Exhibit 10.15
AGREEMENT
This Agreement is made on 24 December 2003 between WINTERTHUR SWISS INSURANCE
COMPANY, a joint-stock company incorporated under the laws of Switzerland
("Winterthur"), and XL INSURANCE (BERMUDA) LTD, a company incorporated under the
laws of Bermuda ("XL").
WHEREAS Winterthur and XL are parties to the Second Amended and
Restated Agreement for the Sale and Purchase of Winterthur International, dated
as of 15 February 2001 ("SPA"), and capitalized terms used herein shall have the
same meanings as in the SPA (unless otherwise indicated);
WHEREAS: (i) there has not been delivered the Completion Financial
Information as required by paragraph 3.1 of Part 2 of Schedule 5 to the SPA;
(ii) Winterthur has delivered certain unaudited financial information for the
Operations as at 30 June 2001; and (iii) Winterthur and XL have been unable to
reach agreement as to the Completion Balance Sheet but have been able to reach
agreement as respects certain other matters as specifically set forth below
solely to settle the Purchase Price, the Initial Net Reserves Amount and the
Initial Net Premium Receivable (as defined in SCHEDULE B hereto).
NOW, THEREFORE, Winterthur and XL hereby agree as follows:
1. DETERMINATION OF PURCHASE PRICE AND INITIAL NET RESERVES AMOUNT
1.1. (a) Winterthur and XL agree the following amounts for purposes of
determining the amount of the Purchase Price and establishing the
Initial Net Reserves Amount and the Initial Net Premium Receivable:
(i) the Pro-Forma Net Asset Value as of 30 June 2001 is US$
234,995,000;
(ii) the Premium (notwithstanding Clause 3.1.5 of the SPA) is US$
51,483,700 (after giving effect to the exclusion of certain
accident and health business, the net amount is US
$31,983,700);
(iii) the Purchase Price is US$ 330,157,700;
(iv) the Initial Net Reserves Amount is US$ 1,509,816,000;
(v) the Initial Net Premium Receivable is US$ 744,266,300; and
(vi) solely for the purpose of determining the Initial Net
Reserves Amount as contemplated by SCHEDULE A hereto, the
Purchase Price and the Initial Net Premium Receivable, the
line items listed on such SCHEDULE A shall be deemed to be
the amounts set forth in such SCHEDULE A;
provided, however, that nothing in this Agreement (other than the
determination of the Initial Net Reserves Amount and the Initial Net
Premium Receivable) shall affect the determination of the Seasoned Net
Reserves Amount or the Seasoned Net Premiums Receivable Balance,
including, without limitation, determination of the date and/or rate
to be used for foreign exchange conversion of any amount in connection
therewith.
(b) Winterthur and XL also agree that the Independent Actuary
need not be instructed under Clause 4.3.5 of the SPA.
1.2. Except as expressly provided herein, nothing in this Agreement shall
affect or be used as evidence with respect to determination of the
rights and/or obligations of XL or Winterthur as respects any
Specified Claim or any other claim under or related to the SPA
provided, however, that XL acknowledges that, upon timely receipt by
the parties of the payments referred to in Section 2 of this
Agreement. Winterthur shall have no continuing obligation under the
SPA to deliver Completion Financial Information (but such
acknowledgement is without prejudice to any Specified Claim or such
other claim XL may have for breach of such provisions prior to such
date). For the avoidance of doubt, this Section is without prejudice
to the double claims provisions in Clauses 8.6 and 8.2.7 of the SPA.
1.3. No agreement has been reached with respect to whether or not there has
been or the extent to which there has been an adjustment to the Net
Asset Value of the relevant Operations pursuant to Clause 3.6 of the
SPA or any other adjustment to the Purchase Price to take account of
any breach of the SPA by any Seller.
1.4. XL hereby informs Winterthur that, except for the purposes expressly
set forth in Section 1.1 above, XL has not agreed to the information
on Schedule A.
