Document:

NON-COMPETITION AGREEMENT

 

Exhibit 10.6

NON-COMPETITION AGREEMENT

     THIS NON-COMPETITION AGREEMENT (this “Agreement”), made as of the 18th day
of December 2001, by and among Ohio Casualty of New Jersey, Inc., an Ohio
domestic property and casualty insurance company (“OCNJ”), The Ohio Casualty
Insurance Company, an Ohio domestic property and casualty insurance company
(“OCIC”), Proformance Insurance Company, a New Jersey domestic property and
casualty insurance company (“PIC”), and National Atlantic Holdings Corp., a New
Jersey corporation (“NAHC”):

W I T N E S S E T H:

     WHEREAS, OCNJ, PIC and NAHC previously have entered into that certain
Replacement Carrier Agreement dated December 18, 2001 (the “Replacement Carrier
Agreement”);

     WHEREAS, OCIC is the parent corporation of OCNJ; and

     WHEREAS, Sections 10.11 and 11.9 of the Replacement Carrier Agreement
require that this Non-Competition Agreement be executed and delivered by each
of the parties hereto as a condition to the obligations of the parties to the
Replacement Carrier Agreement to close the transactions contemplated by the
Replacement Carrier Agreement;

     NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations contained herein, and in consideration of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:

     Section 1. Definitions. Capitalized terms not expressly defined in this
Agreement shall have the meanings ascribed to them in the Replacement Carrier
Agreement. For purposes of this Agreement, the following terms shall have the
respective meanings set forth below:

          (a) “Affiliate,” in reference to a Person, shall mean (i) any other Person
directly or indirectly controlling, controlled by or under common control with
such Person, (ii) any other Person owning or controlling ten percent (10%) or
more of the outstanding voting securities off such Person, and (iii) any
officer, director, member, manager or partner of such Person.

          (b) “Commercial Lines Business” shall mean all business presently written
by the standard commercial lines division and the specialty commercial lines
division of OCIC and its Affiliates, including but not limited to commercial
automobile, inland marine, business owners policies, workers compensation,
package policies, general liability, commercial fire, property, glass, crime,
umbrellas and excess general liability policies and related coverages.

 

 

          (c) “Damages” shall mean all losses, liabilities, claims, damages
(including incidental and consequential damages) and expenses (including costs
of investigation and attorneys’ fees) resulting, directly or indirectly, from
the breach by PIC or NAHC of this Agreement.

          (d) “Non-Competition Period” shall mean a period of three years from and
after the Nonrenewal Date.

          (e) “Non-Overlapping Agents” shall mean those OCNJ Agents who are not also
appointed as agents of PIC to write Commercial Lines Business as of 12:00 a.m.,
Eastern Standard Time, on September 1, 2001.

          (f) “OC Affiliates” shall mean each and every Person who is or becomes an
Affiliate of either or both of OCNJ and OCIC during the Non-Competition Period

          (g) “OCNJ Agents” shall mean each and every Person authorized in writing
by OCNJ to solicit, negotiate, or effect insurance contracts on OCNJ’s behalf
as its agent in New Jersey, regardless of whether such Person is authorized to
collect insurance premiums or to countersign insurance policies on behalf of
OCNJ.

          (h) “Overlapping Agents” shall mean those OCNJ Agents who are also
appointed as agents of PIC to write Commercial Lines Business as of 12:01 a.m.;
Eastern Standard Time, on September 1, 2001.

          (i) “Person” shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union
or other entity or governmental body.

     Section 2. Acknowledgments By PIC and NAHC. Each of PIC and NAHC
acknowledges and agrees that (a) OCNJ and OCJC have required that PIC and NAHC
make the covenants set forth in Section 3 of this Agreement as a condition to
the obligation of OCNJ to close the transactions contemplated by the
Replacement Carrier Agreement, (b) the provisions of Section 3 of this
Agreement are reasonable and necessary to protect and preserve the business of
OCNJ, OCIC and the OC Affiliates, (c) each of PIC and NAHC has received good
and sufficient consideration from OCNJ, OCIC and the OC Affiliates in exchange
for their covenants and obligations set forth in this Agreement, (d) OCNJ, OCIC
and the OC Affiliates would be irreparably damaged if either PIC or NAHC were
to breach the covenants set forth in Section 3 of this Agreement, and (e) as
third party beneficiaries of this Agreement, the OC Affiliates shall be
entitled to enforce this Agreement against PIC, NAHC and their respective
present or future Affiliates to the same extent as OCNJ and OCIC, and the OC
Affiliates shall have available to them the full range of remedies available to
OCNJ and OCIC for any breach of this Agreement by PIC, NAHC and their
respective present or future Affiliates.

