Document:

Unassociated Document

    

    
      	 
      

    

    
      	
              FILED

            

    

    
      	
               

              JAN
      25 2011        

            

    

     

    
      OFFICE
OF INSURANCE REGULATION

    

     

    
      
        	 
      	
                OFFICE
      OF

              
	 
      	
                INSURANCE
      REGULATION

              
	 
      	
                Docketed
      by: ___________

              

      

    

    

    KEVIN M.
McCARTY

    COMMISSIONER

     

    
      
        
          
            	IN
      THE MATTER OF: 	
                    CASE
      NO.: 114165-10-CO

                  

          

        

      

    

    
Application
for Acquisition of FEDERATED

    NATIONAL
INSURANCE COMPANY by and its

    Merger
with and into AMERICAN VEHICLE

    INSURANCE
COMPANY

    ________________________________________________

     

    CONSENT
ORDER

     

    THIS
CAUSE came on for consideration upon the filing with the OFFICE OF INSURANCE
REGULATION (hereinafter referred to as the "OFFICE") of an application for the
acquisition of FEDERATED NATIONAL INSURANCE COMPANY by and its merger with and
into AMERICAN VEHICLE INSURANCE COMPANY (hereinafter referred to as
"Application") pursuant to Sections 628.451 and 628.461, Florida Statutes. The
OFFICE, having considered said application and, being otherwise advised in the
premises, finds as follows:

     

    1. The
OFFICE has jurisdiction over the subject matter and of the parties
herein.

     

    2. AMERICAN
VEHICLE INSURANCE COMPANY (hereinafter referred to as "AMERICAN VEHICLE" or
"APPLICANT") has applied for and, subject to the present and continuing
satisfaction of the requirements, terms and conditions established herein, has
satisfactorily met all of the conditions precedent to the granting of approval
by the OFFICE of its proposed acquisition of FEDERATED NATIONAL INSURANCE
COMPANY (hereinafter

    referred
to as "FEDERATED NATIONAL") and FEDERATED NATIONAL's merger with and into
AMERICAN VEHICLE.

     

     

    
      
        
        

      

      
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    3. AMERICAN
VEHICLE and FEDERATED NATIONAL are both domestic property and casualty insurers
which are each owned one hundred percent (100%) by 21ST CENTURY
HOLDING COMPANY (hereinafter referred to as "21ST
CENTURY"), a Florida corporation whose stock is traded on the NASDAQ under the
symbol "TCHC". The Application represents that the only five percent (5%) or
more shareholders of 21ST CENTURY
are: Dimensional Fund Advisors LP which owns seven and twenty-three hundredths
percent (7.23%), PNC Financial Services Group, Inc. which owns six and
thirty-two hundredths percent (6.32%), and Lloyd I. Miller, III who owns five
and twelve-hundredths percent (5.12%) of the outstanding voting securities of
21st
CENTURY. AMERICAN VEHICLE, FEDERATED NATIONAL, and 21ST CENTURY
represent that, with the exception of the foregoing, no other person or persons
own five percent (5%) or more of the voting securities of 21ST
CENTURY. Said representations are material to the issuance of this Consent
Order.

     

    4. APPLICANT
has submitted a draft Agreement and Plan of Merger (hereinafter referred to as
"MERGER AGREEMENT") between and among 21st
CENTURY, FEDERATED NATIONAL, and APPLICANT whereby APPLICANT will acquire one
hundred percent (100%) of the one million five hundred thousand (1,500,000)
issued and outstanding common shares, with a par value of one U.S. dollar
($1.00) per share, of FEDERATED NATIONAL, upon execution of the MERGER AGREEMENT
and the payment of one U.S. dollar ($1.00) plus other good and valuable
consideration as described in the Application. FEDERATED NATIONAL's common stock
will be surrendered and as a result of the consummation of the merger, (a) the
separate existence of FEDERATED NATIONAL will cease, and (b) AMERICAN VEHICLE
will be the surviving corporation and will remain a wholly-owned subsidiary of
21st
CENTURY (hereinafter
referred to as the "Merger"). APPLICANT and 21st CENTURY
represent that subsequent to the effective date of the acquisition and Merger,
AMERICAN VEHICLE will change its name to "FEDERATED NATIONAL INSURANCE COMPANY".
AMERICAN VEHICLE post-Merger is hereinafter referred to as the "SURVIVING
ENTITY".

     

     

    
      
        
        

      

      
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    5. A
Disclaimer of Control Affidavit is on file with the OFFICE for PNC Financial
Services Group, Inc. certifying that it will not exercise any control, directly
or indirectly, over the activities of AMERICAN VEHICLE or FEDERATED NATIONAL.
The representations made in the Disclaimer of Control Affidavit are material to
the issuance of this Consent Order.

     

    6. A
Disclaimer of Control Affidavit is on file with the OFFICE for Lloyd I. Miller,
III certifying that he does not and will not exercise any control, directly or
indirectly, over the activities of 21st CENTURY
or any entity owned or controlled by 21st CENTURY
and licensed by the OFFICE. Further, Mr. Miller will not attempt to exercise any
control, either directly or indirectly, over the activities of 21st CENTURY
or any licensee without the advance written consent of the OFFICE. The
representations made in the Disclaimer of Control Affidavit are material to the
issuance of this Consent Order.

     

    7. A
Disclaimer of Control Affidavit is on file with the OFFICE for Dimensional Fund
Advisors, LP, certifying that no individual from this entity does or will
exercise any control, directly or indirectly, over the activities of 21st CENTURY
or any entity owned or controlled by 21st CENTURY
and licensed by the OFFICE.  Further, no individual from this entity
will attempt to exercise any control, either directly or indirectly, over the
activities of 21st CENTURY
or any licensee without the advance written consent of the OFFICE. The
representations made in the Disclaimer of Control Affidavit are material to the
issuance of this Consent Order.

