Document:

exhibit109-sagesureinsur

                             ADMINISTRATOR AGREEMENT         This Administrator Agreement (the “Agreement”) is effective as of July 1, 2013, between Federated National  Insurance  Company  (the  “Company”) and SageSure Insurance  Managers  LLC (the  “Administrator”).  Capitalized  terms not specifically defined herein have the meanings ascribed to them in Section 25 of this Agreement.         NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby  acknowledged, the Company and the Administrator hereby agree as follows:      1. Authority         In carrying out the business contemplated under this Agreement, the Administrator agrees and is hereby        authorized:         (A) To procure and evaluate applications for insurance of the type set forth in Exhibit A to this Agreement.        (B) To underwrite risks and determine appropriate premiums for insurance policies of the type set forth in            Exhibit A (the “Underwriting Guidelines”) and in accordance with applicable laws and regulations.        (C) To negotiate, quote, bind, arrange for countersignature of and deliver such policies, endorsements,            certificates, binders, and related filings, if any, pursuant to this Agreement, the Underwriting Guidelines            and applicable laws and regulations.        (D) To have only the “Authorized Representatives” of the Company identified in Exhibit A to this Agreement            sign policies, endorsements, certificates, binders, and related filings, if any, for insurance coverage            issued pursuant to this Agreement.        (E) To process cancellation and non-renewal of policies as directed by the Company in accordance with            applicable laws, regulations and the Underwriting Guidelines.                In  addition,  and  subject  to  the  restrictions  on  authority  contained  elsewhere  in  this  Agreement,  the        Administrator shall have the required incidental authority necessary to fulfill its obligations hereunder, and        such additional authority that may be extended by the Company in writing.      _______________________    Certain identified information has been omitted from this exhibit because it is not material and would be  competitively harmful if publicly disclosed.  Redactions are indicated by [***].    1  AM 20767075.1  

 

   2. Restrictions on Authority         The Administrator further agrees that:         (A) The Administrator shall not underwrite risks for insurance policies other than as prescribed in Exhibit            A, unless the Administrator requests and receives prior written approval from the Company for such            risks. Any approval granted by the Company is limited to the specific risks for which approval has been            sought unless expressly noted in writing otherwise by the Company.        (B) The Administrator understands and agrees that there will be no deviation from filed and approved forms            and  shall  not  waive  any  condition  or  make  any  change  to  the Company’s  insurance  policies,            endorsements or applications without the Company’s prior written consent.  In addition, as applicable            to statutory requirements, if the Administrator determines that any policy requires the manuscripting of            a  new  policy  form  or  coverage  part,  the  Administrator  shall  notify  the  Company  of  such  need  or            requirement as soon as practicable.        (C) The Administrator shall not, without the Company’s prior written consent pursuant to 1.D, (i) appoint            insurance producers or sub-insurance producers to bind insurance coverage or countersign policies            on behalf of the Company, or (ii) make any other agreement rendering the Company liable for the            payment or repayment of expenses, commissions or other sums.        (D) The Administrator shall not negotiate, solicit, quote, bind, arrange for countersignature of or deliver on            behalf of the Company policies, endorsements, certificates or binders in any jurisdiction or territory,            unless otherwise authorized in writing to do so by the Company.        (E) The Administrator shall not negotiate or bind ceded or assumed reinsurance or retrocessions of any            kind on behalf of the Company or commit the Company to participate in insurance or reinsurance            syndicates, pools, agency reinsurance arrangements or joint ventures of any nature.        (F) The Administrator shall not adjust, compromise or settle claims on the Company’s behalf.        (G) The Administrator is bound by separate agreement titled Federated National Insurance Company Logo            Usage Agreement         (H) The Administrator shall not charge any broker fees or service fees without express written authorization            from the Company, other than the fees listed in filed and approved Company rates.        (I) Administrator  will  work  cooperatively  with  Company  to  make  any  adjustments  to  Underwriting            Guidelines as mutually agreed.  Should Company require changes to Underwriting Guidelines that it            determines in its sole discretion, Company will provide written notice as follows:                a. For changes  reducing  eligible  policies  by  less than 5%  (as  calculated based on  prior 12                   months of new business policies for each affected state(s)) – 60 days written notice  2  AM 20767075.1  

 

              b. For changes reducing eligible policies by more than 5% (as calculated based on prior 12                   months  of  new  business  policies  for  each  affected  state(s))  either  in  a  single  change  or                   multiple changes that result in more than 5% – 180 days written notice                c. For  changes  in  catastrophe  modeling  versions  yielding  a  1:100  return  time  Probable                   Maximum Loss (“PML”) greater than 15% - 90 days written notice                d. For changes in the reinsurance rate on line costs greater than 15% - 90 days written notice                e. After the first twelve months of operations, if, in any six-month reporting period, the ratio of                   Incurred Losses to Gross Earned Premiums (the “Loss Ratio” as defined by loss and loss                   adjustment expense both paid and reserved divided by gross earned premium for the same                   period) exceeds fifty percent (50%), with 10 days written notice to Administrator, Company                   shall have the right to take reasonable action to reduce said Loss Ratio. Such actions could                   include the immediate suspension of writing new and or renewal business in territory under                   review or, any reasonable action the Company or its unaffiliated reinsurers deem necessary                   to reduce the Loss Ratio. Such actions shall remain in place until the loss ratio for subsequent                   rolling six-month periods falls below 50% (or at any time Administrator and Company mutually                   agree in writing), at which time Company will be obligated to remove such restrictions.                  f. For declines greater than 10% in the Company’s statutory surplus from quarter to quarter and                   year to year as filed in connection with NAIC filing requirements – 90 days written notice.                g.  For  any  diminished  or  exhausted  reinsurance  capacity  used  in  connection  with  policies                   written under this agreement such as facultative, excess of loss, or quota share treaties.       3. Warranties, Representations and Covenants         The Administrator warrants, represents, and covenants:         (A) That:  (i)  the  Administrator  has  all  licenses  necessary  to  conduct  the  business  described  in  this            Agreement, and (ii) the Administrator shall maintain during the term of this Agreement and for the            period of time during which it has continuing obligations under this Agreement all licenses necessary            to conduct the business described in this Agreement.  In the event that any such license held by            Administrator or its Authorized Representatives expires or terminates, for any reason, the Administrator            shall immediately notify the Company and such Authorized Representative shall not be authorized to            exercise any authority granted herein in any state or states in which the license has been lost as of the            date  of  such  license(s)  expiration  or  termination.  In  the  event  that  any  such  license held  by  the            Administrator expires or terminates,  for any  reason,  the  Administrator shall  immediately notify  the  3  AM 20767075.1  

 

          Company and this Agreement shall be immediately suspended in the applicable state or states as of            the date of such license(s) expiration or termination, unless within one week from the date the Company            receives written notice of the license expiration or termination from the Administrator, the Company            agrees, in writing, to modify the provisions set forth herein.  However, nothing in this section shall affect            the Administrator’s obligation to perform any obligation under this Agreement for which a license is not            required.        (B) That the Administrator shall operate at all times in compliance with this Agreement and the Exhibits            attached hereto and with all applicable laws and regulations.  The Administrator agrees that it is its            responsibility to know and comply with the laws and regulations applicable to it under this Agreement            and  the  business  contemplated  hereunder,  including,  but  not  limited  to:  (i)  laws  and  regulations            regarding notices to insureds and prospective insureds; (ii) applicable unfair trade laws and regulations;            and (iii) record retention laws and regulations.        (C) That the Administrator shall maintain at its own cost and expense, for the term of this Agreement and            for the period of time during which it has continuing obligations under this Agreement, an insurance            policy (policies) covering errors and omissions in the amount of $5,000,000 with an insurer acceptable            to the Company (a copy of which has been provided to the Company prior to the execution of this            Agreement) and obtain from the policy issuing insurer an original certificate of insurance addressed to            (and which shall be forwarded to) the Company.        (D) That within forty-five (45) days after the execution of this Agreement, the Administrator shall provide            the Company with evidence of fidelity bond in the amount of at least $500,000.  Such bond shall, for            the duration of this Agreement and the period in which the Administrator has any continuing obligations            hereunder, contain such terms as are reasonably satisfactory to the Company.        (E) That  the  Administrator  now  has  and  shall  maintain  for  the  duration  of  its  obligations  under  this            Agreement a licensed staff consisting of an adequate number of competent and trained personnel who            have  the  underwriting  expertise  to  select,  underwrite,  and  price  the  business  covered  by  this            Agreement.        (F) That  the  Administrator shall maintain  a  staff  consisting  of an adequate number of  competent  and            trained  personnel,  including  computer  support  personnel,  such  supplies  and  equipment,  including            computer hardware and software, and such procedures as are necessary to administer and supervise            all aspects of the business covered by this Agreement, including but not limited to the servicing of            policies and the billing and collection of premium due from policyholders, Authorized Representatives            and sub-insurance producers.    4  AM 20767075.1  

 

   4. Additional Duties of the Administrator         The Administrator also agrees:         (A) To collect, receive and account for premiums on insurance policies issued pursuant to this Agreement.        (B) That all bank account, lock box, credit card and ACH fees shall be paid by the Administrator. The            Administrator shall receive all billing setup and installment fees to offset the cost of these charges.        (C) That the Administrator shall be responsible to ensure that its operations and the business produced            complies with all applicable laws and regulations.  Without limiting the foregoing, the Administrator            agrees that it shall cooperate with the Company or its designated representative to ensure that the            business produced is in compliance with underwriting loss control requirements as specified in writing            by the Company.  In the event the performance of any duty or obligation of the Administrator herein            would constitute the unauthorized practice of insurance by the Company in an applicable jurisdiction,            the  Administrator  shall  immediately  notify  the  Company  and  this  Agreement  shall  be  immediately            suspended or modified in such jurisdiction.  If such a suspension shall frustrate the purposes of this            Agreement, the Agreement shall terminate unless the parties agree to amend this Agreement so that            the performance by the Administrator does not constitute the unauthorized practice of insurance by the            Company.        (D) That the Administrator shall ensure, according to applicable law that sub-insurance producers are            properly licensed.        (E) That, except as otherwise expressly noted herein or as agreed to by the Company in writing, that the            Administrator  shall  be  responsible  for  costs,  fees  and  expenses  incurred  in  connection  with  the            production of business hereunder, excluding any expenses requested by the Company which are not            required by statute or regulation. Sub-producers of Administrator act as a broker for the policyholder            and are generally not required to be appointed as agent of Company.  However, certain state insurance            laws do require sub-producers of Administrator acting as broker for policyholder to be appointed by            Company.  Administrator shall be responsible for sub-producer licensing and appointment expenses            in  those  states  that  require  sub-producers  of  Administrator  acting  as  broker  of  policyholder  to  be            appointed. Company has the right to appoint any sub-producer of Administrator at the Company’s own            expense.        (F) That  the  Administrator  shall  comply  with  reasonable  instructions  or  directions  received  from  the            Company.        (G) That the Administrator shall maintain updated manuals for all lines of business to which this Agreement            now or hereinafter applies if necessary;  5  AM 20767075.1  

 

      (H) That if the Administrator cancels or non-renews policies as directed by the Company in accordance            with applicable laws, regulations and the Underwriting Guidelines, that the Administrator shall retain            copies of any notices (and original proofs of mailing of same) sent to policyholders to effect such            cancellation or non-renewal and shall make copies of the notices and the original proofs of mailing            available to the Company upon request.        (I) With regard to claims against the Company under policies written pursuant to this Agreement, that the            Administrator shall promptly report such claims to the Company and/or the claim administrator selected            by the Company as the claim administrator for the business produced under this Agreement.  The            Administrator shall assist and cooperate with the Company or its designee in the investigation and            handling of claims (including, but not limited to, the Company’s related salvage and subrogation efforts            and claims against others for indemnification) as the Company may from time to time request; and with            regard to any other claims against the Company of which the Administrator receives written notice or            otherwise becomes aware, to promptly report such claims to the Company.        (J) Unless  otherwise  required by  law or regulations, that the Administrator shall  refer state  insurance            department  contacts,  requests  or  inquiries  regarding  matters  relating  to  business  subject  to  this            Agreement, including requests for access to or copying of records, to the Company.  In the event of            any such contacts, requests or inquiries, the Administrator shall promptly notify the Company of the            contact.  In addition to the obligations specified above, unless prohibited by law or regulation, the            Administrator  shall  promptly  notify  the  Company  of  any  contact,  request  or  inquiry  by  any  other            governmental official or agency regarding matters relating to business subject to this Agreement. The            Administrator  (to  the  extent  possible)  will  prepare  responses  to  regulatory  questions  arising  from            activities relating to this Agreement and submit them to the Company for approval prior to the Company            filing response with respective authorities. The Administrator will cooperate with the Company in the            resolution of any complaints or inquiries by a governmental agency.        (K) To keep accurate, complete and separate, written records of all transactions affecting business written            on behalf of the Company under this Agreement and to file all necessary affidavits and reports as may            be  required  by  applicable  laws  and  regulations.   Without  limiting  the  foregoing,  the  Administrator            agrees, at a minimum to maintain copies of all policy forms, rate exhibits, rules and manuals supplied            by the Company. The Administrator shall also maintain policy records and shall account for all policies            furnished or supplied to the Company.  The underwriting files to be maintained by the Administrator            shall at a minimum consist of a policy application, policies issued, and proof of mailing for all notices            required by law or regulation, including but not limited to cancellation and non-renewal notices.   6  AM 20767075.1  

 

      (L) That the separate records (whether in paper or electronic form) of business for the Company must be            maintained by the Administrator for the greater of: (i) seven (7) years from the termination of the policy            to which the record relates; or (ii) the length of time required by applicable law or regulation.  Before            the  Administrator  destroys  or  discards  any  of  such  records,  the  Administrator  agrees  to  give  the            Company 60 days written notice of its intention to do so.  If during that 60 day period the Company            expresses the desire to maintain such files, the Administrator shall, at Company’s expense, send or            deliver such files to the location directed by Company.         (M) In the event this Agreement is terminated by either party, the Administrator shall maintain the records            in accordance with the preceding paragraph, and in the event that the Company requests duplicate            copies of the records, the Administrator shall provide duplicates to the Company at the Company’s            expense. Also, in the event of an examination by any governmental authority which regulates the            Company,  Administrator  agrees to  cooperate  with  the  Company  during  any  such  examination,            inspection and/or audit and agrees that it shall make any and all files available to such regulatory            authority at the time and place the Company specifies.  In the event duplicate files need to be shipped,            the Company shall bear the cost of duplicating and shipping such files.  The Administrator shall certify            that the duplicate files provided for review by the regulatory authority are true and complete copies of            the original files.        (N) That the records maintained relating to business produced under this Agreement are jointly owned by            the Company and the Administrator. Accordingly, all books, papers and records relating to the business            of  the  Company  under  this  Agreement  or  any  other  agreement  related  thereto,  shall  be  open  for            inspection  or  copying  by  duly  authorized  representatives  of  the  Company  at  all  times  during  the            continuance of this Agreement and any policies issued hereunder, and for the duration of the records            retention requirements hereunder and shall survive the suspension or termination of this Agreement.             Subject to sub-paragraph (K) above, the right of access and copying shall also be available to any            state commissioner, director or superintendent of Insurance, or their designees, with jurisdiction over            the Company.  Further, the Administrator and the Company agree that they will not deprive or impede            the other party’s rights under this paragraph due to the existence of a dispute or disagreement between            the parties.  The Administrator agrees that its failure to fully comply with this paragraph: (i) could cause            serious  and  irreparable  harm  to  the  Company,  and  (ii)  serves  as  adequate  justification  for  the            Company’s seeking and obtaining an ex parte court order or injunction permitting the Company (or its            duly  authorized  representatives)  access  to  such  records  for  immediate  removal or  copying  at  the            Administrator’s offices or at some other location approved by the court issuing the order or injunction.    7  AM 20767075.1  

 

          If copying of the records is authorized, the Administrator agrees to reimburse the company for all costs            and expenses incurred in copying the records.        (O) That the Administrator shall provide copies of any and all policies, endorsements, or other evidences            of insurance to the Company upon request.        (P) That the Administrator shall provide, where permitted by law, written notice to the Company, of any            proposed  or  completed  sale,  transfer,  merger,  consolidation  or  reorganization  involving  (i)  the            Administrator, (ii) a controlling interest in the Administrator, (iii) any company that has a controlling            interest in the Administrator, or (iv) involving a majority of its assets. However, in no event shall such            written notice be given later than the date of any public announcement of: (a) the proposed transaction            or change, or (b) the execution of an agreement concerning the proposed transaction or change.        (Q) That the Administrator shall not take any actions to impede or interfere with the Company’s rights and            ability to recover from third parties, whether any such right of recovery is based in tort or contract.        (R) That  the Administrator shall perform  all  duties  imposed  upon  it under any  reinsurance  agreement            applicable to the business authorized herein, copies of which shall be provided to the Administrator.             The Company agrees to advise the Administrator of any such duties prior to the effective date of any            proposed reinsurance and the Administrator shall be entitled to additional reasonable compensation to            be negotiated between the parties, and approved in writing by the Company, if such duties impose            material additional costs or duties upon the Administrator.        (S) To perform its duties hereunder in accordance with the applicable laws and regulations.        (T) That  the  Administrator  shall  maintain  workers’  compensation  insurance  for  its  employees  in            accordance with applicable laws and regulations.        (U) That, to the extent the Administrator engages in any premium finance transactions, which require the            prior written approval of the Company, the Administrator (i) shall do so in accordance with all applicable            laws and regulations and (ii) does so solely on its own account and at its own risk.  The Administrator            shall be solely liable for any extensions of credit of premium or premium financing to policyholders or            sub-insurance producers and for the full amount of any premiums due to the Company on policies            written under this Agreement regardless of whether the Administrator has collected the premium due            from the policyholder or the sub-producer.        (V) That, in addition to any reports contemplated by this Agreement, the Administrator shall provide the            Company with such additional written reports as the Company may reasonably request from time to            time including, without limitation, the reports set forth in Exhibit C.        (W) That the Administrator shall submit to the Company a business plan that includes a 3 year operational            pro forma by state and agrees to update the pro forma from time to time as requested by the Company.  8  AM 20767075.1  

 

