Document:

Exhibit 10.8

MULTIPLE LINE QUOTA SHARE REINSURANCE AGREEMENT

NO. PORl147218

EFFECTIVE: April  1,2014 

 

between

 

HOMEOWNERS  OF AMERICA  INSURANCE COMPANY

 Irving, Texas

and

SWISS REINSURANCE AMERICA  CORPORATION 

Armonk,  New  York

	
ARTICLE

	
CONTENTS

	
PAGE

	
 

	
 

	
 

	
 

	
PREAMBLE

	
1

	
I

	
BUSINESS COVERED

	
1

	
II

	
EFFECTIVE DATE AND TERMINATION

	
2

	
III

	
TERRITORY

	
3

	
IV

	
RETENTION

	
3

	
V

	
DEFINITIONS

	
4

	
VI

	
INURING REINSURANCE

	
8

	
VII

	
EXCLUSIONS

	
9

	
VIII

	
SPECIAL ACCEPTANCE

	
15

	
IX

	
INTERNATIONAL TRADE CONTROLS AND ECONOMIC SANCTIONS

	
15

	
X

	
REINSURANCE PREMIUM

	
15

	
XI

	
SLIDING SCALE COMMISSION

	
15

	
XII

	
LOSSES, LOSS ADJUSTMENT EXPENSES AND SALVAGES

	
16

	
XIII

	
TERRORISM EXCESS RECOVERY

	
16

	
XIV

	
REPORTS AND REMITTANCES

	
17

	
XV

	
INDIVIDUAL CLAIM REPORTING

	
21

	
XVI

	
ACCESS TO RECORDS

	
22

	
XVII

	
TAXES

	
22

	
XVIII

	
OFFSET

	
22

	
XIX

	
DISPUTE RESOLUTION

	
23

	
XX

	
INSOLVENCY

	
24

	
XXI

	
SERVICING

	
25

	
XXII

	
AMENDEMENTS

	
26

	
 

	
SIGNATURES

	
26

	
 

	
 

	
 

  

 

ATTACHMENTS: INSOLVENCY FUNDS EXCLUSION CLAUSE

              POOLS, ASSOCIATIONS  AND SYNDICATES EXCLUSION CLAUSE TOTAL INSURED VALUE EXCLUSION CLAUSE

              POLLUTION AND SEEPAGE EXCLUSION CLAUSE

              NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - U.S.A.

              NUCLEAR INCIDENT EXCLUSION CLAUSE - REINSURANCE - NO.4

              POLLUTION LIABILITY EXCLUSION CLAUSE - REINSURANCE NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY -

              REINSURANCE - U.S.A.

MULTIPLE LINE QUOTA SHARE 

REINSURANCE AGREEMENT

NO. PORl147218

(hereinafter   referred  to as the "Agreement")

between

HOMEOWNERS OF AMERICA  INSURANCE COMPANY 

Irving, Texas

(hereinafter   referred  to as the "Company")

and

SWISS REINSURANCE AMERICA CORPORATION

 Armonk,  New York

(hereinafter   referred  to as the  "Reinsurer")

ARTICLE I - BUSINESS COVERED

		A.	By this  Agreement   the Company  obligates   itself  to cede to the  Reinsurer  and the Reinsurer   obligates    itself   to  accept   from   the   Company   a  10%   Quota   Share participation     of  the   Company's   Ultimate    Net  Liability   for  Policies   in  force   as of April   1, 2014,   and new  and  renewal   Policies  becoming   effective   on  or after said  date  as respects   losses  occurring   on  or  after  April   1,  2014.    This  Quota Share is subject  to the maximum  cession  limits  set forth  below:

1.         Property  Business

$200,000  each  risk  (10%  share  of the  Company's   Ultimate   Net  Liability of  $2,000,000), however,   in no event  shall  the  Reinsurer's   liability   from all  risks  in  each  Loss  Occurrence   exceed  $400,000 (10%   share  of  the Company's   Ultimate   Net  Liability   of  $4,000,000.       Notwithstanding   the above,   as  respects   all  Terrorism   events,   the   Reinsurer   shall  never  be liable for  more than  $400,000    in any calendar  year.

2.         Casualty  Business

$100,000 each Policy each Loss Occurrence (10%    share   of   the Company's   Ultimate   Net  Liability   of  $1,000,000).     Notwithstanding   the above,   as  respects   all  Terrorism   events,   the   Reinsurer shall  never  be liable  for  more than  $400,000    in any calendar  year.

3.         Subparagraphs  1. and  2.  of  this  Article   notwithstanding, the  liability of the Reinsurer as respects Loss  Occurrences   for   both Property and Casualty business combined shall never exceed 150% of  the  ceded earned premium   for  the  term   of  this Agreement (prior to commission allowed hereon).

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B.         Any  loss arising  under this  Agreement   with  respect  to  80%  of  Loss In Excess of Policy  Limits  and  80%  of  Extra Contractual   Obligations,   as defined   herein,  shall be   recovered    in  the   same   proportion    as  the   contractual     loss   recoverable hereunder   provided  such  contractual   loss plus  Loss In Excess of  Policy  Limits  or such  contractual    loss plus  Extra Contractual   Obligations   shall  never  exceed  the maximum   cession   limit  for  each  Loss  Occurrence   set forth  under  Paragraph  A. above.

		C.	This Agreement   is solely  between   the  Company  and the  Reinsurer,  and  nothing contained   in this  Agreement   shall  create  any obligations   or establish   any  rights against  the  Reinsurer  in favor  of any person or entity  not a party  hereto.

		D.	The performance   of obligations   by both  parties  under  this  Agreement   shall  be in accordance   with  a fiduciary   standard  of good  faith  and fair dealing.

		E.	Under  this   Agreement,    the   indemnity    for   reinsured    loss  applies   only   to  the followingProperty  and Casualty  Business  except  as excluded   under  Article  VII - Exclusions of this Agreement.

 

PROPERTY BUSINESS 

NAIC

CODE: LINES OF BUSINESS:

01         Fire

02        Allied  Lines

04         Homeowners   (Section  I only)

09         Inland  Marine

CASUALTY BUSINESS

 

CLASSES OF INSURANCE 

 

Liability  Other Than Automobile:

 

Bodily  Injury  Liability,   Property  Damage  Liability,  Personal  Injury  Liability, and  Medical  Payments  Coverage  when  written   as part  of a Homeowners (Section    II  only),   Dwelling    Fire   Liability    or   Comprehensive   Personal Liability  Policy.

 

ARTICLE II - EFFECTIVE DATE AND TERMINATION

A.         This  Agreement   shall  become  effective   12:01  a.m., Central  Standard  Time,  April

1,  2014,   and shall  remain  in full  force  until   12:01 a.m.,  Central  Standard  Time, April  1, 2015.

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B.         Upon  termination   of  this   Agreement,  the  Company  shall   have  the  option   of continuing  or terminating  the  liability   in force  at the  date  of termination  as set forth  below.   The Company may exercise  such option  provided  written   notice  of the   Company's  election    is  given   by  certified    mail   or   by  a  courier    service producing  evidence   of  receipt   by the  receiving   party,  to  the  Reinsurer prior  to the  date  of termination.    If the  Company does  not  choose  to  exercise   its option prior to the date  of termination,  such option  shall  revert to the  Reinsurer.

		1.	The Reinsurer shall  be liable  for  losses  occurring   subsequent to the  date of termination  for  all Policies  covered  hereunder and  in force  at the  date of termination  of this  Agreement until  their  natural  expiry,  cancellation or next  anniversary of such  business, whichever  first  occurs;  but  in no case shall  this  reinsurance  be extended   for  longer  than   12  months,  after  the termination   date.      At   such   time,   the   Reinsurer  shall   return   to   the Company the  unearned premiums,  less commissions  applicable, for  the unexpired periods.

		2.	All  reinsurance hereunder shall  be automatically  cancelled as of the date of  termination   and  the   Reinsurer  shall   be  released   of  all   liability    as respects   losses  occurring   subsequent  to  the  date  of  termination.    The Reinsurer  shall  return   to  the  Company the  unearned  premiums  on  the business    in   force    hereunder   at   the   date   of   termination,    less   the commission allowed  thereon.

ARTICLE III -  TERRITORY

A.         As  respects Property   Business,  this   Agreement  applies   to   risks   located   the United   States   of  America,   its  territories   and  possessions  ,  except   that   with respect   to  Inland   Marine   and  Multiple Peril  Policies   covered   hereunder,  the territorial    limits   of  this  Agreement  shall  be those  of  the  original  Policies  when such  Policies  are written   to  cover  risks  primarily   located  in the  United  States  of America,   its territories  and possessions.

		B.	As  respects  Casualty  Business, this  Agreement applies  to  Policies  issued  by the Company within   the  United   States  of  America,   its  territories  and  possessions, and shall  apply to losses  covered  hereunder wherever   occurring.

ARTICLE IV - RETENTION

The  Company warrants that  it shall  retain  net for  its own  account   and  not  reinsure   in any way  10% of its Ultimate Net Liability.

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ARTICLE V -  DEFINITIONS

B.         DECLARATORYJUDGMENT EXPENSES

"Declaratory Judgment  Expenses" shall  mean all  legal  expenses, incurred   in the representation  of the  Company in litigation   brought  to determine the  Company's defense   and/or   indemnification   obligations  that   are  allocable   to  any  specific claim   or loss  applicable  to  Policies  subject  to  this  Agreement.   In addition,   the Company  shall   promptly    notify   the   Reinsurer  of  any   Declaratory  Judgment Expenses subject  to this  Agreement.

C.         EXTRA CONTRACTUAL OBLIGATIONS

1.         "Extra   Contractual   Obligations"   are   defined    as   those    liabilities     not covered   under  any  other   provision   of  this  Agreement  and  which   arise from   the  handling   of  any  claim   on  business   covered   hereunder.  such liabilities   arising   because  of,  but  not  limited   to, the  following:  failure   by the  Company to  settle  within   the  Policy  limit,  or by reason  of  alleged  or actual  negligence, fraud  or bad faith  in reject.ing an offer  of settlement  or in the  preparation  of the  defense  or In the  trial  of  any action  against  its insured   or  in  the  preparation  or  prosecution  of  an  appeal   consequent upon such action.

