Document:

Form of Private Passenger Automobile Quota Share Reinsurance Contract

 Exhibit 10.12 
  
 Private Passenger Automobile Quota Share 
 Reinsurance Contract 
 Effective: January 1, 2004 
  
 issued to 
  
 Old American County Mutual Fire Insurance Company 
 Dallas, Texas 
  
 

 

 Table of Contents 
  

					
	Article	  	 	  	Page
			
	I	  	
Classes of Business Reinsured	  	1
			
	II	  	
Commencement and Termination	  	2
			
	III	  	
Territory (BRMA 51A)	  	4
			
	IV	  	
Exclusions	  	4
			
	V	  	
Retention and Limit	  	6
			
	VI	  	
Assignment	  	8
			
	VII	  	
Loss in Excess of Policy Limits and Extra Contractual Obligations	  	8
			
	VIII	  	
Losses and Loss Adjustment Expense	  	9
			
	IX	  	
Definitions	  	9
			
	X	  	
Loss Occurrence (NMA 2244/BRMA 27A)	  	11
			
	XI	  	
Salvage and Subrogation	  	12
			
	XII	  	
Original Conditions (BRMA 37B)	  	12
			
	XIII	  	
Adjusted Ceding Commission	  	12
			
	XIV	  	
Reports and Remittances	  	14
			
	XV	  	
Late Payments	  	15
			
	XVI	  	
Offset (BRMA 36A)	  	16
			
	XVII	  	
Inspection of Records	  	16
			
	XVIII	  	
Errors and Omissions (BRMA 14F)	  	17
			
	XIX	  	
Taxes	  	17
			
	XX	  	
Currency (BRMA 12A)	  	17
			
	XXI	  	
Unauthorized Reinsurance	  	17
			
	XXII	  	
Conservation, Liquidation or Insolvency	  	18
			
	XXIII	  	
Arbitration	  	19
			
	XXIV	  	
Miscellaneous	  	20
			
	XXV	  	
Prior Agreements	  	20
			
	XXVI	  	
Captions	  	21
			
	XXVII	  	
Entire Agreement	  	21
			
	XXVIII	  	
Intermediary (BRMA 23A)	  	21

  
  
 

 

 Private Passenger Automobile Quota Share 
 Reinsurance Contract 
 Effective: January 1, 2004 
  
 issued to 
  
 Old American County Mutual Fire Insurance Company 
 Dallas, Texas 
 (hereinafter referred to as the “Company”) 

 
 by 
  
 The Subscribing Reinsurer(s) Executing the 
 Interests and Liabilities Agreement(s) 
 Attached Hereto 
 (hereinafter referred to as the “Reinsurer”) 
  
 
Article I—Classes of Business Reinsured 
  

	A.	By this Contract the Company obligates itself to cede to the Reinsurer and the Reinsurer obligates itself to accept quota share reinsurance of the Company’s net retained
liability under policies, contracts and binders of insurance (hereinafter referred to as “policies”) issued or renewed on or after the effective date hereof, and classified by the Company as Private Passenger Automobile Liability,
including but not limited to Personal Injury Protection, Uninsured and Underinsured Motorists, Automobile Physical Damage (including Rental Reimbursement) as respects Private Passenger Automobile business and miscellaneous coverages when written in
conjunction with Private Passenger Automobile business produced and underwritten in Texas by or through A-Affordable Managing General Agency and branch offices of A-Affordable Insurance Agency, Dallas, Texas (hereinafter referred to as the
“General Agent”), for vehicles garaged within the State of Texas. 

  

	B.	“Net retained liability” as used herein is defined as the Company’s gross liability remaining after cessions, if any, to other pro rata reinsurers.

  

	C.	The liability of the Reinsurer with respect to each cession hereunder shall commence obligatorily and simultaneously with that of the Company, subject to the terms, conditions and
limitations hereinafter set forth. 

  

	D.	It is understood that the classes of business reinsured under this Contract are deemed to include coverages required for non-resident drivers under the motor vehicle financial
responsibility law or the motor vehicle compulsory insurance law or any similar law of any state or province, following the provisions of the Company’s policies when they include or are deemed to include so-called “Out of State
Insurance” provisions. 

  

 

 

 
Article II—Commencement and Termination 
  

	A.	This Contract shall become effective at 12:01 a.m., Central Standard Time, January 1, 2004, with respect to losses under policies allocated to underwriting years commencing at or
after that time and date, and shall continue in force thereafter until terminated. 

  

	B.	Either party may terminate this Contract on any December 31 by giving the other party not less than 90 days prior written notice by certified mail. 

  

	C.	Notwithstanding the provisions of paragraph B above, the Company may terminate, on a runoff or cutoff basis at the discretion of the Company, a Subscribing Reinsurer’s
percentage share in this Contract at any time by giving 30 days written notice in the event any of the following circumstances occur: 

  

	 	1.	The Subscribing Reinsurer’s policyholders’ surplus at the beginning of any underwriting year has been reduced by more than 30.0% of the amount of surplus 12 months prior
to that date; or 

  

	 	2.	The Subscribing Reinsurer’s policyholders’ surplus during any underwriting year has been reduced by more than 30.0% of the amount of surplus at the date of the Subscribing
Reinsurer’s most recent financial statement filed with regulatory authorities and available to the public as of the beginning of any underwriting year; or 

  

	 	3.	The Subscribing Reinsurer’s A.M. Best’s rating has been assigned or downgraded below A- and/or Standard & Poor’s rating has been assigned or downgraded below
BBB+; or 

  

	 	4.	The Subscribing Reinsurer has become merged with, acquired by or controlled by any other company, corporation or individual(s) not controlling the Subscribing Reinsurer’s
operations previously; or 

  

	 	5.	The Subscribing Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary) or proceedings have been instituted against the
Subscribing Reinsurer for the appointment of a receiver, liquidator, rehabilitator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations; or

  

	 	6.	The Subscribing Reinsurer has reinsured its entire liability under this Contract without the Company’s prior written consent; or 

  

	 	7.	The Subscribing Reinsurer has ceased assuming new and renewal property and casualty treaty reinsurance business; or 

  

	 	8.	The Subscribing Reinsurer has committed a material breach of conditions, fraud or default under the terms and conditions of this Contract. 

  
 Notices hereunder shall be provided by certified or registered mail, return
receipt requested or by a recognized overnight delivery service and notice shall be deemed to have been provided on the date of mailing. 
  

 

 

	D.	Notwithstanding the provisions of paragraph B above, the Reinsurer may terminate this Contract, on a runoff or cutoff basis at the discretion of the Company, at any time by giving
30 days written notice, in the event any of the following circumstances occur: 

  

	 	1.	The Subscribing Reinsurer has not received payment of any premium amount due from the Company on or before the due date; or 

  

	 	2.	A State Insurance Department or other legal authority has ordered the Company to cease writing business and such order remains in effect for at least 30 days; or

  

	 	3.	The Company has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary) or proceedings have been instituted against the Company for
the appointment of a receiver, liquidator, rehabilitator, conservator or trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations and such action or proceedings have not been
dismissed within 45 days after commencement thereof; or 

  

	 	4.	The Company or the General Agent has committed a material breach of conditions, fraud, or default by either party under the terms and conditions of the Contract; however, a 30 day
“cure period” shall be provided the Company or General Agent during which time the Company or the General Agent shall come into compliance with its obligations under this Contract. If the Company or the General Agent comes into compliance
with its obligations under this Contract during the cure period, the notice of termination shall be rescinded by the Reinsurer. 

  
 Notices hereunder shall be provided by certified or registered mail, return receipt requested or by a recognized overnight delivery service and notice
shall be deemed to have been provided on the date of mailing. 
  

	E.	Notwithstanding the provisions of paragraph B, the Company may terminate this Contract immediately and automatically, without written notice, from the beginning of the underwriting
year and the terms and conditions hereof shall be considered null and void in the event any of the following circumstances occur: 

  

	 	1.	This Contract is deemed not reinsurance, illegal or unenforceable by a State Insurance Department or other legal authority; or 

  

	 	2.	This Contract does not provide sufficient risk transfer to constitute reinsurance in accordance with the guidelines of those Financial Accounting Standards Board Statements of
Financial Accounting Standards. 

  

	F.	Unless the Company elects to reassume the ceded unearned premium in force on the effective date of termination, and so notifies the Reinsurer prior to or as promptly as possible
after the effective date of termination, but not later than 30 days, reinsurance hereunder on business in force on the effective date of termination shall remain in full force and effect until expiration, cancellation or next premium anniversary of
such business, whichever first occurs, but in no event beyond 12 months following the effective date of termination. 

  

 

 

	G.	Notwithstanding the provisions of paragraph F above, in the event the Company is prohibited or precluded by the appropriate regulatory authorities, or by law (in those states where
applicable and enforced), from arranging mid-term cancellation or non-renewal of any policies subject to this Contract beyond their natural expiry, the Reinsurer agrees to extend reinsurance coverage until such policies may be terminated by the
Company. 

  

	H.	Upon notice of termination of this Contract, the Company shall ensure that the General Agent takes those actions necessary, including, but not limited to, sending statutorily
prescribed non-renewal notices to insureds in a timely manner to effectuate the intent that there will be no renewals (but for those required by applicable law or regulation) after the termination of this Contract. In the event of termination for
any reason, it is understood that policy renewals can only be offered or bound within 45 days prior to the renewal or expiration date of the policy. 

  

	I.	“Cutoff” as used herein shall mean that the Subscribing Reinsurer shall have no liability hereunder with respect to losses occurring on or after the effective date and
time of termination. The Subscribing Reinsurer shall return all unearned net collected premium less the provisional ceding commission as stated in Article XIII as of the effective time and date of termination. 

  

	J.	“Underwriting year” as used herein shall mean the period from January 1, 2004 through December 31, 2004, and each subsequent 12-month period shall be a separate
underwriting year. However, if this Contract is terminated, the final underwriting year shall be from the beginning of the then current underwriting year through the effective date of termination. All premiums and losses from policies allocated to
an underwriting year shall be credited or charged, respectively, to such underwriting year, regardless of the date said premiums earn or such losses occur. It is understood that a policy will be allocated to the underwriting year which is in effect
as of: 

  

	 	1.	As respects all new policies, the effective date of such policies; 

  

	 	2.	As respects renewals of one year or less term policies, the renewal date of such policies. 

  
 Such policies shall remain in the same underwriting year, as originally allocated, until the next renewal date or premium
anniversary date, at which time such policies shall be reallocated to the underwriting year in effect as of such date as provided in subparagraph 2 above. 
  
 
Article III—Territory (BRMA 51A) 
  
 The
territorial limits of this Contract shall be identical with those of the Company’s policies. 
  
 
Article IV—Exclusions 
  
 This Contract
does not apply to and specifically excludes the following: 
  

	 	1.	Garagekeepers’ legal liability. 

  

 

 

	 	2.	Vendors single interest. 

  

	 	3.	Nuclear risks as defined in the “Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance (U.S.A.),” the “Nuclear Incident Exclusion Clause - Physical Damage
- Reinsurance (Canada),” the “Nuclear Incident Exclusion Clause - Liability - Reinsurance (U.S.A.)” and the “Nuclear Incident Exclusion Clause - Liability - Reinsurance (Canada)” attached to and forming part of this
Contract. 

  

	 	4.	Loss or damage caused by war, invasion, revolution, bombardment, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, martial law, or
confiscation by order of any government or public authority. 

  

	 	5.	All bodily injury and property damage liability arising out of manufacturing, storage, distribution, handling or removal of asbestos or projects containing asbestos.

  

	 	6.	Pollution and seepage coverages excluded under the provisions of the “Pollution Exclusion Clause - Auto Liability - Reinsurance (BRMA 39B)” attached to and forming part of
this Contract. 

  

	 	7.	Any exposure excluded in the Company’s original policies. 

  

	 	8.	Vehicles principally used as ambulances, fire and police units. 

  

	 	9.	Commercial vehicles rated as such, and all automobile fleets. 

  

	 	10.	Mobile homes. 

  

	 	11.	Automobile dealers. 

  

	 	12.	Vehicles used in racing or speed events. 

  

	 	13.	Taxis, limousines, buses or livery. 

  

	 	14.	Liability as a member, subscriber or reinsurer of any Pool, Syndicate or Association and any FAIR Plan or other combination of insurers or reinsurers formed for the purpose of
covering specific perils, specific classes of business or for the purpose of insuring risks located in specific geographical areas. 

  

	 	15.	All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund.
“Insolvency fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, however denominated, established or governed, which provides for any assessment of or payment or assumption by the Company
of part or all of any claim, debt, charge, fee or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge,
fee or other obligation in whole or in part. 

  

	 	16.	Reinsurance assumed by the Company. 

  

 

 

 
Article V—Retention and Limit 
  

	A.	As respects business subject to this Contract, the Company shall cede to the Reinsurer and the Reinsurer agrees to accept by way of reinsurance its participation share of a 100%
share of all: 

  

	 	1.	Ultimate net loss; 

  

	 	2.	Loss adjustment expense which is deemed to equal 9.0% of net earned premium in addition to ultimate net loss; 

  

	 	3.	Extra contractual obligations limited to an additional limit of $1,000,000 each policy (in addition to the maximum policy limits set forth in paragraph G below), each loss
occurrence for this Contract and subject to a $3,000,000 combined limit of liability for this Contract and the Private Passenger Automobile Quota Share Reinsurance Contract, effective January 1, 2004, issued to Affirmative Insurance Company and
Insura Property and Casualty Insurance Company, both of Bedford Park, Illinois (hereinafter ‘Companion Contract No. 1’), in the aggregate for each underwriting year and in the aggregate with the limits provided in subparagraph 4 below;

  

	 	4.	Loss in excess of policy limits limited to an additional limit of $1,000,000 each policy (in addition to the maximum policy limits set forth in paragraph G below), each loss
occurrence for this Contract and subject to a $3,000,000 combined limit of liability for this Contract and Companion Contract No.1 in the aggregate for each underwriting year in the aggregate in combination with the limits provided in subparagraph 3
above; 

  
 in respect of business subject to this
Contract and written subject to the maximum policy limits set forth in paragraph G below. 
  

	B.	During the period from January 1, 2004 through June 30, 2004, as respects business subject hereto, Affirmative Insurance Company, Bedford Park, Illinois shall assume a 25.0% part of
100% share in the interests and liabilities of the Reinsurer hereunder. 

  

	C.	During the period from July 1, 2004 through December 31, 2004, as respects business subject hereto, Affirmative Insurance Company, Bedford Park, Illinois shall assume at least a
25.0% part, but no more than a 70.0% part, of 100% share in the interests and liabilities of the Reinsurer hereunder. 

  

	D.	The Company may, with written notice to the Reinsurer anytime prior to August 1, 2004 by certified mail, modify its percentage share and then may proportionately reduce the
participation of the Reinsurer’s percentage share of the interests and liabilities hereunder in accordance with paragraph C above. 

