Exhibit 10.70
QUOTA SHARE RETROCESSION CONTRACT
issued to
SCPIE INDEMNITY COMPANY
(an insurance company registered in California
whose address is 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000,
Xxx Xxxxxxx, Xxxxxxxxxx, 90067-1712)
AMERICAN HEALTHCARE INDEMNITY COMPANY
(an insurance company registered in Delaware whose address is
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000,
Xxx Xxxxxxx, Xxxxxxxxxx, 90067-1712)
and
AMERICAN HEALTHCARE SPECIALTY INSURANCE COMPANY
(an insurance company registered in Arkansas whose address is
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000,
Los Angeles, California, 90067-1712)
(collectively, the "Company")
by
GOSHAWK REINSURANCE LIMITED
00 Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxx XX00
(xxx "Reinsurer")
ARTICLE 1
DEFINITIONS AND INTERPRETATION
A. In this agreement the following words and expression shall have the
following meanings unless the context requires otherwise:
"Business Day" means a day (excluding Saturdays and Sundays) on which
commercial banks generally are open in Los Angeles, California for the
transaction of normal banking business;
"Claim" means a claim made by or on behalf of the Insured against the
Company pursuant to a Contract;
"Contracts" means the contracts of reinsurance details of which are set out
at schedule 1 excluding those contracts cancelled by the operation of
paragraph D of Article 10 (Warranties, Exclusions of Contracts and
Undertakings) and "Contract" means any or all of them as the context
requires excluding, for the avoidance of doubt, any rewrites or additions
beyond the current expiration dates of the Contracts;
"Contract Attachment Date" means, with respect to each Contract, the date
identified in the column entitled "Contract Attachment Date" on schedule 1;
"Effective Date" means June 30, 2002;
-1-
"Estimated Percentage" means with respect to a Contract the percentage
identified on schedule 1 under the column "Estimated Goshawk Percentage
Share of Losses";
"Execution Date" means the date of this agreement;
"Guarantee" means the guarantee in the agreed terms to be given on the
Execution Date by SCPIE Holdings Inc. in favour of the Reinsurer;
"Insured" means the party (or parties) insured by the Company pursuant to a
Contract;
"Loss" means the total amount required to be paid by the Company pursuant
to a Contract as a result of an individual Claim;
"Loss Date" means in respect of a Loss the date on which that Loss was
suffered by the Insured;
"Opinion of Counsel" means an opinion of counsel addressed to the Reinsurer
in the agreed terms, in relation to each entity comprising the Company and
in relation to SCPIE Holdings Inc. opining on the good standing of each
such entity as at the Execution Date;
"Representative" means the person appointed pursuant to Article 18 (Company
Representative);
"Security Fund Agreement" means the agreement in the agreed terms referred
to in Article 7.D to be entered into on the Execution Date by the Parties
and a qualified custodian as defined by section 1104.9 of the California
Insurance Code;
"Transitional Services Agreement" means the agreement in the agreed terms
relating to certain transitional services to be provided to the Reinsurer,
to be entered into on the Execution Date by the Reinsurer and SCPIE
Holdings Inc;
"Trust Account" means the account with HSBC (being a qualified United
States financial institution as defined by section 922.7 of the Californian
Insurance Code) set up pursuant to the Trust Agreement;
"Trust Agreement" means the agreement (governed by and subject to the
insurance laws of the State of California) in the agreed terms to be
entered into by the Parties and HSBC on the Execution Date; and
"Warranties" means the warranties set out in schedule 3.
B. In this agreement unless specified, reference to:
(a) "Company" means SCPIE Indemnity Company, American Healthcare Indemnity
Company and American Healthcare Specialty Insurance Company all of them and
each of them as the context admits;
(b) a document in the "agreed terms" is a reference to that document in the
form approved and for the purposes of identification signed by or on behalf
of each of the Reinsurer and the Company;
(c) "Party" means a Party to this agreement and includes its permitted
assignees and/or the successors in title to substantially the whole of its
undertaking;
-2-
(d) Articles, paragraphs or schedules are to Articles, paragraphs of Articles
and schedules to this agreement. The schedules form part of the operative
provisions of this agreement and references to this agreement shall, unless
the context otherwise requires, include references to the recitals and the
schedules;
(e) the time of day is reference to time in Los Angeles, California;
(f) "month" means a calendar month;
(g) words denoting the singular shall, except where the context otherwise
requires, include the plural and vice versa;
(h) the headings in this agreement are for information only and shall be
ignored in construing the same; and
(i) "including" means including without limitation.
ARTICLE 2
BUSINESS COVERED
A. Subject to the limitations and terms and conditions set out herein, the
Company agrees to cede and the Reinsurer agrees to accept a 100% quota
share of the Contracts on the basis that the Reinsurer shall indemnify the
Company, pursuant to the terms and conditions of this agreement (including
the adjustment provisions of Articles 10.B and 10.C), in respect of Losses
except that:
1. the Reinsurer shall not be liable for a Loss in relation to which the
Loss Date, as reported to the Company by the Insured or otherwise
determined pursuant to this Article 2, occurred on or before the
relevant Contract Attachment Date except to the extent provided at
paragraph A.2 of this Article;
2. if no Loss Date has been reported to the Company by the Insured or
otherwise determined pursuant to this Article 2, the Reinsurer shall be
liable for its proportionate share of that Loss, such proportion being
the Estimated Percentage in relation to the relevant Contract subject
to adjustment pursuant to paragraph E of this Article.
B. If:
1. no Loss Date has been reported to the Company by the Insured(s) in
respect of:
(a) a Loss exceeding US$250,000; and/or
(b) Losses arising under one or more Contracts attributable to the same
event which in aggregate exceed US$250,000; and/or
2. either the Company or the Reinsurer becomes aware (whether through the
media or otherwise) of accident(s), casualty(ies), disaster(s) or loss
occurrence(s) (major industry or otherwise) that have the potential to
affect a Contract or Contracts and give rise to Losses hereunder in
excess of US$250,000;
-3-
then the Company and the Reinsurer (who shall notify each other in respect
of their awareness of potential for Losses described under paragraph B.2 of
this Article) shall use their respective commercially reasonable best
efforts to ascertain if the relevant Loss Date(s) for such Loss(es)
occurred on or before the relevant Contract Attachment Date or after the
relevant Contract Attachment Date.
C. If a Party considers at any time that a Loss Date (reported by an Insured
or determined under paragraph B or otherwise) is incorrect then:
1. it may notify the other Party in writing and shall set out at the same
time its reasons in full for such disagreement specifying the date (so
far as it is aware) which it considers is the Loss Date;
2. after the giving of notice under paragraph C.1, the Parties shall use
all reasonable endeavours to establish and agree the correct Loss Date;
3. if the Parties do not reach agreement under paragraph C.2 within 15
days of the giving of notice under paragraph C.1, either Party may
elect for the correct Loss Date to be determined by KPMG or if KPMG is
unwilling to act, such independent firm of internationally recognised
chartered accountants as KPMG nominates, that is willing to act. Any
such firm (including KPMG) shall act as an expert in making any such
determination which shall be final and binding on the Parties (in the
absence of manifest error). The cost of the firm shall be borne by the
Parties equally.
