Exhibit 10.15
RENEWAL RIGHTS AND
ASSUMPTION REINSURANCE AGREEMENT
THIS AGREEMENT, dated as of the 15th day of November 2002 (the "Agreement"), by
and among South Carolina Insurance Company, a South Carolina insurance company
(hereinafter referred to as "SCIC"), and Catawba Insurance Company, a South
Carolina insurance company (hereinafter referred to as "Catawba" and together
with SCIC, collectively hereinafter referred to as "SBG") and The Hartford Fire
Insurance Company, a Connecticut insurance company (hereinafter referred to as
"Hartford").
WHEREAS, SBG has been directed by Federal Insurance and Mitigation
Administration ("FIMA") to cease insuring its National Flood Insurance Program
under the Write Your Own Program that it currently writes (the "WYO Flood
Business Book"); and
WHEREAS, Hartford is an insurer with substantial expertise in underwriting and
insuring risks similar to the WYO Flood Business Book; and
WHEREAS, SBG wishes to transfer and Hartford wishes to acquire, subject to the
terms and conditions of this Agreement, renewal rights to policies written by
SBG during the period January 1, 2002 through and including September 30, 2002
(the "Renewal Policies" which are included in the WYO Flood Business Book; and
WHEREAS, SBG wishes to transfer and Hartford wishes to acquire, via assumption
reinsurance, subject to the terms and conditions of this Agreement, the policies
written by SBG during the period October 1, 2002 through and including December
31, 2002 (the "Assumed Policies); and
NOW, THEREFORE, the parties agree as follows:
I. CLOSING DATE
The closing of the transactions contemplated by this Agreement shall be
on the business day immediately following the date that all conditions
precedent identified in Section X have been satisfied or waived (the
"Closing Date").
II. CONSIDERATION
A. INITIAL CONSIDERATION. On the Closing Date, Hartford shall make a
single payment of $3.8 million to SBG by wire transfer of
immediately available federal funds to the account set forth in
Schedule 1. This amount would be contingent on the WYO Flood
Business Book having a minimum of $40 million of total written
premiums in force on the Closing Date. If the total written
premiums in force is less than $40 million but greater than $35
million, Hartford shall pay SBG 8.5% of the total written premiums
in force as of the Closing Date.
B. VARIABLE PAYMENT.
In the event that the WYO Flood Business Book has at least $40
million in total written premium in force as of the Closing Date, a
variable, retention-based payment will be made as follows:
(i) A calculation of the written premiums in force with Hartford,
less new business written, for the WYO Flood Business Book,
including any "rollover" business placed with Hartford through
America's Flood Services, Inc., would be made as of the date twelve
months from the Closing Date ("Variable Payment Date").
(ii) Hartford shall make a single variable payment to SBG on the
Variable Payment Date as follows:
If total premium in force =
$30 million to $32.499 million, the payout will be $ 250,000
$32.5 million to $34.999 million $ 500,000
$35 million to $37.499 million $ 750,000
$37.5 million or higher $ 1,000,000
$0 to 29.999 million, there will be no variable payment.
III. RENEWAL RIGHTS
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A. Following the Closing Date, SBG shall cooperate with Hartford as
reasonably requested to assist in soliciting renewals of Renewal
Policies. Schedule 2 identifies all of the Renewal Policies as of
the date of this Agreement, which schedule shall be updated as of
the Closing Date.
B. Without limiting the foregoing, SBG and Hartford shall send to each
holder of a Renewal Policy a written notice under the appropriate
SBG letterhead and signature in a form to be reasonably agreed to
by SBG and Hartford informing such policyholder (i) of this
Agreement and the transactions hereunder and encouraging such
policyholder to renew such insurance policy with Hartford and (ii)
if and to the extent required or allowed by applicable policy
provisions, insurance laws or regulation in order to avoid any
requirement that a policy be renewed in the name of any of SBG's
subsidiaries as the insurer thereunder, that such SBG subsidiary is
or will be non-renewing such insurance policy. Such notices shall
be sent after the Closing Date by such means and at such times as
is required by applicable law, regulations or contract obligations
and as determined by Hartford. Hartford and SBG shall each pay all
costs and expenses incurred by them or on their behalf in
connection with the sending of such notices.