  

	E.	Notwithstanding the provisions of paragraph A above, in the event the Company’s net collected premium from policies during the first underwriting year hereunder exceeds
$60,000,000, the cession percentage hereunder, as respects that underwriting year, shall be reduced to the proportion that $60,000,000 bears to the Company’s net earned premium for the first underwriting year. In the event of a reduction of the
cession percentage for the 

  

 

 

 
first underwriting year hereunder, under the provisions of this paragraph, the premiums and losses paid hereunder for the first underwriting year shall be
adjusted retroactively to the beginning of that year. 
  

	F.	Under policies allocated to each underwriting year, the Company shall retain, in addition to its quota share participation in the interests and liabilities of the Reinsurer
hereunder, 100% of all ultimate net loss for this Contract and Companion Contract No. 1 as respects any one loss occurrence in excess of 2.0% of the Company’s net earned premium for this Contract and Companion Contract No. 1 for the
underwriting year, resulting from any event assigned a number by the Property Claims Services Division of American Insurance Services, Inc. and/or from an event from which resulting claims are tracked as resulting from the same weather or
temperature-related event by the systems of the General Agent and, in either or both cases, which involve five or more policies. 

  
 Additionally, in each underwriting year, the Company shall retain, in addition to its quota share participation in the interests and liabilities of the
Reinsurer hereunder, 100% of all ultimate net loss for this Contract and Companion Contract No. 1 in excess of 4.0% of the Company’s net earned premium for this Contract and Companion Contract No. 1 for the underwriting year for all such loss
occurrences in the aggregate. 
  

	G.	The Company, or the General Agent on behalf of the Company, shall purchase or be deemed to have purchased inuring excess facultative reinsurance to limit its loss subject hereto
under any one coverage, any one policy (exclusive of loss in excess of policy limits or extra contractual obligations) to the following amounts: 

  

	 	1.	Automobile Bodily Injury Liability, $25,023 each person, $50,023 each accident; 

  

	 	2.	Automobile Property Damage Liability, $25,023 each accident; 

  

	 	3.	Uninsured/Underinsured Motorists (Bodily Injury Liability), $25,023 each person, $50,023 each accident; 

  

	 	4.	Uninsured/Underinsured Motorists (Property Damage Liability), $25,023 each accident; 

  

	 	5.	Personal Injury Protection, $2,523 each person, each accident; 

  

	 	6.	Medical Payments, $2,523 each person, each accident; 

  

	 	7.	Automobile Physical Damage Liability, $40,023 any one vehicle; 

  

	 	8.	Rental Reimbursement, $20 per day, $600 per policy; 

  

	 	9.	Towing, $50 per occurrence, $150 maximum per policy. 

  
 The Company shall be the sole judge of what constitutes one policy. 
  

	H.	The Automobile Liability amounts shown in paragraph G shall be extended to follow the Company’s policy if the Company’s loss subject hereto is greater than one or more of
said 

  

 

 

 amounts because its policy includes or is deemed to include so-called “Out of State Insurance”
provisions. 
  
 
Article VI—Assignment 
  
 Neither party may
assign its rights or responsibilities under this Contract without the prior written consent of the other party, which consent shall not be unreasonably withheld. 
  
 
Article VII—Loss in Excess of Policy Limits and Extra Contractual Obligations 
  

	A.	In the event the Company pays or is held liable to pay an amount of loss in excess of its policy limit, but otherwise within the terms of its policy (hereinafter referred to as
“loss in excess of policy limits”) or any punitive, exemplary, compensatory or consequential damages, other than loss in excess of policy limits (hereinafter referred to as “extra contractual obligations”) because of alleged or
actual bad faith, negligence or fraud on its part in rejecting an offer of settlement within policy limits, or in the preparation of the defense or in the trial of an action against its insured or reinsured or in the preparation or prosecution of an
appeal consequent upon such an action, or in otherwise handling a claim under a policy subject to this Contract, 100% of the loss in excess of policy limits and/or 100% of the extra contractual obligations shall be subject to the provisions of
Article V, not exceeding, however, $1,000,000 per occurrence for this Contract or $3,000,000 in the aggregate, as respects this Contract and Companion Contract No. 1, any one underwriting year. 

  

	B.	An extra contractual obligation shall be deemed to have occurred on the same date as the loss covered or alleged to be covered under the policy. 

  

	C.	Notwithstanding anything stated herein, this Contract shall not apply to any loss in excess of policy limits or any extra contractual obligation incurred by the Company as a result
of any fraudulent and/or criminal act by any officer or director of the Company acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or
settlement of any claim covered hereunder. 

  

	D.	Recoveries from any form of insurance or reinsurance which protects the Company against claims the subject matter of this Article shall inure to the benefit of this Contract.

  

	E.	If any provision of this Article shall be rendered illegal or unenforceable by the laws, regulations or public policy of any state, such provision shall be considered void in such
state, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction. 

  
 
Article VIII—Losses and Loss Adjustment Expense 
  

	A.	The Reinsurer shall not indemnify the Company for liability beyond the circumscribed policy provisions, including, but not limited to, loss in excess of policy limits, extra
contractual 

  

 

 

 obligations, punitive, exemplary, consequential or compensatory damages or ex gratia payments, except as
otherwise specified in this Contract. 
  

	B.	The Reinsurer shall be liable for an amount of loss adjustment expense equal to 9.0% of net earned premium under this Contract. 

  

	C.	Claims handling shall be accomplished by the General Agent or its designated representative pursuant to the terms of the agreement between the Company and the General Agent
(hereinafter referred to as the “Claims Agent”), and such designation is subject to the Company’s continuing approval and shall not be inconsistent with the terms and conditions of this Contract. 

  

	D.	The Reinsurer’s share of loss, loss adjustment expense allowance and loss recoveries shall be carried into the monthly account for which provision is hereinafter made; however,
when the amount of loss paid by the Company under business subject to this Contract as a result of any one occurrence exceeds $55,000, the Reinsurer’s share will, at the option and the demand of the Company, be reimbursed by special remittance
(herein, “cash call”) within five business days of the Reinsurer’s receipt and acceptance of satisfactory proof of loss. The Reinsurer shall retain the right to deduct from any such special remittance any overdue balance due the
Reinsurer by the Company. 

  

	E.	The Company shall report to the Reinsurer losses involving potential coverage disputes or bad faith situations which may give rise to a loss in excess of policy limits judgment
and/or an extra contractual obligations award. 

  
 
Article IX—Definitions 
  

	A.	“Loss adjustment expense” as used herein shall mean the sum of allocated loss adjustment expense plus unallocated loss adjustment expense. Loss adjustment expense shall be
deemed to be equal to 9.0% of net earned premium for each underwriting year. 

  

	B.	“Allocated loss adjustment expense” as used herein shall mean all expenses incurred by the Company in adjusting, settling and compromising individual claims, including
costs of litigation, declaratory judgment actions and interest on judgments, if any, costs associated with extra contractual obligations and loss in excess of policy limits, third party claims administration costs and all subrogation, salvage and
recovery expenses, but no unallocated loss adjustment expense. The date on which any declaratory judgment obligation is incurred by the Company shall be deemed, in all circumstances, to be the date of the original accident, casualty, disaster or
loss occurrence giving rise to the declaratory judgment action. 

  

	C.	“Unallocated loss adjustment expense” as used herein shall mean the salaries of employees of the Company and/or its third party administrator and their respective normal
office expenses. 

  

	D.	“Ultimate net loss” as used herein shall mean the sum (excluding loss in excess of policy limits, extra contractual obligations and any related expenses for either
allocated loss adjustment expense or unallocated loss adjustment expense) the Company is legally obligated to pay and has paid in settlement of claims and/or in satisfaction of judgments 

  

 

 

 
rendered on account of such claims under policies after all salvage, subrogation and all recoveries and all claims on inuring insurance and reinsurance
(other than the reinsurance provided hereunder), whether collectible or not, are first deducted from such loss to arrive at the amount of liability, if any, accruing under this Contract. 
  

	E.	“Losses incurred” as used herein shall mean ultimate net loss paid as of the valuation date of calculation plus the 9.0% of net earned premium allowance for loss
adjustment expense as further described in Article XIV, plus the ceded reserves for losses outstanding, plus incurred but not reported loss as calculated by the Company (it being understood and agreed that the loss development factors used by the
Company to determine the incurred but not reported loss shall never be less than unity), plus extra contractual obligations and loss in excess of policy limits paid and outstanding plus the additional loss or minus the reduction to loss, if any,
from the preceding underwriting year(s). 

  

	F.	“Net written premium” for each underwriting year as used herein shall mean the Company’s gross written premium for the policies hereunder (excluding all collected fee
income except collected fee income in excess of 15.0% of the Company’s net earned premium for the underwriting year), less cancellations and return premiums, and less premiums ceded by the Company for reinsurance which inures to the benefit of
this Contract, but not less ceding commissions, assessments, premium taxes, refunds to policyholders as dividends or similar plans or loss control fees, or collected fee income in excess of 15.0% of net earned premium. 

  

	G.	“Net earned premium” as used herein shall mean that portion of the Company’s net written premium that has been earned. 

  

	H.	“Net collected premium” as used herein shall mean that portion of the Company’s net written premium that has been remitted as of the valuation date to the Company.

  

	I.	“Collected fee income” as used herein shall mean all fees collected by the General Agent pursuant to policies hereunder, including but not limited to policy fees, billing
fees, SR-22 fees, reinstatement fees, NSF check fees, late payment fees or other similar fees. The collected fee income for this Contract and Companion Contract No. 1 shall be limited to 15.0% of net earned premium for this Contract and Companion
Contract No. 1 for the underwriting year, with any excess collected fee income being included in net written premium for the underwriting year for this Contract and Companion Contract No. 1, and prorated accordingly. 

  

	J.	“Loss ratio” as used herein shall mean the quotient, expressed as a percent, of losses incurred divided by net earned premium. 

  

	K.	“Reinsurer’s expense allowance” as used herein shall have the same meaning as in the Companion Contract being considered, as defined in Article XIII.

  
 
Article X—Loss Occurrence (NMA 2244/BRMA 27A) 
  

	A.	 The term “loss occurrence” shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters,
accidents or losses arising out of one event which occurs within the area of one state of the United States or province of 

  

 

 

 Canada and states or provinces contiguous thereto and to one another. However, the duration and extent of
any one “loss occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event, except that the term “loss
occurrence” shall be further defined as follows: 
  

	 	1.	As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and water damage, all individual losses sustained by the Company occurring during any period of
72 consecutive hours arising out of and directly occasioned by the same event. However, the event need not be limited to one state or province or states or provinces contiguous thereto. 

  

	 	2.	As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 72
consecutive hours within the area of one municipality or county and the municipalities or counties contiguous thereto arising out of and directly occasioned by the same event. The maximum duration of 72 consecutive hours may be extended in respect
of individual losses which occur beyond such 72 consecutive hours during the continued occupation of an assured’s premises by strikers, provided such occupation commenced during the aforesaid period. 

  

	 	3.	As regards earthquake (the epicenter of which need not necessarily be within the territorial confines referred to in the introductory portion of this paragraph) and fire following
directly occasioned by the earthquake, only those individual fire losses which commence during the period of 168 consecutive hours may be included in the Company’s “loss occurrence.” 

  

	 	4.	As regards “freeze,” only individual losses directly occasioned by collapse, breakage of glass and water damage (caused by bursting frozen pipes and tanks) may be included
in the Company’s “loss occurrence.” 

  

	B.	Except for those “loss occurrences” referred to in subparagraphs 1 and 2 of paragraph A above, the Company may choose the date and time when any such period of consecutive
hours commences, provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss, and provided that only one such period of 168
consecutive hours shall apply with respect to one event. 

  

	C.	However, as respects those “loss occurrences” referred to in subparagraphs 1 and 2 of paragraph A above, if the disaster, accident or loss occasioned by the event is of
greater duration than 72 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “loss occurrences,” provided that no two periods overlap and no individual loss is included in more than one such
period, and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss. 

  

	D.	No individual losses occasioned by an event that would be covered by 72 hours clauses may be included in any “loss occurrence” claimed under the 168 hours provision.

  

 

 

 
Article XI—Salvage and Subrogation 
  

	A.	The Company agrees to enforce its rights of recovery and to prosecute all claims arising out of such rights, and to enforce its rights to salvage or subrogation relating to any loss
and to prosecute all claims arising out of those rights. 

  

	B.	The Reinsurer shall benefit proportionately in all recoveries; such recoveries to include but not be limited to salvage, subrogation, reimbursements obtained, and recoveries made.
All salvages, subrogations, recoveries, payments and reversals or reductions of verdicts or judgments, whether recovered, received or obtained prior or subsequent to loss settlement under this Contract, shall be applied as if recovered, received or
obtained prior to the aforesaid settlement and shall be deducted from the actual losses sustained to arrive at the amount of ultimate net loss under this Contract. 

  
 
Article XII—Original Conditions (BRMA 37B) 
  

	A.	All reinsurance under this Contract shall be subject to the same rates, terms, conditions, waivers and interpretations and to the same modifications and alterations as the
respective policies of the Company. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract. The Reinsurer shall be credited with its exact proportion of the original
premiums received by the Company, prior to disbursement of any dividends, but after deduction of premiums, if any, ceded by the Company for inuring reinsurance. 

  

	B.	Nothing herein shall in any manner create any obligations or establish any rights against the Reinsurer in favor of any third party or any persons not parties to this Contract.

  
 
Article XIII—Adjusted Ceding Commission 
  

	A.	The Reinsurer will pay the Company a provisional ceding commission of 26.0%, which shall be calculated on the basis of net collected premium on policies reinsured hereunder. The
provisional ceding commission paid to the Company by the Reinsurer shall be adjusted periodically in accordance with the provisions of paragraph B below. 

  

	B.	The adjusted commission rate shall be calculated as follows and be applied to net earned premium for the underwriting year under consideration as follows: 

 

	 	1.	If the ratio of losses incurred to net earned premium is 70.5% or greater, then the adjusted ceding commission for the underwriting year under consideration shall be 22.5%;

  

	 	2.	If the ratio of losses incurred to net earned premium is less than 70.5%, but not less than 67.0%, then the adjusted ceding commission for the underwriting year under consideration
shall be 22.5%, plus 100% of the difference in percentage points between 70.5% and the actual ratio of losses incurred to net earned premium; 

  

 

 

	 	3.	If the ratio of losses incurred to net earned premium is less than 67.0%, but not less than 65.0%, then the adjusted ceding commission for the underwriting year under consideration
shall be 26.0%, plus 50.0% of the difference in percentage points between 67.0% and the actual ratio of losses incurred to net earned premium; 

  

	 	4.	If the ratio of losses incurred to net earned premium is less than 65.0%, but not less than 50.0%, then the adjusted ceding commission for the underwriting year under consideration
shall be 27.0%, plus 100% of the difference in percentage points between 65.0% and the actual ratio of losses incurred to net earned premium; 

  

	 	5.	If the ratio of losses incurred to net earned premium is 50.0% or less, the adjusted ceding commission for the underwriting year under consideration shall be 42.0%.

