Exhibit 10.1(a)
AMENDMENT NO. 1 TO CATASTROPHE EQUITY SECURITIES ISSUANCE OPTION AGREEMENT
This Amendment No. 1 (this "Amendment") is entered into and effective as of
February 15, 1997 with respect to that certain Catastrophe Equity Securities
Issuance Option Agreement dated February 15, 1997 (together with all the
Exhibits and Schedules and all ancillary, related or supporting documents, the
"Agreement") between Xxxxxx Xxxx Educators Corporation, a Delaware corporation
("HM"), and Centre Reinsurance (U.S.) Limited, a Bermuda corporation ("Option
Writer").
RECITALS
WHEREAS, HM and Option Writer have previously entered into the Agreement;
WHEREAS, certain ancillary, related or supporting documents or instruments
to the Agreement have been executed by affiliates of Option Writer; and
WHEREAS, HM, Option Writer and those certain affiliates of Option Writer
are agreeable to amendment the Agreement as set forth below in this Amendment;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, HM and Option Writer agree as follows:
AGREEMENT
1. Agreement Name. The name of the Agreement is hereby changed from
"Catastrophe Equity Securities Issuance Option Agreement" to "Catastrophe Equity
Securities Issuance Option and Reinsurance Option Agreement", and this change
shall apply to all references to the name of the Agreement contained in the
Agreement, its Exhibits and Schedules, and all ancillary, related or supporting
documents or instruments.
2. Section 1.24A. The following Section 1.24A is hereby inserted
immediately following Section 1.24 of the Agreement:
"1.24A "Quota Share Reinsurance Right" means HM's right, but not
obligation, to bind Option Writer to participate in a ten percent (10%) property
quote share reinsurance treaty on the terms set forth in the attached Exhibit
1.24A."
A copy of such Exhibit 1.24A is attached to this Amendment.
3. Section 2.1. The first sentence of Section 2.1 is hereby amended by
inserting "(a)" immediately following the word "exercise" in line 1, and by
inserting "and (b) the Quota Share Reinsurance Right," immediately following the
word "Event," in line 2.
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4. Section 6.8. The first sentence of Section 6.8 is hereby amended by (a)
replacing "be obligated" with "have the option" in line 2, and (b) inserting ",
in the event of such redemption" immediately following the word "and" in line 4.
5. Section 9.2. Section 9.2 is hereby amended by replacing "ZC Resource
Limited" with "Zurich Centre Group LLC" in subpart (ii).
6. Exhibit 1.3, Section 2(a). Section 2(a) of Exhibit 1.3 is hereby
amended by deleting ", Special Redemption Date" from line 13.
7. Exhibit 1.3, Section 3(a). The first sentence immediately following
the heading of Section 3(a) of Exhibit 1.3 is hereby amended by inserting
"Unless a Special Redemption Event shall have occurred," at the beginning of
such sentence, and by inserting "or at any time after the occurrence of a
Special Redemption Event" immediately prior to the comma following the word
"date" in line 4 of such sentence.
8. Exhibit 1.3, Sections 3(e) and (f). Section 3 of Exhibit 1.3 is hereby
amended by deleting Section 3(e) in its entirety, and renumbering former Section
3(f) as new Section 3(e).
9. Exhibit 1.3, Section 4(b). Section 4(b) of Exhibit 1.3 is hereby
amended by renumbering former Section 4(b) as new Section 4(b)(A), and
inserting, immediately following such new Section 4(b)(A), a new Section 4(b)(B)
which reads in full as follows:
"(B) Notwithstanding anything to the contrary in paragraph (a) of this
Section 4, at any time after the occurrence of a Change of Control Conversion
Event, any holder of Series A Preferred Shares shall be entitled, at the option
of such holder, to cause any or all of such shares to be converted into shares
of Common Stock of the Corporation at the conversion rate set forth in paragraph
(d) of this Section 4 as of the Proposed Conversion Date specified in such
holder's notice to the Corporation delivered pursuant to paragraph (e) of this
Section 4. Such notice shall be effective only to the extent that a Change of
Control Conversion Event has occurred prior to the delivery of such notice."