      (X) That the Administrator shall prepare or cause to prepare, all such necessary policy forms, rate exhibits            and associated rules and manuals as may be required by such regulatory authorities for the business            subject to this Agreement in fillable formats for the applicable statutory authority and sufficient to gain            statutory approval.        (Y) That the Administrator shall provide its Decision Support Services at no additional cost.                 5. Company Duties        (A) The Company shall pay all premium taxes, board fees and other taxes on premiums incident to policies            written by the Administrator for business subject to this Agreement on behalf of the Company.  The            Company shall file for approval with State Insurance Departments: all policy forms, rate exhibits and            associated rules and manuals as may be required by such regulatory authorities for the business            subject to this Agreement or provide Administrator with necessary authority to file rates and forms on            behalf  of  Company.   The  Company  shall  provide  the  Administrator  with  a  list  of  such  approved            documents and copies of such documents unless the documents are contained in the manuals and            other documents the Administrator is required to maintain under this Agreement.        (B) Company shall work cooperatively with Administrator to file rates and forms in the states of Louisiana,            Georgia and Alabama within 5 business days of delivery of final rates and forms by Administrator or            provide Administrator with necessary authority to file rates and forms on behalf of Company.        (C) The Company shall notify the Administrator in a timely manner of any changes to its rates, rules and            forms applicable to insurance subject to this Agreement as ordered by regulatory authority.        (D) The Company shall maintain at least an “A” rating by Demotech.        (E) The Company shall perform all other duties and obligations of the Company required elsewhere in this            Agreement        (F) The Company will maintain affiliation with ISO and other bureaus as needed to provide forms and            access to information needed for compliance with filed manual, rates and forms.         (G) Each year in which premium is earned from policies bound under the terms of this Agreement, the            Company shall provide the Administrator with the following information:  (i) within 30 days following the            Company’s  annual  reinsurance  placement  for  policies  subject  to  this  Agreement,  the  deemed  (or            actual) program reinsurance structure and associated costs; (ii) within 75 days following December 31,            details for profit sharing (as set forth in Exhibit B), including the Actual Gross Earned Premiums, Actual            Ceded Premiums for Excess-of-Loss and Per Risk Reinsurance, Actual Incurred Losses and ALAE            excluding any Bulk Reserves, Actual Recoveries from Excess-of-Loss Reinsurance, Actual Recoveries            from Per Risk Reinsurance, and Actual Booked Taxes, Licenses and Fees (as such terms are used in  9  AM 20767075.1  

 

          Exhibit B).  Each year this Agreement is in effect, the Company shall remit any profit sharing payment            due to the Administrator in accordance with Exhibit B within 15 days of receipt of final calculation.        (H) Neither the Company nor any of its affiliates shall accept any applications for policies authorized in            Exhibit A or available in rates and forms created by Administrator unless submitted by the Administrator            or its affiliates.  If the Company or its affiliates accepts any applications for policies from any other            producers, instead of through the Administrator or in any other manner circumvents the intent of this            paragraph, then the Administrator shall still receive compensation from the Company in accordance            with Exhibit B as if the policies were produced by the Administrator.  This paragraph shall survive the            termination of  this Agreement  for a  period  of  3  years unless  this Agreement  is terminated  by  the            Company, or there is an automatic termination due to some act or failure to act by the Administrator,            pursuant to paragraph 10.C or 10.D, in which case this paragraph will survive for a period of 90 days.        (I) The Company shall make best efforts to gain admission into the remaining states as noted on Exhibit            A (2). It is understood that there are no guarantees that the Company will succeed with its application            process, despite the Company’s best efforts to gain the necessary regulatory approval for admission            in those state where the Company is not currently admitted. Administrator agrees to hold the Company            harmless for failure to obtain and / or maintain regulatory approval.                  6. Payment and Accounting Responsibilities        (A) Premiums and all other funds collected by the Administrator will be held, in a fiduciary capacity as            trustee for Company until delivered to Company. All premiums, net of (i) Commission, (ii) policy fees            and inspection fees, and (iii) set up and installment fees on payment plans, collected by Administrator            with respect to the Policies are the property of Company. The Company and Administrator shall agree            to designate the bank account in such a manner as to clearly establish that Administrator is holding            and acting as fiduciary for Company with respect to the funds in the account.  The premiums received            by Administrator shall  be  kept  in  a  fiduciary  bank  account  in  a  financial  institution  selected  by            Administrator (“Program Bank Account”) provided, however, that: (a) said institution must be a member            of the Federal Reserve System; (b) Administrator’s fiduciary account therein must be insured by the            Federal Deposit Insurance Corporation (c) The Program Bank Account has on line banking capacity            sufficient  to  allow  both  Company  and  Administrator  secured  on-line  access.  Company  authorizes            Administrator to retain the interest income earned on the premiums held by Administrator prior to the            due date for payment to Company.  Administrator must segregate and shall not commingle premiums            collected on behalf of Company with other fiduciary funds received by Administrator in the operation of            its business. Company will have access during ordinary business hours to such books and records as  10  AM 20767075.1  

 

          they pertain to Company’s premiums.  All expenses relating to the fiduciary account described herein            shall be borne solely by Administrator. Company authorizes Administrator, to the extent permitted by            applicable law, to charge and retain billing fees with respect to Policies billed on an installment basis.         (B) The Administrator shall prepare and submit to the Company within ten (10) days after the end of each            month a bordereau report showing all premiums, policy fees, inspection fees, Surcharges, amounts            written, earned and collected; and details of all compensation due to Administrator. The Administrator            shall also provide the Company with such other information that it may reasonably require to satisfy its            own internal reporting requirements as outlined in Exhibit C and any reporting requirements for the            applicable reinsurer.          (C) The  Administrator  will  transfer  money  to  the  Company  30  days  after  the  end  of  each  month that            represents premiums collected less amounts due to Administrator as detailed in Exhibit B.        (D) The Administrator shall only have the authority to prepare online transfers against the Program Bank            Account, for the following purposes:               a. Payment  of  monies  due insureds  in  connection  with  return  premiums  and  endorsements                  relating to insurance produced under this Agreement;               b. Refund of monies received in account for policies related to other insurance carriers;               c. Payments of amounts due the Administrator in accordance with Exhibit B of this Agreement                  from the Program Bank Account; including for interest earned by the Program Bank Account;                  and                d. Payments to the Company.            Consistent with the Administrator’s reporting obligations under this Agreement, the Administrator shall            furnish supporting documentation for all transfers from the Program Bank Account.         (E) The Administrator shall be liable to the Company for any and all premiums due on insurance produced            under this Agreement, including amounts that are still in transit to the Program Bank Account. The            Administrator shall report monthly to the Company any earned premiums that were uncollectible from            policyholders. The Administrator is responsible to pay the Company for any uncollected premiums            exceeding 90 days old under this Agreement, except for uncollected premium caused by any action            taken by Company or state regulatory authority preventing Administrator from collecting premium in            the normal course of business.              7. Administrator’s Status         The Administrator and the Company further agree that:   11  AM 20767075.1  

 

      (A) The Administrator is an independent contractor, not an employee of the Company, and has exclusive            control over its time, the conduct of its operations and the selection of the companies with which it does            business.  Neither the term “Administrator” nor anything contained in this Agreement shall be construed            as creating an employer/employee relationship between the Company and the Administrator, nor shall            the Administrator be authorized to act on behalf of the Company except as expressly authorized in this            Agreement.   Neither party to  this Agreement  shall  solicit  an  individual for  employment  while  such            individual is employed with the other party.        (B) Except as otherwise provided in this Agreement, the Administrator shall be responsible for all expenses            incurred in producing the business authorized and in fulfilling its obligations under this Agreement            unless the Company agrees otherwise in writing.                 8. Indemnification        (A) The Administrator, its  successors and assigns agree to indemnify and hold the Company harmless            against all liability including but not limited to damages, losses, fines, penalties (including, but not            limited to, market conduct fines, penalties or assessments issued by governmental authorities, but            excluding consequential and punitive damages), and reasonable costs and expenses of whatsoever            kind, including but not limited to fees and disbursements of counsel, which the Company is or may be            held liable to pay arising out of: (i) the Administrator’s failure to comply with the terms of this Agreement;            and/or (ii) the willful or negligent acts or omissions of the Administrator, its employees and/or its agents            or assigns.  The Administrator shall also indemnify the Company against all such liability occasioned            by the actions of any of the Authorized Representatives or any countersignature agents appointed at            its behest or pursuant to its recommendation.  The Company agrees that conditions precedent to such            indemnification, are: (a) the Company’s prompt notification to the Administrator of any claim or suit            against  the  Company  regarding  business  written  under  this  Agreement  and/or  any  matters  which            appear reasonably likely to involve acts or omissions discussed in this sub-paragraph except to the            extent any delay does not have a material adverse affect on the Administrator’s ability to handle such            claim or suit; (b) the Company’s cooperation with the Administrator in handling such claim or suit; and            (c) the Company allowing and assisting the Administrator in making such investigations or defending            such matters as the Administrator in its reasonable discretion deems prudent.        (B) The Company agrees to indemnify and hold the Administrator harmless against all liability including            but not limited to damages, losses, fines, penalties (excluding consequential and punitive damages)            and  reasonable  costs  and  expenses  of  whatsoever  kind  including  but  not  limited  to  fees  and            disbursements of counsel, which the Administrator is or may be held liable to pay arising out of:  (i) the  12  AM 20767075.1  

 

          willful or negligent acts or omissions of the Company; (ii) the Company’s failure to comply with the            terms  of  this  Agreement;  and/or  (iii)  any  act  or  omission  of  the  Administrator  based  solely  or  in            substantial part upon procedures prescribed by the Company pursuant to this Agreement or upon            direction or instruction by the Company during the period that this Agreement shall be in force and            effect, including the period in which Administrator may have any continuing obligations hereunder.  The            Administrator agrees that conditions precedent to such indemnification, are: (a) the Administrator’s            prompt notification to the Company of any claim or suit against the Administrator regarding business            written under this Agreement and/or any matters which appear reasonably likely to involve acts or            omissions discussed in this sub-paragraph except to the extent any delay does not have a material            adverse effect on the Company’s ability to handle such claim or suit; (b) the Administrator’s cooperation            with the Company in handling such claim or suit; and (c) the Administrator allowing and assisting the            Company in making such investigations or defending such matters as the Company in its reasonable            discretion deems prudent.                 9. Commission         The Administrator and the Company agree that:         (A) The commission, fees and profit sharing payments to be paid by the Company to the Administrator for            business produced by the Administrator under this Agreement shall be as set forth in Exhibit B of this            Agreement.  For purposes of computing commissions, the rates set forth in Exhibit B shall be applied            to the relevant final gross written premium.  For the purposes of this Agreement, the term “final gross            written premium” shall mean the final written premium, exclusive of fees and Surcharges, charged for            each policy written hereunder.        (B) The commission, policy fees, inspection fees, setup and installment fees, interest, and profit sharing            payments set forth in Exhibit B shall be the sole remuneration paid to the Administrator.             10. Termination and Suspension         The Administrator and the Company further agree that:         (A) The authorization of the Administrator to write any one or more of the classes of insurance authorized            to be written pursuant to this Agreement, may be terminated: (i) by mutual consent of the parties to            this Agreement at any time; (ii) by either party giving written notice to the other party, which written            notice must be received at least 360 days prior to the effective date of termination; (iii) by the Company  13  AM 20767075.1  

 

          upon 60 days written notice to the Administrator in the event that any legislation or regulation has a            materially adverse effect on the ability of the Company and the Administrator (as may reasonably be            determined by the Company or the Administrator in its sole discretion) to carry out the purposes of this            Agreement; or (iv) by the Company, in its sole discretion, upon 60 days written notice to Administrator            upon a “Change in Control” of the Administrator.  For purposes of this Agreement, a Change of Control            of the Administrator shall be deemed to have occurred at such time as: (a) any sale, lease, exchange            or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets            of the Administrator; or (b) Andrew DiLoreto and Terrence McLean are no longer directly or directly            affiliated (as owners, managers or otherwise) with Administrator; or (c) a plan of liquidation of the            Administrator  or  an  agreement  for  the  sale  or  liquidation  of  the  Administrator  is  approved  and            completed.        (B) The authorization of the Administrator to write new business in any one or more of the classes of            insurance authorized to be written pursuant to this Agreement may be suspended by the Company            upon 90 days written notice to the Administrator in the event of (i) a 15% or more increase in the 1:100            PML, (ii) a 15% or more increase for the reinsurance rate on line costs in any territory where premiums            are written subject to this Agreement, (iii) the Company’s statutory surplus to policyholders decreases            by more than 10% in any one quarter or year, (iv) any material loss of reinsurance availability for any            reason relating to treaties currently in place, or (v) the program’s ITD loss ratio exceeding 50%. The            Company will allow 60 days for the Administrator to develop and submit a corrective plan of action and            if the plan is satisfactory to the Company, in its reasonable discretion, then the suspension shall not            take effect.                     (C) Notwithstanding sub-paragraph (A) and (B) above, this Agreement shall terminate immediately if: (i)            there has been an event of fraud, abandonment or gross and willful misconduct under this Agreement            on the part of the Administrator or the Company materially affecting the interests of the other party; (ii)            the  Administrator  has  undergone  an  assignment  for  the  benefit  of  creditors,  has  had  a  receiver            appointed or has had a petition in bankruptcy filed by or against it; (iii) the representations, warranties            and covenants contained in this Agreement shall prove false or misleading in any material way; or (iv)            the Company fails to maintain at least an “A” rating by Demotech.        (D) Notwithstanding  sub-paragraph  (A)  and  (B)  above,  if  the  Administrator  shall  commit  any  material            breach of this Agreement or fail to comply with any reasonable instructions or directions from the            Company,  the  Company  may,  in  its  sole  discretion,  suspend  or  terminate  the  authority  of  the            Administrator under this Agreement, and the Company will be entitled to all legal rights of recovery  14  AM 20767075.1  

 

          from the Administrator.  The Company shall notify the Administrator in writing of any suspension or            termination effected pursuant to this sub-paragraph.  Such suspension or termination shall be effective            on the 10th business day following receipt of the written notice unless before such effective date the            Administrator  notifies  the  Company  that  it  has  cured  the  breach  or  failure  or  the  Company  and            Administrator agree otherwise in writing.        (E) Notwithstanding  the  foregoing,  if  there  is  a  dispute  between  the  Company  and  the  Administrator            concerning any violation or alleged violation of this Agreement or the Administrator’s failure or alleged            failure to comply with any reasonable instructions or directions from the Company, then the Company            may, in its sole discretion, immediately suspend or modify the authority of the Administrator under this            Agreement during the pendency of such dispute.  Written notice shall be provided by the Company to            the Administrator of any suspension affected pursuant to this sub-paragraph, which suspension shall            be effective upon receipt of such written notice unless otherwise specified by the Company in writing            to the Administrator.  Such a suspension shall not effect, negate or in any way diminish the Company’s            rights under this Agreement.           11. Continuing Obligations During Suspension and After Termination         Upon termination or suspension of this Agreement or of the Administrator’s authority under this        Agreement, the Administrator shall:         (A) continue to pay the Company all sums due the Company in the manner described in paragraph 6            above;        (B) continue  to  perform  all  customary  and  necessary  services  regarding  all  policies  issued  by  the            Administrator on behalf of the Company until all such policies have been completely canceled, non-           renewed or otherwise terminated;          (C) continue to perform all services and pay all expenses incurred in fulfillment of its obligation to collect            premiums;        (D) issue all applicable cancellation and/or non-renewal notices in full and complete compliance with this            Agreement and applicable laws and regulations.  Except as may otherwise be required by law or            regulation or as may otherwise be authorized in writing by the Company, any such cancellation and/or            non-renewal notices shall be issued timely to ensure that the Company is not obligated to renew or            extend any policy that has an expiration date after the date such termination or suspension is effective,            or, if the termination or suspension notice given to the Administrator is less than 180 days written            notice, 90 days after written notice of termination or suspension is received by the Administrator;  15  AM 20767075.1  

 

      (E) stop  binding  new  coverage  and  issuing  insurance  and  stop  renewing  business  on  behalf  of  the            Company or extending the term of any existing business, except as may otherwise be required by law            or regulation or as may otherwise be authorized in writing by the Company; and        (F) continue to fulfill all other obligations to the extent that such obligations are not inconsistent with (A)            through (E) above and the contents of the termination or suspension notice.         Following the termination of this Agreement, the Company shall continue to pay the Administrator all amounts        due, as set forth in Exhibit B.      12. Cancellation of Insurance        (A) Nothing in this Agreement shall be construed as limiting or restricting the right of the Company to            cancel any binder, policy, contract or other evidence of insurance issued under this Agreement in            accordance  with  the  cancellation  provisions  of  such  binder,  policy,  contract,  other  evidence  of            insurance and applicable law.        (B) Return premiums for cancellations as a result of payment default under any premium finance plan shall            be calculated in accordance with the terms of the applicable premium finance agreement except in            those jurisdictions where such action is contrary to or otherwise provided for by law.                 13. Ownership of Expirations         The Company and the Administrator agree that:         (A) at the time of cancellation or termination of this Agreement, the Company will not make claim to any            expirations and the Company acknowledges that the Administrator shall have sole ownership rights to            all expirations.         (B) in the event the Administrator owes the Company premium or other funds at the time of the termination            of this Agreement, including but not limited to those that arise under paragraph 6, the Company shall            be deemed to be the owner of the expirations until such time as the Administrator has satisfied in full            its premium and other payment obligations hereunder.                 14. Notices         Except as otherwise provided herein or except as may be mutually agreed upon in writing during the normal        course of business, all written administrative procedures, notices, requests or reports hereunder must be in   16  AM 20767075.1  

 

      writing, mailed by first class registered or certified mail (postage prepaid), overnight mail, electronic mail, or        hand-delivered to the address below:         (A) If to the Administrator:              Andrew P. DiLoreto              SageSure Insurance Managers, LLC              747 Third Avenue, 30th Fl.              New York, NY 10017              Email: [***]                    (B) If to the Company:                                        Mike Braun              Federated National Insurance Company              14050 NW 14th Street, Suite 180              Sunrise, FL 33323                     Email: [***]                Addresses may be changed by written notice to all parties, in writing, signed by the addressee.  Notices sent        by electronic mail will be effective upon the date sent, if sent on a business day before 12:01 p.m., Eastern        Time.  If sent after 12:01 p.m. or on a day other than a business day, notice will be effective on the next        business day. Written notice provided via first class registered mail shall be deemed received three days        after the date it was sent, overnight mail shall be deemed received the day after it was sent, overnight courier        and certified mail and hand-delivered notice shall be deemed received the date it was delivered.  In the event        the date of deemed receipt falls on a Saturday, Sunday or a United States national holiday, the date of receipt        shall be deemed to be the next business day.  The date of receipt or deemed receipt, regardless of the time        of actual receipt, if received during the 9:00 am to 5:00 pm period at the recipient’s location, shall be the first        day of any period of time provided for in any notice given under this Agreement.             15. Limitations         Except  as  otherwise  permitted  under  this  Agreement,  neither the  Administrator  nor  its  sub-insurance        producers  are  authorized,  and  they  are  expressly  forbidden:   to  bind  the  Company  by  any  promise  or        agreement; to incur any debt, expense or liability in the Company’s name or account; to enter into any legal        proceedings in connection with any matter on the Company’s behalf; or to waive or alter any of the provisions        of any policy issued by the Company.            17  AM 20767075.1  

 

   16. Modification and Enforcement of this Agreement        (A) Except as expressly noted herein, this Agreement and the exhibits hereto may not be changed or         amended unless in writing signed by both parties.        (B) In the event a court of competent jurisdiction modifies or invalidates any provision of this Agreement,        all other provisions of this Agreement shall remain in full force and effect.                 17. Applicable Law         This Agreement will be construed and enforced in accordance with and governed by the laws of the State of        Florida without application of the conflicts of laws provisions thereof.      18. Headings         The paragraph headings are for reference only and will not limit or otherwise affect the meaning thereof.      19. Waiver         A waiver by a party of any breach or default by the other party under this Agreement shall not constitute a        continuing waiver or a waiver of any subsequent act in breach or in default hereunder.      20. Comprehension and Non-Reliance         This Agreement is the product of arm’s length negotiations and the terms of this Agreement have been        completely read, fully understood and voluntarily accepted by both the Administrator and the Company.  The        parties  represent  that  each  has  had  full  opportunity  to  consult  its  own  attorney  in  connection  with  the        preparation and review of this Agreement, that each understands the meaning and effect of this Agreement,        that  each  has  carefully  read  and  understands  the  scope  and  effect  of  each  provision  contained  in  this        Agreement, and that each is not relying upon any representations made by any other party, its attorneys or        other representatives.         Further, the parties agree that, for purposes of interpretation, this Agreement shall not be deemed to have        been drafted by one party or the other.    18  AM 20767075.1  