  

	C.	If the Reinsurer’s margin for any underwriting year is in deficit of the stated targeted amount, any amount in excess of the Reinsurer’s expense allowance from any of the
following contracts due from the Reinsurer to the Company shall be used to extinguish such deficit: the Quota Share Reinsurance Agreement, effective January 1, 2002 through December 31, 2003, issued to Vesta Fire Insurance Corporation, Chicago,
Illinois; the 100% Non Standard Private Passenger Quota Share Retrocession Contract, effective July 1, 2001 through December 31, 2001, issued to Vesta Fire Insurance Corporation, Chicago, Illinois; the Private Passenger Non Standard Automobile 100%
Quota Share Reinsurance Contract, effective March 1, 2001 through December 31, 2001, issued to Clarendon National Insurance Company and Harbor Specialty Insurance Company, both of Trenton, New Jersey; the 100% Non Standard Private Passenger Quota
Share Retrocession Contract, effective March 1, 2001 through December 31, 2001, issued to Clarendon National Insurance Company and Harbor Specialty Insurance Company, both of Trenton, New Jersey; and the Non Standard Private Passenger Quota Share
Reinsurance Contract, effective January 1, 2002 through December 31, 2003, issued to Old American County Mutual Fire Insurance Company, Dallas, Texas. The stated targeted amount of Reinsurer’s margin for this Contract in conjunction with
Companion Contract No. 1, on a weighted net earned premium basis between this Contract and Companion Contract No. 1 for the underwriting year beginning January 1, 2004 through December 31, 2004 is deemed to be 7.0% of net earned premium. The
Reinsurer’s margin equals 100% minus the loss ratio for both this Contract and Companion Contract No. 1 combined, expressed as a percent, and ceding commissions paid or owed for both this Contract and Companion Contract No. 1 shall also be
expressed as a percent. 

  

	D.	Within 45 days after 12 months following the end of each underwriting year, and every 12 months thereafter until all losses subject to the underwriting year under consideration have
been finally settled, the Company shall calculate and report the Reinsurer’s margin and the adjusted commission on net earned premium for the underwriting year under consideration, subject to the following with regards to the adjusted ceding
commission only: 

  

	 	1.	As respects the first calculation, if the adjusted commission on premiums earned is greater than commissions previously allowed by the Reinsurer on net earned premium for the
underwriting year, the Reinsurer shall remit 75.0% of the difference to the Company as promptly as possible after receipt and verification of the Company’s report. 

  

 

 

	 	2.	As respects the second and each subsequent calculation, if the adjusted commission on net earned premium is less than commissions previously allowed by the Reinsurer on net earned
premium for the underwriting year, the Company shall remit the difference to the Reinsurer with its report. If the adjusted commission on net earned premium is greater than commissions previously allowed by the Reinsurer on net earned premium for
the underwriting year, the Reinsurer shall remit the difference to the Company as promptly as possible after receipt and verification of the Company’s report, but in any event no more than 30 days following receipt and acceptance of the report.

  
 
Article XIV—Reports and Remittances 
  
 Within 30 days after the end of each month, the Company shall report to the Reinsurer the following, segregated by underwriting year: 
  

	 	1.	Ceded net written premium during the month, as respects all business subject to this Contract; 

  

	 	2.	Ceded net collected premium during the month, as respects all business subject to this Contract; 

  

	 	3.	Ceded net earned premium for the month, as respects all business subject to this Contract; 

  

	 	4.	Provisional ceding commission on (2) above; 

  

	 	5.	Ceded losses paid during the month (net of any recoveries during the month under the “cash call” provisions of Article VIII); 

  

	 	6.	Salvage, subrogation or other recoveries on losses; 

  

	 	7.	9.0% of (3) above, representing the Reinsurer’s share of loss adjustment expenses; 

  

	 	8.	Ceded unearned premium as of the end of the month; 

  

	 	9.	Ceded outstanding loss reserves as of the end of the month; 

  

	 	10.	Collected fee income; 

  

	 	11.	Claims involving extra contractual obligations and loss in excess of policy limits as of the end of the month. 

  
 The positive balance of (2) less (4) less (5) plus (6) less (7) shall be remitted to the
Reinsurer within 45 days after the end of the month. Any balance shown to be due the Company shall be remitted by the within 15 days after receipt and verification of the Company’s report. 
  
 The Company, General Agent and the Reinsurer shall review the management reports being
produced by the General Agent and agree on any other reports to be provided, if any. 
  

 

 

 
Article XV—Late Payments 
  

	A.	The provisions of this Article shall not be implemented unless specifically invoked, in writing, by one of the parties to this Contract. 

  

	B.	In the event any premium, loss or other payment due either party is not received by the intermediary named in Article XXVIII (hereinafter referred to as the
“Intermediary”) by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due
calculated for each such payment on the last business day of each month as follows: 

  

	 	1.	The number of full days which have expired since the due date or the last monthly calculation, whichever the lesser; times 

  

	 	2.	1/365ths of the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made;
times 

  

	 	3.	The amount past due, including accrued interest. 

  
 It is agreed that interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

  

	C.	The establishment of the due date shall, for purposes of this Article, be determined as follows: 

  

	 	1.	As respects any routine payment, adjustment or return due either party, the due date shall be as provided for in the applicable section of this Contract. In the event a due date is
not specifically stated for a given payment, it shall be deemed due 10 business days after the date of transmittal by the Intermediary of the initial billing for each such payment. 

  

	 	2.	As respects a “cash call” made in accordance with paragraph E of Article VIII, payment shall be deemed due five business days after the proof of loss or demand for payment
is transmitted to the Reinsurer. If such loss or claim payment is not received within the five days, interest will accrue on the payment or amount overdue in accordance with paragraph B above, from the date the proof of loss or demand for payment
was transmitted to the Reinsurer. 

  

	 	3.	As respects any payment, adjustment or return due either party not otherwise provided for in subparagraphs 1 and 2 of this paragraph, the due date shall be deemed as 10 business
days following transmittal of written notification that the provisions of this Article have been invoked. 

  
 For purposes of interest calculations only, amounts due hereunder shall be deemed paid upon receipt by the Intermediary. 
  

	D.	 Nothing herein shall be construed as limiting or prohibiting a Subscribing Reinsurer from contesting the validity of any claim, or from participating in the defense
of any claim or suit, 

  

 

 

	 	 
or prohibiting either party from contesting the validity of any payment or from initiating any arbitration or other proceeding in accordance with the
provisions of this Contract. If the debtor party prevails in an arbitration or other proceeding, then any interest penalties due hereunder on the amount in dispute shall be null and void. If the debtor party loses in such proceeding, then the
interest penalty on the amount determined to be due hereunder shall be calculated in accordance with the provisions set forth above unless otherwise determined by such proceedings. If a debtor party advances payment of any amount it is contesting,
and proves to be correct in its contestation, either in whole or in part, the other party shall reimburse the debtor party for any such excess payment made plus interest on the excess amount calculated in accordance with this Article.

  

	E.	Interest penalties arising out of the application of this Article that are $1,000 or less from any party shall be waived unless there is a pattern of late payments consisting of
three or more items over the course of any 12-month period. 

  
 
Article XVI—Offset (BRMA 36A) 
  
 The
Company and the Reinsurer may offset any balance or amount due from one party to the other under this Contract or any other contract heretofore or hereafter entered into between the Company and the Reinsurer, whether acting as assuming reinsurer or
ceding company. This provision shall not be affected by the insolvency of either party to this Contract. 
  
 
Article XVII—Inspection of Records 
  

	A.	Upon notice being given to the Company as specified in paragraph B below, the Reinsurer or its designated representative shall have free access at any reasonable time during any
underwriting year and subsequent to the termination of this Contract to all records of the Company which pertain in any way to this reinsurance, including claim files of any third party administrator adjusting losses on the Company’s behalf and
underwriting files of the General Agent or any managing general agent or managing general underwriter underwriting on the Company’s behalf. At the Reinsurer’s expense, copies of the whole or part of any documents relating to the risks
reinsured hereunder, including claims and underwriting files, will be provided. 

  

	B.	For the purposes of this Article, no more than two weeks prior notice shall be given. However, if any of the conditions set forth in paragraphs C, D or E of Article II exist, the
Reinsurer or its designated representative shall have immediate access without prior notice. 

  
 
Article XVIII—Errors and Omissions (BRMA 14F) 
  
 Inadvertent delays, errors or omissions made in connection with this Contract or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay, error or omission not occurred, provided
always that such error or omission is rectified as soon as possible after discovery. 
  

 

 

 
Article XIX—Taxes 
  
 The Company shall be
liable for all taxes payable under this Contract, whether on premium or otherwise. If the Reinsurer is obligated to pay any taxes under this Contract, the Company shall reimburse the Reinsurer. 
  
 
Article XX—Currency (BRMA 12A) 
  

	A.	Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to mean United States Dollars and all transactions under this
Contract shall be in United States Dollars. 

  

	B.	Amounts paid or received by the Company in any other currency shall be converted to United States Dollars at the rate of exchange at the date such transaction is entered on the
books of the Company. 

  
 
Article XXI—Unauthorized Reinsurance 
  

	A.	In the event the Company is unable to take reserve credit under this Contract or the Reinsurers’ A.M. Best’s rating is below 
“A-,” the Reinsurer hereby
agrees to secure delivery to the Company, prior to the effective date of this Contract, a clean, irrevocable, unconditional Letter of Credit drawn on a Federally Chartered Bank, approved by the National Association of Insurance Commissioners, and in
accordance with the rules and regulations as set forth by the Texas Department of Insurance or any other regulatory authority having jurisdiction, for an amount equal to the Reinsurer’s share of the reserves for premium unearned (net of
uncollected premium) and outstanding losses and loss expenses, including incurred but not reported losses at an amount to be agreed upon by the Reinsurer with such agreement not to be unreasonably withheld. The Company agrees to furnish the
Reinsurer with necessary accounting data to establish the amount of such Letter of Credit. 

  

	B.	In the event the Reinsurer and the Company mutually agree, the Reinsurer may, instead of complying with paragraph A above, enter into a Trust Agreement and establish a Trust Account
for the benefit of the Company in a federally chartered bank, approved by the National Association of Insurance Commissioners. Such amount shall be determined in accordance with paragraph A above. 

  

	C.	The assets deposited in the Trust Account shall be valued, according to their current fair market value, and shall consist only of cash, certificates of deposit, and/or investments
of the types permitted by the Texas Insurance Code, Article 5.75-1 (d), provided that such investments are issued by an institution that is not the parent, subsidiary, or affiliate of either the guarantor or the beneficiary.

  

	D.	The Trust Agreement shall further require that all settlements of account between the General Agent, the Company and the Reinsurer be made in cash or its equivalent.

  

 

 

	E.	The Reinsurer and the Company hereby agree that the assets of the Letter of Credit and/or in the Trust Account established pursuant to this Contract may be withdrawn by the Company
at any time, notwithstanding any other provisions in this Contract. Such withdrawals shall be utilized and applied by the Company or its successors in interest by operation of law, including without limitation any liquidator, rehabilitator,
receiver, or conservator of such Company, without diminution because of insolvency on the part of the Company or the Reinsurer, only for the following purposes: 

  

	 	1.	To reimburse the Company for the Reinsurer’s share of premiums returned to the owners of policies reinsured under this Contract on account of cancellations of such policies;

  

	 	2.	To reimburse the Company for the Reinsurer’s share of surrenders and benefits or losses paid by the Company pursuant to the provisions of the policies reinsured under this
Contract; 

  

	 	3.	In the event of notice of termination of the Letter of Credit and/or Trust Account, to fund an account with the Company in an amount at least equal to the Reinsurer’s share of
reserves described in paragraph A above; 

  

	 	4.	To pay any other amounts due the Company under this Contract. 

  
 
Article XXII—Conservation, Liquidation or Insolvency 
  

	A.	In the event of the insolvency of the Company, the reinsurance afforded by this Contract shall be payable directly by the Reinsurer to the Company or its liquidator, receiver or
statutory successor on the basis of the liability of the Company under the policies, without diminution because of the insolvency of the Company, in accordance with the provisions of any state law which may be involved except:

  

	 	1.	Where the Contract specifically provides another payee of such reinsurance in the event of the insolvency of the Company; or 

  

	 	2.	Where the Reinsurer with the consent of the direct insured(s) has assumed such policy obligations of the Company as direct obligations of the Reinsurer to the payees under such
policies and in substitution for the obligations of the Company to the payees. 

  

	B.	In the event of the insolvency of the Company, the liquidator, receiver or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of a claim
against the insolvent Company on a policy within a reasonable time after such claim is filed in the insolvency proceedings. During the pendency of such claim, the Reinsurer may investigate such claim and interpose at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or defenses which it may deem available to the Company or its liquidator, receiver or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to court
approval, against the insolvent Company as part of the expense of liquidation to the extent of the proportionate share of 

  

 

 

 the benefits which may accrue to the Company solely as a result of the defense undertaken by the
Reinsurer. 
  

	C.	If two or more reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been incurred by the Company. 

  

	D.	Notwithstanding the provisions of Article VI, as respects subject business assumed as reinsurance under this Contract, the parties agree that if the Company has a conservator,
liquidator, or receiver appointed for it, or becomes the subject of any conservation, liquidation or insolvency proceeding, and the Company is permitted to have all its liabilities under the policies reinsured hereunder assumed by another licensed
insurer and the Reinsurer agrees to such assumption, such assuming insurer shall be substituted for the Company as payee of any reinsurance recoverable hereunder in respect of losses under policies subject hereto, and the Reinsurer shall make
payments thereof directly to the substituted insurer. 

  

	E.	In the event the foregoing provisions apply, all the other provisions of this Contract shall apply to the substituted insurer in the same manner as if said insurer were substituted
for the Company as the reinsured party hereunder, and to the extent this Contract reinsures such substituted insurer, coverage hereunder shall be excluded as respects the Company. 

  
 
Article XXIII—Arbitration 
  

	A.	As a condition precedent to any right of action hereunder, in the event of any dispute or difference of opinion hereafter arising with respect to this Contract, it is hereby
mutually agreed that such dispute or difference of opinion shall be submitted to arbitration. One Arbitrator shall be chosen by the Company, the other by the Reinsurer, and an Umpire shall be chosen by the two Arbitrators before they enter upon
arbitration, all of whom shall be active or retired disinterested executive officers of insurance or reinsurance companies. In the event that either party should fail to choose an Arbitrator within 30 days following a written request by the other
party to do so, the requesting party may choose two Arbitrators who shall in turn choose an Umpire before entering upon arbitration. If the two Arbitrators fail to agree upon the selection of an Umpire within 30 days following their appointment,
each Arbitrator shall nominate three candidates within 10 days thereafter, two of whom the other shall decline, and the decision shall be made by drawing lots. 

  

	B.	Each party shall present its case to the Arbitrators within 30 days following the date of appointment of the Umpire. The Arbitrators shall consider this Contract as an honorable
engagement rather than merely as a legal obligation and they are relieved of all judicial formalities and may abstain from following the strict rules of law. The decision of the Arbitrators shall be final and binding on both parties; but failing to
agree, they shall call in the Umpire and the decision of the majority shall be final and binding upon both parties. Judgment upon the final decision of the Arbitrators may be entered in any court of competent jurisdiction. 