D. If the Loss Date is subsequently determined to be different to a Loss Date
applied pursuant to paragraph A.1 in respect of a Loss or if the Parties
believed that a Loss Date could not be determined and the Loss Date is
subsequently reported by an Insured or otherwise determined, the Parties
shall calculate the amount payable (if any) under paragraph A.1 using the
revised Loss Date (in place, if relevant, of the original Loss Date)
setting out such determination in the next report provided pursuant to
paragraph A of Article 7 and account to each other in accordance with
Article 7 on the basis of the revised Loss Date.
E. When, in respect of a Contract under which Loss(es) arose for which no Loss
Date has been determined (without prejudice to paragraphs C and D of this
Article), the ultimate Subject Reinsurance Premium (as defined in Article
6) in respect of that Contract ("USRP") and the ultimate total premium
("UTP") received by the Company for that Contract can be finally determined
the Estimated Percentage in respect of that Contract shall be substituted
by the result of USRP divided by UTP ("Actual Percentage") and the Parties'
proportionate share of the Loss(es) recalculated and the result set out in
the report provided pursuant to paragraph A of Article 7 and the Parties
shall account to each other in accordance with Article 7 on the basis of
the recalculated proportionate share of the Loss(es) provided that:
1. the first such recalculation shall be stated in the report for the
month ended December 31, 2003 and if, in respect of a Contract, the
USRP and/or UTP cannot be finally determined by December 31, 2003 the
Parties shall calculate as at that date the best estimate for the USRP
and UTP and apply the above calculation using such best estimate USRP
and UTP as at December 31, 2003 as the USRP and UTP (subject to
recalculation at December 31, 2007 pursuant to paragraph E.2) for that
Contract; and
2. the second and final such recalculation shall be stated in the report
for the month ended December 31, 2007 and if, in respect of a Contract,
the USRP and UTP cannot be finally determined by December 31, 2007 the
Parties shall calculate as at that date the best
-4-
estimate for the USRP and UTP and apply the above calculation using
such best estimate USRP and UTP as at December 31, 2007 as the final
USRP and UTP for that Contract.
For the purposes of this Article, the USRP for a Contract shall be
calculated as (a) written premium from the relevant Contract Attachment
Date plus (b) the best estimate, as at the relevant date (being December
31, 2003 under paragraph E.1 and December 31, 2007 under paragraph E.2), of
any premium for that Contract that has yet to be recognised as written. The
UTP for a Contract shall be calculated as (a) its USRP plus (b) the written
premium on that Contract prior to and on the relevant Contract Attachment
Date.
F. It is agreed that any adjustment pursuant to the paragraph D and E of this
Article shall not bear interest except to the extent such adjustment has
not been paid by the relevant Party pursuant to Article 7 on the due date
and then interest shall be payable in accordance with Article 7.
ARTICLE 3
TERM
Subject to the terms and conditions of this agreement (including Article 10
(Warranties, Exclusion of Contracts and Undertakings)) the liability of the
Reinsurer hereunder shall commence with effect on the Execution Date and cease
in respect of each Contract, upon the cessation of the liability of the Company
in respect of that Contract.
ARTICLE 4
EXCLUSIONS
The Reinsurer shall not be liable in respect of any Claim to the extent such
Claim relates to:
1. for the avoidance of doubt (without prejudice to the specific
identification of Contracts the subject of this agreement), business
classified by the Company as the Highlands Cut-Through, Xxxxx Limited,
K2 and K2+ programs and more specifically described as follows (a) the
Cut-Through Endorsements issued pursuant to that Cut-Through/Guarantee
Endorsement Agreement dated January 1, 2000, between Highlands
Insurance Group, Inc. and American Healthcare Indemnity Company; (b)
the Rights and Obligations of SCPIE Indemnity Company under Notes
issued by Xxxxx Limited pursuant to the terms of a Note Purchase
Agreement between Hannover Ruckversicherungs Aktiengesellschaft and
Citibank dated February 11, 1994 (and as amended by supplemental
agreements dated December 31, 1997 and March 31, 2000); and (c) the
Rights and Obligations of SCPIE Indemnity Company under letters of
credit issued pursuant to a Master Swap Agreement dated as of November
22, 1996 between SCPIE Indemnity Company and Citibank, N.A. and an
Amendment No. 1 to such Master Swap Agreement dated as of July 1, 1998
(K-2), and an Amendment date July 2001 (K-2+); and
2. the World Trade Center and associated events of September 11, 2001.
-5-
ARTICLE 5
NOTIFICATION, CO-OPERATION, EXPENSES AND RECOVERIES
A. Notwithstanding anything contained in this agreement to the contrary, it is
a condition precedent to any liability of the Reinsurer under this
agreement that:
1. the Company shall inform the Reinsurer in writing of any fact, matter,
event or circumstance which comes to its notice whereby it appears to
the Company that payment is or may be required to be made in relation
to a Contract, such information to be given promptly and in any event
with five (5) Business Days of it coming to the attention of the
Company;
2. the Company shall co-operate with the Reinsurer (and its appointed
representatives) in the investigation and assessment of any Loss and/or
circumstances giving rise to a Claim and keep the Reinsurer fully
informed of all material developments in relation thereto; and
3. the Company shall do and procure the following to the extent requested
by the Reinsurer:
(a) consult with the Reinsurer in respect of all developments, actions, and
decisions of the Company in respect of any Claim, suit or proceeding
involving this reinsurance; and/or
(b) afford the Reinsurer the opportunity to be associated with the Company,
at the sole expense of the Reinsurer, in the defence or control of any
Claim, suit or proceeding involving this reinsurance, and the Company
and the Reinsurer shall co-operate in every respect in the defence of
such Claim, suit or proceeding; and/or
(c) consult with the Reinsurer as concerns the defence or control of any
Claim, suit or proceeding involving this reinsurance so that the
Company shall promptly and diligently take all such action as the
Reinsurer may reasonably request including the institution of
proceedings and the instructing of professional advisers approved by
the Reinsurer to act on behalf of the Company to avoid, dispute,
resist, compromise, defend or appeal against any Claim, suit or
proceeding involving this reinsurance.
B. The Reinsurer will pay any extraordinary external claims expenses incurred
by the Company in connection with the investigation and settlement of
Claims (except to the extent such Claims are excluded pursuant to this
agreement) and to pursuing and obtaining recoveries referred to at
paragraph C of this Article, provided and to the extent the Reinsurer has
consented in writing prior to such expenses being incurred.
C. It is hereby agreed that:
1. the Reinsurer will receive and benefit from all recoveries relating to
the Contracts, whether or not through subrogation, in respect of all
Losses attaching thereto which the Reinsurer is required to pay
pursuant to this agreement;
2. the Company shall:
(a) inform the Reinsurer in writing of any fact, matter, event or
circumstance which comes to its notice whereby it appears to the
Company that recovery may be made in relation to which the
Reinsurer is or may be entitled to benefit under paragraph C1 of
this Article;
-6-
(b) thereafter keep the Reinsurer fully informed of all material
developments in relation thereto to use all reasonable endeavours
to obtain such recovery;
(c) not settle or compromise such recovery without the prior written
consent of the Reinsurer; and
(d) promptly and diligently take all such action as the Reinsurer may
reasonably request in relation thereto including the institution of
proceedings and instruction of professional advisers (subject to
paragraph B of this Article).