 

   21. Non-Assignability         Except as required by law, the rights and obligations set forth in this Agreement, including, without limitation        any  commissions  due  the  Administrator, may  not  be  assigned,  in  whole  or  in  part  without  prior  written        approval of the parties.      22. Privacy         The Company and the Administrator acknowledge that insurance is a highly regulated industry and that        performance of their obligations under this Agreement may give rise to certain duties imposed under laws        and regulations that govern insurance companies, agents and suppliers of insurance services and functions.         The Company and the Administrator further acknowledge that nonpublic personally identifiable personal,        financial and  medical  information  about  customers,  former customers,  applicants  and  claimants  may  be        disclosed to the parties during the course of, and as necessary for, the performance of this Agreement.  Each        of the Administrator and the Company agrees that it will maintain the confidentiality and privacy of such        information and comply with the Gramm-Leach-Bliley act and all other applicable laws, rules and regulations        concerning the maintenance of the privacy of such information.  The Administrator and the Company will limit        access to such information to only those individuals that require access to such information for performance        of this Agreement, and will not disclose such information to a third party unless otherwise permitted by law        and only after requiring the third party to execute a similar confidentiality and privacy clause.  Each of the        Administrator and the Company shall take reasonable precautions to safeguard its computer systems and        offices  in  order  to  comply  with  the  provisions  of  this  paragraph  and  to  prevent  unauthorized  access  to        nonpublic personally identifiable personal, financial and medical information whether in physical, electronic        or other medium.      23. Proprietary Information         (A) In the course of the transactions contemplated by this Agreement, it is anticipated that either party may        disclose or deliver to the other party certain of its trade secrets or confidential or proprietary information        (“Proprietary Information”).         (B) As used in this Section, the party disclosing Proprietary Information as defined below is referred to as        the "Disclosing Party"; the party receiving such Proprietary Information is referred to as the "Recipient".         (C) Proprietary Information shall mean any tangible or intangible proprietary or confidential information or        materials or trade secrets belonging to the Disclosing Party or its affiliates (whether disclosed orally, in writing,  19  AM 20767075.1  

 

      in electronic format or otherwise), including, but not limited to the Disclosing party’s: computer systems;        products, processes, methods and techniques; equipment; data; reports; know-how; customer lists, existing        and proposed contracts with third parties; and business plans, including information concerning the existence        and scope of activities of any research, development, marketing or other projects of the Disclosing Party,        which are furnished, disclosed, learned or otherwise acquired by the Recipient during or in the course of        discussions or any business relationship between the parties.  Proprietary Information of a Disclosing Party        shall also include information embodying or developed by use or testing of Proprietary Information of the        Disclosing Party.         (D) The Company acknowledges that it may be provided with access to Proprietary Information of the        Administrator including, but not limited to, marketing information that is the basis of its sales and distribution        system  developed  by  the  Administrator  and  that  are  the  basis  for  other  business  opportunities  of  the        Administrator.  These materials and information are unique and have extraordinary value as long as they        remain  confidential and  proprietary  to  the  Administrator.   Company  agrees  to  treat  these  materials  and        information  as  valuable  trade  secrets  and  confidential  information  of  the  Administrator  and  in  the  same        manner as the Company’s most sensitive proprietary information.          (E) The Administrator acknowledges that it may be provided with access to Proprietary Information of the        Company  such  as  marketing  information,  underwriting  guidelines,  system  information,  or  sales  process        information that are the basis of its sales and distribution system developed by the Company and that are        the basis for other business opportunities of the Company.  These materials and information are unique and        have  extraordinary  value  as  long  as  they  remain  confidential  and  proprietary  to  the  Company.   The        Administrator agrees  to  treat  these  materials and  information  as  valuable  trade secrets  and  confidential        information  of  the  Company  and  in  the  same  manner  as  the  Administrator’s  most  sensitive  proprietary        information.          (F) Each Party is and shall remain the exclusive owner of Proprietary Information and all patent, copyright,        trade secret, trademark and other intellectual property rights therein.  No license or conveyance of any such        rights  to  the  Recipient  is granted  or  implied under this Agreement.   Recipient  shall  not  copy,  distribute,        decompile,  reverse  engineer  or  disassemble  any  computer  programs  provided  by  the  Disclosing  Party.         Recipient  shall  maintain  all  copyright,  confidentiality  and  other  proprietary  markings  on  the  Proprietary        Information of the Disclosing Party.     20  AM 20767075.1  

 

      (G) Recipient  shall  hold  in  confidence,  and  shall  not  disclose  to  any  person  outside  its  organization        Proprietary Information of the Disclosing Party, unless such disclosure is required in performance of any        services contemplated under the this Agreement and shall not use, share with any other person or exploit        such Proprietary Information for its own benefit or the benefit of another without the prior written consent of        the  Disclosing  Party.   Recipient  may,  in  the  performance  of  services  under  this  Agreement,  disclose        Proprietary Information to non-affiliated third parties on a strict need-to-know basis and only upon receipt of        a  valid,  executed  non-disclosure  agreement  with  the  non-affiliated  third  party.   Recipient  may,  in  the        performance  of  services  under  this  Agreement,  disclose  Proprietary  and/or  Non-public  Information  to        affiliated third parties on a strict need-to-know basis only when the affiliated parties are bound by an obligation        of confidentiality to the same extent as if they were parties hereto. Such information sharing to both affiliated        and non-affiliated parties will be done in accordance will all applicable federal and state laws.         (H) The obligations of the Recipient specified this Section shall not apply to any Proprietary Information to        the extent that such Proprietary Information: (i) is known by or in the possession of the Recipient as shown        by the Recipient's written records immediately prior to the time of disclosure; (ii) is generally known to the        public at the time of disclosure or becomes generally known through no wrongful act on the part of the        Recipient  or  any  of  its  representatives,  including  breach  of  this  Agreement;  (iii)  becomes  known  to  the        Recipient through disclosure by sources other than the Disclosing Party having the legal right to disclose        such Proprietary Information; (iv) has been independently developed by the Recipient without reference to        or use of the Proprietary Information; or (v) is required to be disclosed by the Recipient to comply with a court        order or similar legal process, provided that the Recipient provides prior written notice of such disclosure to        the Disclosing Party and takes reasonable and lawful actions to avoid and/or minimize the extent of such        disclosure.  Except as specifically set forth above, the Receiving party’s obligation to protect the Disclosing        Party’s Proprietary and Non-public Information shall continue in perpetuity.      24. Required Contract Provisions         If any statute, regulation or other law governing the business of the Administrator and its affiliates (if any) and        the Company requires certain contract provisions to be included in this Agreement, those required contract        provisions are deemed to be included in this Agreement.    21  AM 20767075.1  

 

   25. Definitions         The terms defined in this Section 25, whenever used in this Agreement, shall have the following meanings        for all purposes of this Agreement:         Decision  Support  Services - Insight’s  services  and  proprietary  software  platform  that  includes  patented        applications to provide the calculation of various measures including profitability of each policy customized        based on Company’s specific underwriting, reinsurance and other Company specific factors.                 Premiums – means the amounts charged for the policies authorized on Exhibit A.                Surcharges – means state imposed fees as add-ons to the insurance premium and does not include        guaranty fund assessments, premium taxes or other fees not added to a specific policy.                Gross Earned Premiums – means the amount of premium that has been earned on all policies for a        specified period.                 Incurred Losses – means losses occurring within a fixed period, whether or not adjusted or paid during the        same period.                “ALAE” or “Allocated Loss Adjustment Expense” – means loss adjustment expenses that are assignable or        allocable to specific claims.    IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their duly authorized representatives  effective as of the dates first shown above:    SageSure Insurance Managers LLC           Federated National Insurance Company                                                           By:   /s/ Andrew P. DiLoreto              By:   /s/ Michael H. Braun             Date:  6/27/2013                          Date:  6/28/2013                       Name: Andrew P. DiLoreto                  Name: Michael Braun                    Title:  Executive Chairman                Title:  President                          22  AM 20767075.1  

 

                                  EXHIBIT A                                                        UNDERWRITING AUTHORITY AND UNDERWRITING GUIDELINES    Company hereby grants to the Administrator the authority to act as agent for Company to the extent herein  defined.    1. Description of Program.  The Administrator Agreement to which this Exhibit A is attached shall apply to     the Program known as the FedNat Non-FL Homeowners Program.       2. Maximum Annual Direct Written Premium Volume.         Subject to regulatory approval as an admitted carrier, the Administrator’s written capacity authority shall     be limited to the following (measured in gross written premiums in a calendar year):         Alabama                       [***] million        Louisiana                     [***] million        South Carolina                [***] million        New York                      [***] million        Texas                         [***] million        Delaware                      [***] million        Georgia                       [***] million        Maryland                      [***] million        New Jersey                    [***] million        North Carolina                [***] million        Rhode Island                  [***] million                Subject to limitations for maximum premium volume as follows:           o  Year 2013 = [***] million           o  Year 2014 = [***] million           o  Year 2015 = [***] million           o  Year 2016 = [***] million           o  Year 2018 = [***] million           o  Year 2019 = [***] million            3. Authorized Classes of Insurance Business and Types of Risks.  Subject to regulatory approval as an     admitted carrier, the Administrator will be authorized by Company to underwrite on its behalf Policies     containing the following lines of business:       Homeowners HO 3 and HO 6     Dwelling Fire DP 3    4. Policy  Forms  and  Provisions.   Administrator  is  authorized  to  issue,  amend  and  cancel  policies  in     accordance with all filed and approved forms, the terms of this Agreement, the terms of the Policies, and     any applicable state regulations.     5. Territory.   Administrator’s  authority  extends in  all  states  in  which  the  Company  is  licensed  to  write     homeowners and dwelling fire other than the State of Florida.           23  AM 20767075.1  

 

6. Authorized Representatives.                •   Terrence McLean     •   Andrew DiLoreto     •   Brooks Clark     •   Corey Neal     •   Art Greitzer           7. Guidelines.  In underwriting the lines of business described above, Administrator will be bound by the     Underwriting Guidelines set forth for each state. Administrator will develop, evaluate and document risk     information such as exposures, loss history and hazard controls in accordance with such Underwriting     Guidelines.          Limits of Liability:              •   Maximum Per Risk Total Insured Value (TIV):  $3 million (combined limits of liability)     •   Maximum Section II Limit of Liability: $500,000     •   HO3 and DP3             o   Maximum Coverage A Exposure: $1,750,000               o   Minimum Coverage A Exposure: $75,000     •   HO6             o   Maximum Coverage A+C Exposure: $1,750,000               o   Minimum Coverage A+C Exposure: $20,000              Underwriting Requirements:              •   Construction: ISO’s defined frame, masonry veneer, masonry and superior construction.     •   Loss Experience: 2 or less non-zero losses of any type (cat or non cat) in the prior 3 years, or 3 or less non-zero losses         of any type (cat or non cat) in the prior 6 years.     •   Loss Control: Acceptable inspections are required on all HO3 and DP3 new business.  Inspection review must be         completed within 60 days of policy inception date.       •   Ineligible Exposures: Risks under construction (builder’s risk/major alterations), or within Protection Class 10; as well         as those risks specifically listed as ineligible in the Underwriting Manual.               Other Terms & Conditions:          •   Minimum HO3 and DP3 Hurricane Deductibles:              o   Tier 1: 2% of Coverage A             o   Tier 2: 1% of Coverage A      •   All other Peril:             o   HO3 and DP3 -  $500             o   HO6 - $250     •   Rules, Coverage Options & Other Eligible Requirements: Applicable as shown in the Underwriting Manual.     •   Coverage Options: Various and as outlined in the Underwriting Manual.     •   Excess Flood: not available                                             24  AM 20767075.1  

 

                                  EXHIBIT B                            ADMINISTRATOR COMPENSATION   Administrator compensation will consist of the following:     •  Commission     •  Policy Fees and Inspection Fees     •  Setup and Installment Fees on Payment Plans     •  Profit Sharing   All Administrator compensation, other than Profit Sharing, will be reported to Company by the 10th of each  month and paid from Program Bank Account to Administrator’s designated bank account.     Profit Sharing will be paid by Company to Administrator within 15 days of receipt from Administrator of annual  Profit Sharing calculations (to be provided on or about March 15).   A. Commission   The  Administrator  will  earn  commission  based  on  gross  written  premiums  per  policy  (“Commission”).   Commissionable premiums are exclusive of Surcharges and policy fees. Should this agreement terminate  for any reason Administrator agrees to return to the Company all Commission on those policies that are  canceled in a fashion consistent with monthly bordereaux statements.    The Commission allowable under this Agreement shall vary by state in accordance with the list below:      •  LA, SC, AL            o  New Business – [***] of gross written commissionable premium           o  Renewals – [***] of gross written commissionable premium      •  [***], [***], [***], [***], [***], [***], [***], [***] – To Be Mutually Agreed           B. Policy Fees and Inspection Fees   Only as allowed by law may the Administrator earn 100% of all policy fees and inspection fees collected.  Should prevailing rules and regulations differ, the Company will fully cooperate with the Administrator to  preserve the Administrator’s right to the policy fees and inspection fees.   C. Setup Fees and Installment Fees on Payment Plans   The  Administrator  will  collect  and  retain  100%  of  setup  fees  and  installment  fees  on  payment  plans  in  exchange for coverage costs of bank accounts, credit card fees, ACH fees and lockbox fees associated with  this Agreement.     D. Profit Sharing   The Administrator will earn a profit sharing payment annually based on performance.  Company will provide  Administrator with any financial information needed to calculation profit sharing no later than March 1 of each  year. This information includes, but is not limited to, actual loss amounts paid and case reserves, actual  reinsurance costs and associated allocation calculations and premium taxes.   The intent of the profit sharing arrangement is to establish a sharing of the inception to date profits generated  under this Agreement excluding any considerations for Quota Share.  For the purposes of the profit sharing  calculations, Quota Share reinsurance will be excluded from all calculations. The parties agree that if the  25  AM 20767075.1  

 

profit margin (defined based on ITD profit divided by ITD earned premium) is greater than [***], then the  Administrator is entitled to [***] of the margin over [***] of the gross profit. Over the cumulative term of this  Agreement, if the margin is greater than 0% but less than [***], then the Administrator is entitled to [***] of the  margin. If the margin is greater than [***] and less than [***], the Administrator is entitled to [***] of the margin  in excess of [***]. If the profit margin is less than [***], there is no profit sharing.   The following describes in terms of mathematical expressions the approach to the computation over the life  of this Agreement.     Profit sharing payments shall be based on the calculation set forth below.   Profit Sharing Calculations   “ITD”  means Inception-to-Date  for  all  premiums  subject  to  this  Agreement.   For  the  purposes  of  all  calculations, Inception-to-Date refers to measurements for the period starting July 1, 2013 through the latest  measurement period for all premiums subject to this Agreement.  For example, ITD Gross Earned Premium  (or ITD GEP) for the year-end 2014 profit sharing calculations, as calculated in early 2015, is the total Gross  Earned Premium for the periods from July 1, 2013 through December 31, 2014 and would be defined as ITD  GEP or ITD GEP(t).  For the same measurement date in early 2015, ITD GEP(t-1) is defined as the inception- to-date GEP as of the prior year from July 1, 2013 through December 31, 2013.  The first measurement  period will be for 2013 based on the period from inception through December 31, 2013.   Profit Sharing Account(t) = ITD Profit    Profit Share Account Increase(t) = Profit Sharing Account (t) - Profit Sharing Account (t-1)   Current  Year  Gross  Earned  Premiums  =  Gross  Earned  Premiums(t)  =  GEP(t)  =  ITD  Gross Earned  Premiums(t) - ITD Gross Earned Premiums(t-1)   ITD Margin = ITD Profit / ITD GEP   If ITD Margin >= [***] THEN         ITD Profit Sharing = [(ITD Margin - [***]) * [***] + [***]] * ITD GEP   If ITD Margin >= [***] AND ITD Margin < [***] THEN          ITD Profit Sharing = (ITD Margin - [***]) * ITD GEP   ELSE         ITD Profit Sharing = 0   Profit Sharing Earned(t) = MAX[ITD Profit Sharing - SUM(Profit Sharing Earned(i)) for all i < t,0]   If Profit Sharing Earned(t) > 0 then Profit Sharing Payments will be made [***] immediately, [***] one year  later and [***] two years later.  Company will pay the first installment within 15 days of the receipt of final  calculations from Administrator (on or about February 15).  The subsequent two installments will be paid one  year and two years later.   General Definitions         ITD Profit (before profit sharing payments) =  26  AM 20767075.1  

 

            ITD Gross Earned Premiums (excluding policy fees and Surcharges)              Less ITD                    a)    Deemed Catastrophe Excess-of-Loss Reinsurance Costs                    b)    Actual Per Risk Reinsurance Costs                    c)    Actual Gross Losses and ALAE Incurred                    d)    ULAE Charge                    e)    IBNR Charge                     f)    Commissions                     g)    Actual Premium Taxes Incurred                    h)    ISO licensing fees for form usage outside of Florida              Plus                    i)    Deemed Reinsurance Recoveries from Deemed Catastrophe Excess-of-                         Loss Reinsurance in (a)                    j)    Actual Reinsurance Recoveries from Per Risk Reinsurance in (b)                            a) Deemed Catastrophe Excess-of-Loss Reinsurance Costs will be calculated as the sum of following two     amounts:     i) Buy-Down Layer Cost     ii) Shared Corporate Layer Cost          Buy-Down Layer for the first treaty year attaches at the greater of $4 million or 10% of Administrator’s     March 31 in force premium (of the year in which reinsurance program incepts). Buy-Down Layer Cost is     equal to the cost of placing Buy-Down Layer for ONLY business covered under this agreement.  If the     Buy-Down Layer is not purchased by Company, then the Buy-Down Layer Cost is equal to [***] times     modeled AAL at September 30 of the respective year.           Shared Corporate Layer for the 2013 catastrophe year attaches at $7 million and exhausts at 100-year     Return Period PML. The Shared Corporate Layer for 2014 catastrophe year and beyond will attach at     the level of Company’s corporate catastrophe reinsurance purchase and exhaust at the 100-year Return     Period PML (this amount may be increased if required by regulatory or Demotech requirements). The     Shared Corporate Layer Cost will be calculated using the Company’s AIR / RMS average AAL for each     reinsurance layer purchased times Administrator program AIR / RMS average AAL at September 30.      Parties will mutually agree on reasonable estimate of AIR / RMS average AAL multiples for layers that     are only partially covered by Shared Corporate Layer.        Given that Company reinsurance program incepts at July 1 of each year, 6/12 of costs in this section     are from current catastrophe year and 6/12 from prior catastrophe year.  For example, 2014 calendar     year costs for this calculation are based on 1/2 of 2013 catastrophe year costs and 1/2 of 2014     catastrophe year costs.      b) Costs incurred for the Calendar Year in the purchase of Per Risk Reinsurance including XOL Treaty,     Facultative, ID Theft and any other Reinsurance.  For example, if the treaty incepts on July 1 of the     year, the Calendar Year charge is 6/12 of the cost of the cost of the treaty incepting on July 1 of the     preceding year and 6/12 of the cost of the treaty incepting in the current Calendar Year.    c) Calendar Year Incurred Losses and ALAE (including the benefit of subrogation).    d) ULAE Charge is [***] of Earned Premiums.      27  AM 20767075.1  