2. PAYMENTS
2.1. Payment Agreement
Winterthur and XL hereby agree that:
(a) all conditions to release of the Retention Amount and the
Income (these terms and other capitalized terms in this
Section 2.1, not otherwise defined, are used as defined in
the Payment Agreement dated 24 July 2001) are satisfied or
waived; and
(b) Winterthur and XL shall deliver to the Escrow Agent, as soon
as possible on or after the date of this Agreement, the
Transfer Notice in the form set out in Schedule E hereto to
effect to the timely realization and distribution of the
Fund to be received no later than noon, Bermuda time, 31
December 2003, as follows:
(i) 74.84232% of the Retention Amount to XL;
(ii) 25.15768% of the Retention Amount to Winterthur;
(iii) 87.42116% of the Income to XL; and
(iv) 12.57884% of the Income to Winterthur.
(c) Receipt of the payments referred to in Section 2.1(b) above
and Section 2.2 below by Winterthur or XL as appropriate
shall constitute full and final satisfaction of Winterthur
and XL's respective obligations and rights in respect of the
payment of the Purchase Price, without prejudice to Clause
3.5 of the SPA.
2.2. Payment on Account
Winterthur agrees to pay, so that such payment is received no later than
noon, Bermuda time, 31 December 2003, the sum of US$40 million (the
"Advanced Amount") to XL pending the seasoning of net reserves set out in
the SPA, subject to the following provisions:
(a) In the event that the Seasoned Net Reserves Payment is payable by
Winterthur to XL and the total of the Seasoned Net Reserves Payments
(the "SNRP Total") is greater than the Advanced Amount, the Advanced
Amount shall be deducted from the amount of the SNRP Total and the
balance (for the purposes of this Section 2.2, the "Balance") shall be
paid by Winterthur to XL in accordance with the provisions for payment
set out in Clause 4.3.1 of the SPA. (For the avoidance of doubt, the
Balance shall be paid with interest accruing on the Balance and not on
the Seasoned Net Reserves Payment as a whole at the rate set out in
Clause 4.3.1 of the SPA).
(b) In the event that the Seasoned Net Reserves Payment is payable by
Winterthur to XL and the SNRP Total is less than the Advanced Amount,
the Seasoned Net Reserves Payments shall not be paid by Winterthur to
XL and instead XL shall pay the amount by which the SNRP Total is less
than the Advanced Amount in US$ to Winterthur within five Business
Days of the agreement or determination of the Seasoned Net Reserves
Amount plus interest thereon (from and including the End Date to but
excluding the date such payment is made) at a non-compounding rate per
annum of 0.5 per cent above Base Rate.
(c) In the event that no Seasoned Net Reserves Payment is payable under
the terms of the SPA, XL shall repay to Winterthur within five
Business Days of the agreement or determination of the Seasoned Net
Reserves Amount an amount in US$ equal to the Advanced Amount plus
interest thereon (from and including the End Date to but excluding the
date such payment is made) at a non-compounding rate per annum of 0.5
per cent above Base Rate.
(d) In the event that the Seasoned Net Reserves Payment is payable by XL
to Winterthur, the Seasoned Net Reserves Amount shall be increased by
the Advanced Amount and the aggregate amount shall be paid by XL to
Winterthur in accordance with the provisions for payment set out in
Clause 4.3.3 of the SPA.
2.3. Limited Recourse Receivables Financing Facility Agreement
In relation to certain amounts owing to Winterthur:
(a) XL shall procure that Winterthur International (Re) repays CHF
127,087,422.75 in cash to Winterthur so that such funds are
received no later than noon, Bermuda time, 31 December 2003,
which payment shall be deemed to be a payment under the Limited
Recourse Receivables Financing Facility Agreement, together with
interest from 1 July 2002 at a non-compounding rate per annum of
0.5 per cent above the Base Rate; and
(b) XL Insurance shall procure that Winterthur International (Re)
repays CHF 42,362,474.25 in cash, which payment shall be deemed
to be a payment under the Limited Recourse Receivables Financing
Facility Agreement, together with interest from 1 July 2002 at a
non-compounding rate per annum of 0.5 per
cent above the Base Rate to Winterthur simultaneously with the
entry by Winterthur and each of WHCL, Winterthur International
(Re), XL Insurance Switzerland, XL Insurance America, Inc., XL
Select Insurance Company and XL International (Bermuda) Ltd into
reinsurance agreements and related claims handling agreements
relating to certain Asbestos Liabilities (which agreements shall
not amend or vary the terms of the SPA and the rights or
obligations of any person under the SPA, including, without
limitation, under Clauses 9.1.1 and 9.1.2 of the SPA, shall in no
way be prejudiced by the entering into of or the giving effect to
such agreements or by the absence or removal of cover under or
termination of such agreements) all in a form to be agreed
between the parties provided that in the event that such
reinsurance agreements and related claims handling agreements
have not been entered into prior to the making of the payment to
be made under Clause 4.3 of the SPA, such amount shall be repaid
in accordance with the provisions of the Limited Recourse
Receivables Financing Facility Agreement. The parties agree to
use reasonable endeavours to agree and enter into such
reinsurance and related agreements prior to 29 February 2004.
