ENERGY INSURANCE SERVICES, INC. MUTUAL BUSINESS PROTECTED CELL PROGRAM NO. PARTICIPATION AGREEMENT

Transcription

1 ENERGY INSURANCE SERVICES, INC. MUTUAL BUSINESS PROTECTED CELL PROGRAM NO. PARTICIPATION AGREEMENT This Mutual Business Protected Cell Program No. Participation Agreement (the Participation Agreement ) dated as of the day of, 20 (the Effective Date ) is made by and between Energy Insurance Services, Inc. (formerly known as Energy Insurance (Bermuda) Ltd.) (the Company ), a South Carolina domiciled stock corporation, and (hereinafter referred to as the Participant ), a company located in, with respect to Mutual Business Protected Cell Program No. (the Program ). WITNESSETH: WHEREAS, the Participant is desirous of participating as a Member Insured in the Program as made available by the Company; and WHEREAS, the Company is desirous of making the Program available to the Participant, subject to the Participant s agreement to the terms of this Agreement, including Addenda Nos. 1 and 2, attached hereto and made a part hereof. NOW THEREFORE, in consideration of the mutual terms, covenants and conditions contained herein, the parties hereto hereby agree as follows: I. MUTUAL BUSINESS PROTECTED CELL PROGRAM 1.1 Definitions. In interpreting this agreement Bylaws means the Bylaws of the Company, in their present form, attached hereto as Exhibit A, or as from time to time amended. Board means the Board of Directors of the Company or the directors present at a meeting of the directors at which there is a quorum. Member Insured means any person (i) who is an insured or reinsured of the Company or who has risks which are insured or reinsured by the Company, (ii) whose insurance or reinsurance risks the Company has identified as Mutual Business and (iii) who the Company has admitted as a Member Insured in the Company and has been identified in the books and records of the Company as such and as a person entitled to policyholder dividends or good experience returns, in accordance with the Bylaws of the Company. Mutual Business means the insurance or reinsurance business or such portion or portions thereof which the Company identifies in its books and records at the time it accepts such business or such portion or portions thereof as business to be written for Member Insureds on a mutual basis

2 Policy means such contract of insurance, reinsurance, co-insurance and counterinsurance of all kinds, financial guarantee insurance contracts, guaranteed investment contracts, annuities, and guaranty, surety and indemnity business of all kinds and whether the same shall be risk-bearing or fully-funded as the Company may issue from time to time in such form as it may deem expedient. Program Assets includes, without limitation, any and all assets, profits or other funds, including collectible reinsurance, additional premiums from retrospectively rated programs, and interest income specifically attributable to the Program. 1.2 Establishment. The parties agree that the Company shall establish the Program under which it will write Mutual Business for the Participant. The Company agrees that it will designate such business as Mutual Business in its books and records and identify each Policy issued with respect to this Program in its books and records as a Policy issued for Mutual Business. The Company also agrees to maintain a register of Member Insureds of the Program for so long as the Program continues to operate. II. PARTICIPANTS 2.1. Qualification. The Parties hereby agree that, for participation in the Program ( Participation ), the Participant must meet such financial responsibility, underwriting and other requirements for Participation as the Board in its discretion may establish from time to time. Upon approval by the Company of Participation, each prospective Participant must execute and become a party to this Agreement and must purchase an insurance Policy from the Company Term. The undersigned Participant agrees to be bound by this Agreement as of the Effective Date and agrees to remain a Participant of the Program, and to continue to be bound by this Agreement, until the Participation of the Participant terminates as provided in the Addendum No. 1 attached hereto Termination. SEE ADDENDUM NO. 1 HERETO Rights Upon Termination. SEE ADDENDUM NO. 1 HERETO Restrictions on Transfer and Assignment of Participation. Participation or any Participation rights shall not be transferable or assignable except that in the event a Participant is merged, consolidated or substantially all of its assets are sold to another company, the Board may, in their discretion, permit the transfer of Participation and Participation rights to the successor of such Participant; provided, however, that such successor shall become a Participant in the Program, execute this Agreement and assume all the obligations of its predecessor. III. ADMINISTRATION OF MUTUAL BUSINESS PROGRAM 3.1. General Administration. SEE ADDENDUM NO. 1 HERETO Program Advisory Committee. SEE ADDENDUM NO. 1 HERETO