2.         The  date  on  which   an  Extra  Contractual  Obligation  is  incurred   by  the Company shall  be  deemed,   in  all  circumstances,  to  be the  date  of  the original  accident,  casualty,  disaster  or loss occurrence.

		3.	However, coverage  hereunder as respects   Extra Contractual  Obligations shall  not  apply  where   the  loss  has been  incurred   due  to  the  fraud  of  a member  of the  Board of  Directors   or a corporate officer   of the  Company acting   individually  or  collectively  or  in  collusion   with   any  individual  or corporation    or    any    other    organization    or    party    involved     in   the presentation, defense  or settlement of any claim  covered  hereunder.

		4.	Recoveries, collectibles  or retention   from  any other  form  of  insurance or reinsurance including   deductibles  or self-insured  retention   which  protect the  Company against   Extra  Contractual  Obligations,  whether   collectible or not,  shall  inure  to the  benefit   of  the  Reinsurer and  shall  be deducted from the total amount  of Extra Contractual Obligations for purposes of determining  the  loss hereunder.

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

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D.         LOSS ADJUSTMENT EXPENSES

"Loss  Adjustment  Expenses" shall  mean  all  expenses paid  by the  Company in connection  with   the   investigation,  settlement.  defense   or  litigation,    including court  costs  and post judgment   interest.   of any claim  or loss which   is the  subject matter  of  Policies  covered   under  this  Agreement  and  shall  include   Declaratory Judgment  Expenses.   However,  "Loss  Adjustment  Expenses" shall  not  include the  salaries  and  expenses of  Company employees, office   expenses, and  other overhead expenses.

E.         LOSS IN EXCESS OF POLICY LIMITS

1.         "Loss  in Excess  of  Policy  Limits"   is defined  as loss  in excess  of the  limit of  the   original    Policy,   such   loss  in  excess   of  the   limit   having   been incurred   because  of  failure   by  the  Company to  settle  within   the  Policy limit   or by  reason  of  alleged  or  actual  negligence,  fraud  or  bad faith   in rejecting   an offer  of settlement  or in the  preparation  of the  defense  or in the   trial   of   any   action   against    its   insured   or   in  the   preparation   or prosecution  of an appeal  consequent upon  such action.

2.         However,  this    paragraph  shall    not   apply   where    the   loss   has   been incurred    due  to  fraud   by  a  member   of  the   Board   of   Directors    or  a corporate  officer   of the  Company acting   individually  or collectively  or in collusion   with  any  individual  or corporation  or any other  organization  or party   involved   in  the  presentation,  defense   or  settlement  of  any  claim covered  hereunder.

3.         For  the   purposes   of  this   paragraph,  the   word   "loss"   shall   mean  any amounts  which  the Company would   have been contractually  liable to  pay had it not been for the  limit  of the  original  Policy.

		4.	With   respect  to coverage   provided  under  this  paragraph, recoveries from any   insurance   or   reinsurance   other   than   this    Agreement,   whether collectible   or   not,  shall   be  deducted    to   arrive   at  the   amount   of  the Company's Ultimate   Net  Liability.

F.         LOSS OCCURRENCE

As respects  Property  Business  covered  under this  Agreement:

1.        The term "Loss  Occurrence" shall  mean the sum of all individual losses directly occasioned by any one disaster, accident or  loss or series of disasters, accidents or losses arising out of one event which occurs within the area of one state of the United States or province of Canada and states or provinces contiguous thereto and to one another.  However, the  duration  and  extent of any one Loss Occurrence shall  be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and  directly

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occasioned  by the  same  event  except  that  the  term  "Loss  Occurrence" shall be further  defined  as follows:

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

b.         As regards  riot,  riot  attending   a strike,  civil  commotion, vandalism and  malicious   mischief,    all  individual   losses   sustained  by  the Company, occurring   during   any  period  of  72  consecutive  hours within     the    area    of    one    municipality    or    county     and    the municipalities  or  counties   contiguous  thereto   arising   out  of  and directly   occasioned by the  same event.   The maximum duration  of

72  consecutive  hours  may  be  extended   in  respect  of  individual losses  which  occur  beyond  such  72  consecutive hours  during  the continued   occupation   of   an   assured's   premises    by   strikers, provided    such   occupation   commenced   during    the    aforesaid period.

c.          As   regards    earthquake   (the    epicentre     of   which     need    not necessarily  be  within   the  territorial    confines    referred   to   in  the opening    paragraph  of  this   Article)    and  fire   following     directly occasioned  by  the  earthquake,  only  those   individual  fire  losses which   commence  during   the  period   of   168   consecutive  hours may be included   in the  Company's Loss Occurrence.

		d.	As  regards   Freeze,  only  individual  losses  directly   occasioned  by collapse,    breakage  of   glass   and   water    damage    (caused   by bursting    of   frozen   pipes   and  tanks)   may   be  included    in  the Company's Loss Occurrence.

e.         As regards  firestorms,  brush  fires  and any other  fires  or series  of fires,  irrespective  of origin   (except  as provided   in subparagraphs b. and  c. above),  which   spread  through   trees,  grassland or other vegetation,  all  individual  losses  sustained by the  Company which commence during  any  period  of  168  consecutive  hours  within   a

150-mile   radius  of anyone    fixed  point  selected   by the  Company may  be  included   in the  Company's "Loss  Occurrence."  However, an individual loss subject  to this  subparagraph cannot  be included

in more  than  one "Loss Occurrence."

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f.           As   regards   Terrorism,    all   individual    losses   sustained    by  the Company   occurring    during   any  period   of  72  consecutive  hours arising  out of  and directly   occasioned by the  same  event.   Should such  an event  of Terrorism   give  rise to  other  perils  which,   in an unbroken   chain   of  causation,    have  occasioned  the   losses,   the cause of the  losses  is understood to be that  event of Terrorism.

2.         For  all  Loss  Occurrences  the  Company   may  choose  the  date  and  time when  any such  period  of consecutive  hours  commences  provided  that  it is  not  earlier   than   the   date   and  time   of  the   occurrence   of  the  first recorded   individual    loss  sustained   by the  Company   arising   out  of  that disaster,   accident   or  loss and  provided  that  only  one such  period  of  168 consecutive  hours  shall  apply  with  respect  to  one event  except  tor  those Loss Occurrences referred  to  in a., b. and f. above,  where  only  one such period   of  72  consecutive  hours  shall  apply  with   respect  to  one  event, regardless   of the duration   of the  event.

		3.	No individual   losses occasioned by an event that  would  be covered  by 72 hours  clauses  may be included   in any Loss Occurrence claimed  under the

168  hours  provision.

As respects  Casualty  Business  covered  under this  Agreement:

"Loss  Occurrence"  shall  mean  any accident   or occurrence  or series  of accidents or occurrences  arising  out  of  anyone   event  and  happening   within   the term  and scope  of this  Agreement.

G.         GROSS PREMIUMS WRITTEN

"Gross  Premiums  Written"   shall mean  gross and additional   premiums   less return premiums.

H.         POLICIES

"Policies"   shall  mean  each  of  the  Company's binders,   policies   and  contracts   of insurance  on the business  covered  hereunder.

I.           RISK

The  Company   shall   be the  sole  judge   of  what   constitutes   one  risk  provided, however,  that:

1.         A risk  shall  never  be  less than  all  insurable   values  within   exterior   walls and  under  one  roof  regardless   of  fire  divisions,   the  number   of  Policies involved,   and  whether    there   is  a single,   multiple    or  unrelated    named

insureds  involved  in such  risk.

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		2.	When  two  or  more  buildings  are situated   at the  same  general   location, the  Company shall  identify   on  its  records  at the  time  of  acceptance by the    Company,  those    individual   buildings   and   all   insurable   values contained  therein   that   are  considered to  constitute  each  risk.    If  such identification    is   not   made,   each   building    and   all   insurable   values contained therein  shall  be considered to  be a separate risk.

		3.	A risk  shall  be determined from  the  standpoint  of the  predominant  peril and such  peril  shall be noted  in the Company's records.

J.         TERRORISM 

 

"Terrorism" shall  mean:

		1.	Any   actual   or  threatened  violent   act   or  act   harmful   to   human   life, tangible    or  intangible  property   or  infrastructure  directed    towards    or having  the  effect  of (i) influencing or protesting against  any de jure  or de facto  government or policy  thereof,   (ii)  intimidating,  coercing or putting in  fear   a  civilian    population   or  section   thereof    for   the   purpose   of establishing  or  advancing a  specific   ideological,  religious  or  political system  of thought,   perpetrated by a specific   individual or group  directly or indirectly through   agents  acting  on  behalf  of said  individual or group or (iii)  retaliating  against  any  country   for  direct  or vicarious support   by that  country  of any other government or political   system.

		2.	Any  act  declared pursuant to  the  Terrorism Risk  Insurance Act  of  2002, as amended, shall also be considered Terrorism.

K.         ULTIMATE NET LIABILITY

"Ultimate  Net Liability"  shall  mean the  remaining portion  of the  Company's gross liability     on   each   Policy    reinsured   under   this   Agreement   after    deducting recoveries from  all  other  reinsurance, whether   specific   or general  and whether collectible  or not.

ARTICLE VI -  INURING REINSURANCE

The  Company  has  the   right   to   purchase  per  risk   excess  of   loss  reinsurance  on  a facultative  or treaty  basis during  the Term, and recoveries from  any such  contracts shall inure  to  the  benefit   of  this  agreement. All  reinsurance other  than  the  reinsurance set

forth  in this  Article  shall  inure to the sole benefit  of the  Company.

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ARTICLE VII - EXCLUSIONS

		I.	AS RESPECTSPROPERTYBUSINESSCOVEREDUNDERTHIS AGREEMENT THIS AGREEMENTDOESNOT COVER:

 

A.         THE FOLLOWINGGENERALCATEGORIES

1.         All  lines   of  Business  not  specifically  listed  in Article   I - Business

Covered.