 

	C.	If more than one reinsurer is involved in the same dispute, all such reinsurers shall constitute and act as one party for purposes of this Article and communications shall be

  

 

 

 made by the Company to each of the reinsurers constituting one party, provided, however, that nothing
herein shall impair the rights of such reinsurers to assert several, rather than joint, defenses or claims, nor be construed as changing the liability of the reinsurers participating under the terms of this Contract from several to joint.

  

	D.	Each party shall bear the expense of its own Arbitrator, and shall jointly and equally bear with the other the expense of the Umpire and of the arbitration. In the event that the
two Arbitrators are chosen by one party, as above provided, the expense of the Arbitrators, the Umpire and the arbitration shall be equally divided between the two parties. 

  

	E.	Any arbitration proceedings shall take place at Dallas, Texas, but notwithstanding the location of the arbitration, all proceedings pursuant hereto shall be governed by the law of
the State of Texas. 

  
 
Article XXIV—Miscellaneous 
  

	A.	This Contract may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

  

	B.	A waiver by the Company, the Reinsurer or its designated representative of any breach or default by the other party under this Contract shall not constitute a continuing waiver or a
waiver by the Company, the Reinsurer or its designated representative of any subsequent act in breach or of default hereunder. 

  

	C.	The General Agent, on behalf of the Company, shall notify the Reinsurer prior to the effective date of any rate decrease for any business subject hereto. 

 
 
Article XXV—Prior Agreements 
  
 This
Contract shall supersede any and all previous agreements, whether verbal or written, which have been entered into by and between the parties with respect to the subject matter hereof. 
  
 
Article XXVI—Captions 
  
 The captions
contained in this Contract are included only for convenience of reference and do not define, limit, explain or modify this Contract or its interpretation, construction or meaning, and are in no way to be construed as part of this Contract.

  
 
Article XXVII—Entire Agreement 
  
 This
written Contract constitutes the entire agreement between the parties hereto with respect to the business being reinsured hereunder, and there are no understandings between the parties hereto other than as expressed in this Contract. Any change or
modification to this Contract will be made by amendment to this Contract and signed by the parties hereto. 
  

 

 

 
Article XXVIII—Intermediary (BRMA 23A) 
  
 Benfield Inc. is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including but not limited to notices, statements, premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through Benfield Inc., 3600 West 80th Street, Minneapolis, Minnesota 55431. Payments by the Company to the Intermediary shall be
deemed to constitute payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to constitute payment to the Company only to the extent that such payments are actually received by the Company. 
  

 

 

 Nuclear Incident Exclusion Clause—Physical Damage—Reinsurance (U.S.A.) 
  

	1.	This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers
formed for the purpose of covering Atomic or Nuclear Energy risks. 

  

	2.	Without in any way restricting the operation of paragraph (1) of this Clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly
and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to: 

  

	 	I.	Nuclear reactor power plants including all auxiliary property on the site, or 

  

	 	II.	Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such,
or 

  

	 	III.	Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material,” and for reprocessing, salvaging, chemically
separating, storing or disposing of “spent” nuclear fuel or waste materials, or 

  

	 	IV.	Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission. 

 

	3.	Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the
Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that
this paragraph (3) shall not operate 

  

	 	(a)	where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or 

  

	 	(b)	where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st
January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof. 

  

	4.	Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to
the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against. 

  

	5.	It is understood and agreed that this Clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the
primary hazard. 

  

	6.	The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof. 

  

	7.	Reassured to be sole judge of what constitutes: 

  

	 	(a)	substantial quantities, and 

  

	 	(b)	the extent of installation, plant or site. 

  
 Note.—Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that 
  

	 	(a)	all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December
1960 whichever first occurs whereupon all the provisions of this Clause shall apply. 

  

	 	(b)	with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause
until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply. 

  
 12/12/57 
 N.M.A. 1119 
 BRMA 35B 
  
  

 

 

 Nuclear Incident Exclusion Clause—Physical Damage—Reinsurance (Canada) 
  

	1.	This Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers
formed for the purpose of covering Atomic or Nuclear Energy risks. 

  

	2.	Without in any way restricting the operation of paragraph 1 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or indirectly,
and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to: 

  

	 	(a)	nuclear reactor power plants including all auxiliary property on the site, or 

  

	 	(b)	any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and critical facilities as such, or

  

	 	(c)	installations for fabricating complete fuel elements or for processing substantial quantities of radioactive materials, and for reprocessing, salvaging, chemically separating,
storing or disposing of spent nuclear fuel or waste materials, or 

  

	 	(d)	installations other than those listed in (c) above using substantial quantities of radioactive isotopes or other products of nuclear fission. 

  

	3.	Without in any way restricting the operation of paragraphs 1 and 2 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to the
Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith, except
that this paragraph 3 shall not operate: 

  

	 	(a)	where the Reinsured does not have knowledge of such nuclear reactor power plant or nuclear installation, or 

  

	 	(b)	where the said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused.

  

	4.	Without in any way restricting the operation of paragraphs 1, 2 and 3 of this clause, this Agreement does not cover any loss or liability by radioactive contamination accruing to
the Reinsured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against. 

  

	5.	This clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reinsured to be the primary hazard.

  

	6.	The term “radioactive material” means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any
other substances which may be designated by or pursuant to any law, act or statute, or any law amendatory thereof as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of
atomic energy. 

  

	7.	Reinsured to be sole judge of what constitutes: 

  

	 	(a)	substantial quantities, and 

  

	 	(b)	the extent of installation, plant or site. 

  

	8.	Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, this Agreement does not cover any loss or liability accruing to the Reinsured, directly or
indirectly, and whether as Insurer or Reinsurer, caused: 

  

	 	(1)	by any nuclear incident, as defined in or pursuant to the Nuclear Liability Act or any other nuclear liability act, law or statute, or any law amendatory thereof or nuclear
explosion, except for ensuing loss or damage which results directly from fire, lightning or explosion of natural, coal or manufactured gas; 

  

	 	(2)	by contamination by radioactive material. 

  

	NOTE:	Without in any way restricting the operation of paragraphs 1, 2, 3 and 4 of this clause, paragraph 8 of this clause shall only apply to all original contracts of the Reinsured,
whether new, renewal or replacement, which become effective on or after December 31, 1992. 

  
 N.M.A. 1980a (1/4/96) 

 Nuclear Incident Exclusion Clause—Liability—Reinsurance (U.S.A.) 
 (Approved by Lloyd’s Underwriters’ Fire and Non-Marine Association) 
  

	(1)	This reinsurance does not cover any loss or liability accruing to the Reassured as a member of, or subscriber to, any association of insurers or reinsurers formed for the purpose of
covering nuclear energy risks or as a direct or indirect reinsurer of any such member, subscriber or association. 

  

	(2)	Without in any way restricting the operation of paragraph (1) of this Clause it is understood and agreed that for all purposes of this reinsurance all the original policies of the
Reassured (new, renewal and replacement) of the classes specified in Clause II of this paragraph (2) from the time specified in Clause III in this paragraph (2) shall be deemed to include the following provision (specified as the Limited Exclusion
Provision): 

  
 Limited Exclusion Provision.*

  

	 	I.	It is agreed that the policy does not apply under any liability coverage, to 

 (injury, sickness, disease, death or destruction 
 (bodily injury or property damage 
 with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability. 
  

	 	II.	Family Automobile Policies (liability only), Special Automobile Policies (private passenger automobiles, liability only), Farmers Comprehensive Personal Liability Policies
(liability only), Comprehensive Personal Liability Policies (liability only) or policies of a similar nature; and the liability portion of combination forms related to the four classes of policies stated above, such as the Comprehensive Dwelling
Policy and the applicable types of Homeowners Policies. 

  

	 	III.	The inception dates and thereafter of all original policies as described in II above, whether new, renewal or replacement, being policies which either 

  

	 	(a)	become effective on or after 1st May, 1960, or 

  

	 	(b)	become effective before that date and contain the Limited Exclusion Provision set out above; 

  
 provided this paragraph (2) shall not be applicable to Family Automobile Policies, Special Automobile Policies, or policies
or combination policies of a similar nature, issued by the Reassured on New York risks, until 90 days following approval of the Limited Exclusion Provision by the Governmental Authority having jurisdiction thereof. 
  

	(3)	Except for those classes of policies specified in Clause II of paragraph (2) and without in any way restricting the operation of paragraph (1) of this Clause, it is understood and
agreed that for all purposes of this reinsurance the original liability policies of the Reassured (new, renewal and replacement) affording the following coverages: 

  
 Owners, Landlords and Tenants Liability, Contractual Liability, Elevator Liability, Owners or Contractors (including
railroad) Protective Liability, Manufacturers and Contractors Liability, Product Liability, Professional and Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile Liability (including Massachusetts Motor Vehicle or Garage
Liability) 
  
 shall be deemed to include, with respect to such
coverages, from the time specified in Clause V of this paragraph (3), the following provision (specified as the Broad Exclusion Provision): 
  
 Broad Exclusion Provision.* 
  
 It is agreed that the policy does not apply: 
  

	 	I.	Under any Liability Coverage to 

 (injury, sickness,
disease, death or destruction 
 (bodily injury or property damage 
  

	 	(a)	with respect to which an insured under the policy is also an insured under a nuclear energy liability policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic
Energy Liability Underwriters or Nuclear Insurance Association of Canada, or would be an insured under any such policy but for its termination upon exhaustion of its limit of liability; or 

  

	 	(b)	resulting from the hazardous properties of nuclear material and with respect to which (1) any person or organization is required to maintain financial protection pursuant to the
Atomic Energy Act of 1954, or any law amendatory thereof, or (2) the insured is, or had this policy not been issued would be, entitled to indemnity from the United States of America, or any agency thereof, under any agreement entered into by the
United States of America, or any agency thereof, with any person or organization. 

	 	II.	Under any Medical Payments Coverage, or under any Supplementary Payments Provision relating to 

 (immediate medical or surgical relief 
 (first aid, 
 to expenses incurred with respect to 
 (bodily injury, sickness, disease or death 
 (bodily injury 
 resulting from the hazardous properties of nuclear material and arising out of the operation of a nuclear facility by any person or organization.

  

	 	III.	Under any Liability Coverage to 

 (injury, sickness,
disease, death or destruction 
 (bodily injury or property damage 
 resulting from the hazardous properties of nuclear material, if 
  

	 	(a)	the nuclear material (1) is at any nuclear facility owned by, or operated by or on behalf of, an insured or (2) has been discharged or dispersed therefrom; 

 

	 	(b)	the nuclear material is contained in spent fuel or waste at any time possessed, handled, used, processed, stored, transported or disposed of by or on behalf of an insured; or

  

	 	(c)	the 

             (injury, sickness, disease, death or destruction 
             (bodily injury or property damage 
 arises out of the
furnishing by an insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility, but if such facility is located within the United States of America, its
territories, or possessions or Canada, this exclusion (c) applies only to 
 (injury to or destruction of property at such nuclear
facility 
 (property damage to such nuclear facility and any property thereat. 
  

	 	IV.	As used in this endorsement: 

	 	    	“hazardous properties” include radioactive, toxic or explosive properties; “nuclear material” means source material, special nuclear material or byproduct
material; “source material”, “special nuclear material”, and “byproduct material” have the meanings given them in the Atomic Energy Act of 1954 or in any law amendatory thereof; “spent fuel” means any fuel
element or fuel component, solid or liquid, which has been used or exposed to radiation in a nuclear reactor; “waste” means any waste material (1) containing byproduct material and (2) resulting from the operation by any person or
organization of any nuclear facility included within the definition of nuclear facility under paragraph (a) or (b) thereof; “nuclear facility” means 

  

	 	(a)	any nuclear reactor, 

  

	 	(b)	any equipment or device designed or used for (1) separating the isotopes of uranium or plutonium, (2) processing or utilizing spent fuel, or (3) handling processing or packaging
waste, 

  

	 	(c)	any equipment or device used for the processing, fabricating or alloying of special nuclear material if at any time the total amount of such material in the custody of the insured
at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination thereof, or more than 250 grams of uranium 235, 

  

	 	(d)	any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste, and includes the site on which any of the foregoing is located, all
operations conducted on such site and all premises used for such operations; “nuclear reactor” means any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of fissionable
material; 

  
 (With respect to injury to or
destruction of property, the word “injury” or “destruction,” 
 (“property damage” includes all forms of
radioactive contamination of property, 
 (includes all forms of radioactive contamination of property. 
  

	 	V.	The inception dates and thereafter of all original policies affording coverages specified in this paragraph (3), whether new, renewal or replacement, being policies which become
effective on or after 1st May, 1960, provided this paragraph (3) shall not be applicable to 

  

	 	(i)	Garage and Automobile Policies issued by the Reassured on New York risks, or 

  

	 	(ii)	statutory liability insurance required under Chapter 90, General Laws of Massachusetts, until 90 days following approval of the Broad Exclusion Provision by the Governmental
Authority having jurisdiction thereof. 

  

	(4)	Without in any way restricting the operation of paragraph (1) of this Clause, it is understood and agreed that paragraphs (2) and (3) above are not applicable to original liability
policies of the Reassured in Canada and that with respect to such policies this Clause shall be deemed to include the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian Underwriters’ Association or the Independent Insurance
Conference of Canada. 

	*NOTE.	The words printed in italics in the Limited Exclusion Provision and in the Broad Exclusion Provision shall apply only in relation to original liability policies which include a
Limited Exclusion Provision or a Broad Exclusion Provision containing those words. 

 Nuclear Incident Exclusion Clause—Liability—Reinsurance (Canada) 
  

	1.	This Agreement does not cover any loss or liability accruing to the Reinsured as a member of, or subscriber to, any association of insurers or reinsurers formed for the purpose of
covering nuclear energy risks or as a direct or indirect reinsurer of any such member, subscriber, or association. 

  

	2.	Without in any way restricting the operation of paragraph 1 of this clause it is agreed that for all purposes of this Agreement all the original liability contracts of the
Reinsured, whether new, renewal or replacement, of the following classes, namely, 

  
 Personal Liability, 
 Farmers Liability,

 Storekeepers Liability, 
  
 which become effective on or after 31st December 1984, shall be deemed to include, from their inception dates and thereafter, the following provision: — 

 
 Limited Exclusion Provision 
  
 This Policy does not apply to bodily injury or property damage with respect
to which the Insured is also insured under a contract of nuclear energy liability insurance (whether the Insured is named in such contract or not and whether or not it is legally enforceable by the Insured) issued by the Nuclear Insurance
Association of Canada or any other group or pool of insurers or would be an Insured under any such policy but for its termination upon exhaustion of its limit of liability. 
  
 With respect to property, loss of use of such property shall be deemed to be property damage. 
  