3 IV. INSURANCE 4.1. Purchase of Insurance. The Participant agrees that it will purchase a Policy and will promptly pay when due all applicable premiums, reserve premiums and, if called, retrospective adjustments, that may be payable under its Policy. Neither the cancellation, suspension, termination or the void or voidable status of its Policy shall relieve the undersigned Participant of such obligations Premiums and Rating. The method to be used by the Company for the rating of risks insured by the Company and the premiums to be charged under the Policies issued by the Company shall be as from time to time decided upon by the Board. V. FINANCIAL MATTERS 5.1. Allocation of Net Profits. All of the Company s profits from the business of the Program net of any losses and expenses from such Program and net of any fees chargeable by the Company for general expenses including organizational expenses of the Company, both calculated in accordance with generally accepted accounting principles consistently applied, and such other principles as may be specified in the Company s Bylaws, as may be amended from time to time, shall be automatically allocated by the Company to the policyholders surplus established with respect to the Program. The profits from the business of the Program shall be used to offset any losses that the Company may have had in previous years or may have in succeeding years with respect to such Program. Such profits shall be available for declaration and payment of policyholder distributions, which may be declared and paid to the Member Insureds. The Participant shall have no interest in the earnings or profits of the Company with respect to this Program. The Participant may also, in its capacity as a Member Insured, have an interest in policyholder distributions that have been declared by the Company s Board Books of Account. The Company shall maintain separate books and records for each of its Programs, including this Program. All items of income and expense relating to each Program shall be recorded in these books and records, which shall be maintained in accordance with generally accepted accounting principles consistently applied and such other principles as may be specified in the Company s Bylaws, as may be amended from time to time. The Company shall report to the Participants on the financial status of the Program on an annual basis Determination of Member Insureds Interest in Policyholder Distributions. All policyholder distributions declared by the Board and paid out of the Program Assets shall be paid to the Member Insureds based on the ratio of each Member Insured s historical premium to total historical premiums received by the Company with respect to this Program, unless the Board, in its discretion, determines otherwise. VI. OTHER MATTERS 6.1. Confidentiality of Information. The Company shall keep confidential and refrain from the use of information submitted to it by the Participant in connection with the Company s operations, except to the extent that disclosure or use of such information is necessary for the conduct of the Company s operations. The Company shall take reasonable steps to safeguard the - 3 -

4 confidentiality of the information so disclosed to it and shall require its consultants and employees to do likewise Counterparts. SEE ADDENDUM NOS. 1 AND 2 HERETO Amendment and Termination. SEE ADDENDUM NO. 1 HERETO Choice of Law. SEE ADDENDUM NO. 1 HERETO Dispute Resolution. SEE ADDENDUM NO. 1 HERETO Binding Effect. SEE ADDENDUM NO. 1 HERETO Waiver of Breach. SEE ADDENDUM NO. 1 HERETO Headings. SEE ADDENDUM NO. 1 HERETO Severability. SEE ADDENDUM NO. 1 HERETO Commencement. the Effective Date. The Participant shall be bound by the terms of this Agreement as of IN WITNESS WHEREOF, the Participant and the Company have caused this Agreement to be executed and attested to on their behalf. GREENVILLE, SOUTH CAROLINA Date: Attest: ENERGY INSURANCE SERVICES, INC. By: Title: GREENVILLE, SOUTH CAROLINA [ ] Date Attest By: [Attorney-in-Fact] - 4 -