IV. ASSUMPTION REINSURANCE
A. Subject to the terms and conditions of this Agreement, as of
October 1, 2003 (the "Assumption Effective Date"), SBG hereby
cedes, assigns, transfers and sells to Hartford, by way of
assumption reinsurance, the Assumed Policies and any related rights
and benefits, and Hartford hereby accepts and assumes, by way of
assumption reinsurance, the Assumed Policies and any related rights
and benefits.
B. The reinsurance effected under this Article IV shall have the
effect of creating a novation with respect to the Assumed Policies,
and Hartford shall succeed to and assume all of SBG's rights,
privileges, title and interest in and to any defenses, offsets,
counterclaims and cross-claims relating to the Assumed Policies to
which SBG would otherwise be entitled had it continued to act as
the insurer thereunder as if such Assumed Policies were direct
obligations of Hartford. It is expressly understood and agreed by
the parties to this Agreement that no such rights, privileges,
defenses, offsets, cross-actions or counterclaims are waived by the
execution of this Agreement or the consummation of the transactions
contemplated herein, and that Hartford shall be fully subrogated to
all such rights, privileges, defenses, offsets, cross-actions and
counterclaims.
C. Hartford shall bear and shall have sole and full responsibility for
payment of all liabilities under the novated Assumed Policies that
are due and payable on and after the Assumption Effective Date,
including, but not limited to, responsibility for all
administrative costs relating thereto, and shall be substituted in
the place and stead of SBG with respect to such novated Assumed
Policies, and each policyholder under a novated Assumed Policy may
disregard SBG as a party thereto and treat Hartford as if it had
been originally obligated with respect thereto, except as otherwise
provided herein. The policyholder shall have a direct right of
action against Hartford with respect to a novated Assumed Policy.
D. Schedule 3 identifies all of the Assumed Policies through the date
of this Agreement and those that may be issued upon renewal of
existing policies during the period from the date of this Agreement
through and including December 31, 2002.
E. Notwithstanding anything else in this Agreement, Hartford shall
assume, via assumption reinsurance, only those Assumed Policies
that SBG has re-underwritten (the "Re-Underwriting") according to
standards and procedures proscribed by FIMA and Hartford and put
into effect by NFS (as defined below).
F. Notwithstanding anything else in this Agreement, Hartford shall not
assume, via assumption reinsurance or otherwise, any Assumed
Policies if by June 30, 2003 an Assumed Policy policyholder (a
"Non-Consenting Policy"): (i) fails to give affirmative consent in
any jurisdiction in which affirmative consent or non-objection is
required for assumption reinsurance to be effective or (ii) who
resides in a jurisdiction in which a governmental authority having
jurisdiction over an Assumption Certificate (as defined below)
and/or this Agreement fails to approve the Assumption Certificate
and/or this Agreement, if required by applicable law.
V. COVENANTS AND UNDERTAKINGS RELATING TO THE ASSUMPTION REINSURANCE
A. Following the Closing Date, SBG shall, at its sole cost and
expense, use its reasonable, good faith efforts to obtain all
required approvals from and make all required filings with any
governmental
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authority having jurisdiction over the assumption reinsurance
transaction and Assumed Policy policyholders in connection with the
assumption reinsurance transactions contemplated by this Agreement.
Hartford shall use its reasonable, good faith efforts to provide
SBG with such assistance and information as may reasonably be
required in connection with securing such approvals and consents.