	3.	Without in any way restricting the operation of paragraph 1 of this clause it is agreed that for all purposes of this Agreement all the original liability contracts of the
Reinsured, whether new, renewal or replacement, of any class whatsoever (other than Personal Liability, Farmers Liability, Storekeepers Liability or Automobile Liability contracts), which become effective on or after 31st December 1984, shall be
deemed to include, from their inception dates and thereafter, the following provision: — 

  
 Broad Exclusion Provision 
  
 It is agreed that this Policy does not apply: 
  

	 	(a)	to liability imposed by or arising under the Nuclear Liability Act; or 

  

	 	(b)	to bodily injury or property damage with respect to which an Insured under this Policy is also insured under a contract of nuclear energy liability insurance (whether the Insured is
named in such contract or not and whether or not it is legally enforceable by the Insured) issued by the Nuclear Insurance Association of Canada or any other insurer or group or pool of insurers or would be an Insured under any such policy but for
its termination upon exhaustion of its limit of liability; or 

  

	 	(c)	to bodily injury or property damage resulting directly or indirectly from the nuclear energy hazard arising from: 

  

	 	(1)	the ownership, maintenance, operation or use of a nuclear facility by or on behalf of an Insured; 

	 	(2)	the furnishing by an Insured of services, materials, parts or equipment in connection with the planning, construction, maintenance, operation or use of any nuclear facility; and

  

	 	(3)	The possession, consumption, use, handling, disposal or transportation of fissionable substances or of other radioactive material (except radioactive isotopes, away from a nuclear
facility, which have reached the final stage of fabrication so as to be useable for any scientific, medical, agricultural, commercial or industrial purpose) used, distributed, handled or sold by an Insured. 

  
 As used in this Policy: 
  

	 	(I)	The term “nuclear energy hazard” means the radioactive, toxic, explosive or other hazardous properties of radioactive material; 

  

	 	(II)	The term “radioactive material” means uranium, thorium, plutonium, neptunium, their respective derivatives and compounds, radioactive isotopes of other elements and any
other substances that the Atomic Energy Control Board may, by regulation, designate as being prescribed substances capable of releasing atomic energy, or as being requisite for the production, use or application of atomic energy;

  

	 	(III)	The term “nuclear facility” means: 

  

	 	(a)	any apparatus designed or used to sustain nuclear fission in a self-supporting chain reaction or to contain a critical mass of plutonium, thorium and uranium or any one or more of
them; 

  

	 	(b)	any equipment or device designed or used for (i) separating the isotopes of plutonium, thorium and uranium or any one or more of them, (ii) processing or utilizing spent fuel, or
(iii) handling, processing or packaging waste; 

  

	 	(c)	any equipment or device used for the processing, fabricating or alloying of plutonium, thorium or uranium enriched in the isotope uranium 233 or in the isotope uranium 235, or any
one or more of them if at any time the total amount of such material in the custody of the Insured at the premises where such equipment or device is located consists of or contains more than 25 grams of plutonium or uranium 233 or any combination
thereof, or more than 250 grams of uranium 235; 

  

	 	(d)	any structure, basin, excavation, premises or place prepared or used for the storage or disposal of waste radioactive material; 

  
 and includes the site on which any of the foregoing is located, together
with all operations conducted thereon and all premises used for such operations. 
  

	 	(IV)	The term “fissionable substance” means any prescribed substance that is, or from which can be obtained, a substance capable of releasing atomic energy by nuclear fission.

  

	 	(V)	With respect to property, loss of use of such property shall be deemed to be property damage. 

  
 N.M.A. 1979 
  
  
 

 

 Pollution Exclusion Clause—Auto Liability—Reinsurance 
  

	A.	This reinsurance excludes all loss and/or liability accruing to the Company as a result of: 

  

	 	1.	bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants: 

  

	 	a.	that are (or that are contained in any property that is) 

  

	 	i.	being transported or towed by, or handled for movement into, onto or from the insured auto, or otherwise in the course of transit; 

  

	 	ii.	being stored, disposed of, treated or processed in or upon the insured auto; 

  

	 	b.	before the pollutants (or any property in which the pollutants are contained) are moved from the place where they are accepted by the insured for movement into or onto the insured
auto; or 

  

	 	c.	after the pollutants (or any property in which the pollutants are contained) are moved from the insured auto to the place where they are finally delivered, disposed of or abandoned
by the insured; 

  

	 	2.	any governmental direction or request that the insured test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants. 

  

	B.	Paragraph A above does not apply to environmental restoration coverage required by the Motor Carrier Act of 1980, or similar mandatory laws. 

  

	C.	Subparagraph A(1)(a)(ii) above does not apply to fuels, lubricants, fluids, exhaust gases or other similar pollutants that are needed for or result from the normal electrical,
hydraulic or mechanical functioning of the insured auto or its parts, if: 

  

	 	1.	the pollutants escape or are discharged, dispersed or released directly from an auto part designed by its manufacturer to hold, store, receive or dispose of such pollutants; and

  

	 	2.	the bodily injury or property damage does not arise out of the operation of a cherry picker or similar device mounted on an automobile or truck chassis and used to raise or lower
workers, air compressors, pumps and/or generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment. 

  

	D.	Paragraphs A(1)(b) and A(1)(c) above do not apply if: 

  

	 	1.	the pollutants (or any property in which the pollutants are contained) are upset, overturned or damaged as a result of the maintenance or use of an insured auto; and

  

	 	2.	the discharge, dispersal, release or escape of the pollutants is caused directly by such upset, overturn or damage. 

  

	E.	“Pollutants” mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes
material to be recycled, reconditioned or reclaimed. 

  
 BRMA 39B

 Interests and Liabilities Agreement 
  
 entered into by and between 
  
 Old American County Mutual Fire Insurance Company 
 Dallas, Texas 
  
 and 
  
 Affirmative Insurance Company 
 Bedford Park, Illinois 
 (hereinafter
referred to as the “Subscribing Reinsurer”) 
  
 It Is Hereby
Agreed that the Subscribing Reinsurer shall have a 25.0% share in the interests and liabilities of the “Reinsurer” as set forth in the attached Contract entitled: 
  
 Private Passenger Automobile Quota Share 
 Reinsurance Contract 
 Effective: January 1, 2004 
  
 It Is Further Agreed that this Agreement shall become effective at 12:01 a.m., Central
Standard Time, January 1, 2004, and shall continue in force until terminated in accordance with the provisions of the attached Contract. 
  
 It Is Also Agreed that the Subscribing Reinsurer’s share in the attached Contract shall be separate and apart from the shares of the other reinsurers,
and shall not be joint with the shares of the other reinsurers, it being understood that the Subscribing Reinsurer shall in no event participate in the interests and liabilities of the other reinsurers. 
  
 It Is Also Agreed that, as respects the Subscribing Reinsurer’s share in
the attached Contract, the following shall apply: 
  

	 	1.	Subparagraphs 3 and 4 of paragraph A and paragraphs E and F of Article V—Retention and Limit—shall be deleted and the following substituted therefor:

  

	 	“3.	Extra contractual obligations limited to an additional limit of $1,000,000 each policy (in addition to the maximum policy limits set forth in paragraph G below), each loss
occurrence for this Contract and subject to a $3,000,000 combined limit of liability for this Contract and the Private Passenger Automobile Quota Share Reinsurance Contract, effective January 1, 2004, issued to Affirmative Insurance Company and
Insura Property and Casualty Insurance Company, both of Bedford Park, Illinois (hereinafter ‘Companion Contract No. 1’), in the aggregate for each underwriting year and in the aggregate with the limits provided in subparagraph 4 below. It
is understood and agreed that Affirmative Insurance Company shall be liable for 100% of the extra contractual obligations of the Company in excess of $1,000,000 each policy (in addition to the maximum policy limits set forth in paragraph G below),
each loss occurrence for this Contract and 100% of the extra contractual obligations in excess of $3,000,000 in 

  
 

 

 the aggregate as respects this Contract and the Companion Contract No. 1, with the limits provided in
subparagraph 4 below. 
  

	 	4.	Loss in excess of policy limits limited to an additional limit of $1,000,000 each policy (in addition to the maximum policy limits set forth in paragraph G below), each loss
occurrence for this Contract and subject to a $3,000,000 combined limit of liability for this Contract and Companion Contract No. 1 in the aggregate for each underwriting year and in the aggregate with the limits provided in subparagraph 3 above. It
is understood and agreed that Affirmative Insurance Company shall be liable for 100% of the loss in excess of policy limits of the Company in excess of $1,000,000 each policy (in addition to the maximum policy limits set forth in paragraph G below),
each loss occurrence for this Contract and 100% of the loss in excess of policy limits in excess of $3,000,000 in the aggregate as respects this Contract and the Companion Contract No. 1, with the limits provided in subparagraph 3 above.”

  

	 	“E.	Notwithstanding the provisions of paragraph A above, in the event the Company’s net collected premium from policies during the first underwriting year hereunder exceeds
$60,000,000, the cession percentage hereunder, as respects that underwriting year, shall be reduced to the proportion that $60,000,000 bears to the Company’s net earned premium for the first underwriting year. In the event of a reduction of the
cession percentage for the first underwriting year hereunder, under the provisions of this paragraph, the premiums and losses paid hereunder for the first underwriting year shall be adjusted retroactively to the beginning of that year and it is
understood and agreed that Affirmative Insurance Company shall be liable for 100% of the difference between $60,000,000 and the actual cession amount, in addition to its subscribing share of the ceded net collected premium. 

 

	 	F.	Under policies allocated to each underwriting year, the Company shall retain, in addition to its quota share participation in the interest and liabilities of the Reinsurer
hereunder, 100% of all ultimate net loss for this Contract and Companion Contract No. 1 as respects any one loss occurrence in excess of 2.0% of the Company’s net earned premium for this Contract and Companion Contract No. 1 for the
underwriting year, resulting from any event assigned a number by the Property Claims Services Division of American Insurance Services, Inc. and/or from an event from which resulting claims are tracked as resulting from the same weather or
temperature-related event by the systems of the General Agent and, in either or both cases, which involve five or more policies. It is understood and agreed that Affirmative Insurance Company shall be liable for 100% of the ultimate net loss for
this Contract and Companion Contract No. 1 as respects any one loss occurrence in excess of 2.0% of the Company’s net earned premium for this Contract and Companion Contract No. 1 for any one underwriting year, resulting from any event assigned
a number by the Property Claims Services Division of American Insurance Services, Inc. and/or from an event from which resulting claims are tracked as resulting from the same weather or temperature-related event by the systems of the General Agent
and, in either or both cases, which involve five or more policies. 

  

 

 

 Additionally, in each underwriting year, the Company shall retain, in addition to its quota share
participation in the interests and liabilities of the Reinsurer hereunder, 100% of all ultimate net loss for this Contract and Companion Contract No.1 in excess of 4.0% of the Company’s net earned premium for this Contract and Companion
Contract No.1 for the underwriting year for all such loss occurrences in the aggregate. It is understood and agreed that Affirmative Insurance Company shall be liable for 100% of the ultimate net loss for this Contract and Companion Contract No. 1
in excess of 4.0% of the Company’s net earned premium for this Contract and Companion Contract No.1 for any one underwriting year for all such loss occurrences in the aggregate.” 
  

	 	2.	Paragraph A of Article VII—Loss in Excess of Policy Limits and Extra Contractual Obligations—shall be deleted and the following substituted therefor:

  

	 	“A.	In the event the Company pays or is held liable to pay an amount of loss in excess of its policy limit, but otherwise within the terms of its policy (hereinafter referred to as
‘loss in excess of policy limits’) or any punitive, exemplary, compensatory or consequential damages, other than loss in excess of policy limits (hereinafter referred to as ‘extra contractual obligations’) because of alleged or
actual bad faith, negligence or fraud on its part in rejecting an offer of settlement within policy limits, or in the preparation of the defense or in the trial of an action against its insured or reinsured or in the preparation or prosecution of an
appeal consequent upon such an action, or in otherwise handling a claim under a policy subject to this Contract, 100% of the loss in excess of policy limits and/or 100% of the extra contractual obligations shall be subject to the provisions of
Article V, not exceeding, however, $1,000,000 per occurrence for this Contract or $3,000,000 in the aggregate, as respects this Contract and Companion Contract No. 1, any one underwriting year. It is agreed and understood that Affirmative Insurance
Company shall be liable for 100% of the loss in excess of policy limits and/or 100% of the extra contractual obligations in excess of $1,000,000 per occurrence or $3,000,000 in the aggregate, as respects any one underwriting year.”

  
 It Is Also Agreed that, in addition to its participation
in the interests and liabilities of the “Reinsurer” as set forth in the first paragraph of this Agreement, the Subscribing Reinsurer shall be liable for 100% of the provisions as set forth in the following Articles: 
  
 Hold Harmless Article 
  

	 	A.	In consideration of these presents and the reciprocal benefits derived by the Company and the Subscribing Reinsurer, the Subscribing Reinsurer hereby holds the Company
harmless from, and assumes all liability for every claim, demand, liability, loss, damage, cost, charge, attorney’s fees, expense of suit, order, judgment and adjudication incurred in connection with this Contract or any contract or by the
Company in asserting its rights hereunder in connection with or with respect to this Contract. The Subscribing Reinsurer’s obligations hereto relate to but are not limited to the following: all liability for agents’ balances,
return premiums and commissions, deceptive trade practice liability, premiums, policy fees, premium taxes or other charges (whether collected or not), any claims agent, General Agent or its sub-agents relating to this Contract, any agreement between
the Company and any claims agent, any agreement with a premium finance company, and all fees owing to any General Agent or any claims agent under this and the aforementioned related agreements. 

  

 

 

	 	B.	Notwithstanding anything to the contrary, this Article shall not apply to: 

  

	 	1.	Fraud, dishonesty, theft or collusion on the part of any Director, Officer or employee of the Company; or 

  

	 	2.	Policies not reinsured hereunder; or 

  

	 	3.	The Company’s failure to perform its duties and obligations under this Contract due to the Company’s willful misconduct. 

  

	 	C.	The Subscribing Reinsurer shall not seek to recover from or offset against the Company any sums, whether premium or other monies, which the Subscribing
Reinsurer’s designated representative and/or General Agent was unable or unwilling to remit to the Company or the Subscribing Reinsurer. The Company shall not be liable to the Subscribing Reinsurer for premium unless the
Company itself has actually received the premium in question. The Subscribing Reinsurer may not offset any balances on account of losses, loss adjustment expenses or any other amounts due except as to premium actually received by the Company
itself (as distinct from premiums not collected, or premiums collected by any General Agent and/or agent or premium placed in a premium trust account pursuant to the managing general agency agreement) which wrongfully have not been transmitted to
the Subscribing Reinsurer. 

  

	 	D.	If for any reason any General Agent or agent fails or is unable to administer the policies reinsured hereunder (whether the Contract is still in effect or business is being run
off), the Subscribing Reinsurer shall appoint a third party to administer the business and shall be responsible for its share of the cost of said administration. If return premiums or other funds need to be returned to premium finance
companies, policyholders or sub-agents, the Subscribing Reinsurer shall pay these amounts if the General Agent or agent does not. 

  

	 	E.	The Company, at its sole and absolute discretion, may assign, in whole or in part, to the Subscribing Reinsurer, any of its rights under the managing general agency
agreement, including but not limited to collection of premiums and any recourse under any hold harmless or indemnification clause. 