     

     

     

    
      
        
        

      

      
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    8. APPLICANT,
FEDERATED NATIONAL, and 21ST CENTURY have made material representations that,
except as disclosed in the Application, none of the officers and directors of
SURVIVING ENTITY and none of the officers and directors of 21ST CENTURY have
been found guilty of, or pleaded guilty or nolo contendere to, a felony or a
misdemeanor other than a minor traffic violation, without regard to whether a
judgment of conviction was entered by the Court.

     

    9. APPLICANT,
FEDERATED NATIONAL or 21ST CENTURY
shall provide to the OFFICE legible and complete fingerprint cards for all the
officers and directors of 21ST
CENTURY. If the completed fingerprint cards of any said person furnished to the
OFFICE, or other sources utilized by the OFFICE in its investigation process,
reveal that the representations made in paragraph eight (8) above are
inaccurate, those individuals involved shall be removed as an officer and/or
director within thirty (30) days after notification by the OFFICE and replaced
with a person or persons acceptable to the OFFICE.

     

    10. APPLICANT
has submitted evidence that background investigative reports have been ordered
from an independent investigative agency for the following officers and/or
directors of 21ST
CENTURY: Rebecca Campillo, Bruce F. Simberg, Richard W. Wilcox, Jr., Carl Dorf,
Charles B. Hart, Jr. and Jenifer G. Kimbrough. APPLICANT, FEDERATED NATIONAL,
and/or 21ST CENTURY
shall within thirty (30) days of the execution of this Consent Order, submit or
cause to be submitted, current background investigative reports for the
aforementioned individuals. If the background investigative reports on such
officers or directors furnished to the OFFICE or other sources utilized by the
OFFICE in its investigation process reveal that the representations in paragraph
eight (8) above are inaccurate, the individual(s) involved shall be removed as
officer(s) and/or director(s) within thirty (30) days after notification by the
OFFICE and replaced with a person or persons acceptable to the
OFFICE.

     

     

    
      
        
        

      

      
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    11.
Except as stated in paragraphs nine (9) and/or ten (10) above, APPLICANT,
FEDERATED NATIONAL, and 21ST CENTURY
represent that they have submitted complete information on all of the
individuals referenced in paragraph eight (8) above, and that if said
information has not been provided, any such individual shall be removed as
officer and/or director of said company within thirty (30) days after
notification by the OFFICE.

     

    12. If,
upon receipt of such notification from the OFFICE, pursuant to paragraphs nine
(9), ten (10), and/or eleven (11) above, APPLICANT, FEDERATED NATIONAL, and/or
21ST
CENTURY does not timely take the required corrective action, APPLICANT,
FEDERATED NATIONAL, and 21ST CENTURY
agree that such failure to act would constitute an immediate danger to the
public, and the OFFICE may immediately suspend, revoke, or take other
administrative action as it deems appropriate upon the Certificate of Authority
of SURVIVING ENTITY, without further proceedings, pursuant to Sections
120.569(2)(n) and 120.60(6), Florida Statutes.

     

    13. APPLICANT
has filed, and the OFFICE has relied upon the representations in the Plan of
Operation post-Merger and supporting documents that it has submitted with the
Application. Prior written approval must be secured from the OFFICE prior to any
material deviation from said Plan of Operation. Further, SURVIVING ENTITY shall
not exceed the direct, assumed, and/or net premiums written projected in the Pro
Forma Statement for years 2010, 2011, and 2012, submitted with the Application
or as subsequently amended and submitted to and approved by the OFFICE, without
the prior written approval of the OFFICE.

     

    14. APPLICANT,
FEDERATED NATIONAL, and 21ST CENTURY
agree that SURVIVING ENTITY shall not write in the (050) Commercial Multi Peril
line of business, nor shall it write any new commercial property business,
including condo associations, under any other
line of business for which it is authorized, until it receives the prior written
approval of the OFFICE.

     

     

    
      
        
        

      

      
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    15. APPLICANT,
FEDERATED NATIONAL, and 21ST CENTURY
acknowledge that the (240) Surety line of business shall be removed from the
Certificate of Authority of AMERICAN VEHICLE upon execution of this Consent
Order.  Therefore, as of the effective date of the Merger, SURVIVING
ENTITY shall be authorized to write the following lines of business in Florida:
(010) Fire, (020) Allied Lines, (040) Homeowners Multi Peril, (050) Commercial
Multi Peril, (090) Inland Marine, (170) Other Liability, (192) Private Passenger
Auto Liability, (194) Commercial Auto Liability, (211) Private Passenger Auto
Physical Damage, and (212) Commercial Auto Physical Damage. In accordance with
paragraph fourteen (14) above, SURVIVING ENTITY shall not write in the (050)
Commercial Multi Peril line of business until it receives the prior written
approval of the OFFICE.

     

    16. According
to FEDERATED NATIONAL'S September 30, 2010 QUASR submission required by Section
624.424(10), Florida Statutes, FEDERATED NATIONAL has approximately forty-five
percent (45%) of its total book of Homeowners Multi Peril policies located in
Broward, Miami-Dade and Palm Beach Counties ("Tri-County Area"). SURVIVING
ENTITY shall reduce its total number of Homeowners Multi Peril policies in the
Tri-County Area to less than or equal to forty percent (40%) of its total book
of business by December 31, 2011. Furthermore, upon execution of the Consent
Order, SURVIVING ENTITY shall not write more than five hundred thousand U.S.
dollars ($500,000) of new Homeowners Multi Peril premium in the Tri-County Area
each month until otherwise notified by the OFFICE in writing.

     

    17. SURVIVING
ENTITY shall amend the Pro Forma Statement referenced in paragraph thirteen (13)
above, to reflect its compliance with the requirements of paragraph sixteen
(16) above, and submit to the OFFICE for its approval within thirty (30) days
following the execution of this Consent Order.

     

     

     

     

    
      
        
        

      

      
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    18. For the
first year following the effective date of the Merger, any change in the
officers of SURVIVING ENTITY shall be subject to the prior written approval of
the OFFICE.

     

    19. APPLICANT
represents that it will forgive the five million U.S. dollars ($5,000,000)
surplus note issued by FEDERATED NATIONAL. SURVIVING ENTITY shall provide
documentation to the OFFICE within ten (10) days of the effective date of the
Merger reflecting that said surplus note has been forgiven by
APPLICANT.