2.         Policies  issued  with  a deductible   of  $100,000    or more;  provided this  exclusion    shall    not   apply   to   Policies    which    customarily provide a percentage deductible  on the perils of earthquake or windstorm.

3.         Reinsurance assumed.

4.          Ex-gratia  Payments.

5.         Loss   or    damage    occasioned    by   war,    invasion,     revolution, bombardment.   hostilities,     acts   of   foreign    enemies,    civil   war, rebellion,   insurrection,  military   or usurped  power,   martial   law,  or confiscation  by order  of  any government  or public  authority,   but not  excluding   loss  or  damage   which   would   be  covered   under  a standard   form   of   Policy   containing    a  standard    war   exclusion clause.

6.         Insolvency   Funds  as per the  attached   Insolvency   Funds  Exclusion

Clause, which   is made  part of this Agreement.

		7.	Pool,  Syndicate   and  Association   business   as  per  the   attached Pools,  Associations   and  Syndicates  Exclusion   Clause,  which   is made  part of this Agreement.

8.         Risks where  the  Total  Insured  Value,  per  risk,  exceeds  the  figure specified    as   per   the   attached    Total    Insured   Value   Exclusion

Clause, which   is made  part of this  Agreement.

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	9.	Loss   resulting     from    damage    to   overhead    transmission    and distribution   lines,   including    supporting    structures    and  anything attached   thereto,   of  any  public   or private   utility   company,   cable television     or   telecommunication     company    of   any   kind.   This exclusion    shall   not   apply   to   such   overhead   transmission   and distribution   lines,   including    supporting    structures    and  anything attached   thereto   located   on  the  premises   of  any  policyholder  or within   1,000  feet  thereof.    Nor shall this  exclusion   apply  to  utility service  interruption  or contingent   business  interruption   losses for

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any  policyholder,  unless  such  policyholder  is  a public  or  private utility   company,   cable  television   or telecommunication   company of any kind.

10.       Any  statutory    or  regulatory    fine   or  penalty   imposed   upon  the

Company  on account  of any unfair  trade  or claim  practice.

11.       Any  new  business   written   by  the  Company's agents  on  or  after March   1,  2014,   and  subsequent  renewal   of  such  business.   for which    US  RE  Corporation   is  the   intermediary.   that    provides coverage  in Tiers  1. 2 or 3; and any new  business  written   by the Company  on or after  March  1. 2014,   and 'subsequent  renewal  of such   business.   that    provides   coverage    in   zip   codes:   77346.

77449,     77469.     77479     or   77494;     all   as   classified     by  the

Company  as the "Second  Gulf  Program."

B.         THE FOLLOWING CLASSES OF BUSINESS AND TYPES OF RISKS

1.         Mortgage   Impairment.

 

2.         Growing  and/or  standing  crops.

3.         Mortality   and Health  covering  birds. animals  or fish.

4.         All onshore  and offshore  gas and oil drilling   rigs.

5.         Petrochemical  operations   engaged   in the  production,  refining   or upgrading   of petroleum   or petroleum   derivatives or natural  gas.

6.         Satellites.

7.         All  rail road business.

8.         As respects  Inland  Marine  business:

	
 

	
a.

 b.

c.

	
Registered Mail  and Armored  Car Policies. 

Jeweler's   Block  Policies.

Furrier's  Customers Policies.

	
 

d.

	
 

Rolling  Stock.

	
 

e.

	
 

Parcel   Post  when   written    to   cover   banks   and  financial institutions.

	
 

f.

	
 

Commercial Negative  Film Insurance.

	
 

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g.         Garment  Contractors Policies.

h.          Mining  Equipment while  underground.

i.           Radio and Television  Broadcasting Towers.

j.           Motor  Truck  Cargo  Insurance  written   for  common   carriers operating   beyond  a radius of 200  miles.

C.         THE FOLLOWING PERILS

1.         Flood and/or   Earthquake when  written   on a stand  alone  basis.

2.          Difference   in Conditions,  however  styled.

3.          Pollution   and Seepage  as per the  attached   Pollution   and Seepage

Exclusion  Clause which  is made part of this  Agreement.

4.          Nuclear  Incident   Exclusion  Clauses  which  are attached   and made part of this Agreement:

	
 

	
a.

	
Nuclear   Incident    Exclusion   Clause   -  Physical   Damage   - Reinsurance - U.S.A.

	
 

b.

	
 

Nuclear  Incident  Exclusion  Clause - Reinsurance - No.4.

	
 

5.

	
 

a.

	
 

Loss,  damage   or  expense   of  whatsoever   nature   caused directly   or indirectly   by any of the  following,    regardless   of

	
 

	
 

	
any  other   cause  or  event  contributing   concurrently   or  in

	
 

	
 

	
any   other    sequence    to   the   loss:   nuclear    reaction    or

	
 

	
 

	
radiation,   or radioactive contamination,  however  caused.

	
 

	
 

b.

	
 

However,   if  nuclear   reaction   or  radiation,    or  radioactive

contamination    results    in   fire    it   is   specifically    agreed

herewith   that  this  Agreement  will  pay for  such  fire  loss or damage    subject    to   all   of   the   terms,    conditions     and limitations   of this  Agreement.

c.          This  exclusion   shall  not apply  to  loss,  damage  or expense originating    from   and  occurring    at  risks  using   radioactive isotopes   in  any  form  where   the  nuclear   exposure   is  not

considered by the  Company  to be the  primary  hazard.

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6.         Loss, damage  or expense  of whatsoever   nature  arising  directly  or indirectly   from  fungi,   bacteria,   including   mold  or  mildew,   and/or any   mycotoxins,     spores,    scents    or   byproducts     produced    or released  by fungi,   regardless  of  any other  cause,  event,  material, product   and/or   building  component   that  contributed   concurrently or  in  any  sequence    to  that   injury   or  damage.      Such   loss   is excluded    regardless   of  any  other   cause   or  event   contributing concurrently   or in any sequence  to the loss.

		7.	Loss,   damage    or   expense    of   whatsoever     nature   directly    or indirectly   caused  by, contributed   by, resulting  from,  arising  out  of or in connection   with  biological   or chemical  substances,   pollution, contamination,    or  the   threat   thereof,    regardless    of   any  other cause  or event  contributing    concurrently   or in any other  sequence to the  loss, and/or  fire following   therefrom.

D.         In the  event  the  Company   is  inadvertently   bound  on  any  risk  which   is excluded   under   Paragraph   B, of  Part  I of  this  Article,   the   reinsurance provided   under  this  Agreement   shall  apply  to such  risk until  discovery   by the  Company  within   its Home Office  of the  existence  of such  risk and for

30 days thereafter,   and shall then  cease unless  within   the  30 day period,

the   Company   has   received   from   the   Reinsurer   written    notice   of   its approval  of such  risk.

		II.	AS RESPECTS CASUALTY BUSINESS COVERED UNDER THIS AGREEMENT THIS AGREEMENT DOES NOT COVER:

 

A.         THE FOLLOWING GENERAL CATEGORIES

1        Ex-gratia  payments.

 

2.        Risks subject  to  a deductible   or a self-insured   retention   excess  of $25,000.

3.        Loss or damage  caused  directly   or indirectly   by: (a) enemy  attack by  armed  forces   including   action   taken   by  military,   naval  or  air forces   in resisting   an actual  or an immediately impending   enemy attack;  (b) invasion;  (c) insurrection;   (d) rebellion;   (e) revolution;   (f) intervention;   (g) civil war;  and (h) usurped  power.

4.        Reinsurance assumed  by the Company.

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5.         Business   derived    from   any   Pool,   Association,   including    Joint Underwriting   Association,   Syndicate,  Exchange,  Plan,   Fund  or other   facility   directly   as  a member,   subscriber  or  participant,  or indirectly   by way of reinsurance or assessments; provided  this exclusion shall  not apply to Automobile  or Workers  Compensation assigned   risks  which   may  be  currently   or subsequently  covered hereunder.

6.         Pollution   Liability   as per the  attached   Pollution   Liability   Exclusion

Clause - Reinsurance.

7.         Insolvency Funds as per the  attached   Insolvency Funds  Exclusion

Clause.

8.          Nuclear  Incident   Exclusion Clauses  which   are attached   and  made part of this Agreement:

a.         Nuclear  Incident   Exclusion Clause  - Liability  - Reinsurance - U.S.A.

b.          Nuclear  Incident  Exclusion Clause - Reinsurance - NO.4.

9.         Any  actual  or alleged  liability   whatsoever  for  any claim  or claims in  respect   of  loss  or  losses,  directly   or  indirectly   arising   out  of, resulting   from,   or in consequence of  asbestos,  in whatever   form or quantity.

10.       Any  statutory    or  regulatory  fine   or  penalty   imposed    upon  the Company on account  of any unfair  trade  or claim  practice.

11.       Any  liability,   loss, cost  or expense  caused  by any act of Terrorism that  is directly  or indirectly   caused  by, contributed  to by, resulting from,   arising   out  of  or  in connection  with   the  use or  release,  or threat   thereof,    of  any   nuclear   weapon   or  device   or  chemical, biological  or  radiological  agent,  regardless of any  other  cause  or event  contributing   concurrently  or in  any  other  sequence to  the loss.

12.       Any  new  business   written    by the  Company's agents  on  or  after March   1,  2014,   and  subsequent  renewal   of  such  business, for which    US  RE  Corporation   is  the   intermediary,   that    provides coverage   in Tiers  1, 2 or 3; and  any new  business  written   by the Company on  or after  March  1, 2014,   and  subsequent renewal  of such   business,  that   provides    coverage    in  zip   codes:   77346, 77449,     77469,     77479     or   77494;     all   as   classified     by  the Company as the "Second  Gulf  Program."

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B.         THE FOLLOWING INSURANCE COVERAGES

1.         All  Lines of  Business  not specifically  listed  in Article   I -  Business

Covered.