 

 

     Section 3. Non-competition. As an inducement for OCNJ to enter into the
Replacement Carrier Agreement, and as additional consideration for the
consideration to be paid to PIC and NAHC under the Replacement Carrier
Agreement, each of PIC and NAHC agrees, jointly and severally, that:

          (a) For the Non-Competition Period:

               (i) Neither PIC, NAHC, nor any of its or their respective present or
future Affiliates, shall, directly or indirectly, appoint, solicit or provide
quotes to any Non-Overlapping Agent with respect to any Commercial Lines
Business.

               (ii) Neither PIC, NAHC, nor any of its or their respective present or
future Affiliates, shall, directly or indirectly, solicit or provide quotes to
any Overlapping Agent if such solicitation would result in the cancellation,
replacement and/or nonrenewal of any existing policies of Commercial Lines
Business of OCIC and/or any of the OC Affiliates.

               (iii) Neither PIC, NAHC, nor any of its or their respective present or
future Affiliates, shall, directly or indirectly, induce or attempt to induce
any customer, supplier, licensee, agent or other business relation of OCNJ,
OCIC or any OC Affiliate to cease doing business with OCNJ, OCIC or any OC
Affiliate, or in any way interfere with the relationship between any customer,
supplier, licensee, agent or other business relation of OCNJ, OCIC or any OC
Affiliate.

          (b) In the event of a breach by either PIC or NAHC of any covenant set
forth in Subsection 3(a) of this Agreement, the term of such covenant will be
extended, as against both PIC and NAHC, by the period of the duration off such
breach; and

          (c) Neither PIC, NAHC, nor any of their respective present or future
Affiliates, shall, at any time during or after the Non-Competition Period, use
the name or any trademark, trade name, logo or service mark of OCNJ, OCIC or
any OC Affiliate in any manner for any purpose, without the prior written
consent of OCIC and such other parties.

     Section 4. Remedies. PIC and NAHC shall be jointly and severally liable
to OCNJ, OCIC and the OC Affiliates for their covenants, liabilities and
obligations under this Agreement. If PIC or NAHC breaches the covenants set
forth in Section 3 of this Agreement OCNJ, OCIC and the OC Affiliates will be
entitled to the following remedies:

          (a) Damages from PIC and NAHC; and

          (b) In addition to their right to Damages and any other rights they may
have, to obtain injunctive or other equitable relief to restrain any breach or
threatened breach or otherwise to specifically enforce the provisions of
Section 3 of this Agreement, it being agreed that money damages alone would be
inadequate to compensate OCNJ, OCIC and the OC Affiliates and would be an
inadequate remedy for such breach.

 

 

For purposes of Section 4(a), with respect to breaches by PIC or NAHC of their
covenants set forth in Section, 3(a)(i) and (ii), the term “Damages” shall
include, but not be limned to, thirty percent (30%) of the premiums paid or
payable for each policy that is written, cancelled, replaced and/or nonrenewed
in violation of this Agreement.

     Section 5. Binding Effect; Delegation of Duties Prohibited. This
Agreement may be assigned by OCNJ, OCTC and the OC Affiliates and this
Agreement shall inure to the benefit of, and shall be binding upon, the parties
hereto, the OC Affiliates and their respective successors, assigns, heirs and
legal representatives. The OC Affiliates are third party beneficiaries of this
Agreement, and the OC Affiliates shall be entitled to enforce this Agreement
against PIC, NAHC and their respective present and future Affiliates to the
same extent as OCHJ and OCIC. The duties and covenants of PIC and NAHC under
this Agreement, being personal, may not be delegated.