D. This agreement shall protect the Company against liability for any Extra
Contractual Obligations. "Extra Contractual Obligations" are defined as
those liabilities of the Company to an Insured with respect to a Contract
with that Insured arising as a result of an order by a court or a binding
arbitrator that are not covered under any other provision of this agreement
and which arise from the handling of any Claim (to the extent such Claim is
not excluded under this agreement), such liabilities being as a result of,
but not limited to, the following: failure by the Company to settle within
the policy limit, or by reason of alleged or actual negligence, fraud
(subject expressly to the proviso below) or bad faith in rejecting an offer
of settlement or in the preparation of the defence or in the trial of any
action against the Insured or in the preparation or prosecution of an
appeal consequent upon such action. The date on which an Extra Contractual
Obligation is incurred by the Company shall be deemed, in all
circumstances, to be the date of the original accident, casualty, disaster
or loss occurrence and shall be regarded as a Loss for the purposes of this
agreement. However, this clause shall not apply where the loss has been
incurred due to the fraud of a member of the board of directors or a
corporate officer of the Company acting individually or collectively on in
collusion with any individual or corporation or any other organisation or
party involved in the presentation, defence or settlement of any Claim
covered hereunder.
ARTICLE 6
PREMIUM AND OVERRIDE COMMISSION
A. In consideration for the assumption of its liabilities hereunder, the
Company shall pay to the Reinsurer (the first such payment and subsequent
payments being determined in accordance with Article 7 (Remittances)) an
aggregate premium calculated as follows:
1. all of the unearned premium as of the relevant Contract Attachment Date
for each Contract collected by the Company pursuant to the Contracts
and all of the written premium collected by the Company pursuant to the
Contracts following the relevant Contract Attachment Date for each
Contract less return premiums ("Subject Reinsurance Premium"); plus
2. an amount equal to 14.343% of the Subject Reinsurance Premium
("Additional Premium");
in aggregate the "Reinsurer's Premium Income" but subject to deduction and
retention under paragraph B of this Article.
B. The payment under paragraph A.1 shall be subject to retention by the
Company out of such Reinsurer's Premium Income of:
-7-
1. the Company's third party acquisition costs relating to the Contracts
comprising its broker commissions and Lloyd's costs; and
2. an override commission equal to 1.5% of the Reinsurer's Premium Income
less amounts deducted under paragraph B.1 of this Article until the
earlier to occur of (a) 30 June 2003 and (b) both Xxxxx Xxxxx and
Xxxxxxx Xxxxxx ceasing to be employed by SCPIE Management Company; on
which date the foregoing percentage of 1.5% shall reduce to 0.75%.
C. In addition as further consideration for the assumption of the Reinsurer's
liabilities hereunder, any recoveries made by the Company with respect to
the industry loss warranty policy relating to the Company's 2002
underwriting year with respect to a Contract on or after the relevant
Contract Attachment Date shall inure to the benefit of the Reinsurer on a
one hundred per cent basis (100%) and, at the Reinsurer's option, the
Reinsurer may require and the Company shall use its commercially reasonable
best efforts to procure, the novation (for consideration payable by the
Reinsurer of not more than US$1) to the Reinsurer of the rights,
obligations and benefits of the Company under such industry loss warranty
policy provided that the Reinsurer shall ensure that to the extent any
recoveries pursuant to such novated industry loss warranty policy relate to
contracts or claims for which the Reinsurer is not liable pursuant to this
agreement, such recoveries shall inure to the benefit of the Company.
ARTICLE 7
REMITTANCES
A. By no later than 23 December 2002 and thereafter within 15 days following
the end of each month, the Company shall provide to the Reinsurer a report
summarising in respect of that ended month (and, for the first report, in
respect of the longer period from the Effective Date to November 30, 2002):
1. the Subject Reinsurance Premium collected ("Collected Subject
Reinsurance Premium") which shall include any Subject Reinsurance
Premium that is due to be paid to the Company but withheld as a result
of security arrangements, to the extent such withheld premium is not
treated as an asset of the Company which reduces the Reinsurer's
Obligations (defined below at paragraph E) and therefore the value of
the Trust Account required to be funded by the Reinsurer pursuant to
paragraph E of this Article);
2. the Subject Reinsurance Premium due but not collected other than by
reason of being withheld as a result of security arrangements (which
shall be subject to paragraph F of this Article);
3. the amounts provided for in Article 6.B;
4. Losses paid (to the extent the Reinsurer is liable for such Losses
hereunder);
5. subrogation, salvage, or other recoveries to the extent due to the
Reinsurer hereunder; and
6. adjustments due pursuant to paragraphs D and E of Article 2; and
7. the balances due to either Party pursuant to this agreement, payable in
accordance with paragraph B of this Article ("Net Balance").
-8-
Provided that, in respect of the first report (provided by no later than 23
December 2002), the Collected Subject Reinsurance Premium shall comprise
the collected Subject Reinsurance Premium as reflected on the Company's
books as at September 30, 2002 plus the Company's best estimate of the
collected Subject Reinsurance Premium for the period from and including
October 1, 2002 to and including November 30, 2002. The reports following
that first report shall state (as such information becomes available on the
basis of the Company's usual and proper accounting and reporting practices)
the actual Collected Subject Reinsurance Premium for that period and take
into account the necessary adjustment (if any) in the balances due to
either Party with, for the avoidance of doubt, the intention that the
Company shall use its best efforts to ensure that its books and records and
thus the reports provided pursuant to this Paragraph A reflect the correct
position as soon as practicable.
B. Payment of the Net Balance shall be made in a currency determined in
accordance with Article 14 (Currency) in accordance with the following
provisions:
1. payment in respect of the period following the Effective Date to
November 30, 2002 shall be made by the Company on or before December
31, 2002;
2. thereafter, payment shall be made monthly within 5 Business Days after
the presentation to the Reinsurer of the report pursuant to paragraph A
of this Article 7 (but, in any event, to the extent the Net Balance is
payable to the Reinsurer or to the Trust Account, payment by the
Company shall be due no later than 15 days plus 5 Business Days after
the end of each month);
3. if the Net Balance is owed to the Reinsurer, payment shall be made by
the Company by deposit into the Trust Account on and subject to the
terms of the Trust Agreement;
4. if the Net Balance is owed to the Company, payment shall be made by the
Company withdrawing such Net Balance due to it from the Trust Account
(such withdrawal being made within the time limit at paragraph B.2 of
this Article).
C. The Company shall pay the Additional Premium due on the Collected Subject
Reinsurance Premium specified under paragraph A.1 of this Article to the
Reinsurer directly on a monthly basis within 5 Business Days after the
presentation to the Reinsurer of the report pursuant to paragraph A of this
Article (but in any event no later than 15 days plus 5 Business Days after
the end of each month).
D. The Company shall at all times maintain, at its option, either a letter of
credit (rated AA or better) or cash collateral pursuant to the Security
Fund Agreement to secure the payment of the Additional Premium payable
during the term of this agreement to the extent such amount remains unpaid.
