Exhibit 10.32
COMMUTATION AND MUTUAL RELEASE AGREEMENT
This COMMUTATION AND MUTUAL RELEASE AGREEMENT (the "AGREEMENT") made as of and
dated the 21st day of November, 2005 by and among HOUSTON CASUALTY COMPANY, U.S.
SPECIALTY INSURANCE COMPANY, HCC SPECIALTY INSURANCE COMPANY, HCC REINSURANCE
COMPANY LIMITED AND HOUSTON CASUALTY COMPANY EUROPE SEGUROS Y REASEGUROS S.A.
(individually, a "REASSURED" and collectively, the "REASSUREDS") and QUANTA
REINSURANCE LIMITED (the "REINSURER") (The Reassureds and the Reinsurer are
collectively herein referred to as "PARTIES").
WHEREAS, the Parties have entered into certain reinsurance agreements as listed
below whereby the Reinsurer agreed to reinsure the Reassureds pursuant to the
terms and subject to the conditions of the reinsurance agreements:
Obligatory Quota Share Reinsurance Agreement Reference No: 044073-Section
A, effective for the treaty period January 1, 2004 to January 1, 2005
attached hereto as Exhibit A;
USA D&O Liability Obligatory Quota Share Reinsurance Agreement Reference
No: 044073-Section B, effective for the treaty period January 1, 2004 to
January 1, 2005 attached hereto as Exhibit B;
Obligatory Quota Share Reinsurance Agreement Reference No: 044093 effective
for the treaty period October 1, 2004 to January 1, 2005 attached hereto as
Exhibit C; and
Obligatory Quota Share Reinsurance Agreement Reference No: 054073 effective
for the treaty period January 1, 2005 to January 1, 2006 attached hereto as
Exhibit D
The above listed reinsurance agreements are jointly referred to as the
"Reinsurance Agreements"; and
WHEREAS, the Parties desire to terminate the Reinsurance Agreements and fully
and finally settle and commute, by means of the payment referred to in Article 1
hereof (the "Commutation Payments"), any and all past, present and/or future
rights, privileges, duties, obligations and liabilities under the Reinsurance
Agreements, to fully and forever release and discharge one another with respect
to the Reinsurance Agreements, and to enter into mutual releases thereto on the
terms set forth in this Agreement; and
WHEREAS, this Agreement is the result of a compromise freely entered into by the
Parties (following advice from their professional advisors) for their mutual
benefit, releasing them from their respective obligations under the Reinsurance
Agreements as set forth in this Agreement; and
WHEREAS, this Agreement shall apply only to the Reassureds and the Reinsurer
executing this Agreement and as their interests in the Reinsurance Agreements
are specified thereon.
NOW, THEREFORE, intending to be legally bound, in consideration of the
covenants, promises, agreements, assumptions, releases, representations and
warranties set forth herein and the payments to be made hereunder and other good
and valuable consideration recited as set forth herein, the Parties agree as
follows:
ARTICLE 1. PAYMENT & TERMINATION OF COLLATERAL
A. The Reinsurer shall pay to the Reassureds commutation payments as
calculated on Schedule 1 hereto in the amounts and in the currencies listed
below (the "Commutation Payments") for 100% of the liabilities of Reinsurer
under the Reinsurance Agreements by wire transfer to the accounts detailed
below in Article 1B in full without set off or counterclaim and clear of
any deductions not later than Monday, November 28, 2005:
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CONTRACT USD GBP EUR CAD
-------- ---------------- --------------- --------------- ------------
US 044073-Section B USD11,946,758.26 -0- -0- -0-
US 054073-Section A USD 3,363,879.02 -0- -0- -0-
Int'l 044073-Section A USD 2,309,738.23 GBP 680,764.43 EUR1,259,140.91 CAD37,840.69
Int'l 054073-Section B USD 469,102.23 GBP1,543,486.89 EUR 522,150.46 -0-
Int'l 044073 USD 2,454,295.02 GBP 794,008.28 EUR1,120,629.03 CAD56,761.03
---------------- --------------- --------------- ------------
Total USD20,543,772.76 GBP3,018,259.60 EUR2,901,920.40 CAD94,601.72
---------------- --------------- --------------- ------------
B. Payments in USD and CAD to be wired to:
Xxxxx Fargo Bank
Account Number: 4159-734433
ABA Number: 000000000
For Benefit of: HCC Insurance Holdings, Inc.