2.         Fiduciary  Liability.

3.         Fidelity  and Surety.

4.         Credit  and Financial  Guarantee.

5.         Securities   and Exchange  Liability.

6.         Retroactive coverage.

7.         Personal  and Commercial Excess or Umbrella  Liability.

8.         Malpractice  or Professional Liability  except  incidental   Malpractice

Liability.

9.        Errors and Omissions   Liability.

10.       Directors'   and Officers'   Liability.

11.       Advertisers',  Broadcasters'  and  Telecasters'  Liability   as  respects Personal   Injury   Liability   except   as  provided    under   Commercial Package  Policies  or Commercial General  Liability  Coverage  Forms.

12.       Liquor  Law Liability  except  Host Liquor  Law Liability.

13.       Kidnap,  Extortion  and Ransom Liability.

14.       Boiler  and Machinery   Insurance.

15.       Protection   and Indemnity   (Ocean  Marine).

C.         THE FOLLOWINGAS RESPECTS LIABILITY OTHER THAN AUTOMOBILE

1.         Ownership,   operation    or  use  of  vessels   exceeding    50   feet   in length.

		2.	Ownership,    maintenance   or   use   of   any   airport    or   aircraft, including   fueling,   or  any  device  or  machine   intended   for  and/or aiding   in  the   achievement   of  atmospheric  flight,    projection    or

orbit.

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ARTICLE VIII - SPECIAL ACCEPTANCE

Risks  and/or    Policies   which   are  beyond   the  terms,   conditions    or  limitations    of  this Agreement    may  be submitted   to  the  Reinsurer  for  special  acceptance   hereunder;   and such  risks  and/or   Policies,  if accepted   in writing   by the  Reinsurer,  shall  be subject  to  all of the  terms,   conditions    and  limitations    of  this  Agreement,   except  as modified   by the special  acceptance.    Premiums  and losses  derived  from  any special  acceptance   shall  be included  with  other  data for  rating  purposes  under this  Agreement.

ARTICLE IX -INTERNATIONAL TRADE CONTROLS AND ECONOMIC SANCTIONS

No Reinsurer   shall  be deemed  to  provide  cover  and  no Reinsurer  shall  be liable  to  pay any claim  or pay any benefit   hereunder   to  the  extent  that  the  provision   of  such  cover, payment  of such  claim  or provision   of such  benefit  would   expose  that  Reinsurer  to any sanction,   prohibition    or  restriction    under   United   Nations   resolutions    or  the  trade   or economic   sanctions,   laws  or regulations   of any jurisdiction    applicable   to that  Reinsurer.

ARTICLE X - REINSURANCE PREMIUM

		A.	The   Company    shall   cede   to   the   Reinsurer    10%   of  the   Company's    gross unearned   premiums   on its  Ultimate   Net  Liability  in force  as of April  1, 2014   on the  business  covered  hereunder.

B.          The   Company   shall   cede   to   the   Reinsurer    10%   of   the   Company's    Gross Premiums   Written   applicable   to  new  and  renewal   Policies  becoming   effective on  or  after   April   1,  2014,   with   respect   to  its  Ultimate   Net  Liability   on  the business  covered  hereunder.

		C.	The following    percentages   of the  Company's  premium   shall  be allocated   to the business  covered  under this  Agreement:

Homeowners: Section  1-95%          Section  II - 5%

 

Dwelling   Fire:  Section  I - 90%      Section  II - 10%

ARTICLE XI - COMMISSION

		A.	The  Reinsurer   shall  make  a commission    allowance    of  49%   to  the  Company's Gross   Premiums    Written     ceded   hereunder.    The   Company    shall   debit   the Reinsurer  with  the commission   allowance   in the  monthly  accounts.

B.         Such    commission      allowance      includes     provision     for    all    brokerage     and commission.    premium    taxes   of   all   kinds,   all   board,   bureau   and   exchange assessments,   and  any   other   expenses   whatsoever     except   Loss  Adjustment

Expenses.

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ARTICLE XII - LOSSES, LOSS ADJUSTMENT EXPENSES AND SALVAGES

		A.	The  Reinsurer   shall   pay  its  pro  rata  share   of  losses   including    prejudgment interest    paid   by  the   Company    arising    under   Policies    covered    under   this Agreement,  and  the  Reinsurer   shall   benefit   proportionately   in  all  recoveries, including   salvage  and subrogation.

		B.	The  Reinsurer  shall  pay its  pro  rata  share  of  Loss Adjustment  Expenses  paid  by the  Company.

		C.	The  Company   shall  have  the  responsibility  to  investigate,  defend   or  negotiate settlements  of all claims  and lawsuits   related  to Policies  written   by the  Company and  reinsured   under  this  Agreement.   The  Reinsurer,   at  its  own  expense,  may associate    with    the   Company    in   the   defense    of   any   claim,   suit   or   other proceeding which   involves  or is likely  to  involve  the  reinsurance  provided  under this   Agreement,   and  the   Company   shall   cooperate    in  every   respect   in  the defense  of any such claim,  suit or proceeding.

ARTICLE  XIII   -  TERRORISM EXCESS RECOVERY

 

 A.         For purposes  of this  Article:

1.         "Act"    shall    mean   the   Terrorism     Risk   Insurance    Act   of   2002,    any amendments thereto  and any regulations promulgated thereunder.

		2.	"Affiliate,"   "Insured  Losses,"  and "Program  Year"  shall  have the  meanings provided  in the Act.

3.          "Company" shall  include  the Company  and all affiliates.

B.         This   reinsurance   shall   not  apply   to  any  fines,   civil   penalties    or  surcharges assessed  pursuant  to the  Act.

C.         To   the   extent    that   the   Company    allocates    Insured    Losses   and/or    federal assistance   under  the Act  among  affiliates,   claims,  contracts   or otherwise   in any manner   which   impacts  the  reinsurance  provided   hereunder, the  Company  shall apply  a reasonable allocation   method  acceptable to the  Reinsurer.

D.         To   the   extent   that    an   Insured    Loss   is   otherwise     payable   hereunder,  the reinsurance   provided    by  this   Agreement   shall   apply   only   to  the   portion   of liability,   loss,  cost  and/or   expense  retained   by the  Company   net of  any federal assistance    pursuant   to  the  Act.     For  each   Program   Year,  the  liability    of  the Reinsurer  for  Insured  Losses  under  this  Agreement  shall  be reduced  by the  ratio

that  the financial   assistance   under the Act allocated  to  Policies  subject  to this

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Agreement     bears   to   the   Company's    total    Insured    Losses   subject    to   this Agreement.    If the  Company   does  not  make  such  allocation,   the  liability   of  the Reinsurer  for  Insured  Losses  in any Program  Year under  this  Agreement   shall  be reduced   by  the   ratio   that   the  financial    assistance   available   to  the  Company under  the Act for that  Program  Year bears to the Company's  total  Insured  Losses for  the same  Program  Year.

E.         The  parties   recognize   that.   for  any  Program  Year,  the  Reinsurer   may  without waiver   of  the  foregoing    Paragraphs   make  payments   for  Insured   Losses  which, together    with   available   financial    assistance   under  the  Act  and  the  Company retentions   and/or  deductibles   hereunder,   exceed the  Company's  Insured  Losses. In  such  event,  the  Reinsurer's   proportional    share  of  all  such  excess  recovery (hereafter   "Reinsurer's   Excess Share")  shall  inure  to the  benefit  of the Reinsurer. All   excess   recovery   described    in  this   Paragraph   shall   be  allocated    to   the Reinsurer   and  the  Company   in proportion    to the  respective   liability   of  each  for Insured   Losses,  net  of  federal   assistance   under  the  Act,  salvage,  subrogation and other  similar  recoveries,  as applicable.

F.         In the  event  of a Reinsurer's  Excess Share, the Company  shall:

1.         Promptly  pay the  Reinsurer's  Excess Share to the  Reinsurer;  or

2.          Upon  request   of  the  Reinsurer   at  any  time  and  at  the  Reinsurer's   sole discretion,    instead   assign  to  the  Reinsurer   its  rights  to  recover  directly from  the federal   government   any portion  of  Reinsurer's  Excess Share not already   paid  to  the  Reinsurer.    The  Company   shall  cooperate   with   and assist   the   Reinsurer,    at   its   own   expense,   to   the   extent    reasonably necessary  for  the  Reinsurer  to  exercise  those  rights.    If the  Reinsurer  is unable,   for   any   reason,   to   exercise   any   right   assigned   to   it  by  the Company  pursuant  to  this  Article,   the  Company  shall  pay the  Reinsurer's Excess Share to  the  Reinsurer  as if no assignment   had taken  place to the extent  that  the  Company  has not  been deemed  to  have forfeited   the  right to   financial     assistance    under   the   Act   by   virtue    of   the   attempted assignment.

		G.	In the  event  of an Insured  Loss, the  Company  shall  provide  the  Reinsurer  with  a monthly    report   detailing    claim   settlement    activities    and  financial    assistance under  the  Act.    Calculations    for  each  Program  Year  shall  continue   to  be  made until  the settlement   of all Insured  Losses covered  hereunder.

ARTICLE XIV - REPORTS AND REMITTANCES

		A.	The  Company   shall  provide  the  Reinsurer   with   a monthly   account   as well   as quarterly   and  annual  reports  and any bordereaux   requested   by the  Reinsurer  all in  accordance    with   the  provisions   set  forth   in  Paragraphs   C., E., F., H. and  I. below.

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B.         Portfolio   Assumption   - Within   60  days  after  April   1, 2014   , the  Company  shall pay to  the  Reinsurer  the  Reinsurer's   pro  rata share  of the  Company's  unearned premium   reserve  segregated   by Line of  Business  on the  business   in force  as of said  date.

		C.	Monthly   Account   - Within   30  days  after  the  close  of  each  month  the  Company shall  forward   a monthly   account   summarizing  the  following   transactions    under this  Agreement  during  such month:

1.         Gross Premiums  Written   ceded segregated   by Line of Business;

2.         Commissions;

3.         Loss   and   Loss  Adjustment     Expenses   paid   less   recoveries,    including salvage  and subrogation,   segregated   by Line of Business,  by year of loss.