     

    20. SURVIVING
ENTITY shall submit to the OFFICE for its prior written approval any agreements
to be entered into by SURVIVING ENTITY as a result of the Merger, including the
contemplated endorsements and/or amendments to any and all reinsurance
agreements, which were not previously submitted with the
Application.

     

    21. As a
condition of the approval of the Application, SURVIVING ENTITY shall within ten
(10) days following the effective date of the Merger, provide to the Bureau of
Collateral Management the necessary documentation to transfer the current
deposit of FEDERATED NATIONAL in the amount of one million U.S. dollars
($1,000,000) to the existing deposit account of AMERICAN VEHICLE. SURVIVING
ENTITY shall thereafter maintain a deposit of not less than two million U.S.
dollars ($2,000,000) with the Bureau of Collateral Management, until such time
as the OFFICE approves a reduction of said deposit.

     

    22. SURVIVING
ENTITY shall file with the OFFICE, by the 21st day of the month subsequent to
the previous month's end, partial financial statements reflecting its
operational results for the previous month. These filings shall be prepared in
accordance with the format prescribed within the National Association of
Insurance Commissioners Quarterly Statement Instructions for Property and
Casualty Insurers. Each filing shall include, at a minimum, pages 1, 2, 3,
4, 5, 10, 12, and 13 and should be submitted via the Regulatory Electronic
Filing System (REFS) no later than 5:00 p.m. on the 21st of each month. These
reports shall be filed monthly, beginning with the month of January 2011, until
otherwise notified by the OFFICE in writing.

     

     

     

    
      
        
        

      

      
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    23. SURVIVING
ENTITY shall provide the OFFICE, within three (3) business days of each month's
end, a report detailing, by county, the amount of new Homeowners Multi Peril
premium written for that month. Further, the report shall include the total
number of Homeowners Multi Peril policies in force as of that month. These
reports shall be filed monthly, beginning with the month of January 2011, until
otherwise notified by the OFFICE in writing.

     

    24. SURVIVING
ENTITY shall provide the OFFICE within five (5) business days after execution of
the Consent Order, monthly financial projections for 2011.

     

    25. FEDERATED
NATIONAL has represented to the OFFICE that, in an effort to reduce its exposure
in the Tri-County Area, it will nonrenew certain Homeowners Multi Peril policies
that are currently part of its book of business. On January 5, 2011, FEDERATED
NATIONAL submitted to the OFFICE's Bureau of Property and Casualty Financial
Oversight a Summary of Non-Renewal Activity prepared by Insight Catastrophe
Group and marked as page seven (7) which projects the number of policies by
county that will be nonrenewed in 2011. Any material deviation by SURVIVING
ENTITY from this report shall require the OFFICE's prior written approval.
Further, SURVIVING ENTITY shall within three (3) business days of each month's
end provide a report to the OFFICE detailing, by county, the number of
Homeowners Multi Peril policies nonrenewed for that month. These reports shall
be filed monthly, beginning with the month of January 2011, until otherwise
notified by the OFFICE in writing.

     

    26. AMERICAN
VEHICLE, FEDERATED NATIONAL, and 21ST CENTURY
acknowledge that entry of this Consent Order does not constitute approval by the
OFFICE of any contemplated
rate change, but rather that any said rate plan shall be submitted to the OFFICE
for approval as a separate filing.

     

     

     

    
      
        
        

      

      
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    27. 21ST CENTURY
shall cease the payment of any dividends until SURVIVING ENTITY reports two (2)
consecutive quarters of net underwriting income.

     

    28. Under the existing Managing General
Agency Agreement between FEDERATED NATIONAL and ASSURANCE MANAGING GENERAL
AGENTS, INC. (hereinafter referred to as "ASSURANCE MANAGER"), FEDERATED
NATIONAL is obligated to pay ASSURANCE MANAGER six percent (6%) of gross written
premium. FEDERATED NATIONAL has represented to the OFFICE that it will reduce
the fee to ASSURANCE MANAGER to two percent (2%) of gross written premium during
the first quarter of 2011 and three percent (3%) of gross written premium during
the second quarter of 2011. SURVIVING ENTITY shall submit an amendment to the
Managing General Agency Agreement with ASSURANCE MANAGER to the OFFICE within
ten (10) days of the effective date of the Merger, which reflects a fee to
ASSURANCE MANAGER of two percent (2%) of gross written premium during the first
quarter of 2011, three percent (3%) of gross written premium during the second
quarter of 2011, and four percent (4%) of gross written premium thereafter. Said
managing general agency fee shall not be increased above four percent (4%) of
gross written premium without the prior written approval of the
OFFICE.

     

    29. Under the existing Claims Service
Agreement, FEDERATED NATIONAL is obligated to pay SUPERIOR ADJUSTING, INC.
(hereinafter referred to as "SUPERIOR ADJUSTING") four and one-half percent
(4.5%) of gross earned premium. SURVIVING ENTITY shall submit an amendment to
the Claims Service Agreement with SUPERIOR ADJUSTING to the OFFICE within ten
(10) days of the effective date of the Merger, which reflects a lower commission
and fee schedule of three and six-tenths percent (3.6%) of gross earned
premium. Said claims service fee shall not be increased above three and
six-tenths percent (3.6%) of gross earned premium without the prior written
approval of the OFFICE.