 

e) IBNR Factors of [***], [***], [***] applied to (d) for Calendar Years 1, 2, 3 respectively where Year 1 is     most recent year (the latest year in calculation).  Year 1 factor will be applied to accident year incurred     losses measured at December 31.  For example, IBNR of [***] will be applied to 2014 based on 2014     accident year losses reported and measured at December 31, 2014.     f) The sum of Commission rate times Earned Premiums for each policy.    g) The sum of Actual Rate of premium taxes times Earned Premiums for each state.  The Actual Rate of     Premium Taxes is the actual Premium Taxes paid divided by the Gross Written Premium for each state.    h) The  sum  of  expense  incurred  for  providing  licensed  ISO  Forms  for  products  administered  by     Administrator. Should Company incur these costs in connection with revenues generated with a party     other than the Administrator, the Administrator’s costs will be limited to a pro rata portion of the expense     associated with Administrator’s revenue relative to the overall revenue.    i) Reinsurance recoveries from deemed or actual reinsurance described in (a).  To the extent covered     losses are ceded (or deemed ceded) by policies contemplated in this agreement and policies outside of     this agreement, the reinsurance recoveries will be allocated proportionally in each reinsurance layer     based on gross loss for each catastrophe event.    j) Reinsurance recoveries from actual reinsurance described in (b).  To the extent covered losses are ceded     by  policies  contemplated  in  this  agreement  and  policies  outside  of  this  agreement,  the  reinsurance     recoveries will be allocated proportionally in each reinsurance layer based on treaty year total losses     ceded to each reinsurance layer.     Note that all amounts in the calculation of ITD Margin are ITD calculations.   All premium calculations exclude, policy fees, inspection fees, Surcharges, and other regulatory charges  that are added onto the policy charges after the calculation of premium.  Premium taxes are included in  premium.  All premium calculations also exclude setup and installment fees associated with billing and  payment plans.   Modeling and Reinsurance Definitions         AIR Modeling uses the most recently available version of the model running the model settings with        loss amplification (demand surge) without storm surge using the AIR long-term event rates for the        business produced under this agreement.         RMS Modeling uses the most recently available version of the model running the model settings        with loss amplification without storm surge, with secondary uncertainty using the RMS historical        event rates for the business produced under this agreement.         100-Year Return Period PML= Arithmetic Average of the following numbers:        1. AIR loss historical event set with occurrence exceedance probability of 1.0%        2. RMS loss historical event set with occurrence exceedance probability of 1.0%      28  AM 20767075.1  

 

                                  EXHIBIT C                                     REPORTING   Administrator shall keep detailed accounting of the Company’s policy activities on all premiums, taxes, and  any other funds due to the Company on all policies written under this Agreement.  Administrator shall  maintain complete and accurate accounting records in accordance with usual and customary accounting  practices and/or as may be requested by the Company.    On a monthly basis within 10 business days after the end of the month, administrator will provide a detailed  and itemized statement of account of all premiums written, premiums earned, premiums collected, policy fees  written, policy fees collected, inspection fees written, inspection fees collected and any taxes or regulatory  Surcharges required.    Upon execution of this agreement, Companies will work together to implement a mutually agreed reporting  process and format. Administrator shall provide information necessary for Company to report financial and  statistical data, either on a summary or transactional level, in a mutually agreed format.  Administrator shall  ensure that financial and statistical information provided to the Company is accurately coded, input, and  balanced based on the mutually agreed format.              29  AM 20767075.1  

 

                                                                                                              FIRST AMENDMENT TO                            ADMINISTRATOR AGREEMENT                                                  THIS  FIRST  AMENDMENT  TO ADMINISTRATOR  AGREEMENT (this  “First  Amendment”)  is  entered into as of this 1st day of August, 2015 (the “Execution Date”) by and among SageSure Insurance  Managers LLC (“Administrator”) and Federated National Insurance Company (the “Company”).                                      RECITALS                                                 WHEREAS, Administrator and Company entered into that certain Administrator Agreement, as of  June 28, 2013 (the “Agreement”); and          WHEREAS, Administrator and Company desire to make certain amendments to the Agreement as  more particularly described herein.                                     AGREEMENT                                                 NOW,  THEREFORE,  in  consideration  of  the  foregoing  and  the  representations,  warranties,  covenants and agreements contained herein, and for other good and valuable consideration, the receipt and  sufficiency of which are hereby acknowledged, the parties hereto agree as follows:                                                           1. Administrator  and  Company  agree  that  Exhibit  A – Underwriting  Authority  and  Underwriting           Guidelines shall be amended and restated in its entirety and replaced with Exhibit A attached           hereto and made a part hereof effective the Execution Date of this First Amendment.        2. Administrator  and  Company  agree  that  Exhibit  B – Administrator  Compensation  shall  be           amended and restated in its entirety and replaced with Exhibit B attached hereto.                             IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the Execution  Date set forth above            SageSure Insurance Managers LLC           Federated National Insurance Company     By:   /s/ Terrence McLean                 By:   /s/ Michael H. Braun              Date: 8/26/2015                           Date: 8/26/2015                         Name: Terrence McLean                     Name:  Michael H. Braun                 Title:  President                         Title:  President                                                  

 

                                  EXHIBIT A                                                        UNDERWRITING AUTHORITY AND UNDERWRITING GUIDELINES    Company hereby grants to the Administrator the authority to act as agent for Company to the extent herein  defined.    1. Description of Program.  The Administrator Agreement to which this Exhibit A is attached shall apply to     the Program known as the FedNat Non-FL Homeowners Program.       2. Maximum Annual Direct Written Premium Volume.         Subject to the Company obtaining regulatory approval to transact insurance as an admitted carrier in the     following states, the Administrator’s written capacity authority shall be limited to the following (measured     in gross written premiums in a calendar year):         Alabama                       [***] million        Louisiana                     [***] million        South Carolina                [***] million        New York                      [***] million        Texas                         [***] million        Delaware                      [***] million        Georgia                       [***] million        Maryland                      [***] million        New Jersey                    [***] million        North Carolina                [***] million        Rhode Island                  [***] million                Notwithstanding  the  foregoing,  the  Company,  in  its  sole  discretion,  upon  written  notice  to  Administrator and in accordance with all applicable state laws and regulations, may reduce or terminate  Administrators authority in and or all of states listed above.                Subject to limitations for maximum premium volume as follows:           o  Year 2013 = [***] million           o  Year 2014 = [***] million           o  Year 2015 = [***] million           o  Year 2016 = [***] million           o  Year 2017 = [***] million           o  Year 2018 = [***] million           o  Year 2019 = [***] million          Notwithstanding  the  premium  volumes  defined  above,  Company  and  Administrator  will  plan  each     upcoming year’s projections and capital needs as those capital resources are available within FNIC.  In     the  event  that  FNIC  has  limited  capital  for  any  reason  (problems  in  or  out of  Florida and  based on     catastrophes or all other perils), then Company will then allocate the capital along the same percentages     as the prior year.  For example, non-Florida homeowners was 18% of $500 million of premium during the     prior year and then Company will give Administrator 18% of the upcoming year’s capital.  The objective    HFD 224573.6  

 

   is to prevent non-renewals both in and out of Florida though Company may need to contain growth     outside of Florida if FNIC is capital constrained.     3. Authorized Classes of Insurance Business and Types of Risks.  Subject to regulatory approval as an     admitted carrier, the Administrator will be authorized by Company to underwrite on its behalf Policies     containing the following lines of business:       Homeowners HO 3 and HO 6     Dwelling Fire DP 3    4. Policy  Forms  and  Provisions.   Administrator  is  authorized  to  issue,  amend  and  cancel  policies  in     accordance with all filed and approved forms, the terms of this Agreement, the terms of the Policies, and     any applicable state laws and regulations.     5. Territory.  Administrator’s authority extends in all states in which the Company is authorized to write     homeowners and dwelling fire other than the State of Florida.           6. Authorized Representatives.               •  Terrence McLean     •  Andrew DiLoreto     •  Brooks Clark     •  Corey Neal     •  Art Greitzer          7. Guidelines.  In underwriting the lines of business described above, Administrator will be bound by the     Underwriting Guidelines set forth for each state. Administrator will develop, evaluate and document risk     information such as exposures, loss history and hazard controls in accordance with such Underwriting     Guidelines.          Limits of Liability:             •  Maximum Per Risk Total Insured Value (TIV):  $4 million (combined limits of liability)     •  Maximum Section II Limit of Liability: $500,000     •  HO3 and DP3           o  Maximum Coverage A Exposure: $2,000,000             o  Minimum Coverage A Exposure: $75,000     •  HO6           o  Maximum Coverage A+C Exposure: $1,750,000             o  Minimum Coverage A+C Exposure: $20,000             Underwriting Requirements:             •  Construction: ISO’s defined frame, masonry veneer, masonry and superior construction.     •  Loss Experience: 2 or less non-zero losses of any type (cat or non cat) in the prior 3 years, or 3 or less non-zero losses        of any type (cat or non cat) in the prior 6 years.    HFD 224573.6  

 

   •   Loss Control: Acceptable inspections are required on all HO3 and DP3 new business.  Inspection review must be         completed within 60 days of policy inception date.       •   Ineligible Exposures: Risks under construction (builder’s risk/major alterations),  as well as those risks specifically listed         as ineligible in the Underwriting Manual.                       Other Terms & Conditions:          •   Minimum HO3 and DP3 Hurricane Deductibles:              o   Tier 1: 2% of Coverage A             o   Tier 2: 1% of Coverage A      •   All other Peril Deductibles:             o   HO3 and DP3 -  $500             o   HO6 - $250     •   Rules, Coverage Options & Other Eligible Requirements: Applicable as shown in the Underwriting Manual.     •   Coverage Options: Various and as outlined in the Underwriting Manual.     •   Excess Flood: not available                                      HFD 224573.6  

 

                                  EXHIBIT B                            ADMINISTRATOR COMPENSATION   Administrator compensation will consist of the following:     •  Commission     •  Policy Fees and Inspection Fees     •  Setup and Installment Fees on Payment Plans     •  Profit Sharing  All Administrator compensation, other than Profit Sharing, will be reported to Company by the 10th of each  month and paid from Program Bank Account to Administrator’s designated bank account.     Profit Sharing will be paid by Company to Administrator within 15 days of receipt from Administrator of annual  Profit Sharing calculations (to be provided on or about March 15).   A. Commission  The  Administrator  will  earn  commission  based  on  gross  written  premiums  per  policy  (“Commission”).   Commissionable premiums are exclusive of Surcharges and policy fees. Should this agreement terminate  for any reason Administrator agrees to return to the Company all Commission on those policies that are  canceled in a fashion consistent with monthly bordereaux statements.    The Commission allowable under this Agreement shall vary by state in accordance with the list below:   State                     Provisional Commission for policies incepted prior to 9/1/2015  LA, SC, AL                New Business - [***] of gross written commissionable premiums  LA, SC, AL                Renewals - [***] of gross written commissionable premiums    State                      Provisional Commission for policies incepted on or after 9/1/2015  LA, SC, AL                 New Business - [***] of gross written commissionable premiums  LA, SC, AL                 Renewals - [***] of gross written commissionable premiums      •  [***], [***], [***], [***], [***], [***], [***], [***] – To Be Mutually Agreed upon by Company and Administrator     prior to writing any business in such states, which agreement shall be documented by an addendum to     this Exhibit B.            B. Policy Fees and Inspection Fees  Only as allowed by applicable state law may the Administrator charge policy fees and inspection fees in  connection with the business written pursuant to this Agreement.     C. Setup Fees and Installment Fees on Payment Plans  The Administrator will collect setup fees and installment fees allowable under applicable state law on payment  plans  in  exchange  for  coverage  costs  of  bank  accounts,  credit  card  fees,  ACH  fees  and  lockbox  fees  associated with this Agreement.      HFD 224573.6  

 

D. Profit Sharing  The Administrator will earn a profit sharing payment annually based on performance.  Company will provide  Administrator with any financial information needed to calculate profit sharing no later than March 1 of each  year. This information includes, but is not limited to, actual loss amounts paid and case reserves, actual  reinsurance costs and associated allocation calculations and premium taxes.   The intent of the profit sharing arrangement is to establish a sharing of the inception to date profits generated  under this Agreement. The parties agree that if the profit margin (defined based on ITD Profit divided by ITD  Gross Earned Premium) is greater than [***], then the Administrator is entitled to [***] of the margin over [***]  of the gross profit. Over the cumulative term of this Agreement, if the profit margin is greater than [***] but  less than [***], then the Administrator is entitled to 0.0% of the profit margin. If the profit margin is greater  than [***] and less than [***], the Administrator is entitled to [***] of the profit margin in excess of [***] If the  profit margin is less than [***], there is no profit sharing.   The following describes in terms of mathematical expressions the approach to the computation over the life  of this Agreement.     Profit sharing payments shall be based on the calculation set forth below.   Profit Sharing Calculations   “ITD” means Inception-to-Date for all revenues subject to this Agreement, which shall include all premiums,  policy fees, inspection fees, setup fees and installment fees on payment plans collected on business written  pursuant to this Agreement.  For the purposes of all calculations, Inception-to-Date refers to measurements  for the period starting July 1, 2013 through the latest measurement period for all revenues subject to this  Agreement.  For example, ITD Gross Earned Premium (or ITD GEP) for the year-end 2014 profit sharing  calculations, as calculated in early 2015, is the total Gross Earned Premium for the periods from July 1, 2013  through December 31, 2014 and would be defined as ITD GEP or ITD GEP(t).  For the same measurement  date in early 2015, ITD GEP(t-1) is defined as the inception-to-date GEP as of the prior year from July 1,  2013 through December 31, 2013.  The first measurement period will be for 2013 based on the period from  inception through December 31, 2013.   Profit Sharing Account(t) = ITD Profit    Profit Share Account Increase(t) = Profit Sharing Account (t) - Profit Sharing Account (t-1)   Current  Year  Gross  Earned  Premiums  =  Gross  Earned  Premiums(t)  =  GEP(t)  =  ITD  Gross  Earned  Premiums(t) - ITD Gross Earned Premiums(t-1)   ITD Margin = ITD Profit / ITD GEP   If ITD Margin >= [***] THEN         ITD Profit Sharing = [(ITD Margin - [***]) * [***] + [***]] * ITD GEP   If ITD Margin >= [***] AND ITD Margin < [***] THEN          ITD Profit Sharing = (ITD Margin - [***]) * ITD GEP    HFD 224573.6  

 

ELSE         ITD Profit Sharing = 0   Profit Sharing Earned(t) = MAX[ITD Profit Sharing - SUM(Profit Sharing Earned(i)) for all i < t,0]   If Profit Sharing Earned(t) > 0 then Profit Sharing Payments will be made 100% within 15 days of the receipt  of final calculations from Administrator (on or about March 31).    Commission True-up   Once annually, the Administrator will calculate the average paid commission rate paid to Administrator’s  distribution sources.      Average Commission Rate to Distributors = Commission Paid to Distributors / Collected Commissionable  Premium   Provisional Commission Rate = Provisional Commission Amounts Paid / Gross Written Commissionable  Premiums   Commissions Paid to Distributors is defined as the agreed percentage of premium paid to producers for the  placement of Company business plus any promotions, giveaways, incentive related programs, and out-of- pocket retail producer expenses designed to increase production of Company products.    If Average Commission Rate + [***] is less than Provision Commission Rate Administrator will return an  amount to the Company equal to (Provisional Commission - Average Commission Rate - [***]) * Gross Written  Commissionable Premiums.     For each calendar year this Agreement is in effect, Administrator shall not spend in excess of the Provisional  Commission Rate less [***] without prior written approval from Company.   The Commission True-up Payment from Administrator to Company or from Company to Administrator will  take place simultaneously with any Profit Sharing Payment to Administrator such that the Profit Sharing  payment  will  be  decreased,  if  necessary.   If  there  is  no  Profit  Sharing  payment  due  to  Administrator,  Administrator shall make the Commission True-up Payment on or about April 1st of each year.   For periods prior to but not including 2015, the Commission True-up Payment is deemed to be not applicable  in the calculation of any and all profit share payments, earnings or account adjustments.   General Definitions         ITD Profit (before profit sharing payments) =              ITD Gross Earned Premiums excluding surcharges, assessments and other regulatory        charges)              Less ITD                    a)    Deemed Catastrophe Excess-of-Loss Reinsurance Costs                    b)    Actual Per Risk Reinsurance Costs                    c)    Actual Quota Share Reinsurance Costs    HFD 224573.6  

 

                  d)    Actual Gross Losses and ALAE Incurred                    e)    ULAE Charge                    f)    IBNR Charge                     g)    Commissions including Commission True-up amounts                    h)    Actual Premium Taxes Incurred                    i)    ISO licensing fees for form usage outside of Florida              Plus                    j)    Deemed Reinsurance Recoveries from Deemed Catastrophe Excess-of-                         Loss Reinsurance in (a)                    k)    Actual Reinsurance Recoveries from Per Risk Reinsurance in (b)                    l)    Actual Reinsurance Recoveries from Quota Share Reinsurance in (c)                    m)    All policy fees not already included in premium, inspection fees, setup                          fees and installment fees on payment plans                            a) Deemed Catastrophe Excess-of-Loss Reinsurance Costs will be calculated as the sum of following two     amounts:     i) Buy-Down Layer Cost     ii) Shared Corporate Layer Cost          Buy-Down Layer for the first treaty year attaches at the greater of $4 million or 10% of Administrator’s     March 31 in force premium (of the year in which reinsurance program incepts). Buy-Down Layer Cost is     equal to the cost of placing Buy-Down Layer for ONLY business covered under this agreement.  If the     Buy-Down Layer is not purchased by Company, then the Buy-Down Layer Cost is equal to [***] times     modeled AAL at September 30 of the respective year.           Shared Corporate Layer for the 2013 catastrophe year attaches at $7 million and exhausts at 100-year     Return Period PML. The Shared Corporate Layer for 2014 catastrophe year and beyond will attach at     the level of Company’s corporate catastrophe reinsurance purchase and exhaust at the 100-year Return     Period PML (this amount may be increased if required by regulatory or Demotech requirements). The     Shared Corporate Layer Cost will be calculated using the Company’s AIR / RMS average AAL for each     reinsurance layer purchased times Administrator program AIR / RMS average AAL at September 30.      Parties will mutually agree on reasonable estimate of AIR / RMS average AAL multiples for layers that     are only partially covered by Shared Corporate Layer.         Given that Company reinsurance program incepts at July 1 of each year, 6/12 of costs in this section     are from current catastrophe year and 6/12 from prior catastrophe year.  For example, 2014 calendar     year costs for this calculation are based on 1/2 of 2013 catastrophe year costs and 1/2 of 2014     catastrophe year costs.      b) Costs incurred for the Calendar Year in the purchase of Per Risk Reinsurance including XOL Treaty,     Facultative, ID Theft and any other Reinsurance.  For example, if the treaty incepts on July 1 of the     year, the Calendar Year charge is 6/12 of the cost of the cost of the treaty incepting on July 1 of the     preceding year and 6/12 of the cost of the treaty incepting in the current Calendar Year.    c) Ceded earned premium incurred in the purchase of Quota Share Reinsurance for the policies in this     agreement. For example, if the treaty incepts on July 1 of the year, the Calendar Year charge is 6/12 of    HFD 224573.6  