  

	 	F.	The Subscribing Reinsurer shall not sue, or seek arbitration, against the Company for any acts of the Subscribing Reinsurer’s designated representatives and/or
the General Agent for any monies which the Subscribing Reinsurer’s designated representatives and/or the General Agent owes unless the Company has actually received those monies and has wrongfully not remitted them to the Subscribing
Reinsurer. The Subscribing Reinsurer shall indemnify and hold the Company harmless for any damages, liabilities and expenses (including, but not limited to, fines, penalties and attorney fees incurred by reason of the Subscribing
Reinsurer’s designated representatives’ and/or the General Agent’s acts or failures to act. The Company is not responsible for any commissions or other monies payable to the General Agent in connection with this Contract and the
Subscribing Reinsurer’s designated representatives shall not sue, or seek arbitration, against the Company for any actions by or debts owing from the Subscribing Reinsurer. 

  

 

 

 Regulatory Matters Article 
  

	 	A.	It is the parties’ understanding that the Texas Department of Insurance views premium over 90 days due (aged by item and effective date) from insureds or their designated
representative to the Company as non-admitted assets. In confirmation of the liabilities assumed by the Subscribing Reinsurer under this Contract, the Subscribing Reinsurer hereby assumes 100% share of all liability and responsibility
for all premium in the course of collection. 

  

	 	B.	The Subscribing Reinsurer shall agree, at no cost to the Company, to take those actions (including, but not limited to, modifications in how funds are handled and how
accounts are cleared and settled) and agree to those arrangements necessary to ensure that the Company suffers no adverse impact because of this reinsurance program and is in compliance with the laws of the State of Texas and regulations promulgated
by any governmental entity thereof, including the Texas Department of Insurance, insofar as this reinsurance program is concerned, subject to the provisions of Article XXII of the attached Contract. 

  

	 	C.	The Subscribing Reinsurer and the Company shall not offset obligations arising under this Contract with obligations arising under any other agreement except to the extent
permitted under state law and/or regulations. 

  
 Ownership and Maintenance of Records Article 
  
 All records pertaining to policies issued on behalf of the Company through or by the Subscribing Reinsurer or its designated representative subject to this Contract, shall be deemed to be jointly owned records of the Company and the
Subscribing Reinsurer, and shall be made immediately available to the Company or the Subscribing Reinsurer or their representative or any duly appointed examiner for any state within the United States; and these records shall be kept
in the State of Texas. Notwithstanding the foregoing, the Subscribing Reinsurer is authorized to maintain duplicate working files of all such records outside the State of Texas. The Company and the Subscribing Reinsurer agree that
neither will destroy any such records in their possession without the prior written approval of the other, except that the Company shall not be required to retain files longer than required by the guidelines set by the Texas Department of Insurance.

  
 It Is Also Agreed that, in addition to its participation in the
interests and liabilities of the “Reinsurer” set forth in the first paragraph of this Agreement, the Subscribing Reinsurer shall accept and indemnify the Company for 100% of the Company’s business and credit risk and 100% of
the Company’s insurance risk in excess of maximum allowable subject net written premium collected from policies during any underwriting year, as described in Article V of the attached Contract as respects business subject to the attached
Contract, except for the risks of the Reinsurer’s insolvency. 
  
 In
Witness Whereof, the parties hereto by their respective duly authorized representatives have executed this Agreement as of the dates undermentioned at: 
  
 Dallas, Texas, this              day of
                                        
                         in the year
                        . 
  

	 	

  

 

 

 Old American County Mutual Fire Insurance Company 
  
 Bedford Park, Illinois, this
             day of
                                        
                         in the year
                        . 
  

	 	

 Affirmative Insurance CompanyFirst Amended and Restated Managing General Agency Agreement

 Exhibit 10.13 
  
 First Amended and Restated 
 Managing General Agency Agreement 
 Number AFFORD-02-001 
  
 Table of Contents 
  

					
	 	  	 	  	Page

	 Article 1
	  	Appointment	  	2
	 Article 2
	  	Authority of the Managing General Agent	  	2
	 Article 3
	  	Compensation	  	3
	 Article 4
	  	Accounting and Records	  	5
	 Article 5
	  	Reports and Remittances	  	6
	 Article 6
	  	Expenses	  	7
	 Article 7
	  	Premium Escrow Accounts	  	8
	 Article 8
	  	Control of Expirations	  	9
	 Article 9
	  	Independent Contractor Relationship	  	9
	 Article 10
	  	Advertising	  	9
	 Article 11
	  	Agents Licensing	  	10
	 Article 12
	  	Agency Sale or Transfer	  	10
	 Article 13
	  	Hold Harmless	  	10
	 Article 14
	  	Arbitration	  	11
	 Article 15
	  	Termination	  	13
	 Article 16
	  	Claims Handling	  	14
	 Article 17
	  	Reinsurance	  	15
	 Article 18
	  	Miscellaneous	  	15

  

 1 

 FIRST AMENDED AND RESTATED 
 MANAGING GENERAL AGENCY AGREEMENT 
 NUMBER AFFORD-02-001 
  
 This Agreement is made and entered into by and between OLD AMERICAN COUNTY MUTUAL FIRE
INSURANCE COMPANY, a Texas Corporation (Company) and A-AFFORDABLE MANAGING GENERAL AGENCY, INC. f.k.a. INSTANT AUTO MANAGING GENERAL AGENCY, INC. d.b.a. A-AFFORDABLE MANAGING GENERAL AGENCY., a Texas Corporation with administrative
offices in Addison, Texas, (Managing General Agent). 
  
 THE
COMPANY AND THE MANAGING GENERAL AGENT AGREE AS FOLLOWS: 
  
 ARTICLE 1 -
APPOINTMENT 
  
 1.1 The Company appoints the Managing General Agent to
act as its Managing General Agent as that term is defined in Article 21.07-3 of the Texas Insurance Code and the Texas Administrative Code. This appointment is originally effective April 1, 2002 and continuous in nature and shall remain in effect
until terminated in accordance with Article 15. 
  
 1.2 The Managing General Agent
acknowledges and agrees that the Company’s appointment of the Managing General Agent does not restrict in any manner the Company’s right to appoint agents writing any lines of insurance the Company writes through any other agent, sub-agent
or managing general agent either direct to the Company or through other agents. 
  
 1.3 This First Amended and Restated Managing General Agency Agreement Number AFFORD-02-001 hereby amends and restates that certain Managing General Agency Agreement Number AFFORD-02-001 dated April 1, 2002, as amended, made by and between
Company and Managing General Agent. 
  
 ARTICLE 2 - AUTHORITY

  
 2.1 The Managing General Agent has the authority and duty to act on
behalf of the Company in all respects, insofar as necessary for the Managing General Agent to perform the function of a Managing General Agent for the Company. The Company may, from time-to-time, place reasonable written restrictions upon the
Managing General Agent. The Managing General Agent’s authority includes, but is not limited to, production, appointment and supervision of agents for the Company, underwriting, accounting and claims handling. All acts of the Managing General
Agent, insofar as the Company’s business is concerned, are subject to the ultimate authority of the Company. 
  
 2.2 The original source of all business produced under this Agreement shall be property/ casualty, general lines, or limited lines agents in the State of Texas
(Agent(s)). 
  
 2.3 The Managing General Agent has the authority to accept, on
forms approved by the Company, applications, binders, and/or Policies written by or through Agents, for classes or lines 
  

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 of insurance as described in the attached Schedule of Business and in Quota Share Reinsurance Agreements between the
Company and various reinsurers (the Reinsurer) effective April 1, 2002, as amended and all substitutions thereof, (Reinsurance Agreement), a copy of said Agreement is attached hereto and fully incorporated herein. 
  
 2.4 The Managing General Agent acknowledges and agrees that the term(s) of any Policy shall
not exceed twelve (12) months. “Policy” is defined as any policy, endorsement, binder, certificate, proposal for insurance or any other document that binds the Company to insurance coverage. 
  
 2.5 The Managing General Agent has the authority to cancel Policies, at its discretion,
subject to the requirements imposed by law and in compliance with the applicable provisions contained in this Agreement and the Policies. 
  
 2.6 The Managing General Agent has the authority to receive and receipt for premiums and to retain commissions out of such collected premiums subject to the terms and
conditions of this Agreement. 
  
 2.7 The Managing General Agent or its designated
claims handler shall have the authority to set loss reserves and adjust and pay claims on behalf of the Company. 
  
 2.8 The Company shall retain the authority to restrict the premium volume. 
  
 2.9 The Managing General Agent may not authorize policy issuance on behalf of the Company to any broker, agent, managing general agent or any other entity without the
prior written consent of the Company. 
  
 2.10 Any and all agreements with
Agent(s) shall be made directly between the Managing General Agent and such Agent(s). It is understood that the Agent shall have no claim or cause of action against the Company and said Agent(s) shall look solely to the Managing General Agent for
any and all expenses, costs, causes of action and damages, including, but not limited to, extra contractual obligations, arising in any manner from actions or inactions by the Agent(s) or the Managing General Agent. 
  
 2.11 The Managing General Agent shall bear sole responsibility to oversee the proper
licensing of any Agents(s). Should any fines be levied against the Company as the result of the Managing General Agent accepting business from an unlicensed Agent, the Managing General Agent shall hold the Company harmless and reimburse the Company
for any and all expenses so incurred including, but not limited to, legal fees, fines and travel expenses. 
  
 ARTICLE 3 - COMPENSATION 
  
 3.1
The Managing General Agent’s compensation shall be the commission allowed under the Reinsurance Agreement less policy issuing fees and premium taxes. As used in the Article, the term “Net Written Premium” is defined as the total of
all premium amounts on policies written by the Managing General Agent between the Company and the Managing General Agent less return premium and cancellations. 
  

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 3.2 The fronting fees to be paid to the Company shall be a percentage of aggregate Net Written Premiums (NWP) and policy
fees charged (PF) on all policies produced and serviced by the Managing General Agent as follows: 
  

				
	 NWP/PF

	  	Percentage

	 
	 0 - $100,000,000
	  	1.625	%
	 excess of $100,000,000
	  	1.500	%

  
 This calculation shall
include all Net Written Premiums and policy fees charged on policies of insurance issued by the Company and produced and serviced by the Managing General Agent, and any of its agents, local recording agents or other representatives producing
insurance business which is the subject of this Managing General Agency Agreement, including without limitation, Instant Auto Insurance of Texas, Inc d/b/a A-affordable Managing General Agency. In addition, this calculation shall include all Net
Written Premiums and policy fees charged on policies of insurance issued by the Company and produced and serviced by Harbor Insurance Managers, Inc. (Harbor), Old American Insurance Services Inc. (OAIS) and American Agencies General Agency Inc.
(AAGA) in excess of $236,565,000, as contemplated by Managing General Agency Agreement addenda of January 31, 2002 between the Company and those Managing General Agencies. In addition, premium taxes of one and seventy-five percent (1.75%) are due in
addition to the payments above based upon NWP and PF. 
  
 3.3 The tax provision of
one and three-quarters percent (1.75%) of Net Written Premium and policy fees charged includes premium tax and the Texas Overhead Assessment. Amounts due for the Automobile Theft Prevention Pool will be settled separately on a semiannual basis. The
Company retains the right to adjust the premium tax of 1.75% to any new effective rate determined by the Texas Department of Insurance or other such agency. The Company will be liable for remitting state premium taxes based on Net Written Premium
and policy fees charged. 
  
 3.4 Should service fees be charged on any policy
covered by this Agreement, and such fees be deemed taxable by the Texas Comptroller or Department of Insurance for premium tax purposes, then such service fees are to be added to the Net Written Premium and policy fees charged to determine the
amount subject to Fronting Fees. 
  
 3.5 The Managing General Agent shall be
entitled to retain the policy fee less premium taxes of one and three quarters percent (1.75%) and fronting fees as stated in Article 3.2 plus billing and other service fees charged by the Managing General Agent. 
  
 3.6 In the event there is no Agent to receive the designated commission on a Policy, the
Managing General Agent may retain the commission. 
  
 3.7 The commission may, from
time to time, be amended upon mutual agreement of the Company and the Managing General Agent without otherwise affecting the terms and conditions of this Agreement. 
  
 3.8 The Company agrees to pass through to the Managing General Agent any Contingent or Profit Commission allowed by the Reinsurer(s) as
referenced in the Reinsurance Agreement. 
  

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 ARTICLE 4 - ACCOUNTING AND RECORDS 
  
 4.1 The Managing General Agent shall provide and maintain all necessary books, records, policies, claim files, dailies and correspondence
with policyholders to determine the amount of liability of the Company and the amount of premiums therefrom. 
  
 4.2 The Managing General Agent shall prepare separate, itemized, monthly statements for each Agent on the business placed by the Agent through the Managing General Agent, and furnish the Agent with an IRS Form 1099
each year when required. 
  
 4.3 All records shall be kept in such manner and form
as is generally recognized as acceptable in the insurance industry or as may be required by the Company. Such records shall be maintained for at least five (5) years or for any longer applicable retention period required by the Texas Department of
Insurance. All records must be located in Texas, unless approved by the Texas Department of Insurance under Article 1.28 of the Texas Insurance Code. 
  
 4.4 All records applicable to the Company’s business shall be opened for inspection and/or audit at all reasonable times by the Company, its reinsurers, insurance
department personnel or other governmental authorities. 
  
 4.5 Upon request and
pursuant to regulatory requirements, the Managing General Agent shall forward as reasonably required to the Company or the Company’s Designated Accountant and/or Statistical Agent, exact, as written, copies of all applications, binders,
policies, daily reports, monthly reporting forms and endorsements issued by or through licensed Agent(s), including all other evidence of insurance written, modified or terminated. 
  
 4.6 The Managing General Agent shall be solely responsible for and shall keep accurate records of all policies assigned to the Managing
General Agent and shall account to the Company, upon the Company’s reasonable request, for all outstanding and unused policy supplies. In the event canceled or terminated policies or binders are unavailable, the Managing General Agent shall
forward, or cause to be forwarded, properly executed Lost Policy Receipts. 
  
 4.7
At renewal of any Policy issued by the Managing General Agent, the Managing General Agent shall be responsible to the insured for the renewal or non-renewal of the Policy and shall timely communicate any renewal quote or notice of non-renewal to the
insured to preclude the extension of coverage beyond the expiration date of the current in-force policy. 
  
 4.8 The Company shall conduct or cause to be conducted a semi-annual examination of the Managing General Agent. This examination will take place at the Managing General Agent’s business offices or premises where
necessary records are maintained, and the Managing General Agent will bear the total cost of $1,500 per audit plus out of pocket expenses actually and reasonably incurred by the Company to conduct each examination. Such examination must remain on
file with the Company for three (3) years, be available to the Commissioner of Insurance for review, and contain, at a minimum, the following information: 
  

	a.	claims control procedures; 

  

	b.	timeliness of claims payments; 

  

	c.	timeliness of premium reporting and collection; 

  

	d.	compliance with underwriting guidelines; and 

  

	e.	reconciliation of policy inventory. 

  

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 4.9 If within any thirty (30) day period, the Company’s aggregate premium volume increases by thirty percent (30%)
or more, the Company shall conduct, within ninety (90) days of said period, an examination of the Managing General Agent if the Managing General Agent: 
  

	a.	writes greater than twenty percent (20%) of the Company’s aggregate premium volume; and 

  

	b.	has experienced an increase of twenty percent (20%) or more of premium volume during the thirty (30) day period. 