5 ADDENDUM NO. 1 TO THE MUTUAL BUSINESS PROGRAM NO. PARTICIPATION AGREEMENT This Addendum (the Addendum ) to the Mutual Business Protected Cell Program No. Participation Agreement dated as of the day of 20 is made by and between Energy Insurance Services, Inc. (formerly known as Energy Insurance (Bermuda) Ltd.) (the Company ), a South Carolina domiciled stock corporation, and (hereinafter referred to as the Participant ), a company located in, with respect to Mutual Business Protected Cell Program No. (the Program ), both of whom are signatories to the Participation Agreement. WITNESSETH: WHEREAS, the Participant is desirous of participating as a Member Insured in the Program as made available by the Company; and WHEREAS, the Company is desirous of making the Program available to the Participant, subject to the Participant s agreement to the terms of this Addendum. NOW THEREFORE, in consideration of the mutual terms, covenants and conditions contained herein, the parties hereto hereby agree as follows: SECTION I. NATURE OF AGREEMENT 1.1 Participation Agreement. This Addendum is attached to and forms a part of the Participation Agreement. In the event of any conflict between this Addendum and the Participation Agreement, as the latter may be amended from time to time, this Addendum shall govern, even if the Amendment to the Participation Agreement is subsequent to this Addendum. 1.2 Effective Date. This Addendum shall be deemed to be effective as of the effective date of the Participation Agreement. 1.3 Term of Agreement. This Addendum shall remain in effect from the effective date referred to in Section 1.2 until terminated in accordance with Section Bylaws. The Bylaws of the Company (the Bylaws ) are attached as Exhibit A hereto, and the Participant hereby acknowledges that it has received and reviewed the same. 1.5 Definitions. Terms defined in the Bylaws and the Participation Agreement shall have the same meanings when used in this Addendum

6 SECTION II. ADMINISTRATION OF MUTUAL BUSINESS PROGRAM 2.1 General Administration. The Board shall be responsible for the management and administration of the Program, and may delegate such duties as it deems appropriate to others, including the Company s manager. 2.2 Program Advisory Committee. The Participant shall appoint a Program Advisory Committee to assist and advise the Board with respect to any and all matters relating to the Program, including but not limited to the provision of insurance coverage, the settlement or adjusting of claims, the purchase of excess or stop loss insurance or reinsurance, the investment of funds, the declaration of policyholder distributions and any other matters relating to the Program or the Participant with respect to the Program. The Program Advisory Committee shall have no authority whatsoever to bind or otherwise represent the Company, it being understood and agreed that its function is purely to represent the Participant and advise the Board. The Program Advisory Committee shall consist of not less than three persons, provided, however, that if the number of Participants is less than three, the Program Advisory Committee may consist of one or two persons. SECTION III. FINANCIAL INTERESTS OF PARTICIPANTS 3.1 No Interest in Net Worth. No Participant shall have any interest, by virtue of its participation in the Program, in any funds of the Company. The Participant may also, in its capacity as a Member Insured, have an interest in policyholder distributions that have been declared by the Company s Board. 3.2 Interest in Distributions. No distributions of any kind shall be made to any Participant, in its capacity as such, in liquidation or otherwise. Distributions of Program Assets, if and when declared by the Board, may only be paid to Member Insureds, in their capacities as such, in accordance with the formula set forth in Section 5.3 of the Participation Agreement. No Member Insureds shall have any property interest in Program Assets and no interest in distributions until declared by the Board. 3.3 Policyholder Surplus. All of the Company s profits from the business of the Program, net of any losses and expenses from such Program and net of any fees chargeable by the Company for general expenses including organizational expenses of the Company, both calculated in accordance with generally accepted accounting principles consistently applied, and such other principles as may be specified in the Company s Bylaws, as may be amended from time to time, shall be automatically allocated by the Company to the policyholders surplus established with respect to the Program. The profits from the business of the Program shall be used to offset any losses that the Company may have had in previous years or may have in succeeding years with respect to such Program. Such profits shall be available for declaration and payment of policyholder distributions, which may be declared and paid to the Member Insureds. SECTION IV. PROVISION OF INSURANCE COVERAGE 4.1 Policy Form. The Company shall not issue any Policies under any Program unless: - 2 -