     

     

     

    
      
        
        

      

      
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    30.            Any
arrangement or agreement with an affiliated party for the provision of
administrative services shall be evidenced by a written contract. Any such
contract shall comply with the following requirements, if
applicable:

     

    a) SURVIVING
ENTITY must have the right to terminate the contract for cause;

     

    b) The
contract shall contain a provision with respect to the underwriting or other
standards pertaining to the business underwritten by SURVIVING
ENTITY;

     

    c) The
contract shall be retained as part of the official records of both the affiliate
and SURVIVING ENTITY for the term of the contract and five (5) years
afterward;

     

    d) Payment
to the affiliate of any premiums or charges for insurance by or on behalf of the
insured shall be deemed to have been received by SURVIVING ENTITY, and return
premiums or claims payments forwarded by SURVIVING ENTITY to the affiliate shall
not be deemed to have been paid to the insured or claimant until such payments
are received by the insured or claimant;

     

    e) The
affiliate shall hold all funds collected on behalf of or for SURVIVING ENTITY as
well as all return premiums received from SURVIVING ENTITY in a fiduciary
capacity in trust accounts;

     

    f) The
affiliate shall adhere to underwriting standards, rules, procedures and manuals
setting forth the rates to be charged, and the conditions for the acceptance or
rejection of risks as determined by SURVIVING ENTITY;

     

    g) All fees
and charges must be specified in the contract and they must be comparable to
fees charged to any other insurer for which similar contracted services are
provided
by the affiliate; or, if the affiliate does not perform such services for other
insurers, the fees charged must be reasonable in relation to the services
provided;

     

     

     

    
      
        
        

      

      
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    h) All
claims paid by the affiliate from funds collected on behalf of SURVIVING ENTITY
shall be paid only on drafts of, and as authorized by, SURVIVING
ENTITY;

     

    i) SURVIVING
ENTITY shall retain the right of continuing access to books and records
maintained by the affiliate sufficient to permit SURVIVING ENTITY to fulfill all
of its contractual obligations to insured persons, subject to any restrictions
in the written agreement between SURVIVING ENTITY and the affiliate on the
proprietary rights of the parties in such books and records;

     

    j) The
affiliate shall provide written notice, as approved by SURVIVING ENTITY, to
insured individuals advising them of the identity of, and relationship among,
the affiliate, the policyholder, and SURVIVING ENTITY; and

     

    k) Any
policies, certificates, booklets, termination notices, or other written
communications delivered by SURVIVING ENTITY to the affiliate for delivery to
its policyholders shall be delivered by the affiliate promptly after receipt of
instructions from SURVIVING ENTITY to deliver them.

     

    30. APPLICANT,
FEDERATED NATIONAL, and 21ST CENTURY
agree that any managerial, administrative or employee sharing arrangements
involving SURVIVING ENTITY will be in accordance with a formal written
agreement, and must contain, at a minimum, the following:

     

    a) A
requirement of monthly cash settlement of any expenses incurred for the month;
and

     

    b) A clear
delineation of the financial boundaries of each operation.

     

     

     

    
      
        
        

      

      
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    Further,
SURVIVING ENTITY shall not bear any occupancy expenses for space which is
occupied by any other affiliate and, upon examination, shall be prepared to
demonstrate how the occupancy cost and space is allocated among
them.

     

    32. APPLICANT,
FEDERATED NATIONAL, and 21ST CENTURY
agree that this Consent Order, and the OFFICE's approval of the MERGER
AGREEMENT, shall become null and void if the Merger does not become effective
with sixty (60) days of execution of this Consent Order.

     

    33. SURVIVING
ENTITY shall, within ten (10) days from the effective date of the Merger, file
with the OFFICE copies of any and all applicable documentation evidencing the
finalization of the Merger, including the executed Agreement and Plan of Merger
and the Articles of Merger, as filed with the Florida Secretary of
State.

     

    34. SURVIVING
ENTITY shall, within ten (10) days from the effective date of the Merger, file
with the OFFICE copies of its Articles of Amendment to Articles of Incorporation
reflecting the name change of AMERICAN VEHICLE to FEDERATED NATIONAL INSURANCE
COMPANY, as filed with the Florida Secretary of State.

     

    35. SURVIVING
ENTITY shall surrender FEDERATED NATIONAL's original Florida Certificate of
Authority to the OFFICE within ten (10) days from the effective date of the
Merger.

     

    36. APPLICANT,
FEDERATED NATIONAL, and 21ST CENTURY
represent that upon approval of the Application, all existing policyholders of
APPLICANT and FEDERATED NATIONAL will be sent a notice advising them of the
Merger and subsequent name change. Such notice is subject to a separate approval
by the Bureau of Property and Casualty Product Review.  Further,
FEDERATED NATIONAL shall notify its policyholders that AMERICAN

    VEHICLE
will be assuming all of the duties and obligations that were originally those of
FEDERATED NATIONAL.

     

     

    
      
        
        

      

      
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    37. SURVIVING
ENTITY shall, no later than fifteen (15) days after the month in which the
Merger occurs, file an update to its Holding Company Registration Statement, as
required by Section 628.801, Florida Statutes, and Rule 690-143.046, Florida
Administrative Code.

     

    38. Executive
Order 13224, which was signed by President George Bush on September 23, 2001,
and blocks the assets of terrorists and terrorist support organizations
identified by the United States Department of the Treasury, Office of Foreign
Assets Control. The Executive Order also prohibits any transactions by U.S.
persons involving the blocked assets and interests. The list of identified
terrorists and terrorist support organizations is periodically updated at the
Treasury Department's Office of Foreign Assets Control website, www.treas.gov/ofac.  SURVIVING
ENTITY shall maintain and adhere to procedures necessary to detect and prevent
prohibited transactions with individuals and entities which have been identified
at the Treasury Department's Office of Foreign Assets Control
website.

     

    39. APPLICANT,
FEDERATED NATIONAL, and 21ST CENTURY
affirm that all representations are true and that all representations,
requirements, terms and conditions set forth herein are material to the issuance
of this Consent Order, and represent that the information, documentation,
representations, and explanations provided to the OFFICE in connection with the
application for approval of the Merger accurately and completely describe all
transactions, agreements and understandings pertaining to the
Merger.

     

    40. SURVIVING
ENTITY shall report to the OFFICE, Property & Casualty Financial Oversight,
any time it is named as a party defendant in a class action lawsuit, within
fifteen (15) days
after the class is certified, and SURVIVING ENTITY shall include a copy of the
complaint at the time of reporting the class action lawsuit to the
OFFICE.

