Document:

UCC Lease Agreement

EXHIBIT 10.6

LEASE AGREEMENT

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

WITNESSETH:

1.  Premises and Term

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

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

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

2.  Rent

A.    Rent and Security Deposit.

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

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

B.    -intentionally deleted -

3.  Electric Service

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

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

4.  Alterations

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

5.  Service

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

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

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

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

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

6.  Use of Premises

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

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

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

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

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

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

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

7.  Inspections

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

8.  Assignment and Subletting

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

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

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

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

9.  Fire and Casualty Damage

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

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

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

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

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

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

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

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

10.  Liability

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

11.  Condemnation

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

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

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

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

12.  Holding Over

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

13.  Quiet Enjoyment

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

14.  Default

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

15.  Termination by Landlord

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

	
		
	When Notice Provided
	Termination Fee payable to Tenant

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

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

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

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

16.  Landlord's Lien

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

17.  Mortgages

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

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

18.  Landlord's Liability

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

19.  Mechanics and Other Liens

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

20.  Notices

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

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

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

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

    

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

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

21.  Miscellaneous

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

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

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

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

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

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

amount payable by Tenant under this subparagraph 21F.

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

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

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

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

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

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

22.  Substitution of Premises

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

23.  Certain Rights Reserved To The Landlord

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

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

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

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

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

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

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

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

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

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

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

24.  Land Trustee's Exculpation

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

25. Exhibits.

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Signature Page to UCC Lease Agreement

EXECUTED the 31st day of December, 2010

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

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

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

By:    /s/     Roger Beck            
Title:         COO                

 

EXHIBIT A

Floor Plan

EXHIBIT B

Legal DescriptionProgram Manager Agreement

EXHIBIT 10.7
PROGRAM MANAGER AGREEMENT

This Program Manager Agreement, based upon good and valuable consideration, dated the first day of January, 2011, and  all   Endorsements  attached  hereto and  incorporated  herein  (the "Agreement")  is between Kingsway America Inc. and its wholly owned subsidiary· Universal Casualty Company, located at 150 Northwest Point Boulevard, Elk Grove Village, IL 60007 ("Manager"), and American Service Insurance Company, Inc. (hereafter "Company"), located at 150 Northwest Point Boulevard, Elk Grove Village, IL 60007.

NOW, THEREFORE, Manager and Company agree as follows:

ARTICLE I.     Term of Agreement

This Agreement is effective on January 1, 2011 and will continue until such time as no private passenger auto business remains in-force with the Company and all claims related to private passenger auto business written by the Company have been adjudicated, or until terminated under the provisions of Article XIV.

ARTICLE II.    Appointment of Manager

Within the scope of the authority granted to the Manager, the Company appoints Manager as a non-exclusive manager for the Company as follows:

A.  Lines of Authority.  Manager's appointment and authority extends to the classes of business, policies of insurance, including all endorsements and certificates (the "Policies"); and lines and limits of insurance described in this Agreement for which Manager holds all appropriate licenses or authority, as may be required (the "Business").

B.  Territory. Manager's appointment and authority extends to insureds and prospective insureds with their principal place of business or a portion of the risks located in all states as set forth in this Agreement for which it holds appropriate licenses and for which the Company properly appoints the Manager.

C.  Restrictions.  Manager's appointment and authority is subject to any restrictions set forth in this Agreement.

D.  Reinsurance Availability. Manager's appointment and authority for Business written under this
Agreement is subject to the following:

1.   Company is able to obtain and maintain in force at all times reinsurance satisfactory to Company for the Business.  The Company's efforts in this regard will at all times be diligent and undertaken in good faith with the intent to maintain reinsurance during the term of this Agreement, however Company cannot guarantee that its efforts will be successful.

2.  Obtaining reinsurance is the sole responsibility of Company.  When Company obtains satisfactory reinsurance for all or some of the Business, Company will give Manager written notice that Manager may write and bind those classes of business, policies and lines and limits of insurance for which reinsurance has been obtained.

ARTICLE III.   Manager's Duties and Responsibilities

Manager will faithfully perform all of its duties in a commercially reasonable manner, to the best of its professional knowledge, skill and judgment  The Manager's duties include the following:

A.  Solicitation.   To solicit, to the extent allowed by applicable law and regulation, risks and classes of risks at limits and for lines of insurance authorized in this Agreement, that, in their pricing and insurability, meet or exceed the underwriting and pricing standards from time to time established by Company in writing.   It is understood that the Manager will endeavor to transition private passenger  auto policies in-force with the Company, or one of its duly licensed subsidiaries or affiliates, at renewal of such policies beginning on a mutually agreed date that allows sufficient time to meet all contractual and regulatory requirements.

		
	C.  Servicing  Business.
	To  direct  and  implement  the  production,  underwriting, premium collection, accounting, statistical, and other work necessary or incidental to the insurance business Written under this Agreement.   To provide for all usual  and customary services to sub-producers, insureds and policyholders including, without limitation, delivery of Policies, return of premiums due insureds or policyholders in Manager's possession, premium audits on Policies, and timely, appropriate responses to inquiries or complaints, and comply with any service standards as may be set forth in writing by the Company.

D.  Competent Staff.   To maintain sufficient supplies and equipment and a staff of competent, trained and licensed (as required) personnel, to produce, develop, underwrite, handle claims and loss control (if allowed by this Agreement), and supervise the Business covered by this Agreement.

E.  Premium Rates. To quote and charge accurate premiums, rates, surcharges, taxes and fees for Policies bound or written under this Agreement, as described in and in compliance with the approved and applicable rating manuals or written rating plans of Company provided by the Company to Manager.

F.  Compliance with Manuals.   To comply  fully, timely and promptly with all manuals, rules, regulations,  guidelines,  instructions  and  directions  issued  by  Company  relating  to  the Business covered by this Agreement.

G.    Binding of Risks.   To bind and report all risks in accordance with this Agreement, and any other underwriting and pricing standards established by Company in writing and provided to Manager. Manager is to forward all other risks to Company, for review.

H.  Policy Issuance.  To timely and properly issue, deliver and execute or countersign Policies, certificates, endorsements, binders and related documents on forms approved by Company and appropriate regulatory authorities, and as required by law, for the Business described in this  Agreement.   Manager shall ensure Policies will bear any notice requirements of any applicable law.

I.     Policy Cancellation. To cancel or non-renew policies and/or certificates for cause as set forth in such policies, or at the direction of the Company, subject to the requirements imposed by law and. in compliance  with the applicable provisions contained in this Agreement and the Policies, and file the required reports with the appropriate Insurance Department. This does not preclude the Company from taking such action on its own.  At the sole discretion of the Company, the Company has the right to cancel or non-renew any policy and/or certificates issued by the Manager under this Agreement, subject to the relevant state laws, rules, regulations or bulletins.

J.   Producers.

1.  The Manager shall be responsible to accept Business on behalf of the Company by professional insurance agents, solicitors and brokers, who are properly licensed and appointed ("producers").  The Manager's and/or Company's contracts or agreements with the producers shall reflect their agreement to the return of the producers' commissions on canceled policies, the forwarding of premium funds consistent to this Agreement and to otherwise comply with all applicable laws and regulations involving business generated or serviced under this Agreement.

2.  The Manager's and Company's contracts or agreements with the producers shall reflect they are  independent  contractors. If  applicable state laws require the  sub producers to be determined to be agents or sub-agents of the Manager, then the Manager is responsible for the supervision, direction and coordination of the efforts of the sub producer.

3.  Whether the sub producers are determined to be independent contractors, or agents or sub­ agents of the Manager, the Manager is responsible for all of the appointment fees, license fees and costs of background checks of the producers.

4.   Manager shall be solely responsible for payment of all commissions earned by producers and the return of sub producers' commissions oh canceled policies.

5.  Manager may accept business only from producers who have agreed in advance, and in writing, to the return of unearned commissions on canceled Policies, forward all premium funds, and to comply with the applicable laws and regulations involving business generated or serviced under this Agreement.

6.  Manager has no authority, whether actual or implied, to appoint agents for Company or to place such volume of business with any sub producer that would cause such sub producer to qualify as a "managing general agent" with respect to the Company under the insurance laws of any jurisdiction.

7.  Manager shall not accept business on behalf of Company from any producer that has been convicted of any criminal felony involving dishonesty or a breach of trust, or convicted of a crime under 18 U.S. Code Section 1033.

K.  Producers Errors and Omissions. Unless the Company already has this information on file or waives this requirement, Manager will maintain valid evidence of any active producers' professional errors and omissions coverage (a policy copy or certificate of insurance) that specifically covers all  activities  and  entities  contemplated  herein,  to  specifically include coverage for violations of Unfair Trade Practices Acts and Bad Faith, in an amount not less than $100,000 with a deductible not greater than $10,000. The evidence of coverage is to be provided to the Company within five (5) business days of Company's request to the Manager

L.  Premiums.  To charge, collect, and receive all premiums, including but not limited to premium surcharges, fire district and other taxes or assessments levied by any jurisdiction and required to be collected in addition to stated premiums, due on all Policies bound or written under this Agreement.    Premium payment will be made directly by policyholders to the Company in accordance with this Agreement and the incorporated Endorsements

M. Uncollected Premium.

1.   Manager  to  assume  the   obligation  for  collection  activities  relating to  any Uncollected Premium from insureds, policyholders and producers.    ·

2.  Manager shall provide Company with a policy-level listing of all Policies with uncollectible amounts due the Company, on a monthly basis, in a format acceptable to the Company.

N.  Accounting. To timely account for the Business as follows:

1.   All business will be managed on the Company's IT systems, to which Manager will be granted access for the purpose of fulfilling the responsibility under this Agreement. Manager and the Company will ensure that all books and record are maintained in accordance with statutory  accounting  principles  and  insurance  practices,  and the  insurance  laws  and regulations of Illinois, in the state(s) where the Business is located and Manager's state of domicile. All such books, records, and accounts shall be the property of the Company, and Company shall have access to and the right to copy all such books, records and accounts at any time. Upon an order of liquidation of the Company, Manager shall have reasonable access to and the right to copy the files on a timely basis.