7 (a) (b) (c) each such Policy provides that the amount of all claims by all insureds or reinsureds of such Program shall not exceed the aggregate of the funds designated by the Company as funds of such Program; in the event such Program has insufficient funds to pay all such claims, the claims shall be reduced, as provided in the Policy, or if no such provision is made for reduction in claim amounts, in the sole discretion of the Board; and no claim shall be made under such Policy on any assets of the Company other than such Program s Program Assets. Any Policy issued by the Company without such provisions shall nevertheless be deemed to have such provisions and the reduction in claim amounts referred to in paragraph (b) of this Section 4.1 shall be made on an equitable basis in the sole discretion of the Board. For purposes of this Section 4.1, the form of Endorsement attached hereto as Exhibit B, when attached to a Policy issued by the Company, shall be deemed to constitute compliance with this provision. 4.2 Insurance Regulation. No Participant shall have any authority to act on behalf of or otherwise represent the Company. The Participant hereby agrees not to take any actions which might cause the Company to be deemed to be transacting an insurance business in jurisdictions where the Company is not licensed. SECTION V. TAXATION 5.1 The Company shall allocate its liability for United States federal income taxes as set forth below: (a) The Company shall annually charge the Program and each other Program with its income tax liability as if it had been a separate taxpayer filing a separate return. In determining the tax liability of each Program, the Board shall apportion any item of income, gain, loss, deduction or credit not specifically allocable to a Program on any reasonable basis, consistently applied. (b) The Company shall annually credit the Program and each other Program with the income tax benefits attributable to each such program. Income tax benefits include any tax savings to the Company arising from losses (operating, capital or other) or credits (of whatever kind), whether used in the current year, carried back to previous years or carried forward from previous years. (c) The amounts charged to each Program in paragraph (a) less the amounts credited to each Program pursuant to paragraph (b) shall be equal to the Company s overall tax liability. (d) If, in a year, a Program has a credit for an income tax benefit, arising from an operating loss, that it would not have obtained had it been a separate taxpayer filing a separate return, such Program shall be charged, and the other Programs shall be credited, with an interest factor. The interest factor shall be the amount of the credit times the average prime rate - 3 -

8 published in the Wall Street Journal, or other publication selected by the Board, as the prime rate. SECTION VI. MISCELLANEOUS 6.1 Actions Against the Company or its Directors or Officers. (a) The Participant agrees to waive any claim or right of action it might have, whether individually or by or in the right of the Company, against any director or officer of the Company on account of any action taken by such director or officer or the failure of such director or officer to take any action in the performance of his duties with or for the Company; PROVIDED THAT such waiver shall not extend to any matter in respect of any gross negligence, willful default, fraud or dishonesty which may attach to such director or officer. An action against the Company shall be deemed to be an action against its directors or officers. (b) The Participant agrees that any amounts expended by the Company in successfully defending itself or any director or officer against any claim or action brought by the Participant shall be chargeable by the Company as an expense of the Program, or if there are insufficient resources in the Program, such amounts may be charged to the Participant. The Company shall present such claims to its Directors and Officers liability insurer and diligently shall pursue such claims and shall credit the Program for expenditures which are reimbursed by such insurer. (c) The Participant agrees that any amounts expended by the Company in defending itself or in indemnifying or defending a director or other officer against any claim or action arising out of any action taken upon the recommendation of the Program Advisory Committee shall be chargeable by the Company as an expense of the Program, or if there are insufficient resources in the Program, such amounts may be charged to the Participant. The Company shall present such claims to its Directors and Officers liability insurer and diligently shall pursue such claims and shall credit the Program for expenditures which are reimbursed by such insurer. 6.2 Counterparts. This Addendum and Participation Agreement may be executed in counterparts both of which, taken together, shall constitute one instrument. 6.3 Amendment. This Addendum and Participation Agreement may be amended only with the consent of the Company and the Participant. 6.4 Termination. This Addendum may be terminated on written notice given by the Company or the Participant ninety (90) days prior to an anniversary date of the effective date hereof, with such termination effective on the date specified in the notice, but in no event earlier than such anniversary date, provided any required regulatory approval has been previously obtained. Any notice of termination given by the Participant must be evidenced by certification that the termination was approved by such proportion of the Participants as is specified in the Participation Agreement for termination of the Participation Agreement, or if no such proportion is specified, by a majority vote of the Program Advisory Committee referred to in Section 2.2 hereof. The Participation Agreement shall be automatically terminated upon the termination of - 4 -