 

   the cost of the treaty incepting on July 1 of the preceding year and 6/12 of the cost of the treaty     incepting in the current Calendar Year.    d) Calendar Year Incurred Losses and ALAE (including the benefit of subrogation).    e) ULAE Charge is [***] of Earned Premiums.     f) IBNR Factors of [***], [***], [***] applied to (d) for Calendar Years 1, 2, 3 respectively where Year 1 is     most recent year (the latest year in calculation).  Year 1 factor will be applied to accident year incurred     losses measured at December 31.  For example, IBNR of [***] will be applied to 2014 based on 2014     accident year losses reported and measured at December 31, 2014.     g) The sum of Commission rate times Earned Premiums for each policy plus all amounts payable as     Commission True-up by Administrator.     h) The sum of Actual Rate of premium taxes times Earned Premiums for each state.  The Actual Rate of     Premium Taxes is the actual Premium Taxes paid divided by the Gross Written Premium for each state.    i) The  sum  of  expense  incurred  for  providing  licensed  ISO  Forms  for  products  administered  by     Administrator. Should Company incur these costs in connection with revenues generated with a party     other than the Administrator, the Administrator’s costs will be limited to a pro rata portion of the expense     associated with Administrator’s revenue relative to the overall revenue.      j) Reinsurance recoveries from deemed or actual reinsurance described in (a).  To the extent covered     losses are ceded (or deemed ceded) by policies contemplated in this Agreement and policies outside of     this Agreement, the reinsurance recoveries will be allocated proportionally in each reinsurance layer     based on gross loss for each catastrophe event.    k) Reinsurance recoveries from actual reinsurance described in (b).  To the extent covered losses are ceded     by  policies  contemplated  in  this Agreement  and  policies  outside  of this Agreement,  the  reinsurance     recoveries will be allocated proportionally in each reinsurance layer based on treaty year total losses     ceded to each reinsurance layer.    l) Reinsurance recoveries, earned ceding commission and any profit sharing, experience account from     actual reinsurance described in (c).  To the extent covered losses are ceded by policies contemplated in     this  Agreement  and  polices  outside  of  this  Agreement,  the  reinsurance recoveries  will  be  allocated     proportionally in each reinsurance layer based on treaty year losses ceded to each reinsurance layer.     m) All policy fees, inspection fees, setup fees and installment fees on payment plans collected pursuant to     Paragraphs B and C of this Exhibit B.   Note that all amounts in the calculation of ITD Margin are ITD calculations.   All premium calculations exclude, surcharges, assessments and other regulatory charges that are added  onto the policy charges after the calculation of premium.  Premium taxes are included in premium.      HFD 224573.6  

 

Modeling and Reinsurance Definitions         AIR Modeling uses the most recently available version of the model running the model settings with        loss amplification (demand surge) without storm surge using the AIR long-term event rates for the        business produced under this agreement.         RMS Modeling uses the most recently available version of the model running the model settings        with loss amplification without storm surge, with secondary uncertainty using the RMS historical        event rates for the business produced under this agreement.         100-Year Return Period PML= Arithmetic Average of the following numbers:        1. AIR loss historical event set with occurrence exceedance probability of 1.0%        2. RMS loss historical event set with occurrence exceedance probability of 1.0%      HFD 224573.6  

 

                                                                                                             SECOND AMENDMENT TO                            ADMINISTRATOR AGREEMENT                                                  THIS SECOND AMENDMENT TO ADMINISTRATOR AGREEMENT (this “Second Amendment”) is  entered into as of this 20th day of October, 2016 (the “Execution Date”) by and among SageSure Insurance  Managers LLC (“Administrator”) and Federated National Insurance Company (the “Company”).                                      RECITALS                                                 WHEREAS, Administrator and Company entered into that certain Administrator Agreement, as of  June 28, 2013 (the “Agreement”); and          WHEREAS, Administrator and Company desire to make certain amendments to the Agreement as  more particularly described herein.                                     AGREEMENT                                                 NOW, THEREFORE,  in  consideration  of  the  foregoing  and  the  representations,  warranties,  covenants and agreements contained herein, and for other good and valuable consideration, the receipt and  sufficiency of which are hereby acknowledged, the parties hereto agree as follows:                                                           1. Administrator  and  Company  agree  that Exhibit  A – Underwriting  Authority  and  Underwriting           Guidelines Section 2: Maximum Annual Direct Written Premium shall be amended to add the           following:                         [***]                         [***] million              [***]                         [***] million          2. Administrator and Company agree that Exhibit B – Administrator Compensation Sections A:           Commissions shall be amended to include [***].          IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed  this  Second  Amendment  as  of  the  Execution Date set forth above            SageSure Insurance Managers LLC           Federated National Insurance Company     By:   /s/ Terrence McLean                 By:   /s/ Michael H. Braun              Date: 12/5/2016                           Date: 12/5/2016                         Name: Terrence McLean                     Name:  Michael H. Braun                 Title:  President and CEO                 Title:  CEO and President                    

 

                                                                                                                THIRD AMENDMENT TO                            ADMINISTRATOR AGREEMENT                                                  THIS  THIRD  AMENDMENT  TO ADMINISTRATOR  AGREEMENT (this  “Third  Amendment”)  is  entered into as of this 3rd day of January, 2017 (the “Execution Date”) by and among SageSure Insurance  Managers LLC (“Administrator”) and Federated National Insurance Company (the “Company”).                                      RECITALS                                                 WHEREAS, Administrator and Company entered into that certain Administrator Agreement, as of  June 28, 2013 (the “Agreement”); and          WHEREAS, Administrator and Company desire to make certain amendments to the Agreement as  more particularly described herein.                                     AGREEMENT                                                 NOW,  THEREFORE,  in  consideration  of  the  foregoing  and  the representations,  warranties,  covenants and agreements contained herein, and for other good and valuable consideration, the receipt and  sufficiency of which are hereby acknowledged, the parties hereto agree as follows:                                                           1. Administrator  and  Company  agree  that Exhibit  B – Administrator  Compensation  shall  be           amended and restated in its entirety and replaced with Exhibit B attached hereto.                             IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed  this  Third  Amendment  as  of  the  Execution Date set forth above            SageSure Insurance Managers LLC           Federated National Insurance Company     By:   /s/ Terrence McLean                 By:   /s/ Michael H. Braun              Date: 1/20/2017                           Date: 1/20/2017                         Name:  Terrence McLean                    Name:  Michael H. Braun                 Title:  President and CEO                 Title:  President                                                                                             

 

                                  EXHIBIT B                            ADMINISTRATOR COMPENSATION   Administrator compensation will consist of the following:     •  Commission     •  Policy Fees and Inspection Fees     •  Setup and Installment Fees on Payment Plans     •  Profit Sharing  All Administrator compensation, other than Profit Sharing, will be reported to Company by the 10th of each  month and paid from Program Bank Account to Administrator’s designated bank account.     Profit Sharing will be paid by Company to Administrator within 15 days of receipt from Administrator of annual  Profit Sharing calculations (to be provided on or about March 15).   A. Commission  The  Administrator  will  earn  commission  based  on  gross  written  premiums  per  policy  (“Commission”).   Commissionable premiums are exclusive of Surcharges and policy fees. Should this agreement terminate  for any reason Administrator agrees to return to the Company all Commission on those policies that are  canceled in a fashion consistent with monthly bordereaux statements.    The Commission allowable under this Agreement shall vary by state in accordance with the list below:   State                     Provisional Commission for policies incepted prior to 9/1/2015  LA, SC, AL                New Business - [***] of gross written commissionable premiums  LA, SC, AL                Renewals - [***] of gross written commissionable premiums    State                      Provisional Commission for policies incepted on or after 9/1/2015  LA, SC, AL, TX             New Business - [***] of gross written commissionable premiums  LA, SC, AL, TX             Renewals - [***] of gross written commissionable premiums      •  [***], [***], [***], [***], [***], [***], [***], [***], [***] – To Be Mutually Agreed upon by Company and     Administrator prior to writing any business in such states, which agreement shall be documented by an     addendum to this Exhibit B.            B. Policy Fees and Inspection Fees  Only as allowed by applicable state law may the Administrator charge policy fees and inspection fees in  connection with the business written pursuant to this Agreement.     C. Setup Fees and Installment Fees on Payment Plans  The Administrator will collect setup fees and installment fees allowable under applicable state law on payment  plans  in  exchange  for  coverage  costs  of  bank  accounts,  credit  card  fees,  ACH  fees  and  lockbox  fees  associated with this Agreement.      2 

 

D. Profit Sharing  The Administrator will earn a profit sharing payment annually based on performance.  Company will provide  Administrator with any financial information needed to calculate profit sharing no later than March 1 of each  year. This information includes, but is not limited to, actual loss amounts paid and case reserves, actual  reinsurance costs and associated allocation calculations and premium taxes.   The intent of the profit sharing arrangement is to establish a sharing of the inception to date profits generated  under this Agreement. The parties agree that if the profit margin (defined based on ITD Profit divided by ITD  Gross Earned Premium) is greater than [***], then the Administrator is entitled to [***] of the margin over [***]  of the gross profit. Over the cumulative term of this Agreement, if the profit margin is greater than [***] but  less than [***], then the Administrator is entitled to [***] of the profit margin. If the profit margin is greater than  [***] and less than [***], the Administrator is entitled to [***] of the profit margin in excess of [***]. If the profit  margin is less than [***], there is no profit sharing.   The following describes in terms of mathematical expressions the approach to the computation over the life  of this Agreement.     Profit sharing payments shall be based on the calculation set forth below.   Profit Sharing Calculations   “ITD” means Inception-to-Date for all revenues subject to this Agreement, which shall include all premiums,  policy fees, inspection fees, setup fees and installment fees on payment plans collected on business written  pursuant to this Agreement.  For the purposes of all calculations, Inception-to-Date refers to measurements  for the period starting July 1, 2013 through the latest measurement period for all revenues subject to this  Agreement.  For example, ITD Gross Earned Premium (or ITD GEP) for the year-end 2014 profit sharing  calculations, as calculated in early 2015, is the total Gross Earned Premium for the periods from July 1, 2013  through December 31, 2014 and would be defined as ITD GEP or ITD GEP(t).  For the same measurement  date in early 2015, ITD GEP(t-1) is defined as the inception-to-date GEP as of the prior year from July 1,  2013 through December 31, 2013.  The first measurement period will be for 2013 based on the period from  inception through December 31, 2013.   Profit Sharing Account(t) = ITD Profit    Profit Share Account Increase(t) = Profit Sharing Account (t) - Profit Sharing Account (t-1)   Current  Year  Gross  Earned  Premiums  =  Gross  Earned  Premiums(t)  =  GEP(t)  =  ITD  Gross  Earned  Premiums(t) - ITD Gross Earned Premiums(t-1)   ITD Margin = ITD Profit / ITD GEP   If ITD Margin >= [***] THEN         ITD Profit Sharing = [(ITD Margin - [***]) * [***] + [***]] * ITD GEP   If ITD Margin >= [***] AND ITD Margin < [***] THEN          ITD Profit Sharing = (ITD Margin - [***]) * ITD GEP    3 

 

ELSE         ITD Profit Sharing = 0   Profit Sharing Earned(t) = MAX[ITD Profit Sharing - SUM(Profit Sharing Earned(i)) for all i < t,0]   If Profit Sharing Earned(t) > 0 then Profit Sharing Payments will be made 100% within 15 days of the receipt  of final calculations from Administrator (on or about March 31).    Commission True-up   Once annually, the Administrator will calculate the average paid commission rate paid to Administrator’s  distribution sources.      Average Commission Rate to Distributors = Commission Paid to Distributors / Collected Commissionable  Premium   Provisional Commission Rate = Provisional Commission Amounts Paid / Gross Written Commissionable  Premiums   Commissions Paid to Distributors is defined as the agreed percentage of premium paid to producers for the  placement of Company business plus any promotions, giveaways, incentive related programs, and out-of- pocket retail producer expenses designed to increase production of Company products.    If Average Commission Rate + [***] is less than Provision Commission Rate Administrator will return an  amount to the Company equal to (Provisional Commission - Average Commission Rate - [***]) * Gross Written  Commissionable Premiums.     For each calendar year this Agreement is in effect, Administrator shall not spend in excess of the Provisional  Commission Rate less [***] without prior written approval from Company.   The Commission True-up Payment from Administrator to Company or from Company to Administrator will  take place simultaneously with any Profit Sharing Payment to Administrator such that the Profit Sharing  payment  will  be  decreased,  if  necessary.   If  there  is  no  Profit  Sharing  payment  due  to  Administrator,  Administrator shall make the Commission True-up Payment on or about April 1st of each year.   For periods prior to but not including 2015, the Commission True-up Payment is deemed to be not applicable  in the calculation of any and all profit share payments, earnings or account adjustments.   General Definitions         ITD Profit (before profit sharing payments) =              ITD Gross Earned Premiums excluding surcharges, assessments and other regulatory        charges)              Less ITD                    a)    Deemed Catastrophe Excess-of-Loss Reinsurance Costs                    b)    Actual Per Risk Reinsurance Costs                    c)    Actual Quota Share Reinsurance Costs    4 

 

                  d)    Actual Gross Losses and ALAE Incurred                    e)    ULAE Charge                    f)    IBNR Charge                     g)    Commissions including Commission True-up amounts                    h)    Actual Premium Taxes Incurred                    i)    ISO licensing fees for form usage outside of Florida              Plus                    j)    Deemed Reinsurance Recoveries from Deemed Catastrophe Excess-of-                         Loss Reinsurance in (a)                    k)    Actual Reinsurance Recoveries from Per Risk Reinsurance in (b)                    l)    Actual Reinsurance Recoveries from Quota Share Reinsurance in (c)                    m)    All policy fees not already included in premium, inspection fees, setup                          fees and installment fees on payment plans                            a) Deemed Catastrophe Excess-of-Loss Reinsurance Costs will be calculated as the sum of following two     amounts:     i) Buy-Down Layer Cost     ii) Shared Corporate Layer Cost          Buy-Down Layer for the first treaty year attaches at the greater of $4 million or 10% of Administrator’s     March 31 in force premium (of the year in which reinsurance program incepts). Buy-Down Layer Cost is     equal to the cost of placing Buy-Down Layer for ONLY business covered under this agreement.  If the     Buy-Down Layer is not purchased by Company, then the Buy-Down Layer Cost is equal to [***] times     modeled AAL at September 30 of the respective year.           Shared Corporate Layer for the 2013 catastrophe year attaches at $7 million and exhausts at 100-year     Return Period PML. The Shared Corporate Layer for 2014 catastrophe year and beyond will attach at     the level of Company’s corporate catastrophe reinsurance purchase and exhaust at the 100-year Return     Period PML (this amount may be increased if required by regulatory or Demotech requirements). The     Shared Corporate Layer Cost will be calculated using the Company’s AIR / RMS average AAL for each     reinsurance layer purchased times Administrator program AIR / RMS average AAL at September 30.      Parties will mutually agree on reasonable estimate of AIR / RMS average AAL multiples for layers that     are only partially covered by Shared Corporate Layer.         Given that Company reinsurance program incepts at July 1 of each year, 6/12 of costs in this section     are from current catastrophe year and 6/12 from prior catastrophe year.  For example, 2014 calendar     year costs for this calculation are based on 1/2 of 2013 catastrophe year costs and 1/2 of 2014     catastrophe year costs.      b) Costs incurred for the Calendar Year in the purchase of Per Risk Reinsurance including XOL Treaty,     Facultative, ID Theft and any other Reinsurance.  For example, if the treaty incepts on July 1 of the     year, the Calendar Year charge is 6/12 of the cost of the cost of the treaty incepting on July 1 of the     preceding year and 6/12 of the cost of the treaty incepting in the current Calendar Year.    c) Ceded earned premium incurred in the purchase of Quota Share Reinsurance for the policies in this     agreement. For example, if the treaty incepts on July 1 of the year, the Calendar Year charge is 6/12 of    5 

 

   the cost of the treaty incepting on July 1 of the preceding year and 6/12 of the cost of the treaty     incepting in the current Calendar Year.    d) Calendar Year Incurred Losses and ALAE (including the benefit of subrogation).    e) ULAE Charge is [***] of Earned Premiums.     f) IBNR Factors of [***], [***], [***] applied to (d) for Calendar Years 1, 2, 3 respectively where Year 1 is     most recent year (the latest year in calculation).  Year 1 factor will be applied to accident year incurred     losses measured at December 31.  For example, IBNR of [***] will be applied to 2014 based on 2014     accident year losses reported and measured at December 31, 2014.     g) The sum of Commission rate times Earned Premiums for each policy plus all amounts payable as     Commission True-up by Administrator.     h) The sum of Actual Rate of premium taxes times Earned Premiums for each state.  The Actual Rate of     Premium Taxes is the actual Premium Taxes paid divided by the Gross Written Premium for each state.    i) The  sum  of  expense  incurred  for  providing  licensed  ISO  Forms  for  products  administered  by     Administrator. Should Company incur these costs in connection with revenues generated with a party     other than the Administrator, the Administrator’s costs will be limited to a pro rata portion of the expense     associated with Administrator’s revenue relative to the overall revenue.      j) Reinsurance recoveries from deemed or actual reinsurance described in (a).  To the extent covered     losses are ceded (or deemed ceded) by policies contemplated in this Agreement and policies outside of     this Agreement, the reinsurance recoveries will be allocated proportionally in each reinsurance layer     based on gross loss for each catastrophe event.    k) Reinsurance recoveries from actual reinsurance described in (b).  To the extent covered losses are ceded     by  policies  contemplated  in  this Agreement  and  policies  outside  of this Agreement,  the  reinsurance     recoveries will be allocated proportionally in each reinsurance layer based on treaty year total losses     ceded to each reinsurance layer.    l) Reinsurance recoveries, earned ceding commission and any profit sharing, experience account from     actual reinsurance described in (c).  To the extent covered losses are ceded by policies contemplated in     this  Agreement  and  polices  outside  of  this  Agreement,  the  reinsurance  recoveries  will  be  allocated     proportionally in each reinsurance layer based on treaty year losses ceded to each reinsurance layer.     m) All policy fees, inspection fees, setup fees and installment fees on payment plans collected pursuant to     Paragraphs B and C of this Exhibit B.   Note that all amounts in the calculation of ITD Margin are ITD calculations.   All premium calculations exclude, surcharges, assessments and other regulatory charges that are added  onto the policy charges after the calculation of premium.  Premium taxes are included in premium.      6 

 

Modeling and Reinsurance Definitions         AIR Modeling uses the most recently available version of the model running the model settings with        loss amplification (demand surge) without storm surge using the AIR long-term event rates for the        business produced under this agreement.         RMS Modeling uses the most recently available version of the model running the model settings        with loss amplification without storm surge, with secondary uncertainty using the RMS historical        event rates for the business produced under this agreement.         100-Year Return Period PML= Arithmetic Average of the following numbers:        1. AIR loss historical event set with occurrence exceedance probability of 1.0%        2. RMS loss historical event set with occurrence exceedance probability of 1.0%      7 

 