2.  Collect, compile and transmit to the Company to allow for the timely transmission to the appropriate reporting and regulatory agencies, of any and all of !he requested statistical, underwriting and claims data and information, including but not limited to, premium and loss information in a format or formats and at such frequency as may be determined by the respective reporting and regulatory agencies, and the Company.  This data and information shall be furnished to the Company in an electronically transmittable format determined by the Company at no extra charge to the Company.                    ·

3.  To the extent records exist outside of the Company's systems, Manager will furnish, render and provide the Company with an accounting detailing all transactions and insurance written pursuant to this Agreement, including put not limited to all Policies and/or certificates issued (by policy/certificate), changes and cancellations and premium statements on not less than a monthly basis and not later than eight (8) working days after the end of the month in which the transaction occurs and/or the premium is written.

This information shall be furnished to the Company in an electronically transmittable format determined by the Company at no extra charge to the Company beginning at the end of the month in which this Agreement becomes effective, shall encompass, but is not limited to, the following:
(a.) Gross written premium; 
(b.) Net written premium; 
(c.) Unearned premium;
(d.) Collected premium; 

(e.) Gross fees;
(f.) Collected fees;
(g.) Policies issued or bound by insured including location, limits, and effective date; 
(h.) Policies canceled;
(i.)  Premium adjustments due to endorsements, audits or otherwise;
(j.)  Commissions payable to or retained by Manager; 
(k.) Net balance due;
(l.)  Premium  surcharges,  fire  district  and  other  taxes  or  assessments levied  by  any jurisdiction, separated by type of charge or levy;
(m.)  Deposits by policy;
(n.)  Agency fees; and
(o.) Additional information Company may request in writing.

O.  Fiduciary Capacity. Premium payments will be paid  directly  to  the Company, as such Manager will not act in a fiduciary capacity.

P.   Confidentiality.  The materials or information furnished by the Parties may contain proprietary or confidential information (collectively "Confidential Information").   The Parties agree not to directly or indirectly use or disclose such Confidential Information to any other parties without express written permission.  The Parties shall use the same care and discretion to protect the Confidential Information as they use to protect their own Confidential Information, but not less than a commercially reasonable standard of care.   The Parties shall use the Confidential Information  and  shall  restrict  disclosure  of  the  Confidential  Information only  to  those employees of the Parties who have a need to know the particular Confidential Information disclosed only for purposes strictly limited to the performance under this Agreement.

Q.  Manager Expenses.

1.   Manager  is  to  assume  the  obligation for  and to  be  fully  responsible for all costs and expenses associated with the Manager's performance under this Agreement.  These costs and expenses  include, but are not limited to, processing  of assigned risk policies, sub­ producer commissions, loss control reports, premium audits, regulatory exams of the Manager and related fees, fines and settlement costs caused by the Manager, policy and policy  jacket  printing, motor  vehicle reports ("MVRs") and OFAC costs, travel expense, employee salaries, benefits, fees, countersignature fees and expense, postage, advertising, exchanges, appointment and renewal fees, license fees and background checks.

2.  Company shall be responsible only for its own costs and expenses unless otherwise agreed by Company. In the event Company is required to pay any costs or expenses that are the responsibility of the Manager, the Manager shall promptly reimburse Company for its payments thirty (30)  days from invoice.  The Company shall have the right to offset any costs or expenses that it has to pay on behalf of Manager with commissions due under this Agreement.

R.  Licenses.  To obtain and provide Company with copies of all licenses anti permits required by Manager for the proper conduct of its duties under this Agreement, and to immediately provide copies of such licenses and permits upon request of the Company Manager agrees that it will not transact any business in any jurisdiction covered under this Agreement until Manager has obtained all  required  licenses  and permits, and  is  properly  appointed to  represent the Company in such jurisdiction.

S.  Legal Compliance.  To keep fully informed of and comply fully with all applicable laws and regulations.  This includes, but is not limited to compliance with all laws and regulations applicable to insurance producers in the state(s) where the Business is located and where Business is transacted. Manager shall not solicit or bind  any risks in any state until all applicable laws, regulations and 180/NCCI or other bureau rules are in full compliance by the Manager.

T.  Governmental Contacts.   To promptly notify Company of all contacts and correspondence received from insurance regulatory or other governmental authorities relating to the insurance and activities which are the subject of this Agreement, to forward promptly upon receipt all summonses, complaints, subpoenas or other court documents relating to the insurance and activities which are the subject of this Agreement, and to cooperate fully with Company in making any responses.   Manager has no authority to represent Company in regulatory matters and shall not respond to any governmental action except as Company may direct in writing or as required by law.  All complaints from regulatory agencies shall be forwarded to Compliance Shared Services in the Company's Elk Grove Village, Illinois office, along 

with Manager' proposed response specifically addressing the complaint.

U. Premium Financing.

1.  Manager will  not use  any premium ·finance company  that is  owned to any degree, or affiliated with the Manager, or any of its employees, on Policies issued under this Agreement.  The entire premium financed must be forwarded to the Company in a time frame as directed by this Agreement, and will not be sent in installment or partial payments to the Company.

2.  Manager will provide all services arising from premium financing including, but not limited to, promptly and appropriately responding to all correspondence and notices related to such premium financing, ensuring compliance with all Consumer Protection laws, rules or regulations, such as Truth in Lending and any relevant Premium Finance statutes in each state where the Manager writes business pursuant to this Agreement.

3.  Manager shall ensure that all appropriate refunds of premium due to premium finance companies shall  be  timely made, and Manager shall be  liable for, hold harmless, and indemnify Company against any such amounts improperly paid to the insured, or for refunds not made to the insured or to the premium finance company in accordance with the appropriate governing law.

V.  Company  Interface.  To  interface  at  all  times  with  Company  through  electronic data processing hardWare and software, networks and communication lines and other means as specified in writing and in advance by Company.

W. Copies of  Policies.    To  maintain in each insured's  file  all  Policies, endorsements, rating worksheets and related documents and correspondence, Policy cancellations, non-renewals and other terminations processed by the Manager.  Company is entitled to review files upon five (5) business days prior notice.

X.  Records.

1. Manager shall provide  to  Company any and  all records  and/or reports relating to the Business covered  under  this Agreement  including but not limited to policy information and claims information, if any, as may be reasonably requested by Company, within seven (7) business days following such request, or such other period of time as the Manager and Company may agree.

2.  In addition to the specific reports requested under this Agreement, Manager shall furnish such reports related to the Business covered by this Agreement as required by applicable laws or regulations, orders or directives or as may be reasonably requested by Company, within seven (7) business days following such request, or such other period of time as the Manager and Company may agree.

3.  Unless a longer period is required by law, to keep and maintain for a period of seven (7) years from  the  termination  of this  Agreement, separate, identifiable, orderly, accurate, complete and timely records and accounts of all business and transactions pertaining to Policies bound or written under this Agreement including complete underwriting and rate files.  Such records and files shall be the property of Company, however, a copy of said records and files may at all times be maintained by Manager. Upon request by Company or the insurance  regulator or Commissioner of any state having jurisdiction over Company ("Commissioner''), all records and reports maintained pursuant to this Article Ill., shall be provided as hard copies or in an electronic/computer format usable by Company and the Commissioner, within seven (7) business days following such request, or such other period of time as the Manager and Company may agree.

4.  Manager shall maintain paid, closed, and outstanding claims files for all claims handled by Manager on behalf of Company, which files shall  be the joint property of Company and Manager.  However, upon an order of liquidation of Company such files shall become the sole property of the Company or its estate.   These files shall remain in the physical possession of Manager  for the period of time that Manager continues to administer such claims and for a period of seven (7) years after each claim closed.   If Company desires Manager to retain such records beyond that period, Manager shall do so at Company's request and expense.   Company shall have the right, but not the obligation, to direct the Manager in the administration of, or assume administration of any claim or all claims at any time.  In such case, Manager shall fully cooperate with Company and Company shall have access to all claim files, electronic data, systems and Manager's facilities for purposes of administering the claims, and Manager shall deliver any or all original and electronic claims files to Company promptly upon request.  

Manager shall have the right to copy all original files requested by Company and Company and Manager shall share, on a 50-50 basis, the costs of making such copies.

5.  Notwithstanding any other provision of this subsection, Manager must receive approval from Company prior to the  destruction of any documents or records, electronic or otherwise, generated by Manager under this Agreement.

		
	X.
	Audit

1. To permit Company or their designated representative, during the term of this Agreement and for a period of ten (10) years from the termination of this Agreement, to visit, inspect examine, audit and verify, at Manager's offices, during Manager's normal business hours and as often as Company may deem appropriate, with five (5) business days prior notice. The  Company  will  conduct  an  on-site review  of  underwriting  and  claims  processing operations of the Manager at least semiannually.

2.  The activities of Article X (1) above includes, but is not limited to, any of the properties, accounts, premium  trust  funds,  files, documents, books, reports, work papers, internal controls and other records belonging to or in the possession or control of Manager or of any other person relating to the Business covered by this Agreement.

3.  Company may conduct  any audit through any person or persons it may designate. The Insurance Department of any state having jurisdiction over this Agreement shall have the right to exercise Company's rights of audit, after consultation with the Company, and the Manager agrees that it may be examined as if it were the Company. Manager agrees to respond to any audit deficiencies within thirty (30) days after notice from the Company.

		
	Y.
	Financial Statements.

1.   To furnish the Company with an audited financial statement prepared in accordance with Generally Accepted Accounting Practices (GAAP), for the most current year ended December 31st no later than one hundred and eighty (180) days after the execution of this Agreement, or the Company may, at its option, immediately terminate this Agreement.