E. Within 15 days following the end of each calendar quarter, the Company
shall furnish the Reinsurer with a report of the Reinsurer's Obligations
(defined below). To the extent that the assets in the Trust Account (as
shown by the report) are more than one hundred and two per cent. (102%) of
the Reinsurer's Obligations, the Company shall pay to the Reinsurer from
assets in the Trust Account within 5 Business Days following the
presentation of the report to the Reinsurer an amount that results in the
total remaining assets in the Trust Account being equal to one hundred and
two per cent. (102%) of the Reinsurer's Obligations. To the extent that the
assets in the Trust Account (as shown by the report) are less than one
hundred and two per cent. (102%) of the Reinsurer's Obligations, the
Reinsurer shall deposit assets into the Trust Account within 5 Business
Days following the presentation of the report in an amount that results in
the total assets
-9-
in the Trust Account being equal to one hundred and two per cent. (102%) of
the Reinsurer's Obligations.
For the purposes of this paragraph E and paragraph H.3 only, and no other
purpose, the "Reinsurer's Obligations" shall be deemed to be its
"Obligations" in accordance with such term as defined in section 8(d)(7)(D)
of the California Insurance Department bulletin 97 - 5 as it applies to
this agreement being:
1. reserves for known outstanding Losses for which the Reinsurer is liable
hereunder that have been reported to the Reinsurer including amounts
relating thereto for which it is liable pursuant to Article 5;
2. Losses and amounts under Article 5 for which the Reinsurer is liable
hereunder, paid by the Company but not recovered from the Reinsurer;
3. reserves for Losses incurred but not reported and loss adjustment
expense relating thereto to the extent to which the Reinsurer would be
liable hereunder; and
4. reserves for unearned Subject Reinsurance Premiums.
provided, however, such amount shall be reduced by the amount of any
admitted, non-investable assets that are carried on the books of the
Company with respect to the Subject Reinsurance Premium, which reduction,
for the avoidance of doubt, shall include uncollected Subject Reinsurance
Premium, and provided that the undertaking of the Company at Article 10.F
shall apply.
F. If an Insured under a Contract defaults in paying the Subject Reinsurance
Premium to the Company, the Company shall not be liable to pay that Subject
Reinsurance Premium to the Reinsurer unless and to the extent it receives
such Subject Reinsurance Premium provided that the Company shall, and
hereby undertakes to, use its commercially reasonable best efforts to
obtain payment of such Subject Reinsurance Premium and consult with the
Reinsurer in the same manner as specified at Article 5.A (which for the
avoidance of doubt shall apply on the same basis as applies to a "Claim"
under that Article 5.A).
G. The Reinsurer and the Company agree that the Trust Agreement shall include
the following provisions:
1. all of the assets deposited in the Trust Account shall be valued
according to their current fair market value and shall consist solely
of cash in United States dollars, certificates of deposit issued by a
United States bank and payable in United States dollars, and
investments permitted by section 922.5(a)(2) of the California
Insurance Code or any combination of the above;
2. investments in or issued by an entity controlling, controlled by or
under common control with either the Company or the Reinsurer shall not
exceed five per cent (5%) of total investments deposited in the Trust
Account;
3. while such assets are held in the Trust Account, the Reinsurer shall be
credited with the investment income earned with respect to such assets.
The Reinsurer and the Company further agree that the Company shall not
terminate any asset management agreement from time to time applicable to
the Trust Agreement or to the whole
-10-
or any part of the Trust Account save after the Company shall have
given the Reinsurer prior notice of the Company's intention to
terminate the same and a reasonable opportunity to consult with and
make representations to the Company.
H. The Reinsurer and the Company hereby agree that the assets in the Trust
Account may be drawn upon at any time, notwithstanding any other
provision of this agreement, and be used by the Company or any
successor by operation of law of the Company (including, without
limitation, any liquidator, rehabilitator, receiver or conservator of
the Company) for the following purposes, unless otherwise provided by
the Trust Agreement:
1. to pay or reimburse the Company for payment due from the
Reinsurer pursuant to this agreement which has not been
otherwise paid or for unearned Subject Reinsurance Premiums
received into the Trust Account that are due to be repaid by the
Company as return premium which have not otherwise been repaid
by the Reinsurer; and
2. to refund to the Reinsurer any sum pursuant to paragraphs E and
I of this Article; and
3. where the Company has received notification of termination of
the Trust Account and where any of the Reinsurer's Obligations
under this agreement remain unliquidated and undischarged ten
(10) days prior to the termination date, to withdraw amounts
equal to such Reinsurer's Obligations, to the extent that such
Reinsurer's Obligations have not yet been funded by the
Reinsurer, and deposit those amounts in a separate account, in
the name of the Company in any qualified United States financial
institution as defined by California Insurance Code 922.7
specified by the Reinsurer (or, in the absence of specification
by the Reinsurer, an institution of similar financial and
reputational standing as HSBC chosen by the Company) apart from
its general assets, in trust on identical terms (save as varied
by agreement between the Parties) to the Trust Agreement and the
Trust Account for such uses and purposes specified in paragraphs
H.1 and H.2 of this Article as may remain executory after
withdrawal and for any period after the termination date;
provided that the Company hereby agrees and undertakes that if the
amount withdrawn by the Company is in excess of the actual amount
permitted to be drawn by the Company pursuant to paragraph G.1 of the
Article, without limiting any other rights and remedies of the
Reinsurer, the Company shall immediately inform the Reinsurer in
writing of such excess withdrawal and immediately return to the Trust
Account the excess amount so withdrawn together with interest accrued
at a rate of four per cent. (4%) above dollar LIBOR accruing daily from
and including the date of the withdrawal to and excluding the actual
date of repayment.
All of the foregoing shall be applied without diminution in value
because of the insolvency on the part of the Company or the Reinsurer.
I. Notwithstanding the foregoing on or after January 1, 2005 with respect
to any liabilities for which the Company is able to obtain reinsurance
credit in connection with its statutory financial statements in
California and each other jurisdiction in which the Company is admitted
to transact business without the security provided by the
above-referenced Trust Account, the assets held in the Trust Account in
reference to such liabilities and any related investment income thereon
shall be immediately released to the Reinsurer subject to applicable
law and thereafter for the avoidance of doubt payment pursuant to
paragraph B.3 in respect of Subject Reinsurance Premium related to such
liabilities shall be made directly by the Company to the Reinsurer and
payment pursuant to paragraph B.4 in respect of Losses related to such
liabilities shall be made directly by the Reinsurer to the Company.
-11-
J. If a Party fails to pay to the other Party any amount under this
Article on the due date, without prejudice to any other rights and
remedies of such Party, it is hereby agreed such overdue amount shall
bear interest at a rate of four per cent. (4%) above dollar LIBOR
accruing daily from and including the due date for payment to and
excluding the actual date of payment.
K. Each party (at its own cost) shall provide the other with such other
information as may be reasonably required by such part for completion
of its annual statements and any other financial or regulatory filings.
ARTICLE 8
COMPANY'S COMMISSION
A. In this Article:
1. "Net Ultimate Combined Ratio" means (i) the aggregate ultimate
incurred Loss plus aggregate amounts retained by the Company
under paragraph B of Article 6 divided by (ii) the Aggregate
Subject Reinsurance Premium.
2. "Aggregate Subject Reinsurance Premium" means the ultimate
aggregate Subject Reinsurance Premium received by the Company
less, for the avoidance of doubt, return premiums.