The balance  due either  party  shall  be paid within   45  days after  the  close of each

month for the transactions during such month.

D.         In respect  of Paragraph  C. above:

1.         All  Monthly  Account  Statements   shall  be sent to the  Reinsurer  at:

a.          E-Mail/Word,    Excel,   PDF,  or   TIF   Formats,    or   other   scanned documents:

TAPCAM_DirectArmonk@swissre.com,   or b.         Standard  Mail:

Swiss  Reinsurance America  Corporation

Technical  Accounting   Department

175  King Street

Armonk,  NY  10504

2.         All  checks  and  supporting   documentation   shall  be sent  to  the  Reinsurer through    one   of  the   options    set   forth    below   and   shall   identify    the

applicable   Reinsurer  Agreement   Number(s):

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a.         WIRE TRANSFER

(i)         All wires  shall  be sent to: The Bank of  New York

1 Wall  Street

New York, NY  10286

Account  Name:   Swiss  Reinsurance  America  Corporation

Account  Number:   8900489197

ABA Number:   021000018

SWIFT:  IRVTUS3N

		(ii)	All supporting   documentation    shall  be sent to: Swiss  Reinsurance  America  Corporation

Technical  Accounting   Department

175  King Street

Armonk,  NY  10504

b.         COURIER OR OVERNIGHT CARRIER

Both checks  and supporting   documentation    shall  be sent to: Swiss  Reinsurance  America  Corporation   C/O BONY Mellon

500  Ross Street - 154-0455

Pittsburgh,   PA  15262-0001

Attn:   Wholesale   Lockbox 

 

c.          LOCK BOX

Both checks  and supporting   documentation    shall  be sent to:

Swiss  Re

Box 19580

Newark,  NJ  07195-0580

		E.	Premium   Bordereau   - Within   30  days  after  the  Reinsurer's   request,   if any, the Company   shall  submit   a  premium   bordereau   to  the   Reinsurer   segregated    by underwritingyear,  the  following    information    as  respects   each  Policy  covered under  this  Agreement:

1.         Name of  Insured,

2.          Policy  Number,

3.          Effective  and Expiration  Dates,

4.          Line of Business.

 

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F.         Loss  Bordereau   -  Within    30  days   after   the   Reinsurer's  request,   if  any,  the Company    shall   submit    a   loss   bordereau    to   the   Reinsurer    segregating   by underwriting   year   of   loss  the   following     information   as  respects   each   loss covered  under  this  Agreement:

1.        Name of Insured,

2.        Policy  Number,

3.        Policy  Limits,

4.        Effective  and Expiration  Dates,

5.        Claim  Number,

6.        Date of Loss,

7.        Line of Business,

8.        Catastrophe Loss Number,  if applicable.

G.         The  Company  may  make  a request  for  immediate   payment  by the  Reinsurer  for any  individual   gross  loss  covered  hereunder   in excess  of  $1,000,000,    and the Reinsurer   will   be  credited   with   amounts   so  paid  in  the  subsequent  monthly account.

H.         Quarterly   Report  - The Company  shall  furnish  the  Reinsurer  within   30  days after the  close  of  each  calendar   quarter   the  following    information   as  respects   the business  ceded  hereunder:

1.         Unearned  premium   reserves  segregated by Line of Business  at the  end of the   calendar    quarter   and   calculated    on  the   actual   daily   basis   or   in accordance with  the Company's methodology,  as agreed.

		2.	Estimated  loss and  Loss Adjustment  Expense  reserves  outstanding  at the end  of  the  calendar   quarter   segregated  by  Line  of  Business,   by year  of loss.

		I.	Annual   Report  - The  Company  shall  furnish   the  Reinsurer  within   45  days  after the  close  of each  calendar  year a summary  of the business  ceded  hereunder:

1.         Gross  Premiums   Written   ceded  during   the  year  segregated  by  Line  of Business;

2.          Unearned  premium   reserves  segregated by Line of Business;

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		3.	Losses  and  Loss  Adjustment    Expenses  paid,  less  recoveries,   including salvage  and subrogation,   during  the year segregated   by Line of Business, by year of loss;

		4.	Losses and Loss Adjustment   Expenses  outstanding   at the  end of the  year segregated   by Line of Business,  by year of loss.

		J.	As  respects   Property   Business   covered   under  this   Agreement,    the  Company shall   furnish    the   following     to   the   Reinsurer    with    respect   to   occurrences designated   as catastrophes  by the Property  Claim  Services:

1.         Prompt  preliminary   estimate  of amount  recoverable  from  the  Reinsurer;

		2.	Within   30  days  after  the  close  of  each  calendar   quarter  the  amount   of losses  and  Loss Adjustment    Expenses  paid,  less a"  recoveries,   including salvage  and subrogation,   at the  end of  each calendar  quarter  segregated by Line of Business;

		3.	Within   30  days  after  the  close  of  each  calendar   quarter  the  amount   of losses  and  Loss  Adjustment    Expenses  outstanding    at  the  end  of  each calendar  quarter  segregated   by Une of Business.

ARTICLE XV - INDIVIDUAL CLAIM REPORTING

		A.	Notwithstanding   the  provisions   set forth   in Paragraph  F. of Article  XIV - Reports and  Remittances, the  Company  shall  promptly   notify  the  Reinsurer  of each claim where the sum of loss and expense paid-to-date, outstanding   loss reserve and outstanding     expense    reserve   is  equal   to   or   greater    than    $500,000;     this

$500,000     threshold    relates   to   the   Company's    100%   gross   ground-up    loss

amount.

		B.	In   addition,    the   Company    shall   provide   the   Reinsurer    with    the   following information    relative  to said claim:

1.         Identifying   information,    including:

a.          Name of Insured. b.  Policy  Number.

c.          Claim  Number.

d.          Policy  Limit.

e.         Type   of   Coverage   (i.e.,   Lines   of   Business   and/or    Classes   of Insurance).

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f.          Type of Policy (i.e., Primary,  Excess or Umbrella).

g.         Attachment  Point  of  the  Reinsured   Excess  or Umbrella   Policy,  if any.

h.         A comprehensive  narrative   report   including   but  not  limited   to  a description  of the facts,  liability,  damages,  coverage,  current  paid­ to-date  amounts  and current  reserve  amounts.

		2.	Upon  the  Company's learning   of  a material   development,  the  Company shall  promptly   report  such  development  to  the  Reinsurer   along  with  the current  paid-to-date amounts  and the current  reserve  amounts.

		3.	Annual  status   reports   including   the  current   status,   current   paid-to-date amounts  and current  reserve  amounts.

4.          At  the  conclusion   of  the  loss,  the  claim  settlement    amount,   indicating:

loss paid and expense paid.

ARTICLE XVI - ACCESS TO RECORDS

The Reinsurer  or its duly  authorized   representatives  shall  have the  right  to  examine,  at the  offices  of the  Company  at a reasonable time,  during  the currency  of this Agreement or anytime  thereafter,   all books  and  records  of the Company  relating  to  business  which is the subject  of this Agreement.

ARTICLEX VII - TAXES

The Company  shall  be liable  for  all taxes  on  premiums   paid to the  Reinsurer  under  this Agreement,  except  income  or profit  taxes of the  Reinsurer,  and shall  indemnify   and hold the  Reinsurer  harmless  for  any such  taxes  which  the  Reinsurer  may become  obligated to pay to any local, state  or federal  taxing  authority.

ARTICLE XVIII - OFFSET

Each party  to this  Agreement  together   with  their  successors  or assigns  shall  have  and may exercise,  at any time.  the  right  to  offset  any balance  or balances  due the other  (or, if  more   than   one,   any  other).      Such  offset    may  include   balances   due  under   this Agreement  and any other  agreements heretofore   or hereafter   entered  into  between  the parties  regardless   of whether   such  balances  arise from  premiums,   losses  or otherwise, and  regardless   of  capacity   of  any  party.  whether   as  assuming   insurer  and/or   ceding insurer,  under  the  various  agreements  involved.  provided   however,  that  in the  event  of  insolvency of  a party hereto,   offsets   shall   only  be  allowed    in  accordance  with   the provisions   of Section  7427   of the  Insurance  Law of the  State of  New York to the  extent

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such  statute   or  any  other   applicable  law,  statute   or  regulation  governing  such  offset shall apply.

ARTICLE XIX - DISPUTE RESOLUTION

 

Part I - Choice  Of Law And  Forum

 

Any  dispute   arising   under  this  Agreement  shall  be resolved  in the  State  of Texas,  and

the  laws  of  the  State  of  Texas  shall  govern  the  interpretation  and  application  of  this

Agreement.

Part II - Mediation

If a dispute   between   the  Company and  the  Reinsurer, arising   out  of  the  provisions  of this  Agreement or concerning  its  interpretation  or validity  and whether   arising  before  or after  termination   of  this  Agreement  has  not  been  settled   through    negotiation,  both parties  agree  to try  in good  faith  to settle  such dispute  by nonbinding  mediation, before resorting  to arbitration.

Part III - Arbitration

		A.	Resolution of  Disputes  - As a condition   precedent to  any right  of action  arising hereunder,  any  dispute   not  resolved   by mediation  between   the  Company and the  Reinsurer arising  out  of the  provisions of this  Agreement or concerning  its interpretation   or  validity,   whether    arising   before   or  after   termination   of  this Agreement,  shall   be  submitted   to  arbitration   in  the  manner   hereinafter  set forth.

B.           Composition  of  Panel - Unless the  parties  agree  upon  a single  arbitrator   within

15 days  after  the  receipt  of a notice  of  intention   to  arbitrate,   all disputes   shall be submitted  to an arbitration  panel  composed of two  arbitrators and an umpire chosen  in accordance with  Paragraph C. hereof.

