Subject to the terms and conditions of this Agreement, AIAI shall provide or shall cause an Affiliate to provide KFS with the following transition services (collectively, the “AIAI Services”):
(a)     accounting support services, as more particularly described in Schedule 4.2 (the “AIAI Accounting Support Services”); 
(b)    auto claims handling services and commercial auto policy administration and underwriting support services as more particularly described in Schedule 4.2 (the “AIAI Claims Handling Services”); 
(c)    personnel and payroll records support services as more particularly described in Schedule 4.2 (the “AIAI Personnel and Payroll Support Services”);
(d)     information technology services, as more particularly described in Schedule 4.2 (the “AIAI IT Services”);
(e)    tax return services as more particularly described in Schedule 4.2 (the "AIAI Tax Return Services"); and
(f)    additional tax services as more particularly described in Schedule 4.2 (the "AIAI Additional Tax Services").

The Parties acknowledge that Schedule 4.2 contemplates that certain of the AIAI Services will be set out and described in certain additional agreements or amendments to this Agreement (collectively the “AIAI Service Amendments”). The Parties agree to use commercially reasonable efforts in good faith to expeditiously negotiate and enter into all of the AIAI Service Amendments, subject to the terms of Section 7.2. 
3.    License of AIAI Intellectual Property.
(a)    AIAI hereby grants and agrees to cause the Companies to grant to KFS, during the Term, a royalty-free, non-transferable and non-exclusive licence to use in the operations of KFS' business any AIAI Intellectual Property that is, and AIAI Information Systems that are: (i) used by Kingsway prior to Closing; and (ii) necessary to receive the AIAI Services; provided, however, KFS, hereby agrees to be bound by all existing restrictions, obligations and conditions that currently exist or relate to the AIAI Intellectual Property and AIAI Information Systems and such restrictions, obligations and conditions will apply to KFS, mutatis mutandis.

(b)    For greater certainty, but subject to its obligations to provide or cause the provision of the AIAI Services hereunder, such license of AIAI Intellectual Property and AIAI Information Systems shall not, and shall not be deemed to: (i) prohibit AIAI and its Affiliates from freely using, or licensing (on a non-exclusive basis) any of the AIAI Intellectual Property or AIAI Information Systems; or (ii) prohibit AIAI and/or the Companies and their Affiliates from transferring any of the AIAI Intellectual Property or AIAI Information Systems provided that the transferee assumes AIAI's and/or the Companies' obligations under this Agreement in respect of the transferred asset.

ARTICLE V SERVICE CHANGES

1.    Service Change Requests.
(a)     During the Term, any Party, in its capacity as a recipient of Services (a “Recipient Party”) may 

provide written notice (a “Change Request”) to any other Party, in its capacity as a provider of Services (a “Performing Party”) to request a modification to the nature or scope of the Services (including the addition of new services that are not already part of the Services to be performed by the Performing Party).
(b)    The applicable Parties agree to co‐operate and to use commercially reasonable efforts to negotiate an agreement on a Change Request (including any incidental changes to the Service Fees), on terms and conditions that are acceptable to such Parties, acting reasonably.  However, such Parties acknowledge and agree that they may not reach an acceptable agreement with respect to a given Change Request and in such event, the Performing Party shall have no liability or obligation to the Recipient Party in respect of such Change Request.
(c)    The applicable Schedules shall be amended accordingly to reflect any Change Request agreed upon by such Parties.  For greater certainty, it is acknowledged that the Recipient Party bears the costs of preparing any Change Request and any additional costs incurred by a Performing Party to make or implement changes to the Services in response to a Change Request shall be the sole responsibility of the Recipient Party and such additional costs shall be payable in addition to the Service Fees provided for herein.

2.    Termination of Particular Services.
(a)    A Recipient Party may terminate its receipt of Services prior to the expiration of the Term subject to and in accordance with the terms of this Section 5.2.
(b)    A Recipient Party shall provide not less than thirty (30) days prior written notice to a Performing Party of its intent to terminate a particular Service during the Term of this Agreement. Any partial termination notice delivered shall specify in detail: (i) the Service or Services to be terminated; and (ii) the effective date(s) of such termination.
(c)    Unless the applicable Parties agree in writing to the contrary, a particular Service may only be terminated in whole, not in part or subcomponent. Any termination of a particular Service shall be final, and the Service Fees payable by the Recipient Party with respect to such terminated Service shall be appropriately pro‐rated to the effective date of termination. If the termination of a Service prior to the expiration of the Term requires the payment of any fee, cost or expense of a similar nature to a third party (a “Termination Fee”), the Performing Party shall have no obligation to terminate such Service, unless the Recipient Party approves in advance such Termination Fee in writing (a “Termination Fee Approval”). If the Termination Fee Approval is granted and the Termination Fee is paid by the Performing Party, the Termination Fee shall be invoiced (without markup) to and payable by the Recipient Party pursuant to Article VIII of this Agreement.

ARTICLE VI SERVICE STANDARDS

1.    Service Standards and Level of Service for the Services.
(a)    Subject to Section 6.1(b), each of the Parties, in its capacity as a Performing Party, shall:
		
	(i)
	provide the Services in a workmanlike manner and at a level of quality that is reasonable under the circumstances;

		
	(ii)
	provide the Services to a Recipient Party on substantially the same basis as was provided to such Recipient Party prior to Closing, including substantially similar levels of service; and

		
	(iii)
	provide the Services at a level of responsiveness and diligence substantially similar to that provided to a Recipient Party prior to Closing.

(b)     Each of the Parties, in its capacity as a Recipient Party, acknowledges and agrees that a Performing Party is not a professional service provider of the Services to third parties (in particular with respect to the Kingsway Insurance Information Systems or the AIAI Information Systems, as the case may be) and as a result, such Performing Party may not be able to meet normal industry service levels or standards associated with such Services.  Accordingly, each of the Parties, in its capacity as a Performing Party, shall use commercially reasonable efforts to provide such Services to a Recipient Party and allow each of the Parties the right to audit such Services.
(c)    The obligations of a Performing Party to provide the Services in accordance with the standards set forth in this Article shall be subject to:
		
	(i) 
	a Recipient Party ensuring that the physical and technical environments at the facilities of such Recipient Party, to the extent such physical and technical environments are within the control of such Recipient Party and related to the Performing Party's provision, or such Receiving Party's receipt of the Services, are at least equivalent to those present at such Party's premises on the Closing Date; and

		
	(ii)
	a Recipient Party ensuring that nothing within its reasonable control prevents the Performing Party from providing the Services set out herein.

2.    Subcontracting.

A Performing Party may, in its sole discretion and without any written notice to a Recipient Party, engage its Affiliates and/or one or more third parties to provide some or all of the Services which such Performing Party is obligated to provide under this Agreement. In the event a Performing Party, so engages its Affiliates, or any such third parties, such Performing Party shall remain responsible for ensuring the performance of the subcontracted Services by the subcontractor in accordance with the applicable standards set forth in this Agreement and for the indemnification obligations of such Performing Party set forth in Article XIII.  No subcontracting of any Services shall relieve a Performing Party of its obligations under this Agreement with respect to such Services.
3.    Co‐operation.
(a)     Each Party shall, and shall cause its Affiliates and third party subcontractors to, co‐operate to the extent necessary or appropriate to facilitate the performance of the Services in accordance with the terms of this Agreement. Without limiting the foregoing, to the extent that an employee of a Performing Party who was transferred to a Recipient Party in connection with the transactions contemplated by the Merger Agreement and who was engaged, prior to Closing, in providing, co‐ordinating or assisting with the Services to such Recipient Party, such Recipient Party shall cause such transferred employee (or reasonably qualified substitutes) to continue to provide, co‐ordinate or assist with the Services throughout the Term at a level and in a manner at least equivalent in all material respects with such transferred employee's engagement prior to Closing.
(b)     Each Party shall, at all reasonable times under the circumstances, make available to the other Parties properly authorized personnel for the purpose of consultation and decision, and as may otherwise be reasonably necessary in the performance and receipt of the Services.
(c)Each Party shall provide access to their respective facilities, information systems and equipment as appropriate in connection with the provision of the Services subject to their respective physical security procedures and subject to any obligations or limitations imposed by Articles IX and X of this Agreement.
(d)Each Party may change at any time: (i) its physical security procedures; or (ii) the location from which it provides any Service; provided that the Parties shall remain responsible for the performance of the Services in accordance with the terms of this Agreement.

4.    Books and Records. 
Each Party shall maintain or cause to be maintained, in accordance with applicable Laws and its document retention policies (including policies relating to backup computer files and maintaining facilities and procedures for safekeeping and retaining documents), books and records of all transactions pertaining to the performance or receipt (as applicable) of the Services. Access to such books and records by any Party shall, to the extent not prohibited by applicable Laws, be made available for audit or other purposes: (a) upon reasonable prior written notice and during regular business hours, through its employees and representatives; (b) at the requesting Party's sole cost and expense and may not unreasonably interfere with the other Party's or any of its Affiliates' business operations and; (c) subject to the physical security procedures of the Party and its Affiliates who are the subject of such request. Notwithstanding the foregoing, the Parties and any third party subcontractor providing Services under this Agreement shall have access to such books and records as necessary or reasonably required to provide the Services in accordance with the terms of this Agreement.
ARTICLE VII    LIMITATIONS
1.    General Limitations.
(a)    KFS shall have no obligation under this Agreement to provide services or support in support of any business or operations of the Companies other than in support of the Business as set forth on Schedule 3.2. In no event, shall KFS be obligated to provide any Services to the Companies if they cease to be wholly owned subsidiaries of Atlas. 
(b)    In no event shall any Party be obligated hereunder to maintain the employment of any specific employee during the Term; provided that each Party shall remain responsible for the performance of the Services in accordance with the terms of this Agreement.

2.    Third Party Consents and Terms; Compliance with applicable law.
(a)    Each Party warrants that it has as of the Closing Date obtained, or reasonably expects to receive promptly thereafter, all Third Party Consents that are necessary in order for it to provide the Services to the other Parties.
(b)     In the event that any third party vendor requires the payment of a fee or other charge to permit a Performing Party to provide Services to a Recipient Party (“Consent Fee”), then the Recipient Party agrees it shall pay or reimburse the Performing Party all such Consent Fees in full upon receipt of an invoice for same.
(c)     Notwithstanding Section (a), if any Third Party Consent has not or is not obtained, on or before the 

Closing Date, KFS and AIAI will use commercially reasonable efforts to identify, and shall cooperate with each other in achieving, a reasonable alternative arrangement with a view to continue to operate their respective businesses with as minimal interference to their respective business operations as is reasonable until such Third Party Consent is obtained or until such other reasonable alternative arrangement is concluded; provided that no Party shall be responsible or liable to the other Parties hereunder to the extent that any failure or inability to obtain any Third Party Consent restricts, limits, impedes or otherwise prevents the performance by a Party of its obligations hereunder.
(d)    Each Party acknowledges and agrees that any Services provided by a Performing Party and its Affiliates through third parties or by using third party intellectual property are subject to the terms and conditions of any applicable agreements between such Performing Party or its Affiliates and such third parties, as well as compliance with applicable Laws. Each Party agrees to comply, and to cause its Affiliates to comply, with the terms and conditions of any such applicable third party agreements in connection with the provision or receipt (as applicable) of the Services.

3.    Force Majeure.
In the event that a Party or its Affiliates or any third party subcontractor is wholly or partially prevented from, or delayed in, providing one or more Services, or one or more Services are interrupted or suspended, by reason of events beyond its reasonable control (including acts of God, acts of nature, acts, decrees or orders of governmental, regulatory or military authorities, fire, explosion, accident, embargoes, epidemics, war, acts of terrorism, nuclear disaster, civil unrest and/or riots or disruption of Internet access as a result of any virus, worm, Trojan horse, etc.) (any of the foregoing or similar type of event, a “Force Majeure Event”), (a) such Party shall not be obligated to deliver the affected Services during such period, (b) a Recipient Party shall not be obligated to pay for any Services not delivered during such period except for any Consent Fees or Termination Fees (as defined herein), and (c) the applicable Term shall not be tolled during or extended for all or part of such period; provided that nothing in this Section 7.3 shall alter, suspend or limit the payment obligations of any Party under this Agreement for Services previously provided.
ARTICLE VIII PAYMENT
1.    Fees Payable by the Parties.
(a)    The fee, rate or amount to be charged for the Services (the “Service Fees”) shall be:
		
	(i)
	in the case of the Kingsway Services, as set forth in the applicable Schedules attached hereto; and;

		
	(ii)
	in the case of the AIAI Services, as set forth in the applicable Schedules attached hereto.