Payments in GBP to be wired to:
Natwest Bank
Account Number: 00000000
Swift code: XXXXXX0X
Sort code: 60-00-01
For Benefit of: HCC Insurance Holdings, Inc
Payments in EUR to be wired to:
Natwest Bank
Account Number: 00000000
Swift code: XXXXXX0X
Sort code: 60-00-01
For Benefit of: HCC insurance Holdings, Inc.
C. The Reassureds shall accept the Commutation Payments set forth in Article
1A herein, which each party agrees shall serve as full and final settlement
of any and all amounts claimed heretofore or hereinafter to be due by
either party to the other party, arising under, in respect of or in any way
related to the Reinsurance Agreements.
D. Upon receipt of the Commutation Payments, the Reassureds will release the
amount equal under each of the Letters of Credit as Scheduled below:
LOC BALANCE AMOUNT TO AMOUNT TO
BENEFICIARY BANK LOC NUMBER @ 11/18/05 BE RETAINED BE RELEASED
----------- --------- ----------- ----------- ----------- -----------
XX XX Xxxxxx X-000000 6,592,609 4,030,697 2,561,912
HC XX Xxxxxx U-612397 1,171,253 -0- 1,171,253
HC XX Xxxxxx U-619969 7,057,077 -0- 7,057,077
HC XX Xxxxxx U-249982 1,111,895 -0- 1,111,895
HC XX Xxxxxx TUTS-644937 2,009,003 -0- 2,009,003
HC XX Xxxxxx TUTS-644934 331,800 -0- 331,800
USSIC XX Xxxxxx U-612396 706,610 -0- 706,610
USSIC XX Xxxxxx U-619970 3,159,612 -0- 3,159,612
USSIC XX Xxxxxx U-250140 2,884,181 1,000,000 1,884,181
The Reinsurer and Reassureds agree that the amounts to be retained
reflected in the Schedule above shall remain outstanding under letters of
credit as security for agreements of reinsurance between the Parties other
than the Reinsurance Agreements that are the subject of this Commutation
and Mutual Release Agreement.
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ARTICLE 2. MUTUAL RELEASE
A. Simultaneous with payment of the Commutation Payments by the Reinsurer to
the Reassureds and the release of amounts under the Letters of Credit by
the Reassureds to the Reinsurer, the Reinsurer on behalf of itself and its
predecessors, successors, assigns, and their past, present and future
officers, directors, shareholders, employees, agents, receivers, trustees,
attorneys, and legal representatives hereby releases, acquits, and forever
discharges the Reassureds, its predecessors, successors, assigns, and their
past, present, and future officers, directors, shareholders, employees,
agents, receivers, trustees, attorneys, and legal representatives from any
and all claims, debts, demands, causes of action, liabilities, obligations,
costs, disbursements, fees, attorneys' fees, expenses, damages, and
injuries of every kind, nature, and description based on, relating to, or
arising out of the Reinsurance Agreements and any applicable letters of
credit, trust, or other collateral, including, but not limited to, any
common-law or statutory claims for fraud and misrepresentation, or
statutory RICO claims, whether or not now known, suspected, reported, or
claimed, whether fixed or contingent, and whether currently existing or
arising in the future.
B. Simultaneous with payment of the Commutation Payments by the Reinsurer to
the Reassureds and the release of amounts under the Letters of Credit by
the Reassureds to the Reinsurer, the Reassureds on behalf of themselves and
their predecessors, successors, assigns, and their past, present, and
future officers, directors, shareholders, employees, agents, receivers,
trustees, attorneys, and legal representatives, hereby releases, acquits,
and forever discharges the Reinsurer, its predecessors, successors,
assigns, and their past, present, and future officers, directors,
shareholders, employees, agents, receivers, trustees, attorneys, and legal
representatives, from any and all claims, debts, demands, causes of action,
liabilities, obligations, costs, disbursements, fees, attorneys' fees,
expenses, damages, and injuries of every kind, nature, and description
based on, relating to, or arising out of the Reinsurance Agreements and any
applicable letters of credit, trust, or other collateral, including, but
not limited to, any common-law or statutory claims for fraud and
misrepresentation, or statutory RICO claims, whether or not now known,
suspected, reported, or claimed, whether fixed or contingent and whether
currently existing or arising in the future.