C.          Appointment   of  Arbitrators  - The  members  of  the  arbitration   panel  shall  be chosen   from   disinterested   persons   with   at  least   10  years'  experience  in the insurance and reinsurance business.  Unless  a single  arbitrator   is agreed  upon, the  party  requesting  arbitration  (hereinafter  referred  to  as the  "claimant")  shall appoint   an arbitrator   and  give  written    notice  thereof   by certified   mail  or  by a courier   service   producing  evidence   of  receipt   by  the  receiving   party,  to  the other  party  (hereinafter  referred  to  as the  "respondent") together   with  its notice of   intention    to   arbitrate.      Within    30  days   after   receiving   such   notice,   the respondent  shall  also  appoint   an  arbitrator   and  notify  the  claimant   thereof   by certified    mail  or  by  a  courier   service   producing  evidence   of  receipt   by  the receiving   party.    Before  instituting  a hearing,  the  two  arbitrators  so appointed shall   choose   an  umpire.     If,  within    20   days  after   the   appointment   of  the arbitrator    chosen  by the  respondent, the  two  arbitrators  fail  to  agree  upon  the appointment   of  an  umpire,   each  of  them   shall  nominate   three   individuals  to

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serve  as umpire,  of whom   the  other  shall  decline  two  and the  umpire  shall  be chosen   from  the  remaining two   by drawing   lots.   The  name  of  the  individual first  drawn  shall  be the  umpire.

D.          Failure  of  Party to  Appoint   an Arbitrator   - If the  respondent  fails  to  appoint   an arbitrator   within   30  days  after  receiving   a notice  of  intention   to  arbitrate,   the claimant's  arbitrator    shall  appoint   an arbitrator    on  behalf  of  the  respondent, such  arbitrator    shall  then,  together   with   the  claimant's  arbitrator,  choose   an umpire  as provided  in Paragraph C. of Part III of this  Article.

		E.	Submission   of   Dispute    to   Panel   -   Within    30   days   after   the    notice    of appointment   of  all  arbitrators,  the  panel  shall  meet,  and  determine  a timely period  for discovery, discovery procedures and schedules for  hearings.

F.           Procedure  Governing Arbitration   - All  proceedings  before   the  panel  shall  be informal   and the  panel  shall  not  be bound  by the formal  rules  of evidence.  The panel  shall  have the  power  to fix  all procedural rules  relating  to the  arbitration proceeding.  In reaching  any decision,   the  panel  shall  give due consideration  to the  customs  and usages of the  insurance and reinsurance business.

G.          Arbitration  Award   - The  arbitration  panel  shall  render   its  decision   within   60 days  after  termination   of  the  proceeding,  which   decision   shall  be  in  writing, stating   the  reasons  therefor.    The decision  of the  majority   of the  panel  shall  be final  and  binding   on the  parties  to  the  proceeding.  In no event,  however,   will the panel   be   authorized   to   award    punitive,    exemplary   or   consequential damages   of  whatsoever  nature  in  connection  with   any arbitration  proceeding concerning this  Agreement.

		H.	Cost  of  Arbitration  - Unless  otherwise  allocated   by the  panel,  each  party  shall bear the expense  of its own  arbitrator   and shall jointly  and equally  bear with  the other  parties  the  expense  of the umpire  and the arbitration.

ARTICLE XX -INSOLVENCY

		A.	In  the  event  of  insolvency  of  the  Company, the  reinsurance  provided   by  this Agreement  shall  be payable  by the  Reinsurer on the  basis  of the  liability   of the Company as  respects   Policies  covered   hereunder, without   diminution  because of   such    insolvency,   directly    to   the   Company  or   its   liquidator,    receiver, conservator or statutory   successor except  as provided  in Sections  4118(a)(1 )(A) and  1114(c)   of the New York Insurance Law.

B.         The Reinsurer shall  be given written   notice  of the  pendency of each claim  or loss which    may   involve   the   reinsurance   provided    by  this   Agreement   within    a reasonable time  after  such  claim  or  loss  is filed  in the  insolvency proceedings. The  Reinsurer  shall  have  the  right  to  investigate  each  such  claim  or  loss  and interpose,  at  its  own  expense,  in the  proceedings  where  the  claim  or  loss  is to be  adjudicated,  any defense   which   it  may  deem  available  to  the  Company, its

 

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liquidator,   receiver,   conservator   or  statutory    successor.    The  expense   thus incurred   by the  Reinsurer shall  be chargeable, subject  to court  approval,  against the  insolvent   Company as part  of  the  expense  of  liquidation  to  the  extent  of  a proportionate  share  of the  benefit  which  may accrue  to the  Company solely  as a result  of the defense  undertaken by the  Reinsurer.

C.         In addition   to the  offset  provisions set forth  in Article  XVIII - Offset,  any debts  or credits,   liquidated  or unliquidated,  in favor  of or against  either  party  on the date of   the   receivership  or   liquidation   order   (except   where   the   obligation   was purchased by or transferred to be used as an offset)  are deemed  mutual  debts  or credits   and  shall   be  set   off   with   the   balance   only   to   be  allowed    or  paid. Although    such   claim   on  the   part   of  either   party   against   the  other   may  be unliquidated   or   undetermined   in  amount    on  the   date   of   the   entry   of   the receivership  or   liquidation   order,   such   claim   will    be  regarded   as  being   in existence as of such  date and any claims  then  in existence and held  by the other party  may be offset  against  it.

D.         Nothing  contained  in this  Article  is intended  to change  the  relationship  or status of the  parties  to  this  Agreement  or to  enlarge  upon  the  rights  or obligations  of either  party  hereunder except  as provided  herein.

ARTICLE XXI -  SERVICING

		A.	AON  Benfield,   Inc.   is the  Servicing  Agent  providing   services  for the  Company in connection  with   this   Agreement.  There  is  no  Intermediary  of  record   for  this Agreement.

B.         Payments by the  Company to the  Servicing  Agent  shall  be deemed  to  constitute payment   to  the  Reinsurer only  to  the  extent  that   such  payments  are  actually received   by  the   Reinsurer.    Payments  by  the   Reinsurer  shall   be  deemed   to constitute  payment   to   the   Company  to  the   extent   that   such   payments  are actually   received  by either  the Servicing  Agent  or the  Company.

C.         All  communications,  including   but  not limited  to, notices,  reports  and statements relating   to  this   Agreement  shall   be  deemed   delivered   to  the  Company  upon receipt  by the  Servicing  Agent  or the Company, and shall  be deemed  delivered  to the  Reinsurer only  upon  receipt  by the Reinsurer.

		D.	The servicing   agent  shall  have no authority   to negotiate   or otherwise  act on behalf  of the  reinsurer   nor shall AON Benfield,  Inc. receive  any remuneration

(i.e., brokerage) from  the  reinsurer  for providing   such  services

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ARTICLE XXII - AMENDMENTS

This  Agreement    may  be  amended   by  mutual   consent   of  the  parties   expressed   in  an addendum;   and such  addendum,   when  executed   by both  parties,  shall  be deemed  to  be an integral   part of this  Agreement   and binding  on the parties  hereto.

IN WITNESS WHEREOF, the  parties  hereto  have caused  this  Agreement   to  be executed by their  duly  authorized   representatives   as of the. following   dates:

HOMEOWNERS  OF AMERICA INSURANCE COMPANY

Signature                                      Signature      

Print Name                                   Print Name

 

 

Title                                                                              Title

Date                                         Date

SWISS REINSURANCE AMERICA CORPORATION

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SUPPLEMENT TO THE ATTACHMENTS

DEFINITION OF IDENTIFICATION TERMS USED WITHIN  THE ATIACHMENTS

A.         Wherever   the  term  "Company" or "Reinsured" or "Reassured" or whatever   other term   is  used  to  designate   the   reinsured   company    or  companies  within    the various  attachments  to the  reinsurance agreement, the term  shall  be understood to  mean  Company  or Reinsured  or Reassured or whatever   other  term  is used  in the   attached    reinsurance  agreement  to  designate   the   reinsured   company   or companies.

B.         Wherever  the  term  "Agreement" or "Contract"   or "Policy"  or whatever   other  term is  used  to  designate   the  attached    reinsurance  agreement  within   the  various attachments   to  the   reinsurance  agreement,  the  term   shall   be  understood  to mean   Agreement   or  Contract    or  Policy   or  whatever    other   term   is  used  to designate  the  attached  reinsurance agreement.

C.         Wherever   the  term  "Reinsurer"  or  "Reinsurers"  or  "Underwriters"   or whatever other   term    is  used  to   designate    the   reinsurer    or  reinsurers    in  the   various attachments   to  the   reinsurance  agreement,  the  term   shall   be  understood  to mean  Reinsurer  or Reinsurers or Underwriters  or whatever   other  term  is used to designate  the  reinsuring   company  or companies.

INSOLVENCY FUNDS EXCLUSION CLAUSE

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

POOLS, ASSOCIATIONS AND  SYNDICATES EXCLUSION CLAUSE

SECTION A

Excluding:

		(a)	All  Business   derived   directly   or  indirectly    from  any  Pool,  Association    or  Syndicate   which maintains   its own  reinsurance   facilities.

		(b)	Any Pool  or Scheme  (whether   voluntary   or mandatory)  formed   after  March  1, 1968,  for the purpose  of  insuring   Property  whether   on a country-wide    basis  or in  respect  of  designated areas.  This  Exclusion  shall  not  apply to so-called  Automobile   Insurance   Plans or other  Pools formed  to provide  coverage  for Automobile    Physical  Damage.

SECTION B

It  is agreed  that   business,   written    by the  Company  for  the  same  perils,  which   is  known   at the time   to  be  insured   by  or  in  excess   of   underlying    amounts    placed   in  the  following     Pools, Associations   or Syndicates,  whether   by way  of insurance   or reinsurance   is excluded  hereunder:

Industrial    Risk  Insurers   (successor   to   Factory   Insurance   Association    and  Oil   Insurance

Association);   Associated   Factory  Mutuals.

Any  Pool,  Association    or  Syndicate   formed   for  the  purpose   of  writing    Oil,  Gas  or  Petro­ Chemical  Plants and/or   Oil or Gas Drilling   Rigs.

United   States   Aircraft    Insurance   Group,   Canadian   Aircraft    Insurance   Group,   Associated

Aviation  Underwriters,    American  Aviation   Underwriters. SECTION B does  not apply:

(a)    Where   the   Total   Insured   Value   over   all   interests    of  the   risk   in  question    is  less  than

$350,000,000.