B. If the Net Ultimate Combined Ratio is equal to or less than 1.00 the
Reinsurer shall pay to the Company an amount equal to:
0.5 x Aggregate Subject Reinsurance Premium x (1.00 - Net Ultimate
Combined Ratio)
the result being the "Commission".
C. Until the Commission can be finally determined, the Company shall be
entitled to receive payment on account in respect of its Commission
(subject to adjustment) as follows:
1. Within one month following June 30, 2007, the Company shall
provide to the Reinsurer a report calculating the estimated
Commission and for this purpose the Net Ultimate Combined Ratio
shall be calculated on the basis of the aggregate paid or
payable Losses, case reserves and IBNR reserves (calculated on a
basis consistent with the then current accounting and actuarial
policies of the Company) to and including June 30, 2007.
2. The Reinsurer shall pay to the Company within 30 days of receipt
by the Reinsurer of the report an on account amount (if any)
equal to the estimated Commission calculated under paragraph 1
above.
3. Within 30 days of each anniversary of 30 June, 2007 thereafter
the Company shall provide to the Reinsurer a report prepared in
accordance with the provisions at paragraph 1 above up to and
including the date of the relevant anniversary date adjusting as
necessary the estimated Commission.
4. Within 30 days of the date of receipt by the Reinsurer of the
report the Reinsurer shall pay to the Company or, as applicable,
the Company shall repay to the Reinsurer such amount as is
required to ensure that the Company has received on account
estimated Commission calculated pursuant to the most recent
report.
-12-
5. When the Net Ultimate Combined Ratio and Aggregate Subject
Reinsurance Premium can be finally determined, the Company shall
as soon as practicable thereafter prepare a final report setting
out the amount of the Commission and the Reinsurer shall pay to
the Company or, as applicable, the Company shall repay to the
Reinsurer such amount as is required to ensure that the Company
has received pursuant to this Article 8 an amount equal to the
Commission as finally determined.
6. The Reinsurer may notify the Company, no later than 20 days
following receipt of a report pursuant to paragraph C of this
Article, if it disagrees with that report and shall at the same
time set out in writing its reasons in full for such
disagreement and specify the adjustments which, in its opinion,
should be made to the Commission figure specified in the report
in order to comply with the requirements of this agreement.
Thereafter the Company and the Reinsurer shall use all
reasonable endeavours to meet and discuss the objections of the
Reinsurer and to reach agreement upon the adjustments (if any)
required to be made to the Commission figure specified in the
report. If the Company and the Reinsurer do not reach agreement
within a further 20 days of the notice from the Reinsurer, the
Reinsurer may elect for the report to be audited (and the
Commission figure adjusted to reflect the audited figures in the
report) by KPMG or, if KPMG is unwilling to act, such
independent firm of internationally recognised chartered
accountants as KPMG nominates, that is willing to act. Any such
firm (including KPMG) shall act as an expert in making any such
determination which shall be final and binding on the parties
(in the absence of manifest error). The costs of the firm shall
be borne by the Reinsurer as a result of the audit except that
the Company shall bear those costs if the Commission amount is
adjusted by 15% or more from the amount originally specified by
the Company in the report.
7. For the avoidance of doubt, to the extent the Company shall be
required pursuant to paragraphs C.4 and/or C.5 of this Article
to repay to the Reinsurer amounts received on account of its
Commission, such repayment shall not exceed the aggregate amount
of Commission received by the Company pursuant to this Article.
ARTICLE 9
REPORTS
The Company shall provide to the Reinsurer within 15 days of the end of each
month, a report in the format, and containing such information specified, as set
out at schedule 2. The parties agree and acknowledge that the content of the
report may be amended from time to time by mutual consent, which consent shall
not be unreasonably withheld.
ARTICLE 10
WARRANTIES, EXCLUSION OF CONTRACTS AND UNDERTAKINGS
A. The Company hereby represents and warrants to the Reinsurer in the
terms of the Warranties. The Company's representations and warranty in
respect of each of the Warranties at paragraphs 1 and 3 to 7 of
schedule 3 shall be deemed to be repeated continually throughout the
term of this agreement. The Company undertakes to the Reinsurer that it
will disclose forthwith in writing to the Reinsurer any matter which
becomes known to it which is inconsistent with any of the Warranties.
Without restricting the rights of the Reinsurer or the ability of the
Reinsurer to claim damages on any basis available to it, if the Company
is in breach of any of the Warranties or any
-13-
other term of this agreement the Company shall pay to the Reinsurer on
demand as damages the amount necessary on a full indemnity basis to put
the Reinsurer into the position which would have existed if the said
Warranties or other term of this agreement had not been breached,
together with all costs and expenses incurred by the Reinsurer as a
result of such breach.
B. If the aggregate of the premium amounts under the column at schedule 1
headed "Estimate of Premium Before Loading" being US$ 192,068,178, is
incorrect such that the actual aggregate premium received or receivable
by the Reinsurer hereunder in respect of the Contracts pursuant to
Article 6A.1 ("Actual Premium Before Loading") is 10% or more greater
than US$ 192,068,178 then the Reinsurer may at any time elect by notice
to the Company to cede back to the Company (or not accept) amounts
equal to the Excess Percentage (as defined below) of the premium in
respect of a Relevant Contract (as defined below) together with a
proportion of the Losses for which the Reinsurer is liable hereunder in
respect of that Relevant Contract equal to the Excess Percentage, such
notice(s) to be given at the Reinsurer's discretion in respect of any
or all of the Relevant Contracts.
For the purpose of this Article 10.B the following shall apply:
"the Excess Percentage" shall be the amount by which the Actual Premium
Before Loading exceeds the "Estimate of Premium Before Loading" stated
for each Contract at schedule 1, expressed as a percentage of that
"Estimate of Premium Before Loading", minus:
(a) 15%, in respect of Contracts for which the Estimate of Premium
Before Loading is less than US$ 5,000,000;
(b) 10%, in respect of Contracts for which the Estimate of Premium
Before Loading is US$ 5,000,000 or more but less than US$
10,000,000;
(c) 5%, in respect of Contracts for which the Estimate of Premium
Before Loading is US$ 10,000,000 or more;
and each Contract for which the Excess Percentage is greater than zero
shall be a "Relevant Contract".
C. If the premium weighted actual expense ratio for all the Contracts
(including the override commission pursuant to Article 6B.2) is 30% or
more then the Reinsurer may at any time elect by notice to the Company
to cap the expense ratio for which it is liable hereunder in respect of
a Contract in the amount of the Capped Expense Ratio (defined below)
such notice(s) to be given at the Reinsurer's discretion in respect of
any or all of the Contracts.
For the purpose of this Article 10.C the following shall apply:
the "Capped Expense Ratio" for each Contract shall be:
(a) 1.15 multiplied by the relevant estimated expense ratio under
the column at schedule 1 headed "Estimated Expense Ratio
excluding 1.5%" ("Estimated Expense Ratio"), in respect of
Contracts for which the Estimate of Premium Before Loading is
less than US5,000,000;
(b) 1.1 multiplied by the relevant Estimated Expense Ratio in
respect of Contracts for which the Estimate for Premium Before
Loading is US$5,000,000 or more but less than US$10,000,000;
-14-
(c) 1.05 multiplied by the relevant Estimated Expense Ratio in
respect of Contracts for which the Estimate of Premium Before
Loading is US$10,000,000 or more.
