Power Of Attorney

1.1 Exchange of Insurance Contracts.

Each Subscriber agrees to exchange contracts of insurance (“Policies”) with the other Subscribers of the Exchange. Your Subscriber status starts when your first Policy begins and ends when your last Policy expires without renewal or is otherwise terminated by You or the Exchange. You have no interest in the Exchange beyond your status as a policyholder under an in-force Policy issued by the Exchange and the rights specifically set out in this Agreement and in the Bylaws. This Agreement only applies to Policies issued by the Exchange and does not apply to any insurance policies issued by or purchased through any other entity.

1.2 Non-Assessable Policies.

The Exchange shall exchange Policies on a non-assessable basis for cash premiums only, and this Agreement waives all contingent premiums. You shall have no financial obligation to the Exchange, other Subscribers, or the Exchange’s creditors beyond the amounts charged to you for insurance premiums and your required surplus contributions.

1.3 Power of Attorney.

The Subscriber hereby appoints AIF as its attorney-in-fact with the express authority and permission to effectuate and conduct the lawful business affairs of the Exchange. Issuance of a Policy to you by the Exchange constitutes AIF’s acceptance of your appointment. You agree that AIF shall perform all actions of the Exchange on your behalf. This power of attorney and authority includes the ability to carry out all customary functions of a reciprocal insurance exchange, including without limitation the following responsibilities:

1. Establish and enforce the terms of this Agreement and all rates, forms and other requirementsnecessary to exchange Policies on a non-assessable basis;
2. Receive applications, underwrite and issue Policies;
3. Administer and issue renewals, non-renewals, cancellations, endorsements and other modifications to Policies;
4. Maintain Policy records;
5. Prepare and file required reports;
6. Collect, maintain and account for premiums and other funds belonging to the Exchange;
7. Open accounts or borrow money in the name of and invest funds belonging to the Exchange;
8. Monitor the Exchange’s compliance with applicable laws;
9. Prepare advertising and promotional materials;
10. Recruit, appoint and oversee insurance producers;
11. Establish and administer the compensation of insurance producers and other business sources;
12. Receive proofs of loss, investigate and pay claims under Policies, directly or indirectly, through third-party service providers;
13. Bring suit on behalf of and defend claims against the Exchange whether or not related to Policies;
14. Accept service of process on behalf of the Exchange in actions against the Exchange;
15. Operate and oversee customer service centers;
16. Utilize technology and data from affiliates for customer acquisition, pricing, risk assessment and claims administration;
17. Establish and monitor loss reserves;
18. Place assumed and ceded reinsurance;
19. At AIF’s sole discretion, pay dividends to Subscribers and establish and administer subscriber benefits and awards programs; and
20. All other actions necessary and proper to effectuate the foregoing and to manage the business of the Exchange.

1.4 Offices of Attorney-In-Fact.

The AIF offices will be the same as the principal office of Exchange, located at 325 N St Paul, Suite 900, Dallas, TX 75201. The offices of Exchange or AIF may be changed in compliance with the requirements of the laws of the State of Texas and the Subscriber will be promptly notified of any such change of office location and when any such change shall be effective.

1.5 AIF Agreement.

The AIF Agreement between Exchange and AIF, which establishes AIF as the attorney-in-fact for Exchange, is incorporated herein by reference and a copy of the AIF Agreement shall be available for review at www.homeboundexchange.com, or upon request from AIF.

Compensation of AIF

2.1 Fees for Services.

In consideration for the services provided to Exchange, the Exchange shall compensate the AIF as indicated in the AIF Agreement which shall be available for review at www.homeboundexchange.com, or upon request from AIF.

2.2 Adjustments and Modifications.

AIF’s total compensation, as set forth in the AIF Agreement, may be revised or modified at any time, subject to the prior written approval of the Texas Department of Insurance.

2.3 Losses and Expenses.

Exchange will be liable for all losses and expenses, and will reimburse AIF on demand, for losses, loss adjustment expenses, investment expenses and other expenses attributable to the operations of Exchange as dictated by Texas law and the AIF Agreement.

Voting Rights

Although the Subscribers agree to appoint AIF as its attorney-in-fact, the Subscribers will retain voting rights on the bylaws for Homebound Insurance Exchange (the “Exchange Bylaws”). The Subscribers agree that their rights will be limited to those described under Article II of the Exchange Bylaws.