  
 Any such examination shall contain the information required pursuant to Article 4.8.

  
 ARTICLE 5 - MANAGING GENERAL AGENT’S REPORTS AND REMITTANCES

  
 5.1 The Managing General Agent shall submit a report directly to the
Reinsurers, with a copy to the Company, within thirty (30) days after the close of business each calendar month, summarizing the business transacted under this Agreement during the prior month. Such report shall include the following items:

  

	a.	Net Written Premium; 

  

	b.	net collected premium; 

  

	c.	Agent’s commissions; 

  

	d.	losses paid less recoveries and salvage; 

  

	e.	loss adjustment expenses paid; 

  

	f.	outstanding loss reserves; 

  

	g.	outstanding loss expense reserves; 

  

	h.	losses incurred but not reported; 

  

	i.	unearned premium reserve; 

  

	j.	earned premium; and 

  

	k.	policy fees. 

  
 5.2 The Managing General Agent shall remit the sum from above of b - c - d - e, directly to the Reinsurer with a copy to the Company within forty-five (45) days after the close of the calendar month for which the
account is rendered. 
  
 5.3 In addition to the return of premium, the Managing
General Agent shall refund commissions on policy cancellations, reductions in premiums or any other return premiums at the same rate at which such commissions were originally retained. 
  
 5.4 The Company may, at its sole option, reasonably alter the frequency and/or content of the Managing General Agent’s report;
provided, however, such report is made no less frequently than monthly. 
  
 5.5
The omission of any item(s) from a monthly statement shall not affect the responsibility of either party to account for and pay all amounts due the other party, nor shall it prejudice the rights of either party to collect all such amounts due from
the other party. 
  
 5.6 The Managing General Agent shall annually furnish to the
Company the following summary information in such form as to enable the Company to record such information in its annual statement: 
  

	 	a.	summaries, with data segregated by major classes, of net premium written, gross loss paid, net salvage, subrogation and adjusting expenses paid during the year; and

  

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	 	b.	details of in-force and unearned premium running twelve (12) months or less from the policy inception date. 

  
 5.7 The Managing General Agent agrees to furnish the Company with any additional reports
necessary to provide the Company’s monthly, quarterly and/or annual statements to regulatory authorities including, but not limited to, TICO or ISO statistical reporting. 
  
 5.8 The Managing General Agent shall annually furnish the Company current financial statements of the Managing General Agent. These
financial statements shall include, but not be limited to, Profit and Loss, Balance Sheet and Cash Flow Statements. 
  
 ARTICLE 6 – EXPENSES 
  
 6.1 The Managing General Agent is responsible for and shall promptly pay all expenses attributable to the producing and servicing of business under this Agreement, except
as specified in Article 6.2. This responsibility shall not be altered whether the expense is billed to the Managing General Agent or to the Company. These expenses include, but are not limited to: 
  

	a.	salaries and all other benefits of all employees of the Managing General Agent; 

  

	b.	transportation, lodging, and meals of employees of the Managing General Agent; 

  

	c.	postage and other delivery charges; 

  

	d.	advertising; 

  

	e.	printing of policies, forms and endorsements; 

  

	f.	EDP hardware, software, and programming; 

  

	g.	countersignature fees or commissions; 

  

	h.	license and appointment fees for agents, brokers, and solicitors; 

  

	i.	adjustment expenses arising from claims on insurance written under this Agreement, except for expenses incurred at the direction of the Company; 

  

	j.	provision for office space, equipment and other facilities necessary for the operation of Managing General Agent; and 

  

	k.	legal, audit and other expenses relating to any rate filing, regulation, or rule(s) affecting the business of the Managing General Agent pursuant to this Agreement.

  
 6.2 The Company is responsible for and shall promptly pay all
expenses attributable to the actions of the Company as a result of business produced under this Agreement. This responsibility shall not be altered whether the expense is billed to the Company or to the Managing General Agent. These expenses include
but are not limited to: 
  

	a.	salaries and all other benefits of all employees of the Company; 

  

	b.	transportation, lodging, and meals of employees of the Company; 

  

	c.	State or Guaranty Fund Assessments; 

  

	d.	losses and loss adjustment expenses incurred at the direction of the Company; 

  

	e.	cost of reinsurance; and 

  

	f.	legal and auditing expense incurred at the direction of the Company (other than as provided for in Article 4.8). 

  

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 ARTICLE 7 - PREMIUM ESCROW ACCOUNTS 
  
 7.1 The Managing General Agent shall accept in a fiduciary capacity all premiums collected and other funds relating to the business written
under this Agreement. The privilege of retaining commissions shall not be construed as changing the fiduciary capacity. 
  
 7.2 The Managing General Agent assumes responsibility for the net written premium currently due the Company, whether collected or not, on Policies issued by the Managing
General Agent or, the Company on behalf of the Managing General Agent, subject to any deductions provided herein. 
  
 7.3 The Managing General Agent shall establish and maintain a Premium Escrow Account entitled “A-Affordable/Old American Premium Escrow Account”. Escrow
Accounts shall be in a bank, which is a member of the Federal Reserve System and is mutually agreeable to the Managing General Agent and the Company. All premiums collected by the Managing General Agent on business produced under this Agreement
shall be deposited promptly into said account. 
  
 7.4 The Managing General Agent
shall not commingle any premium or escrow funds with its personal accounts or other agency funds or funds held by the Managing General Agent in any other capacity. 
  
 7.5 The Managing General Agent and an officer of the Company shall maintain signature authority on said Premium Escrow Account. 

 
 7.6 The Managing General Agent shall act as trustee for the Company on the Premium Escrow
Account. 
  
 7.7 Interest income and the cost of maintaining Escrow Accounts shall
belong to the Managing General Agent. 
  
 7.8 Escrow Accounts may consist of:

  

	a.	checking, savings, or money market accounts; 

  

	b.	certificates of deposit; or 

  

	c.	United States Treasury bills, notes or bonds. 

  
 7.9 The Managing General Agent may use any and all premium and other funds collected by the Managing General Agent for and on behalf of the Company under this Agreement
solely for the payment of: 
  

	a.	premium balances due less deductions allowed in accordance with this Agreement; 

  

	b.	the return of unearned premiums arising due to cancellation or endorsement; 

  

	c.	the Managing General Agent’s and Agent(s) commission; 

  

	d.	losses and loss adjustment expenses; or 

  

	e.	such other items as mutually agreed upon in writing by the Managing General Agent and the Company. 

  
 7.10 The Company shall not be liable for any loss which occurs by reason of the default or failure of the bank in which an account is
carried and such loss shall not affect the Managing General Agent’s obligations under this Agreement. 
  

 8 

 ARTICLE 8 – CONTROL OF EXPIRATIONS 
  
 8.1 The Managing General Agent’s records and the use and control of expirations of the business produced by the Agents appointed by the
Managing General Agent or by the Company at the Managing General Agent’s request shall remain the property of the Managing General Agent and be left in the Managing General Agent’s undisputed possession, provided the Managing General Agent
is not in default and accounts for and pays over all premium and other sums for which the Managing General Agent may be liable to the Company. 
  
 8.2 Ownership of the records, use and control of expirations and the goodwill relating thereto shall be vested in the Managing General Agent; provided, however, in the
event the Managing General Agent is in default hereunder, and does not remedy such default within a reasonable time and does not account for and pay all premiums or other sums for which it may be liable to the company within a reasonable time
following the due date, such records, use and control of expirations and the good will relating thereto shall become the property of Company. 
  
 8.3 The Managing General Agent assigns to the Company as security for, but not in payment of, the obligations of the Managing General Agent under this Agreement all sums
due or to become due to the Managing General Agent from any insured(s) for whom the Managing General Agent or Agent(s) provided a Policy on behalf of the Company. In the event of default, the Company shall have full authority to demand and collect
such sums and the Managing General Agent or Agent(s) shall not be entitled to any commissions and/or policy fees on any premium so collected by the Company. The Company may also assign any rights it acquires to the Reinsurer. 
  
 8.4 The Managing General Agent pledges and/or grants to the Company, so as to further secure
payment of any and all sums due the Company under this Agreement, any and all of the Managing General Agent’s records of expirations of Policies, including, but not limited to, the ownership and exclusive use of said expirations. In the event
of default, the Company shall have the rights of the holder of a security interest granted by law, including but not limited to the rights of foreclosure to effectuate such security interest, and the Managing General Agent hereby agrees to peaceably
surrender possession of such records to the Company upon demand. 
  
 ARTICLE
9 - INDEPENDENT CONTRACTOR RELATIONSHIP 
  
 9.1 Nothing contained in this
Agreement shall be construed to create the relationship of employer and employee, or joint venture or partnership, between the Company and the Managing General Agent, or between the Company and any employees, representatives or Agents of the
Managing General Agent. 
  
 ARTICLE 10 - ADVERTISING 
  
 10.1 Any advertising is the responsibility of, and shall be in the name of the Managing
General Agent. The Managing General Agent is prohibited from using the Company’s name or logo without prior written consent of the Company. 
  
 10.2 In the event an advertisement containing the Company’s name or logo is used by the Managing General Agent or Agent(s), the Managing General Agent shall send a
copy of the advertisement to the Company and maintain a copy and full details concerning where, when, and how it was used, and comply with all legal requirements regarding content, review and approval of advertising and maintenance of records.

  

 9 

 ARTICLE 11 - AGENTS LICENSING 
  
 11.1 The Managing General Agent shall maintain current license(s) or certificate(s) of authority as required by law for the conduct of
business pursuant to this Agreement. 
  
 11.2 The Managing General Agent shall
assure that all Agents maintain appropriate license(s), certificate(s) of authority and appointments as required by law for conduct of business under this Agreement. 
  
 11.3 The Managing General Agent shall maintain in force an Agency Agreement, in a form satisfactory to the Company, with all Agents.

  
 11.4 Any termination by the Managing General Agent of an Agent shall comply
with the Texas Insurance Code and any other applicable law or regulation. 
  
 ARTICLE 12 - AGENCY SALE OR TRANSFER 
  
 12.1 In the event
a controlling interest (10% or more of outstanding shares) of the Managing General Agent is to be sold or transferred or the Managing General Agent is to merge or be consolidated with another firm (not affiliated with current ownership), the
Managing General Agent shall give thirty (30) days advance written notice to the Company. 
  
 12.2 The Managing General Agent shall also give notice to the Company if there is a change in any principal officer and/or director of the Managing General Agent within 30 days. Under any of these circumstances, the
Company may, at its election: 
  

	 	a.	consent to the assignment of this Agreement to the successor; 

  

	 	b.	enter into a new Managing General Agency Agreement with the successor; or terminate this Agreement pursuant to Article 15. 

  
 The Company shall notify the Managing General Agent of its decision within thirty (30) days
of the receipt of the notice. 
  
 ARTICLE 13 - HOLD HARMLESS

  
 13.1 The Managing General Agent shall indemnify and hold the Company
harmless from any and all claims, demands, causes of action, damages, judgments and expenses (including, but not limited to, attorney’s fees and costs of court) which may be made against the Company and which arise, either directly or
indirectly, out of any action or inaction of the Managing General Agent or the Managing General Agent’s employees or representatives in connection with any rights or obligations of the Managing General Agent incurred in connection with this
Agreement or with asserting rights hereunder including, but not limited to, any action or inaction of the Managing General Agent concerning the termination of Agent(s) pursuant to the Texas Insurance Code or any other applicable law or regulation.

  

 10 

 13.2 The Company shall indemnify and hold the Managing General Agent harmless from any and all claims, demands, causes of
action, damages, judgments and expenses (including, but not limited to, attorney’s fees and costs of court) which may be made against the Managing General Agent and which arise, either directly or indirectly, out of any action or inaction of
the Company including, but not limited to, any such acts of negligence by the Company in connection with any rights or obligations of the Company incurred in connection with this Agreement or with asserting rights hereunder. 
  
 13.3 The Reinsurer is hereby named as a third party beneficiary to all promises, duties and
obligations of indemnification made by the Managing General Agent to the Company to the extent of all damages, fines, penalties and/or loss incurred by the Reinsurer as a direct result of indemnifying and holding the Company harmless for the actions
and/or inactions of the Managing General Agent. Upon indemnification by the Reinsurer, the Company shall assign its rights of recourse against the Managing General Agent to the Reinsurer, provided always that any benefit or right of recourse
extended to the Reinsurer shall be subordinate to that of the Company. 
  
 ARTICLE 14 - ARBITRATION 
  
 14.1 Unless both parties
mutually agree to waive arbitration with respect to a particular dispute, the parties to this Agreement hereby agree that binding arbitration shall be the sole remedy for any and all dispute(s) arising between them with reference to any
transactions, terms or conditions under this Agreement including its formation and validity. Arbitration proceedings brought hereunder shall be referred for final determination to the majority decision of a Panel of three disinterested arbitrators.
Notice of demand for arbitration shall be made in writing and shall be served via certified or registered mail, return receipt requested, on the Respondent to the Arbitration at the Respondent’s current address. The notice requesting
arbitration shall identify the Agreement(s) involved in the dispute, the issues to be resolved in the view of the Petitioner, and the arbitrator selected by the Petitioner. The term “days” as used herein shall mean calendar days.

  
 14.2 The Respondent shall appoint an arbitrator within 30 days of receiving a
request by the Petitioner in writing and served via certified or registered mail, return receipt requested, to do so. At the same time as the appointment, the Respondent shall identify in writing any issues which in its view must be resolved in the
arbitration proceeding and which were not identified by the Petitioner. If the Respondent fails to appoint its arbitrator within 30 days of being requested to do so, in writing, by the Petitioner, the Petitioner shall have the right to appoint the
second arbitrator. Within 30 days after their appointment, the two arbitrators so chosen shall select a third arbitrator to act as umpire. If the two arbitrators do not agree as to the selection of a third arbitrator within 60 days after their
appointment, the third arbitrator shall be selected from a list of six individuals (three named by each arbitrator) by a judge of the federal district court or state court in Dallas County, Texas. 
  
 14.3 Each arbitrator shall be a disinterested, active or retired official or officer of an
insurance or reinsurance company, not under the control or management of either party to this Agreement, and shall have experience in the class and type of business subject to this dispute. 
  
 14.4 Within 30 days after notice of appointment of all arbitrators, the Petitioner and the
Respondent shall each submit a statement of position to the Panel. 
  

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 14.5 Within 60 days after notice of appointment of all arbitrators, each party shall provide the other with its relevant
books, records, and/or other papers not protected from disclosure by either the work-product or attorney client privilege. Other than the exchange of relevant documents, both parties shall refrain from engaging in any type of discovery including,
but not limited to, depositions and interrogatories. 
  
 14.6 Within 30 days
following the exchange of documents, the Petitioner and the Respondent shall submit hearing briefs to the Panel. 
  
 14.7 Unless some other location is mutually agreeable to the parties, arbitration proceedings shall take place within Dallas County, Texas. Arbitration shall commence as
soon as practicable but in no event longer than 120 days after selection of the third arbitrator with notice thereof to the parties. The specific time and site of arbitration shall be promptly agreed to by the parties, or if no Consent is reached,
then determined by the Panel. 
  