B. Subject to receipt of any form filing or other approval required by
any governmental authority having jurisdiction over each
certificate evidencing Hartford's assumption of an Assumed Policy
(an "Assumption Certificate) and/or the assumption reinsurance
transaction contemplated by this Agreement, Hartford shall, at its
sole cost and expense, provide each Assumed Policy policyholder
with an Assumption Certificate and other assumption-related
information required by applicable law or as may reasonably be
required by either party hereto as soon as reasonably possible
after Re-Underwriting. Such Assumption Certificates and
other-assumption related information shall be sent by the Hartford
by first class mail and at its own expense.
VI. OBLIGATIONS OF SBG
A. SBG agrees to enter into a Flood Insurance Full Service Vendor
Agreement ("Vendor Agreement") with National Flood Services, Inc.
("NFS"), effective as of the Closing Date, so that NFS will
administer and service the WYO Flood Business Book and to adjust
and pay all claims on the policies written in the WYO Flood
Business Book according to standards and procedures proscribed by
FIMA and Hartford and put into effect by NFS. Administrative
responsibility includes active policies, open claims, pending
litigation, as well as statistical and financial reporting.
B. SBG shall use its reasonable, good faith efforts to provide to NFS
a hard-drive containing the imaged/micro fisched files detailing
the WYO Flood Business Book documentation no later than January 1,
2003.
C. SBG shall be responsible for all claims and litigation costs under
the WYO Flood Business Book until such policies are either renewed
or assumed by Hartford, as defined by the WYO arrangement with
FIMA.
D. SBG authorizes to Hartford to oversee NFS in its administration of
the WYO Flood Business Book. SBG agrees to fully indemnify and hold
Hartford harmless for any action or inaction that Hartford may take
in supervising or directing NFS.
E. SBG shall revise any Assumed Policy as directed by Hartford and NFS
following Hartford's Re-Underwriting of the Assumed Policies.
F. SBG agrees to comply with all applicable regulatory requirements
relative to non-renewing or otherwise terminating policies in the
SBG WYO Flood Business Book.
G. SBG would use its reasonable, good faith efforts, and perform such
acts necessary or appropriate to effect an orderly transfer of the
WYO Flood Business Book to Hartford, including, but not limited to,
assisting Hartford with execution of necessary agent or broker
appointments.
H. SBG will use its reasonable, good faith efforts, and will cooperate
with Hartford, to secure all necessary consents, approvals,
authorizations and exemptions from governmental agencies and other
third parties. SBG will use its reasonable, good faith efforts to
obtain the satisfaction of the conditions specified in Section X.
VII. OBLIGATIONS OF HARTFORD
A. Hartford agrees to underwrite, upon renewal, the Renewal Policies,
to the extent that such business is presented to Hartford by
insurance producers, subject to Hartford's underwriting policies,
procedures, terms, conditions and process which are in effect at
the time the risk in question is evaluated. However, the decision
to offer to insure or accept any risk or risks within the Renewal
Policies remains solely with Hartford and nothing in this Agreement
obligates Hartford to accept any particular risk or risks.
B. Hartford shall not be required to make any payment under this
Agreement that would constitute a violation by Hartford of law or
regulatory regulations applicable to Hartford, provided that such
prohibited payment(s) will become payable and be paid on the first
date (if any) on which such payments would not constitute a
violation of law or insurance regulations by Hartford.
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C. Hartford will use its reasonable, good faith efforts, and will
cooperate with SBG, to secure all necessary consents, approvals,
authorizations and exemptions from governmental agencies and other
third parties. Hartford will use its reasonable, good faith efforts
to obtain the satisfaction of the conditions specified in Section
X.
D. Hartford shall oversee NFS in the administration of the WYO Flood
Business Book, including claims, litigation and statistical and
financial reporting, subject to SBG's obligation in Section VI.D.
VIII. REPRESENTATIONS AND WARRANTIES
A. SBG and Hartford each represent and warrant that it has the power
and authority to execute, deliver and perform this Agreement, it
has taken all necessary corporate action to authorize the execution
and delivery of this Agreement and such other agreements and
instruments and the consummation of the transactions and
performance of each party's obligations contemplated hereby and
thereby.