                                                                                                              FOURTH AMENDMENT TO                             ADMINISTRATOR AGREEMENT         THIS FOURTH AMENDMENT TO ADMINISTRATOR AGREEMENT (this “Fourth Amendment”), is  entered into this  24th day of October, 2017,  (the “Execution Date”) by and among SageSure Insurance  Managers, LLC (“Administrator”) and Federated National Insurance Company (the “Company”).         WHEREAS, Administrator and Company entered into that certain Administrator Agreement, as of  June 28, 2013 (the “Agreement”), and         WHEREAS, Administrator and Company desire to make certain amendments to the Agreement as  more particularly described herein.                                    AGREEMENT         NOW  THEREFORE,  in  consideration  of  the  foregoing  and  the  representations,  warranties,  covenants and agreements contained herein, and for other good and valuable consideration, the receipt and  sufficiency of which are hereby acknowledged, the parties hereto agree as follows:         1.    Administrator and Company agree that Exhibit B — Administrator Compensation shall be  amended and restated in its entirety and replaced with Exhibit B attached hereto.                2.    Notwithstanding anything in this Agreement to the contrary, Administrator may not terminate  this Agreement in the event the ITD Profits (as defined in Exhibit B) is a negative number; provided, however,  that Administrator may terminate this Agreement for cause pursuant to Section 10(C) of the Agreement.                3.    All provisions of the Agreement not otherwise amended or modified herein are hereby ratified  and shall remain in full force and effect.                 IN WITNESS WHEREOF, the parties have hereto executed this Fourth Amendment as of the  Execution Date set forth above.            SageSure Insurance Managers, LLC          Federated National Insurance Company   By:  /s/Terrence McLean                   By: /s/ Michael H. Braun         Name: Terrence McLean                     Name: Michael H. Braun           Title: President & CEO                    Title: CEO & President           Date: 10/24/2017                          Date: 10/24/2017                                          

 

                                  EXHIBIT B                            ADMINISTRATOR COMPENSATION   Administrator compensation will consist of the following:      •  Commission     •  Policy Fees and Inspection Fees     •  Setup and Installment Fees on Payment Plans     •  Profit Sharing   All Administrator compensation, other than Profit Sharing, will be reported to Company by the 10th of   each month and paid from Program Bank Account to Administrator's designated bank account.   A.    Commission   The  Administrator  will  earn  commission  based  on  gross  written  premiums  per  policy  (“Commission”).  Commissionable premiums are exclusive of Surcharges and policy fees. Should this agreement terminate  for any reason Administrator agrees to return to the Company all Commission on those policies that are  canceled in a fashion consistent with monthly bordereaux statements.   The Commission allowable under this Agreement shall vary by state in accordance with the list below:   State                      Provisional Commission for policies incepted prior to 9/1/2015  LA, SC, AL                 New Business - [***] of gross written commissionable premiums  LA, SC, AL                 Renewals - [***] of gross written commissionable premiums     State                      Provisional Commission for policies incepted on or after 9/1/2015  LA, SC, AL, TX             New Business - [***] of gross written commissionable premiums  LA, SC, AL,TX              Renewals - [***] of gross written commissionable premiums  [***], [***], [***], [***], [***], [***], [***], [***], [***] - To Be Mutually Agreed upon by Company and Administrator  prior to writing any business in such states, which agreement shall be documented by an addendum to this  Exhibit B.   B.    Policy Fees and Inspection Fees   Only as allowed by applicable state law may the Administrator charge policy fees and inspection fees in  connection with the business written pursuant to this Agreement.   C.    Setup Fees and Installment Fees on Payment Plans                                                                                   

 

The Administrator will collect setup fees and installment fees allowable under applicable state law on payment  plans  in  exchange  for  coverage  costs  of  bank  accounts, credit  card  fees,  ACH  fees  and  lockbox  fees  associated with this Agreement.   D.    Profit Sharing   The Administrator will earn a profit sharing payment annually based on performance. Company will provide  Administrator with any financial information needed to calculation profit sharing no later than March 1 of each  year (the “Annual Profit Calculation”). This information includes, but is not limited to, actual loss amounts paid  and case reserves, actual reinsurance costs and associated allocation calculations and premium taxes. Profit  Sharing will be paid by Company to Administrator within 15 days of receipt from Administrator of annual Profit  Sharing calculations (to be provided on or about March 15) (the “Profit Share Payment Date”).   The intent of the profit sharing arrangement is to establish a sharing of the inception to date profits (“ITD  Profits”) generated under this Agreement. The parties agree that if the profit margin (defined based on ITD  Profit divided by ITD Earned Premium) is greater than [***], then the Administrator is entitled to [***] of the  margin over [***] of the gross profit. Over the cumulative term of this Agreement, if the margin is greater than  [***] but less than [***], then the Administrator is entitled to [***] of the profit margin. If the margin is greater  than [***] and less than [***], the Administrator is entitled to [***] of the profit margin in excess of [***]. If the  profit margin is less than [***], there is no profit sharing.   FUNDING ACCOUNT   Commencing with calendar year 2017, the Administrator will establish a funding account for the benefit of  the Company (the Funding Account). The Funding Account will be available for the Administrator to return  excess  profit  sharing  to  the  Company  in  the  event  the  gross  profit  sharing  payments  made  to  the  Administrator since inception of the Agreement exceed the ITD Profits (such amounts referred to as an  “Excess Profit Share”). Initially, the Administrator will deposit $2,500,000 into the Funding Account, and the  parties  will  determine  annually following  the  Profit  Share  Payment  Date  if  additional  funds  need  to  be  deposited into the Funding Account, or if the amount required should be reduced (e.g., the Funding Account  will never have funds in excess of the ITD Profits). If the Annual Profit Calculation shows that the Administrator  has received any Excess Profit Share, then the Administrator shall return such Excess Profit Share to the  Company from the Funding Account.   If the Funding Account is insufficient to return the full amount of the Excess Profit Share, then the parties will  negotiate in good faith to establish a reasonable timeframe for the Administrator to return the outstanding  amount of the Excess Profit Share to the Company. In no event will the Annual Profit Calculation result in the  Administrator owing more than the ITD Profits received by Administrator to the Company.   The following describes in terms of mathematical expressions the approach to the computation over the life  of this Agreement.   Profit sharing payments shall be based on the calculation set forth below.   Profit Sharing Calculations                                                                                   

 

“ITD” means Inception-to-Date for all revenues subject to this Agreement, which shall include all premiums,  policy fees, inspection fees, setup fees and installment fees on payment plans collected on business written  pursuant to this Agreement. For the purposes of all calculations, Inception-to-Date refers to measurements  for the period starting July 1, 2013 through the latest measurement period for all revenues subject to this  Agreement. For example, ITD Gross Earned Premium (or ITD GEP) for the year-end 2014 profit sharing  calculations, as calculated in early 2015, is the total Gross Earned Premium for the periods from July 1, 2013  through December 31, 2014 and would be defined as ITD GEP or ITD GEP(t). For the same measurement  date in early 2015, ITD GEP(t-1) is defined as the inception-to-date GEP as of the prior year from July 1,  2013 through December 31, 2013. The first measurement period will be for 2013 based on the period from  inception through December 31, 2013.   Profit Sharing Account(t) = ITD Profit   Profit Share Account Increase(t) = Profit Sharing Account (t) - Profit Sharing Account (t-1)   Current Year Gross Earned Premiums = Gross Earned Premiums(t) = GEP(t) = ITD Gross Earned  Premiums(t) - ITD Gross Earned Premiums(t-1)   ITD Margin = ITD Profit / ITD GEP   If ITD Margin >= [***] THEN         ITD Profit Sharing = [(ITD Margin - [***]) * [***] + [***]] * ITD GEP   If ITD Margin >= [***] AND ITD Margin [***] THEN         ITD Profit Sharing = (ITD Margin - [***]) * ITD GEP    ELSE         ITD Profit Sharing = 0   Profit Sharing Earned(t) = MAX[ITD Profit Sharing - SUM(Profit Sharing Earned(i)) for all i < t,0]   If Profit Sharing Eamed(t) > 0 then Profit Sharing Payments will be made 100% within 15 days of the receipt  of final calculations from Administrator (on or about March 31). Commission True-up   Once annually, the Administrator will calculate the average paid commission rate paid to Administrator's  distribution sources.   Average Commission Rate to Distributors = Commission Paid to Distributors / Collected Commissionable  Premium   Provisional Commission Rate = Provisional Commission Amounts Paid / Gross Written Commissionable  Premiums                                                                                   

 

Commissions Paid to Distributors is defined as the agreed percentage of premium paid to producers for the  placement of Company business plus any promotions, giveaways, incentive related programs, and out-of- pocket retail producer expenses designed to increase production of Company products.   If Average Commission Rate + [***] is less than Provision Commission Rate Administrator will return an  amount to the Company equal to (Provisional Commission - Average Commission Rate - [***]) * Gross Written  Cornmissionable Premiums.   For each calendar year this Agreement is in effect, Administrator shall not spend in excess of the Provisional  Commission Rate less [***] without prior written approval from Company.   The Commission True-up Payment from Administrator to Company or from Company to Administrator will  take place simultaneously with any Profit Sharing Payment to Administrator such that the Profit Sharing  payment  will  be  decreased,  if  necessary.  If  there  is  no  Profit  Sharing  payment  due  to  Administrator,  Administrator shall make the Commission True-up Payment on or about April 1st of each year.   For periods prior to but not including 2015, the Commission True-up Payment is deemed to be not applicable  in the calculation of any and all profit share payments, earnings or account adjustments.   General Definitions         ITD Profit (before profit sharing payments) =               ITD Gross Earned Premiums (excluding surcharges, assessments and other regulatory        charges) excluding policy fees and Surcharges)               Less ITD                     a) Deemed Catastrophe Excess-of-Loss Reinsurance Costs                                           b) Actual Per Risk Reinsurance Costs                            c) Actual Quota Share Reinsurance Costs                            d) Actual Gross Losses and ALAE Incurred                            e) ULAE Charge                            f) IBNR Charge                            g) Commissions including Commission True-up amounts                            h) Actual Premium Taxes Incurred                            i) ISO licensing fees for form usage outside of Florida Plus                                                                                          

 

                  j) Deemed Reinsurance Recoveries from Deemed Catastrophe Excess-of-Loss                       Reinsurance in (a)                            k) Actual Reinsurance Recoveries from Per Risk Reinsurance in (b)                            l) Actual Reinsurance Recoveries from Quota Share Reinsurance in (c}                            m) All policy fees not already included in premium, inspection fees, setu fees and                       installment fees on payment plans                         a) Deemed Catastrophe Excess-of-Loss Reinsurance Costs will be calculated as the sum of following two     amounts:            i)  Buy-Down Layer Cost      ii)  Shared Corporate Layer Cost   Buy-Down Layer for the first treaty year attaches at the greater of $4 million or 10% of Administrator's March  31 in force premium (of the year in which reinsurance program incepts). Buy-Down Layer Cost is equal to the  cost of placing Buy-Down Layer for ONLY business covered under this agreement. If the Buy-Down Layer is  not purchased by Company, then the Buy-Down Layer Cost is equal to [***] times modeled AAL at September  30 of the respective year.   Shared Corporate Layer for the 2013 catastrophe year attaches at $7 million and exhausts at 100-year Return  Period PML, The Shared Corporate Layer for 2014 catastrophe year and beyond will attach at the level of  Company's corporate catastrophe reinsurance purchase and exhaust at the 100-year Return Period PML  (this amount may be increased if required by regulatory or Demotech requirements). The Shared Corporate  Layer Cost will be calculated using the Company's AIR / RMS average AAL for each reinsurance layer  purchased times Administrator program AIR / RMS average AAL at September 30. Parties will mutually agree  on reasonable estimate of AIR / RMS average AAL multiples for layers that are only partially covered by  Shared Corporate Layer.   Given that Company reinsurance program incepts at July 1 of each year, 6/12 of costs in this section are  from current catastrophe year and 6/12 from prior catastrophe year. For example, 2014 calendar year costs  for this calculation are based on 1/2 of 2013 catastrophe year costs and 1/2 of 2014 catastrophe year costs.   b) Costs incurred for the Calendar Year in the purchase of Per Risk Reinsurance including XOL Treaty,     Facultative, ID Theft and any other Reinsurance. For example, if the treaty incepts on July 1 of the     year, the Calendar Year charge is 6/12 of the cost of the cost of the treaty incepting on July 1 of the     preceding year and 6/12 of the cost of the treaty incepting in the current Calendar Year.       c) Ceded earned premium incurred in the purchase of Quota Share Reinsurance for the policies in this     agreement. For example, if the treaty incepts on July 1 of the year, the Calendar Year charge is 6/12 of     the cost of the treaty incepting on July 1 of the preceding year and 6/12 of the cost of the treaty incepting     in the current Calendar Year.          d) Calendar Year Incurred Losses and ALAE (including the benefit of subrogation).                                                                                  

 

e) ULAE Charge is [***] of Earned Premiums.       f) IBNR Factors of [***], [***], [***] applied to (d) for Calendar Years 1, 2, 3 respectively where Year 1 is     most recent year (the latest year in calculation). Year 1 factor will be applied to accident year incurred     losses measured at December 31. For example, IBNR of [***] will be applied to 2014 based on 2014     accident year losses reported and measured at December 31, 2014. In the event of a catastrophe loss     that results in IBNR calculations hereunder, Administrator shall include the Catastrophe IBNR amount as     calculated by the Company.          g) The sum  of  Commission  rate  times  Earned  Premiums  for  each  policy  plus  all  amounts  payable  as     Commission True-up by Administrator          h) The sum of Actual Rate of premium taxes times Earned Premiums for each state. The Actual Rate of     Premium Taxes is the actual Premium Taxes paid divided by the Gross Written Premium for each state.          i) The  sum  of  expense  incurred  for  providing  licensed  ISO  Forms  for  products  administered  by     Administrator. Should Company incur these costs in connection with revenues generated with a party     other than the Administrator, the Administrator's costs will be limited to a pro rata portion of the expense     associated with Administrator's revenue relative to the overall revenue.          j) Reinsurance  recoveries  from  deemed  or actual reinsurance described  in  (a).  To the extent  covered     losses are ceded (or deemed ceded) by policies contemplated in this agreement and policies outside of     this agreement, the reinsurance recoveries will be allocated proportionally in each reinsurance layer     based on gross loss for each catastrophe event.          k) Reinsurance recoveries from actual reinsurance described in (b). To the extent covered losses are ceded     by  policies  contemplated  in  this  agreement  and  policies  outside  of  this  agreement,  the  reinsurance     recoveries will be allocated proportionally in each reinsurance layer based on treaty year total losses     ceded to each reinsurance layer.          l) Reinsurance recoveries, earned ceding commission and any profit sharing, experience account from     actual reinsurance described in (c). To the extent covered losses are ceded by policies contemplated in     this  Agreement  and  polices  outside  of  this  Agreement,  the  reinsurance  recoveries  will  be  allocated     proportionally in each reinsurance layer based on treaty year losses ceded to each reinsurance layer.          m) All policy fees, inspection fees, setup fees and installment fees on payment plans collected pursuant to     Paragraphs B and C of this Exhibit B.   Note that all amounts in the calculation of ITD Margin are ITD calculations.   All premium calculations exclude, surcharges, assessments and other regulatory charges that are added  onto the policy charges after the calculation of premium. Premium taxes are included in premium.   Modeling and Reinsurance Definitions                                                                                   

 

AIR Modeling uses the most recently available version of the model running the model settings with  loss amplification (demand surge) without storm surge using the AIR long-term event rates for the  business produced under this agreement.   RMS Modeling uses the most recently available version of the model running the model settings with  loss amplification without storm surge, with secondary uncertainty using the RMS historical event  rates for the business produced under this agreement.   100-Year Return Period PML= Arithmetic Average of the following numbers:   1. AIR loss historical event set with occurrence exceedance probability of 1.0%  2. RMS loss historical event set with occurrence exceedance probability of 1.0%                                                                             

 

                                                                                                              FIFTH AMENDMENT TO                                                                     ADMINISTRATOR AGREEMENT                                                 THIS  FIFTH  AMENDMENT  TO  ADMINISTRATOR AGREEMENT  (this  “Fifth  Amendment”),  is  entered  into  this  24  day  of  October,  2018,  (the  “Execution  Date”)  by  and  among  SageSure  Insurance  Managers, LLC (“Administrator”) and FedNat Insurance Company (the “Company”).                WHEREAS, Administrator and Company entered into that certain Administrator Agreement, as of  June 28, 2013 (the “Agreement”), and                WHEREAS, Administrator and Company desire to make certain amendments to the Agreement as  more particularly described herein.                                           AGREEMENT                                                 NOW  THEREFORE,  in  consideration  of  the  foregoing  and  the  representations,  warranties,  covenants and agreements contained herein, and for other good and valuable consideration, the receipt and  sufficiency of which are hereby acknowledged, the parties hereto agree as follows:                 1.    Administrator and Company agree that Exhibit B – Administrator Compensation shall be        amended and restated in its entirety and replaced with Exhibit B attached hereto.                2.    Administrator and Company agree that Exhibit D – Funding Account shall be added to this        Administrator Agreement as Exhibit D attached hereto.                3.    All provisions of the Agreement not otherwise amended or modified herein are hereby        ratified and shall remain in full force and effect.                 IN WITNESS WHEREOF, the parties have hereto executed this Fifth Amendment as of the  Execution Date set forth above.          SageSure Insurance Managers, LLC                FedNat Insurance Company      By: /s/ Terrence McLean                         By: /s/ Michael Braun             Name: Terrence McLean                           Name: Michael Braun               Title:  President & CEO                         Title: President                  Date:  11/5/2018                                Date:  11/2/2018                                              

 

                                  EXHIBIT B                           ADMINISTRATOR COMPENSATION                                           Administrator compensation will consist of the following:       •  Commission     •  Policy Fees and Inspection Fees     •  Setup and Installment Fees on Payment Plans     •  Commission True-Up     •  Profit Sharing    All Administrator compensation, other than Profit Sharing, will be reported to Company by the 10th of each  month and paid from Program Bank Account to Administrator’s designated bank account.    A.    Commission    The  Administrator  will  earn provisional  commission  based  on  gross  written  premiums  per  policy  (“Commission”).  Commissionable  premiums  are  exclusive  of  Surcharges  and  policy  fees.  Should  this  agreement terminate for any reason Administrator agrees to return to the Company all Commission on those  policies that are canceled in a fashion consistent with monthly bordereaux statements.    The Provisional Commission intends to serve as the best estimate of retail commission expenses plus 10%.  Differences  between  the  Provisional  Commission  and the  actual  commission  expenses  required  are  addressed in the Commission True-up section below.    The Commission allowable under this Agreement shall vary by state in accordance with the list below:    State                      Provisional Commission for policies incepted prior to 9/1/2015  LA, SC, AL                 New Business - [***] of gross written commissionable premiums  LA, SC, AL                 Renewals - [***] of gross written commissionable premiums      State                      Provisional Commission for policies incepted on or after 9/1/2015  LA, SC, AL, TX             New Business - [***] of gross written commissionable premiums  LA, SC, AL, TX             Renewals - [***] of gross written commissionable premiums                                                                               B-1 

 