10. Exhibit 1.3, Section 4(c). Section 4(c) is hereby amended by adding
the following sentence to the end of such Section: "Notwithstanding the
foregoing, with respect to a notice of conversion which is superseded by a
notice of redemption, such notice of conversion shall again become effective if
the notice of redemption is subsequently revoked, and the Conversion Date
pursuant to such notice of conversion shall occur on the later of (a) thirty
(30) days following revocation of the notice of redemption, or (b) the Proposed
Conversion Date originally set forth in the notice of conversion.
11. Exhibit 1.3, Section 4(d). Section 4(d) of Exhibit 1.3 is hereby
amended to read in full as follows:
"(d) Conversion Rate. For purposes of conversion of Series A Preferred
Shares to shares of Common Stock pursuant to this Section 4 other than a Special
Conversion Event
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under part A of paragraph (b) of this Section 4, each Series A
Preferred Share shall be converted into the number of Common Stock shares
resulting from dividing (i) the Original Value of Such Series A Preferred Share,
plus Unpaid Dividend Yield to and including the Conversion Date, by (ii) the
greater of (A) the product of the Liquidity Factor multiplied by the Market
Price at Conversion, or (B) the product of the Liquidity Factor multiplied by
the Minimum Book Value Price (such greater value to be referred to as the
"Conversion Price")."
12. Exhibit 1.3, Section 4(e). The second paragraph of Section 4(e) is
hereby amended by inserting "part A of" immediately following the word "to" in
line 1.
13. Exhibit 1.3, Section 4(j)(A). The second paragraph of Section 4(j)
(A) is hereby amended by deleting "(e) or" from the last line of such paragraph.
14. Exhibit 1.3, Section 8. Section 8 of Exhibit 1.3 is hereby amended
by:
(a) Adding the following new definitions (where alphabetically
appropriate):
"Change of Control Conversion Event" means the occurrence of a Change of
Control without the written consent of the holders of more than 50% of the
Series A Preferred Shares then outstanding.
"Liquidity Factor" means, with respect to any conversion other than
pursuant to a Special Conversion Event, an amount equal to (i) 0.90 if the
Conversion Date for such conversion falls 60 days or more after a Change of
Control Conversion Event, or (ii) 1.00 if the Conversion Date does not fall 60
days or more after the occurrence of a Change of Control Conversion Event.
(b) Deleting ", Special Redemption Date" from line 9 of the definition of
"Dividend Yield".
(c) Deleting "after the first anniversary but" from line 4 of the
definition of "Redemption Price".
(d) Replacing "HM" with "the Corporation" in line 2 of the definition of
"Special Conversion Event".
(e) Revising the definition of "Special Redemption Event" to read in full
as follows:
"Special Redemption Event" means the earlier to occur of (i) a Change of
Control Conversion Event, or (ii) any date on which the Company submits to the
holders of its Common Stock a proposal for a Change of Control or any other
matter which requires the affirmative vote of the holders of the Series A
Preferred Shares at the time outstanding, acting as a single class.
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15. Conformed Copies. The amendments to the Agreement described in the
Amendment shall be contained in conformed copies of the Agreement, its Exhibits
and Schedules to be exchanged between the parties. No conformed copies of any
ancillary, supporting or related documents or instruments other than the
Exhibits and Schedules shall be delivered, it being understood that any such
ancillary, supporting or related documents or instruments remain in full force
and effect subject to the amendments set forth above.
16. Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned parties have caused this Amendment to be
duly executed as of the date first written above.
Xxxxxx Xxxx Educators Corporation Centre Reinsurance (U.S.) Limited
/s/ Xxxx X. Xxxxxx /s/ Xxxx Xxxxxxx
--------------------------------- ---------------------------------
Xxxx X. Xxxxxx Xxxx Xxxxxxx
President Senior Vice President
/s/ Xxxxxx X. Xxxx
---------------------------------
Xxxxxx X. Xxxx
Executive Vice President
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Exhibit 1.24A
Xxxxxx Xxxx Educators Corporation 10% Quota Share Treaty Option
In connection with the valid exercise, if any, by Xxxxxx Xxxx Educators
Corporation ("HMEC") of the Securities Issuance Option as described in the
Catastrophe Equity Securities Issuance Option and Reinsurance Option Agreement
dated as of February 15, 1997 between HMEC and Centre Reinsurance (U.S.) Limited
("Centre Re"), Centre Re shall grant, at the time of such exercise by HMEC, to
Xxxxxx Xxxx Insurance Company, Allegiance Insurance Company, Teachers Insurance
Company, and such other insurance company subsidiaries of HMEC as HMEC and
Centre Re shall agree in writing (collectively, the "Optionees"), an irrevocable
option (the "Option") to obligate Centre Re, or its appropriate affiliate as set
forth below, to participate in a 10% property quota-share reinsurance treaty in
accordance with the terms and conditions specified below. The Option may be
exercised by any Optionee by giving notice to Centre Re within five (5) business
days following HMEC's valid exercise of said Securities Issuance Option. If the
Option is so exercised, Centre Re shall enter into a 10% Quota Share Treaty,
substantially on the terms specified below. The Option may not be assigned by
the Optionees, but may be assigned by Centre Re without the consent of the
Optionees to an affiliate of Centre Re.