2.4. Commutation of the CAT Tower
(a) Winterthur agrees and XL agrees to procure that the commutation
agreement (the "Commutation Agreement") in the form set out in
SCHEDULE C to this Agreement shall be entered into as soon as
possible but in any event prior to 31 December 2003;
(b) Winterthur agrees and XL (on behalf of Winterthur International
(Re)) agree that the CHF 19,500,000 million referred to in the
Commutation Agreement shall be repaid by Winterthur (together
with interest of CHF 605,522) by way of set off against the
amount to be repaid by or of behalf of Winterthur International
(Re) pursuant to Section 2.3(a) above.
2.5. The parties shall deliver their respective signed counterparts of the
Transfer Notice to the Escrow Agent as of the opening of business,
London time, on 29 December 2003.
2.6. All payments pursuant to this Section 2 shall be made by wire transfer
of immediately available funds.
3. AMENDMENTS TO SPA
Winterthur and XL agree to amend the SPA as follows subject to (i) timely
receipt of payments in accordance with Section 2 except for Section 2.1(b);
and (ii) timely delivery of the Transfer Notice in accordance with Section
2.5:
3.1. The time limit relating to Specified Claims in Clause 8.2.1(ii)
(excluding sub-clauses (a) and (b)) of the SPA are extended from nine
months to eleven months.
3.2. The provisions relating to seasoning of premiums as set forth on
SCHEDULE B hereto are incorporated into the SPA on the basis that
reference therein to "the Agreement of which this Schedule forms part"
shall be deemed to be a reference this Agreement; and
3.3. Solely for the purposes of determining the unearned premium reserve as
respects the Seasoned Net Reserves Amount pursuant to Clause 4.2 of
the SPA, the loss ratio is seventy-one percent (71%) and the
definition of "Reserves" in the SPA is amended as set forth in
SCHEDULE D hereto.
4. MISCELLANEOUS
4.1. Winterthur and XL shall and XL shall procure that Winterthur
International (Re) shall enter into a letter in the form set out in
Schedule F (the "SRA Amendment Letter") relating to each of the
Sellers Retrocession Agreements as soon as possible but in any event
prior to 31 December 2003, and the Sellers Retrocession Agreements as
amended shall be the Sellers Retrocession Agreement for the purposes
of the SPA. The amendments referred to in the SRA Amendment Letter
shall become effective at the same time as the amendments to the SPA
referred to in Section 3.
4.2. The parties will use their best endeavours to work together in good
faith with a view to agreeing:
(a) a reduction in the "Amount of Cover" as set out in the schedule
to each Sellers Retrocession Agreement;
(b) an adjustment to the "Amount of Deductible" as set out in the
schedule to each Sellers Retrocession Agreement;
(c) a satisfactory solution to the commutation of the Sellers
Retrocession Agreements; and
(d) a satisfactory resolution as to whether there should be an
extension in time for seasoning reinsurance receivables.
4.3. Except as expressly provided herein, nothing herein shall affect
Winterthur's or XL's rights or obligations under the SPA or any
agreement entered into pursuant to the SPA or any Local Agreement,
including, without limitation, in respect of any indemnities,
Specified Claims, other claims under or in respect of the SPA and the
Seasoned Net Reserves Amount, or under any other agreement to which
Winterthur and XL are parties or under any Sellers Retrocession
Agreement. For the avoidance of doubt and notwithstanding any
provision to the contrary therein, nothing herein or any payment made
pursuant hereto shall give rise to commutation or other termination or
a release of parties to either Sellers Retrocession Agreement, which
shall continue in effect.