C. The Parties releasing claims under this Agreement expressly assume the risk
that acts, omissions, matters, causes or things may have occurred which are
not known or are not suspected to exist by one or more of them. The Parties
to the fullest extent permitted by law hereby waive the terms and
provisions of any statute, rule or doctrine of common law which either:
(i) narrowly construes releases purporting by their terms to release
claims in whole or in part based upon, arising from or related to such
acts, omissions, matters, causes or things, or,
(ii) which restricts or prohibits the releasing of such claims.
D. This Agreement is made without any admission of liability or wrongdoing by
any party, and the existence of this Agreement or the use of any term or
condition herein shall not be used as an admission or evidence against any
party in any subsequent dispute, action or proceeding. Nothing in this
Article 2, however, shall prevent any party from relying upon and enforcing
the terms of this Agreement.
ARTICLE 3. OTHER
A. This Agreement shall be binding upon and shall inure to the benefit of the
Parties hereto and their respective predecessors, successors and assigns,
officers, directors, employees, agents, attorneys, stockholders, parents,
affiliates and subsidiaries (including without limitation, any receiver,
conservator, rehabilitator, liquidator, provisional liquidator, trustee or
other statutory successor or quasi-statutory successor) upon its execution.
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B. The Parties represent and warrant, severally, that they and the natural
person signing this Agreement on behalf of each Party has the necessary
right, power and authority to act on behalf of the Party or Parties for
whom or which they are signing. All signatories to this Agreement represent
and warrant, that they have the right, power and authority to execute this
Agreement on behalf of the Party or Parties for whom or which they are
signing.
C. This Agreement shall constitute the entire agreement between the Parties
hereto related to the Reinsurance Agreements, superseding all negotiations,
prior discussions, representations, promises, understandings, oral or
written, expressed or implied, concerning the Reinsurance Agreements which
have been made prior to or contemporaneous with this Agreement's execution.
This Agreement may not be amended except by written amendment executed by
each of the Parties. The Parties agree that this Agreement is not a
contract uberrimae fidei. This Agreement is intended to resolve fully and
finally any and all rights and liabilities of the Parties under the
Reinsurance Agreements and no Party shall:
(i) have any remedy in respect of any representation, warranty or
undertaking of any other party which is not expressly set out or
referred to in this Agreement and upon which reliance may have been
placed prior to and/or when entering into this Agreement, except in
respect of fraudulent misrepresentation, and
(ii) seek to re-open or set aside this Agreement or the Reinsurance
Agreements on any grounds whatsoever, including without limitation,
that this Agreement or the Reinsurance Agreements are void or
avoidable on the basis that any of the Parties in the future becomes
aware of any mistake of law (including any such mistake arising as a
result of a subsequent change in the law which shall include, without
limitation, a settled understanding of the law which is subsequently
departed from by judicial decision) or any mistake of fact, in any way
whatsoever connected with or related to this Agreement or the
Reinsurance Agreements.
D. The Parties hereby agree that neither they nor their respective
professional advisers attorneys, agents, representatives and affiliates,
will make any public disclosure of the terms and conditions of this
Agreement (but not the existence) and will not disclose the terms and
conditions of this Agreement to anyone other than is necessary to
effectuate the terms and conditions of this Agreement except that the
Parties may disclose the terms and conditions of this Agreement to and
through their attorneys, accountants and auditors for legitimate business
purpose where a specific need for such disclosure arises in the judgment of
such attorneys, accountants and auditors, rating agencies or in response to
lawful process or requirement. Notwithstanding the foregoing, nothing in
this Article 3D shall restrict the ability of the Parties to disclose the
terms and conditions of this Agreement to their shareholders,
retrocessionaires or to regulatory entities or in connection with reports
and statements that they may be required from time to time to file or
submit to government agencies.
In the event disclosure is to be made pursuant to this Article 3D, other
than under the exceptions noted above, the disclosing party shall take all
steps necessary to preserve the confidentiality of such information,
including giving prior written notice to the other party, specifying the
information to be disclosed, the manner of disclosure, and to whom
disclosure is to be made. The other, non-disclosing party shall be provided
a reasonable opportunity to oppose such disclosure.
Any third party to whom disclosure is made by the Reinsurer or the
Reassureds shall be bound by this Article 3D and shall so state in writing
to the parties hereto prior to disclosure.