     

     

     

     

    
      
        
        

      

      
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    41. APPLICANT,
FEDERATED NATIONAL, and 21ST CENTURY
hereby expressly waive a hearing in this matter, the making of Findings of Fact
and Conclusions of Law by the OFFICE, and all further and other proceedings
herein to which the parties may be entitled by law or rules of the OFFICE.
APPLICANT, FEDERATED NATIONAL, and 21ST CENTURY
also hereby knowingly and voluntarily waive all rights to challenge or to
contest this Consent Order, in any forum now available to them, including the
right to any administrative proceeding, circuit or federal court action, or any
appeal.

     

    42. The
deadlines set forth in this Consent Order may be extended by written approval of
the OFFICE. Approval of any deadline extension is subject to statutory or
administrative regulation limitations.

     

    43. Each
party to this action shall bear its own costs and fees, except as otherwise set
forth in this Consent Order.

     

    44. Any prior
Consent Order(s) that APPLICANT and/or FEDERATED NATIONAL have entered into with
the OFFICE prior to the effective date of the Merger shall apply and remain in
full force and effect for SURVIVING ENTITY except where provisions of such
Consent Order(s) have expired, have been superseded by subsequent Consent
Orders, or are inconsistent with this Consent Order.

     

    45. SURVIVING
ENTITY shall report to the OFFICE within sixty (60) days from the date of the
execution of this Consent Order a certification evidencing compliance with all
of the requirements of this Consent Order. Any exceptions shall be so noted and
contained in the certification. Exceptions noted in the, certification shall
also include a timeline defining when the outstanding requirements of the
Consent Order will be complete. Said certification shall be submitted
to the OFFICE via electronic mail and directed to the attention of the Assistant
General Counsel representing the OFFICE in this matter and as named in this
Consent Order.

     

     

     

     

    
      
        
        

      

      
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    46. APPLICANT,
FEDERATED NATIONAL, and 21ST CENTURY
agree that failure to adhere to one or more of the terms and conditions
contained herein shall result, without further proceedings, in the revocation of
SURVIVING ENTITY's Certificate of Authority in this state in accordance with
Sections 120.569(2)(n) and 120.60(6), Florida Statutes.

     

    47. The
parties agree that this Consent Order shall be deemed to be executed when the
OFFICE has executed a copy of this Consent Order bearing the signature of
APPLICANT or its authorized representative, FEDERATED NATIONAL or its
representative, and 21ST CENTURY
or its authorized representative, notwithstanding the fact that the copy may
have been transmitted to the OFFICE electronically. Further, APPLICANT,
FEDERATED NATIONAL, and 21ST CENTURY
agree that the signatures of their representatives as affixed to this Consent
Order shall be under the seal of a Notary Public.

    

     

     

    
 

    
      
        
        

      

      
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of 20

        
          

        

      

      
        
        

      

    

    

     

    

    

    WHEREFORE,
subject to the conditions set forth above, the OFFICE hereby approves the
Application for Acquisition of FEDERATED NATIONAL INSURANCE COMPANY by AMERICAN
VEHICLE INSURANCE COMPANY and Merger of FEDERATED NATIONAL INSURANCE COMPANY
with and into AMERICAN VEHICLE INSURANCE COMPANY, and subsequent to the
effective date of the Merger, the name change of AMERICAN VEHICLE INSURANCE
COMPANY to FEDERATED NATIONAL INSURANCE COMPANY.

     

    FURTHER,
all terms and conditions contained herein are hereby ORDERED.

     

    DONE and
ORDERED THIS 25th
day of January
2011.

    

    
      
        	 
      	
                /s/ Kevin M. McCarty,
      Commissioner

              
	 
      	
                Kevin
      M. McCarty, Commissioner

              
	 
      	
                Office
      of Insurance Regulation

              

      

    

    

     

     

    
      
        
        

      

      
        Page 16
of 20

        
          

        

      

      
        
        

      

    

    
      

    

    
      
      

    

    By
execution hereof, AMERICAN VEHICLE INSURANCE COMPANY, consents to entry, of this
Consent Order, agrees without reservation to all of the above terms and
conditions and shall be bound by all provisions herein. The undersigned
represents that he has the authority to bind AMERICAN VEHICLE INSURANCE COMPANY
to the terms and conditions of this Consent Order.

    

    
      
        
          	 
      	
                  AMERICAN
      VEHICLE INSURANCE

                  COMPANY

                
	 
      
	 
      	 
      	 
      
	 
      	
                  By:

                	
                  /s/ Michael H. Braun

                
	 
      	 
      	 
      
	
                  [Corporate
      Seal]

                	
                  Print
      Name:

                	
                  Michael H. Braun

                
	 
      	 
      	 
      
	 
      	
                  Title:

                	
                  President

                
	 
      	 
      	 
      
	 
      	
                  Date:

                	
                  01/20/2011

                

        

      

    

    

    STATE OF
Florida              

    

    COUNTY OF
Broward        

    

    The
foregoing instrument was acknowledge before me this 20th day of January,
2011

    

    By Michael H. Braun               as
President                                                                                     

           (Name of
Person)                        (Type
of Authority – e.g. officer, trustee, attorney-in-fact)

    for American Vehicle Insurance
Company.

           (Company
Name)

    

    

    
      
        
          	 
      	 
      	
                  /s/ Rebecca L. Campillo

                
	
                  REBECCA
      L. CAMPILLO

                  MY
      COMMISSION #DD840104

                  EXPIRES:  February
      05, 2013

                  Fl
      Notary Discount Assoc. Co.

                	 
      	
                  (Signature
      of the Notary)

                
	 
      	 
      
	 
      	 
      
	 
      	
                  Rebecca L. Campillo

                
	 
      	 
      	
                  (Print,
      Type or Stamp Commissioned Name of
Notary)

                

        

      

    

    

    

    

    Personally
Known       X   
OR Produced
Identification                                                                           

    

    Type of
Identification Produced                                                                              

     

     

    
      
        
        

      

      
        Page 17
of 20

        
          

        

      

      
        
        

      

    

     

     

    

    By
execution hereof, FEDERATED NATIONAL INSURANCE COMPANY consents to entry, of this
Consent Order, agrees without reservation to all of the above terms and
conditions and shall be bound by all provisions herein. The undersigned
represents that he/she has the authority to bind FEDERATED NATIONAL INSURANCE
COMPANY to the terms and conditions of this Consent Order.