D. Without prejudice to any other remedies available to the Reinsurer, if
the Company (or its conservator, liquidator or statutory successor)
fails to pay any amount due to the Reinsurer pursuant to Article 7
(whether due directly or to the Trust Account) and fails to remedy such
failure within twenty (20) Business Days of the Reinsurer giving notice
to the Company (or its conservator, liquidator or statutory successor
if relevant) of its intention to exercise its rights under this
Article:
1. on expiry of such notice each Contract in relation to which the
Company has failed to pay an amount due pursuant to Article 7
and not rectified such failure within the notice period shall be
deemed cancelled as a Contract reinsured by the Reinsurer
pursuant to this agreement with effect from the date of the
failure by the Company so to pay in respect of that Contract;
and
2. the Company shall promptly account to the Reinsurer in respect
of any Losses paid by the Reinsurer in respect of the period on
and following such date of failure (and the Reinsurer shall
account to the Company in respect of any amount of Reinsurer's
Premium Income received by the Reinsurer (directly or to the
Trust Account) to the extent earned or unearned for the period
on and following the date of failure).
E. The Company and the Reinsurer hereby undertake for the duration of this
agreement:
1. at all times to comply with all laws, rules and regulations
applicable to each of them; and
2. to notify the other immediately in writing of any material
adverse change in any of their respective businesses, assets or
condition (financial or otherwise).
F. The Company hereunder undertakes to the Reinsurer that for the purposes
of preparing the statements on Reinsurer's Obligations pursuant to
Article 7.D such statements shall be prepared on the same bases and
adopting the same reserving practices and using the same reserving
principles as such bases, practices and principles have been used by
the Company, and reflected in the financial statements of the Company,
for the preceding 3 financial years provided that, such bases,
practices and principles may be modified to the extent necessary to
conform to statutory accounting principles acceptable to the
Commissioner of Insurance in the State of California at the time of
preparation.
ARTICLE 11
OFFSET
The Reinsurer and the Company may offset any balance or amount due from the
other Party under this agreement. This provision shall not be affected by the
insolvency of any Party (including each entity constituting the Company) to this
agreement.
ARTICLE 12
ORIGINAL CONDITIONS
All reinsurance under this agreement shall be subject to the same rates, terms,
conditions, waivers and interpretations, and to the same modifications and
alterations as the respective Contracts excluding
-15-
modifications and alterations to any Contract after the Execution Date made
without the prior consent of the Reinsurer.
ARTICLE 13
NO THIRD PARTY RIGHTS
Nothing herein shall in any manner create any obligations or establish any
rights against the Reinsurer in favour of any third party or any persons not
parties to this agreement.
ARTICLE 14
CURRENCY
A. Where the word "Dollars" and/or the sign "$" appear in this agreement,
they shall mean United States Dollars.
B. All accounts under this agreement shall be kept in United States
Dollars. For purposes of this agreement and the Contracts, all receipts
of Subject Reinsurance Premium and all payments of Losses by the
Company in currencies other than United States Dollars shall be
converted to United States Dollars at the prevailing rate of exchange
on the date of such receipt or payment, as appropriate.
ARTICLE 15
FEDERAL EXCISE TAX
A. This Article applies if the Reinsurer is not exempt from the Federal
Excise Tax.
B. The Reinsurer has agreed to allow for the purpose of paying the Federal
Excise Tax the percentage specified by United States law of the premium
payable hereon to the extent such premium is subject to Federal Excise
Tax.
C. In the event of any return of premium becoming due hereunder, the
Reinsurer shall deduct the percentage specified by United States law
from the amount of the return and the Company or its agent should take
steps to recover the Tax from the United States Government.
ARTICLE 16
ACCESS TO RECORDS
A. The Company shall place at the disposal of the Reinsurer at all
reasonable times, and the Reinsurer shall have the right to inspect,
through its authorised representatives, (including arranging for an
audit) all books, records and papers of the Company in connection with
this reinsurance hereunder or the subject matter thereof.
B. The Reinsurer shall be afforded the opportunity at any time during the
term of this agreement, at its own expense to appoint an agent of its
own choice to assess the Company's claims procedures who shall report
to the Reinsurer the results of such.
-16-
ARTICLE 17
CONFIDENTIALITY
A. This agreement and the pre-agreement documentation may contain
confidential or proprietary information of either party to this
agreement. All Parties shall maintain the confidentiality of this
information and shall not disclose these to any third party without the
other Party's approval.
B. Notwithstanding the above, any party may disclose such information
without further approval from the other Party in answer to
interrogations, subpoenas or other legal/arbitration process as well as
to the Company's reinsurance intermediary hereon, the Reinsurer's
retrocessionaires or in response to requests by governmental and
regulatory agencies. In addition the Parties may disclose such
information to their accountants and outside legal counsel as may be
necessary, as well to the extent required by law or the regulations of
the London Stock Exchange plc or the Listing Rules of the UK Listing
Authority or by the rules and requirements of the U.S. Securities and
Exchange Commission or any other regulatory body.
ARTICLE 18
COMPANY REPRESENTATIVE
A. For the purpose of this agreement the Company has appointed the
President of SCPIE Indemnity Company as its representative
("Representative") and the Reinsurer shall be entitled to deal with the
Representative and assume its decisions and actions are binding on each
of the entities constituting the Company and shall not be required to
make further enquiries. Receipt by SCPIE Indemnity Company of any
monies payable by the Reinsurer to the Company shall be a good
discharge of the obligation of the Reinsurer to pay such monies and the
Reinsurer shall not be required to see the application of monies to the
relevant entities comprising the Company.
B. If the Company (or in the event of its insolvency, its conservator,
liquidator or statutory successor) wishes to replace the
Representative, the Company shall notify the Reinsurer in accordance
with Article 19 (Notice) stating the person who, subject to the consent
of the Reinsurer, is to act as Representative for the purposes of this
agreement and such person shall be deemed to be the Representative with
effect from the date the consent of the Reinsurer is notified to the
Company (by notice to that replacement Representative).
ARTICLE 19
NOTICE
A. Any notice, demand or other communication given or made under or in
connection with the matters contemplated by this agreement shall be in
writing and shall be delivered personally or sent by facsimile or
prepaid airmail post or courier:
In the case of the Company to the Representative at:
SCPIE Indemnity Company
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: President
-17-
In the case of the Reinsurer to:
GoshawK Reinsurance Limited at its office given above
Fax: 00 0 000 000 0000
Attention: Chief Executive Officer
With a copy to:
GoshawK Insurance Holdings plc
00 Xx Xxxx Xxx
Xxxxxx XX0X 0XX
Fax: (00 44) (0)000 000 0000
Attention: Xxxxxx Xxxxxxx
and shall be deemed to have been duly given or made as follows:
(a) if personally delivered, upon delivery at the address of the
relevant Party;
(b) if sent by airmail, five Business Days after the date of
posting;
(c) if sent by facsimile, on receipt of confirmation that the fax
has been received by the number to which it was sent;
provided that if, in accordance with the above provision, any such
notice, demand or other communication would otherwise be deemed to be
given or made after 5.00 p.m. such notice, demand or other
communication shall be deemed to be given or made at 9.00 a.m. on the
next Business Day (such times being times in Los Angeles, California).