2.  Thereafter, the Manager shall furnish the Company, on an annual basis, an audited financial statement  prepared  by  an  independent certified public  accountant in accordance with GAAP, as of December 31 of each calendar year, in a form acceptable to the Company, to be received by the Company no later than July 1 of the following year. In addition, quarterly estimates will be supplied to the Company by the Manager within forty-five (45) days of each quarter end.

3.  The Company shall notify the Director if the opinion on those statements is other than an unqualified opinion. The notice shall be given to the Director within 10 days of receiving the audited financial statement or becoming aware that such opinion has been given. 

		
	Z. 
	Company Property. To promote and safeguard at all times as a fiduciary the best interests and good name of Company and to safeguard, maintain and account for all Policies, forms, manuals, equipment, supplies or  anything  else furnished by Company  or  Manager, all of which shall remain the property of Company.   Manager will return all such property to Company promptly upon demand.  The materials or information furnished to Manager may contain proprietary or confidential  information  of  Company.    Manager  agrees  to  treat  any  such  proprietary or confidential information in accordance with the provisions of Article XVIII.

AA. Prohibited Actions. The Manager shall have no authority to:

1.  Bind any reinsurance or retro-cessions, including, but not limited to, facultative or treaty, on behalf of Company, or commit Company to participate in insurance or reinsurance syndicates. This responsibility shall remain with the Company.

2.  Appoint any producer or sub-producer that is not lawfully licensed to transact the insurance business for which it has been appointed.                   ·

3.  Collect any payment from a reinsurer or commit the Company to any claim settlement with a reinsurer.

4.  Jointly employ an individual who is employed with Company.

5.  Appoint a sub-manager or Program Administrator.

BB. Ethical Conduct.

1. Manager shall not exploit its relationship with Company or use Company's name in connection with any fraudulent, unethical or dishonest transactions.

2.  Manager shall not knowingly use producers, consultants, independent contractors or other representatives that Company could not deal with directly under its Code of Conduct as attached hereto and·incorporated by reference as Exhibit A, and as it may be changed from time to time, or applicable laws or regulations.

3.  Manager may use assets of Company for legitimate business purposes only.

4.   Manager shall avoid any knowing conflict of interest with the Company relating to the
Business.

5.  Manager shall abide by the Company's Privacy Policy as attached hereto and incorporated by reference as Exhibit B, and as it may be changed from time to time, when handling customer information.

CC. Notice of Change in Ownership.   Manager must promptly provide Company with written notice of a material change in ownership of Manager.

ARTICLE IV. General Duties of Company

The Company. shall:

A.  Make all statistical filings and receive all statistical and underwriting data applying to the Program written pursuant to this Agreement, provided that the Manager furnishes all required information and data in  a timely manner so as to enable the Company to meet all time requirements.

B.  Develop, formulate and file policy forms, rates and rules and all other reports and filings, as may be required by the regulatory authorities in the various states where business under this agreement is to be conducted.

C. Remit to the Manager the Compensation to which it is entitled upon Manager's monthly rendering of the reports due under this Agreement to the Company, beginning at the end of the month in which this Agreement becomes effective.

D.  Conduct,  at  least  semi-annually  and  as  often  as  Company  deems  prudent,  solely  at Company's discretion, upon reasonable notice and during normal working hours, an on-site audit of the books, records and accounts of the Manager, including but not limited to those in the underwriting, claims, accounting, IT, marketing, finance and policyholder operations, using either its own employees or independent outside auditors.

E.  Observe  and comply with all applicable laws, regulations and rulings by any governmental authority, agency}  bureau or commission  having  jurisdiction over the conduct of  business under this Agreement.

F.  The Company shall have the right to: (i) cancel or non-.renew any policy of insurance subject to applicable laws and regulations concerning those actions; and (ii} require cancellation of any sub producer's contract or agreement after appropriate notice.

G. If Manager qualifies as a "managing general agent" of Company under any applicable state statute;

1.  Company shall not permit any of Manager's producers to serve on Company's Board of Directors; nor  shall the  Company appoint to  its board of directors an officer, director, employee, producer or controlling shareholder of Manager unless otherwise permitted by law.     ·

2.  Manager shall not permit its producers to serve on Manager's board of directors.

ARTICLE V.    Representations and Warranties

A.  Company warrants and represents that the transactions contemplated hereby:

1.  Are within the corporate powers of the Company and have been duly authorized by all necessary corporate action of the Company.

2.  Constitute the legal, valid and binding obligations of the Company, enforceable against it in accordance with their terms.

3.   Do not and will not conflict with, result in a breach in any of the provisions of, or constitute a default under the provisions of any law, regulation, licensing requirement, charter provision, by-law or other instrument applicable to the Company or its employees or to which the company is a party or may be bound.

B.  Manager warrants and represents that the transactions contemplated hereby:

1.  Are within the corporate  powers o! the Manager and have been duly authorized by all necessary corporate action of the Manager; and Manager is duly authorized to execute this Agreement on behalf of, and to bind, all entities identified as Manager in this Agreement.

2.  Constitute the legal, valid and binding obligations of the Manager, enforceable against it in accordance with their terms.

3.  Do not and will not conflict with, result in a breach in any of the provisions of, or constitute a default under the provisions of any law, regulation, licensing requirement, charter provision, by-law or other  instrument  applicable to the Manager or its  employees or to which the Manager is a part or may be bound.                            ·

C. Manager warrants and represents that:

1.   It currently holds all necessary licenses or authority necessary to carry out its duties and obligations under this Agreement.
2.  Neither Manager,  its officers: directors or other principals, nor any of its employees has been convicted of any criminal felony involving dishonesty or a breach  of trust, or convicted of a crime under 18 U.S. Code Section 1033 and gives Company the authority to verify same.

3.   Manager  hereby gives Company the right to verify information  about Manager, its officers, directors or other principals by obtaining and using consumer reports, investigative reports, credit reports, D&B reports, criminal background checks or any other similar type of report or check.

D.  Manager warrants and represents that:

1.   It has the proper right and interest in the business contemplated herein in order to place the business under this Agreement.

2.  The  business  placed  under  this. Agreement  and  the  incorporated  Endorsements  is  not subject to another entity's claim of interest, including but not limited to, a claim by contract, equity or common law right.

3.   In placing business under this Agreement, it is not in violation of any duty or obligation owed to another entity.

4.   In the event  Manager  breaches  any of the preceding  terms, Manager  agrees to indemnify and hold harmless  the Company, its directors, officer, employees  and agents from any loss or expense arising out of such breach.

E.  Manager  warrants   and  represents  that  the  software  it  employs  is  designed  to  fulfill  all necessary obligations under this Agreement.

F.  Manager  warrants  and  represents  that  the  underwriting  guidelines   to  be  used  by  it  will continue  for  the  life  of  this  Agreement  to  be  in  conformity  with  the  applicable  statutes, regulations,  rules,  bulletins  and  opinions  

in the  various  states  where  business  under  this agreement is to be conducted.
.     .
ARTICLE VI.   Program Manager's Compensation

A.  Company will pay the Manager as full compensation for all of its duties and responsibilities under this Agreement the amounts set forth in Endorsement E attached hereto.

B.  No fees will be allowed to be charged or collected, unless allowed by the Insurance Department of the state in which the risk is located. Any fees collected as installment fees, cancellation, reinstatement, or any other fee related to administration of policies, shall be retained by the Manager. Such fees shall be disclosed to the Company in the manner provided for in this Agreement and the incorporated Endorsements.

ARTICLE VII. Advertising

Manager will not refer to Company  or use the Company's logo (or any division, subsidiary or affiliate of Company, or that of its parent  company), in any advertisement, letter, circular, pamphlet or other publication or statement without the prior written consent of Company.   The Company will not be responsible,  under any circumstances, for any advertising expense  of Manager.   The Manager will insure  that  any  reference  to  Company  pursuant  to this  Article  shall  comply  with the laws and regulations of the jurisdiction in which such advertising occurs or to which it is directed by Manager.

ARTICLE VIII. Representation With Respect to Policies

A.  Manager  will not make  or permit their employees, agents, producers or any other person to make any representation  to applicants, insureds, policyholders or claimants as to the existence or extent of coverage under a Policy or available from the Company that is not consistent with the terms and conditions of coverages available under a Policy or available from the Company.

B.  Manager   shall   establish   procedures   designed   to  ensure   that   Manager  and  Manager's employees, agents, producers or any other person will make known to any applicant, insured or policyholder  the full scope  and effect of all exclusions  and limitations upon or under coverage provided under the Policy and advise their agents and sub producers of their existing statutory obligations, and Manager's  and the Company's expectations in this regard.

ARTICLE IX.  Annual Standards for Volume

Manager will comply with any annual maximum and minimum standards of production for premium volume that are made a part of the Endorsements attached to and incorporated into this Agreement.

ARTICLE X.   Insurance and Guaranty of Manager

Manager will maintain from the inception of this Agreement until all run off business resulting from this Agreement terminates, policies with unaffiliated insurers for the insurance and security requirements of this Article, and on forms acceptable to the Company:

A.  General Liability.    Comprehensive general  liability or umbrella  liability  insurance policy in an amount  of $1,000,000  per occurrence.   The General Liability  policy shall  list Company as an additional insured.

B.  Manager's Guaranties:  Manager shall be required to abide by all terms and conditions in Endorsement  E to encourage  the Manager's  prompt  and faithful compliance  with any and all obligations  under  this  Agreement,  to  include  the  Manager's   responsibility  to  comply  with Premium  Finance  statutes  in making  refunds to insureds  or to policyholders.   The Company shall  also  require  that· it  be  named  as  a  beneficiary  to  the  Letter  of  Credit  specified  in Endorsement  E of this agreement, and in an amount to be determined at the sole discretion of the  Company  up  to  the  maximum  aggregate  amount  set  forth  in Endorsement  F  attached hereto, in order to collateralize  the Guaranty.