(b)    For greater certainty, in no event shall KFS be responsible for, and AIAI or the Companies shall be solely responsible for, any costs or expenses relating to any hardware, software or technical devices and related accessories thereto required to be purchased to complete the orderly transfer of the Companies as a result of the change of ownership and to enable the uninterrupted operation of the Business following Closing.
2.    Billing and Payment Terms.
(a)    Each Party shall invoice the other Parties following the end of a given calendar month for: (i) the Service Fees; (ii) the Termination Fees; and (iii) the Consent Fees, as applicable, incurred during such calendar month. Each Party shall pay all such invoices within thirty (30) Business Days after receipt thereof by wire transfer of immediately available funds, unless otherwise prescribed in a service agreement referenced in the schedules. Payments not made in accordance with the preceding sentence shall bear simple interest from and including the date such payment is due until, but excluding, the date of payment, at a monthly rate of 1.5% (18% per annum). All Service Fees, Termination Fees, Consent Fees and late payments shall be payable and remitted in United States dollars.
(b)    The amount of any Service Fees shall be prorated to the extent necessary on an invoice to reflect the portion of the specified time period for which the Services were actually rendered vis a vis the applicable month, unless otherwise prescribed in a service agreement referenced in the schedules.
(c)    If all or a component of a Service is provided by a third party and the invoice in respect thereof is bundled with items unrelated to the subject matter of this Agreement, the Service Fee in respect of such Service shall only reflect the dollar amount appropriately allocated to such Service.
3.     Taxes.
Each Party shall reimburse the other Parties for any sales, use, gross income, gross receipts or other similar taxes imposed by or withheld on behalf of any provincial or local taxing authority with respect to any payment made by a Party to the other Parties pursuant to this Agreement, except for taxes based or imposed on or measured in whole or in part by net income or net worth, or a tax imposed in lieu thereof, including any provincial business and occupational tax liability imposed on the Party or its Affiliates providing Services. Amounts to be reimbursed in respect of such taxes shall be separately reflected on the relevant invoice.
ARTICLE IX ACCESS AND SECURITY
1.    Security Level; Additional Security Measures.
Each of the Parties and its Affiliates may take physical or information security measures: (a) that affect the manner in 

which the Services are provided to maintain such Party's or its Affiliates' current level (or, if greater, an industry‐standard level) of physical and electronic security (including data security and data privacy) during the Term; and (b) that address any new security‐related issues, including compliance with applicable Laws related to security and issues related to new technologies or threats. Each of the Parties shall provide the other Parties reasonable, prior written notice of any such physical or information security measures that are material to such Party's delivery of the Services. Each of the Parties shall, at a requesting Party's cost and expense, provide all assistance reasonably requested by such Party or its Affiliates in connection with such security measures.
2.    Security Breaches.
In the event of a security breach that relates to the Services, each of the Parties providing such Services shall, subject to any applicable Laws, co-operate with the Parties receiving such Services regarding the timing and manner of: (a) notifications to their respective customers, potential customers, employees and/or agents concerning a breach or threatened breach of security; and (b) disclosures to appropriate Governmental Authorities.
3.    Systems Security.
(a)    If a Recipient Party, its Affiliates, any of their respective personnel or any personnel of any third party retained by such Party or its Affiliates and any authorized agent, auditor or Governmental Authority (collectively, the “Recipient Party Personnel”) is given access by a Performing Party or its Affiliates to: (i) information systems, including any computer systems or software and data stored therein, of the Performing Party or its Affiliates or (collectively, the “Performing Party Systems”), the Recipient Party Personnel shall comply with all of such Performing Party's and its Affiliates' information system security policies, procedures and requirements applicable in accessing and using the Performing Party Systems, and shall not tamper with, compromise or circumvent any security or audit measures employed by such Performing Party or its Affiliates.
(b)    Information pertaining to AIAI and its Affiliates and to KFS and its Affiliates will be logically segregated throughout the Term of this Agreement.  AIAI and KFS will bear equally any and all labour costs associated with such segregation of information. However, all other costs related to the segregation of information, including, but not limited to, costs for any new hardware, software or technical devices and accessories related thereto such as a storage area network required to achieve such separation of information, will be for the account of the applicable Recipient Party.
(c)    Each of the Parties shall ensure that only those of their respective personnel who are specifically authorized by another Party to have access to its information systems, obtain such access and shall prevent unauthorized access, use, destruction, alteration or loss of information contained therein, including: (i) notifying their respective personnel regarding the restrictions set forth in this Agreement and any changes in such Party's information security policies; and (ii) establishing appropriate policies designed to monitor compliance with and effectively enforce such restrictions.
(d)    The personnel of a Party shall access and use only those information systems of another Party, and only such data and information within those information systems to which such given personnel has been granted the right to access and use under this Agreement. Each of the Parties shall have the right to deny access to its information systems to personnel of the other Parties, after prior written notice, in the event a Party reasonably believes that such personnel pose a demonstrable security concern. If, at any time, a Party determines: (i) that any personnel of another Party has sought to circumvent, or has circumvented, such Party's information security policies; or (ii) that any unauthorized personnel of another Party has accessed such Party's information systems or (iii) that any personnel of another Party has engaged in activities that may lead to the unauthorized access, use, destruction, alteration or loss of data, information or software, such Party shall be permitted to immediately terminate access to its information systems by any such personnel and shall promptly notify in writing the applicable Party of the name of such personnel and the circumstances surrounding such breach.
(e)    All user identification numbers and passwords of a Party disclosed to the other Parties, and any information obtained by a Party from access to and use of the other Parties' information systems, shall be deemed Confidential Information (as defined herein) of the disclosing Party.
(f)    Each of the Parties shall co-operate with the other Parties in investigating any apparent unauthorized access to another Party's information systems or any apparent unauthorized release of Confidential Information. Each of the Parties shall promptly notify the other Parties in writing: (i) if such Party has revoked access by any personnel to its own information systems if such personnel also has access to another Party's information systems; and (ii) once any personnel of such Party no longer has a need to access the information systems of another Party so that the applicable Parties can revoke such personnel's access to their information systems.

ARTICLE X    CONFIDENTIALITY
1.    Confidential Information. 
As used in this Agreement, Confidential Information is defined as follows:

(a)    “Confidential Information” means information owned by or concerning a disclosing Party or its Affiliates (including information disclosed in the course of performance or negotiation of this Agreement and the terms of this Agreement) that is not generally known to the public, except for:
		
	(i)
	information that is or becomes publicly available (other than through disclosure by a receiving Party, its Affiliates or any third party retained by a receiving Party), from and after the date of public availability; or

		
	(ii)
	information disclosed to a receiving Party by a third party not known to be bound by any confidentiality agreement with a disclosing party or its Affiliates; provided that (A) under the circumstances of disclosure, the receiving Party does not owe a duty of non‐disclosure to such third party and (B) the disclosure by such third party is not otherwise unlawful.

(b)    Each Party shall not, and shall cause their respective Affiliates and each of their and their Affiliates' directors, officers, employees, vendors, representatives and agents (“Representatives”) not to, disclose to any other Person or use, except for purposes of this Agreement (and only in accordance with applicable Laws), any information that is Confidential Information of another Party respectively, provided that each Party may disclose Confidential Information: (i) to its Representatives on a need‐to‐know basis in connection with the performance of such Party's obligations under this Agreement; (ii) in a regulatory filing if required to be included therein under applicable Laws or, subject to Section 10.1(c) hereof, in response to any summons, subpoena or other legal process or formal or informal investigative demand issued by a Governmental Authority to such Party or its Representatives in the course of any litigation, investigation or administrative proceeding; or (iii) to as reasonably necessary enforce its rights and remedies under this Agreement.
(c)    In the event that a Party or any of their respective Representatives becomes legally compelled by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar judicial or administrative process to disclose any Confidential Information of another Party, such Party shall provide such other Party with prompt prior written notice of such requirement and shall use its reasonable best efforts to co-operate with such other Party (at such other Party's expense) to obtain a protective order or similar remedy to cause Confidential Information not to be disclosed, including interposing all available objections thereto, such as objections based on settlement privilege. In the event that such protective order or other similar remedy is not obtained or the other Party waives compliance with the provisions of this Section 10.1(c) and Section 10.1(e) of this Agreement, such Person shall furnish only that portion of Confidential Information of the other Party that has been legally compelled, and shall exercise commercially reasonable efforts to obtain assurance that confidential treatment shall be accorded such disclosed Confidential Information.
(d)    Each Party shall comply with any and all applicable Laws including, without limitation, all laws relating to privacy.
(e)    Each Party shall, and shall cause its Representatives to, protect Confidential Information of the other Parties by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized disclosure of such Confidential Information as the Party uses to protect its own Confidential Information of a similar nature.
(f)    Each Party shall cause its Representatives to be bound by the same restrictions on use and disclosure of Confidential Information as set forth in this Article X.

ARTICLE XI DATA AND INTELLECTUAL PROPERTY
1.    Ownership of Data.
(a)    As between the Parties, AIAI and its Affiliates shall own all right, title and interest in and to all data generated for AIAI and its Affiliates by KFS, its Affiliates and/or KFS' subcontractors in performing the Kingsway Services, as applicable.    
(b)    As between the Parties, KFS shall own all right, title and interest in and to all data generated for KFS, its Affiliates and/or the KFS' subcontractors by AIAI and its Affiliates in performing the AIAI Services.
(c)    Each Party shall be permitted access to its data at all times, which access shall not be unavailable or restricted or delayed (including in the case of any dispute) except as is expressly provided for in this Agreement.  No Party shall (even in the event of a dispute between the Parties or upon the termination of the Agreement):
		
	(i)
	possess or assert any ownership right, encumbrance or similar right in or over another Party's data; or 

		
	(ii)
	sell, disclose, copy, assign, lease, license or otherwise dispose of, or commercially exploit, any of another Party's data.

(d)    All data of a Recipient Party shall at all times be stored, processed and maintained by a Performing Party such that it is logically separated from the data and information of the other Parties and any other Person.

(e)    Each Recipient Party hereby grants to a Performing Party, during the Term, a limited, revocable, royalty-free, non-transferable and non-exclusive licence to use and process such Recipient Party's data solely as permitted by this Agreement and for the purposes of, and only to the extent necessary for, the provision of the Service to a Recipient Party.
(f)    Each Party shall comply with terms of Schedule 11.1(f).

2.    Ownership of Intellectual Property.
(a)    Except as otherwise expressly set forth herein, each of the Parties and their respective Affiliates shall retain all right, title and interest in and to their respective Intellectual Property.
(b)    Except as otherwise expressly agreed to in writing for any given Service, KFS shall solely and exclusively own all right, title and interest, including all Intellectual Property rights and any other intellectual or proprietary rights therein or thereto, throughout the world in and to all deliverables and materials created by KFS or its Affiliates or jointly with AIAI and its Affiliates (other than KFS) in any connection with the performance of the Services (collectively, “Developed Kingsway IP”), and AIAI and its Affiliates hereby irrevocably assign any and all right, title or interest they may have in Developed Kingsway IP to KFS and its Affiliates. AIAI and its Affiliates shall, without further consideration, execute any documents and take any other actions reasonably requested by KFS or its Affiliates to effectuate the purposes of this Section 11.2(b).

3.    Reservation of Rights.
Except as otherwise expressly set forth herein, no Party or any of its Affiliates shall have any rights or licenses, express or implied, with respect to any intellectual property, hardware or facility of another Party or any of its Affiliates. All rights and licenses not expressly granted in this Agreement are expressly reserved by the Parties and their Affiliates.

ARTICLE XII DISCLAIMER OF REPRESENTATIONS AND WARRANTIES

1.    Disclaimer of Representations and Warranties.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, EACH PARTY EXPRESSLY ACKNOWLEDGES THAT THE OTHER PARTIES DISCLAIM AND ACCEPT NO RESPONSIBILITY FOR ANY OTHER REPRESENTATIONS OR WARRANTIES OR CONDITIONS WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE SERVICES TO BE PROVIDED UNDER THIS AGREEMENT OR OTHERWISE, INCLUDING WITHOUT LIMITATION WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON‐INFRINGEMENT OF ANY SOFTWARE OR HARDWARE OR OTHER INTELLECTUAL PROPERTY PROVIDED HEREUNDER, AND ANY REPRESENTATIONS OR WARRANTIES OR CONDITIONS ARISING FROM COURSE OF DEALING, COURSE OF PERFORMANCE OR TRADE USAGE.
ARTICLE XIII INDEMNIFICATION; LIMITATION ON LIABILITY
1.    General.
(a)    Each of the Parties agrees that the other Party shall have no liability (whether direct or indirect and regardless of the legal theory advanced) to it or any Person asserting claims on behalf of or in right of it in connection with, relating to, or arising out of, this Agreement, except solely for indemnifiable claims under Section 13.2 and Section 13.3 of this Agreement, as applicable.
(b)    For purposes of this Article XIII, “material breach” shall mean in the case of a breach by: (A) a Performing Party and its Affiliates, resulting primarily from their gross negligence, bad faith or wilful misconduct in connection with the provision of the Services; (B) a Recipient Party, resulting primarily from its gross negligence, bad faith or wilful misconduct in connection with the receipt of the Services and fulfillment of the obligations hereunder, and including any failure to make a required payment obligation set out herein; and (C) a third party subcontractor providing Services on behalf of a Performing Party or its Affiliates resulting primarily from the third party subcontractor's gross negligence, bad faith or wilful misconduct in connection with the provision of any such Services; provided that nothing in this Article XIII shall alter, suspend or limit the obligations of the Parties for payment of the Service Fees in accordance with the terms of this Agreement.