9 this Addendum. All insurance policies shall be commuted in accordance with the provisions of Section 6.5 hereof. 6.5 Commutation. Upon the termination of the Participation Agreement: (a) The Company and the Participant agree that all of their respective duties and obligations whether known or unknown, reported or unreported and whether currently existing or arising in the future, under all policies, issued pursuant to this Program, shall be cancelled and the Company and the Participant shall release and discharge one another, their successors and assigns from any further liability or obligation arising out of any such Policy. Notwithstanding the foregoing, the Participant shall remain liable for any and all tax payments that may be due from the Company attributable to the Program and the Participant shall be entitled to receive any and all tax refunds paid to the Company attributable to the Program. (b) The amount of the net Program Assets shall be determined, after taking into account the following items, in the order indicated: (i) (ii) the expenses of the Company directly related to the Program, whether administrative expenses or loss adjustment expenses, including reserves for liabilities to Member Insureds, and the general expenses of the Company, including organization expenses, a reasonable commission to the Company and extraordinary expenses not allocable to a particular Program. The remaining Program Assets shall then be distributed to the Member Insureds. The allocation of such distribution to the Member Insureds shall be as set forth in the Participation Agreement or the policies, or if not set forth in the Participation Agreement or the policies, in the sole discretion of the Board. The decision of the Company s auditors with respect to the abovereferenced amounts shall be final and binding on all Parties. 6.6 Choice of Law. In view of the diverse location of the parties and the desirability of unified regulation, the parties agree that the terms and conditions of this Addendum and the Participation Agreement shall determine their respective rights and duties and this Addendum and the Participation Agreement shall be construed and enforced in accordance with and governed by the internal law of the State of New York, without reference to its conflicts of laws rules. 6.7 Dispute Resolution. All disputes between the Company and the Participant which are not settled between the parties will be submitted to arbitration in New York City by a panel of three arbitrators. One arbitrator will be appointed by the Participant and another by the Company. The two appointed arbitrators will select the third. If the two appointed arbitrators fail to agree upon a third arbitrator after sixty days, the third arbitrator will be selected by the then President of the Association of the Bar of the City of New York. The Participant and the Company may by express agreement determine the arbitral procedures to be followed; in the event the parties do not agree, New York law, as provided above, will govern all such matters of arbitral procedure. To the extent that any such dispute is not subject to arbitration, and unless otherwise required by law, the United States District Court for the Southern District of New - 5 -

10 York will have exclusive jurisdiction of such dispute. For such purpose, the Participant agrees to accept, without objection to form or manner, service of process by registered mail directed to:, or such other address as the Participant may advise. For such purpose, the Company agrees to accept, without objection to form or manner, service of process by registered mail directed to: Energy Insurance Services, Inc., 501 River Street, Greenville, South Carolina or such other address as the Company may advise. The foregoing consents to service of process are not intended nor shall they be construed to extend to any claim, controversy, cause of action, or other matter other than as stated in this paragraph. 6.8 Binding Effect. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Participant and its legal representatives and the Company and its successors. 6.9 Waiver of Breach. The waiver by either party of a breach of any provision of this Agreement by the other shall not operate or be construed as a waiver of any subsequent breach Headings. The headings in this Addendum and the Participation Agreement are for convenience only and shall not be deemed to constitute a part of this Addendum and the Participation Agreement, nor shall they affect the construction or interpretation of any provision of this Addendum and the Participation Agreement Severability. If any provision of this Addendum and the Participation Agreement is invalidated for any reason whatsoever, this Addendum and the Participation Agreement shall remain binding between the parties and in full force and effect except for such invalidated provision. If any injustice shall result therefrom, however, the parties shall negotiate in good faith to provide adjustments to ameliorate the effects of such injustice Exhibits. The exhibits attached hereto are incorporated into and form an integral part of this Addendum and the Participation Agreement