ARTICLE XI.    Indemnification

A.  Manager.   Manager  shall be responsible  to Company and shall indemnify, save, defend and hold  Company,  (or  its rehabilitator  or liquidator)  its affiliates,  and all officers, directors and employees  of Company and its affiliates, 

harmless against any and all claims, suits, hearings, actions, damages  of any kind, liability, fines,penalties, loss or expense, including attorneys' fees caused by or resulting  from any allegation of any misconduct,  error, omission or other act or material  breach  of this  Agreement or material misrepresentation hereunder  by Manager, Manager's  employees, Third Party Administrator,  Adjuster,  or any other type of independent contractor employed by Manager or Manager's affiliates unless the conduct giving rise to the allegation was performed at the specific direction of Company provided the Manager has not contributed to or compounded the act alleged.

B. Company.    Company  or  independent  contractor  employed  by  the  Company shall  be responsible to Manager and shall indemnify, save, defend and hold Manager, including its affiliates, and all shareholders, officers, directors and employees harmless against any and all claims, suits, hearings,  actions, damages  of any kind, liability, fines, penalties, loss or expense, including attorneys' fees caused by or resulting from any allegation of any willful misconduct, gross  negligence,  or  other  material breach  of  this  Agreement or  material misrepresentation hereunder by Company, provided Manager has not contributed to or compounded the act alleged.

C. Procedures.  The party seeking indemnification (the "Indemnified Party") from the other Party (the "Indemnifying Party") shall promptly notify the Indemnifying Party in writing of a claim that it believes gives rise to a claim from indemnification ("Claim").  Failure to ·so give such notice shall not relieve the indemnifying party of its obligations hereunder except to the extent it is prejudiced thereby.   The Indemnifying Party will have the right at any time to assume and thereafter conduct the defense of the Claim with counsel of its choice; provided, however, that the. Indemnifying  Party  will not consent to  the entry of  any  judgment or  enter into any settlement with respect to the Claim without the prior written consent of the Indemnified Party unless the judgment or proposed settlement involves only the payment of money damages and does not impose an injunction or other equitable relief upon the Indemnified Party. Any Indemnified Party will have the right to employ separate counsel in any action and participate in the defense thereof, but the fees and expenses of such counsel will be at the expense of the Indemnified Party unless (i) the employment of such counsel will have been specifically authorized in writing by the Indemnifying Party, (ii) the Indemnifying Party will have failed to assume  the  defense  of  such  action  or  employ counsel  reasonably  satisfactory to  the Indemnified Party, (iii) the Indemnified Party shall have reasonably concluded that there may be defenses available to the Indemnified Party that are different from or additional to those available to the Indemnifying Party, or (iv) the Indemnified Party's counsel shall have advised the Indemnified Party in writing, with a copy delivered to the Indemnifying Party, that there is a conflict of interest that could make it inappropriate under applicable standards of professional conduct to have common counsel, in any which event the Indemnifying Party shall pay the cost of the Indemnified Party's counsel.  In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to the Claim without the prior written consent of the Indemnifying Party.

ARTICLE XII. Special Investigative Unit (SIU) and Claims Department

The Manager must cooperate fully with the Company's SIU and/or the Claims Department in any review, investigation, requests for documentation or any other activity undertaken, including but not limited to audits, discovery sweeps, fraud investigations or defense of claims and suits. Failure to cooperate fully will be considered a breach of this Agreement, allowing for termination of the Agreement by the Company.

ARTICLE XIII.Suspension of Manager's Authority

A.  Notice of Suspension.  The Company may suspend the underwriting authority of the Manager to bind the Company only for the reasons and in accordance with the procedures described below.  The Company shall give immediate written notice of the suspension of authority and the Manager shall then immediately cease to exercise its authority until the reason for the suspension is resolved.   Once resolved, the Company shall reinstate the authority of the Manager.  Notwithstanding any action taken pursuant to this Article, the parties may exercise whatever rights they may have to terminate this Agreement.

B.  Legal Prohibition.   The  Company may suspend binding authority for the Program if the Company is legally prohibited from writing insurance for the Program.   In such event, the suspension shall remain in effect until the prohibition has been lifted.  The suspension shall only apply to the jurisdiction in which the Company is unable to continue writing business.

C.  Loss of Reinsurance.

1.  The Company may suspend binding authority, if in its sole discretion there has occurred any of the following: 

(a.) Impairment of the reinsurance coverage with respect to the Program business.
(b.) Reduction in AM Best's rating of any reinsurer.
(c.) Cancellation or suspension of the reinsurance with respect to all or any material portion of the Program business.
(d.) The  failure of  a  reinsurer  to discharge obligations under  all or any portion of any reinsurance contract relating to business subject to this Agreement.
(e.)The ceasing of any reinsurer to carry on the particular classes of business subject to this Agreement or having the performance of such reinsurance rendered illegal by any subsequent law or regulation.
(f.) Insolvency of a reinsurer reinsuring all or a material part of the Business.
(g.)Any  instance where a reinsurer suspends payment of debts, convenes a meeting of creditors, has a receiver appointed or petition presented for its compulsory liquidation, or has a resolution passed for its voluntary liquidation.

2.  The Manager agrees that upon notification from the Company, it shall· immediately cease the binding of any Policies under this Agreement. If reinsurance is terminated or no longer in full force and effect for all or any part of the Business, Manager's authority for the Business affected shall be suspended, or limited immediately upon written notice to Manager from Company, until further notice, said suspension or limitation not affecting in-force policies of insurance except with regard to renewal thereof.

D.  Loss of License.   The  Company may suspend binding  authority  if a regulatory authority cancels, restricts, suspends  or declines to renew either the Company's or the Manager's license or certificate of authority, provided said license or certificate of authority is required to solicit  and  bind Business  pursuant  to the terms of this  Agreement.    In  such event, the suspension shall remain in effect until such license or certificate of authority has been granted or reinstated by the regulatory  authority and satisfactory evidence  of such action has been provided to all parties.

		
	E.  Indictment.
	The  Company  may suspend binding  authority  if  the  Manager or any of the Manager's principals or executive officers is indicted for a criminal offense the conviction of which would permit termination of the Manager under this Agreement.

F.  Grounds for Termination.  The Company may suspend binding authority for any reason that would permit termination of the Manager under this Agreement pursuant Article XV.

G. Default and Delinquency.   The  Company may suspend binding  authority for failure of the Manager to perform its duties  and responsibilities under this Agreement including without limitation, the timely remitting of accounts and monies to Company, insureds or policyholders and timely and full compliance with applicable laws and regulations and Company directives, rules, regulations or manuals.

H.  Termination by Manager.  The Company ma:y suspend binding authority if the Manager gives notice of termination under Article XIV.

		
	I. 
	Dispute over Termination.  The Company may suspend binding authority in the event of a dispute over the reason for termination of the Agreement.

J.   Termination of Key Employees.   The Company may suspend  the binding authority if the employment of the individuals identified in the attached and incorporated Endorsements, is terminated

ARTICLE XIV.Commencement and Termination

This Agreement shall commence as of the date of .execution of the Agreement, and shall remain in full force until terminated in accordance with the provisions outlined below.

A.  Basis for Termination

1.  This Agreement may be terminated at any time upon the mutual written agreement of the
Company and the Manager.

2.  This Agreement may be  terminated at any time by either party, upon one hundred and eighty (180) days prior written notice, to the other party.

3.  This Agreement may be terminated at any time by the Company,  upon thirty (30) days written notice to Manager in the event of:

(a.) Default.  The failure of the Manager to perform its duties and responsibilities under this Agreement including, without limitation, the timely remittance of accounts and monies to the Company, insureds or policyholders and timely and full compliance with applicable laws and regulations and the Company's directives, rules, regulations or manuals;

(b.) Insufficient or Inaccurate  Data.   The failure of the Manager to properly compute and report all required account data as required by this Agreement and incorporated Endorsements; and

(c.) Ownership Change. A change in the ownership or management of, or in the event of the execution of an agreement of sale, transfer or merger of the Manager, without the prior written notice and consent of the Company.

4.  This Agreement may be terminated immediately at any time by either party by written notice
 (a.)Act of bankruptcy.  If  the other party commits any act of bankruptcy, becomes insolvent or assigns all or part of its assets for the benefit of creditors upon or after the filing of a petition for bankruptcy, whether voluntary or involuntary.                                                        

(b.) Misconduct.  In the event of fraud, abandonment, gross or willful misconduct, material breach of contract, insolvency, or lack of legal capacity to act, including cancellation, suspension or non-renewal of its license or certificate of authority, on the part of either party. Gross or willful misconduct shall include, but shall not be limited to:

(i.) Failure to pay any funds owing to the other party for any reason within ten (10) days after the time set forth in this Agreement other than as provided above regarding minor accounting differences.

(ii.) The delegation of any of Manager's obligations and/or assignment of any rights hereunder without the prior written consent of the Company.

(iii.)Either party being delinquent  two (2) times in any consecutive twelv (12)  month period in either the accounting for or the payment of any and all monies due the other party for any reason.

(c.) Legal.  If the Company determines that, any law or regulation of a federal, state or local government has rendered illegal the performance of any material terms of this Agreement.

(d.) Material breach.  If Manager or Company is in material breach of Agreement, provided the other party seeking to terminate this Agreement has given the other party thirty (30) days prior written notice of the nature of the claimed breach and its intent to terminate if the material breach is not cured within the thirty (30) days period.

(e.) Financial Statements. lf  Manager fails to furnish the Company with an audited financial statement for the most current year no later than one hundred and eighty (180) days after .the execution of this Agreement, the Company may, at its option, immediately terminate this Agreement.

(f.)  Special Investigative Unit ISIUl/Ciaims Department. Manager's failure to fully cooperate with the Company's SIU and/or the Claims Department per Article XII.

(g.) Loss  of insurance. If Manager loses, does not renew, or does not have any of their insurance coverages cited in Article X.

B.  Business after Termination.  In the event of termination of this Agreement, at the election of the Manager, the Company shall continue Policies and binders  in  force until their stated expiration dates, subject to the following provisions:

1.  The Company  reserves  all  its rights to cancel Policies arid  binders  for nonpayment of premium and to cancel Policies and binders issued in violation of the underwriting guidelines then applicable to this Agreement provided  said cancellation comports with applicable state law.