Surplus Contributions

4.1 Policy Premium and Surplus Contributions.

The Subscriber agrees to pay his or her policy premium when due and, in addition, to contribute to Exchange’s surplus in the amounts and during the period of time set forth in 4.2 below (the “Surplus Contribution”). The Subscriber understands and agrees that the amounts paid as Surplus Contributions will be credited as policyholder surplus for the benefit and protection
of all Exchange subscribers and that Surplus Contributions made to Exchange are not premiums for insurance.

4.2 Timing and Amounts of Surplus Contributions.

The Surplus Contributions are payable to Exchange on or prior to the initial effective date of the Subscriber’s coverage and within 30 calendar days of the effective date of all endorsements generating an additional premium. Surplus Contributions will be paid as a percentage of the fixed portion of your total annual Policy premium for Policies issued to you. Each Surplus
Contribution will be paid through your premium billing statement and identified as a separate line item included in the total amount due. The initial percentage will be ten percent (10%). AIF may increase the amount and manner of payment of Surplus Contributions. AIF will notify you in advance in writing of any changes. No increase will be retroactive. Any additional Surplus Contributions required from you will apply prospectively at renewal time. In addition, if AIF determines, in its sole discretion, that circumstances warrant, it may reduce or eliminate Surplus Contributions altogether.

4.3 Purpose of and Limitation on Return of Surplus Contributions.

The Subscriber understands and agrees that the amounts paid as Surplus Contributions will be credited as policyholder
surplus for the benefit and protection of all Exchange subscribers, are not premiums for insurance, and may only be returned in limited circumstances. The Subscriber further understands and agrees that the ability of Exchange to return Surplus Contributions to its subscribers is subject to the provisions of this Agreement and is limited by law. Upon the issuance of an insurance policy, or other confirmation of coverage by Exchange, the return of Surplus Contributions can occur only with the approval of AIF and the Texas Department of Insurance, and as set forth in this Agreement. In the event of a mid-term policy cancellation, AIF will return any Surplus Contributions (without interest) applicable to the cancelled policy term, pro- rated based on the fraction of the policy term that has elapsed and subject to the restrictions set forth in Section 4 hereof and any
applicable law. All other Surplus Contributions, including those made for previous policy terms, will be retained by Exchange for the benefit of all remaining subscribers. The Subscriber understands and agrees that any other return of Surplus Contributions will be subject to the approval of AIF, the Texas Department of Insurance, and the restrictions set forth in Section 4 hereof.

4.4 Limitations on Distributions of Surplus Contributions.

AIF may reduce, suspend or delay payment of a dividend or return of a Surplus Contribution if required to do so by the Texas Department or if AIF determines payment poses a risk to the Exchange’s financial condition or the Exchange otherwise faces a hazardous financial condition. Any payments reduced, suspended or delayed pursuant to this Section will be paid promptly after the conditions requiring such reduction, suspension or delay have been eliminated. If this Section is found to conflict with other terms of this Agreement, this Section supersedes all other terms and conditions of this Agreement.

4.5 Return of Surplus upon Liquidation.

The Subscriber understands and agrees that, in accordance with Texas law, upon the liquidation of the Exchange, the assets of the Exchange shall be distributed to its subscribers who were such within the 12 months prior to the last termination of its certificate of authority, according to such reasonable formula as the Texas Department of Insurance approves. The assets of the Exchange to be distributed upon regulatory approval are those remaining after the discharge of its indebtedness and policy obligations, the payment of any balances due under surplus notes or debentures including accrued interest, and the return of any unused premium.

Rejection of Coverage.

The Subscriber understands and agrees that Exchange has an obligation to its subscribers to maintain strict eligibility and underwriting requirements. Exchange has the right to reject any application for insurance, including this Agreement, and the offer of payment of premium and Surplus Contribution. If such a rejection of coverage occurs after receipt of the Surplus Contribution by Exchange, the Surplus Contribution will be returned to the Subscriber, without payment of interest. An existing subscriber applying for additional lines of coverage is not guaranteed acceptance for those new lines of coverage.

Termination:

This Agreement may be terminated at any time, by the Subscriber or AIF, by terminating all insurance policies issued to the Subscriber, subject to applicable policy provisions and applicable law. In the event that the Subscriber should cease to maintain insurance with Exchange, regardless of whether such insurance is cancelled, rescinded or non-renewed for any reason, you will lose all rights as a subscriber to Exchange.