2.    Indemnification of the Recipient Party.
Subject to the limitations set forth in the Merger Agreement, a Performing Party shall indemnify a Recipient Party against, any and all liabilities, losses, judgments, settlements, damages, costs, fees and expenses, including reasonable legal fees and expenses (collectively, “Claims”), that arise as a result of or in connection with or are otherwise attributable to a material breach by the Performing Party or any of its Affiliates, personnel or representatives of any provision of 

this Agreement . A Performing Party shall not be liable for any indirect or consequential changes that may be incurred by a Recipient Party.
3.    Indemnification of the Performing Party and its Affiliates.
Subject to the limitations set forth in the Merger Agreement, a Recipient Party shall indemnify a Performing Party and its Affiliates against any and all Claims that arise as a result of or in connection with or are otherwise attributable to: (a) a material breach by the Recipient Party or its Affiliates, personnel or representatives of any provision of this Agreement; or (b) any breach or non-compliance by the Recipient Party or its Affiliates of any third party license or agreement between a Performing Party (or its Affiliates) and a third party licensor or supplier of which the Recipient Party or its Affiliate is a beneficiary hereunder in its receipt of the Services.
4.    Indemnification Procedures.
In the event a Party has a Claim for indemnity against another Party under the terms of this Agreement, such Parties shall follow the procedures set forth in Article 13 of the Merger Agreement, except to the extent modified herein.
ARTICLE XIV TERMINATION
1.    Termination.

This Agreement may be terminated as follows:
(a)    by a Recipient Party pursuant to Section 5.2;
(b)    by KFS on ten (10) days notice to the AIAI Companies, in the event ACIC or ASI cease to be a wholly owned subsidiary of Atlas; 
(c)    by any Party immediately in the event that any other Party has been adjudicated bankrupt, has failed to vacate an involuntary bankruptcy or reorganization petition within sixty (60) days of the date of such filing, files such a petition on a voluntary basis, fails to vacate the appointment of a receiver or trustee for it or for a substantial portion of its assets, makes an assignment for the benefit of such Party's creditors or ceases to do business as a going concern; 
(d)    by any Party, upon written notice to the other Parties, in the event that KFS or AIAI is in material breach hereof or is in default of any of its material obligations hereunder or breaches any material provision of this Agreement and fails to remedy such default or breach within thirty (30) days of its receipt of such written notice.

2.    Effect of Termination.
Upon any termination or expiration of this Agreement:
(a)    upon request, each Party shall promptly return to the other Parties all tangible personal property and books, records or files owned by such other Parties and used in connection with the provision of each terminated Service that are in its or its Affiliates' possession or control as of the effective date of such termination, except a Party may retain one (1) copy set in order to comply with its regulatory obligations, which copy set shall be deemed Confidential Information of the Party who made such information available;
(b)    except for the license to use the Kingsway Insurance Information Systems and any related Kingsway Intellectual Property granted hereunder, all licenses granted hereunder shall terminate (inclusive of any rights and licenses to use any intellectual property or information systems of any other Party) as of the effective date of termination, other than the license to use the Kingsway Intellectual Property and Kingsway Insurance Information Systems granted hereunder,  and each Party shall promptly (and in any event within thirty (30) days of the effective date of termination) return to the other Parties all technology and software of the other Parties made available to such Party hereunder or in connection herewith;
(c)    each Party shall promptly pay to the other Parties all undisputed amounts due and payable hereunder by such Party up to and including the effective date of termination;
(d)    each Party shall within thirty (30) days of the effective date of termination return to the other Parties all data of the other Parties in its possession or under its control. Following such return and at the other Parties' written direction, the returning Party shall erase or destroy any data of the other Parties remaining in its possession, or such portion of such data as the other Parties may direct and shall thereafter provide the other Parties with a written certificate confirming such erasure or destruction; and
(e)    Nothing in this Article XIV shall relieve the Parties from their liability for any breach or threatened breach of this Agreement. The provisions of Article VII, Article X, Article XI, Article XII, Article XIII, Section 3.3, this Section 14.2, Article XV and Article XVI, and the obligations of each Party under Article VIII to pay the Service Fees for Services furnished on and prior to the effective date of such termination and any Consent Fees, Termination 

Fees or late payments, shall survive any termination hereunder.

ARTICLE XV DISPUTE RESOLUTION
1.     Disputes.  
Any disputes, disagreements, controversies, questions or claims between the Parties, other than Excluded Disputes, relating to this Agreement or the Services provided hereunder or the Services Fees (a “Dispute”), shall be escalated in accordance with the following procedure. (a) If a Dispute cannot be resolved in the normal course, then the Dispute may be referred, at any time, by any party on written notice to the other Parties as follows: (i) for KFS to the President of KFS; and (ii) for AIAI to the President of AIAI. (b) The individuals identified in paragraph (a) shall mutually agree on the methods by which they shall attempt to resolve any Dispute, such as, for example, telephone and/or video conferences, email and fax communications and/or face to face meetings. No Dispute shall be considered resolved until the parties have agreed to the resolution in writing. (c) If the individuals identified in paragraph (b) cannot resolve a Dispute within a period of thirty (30) calendar days from the date on which it was referred as provided in paragraph (b), then any Party may upon notice to the others refer the Dispute to non-binding mediation for a one (1) day maximum session, to be held no later than sixty (60) calendar days after the date of the notice as provided above. Any such mediation shall: (i) be non-binding on the Parties; (ii) be conducted by a single mediator agreeable to each Party. Any mediator selected must be a suitably qualified, impartial Person who is experienced in commercial and contractual disputes involving services reasonably similar to the Services provided hereunder. If the Parties are unable to mutually agree upon a mediator, KFS and AIAI shall, within ten (10) Business Days following the referral of the matter to mediation, appoint a mediator selector with substantially the same expertise as required for the mediator, and the two mediator selectors so appointed shall appoint a third mediator who shall be the mediator; provided, however, that if only one of KFS or AIAI has chosen a mediator selector within such ten (10) Business Day period, that mediator selector shall be entitled to appoint the mediator. In the event that the mediator selectors are unable to mutually agree upon a mediator within ten (10) Business Days, any Party shall be entitled to apply to an Illinois court judge to select a mediator; (iii) be conducted in the English language in the city of Chicago, Illinois (unless otherwise agreed by the Parties) at such time and venue as the mediator may fix; (iv) be limited to no more than one (1) day unless the parties otherwise agree in writing; and (v) be held with each Party sharing equally the costs of the mediator and expenses relative to the mediation process. (d) No Dispute shall be considered resolved by mediation until the Parties have agreed to the resolution in writing.  If the Dispute is not resolved within five (5) Business Days of the completion of the mediation described in paragraph (c), each Party shall be free to pursue its remedies in a court of competent jurisdiction as provided in Section 1.9. (e) Each Party shall pay its own costs, if any, associated with the process contemplated under paragraph (b) and the mediation contemplated under paragraph (c). All Disputes (and mediation) will be kept confidential to the full extent permitted by applicable Law.  For the purposes of this Agreement “Excluded Disputes” are any disputes, disagreements, controversies, questions or Claims between the Parties relating to: (i) actual or alleged breaches or actual or alleged non-compliance by a Recipient Party of any third party licenses or service agreements between a Performing Party and a third party of which the Recipient Party or its Affiliates is a beneficiary (directly or indirectly) of receipt of the Services hereunder; (ii) any Party's data, Confidential Information or Intellectual Property; or (iii) actual or alleged infringement of any third party's intellectual property rights as a result of the performance of the Services.
ARTICLE XVI    MISCELLANEOUS

1.    Undertakings of the Parties; Breaches.  
Each of the Parties agrees to perform, or cause to be performed, when due all obligations of its Affiliates under this Agreement.  Each of the Parties agrees to be responsible for any breach or threatened breach of Article IX by any of its respective personnel or Article X by any of its respective representatives.
2.    Authority.  
Each Party represents and warrants to the other Party hereto: 
(a)    that it has the requisite power and authority to enter into and deliver this Agreement and to perform its obligations hereunder; 
(b)    that the execution, delivery and performance of this Agreement have been duly and validly authorized by the requisite corporate action on the part of such Party and that no other corporate proceedings on the part of such Party are necessary to authorize the execution, delivery and performance of this Agreement; and 
(c)    that this Agreement has been duly executed and delivered by such Party and, assuming the due authorization, execution and delivery of this Agreement by the other Parties hereto, constitutes a valid and binding obligation of such Party, enforceable against such Party in accordance with its terms and conditions.

3.    Relationship of the Parties.
(a)    The Parties and their respective representatives shall be deemed independent contractors for all purposes under this Agreement.
(b)    This Agreement shall not be deemed or construed to create the relationship of employer or employee, partnership or any type of joint venture relationship, between the Parties.
(c)    The Parties acknowledge and agree that the Parties are not providing legal, accounting or tax advice under this Agreement. Neither party shall be responsible for any action or failure to take any action relating to any Services provided hereunder. The Parties further acknowledge and agree that no fiduciary or other similar relationship is being created between the Parties relating to the Services provided under this Agreement.
(d)    Except as expressly set forth herein, no Party or representative of a Party shall have the authority to contract for or assume obligations of any nature in the name of another Party without that Party's prior written consent.

4.    No Offset.  
None of the Parties shall have the right to offset or withhold any sums they may owe to the other Parties under this Agreement against any sums they may be entitled to receive under any provision of this Agreement, the Merger Agreement or otherwise.
5.    Sole Remedy.  
The provisions of Articles XIII, XIV and XV hereof shall be the sole and exclusive remedies with respect to any breach or threatened breach of this Agreement. 
6.    Amendment, Modification and Waiver.  
(a)    Neither this Agreement nor any provision hereunder may be amended, modified or waived except by an instrument or instruments in writing signed and delivered on behalf of each of the Parties.
(b)    No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided under applicable Laws.

7.    Entire Agreement.  
This Agreement (together with the Schedules and Exhibits attached hereto) constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and verbal, between the Parties with respect to the subject matter hereof. 
8.    Severability.  
Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as would be enforceable.
9.    Counterparts.  
This Agreement may be executed in counterparts (including by facsimile), each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement.
		
	10.
	Third Party Beneficiaries.  

Except as set forth in Article XIII, nothing in this Agreement, express or implied, is intended to confer upon any Person other than the Parties any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.
		
	11.
	Binding Effect; Assignment.  

Except as otherwise expressly set forth herein, neither this Agreement, nor any rights, interests or obligations hereunder, may be directly or indirectly assigned, delegated, sublicensed or transferred by any Party, in whole or in part, to any other Person by operation of law or otherwise, whether voluntarily or involuntarily, without the prior written consent of the other Parties hereto, and any attempt at same shall be null and void ab initio. Subject to the foregoing, this Agreement shall enure to the benefit of and be binding upon the Parties and the respective successors and permitted assigns.
		
	12.
	Descriptive Headings  

The descriptive article and section headings contained herein and in the Schedules and Exhibits attached hereto are 

inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.
		
	13.
	Expenses.  

Except as otherwise expressly set forth herein, all costs and expenses incurred in connection with this Agreement shall be paid by the Party incurring such cost or expense.
		
	14.
	Notices.  

All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by facsimile (delivery of which is confirmed), by courier (delivery of which is confirmed), or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties as follows:
		
	(a)
	to KFS at:

Kingsway Financial Services Inc.
150 Northwest Point Boulevard
Elk Grove Village, Illinois
60007
Attention:     President and CEO
Facsimile:     (847) 952-7079
		
	(b)
	to AIAI at:

American Insurance Acquisition Inc.
150 Northwest Point Boulevard 
Elk Grove Village, IL 60007

Attention:  Scott Wollney
Facsimile:  (847) 228-2580

or to such other address as the Person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. In no event shall the provision of notice pursuant to this Section 16.14 constitute notice for service of any writ, process or summons in any suit, action or other proceeding.
		
	15.
	Notice of Breach. 

Each Party shall promptly notify in writing the other Parties of any breach or threatened breach of this Agreement or of any third party license agreement of which it becomes aware.

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be duly executed on its behalf as of the day and year first above written.
	
				
	 
	 
	KINGSWAY FINANCIAL SERVICES INC.

	Per:
	/s/ Larry G. Swets, Jr.

	 
	Name: Larry G. Swets, Jr.

	 
	Title: President & CEO

	Per:
	/s/ William A. Hickey, Jr.

	 
	Name: William A. Hickey Jr.

	 
	Title: Chief Operating Officer

	
				
	 
	 
	AMERICAN INSURANCE ACQUISITION INC.

	Per:
	/s/ Scott D. Wollney

	 
	Name: Scott D. Wollney

	 
	Title: President & CEO

SCHEDULE 3.2
KINGSWAY SERVICES

		
	 (I)
	Kingsway Accounting Support Services: KFS will provide under an Accounting Shared Services Agreement, support for GAAP and IFRS accounting for AIAI and certain U.S. Affiliates or subsidiaries on an ongoing basis until such time as it is mutually determined by both parties to be unnecessary. As consideration for this Service, AIAI or its U.S. Affiliate for whom Service is rendered will reimburse KFS or its subsidiary or Affiliate who performed the Service for actual costs, including but not limited to employee salaries and related expenses, incurred in providing this Service.