2.  The Manager shall continue to be the agent of the Company for the purpose of servicing Policies and binders in force on or before the date of termination of this Agreement. The Manager shall not without prior written approval of the Company, increase or extend the Company's liability or extend the term or change any conditions of any such Policies under this Agreement.

3.  Upon termination, the Manager shall cease to have any authority to solicit, underwrite, bind or issue business for the Company under this Agreement.

4.   Upon termination of the  Agreement, the Company shall have no obligation to pay the Manager for services in settlement of accounts or concluding of affairs between the Company and the Manager.

5.  If this Agreement is terminated as provided for herein, neither party shall have any claim against the other for loss of prospective profits or fees or damage to business arising solely as a result of said termination.

6.  In the event of termination of the Agreement, any business written hereunder and remaining with the Company shall be permitted to continue to normal eXpiration, provided, however, that if the renewal date of any annual policy shall occur within a period of thirty (30) days after the date of termination of the Agreement, and such renewal shall have had renewal terms already committed, such policy shall be renewed and permitted to continue in force until its next annual renewal date.

7.  Should any  Policy be extended, continued or renewed due to regulatory or other legal restrictions, the terms of this Agreement shall continue to apply to such policies until such Policies are terminated or expire.

8.  Regardless of any dispute, the Company and Manager will fulfill any obligations on Policies.

9.  Claims after termination:

(a.)The Company will have the right to determine who will handle claim servicing in the event of termination.   This may include reinsurance and/or loss portfolio transfer arrangements.

(b.) In  the  event  this  Agreement  terminates and the  Manager  refuses  or  is  unable to administer servicing of business produced under this agreement, then in that event the Manager shall immediately:

(i.) Provide the Company wit.h on-line access to all records  necessary to administer business produced hereunder.

(ii.) Provide  the  Company  with  a  tape  back-up  of  all  programs  and  data  libraries, including updated source code, object code, data files, and all related manuals used in the production and administration of business hereunder.

(c.) The  Company's  obligation  to  pay  the  applicable  fee. to  Manager  as  set  forth in Endorsement C which is attached and incorporated into this Agreement, ceases when this Endorsement or the Agreement terminates, with the last payment of the fee due in the month following termination.

(d.) The Manager agrees to provide for an orderly and timely transition of claim files and support documents to Company. This will be done prior to the termination date, unless
immediate termination was used in which case it will be done within ten (10) days of the termination date.    ·    ·

(e.) Any claims  settlement authority granted to Manager. The  Company may suspend Manager's settlement authority upon 3 days written notice during the pendency of any dispute or arbitration proceeding regarding the cause for termination.

(f.) Upon  such  termination or  suspension, the Company shall  within  i 20  days of  the effective date  thereof, offer  to  assume by commutation, for losses  it  reinsures  for American Service Insurance Company, Inc. on policies subject to this Agreement.

C.  Records Ownership Upon Termination.

1.  In the event of termination of this Agreement, all records, including electronic records, for the Business written under this Agreement (which shall not include work processes, work applications, workflows and actuarial pricing models of Manager, which shall remain the confidential and proprietary information of Manager) shall be co-owned by Company and Manager as provided for in this Agreement.

2.   Upon termination of this Agreement, the Manager agrees:

(a.) to promptly return to the Company, or destroy with the Company's consent, any and all materials belonging to the Company;

(b.) to  immediately discontinue the dissemination or use of any materials, marketing or otherwise, bearing the Company's name or logo; and

(c.) promptly return to Company all original records and all electronic records relating to the
Business.

3.   Upon termination of this Agreement, the Company agrees, for a period of seven (7) years from the date of termination, that:

(a.) Following reasonable advance written notice to Company, Manager shall have the right to access and review all records related to the Business generated by Manager.

(b.) Company will provide:

(i.) Quarterly reports of written and earned premium by state and program.
(ii.) Quarterly  reports  of . claim  activity  by  coverage  including  paid  losses,  reserve transactions, salvage/subrogation recoveries, claim counts (pending, opened, closed).

ARTICLE XV.    Ownership of Expirations

A.  Use and control.  The use and control of all expirations, and all records pertaining to insurance written pursuant to this Agreement shall become the Manager's property and remain in the Managers undisputed possession, provided that Manager fulfills their responsibilities in accordance with this Agreement.

ARTICLE XVI.    Offset

All amounts  due Manager or Company under this or any other agreement between the parties shall be subject to the right of offset, whether or not subject entities are presently listed in this Agreement.  For the protection of the Company, the Company shall have the right of offset with respect to any premium not timely refunded to premium finance companies or to insureds in the time  allotted by  the appropriate state law, or within thirty (30) days after policy cancellation, whichever is greater so long as the premium in question arises from business generated pursuant to this Agreement.   For the purposes of this Article, Manager shall include all subsidiaries and affiliates. The Manager may not use the right of offset to remove funds the Manager believes it is owed from the Premium Account without the prior written consent of the Company.

ARTICLE XVII.     Arbitration

A.  Submission to Arbitration.  In the event of any dispute between the Company and the Manager with reference  to  the interpretation, application, formation, enforcement or  validity of  this Agreement, or their rights with respect to any transaction involved, whether such dispute arises before or after termination of this Agreement, such dispute, upon written request of either party, shall be submitted to the decision of a board of arbitration composed of two arbitrators and an umpire meeting at the Company's offices unless otherwise mutually agreed.  Notwithstanding the generality 

of the foregoing, the Company's right to exercise any of the options or rights contained in this Agreement and the incorporated Endorsements or to obtain any other legally available injunctive remedies shall not be limited by the submission of any dispute to arbitration. The board  of  arbitration will  have  complete jurisdiction over the entire  matter  in dispute, including any question as to its arbitrability.

B.  Notice.   The notice requesting arbitration shall state in particulars all principal issues to be resolved, name the requesting party's arbitrator and shall set a date for the hearing, which date shall be no sooner than ninety (90) days and no later than one hundred twenty (120) days from the date that the notice requesting arbitration is mailed.

C.  Discovery.  Each party may obtain discovery from the other through written interrogatories and through requests for documentation, and may depose witnesses upon notice to the other. Any objections to production of documents or to the scope of discovery. shall be submitted to the umpire for·resolution. The umpire may schedule a conference at which the parties may present oral arguments and submit written briefs with respect to the production of documents or the scope of discovery. The  umpire  shall render a decision within two business days of the conference. The decision shall be binding on the parties.

D.  Arbitration Board Membership.   The members of the board of arbitration shall be active or retired and disinterested officials of insurance companies or lawyers.  Each party shall appoint its own arbitrator and the two arbitrators shall choose a third arbitrator as umpire before the date set for the hearing.  The umpire shall be a lawyer. If the party receiving the notice of arbitration fails to appoint its arbitrator within thirty (30) days after having received the written notice of arbitration, the party giving notice shall appoint the second arbitrator. If the two arbitrators fail to agree upon the appointment of the umpire within thirty (30) days after their appointments, each of them shall name three, of whom the other shall decline two and the selection of the umpire from the remaining two nominees shall be made by drawing lots.   The umpire shall promptly notify all parties  to the arbitration of his selection.

E.  Submission of Briefs.  The parties shall submit their initial briefs within twenty (20) days from appointment of the umpire.   Each may submit reply briefs within ten (10) days after filing theinitial briefs.

F.  Arbitration Award. The board shall make an award with regard to the custom and usage of the insurance business which shall be in writing and shall state the factual and legal basis for the award.  The board may award compensatory money damages and interest thereupon but may not award punitive, exemplary or similar damages arising out of or in connection with a breach of this Agreement.   The award shall be based . upon a hearing in which evidence may be introduced without following strict rules of evidence but in which cross-examination and rebuttal shall be allowed.  At its own election or at the request of the board, either party may submit a post-hearing brief for consideration of the board within twenty (20) days of the close of the hearing.   The board shall make  its award within thirty (30) days following the close of the hearing or the submission of post-hearing briefs, whichever is later, unless the parties consent to an extension.   A decision by the majority of the members of the board shall become the award of the board and shall be final and binding upon all parties to the proceeding.

G. Confirming Court Order.   Either party may apply to the United States District Court for the Northern District of Illinois or to the Circuit Court of Cook County, Illinois for an order confirming the award or to enforce any decision by the umpire with respect to discovery.  The parties consent to the jurisdiction of any such court.   A judgment of such Court shall thereupon be entered.  If such an order is issued, the attorney's fees of the party so applying and court costs will be paid by the party against whom confirmation is sought.

H. Arbitration Expense. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the expense of the umpire.   The remaining costs of the arbitration proceedings or any other costs relating to the arbitration may be allocated by the board.

I.   Survival. This Article shall survive the termination of this Agreement.

J.    Procedural Law. Illinois law shall govern the conduct of arbitrations pursuant to this Agreement.

ARTICLE XVIII.     Contract Terms

A.  Applicable Law. The rights of the parties to this Agreement shall be governed by and construed in accordance with the law(s) of the state. of Illinois without regard to Illinois rules on conflict of laws.

B.  Strict Compliance.  The failure of the Company or Manager to insist on strict compliance with this Agreement and the incorporated Endorsements, or to exercise any right or remedy shall not constitute a waiver of any rights provided under this Agreement, or stop the parties from thereafter demanding full and complete compliance, or prevent the parties from exercising such a remedy in the future.

C.  No Assignment. This contract may not be assigned in whole or part by the Manager.

D.  Notices and Service of Process.  Any notices given with regard to this Agreement (other than the Company's notices or invoices with respect to amounts due hereunder) shall be sent to the following addresses  by U.S. mail or any other means calculated to provide notice:

To Company:
American Service Insurance Company, Inc.
150 Northwest Point Blvd
Elk Grove Village, IL 60007
Attn: Scott Wollney

To Manager:

Universal Casualty Company
150 Northwest Point Boulevard
Elk Grove Village, Illinois 600007
Attn: Roger Beck

For purposes of service of process related to disputes governed by this Agreement only, the parties agree to accept service of process by personal delivery, registered or certified U.S. mail or overnight courier/delivery service to the addresses specified above. Notices and Service of Process is deemed to be given on the date it is received.