    

    
      
        	 
      	
                FEDERATED
      NATIONAL INSURANCE

                COMPANY

              
	 
      
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/ Michael H. Braun

              
	 
      	 
      	 
      
	
                [Corporate
      Seal]

              	
                Print
      Name:

              	
                Michael H. Braun

              
	 
      	 
      	 
      
	 
      	
                Title:

              	
                President

              
	 
      	 
      	 
      
	 
      	
                Date:

              	
                01/20/2011

              

      

    

    

    STATE OF
Florida                

    

    COUNTY OF
Broward         

    

    The
foregoing instrument was acknowledge before me this 20th day of January,
2011

    

    By Michael H. Braun            
as  President                                                                 

           (Name of
Person)                         
(Type of Authority – e.g. officer, trustee,
attorney-in-fact)

    for Federated National Insurance
Company.

           (Company
Name)

     

    
      
        
          
            
              
                	 
      	 
      	
                        /s/
      Rebecca L. Campillo

                      
	
                        REBECCA
      L. CAMPILLO

                        MY
      COMMISSION #DD840104

                        EXPIRES:  February
      05, 2013

                        Fl
      Notary Discount Assoc. Co.

                      	 
      	
                        (Signature
      of the Notary)

                      
	 
      	 
      
	 
      	 
      
	 
      	
                        Rebecca
      L. Campillo

                      
	 
      	 
      	
                        (Print,
      Type or Stamp Commissioned Name of
Notary)

                      

              

            

          

        

      

    

    
 

    
       

    

    Personally
Known       X   
OR Produced Identification                      

    

    Type of
Identification Produced                                                             

     

     

    
      
        
        

      

      
        Page 18
of 20

        
          

        

      

      
        
        

      

    

     

     

     

    By
execution hereof, 21ST CENTURY
HOLDING COMPANY consents to  entry, of this
Consent Order, agrees without reservation to all of the above terms and
conditions and shall be bound by all provisions herein. The undersigned
represents that he/she has the authority to bind 21ST CENTURY
HOLDING COMPANY to the terms and conditions of this Consent Order.

    

    
      
        	 
      	
                21ST
      CENTURY HOLDING COMPANY

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                 /s/ Michael H. Braun

              
	 
      	 
      	 
      
	
                [Corporate
      Seal]

              	
                Print
      Name:

              	
                Michael H. Braun

              
	 
      	 
      	 
      
	 
      	
                Title:

              	
                Chief Executive Officer and
      President

              
	 
      	 
      	 
      
	 
      	
                Date:

              	
                01/20/2011

              

      

    

    

    STATE OF
Florida                

    

    COUNTY OF
Broward         

    

    The
foregoing instrument was acknowledge before me this 20th day of January,
2011

    

    By Michael H. Braun          
as  Chief
Executive Officer and President  

           (Name
of
Person)                       (Type
of Authority – e.g. officer, trustee, attorney-in-fact)

    for 21ST
Century Holding
Company.

           (Company
Name)

     

    
      
        
          
            
              
                	 
      	 
      	
                        /s/
      Rebecca L. Campillo

                      
	
                        REBECCA
      L. CAMPILLO

                        MY
      COMMISSION #DD840104

                        EXPIRES:  February
      05, 2013

                        Fl
      Notary Discount Assoc. Co.

                      	 
      	
                        (Signature
      of the Notary)

                      
	 
      	 
      
	 
      	 
      
	 
      	
                        Rebecca
      L. Campillo

                      
	 
      	 
      	
                        (Print,
      Type or Stamp Commissioned Name of
Notary)

                      

              

            

          

        

      

    

     

    
Personally
Known         X   
OR Produced Identification                      

    

    Type of
Identification Produced                                                              

    

    

    
      
        
        

      

      
        Page 19
of 20

        
          

        

      

      
        
        

      

    

    

     

    COPIES
FURNISHED TO:

    

    MICHAEL
H. BRAUN, PRESIDENT

    Federated
National Insurance Company

    American
Vehicle Insurance Company

    3661 W.
Oakland Park Blvd., Suite 300

    Lauderdale
Lakes, Florida 33311-1156

    Email:
Mbraun@tchcusa.com

     

    FRED E.
KARLINSKY, ESQUIRE

    COLODNY,
FASS, TALENFELD, KARLINSKY, ABATE

    One
Financiäl Plaza, 23rd
Floor

    100
Southeast 3rd
Avenue

    Fort
Lauderdale, Florida 33394

    Email:
fkarlinsky@cftlaw.com

    

    LIBBY
THOMSON, FINANCIAL ADMINISTRATOR

    Bureau of
Property & Casualty Financial Oversight

    Office of
Insurance Regulation

    200 East
Gaines Street

    216B
Larson Building

    Tallahassee,
Florida 32399-0329

    Email:
elizabeth.thomson@floir.com

     

    ERNESTO
("ERNIE") DOMONDON,

    FINANCIAL
EXAMINER/ANALYST SUPERVISOR

    Bureau of
Property & Casualty Financial Oversight

    Office of
Insurance Regulation

    Room
212.8, Larson Building

    200 East
Gaines Street

    Tallahassee,
Florida 32399

    E-Mail:
ernie.domondon@floir.com

    

    JASON B.
NELSON, ASSISTANT GENERAL COUNSEL

     Legal
Services Office

    Office of
Insurance Regulation

    200 East
Gaines Street

    Tallahassee,
Florida 32399-4206

    Phone:
(850) 413-4112 Fax: (850) 922-2543

    Email:
Jason.Nelson@floir.com

    

     

     

    Page 20 of
20Exhibit
10.1

       

    

    EXTRAORDINARY
EQUITY VALUE APPRECIATION

    RESTRICTED STOCK GRANT
AGREEMENT

    

    

    THIS AGREEMENT, made as of the
___ day of ____, 20[11] (the “Grant Date”), between MDC
Partners Inc., a Canadian corporation (the “Corporation”), and ________
(the “Grantee”).