		
	(II)
	Kingsway Auto Policy Administration and Underwriting Support Services: KFS, or its U.S. Affiliates or subsidiaries, will provide under a Program Management Agreement to be incorporated in the future as Schedule 3.2(II), private passenger auto policy administration and underwriting support for ASI relating to business written prior to and after the Closing until such time as all private passenger auto policies are transitioned away from ASI either through renewal by Kingsway or an Affiliate or non-renewal. As consideration for this Service, KFS or its subsidiary or Affiliate who performed the Service will be entitled to renewal rights relative to ASI's private passenger auto book of business plus payment equal to the difference between .95 X earned premium for the period during which this Service is rendered and the fully developed Loss & ALAE amount as recorded on ASI's books for that same period plus 100% of Unallocated Loss Adjustment Expense (“ULAE”) for personal auto lines business as reserved on ASI's books at the close of the Transaction.

		
	(III)
	Kingsway IT Services: To the extent that Kingsway remains the bill to party for services required to support both Kingsway's and the Companies' information technology and related business functions (e.g., Verizon), actual expenses based on invoices will be split proportionately based on actual use.

		
	(I)
	Kingsway Tax Return Services: KFS shall be required to prepare the 2009 federal income tax returns of AIAI, ASI, ACIC, Southern United Fire Insurance Company (“SUFI”), and Southern United General Agency of Texas, Inc. (“SUGAT”) for inclusion in the 2009 Kingsway consolidated federal income tax return.  KFS shall also be required to prepare the 2009 state income tax returns of AIAI, ASI, ACIC, SUFI and SUGAT that are to be included in any combined or unitary state income tax returns whereby KFS or one of its Affiliates is the parent.  AIAI shall (or shall cause ASI, ACIC or other AIAI Affiliates to) be responsible for the preparation and filing of all other income tax and other types of tax or information returns of AIAI, ASI, ACIC, SUFI and SUGAT not mentioned in the first two sentences.  The foregoing services shall be performed without charge to either party. 

SCHEDULE 4.2
AIAI SERVICES
		
	 (I)
	AIAI Accounting Services: AIAI and its Affiliates will provide under an Accounting Shared Services Agreement, support for Statutory accounting for KFS and certain U.S. Affiliates or subsidiaries, including the delivery of related data in agreed formats, on an ongoing basis until such time as it is mutually determined by both parties to be unnecessary. During the first ninety (90) days immediately following the Closing, AIAI will provide limited support for the transition of certain U.S. Affiliates or subsidiaries' actuarial processes. As consideration for this Service, KFS or its U.S. Affiliate for whom Service is rendered will reimburse AIAI or its subsidiary or Affiliate who performed by Service for actual costs, including but not limited to employee salaries and related expenses, incurred in providing this Service.

		
	(II)
	AIAI Claims Handling Services: AIAI, or its U.S. Affiliates or subsidiaries, will provide under an Underwriting & Claims Management Agreement to be incorporated in the future as Schedule 4.2(II), commercial auto policy administration, underwriting and claims handling support for Universal Casualty Company (“UCC”) relating to business written prior to and after the Closing until such time as all commercial auto policies are transitioned away from UCC either through renewal by an AIAI subsidiary, or non-renewal. As consideration for this Service, AIAI or its subsidiary or Affiliate who performed the Service will be entitled to renewal rights relative to UCC's commercial auto book of business plus 100% of ULAE for commercial auto lines business as reserved on UCC's books at the close of the Transaction. 

		
	(III)
	AIAI Personnel and Payroll Support Services: The Companies will provide under a Personnel and Payroll Records Storage Agreement, personnel and payroll records support for records of former employees of KFS that worked at the Companies, including storage of such records, until such time as the minimum retention period for such records has expired under applicable law. As consideration for this Service, KFS will pay to the Companies a one-time fee of $100.00 at the close of the Transaction. 

		
	(IV) 
	AIAI IT Services: AIAI will provide to KFS and certain of its U.S. Subsidiaries or Affiliates limited IT Services to be mutually agreed, relating in particular to the ongoing use of, or transition from, IT infrastructure located at 150 Northwest Point Boulevard, Elk Grove Village, IL 60007. As consideration for this Service, KFS or its U.S. Affiliate for whom Service is rendered will reimburse AIAI or its subsidiary or Affiliate who performed the Service for actual costs, including but not limited to employee salaries and related expenses, incurred in providing this Service. Non-personnel costs (i.e., hardware, software, off-site storage) associated with these services will either be direct expense to KFS or a pass-through of actual expenses based on invoices (to the extent that any of these items are shared between AIAI and KFS, costs will be split proportionately based on actual use). Any special projects that would be above and beyond ordinary services (i.e., reconstructing servers, reconfiguring cubicles) will be billed hourly, based on actual personnel expense.

		
	(V)
	AIAI Tax Return Services: See KFS Tax Return Services in Schedule 3.2 to the Agreement.

		
	(VI)
	AIAI Additional Tax Services:  After the Closing, AIAI shall (and shall cause its respective Affiliates, including AIAI, ASI, ACIC, Southern United Fire Insurance Company (“SUFI”), and Southern United General Agency of Texas, Inc. (“SUGAT”), to):

		
	a.
	Assist KFS in preparing (including, but not limited to, the preparation of work papers and schedules needed to prepare the 2009 income tax returns and assist KFS in accumulating the information necessary to calculate the tax basis in the stock of AIAI, ASI, ACIC, SUFI and SUGAT ) any federal or state income tax return for which KFS is responsible to prepare and file under this agreement and any  amended returns or refund claims relating to federal or state income taxes for taxable periods ending on or before the Closing Date;

		
	b.
	Cooperate fully in preparing for any audits of, or disputes with tax authorities regarding any taxes of AIAI, ASI, ACIC,SUFI and SUGAT relating to any taxable period ending on or before the Closing Date or any taxable year or period beginning before and ending after the Closing Date (a “Straddle Period”); 

		
	c.
	Make available to KFS as reasonably requested all information, records, and documents relating to taxes of AIAI, ASI, ACIC, SUFI and SUGAT for any taxable period ending on or before the Closing Date and any Straddle Period; and

		
	d.
	 Retain or cause to be retained all books and records pertinent to AIAI, ASI, ACIC, SUFI and SUGAT for each taxable period ending on or before the Closing Date or any Straddle Period until the expiration of the applicable statute of limitations (giving effect to any and all extensions and waivers thereof) and to abide by or cause compliance with all record retention agreements entered into by or on behalf of AIAI, ASI, ACIC, SUFI or SUGAT with any tax authority.

The foregoing services shall be performed without charge to either party, however, to the extent AIAI or an Affiliate incurs direct external cost in support of these AIAI Additional Tax Services, and provided that (i) AIAI has informed KFS prior to incurring such external cost, and (ii) AIAI or an Affiliate clearly did not have the ability to provide such service without incurring such external cost, KFS will reimburse AIAI for these costs.

SCHEDULE 11.1(f)
PERSONAL INFORMATION
		
	1.
	In this Agreement, “Personal Information” means information about an identifiable individual, but does not include the name, title or business address or telephone number of an employee of an organization.

		
	2.
	In performing the Services, each Party will treat any and all Personal Information that it receives from any other Party, including concerning any of such other Party's employees, as confidential and:

		
	(a)
	it will use or reproduce such Personal Information only to the extent necessary to fulfill its obligations under this Agreement;

		
	(b)
	it will limit access to such Personal Information to those of its employees and its subcontractors' employees who have a need to be familiar with it or have access to it;

		
	(c)
	it will advise its employees and its subcontractors' employees receiving such Personal Information of the confidentiality obligations assumed in this Agreement;

		
	(d)
	except in the circumstances described in Article 10 of the Agreement or as may be otherwise expressly provided for in this Schedule, it will not disclose such Personal Information to any third party without the prior written consent of such other Party;

		
	(e)
	it will take and reasonable precautions, and in any event not less than the precautions used to protect its own confidential information of like nature, to keep such Personal Information in the strictest confidence and to protect it from unauthorized access, collection, use, disclosure or disposal;

		
	(f)
	it will cease all use of such Personal Information and will return or destroy all such Personal Information, including any copies, at the direction of such other Party, upon the termination of this Agreement or upon request by such other Party. In the case of Personal Information in electronic form “destroy” means to use reasonable efforts to permanently delete such Personal Information from its information systems such that the Personal Information is not accessible in the ordinary course, however each Party recognizes that such electronic representations of Personal Information may continue to exist, subject to the terms hereof, in the other Parties' data system backup tapes, or similar storage media;

		
	(g)
	it will permit representatives of such other Party to review its processes in place for the handling of such Personal Information and to request that it make any changes (at such other Party's cost and expense) that such other Party, acting reasonably, considers necessary in order to protect the confidentiality of such Personal Information and that it will not unreasonably refuse any such requests by such other Party;

		
	(h)
	upon request, it will reasonably cooperate with such other Party in responding to any requests by individuals to allow access to, correct, block, suppress or delete any such Personal Information that it holds on behalf of such other Party;

		
	(i)
	if it becomes aware of a breach of any of the provisions of this Schedule, it will notify such other Party promptly in writing and take all reasonable measures to prevent further breaches;

		
	(j)
	it will not transfer such Personal Information outside of Canada, either physically or electronically without such other Party's prior written consent (provided that each Party acknowledges and approves such transfer to the extent such transfer is contemplated as part of the Services as such Services were provided immediately prior to Closing); and

		
	(k)
	it will reasonably cooperate with, and assist in, any investigation by such other Party or by any Governmental Authority, including the Office of the Privacy Commissioner of Canada, of a complaint that any such Personal Information has been collected, used or disclosed contrary to this Agreement or applicable Law. 

		
	3.
	Each Party warrants that with respect to any and all Personal Information that it may disclose to another Party under this Agreement, it has, where required by applicable Law, obtained informed consent to such disclosure from the individual(s) whose Personal Information is being disclosed.

		
	4.
	Each Party's obligations concerning Personal Information under this Schedule are in addition to, and not in substitution for, any other obligations respecting confidentiality that may be contained in this Agreement.UCC Lease Agreement

EXHIBIT 10.6

LEASE AGREEMENT

THIS LEASE AGREEMENT (the “Lease”) is made and entered into this 31st day of December, 2010, between AMERICAN SERVICE INSURANCE COMPANY, INC. (“Landlord”) and UNIVERSAL CASUALTY COMPANY (“Tenant”).

WITNESSETH:

1.  Premises and Term

In consideration of the obligation of Tenant to pay rent as herein provided, and in consideration of the other terms, provisions, and covenants hereof, Landlord hereby demises and Leases to Tenant, and Tenant hereby accepts and Leases from Landlord, the following described space, to wit: approximately 14,100 square feet as shown and outlined on the plan attached hereto as Exhibit A (the “Leased Premises”) on the second floor, located in the building commonly known as the Kingsway building (the “Building”), situated on the real property described in Exhibit B attached hereto (the “Property”) which is part of a development in the Park at Northwest Point, Elk Grove Village, Illinois (the “Development”). The Leased Premises shall be occupied and used exclusively for general office purposes and for legal purposes incidental thereto and shall not be used for any other purpose.  Tenant shall have shared access to conference rooms, training rooms, meeting facilities and other common areas of the Building without charge and upon reasonable notice to Landlord, but only to the extent Landlord owns the conference rooms, training rooms, meeting facilities and/or other common areas of the Building.

TO HAVE AND TO HOLD the same for a term of thirty-six (36) months commencing on January 1, 2011, and ending December 31, 2013 (“Term”) unless terminated or extended pursuant to any provision hereof. Tenant acknowledges that no representations as to the repair of the Leased Premises, nor promises to alter, remodel or improve the Leased Premises have been made by Landlord, unless such are expressly set forth in this Lease.

The taking of possession by Tenant shall be deemed conclusively to establish that the Building, other improvements, and the Leased Premises are in good and satisfactory condition as of when possession was so taken (except for such items as Landlord is permitted to complete at a later date, which items shall be specified by Landlord to Tenant in writing).

2.  Rent

A.    Rent and Security Deposit.

i.     Tenant agrees to pay to Landlord for the Leased Premises in lawful money of the United States rent for the first twelve (12) months of the term hereof at the rate of Fifteen Dollars ($15.00) per square foot of occupied space, in advance, except that the monthly installment which otherwise shall be due on the commencement date recited above, shall be due and payable on the date hereof. Thereafter one such monthly installment shall be due and payable without demand on or before the first day of each calendar month succeeding the commencement date; further provided, that the rental payment for any fractional calendar month at the commencement or end of the Lease term shall be prorated.  The rate charged for rent shall increase by $0.50 (Fifty Cents) per year for each such succeeding twelve (12) month period.

ii.     In addition, Tenant agrees to deposit with Landlord on the date hereof the sum of One Thousand Dollars ($1,000.00), which sum shall be held by Landlord, without obligation for interest, as security for the full, timely and faithful performance of Tenant's covenants and obligations under this Lease, it being expressly understood and agreed that such deposit is not an advance rental deposit or a measure of Landlord's damages in case of Tenant's default. Upon the occurrence of any event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such funds to the extent necessary to make good any arrears of rent or other payments due to Landlord hereunder, and any other damage, injury, expense or liability caused by any event of Tenant's default; and Tenant shall pay to Landlord on demand the amount so applied in order to restore the security deposit to its original amount. Although the security deposit shall be deemed the property of Landlord, any remaining balance of such deposit shall be returned by Landlord to Tenant at such time after termination of this Lease when Landlord shall have determined that all Tenant's obligations under this Lease have been fulfilled. Subject to the other terms and conditions contained in this Lease, if the Building is conveyed by Landlord, said deposit may be turned over to Landlord's grantee, and if so, Tenant hereby releases Landlord from any and all liability with respect to said deposit and its application or return.