[***], [***], [***], [***], [***], [***], [***], [***], [***] - To Be Mutually Agreed upon by Company and Administrator  prior to writing any business in such states, which agreement shall be documented by an addendum to this  Exhibit B.    B.    Policy Fees and Inspection Fees    Only as allowed by applicable state law may the Administrator charge policy fees and inspection fees in  connection  with  the  business  written  pursuant  to  this  Agreement.  These  fees  are  intended  to  cover  Administrator Program Vendor Expenses  which  are outlined  in  General  Definitions  of  the  Profit  Sharing  Calculations Section of this Exhibit B.    C.    Setup Fees and Installment Fees on Payment Plans    The Administrator will collect setup fees and installment fees allowable under applicable state law on payment  plans  in  exchange  for  coverage  costs  of  bank  accounts,  credit  card  fees,  ACH  fees  and  lockbox  fees  associated with this Agreement. These costs are inclusive of Administrator Program Vendor Expenses which  are outlined in General Definitions of the Profit Sharing Calculations section of this Exhibit B.    D.    Commission True-up    Once annually, the Administrator will calculate the average paid commission rate paid to Administrator's  distribution sources.    Average Commission Rate to Distributors = (Commission Paid to Distributors / Collected Commissionable  Premium) + (Channels-Specific Retail Contingents Paid / Gross Written Commissionable Premiums)    Provisional Commission Rate = Provisional Commission Amounts Paid / Gross Written Commissionable  Premiums    Commissions Paid to Distributors is defined as the agreed percentage of premium paid to producers for the  placement of Company business plus any promotions, giveaways, incentive related programs (excluding  Channels-Specific Retail Contingents Paid), and out-of•pocket retail producer expenses designed to increase  production of Company products.                                                                                 B-2 

 

Company recognizes that Administrator may enter into Channel-Specific Retail Contingent agreements with  large distributors designed to expand Company business. To the extent that those agreements are based on  earned premium, a provisional rate based on the Channel-Specific Retail Contingent contract may be applied  to that Channel-Specific unearned premium reserve for the Company and added to the amounts paid in  determining  the  total  Channels-Specific  Retail  Contingents  Paid  to  a  distributor  in  each  period.  These  Channels-Specific Retail Contingents Paid will be calculated as percent of Gross Written Commissionable  Premiums and added to Average Commission Rate    If Average Commission Rate + [***] is less than Provision Commission Rate, Administrator will return an  amount to the Company equal to (Provisional Commission - Average Commission Rate - [***]) * Gross Earned  Commissionable Premiums (“Commission Giveback”). If Average Commission Rate + [***] is more than the  Provisional Commission Rate, than Company will return to the Administrator an amount equal to (Average  Commission  Rate  +[***] - Provisional  Commission)  *  Gross  Earned  Commissionable  Premiums  (“Commission Shortfall”).    The  Commission  Giveback  from  Administrator  to  Company  or Commission  Shortfall  from  Company  to  Administrator will take place simultaneously with any Profit Sharing Payment to Administrator such that the  Profit  Sharing  payment  will  be  decreased,  if  necessary.  If  there  is  no  Profit  Sharing  payment  due  to  Administrator, Administrator or Company shall make the Commission True-up Payment on or about October  1st of each year. Administrator collection of Program Fees more or less than Administrator incurred Program  Vendor Expenses shall also be taken into consideration when making this Commission True-up Payment, to  increase or decrease accordingly in the event of no Profit Sharing Payment.    For all policies incepting before September 1, 2015, the Commission True-up Payment is deemed to be not  applicable in the calculation of any and all profit share payments, earnings or account adjustments.    E.    Profit Sharing  The Administrator will earn a profit sharing payment annually based on performance. Company will provide  Administrator with any financial information needed to calculate profit sharing no later than July 15th of each  year (the “Annual Profit Calculation”). This information includes, but is not limited to, actual loss amounts paid  and case reserves, actual reinsurance costs and associated allocation calculations and premium taxes. Profit  Sharing will be paid by Company to Administrator within 15 days of receipt from Administrator of annual Profit  Sharing calculations (to be provided on or about July 31) (the “Profit Share Payment Date”).                                                                              B-3 

 

  The intent of the profit sharing arrangement is to establish a sharing of the inception to date profits (“ITD  Profits”) generated under this Agreement. The parties agree that if the profit margin (defined based on ITD  Profit divided by ITD Earned Premium) is greater than [***], then the Administrator is entitled to [***] of the  margin over [***] of the gross profit. Over the cumulative term of this Agreement, if the margin is greater than  [***] but less than [***], then the Administrator is entitled to [***] of the profit margin. If the margin is greater  than [***] and less than [***], the Administrator is entitled to [***] of the profit margin in excess of [***]. If the  profit margin is less than [***], there is no profit sharing.    Notwithstanding anything herein to the contrary, Administrator shall not be entitled to receive any payment  of  profit  share  hereunder  during  any  “Treaty  Year”  (as  defined  below)  in  which  the  Company  incurs  a  catastrophe loss or losses in any state where business is written pursuant to this Agreement unless and until  Administrator has satisfied its obligations to return to Company any Excess Profit Share as set forth below.    Profit Sharing Calculations    The following describes in terms of mathematical expressions the approach to the computation over the life  of this Agreement.    Profit sharing payments shall be based on the calculation set forth below.    “ITD” means Inception-to-Date for all revenues subject to this Agreement, which shall include all premiums,  policy fees, inspection fees, setup fees and installment fees on payment plans collected on business written  pursuant to this Agreement. For the purposes of all calculations, Inception-to-Date refers to measurements  for the period starting July 1, 2013 through the latest measurement period for all revenues subject to this  Agreement. For example, ITD Gross Earned Premium (or ITD GEP) for the year-end 2014 profit sharing  calculations, as calculated in early 2015, is the total Gross Earned Premium for the periods from July 1, 2013  through December 31, 2014 and would be defined as ITD GEP or ITD GEP(t). For the same measurement  date in early 2015, ITD GEP(t-1) is defined as the inception-to-date GEP as of the prior year from July 1,  2013 through December 31, 2013. The first measurement period will be for 2013 based on the period from  inception through December 31, 2013.                                                                                 B-4 

 

For 2018, the first measurement period will be the Stub Period of January 1, 2018 through June 30, 2018  and the second measurement period will be the Treaty Year, July 1, 2018 through June 30, 2019. The Treaty  Year measurement period will be for July 1 through June 30 each following year.    The Stub Period represents the conversion of this profit sharing calculation from Calendar Year to Treaty  Year. A one-time Profit Sharing Payment will be calculated and paid prior to inception of 2018 Treaty Year.  This one-time profit sharing amount is $[***]. As with other profit sharing amounts, any changes that impact  this calculation discovered after execution of this contract will included in calculation of future profit sharing  amounts.    Profit Sharing Account(t) = ITD Profit    Profit Share Account Increase(t) = Profit Sharing Account (t) - Profit Sharing Account (t-1)    Current Year Gross Earned Premiums = Gross Earned Premiums(t) = GEP(t) = ITD Gross Earned  Premiums(t) - ITD Gross Earned Premiums(t-1)    ITD Margin = ITD Profit / ITD GEP    If ITD Margin >= [***] THEN          ITD Profit Sharing = [(ITD Margin - [***]) * [***] + [***]] * ITD GEP    If ITD Margin >= [***] AND ITD Margin < [***] THEN          ITD Profit Sharing = (ITD Margin - [***]) * ITD GEP    ELSE          ITD Profit Sharing = 0    Profit Sharing Earned(t) = MAX[ITD Profit Sharing - SUM(Profit Sharing Earned(i)) for all i < t,0]    If Profit Sharing Earned(t) > 0 then Profit Sharing Payments will be made 100% within 15 days of the receipt  of final calculations from Administrator. Considerations for Administrator collection of Program Fees more or                                                                               B-5 

 

less than Administrator incurred Program Vendor Expenses or Commission Giveback / Shortfall due shall be  made against the Profit Sharing payment in any period.    General Definitions          ITD Profit (before profit sharing payments) =                ITD Gross Earned Premiums (excluding surcharges, assessments and other regulatory        charges)                            Less ITD                                  a) Deemed Catastrophe Excess-of-Loss Reinsurance Costs                                           b) Actual Per Risk Reinsurance Costs                                           c) Actual Quota Share Reinsurance Costs                                           d) Actual Gross Losses and ALAE Incurred                                           e) ULAE Charge                                           f) IBNR Charge                                           g) Commissions including Commission True-up amounts                                           h) Actual Premium Taxes Incurred                                           i) ISO licensing fees                                           j) Any assessments charged by guaranty fees, residual market mechanisms,                       other statutory associations, or similar entities that the Company is unable to                       collect from policyholders due to applicable law or otherwise.                                            k) Program Vendor Expenses              Plus                                                                               B-6 

 

                                         l) Deemed Reinsurance Recoveries from Deemed Catastrophe Excess-of-Loss                       Reinsurance in (a)                                           m) Actual Reinsurance Recoveries from Per Risk Reinsurance in (b)                                           n) Actual Reinsurance Recoveries from Quota Share Reinsurance in (c)                                           o) Program Fees                         a) Deemed Catastrophe Excess-of-Loss Reinsurance Costs will be calculated as the sum of following two     amounts:                            i) Buy-Down Layer Cost                            ii) Shared Corporate Layer Cost                         Buy-Down Layer for the first treaty year attaches at the greater of $4 million or 10% of Administrator's March  31 in force premium (of the year in which reinsurance program incepts). Buy-Down Layer Cost is equal to the  cost of placing Buy-Down Layer for ONLY business covered under this agreement. If the Buy-Down Layer is  not purchased by Company, then the Buy-Down Layer Cost is equal to [***] times modeled AAL at September  30 of the respective year.                         Shared Corporate Layer for the 2013 catastrophe year attaches at $7 million and exhausts at 100-year Return  Period PML. The Shared Corporate Layer for 2014 catastrophe year and beyond will attach at the level of  Company's corporate catastrophe reinsurance purchase and exhaust at the 100-year Return Period PML  (this amount may be increased if required by regulatory or Demotech requirements). The Shared Corporate  Layer Cost will be calculated using the Company's AIR / RMS average AAL for each reinsurance layer  purchased times Administrator program AIR / RMS average AAL at September 30. Parties will mutually agree  on reasonable estimate of AIR / RMS average AAL multiples for layers that are only partially covered by  Shared Corporate Layer.                         b) Costs incurred for the Treaty Year in the purchase of Per Risk Reinsurance including XOL Treaty,     Facultative, ID Theft and any other Reinsurance.                                                                                                     B-7 

 

c) Ceded earned premium incurred in the purchase of Quota Share Reinsurance for the policies in this     agreement. For example, if the treaty incepts on October 1 of the year, the Treaty Year charge is 3/12 of     the cost of the treaty incepting on October 1 of the preceding year and 9/12 of the cost of the treaty     incepting in the current Treaty Year.                         d) Treaty Year Incurred Losses and ALAE (including the benefit of subrogation).                         e) ULAE Charge is [***] of Earned Premiums.                         f) IBNR Factors of [***], [***], [***] applied to (d) for Treaty Years 1, 2, 3 respectively where Year 1 is most     recent year (the latest year in calculation). For example, IBNR of [***] will be applied to 2018 Treaty Year     for losses occurring between 07/01/2018 – 06/30/2019 measured at 06/30/2019. IBNR of 3% will be     applied  to  2018  Treaty  Year  for  losses  occurring  between  07/01/2017 – 06/30/2018  measured  at     06/30/2019. In the event of a catastrophe loss that results in IBNR calculations hereunder, Administrator     shall include the Catastrophe IBNR amount as calculated by the Company.                         g) The  sum  of  Commission  rate  times  Earned  Premiums  for  each  policy  less  all  amounts  payable  as     Commission  Giveback  by  Administrator  to  Company  or  plus  all  amounts  payable  as  Commission     Shortfall by Company to Administrator.                         h) The sum of Actual Rate of premium taxes times Earned Premiums for each state. The Actual Rate of     Premium Taxes is the actual Premium Taxes paid divided by the Gross Written Premium for each state.                         i) The  sum  of  expense  incurred  for  providing  licensed  ISO  Forms  for  products  administered  by     Administrator. Should Company incur these costs in connection with revenues generated with a party     other than the Administrator, the Administrator’s costs will be limited to a pro rata portion of the expense     associated with Administrator’s revenue relative to the overall revenue.                         j) Any assessments charged by guaranty fees, residual market mechanisms, other statutory associations,     or similar entities that the Company is unable to collect from policyholders due to applicable law or     otherwise.                                                                                                      B-8 

 

k) Program Vendor Expenses are defined as all vendor expenses incurred by the Administrator for the     purpose acquiring, qualifying, underwriting, inspecting, modeling, servicing, issuing, and administering     payments to Company business. Agreed vendor expense are (but not limited to):                               1. MapRisk/RiskMeter (geospatial and data lookups)        2. MSB (replacement cost estimation)        3. TransUnion (credit history)        4. ISO A plus (loss history)        5. Inspections        6. AIR & RMS (catastrophe modeling)        7. Print, Postage, Mail, CVExchange        8. Lockbox Fees        9. Credit Card and ACH fees and any new charges for payment methods        10. Any new vendor products to provide better data lookups, replacement cost, credit score or           insurance scores, loss history or anything else used to improve portfolio profitability        11. Any new vendor products to add to or replace traditional inspections        12. Any new vendor intended to replace the services of any specific vendor previous mentioned    The amount of Program Vendor Expenses will be sourced from Administrator GAAP Financial statements  and allocated based on mutually agreed measures by Company and Administrator which are commensurate  with the nature of each expense and how it is best apportioned to Company given Administrator operations.    l) Reinsurance  recoveries  from  deemed  or actual reinsurance described  in  (a).  To the extent  covered     losses are ceded (or deemed ceded) by policies contemplated in this agreement and policies outside of     this agreement, the reinsurance recoveries will be allocated proportionally in each reinsurance layer     based on gross loss for each catastrophe event.    m) Reinsurance recoveries from actual reinsurance described in (b). To the extent covered losses are ceded     by  policies  contemplated  in  this  agreement  and  policies  outside  of  this  agreement,  the  reinsurance     recoveries will be allocated proportionally in each reinsurance layer based on treaty year total losses     ceded to each reinsurance layer.                                                                                 B-9 

 

n) Reinsurance recoveries, earned ceding commission and any profit sharing, experience account from     actual reinsurance described in (c). To the extent covered losses are ceded by policies contemplated in     this  Agreement  and  polices  outside  of  this  Agreement,  the reinsurance  recoveries  will  be  allocated     proportionally in each reinsurance layer based on treaty year losses ceded to each reinsurance layer.          o) Program Fees shall are defined as all policy fees, inspection fees, setup fees and installment fees on     payment plans collected pursuant to Paragraphs B and C of this Exhibit B.          Note that all amounts in the calculation of ITD Margin are ITD calculations.          Administrator and Company mutually agree that Program Fees and Program Vendors Expenses are equal  to each other for all periods up to December 31, 2017.          Modeling and Reinsurance Definitions                AIR Modeling uses the most recently available version of the model running the model settings with        loss amplification (demand surge) without storm surge using the AIR long-term event rates for the        business produced under this agreement.                RMS Modeling uses the most recently available version of the model running the model settings with        loss amplification without storm surge, with secondary uncertainty using the RMS historical event        rates for the business produced under this agreement.                100-Year Return Period PML= Arithmetic Average of the following numbers:                1. AIR loss historical event set with occurrence exceedance probability of 1.0%                2. RMS loss historical event set with occurrence exceedance probability of 1.0%                                                                               B-10 

 

                                                                                                                   EXHIBIT D                                                                         FUNDING ACCOUNT                                           Commencing with the year ending December 31, 2017, the Administrator will establish and maintain a funding  account for the benefit of the Company (the Funding Account) at a financial institution in the United States.    The Administrator and the Company will agree on or about July 1 of each year, the amount to be funded (the  Funded Amount), based on the method outlined below. The Funded Amount will remain in place for a period  beginning July 1 and ending December 31 (the Funding Period). Within 30 days of determination, the Funded  Amount:       1. Will be deposited with cash in the Funding Account; or     2. Posted in the form of one or more letters of credit, acceptable to the Company and executed by the        Administrator for the Company’s benefit; or     3. A combination of 1 and 2 above.          For deposits of the Funded Amount to the Funding Account, the Administrator may:             1. Request the Company withhold monies due the Administrator from Profit Sharing and deposit such        monies in the Funding Account; or     2. Deposit monies in the Funding Account from its own sources of funds; or     3. Use a combination of 1 and 2 above.  The amount of the Funding Account will be set forth by the greater of A or B as outlined below:             A) 0.5 * (Two-Event Hurricane Retention – Expected “No Hurricane” Profit)     B) $2,500,000          Two-Event Hurricane Retention is defined as the Company’s retained catastrophe losses after two (2) 100- YR Return Period PML hurricane events.          Expected “No Hurricane” Profit is defined as a budgeted measure of the Administrator’s profitability should  no hurricanes occur between July 1 and December 31 of each Treaty Year. Treaty Year is defined as the  period from July 1 of a year to June 30 of the following year and corresponds with the Company’s contract  periods for catastrophe reinsurance.                                                                                                                 D-1 

 

Expected “No Hurricane” Profit shall be calculated each year with the following variables:       A. Earned Premium Budgeted by Administrator for the period July 1 through December 31     B. Projected Corporate and Drop-Down Catastrophe XOL Cost for each Treaty Year, based on        reinsurance contract deposit premiums. Cost are to be allocated evenly each month over the        Treaty Year.     C. Actual Property Per Risk Cost of July 1 through December 31 of each calendar year, based on        current terms and conditions     D. ULAE / Earned Premium = 3.0%     E. Ultimate Non-Hurricane Loss & ALAE / Earned Premium - (Administrator best estimate based on        prior actuarial support)     F. Provisional Acquisition Expenses / Earned Premium (Best estimate based on previous year or        mutually agreed)        Expected “No Hurricane” Profit = A*(1 - (D + E + F)) - B – C    Notwithstanding the calculation above, the Company and the Administrator agree $4,000,000 shall be the  agreed-upon amount held in the Funding Account for the Funding Period ending December 31, 2018.    The Funded Amount will be available for the Administrator to return excess profit sharing to the Company in  the event the gross profit-sharing payments made to the Administrator since inception of the Agreement  exceed the ITD Profits (such amounts referred to as an “Excess Profit Share”). If the Annual Profit Calculation  shows that the Administrator has received any Excess Profit Share, then the Administrator shall return such  Excess Profit Share to the Company from the Funding Account.    If in any year the Funded Amount is insufficient to return the full amount of the Excess Profit Share, then the  parties will negotiate in good faith to establish a reasonable timeframe for the Administrator to return the  outstanding amount of the Excess Profit Share to the Company, no later than December 31 of the applicable  year.  In  the  event  that  the  Administrator  does  not  return  the  full  amount  of  the  Excess  Profit  Share  by  December 31 of the applicable year, the Company may, in its sole discretion, offset and withhold payment of  commissions due to Administrator under Paragraph A of Exhibit B attached to this amendment (in an amount  not to exceed 3% of Written Premium per month) and/or offset and withhold any profit sharing payments due  to Administrator pursuant to Paragraph E of Exhibit B, in an amount equal to the Excess Profit Share not  returned to Company by Administrator.    The Company and the Administrator agree to the following provisions for releasing the Funded Amount:       1. If at any time during the Funding Period, and with 30 days’ written notice, the Company provides the        Administrator with documentation of catastrophe losses, net of reinsurance (hereinafter, Retained        Catastrophe Losses), exceeding one-half (50%) of the Expected “No Hurricane” Profit, the Company        may draw on the letter(s) of credit making up a portion of, or all, of the Funded Amount, or the        Administrator will remit monies making up a portion of, or all, of the Funded Amount to the Company        in  an  amount  equal to  the  Retained  Catastrophe  Losses  up  to  the  total  balance  in  the  Funded        Amount.                                                                                D-2 