B. The deemed service provisions set out above do not apply to:
(a) a notice served by airmail, if there is a national or local
suspension, curtailment or disruption of postal services which
affects the collection or delivery of the notice or is such that
the notice cannot reasonably be expected to be delivered within
48 hours or 96 hours (as appropriate) after posting; and
(b) a notice served by facsimile, if, before the time at which the
notice would otherwise be deemed to have been served, the
receiving Party informs the sending Party that the notice has
been received in a form which is unclear in any material
respect.
In proving service it will be sufficient to prove:
(a) in the case of personal service, that it was handed to the Party
or delivered to or left in an appropriate place for receipt of
letters at its address;
(b) in the case of a letter sent by airmail, that the letter was
properly addressed, stamped and posted; and
(c) in the case of facsimile, that it was properly addressed and
despatched to the number of the Party.
C. A Party may notify the other Party to this agreement of a change to its
name, relevant addressee, address or facsimile number provided that
such notification shall only be effective on:
-18-
(a) the date specified in the notification as the date on which the
change is to take place; or
(b) if no date is specified or the date specified is less than 5
Business Days after the date on which notice is given, the date
falling 5 Business Days after notice of any such change has been
given.
ARTICLE 20
WAIVER AND AMENDMENT
A. A waiver of any term, provision or condition of, or consent granted
under this agreement shall be effective only if given in writing and
signed by the waiving or consenting Party and then only in the instance
and for the purpose for which it is given.
B. No failure or delay on the part of any Party in exercising any right,
power or privilege under this agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.
C. This agreement may be varied only by a document signed by all Parties
and expressly incorporating the terms of this agreement as varied into
that document.
D. The rights and remedies herein provided are cumulative with and not
exclusive of any rights or remedies provided by law.
ARTICLE 21
NO PARTNERSHIP
Nothing in this agreement and no action taken by the Parties pursuant to this
agreement shall constitute, or be deemed to constitute, the Parties a
partnership or similar co-operative entity.
ARTICLE 22
NO ASSIGNMENT
No Party shall, without the prior written consent of the other, assign, transfer
or declare a trust (save as provided in the Trust Deed and Security Fund
Agreement) of the benefit of all or any of its obligations under this agreement,
or any benefit arising under or out of this agreement, or delegate any of its
obligations under this agreement or subcontract their provision to any third
party save as provided herein (in respect of which it shall remain responsible
for the proper performance of any such obligations).
ARTICLE 23
INSOLVENCY
In the event of insolvency and the appointment of a conservator, liquidator, or
statutory successor of the Company, the portion of any risk or obligation
assumed by the Reinsurer hereunder shall be payable to the conservator,
liquidator, or statutory successor on the basis of claims allowed against the
insolvent Company by any court of competent jurisdiction or by any conservator,
liquidator, or statutory successor of the Company having authority to allow such
claims, without diminution because of that insolvency, or
-19-
because the conservator, liquidator, or statutory successor has failed to pay
all or a portion of any Claims. Payment by the Reinsurer as set forth in this
Article shall be made directly to the Company or to its conservator, liquidator
or statutory successor except where the contract of insurance or reinsurance
specifically provides another payee in the event of insolvency of the Company.
The conservator, liquidator, or statutory successor of the Company shall give
written notice of the pendency of a claim against the Company indicating the
relevant Contract, within a reasonable time after such claim is filed and the
Reinsurer may interpose, at its own expense, in the proceeding where such claim
is to be adjudicated, any defence or defences which it may deem available to the
Company or its conservator, liquidator, or statutory successor. The expense thus
incurred by the Reinsurer shall be payable subject to court approval out of the
estate of the insolvent Company as part of the expense of conservation or
liquidation to the extent of a proportionate share of the benefit which may
accrue to the Company in conservation or liquidation, solely as a result of the
defence undertaken by the Reinsurer.
This Article shall apply to each entity constituting the Company on a separate
basis.
ARTICLE 24
ARBITRATION
A. As a condition precedent to any right of action hereunder, any dispute
arising out of the interpretation, performance or breach of this
agreement, including the formation or validity thereof, shall be
submitted for decision to a panel of three arbitrators. Notice
requesting arbitration shall be in writing and sent certified or
registered mail, return receipt requested.
B. One arbitrator shall be chosen by each party and the two arbitrators
shall, before instituting the hearing, choose an impartial third
arbitrator who shall preside at the hearing. If either party fails to
appoint its arbitrator within 30 days after being requested to do so by
the other party, the latter, after 10 days' notice by certified or
registered mail of its intention to do so, may appoint the second
arbitrator.
C. Except as expressly stated in this Article, the arbitration proceedings
shall be governed by the rules of the International Chamber of Commerce
in England.
D. All arbitrators shall be disinterested active or former executive
officers of insurance or reinsurance companies or Underwriters at
Lloyd's, London.
E. Within 30 days after notice of appointment of all arbitrators, the
panel shall meet and determine timely periods for briefs, discovery
procedures and schedules for hearings.
F. The panel shall be relieved of all judicial formality and shall not be
bound by the strict rules of procedure and evidence Unless the panel
agrees otherwise, arbitration shall take place in London, England, but
the venue may be changed when deemed by the panel to be in the best
interest of the arbitration proceeding. Insofar as the arbitration
panel looks to substantive law, it shall consider the law of the State
of New York (except for the provisions thereof related to punitive or
exemplary damages or awards and conflicts of laws). The decision of any
two arbitrators when rendered in writing shall be final and binding.
The panel is empowered to grant interim relief as it may deem
appropriate.
G. The panel shall make its decision considering the custom and practice
of the applicable insurance and reinsurance business within 60 days
following the termination of the hearings. Judgment upon the award may
be entered in a court having jurisdiction thereof.
-20-
H. Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear with the other party the cost of the third
arbitrator. The remaining costs of the arbitration shall be allocated
by the panel. The panel may, at its discretion, award such further
costs and expenses as it considers appropriate, including but not
limited to attorneys fees, to the extent permitted by law.
ARTICLE 25
SERVICE OF SUIT
Without prejudice to any other permitted mode of service the Parties
agree that service of process shall be duly served upon if delivered
personally or sent by registered post, in the case of:
1. the Reinsurer to 00 Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxx, XX00
(marked for the attention of the Chief Executive Officer); and
2. the Company to SCPIE Indemnity Company, 0000 Xxxxxxx Xxxx Xxxx,
Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 (marked for the
attention of the President);
or such other person and address in relation to a Party as that Party
shall notify the other in writing from time to time.
ARTICLE 26
MODE OF EXECUTION
A. This agreement may be executed by:
1. an original written ink signature of paper documents;
2. an exchange of facsimile copies showing the original written ink
signature of paper documents;
3. electronic signature technology employing computer software and
a digital signature or digitizer pen pad to capture a person's
handwritten signature in such a manner that the signature is
unique to the person signing, is under the sole control of the
person signing, is capable of verification to authenticate the
signature and is linked to the document signed in such a manner
that if the data is changed, such signature is invalidated.
B. The use of any one or a combination of these methods of execution shall
constitute a legally binding and valid signing of this agreement. This
agreement may be executed in one or more counterparts, each of which,
when duly executed, shall be deemed an original.