B.    -intentionally deleted -

3.  Electric Service

To the extent Tenant is not billed directly by a public utility, Tenant shall pay, upon demand, as additional rent, for all electricity used by Tenant in the Leased Premises for lighting, convenience outlets, and other direct uses. The charge shall be based upon allocation of total building use and shall be at the rates charged for such services by the local public authority or utility but shall not exceed the greater of the trailing twelve (12) month average of electricity charges paid by Tenant or Tenant's proportionate share as defined in Section 21 hereof. In the first year of this lease, the trailing twelve (12) month average shall be considered the monthly average beginning with January 1, 2011 through the end of the month for which billing is being calculated.  Tenant shall furnish, at its own expense, all electric light bulbs, tubes and ballasts. Tenant will not without the written consent of Landlord use any apparatus or device in the Leased Premises which will in anyway increase its usage beyond the amount of electricity which Landlord determines to be commercially reasonable for use of the Leased Premises as general office space, nor connect with electric current (except through existing electrical outlets in the Leased Premises) any apparatus or device for the purpose of using electric current. If Tenant shall require electric current in excess of that which is reasonably obtainable from existing electric outlets and normal for use of the Leased Premises as general office space, then Tenant shall first procure the consent of Landlord (which consent will not be unreasonably withheld). Tenant shall pay all costs of installation of all facilities necessary to furnishing such excess capacity and for such increased electricity usage.

Interruptions of any service shall not be deemed an eviction or disturbance of Tenants use and possession of the Leased Premises or any part thereof, or render Landlord liable for damages by abatement of rent or otherwise or relieve Tenant from performance of Tenant's obligations under this Lease.

4.  Alterations

All improvements and alterations to the Leased Premises to be made by Tenant shall be installed at the cost and expense of Tenant (which cost shall be payable on demand by Landlord as additional rent), but only in accordance with plans and specifications which have been previously submitted to and approved in writing by Landlord, and only by Landlord or by contractors and subcontractors approved in writing by Landlord (which approval shall not be unreasonably withheld). In connection with any request for an approval of alterations by Tenant, Landlord may retain the services of an architect and/or engineer and Tenant shall reimburse Landlord for the reasonable fees of such architect and/or engineer. All alterations, additions, improvements and partitions erected by Tenant shall be and remain the property of Tenant during the term of this Lease and Tenant shall, unless Landlord otherwise elects as hereinafter provided, remove all alterations, improvements and partitions erected by Tenant and restore the Leased Premises to its original condition by the date of termination of this Lease or upon earlier vacating of the Leased Premises; provided, however, that, if at such time Landlord so elects, such alterations, additions, improvements and partitions shall become the property of Landlord as of the date of termination of this Lease or upon earlier vacating of the Leased Premises and title shall pass to Landlord under this Lease as by a bill of sale. All such removals and restoration shall be accomplished in a good workmanlike manner by contractors approved in writing by Landlord so as not to damage the primary structure or structural qualities of the Building. All alterations, additions or improvements proposed by Tenant shall be constructed in accordance with all governmental laws, ordinances, rules and regulations and Tenant shall, prior to construction, provide such assurances to Landlord, including but not limited to, waivers of lien, surety company performance bonds and personal guaranties of individuals of substance, as Landlord shall require to assure payment of the costs thereof and to protect Landlord against any loss from any mechanics', laborers', materialmen's or other liens.

5.  Service

A. In buildings of two or more stories Landlord agrees to furnish Tenant, while occupying the Leased Premises, water, hot, cold and refrigerated at those points of supply provided for general use of tenants; heated and refrigerated air conditioning in season at such times as Landlord normally furnishes these services to all tenants of the Building, and at such temperatures and in such amounts as are in accordance with any applicable statutes, rules or regulations and are considered by Landlord to be standard, such service at other times and on Saturday, Sunday, and holidays to be optional on the part of Landlord (Landlord hereby reserves the right to charge Tenant for any such optional service requested by Tenant on such basis as Landlord, in its sole discretion, determines); janitor service to the Leased Premises on weekdays other than holidays and such window washing as may from time to time in the Landlord's judgment be reasonably required; operatorless passenger elevators for ingress and egress to the floor on which the Leased Premises are located, provided Landlord may reasonably limit the number of elevators to be in operation on Saturdays, Sundays, and holidays; but failure to any extent to furnish or any stoppage or interruption of these defined services, resulting from any cause, shall not render Landlord liable in any respect for damages to any person, property, or business, nor be construed as an eviction of Tenant or work an abatement of rent, nor relieve Tenant from fulfillment of any covenant or agreement 

hereof. Should any equipment or machinery furnished by Landlord cease to function properly, Landlord shall use reasonable diligence to repair the same promptly, but Tenant shall have no claim for rebate of rent or damages on account of any interruptions in service occasioned thereby or resulting therefrom. Whenever heat generating machines or equipment are used by Tenant in the Leased Premises which affect the temperature otherwise maintained by the air conditioning equipment, Landlord reserves the right to install supplementary air conditioning units in the Leased Premises (or for the use of the Leased Premises) and the expense of such purchase, installation, maintenance, and repair shall be paid by Tenant upon demand as additional rent.

B. In buildings of one story without interior common public areas, Landlord agrees to provide, at its cost, water, electricity and telephone service connections into the Leased Premises; but Tenant shall pay for all water, gas, heat, light, power, telephone, sewer, sprinkler system charges and other utilities and services used on or from the Leased Premises, including without limitation, Tenant's proportionate share as determined by Landlord of any central station signaling system installed in the premises or the building of which the premises are a part, together with any taxes, penalties and surcharges or the like pertaining thereto and any maintenance charges for utilities. Tenant shall furnish all electric light bulbs, tubes and ballasts. If any such services are not separately metered to Tenant, Tenant shall pay such proportion of all charges jointly metered with other premises as determined by Landlord, in its sole discretion, to be reasonable. Any such charges paid by Landlord and assessed against Tenant shall be immediately payable to Landlord on demand and shall be additional rent hereunder. Landlord shall in no event be liable for any interruption or failure of utility services on or to the Leased Premises. These costs, paid by Tenant, shall be excluded from amounts billed to Tenant pursuant to Paragraph 2.

C. In single story buildings with heat, ventilating and air conditioning systems servicing individual tenants, Tenant shall, at its own cost and expense, enter into a regularly scheduled preventive maintenance/service contract with a maintenance contractor approved by Landlord, for servicing all heating and air conditioning systems and equipment servicing the Leased Premises. The service contract must include all services suggested by the equipment manufacturer within the operation/maintenance manual and must become effective within thirty (30) days of the date Tenant takes possession of the Leased Premises. If there is a common interior public area with its own HVAC system, the costs to operate and maintain that system plus general maintenance of the common area will be included as part of the cost covered by Paragraph 2.

D. Tenants in single and multi-story buildings shall not provide any janitorial services without Landlords written consent and then only subject to supervision of Landlord and by a janitorial contractor or employees at all times satisfactory to Landlord. Any such services provided by Tenant shall be Tenant's sole risk and responsibility.

6.  Use of Premises

A. Tenant will not occupy or use, nor permit any portion of Leased Premises to be occupied or used, for any business or purpose other than that described above or for any use or purpose which is unlawful in part or in whole or deemed to be disreputable in any manner, or extra hazardous on account of fire, nor permit anything to be done which will render void or in any way increase the rate of fire insurance on the Building or its contents, and Tenant, shall immediately cease and desist from such use, paying all costs and expenses resulting therefrom.

B. Tenant shall at its own cost and expense promptly obtain any and all licenses and permits necessary for any permitted use. Tenant shall comply with all governmental laws, ordinances and regulations applicable to the use and its occupancy of the Leased Premises, and shall promptly comply with all governmental orders and directives for the correction, prevention and abatement of any violations or nuisances in or upon, or connected with, the Leased Premises, all at Tenant's sole expense. If, as a result of any change in the governmental laws, ordinances, and regulations, the Leased Premises must be altered to lawfully accommodate Tenant's use and occupancy, such alterations shall be made only with the consent of Landlord, but the entire cost shall be borne by Tenant; provided, that, the necessity of Landlord's consent shall in no way create any liability against Landlord for failure of Tenant to comply with such laws, ordinances and regulations.

C. Tenant will maintain the Leased Premises (including all fixtures installed by Tenant, water heaters within the Leased Premises and plate glass) in good repair, reasonable wear and tear excepted, and in a clean and healthful condition, and comply with all laws, ordinances, orders, rules, and regulations (state, federal, municipal, and other agencies or bodies having any jurisdiction thereof) with reference to condition, or occupancy of the Leased Premises. Any repairs or replacements shall be with materials and workmanship of the same character, kind and quality as the original. Tenant will not, without the prior written consent of Landlord, paint, install lighting or decorations, or install any signs, window or door lettering or advertising media of any type on or about the Leased Premises.

D. Tenant will conduct its business and control its agents, employees and invitees in such a manner as not to create any nuisance, nor interfere with, annoy, or disturb other tenants or Landlord in the management of the Building.

E. Tenant shall pay upon demand as additional rent the full cost of repairing any damage to the Leased Premises, Building or related facilities resulting from and/or caused in whole or in part by the negligence or misconduct of Tenant, its agents, servants, employees, patrons, customers, or any other person entering upon the Development as a result of Tenant's business activities or resulting from Tenant's default hereunder.

F. Tenant and Tenant's agents, employees, and invitees will comply fully with all rules and regulations of the Development, the Building, parking area and related facilities which Landlord may establish from time to time. Landlord shall at all times have the right to change such rules and regulations or to promulgate other rules and regulations in such reasonable manner as may be deemed advisable for the safety, care, and cleanliness of the Building or the Development and for the preservation of good order therein. Copies of all rules and regulations, changes, and amendments will be forwarded to Tenant in writing and shall be carried out and observed by Tenant. Tenant shall further be responsible for the compliance with such rules and regulations by Tenant's employees, servants, agents and visitors.

G. At termination of this Lease, upon its expiration or otherwise, Tenant shall deliver up the Leased Premises with all improvements located thereon (except as herein provided) in good repair and condition, reasonable wear and tear excepted, broom clean and free of all debris.

7.  Inspections

Landlord shall have the right to enter the Leased Premises at any reasonable time, for the following purposes: (i) to ascertain the condition of the Leased Premises; (ii) to determine whether Tenant is diligently fulfilling Tenant's responsibilities under this Lease; (iii) to clean and to make such repairs as may be required or permitted to be made by Landlord under the terms of this Lease; or (iv) to do any other act or thing which Landlord deems reasonable to preserve the Leased Premises and the Building. During the six (6) months prior to the end of the term hereof and at any time Tenant is in default hereunder, Landlord shall have the right to enter the Leased Premises at any reasonable time during business hours for the purpose of showing the premises. Tenant shall give written notice to Landlord at least thirty (30) days prior to vacating and shall arrange to meet with Landlord for a joint inspection of the Leased Premises. In the event of Tenant's failure to give such notice or arrange such joint inspection, Landlord's inspection at or after Tenant's vacating the Leased Premises shall be conclusively deemed correct for purposes of determining Tenant's responsibility for repairs and restoration.

8.  Assignment and Subletting

A. Tenant shall not have the right to assign or pledge this Lease or to sublet the whole or any part of the Leased Premises, whether voluntarily or by operation of law, or permit the use or occupancy of the Leased Premises by anyone other than Tenant, without the prior written consent of Landlord, and such restrictions shall be binding upon any assignee or subtenant to which Landlord has consented (which consent shall not be unreasonably withheld). In the event Tenant desires to sublet the Leased Premises, or any portion thereof, or assign this Lease, Tenant shall give written notice thereof to Landlord within a reasonable time prior to the proposed commencement date of such subletting or assignment, which notice shall set forth the name of the proposed subtenant or assignee, the relevant terms of any sublease and copies of financial reports and other relevant financial information of the proposed subtenant or assignee. In no event may Tenant sublet, nor will Landlord consent to any sublease of, all or any portion of the Leased Premises if the rent is determined in whole or in part based upon the income or profits derived by the sub-lessee (other than a rent based on a fixed percentage or percentages of receipts or sales). Notwithstanding any permitted assignment or subletting, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the rent herein specified and for compliance with all of its other obligations under the terms, provisions and covenants of his Lease. Upon the occurrence of an “event of default” (as hereinafter defined), if the Leased Premises or any part thereof are then assigned or sublet, Landlord, in addition to any other remedies herein provided or provided by law, may, at its option, collect directly from such assignee or subtenant all rents due and becoming due to Tenant under such assignment or sublease and apply such rent against any sums due to Landlord from Tenant hereunder, and no such collection shall be construed to constitute a novation or a release of Tenant from the further performance of Tenant's obligations hereunder. Tenant shall pay to Landlord, on demand, a reasonable service charge for the processing of the application for the consent and for the preparation of the consent. Such service charge shall be collectible by Landlord only where consent is granted by Landlord.