 

2. If the Company’s Retained Catastrophe Losses do not exceed the Expected “No Hurricane” Profit     during the Funding Period, the Administrator will be entitled to terminate any letter(s) of credit and     transfer  any  remaining  balance  of  the  Funded  Amount  held  in  the  Funding  Account  to  its  own     accounts by the last day of the Funding Period.                                                                                           D-3exhibit1010-sagesureinsm

DocuSign Envelope ID: 321D278C-FA26-4B20-952A-6F65505F7A8C                                    Administrative Services Agreement             This  Administrative  Services  Agreement (the  “Agreement”),  made  this  1st  day  of            November 2015 (“Effective Date”), by and between FedNat Underwriters, Inc.    ("FNU")            and SageSure Insurance Managers LLC ("Company").             WHEREAS,  the  Company  wishes  to  engage  FNU  (together  the  “Parties”)  in  the            performance of various insurance customer service and processing functions.             NOW THEREFORE, in consideration of the mutual covenants hereinafter contained and            upon valuable consideration received, the Parties hereto agree as follows:                I.  Administrative Services                   A.  Company and FNU agree that all work performed by FNU for, or on behalf of,                     the Company shall be first be outlined in a Statement of Work (“SOW”). Each                     SOW will serve as an amendment to this Agreement and will detail Work                     Performed, Duration and Compensation.                    B.  All activities of FNU pursuant to this Agreement shall be in strict compliance                     with the laws and regulations of the state(s) in which insurance is transacted                     in accordance with this Agreement.                    C.  Except as specifically set forth in this Agreement, the Company shall not be                     responsible for FNU's expenses and costs of performance of this Agreement,                     including, but not limited to, salaries, bonuses, rentals, transportation                     facilities, clerk hire, advertising, exchange, personal license fees, or any other                     expenses whatsoever.  Except as specifically set forth in this Agreement or as                     otherwise agreed to in writing between the parties, FNU's sole compensation                     shall be the amounts payable to FNU pursuant to the provisions in Section II.                     D.  Company will provide FNU with all information necessary or appropriate for                     FNU to perform its responsibilities under this Agreement.              II. Compensation               A.  All fees payable to FNU under this Agreement are set forth in the individual                  SOWs, which may be amended from time to time by written agreement of the                  Parties.                  B.  FNU shall invoice Company for fees due hereunder. Company will be fees due                  within 30 days of invoice date.                                                   1 

 

DocuSign Envelope ID: 321D278C-FA26-4B20-952A-6F65505F7A8C                         III. Additional Duties of FNU                           A. FNU  shall,  at  all  times  during  the  period  of  this  Agreement,  comply  with  all                  applicable  laws  and  all  lawful  orders,  policy  decisions  or  other  requirements  of                  the relevant Department of Insurance.                              B. All books, records, accounts, documents and correspondence of FNU reasonably                  necessary  to  confirm FNU’s  proper  performance  of  this  Agreement  shall,  at  all                  times, with 10 business days’ notice, be open to examination by any authorized                  representative of the Company no more than twice per calendar year.  FNU shall                  make  copies  of  such  records  available  upon  request  by  the  Company  whether                  such request is before or after termination of this Agreement. Such records must                  be maintained for seven (7) years or until the completion of a financial or market                  conduct examination  by any insurance  department with  jurisdiction  over  the                  relevant  insurance  carrier,  or  as  set  forth  in  Company’s or  relevant  insurance                  carrier’s document  retention  policy,  whichever  is  longer,  as  long  as  such                  document  retention  policy  has  been provided  to FNU in  writing  prior  to  the                  termination of this Agreement.                           C. FNU shall maintain such licenses as required under applicable law to perform its                  duties hereunder.                        IV. Term and Expiration                                           A. This Agreement shall remain in effect for a period of one (1) years (the “Initial                  Term”) from the Effective Date.  This Agreement will renew automatically for                  additional one (1) year terms (each, together with the Initial Term, a “Term”)                  following the expiration of each Term unless either party provides to the other                  written notice of its election not to renew, such notice to be given not later than                  ninety (90) days  prior to the expiration of any Term.                               B. Notwithstanding the foregoing, either party may terminate this Agreement with                  respect to the other party upon 90 days written notice to such other party.                                 C. Notwithstanding the foregoing, FNU may terminate this Agreement upon written                  notice if any undisputed payment due from Company hereunder is not paid within                  ninety (90) days of its Due Date.                                 D. Company may terminate this agreement immediately upon notice to FNU upon                  any of the following events: (a) repeated problems in the performance of the                  Services; and/or (b) FNU fails to perform any Company representation, covenant,                  and/or obligation contained in this Agreement.  The determination as to whether                  any of the aforementioned events have occurred will be made atCompany’s sole                  discretion.                                                    2             

 

DocuSign Envelope ID: 321D278C-FA26-4B20-952A-6F65505F7A8C                E. Upon termination of this Agreement as between Company and FNU, Company                  shall return to FNU all of FNU's Confidential Information, as defined below, and                  all other information and documentation tendered to Company by FNU pursuant                  to this Agreement, and FNU shall return to Company all of Company’s                  Confidential Information and all other information and documentation tendered to                  FNU by Company and the parties shall otherwise cooperate with each other to                  effect an orderly transition to a successor administrative service company, if any.                        V.  Indemnification, Hold Harmless and Insurance Provisions                           A. Each party will at all times defend, indemnify and hold harmless the other party                  from and against any and all claims for either damages, liabilities, personal                  injuries, death, costs or expenses including, without limitation, reasonable                  attorneys’ fees and expenses, arising out of or relating to:  (a) such party’s                  intellectual property, including, without limitation, any alleged infringement of any                  copyright, patent, literary, privacy, publicity, trademark, service mark or any other                  personal, moral or contract deficiency; (b) such party’s failure to timely collect                  and pay all applicable taxes; or (c) such party’s failure or alleged failure to                  comply with this Agreement or caused in whole or in part as a result of such                  party’s negligent error or omission and/or wrongful act.  The indemnified party will                  give the indemnifying party written notice of any claim, action or demand for                  which indemnity is claimed describing in reasonable detail the nature of the                  claim.  The failure to timely provide such notice shall not affect the right of the                  indemnified parties to indemnification hereunder, except to the extent the                  indemnifying party is prejudiced by such delay.  In the case of third party claims,                  the indemnifying party shall have the control of the defense and/or settlement of                  any claim, and the indemnified party shall cooperate in the defense and/or                  settlement as is required and reasonable; provided that the indemnifying party                  shall not enter into any settlement agreement without the written consent of the                  indemnified party (which consent shall not be unreasonably withheld, conditioned                  or delayed); provided, further, that such consent shall not be required if (i) the                  settlement agreement contains from the third party asserting the claim a general                  release to all indemnified parties affected by the claim and (ii) the settlement                  agreement does not contain any sanction or restriction upon the conduct of any                  business by the indemnified party or its affiliates.  If the indemnified party shall                  withhold its consent to the indemnifying party proposed settlement of such claim,                  then the indemnifying party may, in its sole discretion, elect to pay the                  indemnified party the full amount of the proposed settlement, in which case, the                  indemnifying party shall be relieved of any further liability under this Article V to                  the same extent as if such proposed settlement had been entered into on the                  terms proposed by the indemnifying party.  Each of the Parties shall cooperate,                  and cause their respective affiliates to cooperate, in the defense or prosecution                  of any legal or other proceeding that is the subject of indemnification hereunder                  and shall promptly execute such instruments and furnish or cause to be furnished                  such records, information and testimony, and attend such conferences, discovery                  proceedings, hearings, trials or appeals, as may be reasonably requested in                                                   3             

 

DocuSign Envelope ID: 321D278C-FA26-4B20-952A-6F65505F7A8C                   connection therewith.  Without limiting the generality of the foregoing, the                  indemnified party shall take such additional actions as reasonably requested by                  the indemnifying party and its counsel in contesting any  claim which the                  indemnifying party elects to contest, including the making of any related                  counterclaim against the person asserting the claim or any cross complaint                  against any person, and, to the extent the indemnified party is entitled to                  indemnification hereunder with respect to such claim, the indemnifying party shall                  reimburse the indemnified party for its reasonable out-of-pocket costs and                  expenses actually incurred in taking such requested actions.  The indemnified                  party may participate in, but not control, any defense or settlement of any claim                  controlled by the indemnifying party pursuant to this Article V, and the                  indemnified party shall bear its own costs and expenses with respect to such                  participation.                B. FNU shall maintain errors and omissions insurance with aggregate limits no less                 than  two  million  dollars  ($2,000,000),  coverage  to  be  provided  by  a  Best’s  "A"                 rated  company  or  other  company  to  be  reasonably  acceptable  to  Company.                 FNU  shall  furnish  a  certificate  of  such  insurance  to  Company  at  Company's                 request.            VI. Confidentiality               A. Pursuant  to  this  Agreement,  each  party  may  come  in  contact  with  Confidential                 Information of the other party. “Confidential Information” means any confidential,                 non-public  or  proprietary  information,  data  or  material,  whether  written,  via                 computer disk or other electronic media, which the party may obtain knowledge                 of through or as a result of the relationship established hereunder and includes                 but is not limited to Customer Information, meaning any information related to a                 customer  of  Company  or  that  can  be  identified  with  respect  to  a  customer  of                 Company,  including  the  fact  that  an  individual  is  a  customer  of  Company.                 Information  received  from  a  party  shall  not  be  deemed  to  be  proprietary                 information  and/or  Confidential  Information  which  is:  (i)  already  known  to  the                 receiving party without obligation of confidentiality; or (ii) becomes publicly known                 through no wrongful act of the receiving party; or (iii) received by a party from a                 third party without similar restriction and without breach of this Agreement; or (iv)                 independently  developed  by  a  party;  or  (v)  approved  for  release  by  written                 authorization  of  the  party  providing  the  information.   In  addition,  confidential or                 proprietary information may, without breach hereof, be disclosed pursuant to the                 lawful  requirement  or  a  request  of  a  court  of  competent  jurisdiction  or                 government  agency,  provided  that  the  party  to  be  releasing  the  information,                 immediately  after  it  gains  knowledge  thereof,  gives  the  party  providing  the                 information  written  notice  (but  in  all  events  before  disclosing),  and  provided                 further that the party to be releasing the information reasonably cooperates with                 the  party  providing  the  information  (which  party  shall  reimburse  the  releasing                 party  for  their  reasonable  costs  in  such  cooperation)  in  obtaining  an  adequate                 protective  order.  The  parties  agree  to  hold  all  Confidential  Information  in                                                  4 

 

DocuSign Envelope ID: 321D278C-FA26-4B20-952A-6F65505F7A8C                   confidence, not to use the Confidential Information for any purpose other than for                  the purpose of its business with the others and to only disclose it to each other’s                  respective officers, directors, employees, consultants or independent contractors                  who have been instructed not to disclose such Confidential Information, who are                  legally bound to confidentiality obligations similar in scope to those herein, and                  who  have  a  specific  need-to-know.   The  parties  further  agree  to  use                  commercially reasonable efforts to protect the confidentiality of the Confidential                  Information they receive, at least equivalent to the degree of care that each uses                  in its own business to protect its own similar Confidential Information.                B. Each  party  agrees  to  immediately  notify  the  others  upon  its  discovery  or                 reasonable suspicion of the disclosure of Confidential Information to any person                 who is not an authorized user or authorized recipient of the information or of any                 security breach by an authorized user or authorized recipient of the information.                 Each party will provide the other with full details of such disclosure or breach and                 will take measures to prevent a recurrence of such disclosure or breach, and will                 cooperate  with  the  party  who  has  suffered  the  unauthorized  disclosure,  at  the                 other party’s cost, in any action deemed necessary to protect the confidentiality                 of the disclosed material.            VII. Miscellaneous               A. No party shall be responsible for any delay or failure of performance under this                 Agreement by reason of any acts, events or circumstances beyond its control.                 Such acts, events or circumstances shall include, but not be limited to, Acts of                 God, natural disasters, fires, floods, failure of dikes, dams or levees, wars,                 terrorism, civil disturbances, sabotage, accidents, labor disputes, governmental                 actions, and failures or delays of transportation and/or transmission.  If Company                 or FNU is rendered unable, wholly or in part, by such force majeure to carry out                 its obligations under this Agreement, that party shall give to the other party                 prompt notice thereof, and such obligations shall be suspended to the extent and                 during such time as they are reasonably affected by the force majeure and the                 affected party uses its best efforts to meets its obligations under this Agreement                 as quickly as possible thereafter.  This clause shall not excuse the non-payment                 or late payment of any monetary obligation by either party.               B. This Agreement constitutes the entire agreement between the parties with                 respect to the subject matter hereof and supersedes all prior and contemporary                 agreements in connection herewith.               C. FNU and its personnel shall not be considered employees of Company. The                 relationship of the parties shall be that of independent contractors.  FNU will,                 during the term of this Agreement, maintain all necessary insurance for its                 personnel, including, but not limited to, worker’s compensation, disability,                 unemployment insurance, and general liability insurance.                                                   5 

 

DocuSign Envelope ID: 321D278C-FA26-4B20-952A-6F65505F7A8C                D. The relationship between FNU and Company is not one of a joint venture or                 partnership and nothing in this agreement shall be construed to create any such                 relationship between the parties hereto.               E. Any controversy, dispute, or claim between the Parties arising out of the                 interpretation, performance, or breach of this Agreement, shall be resolved by                 binding arbitration at the request of either party, in accordance with the rules of                 the American Arbitration Association. Each party will select an arbitrator.  The                 two arbitrators will select a third.  If they cannot agree on a third arbitrator within                 30 days, either may request that a selection be made by a judge of a court                 having jurisdiction. The arbitrators shall be active or retired disinterested                 executive officers of property/casualty insurance or reinsurance companies.                 Each party will (1) pay the expenses it incurs; and (2) bear the expense of the                 third arbitrator equally.  A decision agreed to by two of the arbitrators will be                 binding. The location of arbitration proceedings will be in Florida.  The decision of                 the arbitrator(s) shall be final and unreviewable for error of law or legal reasoning                 of any kind. Damages pursuant to this Agreement shall not include those                 deemed exemplary or punitive in nature, nor may they include damages for lost                 profits.  Should any dispute arise out of the terms or performance of this                 Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees                 and costs as determined by the arbitrators.  Judgment upon the arbitrators'                 award may be entered and enforced in any court of competent jurisdiction.               F. No waiver of any right under this Agreement shall be effective unless in writing                 and signed by the party against whom enforcement is sought.  No failure or delay                 in exercising any right shall operate as a waiver thereof.               G. This Agreement is for the sole and exclusive benefit of the parties and their                 successors and permitted assigns, and no third party is intended to or shall have                 any rights hereunder.               H. Except as otherwise provided herein or except as may be mutually agreed upon                 in writing during the normal course of business, all written administrative                 procedures, notices, requests or reports hereunder must be in writing, mailed by                 first class registered or certified mail (postage prepaid), overnight mail, electronic                 mail, or hand-delivered to the address below:                     a. If to the Company:                                      Terrence McLean                                        SageSure Insurance Managers LLC                                       101 Hudson St. Ste. 2700                                         Jersey City, NJ 07302                      b. If to FNU:                                      Gordon Jennings                                         FedNat Underwriters, Inc                                                   6 

 

DocuSign Envelope ID: 321D278C-FA26-4B20-952A-6F65505F7A8C                                        14050 NW 14th Street, Suite 180                                       Sunrise, FL 33323                I. Neither Company nor FNU may assign its rights and obligations under this                 Agreement except to a corporate parent or affiliated entity and with the consent                 of the other party, which consent will not be unreasonably withheld.               J. This Agreement shall be governed by, and construed in accordance with, the                 laws of the State of Florida, without regard to its choice of laws provisions.               K. Neither party shall use the name or marks of the other for any purpose, including                 advertisement or public relations announcements, without prior written approval.               L. In the event any provision of this Agreement is deemed to be invalid, if possible,                 and if the parties agree, it shall be modified to eliminate any objection to its                 validity.  If the provision cannot be modified, or the parties cannot agree to a                 modification, it shall be excised from this Agreement and the rest of this                 Agreement shall continue in effect.            IN  WITNESS  WHEREOF,  the  Parties  have  executed  this  Agreement  in  duplicate            originals to be effective as of the date and year above written as “Effective Date.”             SageSure Insurance Managers LLC           FedNat Underwriters, Inc.             By:                                       By:             Name:   Terrence Mclean                   Name:    J. Gordon Jennings, III            Title:  President & CEO                   Title:   President                                                               1/6/2016           Date:   1/5/16                            Date:                                                    7 

 

DocuSign Envelope ID: 321D278C-FA26-4B20-952A-6F65505F7A8C                                         First Statement of Work                  Attached to and forming a part of the FNU Administrative Service Agreement             Work Performed:                  FNU will perform, and the Company hereby grants authority to FNU to perform,                  the following in the name and stead of the Company:                   a. Customer Service Representatives (CSR):  Using FNU’s staff and facilities,                    provide CSR support during hours agreed upon between FNU and Company                    for:                      Via Telephone, and in a timely manner, answering and responding to                       mortgagee representative requests for policy information, adjusting                       mortgagee clauses if needed, and documenting the interaction in policy                       notes.  Timely manner is defined as answering 80% of telephone calls                       within 30 seconds.                  b. CSR Compliance:  FNU CSR’s will provide CSRs that will:                      Comply as required with state license requirements;                      Answer coverage, policy and accounting questions in accordance with                       Company’s guidelines and Company’s training materials and refer other                       questions to Company;                      Conform to the reasonable training and oversight by Company’s field                       representatives, to include giving Company representatives access to call                       recordings for periodic telephone monitoring reviews            Report(s):                  FNU will provide the Company a report (electronic file in .csv or Excel format) on the            details of the telephone calls handled in the name and stead of the Company as part of the            invoice.  Details of the report will include the date and time of the telephone call, duration, speed            of answer, , and FNU representative who answered the call.  Additionally, any details regarding            abandoned calls will be shared with the Company in the same or separate report.  These            reports will allow the Company insights into the specific call traffic for planning purposes and            verify the telephone service level being provided.             Duration(s):                  One year term, renewable with cancellation provision of ninety (90) days notice                   Compensation:                  Per Answered Call                        o  Phone Call Duration > 20 seconds - $3.00                       o  Phone Call Duration <= 20 seconds - $1.00                                                   8 

 

DocuSign Envelope ID: 321D278C-FA26-4B20-952A-6F65505F7A8C             IN  WITNESS  WHEREOF,  the  Parties  have  executed  this  Statement  of  Work  in            duplicate  originals  to  be  effective  as  of  the  date and  year  above  written  as  “Effective            Date.”             SageSure Insurance Managers LLC           FedNatUnderwriters, Inc.             By:                                       By:                                                                J. Gordon Jennings, III           Name:  Terrence McLean                    Name:                                                                President           Title:    President & CEO                 Title:                                                                1/6/2016           Date:    1/5/16                           Date:                                                    9

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