E.  Jurisdiction. The parties hereby consent to the exclusive jurisdiction of either the United States District Court for the Northern District of Illinois, or to the Circuit Court of Cook County, Illinois, regarding any disputes relating to or arising out of this Agreement.

F.  Severability. If any provision hereof is or shall at any time be deemed invalid and unenforceable then, to the fullest extent permitted by law, the other provisions hereof shall remain in full force and effect and shall be liberally construed in favor bf the Company in order to carry out the intentions of the parties hereto subject to subsection XIV. A. 4. (d) as nearly, as may be possible.

		
	G. Entire  Agreement; Modifications. 
	This  Agreement  and  the  incorporated  Endorsements, constitutes the entire agreement of the parties with respect to the subject matter herein and supersedes any other previous agreements or quotations, whether written or oral, between the Company and the Manager, unless specifically referred to within this Agreement. Except where otherwise provided by the  terms of this Agreement, this  Agreement may not be released, discharged, amended or modified except in writing signed by both parties. Notwithstanding the foregoing, manuals, rules, regulations, guidelines, instructions arid directions issued in writing by the Company from time to time as provided in this Agreement, shall bind the Manager as though a part of this Agreement.

H.  Negotiated Agreement.  This Agreement has been negotiated by the parties and the fact that the initial and final draft shall have been prepared by Company shall not be used in any forum in the construction or interpretation of this Agreement or any of its provisions.

		
	I. 
	Headings.  The headings preceding the text of the articles and paragraphs of this Agreement are intended and inserted solely for the convenience of reference and shall not affect the meaning, construction or effect of this Agreement.

J.   lndependent  Contractor.    This  Agreement  is  not  a  contract  of  employment  and  nothing contained in this Agreement and the incorporated Endorsements shall be construed to create the relationship of joint venture, partnership, or employer and employee between Company and Manager or between Manager and any independent producers, agents or sub-producers. Manager is an independent contractor and shall be free, subject to the terms and conditions of this Agreement, to exercise judgment and discretion with regard to the conduct of business of this Agreement.

K.  Honorable Undertaking. This Agreement shall be considered an honorable undertaking made in good faith and shall be subject to a liberal construction for giving effect to the good faith and honorable intentions of Manager and Company.

L.  Counterparts. This Agreement may be executed in duplicate counterparts and via facsimile with an original signature to follow promptly via U.S. Mail, each of which shall be deemed an original but both of which when taken together shall be deemed one and the same document.

M. Survival.  Articles Ill (0)  (W) (X) (Z) (AA), XI, XII, XIII, XIV, XV, XVI, XVII, and XVIII, and any other provision related to the parties rights post termination shall survive the termination of this Agreement.

N.  Promptly.  Unless  the context  and circumstances require  action sooner, "promptly" in this
Agreement and incorporated Endorsements shall mean "within five (5) business days".

		
	O.
	Timely. Unless the context and circumstances require action sooner, 'timely" in this Agreement and incorporated Endorsements shall mean "within three (3) business days".

P.  Bordereaux.  A listing of accounts and/or transactions from an agent for a specific period of time.  At a specified time, the agent will send the Company a check for monies due per the bordereaux.

Q.   Account current.   Is a listing of the same data as contained within a bordereaux, but at the specified time, the Company will send a check to the agent for monies due per the account current.

R.  Loss Pick. A measurement of normal loss expectancy for the risk in question.

S. Confidentiality.   Manager and Company (each a "Receiving Party") agree, on behalf of themselves and their respective Affiliates, employees and agents, that during the term of this Agreement and for a period of five (5) years after the termination hereof, they shall not, without the prior written consent of the other party, disclose to any third person, corporation, firm or other party or use for any purpose other than as specifically permitted by this Agreement, any Confidential Information disclosed by the other party (the "Disclosing Party"), except where an order of  court  of  competent  jurisdiction, a governmental agency, state or  federal law, the Company's Privacy Policy, or a third party's rights or interest in such Confidential Information otherwise requires such disclosure.

For purposes  of  this  section, "Confidential Information" means  all information relating to a Disclosing Party, its Affiliates or third parties to whom a Disclosing Party owes an obligation of confidentiality that is furnished to a Receiving Party now or in the future by or on behalf of a Disclosing Party or to which a Receiving Party obtains access, in either case whether such information is furnished or made accessible in writing, orally, visually, electronically or by any other means:

For purposes of this section, an "Affiliate" of a person or entity means any person or entity (including any entity acquired or created after the date of this Agreement) that directly or indirectly controls, is controlled by or is under common control with such company.

Notwithstanding the  foregoing, the  following will not constitute Confidential Information for purposes of this Agreement:

1.  information which is or becomes generally available to the public, other than as a result of a disclosure or other act by the Receiving Party or its Affiliates, employees or agents;
2.   information which can be shown by the Receiving Party to have been already known to it on a non-confidential basis prior to being furnished to it by or on behalf of the Disclosing Party; and
3.   Information which becomes available to a Receiving Party on a non-confidential basis from a third party that is not subject to any prohibition against disclosing the information to the Receiving Party.
4.   Notwithstanding anything to the contrary set forth herein, upan any notice of non-renewal or termination under Article XIV, the parties may share such information as may be necessary to secure a replacement insurance carrier or replacement agent, provided that no information will be shared with any party that has not executed a confidentiality agreement no less stringent than the provisions of this Article.
5.  A Receiving Party will not be in breach of its obligations under this Paragraph if it discloses Confidential Information as required by an order of court of competent jurisdiction, a governmental agency, state or federal law; provided, however, that the Receiving Party:
a.  notifies the Disclosing Party sufficiently prior to disclosure to enable the Disclosing Party to seek to 

oppose or restrict the disclosure;
  b.  cooperates with any attempt by the Disclosing Party to oppose or restrict the disclosure;
  c.   uses its best efforts, at the expense of the Disclosing Party, to obtain any protective
order reasonably requested by the Disclosing Party; and
  d.  only discloses such Confidential Information that is required to be disclosed.

IN WITNESS WHEREOF, the  parties, intending to  be  legally  bound,  have  caused their authorized representatives to execute this Agreement and the incorporated Endorsements.

	
					
	 
	 
	 
	 
	 

	Manager:
	 
	 
	Company:
	 

	 
	 
	 
	 
	 

	Universal Casualty Company
	 
	American Service Insurance Company

	 
	 
	 
	 
	 

	/s/ Roger Beck
	 
	 
	/s/ Scott D. Wollney
	 

	President & COO
	 
	 
	President & CEO
	 

	1/11/2011
	 
	 
	1/11/2011
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

EXHIBIT A

Code of Business Conduct and Ethics

INTRODUCTION

The Company's goal is to achieve the highest business and personal ethical standards as well as to comply with all the laws and regulations that apply to our business.   Adherence to the standards contained in this Code will help to ensure decisions that reflect care for all of our stakeholders.  The Code of Business Conduct and Ethics  (the "Code") is intended as an overview of the Company's guiding principles and not as a restatement of Company policies and procedures.

Ethical business behavior is the responsibility of every member of the Company's team and is reflected not only in our relations with each other but also with our policyholders, other organizations, suppliers, competitors, government and the public.   Whatever the area of activity and whatever the degree of responsibility, the Company expects each employee and agent to act in a manner that will enhance its reputation for honesty, integrity and the faithful performance of its undertakings and obligations.

This Code cannot and is not intended to cover every applicable law or provide answers to all questions that might arise; for that we must ultimately rely on each person's good sense of what is right, including a sense of when it is proper to  see guidance from others on the appropriate course of conduct. Because our business depends upon the reputation of the Company and its directors, officers, employees, and agents for integrity and principled business conduct, in many instances this Code goes beyond the requirements of the law.

CONFLICTS OF INTEREST

In exercising our responsibilities, it is vital that we be guided by what is in the best interests of the Company and those clients with whom we have fiduciary relationships. All of our employees are required to conduct their personal and business affairs in such a way so as to avoid conflicts or even the appearance of conflicts with the interests of the Company, its shareholders, brokers, policyholders and its customers.

USE OF INFORMATION .

The  insurance  business,  like  other  service  industries,  is  based  on  the  collection,  organization, evaluation and preservation of information about individuals, organizations and the world at large.  To provide the highest  quality  services  to  our policyholders and  customers, we must  be  efficient in gathering and storing information, be thorough in our analysis of information collected, and be creative in generating new information.   Our  ability to remain competitive requires both our willingness and ability to share information within our organization and our awareness that certain types of information need  to  be. protected  from  disclosure. .    It  is  especially  important  to  maintain our  reputation by safeguarding information entrusted to us by our policyholders, customers and fellow employees; it is also legally required to many cases.

CONFIDENTIALITY OF PERSONAL INFORMATION

Our policyholders and customers  entrust us with confidential information  about their personal and business operations.  The Company  will only collect and maintain information for legal and business reasons.  This means that only those employees and outside governmental authorities and regulators with legitimate reasons to know should have access to such information.

CONFIDENTIALITY  OF BUSINESS INFORMATION

Confidential business information and practices can be defined as information used in trade or business which gives the owner a competitive advantage and which is not generally known to the public. If the owner fails to adequately protect the information or matter, it may lose its confidential status.  Such business information and practices could include software code, customer lists, or a new invention that is yet to be patented.

Sometimes you may encounter such business information and/or practices in the course of evaluating a service provided to, or a service or product received from policy holder, customer or vendor. You may be responsible for the loss of such information and/or practice if you reveal it to others, even fellow Company employees, who do not need to know this proprietary information.  Both the Company, the employee, and  the  agent may  be  held  liable  for  financial losses to  the  owner of  the business information or practice.