    

    WHEREAS, the Corporation has adopted
the 2005 Stock Incentive Plan (as amended, the “Plan”) for the purpose of
providing employees and
consultants of the Corporation and eligible non-employee directors of the
Corporation’s Board of Directors a proprietary interest in pursuing the
long-term growth, profitability and financial success of the
Corporation.  Except as otherwise expressly set forth herein, the
capitalized terms used in this Agreement shall have the same definitions set
forth in the Plan.

    

    WHEREAS, the Human Resources &
Compensation Committee (the “Committee”) of the Board of
Directors has previously determined that it is in the best interests of the
Corporation to make the Extraordinary Equity Value Appreciation Restricted Stock
(“EVARS”) award set
forth herein, given that the Corporation has recently achieved one or more of
the specified stock price targets during calendar years 2011 – 2013 relating to
the EVARS awards.

    

    WHEREAS, pursuant to the Plan, the
Committee has determined to grant an Other Stock-Based Award to the Grantee in
the form of shares of Class A subordinate voting shares, subject to the terms,
conditions and limitations provided herein, including achievement of specified
stock price targets, and in the Plan (the “Restricted
Stock”);

    

    NOW, THEREFORE, the parties hereto
agree as follows:

    

    1.     Grant of
Restricted Stock.

    

    1.1        The
Corporation hereby grants to the Grantee, on the terms and conditions set forth
in this Agreement, the number of shares of Restricted Stock set forth under the
Grantee's name on the signature page hereto and in accordance with Section 1.2
(the “EVARS Stock
Award”).

    

    1.2        The
Grantee's rights with respect to all the shares of Restricted Stock underlying
the EVARS Stock Award shall not vest and will remain forfeitable at all times
prior to the Vesting Date (as defined below).  At any time, reference
to the EVARS Stock Award shall be deemed to be a reference to the Restricted
Shares granted under Section 1.1 that have neither vested nor been forfeited
pursuant to the terms of this Agreement.

    

    1.3        This
Agreement shall be construed in accordance with, and subject to, the terms of
the Plan (the provisions of which are incorporated herein by
reference).

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.     Rights of
Grantee.

    

    Except as otherwise provided in this
Agreement, the Grantee shall be entitled, at all times on and after the Grant
Date, to exercise all rights of a shareholder with respect to the EVARS Stock
Award, including the right to vote the shares of Restricted
Stock.  Prior to the Vesting Date, the Grantee shall not be entitled
to transfer, sell, pledge, hypothecate or assign any portion of the EVARS Stock
Award (collectively, the “Transfer
Restrictions”).

    

    3.     Vesting;
Lapse of Restrictions.

     

    
      3.1        The
Transfer Restrictions with respect to all the shares of Restricted Stock granted
under this Agreement shall lapse on December 31, 2013 (the “Vesting Date”), provided the
Grantee continues to be serving as an employee of the Corporation until such
Vesting Date; provided, further, that the
Transfer Restrictions with respect to all the shares of Restricted Stock shall
lapse, if sooner, on the date of any one of the following “Permitted Acceleration
Events”:  (i) the occurrence of a Change in Control (as defined
in the Plan); (ii) the Grantee’s employment is terminated by the Corporation
(other than for “cause”), or by the employee for “good reason” (as each such
term may be defined in the Grantee’s underlying employment agreement); or (iii)
the Grantee’s death or disability.  In no event shall the Grantee be
vested or otherwise entitled to more than one hundred percent (100%) of the
shares of Restricted Stock granted pursuant to section 1.1 above.

       

      3.2      
 Notwithstanding anything in this Agreement to the contrary, upon the
resignation or termination of Grantee as an executive of the Corporation for
cause (other than due to a Permitted Acceleration Event), all shares of
Restricted Stock in respect of which the Transfer Restrictions have not
previously lapsed in accordance with Section 3.1 hereof shall be forfeited and
automatically transferred to and reacquired by the Corporation at no cost to the
Corporation, and neither the Grantee nor any heirs, executors, administrators or
successors of such Grantee shall thereafter have any right or interest in such
shares of Restricted Stock.

       

      3.3         For
purposes of the foregoing, the following terms shall have the following
meanings:

       

      (a)           “Cause”
means the Grantee’s termination by reason of (i) his/her continued or willful failure
substantially to perform his/her duties for the Corporation, (ii) his/her
willful and serious misconduct in connection with the performance of his/her
duties for the Corporation, (iii) the Grantee’s conviction of, or entering a
plea of guilty or nolo contendere to, a crime that constitutes a felony
or a crime involving moral turpitude, (iv) his/her fraudulent or dishonest
conduct or (v) his/her material breach of any of his/her obligations or
covenants under any written policies of the Corporation or any written agreement
between such Grantee and the Corporation; provided that if, as
of the date of determination, the Grantee is a party to an effective employment
agreement with a different definition of “Cause”, the definition of “Cause” contained in
such employment agreement shall be substituted for the definition set forth
above for all purposes hereunder.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (b)           “Change
in Control” shall have the
meaning set forth in Section 2(b) of the Plan, provided that the reference to
“twenty-five percent (25%) or more of the combined voting power of MDC's
then outstanding voting securities” in Section 2(b)(i) of the Plan shall,
for purposes of this the EVARS Stock Award, be amended to read “fifty
percent (50%) or more of the combined voting power of MDC's then outstanding
voting securities”; and, provided
further, that the reference in Section 2(b)(iii)(A)(III)(3) to “twenty five
percent (25%) or more of the combined voting power of the Surviving
Corporation’s voting securities outstanding immediately following such
transaction” shall, for purposes of this the EVARS Stock Award, be amended to
read “fifty percent (50%) or more of the combined voting power of the Surviving
Corporation’s voting securities outstanding immediately following such
transaction”.