B. In addition to, but not in limitation of, Landlord's right to approve of any subtenant or assignee, Landlord shall have the option, in its sole discretion, in the event of any proposed subletting or assignment, to terminate this Lease, or in the case of a proposed subletting of less than the entire Leased Premises, to recapture the portion of the Leased Premises to be sublet, as of the date the subletting or assignment is to be effective. The option shall be exercised, if at all, by Landlord giving Tenant written notice thereof within sixty (60) days following Landlord's receipt of Tenant's written notice as required above. If this Lease shall be terminated with respect to the entire Leased Premises pursuant to this paragraph, the term of this Lease shall end on the date stated in Tenant's notice as the effective date of the sublease or assignment as if that date had been originally fixed in this Lease 

for the expiration of the term hereof. If Landlord recaptures under this paragraph only a portion of the Leased Premises, the rent during the unexpired term shall abate proportionately based on the rent contained in this Lease as of the date immediately prior to such recapture. Tenant shall, at Tenant's own cost and expense, discharge in full any outstanding commission obligation on the part of Landlord with respect to this Lease, and any commissions which may be due and owing as a result of any proposed assignment or subletting, whether or not the Leased Premises are recaptured pursuant hereto and rented by Landlord to the proposed tenant or any other tenant. In the event of the recapture of a portion of the Leased Premises by Landlord pursuant to the terms of this paragraph, Tenant shall pay all costs associated with the separation of the recaptured premises from the portion not recaptured, including, but without limitation, the cost of all demising partitions, changes in lighting and HVAC distribution systems and all reasonable architectural and/or engineering fees.

C. Any assignment or subletting by Tenant pursuant to subparagraph 8A of all or any portion of the Leased Premises, or termination of the Lease for a portion of the Leased Premises pursuant to subparagraph 8B, shall automatically operate to terminate each and every right, option, or election, if any exist, belonging to Tenant, including by way of illustration, but not limitation, any option to expand its premises or to extend or renew the term of Tenant's Lease for all or any portion of the Leased Premises - i.e. such rights and options shall cease as to both space sublet or assigned and as to any portion of the original Leased Premises retained by Tenant.

9.  Fire and Casualty Damage

A. If the Building, improvements, or Leased Premises are rendered partially or wholly untenantable by fire or other casualty, and if such damage cannot, in Landlord's reasonable estimation, be materially restored within ninety (90) days of such damage, then Landlord may, at its sole option, terminate this Lease as of the date of such fire or casualty. Landlord shall exercise its option provided herein by written notice within sixty (60) days of such fire or other casualty. For purposes hereof, the Building or Leased Premises shall be deemed “materially restored” if they are in such condition as would not prevent or materially interfere with Tenant's use of the Leased Premises for the purpose for which it was then being used.

B. If this Lease is not terminated pursuant to Paragraph 9A, then Landlord shall proceed with all due diligence to repair and restore the Building, improvements or Leased Premises, as the case may be (except that Landlord may elect not to rebuild if such damage occurs during the last year of the term exclusive of any option which is unexercised at the date of such damage).

C. If this Lease shall be terminated pursuant to this Paragraph 9, the term of this Lease shall end on the date of such damage as if that date had been originally fixed in this Lease for the expiration of the term hereof. If this Lease shall not be terminated by Landlord pursuant to this Paragraph 9 and if the Leased Premises is untenantable in whole or in part following such damage, the rent payable during the period in which the Leased Premises is untenantable shall be reduced to such extent, if any, as may be fair and reasonable under all of the circumstances. In the event that Landlord should fail to complete such repairs and material restoration within one hundred fifty (150) days after the date of such damage, Tenant may at its option and as its sole remedy terminate this Lease by delivering written notice to Landlord, whereupon the Lease shall end on the date of such notice as if the date of such notice were the date originally fixed in this Lease for the expiration of the term hereof; provided however, that if construction is delayed because of changes, deletions, or additions in construction requested by Tenant, strikes, lockouts, casualties, acts of God, war, material or labor shortages, governmental regulation or control or other causes beyond the reasonable control of Landlord, the period for restoration, repair or rebuilding shall be extended for the amount of time Landlord is so delayed.

In no event shall Landlord be required to rebuild, repair or replace any part of the partitions, fixtures, additions and other improvements which may have been placed in or about the Leased Premises by Tenant. Any insurance which may be carried by Landlord or Tenant against loss or damage to the Building or Leased Premises shall be for the sole benefit of the party carrying such insurance and under its sole control.

D. Notwithstanding anything herein to the contrary, in the event the holder of any indebtedness secured by a mortgage or deed of trust covering the Leased Premises, Building or Property requires that any insurance proceeds be applied to such indebtedness, then Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within fifteen (15) days after such requirement is made by any such holder, whereupon the Lease shall end on the date of such damage as if the date of such damage were the date originally fixed in this Lease for the expiration of the term hereof.

E. Each of Landlord and Tenant hereby releases the other from any and all liability or responsibility to the other or anyone claiming through or under them by way of subrogation or otherwise for any loss or damage to property caused by fire, extended coverage perils, vandalism or malicious mischief, sprinkler leakage or any other perils insured in policies of insurance covering such property, even if such loss or damage shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible, including any other tenants or occupants of the remainder of the Building in which the Leased Premises is located; provided, however, that this release shall be applicable and in force and effect only to the extent that such 

release shall be lawful at that time and in any event only with respect to loss or damage occurring during such times as the releasor's policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said policies or prejudice the right of the releasor to recover thereunder and then only to the extent of the insurance proceeds payable under such policies. Each Landlord and Tenant agrees that it will request its insurance carriers to include in its policies such a clause or endorsement. If extra cost shall be charged therefor, each party shall advise the other thereof and of the amount of the extra cost, and the other party, at its election, may pay the same, but shall not be obligated to do so. If such other party fails to pay such extra cost, the release provisions of this paragraph shall be inoperative against such other party to the extent necessary to avoid invalidation of such releasor's insurance.

F. In the event of any damage or destruction to the Building or the Leased Premises by any peril covered by the provisions of this Paragraph 9, Tenant shall, upon notice from Landlord, remove forthwith, at its sole cost and expense, such portion or all of the property belonging to Tenant or his licensees from such portion or all of the Building or the Leased Premises as Landlord shall request and Tenant hereby indemnifies and holds Landlord harmless from any loss, liability, costs, and expenses, including attorney's fees, arising out of any claim of damage or injury as a result of any alleged failure to properly secure the Leased Premises prior to such removal and/or such removal.

10.  Liability

Landlord shall not be liable for and Tenant will indemnify and hold Landlord harmless from any loss, liability, costs and expenses, including attorney's fees, arising out of any claim of injury or damage on or about the Leased Premises caused by the negligence or misconduct or breach of this Lease by Tenant, its employees, subtenants, invitees or by any other person entering the Leased Premises or the Building or Development under express or implied invitation of Tenant or arising out of Tenant's use of the Leased Premises. Landlord shall not be liable to Tenant or Tenant's agents, employees, invitees or any person entering upon the Development in whole or in part because of Tenant's use of the Leased Premises for any damage to persons or property due to condition, design, or defect in the Building or its mechanical systems which may exist or occur, and Tenant assumes all risks of damage to such persons or property. Landlord shall not be liable or responsible for any loss or damage to any property or person occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition or order of governmental body or authority, or other matter beyond control of Landlord, or for any injury or damage or inconvenience, which may arise through repair or alteration of any part of the Building, or failure to make repairs, or from any cause whatever except Landlord's willful acts or gross negligence. Tenant shall procure and maintain throughout the term of this Lease a policy of insurance, in form and substance satisfactory to Landlord, at Tenant's sole cost and expense, insuring both Landlord and Tenant against all claims, demands or actions arising out of or in connection with: (i) the Leased Premises; (ii) the condition of the Leased Premises; (iii) Tenant's operations in and maintenance and use of the Leased Premises; and (iv) Tenant's liability assumed under this Lease; the limits of such policy to be in the amount of not less than $1,000,000 per occurrence in respect of injury to persons (including death) and in the amount of not less than $500,000 per occurrence in respect of property damage or destruction, including loss of use thereof. Such policy shall be procured by Tenant from responsible insurance companies satisfactory to Landlord. A certified copy of such policy, together with receipt evidencing payment of the premium, shall be delivered to Landlord prior to the commencement date of this Lease. Not less than thirty (30) days prior to the expiration date of such policy, a certified copy of a renewal thereof (bearing notations evidencing the payment of the renewal premium) shall be delivered to Landlord. Such policy shall further provide that not less than thirty (30) days' written notice shall be given to Landlord before such policy may be canceled or changed to reduce the insurance coverage provided thereby.

11.  Condemnation

A. If any substantial part of the Building, improvements, or Leased Premises should be taken for any public or quasi-public use under governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof and the taking would prevent or materially interfere with the use of the Building or Leased Premises for the purpose for which it is then being used, this Lease shall terminate effective when the physical taking  shall occur in the same manner as if the date of such taking were the date originally fixed in this Lease for the expiration of the term hereof.

B. If part of the Building, improvements, or Leased Premises shall be taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof, and this Lease is not terminated as provided in the subparagraph above, this Lease shall not terminate but the rent payable hereunder during the unexpired portion of this Lease shall be reduced to such extent, if any, as may be fair and reasonable under all of the circumstances and Landlord shall undertake to restore the Building, improvements, and Leased Premises to a condition suitable for Tenant's use, as near to the condition thereof immediately prior to such taking as is reasonably feasible under all the circumstances.

C. In the event of any such taking or private purchase in lieu thereof, Landlord and Tenant shall each be entitled to receive and retain such separate awards and/or portion of lump sum awards as may be allocated to their respective interests in any 

condemnation proceedings; provided that Tenant shall not be entitled to receive any award for Tenant's loss of its leasehold interest, the right to such award being hereby assigned by Tenant to Landlord.

12.  Holding Over

Tenant will, at the termination of this Lease by lapse of time or otherwise, yield up immediate possession to Landlord. If Tenant retains possession of the Leased Premises or any part thereof after such termination, then Landlord may, at its option, serve written notice upon Tenant that such holding over constitutes any one of (i) renewal of this Lease for one year, and from year to year thereafter, or (ii) creation of a month to month tenancy, upon the terms and conditions set forth in this Lease, or (iii) creation of a tenancy at sufferance, in any case upon the terms and conditions set forth in this Lease; provided, however, that the monthly rental (or daily rental under (iii)) shall, in addition to all other sums which are to be paid by Tenant hereunder, whether or not as additional rent, be equal to double the rental being paid monthly to Landlord under this Lease immediately prior to such termination (prorated in the case of (iii) on the basis of a 365 day year for each day Tenant remains in possession). If no such notice is served, then a tenancy at sufferance shall be deemed to be created at the rent in the preceding sentence. Tenant shall also pay to Landlord all damages sustained by Landlord resulting from retention of possession by Tenant, including the loss of any proposed subsequent tenant for any portion of the Leased Premises. The provisions of this paragraph shall not constitute a waiver by Landlord of any right of re-entry as herein set forth; nor shall receipt of any rent or any other act in apparent affirmance of the tenancy operate as a waiver of the right to terminate this Lease for a breach of any of the terms, covenants, or obligations herein on Tenant's part to be performed.

13.  Quiet Enjoyment

Landlord represents and warrants that it has full right and authority to enter into this Lease and that Tenant, while paying the rental and performing its other covenants and agreements herein set forth, shall peaceably and quietly have, hold and enjoy the Leased Premises for the term hereof without hindrance or molestation from Landlord subject to the terms and provisions of this Lease. In the event this Lease is a sublease, then Tenant agrees to take the Leased Premises subject to the provisions of the prior Leases. Landlord shall not be liable for any interference or disturbance by other tenants or third persons, nor shall Tenant be released from any of the obligations of this Lease because of such interference or disturbance.
In the event of change of ownership of the Landlord or sale of the building, or the leasing of additional space to other tenants, which results in loss of square footage to the Leased Premises, Landlord shall use its best efforts  to accommodate Tenant and provide additional square footage to restore to Tenant square footage lost as a result of change of ownership of the Landlord or sale of the building, or the leasing of additional space to other tenants, or adjust the Rent to reflect the diminished square footage.  