USE OF INSIDE INFORMATION

It  is  the  Company's goal  to  protect  shareholder  investments through  strict  enforcement of  the prohibition against insider trading set forth in provincial securities laws and regulations.  No director, officer or employee may buy or sell securities of Kingsway at a time when in possession of "material non-public information.")  There is, however, an exception for trades made pursuant to certain stock plans such as the Kingsway Employee Stock Purchase Plan established in compliance with applicable law.)   Passing such information to someone who may buy or sell securities is also prohibited.  The prohibition on insider trading applies to Kingsway's securities and to securities of other companies if the director, officer or employee learns of material non-public information about those other companies in the course of his or her duties for Kingsway.  This prohibition also extends to certain non-employees who may learn about the "material non-public information" about the Company such as spouses, relatives, and close friends of directors, officers or employees.  Insider trading is both unethical and illegal and will be dealt with firmly.  If you have any questions in connection with whether or not a trade in the company shares is permitted at any particular time, please contact the Executive Vice-President of Kingsway.

FAIR DEALING

Each director, officer and employee shall endeavor to deal fairly and in good faith with Kingsway customers, shareholders, employees, suppliers, regulators, business partners, competitors and others. No  director, officer  or  employee  shall  take  unfair  advantage of  anyone  through  manipulation, concealment, abuse of privileged or confidential information, misrepresentation, fraudulent behavior or any other unfair dealing practice.

PROTECTION AND USE OF COMPANY  ASSETS

Company assets, such. as information. materials, supplies, time,  intellectual property, software, hardware,  and  facilities,  among  other  property,  are  valuable  resources  owned,  licensed,  other otherwise belonging  to the  Company.    Safeguarding Company  assets  is  the  responsibility of all directors,  officers  and employees.    All Company assets  should be used  for legitimate business purposes. The personal use of Company assets without permission is prohibited.

  Employees  are  expected  to   use  Company  equipment  and  materials  (e.g.  telephones, computers, software and photocopiers) or Company business only.   All Company equipment and materials are dedicated for business use only and the Company reserves the right to monitor and investigate usage of company equipment and materials at its discretion.
  Employees should not use Company resources for personal benefit or to benefit persons or entities outside the Company.  In certain circumstances, the Company may approve of the use of particular corporate resources for charitable or community purposes.
 Employees must maintain accurate records and abide by corporate policies concerning reimbursable expenses, and eligibility for all Company benefits, including sick leave, education and disability payments.
  Employees may not make payments or give gifts (other than gifts of nominal value that are generally considered as common business or social courtesies) to government workers or outside suppliers in order to influence regulatory or business decisions.
 The Company has established internal control procedures to ensure that assets are protected and properly used, and that financial records and reports are accurate and reliable.   Employees and supervisors share the responsibility for maintaining and complying with required internal controls.

The  Company's success  depends  upon the integrity of all of its employees.   The Company has instituted a comprehensive set of procedures, rules and controls to prevent fraud and dishonesty and it will take all action necessary arid appropriate to enforce these policies and procedure.

ACCOUNTING PRACTICES

It  is  the policy  of  Kingsway to  fully and fairly disclose  the financial condition of the Company in compliance with applicable accounting principles, laws, rules and regulations. All books and records of Kingsway shall be kept in such a way, as to fully and fairly reflect all company transactions.

RECORDS RETENTION

Officers, employees and agents are expected to become familiar with the Company's policies regarding records retention 

applicable to them and to strictly adhere to those procedures.  Records may not be destroyed except in accordance with the applicable records retention policy.  If you.have any questions in this regard, do not hesitate to contact your supervisor.

COMPLIANCE WITH LAWS, RULES REGULATIONS

As an insurance provider,  the Company. is subject to a myriad of laws and regulations on how we conduct our business.  Many of these laws are designed to protect consumers in situations where it is perceived that a business because of size, resources or expertise is able to unfairly control or influence customer decisions.  It is critically important that both the Company, its employees and agents with the letter and spirit of the laws, which regulate the conduct of our business.

All aspects of Company business are impacted by compliance requirements; for example, sales, underwriting, claims, actuarial, accounting and financial reporting, financial services, investments, and governmental relations.

Kingsway takes a proactive stance on compliance with ail applicable laws, rules and regulations, including insider-trading laws and applicable anti-trust laws.

DUTY TO REPORT AND CONSEQUENCES

Every director, officer and employee has a duty to adhere to this Code of Business conduct and Ethics and all existing company policies and to report to the Company and suspected violations in accordance with applicable procedures.

Employees shall report suspected violations of Company policies contained in the Employee Handbook by following the reporting procedures tor that specific policy in the Employee handbook.  All other suspected violations of the code must be reported to that party or, if no specific procedures are stated, the Executive Vice-President at (905-206-2651).  The Company will investigate any matter so reported and may take appropriate disciplinary and corrective action, up to and including termination.  The Company forbids retaliation against employees who report violations of this Code of Business Conduct and Ethics in good faith.

EXHIBIT B

Privacy Notice To Our Customers

This Privacy Policy is provided to you and other customers of the Company (or "we") to explain our policy relating to maintaining the confidentiality of non-public personal information. We are committed to giving your non-public personal information all the protection required by law. This Privacy Policy outlines the types of non-public personal information that we collect, why we collect it, how we use it, and with whom we share it.

Categories of Non-public Personal Information We Collect: Non-public personal information is personally identifiable financial information about you obtained by the Company in connection with providing products and services to you. It includes information provided by you, obtained by us, or resulting from your transactions with us or others. It does not include information available to the general public. We collect non-public personal information from the following sources:

Information we receive from you on applications or other forms. This information may include your name, address, social security number, health and financial .information,  and may be received in person, by mail, by phone, by facsimile, or via the internet.

Information about your transactions with us, our affiliates or others. This could include, among other things, information to adjust, investigate or settle your insurance claims, your claims history, billing and payment information and coverage selections.

Information we receive from consumer reporting agencies. This information is generally used in connection with the application process. It may include motor vehicle reports, claims reports, credit histories and information we receive from a customer report or investigative consumer report.

Categories  of Parties to  Whom  We May  Disclose Non-public Personal Information: We will disclose your non-public personal information as permitted or required by law. We do not currently disclose non-public personal information about you to our affiliates, except as permitted by law. If we disclose non-public personal information about you to our affiliates, the information will be disclosed to respond to your needs and to provide information about products or services offered by our affiliates. Non-public  personal  information  is  treated  with  the  same  standards  of  confidentially  among all Kingsway affiliates. We may share information among our affiliates about your accounts or our experiences or transactions with you. This includes identification information, account balance information and payment histories. To underwrite your insurance, we may share your consumer report or  investigative  consumer  report  among  our  affiliated  underwriting. companies.  By  applying  for insurance with us, you consent to our sharing of this information among our affiliated insurance underwriting companies. We will not otherwise share your consumer report or investigative consumer report among our affiliates.

We do not disclose non-public personal information about you to nonaffiliated third parties, except as permitted or required by law. We may disclose non-public personal information in connection with the servicing  or processing  of  an insurance  product  or  service that  you request  or  authorize. These services may include check processing, data processing and claims handling functions. We may also disclose non-public personal information with nonaffiliated third parties that perform marketing services on our behalf, with other financial institutions with whom we have joint marketing agreements, or as permitted by law.

We restrict access to your non-public personal information to those employees and other parties necessary to provide  products or services  to you.  We maintain physical electronic  and procedural safeguards to guard your non-public personal information.

Further Information: If you have any additional questions about this privacy policy or concerns regarding your personal information, you may write us at:
American Service Insurance Company, Inc.,
150 Northwest Point Boulevard
Elk Grove Village, Illinois 60007.

ENDORSEMENT  A

PROGRAM MANAGER AGREEMENT
ENTITIES AND LINES OF BUSINESS GOVERNED BY THIS AGREEMENT

ARTICLE I.     Entities and lines of business.

This Endorsement identifies those entities under common ownership or control that are authorized to conduct business under this Agreement.  The Company may apply any provision of this Agreement, including termination and suspension of authority, to one entity, line of business, or territory without necessarily affecting other subject entities, lines of business or territories.

	
				
	Entity Name
	Lines of Business
	Effective Date
	Governing Endorsements

	Universal Casualty Company as Program Manager for American Service Insurance Company, Inc.
	Private Passenger Automobile Insurance
	January 1, 2011 (including claims for policies written prior to this date)
	A, B, C, D, E

ENDORSEMENT B

PROGRAM MANAGER AGREEMENT 
CLASSES 01= BUSINESS AND AUTHORITY

ARTICLE I.     Classes of business.

Manager's authority and responsibility extends to the following classes of business, policies of insurance (including endorsements), lines of business and limits of insurance. Wherever reference is made to Company's Standard Underwriting Guidelines, please note that it is the Manager's responsibility to  access  and base relevant decisions on the Company's most current (on-line) version of the  Standard Underwriting Guidelines.    The Manager must follow appropriate Underwriting Guidelines.

A.  Authorized classes of business.   Manager's authority includes only the following classes of business:

Private Passenger Automobile Insurance

B. Prohibited  classes of business.   Manager has no authority for all types of business cited as "prohibited" or "risks not written" in the Company's Standard Underwriting Guidelines with the following exceptions and additions:

1.  EXCEPTIONS (i.e., Manager's authority is further broadened to include these items): None.
 2.  ADDITIONS: None.

ARTICLE II.

The Program Manager authority may be terminated at any time by the Company for any breach of the
Restrictive Conditions.

A.  Referral classes of business. Manager shall refer to the Company for prior approval for all types of business cited as ."submit" or "conditionally acceptable" in the Company's Standard Underwriting Guidelines with the following exceptions and additions:

1.  EXCEPTIONS (i.e., Manager's authority is further broadened to include these items): 
(a.) None.

2.  ADDITIONS 
(a.)None.
ARTICLE Ill.   Account  Clearance  Process.  N/A ARTICLE IV.  Broker of Record Guidelines.
A.  Company does not honor any "broker-oHecord" letters from any of its Program Managers.