Acknowledgement of Receipt of Documents.

The Subscriber hereby acknowledges and confirms receipt of and represents and warrants to Exchange and AIF that the Subscriber has read and fully understands the AIF Agreement prior to executing this Agreement.

Binding Agreement.

This Agreement will be accepted by AIF upon receipt of the Subscriber’s executed signature on the cover page. The Subscriber agrees that this Agreement, including the limited power of attorney set forth herein, will apply to all insurance policies for which the Subscriber has applied, or will apply, with Exchange. The subscriber further agrees and understands that upon acceptance of this Agreement by AIF, the terms and conditions of this Agreement and the AIF Agreement will be valid and binding upon AIF, the Subscriber, and each of the parties’ respective personal representatives, administrators, successors, and assigns, as indicated by the Subscriber’s signature on the cover page.

General Provisions.

9.1 Governing Law.

This Agreement and all matters relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the substantive laws of the State of Texas, without giving effect to the principles of the conflict of laws or the rules thereof that might require the application of the laws of another jurisdiction.

9.2 Limitation of Actions.

Subscriber agrees AIF shall not be liable to the Exchange or any of its Subscribers for any act or omission under this Agreement except for loss that is determined by a court to be the direct result of the willful misconduct or gross negligence of AIF or any of its officers, directors, employees, agents or advisors, and Subscriber agree the Exchange will hold AIF harmless from and indemnify it for any loss resulting from any actual or alleged breach of any duty it owes or is claimed to owe the Exchange or its Subscribers in its capacity as attorney in fact, except for breaches that are determined by a court to be the direct result of the willful misconduct or gross negligence of AIF or any of its officers, directors, employees, agents or advisors.

Subscriber further agrees that no owner, officer, director or employee of AIF and no officer, director or employee of the Exchange (each, a “Covered Person”) will be liable to the Exchange or its Subscribers for, and agree to hold each of them harmless from, any actual or alleged breach of any duty they owe or are claimed to owe to the Exchange or its Subscribers in their respective capacities as a Covered Person under this Agreement, except for any breach that is determined by a court to be the direct result of the willful misconduct or gross negligence of such Covered Person. Covered Persons shall be entitled to indemnification and advancement of expenses from the Exchange subject to the same exceptions set forth above. Subscriber understands that the purpose of this provision is to give such persons protection to the maximum extent permitted by law. For the avoidance of doubt, the limitations in this Section 9.2 apply to those actions under this Agreement and are not meant to limit a Subscriber’s rights under their applicable insurance policy issued by the Exchange.

Notwithstanding any dispute or difference of opinion arising under this Agreement, the Subscriber and AIF must fulfill all obligations under the reciprocal insurance contracts exchanged by the Subscribers. Subscriber agrees that it will not assign any benefits to which Subscriber is entitled under this Agreement to any third party.

Notwithstanding any dispute or difference of opinion arising under this Agreement, the Subscriber and AIF must fulfill all obligations under the reciprocal insurance contracts exchanged by the Subscribers. Subscriber agrees that it will not assign any benefits to which Subscriber is entitled under Subscriber’s insurance policy(ies) to any third party.

9.3 Rules of Construction.

When a reference is made in this Agreement to a Section or subsection, such reference shall be to a Section or subsection of this Agreement unless otherwise indicated. Any capitalized terms used in any attachment to this Agreement but not otherwise defined therein shall have the meanings as defined in this Agreement.

Revocable Proxy of Subscriber

The Subscriber appoints the AIF, as agent and attorney with powers of substitution as Subscriber’s lawful proxy to vote and act for Subscriber and in Subscriber’s name at any meeting of the Subscribers of the Exchange.

This proxy is solicited on behalf of the management of the Exchange and will empower the holders to vote on Subscriber’s behalf for any business that may properly come before any meeting of the Subscribers.

Subscriber understands that Subscriber may revoke this proxy by giving the Exchange written notice of Subscriber’s revocation at least 10 days before the date of any meeting of the Subscribers of the Exchange at which this proxy is to be exercised. Subscriber further understands that if Subscriber attends a meeting, Subscriber may revoke this proxy by electing to vote in person. Subject to the foregoing, Subscriber understands that this proxy shall be irrevocable.