4.4. Clauses 18.4, 18.8, 18.11 (insofar only as payments required by this
Agreement are made after the date on which such payments are to be
made pursuant to this Agreement), 18.12, 18.15, 18.16, 18.17, 18.18
and 18.19 of the SPA shall apply to this Agreement as if fully set
forth herein (except as respects references therein to other Clauses
of the SPA).
IN WITNESS WHEREOF this Agreement has been duly executed.
SIGNED by /s/ XXXX X. XXXXX /s/ XXXX XXXXXX
----------------- ---------------
on behalf of WINTERTHUR SWISS INSURANCE COMPANY:
SIGNED by /s/ XXXXX XXXXX
------------------
on behalf of XL INSURANCE (BERMUDA) LTD.:
SCHEDULE B
PREMIUM SEASONING - SPA AMENDMENTS
DEFINITIONS
"SEASONED NET PREMIUMS RECEIVABLE BALANCE" means the sum of:
(i) the INITIAL NET PREMIUM RECEIVABLE, being US$ 744,266,300, calculated as
follows:
(a) the premiums and insurance balances receivable (net of bad debt
provisions) as shown in Schedule A to the Agreement of which this
Schedule forms part ("SCHEDULE A") less reinsurance balances payable
and funds held under reinsurance agreements as shown in Schedule A;
less
(b) 29% of the aggregate of the unearned premium as shown in Schedule A
less the prepaid reinsurance premiums as shown in Schedule A; plus
(c) the deferred acquisition costs as shown in Schedule A;
For the avoidance of doubt this is calculated as follows:
US$'000's 1,350,587 - 501,039 - 6,762 - (29% *(824,286-264,556)) + 63,802 =
744,266.
(ii) plus any positive, or, as the case may be, less any negative
adjustment calculated as follows:
(a) 71% of the aggregate of:
(i) the unearned premium less the prepaid reinsurance premiums in
each case to the extent solely relating to Relevant Operations,
as determined in accordance with US GAAP and as identified as at
the End Date calculated as at the Effective Time; less
(ii) the unearned premiums as shown in Schedule A less the prepaid
reinsurance premiums as shown in Schedule A;
plus
(b) the aggregate of:
(i) the premiums and insurance balances receivable (net of bad debt
provisions and, for the avoidance of doubt, net of any
commissions) less reinsurance balances payable and funds held
under reinsurance agreements (and for the avoidance of doubt,
this amount is net of any commissions) in each case to the extent
relating solely to the Relevant Operations, as determined in
accordance with US GAAP identified as at the End Date; less
(ii) the unearned premium less the prepaid reinsurance premiums in
each case to the extent solely relating to Relevant Operations,
as determined in accordance with US GAAP and as identified as at
the End Date calculated as at the Effective Time; plus
(iii) the deferred acquisition costs in each case to the extent solely
relating to Relevant Operations, as determined in accordance with
US GAAP and as identified as at the End Date calculated as at the
Effective Time
less
(c) US$ 346,858,000 being the aggregate of
(i) the premiums and insurance balances receivable (net of bad debt
provisions and, for the avoidance of doubt, net of any
commissions) less reinsurance balances payable and funds held
under reinsurance agreements (and for the avoidance of doubt,
this amount is net of any commissions) as shown in Schedule A;
less
(ii) the unearned premium less the prepaid reinsurance premiums as
shown in Schedule A; plus
(iii) the deferred acquisition costs as shown in Schedule A.
For the avoidance of doubt item (ii)(c) has been calculated using
Schedule A as follows:
USD `000s (1,350,587 - 501,039 - 6,762) less (824,286 - 264,556) plus
(63,802) = 346,858
for the avoidance of doubt, each of (ii)(a) and (ii)(b) can be negative as well
as positive.
In calculating the Seasoned Net Premiums Receivable Balance, the classification,
characterization or provision of any amount shall be consistent with the
classification, characterization or provision used in calculating the Initial
Net Premium Receivable.