11 IN WITNESS WHEREOF, the Participant and the Company have caused this Agreement to be executed and attested to on their behalf. GREENVILLE, SOUTH CAROLINA Date: Attest: ENERGY INSURANCE SERVICES, INC. By: Title: GREENVILLE, SOUTH CAROLINA [ ] Date: Attest: By: By: [Attorney-in-Fact] - 7 -

12 ENERGY INSURANCE SERVICES, INC. BYLAWS (REVISED DECEMBER 4, 2008)

13 BYLAWS OF ENERGY INSURANCE SERVICES, INC. ARTICLE I. INTERPRETATION 1.1 Definitions Guidance 4 ARTICLE II. OFFICES 2.1 Business Office Registered Office 5 ARTICLE III. SHAREHOLDER 3.1 Shareholder Agreement Annual Meeting Special Meetings Place of Meeting Notice of Meeting Fixing of Record Date Quorum and Voting Requirements Proxies Voting of Shares Voting for Directors Shareholder s Rights to Inspect Corporate Records Financial Statements Shall be Furnished to Shareholder 9 ARTICLE IV. BOARD OF DIRECTORS 4.1 General Powers Number, Tenure and Qualifications of Directors Regular Meetings Special Meetings Meeting in South Carolina Notice of Special Meeting Director Quorum Manner of Acting Establishing a Supermajority Quorum or Voting Requirement Action Without a Meeting Removal of a Director Vacancies Compensation Committees 13 ARTICLE V. OFFICERS 5.1 Number 14 Page 1 of 21 Pages

14 5.2 Appointment and Term of Office Removal President Secretary Chairman of the Board Compensation 15 ARTICLE VI. INDEMNIFICATION 6.1 Indemnification of Directors, Officers, Agents and Employees Insurance 16 ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER 7.1 Certificates for Shares Registration of the Transfer of Shares Acquisition of Shares 17 ARTICLE VIII. MUTUAL BUSINESS PROGRAMS 17 ARTICLE IX. ACCOUNTS 9.1 Bank Accounts Accounting Records Audits 19 ARTICLE X. DISTRIBUTIONS 10.1 Distributions Reserves Capitalization of Profits 20 ARTICLE XI. CORPORATE SEAL 20 ARTICLE XII. EMERGENCY BYLAWS 20 ARTICLE XIII. AMENDMENTS 21 Page 2 of 21 Pages

15 ARTICLE I. INTERPRETATION 1.1 Definitions. In interpreting these Bylaws, unless the context requires otherwise: "Act" means the South Carolina Business Corporation Act of 1988 (as amended); "Articles" means the Company s Articles of Domestication as filed with the South Carolina Secretary of State or as from time to time amended; "Bylaws" means these Bylaws in their present form or as from time to time amended; "Board" means the Board of Directors of the Company or the Directors present at a meeting of Directors at which there is a quorum; "Company" means the entity incorporated in South Carolina as Energy Insurance Services, Inc.; "Department" means the South Carolina Department of Insurance. "Member Insured" shall mean any person (i) who is an insured or reinsured of the Company or who has risks which are insured or reinsured by the Company, (ii) whose insurance or reinsurance risks the Company has identified as Mutual Business and (iii) who the Company has admitted as a Member Insured in the Company and has been identified in the books and records of the Company as such and as a person entitled to policyholder dividends or good experience returns, in accordance with these Bylaws; "Mutual Business" means the insurance or reinsurance business or such portion or portions thereof which the Company identifies in its books and records at the time it accepts such business or such portion or portions thereof as business to be written for Member Insureds on a mutual basis; "Mutual Business Program" shall mean any program under which the Company writes Mutual Business; "Policy" means such contract of insurance, reinsurance, co-insurance and counterinsurance of all kinds, financial guarantee insurance contracts, guaranteed investment contracts, annuities, and guaranty, surety and indemnity business of all kinds and whether the same shall be risk-bearing or fully-funded as the Company may issue from time to time in such form as it may deem expedient; "President" means the person appointed by the Board to perform the traditional duties of a corporate president, regardless of actual title granted by the Board; "Principal Office" means the Company s principal place of transacting business, required to be within the State of South Carolina by (B)(3) of the South Carolina Code; Page 3 of 21 Pages