 14.8 The Panel shall be relieved from applying
the strict rules of evidence and/or procedure and shall make its decision based on the custom and practice of the insurance and reinsurance business with a view toward effecting this Agreement in a reasonable manner. Should either party fail to
appear at the arbitration and/or fail to furnish the Panel with any subpoenaed papers or information, the Panel is empowered to proceed ex parte. The Panel shall make its award within 60 days following the close of the hearing. The majority decision
of the Panel shall be final and binding upon the parties and shall be reduced to a written award, which may include factual findings, and shall be signed by any two of the three arbitrators, dated and delivered overnight to the parties. The Panel
may award pre-judgment and post-judgment interest, but in no case shall the authority of the Panel extend to awarding punitive or exemplary damages. Judgment may be entered upon the award by any court having jurisdiction. 
  
 14.9 Each party shall bear the expense of its own arbitrator, but shall equally share with
the other the expense of the third arbitrator. In the event that the two arbitrators are chosen by one party, as above provided, the expense of the two arbitrators, the third arbitrator and the arbitration shall be equally divided between the
Petitioner and the Respondent. Unless mutually agreed other wise, a court reporter transcript shall be taken of the hearing with costs to be divided equally between the parties. The Panel shall allocate the remaining costs of arbitration.

  
 14.10 The Arbitration proceeding brought hereunder, any or all provisions
contained herein, and arbitration awards entered pursuant to this Article are specifically governed by, subject to and enforceable under the Federal Arbitration Act (Title 9, United States Code, Sections 1-14, as amended.) 
  
 14.11 Each party agrees that time is of the essence with respect to all terms and conditions
referenced in this Article. All deadlines contained in this Article may be extended by mutual consent of the parties, and if the Panel has been selected, the Panel’s Consent must also be obtained. 
  
 14.12 Each party agrees that any arbitration award entered pursuant to and governed by this
Article shall not have any precedential or collateral estoppel effect on future arbitrations, proceedings, or controversies, if any, between the parties. Any claim of res judicata or claim preclusion shall itself be subject to arbitration.

  
 14.13 This Article shall survive the termination of this Agreement.

  

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 ARTICLE 15 - TERMINATION 
  
 15.1 This Agreement may be terminated at any calendar quarter by either party issuing a written notice at least ninety (90) days prior to
such date. Any draft authority of the Managing General Agent shall terminate upon the date of said notice of termination except as provided in Article 15.7 or provided otherwise in writing by the Company. 
  
 15.2 This Agreement shall automatically terminate simultaneous with and upon the cancellation
or termination of the reinsurance agreement referred to in Articles 2.3 and 17, except as provided in Article 15.7. 
  
 15.3 The right to solicit and place new business, or renewal, or any modification of existing business, shall be suspended as provided in Article 15.5 in the event of
default by the Managing General Agent. 
  
 The term “default” means any
material breach or material failure to comply with the terms and conditions of this Agreement and includes, but is not limited to, the following: 
  

	a.	failure to remit balances due as required by this Agreement; 

  

	b.	failure to adjust all claims arising from all business written under this Agreement; 

  

	c.	failure to maintain Agent’s license(s) or certificate(s) as required by any public authority; and failure to comply with any and all provisions of the Texas Insurance Code
and/or Texas Administrative Code. 

  
 15.4 In the event that the
Company determines that the Managing General Agent is in default, the Company may, at its sole discretion, suspend the authority of the Managing General Agent. Such suspension shall be effective immediately. The Managing General Agent shall have
thirty (30) days to cure the default. 
  
 15.5 In the event of cancellation of
this Agreement due to fraud or breach of conditions, any indebtedness of the Managing General Agent to the Company and all premiums in the possession of the Managing General Agent, or for the collection of which the Managing General Agent is
responsible, shall, notwithstanding any provisions to the contrary, become immediately due the Company. 
  
 15.6 The failure of the Company or Managing General Agent to declare promptly a default or breach of any of the terms and conditions of this Agreement shall not be construed as a waiver of any of said terms and
conditions, nor estop either party from thereafter demanding a full and complete compliance herewith. 
  
 15.7 Notwithstanding the termination of this Agreement, the provisions of this Agreement shall continue to apply to all unfinished business to the end that all obligations and liabilities incurred by each party as a
result of this Agreement shall be fully performed and discharged. In the event this Agreement is terminated, all fronting fees and premium taxes previously collected will be considered fully earned. 
  
 15.8 The Managing General Agency agrees that for ten years, it shall produce automobile
insurance business in the State of Texas solely for the benefit of the Company, provided that the Managing General Agent shall have the option to cancel the agreement after six years if Instant or an Affiliate purchases a Texas county mutual
insurance company. Notwithstanding the foregoing, the arrangement shall provide that if the Company’s ability to write non-standard auto business is 
  

 13 

 eliminated or impaired to the extent it unreasonably restricts the business of Instant or its affiliates under those
agreements, this agreement may be terminated at the option of the Managing General Agent. 
  
 ARTICLE 16 - CLAIMS HANDLING 
  
 16.1 The Managing General Agent shall have authority to settle all claims arising from business placed with the Company under this Agreement in accordance with established Company procedures. At the sole option of the Company, the Company
may assume any or all of this responsibility. 
  
 16.2 The authority of the
Managing General Agent to settle claims shall not exceed $30,000 per claim without notification to and consent of the Company. The Company retains authority over disputes concerning claims settlement and setting of loss reserves. 
  
 16.3 The Managing General Agent shall promptly report to the Reinsurer with a copy to the
Company any and all claims involving lawsuits, when the Company is named, as soon as the Managing General Agent has been made aware of such lawsuits by any party, and shall cooperate fully with the Company to facilitate reporting, investigation, and
adjustment of any claim, loss or lawsuit when and as requested by the Company. 
  
 16.4 The Managing General Agent may appoint (subject to the approval of the Company, which shall not be unreasonably withheld) appropriate claims adjustment firms to handle certain investigations and settlements relating to claims.

  
 16.5 Payment of losses shall be made on checks or drafts in the name of the
Company. Any expense not directly connected with the settlement of losses or recovery by way of salvage or subrogation shall be incurred solely by the Managing General Agent except as from time to time specifically authorized by the Company.

  
 16.6 The Managing General Agent shall be responsible for the safekeeping of
all checks and/or drafts of the Company used for settling claims and shall perform the following: 
  

	a.	the Managing General Agent shall immediately return all voided checks and/or drafts to the Company; 

  

	b.	the Managing General Agent shall immediately notify the Company of any irregularities, theft, disappearance or destruction of checks and/or drafts; and 

  

	c.	the Managing General Agent shall see to it that all checks and/or drafts are sequentially numbered and issued in order, with all voided checks and/or drafts properly marked and
accounted for. 

  
 16.7 The Managing General Agent shall notify the
Company by sending a copy of a form within thirty (30) days of the determination that the claim: 
  

	a.	involves a coverage dispute 

  

	b.	or involves a demand in excess of policy limits 

  

	c.	allegations of bad faith 

  

	d.	or violations of the Texas Deceptive Trade Practices Act or Article 21.21 of the Texas Insurance Code. 

  

 14 

 The form should include the claimant’s name, claim number, insureds name, policy number and a description of the
claim and/or coverage dispute. This information can be faxed or sent via e-mail to the Company. 
  
 ARTICLE 17 - REINSURANCE 
  
 17.1
The Managing General Agent may not bind reinsurance or retrocessions on behalf of the Company, may not commit the Company to participate in insurance or reinsurance syndicates and may not collect a premium from a reinsurer or commit the Company to a
claims settlement with a reinsurer without the prior written approval of the Company. If the Company gives such prior approval, the Managing General Agent must promptly forward a report to the Company. 
  
 17.2 The Managing General Agent is prohibited from ceding reinsurance on behalf of the
Company. 
  
 17.3 All business coming within the scope of this Agreement shall be
reinsured under the attached Reinsurance Agreement. Because of the nature of the Reinsurance Agreement, the Reinsurer shall have the right to act on all such matters coming within the scope of this Agreement as though the Reinsurer were the Company,
but by doing so or not doing so, shall not invalidate the right of the Company to act hereunder. 
  
 17.4 Any violation of the terms and/or conditions of the Reinsurance Agreement resulting in any diminution of the Reinsurer’s liability to the Company shall be the sole responsibility of the Managing General
Agent and the Managing General Agent shall indemnify and hold the Company harmless from any such liability. 
  
 ARTICLE 18 - MISCELLANEOUS 
  
 18.1
Any obligations and undertakings of each of the parties to this Agreement shall be performable in Dallas County, Texas. The Managing General Agent agrees to pay to the Company all sums of money which may become payable to Company under this
Agreement. 
  
 18.2 Complaints by Insureds - All Texas Department of Insurance
(TDI) complaints are to be handled by the Managing General Agent as follows: 
  

	a.	the Managing General Agent is to notify the Company immediately of any TDI complaints received and forward a copy of the complaint to the Company; 

  

	b.	the Company will promptly notify the Managing General Agent of any complaints it receives on the business written pursuant to this Agreement; 

  

	c.	the Managing General Agent is to promptly research the circumstances of each complaint and provide the Company with a written reasonable explanation of the Managing General
Agent’s position and intention; and 

  

	d.	the Managing General Agent is to maintain complete records of each complaint and all supporting documentation. 

  
 18.3 As regards non-TDI complaints, the Managing General Agent is to maintain a log and
complete records of each complaint and all supporting documentation in a form approved by the Company. 
  

 15 

 18.4 The underwriting guidelines of the Company, as may be promulgated from time to time by the Managing General Agent,
are incorporated herein by reference. 
  
 18.5 The Managing General Agent is
prohibited from offsetting balances due under this Agreement with any offset due under any other contract. 
  
 18.6 As regards the subject matter of this Agreement, this Agreement supersedes all previous Managing General Agency Agreements, if any, whether written and oral, between the Company and the Managing General Agent.

  
 18.7 The Managing General Agent shall maintain errors and omissions insurance
with an insurer acceptable to the Company, covering its operations, including the obligations of this Agreement, in an amount not less than $1,000,000 per claim and annual aggregate with a deductible no greater than $50,000 per claim. 
  
 18.8 No amendments to or modifications of this Agreement shall be valid unless made in
writing and executed by the Company and the Managing General Agent in the form of an Amendment to this Agreement. 
  
 18.9 The Managing General Agent shall cause INSTANT INSURANCE HOLDINGS, INC. a.k.a. Affirmative Insurance Holdings, Inc. to execute a guaranty of the Managing
General Agent’s obligations under this Agreement. 
  
 18.10 The Managing
General Agent shall not directly or indirectly assign its rights and obligations under this Agreement in whole or in part to any non-affiliated party without the prior written approval of the Company. 
  
 18.11 Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and plural and any term stated in either the masculine, the feminine or the neuter gender shall include the masculine, the feminine and the neuter gender. All captions and section headings are intended
to be for purposes of reference only and do not affect the substance of the articles to which they refer. 
  
 18.12 Each party hereto agrees to perform any further acts and execute and deliver any further documents, which may be reasonably necessary to carry out the provisions of this Agreement. 
  
 18.13 In the event that any of the provisions, or portions thereof, of this Agreement are
held to be illegal, invalid or unenforceable by any court of competent jurisdiction, the validity and enforceability of the remaining provisions, or portions thereof, shall not be affected by the illegal, invalid or unenforceable provisions or by
its severance here from. 
  
 18.14 Any and all notices required or permitted to be
given under this Agreement shall be in writing and will be deemed given when deposited in the United States Postal Service, Certified Mail, Return Receipt Requested, to the parties’ address as provided below. 
  
 This Agreement shall be effective the 1st day of January 2004. 
  

 16 

									
	 The Company
	 	 	 	 The Managing General Agent

			
	 OLD AMERICAN COUNTY MUTUAL
 FIRE INSURANCE COMPANY
	 	 	 	A-AFFORDABLE MANAGING GENERAL AGENCY, INC. f.k.a. INSTANT AUTO MANAGING GENERAL AGENCY, INC. d.b.a. A-AFFORDABLE MANAGING GENERAL AGENCY
					
	 By:
	 	 /s/ BRYAN K. WARD
	 	 	 	 By:
	 	 /s/ DAVID B. SNYDER

	 	 	
	 	 	 	 	 	

	 Name:
	 	 Bryan K. Ward
	 	 	 	 Name:
	 	 David B. Snyder

					
	 Title:
	 	 Vice President and Treasurer
	 	 	 	 Title:
	 	 Vice President

					
	 Date:
	 	 January 1, 2004
	 	 	 	 Date:
	 	 January 1, 2004

  

 17 

 SCHEDULE OF BUSINESS 
  
 The Company, the Reinsurer and the Managing General Agent agree that the Managing General Agent has the authority to accept, on forms
approved by the Company, any Policy, endorsement, binder, certificate, or proposal for insurance. The Managing General Agent’s authority is limited by this Schedule of Business. 
  

			
	 Projected premium volume
	  	$40,000,000
	 Territory
	  	Texas only
	 Maximum policy term
	  	Twelve months

  
 Lines of business and maximum limits
of liability 
  

			
	 Coverage

	  	 Maximum Limits

	 Bodily Injury Liability
	  	$ 20,023 each person
	 	  	$ 40,023 each accident
	 Property Damage Liability
	  	$ 15,023 each accident
		
	 Uninsured/Underinsured Motorists
	  	 
	                     Bodily
Injury
	  	$ 20,023 each person
	 	  	$ 40,023 each accident
	                     Property
Damage
	  	$ 15,023 each accident
		
	 Personal Injury Protection
	  	$ 2,523 each person
	 Medical payments
	  	$ 523 each person
	 Physical Damage
	  	$ 30,023 each automobile

  
 This Agreement does not apply to and
specifically excludes the following: 
  

	a.	Any business not produced by A-AFFORDABLE MANAGING GENERAL AGENCY, INC. f.k.a. INSTANT AUTO MANAGING GENERAL AGENCY, INC. d/b/a A-AFFORDABLE MANAGING GENERAL AGENCY, or

  

	b.	Any business not classified as private passenger automobile liability or physical damage, or 

  

	c.	Exclusions specified within the Reinsurance Agreement. 

  

									
	 The Company
	 	 	 	 The Managing General Agent

			
	 OLD AMERICAN COUNTY MUTUAL
 FIRE INSURANCE COMPANY
	 	 	 	A-AFFORDABLE MANAGING GENERAL AGENCY, INC. f.k.a. INSTANT AUTO MANAGING GENERAL AGENCY, INC. d.b.a. A-AFFORDABLE MANAGING GENERAL AGENCY
					
	 By:
	 	 /s/ BRYAN K. WARD
	 	 	 	 By:
	 	 /s/ DAVID B. SNYDER

	 	 	
	 	 	 	 	 	

	 Name:
	 	 Bryan K. Ward
	 	 	 	 Name:
	 	 David B. Snyder

					
	 Title:
	 	 Vice President and Treasurer
	 	 	 	 Title:
	 	 Vice President

					
	 Date:
	 	 January 1, 2004
	 	 	 	 Date:
	 	 January 1, 2004

  

 18

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