E. Each of the Parties expressly represents and warrants, severally, that:
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(i) they have not previously assigned or purported to assign any right or
obligation under the Reinsurance Agreements, nor any claims intended
to be released by this Agreement, to any third party;
(ii) they are not aware of any third party who might assert some interest
in any claims intended to be released hereunder;
(iii) they are a company in good standing under their respective place of
domicile;
(iv) they are not now insolvent nor have any reasonable belief that they
may be found to be insolvent within the one (1) year period
immediately following the date hereof;
(v) they are not aware of any pending agreements, transactions or
negotiations to which they or their subsidiaries or affiliates are a
party that would render this Agreement, or any part thereof, void,
voidable, avoidable or unenforceable;
(vi) all judicial, statutory, regulatory, administrative, and/or
ministerial actions necessary for the execution, delivery, and
performance of this Agreement by each Party have been or will be duly
taken, and that no further action, consent, or approval of any person,
entity, court, or other governmental authority, is required by either
party for the lawful execution or delivery of this Agreement or the
lawful performance and consummation of the transactions contemplated
herein, nor will such transactions violate any provision of any law or
conflict with any order, writ, injunction, or decree of any court or
any other governmental authority;
(vii) they are not making any representations as to any fact or
circumstance other than those contained within this Agreement; and
(viii) they are not relying upon the other, nor upon any person, third
party, or anything other than its own independent knowledge and
judgment and the advice of its own counsel in entering into this
Agreement.
F. If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, the remaining provisions shall remain in full
force and effect; provided, however, that in the event that any court of
competent jurisdiction or governmental agency renders an order, ruling, or
other determination declaring this Agreement or any material provision of
this Agreement null and void, it is mutually agreed by the Reinsurer and
the Reassureds that each shall be restored to the position it was in just
prior to entering into this Agreement.
G. Waiver by any of the Parties of any term, provision, or condition of this
Agreement shall not be construed to be a waiver of any other term,
provision, or condition hereof, nor shall such waiver be deemed a waiver of
any subsequent breach of the same term, provision, or condition. The
failure of any Party to enforce any of the provisions herein shall not be
construed to be a waiver of the right of such Party to enforce any such
provisions.
H. The Parties to this Agreement are entering into it in good faith, at arm's
length, and in the regular course of business, and are in agreement that
the Agreement is valid and enforceable in all respects.
I. The Parties acknowledge that disputes between the Company and other
reinsurers concerning the Reinsurance Agreements may have arisen, or may
arise in the future, and that information about the facts and arguments in
such disputes, or about the resolution of such disputes, may emerge after
the date of this Agreement. The Parties hereby agree, however, that this
Agreement is final and binding and cannot be voided or re-opened by either
side for any reason, including in respect of any later discovered or later
developing facts, arguments, court determinations or dispute resolutions.
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J. Each Party agrees that it shall, from time to time, upon the reasonable
request of the other Party, execute and deliver any further documents which
may be required to fully implement the intent of this Agreement.
K. This Agreement may be executed and delivered is multiple counterparts, each
of which, when so executed and delivered, shall be an original, but such
counterparts shall together constitute but one and the same instrument and
agreement.
L. In consideration of the mutual covenants and agreements contained herein,
each Party hereto agrees that this Agreement, and each and every provision
hereof, is and shall be enforceable by and between them according to its
terms, and each Party does hereby agree that it shall not, directly or
indirectly, contest the validity or enforceability hereof.
M. This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas, without regard to its conflicts of law
principles.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties have executed this Agreement by and their
respective authorized officers or legally empowered agents or representatives.
REASSUREDS:
HOUSTON CASUALTY COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
Date: November 21, 2005
U.S. SPECIALTY INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
Date: November 21, 2005
HCC SPECIALTY INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
Date: November 21, 2005
HCC REINSURANCE COMPANY LIMITED
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
Date: November 21, 2005
HOUSTON CASUALTY COMPANY EUROPE SEGUROS
Y REASEGUROS S.A.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
Date: November 21, 2005
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REINSURER:
QUANTA REINSURANCE LIMITED
By: /s/ Xxxx Xxxx Xxxxxxx, Jr.
---------------------------------
Name: Xxxx Xxxx Xxxxxxx, Jr.
Title: Senior Vice President
Date: November 21, 2005
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