14.  Default

A.  Tenant's Default.  Tenant shall be in default under this Lease if:

i.      Tenant shall fail to pay when or before due any sum of money becoming due to be paid to Landlord hereunder, whether such sum be any installment of the rent herein reserved, any other amount treated as additional rent hereunder, or any other payment or reimbursement to Landlord required herein, whether or not treated as additional rent hereunder, and such failure shall continue for a period of five (5) days from the date such payment was due; or

ii.      Tenant shall fail to comply with any term, provision or covenant of this Lease other than by failing to pay when or before due any sum of money becoming due to be paid to Landlord hereunder, and shall not cure such failure within twenty (20) days (forthwith, if the default involves a hazardous condition) after written notice thereof to Tenant; or
    
iii.      Tenant shall abandon or vacate any substantial portion of the Leased Premises; or

iv.      Tenant shall fail to vacate the Leased Premises immediately upon termination of this Lease, by lapse of time or otherwise, or upon termination of Tenant's right to possession only; or

v.      The leasehold interest of Tenant shall be levied upon under execution or be attached by process of law or Tenant shall fail to contest diligently the validity of any lien or claimed lien and give sufficient security to Landlord to insure payment thereof or shall fail to satisfy any judgment rendered thereon and have the same released, and such default shall continue for ten (10) days after written notice thereof to Tenant; or

vi.      Tenant shall become insolvent, admit in writing its inability to pay its debts generally as they become due, file a petition in bankruptcy or a petition to take advantage of any insolvency statute, make an assignment for the 

benefit of creditors, make a transfer in fraud of creditors, apply for or consent to the appointment of a receiver of itself or of the whole or any substantial part of its property, or file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws, as now in effect or hereafter amended, or any other applicable law or statute of the United States or any state thereof; or

vii.      A court of competent jurisdiction shall enter an order, judgment or decree adjudicating Tenant a bankrupt, or appointing a receiver of Tenant, or of the whole or any substantial part of its property, without the consent of Tenant, or approving a petition filed against Tenant seeking reorganization or arrangement of Tenant under the bankruptcy laws of the United States, as now in effect or hereafter amended, or any state thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within thirty (30) days from the date of entry thereof.

viii.      Sale of Shares.   If Tenant is a corporation and if the ownership thereof shall materially change at any time or from time to time during the term of this Lease from the present composition of same as it may exist at any time, or if a substantial portion of the assets of Tenant shall be sold, assigned or transferred with or without a specific assignment of this Lease, or if Tenant shall merge or consolidate with any firm or corporation, Landlord at its option may, by giving sixty (60) days' prior written notice to Tenant, declare such change a breach of this Lease subject to the remedies provided for breach in Section 16 hereof.

Ownership of a corporation shall be deemed to have materially changed if a number of its voting shares which constitute fifty percent (50%) of the number thereof outstanding from time to time shall be transferred by either the owners thereof or by the corporation, and such transfer of shares shall not first have been approved in advance in writing by Landlord.

B.    Landlord's remedies.  Upon the occurrence of any of such events of default described in Paragraph 14 hereof or elsewhere in this Lease, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever:

i.      Landlord may, at its election, terminate this Lease or terminate Tenant's right to possession only, without terminating the Lease;

ii.      Upon any termination of this Lease, whether by lapse of time or otherwise, or upon any termination of Tenant's right to possession without termination of the Lease, Tenant shall surrender possession and vacate the Leased Premises immediately, and deliver possession thereof to Landlord, and Tenant hereby grants to Landlord full and free license to enter into and upon the Leased Premises in such event with or without process of law and to repossess Landlord of the Leased Premises as of Landlord's former estate and to expel or remove Tenant and any others who may be occupying or within the Leased Premises and to remove any and all property therefrom, without being deemed in any manner guilty of trespass, eviction or forcible entry or detainer, and without incurring any liability for any damage resulting therefrom, Tenant hereby waving any right to claim damage for such reentry and expulsion, and without relinquishing Landlord's right to rent or any other right given to Landlord hereunder or by operation of law;

iii.      Upon any termination of this Lease, whether by lapse of time or otherwise, Landlord shall be entitled to recover as damages, all rent, including any amounts treated as additional rent hereunder, and other sums due and payable by Tenant on the date of termination, plus the sum of (i) an amount equal to the then present value of the rent, including any amounts treated as additional rent hereunder, and other sums provided herein to be paid by Tenant for the residue of the stated term hereof, less the fair rental value of the Leased Premises for such residue (taking into account the time and expense necessary to obtain a replacement tenant or tenants, including expenses hereinafter described in subparagraph (d) relating to recovery of the Leased Premises, preparation for reletting and for reletting itself), and (ii) the cost of performing any other covenants which would have otherwise been performed by Tenant;

		
	iv.
	(1)      Upon any termination of Tenant's right to possession only without termination of the Lease, Landlord may, at Landlord's option, enter into the Leased Premises, remove Tenant's signs and other evidences of tenancy, and take and hold possession thereof as provided in subparagraph (b) above, without such entry and possession terminating the Lease or releasing Tenant, in whole or in part, from any obligation, including Tenant's obligation to pay the rent, including any amounts treated as additional rent, hereunder for the full term. In any such case Tenant shall pay forthwith to Landlord, if Landlord so elects, a sum equal to the entire amount of the rent, including any amounts treated as additional rent hereunder, for the residue of the stated term hereof plus any other sums provided herein to be paid by Tenant for the remainder of the Lease term;

(2)      Landlord may, but need not, relet the Leased Premises or any part thereof for such rent and 

upon such terms as Landlord, in its sole discretion, shall determine (including the right to relet the Leased Premises for a greater or lesser term than that remaining under this Lease, the right to relet the Leased Premises as a part of a larger area, and the right to change the character or use made of the Leased Premises). If Landlord decides to relet the Leased Premises or a duty to relet is imposed upon Landlord by law, Landlord and Tenant agree that Landlord shall only be required to use the same efforts Landlord then uses to Lease other properties Landlord owns or manages (or if the Leased Premises is then managed for Landlord, then Landlord will instruct such manager to use the same efforts such manager then uses to Lease other space or properties which it owns or manages); provided, however that Landlord (or its manager) shall not be required to give any preference or priority to the showing or teasing of the Leased Premises over any other space that Landlord (or its manager) may be leasing or have available and may place a suitable prospective tenant in any such available space regardless of when such alternative space becomes available; provided, further that Landlord shall not be required to observe any instruction given by Tenant about such reletting or accept any tenant offered by Tenant unless such offered tenant has a creditworthiness acceptable to Landlord, Leases the entire Leased Premises, agrees to use the leased premises in a manner consistent with the Lease and Leases the Leased Premises at the same rent, for no more than the current term and on the same other terms and conditions as in this Lease without the expenditure by Landlord for tenant improvements or broker's commissions. In any such case, Landlord may, but shall not be required to, make repairs, alterations and additions in or to the Leased Premises and redecorate the same to the extent Landlord deems necessary or desirable, and Tenant shall, upon demand, pay the cost thereof, together with Landlord's expenses of reletting, including, without limitation, any broker's commission incurred by Landlord. If the consideration collected by Landlord upon any such reletting plus any sums previously collected from Tenant are not sufficient to pay the full amount of all rent, including any amounts treated as additional rent hereunder and other sums reserved in this Lease for the remaining term hereof, together with the costs of repairs, alterations, additions, redecorating, and Landlord's expenses of reletting and the collection of the rent accruing therefrom (including attorney's fees and broker's commissions), Tenant shall pay to Landlord the amount of such deficiency upon demand and Tenant agrees that Landlord may file suit to recover sums failing due under this section from time to time;

v.      Landlord may, at Landlord's option, enter into and upon the Leased Premises, with or without process of law, if Landlord determines in its sole discretion that Tenant is not acting within a commercially reasonable time to maintain, repair or replace anything for which Tenant is responsible hereunder and correct the same, without being deemed in any manner guilty of trespass, eviction or forcible entry and detainer and without incurring any liability for any damage resulting therefrom and Tenant agrees to reimburse Landlord, on demand, as additional rent, for any expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this Lease;

vi.      Any and all property which may be removed from the Leased Premises by Landlord pursuant to the authority of the Lease or of law, to which Tenant is or may be entitled, may be handled, removed and stored, as the case may be, by or at the direction of Landlord at the risk, cost and expense of Tenant, and Landlord shall in no event be responsible for the value, preservation or safekeeping thereof. Tenant shall pay to Landlord, upon demand, any and all expenses incurred in such removal and all storage charges against such property so long as the same shall be in Landlord's possession or under Landlord's control. Any such property of Tenant not retaken by Tenant from storage within thirty (30) days after removal from the Leased Premises shall, at Landlord's option, be deemed conveyed by Tenant to Landlord under this Lease as by a bill of sale without further payment or credit by Landlord to Tenant.

In the event Tenant fails to pay any installment of rent, including any amount treated as additional rent hereunder, or other sums hereunder as and when such installment or other charge is due, Tenant shall pay to Landlord on demand a late charge in an amount equal to five percent (5%) of such installment or other charge overdue in any month and five percent (5%) each month thereafter until paid in full to help defray the additional cost to Landlord for processing such late payments, and such late charge shall be additional rent hereunder and the failure to pay such late charge within ten (10) days after demand therefor shall be an additional event of default hereunder. The provision for such late charge shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner.

Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law (all such remedies being cumulative), nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. No act or thing done by Landlord or its agents during the term hereby granted shall be deemed a termination of this Lease or an acceptance of the surrender of the Leased Premises, and no 

agreement to terminate this Lease or accept a surrender of said premises shall be valid unless in writing signed by Landlord. No waiver by Landlord of any violation or breach of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions and covenants herein contained. Landlord's acceptance of the payment of rental or other payments hereunder after the occurrence of an event of default shall not be construed as a waiver of such default, unless Landlord so notifies Tenant in writing. Forbearance by Landlord in enforcing one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default or of Landlord's right to enforce any such remedies with respect to such default or any subsequent default. If, on account of any breach or default by Tenant in Tenant's obligations under the terms and conditions of this Lease, it shall become necessary or appropriate for Landlord to employ or consult with an attorney concerning or to enforce or defend any of Landlord's rights or remedies hereunder, Tenant agrees to pay any attorney's fees so incurred.

Without limiting the foregoing, Tenant hereby: (i) expressly waives any right to trial by jury; and (ii) expressly waives the service of any notice under any existing or future law of the State of Illinois applicable to landlords and tenants.

Tenant hereby constitutes and irrevocably appoints any attorney of any court to be the true and lawful attorney of Tenant, and, in the name, place and stead of Tenant, to appear for and on behalf of Tenant in any court of record at any time in any suit or suits brought against Tenant for the enforcement of any right hereunder by Landlord, to waive the issuance and service of process and trial by jury, and, from time to time, to confess judgment or judgments in favor of Landlord and against Tenant for any rent, including any amounts treated as additional rent hereunder, other charges, and interest thereon due hereunder by Tenant to Landlord and not paid and for costs of suit and for a reasonable attorney's fee in favor of Landlord to be fixed by the court, and to release all errors that may occur or intervene in such proceedings, including the issuance of execution upon any such judgment, and to stipulate that no appeal shall be prosecuted from such judgment or judgments, or that no proceedings in chancery or otherwise shall be filed or prosecuted to interfere in any way with the operation of such judgment or judgments, or of any execution issued thereon or with any supplemental proceedings taken by Landlord to collect the amount of any such judgment or judgments, and to consent that execution on any judgment or decree in favor of Landlord and against Tenant may issue forthwith.

15.  Termination by Landlord

Landlord may terminate the Lease prior to the end of the Term by giving one hundred twenty (120) days prior written notice to Tenant.  In addition, Landlord shall pay an early termination fee to Tenant according to the following schedule (which fee shall be payable within thirty (30) days of termination of the lease):

	
		
	When Notice Provided
	Termination Fee payable to Tenant

	If provided in months 1 - 3 of the Term
	$100,000

	If provided in months 4 - 12 of the Term
	$80,000

	If provided in months 13 - 24 of the Term
	$60,000

	If provided in months 25 - 30 of the Term
	$50,000

16.  Landlord's Lien

In addition to any statutory lien for rent in Landlord's favor, Landlord shall have and Tenant hereby grants to Landlord a continuing security interest for all rentals and other sums of money becoming due hereunder from Tenant, upon all goods, wares, equipment, fixtures, furniture, inventory, accounts, contract rights, chattel paper and other personal property of Tenant situated on the Leased Premises, and such property shall not be removed therefrom without the consent of Landlord until all arrearages in rent as well as any and all other sums of money then due to Landlord hereunder shall first have been paid and discharged. In the event of a default under this Lease, Landlord shall have, in addition to any other remedies provided herein or by law, all rights and remedies under the Uniform Commercial Code, including without limitation the right to sell the property described in this Paragraph 16 at public or private sale upon five (5) days' notice to Tenant. Tenant hereby agrees to execute such financing statements and other instruments necessary or desirable in Landlord's discretion to perfect the security interest hereby created. Any statutory lien for rent is not hereby waived, the express contractual lien herein granted being in addition and supplementary thereto.

17.  Mortgages

Tenant accepts this Lease subject and subordinate to any mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a first lien or charge upon the Property, or the improvements situated thereon, provided, however, that if the mortgagee, trustee, or holder of any such mortgage or deed of trust elects to have Tenant's interest in this Lease superior to any such instrument, 

then by notice to Tenant from such mortgagee, trustee or holder, this Lease shall be deemed superior to such lien whether this Lease was executed before or after said mortgage or deed of trust. Tenant shall at any time hereafter on demand execute any instruments, releases or other documents which may be required by any such mortgagee for the purpose of subjecting and subordinating this Lease to the lien of any such mortgage or for the purpose of evidencing the superiority of this Lease to the lien of any such mortgage, as may be the case.

18.  Landlord's Liability

In no event shall Landlord's liability for any breach of this Lease exceed the amount of rental then remaining unpaid for the then current term (exclusive of any renewal periods which have not then actually commenced). This provision is not intended to be a measure or agreed amount of Landlord's liability with respect to any particular breach, and shall not be utilized by any court or otherwise for the purpose of determining any liability of Landlord hereunder, except only as a maximum amount not to be exceeded in any event.