       

      (c)           “Disability” shall mean a mental or
physical condition of the Grantee rendering him unable to perform his/her duties
for the Corporation for a period of six (6) consecutive months or for 180 days
within any consecutive 365-day period and which is reasonably expected to
continue indefinitely; provided that if, as
of the date of determination, the Grantee is a party to an effective employment
agreement with a different definition of “Disability” or any derivation of such
term, the definition of
“Disability” (or its derivation) contained in such employment agreement shall be
substituted for the definition set forth above for all purposes
hereunder.

    

    

    4.     Escrow
and Delivery of Shares.

    

    4.1        Certificates
(or an electronic "book entry" on the books of the Corporation's stock transfer
agent) representing the shares of Restricted Stock shall be issued and held by
the Corporation (or its stock transfer agent) in escrow (together with any stock
transfer powers which the Corporation may request of Grantee) and shall remain
in the custody of the Corporation (or its stock transfer agent) until (i) their
delivery to the Grantee as set forth in Section 4.2 hereof, or (ii) their
forfeiture and transfer to the Corporation as set forth in Section 3.2 hereof.
The appointment of an independent escrow agent shall not be
required.

    

    4.2          (a)           Certificates
(or an electronic "book entry") representing those shares of Restricted Stock in
respect of which the Transfer Restrictions have lapsed pursuant to Section 3.1
hereof shall be delivered to the Grantee as soon as practicable following the
Vesting Date.

    

    (b)           The
Grantee, or the executors or administrators of the Grantee's estate, as the case
may be, may receive, hold, sell or otherwise dispose of those shares of
Restricted Stock delivered to him or her pursuant to this Section 4.2 free and
clear of the Transfer Restrictions, but subject to compliance with all federal
and state securities laws.

    

    4.3          (a)           Each
stock certificate issued pursuant to Section 4.1 shall bear a legend in
substantially the following form:

    

    THIS
CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS
AND CONDITIONS APPLICABLE TO RESTRICTED STOCK CONTAINED IN THE 2005 STOCK
INCENTIVE PLAN (THE "PLAN") AND A RESTRICTED STOCK AGREEMENT (THE "AGREEMENT")
BETWEEN THE CORPORATION AND THE REGISTERED OWNER OF THE SHARES REPRESENTED
HEREBY. RELEASE FROM SUCH TERMS AND CONDITIONS SHALL BE MADE ONLY IN ACCORDANCE
WITH THE PROVISIONS OF THE PLAN(S) AND THE AGREEMENT, COPIES OF WHICH ARE ON
FILE IN THE OFFICE OF THE SECRETARY OF THE CORPORATION.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (b)           As
soon as practicable following a Vesting Date, the Corporation shall issue a new
certificate (or electronic "book entry") for shares of the Restricted Stock
which have become non-forfeitable in relation to such Vesting Date, which new
certificate (or electronic "book entry") shall not bear the legend set forth in
paragraph (a) of this Section 4.3 and shall be delivered in accordance with
Section 4.2 hereof.

    

    5.      Dividends.  All
dividends declared and paid by the Corporation on shares underlying the EVARS
Stock Award shall be deferred until the lapsing of the Transfer Restrictions
pursuant to Section 3.1 and shall be distributed only to the extent the
underlying shares of Restricted Stock vest and are distributed in accordance
with Section 3.  The deferred dividends shall be held by the
Corporation for the account of the Grantee until the Vesting Date, at which time
the dividends, with no interest thereon, shall be paid to the Grantee or her/his
estate, as the case may be.  Upon the forfeiture of the shares of
Restricted Stock pursuant to Section 3, any deferred dividends shall also be
forfeited to the Corporation.

    

    6.      No Right
to Continued Retention.  Nothing in this Agreement or the Plan
shall be interpreted or construed to confer upon the Grantee any right with
respect to continuance as an employee, nor shall this Agreement or the Plan
interfere in any way with the right of the Corporation to terminate the
Grantee's service as an employee at any time.

    

    7.     Adjustments
Upon Change in Capitalization.  If, by operation of Section 10
of the Plan, the Grantee shall be entitled to new, additional or different
shares of stock or securities of the Corporation or any successor corporation or
entity or other property, such new, additional or different shares or other
property shall thereupon be subject to all of the conditions and restrictions
which were applicable to the shares of Restricted Stock immediately prior to the
event and/or transaction that gave rise to the operation of Section 10 of the
Plan.

    

    8.      Modification
of Agreement.  Except as set forth in the Plan and herein, this
Agreement may be modified, amended, suspended or terminated, and any terms or
conditions may be waived, but only by a written instrument executed by the
parties hereto.

    

    9.     Severability.  Should
any provision of this Agreement be held by a court of competent jurisdiction to
be unenforceable or invalid for any reason, the remaining provisions of this
Agreement shall not be affected by such holding and shall continue in full force
and effect in accordance with their terms.

    

    10.   Governing
Law.  The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of New
York without regard to its conflict of laws principle, except to the extent that
the application of New York law would result in a violation of the Canadian
Business Corporation Act.

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    *                           *                         *

    

    11.   Successors
in Interest.  This Agreement shall inure to the benefit of and
be binding upon any successor to the Corporation.  This Agreement
shall inure to the benefit of the Grantee's heirs, executors, administrators and
successors.  All obligations imposed upon the Grantee and all rights
granted to the Corporation under this Agreement shall be binding upon the
Grantee's heirs, executors, administrators and successors.

    

    

    MDC
PARTNERS INC.

    

    
      
        
          	
                  By:

                	 
      	 

        

      

    

    Name:   Michael
Sabatino

    Title:     Chief
Accounting Officer

    

    

    MDC
PARTNERS INC.

     

    
      
        	
                By:

              	  
      	 

      
Name:  Mitchell
Gendel

    Title:    General
Counsel

    

    

    GRANTEE:  _________________

     

    
      	
              By:

            	 
      	 

    

    Name:

    

    

    Number
of Shares of Restricted

    Stock
Hereby Granted:  ___

     

     

     

    
      
        
        

      

      
        5

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