     Section 6. Waiver. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any
delay by any party in exercising any right, power or privilege under this
Agreement will operate as a waiver of such right, power or privilege, and no
single or partial exercise of any such right, power or privilege will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right arising out of this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the other parties, (b) no waiver
that may be given by a party will be applicable except in the specific instance
for which it is given, and (c) no notice to or demand on, one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement.

     Section 7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without regard to
conflict of law principles.

     Section 8. Jurisdiction; Service of Process. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Ohio, County of Hamilton, or, i f it has or can acquire jurisdiction, in the
United States District Court for the Southern District of Ohio, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.

 

 

     Section 9. Severability. Whenever possible each provision and term of
this Agreement will be interpreted in a manner to be effective and valid but if
any provision or term of this Agreement is held to be prohibited by or invalid,
then such provision or term will be ineffective only to the extent of such
prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term or the remaining provisions
or terms of this Agreement. If any of the covenants set forth in Section 3 of
this Agreement are held to be unreasonable, arbitrary, or against public
policy, such covenants will be considered divisible with respect to scope and
time, and in such lesser scope and time will he effective, binding and
enforceable against PIC and NAHC.

     Section 10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but which together constitute
one and the same instrument.

     Section 11. Section Headings, Construction. The headings of the Sections,
Paragraphs and Subparagraphs of this Agreement arc solely for convenience and
reference and shall not limit or otherwise affect the meaning of any of the
terms or provisions of this Agreement. All references to “Section” or
“Sections” refer to the corresponding Section or Sections of this Agreement
unless otherwise specified. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word “including” does not limit the preceding words or
terms.

     Section 12. Notices. All notices, consents, waivers, requests or other
communications under this Agreement shall be in writing and shall, be deemed to
have been duly given if delivered or mailed first class certified mail, postage
prepaid, addressed as follows.

	 	 	 	 	 
	 	 	If to OCNJ, to:
	 
	 	 	 	 
	 	 	Ohio Casualty of New Jersey, Inc.

9450 Seward Road

Fairfield, Ohio 45014
	

	 	Attention:
	 	Debra K. Crane, Esq.

Senior Vice President and General Counsel
	 
	 	 	 	 
	 	 	With a copy to:
	 
	 	 	 	 
	 	 	James A. Yano, Esq.

Vorys, Sater, Seymour and Pease LLP

52 East Gay Street

Columbus, Ohio 43215
	 
	 	 	 	 
	 	 	If to OCIC, to:
	 
	 	 	 	 
	 	 	The Ohio Casualty Insurance Company

9450 Seward Road

 

 

	 	 	 	 	 
	 	 	Fairfield, Ohio 45014
	

	 	Attention:
	 	Debra K. Crane, Esq.

Senior Vice President and General Counsel
	 
	 	 	 	 
	 	 	With a copy to:
	 
	 	 	 	 
	 	 	James A. Yano, Esq.

Vorys, Sater, Seymour and Pease LLP

52 East Gay Street

Columbus, Ohio 43215
	 
	 	 	 	 
	 	 	If to PIC, to:
	 
	 	 	 	 
	 	 	Proformance Insurance Company

303 West Main Street

Freehold, New Jersey 07728
	

	 	Attention:
	 	James V. Gorman, Chairman and CEO
	 
	 	 	 	 
	 	 	With a copy to:
	 
	 	 	 	 
	 	 	John M. Pellecchia, Esq.

Riker, Danzig, Sherer, Hyl,and & Perretti LLP

50 West State Street, Suite 1010

Trenton, New Jersey 08608-1220
	 
	 	 	 	 
	 	 	If to NAHC, to:
	 
	 	 	 	 
	 	 	National Atlantic Holdings Corp.

303 West Main Street

Freehold, New Jersey 07728
	

	 	Attention:
	 	James V. Gorman, Chairman and CEO
	 
	 	 	 	 
	 	 	With a copy to:
	 
	 	 	 	 
	 	 	John M. Pellecchia, Esq.