B. SBG represents and warrants that the Renewal Policies are in force,
valid and binding obligations of SBG, and that SBG has not received
any notice of termination or non-renewal of such policies.
C. SBG represents and warrants that the Assumed Policies that are
currently issued are and those that will be issued will be at the
time their issuance, in force, valid and binding obligations of
SBG, and that SBG has not received any notice of termination or
non-renewal of such policies.
D. SBG and Hartford, each represent and warrant that the execution and
delivery of this Agreement and the performance of the transactions
contemplated herein will not violate or conflict with any of the
provisions of its charter or its bylaws or violate or conflict with
or constitute a default under any mortgage, indenture, contract,
agreement, license, permit or instrument or any order or ruling of
any governmental authority to which it is a party or by which it is
bound, or violate any provision of law, statute, rule or regulation
to which it is subject.
IX. SURVIVAL
The representations and warranties of SBG and Hartford shall survive
termination of this Agreement for a period of eighteen months following
the Closing Date.
X. CONDITIONS PRECEDENT
The obligations of the parties to consummate the transactions
contemplated by this Agreement shall be subject to:
A. obtaining all required regulatory approvals, including but not
limited to FIMA;
B. Hartford having received from SBG, documentation from the South
Carolina Department of Insurance approving the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby;
C. Hartford having received from SBG, certified copies of the
resolutions adopted by their respective board of directors
approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
D. Hartford having received the closing deliveries identified in
Article XI;
E. The WYO Flood Business Book shall have a minimum of $35 million of
aggregate total written premiums in force on the Closing Date;
F. (A) each of SBG's representations and warranties contained in this
Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date as if made on the Closing Date
and (B) Hartford having received a certificate signed by a duly
elected officer of SBG to the effect that the foregoing condition
has been satisfied.
XI. CLOSING DELIVERIES
A. At the closing of this Agreement, SBG shall execute and deliver the
following to Hartford:
1. the Agency Agreement (as defined herein);
2. the Vendor Agreement
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3. an updated Schedule 2;
4. evidence of receipt of all consents identified in Section X.A.;
5. the copies identified in Section X.B.;
6. the certified copies identified in Section X.C.; and
7. the certificate identified in Section X.F.(B).
XII. NON-COMPETITION
None of SBG, its subsidiaries, affiliates, successors, agents, appointees
or assigns shall solicit or accept "write your own" flood business on its
own or any third party's behalf, for a period of forty-eight (48) months
from the Closing Date. Notwithstanding the prior sentence, America's
Flood Services, Inc. may place business with Hartford during this time
period in accordance with an agency agreement, the form of which is
contained in Schedule 4 (the "Agency Agreement") and may place business
with other carriers on the same terms presented to Hartford, if Hartford
is unable or unwilling to accept any particular risk or risks.
XIII. TERMINATION
A. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing Date by
mutual written consent of SBG and Hartford.
B. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by either SBG or Hartford (i) if the
Closing Date shall not have occurred by November 22, 2002 or (ii)
if any legal or administrative order permanently restrains, enjoins
or otherwise prohibits consummation of the transactions
contemplated by this Agreement shall become final and
non-appealable; PROVIDED, that the right to terminate this
Agreement pursuant to clause (i) above shall not be available to
any party that has breached in any material respect its obligations
under this Agreement in any manner that shall have proximately
contributed to the occurrence of the failure of the transactions
contemplated by this Agreement to be consummated.
C. In the event of termination of this Agreement and the abandonment
of the transactions pursuant to this Article IX, this Agreement
shall become void and of no effect with no liability on the part of
any party hereto (or of any of its respective affiliates or
representatives); PROVIDED, HOWEVER, except as otherwise provided
herein, no such termination shall relieve any party hereto of any
liability or damages resulting from any breach of this Agreement.