B.  Company will honor  broker-of-record letters against Manager from those Company retail agents duly authorized to  represent Company (lor the subject class of business, size of account, territory, etc.) under the following circumstances:

1.  If the quote has not yet been released by Manager; OR
2.  If the quote has been released by Manager, but more than ten (10) days remain before the proposed effective date.

C.  Company will not  honor broker-of-record letters against its Program Managers from those Company retail agents duly authorized to represent Company (for the subject class of business, size of account, territory, etc.) if the quote has been released by the Program Manager and less than ten (10) days remain before the proposed effective date.

D.  Company reserves the right to modify the broker-of-record process at its sole discretion. 

ARTICLE V.  Authority to Bind  Risks.  Manager's authority to bind qualifying accounts is specified below.

A.  Once authorized (as above), your binding authority is limited to accounts within your authority as otherwise stated in this  contract and subject to the filed rates, rules and forms of the Company.

B.  Binding authority will be suspended immediately if the above individual terminates employment with Manager.

ARTICLE VI. Territory. Manager's  authority . and  responsibility  extends  to  qualifying  accounts headquartered only in the following territories.

A.  All states (not territories or possessions) of the United States where the Company has a valid
Certificate of Authority and Filed Forms and Rates.

B. All other Risks outside these territories require prior written Company approval.

C. Company reserves the right to modify the list of approved territories at its sole discretion. 

ARTICLE VII. Underwriting Information.
A.  Prior to quoting any qualifying account, Manager must obtain at least the requisite underwriting information cited in any applicable Underwriting Guidelines provided by Company with the following exceptions and additions:

1.  EXCEPTIONS (i.e., Manager need not secure the following information prior to quoting an authorized account):

None.

2.   ADDITIONS  (i.e.,  Manager  must secure  the following  information  prior to quoting  an
authorized account):

None.

B.  At the minimum, Manager will obtain the following information prior to binding any qualifying account:

None

ARTICLE VIII. Renewal Processing

A.  Renewal processing must begin a sufficient number of days prior to expiration of policy to satisfy minimum statutory 

renewal requirements.

B.  For those policies being non-renewed, non-renewal notices on policies must. be issued within state guidelines.

C.  For those accounts facing an increase on renewal and with the intent to renew, a letter must be mailed within the time mandated by the state indicating that an increase in premium may occur.

D. Renewal quote must be issued and released to the insured within the state mandated guidelines.

E.  Premium audits will be ordered at the sole discretion of the Company.

ARTICLE IX. Policy Processing and Reports to Company.

A.  Reports to Company: Manager shall report the following to the Company:

1.  Monthly service level reports, as agreed between the Company and Manager
2.  Monthly non renewal notice summary demonstrating compliance with applicable statutes.
3.  Monthly claim compliance reports. 

B.  Additional Responsibilities of Manager:

1.  Manager will comply  with all written terms and conditions of Company's "General Rules" provided to Manager by the Company whether expressed in this Endorsement or not.
2.  Manager will maintain all correspondence necessary to underwrite, rate and manage risks subject to this Agreement and shall make risk files available to Company for its review at anytime.
3.  Account files will contain at least the following information:

(a.) All items  fisted in Article V ("Underwriting Information") above.
(b.) All correspondence
(c.) Completed underwriting checklist (if external to Company's system) 
(d.) Rating Worksheets (if external to Company's system)

4.  Manager  is knowledgeable of and agrees to be fully responsible  for compliance  with all applicable national security and privacy laws and regulations.   This includes, but is not limited to, the Office of Foreign Assets Control requirements, the Gramm-Leach-Billey Act, the Fair Credit Reporting Act, the Insurance Information and Privacy Protection Act and those regulations promulgated to support implementation thereof.  The Manager shall make all compliance measures and documents available to the Company.

ENDORSEMENT C

PROGRAM MANAGER AGREEMENT
CLAIMS SERVICE AGREEMENT

Manager claim settlement procedures:

A.  In addition to ascertaining that all claims reports are forwarded immediately to Company, the Manager has authority to handle, settle, and resolve all Private Passenger Automobile insurance claims in accordance with any applicable contracts of insurance and reinsurance agreement(s).   ·

B.  All claims information, whether electronic or otherwise, shall be maintained on the Company's systems or reported to Company in a timely manner.

C.  A copy of the claim file must be sent to the Company at its request or as soon as it becomes know that the claim: (1) has the potential to exceed an amount determined by the Company; (ii) involves a coverage dispute; (iii) may exceed the Managers claims settlement authority; (iv) is open for more than 6 months; (v) if a consumer complaint or Insurance Department inquiry is received, or (vi) is closed by payment of an amount set by the company.

D.  All claim files will be the joint property of the Company and the Manager. However, upon an order of liquidation of the Company, the files shall become the sole property of the Company or its estate; the Manager shall have reasonable access to and the right to copy the files on a timely basis.

E.  Any settlement authority granted to the Manager may be terminated for cause upon the Company's written notice to the Manager or upon the termination of the contract. The Company may suspend the settlement authority during the pendency of any dispute regarding the cause for termination.

F.  Manager shall not without prior approval of the Company, pay or commit the Company to pay a claim over $50,000, net of reinsurance.

G. Company will assume responsibility to annually obtain an actuary's opinion attesting to the adequacy of its loss reserves which shall include a review and analysis of loss reserves established for losses incurred and outstanding on business that is produced by the Manager.

H. Managers authority to adjudicate claims on behalf of Company is restricted to the following programs:

a.  Private Passenger Automobile Insurance

		
	1.
	All claims  for  programs  not  listed above  will be  adjusted directly  by  the  Company or its designated Third Party Administrator.

J.   Manager may not collect any payment from a reinsurer or commit the insurer to any claim settlement with a reinsurer without prior approval of the Company. If prior approval is given, a report must be promptly forwarded to the Company.

ENDORSEMENT D

PROGRAM  MANAGER AGREEMENT 
COMMISSION PAYMENTS

As used in this Endorsement  D, the following terms shall have the described meanings:

A.  "Allocated  Loss  Adjustment   Expense  shall  include  expenses   of  litigation,  interest  upon judgments which doesn't reduce the Company's limit of liability under the Insured Exposure involved, allocated investigation, adjustment and legal expenses.  However, salaries of the Company's personnel  and office expenses of the .Company shall not be included.

B.
C.  "Net Written  Premium" shall mean the gross premiums  (excluding  policy  fees) charged  on all original and renewal Policies written on behalf of the Company, less return premiums.

D.  "Net  Premium  Collected"  shall  mean  gross  premiums  (excluding  policy  fees)  collected  on behalf of the Company, less return premiums and Manager's commission.

E.  "Earned Net Premiums"  shall mean unearned  net premiums at the beginning of the year; Plus Net  Written  Premiums,   less  return  premiums  (GWP)  during  the  year;  less  unearned  net premiums at the end of the year. ·

F.  "Net Policy  Fees"  shall  mean  gross policy  fees, if any, charged  on  all original and renewal Policies written on behalf of the Company, less return policy fees.

G.  "Accident Year Net  Losses  Incurred"  shall mean:   losses  outstanding  at the end of the year, plus losses paid  for the accident  year, less accident year recoveries,  plus accident  year loss adjustment  expense  and legal fees, plus fee paid under any Claims  Service Agreement, plus IBNR  reserve   at  the   end   of  the   year,   plus   all  assessments  and   regulatory   required contributions.

ARTICLE II.     Compensation

A.  The Manager  or its subsidiary  or affiliate who performed  the Service will be entitled to renewal rights  relative  to  ASI's  private  passenger  auto book  of  business  plus  payment  equal to the difference between .95 X earned premium for the period during  which this agreement is in force and the fully developed Accident Year Loss & ALAE amount as recorded on ASI's books for that same  period   plus   100%   of  ULAE  for  personal auto  lines  business   as  reserved on  the Company's books at the original effective date of this agreement.                    ·

B. Manager's   compensation  under  this  Endorsement,   or  any  other  amounts  or  monies  due Manager  hereunder, shall  be subject  to offset by Company,  or by any of Company's  affiliates ("Affiliates"), with any amounts  due from Manager to Company  or its Affiliates.

ARTICLE Ill.   Miscellaneous Provisions

c. Manager's  compensation and  any  other. monies  due  Manager  shall  be  subject  to offset by Company, or any of its affiliates  for any money  due from Manager  to Company  or its affiliates. This provision shall not be affected by the insolvency of the Manager.

D. Upon an uncured breach by the Manager of claim related obligations to Company resulting in the termination of this agreement, Company shall have the right to collect from Manager the amount of money necessary to hire an alternative third party administrator to adjudicate the balance of claims that would have otherwise been handled by the Manager, up to the amount initially paid to the Manager by the Company for the claim handling portion of this agreement

ENDORSEMENT E

PROGRAM MANAGER 
AGREEMENT FINANCIAL PROTOCOLS

ARTICLE I.  Payment terms

A. Claim related compensation based on ULAE reserved on the effective date of this agreement will be paid by the Company to the Manager on a monthly basis where each monthly amount is based on actuarial work established at year end 2010  projecting the claim payment triangles for business in force on December 31, 2010,  totaling the amount provided for in Endorsement D. A schedule of these payments  will be  incorporated into this  agreement  upon completion of  2010   year end actuarial work.

B. Renewal rights are granted to Manager immediately upon execution of this agreement by both parties.

C. Other compensation will be paid by the Company on a Monthly basis no later than the 20th calendar day of each month for premium earned in the preceding month.

ARTICLE II.    Pass Through Fees

A.  Manager shall be responsible for all regulatory fees collected on a per policy basis as mandated by any regulatory agency in assigned territories.

B.  All fees shall be accounted for on a monthly report to the Company.

C.  All such fees shall be sent to the appropriate regulatory agency in the time frame mandated by statute or regulation.

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