Riker, Danzig, Sherer, Hyland & Perretti LLP

50 West State Street, Suite 1010

Trenton, New Jersey 08608-1220

or to such other address as may have been furnished in writing to the party
giving the notice by the party to whom notice is to be given.

 

 

     Section 13. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior written and oral agreements and
understandings between the parties hereto with respect to the subject matter of
this Agreement. This Agreement may not be amended except by a written
agreement executed by the party to be charged with the amendment.

 

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers, effective as of the day and year set forth
above.

	 	 	 	 	 	 	 
	 	 	OHIO CASUALTY OF NEW JERSEY, INC.
	 
	 	 	 	 	 	 
	

	 	By:   /s/ Elizabeth M. Riczko
	 	 	 	
 
	

	 	Printed
Name:    Elizabeth M. Riczko	 
	

	 	 	 	 	 	
 
	

	 	Title:  Executive
VP &
COO, Personal Lines	 	 	 	 
	 	 	 	 	
 
	 
	 	 	 	 	 	 
	 	 	THE OHIO CASUALTY INSURANCE COMPANY
	 
	 	 	 	 	 	 
	

	 	By:   /s/ Elizabeth M. Riczko
	 	 	 	
 
	

	 	Printed
Name   Elizabeth M. Riczko	 
	

	 	 	 	 	 	
 
	

	 	Title:   Executive
VP & COO, Personal Lines	 	 	 	 
	 	 	 	 	
 
	 
	 	 	 	 	 	 
	 	 	PROFORMANCE INSURANCE COMPANY
	 
	 	 	 	 	 	 
	 	 	By: 	/s/ James V. Gorman
	 	 	 	
 
	 	 	Printed Name: James V. Gorman
	 	 	Title: Chief Executive Officer
	 
	 	 	 	 	 	 
	 	 	NATIONAL ATLANTIC HOLDINGS CORP.
	 
	 	 	 	 	 	 
	 	 	By: 	/s/ James V. Gorman
	 	 	 	
 
	 	 	Printed Name: James V. Gorman
	 	 	Title: Chief Executive OfficerLETTER AGREEMENT

 

Exhibit 10.7

National Atlantic Holdings Corporation

4 Paragon Way, Freehold, New Jersey 07728

(732) 665-1100 Facsimile: (732) 761-0243

July 10, 2004

Dan R. Carmichael, President & CEO

The Ohio Casualty Insurance Company

Ohio Casualty of New Jersey, Inc.

9450 Seward Road Fairfield, OH 45014

			
	 	Re:	
    Investor Rights Agreement and the 

     Replacement Carrier Agreement

Dear Mr. Carmichael:

     
As you know, National Atlantic Holdings Corp. (“NAHC”)
is in the process of preparing a registration statement to be
filed with the Securities and Exchange Commission relating to an
underwritten public offering of not less than $50 million
in value of its common stock (the “IPO”). In
connection with the IPO, the parties are entering into this
letter agreement (this “Letter Agreement”) with
respect to certain provisions of the Investor Rights Agreement
(the “Investor Rights Agreement”), dated as of
December 18, 2001, by and among NAHC, The Ohio Casualty
Insurance Company (“OCIC”) and James V. Gorman and the
Replacement Carrier Agreement (the “Replacement Carrier
Agreement”) among Ohio Casualty of New Jersey, Inc.
(“OCNJ”), NAHC and Proformance Insurance Company
(“Proformance”).

     
        Each of NAHC,
Proformance, OCIC and OCNJ hereby agree as follows:

			
	 	1.	
    In connection with discussions you have had with representatives
    of our managing underwriter (the “Managing
    Underwriter”), you are aware that the Managing Underwriter
    is “highly confident” that it will facilitate the sale
    by OCIC in the IPO of approximately 50% of the shares of common
    stock of NAHC owned by OCIC. Therefore, NAHC shall, and shall
    instruct the Managing Underwriter to, use commercially
    reasonable efforts to facilitate the sale by OCIC in the IPO of
    that number of the shares of common stock of NAHC owned by OCIC
    as shall have a value equal to at least 10% of the total value
    of all shares of common stock of NAHC sold in connection with
    the IPO by NAHC and OCIC, which NAHC currently anticipates will
    be equal to approximately 50% of the number of shares of NAHC
    common stock owned by OCIC as of the date hereof (the “OCIC
    Shares”). For purposes of this Paragraph 1, the per
    share value of the shares of NAHC common stock shall be deemed
    to equal the price per share at which such shares are offered
    and sold to the public in the IPO. Notwithstanding the foregoing
    sentence, NAHC shall not be obligated to take any action, or
    omit to take any action, which in NAHC’s judgment, after
    consultation with the