16 "Registered Office" means the registered office for service of process upon the Company, required to be within the State of South Carolina by and (B)(4) of the South Carolina Code; Resident Director means a director of the Company who resides in South Carolina as required by (I); "Resolution" means a resolution of the Shareholder adopted either in general meeting or by written resolution, in accordance with the provisions of these Bylaws; "Seal" means the common seal of the Company and includes any duplicate thereof; "Secretary" includes a temporary or assistant or deputy Secretary and any person appointed by the Board to perform any of the traditional duties of a corporate Secretary, regardless of actual title granted by the Board; "Shareholder" means the entity incorporated in Barbados as Energy Insurance Mutual Limited; 1.2 Guidance. For the purpose of interpreting these Bylaws, unless the context requires otherwise: (a) (b) (c) (d) (e) Words importing only the singular number include the plural number and vice versa; Words importing only the masculine gender include the feminine and neuter genders; Words importing persons include companies or associations or bodies of persons, whether corporate or un-incorporate; Reference to writing shall include typewriting, printing, lithography, photography and other modes of representing or reproducing words in a legible and nontransitory form; and Any words or expressions defined in the Act as of the date these Bylaws or any part thereof are adopted shall bear the same meaning in these Bylaws or such part (as the case may be). ARTICLE II. OFFICES 2.1 Business Office The Principal Office shall be located in the State of South Carolina as the Board may from time to time designate. The Company may have such other offices, either within or without South Carolina, as the Board may designate or as the business of the Company may require from time to time. Page 4 of 21 Pages

17 2.2 Registered Office The Registered Office shall be located within the State of South Carolina as the Company may, from time to time designate, and may be, but need not be, identical with the Principal Office. 3.1 Shareholder Agreement ARTICLE III. SHAREHOLDER The Shareholder and the Company may enter into an agreement which imposes restrictions on the transfer or registration of transfer of shares of the Company. 3.2 Annual Meeting The annual Shareholder meeting shall be held at such time and date as shall be fixed by the Board, for the purpose of electing directors and for the transaction of such other business as may come before the Shareholder. If the election of directors shall not be held on the day designated herein for any annual Shareholder meeting, or at any subsequent continuation after adjournment thereof, the Board shall cause the election to be held at a special Shareholder meeting as soon thereafter as convenient. In the alternative, any action by the Shareholder which may be taken at an annual meeting may be taken without a meeting if the action is taken by written consent pursuant to of the South Carolina Code. A consent signed under this section has the effect of a meeting vote and may be described as such in any document. 3.3 Special Meetings Special meetings of the Shareholder, for any purpose, described in the meeting notice, may be called by the Board, or by the President, at the request of the Shareholder. 3.4 Place of Meeting The Board may designate any place within or outside of South Carolina as the place of meeting for any annual or special meeting of the Shareholder. If no designation is made, the place of meeting shall be the Principal Office. 3.5 Notice of Meeting (a) Required notice Written notice stating the place, day and hour of any annual or special meeting shall be delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, by the persons calling the meeting, to the Shareholder and Board. Notice shall be deemed to be effective at the earlier of: (1) when deposited in the United States mail, addressed to the Shareholder at his address as it appears on the stock transfer books of the Company, with postage thereon prepaid, (2) on the date shown on the return receipt if sent by registered or certified mail, return receipt requested, and the receipt is Page 5 of 21 Pages