XIV. GENERAL PROVISIONS
A. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given if
delivered personally, by facsimile (which is confirmed) or sent by
overnight courier (providing proof of delivery), to the parties at
the following addresses (or at such other address for a party as
shall be specified by like notice):
1. If to SBG:
The Seibels Xxxxx Group, Inc.
X.X. Xxx Xxx
Xxxxxxxx, XX 00000
Facsimile: 803.748.2839
Attention: President
with a copy to:
The Seibels Xxxxx Group, Inc.
X.X. Xxx Xxx
Xxxxxxxx, XX 00000
Facsimile: 803.748.2839
Attention: General Counsel
2. If to Hartford:
The Hartford Fire Insurance Company
Xxxxxxxx Xxxxx
000
Xxxxxxxx, XX 00000
Facsimile: 860.547.5714
Attention: General Counsel
B. MODIFICATION OR AMENDMENT. No modification, amendment, or
supplement to, or supplement to, or waiver of, this Agreement or
any of its provisions shall be binding upon the parties hereto
unless made in writing and duly signed by all parties to be charged
therewith.
C. CONFIDENTIALITY. Neither SBG nor Hartford will disclose to any
other person, the terms, conditions or facts relevant to this
Agreement, without the written consent of the other party, except
as required by law, rule or regulation. The parties shall jointly
agree upon press releases and agent communications to be
distributed. It is understood that the Confidentiality Agreement
dated October 14, 2002 between SBG and Hartford remains in full
force and effect.
D. INVALIDITY. If any provision of this Agreement is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, such
provision shall be construed or deemed amended to conform to
applicable laws so as to be valid and enforceable, or, if it cannot
be so construed or deemed amended without materially altering the
intention of the parties to the Agreement, it shall be stricken. In
such event, the validity, legality and enforceability of such
provision will not in any way be affected or impaired by it in any
other jurisdiction and the remainder of this Agreement shall remain
in full force and effect.
E. NON-WAIVER. A failure or delay of any party to this Agreement to
enforce at any time any of the provisions of this Agreement, or to
exercise any option herein provided, or to require at any time
performance of any of the provisions hereof, shall in no way be
construed to be a waiver of such provision of this Agreement.
F. ASSIGNMENT. No party hereto shall transfer or assign any of its
rights or obligations under this Agreement without first obtaining
the written consent of the other parties.
G. CAPTIONS. The captions of paragraphs of this Agreement are for
reference only and are not to be construed in any way as a part of
this Agreement.
H. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart,
each of which when executed and delivered shall be deemed an
original and all of which counterparts taken together shall
constitute but one and the same instrument. This Agreement shall
become binding when one or more counterparts taken together shall
have been executed and delivered by the parties by facsimile
transmission or otherwise.
I. APPLICABLE LAW. This Agreement shall be interpreted in accordance
with
Connecticut law, without reference to its conflict of law
provisions.
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IN WITNESS WHEREOF, the parties to this Agreement have executed this Agreement
to be effective on the date specified above.
SOUTH CAROLINA INSURANCE COMPANY THE HARTFORD FIRE INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxxxxxx By: /s/ Xxxxxxx Xxxxxx Xxxxxx
-------------------------------- ---------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx Name: Xxxxxxx Xxxxxx Xxxxxx
----------------------------- ------------------------------
Title: President Title: VP - Strategic Business Dev.
----------------------------- ------------------------------
Date: November 15, 2002 Date: November 15, 2003
----------------------------- ------------------------------
CATAWBA INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
-----------------------------
Title: President
-----------------------------
Date: November 15, 2002
-----------------------------
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EXHIBIT LIST
Schedule 1 - Wiring Instructions
Schedule 2 - Renewal Policies
Schedule 3 - Assumed Policies
Schedule 4 - Agency Agreement
REGISTRANT UNDERTAKES TO PROVIDE COPIES OF THE EXHIBITS
TO THE COMMISSION SUPPLEMENTALLY UPON REQUEST
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