10% Quota Share Treaty ("Reinsurance Agreement") terms and conditions:
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Reinsurer: Zurich Reinsurance (North America), Inc., Centre Re or
one of its affiliates with equal of better credit
ratings and admitted status (or appropriate statutory
security if non-admitted in respective jurisdiction,
at no additional cost to the Reinsured).
Reinsured: Xxxxxx Xxxx Insurance Company, an Illinois insurance
company; and/or Allegiance Insurance Company, a
California insurance company; and/or Teachers
Insurance Company, an Illinois insurance company; and
such other HMEC insurance company subsidiaries as may
be agreed in writing by Centre Re and HMEC.
Effective Date: The Effective Date of the Reinsurance Agreement shall
be the first day of the calendar quarter next
following the receipt by Centre Re of the Reinsured's
notice of the exercise of the Option.
Term: One (1) year from the Effective Date.
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Expiration: At expiration of the Term, Reinsurer shall remain
liable for run-off with respect to all Business
Covered written or renewed during the Term or which
constitutes prospective inforce business at the
Effective Date, including Covered Business renewed by
the request of regulatory authorities, if any.
Run-off limited to twelve (12) months plus odd time,
not to exceed eighteen (18) months in all except as
respects Course of Construction/Builders' Risk
coverages written for the term of a job, for which the
Reinsurer's liability will extend for a total run-off
period, including any extension as original, until job
completion but no more than thirty-six (36) months
from the date of expiration of the Term.
Cancellation: If at any time the Reinsurer becomes insolvent, is
placed in conservation, rehabilitation, or
liquidation, has a receiver appointed, or is acquired
or controlled by, merged with, or reinsures its entire
business with any non-affiliated company or
corporation, the Reinsured will have the right to
cancel this Reinsurance Agreement (with return of
premium as applicable) by giving 15 days notice in
writing. Similarly, should there be a greater than 50%
change in ownership of the Reinsured, excluding
changes in control caused by sales of the Reinsured's
shares under the direct or indirect control of the
Reinsurer, the Reinsurer will have the option to
cancel this Reinsurance Agreement by giving 30 days
notice in writing.
Business Covered: All property and casualty insurance business which (1)
constitutes prospective business in force (and for
which premiums are then unearned) at the Effective
Date which business can be subjected to the
Reinsurance Agreement through a portfolio transfer,
and (2) is written or renewed by the Reinsured during
the Term, including renewal business requested by the
regulatory authorities, if any. With respect to
prospective business inforce at the Effective Date
with a policy period of greater than one year, the
Reinsurer shall only be liable for losses that occur
during the Term.
Exclusions: As attached.
Territory: To follow the Reinsured's policies.
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Limit: 10% quota share of Business Covered, subject to an
aggregate limit of 250% of the difference of Premium
ceded under the Reinsurance Agreement minus the Ceding
Commission, as illustrated by the following formula:
Limit = 2.5 x (Premium - Ceding Commission)
Premium: Pro-rata of (a) gross written premium income on
Business Covered that is written or renewed during the
Term, and (b) premiums earned after the Effective Date
on Business Covered which constitutes prospective
business inforce at the Effective Date (but excluding
premiums earned after the end of the Term on such
prospective inforce business with policy periods of
greater than one year); provided that Premium ceded
shall be subject to a maximum of 110% of the
Reinsured's gross written premium during the one year
period immediately preceding the Effective Date.