ARTICLE 27
SURVIVAL
Articles 17 (Confidentiality), 24 (Arbitration), 25 (Service of Suit), 26 (Mode
of Execution) and 27 (Survival) shall survive the commutation or termination of
this agreement.
ARTICLE 28
-21-
CONDITIONS PRECEDENT
Notwithstanding anything in this agreement to the contrary, it is a condition
precedent to any liability of the Reinsurer under this agreement that on the
Execution Date, the Company shall deliver or cause to be delivered to the
Reinsurer the Opinion of Counsel and the Guarantee, and each of the Company and
the Reinsurer shall deliver or cause to be delivered to the other party the
Security Fund Agreement, the Transitional Services Agreement and the Trust
Agreement in each case duly executed by all parties thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed
by their duly authorised representatives this 18th day of December, in the
year of 2002.
/s/ Xxxxxx X. Xxx, President
---------------------------------
For and on behalf of
SCPIE INDEMNITY COMPANY
/s/ Xxxxxx X. Xxx, President
---------------------------------
For and on behalf of
AMERICAN HEALTHCARE INDEMNITY COMPANY
/s/ Xxxxxx X. Xxx, President
---------------------------------
For and on behalf of
AMERICAN HEALTHCARE SPECIALTY INSURANCE COMPANY
/s/ Xxxxxxxx Xxxx /s/ X. Xxxx
---------------------------------
For and on behalf of
GOSHAWK REINSURANCE LIMITED
-22-
SCHEDULE 1
CONTRACTS
-23-
SCHEDULE 2
FORM OF MONTHLY REPORTS
-24-
SCHEDULE 3
WARRANTIES
For the purpose of this schedule Company means each of the entities comprising
the Company provided that each such entity only warrants in respect of the
Warranties at paragraphs 2 to 7 as they apply to it and the Contracts issued by
it and not in respect of the other entities comprising the Company.
Any Warranty expressed to be given "to the best of the Company's knowledge and
belief" shall not be qualified in the manner stated unless the Company
establishes it has made all reasonable enquiries of its directors, employees and
professional advisers (including its accountants and actuaries) and relevant
third parties to establish the truth and accuracy of that Warranty.
The Company shall be under no liability in respect of a claim under any of the
Warranties at paragraphs 4, 5 and 6 of this schedule 3 unless and until the
liability of the Company in respect of that claim when aggregated with the
liability of the Company in respect of all other such claims under paragraphs 4,
5 and 6 of this schedule 3 shall exceed US$100,000 (and then the Reinsurer shall
be entitled to recover all and not just the excess).
1. COMPANY'S CAPACITY
1.1 Authorisations
The Company has obtained all corporate authorisations and all other
applicable governmental, statutory, regulatory or other consents,
licences, waivers or exemptions required to empower it to enter into
and to perform its obligations under this agreement, the Security Fund
Agreement and the Trust Agreement.
1.2 Proper Execution
The Company's obligations under this agreement, the Security Fund
Agreement and the Trust Agreement are enforceable in accordance with
their terms.
2. CONTRACTS
2.1 Validity of Contracts
(a) The Company has no knowledge of the invalidity of, or a ground
for termination, avoidance or repudiation of, any Contract. No
party to a Contract has given notice of its intention to
terminate. The Company has not sought to repudiate or disclaim
any Contract and to the best of the Company's knowledge and
belief the other party to any Contract has not sought to
repudiate or disclaim that Contract.
(b) The Company is not in material breach of a Contract and no
matter exists which might give rise to such breach by the
Company and to the best of the Company's knowledge and belief
the other party to any Contract is not in material breach of the
Contract and no matter exists which might give rise to such
breach by the other party.
2.2 In respect of the particulars of each of the Contracts set out at
schedule 1:
(a) the statements of estimated premium before loading and expense
ratio at schedule 1 have been prepared on a prudent basis and to
the best of the information, knowledge and belief
-25-
of the Company there exists no fact or matter which would, or is
likely to, render such basis not to be prudent; and
(b) the Contract number and "names of risk" and set out at schedule
1 are true, complete and accurate.
3. INSOLVENCY
3.1 No order has been made, petition presented or resolution passed, or any
other action taken, for the winding up of or for the appointment of a
liquidator, conservator or statutory successor to the Company or in
relation to any part of its business and/or assets and to the best of
the Company's knowledge and belief no such order, petition, resolution
or other action is pending or contemplated. No transfer of assets is
being made by the Company and no obligation is being incurred by it in
connection with the transactions contemplated by this agreement, the
Security Fund Agreement, the Secondment Agreements or the Trust
Agreement with the intent to hinder, delay, or defraud either the
present or future creditors or policyholders of the Company.
3.2 SCPIE Indemnity Company has assets exceeding its liabilities (as such
terms are defined by Generally Accepted Accounting Principles and
statutory accounting principles applied on a consistent basis) in an
amount equal to or exceeding the minimum paid-in capital and surplus as
required pursuant to California Insurance Code sections 700.01 and
700.02 and, therefore, is not insolvent.
3.3 American Healthcare Indemnity Company has assets exceeding its
liabilities (as such terms are defined by Generally Accepted Accounting
Principles and statutory accounting principles applied on a consistent
basis) in an amount equal to or exceeding the minimum paid-in capital
and surplus as required pursuant to Delaware Code Annotated title 18,
section 511 and, therefore, is not insolvent.
3.4 American Healthcare Speciality Insurance Company has assets exceeding
its liabilities (as such terms are defined by Generally Accepted
Accounting Principles and statutory accounting principles applied on a
consistent basis) in an amount equal to or exceeding minimum paid-in
capital and surplus as required pursuant to Arkansas Code Annotated
section 00-00-000 and, therefore, is not insolvent.
4. LEGAL COMPLIANCE
The Company is in compliance with all laws, rules and regulations
applicable to the Company and all elements related to their respective
businesses, operations and financial condition, including, but not
limited to, its assets, holdings, employees and policyholders, as the
case may be.
5. FINANCIAL CONDITION
The financial statements of the Company accurately and honestly present
the Company's financial condition. Since the date of the most recent
financial statements of the Company, there has been no adverse change
in the Company's business, assets or condition (financial or
otherwise).
6. LITIGATION
-26-
There are no actions, suits or proceedings pending, threatened or
contemplated against or affecting the Company or its assets, except for
claims in the ordinary course of insurance business.
7. TAXES
The Company has paid or caused to be paid to the proper authorities
when due all federal, state and local taxes applicable to it. The
Company has filed with the proper authorities when due all federal,
state and local tax returns applicable to it.
8. INFORMATION
8.1 General
To the best of the Company's knowledge and belief all written
information given by, or on behalf of, the Company to the Reinsurer,
its advisers or agents (including, within limitation, Xxxxxxxx USA,
Inc.) before or during the negotiations leading to this agreement is
true, complete, accurate and not misleading.
8.2 Material Information
All information about the Contracts known to the Company which might be
material to a reinsurer of the Contracts has been disclosed to the
Reinsurer in writing.
9. OTHER AGREEMENTS
The Company is not bound by any letter of intent, exclusivity
agreement, heads of agreement or equivalent agreement relating to the
Contracts or the Company.
-27-