 

		
	 	
    representative of the Managing Underwriter in connection with
    the IPO, could materially lessen the likelihood of a successful
    consummation of the IPO. In connection with the IPO, OCIC shall
    provide to NAHC the information concerning OCIC and the proposed
    sale of common stock of NAHC as set forth on Exhibit A
    hereto with respect to the IPO. All reasonable fees and expenses
    of the IPO (other than underwriting discounts or commissions,
    and fees and expenses of counsel to OCIC, which shall each be
    borne by OCIC) shall be borne by NAHC.

			
	 	2.	
    Subject to Paragraph 10 below, OCIC waives any and all
    rights it has, had or may have under, with respect to, or
    arising out of, Section 5 of the Investor Rights Agreement,
    and any and all obligations of NAHC under Section 5 are
    terminated and shall be of no further force or effect as of the
    date hereof.
	 
	 	3.	
    On or prior to July 12, 2004, OCIC shall execute the
    lock-up letter substantially in the form attached hereto as
the “Lock-Up Letter”.
	 
	 	4.	
    Subject to Paragraph 5 below, as soon as practicable
    following expiration of the 180-day lock-up period provided for
    in the Lock-Up Letter (the “Lock-Up Period”), but in
    no event later than 180 days following the expiration of
    the Lock-UP Period, NAHC shall, and shall instruct the Managing
    Underwriter to, use commercially reasonable efforts, subject to
    then applicable market conditions, to facilitate a secondary
    public offering (the “Secondary Offering”) by OCIC of
    the OCIC Shares not sold as part of the IPO and owned by OCIC as
    of such date (the “Remaining OCIC Share”). All
    reasonable fees and expenses related to the Secondary Offering
    (other than discounts or commissions, and fees and expenses of
    counsel to OCIC which shall each be borne by OCIC) shall be
    borne by NAHC.
	 
	 	5.	
    Additionally, upon the mutual consent of NAHC and OCIC, in lieu
    of the Secondary Offering, NAHC and OCIC may mutually agree that
    OCIC shall sell, assign, transfer and tender to NAHC for no
    additional consideration except as set forth in the immediately
    succeeding sentence, an amount of Remaining OCIC Shares, the
    aggregate market value of which is equal to any additional
    amounts then due Proformance by OCNJ in accordance with
    Section 3.2(b) of the Replacement Carrier Agreement (the
    “Specified Amount”). Upon such sale, assignment,
    tender and transfer by OCIC to NAHC (the “Closing”),
    OCNJ shall have no further obligation under section 3.2(b) of
    the Replacement Carrier Agreement, except to the extent that the
    aggregate market value of the Remaining OCIC Shares sold and
    transferred to Proformance is less than the Specified Amount, in
    which case, OCNJ shall pay Proformance at the time of the
    Closing cash in the amount of such shortfall. NAHC acknowledges
    that it shall, as required by the New Jersey Department of
    Banking and Insurance, contribute on the date of the Closing an
    amount equal to the Specified Amount to the capital and surplus
    of Proformance. NAHC shall deliver to OCIC and OCNJ a
    certificate, signed by an officer of NAHC, confirming that such
    contribution to

2

 