SUBSTANTIVE PROVISION
4.4 DETERMINATION OF THE SEASONED NET PREMIUMS RECEIVABLE BALANCE
4.4.1 Subject to Clause 18.4 from and after Completion and until the
End Date XL Insurance shall make available to Winterthur,
Winterthur's Accountants and Winterthur's Actuary during normal
business hours:
(i) all studies relating to premiums receivable, commissions
or reinsurance premium ceded prepared by or on behalf of
XL Insurance to the extent relating to Relevant
Operations; and
(ii) all auditor's letters to management to the extent
relating to net premiums subject to the Initial Net
Premiums Receivable Balance which have been completed by
or on behalf of XL Insurance during such period.
4.4.2 Within 30 Business Days following the End Date XL Insurance
shall deliver to Winterthur a written statement setting forth in
reasonable detail its calculation of the Seasoned Net Premiums
Receivable Balance (the "SEASONED NET PREMIUMS RECEIVABLE
STATEMENT").
4.4.3 In order to enable Winterthur, Winterthur's Accountants and
Winterthur's Actuary to review the Seasoned Net Premiums
Receivable Statement, XL Insurance shall keep up-to-date and
make available to Winterthur, Winterthur's Accountants and
Winterthur's Actuary its books, records, contracts and
agreements relating to the Relevant Operations during normal
business hours and co-operate with them with regard to their
review of the Seasoned Net Premiums Receivable Statement, XL
Insurance agrees insofar as it is reasonable to do so to make
available the services of the employees of the relevant
Associated Companies of XL Insurance to assist Winterthur,
Winterthur's Accountants and Winterthur's Actuary to undertake
the matters contemplated by this Clause 4.4. XL Insurance shall
procure that after the preparation of the Seasoned Net Premiums
Receivable Statement, XL Insurance's Accountants and XL
Insurance's Actuary shall give Winterthur, Winterthur's
Accountants and Winterthur's Actuary access to XL Insurance's
Accountants' and XL Insurance's Actuary's working papers and
files (with the right to take copies at Winterthur's expense,
subject to Winterthur entering into an acceptable
confidentiality undertaking) and personnel which or who are (and
only to the extent) relevant to the review of the Seasoned Net
Premiums Receivable Statement by Winterthur, Winterthur's
Accountants and Winterthur's Actuary subject to Winterthur
providing or procuring the provision of a hold harmless
undertaking to XL Insurance's Accountants and XL Insurance's
Actuary.
4.4.4 Within 30 Business Days of receipt by Winterthur of the Seasoned
Net Premiums Receivable Statement Winterthur may give written
notice to XL Insurance stating that it disagrees with the
Seasoned Net Premiums Receivable Statement, together with
reasons for the disagreement in reasonable detail and
quantifying the amount of such disagreement (for the purpose of
this Clause 4.4 the "WINTERTHUR DISAGREEMENT NOTICE"). In the
absence of such notice within such period, the Seasoned Net
Premiums Receivable Statement shall be final and binding on the
parties for all purposes.
4.4.5 If Winterthur gives a valid Winterthur Disagreement Notice
within such 30 Business Days Winterthur and XL Insurance shall
attempt in good faith to reach agreement in respect thereto. If
they reach agreement then the agreed amount shall be finally and
conclusively the Seasoned Net Premiums Receivable Balance for
the purpose of this Agreement and if they are unable to do so
within 10 Business Days of receipt by XL Insurance of the
Winterthur Disagreement Notice then either Winterthur or XL
Insurance may by notice in writing to the other require that the
calculation of the Seasoned Net Premiums Receivable Balance be
referred to the Independent Actuary (an "ACTUARY APPOINTMENT
NOTICE"). Within 10 Business Days of receipt by a party of the
Actuary Appointment Notice each of Winterthur and XL Insurance
shall give written notice to the other and to the Independent
Actuary of its proposed Seasoned Net Premiums Receivable
Balance.
4.4.6 The Independent Actuary shall be a member of the Casualty
Actuarial Society ("CAS") or a Fellow of the Institute of
Actuaries ("FIA") and shall be instructed to independently
determine the Seasoned Net Premiums Receivable Balance in
accordance with the principles and standards of practice of the
CAS or the FIA as the case may be and the American Academy of
Actuaries and to make its determination as soon as is reasonably
practicable. The procedures of the Independent Actuary shall be
determined by the Independent Actuary, but shall:
(i) give the parties a reasonable opportunity to make
written and oral representations to them;
(ii) require that the parties supply each other with a copy
of any written representations at the same time as they
are made to the Independent Actuary; and
(iii) permit each party to be present while oral submissions
are being made by any other party.