		(b)	To interests traditionally  underwritten  as Inland Marine or Stock and/or Contents written on a Blanket basis.

		(c)	To Contingent  Business Interruption,  except  when  the  Company is  aware that  the  key location  is known at the time  to be insured in any Pool, Association or Syndicate named above.

		(d)	To risks  as follows:  Offices,  Hotels, Apartments,  Hospitals,  Educational Establishments, Public Utilities  (other than Railroad Schedules) and Builders Risks on the classes of risks specified in this subsection (d) only.

Section C:

Nevertheless the  Reinsurer specifically  agrees that  liability  accruing to the Company from its participation in residual market mechanismsincluding but not limited to:

(1) The following  so-called 'Coastal Pool": TexasWindstorm InsuranceAssociation

AND

(2) All "Fair Plan" business

for all perils  otherwise  protected  hereunder shall not be excluded, except. however, that this reinsurance does not include any increase in such liability resulting from:

		(i)	The inability  of any other participant  in such "Coastal Pool" and/or  "Fair Plan" and/or ResidualMarket Mechanismsto  meet its liability.

(ii)        Any claim against such Coastal Pool" and/or "Fair Plan" and/or Residual Market Mechanisms,or any participant therein, including the Company,whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the InsolvencyFund ExclusionClauseincorporated in this Agreement).

TOTAL INSURED VALUE EXCLUSION CLAUSE

It is the  mutual   intention   of the  parties  to  exclude  risks,  other  than  Offices,  Hotels,  Apartments, Hospitals,   Educational  Establishments,  Public  Utilities   (except  Railroad  schedules)  and  Builders Risk  on  the  above  classes,  where   at the  time  of  the  cession,   the  Total   Insured  Value  over  all interests   exceeds  $350,000,000.      However,  the  Company  shall  be protected   hereunder, subject to the  other  terms  and  conditions   of this  Agreement   if subsequently  to cession  being  made the Company   becomes   acquainted  with   the  true   facts   of the  case  and  discovers   that   the  mutual intention    has   been   inadvertently   breached,   the   Company   shall   at  the   first   opportunity,   and certainly   by next  anniversary of the  original  policy,  exclude  the  risk in question.

It  is agreed  that  this  mutual   intention   does  not  apply  to  Contingent  Business   Interruption  or to interest   traditionally   underwritten   as  Inland   Marine   or  to  Stock  and/or   Contents   written    on  a blanket  basis  except  where  the  Company  is aware  that  the Total  Insured  Value of $350,000,000

is already  exceeded   for buildings,   machinery, equipment   and direct  use and occupancy at the  key location.

It is understood  and agreed  that  this  Clause  shall  not  apply hereunder  where  the  Company  writes

100%  of the  risk.

Notwithstanding    anything    contained    herein   to  the   contrary,   it  is  the   mutual   intention    of  the parties   in  respect   of  bridges   and  tunnels   to  exclude   such  risks  where   the  Total  Insured  Value over all interests   exceeds  $350,000,000.

POLLUTION AND SEEPAGE EXCLUSION CLAUSE

This  Reinsurance   does not apply to:

1.      Pollution,      seepage,     contamination       or    environmental       impairment      (hereinafter collectively   referred  to as "pollution")   insurances,   however  styled;

2.      Loss  or damage  caused  directly   or indirectly   by pollution,   unless  said  loss  or damage follows   as a result  of a loss caused  directly   by a peril  covered  hereunder;

3.      Expenses  resulting   from  any governmental    direction   or request  that  material   present in  or part  of  or utilized   on an  insured's   property   be  removed  or  modified,   except   as provided  in 5. below;

4.      Expenses  incurred  in testing  for  and/or  monitoring   pollutants;

		5.	Expenses  incurred  in removing   debris,  unless  (A) the  debris  results  from  a loss caused directly    by  a  peril   covered   hereunder,    and  (8)  the  debris to  be removed  is itself covered hereunder, and (C) the debris is on the insured's premises, subject. however, to  a limit  of  $5,000   plus 25%  of  (i) the  property damage loss, any risk, anyone location, anyone original insured, and (ii) any deductible applicable to the loss;

6.     Expensesincurred to extract pollutants from land or water at the insured's premises unless (A) the release, discharge, or dispersal of pollutants results from a loss caused directly  by  a  peril  covered  hereunder,  and (B) such  expenses  shall  not  exceed

$10,000;

		7.	Loss of  income due to any increased period of time  required to resume operations resulting  from  enforcement  of  any law  regulating  the  prevention,  control,  repair, clean-up or restoration of environmental damage;

8.     Claims under 5. and/or 6. above, unless notice thereof is given to the Companyby the insured within  180 days after the date of the loss occurrence to which  such claims relate.

"Pollutants" means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.  Waste includes materials to be recycled, reconditioned or reclaimed.

- 1 -

Where   no   pollution    exclusion    has  been   accepted    or  approved    by  an  insurance    regulatory authority   for  use in a policy  that  is subject   to this  Agreement   or where   a pollution   exclusion   that has been  used in a policy  is overturned.   either  in whole  or in part.  by a court  having  jurisdiction. there   shall   be  no  recovery   for  pollution    under   this   Agreement    unless   said  pollution    loss  or damage  follows   as a result  of a loss caused  directly   by a peril  covered  hereunder.

Nothing  herein  shall  be deemed  to extend  the  coverage  afforded   by this  reinsurance   to  property or  perils   specifically    excluded   or  not  covered   under  the  terms   and  conditions    of  the  original policy  involved.

-  2  -

NUCLEAR INCIDENT EXCLUSION CLAUSE- PHYSICAL DAMAGE - REINSURANCE- U.SA

N.MA    1119

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

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

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

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

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

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

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

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

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

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

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

N.MA    1119                                                             -2-

6.      The term  "special  nuclear  material"   shall  have the  meaning  given  to it by the Atomic   Energy

Act of  1954  or by any law amendatory thereof.

		7.	Reassured to be sole judge  of what  constitutes: (a)     substantial  quantities,   and

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

NOTE: - Without   in any way  restricting   the  operation   of paragraph   1. hereof,   it is understood  and agreed  that

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

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

N.M.A.1119                                                          - 3 -

NUCLEAR INCIDENT EXCLUSION CLAUSE - REINSURANCE - NO.4

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

		2.	Without    in  any  way   restricting    the  operations    of  Nuclear   Incident   Exclusion   Clauses.   - Liability.   - Physical  Damage.  - Boiler  and  Machinery   and  paragraph   1. of this  Clause.  it  is understood    and agreed  that  for  all purposes   of the  reinsurance   assumed   by the  Reinsurer from   the   Reinsured.   all  original    insurance   policies   or  contracts    of  the  Reinsured   (new. renewal    and  replacement)    shall   be  deemed   to  include   the   applicable    existing    Nuclear Clause   and/or    Nuclear   Exclusion   Clause(s)   in  effect   at  the   time   and  any  subsequent revisions  thereto   as agreed  upon and approved  by the  Insurance  Industry  and/or   a qualified Advisory   or Rating  Bureau.

POLLUTION LIABILITY EXCLUSION CLAUSE - REINSURANCE 

 

This  Reinsurance excludes:

		(1)	Any   loss   occurrence    arising   out   of  the   actual,   alleged   or  threatened    discharge, dispersal,   release  or escape  of pollutants:

a)      At or from  premises  owned,  rented  or occupied  by an original   assured;  or

b)      At   or   from   any   site   or   location    used   for   the   handling,    storage,    disposal, processing   or treatment   of waste;  or

		c)	Which   are  at  any  time   transported,    handled,   stored,   treated,    disposed   of,  or processed  as waste;  or

d)      At  or  from  any  site  or  location   on  which   any  original    assured   is  performing operations:

		(i)	If the  pollutants    are  brought   on  or to  the  site  or  location   in  connection with  such operations;   or

		(ii)	If the operations are to test for, monitor, clean up, remove,contain, treat, detoxify or neutralize the pollutants.

(2)   Any liability, loss, cost or expensearising out of any governmentaldirection or request to test for, monitor, clean up, remove,contain, treat, detoxify or neutralize pollutants.

"Pollutants" means any solid, liquid. gaseousor thermal irritant or contaminant. including smoke. vapor, soot, fumes, acids, alkalis, chemicals and waste.  Waste includes materials to be recycled, reconditioned or reclaimed.

Subparagraphsa) and d)(i) of paragraph (1) of this exclusion do not apply to loss occurrences caused by heat, smoke or fumes from a hostile fire.  As used herein, "hostile fire"  means one which becomesuncontrollable or breaks out from where it was intended to be.

"Original assured"  as used herein  means all insureds as defined  in the  policy issued by the Company.

NUCLEAR INCIDENT EXCLUSION CLAUSE- LIABILITY- REINSURANCE- U.S.A.

 

N.MA  1590

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

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

LIMITED  EXCLUSIONPROVISION*

I.             It is agreed  that  the  policy  does not  apply  under  any liability    coverage,  to injury, sickness,   disease,   death  or  destruction,  bodily   injury  or  property   damage  with respect  to which   an insured   under  the  policy  is also  an insured  under  a nuclear energy   liability   policy  issued  by Nuclear  Energy  Liability   Insurance   Association, Mutual  Atomic   Energy  Liability   Underwriters  or Nuclear  Insurance  Association  of Canada,  or would   be an  insured   under  any  such  policy   but  for  its  termination upon exhaustion of its limit  of liability.

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

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

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

		(b)	become   effective    before   that   date  and  contain   the   Limited   Exclusion Provision    set   out   above;   provided    this    paragraph    2.   shall   not   be applicable   to Family  Automobile  Policies,  Special  Automobile  Policies,  or policies    or   combination   policies    of   a  similar    nature,    issued   by  the Reassured on  New  York  risks,  until   90  days  following    approval   of  the Limited    Exclusion    Provision    by  the    Governmental   Authority     having jurisdiction    thereof.