18 signed by or on behalf of the addressee, (3) when received, or (4) 5 days after deposit in the United States mail, if mailed postpaid and correctly addressed to an address other than that shown in the Company s current record of Shareholder. (b) Adjourned Meeting If any meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time or place, if the new date, time and place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is, or must be, fixed (see 3.6 of this Article III) then notice must be given pursuant to the requirements of paragraph (a) above. (c) Waiver of Notice The Shareholder may waive notice of the meeting (or any other notice), by a writing signed by the Shareholder, which is delivered to the Company (either before or after the date and time stated in the notice) for inclusion in the minutes or filing with the Company s corporate records. (d) Contents of Notice The notice of each special meeting shall include a description of the purposes for which the meeting is called. Except as provided herein, the notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called. If a purpose of any Shareholder meeting is to consider either: (1) a proposed amendment to the Articles; (2) a plan of merger or share exchange; (3) the sale, lease, exchange or other disposition of all, or substantially all of the Company s property; (4) the adoption, amendment or repeal of the Bylaws; (5) dissolution of the Company; or (6) removal of a director for cause, the notice must so state and be accompanied by respectively a copy or summary of the: (1) Proposed Articles of Amendment or Restated Articles of Incorporation; (2) plan of merger or share exchange; (3) transaction for disposition of all the Company s property; or (4) bylaw proposal. Page 6 of 21 Pages

19 If the Company indemnifies or advances expenses to a director, the Company shall report in writing to the Shareholder the consideration received with or before notice of the next meeting. 3.6 Fixing of Record Date For any proper purpose requiring a determination by the Shareholder, the Board may fix in advance a date as the record date of any Company action. Such record date shall not be more than seventy days prior to the date on which the particular action is to be taken. If no record date is so fixed by the Board, the record date shall be at the close of business on: (a) (b) (c) With respect to any annual or special Shareholder meeting called by the Board or President the day before the first notice is delivered to the Shareholder; With respect to a special meeting demanded by the Shareholder, the date the Shareholder signs the demand; With respect to the payment of a share dividend, the date the Board authorizes the share dividend; (d) With respect to actions taken in writing without a meeting (pursuant to Art. III 3.2), the date the Shareholder signs a consent; (e) And with respect to a distribution to the Shareholder (other than one involving a repurchase or reacquisition of shares), the date the Board authorizes the distribution. 3.7 Quorum and Voting Requirements A majority of the votes entitled to be cast on the matter constitutes a quorum for action on that matter. 3.8 Proxies The Shareholder may vote in person, or vote by proxy which is executed in writing by the Shareholder or which is executed by his duly authorized attorney-in-fact. Such proxy shall be dated and filed with the Company secretary or other person authorized to tabulate votes before or at the time of the meeting. Unless a time of expiration is otherwise specified, a proxy is valid for eleven months. A proxy is revocable unless executed in compliance with (d) of the South Carolina Code, or any succeeding statute of like tenor and effect. 3.9 Voting of Shares Each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of the Shareholder. If a quorum exists, action on a matter (other than the election of directors) is approved if the votes cast favoring the action exceed the votes cast opposing the action. Page 7 of 21 Pages

20 3.10 Voting for Directors At each election for directors, the Shareholder shall have the right to vote the number of votes it is entitled to cast for as many persons as there are directors to be elected Shareholder s Rights to Inspect Corporate Records (a) Minutes and Accounting Records The Company shall maintain books and records of its business as required by South Carolina law and shall keep a permanent record of all minutes of meetings and actions taken by the Shareholder or Board, with or without a meeting, and a record of all actions taken by a committee of the Board in place of the Board on behalf of the Company. (b) Absolute Inspection Rights of Records Required at Principal Office The Shareholder has the right to inspect and copy, during regular business hours, any of the following records, all of which the Company is required to keep at the Principal Office: (1) the Articles and all amendments to them currently in effect; (2) the Bylaws and all amendments to them currently in effect; (3) resolutions adopted by its Board creating one or more classes or series of shares, and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding; (4) excerpts from minutes of any meeting of the Board, records of any action of a committee of the Board on behalf of the Company, minutes of any meeting of the Shareholder, and records of action taken by the Shareholder or Board without a meeting; (5) the minutes of all meetings of the Shareholder, and records of all action taken by the Shareholder without a meeting, for the past 10 years; (6) all written communications to the Shareholder generally within the past three years, including the financial statement furnished for the past three years to the Shareholder; (7) a list of the names and business addresses of its current directors and officers; (8) its most recent annual financial statement filed with the South Carolina Department of Insurance; and (9) the Company s federal income and state premium tax returns for the last ten years and accounting records for the Company. Page 8 of 21 Pages