		
	 	
    the capital and surplus of Proformance has been made. For
    purposes of this Paragraph 5, the aggregate value of the
    shares to be sold, transferred, assigned and tendered by OCIC
    shall equal (i) the number of shares sold, transferred,
    assigned and tendered multiplied by (ii) the Market Price.
    “Market Price” shall mean the average per share
    closing prices on the Nasdaq National Market of the NAHC common
    stock for the 30 trading day period immediately preceding (but
    not including) the date of determination of the Market Price. If
    the NAHC common stock is not then traded on the Nasdaq National
    Market, the Market Price shall be determined based upon the
    average of the closing bid and asked prices as furnished by a
    professional market maker making a market in the common stock of
    NAHC selected by NAHC and approved by OCIC (which approval shall
    not be unreasonably withheld, delayed or conditioned) for the 30
    trading day period described above, and if no such market maker
    exists, then the market price shall be determined conclusively
    by a qualified third party selected in accordance with the
    procedures specified in the third through the eight sentences of
    Section 5.1 of the Investor Rights Agreement. It shall be a
    condition to NAHC’s obligations pursuant to this
    Paragraph 5 that the Remaining OCIC Shares shall be, at the
    time of their sale, transfer, assignment and tender to NAHC,
    free and clear of any lien, claim, encumbrance or other similar
    restriction of any kind (other than any restrictions created by
    written agreements to which NAHC is a party). OCIC shall, in
    connection with such sale, transfer, assignment and tender (i)
    deliver to NAHC the stock certificates for the Remaining OCIC
    Shares duly executed in blank, or accompanied by a stock power
    duly executed in blank, in proper form for transfer,
    (ii) pay any and all applicable stock transfer or similar
    taxes, and deliver reasonably satisfactory evidence to NAHC of
    the due payment thereof, and (iii) deliver such other documents
    and instruments as NAHC shall reasonably request so as to vest
    in NAHC full right, title and interest in and to the Remaining
    OCIC Shares.

			
	 	6.	
    Except as specifically set forth in this Letter Agreement, the
    Investor Rights Agreement and the Replacement Carrier Agreement
    remain unamended and full force and effect.
	 
	 	7.	
    In connection with the IPO and any Secondary Offering, NAHC
    shall furnish to OCIC, at the expense of NAHC, copies of the
    registration statement filed with the Securities and Exchange
    Commission, each amendment and supplement thereto, the
    prospectus included in such registration statement (including
    each preliminary prospectus) and such other documents as OCIC
    may reasonably request.
	 
	 	8.	
    In connection with the IPO and the Secondary Offering, OCIC
    shall not be required in any underwriting agreement relating to
    such offering to make any representations or warranties to NAHC
    or the underwriters (other than representations and warranties
    regarding (i) OCIC’s ownership and delivery of the
    OCIC Shares or Remaining OCIC Shares, as the case may be,
    (ii) OCIC’s organization and affiliations,
    (iii) OCIC’s corporate power and authority with
    respect to, and the validity and binding nature of, the
    transaction documents

3

 

		
	 	
    signed by OCIC, (iv) any third party or governmental
    consents required for OCIC to consummate the transaction,
    (v) the transaction not causing defaults or violations
    under law or material documents of OCIC, (vi) accuracy of
    any disclosure provided by OCIC and (vii) trading activity
    and inside information of OCIC with respect to NAHC) or to
    undertake indemnification obligations to the Company or the
    underwriters with respect thereto, except with respect to the
    information furnished by OCIC in writing for use in the
    registration statement or the prospectus and the obligation to
    indemnify shall be individual, not joint and several, for OCIC
    and shall be limited to the gross amount of proceeds received by
    OCIC from the sale of OCIC Shares or Remaining OCIC Shares, as
    the case may be, in such offering pursuant to such registration
    statement.

			
	 	9.	
    (a) NAHC hereby grants to OCIC the right, subject to
    subsections (b), (c) and (d) below, on three occasions
    following the expiration of the Lock Up Period, to demand that
    NAHC file a registration statement with respect to the resale by
    OCIC of any Remaining OCIC Shares. OCIC shall exercise such
    right by delivering to NAHC a written demand, which demand shall
    set forth (i) the number of Remaining OCIC Shares covered
    by the demand and (ii) the intended manner of distribution
    of the Remaining OCIC Shares covered by the demand. NAHC shall,
    upon receipt of the demand, file a registration statement
    covering the transactions contemplated by the demand as promptly
    as practicable given the circumstances, including, without
    limitation, whether NAHC is then eligible to use a registration
    statement on Form S-3.