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

Owners,   Landlords   and  Tenants  Liability,   Contractual  Liability,   Elevator  Liability,   Owners  or Contractors  (including   railroad)  Protective   Liability,   Manufacturers  and Contractors  Liability, Product    Liability,    Professional   and   Malpractice   Liability,    Storekeepers   Liability,    Garage Liability,  Automobile  Liability  (including   Massachusetts  Motor  Vehicle  or Garage  Liability)

shall   be  deemed   to  include   with   respect   to  such  coverages,  from  the  time   specified    in Clause  V. of  this   paragraph   3.,  the  following    provision   (specified   as the  Broad  Exclusion Provision):

BROAD EXCLUSIONPROVISION*

It is agreed  that  the  policy  does not apply:

		I.	Under  any  Liability   Coverage   to  injury,   sickness.   disease.   death  or destruction, bodily  injury  or property  damage

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

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

II.               Under  any  Medical   Payments  Coverage,  or  under  any  Supplementary  Payments Provision   relating   to  immediate   medical   or surgical   relief,  first   aid, to expenses incurred   with   respect  to  bodily  injury,   sickness,   disease  or  death,   bodily   injury resulting   from  the hazardous  properties   of nuclear  material   and arising  out of the operation   of a nuclear  facility   by any person  or organization.

		III.	Under  any  Liability   Coverage,  to  injury,  sickness,   disease,   death  or destruction, bodily   injury   or  property    damage   resulting    from  the   hazardous   properties    of nuclear  material,  if

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

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

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

IV.             As used in this  endorsement:

"hazardous   properties"    include    radioactive.   toxic    or   explosive   properties; "nuclear   material"   means  source  material.   special  nuclear  material   or byproduct material;   "source   material."  "special   nuclear  material."  and  "byproduct  material" have the  meanings given  them  in the  Atomic   Energy Act  of  1954   or in any  law amendatory  thereof;   "spent   fuel"   means  any  fuel   element   or  fuel  component. solid  or liquid.  which  has been used  or exposed  to radiation   in a nuclear  reactor; "waste"   means  any waste   material   (1) containing  byproduct  material   other  than the  tailings   or wastes   produced by the  extraction  or concentration  of uranium  or thorium   from  any ore  processed for  its source  material  content   and (2) resulting from  the  operation  by any person  or organization of any nuclear  facility   included within    the   definition     of   nuclear   facility    under   paragraph  (a)  or  (b)  thereof; "nuclear  facility"   means

(a)          any nuclear  reactor.

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

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

(d)          any structure.  basin.  excavation. premises   or place  prepared  or used for the storage  or disposal  of waste

and  includes   the  site  on  which   any  of  the  foregoing  is  located.   all  operations conducted  on  such  site   and  all  premises   used  for   such  operations;  "nuclear reactor"   means  any apparatus  designed   or  used  to  sustain   nuclear  fission   in  a self-supporting    chain    reaction    or  to   contain    a  critical    mass   of  fissionable material;   with   respect  to  injury  to  or destruction  of  property,  the  word  "injury"   or "destruction"    includes    all   forms    of   radioactive   contamination    of   property; "property   damage"  includes  all forms  of radioactive contamination  of property.

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

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

(ii)          Statutory   liability   insurance   required  under  Chapter  90.  General  Laws  of

Massachusetts.

until    90   days   following     approval    of  the   Broad   Exclusion    Provision    by  the

Governmental Authority   having  jurisdiction    thereof.

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

*NOTE:      The  words   printed   in  BOLD TYPE in the Limited Exclusion Provision and in the Broad Exclusion  Provision shall  apply only  in  relation  to  original  liability  policies  which include a Limited ExclusionProvision or a Broad ExclusionProvisioncontaining those words.ex10-2.htm

EXHIBIT 10.2

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, WHICH OPINION SHALL BE REASONABLY ACCEPTABLE TO THE ISSUER.

 

INNOVUS PHARMACEUTICALS, INC.

 

8% DEBENTURE

 

	$50,000	 San Diego, CA

 

 Dated as of: May 30, 2014

 

In consideration of the receipt of $50,000, the undersigned, Innovus Pharmaceuticals, Inc., a Nevada corporation (“Issuer”), hereby promises to pay, dated as of May 30, 2014, by and between Issuer and Henry Esber (“Debenture Holder”), at the address of 38 Angell Brook Drive, West Boylston, MA 01583, on the Maturity Date (as hereinafter defined), the principal amount of Fifty Thousand Dollars ($50,000), and interest shall accrue hereon from the date hereof and be payable as provided herein.

 

1.           Terms of the Debenture.

1.1           Interest; Interest Rate; Repayment.

(a) This Debenture shall bear interest at the rate of eight (8%) percent (the “Interest Rate”) per annum based on a 365-day year.  Interest shall be payable on the Maturity Date.

(b) The principal outstanding hereunder shall be paid in full on May 30, 2015 (the “Maturity Date”).

 

(c) The principal amount and interest thereon may be prepaid in whole or in part by the Issuer.

 

(d) All monetary payments to be made by Issuer hereunder shall be made in lawful money of the United States by check or wire transfer of immediately available funds.

 

(e) If all or a portion of the principal amount of this Debenture or any interest payable thereon shall not be repaid when due, whether on the Maturity Date, by acceleration or otherwise, such overdue amounts shall bear interest at a rate per annum that is five percent (5%) above the Interest Rate (i.e., 13%) from the date of such non-payment until such amount is paid in full (as well after as before judgment).

 

1.2           Other Assurances.  Issuer shall not, by amendment of its Articles of Incorporation or By-laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by Issuer, but shall at all times in good faith assist in the carrying out of all the provisions of this Debenture and in taking of all such actions as may be necessary or appropriate in order to protect the rights of the Debenture Holder herein against impairment.

 

  

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2.           Events of Default.  If any of the following events (each, an “Event of Default”) shall occur and be continuing:

 

(i)           Issuer shall fail to pay any amount payable under this Debenture, including but limited to installments of interest and/or principal, within three (3) business days after such payment becomes due (at the Maturity Date, an Interest Payment Date or other date) in accordance with the terms hereof;

 

(ii)           Any representation, warranty, covenant or agreement made by Issuer that this Debenture was incorrect in any material respect on or as of the date made;

 

(iii)           Issuer shall default, in any material respect, in the observance or performance of any other agreement contained in this Debenture or any other agreement or instrument contemplated by this Debenture, and such default shall continue unremedied for a period of fifteen (15) days after written notice to Issuer of such default;

 

(iv)           (a) Issuer shall commence any case, proceeding or other action (x) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (y) seeking appointment or a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Issuer shall make a general assignment for the benefit of its creditors; or (b) there shall be commenced against Issuer any case, proceeding or other action of a nature referred to in clause (a) above that (A) results in the entry of an order for relief of any such adjudication of appointment or (B) remains undismissed, undischarged or unbonded for a period of ninety (90) days; or (c) there shall be commenced against Issuer any case, proceeding other action seeking issuance of a warrant of attachment, execution, distrait or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within ninety (90) days from the entry thereof; or (d) Issuer shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in any of the acts set forth in clauses (a), (b) or (c) above; or (e) Issuer shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due then, and in any such event, (x) if such event is an Event of Default specified in subsection (v) above of this Section 2, automatically this Debenture (with all accrued and unpaid interest thereon) and all other amounts owing under this Debenture shall immediately become due and payable, and (y) if such event is any other Event of Default, the Debenture Holder may, by written notice to Issuer, declare this Debenture (with all accrued and unpaid interest thereon) and all other amounts owing under this Debenture to be due and payable forthwith, whereupon the same shall immediately become due and payable.  Except as expressly provided above in this Section 2, presentation, demand, protest and all other notices of any kind are hereby expressly waived by Issuer.

 

3.   MISCELLANEOUS.

 

3.1           Interest Rate.  Any interest payable hereunder that is in excess of the maximum interest rate permitted under applicable law shall be reduced to the maximum interest rate permitted under such applicable law.

 

  

-2-

  

 

3.2           Notices.  All notices and other communications hereunder shall be in writing and shall be deemed to have been given when delivered by hand or by facsimile transmission, when telexed, or upon receipt when mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

 

If to Issuer:

 

Innovus Pharmaceuticals, Inc.

9171 Towne Centre Drive Ste 440

San Diego, CA 92122

Attn:  Lynnette Dillen

Facsimile: (858) 964-2301

 

With a copy (which copy shall not constitute notice) to:

 

Innovus Pharmaceuticals, Inc.

9171 Towne Centre Drive Ste 440

San Diego, CA 92122

Attn:  Legal Department

Facsimile: (858) 964-2301

 

If to Debenture Holder: at its address as furnished on the face of this Debenture.

 

3.3           Entire Agreement; Exercise of Rights.

(a) This Debenture embodies the entire agreement and understanding of the parties hereto with respect to the subject matter hereof.  No amendment of any provision of this Debenture shall be effective unless it is in writing and signed by each of the parties; and no waiver of any provision of this Debenture, nor consent to any departure by either party from it, shall be effective unless it is in writing and signed by the affected party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

(b) No failure on the part of a party to exercise, and no delay in exercising, any right under this Debenture, or any agreement contemplated hereby, shall operate as a waiver hereof by such party, nor shall any single or partial exercise of any right under this Debenture, or any agreement contemplated hereby, preclude any other or further exercise thereof or the exercise of any other right.

 

3.4            Governing Law. This Debenture shall be governed by and construed in accordance with the laws of the State of California applicable to agreements made and to be performed entirely within such state, without regards to its conflicts of law provisions.

3.5           Transferability. This Debenture shall not be transferable in any manner without the express written consent of Issuer, which consent may not be unreasonably withheld.

 

*********************

  

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IN WITNESS WHEREOF, the parties hereto have executed this Debenture on the date first above written.

 

 

INNOVUS PHARMACEUTICALS, INC.

 

 

By:  /s/Lynnette Dillen

       Name: Lynnette Dillen

       Title: Executive Vice President and Chief Financial Officer

 

 

DEBENTURE HOLDER

 

 

By: /s/Henry Esber

       Henry Esber

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