19.  Mechanics and Other Liens

Tenant shall have no authority, express or implied, to create or place any lien or encumbrance of any kind or nature whatsoever upon, or in any manner to bind, the interest of Landlord in the Leased Premises or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs, and each such claim shall affect and each such lien shall attach to, if at all, only the leasehold interest granted to Tenant by this Lease. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Leased Premises on which any lien is or can be validly and legally asserted against its leasehold interest in the Leased Premises or the improvements thereon and that it will save and hold Landlord harmless from any and all loss, liability, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the right, title and interest of the Landlord in the Leased Premises or under the terms of this Lease. Tenant will not permit any mechanic's lien or liens or any other liens which may be imposed by law affecting Landlord's or its mortgagees' interest in the Leased Premises or the Building to be placed upon the Leased Premises or the Building arising out of any action or claimed action by Tenant, and in case of the filing of any such lien Tenant will promptly pay same. If any such lien shall remain in force and effect for twenty (20) days after written notice thereof from Landlord to Tenant, Landlord shall have the right and privilege of paying and discharging the same or any portion thereof without inquiry as to the validity thereof, and any amounts so paid, including expenses and interest, shall be so much additional rent hereunder due from Tenant to Landlord and shall be paid to Landlord immediately on rendition of bill therefor. Notwithstanding the foregoing, Tenant shall have the right to contest any such lien in good faith and with all due diligence so long as any such contest, or action taken in connection therewith, protects the interest of Landlord and Landlord's mortgagee in the Leased Premises, and Landlord and any such mortgagee are, by the expiration of said twenty (20) day period, furnished such protection, and indemnification against any loss, liability, cost or expense related to any such lien and the contest thereof as are satisfactory to Landlord and any such mortgagee.

20.  Notices

Each provision of this Lease or of any applicable governmental laws, ordinances, regulations and other requirements with reference to the sending, mailing or delivery of any notice or the making of any payment shall be deemed to be complied with when and if the following steps are taken:

(a) All rent and other payments required to be made by Tenant to Landlord hereunder shall be payable to American Service Insurance Company, Inc., or to such other entity at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith.

(b) Any notice or other document required or permitted to be delivered hereunder shall be deemed to be delivered whether actually received or not when deposited in the continental United States Mail, postage prepaid, certified or registered mail, addressed to the parties hereto at the respective addresses set out below, or at such other address as they have theretofore specified by written notice delivered in accordance herewith:

LANDLORD:            
American Service Insurance Company, Inc.
150 Northwest Point Boulevard 
Elk Grove Village, IL  60007

    

TENANT:
Universal Casualty Company 
150 Northwest Point Blvd.
Elk Grove Village, IL  60007

All parties included within the terms “Landlord” and “Tenant,” respectively, shall be bound by notices given in accordance with the provisions of this paragraph to the same effect as if each had received such notice.

21.  Miscellaneous

A. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires.

B. The terms, provisions and covenants and conditions contained in this Lease shall apply to, inure to the benefit of, and be binding upon, the parties hereto and upon their respective heirs, legal representatives, successors and permitted assigns, except as otherwise expressly provided herein. Landlord shall have the right to assign any of its rights and obligations under this Lease and Landlord's grantee or Landlord's successor shall upon such assignment, become “Landlord” hereunder, thereby freeing and relieving the grantor or assignor of all covenants and obligations of “Landlord” hereunder; provided, however, that no successor Landlord shall be responsible for the return of any security deposit provided for pursuant to Paragraph 2ii unless such successor receives the deposit. Tenant agrees to furnish promptly upon demand, a corporate resolution, proof of due authorization by partners, or other appropriate documentation evidencing the due authorization of Tenant to enter into this Lease. Nothing herein contained shall give any other Tenant in the Building of which the Leased Premises is a part any enforceable rights either against Landlord or Tenant as a result of the covenants and obligations of either party set forth herein.

C. The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof.

D. Tenant shall at anytime and from time to time within ten (10) days after written request from Landlord execute and deliver to Landlord or any prospective Landlord or mortgagee or prospective mortgagee a sworn and acknowledged estoppel certificate, in form reasonably satisfactory to Landlord and/or Landlord's mortgagee or prospective mortgagee certifying and stating as follows: (i) this Lease has not been modified or amended (or if modified or amended, setting forth such modifications or amendments); (ii) this Lease (as so modified or amended) is in full force and effect (or if not in full force and effect, the reasons therefor); (iii) the Tenant has no offsets or defenses to its performance of the terms and provisions of this Lease, including the payment of rent (or if there are any such defenses or offsets, specifying the same); (iv) Tenant is in possession of the Leased Premises if such be the case; (v) if an assignment of rents or Leases has been served upon Tenant by a mortgagee or prospective mortgagee, Tenant has received such assignment and agrees to be bound by the provisions thereof; and (vi) any other accurate statements reasonably required by Landlord or its mortgagee or prospective mortgagee. It is intended that any such statement delivered pursuant to this subsection may be relied upon by any prospective purchaser or mortgagee and their respective successors and assigns and Tenant shall be liable for all loss, cost or expense resulting from the failure of any sale or funding of any loan caused by any material misstatement contained in such estoppel certificate. Tenant hereby irrevocably appoints Landlord or if Landlord is a trust, Landlord's beneficiary, as attorney-in-fact for the Tenant with full power and authority to execute and deliver in the name of Tenant such estoppel certificate if Tenant fails to deliver the same within such ten (10) day period and such certificate as signed by Landlord or Landlord's beneficiary, as the case may be, shall be fully binding on Tenant, if Tenant fails to deliver a contrary certificate within five (5) days after receipt by Tenant of a copy of the certificate executed by Landlord or Landlord's beneficiary, as the case may be, on behalf of Tenant. In addition to any other remedy Landlord may have hereunder, Landlord may, at its option, if Tenant does not deliver to Landlord an estoppel certificate as set forth above within fifteen (15) days after Tenant is requested to do so, cancel this Lease effective the last day of the then current month, without incurring any liability on account thereof, and the term hereby granted is expressly limited accordingly.

E. This Lease may not be altered, changed or amended except by an instrument in writing signed by both parties hereto.

F. All obligations of Tenant hereunder not fully performed as of the expiration or earlier termination of the term of this Lease shall survive the expiration or earlier termination of the term hereof, including without limitation, all payment obligations with respect to taxes and Operating Costs and all obligations concerning the condition of the premises. Upon the expiration or earlier termination of the term hereof, Tenant shall pay to Landlord the amount, as estimated by Landlord, necessary: (i) to repair and restore the Leased Premises as provided herein; and (ii) to discharge Tenant's obligation for unpaid taxes, Operating Costs or other amounts due Landlord, if any. All such amounts shall be used and held by Landlord for payment of such obligations of Tenant, with Tenant being liable for any additional costs upon demand by Landlord, or with any excess to be returned to Tenant after all such obligations have been determined and satisfied. Any security deposit held by Landlord shall be credited against the 

amount payable by Tenant under this subparagraph 21F.

G. If any clause, phrase, provision or portion of this Lease or the application thereof to any person or circumstance shall be invalid or unenforceable under applicable law, such event shall not affect, impair or render invalid or unenforceable the remainder of this Lease nor any other clause, phrase, provision or portion hereof, nor shall it affect the application of any clause, phrase, provision or portion hereof to other persons or circumstances, and it is also the intention of the parties to this Lease that in lieu of each such clause, phrase, provision or portion of this Lease that is invalid or unenforceable, there be added as a part of this Lease contract a clause, phrase, provision or portion as similar in terms to such invalid or unenforceable clause, phrase, provision or portion as may be possible and be valid and enforceable.

H. Submission of this Lease shall not be deemed to be a reservation of the Leased Premises. Landlord shall not be bound hereby until its delivery to Tenant of an executed copy hereof signed by Landlord, already having been signed by Tenant, and until such delivery Landlord reserves the right to exhibit and Lease the Leased Premises to other prospective tenants. Notwithstanding anything contained herein to the contrary, Landlord may withhold delivery of possession of the Leased Premises from Tenant until such time as Tenant has paid to Landlord the security deposit required by subparagraph 2B hereof, the first month's rent as set forth in subparagraph 2A hereof, and any sum owed pursuant to Paragraph 5 hereof.

I. Whenever a period of time is herein prescribed for action to be taken by Landlord, the Landlord shall not be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays due to causes of any kind whatsoever which are beyond the control of Landlord.

J. Tenant's “proportionate share” as used in this Lease shall mean a fraction, the numerator of which is the gross leasable area of the Leased Premises and the denominator of which is the gross leasable area contained in the Building, in each case as reasonably determined by Landlord. For purposes hereof the numerator is 14,100 and the denominator is 174,000 and Tenant's proportionate share is 8.1%.

K. If there be more than one Tenant, the obligations hereunder imposed upon Tenant shall be joint and several. Any indemnification of, insurance of, or option granted to Landlord shall also include or be exercisable by Landlord's trustee, beneficiary, agents and employees, as the case may be.

L. Each of the parties (i) represents and warrants to the other that it has not dealt with any broker or finder in connection with this Lease; and (ii) indemnifies and holds the other harmless from any and all losses, liability, costs or expenses (including attorneys' fees) incurred as a result of an alleged breach of the foregoing warranty. 

22.  Substitution of Premises

At any time after date of execution of this Lease, Landlord may substitute for the Leased Premises, other premises in the Development (the “new premises”), in which event the new premises shall be deemed to be the Leased Premises for all purposes under this Lease, provided: (i) the new premises shall be located in the Building or a comparable building and shall be similar to the Leased Premises in square footage and appropriateness for the use of Tenant's purposes; (ii) if Tenant is then occupying the Leased Premises, Landlord shall pay the expense of moving Tenant, its property and equipment to the new premises and such moving shall be done at such time and in such manner so as to cause the least inconvenience to Tenant; (iii) Landlord shall give to Tenant not less than thirty (30) days' prior written notice of such substitution; (iv) Landlord shall, at its sole cost, improve the new premises with improvements substantially similar to those located in the Leased Premises, and (v) Landlord shall reimburse Tenant for all costs ancillary to such move including but not limited to stationery, business card, changes in websites and other public materials referencing Tenant's address, filing fees for notice to regulatory bodies of the change of address, transition and service fees incurred to ensure a smooth transition of computer hardware and software applications.

23.  Certain Rights Reserved To The Landlord

The Landlord reserves and may exercise the following rights without affecting Tenant's obligations hereunder:

A.  to change the name or street address of the Building;

B.  to install and maintain a sign or signs on the exterior of the Building;

C.  to have access for the Landlord and the other tenants of the Building to any mail chutes located on the Leased Premises according to the rules of the United States Post Office;

D.  to designate all sources furnishing sign painting and lettering, ice, drinking water, towels, coffee cart service and toilet supplies, lamps and bulbs used on the Leased Premises;

E.  to retain at all times pass keys to the Leased Premises;

F.  to grant to anyone the exclusive right to conduct any particular business or undertaking in the Building;

G.  to close the Building after regular working hours and on the legal holidays subject, however, to Tenant's right to admittance, under such reasonable regulations as Landlord may prescribe from time to time, which may include by way of example but not of limitation, that persons entering or leaving the Building identify themselves to a watchman by registration or otherwise and that said persons establish their right to enter or leave the Building;

H.  to take any and all measures, including inspections, repairs, alterations, decorations, additions and improvements to the Leased Premises or to the Building, as may be necessary or desirable for the safety, protection or preservation of the Leased Premises or the Building or the Landlord's interests, or as may be necessary or desirable in the operation of the Building; and

I.   to add, remove or modify buildings, roadways, walkways, landscaping, lakes, grading and other improvements in or to the Development.

The Landlord may enter upon the Leased Premises and may exercise any or all of the foregoing rights hereby reserved without being deemed guilty of an eviction or disturbance of the Tenant's use or possession and without being liable in any manner to the Tenant and without abatement of rent or affecting any of the Tenant's obligations hereunder.

24.  Land Trustee's Exculpation

It is expressly understood and agreed that nothing in this Lease contained shall be construed as creating any liability whatsoever against the Landlord, or its successors and assigns, personally, and in particular without limiting the generality of the foregoing, there shall be no personal liability to pay any indebtedness accruing hereunder or to perform any covenant, either express or implied, herein contained, and that all personal liability of Landlord, or its successors and assigns, of every sort, if any, is hereby expressly waived by Tenant, and every person now or hereafter claiming any right or security hereunder, and that so far as Landlord, or its successors and assigns, is concerned the owner of any indebtedness or liability accruing hereunder shall look solely to the premises hereby Leased for the payment thereof.

25. Exhibits.

The Exhibits attached hereto shall form part of this Lease as if the same were embodied herein.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Signature Page to UCC Lease Agreement

EXECUTED the 31st day of December, 2010

LANDLORD:
AMERICAN SERVICE INSURANCE COMPANY, INC.
150 Northwest Point Boulevard 
Elk Grove Village, IL  60007

By:      /s/    Scott D. Wollney            
Title:         President            

TENANT:
UNIVERSAL CASUALTY COMPANY
150 Northwest Point Blvd.
Elk Grove Village, IL  60007

By:    /s/     Roger Beck            
Title:         COO                

 

EXHIBIT A

Floor Plan

EXHIBIT B

Legal Description

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