(b) Notwithstanding subsection (a) above, NAHC shall
not be required to comply with any demand it shall receive
pursuant to subsection (a) if

			
	 	(i)	
    NAHC shall have previously received a demand (which, for
    purposes of clarity, the parties agree shall not include the
    IPO) pursuant to subsection (a) within the previous twelve
    (12) calendar months;

			
	 	(ii)	
    NAHC shall reasonably determine that filing a registration
    statement in connection with such demand would (A) require
    NAHC to publicly disclose information which it would not
    otherwise be required to disclose in the absence of filing such
    registration statement, and such disclosure would be detrimental
    to NAHC, or (B) impede the consummation of any acquisition,
    disposition, issuance of securities or other transaction NAHC is
    then contemplating (the parties agreeing that NAHC shall only be
    permitted to not comply with any particular demand by reason of
    this clause (B) for not in excess of 180 days from the
    date of NAHC’s receipt of such demand); or

			
	 	(iii)	
    any Remaining OCIC Shares are then salable pursuant to
    Rule 144.

			
	 	        	
    (c) In connection with any demand made by OCIC pursuant to
    subsection (a) above, OCIC shall (i) enter
    underwriting or similar agreements customary for transactions of
    the type contemplated by this section 9, but which shall conform

4

 

		
	 	
    with the provisions of Section 8 hereof, and
    (ii) shall provide to NAHC the information set forth on
    Exhibit A hereto concerning OCIC and the proposed offering
    of Remaining OCIC Shares with respect to such proposed
    transaction.
	 
	 	
    (d) For avoidance of doubt, if NAHC complies with its
    obligations under Paragraph 4 to facilitate a Secondary
    Offering, the number of demands of OCIC shall be reduced to two
    (2).

			
	 	10.	
    Anything contained herein to the contrary notwithstanding, this
    Letter Agreement shall terminate and be of no further force and
    effect, and all rights of OCIC under the Investor Rights
    Agreement and of NAHC under the Replacement Carrier Agreement
    that have been waived hereunder shall be immediately reinstated,
    nunc pro tunc, in the event NAHC has not consummated the IPO,
    including the sale of the OCIC Shares, prior to
    November 15, 2004.
	 
	 	11.	
    This Letter Agreement shall be governed by the laws of the State
    of New Jersey, without giving effect to the conflicts of laws
    rules of such state.

     
Neither this Letter Agreement nor any provision hereof may be
assigned by any party without the prior written consent of the
other parties hereto. This Letter Agreement may be executed in
counterparts, each of which shall be an original, but together
shall constitute one and the same instrument.

5

 

     
Please indicate that you acknowledge and agree to the terms of
this Letter Agreement by signing in the space provided below and
returning a signed copy of this letter to the undersigned.

		
	 	
    Very truly yours,
	 
	 	
    NATIONAL ATLANTIC HOLDINGS CORP.
	 	
    PROFORMANCE INSURANCE COMPANY

By: /s/ JAMES V. GORMAN

James V. Gorman Chairman
and Chief Exeutive Officer

Acknowledged and Agreed to by:

THE OHIO CASUALTY INSURANCE COMPANY

OHIO CASUALTY OF NEW JERSEY, INC.

		
	By: 	
    /s/ DAN R. CARMICHAEL

Dan R. Carmichael

President and CEO

		
	cc: 	
    Debra Crane, Senior V.P. and General Counsel

Michael Winner, Executive V.P. and CFO

6

 

Exhibit A

1.     The name of the selling
securityholder.

2.     Any material relationship which
the selling securityholder has had within the past three years
with NAHC or any of its predecessors or affiliates.

3.     The amount of securities of the
class of securities to be offered owned by the selling
securityholder prior to the offering, the amount to be offered
for the selling securityholder’s account, and the amount
(and percentage of the class of securities to be offered to be
owned by the selling securityholder after completion of the
offering.

4.     Any additional information as
may be required to be disclosed from time to time with respect
to selling securityholders in secondary offerings of securities
by applicable rules and regulations of the Securities and
Exchange Commission.

7

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