4.4.7 The determination of the Independent Actuary shall be made in
writing and sent to the parties at such time as it shall
determine. The Independent Actuary shall act as an expert and
not as an arbitrator and his or her determination shall be final
and binding on the parties as provided in Clause 4.4.8.
4.4.8 If the Seasoned Net Premiums Receivable Balance as determined by
the Independent Actuary is closer to the amount proposed by XL
Insurance than the amount proposed by Winterthur (in each case
pursuant to the last sentence of Clause 4.4.5) then for the
purpose of this Agreement the Seasoned Net Premiums Receivable
Balance shall be finally and conclusively deemed to be the
amount so proposed by XL Insurance. If the Seasoned Net Premiums
Receivable Balance as determined by the Independent Actuary is
closer to the amount proposed by Winterthur than the amount
proposed by XL Insurance (in each case pursuant to the last
sentence of Clause 4.4.5) then for the purpose of this Agreement
the Seasoned Net Premiums Receivable Balance shall be finally
and conclusively deemed to be the amount so proposed by
Winterthur
4.4.9 The parties shall co-operate with the Independent Actuary and
comply with its reasonable requests made in connection with the
carrying out of its duties under this Agreement. In particular
without limitation XL Insurance shall keep up-to-date and
subject to reasonable notice make available to Winterthur,
Winterthur's Accountants, Winterthur's Actuary and the
Independent Actuary its books, records, contracts and agreements
relating to the Relevant Operations during normal business hours
during the period from the appointment of the Independent
Actuary down to the making of the determination by the
Independent Actuary.
4.4.10 Subject to Clause 4.4.11 nothing in this Clause 4.4 shall
entitle a party or the Independent Actuary access to any
information or document which is protected by legal professional
privilege or any other legal obligation of confidentiality or
which has been prepared by the other party or its accountants,
actuaries and other professional advisers with a view to
assessing the merits of any claim or argument.
4.4.11 A party shall not be entitled by reason of Clause 4.4.10 to
refuse to supply such part or parts of documents as contain only
the facts on which the relevant claim or argument is based.
4.4.12 Each party shall and shall procure that its accountants,
actuaries and other advisers shall and shall instruct the
Independent Actuary to keep all information and documents
provided to them pursuant to this Clause 4.4 confidential and
shall not use the same for any purpose except for use in
connection with the matters contemplated by this Clause 4.
4.5. SEASONED NET PREMIUMS RECEIVABLE PAYMENT
4.5.1 If the Seasoned Net Premiums Receivable Balance as finally
agreed or determined pursuant to Clause 4.4 is greater than 105
per cent of the Initial Net Premiums Receivable Balance XL
Insurance shall or shall procure that other Purchasers as
appropriate pay to Winterthur or other Sellers as appropriate
within five Business Days of such agreement or determination an
amount in US Dollars equal to 100 per cent of the difference
between:
(i) the Seasoned Net Premiums Receivable Balance; and
(ii) 105 per cent of the Initial Net Premiums Receivable
Balance, plus interest thereon (from and including the
End Date, to but excluding the date such payment is
made) at a non-compounding rate per annum of 0.5 per
cent above the Base Rate.
4.5.2 If the Seasoned Net Premiums Receivable Balance as finally
agreed or determined pursuant to Clause 4.4 is less than 95 per
cent of the Initial Net Premiums Receivable Balance Winterthur
shall or shall procure that other Sellers as appropriate pay to
XL Insurance or other Purchasers as appropriate within five
Business Days of such agreement or determination an amount in US
Dollars equal to 100 per cent of the difference between:
(i) 95 per cent of the Initial Net Premiums Receivable
Balance; and
(ii) the Seasoned Net Premiums Receivable Balance, plus
interest thereon (from and including the End Date to but
excluding the date such payment is made) at a
non-compounding rate per annum of 0.5 per cent above the
Base Rate.