Ceding Commission: 20% flat rate of Premium ceded under the Reinsurance
Agreement.
Funding of Reserves: Any non-admitted Reinsurer will provide a clean,
irrevocable, and unconditional Letter of Credit
(and/or OCA's as respects Canadian business) that may
be adjusted no more than quarterly. Such Letter of
Credit will include losses and loss expenses paid by
the Reinsured but not yet recovered from the
Reinsurer, or not reported to the Reinsurer, reserves
for losses and loss expenses incurred outstanding,
reserves for losses and loss expenses incurred but not
reported and unearned premium reserves.
Alternatively, a Trust Agreement which meets the
provisions of Regulation No. 114 of the New York
Insurance Department can be provided to satisfy the
above funding.
Cash Losses: Remittance within five working days for individual
losses in excess of $100,000 for 100% of the ground up
loss.
Reports and Remittances: Report and remittances within 60 days following the
end of each quarter. Amounts due the Reinsured within
30 days following receipt of report. Additionally, the
Reinsured will provide a quarterly report showing
unearned premium and outstanding losses.
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Original Conditions
and Liability of
the Reinsurer: The liability of the Reinsurer under each and every
policy ceded to this Reinsurance Agreement will be
subject in all respects to the same interpretations,
terms, rates, conditions, waivers, modifications,
alterations and cancellations as the respective
policies of the Reinsured to which this Reinsurance
Agreement relates.
Other Provisions: Access to Records Clause
Agency Clause
Aon Re Inc. Intermediary Clause
Arbitration Clause
Currency Clause
Definition of Loss Occurrence (both property and
casualty)
Delays, Errors or Omissions Clause
Extra Contractual Obligations (subject to the Limit)/
Excess of Policy Limits (subject to the Limit)
Entire Agreement / Amendment Clause - Xxxxxx Xxxx
Educators Corporation Catastrophe Equity
Securities Insurance Option and Reinsurance
Option Agreement
Extended Termination Clause (property only)
Federal Excise Tax Clause
Insolvency Clause - for IL and CA domiciled Companies
Loss Notices & Settlements Clause
Net Retained Liability Clause
Offset Clause - this Reinsurance Agreement only
Reports and Remittances Clause
Salvage and Subrogation Clause
Service of Suit Clause
Taxes Clause
Ultimate Net Loss Clause (incuding ALAE, subject to
the Limit)
Intermediary: Aon Re Inc.
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EXCLUSIONS
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Unless otherwise agreed between HMEC and Centre Re, no reinsurance indemnity
will be afforded under this Agreement for:
A. Loss or liability excluded by the Pools, Associations, and Syndicates
Exclusion Clause attached to this Agreement.
B. Loss or liability excluded by the Nuclear Incident Exclusion Clauses -
Physical Damage - Reinsurance U.S.A. and Canada, and Nuclear Energy Risks
Exclusion Clause (Reinsurance) 1994 attached to this Agreement, or as may
be revised hereafter by the Lloyd's Underwriter's Non-Marine Association.
C. Loss or damage occasioned by war, invasion, 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; however, the foregoing will not apply to reinsured policies
containing a standard war exclusion clause.
D. Pollution, seepage and/or contamination. This exclusion does not apply,
however, in any jurisdiction where it is illegal to exclude pollution,
seepage and/or contamination or where there has been a final court ruling
that the Company's pollution, seepage, and/or contamination exclusion is
not valid or enforceable.
If any risks reinsured hereunder as set forth in the Business Covered Sections
but falling within the scope of the above exclusions are assigned to the
reinsured under an Assigned Risk Plan the coverage afforded by this Agreement
will apply to such risks, but only for the policy limits prescribed by said
Plan, and subject to the limits of this Agreement.
The exclusions enumerated above, with the exception of A, B, and C will not
apply when they are merely incidental to the main operations of the insured,
provided such main operations are covered by the Reinsured and are not
themselves excluded from the scope of this Agreement.
Should the Reinsured, by reason of an inadvertent act, error, or omission, be
bound to afford coverages excluded hereunder the Reinsurer will waive the
exclusion(s) with the exception of A, B, and C. The duration of said waiver will
not extend beyond the time that notice of such coverage has been received by the
home office underwriting department of the Reinsured plus the minimum time
period required thereafter for the Reinsured to terminate such coverage.
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